Andrew Scutt

Andrew Scutt asked if U.S. store managers have observed any changes in consumer behavior or a different customer profile due to recent constraints on the U.S. consumer and a government shutdown.

Answer

CEO Lachlan Given stated that the company is seeing strong demand for the loan product in U.S. stores, indicating customers continue to be under pressure. He noted that the business is 'firing on all cylinders' but could not specifically attribute the demand to the government shutdown or other factors, only pointing to robust lending results.

Andrew Scutt asked if U.S. store managers have observed any changes in consumer behavior or a different customer profile due to recent U.S. consumer constraints or the government shutdown.

Answer

CEO Lachlan Given noted strong demand for loan products in U.S. stores, as evidenced by robust lending results. He stated that while he couldn't definitively link it to the government shutdown, customers continue to be under pressure, contributing to the strong lending profile.

Andrew Scutt from ROTH Capital Partners inquired about the current stage of EZCORP's digital transformation journey and how these digital initiatives are enhancing operational efficiencies for in-store management and staff.

Answer

CEO Lachlan Given described the company's digital journey as still being in its early stages, despite several years of progress. He highlighted recent rollouts like 'View Online, Purchase in Store' and the testing of an 'Instant Quote' tool. He emphasized that digital channels like online payments and the EZ+ rewards program support the core physical store business by freeing up staff time to focus on customer-facing activities like making loans and sales. CFO Tim Jugmans added that the digital rollout is even earlier in Latin America, representing a significant future opportunity.

Andrew Scutt from ROTH Capital Partners asked for an update on the company's store acquisition pipeline as it heads into fiscal year 2025.

Answer

CEO Lachlan Given described the M&A pipeline as robust, with a primary focus on markets where EZCORP already operates, particularly in Latin America. He highlighted the potential for future acquisitions of strategic investments like Cash Converters and mentioned the strong returns from the de novo store program, which added 40 locations in Latin America in 2024. Mr. Given also noted significant long-term opportunities for expansion into new global markets.

Andrew Scutt asked about the drivers behind the strong gross margin expansion in the quarter and the company's progress towards achieving 40% gross margin visibility, as well as customer reception to the beta rollout of SkyEMS 2.0 and its upgraded features.

Answer

CFO Kevin Royal explained that approximately 60% of the gross margin improvement was due to initiatives reducing product input costs, with the remainder from lower warranty costs due to improved product quality. CEO Krishna Vanka stated that SkyEMS 2.0 was designed with customer feedback from the airline and material handling industries, focusing on charging efficiency, battery overuse alerts, and mobile browser compatibility. He noted positive feedback from an airline beta tester and plans to package it with battery sales.

Andrew Scutt inquired about the drivers behind the strong gross margin expansion in the quarter and sought additional color on the company's progress towards achieving 40% gross margin. He also asked for an update on the customer reception of the SkyEMS 2.0 beta rollout and how the upgraded product compares to its initial version.

Answer

CFO Kevin Royal explained that gross margin improvement was primarily driven by initiatives to reduce product input costs (approximately 60% of the improvement) and lower warranty-related expenses due to enhanced product quality. CEO Krishna Vanka detailed that SkyEMS 2.0 was designed based on customer feedback to address pain points like charging efficiency and battery overuse, featuring a light, mobile-friendly interface. He noted positive feedback from an airline beta tester and plans for broader rollout, emphasizing its packaging with new battery sales and upsell potential for the 28,000 existing units. CRO Kelly Frey further elaborated on the three-pronged strategy for SkyEMS adoption: telemetry on every new battery, retrofitting the installed base, and offering advanced feature upsells.

Andrew Scutt inquired about A-Mark's increasing international market exposure, particularly in Asia, and how the revenue mix is expected to balance out. He also asked about promising pockets within the expanded DTC segment during the soft market.

Answer

CEO Gregory N. Roberts expressed satisfaction with the integration of LPM Group Limited in Hong Kong and its expansion into Singapore, noting new customer onboarding and access to higher-margin products from China/Southeast Asia. He highlighted strong performance in semi-numismatic and higher-premium bullion products, rare coins via Stack's Bowers Galleries, and growth in the Collateral Finance Corporation business, with an uptick in new loans. Roberts also mentioned high buyback percentages in DTC brands and recent positivity from silver buyers.

Andrew Scutt inquired about the long-term balance of A-Mark's international market exposure, particularly with strategic acquisitions, and identified specific promising pockets within the DTC segment in the current soft environment.

Answer

CEO Greg Roberts expressed satisfaction with the LPM integration in Hong Kong and expansion into Singapore, seeing significant growth opportunities in Southeast Asia through new customer onboarding and access to higher-margin products. He highlighted semi-numismatic items, higher premium bullion, rare coins (Stack's Bowers), and the strong CFC finance business as promising areas. Roberts also noted a high percentage of DTC sales coming from buybacks and recent positivity from silver buyers.

Andrew Scutt from Roth Capital Partners, LLC inquired about A-Mark Precious Metals' long-term international market mix balance, given the substantial growth in international revenue, and identified specific promising pockets within the expanded direct-to-consumer (DTC) segment in the current soft environment.

Answer

CEO Gregory N. Roberts expressed satisfaction with the integration of LPM Group Limited in Hong Kong and its expansion into Singapore, noting optimism for growth in Southeast Asia through new product offerings and client onboarding. He highlighted the positive performance of semi-numismatic and higher premium bullion products, as well as rare coins from Stack's Bowers Galleries. Roberts also mentioned the strength and growth of the Collateral Finance Corporation business, with an uptick in new loans. He noted that DTC brands are seeing high percentages of buybacks, and while premiums remain a challenge, a recent uptick in silver prices has shown some positivity.

Andrew Scutt inquired about A-Mark's market activity and performance quarter-to-date in April following recent gold and silver price volatility. He also asked for an update on the progress and outlook for the company's expansion into the collectibles space after its recent acquisitions.

Answer

Executive Gregory Roberts responded that after a challenging Q3, the company saw a very solid April with increased activity, although it had moderated in the last week or two. Regarding collectibles, he stated that the integration of the SGI and Pinehurst acquisitions was progressing well, with the businesses operating as expected. He highlighted that the Stack's Bowers division had impressive auctions with great demand in April.

Andrew Scutt from ROTH Capital Partners questioned the drivers behind the strong recent profitability of Stack's Bowers, noting its impressive performance in the last six months. He also asked for an update on how A-Mark's marketing efforts are progressing in driving volume and customer growth in the DTC channel.

Answer

Executive Gregory Roberts clarified that Stack's Bowers' recent strong performance was somewhat front-loaded due to the cyclicality of its auction business, including its largest annual auction in August and the sale of a major coin collection. Regarding marketing, Roberts stated that the strategy to acquire new customers and re-engage past ones continues to yield very good results, allowing A-Mark to gain market share even in a slower environment.

Andrew Scutt from ROTH Capital Partners inquired about the drivers for the sequential increase in gross margin, asked for details on the automation enhancements at the Las Vegas (AMGL) facility, and questioned how the company is positioning its inventory for potential volatility around the upcoming election.

Answer

Executive Gregory Roberts explained that the margin improvement came from better performance across most business lines, including investments in DTC marketing and larger wholesale transactions. He detailed the Las Vegas facility expansion, which involves new automated 'Kardex' technology to modernize the pick-and-pack process and significantly increase shipping capacity. On inventory, Roberts expressed comfort with current positioning, noting the nimbleness of their mints (Silver Towne and SMI) to shift production quickly to meet specific product demands.

Andrew Scutt inquired about the ArrowEye acquisition, asking if CPI's stronger balance sheet was leading to larger orders from ArrowEye's existing customers and helping to win new ones. He also asked about potential chip procurement synergies and using CPI's inventory to free up cash flow.

Answer

John Lowe, CEO, President & Director, explained that while ArrowEye's performance has exceeded expectations, it is not yet driven by immediate revenue synergies from CPI's balance sheet, though such opportunities are anticipated for 2026. CFO Jeff Hockstepp confirmed that leveraging CPI's superior purchasing power for chips is a key part of the synergy strategy going forward.

Andrew Scutt of Roth Capital Partners, LLC inquired about the ArrowEye (ROI) acquisition, asking if CPI's stronger balance sheet is leading to larger orders from ArrowEye's existing customers and helping to win new ones. He also asked about the potential to leverage CPI's existing chip inventory for ArrowEye to improve cash flow.

Answer

CEO John Lowe explained that while ArrowEye's performance has exceeded expectations, the outperformance is not yet driven by immediate revenue synergies like larger orders, though such opportunities are anticipated in the future. CFO Jeff Hockstepp confirmed that leveraging CPI's superior purchasing power for chips is a key part of the synergy strategy with ArrowEye going forward.

Andrew Scutt from Roth Capital Partners, LLC inquired about the drivers behind the ArrowEye acquisition's early success, specifically asking if larger customer orders post-acquisition were a key factor and if CPI could leverage its chip inventory for ArrowEye.

Answer

CEO John Lowe explained that while ArrowEye is outperforming expectations, the success is not yet from large-scale revenue synergies, which are viewed as a future opportunity for 2026. CFO Jeff Hockstepp confirmed that leveraging CPI's superior chip purchasing power for ArrowEye is a key part of the planned synergies.

Andrew Scutt asked for details on the strong performance of the prepaid segment, specifically questioning the drivers of its high gross margins and the success of verticals like healthcare payments and eco-friendly cards. He also requested additional color on the progress of inventory clearance.

Answer

President and CEO John Lowe attributed the prepaid segment's success to a shift toward higher-value, fraud-protection packaging and significant growth from the healthcare payments vertical. CFO Jeff Hochstadt added that while Q4 debit and credit margins saw some negative product mix, the overall business model continues to generate operating leverage. Regarding inventory, Hochstadt clarified that the balance sheet reflects the timing of committed chip purchases under a long-term agreement, which is expected to normalize.

Andrew Scutt from ROTH Capital Partners inquired about the momentum of the push provisioning solution with the MEA partnership and asked about the drivers behind the strong growth in the Prepaid segment.

Answer

CEO John Lowe stated that while push provisioning has strong momentum and a growing pipeline, its financial impact is still minor as it's in the early stages. He attributed the Prepaid segment's 13% growth to increased demand for high-value fraud protection packaging and successful expansion into adjacent verticals like healthcare.

Andrew Scutt of Roth Capital Partners inquired about the performance of the recent ArrowEye acquisition, asking if its early success was driven by revenue synergies like larger orders and whether CPI's chip procurement could benefit ArrowEye.

Answer

CEO John Lowe explained that while ArrowEye's performance exceeded revenue and profitability expectations, this was not yet driven by immediate revenue synergies, which are anticipated for 2026. CFO Jeff Hockstepp confirmed that leveraging CPI's superior chip purchasing power for ArrowEye is a key part of the planned synergies.

Andrew Scutt from ROTH Capital Partners requested more detail on the impact of the yield curve on net interest margin for 2025 and asked for clarification on the provision for credit losses taken during the quarter.

Answer

Executive David Taylor explained that net interest margin should benefit from two tailwinds: the maturing of higher-cost GICs issued during the inverted yield curve period and an increase in low-cost deposits from a recent surge in Canadian bankruptcies. He clarified that the higher provision for credit losses was not due to an accounting change but resulted from forward-looking models reflecting a more unstable credit environment, though he noted the bank's provisions remain very low compared to the industry.