Jonathan Weitz

Jonathan Weitz inquired about the expected expenses associated with the integration of Founders One (SMG) and how EZCORP plans to leverage its operational expertise during the integration process over the next 12 months.

Answer

CEO Lachlan Given stated that more detailed financial information for SMG will be available next quarter. He anticipates some increased expenses in control functions (finance, legal, IT) as SMG adapts to public company operations, but expects to leverage existing EZCORP teams to minimize these costs. He believes the revenue upside from SMG and EZCORP's operational playbook will more than offset the integration expenses.

Jonathan Weitz asked about the sustainability of the strong margin performance given potential gold price changes and other contributing factors. He also inquired about EZCORP's capital allocation strategy for the remainder of the year, balancing growth investment, debt repayment, and shareholder returns. Finally, he sought details on the expected expenses for the Founders One (SMG) integration and how EZCORP plans to leverage its operational expertise over the next 12 months.

Answer

CFO Tim Jugmans stated that merchandise sales margins are still at the lower end of what they aim to achieve, with Q1 being the strongest due to holiday demand. He stressed the focus on strong inventory turns and fresh inventory. CEO Lachlan Given reiterated that the business is not managed by sales margin but by turns and minimizing aged inventory. Lachlan Given emphasized a balanced capital allocation strategy, prioritizing M&A and organic growth, with no short-term debt repayments and a re-evaluation of the share buyback program post-acquisitions. Regarding SMG integration expenses, Lachlan Given noted that more details would be available next quarter, but they anticipate leveraging existing EZCORP teams and that revenue upside from operational initiatives should more than compensate for increased control environment expenses.