Zach Oster

Zach Oster asked for additional color on the growth potential in the 11 new countries acquired through the SMG transaction, both in the near and longer term. He also inquired about the M&A outlook specifically for 5-10+ store chains within the U.S. market.

Answer

CEO Lachlan Given highlighted Puerto Rico as the most significant opportunity among the new SMG markets, with potential for substantial de novo store build-outs, leveraging the SMG team's expertise. He noted that while SMG is currently a relatively small part of EZCORP, it has the potential to become a very large business. For the U.S. M&A outlook, Lachlan Given stated that large chains are becoming scarce, with future acquisitions likely focusing on single-digit store counts, though they remain active and disciplined.

Zach Oster asked for an update on the M&A outlook within the U.S., specifically regarding the availability and strategy for acquiring chains with 5 or more stores.

Answer

CEO Lachlan Given stated that following the SMG acquisition, there are fewer large chains remaining in the U.S., with M&A opportunities now primarily focused on single-digit store acquisitions. He affirmed that EZCORP would still consider 5-15 store chains with a disciplined approach prioritizing return on capital, but sees more significant M&A potential in Latin America.

Zach Oster inquired about the growth trajectory of same-store receivables, seeking color on the potential for continued balance growth on a per-store basis versus expansion through new store openings. He also asked for more detail on the graduation program, specifically regarding the mix of small balance loans versus larger loans and any observed funneling towards larger loans.

Answer

CFO Harp Rana explained that market and geographic expansion remains a key lever, noting increased efficiency in loan balances per branch. She reiterated the company's ending net receivables growth forecast, highlighting the typical seasonality with Q1 contraction due to tax refunds and subsequent growth in Q2-Q4. Regarding the graduation program, Ms. Rana stated that the company meets demand within its credit box, noting the rapid growth of the auto-secured product due to its newer status and larger ticket size. She affirmed commitment to a balanced approach, including smaller, higher-yielding loans and graduation to larger loans, acknowledging that oscillations in mix are driven by demand and credit box criteria.

Zach Oster inquired about the growth trajectory for same-store receivables, seeking clarity on the potential for continued balance growth per existing store versus relying on new store expansion. He also asked for more details on Regional Management's graduation program, specifically noting lower-than-expected small balance loans and higher larger loans, and whether this indicated a greater funneling towards larger loans.

Answer

CFO Harp Rana explained that market and geographic expansion are key levers, noting increased efficiency in loan balances per branch. He reiterated the ending net receivables growth forecast, highlighting seasonal patterns with Q1 impacted by tax refunds and growth resuming in Q2-Q4. Rana also stated that the company meets demand within its credit box, highlighting the rapid growth of the auto-secured product due to its newer status and larger ticket size. He affirmed commitment to a balanced growth approach, including originating smaller, higher-yielding loans and graduating customers to larger small and large loans, acknowledging that oscillations occur based on demand and credit box conditions.

Zach Oster sought more color on the dynamics in the European markets, specifically regarding supply, competition, and the outlook for potential ramp-up. He also asked if the $25 million in Q4 share repurchases could be considered a good run rate for future quarterly buybacks, given the new $300 million authorization.

Answer

Ashish Masih, President and CEO, explained that European supply growth is slow due to subdued lending and low delinquencies, with competition remaining robust. He highlighted Cabot's disciplined deployment and focus on operational excellence. For buybacks, he reiterated that the pace is subject to balance sheet and liquidity, and the recent increase reflects confidence in Encore's future, without committing to a specific run rate.

Zach Oster requested more color on the dynamics in the European markets, specifically regarding the outlook, competitive landscape, and potential for future ramp-up. He also followed up on the buyback program, asking if the $25 million deployed quarter-to-date in Q4 could be considered a run rate for future aggressive buybacks, given the $300 million incremental authorization.

Answer

Ashish Masih, President and CEO, explained that European markets remain similar, with slow supply growth due to subdued lending and low charge-off rates, and a disciplined approach to deployment. He noted Cabot's focus on operational excellence and stable collections performance, exceeding forecast expectations for all three quarters this year. Regarding buybacks, Masih reiterated that the $60 million purchased year-to-date, including the $25 million in Q4, reflects their confidence and is subject to balance sheet and liquidity, without providing a specific run rate.