Good day, ladies and gentlemen, and welcome to the EZCORP Fiscal 2016 Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this call may be recorded. I would now like to turn the conference call over to Jeff Christensen, Vice President of Investor Relations for EZCORP. Please go ahead, Jeff.

Thank you, Kate, and good morning, everyone. Welcome to EZCORP's second quarter conference call. Joining me today are Stuart Grimshaw, Chief Executive Officer's EZCORP; and Mark Ashby, Chief Financial Officer of EZCORP. During our prepared remarks, we will be referring to slides which are available for download from our website at investors.ezcorp.com. Before we begin, I'd like to remind everyone that this conference call contains certain forward-looking statements regarding the company's expected operating and financial performance for future periods. These statements are based on the company's current expectations. Actual results for future periods may differ materially from those expressed or implied in these forward-looking statements due to a number of risks and other factors that are discussed in our annual, quarterly and other reports filed with the SEC. Now I would like to turn the call over to Mr. Stuart Grimshaw. Stuart?

Thanks, Jeff, and good morning, everyone. Let me start on the new strategy started in July of last year. We highlighted that there were 3 key areas that we wanted to look into, and really have been focused in simplifying and optimizing our businesses. We've made some pleasing strides under each of these culminating pretax profit increase in the bond segments of 27%, $34 million, and driving this has been an increase in pawn loans outstanding of 12% on a same-store basis of 9%. We've also progressed reasonably well on the comprehensive Mystery Shop program, which we started initiating towards the end of last calendar year. We've seen improvements in the U.S. stores of 17% and Mexico 11%. Just to remind you, that's a mix of video shopping staff, as well as pawn shopping our staff, and that usually have -- for each store about 4x per store per quarter. So we -- the focus on the customer is actually absolute and this is helping drive some of the outstanding performance we have had in the stores. But we also tied the incentive compensation plan for all team members to include growth in our key metrics as well as the experience that we're seeing through the video shop. When it comes to simplifying the approach to our businesses, we've had some very pleasing results. When you look at the return on our 4 earnings assets increasing to 152% from 150%, and again, a strong merchandise margin of 38%, 33%. We continue to see the levels of aged inventory declining, as you'll see on Page 3, where it's reduced from 12% to 9%. In terms of optimizing for the future, the Grupo Finmart strategic review has been completed, with sales of business being the preferred option. The noncash goodwill impairment charge of $73.9 million was recorded this quarter, which lead to the loss from continuing operations of $73 million. However, in our core pawn business, we have acquired 6 more pawn stores in our key market area of Houston. The executive restricted stock incentives are aligned with the shareholders' interest for the primary performance objective for vesting through to FY '18, as cliff vest[ph], is compound annual growth of 10% from a re-based EBITDA. And finally, we're targeting reduction in corporate annual expense of $50 million by FY '18. So that's high-level overview. I'll pass it over to Mark Ashby.

Thanks, Stuart, and good morning, everybody. We turn to Page 4. This is the consolidated GAAP results for the quarter, and also showing for the first half. As Stuart indicated, there's some strong performance in the pawn segments, and offset by the impairment charges associated with Grupo Finmart. The revenue line show a headline of down 2%. That has been by the exchange rate and also because of the Grupo Finmart business, as we'll show right around, as we get into the pawn segments. You'll be able to see the growth coming through. Net revenue for the quarter ended up being basically flat. If you look at the profit before tax based on a segment level, you can see the growth in U.S. Pawn of 15%, Mexico Pawn up from 0 to $2.1 million compared to the same period last year. Grupo Finmart, at a loss of $81.2 million and other international improvements predominantly because of CCV. Improved profit compared to this time in the quarter last year at $1.4 million. We did perform evaluation for accounting purposes of the Grupo Finmart business. The payment of value of $46.5 million. And by the time you go through machinations of the accounting requirements, that led to a goodwill impairment charge of $73.9 million, which is all of the goodwill associated on our balance sheet of Grupo. So there's no goodwill remaining under there, on the consolidated balance sheet. Our corporate expenses were up in Q2, predominantly because of higher accrued incentive compensation. The first half expenses increased from restatement cost and general expense credit last year and also associated with increased compensation cost. That led to a continuing ops net income loss of $73 million for the quarter versus a loss of $3.4 million last year. If we turn to Page…

Thanks, Mark. This is a new slide we put into the packet. If you think of, actually, the size of the pawn profit, very well, what it shows is the absolute focus on the customer that needs the cash drives the results that we see. And if you look at the transactional activity, we are having the store -- same-store basis of up 12% for new pawn loans. And when you look at trends for that across the PLO, outstandings up 9%, which is very strong results for the stores. And there are 2 asset classes, which drive the income statement, which is the pawn loans outstanding and the inventory. And as we see the same store, yellow, up 9% were inventories up 11%, but our redemption rate has been flat, suggesting that this is a quality result, rather than anything that might suggest we have been over the lending. And then the pawn loans outstanding drives the pawn services charge, which is up 8% on a same-store basis, and then the sales from the inventory was up 10% on a same-store basis, and as Mark has outlined, a 38% gross margin. As you'll see, there's a walk through the chart. This led to a profit increase of 27% to $34 million. And as we look down the side on Page 6, you'll see that some of the highlights there, the yields on the PLO in inventory is strong. Redemption has been flat and the inventory turns of 2.4x for the U.S. is actually down slightly from where we were last year. But last year, we were watching a lot of the aged inventory asset, and as I've mentioned before, our age inventory has continued to reduce over that period of time. But we feel that this slide, actually, accurately portrays what we are doing and how the focus on the customer's actually revealing itself through our balance sheet and income statement.

So if we turn to Page 7, when we look at the U.S. Pawn business. The -- as Stuart touched on the metrics that are driving the outcome, we've called out some of the key metrics on the U.S. Pawn business. And if I actually start on the top right-hand side, you can see the same-store pawn loan balance growth year-on-year. At the end of Q3 '15, it was negative and it started to grow over Q4. That was minus 6. It was partly positive at the end of Q1, '16 up to 7% growth at the end of Q2, which is encouraging trend. That also does drive the revenue. So if we look at on a total basis, the Pawn Loans Outstanding for the quarter, up 9%. Pawn service charges are up 5%. So we're starting to see that revenue quite improve. Merchandise margin in the U.S., up from 34% to 39%, and that drove merchandise gross profit increase of 18% for the quarter. And if you summarize all that into a net revenue basis, net revenue is up 8% to $94.6 million. The bottom right-hand corner of the chart shows the continued improvement of gross profit margin, resulting somewhat from the clearing of the aged inventory, which you can see is now down at 10% at the end of the quarter. But it's also reflective in -- one of the comments in the box down the bottom in the continued improvement in the quality pawn loan value. So the focus is on the quality loans, lending more to customers that have intention to redeem, and less to those who are more likely to forfeit. And if you combine that with the pricing management in -- and making sure I have -- inventory is addressed appropriately and not set…

Thanks. We -- let's turn to Slide 12. This is really tries to highlight where we are on the journey. As I mentioned previously in July 2015, we started on this journey. We said it would be a 3-year program, and I probably want to focus on 4 of the key drivers of what we're doing. The first one is really refocusing the pawn store operations, and we've seen here that we have acquired a number of stores over this period of time, but we've also closed down unperforming stores both in the U.S. and Mexico, as we reshaped the portfolio. The second win we've done over this period of time was we have sort of moved away from businesses where we see that the strategic value is limited and not consistent with where we need to be, and that's in close -- that's included closing the U.S. Financial Services business, closing the Mexico buy and sell business, and also undertaking the strategic review of Grupo, which Mark has touched on previously. We've also been investing in our people, and as you see there, we've renewed the executive team. Also, we've invested in the district managers where we've increased the numbers from 55 to 67, which enables a span of the district manager of the stores to go from 10 down to 8, which allows a closer focus on the culturing and mentoring of store managers, which we believe is important, and we've also revised the incentive plans at the store level to focus around the customer. And lastly, what we're looking at now is investing in our customers also through trying to develop, but also looking at the POS, point-of-sale upgrades, as well as customer data analytics, which we're just starting to move into now. So if I conclude by turning to Page 13. There are 4 things that really continue to occupy ourselves, and that's the intense focus on servicing and satisfying our customers' needs for cash. And as you will recall on the -- Slide 6, there's how that works for the balance sheet and the income statement. We continue to invest in process and customer-facing systems. The pawn fundamentals continue to demonstrate really strong momentum through the previous quarter. And as Mark has touched on all those, the 27% pretax profit growth in the performance is great. PLO balances are up 12% and 9%. On the same-store basis and the merchandise margin, 38% is significantly enhanced from where we were last year, which reflects some of the earning assets of 152%, and finally, we're fully into the sale process of Grupo Finmart at this point of time. So with that, I would like to open it up for questions.

[Operator Instructions] Our first question comes from the line of Vincent Caintic with Macquarie.

Two questions. First, on the sale of Grupo Finmart. I remember in the prior discussion, there were -- when talking about the strategic decisions, there was some talk about the debt restrictions or covenants that had to deal with Grupo Finmart, and I was wondering how you are addressing those.

Which debt covenants were you referring to? Vincent, do you have the total for convertible [indiscernible]

Just the [indiscernible] I believe there's a cross collateralization or if that's [indiscernible]

There's a cross default under the convertible bond, which anyway triggers $25 million. If the judgment is $25 million or more, there's a potential trigger on the convertible bond.

Okay, got it. And then secondly, more of a philosophical one, we saw that there was consolidation in the industry with First Cash and Cash America announcing a merger. And I was wondering if that changes your view at all in terms of EZCORP, whether to be a consolidator or to sell or to merge with other participants.

It's always interesting to see 2 competitors sort of being -- sort of competing heavily against each other get together. We'll be watching it. But I think it doesn't change our game much at all. I mean, the focus we've always had is on the customers' need for cash, and we really focused more on that than what our competitors are doing as we're seeing through the strong results that would be in recording. The industry is still quite fragmented. One notwithstanding the merger, you still got the 3 of us -- well, actually, 2 of us really having 15% market share of the overall market in the U.S. So there's still, I think, plenty of space for us all to play and reap the rewards of what is a great business with the right customer. So I think we'll let them focus on their consolidation and we'll focus on the customer.

Our next question comes from the line of Kyle Joseph with Jefferies.

So going back to the Grupo Finmart results, they're definitely a lot better than we expected. I know you said collections improved. I mean, how much of that was seasonality versus how much of it is sort of the unions being able and willing to pay you guys back more so? I mean, I just want to know what's driving the improvement in that business.

There's a couple things. January and February, usually, a bit slower for us, so there is a bit of seasonality that usually comes through that, but the management teams have focused heavily on the collections process. And what you've seen there is as you can see through the average collection time moving quite rapidly. We've been able to make some significant inroads into those -- into the payments from some of the convenios that have been traditional deferrers, and we've actually reduced the origination from convenios where we have seen performance which is detrimental to our collection. So at the moment, we're originating in 69 convenios. This time last year, we had over 200 convenios on our books of which we're probably originating from about 120 of those. So we've significantly reduced the origination into those convenios where we have issues. We've focused the collection themes around ensuring that we don't wait as long as potentially we have in the past to collect. So while there was a small degree of seasonality, most have actually has been strong management initiatives and action to get the cash through the door.

Okay. And then just -- I'm trying to calculate the core and sort of the run rate earnings for the quarter sort of ex the Grupo impairment charge, like what sort of tax rate should I be using to because -- is a little bit of a profit ex that when you also factor in the run rate earnings of the Grupo segment? So what sort of tax rate would I be using on that? And sorry, I've tried to go through all your stuff, but I'm not sure if you guys did disclose a core sort of EPS number for the quarter ex the impairment charge.

No. I don't think we did. So way the average tax rate probably would be about 35%? Probably a bit lower. I think we're going to get about 32%.

32%, okay. And then I can calculate that number from there. And then just going back to debt and liquidity. Sorry, I haven't had time to go through your whole Q, but it looks like you calculated around $140 million of debt still outstanding at Grupo. You can correct me if that's wrong, but just give us an idea of how much of that EZPW could potentially be on the hook for? And how much do you expect the ongoing cash flow is from Grupo to be able to pay that down?

There's a couple components in there. The only [indiscernible] associated, I suppose, to EZCORP is the $230 million of the convertible notes. The balance of the debt is broken into 2 components. It's the actual Grupo debt and then there's the VIE debt, because we have to consolidate the VIE. The VIE is not our debt, and Grupo is not obligated to fund the VIE debt. The average book in there is that we're obligated to support the cash flow hedge for one of the VIEs, but the actual debt itself that you've seen from the chart. If you broke it into 2, I think there's about $50 million belongs to the VIEs, and about $90 million belongs to Grupo, and that is the Grupo components with roughly 50-50 in terms of what's there to be paid out the next 12 months versus beyond 12 months. In terms of -- so hopefully, that gives you a -- a view on that first part of the question. The second part of the question, the trust themselves have serviced around debt, and does get difficult to dissect that when you -- I guess we have to consolidate all these numbers. Grupo itself, the collection rates are improving. The -- how much it can service the buy and debt requirement, I suppose, will depend upon time. The profile of the debt, it's not spread evenly in terms of the debt obligation over the next -- if you look at the next 12 months. The next quarter is relatively low, basically from the end of June onwards. It's such that it increased from there. So there's no specific answer. It depends on collection performance. New debt lines, we're also working on in Grupo at the moment. We expect one to come into play over the next few weeks around the end of May. So there's still funding loans available. So there'll be some substitution effect. So it's sort of a mixed bag.

Got it. That's helpful. And then the cash flow hedge on the VIE? Is that on the entire $50 million? Or is that just one of the slugs of the VIE, if you don't mind?

Down to 30 -- yes, down to $37.8 million.

Okay. So that's that 2017 VIE? So it's the $37.8 million? Okay, got it. And then...

Yes. What you need -- you need to understand what that hedge -- what the potential liabilities. That is -- there are earning assets in there that generate cash flow to support the amortization schedule. So if while the -- if there's any shortfall, that will depend upon the performance of the loans to support that amortization schedule. Sorry, Kyle.

No, got it. That's very helpful. And then just in terms of the sales process, can you give us -- I know you're probably limited in what you can say. But sort of the indication of interest you had, a little bit about of a -- your outlook on timing for that as well.

Obviously, we are a bit limited in what we can say. I think probably say that we've been pleasantly surprised by the level of interest. We are in the process of having discussions with interested parties. Obviously, we want to move as quickly as we can through the process. I think there's a comment in the Q that we had hoped to have it done in a few months' time. And we -- I think we've indicated before the end of the financial year. But we need to move quite quickly because we don't want to unsettle our staff at Grupo either. So it's progressing well at this stage.

Our next question comes from the line of David Diamond [ph] with Rovida[ph] Advisory.

Glad to see the ship heading firmly in the right direction. I had a few very quick questions. First, on the gold price. We're seeing record [indiscernible] again in the gold market. I'm curious of what gold price -- might this become a more material tailwind for the 3-year business, if at all? That's my first question. The second, Stuart, I just wanted to dig a little deeper on the previous caller's industry consolidation question. I'm curious how -- to what extent did the severe relative undervaluation of your stock relative to your peers and also your split shareholder structure. To what extent does that make you less interested in industry consolidation? And lastly, Stuart, if we assume a world sort of post-Finmart for EZCORP, I'm curious, assuming a 9 inning in American baseball game, what inning would you consider the company be in once in your restructuring efforts with Finmart has been done.

Sure. There's quite a bit in there, David, so let me see if I can pick it all up. I mean, the gold price has been moving pretty much between $1,200, $1,300 -- close to $1,300 over the last couple of months. But we're seeing commodities all around the oil, and iron ore's starting to come off and copper's coming off as well. So gold has actually held that range quite strongly as the others are starting to move. So I think it seems to have settled around that $1,250 to $1,275 level. That doesn't really change it too much for us. I mean, we haven't been an active scrapper where some of the margins were made previously. And I think if you go back to the heavy days of 2010, '11, we were actually making some substantial profits through the scrapping. You'll see here the margin on scrap for the quarter was 13%. Some of our competitors are actually having lesser margins than that on scraps. So I think in order to make the heavy days, you'd have to see gold moving back towards that $1,400, $1,500 level, which I don't think we're going to see. But that's just my view. I'm not a very good commodity speculator, so you might have a better view of that than me. In terms of the industry's consolidation, and I think the question is when would we view the EZCORP would see multiples close to where our competitors are and whether the shareholding is a depressant on those multiples. I think once Grupo has been dealt with, you'll get a cleaner position to the absolute value of the company. And we're showing that with the core results and the focus on the customer, we are getting some very strong returns from what has been our core business. So we need to ensure that we manage the Grupo process well to actually show the company's potential to the investment community. Now the split shareholder structure, I think everyone's got a view as to whether it's -- whether there is some form of discount by having that structure or whether there isn't. And I'm actually reasonably neutral on it to the extent that as long as we're outperforming our peers and moving forward with our customers, the focus I have is more about driving the value in the business, not worrying about the shareholding structures of the business. And if I was to look at where we are in 9 innings, we're certainly no where near the seventh-inning stretch. I think once we move Grupo and deal with it in the right manner, I think we're still probably in the second or third innings, which is where, I think, we are in our strategic 3-year cycle as well. So I hope that answers all those questions, David [ph].

Our next question comes from the line of Bill Armstrong with CL King & Associates.

A couple of more questions on Grupo. So in the first half, you've provided about $17 million of funding for working capital and debt repayment. Over the next, say, 3 to 6 months, how much more funding do you think is required, assuming that's probably about what it will take to sell the business?

I don't think we put $17 million. I think it was -- we had the $9 million of bad debt. I think -- or for the next quarter, we sort of indicated that we think the next quarter is probably around in that maybe the $2 million to $3 million per month, but it depends on the funding lines we put in place at Grupo and what that actually pays out to. As Mark suggested, post-June, some of the amortization in some of those funding lines pick up, and we are working closely with an adviser to actually make sure we -- and have debt lines in place through that period of time. So we'll probably be in a better position at the end of the June quarter, Bill, with that funding line to give you more clarity about the quarter ahead.

Okay. The $46.5 million valuation, I just want to make sure I understand exactly what that represents. So we -- is that the equity value of Grupo? Or would that be more of an enterprise value?

Well, that -- the -- how do you describe it? That's -- I'll tell you, the prices here has probably a bit of a better landing point, based upon -- kept the current for the capital structure with EZCORP has within Grupo and extrapolating that for that 5-plus years on a DCF basis. So it's a mechanical type of process out there that comes up with that valuation.

And the metrics and made assets?

Yes. It applies to the fair value of what the assets, in theory, worth, not necessarily what's on your balance sheet. So it's -- if anyone wants to enter an accounting seminar, please let me know.

Okay. That's -- I think that will suffice for that question. And then lastly, when you're going through the process and decided to sell the business, I'm sort of looking at what the market might be for this business. Do you think we're looking at more strategic buyers, financial buyers? Are we looking at just Mexican or Latin American buyers? Are we looking at maybe possibly U.S.-based buyers as well?

I think we've had interest from all of the above. So it's not specifically coming out of one quarter. So we have had interest -- expressions of interest from the U.S. as well as Mexican. So it's still too early to see where it lands, Bill, because I think -- obviously, people -- some people are kicking tires. Some will be interested and we'll figure that out over the next few weeks.

[Operator Instructions] Our next question comes from the line of Christian Hoffmann with Thornburg.

It looks like you guys collected $34 million of tax refunds during the quarter. I was just curious, do you expect any more refunds? Or is that kind of the balance of it?

I would like another one of those, but no, that's it, Christian. That's all there is.

Got it. Can you remind me what the payout of deferred consideration, the $14.875 million, was for in trailing 6-months period?

Last February 2015, we acquired a business. And in that particular point in time, equity was used. And there were certain structures in that the share price wasn't allowed to move by certain amounts but went down. Then we had to technically...

Can they call that?

Yes. And substitute with cash.

Which businesses was that?

Yes, I think it's Cash Pawn.

Which one?

Yes. Around -- it's Cash Pawn. It's around the Austin area and Central Texas area.

Got it. Is there going to be more cash leakage associated with that or any other acquisition?

That was payable a year after the deal was signed. So there's no more sitting on that one.

Are there any other ones?

No.

Let's see. Can you talk about your balance sheet and leverage a little bit. The numbers are a little bit messy. I know you strip out Finmart. You show without Finmart, and you want to sell that now. I appreciate all those things. But how should I think about leverage at the recourse level, leverage at the total entity? Including nonrecourse debt as there are some cash needs there. Can you talk about that a little bit? Because I didn't see much discussion of that in the presentation.

Well, it's actually -- it's quite a simple type structure. We've -- at the EZCORP level, we have $230 million worth of convertible bonds.

And what EBITDA supports that?

I beg your pardon?

What EBITDA supports that?

Basically, the pawn business.

What is the LTM EBITDA for that?

The last 12 months EBITDA for the Pawn business -- off the top of my head, I don't know. But the maturity profile is in 2019, and so that's when the $230 million is due. There's no payment. There's no covenant. There's nothing -- no operating covenants sitting underneath that. So that's a pretty straightforward type of bond. The rest of it is associated with Grupo Finmart into the 2 components, as I alluded to earlier on. And that really is split between the VIEs, which is about $50 million. $90 million. It's Grupo Finmart direct debt and that has amortization schedule associated with it. And obviously, you try and substitute new debt. Now the -- there's not a lot of the loan structures that have -- you have the assets sort of sitting against it. You have the loan book sitting against as in our assets sitting there to service those loans. So it's pretty straight forward. It's not really structured around EBITDA multiples or any of those types of metrics where normally you see floating around.

Yes. I mean, the convertibles trade at stressed levels. So I think it is kind of an important consideration to the extent it's not that transparent. It think it's less helpful for folks, my own personal opinion. Maybe one more, just lastly. What's the -- will be the Plan B if Finmart doesn't attract the price you were looking for?

We'd have to look at some of the other options, which one might have used complete sales, might be partial sales. We'd look at another range of options. But look at putting some instruments and financing in place to ring-fence it. But it's a good business. And we want to make sure that we represent it completely. We've got good expressions of interest so we don't have to really consider that in depth at this point in time until we get further down the track.

And the structure you're contemplating will the nonrecourse debt travel to buyer of that business and fall off of your balance sheet?

Assuming that the -- there's some change of control issues, I think that's been in some of these. So we'll be having discussions with them around that. But we don't think that should be too much of an issue.

But your ultimate goal would be to not have any service requirements or...

Yes. That's correct.

Just to have the whole thing kind of cut off?

Yes. Yes, that's correct.

Our next question is a follow-up from the line of Kyle Joseph with Jefferies.

Just one follow-up question. Just looking at the Slide 11 on Grupo. And it looks like you guys put -- didn't have to put as much cash into Grupo this quarter. And then I think you also highlighted not a lot of near-term maturities for that business. But given the increased collections and not a lot of near-term maturities are 0, what's your outlook for the amount of cash that could potentially have to put into Grupo?

We sort of mentioned this briefly before, Kyle, we think it's probably a couple of million a month through to June. But we're trying to work with some new financing structures, which will alleviate the pressure on us. So by the end of June, hopefully, we'll be in a better position with those discussions underway to give you a better color around that, what they would be going forward. And I would have mentioned, Mark -- Mark had mentioned on the Slide, in June, we start some of the amortization of these lines start increasing. So we're doing a lot of that to try and minimize the cash that does have to go through the Grupo business.

[Operator Instructions] Our next question comes from the line of Sean George with DuPont Capital Management.

Is there any rep and warranty issues with the Grupo Finmart debt or the VIE debt?

In what regard, Sean?,

So if, say there were some issues with the loan documents or customer information, could those loans be potentially put back to the VIE or Grupo Finmart? Kind of what we saw in the housing market in the U.S., 2011, 2012.

Not that I'm aware of.

So if -- yes, so the holders of these securities, say, well, the information was bad in these loans, therefore -- or there was missing information, there's no way for them to put the loans back to Grupo?

I haven't been through the documents on that direct-- that full detail. There's nothing I'm aware of that's been...

Okay. And you've never experienced anything like that today then?

No.

Okay. The assets supporting the debt at Grupo and the VIE, the loans supporting those debt. If the asset balance isn't enough to support the debt, does Grupo or the VIE have to make up the difference? Or can Grupo or do VIE just say, "Well, there wasn't enough assets there in the nonrecourse that is impaired." I guess another way to say it is that recourse back to Grupo or the VIE, even though it's not recoursed to EZCORP.

The base point one has a -- with the recourse nature, has a requirement on it to prop up any cash if there's a shortfall in the servicing. And that has been about $0.5 million a month, I think, at the moment, U.S. dollars. But typically, most of these structures have other capitalization in them, which means that even if some of the delays do occur, they're self-servicing. And with our improved collection sitting behind it, the improvement on those collections doesn't mean that they're fairly self-sustaining.

Okay. So they're very over collateralized. But what about in the case where -- theoretically, I'm sure this wouldn't happen, but in case where all the loans went bad, would they -- would then Grupo have to replenish?

Under the main VIE which they're for, they would be required to ensure the servicing of those loans occurs in line with the contracts that are in place, the monthly contracts in place. So there would be, as we have outlined previously with those particular VIEs, there is a requirement on Grupo in the first instance, in EZCORP potentially in the second instance.

Okay. And what is the servicing requirement? Is it for the life of the loan or is it just for a certain amount of time?

It's the same by 2017. That the 4 major VIEs run off, and there's a surplus portfolio of assets that fits within those.

Our next question comes from the line with Chris Leddy of Lazard.

I just had a couple of questions for clarification's sake. With regard to the Grupo Finmart debt. I understand how the VIE's work with that $50 million. But then you have the $90 million of Grupo debt. And there's a couple of notes because we don't get a full set of financials on Grupo Finmart, there's -- on Page 2, there's $51 million of total assets. Then on Page 39, there's carrying value of assets and liabilities. And then Page 54, there's net earnings assets. Where are those, and which are the ones that actually support that $90 million of debt?

Can we start with the first one?

Yes please.

Page 2 of?

Yes. Page 2 of the 10-Q. So it's assets and liabilities of Grupo Finmart securitization trust. $51.9 million for $2 million [ph], broken down...

It's a public securitization.

I'm sorry, that's what?

It's a public securitization that was done. So that's secondly, that's gonna get amortized in June -- I mean, [indiscernible] June. There's a bunch of assets against that.

Right. And so -- I mean, are we able to then take that $90 million of Grupo Finmart debt and then subtract out this $50 million that securitizes it? Then that you're down to $40 million?

I'd have to check.

I think -- if we just move on to the next one, I'll think of the answer to that question.

Okay. And then the next one was Page 39, I believe. Yes, where there's just -- Note 18, subsequent events, carrying values of major classes of Grupo Finmart assets and liabilities. And so was this is just a summary of the aggregate balance sheet?

That's with assets and liabilities held in the current balance sheet. Yes, that's the consolidated assets of Grupo, including the trust.

Okay, great. And then I guess, on Page 54, there's a note where it says -- I guess, it's the other data. Net earnings assets of continuing operations, $86.7 million. I was trying to figure out what that exactly is.

That should be the net value of the loans on the book that are performing.

Okay, great.

[indiscernible] If I go back to your first -- just to your point, the securitization there, that does -- the public securitization does start to amortize. And it's starting -- I think we've called it out. It's about $1 million a month. It's somewhere in another note in the Q. And that is, I think, probably $35 million, $36 million of the total Grupo debt. So your point was correct. You need to take that off to see what's outside the public securitization.

And I am showing no further questions at this time. That does conclude today's Q&A portion of the call. I'd like to turn it back over to Stuart Grimshaw for any closing remarks.

Thanks, Kate. We'd just like to thank everybody who dialed along for those in the webcast. Thanks for your interest in the company. Mark and Jeff are available for follow-up questions later this morning, and this concludes our call. So thanks very much for everyone.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's call program. You may all disconnect. Everyone, have a great day.