Good morning, ladies and gentlemen, and welcome to the EZCORP's Fourth Quarter and Full Fiscal Year 2017 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Jeff Christensen, Vice President of Investor Relations for EZCORP. Please go ahead, Jeff.

Thank you, Kelly. And good morning, everyone. During our prepared remarks, we will be referring to Slides, which are available for viewing or download from our website at investors.ezcorp.com. Before we begin, I'd like to remind everyone that this conference call, as well as the presentation slides 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 by these forward-looking statements, due to a number of risk and other factors that are discussed in our annual, quarterly, and other reports filed with the Securities and Exchange Commission. Now, I would like to turn the call over to Mr. Stuart Grimshaw. Stuart?

Thanks, Jeff, and good morning everyone. I’d like to just start by acknowledging that we've probably had a quarter of unprecedented natural disasters. And sometimes, it's actually great to be involved in an industry that responds to customers positively after such tragedies occurred. And I think both ourselves and First Cash, in particular, had a great job in meeting the needs of our customers in a timely manner. And we are there for them in their time of need. And I think being part of an industry such as that is something that's – I know that our team feel very proud of. So I'd just like to mention that going into it. We started this journey in July 2015, where we said to each of you that we want to be the leader in responsibly and respectfully meeting our customers' desire for access to cash whenever they need it. Over that period of time, I think we've delivered really well. In this quarter that we've just entered into continues the trend and represents a very strong outcome in light of some of the natural disasters that we have confronted through this period of time. So we turn to Page 3. I think there are four key highlights that we just want to touch on. Our first is the U.S. Pawn stores have had a terrific year, which is a big scale business to deliver outstanding performance. In those areas unaffected by the natural disasters, same-store PLO is up 3%. Our PLO per store unadjusted continues to lead the market, and we've maintained their constant yield of around 14% on that PLO indicating that is a quality portfolio that we have been driving for quite a period of time. U.S. Pawn is now 83% of total pawn profit before tax.…

Thanks, Stuart, and good morning, everyone. First I do want to mention our upcoming Investor Day with analysts and institutional investors in Las Vegas coming up on December 14, with the reception in the evening before. Now on to the results. Our U.S. and Mexico Pawn segments as Stuart had mentioned, delivered solid net revenue expansion in the fourth quarter and the full year despite several natural disasters. We further leverage this into significant earnings increases through two key actions: first, by effectively executing our strategic initiatives to create long-term profitable growth; and second, by managing our cost structure. Let’s take a closer look at how this happens, starting with the consolidated GAAP results on Slide 7. As Stuart mentioned, it was another strong quarter. EPS increased $0.52 to $0.21 per share. EBITDA rose $28 million to just under $19 million on strong growth in both the U.S. and Mexico Pawn segments, and 98% of that EBITDA growth flowed through to the profit before tax line. For the full year, we reported a 91% growth in EBITDA and net income from continuing operations of almost $34 million. Pawn loans outstanding, or PLO, was up 1% to $169 million at the end of the quarter. The U.S. Pawn segment delivered market-leading, same-store PLO growth. This rose 3% in stores unaffected by the hurricanes. Mexico PLO jumped to 19% or 11% on a constant-currency basis. We estimate that the hurricanes reduced U.S. Pawn loan balances by about $5 million at the end of the year. I’ll give you more details on this and its estimated impact on earnings in a few minutes. We effectively managed our expense structure, leveraging the $1 million increase in net revenue into a $28 million improvement in EBITDA. Net interest in the quarter included $2.3 million of…

Thanks, Danny. And to follow-on from Danny's point just made on Slide 15. We acquired GuatePrenda post-balance stake. But I just want to touch on it again because this is a significant acquisition for us. The largest acquisition in terms of store count and we spent probably about four months during the due diligence on this business. And each month, we spent close to the business. We got more and more excited about the opportunity. We've had ownership for about a month now, and everything we've seen on that month supports our decision to purchase this business. We now have 46% of our Latin American pawn stores located in the geography of Guatemala with 72 stores; El Salvador 17 stores; Honduras, 12 stores; and Peru 11 stores; and we continue to see opportunities to expand in those geographies and in an adjacent geographies. It's a very segmented market. We are fortunate we have actually been able to inherit with the acquisition of very high quality management team with a lot of in-country expertise. And the important thing that we do highlight, which is in the last dot point of the compelling financial benefits is the – the business of GuatePrenda has leveraged per store loan balance higher than our existing stores in Mexico. And what we are acquiring is a very high quality portfolio with a high quality management team. And we remain very excited about the opportunities that this presents to EZCORP and to our shareholders. Turning to Slide 16, when I look at the strengths, I'd probably highlight the four points that we try to – denied at the front is that we have a very strong profitable and performing U.S. business, which is scalable and is being leveraged efficiently and effectively through not any of the new partner systems that we're putting in place such as the POS and data analytics but a very high quality store team, which continues to focus on meeting the customers needs for cash. We have a Mexican business, which is continues to outperform. And everything we see in Mexico continues to see the opportunities that can come out of the geography. And we also have a very high quality management team there. And as you saw earlier on, the growth in PLO balances with double-digit compounding is quite unusual and it's great to see. The acquisition of GuatePrenda gives us access to further growth markets and we believe that, that will leverage the business to greater levels than we have seen. And the diversification, we see is being very positive towards the way we look at our business. And most importantly that’s translating into outstanding financial returns for our shareholders. With that, I think we like to open up for questions.

Thank you, Mr. Grimshaw. We would now like to turn the call to questions. [Operator Instructions] Our first question comes from Kyle Joseph from Jefferies. Please go ahead.

Hey, good morning, guys and congrats on a pretty good quarter given all – everything that happened during the quarter. So just touching base first, in terms of the Alpha restructuring, can you give us a sense for sort of the run rate of interest income we can expect going forward or it – just a little bit lumpy?

Yes. Actually, if you take a look on Page 19 of the deck, we've tried to lay out there for you the – both the GAAP as well as the cash interest income that we would expect from the revised Grupo notes. There's one that shows GAAP interest income, and then that's comprised of the two primary components: amortization of the deferred compensation fee and the cash interest income. So you can look at both the impact on the income statement as well as statement of cash flows.

Yes. Perfect. I see that now. Apologies for missing that. And then going back to the Latin American acquisition in terms of the additional stores, can we assume sort of similar store economic than just any [Indiscernible] what the margins at those stores were versus your existing base in Mexico?

We haven't disclosed that, Kyle. I mean, what we have disclosed is the average PLO balance per store is higher than in Mexico. I think it would be logical to assume that some of the inherent behaviors and traits we see in our Mexican business are translatable into the economics of the Latin American business. So that would be the way I would sort of point towards that.

Got it. And than in the new geographies that you guys are now in as a result of that acquisition, can you give us a sense of the size of those markets that relates to Mexico?

Mexico is a fairly big market. And what we're dealing with is Guatemala, which has a population of probably around 15 million people. El Salvador and Honduras around 7 million people each. And then you have Peru, which is, obviously, of a much larger population. So we see Peru as being very interesting due to the scale you can achieve in that area. I think with the other three geographies, we believe there's opportunity to do de novo openings but not to the same set we can probably get out of the further South geography. So certainly, de novo through the Honduras, El Salvador and Guatemala and we'd look to both de novo and acquisition should something come up in adjacencies all within those regions.

Got it. And I really appreciate the color you guys gave in terms of the impact of the hurricane and whatnot. But even when we ex-out the impact there, it does look like retail sales in the U.S. were a little bit – the growth is slowing a bit. Can you give us any sort of color there? And I just point specifically to the inventory turns. The number you provided in the slides, if there is, is it demand? Is it competition? Or is it even in just one quarter, we can’t even call it a trend?

Well, I mean, as an analyst trend’s your friend, but I don’t think one quarter sort of makes the trend that you don’t want to follow. I think that there's a couple of things. I don't think our sales performance was good as what we would have liked. And so we're implementing strategies at the store level to improve that. The other thing I would say though is that we've probably focused more on achieving a stable gross margin through that period of time. And I think you'll see that our competitor actually had a negative sale through that with a decline in the gross margin at the same time. So even though our sales were roughly maintained, our margins we think, is quite important. We think we should be getting greater volume of sales out of that store front, so we don’t think what you’ve seen is a trend. We believe that we have the right strategies in place to return that growth to a positive region.

Got it. Well, thank you very much for answering my questions.

No problem. Thanks, Kyle.

Thanks, Kyle.

[Operator Instructions] Your next question comes from Greg Pendy from Sidoti. Please go ahead.

Hey, guys. Thanks for taking my call. Congratulations on a good quarter. Just wanted to understand. You mentioned sort of the ripple effect and kind of how you think that’ll alleviate around tax season. Can you kind of walk us through it – through that so we better understand – we know why tax season specifically? And why the lingering effect will continue to that point?

Yes. So as you know, pawns are portfolio business, right? And that either shrinking or growing, that takes time to move that portfolio and the earnings follow that time growth or time shrinkage. A smaller PLO is both going to generate smaller pawn service charge revenues until you rebuild that, and it will also generate less fresh inventory through loan defaults that then generally turn into sales of fairly high margin as that’s the youngest bucket that requires the least discounting to move that merchandise. Some of the rationale for the timing, actually, the timing we have, I think, is reasonable to even possibly a bit aggressive. As we look back – I mean, these were unique storms, right? Even between each other, between Harvey and between Irma, one was more of a flood event, where the other was more of a wind event, which has somewhat different effects. And also has a different amount of relief money coming in from FEMA or other organizations that alleviate some of our customers’ need or cash from us, which we think that demand will return but there’s some temporary effect of that, and then takes time to rebuild it. As far as the timing now that’s – that the largest impact that we see on this next year is suppression of pawn service charge revenues, probably two-thirds of the effect that we ultimately will see and about one-third of the effect will be through sales or gross margin or gross profit. And as far as looking at the timing, the best historical point of reference that I could see was back on Hurricane Ike in 2008. That actually took us about nine months to recover the full loan balance at that point. We have actions in place that we think will deliver that return in more like a six-month timeframe. And I think a lot of the relief funds will dry up long before that and give us the ability to rebuild that portfolio by that point. Hopefully that helps provide a little color for you.

Yes. And I guess, just one follow-up. Is that going to change, I guess, temporarily the mix of inventory out there in the system? Are you seeing that impact, I guess? Because some people saw some of their pawnable merchandise most likely damaged and sort of leased to the system. So is there going to be sort of a merchandise mix in some of those stores?

I think the – what we’ve seen is obviously the sales activity has been heightened due to exactly the reason that you’ve seen. But we have sufficient inventory in the system to be able to meet the customers’ demand, and we think that will become pawnable, will remain within the local community pawn cycle as a result of that. So that if we weren’t able to meet those demands, I think what you’re saying is rightful, but we have sufficient inventory around to be able to do that.

That’s helpful. Thanks a lot.

[Operator Instructions] Our next question comes from Michael Cohen from Opportunistic Research. Please go ahead.

Hi, guys. Thanks for taking my question. Just a quick rather mundane question. In terms of looking at the G&A/corporate expense and the OpEx on a kind of sequential quarter basis, it’s – was there anything that shifted from one bucket to the next? Because G&A seemed abnormally low and OpEx seemed a little high. Am I missing something there?

No, we’re not that creative, Michael. We actually – corporate expense has been managed down consistently, so there’s no change in the buckets. But what I do like to see is actually if we can invest in the operating business rather than the corporate center. I think that’s a really good outcome to know that the dollar I invested into the stores returns revenue, whereas the dollar I invested into the corporate center sometimes doesn’t have the same return. So the buckets are actually quite exclusive.

Great, thank you. That’s good to hear. And then, can you just give us an update on the point-of-sale? And it’s specifically kind of what percent of the stores are fully rolled out? And what your initial impressions are at this point?

Actually, we’re now at 180 stores at the moment. We have slowed the rollout down as we’ve dealt with our customers through the hurricane and in Mexico, through the earthquake. But we’ve always said that the customers are the most important at store, we don’t want to distract our store people, and meeting the needs of our customers, particularly at a time like this. We’re about to go into a pretty big selling season as well, so we’ve slowed it through into the New Year. The performance of the system has been sound. It takes about two days for our staff to get trained up, so that’s pretty good, but we’re not risking the business by holding ourselves saying that we have to get it rolled out within a week. We will get there. And with the new acquisition, we’re looking at how we integrate it so we have a consistent point-of-sale system across the whole company. Up to date, it’s been a successful rollout, and we will continue to keep it going.

Can you comment on the 180 stores that have seen it rolled out? And what type of – is the lift consistent with what your expectation has been?

It’s a productivity issue. What we’re actually seeing is the processes can be actually achieved in a much quicker timeframe than what we have had. It’s been – there have been slight uplifts but it’s still too early to, for instance, if you roll that 100 stores in October, it’s still too early to see what the exact uplift is. What we do know is that we can get more face time with our customers that will generate long-term revenue for us and give a great interaction. So we’re hopeful that will provide a lift both in the lending and sales. But the magnitude of that, it’s still too early to actually document.

Great. Thank you for taking my question.

Thanks, Michael.

I’m showing no further questions at this time. I would now like to turn the conference back to Mr. Grimshaw for closing remarks.

Thanks very much. Thanks to everyone for dialing in this morning. Apologies if you’re on the West Coast listening to this, still very early in the morning. But we appreciate your interest in the company. Danny and Jeff are available for questions later this morning, and we welcome any interactions you’d like to have with us. But thanks, once again, and have a great day.

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation, and have a wonderful day. You may now all disconnect.