Good morning, ladies and gentlemen. Welcome to the EZCORP Second Quarter Fiscal 2022 Earnings Call. [Operator Instructions] As a reminder, this call may be recorded. I'd now like to turn the conference over to Jean Marie, Investor Relations with Three Part Advisors. Please go ahead, Jean.

Thank you and good morning, everyone. During our prepared remarks, we'll 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 contain 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 due to a number of risks and other factors that are discussed in our annual, quarterly and other reports filed with the Securities and Exchange Commissions. And as noted in our presentation materials and unless otherwise identified, results are presented on an adjusted basis to remove the effect of foreign currency fluctuations and other discrete items. Attending us on the call today is EZCORP's Chief Executive Officer, Lachlan Given and Tim Jugmans, Chief Financial Officer. Now I would like to turn the call over to Lachlan Given. Lachlan?

Thanks, Jean and good morning, everyone. Our team continues to consistently execute on the strategic plan we announced to the market at the end of fiscal 2020 evidenced by another very strong quarter of financial results. Pawn loans outstanding a key driver of our business increased 38% year-over-year and at its highest level ever for the second quarter. On a consolidated [balance sheet basis]. It has been within 4% of pre-pandemic levels. Building on an excellent [third] quarter, EBITDA was up 61% for the second quarter. We delivered very strong net income and $16.6 million up 75% on last year. I'm also pleased to announce that the board of directors has approved a share buyback program of up to $50 million to be executed over the next three years. We have a robust and liquid balance sheet and confident in our ability to continue to generate strong cash flow. We have the capacity to return cash to shareholders by buying back shares at what we believe in the attractive valuation while continuing to grow the business into significant scale. Beginning on slide 3, we are a global leader in pawnbroking and [indiscernible] retail. We operate 1152 stores in the U.S. and Latin America and our strategic investments in adjacent businesses that expand our presence across the globe. On this slide, we talked about building shareholder value by satisfying the short term cash needs of our customers with an industry leading customer experience that is fueled by continuous innovation. We take pride in every one of our stores and have an intense focus on our people and the service they provide to our customers. We will continue with our disciplined approach to pawn store acquisition both in the markets in which we currently operate and other advantageous regions that allow us…

Thanks Lachlan. Before discussing the results, I would like to run through the effect of the adoption which we took at the beginning of the finance per year for the new accounting standards for convertible notes. This new standard uses the if converted method to calculate a diluted EPS. This method requires the numerator to be adjusted by the after tax interest expense. It assumes the notes are converted at the beginning of the period and the resulting common shares should be included in the denominator. The application of the if converted method only applies if the impact is diluted. Impact to diluted EPS is only accounted for on a prospective basis not retroactively. This materially increases the weighted shares outstanding by 25.2 million assuming all convertible are converted. Slide 11 details the full calculation for FY '22 in comparison to the old method used for the FY '21 results. Our consolidated financial results are on slide 12. PLO ended the period at $172.7 million, up 38% on a year-over-year basis, which is the highest EZCORP has seen at the end of quarter two. We're now within 4% of the Q2 FY '19 same store PLO balance. PSE revenue was up 21% over last year with growth driven by both increased same store PLO growth and acquisitions. Merchandise sales was up 16% with margins falling back to the high end of our normal range at 38%. Our focus on selling inventory in the first 90 days has kept inventory turnover strong at 2.9 times. It was another great quarter with consolidated EBITDA of $32.1 million up to 61%. Turning to our U.S. pawn operations on slide 13, PLO rose 40% driven by a continued focus on half [spoon] pawn operating model and serving our customer needs. PSE was up 19%…

Thanks, Tim. We continue to execute on our strategy in the second quarter, and are extremely pleased with the excellent operating and financial results driven by our team members to continue to embrace our culture of people, pawn and passion. I'd like to thank everyone who attended our investor day in Dallas last month. It was a great opportunity for us to spend time with you in person in the stores and to show you what a passionate and high performance team we are building here at EZ. I also want to thank the Board of Directors for their confidence and [EZ] to continue to deliver consistently strong financial results as evidenced by their approval of a three year $50 million share buyback program. We are very excited about the business of where we can drive it to from here. And with that, we'll open the call for questions. Operator?

Thank you. [Operator Instructions] First question comes from the line of John Hecht from Jefferies. Your line is open.

Hey, guys, thanks very much for taking my questions and congratulations on a great quarter. You mentioned inflationary impacts on some of the G&A but your costs have been very contained as a percentage of revenues recently. Just I guess, how do we balance those two things over the next few quarters, the expense base against the inflationary pressures?

Thanks, John. Yes, the inflationary pressures, we've just like done a good job in the first two quarters really containing that. We do think that as a percentage of net revenue will still be good. But on a dollar basis, we believe that those costs will be going up. But as a percentage of net revenue, we think the trailing 12 months that we produce in the earnings presentation will be on track with that.

Okay, that's very helpful. Thanks. Then, the PLO I mean, you guys have had a great increase in the PLO outstanding. Obviously, some of that bleed from just the normalization, some of its inflationary pressures. Are you seeing anything different from the customer behavior at the store level tied to inflation or are there other factors driving some of the consumer response to what's going on in the market today?

There are a couple of things there John. There is a little bit on inflation. Obviously, some of our customers are being affected by rising gas prices. It's also the change in our business model and in our customer service at the counter has significantly increased over the last few years, especially in the U.S. and the third one, I think our customer had a little bit less money during tax season because of the child tax credits that were handed out through the year which meant they got slightly less of a tax return this year. And so a combination of those three things is really leading to a great quarter.

Okay. And then final question. You added a few stores, I think you said in Dallas. What's the pipeline on the acquisition front and how's the overall market for you whether it's U.S. or LATM what's the overall market like for potential acquisitions?

Good morning, John. Thanks for your question. Look, I think it hadn't changed quarter on quarter. It remained in both regions in the U.S. and in Latin America, relatively robust growth from a pipeline perspective. I think multiples likely coming down we'd like to think with the current environment and the economy, but it remains as it was last quarter, and we're still seeing some exciting stuff to do in Latin America. So pretty robust.

Great. Appreciate that guys. Thanks.

Next question is from Marla Backer from Sidoti. Your line is open.

Thank you. So just as the environment is presenting certain challenges and opportunities. When you look at your store base you've opened new stores de novo, you've opened via M&A. What about underperforming stores? Are there any stores that you see right now in the existing chain that you think might be candidates for closure?

We do. That's a good question. We do run a program looking at exactly that. And we review that very closely. None of the stores that we have at the moment, we believe are there for closure. They're obviously underperforming stores in a large portfolio of stores. We are doing a lot to turn those around. But that is something we do look at on a regular monthly basis to see what we're doing with underperforming stores and the way we can turn those around.

Okay. And then in terms of some of your digital initiatives you've commented on it in the press release and you've commented in the past, you've expanded some of those initiatives to new additional markets. Can you give us a little bit more color on directionally where you see taking some of those opportunities? I mean, what you expect, you might be able to do with some of those initiatives?

I think the way to think about digital is, firstly, we are resulting in up with the [indiscernible] ahead of digital initiatives and strategy. But the way we think about it is that it is a primary driver of attracting new customers to our business, that's the sort of predominant reason. And secondly, we are servicing our existing customers a lot better, quicker, more efficiently, in the way that they want to be serviced. They don't necessarily want to come to us or to extend their loan or pay their loan. So it's really a two prong strategy. But the thing I am most excited about is trying to attract a new customer base to what we do, particularly young people is second hand goods, [indiscernible] becoming seriously large international business where young people prefer to buy secondhand goods. I think is a trend that's incredibly exciting for us. And digital is where we predominantly reach those customers. So I think, yes it is very important for our existing customer base because they want to transact digitally. But really, it's also about growing the cost of the bison and doing it across the existing market and in potentially new markets as well.

Thank you.

Welcome.

There are no further questions at this time. I would now like to turn the conference back to Mr. Lachlan Given.

Thank you operator. Thanks, everyone, for joining this morning. It's obviously a terrific quarter that we're all very proud of the team for so thanks for joining and we look forward to talking to you maybe later.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.