Good afternoon, ladies and gentlemen, and welcome to the EZCORP Fiscal Year-end 2015 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’d now like to turn the conference over to Jeff Christensen, Vice President of Investor Relations for EZCORP. Please go ahead Jeff.

Thank you, and good afternoon, everyone. Welcome to EZCORP's fiscal 2015 results conference call. I’m excited to be with EZCORP. I join the Company yesterday. I look forward to meeting with you in person and speaking with you. Joining me today are Stuart Grimshaw, Chief Executive Officer of EZCORP; and Mark Ashby, Chief Financial Officer of EZCORP. During our prepared remarks, we will be referring to slides which are now available for download from our Web site at investors.ezcorp.com. A complete copy of the slide presentation was also filed this afternoon as an attachment to our 8- K. 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 by these forward-looking statements due to a number of uncertainties and other factors, that are identified on Page 2 of the presentation slide deck and discussed in our annual report on Form 10-K filed with the SEC. It is now my pleasure to turn the call over to Mr. Mr. Stuart Grimshaw. Stuart?

Thanks, Jeff, and good afternoon, everyone, and welcome to the earnings call. We hope everyone has enjoyed the holiday season. We apologize to those of you’ve that we’ve take away from that, so we promise we won’t keep you very long. Sort of an apology from us as well for the following delay we’ve experienced due to the financial restatement. But we now believe that’s behind us and we’re back to the reporting rhythm that’s consistent with the prior years. If I turn to the slide deck and start on Slide 3, the numbers won’t as we would like them, which I’m sure everyone would agree with. However, over the period of time, a lot of work has been achieved and it continues the focus of strategic position that we had on the 29th of July and there we outlined a number of strategies and reported clearly to the focus, simplify, optimize strategies that we would be running through the business. And as we look through the three -- the three areas that we’ve focused on since the strategic update, we’ve refocused on the core business segments being the U.S pawn, Mexican pawn, and Grupo Finmart. We will deal with those individually later on. And we have dealt with the restatement issues and they’ve had a material impact upon the results as Mark Ashby will outline little later on. In terms of building the foundations, we stabilized and strengthened the balance sheet. In particular, we’ve restarted focusing back on our core strengths of PLO growth. We have reduced our aged inventory from 20% of inventory to a 11% now. The provisioning reloans on the Grupo has been strengthened and also we’ve removed the payday loan portfolio from the balance sheet altogether. We’ve implemented a new management team, which I will…

Thanks, Stuart, and good afternoon, everybody. First up, I’m going to talk for a couple of slides about the Grupo restatement. Seeing as it was such a big issue it’s worthwhile just giving you some background or maybe some clarification on the three impacts that it has had and I’ll cover that on Slide 7 and on Slide 8. If I start with Slide 7 on the interest spread, the previous process was to recognize the revenue over the term of the loan. So if you had a loan that was for two years, you would recognize the revenue on that loan each month for the 24 months. What we’ve found is that the effective interest method is more appropriate and the 24 months in terms of contracted loan period could be as long as 30 months in terms of actual cash received period. As a result, we’ve been through all the line portfolio and we’ve averaged them on a 12 month, 24 month, 36 month, or 48 month loan basis. And now spread -- respread the revenue from those loans across the effective interest period, what you saw from that was actually a reduction in interest income from when the loan was originated and commenced, and then spread out over a longer period of time. So you would see that revenue flow over longer period of time, which meant that by the time the loan start to stack, you will see an increase in revenue on an accounting basis flow through. Advantage of this is that it better represents the cash flow of the collection period of the line period. So it gives us a better visibility from an accounting and reporting perspective on what that actually means in terms of running the business from a cash flow. The…

Thanks, Mark. To move on to Slide 19, as we indicated in our call of Slide 29, we wanted to get some deliverables down. But we indicated at the time that there is probably going to be a lot of noise through the accounts at the time that will take us a couple of quarters to stabilize the accounts to actually be able to put some robust measures around the financial metrics, particularly the cost to income, EPS growth, and maybe ROE above cost of equity. So we will come back to those probably half way through the year. In terms of the mystery shopping results it’s still pretty much early days, but we are seeing some -- some stores actually having doubled their performance in the last three months as we’ve gone through the stores, that’s been worthwhile. We just need to aggregate all those. The net providers scores were still trying to get the external view across all that businesses. The turnover rights we’re just cutting by store personnel, be it store managers as we call the wage and salary, so the wage people. We are getting an average turnover of about -- our store managers close to between three to four years, which we really want to get up to the 5 to 10 year bracket, which is why the incentive scheme and the coaching that Joe has put in place for the district managers is quite critical. So we will come back to you a bit later on with more granularity around that, which you can measure a pawn. And finally just to wrap up on Slide 20, just to recap what we’ve been through. We have focused on the three core business segments, U.S pawn, Mexico pawn, and Grupo Finmart, and we will continue to report transparently on those. The execution focus which we outlined was critical to the success of the strategy is quite relentless. We have exited underperforming sites in the pawn businesses. We’ve stabilized the balance sheet. We close the U.S financial services business for rationalized the head office and we’ve a strengthened management team both at Grupo as well as EZCORP head level. And the early signs that we’re seeing, we’re pointing to some of the early signs in the pawn business that’s looking that way, but we still have a lot more work to do to optimize the business performance as to where we think it should go. So with that, I’d like to open the line up for questions.

Thank you, Mr. Grimshaw. We would now like to open the call to questions. [Operator Instruction] Our first question comes from the line of John Hecht of Jefferies. Your line is now open.

Good afternoon. Thanks, guys. First question, I know you guys highlighted a couple quarters ago some strategies for corporate cost savings. Are you done there, or are there more savings to go on a kind of recurring basis?

Hi, John. It’s Stuart. We’ve been through the, I would say, the hard yards of getting the easy wins where it has been duplication across those function and head office. We don't rest on that. I think there is still opportunity but it won’t be of the magnitude of what we've seen tenth past to shrink our head office by 45% in 18 months is fairly extreme so we would be more looking at the process improvement angle as opposed to the actual raw, hard cost cut-out.

Okay. And second question, just related to the overall trends, sort of the macro trends of the business, because you are impacted like others by local prices, low fuel prices and so forth. And you seem to have reasonably good performance coming into the final quarter from the prior quarter. Anything you can comment on the kind of macro trends, or is this just a block and tackle execute environment? What made we want to look for to kind of give us some aspects of a tail wind that mate help you, and others in the industry?

John, the macros are still playing around. We have even watched the sales and they change week to week, depends on the consumers to what’s happening. The change that really sort of occurred in the last quarter was -- I wouldn’t call it the block and tackle, but it’s similar to the hard yard. You have to restore front label, and coaching and managing, the teams and also measuring the performance of what is expected. And I would say that we lost a fair degree of sight around what it takes to be successful in customer engagement at the store level. We're actually now bringing that focus particularly the bear in the U.S Pawn business. And the Mexican pawn business have actually been doing pretty well over the last 12 months. So we’ve actually been just helping them so as to tweak heir model a little bit better particularly around what you should look for given the experience we’ve in the US. What we see is the macro environment is recently benign in terms of not seeing any rapid areas of growth coming out of it. But the issue for us as management is to try and exceed market expectations where we can by managing the business to a soft roll.

Okay. And if I can ask one final question, just so I can confirm from my perspective, is there going to be any more non controlling interest items in the P&L now that you have sold or just closed, any some of those other divisions?

We only had 94% of Grupo.

Okay. So 94%. Okay, you didn’t buy the whole, okay.

No.

No. So that’s the …

There will be a small bit.

So small bit for Grupo, and it’s at the only the final slug of that?

That’s it.

Okay. Thank you.

Thanks, John.

Thank you. [Operator Instructions] Our next question comes from the line of Christian Hoffmann of Thornburg investments. Your line is now open.

Good afternoon.

Hey, Christian.

Hi.

So I’m just looking at Slide 11, which is [indiscernible] normalized continuing results. So if I look at that I get EBITDA in the mid $50 million area. It looks like CapEx is trending around $25 million and interest is about $17 million. Am I thinking about the business in the right way?

I think from a CapEx perspective as we go forward, we’ve given a view to the CapEx trend out over the next couple of years, which will be an average of $15 million per year. So for the year gone, the number was a bit higher, but certainly for the year coming -- or the years coming to will see an average of 15 per year. If you try to work that into your model.

Okay. And I guess my follow-up question would be, if EBITDA is in the $50 million to $60 million area, and by my math the numbers have been rejiggered a few times, but I had EBITDA closer to 230 in 2012 which admittedly was the peak, but can you just kind of help me bridge the plus 200 to the 50ish area? I know gold has had an impact. I know shutting down U.S consumer has had an impact, but with all the changes, it's pretty hard to understand the story and really get a sense of what's going object. But it's a huge delta.

It’s a huge delta. I think the -- it’s probably best to answers it off-line because there is a lot of changes that occurred through that. We're out of U.S Financial Services, as Cash Genie, there is a U.S online business, gold was up. Grupo was contributing reasonably well. There is a lot of changes. It’s a bridge that we can walk you through but it will take a lot more to walk through than just a one-minute discussion on the phone, so perhaps we can catch up with you afterwards.

Who should I see for that? I know there is been some changes. There is well, I’m not sure to contacts anymore.

Yes, the contact would be Jeff.

It just come through, Jeff. This we will link mark in with that as well.

And should filings be normal at this point going forward or are there any other delays or complications that might -- that generally [multiple speakers] a bit?

Over the last delay your head was getting on the phone call today.

Okay. Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Henry Coffey of Sterne, Agee. Your line is now open.

Good afternoon.

Hey, Henry.

You’ve been through hell, so congratulations.

We are about to go through it again with you. That will be fine.

I will be polite. When we look at the capital structure, you have that very low cash cost of interest. Are you penalized on the convertible side with accounting, and what is the effective cost of that on a GAAP/versus actual basis some what’s the effect of cost -- what’s the GAAP cost of your debt versus the actual cash cost?

The GAAP cost -- give me a second.

Because of the accounting for the convert, you got the embedded derivative in there.

Yes.

There is a significant write-off of the borrowing cost sitting in those numbers in terms of the interest number for the year. And I will have to -- just give me a couple of seconds …

Sure.

If I can pull that up. I wonder if I have that at hand. But the amortization -- okay. The actual interest expense -- [indiscernible] the actual interest expense is about 6. The rest is accounting.

And is some of that just related to the accounting around the convert?

Yes.

So what you’ve got, sorts of expense you got sitting in there, the amortization of the premium, the debt premium, and the deferred financing costs, they’re the other two components that build that up.

Given that convert is probably never going to convert or not convert in a long time, is there a way you can adjust for that, or are you going to be sort of stuck with that?

We are stuck with the amortization of those costs. I mean, no matter what you do, you are going to pay for it. The only way in my experience, Henry, you can deal with that is to extend the whole financing structure out, which indeed is another cost which exactly hit you and that becomes more cash prohibitive …

Right.

… an accounting bleep. So that’s the considerations we have to throw into it.

What sort of from a cash generation, capital stock buyback, give us a sense of what sort of resources you’ve. Do you’ve excess cash flow here that we can start seeing deployed in buybacks? Do you’ve the capacity to support the growth that you’re seeing is in Mexico both with Grupo Finmart, as well as the Mexican pawn business there?

I’ll probably split it into two areas, Henry. One is the cash we generate from the pawn operations; we try and apply back into the pawn operations through loan growth or acquisitions should they make sense to us, or even as we see in Mexico some of the Denovo growth. The Grupo growth story is one of that how we use external financiers to fund the loan growth plus also use the cash flow generated to support origination, but also cover the expenses. So the quite distinct ways we manage our cash across both of those businesses. But the surplus cash we do prefer to look to reinvest into the business only because opportunities such we’ve seen in pawn where they picked up 25 stores once someone acquires them we don’t see them again. And these are unique opportunities we don’t want to miss out on and we think the market in its state being reasonably fragmented. Its great opportunity to deploy cash for assets which we’re going to return above the cost of equity anyway.

What -- when you put -- when you estimate where your cost of equity capital is what number are you using?

These are around 11%.

And then, I mean, under what -- are there any circumstances under which you would buy back stock? I know you -- you are at -- we are sort of in a three -- there are three public companies in your sector, and the other two are pretty aggressive at buying back stock right now.

Yes, we would never say never and certainly we think that we always look at it, but at this point in time it is in not on the radar.

And then the businesses we are looking at that’s the future of the pawn -- U.S pawn, Mexico pawn, Grupo Finmart. There is no other -- the lessons of a prior administration were they were looking everywhere, but these three businesses are the business going forward.

That’s correct, Henry. We just want to keep it simple.

Great. Thank you. And congratulations on all the work you’ve done over the last six months.

Thanks, Henry.

Thank you. And our next question comes from the line of Gregg Hillman of First Wilshire Securities. Your line is now open.

Hi. Good afternoon, gentlemen. Could you talk about Grupo Finmart a little bit? In the past you said that the restatement was only an accounting item and it didn’t really affect the cash flows for the business. Is that still your opinion?

Yep. That’s correct. Yes.

Okay. Since you guys have come on board have the fundamentals at Grupo Finmart been deteriorated since you’ve been involved with the company or have they improved?

I think the good way to answer that is probably in a couple of phase. One is, the origination growth of the company has been very strong over the period of time as it has been in the industry. So that hasn’t change at all. What has changed is the accounting policy recognizing the cash situation of the Company, so we’ve aligned the accounting and the cash consistently so that hasn’t been a change. That’s actually been a statement realization. I think the opportunities for us around some of the -- understanding the cost base and getting much closer with the risk profiling now that we are 94% owner, 76% owner, we think will strengthen the company. So I don’t think that things have worsened since we’ve been there. The statement, financial statements have more reflected the state of the company the way it’s been for a couple of years.

Okay. And then, Mark, the whole question of financing the growth at Grupo, I notice the interest rate, the interest cost went up quite a bit from 19 to 28 million. Can you explain that, and can you explain how you’re going to finance growth at Grupo and what kind of interest rate net of any hedges will it be to -- whereby your cost of funds is going to be on a go-forward basis?

Sure. The driver of the interest expense was predominantly the increase in the average debt held throughout the course of the year. And that is to support the origination growth.

Okay. I didn’t catch what you said. Could you say that one more time please?

It’s a mix of the debt on hand increased plus the interest cost associated with the with the debt on hand increased as well.

Okay. Okay and then the question of financing future growth and at what interest rate and what kind of spread or -- by the way, what’s the spread right now? What’s the net interest margin rate now for that business, or what was it for last year?

Was it 36?

Yes. So we’ve got a yield of 36, from 29% last year. The interest rate depends a lot on where the funding comes from. Some of that doesn’t come out of the U.S which has a hitch overlay on it, which probably averages at around 14%, 15% that must direct, which is lower. It all depends on whether we are -- how we’ve actually gone about the funding be securitized one way or another as well. So it’s a mixed average ratio of getting and then obviously we want the rate as low as we can so we can increase the net interest margin which drives more values at the bottom line. So we are very aware of it and part of the structure that we’ve put in place at EZCORP is we’ve put a treasurer in place here for the first time ever, and we have one in Grupo, so that there is a strong focus on the debt management side of that business that is managed both here in the U.S and in Mexico.

And the yield level loans is like 30% to 40%, right?

Yes.

Yes, 36 I think [indiscernible].

36, okay. Okay. Well, maybe I will follow up off-line about that.

Thanks, Gregg.

Thanks.

Thank you. [Operator Instructions] I’m showing no further questions at this time. I’d now like to turn the conference back to Mr. Grimshaw for his closing remarks.

Thanks Sabina. Thanks very much for taking the time to listen to the story and we will be back for you from just over a month time with the Q1. We will be around obviously for the next few days, so we will be very happy to take any call, should you want to get some further analysis or further color on the information we presented today. Thanks once again for your time.

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