Good day, ladies and gentlemen, and welcome to the EZCORP fiscal 2016 third quarter earnings 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, conference is being recorded. I'd like to introduce your host for today's conference, Mr. Jeff Christensen, Vice President of Investor Relations. Sir, please begin.

Thank you, Vince. And good morning, everyone. Welcome to EZCORP’s third quarter conference call. 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 were available for download from our website at investor.ezcorp.com. Before we begin today, 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 risks and other factors that are discussed in our annual, quarterly and other reports filed with the Securities and Exchange Commission. Now, I'd like to turn the call over to Mr. Stuart Grimshaw. Stuart?

Thanks, Jeff, and welcome everybody. Today’s results continue the strong pawn operating results that we've seen over the last three to four quarters. And I think it's worthwhile congratulating all our pawn team, in particular store managers, in the way they’ve gone about their business and met the needs of our customers. The results show a 7% growth in net revenue, which has translated through to a 20% improvement of profit before tax, which evidences some fairly strong operating leverage that sits within the company. As we started down our path about a year ago, we highlighted three areas of focus for us, being focusing on our customer, simplifying across our business, and optimizing for the future. On slide four, you’ll see those highlighted. But the strength of the quarter, we can see, with same-store PLO growth increasing 10% in the US and 19% in Mexico, and that’s on a constant-currency basis. And this represents four consecutive quarters of improvement in same-store PLO growth in the US and eight consecutive quarters in Mexico. We’ve spent a lot of time over the past 12 months in looking at how we serve the customer and this is being driven through investments in our customer engagement and we’re seeing that through the strong pawn results. We’ve embarked upon a lot of coaching and mentoring at the district manager level where we have invested in resources, where we have narrowed the span of control where it used to ten to eight, and we’re starting to see the benefits of being closer to the store manager. We’ve also invested in video mystery shop programs, which gives us an insight as to how the customer interacts with us, and we use that as well in our coaching and mentoring, which is proving very beneficial to our…

Thanks, Stuart. Good morning, everyone. I’m going to take you through a few pages talking about the financial results for the quarter and the year-to-date basis. Just before I do, thank you for your patience and the fact we delayed the call for a week. As Stuart touched on, we've had a pretty complex structure. And as a part of our remediation plans, we’ve reviewed some of the tax accounting going back quite a few years. And we thought it was prudent to complete that before we filed the results. So good to see that we’re now actually up-to-date with those remediation plans. So if I kickoff talking about the GAAP results for the quarter and for the year-to-date, it was a strong quarter, really focusing on continuing ops. Grupo was now classified as discontinued ops. So if we look at the quarter, as Stuart mentioned, the pawn loans outstanding, the PLO, is up 9%. Strong growth in the PSC, the pawn service charges, 8%. Merchandise gross profit was up in dollars and percentage continued to improve. And that gave us a profit for the quarter and a continuing ops net income of $2.9 million against a loss last year of $700,000. On a year-to-date basis, total revenue was driven positively by a $11 million improvement in PSC revenue, offset by lower scrap sales. The movement in exchange rate also had some negative impact on a GAAP basis, but I'll talk to the constant currency numbers a little bit later. But the respective net revenue was up 6% for the year-to-date. A continued focus on cost management that gave us the opportunity to leverage the profit growth, a $7.6 million improvement for the quarter and $10.6 million year-to-date, which is 116% improvement. If we turn to page six, these results…

Thanks, Mark. Turning to slide 14, it’s about a year since we announced the strategic plan. As we look back, it was really triggered by bringing Joe Rotunda back to run the pawn business, which was a terrific asset for us, and then bringing Mitch Fadel in to run the US pawn, which was start of the change of the leadership and a refocusing of the business back into the pawn business, which we know so well. But if you look at the path that we’ve taken, a lot has happened in that 12-month period of time. And we’re at a stage now where we’re moving forward. We’ve got the pawn fundamentals continuing to improve. So as we have refocused the business, we haven’t lost sight of the customer through the whole process. We’ve got commitment for the credit facility and we entered the definitive agreement for Grupo Finmart. We still remain on track to close that by the end of the fiscal year. We're upgrading the POS technology. We’ve had the point-of-sale technology in place since 2001 in its current format. While we have invested in it, it’s time that we actually move into the next generation. That will be supported by the investment in customer data, analytics, which will provide more information to the store manager at point-of-sale, provide more efficiency to the storefront and its processes as well. So we see that as quite critical in the next stage of our evolution. Our corporate expenses are tracking down, which is pleasing to note, and we’re also implementing the workforce management system which will actually provide greater productivity at the storefront level. So turning to slide 15, which is a bit of a summary of where we are and where we have come to, we’re continuing to focus, simplify and optimize, as we outlined in the earlier slide. The performance of the company has strengthened over that period of time and the operating leverage, which we have seen come through these results, is clear to see. The intense focus on market leadership and servicing and satisfying our customers’ needs for cash is critical to our success and we have seen the benefits of the programs we have in place around that, with the PLO growth in the US and Mexico, strong double-digit. The PSC following closely behind that. And pleasingly, the merchandise margin improving quite markedly in Mexico and also in the US. We will continue this investment in the pawn business as it is critical for us. Grupo, we have announced and we have the credit facility in place – about to be in place, assuming we can close that. With that conclusion, we would like to open it up for questions.

Thank you. [Operator Instructions] Our first question is from John Hecht of Jefferies. Your line is open, sir.

Hi, John. He might be on mute.

I'm sorry, I was. Sorry about that. So, first of all…

That’s right is the only question I could answer.

Congrats on all the progress and the improvement with the pawn metrics and then also simplifying the business structure. So first question is around the pawn metric. It seems like you guys are – you’re doing something to show growth at the same-store level that appears to be more rapid than other industry trends. Is this new customer acquisitions or are you optimizing the current customer base? Or do you have any thoughts or steps around that concept?

I think a couple of things. One is, because we are actually growing at quite a rapid rate, we are by default getting market share. So that’s pleasing itself. But having said that, we did lose market share previously. So I think we’re getting everything in the right line. The one thing that we have really focused on is focusing on every customer who comes in the store. We know our customers are quite dynamic and they’re adjustable. I know there’s been a lot of talk about gasoline prices and the like. But gasoline prices actually were impacted early last year. We know our customers actually adjust their patterns, spending and otherwise, within about 60 days of some macro event happening. So we’re dealing with the customers’ needs for cash. They’ve adjusted their needs based on what is coming through the door. I think we’ve adjusted to that. We are rebuilding the market share. I think our customer engagement, as you’ve seen, is very good through the net promoter score. We’re doing it through mystery video shopping as well, making sure we’re on top of it. But I think the real secret lies at the store level where we’re focusing on every customer as an individual, not as a mass group. So we’re spending time with the customer to understand their needs. And sometimes, it does sound a little bit clichéd, but actually doing the basics really well. Drives a lot of value in this business. And if we had too much complexity, which we’ve seen in the past, it can actually distort the economics of the business. So simplicity has actually been one of the key benefits of what we have been doing. And we’re seeing that with the response from the customers.

Okay, that's very helpful. Thanks. Couple of questions on the Grupo sale. First, is there any centralized corporate G&A or corporate expenses that will go away once Grupo is out of the picture?

Anything was directly allocated, John, to Grupo, it’s actually already in discontinued ops. We know that there was, at the start of the year, some of the restatement costs and the like. I think we’ve really called those out. So as much as we can already isolate has been fundamentally isolated. There’ll always be bits and pieces. I wouldn’t think there’s much that we haven’t already…

I understand it's not [indiscernible] but I'm wondering if, from a balance sheet perspective, you can just give us a simplified picture of what your debt, I guess your [indiscernible] debt, so forth, and your cash levels might look like depending upon whether you’re able to find someone to replace [indiscernible].

I couldn’t make it. Sorry, John, can you repeat that? The line is not very good that you’re on.

Yeah, I apologize. I’m in a train station. I’m wondering if you can give us kind of a quick picture of what the – I guess the capital structure would have looked like, assuming you’re able to either, number one, find a replacement financier for the intercompany loan or you’re not. What are the potential outcomes based on how the financing looks like at the resolution of this deal?

Well, I suppose there’s multiple scenarios in terms of the sale, depending upon what’s in the contract. So it gets hard to sort of give you exact position until we complete the transaction.

Intercompany debt is payable back over three years on a 30/40/30 basis. And that probably gives you the best insight. We get repaid over three years on a structured basis and the rest is pretty much a moving part, which is really too early to tell until we can get closer to the – once we get the antitrust approval, we’ll be in a better position to understand that.

Okay. And that’s a 30/40/30 on intercompany loan that they would pay you back?

Yeah, that’s correct.

Guys, thanks very much.

Thanks, John.

Thank you. [Operator Instructions] Our next question is from Alexander Lach of Camden Asset Management. Your line is open, sir.

My question has been answered. Thank you.

Thank you. Our next question is from Christian Hoffmann of Thornburg. Your line is open.

Good morning. Can you just talk about the rationale for the revolving credit facility and some of the key terms there?

At this stage, we haven’t actually finalized the documentation, so we’re still going through the terms, Christian. So it’s too early to do that. The rationale behind it, it just gives us flexibility. We are very keen on expanding our pawn businesses both in the US and Mexico. And that will just give us flexibility to take advantage of opportunities as and when they come up.

Do I understand that correctly that you could use it to grow the loan book as opposed to actually buying stores or is it both?

At the moment, we’re pretty self-sufficient on the loan book. So it’s more focused on the acquisition than the loan book, Christian.

Okay, fair enough. Thank you.

Thank you. [Operator Instructions] Our next question is from Charles Nabhan of Wells Fargo. Your line is open.

Hi. Good morning. It's pretty clear the business – the core pawn business has generated some momentum based on the same-store sales growth this quarter. But I think as you alluded to, it's off a low base in the third quarter of 2015. So my question is, as we get into next year, when the comps become – the year-over-year comps become a little more challenging, is your expectation that you'll continue to generate positive same-store growth? And if so, how should we think about that trajectory as we get into 2017?

Thanks, Charles. I’m not going to be able to provide the input for your model at this stage. But I would say to you that the management objectives we always have is to have positive growth, which means that we’re actually exceeding the needs of our customers. So the internal targets we always have are around positive momentum in our business. I think it’s very hard for you to go to a business who actually models their P&L on a negative performance. So I think it’s fairly appropriate to suggest that we are looking for positive performance. But the magnitude of that is an internal target that we don’t disclose externally.

Okay. And as a follow-up, I'm not sure if you can comment on this or not, but is the commitment for the facility contingent on the closing of the Grupo sale?

No, it’s not.

Okay, thank you.

Thank you. Our next question is from Steve Beckwith [ph] with Stifel. Your line is open, sir.

Hi, guys. Thanks for taking the call. Good quarter. The new facility that's in place – or should be in place, can you use that to repurchase convertibles in the open market?

We haven’t got through the terms and it will be subject to the lender’s approval, should we do that, because you’d be actually – I’m just speaking out loud, but you’d be actually using a senior facility to take out a junior facility. I’m sure in the terms and conditions, it will be subject to lender’s approval. I’m not saying that we should – neither a yes or a no because we haven’t actually gone that far down the path, Steve.

Fair enough. Usually, if it’s a secured facility, the lenders are compliant because they they’ve got the collateral to back up the repurchase. So your repurchase…

Yeah, I understand that. But having worked with lenders over many years, I’ve never found them to be a group that thinks the same way.

Of course not. That's why they are lenders. To that point, on that front – I'm sorry if I missed this. What was the collateral package or has that been disclosed yet for the facility itself?

No. Not as yet. Not as yet, Steve. As I said, we still [indiscernible] that we’ve got a commitment. We’re still going through the terms and conditions.

Great, okay. Thank you very much.

Thanks for your interest.

Thank you. At this time, I see no other questions in queue. I will turn it back to management for any closing remarks.

Thanks very much, Vince. I would like to thank everyone who dialed or logged in to the webcast for their participation. Mark Ashby and Jeff Christensen are available for follow-up questions later this morning. That concludes our call and I’d just like to thank you once again for your interest in the company and have a great day.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect.