Jeff Christensen - VP, Investor Relations Stuart Grimshaw - CEO Mark Ashby - CFO.

John Hecht - Stephens Inc. Christian Hoffmann - Thornburg Investment Management Henry Coffey - Sterne, Agee & Leach, Inc. Gregg Hillman - First Wilshire Securities Management.

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 talk to a little later, but I would like to mention that Joe Rotunda, joined us in May of this year and Joe was overseeing the pawn operations of both U.S and Mexico and Joe I believe is probably the best pawn operator in North America and we’re very grateful to have him back in the Company leading these businesses.

We’ve also looked to the system processes and how we’re looking at those in terms of aligning the general ledger and Grupo. Looking at the point of sale modernization through the pawn business and we’re looking at workforce planning as well, which will optimize the way we manage our workforce in the stores.

And we’ve made quite a lot of noise around the rationalization of our head office functions. Since March 2014, we’ve actually reduced head office numbers by 45% taking over 160 people out of the head office business. And while we’re doing all that, we’ve seen some signs that the business is responding well to the activities that we’re undertaking.

We’ve aligned for strategic initiatives with KPIs, which we meet regularly on. The transition to the new business segment reporting has made it much clearer for everyone to understand what is required of them in the period of time.

And importantly in the last quarter of FY15 we’ve the best quarter-on-quarter same-store loan growth that we’ve seen for over five years. So there are some signs that the work we’re doing well early days is starting to take some traction.

But turning to Slide 4, which just recaps the slide that we outlined on the 29th of July and one of the things you will see the slide quite a lot because this is a three-year journey as a minimum, so we’re not deviating from the plan.

But we’re competing in the end markets that we’ve attractive dynamics and the three areas we’ve outlined we believe we’re well positioned. We are in the top three in those businesses and each of them actually respond well to scale, which we can drive through organic and acquisitive activity.

The core capabilities that we’re seeing being rewarded is actually through customer leadership, and we’re seeing the customer satisfaction results while early and small still show that we’ve some strength and relationship with the customer.

And an undertaking initiatives to win on these markets and supporting that, we’re doing a lot of work particularly in pawn around mystery shopping where we can use the tools that we’ve there to coach and manage our teams to great levels of success for their engagement with the customers.

And particularly we’re starting to align the customer engagement with the incentive schemes for the store people and that is being well received and paying them on a timely basis which means they’re rewarded for the immediacy of what they’re doing. If I move on to Slide 5, this is coming back to the focus, simplify, and optimize.

It’s a very simple strategy that relies on executing well. And under each of these I thought we would give you a bit of color as to what has happened in the period of time. We have acquired a number of new pawn stores and that was 13 in the last quarter to go with the 12 we did earlier in the ’15 financial year.

In Mexico, we’ve identified three Denovo sites that we’re looking to undertake and grow. And in terms of Grupo Finmart we’ve reestablished the management team in terms of hiring new CEO, CFO, and Chief Risk Officer, which I will talk to you on the next slide.

As we mentioned previously, we close the U.S Financial Stores and we did that on time and on budget. We closed 480 stores and with that a 1000 of employees departed the organization. We are able to do that successfully if you can call of that. It’s never a great thing to close the business down, but it was the right thing to do at the time.

And in terms of building capabilities, we were actually started to rebuild the EZCORP executive team and I will talk to that on the page. In the operating model, head office has been reduced in size. We’ve actually brought in someone to look at product and process, which hasn’t been done before.

We’ve a new Chief Risk Officer, which also is quite unusual, but strengthens the risk parameters that we operate within. As I mentioned, the mystery shop programs extended through both the U.S and Mexican pawn stores and the management team been responding extremely well to the valuable feedback they give us around the customer engagement.

As I mentioned incentive plans we have in place to support this. In the rationalization, we actually have closed 44 stores and we look that from the three to five year horizon. There are number of stores that wouldn’t make the return objectives that we have set. 12 of those were in the U.S and 32 were in Mexico.

As I mentioned, the inventory reduction program has worked extremely well.

The span of control in the U.S pawn we’ve actually improved that so that the district managers have just under around 8 stores that report to them and this was as high as 10 two years ago when it gets us back to something close to where we were in 2010 when Joe was running the organization and we believe that the coaching environment we’re creating is going to be critical to the success of this business, as well as ensure that we extend a 10 year as store managers to the level and the duration that we expect.

And the foundational work started on Grupo to support improved underwriting and we’re looking very heavily at risk based pricing. If I move on to Page 6, this really talks to Grupo. I will remind you that in April, May of 2015, we move to a 94% ownership structure which gave us more control of the operation.

We have a new CFO, a new Chief Risk Officer and a new CEO started in the first quarter of this financial year, a new Treasurer staff this month. Both of these have a very strong -- always have a strong mix of background be it on traditional and non-traditional. A number of them come from Scotiabank, Citibank, and Provident Financial.

So we have a very good mix of professional capability, which is designed to support the business as it goes through its next phase of growth while we build the platforms and foundation for success.

The risk management focus is definitely one that has been brought to the fore with this formal credit committee and asset and liability committee established.

And we’ve had third-party recommendations in there looking at how we can improve the underwriting process for both government agencies and individual borrowers which we will undertake at the time.

In terms of the increased profitability focus, we’re looking heavily at loan term and pricing per contract, and we’re looking at prioritizing segments and conveners where we believe the returns are much greater based on the performance we’ve and particularly we’ve been looking in customer segment of the Mexican social security institutes which is the pension segment, which we believe offers tremendous potential.

And we will be undertaking a very thorough cost review of the Grupo business to start and showing that we align the expense ratios to where we hope we can get to.

In terms of the operational efficiency, we have a lot of manual processes which we’re undertaking to automate and one of them will be aligning our people soft general ledgers between the U.S operation and Grupo, so it’s consistently aligned. So with that, I’ll pass over to Mark Ashby to provide more color on the numbers..

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 bad debt reserving was another key change. This most significant change is to reserve a 100% of a loan outstanding where no payment is received within a consecutive 180 day period.

If we do receive payments on those loans subsequent which we do, we use the cost recovery method in those payments are subsequently received and recorded initially against the bad debt expense than any average and continuing revenue is then applied to the interest revenue line of the P&L.

That’s a significant change and you can’t say as we get into the Grupo numbers that if you do have a couple of the conveners, a couple of the agencies that slip into a 180 days which can happen for various reasons, then we reserve a 100% on what I would say is quite a conservative basis.

As we start to collect those, if and when, then that is part of the operational efficiency that we need to have clear focus on what Stuart -- part of what Stuart was referring to early on. The asset sales, it’s a little bit of a nuance.

If you go back, we have the asset sales in FY14 and Q1 FY15, the effect was to reverse those asset sales and keeps the loans on book. So the asset sales of the portfolio we’ve made through the trust, those trust are now consolidated back into our books, so we get the revenue effect.

We also get bad debt effect on the -- under the policies that I’ve outlined above and in addition to that we get the interest expense and the liability that happens to be sitting out there. So they -- those three items have changed the profile of the Grupo business for us.

Not necessarily for bad reasons, it really is does give us better visibility to match some of the cash requirements of the business to the way we report. By way of reference, if I move to Slide 8, and particularly if you look at the top chart is the Grupo Finmart net loan balance restated versus original. It’s all in U.S dollars.

If you look at FY14 Q2, you see that the balances were roughly the same. If you move forward to Q3, Q4, and Q1 FY15, you see the impact of the consolidation of the trust back into that numbers. So we now have a higher balance to start to generate some revenue from. So you can see that.

The original net line balance was declining as we sold off the loans and now we have been restated back up to that level. So that drives interest income as does the interest spread. And that is really reflected in the lower part chart there, which is the Grupo Finmart interest income restated versus original.

And if you look again from around Q3 of FY14 and just have a look at Q3, Q4, ’14 and Q1 ’15, you can start to see a significant departure in revenue recognition compared to what was in the past. Obviously, we hadn’t published Q2, Q3, or Q4, so there is no original loan revenue to compare to.

But you can see the growth in interest income partly because we have the trust consolidated and partly now because of interest spread starting to compound on top of each other as it grows coming forward.

If I move on to -- into Slide 9, what you’re going to see over the next few charts really reflects a lot of what Stuart introduced before in terms of the themes covering impacts of cleaning out inventory focused on driving PLO growth, particularly as Stuart mentioned since Joe has been on board.

Restructuring expenses that we called out on July 29, that will be commencing to incur, but we’ve split it out across each of the operating unit, so that you can try and get an idea of what the normalized numbers look like. So I will start to talk about that. From a total perspective and a continuing operations basis, overall revenue was down 1%.

Net revenue was down 3% and that get really reflects the initiatives to clean out aged inventory and implementing -- implementation of the tightened reserving policies in Grupo and the targeted reduction in scrap volume where scrapping was wound back deliberately to make sure that the we had appropriate inventory to be able to sell the customers at the right point in time.

Expenses in this total chart show an increase of about 13% which is on $50 million, but really it does include nearly $66 million worth of restructuring in payment and other discrete items which I'll touch on a little bit further into the presentation.

The EBIT numbers I will cover in terms of each of the operating unit contributions in future charts. If we have a quick look at interest expense, if we look at the Grupo interest expense that really was due to higher average debt for the year and that was supporting predominantly originations and also the operating costs of the business.

The increase in corporate interest cost is predominantly from the increase amortization of the debt premium associated with the convertible notes that were raised in the previous financial year. So that's the single biggest driver. So that really is the summary of the [indiscernible] year.

On Page 10, we look at the total restructuring charges and other discrete items. Now these are attributable to both continuing and discontinued ops, but just to give you a wholesome picture of what we saw. The cost of USFS, the U.S Financial Services exit, you can see it was in total was about $38.4 million.

That covered the CFPB agreement which we announced a month or so ago of $10.5 million and the rest covered the severance lease exit costs and goodwill write-off.

There are still some of those charges coming into Q1 and we would expect -- and that's on a discontinued ops basis, but we would still expect another $2 million to $3 million flowing through into Q1.

The second point to do with business rationalization costs of $32.6 million, that does include restructuring and have a discrete items and some of the key drivers of that the pawn store closure costs, some impairments to run the underperforming assets, legacy IT, asset write-offs, and we went through a very rigorous process that Stuart touched on earlier about determining which stores to close, whether there are -- whether we thought that they’re currently achieving acceptable financial returns or could in the future.

There was an impairment we put through on the Cash Converters Australia investment of $29.2 million. That reflects the movement in the share price and currency movements where the Australian dollar depreciated against the U.S dollar.

Restatement expenses, we used the word estimate in there $4.1 million, that wasn’t -- clearly wasn’t a cheap exercise and you have to involve a lot of external parties including two groups of auditors and a couple of other accounting firms. Everyone had a seat at the table. And then there was the clearance -- the clean up of the Cash Genie U.K.

Regulatory Compliance and that was another $4 million in it. In terms of restructuring expenses, on a continuing operations basis, again we think there is another $2 million to $3 million coming through as we just wrap up the first quarter and we will finalize that over the coming weeks.

Slide 11 to give you a normalized view of continuing operations and by normalized what we have done is we have taken out the discrete items that I referred to the restructuring charges and put a constant currency view on the continuing operations. So clearly that affects Grupo and affects the Mexican pawn operations which is the bulk of that.

The net revenue on a normalized basis actually increased by 2% for the year and net revenue increased by 1% and you will notice that the U.S pawn was the area where the net revenue did not increased, actually decreased by 5%. And we'll touch on that a little bit later on.

Again, the gap between the 2% and the 1% does reflect in each of these for the margin impact of clearing out all the inventory in particular. Other expenses -- sorry, corporate expenses sitting at minus 7% for the year, and which was down $5 million.

The other expense line is the CCV profit that we take as a portion of their profit into our books or loss. It was a profit in ’14, it was a loss in ’16 -- sorry in ’15. So that’s what that prefers to.

If I jump down again to the bottom line on a normalized basis, we’re looking at loss of $23 million compared to $8 million and you will see where that comes from as we go through the next couple of charts.

As we indicated a little while back, we had planned to move to more effective segment reporting to reflect the way the business is actually managed and you would have seen that in the 10-K and this is a snapshot of each of those operating units.

The normal -- these are normalized numbers, so again the -- for the U.S pawn, we just take that restructuring charges and other discrete items and we could have it as a part of the reconciliation in the back. We have a chart that takes you from GAAP to non-GAAP. In total, the revenues were down 4%.

The PSC revenues were down 1% for the year, but we did see a shift in trend, particularly we got from Q3 to Q4 and I will touch on that on the next slide, but we’re pleased to say that we’re seeing continued improvements in PLO growth and PSC revenues as a result. Merchandise sales -- most merchandise sales were up by 3%.

That really does and you can thus reflect the clearance of aged inventory. The merchandise margin went from 37% to 35% and that has a negative impact clearly on the business for the year. Scrap sales had a significant impact in revenue.

And as I mentioned earlier, it was a direct result of conscious decisions to back off scrapping inventory that could otherwise be sold to customers and generate more appropriate revenue, particularly once we start to deal with the aged inventory levels out there. So overall, that gave us a net revenue reduction of 5%. Expenses were basically flat.

And contribution level which is referred to as EBITDA was $92 million for the year against $113 million last year. The next chart, Page 13, calls out a couple of key indicators for the business.

The U.S pawn line balance in the top left hand corner, obviously that’s a key driver of that revenue structure and you can see the change in trend in terms of growth over the last two quarters of the year. At the end of the year, the PLO balance was minus 6%.

We had been minus 11% earlier on in the year and the trend have reduced on a same-store basis we’re growing that trend was exactly the same. So we’re moving in a positive direction and that trend continued into the first quarter. The pawn revenue that follows the trend of the PLO and again we’re pleased with the direction that’s heading.

The pawn store count, you can see over the course of the year that we made some acquisitions, a couple of Denovo’s early in the year, but we also had closures.

I'd touch on that earlier about the closures of the stores in September as a result of the them being underperforming, although today we didn’t see that could hit financial -- hit all financial hurdles. The bottom three charts really reflect the impact of trying to clean out inventory.

So this shows -- the first chart shows the sales volume last year versus this year while the sales volume is higher. You can look at the merchandise margin and see for the first three quarters were significantly lower.

It wasn’t until Q4 we saw that across and that is a reflection on the fact that if you look at the right hand column, the aged inventory started to reduce to acceptable levels and now we think that the pressure on the merchandise margin will be alleviated coming into FY16.

The next page, which is 14, it’s a similar theme in terms of margins, in terms of cleaning out inventory, a similar theme in many aspects of the restructuring the business. Although on a constant currency ignoring restructuring costs and other discrete items to give you a view of what’s happening in Mexico, and it’s a positive story all the way down.

We’ve seen growth in overall revenues. We’ve seen growth in PLO. We’ve seen growth in merchandise sales. Again, a contraction in merchandise margin from cleaning out the old inventory, our scrap sale not quite as bigger impact in Mexico. So on the end result we saw an increase of 15.3% on net revenue.

Total expenses were basically flat and at an EBIT level we sort of turnaround from a contribution of minus $4 million last year to a positive $3 million in FY15. Page 15 has the same indicators that we used for the U.S pawn.

And you can see the growth in the top left hand corner in the pawn line balance and which is being quite consistent across the course of the year. There was no new stores. As a matter of fact, in Q4, we closed nine stores towards the end of the quarter. The PSC revenue also increased over the quarter -- over consistently from Q2, Q3, Q4.

The impact of clearing inventory is shown in the bottom three charts as well. And you can say the Mexico pawn sales were consistently above last year, but we did have the gross margin significantly impacted across the first three quarters and it wasn't until Q4 that we started to see the -- that margin start to improve and that’s a percent of sale.

That again is a direct reflection on the reduction in aged inventory and the chart in the bottom right actually shows that quite starkly in terms of the improvement that we made. I will just have a quick sip of water. Thank you. Okay.

Grupo Finmart, the -- a couple of callouts in terms of the performance of Grupo Finmart, obviously the profit before tax is not an outcome, but we like to maintain. But we’ve seen a few things occur. First of all, obviously, our ownership went up from 76% to 98% over the last quarter of the year.

I think the interest income continues to grow and that's driven by some strong growth in originations about 24% on last year. But you also will note that the bad debt expense increased from $20 million to $31 million for the year. And that’s a significant increase and as a percentage that grew faster than our interest income.

A lot of that was in Q4 and that is driven predominantly by the impact of the 190 day policy that we have.

So clearly the opportunity to recover some of that money is there and that comes from the focus that Stuart spoke about earlier which is somewhat reflected in the increase and the expenses, which is the investment in the infrastructure to put appropriate infrastructure implies to be able to start to manage the business to the levels that we do expect going forward.

We talked -- if you move to chart 17, not a lot to say about this, but this is just the summary on the U.S Financial Services, which is now close very pleasingly, it occurred on time and it occurred under our initial budget that we anticipated. There were some good negotiations and great collection efforts that put us in a better position.

I don't plan to go through this in any detail, but just to give you a snapshot of what it look like compared to last year. Finally, just a couple of points on the balance sheet.

Continuing the themes that have been talking about earlier, we’re starting to see the growth in the PLO on a constant currency basis as we adjust the impact of depreciation of peso, plus we’re seeing it across the United States, we’re starting to see that growth at a level that we are -- I won’t say we’re happy with, but continue in the direction that we like to see.

Inventory cleanout was a significant focus for the year. I've touched on that across each of the business units. Aged inventories being flushed into a 11% of growth compared to 20% a year prior. Aged general merchandise is now down to 5% of gross general merchandise.

General merchandise turns, improve up to 2.8 times in U.S pawn and 2.4 times in Mexico, which was a significant improvement in Mexico, which is a 56% improvement. Aged jewelry reduced to 15% of gross inventory which is down from 38% last year. So that’s a significant reduction again.

So all that does help in terms of easing gross margin pressure coming into next year. The other item and we touched on Grupo and its part of the restatement is we’ve a very robust bad debt reserving provision practices in place. The 190 days it’s pretty brutal, and but it does give focus to the business.

We think the revenue recognition is now more appropriate in terms of recognizing the cash cycle. But also it does each of those gives opportunity for the business. If we can improve the time to collect the whole loan that starts to affect profitability quickly, same is recovering your bad debt.

On particular on the 190 days as we all as you focus on general reserving ahead of payroll. I won’t take much time on those, but they are key components of trying to draw profitability for Grupo. So that’s a snapshot of the year. Hopefully it gives you a little bit more color than trying to scroll through the 10-K and I will hand back to Stuart..

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..