Jeff Christensen - VP, IR Stuart Grimshaw - CEO Daniel Chism - CFO.

John Hecht - Jefferies Group LLC Vincent Caintic - Stephens Inc., Greg Pendy - Sidoti & Company, LLC.

Good day, ladies and gentlemen, and welcome to the EZCORP Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I would now like to turn the conference call over to Jeff Christensen, Vice President of Investor Relations for EZCORP.

Please go ahead Jeff..

Thank you and good morning everyone. During our prepared remarks, we will be referring to slides, which are available for viewing or download from our website at investors.ezcorp.com.

Before we begin, I'd like to remind everyone 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 or implied by these forward-looking statements due to a number of risk and other factors that are discussed in our annual, quarterly, and other reports filed with the Securities and Exchange Commission. Now, I would like to turn the call over to Mr. Stuart Grimshaw.

Stuart?.

Thanks Jeff. Thanks everyone for joining us. Today, we're pleased to announce continued accelerating financial performance as the result of meeting our customers' needs for cash better than our peers, as you'll see through this presentation today. If we turn to slide three.

Importantly, the net income was up 163% with basic EPS up 170% to $0.27 per share. Adjusted net income was up 27% and Danny will take you through this in the slides of the deck. Importantly, net revenue was up 9%, with PLO also out 9% and PSC up 11%. We also strengthened the balance sheet with the cash balance up 151% year-on-year to $285 million.

Importantly, the Latin American segment continues to deliver strong performance. Their market leading same-store PLO, up 8%, which is 17 consecutive quarters of same-store PLO growth. We've got market leading PLO per store, which was up 17%, further increasing our scale to $93,000 per store.

Latin America now contributes 30% of total EZCORP pawn profit, up from 18% in Q3 FY 2017. And as you can see, this represents a strengthening of the Latin American store count with recently acquired stores in Mexico of 63 on top of the 205 stores in LatAm that we have grown during the course of the year, taking our year-to-date count to 451 stores.

This now represents 47% of all our pawn stores being based in Latin America and provides a terrific springboard for growth opportunities for us. In the U.S., we've got market-leading PLO per store of $282,000 and this is the eighth consecutive quarter that we have led the market.

As you'll recall from Q2, we mentioned that we were holding inventory a little longer than we had previously considered due to a delay in tax checks. And when this [Indiscernible], we'd be focusing on reducing this inventory balance, and we thought there might be a small impact upon gross margin at that time. We, in fact, did, move inventory.

We almost doubled our inventory reduction. But we actually increased our margin to 110 basis points in that time, which is a strong performance of reducing inventory balance and getting a greater yield on our inventory portfolio. We were -- our PLO was off for the quarter and we're a little surprised.

But when we looked into the market, it was a very good performance overall on a comparative basis. And as we saw through the same-store PLO position of the U.S., we continue to gap to our nearest competitor. Turning over the page to what we call the leverage page. We continue to see the benefits of driving a focus on revenue and on costs.

And particularly when you look at the Latin American segment, we are very pleased to see the leverage we are getting out of the segment and once again, justifying the strategic investments we have undertaken. And we still believe that there is future growth opportunities that sit within this segment. The U.S.

continues to drive a solid cash outcome and continues to maintain its leverage position, which has led to the overall corporate position being stable at a 20% margin, which we believe is a very strong position. We turn over the page to page five and we see how the 83% increase in Latin American stores has actually occurred during the three quarters.

What we are really pleased to see is how the opportunities are presenting themselves. We continued to be disciplined in these acquisitions. And we believe, they will return strong earnings forecasts for us over the terms of our ownership as we bring our unique operating model to bear on the practices of these companies.

And it is really pleasing to see the growth we are getting out of this Latin American segment. With that, I'll turn over to Danny to go through the financial numbers in a bit more detail..

Thanks Stuart and good morning everyone. We'll start with the consolidated GAAP results on slide six. This represents the 10th consecutive quarter of growth in net income and earnings per share. Net income rose 163% with several primary drivers.

First, we experienced 9% growth in pawn loans outstanding or PLO, leading to a similar percentage increase in net revenues. Second, Latin America, our fastest growing segment, as Stuart mentioned, delivered outstanding profit before tax. This was up 69% on strong organic and inorganic growth.

We acquired 133 pawn stores in the first quarter and another 63 near the end of the most recent quarter. Third, with its large scale, U.S. pawn continued to generate significant profit of $21.4 million this quarter. The quarter's results also include a $5.2 million pretax gain on litigation settlement and a $3.3 million discrete tax credit.

Operations expenses were 72% of net revenues, up from 70% this quarter last year, mainly from the addition of acquired stores. This quarter also saw a healthy increase in interest income. That reflected the successful restructuring and the notes receivable in September related the Grupo Finmart sale.

We continue to receive timely payments of both principal and interest in accordance with the terms of those notes. Interest expense was also a bit higher. In May, we issued $172.5 million of convertible notes due 2025 bolstering or flexibility to capitalize on growth opportunities.

While we're recording GAAP interest at an assumed rate of 8%, the coupon or actual cash interest we pay on these notes is at a very attractive 2 3/8%. The net effect on the interest -- on the convertible notes, and the incremental interest income from the Grupo Finmart notes receivable was a $600,000 reduction in net interest expense this quarter.

Now onto slide seven. Here the results on a normalized basis after adjusting for the discrete items mentioned earlier and for constant currency. Acquisitions and strong organic growth drove the 10% increase in PLO and net revenue. This is one percentage point higher than the GAAP figures, reflecting some foreign currency headwinds in the quarter.

Merchandise margins expanded 110 basis points to 38%. Higher interest income and lower U.S. corporate income taxes magnified the improvement in net revenue, yielding a 27% increase in adjusted net income. I want to provide a little color on taxes.

In the first quarter conference call, I mentioned that I expect a fourth quarter charge of $2 million to $2.5 million to further revalue certain short-term deferred tax assets due to the new tax law. Those short-term DTAs arrives at the 24.5% U.S.

federal tax rate effective for us this fiscal year, but will reverse at the 21% rate effective in future years. I now expect that fourth quarter charge to be near the low end of that range or about $2 million. Excluding discrete items, I expect the effective tax rate to be about 33% for the full fiscal year.

The year's discrete tax items should almost offset each other. Our 2019 effective tax rate should be 250 to 300 basis points lower than this, reflecting the lower federal rate in effect this year -- this next year. Slide eight presents the results for U.S. pawn.

Our disciplined approach to pawn lending delivered an industry-leading PLO yield and pawn service charges per store. More affective inventory management reduced the balance by 7% or just over $9 million. That's almost double the inventory reduction we saw this quarter last year, while the U.S.

pawn delivered the industry's highest sales and sales gross profit per store. Inventory turns accelerated to 2.1 times from 1.9 times in the immediately preceding quarter. At the same time, merchandise margins increased 110 bps to an industry leading 38%.

Same-store figures on this slide were adjusted for the estimated impact of the hurricanes we saw in Q4 last year. Same-store pawn loans were down 1% and pawn service charges were flat. That's on top of a strong 14% same-store PLO growth this quarter over the last couple of years.

While we were a little disappointed initially to see the -- that it was not a positive PLO growth figure in the U.S. As Stuart mentioned, it actually was a pretty good performance in the current environment relative to others in the market space. Moving on to slide nine. You can see U.S.

pawn's net revenues were equal to the prior year quarter and its pretax contribution was down 10%. As you know, that reflects the continuing impact of last year's hurricanes.

It also reflects higher expenses from an increased number of team members per store and other store investments to enhance the customer experience, all of which are designed to improve future profits.

The green highlighted section near the bottom shows normalized results adjusting for the estimated impact of hurricanes on our pawn service charges in the quarter. On that basis, profit before tax was down 3% in the quarter and it increased 7% percent year-to-date. On slide 10, you can see U.S.

pawn added to its strong record of market-leading same-store PLO growth. This slide shows same-store PLO growth by quarter, stacked on the same quarter of the prior year. Let's contrast that with our public pawn competitor, which you see on the lower portion of the slide.

In virtually every case, EZCORP delivered higher numbers, suggesting we continue to take market share. Slide 11 shows the latest quarter of U.S. pawn's per store metrics compared with our largest competitor. Our U.S.

pawn segment delivered the industry's highest PLO, PLO yield and pawn service charges per store, driven by disciplined lending practices and a focus on creating the best customer experience and meeting their need for cash.

Our 13% larger PLO per store combined with a 200 basis point higher yield produced pawn service charges per store that were 33% higher than the primary competitor. This represented the eighth consecutive quarter of market leading PLO per store, reaching $282,000 this quarter.

Similar to what we saw in pawn loans, our 6% higher inventory sales per store combined with an 80 basis point better margin drove sales gross profit per store 9% higher than the primary competitor. We've already covered the reasons behind our improvement in inventory turns, which you see at the bottom of the slide.

Let's move on to our Latin America operations. Slide 12 highlights the significant improvements here made possible by strong organic growth and a large contribution from acquired stores. The ending PLO increased 116% and total pawn service charges rose 96% on a constant currency basis.

The 63 stores acquired in June are fully reflected in the ending loan balance, but earnings are included only since the date of acquisition or less than a month in the quarter. On a same-store basis, PLO and PSE were both up 8% in local currency. Acquisitions and organic growth drove profit before tax up 69% to $9 million.

Reflecting the success of our expansion strategy, Latin America now comprises 30% of adjusted consolidated pawn profit, up from 18% this quarter last year. The store acquisitions we completed this fiscal year show there are plenty of opportunities to capitalize on the high growth market in Latin America.

Slide 13 shows how PLO more than doubled, driven by strong organic growth, store acquisitions, and new stores. All these actions put us in a great position to continue driving significant increases in net revenue and profit. As a result, the segment delivered a 69% improvement in the profit this quarter and a 92% increase year-to-date.

We expect to gain some operating leverage over time, as acquired stores more fully align with the EZCORP's unique pawn operating model and general merchandise expertise.

The merchandise sales gross -- growth rate and merchandise margins should both improve as new stores increase their focus on general merchandise, pawn loan as well as retail activities. Expenses were higher this quarter due primarily to the acquired stores and the costs related to acquisitions in the pipeline.

On slide 14, you can see Latin America pawn delivered its 17th consecutive quarter of same-store PLO growth. This is compounding on top of an ever increasing base. The industry leading 8% same-store PLO increase this quarter is on top of a very strong 13% growth this quarter last year.

It's clear that during this period, we produced much higher compound results than our largest pawn competitor shown on the bottom of the slide. Slide 15 compares Latin America per store metrics for the most recent quarter. We have 451 stores versus the largest pawn competitor with almost 1,200 stores. This is an opportunity for growth.

And as you've seen, we're acting on that as we've grown our Latin America store count by 83% just in the first nine months of this fiscal year. Looking at EBITDA, we delivered a 64% increase, more than 10 times higher than the largest pawn competitor's growth in the period.

This segment again delivered industry-leading returns from the pawn loan portfolio. Similar to what we saw with the U.S. pawn operations, the 28% higher PLO per store compared to the competitor was magnified with a 200 basis point better yield, driving 39% higher pawn service charges per store.

The table at the very bottom presents inventory dispositions. When measured on a per store basis, it's worth noting that the stores we acquired in the first quarter were more jewelry focused with higher loan redemption rates and lower in-store sales.

As we continue to build the general merchandise business in acquired stores, sales volume and velocity are an opportunity to further enhance earnings. The net result of all this was a very good quarter for the company with a 163% increase in net income and a similar increase in earnings per share.

Just a quick note on the strength of the balance sheet. As Stuart mentioned, our ending cash balance was up 151% at $285 million, enhancing the ability continue our rapid expansion. Now that you've got a little better understanding of the quarter's performance, I'll hand the call back over to Stuart..

Thanks Danny. And turning to slide 16, which is a slide we've seen before. Regarding the long-term growth potential of the organization, we've got the three areas there.

And I've referred on this providing a great customer experience and we're using the information we have through our database and with our data scientists to understand more about our customers as they transact with us and providing a more flexible way of dealing with the customers.

And it's really critical that we understand how they transact and who they are. And the learnings we're getting from that, we're starting to feed into the systems, which is the next boxes there. We provide a great team member experience also.

And as we come into the New Year, we're using a lot of this information to refine and streamline the store base incentive programs, and this provides better outcomes for our team members. And if can align the experience of our team members to the customers we believe that will provide sustainable long-term growth.

And with these two learnings, we're expanding our geographic reach. And as you see, in the last nine months, we've rapidly expanded our reach into the Latin American region. We still see a lot of opportunity to continue to grow via our acquisition and de novo openings.

And we're fortunate that, in both the Guatemalan operation as well as the Mexican operation, we have a very quality management team in place that enables us to continue to expand with a talented management team to drive the results. Finally, turning onto page 17. This chart pulls a lot of things together.

But if we look at the management execution, which is actually shown through the accelerated earnings growth, we've consistently been delivering on many things.

And strategically, we've been delivering it in an industry that is particularly attractive, and we continue to see the opportunities in Latin America providing the geographic diversification, which is important to us, supported by the systems and the operating model that we do have, which does lead to a market leading position.

And as Danny has explained in the PLO per store in both Latin America and the U.S., we're seeing outperformance, which reflects the quality of our team members and the close association we have with our customers, which will continue to enable growth in these businesses to occur. So, with that, I think we'd like open it up for any questions..

[Operator Instructions] And our first question comes from the line of John Hecht from Jefferies. Your line is open..

Thanks guys.

First of all, Danny, could you repeat that tax? I guess, for 2019, what you expect the tax rate to be?.

Yes, I expect it to be about 30% to 30.5%. So, excluding discrete items this year, it will run about 33% and expect it to come down about 250 to 300 basis points. So, probably in that 30% to 30.5% range next year..

Okay. And then the U.S. part of the domestic margins and inventory levels. The margins were pretty high, inventory levels were really contained this quarter. Obviously, you're executing well here.

What do you expect in the intermediate term? Should we expect those trends to persist? Or was that just something you were really focused on for the time being?.

The third quarter, we focused on it quite heavily. We're back into the loan season now. So, we've got the team members focusing on the lending activities to drive the PLO balance. We'll see a focus back towards the sales as we come into the first quarter of the new financial year. We always take the opportunity to lighten the inventory if we can.

But coming into the sales season, we don't want to empty the shelves too quickly. So, typically in the fourth quarter, the margin does come off a little bit, and we want to start re-growing our loan book. So, I think it's probably going to see a bit more balance this quarter, John..

Okay. And then last question. You guys have been very active purchasing companies in Latin America. You have a strong cash balance now.

You -- are you -- how is the pipeline down there? Do you see -- should we expect more of what we've seen in the past few quarters?.

We'd always like to say yes. We've got a great pipeline. There are more opportunities out there. We've always said we're disciplined. So, it's not growth at any cost. We are being as disciplined as we can to make sure we get the right returns. We're still opening de novos. The cash that we hold gives us plenty of flexibility.

So, with those opportunities and the flexibility that we have, we will continue to execute, but it will be at the right time and at the right price..

Okay. Thank you very much guys..

[Operator Instructions] And our next question comes from the line of Vincent Caintic from Stevens. Your line is open..

Hey, thanks. Good morning guys. Just want to also follow-up on the store expansion in Latin America.

Just wondering if you could go into how much more addressable market or opportunity there is for expansion? And maybe where would you like to be your existing geographies, is there more to go? Or do you want to be in new geographies? And then also, maybe relatedly, what's the competition out there for those acquisitions? The other public peer has been doing a lot of acquisitions, too, but it seems like maybe there's enough to go around.

Or is there competition that you're facing as well? Thanks..

Thanks Vincent. I'll try and get through the -- obviously, Mexico is a base that we want to continue to grow. We've got a great management team, a great infrastructure. We do want to continue to grow there. And there still remain a lot of opportunities.

As you correctly have pointed out, our public competitor is quite active as well, but there's more -- there seems to be a lot of opportunities that suggests that we don't have to stand on each other's toes to get there.

In terms of the geographies, obviously, we want to continue to grow on the beachheads that we've established in a number of the countries. But when we look at the new geographies that are adjacent to it, we're very careful on just assessing the quality of management teams that can do it.

And we wanted to make sure that we're not risking shareholders money on just pursuing geographies for the sake of pursuing geographies. It's a very disciplined approach to understanding the quality of that management team and how we can add value.

So, while we do look at the adjacencies, we're not solely focused on rapidly expanding for the sake of rapidly expanding. And as you'll see, we're assisting ourselves by doing our de novos, which we will continue to do in the Guatemala-type regions as well Mexico..

Okay, great. That's really helpful. And for -- when you acquire stores -- the stores that you've acquired this year so far.

So, I would expect there to be a lot of growth as those ramp-up, but maybe you can give us a perspective on how those stores will ramp-up in terms of PLO growth? And then when -- how does the integration of those existing stores -- how have they gone? And then how many -- what percentage, would you say, are fully producing at this point, and how much more can ramp-up? Thank you..

Well, the 63 stores we just purchased have only been there for about 11 days till quarter end. So, it's still a bit new for us. And lot of it, Vincent, comes down to how quickly we can actually implement our operating model. There is a lot of training that has to go on as we've outlined previously.

A number of the -- the acquisition earlier in the year was quite a jewelry-dependent acquisition. So, retraining our staff across four geographies to understand the nuances of general merchandise lending and disposition does take some time. But we actually do get quite a good uplift very quickly and then as the mix changes.

So, after 12 months, you'd see that running pretty well. So, you always look back over 12 months, and you'll see from the growth we're getting out of Latin America. It's coming probably a little quicker than we thought it would. And this is new territory for us; pardon the pun, going into the other countries. So, we're learning as we go along.

But what we have learned is that the acquisition -- the main acquisition that we undertook earlier in the year, they have a very disciplined approach to customer management, and that has worked to accelerate earnings at a rate greater than we thought. And we've owned that for about nine months. So, it's coming quicker than we thought.

I think, after six months, you can look back and see how quickly it's grown. And we'll continue to refine that as we acquire more..

Yes, on the training piece, I'd add not just training internally but training the customers as well, right. Where some acquisitions may have been traditionally more focused on jewelry. Training those customers that we do actually deal in the general merchandise, that takes some time to migrate that understanding in the public..

Okay, great. Very helpful. Thanks very much..

Thanks Vincent..

And our last question comes from the line of David Diamond from Robida [ph]. Your line is open..

Yes, hi.

Can you hear me?.

Yes David.

How are you?.

Good morning David..

I'm fine thanks. Sorry, I just have a bit of pneumonia, so my voice is weak. I have two questions. The first is on the use of proceeds from the convert. You all obviously felt the necessity to upsize the convert. I believe, it was $167 million in proceeds net to you.

I think that investors and we're particularly interested in the more granularity, some detail on how you intend to spend that $167 million between debt repayment, acquisitions, the stock is -- dropped virtually 25% in a straight line as a result of the convert, which was poorly executed in our view.

So, can you give us some more detail there beyond just we're going to make acquisitions and be accretive about it? We'd like to hear sort of, in your minds, how that $167 million will be spent, specifically.

And as a corollary to that, the recent June acquisition of 63 stores for $30.2 million comes out to about $480,000 per store, which is high, I believe, versus historical.

Does that mean that -- excuse me, does that mean that the process is more competitive now between you and First Cash and other buyers? Or are you just willing to pay up to buy a bigger footprint to be more full service rather than just gold and jewelry only? And obviously, this would ultimately drive up margins.

So, can you give us a sense of how competitive this is? And you were willing to pay up a bit more, so I think there's some skepticism in the market about your ability to make these acquisitions. So, I'm interested in that. Thank you. And then I have one quick follow-up to that..

Thanks David. The -- we've got a convert maturing next year. We have an acquisition pipeline in place. We raised the money because we know we have acquisitions that are coming at us. We know that they're strategically relevant for us. We're obviously not going to go out and say that this is the target, this is what it is.

As it is -- as you rightly point out, there is competition out there. There are opportunities that do abound, but the vendors also know what is happening in the market. So, it's just not the competition against our public peer, but also the vendors are well aware of where value sits and where it doesn't sit.

So, we wanted to be cashed up for the reasons of both potential debt repayment as well as acquisition opportunities that are coming at us. And they are principally in the Latin American region. And we do believe that, over the next 12 months, these -- there will be a lot more that will be coming at us. In terms of the most recent one in Mexico.

We look at the accretion that goes with these opportunities and we believe they're smart add-on stores for us. I think the healthy skepticism you refer to can only be removed by the disciplined execution that we bring to the table. And if you could just hold that skepticism till we execute, then we can have another chat about that..

Yes, it's tough to look at just an average acquisition price per store as well because pawn stores aren't created equally. So in different regions, different acquisitions, they're going to be at a different point in maturity as well as different concentration on GM versus jewelry.

They're not going to be directly comparable, David, from one to another..

Okay. Okay. So, my second question is regarding shareholder returns. And I want to be as constructive as possible. I'm not looking to embarrass anyone. Obviously, Stuart, your -- this isn't your first rodeo. I know you're an Olympic athlete. You like to win. You seem like you're a fairly competitive person when I've met you on several occasions.

So, I'd like to be constructive in this question. But the $63,000 issue with EZCORP and in every presentation that I've read or seen, you talk about long-term shareholder value. You also do a side-by-side comparison with First Cash and talk about how your operating metrics are comparable, in certain cases, better, outperforming.

So, the three-year plan is ending this year. Share price -- I believe, the share price is up about $1 from when you started in 2015. Granted you stepped into a difficult situation and have done a fine job of turning it around. But long-term shareholder value seems sort of hollow to those of us that own the shares.

And we're wondering -- I mean, I'm wondering sort of how you define success as a public company? And what levers can you pull beyond operating metrics to deliver long-term shareholder value? Specifically, doesn't it make sense as part of your incentive plan, which is very murky because of the dual shareholder structure and the lack of proxy, et cetera, et cetera? Doesn't it make sense to make shareholder returns, relative to your competitors or relative to the market, front and center now that the company is in much better shape than it was when you took over? So, if you make a lot of the money for investors and you get paid a lot.

And if you don't, you get -- don't get paid as much. So, I think this is a seminal issue for EZCORP going forward and I hope that you and the board take shareholder returns a bit more seriously. So, that's it.

It's all done in good faith, I just -- I'd like you to address that because we really don't have a sense of what you'd consider success as a public company..

Thanks. David, I always appreciate the chat and thanks for the raise you made. We'll take all those on Board because they are all very valid points. And you've been a strong supporter of the company over many years.

And we will, as you said, the three-year is coming to an end and we'll start -- we'll readdress those issues as we go through the reconfiguration of, as you said, determining shareholder value more transparently..

Right. I mean, it would make sense. I mean, given the fact that I believe either you or Lachie are actually on the incentive committee, which -- compensation committee, which I think is sort of unheard of for a public company..

I'm not on the committee, David..

I believe that the Chairman is. So, I'm not trying to be overly critical here, but I think that it's time -- you can talk about relative performance and all this in various presentations on this now, but it rings very hollow right now.

And I think that there's a lot that you guys can do to improve this, and investors will reward you for that if you do. So, good luck and thank you very much..

Thanks Dave..

Our next question comes from the line of Jonathan Haynes, Private Investor. Your line is open..

Good morning. A lot of my questions were answered. But could you address the 6% EBITDA decline in U.S.

pawn? And why the impact from hurricanes last year seems to be lingering so much?.

Sure. The decline in EBITDA was, we actually reinvested into the -- we put -- basically, we put new store members in where we looked at and invested into the fabric of the stores.

So, the -- you'll see the operation expenses went up against last year, as we actually -- virtually restocked the stores, which we believe is a long-term investment and will return. We know that when we put more store members, we get better customer service which usually equates to better revenue streams from that.

In terms of the hurricanes, we had a chart in the previous slides, which we haven't put in this one, regarding the most recent experience we had of something like this was Hurricane Ike, and that took 13 months for us to get back to normal. So, we're just -- we're seeing the -- seeing us starting to come out.

But we thought we could get there quicker, but it looks the same that 12 to 13-month period for everything to get back to what we would term as normal is playing out in the same way..

Okay, great.

And do you have a repurchase authorization in place at this point?.

No. Share repurchase, no..

Okay. And could you tell us what the approximate difference in cost would have been to do straight debt as opposed to a convert? I'm sure you looked at that option..

Yes, it's more expensive. We don't -- if you look at -- I think First Cash have the ability to have an unsecured line, which is very attractive, ours is more in the double-digit number than single-digit..

That's quite a difference. Thank you..

Yes. thank you..

Our last question comes from the line of Greg Pendy from Sidoti. Your line is open..

Hey guys thanks for taking my question. Just -- you guys have been, I guess, visible and transparent on just the spread you're seeing in the stores and PLO on the U.S. probably reflecting hurricane regions versus non-hurricane regions.

Can you just give us a little bit color on the merchandising? Is there also a spread there? In other words, are some of these customers, perhaps, who've received FEMA checks helping boost the merchandising sales and getting the margins higher? Is there a spread in those stores? Thanks..

Yes, we saw it early on, particularly through the Houston area, where the sales were up and the gross margin was up. And as we've -- wherever we've found when there's cash in the hands of our customers, they actually are fairly intent on buying. When they don't have as much cash, they're very keen on negotiating.

And what we've seen is that we've been able to manage them both pretty well, but the sales have increased in those hurricane-affected areas by a little bit, but we're starting to see that actually come back to normal..

And is that also a reflection, do you think, on a per store inventory basis to think about that? I mean are the inventories cleaner at sort of the hurricane-impacted stores versus the non-impacted stores?.

Yes, a little bit, not a significant difference there. But we did see some move through in the hurricane-affected ones..

Okay, that's helpful. Thanks..

Yes, thanks Greg..

And there are no further questions at this time. I will turn the call back over to Stuart Grimshaw for closing remarks..

Thanks everyone who dialed in and thanks very much for the questions. Danny and Jeff will be available for questions later this morning. And we hope you have a great day and we conclude the call. Thank you..

This concludes today's conference call. You may now disconnect..