Good day, ladies and gentlemen, and welcome to the EZCORP First Quarter Fiscal 2019 Earnings 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. As a reminder, this call may be recorded.

I would now like to turn the conference call over to Jeff Christensen, Vice President of Investor Relations of 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 that this conference call, as well as the presentation slides, contain certain forward-looking statements regarding the company's expected operating and financial performance for future periods. These statements are based on the company's current expectations.

Actual results for future periods may differ materially from those expressed 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 and welcome to everyone to our first quarter 2019 financial results presentation. It's been another very strong quarter in terms of our operating performance and Danny will run you through this shortly. However, I'd like to briefly recap some strategic issues we highlighted at the Investor Day in December of last year.

So if you can turn to slide 3, there are four initiatives that we outlined. Firstly, focusing on the customer to deliver market share gains. We've always said that everything starts with satisfying the customer's need for cash. And in this regard, we look to the growth of our loan portfolio.

On a consolidated basis, we grew same-store loans by 8% or a gross 10% with the U.S. growing at 7% and LatAm at 11%, where the LatAm region grew a gross of 27% representing the acquisitions we've undertaken. These are extremely strong numbers that are driven by a great team of people who are focused on the customer experience.

The second initiative was diversification across geographies. We continue to build in our presence in Latin America with the acquisition of five stores in Mexico and four de novo stores in the Latin America region. In addition to these investments, we also undertook four store expansions and five locations in the GPMX business.

To reiterate, the expected five-year ROICs on these investments, we expect 25% from acquisitions, 30% on relocations and 35% on de novos.

We also remain committed to an annual growth of between 100 to 200 stores, but I would caveat that these have to be the right price with the right management team and in the right locations such as the ROICs I mentioned previously are achieved. The third initiative we outlined was a strong cash flow and balance sheet.

Our cash balances have grown to just under $300 million, reflecting an increase in operating cash flow of 18% to $23 million with a-third, $7 million in principal received from AlphaCredit. As discussed at the Investor Day, we have a strong pipeline of acquisitions that we are assessing and are at various stages of discussion with these targets.

We also have a maturity of June 2019 convertible note looming. The convertible debt markets have pretty much been closed since the Investor Day and our board currently reviewing the options available to the company in light of the market condition and strategic opportunities available.

We also continue to look to domestic banks for support on unsecured and zero covenant basis, but today this has proven difficult to achieve. But stepping back, we remain committed to maintaining the financial flexibility to capitalize on the highest-return opportunities. The fourth initiative is the data driven digital engagement with our customers.

We know that our customers are becoming increasingly more sophisticated through the use of smartphones, laptops are tablets. Our industry is not immune to the evolution of digital engagement and fulfillment.

We believe that we must digitize our engagement with our customers, to create a more robust present in that customers financial life cycle, which horizon enhance customer acquisition and retention.

To this end, I’ll talk a little later about the investments we've had in commencing the development of a digital platform in partnership with Boston Consulting Group Digital Ventures. In regards to POS2 by the end of this week will be up and running in 184 stores, 55 in Mexico and 129 in the U.S.

At the time of the Investor Day, we are 100 stores – 108 stores. Importantly, in the U.S., we have presence in seven states where 84% of our stores are located. We will readily move to deploy into these states fully once we get through the tax refund season of which we are unsure as to how long it will last for.

You'll recall our Investor Day, we highlighted the advances we have made in the capture and utilization of the customer data that we have. We mentioned that we have over 220 million data points based our customer rating outcomes upon. We will over the next few months start to integrate the full customer grading system into our POS2.

And with that, I will pass over to Danny..

Thanks, Stuart, and good morning, everyone. I'm excited to share with you our strong pawn operating performance for the first quarter. Let's start with the highlights of the adjusted results on slide 4. Consolidated pawn loans outstanding or PLO was 10% higher at the end of the quarter setting us up well for Q2 and the remainder of fiscal 2019.

For the quarter, we leveraged the 7% increase in net revenues into an 11% higher EBITDA and a 15% rise in adjusted diluted EPS to $0.31. As I mentioned last quarter, our adjusted earnings exclude non-cash interest income and expense from both the current and prior year figures to reflect results more ken to cash earnings.

Net cash from operating activities showed a similar improvement up 18%. Our year-over-year same-store PLO growth at the end of the period was the strongest delivered in several quarters. As Stuart mentioned, U.S. Pawn delivered 7% same-store PLO growth and leveraged the 5% bump in net revenues into an 8% increase in adjusted PBT.

Latin America, our fastest growing segment delivered a double-digit same-store PLO growth, up 11% and was up 27% including the effect of new and acquired stores. The Latin America Pawn segments EBITDA increased 10% to just over US$10 million. Moving on to slide 5.

You see the outstanding progress we've made in regularly improving consolidated EBITDA and EBIT margin. The consolidated margin was at 15% just three years ago and we've now reached 23% in the first quarter.

That advance reflects the benefit of our efforts to simplify and focus the business, leverage our expense structure, and other management actions. For U.S. Pawn, our largest segment EBITDA margin expanded to 33% from 31% reflecting the benefit of a higher PLO combined with well-managed expenses. Latin America Pawn posted a 35% margin in the quarter.

While excited about the new and acquired stores added over the past 15 months, they do temporarily suppress the EBITDA margin until new stores mature and acquired stores are fully integrated and transitioned to EZCORP standards. Turning to slide 6.

Included in the GAAP results for the quarter were non-cash charges of $20.6 million as well as discretionary growth investments and other discrete costs in the quarter that contributed to a pre-tax loss of $5.6 million. Excluding those items, adjusted pre-tax income was $22.5 million. The discrete non-cash charges are comprised of several items.

We recorded $13.3 million impairment to the carrying value of our investment in Cash Converters. We believe there to be upside in CCV stock as current levels in corporate general volatility of the Australian stock market.

CCV's underlying earnings have also demonstrated an improving trend and sell side analysts predict the significantly higher stock price over the next year. Our strict application of the accounting standards caused us to mark our investment down to the price at which CCV stock was trading at December 31.

We also recorded a $2.9 million charge to our equity interest in CCV's income for our portion of its previously announced settlement of a class action lawsuit resolved in the quarter. The remainder came from a $4.4 million charged to fully reserve our exposure to Republic Metals Corporation which declared Chapter 11 bankruptcy in November 2018.

We previously used Republic as our primary gold scrap refinery in the U.S. and Mexico. We continue to pursue collection and in fact recovered almost a quarter of that in just the last week after closing our December books.

Corporate expense includes $2.1 million of investment towards the development of digital data-driven platform to provide transactions and lending services connected to a ledger of physical assets as Stuart mentioned. Stuart will provide a little more insight into this opportunity in a few minutes.

The quarter's GAAP results also included about 800,000 of costs in Latin America, not indicative of current activities in which I don't expect to recur. Please turn to slide 7. Here you'll find the underlying performance after adjusting for constant currency, noncash interest and the discrete items just discussed.

As I mentioned earlier, we leveraged the 7% increase in net revenues into a 15% rise in adjusted diluted EPS to $0.31. The strong growth in PLO was seen in PSC growth with both up 10%. Consolidated operations expense was up 8% from the same quarter last -- from the same quarter last year mainly from acquired and new stores in Latin America.

Consolidated operations expenses represent 68% of net revenue in line with this quarter last year. Operating leverage should grow in fiscal 2019 as acquired stores are further integrated and recent new stores mature and build scale.

We anticipate new stores will reach breakeven and start contributing positive EBITDA in six to nine months, but they do drag EBITDA margins a bit until they mature. Acquired stores have a similar effect until they are fully transitioned to EZCORP standards. Corporate expenses increased modestly up 2%.

On our last call I mentioned that we use adjusted net interest expense to analyze the business. This removes the effect of noncash interest expense related to our convertible debt as well as noncash interest income on our notes receivable from AlphaCredit.

Adjusted net interest expense was $1.2 million in the quarter compared to $400,000 in the same period last year. In the current quarter that removes $5.6 million of noncash interest expense and $1.4 million of noncash interest income, the latter of which will continue to drop quarterly as the note principal continues to be repaid monthly.

Though the effective tax rate on our adjusted income was about 26% this quarter, I continue to expect our adjusted effective tax rate for the full year to be approximately 31% to 32%. I'll briefly touch on the U.S. government shutdown. We've seen no discernible impact on our business related to the shutdown.

The most likely impact could be, if the IRS is delayed this year in issuing customer refunds. If that were to occur, it would push out a bit later the cash inflow we typically see in Q2 and the beginning of Q3.

That would benefit our pawn service charges from loan remaining outstanding longer and will be offset by lower sales in that period as our customers will be shorter on cash. The net impact would not be so much change in earnings as much as a change in the timing of the cash flows. Slide 8 shows U.S.

pawn same-store PLO growth quarter-by-quarter back on top of the same quarter of the prior year and the same information for our largest competitor at the bottom of the chart. The long-term trend remains that we're delivering higher loan growth quarter after quarter suggesting we're continuing to take market share. Slide 9 shows you the excellent U.S.

pawn results for the quarter. U.S. pawn delivered strong year-over-year same-store PLO, up 7%. Even looking at stores unaffected by hurricanes last year same-store PLO rose 4% this quarter, up two percentage points sequentially from last quarter. The ending PLO of $305,000 per store similar to the recent fourth quarter representing a seven-year high.

Same-store PSC was up 8% slightly higher than the PLO increase as disciplined approach to pawn lending maintained a strong loan yield. Inventory was well managed with the same-store increase of only 4% in relation to the 7% improvement in PLO as sales rose 5%.

Merchandise margins were 90 basis points below the prior year quarter, but at 38% remained at the high end of our target range of 35% to 38%. Overall, we leveraged a 5% lift in net revenues to an 8% increase in adjusted profit before tax to $30 million.

We've made no secret of the fact that acquisitions in Latin America are a big part of our growth strategy. As seen on slide 10, even on a same-store basis, the segment is delivering significant long-term loan growth quarter-after-quarter. In fact this was the 19th consecutive quarter of same-store PLO growth.

This quarter's 11% same-store PLO increase was on top of a double-digit increase in the same quarter last year. Slide 11, shows total PLO growth of 27% for Latin America pawn including the impact of new and acquired stores. December quarter-end PLO per store of 84,000 was the highest in Latin America since 2007.

Customers had less cash this quarter driving a strong same-store PLO growth partially offset by software sales. Same-store PSC increased to 7%. The difference between PLO and PSC same-store growth rates is primarily attributable to the rapid growth of the loan portfolio in the period. Latin America delivered 20% higher net revenue.

Profit before tax was about the same as the prior year quarter as expenses increased mainly due to our investments in recently acquired and new stores. We anticipate operating leverage will expand in fiscal 2019 as new stores mature and as we continued to migrate acquired stores to EZCORP standards.

The quarter's expenses also reflect administrative personnel needed prior to the transition of acquired stores on to EZCORP's point-of-sale system, which occurred near the end of the quarter. I also expect PLO yields to return to historical levels as we continue to bring acquired stores up to EZCORP standards and employ our policies and practices.

Turning to slide 12. We ended the quarter with a strong balance sheet and $297 million cash even after investing in additional $9 million in the PLO growth.

Assuming payoff of the $195 million of convertible notes due in June and other liquidity needs for daily operations leaves $30 million to $50 million of available cash to invest in acquisitions, new stores and discretionary growth investments.

In addition, we continue to receive timely, principal and interest payments from AlphaCredit in accordance with the terms of those notes receivable. We anticipate receiving another $19 million in the remainder of fiscal 2019 including cash interest. We also expect to collect another $6 million from AlphaCredit in September 2019.

This is the first installment of the related deferred compensation fee with the remaining $8 million due in fiscal 2020. Now that you have a better understanding of the financial results, I'll turn the call back over to Stuart..

Thanks Danny. And as I mentioned previously I just want to spend a bit of time just running through where we are at the digital platform evolutions for the purposes of this presentation, we're calling it Evergreen. If you turn to slide 14 what we've done was quite an exciting investment for us.

We've partnered with Boston Consulting Group Digital Ventures arm to invest in creation of a digital platform that's customer-centric and innovates and addresses our customers' financial needs.

To this end we've taken a competitive advantage of EZCORP which were large retail footprint, terrific customer engagement, great brand and reputation, and deep customer dives around valuation IP and couple these with the skills of the Boston Consulting Group Digital Ventures arm which has tighter [ph] mindset and speed start-up experience proprietary proven methodology, multidisciplinary teams and a lean approach.

And coupling these, we're using this to research and develop additional platform that places us at the center of the customers' financial needs. Just as background, Boston Consulting Group Digital Ventures is part of many companies such as Starbucks, UBS, and Bosch to invent, launch, and scale game-changing businesses.

This is the core DNA and provides us with the comfort that manage risk appropriately following this part. And turning to slide 15, in an FDIC study published in October 2018, you'll see that there are 63 million unbanked and under-banked individuals in the United States.

You may recall that CEO of Empeño Fácil outlined at the Investor Day that Mexico had a similar number of 16 million or 63% of their adult population. According to the CFSI fundamentally underserved market size report of 2017 unbanked and under-banked consumers spent around $180 billion on fees and interest.

You'll note that our annual revenues are around $900 million, which makes us very small in this segment. There are many monoline fintech companies trying to access the space, but they're either capital-constrained or unable to meet all the customers' financial needs or unable to cost-effectively attract customers to their platform.

This means our customers remain fundamentally underserved to the digital and to a degree the physical world. Turning to slide 16, in conjunction with Boston Consulting Group Digital Ventures, we undertook substantial and in-depth customer research by one-on-one interviews in their homes which highlighted three key friction points.

First is the news upon customer's lack an understanding of an assets value and feel a whole pawn experience is an intimidating one. Secondly, making a payment on the loan can only be undertaken in-store and is a laborious one for time-constrained people.

Thirdly, it incurs time and cost to constrain people to understand loan amount payable payments made and due date. On slide 17, I mentioned previously we've leveraged the strategic assets of the company in the process of creating the digital platform and there are four key points that I want to bring out here.

Firstly, we have 970 pawn store locations combined -- and combined with digital channels, this will enable a strong node with very low acquisition cost for new customers.

We also have 2.4 million loan customers served per annum and this does not account for those customers who either sell product or purchase product with a depth of our customers we're able to trial products rapidly and get feedback instantaneously. Thirdly, 56% of new customers to EZCORP are millennials with strong digital awareness and acceptance.

And fourthly, the proprietary customer behavior and product valuation I see that we have can be leveraged for digital enablement rapidly. If I turn now to slide 18 and this will give you a snapshot of what the skin could potentially look like.

From these inputs we've created the concept of Evergreen which is designed to be a single access point serving the financial solution needs of our customer base. How we're initially going to do this? Firstly, we'll create a digital global asset register for our clients. This will create better understanding of the wealth of the goods they own.

Currently, the research shows that they have a little knowledge of the assets they own and limited knowledge of the value of these assets.

They will be able to take photos of what they own and utilizing the WhatsApp Work app which is under development that was shown on the Investor Day, they will be able to get a total approximate value of these assets. Secondly, most importantly there is a financial inclusion element to this.

We will look to create a digital wallet that will also enable transactions to occur for this customer segment in a low-cost manner. Customers will be able to interact digitally with us that will open the opportunity to many more customers than we currently serve.

And thirdly as we collect more data, we'll be able to see how we can assist more dynamically through the difficult moments. We're really excited about the strategic investment and believe will be a market with an offering towards the end of this calendar year.

As you will have heard from Danny's presentation, we spent around $2.1 million of initial investment as only a very small portion of this was capitalizable in this early stage.

Going forward, we expect the development cost to be in the vicinity of around $1 million a month until launch with around 50% to 60% of this being capitalized based on Boston Consulting Group's experience with other companies. The exact number for capitalization is still under review.

Finally turning to slide 19 where we look to the drivers of long-term growth. In terms of current operational initiatives we remain performing at a very high level.

The focus on serving and satisfying our customers' needs for cash is being seen in the financial results and this is driven by the experience in the store and the commitment of our team members to this vision. We'll continue to drive to higher standards each day.

In terms of the future, we will continue to assess acquisition opportunities that will broaden our footprint in serving the unbanked and under-banked community. We have talked about the role data and digital will play in our future and the development of the Evergreen project we see this come to fruition.

The data insights we gather will also be incorporated with a positive environment which is in the accelerated phase of its implementation. And with that, I'll open it up to questions..

[Operator Instructions] Your first question comes from the line of Vincent Caintic. Your line is open..

Thanks. Good morning guys..

Good morning..

Just wanted to turn back to the slide about the cash available for investments and I just want to confirm here what your thoughts are. Just want to confirm that on the June 2019 maturities that you won't be raising any debt or convert to take care of that that will just be all in the cash already on your balance sheet..

Hi, this is Stuart. As I said in the presentation, the Board are currently discussing that in light of market conditions, the cash availability, and strategic acquisition opportunities that are available. So, they are going through their process at this point of time..

Okay.

And I guess also may be given what you're seeing out there for opportunities, how much cash do you think you need to keep in reserve? So, is $30 million to $50 million kind of right after acquisitions? Or how are you thinking about your cash reserves going forward?.

We think $30 million to $50 million is actually the base level of cash we require that wouldn't be -- that would not be available for acquisitions that is for the operating requirements of the company..

Okay. Got it. Thank you. And switching to this evergreen project. So I think this is really interesting. Are there -- so I'm not as familiar with the offerings that might be available out there.

So I know there's a lot of fintech offerings there, but in terms of pawn or anything that’s really adjacent to your product I guess is there anything out there? Is there kind of competitive differences that you see between what you're intending to offer versus or what might also be out there?.

Yes. The offer we're putting there is actually very unique. There's a couple of small fintech type companies operating in the space, but none of them have a customer base and none of them have a store present and none of them have the parts where collect data instantaneously on customers and have feedback.

So we have searched the market and we believe that this is a very unique offering.

And more importantly, we think it opens the market to new customers as we take some of the nervousness and anxiety of financial stress at the hands of the customer by creating a close to a global asset bank where they believe they have wealth that can meet the strained needs they invariably come under.

So, we think this is an extremely unique offering and we think there is a substantial competitive advantage not only in partnering with Boston Consulting Group, but actually bringing our fiscal assets to bear into the digital world..

That's interesting.

Is there -- I don't if there's been any study on this, but is there a way to size how much you think your customer has in terms of pawnable assets and how many hard assets they have available to them versus what they typically actually are using for pawnable assets? Like how much more is there the addressable market that you could tap?.

All right. It's a good question. We actually don't know because typically the experience in the store is one where the customer has a number of minds and where we're trying to give them the cash based upon asking the questions around other assets that might have or not.

So we -- at this stage, it's a bit of an unknown, but what we had to do is educate the customer that they do have a store wealth and that's not what -- not we sitting around this table what view as our traditional store of wealth..

Okay. Very interesting. Thanks very much..

Thanks, Vincent..

Your next question comes from the line of Greg Pendy. Your line is open..

Hi, guys. Thanks for taking my question.

Just real quick on scrap, I know it was down 24%, is that entirely related to Republic metals? And should there be a catch up in subsequent quarters? And then also while on that topic, I know we can't predict commodity prices, but right now gold would be positioned more favorably I guess starting in your 3Q, assuming that the price is whole? How does that impact scrap? Thanks..

Yes. So on the Republic Metals I'll take that first. I would say, the Scrap volumes you see come through this quarter. The actual write-up we took doesn't show up in that line item. It shows up in the other revenue or other expense.

Although there was within the quarter particularly in Latin America it took a while to establish a relationship with a refinery in Mexico, so that did pressure the volume of Scrap this quarter.

In the U.S., I would say there was some anecdotal pressure on the volume of Scrap, but not significant in the U.S., as we already have different refinery relationships setup. So I would expect a little bit of catch-up this next quarter in Scrap in Latin America. That was the biggest impact on the revenue piece.

Regarding the gold prices, you're absolutely right. It's something obviously we watch on a fairly regular basis as well. To back up to I guess the last time we saw these prices were kind of the May-June time frame last year, so that should provide a bit of a tailwind assuming it. It remains at that height.

But as a commodity price, if I could tell you that it was going to remain that way for the next three months, I could make a heck of a lot more money trading commodities..

Thanks a lot..

[Operator Instructions] The next question comes from the line of Brad Hathaway. Your line is open.

Hi.

One quick clarification from the first question, the $30 million $50 million I believe you talked about is the money you have kind of earmarked for acquisitions and capital investments and things like that it's not actually to fund the operations, correct?.

The 50 to 70 is what we call the baseload that we actually want to have in the bank to fund existing operations. So acquisitions et cetera will be above that and the capital investments would run through the P&L. So that's just what we view as our appropriate safety buffer..

Got it. No I understood that's the 50 to 70, not the 30 to 50. Got it..

Yes, correct. I should have clarified that..

The real question is, this is in our couple of presentations in a row, you talked about this 102 to 200 new stores and you did open nine in the quarter between acquisitions and construction.

What makes you confident you can get to this 100 to 200 number?.

Just the acquisition pipeline we have in place at the moment, Brad. We are looking at some good sized acquisitions and I've always had the caveat this is not the growth of any price type objective. This is growth at the right price.

We have walked from a couple of acquisitions where the price has not been right or the management team hasn't been to the level that we think that would bring -- and that would bring additional risks. So we think that the acquisition we have in place will deliver that. But as I said it's the right price. Seller and buyer have to agree.

It's the right management team, the right locations, we think it's there, but until you get into the nitty-gritty of the two details, you find that a lot more. We still think that is achievable through this year with what we have..

I would add on not only in acquisitions that would be the largest piece of that but we do anticipate opening more de novo stores this year than we did last year as well. We've not put a specific number on that but I would expect some increase year-over-year now..

Got it, right. I figured it had to be acquisitions because opening 100 to 200 de novos would be a bit challenging, I would think..

That would be very ambitious..

And then finally, with regard to -- so do you believe that 100 to 200 stores is financeable out of that $30 million and $50 million?.

Out of the 50 -- $50 million to $70 million is where we are. We would have to make some determinations as to the strategic relevance and returns on the acquisitions which the board are going to have to digest as they consider the utilization of the cash and balance it against the convertible notes in June '19..

And I would reiterate if we go that path, the same discipline that we've exercised where we would only take that on if we thought that any acquisition activity beyond what the available cash would be able to fund, would be accretive to earnings including any drag on EPS from a new financing consistently maintain that discipline..

It seems like obviously -- since you’re investing, you're talking a lot more about returns on capital and whatnot, so that kind of focus and discipline is much appreciated by the shareholder base..

Thanks, Brad..

Thank you..

[Operator Instructions] Your next question comes from the line of Matt Sweeney. Your line is open..

Hi, guys. Congrats on another great operational quarter. I just had a quick question regarding Evergreen, which sounds like it could be very exciting and just want to kind of qualify or quantify the way you use the word partner.

Does that mean that this is more like a vendor partnership or it's just more of an equity partnership?.

We're the full owners with it but what we've been able to do is they have the reputation on the line with it. They are very interested in the outcome of this project so this is -- we haven't actually discussed equity at all. We haven't gone that -- down that path we have as you would appropriately think we have managed the fee basis pretty well.

So they are not -- I don't think they're a vendor and not our true equity partner, but they're completely aligned with the vision and the outcome that's required to make this successful..

Great.

And then keeping in mind that this is the sort of thing that as we know of other fintech offerings out there that can attract a whole new investor base and can be potentially very exciting, and I know it's very early days but are there any thoughts on what kind of metrics you might split out and how you might report this as potentially as maybe a different segment? Or is this something you think will just be rolled into existing line items?.

Matt, that's good question. My sense is that and subject to the board's approval, my sense is we should show this as a separate line of business that you can still get the visibility of the operating performance of the foreign business. And also by that visibility you will see the cost of revenues of what the new initiative is doing.

Now there will be a degree of overlap between the two because we think the global asset register that we'll create will actually increase the transactions through the store that will work that out as we get to launch, so until launch at each quarter will give you an indication of the costs that have occurred and at launch I’ll be recommending to the board unless they think otherwise that we do have a separate line of business..

Yeah, I think that would make the lot of sense just in terms of tracking.

A whole new class of investors that might not be attracted to the traditional pawn business but with this kind of mobility tech focus, I don't want to say that it will be recurring revenues but it will be good access to customers' wallet if you could attract a whole new investor base, so I think that's potentially very exciting..

Yeah. And the -- I mean, typically the business is valued on revenue, so the transparency there is pretty important..

That’s all I have. Thanks guys..

Thanks, Matt..

Your next question comes from the line of Andrew Oskoui. Your line is open..

Hi. I was wondering if you had any updates towards your long-term intentions with debt position in Cash Converters. I know this is dependent on the future CCV share price, your access to financing and other investment opportunities.

But in the future, are you more likely to hold the current position, acquire more of the company or liquidate your shares once they appreciate?.

Hi, Andrew. We think the Cash Converters model is an interesting one, which is how the initial investment came in, they operate in 17 countries globally. I think, the business model still needs refinement.

We know that the franchises actually did very well out of the model, and the franchise will – while it’s doing well, probably could do better than where it is. The management team is being redone. So I think that on the right path to recovery, the issue around anything is class action activity and that’s being reflected in the share price.

And as Danny mentioned it's the write-down on that, but it has a scalable global model which is of interest. We've always said that, we are where we are at 35%. My intention has been as I’ve reiterated on the last investor call, I don't want to commit any more capital to that and that would have to be something fundamentally different for us to do so.

But at this stage there are no plans to invest any more capital. The 35% is a difficult position to move. But at this stage, we have no intentions of moving at the current level of price that it is..

Thank you and congrats on the great quarter..

Thanks, Andrew..

Your next question comes from the line of Vincent Caintic. Your line is open..

Hey, thanks. Just a quick follow-up on the investments you're making into the Evergreen project and any other projects out there. Is there any sort of run rate level of expenses and investments we should think of going forward, absent any acquisitions and to buying stores but just general level of investments we should be modeling in? Thank you..

As I mentioned on the call Vincent that we think on the Evergreen, it's probably about a 1 million per month run rate till launch. We think based upon BCG's experience with other companies 50% to 60% of that is probably capitalizable. The rest is pretty much investments in parts to cloud-based infrastructure.

It's pretty much run-of-the-mill sort of stuff.

Danny do you have anything there?.

No I think that's about right. The capitalization on the work on Evergreen obviously is dependent on the actual tasks output to different phases of that, such were kind of the range of the 50 to 60, but -- so you....

Thanks..

Your next question comes from the line of Matt Sweeney. Your line is open..

Hi, guys. Thanks for taking another one. Kind of follow up on Andrew's question -- but shipping up to Canada instead of Australia, can you update us on CASHMAX? I know there is a shift towards more eminent installment strategies, some loan strategy. And then also think about that strategically on 27 stores, it seems like it's under-scaled.

There are public competitors and that can kind of give us an idea of what that should actually be valued at.

Is that something to think about strategically to maybe sell that and use the money to reinvest in Latin America where returns are better?.

Matt if you felt that, we could get that much money for Canada and make Latin America bigger, I'd be right behind you. I don't think 27 stores is going to move the dial at all. We are shifting to installment through the government initiatives. We did try to move these stores probably about three years ago. We had no takers at all.

We're trying to make the most of it, while we can. And then, if something strategic – someone comes to us or we come to them, we'll certainly deal with that. The 27 stores something like an easy home is not really that relevant to them nor is it for city financial.

So what we're trying to do is manage as best we can, but really it's a bit of rounding year in the financials and it doesn't take any management time at all, so we're just putting it on their care and maintenance until something happens..

So, I mean – bit of rounding I think the segment lost last year like $10 million which relative to your total EBITDA is significant I would think so.

Is there a case to be made that it should even just be shut down to remove that loss?.

Look, we look at that as well, we didn't lose $10 million. There's a few things rolled up into that total package, but that was – we are looking – we look at it all the time, Matt. We haven't had any offers I think there is probably a few stores that we need to consider but we’ve got leases in place on them.

So we're looking at it, but it's not something that bothers me too much..

I apologize. I was looking at the other international number which didn't covers other things, course. So that was my error, not a loss of $10 million. My apologies. .

No problems..

That's all I had. .

Thanks, Matt..

There are no further questions at this time. I'll turn the call back over to the presenters..

Thanks very much everyone. We'd like to thank everyone who’s dialed in and logged into the webcast. Danny and Jeff are available for questions later this morning and this concludes the call. Thank you very much and have a great day..

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