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Ezcorp Inc  (NASDAQ:EZPW)
Q4 2018 Earnings Conference Call
Nov. 15, 2018, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the EZCORP Fourth Quarter and Fiscal 2018 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 for EZCORP. Please go ahead, Jeff.

Jeff Christensen -- Vice President of Investor Relations

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?

Stuart I. Grimshaw -- Chief Executive Officer

Thanks, Jeff, and good morning to everyone.

The year has finished strongly with some great Q4 results as we'll go through today. But the numbers that we're outlining below reflect the continuing drive we have to deliver on our vision of serving and satisfying our customers' needs for cash. And as we've always said, that's the driver of everything that happens and it leads to the great growth we've seen in PLO, which is up 18% to $199 million, and that's driven the adjusted EPS being up 38% with the diluted EPS of $0.20.

We've also excelled in the merchandise margin, moving up 120 basis points to 37%. EBITDA increased 35% to $28 million in the fourth quarter, resulting in adjusted profit before tax increasing 38% to $16.2 million.

These strong results were driven by exceptional growth in Latin America, and you will see below that the PLO up 110% to $44 million, thus 18 consecutive quarters of same-store PLO growth, with this quarter being at 7%. The PLO per store, we set a high -- a record of $96,000 per store, the highest since 2008. And we've increased our store count by 84% in LatAm, which has resulted in a profit before tax increase of 86% to $9.9 million in Q4.

Also pleasing was the growth we saw in the US. And you'll recall in Q3, we said there was an anomaly that we then had negative same-store PLO growth which should concern us and we indicated to you at that time that we were all hands on deck to actually get us refocused on our vision of meeting our customers' needs for cash, and this we have done. The reason we had a concern was that typically if we're losing PLO growth or goes negative, we're concerned that we're losing customers and we have to probably to get it back because it's very difficult if a customer goes somewhere else to get them back over time. And we're pleased to see that the US has returned to a same-store PLO growth of 5% and the highest PLO per store, $305,000 since 2011.

Merchandise margin continues to improve, just 39%, with an adjusted EBITDA of 15% in Q4.

The balance sheet remains strong, with cash up 74% to $286 million and provide strategic flexibility with us. And also credit, the payments from the sale of the Grupo Finmart continues to be received on time in terms of all the schedules that have occurred.

I'll turn now to slide four. Well, we always have this slide, and it reflects the operating leverage in the business. What you'll see across all -- at the corporate level, the U.S. Pawn level and Latin America Pawn level, we continue to see growth in the operating leverage within the Company, which is pleasing. And you'll see that particularly in Latin America, the numbers there on the efficiency are stellar, and this reflects the great management team we have down there, and also the opportunities that we do continue to see in that market where growth is actually coming on -- after the strong management actions we have taken.

On slide five. This is a new slide for you, but I think it reflects why we have undertaken the vision of focusing on our customers' need for cash. And you'll see this reflected in the adjusted EBITDA numbers, which in '15 were $47.5 million and growing to this year to $100.6 million, and this has been driven, I'll say by three levers that have driven it and that is the customer engagement reflected in the PLO and the PSC increases. Some of the work we've done on the customer and product analytics, which have driven a 22% high annual merchandise gross profit, and at the same time, making sure that we are as lean as we can at the corporate center, which produced 17% in annual corporate expense savings. So those three levers have delivered a 28% CAGR over those three-year period, which we believe is a great result.

Turning now on to slide six. What -- the reason the Q4 I think is quite a great results, you see the momentum coming out of this quarter. The PLO growth up 18%; store count up 27%; EBITDA in Q4 growing at 35% versus the 17% annual; and EBITDA margin showing quite a strong increase. So we believe, and we continue to believe, that successful focus on the customer experience and leadership, which we're seeing reflected in all these measures, will continue to drive the revenue growth in FY '19.

I'll turn now to slide seven. We've had 94% increase in store count in Latin America over the past 12 months. 80% of that is really from acquisitions, with 4% from de novos, and we'll continue to accelerate our de novo strategy in the year ahead. This growth has meant that 28% of total EZCORP holding profit in Q4 comes from the segment, which is up from 17% same time last year. And as you'll see that we invested heavily in GPMX, which we acquired in early October, and the first year of acquisition, ROIC was around 12%. We expect that to go to 15%. But as we do these acquisitions, we always talk about the operating model that we bring to these acquisitions in the first 12 months of ownership. The EBITDA of that business has increased by around 40%.

So it's been a great result, and we think Latin America continues to offer opportunities. However, as you would have seen in the last month, it's not without that political and security risk that sits around the business. The comments recently made by a member of the party coming into power as he spooked the markets and have to do with the ATM fees and transfer fees, none of which actually have any direct correlation to ourselves.

And in the Latin American and the Mexican economy, we are not seen as a bank and the regulations are really based around more the retailing and not on the lending. So we continue to believe that we offer a great service, which is supported by the governments, and state governments, particularly, and we'll continue to operate quite successfully in the region. But as we'd seen, there is some volatility that does come from being in the Latin American countries, but we've got the growth rates coming out of these countries that also suggest that we should continue to reinvest and invest in there.

I'll turn now to slide eight. This is a new slide, and what I'm going to do here is to show the growth we've had in the operating cash flow from the company. From '17 to '18, we increased net cash from operating activities by 53% and obviously this funding PLO growth. And that's a good cost to have because funding the PLO growth actually ensures that the business continues to grow and delivers cash to us. And if you look at the operating cash flow after that, it's up 65% year-on-year.

What we've shown in the slide below is in -- sorry, in the chart below, which shows the receipts from AlphaCredit, we invested about $16 million as we've told you in a number of calls into the refurbishment of the stores. So we took the opportunity with the AlphaCredit receipts to actually over-invest in the rehabilitation of our stores, a lot of which we hadn't invested for over 10 years. So this was a one-off catch-up and we do not expect that to be ongoing. And as you've seen through this, there is the -- we've grown from $25 million to $40 million this year.

As we look at the programs ahead of us, we always want to try to keep it in the $25 million to $30 million range, but importantly, if you look at the chart on the bottom, you'll see the maintenance CapEx is running around $11 million, which is about 45% of total profit. If we can invest greater than 50% of CapEx in growth, that's a pretty good opportunity, and we'll continue to look for those growth opportunities, which will turn positive for us.

I'll say that these, the investment activities are outside of the acquisitions we've made, which are about $93 million, and the investment we have made in Cash Converters. And, as you've seen, we took a writedown on the investment. The main cause for that is, it's an industrywide growth (ph) and all the shares in the subprime market in Australia were affected negatively by the result of the announcement of a Senate inquiry, following on from Bank Commission that has been undertaken in Australia. So the whole market was affected by this.

The analysts have an average consensus net profit after tax around $25 million for Cash Converters and their 12-month price target is between $0.40 and $0.50. So as it trades at $0.27 (ph), there is, as the analysts were looking at, is upside there, but there is an overhang from the inquiry that is going to be held in the next month or two.

So I just wanted to sort of clarify some of those issues, while I pass over to Danny.

Daniel M. Chism -- Chief Financial Officer

Thanks, Stuart, and good morning, everyone.

I'm excited to share with you the financial results for a very good fourth quarter and fiscal year. First, I do want to mention our Investor Day in New York on December 13th, for those of you that can attend. You can get the details from Jeff Christensen.

Before we get to the slide on U.S. Pawn, there are a few items worth noting at a consolidated level as well as some expectations for the coming fiscal year. We delivered adjusted diluted EPS of $0.20 in the quarter and $0.79 for the full year. We saw a 9% increase in average consolidated pawn loans outstanding or PLO deliver a 33% increase in adjusted profit before tax to $64 million for the year. We ended the year with PLO 17% above the prior year, setting us up well for a good start to 2019.

For the quarter, adjusted profit before tax was up 38% to $16.2 million. Profit before tax was adjusted for discrete items, including the $11.7 million non-cash impairment of our 35% ownership stake in Cash Converters that Stuart just mentioned. This revalued our prior-year investments to the value of CCV stock at year-end, equaling the price at which they raised additional equity in June this year. This also incorporates recent movements in foreign currency exchange rates.

Consolidated operations expenses returned to 69% of net revenues in the quarter and for the full year, consistent with our expectations and longer-term trend. This reflects the net revenue benefit of some of the investments we made in the third quarter.

As I look toward fiscal 2019, the underlying performance and cash generation of the business as well as comparability to the fiscal 2018 results can be obscured by the non-cash interest we will record on a GAAP basis. This relates primarily to two items: first, amortization to interest expense of the estimated equity component of our convertible debt; and second, amortization to interest income of the deferred compensation fee and other straight line interest income on our notes receivable.

Adjusting for the non-cash portion of each of these items according to their amortization schedules, I expect that adjusted net interest expense I'll use to analyze the business will be about $15 million lower than our fiscal 2019 GAAP interest expense, representing about $0.18 per share. The adjusted results included in this quarter's slide deck do not reflect such an adjustment for non-cash interest. For comparable purposes, when evaluating next year's results, the fiscal 2018 full year results included about $8 million of non-cash interest expense or $0.11 per share, with $1 million or $0.02 per share of that in the first quarter.

As Stuart mentioned, payments from our notes receivable remain current. In fiscal 2018, we received $38 million in cash from AlphaCredit. In fiscal 2019, we anticipate receiving another $30 million, reflecting the declining principal balance and related cash interest. We expect to collect another $6 million in fiscal 2019 as the first installment of the related deferred compensation fee, with the remaining $8 million due in fiscal 2020.

And a quick comment on taxes. As expected, we recognized a $2 million charge in the fourth quarter to further revalue our short-term deferred tax assets due to the new tax law. If you remember, we were subject to a blended tax rate in fiscal 2018 due to our fiscal year straddling the date on which the new law went into effect. Those short-term DTAs were previously revalued at the 24.5% federal tax rate applicable to fiscal 2018, but are expected to reverse in future periods at the now applicable 21% federal rate. This is the last such revaluation I expect from the tax law change. Depending on the mixture of our domestic and foreign earnings and an assumed inflation rate that impacts taxes in Mexico, I expect our overall fiscal 2019 effective tax rate to be in the range of 31% to 32% for the full year.

Turning to slide nine. Let's take a look at the U.S. Pawn results for the quarter. With average PLO in the quarter slightly below the prior year, the 3% increase in pawn service charges was driven by an improved yield. This combined with an 8% higher sales gross profit or 9% on a same-store basis and a 210 basis point improvement in merchandise margins to an industry leading 39% drove strong results.

Overall, we leveraged the 5% bump in net revenues to a 7% increase in adjusted profit before tax. We showed strong year-over-year PLO growth by the end of the period, up 5% in total and up 2% excluding the estimated impact of last year's hurricanes. Inventory was well managed, with an increase of only 2% in relation to the 5% increase in PLO.

Moving now to slide 10. The left side shows that our disciplined approach and focus on meeting our customers' need for cash delivered an industry-leading PLO, PLO yield and net revenue per store in the US. Combining all these factors, we delivered a 15% increase in EBITDA, three times the growth rate of our public pawn competitor and a very nice sequential improvement from our Q3.

The right side of the slide shows same-store PLO growth by quarter stacked on the same quarter for the prior year and the same information for our competitor at the bottom of the chart. You can see our U.S. Pawn operations continue to take market share, adding to its long-term trend of market-leading same-store PLO growth. The ending PLO per store now stands at a seven-year high and 17% higher than the competitor at $305,000 per store.

Let's take a look at our Latin America Pawn operations on slide 11. PLO here more than doubled with pawn service charges up 99% on a constant currency basis. Same-store PLO grew 7%, with an improved yield driving an 11% improvement in same-store pawn service charges. In addition, we delivered a 63% increase in sales gross profit, 100 basis point improvement in merchandise margins to 31% and a higher return on earning assets. The combined effect of these factors was an exceptional 82% jump in net revenues and an 86% improvement in adjusted profit before tax. This includes the results from the 207 net stores added in fiscal 2018 through both acquisitions and the opening of new stores.

The left side of slide 12 shows our industry-leading PLO per store, with monthly yields and net revenues per store roughly equal to our largest competitor. It's worth noting that the GPMX stores we acquired in the first quarter were more jewelry focused. Those stores' net revenue was more concentrated in PSC, with lower in-store merchandise sales than our other Latin American stores. I expect our net revenues per store will continue to improve as we continue to increase these stores' general merchandise lending and in-store sales. That notwithstanding, the acquired stores delivered a robust first year ROIC of 12%, which we expect to exceed 15% by their third full year ownership.

Putting all the pieces together, you see our 86% increase in EBITDA for the quarter compares favorably with the 2% growth for the public pawn competitor. On the right side of this slide, Latin America Pawn delivered its 18th consecutive quarter of same-store PLO growth. This is compounding on top of an ever-increasing base. The industry-leading 7% same-store PLO increase this quarter was on top of a strong 11% growth we delivered this quarter last year. During this period, we produced much higher compound results than the largest pawn competitor shown on the bottom of the chart.

Year-end PLO per store was the highest in Latin America in a decade and the highest in the US since 2011. Both figures demonstrate solid same-store growth year-over-year. Combined with the contribution from acquired stores, this sets us up well for a solid start to 2019. Although it's still early in the fiscal year, that's exactly what we've seen year-to-date.

Now that you've got a little better understanding of financial performance, I'll turn the call back over to Stuart.

Stuart I. Grimshaw -- Chief Executive Officer

Thanks, Danny.

And just turning to slide 12. Just want to reiterate sort of some of the fundamentals we operate on the business, and the chart is quite appropriate because it is centered around the customer. And we've got a lot of levers that we're using, which are driving the results that we're seeing. The customer experience and meeting our customers' needs has been the driver of this result. We are close to the customer. We are in the stores all the time. And we have a track record of executing on this vision as well as seeing the market share gains that come with it.

We're seeing it through scale, strong margins and, as you see, in the operating leverage that exists within the Company. The industry dynamics remain attractive. While we have seen some recent volatility through Mexico, we believe in the long-term nature of the Latin American growth countries that we are in. We have a very diversified geographic footprint, and with that footprint come opportunities both for de novo and potential acquisitions. And we have the systems, incentives and we have a great team that are driving the close relationship with the customer.

We're working hard on all these levers to get the share price back to the levels that we've seen in the past, and we continue to focus strongly on meeting customers' needs at the storefront to drive future profitability of the Company.

So with those closing comments, I'd like to open it up for questions.

Questions and Answers:

Operator

(Operator Instructions) Your first question comes from the line of John Hecht from Jefferies. Your line is open.

John Hecht -- Jefferies. -- Analyst

Good Morning, guys. Thanks very much for taking my questions. The first, gross margins improved about 1% blended over the year. What are you guys seeing in the intermediate term with that? Is this a good range to think about? Are you playing with different loan to values and so forth to expand that for next year? How do we think about that for the coming quarters?

Stuart I. Grimshaw -- Chief Executive Officer

Thanks, John, and good morning. The -- most of the range should be around 35% to 38%. What we've said -- but what we'd seen with the -- the way that we are managing our customer, better understanding the good and the riskier customers, we've been able to actually improve our lending to these customers. As a result of that, the margin has been held up pretty well because when the product drop (ph) that actually reflects both the customer risk as well as the product risk. So we are seeing some good margin activity as a result of the analytics we bought in. Obviously, we try to keep a healthy margin, and it does get a bit seasonal at times, but if we can keep it toward that top end, we'd be pretty happy.

John Hecht -- Jefferies. -- Analyst

Okay. And you have a lot of -- good balance of cash in the balance sheet. You've been acquisitive. Can you -- maybe can you give us some color on what the pipeline looks like right now?

Stuart I. Grimshaw -- Chief Executive Officer

Yes, I mean, we continue to have acquisition opportunities before us. But one thing we have said is that while we have cash, we're not going to deploy it just for the sake of deploying cash. We've been disciplined. Wave laid opportunities pass. And for us, it's important to make sure that where we invest the cash it's invested where the returns are actually very beneficial to shareholders. We still have the 2019 convert, which matures in June, so we're keeping the flexibility of that and making sure that should opportunities arise, we can meet them as and when they occur. But again, John, I'm happy to hold a healthy balance sheet, and I think that's been a strength of the Company over the last few years.

John Hecht -- Jefferies. -- Analyst

Okay. And then final question, Stuart, you mentioned some noise out of the new administration in Mexico. You said it might impact a little bit specifically sort of retailers. Maybe, can you give us color on what specifically that -- the comments were and also maybe remind us what the kind of fee structure you have in Mexico is?

Stuart I. Grimshaw -- Chief Executive Officer

We don't really -- the -- it hasn't affected the retailers at all, but with an effect on the banks. The banks in Mexico typically earn about 35% -- 30% to 39% of their revenue from basic ATM and transfer fees. And that's pretty high in the Latin American basis. And one of the members of the incoming party was trying to present a bill which suggests that ATM transfer fees should be free, which caused the bank share prices in Mexico to drop by about 10% and the peso to also blow out. Within three hours, that has been revoked and we're seeing the peso trade back to it and there was a positive statement that the banking -- basically the banking industry wouldn't be changed for the next three years. So there was a short-term volatility. I think there was some contagion risk, particularly here in the US when people read it and assumed that we were a bank and not actually a pawn company. And it just shows that there is some nervousness still in the markets, both in Mexico and here in the US, but we don't see any -- any flow on into this industry at all because principally we are looked at as a retailer and there aren't any interest rate caps in Mexico. So we feel relatively comfortable with our position.

John Hecht -- Jefferies. -- Analyst

Thank you guys very much.

Stuart I. Grimshaw -- Chief Executive Officer

Thanks, John,

Daniel M. Chism -- Chief Financial Officer

Thanks, John.

Operator

(Operator Instructions) Your next question comes from the line of Vincent Caintic from Stephens. Your line is open.

Vincent Caintic -- Stephens -- Analyst

Hey, thanks. Good morning guys. So good performance in Latin America. Actually my question -- first question is going to be in separate geographies. So just wanted to talk about the -- your investment in Cash Converters and also the regulatory change you had in Canada, so converting the payday loans to installment loans. It seems like there is -- you have a lot of success in Latin America and there's a lot more opportunity there. So kind of a two-part question: If you could talk about your vision for Cash Converters and the Canada business, if you consider these businesses to be core? And related to that, second part, why wouldn't you maybe exit these businesses, harvest the capital and reinvest that more into the Latin America store growth?

Stuart I. Grimshaw -- Chief Executive Officer

Yes, I think -- thanks, Vincent, and good to hear. Cash Converters, I think we had about 30% -- just under 35% of the company. It's not as easy to exit a 35% holding since the market isn't that deep, and so what we're working over is to get the operational performance to a level where share price increase occurs. As I mentioned before the analysts' consensus for the Cash Converters share price is between $0.40 and $0.50. The net profit after tax is around AUD25 million. So trades on about a 6 times PE, which is very, very low compared to the market, but that industry -- part of the industry has been hit quite hard. We think there is still value there. We're working obviously to try and ensure that the profitability of that company continues to increase. So firstly, the exit is very difficult. Secondly, we think there is still upside in the company. And thirdly, we're actually working closely with Cash Converters to see whether there's any value we can help them with and our understanding of the market is because they do operate in a very similar market to us. On the Canada, we're moving into installment because that's actually basically where the regulators are moving everyone. We still offer short-term loans, but we're actually moving more into the installment loans, and (inaudible) writing more installment loans than we are short-term loans. So we're seeing that change. And the interest rate cap came down in around January from 19% to -- you know, it came down in January. So we're watching that business. We think there is still -- it's a good industry for us. It's not big at all, but we think that given the credit culture that sits in Canada, the loss incidents in lending is much less than what we had seen in the payday industry in the US.

Vincent Caintic -- Stephens -- Analyst

Okay, got it. That's helpful. Switching gears here. I know that that Mexican fee concern is -- and driving the stock unfortunately, so I just have a maybe a couple of questions there. If you could discuss maybe what the -- if there's like differences or comparisons on the rate structures or the fees that the different pawn players charge? Like for example, if you think about the non-profits versus what you charge. And is there really any difference between what you -- like the different geographies, for example, if you compare Mexico to the US, like what are the differences there?

Stuart I. Grimshaw -- Chief Executive Officer

Mexico's for us is a much larger general merchandise business than jewelry, and part of that is some of the security concerns we have in Mexico means that exhibiting jewelry comes with a lot of risk. So we've pushed pretty hard into the general merchandise, which typically does attract a higher interest rate than jewelry. So there is that anomaly that we do. The not-for-profits such as Monte de Piedad actually pretty much flowing on a very low loan-to-value ratio. And as a result of that, their merchandising really isn't that heavy, so there really -- and it's a different customer that goes there. We make sure that when the customer enters the store, we understand what their needs are, we ride (ph) them with their cash needs, and that's why we are getting flow whereas some of the not-for-profits don't satisfy the customers need for cash whereas they operate on a very low loan to value ratio. So there are anomalies in the market. It's not as if there is one type of pawn customer. There are various segments of pawn customers. But Mexico, typically it has a stronger growth profile as we keep pushing into the general merchandise sector of the market.

Daniel M. Chism -- Chief Financial Officer

To add on, our focus on customer service and the customer relationship as well is a key differentiator between us and a lot of the non-profits that really don't mind their customers queuing up in a long line.

Vincent Caintic -- Stephens -- Analyst

Okay, got it. Thanks very much.

Stuart I. Grimshaw -- Chief Executive Officer

Thanks, Vincent.

Operator

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

Greg Pendy -- Sidoti -- Analyst

Hi, guys. Thanks for taking my question. Can you just tell us kind of where we're at right now in the IT rollout and how is that playing a role if any in sort of the merchandise margins that you're seeing and is it something that could potentially help you on the pawn yield side as well? Thanks.

Stuart I. Grimshaw -- Chief Executive Officer

Hi, Greg. Yes, we've got about 50 stores operational in -- fully operational on the pawn system in the US and we've got a small number in Mexico, but we are going to accelerate that rollout such that we anticipate virtually all the US to be pretty much on stream by the second quarter of the calendar year of next year. What we're seeing in Mexico will be pretty close behind that. And obviously we don't --we won't be rolling out through Christmas and the tax refund season, which is where the stores are the busiest, so it all becomes the window of opportunities as to when we can insert it. What we're seeing is the actual ability to service the -- serve the customer much quicker, the click-throughs to the loan applications is substantially quicker. We have put in some basic analytics of customer grading into the pawn system, which will enable us to make better decisioning at the front, and hopefully that will exhibit itself in both inventory yield and pawn yield improvements. I don't think it'll be dramatic, but over time we will hopefully see some improvements in that area.

Greg Pendy -- Sidoti -- Analyst

Okay, great. And then can you just kind of -- I know there's been a lot of acquisitions, but now inventory, it's come down sequentially I think for two quarters straight. How comfortable are you that -- at current inventory levels, it seems like the demand for the merchandise is solid, but we're heading into the holidays. So is that something that will continue, you think, to come down or is this a stable level?

Stuart I. Grimshaw -- Chief Executive Officer

Look, I'm -- I think we could -- we can still come down, but we're coming into the sales season at the moment. So we'll typically hold a higher inventory balance coming into the Christmas and the tax refund regions, so I would -- my preference is to see that come down, and I think we will see it come down. We're actually getting better at moving product through with the systems we do have. But inventory is a capital cost and we need to keep moving it so we can get the returns back. So yes, we'd like to see the inventories continue to come down. I think we're getting -- getting there with the PLO growing quicker than inventory. So we're getting the positioning right. But I think there is still more we can do to move it.

Greg Pendy -- Sidoti -- Analyst

Okay. Thanks a lot.

Stuart I. Grimshaw -- Chief Executive Officer

Thanks, Greg.

Operator

(Operator Instructions) Your next question comes from the line of Chris Colvin from Breach Inlet Capital. Your line is open.

Chris Colvin -- Breach Inlet Capital -- Analyst

Thanks, guys. Congrats on a great quarter. You continue to grow faster than FirstCash and outperform them on multiple metrics. Yet you traded at more than a 60% discount, and historically, this discount has been far lower. So given this, can you please articulate your strategy for closing the valuation discount because it would clearly create tremendous shareholder value. So thanks in advance for your response.

Stuart I. Grimshaw -- Chief Executive Officer

Thanks, Chris. I think we are frustrated as well. Our operating performance and focusing on the customer we still believe is the right thing to do by growing geographically and keeping the relevance and operating much, much more efficiently. I think there is probably some disadvantages working to us on share buyback dividends which I think is just an inherent structural issue that will -- that has caused us to trade at a discount. I believe the Mexican overlay that has just happened caused about a 4% drop in the share price, which didn't come back, notwithstanding the clarification of the events. So I think there're some structural issues that work against us. But we still believe that by executing on the relevance of the key drivers that we've outlined on slide 12, we'll continue to grow that. We have the best systems, we have the best teams and we have the capital to deploy into accretive acquisitions. And we have -- are getting the scale and the margins right. The interesting thing about this business and this industry is that it all happens at the store level, to get operating performance. And we spend a lot of time ensuring that we are assisting our team members to get the best out of it. So the strategy of investing into the systems, investing into coaching, expanding the geographies so we can use our proven systems to continue to drive growth, we believe is the right one. But, Chris, as we have discussed, I think there still are some structural headwinds that we're hitting. We like nothing more to see the share price get back to the levels that we've seen, and that's -- that's -- the objective of management is to execute better than anyone else, put runs on the board and get the market to support us as we go through it. And we're disappointed with where the share price is. We think it should be high, but we will continue to speak to shareholders to drive our performance and work toward getting it back.

Chris Colvin -- Breach Inlet Capital -- Analyst

Great. Thanks.

Stuart I. Grimshaw -- Chief Executive Officer

Thanks, Chris.

Operator

Your next question comes from the line of Jordan Hymowitz from Philadelphia Financial. Your line is open.

Jordan Hymowitz -- Philadelphia Financial -- Analyst

Thanks, guys. What is the average rate you charge in Mexico versus the US on a blended basis? Because I know you input taxes rates down there generally.

Stuart I. Grimshaw -- Chief Executive Officer

On the US, we're averaging 15%. In Mexico, it's averaging around 18% -- yes, it's about 16% (ph). So in the US, it varies by state, so it all messes around. And in Mexico, it depends on jewelry and GM as to where you sit, but typically in Mexico we'll get a high yield on the loan portfolio.

Jordan Hymowitz -- Philadelphia Financial -- Analyst

Okay. And you said, mostly it's higher by 200 basis point you said?

Stuart I. Grimshaw -- Chief Executive Officer

In the Latin America, we averaged 16% for this quarter. In the US, I think we're 15% -- 14%. That's an average rate. So we're about 200 different, between Latin America and the US.

Daniel M. Chism -- Chief Financial Officer

And I'd point out, Jordan, that's not the statutory rate. That is taking into account forfeitures as well, right? So that's still calculated on the (multiple speakers).

Stuart I. Grimshaw -- Chief Executive Officer

Yes, but on average, it's looking at 200.

Jordan Hymowitz -- Philadelphia Financial -- Analyst

Perfect. And second, regarding the proposals in Mexico, right now they're only discussed regarding the banking industry, but several of the retailers and retail analysts down there have come out saying, it could affect (inaudible) or other consumer lenders. Why would the retailers be concerned that it could affect them if they're not banks and you're not concerned because if it is a rate cap or a rate cap, would it be across the board?

Stuart I. Grimshaw -- Chief Executive Officer

Yes, the -- I mean, Elektra is an unsecured lender. So they are a bit different to us, while they are a retailer, they're also an unsecured lender. So they would be caught that way -- that way -- typically, if it's going to move, it will be an industry move, not a particular company move. There was a statement that AMLO's party came out with saying that they wouldn't basically change the banking structure for three years seeing the reaction that was taken, and that's why we have a degree of comfort. But I'd also say that as one of my friends notice, it is Mexico and things can change quite rapidly. So while we're comfortable today and we believe in it, but things can change.

Jordan Hymowitz -- Philadelphia Financial -- Analyst

And I think that's correct. AMLO's statement, it says that. But Marino, a senior senator, Montreal (ph) has said that he will ignore what AMLO says and proceed with legislation. So it's kind of like in the US. AMLO may not be pushing it, but his party's pushing it and if they pass something, he may end up signing it.

Stuart I. Grimshaw -- Chief Executive Officer

The Ministry of Finance have said that they would actually have to look at any proposal and have to approve before it gets anywhere as well. So there's still a lot of moving parts, Jordan, and we are obviously the recipient of the news rather than being in it. But there is uncertainty, and I don't disagree with you there. But there seem to be some checks there. But like you, we'll have to see how it plays out, but at this stage we see it as a banking issue, and with my previous comments that the banks make around 35% -- on average about 35% of the revenue comes from these fees, which is extraordinarily high in Latin America, and I think that bode about the comments from the Marino party about why these fee should be regulated.

Jordan Hymowitz -- Philadelphia Financial -- Analyst

Thank you very much.

Stuart I. Grimshaw -- Chief Executive Officer

Thanks, Jordan.

Operator

(Operating Instructions) Your next question comes from the line of Brad Hathaway from Far View. Your line is open.

Brad Hathaway -- Far View -- Analyst

Hi, guys. Two questions for you. One, I guess, I just want to clarify on the Mexico issue, kind of the difference between how you're viewed as a kind of secured pawn lender versus these kind of unsecured lenders in the country. And then the second question was, I was pleased to see the move to a per-share-based competition in this year's 10-K, and I was curious if you could give a little bit more background as to how that came about. Thanks.

Stuart I. Grimshaw -- Chief Executive Officer

Okay. The -- I'll deal with the first one. Typically, the pawn shops are seen more as retail than lenders. While we do lend, it is first -- it's a bit of -- the way it's viewed is pretty much -- I think (inaudible) who sit over the top of it, who are actually more of the retail side than the lending side. So having a blended operation means that we are actually looked more as a retailer than a lender and sit under that versus unsecured lending, which is pure outright unsecured lending. So that's just the way it's looked at in Mexico. Under the EPS, though we have a compensation committee, which has compensation consultants, they look at the structure of the long-term incentive. They were -- obviously we've been discussing with shareholders that their view is that the EBITDA for both short-term and long-term incentives doesn't seem to make a lot of sense. And we actually took that on Board and the Compensation Committee, took the guidance from the consultants and the EPS number, which we have -- as management is very supportive of -- is in the long-term incentive program.

Daniel M. Chism -- Chief Financial Officer

And the other, I'd take on on the secured versus unsecured, much like we saw in the US with pawn lending versus payday lending, there was a lot of concern around cycle of debt with payday loans kind of the historical regulatory overhang, where the pawn industry has been viewed much more favorably largely because a customer can fully satisfy their debt just by forfeiting their collateral. And I think politically that's likely to be viewed very similarly in Mexico as well.

Brad Hathaway -- Far View -- Analyst

Great. Thank you.

Stuart I. Grimshaw -- Chief Executive Officer

Thanks, Brad.

Daniel M. Chism -- Chief Financial Officer

Thanks, Brad.

Operator

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

Matt Sweeney -- Laughing Water Capital -- Analyst

Hi, guys. Thank you for taking my question.

Stuart I. Grimshaw -- Chief Executive Officer

Hi, Matt.

Daniel M. Chism -- Chief Financial Officer

Hi, Matt.

Matt Sweeney -- Laughing Water Capital -- Analyst

Hello. Thank you for taking the question, and congratulations on the continued operational success. Could you just kind of step back and revisit the question a couple of questions ago, asking about the potential for share buybacks and what those structural issues might be? And basically the way I'm thinking is, in the past you've said you can make acquisitions in the 4 to 5 times EBITDA range and maybe 6x for really good assets. And looking at the stock now, it's trading below our estimation of liquidation value if you were to just sell off all the stores piece now, and assuming you believe in the value of Cash Converters and the likelihood of collecting the Grupo Finmart receivable, the stock's trading in that range where you would make an acquisition. So my question is why would you not execute a tender offer here, essentially making a large acquisition than your own stock, which would remove all the operational risk?

Stuart I. Grimshaw -- Chief Executive Officer

It's -- I think we're asked that question at the third quarter. If we've done that, we probably would have lost a bit of money. We have the cash there for a number of reasons. One is that we do have a convertible coming up, which is a commitment that we do have. Two is, we have a number of opportunities on acquisition that we believe add value to the Company in the long term. And if you look at your return, your ROIC, it's not a six month or a nine month that we look at, we look at a three to five year period. Typically, the share buybacks occur when we have surplus cash that is above our commitments as well as our acquisition opportunities. When we did the convertible earlier this year, we actually raised cash at around 9.5 times EBITDA. So on a marginal basis, there are plenty of opportunities, which are accretive on the basis of the marginal cost of funding that we raised at that time. We continue to see the operations -- I hear when we have discussions with shareholders all the time, but on a marginal basis, there are a lot of accretion that can occur with the investment into the with the investment into the opportunities we see.

Matt Sweeney -- Laughing Water Capital -- Analyst

Okay. And then another question. And just for some context, we have owned shares for about three years, and the initial investment was very much a special situation where we believed the stock was trading below asset value and that obviously worked out very well. But the investment has kind of involved -- evolved into the belief that EZCORP has the potential to be a multi-decade growth story, which we know from reading some of the legal documents that are out there that the view that Mr. Cohen agrees with. But the question is, is there a realization that over time the amount of value that it ultimately created through growth is going to be directly tied to the cost of capital? In other words, if your stock is trading at 10 times EBITDA and you can make an acquisition at 5 times EBITDA, that's great, but if the stock is trading at 6 times EBITDA and you make an acquisition at 5 times EBITDA, you're really just -- you're really just pushing paper around and not really creating any value. So what's the -- what's your view on the importance of the cost of capital in and what are the levers that can be pulled?

Stuart I. Grimshaw -- Chief Executive Officer

We look at the return on capital of all the investments that we are -- we are looking at over the three to five year period. So we are not immune to wasting capital. We're trying to understand and we have not backed acquisitions where it hasn't worked out. But as we saw with the GuatePrenda acquisition, that's been a very lucrative transaction where we've been able to use our skills to grow it such that it has -- we have reduced the EBITDA multiple that we paid very quickly in a short period of time. We think the acquisition needs to grow and we look at what is the long-term value. We also believe that we're undervalued, but we think that the growth opportunities we have will retrieve that value very quickly.

Matt Sweeney -- Laughing Water Capital -- Analyst

So I guess, and I guess the question is looking back over the last 30 years, there has been zero value created essentially. I mean, the stock is compounded at 4% a year since the IPO in 1991, and FirstCash came public within two and a half month of that and has compounded at about 16% over that time. So it seems like the Board, which is -- has been historically making the decisions around this kind of stuff does not have a strong track record of actually understanding how value is created. Is it your position that that has changed and the Board has found religion under your leadership or under you as CEO and we can expect improvements going forward?

Stuart I. Grimshaw -- Chief Executive Officer

Yes, I think the Board are actually fairly attuned to the use of capital all the time (multiple speakers). Sorry, Matt. Over the period of time, you have mentioned the share price has swung to very high and very low in that period of time. We haven't consistently taken point to point where we're at. 2011 to 2014, we made a number of acquisitions, which actually affected I think the trust in the Company, the trust in the Board as well. And that was reflected in the share price decrease. And so we're on a rebuild strategy. We had a restatement as a result of some of the accounting actions that were undertaken at that time We're only a couple of years out into the profitability after that, and we are on a path to continue to grow. So I think there have been some issues at both management level and potentially at Board level. I think, given the -- some of the acquisitions we've seen we've come out of hasn't been assessed on a capital efficiency basis. So I think some of your comments are correct. I think some of them aren't. The Board does have a strong handle on how to -- how to utilize cash, has a strong look at what is being done. And as you're seeing with some of the incentive programs are focusing and getting back to the EPS type basis where there is an alignment with the shareholder, and as I said before, we want to get the share price up and see it come up because we also believe that this is a great growth opportunity and it is an international growth opportunity.

Daniel M. Chism -- Chief Financial Officer

And then to add on, we're looking at acquisition opportunities or investment opportunities. We remain very disciplined at making sure that the expected ROIC on that exceeds our weighted average cost of capital because, to your point, Matt, that's the only way you're going to create long-term value. And so we're pretty disciplined around that and -- actually it is one of the reasons why we walk away periodically from deals that don't meet that threshold.

Matt Sweeney -- Laughing Water Capital -- Analyst

Thank you. And so you referred to some of the acquisitions in the 2011 to 2014 time period. And I guess how, as investors, should we have confidence that things have changed when the consultant that oversaw those acquisitions is now the Executive Chairman of the Board, getting paid 10 times more than the Chairman of the Board of FirstCash? Because in my experience, and maybe there's exceptions in Australia, but in my experience, I've never seen a situation where a consultant destroyed massive amounts of value and then was made Executive Chairman. So how, as investors, that we have confidence that something has changed given that setup (ph)?

Stuart I. Grimshaw -- Chief Executive Officer

Well, I wasn't here at the time, and -- you'd have to ask him. I don't think he was involved in those acquisitions, but I'm not here.

Matt Sweeney -- Laughing Water Capital -- Analyst

(multiple speakers).

Stuart I. Grimshaw -- Chief Executive Officer

Yes. All I can say is that there is a strong -- the Board has taken a strong look at everything, and we believe we're on the right path there. The discipline is in place that go there. No one individual actually has an ability to make a decision without the consensus and agreement of the Board. So the ability to have any individual make a carte blanche decision in the management team on the Board is actually quite well insulated by the processes we have in place.

Matt Sweeney -- Laughing Water Capital -- Analyst

I would just like to add that the optics of that are just -- just terrible. It'd be a very easy way to improve optics, which would likely improve your cost of capital is to address that discrepancy between someone who had a record of being participating in destroying value now being the Executive Chairman. And thank you for taking my questions.

Stuart I. Grimshaw -- Chief Executive Officer

Thanks, Matt. I would say he has been involved in the acquisitions that we've done, which have become very, very accretive and very positive, so we -- I certainly don't have that experience at all. And he is a valued member of what we're doing. But, thanks for your call, Matt, and thanks for your support.

Operator

Your next question comes from the line of Sam Chase from Stephens Investment. Your line is open.

Samuel M. Chase -- Stephens Investment -- Analyst

Good morning, guys. I have a quick question that follows up on some of these questions this morning regarding capital allocation. Stuart, when you have the investments in Latin America that you guys are deeming to be ROI positive to the firm and shareholders why double up or I guess it's not double up, why put capital into Australia again into a company we don't control as shareholders no matter what the price you deem to be fair value of that company? I mean, EZCORP isn't an investment holding company. It runs pawn stores. And you guys, I would think would want to put your capital into investments where you control 100% of the assets, instead of an asset you control 30% of the assets and have no management, you don't run the company on a daily basis. So can you just walk through that? And it said in the K that since September 30th, the share price has declined again. We may be revaluing that asset again. I mean, it looks like if you go back, I mean, talking about FirstCash, which I know very well as well, I haven't been on a conference call ever with FirstCash where talking about investments like minority positions in foreign countries long way away. If you want to collapse the multiple, I think the first way to do is to be owning the assets that we're putting our capital into. So could we -- can we talk about that a little bit?

Stuart I. Grimshaw -- Chief Executive Officer

Sure, Sam, and thanks for the call. The investment in Cash Converters is actually in a similar business that we do have. They actually run a very similar type structure that we have pawn operations in Australia and franchise globally. There is an overlap in the way they do develop their business and their opportunities, and we do -- we do like what they do. Your point about should we put more money in or not, I think is a relevant one. At the time they needed capital to pay off an unsecured debt line, and we saw the support within, we see the growth and we believe that it is a good investment. Owning 100% of everything isn't necessarily the right way to go when you can partner and get good returns. Unfortunately, as you have correctly pointed out, the Cash Converters share price hasn't reflected some of the growth in the profit and that is due to for instance the Senate inquiry, which I mentioned previously, which is an industry overhang and not a specific Cash Converters overhang. It's disappointing, and I hear what you say, and we will be deploying capital into Latin America and we'll continue to do so. At this point of time, there is no plans to put any more capital into Cash Converters as your point is a very valid one.

Samuel M. Chase -- Stephens Investment -- Analyst

Okay. So it's fair to say that going forward, no capital into Cash Converters from this point, they've got to sink or swim on their own? And from my standpoint is just when we're trying to raise capital as a firm and mostly at this point that's been on the convertible debt market because that's what's available to you guys. I just would hate to see that capital go to an entity that we don't control as shareholders. It just seems -- make a lot of sense to me to put it toward assets that you guys control.

Stuart I. Grimshaw -- Chief Executive Officer

At this point of time, I don't have any plans -- or we don't have any plans to put any more capital into Cash Converters.

Samuel M. Chase -- Stephens Investment -- Analyst

Perfect. Thank you, guys.

Stuart I. Grimshaw -- Chief Executive Officer

Thanks, Sam.

Operator

Your next question comes from the line of Chris Colvin from Breach Inlet Capital. Your line is open.

Chris Colvin -- Breach Inlet Capital -- Analyst

Yes, two follow-ups. I guess before my questions -- I understand and share in some of the colors, frustration. I think the reality is, some of those structural things we may not be able to fix near term. However, as I mentioned in my prior question, you guys historically traded at a much smaller discount. In fact, I think we calculated 15% for the first decade or the prior decade. Joe was there. So -- and today it's 60% plus. So I think even with those structural issues you can start to close the gap. And I know we were pleased to see as another caller mentioned that EPS was added to your long-term incentive plan. I would also echo another caller's comments that we would love to see a buyback here. I can appreciate the reasons, and you've already addressed it, but I just would want to echo that. To get to my two questions, I guess, great to see the US PLO store growth now back about $300,000. I think it's the first time since 2011. Can you talk about how you were able to drive that? And then my second question would be, do you feel like you're still well positioned to do well during tighter credit environments? I mean, obviously everyone starting to get concerned already about the hit, kind of economic slowdown. So if you can touch on how you expect your business to perform in that type of environment because I imagine it would do pretty well.

Stuart I. Grimshaw -- Chief Executive Officer

Thanks, Chris. The -- as I mentioned previous regarding the PLO and store, everything happens at the store. It doesn't happen by remote management. We spend a lot of time investing and getting the right compensation platforms for our team so that they are aligned to the outcomes that you're seeing today. So getting great people, which we are doing, we're trying to increase the tenure of these people because we know that when we have store managers with tenure of between five and seven years, we have a very successful store business. And we're starting to see the value of the work of around the compensation to increase the tenure. We're focused on the activity on a per day basis as well. And by focusing on the daily outcomes -- and it's a focus that go through from myself through Joe, all the way down the organization to the team members. It works on the basis that we know exactly what activity is being undertaken in each store in each day. And the business is a micromanagement business. You do have to be over the top of it. It's not remote management. And by having those -- by having the positive PLO experiences that we've had over the past two or three years, it means that we are getting more customers. We know that by getting more customers and satisfying their needs, they talk to their friends about it and we get an enhanced return. So I wish there was a magic wand I could say that you run over the top of it and by adding water you can make a lot of money, but it's actually the hard work that's going in over a long period of time to achieve it, to get it to this level. I think it's going to be supported more with the systems we've put in place. That will help us as well. But unfortunately, the answer, Chris, is it's just a lot of hard work at the store level, and then we've got great people.

Daniel M. Chism -- Chief Financial Officer

And Chris, you had asked also about in an environment of an economic slowdown, how the Company would -- how we expect it to respond. I'd say a couple of things there. With the extremely low unemployment that we're seeing in the US, that does -- is a bit of a headwind for pawn lending. Obviously, that provides our customer with a bit more cash, while in a slowdown, I think that would probably increase demand a bit for our product. And then the gold prices as well, right. So that's obviously been a little depressed lately. With an economic pull-down, I think you would probably see gold prices go up a bit, which is a net positive for the Company.

Chris Colvin -- Breach Inlet Capital -- Analyst

Great. Thanks for the responses.

Stuart I. Grimshaw -- Chief Executive Officer

Bye, Chris.

Operator

And there are no further questions at this time. Mr. Grimshaw, I turn the call back over to you.

Stuart I. Grimshaw -- Chief Executive Officer

Thanks very much, and thanks, everyone, for their interest. It's been a good, robust session. We appreciate your support and the questions that are asked. We'd like to thank you for dialing in or if you've logged into the webcast. Both Danny and Jeff will be available for questions later this morning. That concludes the call. Thanks very much and have a great day.

Operator

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

Duration: 58 minutes

Call participants:

Jeff Christensen -- Vice President of Investor Relations

Stuart I. Grimshaw -- Chief Executive Officer

Daniel M. Chism -- Chief Financial Officer

John Hecht -- Jefferies. -- Analyst

Vincent Caintic -- Stephens -- Analyst

Greg Pendy -- Sidoti -- Analyst

Chris Colvin -- Breach Inlet Capital -- Analyst

Jordan Hymowitz -- Philadelphia Financial -- Analyst

Brad Hathaway -- Far View -- Analyst

Matt Sweeney -- Laughing Water Capital -- Analyst

Samuel M. Chase -- Stephens Investment -- Analyst

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