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EZCORP, Inc. (NASDAQ:EZPW)

F1Q 2014 Earnings Conference Call

January 28, 2014 05:00 PM ET

Executives

Mark Kuchenrither - EVP and CFO

Paul Rothamel - President and CEO

Analysts

Bill Carcache - Nomura

John Rowan - Sidoti & Company

John Hecht - Stephens, Inc.

Bob Ramsey - FBR Capital Markets

Operator

Welcome to the Fiscal Year 2014 First Quarter Earnings Release Conference Call. My name is Adrian, and I’ll be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Mark Kuchenrither. Mark Kuchenrither, you may begin.

Mark Kuchenrither

Thank you, Adrian, and good afternoon, everyone. I’m Mark Kuchenrither, EZCORP’s Executive Vice President and Chief Financial Officer. On the call with me today is Paul Rothamel, our President and Chief Executive Officer. Today’s conference call contains certain forward-looking statements regarding the company’s expected operating and financial performance for future periods.

These statements are based on the company’s current expectations. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of uncertainties and other factors including fluctuations in gold prices for the desire of our customers to pawn or sell their gold items, changes in the regulatory environment, changing market conditions in the overall economy, and in the industry and consumer demand for the company’s services and merchandize.

For a discussion of these and other factors affecting the company’s business and prospects see the company’s annual, quarterly and other reports filed with the Securities and Exchange Commission.

Also we have provided supplemental information on our website. The information gives more detail on the impact of gold and jewelry scrap on earnings per share and net earning assets by segment. These materials can be found at ezcorp.com in the investor resources section.

Now I would like to turn the call over to Paul Rothamel, our Chief Executive Officer for his opening comments. And then we will open the call to your questions, Paul?

Paul Rothamel

Thank you, Mark and good afternoon everyone. I want to take a few minutes and share with you what we’re seeing in our business and marketplace today and ultimately what the impact of that is on our consolidated company. In the United States where we operate our two largest businesses, the recent changes in the gold market and regulatory environment are well documented, so I won’t spend a lot of time on that here.

On the pawn side of the business, our largest, let’s talk about the consumer for a minute, we continue to see strong demand for both our loan and retail offerings, as evidenced by our growing loan transaction accounts and positive sales trends. There are clear shift to general merchandize for collateral and retail is in full swing as our pawn loan balance is now 60% gold and diamond jewelry, down from 70% as recently as three to four years ago. More significant swing is in retail sales where general merchandize now accounts to nearly three quarters of our sales versus 60% over the same timeframe. That confluence of change demands that we be better retailers in order to be better lenders, as general merchandize substantially electronics has a shorter shelf life than gold, and unlike gold it is always deflationary so sophisticated pricing and promotions must be in place every day.

The additional online selling channel is another key to our long term ability to move significant inventory of strong margins. In less than 18 months, we’ve grown our capacity rapidly, we expect that explosive growth to continue, as we add additional websites to highlight our products, introduce our own website in the coming months and gain further brand awareness that comes with time in our growing business. Hence the need to strong point of sale pricing, loan management, inventory management systems and more importantly the expertise to run them. Those are the investments we’ve made at EZCORP and we feel very confident that our team can deliver strong financial results overtime. Here, we believe our skill and talent will consistently win in the marketplace.

We do expect the impact of gold volume declines to moderate beginning in Q3 of this year and should we continue to drive strong gold retail sales of 30 plus percent year-over-year growth as we did in the quarter, we expect to see that merchandize return to our loan portfolio as future collateral.

At some point, gold will generate year-over-year improvements. With our improved ability to execute general merchandize in concert with that we’ll continue to be a leader in the U.S. pawn market. All of this, points to our ability to leverage the investments we’ve made here and turn U.S. pawn into a growth business again.

Turning to U.S. financial services our second largest business, roughly 20% of segment contribution, the regulatory environment is again well documented, somewhat less documented is consumers response to our products today.

The fact is like U.S. pawn the demand is growing. Our overall loan balance grew again in 2013 even with regulatory changes as to the number of customers that we served. You all know that over 90% of our customers use our products exactly as intended and their acceptance of our products has not waned, in fact it is strong as ever. So the choice is simple to us you are either in or you are out. Our customer wants this product and we want to provide it although this wrapping out we’re in. The second choice is how are we in. again we’ve chosen to give them options between our storefronts and online channels.

One is very mature for us and the other is new, but the customer deservers and demands both options. Overtime, we expect the yield in this business to continue to decline but because of our store within a storeroom operating model, our increasing online channel and our consolidated leverage expense structure coming together now; we will continue to be a market leader.

Today we’re focused on executing the day-to-day activities that drive customers to us and thus drive loan balance. At the same time we’re consolidating our underwriting, loan origination and collection systems and teams to leverage our best resources and talent that reduce cost. Most of this work will be done this year with additional loan management synergies coming later.

So, what does all this mean? Simply this, we project about a second half of this year the business will be serving more customers than ever with its largest loan balance ever as it is expected to deliver this business back to earnings growth during the same time frame. To be clear, we expect continued choppiness of the market as the market and regulatory environment continue to shake out, the new normal we call it, but that does not make it a bad business, normally consumers clear wants it, so we are definitely in.

In the U.S segment, we live with our storefront pawn business now accented by the online selling channel. Our U.S financial service business is a great complement as it gives further choices to our customers when they need immediate cash. We have three of the four pieces of the puzzle, storefront pawn, online sales and storefront financial services generating earnings with our online lending channel soon to join. That combination will keep our U.S Canada segment, the largest and most important segment at EZCORP for the foreseeable future.

As for our Latin America segment, with Empeño Fácil and Grupo Finmart, it is moved from losing money three years ago contributing roughly 15% of our consolidated segment contribution, we expect that to continue with penetration as high as 20% in the near term.

The Mexican pawn market and Empeño are going through radical change right now as the entire marketplace is seeing the customer shift from gold to general merchandise, later but much faster than the U.S. consumer. In Mexico this really means from gold to electronics and specifically cell phones. Cell phones is the number one collateral item today for our consumer and a number one retail item as well. You can imagine the complexity here versus gold jewelry. The challenge for us is that we've always been in this business but with fewer competitors, but today nearly the entire industry has jumped in and disrupted the marketplace. For us the combined impact for the year-over-year gold declines and rapid move to general merchandise are pressuring our immediate loan and retail business.

The good news is that we made some of the same [adjusting] investments in systems and people as we made in U.S. pawn to drive a more complex business model. Our quarter one trends and loan volume, loan quality, retail sales and expense leverage are all better than the back half of last year. We have slowed our new store growth to focus on maximizing profitability, our existing store base and we expect to see continued consolidation in the marketplace due to these competitive pressures as well as the positive regulatory changes at the federal level.

We believe that with our locations, footprint and scale; we’re well positioned to weather the short term market volatility and return to growing the business again in 2015. Grupo Finmart continues to be the fastest growing business we have today and our key metrics remain consistently strong.

The ability to generate loan originations in active contracts and add new and renew existing contracts are the building blocks to this business. We are focused heavily there today as well as offering additional services that our existing consumers have asked for. Things like we refinance options, access to other loan products et cetera.

And just as in the pawn industry in Mexico, we’re an active participant in the regulatory process and are proactively working at the federal level to ensure proper regulations to product the consumer earned place for our industry. As one of the top three largest providers in the country and conjunction with our industry association, we’re taking a leadership role today in government affairs.

Finally, our minority partners have a strong history in this industry with outstanding credentials across all of Mexico. They are as committed as we are to being one of the largest providers of credit to our customers for years to come.

Our combined segments of U.S, Canada and Latin America are generating 90 plus percent of our segment contribution. We expect that to continue for the foreseeable future. The combination of our big core business is growing stronger and our new channels becoming more mature or coming together. Our focus is on detailed day-to-day acquisition to drive revenues within an expense structure that will leverage against those raising revenues.

In the near term, our remaining smaller businesses are very promising, cash gaining, cash conversion [until we] continue their incubation. We will continue to refine their operating models, improve their profitability and get them ready for growth sometime after this year.

To close before taking your questions, the consolidated level we’re pleased with what we see from a consumer. Our segments are beginning to show the benefits of our investments and we’re really wholly focused on getting those investments to payback through detailed execution at ground level. Our balance sheet remains strong, our cash flows remain strong and our income statement is improving every day.

We have taken and continue to take, the necessary steps to be the customer's first choice. We’re committed to executing at a high level on their behalf as we look forward to delivering on our own short and long term commitments.

And with that we’ll take your questions.

Question-and-Answer Session

Operator

Thank you. We'll now begin the question-and-answer session. [Operator Instructions]. And we have Bill Carcache from Nomura online with a question. Please go ahead.

Bill Carcache - Nomura

Thank you. Paul, I wanted to ask you if you could go back to kind of revisit the comment that you made about having three out of the four segments with online lending soon to join. Could you expand on that a little bit?

Paul Rothamel

Yes, so how we look at it today inside the segment, obviously U.S. pawn is largest business we have in the United States and it will continue to be. It’s also been hit hardest by the gold headwinds but we expect that to anniversary all of that really by fourth quarter for sure and even possibly the third quarter. So, U.S. pawn store fronts is the biggest business. U.S. financial services second largest business. We are committed to that business as well and we've been able to frankly withstand a lot of pressure from the regulatory environment and replace almost all of the earnings that we have lost related to those activities.

The third, the newest -- then we added the online selling channel which is inside U.S. pawn that’s how we think about it because of the new channel for the consumer for us. And that as you saw we were -- we had a 21% increase in the quarter, it’s now 9% of our retail sales, very healthy margins.

And then the fourth piece of the puzzle for us really is online lending and that’s the business that we bought, that we really are essentially making a channel of our store fronts. That has and you will see it in the non-GAAP information at the back of the press release, we lost money in the first quarter like we lost money last year. We expect that loss to moderate in Q2, be flat in Q3 and then begin to make money in that segment -- in that part of the segment in the fourth quarter.

Bill Carcache - Nomura

Okay, that’s very help. And Cash Genie, when you guys talk about, you say in the press release that you expect the favorable trends to continue for Cash Genie. Can you talk about what you are expecting or what you are assuming happens in the UK regulatory environment, for example with respect to caps that are being talked about?

Paul Rothamel

Sure. So, let me talk about the trends just for a second, if you remember from the last call we talked a bit about that we had a good second and third quarter of last year, had a poor execution of a change in product to installment product. We have rectified that, took our, frankly our volumes down a bit, to do that we are now growing those business. So inside the business the underlying trends to our ability to grow the business and grow them profitably along with expense reductions that we made, we feel good about the underlying business trends.

We like everybody else in the UK is waiting for the regulatory group to come out with exactly what their requirements are. We fully expect that we like everyone else in the marketplace will have to alter our products in some way, shape or form. We today through a myriad of sources are very active in that process with the governing body and we'll see when that comes. We should know really within about 60 days exactly what that government body is looking for and then we will have I believe six months to implement, more comfortable that we can be flexible in order to do that.

Bill Carcache - Nomura

Okay, that’s helpful. Finally switching gears to the -- on the pawn side. There was a comment in the press release which I was kind of struck by that the average loan for general merchandise is roughly one-third that of average store loan. I think there had been a time where the thought process was that if gold prices did go down and people shifted to general merchandise that potentially that would be up to almost a full amount. And so I was kind of surprised by that, I wondered if you could comment on whether that’s a number that you feel is pretty sad or is that fluid that one-third, do you still see that moving around and then along those lines is capacity becoming an issue in any of your stores given that growing shift to general merchandise?

Paul Rothamel

On the first point, historically we've run some relationship like that a fourth to a third and to jewelry loan balance size. And I think like you have heard from others, our transaction counts are up but our loan size is down and that’s why you are seeing overall loan balances in our case flat because we don’t have a lot of store growth and down slightly on a COMP basis really for the first time. So, I think in some cases frankly the consumer is taking up more than one loan to offset that jewelry, the fact that they don’t have a jewelry anymore. But we haven’t seen a big -- we frankly haven’t seen a big movement in either jewelry or GM size of loan although jewelry is down slightly in the single-digits right now obviously because of the stock price.

So, we generally look at it in terms of pushing transactions up that may mean that a single customer takes on more loans than they would have in the past to try to get the money that they need. But I think there is no question that was a certainly an industry-wide belief that somehow the consumer would be able to replace gold with jewelry and of course -- excuse me gold with general merchandise and we are feeling they are doing it but not nearly to the degree that we’d all like.

Concerning capacity, I assume you are talking about sales floor and back room capacity. And so the answer is that across our 500 plus pawn shops we have lot of capacity, to handle the shift to GM, in fact because of this move along with some of the other things that we touched on [for systems] and things we kicked off an initiative to improve the efficiencies of our back rooms, that will actually finish this year and on average we’re able to improve capacity without any kind of expansion of the building or anything like that and the back room is roughly 30%, some stores more than that from others, but we’re quite comfortable.

That points to by the way not just the capacity of the facilities but it’s our capacity to move and dispose of goods and that’s going to be the key and frankly that’s why we’re pretty excited about our sales numbers out of the last quarter particularly in jewelry because that was a big shift in strategy for us, but even our GM sales have been very strong all year and the good news in January will come out of the [indiscernible] again in positive single-digit right now, a little bit off fourth quarter in GM but frankly just a strong in gold right now, I think round about 28% comes from gold.

Operator

And we have a John Rowan for Sidoti & Company along with a question. Please go ahead.

John Rowan - Sidoti & Company

What was the reasonably large gain on sales disposal of assets?

Paul Rothamel

Sure, so that’s actually a strategic action that we took in the quarter, it’s been in play, it’s actually been in process for about 18 months that was sale of seven stores in a secondary market to us to frankly to strategic investors that we know very well and have been partners with the company in the past, recent past as well. So they are going to develop the market, we’ll have every opportunity to take that back at some point, but that’s really what that was about. And I know it shows a gain on sale on the one line, there were costs associated with it that really are buried in other lines that we didn’t show, but that’s what that is.

John Rowan - Sidoti & Company

Okay, but you sold the seven stores?

Paul Rothamel

Yes we did, yes.

John Rowan - Sidoti & Company

Can you explain your online strategy; I mean obviously you drove substantial increase in online sales. How has that changed over the past year? Assuming an example and I was searching for a clock radio the other day, and EZCORP showed up as a seller of it, I was pretty surprised by that. I just wanted to know what you have done in the past year to drive such volume through the online channel.

Paul Rothamel

My first question is I hope you bought or my first comment is I hope you bought that John.

John Rowan - Sidoti & Company

I didn’t.

Paul Rothamel

Yes, so really we -- I go back 18 months and grew out of frankly individual stores that we picked up through acquisition and even some of our own stores in the past have done it on a one store basis. And we looked at it hard; we built the business model. Probably two years ago we started to roll this thing out 18 months ago and it went through some early iterations but the fact of the matter is we studied the heck out of third party auction sites, we also studied some retailers in their early days, and when I say retailers I mean generally Target and Wal-Mart and companies like that. In their early days of online lending -- excuse me online selling. And for us we have obviously millions of dollars of merchandise sitting in stores and our first attempts are really to get it to consumers that maybe wouldn’t come into our stores.

So we've done it across frankly the third party that you all know, you just mentioned Amazon, eBay, Kijiji and several others. And we've really refined all the processes and it’s generated at store level and that’s how we do it. The key to the whole thing is frankly is logistics, because you got to keep your customer service levels very, very high. And so we didn’t race because we weren’t going to come out of the shoots and have problems, we went slow; we built this thing hub and spoke from our stores. We identified specific people in the stores that would be internet people, online selling people. And then we built some structure in Austin to support all that with some experts that aren’t pawn experts and they are not lending experts, they are online retail experts. And they brought some skills with them.

And so we feel very -- and how this thing has kind of moved, frankly in 18 months is faster than I would have ever thought we could move it, and that’s a credit to the team so I feel very good about that. And I do believe that if you look -- if you go and look at others business case scenarios about people doing this, we’re ahead of the curve and so the idea that we’re now going to launch up our own website is the natural progression and the next step, but we’ll stay on the third parties for quite a while frankly.

John Rowan - Sidoti & Company

Okay and then just one last question. The -- just address the inventory levels. On a dollar basis just so up a descent amount year-over-year, obviously you had a good retail season. But my understanding of your strategy was you're going to haul this gold, you're going to retail it and whatever we can't retail, we'll scrap. And I just want to -- what you are looking at as far as we can have an inventory and that build year-over-year is I want to make sure that there is still a chunk that you can scrap to bring that inventory level down and scraps still at a profitable margin.

Paul Rothamel

Yes, there is. I think, and if you remember John what we talked about was for us it wasn’t at the end of the Christmas season in Q1, it was at the end of the -- frankly, the tax season, the Valentine season in Q2 that we would scrap, if we needed to. But I would tell you, yes, our inventories are building back to capacity, that was asked earlier, I know that was in general merchandise capacity, but the fact of the matter is we have a lot of capacity at our store levels itself [indiscernible] today and we’re frankly just getting good at it.

So, we have the opportunity to scrap it. In fact our scrap -- we scraped, compared to our own expectations in Q1, we scraped better than we expected to be in our margins I think we’re 28% on scrap. So, even the scraping portion that we did, we did effectively. I think we retailed effectively at 45 points of margin. We scraped at 28. And we still have the biggest selling season in gold ahead of us over the next three weeks. And then we’ll take a look. And we’ll -- I expect that we’ll scrap but I will also tell you that we’re not going to scrap to a point that we’re starving our stores for sales.

Operator

And we have John Hecht from Stephens online with the question. Please go ahead.

John Hecht - Stephens, Inc.

Afternoon, thanks for taking my questions. Rothamel, do you have a sense or can you quantify what some of the offsetting expenses would have been during the quarter, just to give us a sense?

Paul Rothamel

Yes. So, just specific to that deal we’re talking about one time -- we didn’t get into a tunnel one time discussions. The gain on sale you can see on the line is $6.3 million, is about a $0.5 million of expense in the quarter buried in other lines related specifically to that. And we also disclosed in the 10-K earlier we had a one-time discretionary bonus payment in the quarter, which is a one-time the other way. If you roll all those things up, I mean our one timers essentially were plus $0.01 to $0.02. That plus was worth the call out today and being online were in relationship to our $0.42 earnings.

John Hecht - Stephens, Inc.

And this adjustment to your 30% tax rate is that permanent based on the current shift domestic versus international?

Mark Kuchenrithe

John, it’s Mark. Yes it is. We expect our tax rate to run at 30.2% for raining over the year.

John Hecht - Stephens, Inc.

Okay. And then can you give us a sense on I guess with the combination of U.S. and UK, just consumer lending generally speaking. How much of that on a composition basis is title and installment relative to payday lending?

Mark Kuchenrithe

So, the fastest growing segment we have is auto title, the second fastest is installment. But roughly 60% of our lending in the U.S. is still payday lending. Now, for us, again, we use that’s not all in Texas anymore we move balances significantly outside the State of Texas. And remember, what we call a payday loan isn’t what everybody thinks is a two day payday loan, which is the old legacy product so it’s other products now that as examples that we run in San Antonio and in Austin that are appropriate for the regulatory environment and the consumer still comes to us for that loan. It’s a little muddy when you just ask about payday lending. And the legacy product for us is probably 25% to 30% of our volume today.

Operator

And your next question comes from Bob Ramsey from FBR. Please go ahead.

Bob Ramsey - FBR Capital Markets

Good evening guys. Quick question, the other fee income line looked bigger this quarter than I was expecting. I know you had kind of a big number in there last year. But I know [Daniel] was I think the Western Union agreement, and I think it was zero last quarter. So, I wasn’t expecting the 5.6 million. Is there anything unusual in there or is it just lumpy, or?

Mark Kuchenrithe

Yes, I’ll be happy to talk to that. So, when we look at the other revenue lines that you called out last year, we had a implementation fee that we collected from Western Union that was reflected last year in other revenues on the U.S. in it. if you look at the Latin American segment this year we had a benefit of financing strategy that we -- that [indiscernible] employed that was similar to a CSO model where they sold part of their receivables and so they received a gain on the sale of those receivables and they’ll service and collect the portfolio that was sold and manage it for the financer.

Bob Ramsey - FBR Capital Markets

Okay.

Mark Kuchenrithe

Bob, [we] actually did that last year as well, and this was just -- in first quarter this was just a bigger transaction and it’s something that will be reoccurring and has been reoccurring inside that business as a form of finance.

Bob Ramsey - FBR Capital Markets

Okay is it -- did it say it’ll happen quarterly, annually or does it sort of depend on the flow business.

Mark Kuchenrithe

Well what’s happening as you know that business is growing, it's been growing very rapidly and so it’s been as the loan portfolio has grown into a size that’s appropriate to go do a transaction, so it’s more based on timing of the growth of the portfolio but we expect as the business continues to grow that those will become a more steady stream.

Bob Ramsey - FBR Capital Markets

Okay, I know you also mentioned the release that the provision that’s in mart was 10% of fees this quarter which is higher than it should be on a normalized basis, did the transaction affect the provision in any way or if not sort of why was the credit cost elevated in that business this quarter.

Paul Rothamel

No that wouldn’t have anything to do with it, the -- frankly it was a little bit elevated to us based on our expected run rate I think we put in the press release, we think will be in the mid-single digits so, a blip on the radar frankly to couple of points higher than it’s been so, the team is comfortable that it’ll be back below that in the next two and three quarters.

Bob Ramsey - FBR Capital Markets

Okay, I know you guys highlighted the loss at Albemarle and Bond, I’m just curious, is that your share of their earnings or is there any write down that’s in that line as well, the 1.2 million, I guess.

Paul Rothamel

Well there was a -- there was an adjustment made because as you know it, the end of the year we estimated their losses, because we have lack of visibility and during the first quarter they finally put out their yearend results which was -- had a loss greater than we anticipated and so we adjusted accordingly.

Bob Ramsey - FBR Capital Markets

Okay, that makes sense but you all did not change your carrying value above Albemarle and Bond at the end of the quarter, I guess what I’m asking is...

Paul Rothamel

I’m sorry; it does have an effect of reducing our carrying balance. So right now our balance sheet exposure is 7.9 million.

Bob Ramsey - FBR Capital Markets

Okay and the 1.2 million loss you highlighted from Albemarle and Bond is you know equal to that loss from unconsolidated affiliates, does that mean the cash convertors was basically neutral or break even this quarter in terms of its contribution.

Paul Rothamel

No, cash convertors made money in the quarter and we booked a profit there, remember we also have Cash Genie in that other international segment.

Bob Ramsey - FBR Capital Markets

Okay I was looking just a the consolidated income statement in that loss net income from unconsolidated -- which I thought was purely those two.

Mark Kuchenrithe

It’s not a loss; it’s a gain of one point. It’s a gain.

Bob Ramsey - FBR Capital Markets

You’re right. Okay. Is it just those two businesses, I mean I can do math and back out the 1.2 million loss and cash convertors that is -- okay I got it now, I got it. Thank you for that, I guess only other question I’ll ask you guys, I wonder if you have any thoughts you want to share on the upcoming proxy vote, I know some people have asked me what would be sort of the goal of increasing authorized shares outstanding as a lot of people view your stock as undervalued and aren’t sure what the goal would be in issuing stock at these levels.

Mark Kuchenrithe

The easy answer to that is that just because of the proxy vote for additional shares doesn’t mean anybody’s going to run out and issue shares, the fact of the matter is we have no flexibility available for the company today, we have historically used shares for really for only two reasons and that was for any type of equity investments over time and certainly depending on the market, depending on whether that was the right form of capital to use, along with compensation, so to us it’s a bit of good corporate housekeeping to have that flexibility and that’s all it is.

Operator

And we have John Rowan from Sidoti & Company, just queued up.

John Rowan - Sidoti & Company

Hi guys, sorry, just one more follow up question, the last one. So the equity in -- of unconsolidated affiliates that should be 1.2 million higher because that includes the impairment of Albemarle and Bond, is that a good run rate going forward for just Cash Genie and cash convertors?

Paul Rothamel

Yes, there was some confusion in the discussion there, so the line that says equity and net income unconsolidated affiliates does not include Cash Genie but the 1.271 million on page 8 that you’re probably looking at is a positive not a negative number, so I think what you’re really asking is what do we expect for run rate out of these affiliates and it’s like, look I mean it’s a problem for the next several quarters to us because of A&B, you know we’ve got cash convertors at whatever public information they provided you is what we’ve based it on. So we’re based on the same thing and Albemarle & Bond is a crapshoot right now to be honest on a run rate. So, I would thank, we expect their losses to continue for some period of time and as I said and cash converters will be what they publically stated.

John Rowan - Sidoti & Company

So, I understand, I’m just trying to get out of if there was $1.2 million impairment in the equity value of Albemarle & Bond that, if we just exclude that would mean that the run rate on that number is $1.2 million higher per quarter, that’s all I’m trying to get out, if there was in fact the impairment of the equity value in that number?

Mark Kuchenrithe

Yes, so if you look at the segment reporting, you look at other international segment reporting which is where I thought Bob was looking at, the $685,000 loss that showed at the segment contribution includes that write-down of A&B that we discussed. And so the run rate and absent of that is what Paul just talked about, cash converter ongoing is what is based on public information and Paul has already discussed what you expect your Cash Genie to do which is improve overtime. So you will see an improvement in that on that line item in absence of A&B impact overtime.

Operator

And we have no further questions.

Paul Rothamel

Okay, we appreciate your interest in EZCORP and your time today. We look forward to talking with you again in another 90 days. Thank you.

Operator

Thank you ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.

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