EZCORP INC (EZPW) FY 2021 MD&A

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to inform the reader about matters affecting the financial condition and results of operations of EZCORP Inc. and its subsidiaries (collectively, “we,” “us”, “our” or the “Company”) for the two-year period ended September 30, 2021. The following discussion should be read together with our consolidated financial statements and accompanying notes included in “Part II, Item 8 — Financial Statements and Supplementary Data.” This discussion and analysis contains forward-looking statements, and our actual results could differ materially from those anticipated in these forward-looking statements. See “Part I, Item 1A — Risk Factors” and “Cautionary Statement Regarding Risks and Uncertainties That May Affect Future Results” below.

Acquisitions

In June 2021, we completed the acquisition of 100% of the common shares of PLO del Bajio S. de R.L. de C.V. (“Bajio”) and gained control of the entity, further expanding our geographic footprint within Mexico with the addition of 128 pawn stores. These stores, operating under the name "Cash Apoyo Efectivo," are located principally in the Mexico City metropolitan area and have strong brand recognition in that market. This was our largest acquisition to date in terms of store-count. The total consideration paid for Bajio was $23.6 million, consisting of cash of $17.4 million, of which $11.6 million was paid in cash at closing and the remaining $5.8 million is accrued and held as restricted cash to be paid out per the acquisition agreement, and 212,870 shares of our Class A Non-Voting Common Stock valued at $1.6 million. In addition, the sellers may be entitled to additional payments of up to $4.6 million over the next two years, contingent on the performance of the acquired stores with growing its loan portfolio. We also repaid $14.9 million of Bajio’s existing debt assumed in the acquisition.

In May 2021, we acquired 11 pawn stores in the Houston, Texas area, providing an immediate market-leading position in the South Houston area and enhancing our already strong position in the strategically important Houston metro market.

COVID-19

The COVID-19 pandemic continues to affect the U.S. and global economies, and as disclosed in our 2020 Annual Report on Form 10-K, the pandemic also affected our business in a variety of ways beginning in the second quarter of fiscal 2020 and continuing into fiscal 2021. The full extent and duration of the COVID-19 impact on the global economy generally, and on our business specifically, is currently unknown. The impact of the pandemic, and the recovery therefrom, continued to adversely affect net revenues and earnings in fiscal 2021. During the latter part of fiscal 2021, we saw pawn transaction activity continue to rebuild, driving PLO balances closer to pre-pandemic levels, which will drive accelerating PSC revenue in the coming quarters given the natural lag between pawn originations and related fees. A prolonged pandemic and recovery may have an adverse effect on our results of operations, financial position and liquidity in future periods.

Results of Operations

Non-GAAP Financial Information

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide certain other non-GAAP financial information on a constant currency basis ("constant currency") and “same store” basis. We use constant currency results to evaluate our Latin America Pawn operations, which are denominated primarily in Mexican pesos, Guatemalan quetzales and other Latin American currencies. We analyze results on a same store basis (which is defined as stores open during the entirety of the comparable periods) to better understand existing store performance without the influence of increases or decreases resulting solely from changes in store count. We believe presentation of constant currency and same store results is meaningful and useful in understanding the activities and business metrics of our Latin America Pawn operations and reflect an additional way of viewing aspects of our business that, when viewed with GAAP results, provide a better understanding and evaluation of factors and trends affecting our business. We provide non-GAAP financial information for informational purposes and to enhance understanding of our GAAP consolidated financial statements. We use this non-GAAP financial information to evaluate and compare operating results across accounting periods. Readers should consider the information in addition to, but not rather than or superior to, our financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

Constant currency results reported herein are calculated by translating consolidated balance sheet and consolidated statement of operations items denominated in local currency to U.S. dollars using the exchange rate from the prior-year comparable period, as opposed to the current period, in order to exclude the effects of foreign currency rate fluctuations. We used the end-of-period rate for balance sheet items and the average closing daily exchange rate on a monthly basis during the appropriate period for statement of operations items. Our statement of

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operations constant currency results reflect the monthly exchange rate fluctuations and are not directly calculable from the rates below. Constant currency results, where presented, also exclude the foreign currency gain or loss. The end-of-period and approximate average exchange rates for each applicable currency as compared to U.S. dollars as of and for the twelve months ended September 30, 2021 and 2020 were as follows:

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Operating Results

Fiscal 2021 vs. Fiscal 2020

These tables, as well as the discussion that follows, should be read in conjunction with the accompanying condensed consolidated financial statements and related notes.

Summary Financial Data

The following table presents selected summary consolidated financial data for fiscal 2021 and fiscal 2020.

Net revenues for fiscal 2021 were $449.5 million compared to $449.2 million in the prior year, reflecting lower average PLO (driving lower PSC), offset by improved sales profit margins. PSC decreased 5% due to a decline in new loans activity and PLO as customer borrowing behaviors were impacted by COVID-19 during the latter half of fiscal 2020 and through much of fiscal 2021. PLO increased 34% during fiscal 2021 as pawn transaction activity steadily rebuilt through the year. Merchandise sales decreased 11% compared to fiscal 2020 when the

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COVID-19 pandemic drove significant increases in sales volume in the latter half of year. Gross margin on merchandise sales grew 900 bps to 42%, resulting in a 13% increase in merchandise sales gross profit, primarily driven by effective inventory management.

Operating expenses decreased $79.3 million or 16%, primarily due to the $54.7 million goodwill impairment charge and the other charges of $20.4 million recorded during the prior year. In fiscal 2020, a reversal of incentive compensation for $20.9 million was recorded resulting from the termination of certain executives ($12.0 million) and the impact of COVID-19 to long-term and short-term incentive plans ($8.9 million). Excluding these charges and the reversal of incentive compensation, operating expenses decreased $25.1 million or 6%, primarily due to the strategic initiatives implemented in the fourth quarter of fiscal 2020, including cost optimization at the corporate level and cost cutting at the store level due to reduced transaction activity.

During fiscal 2020, we recorded goodwill, intangible and other assets impairment charges of $54.7 million, as further described in Note 8: Goodwill and Intangible Assets of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.”

During fiscal 2020, we recorded other charges of $20.4 million due to the implementation of strategic initiatives, as further described in Note 2: Other Charges of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.”

Total non-operating expenses decreased $6.6 million, or 30%, primarily due to non-recurring costs incurred in the prior year of a $7.1 million charge ($10.1 million, net of a $3.0 million tax benefit) for our share of the Cash Converters settlement of a class action lawsuit and a $5.0 million charge for the closure of our CASHMAX business in Canada.

Income tax expense increased $9.1 million primarily due to an increase in income before income taxes of $86.2 million, offset by a decrease in income tax expense of approximately $9.0 million due to non-deductible goodwill impairments booked in the second quarter of fiscal 2020.

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U.S. Pawn

The following table presents selected summary financial data from our U.S. Pawn segment:

Pawn service charges decreased 6% primarily due to a decline in new loans activity and PLO as customer borrowing behaviors were impacted by COVID-19 and related government stimulus initiatives during the latter half of fiscal 2020 and through the first half of fiscal 2021. Merchandise sales decreased 13% compared to fiscal 2020 when the COVID-19 pandemic drove significant increases in sales volume in the latter half of year. Gross margin on merchandise sales grew 800 bps to 44%, resulting in a 7% increase in merchandise sales gross profit, primarily driven by effective inventory management.

Store expenses decreased 3%. In fiscal 2020, a reversal of incentive compensation for $2.4 million was recorded resulting from the termination of certain executives ($1.2 million) and the impact of COVID-19 to long-term and short-term incentive plans ($1.2 million). Excluding the reversal of incentive compensation, store expenses decreased $10.7 million or 4%, primarily due to the strategic initiatives implemented in the fourth quarter of fiscal year 2020, including cost cutting at the store level due to reduced transaction activity.

Segment contribution increased $12.4 million primarily due to the $10.0 million goodwill impairment charge and the other charges of $3.1 million recorded during the prior year. Excluding these charges and the reversal of incentive compensation described above, segment contribution increased $1.7 million due to the changes in net revenues and store expenses described above.

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Latin America Pawn

The following table presents selected summary financial data from our Latin America Pawn segment, including constant currency results, after translation to U.S. dollars from functional currencies. See “Results of Operations — Non-GAAP Financial Information” above.

During fiscal 2021, we acquired 128 stores and opened 15 de novo stores.

PLO increased 60% to $40.0 million (51% on constant currency basis). On a same store basis, PLO increased 37% (29% on a constant currency basis). Though PLO has significantly improved, the average monthly ending PLO per store during the year was down 16% (19% on

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a constant currency basis) resulting from a substantial decline in new loans activity and associated loan balances due to the COVID-19 effects on the business in fiscal 2020.

PSC increased 1% (decreased 2% on a constant currency basis) and same store PSC decreased by 4% (7% on a constant currency basis) due to the lower average PLO during the year offset by a higher yield.

Merchandise sales decreased 5% (8% on a constant currency basis) and 12% on a same store basis (14% on a constant currency basis). This decrease in merchandise sales was offset by an increase in merchandise sales gross profit driven by a substantial improvement in merchandise sales gross profit margin primarily due to effective inventory management.

Store expenses increased $7.6 million or 11% (8% on a constant currency basis) primarily due to growth in store count during the year. On a same-store basis, store expenses increased by $2.8 million or 4% (1% on a constant currency basis).

Segment contribution increased $44.0 million, or 165%, to $17.3 million (160% on a constant currency basis). Excluding the $35.9 million goodwill impairment charge and the other charges of $1.7 million recorded during the prior year, segment contribution increased $6.3 million, primarily due to the changes in net revenues and store expenses described above.

Other International

The following table presents selected summary financial data for our Other International segment after translation to U.S. dollars from its functional currency of primarily Australian and Canadian dollars:

Segment contribution was $4.4 million. When excluding the $7.1 million charge ($10.1 million, net of a $3.0 million tax benefit) for our share of the Cash Converters settlement of a class action lawsuit and a $5.0 million charge for the closure of our CASHMAX business in Canada in the prior year, segment contribution increased $2.7 million, primarily due to the elimination of store losses from CASHMAX.

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Other Items

The following table reconciles our consolidated segment contribution discussed above to net income attributable to EZCORP, Inc., including items that affect our consolidated financial results but are not allocated among segments:

Segment contribution increased $71.1 million, primarily due to a $47.1 million impairment charge of certain long-lived assets, $8.6 million in other charges and a $7.1 million charge ($10.1 million, net of a $3.0 million tax benefit) for our share of the Cash Converters settlement of a class action lawsuit in fiscal 2020. Excluding those charges, segment contribution increased by $8.3 million or 8% primarily due to the improvements of the Latin America pawn segment.

General and administrative expenses increased $2.4 million, or 4%. In fiscal 2020, a reversal of incentive compensation for $17.0 million was recorded resulting from the termination of certain executives ($10.3 million) and the impact of COVID-19 to long-term and short-term incentive plans ($6.7 million). Excluding the reversal of incentive compensation, general and administrative expenses decreased $14.6 million or 21%, due to expense optimization initiatives that started at the end of the fourth quarter of fiscal 2020.

Other charges of $11.8 million incurred in the prior year resulted from the implementation of cost saving initiatives and rationalizing non-core activities.

Income tax expense increased $9.1 million primarily due to an increase in income before income taxes of $86.2 million offset by a decrease in income tax expense of approximately $9.0 million due to non-deductible goodwill impairments booked in the second quarter of fiscal 2020.

Income tax expense includes other items that do not necessarily correspond to pre-tax earnings and create volatility in our effective tax rate. These items include the net effect of state taxes, non-deductible items and changes in valuation allowances for certain foreign operations. See Note 11: Income Taxes of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data” for quantification of these items.

Fiscal 2020 vs. Fiscal 2019

The Results of Operations discussion for fiscal 2020 vs. fiscal 2019 has been omitted and is located in “Part II, Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended September 30, 2020, which was filed with the SEC on December 14, 2020.

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Liquidity and Capital Resources

Cash Flows

The table and discussion below present a summary of the sources and uses of our cash:

The decrease in cash flows from operating activities year-over-year was due to a $31.2 million decrease from changes in working capital, offset by a $28.6 million increase in net income, exclusive of non-cash items. Changes in working capital are primarily related to the timing of collections in pawn service charges receivable, inventory purchases and the timing of payments of accounts payable and prepaid expenses.

The decrease in cash flows from investing activities year-over-year was primarily due to a $95.8 million decrease in the sale of forfeited collateral, a decrease of $76.6 million in net pawn lending and collections and acquisitions of $19.0 million. The decrease in sale of forfeited collateral and decrease in net pawn lending and collections was primarily attributable to a change in customer borrowing behaviors during the COVID-19 pandemic. The $19.0 million in acquisitions is primarily attributable to the CAE acquisition discussed in Note 3: Acquisitions of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.”

The increase in cash flows used in financing activities year-over-year was primarily due to the payment of assumed debt of $14.9 million from the CAE acquisition, offset by a $5.2 million decrease from the repurchase of common stock in the prior year.

The net effect of these changes was a $48.9 million decrease in cash on hand during the current year, resulting in a $263.6 million ending cash and restricted cash balance.

Sources and Uses of Cash

In December 2019, our Board of Directors authorized a stock repurchase program that will allow us to repurchase up to $60 million of our Class A Non-voting Common Stock over three years. On March 20, 2020, we suspended the repurchase of shares under the program in order to preserve current liquidity given the uncertainty of the impact of the COVID-19 pandemic to our operations. As of September 30, 2021, we had repurchased and retired 943,149 shares of our Class A Common Stock for $5.2 million. The resumption of our stock repurchase program and the amount and timing of purchases will be dependent on a variety of factors, such as the return to normal business conditions, stock price, trading volume, general market conditions, legal and regulatory requirements, cash flow levels and corporate considerations determined by management and the Board, such as liquidity and capital needs and the availability of attractive alternative investment opportunities. The Board of Directors has reserved the right to modify, suspend or terminate the program at any time. We did not make any stock repurchases during the year ended September 30, 2021.

We anticipate that cash flows from operations and cash on hand will be adequate to fund any future stock repurchases, our contractual obligations, planned de novo store growth, capital expenditures and working capital requirements through fiscal 2022. We continue to explore acquisition opportunities, both large and small, and may choose to pursue additional debt, equity or equity-linked financings in the future should the need arise. Given the current uncertainty related to the COVID-19 pandemic, we may adjust our capital or other expenditures. Depending on the level of acquisition activity and other factors, our ability to repay our longer term debt obligations, including the convertible debt maturing in 2024 and 2025, may require us to refinance these obligations through the issuance of new debt securities, equity securities, convertible securities or through new credit facilities.

Convertible Notes

For a description of the terms of our convertible notes, including the associated conversion and other related features and transactions, see Note 9: Debt of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.”

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Contractual Obligations

Below is a summary of our cash needs to meet future aggregate contractual obligations as of September 30, 2021:

(a)    Excludes debt discount and deferred financing costs as well as convertible features.

(b)    Excludes $5.1 million in sublease payments expected to be received.

(c)    No provision for uncertain tax benefits has been reflected in the contractual obligations table as the timing of any such payment is uncertain. See Note 11: Income Taxes of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.” Additionally, no provision for insurance reserves, deferred compensation arrangements, or other liabilities totaling $7.6 million has been included as the timing of such payments are uncertain.

(d)    Total excludes contractual obligations already recorded on our consolidated balance sheets as current liabilities, except for the accrued portions of interest and lease obligations which are included in interest on long-term debt obligations and lease obligations captions above.

In addition to the lease obligations in the table above, we are responsible for the maintenance, property taxes and insurance at most of our locations. During the fiscal year ended September 30, 2021, these collectively amounted to $25.5 million.

Critical Accounting Estimates

The preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and judgments including those related to revenue recognition, inventory, loan loss allowances, goodwill and indefinite-lived intangible assets, long-lived and other intangible assets, income taxes, contingencies and litigation. We base our estimates on historical experience, observable trends and various other assumptions that we believe to be reasonable under the circumstances. We use this information to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from the estimates under different assumptions or conditions.

The critical accounting policies and estimates that could have a significant impact on our results of operations, as well as relevant recent accounting pronouncements, are described in Note 1: Organization and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.” Certain accounting policies regarding the quantification of the sensitivity of certain critical estimates are discussed further below.

Pawn Loan Revenue Recognition

We record PSC using the effective interest method over the life of the loan for all pawn loans we believe to be collectible. We base our estimate of collectible loans on several inputs, including recent redemption rates, historical trends in redemption rates and the amount of loans due in the following months. Unexpected variations in any of these factors could change our estimate of collectible loans, affecting our earnings and financial condition. As of September 30, 2021, the balance of our PSC receivable was $29.3 million. Assuming the average forfeiture rate increased or decreased by 10%, our pawn service charges receivable balance as of September 30, 2021 would have increased or decreased by approximately $0.8 million.

Inventory and Cost of Goods Sold

We consider our estimates of obsolete or slow-moving inventory and shrinkage estimates in determining the appropriate overall valuation allowance for inventory. We monitor our sales margins for each type of inventory on an ongoing basis and compare to historical margins. Significant variances in those margins may require a revision to future inventory reserve estimates. We have historically revised our reserve estimates pertaining to jewelry inventory depending on the current price of gold and resulting trends in margins. Future declines in gold prices may cause an increase in reserve rates pertaining to jewelry inventory. As of September 30, 2021, the gross balance of our inventory was $115.3 million, for which we have included reserves of $4.3 million. Assuming the reserve rates were increased or decreased by 10%, our inventory reserve balance as of September 30, 2021 would have increased or decreased by approximately $0.4 million.

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Goodwill and Indefinite-Lived Intangible Assets

When testing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the estimated fair value of a reporting unit is less than its carrying amount. If we elect to perform a qualitative assessment and determine an impairment is more-likely-than-not, we are then required to perform a quantitative impairment test; otherwise, no further analysis is required. We also may elect not to perform a qualitative assessment and, instead, proceed directly to a quantitative impairment test. When performing a quantitative impairment test, we apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

When we perform a quantitative goodwill impairment test, we estimate the fair value of the reporting unit using an income approach based on the present value of expected future cash flows, including terminal value, utilizing a market-based weighted average cost of capital (“WACC”) determined separately for each reporting unit. The determination of fair value involves the use of estimates and assumptions, including revenue growth rates, operating margins and terminal growth rates discounted by an estimated WACC derived from other publicly traded companies that are similar but not identical to us from an operational and economic standpoint. We use discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and in our internally developed forecasts.

We test indefinite-lived intangible assets for impairment by first assessing qualitative factors to determine whether it is necessary to perform a quantitative impairment test. If we believe as a result of the qualitative assessment that it is more-likely-than-not that the fair value of the indefinite-lived intangible asset is less than its carrying amount, a quantitative impairment test is required. Otherwise, no further testing is required.

We consider the assessment of the occurrence of triggering events or substantive changes in circumstances that may indicate the fair value of goodwill may be impaired to be a critical estimate. Furthermore, we consider the assumptions discussed above pertaining to the income approach we use in the quantitative testing of impairment to be critical estimates.

The results of the impairment analyses for fiscal year 2021 and fiscal year 2020 are discussed in Note 8: Goodwill and Intangible Assets of Notes to Consolidated Financial Statements included in “Part II, Item 8 — Financial Statements and Supplemental Data.”

Income Taxes

Management believes that it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with future reversals of existing taxable temporary differences, will be sufficient to fully recover the net recorded deferred tax assets. In the event we determine all or part of the net deferred tax assets are not realizable in the future, we will make an adjustment to the valuation allowance that would be charged to earnings in the period such determination is made. We have included valuation allowances against deferred tax assets for net operating losses and tax credits not expected to be utilized based on specific facts and estimates for each jurisdiction.

We consider the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. We have not recorded a deferred tax liability related to foreign withholding taxes of our undistributed earnings of foreign subsidiaries indefinitely invested outside the U.S.

We may be subject to income tax audits by the respective tax authorities in any or all of the jurisdictions in which we operate or have operated within a relevant period. Significant judgment is required in determining uncertain tax positions. We utilize the required two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately forecast actual outcomes. We adjust these reserves in light of changing facts and circumstances, such as the closing of an audit or the refinement of an estimate. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We believe adequate provisions for income taxes have been made for all periods.

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Cautionary Statement Regarding Risks and Uncertainties That May Affect Future Results

This Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend that all forward-looking statements be subject to the safe harbors created by these laws. All statements, other than statements of historical facts, regarding our strategy, future operations, financial position, future revenues, projected costs, prospects, plans and objectives are forward-looking statements. The words “may,” "can," “should,” “could,” “will,” "would," “predict,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such statements are only predictions of the outcome and timing of future events based on our current expectations and currently available information. Actual results could differ materially from those expressed in the forward-looking statements due to a number of risks and uncertainties, many of which are beyond our control. Accordingly, you should not regard any forward-looking statement as a representation that the expected results will be achieved. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this report. Such risks and uncertainties include, among other things:

•Changes in laws and regulations;

•Negative characterizations of our industry;

•Concentration of business in Texas and Florida;

•Changes in gold prices or volumes;

•Changes in sales, pawn loan balances, sales margins, pawn redemption rates or other important operating metrics;

•Our ability to continue growing our store count through acquisitions and de novo openings;

•Continuing indemnification obligations for pre-closing taxes related to our sale of Grupo Finmart;

•Our controlled ownership structure;

•Potential regulatory fines and penalties, lawsuits and related liabilities related to firearms business;

•Potential robberies, burglaries and other crimes at our stores;

•Changes in the competitive landscape;

•Our ability to design or acquire, deploy and maintain adequate information technology and other business systems;

•Failure to achieve adequate return on investments;

•Potential uninsured property, casualty or other losses;

•Potential natural disasters;

•Financial statement impact of potential impairment of goodwill or other intangible assets such as trade names;

•Potential conversion of Convertible Notes into cash (which could adversely affect liquidity) or stock (which will cause dilution of existing stockholders);

•Limited number of unreserved shares available for future issuance;

•Public health issues that could adversely affect our financial condition or results of operations;

•Changes in the business, regulatory, political or social climate in Latin America;

•Changes in foreign currency exchange rates;

•The outcome of future litigation and regulatory proceedings;

•Potential disruptive effect of acquisitions, investments and new businesses;

•Potential exposure under anti-corruption, anti-bribery, anti-money laundering and other general business laws and regulations;

•Changes in liquidity, capital requirements or access to debt and capital markets;

•Potential data security breaches or other cyber-attacks; and

•Potential civil unrest or government overthrow and other events beyond our control.

For a discussion of these important risk factors, see "Part I, Item 1A — Risk Factors."

In addition, we cannot predict all of the risks and uncertainties that could cause our actual results to differ from those expressed in the forward-looking statements. You should not place undue reliance on our forward-looking statements. Although forward-looking statements reflect our good faith beliefs, forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Accordingly, you should not regard any forward-looking statements as a representation that the expected results will be achieved.

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We specifically disclaim any responsibility to publicly update any information contained in a forward-looking statement except as required by law. All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.