Debt

9 Months Ended

Jun. 30, 2020

NOTE 8: DEBT

The following tables present the Company's debt instruments outstanding, contractual maturities and interest expense:



	June 30, 2020								June 30, 2019							September 30, 2019
	Gross Amount		Debt Discount and Issuance Costs			Carrying Amount			Gross Amount		Debt Discount and Issuance Costs			Carrying Amount		Gross Amount		Debt Discount and Issuance Costs			Carrying Amount

	(in thousands)
2024 Convertible Notes	143,750		(28,069		)	115,681			143,750		(33,841		)	109,909		143,750		(32,439		)	111,311
2025 Convertible Notes	172,500		(41,122		)	131,378			172,500		(47,958		)	124,542		172,500		(46,290		)	126,210
8.5% unsecured debt due 2024*	998		—			998			1,148		—			1,148		1,092		—			1,092
CASHMAX secured borrowing facility*	295		(466		)	(171		)	804		(739		)	65		634		(653		)	(19		)
Total	$	317,543	$	(69,657	)	$	247,886		$	318,202	$	(82,538	)	$	235,664	$	317,976	$	(79,382	)	$	238,594
Less current portion	268		—			268			215		—			215		214		—			214
Total long-term debt	$	317,275	$	(69,657	)	$	247,618		$	317,987	$	(82,538	)	$	235,449	$	317,762	$	(79,382	)	$	238,380



*	Amount translated from Guatemalan quetzals and Canadian dollars as of applicable period end. Certain disclosures omitted due to materiality considerations.



	Schedule of Contractual Maturities
	Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years

	(in thousands)
2024 Convertible Notes*	$	143,750	$	—	$	—	$	143,750	$	—
2025 Convertible Notes*	172,500		—		—		172,500		—
8.5% unsecured debt due 2024	998		268		430		300		—
CASHMAX secured borrowing facility	295		—		295		—		—
	$	317,543	$	268	$	725	$	316,550	$	—



*	Excludes the potential impact of embedded derivatives as discussed below.



	Three Months Ended June 30,				Nine Months Ended June 30,
	2020		2019		2020		2019

	(in thousands)
2019 Convertible Notes:
Contractual interest expense	$	—	$	896	$	—	$	3,034
Amortization of debt discount and deferred financing costs	—		2,314		—		7,567
Total interest expense	$	—	$	3,210	$	—	$	10,601

2024 Convertible Notes:
Contractual interest expense	$	1,033	$	1,033	$	3,100	$	3,099
Amortization of debt discount and deferred financing costs	1,484		1,376		4,370		4,051
Total interest expense	$	2,517	$	2,409	$	7,470	$	7,150

2025 Convertible Notes:
Contractual interest expense	$	1,024	$	1,024	$	3,072	$	3,072
Amortization of debt discount and deferred financing costs	1,754		1,630		5,168		4,806
Total interest expense	$	2,778	$	2,654	$	8,240	$	7,878

2.375% Convertible Senior Notes Due 2025

In May 2018, the Company issued $172.5 million aggregate principal amount of 2.375% Convertible Senior Notes Due 2025 (the “2025 Convertible Notes”). The 2025 Convertible Notes were issued pursuant to an indenture dated May 14, 2018 (the "2018 Indenture") by and between the Company and Wells Fargo Bank, National Association, as the original trustee. The 2025 Convertible Notes were issued in a private offering under Rule 144A under the Securities Act of 1933. The 2025 Convertible Notes pay interest semi-annually in arrears at a rate of 2.375% per annum on May 1 and November 1 of each year, commencing November 1, 2018, and mature on May 1, 2025 (the "2025 Maturity Date"), unless converted, redeemed or repurchased in accordance with the terms prior to such date. The carrying amount of the 2025 Convertible Notes as a separate equity-classified instrument (the “2025 Convertible Notes Embedded Derivative”) included in “Additional paid-in capital” in our condensed consolidated balance sheets as of June 30, 2020 was $39.0 million. The effective interest rate for the three and nine months ended June 30, 2020 was approximately 9%. As of June 30, 2020, the remaining unamortized debt discount and issuance costs will be amortized through the 2025 Maturity Date assuming no early conversion.

The 2025 Convertible Notes are convertible into cash or shares of Class A Non-voting Common Stock ("Class A Common Stock"), or any combination thereof, at the Company's option subject to satisfaction of certain conditions and during the periods described in the 2018 Indenture, based on an initial conversion rate of 62.8931 shares of Class A Common Stock per $1,000 principal amount of 2025 Convertible Notes (equivalent to an initial conversion price of $15.90 per share of the Company's Class A Common Stock). The Company accounts for the Class A Common Stock issuable upon conversion under the treasury stock method. To the extent the Company's average share price is over $15.90 per share for any fiscal quarter or year-to-date period, the Company is required to recognize incremental dilution of the Company's earnings per share.

If, among other triggers described in the 2018 Indenture, the market price of the Company's Class A Common Stock meets the threshold based on at least 20 of the final 30 trading days of the quarter for the 2025 Convertible Notes to become convertible at the option of the holders during the subsequent quarter, the Company may be required to classify the 2025 Convertible Notes as current on the Company's condensed consolidated balance sheets for each quarter in which such triggers are met. The stock

trading price condition and other triggers are measured on a quarter-by-quarter basis and were not met as of June 30, 2020. As of June 30, 2020, the if-converted value of the 2025 Convertible Notes did not exceed the principal amount.

2.875% Convertible Senior Notes Due 2024

In July 2017, the Company issued $143.75 million aggregate principal amount of 2.875% Convertible Senior Notes Due 2024 (the “2024 Convertible Notes”). The 2024 Convertible Notes were issued pursuant to an indenture dated July 5, 2017 (the "2017 Indenture") by and between the Company and Wells Fargo Bank, National Association, as the original trustee. The 2024 Convertible Notes were issued in a private offering under Rule 144A under the Securities Act of 1933. The 2024 Convertible Notes pay interest semi-annually in arrears at a rate of 2.875% per annum on January 1 and July 1 of each year, commencing January 1, 2018, and mature on July 1, 2024 (the "2024 Maturity Date"), unless converted, redeemed or repurchased in accordance with the terms prior to such date. The carrying amount of the 2024 Convertible Notes as a separate equity-classified instrument (the “2024 Convertible Notes Embedded Derivative”) included in “Additional paid-in capital” in our condensed consolidated balance sheets of June 30, 2020 was $25.3 million. The effective interest rate for the three and nine months ended June 30, 2020 was approximately 9%. As of June 30, 2020, the remaining unamortized debt discount and issuance costs will be amortized through the 2024 Maturity Date assuming no early conversion.

The 2024 Convertible Notes are convertible into cash or shares of Class A Common Stock, or any combination thereof, at the Company's option subject to satisfaction of certain conditions and during the periods described in the 2017 Indenture, based on an initial conversion rate of 100 shares of Class A Common Stock per $1,000 principal amount of 2024 Convertible Notes (equivalent to an initial conversion price of $10.00 per share of the Company's Class A Common Stock). The Company accounts for the Class A Common Stock issuable upon conversion under the treasury stock method. To the extent the Company's average share price is over $10.00 per share for any fiscal quarter, the Company is required to recognize incremental dilution of our earnings per share.

If, among other triggers described in the 2017 Indenture, the market price of the Company's Class A Common Stock meets the threshold based on at least 20 of the final 30 trading days of the quarter for the 2024 Convertible Notes to become convertible at the option of the holders during the subsequent quarter, the Company may be required to classify the 2024 Convertible Notes as current on the Company's condensed consolidated balance sheets for each quarter in which such triggers are met. The stock trading price condition and other triggers are measured on a quarter-by-quarter basis and were not met as of June 30, 2020. As of June 30, 2020, the if-converted value of the 2024 Convertible Notes did not exceed the principal amount.

2.125% Cash Convertible Senior Notes Due 2019

In June 2014, the Company issued $200 million aggregate principal amount of 2.125% Cash Convertible Senior Notes Due 2019 (the "2019 Convertible Notes"), with an additional $30 million principal amount of 2019 Convertible Notes issued in July 2014. In July 2017, the Company used $34.4 million of net proceeds from the 2024 Convertible Notes offering to repurchase and retire $35.0 million aggregate principal amount of 2019 Convertible Notes. The 2019 Convertible Notes paid interest semi-annually in arrears at a rate of 2.125% per annum on June 15 and December 15 of each year. The 2019 Convertible Notes matured on June 15, 2019 (the "2019 Maturity Date"), and the remaining $195.0 million aggregate principal amount outstanding plus accrued interest was repaid using cash on hand.

2019 Convertible Notes Warrants

In connection with the issuance of the 2019 Convertible Notes, the Company also sold net-share-settled warrants (the “2019 Convertible Notes Warrants”). The 2019 Convertible Notes Warrants allowed for the purchase of up to approximately 14.3 million shares of the Company's Class A Common Stock at a strike price of $20.83 per share. The Company accounted for the Class A Common Stock issuable upon exercise under the treasury stock method. The 2019 Convertible Notes Warrants began to expire on a daily basis after we repaid the 2019 Convertible Notes and the last of the unexpired 2019 Convertible Notes Warrants expired in May 2020. As of June 30, 2020, there were no 2019 Convertible Notes Warrants outstanding, and no shares of Class A Common Stock were ever issued pursuant to the 2019 Convertible Notes Warrants.

CASHMAX Secured Borrowing Facility

In November 2018, the Company entered into a receivable's securitization facility with a third-party lender (the "lender") to provide funding for installment loan originations in our Canadian CASHMAX business. Under the facility, a variable interest entity (the "trust") has the right, subject to various conditions, to borrow up to CAD $25 million from the lender (the "third-party loan") and use the proceeds to purchase interests in installment loan receivables generated by CASHMAX. The trust uses collections on the transferred receivables to pay various amounts in accordance with an agreed priority arrangement, including expenses, its obligations under the third-party loan and, to the extent available, amounts owned to CASHMAX with respect to the purchase price of the transferred receivables and CASHMAX's retained interest in the receivables. CASHMAX has no obligation with respect to the third-party loan or the transferred receivables except to (a) service the underlying installment loans on behalf of the trust and (b) pay amounts owed under or repurchase the underlying installment loans in the event of a breach by CASHMAX or in certain other limited circumstances. The facility is nonrecourse to EZCORP (subject to certain limited guaranty obligations), allowed borrowing through November 2019, and fully matures in November 2021. The Company's obligation under the facility as of June 30, 2020 was $0.3 million.