FirstCash, Inc. (the “Company”) (Nasdaq: FCFS), the leading
international operator of over 2,600 retail pawn stores in the U.S.
and Latin America, today announced operating results, including
record revenues and earnings per share and significant store
additions, for the three and six month periods ended June 30,
2019. Additionally, the Board of Directors declared a $0.25 per
share quarterly cash dividend.
Mr. Rick Wessel, chief executive officer,
stated, “Our second quarter results saw strong revenue, earnings
and margin growth from core pawn operations, highlighted by 13%
growth in diluted earnings per share and 17% growth on an adjusted,
non-GAAP basis. In addition, we added 73 locations in four
countries from acquisitions and new store openings during the
quarter, bringing year-to-date store additions to 237 units. With
these results, we begin the second half of 2019 with good momentum
in our core pawn operations, and despite the earnings headwind from
our decision to exit our non-core consumer lending business in Ohio
this quarter, we have increased the lower end of the previous
earnings guidance range by $0.05 per share.”
This release contains adjusted earnings
measures, which exclude merger and other acquisition expenses,
certain non-cash foreign currency exchange gains and losses and
non-recurring consumer lending wind-down costs, which are non-GAAP
financial measures. Please refer to the descriptions and
reconciliations to GAAP of these and other non-GAAP financial
measures at the end of this release.
|
|
Three Months Ended June 30, |
|
|
As Reported (GAAP) |
|
Adjusted (Non-GAAP) |
In thousands, except per share
amounts |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenue |
|
$ |
446,014 |
|
|
$ |
419,972 |
|
|
$ |
446,014 |
|
|
$ |
419,972 |
|
Net income |
|
$ |
33,048 |
|
|
$ |
30,171 |
|
|
$ |
35,297 |
|
|
$ |
31,683 |
|
Diluted earnings per
share |
|
$ |
0.76 |
|
|
$ |
0.67 |
|
|
$ |
0.82 |
|
|
$ |
0.70 |
|
EBITDA (non-GAAP measure) |
|
$ |
64,189 |
|
|
$ |
59,012 |
|
|
$ |
67,094 |
|
|
$ |
61,125 |
|
Weighted-average diluted
shares |
|
43,256 |
|
|
45,043 |
|
|
43,256 |
|
|
45,043 |
|
|
|
Six Months Ended June 30, |
|
|
As Reported (GAAP) |
|
Adjusted (Non-GAAP) |
In thousands, except per share
amounts |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenue |
|
$ |
913,618 |
|
|
$ |
869,772 |
|
|
$ |
913,618 |
|
|
$ |
869,772 |
|
Net income |
|
$ |
75,703 |
|
|
$ |
71,806 |
|
|
$ |
77,818 |
|
|
$ |
73,502 |
|
Diluted earnings per
share |
|
$ |
1.74 |
|
|
$ |
1.57 |
|
|
$ |
1.79 |
|
|
$ |
1.61 |
|
EBITDA (non-GAAP measure) |
|
$ |
141,072 |
|
|
$ |
131,291 |
|
|
$ |
143,786 |
|
|
$ |
133,643 |
|
Weighted-average diluted
shares |
|
43,456 |
|
|
45,757 |
|
|
43,456 |
|
|
45,757 |
|
Earnings Highlights
- Diluted earnings per share increased 13% on a GAAP basis and
17% on a non-GAAP adjusted basis in the second quarter of 2019
compared to the prior-year quarter. For the six month year-to-date
period, diluted earnings per share increased 11% on a GAAP and
adjusted non-GAAP basis, respectively.
- Further contraction in non-core consumer lending operations and
wind-down costs in Ohio negatively impacted earnings per share by
approximately $0.10 on a GAAP basis for the second quarter and
$0.05 on an adjusted non-GAAP basis, compared to the same
prior-year period.
- Net income, on a GAAP basis, increased 10% for the second
quarter of 2019 compared to the second quarter of 2018. On a
non-GAAP adjusted basis, net income increased 11% for the second
quarter compared to the prior-year period.
- Segment earnings in Latin America increased 23% on a U.S.
dollar basis and 21% on a constant currency basis for the second
quarter compared to the prior-year quarter. While U.S. segment
earnings on a GAAP basis declined 4% for the second quarter,
excluding the contribution from non-core consumer lending
operations and wind-down costs in Ohio, U.S. segment
earnings on a non-GAAP basis increased 5% for the quarter compared
to the prior-year quarter.
- EBITDA and adjusted EBITDA increased 9% and 10%, respectively,
in the second quarter of 2019 compared to the prior-year
quarter.
- For the trailing twelve months ended June 30, 2019,
consolidated revenues totaled $1.8 billion, net income was $157
million and adjusted EBITDA totaled $294 million.
- Cash flow from operating activities for the trailing twelve
months ended June 30, 2019 totaled $229 million, while adjusted
free cash flow, a non-GAAP financial measure, was $189 million for
the twelve months ended June 30, 2019.
Acquisitions and Store Opening
Highlights
- The Company acquired a total of 50 full-service pawn stores in
the second quarter of 2019 as it completed nine separate
transactions for a total purchase price of $13 million. The
acquisitions included 40 franchised Prendamex locations, primarily
in central Mexico, and 10 large format locations in Texas.
Year-to-date, a total of 178 stores have been acquired, including
158 stores in Latin America and 20 stores in the U.S.
- A total of 23 de novo locations were opened during the second
quarter in Latin America, including 18 stores in Mexico, three
stores in Colombia and two stores in Guatemala. Year-to-date, a
total of 59 new stores have been opened, which compares to 27 new
stores opened at the same point a year ago.
- Over the trailing twelve-month period ended June 30, 2019, the
Company has added a total of 449 locations and has increased the
number of pawn stores by 17%. Over 93% of the stores added in the
last twelve months are located in Latin America where the number of
pawn stores has increased by 35% over the same twelve-month
period.
- As of June 30, 2019, the Company operated 2,646 stores, with
1,592 stores in Latin America, representing 60% of the total store
base, and 1,054 stores in the U.S. The Latin American locations
include 1,519 stores in Mexico, 52 stores in Guatemala, 13 stores
in El Salvador and eight stores in Colombia, while the U.S. stores
are located in 24 states and the District of Columbia.
Note: Certain growth rates in “Latin America
Operations” below are calculated on a constant currency basis, a
non-GAAP financial measure defined at the end of this release and
reconciled to the most comparable GAAP measures in the financial
statements in this release. The average Mexican peso to U.S. dollar
exchange rate for the three-month period ended June 30, 2019
was 19.1 pesos / dollar, a favorable change of 2% versus the
comparable prior-year period, and for the six-month period ended
June 30, 2019 was 19.2 pesos / dollar, an unfavorable change
of 1% versus the prior-year period.
Latin America Operations
- LatAm segment pre-tax operating income for the quarter
increased 23%, or 21% on a constant currency basis, compared to the
second quarter of 2018. The year-to-date segment contribution
increased 21% on both a U.S. dollar and constant currency
basis.
- Driven by store additions and increasing same-store revenues,
total Latin America revenues for the second quarter of 2019 were a
record $166 million, an increase of 27% on a U.S. dollar basis and
26% on a constant currency basis, as compared to the second quarter
of 2018.
- The strong revenue growth included a 33% increase in pawn fees
and a 23% increase in retail sales compared to the prior-year
quarter. On a constant currency basis, pawn fees and retail
merchandise sales increased 32% and 22%, respectively, as compared
to the prior-year quarter.
- Same-store core pawn revenues increased 7% on a U.S. dollar
translated basis, consisting of an 8% increase in same-store pawn
fees and 6% increase in same-store retail sales compared to the
prior-year quarter. On a constant currency basis, same-store core
pawn revenues increased 5%, composed of a 7% increase in same-store
pawn fees and a 5% increase in same-store retail sales compared to
the prior-year quarter.
- Pawn loans outstanding increased 40% on a U.S. dollar
translated basis and 35% on a constant currency basis versus the
prior year and totaled a record $113 million at June 30, 2019.
Same-store pawn loans at quarter end increased 14% on a U.S. dollar
translated basis, while they increased 10% on a constant currency
basis, compared to the same prior-year quarter. As a comparison,
same-store pawn loans a year ago were up only 2% on a constant
currency basis.
- Segment retail margins were 35% in the second quarter, which
was consistent with the prior-year quarter. Year-to-date
retail margins were 36% compared to 35% in the comparative
prior-year period.
- Inventories at June 30, 2019 were $94 million compared to $65
million a year ago. The increase was driven by the net addition of
410 pawn stores over the past twelve months and continued
maturation of existing stores. As of June 30, 2019, inventories
aged greater than one year remained consistent and low at 1%.
- Inventory turns in Latin America for the trailing twelve months
ended June 30, 2019 remained strong at 3.8 times.
- Total store operating expenses increased 32% for the quarter,
or 31% on a constant currency basis, driven primarily by the net
addition of 410 pawn stores over the past twelve months. Same-store
operating expenses increased 7% in the second quarter of 2019, or
6% on a constant currency basis, and were impacted by slightly
higher operating costs in some regions related to acquisition
integration and minor inflationary pressures in Latin America. The
Company believes that there are unrealized operating expense
synergy opportunities related to the extensive acquisition activity
over the past 18 months.
U.S. Operations
- U.S. segment pre-tax operating income for the quarter decreased
4% compared to the second quarter of 2018 and was impacted by the
accelerated contraction in non-core consumer lending operations in
2019 (see the “Consumer Lending Contraction and Ohio Wind-Down
Costs” section below). Excluding the contribution from non-core
consumer lending and Ohio wind-down costs, the adjusted segment
pre-tax operating income (a non-GAAP measure) for the quarter
increased 5% compared to the prior-year quarter, primarily due to
improved retail margins, pawn loan yields and operating expense
reductions. Year-to-date, the segment contribution increased 1%
and, on an adjusted non-GAAP basis, increased 7%.
- Total revenues for the second quarter were $280 million, a
decrease of 3% compared to the second quarter of 2018, and included
the expected impact of a 60% decline, or $8 million, in non-core
consumer loan and credit services fees and a 29% decline, or $6
million, in non-core scrap jewelry sales. Core revenues from pawn
fees and retail sales increased by 2%.
- Net revenue (or gross profit) for the second quarter of 2019
decreased 2%, reflecting the declines in non-core revenues. More
importantly, net revenue from core pawn operations increased 4%
compared to the prior-year quarter as a result of the continued
improvements in retail sales margins and pawn yields as highlighted
below.
- Retail sales margin increased to 38% for the quarter compared
to 37% in the prior-year quarter. Despite continued growth of
online retailing in general, the Company’s retail sales, which are
all store-generated, increased 1% compared to the second quarter of
2018 and same-store retail sales were equal to the prior-year
quarter.
- Pawn fees increased 3% and same-store pawn fee revenues
increased 2% in the second quarter compared to the prior-year
quarter as pawn yields improved by 4% quarter-over-quarter.
- Pawn loans outstanding at June 30, 2019 totaled $262 million, a
decrease of 2% in total and 3% on a same-store basis. While
same-store pawn balances slightly improved sequentially, the
overall decrease was due primarily to the continued focus on
increasing the volume of direct purchases of goods from customers
in the legacy Cash America stores not interested in a pawn loan,
which resulted in a 23% increase in the percentage of such direct
purchase transactions for the quarter as compared to the prior-year
quarter. Additionally, purchased inventory typically turns faster
and has higher margins than forfeited items.
- Inventories at June 30, 2019 declined $12 million, or 6%, to
$173 million compared to $185 million a year ago, primarily from
strategic reductions in overall inventory levels. As of June 30,
2019, U.S. inventories aged greater than one year were 4%.
- Inventory turns in the U.S. increased for the seventh
sequential quarter and were 2.8 times for the trailing twelve month
period ended June 30, 2019 compared to 2.6 times for the twelve
month period ended June 30, 2018. Inventory turns in the U.S. are
slower than in Latin America due to the larger jewelry component in
the U.S. compared to a greater general merchandise inventory
component in Latin America.
- Total store operating expenses for the quarter decreased 1% in
total and on a same-store basis compared to the prior-year quarter,
primarily due to continued efforts to realize cost savings from
real estate, technology and labor expenses.
Consumer Lending Contraction and Ohio
Wind-Down Costs
- As previously disclosed, the Company stopped offering unsecured
consumer lending products in all of its Ohio locations, effective
April 26, 2019, in response to certain regulatory developments in
Ohio impacting such products. As a result, 52 of the Ohio Cashland
locations, whose revenue was derived primarily from unsecured
consumer lending products, were closed during the second quarter.
The remaining 67 locations in Ohio are expected to have sufficient
pawn revenues to continue operating as full-service pawnshops.
- As a result of the wind-down of the Company’s Ohio consumer
lending business, the Company incurred non-recurring exit costs of
approximately $2 million, net of tax, for the quarter ended June
30, 2019, which have been excluded from adjusted net income and
adjusted earnings per share. These charges include increased loan
loss provisions, employee severance costs, lease termination costs
and other exit costs.
- In addition to the discontinuance of consumer lending
activities in Ohio, the Company closed two other stand-alone
consumer loan stores and ceased offering unsecured consumer loans
and/or credit services products in 78 of its pawnshops located in
Texas, Louisiana and Kentucky during the first half of 2019. The
Company currently offers unsecured consumer loans and/or credit
services in only 81 remaining locations, of which 75 are
full-service pawnshops that offer consumer loans/credit services as
minor ancillary products. The Company expects to further reduce
locations offering such products in the future.
- Driven by the Ohio store closings and the Company’s continued
de-emphasis on consumer lending operations, U.S. consumer lending
revenues declined $8 million in the second quarter, or 60%, and $13
million for the year-to-date period, or 44%, compared to the
respective prior year periods. The Company expects revenues from
unsecured consumer lending products in the second half of 2019 to
be approximately $4 million, which accounts for less than 0.5% of
total second half revenues.
Cash Dividend and Stock
Repurchases
- The Board of Directors declared a $0.25 per share third quarter
cash dividend on common shares outstanding, which will be paid on
August 30, 2019 to stockholders of record as of
August 15, 2019. Any future dividends are subject to approval
by the Company’s Board of Directors.
- During the second quarter, the Company repurchased 328,000
shares at an aggregate cost of $30 million and an average per share
cost of $92.24. Year-to-date, the Company has repurchased
671,000 shares for an aggregate price of $59 million at an average
price of $88.62 per share, leaving $83 million available for future
repurchases under the current share repurchase programs. Future
share repurchases are subject to expected liquidity, debt covenant
restrictions and other relevant factors.
- Since the merger with Cash America in September 2016 and
through the second quarter of 2019, the Company has repurchased a
total of 5,630,000 shares, or 28% of the shares issued as a result
of the merger, at an average repurchase price of $75.84 per share,
resulting in a 12% reduction in the total number of shares
outstanding immediately following the merger.
Liquidity and Return
Metrics
- The Company generated $229 million of cash flow from operations
and $189 million in adjusted free cash flow during the twelve
months ended June 30, 2019 compared to $238 million of cash flow
from operations and $254 million of adjusted free cash flow during
the same prior-year period. Current period free cash flow includes
the impact of accelerated loan growth in Latin America and store
expansion activities, while the prior-year comparative amount
included a $21 million cash inflow from a non-recurring tax refund
related to the merger and larger than normal cash inflows related
to the liquidation of excess inventories in the legacy Cash America
stores.
- The Company continues to maintain excellent liquidity ratios
while funding share repurchases totaling $117 million, dividends of
$42 million and acquisitions of $118 million during the trailing
twelve months ended June 30, 2019. The net debt ratio, which is
calculated using a non-GAAP financial measure, for the trailing
twelve months ended June 30, 2019 was 1.9 to 1.
- Return on assets for the trailing twelve months ended June 30,
2019 was 7% while return on tangible assets was 15% for the same
period, which compared to 8% and 15% returns, respectively, for the
comparable prior-year period. The return on assets for the trailing
twelve months ended June 30, 2019 was negatively impacted by the
first-time inclusion of the operating lease right of use asset,
arising from the implementation of the Financial Accounting
Standards Board’s new lease accounting standard, which was not
included on the balance sheet prior to January 1, 2019. Return on
tangible assets is a non-GAAP financial measure and is calculated
by excluding goodwill, intangible assets, net and the operating
lease right of use asset from the respective return
calculations.
- Return on equity was 12% for the trailing twelve months ended
June 30, 2019, while return on tangible equity was 49%. This
compares to returns of 12% and 34%, respectively, for the
comparable prior-year period. Return on tangible equity is a
non-GAAP financial measure and is calculated by excluding goodwill
and intangible assets, net from the respective return
calculations.
2019 Outlook
- As expected, first half results saw strong growth in the
Company’s core pawn business, partially offset by further
contraction in the non-core consumer lending business. While
consumer lending, and Ohio in particular, will further drag on
earnings in the second half of 2019, the Company is raising the
lower end of its full-year 2019 guidance for adjusted diluted
earnings per share by $0.05, based on year-to-date strength in core
pawn earnings.
- Adjusted diluted earnings per share are now expected to be in
the range of $3.85 to $4.00. The tightened full-year 2019
guidance range represents an increase of 9% to 13% over the
prior-year adjusted earnings per share of $3.53. As described
below, the guidance for 2019 includes the impact of an expected net
reduction in U.S. segment earnings from unsecured consumer lending
operations and wind-down costs in Ohio of approximately $0.25
to $0.30 per share, a forecast foreign currency drag of
approximately $0.03 to $0.05 per share and a $0.05 to $0.08 per
share impact from a higher blended effective income tax rate.
Excluding these impacts at their midpoint estimates, estimated
earnings per share in 2019 would increase in a range of 20% to 24%
compared to 2018.
- Due primarily to the impact of the recent decision to
discontinue Ohio consumer lending as described above, the Company
is providing quarterly guidance for third quarter 2019. Adjusted
diluted earnings per share is expected to be in the range of $0.80
to $0.85, reflecting an expected decrease in third quarter consumer
lending revenues of approximately 85% compared to the prior-year
quarter. The Company expects the incremental decline in consumer
lending revenues to be substantially offset by additional growth in
core pawn revenues, including fourth quarter Latin America retail
sales in particular.
- The earnings guidance for full-year and third quarter 2019 is
presented on a non-GAAP basis, as it does not include merger and
other acquisition expenses, certain non-cash foreign currency
exchange gains and losses and non-recurring consumer lending
wind-down costs. Estimated GAAP basis full-year 2019 diluted
earnings per share represents an increase of 11% to 16% over the
prior-year GAAP basis diluted earnings per share of $3.41.
- The estimate of expected earnings per share for 2019 includes
the following assumptions:
- An anticipated earnings drag of approximately $0.25 to $0.30
per share during 2019 primarily due to the wind-down of unsecured
consumer loan products in Ohio and further strategic reductions in
consumer lending operations outside of Ohio. The Company is
currently modeling total consumer lending revenues for 2019 to be
approximately $20 million, which represents an estimated 65%
reduction compared to 2018 consumer lending revenues.
- Given continued volatility, the Company continues to use an
estimated average foreign currency exchange rate of 20.0 Mexican
pesos / U.S. dollar for the remainder of 2019 compared to the
average exchange rate of 19.2 Mexican pesos / U.S. dollar for 2018.
The projected change in the exchange rate represents an earnings
headwind of approximately $0.03 to $0.05 per share for 2019 when
compared to 2018 results. Each full Mexican peso change in the
exchange rate to the U.S. dollar represents approximately $0.10 to
$0.12 per share of annualized earnings impact.
- The effective income tax rate is expected to range from 27.0%
to 27.5% for 2019. This represents an increase over the 2018
effective rate of 26.1% (adjusted for the $1.5 million
non-recurring tax benefit recognized in 2018 as a result of the Tax
Cuts and Jobs Act) due in part to the increasing share of earnings
from Latin America, where corporate tax rates are higher, and an
increase in certain non-deductible expenses resulting from the Tax
Cuts and Jobs Act, which combined, represents an additional
earnings headwind of approximately $0.05 to $0.08 per share as
compared to 2018 results.
- Plans to open a total of approximately 80 to 85 new
full-service pawn stores in 2019 in Latin America, which includes
targeted openings of 57 to 62 stores in Mexico, 15 stores in
Guatemala and eight stores in Colombia. The increased number of
projected store openings in 2019 combined with the first half
front-loading of new store openings will cause an expected
additional drag to earnings of approximately $0.02 to $0.03 per
share compared to last year. The Company expects to complete
additional acquisitions in 2019, primarily in Latin America, which
are not reflected in the guidance.
Additional Commentary and
Analysis
Mr. Wessel further commented, “FirstCash had
another record quarter, posting record revenues and generating
diluted earnings per share growth of 13% on a GAAP basis and 17% on
an adjusted non-GAAP basis. The earnings growth was driven by
exceptional revenue growth in Latin America and continued margin
improvements in the core pawn business in the U.S.
“In Latin America, second quarter revenues grew
by 27% (26% on a constant currency basis), which represents the
highest quarterly growth rate in over seven years. Importantly,
pawn receivables at June 30 increased 40%, or 35% on a constant
currency basis, over the prior year, which is historically a
leading indicator of future revenue growth. The growth in pawn
receivables was primarily driven by the significant store additions
that totaled 420 over the past twelve months and the impressive 14%
growth, 10% on a constant currency basis, in same-store pawn
loans.
“The Company’s new store openings in Latin
America continued at a record pace and we plan to complete the
majority of the expected openings of 80 to 85 new locations by
early fall, which will allow undivided operational focus on the
important fourth quarter sales season. We remain excited about the
de novo store opening opportunities in the newer markets of
Colombia and Guatemala and are encouraged about the early results
from most locations in these markets.
“Acquisition activity remains strong in Mexico
as well, with the addition of 40 stores this quarter and 158 stores
year-to-date. All of the acquired locations this year are
franchised Prendamex locations where we continue to see significant
opportunities to enhance their retail operations and increase
overall revenues and profitability by integrating them onto the
First Pawn IT platform and training personnel in FirstCash
operating best practices. As an example, for the initial set of 126
Prendamex stores acquired in early 2018 and which entered the comp
base for the first time this quarter, second quarter 2019 revenues
increased over 100% compared to last year, primarily from increased
retail sales, while pawn loans outstanding increased by over 40%
year-over-year.
“Turning to the U.S., our results were also
extremely encouraging as we posted positive growth in core revenues
and gross profit, including a 2% increase in same-store pawn fees
and 5% increase in retail gross profit. We continue to realize
further store expense savings, primarily from optimizing labor
costs and reducing technology expenses in the legacy Cash America
stores, where we continue to believe there are still additional
margin expansion opportunities.
“As previously announced, and in conjunction
with the change in law in Ohio, we discontinued all non-secured
consumer lending products in Ohio and closed 52 Cashland stores
that were primarily focused on unsecured consumer lending products.
We will continue to operate 61 Cashland stores in Ohio that have
larger pawn operations where we believe there is an opportunity to
grow our pawn business as customers look for alternatives to
traditional unsecured consumer lending products. Additionally, we
operate six large format Cash America stores in Ohio that we
believe should benefit from the change in law as well.
“The Company continues to maintain a strong
balance sheet and cash flows. The majority of our store and asset
growth continues to be funded primarily with operating cash flows
and net leverage remains low at less than two times adjusted
EBITDA. We continue to prioritize acquisitions and store investment
opportunities while still repurchasing stock at what we believe are
attractive prices. Year-to-date, we have committed over $35 million
for acquisitions and repurchased 671,000 shares at a total cost of
$59 million and an average price per share of $88.62. Additionally,
this year we are on pace to pay dividends to shareholders of
approximately $43 million.
“We are confident in our business model and
growth opportunities both in Latin America and the U.S. and intend
to use our free cash flow to continue to build new stores, pursue
strategic acquisitions, repurchase shares and pay dividends. As a
result, we believe that we are well positioned to continue to
increase shareholder value over time,” concluded Mr. Wessel, chief
executive officer.
About FirstCash
FirstCash is the leading international operator
of pawn stores with more than 2,600 retail pawn locations in 24
U.S. states and the District of Columbia and in Latin America,
which includes all the states in Mexico and the countries of
Guatemala, El Salvador and Colombia. The Company employs
approximately 21,000 people between the U.S. and Latin America.
FirstCash focuses on serving cash and credit constrained consumers
primarily through its retail pawn locations, which buy and sell a
wide variety of jewelry, consumer electronics, tools, household
appliances, sporting goods, musical instruments and other
merchandise, and make small non-recourse pawn loans secured by
pledged personal property.
FirstCash is a component company in both the
Standard & Poor’s SmallCap 600 Index® and the
Russell 2000 Index®. FirstCash’s common stock
(ticker symbol “FCFS”) is traded on the Nasdaq,
the creator of the world’s first electronic stock market. For
additional information regarding FirstCash and the services it
provides, visit FirstCash’s websites located at
http://www.firstcash.com and http://www.cashamerica.com.
Forward-Looking Information
This release contains forward-looking statements
about the business, financial condition and prospects of FirstCash,
Inc. and its wholly owned subsidiaries (together, the “Company”).
Forward-looking statements, as that term is defined in the Private
Securities Litigation Reform Act of 1995, can be identified by the
use of forward-looking terminology such as “outlook,” “believes,”
“projects,” “expects,” “may,” “estimates,” “should,” “plans,”
“targets,” “intends,” “could,” “would,” “anticipates,” “potential,”
“confident,” “optimistic,” or the negative thereof, or other
variations thereon, or comparable terminology, or by discussions of
strategy, objectives, estimates, guidance, expectations and future
plans. Forward-looking statements can also be identified by the
fact that these statements do not relate strictly to historical or
current matters. Rather, forward-looking statements relate to
anticipated or expected events, activities, trends or results.
Because forward-looking statements relate to matters that have not
yet occurred, these statements are inherently subject to risks and
uncertainties.
While the Company believes the expectations
reflected in forward-looking statements are reasonable, there can
be no assurances such expectations will prove to be accurate.
Security holders are cautioned such forward-looking statements
involve risks and uncertainties. Certain factors may cause results
to differ materially from those anticipated by the forward-looking
statements made in this release. Such factors may include, without
limitation, the risks, uncertainties and regulatory developments
discussed and described in the Company’s 2018 annual report on Form
10-K filed with the Securities and Exchange Commission (the “SEC”)
on February 5, 2019, including the risks described in Part 1,
Item 1A, “Risk Factors” thereof, and other reports filed
subsequently by the Company with the SEC. Many of these risks and
uncertainties are beyond the ability of the Company to control, nor
can the Company predict, in many cases, all of the risks and
uncertainties that could cause its actual results to differ
materially from those indicated by the forward-looking statements.
The forward-looking statements contained in this release speak only
as of the date of this release, and the Company expressly disclaims
any obligation or undertaking to report any updates or revisions to
any such statement to reflect any change in the Company’s
expectations or any change in events, conditions or circumstances
on which any such statement is based, except as required by
law.
FIRSTCASH,
INC.CONSOLIDATED STATEMENTS OF
INCOME(unaudited, in thousands, except per share
amounts)
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenue: |
|
|
|
|
|
|
|
|
Retail merchandise sales |
|
$ |
278,754 |
|
|
$ |
255,742 |
|
|
$ |
562,995 |
|
|
$ |
525,583 |
|
Pawn loan fees |
|
136,923 |
|
|
123,012 |
|
|
278,115 |
|
|
252,805 |
|
Wholesale scrap jewelry sales |
|
24,981 |
|
|
27,475 |
|
|
56,691 |
|
|
62,200 |
|
Consumer loan and credit services fees |
|
5,356 |
|
|
13,743 |
|
|
15,817 |
|
|
29,184 |
|
Total revenue |
|
446,014 |
|
|
419,972 |
|
|
913,618 |
|
|
869,772 |
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
176,272 |
|
|
163,574 |
|
|
355,621 |
|
|
338,071 |
|
Cost of wholesale scrap jewelry sold |
|
23,934 |
|
|
24,076 |
|
|
54,287 |
|
|
56,571 |
|
Consumer loan and credit services loss provision |
|
1,503 |
|
|
3,894 |
|
|
3,606 |
|
|
7,621 |
|
Total cost of revenue |
|
201,709 |
|
|
191,544 |
|
|
413,514 |
|
|
402,263 |
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
244,305 |
|
|
228,428 |
|
|
500,104 |
|
|
467,509 |
|
|
|
|
|
|
|
|
|
|
Expenses and other
income: |
|
|
|
|
|
|
|
|
Store operating expenses (1) |
|
148,347 |
|
|
138,043 |
|
|
295,199 |
|
|
276,391 |
|
Administrative expenses |
|
31,696 |
|
|
29,720 |
|
|
63,850 |
|
|
57,722 |
|
Depreciation and amortization |
|
10,510 |
|
|
10,952 |
|
|
20,384 |
|
|
22,235 |
|
Interest expense |
|
8,548 |
|
|
6,529 |
|
|
16,918 |
|
|
12,727 |
|
Interest income |
|
(155 |
) |
|
(740 |
) |
|
(359 |
) |
|
(1,721 |
) |
Merger and other acquisition expenses |
|
556 |
|
|
2,113 |
|
|
705 |
|
|
2,352 |
|
Gain on foreign exchange (1) |
|
(483 |
) |
|
(460 |
) |
|
(722 |
) |
|
(247 |
) |
Total expenses and other income |
|
199,019 |
|
|
186,157 |
|
|
395,975 |
|
|
369,459 |
|
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
45,286 |
|
|
42,271 |
|
|
104,129 |
|
|
98,050 |
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
12,238 |
|
|
12,100 |
|
|
28,426 |
|
|
26,244 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
33,048 |
|
|
$ |
30,171 |
|
|
$ |
75,703 |
|
|
$ |
71,806 |
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.77 |
|
|
$ |
0.67 |
|
|
$ |
1.75 |
|
|
$ |
1.57 |
|
Diluted |
|
$ |
0.76 |
|
|
$ |
0.67 |
|
|
$ |
1.74 |
|
|
$ |
1.57 |
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
43,081 |
|
|
44,942 |
|
|
43,298 |
|
|
45,680 |
|
Diluted |
|
43,256 |
|
|
45,043 |
|
|
43,456 |
|
|
45,757 |
|
|
|
|
|
|
|
|
|
|
Dividends declared per common
share |
|
$ |
0.25 |
|
|
$ |
0.22 |
|
|
$ |
0.50 |
|
|
$ |
0.44 |
|
(1) The gain on foreign exchange of $0.5
million and $0.2 million for the three and six months ended June
30, 2018, respectively, was reclassified on the consolidated
statements of income in order to conform with the presentation for
the three and six months ended June 30, 2019. The gain on foreign
exchange was reclassified from store operating expenses and
reported separately on the consolidated statements of income.
FIRSTCASH,
INC.CONSOLIDATED BALANCE
SHEETS(unaudited, in thousands)
|
|
June 30, |
|
December 31, |
|
|
2019 |
|
2018 |
|
2018 |
ASSETS |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
67,012 |
|
|
$ |
83,127 |
|
|
$ |
71,793 |
|
Fees and service charges
receivable |
|
46,991 |
|
|
42,920 |
|
|
45,430 |
|
Pawn loans |
|
375,167 |
|
|
348,295 |
|
|
362,941 |
|
Consumer loans, net |
|
3,850 |
|
|
17,256 |
|
|
15,902 |
|
Inventories |
|
266,440 |
|
|
249,689 |
|
|
275,130 |
|
Income taxes receivable |
|
1,041 |
|
|
486 |
|
|
1,379 |
|
Prepaid expenses and other
current assets |
|
9,590 |
|
|
19,913 |
|
|
17,317 |
|
Total current assets |
|
770,091 |
|
|
761,686 |
|
|
789,892 |
|
|
|
|
|
|
|
|
Property and equipment,
net |
|
290,725 |
|
|
236,434 |
|
|
251,645 |
|
Operating lease right of use
asset (1) |
|
293,357 |
|
|
— |
|
|
— |
|
Goodwill |
|
940,653 |
|
|
857,070 |
|
|
917,419 |
|
Intangible assets, net |
|
87,200 |
|
|
89,962 |
|
|
88,140 |
|
Other assets |
|
10,890 |
|
|
52,193 |
|
|
49,238 |
|
Deferred tax assets |
|
11,570 |
|
|
12,295 |
|
|
11,640 |
|
Total assets |
|
$ |
2,404,486 |
|
|
$ |
2,009,640 |
|
|
$ |
2,107,974 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
Accounts payable and accrued
liabilities |
|
$ |
71,410 |
|
|
$ |
79,961 |
|
|
$ |
96,928 |
|
Customer deposits |
|
40,665 |
|
|
34,300 |
|
|
35,368 |
|
Income taxes payable |
|
317 |
|
|
3,207 |
|
|
749 |
|
Lease liability, current
(1) |
|
84,513 |
|
|
— |
|
|
— |
|
Total current liabilities |
|
196,905 |
|
|
117,468 |
|
|
133,045 |
|
|
|
|
|
|
|
|
Revolving unsecured credit
facility |
|
340,000 |
|
|
221,500 |
|
|
295,000 |
|
Senior unsecured notes |
|
296,222 |
|
|
295,560 |
|
|
295,887 |
|
Deferred tax liabilities |
|
60,069 |
|
|
51,011 |
|
|
54,854 |
|
Lease liability, non-current
(1) |
|
184,348 |
|
|
— |
|
|
— |
|
Other liabilities |
|
— |
|
|
14,057 |
|
|
11,084 |
|
Total liabilities |
|
1,077,544 |
|
|
699,596 |
|
|
789,870 |
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
Preferred stock |
|
— |
|
|
— |
|
|
— |
|
Common stock |
|
493 |
|
|
493 |
|
|
493 |
|
Additional paid-in capital |
|
1,227,478 |
|
|
1,221,572 |
|
|
1,224,608 |
|
Retained earnings |
|
660,845 |
|
|
546,097 |
|
|
606,810 |
|
Accumulated other comprehensive loss |
|
(103,932 |
) |
|
(114,668 |
) |
|
(113,117 |
) |
Common stock held in treasury, at cost |
|
(457,942 |
) |
|
(343,450 |
) |
|
(400,690 |
) |
Total stockholders’ equity |
|
1,326,942 |
|
|
1,310,044 |
|
|
1,318,104 |
|
Total liabilities and stockholders’ equity |
|
$ |
2,404,486 |
|
|
$ |
2,009,640 |
|
|
$ |
2,107,974 |
|
(1) The Company adopted ASC 842
prospectively as of January 1, 2019, using the transition method
that required prospective application from the adoption date. As a
result of the transition method used, ASC 842 was not applied to
periods prior to adoption and the adoption of ASC 842 had no impact
on the Company’s comparative prior periods presented.
FIRSTCASH, INC.OPERATING
INFORMATION(UNAUDITED)
The Company’s reportable segments are as
follows:
- Latin America operations - Includes all pawn and consumer loan
operations in Latin America, which includes operations in Mexico,
Guatemala, El Salvador and Colombia.
- U.S. operations - Includes all pawn and consumer loan
operations in the U.S.
The Company provides revenues, cost of revenues,
store operating expenses, pre-tax operating income and earning
assets by segment. Store operating expenses include salary and
benefit expense of store-level employees, occupancy costs, bank
charges, security, insurance, utilities, supplies and other costs
incurred by the stores.
Latin America Operations Segment
Results
The Company’s management reviews and analyzes
certain operating results in Latin America on a constant currency
basis because the Company believes this better represents the
Company’s underlying business trends. Constant currency results are
non-GAAP financial measures, which exclude the effects of foreign
currency translation and are calculated by translating current-year
results at prior-year average exchange rates. The scrap jewelry
generated in Latin America is sold and settled in U.S. dollars, and
therefore wholesale scrap jewelry sales revenue is not affected by
foreign currency translation. A small percentage of the operating
and administrative expenses in Latin America are also billed and
paid in U.S. dollars, which are not affected by foreign currency
translation. Amounts presented on a constant currency basis are
denoted as such. See the “Constant Currency Results” section below
for additional discussion of constant currency results.
FIRSTCASH, INC.OPERATING
INFORMATION (CONTINUED)(UNAUDITED)
The following table details earning assets,
which consist of pawn loans, inventories and consumer loans, net as
well as other earning asset metrics of the Latin America operations
segment as of June 30, 2019 as compared to June 30, 2018
(dollars in thousands, except as otherwise noted):
|
|
|
|
|
|
|
|
|
|
|
Constant Currency Basis |
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
Increase / |
|
As of June 30, |
|
Increase / |
|
2019 |
|
(Decrease) |
|
2019 |
|
2018 |
|
(Decrease) |
|
(Non-GAAP) |
|
(Non-GAAP) |
Latin America
Operations Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pawn loans |
$ |
112,811 |
|
|
$ |
80,709 |
|
|
|
40 |
% |
|
|
$ |
109,152 |
|
|
|
35 |
% |
|
Inventories |
|
93,565 |
|
|
|
65,158 |
|
|
|
44 |
% |
|
|
90,507 |
|
|
|
39 |
% |
|
Consumer loans, net (1) |
|
— |
|
|
|
147 |
|
|
|
(100 |
)% |
|
|
— |
|
|
|
(100 |
)% |
|
|
$ |
206,376 |
|
|
$ |
146,014 |
|
|
|
41 |
% |
|
|
$ |
199,659 |
|
|
|
37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average outstanding pawn loan
amount (in ones) |
$ |
69 |
|
|
$ |
62 |
|
|
|
11 |
% |
|
|
$ |
66 |
|
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of pawn
collateral: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General merchandise |
73 |
% |
|
79 |
% |
|
|
|
|
|
|
|
|
|
|
Jewelry |
27 |
% |
|
21 |
% |
|
|
|
|
|
|
|
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of
inventories: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General merchandise |
74 |
% |
|
75 |
% |
|
|
|
|
|
|
|
|
|
|
Jewelry |
26 |
% |
|
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of inventory aged
greater than one year |
1 |
% |
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
(1) The Company discontinued offering an
unsecured consumer loan product in Latin America effective June 30,
2018.
FIRSTCASH, INC.OPERATING
INFORMATION (CONTINUED)(UNAUDITED)
The following table presents segment pre-tax
operating income of the Latin America operations segment for the
three months ended June 30, 2019 as compared to the three
months ended June 30, 2018 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
Constant Currency Basis |
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
|
|
|
|
|
|
|
|
|
Ended |
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
June 30, |
|
Increase / |
|
|
June 30, |
|
Increase / |
|
2019 |
|
(Decrease) |
|
|
2019 |
|
2018 |
|
(Decrease) |
|
(Non-GAAP) |
|
(Non-GAAP) |
Latin America
Operations Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail merchandise sales |
|
$ |
109,836 |
|
|
$ |
89,301 |
|
|
|
23 |
% |
|
|
$ |
108,622 |
|
|
|
22 |
% |
|
Pawn loan fees |
|
46,797 |
|
|
35,187 |
|
|
|
33 |
% |
|
|
46,277 |
|
|
|
32 |
% |
|
Wholesale scrap jewelry sales |
|
9,193 |
|
|
5,342 |
|
|
|
72 |
% |
|
|
9,193 |
|
|
|
72 |
% |
|
Consumer loan fees |
|
— |
|
|
342 |
|
|
|
(100 |
)% |
|
|
— |
|
|
|
(100 |
)% |
|
Total revenue |
|
165,826 |
|
|
130,172 |
|
|
|
27 |
% |
|
|
164,092 |
|
|
|
26 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
71,610 |
|
|
58,302 |
|
|
|
23 |
% |
|
|
70,828 |
|
|
|
21 |
% |
|
Cost of wholesale scrap jewelry sold |
|
9,081 |
|
|
5,121 |
|
|
|
77 |
% |
|
|
8,984 |
|
|
|
75 |
% |
|
Consumer loan loss provision |
|
— |
|
|
84 |
|
|
|
(100 |
)% |
|
|
— |
|
|
|
(100 |
)% |
|
Total cost of revenue |
|
80,691 |
|
|
63,507 |
|
|
|
27 |
% |
|
|
79,812 |
|
|
|
26 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
85,135 |
|
|
66,665 |
|
|
|
28 |
% |
|
|
84,280 |
|
|
|
26 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Store operating expenses (1) |
|
45,338 |
|
|
34,418 |
|
|
|
32 |
% |
|
|
44,927 |
|
|
|
31 |
% |
|
Depreciation and amortization |
|
3,579 |
|
|
2,740 |
|
|
|
31 |
% |
|
|
3,550 |
|
|
|
30 |
% |
|
Total segment expenses |
|
48,917 |
|
|
37,158 |
|
|
|
32 |
% |
|
|
48,477 |
|
|
|
30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
|
$ |
36,218 |
|
|
$ |
29,507 |
|
|
|
23 |
% |
|
|
$ |
35,803 |
|
|
|
21 |
% |
|
(1) The gain on foreign exchange for the
Latin America operations segment of $0.5 million for the three
months ended June 30, 2018 was reclassified on the consolidated
statements of income in order to conform with the presentation for
the three months ended June 30, 2019. The gain on foreign exchange
was reclassified from store operating expenses and reported
separately on the consolidated statements of income.
FIRSTCASH, INC.OPERATING
INFORMATION (CONTINUED)(UNAUDITED)
The following table presents segment pre-tax
operating income of the Latin America operations segment for the
six months ended June 30, 2019 as compared to the six months
ended June 30, 2018 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
Constant Currency Basis |
|
|
|
|
|
|
|
|
|
|
Six Months |
|
|
|
|
|
|
|
|
|
|
|
|
Ended |
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
June 30, |
|
Increase / |
|
|
June 30, |
|
Increase / |
|
2019 |
|
(Decrease) |
|
|
2019 |
|
2018 |
|
(Decrease) |
|
(Non-GAAP) |
|
(Non-GAAP) |
Latin America
Operations Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail merchandise sales |
|
$ |
207,262 |
|
|
$ |
173,090 |
|
|
|
20 |
% |
|
|
$ |
208,658 |
|
|
|
21 |
% |
|
Pawn loan fees |
|
90,113 |
|
|
68,738 |
|
|
|
31 |
% |
|
|
90,713 |
|
|
|
32 |
% |
|
Wholesale scrap jewelry sales |
|
18,118 |
|
|
10,610 |
|
|
|
71 |
% |
|
|
18,118 |
|
|
|
71 |
% |
|
Consumer loan fees |
|
— |
|
|
744 |
|
|
|
(100 |
)% |
|
|
— |
|
|
|
(100 |
)% |
|
Total revenue |
|
315,493 |
|
|
253,182 |
|
|
|
25 |
% |
|
|
317,489 |
|
|
|
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
133,215 |
|
|
112,183 |
|
|
|
19 |
% |
|
|
134,123 |
|
|
|
20 |
% |
|
Cost of wholesale scrap jewelry sold |
|
18,164 |
|
|
9,963 |
|
|
|
82 |
% |
|
|
18,280 |
|
|
|
83 |
% |
|
Consumer loan loss provision |
|
— |
|
|
167 |
|
|
|
(100 |
)% |
|
|
— |
|
|
|
(100 |
)% |
|
Total cost of revenue |
|
151,379 |
|
|
122,313 |
|
|
|
24 |
% |
|
|
152,403 |
|
|
|
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
164,114 |
|
|
130,869 |
|
|
|
25 |
% |
|
|
165,086 |
|
|
|
26 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Store operating expenses (1) |
|
88,306 |
|
|
68,383 |
|
|
|
29 |
% |
|
|
88,948 |
|
|
|
30 |
% |
|
Depreciation and amortization |
|
6,884 |
|
|
5,449 |
|
|
|
26 |
% |
|
|
6,938 |
|
|
|
27 |
% |
|
Total segment expenses |
|
95,190 |
|
|
73,832 |
|
|
|
29 |
% |
|
|
95,886 |
|
|
|
30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
|
$ |
68,924 |
|
|
$ |
57,037 |
|
|
|
21 |
% |
|
|
$ |
69,200 |
|
|
|
21 |
% |
|
(1) The gain on foreign exchange for the
Latin America operations segment of $0.2 million for the six months
ended June 30, 2018 was reclassified on the consolidated statements
of income in order to conform with the presentation for the six
months ended June 30, 2019. The gain on foreign exchange was
reclassified from store operating expenses and reported separately
on the consolidated statements of income.
FIRSTCASH, INC.OPERATING
INFORMATION (CONTINUED)(UNAUDITED)
U.S. Operations Segment Results
The following table details earning assets,
which consist of pawn loans, inventories and consumer loans, net as
well as other earning asset metrics of the U.S. operations segment
as of June 30, 2019 as compared to June 30, 2018 (dollars
in thousands, except as otherwise noted):
|
As of June 30, |
|
Increase / |
|
2019 |
|
2018 |
|
(Decrease) |
U.S. Operations
Segment |
|
|
|
|
|
|
|
|
|
Earning assets: |
|
|
|
|
|
|
|
|
|
Pawn loans |
$ |
262,356 |
|
|
$ |
267,586 |
|
|
|
(2 |
)% |
|
Inventories |
|
172,875 |
|
|
|
184,531 |
|
|
|
(6 |
)% |
|
Consumer loans, net (1) |
|
3,850 |
|
|
|
17,109 |
|
|
|
(77 |
)% |
|
|
$ |
439,081 |
|
|
$ |
469,226 |
|
|
|
(6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
Average outstanding pawn loan
amount (in ones) |
$ |
166 |
|
|
$ |
160 |
|
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
Composition of pawn
collateral: |
|
|
|
|
|
|
|
|
|
General merchandise |
37 |
% |
|
37 |
% |
|
|
|
|
Jewelry |
63 |
% |
|
63 |
% |
|
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of
inventories: |
|
|
|
|
|
|
|
|
|
General merchandise |
44 |
% |
|
41 |
% |
|
|
|
|
Jewelry |
56 |
% |
|
59 |
% |
|
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of inventory aged
greater than one year |
4 |
% |
|
4 |
% |
|
|
|
|
(1) The Company ceased offering unsecured
consumer lending and credit services products in all 119 Ohio
locations on April 26, 2019 and closed 52 Ohio locations during the
second quarter of 2019. See “Consumer Lending Contraction and
Ohio Wind-Down Costs” for further discussion.
FIRSTCASH, INC.OPERATING
INFORMATION (CONTINUED)(UNAUDITED)
The following table presents segment pre-tax
operating income of the U.S. operations segment for the three
months ended June 30, 2019 as compared to the three months
ended June 30, 2018 (dollars in thousands):
|
|
Three Months Ended |
|
|
|
|
|
|
June 30, |
|
Increase / |
|
|
2019 |
|
2018 |
|
(Decrease) |
U.S. Operations
Segment |
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
Retail merchandise sales |
|
$ |
168,918 |
|
|
$ |
166,441 |
|
|
|
1 |
% |
|
Pawn loan fees |
|
90,126 |
|
|
87,825 |
|
|
|
3 |
% |
|
Wholesale scrap jewelry sales |
|
15,788 |
|
|
22,133 |
|
|
|
(29 |
)% |
|
Consumer loan and credit services fees |
|
5,356 |
|
|
13,401 |
|
|
|
(60 |
)% |
|
Total revenue |
|
280,188 |
|
|
289,800 |
|
|
|
(3 |
)% |
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
104,662 |
|
|
105,272 |
|
|
|
(1 |
)% |
|
Cost of wholesale scrap jewelry sold |
|
14,853 |
|
|
18,955 |
|
|
|
(22 |
)% |
|
Consumer loan and credit services loss provision |
|
1,503 |
|
|
3,810 |
|
|
|
(61 |
)% |
|
Total cost of revenue |
|
121,018 |
|
|
128,037 |
|
|
|
(5 |
)% |
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
159,170 |
|
|
161,763 |
|
|
|
(2 |
)% |
|
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
Store operating expenses |
|
103,009 |
|
|
103,625 |
|
|
|
(1 |
)% |
|
Depreciation and amortization |
|
5,269 |
|
|
5,037 |
|
|
|
5 |
% |
|
Total segment expenses |
|
108,278 |
|
|
108,662 |
|
|
|
— |
% |
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
|
$ |
50,892 |
|
|
$ |
53,101 |
|
|
|
(4 |
)% |
|
FIRSTCASH, INC.OPERATING
INFORMATION (CONTINUED)(UNAUDITED)
The following table presents segment pre-tax
operating income of the U.S. operations segment for the six months
ended June 30, 2019 as compared to the six months ended
June 30, 2018 (dollars in thousands):
|
|
Six Months Ended |
|
|
|
|
|
|
June 30, |
|
Increase / |
|
|
2019 |
|
2018 |
|
(Decrease) |
U.S. Operations
Segment |
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
Retail merchandise sales |
|
$ |
355,733 |
|
|
$ |
352,493 |
|
|
|
1 |
% |
|
Pawn loan fees |
|
188,002 |
|
|
184,067 |
|
|
|
2 |
% |
|
Wholesale scrap jewelry sales |
|
38,573 |
|
|
51,590 |
|
|
|
(25 |
)% |
|
Consumer loan and credit services fees |
|
15,817 |
|
|
28,440 |
|
|
|
(44 |
)% |
|
Total revenue |
|
598,125 |
|
|
616,590 |
|
|
|
(3 |
)% |
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
222,406 |
|
|
225,888 |
|
|
|
(2 |
)% |
|
Cost of wholesale scrap jewelry sold |
|
36,123 |
|
|
46,608 |
|
|
|
(22 |
)% |
|
Consumer loan and credit services loss provision |
|
3,606 |
|
|
7,454 |
|
|
|
(52 |
)% |
|
Total cost of revenue |
|
262,135 |
|
|
279,950 |
|
|
|
(6 |
)% |
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
335,990 |
|
|
336,640 |
|
|
|
— |
% |
|
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
Store operating expenses |
|
206,893 |
|
|
208,008 |
|
|
|
(1 |
)% |
|
Depreciation and amortization |
|
10,314 |
|
|
10,592 |
|
|
|
(3 |
)% |
|
Total segment expenses |
|
217,207 |
|
|
218,600 |
|
|
|
(1 |
)% |
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
|
$ |
118,783 |
|
|
$ |
118,040 |
|
|
|
1 |
% |
|
FIRSTCASH, INC.OPERATING
INFORMATION (CONTINUED)(UNAUDITED)
Consolidated Results of Operations
The following table reconciles pre-tax operating
income of the Company’s Latin America operations segment and U.S.
operations segment discussed above to consolidated net income (in
thousands):
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Consolidated Results
of Operations |
|
|
|
|
|
|
|
Segment pre-tax operating
income: |
|
|
|
|
|
|
|
Latin America operations segment pre-tax operating income (1) |
$ |
36,218 |
|
|
$ |
29,507 |
|
|
$ |
68,924 |
|
|
$ |
57,037 |
|
U.S. operations segment pre-tax operating income |
50,892 |
|
|
53,101 |
|
|
118,783 |
|
|
118,040 |
|
Consolidated segment pre-tax operating income |
87,110 |
|
|
82,608 |
|
|
187,707 |
|
|
175,077 |
|
|
|
|
|
|
|
|
|
Corporate expenses and other
income: |
|
|
|
|
|
|
|
Administrative expenses |
31,696 |
|
|
29,720 |
|
|
63,850 |
|
|
57,722 |
|
Depreciation and amortization |
1,662 |
|
|
3,175 |
|
|
3,186 |
|
|
6,194 |
|
Interest expense |
8,548 |
|
|
6,529 |
|
|
16,918 |
|
|
12,727 |
|
Interest income |
(155 |
) |
|
(740 |
) |
|
(359 |
) |
|
(1,721 |
) |
Merger and other acquisition expenses |
556 |
|
|
2,113 |
|
|
705 |
|
|
2,352 |
|
Gain on foreign exchange (1) |
(483 |
) |
|
(460 |
) |
|
(722 |
) |
|
(247 |
) |
Total corporate expenses and other income |
41,824 |
|
|
40,337 |
|
|
83,578 |
|
|
77,027 |
|
|
|
|
|
|
|
|
|
Income before income
taxes |
45,286 |
|
|
42,271 |
|
|
104,129 |
|
|
98,050 |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
12,238 |
|
|
12,100 |
|
|
28,426 |
|
|
26,244 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
33,048 |
|
|
$ |
30,171 |
|
|
$ |
75,703 |
|
|
$ |
71,806 |
|
(1) The gain on foreign exchange for the
Latin America operations segment of $0.5 million and $0.2 million
for the three and six months ended June 30, 2018 was reclassified
on the consolidated statements of income in order to conform with
the presentation for the three and six months ended June 30, 2019.
The gain on foreign exchange was reclassified from store operating
expenses and reported separately on the consolidated statements of
income.
FIRSTCASH, INC.STORE
COUNT ACTIVITY
The following table details store count activity
for the three months ended June 30, 2019:
|
|
|
|
Consumer |
|
|
|
|
Pawn |
|
Loan |
|
Total |
|
|
Locations (1) |
|
Locations |
|
Locations |
Latin America operations
segment: |
|
|
|
|
|
|
Total locations, beginning of period |
|
1,530 |
|
|
— |
|
|
1,530 |
|
New locations opened |
|
23 |
|
|
— |
|
|
23 |
|
Locations acquired |
|
40 |
|
|
— |
|
|
40 |
|
Locations closed or consolidated |
|
(1 |
) |
|
— |
|
|
(1 |
) |
Total locations, end of period |
|
1,592 |
|
|
— |
|
|
1,592 |
|
|
|
|
|
|
|
|
U.S. operations segment: |
|
|
|
|
|
|
Total locations, beginning of period |
|
1,085 |
|
|
15 |
|
|
1,100 |
|
Locations acquired |
|
10 |
|
|
— |
|
|
10 |
|
Locations closed or consolidated (2) |
|
(47 |
) |
|
(9 |
) |
|
(56 |
) |
Total locations, end of period |
|
1,048 |
|
|
6 |
|
|
1,054 |
|
|
|
|
|
|
|
|
Total: |
|
|
|
|
|
|
Total locations, beginning of period |
|
2,615 |
|
|
15 |
|
|
2,630 |
|
New locations opened |
|
23 |
|
|
— |
|
|
23 |
|
Locations acquired |
|
50 |
|
|
— |
|
|
50 |
|
Locations closed or consolidated (2) |
|
(48 |
) |
|
(9 |
) |
|
(57 |
) |
Total locations, end of period |
|
2,640 |
|
|
6 |
|
|
2,646 |
|
(1) At June 30, 2019, 75 of the U.S.
pawn stores, primarily located in Texas, also offered consumer
loans and/or credit services primarily as an ancillary product.
This compares to 307 U.S. pawn locations which offered such
products as of June 30, 2018.
(2) Includes the closing of 52 Ohio
locations primarily focused on consumer lending products. See
“Consumer Lending Contraction and Ohio Wind-Down Costs” for
additional discussion of these store closings.
FIRSTCASH, INC.STORE
COUNT ACTIVITY (CONTINUED)
The following table details store count activity for the six
months ended June 30, 2019:
|
|
|
|
Consumer |
|
|
|
|
Pawn |
|
Loan |
|
Total |
|
|
Locations (1) |
|
Locations |
|
Locations |
Latin America operations
segment: |
|
|
|
|
|
|
Total locations, beginning of period |
|
1,379 |
|
|
— |
|
|
1,379 |
|
New locations opened |
|
59 |
|
|
— |
|
|
59 |
|
Locations acquired |
|
158 |
|
|
— |
|
|
158 |
|
Locations closed or consolidated |
|
(4 |
) |
|
— |
|
|
(4 |
) |
Total locations, end of period |
|
1,592 |
|
|
— |
|
|
1,592 |
|
|
|
|
|
|
|
|
U.S. operations segment: |
|
|
|
|
|
|
Total locations, beginning of period |
|
1,077 |
|
|
17 |
|
|
1,094 |
|
Locations acquired |
|
20 |
|
|
— |
|
|
20 |
|
Locations closed or consolidated (2) |
|
(49 |
) |
|
(11 |
) |
|
(60 |
) |
Total locations, end of period |
|
1,048 |
|
|
6 |
|
|
1,054 |
|
|
|
|
|
|
|
|
Total: |
|
|
|
|
|
|
Total locations, beginning of period |
|
2,456 |
|
|
17 |
|
|
2,473 |
|
New locations opened |
|
59 |
|
|
— |
|
|
59 |
|
Locations acquired |
|
178 |
|
|
— |
|
|
178 |
|
Locations closed or consolidated (2) |
|
(53 |
) |
|
(11 |
) |
|
(64 |
) |
Total locations, end of period |
|
2,640 |
|
|
6 |
|
|
2,646 |
|
(1) At June 30, 2019, 75 of the U.S.
pawn stores, primarily located in Texas, also offered consumer
loans and/or credit services primarily as an ancillary product.
This compares to 307 U.S. pawn locations which offered such
products as of June 30, 2018.
(2) Includes the closing of 52 Ohio
locations and two other locations outside of Ohio primarily focused
on consumer lending products. See “Consumer Lending Contraction and
Ohio Wind-Down Costs” for additional discussion of these store
closings.
FIRSTCASH,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL
MEASURES(UNAUDITED)
The Company uses certain financial calculations
such as adjusted net income, adjusted diluted earnings per share,
EBITDA, adjusted EBITDA, free cash flow, adjusted free cash flow,
constant currency results, return on tangible assets and return on
tangible equity as factors in the measurement and evaluation of the
Company’s operating performance and period-over-period growth. The
Company derives these financial calculations on the basis of
methodologies other than generally accepted accounting principles
(“GAAP”), primarily by excluding from a comparable GAAP measure
certain items the Company does not consider to be representative of
its actual operating performance. These financial calculations are
“non-GAAP financial measures” as defined in SEC rules. The Company
uses these non-GAAP financial measures in operating its business
because management believes they are less susceptible to variances
in actual operating performance that can result from the excluded
items, other infrequent charges and currency fluctuations. The
Company presents these financial measures to investors because
management believes they are useful to investors in evaluating the
primary factors that drive the Company’s core operating performance
and because management believes they provide greater transparency
into the Company’s results of operations. However, items that are
excluded and other adjustments and assumptions that are made in
calculating these non-GAAP financial measures are significant
components in understanding and assessing the Company’s financial
performance. These non-GAAP financial measures should be evaluated
in conjunction with, and are not a substitute for, the Company’s
GAAP financial measures. Further, because these non-GAAP financial
measures are not determined in accordance with GAAP and are thus
susceptible to varying calculations, the non-GAAP financial
measures, as presented, may not be comparable to other similarly
titled measures of other companies.
While acquisitions are an important part of the
Company’s overall strategy, the Company has adjusted the applicable
financial calculations to exclude merger and other acquisition
expenses to allow more accurate comparisons of the financial
results to prior periods and because the Company does not consider
these merger and other acquisition expenses to be related to the
organic operations of the acquired businesses or its continuing
operations and such expenses are generally not relevant to
assessing or estimating the long-term performance of the acquired
businesses. The Company believes that providing adjusted
non-GAAP measures, which exclude these items, allows management and
investors to consider the ongoing operations of the business both
with, and without, such expenses. Merger and other acquisition
expenses include incremental costs directly associated with merger
and acquisition activities, including professional fees, legal
expenses, severance, retention and other employee-related costs,
contract breakage costs and costs related to the consolidation of
technology systems and corporate facilities, among others.
The Company has certain leases in Mexico which
are denominated in U.S. dollars. The lease liability of these U.S.
dollar denominated leases, which is considered a monetary
liability, is remeasured into Mexican pesos using current period
exchange rates which results in the recognition of foreign currency
exchange gains or losses. The Company has adjusted the applicable
financial measures to exclude these remeasurement gains or losses
because they are non-cash, non-operating items that could create
volatility in the Company’s consolidated results of operations due
to the magnitude of the end of period lease liability being
remeasured and to improve comparability of current periods
presented with prior periods due to the adoption of ASC 842 on
January 1, 2019.
FIRSTCASH,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
(CONTINUED)(UNAUDITED)
Adjusted Net Income, Adjusted Diluted
Earnings Per Share, Return on Tangible Assets and Return on
Tangible Equity
Management believes the presentation of adjusted
net income, adjusted diluted earnings per share, return on tangible
assets and return on tangible equity provides investors with
greater transparency and provides a more complete understanding of
the Company’s financial performance and prospects for the future by
excluding items that management believes are non-operating in
nature and not representative of the Company’s core operating
performance of its continuing operations. In addition, management
believes the adjustments shown below are useful to investors in
order to allow them to compare the Company’s financial results for
the current periods presented with the prior periods presented.
The following table provides a reconciliation
between net income and diluted earnings per share calculated in
accordance with GAAP to adjusted net income and adjusted diluted
earnings per share, which are shown net of tax (in thousands,
except per share amounts):
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
In Thousands |
|
Per Share |
|
In Thousands |
|
Per Share |
|
In Thousands |
|
Per Share |
|
In Thousands |
|
Per Share |
Net income and diluted
earnings per share, as reported |
$ |
33,048 |
|
|
$ |
0.76 |
|
|
$ |
30,171 |
|
|
$ |
0.67 |
|
|
$ |
75,703 |
|
|
$ |
1.74 |
|
|
$ |
71,806 |
|
|
$ |
1.57 |
|
Adjustments, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger and other acquisition expenses |
426 |
|
|
0.01 |
|
|
1,512 |
|
|
0.03 |
|
|
530 |
|
|
0.01 |
|
|
1,696 |
|
|
0.04 |
|
Non-cash foreign currency gain related to lease liability |
(136 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(374 |
) |
|
(0.01 |
) |
|
— |
|
|
— |
|
Ohio consumer lending wind-down costs |
1,959 |
|
|
0.05 |
|
|
— |
|
|
— |
|
|
1,959 |
|
|
0.05 |
|
|
— |
|
|
— |
|
Adjusted net income and
diluted earnings per share |
$ |
35,297 |
|
|
$ |
0.82 |
|
|
$ |
31,683 |
|
|
$ |
0.70 |
|
|
$ |
77,818 |
|
|
$ |
1.79 |
|
|
$ |
73,502 |
|
|
$ |
1.61 |
|
FIRSTCASH,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
(CONTINUED)(UNAUDITED)
The following tables provide a reconciliation of
the gross amounts, the impact of income taxes and the net amounts
for the adjustments included in the table above (in thousands):
|
Three Months Ended June 30, |
|
2019 |
|
2018 |
|
Pre-tax |
|
Tax |
|
After-tax |
|
Pre-tax |
|
Tax |
|
After-tax |
Merger and other acquisition
expenses |
$ |
556 |
|
|
$ |
130 |
|
|
$ |
426 |
|
|
$ |
2,113 |
|
|
$ |
601 |
|
|
$ |
1,512 |
|
Non-cash foreign currency gain
related to lease liability |
(195 |
) |
|
(59 |
) |
|
(136 |
) |
|
— |
|
|
— |
|
|
— |
|
Ohio consumer lending
wind-down costs |
2,544 |
|
|
585 |
|
|
1,959 |
|
|
— |
|
|
— |
|
|
— |
|
Total adjustments |
$ |
2,905 |
|
|
$ |
656 |
|
|
$ |
2,249 |
|
|
$ |
2,113 |
|
|
$ |
601 |
|
|
$ |
1,512 |
|
|
Six Months Ended June 30, |
|
2019 |
|
2018 |
|
Pre-tax |
|
Tax |
|
After-tax |
|
Pre-tax |
|
Tax |
|
After-tax |
Merger and other acquisition
expenses |
$ |
705 |
|
|
$ |
175 |
|
|
$ |
530 |
|
|
$ |
2,352 |
|
|
$ |
656 |
|
|
$ |
1,696 |
|
Non-cash foreign currency gain
related to lease liability |
(535 |
) |
|
(161 |
) |
|
(374 |
) |
|
— |
|
|
— |
|
|
— |
|
Ohio consumer lending
wind-down costs |
2,544 |
|
|
585 |
|
|
1,959 |
|
|
— |
|
|
— |
|
|
— |
|
Total adjustments |
$ |
2,714 |
|
|
$ |
599 |
|
|
$ |
2,115 |
|
|
$ |
2,352 |
|
|
$ |
656 |
|
|
$ |
1,696 |
|
FIRSTCASH,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
(CONTINUED)(UNAUDITED)
The following table provides a calculation of
return on tangible assets and return on tangible equity (dollars in
thousands):
|
June 30, |
|
2019 |
|
2018 |
Return on tangible assets
calculation: |
|
|
|
|
|
Average total assets |
$ |
2,194,873 |
|
|
|
$ |
2,062,433 |
|
|
Adjustments: |
|
|
|
|
|
Average goodwill |
|
(910,847 |
) |
|
|
(841,145 |
) |
Average intangible assets, net |
|
(88,402 |
) |
|
|
(94,040 |
) |
Average operating lease right of use asset |
|
(118,305 |
) |
|
|
— |
|
|
Average tangible assets |
$ |
1,077,319 |
|
|
|
$ |
1,127,248 |
|
|
Net income for the trailing twelve months |
$ |
157,103 |
|
|
|
$ |
167,814 |
|
|
Return on tangible assets |
15 |
% |
|
|
15 |
% |
|
|
|
|
|
|
|
Return on tangible equity
calculation: |
|
|
|
|
|
Average stockholders’ equity |
$ |
1,319,047 |
|
|
|
$ |
1,433,755 |
|
|
Adjustments: |
|
|
|
|
|
Average goodwill |
|
(910,847 |
) |
|
|
(841,145 |
) |
Average intangible assets, net |
|
(88,402 |
) |
|
|
(94,040 |
) |
Average tangible equity |
$ |
319,798 |
|
|
|
$ |
498,570 |
|
|
Net income for the trailing twelve months |
$ |
157,103 |
|
|
|
$ |
167,814 |
|
|
Return on tangible equity |
49 |
% |
|
|
34 |
% |
|
FIRSTCASH,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
(CONTINUED)(UNAUDITED)
The following table provides a calculation of
segment pre-tax operating income excluding contribution from
consumer lending operations and Ohio store closures (“Adjusted
Segment Pre-tax Operating Income”) (dollars in thousands):
|
|
Three Months Ended |
|
|
|
|
|
|
June 30, |
|
Increase / |
|
|
2019 |
|
2018 |
|
(Decrease) |
U.S. Operations
Segment: |
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating income |
|
$ |
50,892 |
|
|
$ |
53,101 |
|
|
|
(4 |
)% |
|
Contribution from consumer
lending operations and Ohio store closures |
|
|
(1,290 |
) |
|
|
(5,842 |
) |
|
|
(78 |
)% |
|
Adjusted segment pre-tax operating income |
|
$ |
49,602 |
|
|
$ |
47,259 |
|
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
June 30, |
|
Increase / |
|
|
2019 |
|
2018 |
|
(Decrease) |
U.S. Operations
Segment: |
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
|
$ |
118,783 |
|
|
$ |
118,040 |
|
|
|
1 |
% |
|
Contribution from consumer
lending operations and Ohio store closures |
|
|
(6,863 |
) |
|
|
(13,206 |
) |
|
|
(48 |
)% |
|
Adjusted segment pre-tax operating income |
|
$ |
111,920 |
|
|
$ |
104,834 |
|
|
|
7 |
% |
|
FIRSTCASH,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
(CONTINUED)(UNAUDITED)
Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) and Adjusted EBITDA
The Company defines EBITDA as net income before
income taxes, depreciation and amortization, interest expense and
interest income and adjusted EBITDA as EBITDA adjusted for certain
items as listed below that management considers to be non-operating
in nature and not representative of its actual operating
performance. The Company believes EBITDA and adjusted EBITDA are
commonly used by investors to assess a company’s financial
performance, and adjusted EBITDA is used in the calculation of the
net debt ratio as defined in the Company’s senior unsecured notes
covenants. The following table provides a reconciliation of net
income to EBITDA and adjusted EBITDA (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trailing Twelve |
|
|
Three Months Ended |
|
Six Months Ended |
|
Months Ended |
|
|
June 30, |
|
June 30, |
|
June 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income |
|
$ |
33,048 |
|
|
$ |
30,171 |
|
|
$ |
75,703 |
|
|
$ |
71,806 |
|
|
$ |
157,103 |
|
|
$ |
167,814 |
|
Income taxes |
|
|
12,238 |
|
|
|
12,100 |
|
|
|
28,426 |
|
|
|
26,244 |
|
|
|
54,285 |
|
|
|
28,838 |
|
Depreciation and amortization |
|
|
10,510 |
|
|
|
10,952 |
|
|
|
20,384 |
|
|
|
22,235 |
|
|
|
41,110 |
|
|
|
48,536 |
|
Interest expense |
|
|
8,548 |
|
|
|
6,529 |
|
|
|
16,918 |
|
|
|
12,727 |
|
|
|
33,364 |
|
|
|
25,064 |
|
Interest income |
|
|
(155 |
) |
|
|
(740 |
) |
|
|
(359 |
) |
|
|
(1,721 |
) |
|
|
(1,082 |
) |
|
|
(2,598 |
) |
EBITDA |
|
|
64,189 |
|
|
|
59,012 |
|
|
|
141,072 |
|
|
|
131,291 |
|
|
|
284,780 |
|
|
|
267,654 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger and other acquisition expenses |
|
|
556 |
|
|
|
2,113 |
|
|
|
705 |
|
|
|
2,352 |
|
|
|
5,996 |
|
|
|
9,161 |
|
Non-cash foreign currency gain related to lease liability |
|
|
(195 |
) |
|
|
— |
|
|
|
(535 |
) |
|
|
— |
|
|
|
(535 |
) |
|
|
— |
|
Ohio consumer lending wind-down costs |
|
|
2,544 |
|
|
|
— |
|
|
|
2,544 |
|
|
|
— |
|
|
|
2,544 |
|
|
|
— |
|
Asset impairments related to consumer loan operations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,514 |
|
|
|
— |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20 |
|
Adjusted EBITDA |
|
$ |
67,094 |
|
|
$ |
61,125 |
|
|
$ |
143,786 |
|
|
$ |
133,643 |
|
|
$ |
294,299 |
|
|
$ |
276,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt ratio
calculation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt (outstanding principal) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
640,000 |
|
|
$ |
521,500 |
|
Less: cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(67,012 |
) |
|
|
(83,127 |
) |
Net debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
572,988 |
|
|
$ |
438,373 |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
294,299 |
|
|
$ |
276,835 |
|
Net debt ratio (net debt
divided by adjusted EBITDA) |
|
|
|
|
|
|
|
|
|
|
|
|
|
1.9:1 |
|
|
1.6:1 |
|
FIRSTCASH,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
(CONTINUED)(UNAUDITED)
Free Cash Flow and Adjusted Free Cash Flow
For purposes of its internal liquidity
assessments, the Company considers free cash flow and adjusted free
cash flow. The Company defines free cash flow as cash flow from
operating activities less purchases of furniture, fixtures,
equipment and improvements and net fundings/repayments of pawn and
consumer loans, which are considered to be operating in nature by
the Company but are included in cash flow from investing
activities. Adjusted free cash flow is defined as free cash flow
adjusted for merger and other acquisition expenses paid that
management considers to be non-operating in nature.
The Company previously included store real
property purchases as a component of purchases of property and
equipment. Management considers the store real property purchases
to be discretionary in nature and not required to operate or grow
its pawn operations. To further enhance transparency of these
distinct items, the Company now reports purchases of store real
property and purchases of furniture, fixtures, equipment and
improvements separately on the consolidated statements of cash
flows. As a result, the current definitions of free cash flow and
adjusted free cash flow differ from prior period definitions as
they now exclude discretionary purchases of store real property and
the Company has retrospectively applied the current definitions to
prior-period results.
Free cash flow and adjusted free cash flow are
commonly used by investors as an additional measure of cash
generated by business operations that may be used to repay
scheduled debt maturities and debt service or, following payment of
such debt obligations and other non-discretionary items, may be
available to invest in future growth through new business
development activities or acquisitions, repurchase stock, pay cash
dividends or repay debt obligations prior to their maturities.
These metrics can also be used to evaluate the Company’s ability to
generate cash flow from business operations and the impact that
this cash flow has on the Company’s liquidity. However, free cash
flow and adjusted free cash flow have limitations as analytical
tools and should not be considered in isolation or as a substitute
for cash flow from operating activities or other income statement
data prepared in accordance with GAAP. The following table
reconciles cash flow from operating activities to free cash flow
and adjusted free cash flow (in thousands):
|
|
|
|
|
|
|
|
|
|
Trailing Twelve |
|
|
Three Months Ended |
|
Six Months Ended |
|
Months Ended |
|
|
June 30, |
|
June 30, |
|
June 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Cash flow from operating
activities |
|
$ |
34,276 |
|
|
$ |
28,651 |
|
|
$ |
105,973 |
|
|
$ |
119,967 |
|
|
$ |
229,435 |
|
|
$ |
237,511 |
|
Cash flow from investing
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Loan receivables, net of cash repayments |
|
(22,642 |
) |
|
(25,307 |
) |
|
19,574 |
|
|
30,913 |
|
|
(1,214 |
) |
|
37,685 |
|
Purchases of furniture, fixtures, equipment and improvements |
|
(13,246 |
) |
|
(9,080 |
) |
|
(22,904 |
) |
|
(14,468 |
) |
|
(44,113 |
) |
|
(27,684 |
) |
Free cash flow |
|
(1,612 |
) |
|
(5,736 |
) |
|
102,643 |
|
|
136,412 |
|
|
184,108 |
|
|
247,512 |
|
Merger and other acquisition expenses paid, net of tax benefit |
|
426 |
|
|
1,531 |
|
|
530 |
|
|
3,099 |
|
|
4,503 |
|
|
6,213 |
|
Adjusted free cash flow
(1) |
|
$ |
(1,186 |
) |
|
$ |
(4,205 |
) |
|
$ |
103,173 |
|
|
$ |
139,511 |
|
|
$ |
188,611 |
|
|
$ |
253,725 |
|
(1) The six months and trailing twelve
months ended June 30, 2019 include the impact of accelerated loan
growth in Latin America and store expansion activities, while the
prior-year comparative periods included a $21 million cash inflow
from a non-recurring tax refund related to the merger and larger
than normal cash inflows related to the liquidation of excess
inventories in the legacy Cash America stores.
FIRSTCASH,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
(CONTINUED)(UNAUDITED)
Constant Currency Results
The Company’s reporting currency is the U.S.
dollar. However, certain performance metrics discussed in this
release are presented on a “constant currency” basis, which is
considered a non-GAAP financial measure. The Company’s management
uses constant currency results to evaluate operating results of
business operations in Latin America, which are primarily
transacted in local currencies.
The Company believes constant currency results
provide investors with valuable supplemental information regarding
the underlying performance of its business operations in Latin
America, consistent with how the Company’s management evaluates
such performance and operating results. Constant currency results
reported herein are calculated by translating certain balance sheet
and income statement items denominated in local currencies using
the exchange rate from the prior-year comparable period, as opposed
to the current comparable period, in order to exclude the effects
of foreign currency rate fluctuations for purposes of evaluating
period-over-period comparisons. Business operations in Mexico,
Guatemala and Colombia are transacted in Mexican pesos, Guatemalan
quetzales and Colombian pesos, respectively. The Company also has
operations in El Salvador where the reporting and functional
currency is the U.S. dollar. See the Latin America operations
segment tables elsewhere in this release for an additional
reconciliation of certain constant currency amounts to as reported
GAAP amounts.
The following table provides exchange rates for
the Mexican peso, Guatemalan quetzal and Colombian peso for the
current and prior-year periods:
|
|
June 30, |
|
Favorable |
|
|
2019 |
|
2018 |
|
(Unfavorable) |
Mexican peso / U.S. dollar
exchange rate: |
|
|
|
|
|
|
|
|
End-of-period |
|
19.2 |
|
19.9 |
|
|
4 |
% |
|
Three months ended |
|
19.1 |
|
19.4 |
|
|
2 |
% |
|
Six months ended |
|
19.2 |
|
19.1 |
|
|
(1 |
)% |
|
|
|
|
|
|
|
|
|
|
Guatemalan quetzal / U.S.
dollar exchange rate: |
|
|
|
|
|
|
|
|
End-of-period |
|
7.7 |
|
7.5 |
|
|
(3 |
)% |
|
Three months ended |
|
7.7 |
|
7.4 |
|
|
(4 |
)% |
|
Six months ended |
|
7.7 |
|
7.4 |
|
|
(4 |
)% |
|
|
|
|
|
|
|
|
|
|
Colombian peso / U.S. dollar
exchange rate: |
|
|
|
|
|
|
|
|
End-of-period |
|
3,206 |
|
2,931 |
|
|
(9 |
)% |
|
Three months ended |
|
3,240 |
|
2,839 |
|
|
(14 |
)% |
|
Six months ended |
|
3,188 |
|
2,849 |
|
|
(12 |
)% |
|
For further information, please contact:Gar
JacksonGlobal IR GroupPhone: (817)
886-6998Email: gar@globalirgroup.com
Doug Orr, Executive Vice President and Chief Financial
OfficerPhone: (817)
258-2650Email: investorrelations@firstcash.comWebsite: investors.firstcash.com
FirstCash (NASDAQ:FCFS)
Historical Stock Chart
From Jun 2024 to Jul 2024
FirstCash (NASDAQ:FCFS)
Historical Stock Chart
From Jul 2023 to Jul 2024