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 for the fourth
quarter and full-year ended December 31, 2019. In addition,
the Board of Directors declared a $0.27 per share quarterly cash
dividend to be paid in February 2020 and announced a new $100
million share repurchase authorization. The Company also initiated
earnings guidance for 2020.
Mr. Rick Wessel, chief executive officer,
stated, “FirstCash completed another successful year, posting
record fourth quarter and full-year 2019 revenue and net income
results, highlighted by strong earnings growth from our core pawn
operations. We also accelerated organic store growth in 2019 with a
record 89 new store openings in Latin America, combined with
acquisitions of 190 additional locations, which positions us for
further revenue and earnings growth in 2020. The Company’s robust
balance sheet and cash flows continue to support both the long-term
expansion strategy and additional shareholder returns, including
dividends and further share buyback programs.”
This release contains adjusted earnings
measures, which exclude, among other things, 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 December 31, |
|
|
As Reported (GAAP) |
|
Adjusted (Non-GAAP) |
In thousands, except per share
amounts |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenue |
|
$ |
498,362 |
|
|
$ |
481,208 |
|
|
$ |
498,362 |
|
|
$ |
481,208 |
|
Net income |
|
$ |
54,154 |
|
|
$ |
48,075 |
|
|
$ |
53,836 |
|
|
$ |
49,201 |
|
Diluted earnings per
share |
|
$ |
1.27 |
|
|
$ |
1.09 |
|
|
$ |
1.26 |
|
|
$ |
1.12 |
|
EBITDA (non-GAAP measure) |
|
$ |
90,292 |
|
|
$ |
81,404 |
|
|
$ |
89,823 |
|
|
$ |
84,987 |
|
Weighted-average diluted
shares |
|
42,760 |
|
|
43,936 |
|
|
42,760 |
|
|
43,936 |
|
|
|
Twelve Months Ended December 31, |
|
|
As Reported (GAAP) |
|
Adjusted (Non-GAAP) |
In thousands, except per share
amounts |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenue |
|
$ |
1,864,439 |
|
|
$ |
1,780,858 |
|
|
$ |
1,864,439 |
|
|
$ |
1,780,858 |
|
Net income |
|
$ |
164,618 |
|
|
$ |
153,206 |
|
|
$ |
167,900 |
|
|
$ |
158,290 |
|
Diluted earnings per
share |
|
$ |
3.81 |
|
|
$ |
3.41 |
|
|
$ |
3.89 |
|
|
$ |
3.53 |
|
EBITDA (non-GAAP measure) |
|
$ |
299,495 |
|
|
$ |
274,999 |
|
|
$ |
303,782 |
|
|
$ |
284,156 |
|
Weighted-average diluted
shares |
|
43,208 |
|
|
44,884 |
|
|
43,208 |
|
|
44,884 |
|
Consolidated Earnings
Highlights
- Diluted earnings per share
increased 17% on a GAAP basis and 13% on an adjusted non-GAAP basis
in the fourth quarter of 2019 compared to the prior-year quarter.
For the full year, diluted earnings per share increased 12% on a
GAAP basis and 10% on an adjusted non-GAAP basis compared to the
prior year.
- Year-over-year comparative earnings
per share growth on both a GAAP and adjusted non-GAAP basis
were negatively impacted by the expected contraction in non-core
consumer lending revenues and costs associated with the Company’s
previously announced wind-down of consumer lending operations in
Ohio.
- Fourth quarter 2019 earnings were reduced by approximately
$0.07 per share on both a GAAP and adjusted non-GAAP basis compared
to the prior-year quarter as a result of non-core consumer lending
contraction, while full-year GAAP basis and adjusted non-GAAP
earnings per share were reduced by approximately $0.25 and $0.19,
respectively, compared to the prior year.
- Excluding the earnings impact from consumer lending
contraction, adjusted non-GAAP earnings per share would have
increased 20% for the fourth quarter and 17% for the full year 2019
compared to the respective prior-year periods.
- Consolidated revenues for the full
year totaled $1.9 billion, a 5% increase over the prior year, while
fourth quarter revenues increased 4% over the prior-year quarter.
Revenues from core pawn operations, consisting of retail
merchandise sales and pawn fees, increased 8% for the year and 6%
for the quarter compared to the prior-year periods.
- Total retail sales increased 8% for
the year and 7% for the quarter. Despite significant holiday season
competition from both traditional and internet-based retailers,
same-store retail sales in the Company’s stores accelerated
sequentially in the fourth quarter, increasing 4% on a U.S. dollar
basis and 3% on a constant currency basis. These results improved
significantly over the Company’s full-year 2019 same-store retail
sales growth rate of 1% on both a dollar and constant currency
basis as compared to the prior year. Of note, the Company sold over
14 million individual pre-owned items in 2019 that it believes
makes it one of the largest resellers of recycled consumer products
in the Americas.
- Retail sales results were further
bolstered by strong margins in 2019 that increased to 37% for the
full year compared to 36% in the prior year, while fourth quarter
retail margins remained solid at 36%.
- Pawn fees grew 8% during 2019 and
4% in the fourth quarter, driven by store growth and continued
yield improvements in existing stores. Same-store pawn fees grew 1%
in the fourth quarter and 2% for the full year.
- Consolidated net income was a
record $165 million in 2019 and adjusted EBITDA surpassed $300
million for the first time, totaling a record $304 million. Growth
in adjusted EBITDA during 2019 was 7% compared to the prior year,
despite the significant year-over-year decline in the consolidated
pre-tax earnings from consumer lending contraction.
- Cash flow from operating activities
for 2019 totaled $232 million, while adjusted free cash flow, a
non-GAAP financial measure, was $223 million for 2019.
Acquisitions and Store Opening
Highlights
- A record 89 new pawn stores were
opened in Latin America in 2019, a 71% increase over the 52 new
stores opened last year. The 2019 openings included 70 stores in
Mexico, 15 in Guatemala and four in Colombia.
- In addition, a total of 190 stores
were acquired in 2019, including 163 Prendamex locations in Mexico
and 27 stores in the U.S.
- In total, the store openings and
acquisitions in 2019 added 279 locations across the U.S. and Latin
America. Over 90% of the stores added in 2019 were located in
Latin America where the number of pawn stores increased by 18%
compared to 2018. Over the last three years, a total of 777
locations have been added, driving a 28% increase in the store
count.
- As of December 31, 2019, the
Company operated 2,679 stores, with 1,623 stores in Latin America,
representing 61% of the total store base, and 1,056 stores in the
U.S. The Latin American locations include 1,548 stores in Mexico,
54 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 2019 was 19.3 pesos / dollar, an unfavorable
change of 1% versus the comparable prior-year period, and for the
fourth quarter of 2019 was 19.3 pesos / dollar, a favorable change
of 3% versus the prior-year period.
Latin America Operations
- Latin America revenues for the fourth quarter of 2019 increased
16% on a U.S. dollar basis and 13% on a constant currency basis, as
compared to the fourth quarter of 2018. For the full year, Latin
America revenues were a record $671 million, representing a 21%
increase on both a U.S. dollar and constant currency basis compared
to the prior year.
- Revenue growth was driven by a 16% increase in retail sales and
a 14% increase in pawn fees compared to the prior-year quarter. On
a constant currency basis, retail sales and pawn fees increased 13%
and 11%, respectively, as compared to the prior-year quarter. For
the full year, retail sales and pawn fees increased 19% and 22%,
respectively, compared to the prior year on both a U.S. dollar and
constant currency basis.
- Same-store core pawn revenues increased 8% on a U.S. dollar
basis for the quarter and 5% on a constant currency basis. By
component, same-store retail sales increased 8% on a U.S. dollar
basis and 5% on a constant currency basis and same-store pawn fees
increased 6% on a U.S. dollar basis and 3% on a constant currency
basis compared to the prior-year quarter.
- Pawn loans outstanding totaled a record $101 million at
December 31, 2019, up 10% on a U.S. dollar basis and 6% on a
constant currency basis versus the prior year. Same-store pawn
loans at year end increased 1% on a U.S. dollar basis, while
decreasing 3% on a constant currency basis compared to the prior
year. Despite the slight decline in constant currency same-store
loan balances, same-store pawn fees increased due to a 3%
improvement in the effective pawn yield for the fourth quarter,
reflecting a higher quality loan portfolio with a greater
percentage of performing loans and simplification of rate
structures in the Prendamex stores.
- Segment retail margins were 34% for the full year compared to
36% in the prior year as fourth quarter retail margins of 32% were
compressed in November largely due to ”buen fin” (Mexico’s black
Friday) promotional discounting from mass-merchandise retailers in
Mexico on certain highly competitive electronics categories such as
phones and televisions. Of note, retail margins began to
rebound in late December and are trending to more normalized
levels of 35% to 36% thus far in January.
- Inventory turns in Latin America for the year ended December
31, 2019 remained strong at 3.8 times, while inventories aged
greater than one year as of December 31, 2019 remained low and in
line with the prior-year period at 1%.
- Primarily the result of the record number of new store openings
that totaled 89 in 2019, store operating expenses increased 15% for
the quarter, or 12% on a constant currency basis. Same-store
operating expenses increased 3% in the fourth quarter of 2019, or
1% on a constant currency basis. Store depreciation and
amortization costs also increased due to the increased level of
store openings.
- Latin America segment pre-tax operating income increased 13% in
2019 on both a U.S. dollar and constant currency basis. For the
quarter, segment income increased 3%, or 1% on a constant currency
basis, compared to the fourth quarter of 2018. The growth rates
were impacted by the pre-tax expense drag associated with the 89
new store openings in 2019 compared to 52 in the prior year, which
reduced 2019 segment contribution by approximately $2 million for
the year and $0.5 million for the fourth quarter.
U.S. Operations
- Total domestic revenues for the fourth quarter declined 3%
compared to the fourth quarter of 2018 due to the previously
disclosed and anticipated 86% decline in non-core consumer loan and
credit services fees. Excluding consumer loan fees and scrap
jewelry sales, core pawn revenues increased 1% for the quarter and
2% for the full year compared to the respective prior-year
periods.
- Net revenue (or gross profit), also impacted by the declines in
non-core consumer lending operations in 2019, decreased 2% for the
fourth quarter of 2019. Excluding consumer lending operations and
wholesale scrap sales, net revenue from core pawn operations
increased 2% compared to the prior-year quarter as a result of
improvements in retail sales margins and pawn yields as highlighted
below.
- Despite competition from online retailers, the Company’s U.S.
retail sales, which are almost exclusively generated from brick and
mortar locations, increased 2% in total and 1% on a same-store
basis compared to the prior-year quarter.
- Retail sales margins increased to 39% and 38% for the three and
twelve month periods ended December 31, 2019, respectively,
compared to 37% in both of the respective prior-year periods.
Coupled with the increase in top-line retail sales, the net revenue
or gross profit from retail operations increased 5% for the quarter
and 6% for the year. The margin improvements continued to be
primarily a function of increasing the percentage of inventory
purchased directly from customers in legacy Cash America stores, as
purchased inventory typically turns faster with higher margins than
inventory acquired from forfeited pawn loans.
- Total and same-store pawn fees in the fourth quarter were even
compared to the prior-year quarter despite slightly lower levels of
pawn receivables, reflecting ongoing improvement in effective pawn
yields which improved by 2% quarter-over-quarter.
- Same-store pawn balances improved sequentially, as pawn loans
outstanding at December 31, 2019 totaled $269 million, a decrease
of 1% in total and on a same-store basis compared to a 3% decline
at the end of September 2019. The small decrease in pawn
receivables at year end remains primarily related to the 14%
quarter-over-quarter increase in inventory purchased directly from
customers not interested in getting a loan, mostly from the legacy
Cash America stores. The Company expects to fully anniversary the
increased “buy” percentages in the first half of 2020.
- Inventories at December 31, 2019 declined $19 million, or 9%,
primarily from further strategic reductions in overall inventory
levels. As of December 31, 2019, U.S. inventories aged greater than
one year were 3% compared to 4% aged inventories a year ago.
- Inventory turns in the U.S. increased to 2.8 times for the year
ended December 31, 2019 compared to 2.7 times for the year ended
December 31, 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.
- U.S. segment pre-tax operating income for the full year was
flat and decreased 3% for the quarter compared to the comparable
prior-year periods, which included the significant impact of the
accelerated contraction in non-core consumer lending operations in
2019. Excluding the impact from non-core consumer lending and Ohio
wind-down costs, the adjusted U.S. segment pre-tax operating income
(a non-GAAP measure) for the quarter increased 3% compared to the
prior-year quarter, and for the full year the segment pre-tax
operating income increased 6% on an adjusted non-GAAP basis.
- Segment pre-tax operating margin was 22% for the fourth quarter
of 2019 and 20% for the full year. Excluding the impact from
non-core consumer lending and Ohio wind-down costs, the adjusted
U.S. segment pre-tax operating margin (a non-GAAP measure) was 22%
for the fourth quarter and 20% for full-year 2019 compared to 21%
and 19% in the respective prior-year periods.
Consumer Lending Contraction and Ohio
Wind-Down Costs
- As previously disclosed, the
Company ceased offering unsecured consumer lending products in all
of its Ohio locations, effective April 26, 2019, in response to
state-level regulatory changes impacting such products. As a
result, 52 of the Company’s Ohio Cashland locations were closed
during the second quarter of 2019. Despite the loss of consumer
lending revenues, the remaining 67 locations in Ohio collectively
had 11% year-over-year growth in pawn loans by the end of 2019 and
are expected to continue operating as full-service pawnshops.
- As a result of exiting the Ohio
consumer lending business, the Company incurred non-recurring
wind-down costs of approximately $2.7 million, net of tax, for the
year ended December 31, 2019, which is excluded from adjusted net
income and adjusted earnings per share. These charges include
increased loan loss provisions, employee severance, lease
termination payments and other exit costs.
- During 2019, the Company closed two
additional stand-alone consumer loan stores in Texas and ceased
offering unsecured consumer loans and/or credit services as
ancillary products in 110 of its pawnshops located in Texas,
Louisiana and Kentucky. The Company currently offers unsecured
consumer loans or credit services in only 47 remaining locations in
three U.S. states, of which 41 of the locations are full-service
pawnshops only offering such services as a minor ancillary product.
The Company expects to further reduce the number of locations
offering unsecured consumer lending products and/or credit services
in the future.
- As a result of the Ohio store
closings and the Company’s continued de-emphasis on consumer
lending operations, U.S. consumer lending revenues declined $11
million, or 86%, in the fourth quarter and $35 million, or 64%, for
the full year of 2019, compared to the respective prior-year
periods. Total revenues from consumer loan and credit services
operations were $20 million in 2019, accounting for only 1% of the
Company’s total revenues. For 2020, the Company expects such
revenues to further decline to approximately $5 million and account
for approximately one quarter of one percent, or 0.25%, of total
revenues.
Cash Dividend and Stock
Repurchases
- The Board of Directors declared a
$0.27 per share first quarter cash dividend on common shares
outstanding, which will be paid on February 28, 2020 to
stockholders of record as of February 14, 2020. This
represents an 8% increase over the dividend of $0.25 per share paid
in the first quarter of 2019. Any future dividends are subject to
approval by the Company’s Board of Directors.
- During the fourth quarter, the
Company repurchased 554,000 shares at an aggregate cost of $47
million. For the full year, the Company repurchased 1,305,000
shares at an aggregate cost of $114 million.
- Since the merger with Cash America
in September 2016 and through December 31, 2019, the Company has
repurchased a total of 6,264,000 shares, or 31% of the shares
issued as a result of the merger, at an average repurchase price of
$76.87 per share, resulting in a 13% reduction in the total number
of shares outstanding immediately following the merger.
- Subsequent to year end and through
January 28, 2020, the Company repurchased an additional 332,000
shares at an aggregate cost of $28 million and expects to complete
the $100 million share repurchase program authorized in October
2018 by the end of January.
- On January 28, 2020, the Board of
Directors approved a new share repurchase authorization of up to
$100 million of repurchases. Future share repurchases are subject
to expected liquidity, debt covenant restrictions and other
relevant factors.
Liquidity and Return Metrics
- The Company generated $232 million
in cash flows from operations and $223 million in adjusted free
cash flows during 2019 compared to $243 million of cash flow from
operations and $225 million of adjusted free cash flow during 2018.
Current period free cash flow includes the impact of accelerated
store expansion activities in Latin America, while the prior-year
comparative amount included a $21 million cash inflow from a
non-recurring tax refund related to the merger.
- During 2019, the Company invested
$166 million of its free cash flows including $44 million for new
store build-outs and maintenance capital expenditures, $47 million
for acquisitions and $75 million for real estate purchases,
primarily at existing locations. An additional $158 million went to
shareholder payouts in the form of dividends which totaled $44
million and share repurchases of $114 million which represented a
96% payout ratio as a percentage of net income.
- Outstanding debt at December 2019
included $300 million in senior notes and $335 million outstanding
on the bank line of credit, representing an increase of only $40
million compared to the prior year. The Company continues to
maintain excellent liquidity ratios. The net debt ratio, which is
calculated using a non-GAAP financial measure, for the year ended
December 31, 2019 was 1.9 to 1 compared to 1.8 to 1 a year
ago.
- In December 2019, the Company
amended its unsecured credit facility to increase the total lender
commitment from $425 million to $500 million and extend the term of
the facility through December 19, 2024. An additional bank was
added to the lender group, and the increased commitment gives the
Company additional flexibility to support its long-term growth and
shareholder return strategies.
- Return on assets for 2019 was 7%,
while the return on tangible assets was 15% for the same period,
which compares to 7% and 14% returns, respectively, for 2018. The
return on assets for 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
year, while the return on tangible equity was 53%. This compares to
returns of 11% and 38%, respectively, for the prior year. 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.
2020 Outlook
- The Company is initiating full-year
2020 guidance for diluted earnings per share to be in a range of
$4.05 to $4.25. Estimated 2020 diluted earnings per share
represents an increase of 6% to 12% over the prior-year GAAP basis
diluted earnings per share of $3.81.
- As described in more detail below,
the guidance for 2020 includes the impact of an expected reduction
in U.S. segment earnings from unsecured consumer lending operations
of approximately $0.13 per share. Additionally, the guidance
is impacted by approximately $0.12 per share related to
conservative assumptions for foreign currency exchange rates,
increases in the effective tax rate and the year-over-year increase
in the projected number of new store openings.
- Excluding these impacts, estimated
earnings per share in 2020 are expected to increase in the range of
11% to 16% compared to 2019 adjusted earnings per share of
$3.89.
- Comparative earnings for the first
five months of 2020 will be particularly impacted by the
discontinuance of the Company’s Ohio consumer lending operations
until fully lapped in May. Accordingly, the Company is providing
quarterly guidance for the first quarter of 2020 with an
expectation of adjusted diluted earnings per share to be in the
range of $0.85 to $0.95, reflecting an expected decrease in first
quarter consumer lending revenues of approximately 89% compared to
the same prior-year quarter.
- The estimate of expected diluted earnings per share for 2020
includes the following assumptions:
- An anticipated earnings drag of
approximately $0.12 to $0.14 per share during 2020, primarily due
to the further strategic reductions in the Company’s consumer
lending operations. The Company is currently modeling total
consumer lending revenues for 2020 to be approximately $5 million,
which represents an estimated 75% reduction compared to 2019
consumer lending revenues. Consumer lending operations are expected
to account for approximately one quarter of one percent, or 0.25%,
of total revenues in 2020.
- Given past volatility in foreign
exchange rates, the Company continues to use an estimated average
foreign currency exchange rate of 20.0 Mexican pesos / U.S. dollar
for 2020. This compares to an average rate of 19.3 in 2019, which
results in an expected earnings headwind of approximately $0.07 to
$0.08 per share for 2020 when compared to actual 2019 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 2020 compared to the
actual rate of 26.7% in 2019, which represents approximately $0.03
to $0.05 of earnings headwind.
- Plans to open approximately 90 to
100 new full-service pawn stores in 2020 in Latin America, which
includes openings in Mexico, Guatemala and Colombia.
- While the potential for
opportunistic acquisitions is expected to continue, the current
earnings guidance does not include assumptions for any acquisitions
in 2020.
- The Company expects to continue
repurchasing shares in 2020, with a targeted shareholder payout
ratio, which includes share repurchases and dividends, of
approximately 75% of net income.
Additional Commentary and Analysis
Mr. Wessel further commented on the 2019
results, “We are pleased to report both fourth quarter and
full-year results that delivered increased revenues and strong
earnings growth from the Company’s core pawn operations. As
we begin 2020, we remain committed to future revenue growth and
continued profitability improvements in both the U.S. and Latin
America.
“Our U.S. results in the fourth quarter
continued to reflect stable demand and improving margins for core
pawn products, as we posted a 5% increase in retail gross profit
with 39% retail margins, which are the highest margins achieved by
the Company since the merger with Cash America in 2016. Pawn
lending metrics improved as well, with a 2% increase in the
effective pawn yield and solid sequential improvement in same-store
pawn receivable balances during the fourth quarter. Looking ahead,
we believe we are on target to see positive overall same-store pawn
receivable comps in the U.S. sometime in the first half of 2020 and
expect retail margins and pawn yields to continue trending
positively, as well.
“We also continued to wind down the small amount
of remaining non-core unsecured consumer lending products in the
U.S. during 2019, including the elimination of these products in
all of our Ohio locations due to state regulatory restrictions that
went into effect in April 2019. A portion of the improvement in
U.S. pawn activity came from the 67 remaining Ohio stores, now
operating solely as pawnshops, which saw an 11% year-over-year
increase in pawn loans which, for FirstCash, is a positive
by-product of the regulatory change.
“In Latin America, retail sales growth in the
fourth quarter remained solid, up 13% in total and up 5% on a
same-store, constant currency basis, which were especially strong
results compared to other large discount retailers in the fourth
quarter. Inventory turns also remained high while aged inventory
levels were still low at 1% at year end. Even with anticipated
temporary softness in Mexico pawn receivables, revenue from pawn
fees exceeded internal expectations as they were up on a constant
currency basis by 11% in total and 3% from same-stores, indicating
improved yields on a higher quality loan portfolio. At this point,
the previously noted impact of recently implemented social welfare
programs on pawn demand in Mexico appears to be moderating and we
expect that fundamental demand will begin to rebound in the second
half of 2020 based on historical patterns.
“We re-accelerated organic store growth in 2019
with a record level of de novo store openings that we anticipate to
be a new baseline for future annual store growth expectations. The
89 stores we added in Latin America and the 190 stores we acquired
in Mexico and the U.S. over the past year are expected to help
drive 2020 revenue and earnings growth across multiple markets. The
529 Prendamex stores acquired over the past two years continue to
perform well. Constant currency same-store core revenues in these
locations were up 31% in the fourth quarter, which included a 46%
increase in retail sales, and we are now starting to realize
expense synergies, which contributed to the sequential decline in
administrative expenses in the fourth quarter.
“The cash flows and the balance sheet of
FirstCash remained strong in 2019, as well. During the fourth
quarter, we again raised the quarterly cash dividend, which marks
three consecutive years of dividend increases. In addition, the
Company expects to complete its current outstanding buyback plan by
the end of January, which will be the fifth $100 million buyback
plan completed since 2017, and the Board of Directors has
authorized another $100 million share repurchase plan.
“As the Company continues to grow, we recently
increased the size of the revolving bank credit facility from $425
million to $500 million through the addition of another large bank
and extended its term for a full five years. Our net debt to
adjusted EBITDA ratio remains under 2 to 1, giving us significant
flexibility to support future store openings and acquisition
opportunities as they arise while allowing us to maintain robust
shareholder payouts from dividends and buybacks.
“The earnings guidance for 2020 reflects
continued growth from core pawn operations which more than offsets
the final remaining headwinds from exiting the consumer loan
business in Ohio, which will be fully lapped after the second
quarter. The guidance also reflects conservative assumptions for
both LatAm pawn receivable growth in the first half of 2020 and the
Mexican peso exchange rate for the full year. Of other note, the
2020 guidance reflects continued earnings drag from approximately
90 to 100 planned new store openings but does not assume earnings
growth from any potential acquisitions that may happen in 2020.
“In summary, we also take time to note the
tremendous growth of the Company over the past ten years. Our
market cap has grown over the past decade from less than $700
million to over $3.4 billion and FirstCash has delivered a total
shareholder return of 282% over the past ten years, which is well
above market returns. As we enter the new decade, we remain
committed to further delivering revenue and earnings growth to
drive long-term value and meaningful returns to our shareholders,”
concluded Rick Wessel, chief executive officer.
About FirstCash
FirstCash is the leading international operator
of pawn stores with more than 2,600 retail pawn locations and
21,000 employees in 24 U.S. states, the District of Columbia and
four countries in Latin America including Mexico, Guatemala, El
Salvador and Colombia. FirstCash focuses on serving cash and credit
constrained consumers through its retail pawn locations, which buy
and sell a wide variety of jewelry, electronics, tools, appliances,
sporting goods, musical instruments and other merchandise, and make
small consumer pawn loans secured by pledged personal property.
FirstCash is a component company in both the
Standard & Poor’s MidCap 400 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, including the Company’s forthcoming
annual report on Form 10-K. 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 |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenue: |
|
|
|
|
|
|
|
|
Retail merchandise sales |
|
$ |
331,208 |
|
|
$ |
309,614 |
|
|
$ |
1,175,561 |
|
|
$ |
1,091,614 |
|
Pawn loan fees |
|
143,830 |
|
|
137,728 |
|
|
564,824 |
|
|
525,146 |
|
Wholesale scrap jewelry sales |
|
21,524 |
|
|
20,971 |
|
|
103,876 |
|
|
107,821 |
|
Consumer loan and credit services fees |
|
1,800 |
|
|
12,895 |
|
|
20,178 |
|
|
56,277 |
|
Total revenue |
|
498,362 |
|
|
481,208 |
|
|
1,864,439 |
|
|
1,780,858 |
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
211,643 |
|
|
195,308 |
|
|
745,861 |
|
|
696,666 |
|
Cost of wholesale scrap jewelry sold |
|
19,125 |
|
|
19,534 |
|
|
96,072 |
|
|
99,964 |
|
Consumer loan and credit services loss provision |
|
330 |
|
|
4,366 |
|
|
4,159 |
|
|
17,461 |
|
Total cost of revenue |
|
231,098 |
|
|
219,208 |
|
|
846,092 |
|
|
814,091 |
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
267,264 |
|
|
262,000 |
|
|
1,018,347 |
|
|
966,767 |
|
|
|
|
|
|
|
|
|
|
Expenses and other
income: |
|
|
|
|
|
|
|
|
Store operating expenses |
|
150,521 |
|
|
145,210 |
|
|
595,539 |
|
|
563,321 |
|
Administrative expenses |
|
27,908 |
|
|
32,343 |
|
|
122,334 |
|
|
120,042 |
|
Depreciation and amortization |
|
10,846 |
|
|
9,876 |
|
|
41,904 |
|
|
42,961 |
|
Interest expense |
|
8,195 |
|
|
8,580 |
|
|
34,035 |
|
|
29,173 |
|
Interest income |
|
(267 |
) |
|
(228 |
) |
|
(1,055 |
) |
|
(2,444 |
) |
Merger and other acquisition expenses |
|
256 |
|
|
2,069 |
|
|
1,766 |
|
|
7,643 |
|
(Gain) loss on foreign exchange |
|
(1,713 |
) |
|
974 |
|
|
(787 |
) |
|
762 |
|
Total expenses and other income |
|
195,746 |
|
|
198,824 |
|
|
793,736 |
|
|
761,458 |
|
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
71,518 |
|
|
63,176 |
|
|
224,611 |
|
|
205,309 |
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
17,364 |
|
|
15,101 |
|
|
59,993 |
|
|
52,103 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
54,154 |
|
|
$ |
48,075 |
|
|
$ |
164,618 |
|
|
$ |
153,206 |
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.27 |
|
|
$ |
1.10 |
|
|
$ |
3.83 |
|
|
$ |
3.42 |
|
Diluted |
|
1.27 |
|
|
1.09 |
|
|
3.81 |
|
|
3.41 |
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
42,534 |
|
|
43,795 |
|
|
43,020 |
|
|
44,777 |
|
Diluted |
|
42,760 |
|
|
43,936 |
|
|
43,208 |
|
|
44,884 |
|
|
|
|
|
|
|
|
|
|
Dividends declared per common
share |
|
$ |
0.27 |
|
|
$ |
0.25 |
|
|
$ |
1.02 |
|
|
$ |
0.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRSTCASH,
INC.CONSOLIDATED BALANCE
SHEETS(unaudited, in thousands)
|
|
December 31, |
|
|
2019 |
|
2018 |
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
$ |
46,527 |
|
|
$ |
71,793 |
|
Fees and service charges
receivable |
|
46,686 |
|
|
45,430 |
|
Pawn loans |
|
369,527 |
|
|
362,941 |
|
Consumer loans, net |
|
751 |
|
|
15,902 |
|
Inventories |
|
265,256 |
|
|
275,130 |
|
Income taxes receivable |
|
875 |
|
|
1,379 |
|
Prepaid expenses and other
current assets |
|
11,367 |
|
|
17,317 |
|
Total current assets |
|
740,989 |
|
|
789,892 |
|
|
|
|
|
|
Property and equipment,
net |
|
336,167 |
|
|
251,645 |
|
Operating lease right of use
asset |
|
304,549 |
|
|
— |
|
Goodwill |
|
948,643 |
|
|
917,419 |
|
Intangible assets, net |
|
85,875 |
|
|
88,140 |
|
Other assets |
|
11,506 |
|
|
49,238 |
|
Deferred tax assets |
|
11,711 |
|
|
11,640 |
|
Total assets |
|
$ |
2,439,440 |
|
|
$ |
2,107,974 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
Accounts payable and accrued
liabilities |
|
$ |
72,398 |
|
|
$ |
96,928 |
|
Customer deposits |
|
39,736 |
|
|
35,368 |
|
Income taxes payable |
|
4,302 |
|
|
749 |
|
Lease liability, current
(1) |
|
86,466 |
|
|
— |
|
Total current liabilities |
|
202,902 |
|
|
133,045 |
|
|
|
|
|
|
Revolving unsecured credit
facility |
|
335,000 |
|
|
295,000 |
|
Senior unsecured notes |
|
296,568 |
|
|
295,887 |
|
Deferred tax liabilities |
|
61,431 |
|
|
54,854 |
|
Lease liability, non-current
(1) |
|
193,504 |
|
|
— |
|
Other liabilities |
|
— |
|
|
11,084 |
|
Total liabilities |
|
1,089,405 |
|
|
789,870 |
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
Common stock |
|
493 |
|
|
493 |
|
Additional paid-in capital |
|
1,231,528 |
|
|
1,224,608 |
|
Retained earnings |
|
727,476 |
|
|
606,810 |
|
Accumulated other comprehensive loss |
|
(96,969 |
) |
|
(113,117 |
) |
Common stock held in treasury, at cost |
|
(512,493 |
) |
|
(400,690 |
) |
Total stockholders’ equity |
|
1,350,035 |
|
|
1,318,104 |
|
Total liabilities and stockholders’ equity |
|
$ |
2,439,440 |
|
|
$ |
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 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.
The following table provides exchange rates for
the Mexican peso, Guatemalan quetzal and Colombian peso for the
current and prior-year periods:
|
|
December 31, |
|
Favorable / |
|
|
2019 |
|
2018 |
|
(Unfavorable) |
Mexican peso / U.S. dollar
exchange rate: |
|
|
|
|
|
|
|
|
End-of-period |
|
18.8 |
|
19.7 |
|
|
5 |
% |
|
Three months ended |
|
19.3 |
|
19.8 |
|
|
3 |
% |
|
Twelve months ended |
|
19.3 |
|
19.2 |
|
|
(1 |
)% |
|
|
|
|
|
|
|
|
|
|
Guatemalan quetzal / U.S.
dollar exchange rate: |
|
|
|
|
|
|
|
|
End-of-period |
|
7.7 |
|
7.7 |
|
|
— |
% |
|
Three months ended |
|
7.7 |
|
7.7 |
|
|
— |
% |
|
Twelve months ended |
|
7.7 |
|
7.5 |
|
|
(3 |
)% |
|
|
|
|
|
|
|
|
|
|
Colombian peso / U.S. dollar
exchange rate: |
|
|
|
|
|
|
|
|
End-of-period |
|
3,277 |
|
3,250 |
|
|
(1 |
)% |
|
Three months ended |
|
3,404 |
|
3,166 |
|
|
(8 |
)% |
|
Twelve months ended |
|
3,280 |
|
2,956 |
|
|
(11 |
)% |
|
|
|
|
|
|
|
|
|
|
|
FIRSTCASH, INC.OPERATING
INFORMATION (CONTINUED)(UNAUDITED)
The following table details earning assets,
which consist of pawn loans and inventories as well as other
earning asset metrics of the Latin America operations segment as of
December 31, 2019 as compared to December 31, 2018 (dollars in
thousands, except as otherwise noted):
|
|
|
|
|
|
|
|
|
|
|
Constant Currency Basis |
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
As of December 31, |
|
|
|
2019 |
|
Increase |
|
2019 |
|
2018 |
|
Increase |
|
(Non-GAAP) |
|
(Non-GAAP) |
Latin America
Operations Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pawn loans |
$ |
100,734 |
|
|
$ |
91,357 |
|
|
|
10 |
% |
|
|
$ |
96,640 |
|
|
|
6 |
% |
|
Inventories |
|
83,936 |
|
|
|
75,152 |
|
|
|
12 |
% |
|
|
80,490 |
|
|
|
7 |
% |
|
|
$ |
184,670 |
|
|
$ |
166,509 |
|
|
|
11 |
% |
|
|
$ |
177,130 |
|
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average outstanding pawn loan
amount (in ones) |
$ |
71 |
|
|
$ |
68 |
|
|
|
4 |
% |
|
|
$ |
68 |
|
|
|
— |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of pawn
collateral: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General merchandise |
67 |
% |
|
74 |
% |
|
|
|
|
|
|
|
|
|
|
Jewelry |
33 |
% |
|
26 |
% |
|
|
|
|
|
|
|
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of
inventories: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General merchandise |
66 |
% |
|
68 |
% |
|
|
|
|
|
|
|
|
|
|
Jewelry |
34 |
% |
|
32 |
% |
|
|
|
|
|
|
|
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of inventory aged
greater than one year |
1 |
% |
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31, 2019 as compared to the three
months ended December 31, 2018 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
Constant Currency Basis |
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
|
|
|
|
|
|
|
|
|
Ended |
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
December 31, |
|
Increase / |
|
|
December 31, |
|
Increase / |
|
2019 |
|
(Decrease) |
|
|
2019 |
|
2018 |
|
(Decrease) |
|
(Non-GAAP) |
|
(Non-GAAP) |
Latin America
Operations Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail merchandise sales |
|
$ |
132,906 |
|
|
$ |
114,514 |
|
|
|
16 |
% |
|
|
$ |
129,384 |
|
|
|
13 |
% |
|
Pawn loan fees |
|
47,562 |
|
|
41,733 |
|
|
|
14 |
% |
|
|
46,308 |
|
|
|
11 |
% |
|
Wholesale scrap jewelry sales |
|
6,653 |
|
|
5,647 |
|
|
|
18 |
% |
|
|
6,653 |
|
|
|
18 |
% |
|
Total revenue |
|
187,121 |
|
|
161,894 |
|
|
|
16 |
% |
|
|
182,345 |
|
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
89,866 |
|
|
73,050 |
|
|
|
23 |
% |
|
|
87,490 |
|
|
|
20 |
% |
|
Cost of wholesale scrap jewelry sold |
|
5,524 |
|
|
5,429 |
|
|
|
2 |
% |
|
|
5,380 |
|
|
|
(1 |
)% |
|
Consumer loan loss provision (1) |
|
— |
|
|
17 |
|
|
|
(100 |
)% |
|
|
— |
|
|
|
(100 |
)% |
|
Total cost of revenue |
|
95,390 |
|
|
78,496 |
|
|
|
22 |
% |
|
|
92,870 |
|
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
91,731 |
|
|
83,398 |
|
|
|
10 |
% |
|
|
89,475 |
|
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Store operating expenses |
|
48,221 |
|
|
42,076 |
|
|
|
15 |
% |
|
|
47,064 |
|
|
|
12 |
% |
|
Depreciation and amortization |
|
3,947 |
|
|
2,969 |
|
|
|
33 |
% |
|
|
3,860 |
|
|
|
30 |
% |
|
Total segment expenses |
|
52,168 |
|
|
45,045 |
|
|
|
16 |
% |
|
|
50,924 |
|
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
|
$ |
39,563 |
|
|
$ |
38,353 |
|
|
|
3 |
% |
|
|
$ |
38,551 |
|
|
|
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
twelve months ended December 31, 2019 as compared to the
twelve months ended December 31, 2018 (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
Constant Currency Basis |
|
|
|
|
|
|
|
|
Twelve Months |
|
|
|
|
|
|
|
|
|
|
Ended |
|
|
|
|
Twelve Months Ended |
|
|
|
|
|
December 31, |
|
Increase / |
|
|
December 31, |
|
Increase / |
|
2019 |
|
(Decrease) |
|
|
2019 |
|
2018 |
|
(Decrease) |
|
(Non-GAAP) |
|
(Non-GAAP) |
Latin America
Operations Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail merchandise sales |
|
$ |
453,434 |
|
|
$ |
382,020 |
|
|
|
19 |
% |
|
|
$ |
454,431 |
|
|
|
19 |
% |
|
Pawn loan fees |
|
185,429 |
|
|
151,740 |
|
|
|
22 |
% |
|
|
185,826 |
|
|
|
22 |
% |
|
Wholesale scrap jewelry sales |
|
32,063 |
|
|
22,103 |
|
|
|
45 |
% |
|
|
32,063 |
|
|
|
45 |
% |
|
Consumer loan fees (1) |
|
— |
|
|
860 |
|
|
|
(100 |
)% |
|
|
— |
|
|
|
(100 |
)% |
|
Total revenue |
|
670,926 |
|
|
556,723 |
|
|
|
21 |
% |
|
|
672,320 |
|
|
|
21 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
297,950 |
|
|
246,150 |
|
|
|
21 |
% |
|
|
298,621 |
|
|
|
21 |
% |
|
Cost of wholesale scrap jewelry sold |
|
30,131 |
|
|
21,656 |
|
|
|
39 |
% |
|
|
30,191 |
|
|
|
39 |
% |
|
Consumer loan loss provision (1) |
|
— |
|
|
238 |
|
|
|
(100 |
)% |
|
|
— |
|
|
|
(100 |
)% |
|
Total cost of revenue |
|
328,081 |
|
|
268,044 |
|
|
|
22 |
% |
|
|
328,812 |
|
|
|
23 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
342,845 |
|
|
288,679 |
|
|
|
19 |
% |
|
|
343,508 |
|
|
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Store operating expenses |
|
183,031 |
|
|
149,224 |
|
|
|
23 |
% |
|
|
183,562 |
|
|
|
23 |
% |
|
Depreciation and amortization |
|
14,626 |
|
|
11,333 |
|
|
|
29 |
% |
|
|
14,687 |
|
|
|
30 |
% |
|
Total segment expenses |
|
197,657 |
|
|
160,557 |
|
|
|
23 |
% |
|
|
198,249 |
|
|
|
23 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
|
$ |
145,188 |
|
|
$ |
128,122 |
|
|
|
13 |
% |
|
|
$ |
145,259 |
|
|
|
13 |
% |
|
(1) The Company discontinued offering an unsecured consumer loan
product in Latin America, effective June 30, 2018.
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 December 31, 2019 as compared to
December 31, 2018 (dollars in thousands, except as otherwise
noted):
|
As of December 31, |
|
Increase / |
|
2019 |
|
2018 |
|
(Decrease) |
U.S. Operations
Segment |
|
|
|
|
|
|
|
|
|
Earning assets: |
|
|
|
|
|
|
|
|
|
Pawn loans |
$ |
268,793 |
|
|
$ |
271,584 |
|
|
|
(1 |
)% |
|
Inventories |
|
181,320 |
|
|
|
199,978 |
|
|
|
(9 |
)% |
|
Consumer loans, net (1) |
|
751 |
|
|
|
15,902 |
|
|
|
(95 |
)% |
|
|
$ |
450,864 |
|
|
$ |
487,464 |
|
|
|
(8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
Average outstanding pawn loan
amount (in ones) |
$ |
177 |
|
|
$ |
172 |
|
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
Composition of pawn
collateral: |
|
|
|
|
|
|
|
|
|
General merchandise |
34 |
% |
|
34 |
% |
|
|
|
|
Jewelry |
66 |
% |
|
66 |
% |
|
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of
inventories: |
|
|
|
|
|
|
|
|
|
General merchandise |
47 |
% |
|
42 |
% |
|
|
|
|
Jewelry |
53 |
% |
|
58 |
% |
|
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of inventory aged
greater than one year |
3 |
% |
|
4 |
% |
|
|
|
|
(1) The Company ceased offering unsecured consumer lending and
credit services products in all its 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 December 31, 2019 as compared to the three months
ended December 31, 2018 (dollars in thousands):
|
|
Three Months Ended |
|
|
|
|
|
|
December 31, |
|
Increase / |
|
|
2019 |
|
2018 |
|
(Decrease) |
U.S. Operations
Segment |
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
Retail merchandise sales |
|
$ |
198,302 |
|
|
$ |
195,100 |
|
|
|
2 |
% |
|
Pawn loan fees |
|
96,268 |
|
|
95,995 |
|
|
|
— |
% |
|
Wholesale scrap jewelry sales |
|
14,871 |
|
|
15,324 |
|
|
|
(3 |
)% |
|
Consumer loan and credit services fees (1) |
|
1,800 |
|
|
12,895 |
|
|
|
(86 |
)% |
|
Total revenue |
|
311,241 |
|
|
319,314 |
|
|
|
(3 |
)% |
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
121,777 |
|
|
122,258 |
|
|
|
— |
% |
|
Cost of wholesale scrap jewelry sold |
|
13,601 |
|
|
14,105 |
|
|
|
(4 |
)% |
|
Consumer loan and credit services loss provision (1) |
|
330 |
|
|
4,349 |
|
|
|
(92 |
)% |
|
Total cost of revenue |
|
135,708 |
|
|
140,712 |
|
|
|
(4 |
)% |
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
175,533 |
|
|
178,602 |
|
|
|
(2 |
)% |
|
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
Store operating expenses |
|
102,300 |
|
|
103,134 |
|
|
|
(1 |
)% |
|
Depreciation and amortization |
|
5,333 |
|
|
5,144 |
|
|
|
4 |
% |
|
Total segment expenses |
|
107,633 |
|
|
108,278 |
|
|
|
(1 |
)% |
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
|
$ |
67,900 |
|
|
$ |
70,324 |
|
|
|
(3 |
)% |
|
(1) The Company ceased offering unsecured consumer lending and
credit services products in all its 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 twelve
months ended December 31, 2019 as compared to the twelve
months ended December 31, 2018 (dollars in thousands):
|
|
Twelve Months Ended |
|
|
|
|
|
|
December 31, |
|
Increase / |
|
|
2019 |
|
2018 |
|
(Decrease) |
U.S. Operations
Segment |
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
Retail merchandise sales |
|
$ |
722,127 |
|
|
$ |
709,594 |
|
|
|
2 |
% |
|
Pawn loan fees |
|
379,395 |
|
|
373,406 |
|
|
|
2 |
% |
|
Wholesale scrap jewelry sales |
|
71,813 |
|
|
85,718 |
|
|
|
(16 |
)% |
|
Consumer loan and credit services fees (1) |
|
20,178 |
|
|
55,417 |
|
|
|
(64 |
)% |
|
Total revenue |
|
1,193,513 |
|
|
1,224,135 |
|
|
|
(3 |
)% |
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
447,911 |
|
|
450,516 |
|
|
|
(1 |
)% |
|
Cost of wholesale scrap jewelry sold |
|
65,941 |
|
|
78,308 |
|
|
|
(16 |
)% |
|
Consumer loan and credit services loss provision (1) |
|
4,159 |
|
|
17,223 |
|
|
|
(76 |
)% |
|
Total cost of revenue |
|
518,011 |
|
|
546,047 |
|
|
|
(5 |
)% |
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
675,502 |
|
|
678,088 |
|
|
|
— |
% |
|
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
Store operating expenses |
|
412,508 |
|
|
414,097 |
|
|
|
— |
% |
|
Depreciation and amortization |
|
20,860 |
|
|
21,021 |
|
|
|
(1 |
)% |
|
Total segment expenses |
|
433,368 |
|
|
435,118 |
|
|
|
— |
% |
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
|
$ |
242,134 |
|
|
$ |
242,970 |
|
|
|
— |
% |
|
(1) The Company ceased offering unsecured consumer lending and
credit services products in all its 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)
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 |
|
Twelve Months Ended |
|
December 31, |
|
December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Consolidated Results
of Operations |
|
|
|
|
|
|
|
Segment pre-tax operating
income: |
|
|
|
|
|
|
|
Latin America operations segment pre-tax operating income |
$ |
39,563 |
|
|
$ |
38,353 |
|
|
$ |
145,188 |
|
|
$ |
128,122 |
|
U.S. operations segment pre-tax operating income |
67,900 |
|
|
70,324 |
|
|
242,134 |
|
|
242,970 |
|
Consolidated segment pre-tax operating income |
107,463 |
|
|
108,677 |
|
|
387,322 |
|
|
371,092 |
|
|
|
|
|
|
|
|
|
Corporate expenses and other
income: |
|
|
|
|
|
|
|
Administrative expenses |
27,908 |
|
|
32,343 |
|
|
122,334 |
|
|
120,042 |
|
Depreciation and amortization |
1,566 |
|
|
1,763 |
|
|
6,418 |
|
|
10,607 |
|
Interest expense |
8,195 |
|
|
8,580 |
|
|
34,035 |
|
|
29,173 |
|
Interest income |
(267 |
) |
|
(228 |
) |
|
(1,055 |
) |
|
(2,444 |
) |
Merger and other acquisition expenses |
256 |
|
|
2,069 |
|
|
1,766 |
|
|
7,643 |
|
(Gain) loss on foreign exchange |
(1,713 |
) |
|
974 |
|
|
(787 |
) |
|
762 |
|
Total corporate expenses and other income |
35,945 |
|
|
45,501 |
|
|
162,711 |
|
|
165,783 |
|
|
|
|
|
|
|
|
|
Income before income
taxes |
71,518 |
|
|
63,176 |
|
|
224,611 |
|
|
205,309 |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
17,364 |
|
|
15,101 |
|
|
59,993 |
|
|
52,103 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
54,154 |
|
|
$ |
48,075 |
|
|
$ |
164,618 |
|
|
$ |
153,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRSTCASH, INC.STORE
COUNT ACTIVITY
The following tables detail store count activity:
|
|
Three Months Ended December 31, 2019 |
|
|
Latin America |
|
U.S. |
|
|
|
|
Operations Segment |
|
Operations Segment (1) |
|
Total Locations |
Total locations, beginning of period |
|
1,612 |
|
|
1,053 |
|
|
2,665 |
|
New locations opened |
|
14 |
|
|
— |
|
|
14 |
|
Locations acquired |
|
— |
|
|
7 |
|
|
7 |
|
Locations closed or consolidated |
|
(3 |
) |
|
(4 |
) |
|
(7 |
) |
Total locations, end of period |
|
1,623 |
|
|
1,056 |
|
|
2,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, 2019 |
|
|
Latin America |
|
U.S. |
|
|
|
|
Operations Segment |
|
Operations Segment (1) |
|
Total Locations |
Total locations, beginning of
period |
|
1,379 |
|
|
1,094 |
|
|
2,473 |
|
New locations opened |
|
89 |
|
|
— |
|
|
89 |
|
Locations acquired |
|
163 |
|
|
27 |
|
|
190 |
|
Locations closed or consolidated (2) |
|
(8 |
) |
|
(65 |
) |
|
(73 |
) |
Total locations, end of period |
|
1,623 |
|
|
1,056 |
|
|
2,679 |
|
(1) At December 31, 2019, includes six consumer loan
locations located in Texas, which only offer credit services
products. This compares to 17 consumer loan locations which only
offered consumer loans and/or credit services as of
December 31, 2018. At December 31, 2019, 41 of the pawn
stores, primarily located in Texas, also offered consumer loans
and/or credit services primarily as an ancillary product. This
compares to 262 U.S. pawn locations which offered such products as
of December 31, 2018.
(2) Includes the closing of 52 Ohio locations and two other
locations in Texas 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, return on
tangible equity and adjusted segment pre-tax operating income and
margin 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 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 and other 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 unrealized 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, Return on Tangible
Equity and Adjusted Segment Pre-Tax Operating Income and
Margin
Management believes the presentation of adjusted
net income, adjusted diluted earnings per share, return on tangible
assets, return on tangible equity and adjusted segment pre-tax
operating income and margin 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 December 31, |
|
Twelve Months Ended December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
InThousands |
|
PerShare |
|
InThousands |
|
PerShare |
|
InThousands |
|
PerShare |
|
InThousands |
|
PerShare |
Net income and diluted earnings per share, as reported |
$ |
54,154 |
|
|
$ |
1.27 |
|
|
$ |
48,075 |
|
|
$ |
1.09 |
|
|
$ |
164,618 |
|
|
$ |
3.81 |
|
|
$ |
153,206 |
|
|
$ |
3.41 |
|
Adjustments, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger and other acquisition expenses |
179 |
|
|
— |
|
|
1,454 |
|
|
0.03 |
|
|
1,276 |
|
|
0.03 |
|
|
5,412 |
|
|
0.12 |
|
Non-cash foreign currency gain related to lease liability |
(619 |
) |
|
(0.01 |
) |
|
— |
|
|
— |
|
|
(653 |
) |
|
(0.01 |
) |
|
— |
|
|
— |
|
Ohio consumer lending wind-down costs and asset impairments |
122 |
|
|
— |
|
|
1,166 |
|
|
0.03 |
|
|
2,659 |
|
|
0.06 |
|
|
1,166 |
|
|
0.03 |
|
Net tax benefit from Tax Act |
— |
|
|
— |
|
|
(1,494 |
) |
|
(0.03 |
) |
|
— |
|
|
— |
|
|
(1,494 |
) |
|
(0.03 |
) |
Adjusted net income and
diluted earnings per share |
$ |
53,836 |
|
|
$ |
1.26 |
|
|
$ |
49,201 |
|
|
$ |
1.12 |
|
|
$ |
167,900 |
|
|
$ |
3.89 |
|
|
$ |
158,290 |
|
|
$ |
3.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31, |
|
2019 |
|
2018 |
|
Pre-tax |
|
Tax |
|
After-tax |
|
Pre-tax |
|
Tax |
|
After-tax |
Merger and other acquisition expenses |
$ |
256 |
|
|
$ |
77 |
|
|
$ |
179 |
|
|
$ |
2,069 |
|
|
$ |
615 |
|
|
$ |
1,454 |
|
Non-cash foreign currency gain
related to lease liability |
(884 |
) |
|
(265 |
) |
|
(619 |
) |
|
— |
|
|
— |
|
|
— |
|
Ohio consumer lending
wind-down costs and asset impairments |
159 |
|
|
37 |
|
|
122 |
|
|
1,514 |
|
|
348 |
|
|
1,166 |
|
Net tax benefit from Tax
Act |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,494 |
|
|
(1,494 |
) |
Total adjustments |
$ |
(469 |
) |
|
$ |
(151 |
) |
|
$ |
(318 |
) |
|
$ |
3,583 |
|
|
$ |
2,457 |
|
|
$ |
1,126 |
|
|
Twelve Months Ended December 31, |
|
2019 |
|
2018 |
|
Pre-tax |
|
Tax |
|
After-tax |
|
Pre-tax |
|
Tax |
|
After-tax |
Merger and other acquisition expenses |
$ |
1,766 |
|
|
$ |
490 |
|
|
$ |
1,276 |
|
|
$ |
7,643 |
|
|
$ |
2,231 |
|
|
$ |
5,412 |
|
Non-cash foreign currency gain
related to lease liability |
(933 |
) |
|
(280 |
) |
|
(653 |
) |
|
— |
|
|
— |
|
|
— |
|
Ohio consumer lending
wind-down costs and asset impairments |
3,454 |
|
|
795 |
|
|
2,659 |
|
|
1,514 |
|
|
348 |
|
|
1,166 |
|
Net tax benefit from Tax
Act |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,494 |
|
|
(1,494 |
) |
Total adjustments |
$ |
4,287 |
|
|
$ |
1,005 |
|
|
$ |
3,282 |
|
|
$ |
9,157 |
|
|
$ |
4,073 |
|
|
$ |
5,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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):
|
December 31, |
|
2019 |
|
2018 |
Return on tangible assets
calculation: |
|
|
|
|
|
Average total assets |
$ |
2,342,095 |
|
|
$ |
2,060,115 |
|
Adjustments: |
|
|
|
|
|
Average goodwill |
|
(935,210 |
) |
|
|
(871,294 |
) |
Average intangible assets, net |
|
(87,099 |
) |
|
|
(90,517 |
) |
Average operating lease right of use asset |
|
(236,907 |
) |
|
|
— |
|
Average tangible assets |
$ |
1,082,879 |
|
|
$ |
1,098,304 |
|
Net income |
$ |
164,618 |
|
|
$ |
153,206 |
|
Return on tangible assets |
15 |
% |
|
14 |
% |
|
|
|
|
|
|
Return on tangible equity
calculation: |
|
|
|
|
|
Average stockholders’ equity |
$ |
1,331,935 |
|
|
$ |
1,367,899 |
|
Adjustments: |
|
|
|
|
|
Average goodwill |
|
(935,210 |
) |
|
|
(871,294 |
) |
Average intangible assets, net |
|
(87,099 |
) |
|
|
(90,517 |
) |
Average tangible equity |
$ |
309,626 |
|
|
$ |
406,088 |
|
Net income |
$ |
164,618 |
|
|
$ |
153,206 |
|
Return on tangible equity |
53 |
% |
|
38 |
% |
|
|
|
|
|
|
FIRSTCASH,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
(CONTINUED)(UNAUDITED)
The following tables provide a calculation of
U.S. segment pre-tax operating income and U.S. segment pre-tax
operating margin excluding the contribution from consumer lending
operations and Ohio store closures (dollars in thousands):
|
|
Three Months Ended |
|
|
|
|
|
|
December 31, |
|
Increase / |
|
|
2019 |
|
2018 |
|
(Decrease) |
U.S. Operations
Segment Pre-Tax Operating Income: |
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating income |
|
$ |
67,900 |
|
|
$ |
70,324 |
|
|
|
(3 |
)% |
|
Less contribution from
consumer lending operations and Ohio wind-down costs: |
|
|
|
|
|
|
|
|
|
|
Consumer loan and credit services fees |
|
|
1,800 |
|
|
|
12,895 |
|
|
|
|
|
Consumer loan and credit services loss provision |
|
|
(330 |
) |
|
|
(4,349 |
) |
|
|
|
|
Net revenue from consumer loan and credit services |
|
|
1,470 |
|
|
|
8,546 |
|
|
|
|
|
Store operating expenses |
|
|
(225 |
) |
|
|
(3,173 |
) |
|
|
|
|
Contribution from consumer lending operations and Ohio wind-down
costs |
|
|
1,245 |
|
|
|
5,373 |
|
|
|
(77 |
)% |
|
Adjusted segment pre-tax
operating income |
|
$ |
66,655 |
|
|
$ |
64,951 |
|
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended |
|
|
|
|
|
|
December 31, |
|
Increase / |
|
|
2019 |
|
2018 |
|
(Decrease) |
U.S. Operations
Segment Pre-Tax Operating Income: |
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
|
$ |
242,134 |
|
|
$ |
242,970 |
|
|
|
— |
% |
|
Less contribution from
consumer lending operations and Ohio wind-down costs: |
|
|
|
|
|
|
|
|
|
|
Consumer loan and credit services fees |
|
|
20,178 |
|
|
|
55,417 |
|
|
|
|
|
Consumer loan and credit services loss provision |
|
|
(4,159 |
) |
|
|
(17,223 |
) |
|
|
|
|
Net revenue from consumer loan and credit services |
|
|
16,019 |
|
|
|
38,194 |
|
|
|
|
|
Store operating expenses |
|
|
(5,994 |
) |
|
|
(14,554 |
) |
|
|
|
|
Contribution from consumer lending operations and Ohio wind-down
costs |
|
|
10,025 |
|
|
|
23,640 |
|
|
|
(58 |
)% |
|
Adjusted segment pre-tax
operating income |
|
$ |
232,109 |
|
|
$ |
219,330 |
|
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRSTCASH,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
(CONTINUED)(UNAUDITED
|
Three Months Ended |
|
December 31, |
|
2019 |
|
2018 |
U.S. Operations
Segment Pre-Tax Operating Margin: |
|
|
|
|
|
U.S. operations segment revenue |
$ |
311,241 |
|
|
$ |
319,314 |
|
Less consumer loan and credit services fees |
|
(1,800 |
) |
|
|
(12,895 |
) |
Adjusted U.S. operations
segment revenue |
|
309,441 |
|
|
|
306,419 |
|
Adjusted U.S. operations
segment pre-tax operating income |
|
66,655 |
|
|
|
64,951 |
|
Adjusted U.S. operations
segment pre-tax operating margin |
22 |
% |
|
21 |
% |
|
|
|
|
|
|
|
Twelve Months Ended |
|
December 31, |
|
2019 |
|
2018 |
U.S. Operations
Segment Pre-Tax Operating Margin: |
|
|
|
|
|
U.S. operations segment
revenue |
$ |
1,193,513 |
|
|
$ |
1,224,135 |
|
Less consumer loan and credit services fees |
|
(20,178 |
) |
|
|
(55,417 |
) |
Adjusted U.S. operations
segment revenue |
|
1,173,335 |
|
|
|
1,168,718 |
|
Adjusted U.S. operations
segment pre-tax operating income |
|
232,109 |
|
|
|
219,330 |
|
Adjusted U.S. operations
segment pre-tax operating margin |
20 |
% |
|
19 |
% |
|
|
|
|
|
|
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):
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income |
|
$ |
54,154 |
|
|
$ |
48,075 |
|
|
$ |
164,618 |
|
|
$ |
153,206 |
|
Income taxes |
|
|
17,364 |
|
|
|
15,101 |
|
|
|
59,993 |
|
|
|
52,103 |
|
Depreciation and amortization |
|
|
10,846 |
|
|
|
9,876 |
|
|
|
41,904 |
|
|
|
42,961 |
|
Interest expense |
|
|
8,195 |
|
|
|
8,580 |
|
|
|
34,035 |
|
|
|
29,173 |
|
Interest income |
|
|
(267 |
) |
|
|
(228 |
) |
|
|
(1,055 |
) |
|
|
(2,444 |
) |
EBITDA |
|
|
90,292 |
|
|
|
81,404 |
|
|
|
299,495 |
|
|
|
274,999 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Merger and other acquisition expenses |
|
|
256 |
|
|
|
2,069 |
|
|
|
1,766 |
|
|
|
7,643 |
|
Non-cash foreign currency gain related to lease liability |
|
|
(884 |
) |
|
|
— |
|
|
|
(933 |
) |
|
|
— |
|
Ohio consumer lending wind-down costs and asset impairments |
|
|
159 |
|
|
|
1,514 |
|
|
|
3,454 |
|
|
|
1,514 |
|
Adjusted EBITDA |
|
$ |
89,823 |
|
|
$ |
84,987 |
|
|
$ |
303,782 |
|
|
$ |
284,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt ratio
calculation: |
|
|
|
|
|
|
|
|
|
|
|
|
Total debt (outstanding principal) |
|
|
|
|
|
|
|
$ |
635,000 |
|
|
$ |
595,000 |
|
Less: cash and cash equivalents |
|
|
|
|
|
|
|
|
(46,527 |
) |
|
|
(71,793 |
) |
Net debt |
|
|
|
|
|
|
|
$ |
588,473 |
|
|
$ |
523,207 |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
$ |
303,782 |
|
|
$ |
284,156 |
|
Net debt ratio (net debt
divided by adjusted EBITDA) |
|
|
|
|
|
|
|
1.9:1 |
|
|
1.8:1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
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):
|
Twelve Months Ended |
|
December 31, |
|
2019 |
|
2018 |
Cash flow from operating activities (1) |
$ |
231,596 |
|
|
$ |
243,429 |
|
Cash flow from investing
activities: |
|
|
|
Loan receivables, net of cash repayments |
34,406 |
|
|
10,125 |
|
Purchases of furniture, fixtures, equipment and improvements
(2) |
(44,311 |
) |
|
(35,677 |
) |
Free cash flow |
221,691 |
|
|
217,877 |
|
Merger and other acquisition expenses paid, net of tax benefit |
1,276 |
|
|
7,072 |
|
Adjusted free cash flow |
$ |
222,967 |
|
|
$ |
224,949 |
|
(1) The twelve months ended December 31, 2018 includes a $21
million cash inflow from a non-recurring tax refund related to the
merger.
(2) The twelve months ended December 31, 2019 include the impact
of accelerated new store expansion activities in Latin America with
89 new stores opened during 2019 compared to 52 new stores opened
during 2018.
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.
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
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