FirstCash, Inc. (the “Company”) (Nasdaq: FCFS), the leading
international operator of over 2,770 retail pawn stores in the U.S.
and Latin America, today announced operating results for the three
month period ended March 31, 2021, and an update on the impact
of COVID-19 on its business. In addition, the Board of Directors
declared a $0.30 per share quarterly cash dividend, an increase of
11% compared to the previous quarterly dividend of $0.27 per share,
to be paid in May 2021.
Mr. Rick Wessel, chief executive officer,
stated, “We are pleased to report strong first quarter earnings
results and cash flows which exceeded our internal expectations.
These rapidly improving results highlight the diversity of
FirstCash’s business model and continued profitability despite the
impacts of COVID-19. More importantly, our dedicated and
experienced team of front line associates and store managers have
consistently performed at an incredibly high level to support our
customers through challenging and rapidly evolving circumstances
over the past twelve months.
“The strength of first quarter sales volumes and
margins in the U.S. drove a year-over-year increase in domestic
retail gross profit as our stores benefited from improved inventory
levels and the impact of additional federal stimulus payments to
consumers. In Latin America, we continued to see a recovery in pawn
lending demand as total loan balances reached near pre-pandemic
levels. The Company’s operations in Latin America also realized
robust retail margins and strong inventory turns. Additionally, our
disciplined focus on expense control contributed to further
operating margin recovery in both markets.
“Our strategic growth initiatives resulted in 24
new first quarter stores in three Latin American countries and the
acquisition of two U.S. stores in Texas. With robust first quarter
cash flows, we were able to significantly reduce revolving debt and
we believe that we are well positioned for continued investments in
growth and shareholder returns, including the increased quarterly
dividend.”
This release contains adjusted earnings
measures, which exclude certain extraordinary and/or non-cash
expenses, 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 March 31, |
|
|
As Reported (GAAP) |
|
Adjusted (Non-GAAP) |
In thousands, except per share
amounts |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenue |
|
$ |
407,939 |
|
|
$ |
466,490 |
|
|
$ |
407,939 |
|
|
$ |
466,490 |
|
Net income |
|
$ |
33,715 |
|
|
$ |
32,918 |
|
|
$ |
34,928 |
|
|
$ |
40,295 |
|
Diluted earnings per
share |
|
$ |
0.82 |
|
|
$ |
0.78 |
|
|
$ |
0.85 |
|
|
$ |
0.96 |
|
EBITDA (non-GAAP measure) |
|
$ |
63,955 |
|
|
$ |
64,624 |
|
|
$ |
65,601 |
|
|
$ |
74,606 |
|
Weighted-average diluted
shares |
|
41,056 |
|
|
42,007 |
|
|
41,056 |
|
|
42,007 |
|
Consolidated Earnings Highlights
- Diluted earnings
per share for the first quarter increased 5% on a GAAP basis and
decreased 11% on an adjusted non-GAAP basis compared to the
prior-year quarter, reflecting the strongest comparative quarter
since the beginning of the pandemic.
- Earnings results
reflected expected revenue declines of 13% in the first quarter,
which primarily related to the impacts of COVID-19 on pawn lending
and inventory levels. The revenue contraction for the quarter was
the smallest since the second quarter of last year, and the Company
saw significant improvement in many key operating metrics during
the first quarter:
- Retail results were
stronger than anticipated and drove a 3% increase in first quarter
merchandise gross profit compared to the first quarter of 2020. The
increase was driven by a smaller than expected decline in U.S.
retail sales of only 3% and continued margin improvements in both
the U.S. and Latin America.
- Retail sales gross
margins of 42% in the first quarter remained at record levels and
were a significant improvement over the 38% gross margins in the
first quarter of last year.
- Improving pawn loan
demand in Latin America was offset by lower demand in the U.S. that
was impacted by two rounds of stimulus payments to most of the
Company’s customers. Pawn fees declined 19% on a consolidated basis
for the quarter compared to the prior-year quarter.
- Inventory levels
remained stable, decreasing only 3% sequentially compared to the
fourth quarter of 2020 despite the larger than expected first
quarter retail sales volumes.
- Increased inventory
turns and margins resulted in a record return on earning assets
(trailing twelve months net revenue divided by average pawn
receivables and inventories) of 189% in the first quarter of 2021
compared to 164% in the first quarter of 2020.
- The Company
continued its efforts to improve efficiency and optimize expenses
which resulted in an 11% reduction in store-level expenses and a 6%
reduction in administrative expenses compared to the prior-year
quarter.
- The adjusted EBITDA
margin for the first quarter of 2021 was over 16%, which equals the
“pre-pandemic” margin in the first quarter of 2020.
- Cash flow from
operating activities was $214 million for the trailing twelve
months ended March 31, 2021, while adjusted free cash flow, a
non-GAAP financial measure, was $276 million for the trailing
twelve months.
- First quarter
earnings generated an improvement in the Company’s annualized
return on assets and return on equity compared to the first quarter
of last year.
Acquisitions and Store Opening
Highlights
- A total of 24 de
novo locations were opened in Latin America during the first
quarter, which included 22 locations in Mexico, one in Guatemala
and one in Colombia.
- Including two
additional locations acquired in the U.S. in January, there were 26
total store additions during the first quarter. The Company has
added 96 total locations over the last twelve months and 163
locations since the beginning of 2020.
- As of March 31,
2021, the Company operated 2,771 stores, with 1,725 stores in Latin
America and 1,046 stores in the U.S. The Latin American locations
include 1,637 stores in Mexico, 60 stores in Guatemala, 15 stores
in Colombia and 13 stores in El Salvador.
U.S. Pawn Operations
- Retail sales for
the first quarter of 2021 were stronger than anticipated, down only
3% compared to the prior-year quarter, which compares favorably to
the 17% decline in the previous sequential quarter. Sales volumes
were very strong in early January and again in March, consistent
with the timing of stimulus payments and tax refunds. On a same
store-basis, retail sales declined only 5% compared to the
prior-year quarter.
- Retail sales
margins continued to expand, with a first quarter margin of 44%
compared to the 39% margin in the same quarter last year. The
strength in retail margins reflect continued retail demand for
value-priced, pre-owned merchandise, increased buying of fresh
merchandise from customers and lower levels of aged inventory, all
of which limited the need for normal discounting.
- Resulting gross
profit from retail sales increased 9% compared to a year ago,
reflecting the diversity and durability of the pawn business for
the reasons noted above.
- The sales results
generated annualized inventory turnover rates of 3.5 times for the
quarter and 3.3 times for the trailing twelve months ended March
31, 2021 compared to 3.1 and 2.9 times in the respective prior-year
periods. Despite the larger than expected first quarter retail
sales volumes, inventory levels at the end of the first quarter
decreased only 6% compared to the previous sequential quarter and
aged inventories remained low at only 2% of total inventories. In
order to augment retail inventories and support increased turns,
the Company continued to emphasize direct “buys” of merchandise
purchased from customers. Retail inventory production was further
bolstered by decreasing the percentage of jewelry normally scrapped
and liquidated on a wholesale basis.
- Pawn receivables at
March 31, 2021 were down 24% in total compared to the prior year,
which was also a sequential decline compared to an 18% decline at
the beginning of the quarter, due primarily to the impact of direct
federal stimulus payments delivered in early January and beginning
again in March. Pawn loan originations were down 19% for the
quarter, which is down sequentially, but still an improvement over
the second and third quarters of 2020. Same-store pawn receivables
were down 25% at quarter end and resulting total and same-store
pawn fees for the first quarter were down 22% and 23%,
respectively, compared to the prior-year quarter.
- Wholesale scrap
jewelry margins improved to 18% in the first quarter of 2021
compared to 10% in the respective prior-year period, as the Company
benefited from increased gold prices. Despite lower sales volumes,
net revenue from non-core scrap jewelry sales increased 15% for the
quarter compared to the prior-year quarter as a result of the
increased margins.
- Store operating
expenses decreased 12% in total and on a same-store basis compared
to the prior-year quarter, reflecting the continued expense
optimization efforts from reduced staffing levels through normal
attrition, reduced store hours in some markets and other
store-level cost saving initiatives.
- Although segment
pre-tax income for the first quarter was down a modest 5% compared
to the prior year, the segment pre-tax margin improved to 22% for
the first quarter of 2021 compared to 21% for both the prior-year
quarter and previous sequential quarter.
Note: Certain growth rates in “Latin America
Pawn Operations” below are calculated on a constant currency basis,
a non-GAAP financial measure defined at the end of this release.
The average Mexican peso to U.S. dollar exchange rate for the three
month period ended March 31, 2021 was 20.3 pesos / dollar, an
unfavorable change of 2% versus the comparable prior-year
period.
Latin America Pawn
Operations
-
All of the Company’s stores in Latin America are currently open and
operating, although operations continued to be nominally impacted
by restricted operating hours or days in certain markets.
-
Pawn loan origination volumes in Latin America continued to improve
during the first quarter with resulting pawn loans outstanding at
March 31, 2021 up 6% on a U.S. dollar translated basis and down 6%
on a constant currency basis compared to the prior year. Same-store
pawn loans at March 31, 2021 increased 5% on a U.S. dollar
translated basis and decreased 7% on a constant currency basis
compared to the prior year.
-
Pawn fees, which typically lag pawn receivables growth, decreased
12% in the first quarter, or 10% on a constant currency basis, as
compared to the prior-year quarter, representing solid sequential
improvement over the fourth quarter of 2020. On a same-store basis,
pawn fees decreased 13% on a U.S. dollar basis and were down 11% on
a constant currency basis compared to the prior-year quarter.
-
Retail sales in the first quarter were impacted by a combination of
lower inventory levels and the absence of government stimulus
programs in Latin America. Resulting retail sales for the first
quarter decreased 18%, or 17% on a constant currency basis,
compared to the prior-year quarter. Same-store retail sales
decreased 21% on a U.S. dollar basis and 19% on a constant currency
basis compared to the prior-year quarter.
-
Partially offsetting the impact of lower total retail sales, retail
margins continued to strengthen at 38% in the first quarter
compared to 35% in the first quarter of 2020. As in the U.S., the
improved margins reflect fresher inventories and continued demand
for popular value-priced consumer electronics. As a result, gross
profit from retail sales declined only 11% on a U.S. dollar basis,
or 9% on a constant currency basis, in the first quarter compared
to the prior-year quarter.
-
Further reflecting the improved retail efficiency, annualized
inventory turnover was a near record at 4.4 times for the trailing
twelve months ended March 31, 2021 compared to 3.9 turns in the
same period last year. Inventories aged greater than one year as of
March 31, 2021 remained extremely low at 2%.
-
Store operating expenses decreased 8%, or 6% on a constant currency
basis, while same-store operating expenses decreased 11%, or 9% on
a constant currency basis, compared to the prior-year quarter. The
reduction in operating expenses reflects the continued expense
optimization efforts from reduced staffing levels through normal
attrition, reduced store hours and other store-level cost saving
initiatives.
- Segment pre-tax operating margin
was 19% for the first quarter of 2021 (also 19% on a constant
currency basis) compared to 21% in the prior-year quarter.
Liquidity and Shareholder Returns
- The Company
generated $214 million in cash flow from operations and $276
million in adjusted free cash flow during the trailing twelve
months ended March 31, 2021 compared to $237 million of cash flow
from operations and $238 million of adjusted free cash flow during
the same prior-year period.
- Utilizing strong
first quarter cash flows, the Company was able to reduce
outstanding debt by $79 million during the quarter. The Company’s
strong liquidity position includes cash balances at March 31, 2021
of $55 million and ample borrowing capacity under bank lines of
credit.
- The Company also
utilized its cash flow and liquidity to invest $25 million in
acquisitions, capital expenditures, primarily for new stores, and
purchases of store real estate during the three months ended March
31, 2021.
- The Board of
Directors declared a $0.30 per share second quarter cash dividend
on common shares outstanding, which will be paid on May 28,
2021 to stockholders of record as of May 14, 2021. On an
annualized basis, the increased dividend is now $1.20 per share,
representing and 11% increase. Any future dividends are subject to
approval by the Company’s Board of Directors.
- During the first
quarter, the Company repurchased 84,000 shares of common stock at
an aggregate cost of $5 million and an average cost per share of
$59.06. The Company has $117 million remaining under its current
share repurchase authorizations. Future share repurchases are
subject to expected liquidity, acquisition opportunities, debt
covenant restrictions and other relevant factors.
2021 Outlook
Given the continued uncertainties related to
COVID-19, the Company is not currently providing earnings guidance.
However, the following factors are expected to impact operating
trends in 2021:
- Impact of COVID-19:
The extent to which COVID-19 continues to impact the Company’s
operations will depend on future developments, which remain
uncertain and cannot be predicted with confidence. This includes
the ongoing duration and severity of the pandemic, the pace of
economic recovery and the duration of governmental responses such
as stimulus programs, enhanced child tax credits and extended
unemployment benefits as seen in the U.S.
- U.S. pawn loan
demand, which had partially recovered in the second half of last
year, has dampened slightly this year, which the Company attributes
primarily to the two rounds of federal stimulus payments, with the
most recent beginning in late March ($1,400 for most eligible
people), which created significant additional short-term liquidity
for many customers. Resulting same-store pawn balances are
currently down 18% compared to the prior year (2020) and 32%
compared to more normalized 2019 levels. Daily new loan origination
activity has started to improve since early April, with same-store
new loan volumes currently down approximately 25% to 30% compared
to 2019, indicating that the impact from the latest round of
stimulus payments has peaked and is beginning to recover.While the
most recent round of U.S. stimulus payments appear to be less
impactful compared to the pandemic-related declines in the second
quarter of 2020, the recovery of domestic loan demand will still
likely be tempered for the next several months. In addition, given
the significant retail sales volume in March, retail sales could be
impacted by lower inventory levels in the near term. As a reminder,
the Company had very strong retail sales in the second quarter of
last year and more normalized pawn fee revenue at the onset of the
pandemic as consumers paid down loans and related fees.
- In Mexico, which
comprises the majority of the Company’s LatAm operations and where
there have been minimal stimulus programs, same-store pawn loans
are currently 3% above prior-year levels and 11% below this point
in 2019. Inventories, while expected to recover on a lagging basis
to pawn receivables, begin the second quarter 23% below the prior
year which will continue to impact retail sales volumes in the near
term.
- Income tax rate:
For the full year of 2021, the effective income tax rate, under
current codes in the U.S. and Mexico, is expected to range from 27%
to 28% compared to 25.8% in 2020.
- New store openings,
consolidations and repositionings: Despite the challenges presented
by COVID-19, including significant construction, utility and
permitting delays, the Company has a solid pipeline of additional
stores leased, under construction or completed and awaiting
permits. While there continue to be COVID-19 related operating
challenges in many expansion markets, the Company expects 50 to 60
new store openings in 2021. In addition, the Company continues to
believe there are significant opportunities for accretive
consolidations, expansions and/or relocations of acquired small
format stores in Mexico.
Additional Commentary and
Analysis
Mr. Wessel provided the following additional
insights on the Company’s first quarter operating results:
“Our first quarter results were encouraging,
driven primarily by the continued re-opening of the economies in
most of our markets in both the U.S. and Latin America. The
Company’s U.S. operations saw robust retail sales as more customers
visited our stores, ready to spend their stimulus payments and tax
refunds. We saw strong demand across all merchandise categories,
such as jewelry, electronics, power tools and sporting goods, and
were able to meet most of the demand with fresh, just in-time
inventories that commanded record gross margins.
“As with most consumer lenders, our loan
origination volumes are significantly improved over last year,
although balances remain below normal levels given the
unprecedented liquidity for many consumers at the current time.
While demand for consumer credit will likely take additional time
to fully rebound, we remain positive on the long-term recovery in
U.S. pawn loan demand, especially given our geographic footprint
and unique competitive positioning as a small-dollar, non-recourse
lender.
“In Latin America we are seeing a somewhat
quicker recovery, as evidenced by our end of quarter pawn
receivables in Mexico, which were up on a dollar-basis and down
only 6% in the local currency compared to last year. There is a
solid backlog of layaway deposits, up 12% sequentially in local
currency, which is a leading indicator for future retail sales.
Similar to the U.S., we have also been able to expand retail
margins and recover operating profits with improved inventory turns
and expense control.
“As we have highlighted, most of FirstCash’s key
earnings metrics and margins continue to improve compared to the
second half of 2020. With an anticipated further recovery in pawn
lending activity, our goal is to structurally maintain a
significant portion of the gross margin improvements and expense
efficiencies, which we believe will further drive the Company’s
long-term profitability.
“Store expansion is off to a fast start in 2021,
as 24 de novo stores have been opened in Latin America while two
stores have been acquired in the U.S. Over the past 15 months, the
Company has added 163 new locations in four countries and while the
impacts of the pandemic have dampened their collective contribution
to-date, we are optimistic for rapid earnings accretion from these
locations as the recovery continues.
“We remain committed to taking advantage of
additional strategic opportunities as well, primarily through
potential acquisitions in our existing markets. In addition, the
Company continues to make substantial investments in technology and
corporate infrastructure to drive collaboration, efficiencies and
further reduce operating costs. Finally, we note the ongoing
optimization of our real estate portfolio through strategic
relocations, rent optimization and purchases of the underlying real
estate in some locations. Through these activities, we have reduced
same-store rent expense in our U.S. segment by 4% this quarter
compared to the prior-year quarter and also of importance, we
control our destiny in the typically high profit locations where we
have acquired the real estate.
“As we begin the second quarter, we believe we
have ample capacity to open and acquire additional stores, fund a
further expected recovery in pawn loan demand and fund shareholder
returns,” concluded Mr. Wessel.
About FirstCash
FirstCash is the leading international operator
of pawn stores with over 2,770 retail pawn locations and 17,000
employees in 24 U.S. states, the District of Columbia and four
countries in Latin America including Mexico, Guatemala, Colombia
and El Salvador. 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 website located at
http://www.firstcash.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 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
(1) related to the COVID-19 pandemic, including the unknown
duration and severity of the COVID-19 pandemic, which may be
impacted by variants of the COVID-19 virus and the timing,
availability and efficacy of the COVID-19 vaccines in the
jurisdictions in which the Company operates, the impact of
governmental responses that have been, and may in the future be,
imposed in response to the pandemic, including stimulus programs
which could adversely impact lending demand and regulations which
could adversely affect the Company’s ability to continue to fully
operate, potential changes in consumer behavior and shopping
patterns which could impact demand for both the Company’s pawn loan
and retail products, changes in the economic conditions in the
United States and Latin America, which potentially could have an
impact on discretionary consumer spending or impact demand for pawn
loan products, and currency fluctuations, primarily involving the
Mexican peso and (2) those discussed and described in the Company’s
most recent Annual Report on Form 10-K filed with the Securities
and Exchange Commission (the “SEC”), including the risks described
in Part 1, Item 1A, “Risk Factors” thereof, and in the 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 |
|
|
March 31, |
|
|
2021 |
|
2020 |
Revenue: |
|
|
|
|
Retail merchandise sales |
|
$ |
272,042 |
|
|
$ |
296,629 |
|
Pawn loan fees |
|
115,522 |
|
|
142,115 |
|
Wholesale scrap jewelry sales |
|
20,375 |
|
|
26,371 |
|
Consumer loan and credit services fees |
|
— |
|
|
1,375 |
|
Total revenue |
|
407,939 |
|
|
466,490 |
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
Cost of retail merchandise sold |
|
157,153 |
|
|
184,695 |
|
Cost of wholesale scrap jewelry sold |
|
17,197 |
|
|
22,847 |
|
Consumer loan and credit services loss provision |
|
— |
|
|
(361 |
) |
Total cost of revenue |
|
174,350 |
|
|
207,181 |
|
|
|
|
|
|
Net revenue |
|
233,589 |
|
|
259,309 |
|
|
|
|
|
|
Expenses and other
income: |
|
|
|
|
Store operating expenses |
|
137,324 |
|
|
153,500 |
|
Administrative expenses |
|
30,999 |
|
|
32,902 |
|
Depreciation and amortization |
|
10,612 |
|
|
10,674 |
|
Interest expense |
|
7,230 |
|
|
8,418 |
|
Interest income |
|
(158 |
) |
|
(185 |
) |
Merger and acquisition expenses |
|
166 |
|
|
68 |
|
Loss on foreign exchange |
|
267 |
|
|
2,685 |
|
Write-off of certain Cash America merger related lease
intangibles |
|
878 |
|
|
3,630 |
|
Impairment of certain other assets |
|
— |
|
|
1,900 |
|
Total expenses and other income |
|
187,318 |
|
|
213,592 |
|
|
|
|
|
|
Income before income
taxes |
|
46,271 |
|
|
45,717 |
|
|
|
|
|
|
Provision for income taxes |
|
12,556 |
|
|
12,799 |
|
|
|
|
|
|
Net income |
|
$ |
33,715 |
|
|
$ |
32,918 |
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
Basic |
|
$ |
0.82 |
|
|
$ |
0.79 |
|
Diluted |
|
$ |
0.82 |
|
|
$ |
0.78 |
|
|
|
|
|
|
Weighted-average shares
outstanding: |
|
|
|
|
Basic |
|
41,034 |
|
|
41,912 |
|
Diluted |
|
41,056 |
|
|
42,007 |
|
|
|
|
|
|
Dividends declared per common
share |
|
$ |
0.27 |
|
|
$ |
0.27 |
|
Certain amounts in the consolidated statements
of income for the three months ended March 31, 2020 have been
reclassified in order to conform to the 2021 presentation.
FIRSTCASH,
INC.CONSOLIDATED BALANCE
SHEETS(unaudited, in thousands)
|
|
March 31, |
|
December 31, |
|
|
2021 |
|
2020 |
|
2020 |
ASSETS |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
54,641 |
|
|
$ |
75,464 |
|
|
$ |
65,850 |
|
Fees and service charges
receivable |
|
35,334 |
|
|
40,121 |
|
|
41,110 |
|
Pawn loans |
|
265,438 |
|
|
314,296 |
|
|
308,231 |
|
Inventories |
|
185,336 |
|
|
227,876 |
|
|
190,352 |
|
Income taxes receivable |
|
8,236 |
|
|
4,279 |
|
|
9,634 |
|
Prepaid expenses and other
current assets |
|
8,629 |
|
|
10,736 |
|
|
9,388 |
|
Total current assets |
|
557,614 |
|
|
672,772 |
|
|
624,565 |
|
|
|
|
|
|
|
|
Property and equipment,
net |
|
384,617 |
|
|
329,066 |
|
|
373,667 |
|
Operating lease right of use
asset |
|
287,418 |
|
|
280,840 |
|
|
298,957 |
|
Goodwill |
|
974,051 |
|
|
927,290 |
|
|
977,381 |
|
Intangible assets, net |
|
83,229 |
|
|
84,999 |
|
|
83,651 |
|
Other assets |
|
9,365 |
|
|
9,188 |
|
|
9,818 |
|
Deferred tax assets |
|
3,869 |
|
|
8,718 |
|
|
4,158 |
|
Total assets |
|
$ |
2,300,163 |
|
|
$ |
2,312,873 |
|
|
$ |
2,372,197 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
Accounts payable and accrued
liabilities |
|
$ |
79,575 |
|
|
$ |
74,805 |
|
|
$ |
81,917 |
|
Customer deposits |
|
38,727 |
|
|
39,728 |
|
|
34,719 |
|
Income taxes payable |
|
7,139 |
|
|
9,832 |
|
|
1,148 |
|
Lease liability, current |
|
86,529 |
|
|
82,355 |
|
|
88,622 |
|
Total current liabilities |
|
211,970 |
|
|
206,720 |
|
|
206,406 |
|
|
|
|
|
|
|
|
Revolving unsecured credit
facilities |
|
44,000 |
|
|
355,519 |
|
|
123,000 |
|
Senior unsecured notes |
|
493,108 |
|
|
296,744 |
|
|
492,916 |
|
Deferred tax liabilities |
|
73,020 |
|
|
64,728 |
|
|
71,173 |
|
Lease liability,
non-current |
|
186,972 |
|
|
181,787 |
|
|
194,887 |
|
Total liabilities |
|
1,009,070 |
|
|
1,105,498 |
|
|
1,088,382 |
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
Common stock |
|
493 |
|
|
493 |
|
|
493 |
|
Additional paid-in capital |
|
1,218,323 |
|
|
1,224,113 |
|
|
1,221,788 |
|
Retained earnings |
|
811,921 |
|
|
749,126 |
|
|
789,303 |
|
Accumulated other comprehensive loss |
|
(130,767 |
) |
|
(180,472 |
) |
|
(118,432 |
) |
Common stock held in treasury, at cost |
|
(608,877 |
) |
|
(585,885 |
) |
|
(609,337 |
) |
Total stockholders’ equity |
|
1,291,093 |
|
|
1,207,375 |
|
|
1,283,815 |
|
Total liabilities and stockholders’ equity |
|
$ |
2,300,163 |
|
|
$ |
2,312,873 |
|
|
$ |
2,372,197 |
|
Certain amounts in the consolidated balance
sheets as of March 31, 2020 have been reclassified in order to
conform to the 2021 presentation.
FIRSTCASH, INC.OPERATING
INFORMATION(UNAUDITED)
The Company’s reportable segments are as
follows:
- U.S.
operations
- Latin America operations - includes
operations in Mexico, Guatemala, Colombia and El Salvador
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.
U.S. Operations Segment Results
The following table details earning assets,
which consist of pawn loans and inventories, as well as other
earning asset metrics of the U.S. operations segment as of
March 31, 2021 as compared to March 31, 2020 (dollars in
thousands, except as otherwise noted):
|
As of March 31, |
|
Increase / |
|
2021 |
|
2020 |
|
(Decrease) |
U.S. Operations
Segment |
|
|
|
|
|
|
|
|
Earning assets: |
|
|
|
|
|
|
|
|
Pawn loans |
$ |
169,642 |
|
|
$ |
224,121 |
|
|
|
(24 |
) |
% |
Inventories |
|
128,308 |
|
|
|
162,142 |
|
|
|
(21 |
) |
% |
|
$ |
297,950 |
|
|
$ |
386,263 |
|
|
|
(23 |
) |
% |
|
|
|
|
|
|
|
|
|
Average outstanding pawn loan
amount (in ones) |
$ |
215 |
|
|
$ |
182 |
|
|
|
18 |
|
% |
|
|
|
|
|
|
|
|
|
Composition of pawn
collateral: |
|
|
|
|
|
|
|
|
General merchandise |
30 |
% |
|
31 |
% |
|
|
|
Jewelry |
70 |
% |
|
69 |
% |
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Composition of
inventories: |
|
|
|
|
|
|
|
|
General merchandise |
44 |
% |
|
42 |
% |
|
|
|
Jewelry |
56 |
% |
|
58 |
% |
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of inventory aged
greater than one year |
2 |
% |
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Inventory turns (trailing
twelve months cost of merchandise sales divided by average
inventories) |
3.3 times |
|
2.9 times |
|
|
|
FIRSTCASH, INC.OPERATING
INFORMATION (CONTINUED)(UNAUDITED)
The following table presents segment pre-tax
operating income and other operating metrics of the U.S. operations
segment for the three months ended March 31, 2021 as compared
to the three months ended March 31, 2020 (dollars in
thousands):
|
Three Months Ended |
|
|
|
|
|
March 31, |
|
|
|
2021 |
|
2020 |
|
Decrease |
U.S. Operations
Segment |
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
Retail merchandise sales |
$ |
189,957 |
|
|
$ |
195,966 |
|
|
|
|
(3 |
) |
% |
|
Pawn loan fees |
|
76,397 |
|
|
|
97,857 |
|
|
|
|
(22 |
) |
% |
|
Wholesale scrap jewelry sales |
|
9,203 |
|
|
|
15,478 |
|
|
|
|
(41 |
) |
% |
|
Consumer loan and credit services fees (1) |
|
— |
|
|
|
1,375 |
|
|
|
|
(100 |
) |
% |
|
Total revenue |
|
275,557 |
|
|
|
310,676 |
|
|
|
|
(11 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
106,530 |
|
|
|
119,529 |
|
|
|
|
(11 |
) |
% |
|
Cost of wholesale scrap jewelry sold |
|
7,513 |
|
|
|
14,006 |
|
|
|
|
(46 |
) |
% |
|
Consumer loan and credit services loss provision (1) |
|
— |
|
|
|
(361 |
) |
|
|
|
(100 |
) |
% |
|
Total cost of revenue |
|
114,043 |
|
|
|
133,174 |
|
|
|
|
(14 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
161,514 |
|
|
|
177,502 |
|
|
|
|
(9 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
|
Store operating expenses |
|
95,247 |
|
|
|
107,706 |
|
|
|
|
(12 |
) |
% |
|
Depreciation and amortization |
|
5,382 |
|
|
|
5,401 |
|
|
|
|
— |
|
% |
|
Total segment expenses |
|
100,629 |
|
|
|
113,107 |
|
|
|
|
(11 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
$ |
60,885 |
|
|
$ |
64,395 |
|
|
|
|
(5 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
Operating metrics: |
|
|
|
|
|
|
|
|
|
Retail merchandise sales margin |
44 |
% |
|
39 |
|
% |
|
|
|
|
Wholesale scrap jewelry sales margin |
18 |
% |
|
10 |
|
% |
|
|
|
|
Net revenue margin |
59 |
% |
|
57 |
|
% |
|
|
|
|
Segment pre-tax operating margin |
22 |
% |
|
21 |
|
% |
|
|
|
|
(1) Effective June 30, 2020,
the Company no longer offers an unsecured consumer loan product in
the U.S.
FIRSTCASH, INC.OPERATING
INFORMATION (CONTINUED)(UNAUDITED)
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 wholesale scrap
jewelry sales in Latin America are priced and settled in U.S.
dollars, and are not affected by foreign currency translation, as
are a small percentage of the operating and administrative expenses
in Latin America, which are billed and paid in U.S. dollars.
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:
|
|
March 31, |
|
Favorable / |
|
|
2021 |
|
2020 |
|
(Unfavorable) |
Mexican peso / U.S. dollar
exchange rate: |
|
|
|
|
|
|
|
End-of-period |
|
20.6 |
|
23.5 |
|
|
12 |
|
% |
Three months ended |
|
20.3 |
|
19.9 |
|
|
(2 |
) |
% |
|
|
|
|
|
|
|
|
Guatemalan quetzal / U.S.
dollar exchange rate: |
|
|
|
|
|
|
|
End-of-period |
|
7.7 |
|
7.7 |
|
|
— |
|
% |
Three months ended |
|
7.8 |
|
7.7 |
|
|
(1 |
) |
% |
|
|
|
|
|
|
|
|
Colombian peso / U.S. dollar
exchange rate: |
|
|
|
|
|
|
|
End-of-period |
|
3,737 |
|
4,065 |
|
|
8 |
|
% |
Three months ended |
|
3,553 |
|
3,533 |
|
|
(1 |
) |
% |
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
March 31, 2021 as compared to March 31, 2020 (dollars in
thousands, except as otherwise noted):
|
|
|
|
|
|
|
|
|
|
|
Constant Currency Basis |
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
Increase / |
|
As of March 31, |
|
Increase / |
|
2021 |
|
(Decrease) |
|
2021 |
|
2020 |
|
(Decrease) |
|
(Non-GAAP) |
|
(Non-GAAP) |
Latin America
Operations Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pawn loans |
$ |
95,796 |
|
|
$ |
90,175 |
|
|
|
6 |
|
% |
|
|
$ |
84,498 |
|
|
|
(6 |
) |
% |
|
Inventories |
|
57,028 |
|
|
|
65,734 |
|
|
|
(13 |
) |
% |
|
|
50,324 |
|
|
|
(23 |
) |
% |
|
|
$ |
152,824 |
|
|
$ |
155,909 |
|
|
|
(2 |
) |
% |
|
|
$ |
134,822 |
|
|
|
(14 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average outstanding pawn loan
amount (in ones) |
$ |
76 |
|
|
$ |
56 |
|
|
|
36 |
|
% |
|
|
$ |
67 |
|
|
|
20 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of pawn
collateral: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General merchandise |
66 |
% |
|
70 |
% |
|
|
|
|
|
|
|
|
|
|
Jewelry |
34 |
% |
|
30 |
% |
|
|
|
|
|
|
|
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of
inventories: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General merchandise |
58 |
% |
|
62 |
% |
|
|
|
|
|
|
|
|
|
|
Jewelry |
42 |
% |
|
38 |
% |
|
|
|
|
|
|
|
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of inventory aged
greater than one year |
2 |
% |
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory turns (trailing
twelve months cost of merchandise sales divided by average
inventories) |
4.4 times |
|
3.9 times |
|
|
|
|
|
|
|
|
|
|
FIRSTCASH, INC.OPERATING
INFORMATION (CONTINUED)(UNAUDITED)
The following table presents segment pre-tax
operating income and other operating metrics of the Latin America
operations segment for the three months ended March 31, 2021
as compared to the three months ended March 31, 2020 (dollars
in thousands):
|
|
|
|
|
|
|
|
|
|
|
Constant Currency Basis |
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
|
|
|
|
|
|
|
|
|
Ended |
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
March 31, |
|
Increase / |
|
|
March 31, |
|
Increase / |
|
2021 |
|
(Decrease) |
|
|
2021 |
|
|
2020 |
|
(Decrease) |
|
(Non-GAAP) |
|
(Non-GAAP) |
Latin America
Operations Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail merchandise sales |
|
$ |
82,085 |
|
|
|
$ |
100,663 |
|
|
|
(18 |
) |
% |
|
|
$ |
83,937 |
|
|
|
(17 |
) |
% |
|
Pawn loan fees |
|
39,125 |
|
|
|
44,258 |
|
|
|
(12 |
) |
% |
|
|
40,010 |
|
|
|
(10 |
) |
% |
|
Wholesale scrap jewelry sales |
|
11,172 |
|
|
|
10,893 |
|
|
|
3 |
|
% |
|
|
11,172 |
|
|
|
3 |
|
% |
|
Total revenue |
|
132,382 |
|
|
|
155,814 |
|
|
|
(15 |
) |
% |
|
|
135,119 |
|
|
|
(13 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
50,623 |
|
|
|
65,166 |
|
|
|
(22 |
) |
% |
|
|
51,763 |
|
|
|
(21 |
) |
% |
|
Cost of wholesale scrap jewelry sold |
|
9,684 |
|
|
|
8,841 |
|
|
|
10 |
|
% |
|
|
9,902 |
|
|
|
12 |
|
% |
|
Total cost of revenue |
|
60,307 |
|
|
|
74,007 |
|
|
|
(19 |
) |
% |
|
|
61,665 |
|
|
|
(17 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
72,075 |
|
|
|
81,807 |
|
|
|
(12 |
) |
% |
|
|
73,454 |
|
|
|
(10 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Store operating expenses |
|
42,077 |
|
|
|
45,794 |
|
|
|
(8 |
) |
% |
|
|
42,960 |
|
|
|
(6 |
) |
% |
|
Depreciation and amortization |
|
4,263 |
|
|
|
4,063 |
|
|
|
5 |
|
% |
|
|
4,350 |
|
|
|
7 |
|
% |
|
Total segment expenses |
|
46,340 |
|
|
|
49,857 |
|
|
|
(7 |
) |
% |
|
|
47,310 |
|
|
|
(5 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
|
$ |
25,735 |
|
|
|
$ |
31,950 |
|
|
|
(19 |
) |
% |
|
|
$ |
26,144 |
|
|
|
(18 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail merchandise sales margin |
38 |
% |
|
35 |
% |
|
|
|
|
38 |
% |
|
|
|
|
Wholesale scrap jewelry sales margin |
13 |
% |
|
19 |
% |
|
|
|
|
11 |
% |
|
|
|
|
Net revenue margin |
54 |
% |
|
53 |
% |
|
|
|
|
54 |
% |
|
|
|
|
Segment pre-tax operating margin |
19 |
% |
|
21 |
% |
|
|
|
|
19 |
% |
|
|
|
|
FIRSTCASH, INC.OPERATING
INFORMATION (CONTINUED)(UNAUDITED)
Consolidated Results of Operations
The following table reconciles pre-tax operating
income of the Company’s U.S. operations segment and Latin America
operations segment discussed above to consolidated net income (in
thousands):
|
Three Months Ended |
|
March 31, |
|
2021 |
|
2020 |
Consolidated Results
of Operations |
|
|
|
Segment pre-tax operating
income: |
|
|
|
U.S. operations |
$ |
60,885 |
|
|
|
$ |
64,395 |
|
|
Latin America operations |
25,735 |
|
|
|
31,950 |
|
|
Consolidated segment pre-tax operating income |
86,620 |
|
|
|
96,345 |
|
|
|
|
|
|
Corporate expenses and other
income: |
|
|
|
Administrative expenses |
30,999 |
|
|
|
32,902 |
|
|
Depreciation and amortization |
967 |
|
|
|
1,210 |
|
|
Interest expense |
7,230 |
|
|
|
8,418 |
|
|
Interest income |
(158 |
) |
|
|
(185 |
) |
|
Merger and acquisition expenses |
166 |
|
|
|
68 |
|
|
Loss on foreign exchange |
267 |
|
|
|
2,685 |
|
|
Write-off of certain Cash America merger related lease
intangibles |
878 |
|
|
|
3,630 |
|
|
Impairment of certain other assets |
— |
|
|
|
1,900 |
|
|
Total corporate expenses and other income |
40,349 |
|
|
|
50,628 |
|
|
|
|
|
|
Income before income
taxes |
46,271 |
|
|
|
45,717 |
|
|
|
|
|
|
Provision for income taxes |
12,556 |
|
|
|
12,799 |
|
|
|
|
|
|
Net income |
$ |
33,715 |
|
|
|
$ |
32,918 |
|
|
FIRSTCASH, INC.STORE
COUNT ACTIVITY
The following table details store count
activity:
|
|
Three Months Ended March 31, 2021 |
|
|
U.S. |
|
Latin America |
|
|
|
|
Operations Segment |
|
Operations Segment |
|
Total Locations |
Total locations, beginning of period |
|
1,046 |
|
|
1,702 |
|
|
2,748 |
|
New locations opened |
|
— |
|
|
24 |
|
|
24 |
|
Locations acquired |
|
2 |
|
|
— |
|
|
2 |
|
Consolidation of existing pawn locations (1) |
|
(2 |
) |
|
(1 |
) |
|
(3 |
) |
Total locations, end of period |
|
1,046 |
|
|
1,725 |
|
|
2,771 |
|
(1) Store consolidations were
primarily acquired locations over the past four years which have
been combined with overlapping stores and for which the Company
expects to maintain a significant portion of the acquired customer
base in the consolidated location.
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
and constant currency results 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 under the 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 acquisition expenses
to allow more accurate comparisons of the financial results to
prior periods. In addition, the Company does not consider these
merger and 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.
Merger and 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 resulting 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.
In conjunction with the Cash America merger in
2016, the Company recorded certain lease intangibles related to
above or below market lease liabilities of Cash America which are
included in the operating lease right of use asset on the
consolidated balance sheets. As the Company continues to
opportunistically purchase real estate from landlords at certain
Cash America stores, the associated lease intangible, if any, is
written-off and gain or loss is recognized. The Company has
adjusted the applicable financial measures to exclude these gains
or losses given the variability in size and timing of these
transactions and because they are non-cash, non-operating gains or
losses. The Company believes this improves comparability of
operating results for current periods presented with prior
periods.
FIRSTCASH,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
(CONTINUED)(UNAUDITED)
Adjusted Net Income and Adjusted Diluted
Earnings Per Share
Management believes the presentation of adjusted
net income and adjusted diluted earnings per share 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 March 31, |
|
2021 |
|
2020 |
|
In Thousands |
|
Per Share |
|
In Thousands |
|
Per Share |
Net income and diluted earnings per share, as reported |
$ |
33,715 |
|
|
$ |
0.82 |
|
|
$ |
32,918 |
|
|
$ |
0.78 |
|
Adjustments, net of tax: |
|
|
|
|
|
|
|
Merger and acquisition expenses |
116 |
|
|
— |
|
|
50 |
|
|
— |
|
Non-cash foreign currency loss related to lease liability |
421 |
|
|
0.01 |
|
|
3,069 |
|
|
0.07 |
|
Non-cash write-off of certain Cash America merger related lease
intangibles |
676 |
|
|
0.02 |
|
|
2,795 |
|
|
0.07 |
|
Non-cash impairment of certain other assets (1) |
— |
|
|
— |
|
|
1,463 |
|
|
0.04 |
|
Adjusted net income and diluted earnings per share |
$ |
34,928 |
|
|
$ |
0.85 |
|
|
$ |
40,295 |
|
|
$ |
0.96 |
|
(1) Impairment related to a
non-operating asset in which the Company determined that an other
than temporary impairment existed as of March 31, 2020.The
following table provides 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 March 31, |
|
2021 |
|
2020 |
|
Pre-tax |
|
Tax |
|
After-tax |
|
Pre-tax |
|
Tax |
|
After-tax |
Merger and acquisition expenses |
$ |
166 |
|
|
$ |
50 |
|
|
$ |
116 |
|
|
$ |
68 |
|
|
$ |
18 |
|
|
$ |
50 |
|
Non-cash foreign currency loss related to lease liability |
602 |
|
|
181 |
|
|
421 |
|
|
4,384 |
|
|
1,315 |
|
|
3,069 |
|
Non-cash write-off of certain Cash America merger related lease
intangibles |
878 |
|
|
202 |
|
|
676 |
|
|
3,630 |
|
|
835 |
|
|
2,795 |
|
Non-cash impairment of certain other assets |
— |
|
|
— |
|
|
— |
|
|
1,900 |
|
|
437 |
|
|
1,463 |
|
Total adjustments |
$ |
1,646 |
|
|
$ |
433 |
|
|
$ |
1,213 |
|
|
$ |
9,982 |
|
|
$ |
2,605 |
|
|
$ |
7,377 |
|
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 |
|
Months Ended |
|
|
March 31, |
|
March 31, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Net income |
|
$ |
33,715 |
|
|
$ |
32,918 |
|
|
$ |
107,376 |
|
|
$ |
154,881 |
|
Income taxes |
|
|
12,556 |
|
|
|
12,799 |
|
|
|
36,877 |
|
|
|
56,604 |
|
Depreciation and amortization |
|
|
10,612 |
|
|
|
10,674 |
|
|
|
42,043 |
|
|
|
42,704 |
|
Interest expense |
|
|
7,230 |
|
|
|
8,418 |
|
|
|
28,156 |
|
|
|
34,083 |
|
Interest income |
|
|
(158 |
) |
|
|
(185 |
) |
|
|
(1,513 |
) |
|
|
(1,036 |
) |
EBITDA |
|
|
63,955 |
|
|
|
64,624 |
|
|
|
212,939 |
|
|
|
287,236 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Merger and acquisition expenses |
|
|
166 |
|
|
|
68 |
|
|
|
1,414 |
|
|
|
1,685 |
|
Non-cash foreign currency loss (gain) related to lease
liability |
|
|
602 |
|
|
|
4,384 |
|
|
|
(2,533 |
) |
|
|
3,791 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
11,737 |
|
|
|
— |
|
Non-cash write-off of certain Cash America merger related lease
intangibles |
|
|
878 |
|
|
|
3,630 |
|
|
|
4,303 |
|
|
|
3,630 |
|
Non-cash impairment of certain other assets |
|
|
— |
|
|
|
1,900 |
|
|
|
— |
|
|
|
1,900 |
|
Consumer lending wind-down costs and asset impairments |
|
|
— |
|
|
|
— |
|
|
|
109 |
|
|
|
3,454 |
|
Adjusted EBITDA |
|
$ |
65,601 |
|
|
$ |
74,606 |
|
|
$ |
227,969 |
|
|
$ |
301,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt ratio
calculation: |
|
|
|
|
|
|
|
|
|
|
|
|
Total debt (outstanding principal) |
|
|
|
|
|
|
|
$ |
544,000 |
|
|
$ |
655,519 |
|
Less: cash and cash equivalents |
|
|
|
|
|
|
|
|
(54,641 |
) |
|
|
(75,464 |
) |
Net debt |
|
|
|
|
|
|
|
$ |
489,359 |
|
|
$ |
580,055 |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
$ |
227,969 |
|
|
$ |
301,696 |
|
Net debt ratio (net debt
divided by adjusted EBITDA) |
|
|
|
|
|
|
|
2.1 : 1 |
|
|
1.9 : 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 loan
receivables, 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 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):
|
|
|
|
|
|
Trailing Twelve |
|
|
Three Months Ended |
|
Months Ended |
|
|
March 31, |
|
March 31, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Cash flow from operating activities |
|
$ |
69,174 |
|
|
$ |
77,385 |
|
|
$ |
214,053 |
|
|
$ |
237,284 |
|
Cash flow from investing
activities: |
|
|
|
|
|
|
|
|
Loan receivables, net (1) |
|
42,394 |
|
|
52,279 |
|
|
97,123 |
|
|
44,469 |
|
Purchases of furniture, fixtures, equipment and improvements |
|
(9,491 |
) |
|
(10,581 |
) |
|
(36,453 |
) |
|
(45,234 |
) |
Free cash flow |
|
102,077 |
|
|
119,083 |
|
|
274,723 |
|
|
236,519 |
|
Merger and acquisition expenses paid, net of tax benefit |
|
116 |
|
|
50 |
|
|
1,057 |
|
|
1,222 |
|
Adjusted free cash flow |
|
$ |
102,193 |
|
|
$ |
119,133 |
|
|
$ |
275,780 |
|
|
$ |
237,741 |
|
(1) Includes the funding of new
loans net of cash repayments and recovery of principal through the
sale of inventories acquired from forfeiture of pawn
collateral.
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 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. 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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