FirstCash, Inc. (the “Company”) (Nasdaq: FCFS), the leading
international operator of over 2,800 retail pawn stores in the U.S.
and Latin America, today announced that it has entered into a
definitive agreement to acquire American First Finance, Inc.
(“American First Finance” or “AFF”), a rapidly growing,
technology-driven virtual lease-to-own (“LTO”) and retail finance
provider focused on underserved, non-prime customers. Under the
terms of the agreement, the total consideration payable at closing
is valued at approximately $1.17 billion, based on FirstCash’s
closing stock price on October 26, 2021, consisting of
approximately 8.05 million shares of common stock and $406 million
in cash, subject to a net debt adjustment. Up to an additional $300
million of consideration is payable in the event AFF achieves
certain performance targets through the first half of 2023.
The addition of American First Finance launches FirstCash into
the large and growing point-of-sale (“POS”) and buy now pay later
payment space, which is estimated to have a $600 billion total
addressable market1. AFF is the fourth largest provider of POS
payment solutions to underserved retail customers in the U.S. with
significant scale. AFF serves customers through its differentiated
omnichannel strategy, utilizing sophisticated underwriting models
and its e-commerce capabilities.
Rick Wessel, FirstCash Chief Executive Officer and Vice-Chairman
of the Board stated, “Since our founding more than 30 years ago and
through the merger of First Cash and Cash America in 2016, we have
successfully executed on our growth strategy and established
FirstCash as a leading retailer and provider of financial services
to underserved consumers, while delivering significant value to
shareholders. Building on the complementary strengths of FirstCash
and American First Finance, this transaction diversifies us beyond
our core pawn business with the addition of a fast-growing segment
that significantly expands our customer base and introduces a
scalable, technology-driven product set into our organization.”
Mr. Wessel continued, “With the tremendous growth in the retail
POS finance and buy now pay later space, AFF is an ideal partner
for FirstCash, bringing a highly profitable and scaled platform
with industry leading LTO and retail finance capabilities, a large
and highly reputable merchant base and an experienced management
team. Working with American First Finance, we believe we are well
positioned to drive further expansion in this large and growing
addressable market. In addition, we believe there are opportunities
to utilize American First Finance’s platform to bring flexible
payment options to our pawn stores to drive even faster inventory
turns and supplement our existing retail layaway product. We are
excited to welcome AFF’s talented team and look forward to the
opportunities ahead to serve more customers than ever.”
Doug Rippel, Chairman and Founder of American First Finance
stated, “When I founded AFF in 2013, I set out to provide millions
of consumers without pristine credit with flexible payment
solutions to acquire durable goods and services, and I am
incredibly proud of what we’ve built. FirstCash shares our vision
of providing retail financing alternatives to underserved
customers, and with its strong operational track record, we are
confident that AFF will be even better positioned to grow its
customer and merchant base and continue supporting their needs. I
look forward to being a significant shareholder and joining the
FirstCash Board of Directors to help guide our combined company
going forward.”
Compelling Strategic and Financial Benefits
- Facilitates FirstCash’s Entrance into Large and Growing
POS Payments Market. Today, retail POS financing is one of
the fastest growing portions of the financial services sector.
FirstCash has a proven track record in retail-based operations
focused on underserved consumers, and through this transaction with
AFF, will become a leader in the highly complementary POS payments
space focused on similar customers. Today, AFF supports a
nationwide network of more than 6,500 active merchant partner
stores and e-commerce platforms, generating growth opportunities
and incremental sales to consumers who would not have qualified for
financing offers typically provided by these merchants. It has
established significant presence with merchant partners focused on
furniture and mattresses, appliances, jewelry, electronics and
automotive products and repair services, among others. AFF has seen
rapid growth in its invoice volume with merchant partners, growing
from less than $350 million in 2019 to an estimated $800 million in
2021.
- Expanded Product Offerings Enhancing FirstCash’s Core
Pawn Business. With AFF, FirstCash can provide flexible
payment options to retail customers in its pawn locations which
will provide a new source of revenue. Specifically, AFF’s LTO
platform will enhance options for customers beyond FirstCash’s
existing layaway program by allowing them to take home leased
merchandise immediately. Over the longer term, FirstCash expects to
explore opportunities for potential LTO and retail finance products
in Latin America. Additionally, for all AFF LTO customers who wish
to return leased merchandise, FirstCash can accept these items at
one of its 1,087 U.S. pawn locations across 25 states and the
District of Columbia.
- Leverages Integrated Technology, Data, e-Commerce and
Mobile Capabilities to Accelerate Omnichannel Strategy.
AFF’s fully integrated technology platform is easily incorporated
into its merchant partners’ systems in-cart checkout platforms and
more broadly online as well as for mobile devices. With the
addition of AFF’s enhanced technology, data and e-commerce
capabilities, FirstCash will be well positioned to capitalize on
growth opportunities in both existing and new product and service
categories. In addition, AFF will also support FirstCash’s efforts
to integrate digital payment options for pawn customers to provide
greater convenience and operational efficiencies.
- Provides Significant Revenue and Earnings Growth
Opportunity. AFF generated revenues of approximately $350
million in 2020 with estimated revenues of over $600 million and
over $800 million in 2021 and 2022, respectively. AFF projects
adjusted EBITDA for 2022 between $120 million and $140
million.
- Creates Opportunity for Immediate Adjusted EPS and
Adjusted EBITDA Accretion. The transaction is expected to
be approximately 15% accretive to adjusted earnings per share in
2022, with further accretion expected in 20232. Adjusted EBITDA
accretion is projected to be approximately 30% in 2022.
- Generates Strong Cash Flow to Support Balanced Capital
Allocation Plans, Including Shareholder Returns. FirstCash
expects to continue generating significant free cash flows and will
remain focused on long-term shareholder returns through further
investment in its core domestic and international pawn business,
while also accelerating AFF’s growth. FirstCash expects to maintain
its current dividend policy and to opportunistically repurchase
shares under its existing authorization. FirstCash remains
committed to maintaining a solid balance sheet and its strong and
stable credit ratings.
Terms of Acquisition and New Parent Company
Formation
Under the terms of the agreement, FirstCash will acquire 100% of
the outstanding equity interests of American First Finance, for a
consideration at closing consisting of approximately 8.05 million
shares of common stock and $406 million in cash, subject to
adjustment for AFF’s net debt at closing and certain other items.
In addition to the closing purchase price, as noted above, the
seller has the potential to receive up to an additional $300
million pursuant to an earnout if AFF meets certain adjusted EBITDA
targets through the first half of 2023.
As part of the transaction, FirstCash will form a new parent
company, which will assume FirstCash’s listing on the Nasdaq and
maintain the “FCFS” ticker symbol. At closing, the existing shares
of FirstCash stock will automatically convert on a one-for-one
basis into shares of common stock of the new FirstCash parent
company. Upon completion of the transaction, Mr. Rippel and his
affiliates will control approximately 16.6% of the outstanding
shares of the new FirstCash parent company and existing FirstCash
shareholders will control the remaining 83.4%. At closing, Mr.
Rippel will also be appointed to the Board of Directors of the new
FirstCash parent company.
Following the close of the transaction, AFF will operate as a
separate Dallas-based business unit within FirstCash led by Howard
Hambleton, AFF’s President and Chief Executive Officer, and the
rest of its current management team.
The transaction has been unanimously approved by FirstCash’s
Board of Directors and is expected to close in late 2021 or early
first quarter of 2022, subject to the satisfaction of customary
closing conditions and receipt of regulatory approvals, including
antitrust approvals.
The cash portion of the transaction will be funded through a
combination of cash on hand and debt financing.
Conference Call
FirstCash and AFF will host a conference call today at 8:30 a.m.
Eastern Time (7:30 a.m. Central Time) to discuss the transaction.
The live webcast can be accessed at
https://investors.firstcash.com/. The webcast can also be accessed
by dialing 877-876-9176, (U.S. / Canada) or 785-424-1670
(International) and giving the Conference ID: 5723421. A replay of
the call will be available by dialing 877-876-9176, (U.S. / Canada)
or 785-424-1670 (International) and giving the Conference ID:
5723421.
Presentation and Infographic
Associated presentation materials and an infographic regarding
the transaction will be available on the investor relations section
of FirstCash’s website at https://investors.firstcash.com/.
Advisors
Jefferies LLC is acting as lead financial advisor to FirstCash,
with Comstock Capital & Advisory Group acting as additional
financial advisor and Alston & Bird acting as legal advisor.
Stephens Inc. is acting as financial advisor to AFF and King &
Spalding LLP is acting as legal advisor.
About FirstCash
FirstCash is the leading international operator of pawn stores
with over 2,800 retail pawn locations and 16,000 employees in 25
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.
About American First Finance
American First Finance (“AFF”) is a leading technology-driven
point-of-sale payments platform focused on serving credit
constrained consumers. Founded in 2013, AFF established itself as
an innovative retail finance provider with differentiated products
that offer consumers payment flexibility across marketplaces.
Today, AFF’s payment solutions are available across 26 verticals
with providers of both consumer goods and services using either
AFF’s lease-to-own solution, a merchant-based retail installment
sales agreement, or a bank-issued loan. As one of the four largest
true omni-channel providers of “no credit required” payment
options, AFF supports a nationwide network of more than 6,500
active merchant partners with seamless experiences in-store,
online, in-cart and on mobile devices. The company has established
significant presence generating more than $1.9 billion in
originations and sales for its merchant partners since inception.
The company serves local, regional, and national merchants in
furniture, appliances, electronics, automotive repair, tire &
wheel, wireless, jewelry, cosmetic, and dental, among other
verticals.
For additional information regarding AFF and the services it
provides, visit AFF’s website located at
http://www.americanfirstfinance.com.
Cautionary Statement Regarding Forward-Looking
Statements
This release contains “forward-looking statements” (as defined
in the Private Securities Litigation Reform Act of 1995) regarding,
among other things, the acquisition by FirstCash of AFF and future
events or the future financial performance of FirstCash and AFF.
Words such as “anticipate,” “expect,” “project,” “intend,”
“believe,” “will,” “estimates,” “may,” “could,” “should” and words
and terms of similar substance used in connection with any
discussion of future plans, actions or events identify
forward-looking statements. The closing of the acquisition is
subject to regulatory approvals and other customary closing
conditions. There is no assurance that such conditions will be met
or that the acquisition will be consummated within the expected
time frame, or at all.
Forward-looking statements relating to the acquisition include,
but are not limited to: statements about the benefits of the
acquisition, including anticipated growth of AFF’s business,
certain synergies and future financial and operating results;
potential financing for the acquisition; FirstCash’s plans,
objectives, expectations, projections and intentions; the expected
timing of completion of the acquisition; and other statements
relating to the transaction that are not historical facts.
Forward-looking statements are based on information currently
available to FirstCash and involve estimates, expectations and
projections. Investors are cautioned that all such forward-looking
statements are subject to risks and uncertainties, and important
factors could cause actual events or results to differ materially
from those indicated by such forward-looking statements. With
respect to the proposed acquisition, these risks, uncertainties and
factors include, but are not limited to: the risk that FirstCash or
AFF may be unable to obtain governmental and regulatory approvals
required for the transaction, or that required governmental and
regulatory approvals may delay the transaction or result in the
imposition of conditions that could reduce the anticipated benefits
from the acquisition or cause the parties to abandon the
acquisition; the risk that FirstCash may not be able to finance the
acquisition on favorable terms, if at all; the length of time
necessary to consummate the acquisition, which may be longer than
anticipated for various reasons; the risk that AFF will not be
integrated successfully; the risk that the cost savings, synergies
and growth from the acquisition may not be fully realized or may
take longer to realize than expected; the diversion of management
time on transaction-related issues; and the risk that costs
associated with the integration of the businesses are higher than
anticipated; risks related to Mr. Rippel’s and his Affiliates
future ownership of approximately 16.6% of New Parent’s outstanding
stock after closing and the impact of future sales of such stock by
Rippel following the closing.
Furthermore, if the acquisition is consummated, FirstCash will
be subject to additional risks and uncertainties resulting from its
ownership of AFF, including, but not limited to: inherent risks
resulting from FirstCash’s entry into the line of businesses
currently conducted by AFF; risks related to the extensive
regulatory regimes that the AFF business is subject to and the
heightened effect of future regulatory or legislative actions,
including at the state level, on AFF and the effect of compliance
with enforcement actions, orders or agreements issued by applicable
regulators; risks related to AFF’s underwriting practices, loan
loss provision and the fact that AFF could experience credit losses
significantly higher than historic losses or its loan loss
provision; increased competition from other entities offering “buy
now, pay later” products, including larger financial institutions,
retailers, internet-based lenders and other entities offering
similar financial services as AFF; decrease in demand for AFF’s
products and services due to changes in the general economic
environment, or social or political conditions; the potential
impact of the announcement or consummation of the acquisition on
relationships with merchants, AFF’s bank partner, management team
and other employees; risk related to the ongoing COVID-19 pandemic,
including government responses thereto such as stimulus programs
which could impact demand for AFF’s products; risks related to
supply chain disruptions impacting the merchants with which AFF
does business and the impact that such disruptions could have on
the demand for AFF’s products; risks related to any current or
future litigation proceedings; the ability to attract new customers
and merchants and retain existing customers and merchants in the
manner anticipated; risks related to AFF’s merchant concentration;
the ability to hire and retain key personnel; reliance on existing
information technology systems; ability to protect intellectual
property rights; impact of security breaches, cyber-attacks or
fraudulent activity on AFF’s operations and reputations; the risks
associated with assumptions the parties make in connection with the
parties’ critical accounting estimates and legal proceedings; and
the potential of economic downturn or effects of tax assessments or
tax positions taken, risks related to goodwill and other intangible
asset impairment, tax adjustments, anticipated tax rates, or other
regulatory compliance costs.
Additional information concerning other risk factors is also
contained in FirstCash’s most recently filed Annual Reports on Form
10-K, subsequent Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and other Securities and Exchange Commission (“SEC”)
filings.
Many of these risks, uncertainties and assumptions are beyond
FirstCash’s ability to control or predict. Because of these risks,
uncertainties and assumptions, you should not place undue reliance
on these forward-looking statements. Furthermore, forward-looking
statements speak only as of the information currently available to
the parties on the date they are made, and FirstCash does not
undertakes any obligation to update publicly or revise any
forward-looking statements to reflect events or circumstances that
may arise after the date of this communication. FirstCash does not
give any assurance (1) that either FirstCash or AFF will achieve
its expectations, or (2) concerning any result or the timing
thereof. All subsequent written and oral forward-looking statements
concerning FirstCash, AFF, the acquisition or other matters and
attributable to FirstCash, AFF or any person acting on their behalf
are expressly qualified in their entirety by the cautionary
statements above.
Contacts for FirstCash
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
Aaron Palash or Kara SperryJoele Frank, Wilkinson Brimmer
Katcher212-355-4449
______________________________
1 Jefferies research estimate for Buy Now Pay Later addressable
market; report dated May 26, 20212 Adjusted EPS accretion excludes
amortization of acquisition related intangible assets
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