FirstCash Reports Fourth Quarter and Full-Year Earnings Results; Declares Quarterly Cash Dividend
As previously announced on
Mr.
This release contains adjusted earnings measures, which exclude certain non-operating 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 |
||||||||||||
As Reported (GAAP) | Adjusted (Non-GAAP) | |||||||||||
In thousands, except per share amounts | 2021 | 2020 | 2021 | 2020 | ||||||||
Revenue | $ | 501,774 | $ | 392,158 | $ | 501,774 | $ | 392,158 | ||||
Net income | $ | 29,371 | $ | 32,726 | $ | 63,472 | $ | 34,532 | ||||
Diluted earnings per share | $ | 0.70 | $ | 0.79 | $ | 1.52 | $ | 0.84 | ||||
EBITDA (non-GAAP measure) | $ | 60,026 | $ | 60,848 | $ | 102,289 | $ | 62,105 | ||||
Weighted-average diluted shares | 41,720 | 41,331 | 41,720 | 41,331 |
Twelve Months Ended |
||||||||||||
As Reported (GAAP) | Adjusted (Non-GAAP) | |||||||||||
In thousands, except per share amounts | 2021 | 2020 | 2021 | 2020 | ||||||||
Revenue | $ | 1,698,965 | $ | 1,631,284 | $ | 1,698,965 | $ | 1,631,284 | ||||
Net income | $ | 124,909 | $ | 106,579 | $ | 161,479 | $ | 125,153 | ||||
Diluted earnings per share | $ | 3.04 | $ | 2.56 | $ | 3.94 | $ | 3.01 | ||||
EBITDA (non-GAAP measure) | $ | 244,098 | $ | 213,608 | $ | 289,631 | $ | 236,974 | ||||
Weighted-average diluted shares | 41,024 | 41,600 | 41,024 | 41,600 |
Consolidated Earnings Highlights
- Diluted earnings per share for the fourth quarter decreased 11% on a GAAP basis primarily due to non-recurring AFF transaction costs and other purchase accounting impacts related to the acquisition. Adjusted non-GAAP earnings per share increased 81% compared to the prior-year quarter.
- For the full year of 2021, diluted earnings per share increased 19% on a GAAP basis and increased 31% on an adjusted non-GAAP basis compared to the prior year.
- While EBITDA for the fourth quarter decreased 1% compared to the prior-year quarter, reflective of non-recurring AFF transaction and purchase accounting impacts, adjusted EBITDA increased 65% compared to the prior-year quarter. For the full year, EBITDA increased 14% while adjusted EBITDA increased 22% compared to the prior year. Importantly, fourth quarter 2021 adjusted EBITDA was up 14% over the fourth quarter two years ago in 2019, which was the last pre-pandemic comparative period. EBITDA and adjusted EBITDA are non-GAAP financial measures.
- The strength in revenue and adjusted earnings growth in the fourth quarter of 2021 was driven primarily by increased pawn receivables and inventories, leading to significant growth in revenues and profitability in both the
U.S. andLatin America pawn segments versus the prior-year period:- Consolidated retail pawn merchandise sales increased 28% in the fourth quarter and gross profit from retail sales increased 22%.
- Total pawn fees increased 13% in the fourth quarter compared to the prior-year quarter.
U.S. pawn segment income for the fourth quarter was$73 million , an increase of 43% over the fourth quarter of the prior year. TheU.S. pawn operating margin improved from 21% in the fourth quarter of 2020 to 24% in the fourth quarter of 2021.Latin America pawn segment income for the fourth quarter was$36 million , an increase of 19% over the fourth quarter of the prior year and 20% on a constant currency basis. TheLatin America pawn operating margin improved to 22% in fourth quarter of 2021 compared to 21% in the prior year.
Acquisition of American First Finance
- On
December 17, 2021 , the Company completed its acquisition of AFF, a leading technology-driven retail POS payments platform primarily focused on providing lease-to-own solutions and other retail financing solutions through approximately 6,500 retail and e-commerce merchant partner locations. - AFF’s full fourth quarter results, including the period prior to the acquisition, saw strong lease-to-own and retail finance transaction volumes with the corresponding revenue growth driven by the increase in receivable balances. Reported GAAP earnings for the brief stub period from the
December 17 acquisition date throughDecember 31 included in the Company’s consolidated results reflected certain required purchase accounting entries, primarily to establish loss reserves using expected lifetime loss methodologies. On an adjusted basis, excluding purchase accounting adjustments, AFF earnings for the 15 days post closing of the acquisition were approximately$0.07 per share, net of interest and taxes.
Pawn Acquisitions and Store Opening Highlights
- On
October 18, 2021 , the Company acquired a chain of 18 pawn stores in theU.S. gulf coast region with locations in southwestFlorida ,Alabama ,Mississippi andLouisiana .FirstCash now has a total of 87 stores in the growingFlorida market, and the acquisition resulted in the addition of the Company’s first two locations inMississippi . Including this acquisition, a total of 46 U.S. pawn stores were acquired in 2021 for an aggregate purchase price of approximately$78 million . - A total of 11 de novo pawn stores were opened in
Latin America during the fourth quarter, all of which were located inMexico . - For the full year of 2021, a total of 107 stores were added, composed of 46 acquired
U.S. stores, 60 de novo stores opened in three Latin American countries and one de novo store opened in theU.S. The Company also acquired a pawn license to add a new store inLas Vegas, Nevada which it expects to open in 2022. Including this new location, the Company will have 23 stores in theLas Vegas metro area. In addition, a total of seven stores were optimally sized and strategically relocated to improved locations. - As of
December 31, 2021 , the Company operated 2,825 pawn stores, with 1,744 stores located inLatin America and 1,081 stores in theU.S. The Latin American locations include 1,656 stores inMexico , 60 stores inGuatemala , 15 stores inColombia and 13 stores inEl Salvador .
- Segment pre-tax operating income increased 43% for the fourth quarter compared to the prior-year quarter. The resulting segment pre-tax operating margin was 24% for the fourth quarter of 2021, a significant improvement over the 21% margin for the prior-year quarter.
- Pawn receivables were up 16% in total at
December 31, 2021 compared to the prior year, while same-store pawn receivables increased 13%, reflecting the continuing recovery in pawn balances from 2020 levels. Resulting pawn fees, which typically lag pawn receivables growth, were up 15% in total for the fourth quarter and up 10% on a same-store basis, as compared to the prior-year quarter. - Retail merchandise sales for the fourth quarter of 2021 increased 29% compared to the prior-year quarter. On a same-store basis, retail sales increased 24% compared to the prior-year quarter.
- Retail sales margins remained robust at 43% in the fourth quarter, reflecting 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 reduced the need for discounting. Full-year retail sales margins increased to 44% for 2021 compared to 42% in the prior year.
- Inventories increased 45% on a year-over-year basis versus the prior year’s depleted levels and are approaching normalized, pre-COVID levels on a per store basis on the higher store count. Inventories aged greater than one year decreased to 1% versus the prior-year end period of 2%.
- Operating expenses increased 6% in total and 2% on a same-store basis compared to the prior-year quarter, reflecting increased store count and increased incentive compensation expense driven by higher revenues. For the full year, operating expenses decreased 4% in total and 6% on a same-store basis compared to the prior year, reflecting expense optimization efforts from reduced staffing levels and other operating efficiency initiatives versus the prior-year period.
Note: Certain growth rates in “Latin America Pawn Segment” 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
Latin America Pawn Segment
- Segment pre-tax operating income for the fourth quarter of 2021 increased 19% (20% on a constant currency basis) over the prior-year quarter. The resulting segment pre-tax operating margin increased to 22% for the fourth quarter of 2021 (also 22% on a constant currency basis) compared to 21% in the prior-year quarter.
- Pawn receivables at
December 31, 2021 increased 4% on aU.S. dollar basis compared to the prior year and 7% on a constant currency basis. On a same-store basis, pawn receivables increased 3% on aU.S. dollar basis and 6% on a constant currency basis compared to the prior year. The Company attributes slower growth in Latin American pawn receivables in part to continued record levels of currency remittances from theU.S. - Pawn fees in the fourth quarter increased 11% in total, or 12% on a constant currency basis, as compared to the prior-year quarter. On a same-store basis, pawn fees increased 10% on a
U.S. dollar basis and 11% on a constant currency basis. For the full year, pawn fees increased 16% and 10% compared to the prior year on aU.S. dollar and constant currency basis, respectively. - Retail merchandise sales in the fourth quarter increased 25%, or 26% on a constant currency basis, compared to the prior-year quarter. Same-store retail sales increased 24% on a
U.S. dollar basis and on a constant currency basis. For the full year, retail sales increased 10% and 4% on aU.S. dollar and constant currency basis, respectively, compared to the prior year. - Retail margins were 36% in the fourth quarter of 2021 compared to 38% in 2020. For the full year, retail margins were 37% in both 2021 and 2020.
- Inventories turned 4.2 times in 2021 compared to 4.3 times in 2020, while inventories aged greater than one year decreased to 1% versus the prior-year end period of 2%.
- Same-store operating expenses increased 7% on a dollar-denominated basis and 8% on a constant currency basis, compared to the prior-year quarter as a result of lower than normal expenses in the prior year and inflationary impacts on certain expenses in the current year. For the full year, dollar-denominated and constant currency same-store operating expenses increased 6% and 1%, respectively, compared to the prior year.
Liquidity and Shareholder Returns
- In
December 2021 , the Company successfully completed an offering of$550 million of 5.625% senior unsecured notes due in 2030. The Company used the proceeds from the offering to finance the cash consideration and transaction expenses for the AFF acquisition, repay, in full, the outstanding debt under AFF’s credit facility, pay fees and expenses related to the note offering and reduce the outstanding balance on the Company’s revolving unsecured credit facility. - The Board of Directors declared a
$0.30 per share first quarter cash dividend on common shares outstanding, which will be paid onFebruary 28, 2022 to stockholders of record as ofFebruary 21, 2022 . This represents an annualized cash dividend of$1.20 per share. Any future dividends are subject to approval by the Company’s Board of Directors. - During 2021, the Company repurchased 688,000 shares of common stock at an aggregate cost of
$50 million and an average cost per share of$72.10 . The Company has$72 million remaining under its current share repurchase authorization. Future share repurchases are subject to expected liquidity, acquisition opportunities, debt covenant restrictions and other relevant factors.
2022 Outlook
The current operating environment continues to present uncertainties related to the COVID-19 pandemic and other macroeconomic factors such as supply chain issues, inflation and weaker consumer sentiment, all of which could have both positive and negative impacts on the Company’s operations. In particular, COVID related concerns, staffing constraints, supply chain delays and weather events year-to-date have impacted operations and traffic counts for many retailers, including the Company’s pawn stores and many of AFF’s retail merchant partners. While inflationary price increases typically drive increased demand for pawn transactions, its impact on retail sales in pawn stores and for AFF’s merchant partners are difficult to predict. Additionally, there are potential impacts around the
Despite these near-term uncertainties, the Company expects to achieve significant revenue and earnings growth in 2022 based on the following factors:
- Demand for pawn loans continues to improve, especially in the
U.S. , where same-store pawn receivables atJanuary 31, 2022 were up 24% over the prior year, and same-store originations inJanuary 2022 were up 38% overJanuary 2021 originations. InMexico , same-store pawn receivables atJanuary 31, 2022 are up 4% compared to balances a year ago, with originations for the month ofJanuary 2022 up 1% compared to the same month last year. - Pawn merchandise inventories are well positioned, having essentially normalized to pre-COVID levels with very limited amounts of aged inventory. The Company expects the improved inventory position to drive increased sales in 2022, although the Company’s sales thus far in 2022 have been temporarily impacted by reduced customer traffic, weather events and other COVID-related operational challenges in the Company’s pawn stores.
- The new retail POS payment solutions segment (AFF) is expected to drive significant revenue and earnings growth from its lease-to-own and retail finance products in 2022. While the Company believes that many of AFF’s retail partners faced retailing issues described above, which negatively impacted the volume of AFF’s lease-to-own and credit transactions in January, it continues to expect full year 2022 adjusted EBITDA accretion from AFF of 30% or more.
- AFF’s estimated lease and loan loss reserves reflect continued normalization to higher pre-pandemic loss rates while also considering the potential impact of reduced
U.S. tax refunds as previously noted above. As an additional point of reference for AFF’s expected 2022 results, first quarter and early second quarter results will also reflect a normal seasonal increase in loss provisioning rates for originations for the few months after the tax refund season consistent with historical lifetime loss rates under CECL accounting methodologies. - The Company expects up to 60 new store additions for the full year 2022, primarily in
Latin America , and will continue to seek and evaluate accretive pawn acquisitions across all of its existing markets. In addition, the Company continues to optimize its footprint inMexico through strategic consolidations of overlapping acquired stores. - Inflationary economic environments typically benefit the Company by driving increased customer demand for value priced products and lending services in pawn stores. Of note, over 50% of the Company’s pawn collateral and inventories are held in gold. At the same time, the Company expects to see increases in wages and other operating costs in 2022, particularly in
Mexico , where the government recently raised the federal minimum wage and increased certain other statutory employer funded benefits. - For the full year of 2022, the effective income tax rate under current tax codes in the
U.S. andLatin America is expected to range from 24.5% to 25.5%. - The current trading level for the Mexican peso to the
U.S. dollar is approximately 20.7 to 1, which is a slight headwind to the average rate in 2021 of 20.3 to 1. Each full point in the exchange rate represents an approximate$0.08 impact on earnings per share.
Additional Commentary and Analysis
“FirstCash continued to invest in the long-term growth of its pawn business through the opening and acquisition of more pawn stores in 2021. The addition of 47 U.S. stores, primarily through highly accretive acquisitions, was the highest
“Our core pawn business is well-positioned for further expected growth in 2022, driven by continued store additions and increased same-store pawn receivables and inventories. Additionally, we believe that we can maintain margin strength given our current inventory quality and freshness. Despite January’s operational challenges from COVID in most markets and weather events in certain
“Since closing the AFF transaction in December, we are rapidly integrating our senior management teams and continue to see long-term opportunities for revenue synergies and operating efficiencies across both our pawn and retail POS payment solutions platforms. More importantly, we believe in the long-term prospects for AFF’s operations to be highly accretive to the consolidated earnings and cash flows of
“We are confident in our ability to drive additional revenue and growth in 2022. Our balance sheet and cash flow generation remain strong and position us well to grow earning assets and store locations while continuing to pay dividends, purchase real estate and make stock repurchases. I would like to thank our 17,000 employees who make this all possible,” concluded
About
Forward-Looking Information
This release contains forward-looking statements about the business, financial condition and prospects of
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, risks associated with the
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands)
Three Months Ended | Twelve Months Ended | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue: | ||||||||||||||||
Retail merchandise sales | $ | 327,914 | $ | 256,507 | $ | 1,134,249 | $ | 1,075,518 | ||||||||
Pawn loan fees | 128,986 | 113,842 | 475,782 | 457,517 | ||||||||||||
Leased merchandise income | 22,720 | — | 22,720 | — | ||||||||||||
Interest and fees on finance receivables | 9,024 | 13 | 9,024 | 2,016 | ||||||||||||
Wholesale scrap jewelry sales | 13,130 | 21,796 | 57,190 | 96,233 | ||||||||||||
Total revenue | 501,774 | 392,158 | 1,698,965 | 1,631,284 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Cost of retail merchandise sold | 194,830 | 147,651 | 663,464 | 641,087 | ||||||||||||
Depreciation of leased merchandise | 12,826 | — | 12,826 | — | ||||||||||||
Provision for lease losses | 5,442 | — | 5,442 | — | ||||||||||||
Provision for loan losses (1) | 48,952 | (8 | ) | 48,952 | (488 | ) | ||||||||||
Cost of wholesale scrap jewelry sold | 11,472 | 18,524 | 49,129 | 79,546 | ||||||||||||
Total cost of revenue | 273,522 | 166,167 | 779,813 | 720,145 | ||||||||||||
Net revenue | 228,252 | 225,991 | 919,152 | 911,139 | ||||||||||||
Expenses and other income: | ||||||||||||||||
Operating expenses | 149,761 | 135,546 | 564,832 | 562,158 | ||||||||||||
Administrative expenses | 22,654 | 25,289 | 111,259 | 110,931 | ||||||||||||
Depreciation and amortization | 13,175 | 10,681 | 45,906 | 42,105 | ||||||||||||
Interest expense | 9,997 | 7,391 | 32,386 | 29,344 | ||||||||||||
Interest income | (276 | ) | (331 | ) | (696 | ) | (1,540 | ) | ||||||||
Loss (gain) on foreign exchange | 188 | (755 | ) | 436 | 884 | |||||||||||
Merger and acquisition expenses | 14,185 | 1,107 | 15,449 | 1,316 | ||||||||||||
Gain on revaluation of contingent acquisition consideration (2) | (17,871 | ) | — | (17,871 | ) | — | ||||||||||
Impairments and dispositions of certain other assets | (691 | ) | 3,956 | 949 | 10,505 | |||||||||||
Loss on extinguishment of debt | — | — | — | 11,737 | ||||||||||||
Total expenses and other income | 191,122 | 182,884 | 752,650 | 767,440 | ||||||||||||
Income before income taxes | 37,130 | 43,107 | 166,502 | 143,699 | ||||||||||||
Provision for income taxes | 7,759 | 10,381 | 41,593 | 37,120 | ||||||||||||
Net income | $ | 29,371 | $ | 32,726 | $ | 124,909 | $ | 106,579 |
Certain amounts in the consolidated statements of income for the three months and year ended
(1) Includes
(2) Gain resulting from decrease in the estimated fair value of the liability for contingent AFF purchase price consideration resulting from the increase in the Company’s stock price between the acquisition closing date of
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
2021 | 2020 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 120,046 | $ | 65,850 | ||||
Accounts receivable, net | 55,356 | 41,110 | ||||||
Pawn loans | 347,973 | 308,231 | ||||||
Finance receivables, net (1) | 181,021 | — | ||||||
Inventories | 263,311 | 190,352 | ||||||
Leased merchandise, net (1) | 143,944 | — | ||||||
Income taxes receivable | 11,139 | 9,634 | ||||||
Prepaid expenses and other current assets | 12,288 | 9,388 | ||||||
Total current assets | 1,135,078 | 624,565 | ||||||
Property and equipment, net | 462,526 | 373,667 | ||||||
Operating lease right of use asset | 306,061 | 298,957 | ||||||
1,528,233 | 977,381 | |||||||
Intangible assets, net | 388,184 | 83,651 | ||||||
Other assets | 8,531 | 9,818 | ||||||
Deferred tax assets | 5,614 | 4,158 | ||||||
Total assets | $ | 3,834,227 | $ | 2,372,197 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Accounts payable and accrued liabilities | $ | 239,519 | $ | 81,917 | ||||
Customer deposits and prepayments | 57,310 | 34,719 | ||||||
Income taxes payable | 3,387 | 1,148 | ||||||
Lease liability, current | 90,570 | 88,622 | ||||||
Total current liabilities | 390,786 | 206,406 | ||||||
Revolving unsecured credit facilities | 259,000 | 123,000 | ||||||
Senior unsecured notes | 1,033,904 | 492,916 | ||||||
Deferred tax liabilities | 125,294 | 71,173 | ||||||
Lease liability, non-current | 203,166 | 194,887 | ||||||
Other liabilities | 13,950 | — | ||||||
Total liabilities | 2,026,100 | 1,088,382 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 573 | 493 | ||||||
Additional paid-in capital | 1,724,956 | 1,221,788 | ||||||
Retained earnings | 866,679 | 789,303 | ||||||
Accumulated other comprehensive loss | (131,299 | ) | (118,432 | ) | ||||
Common stock held in treasury, at cost | (652,782 | ) | (609,337 | ) | ||||
Total stockholders’ equity | 1,808,127 | 1,283,815 | ||||||
Total liabilities and stockholders’ equity | $ | 3,834,227 | $ | 2,372,197 |
The balance sheet is subject to change as the Company finalizes the analysis of the fair value of the assets acquired and liabilities assumed as of the date of the AFF Acquisition.
(1) See reconciliation of as reported AFF earning asset balances to AFF earning asset balances adjusted to exclude the impacts of purchase accounting in the “Reconciliations of non-GAAP Financial Measures to GAAP Financial Measures” section elsewhere in this release.
OPERATING INFORMATION
(UNAUDITED)
The Company’s reportable segments are as follows:
U.S. pawnLatin America pawn- Retail POS payment solutions (AFF)
The Company provides revenues, cost of revenues, operating expenses, pre-tax operating income and earning assets by segment. Operating expenses include salary and benefit expense of pawn store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the pawn stores. Additionally, costs incurred in operating AFF have been classified as operating expenses, which include salary and benefit expense of certain operations focused departments, merchant partner incentives, bank and other payment processing charges, credit reporting costs, information technology costs, advertising costs and other operational costs incurred by AFF.
The following table details earning assets, which consist of pawn loans and inventories, as well as other earning asset metrics of the
As of |
||||||||||||
2021 | 2020 | Increase | ||||||||||
Earning assets: | ||||||||||||
Pawn loans | $ | 256,311 | $ | 220,391 | 16 | % | ||||||
Inventories | 197,486 | 136,109 | 45 | % | ||||||||
$ | 453,797 | $ | 356,500 | 27 | % | |||||||
Average outstanding pawn loan amount (in ones) | $ | 222 | $ | 198 | 12 | % | ||||||
Composition of pawn collateral: | ||||||||||||
General merchandise | 34 | % | 33 | % | ||||||||
Jewelry | 66 | % | 67 | % | ||||||||
100 | % | 100 | % | |||||||||
Composition of inventories: | ||||||||||||
General merchandise | 45 | % | 46 | % | ||||||||
Jewelry | 55 | % | 54 | % | ||||||||
100 | % | 100 | % | |||||||||
Percentage of inventory aged greater than one year | 1 | % | 2 | % | ||||||||
Inventory turnover (trailing twelve months cost of merchandise sales divided by average inventories) | 2.8 times | 3.2 times |
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
The following table presents segment pre-tax operating income and other operating metrics of the
Three Months Ended | ||||||||||||
Increase / | ||||||||||||
2021 | 2020 | (Decrease) | ||||||||||
Revenue: | ||||||||||||
Retail merchandise sales | $ | 211,906 | $ | 163,753 | 29 | % | ||||||
Pawn loan fees | 85,337 | 74,500 | 15 | % | ||||||||
Wholesale scrap jewelry sales | 6,946 | 7,678 | (10 | )% | ||||||||
Interest and fees on finance receivables (1) | — | 13 | (100 | )% | ||||||||
Total revenue | 304,189 | 245,944 | 24 | % | ||||||||
Cost of revenue: | ||||||||||||
Cost of retail merchandise sold | 120,584 | 90,075 | 34 | % | ||||||||
Cost of wholesale scrap jewelry sold | 6,208 | 6,830 | (9 | )% | ||||||||
Provision for loan losses (1) | — | (8 | ) | 100 | % | |||||||
Total cost of revenue | 126,792 | 96,897 | 31 | % | ||||||||
Net revenue | 177,397 | 149,047 | 19 | % | ||||||||
Segment expenses: | ||||||||||||
Operating expenses | 98,827 | 92,941 | 6 | % | ||||||||
Depreciation and amortization | 5,843 | 5,391 | 8 | % | ||||||||
Total segment expenses | 104,670 | 98,332 | 6 | % | ||||||||
Segment pre-tax operating income | $ | 72,727 | $ | 50,715 | 43 | % | ||||||
Operating metrics: | ||||||||||||
Retail merchandise sales margin | 43 | % | 45 | % | ||||||||
Net revenue margin | 58 | % | 61 | % | ||||||||
Segment pre-tax operating margin | 24 | % | 21 | % |
(1) Effective
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
The following table presents segment pre-tax operating income and other operating metrics of the
Twelve Months Ended | ||||||||||||
Increase / | ||||||||||||
2021 | 2020 | (Decrease) | ||||||||||
Revenue: | ||||||||||||
Retail merchandise sales | $ | 742,374 | $ | 720,281 | 3 | % | ||||||
Pawn loan fees | 305,350 | 310,437 | (2 | )% | ||||||||
Wholesale scrap jewelry sales | 27,163 | 45,405 | (40 | )% | ||||||||
Interest and fees on finance receivables (1) | — | 2,016 | (100 | )% | ||||||||
Total revenue | 1,074,887 | 1,078,139 | — | % | ||||||||
Cost of revenue: | ||||||||||||
Cost of retail merchandise sold | 416,039 | 415,938 | — | % | ||||||||
Cost of wholesale scrap jewelry sold | 22,886 | 39,584 | (42 | )% | ||||||||
Provision for loan losses (1) | — | (488 | ) | 100 | % | |||||||
Total cost of revenue | 438,925 | 455,034 | (4 | )% | ||||||||
Net revenue | 635,962 | 623,105 | 2 | % | ||||||||
Segment expenses: | ||||||||||||
Operating expenses | 380,895 | 396,627 | (4 | )% | ||||||||
Depreciation and amortization | 22,234 | 21,743 | 2 | % | ||||||||
Total segment expenses | 403,129 | 418,370 | (4 | )% | ||||||||
Segment pre-tax operating income | $ | 232,833 | $ | 204,735 | 14 | % | ||||||
Operating metrics: | ||||||||||||
Retail merchandise sales margin | 44 | % | 42 | % | ||||||||
Net revenue margin | 59 | % | 58 | % | ||||||||
Segment pre-tax operating margin | 22 | % | 19 | % |
(1) Effective
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
Latin America Pawn Segment Results
The Company’s management reviews and analyzes operating results in
The following table provides exchange rates for the Mexican peso, Guatemalan quetzal and Colombian peso for the current and prior-year periods:
Favorable / | |||||||||
2021 | 2020 | (Unfavorable) | |||||||
Mexican peso / |
|||||||||
End-of-period | 20.6 | 19.9 | (4 | )% | |||||
Three months ended | 20.7 | 20.6 | — | % | |||||
Twelve months ended | 20.3 | 21.5 | 6 | % | |||||
Guatemalan quetzal / |
|||||||||
End-of-period | 7.7 | 7.8 | 1 | % | |||||
Three months ended | 7.7 | 7.8 | 1 | % | |||||
Twelve months ended | 7.7 | 7.7 | — | % | |||||
Colombian peso / |
|||||||||
End-of-period | 3,981 | 3,433 | (16 | )% | |||||
Three months ended | 3,880 | 3,662 | (6 | )% | |||||
Twelve months ended | 3,742 | 3,693 | (1 | )% |
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
Constant Currency Basis | ||||||||||||||||||||
As of | ||||||||||||||||||||
As of |
Increase / | 2021 | Increase | |||||||||||||||||
2021 | 2020 | (Decrease) | (Non-GAAP) | (Non-GAAP) | ||||||||||||||||
Latin America Pawn Segment | ||||||||||||||||||||
Earning assets: | ||||||||||||||||||||
Pawn loans | $ | 91,662 | $ | 87,840 | 4 | % | $ | 94,420 | 7 | % | ||||||||||
Inventories | 65,825 | 54,243 | 21 | % | 67,821 | 25 | % | |||||||||||||
$ | 157,487 | $ | 142,083 | 11 | % | $ | 162,241 | 14 | % | |||||||||||
Average outstanding pawn loan amount (in ones) | $ | 77 | $ | 78 | (1 | )% | $ | 79 | 1 | % | ||||||||||
Composition of pawn collateral: | ||||||||||||||||||||
General merchandise | 67 | % | 64 | % | ||||||||||||||||
Jewelry | 33 | % | 36 | % | ||||||||||||||||
100 | % | 100 | % | |||||||||||||||||
Composition of inventories: | ||||||||||||||||||||
General merchandise | 68 | % | 56 | % | ||||||||||||||||
Jewelry | 32 | % | 44 | % | ||||||||||||||||
100 | % | 100 | % | |||||||||||||||||
Percentage of inventory aged greater than one year | 1 | % | 2 | % | ||||||||||||||||
Inventory turnover (trailing twelve months cost of merchandise sales divided by average inventories) | 4.2 times | 4.3 times |
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
The following table presents segment pre-tax operating income and other operating metrics of the
Constant Currency Basis | |||||||||||||||||||||
Three Months | |||||||||||||||||||||
Ended | |||||||||||||||||||||
Three Months Ended | Increase / | ||||||||||||||||||||
Increase / | 2021 | (Decrease) | |||||||||||||||||||
2021 | 2020 | (Decrease) | (Non-GAAP) | (Non-GAAP) | |||||||||||||||||
Latin America Pawn Segment | |||||||||||||||||||||
Revenue: | |||||||||||||||||||||
Retail merchandise sales | $ | 116,008 | $ | 92,754 | 25 | % | $ | 116,608 | 26 | % | |||||||||||
Pawn loan fees | 43,649 | 39,342 | 11 | % | 43,875 | 12 | % | ||||||||||||||
Wholesale scrap jewelry sales | 6,184 | 14,118 | (56 | )% | 6,184 | (56 | )% | ||||||||||||||
Total revenue | 165,841 | 146,214 | 13 | % | 166,667 | 14 | % | ||||||||||||||
Cost of revenue: | |||||||||||||||||||||
Cost of retail merchandise sold | 74,246 | 57,576 | 29 | % | 74,627 | 30 | % | ||||||||||||||
Cost of wholesale scrap jewelry sold | 5,264 | 11,694 | (55 | )% | 5,288 | (55 | )% | ||||||||||||||
Total cost of revenue | 79,510 | 69,270 | 15 | % | 79,915 | 15 | % | ||||||||||||||
Net revenue | 86,331 | 76,944 | 12 | % | 86,752 | 13 | % | ||||||||||||||
Segment expenses: | |||||||||||||||||||||
Operating expenses | 46,017 | 42,605 | 8 | % | 46,250 | 9 | % | ||||||||||||||
Depreciation and amortization | 4,446 | 4,248 | 5 | % | 4,474 | 5 | % | ||||||||||||||
Total segment expenses | 50,463 | 46,853 | 8 | % | 50,724 | 8 | % | ||||||||||||||
Segment pre-tax operating income | $ | 35,868 | $ | 30,091 | 19 | % | $ | 36,028 | 20 | % | |||||||||||
Operating metrics: | |||||||||||||||||||||
Retail merchandise sales margin | 36 | % | 38 | % | 36 | % | |||||||||||||||
Net revenue margin | 52 | % | 53 | % | 52 | % | |||||||||||||||
Segment pre-tax operating margin | 22 | % | 21 | % | 22 | % |
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
The following table presents segment pre-tax operating income and other operating metrics of the
Constant Currency Basis | |||||||||||||||||||||
Twelve Months | |||||||||||||||||||||
Ended | |||||||||||||||||||||
Twelve Months Ended | Increase / | ||||||||||||||||||||
Increase / | 2021 | (Decrease) | |||||||||||||||||||
2021 | 2020 | (Decrease) | (Non-GAAP) | (Non-GAAP) | |||||||||||||||||
Latin America Pawn Segment | |||||||||||||||||||||
Revenue: | |||||||||||||||||||||
Retail merchandise sales | $ | 391,875 | $ | 355,237 | 10 | % | $ | 371,033 | 4 | % | |||||||||||
Pawn loan fees | 170,432 | 147,080 | 16 | % | 161,336 | 10 | % | ||||||||||||||
Wholesale scrap jewelry sales | 30,027 | 50,828 | (41 | )% | 30,027 | (41 | )% | ||||||||||||||
Total revenue | 592,334 | 553,145 | 7 | % | 562,396 | 2 | % | ||||||||||||||
Cost of revenue: | |||||||||||||||||||||
Cost of retail merchandise sold | 247,425 | 225,149 | 10 | % | 234,308 | 4 | % | ||||||||||||||
Cost of wholesale scrap jewelry sold | 26,243 | 39,962 | (34 | )% | 24,837 | (38 | )% | ||||||||||||||
Total cost of revenue | 273,668 | 265,111 | 3 | % | 259,145 | (2 | )% | ||||||||||||||
Net revenue | 318,666 | 288,034 | 11 | % | 303,251 | 5 | % | ||||||||||||||
Segment expenses: | |||||||||||||||||||||
Operating expenses | 179,020 | 165,531 | 8 | % | 170,108 | 3 | % | ||||||||||||||
Depreciation and amortization | 17,834 | 15,816 | 13 | % | 17,005 | 8 | % | ||||||||||||||
Total segment expenses | 196,854 | 181,347 | 9 | % | 187,113 | 3 | % | ||||||||||||||
Segment pre-tax operating income | $ | 121,812 | $ | 106,687 | 14 | % | $ | 116,138 | 9 | % | |||||||||||
Operating metrics: | |||||||||||||||||||||
Retail merchandise sales margin | 37 | % | 37 | % | 37 | % | |||||||||||||||
Net revenue margin | 54 | % | 52 | % | 54 | % | |||||||||||||||
Segment pre-tax operating margin | 21 | % | 19 | % | 21 | % |
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
Retail POS Payment Solutions Segment Results
The Company completed the AFF acquisition on
As a result of purchase accounting, AFF’s as reported earning assets, consisting of leased merchandise and finance receivables, contain significant fair value adjustments. The fair value adjustments will be amortized over the life of the lease contracts and finance receivables acquired at the time of acquisition.
The following table provides a detail of leased merchandise as reported and as adjusted to exclude the impacts of purchase accounting as of
As of |
|||||||||
As Reported (GAAP) |
Adjustments | Adjusted (Non-GAAP) |
|||||||
Leased merchandise, before allowance for lease losses (1) | $ | 149,386 | $ | 53,829 | $ | 203,215 | |||
Less allowance for lease losses (2) | 5,442 | 61,526 | 66,968 | ||||||
Leased merchandise, net | $ | 143,944 | $ | (7,697 | ) | $ | 136,247 |
(1) As reported acquired leased merchandise was recorded at fair value (which includes estimates for charge-offs) in conjunction with purchase accounting. Adjustment represents the difference between the original depreciated cost and fair value of the remaining acquired leased merchandise.
(2) As reported allowance for lease losses represents the provision for lease losses for leases originated between
The following table provides a detail of finance receivables as reported and as adjusted to exclude the impacts of purchase accounting as of
As of |
|||||||||
As Reported (GAAP) |
Adjustments | Adjusted (Non-GAAP) |
|||||||
Finance receivables, before allowance for loan losses (1) | $ | 256,595 | $ | (42,657 | ) | $ | 213,938 | ||
Less allowance for loan losses | 75,574 | — | 75,574 | ||||||
Finance receivables, net | $ | 181,021 | $ | (42,657 | ) | $ | 138,364 |
(1) As reported acquired finance receivables was recorded at fair value in conjunction with purchase accounting. Adjustment represents the difference between the original amortized cost basis and fair value of the remaining acquired finance receivables.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
AFF’s as reported results of operations also contain significant purchase accounting impacts. The following table presents segment pre-tax operating income as reported and as adjusted to exclude the impacts of purchase accounting for the period from
As Reported | Adjusted | |||||||||
(GAAP) | Adjustments | (Non-GAAP) | ||||||||
Retail POS Payment Solutions Segment | ||||||||||
Revenue: | ||||||||||
Leased merchandise income | $ | 22,720 | $ | 404 | $ | 23,124 | ||||
Interest and fees on finance receivables | 9,024 | 1,708 | 10,732 | |||||||
Total revenue | 31,744 | 2,112 | 33,856 | |||||||
Cost of revenue: | ||||||||||
Depreciation of leased merchandise | 12,826 | — | 12,826 | |||||||
Provision for lease losses | 5,442 | — | 5,442 | |||||||
Provision for loan losses (1) | 48,952 | (44,250 | ) | 4,702 | ||||||
Total cost of revenue | 67,220 | (44,250 | ) | 22,970 | ||||||
Net revenue | (35,476 | ) | 46,362 | 10,886 | ||||||
Segment expenses: | ||||||||||
Operating expenses | 4,917 | — | 4,917 | |||||||
Depreciation and amortization (2) | 122 | — | 122 | |||||||
Total segment expenses | 5,039 | — | 5,039 | |||||||
Segment pre-tax operating income | $ | (40,515 | ) | $ | 46,362 | $ | 5,847 |
(1) As reported provision for loan losses includes the establishment of the initial allowance for expected lifetime credit losses for acquired finance receivables not considered purchased credit deteriorated, which is recorded as an expense in the provision for loan losses.
(2) Amortization of identified intangible assets in the AFF acquisition are considered corporate expenses and not included in segment depreciation and amortization.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
Consolidated Results of Operations
The following table reconciles pre-tax operating income of the Company’s
Three Months Ended | Twelve Months Ended | ||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
Consolidated Results of Operations | |||||||||||||||
Segment pre-tax operating income: | |||||||||||||||
$ | 72,727 | $ | 50,715 | $ | 232,833 | $ | 204,735 | ||||||||
35,868 | 30,091 | 121,812 | 106,687 | ||||||||||||
Retail POS payment solutions (1) | (40,515 | ) | — | (40,515 | ) | — | |||||||||
Consolidated segment pre-tax operating income | 68,080 | 80,806 | 314,130 | 311,422 | |||||||||||
Corporate expenses and other income: | |||||||||||||||
Administrative expenses | 22,654 | 25,289 | 111,259 | 110,931 | |||||||||||
Depreciation and amortization | 2,764 | 1,042 | 5,716 | 4,546 | |||||||||||
Interest expense | 9,997 | 7,391 | 32,386 | 29,344 | |||||||||||
Interest income | (276 | ) | (331 | ) | (696 | ) | (1,540 | ) | |||||||
Loss (gain) on foreign exchange | 188 | (755 | ) | 436 | 884 | ||||||||||
Merger and acquisition expenses | 14,185 | 1,107 | 15,449 | 1,316 | |||||||||||
Gain on revaluation of contingent acquisition consideration | (17,871 | ) | — | (17,871 | ) | — | |||||||||
Impairments and dispositions of certain other assets | (691 | ) | 3,956 | 949 | 10,505 | ||||||||||
Loss on extinguishment of debt | — | — | — | 11,737 | |||||||||||
Total corporate expenses and other income | 30,950 | 37,699 | 147,628 | 167,723 | |||||||||||
Income before income taxes | 37,130 | 43,107 | 166,502 | 143,699 | |||||||||||
Provision for income taxes | 7,759 | 10,381 | 41,593 | 37,120 | |||||||||||
Net income | $ | 29,371 | $ | 32,726 | $ | 124,909 | $ | 106,579 |
(1) Includes the results of operations for AFF for the period
PAWN STORE COUNT ACTIVITY
The following tables detail pawn store count activity:
Three Months Ended |
|||||||||
Total | |||||||||
Total locations, beginning of period | 1,069 | 1,739 | 2,808 | ||||||
New locations opened | — | 11 | 11 | ||||||
Locations acquired | 18 | — | 18 | ||||||
Consolidation of existing pawn locations (1) | (6 | ) | (6 | ) | (12 | ) | |||
Total locations, end of period | 1,081 | 1,744 | 2,825 | ||||||
Twelve Months Ended |
|||||||||
Total | |||||||||
Total locations, beginning of period | 1,046 | 1,702 | 2,748 | ||||||
New locations opened (2) | 1 | 60 | 61 | ||||||
Locations acquired | 46 | — | 46 | ||||||
Consolidation of existing pawn locations (1) | (12 | ) | (18 | ) | (30 | ) | |||
Total locations, end of period | 1,081 | 1,744 | 2,825 |
(1) Store consolidations were primarily acquired locations over the past five 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.
(2) In addition to new store openings, the Company strategically relocated five and two stores in the
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO 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, adjusted retail POS payment solutions segment metrics 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
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, which include the Company’s transaction expenses incurred in connection with its acquisition of AFF. 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
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.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO 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. 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 |
Twelve Months Ended |
||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||
In Thousands | Per Share | In Thousands | Per Share | In Thousands | Per Share | In Thousands | Per Share | ||||||||||||||||||||
Net income and diluted earnings per share, as reported | $ | 29,371 | $ | 0.70 | $ | 32,726 | $ | 0.79 | $ | 124,909 | $ | 3.04 | $ | 106,579 | $ | 2.56 | |||||||||||
Adjustments, net of tax: | |||||||||||||||||||||||||||
Merger and acquisition expenses | 10,922 | 0.26 | 839 | 0.02 | 11,872 | 0.29 | 991 | 0.02 | |||||||||||||||||||
Non-cash foreign currency loss (gain) related to lease liability | 195 | 0.01 | (1,579 | ) | (0.04 | ) | 451 | 0.01 | 874 | 0.02 | |||||||||||||||||
AFF purchase accounting adjustments, net (1) | 23,517 | 0.56 | — | — | 23,517 | 0.58 | — | — | |||||||||||||||||||
Impairments and dispositions of certain other assets | (533 | ) | (0.01 | ) | 1,853 | 0.05 | 730 | 0.02 | 6,979 | 0.17 | |||||||||||||||||
Loss on extinguishment of debt | — | — | — | — | — | — | 9,037 | 0.22 | |||||||||||||||||||
Accrual of pre-merger Cash America income tax liability | — | — | 693 | 0.02 | — | — | 693 | 0.02 | |||||||||||||||||||
Adjusted net income and diluted earnings per share | $ | 63,472 | $ | 1.52 | $ | 34,532 | $ | 0.84 | $ | 161,479 | $ | 3.94 | $ | 125,153 | $ | 3.01 |
(1) Includes
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO 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 |
|||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||
Pre-tax | Tax | After-tax | Pre-tax | Tax | After-tax | ||||||||||||||||||
Merger and acquisition expenses | $ | 14,185 | $ | 3,263 | $ | 10,922 | $ | 1,107 | $ | 268 | $ | 839 | |||||||||||
Non-cash foreign currency loss (gain) related to lease liability | 278 | 83 | 195 | (2,256 | ) | (677 | ) | (1,579 | ) | ||||||||||||||
AFF purchase accounting adjustments, net | 30,542 | 7,025 | 23,517 | — | — | — | |||||||||||||||||
Impairment and dispositions of certain other assets | (691 | ) | (158 | ) | (533 | ) | 2,406 | 553 | 1,853 | ||||||||||||||
Accrual of pre-merger Cash America income tax liability | — | — | — | — | (693 | ) | 693 | ||||||||||||||||
Total adjustments | $ | 44,314 | $ | 10,213 | $ | 34,101 | $ | 1,257 | $ | (549 | ) | $ | 1,806 |
Twelve Months Ended |
||||||||||||||||||
2021 | 2020 | |||||||||||||||||
Pre-tax | Tax | After-tax | Pre-tax | Tax | After-tax | |||||||||||||
Merger and acquisition expenses | $ | 15,449 | $ | 3,577 | $ | 11,872 | $ | 1,316 | $ | 325 | $ | 991 | ||||||
Non-cash foreign currency loss related to lease liability | 644 | 193 | 451 | 1,249 | 375 | 874 | ||||||||||||
AFF purchase accounting adjustments, net | 30,542 | 7,025 | 23,517 | — | — | — | ||||||||||||
Impairment and dispositions of certain other assets | 949 | 219 | 730 | 9,064 | 2,085 | 6,979 | ||||||||||||
Loss on extinguishment of debt | — | — | — | 11,737 | 2,700 | 9,037 | ||||||||||||
Accrual of pre-merger Cash America income tax liability | — | — | — | — | (693 | ) | 693 | |||||||||||
Total adjustments | $ | 47,584 | $ | 11,014 | $ | 36,570 | $ | 23,366 | $ | 4,792 | $ | 18,574 |
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO 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 as a starting point in the calculation of the consolidated total debt ratio as defined in the Company’s senior unsecured notes. The following table provides a reconciliation of net income to EBITDA and adjusted EBITDA (in thousands):
Three Months Ended | Twelve Months Ended | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net income | $ | 29,371 | $ | 32,726 | $ | 124,909 | $ | 106,579 | ||||||||
Income taxes | 7,759 | 10,381 | 41,593 | 37,120 | ||||||||||||
Depreciation and amortization | 13,175 | 10,681 | 45,906 | 42,105 | ||||||||||||
Interest expense | 9,997 | 7,391 | 32,386 | 29,344 | ||||||||||||
Interest income | (276 | ) | (331 | ) | (696 | ) | (1,540 | ) | ||||||||
EBITDA | 60,026 | 60,848 | 244,098 | 213,608 | ||||||||||||
Adjustments: | ||||||||||||||||
Merger and acquisition expenses | 14,185 | 1,107 | 15,449 | 1,316 | ||||||||||||
Non-cash foreign currency loss (gain) related to lease liability | 278 | (2,256 | ) | 644 | 1,249 | |||||||||||
AFF purchase accounting adjustments, net (1) | 28,491 | — | 28,491 | — | ||||||||||||
Impairments and dispositions of certain other assets | (691 | ) | 2,406 | 949 | 9,064 | |||||||||||
Loss on extinguishment of debt | — | — | — | 11,737 | ||||||||||||
Adjusted EBITDA | $ | 102,289 | $ | 62,105 | $ | 289,631 | $ | 236,974 |
(1) Excludes $2 million of amortization expense related to identifiable intangible assets from the AFF acquisition for the three and twelve months ended
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO 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 loan and finance 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):
Three Months Ended | Twelve Months Ended | ||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
Cash flow from operating activities | $ | 85,454 | $ | 44,898 | $ | 223,304 | $ | 222,264 | |||||||
Cash flow from investing activities: | |||||||||||||||
Pawn loans, net (1) | (2,703 | ) | (38,932 | ) | (73,340 | ) | 105,418 | ||||||||
Finance receivables, net | (5,844 | ) | 10 | (5,844 | ) | 1,590 | |||||||||
Purchases of furniture, fixtures, equipment and improvements | (10,414 | ) | (9,690 | ) | (42,022 | ) | (37,543 | ) | |||||||
Free cash flow | 66,493 | (3,714 | ) | 102,098 | 291,729 | ||||||||||
Merger and acquisition expenses paid, net of tax benefit | 10,922 | 840 | 11,872 | 991 | |||||||||||
Adjusted free cash flow | $ | 77,415 | $ | (2,874 | ) | $ | 113,970 | $ | 292,720 |
(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.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES (CONTINUED)
(UNAUDITED)
Retail POS Payment Solutions Segment Purchase Accounting Adjustments
Management believes the presentation of certain retail POS payment solutions segment metrics adjusted to exclude the impacts of purchase accounting provides investors with greater transparency and provides a more complete understanding of AFF’s financial performance and prospects for the future by excluding the impacts of purchase accounting, which management believes is non-operating in nature and not representative of AFF’s core operating performance. See the retail POS payment solutions segment tables elsewhere in this release for additional reconciliation of certain amounts adjusted to exclude the impacts of purchase accounting to as reported GAAP amounts.
Constant Currency Results
The Company’s reporting currency is the
The Company believes constant currency results provide valuable supplemental information regarding the underlying performance of its business operations in
For further information, please contact: | |
Global IR Group | |
Phone: | (817) 886-6998 |
Email: | gar@globalirgroup.com |
Phone: | (817) 258-2650 |
Email: | investorrelations@firstcash.com |
Website: | investors.firstcash.com |
Source: FirstCash, Inc.