FirstCash Reports Strong Third Quarter Results; Announces 18-Store U.S. Pawn Acquisition; Declares $0.30 Quarterly Cash Dividend
Mr.
“FirstCash also continues to invest in growth opportunities and provide shareholder returns utilizing its strong balance sheet and cash flows. We are pleased to announce an 18-store acquisition of
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 |
||||||||||||||||
As Reported (GAAP) | Adjusted (Non-GAAP) | |||||||||||||||
In thousands, except per share amounts | 2021 | 2020 | 2021 | 2020 | ||||||||||||
Revenue | $ | 399,674 | $ | 359,890 | $ | 399,674 | $ | 359,890 | ||||||||
Net income | $ | 33,396 | $ | 15,062 | $ | 34,041 | $ | 24,453 | ||||||||
Diluted earnings per share | $ | 0.82 | $ | 0.36 | $ | 0.84 | $ | 0.59 | ||||||||
EBITDA (non-GAAP measure) | $ | 63,331 | $ | 34,174 | $ | 64,217 | $ | 46,333 | ||||||||
Weighted-average diluted shares | 40,516 | 41,536 | 40,516 | 41,536 |
Nine Months Ended |
||||||||||||||||
As Reported (GAAP) | Adjusted (Non-GAAP) | |||||||||||||||
In thousands, except per share amounts | 2021 | 2020 | 2021 | 2020 | ||||||||||||
Revenue | $ | 1,197,191 | $ | 1,239,126 | $ | 1,197,191 | $ | 1,239,126 | ||||||||
Net income | $ | 95,538 | $ | 73,853 | $ | 98,007 | $ | 90,620 | ||||||||
Diluted earnings per share | $ | 2.34 | $ | 1.77 | $ | 2.40 | $ | 2.17 | ||||||||
EBITDA (non-GAAP measure) | $ | 184,072 | $ | 152,760 | $ | 187,342 | $ | 174,869 | ||||||||
Weighted-average diluted shares | 40,789 | 41,691 | 40,789 | 41,691 |
Consolidated Earnings Highlights
- Diluted earnings per share for the third quarter increased 128% on a GAAP basis and increased 42% on an adjusted non-GAAP basis compared to the prior-year quarter. Year-to-date diluted earnings per share increased 32% on a GAAP basis and increased 11% on an adjusted non-GAAP basis compared to the prior year. Prior-year GAAP results include expenses associated with the favorable refinancing of the Company’s senior notes in the third quarter of 2020.
- EBITDA and Adjusted EBITDA (non-GAAP measures) for the third quarter increased 85% and 39%, respectively, compared to the prior-year quarter. For the year-to-date nine month period, EBITDA increased 20% while adjusted EBITDA increased 7% compared to the same period last year.
- Operating results in the third quarter reflect increased earning asset levels from a year ago and continued growth in revenues and profitability in both the
U.S. andLatin America segments versus the prior-year period.- Consolidated pawn loans outstanding at quarter end increased 29% over the prior year while retail merchandise inventories increased 51% compared to last year.
- Total pawn fees, which typically lag the growth in pawn receivables, increased 22% in the third quarter compared to the prior-year quarter, while retail sales increased 14%.
- Store operating expenses increased a modest 5% in the third quarter on a larger store base compared to last year, reflecting continued expense discipline.
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 added the Company’s first two locations inMississippi . Including this acquisition, a total of 46 U.S. stores have been acquired this year for an aggregate purchase price of approximately$77 million . - A total of 14 de novo locations were opened during the third quarter, all of which were located in
Mexico . Year-to-date, 50 stores have been opened, of which 49 are located inLatin America . - Including the 18-store
U.S. acquisition in October, the Company now operates 2,826 stores, with 1,739 stores located inLatin America and 1,087 stores in theU.S. The Latin American locations include 1,651 stores inMexico , 60 stores inGuatemala , 15 stores inColombia and 13 stores inEl Salvador .
- Pawn receivables were up 29% at
September 30, 2021 compared to the prior year, while same-store pawn receivables increased 23%, reflecting the continuing recovery in pawn balances from 2020 levels. Resulting pawn fees, which typically lag pawn receivables growth, were up 16% for the third quarter and 11% on a same-store basis, as compared to the prior-year quarter. - Retail merchandise sales for the third quarter of 2021 were up 10% compared to the prior-year quarter. On a same store-basis, retail sales increased 6% compared to the prior-year quarter.
- Retail margins remained near record levels at 44%, which continued to reflect consumer demand for fresh and readily available retail products across all merchandise categories.
- Inventories increased 45% on a year-over-year basis versus the prior year’s depleted levels and are approaching normalized, pre-COVID levels.
- Annualized inventory turnover remained strong at 2.9 times for the trailing twelve months ended
September 30, 2021 . Inventories aged greater than one year as ofSeptember 30, 2021 declined further to only 1% of total inventories, which further contributed to the strength of retail margins. - Store operating expenses increased 1% in total but decreased 3% on a same-store basis compared to the prior-year quarter, reflecting the continued expense optimization from reduced staffing levels and other operating efficiency initiatives.
- Pre-tax operating income for the
U.S. segment increased 39% for the third quarter compared to the prior-year quarter. The resulting segment pre-tax operating margin was 21% for the third quarter of 2021, a significant improvement over the 16% margin for the prior-year 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
Latin America Pawn Operations
- Pawn receivables at
September 30, 2021 increased 30% onU.S. dollar basis compared to the prior year and 18% on a constant currency basis. On a same-store basis, pawn receivables increased 29% on aU.S. dollar basis and 17% on a constant currency basis compared to the prior year. - Pawn fees increased 34% in the third quarter, or 22% on a constant currency basis, as compared to the prior-year quarter. On a same-store basis, pawn fees increased 33% on a
U.S. dollar basis and 21% on a constant currency basis compared to the prior-year quarter. - Retail merchandise sales for the third quarter increased 22%, or 11% on a constant currency basis, compared to the prior-year quarter. Same-store retail sales increased 21% on a
U.S. dollar basis and 10% on a constant currency basis compared to the prior-year quarter. - Retail margins remained solid at 36% in the third quarter, while the annualized inventory turnover was strong at 4.2 times for the trailing twelve months ended
September 30, 2021 . Inventories aged greater than one year as ofSeptember 30, 2021 declined further to 1% of total inventories. - Store operating expenses increased 15% on a
U.S. dollar basis but only 6% on a constant currency basis while same-store operating expenses increased 14%, or 5% on a constant currency basis, compared to the prior-year quarter. Store operating expenses in the prior-year quarter were lower than normal in part due to temporary store closures and restrictions on retail operations in most Latin American markets due to the pandemic. - Segment pre-tax operating income for the third quarter of 2021 increased 34% (23% on a constant currency basis) over the prior-year quarter. The resulting segment pre-tax operating margin increased to 21% for the third quarter of 2021 (also 21% on a constant currency basis) compared to 19% in the prior-year quarter.
Liquidity and Shareholder Returns
- During the third quarter, the Company utilized its operating cash flows and borrowing capacity to fund
$79 million in the growth of earning assets (pawn receivables and inventory) and$20 million for capital expenditures and purchases of store real estate. For the nine month year-to-date period, the Company has funded$96 million in earning asset growth and$70 million in capital expenditures, which includes$38 million in real estate purchases for 30 of its existing pawn locations. - The Board of Directors declared a
$0.30 per share fourth quarter cash dividend on common shares outstanding, which will be paid onNovember 30, 2021 to stockholders of record as ofNovember 15, 2021 . This represents an annualized dividend of$1.20 per share. Any future dividends are subject to approval by the Company’s Board of Directors.
- The Company repurchased 152,000 shares of common stock during the third quarter at an aggregate cost of
$12 million and an average cost per share of$76.43 . For the nine months endedSeptember 30, 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.
2021 Outlook
Given the continued uncertainties related to COVID-19 and the associated government assistance programs enacted in response, the Company is not providing 2021 earnings guidance. However, the following factors are expected to impact operating trends throughout the remainder of 2021:
- Although pawn lending demand continues to recover, beginning same-store pawn balances entering the fourth quarter are down approximately 13% in the
U.S. compared to pre-pandemic levels at the beginning of the fourth quarter of 2019. InLatin America , same-store pawn loans at the beginning of the fourth quarter are 8% below the same date in 2019. - While inventories continue to normalize to pre-pandemic levels, same-store inventory levels in both the
U.S. and Latin America are still down 9% and 19%, respectively, as ofSeptember 30, 2021 compared to the same date in 2019. - For the full year of 2021, the effective income tax rate under current tax codes in the
U.S. andLatin America is expected to range from 25.5% to 26.5% compared to 25.8% in 2020. - Through September, the Company has opened 50 new stores and continues to expect up to 60 new store additions for the full year 2021.
Additional Commentary and Analysis
“In the
“U.S. retail merchandise sales also remained strong, with margins that continue to be at or near record levels. The resulting pre-tax
“We believe operating results in the Latin American segment for the third quarter were slightly impacted in certain markets due to operating restrictions and lower traffic counts, which we attribute to the concerns over the Delta variant of COVID-19. Despite these challenges, earning assets (pawn receivables and merchandise inventories) at the end of September were up 29% over the prior year on a constant currency basis. Resulting revenue growth and continued expense control measures drove a 34% increase in segment pre-tax income on a
“Retail inventories in both the
“With the announced acquisition of 18 additional
“We remain committed to the growth of
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, the risks, uncertainties and regulatory developments: (1) related to the COVID-19 pandemic, including the unknown duration and severity of the COVID-19 pandemic, and the impact of governmental responses that have been, and may in the future be, imposed in response to the pandemic, and (2) discussed and described in the Company’s most recent Annual Report on Form 10-K filed with the
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
Three Months Ended | Nine Months Ended | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue: | ||||||||||||||||
Retail merchandise sales | $ | 268,726 | $ | 234,982 | $ | 806,335 | $ | 819,011 | ||||||||
Pawn loan fees | 121,365 | 99,570 | 346,796 | 343,675 | ||||||||||||
Wholesale scrap jewelry sales | 9,583 | 25,281 | 44,060 | 74,437 | ||||||||||||
Consumer loan and credit services fees | — | 57 | — | 2,003 | ||||||||||||
Total revenue | 399,674 | 359,890 | 1,197,191 | 1,239,126 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Cost of retail merchandise sold | 158,057 | 137,230 | 468,634 | 493,436 | ||||||||||||
Cost of wholesale scrap jewelry sold | 8,528 | 19,818 | 37,657 | 61,022 | ||||||||||||
Consumer loan and credit services loss provision | — | 104 | — | (480 | ) | |||||||||||
Total cost of revenue | 166,585 | 157,152 | 506,291 | 553,978 | ||||||||||||
Net revenue | 233,089 | 202,738 | 690,900 | 685,148 | ||||||||||||
Expenses and other income: | ||||||||||||||||
Store operating expenses | 138,619 | 132,061 | 415,071 | 426,612 | ||||||||||||
Administrative expenses | 30,208 | 24,354 | 88,605 | 85,642 | ||||||||||||
Depreciation and amortization | 11,217 | 10,426 | 32,731 | 31,424 | ||||||||||||
Interest expense | 7,961 | 6,561 | 22,389 | 21,953 | ||||||||||||
Interest income | (143 | ) | (499 | ) | (420 | ) | (1,209 | ) | ||||||||
Merger and acquisition expenses | 12 | 7 | 1,264 | 209 | ||||||||||||
Loss (gain) on foreign exchange | 558 | (432 | ) | 248 | 1,639 | |||||||||||
Write-off of certain Cash America merger related lease intangibles | 361 | 837 | 1,640 | 4,649 | ||||||||||||
Loss on extinguishment of debt | — | 11,737 | — | 11,737 | ||||||||||||
Impairment of certain other assets | — | — | — | 1,900 | ||||||||||||
Total expenses and other income | 188,793 | 185,052 | 561,528 | 584,556 | ||||||||||||
Income before income taxes | 44,296 | 17,686 | 129,372 | 100,592 | ||||||||||||
Provision for income taxes | 10,900 | 2,624 | 33,834 | 26,739 | ||||||||||||
Net income | $ | 33,396 | $ | 15,062 | $ | 95,538 | $ | 73,853 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.83 | $ | 0.36 | $ | 2.34 | $ | 1.78 | ||||||||
Diluted | $ | 0.82 | $ | 0.36 | $ | 2.34 | $ | 1.77 | ||||||||
Weighted-average shares outstanding: | ||||||||||||||||
Basic | 40,453 | 41,440 | 40,745 | 41,597 | ||||||||||||
Diluted | 40,516 | 41,536 | 40,789 | 41,691 | ||||||||||||
Dividends declared per common share | $ | 0.30 | $ | 0.27 | $ | 0.87 | $ | 0.81 |
Certain amounts in the consolidated statements of income for the nine months ended
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
2021 | 2020 | 2020 | ||||||||||
ASSETS | ||||||||||||
Cash and cash equivalents | $ | 49,907 | $ | 78,844 | $ | 65,850 | ||||||
Fees and service charges receivable | 43,492 | 36,423 | 41,110 | |||||||||
Pawn loans | 348,993 | 270,619 | 308,231 | |||||||||
Inventories | 254,260 | 168,664 | 190,352 | |||||||||
Income taxes receivable | 4,791 | 7,534 | 9,634 | |||||||||
Prepaid expenses and other current assets | 10,002 | 10,647 | 9,388 | |||||||||
Total current assets | 711,445 | 572,731 | 624,565 | |||||||||
Property and equipment, net | 411,042 | 341,827 | 373,667 | |||||||||
Operating lease right of use asset | 300,040 | 289,175 | 298,957 | |||||||||
1,014,052 | 932,329 | 977,381 | ||||||||||
Intangible assets, net | 83,019 | 83,837 | 83,651 | |||||||||
Other assets | 8,413 | 9,087 | 9,818 | |||||||||
Deferred tax assets | 5,472 | 6,509 | 4,158 | |||||||||
Total assets | $ | 2,533,483 | $ | 2,235,495 | $ | 2,372,197 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Accounts payable and accrued liabilities | $ | 87,629 | $ | 79,979 | $ | 81,917 | ||||||
Customer deposits | 46,702 | 36,189 | 34,719 | |||||||||
Income taxes payable | 522 | 183 | 1,148 | |||||||||
Lease liability, current | 89,502 | 84,970 | 88,622 | |||||||||
Total current liabilities | 224,355 | 201,321 | 206,406 | |||||||||
Revolving unsecured credit facilities | 246,000 | 40,000 | 123,000 | |||||||||
Senior unsecured notes | 493,499 | 492,775 | 492,916 | |||||||||
Deferred tax liabilities | 78,191 | 69,261 | 71,173 | |||||||||
Lease liability, non-current | 197,618 | 188,212 | 194,887 | |||||||||
Total liabilities | 1,239,663 | 991,569 | 1,088,382 | |||||||||
Stockholders’ equity: | ||||||||||||
Common stock | 493 | 493 | 493 | |||||||||
Additional paid-in capital | 1,222,432 | 1,226,512 | 1,221,788 | |||||||||
Retained earnings | 849,438 | 767,683 | 789,303 | |||||||||
Accumulated other comprehensive loss | (125,761 | ) | (164,877 | ) | (118,432 | ) | ||||||
Common stock held in treasury, at cost | (652,782 | ) | (585,885 | ) | (609,337 | ) | ||||||
Total stockholders’ equity | 1,293,820 | 1,243,926 | 1,283,815 | |||||||||
Total liabilities and stockholders’ equity | $ | 2,533,483 | $ | 2,235,495 | $ | 2,372,197 |
OPERATING INFORMATION
(UNAUDITED)
The Company’s reportable segments are as follows:
U.S. operationsLatin America operations - includes operations inMexico ,Guatemala ,Colombia andEl 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.
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 | $ | 242,825 | $ | 188,819 | 29 | % | |||||
Inventories | 175,047 | 120,397 | 45 | % | |||||||
$ | 417,872 | $ | 309,216 | 35 | % | ||||||
Average outstanding pawn loan amount (in ones) | $ | 208 | $ | 188 | 11 | % | |||||
Composition of pawn collateral: | |||||||||||
General merchandise | 36 | % | 34 | % | |||||||
Jewelry | 64 | % | 66 | % | |||||||
100 | % | 100 | % | ||||||||
Composition of inventories: | |||||||||||
General merchandise | 48 | % | 42 | % | |||||||
Jewelry | 52 | % | 58 | % | |||||||
100 | % | 100 | % | ||||||||
Percentage of inventory aged greater than one year | 1 | % | 2 | % | |||||||
Inventory turns (trailing twelve months cost of merchandise sales divided by average inventories) | 2.9 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 | $ | 167,257 | $ | 151,618 | 10 | % | ||||||
Pawn loan fees | 76,674 | 66,180 | 16 | % | ||||||||
Wholesale scrap jewelry sales | 4,168 | 12,692 | (67 | ) | % | |||||||
Consumer loan and credit services fees (1) | — | 57 | (100 | ) | % | |||||||
Total revenue | 248,099 | 230,547 | 8 | % | ||||||||
Cost of revenue: | ||||||||||||
Cost of retail merchandise sold | 93,326 | 84,673 | 10 | % | ||||||||
Cost of wholesale scrap jewelry sold | 3,778 | 10,316 | (63 | ) | % | |||||||
Consumer loan and credit services loss provision (1) | — | 104 | (100 | ) | % | |||||||
Total cost of revenue | 97,104 | 95,093 | 2 | % | ||||||||
Net revenue | 150,995 | 135,454 | 11 | % | ||||||||
Segment expenses: | ||||||||||||
Store operating expenses | 93,247 | 92,678 | 1 | % | ||||||||
Depreciation and amortization | 5,662 | 5,390 | 5 | % | ||||||||
Total segment expenses | 98,909 | 98,068 | 1 | % | ||||||||
Segment pre-tax operating income | $ | 52,086 | $ | 37,386 | 39 | % | ||||||
Operating metrics: | ||||||||||||
Retail merchandise sales margin | 44 | % | 44 | % | ||||||||
Net revenue margin | 61 | % | 59 | % | ||||||||
Segment pre-tax operating margin | 21 | % | 16 | % |
(1) Effective
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
The following table presents segment pre-tax operating income and other operating metrics of the
Nine Months Ended | |||||||||||||
Increase / | |||||||||||||
2021 | 2020 | (Decrease) | |||||||||||
Revenue: | |||||||||||||
Retail merchandise sales | $ | 530,468 | $ | 556,528 | (5 | ) | % | ||||||
Pawn loan fees | 220,013 | 235,937 | (7 | ) | % | ||||||||
Wholesale scrap jewelry sales | 20,217 | 37,727 | (46 | ) | % | ||||||||
Consumer loan and credit services fees (1) | — | 2,003 | (100 | ) | % | ||||||||
Total revenue | 770,698 | 832,195 | (7 | ) | % | ||||||||
Cost of revenue: | |||||||||||||
Cost of retail merchandise sold | 295,455 | 325,863 | (9 | ) | % | ||||||||
Cost of wholesale scrap jewelry sold | 16,678 | 32,754 | (49 | ) | % | ||||||||
Consumer loan and credit services loss provision (1) | — | (480 | ) | (100 | ) | % | |||||||
Total cost of revenue | 312,133 | 358,137 | (13 | ) | % | ||||||||
Net revenue | 458,565 | 474,058 | (3 | ) | % | ||||||||
Segment expenses: | |||||||||||||
Store operating expenses | 282,068 | 303,686 | (7 | ) | % | ||||||||
Depreciation and amortization | 16,391 | 16,352 | — | % | |||||||||
Total segment expenses | 298,459 | 320,038 | (7 | ) | % | ||||||||
Segment pre-tax operating income | $ | 160,106 | $ | 154,020 | 4 | % | |||||||
Operating metrics: | |||||||||||||
Retail merchandise sales margin | 44 | % | 41 | % | |||||||||
Net revenue margin | 59 | % | 57 | % | |||||||||
Segment pre-tax operating margin | 21 | % | 19 | % |
(1) Effective
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
Latin America Operations Segment Results
The Company’s management reviews and analyzes certain 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 | 20.3 | 22.5 | 10 | % | ||||||
Three months ended | 20.0 | 22.1 | 10 | % | ||||||
Nine months ended | 20.1 | 21.8 | 8 | % | ||||||
Guatemalan quetzal / |
||||||||||
End-of-period | 7.7 | 7.8 | 1 | % | ||||||
Three months ended | 7.7 | 7.7 | — | % | ||||||
Nine months ended | 7.7 | 7.7 | — | % | ||||||
Colombian peso / |
||||||||||
End-of-period | 3,835 | 3,879 | 1 | % | ||||||
Three months ended | 3,844 | 3,730 | (3 | ) | % | |||||
Nine months ended | 3,696 | 3,703 | — | % |
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 |
2021 | Increase | |||||||||||||||||||
2021 | 2020 | Increase | (Non-GAAP) | (Non-GAAP) | |||||||||||||||||
Latin America Operations Segment | |||||||||||||||||||||
Earning assets: | |||||||||||||||||||||
Pawn loans | $ | 106,168 | $ | 81,800 | 30 | % | $ | 96,443 | 18 | % | |||||||||||
Inventories | 79,213 | 48,267 | 64 | % | 71,927 | 49 | % | ||||||||||||||
$ | 185,381 | $ | 130,067 | 43 | % | $ | 168,370 | 29 | % | ||||||||||||
Average outstanding pawn loan amount (in ones) | $ | 76 | $ | 64 | 19 | % | $ | 69 | 8 | % | |||||||||||
Composition of pawn collateral: | |||||||||||||||||||||
General merchandise | 68 | % | 66 | % | |||||||||||||||||
Jewelry | 32 | % | 34 | % | |||||||||||||||||
100 | % | 100 | % | ||||||||||||||||||
Composition of inventories: | |||||||||||||||||||||
General merchandise | 67 | % | 60 | % | |||||||||||||||||
Jewelry | 33 | % | 40 | % | |||||||||||||||||
100 | % | 100 | % | ||||||||||||||||||
Percentage of inventory aged greater than one year | 1 | % | 2 | % | |||||||||||||||||
Inventory turns (trailing twelve months cost of merchandise sales divided by average inventories) | 4.2 times | 4.1 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 Operations Segment | |||||||||||||||||||||||||
Revenue: | |||||||||||||||||||||||||
Retail merchandise sales | $ | 101,469 | $ | 83,364 | 22 | % | $ | 92,367 | 11 | % | |||||||||||||||
Pawn loan fees | 44,691 | 33,390 | 34 | % | 40,662 | 22 | % | ||||||||||||||||||
Wholesale scrap jewelry sales | 5,415 | 12,589 | (57 | ) | % | 5,415 | (57 | ) | % | ||||||||||||||||
Total revenue | 151,575 | 129,343 | 17 | % | 138,444 | 7 | % | ||||||||||||||||||
Cost of revenue: | |||||||||||||||||||||||||
Cost of retail merchandise sold | 64,731 | 52,557 | 23 | % | 58,945 | 12 | % | ||||||||||||||||||
Cost of wholesale scrap jewelry sold | 4,750 | 9,502 | (50 | ) | % | 4,300 | (55 | ) | % | ||||||||||||||||
Total cost of revenue | 69,481 | 62,059 | 12 | % | 63,245 | 2 | % | ||||||||||||||||||
Net revenue | 82,094 | 67,284 | 22 | % | 75,199 | 12 | % | ||||||||||||||||||
Segment expenses: | |||||||||||||||||||||||||
Store operating expenses | 45,372 | 39,383 | 15 | % | 41,555 | 6 | % | ||||||||||||||||||
Depreciation and amortization | 4,591 | 3,903 | 18 | % | 4,229 | 8 | % | ||||||||||||||||||
Total segment expenses | 49,963 | 43,286 | 15 | % | 45,784 | 6 | % | ||||||||||||||||||
Segment pre-tax operating income | $ | 32,131 | $ | 23,998 | 34 | % | $ | 29,415 | 23 | % | |||||||||||||||
Operating metrics: | |||||||||||||||||||||||||
Retail merchandise sales margin | 36 | % | 37 | % | 36 | % | |||||||||||||||||||
Net revenue margin | 54 | % | 52 | % | 54 | % | |||||||||||||||||||
Segment pre-tax operating margin | 21 | % | 19 | % | 21 | % |
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
The following table presents segment pre-tax operating income and other operating metrics of the
Constant Currency Basis | |||||||||||||||||||||||||
Nine Months | |||||||||||||||||||||||||
Ended | |||||||||||||||||||||||||
Nine Months Ended | Increase / | ||||||||||||||||||||||||
Increase / | 2021 | (Decrease) | |||||||||||||||||||||||
2021 | 2020 | (Decrease) | (Non-GAAP) | (Non-GAAP) | |||||||||||||||||||||
Latin America Operations Segment | |||||||||||||||||||||||||
Revenue: | |||||||||||||||||||||||||
Retail merchandise sales | $ | 275,867 | $ | 262,483 | 5 | % | $ | 256,116 | (2 | ) | % | ||||||||||||||
Pawn loan fees | 126,783 | 107,738 | 18 | % | 117,662 | 9 | % | ||||||||||||||||||
Wholesale scrap jewelry sales | 23,843 | 36,710 | (35 | ) | % | 23,843 | (35 | ) | % | ||||||||||||||||
Total revenue | 426,493 | 406,931 | 5 | % | 397,621 | (2 | ) | % | |||||||||||||||||
Cost of revenue: | |||||||||||||||||||||||||
Cost of retail merchandise sold | 173,179 | 167,573 | 3 | % | 160,821 | (4 | ) | % | |||||||||||||||||
Cost of wholesale scrap jewelry sold | 20,979 | 28,268 | (26 | ) | % | 19,449 | (31 | ) | % | ||||||||||||||||
Total cost of revenue | 194,158 | 195,841 | (1 | ) | % | 180,270 | (8 | ) | % | ||||||||||||||||
Net revenue | 232,335 | 211,090 | 10 | % | 217,351 | 3 | % | ||||||||||||||||||
Segment expenses: | |||||||||||||||||||||||||
Store operating expenses | 133,003 | 122,926 | 8 | % | 124,080 | 1 | % | ||||||||||||||||||
Depreciation and amortization | 13,388 | 11,568 | 16 | % | 12,544 | 8 | % | ||||||||||||||||||
Total segment expenses | 146,391 | 134,494 | 9 | % | 136,624 | 2 | % | ||||||||||||||||||
Segment pre-tax operating income | $ | 85,944 | $ | 76,596 | 12 | % | $ | 80,727 | 5 | % | |||||||||||||||
Operating metrics: | |||||||||||||||||||||||||
Retail merchandise sales margin | 37 | % | 36 | % | 37 | % | |||||||||||||||||||
Net revenue margin | 54 | % | 52 | % | 55 | % | |||||||||||||||||||
Segment pre-tax operating margin | 20 | % | 19 | % | 20 | % |
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
Consolidated Results of Operations
The following table reconciles pre-tax operating income of the Company’s
Three Months Ended | Nine Months Ended | ||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
Consolidated Results of Operations | |||||||||||||||
Segment pre-tax operating income: | |||||||||||||||
$ | 52,086 | $ | 37,386 | $ | 160,106 | $ | 154,020 | ||||||||
32,131 | 23,998 | 85,944 | 76,596 | ||||||||||||
Consolidated segment pre-tax operating income | 84,217 | 61,384 | 246,050 | 230,616 | |||||||||||
Corporate expenses and other income: | |||||||||||||||
Administrative expenses | 30,208 | 24,354 | 88,605 | 85,642 | |||||||||||
Depreciation and amortization | 964 | 1,133 | 2,952 | 3,504 | |||||||||||
Interest expense | 7,961 | 6,561 | 22,389 | 21,953 | |||||||||||
Interest income | (143 | ) | (499 | ) | (420 | ) | (1,209 | ) | |||||||
Merger and acquisition expenses | 12 | 7 | 1,264 | 209 | |||||||||||
Loss (gain) on foreign exchange | 558 | (432 | ) | 248 | 1,639 | ||||||||||
Write-off of certain Cash America merger related lease intangibles | 361 | 837 | 1,640 | 4,649 | |||||||||||
Loss on extinguishment of debt | — | 11,737 | — | 11,737 | |||||||||||
Impairment of certain other assets | — | — | — | 1,900 | |||||||||||
Total corporate expenses and other income | 39,921 | 43,698 | 116,678 | 130,024 | |||||||||||
Income before income taxes | 44,296 | 17,686 | 129,372 | 100,592 | |||||||||||
Provision for income taxes | 10,900 | 2,624 | 33,834 | 26,739 | |||||||||||
Net income | $ | 33,396 | $ | 15,062 | $ | 95,538 | $ | 73,853 |
STORE COUNT ACTIVITY
The following tables detail store count activity:
Three Months Ended |
|||||||||
Operations Segment | Operations Segment | Total Locations | |||||||
Total locations, beginning of period | 1,071 | 1,733 | 2,804 | ||||||
New locations opened | — | 14 | 14 | ||||||
Consolidation of existing pawn locations (1) | (2 | ) | (8 | ) | (10 | ) | |||
Total locations, end of period | 1,069 | 1,739 | 2,808 | ||||||
Nine Months Ended |
|||||||||
Operations Segment | Operations Segment | Total Locations | |||||||
Total locations, beginning of period | 1,046 | 1,702 | 2,748 | ||||||
New locations opened | 1 | 49 | 50 | ||||||
Locations acquired (2) | 28 | — | 28 | ||||||
Consolidation of existing pawn locations (1) | (6 | ) | (12 | ) | (18 | ) | |||
Total locations, end of period | 1,069 | 1,739 | 2,808 |
(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) | Does not include the acquisition of 18 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 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. 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 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 |
Nine 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 | $ | 33,396 | $ | 0.82 | $ | 15,062 | $ | 0.36 | $ | 95,538 | $ | 2.34 | $ | 73,853 | $ | 1.77 | |||||||||||||||
Adjustments, net of tax: | |||||||||||||||||||||||||||||||
Merger and acquisition expenses | 8 | — | 5 | — | 950 | 0.02 | 151 | — | |||||||||||||||||||||||
Non-cash foreign currency loss (gain) related to lease liability | 359 | 0.01 | (308 | ) | (0.01 | ) | 256 | 0.01 | 2,453 | 0.06 | |||||||||||||||||||||
Non-cash write-off of certain Cash America merger related lease intangibles | 278 | 0.01 | 644 | 0.02 | 1,263 | 0.03 | 3,579 | 0.09 | |||||||||||||||||||||||
Loss on extinguishment of debt | — | — | 9,037 | 0.22 | — | — | 9,037 | 0.22 | |||||||||||||||||||||||
Non-cash impairment of certain other assets (1) | — | — | — | — | — | — | 1,463 | 0.03 | |||||||||||||||||||||||
Consumer lending wind-down costs and asset impairments | — | — | 13 | — | — | — | 84 | — | |||||||||||||||||||||||
Adjusted net income and diluted earnings per share | $ | 34,041 | $ | 0.84 | $ | 24,453 | $ | 0.59 | $ | 98,007 | $ | 2.40 | $ | 90,620 | $ | 2.17 |
(1) Impairment related to a non-operating asset in which the Company determined that an other than temporary impairment existed as of
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 | $ | 12 | $ | 4 | $ | 8 | $ | 7 | $ | 2 | $ | 5 | |||||||||||
Non-cash foreign currency loss (gain) related to lease liability | 513 | 154 | 359 | (439 | ) | (131 | ) | (308 | ) | ||||||||||||||
Non-cash write-off of certain Cash America merger related lease intangibles | 361 | 83 | 278 | 837 | 193 | 644 | |||||||||||||||||
Loss on extinguishment of debt | — | — | — | 11,737 | 2,700 | 9,037 | |||||||||||||||||
Consumer lending wind-down costs and asset impairments | — | — | — | 17 | 4 | 13 | |||||||||||||||||
Total adjustments | $ | 886 | $ | 241 | $ | 645 | $ | 12,159 | $ | 2,768 | $ | 9,391 | |||||||||||
Nine Months Ended |
|||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||
Pre-tax | Tax | After-tax | Pre-tax | Tax | After-tax | ||||||||||||||||||
Merger and acquisition expenses | $ | 1,264 | $ | 314 | $ | 950 | $ | 209 | $ | 58 | $ | 151 | |||||||||||
Non-cash foreign currency loss related to lease liability | 366 | 110 | 256 | 3,505 | 1,052 | 2,453 | |||||||||||||||||
Non-cash write-off of certain Cash America merger related lease intangibles | 1,640 | 377 | 1,263 | 4,649 | 1,070 | 3,579 | |||||||||||||||||
Loss on extinguishment of debt | — | — | — | 11,737 | 2,700 | 9,037 | |||||||||||||||||
Non-cash impairment of certain other assets | — | — | — | 1,900 | 437 | 1,463 | |||||||||||||||||
Consumer lending wind-down costs and asset impairments | — | — | — | 109 | 25 | 84 | |||||||||||||||||
Total adjustments | $ | 3,270 | $ | 801 | $ | 2,469 | $ | 22,109 | $ | 5,342 | $ | 16,767 |
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 (dollars in thousands):
Trailing Twelve | ||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | Months Ended | ||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||
Net income | $ | 33,396 | $ | 15,062 | $ | 95,538 | $ | 73,853 | $ | 128,264 | $ | 128,007 | ||||||||||||||
Income taxes | 10,900 | 2,624 | 33,834 | 26,739 | 44,215 | 44,103 | ||||||||||||||||||||
Depreciation and amortization | 11,217 | 10,426 | 32,731 | 31,424 | 43,412 | 42,270 | ||||||||||||||||||||
Interest expense | 7,961 | 6,561 | 22,389 | 21,953 | 29,780 | 30,148 | ||||||||||||||||||||
Interest income | (143 | ) | (499 | ) | (420 | ) | (1,209 | ) | (751 | ) | (1,476 | ) | ||||||||||||||
EBITDA | 63,331 | 34,174 | 184,072 | 152,760 | 244,920 | 243,052 | ||||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||
Merger and acquisition expenses | 12 | 7 | 1,264 | 209 | 2,371 | 465 | ||||||||||||||||||||
Non-cash foreign currency loss (gain) related to lease liability | 513 | (439 | ) | 366 | 3,505 | (1,890 | ) | 2,621 | ||||||||||||||||||
Non-cash write-off of certain Cash America merger related lease intangibles | 361 | 837 | 1,640 | 4,649 | 4,046 | 4,649 | ||||||||||||||||||||
Loss on extinguishment of debt | — | 11,737 | — | 11,737 | — | 11,737 | ||||||||||||||||||||
Non-cash impairment of certain other assets | — | — | — | 1,900 | — | 1,900 | ||||||||||||||||||||
Consumer lending wind-down costs and asset impairments | — | 17 | — | 109 | — | 268 | ||||||||||||||||||||
Adjusted EBITDA | $ | 64,217 | $ | 46,333 | $ | 187,342 | $ | 174,869 | $ | 249,447 | $ | 264,692 | ||||||||||||||
Net debt ratio calculation: | ||||||||||||||||||||||||||
Total debt (outstanding principal) | $ | 746,000 | $ | 540,000 | ||||||||||||||||||||||
Less: cash and cash equivalents | (49,907 | ) | (78,844 | ) | ||||||||||||||||||||||
Net debt | $ | 696,093 | $ | 461,156 | ||||||||||||||||||||||
Adjusted EBITDA | $ | 249,447 | $ | 264,692 | ||||||||||||||||||||||
Net debt ratio (net debt divided by adjusted EBITDA) | 2.8 | :1 | 1.7 | :1 |
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 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 | Nine Months Ended | Months Ended | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Cash flow from operating activities | $ | 24,101 | $ | 34,067 | $ | 137,850 | $ | 177,366 | $ | 182,748 | $ | 245,138 | ||||||||||||
Cash flow from certain investing activities: | ||||||||||||||||||||||||
Loan receivables, net (1) | (62,145 | ) | (32,349 | ) | (70,637 | ) | 145,930 | (109,559 | ) | 183,334 | ||||||||||||||
Purchases of furniture, fixtures, equipment and improvements | (10,583 | ) | (7,377 | ) | (31,608 | ) | (27,853 | ) | (41,298 | ) | (39,060 | ) | ||||||||||||
Free cash flow | (48,627 | ) | (5,659 | ) | 35,605 | 295,443 | 31,891 | 389,412 | ||||||||||||||||
Merger and acquisition expenses paid, net of tax benefit | 8 | 5 | 950 | 151 | 1,790 | 330 | ||||||||||||||||||
Adjusted free cash flow | $ | (48,619 | ) | $ | (5,654 | ) | $ | 36,555 | $ | 295,594 | $ | 33,681 | $ | 389,742 |
(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)
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: | |
Gar Jackson | |
Phone: | (817) 886-6998 |
Email: | gar@globalirgroup.com |
Phone: | (817) 258-2650 |
Email: | investorrelations@firstcash.com |
Website: | investors.firstcash.com |
Source: FirstCash, Inc.