FirstCash Holdings, Inc. (“FirstCash” or the “Company”) (Nasdaq:
FCFS), the leading international operator of retail pawn stores and
a leading provider of retail point-of-sale (“POS”) payment
solutions, today announced operating results for the three and six
month periods ended June 30, 2022. The Company also announced
that the Board of Directors declared a quarterly cash dividend of
$0.33 per share, an increase of 10% compared to the previous
quarterly dividend of $0.30 per share, which will be paid in August
2022.
Mr. Rick Wessel, chief executive officer,
stated, “We are excited to report record second quarter results
driven by especially strong revenue growth from core pawn
operations as consolidated same-store pawn fees grew 20%
while consolidated retail sales were up 10% on a same-store
basis over the prior-year quarter. Resulting segment earnings from
pawn operations increased 36% in the U.S. and 18% in Latin America
versus the prior year. The recently acquired AFF operations saw
continued growth in active retail merchant locations and gross
transaction volumes, which contributed to solid earnings results
for the retail POS payment solutions segment.
“The Company’s cash flows and balance sheet
continue to be strong, supporting revenue growth, $102 million in
stock repurchases so far this year and the announced 10% increase
in the cash dividend. We further believe the outlook for the second
half of 2022 remains highly positive given July revenue trends in
our pawn stores.”
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 June 30, |
|
As Reported (GAAP) |
|
Adjusted (Non-GAAP) |
In thousands, except per share amounts |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
Revenue |
$ |
647,616 |
|
$ |
389,578 |
|
$ |
659,130 |
|
$ |
389,578 |
Net income |
$ |
86,108 |
|
$ |
28,427 |
|
$ |
51,159 |
|
$ |
29,038 |
Diluted earnings per
share |
$ |
1.81 |
|
$ |
0.70 |
|
$ |
1.08 |
|
$ |
0.71 |
EBITDA (non-GAAP measure) |
$ |
151,629 |
|
$ |
56,786 |
|
$ |
96,417 |
|
$ |
57,524 |
Weighted-average diluted
shares |
|
47,499 |
|
|
40,802 |
|
|
47,499 |
|
|
40,802 |
|
Six Months Ended June 30, |
|
As Reported (GAAP) |
|
Adjusted (Non-GAAP) |
In thousands, except per share amounts |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
Revenue |
$ |
1,307,455 |
|
$ |
797,517 |
|
$ |
1,335,142 |
|
$ |
797,517 |
Net income |
$ |
114,113 |
|
$ |
62,142 |
|
$ |
108,031 |
|
$ |
63,966 |
Diluted earnings per
share |
$ |
2.38 |
|
$ |
1.52 |
|
$ |
2.26 |
|
$ |
1.56 |
EBITDA (non-GAAP measure) |
$ |
229,725 |
|
$ |
120,741 |
|
$ |
197,765 |
|
$ |
123,125 |
Weighted-average diluted
shares |
|
47,897 |
|
|
40,929 |
|
|
47,897 |
|
|
40,929 |
Consolidated Operating
Highlights
- Diluted earnings
per share for the second quarter of 2022 increased 159% on a GAAP
basis to $1.81, which included a gain related to the revaluation of
the contingent consideration related to the AFF acquisition,
partially offset by other non-cash AFF purchase accounting
adjustments as further discussed in the AFF segment results
below.
- Adjusted non-GAAP
diluted earnings per share, which exclude the above impacts and
other adjustments described herein, increased 52% to $1.08 compared
to the prior-year quarter.
- Year-to-date
diluted earnings per share increased 57% on a GAAP basis and 45% on
an adjusted non-GAAP basis compared to the prior year.
- Consolidated
revenues totaled $648 million, a second quarter record,
representing a 66% increase over the prior-year quarter. Adjusted
consolidated revenues were $659 million, up 69%, for the second
quarter, which excludes the non-cash impacts from purchase
accounting. Year-to-date consolidated revenues increased 64% on a
GAAP basis and increased 67% on an adjusted non-GAAP basis compared
to the prior year.
- EBITDA and Adjusted
EBITDA for the second quarter of 2022 increased 167% and 68%,
respectively, compared to the prior-year quarter. For the twelve
month period ended June 30, 2022, EBITDA increased 64% to $353
million while adjusted EBITDA increased 57% to $364 million over
the comparable prior year period.
- Pre-tax operating
income from the Company’s pawn segments increased $22 million, or
29%, in the second quarter of 2022 compared to the prior-year
quarter, reflecting significant growth in pawn receivables and more
normalized merchandise inventory levels compared to a year ago.
Year-to-date profit from the pawn segments for 2022 increased 24%
compared to last year and represented 80% of adjusted segment
profit.
- U.S. pawn segment
pre-tax income for the second quarter of 2022 was $64 million, an
increase of 36% over the second quarter of the prior year. These
results were driven primarily by a 31% increase in pawn fee revenue
compared to last year.
- Latin America pawn
segment pre-tax income for the second quarter of 2022 was $33
million, an increase of 18% over the second quarter of the prior
year, reflecting accelerating pawn loan demand and double digit
growth in combined revenue from pawn fees and retail sales.
- The retail POS
payment solutions segment (AFF) contributed second quarter GAAP
segment pre-tax income of $12 million. Excluding non-cash purchase
accounting impacts, adjusted segment pre-tax income was $25
million.
U.S. Pawn Segment
- Segment pre-tax
operating income increased by $17 million, or 36%, for the second
quarter of 2022 compared to the prior-year quarter. The resulting
segment pre-tax operating margin was 21% for the second quarter of
2022, an improvement over the 19% margin for the prior-year
quarter.
- Year-to-date
segment pre-tax operating income increased by $29 million, or 27%
compared to the prior-year period. The resulting segment pre-tax
operating margin was 22% for the year-to-date period, an
improvement over the 21% margin for the prior-year.
- Pawn receivables at
June 30, 2022 increased 33% compared to the prior year and are now
above the comparative pre-pandemic levels of June 2019. Same-store
pawn receivables are also up 33% over the same point a year
ago.
- Pawn loan fee
revenue was up 31% for the second quarter of 2022 and 29% on a
same-store basis, as compared to the prior-year quarter.
- Retail merchandise
sales in the second quarter of 2022 increased 13% compared to the
prior-year quarter. On a same store-basis, retail sales increased
10% compared to the prior-year quarter.
- Retail sales
margins remained strong at 41% in the second quarter of 2022,
reflecting solid demand for value-priced, pre-owned merchandise and
low levels of aged inventory.
- Merchandise
inventories increased 29% on a year-over-year basis versus the
depleted levels a year ago and are now normalized to pre-COVID
levels. Inventories remain well-positioned, with aged inventory
(greater than one year) remaining low at 1%.
- Operating expenses
increased 8% in total and 6% on a same-store basis in the second
quarter of 2022 compared to the prior-year quarter and includes a
23% increase in variable compensation expense over the prior-year
period as a result of the strong operating results.
- One store in Texas
was acquired during the second quarter of 2022 with two additional
stores acquired in Florida subsequent to the June 30 quarter end.
Two existing store locations have been strategically relocated this
year with another four relocations in progress. Additionally, the
Company purchased the underlying real estate at 22 of its pawn
stores during the second quarter and a total of 28 properties have
been acquired year-to-date.
Latin America Pawn Segment
Note: Certain growth rates below are calculated
on a constant currency basis, a non-GAAP financial measure defined
at the end of this release. The average Mexican peso to U.S. dollar
exchange rate for the second quarter of 2022 was 20.0 pesos /
dollar, and for the six month period ended June 30, 2022 was
20.3 pesos / dollar, both of which were materially consistent with
the prior-year periods.
-
Segment pre-tax operating income for the second quarter of 2022
increased 18% over the prior-year quarter, reflecting an increased
contribution from retail sales revenue. The resulting segment
pre-tax operating margin increased to 21% for the second quarter of
2022 compared to 20% in the prior-year quarter.
-
Year-to-date segment pre-tax operating income increased by $9
million, or 17% compared to the prior-year period. The resulting
segment pre-tax operating margin was 20% for the year-to-date
period, which equaled the prior-year period.
-
Total and same-store retail merchandise sales in the second quarter
of 2022 were especially strong, increasing 11% compared to the
prior-year quarter, reflecting continued demand for popular
value-priced merchandise.
-
Pawn loan fees increased 8% in the second quarter of 2022 as
compared to the prior-year quarter, reflecting growth in both pawn
receivables and yields on the portfolio. On a same-store basis,
pawn loan fees increased 7% compared to the prior-year
quarter.
-
Pawn receivables at June 30, 2022 increased 6% compared to the
prior year, or 7% on a constant currency basis. On a same-store
basis, pawn receivables increased 5%, or 6% on a constant currency
basis, compared to the prior year. These constant currency growth
rates represented sequential improvement compared to the first
quarter and indicated that demand in Latin America is now beginning
to follow recent U.S. trends.
-
Retail margins remained consistent and solid at 37% in the second
quarter of 2022, especially given the significant percentage of
sales coming from cell phones and other consumer electronics.
-
Annualized inventory turnover was 4.2 times for the trailing twelve
months ended June 30, 2022, while inventories aged greater than one
year as of June 30, 2022 remained low at 1%.
- Operating expenses
increased 5% in total and on a same-store basis compared to the
prior-year quarter, which includes a 21% increase in variable
compensation expense over the prior year.
- A total of nine de
novo locations were opened in Latin America during the second
quarter of 2022 and 19 locations have been opened year-to-date. The
Company also continues to strategically relocate and/or consolidate
specific acquired stores in order to upgrade the locations and
increase operational efficiencies.
Retail POS Payment Solutions Segment - American First
Finance (AFF)
Note: The reconciliations of GAAP revenues and
earnings for this segment to adjusted revenues and earnings are
provided and described in more detail in the Retail POS Payment
Solutions Segment Results section of this release.
- Total segment
revenues, comprised of lease-to-own (“LTO”) fees and interest and
fees on finance receivables, for the second quarter of 2022 totaled
$191 million on a GAAP basis, or $203 million on an adjusted basis,
which excludes the non-cash impacts of fair value purchase
accounting requirements. Revenues for the year-to-date period
totaled $384 million on a GAAP basis and $412 million on an
adjusted basis.
- Segment pre-tax
operating income for the second quarter of 2022 totaled $12 million
on a GAAP basis, or $25 million on an adjusted basis, which
excludes non-cash purchase accounting impacts. For the year-to-date
period, segment pre-tax operating income totaled $17 million on a
GAAP basis and $50 million on an adjusted basis.
- AFF continued to
grow market share in the retail POS payment solutions space with
approximately 7,600 active retail and e-commerce merchant partner
locations at June 30, 2022, representing a 34% increase in active
merchant locations compared to the same point last year and a 10%
sequential increase.
- Combined leased
merchandise and finance receivables outstanding at June 30, 2022,
excluding the impacts of purchase accounting, increased 21%
compared to the same point last year.
- Gross transaction
volume from LTO and POS financing transactions totaled $206 million
for the second quarter of 2022. This represents an increase of 5%
compared to pre-acquisition results in the second quarter of 2021.
Gross transaction volume was driven by the growth in retail partner
locations and online originations, partially offset by the slowdown
in consumer foot traffic in many of AFF’s merchant partner retail
locations.
- Credit loss
provisioning was in line with expectations, which is based on
CECL-type accounting methodology which estimates full day-one
provisioning of expected lifetime losses on both LTO and retail
finance products. The provisioning for second quarter 2022 gross
transaction originations reflects the historical pre-COVID credit
environment supplemented with an additional provisioning overlay
given the current macroeconomic environment. Combined lease and
loan charge-offs for the second quarter of 2022 were consistent
with previously expected losses included in the Company’s loss
reserves on the lease and loan portfolio.
- In addition to the
segment level results for AFF, the Company recognized a non-cash
gain of $66 million in the second quarter related to a net decrease
in the fair value of the contingent consideration payable to the
seller of AFF. The contingent consideration is primarily based on
AFF’s achievement of certain EBITDA targets by the end of 2022 and
in the first half of 2023. Given the macro-driven slowdown in
origination activity compared to the forecasts at the time the AFF
acquisition was negotiated last summer, the Company now expects the
earnout component of the contingent consideration to be at the low
end of the payout scale. The gain has been excluded from adjusted
earnings measures as described in more detail in the reconciliation
of non-GAAP financial measures to GAAP financial measures provided
elsewhere in this release.
Cash Flow and Liquidity
- The Company
generated $227 million in cash flow from operations and $152
million in adjusted free cash flow during the six months ended June
30, 2022, which represented year-over-year increases of 99% and
78%, respectively.
- For the trailing
twelve months ended June 30, 2022, cash flow from operations
totaled $336 million while adjusted free cash flow was $181
million, representing year-over-year increases of 75% and 136%,
respectively.
- The Company’s strong liquidity
position at June 30, 2022 includes cash balances of $110 million
and ample borrowing capacity under its bank lines of credit.
Year-to-date, the Company has utilized its cash flows and liquidity
to fund significant growth in pawn receivables and inventories,
strategically purchase $59 million of underlying real estate at 28
pawn store locations and repurchase $88 million of its stock, as
further discussed below.
- The resulting net
debt to trailing twelve months adjusted EBITDA ratio improved to
3.3 times as of June 30, 2022 compared to 4.1 times as of December
31, 2021.
Shareholder Returns
- The Company
repurchased 301,000 shares of common stock during the second
quarter of 2022 at an aggregate cost of $20 million and an average
cost per share of $68.10. Year-to-date, through the date of this
release, the Company repurchased 1,486,000 shares of common stock
in 2022 at an aggregate cost of $102 million and an average cost
per share of $68.79. The Company had $70 million remaining under
its current share repurchase authorization as of the date of this
release. Future share repurchases are subject to expected
liquidity, acquisition opportunities, debt covenant restrictions
and other relevant factors.
- The Board of
Directors declared a $0.33 per share third quarter cash dividend on
common shares outstanding, which will be paid on August 26,
2022 to stockholders of record as of August 12, 2022. On an
annualized basis, the dividend is now $1.32 per share, representing
a 10% increase over the previous annualized dividend of $1.20 per
share. Any future dividends are subject to approval by the
Company’s Board of Directors.
2022 Outlook
The Company outlook for 2022 remains very
positive as it continues to expect significant year-over-year
revenue and earnings growth based on first half results and current
trends. Anticipated conditions and trends for the remainder of the
year include the following:
Pawn Operations:
- Pawn operations are
expected to remain the primary earnings driver for 2022 as the
Company expects segment income from the combined U.S. and Latin
America pawn segments will be approximately 80% of total adjusted
segment level pre-tax income.
- Inflationary
economic environments have historically driven increased customer
demand for both pawn loans and value-priced merchandise offered in
pawn stores.
- Demand for pawn
loans in the U.S. continues to be robust, with continued growth in
pawn receivable balances. Customer fundings (new pawns and direct
purchases of merchandise from customers) for July continue to be
above comparative pre-pandemic levels in 2019.
- In Latin America,
growth in pawn balances accelerated significantly in the second
quarter with pawn receivables now above 2019 levels for the first
time since the pandemic began. In July to date, the Company has
seen continued sequential acceleration in customer fundings
compared to June.
- July retail sales
results continue to be extremely strong, with same-store sales up
over 13% in the U.S. and over 8% in Latin America month-to-date
over the comparative prior-year period.
- Pawn merchandise
inventories remain well-positioned, having essentially normalized
to pre-COVID levels with very limited amounts of aged inventory,
which continue to drive retail margins at or above historical
levels.
- Increases in wages
and certain other operating costs across all markets are expected
in 2022, including Mexico in particular, where the federal minimum
wage and certain statutory employee benefits were increased at the
beginning of the year. The Company believes these additional
expenses are manageable and expects them to be more than offset by
increased revenues.
- The Company
continues to expect up to 60 new store additions in 2022 through a
combination of de novo openings and acquisitions.
- The current trading
level for the Mexican peso to the U.S. dollar is approximately 20.5
to 1. Each full point change in the exchange rate of the peso
represents an approximate $0.08 annual impact on earnings per
share.
AFF Operations:
- Despite
macroeconomic headwinds negatively impacting retail sales at many
of AFF’s retail merchant partners, the Company continues to expect
AFF to generate full year growth in gross transaction volumes and
total revenues, primarily from increased door counts from both new
and existing merchant relationships.
- The roll out of AFF
products to the FirstCash stores in the U.S. is well underway with
approximately 300 locations now offering the product and the
remainder of the U.S. pawn stores expected to be onboarded in the
second half of 2022.
- AFF’s estimated
lease and loan loss provisioning for the remainder of the year is
expected to reflect higher, pre-pandemic loss rates with additional
provisioning for certain portfolios given the current macroeconomic
environment. As a reminder, AFF utilizes a lease and loan reserve
methodology that reflects expected lifetime losses on its
portfolios. The initial lifetime lease and loan loss reserve is
established in the month that the transactions are originated and
is updated monthly thereafter only for the change in estimated
future losses.
Tax Rate:
- The consolidated
effective income tax rate for the six months ended June 30, 2022
was 22.2%, which included a $3.4 million permanent tax benefit
related to the gain on revaluation of contingent acquisition
consideration described above. Excluding the permanent tax benefit,
the adjusted effective income tax rate was 24.5% for the six months
ended June 30, 2022.
- For the full year
of 2022, the adjusted effective income tax rate (excluding the
permanent tax benefit described above) under current tax codes in
the U.S. and Latin America is expected to range from 24.5% to
25.5%.
Additional Commentary and
Analysis
Mr. Wessel provided additional insights on the
Company’s strong second quarter operating performance, “Given the
inflationary and uncertain macroeconomic environment, our results
reflect the durability and often defensive nature of our core pawn
business. During the second quarter, we experienced further
demand-driven acceleration of pawn receivable growth in both our
U.S. and LatAm markets. Additionally, demand for deep value retail
goods remained strong, with both segments reporting double-digit
growth in same-store retail sales and retail margins at or above
historical levels. At the same time, we continued to manage our
expenses, with same-store operating expenses up less than the
current rate of inflation in both the U.S. and Latin America.
“These outstanding results in our core pawn
segments generated strong revenue growth which, coupled with
outstanding execution by our experienced operations teams,
translated into even greater earnings growth. As we begin the third
quarter, our pawn stores in both the U.S. and Latin America
continue to see increasing demand for pawn loans and value-priced
merchandise, which is consistent with pawn revenue growth
demonstrated in previous recessionary economic cycles.
“AFF again posted solid results during its
second full quarter since the acquisition late last year. While the
retail environment for most of AFF’s merchant partners remains
challenging, AFF again saw year-over-year growth in gross
transaction volumes and revenues during the second quarter. We are
encouraged by the continued growth in the number of active merchant
doors across most industry verticals, positioning AFF for future
revenue and earnings growth. Credit performance for the quarter was
as expected with trends that are consistent with pre-pandemic
results in 2018 and 2019. The lease and loan loss reserves continue
to reflect lifetime expected losses based on historical performance
and expected near-term trends.
“Consolidated second quarter and year-to-date
earnings growth translated into strong cash flows which continue to
be reinvested into assets supporting revenue growth and shareholder
returns. Growth investments included a combination of pawn store
acquisitions, new store openings and strategic real estate
purchases. We also continued to opportunistically repurchase stock,
with second quarter-to-date repurchases of 301,000 shares and
almost 1.5 million shares repurchased this year through the date of
this release. Since the merger with Cash America in 2016, the
Company has now repurchased almost 10 million shares of stock.
“Additionally, we are especially pleased to
announce the 10% increase in our quarterly dividend to $0.33 per
share, or $1.32 per year, which reflects our continued confidence
and optimism about the business.
“As we look toward the second half of the year
and beyond, we believe that we are very well-positioned with over
80% of our expected adjusted segment net income for 2022
anticipated to come from our core pawn operations. Additionally,
our cash flows and balance sheet are expected to support further
long term growth of assets and shareholder returns. I would like to
thank our 17,000 employees for their hard work and dedication,
particularly over these past few challenging years, while
maintaining our high standards of customer service,” concluded Mr.
Wessel.
About FirstCash
FirstCash is the leading international operator
of pawn stores and a leading provider of technology-driven
point-of-sale payment solutions, both focused on serving cash and
credit-constrained consumers. FirstCash’s more than 2,800 pawn
stores buy and sell a wide variety of jewelry, electronics, tools,
appliances, sporting goods, musical instruments and other
merchandise, and make small consumer pawn loans secured by pledged
personal property. FirstCash, through its wholly owned subsidiary,
AFF, also provides lease-to-own and retail finance payment
solutions for consumer goods and services through a nationwide
network of approximately 7,600 active retail merchant partner
locations. As one of the largest omni-channel providers of “no
credit required” payment options, AFF’s technology provides its
merchant partners with seamless leasing and financing experiences
in-store, online, in-cart and on mobile devices.
FirstCash is a component company in both the
Standard & Poor’s MidCap 400 Index® and the
Russell 2000 Index®. FirstCash’s common stock
(ticker symbol “FCFS”) is traded on the Nasdaq,
the creator of the world’s first electronic stock market. For
additional information regarding FirstCash and the services it
provides, visit FirstCash’s websites located at
http://www.firstcash.com and
http://www.americanfirstfinance.com.
Forward-Looking
Information
This release contains forward-looking statements
about the business, financial condition and prospects of FirstCash
Holdings, Inc. and its wholly owned subsidiaries (together, the
“Company”). Forward-looking statements, as that term is defined in
the Private Securities Litigation Reform Act of 1995, can be
identified by the use of forward-looking terminology such as
“outlook,” “believes,” “projects,” “expects,” “may,” “estimates,”
“should,” “plans,” “targets,” “intends,” “could,” “would,”
“anticipates,” “potential,” “confident,” “optimistic,” or the
negative thereof, or other variations thereon, or comparable
terminology, or by discussions of strategy, objectives, estimates,
guidance, expectations and future plans. Forward-looking statements
can also be identified by the fact that these statements do not
relate strictly to historical or current matters. Rather,
forward-looking statements relate to anticipated or expected
events, activities, trends or results. Because forward-looking
statements relate to matters that have not yet occurred, these
statements are inherently subject to risks and uncertainties.
While the Company believes the expectations
reflected in forward-looking statements are reasonable, there can
be no assurances such expectations will prove to be accurate.
Security holders are cautioned such forward-looking statements
involve risks and uncertainties. Certain factors may cause results
to differ materially from those anticipated by the forward-looking
statements made in this release. Such factors may include, without
limitation, risks related to the AFF transaction, including the
failure of the transaction to deliver the estimated value and
benefits expected by the Company, the incurrence of unexpected
future costs, liabilities or obligations as a result of the
transaction, the effect of the transaction on the ability of the
Company to retain and hire personnel and maintain relationships
with retail partners, consumers and others with whom the Company
and AFF do business; the ability of the Company to successfully
integrate AFF’s operations; the ability of the Company to
successfully implement its plans, forecasts and other expectations
with respect to AFF’s business; risks associated with the Consumer
Financial Protection Bureau (the “CFPB”) lawsuit filed against the
Company, the putative shareholder securities class action lawsuit
filed against the Company, the California private lawsuits filed
against the Company in which the plaintiffs are seeking class
certification, and subpoenas seeking information from the Company
received from state regulators from time to time, including the
incurrence of meaningful expenses, reputational damage, monetary
damages and other penalties; risks related to the regulatory
environment in which the Company operates; general economic risks,
including the contributory effects of the COVID-19 pandemic and
governmental responses that have been, and may in the future be,
imposed in response to the pandemic; potential changes in consumer
behavior and shopping patterns which could impact demand for the
Company’s pawn loan, retail, lease-to-own and retail finance
products; labor shortages and increased labor costs; inflation; a
deterioration in the economic conditions in the United States and
Latin America which potentially could have an impact on
discretionary consumer spending; currency fluctuations, primarily
involving the Mexican peso; and other risks discussed and described
in the Company’s most recent Annual Report on Form 10-K filed with
the Securities and Exchange Commission (the “SEC”), including the
risks described in Part 1, Item 1A, “Risk Factors” thereof, and
other reports filed with the SEC. Many of these risks and
uncertainties are beyond the ability of the Company to control, nor
can the Company predict, in many cases, all of the risks and
uncertainties that could cause its actual results to differ
materially from those indicated by the forward-looking statements.
The forward-looking statements contained in this release speak only
as of the date of this release, and the Company expressly disclaims
any obligation or undertaking to report any updates or revisions to
any such statement to reflect any change in the Company’s
expectations or any change in events, conditions or circumstances
on which any such statement is based, except as required by
law.
FIRSTCASH HOLDINGS,
INC.CONSOLIDATED STATEMENTS OF
INCOME(unaudited, in thousands)
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Revenue: |
|
|
|
|
|
|
|
Retail merchandise sales |
$ |
298,257 |
|
|
$ |
265,567 |
|
|
$ |
601,076 |
|
|
$ |
537,609 |
|
Pawn loan fees |
|
134,067 |
|
|
|
109,909 |
|
|
|
265,886 |
|
|
|
225,431 |
|
Leased merchandise income |
|
147,700 |
|
|
|
— |
|
|
|
297,647 |
|
|
|
— |
|
Interest and fees on finance receivables |
|
43,744 |
|
|
|
— |
|
|
|
86,193 |
|
|
|
— |
|
Wholesale scrap jewelry sales |
|
23,848 |
|
|
|
14,102 |
|
|
|
56,653 |
|
|
|
34,477 |
|
Total revenue |
|
647,616 |
|
|
|
389,578 |
|
|
|
1,307,455 |
|
|
|
797,517 |
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
179,309 |
|
|
|
153,424 |
|
|
|
361,523 |
|
|
|
310,577 |
|
Depreciation of leased merchandise |
|
82,605 |
|
|
|
— |
|
|
|
176,311 |
|
|
|
— |
|
Provision for lease losses |
|
38,035 |
|
|
|
— |
|
|
|
77,855 |
|
|
|
— |
|
Provision for loan losses |
|
26,800 |
|
|
|
— |
|
|
|
51,497 |
|
|
|
— |
|
Cost of wholesale scrap jewelry sold |
|
19,895 |
|
|
|
11,932 |
|
|
|
48,110 |
|
|
|
29,129 |
|
Total cost of revenue |
|
346,644 |
|
|
|
165,356 |
|
|
|
715,296 |
|
|
|
339,706 |
|
|
|
|
|
|
|
|
|
Net revenue |
|
300,972 |
|
|
|
224,222 |
|
|
|
592,159 |
|
|
|
457,811 |
|
|
|
|
|
|
|
|
|
Expenses and other
income: |
|
|
|
|
|
|
|
Operating expenses |
|
180,555 |
|
|
|
139,128 |
|
|
|
353,851 |
|
|
|
276,452 |
|
Administrative expenses |
|
37,068 |
|
|
|
27,398 |
|
|
|
73,931 |
|
|
|
58,397 |
|
Depreciation and amortization |
|
25,982 |
|
|
|
10,902 |
|
|
|
51,524 |
|
|
|
21,514 |
|
Interest expense |
|
16,246 |
|
|
|
7,198 |
|
|
|
32,467 |
|
|
|
14,428 |
|
Interest income |
|
(222 |
) |
|
|
(119 |
) |
|
|
(898 |
) |
|
|
(277 |
) |
Loss (gain) on foreign exchange |
|
27 |
|
|
|
(577 |
) |
|
|
(453 |
) |
|
|
(310 |
) |
Merger and acquisition expenses |
|
314 |
|
|
|
1,086 |
|
|
|
979 |
|
|
|
1,252 |
|
Gain on revaluation of contingent acquisition consideration |
|
(65,559 |
) |
|
|
— |
|
|
|
(62,989 |
) |
|
|
— |
|
Other expenses (income), net |
|
(3,062 |
) |
|
|
401 |
|
|
|
(2,885 |
) |
|
|
1,279 |
|
Total expenses and other income |
|
191,349 |
|
|
|
185,417 |
|
|
|
445,527 |
|
|
|
372,735 |
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
109,623 |
|
|
|
38,805 |
|
|
|
146,632 |
|
|
|
85,076 |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
23,515 |
|
|
|
10,378 |
|
|
|
32,519 |
|
|
|
22,934 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
86,108 |
|
|
$ |
28,427 |
|
|
$ |
114,113 |
|
|
$ |
62,142 |
|
Certain amounts in the consolidated statements
of income for the three and six months ended June 30, 2021
have been reclassified in order to conform to the 2022
presentation.
FIRSTCASH HOLDINGS,
INC.CONSOLIDATED BALANCE
SHEETS(unaudited, in thousands)
|
June 30, |
|
December 31, |
|
2022 |
|
2021 |
|
2021 |
ASSETS |
|
|
|
|
|
Cash and cash equivalents |
$ |
110,414 |
|
|
$ |
50,061 |
|
|
$ |
120,046 |
|
Accounts receivable, net |
|
55,924 |
|
|
|
40,183 |
|
|
|
55,356 |
|
Pawn loans |
|
385,708 |
|
|
|
312,166 |
|
|
|
347,973 |
|
Finance receivables,
net(1) |
|
125,619 |
|
|
|
— |
|
|
|
181,021 |
|
Inventories |
|
260,528 |
|
|
|
216,955 |
|
|
|
263,311 |
|
Leased merchandise,
net(1) |
|
118,924 |
|
|
|
— |
|
|
|
143,944 |
|
Prepaid expenses and other
current assets |
|
21,125 |
|
|
|
19,022 |
|
|
|
17,707 |
|
Total current assets |
|
1,078,242 |
|
|
|
638,387 |
|
|
|
1,129,358 |
|
|
|
|
|
|
|
Property and equipment,
net |
|
519,836 |
|
|
|
404,283 |
|
|
|
462,526 |
|
Operating lease right of use
asset |
|
301,979 |
|
|
|
299,223 |
|
|
|
306,061 |
|
Goodwill |
|
1,522,192 |
|
|
|
1,017,273 |
|
|
|
1,536,178 |
|
Intangible assets, net |
|
359,716 |
|
|
|
83,372 |
|
|
|
388,184 |
|
Other assets |
|
8,345 |
|
|
|
9,406 |
|
|
|
8,531 |
|
Deferred tax assets, net |
|
6,231 |
|
|
|
4,489 |
|
|
|
5,614 |
|
Total assets |
$ |
3,796,541 |
|
|
$ |
2,456,433 |
|
|
$ |
3,836,452 |
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
Accounts payable and accrued
liabilities |
$ |
198,967 |
|
|
$ |
103,700 |
|
|
$ |
244,327 |
|
Customer deposits and
prepayments |
|
59,754 |
|
|
|
44,486 |
|
|
|
57,310 |
|
Lease liability, current |
|
90,804 |
|
|
|
89,027 |
|
|
|
90,570 |
|
Total current liabilities |
|
349,525 |
|
|
|
237,213 |
|
|
|
392,207 |
|
|
|
|
|
|
|
Revolving unsecured credit
facilities |
|
274,000 |
|
|
|
163,000 |
|
|
|
259,000 |
|
Senior unsecured notes |
|
1,034,761 |
|
|
|
493,303 |
|
|
|
1,033,904 |
|
Deferred tax liabilities,
net |
|
121,046 |
|
|
|
75,912 |
|
|
|
126,098 |
|
Lease liability,
non-current |
|
199,211 |
|
|
|
196,189 |
|
|
|
203,166 |
|
Other liabilities |
|
— |
|
|
|
— |
|
|
|
13,950 |
|
Total liabilities |
|
1,978,543 |
|
|
|
1,165,617 |
|
|
|
2,028,325 |
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
Common stock |
|
573 |
|
|
|
493 |
|
|
|
573 |
|
Additional paid-in capital |
|
1,729,625 |
|
|
|
1,219,948 |
|
|
|
1,724,956 |
|
Retained earnings |
|
952,011 |
|
|
|
828,040 |
|
|
|
866,679 |
|
Accumulated other comprehensive loss |
|
(119,994 |
) |
|
|
(115,790 |
) |
|
|
(131,299 |
) |
Common stock held in treasury, at cost |
|
(744,217 |
) |
|
|
(641,875 |
) |
|
|
(652,782 |
) |
Total stockholders’ equity |
|
1,817,998 |
|
|
|
1,290,816 |
|
|
|
1,808,127 |
|
Total liabilities and stockholders’ equity |
$ |
3,796,541 |
|
|
$ |
2,456,433 |
|
|
$ |
3,836,452 |
|
Certain amounts in the consolidated balance
sheets as of June 30, 2021 and December 31, 2021 have been
reclassified in order to conform to the 2022 presentation.
(1) See reconciliation of 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.
FIRSTCASH HOLDINGS,
INC.OPERATING
INFORMATION(UNAUDITED)
The Company’s reportable segments are as
follows:
- U.S. pawn
- Latin 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.
Administrative expenses and amortization expense of intangible
assets related to the purchase of AFF are not included in the
segment pre-tax operating income.
U.S. Pawn Segment Results
The following table details earning assets,
which consist of pawn loans and inventories, as well as other
earning asset metrics of the U.S. pawn segment as of June 30,
2022 as compared to June 30, 2021 (dollars in thousands,
except as otherwise noted):
|
As of June 30, |
|
|
|
2022 |
|
2021 |
|
Increase |
U.S. Pawn
Segment |
|
|
|
|
|
|
|
Earning assets: |
|
|
|
|
|
|
|
Pawn loans |
$ |
271,255 |
|
|
$ |
203,838 |
|
|
33 |
% |
Inventories |
|
185,921 |
|
|
|
144,083 |
|
|
29 |
% |
|
$ |
457,176 |
|
|
$ |
347,921 |
|
|
31 |
% |
|
|
|
|
|
|
|
|
Average outstanding pawn loan
amount (in ones) |
$ |
222 |
|
|
$ |
209 |
|
|
6 |
% |
|
|
|
|
|
|
|
|
Composition of pawn
collateral: |
|
|
|
|
|
|
|
General merchandise |
35 |
% |
|
35 |
% |
|
|
Jewelry |
65 |
% |
|
65 |
% |
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
Composition of
inventories: |
|
|
|
|
|
|
|
General merchandise |
45 |
% |
|
49 |
% |
|
|
Jewelry |
55 |
% |
|
51 |
% |
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
Percentage of inventory aged
greater than one year |
1 |
% |
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
Inventory turns (trailing
twelve months cost of merchandise sales divided by average
inventories) |
2.7 times |
|
3.1 times |
|
|
FIRSTCASH HOLDINGS,
INC.OPERATING INFORMATION
(CONTINUED)(UNAUDITED)
The following table presents segment pre-tax
operating income and other operating metrics of the U.S. pawn
segment for the three months ended June 30, 2022 as compared
to the three months ended June 30, 2021 (dollars in
thousands):
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
2022 |
|
2021 |
|
Increase |
U.S. Pawn
Segment |
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
Retail merchandise sales |
$ |
195,369 |
|
|
$ |
173,254 |
|
|
13 |
% |
Pawn loan fees |
|
87,743 |
|
|
|
66,942 |
|
|
31 |
% |
Wholesale scrap jewelry sales |
|
15,673 |
|
|
|
6,846 |
|
|
129 |
% |
Total revenue |
|
298,785 |
|
|
|
247,042 |
|
|
21 |
% |
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
114,390 |
|
|
|
95,599 |
|
|
20 |
% |
Cost of wholesale scrap jewelry sold |
|
13,282 |
|
|
|
5,387 |
|
|
147 |
% |
Total cost of revenue |
|
127,672 |
|
|
|
100,986 |
|
|
26 |
% |
|
|
|
|
|
|
|
|
Net revenue |
|
171,113 |
|
|
|
146,056 |
|
|
17 |
% |
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
Operating expenses |
|
101,242 |
|
|
|
93,574 |
|
|
8 |
% |
Depreciation and amortization |
|
5,868 |
|
|
|
5,347 |
|
|
10 |
% |
Total segment expenses |
|
107,110 |
|
|
|
98,921 |
|
|
8 |
% |
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
$ |
64,003 |
|
|
$ |
47,135 |
|
|
36 |
% |
|
|
|
|
|
|
|
|
Operating metrics: |
|
|
|
|
|
|
|
Retail merchandise sales margin |
41 |
% |
|
45 |
% |
|
|
Net revenue margin |
57 |
% |
|
59 |
% |
|
|
Segment pre-tax operating margin |
21 |
% |
|
19 |
% |
|
|
FIRSTCASH HOLDINGS,
INC.OPERATING INFORMATION
(CONTINUED)(UNAUDITED)
The following table presents segment pre-tax
operating income and other operating metrics of the U.S. pawn
segment for the six months ended June 30, 2022 as compared to
the six months ended June 30, 2021 (dollars in thousands):
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2022 |
|
2021 |
|
Increase |
U.S. Pawn
Segment |
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
Retail merchandise sales |
$ |
400,311 |
|
|
$ |
363,211 |
|
|
10 |
% |
Pawn loan fees |
|
178,082 |
|
|
|
143,339 |
|
|
24 |
% |
Wholesale scrap jewelry sales |
|
32,197 |
|
|
|
16,049 |
|
|
101 |
% |
Total revenue |
|
610,590 |
|
|
|
522,599 |
|
|
17 |
% |
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
234,108 |
|
|
|
202,129 |
|
|
16 |
% |
Cost of wholesale scrap jewelry sold |
|
27,812 |
|
|
|
12,900 |
|
|
116 |
% |
Total cost of revenue |
|
261,920 |
|
|
|
215,029 |
|
|
22 |
% |
|
|
|
|
|
|
|
|
Net revenue |
|
348,670 |
|
|
|
307,570 |
|
|
13 |
% |
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
Operating expenses |
|
200,064 |
|
|
|
188,821 |
|
|
6 |
% |
Depreciation and amortization |
|
11,455 |
|
|
|
10,729 |
|
|
7 |
% |
Total segment expenses |
|
211,519 |
|
|
|
199,550 |
|
|
6 |
% |
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
$ |
137,151 |
|
|
$ |
108,020 |
|
|
27 |
% |
|
|
|
|
|
|
|
|
Operating metrics: |
|
|
|
|
|
|
|
Retail merchandise sales margin |
42 |
% |
|
44 |
% |
|
|
Net revenue margin |
57 |
% |
|
59 |
% |
|
|
Segment pre-tax operating margin |
22 |
% |
|
21 |
% |
|
|
FIRSTCASH HOLDINGS,
INC.OPERATING INFORMATION
(CONTINUED)(UNAUDITED)
Latin America Pawn Segment
Results
The Company’s management reviews and analyzes
certain operating results in Latin America on a constant currency
basis because the Company believes this better represents the
Company’s underlying business trends. Constant currency results are
non-GAAP financial measures, which exclude the effects of foreign
currency translation and are calculated by translating current-year
results at prior-year average exchange rates. The wholesale scrap
jewelry sales in Latin America are priced and settled in U.S.
dollars and are not affected by foreign currency translation, as
are a small percentage of the operating and administrative expenses
in Latin America, which are billed and paid in U.S. dollars.
Amounts presented on a constant currency basis are denoted as such.
See the “Constant Currency Results” section below for additional
discussion of constant currency results.
The following table provides exchange rates for
the Mexican peso, Guatemalan quetzal and Colombian peso for the
current and prior-year periods:
|
June 30, |
|
Favorable / |
|
|
2022 |
|
2021 |
|
(Unfavorable) |
|
Mexican peso / U.S. dollar
exchange rate: |
|
|
|
|
|
|
End-of-period |
20.0 |
|
19.8 |
|
(1 |
)% |
Three months ended |
20.0 |
|
20.1 |
|
— |
% |
Six months ended |
20.3 |
|
20.2 |
|
— |
% |
|
|
|
|
|
|
|
Guatemalan quetzal / U.S.
dollar exchange rate: |
|
|
|
|
|
|
End-of-period |
7.8 |
|
7.7 |
|
(1 |
)% |
Three months ended |
7.7 |
|
7.7 |
|
— |
% |
Six months ended |
7.7 |
|
7.7 |
|
— |
% |
|
|
|
|
|
|
|
Colombian peso / U.S. dollar
exchange rate: |
|
|
|
|
|
|
End-of-period |
4,127 |
|
3,757 |
|
(10 |
)% |
Three months ended |
3,914 |
|
3,690 |
|
(6 |
)% |
Six months ended |
3,914 |
|
3,622 |
|
(8 |
)% |
FIRSTCASH HOLDINGS,
INC.OPERATING INFORMATION
(CONTINUED)(UNAUDITED)
The following table details earning assets,
which consist of pawn loans and inventories as well as other
earning asset metrics of the Latin America pawn segment as of
June 30, 2022 as compared to June 30, 2021 (dollars in
thousands, except as otherwise noted):
|
|
|
|
|
|
|
|
|
Constant Currency Basis |
|
|
|
|
|
|
|
|
|
As of |
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
As of June 30, |
|
|
|
2022 |
|
Increase |
|
2022 |
|
2021 |
|
Increase |
|
(Non-GAAP) |
|
(Non-GAAP) |
Latin America Pawn
Segment |
|
|
|
|
|
|
|
|
|
|
|
Earning assets: |
|
|
|
|
|
|
|
|
|
|
|
Pawn loans |
$ |
114,453 |
|
|
$ |
108,328 |
|
|
6 |
% |
|
$ |
115,482 |
|
7 |
% |
Inventories |
|
74,607 |
|
|
|
72,872 |
|
|
2 |
% |
|
|
75,278 |
|
3 |
% |
|
$ |
189,060 |
|
|
$ |
181,200 |
|
|
4 |
% |
|
$ |
190,760 |
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Average outstanding pawn loan
amount (in ones) |
$ |
80 |
|
|
$ |
80 |
|
|
— |
% |
|
$ |
81 |
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Composition of pawn
collateral: |
|
|
|
|
|
|
|
|
|
|
|
General merchandise |
69 |
% |
|
67 |
% |
|
|
|
|
|
|
Jewelry |
31 |
% |
|
33 |
% |
|
|
|
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of
inventories: |
|
|
|
|
|
|
|
|
|
|
|
General merchandise |
70 |
% |
|
64 |
% |
|
|
|
|
|
|
Jewelry |
30 |
% |
|
36 |
% |
|
|
|
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of inventory aged
greater than one year |
1 |
% |
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory turns (trailing
twelve months cost of merchandise sales divided by average
inventories) |
4.2 times |
|
4.4 times |
|
|
|
|
|
|
FIRSTCASH HOLDINGS,
INC.OPERATING INFORMATION
(CONTINUED)(UNAUDITED)
The following table presents segment pre-tax
operating income and other operating metrics of the Latin America
pawn segment for the three months ended June 30, 2022 as
compared to the three months ended June 30, 2021 (dollars in
thousands):
|
|
|
|
|
|
|
Constant Currency Basis |
|
|
|
|
|
|
|
Three Months |
|
|
|
|
|
|
|
Ended |
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
June 30, |
|
|
|
2022 |
|
Increase |
|
2022 |
|
2021 |
|
Increase |
|
(Non-GAAP) |
|
(Non-GAAP) |
Latin America Pawn
Segment |
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
Retail merchandise sales |
$ |
102,888 |
|
|
$ |
92,313 |
|
|
11 |
% |
|
$ |
102,841 |
|
|
11 |
% |
Pawn loan fees |
|
46,324 |
|
|
|
42,967 |
|
|
8 |
% |
|
|
46,304 |
|
|
8 |
% |
Wholesale scrap jewelry sales |
|
8,175 |
|
|
|
7,256 |
|
|
13 |
% |
|
|
8,175 |
|
|
13 |
% |
Total revenue |
|
157,387 |
|
|
|
142,536 |
|
|
10 |
% |
|
|
157,320 |
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
64,919 |
|
|
|
57,825 |
|
|
12 |
% |
|
|
64,888 |
|
|
12 |
% |
Cost of wholesale scrap jewelry sold |
|
6,613 |
|
|
|
6,545 |
|
|
1 |
% |
|
|
6,609 |
|
|
1 |
% |
Total cost of revenue |
|
71,532 |
|
|
|
64,370 |
|
|
11 |
% |
|
|
71,497 |
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
85,855 |
|
|
|
78,166 |
|
|
10 |
% |
|
|
85,823 |
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
|
Operating expenses |
|
48,053 |
|
|
|
45,554 |
|
|
5 |
% |
|
|
48,048 |
|
|
5 |
% |
Depreciation and amortization |
|
4,553 |
|
|
|
4,534 |
|
|
— |
% |
|
|
4,559 |
|
|
1 |
% |
Total segment expenses |
|
52,606 |
|
|
|
50,088 |
|
|
5 |
% |
|
|
52,607 |
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
$ |
33,249 |
|
|
$ |
28,078 |
|
|
18 |
% |
|
$ |
33,216 |
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
Operating metrics: |
|
|
|
|
|
|
|
|
|
Retail merchandise sales margin |
37 |
% |
37 |
% |
|
|
37 |
% |
|
|
Net revenue margin |
55 |
% |
55 |
% |
|
|
55 |
% |
|
|
Segment pre-tax operating margin |
21 |
% |
20 |
% |
|
|
21 |
% |
|
|
FIRSTCASH HOLDINGS,
INC.OPERATING INFORMATION
(CONTINUED)(UNAUDITED)
The following table presents segment pre-tax
operating income and other operating metrics of the Latin America
pawn segment for the six months ended June 30, 2022 as
compared to the six months ended June 30, 2021 (dollars in
thousands):
|
|
|
|
|
|
|
Constant Currency Basis |
|
|
|
|
|
|
|
Six Months |
|
|
|
|
|
|
|
Ended |
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
June 30, |
|
|
|
2022 |
|
Increase |
|
2022 |
|
2021 |
|
Increase |
|
(Non-GAAP) |
|
(Non-GAAP) |
Latin America Pawn
Segment |
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
Retail merchandise sales |
$ |
200,765 |
|
|
$ |
174,398 |
|
|
15 |
% |
|
$ |
201,673 |
|
|
16 |
% |
Pawn loan fees |
|
87,804 |
|
|
|
82,092 |
|
|
7 |
% |
|
|
88,202 |
|
|
7 |
% |
Wholesale scrap jewelry sales |
|
24,456 |
|
|
|
18,428 |
|
|
33 |
% |
|
|
24,456 |
|
|
33 |
% |
Total revenue |
|
313,025 |
|
|
|
274,918 |
|
|
14 |
% |
|
|
314,331 |
|
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
127,415 |
|
|
|
108,448 |
|
|
17 |
% |
|
|
127,987 |
|
|
18 |
% |
Cost of wholesale scrap jewelry sold |
|
20,298 |
|
|
|
16,229 |
|
|
25 |
% |
|
|
20,392 |
|
|
26 |
% |
Total cost of revenue |
|
147,713 |
|
|
|
124,677 |
|
|
18 |
% |
|
|
148,379 |
|
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
165,312 |
|
|
|
150,241 |
|
|
10 |
% |
|
|
165,952 |
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
|
Operating expenses |
|
93,595 |
|
|
|
87,631 |
|
|
7 |
% |
|
|
94,032 |
|
|
7 |
% |
Depreciation and amortization |
|
8,954 |
|
|
|
8,797 |
|
|
2 |
% |
|
|
9,013 |
|
|
2 |
% |
Total segment expenses |
|
102,549 |
|
|
|
96,428 |
|
|
6 |
% |
|
|
103,045 |
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
$ |
62,763 |
|
|
$ |
53,813 |
|
|
17 |
% |
|
$ |
62,907 |
|
|
17 |
% |
|
|
|
|
|
|
|
|
|
|
Operating metrics: |
|
|
|
|
|
|
|
|
|
Retail merchandise sales margin |
37 |
% |
38 |
% |
|
|
37 |
% |
|
|
Net revenue margin |
53 |
% |
55 |
% |
|
|
53 |
% |
|
|
Segment pre-tax operating margin |
20 |
% |
20 |
% |
|
|
20 |
% |
|
|
FIRSTCASH HOLDINGS,
INC.OPERATING INFORMATION
(CONTINUED)(UNAUDITED)
Retail POS Payment Solutions Segment
Results
The Company completed the AFF acquisition on
December 17, 2021, and the results of operations of AFF have been
consolidated since the acquisition date. 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, which is approximately one year from the date
of the acquisition. The Company expects the fair value adjustments
impacting AFF’s earning assets and segment earnings will be minimal
in 2023 and beyond.
The following table provides a detail of leased
merchandise as reported and as adjusted to exclude the impacts of
purchase accounting as of June 30, 2022 (in thousands):
|
As of June 30, 2022 |
|
As Reported(GAAP) |
|
Adjustments |
|
Adjusted(Non-GAAP) |
Leased merchandise, before allowance for lease losses(1) |
$ |
188,025 |
|
|
$ |
15,174 |
|
|
$ |
203,199 |
|
Less allowance for lease losses |
|
(69,101 |
) |
|
|
(16,913 |
) |
|
|
(86,014 |
) |
Leased merchandise, net |
$ |
118,924 |
|
|
$ |
(1,739 |
) |
|
$ |
117,185 |
|
(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.
The following table provides a detail of finance
receivables as reported and as adjusted to exclude the impacts of
purchase accounting as of June 30, 2022 (in thousands):
|
As of June 30, 2022 |
|
As Reported(GAAP) |
|
Adjustments |
|
Adjusted(Non-GAAP) |
Finance receivables, before allowance for loan losses(1) |
$ |
199,555 |
|
|
$ |
(14,970 |
) |
|
$ |
184,585 |
|
Less allowance for loan losses |
|
(73,936 |
) |
|
|
— |
|
|
|
(73,936 |
) |
Finance receivables, net |
$ |
125,619 |
|
|
$ |
(14,970 |
) |
|
$ |
110,649 |
|
(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.
FIRSTCASH HOLDINGS,
INC.OPERATING INFORMATION
(CONTINUED)(UNAUDITED)
The following table presents segment pre-tax
operating income as reported and as adjusted to exclude the impacts
of purchase accounting for the three months ended June 30,
2022 (in thousands):
|
Three Months Ended June 30, 2022 |
|
As Reported |
|
|
|
Adjusted |
|
(GAAP) |
|
Adjustments |
|
(Non-GAAP) |
Retail POS Payment
Solutions Segment |
|
|
|
|
|
Revenue: |
|
|
|
|
|
Leased merchandise income |
$ |
147,700 |
|
$ |
— |
|
|
$ |
147,700 |
Interest and fees on finance receivables |
|
43,744 |
|
|
11,514 |
|
|
|
55,258 |
Total revenue |
|
191,444 |
|
|
11,514 |
|
|
|
202,958 |
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
Depreciation of leased merchandise |
|
82,605 |
|
|
(1,598 |
) |
|
|
81,007 |
Provision for lease losses |
|
38,035 |
|
|
— |
|
|
|
38,035 |
Provision for loan losses |
|
26,800 |
|
|
— |
|
|
|
26,800 |
Total cost of revenue |
|
147,440 |
|
|
(1,598 |
) |
|
|
145,842 |
|
|
|
|
|
|
Net revenue |
|
44,004 |
|
|
13,112 |
|
|
|
57,116 |
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
Operating expenses |
|
31,260 |
|
|
— |
|
|
|
31,260 |
Depreciation and amortization |
|
699 |
|
|
— |
|
|
|
699 |
Total segment expenses |
|
31,959 |
|
|
— |
|
|
|
31,959 |
|
|
|
|
|
|
Segment pre-tax operating
income |
$ |
12,045 |
|
$ |
13,112 |
|
|
$ |
25,157 |
FIRSTCASH HOLDINGS,
INC.OPERATING INFORMATION
(CONTINUED)(UNAUDITED)
The following table presents segment pre-tax
operating income as reported and as adjusted to exclude the impacts
of purchase accounting for the six months ended June 30, 2022
(in thousands):
|
Six Months Ended June 30, 2022 |
|
As Reported |
|
|
|
Adjusted |
|
(GAAP) |
|
Adjustments |
|
(Non-GAAP) |
Retail POS Payment
Solutions Segment |
|
|
|
|
|
Revenue: |
|
|
|
|
|
Leased merchandise income |
$ |
297,647 |
|
$ |
— |
|
|
$ |
297,647 |
Interest and fees on finance receivables |
|
86,193 |
|
|
27,687 |
|
|
|
113,880 |
Total revenue |
|
383,840 |
|
|
27,687 |
|
|
|
411,527 |
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
Depreciation of leased merchandise |
|
176,311 |
|
|
(5,957 |
) |
|
|
170,354 |
Provision for lease losses |
|
77,855 |
|
|
— |
|
|
|
77,855 |
Provision for loan losses |
|
51,497 |
|
|
— |
|
|
|
51,497 |
Total cost of revenue |
|
305,663 |
|
|
(5,957 |
) |
|
|
299,706 |
|
|
|
|
|
|
Net revenue |
|
78,177 |
|
|
33,644 |
|
|
|
111,821 |
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
Operating expenses |
|
60,192 |
|
|
— |
|
|
|
60,192 |
Depreciation and amortization |
|
1,381 |
|
|
— |
|
|
|
1,381 |
Total segment expenses |
|
61,573 |
|
|
— |
|
|
|
61,573 |
|
|
|
|
|
|
Segment pre-tax operating
income |
$ |
16,604 |
|
$ |
33,644 |
|
|
$ |
50,248 |
FIRSTCASH HOLDINGS,
INC.OPERATING INFORMATION
(CONTINUED)(UNAUDITED)
Consolidated Results of Operations
The following table reconciles pre-tax operating
income of the Company’s U.S. pawn segment, Latin America pawn
segment and retail POS payment solutions segment discussed above to
consolidated net income (in thousands):
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Consolidated Results
of Operations |
|
|
|
|
|
|
|
Segment pre-tax operating
income: |
|
|
|
|
|
|
|
U.S. pawn |
$ |
64,003 |
|
|
$ |
47,135 |
|
|
$ |
137,151 |
|
|
$ |
108,020 |
|
Latin America pawn |
|
33,249 |
|
|
|
28,078 |
|
|
|
62,763 |
|
|
|
53,813 |
|
Retail POS payment solutions(1) |
|
12,045 |
|
|
|
— |
|
|
|
16,604 |
|
|
|
— |
|
Consolidated segment pre-tax operating income |
|
109,297 |
|
|
|
75,213 |
|
|
|
216,518 |
|
|
|
161,833 |
|
|
|
|
|
|
|
|
|
Corporate expenses and other
income: |
|
|
|
|
|
|
|
Administrative expenses |
|
37,068 |
|
|
|
27,398 |
|
|
|
73,931 |
|
|
|
58,397 |
|
Depreciation and amortization |
|
14,862 |
|
|
|
1,021 |
|
|
|
29,734 |
|
|
|
1,988 |
|
Interest expense |
|
16,246 |
|
|
|
7,198 |
|
|
|
32,467 |
|
|
|
14,428 |
|
Interest income |
|
(222 |
) |
|
|
(119 |
) |
|
|
(898 |
) |
|
|
(277 |
) |
Loss (gain) on foreign exchange |
|
27 |
|
|
|
(577 |
) |
|
|
(453 |
) |
|
|
(310 |
) |
Merger and acquisition expenses |
|
314 |
|
|
|
1,086 |
|
|
|
979 |
|
|
|
1,252 |
|
Gain on revaluation of contingent acquisition consideration |
|
(65,559 |
) |
|
|
— |
|
|
|
(62,989 |
) |
|
|
— |
|
Other expenses (income), net |
|
(3,062 |
) |
|
|
401 |
|
|
|
(2,885 |
) |
|
|
1,279 |
|
Total corporate expenses and other income |
|
(326 |
) |
|
|
36,408 |
|
|
|
69,886 |
|
|
|
76,757 |
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
109,623 |
|
|
|
38,805 |
|
|
|
146,632 |
|
|
|
85,076 |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
23,515 |
|
|
|
10,378 |
|
|
|
32,519 |
|
|
|
22,934 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
86,108 |
|
|
$ |
28,427 |
|
|
$ |
114,113 |
|
|
$ |
62,142 |
|
(1) The AFF segment results are
significantly impacted by certain purchase accounting adjustments
as noted in the retail POS payment solutions segment results of
operations above. Adjusted retail POS payment solutions segment
pre-tax operating income excluding such purchase accounting
adjustments was $25 million and $50 million for the three and six
months ended June 30, 2022, respectively.
FIRSTCASH HOLDINGS,
INC.PAWN STORE COUNT ACTIVITY
As of June 30, 2022, the Company operated
2,834 pawn store locations comprised of 1,076 stores in 25 U.S.
states and the District of Columbia, 1,669 stores in 32 states in
Mexico, 60 stores in Guatemala, 15 stores in Colombia and 14 stores
in El Salvador.
The following tables detail pawn store count
activity for the three and six months ended June 30, 2022:
|
Three Months Ended June 30, 2022 |
|
U.S. |
|
Latin America |
|
Total |
Total locations, beginning of period |
1,078 |
|
|
1,751 |
|
|
2,829 |
|
New locations opened(1) |
— |
|
|
9 |
|
|
9 |
|
Locations acquired |
1 |
|
|
— |
|
|
1 |
|
Consolidation of existing pawn locations(2) |
(3 |
) |
|
(2 |
) |
|
(5 |
) |
Total locations, end of period |
1,076 |
|
|
1,758 |
|
|
2,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2022 |
|
U.S. |
|
Latin America |
|
Total |
Total locations, beginning of
period |
1,081 |
|
|
1,744 |
|
|
2,825 |
|
New locations opened(1) |
— |
|
|
19 |
|
|
19 |
|
Locations acquired |
1 |
|
|
— |
|
|
1 |
|
Consolidation of existing pawn locations(2) |
(6 |
) |
|
(5 |
) |
|
(11 |
) |
Total locations, end of period |
1,076 |
|
|
1,758 |
|
|
2,834 |
|
(1) In addition to new store openings, the
Company strategically relocated two stores in the U.S. during the
three months ended June 30, 2022. During the six months ended
June 30, 2022, the Company relocated two stores in the U.S.
and one store in Latin America.(2) 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.As of June 30, 2022, AFF
provided LTO and retail POS solutions for consumer goods and
services through a nationwide network of approximately 7,600 active
retail merchant partner locations.
FIRSTCASH HOLDINGS,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL
MEASURES(UNAUDITED)
The Company uses certain financial calculations
such as adjusted net income, adjusted diluted earnings per share,
EBITDA, adjusted EBITDA, free cash flow, adjusted free cash flow,
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 SEC rules. The
Company uses these non-GAAP financial measures in operating its
business because management believes they are less susceptible to
variances in actual operating performance that can result from the
excluded items, other infrequent charges and currency fluctuations.
The Company presents these financial measures to investors because
management believes they are useful to investors in evaluating the
primary factors that drive the Company’s core operating performance
and provide greater transparency into the Company’s results of
operations. However, items that are excluded and other adjustments
and assumptions that are made in calculating these non-GAAP
financial measures are significant components in understanding and
assessing the Company’s financial performance. These non-GAAP
financial measures should be evaluated in conjunction with, and are
not a substitute for, the Company’s GAAP financial measures.
Further, because these non-GAAP financial measures are not
determined in accordance with GAAP and are thus susceptible to
varying calculations, the non-GAAP financial measures, as
presented, may not be comparable to other similarly-titled measures
of other companies.
While acquisitions are an important part of the
Company’s overall strategy, the Company has adjusted the applicable
financial calculations to exclude merger and acquisition expenses,
including the Company’s transaction expenses incurred in connection
with its acquisition of AFF, and the impacts of purchase accounting
with respect to the AFF acquisition in order 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 Mexico which
are denominated in U.S. dollars. The lease liability of these U.S.
dollar denominated leases, which is considered a monetary
liability, is remeasured into Mexican pesos using current period
exchange rates, resulting in the recognition of foreign currency
exchange gains or losses. The Company has adjusted the applicable
financial measures to exclude these remeasurement gains or losses
because they are non-cash, non-operating items that could create
volatility in the Company’s consolidated results of operations due
to the magnitude of the end of period lease liability being
remeasured and to improve comparability of current periods
presented with prior periods.
In conjunction with the Cash America merger in
2016, the Company recorded certain lease intangibles related to
above- or below-market lease liabilities of Cash America which are
included in the operating lease right of use asset on the
consolidated balance sheets. As the Company continues to
opportunistically purchase real estate from landlords at certain
Cash America stores, the associated lease intangible, if any, is
written off and gain or loss is recognized. The Company has
adjusted the applicable financial measures to exclude these gains
or losses given the variability in size and timing of these
transactions and because they are non-cash, non-operating gains or
losses. The Company believes this improves comparability of
operating results for current periods presented with prior
periods.
FIRSTCASH HOLDINGS,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
(CONTINUED)(UNAUDITED)
Adjusted Net Income and Adjusted Diluted
Earnings Per Share
Management believes the presentation of adjusted
net income and adjusted diluted earnings per share provides
investors with greater transparency and provides a more complete
understanding of the Company’s financial performance and prospects
for the future by excluding items that management believes are
non-operating in nature and not representative of the Company’s
core operating performance. 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 June 30, |
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
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 |
$ |
86,108 |
|
|
$ |
1.81 |
|
|
$ |
28,427 |
|
|
$ |
0.70 |
|
|
$ |
114,113 |
|
|
$ |
2.38 |
|
|
$ |
62,142 |
|
|
$ |
1.52 |
Adjustments, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger and acquisition expenses |
|
242 |
|
|
|
0.01 |
|
|
|
826 |
|
|
|
0.02 |
|
|
|
753 |
|
|
|
0.02 |
|
|
|
942 |
|
|
|
0.02 |
Non-cash foreign currency (gain) loss related to lease
liability |
|
(12 |
) |
|
|
— |
|
|
|
(524 |
) |
|
|
(0.02 |
) |
|
|
(496 |
) |
|
|
(0.01 |
) |
|
|
(103 |
) |
|
|
— |
AFF purchase accounting adjustments(1) |
|
21,011 |
|
|
|
0.44 |
|
|
|
— |
|
|
|
— |
|
|
|
47,736 |
|
|
|
1.00 |
|
|
|
— |
|
|
|
— |
Gain on revaluation of contingent acquisition consideration(2) |
|
(53,833 |
) |
|
|
(1.13 |
) |
|
|
— |
|
|
|
— |
|
|
|
(51,854 |
) |
|
|
(1.08 |
) |
|
|
— |
|
|
|
— |
Other expenses (income), net(3) |
|
(2,357 |
) |
|
|
(0.05 |
) |
|
|
309 |
|
|
|
0.01 |
|
|
|
(2,221 |
) |
|
|
(0.05 |
) |
|
|
985 |
|
|
|
0.02 |
Adjusted net income and
diluted earnings per share |
$ |
51,159 |
|
|
$ |
1.08 |
|
|
$ |
29,038 |
|
|
$ |
0.71 |
|
|
$ |
108,031 |
|
|
$ |
2.26 |
|
|
$ |
63,966 |
|
|
$ |
1.56 |
(1) See detail of the AFF purchase
accounting adjustments below.(2) The seller of AFF has the
right to receive up to $250 million and up to $50 million of
additional consideration if AFF achieves certain adjusted EBITDA
targets for the period consisting of the fourth quarter of 2021
through the end of 2022 and the first half of 2023, respectively.
In addition, the seller of AFF has the right to receive up to an
additional $75 million of consideration based on the performance of
the Company’s stock through February 28, 2023. The Company
estimated the fair value of this contingent consideration payable
to the seller of AFF as of the acquisition date and revalues the
contingent consideration to fair value at the end of each reporting
period with changes in the fair value recognized in the
consolidated statements of income. The gain is a result of a net
decrease in the estimated fair value of the contingent
consideration payable to the seller of AFF as of June 30,
2022.(3) For both the three and six months ended June 30,
2022, primarily includes a $2 million gain, net of tax, recognized
as a result of a cash distribution received from a non-operating
investment acquired in conjunction with the Cash America merger.
The Company has elected to exclude the gain from adjusted earnings
given the non-operating nature of the income.
FIRSTCASH HOLDINGS,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
(CONTINUED)(UNAUDITED)
The following tables provide a reconciliation of
the gross amounts, the impact of income taxes and the net amounts
for the adjustments included in the table above (in thousands):
|
Three Months Ended June 30, |
|
2022 |
|
2021 |
|
Pre-tax |
|
Tax |
|
After-tax |
|
Pre-tax |
|
Tax |
|
After-tax |
Merger and acquisition expenses |
$ |
314 |
|
|
$ |
72 |
|
|
$ |
242 |
|
|
$ |
1,086 |
|
|
$ |
260 |
|
|
$ |
826 |
|
Non-cash foreign currency gain
related to lease liability |
|
(17 |
) |
|
|
(5 |
) |
|
|
(12 |
) |
|
|
(749 |
) |
|
|
(225 |
) |
|
|
(524 |
) |
AFF purchase accounting
adjustments(1) |
|
27,287 |
|
|
|
6,276 |
|
|
|
21,011 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Gain on revaluation of
contingent acquisition consideration |
|
(65,559 |
) |
|
|
(11,726 |
) |
|
|
(53,833 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other expenses (income),
net |
|
(3,062 |
) |
|
|
(705 |
) |
|
|
(2,357 |
) |
|
|
401 |
|
|
|
92 |
|
|
|
309 |
|
Total adjustments |
$ |
(41,037 |
) |
|
$ |
(6,088 |
) |
|
$ |
(34,949 |
) |
|
$ |
738 |
|
|
$ |
127 |
|
|
$ |
611 |
|
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
Pre-tax |
|
Tax |
|
After-tax |
|
Pre-tax |
|
Tax |
|
After-tax |
Merger and acquisition expenses |
$ |
979 |
|
|
$ |
226 |
|
|
$ |
753 |
|
|
$ |
1,252 |
|
|
$ |
310 |
|
|
$ |
942 |
|
Non-cash foreign currency gain
related to lease liability |
|
(709 |
) |
|
|
(213 |
) |
|
|
(496 |
) |
|
|
(147 |
) |
|
|
(44 |
) |
|
|
(103 |
) |
AFF purchase accounting
adjustments(1) |
|
61,995 |
|
|
|
14,259 |
|
|
|
47,736 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Gain on revaluation of
contingent acquisition consideration |
|
(62,989 |
) |
|
|
(11,135 |
) |
|
|
(51,854 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other expenses (income),
net |
|
(2,885 |
) |
|
|
(664 |
) |
|
|
(2,221 |
) |
|
|
1,279 |
|
|
|
294 |
|
|
|
985 |
|
Total adjustments |
$ |
(3,609 |
) |
|
$ |
2,473 |
|
|
$ |
(6,082 |
) |
|
$ |
2,384 |
|
|
$ |
560 |
|
|
$ |
1,824 |
|
(1) The following table details AFF
purchase accounting adjustments for the three and six months ended
June 30, 2022 (in thousands):
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2022 |
|
2022 |
|
Pre-tax |
|
Tax |
|
After-tax |
|
Pre-tax |
|
Tax |
|
After-tax |
Amortization of fair value premium on acquired finance
receivables |
$ |
11,514 |
|
$ |
2,649 |
|
$ |
8,865 |
|
$ |
27,687 |
|
$ |
6,368 |
|
$ |
21,319 |
Amortization of fair value
premium on acquired leased merchandise |
|
1,598 |
|
|
367 |
|
|
1,231 |
|
|
5,957 |
|
|
1,370 |
|
|
4,587 |
Amortization of acquired
intangible assets |
|
14,175 |
|
|
3,260 |
|
|
10,915 |
|
|
28,351 |
|
|
6,521 |
|
|
21,830 |
Total AFF purchase accounting adjustments |
$ |
27,287 |
|
$ |
6,276 |
|
$ |
21,011 |
|
$ |
61,995 |
|
$ |
14,259 |
|
$ |
47,736 |
The fair value premium on acquired finance
receivables and leased merchandise was a result of recognizing
these acquired assets at fair value in purchase accounting, the
amortization of which is non-cash. There is approximately $15
million of fair value premium related to acquired finance
receivables remaining and $2 million of fair value premium related
to acquired leased merchandise remaining, which are expected to be
substantially amortized by the end of 2022. The acquired intangible
assets will be amortized through 2028.
FIRSTCASH HOLDINGS,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
(CONTINUED)(UNAUDITED)
Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) and Adjusted EBITDA
The Company defines EBITDA as net income before
income taxes, depreciation and amortization, interest expense and
interest income and adjusted EBITDA as EBITDA adjusted for certain
items, as listed below, that management considers to be
non-operating in nature and not representative of its actual
operating performance. The Company believes EBITDA and adjusted
EBITDA are commonly used by investors to assess a company’s
financial performance and adjusted EBITDA is used 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):
|
|
|
|
|
|
|
|
|
|
|
|
|
Trailing Twelve |
|
Three Months Ended |
|
Six Months Ended |
|
Months Ended |
|
June 30, |
|
June 30, |
|
June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net income |
$ |
86,108 |
|
|
$ |
28,427 |
|
|
$ |
114,113 |
|
|
$ |
62,142 |
|
|
$ |
176,880 |
|
|
$ |
109,930 |
|
Provision for income taxes |
|
23,515 |
|
|
|
10,378 |
|
|
|
32,519 |
|
|
|
22,934 |
|
|
|
51,178 |
|
|
|
35,939 |
|
Depreciation and amortization |
|
25,982 |
|
|
|
10,902 |
|
|
|
51,524 |
|
|
|
21,514 |
|
|
|
75,916 |
|
|
|
42,621 |
|
Interest expense |
|
16,246 |
|
|
|
7,198 |
|
|
|
32,467 |
|
|
|
14,428 |
|
|
|
50,425 |
|
|
|
28,380 |
|
Interest income |
|
(222 |
) |
|
|
(119 |
) |
|
|
(898 |
) |
|
|
(277 |
) |
|
|
(1,317 |
) |
|
|
(1,107 |
) |
EBITDA |
|
151,629 |
|
|
|
56,786 |
|
|
|
229,725 |
|
|
|
120,741 |
|
|
|
353,082 |
|
|
|
215,763 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger and acquisition expenses |
|
314 |
|
|
|
1,086 |
|
|
|
979 |
|
|
|
1,252 |
|
|
|
15,176 |
|
|
|
2,366 |
|
Non-cash foreign currency (gain) loss related to lease
liability |
|
(17 |
) |
|
|
(749 |
) |
|
|
(709 |
) |
|
|
(147 |
) |
|
|
82 |
|
|
|
(2,842 |
) |
AFF purchase accounting adjustments(1) |
|
13,112 |
|
|
|
— |
|
|
|
33,644 |
|
|
|
— |
|
|
|
80,006 |
|
|
|
— |
|
Gain on revaluation of contingent acquisition consideration |
|
(65,559 |
) |
|
|
— |
|
|
|
(62,989 |
) |
|
|
— |
|
|
|
(80,860 |
) |
|
|
— |
|
Other expenses (income), net |
|
(3,062 |
) |
|
|
401 |
|
|
|
(2,885 |
) |
|
|
1,279 |
|
|
|
(3,215 |
) |
|
|
4,539 |
|
Loss on extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11,737 |
|
Adjusted EBITDA |
$ |
96,417 |
|
|
$ |
57,524 |
|
|
$ |
197,765 |
|
|
$ |
123,125 |
|
|
$ |
364,271 |
|
|
$ |
231,563 |
|
(1) Excludes $14 million, $28 million and
$30 million of amortization expense related to identifiable
intangible assets as a result of the AFF acquisition for the three
months, six months and trailing twelve months ended June 30,
2022, respectively, which is already included in the add back of
depreciation and amortization to calculate EBITDA.
FIRSTCASH HOLDINGS,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
(CONTINUED)(UNAUDITED)
Free Cash Flow and Adjusted Free Cash Flow
For purposes of its internal liquidity
assessments, the Company considers free cash flow and adjusted free
cash flow. The Company defines free cash flow as cash flow from
operating activities less purchases of furniture, fixtures,
equipment and improvements and net fundings/repayments of pawn 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 additional measures 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, that 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 |
|
Six Months Ended |
|
Months Ended |
|
June 30, |
|
June 30, |
|
June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Cash flow from operating activities |
$ |
106,622 |
|
|
$ |
44,575 |
|
|
$ |
226,767 |
|
|
$ |
113,749 |
|
|
$ |
336,322 |
|
|
$ |
192,714 |
|
Cash flow from certain
investing activities: |
|
|
|
|
|
|
|
|
|
|
|
Pawn loans, net(1) |
|
(49,648 |
) |
|
|
(50,886 |
) |
|
|
(32,265 |
) |
|
|
(8,492 |
) |
|
|
(97,113 |
) |
|
|
(79,945 |
) |
Finance receivables, net |
|
(23,607 |
) |
|
|
— |
|
|
|
(23,546 |
) |
|
|
— |
|
|
|
(29,390 |
) |
|
|
182 |
|
Purchases of furniture, fixtures, equipment and improvements |
|
(12,658 |
) |
|
|
(11,534 |
) |
|
|
(19,686 |
) |
|
|
(21,025 |
) |
|
|
(40,683 |
) |
|
|
(38,092 |
) |
Free cash flow |
|
20,709 |
|
|
|
(17,845 |
) |
|
|
151,270 |
|
|
|
84,232 |
|
|
|
169,136 |
|
|
|
74,859 |
|
Merger and acquisition expenses paid, net of tax benefit |
|
242 |
|
|
|
826 |
|
|
|
753 |
|
|
|
942 |
|
|
|
11,683 |
|
|
|
1,787 |
|
Adjusted free cash flow |
$ |
20,951 |
|
|
$ |
(17,019 |
) |
|
$ |
152,023 |
|
|
$ |
85,174 |
|
|
$ |
180,819 |
|
|
$ |
76,646 |
|
(1) Includes the funding of new loans net
of cash repayments and recovery of principal through the sale of
inventories acquired from forfeiture of pawn collateral.
FIRSTCASH HOLDINGS,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO 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 above for additional reconciliations of certain amounts
adjusted to exclude the impacts of purchase accounting to as
reported GAAP amounts.
Additionally, the following table provides a
reconciliation of consolidated total revenue presented in
accordance with GAAP to adjusted total revenue, which excludes the
impacts of purchase accounting (in thousands):
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Total revenue, as reported |
$ |
647,616 |
|
$ |
389,578 |
|
$ |
1,307,455 |
|
$ |
797,517 |
Adjustments: |
|
|
|
|
|
|
|
AFF purchase accounting adjustments(1) |
|
11,514 |
|
|
— |
|
|
27,687 |
|
|
— |
Adjusted total revenue |
$ |
659,130 |
|
$ |
389,578 |
|
$ |
1,335,142 |
|
$ |
797,517 |
(1) Adjustment relates to the net
amortization of the fair value premium on acquired finance
receivables, which is recognized as an adjustment to interest
income on an effective yield basis over the lives of the acquired
finance receivables. See the retail POS payment solutions segment
tables above for additional segment level
reconciliations.Constant Currency Results
The Company’s reporting currency is the U.S.
dollar. However, certain performance metrics discussed in this
release are presented on a “constant currency” basis, which is
considered a non-GAAP financial measure. The Company’s management
uses constant currency results to evaluate operating results of
business operations in Latin America, which are primarily
transacted in local currencies.
The Company believes constant currency results
provide valuable supplemental information regarding the underlying
performance of its business operations in Latin America, consistent
with how the Company’s management evaluates such performance and
operating results. Constant currency results reported herein are
calculated by translating certain balance sheet and income
statement items denominated in local currencies using the exchange
rate from the prior-year comparable period, as opposed to the
current comparable period, in order to exclude the effects of
foreign currency rate fluctuations for purposes of evaluating
period-over-period comparisons. Business operations in Mexico,
Guatemala and Colombia are transacted in Mexican pesos, Guatemalan
quetzales and Colombian pesos. The Company also has operations in
El Salvador, where the reporting and functional currency is the
U.S. dollar. See the Latin America pawn segment tables elsewhere in
this release for an additional reconciliation of certain constant
currency amounts to as reported GAAP amounts.
For further information, please contact: Gar
JacksonGlobal IR GroupPhone: (817) 886-6998Email:
gar@globalirgroup.com
Doug Orr, Executive Vice President and Chief Financial
OfficerPhone: (817) 258-2650Email:
investorrelations@firstcash.comWebsite: investors.firstcash.com
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