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 record operating results for the fourth
quarter and full-year ended December 31, 2022. The Company
also announced that the Board of Directors declared a quarterly
cash dividend of $0.33 per share, which will be paid in February
2023.
Mr. Rick Wessel, chief executive officer,
stated, “Record fourth quarter revenue and earnings results capped
off an outstanding 2022 for FirstCash. Pawn receivables ended the
year at record levels and we continued to see strong revenue and
earnings growth from the core pawn segments in both the U.S. and
Latin America. Additionally, the retail POS payment solutions
segment (American First Finance or AFF), continued to generate
revenue and earnings growth in the fourth quarter, both
year-over-year and sequentially.
“FirstCash completed several significant pawn
store acquisitions in the fourth quarter, adding 27 U.S. locations
and one store in Latin America. In addition, 17 new stores were
opened in Latin America, bringing the total store additions to 45
locations for the quarter and 76 for the year. We anticipate that
these added stores will be accretive in 2023, which we expect will
further drive long-term revenue and earnings growth.
“Our strong balance sheet and record cash flows
further supported shareholder returns in 2022 with $158 million
going toward the repurchase of 2.2 million shares of stock in
addition to paying $60 million in cash dividends.”
This release contains adjusted financial
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 December 31, |
|
|
As Reported (GAAP) |
|
Adjusted (Non-GAAP) |
In thousands, except per share
amounts |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Revenue |
|
$ |
749,344 |
|
$ |
501,774 |
|
$ |
757,203 |
|
$ |
503,482 |
Net income |
|
$ |
80,066 |
|
$ |
29,371 |
|
$ |
76,642 |
|
$ |
63,472 |
Diluted earnings per
share |
|
$ |
1.72 |
|
$ |
0.70 |
|
$ |
1.65 |
|
$ |
1.52 |
EBITDA (non-GAAP measure) |
|
$ |
147,693 |
|
$ |
60,026 |
|
$ |
130,731 |
|
$ |
102,289 |
Weighted-average diluted
shares |
|
|
46,523 |
|
|
41,720 |
|
|
46,523 |
|
|
41,720 |
|
|
Twelve Months Ended December 31, |
|
|
As Reported (GAAP) |
|
Adjusted (Non-GAAP) |
In thousands, except per share
amounts |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Revenue |
|
$ |
2,728,942 |
|
$ |
1,698,965 |
|
$ |
2,771,599 |
|
$ |
1,700,673 |
Net income |
|
$ |
253,495 |
|
$ |
124,909 |
|
$ |
245,737 |
|
$ |
161,479 |
Diluted earnings per
share |
|
$ |
5.36 |
|
$ |
3.04 |
|
$ |
5.19 |
|
$ |
3.94 |
EBITDA (non-GAAP measure) |
|
$ |
496,860 |
|
$ |
244,098 |
|
$ |
437,344 |
|
$ |
289,631 |
Weighted-average diluted
shares |
|
|
47,330 |
|
|
41,024 |
|
|
47,330 |
|
|
41,024 |
Consolidated Operating Highlights
- The Company posted
record consolidated revenues, net income, earnings per share,
EBITDA and operating cash flows for the fourth quarter and the full
year 2022:
- Net income for the
fourth quarter increased 173% over the prior-year quarter on a GAAP
basis while adjusted net income, which excludes certain purchase
accounting and other adjustments as described herein, increased 21%
compared to the prior-year quarter. For the full year, net income
increased 103% on a GAAP basis and 52% on an adjusted basis
compared to the prior year.
- Diluted earnings
per share for the fourth quarter of 2022 increased 146% over the
prior-year quarter on a GAAP basis while adjusted diluted earnings
per share, which excludes certain purchase accounting and other
adjustments as described herein, increased 9% compared to the
prior-year quarter. For the full year of 2022, diluted earnings per
share increased 76% on a GAAP basis and 32% on an adjusted basis
compared to the prior year.
- Adjusted EBITDA for
the full year was $437 million, an increase of $148 million, or
51%, compared to the prior year. For the fourth quarter of 2022,
adjusted EBITDA increased 28% compared to the prior-year
quarter.
- Consolidated
revenues totaled $2.7 billion for 2022, an increase of 61% on a
GAAP basis and 63% on an adjusted basis compared to the prior year.
Consolidated revenues in the fourth quarter increased 49% over the
prior-year quarter and 50% on an adjusted basis.
- Operating cash
flows for the full year were a record $469 million, as were
adjusted free cash flows (a non-GAAP measure) of $315 million in
2022.
- Combined pre-tax
operating income from the Company’s two pawn segments increased 16%
in the fourth quarter of 2022 compared to the prior-year quarter
and represented 80% of consolidated adjusted segment profit for the
quarter.
- U.S. pawn segment
pre-tax income for the fourth quarter of 2022 was $83 million, an
increase of 15% over the fourth quarter of the prior year. These
results were driven primarily by a 16% increase in pawn fee revenue
compared to the prior-year quarter.
- Latin America pawn
segment pre-tax income for the fourth quarter of 2022 was $43
million, an increase of 19% over the fourth quarter of the prior
year (14% on a constant currency basis), reflecting continued
acceleration of pawn and retail demand across all markets.
- The retail POS
payment solutions segment (AFF) contributed fourth quarter GAAP
segment pre-tax income of $22 million while adjusted segment
pre-tax income, which excludes non-cash purchase accounting
impacts, was $31 million, an 11% increase compared to the previous
sequential quarter (third quarter of 2022).
Store Base and Platform
Growth
- Pawn
Stores: During the fourth quarter, the Company added a
total of 45 pawn stores and for the full year added 76 new
locations:
- U.S.
Pawn: The Company completed the acquisitions of a 14-store
chain in Alabama and an 11-store chain in Texas during December.
The Alabama acquisition significantly expands the Company’s
presence in the state where it is now the largest operator with a
total of 23 locations. The Texas acquisition further increases the
Company’s leading market share in the rapidly growing central Texas
region. Additionally, the Company completed single store
acquisitions in Florida and Texas during the quarter.Including
these acquisitions, a total of 30 U.S. pawn stores were acquired in
2022 for an aggregate purchase price of approximately $73 million.
In total, the Company now has an industry leading 1,101
full-service U.S. pawn locations in 25 states and the District of
Columbia.Additionally, the Company purchased the underlying real
estate at six of its existing pawn stores during the fourth
quarter, part of the 44 properties acquired in total during 2022.
This brings the total number of owned U.S. locations to 294.
- Latin
America Pawn: A total of 17 de novo locations were opened
in Latin America during the fourth quarter of 2022 and one store
was acquired in Guatemala. For the full year, 45 de novo locations
were opened with 43 in Mexico, one in Guatemala and one in El
Salvador.The Company also acquired, from competitors, the operating
assets, both pawns and inventories, of 19 stores in Latin America
during the fourth quarter. The acquired assets have been
redistributed to existing Company locations within close proximity
and the competitors’ stores were closed, thereby minimizing store
cannibalization and maximizing existing store operating
efficiencies.
- Retail POS
Payment Solutions Merchant Partnerships: AFF continued to
grow market share in its space in 2022 with approximately 9,200
active retail and e-commerce merchant partner locations at December
31, 2022, representing a 41% increase in active merchant locations
compared to December 31, 2021. With these additions, which included
almost 1,100 of the Company’s U.S. pawn stores, the Company
continues to realize increased diversification of its key merchant
relationships and market verticals.
U.S. Pawn Segment Operating
Results
- Segment pre-tax
operating income increased by $58 million for full year 2022, or
25%, compared to the prior year. The resulting segment pre-tax
operating margin was 23% for the full year, an improvement over the
22% margin for the prior year.
- Segment pre-tax
operating income in the fourth quarter of 2022 increased by $11
million, or 15%, compared to the prior-year quarter, driven
primarily by increased pawn loan fees. The resulting segment
pre-tax operating margin was 25% for the fourth quarter of 2022, an
improvement over the 24% margin for the prior-year quarter.
- Pawn loan fee
revenue increased 22% for 2022 and 16% for the fourth quarter,
while on a same-store basis, pawn loan fee revenue increased 20%
and 16%, respectively, compared to the same prior-year
periods.
- Pawn receivables at
December 31, 2022 increased 10% compared to the prior year and are
above the comparative pre-pandemic levels of December 2019.
Same-store pawn receivables are up 8% over the same point a year
ago.
- Retail merchandise
sales increased 10% for the full year 2022 while the fourth quarter
sales increased 5% compared to the prior-year quarter. On a
same-store basis, retail sales increased 4% compared to the
prior-year quarter. As a reminder, the comparable fourth quarter
2021 results had normalized inventory levels and were especially
strong, up 29% compared to the fourth quarter of 2020.
- Retail sales
margins remained above historical averages at 42% for the fourth
quarter and full year of 2022, reflecting solid demand for
value-priced, pre-owned merchandise and low levels of aged
inventory.
- Annualized
inventory turnover was 2.7 times for the twelve months ended
December 31, 2022 and inventories remain well-positioned, with aged
inventory (greater than one year) remaining extremely low at
1%.
- Operating expenses
increased 6% in the fourth quarter of 2022 both in total and on a
same-store basis compared to the prior-year quarter, and for the
full year were up 7% in total and 5% on a same-store basis compared
to the prior year, reflecting slightly increased staffing levels
necessary to support revenue growth and the impact of higher
variable compensation expense.
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 fourth quarter of 2022 was 19.7 pesos /
dollar, a favorable change of 5% versus the prior-year period, and
for the twelve-month period ended December 31, 2022 was 20.1
pesos / dollar, a favorable change of 1% versus the comparable
prior-year period.
Latin America Pawn Segment Operating
Results
-
For the full year of 2022, segment pre-tax operating income
increased 17%, or 16% on a constant currency basis, or $20 million,
compared to the prior year. The resulting pre-tax operating margin
was 21% for the full year which equaled the prior year.
-
Fourth quarter segment pre-tax operating income was strong as well,
increasing 19%, or 14% on a constant currency basis, over the
prior-year quarter, driven primarily by increased retail
merchandise sales and pawn loan fees. The resulting pre-tax
operating margin was 21% for the fourth quarter of 2022 compared to
22% in the prior-year quarter.
-
Pawn receivables were at record year-end levels as of December 31,
2022, increasing 18% on a U.S. dollar basis, or 12% on a constant
currency basis, both in total and on a same-store basis, compared
to the prior year.
-
Pawn loan fees increased 16%, or 11% on a constant currency basis,
in the fourth quarter of 2022 as compared to the prior-year
quarter, reflecting growth in pawn receivables. Same-store pawn
loan fees increased 16%, or 10% on a constant currency basis,
compared to the prior-year quarter. For the full year, pawn loan
fees increased 10% compared to the prior year on a U.S. dollar and
constant currency basis, respectively.
-
Retail merchandise sales in the fourth quarter of 2022 increased
20%, or 14% on a constant currency basis, compared to the
prior-year quarter. Same-store retail merchandise sales in the
fourth quarter of 2022 increased 19% on a U.S. dollar basis, or 14%
on a constant currency basis. For the full year, retail merchandise
sales increased 14%, or 13% on a constant currency basis, compared
to the prior year, while same-store retail merchandise sales
increased 13%, or 12% on a constant currency basis, compared to the
prior year.
-
Retail margins remained within historical norms at 34% for the
fourth quarter of 2022 and 36% for the full year, despite a highly
competitive holiday retail environment in Mexico for cell phones
and other popular consumer electronics. Annualized inventories
turned at near record levels of 4.2 times in 2022 and 2021, while
inventories aged greater than one year remained extremely low at
1%.
- Operating expenses
increased 12% in total and on a same-store basis compared to the
prior-year quarter while full year operating expenses increased 8%
in total and 7% on a same-store basis compared to the prior year.
The increases were driven by higher incentive compensation expense
related to growth in net revenue and earnings along with general
inflationary impacts and increases in the federally mandated
minimum wage and benefit programs.
Retail POS Payment Solutions Segment -
American First Finance (AFF) Operating Results
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.
- Segment pre-tax
operating income for the fourth quarter of 2022 totaled $22 million
on a GAAP basis and $31 million on an adjusted basis, which
excludes non-cash purchase accounting impacts. This represents a
sequential improvement of 12% and 11%, respectively, over the third
quarter of 2022. For the full year, segment pre-tax operating
income totaled $59 million on a GAAP basis and $110 million on an
adjusted basis.
- Segment revenues
for the quarter, comprised of lease-to-own (“LTO”) fees and
interest and fees on finance receivables, totaled $213 million on a
GAAP basis, or $221 million on an adjusted basis, which excludes
the non-cash impacts of fair value purchase accounting
requirements. Revenues for the full year totaled $803 million on a
GAAP basis and $846 million on an adjusted basis.
- Combined gross
leased merchandise and finance receivables outstanding at December
31, 2022, excluding the impacts of purchase accounting, increased
2% compared to the December 31, 2021 balances. Gross merchandise
under LTO, which is AFF’s core POS payment solution product,
increased 15% year-over-year.
- Gross volume of
originated LTO and POS financing transactions totaled $851 million
for all of 2022, representing 5% growth over the prior year. While
fourth quarter origination activity saw a slight decrease of 1%
compared to the fourth quarter of 2021, origination activity in
December 2022 increased 4% compared to December 2021, reflecting
improved origination momentum during the holiday season.
- As highlighted
earlier in this release, AFF saw 41% growth in the number of active
merchant locations at December 31, 2022 compared to the same point
a year ago. Merchant door locations growth in 2022 included almost
1,100 of the Company’s U.S. pawn locations.
- For the core LTO
product, the average monthly net charge-off (“NCO”) rate
(merchandise net charge-offs as a percentage of the average
merchandise on lease for the period, both figures being adjusted to
exclude any fair value purchase accounting impacts) for the fourth
quarter of 2022 was 5%,which is in line with the rate in the
prior-year quarter. The average monthly NCO rate for the full year
of 2022 was 5% as well.
- For finance
receivable products, the average monthly NCO rate (receivable net
charge-offs as a percentage of the average receivable balance for
the period) for the fourth quarter of 2022 was in-line with recent
loss expectations at 5% as compared to the prior-year quarter rate
of 4%. The average monthly NCO rate for the full year of 2022 was
5%.
Cash Flow and Liquidity
- The Company
generated $469 million in cash flow from operations and $315
million in adjusted free cash flow during 2022, which represented
year-over-year increases of 110% and 177%, respectively.
- The Company’s
strong liquidity position at December 31, 2022 includes cash
balances of $117 million and ample borrowing capacity under its
revolving credit facilities. During 2022, the Company utilized its
cash flows and liquidity to fund significant growth in pawn
receivables and inventories, acquire 31 pawn stores for $70
million, strategically purchase $83 million of underlying real
estate at 44 pawn store locations, pay dividends that total $60
million and repurchase $158 million of its stock, as further
discussed below.
- The majority of the
Company’s long-term financing is fixed rate debt with favorable
terms and maturity dates not until 2028 and 2030. During 2022, the
Company also upsized its revolving U.S. credit facility to $590
million and extended the maturity date to 2027.
- The Company’s
leverage ratio was reduced significantly in 2022 as net debt to
adjusted EBITDA was 2.9x at December 31, 2022 compared to 4.1x at
December 31, 2021.
Shareholder Returns
- During the fourth
quarter of 2022, the Company repurchased 169,000 shares of common
stock at an aggregate cost of $13 million and an average cost per
share of $77.78.
- For the full year,
the Company repurchased 2,204,000 shares of common stock at an
aggregate cost of $158 million and an average cost per share of
$71.63. The Company has approximately $14 million remaining under
the current share repurchase program authorized in April 2022.
- As previously
reported, on October 26, 2022, the Board of Directors approved an
additional share repurchase authorization for up to $100 million
that becomes effective upon the completion of the current
authorization. Combined with the current plan, the Company has
authorization to repurchase up to $114 million of its common stock.
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 first quarter cash dividend on
common shares outstanding which will be paid on February 28,
2023 to stockholders of record as of February 14, 2023. This
represents an annualized cash dividend of $1.32 per share. Any
future dividends are subject to approval by the Company’s Board of
Directors.
- The Company
generated a 14% return on equity in 2022, compared to a 9% return
in 2021, while the return on assets for 2022 was 7% compared to 5%
in 2021.
2023 Outlook
The Company’s outlook for 2023 is highly
positive, with expected year-over-year growth in revenue and
earnings in all segments driven by the continued growth in earning
asset balances coupled with recent store additions as we begin the
year. Anticipated conditions and trends for 2023 include the
following:
Pawn Operations:
- Pawn operations are
expected to remain the primary earnings driver in 2023 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. In addition, credit tightening from competing
unsecured lenders has historically driven additional demand for
pawn products.
- Beginning of the
year pawn receivables are up 10% in the U.S., which includes
balances from recently acquired stores, and Latin American balances
are up 12% on a currency adjusted basis. While comparative 2022
prior-year balances will progressively increase over the course of
2023, the Company expects to maintain mid-single digit or better
growth in pawn receivables in both markets during the year, with
per store balances that are well ahead of comparative balances in
pre-pandemic 2019.
- Consolidated retail
sales are expected to grow as well, reflecting mid-single digit
growth in total inventories with margins for 2023 expected to
remain above 40% in the U.S. with mid-thirty percent margins in
Latin America.
- Operating expenses
are expected to rise moderately in all markets due to the increase
in store counts from recent acquisitions/openings of approximately
3% along with continued inflationary impacts from higher labor
costs and other expenses in a range of 5% to 7% on a same-store
basis.
- The Company expects
approximately 60 new store additions in Latin America in 2023
through de novo openings and another four stores are expected to be
opened in the Las Vegas market in the U.S. in 2023. Management
continues to evaluate additional potential opportunities for store
growth from opportunistic acquisitions in the U.S. and Latin
America.
POS Payment Solutions (AFF) Operations:
- Macroeconomic
retail headwinds continue to impact consumer confidence in general
and more specifically for large ticket transactions at many of
AFF’s retail merchant partners. Assuming that the current macro
environment does not change significantly, management continues to
expect year-over-year growth in gross transaction volumes of 8% to
12% in 2023, primarily from increased merchant door counts, which
should result in similar expected growth in revenues for 2023 as
well. As a reminder, LTO and finance revenues are typically lower
in the first half of the year due to the impact of early buyout
activity associated with first quarter tax refunds which reduces
merchandise on lease and finance receivable balances.
- The Company expects
AFF’s estimated lease and loan loss provisioning rates for 2023 to
remain consistent with 2022, reflecting continued additional
provisioning above historical losses for most portfolios given
ongoing inflationary stress on consumers. As a reminder, AFF
utilizes a lease and loan reserve methodology that reflects
expected lifetime losses on its portfolios which are established
and expensed in the month of origination and updated monthly
thereafter if there are changes in estimated future losses based
upon actual performance trends. From a seasonal perspective, lease
and loan loss reserve provisioning on originations are higher in
the first half of the year based on the longer length of time
before the next tax refund season. Operating expenses for the full
year are expected to increase in 2023 as well, primarily due to the
expected increase in origination activity.
- With the expected
2023 revenue growth, the Company expects full year earnings growth
from AFF in 2023 as well. Most of the 2023 earnings growth is
projected in the second, third and fourth quarters. Comparative
earnings in the first quarter of last year were elevated,
benefiting from lower than normal credit provisioning and variable
expenses due to highly suppressed first quarter 2022 merchant
driven origination activity, driven in part to the resurgence of
Omicron and winter weather patterns a year ago.
- There are no
remaining purchase accounting adjustments impacting reported
revenues beginning in 2023. The Company will continue to adjust
earnings measures to exclude non-cash amortization of intangible
assets arising from the AFF acquisition, which is expected to total
approximately $57 million in 2023.
Interest Expense, Tax Rates and Currency:
- While the Company
expects some level of net de-leveraging by the end of 2023, net
interest expense is expected to increase in 2023 compared to 2022
by approximately $10 million to $14 million due to higher floating
interest rates on the borrowings under the revolving credit
facilities.
- For the full year
of 2023, the effective income tax rate under current tax codes in
the U.S. and Latin America is expected to range from 24% to 25%.
This compares to the 2022 adjusted effective tax rate of
23.4%.
- Each full point
change in the exchange rate of the Mexico peso represents an
approximate $0.08 to $0.10 annual impact on earnings per
share.
Additional Commentary and
Analysis
Mr. Wessel further commented on the 2022
results, “The tremendous fourth quarter and full year results
reflected a strong operating environment, especially for pawn,
coupled with outstanding execution on the part of our professionals
across our entire organization.
“Both the U.S. and Latin America pawn segments
performed exceptionally well during 2022, with continued growth
momentum through the fourth quarter. The current demand for pawn
products in both markets has more than fully recovered from the
pandemic related impacts, with fourth quarter pawn segment income
for 2022 up over comparative income in 2019 by 23% in the U.S. and
8% in Latin America.
“FirstCash continued to grow its store base
through several fourth quarter acquisitions in the U.S. that
totaled 27 stores primarily located in Alabama and Texas. Most of
these stores are highly profitable and were acquired at earnings
multiples in line with historic valuations and, as a result, we
expect them to be immediately accretive to earnings in 2023. The
Latin America store base and earning assets grew in the fourth
quarter as well, with the opening of 17 new locations, one acquired
store and through the consolidation of earning assets at 19
competitor stores that were redistributed into our existing store
base to minimize cannibalization and maximize existing store
efficiencies.
“We continue to see a robust operating
environment for pawn lending as we enter 2023 with beginning pawn
receivables up 10% in the U.S. and 18% in Latin America versus the
prior year. Retail demand remains solid in the U.S. segment as
evidenced by the continued strength in margins and inventory turns
in the fourth quarter. Latin America retail sales were particularly
strong with currency adjusted same-store sales growth of 14% in the
fourth quarter when compared to the prior year.
“We believe the outlook for pawn store growth in
2023 is exciting as well, with plans to open approximately 60 new
locations in Latin America and another four locations in the Las
Vegas market where licensing restrictions are cumbersome. In
addition, we continue to expect multiple acquisition opportunities
in both the U.S. and Latin America during 2023.
“The new retail POS payment solutions segment
resulting from the acquisition of AFF in December 2021 contributed
significantly to our consolidated revenues, earnings and cash flows
in its first full year of operations as part of FirstCash. While
2022 was a difficult operating environment for almost all LTO
operators due to reduced origination activity and normalizing
consumer credit, we believe that AFF significantly outperformed
most of its peers. In particular, AFF saw continued growth in
originations while successfully navigating a more challenging
credit environment. We remain very optimistic about AFF’s ability
to generate long-term earnings growth and provide diversification
of our overall product portfolio.
“The Company’s financial position remains
strong, as illustrated by the strength of its balance sheet and
cash flows, and we intend to continue to provide shareholder
returns through dividends, buybacks, new stores, accretive
acquisitions and real estate purchases. We believe that expected
cash flows in 2023 can continue to fund these initiatives and
further reduce our leverage ratio.
“In summary, we are extremely pleased with our
execution and accomplishments in 2022 and look forward to the
potential for further growth in revenues, earnings and shareholder
value in 2023,” 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 9,200 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, outlook 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 and risks may
include, without limitation, risks related to the regulatory
environment in which the Company operates; risks associated with
the legal and regulatory proceedings that the Company is a party
to, or may become a party to in the future, including the Consumer
Financial Protection Bureau (the “CFPB”) lawsuit filed against the
Company, the putative shareholder securities class action lawsuit
filed against the Company; risks related to the AFF transaction and
the Company’s other acquisitions, including the failure of the
transaction to deliver the estimated value and benefits expected by
the Company; potential changes in consumer behavior and shopping
patterns which could impact demand for the Company’s pawn loan,
retail, lease-to-own (“LTO”) and retail finance products,
including, as a result to, changes in the general economic
conditions; labor shortages and increased labor costs; a
deterioration in the economic conditions in the United States and
Latin America, including as a result of inflation and rising
interest rates, which potentially could have an impact on
discretionary consumer spending and demand for the Company’s
products; currency fluctuations, primarily involving the Mexican
peso; competition the Company faces from other retailers and
providers of retail payment solutions; the ability of the Company
to successfully execute on its business strategies; 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 in the 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 |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Revenue: |
|
|
|
|
|
|
|
|
Retail merchandise sales |
|
$ |
359,161 |
|
|
$ |
327,914 |
|
|
$ |
1,261,136 |
|
|
$ |
1,134,249 |
|
Pawn loan fees |
|
|
149,777 |
|
|
|
128,986 |
|
|
|
561,390 |
|
|
|
475,782 |
|
Leased merchandise income |
|
|
166,427 |
|
|
|
22,720 |
|
|
|
622,163 |
|
|
|
22,720 |
|
Interest and fees on finance receivables |
|
|
46,241 |
|
|
|
9,024 |
|
|
|
181,280 |
|
|
|
9,024 |
|
Wholesale scrap jewelry sales |
|
|
27,738 |
|
|
|
13,130 |
|
|
|
102,973 |
|
|
|
57,190 |
|
Total revenue |
|
|
749,344 |
|
|
|
501,774 |
|
|
|
2,728,942 |
|
|
|
1,698,965 |
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
|
220,831 |
|
|
|
194,830 |
|
|
|
764,553 |
|
|
|
663,464 |
|
Depreciation of leased merchandise |
|
|
90,665 |
|
|
|
12,826 |
|
|
|
353,495 |
|
|
|
12,826 |
|
Provision for lease losses |
|
|
29,731 |
|
|
|
5,442 |
|
|
|
139,502 |
|
|
|
5,442 |
|
Provision for loan losses (1) |
|
|
35,049 |
|
|
|
48,952 |
|
|
|
118,502 |
|
|
|
48,952 |
|
Cost of wholesale scrap jewelry sold |
|
|
23,933 |
|
|
|
11,472 |
|
|
|
88,304 |
|
|
|
49,129 |
|
Total cost of revenue |
|
|
400,209 |
|
|
|
273,522 |
|
|
|
1,464,356 |
|
|
|
779,813 |
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
|
349,135 |
|
|
|
228,252 |
|
|
|
1,264,586 |
|
|
|
919,152 |
|
|
|
|
|
|
|
|
|
|
Expenses and other
income: |
|
|
|
|
|
|
|
|
Operating expenses |
|
|
189,511 |
|
|
|
149,761 |
|
|
|
728,909 |
|
|
|
564,832 |
|
Administrative expenses |
|
|
37,061 |
|
|
|
22,654 |
|
|
|
147,943 |
|
|
|
111,259 |
|
Depreciation and amortization |
|
|
26,337 |
|
|
|
13,175 |
|
|
|
103,832 |
|
|
|
45,906 |
|
Interest expense |
|
|
19,959 |
|
|
|
9,997 |
|
|
|
70,708 |
|
|
|
32,386 |
|
Interest income |
|
|
(209 |
) |
|
|
(276 |
) |
|
|
(1,313 |
) |
|
|
(696 |
) |
(Gain) loss on foreign exchange |
|
|
(387 |
) |
|
|
188 |
|
|
|
(585 |
) |
|
|
436 |
|
Merger and acquisition expenses |
|
|
2,027 |
|
|
|
14,185 |
|
|
|
3,739 |
|
|
|
15,449 |
|
Gain on revaluation of contingent acquisition consideration |
|
|
(26,760 |
) |
|
|
(17,871 |
) |
|
|
(109,549 |
) |
|
|
(17,871 |
) |
Other expenses (income), net |
|
|
(10 |
) |
|
|
(691 |
) |
|
|
(2,731 |
) |
|
|
949 |
|
Total expenses and other income |
|
|
247,529 |
|
|
|
191,122 |
|
|
|
940,953 |
|
|
|
752,650 |
|
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
|
101,606 |
|
|
|
37,130 |
|
|
|
323,633 |
|
|
|
166,502 |
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
21,540 |
|
|
|
7,759 |
|
|
|
70,138 |
|
|
|
41,593 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
80,066 |
|
|
$ |
29,371 |
|
|
$ |
253,495 |
|
|
$ |
124,909 |
|
(1) Results for the three and
twelve months ended December 31, 2021 include a $44 million expense
to establish the initial allowance for expected lifetime credit
losses for acquired finance receivables of AFF. See “Retail POS
Payment Solutions Segment Results” below.
FIRSTCASH HOLDINGS,
INC.CONSOLIDATED BALANCE
SHEETS(unaudited, in thousands)
|
|
December 31, |
|
|
|
2022 |
|
|
|
2021 |
|
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
$ |
117,330 |
|
|
$ |
120,046 |
|
Accounts receivable, net |
|
|
57,792 |
|
|
|
55,356 |
|
Pawn loans |
|
|
390,617 |
|
|
|
347,973 |
|
Finance receivables, net
(1) |
|
|
103,494 |
|
|
|
181,021 |
|
Inventories |
|
|
288,339 |
|
|
|
263,311 |
|
Leased merchandise, net
(1) |
|
|
153,302 |
|
|
|
143,944 |
|
Prepaid expenses and other
current assets |
|
|
19,788 |
|
|
|
17,707 |
|
Total current assets |
|
|
1,130,662 |
|
|
|
1,129,358 |
|
|
|
|
|
|
Property and equipment,
net |
|
|
538,681 |
|
|
|
462,526 |
|
Operating lease right of use
asset |
|
|
307,009 |
|
|
|
306,061 |
|
Goodwill |
|
|
1,581,381 |
|
|
|
1,536,178 |
|
Intangible assets, net |
|
|
330,338 |
|
|
|
388,184 |
|
Other assets |
|
|
9,415 |
|
|
|
8,531 |
|
Deferred tax assets, net |
|
|
7,381 |
|
|
|
5,614 |
|
Total assets |
|
$ |
3,904,867 |
|
|
$ |
3,836,452 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
Accounts payable and accrued
liabilities |
|
$ |
139,460 |
|
|
$ |
244,327 |
|
Customer deposits and
prepayments |
|
|
63,125 |
|
|
|
57,310 |
|
Lease liability, current |
|
|
92,944 |
|
|
|
90,570 |
|
Total current liabilities |
|
|
295,529 |
|
|
|
392,207 |
|
|
|
|
|
|
Revolving unsecured credit
facilities |
|
|
339,000 |
|
|
|
259,000 |
|
Senior unsecured notes |
|
|
1,035,698 |
|
|
|
1,033,904 |
|
Deferred tax liabilities,
net |
|
|
151,759 |
|
|
|
126,098 |
|
Lease liability,
non-current |
|
|
203,115 |
|
|
|
203,166 |
|
Other liabilities |
|
|
— |
|
|
|
13,950 |
|
Total liabilities |
|
|
2,025,101 |
|
|
|
2,028,325 |
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
Common stock |
|
|
573 |
|
|
|
573 |
|
Additional paid-in capital |
|
|
1,734,528 |
|
|
|
1,724,956 |
|
Retained earnings |
|
|
1,060,603 |
|
|
|
866,679 |
|
Accumulated other comprehensive loss |
|
|
(106,573 |
) |
|
|
(131,299 |
) |
Common stock held in treasury, at cost |
|
|
(809,365 |
) |
|
|
(652,782 |
) |
Total stockholders’ equity |
|
|
1,879,766 |
|
|
|
1,808,127 |
|
Total liabilities and stockholders’ equity |
|
$ |
3,904,867 |
|
|
$ |
3,836,452 |
|
Certain amounts in the consolidated balance
sheet as of 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 as of
December 31, 2021 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 expenses 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
December 31, 2022 as compared to December 31, 2021
(dollars in thousands, except as otherwise noted):
|
As of December 31, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Increase |
U.S. Pawn
Segment |
|
|
|
|
|
|
|
|
Earning assets: |
|
|
|
|
|
|
|
|
Pawn loans |
$ |
282,089 |
|
|
$ |
256,311 |
|
|
|
10 |
% |
Inventories |
|
202,594 |
|
|
|
197,486 |
|
|
|
3 |
% |
|
$ |
484,683 |
|
|
$ |
453,797 |
|
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
Average outstanding pawn loan
amount (in ones) |
$ |
247 |
|
|
$ |
222 |
|
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
Composition of pawn
collateral: |
|
|
|
|
|
|
|
|
General merchandise |
30 |
% |
|
34 |
% |
|
|
|
Jewelry |
70 |
% |
|
66 |
% |
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Composition of
inventories: |
|
|
|
|
|
|
|
|
General merchandise |
41 |
% |
|
45 |
% |
|
|
|
Jewelry |
59 |
% |
|
55 |
% |
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of inventory aged
greater than one year |
1 |
% |
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Inventory turnover (trailing
twelve months cost of merchandise sales divided by average
inventories) |
2.7 times |
|
2.8 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 December 31, 2022 as
compared to the three months ended December 31, 2021 (dollars
in thousands):
|
Three Months Ended |
|
|
|
|
December 31, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Increase |
U.S. Pawn
Segment |
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
Retail merchandise sales |
$ |
222,383 |
|
|
$ |
211,906 |
|
|
|
5 |
% |
Pawn loan fees |
|
99,112 |
|
|
|
85,337 |
|
|
|
16 |
% |
Wholesale scrap jewelry sales |
|
17,851 |
|
|
|
6,946 |
|
|
|
157 |
% |
Total revenue |
|
339,346 |
|
|
|
304,189 |
|
|
|
12 |
% |
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
129,711 |
|
|
|
120,584 |
|
|
|
8 |
% |
Cost of wholesale scrap jewelry sold |
|
15,743 |
|
|
|
6,208 |
|
|
|
154 |
% |
Total cost of revenue |
|
145,454 |
|
|
|
126,792 |
|
|
|
15 |
% |
|
|
|
|
|
|
|
|
|
Net revenue |
|
193,892 |
|
|
|
177,397 |
|
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
Operating expenses |
|
104,467 |
|
|
|
98,827 |
|
|
|
6 |
% |
Depreciation and amortization |
|
5,944 |
|
|
|
5,843 |
|
|
|
2 |
% |
Total segment expenses |
|
110,411 |
|
|
|
104,670 |
|
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
$ |
83,481 |
|
|
$ |
72,727 |
|
|
|
15 |
% |
|
|
|
|
|
|
|
|
|
Operating metrics: |
|
|
|
|
|
|
|
|
Retail merchandise sales margin |
42 |
% |
|
43 |
% |
|
|
|
Net revenue margin |
57 |
% |
|
58 |
% |
|
|
|
Segment pre-tax operating margin |
25 |
% |
|
24 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
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 twelve months ended December 31, 2022 as
compared to the twelve months ended December 31, 2021 (dollars
in thousands):
|
Twelve Months Ended |
|
|
|
|
December 31, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Increase |
U.S. Pawn
Segment |
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
Retail merchandise sales |
$ |
818,548 |
|
|
$ |
742,374 |
|
|
|
10 |
% |
Pawn loan fees |
|
373,416 |
|
|
|
305,350 |
|
|
|
22 |
% |
Wholesale scrap jewelry sales |
|
63,004 |
|
|
|
27,163 |
|
|
|
132 |
% |
Total revenue |
|
1,254,968 |
|
|
|
1,074,887 |
|
|
|
17 |
% |
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
478,718 |
|
|
|
416,039 |
|
|
|
15 |
% |
Cost of wholesale scrap jewelry sold |
|
54,893 |
|
|
|
22,886 |
|
|
|
140 |
% |
Total cost of revenue |
|
533,611 |
|
|
|
438,925 |
|
|
|
22 |
% |
|
|
|
|
|
|
|
|
|
Net revenue |
|
721,357 |
|
|
|
635,962 |
|
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
Operating expenses |
|
407,039 |
|
|
|
380,895 |
|
|
|
7 |
% |
Depreciation and amortization |
|
23,205 |
|
|
|
22,234 |
|
|
|
4 |
% |
Total segment expenses |
|
430,244 |
|
|
|
403,129 |
|
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
Segment pre-tax operating
income |
$ |
291,113 |
|
|
$ |
232,833 |
|
|
|
25 |
% |
|
|
|
|
|
|
|
|
|
Operating metrics: |
|
|
|
|
|
|
|
|
Retail merchandise sales margin |
42 |
% |
|
44 |
% |
|
|
|
Net revenue margin |
57 |
% |
|
59 |
% |
|
|
|
Segment pre-tax operating margin |
23 |
% |
|
22 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
FIRSTCASH HOLDINGS,
INC.OPERATING INFORMATION
(CONTINUED)(UNAUDITED)
Latin America Pawn Segment
Results
The Company’s management reviews and analyzes
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:
|
|
December 31, |
|
Favorable / |
|
|
2022 |
|
2021 |
|
(Unfavorable) |
Mexican peso / U.S. dollar
exchange rate: |
|
|
|
|
|
|
|
End-of-period |
|
19.4 |
|
20.6 |
|
|
6 |
% |
Three months ended |
|
19.7 |
|
20.7 |
|
|
5 |
% |
Twelve months ended |
|
20.1 |
|
20.3 |
|
|
1 |
% |
|
|
|
|
|
|
|
|
Guatemalan quetzal / U.S.
dollar exchange rate: |
|
|
|
|
|
|
|
End-of-period |
|
7.9 |
|
7.7 |
|
|
(3 |
)% |
Three months ended |
|
7.8 |
|
7.7 |
|
|
(1 |
)% |
Twelve months ended |
|
7.7 |
|
7.7 |
|
|
— |
% |
|
|
|
|
|
|
|
|
Colombian peso / U.S. dollar
exchange rate: |
|
|
|
|
|
|
|
End-of-period |
|
4,810 |
|
3,981 |
|
|
(21 |
)% |
Three months ended |
|
4,809 |
|
3,880 |
|
|
(24 |
)% |
Twelve months ended |
|
4,253 |
|
3,742 |
|
|
(14 |
)% |
|
|
|
|
|
|
|
|
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
December 31, 2022 as compared to December 31, 2021 (dollars in
thousands, except as otherwise noted):
|
|
|
|
|
|
|
|
|
|
|
Constant Currency Basis |
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
As of December 31, |
|
|
|
2022 |
|
Increase |
|
2022 |
|
2021 |
|
Increase |
|
(Non-GAAP) |
|
(Non-GAAP) |
Latin America Pawn
Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pawn loans |
$ |
108,528 |
|
|
$ |
91,662 |
|
|
|
18 |
% |
|
|
$ |
102,573 |
|
12 |
% |
Inventories |
|
85,745 |
|
|
|
65,825 |
|
|
|
30 |
% |
|
|
|
81,013 |
|
23 |
% |
|
$ |
194,273 |
|
|
$ |
157,487 |
|
|
|
23 |
% |
|
|
$ |
183,586 |
|
17 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average outstanding pawn loan
amount (in ones) |
$ |
83 |
|
|
$ |
77 |
|
|
|
8 |
% |
|
|
$ |
79 |
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of pawn
collateral: |
|
|
|
|
|
|
|
|
|
|
|
|
|
General merchandise |
67 |
% |
|
67 |
% |
|
|
|
|
|
|
|
|
Jewelry |
33 |
% |
|
33 |
% |
|
|
|
|
|
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of
inventories: |
|
|
|
|
|
|
|
|
|
|
|
|
|
General merchandise |
71 |
% |
|
68 |
% |
|
|
|
|
|
|
|
|
Jewelry |
29 |
% |
|
32 |
% |
|
|
|
|
|
|
|
|
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of inventory aged
greater than one year |
1 |
% |
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory turnover (trailing
twelve months cost of merchandise sales divided by average
inventories) |
4.2 times |
|
4.2 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 December 31, 2022 as
compared to the three months ended December 31, 2021 (dollars
in thousands):
|
|
|
|
|
|
|
|
|
|
|
Constant Currency Basis |
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
|
|
|
|
|
|
|
|
Ended |
|
|
|
|
Three Months Ended |
|
|
|
|
|
December 31, |
|
|
|
December 31, |
|
|
|
|
2022 |
|
|
Increase |
|
2022 |
|
2021 |
|
Increase |
|
(Non-GAAP) |
|
(Non-GAAP) |
Latin America Pawn
Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail merchandise sales |
$ |
139,167 |
|
|
$ |
116,008 |
|
|
|
20 |
% |
|
|
$ |
132,671 |
|
|
|
14 |
% |
Pawn loan fees |
|
50,665 |
|
|
|
43,649 |
|
|
|
16 |
% |
|
|
|
48,288 |
|
|
|
11 |
% |
Wholesale scrap jewelry sales |
|
9,887 |
|
|
|
6,184 |
|
|
|
60 |
% |
|
|
|
9,887 |
|
|
|
60 |
% |
Total revenue |
|
199,719 |
|
|
|
165,841 |
|
|
|
20 |
% |
|
|
|
190,846 |
|
|
|
15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
92,392 |
|
|
|
74,246 |
|
|
|
24 |
% |
|
|
|
88,104 |
|
|
|
19 |
% |
Cost of wholesale scrap jewelry sold |
|
8,190 |
|
|
|
5,264 |
|
|
|
56 |
% |
|
|
|
7,789 |
|
|
|
48 |
% |
Total cost of revenue |
|
100,582 |
|
|
|
79,510 |
|
|
|
27 |
% |
|
|
|
95,893 |
|
|
|
21 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
99,137 |
|
|
|
86,331 |
|
|
|
15 |
% |
|
|
|
94,953 |
|
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
51,680 |
|
|
|
46,017 |
|
|
|
12 |
% |
|
|
|
49,472 |
|
|
|
8 |
% |
Depreciation and amortization |
|
4,805 |
|
|
|
4,446 |
|
|
|
8 |
% |
|
|
|
4,629 |
|
|
|
4 |
% |
Total segment expenses |
|
56,485 |
|
|
|
50,463 |
|
|
|
12 |
% |
|
|
|
54,101 |
|
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating income |
$ |
42,652 |
|
|
$ |
35,868 |
|
|
|
19 |
% |
|
|
$ |
40,852 |
|
|
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail merchandise sales margin |
34 |
% |
|
36 |
% |
|
|
|
|
34 |
% |
|
|
|
Net revenue margin |
50 |
% |
|
52 |
% |
|
|
|
|
50 |
% |
|
|
|
Segment pre-tax operating margin |
21 |
% |
|
22 |
% |
|
|
|
|
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 twelve months ended December 31, 2022 as
compared to the twelve months ended December 31, 2021 (dollars
in thousands):
|
|
|
|
|
|
|
|
|
|
|
Constant Currency Basis |
|
|
|
|
|
|
|
|
Twelve Months |
|
|
|
|
|
|
|
|
|
|
Ended |
|
|
|
Twelve Months Ended |
|
|
|
|
|
December 31, |
|
|
|
December 31, |
|
|
|
|
2022 |
|
|
Increase |
|
2022 |
|
2021 |
|
Increase |
|
(Non-GAAP) |
|
(Non-GAAP) |
Latin America Pawn
Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail merchandise sales |
$ |
447,523 |
|
|
$ |
391,875 |
|
|
|
14 |
% |
|
|
$ |
444,463 |
|
|
|
13 |
% |
Pawn loan fees |
|
187,974 |
|
|
|
170,432 |
|
|
|
10 |
% |
|
|
|
186,673 |
|
|
|
10 |
% |
Wholesale scrap jewelry sales |
|
39,969 |
|
|
|
30,027 |
|
|
|
33 |
% |
|
|
|
39,969 |
|
|
|
33 |
% |
Total revenue |
|
675,466 |
|
|
|
592,334 |
|
|
|
14 |
% |
|
|
|
671,105 |
|
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of retail merchandise sold |
|
288,449 |
|
|
|
247,425 |
|
|
|
17 |
% |
|
|
|
286,487 |
|
|
|
16 |
% |
Cost of wholesale scrap jewelry sold |
|
33,411 |
|
|
|
26,243 |
|
|
|
27 |
% |
|
|
|
33,162 |
|
|
|
26 |
% |
Total cost of revenue |
|
321,860 |
|
|
|
273,668 |
|
|
|
18 |
% |
|
|
|
319,649 |
|
|
|
17 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
353,606 |
|
|
|
318,666 |
|
|
|
11 |
% |
|
|
|
351,456 |
|
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
193,254 |
|
|
|
179,020 |
|
|
|
8 |
% |
|
|
|
192,151 |
|
|
|
7 |
% |
Depreciation and amortization |
|
18,325 |
|
|
|
17,834 |
|
|
|
3 |
% |
|
|
|
18,283 |
|
|
|
3 |
% |
Total segment expenses |
|
211,579 |
|
|
|
196,854 |
|
|
|
7 |
% |
|
|
|
210,434 |
|
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment pre-tax operating income |
$ |
142,027 |
|
|
$ |
121,812 |
|
|
|
17 |
% |
|
|
$ |
141,022 |
|
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail merchandise sales margin |
36 |
% |
|
37 |
% |
|
|
|
|
36 |
% |
|
|
|
Net revenue margin |
52 |
% |
|
54 |
% |
|
|
|
|
52 |
% |
|
|
|
Segment pre-tax operating margin |
21 |
% |
|
21 |
% |
|
|
|
|
21 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 as of December 31, 2021. The fair value adjustments to
AFF’s acquired earning assets were fully amortized during 2022 and
therefore, will not impact AFF’s earning assets or segment earnings
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 December 31, 2022 and 2021 (in
thousands):
|
As Reported(GAAP) |
|
Adjustments |
|
Adjusted(Non-GAAP) |
As of December 31,
2022 |
|
|
|
|
|
Leased merchandise, before allowance for lease losses |
$ |
233,974 |
|
|
$ |
— |
|
|
$ |
233,974 |
|
Less allowance for lease losses |
|
(79,576 |
) |
|
|
— |
|
|
|
(79,576 |
) |
Leased merchandise, net
(1) |
$ |
154,398 |
|
|
$ |
— |
|
|
$ |
154,398 |
|
|
|
|
|
|
|
As of December 31, 2021 |
|
|
|
|
|
Leased merchandise, before
allowance for lease losses (2) |
$ |
149,386 |
|
|
$ |
53,829 |
|
|
$ |
203,215 |
|
Less allowance for lease losses (3) |
|
(5,442 |
) |
|
|
(61,526 |
) |
|
|
(66,968 |
) |
Leased merchandise, net |
$ |
143,944 |
|
|
$ |
(7,697 |
) |
|
$ |
136,247 |
|
(1) Includes $1 million of
intersegment transactions related to the Company offering AFF’s LTO
payment solution as a payment option in its U.S. pawn stores that
are eliminated upon consolidation.
(2) 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.
(3) As reported allowance for
lease losses as of December 31, 2021 represents the provision for
lease losses for leases originated between December 17, 2021 and
December 31, 2021. Adjustment represents the remaining allowance
for lease losses of acquired leased merchandise, which is included
in the fair value of the acquired leased merchandise described in
(2) above.
FIRSTCASH HOLDINGS,
INC.OPERATING INFORMATION
(CONTINUED)(UNAUDITED)
The following table provides a detail of finance
receivables as reported and as adjusted to exclude the impacts of
purchase accounting as of December 31, 2022 and 2021 (in
thousands):
|
As Reported(GAAP) |
|
Adjustments |
|
Adjusted(Non-GAAP) |
As of December 31,
2022 |
|
|
|
|
|
Finance receivables, before allowance for loan losses |
$ |
188,327 |
|
|
$ |
— |
|
|
$ |
188,327 |
|
Less allowance for loan losses |
|
(84,833 |
) |
|
|
— |
|
|
|
(84,833 |
) |
Finance receivables, net |
$ |
103,494 |
|
|
$ |
— |
|
|
$ |
103,494 |
|
|
|
|
|
|
|
As of December 31, 2021 |
|
|
|
|
|
Finance receivables, before
allowance for loan losses (1) |
$ |
256,595 |
|
|
$ |
(42,657 |
) |
|
$ |
213,938 |
|
Less allowance for loan losses |
|
(75,574 |
) |
|
|
— |
|
|
|
(75,574 |
) |
Finance receivables, net |
$ |
181,021 |
|
|
$ |
(42,657 |
) |
|
$ |
138,364 |
|
(1) As reported acquired
finance receivables were 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)
AFF’s as reported results of operations contain
significant purchase accounting impacts. The following tables
present segment pre-tax operating income as reported and as
adjusted to exclude the impacts of purchase accounting for the
three and twelve months ended December 31, 2022 and the period
from December 17, 2021 through December 31, 2021 (in
thousands):
|
Three Months Ended December 31, 2022 |
|
As Reported |
|
|
|
Adjusted |
|
(GAAP) |
|
Adjustments |
|
(Non-GAAP) |
Retail POS Payment
Solutions Segment |
|
|
|
|
|
Revenue: |
|
|
|
|
|
Leased merchandise income |
$ |
166,427 |
|
$ |
— |
|
|
$ |
166,427 |
Interest and fees on finance receivables |
|
46,241 |
|
|
7,859 |
|
|
|
54,100 |
Total revenue |
|
212,668 |
|
|
7,859 |
|
|
|
220,527 |
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
Depreciation of leased merchandise |
|
91,090 |
|
|
(901 |
) |
|
|
90,189 |
Provision for lease losses |
|
29,913 |
|
|
— |
|
|
|
29,913 |
Provision for loan losses |
|
35,049 |
|
|
— |
|
|
|
35,049 |
Total cost of revenue |
|
156,052 |
|
|
(901 |
) |
|
|
155,151 |
|
|
|
|
|
|
Net revenue |
|
56,616 |
|
|
8,760 |
|
|
|
65,376 |
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
Operating expenses |
|
33,364 |
|
|
— |
|
|
|
33,364 |
Depreciation and amortization |
|
756 |
|
|
— |
|
|
|
756 |
Total segment expenses |
|
34,120 |
|
|
— |
|
|
|
34,120 |
|
|
|
|
|
|
Segment pre-tax operating
income |
$ |
22,496 |
|
$ |
8,760 |
|
|
$ |
31,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRSTCASH HOLDINGS,
INC.OPERATING INFORMATION
(CONTINUED)(UNAUDITED)
|
Twelve Months Ended December 31, 2022 |
|
As Reported |
|
|
|
Adjusted |
|
(GAAP) |
|
Adjustments |
|
(Non-GAAP) |
Retail POS Payment
Solutions Segment |
|
|
|
|
|
Revenue: |
|
|
|
|
|
Leased merchandise income |
$ |
622,163 |
|
$ |
— |
|
|
$ |
622,163 |
Interest and fees on finance receivables |
|
181,280 |
|
|
42,657 |
|
|
|
223,937 |
Total revenue |
|
803,443 |
|
|
42,657 |
|
|
|
846,100 |
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
Depreciation of leased merchandise |
|
354,104 |
|
|
(7,697 |
) |
|
|
346,407 |
Provision for lease losses |
|
140,118 |
|
|
— |
|
|
|
140,118 |
Provision for loan losses |
|
118,502 |
|
|
— |
|
|
|
118,502 |
Total cost of revenue |
|
612,724 |
|
|
(7,697 |
) |
|
|
605,027 |
|
|
|
|
|
|
Net revenue |
|
190,719 |
|
|
50,354 |
|
|
|
241,073 |
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
Operating expenses |
|
128,616 |
|
|
— |
|
|
|
128,616 |
Depreciation and amortization |
|
2,912 |
|
|
— |
|
|
|
2,912 |
Total segment expenses |
|
131,528 |
|
|
— |
|
|
|
131,528 |
|
|
|
|
|
|
Segment pre-tax operating
income |
$ |
59,191 |
|
$ |
50,354 |
|
|
$ |
109,545 |
|
|
|
|
|
|
|
|
|
|
FIRSTCASH HOLDINGS,
INC.OPERATING INFORMATION
(CONTINUED)(UNAUDITED)
|
December 17, 2021 - December 31, 2021 |
|
As Reported |
|
|
|
Adjusted |
|
(GAAP) |
|
Adjustments |
|
(Non-GAAP) |
Retail POS Payment
Solutions Segment |
|
|
|
|
|
Revenue: |
|
|
|
|
|
Leased merchandise income |
$ |
22,720 |
|
|
$ |
— |
|
|
$ |
22,720 |
Interest and fees on finance receivables |
|
9,024 |
|
|
|
1,708 |
|
|
|
10,732 |
Total revenue |
|
31,744 |
|
|
|
1,708 |
|
|
|
33,452 |
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
Depreciation of leased merchandise |
|
12,826 |
|
|
|
(404 |
) |
|
|
12,422 |
Provision for lease losses |
|
5,442 |
|
|
|
— |
|
|
|
5,442 |
Provision for loan losses (1) |
|
48,952 |
|
|
|
(44,250 |
) |
|
|
4,702 |
Total cost of revenue |
|
67,220 |
|
|
|
(44,654 |
) |
|
|
22,566 |
|
|
|
|
|
|
Net revenue (loss) |
|
(35,476 |
) |
|
|
46,362 |
|
|
|
10,886 |
|
|
|
|
|
|
Segment expenses: |
|
|
|
|
|
Operating expenses |
|
4,917 |
|
|
|
— |
|
|
|
4,917 |
Depreciation and amortization |
|
122 |
|
|
|
— |
|
|
|
122 |
Total segment expenses |
|
5,039 |
|
|
|
— |
|
|
|
5,039 |
|
|
|
|
|
|
Segment pre-tax operating
income (loss) |
$ |
(40,515 |
) |
|
$ |
46,362 |
|
|
$ |
5,847 |
(1) As reported provision for
loan losses includes the establishment of the initial allowance for
expected lifetime credit losses for acquired finance receivables
not considered purchased credit deteriorated, which is recorded as
an expense in the provision for loan losses.
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 |
|
Twelve Months Ended |
|
December 31, |
|
December 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Consolidated Results
of Operations |
|
|
|
|
|
|
|
Segment pre-tax operating
income (loss): |
|
|
|
|
|
|
|
U.S. pawn |
$ |
83,481 |
|
|
$ |
72,727 |
|
|
$ |
291,113 |
|
|
$ |
232,833 |
|
Latin America pawn |
|
42,652 |
|
|
|
35,868 |
|
|
|
142,027 |
|
|
|
121,812 |
|
Retail POS payment solutions (1) |
|
22,496 |
|
|
|
(40,515 |
) |
|
|
59,191 |
|
|
|
(40,515 |
) |
Intersegment eliminations (2) |
|
(510 |
) |
|
|
— |
|
|
|
(1,096 |
) |
|
|
— |
|
Consolidated segment pre-tax operating income |
|
148,119 |
|
|
|
68,080 |
|
|
|
491,235 |
|
|
|
314,130 |
|
|
|
|
|
|
|
|
|
Corporate expenses and other
income: |
|
|
|
|
|
|
|
Administrative expenses |
|
37,061 |
|
|
|
22,654 |
|
|
|
147,943 |
|
|
|
111,259 |
|
Depreciation and amortization |
|
14,832 |
|
|
|
2,764 |
|
|
|
59,390 |
|
|
|
5,716 |
|
Interest expense |
|
19,959 |
|
|
|
9,997 |
|
|
|
70,708 |
|
|
|
32,386 |
|
Interest income |
|
(209 |
) |
|
|
(276 |
) |
|
|
(1,313 |
) |
|
|
(696 |
) |
(Gain) loss on foreign exchange |
|
(387 |
) |
|
|
188 |
|
|
|
(585 |
) |
|
|
436 |
|
Merger and acquisition expenses |
|
2,027 |
|
|
|
14,185 |
|
|
|
3,739 |
|
|
|
15,449 |
|
Gain on revaluation of contingent acquisition consideration |
|
(26,760 |
) |
|
|
(17,871 |
) |
|
|
(109,549 |
) |
|
|
(17,871 |
) |
Other expenses (income), net |
|
(10 |
) |
|
|
(691 |
) |
|
|
(2,731 |
) |
|
|
949 |
|
Total corporate expenses and other income |
|
46,513 |
|
|
|
30,950 |
|
|
|
167,602 |
|
|
|
147,628 |
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
101,606 |
|
|
|
37,130 |
|
|
|
323,633 |
|
|
|
166,502 |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
21,540 |
|
|
|
7,759 |
|
|
|
70,138 |
|
|
|
41,593 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
80,066 |
|
|
$ |
29,371 |
|
|
$ |
253,495 |
|
|
$ |
124,909 |
|
(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 $31 million and $110 million for the
three and twelve months ended December 31, 2022, respectively, and
$6 million for both the three and the twelve months ended
December 31, 2021. The three and twelve months ended December 31,
2021 include the results of operations for AFF for the period
December 17, 2021 to December 31,
2021.(2) Represents the elimination of
intersegment transactions related to the Company offering AFF’s LTO
payment solution as a payment option in its U.S. pawn stores.
Intersegment retail merchandise sales of $2 million, cost of
retail merchandise sold of $1 million, depreciation of leased
merchandise of $0.4 million and provision for lease losses of
$0.2 million for the three months ended December 31, 2022 were
eliminated. Intersegment retail merchandise sales of
$5 million, cost of retail merchandise sold of
$3 million, depreciation of leased merchandise of
$1 million and provision for lease losses of $1 million
for the twelve months ended December 31, 2022 were eliminated.
FIRSTCASH HOLDINGS,
INC.PAWN STORE LOCATIONS AND MERCHANT PARTNER
LOCATIONS
Pawn Operations
As of December 31, 2022, the Company
operated 2,872 pawn store locations comprised of 1,101 stores in 25
U.S. states and the District of Columbia, 1,682 stores in 32 states
in Mexico, 61 stores in Guatemala, 14 stores in Colombia and 14
stores in El Salvador.
The following tables detail pawn store count activity for the
three and twelve months ended December 31, 2022:
|
|
Three Months Ended December 31, 2022 |
|
|
U.S. |
|
Latin America |
|
Total |
Total locations, beginning of period |
|
1,076 |
|
|
1,763 |
|
|
2,839 |
|
New locations opened (1) |
|
— |
|
|
17 |
|
|
17 |
|
Locations acquired |
|
27 |
|
|
1 |
|
|
28 |
|
Consolidation of existing pawn locations (2) |
|
(2 |
) |
|
(10 |
) |
|
(12 |
) |
Total locations, end of period |
|
1,101 |
|
|
1,771 |
|
|
2,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, 2022 |
|
|
U.S. |
|
Latin America |
|
Total |
Total locations, beginning of
period |
|
1,081 |
|
|
1,744 |
|
|
2,825 |
|
New locations opened (1) |
|
— |
|
|
45 |
|
|
45 |
|
Locations acquired |
|
30 |
|
|
1 |
|
|
31 |
|
Consolidation of existing pawn locations (2) |
|
(10 |
) |
|
(19 |
) |
|
(29 |
) |
Total locations, end of period |
|
1,101 |
|
|
1,771 |
|
|
2,872 |
|
(1) In addition to new store
openings, the Company strategically relocated one store in Latin
America during the three months ended December 31, 2022.
During the twelve months ended December 31, 2022, the Company
relocated two stores in the U.S. and two stores in Latin
America.
(2) Store consolidations were
primarily acquired locations over the past six 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.POS Payment
Solutions
As of December 31, 2022, AFF provided LTO
and retail POS solutions for consumer goods and services through a
network of approximately 9,200 active retail merchant partner
locations located in all 50 U.S. states, the District of Columbia
and Puerto Rico.
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. 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
(i) 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 (ii) 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 December 31, |
|
Twelve Months Ended December 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
InThousands |
|
PerShare |
|
InThousands |
|
PerShare |
|
InThousands |
|
PerShare |
|
InThousands |
|
PerShare |
Net income and diluted earnings per share, as reported |
$ |
80,066 |
|
|
$ |
1.72 |
|
|
$ |
29,371 |
|
|
$ |
0.70 |
|
|
$ |
253,495 |
|
|
$ |
5.36 |
|
|
$ |
124,909 |
|
|
$ |
3.04 |
|
Adjustments, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger and acquisition expenses |
|
1,561 |
|
|
|
0.03 |
|
|
|
10,922 |
|
|
|
0.26 |
|
|
|
2,878 |
|
|
|
0.06 |
|
|
|
11,872 |
|
|
|
0.29 |
|
Non-cash foreign currency (gain) loss related to lease
liability |
|
(685 |
) |
|
|
(0.01 |
) |
|
|
195 |
|
|
|
0.01 |
|
|
|
(930 |
) |
|
|
(0.02 |
) |
|
|
451 |
|
|
|
0.01 |
|
AFF purchase accounting adjustments (1) |
|
17,660 |
|
|
|
0.38 |
|
|
|
37,278 |
|
|
|
0.89 |
|
|
|
82,432 |
|
|
|
1.74 |
|
|
|
37,278 |
|
|
|
0.91 |
|
Gain on revaluation of contingent acquisition consideration
(2) |
|
(21,952 |
) |
|
|
(0.47 |
) |
|
|
(13,761 |
) |
|
|
(0.33 |
) |
|
|
(90,035 |
) |
|
|
(1.91 |
) |
|
|
(13,761 |
) |
|
|
(0.33 |
) |
Other expenses (income), net |
|
(8 |
) |
|
|
— |
|
|
|
(533 |
) |
|
|
(0.01 |
) |
|
|
(2,103 |
) |
|
|
(0.04 |
) |
|
|
730 |
|
|
|
0.02 |
|
Adjusted net income and
diluted earnings per share |
$ |
76,642 |
|
|
$ |
1.65 |
|
|
$ |
63,472 |
|
|
$ |
1.52 |
|
|
$ |
245,737 |
|
|
$ |
5.19 |
|
|
$ |
161,479 |
|
|
$ |
3.94 |
|
(1) See detail of the AFF
purchase accounting adjustments in tables below.
(2) The gain on revaluation of
contingent acquisition consideration is the result of the change in
the estimated fair value of the contingent acquisition
consideration liability, which as of December 31, 2022 had an
estimated fair value of $0. Given the macro-driven slowdown in
origination activity compared to the forecasts at the time the AFF
acquisition was negotiated in the summer of 2021, the Company no
longer expects to pay any material amount of the contingent
consideration as of December 31, 2022.
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 December 31, |
|
|
2022 |
|
|
|
2021 |
|
|
Pre-tax |
|
Tax |
|
After-tax |
|
Pre-tax |
|
Tax |
|
After-tax |
Merger and acquisition expenses |
$ |
2,027 |
|
|
$ |
466 |
|
|
$ |
1,561 |
|
|
$ |
14,185 |
|
|
$ |
3,263 |
|
|
$ |
10,922 |
|
Non-cash foreign currency
(gain) loss related to lease liability |
|
(979 |
) |
|
|
(294 |
) |
|
|
(685 |
) |
|
|
278 |
|
|
|
83 |
|
|
|
195 |
|
AFF purchase accounting
adjustments (1) |
|
22,935 |
|
|
|
5,275 |
|
|
|
17,660 |
|
|
|
48,413 |
|
|
|
11,135 |
|
|
|
37,278 |
|
Gain on revaluation of
contingent acquisition consideration |
|
(26,760 |
) |
|
|
(4,808 |
) |
|
|
(21,952 |
) |
|
|
(17,871 |
) |
|
|
(4,110 |
) |
|
|
(13,761 |
) |
Other expenses (income),
net |
|
(10 |
) |
|
|
(2 |
) |
|
|
(8 |
) |
|
|
(691 |
) |
|
|
(158 |
) |
|
|
(533 |
) |
Total adjustments |
$ |
(2,787 |
) |
|
$ |
637 |
|
|
$ |
(3,424 |
) |
|
$ |
44,314 |
|
|
$ |
10,213 |
|
|
$ |
34,101 |
|
|
Twelve Months Ended December 31, |
|
|
2022 |
|
|
|
2021 |
|
|
Pre-tax |
|
Tax |
|
After-tax |
|
Pre-tax |
|
Tax |
|
After-tax |
Merger and acquisition expenses |
$ |
3,739 |
|
|
$ |
861 |
|
|
$ |
2,878 |
|
|
$ |
15,449 |
|
|
$ |
3,577 |
|
|
$ |
11,872 |
|
Non-cash foreign currency
(gain) loss related to lease liability |
|
(1,329 |
) |
|
|
(399 |
) |
|
|
(930 |
) |
|
|
644 |
|
|
|
193 |
|
|
|
451 |
|
AFF purchase accounting
adjustments (1) |
|
107,055 |
|
|
|
24,623 |
|
|
|
82,432 |
|
|
|
48,413 |
|
|
|
11,135 |
|
|
|
37,278 |
|
Gain on revaluation of
contingent acquisition consideration |
|
(109,549 |
) |
|
|
(19,514 |
) |
|
|
(90,035 |
) |
|
|
(17,871 |
) |
|
|
(4,110 |
) |
|
|
(13,761 |
) |
Other expenses (income),
net |
|
(2,731 |
) |
|
|
(628 |
) |
|
|
(2,103 |
) |
|
|
949 |
|
|
|
219 |
|
|
|
730 |
|
Total adjustments |
$ |
(2,815 |
) |
|
$ |
4,943 |
|
|
$ |
(7,758 |
) |
|
$ |
47,584 |
|
|
$ |
11,014 |
|
|
$ |
36,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The following tables detail
AFF purchase accounting adjustments (in thousands):
|
|
Three Months Ended December 31, |
|
|
2022 |
|
2021 |
|
|
Pre-tax |
|
Tax |
|
After-tax |
|
Pre-tax |
|
Tax |
|
After-tax |
|
Amortization of fair value adjustment on acquired finance
receivables |
$ |
7,859 |
|
$ |
1,807 |
|
$ |
6,052 |
|
$ |
1,708 |
|
$ |
392 |
|
$ |
1,316 |
|
Amortization of fair value
adjustment on acquired leased merchandise |
|
901 |
|
|
208 |
|
|
693 |
|
|
404 |
|
|
93 |
|
|
311 |
|
Amortization of acquired
intangible assets |
|
14,175 |
|
|
3,260 |
|
|
10,915 |
|
|
2,051 |
|
|
472 |
|
|
1,579 |
|
Provision for loan losses
(establish initial allowance for expected lifetime credit losses
for non-purchase credit deteriorated (“PCD”) loans) |
|
— |
|
|
— |
|
|
— |
|
|
44,250 |
|
|
10,178 |
|
|
34,072 |
|
Total AFF purchase accounting adjustments |
$ |
22,935 |
|
$ |
5,275 |
|
$ |
17,660 |
|
$ |
48,413 |
|
$ |
11,135 |
|
$ |
37,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRSTCASH HOLDINGS,
INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
(CONTINUED)(UNAUDITED)
|
|
Twelve Months Ended December 31, |
|
|
2022 |
|
2021 |
|
|
Pre-tax |
|
Tax |
|
After-tax |
|
Pre-tax |
|
Tax |
|
After-tax |
|
Amortization of fair value adjustment on acquired finance
receivables |
$ |
42,657 |
|
$ |
9,811 |
|
$ |
32,846 |
|
$ |
1,708 |
|
$ |
392 |
|
$ |
1,316 |
|
Amortization of fair value
adjustment on acquired leased merchandise |
|
7,697 |
|
|
1,772 |
|
|
5,925 |
|
|
404 |
|
|
93 |
|
|
311 |
|
Amortization of acquired
intangible assets |
|
56,701 |
|
|
13,040 |
|
|
43,661 |
|
|
2,051 |
|
|
472 |
|
|
1,579 |
|
Provision for loan losses
(establish initial allowance for expected lifetime credit losses
for non-PCD loans) |
|
— |
|
|
— |
|
|
— |
|
|
44,250 |
|
|
10,178 |
|
|
34,072 |
|
Total AFF purchase accounting adjustments |
$ |
107,055 |
|
$ |
24,623 |
|
$ |
82,432 |
|
$ |
48,413 |
|
$ |
11,135 |
|
$ |
37,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value
adjustments on acquired finance receivables and leased merchandise
resulted from the recognition of these acquired assets at fair
value in purchase accounting, the amortization of which is
non-cash. The fair value adjustments related to acquired finance
receivables and acquired leased merchandise were fully amortized as
of December 31, 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):
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net income |
|
$ |
80,066 |
|
|
$ |
29,371 |
|
|
$ |
253,495 |
|
|
$ |
124,909 |
|
Income taxes |
|
|
21,540 |
|
|
|
7,759 |
|
|
|
70,138 |
|
|
|
41,593 |
|
Depreciation and amortization |
|
|
26,337 |
|
|
|
13,175 |
|
|
|
103,832 |
|
|
|
45,906 |
|
Interest expense |
|
|
19,959 |
|
|
|
9,997 |
|
|
|
70,708 |
|
|
|
32,386 |
|
Interest income |
|
|
(209 |
) |
|
|
(276 |
) |
|
|
(1,313 |
) |
|
|
(696 |
) |
EBITDA |
|
|
147,693 |
|
|
|
60,026 |
|
|
|
496,860 |
|
|
|
244,098 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Merger and acquisition expenses |
|
|
2,027 |
|
|
|
14,185 |
|
|
|
3,739 |
|
|
|
15,449 |
|
Non-cash foreign currency (gain) loss related to lease
liability |
|
|
(979 |
) |
|
|
278 |
|
|
|
(1,329 |
) |
|
|
644 |
|
AFF purchase accounting adjustments (1) |
|
|
8,760 |
|
|
|
46,362 |
|
|
|
50,354 |
|
|
|
46,362 |
|
Gain on revaluation of contingent acquisition consideration |
|
|
(26,760 |
) |
|
|
(17,871 |
) |
|
|
(109,549 |
) |
|
|
(17,871 |
) |
Other expenses (income), net |
|
|
(10 |
) |
|
|
(691 |
) |
|
|
(2,731 |
) |
|
|
949 |
|
Adjusted EBITDA |
|
$ |
130,731 |
|
|
$ |
102,289 |
|
|
$ |
437,344 |
|
|
$ |
289,631 |
|
(1) Excludes $14 million
and $57 million of amortization expense related to
identifiable intangible assets as a result of the AFF acquisition
for the three and twelve months ended December 31, 2022,
respectively, which is already included in the add-back of
depreciation and amortization to net income used to calculate
EBITDA. For both the three and twelve months ended December 31,
2021, $2 million was excluded.
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):
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
December 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Cash flow from operating
activities |
$ |
143,507 |
|
|
$ |
85,454 |
|
|
$ |
469,305 |
|
|
$ |
223,304 |
|
Cash flow from investing
activities: |
|
|
|
|
|
|
|
Pawn loans, net (1) |
|
38,890 |
|
|
|
(2,703 |
) |
|
|
(35,817 |
) |
|
|
(73,340 |
) |
Finance receivables, net |
|
(35,719 |
) |
|
|
(5,844 |
) |
|
|
(85,353 |
) |
|
|
(5,844 |
) |
Purchases of furniture, fixtures, equipment and improvements |
|
(5,956 |
) |
|
|
(10,414 |
) |
|
|
(35,586 |
) |
|
|
(42,022 |
) |
Free cash flow |
|
140,722 |
|
|
|
66,493 |
|
|
|
312,549 |
|
|
|
102,098 |
|
Merger and acquisition expenses paid, net of tax benefit |
|
1,561 |
|
|
|
10,922 |
|
|
|
2,878 |
|
|
|
11,872 |
|
Adjusted free cash flow |
$ |
142,283 |
|
|
$ |
77,415 |
|
|
$ |
315,427 |
|
|
$ |
113,970 |
|
(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 elsewhere in this release for additional reconciliation 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 |
|
Twelve Months Ended |
|
December 31, |
|
December 31, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Total revenue, as reported |
$ |
749,344 |
|
$ |
501,774 |
|
$ |
2,728,942 |
|
$ |
1,698,965 |
AFF purchase accounting
adjustments (1) |
|
7,859 |
|
|
1,708 |
|
|
42,657 |
|
|
1,708 |
Adjusted total revenue |
$ |
757,203 |
|
$ |
503,482 |
|
$ |
2,771,599 |
|
$ |
1,700,673 |
(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 elsewhere in this release 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 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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