FCFS - FirstCash Reports Record First Quarter Results; Earnings per Share Increase 32% in Total and 24% on an Adjusted Basis; Announces Acquisitions of 22 U.S. Pawn Stores and 19 New Store Openings in LatAm; Declares Quarterly Cash Dividend | Benzinga

FORT WORTH, Texas, April 25, 2024 (GLOBE NEWSWIRE) -- FirstCash Holdings, Inc. ("FirstCash" or the "Company") (NASDAQ:FCFS), the leading international operator of more than 3,000 retail pawn stores and a leading provider of retail point-of-sale ("POS") payment solutions through American First Finance ("AFF"), today announced operating results for the three month period ended March 31, 2024. The Company also announced that the Board of Directors declared a quarterly cash dividend of $0.35 per share, which will be paid in May 2024.

Mr. Rick Wessel, chief executive officer, stated, "FirstCash posted record first quarter operating results with year-over-year earnings per share growth of 32% in total and 24% on a non-GAAP adjusted basis. The strong results were driven by the continued strength of core pawn operations as pawn receivables increased 23% over the prior year in the U.S., while the growth of pawn receivables in Latin America was strong in the first quarter and accelerated sequentially compared to the prior quarter. In addition, double-digit revenue growth and improved margins for AFF resulted in a 43% increase in the retail POS payment solutions segment earnings over the same period last year.

"We continue to see significant store growth opportunities and are pleased to announce the completion last week of a pawn acquisition which adds 21 store locations in North Carolina. Coupled with an earlier one-store acquisition and 19 first quarter new store openings, FirstCash has added 41 locations so far this year and now has over 3,000 pawn locations in total, a major milestone which further bolsters its position as the largest pawn operator in the Americas.

"Given FirstCash's continued profitability and strong cash flows, we remain focused on shareholder returns and are pleased to again pay our regular cash dividend this quarter of $0.35 per share, or $1.40 annualized. The Company also completed a $500 million bond offering during the first quarter that enabled us to pay down a significant portion of the revolving credit facility and provides additional long-term funding for growth and future shareholder returns."

This release contains adjusted financial measures, which exclude certain non-operating and/or non-cash income and expenses, that 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.

Consolidated Operating Highlights

• Gross revenues totaled $836 million in the first quarter, an increase of 10% compared to the prior-year quarter while net revenues, or gross profit, increased 14% over the same period.
• Diluted earnings per share for the first quarter increased 32% over the prior-year quarter on a GAAP basis while adjusted diluted earnings per share increased 24% compared to the prior-year quarter.
• Net income for the first quarter increased 30% over the prior-year quarter on a GAAP basis while adjusted net income increased 22% compared to the prior-year quarter. For the twelve month period ended March 31, 2024, net income totaled $233 million on a GAAP basis while adjusted net income was $289 million.
• Adjusted EBITDA increased 20% in the first quarter compared to the prior-year quarter. For the twelve month period ended March 31, 2024, adjusted EBITDA totaled $534 million, an increase of 20% over the comparable prior-year period.
• Operating cash flows for the twelve month period ended March 31, 2024 were $428 million and adjusted free cash flows (a non-GAAP measure) were $201 million.
  

Store Base and Platform Growth

• Pawn Stores:
  
  • During the first quarter, the Company added a total of 20 new pawn locations which included one acquired location in the U.S. and 19 store openings in Latin America. The new stores in Latin America included 15 locations in Mexico, two locations in Guatemala, and one location each in Colombia and El Salvador.
  • Subsequent to quarter end, the Company acquired 21 pawn stores in North Carolina. This brings the total store count in this important U.S. market to 75 locations.
  • As of today, the Company has 3,017 locations, comprised of 1,199 U.S. locations and 1,818 locations in Latin America.
  • The Company also purchased the underlying real estate at nine of its existing pawn stores during the first quarter. This brings the total number of owned U.S. locations to 346.
• Retail POS Payment Solutions Merchant Partnerships:
  
  • At March 31, 2024, there were approximately 12,200 active retail and e-commerce merchant partner locations, representing a 24% increase in the number of active merchant locations compared to a year ago.
  • Since the Company's acquisition of AFF in December 2021, the number of active merchant locations has increased almost 90%.

U.S. Pawn Segment Operating Results

• Segment pre-tax operating income in the first quarter of 2024 was $97 million, an increase of $16 million, or 19%, compared to the prior-year quarter. The resulting segment pre-tax operating margin increased to 26% for the first quarter of 2024, an improvement over the 24% margin for the prior-year quarter.
• Pawn loan fee revenue increased 20% for the first quarter, while on a same-store basis, pawn loan fee revenue increased 12% compared to the prior-year quarter. The increased pawn loan fee revenue reflected store growth and continued growth in demand for pawn loans.
• Pawn receivables continued to grow to record levels, increasing 23% in total at March 31, 2024 compared to the prior year. The increase in total pawn receivables was driven by a 7% increase in the U.S. store count coupled with an impressive 14% same-store increase. The same-store increase was driven by a 6% increase in average loan size and an 8% increase in the number of loans outstanding.
• Total retail merchandise sales increased 12% in the first quarter of 2024 compared to the prior-year quarter. Same-store retail sales increased 4% compared to the prior-year quarter, which was a meaningful sequential improvement from the less than 1% increase in the fourth quarter of 2023 as compared to the fourth quarter of 2022.
• Retail sales margins remained strong at 41% for the first quarter and continue to be driven by optimized loan-to-value ratios, solid demand for value-priced, pre-owned merchandise and low levels of aged inventory.
• Annualized inventory turnover was 2.8 times for the trailing twelve months ended March 31, 2024, which equaled the prior-year annualized inventory turnover. Inventories aged greater than one year at March 31, 2024 remained extremely low at 1%.
• Operating expenses for the first quarter increased 8% in total due primarily to the 7% weighted-average store growth in the second half of 2023. Same-store expenses were flat compared to the prior-year quarter.
  

Latin America Pawn Segment Operating Results

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 first quarter of 2024 was 17.0 pesos / dollar, a favorable change of 9% versus the comparable prior-year period.

• First quarter segment pre-tax operating income totaled $32 million, which was a modest 3% decline compared to the prior year resulting in a pre-tax operating margin of 16% compared to 18% in the prior-year quarter. On a constant currency basis, which excludes the favorable foreign exchange rate impact in 2024, segment income was down 10% for the quarter compared to the prior-year quarter due primarily to increased costs related to inflationary pressures and continued store expansion as described further below.
• Pawn loan fees increased 16%, or 6% on a constant currency basis, in the first quarter of 2024 as compared to the prior-year quarter, while same-store pawn loan fees increased 16%, or 5% on a constant currency basis, compared to the prior year.
• Pawn receivables at March 31, 2024 increased 16%, or 7% on a constant currency basis, in total and on a same-store basis compared to the prior year.
• Retail merchandise sales in the first quarter of 2024 increased 10%, or flat on a constant currency basis, compared to the prior-year quarter. Same-store retail merchandise sales in the first quarter of 2024 were up 9%, or flat on a constant currency basis, compared to the prior-year quarter.
• Retail margins increased to 36% for the first quarter of 2024 compared to 34% in the prior-year quarter. Annualized inventory turnover improved to 4.4 times for the trailing twelve months ended March 31, 2024 versus 4.3 times for the same prior-year period, while inventories aged greater than one year at March 31, 2024 remained extremely low at 1%.
• Operating expenses increased 21% in total and 18% on a same-store basis compared to the prior-year quarter. On a constant currency basis, they increased 11% in total and 8% on a same-store basis. The increase in total expenses from all stores reflected increased store counts, accelerated store opening activity and higher labor costs (due primarily to further increases in the federal minimum wage and other mandated benefit programs) along with other inflationary impacts.

American First Finance (AFF) - Retail POS Payment Solutions Segment Operating Results

• First quarter segment pre-tax operating income totaled $33 million, an increase of 43% over the prior-year quarter.
• Segment revenues for the quarter, comprised of lease-to-own ("LTO") fees and interest and fees on finance receivables, increased 10% compared to the prior-year quarter.

• Gross transaction volume from originated LTO and POS financing transactions totaled $256 million for the first quarter, representing an increase of 3% over the first quarter of last year as the 24% increase in active merchant doors offset a decline of 14% in same-door originations. Most of the same-door origination decrease was in AFF's significant furniture category as many furniture, appliance and electronics retailers experienced softer than expected sales activity during the quarter.
• Combined gross leased merchandise and finance receivables outstanding at March 31, 2024 increased 5% compared to the March 31, 2023 balances.
• AFF continues to provide up front expected lifetime loss provisioning on leased merchandise and finance receivable originations. The resulting allowance on leased merchandise and finance receivables at March 31, 2024 was 42% of the gross receivables, which was consistent with the prior year.
• The combined lease and loan loss provision, as a percentage of the total gross transaction volume originated, decreased slightly from 31% during the first quarter of 2023 to 29% during the first quarter of 2024, which reflected lower than expected charge-offs on first half of 2023 originations.
• The average monthly net charge-off ("NCO") rate for combined leased merchandise and finance receivable products for the first quarter of 2024 was 5.3% compared to the prior year of 4.7%. The current year rate was impacted in part by slower portfolio growth in the current quarter compared to last year but remains well within the Company's targeted range for NCO's.
• Operating expenses increased 4% compared to the prior-year quarter, primarily due to increased acquisition and servicing costs to support receivable growth.

Cash Flow and Liquidity

• Each of the Company's business segments generated significant operating cash flows during the twelve month period ended March 31, 2024. Consolidated operating cash flows for the twelve month period ended March 31, 2024 totaled $428 million and adjusted free cash flows (a non-GAAP measure) were $201 million. The cash flows helped fund significant growth in earning assets and continued investments in the store platform over the past twelve months, which included:
  
  • Net investment in working capital of over $100 million to fund year-over-year increases in customer receivables, pawn inventories and LTO merchandise
  • Acquisitions of pawn stores totaling $181 million
  • Investments in real estate of $64 million
• In February 2024, the Company successfully completed an offering of $500 million of 6.875% senior unsecured notes due in 2032. The Company used the proceeds to reduce the outstanding balance on the Company's higher-rate, revolving credit facility. Total outstanding debt at March 31, 2024 decreased $53 million on a sequential basis compared to December 31, 2023.
• The majority (over $1.5 billion) of the Company's long-term financing remains fixed rate debt with favorable interest rates ranging from 4.625% to 6.875% and maturity dates that do not begin until 2028 and continue into 2032.
• The Company's consolidated debt to trailing twelve months EBITDA ratio was 2.75x adjusted EBITDA (as defined in the Company's U.S. revolving commercial bank credit facility which provides proforma credit for acquired earnings) at March 31, 2024.
  

Shareholder Returns

• The Board of Directors declared a $0.35 per share second quarter cash dividend, which will be paid on May 31, 2024 to stockholders of record as of May 15, 2024. This represents an annualized dividend of $1.40 per share. Any future dividends are subject to approval by the Company's Board of Directors.
• The Company has $200 million available under the currently authorized share repurchase program. Given the current volume of acquisition activity, the Company did not repurchase any shares during the first quarter of 2024. Future share repurchases are subject to expected liquidity, acquisitions and other investment opportunities, debt covenant restrictions, market conditions and other relevant factors.
• The Company generated a 12% return on equity and a 6% return on assets for the twelve months ended March 31, 2024. Using adjusted net income for the twelve months ended March 31, 2024, the adjusted return on equity was 15% while the adjusted return on assets was 7%.
  

2024 Outlook

The Company's outlook for 2024 continues to be 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. Anticipated conditions and trends for the remainder of 2024 include the following:

Pawn Operations:

• Pawn operations are expected to remain the primary earnings driver in 2024 as the Company expects segment income from the combined U.S. and Latin America pawn segments to be approximately 80% of total segment level pre-tax income for the full year.
• The Company is now targeting the addition of approximately 90 to 100 locations in 2024 through new store openings and acquisitions. The Company's current store count for 2024 stands at 3,017 locations. Furthermore, management continues to see a pipeline of additional acquisition opportunities in both the U.S. and Latin America, which could further boost store additions.

U.S. Pawn

• U.S. pawn operations are expected to benefit in 2024 from full year revenue and earnings contributions from the 87 stores acquired in the second half of 2023 and the 22 stores acquired thus far in 2024.
• Same-store pawn receivables at March 31, 2024 were up 14% compared to a year ago. Year-over-year same-store receivable growth in April continues at a similar pace, although as a reminder, these growth rates for the balance of 2024 are expected to moderate as the Company begins to lap the significant prior year growth in pawn receivables beginning in the second quarter of 2023.
• Retail sales are expected to follow similar trends to pawn fees with retail margins of 40% or more.
• Store operating expenses are expected to increase in line with store additions.

Latin America Pawn

• Latin America pawn loan growth to-date in April is currently up approximately 18% on a dollar basis and 9% on a constant currency basis as compared to the prior-year period and full year 2024 fee growth is anticipated to remain in a mid-single digit range or better assuming foreign exchange rates remain steady.
• Retail sales in Latin America are also expected to grow, although at a slightly slower rate than pawn fees given current inventory levels, which remain below historical levels as a percentage of pawn receivables. Retail margins are anticipated to remain in a 35% to 36% range.
• Store operating expenses in Latin America this year are expected to rise in a range of 7% to 10% for the full year compared to last year due to increased store counts along with continued inflationary impacts (primarily related to further minimum wage increases in Latin America). Even with increased operating expenses, the Company still anticipates earnings growth from the Latin America segment over the remainder of the year.
  

Retail POS Payment Solutions (AFF) Operations:

• Despite softer than expected retail sales during the first quarter at many of AFF's furniture merchant partners, the Company is still projecting growth in gross transaction volumes, which are now expected to grow 4% to 8% in 2024. Resulting revenues are now forecast to grow year-over-year in a similar range for the balance of 2024.

• The full year loss provision expense for 2024 is expected to remain in line with origination activity, with anticipated provision rates (combined provision for lease and loan losses as a percentage of the total gross transaction volume originated) ranging between 28% and 32% in the second quarter of 2024 and 27% and 31% for the full year. As a reminder, provisioning rates are seasonally higher in the first half of the year versus the last half based on the proximity to the tax refund collection cycle typically in the first quarter each year.
• Operating expenses for the full year are expected to remain relatively consistent with the first quarter run-rate for the balance of 2024.

Interest Expense, Tax Rates and Currency:

• Net interest expense is expected to increase for full year 2024 compared to 2023, with most of the increase expected in the first half of 2024 due to higher year-over-year interest rates for the comparative periods.
• For the full year of 2024, the effective income tax rate under current tax codes in the U.S. and Latin America is expected to range from 25% to 26%.
• Each full point change in the exchange rate of the Mexico peso represents an annual earnings impact of approximately $0.10 per share.
  

Additional Commentary and Analysis   

Mr. Wessel provided additional insights on the Company's first quarter results, "Our consolidated earnings in the first quarter were outstanding as evidenced by 20% or greater growth in consolidated net income, earnings per share and adjusted EBITDA over last year.

"The Company's overall pawn operations continue to perform exceptionally, driven by what we believe to be ongoing inflationary pressures and credit tightening impacting cash-constrained consumers. Our ability to provide customers with fast, convenient and ready access to cash coupled with a wide array of value-priced pre-owned retail merchandise is unique in both the consumer finance and retail sectors. As a result, our U.S. pawn operations generated 20% growth in pawn fees coupled with 12% growth in retail merchandise sales in the first quarter compared to last year, which contributed significantly to the strong consolidated results.

"We are also encouraged by first quarter pawn demand and retail margin trends in Latin America. While first quarter operating expenses were impacted by another increase in the minimum wage in Mexico, we saw strong sequential improvement in pawn receivables and improved retail margins in the first quarter. Accordingly, we continue to expect full year earnings growth in 2024 in Latin America.

"While reaching the 3,000 store milestone is a significant accomplishment, we expect further expansion in our core pawn business. We are extremely excited to complete the announced acquisition in North Carolina which further expands our strong presence in this fast growing state. Additionally, we added 20 stores in the first quarter, including 19 new large format stores across four countries in Latin America, and expect 50-60 new store additions for the full year. We believe the outlook for additional store openings and acquisitions over the balance of 2024 remains highly positive.

"AFF posted strong first quarter results as well and continues to be an accretive addition to our growth platform, representing approximately 21% of our pre-tax segment income. While the current retail environment for new, higher-ticket furniture remains challenging, we have increased the number of merchant partner doors by 24% year-over-year and continue to expand merchant relationships into other non-furniture categories. As a result, AFF's POS payment solutions are now being offered through more than 12,000 retail and e-commerce merchant partner locations across 26 product and service categories.

"Our balance sheet remains very strong. During the quarter we completed a $500 million bond offering that allowed us to pay down a significant portion of our higher interest rate credit facility, providing greater financial flexibility going forward for continued acquisitions, new store growth and future share buybacks.

"In summary, we believe the value proposition to our customers across multiple segments is stronger than ever and that we are well positioned to meet their needs and continue to generate long-term revenue and earnings results for our shareholders," 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 3,000 pawn stores in the U.S. and Latin America buy and sell a wide variety of jewelry, electronics, tools, appliances, sporting goods, musical instruments and other merchandise, and make small non-recourse 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 12,200 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"), including the Company's outlook for 2024. 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, outlook 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 that 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 extensive 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; risks related to the Company's acquisitions, including the failure of the Company's acquisitions to deliver the estimated value and benefits expected by the Company and the ability of the Company to continue to identify and consummate acquisitions on favorable terms, if at all; 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 those changes resulting from shifts 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, elevated interest rates and higher gas prices, 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 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.

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