FirstCash Reports Third Quarter Results; Company Sees Continued Improvement in Pawn Lending and Retail Margin Trends; Store Count Reaches 2,750 Location Milestone
Mr.
“Given FirstCash’s continued profitability and strong cash flows, we are pleased to again pay our regular cash dividend this quarter of
This release contains adjusted earnings measures, which exclude debt extinguishment costs and certain other extraordinary and/or non-cash expenses, which are non-GAAP financial measures. Please refer to the descriptions and reconciliations to GAAP of these and other non-GAAP financial measures at the end of this release.
Three Months Ended |
|||||||||||
As Reported (GAAP) | Adjusted (Non-GAAP) | ||||||||||
In thousands, except per share amounts | 2020 | 2019 | 2020 | 2019 | |||||||
Revenue | $ | 359,890 | $ | 452,459 | $ | 359,890 | $ | 452,459 | |||
Net income | $ | 15,062 | $ | 34,761 | $ | 24,453 | $ | 36,246 | |||
Diluted earnings per share | $ | 0.36 | $ | 0.81 | $ | 0.59 | $ | 0.84 | |||
EBITDA (non-GAAP measure) | $ | 34,174 | $ | 68,131 | $ | 46,333 | $ | 70,173 | |||
Weighted-average diluted shares | 41,536 | 43,167 | 41,536 | 43,167 |
Nine Months Ended |
|||||||||||
As Reported (GAAP) | Adjusted (Non-GAAP) | ||||||||||
In thousands, except per share amounts | 2020 | 2019 | 2020 | 2019 | |||||||
Revenue | $ | 1,239,126 | $ | 1,366,077 | $ | 1,239,126 | $ | 1,366,077 | |||
Net income | $ | 73,853 | $ | 110,464 | $ | 90,620 | $ | 114,064 | |||
Diluted earnings per share | $ | 1.77 | $ | 2.55 | $ | 2.17 | $ | 2.63 | |||
EBITDA (non-GAAP measure) | $ | 152,760 | $ | 209,203 | $ | 174,869 | $ | 213,959 | |||
Weighted-average diluted shares | 41,691 | 43,358 | 41,691 | 43,358 | |||||||
Consolidated Earnings Highlights
- Due primarily to the combined impacts of COVID-19, debt extinguishment costs, lower foreign exchange rates and the wind-down of consumer lending operations, diluted earnings per share decreased 56% on a GAAP basis and 30% on an adjusted non-GAAP basis in the third quarter of 2020 compared to the prior-year quarter. For the nine month year-to-date period, diluted earnings per share decreased 31% on a GAAP basis and 17% on an adjusted non-GAAP basis. Key factors affecting the comparability of 2020 earnings results to 2019 include:
• Third quarter and year-to-date 2020 GAAP net income was reduced by the loss on extinguishment of debt related to the senior notes refinancing which was$9 million , or$0.22 per share, on a tax-effected basis. This loss is excluded from the Company’s non-GAAP adjusted financial measures (see detailed reconciliation of non-GAAP financial measures provided elsewhere in this release).
• The COVID-19 related impact on lending demand resulted in pawn fee revenues declining$43 million , or 30%, in the third quarter compared to the prior-year quarter. The impact of the decline was significantly offset by combined store-level and administrative expense reductions of$24 million during the quarter as compared to the prior-year quarter.
• While total merchandise sales (from retail and wholesale scrap jewelry sales) were down 15% compared to the prior-year quarter, due primarily to lower beginning inventory levels, gross profit from merchandise sales was down only 2% on aU.S dollar basis and up slightly (under 1%) on a constant currency basis, in each case compared to the prior-year quarter, a result of significantly increased retail and scrap jewelry margins.
• Foreign exchange rates inLatin America were also negatively impacted by COVID-19, affectingU.S. dollar-reported earnings per share and represented approximately$0.03 of earnings drag in the third quarter and$0.08 year-to-date.
• Contraction and termination of non-core unsecured consumer lending operations during the first half of the year reduced earnings per share on a GAAP basis by$0.02 in the third quarter of 2020 and$0.07 per share year-to-date. Adjusted non-GAAP earnings per share were impacted by$0.03 in the third quarter and$0.13 year-to-date compared to the respective prior-year periods.
• Income tax rates for the third quarter and the year-to-date periods were lower than prior-year periods, primarily due to theInternal Revenue Service finalizing regulations inJuly 2020 for the global intangible low-taxed income tax (“GILTI tax”) provisions for foreign operations in theU.S. federal tax code. The GILTI tax became effective in 2018, and based on preliminaryIRS guidance, the impact to the Company has been included in its tax provisions since 2018. The finalized regulations issued in July effectively eliminated the impact of the incremental GILTI tax for the Company’s 2018, 2019 and current tax years and permitted retroactive application which results in a reduction in 2020 tax expense of approximately$3 million , or$0.07 per share. - Net income for the third quarter totaled
$15 million on a GAAP basis and$24 million on an adjusted non-GAAP basis. For the trailing twelve months endedSeptember 30, 2020 , consolidated net income was$128 million on a GAAP basis and$144 million on an adjusted non-GAAP basis, while adjusted EBITDA totaled$265 million . - Cash flow from operating activities was
$245 million for the trailing twelve months endedSeptember 30, 2020 . Adjusted free cash flow, a non-GAAP financial measure, for the trailing twelve months was$390 million .
Acquisitions and Store Opening Highlights
- A total of 13 de novo locations were opened in
Latin America during the third quarter, which included 10 locations inMexico , two inGuatemala and one inColombia . Several expected third quarter openings were impacted by pandemic-related delays in obtaining various operating permits.
- Year-to-date, a total of 104 stores have been added in
Latin America , including 64 de novo stores and 40 acquired stores.
- The total store count at
September 30, 2020 stands at a record 2,750 locations, of which, 63% or 1,720 are inLatin America and 1,030 are inthe United States .
- During the third quarter, all of the current 1,030
U.S. stores were operational, excluding a very limited number of temporary closures primarily related to the Company’s COVID-19 safety protocols.
- As previously reported, with the onset of COVID-19 related lock-downs and subsequent federal stimulus response, pawn loan originations in the
U.S. fell significantly in April, declining almost 60% for the month. Pawn loan originations began improving in May and continued to rebound throughout the third quarter and thus far into October. Same-store pawn loan origination volumes were down only 17% in September as compared to the same prior-year period and were down only 8% during the past two weeks of October. During the same two week period, the volume of “buys,” which is merchandise purchased directly from customers, has increased 16% on a same-store basis compared to last year and total same-store customer fundings, which are pawn loan originations plus buys, are down just 5% compared to last year’s same two week period.
- Pawn balances at
September 30 were down 30% compared to the prior year in total and on a same-store basis, resulting in a 30% reduction in total and same-store pawn fee revenues compared to the prior-year quarter, which compares favorably to the 40% decrease in pawn balances at the end of June. As ofOctober 20 , same-store pawn loans are down 26% compared to the prior year, and given the accelerating recovery in pawn originations, we believe could improve even more rapidly in the fourth quarter.
- Pawn loan forfeiture rates in the third quarter were again lower than historical levels, driven by customer liquidity and more active buying of general merchandise items. The resulting average monthly yield of 12% on the pawn loan portfolio for the third quarter represented an improvement of approximately 30 basis points compared to the yield in the prior-year comparable quarter.
- Inventory levels at the beginning of the third quarter were lower than normal following record second quarter domestic retail sales and fewer forfeited pawn loans due to the impacts of COVID-19 on lending activity. Partially offsetting the impact of lower beginning inventories was an increase in the percentage of merchandise purchased directly from customers. Purchased inventories can be put up for sale faster and typically at better margins than forfeited collateral. Resulting inventory levels at the end of the third quarter remained consistent with the previous sequential quarter, while retail sales decreased a modest 10% compared to the prior-year quarter, both in total and on a same-store basis.
- Despite the decline in top-line retail sales, total gross profit from retail sales for the third quarter increased 4% over the prior-year quarter driven by a 600 basis point improvement in retail margins. The third quarter retail margin of 44% was significantly higher than the 38% margin in the same quarter last year and greater than the 42% margin in the previous sequential quarter. The continued strength in retail margins reflect continued retail demand for value-priced pre-owned merchandise, increased buying of fresh merchandise from customers and lower levels of aged inventory, all of which limited the need for normal discounting. Aged inventories were 2% of total inventories at
September 30 , which improved compared to 3% a year ago.
- Net revenue from non-core scrap jewelry sales increased 10% for the quarter and 8% year-to-date compared to the respective prior-year periods. The improvement was driven primarily by increased gold prices and resulted in a 19% third quarter margin on scrap jewelry sales compared to 12% in the prior-year quarter.
- Store operating expenses decreased 10% on both a total and same-store basis compared to the prior-year quarter, reflecting the continued expense optimization efforts from reduced staffing levels through normal attrition, reduced store hours and other store-level cost saving initiatives.
- Consistent with the Company’s strategy to focus on pawn operations, the Company ceased offering unsecured consumer loan and credit services products, which include all payday and installment loans, in the
U.S. effectiveJune 30, 2020 .
- Revenues from consumer lending operations in the third quarter were from loans and credit services transactions originated prior to
June 30, 2020 and totaled only$57,000 compared to$3 million in the third quarter of last year. The Company anticipates no revenue and minimal earnings contribution from the remaining wind-down of its consumer lending operations in the fourth quarter of 2020.
Note: Certain growth rates in “Latin America Operations” below are calculated on a constant currency basis, a non-GAAP financial measure defined at the end of this release. The average Mexican peso to
Latin America Pawn Operations
- All of the Company’s stores in
Latin America are currently open and operating. During the third quarter, operations were nominally impacted by restricted operating days/hours inColombia ,El Salvador andGuatemala , mass transit closings and other short-term closings due primarily to safety protocols related to the COVID-19 pandemic.
Latin America saw second quarter declines in economic activity and personal spending related to COVID-19. The impact on pawn originations was significant, with year-over-year origination volumes declining approximately 50% inMexico during May. This decline, while considerable, was less severe than in theU.S. , likely due to limited government stimulus programs inLatin America in response to the pandemic. Pawn loan origination volume inLatin America improved steadily during the third quarter, with same-store origination volumes inMexico down 19% in September and 15% over the past two weeks of October compared to the prior-year periods.
- Pawn loans outstanding at
September 30 were down 29% on aU.S. dollar translated basis and 19% on a constant currency basis compared to the prior year, while same-store pawn loans at quarter end decreased 31% on aU.S. dollar translated basis and 21% on a constant currency basis compared to the prior-year quarter. As ofOctober 20 , currency adjusted pawn loans were down 18% compared to the prior year.
- Pawn fees in the third quarter decreased 30% in total, or 21% on a constant currency basis, as compared to the prior-year quarter. On a same-store basis, pawn fees decreased 32% on a
U.S. dollar basis and were down 23% on a constant currency basis. Similar toU.S. results, pawn redemptions inLatin America were strong and drove improved yields during the quarter.
- Retail sales were impacted by a combination of lower beginning inventory levels and a more limited economic recovery in the third quarter versus the
U.S. Resulting retail sales for the third quarter decreased 26%, or 17% on a constant currency basis, compared to the prior-year quarter. Same-store retail sales decreased 29% on aU.S. dollar basis and were down 20% on a constant currency basis.
- Partially offsetting lower sales, retail sales margins improved to 37% in the third quarter compared to 34% in the prior-year quarter and 36% in the previous sequential quarter due to the increased focus on loan-to-value ratios. Aged inventories remained low at less than 2% of total inventories.
- Net revenue from scrap jewelry sales was
$3 million for the quarter compared to less than$1 million in the prior-year period as a result of increased margins and higher volumes. Scrap jewelry sales margins were strong at 25% during the third quarter versus 12% in the prior-year quarter, driven by increased dollar-denominated gold prices.
- Store operating expenses decreased 15%, or 5% on a constant currency basis, and same-store operating expenses decreased 19%, or 10% on a constant currency basis, compared to the prior-year quarter. The reduction in operating expenses reflects the continued expense optimization efforts from reduced staffing levels through normal attrition, reduced store hours and other store level cost saving initiatives.
Liquidity and Shareholder Returns
- In
August 2020 , the Company successfully completed an offering of$500 million of 4.625% senior unsecured notes due in 2028. The Company used the proceeds from the offering to redeem all$300 million of its 5.375% senior notes due in 2024, to significantly pay down the outstanding balance on the Company’s revolving unsecured credit facility and to pay fees and expenses related to the redemption and offering. In addition to the lower interest rate and the extended term, the new notes provide greater flexibility for opportunistic acquisitions, strategic real estate purchases and shareholder payouts in the form of dividends and share repurchases.
- The Company’s strong liquidity position at
September 30, 2020 includes cash balances of$79 million and significant availability under its$500 million domestic bank line of credit.
- The net debt ratio improved to 1.7 to 1 for the trailing twelve months ended
September 30, 2020 , compared to 1.9 to 1 a year ago. See non-GAAP financial measures elsewhere in this release.
- The Board of Directors declared a
$0.27 per share fourth quarter cash dividend on common shares outstanding, which will be paid onNovember 27, 2020 to stockholders of record as ofNovember 13, 2020 . This represents an annualized cash dividend of$1.08 per share. Any future dividends are subject to approval by the Company’s Board of Directors.
- Effective
October 20, 2020 , the Company lifted the temporary suspension of its share repurchase program put in place in April at the onset of the COVID-19 pandemic. Future share repurchases will remain subject to expected liquidity, debt covenant restrictions, alternative acquisition opportunities and other relevant factors. Year-to-date, the Company repurchased 981,000 shares at an aggregate cost of$80 million and$48 million remains under the current share repurchase authorization.
2020 Outlook
- Due to the uncertainty around COVID-19 and foreign currency volatility, the Company withdrew its initial 2020 earnings guidance on
April 22, 2020 . Given the ongoing uncertainties regarding the pace of the recovery in pawn receivables and inventories and ongoing currency volatility, the Company has not reinstated earnings guidance for the balance of the year. However, as the Company continues to evaluate its 2020 earnings results, the following factors are expected to impact its comparisons to prior-year results:
• Impact of COVID-19: The extent to which COVID-19 continues to impact the Company’s operations will depend on future developments, which are uncertain and cannot be predicted with confidence, including the ongoing duration and severity of the outbreak and government responses to the pandemic and the resulting impact on borrowing demand and retail operations. For example, the normalization of demand for pawn loans could be delayed in the short-term by reduced personal spending if businesses and schools cannot reopen or remain open and by additional government stimulus payments and benefit programs.
Based on the currently improving growth trends for pawn receivables, the Company expects a smaller percentage decline in pawn fees in the fourth quarter as compared to the third quarter. While inventory levels have generally stabilized in the third quarter, especially in theU.S. , fourth quarter sales will be impacted by lower inventory levels compared to the prior year. Despite the effects of the pandemic and currency volatility, full-year retail sales for 2020 are still expected to be down less than 10% to the prior year. The Company expects the continuation of improved retail margins in the fourth quarter, which will partially offset lower sales volumes, and expects to realize total expense savings at a rate similar to third quarter results.
• Currency volatility: Global economic uncertainty due to the COVID-19 pandemic has strengthened the relative value of theU.S. dollar and negatively impacted developing market currencies, including the Mexican peso, which is the primary currency for the Company’s foreign operations. The current peso to dollar exchange rate of approximately 21.5 to 1 compares to an average rate in the first nine months of 2020 of 21.8 to 1 and an average rate of 19.3 to 1 during all of 2019. For the fourth quarter of 2020, the Company estimates that each full Mexican peso change in the exchange rate to theU.S. dollar represents approximately$0.08 to$0.10 per share of annualized earnings impact to the Company.
• Income tax rate: For the full-year of 2020, the effective income tax rate is expected to range from 24.5% to 26.0% compared to 26.7% in 2019. The lower expected tax rate is primarily due to the finalized regulations on the GILTI tax as noted above and is dependent on other estimates that affect the tax rate and are subject to considerable change, such as the inflation index inMexico and certain nondeductible executive incentive compensation in theU.S.
• New store openings: Despite the challenges presented by COVID-19, including significant construction, utility and permitting delays, a total of 64 stores were opened inLatin America during the first nine months of the year. While the Company has a strong pipeline of additional stores leased, under construction or completed and awaiting permits, the impacts of COVID-19 will likely limit the number of 2020 openings to a total of 70 to 75 stores. As a reminder, the Company typically limits the number of fourth quarter openings in order to minimize operational distractions in the holiday sales season.
Additional Commentary and Analysis
“FirstCash continues to focus on customer and employee safety as we navigate the pandemic and its significant health and economic impacts. We are proud of our team’s resiliency and dedication to safely provide essential products and services to our loyal customers in these challenging times. The Company’s ability to keep its stores open and maintain our workforce have been critical. We have remained committed to avoiding layoffs or furloughs in any of our significant geographic markets and corporate offices and our front-line employees, as a whole, have benefited from record levels of incentive pay so far this year.
“We are seeing a steady rebound in pawn activity, with
“Despite the obvious challenges, we have now safely added over 100 stores this year through acquisitions and new store openings. Additional store openings are planned in the fourth quarter and our real estate team continues to build a pipeline of openings for 2021. We are also optimistic about potential store acquisition opportunities in both the
“FirstCash continues to maintain strong liquidity and has generated record free cash flows in this year’s unprecedented environment. The Company’s excellent credit profile was evidenced by our ability to refinance our senior notes in August with an oversubscribed and upsized
“While 2020 has obviously been a challenging year for our customers, employees and the Company, we remain optimistic about the recovery and believe that we are very well positioned for long-term growth and increased shareholder value,” concluded
About
Forward-Looking Information
This release contains forward-looking statements about the business, financial condition and prospects of
While the Company believes the expectations reflected in forward-looking statements are reasonable, there can be no assurances such expectations will prove to be accurate. Security holders are cautioned such forward-looking statements involve risks and uncertainties. Certain factors may cause results to differ materially from those anticipated by the forward-looking statements made in this release. Such factors may include, without limitation, the risks, uncertainties and regulatory developments (1) related to the COVID-19 pandemic, which include risks and uncertainties related to the current unknown duration and severity of the COVID-19 pandemic, the impact of governmental responses that have been, and may in the future be, imposed in response to the pandemic, including stimulus programs which could adversely impact lending demand and regulations which could adversely affect the Company’s ability to continue to fully operate, potential changes in consumer behavior and shopping patterns which could impact demand for both the Company’s pawn loan and retail products, the deterioration in the economic conditions in
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
Three Months Ended | Nine Months Ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenue: | |||||||||||||||
Retail merchandise sales | $ | 234,982 | $ | 281,358 | $ | 819,011 | $ | 844,353 | |||||||
Pawn loan fees | 99,570 | 142,879 | 343,675 | 420,994 | |||||||||||
Wholesale scrap jewelry sales | 25,281 | 25,661 | 74,437 | 82,352 | |||||||||||
Consumer loan and credit services fees | 57 | 2,561 | 2,003 | 18,378 | |||||||||||
Total revenue | 359,890 | 452,459 | 1,239,126 | 1,366,077 | |||||||||||
Cost of revenue: | |||||||||||||||
Cost of retail merchandise sold | 137,230 | 178,597 | 493,436 | 534,218 | |||||||||||
Cost of wholesale scrap jewelry sold | 19,818 | 22,660 | 61,022 | 76,947 | |||||||||||
Consumer loan and credit services loss provision | 104 | 223 | (480 | ) | 3,829 | ||||||||||
Total cost of revenue | 157,152 | 201,480 | 553,978 | 614,994 | |||||||||||
Net revenue | 202,738 | 250,979 | 685,148 | 751,083 | |||||||||||
Expenses and other income: | |||||||||||||||
Store operating expenses | 132,061 | 149,819 | 426,612 | 445,018 | |||||||||||
Administrative expenses | 24,354 | 30,576 | 85,642 | 94,426 | |||||||||||
Depreciation and amortization | 10,426 | 10,674 | 31,424 | 31,058 | |||||||||||
Interest expense | 6,561 | 8,922 | 21,953 | 25,840 | |||||||||||
Interest income | (499 | ) | (429 | ) | (1,209 | ) | (788 | ) | |||||||
Merger and other acquisition expenses | 7 | 805 | 209 | 1,510 | |||||||||||
(Gain) loss on foreign exchange | (432 | ) | 1,648 | 1,639 | 926 | ||||||||||
Loss on extinguishment of debt | 11,737 | — | 11,737 | — | |||||||||||
Write-offs and impairments of certain lease intangibles and other assets | 837 | — | 6,549 | — | |||||||||||
Total expenses and other income | 185,052 | 202,015 | 584,556 | 597,990 | |||||||||||
Income before income taxes | 17,686 | 48,964 | 100,592 | 153,093 | |||||||||||
Provision for income taxes | 2,624 | 14,203 | 26,739 | 42,629 | |||||||||||
Net income | $ | 15,062 | $ | 34,761 | $ | 73,853 | $ | 110,464 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.36 | $ | 0.81 | $ | 1.78 | $ | 2.56 | |||||||
Diluted | $ | 0.36 | $ | 0.81 | $ | 1.77 | $ | 2.55 | |||||||
Weighted-average shares outstanding: | |||||||||||||||
Basic | 41,440 | 42,957 | 41,597 | 43,183 | |||||||||||
Diluted | 41,536 | 43,167 | 41,691 | 43,358 | |||||||||||
Dividends declared per common share | $ | 0.27 | $ | 0.25 | $ | 0.81 | $ | 0.75 | |||||||
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
2020 | 2019 | 2019 | |||||||||
ASSETS | |||||||||||
Cash and cash equivalents | $ | 78,844 | $ | 61,183 | $ | 46,527 | |||||
Fees and service charges receivable | 36,423 | 48,587 | 46,686 | ||||||||
Pawn loans | 270,619 | 385,907 | 369,527 | ||||||||
Consumer loans, net | — | 895 | 751 | ||||||||
Inventories | 168,664 | 281,921 | 265,256 | ||||||||
Income taxes receivable | 7,534 | 1,944 | 875 | ||||||||
Prepaid expenses and other current assets | 10,647 | 9,275 | 11,367 | ||||||||
Total current assets | 572,731 | 789,712 | 740,989 | ||||||||
Property and equipment, net | 341,827 | 300,087 | 336,167 | ||||||||
Operating lease right of use asset | 289,175 | 288,460 | 304,549 | ||||||||
932,329 | 936,562 | 948,643 | |||||||||
Intangible assets, net | 83,837 | 86,468 | 85,875 | ||||||||
Other assets | 9,087 | 10,880 | 11,506 | ||||||||
Deferred tax assets | 6,509 | 10,624 | 11,711 | ||||||||
Total assets | $ | 2,235,495 | $ | 2,422,793 | $ | 2,439,440 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Accounts payable and accrued liabilities | $ | 79,979 | $ | 81,999 | $ | 72,398 | |||||
Customer deposits | 36,189 | 41,686 | 39,736 | ||||||||
Income taxes payable | 183 | 713 | 4,302 | ||||||||
Lease liability, current | 84,970 | 83,328 | 86,466 | ||||||||
Total current liabilities | 201,321 | 207,726 | 202,902 | ||||||||
Revolving unsecured credit facilities | 40,000 | 340,000 | 335,000 | ||||||||
Senior unsecured notes | 492,775 | 296,394 | 296,568 | ||||||||
Deferred tax liabilities | 69,261 | 61,240 | 61,431 | ||||||||
Lease liability, non-current | 188,212 | 181,257 | 193,504 | ||||||||
Total liabilities | 991,569 | 1,086,617 | 1,089,405 | ||||||||
Stockholders’ equity: | |||||||||||
Common stock | 493 | 493 | 493 | ||||||||
Additional paid-in capital | 1,226,512 | 1,229,793 | 1,231,528 | ||||||||
Retained earnings | 767,683 | 684,865 | 727,476 | ||||||||
Accumulated other comprehensive loss | (164,877 | ) | (113,516 | ) | (96,969 | ) | |||||
Common stock held in treasury, at cost | (585,885 | ) | (465,459 | ) | (512,493 | ) | |||||
Total stockholders’ equity | 1,243,926 | 1,336,176 | 1,350,035 | ||||||||
Total liabilities and stockholders’ equity | $ | 2,235,495 | $ | 2,422,793 | $ | 2,439,440 | |||||
OPERATING INFORMATION
(UNAUDITED)
The Company’s reportable segments are as follows:
U.S. operationsLatin America operations - Includes operations inMexico ,Guatemala ,El Salvador andColombia
The Company provides revenues, cost of revenues, store operating expenses, pre-tax operating income and earning assets by segment. Store operating expenses include salary and benefit expense of store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the stores.
The following table details earning assets, which consist of pawn loans, inventories and unsecured consumer loans, net as well as other earning asset metrics of the
As of |
Increase / | |||||||||
2020 | 2019 | (Decrease) | ||||||||
Earning assets: | ||||||||||
Pawn loans | $ | 188,819 | $ | 270,659 | (30 | )% | ||||
Inventories | 120,397 | 185,369 | (35 | )% | ||||||
Consumer loans, net (1) | — | 895 | (100 | )% | ||||||
$ | 309,216 | $ | 456,923 | (32 | )% | |||||
Average outstanding pawn loan amount (in ones) | $ | 188 | $ | 167 | 13 | % | ||||
Composition of pawn collateral: | ||||||||||
General merchandise | 34 | % | 36 | % | ||||||
Jewelry | 66 | % | 64 | % | ||||||
100 | % | 100 | % | |||||||
Composition of inventories: | ||||||||||
General merchandise | 42 | % | 47 | % | ||||||
Jewelry | 58 | % | 53 | % | ||||||
100 | % | 100 | % | |||||||
Percentage of inventory aged greater than one year | 2 | % | 3 | % | ||||||
Inventory turns (trailing twelve months retail sales divided by average inventories) | 3.2 times |
2.8 times | ||||||||
(1) Effective
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
The following table presents segment pre-tax operating income of the
Three Months Ended | ||||||||
Increase / | ||||||||
2020 | 2019 | (Decrease) | ||||||
Revenue: | ||||||||
Retail merchandise sales | $ | 151,618 | $ | 168,092 | (10 | )% | ||
Pawn loan fees | 66,180 | 95,125 | (30 | )% | ||||
Wholesale scrap jewelry sales | 12,692 | 18,369 | (31 | )% | ||||
Consumer loan and credit services fees | 57 | 2,561 | (98 | )% | ||||
Total revenue | 230,547 | 284,147 | (19 | )% | ||||
Cost of revenue: | ||||||||
Cost of retail merchandise sold | 84,673 | 103,728 | (18 | )% | ||||
Cost of wholesale scrap jewelry sold | 10,316 | 16,217 | (36 | )% | ||||
Consumer loan and credit services loss provision | 104 | 223 | (53 | )% | ||||
Total cost of revenue | 95,093 | 120,168 | (21 | )% | ||||
Net revenue | 135,454 | 163,979 | (17 | )% | ||||
Segment expenses: | ||||||||
Store operating expenses | 92,678 | 103,315 | (10 | )% | ||||
Depreciation and amortization | 5,390 | 5,213 | 3 | % | ||||
Total segment expenses | 98,068 | 108,528 | (10 | )% | ||||
Segment pre-tax operating income | $ | 37,386 | $ | 55,451 | (33 | )% | ||
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
The following table presents segment pre-tax operating income of the
Nine Months Ended | |||||||||
Increase / | |||||||||
2020 | 2019 | (Decrease) | |||||||
Revenue: | |||||||||
Retail merchandise sales | $ | 556,528 | $ | 523,825 | 6 | % | |||
Pawn loan fees | 235,937 | 283,127 | (17 | )% | |||||
Wholesale scrap jewelry sales | 37,727 | 56,942 | (34 | )% | |||||
Consumer loan and credit services fees | 2,003 | 18,378 | (89 | )% | |||||
Total revenue | 832,195 | 882,272 | (6 | )% | |||||
Cost of revenue: | |||||||||
Cost of retail merchandise sold | 325,863 | 326,134 | — | % | |||||
Cost of wholesale scrap jewelry sold | 32,754 | 52,340 | (37 | )% | |||||
Consumer loan and credit services loss provision | (480 | ) | 3,829 | (113 | )% | ||||
Total cost of revenue | 358,137 | 382,303 | (6 | )% | |||||
Net revenue | 474,058 | 499,969 | (5 | )% | |||||
Segment expenses: | |||||||||
Store operating expenses | 303,686 | 310,208 | (2 | )% | |||||
Depreciation and amortization | 16,352 | 15,527 | 5 | % | |||||
Total segment expenses | 320,038 | 325,735 | (2 | )% | |||||
Segment pre-tax operating income | $ | 154,020 | $ | 174,234 | (12 | )% | |||
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
Latin America Operations Segment Results
The Company’s management reviews and analyzes certain operating results in
The following table provides exchange rates for the Mexican peso, Guatemalan quetzal and Colombian peso for the current and prior-year periods:
Favorable / | ||||||
2020 | 2019 | (Unfavorable) | ||||
Mexican peso / |
||||||
End-of-period | 22.5 | 19.6 | (15 | )% | ||
Three months ended | 22.1 | 19.4 | (14 | )% | ||
Nine months ended | 21.8 | 19.3 | (13 | )% | ||
Guatemalan quetzal / |
||||||
End-of-period | 7.8 | 7.7 | (1 | )% | ||
Three months ended | 7.7 | 7.7 | — | % | ||
Nine months ended | 7.7 | 7.7 | — | % | ||
Colombian peso / |
||||||
End-of-period | 3,879 | 3,462 | (12 | )% | ||
Three months ended | 3,730 | 3,339 | (12 | )% | ||
Nine months ended | 3,703 | 3,239 | (14 | )% | ||
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
The following table details earning assets, which consist of pawn loans and inventories as well as other earning asset metrics of the
Constant Currency Basis | ||||||||||||||||
As of | ||||||||||||||||
Increase / | ||||||||||||||||
As of |
2020 | (Decrease) | ||||||||||||||
2020 | 2019 | Decrease | (Non-GAAP) | (Non-GAAP) | ||||||||||||
Latin America Operations Segment | ||||||||||||||||
Earning assets: | ||||||||||||||||
Pawn loans | $ | 81,800 | $ | 115,248 | (29 | )% | $ | 93,105 | (19 | )% | ||||||
Inventories | 48,267 | 96,552 | (50 | )% | 54,770 | (43 | )% | |||||||||
$ | 130,067 | $ | 211,800 | (39 | )% | $ | 147,875 | (30 | )% | |||||||
Average outstanding pawn loan amount (in ones) | $ | 64 | $ | 66 | (3 | )% | $ | 73 | 11 | % | ||||||
Composition of pawn collateral: | ||||||||||||||||
General merchandise | 66 | % | 72 | % | ||||||||||||
Jewelry | 34 | % | 28 | % | ||||||||||||
100 | % | 100 | % | |||||||||||||
Composition of inventories: | ||||||||||||||||
General merchandise | 60 | % | 73 | % | ||||||||||||
Jewelry | 40 | % | 27 | % | ||||||||||||
100 | % | 100 | % | |||||||||||||
Percentage of inventory aged greater than one year | 2 | % | 1 | % | ||||||||||||
Inventory turns (trailing twelve months retail sales divided by average inventories) | 4.1 times |
3.7 times |
||||||||||||||
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
The following table presents segment pre-tax operating income of the
Constant Currency Basis | |||||||||||||||||
Three Months | |||||||||||||||||
Ended | |||||||||||||||||
Three Months Ended | Increase / | ||||||||||||||||
Increase / | 2020 | (Decrease) | |||||||||||||||
2020 | 2019 | (Decrease) | (Non-GAAP) | (Non-GAAP) | |||||||||||||
Latin America Operations Segment | |||||||||||||||||
Revenue: | |||||||||||||||||
Retail merchandise sales | $ | 83,364 | $ | 113,266 | (26 | )% | $ | 94,326 | (17 | )% | |||||||
Pawn loan fees | 33,390 | 47,754 | (30 | )% | 37,869 | (21 | )% | ||||||||||
Wholesale scrap jewelry sales | 12,589 | 7,292 | 73 | % | 12,589 | 73 | % | ||||||||||
Total revenue | 129,343 | 168,312 | (23 | )% | 144,784 | (14 | )% | ||||||||||
Cost of revenue: | |||||||||||||||||
Cost of retail merchandise sold | 52,557 | 74,869 | (30 | )% | 59,447 | (21 | )% | ||||||||||
Cost of wholesale scrap jewelry sold | 9,502 | 6,443 | 47 | % | 10,816 | 68 | % | ||||||||||
Total cost of revenue | 62,059 | 81,312 | (24 | )% | 70,263 | (14 | )% | ||||||||||
Net revenue | 67,284 | 87,000 | (23 | )% | 74,521 | (14 | )% | ||||||||||
Segment expenses: | |||||||||||||||||
Store operating expenses | 39,383 | 46,504 | (15 | )% | 44,204 | (5 | )% | ||||||||||
Depreciation and amortization | 3,903 | 3,795 | 3 | % | 4,370 | 15 | % | ||||||||||
Total segment expenses | 43,286 | 50,299 | (14 | )% | 48,574 | (3 | )% | ||||||||||
Segment pre-tax operating income | $ | 23,998 | $ | 36,701 | (35 | )% | $ | 25,947 | (29 | )% | |||||||
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
The following table presents segment pre-tax operating income of the
Constant Currency Basis | |||||||||||||||||
Nine Months | |||||||||||||||||
Ended | |||||||||||||||||
Nine Months Ended | Increase / | ||||||||||||||||
Increase / | 2020 | (Decrease) | |||||||||||||||
2020 | 2019 | (Decrease) | (Non-GAAP) | (Non-GAAP) | |||||||||||||
Latin America Operations Segment | |||||||||||||||||
Revenue: | |||||||||||||||||
Retail merchandise sales | $ | 262,483 | $ | 320,528 | (18 | )% | $ | 295,523 | (8 | )% | |||||||
Pawn loan fees | 107,738 | 137,867 | (22 | )% | 121,324 | (12 | )% | ||||||||||
Wholesale scrap jewelry sales | 36,710 | 25,410 | 44 | % | 36,710 | 44 | % | ||||||||||
Total revenue | 406,931 | 483,805 | (16 | )% | 453,557 | (6 | )% | ||||||||||
Cost of revenue: | |||||||||||||||||
Cost of retail merchandise sold | 167,573 | 208,084 | (19 | )% | 188,607 | (9 | )% | ||||||||||
Cost of wholesale scrap jewelry sold | 28,268 | 24,607 | 15 | % | 31,892 | 30 | % | ||||||||||
Total cost of revenue | 195,841 | 232,691 | (16 | )% | 220,499 | (5 | )% | ||||||||||
Net revenue | 211,090 | 251,114 | (16 | )% | 233,058 | (7 | )% | ||||||||||
Segment expenses: | |||||||||||||||||
Store operating expenses | 122,926 | 134,810 | (9 | )% | 137,211 | 2 | % | ||||||||||
Depreciation and amortization | 11,568 | 10,679 | 8 | % | 12,886 | 21 | % | ||||||||||
Total segment expenses | 134,494 | 145,489 | (8 | )% | 150,097 | 3 | % | ||||||||||
Segment pre-tax operating income | $ | 76,596 | $ | 105,625 | (27 | )% | $ | 82,961 | (21 | )% | |||||||
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
Consolidated Results of Operations
The following table reconciles pre-tax operating income of the Company’s
Three Months Ended | Nine Months Ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Consolidated Results of Operations | |||||||||||||||
Segment pre-tax operating income: | |||||||||||||||
$ | 37,386 | $ | 55,451 | $ | 154,020 | $ | 174,234 | ||||||||
23,998 | 36,701 | 76,596 | 105,625 | ||||||||||||
Consolidated segment pre-tax operating income | 61,384 | 92,152 | 230,616 | 279,859 | |||||||||||
Corporate expenses and other income: | |||||||||||||||
Administrative expenses | 24,354 | 30,576 | 85,642 | 94,426 | |||||||||||
Depreciation and amortization | 1,133 | 1,666 | 3,504 | 4,852 | |||||||||||
Interest expense | 6,561 | 8,922 | 21,953 | 25,840 | |||||||||||
Interest income | (499 | ) | (429 | ) | (1,209 | ) | (788 | ) | |||||||
Merger and other acquisition expenses | 7 | 805 | 209 | 1,510 | |||||||||||
(Gain) loss on foreign exchange | (432 | ) | 1,648 | 1,639 | 926 | ||||||||||
Loss on extinguishment of debt | 11,737 | — | 11,737 | — | |||||||||||
Write-offs and impairments of certain lease intangibles and other assets | 837 | — | 6,549 | — | |||||||||||
Total corporate expenses and other income | 43,698 | 43,188 | 130,024 | 126,766 | |||||||||||
Income before income taxes | 17,686 | 48,964 | 100,592 | 153,093 | |||||||||||
Provision for income taxes | 2,624 | 14,203 | 26,739 | 42,629 | |||||||||||
Net income | $ | 15,062 | $ | 34,761 | $ | 73,853 | $ | 110,464 | |||||||
STORE COUNT ACTIVITY
The following tables detail store count activity:
Three Months Ended |
||||||||
Operations Segment (2) | Operations Segment (3) | Total Locations | ||||||
Total locations, beginning of period | 1,035 | 1,710 | 2,745 | |||||
New locations opened | — | 13 | 13 | |||||
Consolidation of existing pawn locations | (5 | ) | (3 | ) | (8 | ) | ||
Total locations, end of period | 1,030 | 1,720 | 2,750 | |||||
Nine Months Ended |
||||||||
Operations Segment (2) | Operations Segment (3) | Total Locations | ||||||
Total locations, beginning of period | 1,056 | 1,623 | 2,679 | |||||
New locations opened | — | 64 | 64 | |||||
Locations acquired | — | 40 | 40 | |||||
Closure of consumer loan stores (1) | (13 | ) | — | (13 | ) | |||
Consolidation of existing pawn locations | (13 | ) | (7 | ) | (20 | ) | ||
Total locations, end of period | 1,030 | 1,720 | 2,750 | |||||
(1) Effective
(2) The table does not include 42 check cashing locations operated by independent franchisees under franchising agreements with the Company.
(3) The table does not include 27 Prendamex pawn locations operated by independent franchisees under franchising agreements with the Company.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES
(UNAUDITED)
The Company uses certain financial calculations such as adjusted net income, adjusted diluted earnings per share, EBITDA, adjusted EBITDA, free cash flow, adjusted free cash flow and constant currency results as factors in the measurement and evaluation of the Company’s operating performance and period-over-period growth. The Company derives these financial calculations on the basis of methodologies other than generally accepted accounting principles (“GAAP”), primarily by excluding from a comparable GAAP measure certain items the Company does not consider to be representative of its actual operating performance. These financial calculations are “non-GAAP financial measures” as defined under the
While acquisitions are an important part of the Company’s overall strategy, the Company has adjusted the applicable financial calculations to exclude merger and other acquisition expenses to allow more accurate comparisons of the financial results to prior periods. In addition, the Company does not consider these merger and other 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 other 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
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES (CONTINUED)
(UNAUDITED)
Adjusted Net Income and Adjusted Diluted Earnings Per Share
Management believes the presentation of adjusted net income and adjusted diluted earnings per share provides investors with greater transparency and provides a more complete understanding of the Company’s financial performance and prospects for the future by excluding items that management believes are non-operating in nature and not representative of the Company’s core operating performance of its continuing operations. In addition, management believes the adjustments shown below are useful to investors in order to allow them to compare the Company’s financial results for the current periods presented with the prior periods presented.
The following table provides a reconciliation between net income and diluted earnings per share calculated in accordance with GAAP to adjusted net income and adjusted diluted earnings per share, which are shown net of tax (in thousands, except per share amounts):
Three Months Ended |
Nine Months Ended |
||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||
In Thousands | Per Share | In Thousands | Per Share | In Thousands | Per Share | In Thousands | Per Share | ||||||||||||||||||||||||
Net income and diluted earnings per share, as reported | $ | 15,062 | $ | 0.36 | $ | 34,761 | $ | 0.81 | $ | 73,853 | $ | 1.77 | $ | 110,464 | $ | 2.55 | |||||||||||||||
Adjustments, net of tax: | |||||||||||||||||||||||||||||||
Merger and other acquisition expenses | 5 | — | 567 | 0.01 | 151 | — | 1,097 | 0.02 | |||||||||||||||||||||||
Non-cash foreign currency (gain) loss related to lease liability | (308 | ) | (0.01 | ) | 340 | 0.01 | 2,453 | 0.06 | (34 | ) | — | ||||||||||||||||||||
Loss on extinguishment of debt | 9,037 | 0.22 | — | — | 9,037 | 0.22 | — | — | |||||||||||||||||||||||
Non-cash write-off of certain merger related lease intangibles (1) | 644 | 0.02 | — | — | 3,579 | 0.09 | — | — | |||||||||||||||||||||||
Non-cash impairment of certain other assets (2) | — | — | — | — | 1,463 | 0.03 | — | — | |||||||||||||||||||||||
Consumer lending wind-down costs and asset impairments | 13 | — | 578 | 0.01 | 84 | — | 2,537 | 0.06 | |||||||||||||||||||||||
Adjusted net income and diluted earnings per share | $ | 24,453 | $ | 0.59 | $ | 36,246 | $ | 0.84 | $ | 90,620 | $ | 2.17 | $ | 114,064 | $ | 2.63 | |||||||||||||||
(1) Certain above/below market store lease intangibles, recorded in conjunction with the Cash America merger in 2016, were written-off as a result of the Company purchasing the real estate from the landlords of the respective stores.
(2) Impairment related to a non-operating asset in which the Company determined that an other than temporary impairment existed as of
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES (CONTINUED)
(UNAUDITED)
The following tables provide a reconciliation of the gross amounts, the impact of income taxes and the net amounts for the adjustments included in the table above (in thousands):
Three Months Ended |
|||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||
Pre-tax | Tax | After-tax | Pre-tax | Tax | After-tax | ||||||||||||||||||
Merger and other acquisition expenses | $ | 7 | $ | 2 | $ | 5 | $ | 805 | $ | 238 | $ | 567 | |||||||||||
Non-cash foreign currency (gain) loss related to lease liability | (439 | ) | (131 | ) | (308 | ) | 486 | 146 | 340 | ||||||||||||||
Loss on extinguishment of debt | 11,737 | 2,700 | 9,037 | — | — | — | |||||||||||||||||
Non-cash write-off of certain merger related lease intangibles | 837 | 193 | 644 | — | — | — | |||||||||||||||||
Consumer lending wind-down costs and asset impairments | 17 | 4 | 13 | 751 | 173 | 578 | |||||||||||||||||
Total adjustments | $ | 12,159 | $ | 2,768 | $ | 9,391 | $ | 2,042 | $ | 557 | $ | 1,485 | |||||||||||
Nine Months Ended |
|||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||
Pre-tax | Tax | After-tax | Pre-tax | Tax | After-tax | ||||||||||||||||||
Merger and other acquisition expenses | $ | 209 | $ | 58 | $ | 151 | $ | 1,510 | $ | 413 | $ | 1,097 | |||||||||||
Non-cash foreign currency loss (gain) related to lease liability | 3,505 | 1,052 | 2,453 | (49 | ) | (15 | ) | (34 | ) | ||||||||||||||
Loss on extinguishment of debt | 11,737 | 2,700 | 9,037 | — | — | — | |||||||||||||||||
Non-cash write-off of certain merger related lease intangibles | 4,649 | 1,070 | 3,579 | — | — | — | |||||||||||||||||
Non-cash impairment of certain other assets | 1,900 | 437 | 1,463 | — | — | — | |||||||||||||||||
Consumer lending wind-down costs and asset impairments | 109 | 25 | 84 | 3,295 | 758 | 2,537 | |||||||||||||||||
Total adjustments | $ | 22,109 | $ | 5,342 | $ | 16,767 | $ | 4,756 | $ | 1,156 | $ | 3,600 | |||||||||||
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES (CONTINUED)
(UNAUDITED)
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA
The Company defines EBITDA as net income before income taxes, depreciation and amortization, interest expense and interest income and adjusted EBITDA as EBITDA adjusted for certain items as listed below that management considers to be non-operating in nature and not representative of its actual operating performance. The Company believes EBITDA and adjusted EBITDA are commonly used by investors to assess a company’s financial performance, and adjusted EBITDA is used in the calculation of the net debt ratio as defined in the Company’s senior unsecured notes covenants. The following table provides a reconciliation of net income to EBITDA and adjusted EBITDA (dollars in thousands):
Trailing Twelve | |||||||||||||||||||||||
Three Months Ended | Nine Months Ended | Months Ended | |||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||
Net income | $ | 15,062 | $ | 34,761 | $ | 73,853 | $ | 110,464 | $ | 128,007 | $ | 158,539 | |||||||||||
Income taxes | 2,624 | 14,203 | 26,739 | 42,629 | 44,103 | 57,730 | |||||||||||||||||
Depreciation and amortization | 10,426 | 10,674 | 31,424 | 31,058 | 42,270 | 40,934 | |||||||||||||||||
Interest expense | 6,561 | 8,922 | 21,953 | 25,840 | 30,148 | 34,420 | |||||||||||||||||
Interest income | (499 | ) | (429 | ) | (1,209 | ) | (788 | ) | (1,476 | ) | (1,016 | ) | |||||||||||
EBITDA | 34,174 | 68,131 | 152,760 | 209,203 | 243,052 | 290,607 | |||||||||||||||||
Adjustments: | |||||||||||||||||||||||
Merger and other acquisition expenses | 7 | 805 | 209 | 1,510 | 465 | 3,579 | |||||||||||||||||
Non-cash foreign currency (gain) loss related to lease liability | (439 | ) | 486 | 3,505 | (49 | ) | 2,621 | (49 | ) | ||||||||||||||
Loss on extinguishment of debt | 11,737 | — | 11,737 | — | 11,737 | — | |||||||||||||||||
Non-cash write-off of certain merger related lease intangibles | 837 | — | 4,649 | — | 4,649 | — | |||||||||||||||||
Non-cash impairment of certain other assets | — | — | 1,900 | — | 1,900 | — | |||||||||||||||||
Consumer lending wind-down costs and asset impairments | 17 | 751 | 109 | 3,295 | 268 | 4,809 | |||||||||||||||||
Adjusted EBITDA | $ | 46,333 | $ | 70,173 | $ | 174,869 | $ | 213,959 | $ | 264,692 | $ | 298,946 | |||||||||||
Net debt ratio calculation: | |||||||||||||||||||||||
Total debt (outstanding principal) | $ | 540,000 | $ | 640,000 | |||||||||||||||||||
Less: cash and cash equivalents | (78,844 | ) | (61,183 | ) | |||||||||||||||||||
Net debt | $ | 461,156 | $ | 578,817 | |||||||||||||||||||
Adjusted EBITDA | $ | 264,692 | $ | 298,946 | |||||||||||||||||||
Net debt ratio (net debt divided by adjusted EBITDA) | 1.7 | :1 | 1.9 | :1 | |||||||||||||||||||
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES (CONTINUED)
(UNAUDITED)
Free Cash Flow and Adjusted Free Cash Flow
For purposes of its internal liquidity assessments, the Company considers free cash flow and adjusted free cash flow. The Company defines free cash flow as cash flow from operating activities less purchases of furniture, fixtures, equipment and improvements and net fundings/repayments of pawn and consumer loans, 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 other acquisition expenses paid that management considers to be non-operating in nature.
Free cash flow and adjusted free cash flow are commonly used by investors as an additional measure of cash generated by business operations that may be used to repay scheduled debt maturities and debt service or, following payment of such debt obligations and other non-discretionary items, may be available to invest in future growth through new business development activities or acquisitions, repurchase stock, pay cash dividends or repay debt obligations prior to their maturities. These metrics can also be used to evaluate the Company’s ability to generate cash flow from business operations and the impact that this cash flow has on the Company’s liquidity. However, free cash flow and adjusted free cash flow have limitations as analytical tools and should not be considered in isolation or as a substitute for cash flow from operating activities or other income statement data prepared in accordance with GAAP. Free cash flow during the nine months and trailing twelve months ended
Trailing Twelve | |||||||||||||||||||||||
Three Months Ended | Nine Months Ended | Months Ended | |||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||
Cash flow from operating activities | $ | 34,067 | $ | 57,851 | $ | 177,366 | $ | 163,824 | $ | 245,138 | $ | 233,034 | |||||||||||
Cash flow from investing activities: | |||||||||||||||||||||||
Loan receivables, net (1) | (32,349 | ) | (22,572 | ) | 145,930 | (2,998 | ) | 183,334 | 20,182 | ||||||||||||||
Purchases of furniture, fixtures, equipment and improvements | (7,377 | ) | (10,200 | ) | (27,853 | ) | (33,104 | ) | (39,060 | ) | (43,013 | ) | |||||||||||
Free cash flow | (5,659 | ) | 25,079 | 295,443 | 127,722 | 389,412 | 210,203 | ||||||||||||||||
Merger and other acquisition expenses paid, net of tax benefit | 5 | 567 | 151 | 1,097 | 330 | 2,568 | |||||||||||||||||
Adjusted free cash flow | $ | (5,654 | ) | $ | 25,646 | $ | 295,594 | $ | 128,819 | $ | 389,742 | $ | 212,771 | ||||||||||
(1) Includes the funding of new loans net of cash repayments and recovery of principal through the sale of inventories acquired from forfeiture of pawn collateral.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES (CONTINUED)
(UNAUDITED)
Constant Currency Results
The Company’s reporting currency is the
The Company believes constant currency results provide investors with valuable supplemental information regarding the underlying performance of its business operations in
For further information, please contact:
Phone: (817) 886-6998
Email: gar@globalirgroup.com
Phone: (817) 258-2650
Email: investorrelations@firstcash.com
Website: investors.firstcash.com
Source: FirstCash, Inc.