Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

Current Report
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

July 24, 2019
(Date of Report - Date of Earliest Event Reported)
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FIRSTCASH, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation)
001-10960
(Commission
File Number)
75-2237318
(IRS Employer
Identification No.)

1600 West 7th Street, Fort Worth, Texas 76102
(Address of principal executive offices, including zip code)

(817) 335-1100
(Registrant’s telephone number, including area code)

NONE
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $.01 per share
FCFS
The Nasdaq Stock Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company    o



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o



Item 2.02 Results of Operations and Financial Condition.

On July 24, 2019, FirstCash, Inc. (the “Company”) issued a press release announcing its financial results for the three and six month periods ended June 30, 2019 and the Board of Directors’ declaration of a third quarter cash dividend of $0.25 per common share (the “Earnings Release”). The Earnings Release is attached hereto as Exhibit 99.1 and is incorporated by reference in its entirety into this Item 2.02.

The information provided in this Item 2.02, including the Earnings Release, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by the specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.
 
(d) Exhibits:
 
 
 
 
 
 
99.1



3


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: July 24, 2019
FIRSTCASH, INC.
 
(Registrant)
 
 
 
/s/ R. DOUGLAS ORR
 
R. Douglas Orr
 
Executive Vice President and Chief Financial Officer
 
(As Principal Financial and Accounting Officer)


4
Exhibit

EXHIBIT 99.1
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FirstCash Reports Second Quarter Results;
Announces Second Quarter Acquisitions and Openings Totaling 73 Stores;
Declares Quarterly Dividend of $0.25 per Share;
Tightens Guidance Towards Upper End of Range
____________________________________________________________

Fort Worth, Texas (July 24, 2019) -- FirstCash, Inc. (the “Company”) (Nasdaq: FCFS), the leading international operator of over 2,600 retail pawn stores in the U.S. and Latin America, today announced operating results, including record revenues and earnings per share and significant store additions, for the three and six month periods ended June 30, 2019. Additionally, the Board of Directors declared a $0.25 per share quarterly cash dividend.

Mr. Rick Wessel, chief executive officer, stated, “Our second quarter results saw strong revenue, earnings and margin growth from core pawn operations, highlighted by 13% growth in diluted earnings per share and 17% growth on an adjusted, non-GAAP basis. In addition, we added 73 locations in four countries from acquisitions and new store openings during the quarter, bringing year-to-date store additions to 237 units. With these results, we begin the second half of 2019 with good momentum in our core pawn operations, and despite the earnings headwind from our decision to exit our non-core consumer lending business in Ohio this quarter, we have increased the lower end of the previous earnings guidance range by $0.05 per share.”

This release contains adjusted earnings measures, which exclude merger and other acquisition expenses, certain non-cash foreign currency exchange gains and losses and non-recurring consumer lending wind-down costs, which are non-GAAP financial measures. Please refer to the descriptions and reconciliations to GAAP of these and other non-GAAP financial measures at the end of this release.

 
 
Three Months Ended June 30,
 
 
As Reported (GAAP)
 
Adjusted (Non-GAAP)
In thousands, except per share amounts
 
2019
 
2018
 
2019
 
2018
Revenue
 
$
446,014

 
$
419,972

 
$
446,014

 
$
419,972

Net income
 
$
33,048

 
$
30,171

 
$
35,297

 
$
31,683

Diluted earnings per share
 
$
0.76

 
$
0.67

 
$
0.82

 
$
0.70

EBITDA (non-GAAP measure)
 
$
64,189

 
$
59,012

 
$
67,094

 
$
61,125

Weighted-average diluted shares
 
43,256

 
45,043

 
43,256

 
45,043


 
 
Six Months Ended June 30,
 
 
As Reported (GAAP)
 
Adjusted (Non-GAAP)
In thousands, except per share amounts
 
2019
 
2018
 
2019
 
2018
Revenue
 
$
913,618

 
$
869,772

 
$
913,618

 
$
869,772

Net income
 
$
75,703

 
$
71,806

 
$
77,818

 
$
73,502

Diluted earnings per share
 
$
1.74

 
$
1.57

 
$
1.79

 
$
1.61

EBITDA (non-GAAP measure)
 
$
141,072

 
$
131,291

 
$
143,786

 
$
133,643

Weighted-average diluted shares
 
43,456

 
45,757

 
43,456

 
45,757






Earnings Highlights
Diluted earnings per share increased 13% on a GAAP basis and 17% on a non-GAAP adjusted basis in the second quarter of 2019 compared to the prior-year quarter. For the six month year-to-date period, diluted earnings per share increased 11% on a GAAP and adjusted non-GAAP basis, respectively.
Further contraction in non-core consumer lending operations and wind-down costs in Ohio negatively impacted earnings per share by approximately $0.10 on a GAAP basis for the second quarter and $0.05 on an adjusted non-GAAP basis, compared to the same prior-year period.
Net income, on a GAAP basis, increased 10% for the second quarter of 2019 compared to the second quarter of 2018. On a non-GAAP adjusted basis, net income increased 11% for the second quarter compared to the prior-year period.
Segment earnings in Latin America increased 23% on a U.S. dollar basis and 21% on a constant currency basis for the second quarter compared to the prior-year quarter. While U.S. segment earnings on a GAAP basis declined 4% for the second quarter, excluding the contribution from non-core consumer lending operations and wind-down costs in Ohio, U.S. segment earnings on a non-GAAP basis increased 5% for the quarter compared to the prior-year quarter.
EBITDA and adjusted EBITDA increased 9% and 10%, respectively, in the second quarter of 2019 compared to the prior-year quarter.
For the trailing twelve months ended June 30, 2019, consolidated revenues totaled $1.8 billion, net income was $157 million and adjusted EBITDA totaled $294 million.
Cash flow from operating activities for the trailing twelve months ended June 30, 2019 totaled $229 million, while adjusted free cash flow, a non-GAAP financial measure, was $189 million for the twelve months ended June 30, 2019.

Acquisitions and Store Opening Highlights
The Company acquired a total of 50 full-service pawn stores in the second quarter of 2019 as it completed nine separate transactions for a total purchase price of $13 million. The acquisitions included 40 franchised Prendamex locations, primarily in central Mexico, and 10 large format locations in Texas. Year-to-date, a total of 178 stores have been acquired, including 158 stores in Latin America and 20 stores in the U.S.
A total of 23 de novo locations were opened during the second quarter in Latin America, including 18 stores in Mexico, three stores in Colombia and two stores in Guatemala. Year-to-date, a total of 59 new stores have been opened, which compares to 27 new stores opened at the same point a year ago.
Over the trailing twelve-month period ended June 30, 2019, the Company has added a total of 449 locations and has increased the number of pawn stores by 17%. Over 93% of the stores added in the last twelve months are located in Latin America where the number of pawn stores has increased by 35% over the same twelve-month period.
As of June 30, 2019, the Company operated 2,646 stores, with 1,592 stores in Latin America, representing 60% of the total store base, and 1,054 stores in the U.S. The Latin American locations include 1,519 stores in Mexico, 52 stores in Guatemala, 13 stores in El Salvador and eight stores in Colombia, while the U.S. stores are located in 24 states and the District of Columbia.

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 and reconciled to the most comparable GAAP measures in the financial statements in this release. The average Mexican peso to U.S. dollar exchange rate for the three-month period ended June 30, 2019 was 19.1 pesos / dollar, a favorable change of 2% versus the comparable prior-year period, and for the six-month period ended June 30, 2019 was 19.2 pesos / dollar, an unfavorable change of 1% versus the prior-year period.


2


Latin America Operations
LatAm segment pre-tax operating income for the quarter increased 23%, or 21% on a constant currency basis, compared to the second quarter of 2018. The year-to-date segment contribution increased 21% on both a U.S. dollar and constant currency basis.
Driven by store additions and increasing same-store revenues, total Latin America revenues for the second quarter of 2019 were a record $166 million, an increase of 27% on a U.S. dollar basis and 26% on a constant currency basis, as compared to the second quarter of 2018.
The strong revenue growth included a 33% increase in pawn fees and a 23% increase in retail sales compared to the prior-year quarter. On a constant currency basis, pawn fees and retail merchandise sales increased 32% and 22%, respectively, as compared to the prior-year quarter.
Same-store core pawn revenues increased 7% on a U.S. dollar translated basis, consisting of an 8% increase in same-store pawn fees and 6% increase in same-store retail sales compared to the prior-year quarter. On a constant currency basis, same-store core pawn revenues increased 5%, composed of a 7% increase in same-store pawn fees and a 5% increase in same-store retail sales compared to the prior-year quarter.
Pawn loans outstanding increased 40% on a U.S. dollar translated basis and 35% on a constant currency basis versus the prior year and totaled a record $113 million at June 30, 2019. Same-store pawn loans at quarter end increased 14% on a U.S. dollar translated basis, while they increased 10% on a constant currency basis, compared to the same prior-year quarter. As a comparison, same-store pawn loans a year ago were up only 2% on a constant currency basis.
Segment retail margins were 35% in the second quarter, which was consistent with the prior-year quarter. Year-to-date retail margins were 36% compared to 35% in the comparative prior-year period.
Inventories at June 30, 2019 were $94 million compared to $65 million a year ago. The increase was driven by the net addition of 410 pawn stores over the past twelve months and continued maturation of existing stores. As of June 30, 2019, inventories aged greater than one year remained consistent and low at 1%.
Inventory turns in Latin America for the trailing twelve months ended June 30, 2019 remained strong at 3.8 times.
Total store operating expenses increased 32% for the quarter, or 31% on a constant currency basis, driven primarily by the net addition of 410 pawn stores over the past twelve months. Same-store operating expenses increased 7% in the second quarter of 2019, or 6% on a constant currency basis, and were impacted by slightly higher operating costs in some regions related to acquisition integration and minor inflationary pressures in Latin America. The Company believes that there are unrealized operating expense synergy opportunities related to the extensive acquisition activity over the past 18 months.
U.S. Operations
U.S. segment pre-tax operating income for the quarter decreased 4% compared to the second quarter of 2018 and was impacted by the accelerated contraction in non-core consumer lending operations in 2019 (see the “Consumer Lending Contraction and Ohio Wind-Down Costs” section below). Excluding the contribution from non-core consumer lending and Ohio wind-down costs, the adjusted segment pre-tax operating income (a non-GAAP measure) for the quarter increased 5% compared to the prior-year quarter, primarily due to improved retail margins, pawn loan yields and operating expense reductions. Year-to-date, the segment contribution increased 1% and, on an adjusted non-GAAP basis, increased 7%.
Total revenues for the second quarter were $280 million, a decrease of 3% compared to the second quarter of 2018, and included the expected impact of a 60% decline, or $8 million, in non-core consumer loan and credit services fees and a 29% decline, or $6 million, in non-core scrap jewelry sales. Core revenues from pawn fees and retail sales increased by 2%.
Net revenue (or gross profit) for the second quarter of 2019 decreased 2%, reflecting the declines in non-core revenues. More importantly, net revenue from core pawn operations increased 4% compared to the prior-year quarter as a result of the continued improvements in retail sales margins and pawn yields as highlighted below.

3


Retail sales margin increased to 38% for the quarter compared to 37% in the prior-year quarter. Despite continued growth of online retailing in general, the Company’s retail sales, which are all store-generated, increased 1% compared to the second quarter of 2018 and same-store retail sales were equal to the prior-year quarter.
Pawn fees increased 3% and same-store pawn fee revenues increased 2% in the second quarter compared to the prior-year quarter as pawn yields improved by 4% quarter-over-quarter.
Pawn loans outstanding at June 30, 2019 totaled $262 million, a decrease of 2% in total and 3% on a same-store basis. While same-store pawn balances slightly improved sequentially, the overall decrease was due primarily to the continued focus on increasing the volume of direct purchases of goods from customers in the legacy Cash America stores not interested in a pawn loan, which resulted in a 23% increase in the percentage of such direct purchase transactions for the quarter as compared to the prior-year quarter. Additionally, purchased inventory typically turns faster and has higher margins than forfeited items.
Inventories at June 30, 2019 declined $12 million, or 6%, to $173 million compared to $185 million a year ago, primarily from strategic reductions in overall inventory levels. As of June 30, 2019, U.S. inventories aged greater than one year were 4%.
Inventory turns in the U.S. increased for the seventh sequential quarter and were 2.8 times for the trailing twelve month period ended June 30, 2019 compared to 2.6 times for the twelve month period ended June 30, 2018. Inventory turns in the U.S. are slower than in Latin America due to the larger jewelry component in the U.S. compared to a greater general merchandise inventory component in Latin America.
Total store operating expenses for the quarter decreased 1% in total and on a same-store basis compared to the prior-year quarter, primarily due to continued efforts to realize cost savings from real estate, technology and labor expenses.
Consumer Lending Contraction and Ohio Wind-Down Costs
As previously disclosed, the Company stopped offering unsecured consumer lending products in all of its Ohio locations, effective April 26, 2019, in response to certain regulatory developments in Ohio impacting such products. As a result, 52 of the Ohio Cashland locations, whose revenue was derived primarily from unsecured consumer lending products, were closed during the second quarter. The remaining 67 locations in Ohio are expected to have sufficient pawn revenues to continue operating as full-service pawnshops.
As a result of the wind-down of the Company’s Ohio consumer lending business, the Company incurred non-recurring exit costs of approximately $2 million, net of tax, for the quarter ended June 30, 2019, which have been excluded from adjusted net income and adjusted earnings per share. These charges include increased loan loss provisions, employee severance costs, lease termination costs and other exit costs.
In addition to the discontinuance of consumer lending activities in Ohio, the Company closed two other stand-alone consumer loan stores and ceased offering unsecured consumer loans and/or credit services products in 78 of its pawnshops located in Texas, Louisiana and Kentucky during the first half of 2019. The Company currently offers unsecured consumer loans and/or credit services in only 81 remaining locations, of which 75 are full-service pawnshops that offer consumer loans/credit services as minor ancillary products. The Company expects to further reduce locations offering such products in the future.
Driven by the Ohio store closings and the Company’s continued de-emphasis on consumer lending operations, U.S. consumer lending revenues declined $8 million in the second quarter, or 60%, and $13 million for the year-to-date period, or 44%, compared to the respective prior year periods. The Company expects revenues from unsecured consumer lending products in the second half of 2019 to be approximately $4 million, which accounts for less than 0.5% of total second half revenues.

4


Cash Dividend and Stock Repurchases
The Board of Directors declared a $0.25 per share third quarter cash dividend on common shares outstanding, which will be paid on August 30, 2019 to stockholders of record as of August 15, 2019. Any future dividends are subject to approval by the Company’s Board of Directors.
During the second quarter, the Company repurchased 328,000 shares at an aggregate cost of $30 million and an average per share cost of $92.24. Year-to-date, the Company has repurchased 671,000 shares for an aggregate price of $59 million at an average price of $88.62 per share, leaving $83 million available for future repurchases under the current share repurchase programs. Future share repurchases are subject to expected liquidity, debt covenant restrictions and other relevant factors.
Since the merger with Cash America in September 2016 and through the second quarter of 2019, the Company has repurchased a total of 5,630,000 shares, or 28% of the shares issued as a result of the merger, at an average repurchase price of $75.84 per share, resulting in a 12% reduction in the total number of shares outstanding immediately following the merger.
Liquidity and Return Metrics
The Company generated $229 million of cash flow from operations and $189 million in adjusted free cash flow during the twelve months ended June 30, 2019 compared to $238 million of cash flow from operations and $254 million of adjusted free cash flow during the same prior-year period. Current period free cash flow includes the impact of accelerated loan growth in Latin America and store expansion activities, while the prior-year comparative amount included a $21 million cash inflow from a non-recurring tax refund related to the merger and larger than normal cash inflows related to the liquidation of excess inventories in the legacy Cash America stores.
The Company continues to maintain excellent liquidity ratios while funding share repurchases totaling $117 million, dividends of $42 million and acquisitions of $118 million during the trailing twelve months ended June 30, 2019. The net debt ratio, which is calculated using a non-GAAP financial measure, for the trailing twelve months ended June 30, 2019 was 1.9 to 1.
Return on assets for the trailing twelve months ended June 30, 2019 was 7% while return on tangible assets was 15% for the same period, which compared to 8% and 15% returns, respectively, for the comparable prior-year period. The return on assets for the trailing twelve months ended June 30, 2019 was negatively impacted by the first-time inclusion of the operating lease right of use asset, arising from the implementation of the Financial Accounting Standards Board’s new lease accounting standard, which was not included on the balance sheet prior to January 1, 2019. Return on tangible assets is a non-GAAP financial measure and is calculated by excluding goodwill, intangible assets, net and the operating lease right of use asset from the respective return calculations.
Return on equity was 12% for the trailing twelve months ended June 30, 2019, while return on tangible equity was 49%. This compares to returns of 12% and 34%, respectively, for the comparable prior-year period. Return on tangible equity is a non-GAAP financial measure and is calculated by excluding goodwill and intangible assets, net from the respective return calculations.

5


2019 Outlook
As expected, first half results saw strong growth in the Company’s core pawn business, partially offset by further contraction in the non-core consumer lending business. While consumer lending, and Ohio in particular, will further drag on earnings in the second half of 2019, the Company is raising the lower end of its full-year 2019 guidance for adjusted diluted earnings per share by $0.05, based on year-to-date strength in core pawn earnings.
Adjusted diluted earnings per share are now expected to be in the range of $3.85 to $4.00. The tightened full-year 2019 guidance range represents an increase of 9% to 13% over the prior-year adjusted earnings per share of $3.53. As described below, the guidance for 2019 includes the impact of an expected net reduction in U.S. segment earnings from unsecured consumer lending operations and wind-down costs in Ohio of approximately $0.25 to $0.30 per share, a forecast foreign currency drag of approximately $0.03 to $0.05 per share and a $0.05 to $0.08 per share impact from a higher blended effective income tax rate. Excluding these impacts at their midpoint estimates, estimated earnings per share in 2019 would increase in a range of 20% to 24% compared to 2018.
Due primarily to the impact of the recent decision to discontinue Ohio consumer lending as described above, the Company is providing quarterly guidance for third quarter 2019. Adjusted diluted earnings per share is expected to be in the range of $0.80 to $0.85, reflecting an expected decrease in third quarter consumer lending revenues of approximately 85% compared to the prior-year quarter. The Company expects the incremental decline in consumer lending revenues to be substantially offset by additional growth in core pawn revenues, including fourth quarter Latin America retail sales in particular.
The earnings guidance for full-year and third quarter 2019 is presented on a non-GAAP basis, as it does not include merger and other acquisition expenses, certain non-cash foreign currency exchange gains and losses and non-recurring consumer lending wind-down costs. Estimated GAAP basis full-year 2019 diluted earnings per share represents an increase of 11% to 16% over the prior-year GAAP basis diluted earnings per share of $3.41.
The estimate of expected earnings per share for 2019 includes the following assumptions:
An anticipated earnings drag of approximately $0.25 to $0.30 per share during 2019 primarily due to the wind-down of unsecured consumer loan products in Ohio and further strategic reductions in consumer lending operations outside of Ohio. The Company is currently modeling total consumer lending revenues for 2019 to be approximately $20 million, which represents an estimated 65% reduction compared to 2018 consumer lending revenues.
Given continued volatility, the Company continues to use an estimated average foreign currency exchange rate of 20.0 Mexican pesos / U.S. dollar for the remainder of 2019 compared to the average exchange rate of 19.2 Mexican pesos / U.S. dollar for 2018. The projected change in the exchange rate represents an earnings headwind of approximately $0.03 to $0.05 per share for 2019 when compared to 2018 results. Each full Mexican peso change in the exchange rate to the U.S. dollar represents approximately $0.10 to $0.12 per share of annualized earnings impact.
The effective income tax rate is expected to range from 27.0% to 27.5% for 2019. This represents an increase over the 2018 effective rate of 26.1% (adjusted for the $1.5 million non-recurring tax benefit recognized in 2018 as a result of the Tax Cuts and Jobs Act) due in part to the increasing share of earnings from Latin America, where corporate tax rates are higher, and an increase in certain non-deductible expenses resulting from the Tax Cuts and Jobs Act, which combined, represents an additional earnings headwind of approximately $0.05 to $0.08 per share as compared to 2018 results.
Plans to open a total of approximately 80 to 85 new full-service pawn stores in 2019 in Latin America, which includes targeted openings of 57 to 62 stores in Mexico, 15 stores in Guatemala and eight stores in Colombia. The increased number of projected store openings in 2019 combined with the first half front-loading of new store openings will cause an expected additional drag to earnings of approximately $0.02 to $0.03 per share compared to last year. The Company expects to complete additional acquisitions in 2019, primarily in Latin America, which are not reflected in the guidance.

6


Additional Commentary and Analysis

Mr. Wessel further commented, “FirstCash had another record quarter, posting record revenues and generating diluted earnings per share growth of 13% on a GAAP basis and 17% on an adjusted non-GAAP basis. The earnings growth was driven by exceptional revenue growth in Latin America and continued margin improvements in the core pawn business in the U.S.

“In Latin America, second quarter revenues grew by 27% (26% on a constant currency basis), which represents the highest quarterly growth rate in over seven years. Importantly, pawn receivables at June 30 increased 40%, or 35% on a constant currency basis, over the prior year, which is historically a leading indicator of future revenue growth. The growth in pawn receivables was primarily driven by the significant store additions that totaled 420 over the past twelve months and the impressive 14% growth, 10% on a constant currency basis, in same-store pawn loans.

“The Company’s new store openings in Latin America continued at a record pace and we plan to complete the majority of the expected openings of 80 to 85 new locations by early fall, which will allow undivided operational focus on the important fourth quarter sales season. We remain excited about the de novo store opening opportunities in the newer markets of Colombia and Guatemala and are encouraged about the early results from most locations in these markets.

“Acquisition activity remains strong in Mexico as well, with the addition of 40 stores this quarter and 158 stores year-to-date. All of the acquired locations this year are franchised Prendamex locations where we continue to see significant opportunities to enhance their retail operations and increase overall revenues and profitability by integrating them onto the First Pawn IT platform and training personnel in FirstCash operating best practices. As an example, for the initial set of 126 Prendamex stores acquired in early 2018 and which entered the comp base for the first time this quarter, second quarter 2019 revenues increased over 100% compared to last year, primarily from increased retail sales, while pawn loans outstanding increased by over 40% year-over-year.

“Turning to the U.S., our results were also extremely encouraging as we posted positive growth in core revenues and gross profit, including a 2% increase in same-store pawn fees and 5% increase in retail gross profit. We continue to realize further store expense savings, primarily from optimizing labor costs and reducing technology expenses in the legacy Cash America stores, where we continue to believe there are still additional margin expansion opportunities.

“As previously announced, and in conjunction with the change in law in Ohio, we discontinued all non-secured consumer lending products in Ohio and closed 52 Cashland stores that were primarily focused on unsecured consumer lending products. We will continue to operate 61 Cashland stores in Ohio that have larger pawn operations where we believe there is an opportunity to grow our pawn business as customers look for alternatives to traditional unsecured consumer lending products. Additionally, we operate six large format Cash America stores in Ohio that we believe should benefit from the change in law as well.

“The Company continues to maintain a strong balance sheet and cash flows. The majority of our store and asset growth continues to be funded primarily with operating cash flows and net leverage remains low at less than two times adjusted EBITDA. We continue to prioritize acquisitions and store investment opportunities while still repurchasing stock at what we believe are attractive prices. Year-to-date, we have committed over $35 million for acquisitions and repurchased 671,000 shares at a total cost of $59 million and an average price per share of $88.62. Additionally, this year we are on pace to pay dividends to shareholders of approximately $43 million.

“We are confident in our business model and growth opportunities both in Latin America and the U.S. and intend to use our free cash flow to continue to build new stores, pursue strategic acquisitions, repurchase shares and pay dividends. As a result, we believe that we are well positioned to continue to increase shareholder value over time,” concluded Mr. Wessel, chief executive officer.


7


About FirstCash

FirstCash is the leading international operator of pawn stores with more than 2,600 retail pawn locations in 24 U.S. states and the District of Columbia and in Latin America, which includes all the states in Mexico and the countries of Guatemala, El Salvador and Colombia. The Company employs approximately 21,000 people between the U.S. and Latin America. FirstCash focuses on serving cash and credit constrained consumers primarily through its retail pawn locations, which buy and sell a wide variety of jewelry, consumer electronics, tools, household appliances, sporting goods, musical instruments and other merchandise, and make small non-recourse pawn loans secured by pledged personal property.

FirstCash is a component company in both the Standard & Poor’s SmallCap 600 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.cashamerica.com.

Forward-Looking Information
 
This release contains forward-looking statements about the business, financial condition and prospects of FirstCash, Inc. and its wholly owned subsidiaries (together, the “Company”). Forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, can be identified by the use of forward-looking terminology such as “outlook,” “believes,” “projects,” “expects,” “may,” “estimates,” “should,” “plans,” “targets,” “intends,” “could,” “would,” “anticipates,” “potential,” “confident,” “optimistic,” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, guidance, expectations and future plans. Forward-looking statements can also be identified by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties.
 
While the Company believes the expectations reflected in forward-looking statements are reasonable, there can be no assurances such expectations will prove to be accurate. Security holders are cautioned such forward-looking statements involve risks and uncertainties. Certain factors may cause results to differ materially from those anticipated by the forward-looking statements made in this release. Such factors may include, without limitation, the risks, uncertainties and regulatory developments discussed and described in the Company’s 2018 annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 5, 2019, including the risks described in Part 1, Item 1A, “Risk Factors” thereof, and other reports filed subsequently by the Company 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.

8


FIRSTCASH, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2019
 
2018
 
2019
 
2018
Revenue:
 
 
 
 
 
 
 
 
Retail merchandise sales
 
$
278,754

 
$
255,742

 
$
562,995

 
$
525,583

Pawn loan fees
 
136,923

 
123,012

 
278,115

 
252,805

Wholesale scrap jewelry sales
 
24,981

 
27,475

 
56,691

 
62,200

Consumer loan and credit services fees
 
5,356

 
13,743

 
15,817

 
29,184

Total revenue
 
446,014

 
419,972

 
913,618

 
869,772

 
 
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
 
Cost of retail merchandise sold
 
176,272

 
163,574

 
355,621

 
338,071

Cost of wholesale scrap jewelry sold
 
23,934

 
24,076

 
54,287

 
56,571

Consumer loan and credit services loss provision
 
1,503

 
3,894

 
3,606

 
7,621

Total cost of revenue
 
201,709

 
191,544

 
413,514

 
402,263

 
 
 
 
 
 
 
 
 
Net revenue
 
244,305

 
228,428

 
500,104

 
467,509

 
 
 
 
 
 
 
 
 
Expenses and other income:
 
 
 
 
 
 
 
 
Store operating expenses (1)
 
148,347

 
138,043

 
295,199

 
276,391

Administrative expenses
 
31,696

 
29,720

 
63,850

 
57,722

Depreciation and amortization
 
10,510

 
10,952

 
20,384

 
22,235

Interest expense
 
8,548

 
6,529

 
16,918

 
12,727

Interest income
 
(155
)
 
(740
)
 
(359
)
 
(1,721
)
Merger and other acquisition expenses
 
556

 
2,113

 
705

 
2,352

Gain on foreign exchange (1)
 
(483
)
 
(460
)
 
(722
)
 
(247
)
Total expenses and other income
 
199,019

 
186,157

 
395,975

 
369,459

 
 
 
 
 
 
 
 
 
Income before income taxes
 
45,286

 
42,271

 
104,129

 
98,050

 
 
 
 
 
 
 
 
 
Provision for income taxes
 
12,238

 
12,100

 
28,426

 
26,244

 
 
 
 
 
 
 
 
 
Net income
 
$
33,048

 
$
30,171

 
$
75,703

 
$
71,806

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.77

 
$
0.67

 
$
1.75

 
$
1.57

Diluted
 
$
0.76

 
$
0.67

 
$
1.74

 
$
1.57

 
 
 
 
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
43,081

 
44,942

 
43,298

 
45,680

Diluted
 
43,256

 
45,043

 
43,456

 
45,757

 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$
0.25

 
$
0.22

 
$
0.50

 
$
0.44


(1) 
The gain on foreign exchange of $0.5 million and $0.2 million for the three and six months ended June 30, 2018, respectively, was reclassified on the consolidated statements of income in order to conform with the presentation for the three and six months ended June 30, 2019. The gain on foreign exchange was reclassified from store operating expenses and reported separately on the consolidated statements of income.


9


FIRSTCASH, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 
 
June 30,
 
December 31,
 
 
2019
 
2018
 
2018
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
 
$
67,012

 
$
83,127

 
$
71,793

Fees and service charges receivable
 
46,991

 
42,920

 
45,430

Pawn loans
 
375,167

 
348,295

 
362,941

Consumer loans, net
 
3,850

 
17,256

 
15,902

Inventories
 
266,440

 
249,689

 
275,130

Income taxes receivable
 
1,041

 
486

 
1,379

Prepaid expenses and other current assets
 
9,590

 
19,913

 
17,317

Total current assets
 
770,091

 
761,686

 
789,892

 
 
 
 
 
 
 
Property and equipment, net
 
290,725

 
236,434

 
251,645

Operating lease right of use asset (1)
 
293,357

 

 

Goodwill
 
940,653

 
857,070

 
917,419

Intangible assets, net
 
87,200

 
89,962

 
88,140

Other assets
 
10,890

 
52,193

 
49,238

Deferred tax assets
 
11,570

 
12,295

 
11,640

Total assets
 
$
2,404,486

 
$
2,009,640

 
$
2,107,974

 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
$
71,410

 
$
79,961

 
$
96,928

Customer deposits
 
40,665

 
34,300

 
35,368

Income taxes payable
 
317

 
3,207

 
749

Lease liability, current (1)
 
84,513

 

 

Total current liabilities
 
196,905

 
117,468

 
133,045

 
 
 
 
 
 
 
Revolving unsecured credit facility
 
340,000

 
221,500

 
295,000

Senior unsecured notes
 
296,222

 
295,560

 
295,887

Deferred tax liabilities
 
60,069

 
51,011

 
54,854

Lease liability, non-current (1)
 
184,348

 

 

Other liabilities
 

 
14,057

 
11,084

Total liabilities
 
1,077,544

 
699,596

 
789,870

 
 
 
 
 
 
 
Stockholders’ equity:
 
 
 
 
 
 
Preferred stock
 

 

 

Common stock
 
493

 
493

 
493

Additional paid-in capital
 
1,227,478

 
1,221,572

 
1,224,608

Retained earnings
 
660,845

 
546,097

 
606,810

Accumulated other comprehensive loss
 
(103,932
)
 
(114,668
)
 
(113,117
)
Common stock held in treasury, at cost
 
(457,942
)
 
(343,450
)
 
(400,690
)
Total stockholders’ equity
 
1,326,942

 
1,310,044

 
1,318,104

Total liabilities and stockholders’ equity
 
$
2,404,486

 
$
2,009,640

 
$
2,107,974


(1) 
The Company adopted ASC 842 prospectively as of January 1, 2019, using the transition method that required prospective application from the adoption date. As a result of the transition method used, ASC 842 was not applied to periods prior to adoption and the adoption of ASC 842 had no impact on the Company’s comparative prior periods presented.

10


FIRSTCASH, INC.
OPERATING INFORMATION
(UNAUDITED)

The Company’s reportable segments are as follows:

Latin America operations - Includes all pawn and consumer loan operations in Latin America, which includes operations in Mexico, Guatemala, El Salvador and Colombia.
U.S. operations - Includes all pawn and consumer loan operations in the U.S.

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.

Latin America Operations Segment Results

The Company’s management reviews and analyzes certain operating results in Latin America on a constant currency basis because the Company believes this better represents the Company’s underlying business trends. Constant currency results are non-GAAP financial measures, which exclude the effects of foreign currency translation and are calculated by translating current-year results at prior-year average exchange rates. The scrap jewelry generated in Latin America is sold and settled in U.S. dollars, and therefore wholesale scrap jewelry sales revenue is not affected by foreign currency translation. A small percentage of the operating and administrative expenses in Latin America are also billed and paid in U.S. dollars, which are not affected by foreign currency translation. 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.


11


FIRSTCASH, INC.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)

The following table details earning assets, which consist of pawn loans, inventories and consumer loans, net as well as other earning asset metrics of the Latin America operations segment as of June 30, 2019 as compared to June 30, 2018 (dollars in thousands, except as otherwise noted):

 
 
 
 
 
 
 
 
 
 
 
Constant Currency Basis
 
 
 
 
 
 
 
 
 
 
 
 
As of
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30,
 
Increase /
 
As of June 30,
 
Increase /
 
2019
 
(Decrease)
 
2019
 
2018
 
(Decrease)
 
(Non-GAAP)
 
(Non-GAAP)
Latin America Operations Segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pawn loans
$
112,811

 
$
80,709

 
 
40
 %
 
 
$
109,152

 
 
35
 %
 
Inventories
 
93,565

 
 
65,158

 
 
44
 %
 
 
90,507

 
 
39
 %
 
Consumer loans, net (1)
 

 
 
147

 
 
(100
)%
 
 

 
 
(100
)%
 
 
$
206,376

 
$
146,014

 
 
41
 %
 
 
$
199,659

 
 
37
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average outstanding pawn loan amount (in ones)
$
69

 
$
62

 
 
11
 %
 
 
$
66

 
 
6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Composition of pawn collateral:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
General merchandise
73
%
 
79
%
 
 
 
 
 
 
 
 
 
 
Jewelry
27
%
 
21
%
 
 
 
 
 
 
 
 
 
 
 
100
%
 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Composition of inventories:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
General merchandise
74
%
 
75
%
 
 
 
 
 
 
 
 
 
 
Jewelry
26
%
 
25
%
 
 
 
 
 
 
 
 
 
 
 
100
%
 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of inventory aged greater than one year
1
%
 
1
%
 
 
 
 
 
 
 
 
 
 

(1) 
The Company discontinued offering an unsecured consumer loan product in Latin America effective June 30, 2018.


12


FIRSTCASH, INC.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)

The following table presents segment pre-tax operating income of the Latin America operations segment for the three months ended June 30, 2019 as compared to the three months ended June 30, 2018 (dollars in thousands):

 
 
 
 
 
 
 
 
 
 
Constant Currency Basis
 
 
 
 
 
 
 
 
 
 
Three Months
 
 
 
 
 
 
 
 
 
 
 
 
Ended
 
 
 
 
 
 
Three Months Ended
 
 
 
 
 
June 30,
 
Increase /
 
 
June 30,
 
Increase /
 
2019
 
(Decrease)
 
 
2019
 
2018
 
(Decrease)
 
(Non-GAAP)
 
(Non-GAAP)
Latin America Operations Segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail merchandise sales
 
$
109,836

 
$
89,301

 
 
23
 %
 
 
$
108,622

 
 
22
 %
 
Pawn loan fees
 
46,797

 
35,187

 
 
33
 %
 
 
46,277

 
 
32
 %
 
Wholesale scrap jewelry sales
 
9,193

 
5,342

 
 
72
 %
 
 
9,193

 
 
72
 %
 
Consumer loan fees
 

 
342

 
 
(100
)%
 
 

 
 
(100
)%
 
Total revenue
 
165,826

 
130,172

 
 
27
 %
 
 
164,092

 
 
26
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of retail merchandise sold
 
71,610

 
58,302

 
 
23
 %
 
 
70,828

 
 
21
 %
 
Cost of wholesale scrap jewelry sold
 
9,081

 
5,121

 
 
77
 %
 
 
8,984

 
 
75
 %
 
Consumer loan loss provision
 

 
84

 
 
(100
)%
 
 

 
 
(100
)%
 
Total cost of revenue
 
80,691

 
63,507

 
 
27
 %
 
 
79,812

 
 
26
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
85,135

 
66,665

 
 
28
 %
 
 
84,280

 
 
26
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Store operating expenses (1)
 
45,338

 
34,418

 
 
32
 %
 
 
44,927

 
 
31
 %
 
Depreciation and amortization
 
3,579

 
2,740

 
 
31
 %
 
 
3,550

 
 
30
 %
 
Total segment expenses
 
48,917

 
37,158

 
 
32
 %
 
 
48,477

 
 
30
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment pre-tax operating income
 
$
36,218

 
$
29,507

 
 
23
 %
 
 
$
35,803

 
 
21
 %
 

(1) 
The gain on foreign exchange for the Latin America operations segment of $0.5 million for the three months ended June 30, 2018 was reclassified on the consolidated statements of income in order to conform with the presentation for the three months ended June 30, 2019. The gain on foreign exchange was reclassified from store operating expenses and reported separately on the consolidated statements of income.







13


FIRSTCASH, INC.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)

The following table presents segment pre-tax operating income of the Latin America operations segment for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018 (dollars in thousands):

 
 
 
 
 
 
 
 
 
 
Constant Currency Basis
 
 
 
 
 
 
 
 
 
 
Six Months
 
 
 
 
 
 
 
 
 
 
 
 
Ended
 
 
 
 
 
 
Six Months Ended
 
 
 
 
 
June 30,
 
Increase /
 
 
June 30,
 
Increase /
 
2019
 
(Decrease)
 
 
2019
 
2018
 
(Decrease)
 
(Non-GAAP)
 
(Non-GAAP)
Latin America Operations Segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail merchandise sales
 
$
207,262

 
$
173,090

 
 
20
 %
 
 
$
208,658

 
 
21
 %
 
Pawn loan fees
 
90,113

 
68,738

 
 
31
 %
 
 
90,713

 
 
32
 %
 
Wholesale scrap jewelry sales
 
18,118

 
10,610

 
 
71
 %
 
 
18,118

 
 
71
 %
 
Consumer loan fees
 

 
744

 
 
(100
)%
 
 

 
 
(100
)%
 
Total revenue
 
315,493

 
253,182

 
 
25
 %
 
 
317,489

 
 
25
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of retail merchandise sold
 
133,215

 
112,183

 
 
19
 %
 
 
134,123

 
 
20
 %
 
Cost of wholesale scrap jewelry sold
 
18,164

 
9,963

 
 
82
 %
 
 
18,280

 
 
83
 %
 
Consumer loan loss provision
 

 
167

 
 
(100
)%
 
 

 
 
(100
)%
 
Total cost of revenue
 
151,379

 
122,313

 
 
24
 %
 
 
152,403

 
 
25
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
164,114

 
130,869

 
 
25
 %
 
 
165,086

 
 
26
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Store operating expenses (1)
 
88,306

 
68,383

 
 
29
 %
 
 
88,948

 
 
30
 %
 
Depreciation and amortization
 
6,884

 
5,449

 
 
26
 %
 
 
6,938

 
 
27
 %
 
Total segment expenses
 
95,190

 
73,832

 
 
29
 %
 
 
95,886

 
 
30
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment pre-tax operating income
 
$
68,924

 
$
57,037

 
 
21
 %
 
 
$
69,200

 
 
21
 %
 

(1) 
The gain on foreign exchange for the Latin America operations segment of $0.2 million for the six months ended June 30, 2018 was reclassified on the consolidated statements of income in order to conform with the presentation for the six months ended June 30, 2019. The gain on foreign exchange was reclassified from store operating expenses and reported separately on the consolidated statements of income.


14


FIRSTCASH, INC.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)

U.S. Operations Segment Results

The following table details earning assets, which consist of pawn loans, inventories and consumer loans, net as well as other earning asset metrics of the U.S. operations segment as of June 30, 2019 as compared to June 30, 2018 (dollars in thousands, except as otherwise noted):

 
As of June 30,
 
Increase /
 
2019
 
2018
 
(Decrease)
U.S. Operations Segment
 
 
 
 
 
 
 
 
 
Earning assets:
 
 
 
 
 
 
 
 
 
Pawn loans
$
262,356

 
$
267,586

 
 
(2
)%
 
Inventories
 
172,875

 
 
184,531

 
 
(6
)%
 
Consumer loans, net (1)
 
3,850

 
 
17,109

 
 
(77
)%
 
 
$
439,081

 
$
469,226

 
 
(6
)%
 
 
 
 
 
 
 
 
 
 
 
Average outstanding pawn loan amount (in ones)
$
166

 
$
160

 
 
4
 %
 
 
 
 
 
 
 
 
 
 
 
Composition of pawn collateral:
 
 
 
 
 
 
 
 
 
General merchandise
37
%
 
37
%
 
 
 
 
Jewelry
63
%
 
63
%
 
 
 
 
 
100
%
 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Composition of inventories:
 
 
 
 
 
 
 
 
 
General merchandise
44
%
 
41
%
 
 
 
 
Jewelry
56
%
 
59
%
 
 
 
 
 
100
%
 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of inventory aged greater than one year
4
%
 
4
%
 
 
 
 

(1) 
The Company ceased offering unsecured consumer lending and credit services products in all 119 Ohio locations on April 26, 2019 and closed 52 Ohio locations during the second quarter of 2019. See “Consumer Lending Contraction and Ohio Wind-Down Costs” for further discussion.


15


FIRSTCASH, INC.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)

The following table presents segment pre-tax operating income of the U.S. operations segment for the three months ended June 30, 2019 as compared to the three months ended June 30, 2018 (dollars in thousands):

 
 
Three Months Ended
 
 
 
 
 
 
June 30,
 
Increase /
 
 
2019
 
2018
 
(Decrease)
U.S. Operations Segment
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
Retail merchandise sales
 
$
168,918

 
$
166,441

 
 
1
 %
 
Pawn loan fees
 
90,126

 
87,825

 
 
3
 %
 
Wholesale scrap jewelry sales
 
15,788

 
22,133

 
 
(29
)%
 
Consumer loan and credit services fees
 
5,356

 
13,401

 
 
(60
)%
 
Total revenue
 
280,188

 
289,800

 
 
(3
)%
 
 
 
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
 
Cost of retail merchandise sold
 
104,662

 
105,272

 
 
(1
)%
 
Cost of wholesale scrap jewelry sold
 
14,853

 
18,955

 
 
(22
)%
 
Consumer loan and credit services loss provision
 
1,503

 
3,810

 
 
(61
)%
 
Total cost of revenue
 
121,018

 
128,037

 
 
(5
)%
 
 
 
 
 
 
 
 
 
 
Net revenue
 
159,170

 
161,763

 
 
(2
)%
 
 
 
 
 
 
 
 
 
 
Segment expenses:
 
 
 
 
 
 
 
 
Store operating expenses
 
103,009

 
103,625

 
 
(1
)%
 
Depreciation and amortization
 
5,269

 
5,037

 
 
5
 %
 
Total segment expenses
 
108,278

 
108,662

 
 
 %
 
 
 
 
 
 
 
 
 
 
Segment pre-tax operating income
 
$
50,892

 
$
53,101

 
 
(4
)%
 












16


FIRSTCASH, INC.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)

The following table presents segment pre-tax operating income of the U.S. operations segment for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018 (dollars in thousands):

 
 
Six Months Ended
 
 
 
 
 
 
June 30,
 
Increase /
 
 
2019
 
2018
 
(Decrease)
U.S. Operations Segment
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
Retail merchandise sales
 
$
355,733

 
$
352,493

 
 
1
 %
 
Pawn loan fees
 
188,002

 
184,067

 
 
2
 %
 
Wholesale scrap jewelry sales
 
38,573

 
51,590

 
 
(25
)%
 
Consumer loan and credit services fees
 
15,817

 
28,440

 
 
(44
)%
 
Total revenue
 
598,125

 
616,590

 
 
(3
)%
 
 
 
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
 
Cost of retail merchandise sold
 
222,406

 
225,888

 
 
(2
)%
 
Cost of wholesale scrap jewelry sold
 
36,123

 
46,608

 
 
(22
)%
 
Consumer loan and credit services loss provision
 
3,606

 
7,454

 
 
(52
)%
 
Total cost of revenue
 
262,135

 
279,950

 
 
(6
)%
 
 
 
 
 
 
 
 
 
 
Net revenue
 
335,990

 
336,640

 
 
 %
 
 
 
 
 
 
 
 
 
 
Segment expenses:
 
 
 
 
 
 
 
 
Store operating expenses
 
206,893

 
208,008

 
 
(1
)%
 
Depreciation and amortization
 
10,314

 
10,592

 
 
(3
)%
 
Total segment expenses
 
217,207

 
218,600

 
 
(1
)%
 
 
 
 
 
 
 
 
 
 
Segment pre-tax operating income
 
$
118,783

 
$
118,040

 
 
1
 %
 


17


FIRSTCASH, INC.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)

Consolidated Results of Operations

The following table reconciles pre-tax operating income of the Company’s Latin America operations segment and U.S. operations segment discussed above to consolidated net income (in thousands):

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
Consolidated Results of Operations
 
 
 
 
 
 
 
Segment pre-tax operating income:
 
 
 
 
 
 
 
Latin America operations segment pre-tax operating income (1)
$
36,218

 
$
29,507

 
$
68,924

 
$
57,037

U.S. operations segment pre-tax operating income
50,892

 
53,101

 
118,783

 
118,040

Consolidated segment pre-tax operating income
87,110

 
82,608

 
187,707

 
175,077

 
 
 
 
 
 
 
 
Corporate expenses and other income:
 
 
 
 
 
 
 
Administrative expenses
31,696

 
29,720

 
63,850

 
57,722

Depreciation and amortization
1,662

 
3,175

 
3,186

 
6,194

Interest expense
8,548

 
6,529

 
16,918

 
12,727

Interest income
(155
)
 
(740
)
 
(359
)
 
(1,721
)
Merger and other acquisition expenses
556

 
2,113

 
705

 
2,352

Gain on foreign exchange (1)
(483
)
 
(460
)
 
(722
)
 
(247
)
Total corporate expenses and other income
41,824

 
40,337

 
83,578

 
77,027

 
 
 
 
 
 
 
 
Income before income taxes
45,286

 
42,271

 
104,129

 
98,050

 
 
 
 
 
 
 
 
Provision for income taxes
12,238

 
12,100

 
28,426

 
26,244

 
 
 
 
 
 
 
 
Net income
$
33,048

 
$
30,171

 
$
75,703

 
$
71,806


(1) 
The gain on foreign exchange for the Latin America operations segment of $0.5 million and $0.2 million for the three and six months ended June 30, 2018 was reclassified on the consolidated statements of income in order to conform with the presentation for the three and six months ended June 30, 2019. The gain on foreign exchange was reclassified from store operating expenses and reported separately on the consolidated statements of income.


18


FIRSTCASH, INC.
STORE COUNT ACTIVITY

The following table details store count activity for the three months ended June 30, 2019:

 
 
 
 
Consumer
 
 
 
 
Pawn
 
Loan
 
Total
 
 
Locations (1)
 
Locations
 
Locations
Latin America operations segment:
 
 
 
 
 
 
Total locations, beginning of period
 
1,530

 

 
1,530

New locations opened
 
23

 

 
23

Locations acquired
 
40

 

 
40

Locations closed or consolidated
 
(1
)
 

 
(1
)
Total locations, end of period
 
1,592

 

 
1,592

 
 
 
 
 
 
 
U.S. operations segment:
 
 
 
 
 
 
Total locations, beginning of period
 
1,085

 
15

 
1,100

Locations acquired
 
10

 

 
10

Locations closed or consolidated (2)
 
(47
)
 
(9
)
 
(56
)
Total locations, end of period
 
1,048

 
6

 
1,054

 
 
 
 
 
 
 
Total:
 
 
 
 
 
 
Total locations, beginning of period
 
2,615

 
15

 
2,630

New locations opened
 
23

 

 
23

Locations acquired
 
50

 

 
50

Locations closed or consolidated (2)
 
(48
)
 
(9
)
 
(57
)
Total locations, end of period
 
2,640

 
6

 
2,646


(1) 
At June 30, 2019, 75 of the U.S. pawn stores, primarily located in Texas, also offered consumer loans and/or credit services primarily as an ancillary product. This compares to 307 U.S. pawn locations which offered such products as of June 30, 2018.

(2) 
Includes the closing of 52 Ohio locations primarily focused on consumer lending products. See “Consumer Lending Contraction and Ohio Wind-Down Costs” for additional discussion of these store closings.








19


FIRSTCASH, INC.
STORE COUNT ACTIVITY (CONTINUED)

The following table details store count activity for the six months ended June 30, 2019:

 
 
 
 
Consumer
 
 
 
 
Pawn
 
Loan
 
Total
 
 
Locations (1)
 
Locations
 
Locations
Latin America operations segment:
 
 
 
 
 
 
Total locations, beginning of period
 
1,379

 

 
1,379

New locations opened
 
59

 

 
59

Locations acquired
 
158

 

 
158

Locations closed or consolidated
 
(4
)
 

 
(4
)
Total locations, end of period
 
1,592

 

 
1,592

 
 
 
 
 
 
 
U.S. operations segment:
 
 
 
 
 
 
Total locations, beginning of period
 
1,077

 
17

 
1,094

Locations acquired
 
20

 

 
20

Locations closed or consolidated (2)
 
(49
)
 
(11
)
 
(60
)
Total locations, end of period
 
1,048

 
6

 
1,054

 
 
 
 
 
 
 
Total:
 
 
 
 
 
 
Total locations, beginning of period
 
2,456

 
17

 
2,473

New locations opened
 
59

 

 
59

Locations acquired
 
178

 

 
178

Locations closed or consolidated (2)
 
(53
)
 
(11
)
 
(64
)
Total locations, end of period
 
2,640

 
6

 
2,646


(1) 
At June 30, 2019, 75 of the U.S. pawn stores, primarily located in Texas, also offered consumer loans and/or credit services primarily as an ancillary product. This compares to 307 U.S. pawn locations which offered such products as of June 30, 2018.

(2) 
Includes the closing of 52 Ohio locations and two other locations outside of Ohio primarily focused on consumer lending products. See “Consumer Lending Contraction and Ohio Wind-Down Costs” for additional discussion of these store closings.





20


FIRSTCASH, INC.
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, constant currency results, return on tangible assets and return on tangible equity 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 in 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 because management believes they 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 other acquisition expenses to allow more accurate comparisons of the financial results to prior periods and because 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. The Company believes that providing adjusted non-GAAP measures, which exclude these items, allows management and investors to consider the ongoing operations of the business both with, and without, such expenses. 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 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 which results in the recognition of foreign currency exchange gains or losses. The Company has adjusted the applicable financial measures to exclude these remeasurement gains or losses because they are non-cash, non-operating items that could create volatility in the Company’s consolidated results of operations due to the magnitude of the end of period lease liability being remeasured and to improve comparability of current periods presented with prior periods due to the adoption of ASC 842 on January 1, 2019.




21


FIRSTCASH, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES (CONTINUED)
(UNAUDITED)

Adjusted Net Income, Adjusted Diluted Earnings Per Share, Return on Tangible Assets and Return on Tangible Equity

Management believes the presentation of adjusted net income, adjusted diluted earnings per share, return on tangible assets and return on tangible equity 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 June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
In Thousands
 
Per Share
 
In Thousands
 
Per Share
 
In Thousands
 
Per Share
 
In Thousands
 
Per Share
Net income and diluted earnings per share, as reported
$
33,048

 
$
0.76

 
$
30,171

 
$
0.67

 
$
75,703

 
$
1.74

 
$
71,806

 
$
1.57

Adjustments, net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Merger and other acquisition expenses
426

 
0.01

 
1,512

 
0.03

 
530

 
0.01

 
1,696

 
0.04

Non-cash foreign currency gain related to lease liability
(136
)
 

 

 

 
(374
)
 
(0.01
)
 

 

Ohio consumer lending wind-down costs
1,959

 
0.05

 

 

 
1,959