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FirstCash Reports Record Third Quarter Earnings Results; Store Count Now at 2,665 Locations with 258 Units Added Year-to-Date; Increases Quarterly Dividend by 8% to $0.27 per Share

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FirstCash Reports Record Third Quarter Earnings Results; Store Count Now at 2,665 Locations with 258 Units Added Year-to-Date; Increases Quarterly Dividend by 8% to $0.27 per Share

FORT WORTH, Texas, Oct. 23, 2019 (GLOBE NEWSWIRE) -- FirstCash, Inc. (the “Company”) (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, for the three and nine month periods ended September 30, 2019.

Mr. Rick Wessel, chief executive officer, stated, “We had outstanding third quarter results driven by the strength of revenue growth and earnings from core pawn operations. Latin American revenues grew 19% for the quarter and 21% on a constant currency basis, while U.S. results continued to realize growth in retail sales and margins, pawn fees and segment income from pawn operations. The Company continued to add store locations during the third quarter, with year-to-date acquisitions now totaling 183 stores, primarily in Mexico, and 75 additions through de novo store openings in Mexico, Guatemala and Colombia.”

In addition, the Board of Directors declared a $0.27 per share quarterly cash dividend, an increase of 8% compared to the previous quarterly dividend of $0.25 per share. “Utilizing our strong balance sheet and cash flows, year-to-date, FirstCash has opened or acquired 258 locations, repurchased $67 million of common stock and has increased the annualized dividend to $1.08 per share,” Mr. Wessel concluded.

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 September 30,

As Reported (GAAP)

Adjusted (Non-GAAP)

In thousands, except per share amounts

2019

2018

2019

2018

Revenue

$

452,459

$

429,878

$

452,459

$

429,878

Net income

$

34,761

$

33,325

$

36,246

$

35,587

Diluted earnings per share

$

0.81

$

0.76

$

0.84

$

0.81

EBITDA (non-GAAP measure)

$

68,131

$

62,304

$

70,173

$

65,526

Weighted-average diluted shares

43,167

44,116

43,167

44,116


Nine Months Ended September 30,

As Reported (GAAP)

Adjusted (Non-GAAP)

In thousands, except per share amounts

2019

2018

2019

2018

Revenue

$

1,366,077

$

1,299,650

$

1,366,077

$

1,299,650

Net income

$

110,464

$

105,131

$

114,064

$

109,089

Diluted earnings per share

$

2.55

$

2.33

$

2.63

$

2.41

EBITDA (non-GAAP measure)

$

209,203

$

193,595

$

213,959

$

199,169

Weighted-average diluted shares

43,358

45,204

43,358

45,204

Earnings Highlights

  • Diluted earnings per share increased 7% on a GAAP basis and 4% on a non-GAAP adjusted basis in the third quarter of 2019 compared to the prior-year quarter. For the nine month year-to-date period, diluted earnings per share increased 9% on both a GAAP and adjusted non-GAAP basis.

  • Year-over-year comparative earnings per share growth was negatively impacted by several notable, non-core or non-operational items including:

    • Expected contraction in non-core consumer lending operations and costs associated with the wind-down of the Company’s consumer lending operations in Ohio reduced third quarter 2019 earnings per share by approximately $0.07 on a GAAP basis and $0.06 on an adjusted non-GAAP basis, compared to the same prior-year period, and on a year-to-date basis reduced GAAP and adjusted non-GAAP earnings per share by approximately $0.19 and $0.13, respectively. See the “Consumer Lending Contraction and Ohio Wind-Down Costs” section below.

    • The impact of weaker foreign currency translation and a net foreign exchange loss represented an earnings headwind of $0.03 per share in both the third quarter and year-to-date period compared to the respective prior-year periods.

    • An increase in the consolidated effective income tax rate negatively impacted comparative earnings by approximately $0.05 per share for the third quarter and $0.06 per share for the full year compared to the respective prior-year periods.

    • The sum of these impacts on earnings per share were approximately $0.15 for the quarter and $0.28 year-to-date on a GAAP basis, and $0.14 for the quarter and $0.22 year-to-date on a non-GAAP adjusted basis.

  • Segment earnings in Latin America increased 12% on a U.S. dollar basis and 14% on a constant currency basis for the third quarter compared to the prior-year quarter.

  • U.S. segment earnings increased 2% for the third quarter on a GAAP basis. Excluding the reduction in earnings from non-core consumer lending operations and wind-down costs in Ohio (a non-GAAP measure), U.S. segment earnings increased 8% for the quarter compared to the prior-year quarter.

  • Consolidated retail sales margins increased to 37% for both the three and nine months ended September 30, 2019 compared to 36% in the respective prior-year periods.

  • For the trailing twelve months ended September 30, 2019, consolidated revenues totaled $1.8 billion, net income was $159 million and adjusted EBITDA totaled $299 million.

  • Growth in EBITDA and adjusted EBITDA during 2019 outpaced growth in net income and adjusted net income, increasing 9% and 7%, respectively, in the third quarter of 2019 compared to the prior-year quarter. These increases would have been even greater except for the impact from the contraction in non-core consumer lending operations as described above.

  • Cash flow from operating activities for the trailing twelve months ended September 30, 2019 totaled $233 million, while adjusted free cash flow, a non-GAAP financial measure, was $213 million for the twelve months ended September 30, 2019.

Acquisitions and Store Opening Highlights

  • A total of 16 de novo locations were opened during the third quarter, all in Latin America. Year-to-date, a total of 75 new stores have been opened in Latin America, which compares to 43 new stores opened at the same point a year ago. The 75 store openings this year include 58 in Mexico, 13 in Guatemala and four in Colombia.

  • The Company acquired a total of five franchised Prendamex locations in Mexico during the third quarter of 2019. Year-to-date, a total of 183 stores have been acquired, including 163 stores in Latin America and 20 stores in the U.S.

  • Over the trailing twelve-month period ended September 30, 2019, the Company has added a total of 300 locations, representing a 10% increase in the number of pawn stores. Over 90% of the stores added in the last twelve months are located in Latin America where the number of pawn stores has increased by 20% over the same twelve-month period.

  • As of September 30, 2019, the Company operated 2,665 stores, with 1,612 stores in Latin America, representing 60% of the total store base, and 1,053 stores in the U.S. The Latin American locations include 1,539 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 September 30, 2019 was 19.4 pesos / dollar, an unfavorable change of 2% versus the comparable prior-year period, and for the nine-month period ended September 30, 2019 was 19.3 pesos / dollar, an unfavorable change of 2% versus the prior-year period.

Latin America Operations

  • LatAm segment pre-tax operating income for the quarter increased 12%, or 14% on a constant currency basis, compared to the third quarter of 2018. The year-to-date segment pre-tax operating income increased 18%, or 19% on a constant currency basis.

  • Driven by store additions and same-store revenue growth, total Latin America revenues for the third quarter of 2019 were a record $168 million, an increase of 19% on a U.S. dollar basis and 21% on a constant currency basis, as compared to the third quarter of 2018. Year-to-date, total Latin America revenues increased 23% on a U.S. dollar basis and 24% on a constant currency basis, as compared to the prior-year period.

  • The strong revenue growth included a 20% increase in retail sales and a 16% increase in pawn fees compared to the prior-year quarter. On a constant currency basis, retail sales and pawn fees increased 23% and 18%, respectively, as compared to the prior-year quarter.

  • Same-store core pawn revenues increased 4% on a U.S. dollar translated basis and 6% on a constant currency basis, which represented the third sequential quarterly increase in this number. By component, same-store retail sales increased 5% on a U.S. dollar basis and 8% on a constant currency basis compared to the prior-year quarter. While same-store pawn fees were flat on a U.S. dollar basis, they were up 2% on a constant currency basis.

  • Pawn loans outstanding totaled a record $115 million at September 30, 2019, increasing 6% on a U.S. dollar translated basis and 10% on a constant currency basis versus the prior year. Same-store pawn loans at quarter end decreased 2% on a U.S. dollar translated basis, while they increased 2% on a constant currency basis, compared to the prior year.

  • Segment retail margins were 34% in the third quarter and 35% year-to-date compared to 35% in both prior-year periods. The slight third quarter margin compression was experienced primarily in the first half of the quarter with margins improving in September and thus far in October.

  • Inventory turns in Latin America for the trailing twelve months ended September 30, 2019 remained strong at 3.7 times, while inventories aged greater than one year as of September 30, 2019 remained low at 1%.

  • Store operating expenses increased 20% for the quarter, or 23% on a constant currency basis, driven primarily by the 20% increase in the number of stores in Latin America over the past twelve months. Same-store operating expenses increased 1% in the third quarter of 2019, or 3% on a constant currency basis.

U.S. Operations

  • U.S. segment pre-tax operating income for the quarter increased 2% compared to the third quarter of 2018, which included the significant impact of 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 U.S. segment pre-tax operating income (a non-GAAP measure) for the quarter increased 8% compared to the prior-year quarter, primarily due to improved retail margins and pawn loan yields. Year-to-date, the segment pre-tax operating income increased 1% while increasing 7% on an adjusted non-GAAP basis.

  • Total revenues for the third quarter were $284 million, a decrease of 1% compared to the third quarter of 2018, which reflected an anticipated 82% decline, or $12 million, in non-core consumer loan and credit services fees. Core revenues from pawn fees and retail sales increased 3% for the quarter and 2% year-to-date.

  • Net revenue (or gross profit), which was also impacted by the declines in non-core consumer lending operations in 2019 increased 1% for the third quarter of 2019. More importantly, net revenue from core pawn operations increased 4% compared to the prior-year quarter as a result of the continued improvements in both retail sales margins and pawn yields as highlighted below.

  • Despite continued growth of online retailing in general, the Company’s retail sales, which are almost exclusively generated from brick and mortar locations, increased 4% in total and 3% on a same-store basis compared to the prior-year quarter. In addition to the top-line retail sales growth, the Company was able to increase retail sales margins to 38% for both the three and nine month periods ended September 30, 2019 compared to 37% and 36% in the respective prior-year periods.

  • Total pawn fees increased 2% and same-store pawn fees increased 1% in the third quarter compared to the prior-year quarter as pawn yields improved by 5% quarter-over-quarter.

  • Pawn loans outstanding at September 30, 2019 totaled $271 million, a decrease of 3% in total and on a same-store basis. While same-store pawn balances improved slightly 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 22% 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 September 30, 2019 declined $15 million, or 8%, primarily from further strategic reductions in overall inventory levels. As of September 30, 2019, U.S. inventories aged greater than one year were 3% compared to 4% aged inventories a year ago.

  • Inventory turns in the U.S. increased to 2.8 times for the trailing twelve month period ended September 30, 2019 compared to 2.7 times for the twelve month period ended September 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.

Consumer Lending Contraction and Ohio Wind-Down Costs

  • As previously disclosed, the Company ceased offering unsecured consumer lending products in all of its Ohio locations, effective April 26, 2019, in response to state-level regulatory changes impacting such products. As a result, 52 of the Company’s Ohio Cashland locations, whose revenue was derived primarily from such unsecured consumer lending products, were closed during the second quarter. Despite the loss of consumer lending revenues, the remaining 67 locations in Ohio are expected to have sufficient pawn revenues to continue operating profitably as full-service pawnshops.

  • As a result of the wind-down of the Ohio consumer lending business, the Company incurred non-recurring exit costs of approximately $0.6 million and $2.5 million, net of tax, for the quarter and year-to-date periods ended September 30, 2019, respectively, 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, the Company closed two other stand-alone consumer loan stores and ceased offering unsecured consumer loans and/or credit services as ancillary products in 78 of its pawnshops located in Texas, Louisiana and Kentucky during the first nine months of 2019. The Company currently offers unsecured consumer loans and/or credit services in only 81 U.S. locations, of which 75 are full-service pawnshops offering such services as 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 $12 million in the third quarter, or 82%, and $24 million for the year-to-date period, or 57%, compared to the respective prior-year periods.

Cash Dividend and Stock Repurchases

  • The Board of Directors declared a $0.27 per share fourth quarter cash dividend on common shares outstanding, which will be paid on November 29, 2019 to stockholders of record as of November 15, 2019. On an annualized basis, the dividend is now $1.08 per share, representing an 8% increase in the annualized payout. Any future dividends are subject to approval by the Company’s Board of Directors.

  • During the third quarter, the Company repurchased 80,000 shares at an aggregate cost of $8 million and an average per share cost of $93.30. Year-to-date, the Company has repurchased 751,000 shares for an aggregate price of $67 million at an average price of $89.13 per share.

  • Since the merger with Cash America in September 2016 and through the third quarter of 2019, the Company has repurchased a total of 5,710,000 shares, or 28% of the shares issued as a result of the merger, at an average repurchase price of $76.09 per share, resulting in a 12% reduction in the total number of shares outstanding immediately following the merger.

  • Subsequent to quarter end and through October 22, 2019, the Company repurchased an additional 203,000 shares at an aggregate cost of $18 million and an average cost of $90.66 per share, leaving $57 million available for future repurchases under the current share repurchase program. Future share repurchases are subject to expected liquidity, debt covenant restrictions and other relevant factors.

Liquidity and Return Metrics

  • The Company generated $233 million of cash flow from operations and $213 million in adjusted free cash flow during the twelve months ended September 30, 2019 compared to $246 million of cash flow from operations and $244 million of adjusted free cash flow during the same prior-year period. Current period free cash flow includes the impact of accelerated store expansion activities in Latin America, 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 $84 million, dividends of $43 million and acquisitions of $58 million during the trailing twelve months ended September 30, 2019. The net debt ratio, which is calculated using a non-GAAP financial measure, for the trailing twelve months ended September 30, 2019 was 1.9 to 1.

  • Return on assets for the trailing twelve months ended September 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 September 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 September 30, 2019 while return on tangible equity was 51%. This compares to returns of 12% and 38%, 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.

2019 Outlook

  • Adjusted non-GAAP diluted earnings per share for 2019 is expected to remain within the range of $3.85 to $4.00. The 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 of approximately $0.25 to $0.27 per share, negative foreign currency headwinds of approximately $0.04 to $0.06 per share and a $0.07 to $0.11 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 25% compared to 2018.

  • The earnings guidance for full-year 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. Given the difficulty in predicting the amount and timing of these amounts, the Company cannot reasonably provide a full reconciliation of adjusted guidance to GAAP guidance. However, based on expenses incurred year-to-date, the Company expects estimated GAAP basis full-year 2019 diluted earnings per share to be within the range of $3.77 to $3.92, compared to the prior-year GAAP basis diluted earnings per share of $3.41.

  • The estimate of expected adjusted non-GAAP diluted earnings per share for 2019 includes the following assumptions:

    • An anticipated earnings drag of approximately $0.25 to $0.27 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. The Company expects revenues from unsecured consumer lending products in the fourth quarter of 2019 to be less than $2 million, which accounts for less than 0.5% of estimated total fourth quarter revenues.

    • On a full-year basis, the impact of foreign currency represents an expected earnings headwind of approximately $0.04 to $0.06 per share for 2019 when compared to 2018 results, which includes an estimated net foreign exchange loss of $0.02 per share and expected headwinds from the decrease in the average value of the Mexican peso in 2019 of $0.02 to $0.04 per share. 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. 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 fourth quarter of 2019.

    • The effective income tax rate is expected to range from 27.5% to 28.0% for 2019, which is 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) and represents an earnings headwind of approximately $0.07 to $0.11 per share as compared to 2018 results. The increased rate is due in part to the increasing share of earnings from Latin America, where corporate tax rates are higher, an expected reduction in a foreign permanent tax benefit related to an inflation index adjustment allowed under Mexico tax law due to an anticipated lower inflation rate in Mexico compared to the prior year and an increase in certain non-deductible expenses resulting from the Tax Cuts and Jobs Act.

    • Plans to open 85 or more new full-service pawn stores in 2019 in Latin America, which includes targeted openings of 68 stores in Mexico, 13 stores in Guatemala and four 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.

Additional Commentary and Analysis

Mr. Wessel further commented, “FirstCash had another strong quarter, posting record third quarter revenues, adjusted net income and adjusted EBITDA. We continue to successfully execute on our growth strategy and have added 258 stores during the first nine months of the year. Additionally, we believe there are further revenue and expense synergies to be realized out of the 529 stores that we have acquired in Mexico since 2018 that have started to roll into the same-store comparable base.

“In Latin America, revenue growth for the quarter continued at an impressive rate of 21% on a constant currency basis and stands at 24% growth on a constant currency basis for the year-to-date period. Retail sales growth was especially strong as we continued the integration of the Prendamex acquisitions with a significant emphasis on improving retail operations. There are now 184 Prendamex stores in the same-store comp base, which represents approximately one-third of the total Prendamex stores acquired, and the revenues from these stores increased approximately 30% in the third quarter compared to the same quarter last year, driven largely by 63% growth in same-store retail sales.

“Pawn loan fees in Latin America increased 18% over last year on a local currency basis. Same-store fees grew as well, but at a slower rate, which the Company attributes in part to increased governmental support for social welfare programs for lower income consumers under the new federal administration in Mexico. However, our past experience with these types of programs leads us to believe that it will have a limited long-term impact on pawn demand.

“Our focus on further long-term growth in Latin America continues to be supported by our strategic acquisitions and store opening activities. We have acquired 163 Latin American locations year-to-date and are on pace to open at least 85 new locations. While the record level of store opening activities are a slight drag on current year earnings, these locations are expected to be additive to earnings next year and beyond.

“U.S. pawn results were impressive as well, primarily driven by further improvements in retail margins and increased yields on pawn receivables. As a result, net revenue from pawn fees and retail sales grew 4% and the combined yield on earnings assets (pawn loans and inventories) has improved from 134% to 146% comparing the trailing twelve months of this year to the prior-year period. Combined with continued expense discipline, the segment contribution from pawn operations increased 8%, which is an impressive number for our very mature U.S. store base.

“Our balance sheet and cash flows remain strong, as does our access to favorable long-term credit facilities. Our first priority is to continue deploying capital to support store additions from opening new stores and making strategic acquisitions. We have ample cash flows and capital to also support our dividend and stock buyback programs. Since the merger with Cash America, we have repurchased 5.7 million shares and paid out dividends totaling $119 million through quarter end. Today, we are pleased to announce the increased dividend, which represents the fourth consecutive year that we have increased our dividend.

“Our guidance for full year 2019 earnings remains unchanged from last quarter. While core pawn results in the U.S. are running ahead of our previous forecast, we are slightly more cautious about pawn loan demand in Mexico for the time being and the non-operational impacts of foreign currency headwind and slightly higher effective income tax rates as we enter the fourth quarter.

“We remain committed as always to creating long-term shareholder value through revenue and earnings growth coupled with significant additional returns through dividends and stock repurchases. Our trailing twelve month adjusted EBITDA reached $299 million, another record that we believe will continue to grow as we execute on our objectives,” concluded Mr. Wessel, chief executive officer.

About FirstCash

FirstCash is the leading international operator of pawn stores with more than 2,600 retail pawn locations and more than 21,000 employees in 24 U.S. states, the District of Columbia and in Latin America. The Company currently operates in Mexico and the countries of Guatemala, El Salvador and Colombia. FirstCash focuses on serving cash and credit constrained consumers 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 consumer pawn loans secured by pledged personal property.

FirstCash is a component company in both the Standard & Poor’s MidCap 400 Index® and the Russell 2000 Index®. FirstCash’s common stock (ticker symbol “FCFS”) is traded on the Nasdaq, the creator of the world’s first electronic stock market. For additional information regarding FirstCash and the services it provides, visit FirstCash’s websites located at http://www.firstcash.com and http://www.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.

FIRSTCASH, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Revenue:

Retail merchandise sales

$

281,358

$

256,417

$

844,353

$

782,000

Pawn loan fees

142,879

134,613

420,994

387,418

Wholesale scrap jewelry sales

25,661

24,650

82,352

86,850

Consumer loan and credit services fees

2,561

14,198

18,378

43,382

Total revenue

452,459

429,878

1,366,077

1,299,650

Cost of revenue:

Cost of retail merchandise sold

178,597

163,287

534,218

501,358

Cost of wholesale scrap jewelry sold

22,660

23,859

76,947

80,430

Consumer loan and credit services loss provision

223

5,474

3,829

13,095

Total cost of revenue

201,480

192,620

614,994

594,883

Net revenue

250,979

237,258

751,083

704,767

Expenses and other income:

Store operating expenses (1)

149,819

141,720

445,018

418,111

Administrative expenses

30,576

29,977

94,426

87,699

Depreciation and amortization

10,674

10,850

31,058

33,085

Interest expense

8,922

7,866

25,840

20,593

Interest income

(429

)

(495

)

(788

)

(2,216

)

Merger and other acquisition expenses

805

3,222

1,510

5,574

Loss (gain) on foreign exchange (1)

1,648

35

926

(212

)

Total expenses and other income

202,015

193,175

597,990

562,634

Income before income taxes

48,964

44,083

153,093

142,133

Provision for income taxes

14,203

10,758

42,629

37,002

Net income

$

34,761

$

33,325

$

110,464

$

105,131

Earnings per share:

Basic

$

0.81

$

0.76

$

2.56

$

2.33

Diluted

$

0.81

$

0.76

$

2.55

$

2.33

Weighted-average shares outstanding:

Basic

42,957

43,981

43,183

45,107

Diluted

43,167

44,116

43,358

45,204

Dividends declared per common share

$

0.25

$

0.22

$

0.75

$

0.66


(1)

The loss on foreign exchange of $35,000 and gain on foreign exchange of $0.2 million for the three and nine months ended September 30, 2018, respectively, was reclassified on the consolidated statements of income in order to conform with the presentation for the three and nine months ended September 30, 2019. The loss (gain) on foreign exchange was reclassified from store operating expenses and reported separately on the consolidated statements of income.


FIRSTCASH, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)

September 30,

December 31,

2019

2018

2018

ASSETS

Cash and cash equivalents

$

61,183

$

57,025

$

71,793

Fees and service charges receivable

48,587

49,141

45,430

Pawn loans

385,907

387,733

362,941

Consumer loans, net

895

17,804

15,902

Inventories

281,921

277,438

275,130

Income taxes receivable

1,944

1,065

1,379

Prepaid expenses and other current assets

9,275

18,396

17,317

Total current assets

789,712

808,602

789,892

Property and equipment, net

300,087

250,088

251,645

Operating lease right of use asset (1)

288,460

Goodwill

936,562

906,322

917,419

Intangible assets, net

86,468

88,900

88,140

Other assets

10,880

50,635

49,238

Deferred tax assets

10,624

11,933

11,640

Total assets

$

2,422,793

$

2,116,480

$

2,107,974

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable and accrued liabilities

$

81,999

$

103,223

$

96,928

Customer deposits

41,686

35,874

35,368

Income taxes payable

713

279

749

Lease liability, current (1)

83,328

Total current liabilities

207,726

139,376

133,045

Revolving unsecured credit facility

340,000

305,000

295,000

Senior unsecured notes

296,394

295,722

295,887

Deferred tax liabilities

61,240

52,149

54,854

Lease liability, non-current (1)

181,257

Other liabilities

12,505

11,084

Total liabilities

1,086,617

804,752

789,870

Stockholders’ equity:

Preferred stock

Common stock

493

493

493

Additional paid-in capital

1,229,793

1,222,947

1,224,608

Retained earnings

684,865

569,691

606,810

Accumulated other comprehensive loss

(113,516

)

(97,970

)

(113,117

)

Common stock held in treasury, at cost

(465,459

)

(383,433

)

(400,690

)

Total stockholders’ equity

1,336,176

1,311,728

1,318,104

Total liabilities and stockholders’ equity

$

2,422,793

$

2,116,480

$

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.

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.

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

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

Constant Currency Basis

As of

September 30,

As of September 30,

Increase /

2019

Increase

2019

2018

(Decrease)

(Non-GAAP)

(Non-GAAP)

Latin America Operations Segment

Earning assets:

Pawn loans

$

115,248

$

108,924

6

%

$

120,116

10

%

Inventories

96,552

77,034

25

%

100,655

31

%

$

211,800

$

185,958

14

%

$

220,771

19

%

Average outstanding pawn loan amount (in ones)

$

66

$

68

(3

)%

$

69

1

%

Composition of pawn collateral:

General merchandise

72

%

77

%

Jewelry

28

%

23

%

100

%

100

%

Composition of inventories:

General merchandise

73

%

73

%

Jewelry

27

%

27

%

100

%

100

%

Percentage of inventory aged greater than one year

1.2

%

0.4

%

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 September 30, 2019 as compared to the three months ended September 30, 2018 (dollars in thousands):

Constant Currency Basis

Three Months

Ended

Three Months Ended

September 30,

Increase /

September 30,

Increase /

2019

(Decrease)

2019

2018

(Decrease)

(Non-GAAP)

(Non-GAAP)

Latin America Operations Segment

Revenue:

Retail merchandise sales

$

113,266

$

94,416

20

%

$

115,867

23

%

Pawn loan fees

47,754

41,269

16

%

48,847

18

%

Wholesale scrap jewelry sales

7,292

5,846

25

%

7,292

25

%

Consumer loan fees (1)

116

(100

)%

(100

)%

Total revenue

168,312

141,647

19

%

172,006

21

%

Cost of revenue:

Cost of retail merchandise sold

74,869

60,917

23

%

76,586

26

%

Cost of wholesale scrap jewelry sold

6,443

6,264

3

%

6,590

5

%

Consumer loan loss provision (1)

54

(100

)%

(100

)%

Total cost of revenue

81,312

67,235

21

%

83,176

24

%

Net revenue

87,000

74,412

17

%

88,830

19

%

Segment expenses:

Store operating expenses (2)

46,504

38,765

20

%

47,532

23

%

Depreciation and amortization

3,795

2,915

30

%

3,885

33

%

Total segment expenses

50,299

41,680

21

%

51,417

23

%

Segment pre-tax operating income

$

36,701

$

32,732

12

%

$

37,413

14

%


(1)

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

(2)

The loss on foreign exchange for the Latin America operations segment of $35,000 for the three months ended September 30, 2018 was reclassified on the consolidated statements of income in order to conform with the presentation for the three months ended September 30, 2019. The loss on foreign exchange was reclassified from store operating expenses and reported separately on the consolidated statements of income.

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

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

Constant Currency Basis

Nine Months

Ended

Nine Months Ended

September 30,

Increase /

September 30,

Increase /

2019

(Decrease)

2019

2018

(Decrease)

(Non-GAAP)

(Non-GAAP)

Latin America Operations Segment

Revenue:

Retail merchandise sales

$

320,528

$

267,506

20

%

$

324,425

21

%

Pawn loan fees

137,867

110,007

25

%

139,528

27

%

Wholesale scrap jewelry sales

25,410

16,456

54

%

25,410

54

%

Consumer loan fees (1)

860

(100

)%

(100

)%

Total revenue

483,805

394,829

23

%

489,363

24

%

Cost of revenue:

Cost of retail merchandise sold

208,084

173,100

20

%

210,625

22

%

Cost of wholesale scrap jewelry sold

24,607

16,227

52

%

24,898

53

%

Consumer loan loss provision (1)

221

(100

)%

(100

)%

Total cost of revenue

232,691

189,548

23

%

235,523

24

%

Net revenue

251,114

205,281

22

%

253,840

24

%

Segment expenses:

Store operating expenses (2)

134,810

107,148

26

%

136,457

27

%

Depreciation and amortization

10,679

8,364

28

%

10,821

29

%

Total segment expenses

145,489

115,512

26

%

147,278

28

%

Segment pre-tax operating income

$

105,625

$

89,769

18

%

$

106,562

19

%


(1)

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

(2)

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

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 September 30, 2019 as compared to September 30, 2018 (dollars in thousands, except as otherwise noted):

As of September 30,

Increase /

2019

2018

(Decrease)

U.S. Operations Segment

Earning assets:

Pawn loans

$

270,659

$

278,809

(3

)%

Inventories

185,369

200,404

(8

)%

Consumer loans, net (1)

895

17,804

(95

)%

$

456,923

$

497,017

(8

)%

Average outstanding pawn loan amount (in ones)

$

167

$

163

2

%

Composition of pawn collateral:

General merchandise

36

%

36

%

Jewelry

64

%

64

%

100

%

100

%

Composition of inventories:

General merchandise

47

%

42

%

Jewelry

53

%

58

%

100

%

100

%

Percentage of inventory aged greater than one year

3

%

4

%


(1)

The Company ceased offering unsecured consumer lending and credit services products in all its 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.

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 September 30, 2019 as compared to the three months ended September 30, 2018 (dollars in thousands):

Three Months Ended

September 30,

Increase /