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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

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 (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 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.

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.

  • 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.

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.

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.

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.

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.


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.

 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.

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, 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.

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.

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.

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.

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):

null
    Three Months Ended        
    June 30,   Increase /
    2019   2018   (Decrease)
U.S. Operations Segment