Market Overview

FirstCash Reports First Quarter EPS of $0.90 and Raises Full Year Guidance; Announces Acquisitions and Openings of 156 Stores; Declares Quarterly Dividend of $0.22 per Share; Completes Share Repurchase Plans and Adds New $100 Million Authorization

Share:

FirstCash, Inc. (the "Company") (NYSE:FCFS), the leading international
operator of 2,247 retail pawn stores in the U.S. and Latin America,
today announced record revenue, net income and earnings per share for
the three month period ended March 31, 2018. In addition, the Company
announced that it increased its earnings per share guidance for 2018,
that the Board of Directors declared a $0.22 per share quarterly cash
dividend and that the Company has completed its previously authorized
share buyback programs and the Board of Directors authorized an
additional $100 million for future share repurchases.

Mr. Rick Wessel, chief executive officer, stated, "FirstCash is off to a
great start in 2018 as first quarter earnings per share of $0.90 grew
34% over the prior year on the strength of Latin American revenue
growth, rapidly improving U.S. profitability metrics, further merger
synergies and the reduced U.S. corporate tax rate. These results, along
with continued investments in store additions, strengthening pawn demand
and continued share repurchases provide the catalysts to increase our
full year 2018 earnings guidance by $0.20 per share, representing 22% to
30% EPS growth versus the prior year.

"We are excited to announce several acquisitions, highlighted by the
purchase in March of 126 stores in Mexico. In the U.S., we acquired
three single stores in the first quarter and, in early April, completed
an acquisition of a 12 store chain in Tennessee and Georgia and a single
store in Maryland. These all-cash acquisitions, coupled with de novo
store openings, which includes our first store in Colombia, brings our
total store count to 2,247 locations, of which 1,136 locations are in
our primary growth market of Latin America and represent 51% of the
total store base." Mr. Wessel concluded.

Adjusted earnings measures for 2018 exclude merger and acquisition
related expenses, which are further described, along with the
adjustments for 2017 results, in the detailed reconciliations of
adjusted earnings provided at the end of this release.

   
Three Months Ended March 31,
2018     2017
In thousands, except per share amounts As Reported     Adjusted As Reported   Adjusted
(GAAP) * (Non-GAAP) (GAAP) * (Non-GAAP)
Revenue $ 449,800 $ 449,800 $ 447,576 $ 447,576
Net income $ 41,635 $ 41,819 $ 32,645 $ 33,053
Diluted earnings per share $ 0.90 $ 0.90 $ 0.67 $ 0.68
EBITDA (non-GAAP measure) $ 72,279 $ 72,518 $ 72,271 $ 72,918
Weighted average diluted shares 46,479 46,479 48,402 48,402
*  

Other than EBITDA, which is a non-GAAP financial measure. See
the detailed reconciliation of non-GAAP financial measures
provided at the end of this release.

Earnings Highlights

  • Diluted earnings per share increased 34% in the first quarter of 2018
    compared to the first quarter of 2017, while on a non-GAAP adjusted
    basis, diluted earnings per share increased 32% for the first quarter
    compared to the prior-year quarter.
  • Net income for the first quarter of 2018 increased 28% compared to the
    first quarter of 2017, while on a non-GAAP adjusted basis, net income
    for the quarter increased 27%.
  • For the trailing twelve months ended March 31, 2018, consolidated
    revenues totaled $1.8 billion, net income was $153 million and
    adjusted EBITDA totaled $273 million. EBITDA and adjusted EBITDA are
    non-GAAP measures and are calculated in the detailed reconciliation of
    non-GAAP financial measures provided at the end of this release.
  • Cash flow from operating activities for the trailing twelve months
    ended March 31, 2018 totaled $248 million, compared to $136 million in
    the prior-year comparative period. Adjusted free cash flow, a non-GAAP
    measure, was $246 million for the twelve months ended, an increase of
    46% over the comparable prior-year amount of $168 million. Adjusted
    free cash flow is a non-GAAP measure and is calculated in the detailed
    reconciliation of non-GAAP financial measures provided at the end of
    this release.
  • The Company continued to drive further merger-related cost synergies,
    including depreciation savings, during the first quarter. Consolidated
    administrative expenses for the first quarter of 2018 were $28
    million, which compares favorably to $33 million in the first quarter
    of 2017 and pro forma administrative expenses of $43 million in the
    first quarter of 2016 prior to the merger. Consolidated depreciation
    and amortization expense in the first quarter was $11 million,
    compared to $14 million in the comparable 2017 quarter and $18 million
    in the first quarter 2016 on a pro forma basis.
  • The profit margin on income before taxes for the first quarter
    improved from 11.7% last year to 12.4% this year, while the net income
    margin improved from 7.3% to 9.3% over the same periods.
  • Net income and earnings per share for the first quarter included the
    benefit of the lower U.S. corporate tax rate of approximately $4
    million, or $0.09 per share, as compared to the first quarter of 2017.
    The U.S. tax benefit was partially offset by expected contraction in
    non-core consumer lending operations, which negatively impacted
    earnings by approximately $0.07 to $0.08 per share as compared to the
    prior year.
  • The weighted average share count in the first quarter of 2018 declined
    4% compared to the prior year as the Company continued to repurchase
    shares funded primarily through operating cash flows.

Acquisition and Store Opening Highlights

  • The Company continues to invest in strategic acquisitions having
    already completed multiple transactions this year to acquire a total
    of 142 locations in the U.S. and Mexico for aggregate, all-cash
    consideration of $24 million. Highlights of these transactions include:

    • The acquisition of 126 pawn locations in Mexico, operating under
      the Prendamex brand, was completed on March 1, 2018. Most of these
      locations are smaller-format, jewelry-focused stores located in
      urban markets in eight states in central and southern Mexico. As
      with the previous Maxi Prenda acquisition in early 2016, which
      were also smaller-format locations, the Company believes there is
      significant long-term growth potential in these stores through
      implementing the FirstPawn IT platform and by training associates
      in Company best practices that increase focus on general
      merchandise lending and retail operations. Additionally, many of
      these smaller stores will benefit from revenue and cost synergies
      arising from their proximity to the Company's larger full-service
      stores. The all-cash acquisition was funded with available cash
      balances in Mexico.
    • The Company acquired 12 full-service pawn locations operating
      under the U.S. Money Shops brand located in Tennessee and Georgia.
      These stores integrate well into the Company's existing footprint
      in these markets where the Company now has a total of 53 locations
      in Tennessee and 46 locations in Georgia. The all-cash acquisition
      closed on April 6, 2018, subsequent to quarter end, and is not
      included in the quarter end store counts.
    • During the first quarter, the Company completed three additional
      single store acquisitions in the states of Louisiana, North
      Carolina and Texas. In addition, the acquisition of a single store
      located in Maryland was completed in April, which is not included
      in the quarter end store counts.
  • FirstCash opened a total of 11 large format de novo locations in Latin
    America during the first quarter, which included nine stores in Mexico
    and single stores in Guatemala and Colombia. The Colombian store
    opening marks the Company's first location in South America, while the
    Guatemalan store is the Company's first large format, First
    Cash-branded store in that market.
  • The Company has a strong pipeline of additional de novo locations
    which are expected to open in 2018, including at least four additional
    stores in Colombia.
  • As of April 26, 2018, FirstCash operated 2,247 stores, composed of
    1,136 stores in Latin America, representing 51% of the store base, and
    1,111 stores in the U.S., representing 49% of the store base.

Note: Certain growth rates in "Latin American Operations" are
calculated on a constant currency basis, a non-GAAP 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 March 31, 2018 was 18.8 pesos / dollar, a favorable change of 8%
versus the comparable prior-year period.

Latin American Operations

  • Revenues for the first quarter totaled $123 million, an increase of
    25% on a U.S. dollar translated basis and 16% on a constant currency
    basis as compared to the first quarter of 2017, driven by strong
    same-store sales results and contributions from new stores.
  • Same-store core pawn revenues, which includes pawn lending fees and
    retail merchandise sales, for the quarter increased 23% on a U.S.
    dollar translated basis, driven by a 23% increase in both same-store
    retail sales and pawn fees compared to the prior-year quarter. On a
    constant currency basis, core same-store revenues and both of its
    components, retail sales and pawn fees, increased 13% compared to the
    prior-year quarter.
  • Retail margins for the first quarter were consistent with the prior
    year and previous sequential quarter at 36%.
  • Pawn loans, the leading indicator of future revenue growth, increased
    by 22%, or 19% on a constant currency basis, versus the same
    prior-year quarter and totaled $86 million at March 31, 2018.
    Same-store pawn loans at quarter end increased 14% on a dollar
    translated basis and increased 12% on a constant currency basis
    compared to the same prior-year quarter.
  • Inventories at March 31, 2018 increased $16 million to $67 million
    compared to $51 million a year ago. The increase was driven by the net
    addition of 167 stores over the past twelve months and continued
    maturation of existing stores, including the smaller format Maxi
    Prenda stores acquired just over two years ago. As of March 31, 2018,
    inventories aged greater than one year remained extremely low at 1%.
    Inventory turns in Latin America for the prior twelve month period
    were 4.0 times.
  • Pre-tax operating income for the Latin American segment increased 32%
    in U.S. dollars and 23% on a constant currency basis for the first
    quarter, while the net segment operating margin increased over 100
    basis points to 22.2%.

U.S. Operations

  • Revenues for the first quarter totaled $327 million, a decrease of 6%
    compared to the first quarter of 2017, which includes the expected
    impact of a 28% decline in non-core consumer loan and credit services
    fees and a 10% decline in non-core scrap jewelry sales.
  • Same-store retail sales for the first quarter were even with the
    prior-year quarter in the First Cash stores while down 5% in the Cash
    America stores, which reflected intentionally lower inventory levels,
    especially in aged categories, compared to the prior year. As a
    result, overall same-store retail sales in the U.S. declined just
    under 4% for the first quarter compared to the prior-year quarter.
  • Same-store pawn fee revenues decreased 5% in the first quarter
    compared to the prior-year quarter due to the expected year-over-year
    decline in the Cash America pawn balances, partially offset by a 4%
    increase in the legacy First Cash stores and improved yields on the
    Cash America pawn receivables. Same-store pawn fee revenues in the
    Cash America stores declined 8% in the first quarter compared to an
    11% decrease in the prior sequential quarter.
  • Retail margins improved sequentially to 35% for the quarter compared
    to 33% and 34% in the third and fourth quarter of 2017, respectively.
    The retail margin in the Cash America locations saw even stronger
    sequential improvement at 34% compared to 31% in the fourth quarter of
    2017.
  • Pawn loans outstanding at March 31, 2018 totaled $237 million, a
    decrease of 3% in total and on a same-store basis. This represented a
    significant sequential improvement over the fourth quarter of 2017
    when pawn loans were down 6% overall and 7% on a same-store basis.
    Pawn loans in the legacy First Cash stores increased 6% on a
    same-store basis, marking the sixth sequential quarter of positive
    year-over-year comparisons. Pawn loans in the Cash America stores also
    saw significant sequential improvement as the 6% decrease in same
    store pawn loans outstanding at March 31, 2018 compared favorably to
    the 10% decline last quarter.
  • Inventories at March 31, 2018 declined $70 million, or 27%, to $188
    million compared to $258 million a year ago, primarily from strategic
    reductions in overall inventory levels, including focused liquidation
    of aged inventories in the Cash America stores. As of March 31, 2018,
    inventories aged greater than one year were 5%. Aged inventories in
    the legacy First Cash stores were consistent at 5%, while aged
    inventories in the Cash America stores were also 5%, a significant
    sequential improvement over the 7% aged level last quarter and 14%
    aged level in the first and second quarter of 2017. Inventory turns in
    the U.S. for the prior twelve month period were 2.5 times. Inventory
    turns in the U.S. are slower than Latin America due to the larger
    jewelry component in the U.S. compared to a greater general
    merchandise inventory component in Latin America.
  • The Company entered into an agreement in early April 2018 to sell the
    remaining assets of its California consumer lending operations, which
    were part of the Cash America merger. The Company closed three of the
    locations in the first quarter with the assets of the remaining eight
    locations being sold during the second quarter. After the second
    quarter, the Company will no longer have operations in California. The
    Company expects to record a small loss resulting from the sale of less
    than $0.01 per share, which includes the cost of terminating the
    remaining lease liabilities.

Cash Dividend and Stock Repurchases

  • During the first quarter, the Company paid a $0.22 per share cash
    dividend on common shares outstanding that totaled $10 million.
  • The Board of Directors declared a $0.22 per share second quarter cash
    dividend on common shares outstanding, which will be paid on May 31,
    2018 to stockholders of record as of May 15, 2018. Any future
    dividends are subject to approval by the Company's Board of Directors.
  • The Company completed the $100 million share repurchase authorization
    initiated in June 2017 by repurchasing 239,000 shares during January
    2018 at an aggregate cost of $17 million. The average repurchase price
    for the entire plan was $61.63 per share.
  • The Company also completed the October 2017 $100 million share
    repurchase authorization after repurchasing 1,139,000 shares through
    quarter end and an additional 143,000 shares through April 6th at an
    average repurchase price of $78.01 per share.
  • Given the completion of repurchases under both prior plans and the
    strong cash flows from the business, the Company's Board of Directors
    authorized a new $100 million share repurchase program that became
    effective on April 25, 2018. The Company expects to complete this
    authorization in 2018, subject to expected liquidity, debt covenant
    restrictions and other relevant factors.
  • Since the merger with Cash America in September 2016, the Company has
    repurchased a total of 3,137,000 shares at an average repurchase price
    of $67.04 per share, resulting in a 6.5% reduction from the number of
    shares outstanding at the time of the merger.

Liquidity and Return Metrics

  • The Company generated $248 million in cash flows from operations and
    $246 million in adjusted free cash flow during the twelve months ended
    March 31, 2018 compared to $136 million and $168 million,
    respectively, during the same prior-year period. Adjusted free cash
    flow is a non-GAAP measure and is calculated in the detailed
    reconciliation of non-GAAP financial measures provided at the end of
    this release.
  • While the Company funded share repurchases in the first quarter
    totaling $100 million, paid $10 million in dividends and funded
    acquisitions totaling $13 million, outstanding debt was reduced by $24
    million during the first quarter of 2018 to $383 million. Outstanding
    debt at March 31, 2018 includes the $300 million senior notes due in
    2024 and $83 million drawn on the $400 million unsecured credit
    facility. This compares to $337 million of outstanding debt a year ago
    and $560 million of outstanding debt at September 30, 2016,
    immediately following the merger.
  • As of March 31, 2018, the Company had $110 million in cash on its
    balance sheet and $312 million of availability for future borrowings
    under its long-term, unsecured credit facility.
  • The ratio of net debt, defined as total debt less cash and cash
    equivalents, to trailing twelve months adjusted EBITDA, as defined in
    the Company's senior notes covenants, was 1.0 to 1. The calculation of
    the net debt ratio is included in the detailed reconciliation of
    non-GAAP financial measures provided at the end of this release.
  • The return on assets for the trailing twelve months ended March 31,
    2018 was 7.4%, while the return on tangible assets was 13.5% for the
    same period. The return on equity was 10.4% for the trailing twelve
    months ended March 31, 2018.

Fiscal 2018 Outlook

  • The Company is increasing its fiscal full-year 2018 guidance for
    earnings per share to be in the range of $3.35 to $3.55, which
    compares to previous 2018 guidance issued on February 1, 2018, of
    $3.15 to $3.35 per share. The increase reflects the strong first
    quarter performance and anticipated earnings contributions, primarily
    in the fourth quarter, from increased pawn loan demand and recent
    acquisitions. The updated 2018 guidance represents year-over-year
    earnings per share growth to be in a range of 22% to 30% compared to
    2017 adjusted diluted earnings per share of $2.74.
  • The estimate of expected earnings per share includes the following
    assumptions:

    • The Company now expects to add approximately 200 locations in
      2018, which includes the 126 smaller format Prendamex stores, 30
      large format stores opened or acquired thus far and 40 to 50
      additional large format locations over the remainder of the year.
    • An expected effective income tax rate for fiscal 2018 of
      approximately 26% to 27%, which compares to the effective rate,
      excluding the impact of the Tax Act, of 32.3% for fiscal 2017.
    • An estimated exchange rate of approximately 20.0 Mexican pesos /
      U.S. dollar for fiscal 2018 compared to the foreign exchange rate
      of 18.9 Mexican pesos / U.S. dollar in fiscal 2017. The forecast
      reflects continued potential currency volatility, related
      primarily to ongoing trade and immigration discussions between the
      U.S. and Mexico. As a reminder, other than normal cash transfers
      from Latin America to the U.S. parent for certain royalties and
      management fees, the Company does not intend to repatriate
      earnings from Mexico to the U.S. but rather reinvest profits from
      Latin America into further expansion throughout the region.
    • An anticipated earnings drag in fiscal 2018 of approximately $0.15
      to $0.17 per share due to expected strategic reductions in
      consumer lending operations, primarily through store closings and
      divestitures that includes the California operations and the
      elimination of remaining non-franchised check cashing operations.
      Consumer lending operations are now expected to contribute
      approximately 3% of revenue in 2018.
    • An estimated earnings drag in 2018 for merger related expenses of
      $0.02 to $0.04 per share, net of tax.

Additional Commentary and Analysis

Mr. Wessel further commented, "The strong earnings results for the first
quarter and increased full-year guidance reflect a number of positive
catalysts. We continue to post strong revenue and store growth in Latin
America, driven by a combination of de novo store openings and strategic
acquisitions. We believe the combination of an improving U.S. operating
environment, continued merger integration progress and the strength of
our free cash flows will drive both near and long-term earnings growth.

"FirstCash's Latin America operations continue to deliver tremendous
growth as evidenced by increases in core revenue of 17% and total pawn
receivables of 19%, both on a constant currency basis versus the prior
year. The particularly strong growth rate in pawn receivables is
especially important as it is a leading indicator of future revenue
growth. De novo stores opened over the past few years continue to mature
as expected and the Maxi Prenda stores that were acquired approximately
two years ago continue to produce excellent returns driven in part by
improved retail sales that were up 36% quarter-over-quarter (28% on a
constant currency basis).

"The acquisition announced today of the 126 Prendamex stores in Mexico
has many of the same characteristics as the Maxi Prenda stores and we
believe that over time these stores can show similar improvements in
retail sales and other operating and return metrics, which we can
achieve by implementing our full-service lending and retail model,
supported by our superior technology platform, retail strategies and
revenue synergies from nearby full-service locations. These typically
smaller format locations, located in neighborhoods where it is difficult
to open larger locations, significantly expands our playing field in
Latin America by increasing the number of potential store formats in
each country.

"We are also excited to announce the expansion of FirstCash's Latin
American operations into South America with the opening of the first
store in Bogota, Colombia. We intend to open several more stores this
year and believe the Colombian market can support several hundred stores
over time. In many ways, our start in Colombia today is similar to
Mexico when we started there in 1999 with our first four large format
stores. We believe that our well-organized, large format locations with
a diversified merchandise mix will be a market disrupter and will
provide significant growth opportunities in South America. In addition,
we opened our first de novo, large format store in Guatemala this
quarter, where there are now 34 stores in what is proving to be an
excellent market with strong operating margins, limited competition and
ample opportunities for expansion.

"In the U.S., the operating environment for pawn lending continues to
improve. We saw further improvement in pawn loan demand during the
quarter, as the seasonal pawn loan paydown cycle driven by income tax
refunds was shorter and less pronounced. Additionally, the markets
negatively impacted by hurricanes last fall saw solid first quarter 2018
recoveries in pawn loan balances. Retail sales, which are almost
exclusively generated from our neighborhood storefronts, remain solid
despite competition from other retailers and on-line exchange platforms.
Most notably, we are seeing strong sequential retail margin expansion
and improving inventory turn ratios, which are indicative of the unique
value proposition we provide our loyal customers in their local markets.

"With this momentum, we anticipate that consolidated U.S. same-store
comparative year-over-year pawn receivables and pawn fee revenues will
both turn positive in the third quarter. These are important post merger
milestones that we now expect to achieve sooner than initially
anticipated. The particularly strong sequential improvements in loan
balances and retail margins in the Cash America stores are the direct
result of our efforts to quickly and efficiently integrate all of the
stores onto the FirstPawn IT platform during 2017. The Cash America
store associates can now utilize real time pricing data from more than
1,100 U.S. locations to quickly determine the true retail value of an
item based on the millions of U.S. pawn and retail transactions we
process every year.

"The continued growth of the U.S. pawn operations should be further
enhanced with the announced April acquisitions of 13 stores, primarily
in the southeastern U.S., where we continue to expand and fill in these
key markets that have growing populations and favorable customer
demographics. At the same time, we continue to intentionally divest and
further reduce the remaining non-core consumer lending operations,
including today's announced sale of the California consumer lending
operations.

"The significant operating synergies from the merger with Cash America
continue to be realized as trailing twelve month synergies are now at
$70 million compared to pre-merger pro forma levels. We now anticipate
in-place run rate synergies of at least $75 million as we complete
fiscal 2018, which is well in excess of the original target of $65
million.

"Utilizing our robust cash flows, during the quarter we repurchased
1,378,000 shares, acquired 129 stores, paid a $10 million dividend and
paid down $24 million of our credit facility. The Board of Directors
authorized an additional $100 million share repurchase program, the
third such $100 million authorization since the merger closed in
September of 2016. We continue to believe that the best use of cash is
de novo store openings and strategic acquisitions followed by share
repurchases and dividends. Fortunately, our strong cash flows and
balance sheet currently allow us to do all of these. In 2017, we
returned approximately 100% of our net income to shareholders in the
form of dividends and buybacks and expect to return at least similar
levels in 2018 in addition to further investments in de novo store
growth and strategic acquisitions.

"In closing, we remain committed to pawn-focused earnings growth
strategies in both Latin America and the U.S. where we continue to
invest in new stores and accretive acquisitions to build a larger and
more diversified multi-country earnings platform. This quarter we
continued to deliver on this strategy, announcing two sizeable
acquisitions while continuing to open new large format stores in Latin
America across three countries, including our first in South America.
Coupled with our capacity to repurchase stock and pay cash dividends, we
are excited about our prospects for driving long-term shareholder
value," concluded Rick Wessel, FirstCash chief executive officer.

About FirstCash

FirstCash is the leading international operator of pawn stores with over
2,200 retail pawn and consumer lending locations in 25 U.S. states and
Latin America, which includes all the states in Mexico and the countries
of Guatemala, El Salvador and Colombia. The Company employs
approximately 17,000 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, power tools, household
appliances, sporting goods, musical instruments and other merchandise,
and make small consumer pawn loans secured by pledged personal property.
Approximately 97% of the Company's revenues are from pawn operations.

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 NYSE, home
to many of the world's most iconic brands, technology business leaders
and emerging growth companies shaping today's global economic landscape.
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 "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 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.

These forward-looking statements are made to provide the public with
management's current assessment of the Company's business. Although 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 (i) the Company's 2017 annual
report on Form 10-K filed with the Securities and Exchange Commission
(the "SEC") on February 20, 2018, including the risks described in Part
1, Item 1A, "Risk Factors" thereof, and (ii) other reports filed with
the SEC, including the Company's forthcoming Quarterly Report on Form
10-Q. 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.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in thousands, except per share amounts)

 
Three Months Ended
March 31,
2018     2017
Revenue:
Retail merchandise sales $ 269,841 $ 259,994
Pawn loan fees 129,793 128,251
Wholesale scrap jewelry sales 34,725 38,111
Consumer loan and credit services fees 15,441   21,220  
Total revenue 449,800   447,576  
 
Cost of revenue:
Cost of retail merchandise sold 174,497 165,635
Cost of wholesale scrap jewelry sold 32,495 34,949
Consumer loan and credit services loss provision 3,727   4,092  
Total cost of revenue 210,719   204,676  
 
Net revenue 239,081   242,900  
 
Expenses and other income:
Store operating expenses 138,561 136,744
Administrative expenses 28,002 33,238
Depreciation and amortization 11,283 14,243
Interest expense 6,198 6,113
Interest income (981 ) (327 )
Merger and other acquisition expenses 239   647  
Total expenses and other income 183,302   190,658  
 
Income before income taxes 55,779 52,242
 
Provision for income taxes 14,144   19,597  
 
Net income $ 41,635   $ 32,645  
 
Net income per share:
Basic $ 0.90 $ 0.67
Diluted $ 0.90 $ 0.67
 
Weighted average shares outstanding:
Basic 46,426 48,389
Diluted 46,479 48,402
 
Dividends declared per common share $ 0.22 $ 0.19
 
       

FIRSTCASH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)

 
March 31, December 31,
2018     2017 2017
ASSETS
Cash and cash equivalents $ 110,408 $ 73,148 $ 114,423
Fees and service charges receivable 40,022 38,021 42,736
Pawn loans 322,625 314,505 344,748
Consumer loans, net 17,447 22,209 23,522
Inventories 254,298 308,165 276,771
Income taxes receivable 24 18,419 19,761
Prepaid expenses and other current assets 21,575   14,331   20,236  
Total current assets 766,399 788,798 842,197
 
Property and equipment, net 234,126 237,258 230,341
Goodwill 844,516 835,567 831,145
Intangible assets, net 91,764 101,594 93,819
Other assets 54,392 69,088 54,045
Deferred tax assets 12,499   11,249   11,237  
Total assets $ 2,003,696   $ 2,043,554   $ 2,062,784  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 88,328 $ 79,726 $ 84,331
Customer deposits 35,692 36,983 32,019
Income taxes payable 12,266   1,041   4,221  

Total current liabilities

136,286 117,750 120,571
 
Revolving unsecured credit facility 83,000 137,000 107,000
Senior unsecured notes 295,400 196,721 295,243
Deferred tax liabilities 49,063 74,368 47,037
Other liabilities 15,661   30,480   17,600  
Total liabilities 579,410   556,319   587,451  
 
Stockholders' equity:
Preferred stock
Common stock 493 493 493
Additional paid-in capital 1,220,491 1,217,756 1,220,356
Retained earnings 525,847 410,874 494,457
Accumulated other comprehensive loss (90,043 ) (96,801 ) (111,877 )
Common stock held in treasury, at cost (232,502 ) (45,087 ) (128,096 )
Total stockholders' equity 1,424,286   1,487,235   1,475,333  
Total liabilities and stockholders' equity $ 2,003,696   $ 2,043,554   $ 2,062,784  
 

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 currently 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 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 is therefore 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,
consumer loans, net and inventories as well as other earning asset
metrics of the Latin America operations segment as of March 31, 2018 as
compared to March 31, 2017 (dollars in thousands, except as otherwise
noted):

               
Constant Currency Basis
Balance at    
March 31, Increase /
Balance at March 31, Increase / 2018 (Decrease)
2018 2017 (Decrease) (Non-GAAP) (Non-GAAP)
Latin America Operations Segment
Earning assets:
Pawn loans $ 85,603 $ 70,272 22 % $ 83,629 19 %
Inventories 66,772 50,634 32 % 65,213 29 %
Consumer loans, net   363     376   (3 )% 354   (6 )%
$ 152,738   $ 121,282   26 % $ 149,196   23 %
 
Average outstanding pawn loan amount (in ones) $ 67 $ 62 8 % $ 66 6 %
 
Composition of pawn collateral:
General merchandise 81 % 81 %
Jewelry 19 % 19 %
100 % 100 %
 
Composition of inventories:
General merchandise 75 % 74 %
Jewelry 25 % 26 %
100 % 100 %
 
Percentage of inventory aged greater than one year 1 % 1 %
 

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 March 31,
2018 as compared to the three months ended March 31, 2017 (dollars in
thousands):

               
Constant Currency Basis
Three Months    
Ended
Three Months Ended March 31, Increase /
March 31, Increase / 2018 (Decrease)
2018 2017 (Decrease) (Non-GAAP) (Non-GAAP)
Latin America Operations Segment
Revenue:
Retail merchandise sales $ 83,789 $ 66,328 26 % $ 77,360 17 %
Pawn loan fees 33,551 26,433 27 % 31,008 17 %
Wholesale scrap jewelry sales 5,268 5,214 1 % 5,268 1 %
Consumer loan and credit services fees 402   405   (1 )% 370   (9 )%
Total revenue 123,010   98,380   25 % 114,006   16 %
 
Cost of revenue:
Cost of retail merchandise sold 53,881 42,138 28 % 49,760 18 %
Cost of wholesale scrap jewelry sold 4,842 4,267 13 % 4,455 4 %
Consumer loan and credit services loss provision 83   102   (19 )% 76   (25 )%
Total cost of revenue 58,806   46,507   26 % 54,291   17 %
 
Net revenue 64,204   51,873   24 % 59,715   15 %
 
Segment expenses:
Store operating expenses 34,178 28,776 19 % 31,812 11 %
Depreciation and amortization 2,709   2,397   13 % 2,521   5 %
Total segment expenses 36,887   31,173   18 % 34,333   10 %
 
Segment pre-tax operating income $ 27,317   $ 20,700   32 % $ 25,382   23 %
 

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

U.S. Operations Segment Results

The following table details earning assets, which consist of pawn loans,
consumer loans, net and inventories as well as other earning asset
metrics of the U.S. operations segment as of March 31, 2018 as compared
to March 31, 2017 (dollars in thousands, except as otherwise noted):

       
Balance at March 31, Increase /
2018     2017 (Decrease)
U.S. Operations Segment
Earning assets:
Pawn loans $ 237,022 $ 244,233 (3 )%
Inventories 187,526 257,531 (27 )%
Consumer loans, net (1)   17,084     21,833   (22 )%
$ 441,632   $ 523,597   (16 )%
 
Average outstanding pawn loan amount (in ones) $ 164 $ 154 6 %
 
Composition of pawn collateral:
General merchandise 34 % 36 %
Jewelry   66 %   64 %
  100 %   100 %
 
Composition of inventories:
General merchandise 39 % 44 %
Jewelry   61 %   56 %
  100 %   100 %
 
Percentage of inventory aged greater than one year 5 % 12 %
(1)  

Does not include the off-balance sheet principal portion of
active CSO extensions of credit made by independent third-party
lenders. These amounts, net of the Company's estimated fair value
of its liability for guaranteeing the extensions of credit,
totaled $7 million and $9 million as of March 31, 2018 and 2017,
respectively.

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 March 31, 2018 as
compared to the three months ended March 31, 2017 (dollars in thousands):

  Three Months Ended  
March 31,
2018   2017 Decrease
U.S. Operations Segment
Revenue:
Retail merchandise sales $ 186,052 $ 193,666 (4 )%
Pawn loan fees 96,242 101,818 (5 )%
Wholesale scrap jewelry sales 29,457 32,897 (10 )%
Consumer loan and credit services fees 15,039 20,815 (28 )%
Total revenue 326,790 349,196 (6 )%
 
Cost of revenue:
Cost of retail merchandise sold 120,616 123,497 (2 )%
Cost of wholesale scrap jewelry sold 27,653 30,682 (10 )%
Consumer loan and credit services loss provision 3,644 3,990 (9 )%
Total cost of revenue 151,913 158,169 (4 )%
 
Net revenue 174,877 191,027 (8 )%
 
Segment expenses:
Store operating expenses 104,383 107,968 (3 )%
Depreciation and amortization 5,555 6,419 (13 )%
Total segment expenses 109,938 114,387 (4 )%
 
Segment pre-tax operating income $ 64,939 $ 76,640 (15 )%
 

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
March 31,
2018     2017
Consolidated Results of Operations
Segment pre-tax operating income:

Latin America operations segment pre-tax operating income

$

27,317

$

20,700

U.S. operations segment pre-tax operating income

 

64,939

 

 

76,640  
Consolidated segment pre-tax operating income 92,256   97,340  
 
Corporate expenses and other income:
Administrative expenses 28,002 33,238
Depreciation and amortization 3,019 5,427
Interest expense 6,198 6,113
Interest income (981 ) (327 )
Merger and other acquisition expenses 239   647  
Total corporate expenses and other income 36,477   45,098  
 
Income before income taxes 55,779 52,242
 
Provision for income taxes 14,144   19,597  
 
Net income $ 41,635   $ 32,645  
 

FIRSTCASH, INC.
STORE COUNT ACTIVITY

The following table details store count activity for the three months
ended March 31, 2018:

    Consumer  
Pawn Loan Total
Locations (1), (2) Locations (2), (3) Locations
Latin America operations segment:
Total locations, beginning of period 971 28 999
New locations opened 11 11
Locations acquired 126 126
Locations closed or consolidated (3 )   (3 )
Total locations, end of period 1,105   28   1,133  

 

U.S. operations segment:
Total locations, beginning of period 1,068 44 1,112
Locations acquired (4) 3 3
Locations closed or consolidated (7 ) (3 ) (10 )
Total locations, end of period 1,064   41   1,105  
 
Total:
Total locations, beginning of period 2,039 72 2,111
New locations opened 11 11
Locations acquired (4) 129 129
Locations closed or consolidated (10 ) (3 ) (13 )
Total locations, end of period 2,169   69   2,238  
(1)  

At March 31, 2018, 311 of the U.S. pawn stores, which are
primarily located in Texas and Ohio, also offered consumer loans
or credit services products, while 49 Mexico pawn stores offered
consumer loan products.

(2)

The Company closed 10 pawn stores, seven in the U.S. and
three in Latin America, during the first quarter of 2018, which
were primarily smaller format stores emphasizing payday lending or
underperforming locations which were consolidated into existing
stores, an opportunity driven by acquisitions and the merger.
Additionally, three consumer loan stores were closed in the U.S.
during the quarter.

(3)

The Company's U.S. free-standing consumer loan locations
offer consumer loans and/or credit services products and are
located in Ohio, Texas, California and limited markets in Mexico.
Subsequent to March 31, 2018, the Company entered into an
agreement to sell the assets of the eight remaining California
consumer loan locations included in this table. The table does not
include 62 check cashing locations operated by independent
franchises under franchising agreements with the Company.

(4)

The table does not include the 13 U.S. pawn stores acquired
in April 2018.

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 net income per share, EBITDA, adjusted EBITDA, free
cash flow, adjusted free cash flow and constant currency results (as
defined or explained below) 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
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 adjusted net income, adjusted net income per share,
EBITDA, adjusted EBITDA, free cash flow, adjusted free cash flow and
constant currency results 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,
adjusted net income, adjusted net income per share, EBITDA, adjusted
EBITDA, free cash flow, adjusted free cash flow and constant currency
results, as presented, may not be comparable to other similarly titled
measures of other companies.

The Company has adjusted the applicable financial measures to exclude,
among other expenses and benefits, merger related expenses because it
generally would not incur such costs and expenses as part of its
continuing operations. The merger related expenses are predominantly
incremental costs directly associated with the merger and integration of
Cash America, including professional fees, legal expenses, severance and
retention payments, accelerated vesting of certain equity compensation
awards, contract breakage costs and costs related to consolidation of
technology systems and corporate facilities.

FIRSTCASH, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURES

TO GAAP FINANCIAL MEASURES (CONTINUED)
(UNAUDITED)

Adjusted Net Income and Adjusted Net Income Per
Share

Management believes the presentation of adjusted net income and adjusted
net income per share ("Adjusted Income Measures") 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. 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 the net income and
diluted earnings per share calculated in accordance with GAAP to the
Adjusted Income Measures, which are shown net of tax (in thousands,
except per share amounts):

   
Three Months Ended March 31,
2018     2017
In Thousands     Per Share In Thousands     Per Share
Net income, as reported $ 41,635 $ 0.90 $ 32,645 $ 0.67
Adjustments, net of tax:
Merger and other acquisition expenses:
Severance and retention 42 354 0.01
Other 142     54  
Total merger and other acquisition expenses 184     408   0.01
Adjusted net income $ 41,819   $ 0.90   $ 33,053   $ 0.68
 

The following table provides a reconciliation of the gross amounts, the
impact of income taxes and the net amounts for the adjustments included
in the table above (in thousands):

   
Three Months Ended March 31,
2018     2017
Pre-tax     Tax     After-tax Pre-tax     Tax     After-tax
Merger and other acquisition expenses $ 239 $ 55 $ 184 $ 647 $ 239 $ 408
 

FIRSTCASH, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURES

TO GAAP FINANCIAL MEASURES (CONTINUED)
(UNAUDITED)

Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA) and Adjusted EBITDA

The Company defines EBITDA as net income before income taxes,
depreciation and amortization, interest expense and interest income and
adjusted EBITDA as EBITDA adjusted for certain items as listed below
that management considers to be non-operating in nature and not
representative of its actual operating performance. The Company believes
EBITDA and adjusted EBITDA are commonly used by investors to assess a
company's financial performance and adjusted EBITDA is used in the
calculation of the Net Debt Ratio as defined in the Company's senior
notes covenants. The following table provides a reconciliation of net
income to EBITDA and adjusted EBITDA (dollars in thousands):

         
Trailing Twelve
Three Months Ended Months Ended
March 31, March 31,
2018 2017 2018     2017
Net income $ 41,635 $ 32,645 $ 152,882 $ 79,598
Income taxes 14,144 19,597 22,967 46,430
Depreciation and amortization 11,283 14,243 52,273 41,171
Interest expense 6,198 6,113 24,120 21,973
Interest income   (981 )   (327 )   (2,251 )   (804 )
EBITDA 72,279 72,271 249,991 188,368
Adjustments:
Merger and other acquisition expenses 239 647 8,654 36,917
Loss on extinguishment of debt 14,114
Net gain on sale of common stock of Enova               (1,299 )
Adjusted EBITDA $ 72,518   $ 72,918   $ 272,759   $ 223,986  
 
Net Debt Ratio calculated as follows:
Total debt (outstanding principal) $ 383,000 $ 337,000
Less: cash and cash equivalents   (110,408 )   (73,148 )
Net debt $ 272,592 $ 263,852
Adjusted EBITDA $ 272,759   $ 223,986  
Net Debt Ratio   1.00:1     1.18:1  
 

FIRSTCASH, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURES

TO GAAP FINANCIAL MEASURES (CONTINUED)
(UNAUDITED)

Free Cash Flow and Adjusted Free Cash Flow

For purposes of its internal liquidity assessments, the Company
considers free cash flow and adjusted free cash flow. The Company
defines free cash flow as cash flow from operating activities less
purchases of property and equipment and net fundings/repayments of pawn
and consumer loans, which are considered to be operating in nature by
the Company but are included in cash flow from investing activities, and
adjusted free cash flow as free cash flow adjusted for merger related
expenses paid that management considers to be non-operating in nature.
Free cash flow and adjusted free cash flow are commonly used by
investors as an additional measure of cash generated by business
operations that may be used to repay scheduled debt maturities and debt
service or, following payment of such debt obligations and other
non-discretionary items, may be available to invest in future growth
through new business development activities or acquisitions, repurchase
stock, pay cash dividends or repay debt obligations prior to their
maturities. These metrics can also be used to evaluate the Company's
ability to generate cash flow from business operations and the impact
that this cash flow has on the Company's liquidity. However, free cash
flow and adjusted free cash flow have limitations as analytical tools
and should not be considered in isolation or as a substitute for cash
flow from operating activities or other income statement data prepared
in accordance with GAAP. The following table reconciles net cash flow
from operating activities to free cash flow and adjusted free cash flow
(in thousands):

           
Trailing Twelve
Three Months Ended Months Ended
March 31, March 31,
2018 2017 2018     2017
Cash flow from operating activities $ 91,316 $ 63,865 $ 247,808 $ 135,643
Cash flow from investing activities:
Loan receivables, net of cash repayments 56,220 67,189 29,766 45,824
Purchases of property and equipment (1) (8,837 ) (8,076 ) (37,896 ) (35,596 )
Free cash flow 138,699 122,978 239,678 145,871
Merger related expenses paid, net of tax benefit 1,568   1,802  

6,425

  22,575  
Adjusted free cash flow $ 140,267   $ 124,780   $

246,103

  $ 168,446  
 
(1)  

Includes acquisitions of real estate at new or existing store
locations totaling $3 million and $2 million for the three months
ended March 31, 2018 and 2017, respectively, and $13 million for
both the trailing twelve months ended March 31, 2018 and 2017.

 

FIRSTCASH, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURES

TO GAAP FINANCIAL MEASURES (CONTINUED)
(UNAUDITED)

Constant Currency Results

The Company's reporting currency is the U.S. dollar. However, certain
performance metrics discussed in this release are presented on a
"constant currency" basis, which is considered a non-GAAP measurement of
financial performance. The Company's management uses constant currency
results to evaluate operating results of business operations in Latin
America, which are primarily transacted in local currencies.

The Company believes constant currency results provide investors with
valuable supplemental information regarding the underlying performance
of its business operations in Latin America, consistent with how the
Company's management evaluates such performance and operating results.
Constant currency results reported herein are calculated by translating
certain balance sheet and income statement items denominated in local
currencies using the exchange rate from the prior-year comparable
period, as opposed to the current comparable period, in order to exclude
the effects of foreign currency rate fluctuations for purposes of
evaluating period-over-period comparisons. Business operations in
Mexico, Guatemala and Colombia are transacted in Mexican pesos,
Guatemalan quetzales and Colombian pesos, respectively. The Company also
has operations in El Salvador where the reporting and functional
currency is the U.S. dollar. See the Latin America operations segment
tables elsewhere in this release for an additional reconciliation of
certain constant currency amounts to as reported GAAP amounts.

The following table provides exchange rates for the Mexican peso,
Guatemalan quetzal and Colombian peso for the current and prior-year
periods:

   
March 31, Favorable /
2018   2017 (Unfavorable)
Mexican peso / U.S. dollar exchange rate:
End-of-period 18.3 18.8 3 %
Three months ended 18.8 20.4 8 %
 
Guatemalan quetzal / U.S. dollar exchange rate:
End-of-period 7.4 7.3 (1 )%
Three months ended 7.4 7.4 %
 
Colombian peso / U.S. dollar exchange rate:
End-of-period 2,780 2,880 3 %
Three months ended 2,859 2,921 2 %
 

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