Market Overview

FirstCash Reports Record Third Quarter Results; Adds 170 Stores for the Quarter and 403 Stores Year-To-Date; Increases Quarterly Dividend by 14% to $0.25 per Share; Adds Additional $100 Million Repurchase Authorization

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FORT WORTH, Texas, Oct. 25, 2018 (GLOBE NEWSWIRE) -- FirstCash, Inc. (the "Company") (NASDAQ:FCFS), the leading international operator of more than 2,400 retail pawn stores in the U.S. and four countries in Latin America, today announced record revenue, net income and earnings per share for the three and nine month periods ended September 30, 2018. Third quarter earnings per share on a GAAP basis were $0.76, an increase of 29% over the prior year, while adjusted earnings per share, as described below, were $0.81 and increased 33% over the prior year.

In addition, the Board of Directors declared a $0.25 per share quarterly cash dividend, an increase of 14% compared to the previous quarterly dividend of $0.22 per share. The Board of Directors also authorized an additional $100 million for future share repurchases, which combined with the $60 million remaining on the current authorization, provides $160 million now authorized for future share repurchases. The Company also updated its 2018 earnings guidance to be in the upper half of its previously estimated range.

Mr. Rick Wessel, chief executive officer, stated, "FirstCash posted another quarter of strong earnings growth driven by revenue growth in Latin America and continued margin improvement in the U.S. At the same time, we added another 170 pawn locations in Latin America during the quarter, consisting of two significant acquisitions totaling 154 stores in Mexico and the opening of 16 de novo locations in Mexico, Guatemala and Colombia. Year-to-date, FirstCash has now added 403 locations in four countries and has grown the total number of pawn stores by 18%.

"Utilizing our strong balance sheet and cash flows, FirstCash has further increased shareholder returns with year-to-date share repurchases totaling $257 million and is now increasing the annualized dividend to $1.00 per share and increasing the share repurchase authorization," Mr. Wessel concluded.

This release contains adjusted earnings measures, which exclude, among other things, merger and other acquisition expenses, and are non-GAAP financial measures. Please refer to the descriptions and reconciliations to GAAP of these and other non-GAAP financial measures at the end of this release.

    Three Months Ended September 30,
    2018   2017
    As Reported   Adjusted   As Reported   Adjusted
In thousands, except per share amounts   (GAAP)   (Non-GAAP)   (GAAP)   (Non-GAAP)
Revenue   $ 429,878     $ 429,878     $ 435,412     $ 435,412  
Net income   $ 33,325     $ 35,587     $ 28,274     $ 28,861  
Diluted earnings per share   $ 0.76     $ 0.81     $ 0.59     $ 0.61  
EBITDA (non-GAAP measure)   $ 62,304     $ 65,526     $ 61,150     $ 62,081  
Weighted average diluted shares   44,116     44,116     47,668     47,668  
                         


    Nine Months Ended September 30,
    2018   2017
    As Reported   Adjusted   As Reported   Adjusted
In thousands, except per share amounts   (GAAP)   (Non-GAAP)   (GAAP)   (Non-GAAP)
Revenue   $ 1,299,650     $ 1,299,650     $ 1,299,617     $ 1,299,617  
Net income   $ 105,131     $ 109,089     $ 76,158     $ 87,044  
Diluted earnings per share   $ 2.33     $ 2.41     $ 1.58     $ 1.81  
EBITDA (non-GAAP measure)   $ 193,595     $ 199,169     $ 174,770     $ 192,048  
Weighted average diluted shares   45,204     45,204     48,117     48,117  
                         

Earnings Highlights

  • Diluted earnings per share increased 29% in the third quarter of 2018 and 47% for the year-to-date period compared to the prior-year periods. On a non-GAAP adjusted basis, which excludes current and prior-year merger and other acquisition expenses and debt extinguishment costs from 2017, diluted earnings per share increased 33% in both the third quarter and year-to-date periods compared to the prior-year periods.
  • Net income, on a GAAP basis, for the third quarter of 2018 increased 18% compared to the third quarter of 2017 and increased 38% for the year-to-date period compared to the prior-year period, while on a non-GAAP adjusted basis, net income increased 23% for the third quarter and 25% for the year-to-date period compared to the respective prior-year periods.
  • For the trailing twelve months ended September 30, 2018, consolidated revenues totaled $1.8 billion, net income was $173 million and adjusted EBITDA, a non-GAAP financial measure, totaled $280 million.
  • Cash flow from operating activities for the trailing twelve months ended September 30, 2018 totaled $246 million, an increase of 20% compared to $205 million in the prior-year period. Adjusted free cash flow, a non-GAAP financial measure, was $244 million for the twelve months ended September 30, 2018, an increase of 20% over the comparable prior-year amount of $204 million.
  • The pre-tax profit margin for the third quarter of 2018 increased to 10.3% compared to 9.5% in the prior-year quarter and for the year-to-date period increased to 10.9% this year compared to 8.9% last year. On a non-GAAP adjusted basis, the pre-tax profit margin increased to 11.0% for the quarter and 11.4% year-to-date, compared to 9.8% and 10.2% for the respective prior-year periods.
  • The net income margin for the third quarter of 2018 improved from 6.5% last year to 7.8% this year and on a year-to-date basis it improved from 5.9% last year to 8.1% this year. On a non-GAAP adjusted basis, it improved to 8.3% for the quarter and 8.4% year-to-date, compared to 6.6% and 6.7% for the respective prior-year periods.
  • Net income and earnings per share included approximately $4 million, or $0.08 per share, of benefit from the lower U.S. corporate tax rate as compared to the third quarter of 2017 and approximately $10 million, or $0.22 per share, for the year-to-date period. The U.S. tax benefit was partially offset by the expected contraction in non-core consumer lending operations, which negatively impacted earnings by approximately $0.06 and $0.19 per share for the quarter and year-to-date periods, respectively, as compared to the same prior-year periods. In addition, prior-year results for the year-to-date period included a tax-effected $9 million, or $0.19 per share, debt extinguishment charge incurred as a result of the senior unsecured notes that were refinanced in May of 2017.

Acquisition and Store Opening Highlights

  • As previously announced, the Company completed two acquisitions during the third quarter which added a total of 154 stores in Latin America. The first acquisition of 97 stores in the southern gulf region of Mexico closed in August, while the second acquisition of 57 stores in east-central Mexico closed in September. These acquisitions of mostly smaller format locations are in many markets where FirstCash previously had a limited presence.
  • Year-to-date, the Company has acquired a total of 360 stores, including 342 stores in Latin America and 18 stores in the U.S., for aggregate, all-cash consideration of $105 million, net of cash acquired.
  • A total of 16 large format de novo stores were opened in Latin America during the third quarter, which included 13 stores in Mexico, two stores in Guatemala and one store in Colombia. The Company has opened 43 de novo stores year-to-date in Latin America and has a strong pipeline of additional de novo locations expected to open in the fourth quarter and early in 2019. The Company anticipates that for the full year, new store openings in Latin America will total at least 55 locations, surpassing the 45 de novo locations opened in Latin America in the prior year.
  • In the first nine months of 2018, the Company added, through acquisitions and new store openings, 385 locations in Latin America and 18 locations in the U.S. for a total of 403 store additions. These 2018 additions have resulted in an 18% increase in the number of pawn stores over the past nine months and represents a record pace of expansion in Latin America.
  • As of September 30, 2018, the Company operated 2,446 stores, composed of 1,346 stores in Latin America that includes 1,292 stores in Mexico, 37 stores in Guatemala, 13 stores in El Salvador and four stores in Colombia that collectively represent 55% of the store base, and 1,100 stores in the U.S., representing 45% of the store base.

Note: Certain growth rates in "Latin American Operations" below are calculated on a constant currency basis, a non-GAAP financial measure defined at the end of this release and reconciled to the most comparable GAAP measures in the financial statements in this release. The average Mexican peso to U.S. dollar exchange rate for the three-month period ended September 30, 2018 was 19.0 pesos / dollar, an unfavorable change of 7% versus the comparable prior-year period, and for the nine-month period ended September 30, 2018 was 19.0 pesos / dollar, an unfavorable change of 1% versus the prior-year period.

Latin American Operations

  • Revenues for the third quarter of 2018 totaled $142 million, an increase of 10% on a U.S. dollar translated basis and 17% on a constant currency basis as compared to the third quarter of 2017. Retail sales of pawn merchandise increased 10% on a U.S. dollar translated basis and 17% on a constant currency basis, while pawn fees increased 11% on a U.S. dollar translated basis and 18% on a constant currency basis compared to the prior-year quarter. 
  • The Latin America segment pre-tax operating income for the quarter increased 1%, or 7% on a constant currency basis, compared to the third quarter of 2017 and increased 11%, or 12% on a constant currency basis, during the 2018 year-to-date period compared to the prior-year comparable period. Margin growth in 2018, and in the third quarter in particular, was negatively impacted by the significant acquisition activity in 2018 and the recent decision to discontinue non-core unsecured consumer lending products in Mexico.
  • Reflecting the 7% decline in the value of the Mexican peso compared to the prior year, same-store core pawn revenues on a U.S. dollar translated basis were flat, consisting of a 1% increase in same-store retail sales and a 4% decrease in same-store pawn fees compared to the prior-year quarter. On a constant currency basis, same-store core pawn revenues increased 6%, composed of an 8% increase in same-store retail sales and a 2% increase in same-store pawn fees compared to the prior-year quarter.
  • Retail margins for the third quarter were 35% compared to 37% in the comparable prior-year quarter, which was in part the result of the 342 recent smaller format store acquisitions that had lower retail margins during the integration. Excluding stores acquired in 2018, retail margins were 36%, which represented a sequential improvement over the second quarter. 
  • Pawn loans outstanding totaled $109 million at September 30, 2018, an increase of 21% on a U.S. dollar translated basis and 25% on a constant currency basis versus the prior year. Same-store pawn loans declined 3% on a U.S. dollar translated basis, while they were flat on a constant currency basis, compared to the prior year. This trend was consistent with prior-quarter results and not unexpected given the strong comparisons a year ago and continued focus on loan-to-value ratios and retail margins.
  • Inventories at September 30, 2018 increased $9 million to $77 million compared to $68 million a year ago. The increase was driven by the net addition of 385 pawn stores over the past twelve months and continued maturation of existing stores. As of September 30, 2018, inventories aged greater than one year remained extre
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