Investment research report for FCFS

Table of Contents

Executive Summary
Valuation Analysis
Industry and Competitors Analysis
Financial Analysis
Earnings Call Multi-Year Analysis
Financial Statements Multi Year
Insider Trading Analysis
Management Compensation Benchmark Analysis
Proxy Statement Analysis
News Analysis
Technical Indicators Analysis
Financial Statements Annual
Financial Statements Quarterly
Earnings Call Analysis

Executive Summary

Company Overview

FirstCash Holdings, Inc. (FCFS) is a leading operator of retail pawn stores and provider of retail point-of-sale payment solutions. The company operates over 2,800 pawn stores across the United States, Mexico, and Latin America, offering collateral-based lending and retail services. In 2021, FCFS acquired American First Finance (AFF), expanding its business into the retail POS payment solutions market, including leasing and lending products.

Financial Performance

FCFS has demonstrated consistent revenue and earnings growth, driven by its core pawn operations and the recent AFF acquisition. In 2022, the company reported revenue of $2.73 billion, a 15% increase from the prior year, and net income of $219.3 million. The pawn segments in the U.S. and Latin America saw strong growth in pawn loan fees and retail merchandise sales, while the retail POS payment solutions segment contributed significantly to revenue through increased leased merchandise income and finance receivables.

Growth Strategy

FCFS’s growth strategy is focused on organic expansion through new pawn store openings, primarily in Latin America, and strategic acquisitions to diversify its business model. The company opened 61 new pawn stores in 2021 and continues to invest in its retail POS payment solutions segment through technology enhancements and expanding its merchant partner network. FCFS maintains a strong financial position, with ample liquidity and credit facility capacity to support its growth initiatives.

Competitive Landscape and Risks

FCFS operates in the highly competitive financial services industry, facing competition from other pawn lenders, consumer finance companies, and alternative lending providers. The company’s success is dependent on its ability to execute its growth strategies, integrate acquisitions effectively, and navigate regulatory challenges, including ongoing legal proceedings related to alleged violations of the Military Lending Act. Economic conditions, such as the COVID-19 pandemic and inflationary pressures, also present potential risks to the company’s operations and financial performance.

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Valuation Analysis

PE ratio

  • Low: 18.124810096650783
  • Base: 22.80884144873798
  • High: 27.492872800825175

PB ratio

  • Low: 1.5037867743217423
  • Base: 2.1199246611009297
  • High: 2.736062547880117

EPS Growth

  • Low: 2.04%
  • Med: 14.20%
  • High: 20.25%

DPS Growth

  • Low: 10.11%
  • Med: 11.95%
  • High: 13.55%

FCF Growth

  • Low: 4.84%
  • Med: 20.81%
  • High: 27.82%

Value forecast by FCF

  • Low: 168.09
  • Med: 444.26
  • High: 684.85

Value forecast by EPS

  • Low: 143.12
  • Med: 295.17
  • High: 428.98

Value forecast by DPS

  • Low: 229.93
  • Med: 257.13
  • High: 283.62

The current price for FCFS is $109.27.

Price target for 18 months from now

  • Low: 115.16
  • Med: 142.09
  • High: 165.65

Price target for 4 years from now

  • Low: 124.99
  • Med: 196.79
  • High: 259.61

Price target for 10 years from now

  • Low: 148.57
  • Med: 328.07
  • High: 485.12

The net present value multiplier discounted at 10.22% gives the value of the stock as:
– Low: 1.36
– Med: 3.00
– High: 4.44

The upside/downside ratio is 5.31, and our rating is Strong Buy.

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Industry and Competitors Analysis

Based on the information provided, FCFS (FirstCash Holdings, Inc.) operates in the financial services industry, specifically in the credit services sector. Its main business is operating retail pawn stores that provide loans against collateral and sell merchandise acquired through loan forfeitures.

Key Competitors

Some of FCFS’s key competitors in the credit services industry include:

  1. World Acceptance Corporation (WRLD) – Provides small-loan consumer finance services, including short-term and installment loans.
  2. Enova International, Inc. (ENVA) – Offers online financial services, including installment loans, line of credit accounts, and loan servicing.
  3. Green Dot Corporation (GDOT) – Provides deposit account programs, prepaid debit cards, and financial technology services.
  4. Medallion Financial Corp. (MFIN) – Offers loans for consumer purchases of recreational vehicles, home improvements, and commercial businesses, as well as taxi medallion loans.
  5. SLM Corporation (SLM) – Originates and services private education loans and offers retail deposit accounts.
  6. Federal Agricultural Mortgage Corporation (AGM) – Provides a secondary market for various agricultural and rural loans.
  7. Navient Corporation (NAVI) – Offers education loan management, asset recovery services, and business processing solutions.
  8. Nelnet, Inc. (NNI) – Provides loan servicing, education technology, payment processing, and asset management services.
  9. ORIX Corporation (IX) – A diversified financial services company with operations in leasing, lending, investment, asset management, and insurance.
  10. Oportun Financial Corporation (OPRT) – Offers personal loans, auto loans, and credit cards, primarily targeting underserved communities.

Competitive Positioning

In terms of competitive positioning, FCFS appears to be a significant player in the pawn lending and retail pawn store market, with a large network of over 2,700 stores across the United States, Mexico, and Latin America. However, it faces competition from other pawn lenders, as well as broader consumer finance companies offering alternative lending products. FCFS’s focus on collateral-based lending and its international presence may provide some competitive advantages, but it operates in a highly competitive industry with various players offering different types of credit services.

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Chart of Competitors

"Chart of Competitors"

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Financial Analysis

Financial Strength

The company has maintained a healthy current ratio above 3 in recent years, indicating good liquidity position. Debt levels seem reasonable with debt/equity ratio around 0.8-1.0 in recent years. Interest coverage ratio has been above 4 consistently, suggesting ability to comfortably service debt obligations.

Potential for Growth

Revenue growth has been uneven, with some quarters showing declines year-over-year. However, the 3-year revenue growth per share has been positive in most periods, indicating growth over a longer horizon. Analyst estimates project revenue growth of around 5-10% annually over the next few years.

Competitive Advantage

Being a large pawn operator with over 2,800 stores provides scale advantages. The pawn lending business model can be resilient during economic downturns when consumers seek short-term credit.

Quality of Management

Profitability metrics like return on equity and assets have fluctuated but remained positive overall. The company has generally grown its operating cash flows and free cash flows over the long run.

Shareholder Friendliness

FirstCash pays a modest dividend, with a current yield around 0.3%. The dividend has grown slowly but steadily over the years. Share repurchases do not seem to be a major use of cash.

Valuation

The price/earnings ratio is currently around 23x, which is reasonable for a financial services firm. Price/free cash flow is elevated at around 59x, suggesting the market prices in significant growth expectations. Analysts’ earnings estimates imply a forward P/E of around 15x for 2024, which appears attractive if growth projections are achieved.

In summary, FirstCash appears to have a reasonably solid financial position and competitive advantages in its niche pawn lending business. Growth has been uneven but analysts expect a return to mid-single digit revenue/earnings growth. The valuation seems fair based on forward earnings estimates. Maintaining profitability, cash flows and prudent capital allocation will be important for creating shareholder value going forward.

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Chart of Key Per Share Metrics

"Chart of Key Per Share Metrics"

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Chart of Absolute Metrics

"Chart of Absolute Metrics"

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Earnings Call Multi-Year Analysis

The company has not held any earnings calls in the past few years, making it difficult to conduct a comprehensive multi-year analysis. Without access to the transcripts or recordings of these calls, it is challenging to assess the company’s historical performance, management’s commentary, and any insights that could be gleaned from these events.

Key Takeaways and Implications

Due to the lack of available earnings call data, there are no meaningful key takeaways or implications that can be derived from a multi-year analysis. The absence of this information makes it challenging to evaluate the company’s communication with investors, its transparency, and any potential trends or patterns that could inform the overall financial analysis.

Recommendations and Future Considerations

Without the necessary earnings call data, it is not possible to provide any meaningful recommendations or considerations for the future. The company’s decision to forgo these investor communication events limits the ability to gain a deeper understanding of its financial performance, strategic direction, and management’s perspective on the business.

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Financial Statements Multi Year

Strong revenue and earnings growth across core business segments

The pawn operations in both the U.S. and Latin America saw healthy increases in pawn loan fees and retail merchandise sales, driving revenue and profit growth. The retail POS payment solutions segment (AFF) also contributed significantly to revenue growth through increased leased merchandise income and finance receivables.

Continued expansion through new store openings and acquisitions

The company opened several new pawn stores, particularly in Latin America, to drive future growth. The acquisition of AFF expanded the company’s business into the retail POS payment solutions market, providing a new growth avenue.

Diversified business model and balanced growth

While pawn operations remain the core business, the company has diversified into the complementary retail POS payment solutions segment. Growth was balanced across the U.S. pawn, Latin America pawn, and retail POS payment solutions segments.

Strong financial position and capital allocation

The company maintained a solid liquidity position with ample cash and credit facility capacity. It continued returning capital to shareholders through share repurchases and dividends.

The company faced regulatory challenges, including a lawsuit related to the Military Lending Act. It managed risks associated with the COVID-19 pandemic and inflationary pressures in certain markets.

Overall, the financial statements demonstrate the company’s ability to drive growth across its diversified business segments, maintain a strong financial position, and navigate regulatory and economic challenges. The company appears well-positioned for long-term growth, though investors should monitor potential risks and the execution of its growth strategies.

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Insider Trading Analysis

The CEO (Douglas Rippel) and CFO (R. Douglas Orr) have been consistently selling large amounts of their company stock over the past few years. This suggests they may be less optimistic about the long-term prospects of the company.

Other key executives like Rick L. Wessel and John C. Powell have also been actively selling their shares, further reinforcing the bearish sentiment from insiders.

The volume and frequency of insider sales have increased significantly in 2023 and 2024 compared to previous years, indicating growing concerns among top management.

Short-Term Implications

The high level of insider selling, especially by the CEO and CFO, could be a red flag for short-term investors. It suggests that insiders may have information about potential challenges or a less favorable outlook for the company in the near future.

The consistent and substantial nature of the insider sales, with the CEO alone selling over 720,000 shares in a single transaction, is particularly concerning and could signal broader issues that may not be apparent to outside investors.

Short-term investors should closely monitor the company’s financial performance and any further developments, as the insider trading patterns may be indicative of potential downside risks in the stock price in the coming months.

Overall, the long-term and recent insider trading patterns for FirstCash Holdings, Inc. suggest a bearish sentiment among the company’s top management, which could have significant implications for both long-term and short-term investors. Caution is advised, and further research into the company’s fundamentals and any underlying issues is recommended before making investment decisions.

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Management Compensation Benchmark Analysis

Base Salary Portion of Total Compensation

Based on the executive compensation details provided, it does not appear that the executives at FCFS are compensated in a way that strongly aligns with creating long-term shareholder value. The base salary portion of total compensation for the top executives at FCFS is quite high, ranging from around 12-55% across the years. This suggests a significant portion of their pay is not tied to performance.

Comparison to Peers

Compared to other companies like WRLD and ENVA, the FCFS executives have a much higher base salary percentage of total compensation. WRLD and ENVA executives tend to have a lower base salary portion, with more pay tied to bonuses, stock awards, and incentive plans.

Lack of Performance-Based Pay

FCFS does not seem to utilize long-term incentive plans or equity-based compensation as heavily as some peers. Many of the top executives have $0 reported in incentive plan compensation.

Potential Misalignment with Shareholder Interests

The high base salary and lack of performance-based pay components indicate the FCFS executive compensation structure may not be optimally designed to drive long-term shareholder value creation. Peers like WRLD and ENVA appear to have compensation plans that are more closely aligned with shareholder interests.

In summary, the FCFS executive compensation program appears to be weighted more towards fixed pay rather than variable, performance-based pay. This structure may not provide the best incentives for executives to focus on long-term value creation for shareholders. Benchmarking against peers with more shareholder-aligned compensation plans could provide insights for FCFS to consider adjustments.

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Proxy Statement Analysis

Executive Compensation Alignment

The following analysis is based on the latest proxy statement of FCFS. Based on the information provided in the DEF 14A filing, the executive compensation at this company appears to be well-aligned with creating long-term shareholder value. Here are the key insights for a long-term investor:

  1. Significant portion of compensation is in the form of long-term incentives like performance-based restricted stock units (PSUs) and time-based restricted stock units (RSUs). The value of these awards is directly linked to the company’s long-term stock performance, aligning executives’ interests with shareholders.

  2. The vesting of PSUs is tied to specific performance metrics like adjusted earnings per share (EPS) and return on invested capital (ROIC), which are directly related to the company’s financial performance and long-term value creation.

  3. The long-term incentive awards have multi-year vesting periods, typically three years or more, encouraging executives to take a long-term view and make decisions that benefit the company and shareholders over the long run.

  4. The company has stock ownership guidelines in place, requiring executives to maintain a certain level of stock ownership, further aligning their interests with long-term shareholders.

Overall, the emphasis on long-term incentives, performance-based metrics, multi-year vesting periods, and stock ownership requirements suggests that the executive compensation structure is designed to incentivize sustainable growth and long-term value creation for shareholders.

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News Analysis

Positives

Based on the news articles, here are the key points that could impact a long-term investor in FirstCash (FCFS):

  • Strong earnings growth and revenue increases reported in recent quarters, driven by growth in the pawn and retail finance segments
  • Aggressive expansion through acquisitions and new store openings, adding hundreds of locations annually in the U.S. and Latin America
  • Consistent increases in quarterly dividend payments over time
  • Share repurchase programs authorized to boost shareholder returns
  • Viewed as a counter-cyclical business that can perform well during economic downturns when demand for pawn loans rises

Potential Concerns

  • Near-term growth outlook in Mexico has slowed recently
  • Exited the unsecured consumer lending business in 2020 due to challenges
  • Acquired American First Finance in 2021 for over $1 billion, a major acquisition that adds integration risks
  • Faced a securities class action lawsuit in 2022 related to disclosures
  • Macro headwinds like the COVID-19 pandemic temporarily impacted operations

Overall, FirstCash appears to be executing well on its pawn-focused strategy for long-term growth through acquisitions and new store expansions. However, large acquisitions, legal issues, and economic cycles are risks investors should monitor. The dividend growth and counter-cyclical nature of the pawn business could appeal to long-term investors willing to tolerate some volatility.

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Technical Indicators Analysis

Next Week Trading

The recent price action and technical indicators suggest a neutral to slightly bearish outlook for the next week. The TEMA (Triple Exponential Moving Average) has been declining, indicating a potential downward trend. The RSI (Relative Strength Index) is in the neutral range, suggesting the stock is not overbought or oversold. Traders may want to be cautious and look for opportunities to enter short positions or wait for a clearer trend to emerge.

Resistance and Support Levels

The 20-day SMA (Simple Moving Average) at around $114.47 and the 50-day SMA at around $119.16 could act as resistance levels. The 200-day SMA at around $112.44 could provide support. Traders may want to monitor these levels for potential breakouts or pullbacks.

Short-Term Investor

The short-term technical indicators are mixed. The declining TEMA and neutral RSI suggest a lack of strong momentum, which may be a concern for short-term investors. However, the stock is trading above the 20-day, 50-day, and 200-day SMAs, indicating a relatively strong overall trend. Short-term investors may want to closely monitor the stock’s price action and consider taking profits or cutting losses if the downward momentum persists.

Long-Term Investor

For long-term investors, the overall technical picture appears relatively positive. The stock is trading above the 200-day SMA, indicating a bullish long-term trend. The ADX (Average Directional Index) is above 20, suggesting a strong trend. While the recent decline in the TEMA and the neutral RSI may be a concern in the short term, the long-term trend remains intact. Long-term investors may want to hold their positions or consider adding to their positions on any significant pullbacks.

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Chart of Valuation History

"Chart of Valuation History"

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Financial Statements Annual

Financial Statements Annual 2024 Q2

Pawn Operations

The US pawn segment saw a 9% increase in total revenue, driven by a 17% increase in pawn loan fees and a 4% increase in retail merchandise sales. Same-store retail sales declined 2% due to lower inventory levels.

Pawn loan receivables in the US increased 22% in total and 14% on a same-store basis, driven by increased demand for pawn loans.

The Latin America pawn segment saw a 19% increase in total revenue (7% on a constant currency basis), driven by higher retail merchandise sales and pawn loan fees. Pawn loan receivables in Latin America increased 18% (3% on a constant currency basis) due to increased demand, though the growth was lower than expected due to the impact of minimum wage and benefit program increases in Mexico.

Retail POS Payment Solutions

Leased merchandise income increased 21% to $752.7 million, while interest and fees on finance receivables increased 29% to $233.8 million. The allowance for lease losses increased 20% to $95.8 million, and the allowance for loan losses increased 14% to $96.5 million, reflecting the growth in the lease and finance receivables portfolios. Segment pretax operating income increased 123% to $132.0 million, or 21% on an adjusted basis excluding purchase accounting impacts.

Consolidated Results

Consolidated revenue increased 15.5% to $3.15 billion, while net income decreased 13.5% to $219.3 million. Adjusted net income, which excludes certain non-operating items, increased 12.7% to $276.9 million. The company repurchased 1.2 million shares of common stock for $114.4 million and paid $61.9 million in dividends during 2023. The company had $127.0 million in cash and cash equivalents and $1.05 billion in available borrowing capacity under its credit facilities as of December 31, 2023.

Overall, the company saw strong performance in its core pawn operations, particularly in the US, and continued growth in its retail POS payment solutions business, though consolidated results were impacted by increased expenses and interest costs.

Financial Statements Annual 2023 Q2

The Company’s Primary Business

The Company’s primary business continues to be the operation of retail pawn stores, which accounted for 85% of consolidated net revenues in 2022. The Company also operates a retail POS payment solutions business through its AFF subsidiary, which accounted for 15% of consolidated net revenues in 2022.

US Pawn Segment

In the US pawn segment:

  • Retail merchandise sales increased 10% in 2022 compared to 2021, driven by increased inventory levels and greater demand for value-priced consumer goods.
  • Pawn loan fees increased 22% in 2022 compared to 2021, reflecting the continued recovery in pawn loan demand to pre-pandemic levels.
  • Segment pre-tax operating income increased 25% in 2022 compared to 2021, driven by a 13% increase in net revenue.

Latin America Pawn Segment

In the Latin America pawn segment:

  • Retail merchandise sales increased 14% (13% on a constant currency basis) in 2022 compared to 2021, also driven by increased inventory levels and greater demand.
  • Pawn loan fees increased 10% (also 10% on a constant currency basis) in 2022 compared to 2021, reflecting the continued recovery in pawn loan demand.
  • Segment pre-tax operating income increased 17% (16% on a constant currency basis) in 2022 compared to 2021.

Retail POS Payment Solutions Segment (AFF)

In the retail POS payment solutions segment (AFF):

  • Finance receivables before allowance for loan losses decreased 27% as of December 31, 2022 compared to December 31, 2021, primarily due to the amortization of fair value purchase accounting adjustments.
  • Leased merchandise before allowance for lease losses increased 57% as of December 31, 2022 compared to December 31, 2021, primarily due to the growth in the LTO product.
  • Segment pre-tax operating income was $59.2 million in 2022, which increased to $109.5 million when excluding the impact of purchase accounting adjustments.

Liquidity and Capital Allocation

The Company’s liquidity position remains strong, with $117.3 million in cash and cash equivalents and $2.8 billion of available and unused funds under its revolving unsecured credit facilities as of December 31, 2022.

The Company repurchased 2.2 million shares of common stock for $157.9 million during 2022 and paid $59.6 million in dividends.

Conclusion

In summary, the Company’s core pawn operations continued to perform well, with strong growth in both the US and Latin America segments. The AFF acquisition also contributed meaningfully to the Company’s results, though the impact was muted by purchase accounting adjustments. The Company maintained a solid financial position to support its growth initiatives.

Financial Statements Annual 2022 Q2

Strategic and Business Insights

The company has grown through a combination of organic expansion (opening new pawn stores) and strategic acquisitions, including the recent acquisition of American First Finance (AFF) in December 2021. The AFF acquisition expanded the company’s business into retail point-of-sale payment solutions.

The company’s organic growth strategy is focused on increasing productivity at existing pawn stores and opening new pawn stores, primarily in Latin America. The company opened 61 new pawn stores in 2021.

The company’s retail POS payment solutions segment, consisting of AFF, is focused on expanding its network of merchant partners, increasing utilization of its products, and improving its technology platform.

Competition remains intense from other pawnshops, consumer lenders, and retailers, which could impact the company’s revenue and profitability.

The company’s future success is dependent on the ability of its management team to execute its business strategy, including integrating the AFF acquisition.

Financial and Operational Insights

Revenue grew 4% in 2021 to $1.70 billion, driven by increases in retail merchandise sales and pawn loan fees, partially offset by declines in wholesale scrap jewelry sales.

Net income increased 17% to $124.9 million in 2021, with adjusted net income up 29% to $161.5 million.

Pawn loan balances increased 16% in the US and 7% in Latin America on a constant currency basis, reflecting a recovery in pawn lending demand.

The company maintained a strong liquidity position, with $120 million in cash and $2.67 billion in available credit facility capacity as of December 31, 2021.

The company continued to return capital to shareholders, paying $47.5 million in dividends and repurchasing $49.6 million of its common stock in 2021.

Regulatory and Risk Insights

The company’s operations are subject to extensive regulation, and changes in laws or regulations could adversely impact its business.

The company is involved in various legal proceedings, including a lawsuit filed by the Consumer Financial Protection Bureau alleging violations of the Military Lending Act.

The ongoing COVID-19 pandemic continues to present uncertainty and risks to the company’s operations and financial performance.

Overall, the company demonstrated resilience and growth in 2021, particularly with the transformative acquisition of AFF, while navigating regulatory challenges and the ongoing pandemic. The company’s focus on organic expansion, strategic acquisitions, and diversifying its business model into retail POS payment solutions positions it for continued growth, though it faces competitive and regulatory risks.

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Financial Statements Quarterly

Financial Statements Quarterly 2024 Q2

Strong revenue and earnings growth

The company reported a 10% increase in total revenue and a 30% increase in net income compared to the prior year quarter. This indicates the business is growing at a healthy pace.

Balanced growth across segments

The US pawn, Latin America pawn, and retail POS payment solutions segments all contributed to the overall revenue and earnings growth, demonstrating the diversification of the business.

Expanding pawn operations

The company opened 19 new pawn stores in the quarter and acquired 1 additional store, continuing its strategy of growing its core pawn business through new store openings and acquisitions. This should drive future growth.

Improving pawn loan balances and fees

Pawn loan balances increased 23% in the US and 16% in Latin America, leading to a 20% increase in US pawn loan fees and a 16% increase in Latin America pawn loan fees. This indicates strong demand for pawn loans.

Solid retail POS payment solutions performance

The retail POS payment solutions segment saw a 12% increase in leased merchandise income and a 43% increase in pretax operating income, demonstrating the growth potential of this business line.

Prudent capital allocation

The company paid a $0.35 per share dividend and has $2 billion remaining under its share repurchase authorization, showing a commitment to returning capital to shareholders.

Healthy liquidity and leverage

The company had $1.35 billion in cash and $6.58 billion in available credit facility capacity, providing ample liquidity. Its consolidated total debt ratio of 2.5x is well within its debt covenants.

Overall, the financial statements demonstrate the company’s ability to drive balanced growth across its diversified business segments, efficiently allocate capital, and maintain a strong financial position – all positive signs for long-term investors.

Financial Statements Quarterly 2024 Q1

Operational Performance

The company’s US pawn segment saw a 15% increase in pretax operating income, driven by higher pawn loan fees and retail merchandise sales margins. The Latin America pawn segment also reported a 12% increase in pretax operating income, though this was partially offset by higher operating expenses due to inflationary pressures. The retail POS payment solutions segment (AFF) saw a 96% increase in pretax operating income, though this was significantly impacted by purchase accounting adjustments. Adjusting for these, the segment’s pretax operating income still increased 41%.

Revenue and Profitability

Consolidated revenue increased 8% year-over-year, driven by growth across all business segments. Gross profit margin improved, with the US pawn segment reporting a 43% retail merchandise sales margin and the Latin America pawn segment reporting a 35% margin. Net income decreased 14% year-over-year, primarily due to higher interest expense, administrative expenses, and a lower gain on revaluation of contingent acquisition consideration.

Balance Sheet and Liquidity

The company had $865 million in cash and cash equivalents and $609 million in available and unused credit facility capacity as of September 30, 2023. Working capital increased to $917 million, with a current ratio of 3.91, indicating a strong liquidity position. The company continued to invest in growth, with $467 million spent on pawn store acquisitions and $467 million on discretionary pawn store real estate purchases during the first nine months of 2023.

Capital Allocation

The company returned $461 million to shareholders through dividends and $115 million through share repurchases during the first nine months of 2023. The board authorized a new $2 billion share repurchase program in July 2023, demonstrating the company’s commitment to shareholder returns.

Overall, the financial statements indicate the company is executing well on its strategic priorities, with strong operational performance, a healthy balance sheet, and a balanced approach to capital allocation. The long-term investor should be encouraged by the company’s ability to grow its core pawn business while also expanding its retail POS payment solutions segment.

Financial Statements Quarterly 2023 Q4

Strong performance across the business segments

The US pawn segment saw a 13% increase in pretax operating income, driven by a 9% increase in net revenue and disciplined expense management. The Latin America pawn segment also delivered a 13% increase in pretax operating income, with constant currency revenue growth of 9% and a focus on operational efficiency. The retail POS payment solutions segment (AFF) reported a 114% increase in pretax operating income, though this was significantly impacted by purchase accounting adjustments. Excluding these adjustments, the segment’s pretax operating income increased 3% year-over-year.

Continued expansion and investment

The company opened 18 new pawn stores during the quarter, bringing the total to 2,889 locations across the US and Latin America. The company invested $345 million to purchase real estate at 14 existing store locations, demonstrating its commitment to strategic growth. AFF continued to expand its merchant partner network and grow its leased merchandise and finance receivables balances.

Strong liquidity and capital position

The company had $1.05 billion in cash and cash equivalents and $2.11 billion in available and unused credit facility capacity as of June 30, 2023. The company repurchased $101.8 million of its common stock during the first half of 2023 and declared a $0.35 per share quarterly dividend. The company’s consolidated total debt ratio remained healthy at 2.7x, providing flexibility for future growth and capital allocation.

Regulatory environment

The company continues to navigate the regulatory landscape, including the ongoing lawsuit filed by the Consumer Financial Protection Bureau (CFPB) related to alleged violations of the Military Lending Act. The company believes it has meritorious defenses and is vigorously defending itself.

Overall, FirstCash delivered strong operational and financial performance across its business segments, while continuing to invest in growth, return capital to shareholders, and manage its regulatory risks. The company appears well-positioned to capitalize on opportunities in the pawn and retail POS payment solutions markets.

Financial Statements Quarterly 2023 Q3

Strong Revenue Growth

The company reported total revenue of $762.7 million, up 15.6% year-over-year, driven by growth across all business segments – US pawn, Latin America pawn, and retail POS payment solutions.

Improved Profitability

Net income increased 69% to $47.4 million, with diluted EPS of $0.99, up from $0.58 in the prior year quarter. This was driven by higher revenues, improved operating margins, and disciplined expense management.

Robust Pawn Operations

The US pawn segment saw a 14% increase in pawn loan fees, while the Latin America pawn segment reported an 18% increase in pawn loan fees on a constant currency basis. This reflects strong demand for pawn lending services.

Expanding Retail POS Payment Solutions

The retail POS payment solutions segment, which includes the American First Finance (AFF) business, reported a 22% increase in leased merchandise income and a 29% increase in interest and fees on finance receivables. This demonstrates the continued growth of the LTO and retail finance offerings.

Prudent Capital Allocation

The company repurchased 782,000 shares of common stock for $71.4 million during the quarter, while also declaring a $0.33 per share quarterly dividend. This reflects the company’s commitment to returning capital to shareholders.

Solid Balance Sheet and Liquidity

The company had $100.8 million in cash and cash equivalents and $2.79 billion of available and unused capacity under its revolving credit facility as of March 31, 2023, providing ample liquidity to fund growth initiatives and shareholder returns.

Overall, the financial results demonstrate FirstCash’s ability to drive growth across its diversified business model, while maintaining strong profitability and a healthy financial position to support its strategic priorities.

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Earnings Call Analysis

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The information provided on this blog is for informational purposes only and should not be considered as financial advice. You should consult with a qualified financial professional before making any investment decisions. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal.