Delaware (State or other jurisdiction of incorporation) | 001-10960 (Commission File Number) | 75-2237318 (IRS Employer Identification No.) |
Dated: April 26, 2018 | FIRSTCASH, INC. |
(Registrant) | |
/s/ R. DOUGLAS ORR | |
R. Douglas Orr | |
Executive Vice President and Chief Financial Officer | |
(As Principal Financial and Accounting Officer) |
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. |
• | 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. |
• | 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. |
• | 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%. |
• | 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. |
• | 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. |
• | 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. |
• | 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 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. |
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 |
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 |
• | 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. |
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 | % |
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 | % |
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. |
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 | )% |
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 |
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. |
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 |
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 |
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 |
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. |
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 | % |
7!E
M $YO;F4 )=&]P3W5T '!A8VME="!B96=I
M;CTB[[N_(B!I9#TB5S5-,$UP0V5H:4AZ &UP1SIM;V1E/2)#35E+(B!X;7!'.G1Y<&4](E!23T-%4U,B('AM<$ &UP1SIS=V%T
M8VA.86UE/2)#/3 @33TP(%D],"!+/38P(B!X;7!'.FUO9&4](D--64LB('AM
M<$ 9U.?$R?;3[@HHHK[8\
M\**** "BBB@ HHHH **** "BBB@ HHHH **** "BBB@ HHHH **** "BBB@
MHHHH **** "BBB@ KI_@=\+;SXX_&GPAX*T[=]O\7:U9Z+;8&2)+F=(5X^KB
MN8K[H_X-P_@5_P +Q_X*R_#^6:'SM/\ !,-YXGNAC.WR(2D#?AQO]IR^>L)F,[*QJ\UYKQ76UC)L +BVLN;Z[]K)>_V;_HKV
M'_&IG?9OJG91^=G754 CD '[2_\ Z&/L7F_U-^K+?K+U:S!?<[&KJH=>^QC0
MXR',J8SW>WW>IN_ZVM3D*A@R9)&@3OX1_P#1F+)K( /K'3/KI]4^K9U>!T_*
M%^5;NV5^A:V0QIL?[[:65M]C?WEY=_C&S6YWUNS "'U88KQ:M. QN^UO]G(M
MN7H7U:^H.#]5\^SJIS7Y&VA]<6,:T,!++'V[F?R:EY!=9D]6ZA9:&SD]1O
ZIL&06T 8K7#^OZ.]* R'/$9 /U4"1,?I\7H2:X374K7]%=
M3]5<7K-MY_7
JX]>.RV[JN/]E9D%
MP::6.%C;O9M_2>IZC/SF>^EB^@52M_8OVH>M]F^USIO]/U)_M?I$V//#UB>/
MB$Y^IE?J?
MI?\ 3>GZ?^$7-= PQU3K6!@OFS[5D5MN$R=A<'Y#O^V_47T1\4Z(^(2N0!YJ'I0>OA[I'Q,?/A]I'Y0?OQ_J
M(!4@02!L()@@Q"#P(1PA2"%U(:$ASB'[(B,>*KZ5AX7^!OA_34Z(VJ>(YKXGW(C@AQ]
M,G'J:^NPGASQ#B%>.&<5_><8_@VG^!Q3S3#1^U]VI^\-%