FirstCash (FCFS) Tops Q1 EPS by 11c, Revenues Beat

FirstCash (NASDAQ: FCFS) reported Q1 EPS of $0.82, $0.11 better than the analyst estimate of $0.71. Revenue for the quarter came in at $407.94 million versus the consensus estimate of $363 million.

Mr. Rick Wessel, chief executive officer, stated, “We are pleased to report strong first quarter earnings results and cash flows which exceeded our internal expectations. These rapidly improving results highlight the diversity of FirstCash’s business model and continued profitability despite the impacts of COVID-19. More importantly, our dedicated and experienced team of front line associates and store managers have consistently performed at an incredibly high level to support our customers through challenging and rapidly evolving circumstances over the past twelve months.

“The strength of first quarter sales volumes and margins in the U.S. drove a year-over-year increase in domestic retail gross profit as our stores benefited from improved inventory levels and the impact of additional federal stimulus payments to consumers. In Latin America, we continued to see a recovery in pawn lending demand as total loan balances reached near pre-pandemic levels. The Company’s operations in Latin America also realized robust retail margins and strong inventory turns. Additionally, our disciplined focus on expense control contributed to further operating margin recovery in both markets.

“Our strategic growth initiatives resulted in 24 new first quarter stores in three Latin American countries and the acquisition of two U.S. stores in Texas. With robust first quarter cash flows, we were able to significantly reduce revolving debt and we believe that we are well positioned for continued investments in growth and shareholder returns, including the increased quarterly dividend.”

2021 Outlook

Given the continued uncertainties related to COVID-19, the Company is not currently providing earnings guidance. However, the following factors are expected to impact operating trends in 2021:

• Impact of COVID-19: The extent to which COVID-19 continues to impact the Company’s operations will depend on future developments, which remain uncertain and cannot be predicted with confidence. This includes the ongoing duration and severity of the pandemic, the pace of economic recovery and the duration of governmental responses such as stimulus programs, enhanced child tax credits and extended unemployment benefits as seen in the U.S.
  • U.S. pawn loan demand, which had partially recovered in the second half of last year, has dampened slightly this year, which the Company attributes primarily to the two rounds of federal stimulus payments, with the most recent beginning in late March ($1,400 for most eligible people), which created significant additional short-term liquidity for many customers. Resulting same-store pawn balances are currently down 18% compared to the prior year (2020) and 32% compared to more normalized 2019 levels. Daily new loan origination activity has started to improve since early April, with same-store new loan volumes currently down approximately 25% to 30% compared to 2019, indicating that the impact from the latest round of stimulus payments has peaked and is beginning to recover.
  • While the most recent round of U.S. stimulus payments appear to be less impactful compared to the pandemic-related declines in the second quarter of 2020, the recovery of domestic loan demand will still likely be tempered for the next several months. In addition, given the significant retail sales volume in March, retail sales could be impacted by lower inventory levels in the near term. As a reminder, the Company had very strong retail sales in the second quarter of last year and more normalized pawn fee revenue at the onset of the pandemic as consumers paid down loans and related fees.
  • In Mexico, which comprises the majority of the Company’s LatAm operations and where there have been minimal stimulus programs, same-store pawn loans are currently 3% above prior-year levels and 11% below this point in 2019. Inventories, while expected to recover on a lagging basis to pawn receivables, begin the second quarter 23% below the prior year which will continue to impact retail sales volumes in the near term.
• Income tax rate: For the full year of 2021, the effective income tax rate, under current codes in the U.S. and Mexico, is expected to range from 27% to 28% compared to 25.8% in 2020.
• New store openings, consolidations and repositionings: Despite the challenges presented by COVID-19, including significant construction, utility and permitting delays, the Company has a solid pipeline of additional stores leased, under construction or completed and awaiting permits. While there continue to be COVID-19 related operating challenges in many expansion markets, the Company expects 50 to 60 new store openings in 2021. In addition, the Company continues to believe there are significant opportunities for accretive consolidations, expansions and/or relocations of acquired small format stores in Mexico.

For earnings history and earnings-related data on FirstCash (FCFS) click here.

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