FirstCash Holdings, Inc. (NASDAQ:FCFS), a leading operator of retail pawn stores and provider of technology-driven retail point-of-sale (POS) payment solutions, reported its second quarter 2024 financial results, showcasing strong performance across its core business segments.
For the second quarter of 2024, the company reported net income of $49.1 million, or $1.08 per diluted share, compared to $45.2 million, or $0.99 per diluted share, in the prior-year quarter. On an adjusted basis, which excludes certain non-recurring items, the company reported net income of $61.9 million, or $1.37 per diluted share, compared to $55.6 million, or $1.22 per diluted share, in the second quarter of 2023.
Revenue for the quarter totaled $831.0 million, up from $750.6 million in the same period last year, representing a 10.7% increase. This was driven by strong performance in the company's pawn lending operations, which saw a 17.0% increase in U.S. retail merchandise sales and a 10.0% increase in Latin America retail merchandise sales. The retail POS payment solutions segment also contributed to the revenue growth, with a 3.0% increase in leased merchandise income.
For the first six months of 2024, the company reported net income of $110.4 million, or $2.44 per diluted share, compared to $92.6 million, or $2.01 per diluted share, in the first half of 2023. On an adjusted basis, net income for the first six months of 2024 was $132.1 million, or $2.91 per diluted share, compared to $113.3 million, or $2.46 per diluted share, in the prior-year period. Revenue for the first half of 2024 totaled $1.67 billion, up from $1.51 billion in the first six months of 2023.
"The company is pleased to report another quarter of strong financial performance, driven by continued growth in its pawn lending operations and the expansion of its retail POS payment solutions business," said Rick L. Wessel, Chief Executive Officer of FirstCash Holdings. "The focus on providing value-added services to customers, coupled with a disciplined approach to operations and capital allocation, has enabled the company to deliver consistent results and create long-term value for shareholders."
Business Overview
FirstCash Holdings operates in two primary business segments: Pawn and Retail POS Payment Solutions.Pawn Segment
The company's pawn segment operates 3,018 retail pawn stores across the United States and Latin America as of June 30, 2024. This includes 1,201 stores in the U.S. and 1,817 stores in Latin America, primarily in Mexico, Guatemala, El Salvador, and Colombia.The pawn segment generates revenue from retail merchandise sales, pawn loan fees, and wholesale scrap jewelry sales. In the second quarter of 2024, the U.S. pawn segment reported a 17.0% increase in retail merchandise sales, driven by strong demand for value-priced, pre-owned merchandise and low levels of aged inventory. Pawn loan fees in the U.S. also increased by 22.0% during the quarter, reflecting continued growth in demand for pawn loans.
In Latin America, the pawn segment reported a 6.0% increase in retail merchandise sales (3.0% on a constant currency basis) and a 10.0% increase in pawn loan fees (7.0% on a constant currency basis) during the second quarter of 2024. The increase in Latin American pawn operations was primarily due to higher inventory levels and greater demand for value-priced, pre-owned merchandise.
Retail POS Payment Solutions Segment
The company's retail POS payment solutions segment, which operates solely through its AFF subsidiary, provides lease-to-own (LTO) and other retail financing solutions to consumers through a network of approximately 12,800 active merchant partner locations across the United States and Puerto Rico as of June 30, 2024.In the second quarter of 2024, the retail POS payment solutions segment reported a 3.0% increase in leased merchandise income, which was partially offset by a 2.0% decrease in gross transaction volumes. The segment's provision for lease losses decreased by 10.0% during the quarter, while the provision for loan losses increased by 10.0%.
Financial Condition and Liquidity
As of June 30, 2024, FirstCash Holdings had $113.7 million in cash and cash equivalents and $519.8 million of available and unused funds under its revolving unsecured credit facilities, subject to certain financial covenants. The company's working capital was $957.7 million, and its current ratio was 4.0 to 1.For the trailing twelve months ended June 30, 2024, the company generated $439.2 million in operating cash flow and $220.2 million in adjusted free cash flow. This strong cash flow generation has enabled the company to fund its growth initiatives, make strategic acquisitions, and return capital to shareholders through dividends and share repurchases.
Guidance and Outlook
FirstCash Holdings did not provide specific financial guidance for the full year 2024. However, the company remains focused on executing its strategic priorities, which include continued expansion of its pawn store network, further growth of its retail POS payment solutions business, and disciplined capital allocation to drive long-term shareholder value.Risks and Challenges
The company operates in a highly regulated industry, with pawn and retail financing activities subject to various federal, state, and local laws and regulations. Changes in these regulations, or the interpretation and enforcement thereof, could have a material impact on the company's operations and financial performance.Additionally, the company's results are susceptible to fluctuations in foreign currency exchange rates, particularly the Mexican peso, which can impact the translation of its Latin American operations. Macroeconomic factors, such as inflation, interest rates, and consumer spending patterns, can also affect the company's performance.