Business Overview and History
FirstCash Holdings, Inc. (FCFS) is the leading international operator of retail pawn stores and a leading provider of innovative retail point-of-sale (POS) payment solutions. With a history dating back to 1988, the company has established itself as a trusted brand in the pawn industry, serving cash-constrained and credit-challenged consumers across the United States and Latin America.
FirstCash was founded in 1988 in Fort Worth, Texas, with the opening of its first pawn store. Over the past three decades, the company has expanded its reach through strategic acquisitions and organic growth, solidifying its position as the premier pawn operator in the United States and Latin America.
The company's growth strategy initially focused on expanding its pawn operations within the United States, taking advantage of favorable demographic and regulatory environments in certain regions. In the early 2000s, FirstCash made a strategic move by entering the Mexican market, capitalizing on a large, underbanked consumer base in need of short-term, collateral-based loans. This international expansion proved successful, leading to further growth in other Latin American countries such as Guatemala, El Salvador, and Colombia.
Throughout its history, FirstCash has faced various challenges, including navigating an evolving regulatory landscape for the pawn industry, currency fluctuations in its Latin American markets, and increasing competition from other lenders and retailers. However, the company has demonstrated resilience by adapting its business model and making strategic acquisitions to maintain its market-leading position.
A significant milestone in FirstCash's history came in 2021 with the acquisition of American First Finance (AFF), a leading provider of technology-driven retail point-of-sale payment solutions. This acquisition marked a pivotal moment for the company, diversifying its business model beyond pawn operations and allowing it to serve credit-constrained consumers through an additional channel. Since the AFF acquisition, FirstCash has worked to integrate the new business and leverage cross-selling opportunities between its pawn and retail POS payment solutions segments.
As of December 31, 2024, FirstCash operated a network of 3,030 pawn stores across 29 U.S. states, Mexico, Guatemala, El Salvador, and Colombia. The company's pawn stores provide customers with a quick and convenient source of small, secured loans, known as pawn loans, as well as the opportunity to buy and sell pre-owned merchandise such as jewelry, electronics, tools, and musical instruments.
In addition to its core pawn operations, FirstCash has also diversified into the retail POS payment solutions business through the acquisition of American First Finance (AFF) in 2021. AFF focuses on lease-to-own (LTO) products and other retail financing options, serving a network of traditional and e-commerce merchant partners across the United States and Puerto Rico. This segment has become an increasingly important part of FirstCash's overall business, accounting for 17% of the company's consolidated net revenue in 2024.
Financial Performance and Ratios
Over the past three years, FirstCash has demonstrated impressive financial performance. In 2024, the company reported total revenue of $3.39 billion, a 7.6% increase from the previous year. Net income for the year reached $258.81 million, translating to diluted earnings per share of $5.73. The company's operating cash flow for 2024 was $539.96 million, with free cash flow of $260.40 million.
FirstCash's balance sheet remains strong, with a current ratio of 4.00 as of December 31, 2024, indicating a robust liquidity position. The company's debt-to-equity ratio stood at 0.86, reflecting a prudent capital structure. Additionally, the company's return on equity (ROE) was 12.82% in 2024, showcasing its ability to generate solid returns for shareholders.
In the most recent quarter (Q4 2024), FirstCash reported revenue of $883.81 million, representing a 3.7% year-over-year growth. This growth was primarily driven by strong pawn demand and same-store sales growth. Net income for the quarter was $83.55 million.
Liquidity
FirstCash maintains a strong liquidity position, as evidenced by its current ratio of 4.00 and quick ratio of 3.15 as of December 31, 2024. This indicates that the company has ample short-term assets to cover its short-term liabilities. The company's robust cash flow generation, with operating cash flow of $539.96 million in 2024, further supports its liquidity position and ability to fund operations and growth initiatives.
As of December 31, 2024, FirstCash had cash and cash equivalents of $175.09 million. The company also had access to $528.90 million under its unsecured credit facilities, subject to certain financial covenants. This available credit line provides additional financial flexibility for strategic initiatives and potential acquisitions.
Pawn Segment Performance
The U.S. pawn segment, which accounted for 60% of consolidated net revenue in 2024, has been a consistent driver of FirstCash's growth. During the year, the company's U.S. pawn retail merchandise sales increased by 13.0% to $969.37 million, while pawn loan fees grew by 16.0% to $505.26 million. This strong performance was driven by an increase in same-store pawn receivables of 12.0%, as well as the integration of 28 acquired pawn stores in the U.S. The segment's pre-tax operating income grew 18% to $397.3 million, with a pre-tax operating margin of 25%.
In the Latin America pawn segment, which represented 24% of consolidated net revenue, the company reported a 2.0% increase in retail merchandise sales and a 4.0% rise in pawn loan fees on a constant currency basis. On a constant currency basis, retail merchandise sales in the Latin America pawn segment increased 4% to $556.7 million, maintaining a 35% gross profit margin. Pawn loan fees grew 7% on a constant currency basis to $238.3 million. The Latin America pawn segment's pre-tax operating income decreased 2% on a constant currency basis to $153.8 million, with a pre-tax operating margin of 18%.
Retail POS Payment Solutions Segment
FirstCash's retail POS payment solutions segment, operated through its subsidiary AFF, has been a rapidly growing part of the business, accounting for 17% of consolidated net revenue in 2024. During the year, AFF's leased merchandise income increased by 2.0% to $766.2 million, while interest and fees on finance receivables grew by 5.0% to $245.9 million. The segment's pre-tax operating income was $128.6 million, down 3% from the prior year, with a pre-tax operating margin of 13%. This decrease was primarily due to a slight decline in net revenue, as the segment saw a 9% decrease in leased merchandise volumes, partially offset by a 5% increase in finance receivables.
AFF's focus on expanding its merchant partner network and improving customer utilization rates has been a key driver of the segment's performance. As of December 31, 2024, AFF had approximately 13,600 active retail merchant partner locations offering its leasing and financing products across 26 different industry verticals.
Geographic Market Performance
FirstCash operates pawn stores in the United States (1,200 stores) and Latin America (1,830 stores across Mexico, Guatemala, El Salvador, and Colombia). In 2024, Latin America accounted for 24% of total revenue and 22% of total cost of revenue. The company's diverse geographic presence helps mitigate risks associated with economic fluctuations in individual markets and provides opportunities for growth in underserved regions.
Industry Trends and Competitive Landscape
The pawn industry in the United States is mature but fragmented, with an estimated 12,000 to 14,000 total pawnshops. FirstCash is the largest public operator of pawn stores in both the U.S. and Mexico, giving it a significant competitive advantage in terms of scale and operational efficiency.
The retail POS payment solutions industry is experiencing rapid growth as credit-constrained consumers seek alternative financing options. This trend has been accelerated by the increasing adoption of digital payment technologies and the growing demand for flexible payment options in both traditional and e-commerce retail environments.
Human Capital Resources
FirstCash recognizes the importance of its workforce in driving the company's success. With approximately 20,000 employees across six countries, the majority of whom are in the U.S. and Mexico, the company focuses on providing competitive wages, benefits, and training and development opportunities to attract and retain qualified employees. FirstCash also has programs in place to promote workplace safety, diversity, and inclusion, which are critical factors in maintaining a motivated and productive workforce.
Risks and Challenges
While FirstCash has demonstrated strong financial performance, the company faces several risks and challenges that investors should consider:
1. Regulatory Environment: The pawn and retail POS payment solutions industries are subject to extensive regulation at the federal, state, and local levels in both the U.S. and Latin America. Changes in laws and regulations could significantly impact the company's operations and profitability. On November 12, 2021, the Consumer Financial Protection Bureau (CFPB) initiated a lawsuit against the company alleging violations of the Military Lending Act (MLA). The lawsuit is ongoing, and an unfavorable outcome could have a material impact on the company's business and financial condition.
2. Competition: FirstCash operates in highly competitive markets, facing rivalry from other pawn stores, branch-based consumer lenders, banks, credit unions, online lenders, and other retail payment solution providers. Maintaining a competitive edge is crucial for the company's continued success.
3. Macroeconomic Conditions: Economic factors such as unemployment levels, consumer spending patterns, and government stimulus programs can significantly impact the demand for FirstCash's products and services, especially in its pawn and retail POS payment solutions segments.
4. Foreign Currency Risks: A significant portion of FirstCash's operations are located in Latin America, where the company is exposed to fluctuations in foreign currency exchange rates, particularly the Mexican peso. This can affect the company's reported financial results.
5. Merchant Partner Concentration: In the retail POS payment solutions segment, a significant portion of AFF's gross transaction volumes have historically been concentrated with certain large merchant partners, primarily in the furniture industry. The loss or reduction of business from these partners could have a material impact on the segment's performance.
Outlook and Guidance
For the full year 2025, FirstCash provided the following guidance:
- Total revenue is expected to be in the range of $3.50 billion to $3.60 billion. - Diluted earnings per share are projected to be between $6.00 and $6.20. - The company plans to open 65 to 75 new pawn stores in Latin America and acquire 20 to 30 pawn stores in the U.S. - Capital expenditures are expected to be in the range of $80 million to $90 million.
The company's guidance reflects its confidence in the continued strength of its pawn operations, as well as the growth potential of its retail POS payment solutions segment. FirstCash's diversified business model and focus on serving credit-constrained consumers position the company well to navigate the evolving market landscape.
Conclusion
FirstCash Holdings has established itself as a leading provider of pawn and retail POS payment solutions, catering to the needs of cash-constrained and credit-challenged consumers across the United States and Latin America. The company's strong financial performance, diversified business model, and strategic growth initiatives position it well for continued success. While the company faces industry-specific risks, its experienced management team and proven track record instill confidence in its ability to navigate the challenges and capitalize on emerging opportunities in the years ahead.
With a robust liquidity position, a growing store network, and a focus on operational efficiency, FirstCash is well-equipped to pursue its growth strategy and deliver value to shareholders. The company's ability to adapt to changing market conditions and leverage its scale across both pawn operations and retail POS payment solutions segments provides a solid foundation for long-term growth and profitability.