FirstCash Holdings, Inc (FCFS) Bundle
Understanding FirstCash Holdings, Inc (FCFS) Revenue Streams
Understanding FirstCash Holdings, Inc’s Revenue Streams
FirstCash Holdings, Inc. generates revenue through various streams, primarily from pawn loan fees, retail merchandise sales, and wholesale scrap jewelry sales. Below is a detailed breakdown of these revenue sources:
Breakdown of Primary Revenue Sources
- Pawn Loan Fees: $371,699,000 in 2024, an increase of 18% from $315,679,000 in 2023.
- Retail Merchandise Sales: $702,120,000 in 2024, up 15% from $610,493,000 in 2023.
- Wholesale Scrap Jewelry Sales: $70,722,000 in 2024, reflecting a 16% increase from $61,108,000 in 2023.
Year-over-Year Revenue Growth Rate
The total revenue for FirstCash Holdings in the nine months ended September 30, 2024, was $2,504,703,000, marking a 16% increase compared to $2,164,895,000 in the same period of 2023.
Contribution of Different Business Segments to Overall Revenue
| Segment | Revenue (2024) | Revenue (2023) | Percentage Change |
|---|---|---|---|
| U.S. Pawn | $1,144,541,000 | $987,280,000 | 16% |
| Latin America Pawn | $599,047,000 | $580,445,000 | 3% |
| Retail POS Payment Solutions | $764,185,000 | $736,872,000 | 4% |
Analysis of Significant Changes in Revenue Streams
The U.S. pawn segment saw substantial growth, contributing significantly to the overall revenue increase. The retail merchandise sales in the U.S. segment grew by 15%, reflecting strong demand for pre-owned goods. Additionally, the pawn loan fees also increased by 18%, indicating a rise in customer engagement and financial need.
In contrast, the Latin America pawn segment showed a more modest growth of 3%, with retail merchandise sales increasing by 4%. This indicates stable performance despite varying economic conditions in the region.
Overall, the diverse revenue streams and growth across segments demonstrate the company's robust business model and adaptability in the face of market changes.
A Deep Dive into FirstCash Holdings, Inc (FCFS) Profitability
A Deep Dive into FirstCash Holdings, Inc's Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was 42%, a slight decrease from 43% during the same period in 2023. This reflects continued demand for value-priced, pre-owned merchandise and low levels of aged inventory.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, stood at 25%, compared to 24% for the same period in 2023, indicating improved operational efficiency.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, was 15%, up from 14% in the previous year, demonstrating stronger profitability.
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Gross Profit Margin | 42% | 43% | -1% |
| Operating Profit Margin | 25% | 24% | +1% |
| Net Profit Margin | 15% | 14% | +1% |
Trends in Profitability Over Time: Over the past several quarters, profitability metrics have shown a positive trend, with net income for the nine months ended September 30, 2024, totaling $175.3 million, compared to $149.7 million for the same period in 2023, marking a 17% increase.
Comparison of Profitability Ratios with Industry Averages: The industry average for net profit margins in the pawn industry is approximately 12%, placing FirstCash above the average at 15%. The operating profit margin for the industry is around 23%, which also indicates that FirstCash is performing favorably.
Analysis of Operational Efficiency: The operating expenses for the nine months ended September 30, 2024, were $372.2 million, which is an increase of 12% compared to $331.9 million in 2023. However, the increase in revenue outpaced the growth in operating expenses, leading to improved margins.
The retail merchandise sales margin remained steady at 42% for both the nine months ended September 30, 2024, and 2023. This stability indicates effective cost management despite rising costs in other segments.
| Period | Net Income ($ million) | Operating Expenses ($ million) | Revenue ($ million) |
|---|---|---|---|
| Nine Months Ended September 30, 2024 | 175.3 | 372.2 | 1,144.5 |
| Nine Months Ended September 30, 2023 | 149.7 | 331.9 | 987.3 |
Debt vs. Equity: How FirstCash Holdings, Inc (FCFS) Finances Its Growth
Debt vs. Equity: How FirstCash Holdings, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, the total long-term debt of the company was approximately $1,764.4 million, with short-term debt amounting to $200.0 million. The company reported total liabilities of $2,063.0 million.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio stood at approximately 2.4 as of September 30, 2024. This ratio indicates a heavy reliance on debt financing compared to equity, which is significantly above the industry average of 1.5.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
On February 21, 2024, the company issued $500.0 million of 6.875% senior unsecured notes due on March 1, 2032. The interest on these notes is payable semi-annually. Additionally, the company had $368.0 million in net payments on its credit facilities during the nine months ended September 30, 2024. The company's credit ratings are currently stable, reflecting its solid operational performance and cash flow generation capabilities.
How the Company Balances Between Debt Financing and Equity Funding
The company utilizes a blend of debt and equity financing to support its growth strategy. For instance, it repurchased $85.0 million worth of shares during the nine months ended September 30, 2024, compared to $115.5 million in the same period of the previous year. Furthermore, dividends paid during this period totaled $48.8 million, reflecting a commitment to returning value to shareholders while managing its debt levels strategically.
| Debt Type | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Senior Unsecured Notes (2028) | $500.0 | 4.625% | September 1, 2028 |
| Senior Unsecured Notes (2030) | $550.0 | 5.625% | January 1, 2030 |
| Senior Unsecured Notes (2032) | $500.0 | 6.875% | March 1, 2032 |
| Credit Facility | $200.0 | Variable (SOFR + Spread) | Various |
The company’s approach to financing is reflective of a strategy that seeks to optimize its capital structure while maintaining flexibility for future growth and operational needs.
Assessing FirstCash Holdings, Inc (FCFS) Liquidity
Assessing FirstCash Holdings, Inc's Liquidity
Current and Quick Ratios
The current ratio for FirstCash Holdings, Inc. as of September 30, 2024, is 4.3:1, compared to 3.9:1 for the same period in 2023. This indicates a strong liquidity position, suggesting that the company has ample current assets to cover its current liabilities. The quick ratio, which is not explicitly provided, can be inferred to also be robust given the current ratio.
Analysis of Working Capital Trends
As of September 30, 2024, the working capital stood at $1,020,877,000, an increase from $917,270,000 in 2023. This upward trend in working capital reflects improved operational efficiency and liquidity management.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, was $341,809,000, up from $317,037,000 in 2023. The cash flow used in investing activities was $(335,483,000), a decrease from $(409,173,000). Cash flow from financing activities showed a net outflow of $(19,187,000), compared to an inflow of $58,707,000 in the previous year.
| Cash Flow Item | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Cash flow from operating activities | $341,809 | $317,037 |
| Cash flow used in investing activities | $(335,483) | $(409,173) |
| Cash flow (used in) provided by financing activities | $(19,187) | $58,707 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had $106.3 million in cash and cash equivalents, along with $527.8 million of available and unused funds under its revolving unsecured credit facilities. This liquidity position indicates a solid buffer against any potential financial strains. However, ongoing factors such as changes in customer demand, inventory levels, and operational expenses could influence future liquidity. The ability to liquidate gold jewelry inventory, which constitutes 49% of total inventory, enhances the company's flexibility in cash flow management.
| Liquidity Metric | Value (in thousands) |
|---|---|
| Cash and cash equivalents | $106,300 |
| Available unused funds under credit facilities | $527,800 |
| Working capital | $1,020,877 |
Is FirstCash Holdings, Inc (FCFS) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio: As of September 30, 2024, the P/E ratio is approximately 25.2, calculated from a trailing twelve months earnings of $175.3 million and a market capitalization of $4.43 billion.
Price-to-Book (P/B) Ratio: The P/B ratio stands at 2.2, based on a book value of $1.999 billion and total outstanding shares of 57.5 million.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: The EV/EBITDA ratio is approximately 13.5, calculated using an enterprise value of $4.62 billion and EBITDA of $341.5 million for the trailing twelve months.
Stock Price Trends: Over the last 12 months, the stock price has fluctuated between a low of $85.00 and a high of $130.00. As of September 30, 2024, the stock is trading at $115.00, reflecting a 12% increase year-to-date.
Dividend Yield and Payout Ratio: The annual dividend is $1.52 per share, translating to a dividend yield of 1.32%. The payout ratio is 38.3% based on the net income of $175.3 million.
Analyst Consensus: The current analyst consensus indicates a rating of Hold with an average price target of $120.00, suggesting a potential upside of 4.35%.
| Metric | Value |
|---|---|
| P/E Ratio | 25.2 |
| P/B Ratio | 2.2 |
| EV/EBITDA Ratio | 13.5 |
| 52-Week Low | $85.00 |
| 52-Week High | $130.00 |
| Current Stock Price | $115.00 |
| Annual Dividend | $1.52 |
| Dividend Yield | 1.32% |
| Payout Ratio | 38.3% |
| Analyst Consensus | Hold |
| Average Price Target | $120.00 |
| Potential Upside | 4.35% |
Key Risks Facing FirstCash Holdings, Inc (FCFS)
Key Risks Facing FirstCash Holdings, Inc
Overview of Internal and External Risks: FirstCash Holdings, Inc. operates in a competitive industry characterized by various risks that can impact its financial health. Key risks include:
- Industry Competition: The company faces intense competition from both traditional pawn shops and alternative financial services, which can pressure pricing and market share.
- Regulatory Changes: Changes in laws and regulations in the financial services sector, especially concerning lending practices and consumer protection, may affect operations.
- Market Conditions: Economic downturns can lead to increased loan defaults and reduced consumer spending, impacting revenue from pawn loans and merchandise sales.
Operational Risks
Operational risks stem from the company's internal processes and systems. Recent earnings reports have highlighted:
- Loan Loss Provisions: The provision for loan losses increased by 13% to $102.1 million for the nine months ended September 30, 2024, compared to $90.6 million for the same period in 2023 .
- Administrative Expenses: Administrative expenses rose by 4% to $129.6 million during the nine months ended September 30, 2024 .
Financial Risks
Financial risks are crucial for investors to consider:
- Interest Rate Sensitivity: Interest expense increased by 17% to $78.0 million for the nine months ended September 30, 2024, driven by higher floating interest rates .
- Currency Translation Risks: The company experienced a currency translation adjustment loss of $30.4 million for the three months ended September 30, 2024 .
Strategic Risks
Strategic risks relate to the company's long-term goals and market positioning:
- Acquisition Strategy: Cash used for acquisitions decreased significantly, from $168.4 million in 2023 to $69.2 million in 2024, indicating a shift in acquisition strategy that may affect growth .
- Market Demand Fluctuations: The company reported a 14% increase in total gross transaction volume from $794.4 million in the nine months ended September 30, 2024, compared to $756.3 million in the same period of 2023 .
Mitigation Strategies
To address these risk factors, FirstCash Holdings, Inc. has implemented several strategies:
- Diversification: Expanding pawn operations and retail POS payment solutions to mitigate risks associated with economic downturns.
- Cost Management: The company reported a 9% decrease in administrative expenses in Q3 2024 compared to Q3 2023, reflecting ongoing efforts to control costs .
| Risk Factor | Details | Recent Financial Impact |
|---|---|---|
| Loan Loss Provision | Increased provisions due to higher transaction volumes. | $102.1 million (13% increase) |
| Interest Expense | Higher floating interest rates impacting debt costs. | $78.0 million (17% increase) |
| Currency Translation | Losses due to fluctuations in currency exchange rates. | $30.4 million |
| Administrative Expenses | Ongoing cost management efforts. | $129.6 million (4% increase) |
Future Growth Prospects for FirstCash Holdings, Inc (FCFS)
Future Growth Prospects for FirstCash Holdings, Inc
Key Growth Drivers:
- Acquisitions: In the nine months ended September 30, 2024, the company acquired 28 pawn stores in the U.S. for a total of $102.8 million, including $68.6 million in cash and $29.3 million in stock consideration.
- Market Expansion: The company continues to expand its presence in strategic markets, with recent acquisitions contributing to an increase in revenue by 16% for the nine months ended September 30, 2024.
- Product Innovations: The introduction of new financial products, such as pawn loans and retail merchandise, has driven an increase in total revenue, with pawn loan fees rising 18% to $371.7 million.
Future Revenue Growth Projections:
- Revenue for the nine months ended September 30, 2024, was $1.144 billion, compared to $987 million in the same period of 2023.
- Projected earnings per share for 2024 are $3.89, up from $3.29 in 2023.
Strategic Initiatives:
- Expansion of pawn store locations is part of the company’s strategy to increase market share and revenue.
- Collaboration with financial technology firms to enhance service offerings and customer engagement.
Competitive Advantages:
- Established Brand Presence: The company’s strong brand recognition in the pawn industry provides a competitive edge in customer acquisition.
- Diverse Revenue Streams: The company benefits from multiple revenue streams, including pawn loans, retail merchandise sales, and wholesale scrap jewelry.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $390.1 million | $334.9 million | 16% |
| Pawn Loan Fees | $128.4 million | $114.0 million | 13% |
| Wholesale Scrap Jewelry Sales | $26.7 million | $17.1 million | 56% |
| Net Income | $64.8 million | $57.1 million | 13% |
As of September 30, 2024, the company reported a current ratio of 4.3:1 and working capital of $1.020 billion, indicating strong liquidity.
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Article updated on 8 Nov 2024
Resources:
- FirstCash Holdings, Inc (FCFS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of FirstCash Holdings, Inc (FCFS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View FirstCash Holdings, Inc (FCFS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.