Overview of the Company’s Financial Performance

First Cash Financial Services, Inc. (the “Company”) is the leading operator of pawn stores in the U.S. and Latin America, as well as a leading provider of technology-driven, retail point-of-sale (POS) payment solutions. The Company’s two business lines are organized into three reportable segments: the U.S. pawn segment, the Latin America pawn segment, and the retail POS payment solutions segment.

In 2024, the Company reported strong financial results, with revenue increasing 7% to $3.39 billion and net income growing 18% to $258.8 million compared to the prior year. Diluted earnings per share rose 19% to $5.73. On an adjusted basis, which excludes certain non-operating items, net income increased 9% to $302.7 million, and adjusted diluted earnings per share grew 11% to $6.70.

Revenue and Profit Trends

The U.S. pawn segment, which accounts for the largest portion of the Company’s revenue, saw a 15% increase in total revenue to $1.57 billion, driven by a 13% rise in retail merchandise sales and a 16% jump in pawn loan fees. The Latin America pawn segment also reported solid results, with revenue increasing 1% (4% on a constant currency basis) to $811.9 million.

The retail POS payment solutions segment, which consists solely of the operations of the Company’s subsidiary AFF, generated revenue of $1.01 billion, up 3% year-over-year. This segment saw a 2% increase in leased merchandise income and a 5% rise in interest and fees on finance receivables.

Across the Company’s three segments, pre-tax operating income totaled $676.4 million in 2024, an 8% increase from the prior year. The U.S. pawn segment was the primary driver of this growth, with pre-tax operating income rising 18% to $397.3 million and maintaining a 25% pre-tax operating margin. The Latin America pawn segment’s pre-tax operating income declined 4% (2% decrease on a constant currency basis) to $150.2 million, while the retail POS payment solutions segment’s pre-tax operating income decreased 3% to $128.6 million.

Analysis of Strengths and Weaknesses

The Company’s key strengths include its leading market positions in pawn lending and retail POS payment solutions, diversified revenue streams, and strong cash flow generation. The pawn business model, with its ability to rapidly liquidate inventory, provides the Company with significant financial flexibility. Additionally, the retail POS payment solutions segment, through its AFF subsidiary, offers a complementary and growing revenue stream.

However, the Company faces some challenges, including exposure to macroeconomic conditions, regulatory risks, and competitive pressures. The Latin America pawn segment has been impacted by unfavorable foreign currency movements, which have weighed on its financial performance. The retail POS payment solutions segment has also seen some softness, with a 9% decrease in gross transaction volumes for its leased merchandise business due to weakness in the furniture industry and the bankruptcy of two major retail partners.

Outlook and Future Prospects

Looking ahead, the Company remains focused on expanding its pawn operations through new store openings, acquisitions, and growth in pawn receivables and inventories. In 2024, the Company acquired 28 pawn stores in the U.S., 10 pawn stores in Mexico, and opened 61 new locations across Latin America and the U.S.

In the retail POS payment solutions segment, AFF expects to continue growing its business by expanding relationships with new and existing merchant partners and investing in its customer and merchant support operations, technology platforms, and proprietary decisioning processes.

The Company also plans to continue returning capital to shareholders through quarterly cash dividends and share repurchases. In 2024, the Company paid $65.8 million in dividends and repurchased $85.0 million of its common stock.

Overall, the Company’s diversified business model, strong market positions, and focus on growth and shareholder returns position it well for the future. However, the Company will need to navigate macroeconomic challenges, regulatory changes, and competitive dynamics to maintain its momentum.

Conclusion

First Cash Financial Services delivered solid financial results in 2024, with strong performance in its core pawn lending business and continued growth in its retail POS payment solutions segment. The Company’s leading market positions, diversified revenue streams, and focus on expansion and shareholder returns are key strengths. However, it faces headwinds from macroeconomic conditions, regulatory risks, and competitive pressures, particularly in its Latin America pawn segment and retail POS payment solutions business. By successfully executing its growth strategies and managing these challenges, the Company aims to continue delivering value for its shareholders.