FIRST CASH FINANCIAL SERVICES, INC. Investor Presentation June 2015

Transcription

1 FIRST CASH FINANCIAL SERVICES, INC. Investor Presentation June 2015 Investor Presentation August 2016

2 SAFE HARBOR STATEMENT This presentation contains forward- looking statements, as defined by the Private Securities Litigation Reform Act of 1995, that can be identified by words such as believes, expects, projects, and similar expressions and involve numerous risks and uncertainties. The Company s actual results could differ materially from those anticipated in such forward- looking statements as a result of certain factors, including those set forth in the Company s filings with the Securities and Exchange Commission. 2

3 PAWNSHOP PROFILE Neighborhood- based stores serving cash- constrained customers Buy and sell popular pre- owned consumer products including: Consumer electronics & appliances Jewelry, diamonds & watches Power tools, musical instruments & sporting goods Ready and immediate source of cash for customers looking to sell items Source of small, short- term loans 3 Fully collateralized No collections/credit reporting

4 SIGNIFICANT STORE GROWTH Driven primarily by organic growth coupled with strategic acquisitions 11 Year 6 Month CAGR: U.S. - 8% Latin America - 22% Total - 16% ,005 1,075 1,

5 COMPOSITION OF PAWN COLLATERAL As of June 30, 2016 U.S. reflects historical mix; Latin America focused on general merchandise, where competition is limited United States Latin America Consolidated 18% 53% 47% 82% 35% 65% Note: Historically, over 75% of all pawn loans are redeemed, and the collateral is returned to the customer 5

6 FOCUSED ON RETAIL OPPORTUNITY Merchandise sales (including retail and scrap) accounted for 69% of total revenues for the trailing twelve months ended June 30, 2016 Merchandise primarily acquired through: Forfeiture of pawn loan collateral Direct buys from customers Rapid inventory turnover (3.4x for the trailing twelve months ended June 30, 2016) Gross retail margins exceed those of competitors FCFS retail margin of 38% for 2015 Other two public pawn operators average 2015* retail margin of 33% INVENTORY MIX 9% As of June 30, % 12% 31% 39% * Includes Cash America for fiscal 2015 and EZCORP, Inc. for the twelve months ended September 30,

7 PROPRIETARY IT SYSTEMS DRIVE MARGINS Proprietary sales and transaction histories drive industry leading yields & sales margins Merchandise sales database provides real- time pricing, turnover & margin data Pawn transaction database provides product & customer performance histories 7

8 PAWN OPERATING METRICS Trailing Twelve Months Ended June 30, 2016 Pawn Receivables Average loan size as of June 30, 2016: $160 in U.S. $62 in Latin America Term: 30 days Typical monthly service charge: 4% to 25% Varies with size of loan All loans fully collateralized: non- performing pawns become retail store inventory Retail sales margin, TTM 38% Effective monthly yield on pawn receivables 13.3% Inventory turnover, annualized 3.4x Store operating profit margin, TTM 24% 8

9 STABLE PAWN REGULATORY ENVIRONMENT UNITED STATES MEXICO Pawn regulated primarily at state level First Cash operates in states with favorable regulations Significant regulations in all states to prevent stolen property transactions No material changes to state pawn regulations in 30+ years Pawn seen as more customer friendly than payday loan products Affordable, small dollar product No obligation to repay loan or fees = no debt cycle No collections 9 Pawn regulated at the federal level by federal consumer protection agency ( PROFECO ) Regulates store- front operations No rate- setting authority Current law (2013) provides for: Registration and inspection of pawn locations Approval of customer contracts and required disclosures Customer identification procedures and reporting of suspicious transactions Failure to meet requirements may lead to suspension or closure of non- compliant operators

10 NEW U.S. PAYDAY REGULATIONS IMPACTS LESS THAN 3% OF REVENUES In June 2016, the U.S. Consumer Financial Protection Bureau ("CFPB") published rules significantly affecting payday loans, vehicle title loans and various other small consumer loan products (not likely to become effective until 2018) The proposed rules included, among other things: Additional underwriting requirements Cooling- off periods between certain loans Limitations to prevent the sustained use of certain loans such as capping the number of rollovers Restrictions on collection practices Proposed rules do not impose new regulatory requirements on non- recourse pawn loans 10

11 LATIN AMERICAN OPERATIONS SIGNIFICANT GROWTH OPPORTUNITY 11

12 MAXI PRENDA ACQUISITION Multi- Stage Acquisition of 211 Pawn Stores in Latin America 32 stores in Guatemala (December 2015) 166 stores in Mexico (January 2016) 13 stores in El Salvador (February 2016) First stores in Central America Opportunity for additional store expansion Strategic Highlights Includes 3 new states in Mexico now operating in all states in the country First stores in Central America two countries with opportunity for expansion in both markets Full service model with over 60% of pawns collateralized with general merchandise Purchase funded entirely with available cash generated in Mexico 12

13 CONSISTENT STORE GROWTH 13

14 MEXICO GROWTH STRATEGY Pawn industry has long standing history in Mexico Pawn market remains bifurcated Approximately 5,500 small format, gold jewelry- focused stores Significant contraction across the industry Limited operators have demonstrated the ability to diversify away from gold Approximately 1,500 large format, full- service stores First Cash has well over 50% market share Operational capacity to open approximately 60 de novo stores per year Only one other U.S. public pawn company operates in Mexico and they are not currently expanding pawn operations in Mexico Locally- based competition remains fragmented and limited 14

15 MEXICO OPERATIONS As of June 30, 2016 Chihuahua 901 Stores all 32 states 873 Pawn stores 28 Consumer loan stores Coahuila Nuevo Leon Baja California Tamaulipas Baja California Sur Sonora San Luis Potosi Guanajuato Queretaro Sinaloa Durango Nayarit Zacatecas Aguascalientes Jalisco Colima Michoacan Estado de Mexico Guerrero Estado de Ciudad de Mexico 15 Hidalgo Tlaxcala Puebla Veracruz Oaxaca Chiapas Morelos Tabasco Yucatan Quintana Roo Campeche

16 CONSISTENT REVENUE GROWTH $281 $322 $363 $388 * Includes retail merchandise sales and pawn loan fees ** Includes consumer loan and credit services fees and wholesale scrap jewelry sales *** Calculated using the 2011 Mexican peso / U.S. dollar exchange rate 16 $368 Core revenue growth (cc) : 201% growth 25% 5- year CAGR Second quarter 2016 highlights: Retail merchandise sales growth (cc): 31% Pawn fee revenue growth (cc): 37% Same- store core revenue growth (cc): 10% Pawn loans receivable growth (cc): 43%

17 MEXICO NEW STORE INVESTMENT PROVEN RAPID PAYBACK MODEL New Store Cash Flow Store Investment Cap Ex - Leasehold improvements & fixtures - Computer & security equipment Start- up Losses - Pre- opening - First six months of operation $170,000 $25,000 Total Store Investment $195,000 Working Capital First Year for New Store - Operating cash - Loan funding - Inventory $120,000 Typical Mexico New Store Ramp Cumulative Break- even point = approximately 2.75 years 1 Revenue reflects peso exchange rate of 13.5:1 (trailing five year monthly average) 2 Store- level operating profit before administrative expense & taxes 17

18 NEW LAT AM MARKET OPPORTUNITIES We believe the First Cash full- service pawn model can be replicated in other Latin American markets Still significant runway in Mexico, but looking opportunistically for expansion opportunities in other markets with: Large unbanked and under- banked populations Limited competition in full- service model First Cash has strong LatAm cash flows to fund development in other Latin American markets Recent 211- store acquisition in Mexico, Guatemala & El Salvador funded entirely with cash on hand generated in Mexico 18

19 U.S. OPERATIONS 19

20 U.S. OPERATIONS June 30, MD 28 3 D.C STORES 14 STATES Pawn Stores Consumer Loan Stores 20

21 SIGNIFICANT REVENUE GROWTH $337 $325 $298 $270 $233 * Includes retail merchandise sales and pawn loan fees ** Includes consumer loan and credit services fees and wholesale scrap jewelry sales 21 Core revenue growth : 152% growth 20% 5- year CAGR Second quarter 2016 highlights: Core revenue growth of 4% year- over- year Retail sales growth of 6% year- over- year Same- store revenues down 1%, which is a sequential improvement

22 CONSOLIDATED OPERATIONS 22

23 2nd QUARTER 2016 OPERATING RESULTS (1) Adjusted net income (2) of $14.3 million, or $0.51 per share Core pawn revenues (pawn fees & retail sales) increased 20% compared to the prior- year quarter Retail sales increased 21% compared to the prior- year quarter Up 6% in U.S. Up 31% in Latin America Retail margins and turns remained strong at 38% and 3.4x, respectively Same- store revenue from core pawn operations (excluding scrap jewelry sales and consumer loan fees) increased 10% in Latin America and 5% overall compared to the prior- year period Total pawn loans receivable increased 43% in Latin America compared to the prior- year period (1) All revenue and pawn loan receivable amounts are presented on a constant currency basis, which is a non- GAAP measurement. See Non- GAAP Financial Information in the Appendix. (2) Adjusted net income and earnings per share are non- GAAP measures reconciled in the detailed reconciliation of non- GAAP financial measures provided 23 in the Appendix.

24 REVENUE GROWTH 92% of 2015 Revenues were Core * Calculated using the 2011 Mexican peso / U.S. dollar average exchange rate 24

25 OVER $1 BILLION IN CUMULATIVE INVESTMENTS & SHAREHOLDER PAYOUTS Stock Repurchases & Dividends: 12,051,669 split- adjusted shares repurchased Dividend policy implemented Q $7.1 million dividends paid year- to- date Cumulative Total $ Millions $345 Acquisitions: 158 stores acquired in U.S. 311 stores acquired in Latin America Capital Expenditures: Includes 717 De Novo store openings $411 $252 25

26 2016 GUIDANCE* Full- year 2016 adjusted earnings guidance is anticipated to be $2.35 to $2.45 per diluted share The 2016 outlook for adjusted earnings per share and store growth does not include any assumptions regarding earnings or store additions related to the announced merger with Cash America International, Inc. The Company is raising the lower end of its guidance range by $0.10 per share and expects its fiscal full- year 2016 guidance for adjusted earnings, which excludes non- recurring merger transactions costs, to be in the range of $2.35 to $2.45 per diluted share. The previous guidance range provided on April 28, 2016, was $2.25 to $2.45 per share. These revised estimates reflect the following assumptions: An estimated foreign exchange rate of approximately 18.5 Mexican pesos / U.S. dollar for the balance of fiscal The estimate excludes the impact of non- recurring transaction expenses of $0.10 per share in the first half of 2016 and excludes any such transaction or restructuring expenses that will be incurred during the remainder of fiscal 2016, which are primarily related to the pending merger with Cash America International, Inc. Excluding the impact of the merger or additional acquisitions, the Company expects to add approximately 220 to 225 new stores in * As provided by the Company on July 28,

27 INVESTMENT RECAP International pawn- focused business model Focused on small secured loans to underbanked consumers with limited access to traditional credit products Focus on large format, full- service model is a significant competitive advantage across the region Strong margins & cash flows Proven growth strategy Long- runway for growth in Latin America where competition is limited Strong balance sheet to fund future growth, acquisitions, stock buybacks and pay dividends 27

28 APPENDIX

29 TOP 10 FCFS SHAREHOLDERS Institution Name Shares * (FCFS) % S/O (FCFS) Genesis Asset Managers, LP 2,708, BlackRock Fund Advisors 2,516, The Vanguard Group, Inc. 2,125, William Blair & Company, LLC (Asset Management) 1,607, GIC Asset Management Pte., LTD 1,433, Vaughan Nelson Investment Management, L.P. 1,325, Fiduciary Management, Inc. 1,125, NewSouth Capital Management, Inc. 1,075, Fidelity Management & Research Company 986, Cooke & Bieler, L.P. 936, *Holdings are as of 3/31/

30 REVENUE DETAIL (Unaudited) Constant Currency Basis Three Months Ended Increase / June 30, Increase / 2016 (Decrease) (Decrease) (Non- GAAP) (Non- GAAP) Domestic revenue: Retail merchandise sales $ 47,065 $ 44,323 6% $ 47,065 6% Pawn loan fees 21,844 22,060 (1)% 21,844 (1)% Consumer loan and credit services fees 4,419 6,174 (28)% 4,419 (28)% Wholesale scrap jewelry revenue 6,070 4,410 38% 6,070 38% 79,398 76,967 3% 79,398 3% International revenue: Retail merchandise sales 68,478 61,302 12% 80,278 31% Pawn loan fees 30,034 25,523 18% 35,065 37% Consumer loan and credit services fees (7)% 586 9% Wholesale scrap jewelry revenue 3,572 3,295 8% 3,572 8% 102,581 90,656 13% 119,501 32% Total revenue: Retail merchandise sales 115, ,625 9% 127,343 21% Pawn loan fees 51,878 47,583 9% 56,909 20% Consumer loan and credit services fees 4,916 6,710 (27)% 5,005 (25)% Wholesale scrap jewelry revenue 9,642 7,705 25% 9,642 25% $ 181,979 $ 167,623 9% $ 198,899 19% 30

31 REVENUE DETAIL (Unaudited) Constant Currency Basis Six Months Ended Increase / June 30, Increase / 2016 (Decrease) (Decrease) (Non- GAAP) (Non- GAAP) Domestic revenue: Retail merchandise sales $ 102,126 $ 96,329 6% $ 102,126 6% Pawn loan fees 46,089 45,966 % 46,089 % Consumer loan and credit services fees 9,628 13,238 (27)% 9,628 (27)% Wholesale scrap jewelry revenue 10,864 10,148 7% 10,864 7% 168, ,681 2% 168,707 2% International revenue: Retail merchandise sales 132, ,750 10% 156,754 31% Pawn loan fees 57,222 50,271 14% 67,584 34% Consumer loan and credit services fees 974 1,067 (9)% 1,162 9% Wholesale scrap jewelry revenue 6,086 6,877 (12)% 6,086 (12)% 196, ,965 10% 231,586 30% Total revenue: Retail merchandise sales 234, ,079 8% 258,880 20% Pawn loan fees 103,311 96,237 7% 113,673 18% Consumer loan and credit services fees 10,602 14,305 (26)% 10,790 (25)% Wholesale scrap jewelry revenue 16,950 17,025 % 16,950 % $ 365,182 $ 343,646 6% $ 400,293 16% 31

32 Adjusted EBITDA See discussion of non- GAAP financial information herein Trailing Twelve Months Ended June 30, Net income $ 55,430 $ 76,596 Income taxes 25,338 31,797 Depreciation and amortization (1) 18,545 17,664 Interest expense 17,527 16,327 Interest income (1,327) (1,076) Non- recurring restructuring expenses related to U.S. consumer loan operations 8, Non- recurring acquisition expenses 6,179 2,117 Adjusted EBITDA $ 130,131 $ 143,864 Adjusted EBITDA margin calculated as follows: Total revenue $ 726,138 $ 721,420 Adjusted EBITDA $ 130,131 $ 143,864 Adjusted EBITDA as a percentage of revenue 18% 20% (1) For the trailing twelve months ended June 30, 2015, excludes $229,000 of depreciation and amortization and for the trailing twelve months ended June 30, 2016, excludes $264,000 of depreciation and amortization, which are included in the non-recurring restructuring expenses related to U.S. consumer loan operations. 32

33 FREE CASH FLOW See discussion of non- GAAP financial information herein Trailing Twelve Months Ended June 30, Cash flow from operating activities, including discontinued operations $ 90,413 $ 91,049 Cash flow from investing activities: Loan receivables (9,211) 1,517 Purchases of property and equipment (29,546) (20,495) Free cash flow $ 51,656 $ 72,071 33

34 Adjusted Net Income and Net Income Per Share See discussion of non- GAAP financial information herein In Thousands Three Months Ended June 30, Six Months Ended June 30, Per Share In Thousands Per Share In Thousands Per Share In Thousands Per Share Net income, as reported $ 11,673 $ 0.41 $ 13,339 $ 0.47 $ 24,847 $ 0.88 $ 30,127 $ 1.06 Adjustments, net of tax: Non- recurring restructuring expenses related to U.S. consumer loan operations Non- recurring acquisition expenses 2, , Adjusted net income $ 14,324 $ 0.51 $ 14,301 $ 0.51 $ 27,758 $ 0.98 $ 31,225 $

35 NON- GAAP FINANCIAL INFORMATION The Company uses certain financial calculations, such as adjusted net income, adjusted net income per share, adjusted EBITDA, free cash flow and constant currency results (collectively "Non- GAAP Measures"), which are not considered measures of financial performance under U.S. generally accepted accounting principles ("GAAP"). Items excluded from the calculation of Non- GAAP Measures are significant components in understanding and assessing the Company s financial performance. Since Non- GAAP Measures are not measures determined in accordance with GAAP and are thus susceptible to varying calculations, Non- GAAP Measures, as presented, may not be comparable to other similarly titled measures of other companies. Non- GAAP Measures should not be considered as alternatives to net income, cash flow provided by or used in operating, investing or financing activities or other financial statement data presented in the Company s consolidated financial statements as indicators of financial performance or liquidity. Non- GAAP Measures should be evaluated in conjunction with,and are nota substitute for, GAAPfinancialmeasures. 35

36 RESEARCH ANALYSTS The following is a list of analysts who provide research: Company Analyst Phone Latin America Bank of America/Merrill Lynch Carlos Peyrelongue (52) x Industry Focus Retail/ Consumer Specialty Finance Bradesco BBI Richard Cathcart (55) x x CL King & Associates William Armstrong (518) x Janney Capital Markets John Rowan (212) x Jefferies & Company, Inc. John Hecht (415) x J.P. Morgan Nur Cristiani (52) x JMP Securities David Scharf (415) x Wells Fargo Securities, LLC Joel Houck (443) x 36

37 Investor Contact Information Investor Relations Gar Jackson Global IR Group (817) (949)