FirstCash Holdings, Inc. 2024 10-K Report Review

Overview

FirstCash Holdings, Inc. is a leading operator of pawn stores in the U.S. and Latin America, and a provider of retail POS payment solutions through its subsidiary, American First Finance (AFF). The company operates over 3,000 pawnshops and offers lease-to-own (LTO) and retail finance solutions across a large network of merchant partners.

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Business Description

FirstCash's primary business is the operation of retail pawn stores, which provide non-recourse pawn loans and buy merchandise directly from customers. The company also operates a retail POS payment solutions business through AFF, focusing on LTO products and facilitating other retail financing payment options.

Pawn Operations

Pawn stores are neighborhood-based retail locations that buy and sell pre-owned consumer products and provide small, secured consumer loans. The company operates in 29 U.S. states and the District of Columbia, as well as in Mexico, Guatemala, El Salvador, and Colombia.

Retail POS Payment Solutions

AFF facilitates LTO and retail finance programs, allowing merchant partners to complete sales by providing customers with a retail POS payment solution. AFF serves credit-constrained customers who may not qualify for prime or near-prime retail payment options.

Financial Performance

Revenue and Profitability

For the fiscal year ended December 31, 2024, FirstCash reported total revenue of $3.39 billion, a 7.5% increase from the previous year. Net income was $258.8 million, up from $219.3 million in 2023. The company's adjusted EBITDA was $558.4 million, reflecting strong operational performance.

Segment Performance

• U.S. Pawn Segment: Revenue increased by 15% to $1.57 billion, driven by a 16% increase in pawn loan fees and a 13% increase in retail merchandise sales.
• Latin America Pawn Segment: Revenue grew by 1% to $811.9 million, with a 4% increase in pawn loan fees. The segment faced a 3% unfavorable currency impact.
• Retail POS Payment Solutions Segment: Revenue increased by 3% to $1.01 billion, with a 5% increase in interest and fees on finance receivables.

Cash Flow and Liquidity

The company generated $540 million in cash flow from operating activities, a 30% increase from 2023. It ended the year with $175.1 million in cash and cash equivalents and $528.9 million in available credit.

Risk Factors

FirstCash faces several risks, including regulatory changes, competition, and economic conditions. The company is subject to extensive regulation in both the U.S. and Latin America, which could impact its operations. Additionally, competition from other pawnshops, consumer finance companies, and retailers could affect its market position.

Investment Potential

FirstCash Holdings, Inc. demonstrates strong financial performance and growth potential, particularly in its U.S. pawn segment. The company's expansion strategy, coupled with its robust cash flow and liquidity position, supports its investment potential. However, investors should consider the regulatory and competitive risks that could impact future performance.

Conclusion

FirstCash Holdings, Inc. presents a compelling investment opportunity with a solid track record of growth and profitability. The company's strategic focus on expanding its pawn operations and retail POS payment solutions positions it well for future success. With a balanced approach to risk management and growth, FirstCash is poised to continue delivering value to its shareholders.