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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2022

OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission file number 001-10960

FIRSTCASH HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

87-3920732

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1600 West 7th Street, Fort Worth, Texas 76102

(Address of principal executive offices) (Zip code)

(817) 335-1100

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock, par value $.01 per share			FCFS			The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒ Yes   ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ☒ Yes   ☐ No

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☒			Large accelerated filer			☐			Accelerated filer
☐			Non-accelerated filer			☐			Smaller reporting company
						☐			Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     ☐ Yes  ☒ No

As of July 27, 2022, there were 47,035,869 shares of common stock outstanding.

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FIRSTCASH HOLDINGS, INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2022

INDEX

PART I.			FINANCIAL INFORMATION
Item 1.			Financial Statements (Unaudited)			1
			Consolidated Balance Sheets			1
			Consolidated Statements of Income			2
			Consolidated Statements of Comprehensive Income			3
			Consolidated Statements of Changes in Stockholders’ Equity			4
			Consolidated Statements of Cash Flows			6
			Notes to Consolidated Financial Statements			8
Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			51
Item 4.			Controls and Procedures			52
PART II.			OTHER INFORMATION
Item 1.			Legal Proceedings			53
Item 1A.			Risk Factors			53
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			53
Item 3.			Defaults Upon Senior Securities			54
Item 4.			Mine Safety Disclosures			54
Item 5.			Other Information			54
Item 6.			Exhibits			55
SIGNATURES						56

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CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS

Forward-Looking Information

This quarterly report contains forward-looking statements about the business, financial condition and prospects of FirstCash Holdings, Inc. and its wholly owned subsidiaries (together, the “Company”). Forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, can be identified by the use of forward-looking terminology such as “believes,” “projects,” “expects,” “may,” “estimates,” “should,” “plans,” “targets,” “intends,” “could,” “would,” “anticipates,” “potential,” “confident,” “optimistic” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, guidance, expectations and future plans. Forward-looking statements can also be identified by the fact these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties.

While the Company believes the expectations reflected in forward-looking statements are reasonable, there can be no assurances such expectations will prove to be accurate. Security holders are cautioned that such forward-looking statements involve risks and uncertainties. Certain factors may cause results to differ materially from those anticipated by the forward-looking statements made in this quarterly report. Such factors may include, without limitation, risks related to the American First Finance (“AFF”) transaction, including the failure of the transaction to deliver the estimated value and benefits expected by the Company, the incurrence of unexpected future costs, liabilities or obligations as a result of the transaction, the effect of the transaction on the ability of the Company to retain and hire personnel and maintain relationships with retail partners, consumers and others with whom the Company and AFF do business; the ability of the Company to successfully integrate AFF’s operations; the ability of the Company to successfully implement its plans, forecasts and other expectations with respect to AFF’s business; risks associated with the Consumer Financial Protection Bureau (the “CFPB”) lawsuit filed against the Company, the putative shareholder securities class action lawsuit filed against the Company, the California private lawsuits filed against the Company in which the plaintiffs are seeking class certification, and subpoenas seeking information from the Company received from state regulators from time to time, including the incurrence of meaningful expenses, reputational damage, monetary damages and other penalties; risks related to the regulatory environment in which the Company operates; general economic risks, including the contributory effects of the COVID-19 pandemic and governmental responses that have been, and may in the future be, imposed in response to the pandemic; potential changes in consumer behavior and shopping patterns which could impact demand for the Company’s pawn loan, retail, lease-to-own and retail finance products; labor shortages and increased labor costs; inflation; a deterioration in the economic conditions in the United States and Latin America which potentially could have an impact on discretionary consumer spending; currency fluctuations, primarily involving the Mexican peso; and other risks discussed and described in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”), including the risks described in Part 1, Item 1A, “Risk Factors” thereof, and other reports filed with the SEC. Many of these risks and uncertainties are beyond the ability of the Company to control, nor can the Company predict, in many cases, all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. The forward-looking statements contained in this quarterly report speak only as of the date of this quarterly report, and the Company expressly disclaims any obligation or undertaking to report any updates or revisions to any such statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
						June 30,												December 31,
						2022						2021						2021
ASSETS
Cash and cash equivalents						$	110,414					$	50,061					$	120,046
Accounts receivable, net						55,924						40,183						55,356
Pawn loans						385,708						312,166						347,973
Finance receivables, net						125,619						—						181,021
Inventories						260,528						216,955						263,311
Leased merchandise, net						118,924						—						143,944
Prepaid expenses and other current assets						21,125						19,022						17,707
Total current assets						1,078,242						638,387						1,129,358
Property and equipment, net						519,836						404,283						462,526
Operating lease right of use asset						301,979						299,223						306,061
Goodwill						1,522,192						1,017,273						1,536,178
Intangible assets, net						359,716						83,372						388,184
Other assets						8,345						9,406						8,531
Deferred tax assets, net						6,231						4,489						5,614
Total assets						$	3,796,541					$	2,456,433					$	3,836,452
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued liabilities						$	198,967					$	103,700					$	244,327
Customer deposits and prepayments						59,754						44,486						57,310
Lease liability, current						90,804						89,027						90,570
Total current liabilities						349,525						237,213						392,207
Revolving unsecured credit facilities						274,000						163,000						259,000
Senior unsecured notes						1,034,761						493,303						1,033,904
Deferred tax liabilities, net						121,046						75,912						126,098
Lease liability, non-current						199,211						196,189						203,166
Other liabilities						—						—						13,950
Total liabilities						1,978,543						1,165,617						2,028,325
Stockholders’ equity:
Common stock						573						493						573
Additional paid-in capital						1,729,625						1,219,948						1,724,956
Retained earnings						952,011						828,040						866,679
Accumulated other comprehensive loss						(119,994)						(115,790)						(131,299)
Common stock held in treasury, at cost						(744,217)						(641,875)						(652,782)
Total stockholders’ equity						1,817,998						1,290,816						1,808,127
Total liabilities and stockholders’ equity						$	3,796,541					$	2,456,433					$	3,836,452
The accompanying notes are an integral part of these consolidated financial statements.

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FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2022						2021						2022						2021
Revenue:
Retail merchandise sales			$	298,257					$	265,567					$	601,076					$	537,609
Pawn loan fees			134,067						109,909						265,886						225,431
Leased merchandise income			147,700						—						297,647						—
Interest and fees on finance receivables			43,744						—						86,193						—
Wholesale scrap jewelry sales			23,848						14,102						56,653						34,477
Total revenue			647,616						389,578						1,307,455						797,517
Cost of revenue:
Cost of retail merchandise sold			179,309						153,424						361,523						310,577
Depreciation of leased merchandise			82,605						—						176,311						—
Provision for lease losses			38,035						—						77,855						—
Provision for loan losses			26,800						—						51,497						—
Cost of wholesale scrap jewelry sold			19,895						11,932						48,110						29,129
Total cost of revenue			346,644						165,356						715,296						339,706
Net revenue			300,972						224,222						592,159						457,811
Expenses and other income:
Operating expenses			180,555						139,128						353,851						276,452
Administrative expenses			37,068						27,398						73,931						58,397
Depreciation and amortization			25,982						10,902						51,524						21,514
Interest expense			16,246						7,198						32,467						14,428
Interest income			(222)						(119)						(898)						(277)
Loss (gain) on foreign exchange			27						(577)						(453)						(310)
Merger and acquisition expenses			314						1,086						979						1,252
Gain on revaluation of contingent acquisition consideration			(65,559)						—						(62,989)						—
Other expenses (income), net			(3,062)						401						(2,885)						1,279
Total expenses and other income			191,349						185,417						445,527						372,735
Income before income taxes			109,623						38,805						146,632						85,076
Provision for income taxes			23,515						10,378						32,519						22,934
Net income			$	86,108					$	28,427					$	114,113					$	62,142
Earnings per share:
Basic			$	1.82					$	0.70					$	2.39					$	1.52
Diluted			$	1.81					$	0.70					$	2.38					$	1.52
The accompanying notes are an integral part of these consolidated financial statements.

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FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2022						2021						2022						2021
Net income			$	86,108					$	28,427					$	114,113					$	62,142
Other comprehensive income:
Currency translation adjustment			(484)						14,977						11,305						2,642
Comprehensive income			$	85,624					$	43,404					$	125,418					$	64,784
The accompanying notes are an integral part of these consolidated financial statements.

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FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited, in thousands, except per share amounts)
Six Months Ended June 30, 2022
									Common Stock												Additional Paid-In Capital						Retained Earnings						Accum- ulated Other Compre- hensive Loss						Common Stock Held in Treasury												Total Stock- holders’ Equity
															Shares						Amount																								Shares						Amount
As of 12/31/2021															57,322						$	573					$	1,724,956					$	866,679					$	(131,299)					8,843						$	(652,782)					$	1,808,127
Shares issued under share-based compensation plan															—						—						(1,281)						—						—						(17)						1,281						—
Share-based compensation expense															—						—						3,075						—						—						—						—						3,075
Net income															—						—						—						28,005						—						—						—						28,005
Cash dividends ($0.30 per share)															—						—						—						(14,546)						—						—						—						(14,546)
Currency translation adjustment															—						—						—						—						11,789						—						—						11,789
Purchases of treasury stock															—						—						—						—						—						1,048						(72,217)						(72,217)
As of 3/31/2022															57,322						$	573					$	1,726,750					$	880,138					$	(119,510)					9,874						$	(723,718)					$	1,764,233
Share-based compensation expense															—						—						2,875						—						—						—						—						2,875
Net income															—						—						—						86,108						—						—						—						86,108
Cash dividends ($0.30 per share)															—						—						—						(14,235)						—						—						—						(14,235)
Currency translation adjustment															—						—						—						—						(484)						—						—						(484)
Purchases of treasury stock															—						—						—						—						—						301						(20,499)						(20,499)
As of 6/30/2022															57,322						$	573					$	1,729,625					$	952,011					$	(119,994)					10,175						$	(744,217)					$	1,817,998
The accompanying notes are an integral part of these consolidated financial statements.

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FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
CONTINUED
(unaudited, in thousands, except per share amounts)
Six Months Ended June 30, 2021
									Common Stock												Additional Paid-In Capital						Retained Earnings						Accum- ulated Other Compre- hensive Loss						Common Stock Held in Treasury												Total Stock- holders’ Equity
															Shares						Amount																								Shares						Amount
As of 12/31/2020															49,276						$	493					$	1,221,788					$	789,303					$	(118,432)					8,238						$	(609,337)					$	1,283,815
Shares issued under share-based compensation plan, net of 28 shares net-settled															—						—						(7,090)						—						—						(73)						5,427						(1,663)
Share-based compensation expense															—						—						3,625						—						—						—						—						3,625
Net income															—						—						—						33,715						—						—						—						33,715
Cash dividends ($0.27 per share)															—						—						—						(11,097)						—						—						—						(11,097)
Currency translation adjustment															—						—						—						—						(12,335)						—						—						(12,335)
Purchases of treasury stock															—						—						—						—						—						84						(4,967)						(4,967)
As of 3/31/2021															49,276						$	493					$	1,218,323					$	811,921					$	(130,767)					8,249						$	(608,877)					$	1,291,093
Share-based compensation expense															—						—						1,625						—						—						—						—						1,625
Net income															—						—						—						28,427						—						—						—						28,427
Cash dividends ($0.30 per share)															—						—						—						(12,308)						—						—						—						(12,308)
Currency translation adjustment															—						—						—						—						14,977						—						—						14,977
Purchases of treasury stock															—						—						—						—						—						452						(32,998)						(32,998)
As of 6/30/2021															49,276						$	493					$	1,219,948					$	828,040					$	(115,790)					8,701						$	(641,875)					$	1,290,816
The accompanying notes are an integral part of these consolidated financial statements.

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FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
						Six Months Ended
						June 30,
						2022						2021
Cash flow from operating activities:
Net income						$	114,113					$	62,142
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation of leased merchandise						176,311						—
Provision for lease losses						77,855						—
Provision for loan losses						51,497						—
Share-based compensation expense						5,950						5,250
Depreciation and amortization expense						51,524						21,514
Amortization of debt issuance costs						1,473						793
Net amortization of premiums, discounts and unearned origination fees on finance receivables						27,451						—
Gain on revaluation of contingent acquisition consideration						(62,989)						—
Impairments and dispositions of certain other assets						318						1,279
Deferred income taxes, net						12,702						4,444
Changes in operating assets and liabilities, net of business combinations:
Accounts receivable, net						(224)						1,369
Inventories purchased directly from customers, wholesalers or manufacturers						1,804						(9,173)
Leased merchandise, net						(229,146)						—
Prepaid expenses and other assets						(1,672)						(2,107)
Accounts payable, accrued liabilities and other liabilities						(4,846)						26,748
Income taxes						4,646						1,490
Net cash flow provided by operating activities						226,767						113,749
Cash flow from investing activities:
Pawn loans, net (1)						(32,265)						(8,492)
Finance receivables, net						(23,546)						—
Purchases of furniture, fixtures, equipment and improvements						(19,686)						(21,025)
Purchases of store real property						(58,559)						(29,096)
Acquisitions of pawn stores, net of cash acquired						(2,343)						(49,334)
Net cash flow used in investing activities						(136,399)						(107,947)
Cash flow from financing activities:
Borrowings from unsecured credit facilities						126,000						227,000
Repayments of unsecured credit facilities						(111,000)						(187,000)
Debt issuance costs paid						(475)						—
Purchases of treasury stock						(87,727)						(36,427)
Payment of withholding taxes on net share settlements of restricted stock unit awards and stock options exercised						—						(1,663)
Dividends paid						(28,781)						(23,405)
Net cash flow used in financing activities						(101,983)						(21,495)

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FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONTINUED
(unaudited, in thousands)
						Six Months Ended
						June 30,
						2022						2021
Effect of exchange rates on cash						1,983						(96)
Change in cash and cash equivalents						(9,632)						(15,789)
Cash and cash equivalents at beginning of the period						120,046						65,850
Cash and cash equivalents at end of the period						$	110,414					$	50,061

(1)Includes the funding of new pawn loans net of cash repayments and recovery of principal through the sale of inventories acquired from forfeiture of pawn collateral.

The accompanying notes are an integral part of these consolidated financial statements.    

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FIRSTCASH HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 1 - General

Basis of Presentation

The accompanying consolidated balance sheet as of December 31, 2021, which is derived from audited consolidated financial statements, and the unaudited consolidated financial statements, including the notes thereto, include the accounts of FirstCash Holdings, Inc. and its wholly-owned subsidiaries (together, the “Company”). The Company regularly makes acquisitions, and the results of operations for the acquired stores have been consolidated since the acquisition dates. All significant intercompany accounts and transactions have been eliminated.

These unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include certain information and disclosures required for comprehensive financial statements. These interim period financial statements should be read in conjunction with the Company’s audited consolidated financial statements, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022. The consolidated financial statements as of June 30, 2022 and 2021, and for the three month and six month periods ended June 30, 2022 and 2021, are unaudited, but in management’s opinion include all adjustments (consisting of only normal recurring adjustments) considered necessary to present fairly the financial position, results of operations and cash flow for such interim periods. Operating results for the periods ended June 30, 2022 are not necessarily indicative of the results that may be expected for the full year.

On December 17, 2021, the Company completed the acquisition (the “AFF Acquisition”) of AFF, which is a leading technology-driven retail point-of-sale (“POS”) payment solutions platform primarily focused on providing lease-to-own (“LTO”) products.

The Company has operations in Latin America, where in Mexico, Guatemala and Colombia, the functional currency is the Mexican peso, Guatemalan quetzal and Colombian peso. Accordingly, the assets and liabilities of these subsidiaries are translated into U.S. dollars at the exchange rate in effect at each balance sheet date, and the resulting adjustments are accumulated in other comprehensive income (loss) as a separate component of stockholders’ equity. Revenues and expenses are translated at the average exchange rates occurring during the respective period. The Company also has operations in El Salvador where the reporting and functional currency is the U.S. dollar.

Use of Estimates

The preparation of interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and related revenue and expenses, and the disclosure of gain and loss contingencies at the date of the financial statements. Such estimates and assumptions are subject to a number of risks and uncertainties, which may cause actual results to differ materially from the Company’s estimates.

Reclassification

Certain amounts in the consolidated balance sheets as of June 30, 2021 and December 31, 2021, and the consolidated statements of income and consolidated statements of cash flows for the six months ended June 30, 2021, have been reclassified in order to conform to the 2022 presentation.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board issued ASU No 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank-offered rates to alternative reference rates. ASU 2020-04 was effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company does not expect ASU 2020-04 to have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

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In March 2022, the Financial Accounting Standards Board issued ASU No 2022-02, “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”). ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for entities. Early adoption is permitted if an entity has adopted the CECL accounting standard. Except for expanded disclosures to its vintage disclosures, the Company does not expect ASU 2022-02 to have a material effect on the Company’s current financial position, results of operations or financial statements.

Note 2 - Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):

			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2022						2021						2022						2021
Numerator:
Net income			$	86,108					$	28,427					$	114,113					$	62,142
Denominator:
Weighted-average common shares for calculating basic earnings per share			47,425						40,754						47,831						40,893
Effect of dilutive securities:
Stock options and restricted stock unit awards			74						48						66						36
Weighted-average common shares for calculating diluted earnings per share			47,499						40,802						47,897						40,929
Earnings per share:
Basic			$	1.82					$	0.70					$	2.39					$	1.52
Diluted			$	1.81					$	0.70					$	2.38					$	1.52

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Note 3 - Acquisitions

American First Finance Acquisition

On December 17, 2021, the Company completed the AFF Acquisition. Subsequent to December 31, 2021, the Company made certain measurement period adjustments to the preliminary purchase price allocation, which resulted in a decrease in goodwill of $16.9 million. The adjusted purchase price allocation is reflected in the accompanying consolidated balance sheet as of June 30, 2022.

The following table details the preliminary purchase price allocation as of December 31, 2021, the measurement period adjustments made during the six months ended June 30, 2022 and the preliminary purchase price allocation as of June 30, 2022, subject to future measurement period adjustments (in thousands):

			December 31,						2022						June 30,
			2021						Adjustments						2022
Accounts receivable			$	11,660					$	—					$	11,660
Finance receivables			225,261						—						225,261
Leased merchandise			139,649						—						139,649
Prepaid expenses and other current assets			4,474						(238)						4,236
Property and equipment			11,670						—						11,670
Operating lease right of use asset			491						—						491
Goodwill			503,106						(16,893)						486,213
Intangible assets			305,100						—						305,100
Accounts payable and accrued liabilities			(28,357)						(1,083)						(29,440)
Customer deposits and prepayments			(11,014)						—						(11,014)
Lease liability, current			(10)						—						(10)
Deferred tax liabilities (1)			(42,608)						18,214						(24,394)
Lease liability, non-current			(481)						—						(481)
Purchase price			$	1,118,941					$	—					$	1,118,941

(1)Measurement period adjustment is primarily a result of the seller finalizing the ending tax basis in the assets and liabilities acquired, which carried over to the Company.

Note 4 - Operating Leases

Lessor

For information about the Company’s revenue-generating activities as a lessor, refer to Note 2 to the consolidated financial statements included in the Company’s 2021 Annual Report on Form 10-K. All of the Company’s lease agreements are considered operating leases.

Lessee

The Company leases the majority of its pawnshop locations and certain administrative offices under operating leases and determines if an arrangement is or contains a lease at inception. Many leases include both lease and non-lease components, for which the Company accounts separately. Lease components include rent, taxes and insurance costs while non-lease components include common area or other maintenance costs. Operating leases are included in operating lease right of use assets, lease liability, current and lease liability, non-current in the consolidated balance sheets. The Company does not have any finance leases.

Leased facilities are generally leased for a term of three to five years with one or more options to renew for an additional three to five years, typically at the Company’s sole discretion. In addition, the majority of these leases can be terminated early upon an adverse change in law which negatively affects the store’s profitability. The Company regularly evaluates renewal and termination options to determine if the Company is reasonably certain to exercise the option, and excludes these options from

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the lease term included in the recognition of the operating lease right of use asset and lease liability until such certainty exists. The weighted-average remaining lease term for operating leases was 4.1 years for both June 30, 2022 and 2021.

The operating lease right of use asset and lease liability is recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The Company’s leases do not provide an implicit rate and therefore, it uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. The Company utilizes a portfolio approach for determining the incremental borrowing rate to apply to groups of leases with similar characteristics. The weighted-average discount rate used to measure the lease liability as of June 30, 2022 and 2021 was 6.0% and 6.6%, respectively.

The Company has certain operating leases in Mexico which are denominated in U.S. dollars. The liability related to these leases is considered a monetary liability and requires remeasurement each reporting period into the functional currency (Mexican pesos) using reporting date exchange rates. The remeasurement results in the recognition of foreign currency exchange gains or losses each reporting period, which can produce a certain level of earnings volatility. The Company recognized a foreign currency gain of less than $0.1 million and a gain of $0.7 million during the three months ended June 30, 2022 and 2021, respectively, related to the remeasurement of these U.S. dollar denominated operating leases, which is included in loss (gain) on foreign exchange in the accompanying consolidated statements of income. During the six months ended June 30, 2022 and 2021, the Company recognized a foreign currency gain of $0.7 million and a gain of $0.1 million, respectively, related to these U.S. dollar denominated leases.

Lease expense is recognized on a straight-line basis over the lease term, with variable lease expense recognized in the period such payments are incurred. The following table details the components of lease expense included in operating expenses in the consolidated statements of income during the three and six months ended June 30, 2022 and 2021 (in thousands):

			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2022						2021						2022						2021
Operating lease expense			$	32,074					$	31,374					$	63,602					$	62,439
Variable lease expense (1)			4,229						3,939						8,403						7,773
Total operating lease expense			$	36,303					$	35,313					$	72,005					$	70,212

(1)Variable lease costs consist primarily of taxes, insurance and common area or other maintenance costs paid based on actual costs incurred by the lessor and can therefore vary over the lease term.

The following table details the maturity of lease liabilities for all operating leases as of June 30, 2022 (in thousands):

Six months ending December 31, 2022			$	55,095
2023			96,437
2024			73,362
2025			46,588
2026			27,112
Thereafter			28,529
Total			$	327,123
Less amount of lease payments representing interest			(37,108)
Total present value of lease payments			$	290,015

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The following table details supplemental cash flow information related to operating leases for the six months ended June 30, 2022 and 2021 (in thousands):

			Six Months Ended
			June 30,
			2022						2021
Cash paid for amounts included in the measurement of operating lease liabilities			$	58,343					$	56,570
Leased assets obtained in exchange for new operating lease liabilities			$	41,991					$	49,209

Note 5 - Fair Value of Financial Instruments

The fair value of financial instruments is determined by reference to various market data and other valuation techniques, as appropriate. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The three fair value levels are (from highest to lowest):

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

Recurring Fair Value Measurements

The Company’s financial assets and liabilities as of June 30, 2022 and December 31, 2021 that are measured at fair value on a recurring basis are as follows (in thousands):

						Estimated Fair Value
						June 30,						Fair Value Measurements Using
						2022						Level 1						Level 2						Level 3
Financial liabilities:
Contingent AFF acquisition consideration (1)						$	46,560					$	—					$	—					$	46,560

(1)The contingent consideration related to the AFF Acquisition is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

						Estimated Fair Value
						December 31,						Fair Value Measurements Using
						2021						Level 1						Level 2						Level 3
Financial liabilities:
Contingent AFF acquisition consideration (1)						$	109,549					$	—					$	—					$	109,549

(1)The current portion of $95.6 million is included in accounts payable and accrued liabilities and the non-current portion of $14.0 million is included in other liabilities in the accompanying consolidated balance sheets.

The Company revalues the contingent consideration related to the AFF Acquisition to fair value at the end of each reporting period. The estimate of the fair value of contingent consideration related to the AFF Acquisition is determined by applying a Monte Carlo simulation, which includes inputs not observable in the market, such as the risk-free rate, risk-adjusted discount rate, the volatility of the underlying financial metrics and projected financial forecast of AFF over the earn-out period, and therefore represents a Level 3 measurement. Significant increases or decreases in these inputs could result in a significantly lower or higher fair value measurement of the contingent consideration related to the AFF Acquisition.

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The changes in financial assets and liabilities that are measured and recorded at fair value on a recurring basis using Level 3 fair value measurements for the three and six months ended June 30, 2022 are as follows (in thousands):

			Three Months Ended						Six Months Ended
			June 30, 2022						June 30, 2022
Contingent AFF acquisition consideration at beginning of the period			$	112,119					$	109,549
Change in fair value (1)			(65,559)						(62,989)
Contingent AFF acquisition consideration at end of the period			$	46,560					$	46,560

(1)    The Company recognized a gain of $65.6 million and $63.0 million during the three and six months ended June 30, 2022, respectively, as a result of the change in fair value of the contingent consideration related to the AFF Acquisition, which is included in gain on revaluation of contingent acquisition consideration in the accompanying consolidated statements of income.

There were no transfers in or out of Level 1, 2 or 3 during the three and six months ended June 30, 2022, and the Company did not have any financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2021.

Fair Value Measurements on a Non-Recurring Basis

The Company measures non-financial assets and liabilities, such as property and equipment and intangible assets, at fair value on a non-recurring basis or when events or circumstances indicate that the carrying amount of the assets may be impaired.

Financial Assets and Liabilities Not Measured at Fair Value, But for Which Fair Value is Disclosed