SEC Filing | FirstCash, Inc.

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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, 2023


☐			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

https://cdn.kscope.io/4d6c495f3979e606e92cf196336ab4ce-fcfslogo.jpg

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 26, 2023, there were 45,107,912 shares of common stock outstanding.


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FIRSTCASH HOLDINGS, INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2023

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	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	54

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	56

SIGNATURES		57


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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, outlook 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, outlook 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 extensive regulatory environment in which the Company operates; risks associated with the legal and regulatory proceedings that the Company is a party to, or may become a party to in the future, including the Consumer Financial Protection Bureau (the “CFPB”) lawsuit filed against the Company; risks related to the Company’s acquisitions, including the failure of any material acquisition, including the American First Finance (“AFF”) acquisition, to deliver the estimated value and benefits expected by the Company and the ability of the Company to continue to identify and consummate acquisitions on favorable terms; potential changes in consumer behavior and shopping patterns which could impact demand for the Company’s pawn loan, retail, lease-to-own (“LTO”) and retail finance products, including, as a result to, changes in the general economic conditions; labor shortages and increased labor costs; a deterioration in the economic conditions in the United States and Latin America, including as a result of inflation and rising interest rates, which potentially could have an impact on discretionary consumer spending and demand for the Company’s products; currency fluctuations, primarily involving the Mexican peso; competition the Company faces from other retailers and providers of retail payment solutions; the ability of the Company to successfully execute on its business strategies; 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,
	2023		2022		2022
ASSETS
Cash and cash equivalents	$	104,598	$	110,414	$	117,330
Accounts receivable, net	63,337		55,924		57,792
Pawn loans	426,165		385,708		390,617
Finance receivables, net	110,555		125,619		103,494
Inventories	267,142		260,528		288,339
Leased merchandise, net	143,145		118,924		153,302
Prepaid expenses and other current assets	30,102		21,125		19,788
Total current assets	1,145,044		1,078,242		1,130,662

Property and equipment, net	587,934		519,836		538,681
Operating lease right of use asset	305,513		301,979		307,009
Goodwill	1,600,068		1,522,192		1,581,381
Intangible assets, net	303,642		359,716		330,338
Other assets	9,586		8,345		9,415
Deferred tax assets, net	7,770		6,231		7,381
Total assets	$	3,959,557	$	3,796,541	$	3,904,867

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable and accrued liabilities	$	146,163	$	198,967	$	139,460
Customer deposits and prepayments	70,056		59,754		63,125
Lease liability, current	96,215		90,804		92,944
Total current liabilities	312,434		349,525		295,529

Revolving unsecured credit facilities	376,000		274,000		339,000

Senior unsecured notes	1,036,660		1,034,761		1,035,698
Deferred tax liabilities, net	140,609		121,046		151,759
Lease liability, non-current	197,135		199,211		203,115

Total liabilities	2,062,838		1,978,543		2,025,101

Stockholders’ equity:

Common stock	573		573		573
Additional paid-in capital	1,734,122		1,729,625		1,734,528
Retained earnings	1,122,579		952,011		1,060,603
Accumulated other comprehensive loss	(49,258)		(119,994)		(106,573)
Common stock held in treasury, at cost	(911,297)		(744,217)		(809,365)
Total stockholders’ equity	1,896,719		1,817,998		1,879,766
Total liabilities and stockholders’ equity	$	3,959,557	$	3,796,541	$	3,904,867

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,
	2023		2022		2023		2022
Revenue:
Retail merchandise sales	$	320,864	$	298,257	$	648,779	$	601,076
Pawn loan fees	154,178		134,067		305,738		265,886
Leased merchandise income	189,805		147,700		373,243		297,647
Interest and fees on finance receivables	58,192		43,744		112,834		86,193
Wholesale scrap jewelry sales	27,583		23,848		72,767		56,653
Total revenue	750,622		647,616		1,513,361		1,307,455

Cost of revenue:
Cost of retail merchandise sold	192,271		179,309		391,272		361,523
Depreciation of leased merchandise	102,521		82,605		204,126		176,311
Provision for lease losses	52,873		38,035		101,938		77,855
Provision for loan losses	28,190		26,800		57,475		51,497
Cost of wholesale scrap jewelry sold	21,880		19,895		57,607		48,110
Total cost of revenue	397,735		346,644		812,418		715,296

Net revenue	352,887		300,972		700,943		592,159

Expenses and other income:
Operating expenses	204,781		180,555		403,842		353,851
Administrative expenses	40,355		37,068		79,372		73,931
Depreciation and amortization	27,050		25,982		54,161		51,524
Interest expense	21,071		16,246		41,968		32,467
Interest income	(408)		(222)		(925)		(898)
(Gain) loss on foreign exchange	(817)		27		(1,619)		(453)
Merger and acquisition expenses	252		314		283		979
Gain on revaluation of contingent acquisition consideration	—		(65,559)		—		(62,989)
Other expenses (income), net	79		(3,062)		124		(2,885)


Total expenses and other income	292,363		191,349		577,206		445,527

Income before income taxes	60,524		109,623		123,737		146,632

Provision for income taxes	15,344		23,515		31,169		32,519

Net income	$	45,180	$	86,108	$	92,568	$	114,113

Earnings per share:
Basic	$	0.99	$	1.82	$	2.02	$	2.39
Diluted	$	0.99	$	1.81	$	2.01	$	2.38

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,
	2023		2022		2023		2022
Net income	$	45,180	$	86,108	$	92,568	$	114,113
Other comprehensive income:
Currency translation adjustment	27,802		(484)		57,315		11,305
Comprehensive income	$	72,982	$	85,624	$	149,883	$	125,418

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, 2023
	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 12/31/2022		57,322	$	573	$	1,734,528	$	1,060,603	$	(106,573)	11,030	$	(809,365)	$	1,879,766
Shares issued under share-based compensation plan, net of 28 shares net-settled		—	—		(7,156)		—		—		(64)	4,693		(2,463)


Share-based compensation expense		—	—		3,375		—		—		—	—		3,375
Net income		—	—		—		47,388		—		—	—		47,388
Cash dividends ($0.33 per share)		—	—		—		(15,294)		—		—	—		(15,294)
Currency translation adjustment		—	—		—		—		29,513		—	—		29,513
Purchases of treasury stock, including excise tax		—	—		—		—		—		782	(71,411)		(71,411)

As of 3/31/2023		57,322	$	573	$	1,730,747	$	1,092,697	$	(77,060)	11,748	$	(876,083)	$	1,870,874




Share-based compensation expense		—	—		3,375		—		—		—	—		3,375
Net income		—	—		—		45,180		—		—	—		45,180
Cash dividends ($0.33 per share)		—	—		—		(15,298)		—		—	—		(15,298)
Currency translation adjustment		—	—		—		—		27,802		—	—		27,802
Purchases of treasury stock, including excise tax		—	—		—		—		—		371	(35,214)		(35,214)

As of 6/30/2023		57,322	$	573	$	1,734,122	$	1,122,579	$	(49,258)	12,119	$	(911,297)	$	1,896,719


















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, 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 CASH FLOWS
(unaudited, in thousands)
	Six Months Ended
	June 30,
	2023		2022
Cash flow from operating activities:
Net income	$	92,568	$	114,113
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation of leased merchandise	204,126		176,311
Provision for lease losses	101,938		77,855
Provision for loan losses	57,475		51,497
Share-based compensation expense	6,750		5,950
Depreciation and amortization expense	54,161		51,524
Amortization of debt issuance costs	1,375		1,473
Net amortization of premiums, discounts and unearned origination fees on finance receivables	(7,411)		27,451
Gain on revaluation of contingent acquisition consideration	—		(62,989)
Impairments and dispositions of certain other assets	124		318

Deferred income taxes, net	(10,571)		12,702
Changes in operating assets and liabilities, net of business combinations:
Accounts receivable, net	(3,551)		(224)
Inventories purchased directly from customers, wholesalers or manufacturers	11,476		1,804
Leased merchandise, net	(295,907)		(229,146)
Prepaid expenses and other assets	(4,696)		(1,672)
Accounts payable, accrued liabilities and other liabilities	(2,936)		(4,846)
Income taxes	748		4,646
Net cash flow provided by operating activities	205,669		226,767
Cash flow from investing activities:
Pawn loans, net (1)	188		(32,265)
Finance receivables, net	(57,125)		(23,546)
Purchases of furniture, fixtures, equipment and improvements	(28,348)		(19,686)
Purchases of store real property	(34,542)		(58,559)

Acquisitions of pawn stores, net of cash acquired	(5,472)		(2,343)

Net cash flow used in investing activities	(125,299)		(136,399)
Cash flow from financing activities:
Borrowings from unsecured credit facilities	180,000		126,000
Repayments of unsecured credit facilities	(143,000)		(111,000)





Debt issuance costs paid	—		(475)
Purchases of treasury stock	(101,843)		(87,727)


Payment of withholding taxes on net share settlements of restricted stock unit awards	(2,463)		—
Dividends paid	(30,592)		(28,781)
Net cash flow used in financing activities	(97,898)		(101,983)


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FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONTINUED
(unaudited, in thousands)
	Six Months Ended
	June 30,
	2023		2022
Effect of exchange rates on cash	4,796		1,983
Change in cash and cash equivalents	(12,732)		(9,632)
Cash and cash equivalents at beginning of the period	117,330		120,046
Cash and cash equivalents at end of the period	$	104,598	$	110,414

(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, 2022, which is derived from audited consolidated financial statements, and the unaudited consolidated financial statements, including the notes thereto, includes 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 acquisitions 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, 2022, filed with the SEC on February 6, 2023. The consolidated financial statements as of June 30, 2023 and 2022, and for the three month and six month periods ended June 30, 2023 and 2022, 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, 2023 are not necessarily indicative of the results that may be expected for the full year.

The Company has pawn 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 pawn 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.

Recent Accounting Pronouncements

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. Except for expanded disclosures to the Company’s vintage disclosures, ASU 2022-02 did not have a material effect on the Company’s current financial position, results of operations or financial statements. See Note 5.


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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,
	2023		2022		2023		2022
Numerator:
Net income	$	45,180	$	86,108	$	92,568	$	114,113



Denominator:
Weighted-average common shares for calculating basic earnings per share	45,455		47,425		45,799		47,831
Effect of dilutive securities:
Restricted stock unit awards	223		74		194		66
Weighted-average common shares for calculating diluted earnings per share	45,678		47,499		45,993		47,897

Earnings per share:
Basic	$	0.99	$	1.82	$	2.02	$	2.39
Diluted	$	0.99	$	1.81	$	2.01	$	2.38

Note 3 - 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 2022 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 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 3.9 years as of June 30, 2023 and 4.1 years as of June 30, 2022.

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, 2023 and 2022 was 7.3% and 6.0%, respectively.


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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 $1.1 million and less than $0.1 million during the three months ended June 30, 2023 and 2022, respectively, related to the remeasurement of these U.S. dollar denominated operating leases, which is included in (gain) loss on foreign exchange in the accompanying consolidated statements of income. During the six months ended June 30, 2023 and 2022, the Company recognized a foreign currency gain of $2.3 million and $0.7 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, 2023 and 2022 (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Operating lease expense	$	34,475	$	32,074	$	68,015	$	63,602
Variable lease expense (1)	4,561		4,229		9,033		8,403
Total operating lease expense	$	39,036	$	36,303	$	77,048	$	72,005

(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, 2023 (in thousands):


Six months ending December 31, 2023	$	59,618
2024	101,384
2025	72,721
2026	49,375
2027	25,547
Thereafter	28,781
Total	$	337,426
Less amount of lease payments representing interest	(44,076)
Total present value of lease payments	$	293,350

The following table details supplemental cash flow information related to operating leases for the six months ended June 30, 2023 and 2022 (in thousands):


	Six Months Ended
	June 30,
	2023		2022
Cash paid for amounts included in the measurement of operating lease liabilities	$	60,660	$	58,343
Leased assets obtained in exchange for new operating lease liabilities	$	35,392	$	41,991


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Note 4 - 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 did not have any financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2023. The Company’s financial assets and liabilities as of June 30, 2022 and December 31, 2022 that are measured at fair value on a recurring basis are as follows (in thousands):


	Estimated Fair Value
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Financial liabilities (1):
Contingent consideration as of June 30, 2022	$	—	$	—	$	46,560
Contingent consideration as of December 31, 2022	—		—		—

(1)Under the AFF purchase agreement, the seller parties had the right to receive up to $50 million of additional consideration if AFF achieved certain adjusted EBITDA targets for the first half of 2023. AFF did not achieve the threshold adjusted EBITDA target for the first half of 2023 and, therefore, the $50 million of additional consideration was not earned by the seller parties. As of June 30, 2023, there was no remaining contingent consideration available to the seller parties. The contingent consideration related to the AFF acquisition is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheet as of June 30, 2022.

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, 2023 and June 30, 2022 are as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Contingent consideration at beginning of the period	$	—	$	112,119	$	—	$	109,549
Change in fair value (1)	—		(65,559)		—		(62,989)
Contingent 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, 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, 2023 and June 30, 2022.


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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

The Company’s financial assets and liabilities as of June 30, 2023, June 30, 2022 and December 31, 2022 that are not measured at fair value in the consolidated balance sheets are as follows (in thousands):


	Carrying Value		Estimated Fair Value
	June 30,		June 30,		Fair Value Measurements Using
	2023		2023		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	104,598	$	104,598	$	104,598	$	—	$	—
Accounts receivable, net	63,337		63,337		—		—		63,337
Pawn loans	426,165		426,165		—		—		426,165
Finance receivables, net (1)	110,555		225,195		—		—		225,195
	$	704,655	$	819,295	$	104,598	$	—	$	714,697

Financial liabilities:
Revolving unsecured credit facility	$	376,000	$	376,000	$	—	$	376,000	$	—
Senior unsecured notes (outstanding principal)	1,050,000		941,000		—		941,000		—
	$	1,426,000	$	1,317,000	$	—	$	1,317,000	$	—

(1)Finance receivables, gross as of June 30, 2023 was $216.0 million. See Note 5.


	Carrying Value		Estimated Fair Value
	June 30,		June 30,		Fair Value Measurements Using
	2022		2022		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	110,414	$	110,414	$	110,414	$	—	$	—
Accounts receivable, net	55,924		55,924		—		—		55,924
Pawn loans	385,708		385,708		—		—		385,708
Finance receivables, net (1)	125,619		196,210		—		—		196,210
	$	677,665	$	748,256	$	110,414	$	—	$	637,842

Financial liabilities:
Revolving unsecured credit facilities	$	274,000	$	274,000	$	—	$	274,000	$	—
Senior unsecured notes (outstanding principal)	1,050,000		900,000		—		900,000		—
	$	1,324,000	$	1,174,000	$	—	$	1,174,000	$	—

(1)Finance receivables, gross as of June 30, 2022 was $190.3 million. See Note 5.


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	Carrying Value		Estimated Fair Value
	December 31,		December 31,		Fair Value Measurements Using
	2022		2022		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	117,330	$	117,330	$	117,330	$	—	$	—
Accounts receivable, net	57,792		57,792		—		—		57,792
Pawn loans	390,617		390,617		—		—		390,617
Finance receivables, net (1)	103,494		201,895		—		—		201,895
	$	669,233	$	767,634	$	117,330	$	—	$	650,304

Financial liabilities:
Revolving unsecured credit facilities	$	339,000	$	339,000	$	—	$	339,000	$	—
Senior unsecured notes (outstanding principal)	1,050,000		932,000		—		932,000		—
	$	1,389,000	$	1,271,000	$	—	$	1,271,000	$	—

(1)Finance receivables, gross as of December 31, 2022 were $196.0 million. See Note 5.

As cash and cash equivalents have maturities of less than three months, the carrying value of cash and cash equivalents approximates fair value. Due to their short-term maturities, the carrying value of pawn loans and accounts receivable, net approximate fair value.

Finance receivables are measured at amortized cost, net of an allowance for loan losses on the consolidated balance sheets. In estimating fair value for finance receivables, the Company utilized a discounted cash flow methodology. The Company used various unobservable inputs reflecting its own assumptions, such as contractual future principal and interest cash flows, future charge-off rates and discount rates (which consider current interest rates and are adjusted for credit risk, among other factors).

The carrying value of the unsecured credit facilities approximates fair value as of June 30, 2023, June 30, 2022 and December 31, 2022. The fair value of the unsecured credit facilities is estimated based on market values for debt issuances with similar characteristics or rates currently available for debt with similar terms. In addition, the unsecured credit facilities have a variable interest rate based on the prevailing secured overnight financing rate (“SOFR”) or the Mexican Central Bank’s interbank equilibrium rate (“TIIE”) and reprice with any changes in SOFR or TIIE. The fair value of the senior unsecured notes is estimated based on quoted prices in markets that are not active.

Note 5 - Finance Receivables, Net

Finance receivables, net, which include retail installment sales agreements and bank-originated installment loans, consist of the following (in thousands):


	As of June 30,				As of December 31,
	2023		2022		2022
Finance receivables, gross	$	216,037	$	190,256	$	195,987
Fair value premium on non-purchase credit deteriorated (”PCD”) finance receivables (1)	—		13,003		—

Merchant partner discounts and premiums, net	(7,812)		(1,002)		(3,517)
Unearned origination fees	(4,616)		(2,702)		(4,143)
Finance receivables, amortized cost	203,609		199,555		188,327
Less allowance for loan losses	(93,054)		(73,936)		(84,833)
Finance receivables, net	$	110,555	$	125,619	$	103,494

(1)Represents the difference between the initial fair value and the unpaid principal balance as of the date of the AFF acquisition, which is recognized through interest income on an effective yield basis over the lives of the related non-PCD finance receivables.


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The following table details the changes in the allowance for loan losses (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Balance at beginning of period	$	88,610	$	72,332	$	84,833	$	75,574
Provision for loan losses	28,190		26,800		57,475		51,497

Charge-offs	(25,274)		(26,579)		(52,391)		(55,987)
Recoveries	1,528		1,383		3,137		2,852
Balance at end of period	$	93,054	$	73,936	$	93,054	$	73,936

The following is an assessment of the credit quality indicators of the amortized cost of finance receivables as of June 30, 2023 and 2022, by origination year (in thousands):


	Origination Year
	2023		2022		2021		Total
As of June 30, 2023
Delinquency:
1 to 30 days past due	$	10,963	$	6,371	$	580	$	17,914
31 to 60 days past due	5,973		4,141		410		10,524
61 to 89 days past due (1)	4,200		4,000		401		8,601
Total past due finance receivables	21,136		14,512		1,391		37,039
Current finance receivables	110,611		51,481		4,478		166,570
Finance receivables, amortized cost	$	131,747	$	65,993	$	5,869	$	203,609


	Origination Year
	2022		2021		2020		Total
As of June 30, 2022
Delinquency:
1 to 30 days past due	$	8,919	$	7,849	$	478	$	17,246
31 to 60 days past due	4,467		5,275		286		10,028
61 to 89 days past due (1)	3,014		4,837		293		8,144
Total past due finance receivables before fair value adjustments	16,400		17,961		1,057		35,418
Current finance receivables before fair value adjustments	89,414		57,852		3,868		151,134
Finance receivables before fair value adjustments	$	105,814	$	75,813	$	4,925	186,552
Fair value premium on non-PCD finance receivables							13,003
Finance receivables, amortized cost							$	199,555

(1)The Company charges off finance receivables when a receivable is 90 days or more contractually past due.

The following table details the gross charge-offs of finance receivables for the six months ended June 30, 2023, by origination year (in thousands):


	Origination Year
	2023		2022		2021		Total
Finance receivables gross charge-offs:
Gross charge-offs during the six months ended June 30, 2023	$	6,110	$	39,770	$	6,511	$	52,391


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Note 6 - Leased Merchandise, Net

Leased merchandise, net consists of the following (in thousands):


	As of June 30,				As of December 31,
	2023		2022		2022
Leased merchandise (1)	$	369,547	$	255,559	$	335,038
Processing fees	(4,313)		(2,882)		(4,124)
Merchant partner discounts and premiums, net	2,735		1,862		2,456
Accumulated depreciation	(113,852)		(66,514)		(100,879)
Leased merchandise, before allowance for lease losses	254,117		188,025		232,491
Less allowance for lease losses	(110,972)		(69,101)		(79,189)
Leased merchandise, net	$	143,145	$	118,924	$	153,302

(1)Acquired leased merchandise in the AFF acquisition was recorded at fair value.

The following table details the changes in the allowance for lease losses (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Balance at beginning of period	$	93,149	$	40,364	$	79,189	$	5,442
Provision for lease losses	52,873		38,035		101,938		77,855
Charge-offs	(36,723)		(10,301)		(73,501)		(16,321)
Recoveries	1,673		1,003		3,346		2,125
Balance at end of period	$	110,972	$	69,101	$	110,972	$	69,101


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Note 7 - Long-Term Debt

The following table details the Company’s long-term debt at the respective principal amounts, net of unamortized debt issuance costs on the senior unsecured notes (in thousands):


	As of June 30,				As of December 31,
	2023		2022		2022

Revolving unsecured credit facility, maturing 2027 (1)	$	376,000	$	274,000	$	339,000

Senior unsecured notes:
4.625% senior unsecured notes due 2028 (2)	493,981		492,981		493,475
5.625% senior unsecured notes due 2030 (3)	542,679		541,780		542,223
Total senior unsecured notes	1,036,660		1,034,761		1,035,698

Total long-term debt	$	1,412,660	$	1,308,761	$	1,374,698

(1)Debt issuance costs related to the Company’s revolving unsecured credit facilities are included in other assets in the accompanying consolidated balance sheets.

(2)As of June 30, 2023, June 30, 2022 and December 31, 2022, deferred debt issuance costs of $6.0 million, $7.0 million and $6.5 million, respectively, are included as a direct deduction from the carrying amount of the senior unsecured notes due 2028 in the accompanying consolidated balance sheets.

(3)As of June 30, 2023, June 30, 2022 and December 31, 2022, deferred debt issuance costs of $7.3 million, $8.2 million and $7.8 million, respectively, are included as a direct deduction from the carrying amount of the senior unsecured notes due 2030 in the accompanying consolidated balance sheets.

Revolving Unsecured Credit Facility

As of June 30, 2023, the Company maintained an unsecured line of credit with a group of U.S.-based commercial lenders (the “Credit Facility”) in the amount of $590.0 million. The Credit Facility matures on August 30, 2027. As of June 30, 2023, the Company had $376.0 million in outstanding borrowings and $2.9 million in outstanding letters of credit under the Credit Facility, leaving $211.1 million available for future borrowings, subject to certain financial covenants. The Credit Facility bears interest at the Company’s option of either (i) the prevailing SOFR (with interest periods of 1, 3 or 6 months at the Company’s option) plus a fixed spread of 2.5% and a fixed SOFR adjustment of 0.1% or (ii) the prevailing prime or base rate plus a fixed spread of 1.5%. The agreement has an interest rate floor of 0%. Additionally, the Company is required to pay an annual commitment fee of 0.325% on the average daily unused portion of the Credit Facility commitment. The weighted-average interest rate on amounts outstanding under the Credit Facility at June 30, 2023 was 7.70% based on 1-month SOFR. Under the terms of the Credit Facility, the Company is required to maintain certain financial ratios and comply with certain financial covenants. The Credit Facility also contains customary restrictions on the Company’s ability to incur additional debt, grant liens, make investments, consummate acquisitions and similar negative covenants with customary carve-outs and baskets. The Company was in compliance with the covenants of the Credit Facility as of June 30, 2023. During the six months ended June 30, 2023, the Company received net proceeds of $37.0 million from borrowings pursuant to the Credit Facility.

Senior Unsecured Notes Due 2028

On August 26, 2020, the Company issued $500.0 million of 4.625% senior unsecured notes due on September 1, 2028 (the “2028 Notes”), all of which are currently outstanding. Interest on the 2028 Notes is payable semi-annually in arrears on March 1 and September 1. The 2028 Notes are fully and unconditionally guaranteed on a senior unsecured basis jointly and severally by all of the Company's existing and future domestic subsidiaries that guarantee its Credit Facility. The 2028 Notes will permit the Company to make restricted payments, such as purchasing shares of its stock and paying cash dividends, in an unlimited amount if, after giving pro forma effect to the incurrence of any indebtedness to make such payment, the Company's consolidated total debt ratio is less than 2.75 to 1. The consolidated total debt ratio is defined generally in the indenture governing the 2028 Notes as the ratio of (1) the total consolidated debt of the Company minus cash and cash equivalents of the Company to (2) the Company’s consolidated trailing twelve months EBITDA, as adjusted to exclude certain non-recurring expenses and giving pro forma effect to operations acquired during the measurement period. As of June 30, 2023, the Company’s consolidated total debt ratio was 2.7 to 1. While the 2028 Notes generally limit the Company’s ability to make


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restricted payments if the consolidated total debt ratio is greater than 2.75 to 1, restricted payments are allowable within certain permitted baskets, which currently provide the Company with continued flexibility to make restricted payments when the Company’s consolidated total debt ratio is greater than 2.75 to 1.

Senior Unsecured Notes Due 2030

On December 13, 2021, the Company issued $550.0 million of 5.625% senior unsecured notes due on January 1, 2030 (the “2030 Notes”), all of which are currently outstanding. Interest on the 2030 Notes is payable semi-annually in arrears on January 1 and July 1. The 2030 Notes are fully and unconditionally guaranteed on a senior unsecured basis jointly and severally by all of the Company's existing and future domestic subsidiaries that guarantee its Credit Facility. The 2030 Notes will permit the Company to make restricted payments, such as purchasing shares of its stock and paying cash dividends, in an unlimited amount if, after giving pro forma effect to the incurrence of any indebtedness to make such payment, the Company's consolidated total debt ratio is less than 3.0 to 1. The consolidated total debt ratio is defined generally in the indenture governing the 2030 Notes as the ratio of (1) the total consolidated debt of the Company minus cash and cash equivalents of the Company to (2) the Company’s consolidated trailing twelve months EBITDA, as adjusted to exclude certain non-recurring expenses and giving pro forma effect to operations acquired during the measurement period. As of June 30, 2023, the Company’s consolidated total debt ratio was 2.7 to 1. While the 2030 Notes generally limit the Company’s ability to make restricted payments if the consolidated total debt ratio is greater than 3.0 to 1, restricted payments are allowable within certain permitted baskets, which currently provides the Company with continued flexibility to make restricted payments when the Company’s consolidated total debt ratio is greater than 3.0 to 1.

Note 8 - Commitments and Contingencies

Litigation

The Company, in the ordinary course of business, is a party to various legal and regulatory proceedings and other general claims. Although no assurances can be given, in management’s opinion, such outstanding proceedings are not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

The Company believes it has meritorious defenses to all of the claims described below, and intends to vigorously defend itself against such claims. However, legal and regulatory proceedings involve an inherent level of uncertainty and no assurances can be given regarding the ultimate outcome of any such matters or whether an adverse outcome would not have a material adverse impact on the Company’s financial position, results of operations, or cash flows. At this stage, the Company is unable to determine whether a future loss will be incurred for any of its outstanding legal and regulatory proceedings or estimate a range of loss with respect to such proceeding, if any, and accordingly, no material amounts have been accrued in the Company’s financial statements for legal and regulatory proceedings.

On January 14, 2022, plaintiff Genesee County Employees’ Retirement System filed a putative shareholder securities class action lawsuit (the “Litigation”) in the United States District Court for the Northern District of Texas against the Company and certain of its current officers styled Genesee County Employees’ Retirement System v. FirstCash Holdings, Inc., et al., Civil Action No. 4:22-CV-00033-P (N.D. Tex.). The complaint alleges that the defendants made materially false and/or misleading statements that caused losses to investors, including that the Company failed to disclose in public statements that the Company engaged in widespread and systemic violations of the Military Lending Act (“MLA”). On March 31, 2023, the Court granted the Company’s Motion to Dismiss with prejudice and entered Final Judgment in its favor.

The Company was named as a nominal defendant and certain of the Company’s current and former directors and officers were named as defendants in a shareholder derivative lawsuit filed on July 19, 2022 in the United States District Court for the Northern District of Texas and styled Treppel Family Trust U/A 08/18/18 Lawrence A. Treppel and Geri D. Treppel for the Benefit of Geri D. Treppel and Larry A. Treppel, Derivatively on Behalf of FirstCash Holdings, Inc., v. Rick L. Wessel, et. al, Case 4:22-cv-00623-P (N.D. Tex). The complaint made similar allegations as the Litigation and alleged a single count for breach of fiduciary duty against the named derivative defendants. On June 20, 2023, the Plaintiff filed a stipulation voluntarily dismissing the case without prejudice and the Court closed the case the same day.


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On November 12, 2021, the CFPB initiated a civil action in the United States District Court for the Northern District of Texas against FirstCash, Inc. and Cash America West, Inc., two of the Company’s subsidiaries, alleging violations of the MLA in connection with pawn transactions. The CFPB also alleges that these same alleged violations of the MLA constitute breaches of a 2013 CFPB consent order entered into by its predecessor company that, among other things, allegedly required the company and its successors to cease and desist from further MLA violations. The CFPB is seeking an injunction, redress for affected borrowers and a civil monetary penalty. On March 28, 2022, the CFPB filed a motion to strike certain affirmative defenses of the Company. The Company responded by filing a motion for partial summary judgment. On October 24, 2022, the Company filed a motion to dismiss the lawsuit on the basis that the funding structure of the CFPB is unconstitutional. This motion to dismiss follows the recent decision in another case by the Fifth Circuit Court of Appeals which found that the CFPB is unconstitutionally structured. The Fifth Circuit’s decisions govern the law applied in the jurisdiction in which the CFPB action is pending against the Company. In light of the CFPB's stated intent to seek Supreme Court review of that decision, the parties stipulated to a stay of the action against the Company, which the Court entered on November 4, 2022. The Supreme Court decided to review the Fifth Circuit's decision, which has been set for oral argument on October 3, 2023. Following that argument, the Supreme Court will issue a decision some time before its term ends in June 2024. The stay of the CFPB’s action against the Company will remain in effect until that Supreme Court appeal is resolved.

Gold Forward Sales Contracts

As of June 30, 2023, the Company had contractual commitments to deliver a total of 66,600 gold ounces during the months of July 2023 through March 2025 at a weighted-average price of $2,013 per ounce. The ounces required to be delivered over this time period are within historical scrap gold volumes and the Company expects to have the required gold ounces to meet the commitments as they come due.

Note 9 - Segment Information

The Company organizes its operations into three reportable segments as follows:

•U.S. pawn

•Latin America pawn

•Retail POS payment solutions (AFF)

Corporate expenses and income, which include administrative expenses, corporate depreciation and amortization, interest expense, interest income, (gain) loss on foreign exchange, merger and acquisition expenses, gain on revaluation of contingent acquisition consideration, and other expenses (income), net, are presented on a consolidated basis and are not allocated between the U.S. pawn segment, Latin America pawn segment or retail POS payment solutions segment. Intersegment transactions relate to the Company offering AFF’s LTO payment solution as a payment option in its U.S. pawn stores and are eliminated to arrive at consolidated totals.


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The following tables present reportable segment information for the three and six month periods ended June 30, 2023 and 2022 as well as segment earning assets (in thousands):


	Three Months Ended June 30, 2023
	U.S. Pawn		Latin America Pawn		Retail POS Payment Solutions		Corporate/ Eliminations			Consolidated
Revenue:
Retail merchandise sales	$	196,043	$	126,581	$	—	$	(1,760)	(1)	$	320,864
Pawn loan fees	98,973		55,205		—		—			154,178
Leased merchandise income	—		—		189,805		—			189,805
Interest and fees on finance receivables	—		—		58,192		—			58,192
Wholesale scrap jewelry sales	17,652		9,931		—		—			27,583
Total revenue	312,668		191,717		247,997		(1,760)			750,622

Cost of revenue:
Cost of retail merchandise sold	111,539		81,660		—		(928)		(1)	192,271
Depreciation of leased merchandise	—		—		103,062		(541)		(1)	102,521
Provision for lease losses	—		—		53,048		(175)		(1)	52,873
Provision for loan losses	—		—		28,190		—			28,190
Cost of wholesale scrap jewelry sold	14,225		7,655		—		—			21,880
Total cost of revenue	125,764		89,315		184,300		(1,644)			397,735

Net revenue (loss)	186,904		102,402		63,697		(116)			352,887

Expenses and other income:
Operating expenses	108,159		59,507		37,115		—			204,781
Administrative expenses	—		—		—		40,355			40,355
Depreciation and amortization	6,330		5,203		751		14,766			27,050
Interest expense	—		—		—		21,071			21,071
Interest income	—		—		—		(408)			(408)
Gain on foreign exchange	—		—		—		(817)			(817)
Merger and acquisition expenses	—		—		—		252			252

Other expenses (income), net	—		—		—		79			79

Total expenses and other income	114,489		64,710		37,866		75,298			292,363

Income (loss) before income taxes	$	72,415	$	37,692	$	25,831	$	(75,414)		$	60,524

(1)Represents the elimination of intersegment transactions related to the Company offering AFF’s LTO payment solution as a payment option in its U.S. pawn stores.


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	Six Months Ended June 30, 2023
	U.S. Pawn		Latin America Pawn		Retail POS Payment Solutions		Corporate/ Eliminations			Consolidated
Revenue:
Retail merchandise sales	$	406,724	$	245,518	$	—	$	(3,463)	(1)	$	648,779
Pawn loan fees	201,657		104,081		—		—			305,738
Leased merchandise income	—		—		373,243		—			373,243
Interest and fees on finance receivables	—		—		112,834		—			112,834
Wholesale scrap jewelry sales	43,968		28,799		—		—			72,767
Total revenue	652,349		378,398		486,077		(3,463)			1,513,361

Cost of revenue:
Cost of retail merchandise sold	233,468		159,623		—		(1,819)		(1)	391,272
Depreciation of leased merchandise	—		—		205,234		(1,108)		(1)	204,126
Provision for lease losses	—		—		102,214		(276)		(1)	101,938
Provision for loan losses	—		—		57,475		—			57,475
Cost of wholesale scrap jewelry sold	35,307		22,300		—		—			57,607
Total cost of revenue	268,775		181,923		364,923		(3,203)			812,418

Net revenue (loss)	383,574		196,475		121,154		(260)			700,943

Expenses and other income:
Operating expenses	217,940		115,263		70,639		—			403,842
Administrative expenses	—		—		—		79,372			79,372
Depreciation and amortization	12,200		10,648		1,487		29,826			54,161
Interest expense	—		—		—		41,968			41,968
Interest income	—		—		—		(925)			(925)
Gain on foreign exchange	—		—		—		(1,619)			(1,619)
Merger and acquisition expenses	—		—		—		283			283

Other expenses (income), net	—		—		—		124			124

Total expenses and other income	230,140		125,911		72,126		149,029			577,206

Income (loss) before income taxes	$	153,434	$	70,564	$	49,028	$	(149,289)		$	123,737


	As of June 30, 2023
	U.S. Pawn		Latin America Pawn		Retail POS Payment Solutions		Corporate/ Eliminations			Consolidated
Earning assets:
Pawn loans	$	291,447	$	134,718	$	—	$	—		$	426,165
Finance receivables, net	—		—		110,555		—			110,555
Inventories	180,410		86,732		—		—			267,142
Leased merchandise, net	—		—		144,501		(1,356)		(1)	143,145

(1)Represents the elimination of intersegment transactions related to the Company offering AFF’s LTO payment solution as a payment option in its U.S. pawn stores.


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	Three Months Ended June 30, 2022
	U.S. Pawn		Latin America Pawn		Retail POS Payment Solutions		Corporate/ Eliminations		Consolidated
Revenue:
Retail merchandise sales	$	195,369	$	102,888	$	—	$	—	$	298,257
Pawn loan fees	87,743		46,324		—		—		134,067
Leased merchandise income	—		—		147,700		—		147,700
Interest and fees on finance receivables	—		—		43,744		—		43,744
Wholesale scrap jewelry sales	15,673		8,175		—		—		23,848
Total revenue	298,785		157,387		191,444		—		647,616

Cost of revenue:
Cost of retail merchandise sold	114,390		64,919		—		—		179,309
Depreciation of leased merchandise	—		—		82,605		—		82,605
Provision for lease losses	—		—		38,035		—		38,035
Provision for loan losses	—		—		26,800		—		26,800
Cost of wholesale scrap jewelry sold	13,282		6,613		—		—		19,895
Total cost of revenue	127,672		71,532		147,440		—		346,644

Net revenue	171,113		85,855		44,004		—		300,972

Expenses and other income:
Operating expenses	101,242		48,053		31,260		—		180,555
Administrative expenses	—		—		—		37,068		37,068
Depreciation and amortization	5,868		4,553		699		14,862		25,982
Interest expense	—		—		—		16,246		16,246
Interest income	—		—		—		(222)		(222)
Loss on foreign exchange	—		—		—		27		27
Merger and acquisition expenses	—		—		—		314		314
Gain on revaluation of contingent acquisition consideration	—		—		—		(65,559)		(65,559)
Other expenses (income), net	—		—		—		(3,062)		(3,062)

Total expenses and other income	107,110		52,606		31,959		(326)		191,349

Income before income taxes	$	64,003	$	33,249	$	12,045	$	326	$	109,623


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	Six Months Ended June 30, 2022
	U.S. Pawn		Latin America Pawn		Retail POS Payment Solutions		Corporate/ Eliminations		Consolidated
Revenue:
Retail merchandise sales	$	400,311	$	200,765	$	—	$	—	$	601,076
Pawn loan fees	178,082		87,804		—		—		265,886
Leased merchandise income	—		—		297,647		—		297,647
Interest and fees on finance receivables	—		—		86,193		—		86,193
Wholesale scrap jewelry sales	32,197		24,456		—		—		56,653
Total revenue	610,590		313,025		383,840		—		1,307,455

Cost of revenue:
Cost of retail merchandise sold	234,108		127,415		—		—		361,523
Depreciation of leased merchandise	—		—		176,311		—		176,311
Provision for lease losses	—		—		77,855		—		77,855
Provision for loan losses	—		—		51,497		—		51,497
Cost of wholesale scrap jewelry sold	27,812		20,298		—		—		48,110
Total cost of revenue	261,920		147,713		305,663		—		715,296

Net revenue	348,670		165,312		78,177		—		592,159

Expenses and other income:
Operating expenses	200,064		93,595		60,192		—		353,851
Administrative expenses	—		—		—		73,931		73,931
Depreciation and amortization	11,455		8,954		1,381		29,734		51,524
Interest expense	—		—		—		32,467		32,467
Interest income	—		—		—		(898)		(898)
Gain on foreign exchange	—		—		—		(453)		(453)
Merger and acquisition expenses	—		—		—		979		979
Gain on revaluation of contingent acquisition consideration	—		—		—		(62,989)		(62,989)
Other expenses (income), net	—		—		—		(2,885)		(2,885)

Total expenses and other income	211,519		102,549		61,573		69,886		445,527

Income (loss) before income taxes	$	137,151	$	62,763	$	16,604	$	(69,886)	$	146,632


	As of June 30, 2022
	U.S. Pawn		Latin America Pawn		Retail POS Payment Solutions		Consolidated
Earning assets:
Pawn loans	$	271,255	$	114,453	$	—	$	385,708
Finance receivables, net	—		—		125,619		125,619
Inventories	185,921		74,607		—		260,528
Leased merchandise, net	—		—		118,924		118,924


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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of financial condition, results of operations, liquidity and capital resources of FirstCash Holdings, Inc. and its wholly-owned subsidiaries (together, the “Company”) should be read in conjunction with the Company’s consolidated financial statements and accompanying notes included under Part I, Item 1 of this quarterly report on Form 10-Q, as well as with the audited consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

GENERAL

The Company’s primary line of business is the operation of retail pawn stores, also known as “pawnshops,” which focus on serving cash and credit-constrained consumers. The Company is the leading operator of pawn stores in the U.S. and Latin America. Pawn stores help customers meet small short-term cash needs by providing non-recourse pawn loans and buying merchandise directly from customers. Personal property, such as jewelry, electronics, tools, appliances, sporting goods and musical instruments, is pledged and held as collateral for the pawn loans over the typical 30-day term of the loan. Pawn stores also generate retail sales primarily from the merchandise acquired through collateral forfeitures and over-the-counter purchases from customers.

The Company is also a leading provider of technology-driven, retail POS payment solutions focused on serving credit-constrained consumers. The Company’s retail POS payment solutions business line consists solely of the operations of AFF, which focuses on LTO products and facilitating other retail financing payment options across a large network of traditional and e-commerce merchant partners in all 50 states in the U.S., the District of Columbia and Puerto Rico. AFF’s retail partners provide consumer goods and services to their customers and use AFF’s LTO and retail finance solutions to facilitate payments on such transactions.

The Company’s two business lines are organized into three reportable segments. The U.S. pawn segment consists of all pawn operations in the U.S. and the Latin America pawn segment consists of all pawn operations in Mexico, Guatemala, Colombia and El Salvador. The retail POS payment solutions segment consists of the operations of AFF in the U.S. and Puerto Rico.


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OPERATIONS AND LOCATIONS

Pawn Operations

As of June 30, 2023, the Company operated 2,889 pawn store locations composed of 1,101 stores in 25 U.S. states and the District of Columbia, 1,697 stores in 32 states in Mexico, 63 stores in Guatemala, 14 stores in Colombia and 14 stores in El Salvador.

The following tables detail pawn store count activity for the three and six months ended June 30, 2023:


	Three Months Ended June 30, 2023
	U.S.	Latin America	Total
Total locations, beginning of period	1,102	1,775	2,877
New locations opened (1)	2	16	18
Locations acquired	1	—	1


Consolidation of existing pawn locations (2)	(4)	(3)	(7)

Total locations, end of period	1,101	1,788	2,889


	Six Months Ended June 30, 2023
	U.S.	Latin America	Total
Total locations, beginning of period	1,101	1,771	2,872
New locations opened (1)	2	30	32
Locations acquired	4	—	4


Consolidation of existing pawn locations (2)	(6)	(13)	(19)

Total locations, end of period	1,101	1,788	2,889

(1)In addition to new store openings, the Company strategically relocated one store in the U.S. and one store in Latin America during the three months ended June 30, 2023. During the six months ended June 30, 2023, the Company strategically relocated two stores in the U.S. and two stores in Latin America.

(2)Store consolidations were primarily acquired locations over the past six years which have been combined with overlapping stores and for which the Company expects to maintain a significant portion of the acquired customer base in the consolidated location.

POS Payment Solutions

As of June 30, 2023, AFF provided LTO and retail POS payment solutions for consumer goods and services through a network of approximately 10,500 active retail merchant partner locations located in all 50 U.S. states, the District of Columbia and Puerto Rico.

CRITICAL ACCOUNTING ESTIMATES

The financial statements have been prepared in accordance with GAAP. The significant accounting policies and estimates that the Company believes are the most critical to aid in fully understanding and evaluating its reported financial results have been reported in the Company’s 2022 Annual Report on Form 10-K. There have been no changes to the Company’s significant accounting policies for the six months ended June 30, 2023.


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RESULTS OF OPERATIONS (unaudited)

Operating Results for the Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

U.S. Pawn Segment

The following table presents segment pre-tax operating income and other operating metrics of the U.S. pawn segment for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 (dollars in thousands). Operating expenses include salary and benefit expenses of pawn-store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the pawn stores.


	Three Months Ended
	June 30,						Increase /
	2023			2022			(Decrease)
U.S. Pawn Segment
Revenue:
Retail merchandise sales	$	196,043		$	195,369			—	%
Pawn loan fees		98,973			87,743			13	%
Wholesale scrap jewelry sales		17,652			15,673			13	%
Total revenue		312,668			298,785			5	%

Cost of revenue:
Cost of retail merchandise sold		111,539			114,390			(2)	%
Cost of wholesale scrap jewelry sold		14,225			13,282			7	%
Total cost of revenue		125,764			127,672			(1)	%

Net revenue		186,904			171,113			9	%

Segment expenses:
Operating expenses		108,159			101,242			7	%
Depreciation and amortization		6,330			5,868			8	%
Total segment expenses		114,489			107,110			7	%

Segment pre-tax operating income	$	72,415		$	64,003			13	%

Operating metrics:
Retail merchandise sales margin	43		%	41		%

Net revenue margin	60		%	57		%
Segment pre-tax operating margin	23		%	21		%


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The following table details earning assets, which consist of pawn loans and inventories as well as other earning asset metrics of the U.S. pawn segment, as of June 30, 2023 compared to June 30, 2022 (dollars in thousands, except as otherwise noted):


	As of June 30,						Increase /
	2023			2022			(Decrease)
U.S. Pawn Segment
Earning assets:
Pawn loans	$	291,447		$	271,255			7	%
Inventories		180,410			185,921			(3)	%
	$	471,857		$	457,176			3	%

Average outstanding pawn loan amount (in ones)	$	241		$	222			9	%

Composition of pawn collateral:
General merchandise	31		%	35		%
Jewelry	69		%	65		%
	100		%	100		%

Composition of inventories:
General merchandise	44		%	45		%
Jewelry	56		%	55		%
	100		%	100		%

Percentage of inventory aged greater than one year	2		%	1		%

Inventory turns (trailing twelve months cost of merchandise sales divided by average inventories)	2.8 times			2.7 times

Retail Merchandise Sales Operations

U.S. retail merchandise sales increased slightly, totaling $196.0 million during the second quarter of 2023 compared to $195.4 million for the second quarter of 2022. Same-store retail sales decreased 3% in the second quarter of 2023 compared to the second quarter of 2022. The slight increase in total retail sales was primarily due to sales contributions from acquired stores, whereas the decrease in same-store retail sales was primarily due to slightly lower than normal inventory levels during the second quarter of 2023 compared to the second quarter of 2022, as further described below. The gross profit margin on retail merchandise sales in the U.S. was 43% in the second quarter of 2023 and 41% in the second quarter of 2022.

U.S. inventories decreased 3% from $185.9 million at June 30, 2022 to $180.4 million at June 30, 2023. The decrease was primarily due to slightly lower pawn loan forfeiture rates in the second quarter of 2023 compared to the second quarter of 2022. Inventories aged greater than one year in the U.S. were 2% at June 30, 2023 and 1% at June 30, 2022.

Pawn Lending Operations

U.S. pawn loan receivables as of June 30, 2023 increased 7% in total and 6% on a same-store basis compared to June 30, 2022. The increase in total and same-store pawn receivables was primarily due to continued inflationary pressures driving additional demand for consumer credit and tightening of competing forms of consumer credit.

U.S. pawn loan fees increased 13% to $99.0 million during the second quarter of 2023 compared to $87.7 million for the second quarter of 2022. Same-store pawn fees in the second quarter of 2023 increased 11% compared to the second quarter of 2022. The increase in total and same-store pawn loan fees was primarily due to higher average pawn receivables and increased portfolio yield driven by improved customer redemption rates.


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Segment Expenses

U.S. operating expenses increased 7% to $108.2 million during the second quarter of 2023 compared to $101.2 million during the second quarter of 2022 while same-store operating expenses increased 4% compared with the prior-year period. The increase in total and same-store operating expenses was primarily due to inflationary increases in wages and certain other operating costs and increased store-level incentive compensation driven by increased net revenues and segment profit during the second quarter of 2023 compared to the second quarter of 2022.

Segment Pre-Tax Operating Income

The U.S. segment pre-tax operating income for the second quarter of 2023 was $72.4 million, which generated a pre-tax segment operating margin of 23% compared to $64.0 million and 21% in the prior year, respectively. The increase in the segment pre-tax operating income and margin reflected an improved net revenue margin partially offset by the increase in segment expenses.


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Latin America Operations Segment

Latin American results of operations for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 benefited from a 12% favorable change in the average value of the Mexican peso compared to the U.S. dollar. The translated value of Latin American earning assets as of June 30, 2023 compared to June 30, 2022 benefited from a 15% favorable change in the end-of-period Mexican peso compared to the U.S. dollar. Constant currency results are non-GAAP financial measures, which exclude the effects of foreign currency translation and are calculated by translating current-year results at prior-year average exchange rates. See the “Constant Currency Results” section in “Non-GAAP Financial Information” below for additional discussion of constant currency operating results.

The following table presents segment pre-tax operating income and other operating metrics of the Latin America pawn segment for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 (dollars in thousands). Operating expenses include salary and benefit expenses of pawn-store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the pawn stores.


													Constant Currency Basis
													Three Months
													Ended
		Three Months Ended											June 30,
		June 30,											2023			Increase
		2023				2022			Increase				(Non-GAAP)			(Non-GAAP)
Latin America Pawn Segment
Revenue:
Retail merchandise sales		$	126,581			$	102,888			23	%		$	112,899			10	%
Pawn loan fees		55,205				46,324				19	%		49,177				6	%
Wholesale scrap jewelry sales		9,931				8,175				21	%		9,931				21	%
Total revenue		191,717				157,387				22	%		172,007				9	%

Cost of revenue:
Cost of retail merchandise sold		81,660				64,919				26	%		72,893				12	%
Cost of wholesale scrap jewelry sold		7,655				6,613				16	%		6,798				3	%
Total cost of revenue		89,315				71,532				25	%		79,691				11	%

Net revenue		102,402				85,855				19	%		92,316				8	%

Segment expenses:
Operating expenses		59,507				48,053				24	%		53,373				11	%
Depreciation and amortization		5,203				4,553				14	%		4,693				3	%
Total segment expenses		64,710				52,606				23	%		58,066				10	%

Segment pre-tax operating income		$	37,692			$	33,249			13	%		$	34,250			3	%

Operating metrics:
Retail merchandise sales margin	35			%	37			%				35			%

Net revenue margin	53			%	55			%				54			%
Segment pre-tax operating margin	20			%	21			%				20			%


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The following table details earning assets, which consist of pawn loans and inventories as well as other earning asset metrics of the Latin America pawn segment, as of June 30, 2023 compared to June 30, 2022 (dollars in thousands, except as otherwise noted):


										Constant Currency Basis
										As of
										June 30,		Increase /
	As of June 30,									2023		(Decrease)
	2023			2022			Increase			(Non-GAAP)		(Non-GAAP)
Latin America Pawn Segment
Earning assets:
Pawn loans	$	134,718		$	114,453			18	%	$	116,100		1	%
Inventories		86,732			74,607			16	%	74,844			—	%
	$	221,450		$	189,060			17	%	$	190,944		1	%

Average outstanding pawn loan amount (in ones)	$	91		$	80			14	%	$	79		(1)	%

Composition of pawn collateral:
General merchandise	66		%	69		%
Jewelry	34		%	31		%
	100		%	100		%

Composition of inventories:
General merchandise	69		%	70		%
Jewelry	31		%	30		%
	100		%	100		%

Percentage of inventory aged greater than one year	1		%	1		%

Inventory turns (trailing twelve months cost of merchandise sales divided by average inventories)	4.3 times			4.2 times

Retail Merchandise Sales Operations

Latin America retail merchandise sales increased 23% (10% on a constant currency basis) to $126.6 million during the second quarter of 2023 compared to $102.9 million for the second quarter of 2022. Same-store retail sales increased 23% (9% on a constant currency basis) during the second quarter of 2023 compared to the second quarter of 2022. The increase in total and same-store retail sales was primarily due to increased inventory levels during the second quarter of 2023 compared to the second quarter of 2022 and greater demand for value-priced consumer goods, with such demand driven in part by inflationary pressures on the Company’s customers. The gross profit margin on retail merchandise sales was 35% during the second quarter of 2023 and 37% during the second quarter of 2022.

Latin America inventories increased 16% (flat on a constant currency basis) from $74.6 million at June 30, 2022 to $86.7 million at June 30, 2023. Inventories aged greater than one year in Latin America were 1% at both June 30, 2023 and 2022.


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Pawn Lending Operations

Latin America pawn loan receivables increased 18% (1% on a constant currency basis) as of June 30, 2023 compared to June 30, 2022, and on a same-store basis, pawn loan receivables increased 17% and 1%, respectively. Management believes that the flattening in local currency pawn balances in part reflects continued increases in government-mandated minimum wage and benefit programs in Mexico which have significantly benefited many cash-constrained consumers.

Latin America pawn loan fees increased 19% (6% on a constant currency basis), totaling $55.2 million during the second quarter of 2023 compared to $46.3 million for the second quarter of 2022. Same-store pawn fees also increased 19% (6% on a constant currency basis) in the second quarter of 2023 compared to the second quarter of 2022. The increase in total and same-store constant currency pawn loan fees was primarily due to improved pawn yields and higher average pawn receivables.

Segment Expenses

Operating expenses increased 24% (11% on a constant currency basis) to $59.5 million during the second quarter of 2023 compared to $48.1 million during the second quarter of 2022, reflecting continued store growth, inflationary pressure on labor and other operating expenses and increases in the federally mandated minimum wage and other required benefit programs. Same-store operating expenses increased 23% (10% on a constant currency basis) compared to the prior-year period.

Segment Pre-Tax Operating Income

The segment pre-tax operating income for the second quarter of 2023 was $37.7 million, which generated a pre-tax segment operating margin of 20% compared to $33.2 million and 21% in the prior year, respectively.


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Retail POS Payment Solutions Segment

Retail POS Payment Solutions Operating Results

The following table presents segment pre-tax operating income of the retail POS payment solutions segment for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 (dollars in thousands):


								Adjusted (1)
								Three Months
								Ended
	Three Months Ended							June 30,
	June 30,							2022		Increase
	2023		2022		Increase			(Non-GAAP)		(Non-GAAP)
Retail POS Payment Solutions Segment
Revenue:
Leased merchandise income	$	189,805	$	147,700		29	%	$	147,700		29	%
Interest and fees on finance receivables	58,192		43,744			33	%	55,258			5	%

Total revenue	247,997		191,444			30	%	202,958			22	%

Cost of revenue:
Depreciation of leased merchandise	103,062		82,605			25	%	81,007			27	%
Provision for lease losses	53,048		38,035			39	%	38,035			39	%
Provision for loan losses	28,190		26,800			5	%	26,800			5	%

Total cost of revenue	184,300		147,440			25	%	145,842			26	%

Net revenue	63,697		44,004			45	%	57,116			12	%

Segment expenses:
Operating expenses	37,115		31,260			19	%	31,260			19	%
Depreciation and amortization	751		699			7	%	699			7	%
Total segment expenses	37,866		31,959			18	%	31,959			18	%

Segment pre-tax operating income	$	25,831	$	12,045		114	%	$	25,157		3	%

(1)As a result of purchase accounting, AFF’s as reported amounts for the three months ended June 30, 2022 contain significant fair value adjustments. The adjusted amounts for the three months ended June 30, 2022 exclude these fair value purchase accounting adjustments.


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The following table provides a detail of gross transaction volumes originated during the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 (in thousands):


	Three Months Ended
	June 30,
	2023		2022		Increase
Leased merchandise	$	154,103	$	123,263		25	%
Finance receivables	101,863		82,929			23	%
Total gross transaction volume	$	255,966	$	206,192		24	%

The following table details retail POS payment solutions earning assets as of June 30, 2023 as compared to June 30, 2022 (in thousands):


								Adjusted (2)
								As of
								June 30,		Increase /
	As of June 30,				Increase /			2022		(Decrease)
	2023		2022		(Decrease)			(Non-GAAP)		(Non-GAAP)
Leased merchandise, net:
Leased merchandise, before allowance for lease losses	$	255,465	$	188,025		36	%	$	203,199		26	%
Less allowance for lease losses	(110,964)		(69,101)			61	%	(86,014)			29	%
Leased merchandise, net (1)	$	144,501	$	118,924		22	%	$	117,185		23	%

Finance receivables, net:
Finance receivables, before allowance for loan losses	$	203,609	$	199,555		2	%	$	184,585		10	%
Less allowance for loan losses	(93,054)		(73,936)			26	%	(73,936)			26	%
Finance receivables, net	$	110,555	$	125,619		(12)	%	$	110,649		—	%

(1)Includes $1.4 million of intersegment transactions as of June 30, 2023 related to the Company offering AFF’s LTO payment solution as a payment option in its U.S. pawn stores that are eliminated upon consolidation. Excluding the intersegment transactions, consolidated net leased merchandise totaled $143.1 million.

(2)As a result of purchase accounting, AFF’s June 30, 2022 as reported earning assets contain significant fair value adjustments, which were fully amortized during 2022. The adjusted amounts as of June 30, 2022 exclude these fair value purchase accounting adjustments.


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The following table details the changes in the allowance for lease and loan losses and other portfolio metrics for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 (in thousands):


													Adjusted (5)
													Three Months
													Ended
	Three Months Ended												June 30,
	June 30,								Increase /				2022			Increase
		2023				2022			(Decrease)				(Non-GAAP)			(Non-GAAP)
Allowance for lease losses:
Balance at beginning of period		$	93,269			$	40,364			131	%		$	76,028			23	%
Provision for lease losses (1)		53,048				38,035				39	%		38,035				39	%
Charge-offs		(37,026)				(10,301)				259	%		(29,052)				27	%
Recoveries		1,673				1,003				67	%		1,003				67	%
Balance at end of period		$	110,964			$	69,101			61	%		$	86,014			29	%

Leased merchandise portfolio metrics:
Provision expense as percentage of originations (2)	34			%								31			%
Average monthly net charge-off rate (3)	4.7			%								4.7			%
Delinquency rate (4)	20.7			%								19.0			%

Allowance for loan losses:
Balance at beginning of period		$	88,610			$	72,332			23	%
Provision for loan losses		28,190				26,800				5	%

Charge-offs		(25,274)				(26,579)				(5)	%
Recoveries		1,528				1,383				10	%
Balance at end of period		$	93,054			$	73,936			26	%

Finance receivables portfolio metrics:
Provision rate (2)	28			%	32			%
Average monthly net charge-off rate (3)	4.0			%	4.5			%
Delinquency rate (4)	18.1			%	19.0			%

(1)Includes $0.2 million of intersegment transactions for the three months ended June 30, 2023 related to the Company offering AFF’s LTO payment solution as a payment option in its U.S. pawn stores that are eliminated upon consolidation. Excluding the intersegment transactions, the provision for lease losses totaled $52.9 million.

(2)Calculated as provision for lease or loan losses as a percentage of the respective gross transaction volume originated.

(3)Calculated as charge-offs, net of recoveries, as a percentage of the respective average earning asset balance before allowance for lease or loan losses (adjusted to exclude any fair value purchase accounting adjustments, as applicable).

(4)Calculated as the percentage of the respective contractual earning asset balance owed that is 1 to 89 days past due (the Company charges off leases and finance receivables when they are 90 days or more contractually past due).

(5)As a result of purchase accounting, AFF’s as reported allowance for lease losses for the three months ended June 30, 2022 contain significant fair value adjustments. The adjusted amounts for the three months ended June 30, 2022 exclude these fair value purchase accounting adjustments. As a result of the significance of these accounting adjustments, the Company does not believe that the unadjusted leased merchandise portfolio metrics for the three months ended June 30, 2022 provide a useful comparison against the June 30, 2023 amounts.


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LTO Operations

Leased merchandise, before allowance for lease losses, increased 36% as of June 30, 2023 compared to June 30, 2022. On an adjusted basis, excluding the impacts of fair value purchase accounting, leased merchandise, before allowance for lease losses, increased 26% as of June 30, 2023 compared to June 30, 2022. This increase was primarily due to increased transaction volumes from both existing merchants and new merchant locations added since June 30, 2022.

The allowance for lease losses increased 61% to $111.0 million as of June 30, 2023 compared to $69.1 million as of June 30, 2022. On an adjusted basis, excluding the impacts of fair value purchase accounting, the allowance for lease losses increased 29% as of June 30, 2023 compared to June 30, 2022. This increase was primarily due to the 25% increase in gross transaction volume compared to the second quarter of 2022.

Leased merchandise income increased 29% to $189.8 million during the second quarter of 2023 compared to $147.7 million for the second quarter of 2022, which was primarily due to the higher leased merchandise balances.

Depreciation of leased merchandise increased 25% to $103.1 million during the second quarter of 2023 compared to $82.6 million during the second quarter of 2022. On an adjusted basis, excluding the impacts of fair value purchase accounting, depreciation of leased merchandise increased 27%. The increase was primarily due to higher leased merchandise balances. As a percentage of leased merchandise income, depreciation of leased merchandise decreased slightly from 55% during the second quarter of 2022 (adjusted to exclude purchase accounting adjustments) to 54% during the second quarter of 2023.

Provision for lease losses increased 39% to $53.0 million during the second quarter of 2023 compared to $38.0 million for the second quarter of 2022, which was primarily due to the 25% increase in gross transaction volumes and a slight increase in lease loss provisioning rates used during the second quarter of 2023. As a percentage of gross transaction volume, the provision for lease losses increased from 31% during the second quarter of 2022 to 34% during the second quarter of 2023.

Retail Finance Operations

Finance receivables, before allowance for loan losses, increased 2% as of June 30, 2023 compared to June 30, 2022. On an adjusted basis, excluding the impacts of fair value purchase accounting, finance receivables, before allowance for loan losses, increased 10% as of June 30, 2023 compared to June 30, 2022. This increase in the outstanding receivable balance was primarily due to increased transaction volumes from both existing merchants and new merchant locations added since June 30, 2022.

The allowance for loan losses increased 26% to $93.1 million as of June 30, 2023 compared to $73.9 million as of June 30, 2022. This increase was primarily due to the 23% increase in gross transaction volume compared to the second quarter of 2022.

Interest and fees on finance receivables increased 33% to $58.2 million during the second quarter of 2023 compared to $43.7 million for the second quarter of 2022. On an adjusted basis, excluding the impacts of fair value purchase accounting, interest and fees on finance receivables increased 5%, which was primarily due to the higher finance receivable balances.

Provision for loan losses increased 5% to $28.2 million during the second quarter of 2023 compared to $26.8 million for the second quarter of 2022, which was primarily due to the 23% increase in gross transaction volumes, partially offset by slightly improved net charge-off trends primarily on 2022 origination vintages and a slight decrease in loan loss provisioning rates used during the second quarter of 2023. As a percentage of gross transaction volume, the provision for loan losses decreased from 32% during the second quarter of 2022 to 28% during the second quarter of 2023.

Segment Expenses

Operating expenses increased 19% to $37.1 million during the second quarter of 2023 compared to $31.3 million during the second quarter of 2022, which was primarily due to increases in gross transaction volumes. As a percentage of segment revenues, operating expenses remained consistent at 15% during both the second quarter of 2023 and 2022 (adjusted to exclude purchase accounting adjustments).


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Segment Pre-Tax Operating Income

The retail POS payment solutions segment pre-tax operating income for the second quarter of 2023 was $25.8 million compared to $12.0 million in the second quarter of 2022. The increase was primarily the result of fair value purchase accounting. On an adjusted basis, excluding the impacts of fair value purchase accounting, segment pre-tax operating income for the second quarter of 2022 was $25.2 million.

Consolidated Results of Operations

The following table reconciles pre-tax operating income of the Company’s U.S. pawn segment, Latin America pawn segment and retail POS payment solutions segment, discussed above, to consolidated net income for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 (dollars in thousands):


	Three Months Ended
	June 30,				Increase /
	2023		2022		(Decrease)
Consolidated Results of Operations
Segment pre-tax operating income:
U.S. pawn	$	72,415	$	64,003		13	%
Latin America pawn	37,692		33,249			13	%
Retail POS payment solutions (1)	25,831		12,045			114	%
Intersegment elimination (2)	(116)		—			—	%
Consolidated segment pre-tax operating income	135,822		109,297			24	%

Corporate expenses and other income:
Administrative expenses	40,355		37,068			9	%
Depreciation and amortization	14,766		14,862			(1)	%
Interest expense	21,071		16,246			30	%
Interest income	(408)		(222)			84	%
(Gain) loss on foreign exchange	(817)		27			(3,126)	%
Merger and acquisition expenses	252		314			(20)	%
Gain on revaluation of contingent acquisition consideration	—		(65,559)			(100)	%
Other expenses (income), net	79		(3,062)			(103)	%

Total corporate expenses and other income	75,298		(326)			(23,198)	%

Income before income taxes	60,524		109,623			(45)	%

Provision for income taxes	15,344		23,515			(35)	%

Net income	$	45,180	$	86,108		(48)	%

(1)The AFF segment results for the three months ended June 30, 2022 are significantly impacted by certain purchase accounting adjustments, as noted in the retail POS payment solutions segment results of operations above. Adjusted retail POS payment solutions segment pre-tax operating income, excluding such purchase accounting adjustments, was $25.2 million for the three months ended June 30, 2022.

(2)Represents the elimination of intersegment transactions related to the Company offering AFF’s LTO payment solution as a payment option in its U.S. pawn stores. For further detail, see Note 9 of Notes to Consolidated Financial Statements.


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Corporate Expenses and Taxes

Administrative expenses increased 9% to $40.4 million during the second quarter of 2023 compared to $37.1 million in the second quarter of 2022. As a percentage of revenue, administrative expenses decreased from 6% during the second quarter of 2022 to 5% during the second quarter of 2023.

Interest expense increased 30% to $21.1 million during the second quarter of 2023 compared to $16.2 million in the second quarter of 2022, primarily due to higher floating interest rates and higher average balances outstanding on the Company’s unsecured credit facilities. See Note 7 of Notes to Consolidated Financial Statements and “Liquidity and Capital Resources.”

The Company recognized a gain on revaluation of contingent acquisition consideration of $65.6 million during the second quarter of 2022 as a result of a decrease in the liability for the estimated fair value of contingent consideration related to the AFF acquisition. See Note 4 of Notes to Consolidated Financial Statements.

The Company recognized a gain of $3.2 million during the second quarter of 2022 as a result of a cash distribution received from a non-operating investment acquired in conjunction with the merger with Cash America International, Inc. (“Cash America Merger”), which was included in other expenses (income), net in the accompanying consolidated statements of income.

Consolidated effective income tax rates for the second quarter of 2023 and 2022 were 25.4% and 21.5%, respectively. The increase in the effective tax rate was primarily due to a $3.4 million permanent domestic tax benefit recognized in the second quarter of 2022 related to the $65.6 million gain on revaluation of certain contingent consideration related to the AFF acquisition as described above and a decreased foreign permanent tax benefit recorded in the second quarter of 2023 compared to the second quarter of 2022, related to a decreased inflation index adjustment allowed in Mexico as a result of moderating inflation in Mexico.


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Operating Results for the Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

U.S. Pawn Segment

The following table presents segment pre-tax operating income and other operating metrics of the U.S. pawn segment for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 (dollars in thousands). Operating expenses include salary and benefit expenses of pawn-store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the pawn stores.


	Six Months Ended
	June 30,						Increase /
	2023			2022			(Decrease)
U.S. Pawn Segment
Revenue:
Retail merchandise sales	$	406,724		$	400,311			2	%
Pawn loan fees		201,657			178,082			13	%
Wholesale scrap jewelry sales		43,968			32,197			37	%
Total revenue		652,349			610,590			7	%

Cost of revenue:
Cost of retail merchandise sold		233,468			234,108			—	%
Cost of wholesale scrap jewelry sold		35,307			27,812			27	%
Total cost of revenue		268,775			261,920			3	%

Net revenue		383,574			348,670			10	%

Segment expenses:
Operating expenses		217,940			200,064			9	%
Depreciation and amortization		12,200			11,455			7	%
Total segment expenses		230,140			211,519			9	%

Segment pre-tax operating income	$	153,434		$	137,151			12	%

Operating metrics:
Retail merchandise sales margin	43		%	42		%

Net revenue margin	59		%	57		%
Segment pre-tax operating margin	24		%	22		%

Retail Merchandise Sales Operations

U.S. retail merchandise sales increased 2% to $406.7 million during the six months ended June 30, 2023 compared to $400.3 million for the six months ended June 30, 2022. Same-store retail sales decreased 2% during the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The increase in total retail sales was primarily due to sales contributions from acquired stores whereas the decrease in same-store retail sales was primarily due to slightly lower than normal inventory levels during the six months ended June 30, 2023 compared to the six months ended June 30, 2022. During the six months ended June 30, 2023, the gross profit margin on retail merchandise sales in the U.S. was 43% compared to a margin of 42% during the six months ended June 30, 2022.


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Pawn Lending Operations

U.S. pawn loan fees increased 13% to $201.7 million during the six months ended June 30, 2023 compared to $178.1 million for the six months ended June 30, 2022. Same-store pawn fees increased 11% during the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The increase in total and same-store pawn loan fees was primarily due to higher average pawn receivables and increased portfolio yield driven by improved customer redemption rates.

Segment Expenses

U.S. store operating expenses increased 9% to $217.9 million during the six months ended June 30, 2023 compared to $200.1 million during the six months ended June 30, 2022 while same-store operating expenses increased 6% compared with the prior-year period. The increase in total and same-store operating expenses was primarily due to inflationary increases in wages and certain other operating costs and increased store-level incentive compensation driven by increased net revenues and segment profit during the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

Segment Pre-Tax Operating Income

The U.S. segment pre-tax operating income for the six months ended June 30, 2023 was $153.4 million, which generated a pre-tax segment operating margin of 24% compared to $137.2 million and 22% in the prior year, respectively. The increase in the segment pre-tax operating income and margin reflected an improved net revenue margin partially offset by the increase in segment expenses.


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Latin America Operations Segment

Latin American results of operations for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 benefited from a 10% favorable change in the average value of the Mexican peso compared to the U.S. dollar.

The following table presents segment pre-tax operating income and other operating metrics of the Latin America pawn segment for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 (dollars in thousands). Operating expenses include salary and benefit expenses of pawn-store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the pawn stores.


													Constant Currency Basis
													Six Months
													Ended
		Six Months Ended											June 30,			Increase /
		June 30,											2023			(Decrease)
		2023				2022			Increase				(Non-GAAP)			(Non-GAAP)
Latin America Pawn Segment
Revenue:
Retail merchandise sales		$	245,518			$	200,765			22	%		$	222,177			11	%
Pawn loan fees		104,081				87,804				19	%		94,092				7	%
Wholesale scrap jewelry sales		28,799				24,456				18	%		28,799				18	%
Total revenue		378,398				313,025				21	%		345,068				10	%

Cost of revenue:
Cost of retail merchandise sold		159,623				127,415				25	%		144,550				13	%
Cost of wholesale scrap jewelry sold		22,300				20,298				10	%		20,069				(1)	%
Total cost of revenue		181,923				147,713				23	%		164,619				11	%

Net revenue		196,475				165,312				19	%		180,449				9	%

Segment expenses:
Operating expenses		115,263				93,595				23	%		104,949				12	%
Depreciation and amortization		10,648				8,954				19	%		9,804				9	%
Total segment expenses		125,911				102,549				23	%		114,753				12	%

Segment pre-tax operating income		$	70,564			$	62,763			12	%		$	65,696			5	%

Operating metrics:
Retail merchandise sales margin	35			%	37			%				35			%

Net revenue margin	52			%	53			%				52			%
Segment pre-tax operating margin	19			%	20			%				19			%


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Retail Merchandise Sales Operations

Latin America retail merchandise sales increased 22% (11% on a constant currency basis) to $245.5 million during the six months ended June 30, 2023 compared to $200.8 million for the six months ended June 30, 2022. Same-store retail sales increased 22% (10% on a constant currency basis) during the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The increase in total and same-store retail sales was primarily due to increased inventory levels during the six months ended June 30, 2023 compared to the six months ended June 30, 2022 and greater demand for value-priced consumer goods, with such demand driven in part by inflationary pressures on the Company’s customers. The gross profit margin on retail merchandise sales was 35% during the six months ended June 30, 2023 and 37% during the six months ended June 30, 2022.

Pawn Lending Operations

Latin America pawn loan fees increased 19% (7% on a constant currency basis) to $104.1 million during the six months ended June 30, 2023 compared to $87.8 million for the six months ended June 30, 2022. Same-store pawn fees increased 18% (7% on a constant currency basis) during the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The increase in total and same-store constant currency pawn loan fees was primarily due to improved pawn yields and higher average pawn receivables.

Segment Expenses

Operating expenses increased 23% (12% on a constant currency basis) to $115.3 million during the six months ended June 30, 2023 compared to $93.6 million during the six months ended June 30, 2022, reflecting continued store growth, inflationary pressure on labor and other operating expenses and increases in the federally mandated minimum wage and other required benefit programs. Same-store operating expenses increased 22% (11% on a constant currency basis) compared to the prior-year period.

Segment Pre-Tax Operating Income

The segment pre-tax operating income for the six months ended June 30, 2023 was $70.6 million, which generated a pre-tax segment operating margin of 19% compared to $62.8 million and 20% in the prior year, respectively.


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Retail POS Payment Solutions Segment

Retail POS Payment Solutions Operating Results

The following table presents segment pre-tax operating income of the retail POS payment solutions segment for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 (dollars in thousands):


								Adjusted (1)
								Six Months
								Ended
	Six Months Ended							June 30,		Increase /
	June 30,							2022		(Decrease)
	2023		2022		Increase			(Non-GAAP)		(Non-GAAP)
Retail POS Payment Solutions Segment
Revenue:
Leased merchandise income	$	373,243	$	297,647		25	%	$	297,647		25	%
Interest and fees on finance receivables	112,834		86,193			31	%	113,880			(1)	%

Total revenue	486,077		383,840			27	%	411,527			18	%

Cost of revenue:
Depreciation of leased merchandise	205,234		176,311			16	%	170,354			20	%
Provision for lease losses	102,214		77,855			31	%	77,855			31	%
Provision for loan losses	57,475		51,497			12	%	51,497			12	%

Total cost of revenue	364,923		305,663			19	%	299,706			22	%

Net revenue	121,154		78,177			55	%	111,821			8	%

Segment expenses:
Operating expenses	70,639		60,192			17	%	60,192			17	%
Depreciation and amortization	1,487		1,381			8	%	1,381			8	%
Total segment expenses	72,126		61,573			17	%	61,573			17	%

Segment pre-tax operating income	$	49,028	$	16,604		195	%	$	50,248		(2)	%

(1)As a result of purchase accounting, AFF’s as reported amounts for the six months ended June 30, 2022 contain significant fair value adjustments. The adjusted amounts for the six months ended June 30, 2022 exclude these fair value purchase accounting adjustments.

The following table provides a detail of gross transaction volumes originated during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 (in thousands):


	Six Months Ended
	June 30,
	2023		2022		Increase
Leased merchandise	$	305,278	$	235,717		30	%
Finance receivables	200,303		155,066			29	%
Total gross transaction volume	$	505,581	$	390,783		29	%


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The following table details the changes in the allowance for lease and loan losses and other portfolio metrics for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 (in thousands):


													Adjusted (5)
													Six Months
													Ended
	Six Months Ended												June 30,
	June 30,								Increase /				2022			Increase
		2023				2022			(Decrease)				(Non-GAAP)			(Non-GAAP)
Allowance for lease losses:
Balance at beginning of period		$	79,576			$	5,442			1,362	%		$	66,968			19	%
Provision for lease losses (1)		102,214				77,855				31	%		77,855				31	%
Charge-offs		(74,172)				(16,321)				354	%		(60,934)				22	%
Recoveries		3,346				2,125				57	%		2,125				57	%
Balance at end of period		$	110,964			$	69,101			61	%		$	86,014			29	%

Leased merchandise portfolio metrics:
Provision expense as percentage of originations (2)	33			%								33			%
Average monthly net charge-off rate (3)	4.8			%								4.8			%
Delinquency rate (4)	20.7			%								19.0			%

Allowance for loan losses:
Balance at beginning of period		$	84,833			$	75,574			12	%
Provision for loan losses		57,475				51,497				12	%

Charge-offs		(52,391)				(55,987)				(6)	%
Recoveries		3,137				2,852				10	%
Balance at end of period		$	93,054			$	73,936			26	%

Finance receivables portfolio metrics:
Provision rate (2)	29			%	33			%
Average monthly net charge-off rate (3)	4.2			%	4.4			%
Delinquency rate (4)	18.1			%	19.0			%

(1)Includes $0.3 million of intersegment transactions for the six months ended June 30, 2023 related to the Company offering AFF’s LTO payment solution as a payment option in its U.S. pawn stores that are eliminated upon consolidation. Excluding the intersegment transactions, the provision for lease losses totaled $101.9 million.

(2)Calculated as provision for lease or loan losses as a percentage of the respective gross transaction volume originated.

(5)As a result of purchase accounting, AFF’s as reported allowance for lease losses for the six months ended June 30, 2022 contain significant fair value adjustments. The adjusted amounts for the six months ended June 30, 2022 exclude these fair value purchase accounting adjustments. As a result of the significance of these accounting adjustments, the Company does not believe that the unadjusted leased merchandise portfolio metrics for the six months ended June 30, 2022 provide a useful comparison against the June 30, 2023 amounts.


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LTO Operations

Leased merchandise income increased 25% to $373.2 million during the six months ended June 30, 2023 compared to $297.6 million for the six months ended June 30, 2022, which was primarily due to the higher leased merchandise balances.

Depreciation of leased merchandise increased 16% to $205.2 million during the six months ended June 30, 2023 compared to $176.3 million during the six months ended June 30, 2022. On an adjusted basis, excluding the impacts of fair value purchase accounting, depreciation of leased merchandise increased 20%. The increase was primarily due to higher leased merchandise balances. As a percentage of leased merchandise income, depreciation of leased merchandise decreased slightly from 57% during the six months ended June 30, 2022 (adjusted to exclude purchase accounting adjustments) to 55% during the six months ended June 30, 2023.

Provision for lease losses increased 31% to $102.2 million during the six months ended June 30, 2023 compared to $77.9 million for the six months ended June 30, 2022, which was primarily due to the 30% increase in gross transaction volumes. As a percentage of gross transaction volume, the provision for lease losses remained consistent at 33% during both the six months ended June 30, 2022 and 2023.

Retail Finance Operations

Interest and fees on finance receivables increased 31% to $112.8 million during the six months ended June 30, 2023 compared to $86.2 million for the six months ended June 30, 2022. On an adjusted basis, excluding the impacts of fair value purchase accounting, interest and fees on finance receivables decreased 1%. The decrease was primarily due to timing of transaction volume originations in 2022 resulting in a decline in the average finance receivable balance during most of 2022.

Provision for loan losses increased 12% to $57.5 million during the six months ended June 30, 2023 compared to $51.5 million for the six months ended June 30, 2022, which was primarily due to the 29% increase in gross transaction volumes, partially offset by slightly improved net charge-off trends primarily on 2022 origination vintages and a slight decrease in loan loss provisioning rates used during the six months ended June 30, 2023 compared to the six months ended June 30, 2022. As a percentage of gross transaction volume, the provision for loan losses decreased from 33% during the six months ended June 30, 2022 to 29% during the six months ended June 30, 2023.

Segment Expenses

Operating expenses increased 17% to $70.6 million during the six months ended June 30, 2023 compared to $60.2 million during the six months ended June 30, 2022, which was primarily due to increases in gross transaction volumes. As a percentage of segment revenues, operating expenses remained consistent at 15% during both the six months ended June 30, 2023 and 2022 (adjusted to exclude purchase accounting adjustments).

Segment Pre-Tax Operating Income

The retail POS payment solutions segment pre-tax operating income for the six months ended June 30, 2023 was $49.0 million compared to $16.6 million in the six months ended June 30, 2022. The increase was primarily the result of fair value purchase accounting. On an adjusted basis, excluding the impacts of fair value purchase accounting, segment pre-tax operating income for the six months ended June 30, 2022 was $50.2 million. The decrease in this adjusted segment pre-tax operating income was primarily the result of the provision for lease and loan losses associated with the increased gross transaction volume (full provision is recorded in the month of transaction origination).


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Consolidated Results of Operations

The following table reconciles pre-tax operating income of the Company’s U.S. pawn segment, Latin America pawn segment and retail POS payment solutions segment, discussed above, to consolidated net income for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 (dollars in thousands):


	Six Months Ended
	June 30,				Increase /
	2023		2022		(Decrease)
Consolidated Results of Operations
Segment pre-tax operating income:
U.S. operations	$	153,434	$	137,151		12	%
Latin America pawn	70,564		62,763			12	%
Retail POS payment solutions (1)	49,028		16,604			195	%
Intersegment eliminations (2)	(260)		—			—	%
Consolidated segment pre-tax operating income	272,766		216,518			26	%

Corporate expenses and other income:
Administrative expenses	79,372		73,931			7	%
Depreciation and amortization	29,826		29,734			—	%
Interest expense	41,968		32,467			29	%
Interest income	(925)		(898)			3	%
Gain on foreign exchange	(1,619)		(453)			257	%
Merger and acquisition expenses	283		979			(71)	%
Gain on revaluation of contingent acquisition consideration	—		(62,989)			(100)	%
Other expenses (income), net	124		(2,885)			(104)	%

Total corporate expenses and other income	149,029		69,886			113	%

Income before income taxes	123,737		146,632			(16)	%

Provision for income taxes	31,169		32,519			(4)	%

Net income	$	92,568	$	114,113		(19)	%

(1)The AFF segment results for the six months ended June 30, 2022 are significantly impacted by certain purchase accounting adjustments, as noted in the retail POS payment solutions segment results of operations above. Adjusted retail POS payment solutions segment pre-tax operating income, excluding such purchase accounting adjustments, was $50.2 million for the six months ended June 30, 2022.


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Corporate Expenses and Taxes

Administrative expenses increased 7% to $79.4 million during the six months ended June 30, 2023 compared to $73.9 million during the six months ended June 30, 2022, primarily due to the AFF acquisition. As a percentage of revenue, administrative expenses decreased from 6% during the six months ended June 30, 2022 to 5% during the six months ended June 30, 2023.

Interest expense increased 29% to $42.0 million during the six months ended June 30, 2023 compared to $32.5 million for the six months ended June 30, 2022, primarily due to higher floating interest rates and higher average balances outstanding on the Company’s unsecured credit facilities. See Note 7 of Notes to Consolidated Financial Statements and “Liquidity and Capital Resources.”

The Company recognized a gain on revaluation of contingent acquisition consideration of $63.0 million during the six months ended June 30, 2022 as a result of a decrease in the liability for the estimated fair value of certain contingent consideration related to the AFF acquisition. See Note 4 of Notes to Consolidated Financial Statements.

The Company recognized a gain of $3.2 million during the six months ended June 30, 2022 as a result of a cash distribution received from a non-operating investment acquired in conjunction with the Cash America Merger, which was included in other expenses (income), net in the accompanying consolidated statements of income.

Consolidated effective income tax rates for the six months ended June 30, 2023 and 2022 were 25.2% and 22.2%, respectively. The increase in the effective tax rate was primarily due to a $3.4 million permanent domestic tax benefit recognized in the six months ended June 30, 2022 related to the $63.0 million gain on revaluation of certain contingent consideration related to the AFF acquisition as described above and a decreased foreign permanent tax benefit recorded in the six months ended June 30, 2023 compared to the six months ended June 30, 2022, related to a decreased inflation index adjustment allowed in Mexico as a result of moderating inflation in Mexico.

LIQUIDITY AND CAPITAL RESOURCES

Material Capital Requirements

The Company’s primary capital requirements include:

•Expand pawn operations through growth of pawn receivables and inventories in existing stores, new store openings, strategic acquisitions of pawn stores and purchases of real estate at existing locations;

•Expand retail POS payment solutions operations through growth of the business generated from new and existing merchant partners; and

•Return capital to shareholders through dividends and stock repurchases.

Other material capital requirements include operating expenses (see Note 3 of Notes to Consolidated Financial Statements regarding operating lease commitments), maintenance capital expenditures related to its facilities, technology-related equipment, general corporate operating activities, income tax payments and debt service, among others. While the Company currently expects net de-leveraging by the end of 2023, net interest expense is expected to increase in 2023 compared to 2022 due to higher floating interest rates on the borrowings under the revolving credit facilities. The Company believes that net cash provided by operating activities and available and unused funds under its revolving unsecured credit facilities will be adequate to meet its liquidity and capital needs for these items over the next 12 months and also in the longer-term beyond the next 12 months.

Expand Pawn Operations

The Company intends to continue expansion through new store openings and acquisitions. For 2023, the Company expects to add approximately 60 new (“de novo”) stores in Latin America and four de novo stores in the U.S. Future store openings are subject to the Company’s ability to identify locations in markets with attractive demographics, available real estate with favorable leases and limited competition. The Company evaluates potential acquisitions based upon growth potential, purchase price, available liquidity, strategic fit and quality of management personnel, among other factors. During the six months ended June 30, 2023, the Company acquired four pawn stores in the U.S. and acquired two pawn licenses to open pawn stores in the state of Nevada for a cumulative purchase price of $5.2 million, net of cash acquired and subject to future post-closing adjustments.


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Although viewed by management as a discretionary expenditure not required to operate its pawn stores, the Company may continue to strategically purchase real estate from its landlords at existing stores or in conjunction with pawn store acquisitions as opportunities arise at reasonable valuations. The Company purchased the real estate at 14 store locations, primarily from landlords at existing stores, for a cumulative purchase price of $34.5 million during the six months ended June 30, 2023.

Expand Retail POS Payment Solutions Operations

AFF expects to expand its business primarily by promoting and expanding relationships with both new and existing customers and retail merchant partners. In addition, AFF has made, and intends to continue to make, investments in its customer and merchant support operations and facilities, its technology platforms and its proprietary decisioning platforms and processes. In addition to utilizing cash flows generated from its own operations to fund expected 2023 growth, AFF has access to the additional sources of liquidity described below if needed to fund further expansion activities.

Return of Capital to Shareholders

In July 2023, the Company’s Board of Directors declared a $0.35 per share third quarter cash dividend on common shares outstanding, or an aggregate of $15.8 million based on the June 30, 2023 share count, to be paid on August 31, 2023 to stockholders of record as of August 15, 2023. While the Company currently expects to continue the payment of quarterly cash dividends, the amount, declaration and payment of cash dividends in the future (quarterly or otherwise) will be made by the Board of Directors, from time to time, subject to the Company’s financial condition, results of operations, business requirements, compliance with legal requirements, debt covenant restrictions and other relevant factors.

During the six months ended June 30, 2023, the Company repurchased a total of 1,153,000 shares of common stock at an aggregate cost of $105.6 million and an average cost per share of $91.48. The aggregate cost and average cost per share does not include the effect of the 1% excise tax on certain share repurchases enacted under the inflation Reduction Act of 2022. The Company incurred $1.1 million of excise taxes during the six months ended June 30, 2023. During the six months ended June 30, 2022, the Company repurchased 1,349,000 shares of common stock at an aggregate cost of $92.7 million and an average cost per share of $68.70.

Subsequent to June 30, 2023, the Company had approximately $8.8 million of remaining availability under its share repurchase program authorized in October 2022. During July 2023, the Company repurchased a total of 95,000 shares of common stock at an aggregate cost of $8.8 million and an average cost per share of $92.79, which completed the share repurchase program authorized in October 2022.

In July 2023, the Company’s Board of Directors authorized an additional common stock repurchase program for up to $200.0 million of the Company’s outstanding common stock, of which the entire $200.0 million is currently remaining. While the Company intends to continue repurchases under its active share repurchase program, future share repurchases are subject to a variety of factors, including, but not limited to, the level of cash balances, liquidity needs, including funding acquisitions, credit availability, debt covenant restrictions, general business and economic conditions, regulatory requirements, the market price of the Company’s stock, dividend policy and the availability of alternative investment opportunities.

Sources of Liquidity

The Company regularly evaluates opportunities to optimize its capital structure, including through consideration of the issuance of debt or equity, to refinance existing debt and to enter into interest rate hedge transactions, such as interest rate swap agreements. As of June 30, 2023, the Company’s primary sources of liquidity were $104.6 million in cash and cash equivalents and $211.1 million of available and unused funds under the Company’s revolving unsecured credit facility, subject to certain financial covenants (see Note 7 of Notes to Consolidated Financial Statements). The Company had working capital of $832.6 million as of June 30, 2023.

The Company’s cash and cash equivalents as of June 30, 2023 included $28.4 million held by its foreign subsidiaries. These cash balances, which are primarily held in Mexican pesos, are associated with foreign earnings the Company has asserted are indefinitely reinvested and which the Company primarily plans to use to support its continued growth plans outside the U.S. through funding of capital expenditures, acquisitions, operating expenses or other similar cash needs of the Company’s foreign operations.


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The Company’s liquidity is affected by a number of factors, including changes in general customer traffic and demand, pawn loan balances, loan-to-value ratios, collection of pawn fees, merchandise sales, inventory levels, LTO merchandise, finance receivable balances, collection of lease and finance receivable payments, seasonality, operating expenses, administrative expenses, expenses related to merger and acquisition activities, litigation-related expenses, tax rates, gold prices, foreign currency exchange rates and the pace of new pawn store expansion and acquisitions. Additionally, a prolonged reduction in earnings and EBITDA could limit the Company’s future ability to fully borrow on its credit facilities under current leverage covenants. Regulatory developments affecting the Company’s operations may also impact profitability and liquidity. See “Regulatory Developments.”

If needed, the Company could seek to raise additional funds from a variety of sources, including, but not limited to, repatriation of excess cash held in Latin America, the sale of assets, reductions in operating expenses, capital expenditures and dividends, the forbearance or deferral of operating expenses, the issuance of debt, other structured financing arrangements or equity securities, the leveraging of currently unencumbered real estate owned by the Company and/or changes to its management of current assets. The characteristics of the Company’s current assets, specifically the ability to rapidly liquidate gold jewelry inventory, which accounts for 47% of total inventory, give the Company flexibility to quickly increase cash flow if necessary.

Cash Flows and Liquidity Metrics

The following tables set forth certain historical information with respect to the Company’s sources and uses of cash and other key indicators of liquidity (dollars in thousands):


	Six Months Ended June 30,
	2023		2022
Cash flow provided by operating activities	$	205,669	$	226,767
Cash flow used in investing activities	$	(125,299)	$	(136,399)
Cash flow used in financing activities	$	(97,898)	$	(101,983)


		As of June 30,
		2023			2022
Working capital		$	832,610		$	728,717
Current ratio	3.7:1			3.1:1

Cash Flow Provided by Operating Activities

Net cash provided by operating activities decreased $21.1 million, or 9%, from $226.8 million for the six months ended June 30, 2022 to $205.7 million for the six months ended June 30, 2023, as a decrease in net income of $21.5 million was offset by net changes in certain non-cash adjustments to reconcile net income to operating cash flow and net changes in other operating assets and liabilities (as detailed in the consolidated statements of cash flows).

Cash Flow Used in Investing Activities

Net cash used in investing activities decreased $11.1 million, or 8%, from $136.4 million for the six months ended June 30, 2022 to $125.3 million for the six months ended June 30, 2023. Cash flows from investing activities are utilized primarily to fund acquisitions, purchase of furniture, fixtures, equipment and improvements, which includes capital expenditures for improvements to existing stores and for new pawn store openings and other corporate assets, and discretionary purchases of store real property. In addition, cash flows related to 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 and changes in net finance receivables, are included in investing activities. The Company paid $28.3 million for furniture, fixtures, equipment and improvements and $34.5 million for discretionary pawn store real property purchases during the six months ended June 30, 2023 compared to $19.7 million and $58.6 million in the prior-year period, respectively. The Company paid $5.5 million in cash related to pawn store acquisitions during the six months ended June 30, 2023 compared to $2.3 million during the six months ended June 30, 2022. The Company received funds from a net decrease in pawn loans of $0.2 million during the six months ended June 30, 2023 and funded a net increase of $32.3 million during the six months ended June 30, 2022. The Company funded a net increase in finance receivables of $57.1 million during the six months ended June 30, 2023 and $23.5 million during the six months ended June 30, 2022.


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Cash Flow Used in Financing Activities

Net cash used in financing activities decreased $4.1 million, or 4%, from $102.0 million for the six months ended June 30, 2022 to $97.9 million for the six months ended June 30, 2023. Net borrowings on the credit facilities were $37.0 million during the six months ended June 30, 2023 compared to net borrowings of $15.0 million during the six months ended June 30, 2022. The Company funded $101.8 million for share repurchases and paid dividends of $30.6 million during the six months ended June 30, 2023, compared to funding $87.7 million of share repurchases and dividends paid of $28.8 million during the six months ended June 30, 2022. In addition, the Company paid withholding taxes on net share settlements of restricted stock awards during the six months ended June 30, 2023 of $2.5 million.

REGULATORY DEVELOPMENTS

The Company’s pawn, LTO and retail finance businesses are subject to significant regulation in all of the jurisdictions in which it operates. Existing regulations and regulatory developments are further and more completely described under “Governmental Regulation” in Part I, Item 1 of the Company’s 2022 Annual Report on Form 10-K filed with the SEC on February 6, 2023 and in subsequent documents filed with the SEC.

There have been no other material changes in regulatory developments directly affecting the Company since December 31, 2022.

NON-GAAP FINANCIAL INFORMATION

The Company uses certain financial calculations such as adjusted net income, adjusted diluted earnings per share, EBITDA, adjusted EBITDA, free cash flow, adjusted free cash flow, adjusted retail POS payment solutions segment metrics and constant currency results as factors in the measurement and evaluation of the Company’s operating performance and period-over-period growth. The Company derives these financial calculations on the basis of methodologies other than GAAP, primarily by excluding from a comparable GAAP measure certain items the Company does not consider to be representative of its actual operating performance. These financial calculations are “non-GAAP financial measures” as defined under the SEC rules. The Company uses these non-GAAP financial measures in operating its business because management believes they are less susceptible to variances in actual operating performance that can result from the excluded items, other infrequent charges and currency fluctuations. The Company presents these financial measures to investors because management believes they are useful to investors in evaluating the primary factors that drive the Company’s core operating performance and provide greater transparency into the Company’s results of operations. However, items that are excluded and other adjustments and assumptions that are made in calculating these non-GAAP financial measures are significant components in understanding and assessing the Company’s financial performance. These non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, the Company’s GAAP financial measures. Further, because these non-GAAP financial measures are not determined in accordance with GAAP and are thus susceptible to varying calculations, the non-GAAP financial measures, as presented, may not be comparable to other similarly-titled measures of other companies.

While acquisitions are an important part of the Company’s overall strategy, the Company has adjusted the applicable financial calculations to exclude merger and acquisition expenses, including the Company’s transaction expenses incurred in connection with its acquisition of AFF and the impacts of purchase accounting with respect to the AFF acquisition, in order to allow more accurate comparisons of the financial results to prior periods. In addition, the Company does not consider these merger and acquisition expenses to be related to the organic operations of the acquired businesses or its continuing operations, and such expenses are generally not relevant to assessing or estimating the long-term performance of the acquired businesses. Merger and acquisition expenses include incremental costs directly associated with merger and acquisition activities, including professional fees, legal expenses, severance, retention and other employee-related costs, contract breakage costs and costs related to the consolidation of technology systems and corporate facilities, among others.

The Company has certain leases in Mexico which are denominated in U.S. dollars. The lease liability of these U.S.-dollar-denominated leases, which is considered a monetary liability, is remeasured into Mexican pesos using current period exchange rates, resulting in the recognition of foreign currency exchange gains or losses. The Company has adjusted the applicable financial measures to exclude these remeasurement gains or losses (i) because they are non-cash, non-operating items that could create volatility in the Company’s consolidated results of operations due to the magnitude of the end of period lease liability being remeasured and (ii) to improve comparability of current periods presented with prior periods.


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In conjunction with the Cash America merger in 2016, the Company recorded certain lease intangibles related to above- or below-market lease liabilities of Cash America, which are included in the operating lease right of use asset on the consolidated balance sheets. As the Company continues to opportunistically purchase real estate from landlords at certain Cash America stores, the associated lease intangible, if any, is written off and gain or loss is recognized. The Company has adjusted the applicable financial measures to exclude these gains or losses given the variability in size and timing of these transactions and because they are non-cash, non-operating gains or losses. The Company believes this improves comparability of operating results for current periods presented with prior periods.

Adjusted Net Income and Adjusted Diluted Earnings Per Share

Management believes the presentation of adjusted net income and adjusted diluted earnings per share provides investors with greater transparency and provides a more complete understanding of the Company’s financial performance and prospects for the future by excluding items that management believes are non-operating in nature and not representative of the Company’s core operating performance. In addition, management believes the adjustments shown below are useful to investors in order to allow them to compare the Company’s financial results for the current periods presented with the prior periods presented.

The following table provides a reconciliation between net income and diluted earnings per share calculated in accordance with GAAP to adjusted net income and adjusted diluted earnings per share, which are shown net of tax (in thousands, except per share amounts):


	Three Months Ended June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
	In Thousands		Per Share		In Thousands		Per Share		In Thousands		Per Share		In Thousands		Per Share
Net income and diluted earnings per share, as reported	$	45,180	$	0.99	$	86,108	$	1.81	$	92,568	$	2.01	$	114,113	$	2.38
Adjustments, net of tax:




Merger and acquisition expenses	191		—		242		0.01		213		0.01		753		0.02
Non-cash foreign currency gain related to lease liability	(766)		(0.01)		(12)		—		(1,613)		(0.04)		(496)		(0.01)
AFF purchase accounting adjustments (1)	10,887		0.24		21,011		0.44		21,989		0.48		47,736		1.00
Gain on revaluation of contingent acquisition consideration	—		—		(53,833)		(1.13)		—		—		(51,854)		(1.08)
Other expenses (income), net	61		—		(2,357)		(0.05)		96		—		(2,221)		(0.05)


Adjusted net income and diluted earnings per share	$	55,553	$	1.22	$	51,159	$	1.08	$	113,253	$	2.46	$	108,031	$	2.26

(1)See detail of the AFF purchase accounting adjustments in tables below.


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The following tables provide a reconciliation of the gross amounts, the impact of income taxes and the net amounts for the adjustments included in the table above (in thousands):


	Three Months Ended June 30,
	2023						2022
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Merger and acquisition expenses	$	252	$	61	$	191	$	314	$	72	$	242
Non-cash foreign currency gain related to lease liability	(1,095)		(329)		(766)		(17)		(5)		(12)
AFF purchase accounting adjustments (1)	14,140		3,253		10,887		27,287		6,276		21,011
Gain on revaluation of contingent acquisition consideration	—		—		—		(65,559)		(11,726)		(53,833)
Other expenses (income), net	79		18		61		(3,062)		(705)		(2,357)


Total adjustments	$	13,376	$	3,003	$	10,373	$	(41,037)	$	(6,088)	$	(34,949)


	Six Months Ended June 30,
	2023						2022
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Merger and acquisition expenses	$	283	$	70	$	213	$	979	$	226	$	753
Non-cash foreign currency gain related to lease liability	(2,305)		(692)		(1,613)		(709)		(213)		(496)
AFF purchase accounting adjustments (1)	28,558		6,569		21,989		61,995		14,259		47,736
Gain on revaluation of contingent acquisition consideration	—		—		—		(62,989)		(11,135)		(51,854)
Other expenses (income), net	124		28		96		(2,885)		(664)		(2,221)


Total adjustments	$	26,660	$	5,975	$	20,685	$	(3,609)	$	2,473	$	(6,082)

(1)The following tables detail AFF purchase accounting adjustments (in thousands):


	Three Months Ended June 30,
	2023						2022
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Amortization of fair value adjustment on acquired finance receivables	$	—	$	—	$	—	$	11,514	$	2,649	$	8,865
Amortization of fair value adjustment on acquired leased merchandise	—		—		—		1,598		367		1,231
Amortization of acquired intangible assets	14,140		3,253		10,887		14,175		3,260		10,915
Total AFF purchase accounting adjustments	$	14,140	$	3,253	$	10,887	$	27,287	$	6,276	$	21,011


	Six Months Ended June 30,
	2023						2022
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Amortization of fair value adjustment on acquired finance receivables	$	—	$	—	$	—	$	27,687	$	6,368	$	21,319
Amortization of fair value adjustment on acquired leased merchandise	—		—		—		5,957		1,370		4,587
Amortization of acquired intangible assets	28,558		6,569		21,989		28,351		6,521		21,830
Total AFF purchase accounting adjustments	$	28,558	$	6,569	$	21,989	$	61,995	$	14,259	$	47,736


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Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA

The Company defines EBITDA as net income before income taxes, depreciation and amortization, interest expense and interest income and adjusted EBITDA as EBITDA adjusted for certain items, as listed below, that management considers to be non-operating in nature and not representative of its actual operating performance. The Company believes EBITDA and adjusted EBITDA are commonly used by investors to assess a company’s financial performance, and adjusted EBITDA is used as a starting point in the calculation of the consolidated total debt ratio as defined in the Company’s senior unsecured notes. The following table provides a reconciliation of net income to EBITDA and adjusted EBITDA (in thousands):


									Trailing Twelve
	Three Months Ended				Six Months Ended				Months Ended
	June 30,				June 30,				June 30,
	2023		2022		2023		2022		2023		2022
Net income	$	45,180	$	86,108	$	92,568	$	114,113	$	231,950	$	176,880
Provision for income taxes		15,344		23,515		31,169		32,519		68,788		51,178
Depreciation and amortization		27,050		25,982		54,161		51,524		106,469		75,916
Interest expense		21,071		16,246		41,968		32,467		80,209		50,425
Interest income		(408)		(222)		(925)		(898)		(1,340)		(1,317)
EBITDA		108,237		151,629		218,941		229,725		486,076		353,082
Adjustments:
Merger and acquisition expenses		252		314		283		979		3,043		15,176
Non-cash foreign currency (gain) loss related to lease liability		(1,095)		(17)		(2,305)		(709)		(2,925)		82
AFF purchase accounting adjustments (1)		—		13,112		—		33,644		16,710		80,006
Gain on revaluation of contingent acquisition consideration		—		(65,559)		—		(62,989)		(46,560)		(80,860)
Other expenses (income), net		79		(3,062)		124		(2,885)		278		(3,215)


Adjusted EBITDA	$	107,473	$	96,417	$	217,043	$	197,765	$	456,622	$	364,271

(1)Excludes $14.1 million, $28.6 million and $56.9 million of amortization expense related to identifiable intangible assets as a result of the AFF acquisition for the three months, six months and trailing twelve months ended June 30, 2023, respectively, which is included in the add back of depreciation and amortization to net income used to calculate EBITDA. Excludes $14.2 million, $28.4 million and $30.4 million of amortization expense related to identifiable intangible assets as a result of the AFF acquisition for the three months, six months and trailing twelve months ended June 30, 2022, respectively, which is included in the add back of depreciation and amortization to net income used to calculate EBITDA.


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Free Cash Flow and Adjusted Free Cash Flow

For purposes of its internal liquidity assessments, the Company considers free cash flow and adjusted free cash flow. The Company defines free cash flow as cash flow from operating activities less purchases of furniture, fixtures, equipment and improvements and net fundings/repayments of pawn loan and finance receivables, which are considered to be operating in nature by the Company but are included in cash flow from investing activities. Adjusted free cash flow is defined as free cash flow adjusted for merger and acquisition expenses paid that management considers to be non-operating in nature.

Free cash flow and adjusted free cash flow are commonly used by investors as additional measures of cash, generated by business operations, that may be used to repay scheduled debt maturities and debt service or, following payment of such debt obligations and other non-discretionary items, that may be available to invest in future growth through new business development activities or acquisitions, repurchase stock, pay cash dividends or repay debt obligations prior to their maturities. These metrics can also be used to evaluate the Company’s ability to generate cash flow from business operations and the impact that this cash flow has on the Company’s liquidity. However, free cash flow and adjusted free cash flow have limitations as analytical tools and should not be considered in isolation or as a substitute for cash flow from operating activities or other income statement data prepared in accordance with GAAP. The following table reconciles cash flow from operating activities to free cash flow and adjusted free cash flow (in thousands):


									Trailing Twelve
	Three Months Ended				Six Months Ended				Months Ended
	June 30,				June 30,				June 30,
	2023		2022		2023		2022		2023		2022
Cash flow from operating activities	$	95,075	$	106,622	$	205,669	$	226,767	$	448,207	$	336,322
Cash flow from certain investing activities:
Pawn loans, net (1)	(44,170)		(49,648)		188		(32,265)		(3,364)		(97,113)
Finance receivables, net	(32,585)		(23,607)		(57,125)		(23,546)		(118,932)		(29,390)
Purchases of furniture, fixtures, equipment and improvements	(14,520)		(12,658)		(28,348)		(19,686)		(44,248)		(40,683)
Free cash flow	3,800		20,709		120,384		151,270		281,663		169,136
Merger and acquisition expenses paid, net of tax benefit	191		242		213		753		2,338		11,683
Adjusted free cash flow	$	3,991	$	20,951	$	120,597	$	152,023	$	284,001	$	180,819

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


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Retail POS Payment Solutions Segment Purchase Accounting Adjustments

Management believes the presentation of certain retail POS payment solutions segment metrics, adjusted to exclude the impacts of purchase accounting, provides investors with greater transparency and provides a more complete understanding of AFF’s financial performance and prospects for the future by excluding the impacts of purchase accounting, which management believes is non-operating in nature and not representative of AFF’s core operating performance. See the retail POS payment solutions segment tables in “Results of Operations” above for additional reconciliation of certain amounts adjusted to exclude the impacts of purchase accounting to as reported GAAP amounts.

Additionally, the following table provides a reconciliation of consolidated total revenue, presented in accordance with GAAP, to adjusted total revenue, which excludes the impacts of purchase accounting (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Total revenue, as reported	$	750,622	$	647,616	$	1,513,361	$	1,307,455
Adjustments:
AFF purchase accounting adjustments (1)	—		11,514		—		27,687
Adjusted total revenue	$	750,622	$	659,130	$	1,513,361	$	1,335,142

(1)Adjustment relates to the net amortization of the fair value premium on acquired finance receivables, which is recognized as an adjustment to interest income on an effective yield basis over the lives of the acquired finance receivables. See the retail POS payment solutions segment tables in “Results of Operations” above for additional segment-level reconciliations.

Constant Currency Results

The Company’s reporting currency is the U.S. dollar, however, certain performance metrics discussed in this report are presented on a “constant currency” basis, which is considered a non-GAAP financial measure. The Company’s management uses constant currency results to evaluate operating results of business operations in Latin America, which are transacted in local currencies in Mexico, Guatemala and Colombia. The Company also has operations in El Salvador, where the reporting and functional currency is the U.S. dollar.

The Company believes constant currency results provide valuable supplemental information regarding the underlying performance of its business operations in Latin America, consistent with how the Company’s management evaluates such performance and operating results. Constant currency results reported herein are calculated by translating certain balance sheet and income statement items denominated in local currencies using the exchange rate from the prior-year comparable period, as opposed to the current comparable period, in order to exclude the effects of foreign currency rate fluctuations for purposes of evaluating period-over-period comparisons. See the Latin America pawn segment tables in “Results of Operations” above for additional reconciliation of certain constant currency amounts to as reported GAAP amounts.


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The following table provides exchange rates for the Mexican peso, Guatemalan quetzal and Colombian peso for the current and prior-year periods:


	June 30,		Favorable /
	2023	2022	(Unfavorable)
Mexican peso / U.S. dollar exchange rate:
End-of-period	17.1	20.0		15	%
Three months ended	17.7	20.0		12	%
Six months ended	18.2	20.3		10	%

Guatemalan quetzal / U.S. dollar exchange rate:
End-of-period	7.8	7.8		—	%
Three months ended	7.8	7.7		(1)	%
Six months ended	7.8	7.7		(1)	%

Colombian peso / U.S. dollar exchange rate:
End-of-period	4,191	4,127		(2)	%
Three months ended	4,431	3,914		(13)	%
Six months ended	4,596	3,914		(17)	%

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to the Company’s operations result primarily from changes in interest rates, gold prices and foreign currency exchange rates and are described in detail in the Company’s 2022 Annual Report on Form 10-K. The impact of current-year fluctuations in foreign currency exchange rates, in particular, are further discussed in Part I, Item 2 herein. The Company does not engage in speculative or leveraged transactions, nor does it hold or issue financial instruments for trading purposes. There have been no material changes to the Company’s exposure to market risks since December 31, 2022.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of June 30, 2023 (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures or internal controls will prevent all possible error and fraud. The Company’s disclosure controls and procedures are, however, designed to provide reasonable assurance of achieving their objectives, and the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective at that reasonable assurance level.


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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 8 - Commitments and Contingencies of Notes to Consolidated Financial Statements contained in Part I, Item 1 of this report which is incorporated to this Part II, Item 1 by reference.

ITEM 1A. RISK FACTORS

Important risk factors that could materially affect the Company’s business, financial condition or results of operations in future periods are described in Part I, Item 1A, “Risk Factors” of the Company’s 2022 Annual Report on Form 10-K. These factors are supplemented by those discussed under “Management’s Discussion And Analysis Of Financial Condition And Results Of Operations” and “Regulatory Developments” in Part I, Item 2 of this quarterly report and in “Governmental Regulation” in Part I, Item 1 of the Company’s 2022 Annual Report on Form 10-K. There have been no material changes in the Company’s risk factors from those in Part I, Item 1A, “Risk Factors” of the Company’s 2022 Annual Report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about purchases made by the Company of shares of its common stock during the three months ended June 30, 2023 (dollars in thousands, except per share amounts):


	Total Number Of Shares Purchased	Average Price Paid Per Share (1)		Total Number Of Shares Purchased As Part Of Publicly Announced Plans (2)	Approximate Dollar Value Of Shares That May Yet Be Purchased Under The Plans (1)




April 1 through April 30, 2023	104,964	$	94.03	104,964	$	33,779
May 1 through May 31, 2023	—	—		—	33,779
June 1 through June 30, 2023	266,631	93.75		266,631	8,783
Total	371,595	93.83		371,595

(1)The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. During the three months ended June 30, 2023, the Company reflected the applicable excise tax in treasury stock as part of the cost basis of the stock repurchased and recorded a corresponding liability for the excise taxes payable in accrued expenses and other liabilities on the consolidated balance sheet. All dollar amounts presented exclude such excise taxes.

(2)On October 27, 2022, the Company’s board of directors authorized the repurchases of an aggregate of $100.0 million of its shares of common stock. During July 2023, the Company repurchased a total of 95,000 shares of common stock at an aggregate cost of $8.8 million and an average cost per share of $92.79, which completed the share repurchase program authorized in October 2022. In July 2023, the Company’s Board of Directors authorized an additional common stock repurchase program for up to $200.0 million of the Company’s outstanding common stock, of which the entire $200.0 million is currently remaining.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.


Table of Contents

ITEM 6. EXHIBITS

Incorporated by Reference

Exhibit No.

Exhibit Description

Form

File No.

Exhibit

Filing Date

Filed Herewith

3.1

Amended and Restated Certificate of Incorporation of FirstCash Holdings, Inc., dated December 16, 2021

8-K12B

001-10960

3.1

12/16/2021

3.2

Amended and Restated Bylaws of FirstCash Holdings, Inc., dated December 16, 2021

8-K12B

001-10960

3.2

12/16/2021

31.1

Certification Pursuant to Exchange Act Section 13(a)-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act, provided by Rick L. Wessel, Chief Executive Officer

31.2

Certification Pursuant to Exchange Act Section 13(a)-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act, provided by R. Douglas Orr, Chief Financial Officer

32.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, provided by Rick L. Wessel, Chief Executive Officer

32.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, provided by R. Douglas Orr, Chief Financial Officer

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (embedded within the Inline XBRL document contained in Exhibit 101)


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Dated: July 31, 2023			FIRSTCASH HOLDINGS, INC.
			(Registrant)

			/s/ RICK L. WESSEL
			Rick L. Wessel
			Chief Executive Officer
			(On behalf of the Registrant)

			/s/ R. DOUGLAS ORR
			R. Douglas Orr
			Executive Vice President and Chief Financial Officer
			(As Principal Financial and Accounting Officer)

Document

EXHIBIT 31.1

CERTIFICATION PURSUANT TO EXCHANGE ACT SECTION 13(a)-14(a)/15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Rick L. Wessel, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of FirstCash Holdings, Inc. (the “Registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5.The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: July 31, 2023

/s/ Rick L. Wessel

Rick L. Wessel

Chief Executive Officer

Document

EXHIBIT 31.2

CERTIFICATION PURSUANT TO EXCHANGE ACT SECTION 13(a)-14(a)/15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, R. Douglas Orr, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of FirstCash Holdings, Inc. (the “Registrant”);

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: July 31, 2023

/s/ R. Douglas Orr

R. Douglas Orr

Chief Financial Officer

Document

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of FirstCash Holdings, Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Rick L. Wessel, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 31, 2023

/s/ Rick L. Wessel

Rick L. Wessel

Chief Executive Officer

Document

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of FirstCash Holdings, Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, R. Douglas Orr, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 31, 2023

/s/ R. Douglas Orr

R. Douglas Orr

Chief Financial Officer