UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 10-Q
[ X ]☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 2017Quarterly Period Ended March 31, 2023
OR
[    ]☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________


Commission file number 001-10960

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FIRSTCASH HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware75-223731887-3920732
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1600 West 7th Street, Fort Worth, Texas76102
(Address of principal executive offices)(Zip Code)


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)


NONENot 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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.01 per shareFCFSThe 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.    x☒Yes   o☐ No


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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).    x☒Yes   o☐ No



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.
x  Large accelerated filer
o  Accelerated filer
o  Non-accelerated filer (Do not check if a smaller reporting company)
o  Smaller reporting company
o  Emerging growth company


Table of Contents
☒		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. o☐


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


As of October 25, 2017,April 26, 2023, there were 47,186,68745,469,468 shares of common stock outstanding.








FIRSTCASH HOLDINGS, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2023

INDEX

FIRSTCASH, INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2017

INDEX

PART I.
FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Income (Loss)
Condensed Consolidated Statements of Comprehensive Income (Loss)
Condensed Consolidated Statements of Changes in Stockholders'Stockholders’ Equity
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
SIGNATURES
48





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.


These forward-looking statements are made to provide the public with management’s current assessment of the Company’s business. AlthoughWhile 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 uncertaintiesassociated with the legal and regulatory developmentsproceedings 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 and the shareholder class action and derivatives lawsuits filed against the Company; risks related to the American First Finance (“AFF”) transaction and the Company’s other acquisitions, including the failure of any acquisition, including the AFF acquisition, to deliver the estimated value and benefits expected by the Company; 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 (i) the Company’s 2016 annual reportmost recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2017,, including the risks described in Part 1, Item 1A, “Risk Factors” thereof, (ii) in this quarterly report, and (iii) the 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.






PART I. FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 March 31,December 31,
 202320222022
ASSETS   
Cash and cash equivalents$100,795 $113,317 $117,330 
Accounts receivable, net56,357 52,017 57,792 
Pawn loans377,697 344,101 390,617 
Finance receivables, net102,093 140,481 103,494 
Inventories257,603 247,276 288,339 
Leased merchandise, net148,854 119,147 153,302 
Prepaid expenses and other current assets29,523 22,592 19,788 
Total current assets1,072,922 1,038,931 1,130,662 
Property and equipment, net563,422 471,193 538,681 
Operating lease right of use asset308,890 303,444 307,009 
Goodwill1,591,460 1,541,424 1,581,381 
Intangible assets, net315,865 373,928 330,338 
Other assets9,204 8,318 9,415 
Deferred tax assets, net7,534 5,930 7,381 
Total assets$3,869,297 $3,743,168 $3,904,867 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Accounts payable and accrued liabilities$142,277 $237,164 $139,460 
Customer deposits and prepayments69,075 57,874 63,125 
Lease liability, current95,338 92,091 92,944 
Total current liabilities306,690 387,129 295,529 
Revolving unsecured credit facilities308,000 218,000 339,000 
Senior unsecured notes1,036,176 1,034,355 1,035,698 
Deferred tax liabilities, net145,686 126,741 151,759 
Lease liability, non-current201,871 198,760 203,115 
Other liabilities— 13,950 — 
Total liabilities1,998,423 1,978,935 2,025,101 
Stockholders’ equity:   
Common stock573 573 573 
Additional paid-in capital1,730,747 1,726,750 1,734,528 
Retained earnings1,092,697 880,138 1,060,603 
Accumulated other comprehensive loss(77,060)(119,510)(106,573)
Common stock held in treasury, at cost(876,083)(723,718)(809,365)
Total stockholders’ equity1,870,874 1,764,233 1,879,766 
Total liabilities and stockholders’ equity$3,869,297 $3,743,168 $3,904,867 
The accompanying notes are an integral part of these consolidated financial statements.
1

FIRSTCASH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
     
  September 30, December 31,
  2017 2016 2016
ASSETS      
Cash and cash equivalents $93,411
 $83,356
 $89,955
Fees and service charges receivable 45,134
 45,708
 41,013
Pawn loans 371,367
 373,169
 350,506
Consumer loans, net 24,515
 27,792
 29,204
Inventories 308,683
 332,862
 330,683
Income taxes receivable 27,867
 36,449
 25,510
Prepaid expenses and other current assets 23,818
 31,935
 25,264
Investment in common stock of Enova —
 54,786
 —
Total current assets 894,795
 986,057
 892,135
       
Property and equipment, net 234,309
 240,749
 236,057
Goodwill 834,883
 865,350
 831,151
Intangible assets, net 95,991
 106,502
 104,474
Other assets 59,054
 69,125
 71,679
Deferred tax assets 12,694
 9,912
 9,707
Total assets $2,131,726
 $2,277,695
 $2,145,203
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Accounts payable and accrued liabilities $94,769
 $129,997
 $109,354
Customer deposits 37,626
 37,591
 33,536
Income taxes payable 3,763
 910
 738
Total current liabilities 136,158
 168,498
 143,628
       
Revolving unsecured credit facilities 140,000
 360,000
 260,000
Senior unsecured notes 294,961
 196,373
 196,545
Deferred tax liabilities 73,203
 42,125
 61,275
Other liabilities 19,725
 77,645
 33,769
Total liabilities 664,047
 844,641
 695,217
       
Stockholders’ equity:      
Preferred stock —
 —
 —
Common stock 493
 493
 493
Additional paid-in capital 1,219,589
 1,217,820
 1,217,969
Retained earnings 436,159
 359,926
 387,401
Accumulated other comprehensive loss (88,445) (109,114) (119,806)
Common stock held in treasury, at cost (100,117) (36,071) (36,071)
Total stockholders’ equity 1,467,679
 1,433,054
 1,449,986
Total liabilities and stockholders’ equity $2,131,726
 $2,277,695
 $2,145,203
       
The accompanying notes are an integral part
of these condensed consolidated financial statements.

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
 Three Months Ended
 March 31,
 20232022
Revenue:  
Retail merchandise sales$327,915 $302,819 
Pawn loan fees151,560 131,819 
Leased merchandise income183,438 149,947 
Interest and fees on finance receivables54,642 42,449 
Wholesale scrap jewelry sales45,184 32,805 
Total revenue762,739 659,839 
Cost of revenue:  
Cost of retail merchandise sold199,001 182,214 
Depreciation of leased merchandise101,605 93,706 
Provision for lease losses49,065 39,820 
Provision for loan losses29,285 24,697 
Cost of wholesale scrap jewelry sold35,727 28,215 
Total cost of revenue414,683 368,652 
Net revenue348,056 291,187 
Expenses and other income:  
Operating expenses199,061 173,296 
Administrative expenses39,017 36,863 
Depreciation and amortization27,111 25,542 
Interest expense20,897 16,221 
Interest income(517)(676)
Gain on foreign exchange(802)(480)
Merger and acquisition expenses31 665 
Loss on revaluation of contingent acquisition consideration— 2,570 
Other expenses (income), net45 177 
Total expenses and other income284,843 254,178 
Income before income taxes63,213 37,009 
Provision for income taxes15,825 9,004 
Net income$47,388 $28,005 
Earnings per share:  
Basic$1.03 $0.58 
Diluted$1.02 $0.58 
The accompanying notes are an integral part of these consolidated financial statements.
2

FIRSTCASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited, in thousands, except per share amounts)
     
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2017 2016 2017 2016
Revenue:        
Retail merchandise sales $246,334
 $152,215
 $750,150
 $386,534
Pawn loan fees 132,545
 79,505
 383,428
 182,816
Wholesale scrap jewelry sales 37,528
 18,956
 107,285
 35,906
Consumer loan and credit services fees 19,005
 10,477
 58,754
 21,079
Total revenue 435,412
 261,153
 1,299,617
 626,335
         
Cost of revenue:        
Cost of retail merchandise sold 161,350
 93,399
 483,458
 239,166
Cost of wholesale scrap jewelry sold 36,831
 16,977
 102,370
 30,701
Consumer loan and credit services loss provision 6,185
 3,413
 15,419
 5,780
Total cost of revenue 204,366
 113,789
 601,247
 275,647
         
Net revenue 231,046
 147,364
 698,370
 350,688
         
Expenses and other income:        
Store operating expenses 138,966
 80,574
 412,780
 190,563
Administrative expenses 29,999
 24,500
 93,542
 58,277
Depreciation and amortization 13,872
 7,281
 42,804
 17,165
Interest expense 6,129
 5,073
 17,827
 13,859
Interest income (418) (138) (1,138) (636)
Merger and other acquisition expenses 911
 29,398
 3,164
 33,877
Loss on extinguishment of debt 20
 —
 14,114
 —
Net loss on sale of common stock of Enova —
 253
 —
 253
Total expenses and other income 189,479
 146,941
 583,093
 313,358
         
Income before income taxes 41,567
 423
 115,277
 37,330
         
Provision for income taxes 13,293
 1,835
 39,119
 13,895
         
Net income (loss) $28,274
 $(1,412) $76,158
 $23,435
         
Net income (loss) per share:        
Basic $0.59
 $(0.04) $1.58
 $0.77
Diluted $0.59
 $(0.04) $1.58
 $0.77
         
Dividends declared per common share $0.190
 $0.125
 $0.570
 $0.375
         
The accompanying notes are an integral part
of these condensed consolidated financial statements.

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
 Three Months Ended
 March 31,
 20232022
Net income$47,388 $28,005 
Other comprehensive income:  
Currency translation adjustment29,513 11,789 
Comprehensive income$76,901 $39,794 
 The accompanying notes are an integral part of these consolidated financial statements.
FIRSTCASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)
     
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2017 2016 2017 2016
Net income (loss) $28,274
 $(1,412) $76,158
 $23,435
Other comprehensive income (loss):        
Currency translation adjustment (4,981) (12,248) 31,361
 (28,951)
Change in fair value of investment in common stock of Enova (1)
 —
 (1,753) —
 (1,753)
Comprehensive income (loss) $23,293
 $(15,413) $107,519
 $(7,269)
         
(1) Net of tax benefit of $1,031 for the three and nine months ended September 30, 2016.
         
 The accompanying notes are an integral part
of these condensed consolidated financial statements.

FIRSTCASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited, in thousands)
                     
  
Preferred
Stock
 
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       Shares Amount  
Balance at 12/31/2016 —
 $—
 49,276
 $493
 $1,217,969
 $387,401
 $(119,806) 769
 $(36,071) $1,449,986
Shares issued under share-based com-pensation plan —
 —
 —
 —
 (440) —
 —
 (10) 440
 —
Exercise of stock options —
 —
 —
 —
 (242) —
 —
 (13) 549
 307
Share-based compensa-tion expense —
 —
 —
 —
 2,302
 —
 —
 —
 —
 2,302
Net income —
 —
 —
 —
 —
 76,158
 —
 —
 —
 76,158
Dividends paid —
 —
 —
 —
 —
 (27,400) —
 —
 —
 (27,400)
Currency translation adjustment —
 —
 —
 —
 —
 —
 31,361
 —
 —
 31,361
Repurchases of treasury stock —
 —
 —
 —
 —
 —
 —
 1,182
 (65,035) (65,035)
Balance at 9/30/2017 —
 $—
 49,276
 $493
 $1,219,589
 $436,159
 $(88,445) 1,928
 $(100,117) $1,467,679
                     
The accompanying notes are an integral part
of these condensed consolidated financial statements.

3


FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited, in thousands, except per share amounts)
Three Months Ended March 31, 2023
Common
Stock		Additional
Paid-In
Capital		Retained
Earnings		Accum-
ulated
Other
Compre-
hensive
Loss		Common Stock
Held in Treasury		Total
Stock-
holders’
Equity
 SharesAmount   SharesAmount 
As of 12/31/202257,322 $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 3/31/202357,322 $573 $1,730,747 $1,092,697 $(77,060)11,748 $(876,083)$1,870,874 
The accompanying notes are an integral part of these consolidated financial statements.

4

FIRSTCASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
CONTINUED
(unaudited, in thousands)
                     
  
Preferred
Stock
 
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       Shares Amount  
Balance at 12/31/2015 —
 $—
 40,288
 $403
 $202,393
 $643,604
 $(78,410) 12,052
 $(336,608) $431,382
Shares issued under share-based com-pensation plan —
 —
 7
 —
 (3,903) —
 —
 (83) 3,903
 —
Shares issued upon merger with Cash America —
 —
 20,181
 202
 1,015,305
 —
 —
 —
 —
 1,015,507
Share-based compensa-tion expense —
 —
 —
 —
 4,025
 —
 —
 —
 —
 4,025
Net income —
 —
 —
 —
 —
 23,435
 —
 —
 —
 23,435
Dividends paid —
 —
 —
 —
 —
 (10,591) —
 —
 —
 (10,591)
Change in fair value of investment in common stock of Enova, net of tax —
 —
 —
 —
 —
 —
 (1,753) —
 —
 (1,753)
Currency translation adjustment —
 —
 —
 —
 —
 —
 (28,951) —
 —
 (28,951)
Retirement of treasury stock —
 —
 (11,200) (112) —
 (296,522) —
 (11,200) 296,634
 —
Balance at 9/30/2016 —
 $—
 49,276
 $493
 $1,217,820
 $359,926
 $(109,114) 769
 $(36,071) $1,433,054
                     
The accompanying notes are an integral part
of these condensed consolidated financial statements.

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
CONTINUED
(unaudited, in thousands, except per share amounts)
Three Months Ended March 31, 2022
Common
Stock		Additional
Paid-In
Capital		Retained
Earnings		Accum-
ulated
Other
Compre-
hensive
Loss		Common Stock
Held in Treasury		Total
Stock-
holders’
Equity
 SharesAmount   SharesAmount 
As of 12/31/202157,322 $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 3/31/202257,322 $573 $1,726,750 $880,138 $(119,510)9,874 $(723,718)$1,764,233 
The accompanying notes are an integral part of these consolidated financial statements.
5

FIRSTCASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
  Nine Months Ended
  September 30,
  2017 2016
Cash flow from operating activities:    
Net income $76,158
 $23,435
Adjustments to reconcile net income to net cash flow provided by operating activities:    
Non-cash portion of credit loss provision 10,012
 2,368
Share-based compensation expense 2,302
 4,025
Net loss on sale of common stock of Enova —
 253
Depreciation and amortization expense 42,804
 17,165
Amortization of debt issuance costs 1,322
 1,083
Amortization of favorable/(unfavorable) lease intangibles, net (744) (58)
Loss on extinguishment of debt 14,114
 —
Deferred income taxes, net 11,137
 8,665
Changes in operating assets and liabilities, net of business combinations:    
Fees and service charges receivable (3,017) (2,630)
Inventories 5,206
 (4,924)
Prepaid expenses and other assets 7,819
 1,774
Accounts payable, accrued liabilities and other liabilities (21,036) 2,990
Income taxes 2,769
 (13,672)
Net cash flow provided by operating activities 148,846
 40,474
Cash flow from investing activities:    
Loan receivables, net of cash repayments 5,261
 (31,486)
Purchases of property and equipment (26,595) (23,426)
Portion of aggregate merger consideration paid in cash, net of cash acquired —
 (8,251)
Acquisitions of pawn stores, net of cash acquired (1,141) (28,756)
Proceeds from sale of common stock of Enova —
 2,962
Net cash flow used in investing activities (22,475) (88,957)
Cash flow from financing activities:    
Borrowings from revolving credit facilities 181,000
 396,000
Repayments of revolving credit facilities (301,000) (94,000)
Repayments of debt assumed from acquisitions —
 (238,532)
Issuance of senior unsecured notes 300,000
 —
Repurchase/redemption of senior unsecured notes (200,000) —
Repurchase/redemption premiums paid on senior unsecured notes (10,895) —
Debt issuance costs paid (5,342) (2,340)
Purchases of treasury stock (65,035) —
Proceeds from exercise of share-based compensation awards 307
 —
Dividends paid (27,400) (10,591)
Net cash flow provided by (used in) financing activities (128,365) 50,537
Effect of exchange rates on cash 5,450
 (5,652)
Change in cash and cash equivalents 3,456
 (3,598)
Cash and cash equivalents at beginning of the period 89,955
 86,954
Cash and cash equivalents at end of the period $93,411
 $83,356
     
The accompanying notes are an integral part
of these condensed consolidated financial statements.

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 Three Months Ended
March 31,
 20232022
Cash flow from operating activities:  
Net income$47,388 $28,005 
Adjustments to reconcile net income to net cash flow provided by operating activities:  
Depreciation of leased merchandise101,605 93,706 
Provision for lease losses49,065 39,820 
Provision for loan losses29,285 24,697 
Share-based compensation expense3,375 3,075 
Depreciation and amortization expense27,111 25,542 
Amortization of debt issuance costs692 732 
Net amortization of premiums, discounts and unearned origination fees on finance receivables(3,344)15,782 
Loss on revaluation of contingent acquisition consideration— 2,570 
Impairments and dispositions of certain other assets45 177 
Deferred income taxes, net(5,732)493 
Changes in operating assets and liabilities, net of business combinations:  
Accounts receivable, net2,484 3,746 
Inventories purchased directly from customers, wholesalers or manufacturers12,819 7,075 
Leased merchandise, net(146,222)(108,729)
Prepaid expenses and other assets(2,138)(1,165)
Accounts payable, accrued liabilities and other liabilities(20,992)(14,707)
Income taxes15,153 (674)
Net cash flow provided by operating activities110,594 120,145 
Cash flow from investing activities:  
Pawn loans, net (1)
44,358 17,383 
Finance receivables, net(24,540)61 
Purchases of furniture, fixtures, equipment and improvements(13,828)(7,028)
Purchases of store real property(17,483)(10,233)
Acquisitions of pawn stores, net of cash acquired(1,746)— 
Net cash flow (used in) provided by investing activities(13,239)183 
Cash flow from financing activities:  
Borrowings from unsecured credit facilities73,000 39,000 
Repayments of unsecured credit facilities(104,000)(80,000)
Debt issuance costs paid— (132)
Purchases of treasury stock(67,227)(72,217)
Payment of withholding taxes on net share settlements of restricted stock unit awards(2,463)— 
Dividends paid(15,294)(14,546)
Net cash flow used in financing activities(115,984)(127,895)
6

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONTINUED
(unaudited, in thousands)
Three Months Ended
March 31,
20232022
Effect of exchange rates on cash2,094 838 
Change in cash and cash equivalents(16,535)(6,729)
Cash and cash equivalents at beginning of the period117,330 120,046 
Cash and cash equivalents at end of the period$100,795 $113,317 

(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.    

7

FIRSTCASH HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands except per share amounts, unless otherwise indicated)

Note 1 - General
Note 1 - Significant Accounting Policies


Basis of Presentation


The accompanying condensed consolidated balance sheet at as of December 31, 2016,2022, which is derived from audited consolidated financial statements, and the unaudited condensed consolidated financial statements, including the notes thereto, includeincludes the accounts of FirstCash Holdings, Inc. and its wholly-owned subsidiaries (together, the “Company”). The Company regularly makes acquisitions, and the results of operations for the acquired storesacquisitions have been consolidated since the acquisition dates. All significant intercompany accounts and transactions have been eliminated.


These unaudited consolidated financial statements are condensed and do not include all disclosures and footnotes required byhave been prepared in accordance with U.S. generally accepted accounting principles in(“GAAP”) for interim financial information and with the United States of Americarules and regulations for completereporting 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 reportAnnual Report on Form 10-K for the year ended December 31, 2016,2022, filed with the Securities and Exchange Commission (the “SEC”)SEC on March 1, 2017.February 6, 2023. The condensed consolidated financial statements as of September 30, 2017March 31, 2023 and 2016,2022, and for the three month and nine month periods ended September 30, 2017March 31, 2023 and 2016,2022, 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 periodsperiod ended September 30, 2017March 31, 2023 are not necessarily indicative of the results that may be expected for the full fiscal year.

On September 1, 2016, the Company completed its merger with Cash America International, Inc. (“Cash America”), whereby Cash America merged with and into a wholly owned subsidiary of the Company (the “Merger”). The accompanying unaudited condensed consolidated results of operations for the three month and nine month periods ended September 30, 2017 include the results of operations for Cash America, while the comparable prior-year periods include the results of operations for Cash America for the period September 2, 2016 to September 30, 2016, affecting comparability of 2017 and 2016 amounts. The Company has performed a valuation analysis of identifiable assets acquired and liabilities assumed and allocated the aggregate Merger consideration based on the fair values of those identifiable assets and liabilities.


The Company has significantpawn operations in Latin America, where in Mexico, Guatemala and GuatemalaColombia, the functional currency is the Mexican peso, and Guatemalan quetzal respectively.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 three month and nine month periods ended September 30, 2017 and 2016.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 May 2014,March 2022, the Financial Accounting Standards Board issued ASU No. 2014-09, “Revenue from Contracts with CustomersNo 2022-02, “Financial Instruments—Credit Losses (Topic 606)”326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2014-09”2022-02”). ASU 2014-09 is a comprehensive revenue recognition model that requires a company2022-02 eliminates the accounting guidance for troubled debt restructurings by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the Financial Accounting Standards Board issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606),” which delayed the effective date of ASU 2014-09 by one year.borrowers experiencing financial difficulty. In addition, between March 2016the amendments require disclosure of current period gross write-offs for financing receivables and December 2016, the Financial Accounting Standards Board issued ASU No. 2016-08, “Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting revenue gross versus net)” (“ASU 2016-08”), ASU No. 2016-10, “Identifying Performance Obligations and Licensing” (“ASU 2016-10”), ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”), and ASU No. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” (“ASU 2016-20”). ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 clarify certain aspectsnet investment in leases by year of ASU 2014-09 and provide additional implementation guidance. ASU 2014-09, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 (collectively, “ASC 606”) become effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2017 for public companies. Early adoption is permitted but not before annual reporting periods beginning after December 15, 2016. Entities are permitted to adopt ASC 606 using one of two methods: (a) full retrospective
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adoption, meaning the standard is applied to all periods presented, or (b) modified retrospective adoption, meaning the cumulative effect of applying the new standard is recognized as an adjustment to the opening retained earnings balance.

The Company plans to adopt ASC 606 using the modified retrospective method. The Company does not believe the adoption of ASC 606 will impact the Company’s revenue recognition for pawn loan fees or consumer loan fees, as it believes neither is within the scope of ASC 606. Further, the Company has not identified any impacts to its consolidated financial statements that it believes will be material as a result of the adoption of ASC 606 for other revenue streams (retail merchandise sales, credit services fees and wholesale scrap jewelry sales), although it continues to evaluate the impact of adoption.

In July 2015, the Financial Accounting Standards Board issued ASU No. 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11 requires inventory be measured at the lower of cost or net realizable value. ASU 2015-11 defines net realizable value as the estimated selling priceorigination in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventory measured using last-in, first-out (“LIFO”) or the retail inventory method are excluded from the scope of this update.vintage disclosures. ASU 2015-11 requires prospective application and2022-02 is effective for fiscal years beginning after December 15, 2016 and2022, including interim periods within those fiscal years with early adoption permitted. The Company adopted ASU 2015-11 as of January 1, 2017, and the guidance was applied prospectively. There were no changesfor entities. Except for expanded disclosures to the Company’s financial position, results of operations, financial statementvintage disclosures, or valuation of inventory.

In February 2016, the Financial Accounting Standards Board issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires a lessee to recognize, in the statement of financial position, a liability to make lease payments (the lease liability) and a right-to-use asset representing its right to use the underlying asset for the lease term. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the income statement. Lessor accounting remains largely unchanged. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, with early adoption permitted. An entity will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently assessing the potential impact of ASU 2016-02 on its consolidated financial statements.

In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. ASU 2016-13 is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently assessing the potential impact of ASU 2016-13 on its consolidated financial statements.

In August 2016, the Financial Accounting Standards Board issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing existing diversity in practice. ASU 2016-15 is effective for public entities for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company does2022-02 did not expect ASU 2016-15 to have a material effect on the Company’s consolidated financial statements or current financial statement disclosures.

In January 2017, the Financial Accounting Standards Board issued ASU No. 2017-01, “Business Combinations (Topic 805) - Clarifying the Definition of a Business” (“ASU 2017-01”). ASU 2017-01 provides amendments to clarify the definition of a business and affects all companies and other reporting organizations that must determine whether they have acquired or sold a business. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years and should be applied prospectively as of the beginning of the period of adoption. Early adoption is permitted under certain circumstances. The Company does not expect ASU 2017-01 to have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.statements. See Note 5.

In January 2017, the Financial Accounting Standards Board issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). These amendments eliminate step 2 from the goodwill impairment test. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1,
8


2017 and should be adopted on a prospective basis. The Company does not expect ASU 2017-04 to have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

Note 2 - Earnings Per Share


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

Three Months Ended
March 31,
 20232022
Numerator:  
Net income$47,388 $28,005 
Denominator:  
Weighted-average common shares for calculating basic earnings per share46,147 48,241 
Effect of dilutive securities:  
Restricted stock unit awards165 59 
Weighted-average common shares for calculating diluted earnings per share46,312 48,300 
Earnings per share:  
Basic$1.03 $0.58 
Diluted$1.02 $0.58 

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 4.0 years as of March 31, 2023 and 4.1 years as of March 31, 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 March 31, 2023 and 2022 was 6.9% and 6.1%, respectively.

The Company has certain operating leases in Mexico which are denominated in U.S. dollars. The liability related to these leases is considered a monetary liability and requires remeasurement each reporting period into the functional currency (Mexican pesos) using reporting date exchange rates. The remeasurement results in the recognition of foreign currency exchange gains or
9

  Three Months Ended Nine Months Ended
  September 30, September 30,
  2017 2016 2017 2016
Numerator:        
Net income (loss) $28,274
 $(1,412) $76,158
 $23,435
         
Denominator (in thousands):        
Weighted-average common shares for calculating basic earnings per share 47,628
 34,631
 48,090
 30,372
Effect of dilutive securities:        
Stock options and nonvested stock awards 40
 —
 27
 —
Weighted-average common shares for calculating diluted earnings per share 47,668
 34,631
 48,117
 30,372
         
Net income (loss) per share:        
Basic $0.59
 $(0.04) $1.58
 $0.77
Diluted $0.59
 $(0.04) $1.58
 $0.77

losses each reporting period, which can produce a certain level of earnings volatility. The Company recognized a foreign currency gain of $1.2 million and $0.7 million during the three months ended March 31, 2023 and 2022, respectively, related to the remeasurement of these U.S. dollar denominated operating leases, which is included in gain on foreign exchange in the accompanying consolidated statements of income.

Note 3 - Long-Term DebtLease 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 months ended March 31, 2023 and 2022 (in thousands):


Three Months Ended
March 31,
20232022
Operating lease expense$33,540 $31,528 
Variable lease expense (1)
4,472 4,174 
Total operating lease expense$38,012 $35,702 

(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 Company’s long-term debt atmaturity of lease liabilities for all operating leases as of March 31, 2023 (in thousands):

Nine months ending December 31, 2023$86,200 
202494,792 
202566,885 
202644,321 
202721,472 
Thereafter26,185 
Total$339,855 
Less amount of lease payments representing interest(42,646)
Total present value of lease payments$297,209 

The following table details supplemental cash flow information related to operating leases for the respective principal amounts, net of unamortized debt issuance costs:three months ended March 31, 2023 and 2022 (in thousands):


Three Months Ended
March 31,
20232022
Cash paid for amounts included in the measurement of operating lease liabilities$30,146 $29,132 
Leased assets obtained in exchange for new operating lease liabilities$19,734 $18,946 


10

 September 30, December 31,
 2017 2016 2016
Senior unsecured notes:     
5.375% senior notes due 2024 (1)
$294,961
 $—
 $—
6.75% senior notes due 2021 (2)
—
 196,373
 196,545
 $294,961
 $196,373
 $196,545
      
Revolving unsecured credit facility, maturing 2022$140,000
 $360,000
 $260,000

(1)
As of September 30, 2017, deferred debt issuance costs of $5,039 are included as a direct deduction from the carrying amount of the senior unsecured notes due 2024 in the accompanying condensed consolidated balance sheets.

(2)
As of September 30, 2016 and December 31, 2016, deferred debt issuance costs of $3,627 and $3,455, respectively, are included as a direct deduction from the carrying amount of the senior unsecured notes due 2021 in the accompanying condensed consolidated balance sheets.

Senior Unsecured Notes

On May 30, 2017, the Company completed an offering of $300,000 of 5.375% senior notes due on June 1, 2024 (the “Notes”). Interest on the Notes will be payable semi-annually in arrears on June 1 and December 1, commencing on December 1, 2017. The Notes were sold to the placement agents as initial purchasers for resale only to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States in accordance with Regulation S under the Securities Act. The Company used the proceeds from the offering to repurchase, or otherwise redeem, its outstanding $200,000, 6.75% senior notes due 2021 (the “2021 Notes”), to repay borrowings under the Company’s credit facility and to pay related fees and expenses associated with the Notes offering and the repurchase and redemption of the 2021 Notes. The Company capitalized approximately $5,200 in issuance costs, which consisted primarily of placement agent fees and legal and other professional expenses. The issuance costs are being amortized over the life of the Notes as a component of interest expense and are carried as a direct deduction from the carrying amount of the Notes in the accompanying condensed consolidated balance sheets.

The 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 primary revolving bank credit facility. The Notes will permit the Company to make share repurchases of up to $100,000 with the net proceeds of the Notes and other available funds and 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 (“Net Debt Ratio”) is less than 2.25 to 1.00. The Net Debt Ratio is defined generally in the indenture governing the Notes (the “Indenture”) 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.

The Company may redeem the Notes at any time on or after June 1, 2020, at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any. In addition, prior to June 1, 2020, the Company may redeem some or all of the Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, plus a “make-whole” premium set forth in the Indenture. The Company may redeem up to 35% of the Notes prior to June 1, 2020, with the proceeds of certain equity offerings at a redemption price of 105.375% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any. In addition, upon a change of control, noteholders have the right to require the Company to purchase the Notes at a price equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest, if any.

For the nine months ended September 30, 2017, the Company recognized a $14,114 loss on extinguishment of debt related to the repurchase or redemption of the 2021 Notes which includes the tender or redemption premiums paid over the outstanding $200,000 principal amount of the 2021 Notes and other reacquisition costs of $10,895 and the write off of unamortized debt issuance costs of $3,219.
Revolving Credit Facilities

At September 30, 2017, the Company maintained a line of credit with a group of U.S. based commercial lenders (the “2016 Credit Facility”) in the amount of $400,000. In May 2017, the term of the 2016 Credit Facility was extended through September 2, 2022. The calculation of the fixed charge coverage ratio was also amended to remove share repurchases from the calculation to provide greater flexibility for making future share repurchases and paying cash dividends.

At September 30, 2017, the Company had $140,000 in outstanding borrowings and a $4,456 outstanding letter of credit under the 2016 Credit Facility, leaving $255,544 available for future borrowings. The 2016 Credit Facility bears interest, at the Company’s option, at either (i) the prevailing London Interbank Offered Rate (“LIBOR”) (with interest periods of 1 week or 1, 2, 3 or 6 months at the Company’s option) plus a fixed spread of 2.5% or (ii) the prevailing prime or base rate plus a fixed spread of 1.5%. The agreement has a LIBOR floor of 0%. Additionally, the Company is required to pay an annual commitment fee of 0.50% on the average daily unused portion of the 2016 Credit Facility commitment. The weighted-average interest rate on amounts outstanding under the 2016 Credit Facility at September 30, 2017 was 3.75% based on 1 week LIBOR. Under the terms of the 2016 Credit Facility, the Company is required to maintain certain financial ratios and comply with certain financial covenants. The 2016 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 requirements and covenants of the 2016 Credit Facility as of September 30, 2017. During the nine months ended September 30, 2017, the Company made net payments of $120,000 pursuant to the 2016 Credit Facility.

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At September 30, 2017, the Company maintained a U.S. dollar denominated line of credit with a bank in Mexico (the “Mexico Credit Facility”) in the amount of $10,000. The Mexico Credit Facility bears interest at 30-day LIBOR plus a fixed spread of 2.0% and matures in December 2017. Under the terms of the Mexico Credit Facility, the Company is required to maintain certain financial ratios and comply with certain financial covenants. The Company was in compliance with the requirements and covenants of the Mexico Credit Facility as of September 30, 2017. The Company is required to pay a one-time commitment fee of $25 due when the first amount is drawn/borrowed. At September 30, 2017, the Company had no amount outstanding under the Mexico Credit Facility and $10,000 was available for borrowings.

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


As of September 30, 2017, the Company did not have anyThe Company’s financial assets orand liabilities as of March 31, 2023, March 31, 2022 and December 31, 2022 that are measured at fair value on a recurring basis. basis are as follows (in thousands):

Estimated Fair Value
Fair Value Measurements Using
Level 1Level 2Level 3
Financial liabilities:
Contingent consideration as of March 31, 2023$— $— $— 
Contingent consideration as of March 31, 2022 (1)
— — 112,119 
Contingent consideration as of December 31, 2022— — — 

(1)The Company’scurrent portion of $98.2 million is included in accounts payable and accrued liabilities and the non-current portion of $14.0 million is included in other liabilities in the accompanying consolidated balance sheet as of March 31, 2022.

As of March 31, 2023, the seller parties have the right to receive up to $50 million of additional consideration if AFF achieves certain adjusted EBITDA targets for the first half of 2023. The Company revalues this contingent consideration to fair value at the end of each reporting period. The estimate of the fair value of contingent consideration is determined by applying a Monte Carlo simulation, which includes inputs not observable in the market, such as the risk-free rate, risk-adjusted discount rate, the volatility of the underlying financial metrics and projected financial forecast of AFF over the earn-out period, and therefore represents a Level 3 measurement. Significant increases or decreases in these inputs could result in a significantly lower or higher fair value measurement of the contingent consideration.

The changes in financial assets and liabilities that wereare measured and recorded at fair value on a recurring basis using Level 3 fair value measurements for the three months ended March 31, 2023 and March 31, 2022 are as follows (in thousands):

Three Months Ended
March 31,
20232022
Contingent consideration at beginning of the period$— $109,549 
Change in fair value (1)
— 2,570 
Contingent consideration at end of the period$— $112,119 

(1)The Company recognized a loss of September 30, 2016 and December 31, 2016 were as follows:

  September 30, Fair Value Measurements Using
Financial assets: 2016 Level 1 Level 2 Level 3
Cash America nonqualified savings plan-related assets $12,229
 $12,229
 $—
 $—
Investment in common stock of Enova 54,786
 54,786
 —
 —
  $67,015
 $67,015
 $—
 $—

  December 31, Fair Value Measurements Using
  2016 Level 1 Level 2 Level 3
Financial assets:        
Cash America nonqualified savings plan-related assets $12,663
 $12,663
 $—
 $—
  $12,663
 $12,663
 $—
 $—

Prior to the Merger, Cash America had a nonqualified savings plan that was available to certain members of its management. Upon completion of the Merger, the nonqualified savings plan was terminated and$2.6 million during the three months ended March 31, 2017, the Company dissolved the plan and distributed the remaining assets to the participants. As of September 30, 2016 and December 31, 2016, the assets2022 as a result of the nonqualified savings plan included marketable equity securities, which were classified as Level 1 andchange in fair value of the fair values were based on quoted market prices. The nonqualified savings plan assets were included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheet with an offsetting liability of equal amount,contingent consideration, which is included in accounts payable and accrued expensesloss on revaluation of contingent acquisition consideration in the accompanying condensed consolidated balance sheet.statements of income.


The Company’s investmentThere were no transfers in common stockor out of Enova represented the Company’s available-for-sale shares of Enova International, Inc. (“Enova”) common stock. As of September 30, 2016, the equity securities representing Enova common stock were classified as Level 1, 2 or 3 during the three months ended March 31, 2023 and based on the market determined stock price of Enova. During 2016, the Company sold all of the Enova shares in open market transactions.March 31, 2022.




11


Fair Value Measurements on a NonrecurringNon-Recurring Basis


The Company measures non-financial assets and liabilities, such as property and equipment and intangible assets, at fair value on a nonrecurringnon-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 September 30, 2017, 2016March 31, 2023, March 31, 2022 and December 31, 20162022 that are not measured at fair value in the condensed consolidated balance sheets are as follows:follows (in thousands):


Carrying ValueEstimated Fair Value
March 31,March 31,Fair Value Measurements Using
20232023Level 1Level 2Level 3
Financial assets:
Cash and cash equivalents$100,795 $100,795 $100,795 $— $— 
Accounts receivable, net56,357 56,357 — — 56,357 
Pawn loans377,697 377,697 — — 377,697 
Finance receivables, net (1)
102,093 214,206 — — 214,206 
$636,942 $749,055 $100,795 $— $648,260 
Financial liabilities:
Revolving unsecured credit facility$308,000 $308,000 $— $308,000 $— 
Senior unsecured notes (outstanding principal)1,050,000 950,000 — 950,000 — 
$1,358,000 $1,258,000 $— $1,258,000 $— 
  Carrying Value Estimated Fair Value
  September 30, September 30, Fair Value Measurements Using
  2017 2017 Level 1 Level 2 Level 3
Financial assets:          
Cash and cash equivalents $93,411
 $93,411
 $93,411
 $—
 $—
Pawn loans 371,367
 371,367
 —
 —
 371,367
Consumer loans, net 24,515
 24,515
 —
 —
 24,515
Fees and service charges receivable 45,134
 45,134
 —
 —
 45,134
  $534,427
 $534,427
 $93,411
 $—
 $441,016
           
Financial liabilities:          
Revolving unsecured credit facilities $140,000
 $140,000
 $—
 $140,000
 $—
Senior unsecured notes, outstanding principal 300,000
 314,000
 —
 314,000
 —
  $440,000
 $454,000
 $—
 $454,000
 $—


(1)Finance receivables, gross as of March 31, 2023 was $201.3 million. See Note 5.

 Carrying Value Estimated Fair ValueCarrying ValueEstimated Fair Value
 September 30, September 30, Fair Value Measurements UsingMarch 31,March 31,Fair Value Measurements Using
 2016 2016 Level 1 Level 2 Level 320222022Level 1Level 2Level 3
Financial assets:          Financial assets:
Cash and cash equivalents $83,356
 $83,356
 $83,356
 $—
 $—
Cash and cash equivalents$113,317 $113,317 $113,317 $— $— 
Accounts receivable, netAccounts receivable, net52,017 52,017 — — 52,017 
Pawn loans 373,169
 373,169
 —
 —
 373,169
Pawn loans344,101 344,101 — — 344,101 
Consumer loans, net 27,792
 27,792
 —
 —
 27,792
Fees and service charges receivable 45,708
 45,708
 —
 —
 45,708
Finance receivables, net (1)
Finance receivables, net (1)
140,481 180,819 — — 180,819 
 $530,025
 $530,025
 $83,356
 $—
 $446,669
$649,916 $690,254 $113,317 $— $576,937 
          
Financial liabilities:          Financial liabilities:
Revolving unsecured credit facilities $360,000
 $360,000
 $—
 $360,000
 $—
Revolving unsecured credit facilities$218,000 $218,000 $— $218,000 $— 
Senior unsecured notes, outstanding principal 200,000
 210,000
 —
 210,000
 —
Senior unsecured notes (outstanding principal)Senior unsecured notes (outstanding principal)1,050,000 992,000 — 992,000 — 
 $560,000
 $570,000
 $—
 $570,000
 $—
$1,268,000 $1,210,000 $— $1,210,000 $— 


(1)Finance receivables, gross as of March 31, 2022 was $191.8 million. See Note 5.

12


Carrying ValueEstimated Fair Value
December 31,December 31,Fair Value Measurements Using
20222022Level 1Level 2Level 3
Financial assets:
Cash and cash equivalents$117,330 $117,330 $117,330 $— $— 
Accounts receivable, net57,792 57,792 — — 57,792 
Pawn loans390,617 390,617 — — 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 $— 

  Carrying Value Estimated Fair Value
  December 31, December 31, Fair Value Measurements Using
  2016 2016 Level 1 Level 2 Level 3
Financial assets:          
Cash and cash equivalents $89,955
 $89,955
 $89,955
 $—
 $—
Pawn loans 350,506
 350,506
 —
 —
 350,506
Consumer loans, net 29,204
 29,204
 —
 —
 29,204
Fees and service charges receivable 41,013
 41,013
 —
 —
 41,013
  $510,678
 $510,678
 $89,955
 $—
 $420,723
           
Financial liabilities:          
Revolving unsecured credit facilities $260,000
 $260,000
 $—
 $260,000
 $—
Senior unsecured notes, outstanding principal 200,000
 208,000
 —
 208,000
 —
  $460,000
 $468,000
 $—
 $468,000
 $—
(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 fees and service chargesaccounts receivable, net approximate fair value. Short-term loans and installment loans, collectively, represent consumer loans,

Finance receivables are measured at amortized cost, net of an allowance for loan losses on the accompanying condensed consolidated balance sheetssheets. 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 carried net of the allowanceadjusted for estimated loan losses, which is calculated by applying historical loss rates combined with recent default trends to the gross consumer loan balance. The unobservable inputs used to calculate the fair value of these loans include historical loss rates, recent default trends and estimated remaining loan terms; therefore, the carrying value approximates the fair value.credit risk, among other factors).


The carrying value of the Company’s priorunsecured credit facilities approximates fair value as of September 30, 2016.March 31, 2023, March 31, 2022 and December 31, 2022. The carryingfair value of the Company’s currentunsecured credit facilities (the 2016 Credit Facilityis 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 the Mexico Credit Facility) approximates fair value as of September 30, 2017 and December 31, 2016.reprice with any changes in SOFR or TIIE. The fair value of the senior unsecured notes have beenis estimated based on a discounted cash flow analysis using a discount rate representing the Company’s estimate of the ratequoted prices in markets that would be used by market participants. Changes in assumptions or estimation methodologies may have a material effect on these estimated fair values.are not active.



13


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 March 31,As of
December 31,
202320222022
Finance receivables, gross$201,288 $191,845 $195,987 
Fair value premium on non-purchase credit deteriorated (”PCD”) finance receivables (1)
— 22,981 — 
Merchant partner discounts and premiums, net(6,328)(430)(3,517)
Unearned origination fees(4,257)(1,583)(4,143)
Finance receivables, amortized cost190,703 212,813 188,327 
Less allowance for loan losses(88,610)(72,332)(84,833)
Finance receivables, net$102,093 $140,481 $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.

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

Three Months Ended
March 31,
20232022
Balance at beginning of period$84,833 $75,574 
Provision for loan losses29,285 24,697 
Charge-offs(27,117)(29,408)
Recoveries1,609 1,469 
Balance at end of period$88,610 $72,332 


14

The following is an assessment of the credit quality indicators of the amortized cost of finance receivables as of March 31, 2023 and 2022, by origination year (in thousands):

Origination Year
202320222021Total
As of March 31, 2023
Delinquency:
1 to 30 days past due$4,921 $8,873 $1,311 $15,105 
31 to 60 days past due1,517 5,822 843 8,182 
61 to 90 days past due (1)
406 6,455 848 7,709 
Total past due finance receivables6,844 21,150 3,002 30,996 
Current finance receivables69,507 79,465 10,735 159,707 
Finance receivables, amortized cost$76,351 $100,615 $13,737 $190,703 
Origination Year
202220212020Total
As of March 31, 2022
Delinquency:
1 to 30 days past due$3,083 $11,180 $1,132 $15,395 
31 to 60 days past due1,048 6,917 556 8,521 
61 to 90 days past due (1)
405 8,078 647 9,130 
Total past due finance receivables before fair value adjustments4,536 26,175 2,335 33,046 
Current finance receivables before fair value adjustments53,211 93,838 9,737 156,786 
Finance receivables before fair value adjustments$57,747 $120,013 $12,072 189,832 
Fair value premium on non-PCD finance receivables22,981 
Finance receivables, amortized cost$212,813 

(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 three months ended March 31, 2023, by origination year (in thousands):

Origination Year
202320222021Total
Finance receivables gross charge-offs:
Gross charge-offs during the three months ended March 31, 2023$187 $22,444 $4,486 $27,117 


15

Note 6 - Leased Merchandise, Net

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

As of March 31,As of
December 31,
202320222022
Leased merchandise (1)
$349,648 $193,023 $335,038 
Processing fees(4,341)(2,019)(4,124)
Merchant partner discounts and premiums, net2,693 1,192 2,456 
Accumulated depreciation(105,997)(32,685)(100,879)
Leased merchandise, before allowance for lease losses242,003 159,511 232,491 
Less allowance for lease losses(93,149)(40,364)(79,189)
Leased merchandise, net$148,854 $119,147 $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
March 31,
 20232022
Balance at beginning of period$79,189 $5,442 
Provision for lease losses49,065 39,820 
Charge-offs(36,778)(6,020)
Recoveries1,673 1,122 
Balance at end of period$93,149 $40,364 


16

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 March 31,As of
December 31,
202320222022
Revolving unsecured credit facility, maturing 2027 (1)
$308,000 $218,000 $339,000 
Senior unsecured notes:
4.625% senior unsecured notes due 2028 (2)
493,727 492,739 493,475 
5.625% senior unsecured notes due 2030 (3)
542,449 541,616 542,223 
Total senior unsecured notes1,036,176 1,034,355 1,035,698 
Total long-term debt$1,344,176 $1,252,355 $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 March 31, 2023, March 31, 2022 and December 31, 2022, deferred debt issuance costs of $6.3 million, $7.3 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 March 31, 2023, March 31, 2022 and December 31, 2022, deferred debt issuance costs of $7.6 million, $8.4 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 March 31, 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 March 31, 2023, the Company had $308.0 million in outstanding borrowings and $2.9 million in outstanding letters of credit under the Credit Facility, leaving $279.1 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 March 31, 2023 was 7.34% 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 March 31, 2023. During the three months ended March 31, 2023, the Company made net payments of $31.0 million pursuant to the Credit Facility.

Revolving Unsecured Uncommitted Credit Facility

During the period from January 1, 2023 through March 9, 2023, the Company’s primary subsidiary in Mexico, First Cash S.A. de C.V., maintained an unsecured and uncommitted line of credit guaranteed by FirstCash, Inc. with a bank in Mexico (the “Mexico Credit Facility”) in the amount of $600.0 million Mexican pesos. The Mexico Credit Facility charged interest at TIIE plus a fixed spread of 2.5%. Under the terms of the Mexico Credit Facility, the Company was required to maintain certain financial ratios and comply with certain financial covenants. The Company was in compliance with the covenants of the Mexico Credit Facility through March 9, 2023. The Mexico Credit Facility matured on March 9, 2023 and during the period from January 1, 2023 through March 9, 2023, the Company had no amount outstanding under the Mexico Credit Facility.


17

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 March 31, 2023, the Company’s consolidated total debt ratio was 2.6 to 1. While the 2028 Notes generally limit the Company’s ability to make 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 March 31, 2023, the Company’s consolidated total debt ratio was 2.6 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 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.
18

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 makes similar allegations as the Litigation and alleges a single count for breach of fiduciary duty against the named derivative defendants. The action does not quantify any alleged damages, but, in addition to attorneys’ fees and costs and certain equitable relief, the derivative plaintiff seeks to recover damages on behalf of the Company for purported financial harm and to have the court order changes in the Company’s corporate governance. On August 8, 2022, the Court entered an Order staying proceedings in this action pending the disposition of any motion to dismiss filed in the Litigation noted above. On March 31, 2023, the Court granted the Company’s Motion to Dismiss with prejudice in the Litigation noted above and entered Final Judgment in the Company’s favor. As of the date of this quarterly report, the stay of this derivative action remains in place.

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, and is not expected to issue a decision in that case until late 2023 at the earliest. The stay of the CFPB’s action against the Company will remain in effect until that appeal is resolved.

Gold Forward Sales Contracts

As of March 31, 2023, the Company had contractual commitments to deliver a total of 70,500 gold ounces during the months of April 2023 through February 2025 at a weighted-average price of $1,999 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 59 - Segment Information


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


•U.S. operations - Includes all pawn
•Latin America pawn
•Retail POS payment solutions (AFF)

Corporate expenses and consumer loan operations inincome, which include administrative expenses, corporate depreciation and amortization, interest expense, interest income, gain on foreign exchange, merger and acquisition expenses, loss 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 operations - Includes all 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 consumer loan operations in Latin America, which currently includes operations in Mexico, Guatemala and El Salvadorare eliminated to arrive at consolidated totals.




19

The following tables present reportable segment information for the three month period ended March 31, 2023 and nine month periods ended September 30, 2017 and 2016:2022 as well as segment earning assets (in thousands):


Three Months Ended March 31, 2023
 U.S.
Pawn		Latin America
Pawn		Retail POS
Payment
Solutions		Corporate/
Eliminations		Consolidated
Revenue:   
Retail merchandise sales$210,681 $118,937 $— $(1,703)(1)$327,915 
Pawn loan fees102,684 48,876 — — 151,560 
Leased merchandise income— — 183,438 — 183,438 
Interest and fees on finance receivables— — 54,642 — 54,642 
Wholesale scrap jewelry sales26,316 18,868 — — 45,184 
Total revenue339,681 186,681 238,080 (1,703)762,739 
Cost of revenue:    
Cost of retail merchandise sold121,929 77,963 — (891)(1)199,001 
Depreciation of leased merchandise— — 102,172 (567)(1)101,605 
Provision for lease losses— — 49,166 (101)(1)49,065 
Provision for loan losses— — 29,285 — 29,285 
Cost of wholesale scrap jewelry sold21,082 14,645 — — 35,727 
Total cost of revenue143,011 92,608 180,623 (1,559)414,683 
Net revenue (loss)196,670 94,073 57,457 (144)348,056 
Expenses and other income:    
Operating expenses109,781 55,756 33,524 — 199,061 
Administrative expenses— — — 39,017 39,017 
Depreciation and amortization5,870 5,445 736 15,060 27,111 
Interest expense— — — 20,897 20,897 
Interest income— — — (517)(517)
Gain on foreign exchange— — — (802)(802)
Merger and acquisition expenses— — — 31 31 
Other expenses (income), net— — — 45 45 
Total expenses and other income115,651 61,201 34,260 73,731 284,843 
Income (loss) before income taxes$81,019 $32,872 $23,197 $(73,875)$63,213 
  Three Months Ended September 30, 2017
  
U.S.
Operations
 
Latin America
Operations
 Corporate Consolidated
Revenue:        
Retail merchandise sales $160,598
 $85,736
 $—
 $246,334
Pawn loan fees 95,266
 37,279
 —
 132,545
Wholesale scrap jewelry sales 32,397
 5,131
 —
 37,528
Consumer loan and credit services fees 18,525
 480
 —
 19,005
Total revenue 306,786
 128,626
 —
 435,412
         
Cost of revenue:        
Cost of retail merchandise sold 107,561
 53,789
 —
 161,350
Cost of wholesale scrap jewelry sold 31,518
 5,313
 —
 36,831
Consumer loan and credit services loss provision 6,068
 117
 —
 6,185
Total cost of revenue 145,147
 59,219
 —
 204,366
         
Net revenue 161,639
 69,407
 —
 231,046
         
Expenses and other income:        
Store operating expenses 104,555
 34,411
 —
 138,966
Administrative expenses —
 —
 29,999
 29,999
Depreciation and amortization 5,919
 2,704
 5,249
 13,872
Interest expense —
 —
 6,129
 6,129
Interest income —
 —
 (418) (418)
Merger and other acquisition expenses —
 —
 911
 911
Loss on extinguishment of debt —
 —
 20
 20
Total expenses and other income 110,474
 37,115
 41,890
 189,479
         
Income (loss) before income taxes $51,165
 $32,292
 $(41,890) $41,567


As of March 31, 2023
U.S.
Pawn		Latin America
Pawn		Retail POS
Payment
Solutions		Corporate/
Eliminations		Consolidated
Earning assets:
Pawn loans$256,773 $120,924 $— $— $377,697 
Finance receivables, net— — 102,093 — 102,093 
Inventories178,587 79,016 — — 257,603 
Leased merchandise, net— — 150,094 (1,240)(1)148,854 

(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.

20


Three Months Ended March 31, 2022
 U.S.
Pawn		Latin America
Pawn		Retail POS
Payment
Solutions		Corporate/
Eliminations		Consolidated
Revenue:   
Retail merchandise sales$204,942 $97,877 $— $— $302,819 
Pawn loan fees90,339 41,480 — — 131,819 
Leased merchandise income— — 149,947 — 149,947 
Interest and fees on finance receivables— — 42,449 — 42,449 
Wholesale scrap jewelry sales16,524 16,281 — — 32,805 
Total revenue311,805 155,638 192,396 — 659,839 
Cost of revenue:    
Cost of retail merchandise sold119,718 62,496 — — 182,214 
Depreciation of leased merchandise— — 93,706 — 93,706 
Provision for lease losses— — 39,820 — 39,820 
Provision for loan losses— — 24,697 — 24,697 
Cost of wholesale scrap jewelry sold14,530 13,685 — — 28,215 
Total cost of revenue134,248 76,181 158,223 — 368,652 
Net revenue177,557 79,457 34,173 — 291,187 
Expenses and other income:    
Operating expenses98,822 45,542 28,932 — 173,296 
Administrative expenses— — — 36,863 36,863 
Depreciation and amortization5,587 4,401 682 14,872 25,542 
Interest expense— — — 16,221 16,221 
Interest income— — — (676)(676)
Gain on foreign exchange— — — (480)(480)
Merger and acquisition expenses— — — 665 665 
Loss on revaluation of contingent acquisition consideration— — — 2,570 2,570 
Other expenses (income), net— — — 177 177 
Total expenses and other income104,409 49,943 29,614 70,212 254,178 
Income (loss) before income taxes$73,148 $29,514 $4,559 $(70,212)$37,009 

  Three Months Ended September 30, 2016
  
U.S.
Operations
 
Latin America
Operations
 Corporate Consolidated
Revenue:        
Retail merchandise sales $84,547
 $67,668
 $—
 $152,215
Pawn loan fees 48,840
 30,665
 —
 79,505
Wholesale scrap jewelry sales 15,046
 3,910
 —
 18,956
Consumer loan and credit services fees 9,991
 486
 —
 10,477
Total revenue 158,424
 102,729
 —
 261,153
         
Cost of revenue:        
Cost of retail merchandise sold 51,922
 41,477
 —
 93,399
Cost of wholesale scrap jewelry sold 13,955
 3,022
 —
 16,977
Consumer loan and credit services loss provision 3,275
 138
 —
 3,413
Total cost of revenue 69,152
 44,637
 —
 113,789
         
Net revenue 89,272
 58,092
 —
 147,364
         
Expenses and other income:        
Store operating expenses 52,480
 28,094
 —
 80,574
Administrative expenses —
 —
 24,500
 24,500
Depreciation and amortization 2,906
 2,602
 1,773
 7,281
Interest expense —
 —
 5,073
 5,073
Interest income —
 —
 (138) (138)
Merger and other acquisition expenses —
 —
 29,398
 29,398
Net loss on sale of common stock of Enova —
 —
 253
 253
Total expenses and other income 55,386
 30,696
 60,859
 146,941
         
Income (loss) before income taxes $33,886
 $27,396
 $(60,859) $423
As of March 31, 2022
U.S.
Pawn		Latin America
Pawn		Retail POS
Payment
Solutions		Consolidated
Earning assets:
Pawn loans$241,597$102,504$—$344,101
Finance receivables, net——140,481140,481
Inventories184,67162,605—247,276
Leased merchandise, net——119,147119,147


21


  Nine Months Ended September 30, 2017
  
U.S.
Operations
 
Latin America
Operations
 Corporate Consolidated
Revenue:        
Retail merchandise sales $519,116
 $231,034
 $—
 $750,150
Pawn loan fees 287,338
 96,090
 —
 383,428
Wholesale scrap jewelry sales 91,430
 15,855
 —
 107,285
Consumer loan and credit services fees 57,425
 1,329
 —
 58,754
Total revenue 955,309
 344,308
 —
 1,299,617
         
Cost of revenue:        
Cost of retail merchandise sold 337,789
 145,669
 —
 483,458
Cost of wholesale scrap jewelry sold 87,600
 14,770
 —
 102,370
Consumer loan and credit services loss provision 15,115
 304
 —
 15,419
Total cost of revenue 440,504
 160,743
 —
 601,247
         
Net revenue 514,805
 183,565
 —
 698,370
         
Expenses and other income:        
Store operating expenses 318,044
 94,736
 —
 412,780
Administrative expenses —
 —
 93,542
 93,542
Depreciation and amortization 18,759
 7,723
 16,322
 42,804
Interest expense —
 —
 17,827
 17,827
Interest income —
 —
 (1,138) (1,138)
Merger and other acquisition expenses —
 —
 3,164
 3,164
Loss on extinguishment of debt —
 —
 14,114
 14,114
Total expenses and other income 336,803
 102,459
 143,831
 583,093
         
Income (loss) before income taxes $178,002
 $81,106
 $(143,831) $115,277

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  Nine Months Ended September 30, 2016
  
U.S.
Operations
 
Latin America
Operations
 Corporate Consolidated
Revenue:        
Retail merchandise sales $186,673
 $199,861
 $—
 $386,534
Pawn loan fees 94,929
 87,887
 —
 182,816
Wholesale scrap jewelry sales 25,910
 9,996
 —
 35,906
Consumer loan and credit services fees 19,619
 1,460
 —
 21,079
Total revenue 327,131
 299,204
 —
 626,335
         
Cost of revenue:        
Cost of retail merchandise sold 114,632
 124,534
 —
 239,166
Cost of wholesale scrap jewelry sold 22,914
 7,787
 —
 30,701
Consumer loan and credit services loss provision 5,380
 400
 —
 5,780
Total cost of revenue 142,926
 132,721
 —
 275,647
         
Net revenue 184,205
 166,483
 —
 350,688
         
Expenses and other income:        
Store operating expenses 107,196
 83,367
 —
 190,563
Administrative expenses —
 —
 58,277
 58,277
Depreciation and amortization 5,827
 7,919
 3,419
 17,165
Interest expense —
 —
 13,859
 13,859
Interest income —
 —
 (636) (636)
Merger and other acquisition expenses —
 —
 33,877
 33,877
Net loss on sale of common stock of Enova —
 —
 253
 253
Total expenses and other income 113,023
 91,286
 109,049
 313,358
         
Income (loss) before income taxes $71,182
 $75,197
 $(109,049) $37,330

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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 (the(together, the “Company”) should be read in conjunction with the Company’s condensed 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 reportAnnual Report on Form 10-K for the year ended December 31, 2016. References in this quarterly report2022.

GENERAL

The Company’s primary line of business is the operation of retail pawn stores, also known as “pawnshops,” which focus on Form 10-Q to “year-to-date” refer to the nine-month period from January 1, 2017 to September 30, 2017.

On September 1, 2016, the Company completed its merger with Cash America International, Inc. (“Cash America”), whereby Cash America merged withserving cash and into a wholly owned subsidiary of the Company (the “Merger”). The accompanying unaudited condensed consolidated results of operations for the three month and nine month periods ended September 30, 2017 include the results of operations for Cash America, while the comparable prior-year periods include the results of operations for Cash America for the period September 2, 2016 to September 30, 2016, affecting comparability of 2017 and 2016 amounts. The Company has performed a valuation analysis of identifiable assets acquired and liabilities assumed and allocated the aggregate Merger consideration based on the fair values of those identifiable assets and liabilities.

In thousands except share and per share amounts, unless otherwise indicated.

GENERAL   

credit-constrained consumers. The Company is athe leading operator of retail-based pawn stores with over 2,100 store locations in the U.S. and Latin America. The Company’sPawn 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 significant retail sales primarily from the merchandise acquired through collateral forfeitures and over-the-counter purchases from customers. The stores also offer pawn loans to help customers meet small short-term cash needs. Personal property, such as consumer electronics, jewelry, power tools, household appliances, sporting goods and musical instruments, is pledged as collateral for the pawn loans and held by the Company over the life of the loan. In addition, some of the Company’s pawn stores offer consumer loans or credit services products. The Company’s strategy is to focus on growing its retail-based pawn operations in the U.S. and Latin America through new store openings and strategic acquisition opportunities as they arise. Pawn operations accounted for 95% and 97% of the Company’s consolidated revenue during the nine month periods ended September 30, 2017 and 2016, respectively.


The Company organizes itsis 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 twothree reportable segments. The U.S. operationspawn segment consists of all pawn and consumer loan operations in the U.S. and the Latin America operationspawn segment consists of all pawn and consumer loan operations in Latin America, which currently includes operations in Mexico, Guatemala, Colombia and El Salvador.

The Company recognizes pawn loan fee revenue on a constant-yield basis over the liferetail POS payment solutions segment consists of the pawn loan for all pawn loansoperations of which the Company deems collection to be probable based on historical redemption statistics. If a pawn loan is not repaid prior to the expiration of the loan term, including any extension or grace period, if applicable, the property is forfeited to the Company and transferred to inventory at a value equal to the principal amount of the loan, exclusive of accrued pawn fee revenue. The Company records merchandise sales revenue at the time of the sale and presents merchandise sales net of any sales or value-added taxes collected. The Company does not provide direct financing to customers for the purchase of its merchandise, but does permit its customers to purchase merchandise on an interest-free layaway plan. Should the customer fail to make a required payment pursuant to a layaway plan, the previous payments are typically forfeited to the Company. Interim payments from customers on layaway sales are recorded as deferred revenue and subsequently recorded as income during the period in which final payment is received or when previous payments are forfeited to the Company. Some jewelry is melted at a third-party facility and the precious metal and diamond content is sold at either prevailing market commodity prices or a previously agreed upon price with a commodity buyer. The Company records revenue from these wholesale scrap jewelry transactions when a price has been agreed upon and the Company ships the commodity to the buyer.

The Company operates a small number of stand-alone consumer finance storesAFF in the U.S. and Mexico. These stores provide consumer financial services products including credit services, consumer loans and check cashing. In addition, 366 of the Company’s pawn stores also offer credit services and/or consumer loans as an ancillary product. Consumer loan and credit services revenue accounted for 5% and 3% of consolidated revenue during the nine month periods ended September 30, 2017 and 2016, respectively. The increase in consumer loan and credit services revenue as a percentage of consolidated revenue was solely the result of the Merger as the Company continues to de-emphasize its consumer lending operations in light of increasing regulatory constraints on these operations.Puerto Rico.


The Company recognizes service fee income on consumer loan transactions on a constant-yield basis over the life of the loan and recognizes credit services fees ratably over the life of the extension of credit made by independent third-party lenders. Changes in the valuation reserve on consumer loans and credit services transactions are charged or credited to the consumer loan credit loss provision. The credit loss provision associated with the Company’s credit services organization program and consumer loans is based primarily upon historical credit loss experience, with consideration given to recent credit loss trends, delinquency rates, economic conditions and management’s expectations of future credit losses.

Stores included in the same-store calculations presented in this report are those stores that were opened or acquired prior to the beginning of the prior-year comparative period and remained open through the end of the reporting period. Also included are stores that were relocated during the applicable period within a specified distance serving the same market where there is not a significant change in store size and where there is not a significant overlap or gap in timing between the opening of the new store and the closing of the existing store. Unless otherwise noted, same-store calculations exclude the results of the merged Cash America stores. Legacy Cash America same-store calculations refer to Cash America stores that were opened prior to the beginning of the prior-year comparative period (although not then owned by the Company) and remained open through the end of the reporting period.

Operating expenses consist of all items directly related to the operation of the Company’s stores, including salaries and related payroll costs, rent, utilities, facilities maintenance, advertising, property taxes, licenses, supplies and security. Administrative expenses consist of items relating to the operation of the corporate offices, including the compensation and benefit costs of corporate management, area supervisors and other operations management personnel, collection operations and personnel, accounting and administrative costs, information technology costs, liability and casualty insurance, outside legal and accounting fees and stockholder-related expenses. Merger and other acquisition expenses primarily include incremental costs directly associated with the Merger and integration of Cash America, including professional fees, legal expenses, severance, retention and other employee-related costs, accelerated vesting of certain equity compensation awards, contract breakage costs and costs related to consolidation of technology systems and corporate facilities.

The Company’s business is subject to seasonal variations and operating results for the current quarter and year-to-date periods are not necessarily indicative of the results of operations for the full year. Typically, the Company experiences seasonal growth of service fees in the third and fourth quarter of each year due to loan balance growth. Service fees generally decline in the first and second quarter of each year after the heavy repayment period of pawn and consumer loans associated with statutory bonuses received by customers in the fourth quarter in Mexico and with tax refund proceeds received by customers in the first quarter in the U.S. Retail sales are seasonally higher in the fourth quarter associated with holiday shopping and, to a lesser extent, in the first quarter associated with tax refunds.

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OPERATIONS AND LOCATIONS


Pawn Operations

As of September 30, 2017,March 31, 2023, the Company had 2,106operated 2,877 pawn store locations composed of 1,102 stores in 2625 U.S. states and the District of Columbia, 1,686 stores in 32 states in Mexico, 61 stores in Guatemala, 14 stores in Colombia and 14 stores in El Salvador, which represents a net store-count increase of 1% over the number of stores at September 30, 2016.Salvador.

The following table details pawn store count activity for the three months ended September 30, 2017:March 31, 2023:


Three Months Ended March 31, 2023
 U.S.Latin AmericaTotal
Total locations, beginning of period1,101 1,771 2,872 
New locations opened (1)
— 14 14 
Locations acquired3 — 3 
Consolidation of existing pawn locations (2)
(2)(10)(12)
Total locations, end of period1,102 1,775 2,877 
    Consumer  
  Pawn Loan Total
  
Locations (1)
 
Locations (2)
 Locations
U.S.:      
Total locations, beginning of period 1,073
 44
 1,117
New locations opened 1
 —
 1
Locations closed or consolidated (1) —
 (1)
Total locations, end of period 1,073
 44
 1,117
       
Latin America:      
Total locations, beginning of period 952
 28
 980
New locations opened 9
 —
 9
Total locations, end of period 961
 28
 989
       
Total:      
Total locations, beginning of period 2,025
 72
 2,097
New locations opened 10
 —
 10
Locations closed or consolidated (1) —
 (1)
Total locations, end of period 2,034
 72
 2,106


(1)
At September 30, 2017, 317 of the U.S. pawn stores, which are primarily located in Texas and Ohio, also offered consumer loans or credit services products, while 49 Mexico pawn stores offered consumer loan products.

(2)
The Company’s U.S. free-standing consumer loan locations offer consumer loans and/or a credit services product and are located in Ohio, Texas, California and limited markets in Mexico. The table does not include 63 check cashing locations operated by independent franchisees under franchising agreements with the Company.

(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 March 31, 2023.


(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.


22


The following table details store count activity for the nine months ended September 30, 2017:

    Consumer  
  Pawn Loan Total
  
Locations (1)
 
Locations (2)
 Locations
U.S.:      
Total locations, beginning of period 1,085
 45
 1,130
New locations opened 2
 —
 2
Locations acquired 1
 —
 1
Locations closed or consolidated (15) (1) (16)
Total locations, end of period 1,073
 44
 1,117
       
Latin America:      
Total locations, beginning of period 927
 28
 955
New locations opened 32
 —
 32
Locations acquired 5
 —
 5
Locations closed or consolidated (3) —
 (3)
Total locations, end of period 961
 28
 989
       
Total:      
Total locations, beginning of period 2,012
 73
 2,085
New locations opened 34
 —
 34
Locations acquired 6
 —
 6
Locations closed or consolidated (18) (1) (19)
Total locations, end of period 2,034
 72
 2,106

(1)
At September 30, 2017, 317 of the U.S. pawn stores, which are primarily located in Texas and Ohio, also offered consumer loans or credit services products, while 49 Mexico pawn stores offer consumer loan products.

(2)
The Company’s U.S. free-standing consumer loan locations offer consumer loans and/or a credit services product and are located in Ohio, Texas, California and limited markets in Mexico. The table does not include 63 check cashing locations operated by independent franchisees under franchising agreements with the Company.

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POS Payment Solutions

As of March 31, 2023, AFF provided LTO and retail POS payment solutions for consumer goods and services through a network of approximately 9,800 active retail merchant partner locations located in all 50 U.S. states, the District of Columbia and Puerto Rico.

CRITICAL ACCOUNTING POLICIESESTIMATES


The preparation of financial statements have been prepared in conformityaccordance with accounting principles generally accepted in the United States of America requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities, related revenue and expenses, and disclosure of gain and loss contingencies at the date of the financial statements. Such estimates, assumptions and judgments are subject to a number of risks and uncertainties, which may cause actual results to differ materially from the Company’s estimates.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 2016 annual report2022 Annual Report on Form 10-K. There have been no changes to the Company’s significant accounting policies for the ninethree months ended September 30, 2017.March 31, 2023.


Recent Accounting Pronouncements

See Note 1 - Significant Accounting Policies of the condensed consolidated financial statements contained in Part I, Item 1 of this report for a discussion of recent accounting pronouncements that the Company has adopted or will adopt in future periods.

RESULTS OF CONTINUING OPERATIONS (unaudited)

Constant Currency Results

The Company’s management reviews and analyzes certain operating results in Latin America on a constant currency basis because the Company believes this better represents the Company’s underlying business trends. Constant currency results are non-GAAP measures, which exclude the effects of foreign currency translation and are calculated by translating current year results at prior year average exchange rates. The scrap jewelry generated in Latin America is sold and settled in U.S. dollars and is therefore not affected by foreign currency translation. A small percentage of the operating and administrative expenses in Latin America are also billed and paid in U.S. dollars which are not affected by foreign currency translation.

Business operations in Mexico and Guatemala are transacted in Mexican pesos and Guatemalan quetzales, respectively. The Company also has operations in El Salvador where the reporting and functional currency is the U.S. dollar. The following table provides exchange rates for the Mexican peso and Guatemalan quetzal for the current and prior year periods:  
  September 30, Favorable /
  2017 2016 (Unfavorable)
Mexican peso / U.S. dollar exchange rate:        
End-of-period 18.2 19.5  7 % 
Three months ended 17.8 18.7  5 % 
Nine months ended 18.9 18.3  (3)% 
         
Guatemalan quetzal / U.S. dollar exchange rate:        
End-of-period 7.3 7.5  3 % 
Three months ended 7.3 7.6  4 % 
Nine months ended 7.4 7.6  3 % 

Amounts presented on a constant currency basis are denoted as such. See “—Non-GAAP Financial Information” for additional discussion of constant currency operating results.

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Operating Results for the Three Months Ended September 30, 2017March 31, 2023 Compared to the Three Months Ended September 30, 2016March 31, 2022


U.S. OperationsPawn Segment

The following table details earning assets, which consist of pawn loans, consumer loans, net and inventories as well as other earning asset metrics of the U.S. operations segment as of September 30, 2017 as compared to September 30, 2016:

 Balance at September 30, Increase /
 2017 2016 (Decrease)
U.S. Operations Segment         
Earning assets:         
Pawn loans$281,217
 $300,646
  (6)% 
Consumer loans, net (1)
 24,108
  27,381
  (12)% 
Inventories 240,384
  280,429
  (14)% 
 $545,709
 $608,456
  (10)% 
          
Average outstanding pawn loan amount (in ones)$152
 $145
  5 % 
          
Composition of pawn collateral:         
General merchandise36% 39%    
Jewelry64% 61%    
 100% 100%    
          
Composition of inventories:         
General merchandise43% 48%    
Jewelry57% 52%    
 100% 100%    
          
Percentage of inventory aged greater than one year9% 6%    

(1)
Does not include the off-balance sheet principal portion of active CSO extensions of credit made by independent third-party lenders. These amounts, net of the Company’s estimated fair value of its liability for guaranteeing the extensions of credit, totaled $9,251 and $11,641 as of September 30, 2017 and 2016, respectively.

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The following table presents segment pre-tax operating income and other operating metrics of the U.S. operationspawn segment for the three months ended September 30, 2017 asMarch 31, 2023 compared to the three months ended September 30, 2016. Store operatingMarch 31, 2022 (dollars in thousands). Operating expenses include salary and benefit expenseexpenses of store-levelpawn-store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the pawn stores.


  Three Months Ended    
  September 30,  
  2017 2016 Increase
U.S. Operations Segment        
Revenue:        
Retail merchandise sales $160,598
 $84,547
  90% 
Pawn loan fees 95,266
 48,840
  95% 
Wholesale scrap jewelry sales 32,397
 15,046
  115% 
Consumer loan and credit services fees 18,525
 9,991
  85% 
Total revenue 306,786
 158,424
  94% 
         
Cost of revenue:        
Cost of retail merchandise sold 107,561
 51,922
  107% 
Cost of wholesale scrap jewelry sold 31,518
 13,955
  126% 
Consumer loan and credit services loss provision 6,068
 3,275
  85% 
Total cost of revenue 145,147
 69,152
  110% 
         
Net revenue 161,639
 89,272
  81% 
         
Segment expenses:        
Store operating expenses 104,555
 52,480
  99% 
Depreciation and amortization 5,919
 2,906
  104% 
Total segment expenses 110,474
 55,386
  99% 
         
Segment pre-tax operating income $51,165
 $33,886
  51% 

Retail Merchandise Sales Operations

U.S. retail merchandise sales increased 90% to $160,598 during the third quarter of 2017 compared to $84,547 for the third quarter of 2016. The increase was primarily due to the third quarter of 2016 only including the results of operations for Cash America for the period September 2, 2016 to September 30, 2016 (“Cash America 2016 Partial Quarter”) as the Merger was completed on September 1, 2016. Same-store retail sales decreased 1% in both legacy First Cash and Cash America stores in the third quarter of 2017 compared to the third quarter of 2016. During the third quarter of 2017, the gross profit margin on retail merchandise sales in the U.S. was 33% compared to a margin of 39% during the third quarter of 2016, reflecting the impact of historically lower margins in the Cash America stores and a focus during the third quarter of 2017 on clearing aged inventory levels in the Cash America stores.

U.S. inventories decreased 14% from $280,429 at September 30, 2016 to $240,384 at September 30, 2017. The decrease was due to a 19% decline in legacy Cash America store inventories as the Company continues to optimize inventory levels and clear aged inventory in the Cash America stores, partially offset by a 6% increase in legacy First Cash store inventories. Inventories aged greater than one year were 11% and 5% in the legacy Cash America stores and legacy First Cash U.S. stores, respectively.

Three Months Ended
March 31,
20232022Increase
U.S. Pawn Segment
Revenue:
Retail merchandise sales$210,681 $204,942 3 %
Pawn loan fees102,684 90,339 14 %
Wholesale scrap jewelry sales26,316 16,524 59 %
Total revenue339,681 311,805 9 %
Cost of revenue:  
Cost of retail merchandise sold121,929 119,718 2 %
Cost of wholesale scrap jewelry sold21,082 14,530 45 %
Total cost of revenue143,011 134,248 7 %
Net revenue196,670 177,557 11 %
Segment expenses:  
Operating expenses109,781 98,822 11 %
Depreciation and amortization5,870 5,587 5 %
Total segment expenses115,651 104,409 11 %
Segment pre-tax operating income$81,019 $73,148 11 %
Operating metrics:
Retail merchandise sales margin42 %42 %
Net revenue margin58 %57 %
Segment pre-tax operating margin24 %23 %
23


Pawn Lending Operations

U.S. pawn loan fees increased 95% totaling $95,266 during the third quarter of 2017 compared to $48,840 for the third quarter of 2016. The increase was primarily due to the Cash America 2016 Partial Quarter. Legacy First Cash same-store pawn loan fees increased 3%, while legacy Cash America same-store pawn loan fees decreased 11% in the third quarter of 2017 compared to the third quarter of 2016. Pawn loan receivables in the U.S. as of September 30, 2017 decreased 6% compared to September 30, 2016. Legacy First Cash same-store pawn receivables increased 5%, while legacy Cash America same-store pawn receivables decreased 13% as of September 30, 2017 compared to September 30, 2016. The decline in legacy Cash America same-store pawn receivables and pawn loan fees was primarily due to the expected impact of reducing the holding period on delinquent pawn loans, continued optimization of loan-to-value ratios and to a lesser extent, the impact of the hurricane on pawn receivables in coastal Texas markets.

Wholesale Scrap Jewelry Operations

U.S. wholesale scrap jewelry revenue, consisting primarily of gold sales, increased 115% to $32,397 during the third quarter of 2017 compared to $15,046 during the third quarter of 2016. The increase in wholesale scrap jewelry revenue was primarily due to the Cash America 2016 Partial Quarter. The scrap gross profit margin in the U.S. was 3% compared to the prior-year margin of 7%, primarily as a result of the typically higher cost basis in scrap jewelry sold by the Cash America stores. Scrap jewelry profits accounted for less than 1% of U.S. net revenue (gross profit) for the third quarter of 2017 compared to 1% in the third quarter of 2016.

Consumer Lending Operations

Service fees from U.S. consumer loans and credit services transactions (collectively, consumer lending operations) increased 85% to $18,525 during the third quarter of 2017 compared to $9,991 for the third quarter of 2016. The increase in fees was due to the Cash America 2016 Partial Quarter. Excluding the increase due to the Cash America 2016 Partial Quarter, consumer loan and credit services fees decreased 32% as the Company continues to de-emphasize consumer lending operations in light of increasing regulatory constraints. Revenues from consumer lending operations comprised 6% of total U.S. revenue during the third quarter of 2017 and 2016.

Segment Expenses and Segment Pre-Tax Operating Income

U.S. store operating expenses increased 99% to $104,555 during the third quarter of 2017 compared to $52,480 during the third quarter of 2016, primarily as a result of the Merger. Same-store operating expenses increased 2% and decreased 3% in the legacy First Cash and Cash America stores, respectively, compared with the prior-year period.

U.S. store depreciation and amortization increased 104% to $5,919 during the third quarter of 2017 compared to $2,906 during the third quarter of 2016, primarily as a result of the Merger.

The U.S. segment pre-tax operating income for the third quarter of 2017 was $51,165, which generated a pre-tax segment operating margin of 17% compared to $33,886 and 21% in the prior year, respectively. The decline in the segment pre-tax operating margin was primarily due to historically lower operating margins in the Cash America stores and a focus during the third quarter of 2017 on clearing aged inventory levels in Cash America stores, resulting in lower gross profit margins on retail merchandise sales.
Table of Contents

Latin America Operations Segment

The following table details earning assets, which consist of pawn loans consumer loans, net and inventories as well as other earning asset metrics of the Latin America operationsU.S. pawn segment, as of September 30, 2017 asMarch 31, 2023 compared to September 30, 2016:March 31, 2022 (dollars in thousands, except as otherwise noted):


As of March 31,Increase /
 20232022(Decrease)
U.S. Pawn Segment   
Earning assets:
Pawn loans$256,773 $241,597 6 %
Inventories178,587 184,671 (3)%
$435,360 $426,268 2 %
Average outstanding pawn loan amount (in ones)$248 $226 10 %
Composition of pawn collateral:
General merchandise30 %33 %
Jewelry70 %67 %
 100 %100 %
Composition of inventories:
General merchandise42 %44 %
Jewelry58 %56 %
100 %100 %
Percentage of inventory aged greater than one year2 %1 %
Inventory turns (trailing twelve months cost of merchandise sales divided by average inventories)2.8 times2.8 times
           Constant Currency Basis 
           Balance at    
           September 30, Increase /
 Balance at September 30, Increase / 2017 (Decrease)
 2017 2016 (Decrease) (Non-GAAP) (Non-GAAP)
Latin America Operations Segment               
Earning assets:               
Pawn loans$90,150
 $72,523
  24 %  $84,378
  16 % 
Consumer loans, net 407
  411
  (1)%  380
  (8)% 
Inventories 68,299
  52,433
  30 %  63,855
  22 % 
 $158,856
 $125,367
  27 %  $148,613
  19 % 
                
Average outstanding pawn loan amount (in ones)$67
 $59
  14 %  $63
  7 % 
                
Composition of pawn collateral:               
General merchandise82% 82%          
Jewelry18% 18%          
 100% 100%          
                
Composition of inventories:               
General merchandise75% 80%          
Jewelry25% 20%          
 100% 100%          
                
Percentage of inventory aged greater than one year1% 1%          


Retail Merchandise Sales Operations

U.S. retail merchandise sales increased 3% to $210.7 million during the first quarter of 2023 compared to $204.9 million for the first quarter of 2022. Same-store retail sales decreased 1% in the first quarter of 2023 compared to the first quarter of 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 first quarter of 2023 compared to the first quarter of 2022, as further described below. The gross profit margin on retail merchandise sales in the U.S. was 42% in both the first quarter of 2023 and 2022.

U.S. inventories decreased 3% from $184.7 million at March 31, 2022 to $178.6 million at March 31, 2023. The decrease was primarily due to slightly lower pawn loan forfeiture rates in the first quarter of 2023 compared to the first quarter of 2022. Inventories aged greater than one year in the U.S. were 2% at March 31, 2023 and 1% at March 31, 2022.

Pawn Lending Operations

U.S. pawn loan receivables as of March 31, 2023 increased 6% in total and 5% on a same-store basis compared to March 31, 2022. The increase in total and same-store pawn receivables was primarily due to continued inflationary pressures driving additional demand for consumer credit.

U.S. pawn loan fees increased 14% to $102.7 million during the first quarter of 2023 compared to $90.3 million for the first quarter of 2022. Same-store pawn fees in the first quarter of 2023 increased 11% compared to the first quarter of 2022. The increase in total and same-store pawn loan fees was primarily due to higher average pawn receivables which reflected the continued recovery in pawn loan receivables to pre-pandemic levels combined with inflationary pressures driving additional demand for consumer credit.


24


Segment Expenses

U.S. operating expenses increased 11% to $109.8 million during the first quarter of 2023 compared to $98.8 million during the first quarter of 2022 while same-store operating expenses increased 8% 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 first quarter of 2023 compared to the first quarter of 2022.

Segment Pre-Tax Operating Income

The U.S. segment pre-tax operating income for the first quarter of 2023 was $81.0 million, which generated a pre-tax segment operating margin of 24% compared to $73.1 million and 23% 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.

25

Latin America Operations Segment

Latin American results of operations for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 benefited from a 9% 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 March 31, 2023 compared to March 31, 2022 benefited from a 9% 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 operationspawn segment for the three months ended September 30, 2017 asMarch 31, 2023 compared to the three months ended September 30, 2016. Store operatingMarch 31, 2022 (dollars in thousands). Operating expenses include salary and benefit expenseexpenses of store-levelpawn-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 EndedMarch 31,Increase /
March 31,2023(Decrease)
 20232022Increase(Non-GAAP)(Non-GAAP)
Latin America Pawn Segment
Revenue:
Retail merchandise sales$118,937 $97,877 22 %$109,139 12 %
Pawn loan fees48,876 41,480 18 %44,815 8 %
Wholesale scrap jewelry sales18,868 16,281 16 %18,868 16 %
Total revenue186,681 155,638 20 %172,822 11 %
Cost of revenue:   
Cost of retail merchandise sold77,963 62,496 25 %71,583 15 %
Cost of wholesale scrap jewelry sold14,645 13,685 7 %13,363 (2)%
Total cost of revenue92,608 76,181 22 %84,946 12 %
Net revenue94,073 79,457 18 %87,876 11 %
Segment expenses:   
Operating expenses55,756 45,542 22 %51,494 13 %
Depreciation and amortization5,445 4,401 24 %5,115 16 %
Total segment expenses61,201 49,943 23 %56,609 13 %
Segment pre-tax operating income$32,872 $29,514 11 %$31,267 6 %
Operating metrics:
Retail merchandise sales margin34 %36 %34 %
Net revenue margin50 %51 %51 %
Segment pre-tax operating margin18 %19 %18 %
26

          Constant Currency Basis
          Three Months    
        Ended    
  Three Months Ended     September 30, Increase /
  September 30, Increase / 2017 (Decrease)
  2017 2016 (Decrease) (Non-GAAP) (Non-GAAP)
Latin America Operations Segment              
Revenue:              
Retail merchandise sales $85,736
 $67,668
  27 %  $81,686
  21 % 
Pawn loan fees 37,279
 30,665
  22 %  35,534
  16 % 
Wholesale scrap jewelry sales 5,131
 3,910
  31 %  5,131
  31 % 
Consumer loan and credit services fees 480
 486
  (1)%  457
  (6)% 
Total revenue 128,626
 102,729
  25 %  122,808
  20 % 
               
Cost of revenue:              
Cost of retail merchandise sold 53,789
 41,477
  30 %  51,252
  24 % 
Cost of wholesale scrap jewelry sold 5,313
 3,022
  76 %  5,068
  68 % 
Consumer loan and credit services loss provision 117
 138
  (15)%  111
  (20)% 
Total cost of revenue 59,219
 44,637
  33 %  56,431
  26 % 
               
Net revenue 69,407
 58,092
  19 %  66,377
  14 % 
               
Segment expenses:              
Store operating expenses 34,411
 28,094
  22 %  32,920
  17 % 
Depreciation and amortization 2,704
 2,602
  4 %  2,587
  (1)% 
Total segment expenses 37,115
 30,696
  21 %  35,507
  16 % 
               
Segment pre-tax operating income $32,292
 $27,396
  18 %  $30,870
  13 % 

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 March 31, 2023 compared to March 31, 2022 (dollars in thousands, except as otherwise noted):

Constant Currency Basis
As of
March 31,Increase /
As of March 31,2023(Decrease)
 20232022Increase(Non-GAAP)(Non-GAAP)
Latin America Pawn Segment    
Earning assets:
Pawn loans$120,924 $102,504 18 %$110,235 8 %
Inventories79,016 62,605 26 %72,073 15 %
$199,940 $165,109 21 %$182,308 10 %
Average outstanding pawn loan amount (in ones)$85 $79 8 %$77 (3)%
Composition of pawn collateral:
General merchandise67 %68 %
Jewelry33 %32 %
100 %100 %
Composition of inventories:
General merchandise72 %68 %
Jewelry28 %32 %
100 %100 %
Percentage of inventory aged greater than one year1 %1 %
Inventory turns (trailing twelve months cost of merchandise sales divided by average inventories)4.3 times4.3 times

Retail Merchandise Sales Operations


Latin America retail merchandise sales increased 27% (21%22% (12% on a constant currency basis) to $85,736$118.9 million during the thirdfirst quarter of 20172023 compared to $67,668$97.9 million for the thirdfirst quarter of 2016. The increase was primarily due to a 24% increase (19%2022. Same-store retail sales increased 21% (11% on a constant currency basis) during the first quarter of 2023 compared to the first quarter of 2022. The increase in total and same-store retail sales which included a same-store retail sales increase of 59% (52% on a constant currency basis) in the Maxi Prenda stores acquired in the fourth quarter of 2015 and first quarter of 2016. Excluding the Maxi Prenda stores, same-store retail sales increased 19% (14% on a constant currency basis), which was primarily due to strong retailincreased inventory levels during the first quarter of 2023 compared to the first quarter of 2022 and greater demand trends andfor value-priced consumer goods, with such demand driven in part by inflationary pressures on the maturation of existing stores.Company’s customers. The gross profit margin on retail merchandise sales was 37%34% during the thirdfirst quarter of 2017 compared to 39%2023 and 36% during the thirdfirst quarter of 2016.2022.


Inventories in Latin America inventories increased 30% (22%26% (15% on a constant currency basis) from $52,433$62.6 million at September 30, 2016March 31, 2022 to $68,299$79.0 million at September 30, 2017. Increased inventory levels in the Maxi Prenda stores, which historically carried lowerMarch 31, 2023. The increase was primarily due to lower-than-normal inventory balances thanat March 31, 2022 due to the typical First Cash store, accounted for 32%impacts of the increase with growth from new store openingsCOVID-19 pandemic. Inventories aged greater than one year in Latin America were 1% at both March 31, 2023 and the maturation of existing stores accounting for the remainder of the increase.2022.



27


Pawn Lending Operations


Pawn loan fees in Latin America pawn loan receivables increased 22% (16%18% (8% on a constant currency basis) totaling $37,279 during the third quarteras of 2017March 31, 2023 compared to $30,665 for the third quarter of 2016, primarily as a result of the 24% (16%March 31, 2022, and on a constant currency basis) increase insame-store basis, pawn loan receivables as of September 30, 2017 compared to September 30, 2016.increased 18% and 7%, respectively. The increase in pawn receivables reflects a same-store pawn receivable increase of 22% (14% on a constant currency basis)total and new store additions. The increase in same-store pawn receivables was primarily due to strongthe continued recovery in pawn loan demand to pre-pandemic levels combined with inflationary pressures driving additional demand for pawn loans and the maturation of existing stores.consumer credit.

Wholesale Scrap Jewelry Operations


Latin America wholesale scrap jewelry revenue, consisting primarily of gold sales,pawn loan fees increased 31% to $5,13118% (8% on a constant currency basis), totaling $48.9 million during the thirdfirst quarter of 20172023 compared to $3,910 during$41.5 million for the thirdfirst quarter of 2016.2022. Same-store pawn fees also increased 18% (8% on a constant currency basis) in the first quarter of 2023 compared to the first quarter of 2022. The increase in wholesale scrap jewelry revenuetotal and same-store constant currency pawn loan fees was primarily due to reduced scrapping activitieshigher average pawn receivables which reflected the continued recovery in pawn loan receivables to pre-pandemic levels combined with inflationary pressures driving additional demand for consumer credit.

Segment Expenses

Operating expenses increased 22% (13% on a constant currency basis) to $55.8 million during the first quarter of 2023 compared to $45.5 million during the first quarter of 2022, reflecting continued store growth, inflationary pressure on labor and other operating expenses and increases in the Maxi Prenda stores during the third quarter of 2016 as those stores were being converted to the Company’s proprietary point of salefederally mandated minimum wage and loan management system. The scrap gross profit margin in Latin America was a loss of 4% (1% profitother required benefit programs. Same-store operating expenses increased 21% (12% on a constant currency basis) compared to the prior-year margin of 23%. Scrap jewelry profits or losses accounted for less than 1% of Latin America net revenue (gross profit) for the third quarter of 2017 compared to 2% in the third quarter of 2016.period.


Segment Expenses and Segment Pre-Tax Operating Income

Store operating expenses increased 22% (17% on a constant currency basis) to $34,411 during the third quarter of 2017 compared to $28,094 during the third quarter of 2016 and same-store operating expenses increased 14% (9% on a constant currency basis) compared to the prior-year period. The increase in both total and same-store operating expenses was due in large part to increased compensation expense related to incentive pay and entry level wage competition.


The segment pre-tax operating income for the thirdfirst quarter of 20172023 was $32,292,$32.9 million, which generated a pre-tax segment operating margin of 25%18% compared to $27,396$29.5 million and 27%19% in the prior year, respectively.



28


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 March 31, 2023 as compared to the three months ended March 31, 2022 (dollars in thousands):

Adjusted (1)
Three Months
Ended
Three Months EndedMarch 31,Increase /
March 31,2022(Decrease)
 20232022Increase(Non-GAAP)(Non-GAAP)
Retail POS Payment Solutions Segment
Revenue:
Leased merchandise income$183,438 $149,947 22 %$149,947 22 %
Interest and fees on finance receivables54,642 42,449 29 %58,622 (7)%
Total revenue238,080 192,396 24 %208,569 14 %
Cost of revenue:   
Depreciation of leased merchandise102,172 93,706 9 %89,347 14 %
Provision for lease losses49,166 39,820 23 %39,820 23 %
Provision for loan losses29,285 24,697 19 %24,697 19 %
Total cost of revenue180,623 158,223 14 %153,864 17 %
Net revenue57,457 34,173 68 %54,705 5 %
Segment expenses:   
Operating expenses33,524 28,932 16 %28,932 16 %
Depreciation and amortization736 682 8 %682 8 %
Total segment expenses34,260 29,614 16 %29,614 16 %
Segment pre-tax operating income$23,197 $4,559 409 %$25,091 (8)%

(1)As a result of purchase accounting, AFF’s as reported amounts for the three months ended March 31, 2022 contain significant fair value adjustments. The adjusted amounts for the three months ended March 31, 2022 exclude these fair value purchase accounting adjustments.


29

The following table provides a detail of gross transaction volumes originated during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 (in thousands):

Three Months Ended
March 31,
20232022Increase
Leased merchandise$151,175 $112,453 34 %
Finance receivables98,440 72,137 36 %
Total gross transaction volume$249,615 $184,590 35 %

The following table details retail POS solutions earning assets as of March 31, 2023 as compared to March 31, 2022 (in thousands):

Adjusted (2)
As of
March 31,Increase /
As of March 31,Increase /2022(Decrease)
 20232022(Decrease)(Non-GAAP)(Non-GAAP)
Leased merchandise, net:
Leased merchandise, before allowance for lease losses$243,363 $159,511 53 %$191,838 27 %
Less allowance for lease losses(93,269)(40,364)131 %(76,028)23 %
Leased merchandise, net (1)
$150,094 $119,147 26 %$115,810 30 %
Finance receivables, net:
Finance receivables, before allowance for loan losses$190,703 $212,813 (10)%$186,329 2 %
Less allowance for loan losses(88,610)(72,332)23 %(72,332)23 %
Finance receivables, net$102,093 $140,481 (27)%$113,997 (10)%

(1)Includes $1.2 million of intersegment transactions as of March 31, 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.

(2)As a result of purchase accounting, AFF’s March 31, 2022 as reported earnings assets contain significant fair value adjustments, which were fully amortized during 2022. The adjusted amounts as of March 31, 2022 exclude these fair value purchase accounting adjustments.


30

The following table details the changes in the allowance for lease and loan losses and other portfolio metrics for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 (in thousands):

Adjusted (4)
Three Months
Ended
Three Months EndedMarch 31,
March 31,Increase /2022Increase
 20232022(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 losses49,065 39,820 23 %39,820 23 %
Charge-offs(37,045)(6,020)515 %(31,882)16 %
Recoveries1,673 1,122 49 %1,122 49 %
Balance at end of period$93,269 $40,364 131 %$76,028 23 %
Leased merchandise portfolio metrics:
Provision expense as percentage of originations (1)
32 %35 %
Average monthly net charge-off rate (2)
5.0 %5.3 %
Delinquency rate (3)
17.3 %17.0 %
Allowance for loan losses:
Balance at beginning of period$84,833 $75,574 12 %
Provision for loan losses29,285 24,697 19 %
Charge-offs(27,117)(29,408)(8)%
Recoveries1,609 1,469 10 %
Balance at end of period$88,610 $72,332 23 %
Finance receivables portfolio metrics:
Provision rate (1)
30 %34 %
Average monthly net charge-off rate (2)
4.3 %4.7 %
Delinquency rate (3)
16.1 %17.4 %

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

(2)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).

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

(4)As a result of purchase accounting, AFF’s as reported allowance for lease losses for the three months ended March 31, 2022 contain significant fair value adjustments. The adjusted amounts for the three months ended March 31, 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 March 31, 2022 provide a useful comparison against the March 31, 2023 amounts.




31

LTO Operations

Leased merchandise, before allowance for lease losses, increased 53% as of March 31, 2023 compared to March 31, 2022. On an adjusted basis, excluding the impacts of fair value purchase accounting, leased merchandise, before allowance for lease losses, increased 27% as of March 31, 2023 compared to March 31, 2022. This increase was primarily due to increased transaction volumes from both existing merchants and new merchant locations added since March 31, 2022.

The allowance for lease losses increased 131% to $93.3 million as of March 31, 2023 compared to $40.4 million as of March 31, 2022. On an adjusted basis, excluding the impacts of fair value purchase accounting, the allowance for lease losses increased 23% as of March 31, 2023 compared to March 31, 2022. This increase was primarily due to the increase in gross transaction volume compared to the first quarter of 2022.

Leased merchandise income increased 22% to $183.4 million during the first quarter of 2023 compared to $149.9 million for the first quarter of 2022, which was primarily due to the higher leased merchandise balances.

Depreciation of leased merchandise increased 9% to $102.2 million during the first quarter of 2023 compared to $93.7 million during the first quarter of 2022. On an adjusted basis, excluding the impacts of fair value purchase accounting, depreciation of leased merchandise increased 14%. The increase was primarily due to higher leased merchandise balances. As a percentage of leased merchandise income, depreciation of leased merchandise decreased from 60% during the first quarter of 2022 (adjusted to exclude purchase accounting adjustments) to 56% during the first quarter of 2023.

Provision for lease losses increased 23% to $49.2 million during the first quarter of 2023 compared to $39.8 million for the first quarter of 2022, which was primarily due to the increase in gross transaction volumes, partially offset by lower than expected charge-offs. As a percentage of gross transaction volume, the provision for lease losses decreased from 35% during the first quarter of 2022 to 32% during the first quarter of 2023 due to slightly improved net charge-off trends on 2022 origination vintages.

Retail Finance Operations

Finance receivables, before allowance for loan losses, decreased 10% as of March 31, 2023 compared to March 31, 2022. On an adjusted basis, excluding the impacts of fair value purchase accounting, finance receivables, before allowance for loan losses, increased 2% as of March 31, 2023 compared to March 31, 2022. This increase in the outstanding receivable balance was primarily due to new merchant locations added primarily in the fourth quarter of 2022 and first quarter of 2023, resulting in increased quarter-over-quarter transaction volumes.

The allowance for loan losses increased 23% to $88.6 million as of March 31, 2023 compared to $72.3 million as of March 31, 2022. While finance receivable credit metrics generally improved during the first quarter of 2023 compared to the first quarter of 2022, certain retail financing products AFF makes available to its merchants have less extensive history than the LTO products, therefore, the Company continues to apply certain qualitative factors and forecasted business trends in its CECL reserve methodology for its finance receivables.

Interest and fees on finance receivables increased 29% to $54.6 million during the first quarter of 2023 compared to $42.4 million for the first quarter of 2022. On an adjusted basis, excluding the impacts of fair value purchase accounting, interest and fees on finance receivables decreased 7%. The decrease was primarily due to timing of transaction volume originations resulting in a decline in the average finance receivable balance during most of 2022 as noted above.

Provision for loan losses increased 19% to $29.3 million during the first quarter of 2023 compared to $24.7 million for the first quarter of 2022, which was primarily due to the increase in gross transaction volumes, partially offset by lower than expected charge-offs. As a percentage of gross transaction volume, the provision for loan losses decreased from 34% during the first quarter of 2022 to 30% during the first quarter of 2023 due to slightly improved net charge-off trends on 2022 origination vintages.

Segment Expenses

Operating expenses increased 16% to $33.5 million during the first quarter of 2023 compared to $28.9 million during the first quarter of 2022, which was primarily due to higher leased merchandise balances and transaction volumes. As a percentage of segment revenues, operating expenses remained consistent at 14% during both the first quarter of 2023 and 2022 (adjusted to exclude purchase accounting adjustments).
32

Segment Pre-Tax Operating Income

The retail POS payment solutions segment pre-tax operating income for the first quarter of 2023 was $23.2 million compared to $4.6 million in the first 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 first quarter of 2022 was $25.1 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).

Consolidated Results of Operations


The following table reconciles pre-tax operating income of the Company’s U.S. operationspawn segment, Latin America pawn segment and Latin America operationsretail POS payment solutions segment, discussed above, to consolidated net income for the three months ended September 30, 2017 asMarch 31, 2023 compared to the three months ended September 30, 2016:March 31, 2022 (dollars in thousands):


Three Months Ended
March 31,Increase /
 20232022(Decrease)
Consolidated Results of Operations
Segment pre-tax operating income:
U.S. pawn$81,019 $73,148 11 %
Latin America pawn32,872 29,514 11 %
Retail POS payment solutions (1)
23,197 4,559 409 %
Intersegment elimination (2)
(144)— — %
Consolidated segment pre-tax operating income136,944 107,221 28 %
Corporate expenses and other income:  
Administrative expenses39,017 36,863 6 %
Depreciation and amortization15,060 14,872 1 %
Interest expense20,897 16,221 29 %
Interest income(517)(676)(24)%
Gain on foreign exchange(802)(480)67 %
Merger and acquisition expenses31 665 (95)%
Loss on revaluation of contingent acquisition consideration— 2,570 (100)%
Other expenses (income), net45 177 (75)%
Total corporate expenses and other income73,731 70,212 5 %
Income before income taxes63,213 37,009 71 %
Provision for income taxes15,825 9,004 76 %
  
Net income$47,388 $28,005 69 %
  Three Months Ended    
  September 30, Increase /
  2017 2016 (Decrease)
Consolidated Results of Operations        
U.S. operations segment pre-tax operating income $51,165
 $33,886
  51 % 
Latin America operations segment pre-tax operating income 32,292
 27,396
  18 % 
Consolidated segment pre-tax operating income 83,457
 61,282
  36 % 
         
Corporate expenses and other income:        
Administrative expenses 29,999
 24,500
  22 % 
Depreciation and amortization 5,249
 1,773
  196 % 
Interest expense 6,129
 5,073
  21 % 
Interest income (418) (138)  203 % 
Merger and other acquisition expenses 911
 29,398
  (97)% 
Loss on extinguishment of debt 20
 —
  — % 
Net loss on sale of common stock of Enova —
 253
  (100)% 
Total corporate expenses and other income 41,890
 60,859
  (31)% 
         
Income before income taxes 41,567
 423
  9,727 % 
         
Provision for income taxes 13,293
 1,835
  624 % 
         
Net income (loss) $28,274
 $(1,412)  2,102 % 
         
Comprehensive income (loss) $23,293
 $(15,413)  251 % 


(1)The AFF segment results for the three months ended March 31, 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 million for the three months ended March 31, 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 22%6% to $29,999$39.0 million during the thirdfirst quarter of 20172023 compared to $24,500 during$36.9 million in the thirdfirst quarter of 2016, primarily as a result of the Merger, a 37% increase in the weighted-average store count resulting in additional management and supervisory compensation and other support expenses required for such growth and by a 5% favorable change in the average value of the Mexican peso, which increased comparative administrative expenses in Mexico.2022. As a percentage of revenue, administrative expenses decreased from 9%6% during the thirdfirst quarter of 20162022 to 7%5% during the thirdfirst quarter of 2017,2023.

Interest expense increased 29% to $20.9 million during the first quarter of 2023 compared to $16.2 million in the first quarter of 2022, primarily due to synergies realized fromhigher floating interest rates and higher average balances outstanding on the MergerCompany’s unsecured credit facilities. See Note 7 of Notes to Consolidated Financial Statements and the Maxi Prenda acquisition.“Liquidity and Capital Resources.”


Depreciation and amortization increased to $5,249The Company recognized a loss on revaluation of contingent acquisition consideration of $2.6 million during the thirdfirst quarter of 2017 compared to $1,773 during the third quarter of 2016 primarily due to the assumption of substantial corporate property and equipment from the Merger and $2,313 in amortization expense related to intangible assets acquired2022 as a result of the Merger.

Interest expense increased to $6,129an increase in the third quarter of 2017 compared to $5,073liability for the third quarterestimated fair value of 2016. See “—Liquidity and Capital Resources.”

Merger and other acquisition expenses decreased to $911 during the third quarter of 2017 compared to $29,398 during the third quarter of 2016, reflecting timing in transaction and integration costs primarilycontingent consideration related to the Merger.AFF acquisition. See “—Non-GAAPNote 4 of Notes to Consolidated Financial Information” for additional details of Merger related expenses.Statements.


For the third quarter of 2017 and 2016, the Company’sConsolidated effective federal income tax rates were 32.0% and 433.8%, respectively. The effective tax rate for the third quarter of 2016 was impacted by certain significant Merger related expenses being non-deductible for income tax purposes. The effective tax rate for the third quarter included changes in certain tax estimates made during the third quarter of 2017 as a result of finalizing the 2016 tax returns.

Net Income, Adjusted Net Income, Net Income Per Share and Adjusted Net Income Per Share

The following table sets forth revenue, net revenue, net income, net income per share, adjusted net income and adjusted net income per share for the third quarter of 2017 compared to the third quarter of 2016:

  Three Months Ended September 30,
  2017 2016
  As Reported Adjusted As Reported Adjusted
  (GAAP) (Non-GAAP) (GAAP) (Non-GAAP)
Revenue $435,412
 $435,412
 $261,153
 $261,153
Net revenue $231,046
 $231,046
 $147,364
 $147,364
Net income (loss) $28,274
 $28,861
 $(1,412) $20,126
Diluted earnings (loss) per share $0.59
 $0.61
 $(0.04) $0.58
Weighted avg diluted shares 47,668
 47,668
 34,631
 34,631

GAAP and adjusted earnings per share for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 were positively impacted by $0.02 per share due to the year-over-year 5% favorable change in the average value of the Mexican peso. Adjusted net income removes certain items from GAAP net income that the Company does not consider to be representative of its actual operating performance, such as Merger and other acquisition expenses and loss on extinguishment of debt, but does not adjust for the effects of foreign currency rate fluctuations. See “—Non-GAAP Financial Information—Adjusted Net Income and Adjusted Net Income Per Share” below.
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Operating Results for the Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016

U.S. Operations Segment

The following table presents segment pre-tax operating income of the U.S. operations segment for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. Store operating expenses include salary and benefit expense of store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the stores.

  Nine Months Ended    
  September 30,  
  2017 2016 Increase
U.S. Operations Segment        
Revenue:        
Retail merchandise sales $519,116
 $186,673
  178% 
Pawn loan fees 287,338
 94,929
  203% 
Wholesale scrap jewelry sales 91,430
 25,910
  253% 
Consumer loan and credit services fees 57,425
 19,619
  193% 
Total revenue 955,309
 327,131
  192% 
         
Cost of revenue:        
Cost of retail merchandise sold 337,789
 114,632
  195% 
Cost of wholesale scrap jewelry sold 87,600
 22,914
  282% 
Consumer loan and credit services loss provision 15,115
 5,380
  181% 
Total cost of revenue 440,504
 142,926
  208% 
         
Net revenue 514,805
 184,205
  179% 
         
Segment expenses:        
Store operating expenses 318,044
 107,196
  197% 
Depreciation and amortization 18,759
 5,827
  222% 
Total segment expenses 336,803
 113,023
  198% 
         
Segment pre-tax operating income $178,002
 $71,182
  150% 

Retail Merchandise Sales Operations

U.S. retail merchandise sales increased 178% to $519,116 during the nine months ended September 30, 2017 compared to $186,673 for the nine months ended September 30, 2016. The increase was primarily due to the nine months ended September 30, 2016 only including the results of operations for Cash America for the period September 2, 2016 to September 30, 2016 (“Cash America 2016 Partial Period”) as the Merger was completed on September 1, 2016. Same-store retail sales decreased 1% in legacy First Cash stores and decreased 4% in legacy Cash America stores during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Gross profit margin on retail merchandise sales in the U.S. was 35% during the nine months ended September 30, 2017 compared to a margin of 39% during the nine months ended September 30, 2016, reflecting the impact of historically lower margins in the Cash America stores and a focus during 2017 on clearing aged inventory levels in the Cash America stores.

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Pawn Lending Operations

U.S. pawn loan fees increased 203% totaling $287,338 during the nine months ended September 30, 2017 compared to $94,929 for the nine months ended September 30, 2016. The increase was primarily due to the Cash America 2016 Partial Period. Legacy First Cash same-store pawn loan fees increased 4%, while legacy Cash America same-store pawn loan fees decreased 8% during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Pawn loan receivables in the U.S. as of September 30, 2017 decreased 6% compared to September 30, 2016. Legacy First Cash same-store pawn receivables increased 5%, while legacy Cash America same-store pawn receivables decreased 13% as of September 30, 2017 compared to September 30, 2016. The decline in legacy Cash America same-store pawn receivables and pawn loan fees was primarily due to the expected impact of reducing the holding period on delinquent pawn loans, continued optimization of loan-to-value ratios and to a lesser extent, the impact of the hurricane on pawn receivables in coastal Texas markets.

Wholesale Scrap Jewelry Operations

U.S. wholesale scrap jewelry revenue, consisting primarily of gold sales, increased 253% to $91,430 during the nine months ended September 30, 2017 compared to $25,910 during the nine months ended September 30, 2016. The increase in wholesale scrap jewelry revenue was primarily due to the Cash America 2016 Partial Period. The scrap gross profit margin in the U.S. was 4% compared to the prior-year margin of 12%, primarily as a result of the typically higher cost basis in scrap jewelry sold by the Cash America stores. Scrap jewelry profits accounted for 1% of U.S. net revenue (gross profit) for the nine months ended September 30, 2017 compared to 2% in the nine months ended September 30, 2016.

Consumer Lending Operations

Service fees from U.S. consumer loans and credit services transactions (collectively, consumer lending operations) increased 193% to $57,425 during the nine months ended September 30, 2017 compared to $19,619 for the nine months ended September 30, 2016. The increase in fees was due to the Cash America 2016 Partial Period. Excluding the increase due to the Cash America 2016 Partial Period, consumer loan and credit services fees decreased 30% as the Company continues to de-emphasize consumer lending operations in light of increasing regulatory constraints. Revenues from consumer lending operations comprised 6% of total U.S. revenue during the nine months ended September 30, 2017 and 2016.

Segment Expenses and Segment Pre-Tax Operating Income

U.S. store operating expenses increased 197% to $318,044 during the nine months ended September 30, 2017 compared to $107,196 during the nine months ended September 30, 2016, primarily as a result of the Merger. Same-store operating expenses increased 1% and decreased 3% in the legacy First Cash and Cash America stores, respectively, compared with the prior-year period.

U.S. store depreciation and amortization increased 222% to $18,759 during the nine months ended September 30, 2017 compared to $5,827 during the nine months ended September 30, 2016, primarily as a result of the Merger.

The U.S. segment pre-tax operating income for the nine months ended September 30, 2017 was $178,002, which generated a pre-tax segment operating margin of 19% compared to $71,182 and 22% in the prior year, respectively. The decline in the segment pre-tax operating margin was primarily due to historically lower operating margins in the Cash America stores and a focus during 2017 on clearing aged inventory levels in Cash America stores, resulting in lower gross profit margins on retail merchandise sales.


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Latin America Operations Segment

The following table presents segment pre-tax operating income of the Latin America operations segment for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. Store operating expenses include salary and benefit expense of store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the stores.

          Constant Currency Basis
          Nine Months    
        Ended    
  Nine Months Ended     September 30, Increase /
  September 30, Increase / 2017 (Decrease)
  2017 2016 (Decrease) (Non-GAAP) (Non-GAAP)
Latin America Operations Segment              
Revenue:              
Retail merchandise sales $231,034
 $199,861
  16 %  $238,833
  19 % 
Pawn loan fees 96,090
 87,887
  9 %  99,272
  13 % 
Wholesale scrap jewelry sales 15,855
 9,996
  59 %  15,855
  59 % 
Consumer loan and credit services fees 1,329
 1,460
  (9)%  1,377
  (6)% 
Total revenue 344,308
 299,204
  15 %  355,337
  19 % 
               
Cost of revenue:              
Cost of retail merchandise sold 145,669
 124,534
  17 %  150,536
  21 % 
Cost of wholesale scrap jewelry sold 14,770
 7,787
  90 %  15,238
  96 % 
Consumer loan and credit services loss provision 304
 400
  (24)%  315
  (21)% 
Total cost of revenue 160,743
 132,721
  21 %  166,089
  25 % 
               
Net revenue 183,565
 166,483
  10 %  189,248
  14 % 
               
Segment expenses:              
Store operating expenses 94,736
 83,367
  14 %  97,565
  17 % 
Depreciation and amortization 7,723
 7,919
  (2)%  7,956
  — % 
Total segment expenses 102,459
 91,286
  12 %  105,521
  16 % 
               
Segment pre-tax operating income $81,106
 $75,197
  8 %  $83,727
  11 % 

Retail Merchandise Sales Operations

Latin America retail merchandise sales increased 16% (19% on a constant currency basis) to $231,034 during the nine months ended September 30, 2017 compared to $199,861 for the nine months ended September 30, 2016. The increase was primarily due to a 9% increase (13% on a constant currency basis) in same-store retail sales, which included a same-store retail sales increase of 25% (20% on a constant currency basis) in the Maxi Prenda stores acquired in the fourth quarter of 2015 and first quarter of 2016. Excluding the Maxi Prenda stores, same-store retail sales increased 9% (13% on a constant currency basis), which was primarily due to strong retail demand trends2023 and the maturation of existing stores. During the nine months ended September 30, 2017, the gross profit margin on retail merchandise sales was 37% compared to 38% during the nine months ended September 30, 2016.

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Pawn Lending Operations

Pawn loan fees in Latin America increased 9% (13% on a constant currency basis) totaling $96,090 during the nine months ended September 30, 2017 compared to $87,887 for the nine months ended September 30, 2016 as a result of the 24% (16% on a constant currency basis) increase in pawn loan receivables as of September 30, 2017 compared to September 30, 2016. The increase in pawn receivables reflects a same-store pawn receivable increase of 22% (14% on a constant currency basis)2022 were 25.0% and new store additions. The increase in same-store pawn receivables was primarily due to strong demand for pawn loans and the maturation of existing stores.

Wholesale Scrap Jewelry Operations

Latin America wholesale scrap jewelry revenue, consisting primarily of gold sales, increased 59% to $15,855 during the nine months ended September 30, 2017 compared to $9,996 during the nine months ended September 30, 2016. The increase in wholesale scrap jewelry revenue was primarily due to reduced scrapping activities in the Maxi Prenda stores during the nine months ended September 30, 2016 as those stores were being converted to the Company’s proprietary point of sale and loan management system. The scrap gross profit margin in Latin America was 7% (4% on a constant currency basis) compared to the prior-year margin of 22%. Scrap jewelry profits accounted for 1% of Latin America net revenue (gross profit) for the nine months ended September 30, 2017, which equaled the nine months ended September 30, 2016.

Segment Expenses and Segment Pre-Tax Operating Income

Store operating expenses increased 14% (17% on a constant currency basis) to $94,736 during the nine months ended September 30, 2017 compared to $83,367 during the nine months ended September 30, 2016 and same-store operating expenses increased 4% (7% on a constant currency basis) compared to the prior-year period. The increase in both total and same-store operating expenses was due in large part to increased compensation expense related to incentive pay and entry level wage competition.

The segment pre-tax operating income for the nine months ended September 30, 2017 was $81,106, which generated a pre-tax segment operating margin of 24% compared to $75,197 and 25% in the prior year,24.3%, respectively.


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Consolidated Results of Operations

The following table reconciles pre-tax operating income of the Company’s U.S. operations segment and Latin America operations segment discussed above to consolidated net income for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016:

  Nine Months Ended    
  September 30, Increase /
  2017 2016 (Decrease)
Consolidated Results of Operations        
U.S. operations segment pre-tax operating income $178,002
 $71,182
  150 % 
Latin America operations segment pre-tax operating income 81,106
 75,197
  8 % 
Consolidated segment pre-tax operating income 259,108
 146,379
  77 % 
         
Corporate expenses and other income:        
Administrative expenses 93,542
 58,277
  61 % 
Depreciation and amortization 16,322
 3,419
  377 % 
Interest expense 17,827
 13,859
  29 % 
Interest income (1,138) (636)  79 % 
Merger and other acquisition expenses 3,164
 33,877
  (91)% 
Loss on extinguishment of debt 14,114
 —
  — % 
Net loss on sale of common stock of Enova —
 253
  (100)% 
Total corporate expenses and other income 143,831
 109,049
  32 % 
         
Income before income taxes 115,277
 37,330
  209 % 
         
Provision for income taxes 39,119
 13,895
  182 % 
         
Net income $76,158
 $23,435
  225 % 
         
Comprehensive income (loss) $107,519
 $(7,269)  1,579 % 

Corporate Expenses and Taxes

Administrative expenses increased 61% to $93,542 during the nine months ended September 30, 2017 compared to $58,277 during the nine months ended September 30, 2016, primarily as a result of the Merger and a 54% increase in the weighted-average store count resulting in additional management and supervisory compensation and other support expenses required for such growth, partially offset by a 3% unfavorable change in the average value of the Mexican peso, which reduced comparative administrative expenses in Mexico. As a percentage of revenue, administrative expenses decreased from 9% during the nine months ended September 30, 2016 to 7% during the nine months ended September 30, 2017, primarily due to synergies realized from the Merger and the Maxi Prenda acquisition.

Depreciation and amortization increased to $16,322 during the nine months ended September 30, 2017 compared to $3,419 during the nine months ended September 30, 2016 primarily due to the assumption of substantial corporate property and equipment from the Merger and $7,428 in amortization expense related to intangible assets acquired as a result of the Merger.

Interest expense increased to $17,827 during the nine months ended September 30, 2017 compared to $13,859 for the nine months ended September 30, 2016. See “—Liquidity and Capital Resources.”

Merger and other acquisition expenses decreased to $3,164 during the nine months ended September 30, 2017 compared to $33,877 for the nine months ended September 30, 2016, reflecting timing in transaction and integration costs primarily related to the Merger. See “—Non-GAAP Financial Information” for additional details of Merger related expenses.
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During the nine months ended September 30, 2017, the Company repurchased through a tender offer, or otherwise redeemed, its outstanding $200,000, 6.75% senior notes due 2021 incurring a loss on extinguishment of debt of $14,114.

For the nine months ended September 30, 2017 and 2016, the Company’s effective federal income tax rates were 33.9% and 37.2%, respectively. The decrease in the effective tax rate was primarily due to certain significant Merger related expenses being non-deductible for income tax purposes during the nine months ended September 30, 2016, the tax impact of the loss on extinguishment of debt and changes in certain tax estimates made during 2017 as a result of finalizing the 2016 tax returns.

Net Income, Adjusted Net Income, Net Income Per Share and Adjusted Net Income Per Share

The following table sets forth revenue, net revenue, net income, net income per share, adjusted net income and adjusted net income per share for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016:

  Nine Months Ended September 30,
  2017 2016
  As Reported Adjusted As Reported Adjusted
  (GAAP) (Non-GAAP) (GAAP) (Non-GAAP)
Revenue $1,299,617
 $1,299,617
 $626,335
 $626,335
Net revenue $698,370
 $698,370
 $350,688
 $350,688
Net income $76,158
 $87,044
 $23,435
 $47,884
Diluted earnings per share $1.58
 $1.81
 $0.77
 $1.58
Weighted avg diluted shares 48,117
 48,117
 30,372
 30,372

GAAP and adjusted earnings per share for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 were negatively impacted by $0.03 per share due to the year-over-year 3% unfavorable change in the average value of the Mexican peso. Adjusted net income removes certain items from GAAP net income that the Company does not consider to be representative of its actual operating performance, such as Merger and other acquisition expenses, but does not adjust for the effects of foreign currency rate fluctuations. See “—Non-GAAP Financial Information—Adjusted Net Income and Adjusted Net Income Per Share” below.

LIQUIDITY AND CAPITAL RESOURCES


As of September 30, 2017, theMaterial Capital Requirements

The Company’s primary sourcescapital requirements include:

•Expand pawn operations through growth of liquidity were $93,411pawn 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 cash equivalents, $265,544 of available and unused funds under the Company’s long-term lines ofits revolving unsecured credit with its commercial lenders, $441,016 in customer loans and fees and service charges receivable and $308,683 in inventories. As of September 30, 2017, the amount of cash associated with indefinitely reinvested foreign earnings was $42,329, which is primarily held in Mexican pesos. The Company had working capital of $758,637 as of September 30, 2017 and total equity exceeded liabilities by a ratio of 2.2 to 1.

On May 30, 2017, the Company completed an offering of $300,000 of 5.375% senior notes due on June 1, 2024 (the “Notes”). Interest on the Notesfacilities will be payable semi-annually in arrears on June 1adequate to meet its liquidity and December 1, commencing on December 1, 2017. The Notes were sold to the placement agents as initial purchaserscapital needs for resale only to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States in accordance with Regulation S under the Securities Act. The Company used the proceeds from the offering to repurchase, or otherwise redeem, its outstanding $200,000, 6.75% senior notes due 2021 (the “2021 Notes”), to repay borrowings under the Company’s credit facility and to pay related fees and expenses associated with the Notes offering and the repurchase and redemption of the 2021 Notes. The Company capitalized approximately $5,200 in issuance costs, which consisted primarily of placement agent fees and legal and other professional expenses. The issuance costs are being amortizedthese items over the life of the Notes as a component of interest expensenext 12 months and are carried as a direct deduction from the carrying amount of the Notesalso in the accompanying condensed consolidated balance sheets.

The 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 primary revolving bank credit facility. The Notes will permit the Company to make share repurchases of up to $100,000 with the net proceeds of the Notes and other available funds and 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 (“Net Debt
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Ratio”) is less than 2.25 to 1.00. The Net Debt Ratio is defined generally in the indenture governing the Notes (the “Indenture”) 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.

The Company may redeem the Notes at any time on or after June 1, 2020, at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any. In addition, prior to June 1, 2020, the Company may redeem some or all of the Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, plus a “make-whole” premium set forth in the Indenture. The Company may redeem up to 35% of the Notes prior to June 1, 2020, with the proceeds of certain equity offerings at a redemption price of 105.375% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any. In addition, upon a change of control, noteholders have the right to require the Company to purchase the Notes at a price equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest, if any.

For the nine months ended September 30, 2017, the Company recognized a $14,114 loss on extinguishment of debt related to the repurchase or redemption of the 2021 Notes which includes the tender or redemption premiums paid over the outstanding $200,000 principal amount of the 2021 Notes and other reacquisition costs of $10,895 and the write off of unamortized debt issuance costs of $3,219.
At September 30, 2017, the Company maintained a line of credit with a group of U.S. based commercial lenders (the “2016 Credit Facility”) in the amount of $400,000. In May 2017, the term of the 2016 Credit Facility was extended through September 2, 2022. The calculation of the fixed charge coverage ratio was also amended to remove share repurchases from the calculation to provide greater flexibility for making future share repurchases and paying cash dividends.

At September 30, 2017, the Company had $140,000 in outstanding borrowings and a $4,456 outstanding letter of credit under the 2016 Credit Facility, leaving $255,544 available for future borrowings. The 2016 Credit Facility bears interest, at the Company’s option, at either (i) the prevailing London Interbank Offered Rate (“LIBOR”) (with interest periods of 1 week or 1, 2, 3 or 6 months at the Company’s option) plus a fixed spread of 2.5% or (ii) the prevailing prime or base rate plus a fixed spread of 1.5%. The agreement has a LIBOR floor of 0%. Additionally, the Company is required to pay an annual commitment fee of 0.50% on the average daily unused portion of the 2016 Credit Facility commitment. The weighted-average interest rate on amounts outstanding under the 2016 Credit Facility at September 30, 2017 was 3.75% based on 1 week LIBOR. Under the terms of the 2016 Credit Facility, the Company is required to maintain certain financial ratios and comply with certain financial covenants. The 2016 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 requirements and covenants of the 2016 Credit Facility as of September 30, 2017, and believes it has the capacity to borrow a substantial portion of the amount available under the 2016 Credit Facility under the most restrictive covenant. During the nine months ended September 30, 2017, the Company made net payments of $120,000 pursuant to the 2016 Credit Facility.

At September 30, 2017, the Company maintained a U.S. dollar denominated line of credit with a bank in Mexico (the “Mexico Credit Facility”) in the amount of $10,000. The Mexico Credit Facility bears interest at 30-day LIBOR plus a fixed spread of 2.0% and matures in December 2017. Under the terms of the Mexico Credit Facility, the Company is required to maintain certain financial ratios and comply with certain financial covenants. The Company was in compliance with the requirements and covenants of the Mexico Credit Facility as of September 30, 2017, and believes it has the capacity to borrow the full amount available under the Mexico Credit Facility under the most restrictive covenant. The Company is required to pay a one-time commitment fee of $25 due when the first amount is drawn/borrowed. At September 30, 2017, the Company had no amount outstanding under the Mexico Credit Facility and $10,000 was available for borrowings.

In general, revenue growth is dependent upon the Company’s ability to fund the addition of store locations (both de novo openings and acquisitions) and growth in customer loan balances and inventories. In addition to these factors, changes in loan balances, collection of pawn fees, merchandise sales, inventory levels, seasonality, operating expenses, administrative expenses, expenses related to the Merger, tax rates, gold prices, foreign currency exchange rates and the pace of new store expansions and acquisitions, affect the Company’s liquidity. Management believes cash on hand, the borrowings available under its credit facilities, anticipated cash generated from operations (including the normal seasonal increases in operating cash flows occurring in the first and fourth quarters) and other current working capital will be sufficient to meet the Company’s anticipated capital requirements for its business for at leastlonger-term beyond the next twelve12 months. Where appropriate or desirable, in connection with the Company’s efficient management of its liquidity position, the Company could seek to raise additional funds from a variety of sources, including the sale of assets, reductions in capital spending, the issuance of debt or equity securities 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 and adjust outflows of cash in its lending practices, gives the Company flexibility to quickly modify its business strategy to increase cash

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Expand Pawn Operations


flow from its business, if necessary. Regulatory developments affecting the Company’s operations may also impact profitability and liquidity. See “—Regulatory Developments.”

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 fund ongoing cash needs such as general corporate purposes, growth initiatives and its stock repurchase program.

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:

  Nine Months Ended
  September 30,
  2017 2016
Cash flow provided by operating activities $148,846
 $40,474
Cash flow used in investing activities $(22,475) $(88,957)
Cash flow provided by (used in) financing activities $(128,365) $50,537

  Balance at September 30,
  2017 2016
Working capital $758,637
 $817,559
Current ratio6.57:1 5.85:1 
Liabilities to equity ratio0.45:1 0.59:1 
Net Debt Ratio (1)
1.28:1 3.42:1 

(1)
Pursuant to the covenants of the Notes, the Company may 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 Net Debt Ratio is less than 2.25 to 1.00. Adjusted EBITDA, a component of the Net Debt Ratio, is a non-GAAP measure. See “—Non-GAAP Financial Information” for a calculation of the Net Debt Ratio.

Net cash provided by operating activities increased $108,372, or 268%, from $40,474 for the nine months ended September 30, 2016 to $148,846 for the nine months ended September 30, 2017, due primarily to an increase in net income of $52,723 and net changes in certain adjustments and operating assets and liabilities (as detailed in the condensed consolidated statements of cash flows).

Net cash used in investing activities decreased $66,482, or 75%, from $88,957 for the nine months ended September 30, 2016 to $22,475 for the nine months ended September 30, 2017. Cash flows from investing activities are utilized primarily to fund pawn store acquisitions and purchases of property and equipment. In addition, net cash flows related to fundings/repayments of pawn and consumer loans are included in investing activities. The Company paid $1,141 in cash related to acquisitions during the nine months ended September 30, 2017 compared to $28,756 in the prior-year period. In addition, the portion of the aggregate Merger consideration paid in cash upon closing of the Merger, net of cash acquired, was $8,251 during nine months ended September 30, 2016. The Company received net repayments on loan receivables of $5,261 during the nine months ended September 30, 2017 compared to net fundings of $31,486 during the nine months ended September 30, 2016 and received proceeds of $2,962 from the sale of 317,000 shares of common stock of Enova International, Inc. during the nine months ended September 30, 2016.

Net cash used in financing activities increased $178,902, or 354%, from net cash provided by financing activities of $50,537 for the nine months ended September 30, 2016 to net cash used in financing activities of $128,365 for the nine months ended September 30, 2017. Net payments on the Company’s credit facilities were $120,000 during the nine months ended September 30, 2017 compared to net proceeds of $302,000 during the nine months ended September 30, 2016. During the nine months ended September 30, 2017, the Company received $300,000 in proceeds from the private offering of the Notes and paid $5,342 in debt issuance costs. Using part of the proceeds from the Notes, the Company repurchased, or otherwise redeemed, the $200,000 2021 Notes and paid tender or redemption premiums over the face value of the 2021 Notes and other reacquisition costs of $10,895 during the nine months ended September 30, 2017. In addition, the Company repaid $6,532 in peso-denominated debt assumed from the Maxi Prenda acquisition and $232,000 in debt assumed in conjunction with the Merger during the nine months ended September 30, 2016. The Company repurchased $65,035 worth of shares of its common stock, realized proceeds from the exercise
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of stock options of $307 and paid dividends of $27,400 during the nine months ended September 30, 2017, compared to dividends paid of $10,591 during the nine months ended September 30, 2016.

During the nine months ended September 30, 2017, the Company opened 32 new pawn stores in Latin America, acquired five pawn stores in Latin America, opened two pawn stores in the U.S. and acquired one pawn store in the U.S. The cumulative purchase price of the 2017 acquisitions was $1,154, net of cash acquired and certain post-closing adjustments. The purchases were composed of $1,124 in cash paid during the nine months ended September 30, 2017 and $30 of deferred purchase price payable to the sellers in 2017. During the nine months ended September 30, 2017, the Company also paid $17 of deferred purchase price amounts payable related to prior-year acquisitions. The Company funded $26,595 in capital expenditures during the nine months ended September 30, 2017, related primarily to maintenance capital expenditures and new store additions.

The Company intends to continuecontinue expansion primarily through acquisitions and new store openings.openings and acquisitions. For fiscal 2017,2023, the Company expects to add approximately 50 toapproximately 60 new (“de novo”) stores primarily in Latin America.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 expects that total capital expenditures for 2017, including expenditures for new and remodeled stores and other corporate assets, will total approximately $32,000 to $37,000. Management believes that cash on hand, the amounts available to be drawn under the credit facilities and cash generated from operations will be sufficient to accommodate the Company’s current operations and store expansion plans for the remainder of 2017.

The Company continually looks for, and is presented with, potential acquisition opportunities. The Company currently has no other contractual commitments for materially significant future acquisitions, business combinations or capital commitments. The Company will evaluateevaluates potential acquisitions based upon growth potential, purchase price, available liquidity, debt covenant restrictions, strategic fit and quality of management personnel, among other factors. IfDuring the three months ended March 31, 2023, the Company encounters an attractive opportunity to acquire newacquired three pawn stores in the nearU.S. for a cumulative purchase price of $2.2 million, net of cash acquired and subject to future post-closing adjustments.

Although viewed by management as a discretionary expenditure not required to operate its pawn stores, the Company may seek additional financing,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 termsreal estate at five store locations, primarily from landlords at existing stores, for a cumulative purchase price of which will be negotiated on a case-by-case basis.$17.5 million during the three months ended March 31, 2023.


As of September 30, 2017, the Company has contractual commitments to deliver a total of 7,475 gold ounces over the months of October through December 31, 2017. The ounces required to be delivered over this time period are well within historical scrap gold volumes and the Company
34

Expand Retail POS Payment Solutions Operations

AFF expects to haveexpand 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 required gold ouncesadditional sources of liquidity described below if needed to meet the commitments as they come due.fund further expansion activities.


Return of Capital to Shareholders

In January 2015,April 2023, the Company’s Board of Directors authorizeddeclared a common stock repurchase program for up to 2,000,000 shares of the Company’s outstanding common stock. During the first quarter of 2017, the Company repurchased 228,000 shares of its common stock at an aggregate cost of $10,005 and an average cost$0.33 per share of $43.94. In May 2017, the Company’s Board of Directors authorized a new common stock repurchase program for up to $100,000 of the Company’s outstanding common stock. The new share repurchase program replaced the Company’s prior share repurchase plan, which was terminated in May 2017. Under the May 2017 stock repurchase program, the Company has repurchased 954,000 shares of its common stock at an aggregate cost of $55,030 and an average cost per share of $57.65 and $44,970 remains available for repurchases as of September 30, 2017. The Company intends to continue repurchases under its repurchase program in 2017 through open market transactions under trading plans in accordance with Rule 10b5-1 and Rule 10b-18 under the Exchange Act of 1934, as amended, subject to a variety of factors, including, but not limited to, the level of cash balances, credit availability, debt covenant restrictions, general business conditions, regulatory requirements, the market price of the Company’s stock, dividend policy and the availability of alternative investment opportunities.

In October 2017, the Company’s Board of Directors authorized an additional common stock repurchase program for up to $100,000 of the Company’s outstanding common stock to become effective upon completion of the May 2017 program.

In October 2017, the Company’s Board of Directors approved a plan to increase the annual dividend 5% from $0.76 per share to $0.80 per share, or $0.20 per share quarterly, beginning in the fourth quarter of 2017. The $0.20 per share fourthsecond quarter cash dividend on common shares outstanding, or an aggregate of $9,470$15.0 million based on September 30, 2017the March 31, 2023 share counts, declared by the Board of Directors willcount, to be paid on November 30, 2017May 31, 2023 to stockholders of record as of November 13, 2017. TheMay 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, and debt covenant restrictions.restrictions and other relevant factors.


During the three months ended March 31, 2023, the Company repurchased a total of 782,000 shares of common stock at an aggregate cost of $70.7 million and an average cost per share of $90.37. 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 $0.7 million of excise taxes during the three months ended March 31, 2023. During the three months ended March 31, 2022, the Company repurchased 1,048,000 shares of common stock at an aggregate cost of $72.2 million and an average cost per share of $68.87. The Company has approximately $43.6 million of remaining availability under its share repurchase program authorized in October 2022. 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, 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 March 31, 2023, the Company’s primary sources of liquidity were $100.8 million in cash and cash equivalents and $279.1 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 $766.2 million as of March 31, 2023.

The Company’s cash and cash equivalents as of March 31, 2023 included $35.2 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.

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 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 49% of total inventory, give the Company flexibility to quickly increase cash flow if necessary.
35


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):

Three Months Ended March 31,
20232022
Cash flow provided by operating activities$110,594 $120,145 
Cash flow (used in) provided by investing activities$(13,239)$183 
Cash flow used in financing activities$(115,984)$(127,895)

As of March 31,
20232022
Working capital$766,232 $651,802 
Current ratio3.5:12.7:1

Cash Flow Provided by Operating Activities

Net cash provided by operating activities decreased $9.6 million, or 8%, from $120.1 million for the three months ended March 31, 2022 to $110.6 million for the three months ended March 31, 2023, as an increase in net income of $19.4 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 increased $13.4 million, or 7,334%, from net cash provided by investing activities of $0.2 million for the three months ended March 31, 2022 to net cash used in investing activities of $13.2 million for the three months ended March 31, 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 $13.8 million for furniture, fixtures, equipment and improvements and $17.5 million for discretionary pawn store real property purchases during the three months ended March 31, 2023 compared to $7.0 million and $10.2 million in the prior-year period, respectively. The Company paid $1.7 million in cash related to pawn store acquisitions during the three months ended March 31, 2023. The Company received funds from a net decrease in pawn loans of $44.4 million during the three months ended March 31, 2023 and $17.4 million during the three months ended March 31, 2022. The Company funded a net increase in finance receivables of $24.5 million during the three months ended March 31, 2023 and received funds from a net decrease in finance receivables of $0.1 million during the three months ended March 31, 2022.

Cash Flow Used in Financing Activities

Net cash used in financing activities decreased $11.9 million, or 9%, from $127.9 million for the three months ended March 31, 2022 to $116.0 million for the three months ended March 31, 2023. Net payments on the credit facilities were $31.0 million during the three months ended March 31, 2023 compared to net payments of $41.0 million during the three months ended March 31, 2022. The Company funded $67.2 million for share repurchases and paid dividends of $15.3 million during the three months ended March 31, 2023, compared to funding $72.2 million of share repurchases and dividends paid of $14.5 million during the three months ended March 31, 2022. In addition, the Company paid withholding taxes on net share settlements of restricted stock awards during the three months ended March 31, 2023 of $2.5 million.


36

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 filings on Form 10-Q.

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 net incomediluted 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 defined or explained below) 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 generally accepted accounting principles (“GAAP”),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 in Securities and Exchange Commission (“SEC”)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 because management believes they 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 adjusted net income, adjusted net income per share, EBITDA, adjusted EBITDA, free cash flow, adjusted free cash flow and constant currency resultsthese 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, adjusted net income, adjusted net income per share, EBITDA, adjusted EBITDA, free cash flow, adjusted free cash flow and constant currency results,the non-GAAP financial measures, as presented, may not be comparable to other similarly titledsimilarly-titled measures of other companies.


TheWhile acquisitions are an important part of the Company’s overall strategy, the Company expectshas adjusted the applicable financial calculations to incur additionalexclude merger and acquisition expenses, in 2017 and 2018including 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 integrationacquisition 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 Cash America.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 because it generally would not incur such coststhat 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 expenses as part(ii) to improve comparability of its continuing operations. The Merger related expenses are predominantly incremental costs directly associatedcurrent periods presented with prior periods.

In conjunction with the Merger and integrationCash America merger in 2016, the Company recorded certain lease intangibles related to above- or below-market lease liabilities of Cash America, including professional fees, legal expenses, severancewhich 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 retention payments, accelerated vestinggain 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 certain equity compensation awards, contract breakage coststhese transactions and costs related to consolidationbecause they are non-cash, non-operating gains or losses. The Company believes this improves comparability of technology systems and corporate facilities.operating results for current periods presented with prior periods.



37


Adjusted Net Income and Adjusted Net IncomeDiluted Earnings Per Share


Management believes the presentation of adjusted net income and adjusted net incomediluted earnings per share (“Adjusted Income Measures”) 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 the net income and diluted earnings per share calculated in accordance with GAAP to the Adjusted Income Measures,adjusted net income and adjusted diluted earnings per share, which are shown net of tax:tax (in thousands, except per share amounts):

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 In Thousands Per Share In Thousands Per Share In Thousands Per Share In Thousands Per Share
Net income (loss), as reported$28,274
 $0.59
 $(1,412) $(0.04) $76,158
 $1.58
 $23,435
 $0.77
Adjustments, net of tax:               
Merger related expenses:               
Transaction—
 —
 10,915
 0.32
 —
 —
 13,732
 0.45
Severance and retention56
 —
 8,737
 0.25
 857
 0.02
 8,737
 0.29
Other518
 0.02
 1,726
 0.05
 1,137
 0.02
 1,726
 0.06
Total Merger related expenses574
 0.02
 21,378
 0.62
 1,994
 0.04
 24,195
 0.80
Other acquisition expenses—
 —
 —
 —
 —
 —
 94
 —
Loss on extinguishment of debt13
 —
 —
 —
 8,892
 0.19
 —
 —
Net loss on sale of common stock of Enova—
 —
 160
 —
 —
 —
 160
 0.01
Adjusted net income$28,861
 $0.61
 $20,126
 $0.58
 $87,044
 $1.81
 $47,884
 $1.58
Three Months Ended March 31,
 20232022
In ThousandsPer ShareIn ThousandsPer Share
Net income and diluted earnings per share, as reported$47,388 $1.02 $28,005 $0.58 
Adjustments, net of tax:
Merger and acquisition expenses22 — 511 0.01 
Non-cash foreign currency gain related to lease liability(847)(0.01)(484)(0.01)
AFF purchase accounting adjustments (1)
11,102 0.24 26,724 0.56 
Loss on revaluation of contingent acquisition consideration— — 1,979 0.04 
Other expenses (income), net35 — 136 — 
Adjusted net income and diluted earnings per share$57,700 $1.25 $56,871 $1.18 


(1)See detail of the AFF purchase accounting adjustments in tables below.
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The following tables providetable provides a reconciliation of the gross amounts, the impact of income taxes and the net amounts for each of the adjustments included in the table above:above (in thousands):


Three Months Ended March 31,
 20232022
Pre-taxTaxAfter-taxPre-taxTaxAfter-tax
Merger and acquisition expenses$31 $9 $22 $665 $154 $511 
Non-cash foreign currency gain related to lease liability(1,210)(363)(847)(692)(208)(484)
AFF purchase accounting adjustments (1)
14,418 3,316 11,102 34,707 7,983 26,724 
Loss on revaluation of contingent acquisition consideration— — — 2,570 591 1,979 
Other expenses (income), net45 10 35 177 41 136 
Total adjustments$13,284 $2,972 $10,312 $37,427 $8,561 $28,866 
 Three Months Ended September 30,
 2017 2016
 Pre-tax Tax After-tax Pre-tax Tax After-tax
Merger related expenses (1)
$911
 $337
 $574
 $29,398
 $8,020
 $21,378
Loss on extinguishment of debt20
 7
 13
 —
 —
 —
Net loss on sale of common stock of Enova—
 —
 —
 253
 93
 160
Total adjustments$931
 $344
 $587
 $29,651
 $8,113
 $21,538


(1)The following table details AFF purchase accounting adjustments (in thousands):

 Nine Months Ended September 30,
 2017 2016
 Pre-tax Tax After-tax Pre-tax Tax After-tax
Merger related expenses (1)
$3,164
 $1,170
 $1,994
 $33,727
 $9,532
 $24,195
Other acquisition expenses—
 —
 —
 150
 56
 94
Loss on extinguishment of debt14,114
 5,222
 8,892
 —
 —
 —
Net loss on sale of common stock of Enova—
 —
 —
 253
 93
 160
Total adjustments$17,278
 $6,392
 $10,886
 $34,130
 $9,681
 $24,449
Three Months Ended March 31,
 20232022
Pre-taxTaxAfter-taxPre-taxTaxAfter-tax
Amortization of fair value adjustment on acquired finance receivables$— $— $— $16,173 $3,720 $12,453 
Amortization of fair value adjustment on acquired leased merchandise— — — 4,359 1,003 3,356 
Amortization of acquired intangible assets14,418 3,316 11,102 14,175 3,260 10,915 
Total AFF purchase accounting adjustments$14,418 $3,316 $11,102 $34,707 $7,983 $26,724 

(1)
Resulting tax benefit for the three and nine months ended September 30, 2016 is less than the statutory rate as a portion of the transaction costs were not deductible for tax purposes.


38


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 Net Debt Ratioconsolidated total debt ratio as defined in the Company’s senior notes covenants.unsecured notes. The following table provides a reconciliation of net income to EBITDA and adjusted EBITDA:EBITDA (in thousands):

Trailing Twelve
 Three Months EndedMonths Ended
March 31,March 31,
2023202220232022
Net income$47,388 $28,005 $272,878 $119,199 
Provision for income taxes15,825 9,004 76,959 38,041 
Depreciation and amortization27,111 25,542 105,401 60,836 
Interest expense20,897 16,221 75,384 41,377 
Interest income(517)(676)(1,154)(1,214)
EBITDA110,704 78,096 529,468 258,239 
Adjustments:
Merger and acquisition expenses31 665 3,105 15,948 
Non-cash foreign currency gain related to lease liability(1,210)(692)(1,847)(650)
AFF purchase accounting adjustments (1)
— 20,532 29,822 66,894 
Loss (gain) on revaluation of contingent acquisition consideration— 2,570 (112,119)(15,301)
Other expenses (income), net45 177 (2,863)248 
Adjusted EBITDA$109,570 $101,348 $445,566 $325,378 
              Trailing Twelve
  Three Months Ended Nine Months Ended Months Ended
  September 30, September 30, September 30,
  2017 2016 2017 2016 2017 2016
Net income (loss) $28,274
 $(1,412) $76,158
 $23,435
 $112,850
 $42,845
Income taxes  13,293
  1,835
  39,119
  13,895
  58,544
  22,112
Depreciation and amortization  13,872
  7,281
  42,804
  17,165
  57,504
  21,453
Interest expense  6,129
  5,073
  17,827
  13,859
  24,288
  18,264
Interest income  (418)  (138)  (1,138)  (636)  (1,253)  (1,059)
EBITDA  61,150
  12,639
  174,770
  67,718
  251,933
  103,615
Adjustments:                  
Merger related expenses  911
  29,398
  3,164
  33,727
  5,657
  33,727
Other acquisition expenses  —
  —
  —
  150
  300
  1,850
Loss on extinguishment of debt  20
  —
  14,114
  —
  14,114
  —
Net (gain) / loss on sale of common stock of Enova  —
  253
  —
  253
  (1,552)  253
Adjusted EBITDA $62,081
 $42,290
 $192,048
 $101,848
 $270,452
 $139,445
                   
Net Debt Ratio calculated as follows:                  
Total debt (outstanding principal)             $440,000
 $560,000
Less: cash and cash equivalents              (93,411)  (83,356)
Net debt             $346,589
 $476,644
Adjusted EBITDA             $270,452
 $139,445
Net Debt Ratio             1.28:1
3.42:1


(1)Excludes $14.4 million and $56.9 million of amortization expense related to identifiable intangible assets as a result of the AFF acquisition for the three months and trailing twelve months ended March 31, 2023, respectively, which is included in the add back of depreciation and amortization to net income used to calculate EBITDA. Excludes $14.2 million and $16.2 million of amortization expense related to identifiable intangible assets as a result of the AFF acquisition for the three months and trailing twelve months ended March 31, 2022, respectively, which is included in the add back of depreciation and amortization to net income used to calculate EBITDA.


39


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 propertyfurniture, fixtures, equipment and equipmentimprovements and net fundings/repayments of pawn loan and consumer loans,finance receivables, which are considered to be operating in nature by the Company but are included in cash flow from investing activities, and adjustedactivities. Adjusted free cash flow is defined as free cash flow adjusted for Merger relatedmerger 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 an additional measuremeasures 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 net cash flow from operating activities to free cash flow and adjusted free cash flow:flow (in thousands):


Trailing Twelve
Three Months EndedMonths Ended
March 31,March 31,
2023202220232022
Cash flow from operating activities$110,594 $120,145 $459,754 $274,275 
Cash flow from certain investing activities:
Pawn loans, net (1)
44,358 17,383 (8,842)(98,351)
Finance receivables, net(24,540)61 (109,954)(5,783)
Purchases of furniture, fixtures, equipment and improvements(13,828)(7,028)(42,386)(39,559)
Free cash flow116,584 130,561 298,572 130,582 
Merger and acquisition expenses paid, net of tax benefit22 511 2,389 12,267 
Adjusted free cash flow$116,606 $131,072 $300,961 $142,849 

(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.


40

          Trailing Twelve
  Three Months Ended Nine Months Ended Months Ended
  September 30, September 30, September 30,
  2017 2016 2017 2016 2017 2016
Cash flow from operating activities $46,033
 $901
 $148,846
 $40,474
 $205,226
 $68,101
Cash flow from investment activities:            
Loan receivables, net of cash repayments (28,702) (22,020) 5,261
 (31,486) 20,675
 (12,903)
Purchases of property and equipment (9,194) (6,353) (26,595) (23,426) (37,032) (28,971)
Free cash flow 8,137
 (27,472) 127,512
 (14,438) 188,869
 26,227
Merger related expenses paid, net of tax benefit 898
 18,158
 4,443
 19,715
 5,667
 19,715
Adjusted free cash flow $9,035
 $(9,314) $131,955
 $5,277
 $194,536
 $45,942

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
March 31,
 20232022
Total revenue, as reported$762,739 $659,839 
AFF purchase accounting adjustments (1)
— 16,173 
Adjusted total revenue$762,739 $676,012 

(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,dollar, however, certain performance metrics discussed in this report are presented on a “constant currency” basis, which is considered a non-GAAP measurement of financial performance.measure. The Company’s management uses constant currency results to evaluate operating results of business operations in Latin America, which are primarily transacted in local currencies.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 investors with 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. Business operations in Mexico and Guatemala are transacted in Mexican pesos and Guatemalan quetzales, respectively. The Company also has operations in El Salvador where the reporting and functional currency is the U.S. dollar. See the Latin America operationspawn segment tables in “—Results“Results of Continuing Operations” above for additional reconciliation of certain constant currency amounts to as reported GAAP amounts.



41


REGULATORY DEVELOPMENTS   

The Company is subject to significant regulation of its pawn, consumer loan and general business operations in all of the jurisdictions in which it operates. These regulations are implemented through various laws, ordinances and regulatory pronouncements from federal, state and municipal governmental entities in the U.S. and Latin America. These regulatory bodies often have broad discretionary authority over the establishment, interpretation and enforcement of such regulations. These regulations are subject to change, sometimes significantly, as a result of political, economic or social trends, events and media perception.

The Company is subject to specific laws, regulations and ordinances primarily concerning its pawn and consumer lending operations. Many statutes and regulations prescribe, among other things, the general terms of the Company’s pawn and consumer loan agreements, including maximum service fees and/or interestfollowing table provides exchange rates that may be charged and collected and mandatory consumer disclosures. In many municipal, state and federal jurisdictions, in both the U.S. and countries in Latin America, the Company must obtain and maintain regulatory operating licenses and comply with regular or frequent regulatory reporting and registration requirements, including reporting and recording of pawn loans, pawned collateral, used merchandise purchased from the general public, retail sales activities, firearm transactions, export, import and transfer of merchandise, and currency transactions, among other things. Existing regulations and regulatory developments are further and more completely described under “Governmental Regulation” in Part I, Item 1 of the Company’s 2016 annual report on Form 10-K filed with the SEC on March 1, 2017. There have been no material changes to the Company’s regulatory developments since December 31, 2016, except as explained below.

On July 11, 2017, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule on consumer arbitration agreements banning waiver of class action in pre-dispute arbitration clauses (the “Arbitration Rule”) with an effective date of March 2019. The rule, as written, would have prohibited financial services companies, including the Company, from using arbitration clauses that ban consumers from participating in class actions. On July 25, 2017, the House of Representatives voted to repeal the Arbitration Rule using the Congressional Review Act (the “CRA”) and on October 24, 2017, the Senate also voted to repeal the Arbitration Rule under the CRA. The repeal measure will now go to the president’s desk, where it is expected to be signed. The congressional repeal prevents the measure from returning to legislative consideration for the next five years. The Arbitration Rule was also legally challenged by various industry tradesMexican peso, Guatemalan quetzal and groups seeking declaratoryColombian peso for the current and injunctive relief and challenging the constitutionality and legality of the Arbitration Rule and the CFPB, among other things (the “Arbitration Lawsuit”). The CRA repeal likely makes the Arbitration Lawsuit moot unless the plaintiffs pursue additional relief or declaration that the CFPB is unconstitutional.prior-year periods:  


On October 5, 2017, the CFPB released its small-dollar loan rule (the “SDL Rule”), which is scheduled to take effect in July 2019. If the SDL Rule takes effect, lenders, like the Company, will be required, among other things, to determine whether consumers have the ability to repay their loans before issuing certain short-term small dollar, payday and auto title loans. Importantly, the SDL Rule does not apply to non-recourse pawn loans. The SDL Rule applies to all storefront and online small-dollar short-term lenders regardless of state license or tribal affiliation. However, the CFPB provided for an exception for lenders offering accommodation loans that make less than 2,500 short-term loans per year and derive no more than 10 percent of their revenue from such loans. Additionally, the CFPB exempted the National Credit Union Administration’s authorized “payday alternative loans” and certain wage advance loans offered to employees by employers. The SDL Rule will likely be subject to legislative challenges, trade association litigation and potentially a new CFPB Director. If the SDL Rule does become effective, the small dollar lending industry will experience a significant regulatory change.
March 31,Favorable /
 20232022(Unfavorable)
Mexican peso / U.S. dollar exchange rate:   
End-of-period18.120.09 %
Three months ended18.720.59 %
Guatemalan quetzal / U.S. dollar exchange rate:
End-of-period7.87.7(1)%
Three months ended7.87.7(1)%
Colombian peso / U.S. dollar exchange rate:
End-of-period4,6273,748(23)%
Three months ended4,7623,914(22)%


The Company believes that the SDL Rule will not directly impact the vast majority of its pawn products, which comprise approximately 95% of its total revenues.

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 2016 annual report2022 Annual Report on Form 10-K. The impact of current-year fluctuations in gold prices and 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, 2016.2022.


Table of Contents

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 RulesRule 13a-15(e) under the Securities Exchange Act of 1934) (the “Exchange Act”) as of September 30, 2017March 31, 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 hashave been no changechanges in the Company’s internal control over financial reporting during the quarter ended September 30, 2017March 31, 2023 that hashave materially affected, or isare 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.


42

PART II. OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS


There have been no material changesSee Note 8 - Commitments and Contingencies of Notes to Consolidated Financial Statements contained in the statusPart I, Item 1 of legal proceedings previously reported in the Company’s 2016 annualthis report on Form 10-K.which is incorporated to this Part II, Item 1 by reference.


ITEM 1A. RISK FACTORS


Important risk factors that could causematerially affect the Company’s business, financial condition or results or events to differ from current expectations,of operations in future periods are described in Part I, Item 1A, “Risk Factors” of the Company’s 2016 annual report2022 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 2016 annual report2022 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
(In thousands except share and per share amounts)

In January 2015, the Company’s Board of Directors authorized a common stock repurchase program for up to 2,000,000 shares of the Company’s outstanding common stock. During the first quarter of 2017, the Company repurchased 228,000 shares of its common stock at an aggregate cost of $10,005 and an average cost per share of $43.94. In May 2017, the Company’s Board of Directors authorized a new common stock repurchase program for up to $100,000 of the Company’s outstanding common stock. The new share repurchase program replaced the Company’s prior share repurchase plan, which was terminated in May 2017. Under the May 2017 stock repurchase program, the Company has repurchased 954,000 shares of its common stock at an aggregate cost of $55,030 and an average cost per share of $57.65 and $44,970 remains available for repurchases as of September 30, 2017. The Company intends to continue repurchases under its repurchase program in 2017 through open market transactions under trading plans in accordance with Rule 10b5-1 and Rule 10b-18 under the Exchange Act of 1934, as amended, subject to a variety of factors, including, but not limited to, the level of cash balances, credit availability, debt covenant restrictions, general business conditions, regulatory requirements, the market price of the Company’s stock, dividend policy and the availability of alternative investment opportunities.

Table of Contents


The following table provides the information with respect toabout purchases made by the Company of shares of its common stock during each month the programs were in effect during the ninethree months ended September 30, 2017:March 31, 2023 (dollars in thousands, except per share amounts):


Total
Number
Of Shares
Purchased (1)
Average
Price
Paid
Per Share (1), (2)
Total Number Of
Shares Purchased
As Part Of Publicly
Announced Plans
Approximate Dollar Value Of Shares That May Yet Be Purchased Under The Plans (2)
January 1 through January 31, 202328,331 $86.91 — $114,353 
February 1 through February 28, 2023230,370 89.45 230,370 93,746 
March 1 through March 31, 2023552,028 90.75 552,028 43,648 
Total810,729 90.25 782,398 
  
Total
Number
Of Shares
Purchased
 
Average
Price
Paid
Per Share
 
Total Number Of
Shares Purchased
As Part Of Publicly
Announced Plans
 Maximum Number Of Shares That May Yet Be Purchased Under The Plans Approximate Dollar Value Of Shares That May Yet Be Purchased Under The Plans
January 1 through January 31, 2017 —
 $—
 —
 1,148,000
 
(2) 
February 1 through February 28, 2017 228,000
 43.94
 228,000
 920,000
 
(2) 
March 1 through March 31, 2017 —
 —
 —
 920,000
 
(2) 
April 1 through April 30, 2017 —
 —
 —
 920,000
 
(2) 
May 1 through May 31, 2017 —
 —
 —
 
(1) 
 $100,000
June 1 through June 30, 2017 290,000
 56.06
 290,000
 
(1) 
 83,731
July 1 through July 31, 2017 292,000
 58.21
 292,000
 
(1) 
 66,733
August 1 through August 31, 2017 269,000
 58.53
 269,000
 
(1) 
 50,989
September 1 through September 30, 2017 103,000
 58.22
 103,000
 
(1) 
 44,970
Total 1,182,000
 $55.01
 1,182,000
    


(1)
The 2,000,000 share repurchase program was terminated in May 2017.

(2)
The $100,000 repurchase program was initiated in May 2017.

(1)In October 2017, the Company’s Board of Directors authorized an additional common stock repurchase program for up to $100,000January 2023, 28,331 shares of the Company’s outstanding common stock were withheld by the Company to become effectivesatisfy tax obligations that arose upon completionvesting of certain restricted stock granted pursuant to shareholder approved plans. These shares were not acquired pursuant to a publicly announced repurchase plan.

(2)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 March 31, 2023, the Company reflected the applicable excise tax in treasury stock as part of the May 2017 program.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.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES


Not Applicable.


ITEM 4. MINE SAFETY DISCLOSURES


Not Applicable.


ITEM 5. OTHER INFORMATION


None.


43


ITEM 6. EXHIBITS

  Incorporated by Reference 
Exhibit No.Exhibit DescriptionFormFile No.ExhibitFiling DateFiled Herewith
3.1
Amended and Restated Certificate of Incorporation of FirstCash Holdings, Inc., dated December 16, 2021
8-K12B001-109603.112/16/2021
3.2
Amended and Restated Bylaws of FirstCash Holdings, Inc., dated December 16, 2021
8-K12B001-109603.212/16/2021
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
    X
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
    X
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
    X
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
    X
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL documentX
101.SCHInline XBRL Taxonomy Extension Schema DocumentX
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentX
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentX
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentX
104Cover Page Interactive Data File (embedded within the Inline XBRL document contained in Exhibit 101)X

44

    Incorporated by Reference  
Exhibit No. Exhibit Description Form File No. Exhibit Filing Date Filed Herewith
3.1 
Amended and Restated Certificate of Incorporation
 DEF 14A 0-19133 B 04/29/2004  
3.2 
Amendment to Amended and Restated Certificate of Incorporation
 8-K 001-10960 3.1 09/02/2016  
3.3 
Amended and Restated Bylaws
 8-K 001-10960 3.2 09/02/2016  
31.1 
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act provided by Rick L. Wessel, Chief Executive Officer
         X
31.2 
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act provided by R. Douglas Orr, Chief Financial Officer
         X
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
         X
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
         X
101 (1)
 The following financial information from the Company's Quarterly Report on Form 10-Q for the third quarter of fiscal 2017, filed with the SEC on November 1, 2017, is formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets at September 30, 2017, September 30, 2016 and December 31, 2016, (ii) Condensed Consolidated Statements of Income (Loss) for the three and nine months ended September 30, 2017 and September 30, 2016, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017 and September 30, 2016, (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2017 and September 30, 2016, (v) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and September 30, 2016 and (vi) Notes to Condensed Consolidated Financial Statements.         X

(1)
The XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

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: May 2, 2023FIRSTCASH HOLDINGS, INC.
Dated: November 1, 2017FIRSTCASH, INC.(Registrant)
(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)

45
48