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What changed in FirstCash Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FirstCash Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+476 added−475 removedSource: 10-K (2024-02-05) vs 10-K (2023-02-06)

Top changes in FirstCash Holdings, Inc.'s 2023 10-K

476 paragraphs added · 475 removed · 388 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

156 edited+31 added−21 removed70 unchanged
Biggest changeThe learning takes a blended approach involving formal courses, self-directed learning and on-the-job applications. • Coordinating and enrolling training at least annually to all of the Company’s management-level team members, including compliance, ethics and leadership training. • Providing team members with recurring training on critical issues such as safety and security, compliance, ethics and integrity, and information security. • Offering a tuition reimbursement program to U.S. employees that provides eligible team members up to $2,000 per year for courses related to current or future roles at the Company and also discounted tuition rates to select universities. • Offering all U.S. eligible employees health insurance benefits and a comprehensive suite of well-being offerings, including unlimited health coaching sessions, unlimited financial coaching sessions with a certified financial planner and counseling/emotional support through the Company’s Employee Assistance program. • Almost all employees in Latin American are provided statutorily required public healthcare and other statutory benefits.
Biggest changeThe learning takes a blended approach involving formal courses, self-directed learning and on-the-job applications. • Coordinating and enrolling training, at least annually, including compliance and anti-harassment training to all team members, as well as ethics and leadership training to all management-level team members. • Providing team members with recurring training on critical issues such as safety and security, lending and collection practices, ethics and integrity, information security and other compliance matters. • Offering a tuition reimbursement program to U.S. employees for courses related to current or future roles at the Company and also discounted tuition rates to select universities. • Offering all U.S. eligible employees health and life insurance benefits and a comprehensive suite of well-being offerings, including unlimited health coaching sessions, unlimited financial coaching sessions with a certified financial planner and counseling/emotional support through the Company’s Employee Assistance program. • Matching team members’ 401(k) plan contributions for all U.S. employees after one year of service. • Offering access to thousands of partner discounts for services and products through the partner portal. • Offering a “work now - paid tomorrow” program through the Earned Wage Access Program. • Providing all employees in Latin America public healthcare and other statutory benefits where required by statute.
Acquisitions Due to the fragmented nature of the pawn industry, the Company believes attractive acquisition opportunities will continue to arise in both Latin America and the U.S.
Acquisitions Due to the fragmented nature of the pawn industry, the Company believes attractive acquisition opportunities will continue to arise in both the U.S. and Latin America.
The Company is certified as an Empresa Socialmente Responsable (“ESR”), or a socially responsible company, in Mexico under the XII Latin American Meeting of Corporate Social Responsibility Framework.
The Company is certified in Mexico as an Empresa Socialmente Responsable (“ESR”), or a socially responsible company under the XII Latin American Meeting of Corporate Social Responsibility Framework.
The SCRA limits the rate of interest a covered servicemember may be charged, including certain fees, as well as the actions that can be taken while the consumer is a covered servicemember, including limitations on the ability to maintain legal action and obtain default judgments.
The SCRA limits the rate of interest, including certain fees, that a covered servicemember may be charged, as well as the actions, including limitations on the ability to maintain legal action and obtain default judgments, that can be taken while the consumer is a covered servicemember.
The Company complies with notice and opt-out requirements for prescreen solicitations and for certain information sharing under the FCRA, and conducts reasonable investigations of disputes as applicable. The Company also has implemented an identity theft prevention program to fulfill the requirements of the Red Flags Regulations and Guidelines issued under the Fair and Accurate Credit Transactions Act (the “FACTA”).
The Company complies with notice and opt-out requirements for prescreen solicitations and for certain information sharing under the FCRA and conducts reasonable investigations of disputes as applicable. The Company also has implemented an identity theft prevention program to fulfill the requirements of the Red Flags Regulations and Guidelines issued under the Fair and Accurate Credit Transactions Act (“FACTA”).
Anti-corruption - The Company is subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”) and other similar laws in other jurisdictions which generally prohibit companies and their agents or intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits.
Anti-Corruption — The Company is subject to the U.S. Foreign Corrupt Practices Act (“FCPA”) and other similar laws in other jurisdictions, which generally prohibit companies and their agents or intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits.
AFF Business - In addition to federal regulatory oversight, currently, nearly every state specifically regulates LTO transactions via state statutes and regulations. This includes states in which AFF operates through existing merchant partners. The scope of state LTO regulation, including permissible rental rates, fees and terms, varies from state to state.
AFF Business — In addition to federal regulatory oversight, nearly every state currently and specifically regulates LTO transactions via state statutes and regulations. This includes states in which AFF operates through existing merchant partners. The scope of LTO regulation, including permissible rental rates, fees and terms, varies from state to state.
Privacy Laws - Mexico’s Federal Personal Information Protection Act requires companies to protect their customers’ personal information, among other things. Mexico State and Local Regulations Certain state and local governmental entities in Mexico also regulate pawn and retail businesses through state laws and local zoning and permitting ordinances.
Privacy Laws — Mexico’s Federal Personal Information Protection Act requires companies to protect, among other things, their customers’ personal information. State and Local Regulations — Certain state and local governmental entities in Mexico also regulate pawn and retail businesses through state laws and local zoning and permitting ordinances.
After a suitable location has been identified and a lease and the appropriate licenses are obtained, a new store can typically be open for business within six and 12 weeks. The investment required to open a new location includes store operating cash, inventory, funds for pawn loans, leasehold improvements, store fixtures, security systems, computer equipment and other start-up costs.
After a suitable location has been identified and a lease and the appropriate licenses are obtained, a new store can typically open for business within six to 12 weeks. The investment required to open a new location includes store operating cash, inventory, funds for pawn loans, leasehold improvements, store fixtures, security systems, computer equipment and other start-up costs.
In general, state statutes and regulations establish licensing requirements for pawnbrokers and may regulate various aspects of pawn transactions, including the purchase and sale of merchandise, service charges, interest rates, the content and form of the pawn transaction agreement and the length of time a pawnbroker must hold a purchased item or forfeited pawn before it is made available for sale.
In general, state statutes and regulations establish licensing requirements for pawnbrokers and may regulate various aspects of pawn transactions, including the purchase and sale of merchandise, service charges, fees and interest rates, the content and form of the pawn transaction agreement and the length of time a pawnbroker must hold a purchased item or forfeited pawn before it is made available for sale.
Products Offered by AFF AFF’s merchant partners may provide consumer goods and services to their customers using one of AFF’s retail POS payment options, including an LTO product, a merchant-based retail installment sales agreement (“RISA”) or a bank-originated installment loan, to facilitate payments on such transactions.
Products Offered by AFF AFF’s merchant partners may provide consumer goods and services to their customers using one of AFF’s retail POS payment options, including a LTO product, a merchant-based retail installment sales agreement (“RISA”) or a bank-originated installment loan, to facilitate payments on such transactions.
Governance The Board and the Nominating and Corporate Governance Committee of the Board routinely assess the composition and size of the Board and aim to strike a balance between the knowledge and understanding of the business that comes from longer-term service on the Board and the fresh ideas and perspective that can come from adding new members.
Governance The Board and the Nominating and Corporate Governance Committee of the Board routinely assess the composition and size of the Board and aim to strike a balance between the knowledge and understanding of the business that comes from longer-term service on the Board and the fresh ideas and perspective that come from adding new members.
To encourage customer traffic and repeat business, which management believes is a key determinant of a store’s success, the Company has taken several steps to distinguish its stores and to make customers feel more comfortable and secure.
To increase customer traffic and encourage repeat business, which management believes is a key determinant of a store’s success, the Company has taken several steps to distinguish its stores and to make customers feel more comfortable and secure.
The customer can still utilize a purchase option after the early buyout period ends and obtain ownership before the end of the lease by paying a certain percentage of the remaining lease renewal payments (usually established by applicable state law).
The customer can still utilize an early purchase option after the early buyout period ends and obtain ownership before the end of the lease by paying a certain percentage of the remaining lease renewal payments (usually established by applicable state law).
With respect to AFF’s servicing of the Bank’s loans in which AFF holds an interest in the receivables, certain state statutes and regulations require that AFF maintain certain licenses and provide periodic reporting of activities related to that servicing activity.
With respect to AFF’s sub-servicing of the Bank’s loans in which AFF holds an interest in the receivables, certain state statutes and regulations require that AFF maintain certain licenses and provide periodic reporting of activities related to that servicing activity.
As a result of such licensure, AFF may also be subject to periodic supervisory examination by the applicable state regulator to review AFF’s business activities during the servicing process for compliance with applicable state laws.
As a result of such licensure, AFF may also be subject to periodic supervisory examination by the applicable state regulator to review AFF’s business activities during the sub-servicing process for compliance with applicable state laws.
The CFPB also has the authority to issue civil investigative demands and pursue administrative proceedings or litigation for actual or perceived violations of federal consumer laws (including the CFPB’s own rules).
The CFPB also has the authority to issue civil investigative demands and pursue administrative proceedings or litigation for actual or perceived violations of federal consumer financial laws (including the CFPB’s own rules).
At the time a pawn loan transaction is entered into, an agreement or pawn contract, commonly referred to as a “pawn ticket,” is presented to the borrower for signature that includes, among other items, the borrower’s name and identification information, a description of the pledged goods, amount financed, pawn service fee, maturity date, total amount that must be paid to redeem the pledged goods on the maturity date and the annual percentage rate.
At the time a pawn loan transaction is entered into, an agreement or pawn contract, commonly referred to as a “pawn ticket,” is presented to the borrower for signature that includes, among other items, the borrower’s name and identification information, a description of the pledged goods, amount financed, pawn service fee, maturity date, total amount that must be paid to redeem the pledged goods on the maturity date and the fee charged expressed as an annual percentage rate.
RISA finance receivables typically have a term ranging from six and 24 months, and when utilized for the purchase of tangible personal property, are generally secured by such tangible personal property.
RISA finance receivables typically have a term ranging from six to 24 months, and when utilized for the purchase of tangible personal property, are generally secured by such tangible personal property.
The customer can take advantage of an early payoff discount, whereby the customer generally has between 90 and 105 days to pay the original principal amount (including any origination fee) without paying any interest charges. Bank-originated loans typically have a term ranging from six and 24 months and can be either secured by tangible personal property or unsecured.
The customer can take advantage of an early payoff discount, whereby the customer generally has between 90 and 101 days to pay the original principal amount (including any origination fee) without paying any interest charges. Bank-originated loans typically have a term ranging from six to 24 months and can be either secured by tangible personal property or unsecured.
The Company does not own, lease or operate any long-haul trucks to support its 2,872 pawn locations and, other than operating small storefront locations which are typically 5,000 square feet or less, the Company’s operations leave a limited carbon footprint compared to manufacturers and retailers selling new merchandise with extensive supply chain and distribution channels.
The Company does not own, lease or operate any long-haul trucks to support its 2,997 pawn locations and, other than operating small storefront locations which are typically 5,000 square feet or less, the Company’s operations leave a limited carbon footprint compared to manufacturers and retailers selling new merchandise with extensive supply chain and distribution channels.
Generally, these states are located in the Southeast, Midwest and Southwest regions of the country, which is where the majority of the Company’s U.S. stores are located. 1 Table of Contents Historically, competitor pawn stores in Latin America have limited square footage and focus on providing loans collateralized by gold jewelry or small electronics.
Generally, these states are located in the Southeast, Midwest, Southwest and Mountain West regions of the country, which is where the majority of the Company’s U.S. stores are located. 1 Table of Contents Historically, competitor pawn stores in Latin America have limited square footage and focus on providing loans collateralized by gold jewelry or small electronics.
The Company provides its employees and their families with access to a variety of flexible and convenient health and wellness programs, including benefits that provide protection and security so they can have peace of mind concerning events that may require time away from work or that impact their financial well-being, that support their physical and mental health by providing tools and resources to help them improve or maintain their health status and encourage engagement in healthy behaviors, and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families.
The Company provides its employees and their families with access to a variety of flexible and convenient health and wellness programs, including benefits that provide protection and security so they can have peace of mind when navigating events that may require time away from work or that impact their financial well-being, that support their physical and mental health by providing tools and resources to help them improve or maintain their health status and encourage engagement in healthy behaviors, and that offer choice, where possible, so they can customize their benefits to meet their needs and the needs of their families.
Many of the Company’s acquired stores in Latin America tend to be smaller than its U.S. stores, especially those located in dense urban markets, which may not have dedicated parking. Management has established a standard store design intended to facilitate operations and provide a positive customer experience.
Many of the Company’s acquired stores in Latin America tend to be smaller than its U.S. stores, especially those located in dense urban markets that may not have dedicated parking. Management has established a standard store design intended to facilitate operations and provide a positive customer experience.
This ESR certification is granted to companies that meet a series of criteria that generally cover the economic, social and environmental sustainability of its operations, which include corporate ethics, good governance, the quality of life of the Company’s employees and a proven commitment to the betterment of the community where it operates, including the care and preservation of the environment.
This ESR certification is granted to companies that meet a series of criteria that generally cover the economic, social and environmental sustainability of its operations, including corporate ethics, good governance, the quality of life of the Company’s employees and a proven commitment to the betterment of the community where it operates, including the care and preservation of the environment.
Other lenders may, and do, lend money on financial terms more favorable than those offered by the Company. Management believes the pawn industry remains highly fragmented with an estimated 12,000 to 14,000 total pawnshops in the U.S. and 7,000 to 8,000 pawnshops in Mexico.
Other non-specialty lenders may, and do, lend money on financial terms more favorable than those offered by the Company. Management believes the pawn industry remains highly fragmented with an estimated 12,000 to 14,000 total pawnshops in the U.S. and 7,000 to 8,000 total pawnshops in Mexico.
The Company typically experiences seasonal growth in its pawn loan balances in the third and fourth quarters following lower balances in the first two quarters due to the typical repayment of pawn loans associated with statutory bonuses received by customers in the fourth quarter in Mexico and with tax refund proceeds typically received by customers in the first quarter in the U.S.
The Company typically experiences seasonal growth in its pawn loan balances in the third and fourth quarters preceded by lower balances in the first two quarters due to the typical repayment of pawn loans associated with statutory bonuses received by customers in the fourth quarter in Mexico and with tax refund proceeds typically received by customers in the first quarter in the U.S.
Truth in Lending Act (“TILA”) - TILA and its implementing regulations known as Regulation Z require creditors to deliver disclosures to borrowers during the life cycle of a loan or RISA, including when publishing certain advertisements, at application, at account opening and at consummation.
Truth in Lending Act (“TILA”) — TILA and its implementing regulation known as Regulation Z, require creditors to deliver disclosures to borrowers at certain points during the life cycle of a loan or RISA, including when publishing certain advertisements, at application, at account opening and at consummation.
Many of the Company’s pawn locations are also subject to local ordinances that require, among other things, local permits, licenses, record keeping requirements and procedures, reporting of daily transactions, and adherence to local law enforcement “do-not-buy-lists” by checking databases created and maintained by law enforcement.
Many of the Company’s pawn locations are also subject to local ordinances that require, among other things, local permits, licenses, record keeping requirements and procedures, daily transactions reports, and adherence to local law enforcement “do-not-buy-lists” by checking databases created and maintained by law enforcement.
The customer can take advantage of an early payoff discount, whereby the customer generally has between 90 and 105 days to pay the original principal amount, plus a nominal early payoff discount fee (equal to or less than the accrued interest charges), without incurring any additional interest charges.
The customer can take advantage of an early payoff discount, whereby the customer generally has between 90 and 101 days to pay the original principal amount, plus a nominal early payoff discount fee (equal to or less than the accrued interest charges), without incurring any additional interest charges.
Decisioning Process AFF has made substantial investments in the development of its unique and proprietary decisioning platform that is customizable to individual merchants and/or merchandise categories. The platform is supported by an experienced and robust data science team that use data analytics to continually improve the performance of the decisioning platform.
Decisioning Process AFF has made substantial investments in the development of its unique and proprietary decisioning platform that is customizable to individual merchants and/or merchandise categories. The platform is supported by an experienced and robust data science team that uses data analytics to continually improve the performance of the decisioning platform.
Merchant partners are subject to suspension and/or termination if, based upon the results of AFF’s monitoring, they are found to be out of compliance with the merchant agreement, have low lease or loan quality performance, have elevated customer complaint volume or fail to comply with applicable law.
Merchant partners are subject to suspension and/or termination if, based upon the results of AFF’s monitoring, they are found to be out of compliance with the merchant agreement, have low lease or loan quality performance, have elevated customer complaint volume or fail to comply with applicable laws.
Procuraduria Federal del Consumidor (“PROFECO”) - The Company’s pawn business in Mexico is regulated by PROFECO, Mexico’s primary federal consumer protection agency, which requires the Company to annually register its pawn stores, approve pawn contracts and disclose the interest rate and fees charged on pawn transactions.
Procuraduria Federal del Consumidor (“PROFECO”) — The Company’s pawn business in Mexico is regulated by PROFECO, Mexico’s primary federal consumer protection agency, which requires the Company to annually register its pawn stores, approve pawn contracts and disclose the interest rates and fees charged on pawn transactions.
These efforts include: • Providing all store support team members and all management across the Company access to a library of third-party courses enabling the development of new skills that contribute to career growth and development. • Delivering an in-house designed continuous learning program to avail store team members a career path with the destination of their choosing while using custom learning solutions designed to add and confirm both competencies and proficiencies throughout all levels of their career.
These efforts include the following: • Providing all store support team members and all management across the Company access to a library of third-party courses enabling the development of new employment-related skills that contribute to career growth and development. • Delivering an in-house designed continuous learning program to avail store team members a career path with the destination of their choosing while using custom learning solutions designed to add and confirm both competencies and proficiencies throughout all levels of their career.
Specifically, the FCRA establishes requirements that apply to the use of “consumer reports” and similar data, including certain notifications to consumers, including when an adverse action, such as a loan declination, is based on information contained in a consumer report.
Specifically, the FCRA establishes requirements that apply to the use of “consumer reports” and similar data, including certain notifications to consumers, such as when an adverse action (e.g. loan declination), is based on information contained in a consumer report.
Federal Regulations The U.S. government and its agencies have significant regulatory authority over the Company’s activities and its business is subject to a variety of federal laws, including but not limited to the following: Federal Trade Commission (“FTC”) Act and Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) - The FTC and the CFPB regulate advertising, marketing of and practices related to financial products and services.
Federal Regulations The U.S. government and its agencies have significant regulatory authority over the Company’s activities, and its business is subject to a variety of federal laws, including but not limited to the following: Federal Trade Commission (“FTC”) Act and Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) — The FTC and the CFPB regulate advertising for, the marketing of, and practices related to the origination and servicing of financial products and services.
This proprietary decisioning platform is used to determine whether a particular applicant meets AFF’s (or the Bank’s as applicable) LTO, RISA or loan qualifications for a particular amount. The sophisticated algorithms consider external and internal data points beyond traditional credit scores, allowing AFF or the Bank to approve customers that do not have a credit score.
This proprietary decisioning platform is used to determine whether a particular applicant meets AFF’s LTO or RISA decisioning criteria or the Bank’s loan qualifications for a particular amount. The sophisticated algorithms consider external and internal data points beyond traditional credit scores, allowing AFF or the Bank to approve customers that do not have a credit score.
In these proceedings, the CFPB can seek consent orders, confidential memorandums of understandings, cease and desist orders (which can include orders for redisclosure, restitution or rescission of contracts, as well as affirmative or injunctive relief) and monetary penalties.
In these proceedings, the CFPB can seek consent orders, confidential memorandums of understanding, cease and desist orders (which can include orders for redisclosure, restitution or rescission of contracts, as well as affirmative or injunctive relief) and monetary penalties.
Most state LTO laws require LTO companies to disclose to their customers the total number of payments, total amount and timing of all payments to acquire ownership of an item, any other charges that may be imposed and miscellaneous other items.
Most state LTO laws require LTO companies to disclose to their customers the total number of payments, total amount and timing of all payments to acquire ownership of an item, and any other charges that may be imposed.
For example, in certain states where the Company has significant or concentrated operations, states have enacted legislation or implemented regulations which require items such as special state operating permits for pawn stores, certification of pawn employees trained in valuation of merchandise, strict customer identification controls, collateral ownership certifications and/or detailed and specified transactional reporting of customers and operations.
For example, in certain states where the Company has significant or concentrated operations, states have enacted legislation or implemented regulations which require special state operating permits for pawn stores, certification of pawn employees trained in valuation of merchandise, strict customer identification controls, collateral ownership certifications and/or detailed and specified transactional reporting of customers and operations.
In addition, the Company must also comply with various state law provisions and the regulations of the U.S. Department of Justice-Bureau of Alcohol, Tobacco and 17 Table of Contents Firearms that require each pawn lending location dealing in guns to obtain a Federal Firearm License (“FFL”) and maintain a permanent record of all receipts and dispositions of firearms.
In addition, the Company must also comply with various state law provisions and the regulations of the U.S. Department of Justice-Bureau of Alcohol, Tobacco and Firearms that require each pawn lending location dealing in guns to obtain a Federal Firearm License (“FFL”) and maintain a permanent record of all receipts and dispositions of firearms.
The Company’s proprietary point-of-sale and loan management system tracks certain key transactional performance measures, including pawn loan yields and merchandise sales margins, and permits a store manager or clerk to instantly recall the cost of an item in inventory and the date it was purchased, including the prior transaction history of a particular customer.
The Company’s proprietary POS and loan management system tracks certain key transactional performance measures, including pawn loan yields and merchandise sales margins, and permits a store manager or clerk to instantly recall the cost of an item in inventory and the date it was purchased, including the prior transaction history of a particular customer.
Each of these retail POS payment options is subject to AFF’s (or AFF’s partner bank’s) proprietary technology-driven decisioning process as further described below. AFF’s ability to customize the technology and offer a choice between retail POS payment options provides its merchant partners the ability to pick and choose the most effective solution for its business and customers.
Each of these retail POS payment options is subject to AFF’s (or AFF’s partner bank’s) proprietary technology-driven decisioning process as further described below. AFF’s ability to customize the technology and offer a choice between retail POS payment options provides its merchant partners the ability to identify the most effective solution for its business and customers.
With an ongoing focus toward improving application conversion rates combined with an enhanced risk segmentation of its applications, AFF believes that it has numerous opportunities to gain additional market share and expand its large and fast-growing merchant and customer base to achieve greater levels of revenue and profitability.
With an ongoing focus toward improving application conversion rates for qualified applicants combined with an enhanced risk segmentation of its applications, AFF believes that it has numerous opportunities to gain additional market share and expand its large and fast-growing merchant and customer base to achieve greater levels of revenue and profitability.
There are no minimum or maximum pawn loan to fair market value restrictions in connection with the Company’s lending activities. In order to estimate the value of the collateral, the Company utilizes its proprietary point-of-sale and loan management system to recall recent selling prices of similar merchandise in its own stores.
There are no minimum or maximum pawn loan to fair market value restrictions in connection with the Company’s lending activities. In order to estimate the value of the collateral, the Company utilizes its proprietary POS and loan management system to recall recent selling prices of similar merchandise in its own stores.
PROFECO regulates the form and non-financial terms of pawn contracts and defines certain operating standards and procedures for pawnshops, including retail operations, consumer disclosures and establishes reporting requirements and requires all pawn businesses and their owners to register annually with and be approved by PROFECO in order to legally operate.
PROFECO regulates the form and non-financial terms of pawn contracts and defines certain operating standards and procedures for pawnshops and consumer disclosures, establishes reporting requirements and requires all pawn businesses and their owners to register annually with and be approved by PROFECO in order to legally operate.
As required by applicable law, the amounts of these charges are disclosed to the customer on the pawn ticket. Pawn loan fees accounted for 21% of the Company’s revenue during 2022. The amount the Company is willing to finance for a pawn loan is primarily based on a percentage of the estimated retail value of the collateral.
As required by applicable law, the amounts of these charges are disclosed to the customer on the pawn ticket. Pawn loan fees accounted for 21% of the Company’s consolidated revenue during 2023. The amount the Company is willing to finance for a pawn loan is primarily based on a percentage of the estimated retail value of the collateral.
The Company makes available, free of charge, at its corporate website, its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after they are electronically filed with the Securities and Exchange Commission (“SEC”).
The Company makes available, free of charge, on its corporate website, its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after they are electronically filed with the SEC.
The Company operates two business lines, pawn operations and retail POS payment solutions, which are organized into three reportable segments. The U.S. pawn segment consists of all pawn operations in 25 U.S. states and the District of Columbia, while the Latin America pawn segment consists of all pawn operations in Mexico, Guatemala, Colombia and El Salvador.
The Company operates two business lines, pawn operations and retail POS payment solutions, which are organized into three reportable segments. The U.S. pawn segment consists of pawn operations in 29 U.S. states and the District of Columbia, while the Latin America pawn segment consists of pawn operations in Mexico, Guatemala, Colombia and El Salvador.
The merchant’s selection of the appropriate retail POS payment option depends upon which payment options are allowable under applicable state law, whether AFF’s bank partner makes loans in the state where the merchant is located and the type of products or services offered by the merchant.
The merchant’s selection of the appropriate retail POS payment option depends upon applicable regulations in the state in which the merchant operates, including which payment options are allowable under applicable state law, whether AFF’s bank partner makes loans in the state where the merchant is located and which type of products or services are offered by the merchant.
(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. 5 Table of Contents As of December 31, 2022, the Company’s pawn stores were located in the following countries and states: Number of Locations U.S.
(2) Store consolidations were primarily acquired locations over the past seven 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. 5 Table of Contents As of December 31, 2023, the Company’s pawn stores were located in the following countries and states: Number of Locations U.S.
To take advantage of the early buyout option, the customer generally has between 90 and 105 days to pay the cash price of the leased merchandise, plus a nominal early buyout fee.
To take advantage of the early buyout option, the customer generally has between 90 and 101 days to pay the cash price of the leased merchandise, plus a nominal early buyout fee.
The pawnshop and other specialty consumer finance industries are characterized by a large number of independent owner-operators, some of whom own and operate multiple locations. In addition, the Company competes with other non-pawn lenders, such as banks and consumer finance companies, which generally lend on an unsecured as well as a secured basis.
The pawnshop and other specialty consumer finance industries are characterized by a large number of independent owner-operators, some of whom own and operate multiple locations. In addition, the Company competes with other non-specialty consumer finance lenders, such as banks, credit card providers and other consumer finance companies, which generally lend on an unsecured as well as a secured basis.
The Company has also established relationships and supports certain foundations and social programs in Mexico, which provide internships, reading initiatives and recycling programs for disadvantaged citizens.
The Company has also established relationships and supports certain foundations and social programs in Mexico that provide internships, reading initiatives and recycling programs for disadvantaged citizens.
Certain other states have proposed similar legislation but have not yet enacted such legislation.
Certain other states have proposed, but have not yet enacted, similar legislation.
Environmental Sustainability The Company’s pawn business extends the lifecycle and utilization of popular consumer products. Most of the Company’s merchandise inventories are pre-owned items sourced directly from local customers in each store’s immediate geographic neighborhood.
Environmental Sustainability The Company’s pawn business extends the life cycle and utilization of popular consumer products. Most of the Company’s merchandise inventories are pre-owned items sourced directly from local customers in each store’s immediate geographic neighborhood.
In Latin America, the number of unbanked or under-banked consumers can be as much as 75% of the population in countries such as Mexico. As a result, the majority of the Company’s customers have limited access to traditional forms of credit or capital.
In Latin America, the number of unbanked or under-banked consumers can be as much as 75% of the population. As a result, the majority of the Company’s customers have limited access to traditional forms of credit or capital.
For example, the majority of the Company’s front-line, store-based employees participate in a non-qualified profit sharing program which pays up to 8% of the gross profit an employee personally produced through assigned customer service activities. Health and Safety The Company is committed to the health, safety and wellness of its employees.
For example, the majority of the Company’s front-line, store-based employees participate in a non-qualified profit sharing program that pays up to 8% of the gross profit an employee personally produces through assigned customer service activities. Health and Safety The Company is committed to the health, safety and wellness of its employees.
The pawn industry in the U.S. is well established, with the highest concentration of pawn stores located in states that have favorable customer demographics and maintain regulations most conducive to profitable pawn operations.
The pawn industry in the U.S. is well established, with the highest concentration of pawn stores located in states that have favorable customer demographics, high population growth and maintain regulations most conducive to profitable pawn operations.
The Company’s retail business competitors include numerous retail and wholesale merchants, including jewelry stores, rent-to-own operators, discount retail stores, “second-hand” stores, consumer electronics stores, other specialty retailers, online retailers, online auction sites, online classified advertising sites and other pawnshops.
The Company’s retail business competitors include numerous retail and wholesale merchants, including jewelry stores, rent-to-own operators, discount retail stores, “second-hand” stores, consumer electronics stores, other specialty retailers, online retailers, online auction sites, online marketplace sites and other pawnshops.
Like Mexico, department agencies, including local and state police officials, have unlimited and discretionary authority in their application of their rules and requirements. 19 Table of Contents FirstCash Website The Company’s primary corporate website is www.firstcash.com .
Like Mexico, department agencies, including local and state police officials, have unlimited and discretionary authority in their application of their rules and requirements. FirstCash Website The Company’s primary corporate website is www.firstcash.com .
While this concentration has provided AFF with opportunities for growth, the increasing size and importance of individual merchant partners creates a certain degree of exposure to potential transaction volume loss. AFF’s top five merchant partners accounted for an aggregate of 5% of consolidated 2022 revenues.
While this concentration has provided AFF with opportunities for growth, the increasing size and importance of individual merchant partners creates a certain degree of exposure to potential transaction volume loss. AFF’s top five merchant partners accounted for an aggregate of 15% of consolidated 2023 revenues.
Over the last five years, 1,044 pawn stores have been opened or acquired with the net store count growing at a compound annual store growth rate of 6% over this period. The Company intends to open or acquire additional stores in locations where management believes appropriate consumer demand and other favorable conditions exist.
Over the last five years, 756 pawn stores have been opened or acquired, with the net store count growing at a compound annual store growth rate of 4% over this period. The Company intends to open or acquire additional stores in locations where management believes appropriate consumer demand and other favorable conditions exist.
The customer has the right to acquire ownership of the leased merchandise either through an early buyout option, another early purchase 7 Table of Contents option after the early buyout option expires, or through payment of all required lease renewal payments.
The customer has the right to acquire ownership of the leased merchandise either through an early buyout option, through another early purchase option after the early buyout option expires, or through payment of all required lease renewal payments.
Retail POS Payment Solutions Competitive Environment AFF’s retail POS payment solutions business competes with national, regional and local LTO stores, virtual LTO companies, rental stores that do not offer their customers a purchase option and various other types of consumer finance companies that may enable customers to shop at traditional or online retailers on credit.
Retail POS Payment Solutions Competitive Environment AFF’s retail POS payment solutions business competes with national, regional and local LTO stores, virtual LTO companies, rental stores that do not offer their customers a purchase option, buy now / pay later providers, and various other types of consumer finance companies that may enable customers to shop at traditional or online retailers on credit.
None of the Company’s other Latin American employees are covered by collective bargaining agreements. 13 Table of Contents Global Gender Demographics Among the Company’s global workforce as of December 31, 2022, 56% identify as women and 44% as men. In management positions for the Company’s global operations, 54% identify as women and 46% as men as of December 31, 2022.
None of the Company’s other Latin American employees are covered by collective bargaining agreements. 13 Table of Contents Global Gender Demographics Among the Company’s global workforce as of December 31, 2023, 56% identify as women and 44% as men. In management positions for the Company’s global operations, 56% identify as women and 44% as men as of December 31, 2023.
The Company also melts certain quantities of scrap jewelry and sells the gold, silver and diamonds in the commodity markets. Merchandise sales accounted for 50% of the Company’s revenue during 2022. Merchandise inventory is acquired primarily through forfeited pawn loan collateral and, to a lesser extent, through purchases of used goods directly from the general public.
The Company also melts certain quantities of scrap jewelry and sells the gold, silver and diamonds in the commodity markets. Merchandise sales accounted for 48% of the Company’s consolidated revenue during 2023. Merchandise inventory is acquired primarily through forfeited pawn loan collateral and, to a lesser extent, through purchases of used goods directly from the general public.
The Company has employee-training programs that promote customer service, productivity, professionalism, regulatory compliance and cyber and information security.
The Company has employee training programs that promote customer service, productivity, professionalism, regulatory compliance and information privacy and security.
Failure to comply with these requirements may result in, among other things, refunds of excess charges, monetary penalties, revocation of required licenses, voiding of RISA transactions and other administrative enforcement actions.
Failure to comply with these requirements may result in, among other things, refunds of excess charges, monetary penalties, revocation of required licenses, and voiding of RISA transactions.
Existing merchant partners are subject to regular monitoring. AFF’s monitoring procedures are designed to identify merchant partners that do not meet AFF’s merchant standards.
Approved merchant partners are subject to regular monitoring. AFF’s monitoring procedures are designed to identify merchant partners that do not meet AFF’s merchant standards.
The Company is working to further reduce energy consumption by retrofitting buildings with LED lighting and reducing corporate travel by utilizing remote work and meeting technologies. Pawn Stores Offer Safe Lending Solutions in Underserved Communities It is estimated by multiple studies and surveys that approximately 25% of U.S. households remain unbanked or under-banked.
The Company is working to further reduce energy consumption by retrofitting buildings with LED lighting and reducing corporate travel by utilizing remote work and meeting technologies. Safe Capital Access Solutions in Underserved Communities It is estimated by multiple studies and surveys that approximately 25% of U.S. households remain unbanked or under-banked.
Among managers in the Company’s U.S. operations, 45% identify as Hispanic, 15% as Black, 1% as Asian, 4% as two or more races or Other and 35% as White as of December 31, 2022. 14 Table of Contents Employee Empowerment The Company is committed to creating a safe, trusted and diverse environment in which its employees can thrive.
Among managers in the Company’s U.S. operations as of December 31, 2023, 46% identify as Hispanic, 15% as Black, 1% as Asian, 3% as two or more races or Other and 35% as White. 14 Table of Contents Employee Empowerment The Company is committed to creating a safe, trusted and diverse environment in which its employees can thrive.
AFF employs an automated application decisioning process, creating a highly efficient, scalable model. While the Bank partner utilizes AFF’s technology platform to process and evaluate consumer applications originated by the Bank, all credit underwriting and approval criteria used by the Bank to underwrite the loans are provided and approved by the Bank.
AFF employs an automated application decisioning process, creating a highly efficient, scalable model. While the Bank utilizes AFF’s technology platform to process and evaluate consumer applications originated by the Bank, all credit underwriting and approval criteria used by the Bank to underwrite the loans are provided and approved under the Bank’s exclusive authority.
Competitive factors in the Company’s retail operations include the ability to provide the customer with a variety of merchandise items at attractive prices. The Company’s pawn lending business competes primarily with other pawn store operators and other specialty consumer finance operators, including online lenders.
Competitive factors in the Company’s retail operations include the ability to provide the customer with a variety of merchandise items at attractive prices. The Company’s pawn lending business competes primarily with other specialty consumer finance lenders, including pawn store operators, payday loan stores, branch-based lenders and other specialty consumer finance operators, including online lenders.
State and Local Regulations Pawn Business - The Company operates pawn stores in 25 U.S. states and the District of Columbia, all of which have licensing and/or fee regulations on pawnshop operations and employees, and are subject to regular state level regulatory audits.
State and Local Regulations Pawn Business — The Company operates pawn stores in 29 U.S. states and the District of Columbia, all of which jurisdictions have licensing and/or fee regulations on pawnshop operations and employees, and are subject to regular regulatory audits in many states.
Through AFF, the Company provides point-of-sale payment solutions through technology-enabled virtual LTO and consumer finance platforms with minimal environmental impact. The Company provides its customers with rapid access to capital while operating its business in a manner that results in a positive impact on its employees, communities and the environment.
In addition, through AFF, the Company provides POS payment solutions through technology-enabled virtual LTO and consumer finance platforms with minimal environmental impact. In summary, the Company provides millions of customers with rapid access to capital while operating its business in a manner that results in a positive impact on its employees, communities and the environment.
While the Company believes such actions have been without merit, there is no guarantee that an adverse outcome in such matters would not have an adverse impact on the Company. U.S.
While the Company believes such actions have been without merit, there is no guarantee that an adverse outcome in such matters would not have an adverse impact on the Company. 17 Table of Contents U.S.
In addition, all operators must comply with additional customer notice and disclosure provisions, bonding and insurance requirements to insure against loss or insolvency, reporting of certain types of suspicious transactions, and reporting to state law enforcement officials of certain transactions (or series of transactions) or suspicious transactions on a monthly basis to states’ attorneys general offices.
All operators must also comply with additional customer notice and disclosure provisions, bonding and insurance requirements to insure against loss or insolvency, reporting of certain types of suspicious transactions, and reporting to state law enforcement officials of certain transactions (or 18 Table of Contents series of transactions) on a monthly basis to states’ attorneys general offices.
Some state RISA laws require AFF, as a purchaser of RISA transactions, to obtain a license or file a registration or notification with the applicable state regulator. Where licensing or registration is required, AFF is subject to extensive state rules, licensing and examination.
Most state RISA laws require certain consumer-facing disclosures, and some state RISA laws require AFF, as a purchaser of RISA transactions, to obtain a license or file a registration or notification with the applicable state regulator. Where licensing or registration is required, AFF is subject to extensive state rules, licensing and examination.
In addition, the current presidential administration in the U.S. has taken a more aggressive enforcement stance against consumer finance companies serving credit-constrained customers like the Company. For a discussion of the risks related to the Company’s regulatory environment, see “Item 1A. Risk Factors—Regulatory, Legislative and Legal Risks.” U.S.
In addition, the current presidential administration in the U.S. has taken a more aggressive enforcement stance against all consumer finance companies that, like the Company, serve credit-constrained customers. For a discussion of the risks related to the Company’s regulatory environment, see “Item 1A. Risk Factors—Regulatory, Legislative and Legal Risks.” 15 Table of Contents U.S.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf enacted, new laws and regulations could limit the types of licenses, firearms, ammunition and certain related accessories that the Company is permitted to purchase and sell and could impose new restrictions and requirements on the manner in which the Company pawns, offers, purchases and sells these products, which could have a material adverse effect on the Company’s business, prospects, results of operations and financial condition. 31 Table of Contents Furthermore, the Company may incur losses and reputational damage due to lawsuits relating to its performance of background checks on firearms purchases as mandated by state and federal law, the selling of firearms or the improper use of firearms sold by the Company, including lawsuits by individuals, municipalities, state or federal agencies or other organizations attempting to recover damages or costs from firearms retailers relating to the sale or misuse of firearms.
Biggest changeIf enacted, new laws and regulations could limit the types of licenses, firearms, ammunition and certain related accessories that the Company is permitted to purchase and sell and could impose new restrictions and requirements on the manner in which the Company pawns, offers, purchases and sells these products, which could have a material adverse effect on the Company’s business, prospects, results of operations and financial condition.
Risks Related to Tax and Financial Matters • The Company’s existing and future levels of indebtedness could adversely affect its financial health, its ability to obtain financing in the future, its ability to react to changes in its business and its ability to fulfill its obligations under such indebtedness. • Adverse changes in interest rates could negatively impact the Company’s operating results. • Declines in commodity market prices of gold, other precious metals and diamonds could negatively affect the Company’s profits. • The Company’s financial position and results of operations may change significantly due to fluctuations in currency exchange rates in Latin American markets. • Unexpected changes in both domestic and foreign tax laws and policies could negatively impact the Company’s operating results.
Risks Related to Financial and Tax Matters • The Company’s existing and future levels of indebtedness could adversely affect its financial health, its ability to obtain financing in the future, its ability to react to changes in its business and its ability to fulfill its obligations under such indebtedness. • Adverse changes in interest rates could negatively impact the Company’s operating results. • Declines in commodity market prices of gold, other precious metals and diamonds could negatively affect the Company’s profits. • The Company’s financial position and results of operations may change significantly due to fluctuations in currency exchange rates in Latin American markets. • Unexpected changes in both domestic and foreign tax laws and policies could negatively impact the Company’s operating results.
Because the Company maintains a significant supply of cash, loan collateral and inventories in its pawn stores and certain processing centers, the Company may be subject to employee and third-party robberies, riots, looting, burglaries and thefts. The Company also may be subject to liability as a result of crimes at its pawn stores.
Because the Company maintains a significant supply of cash, loan collateral and inventories in its pawn stores and certain processing centers, the Company may be subject to employee and third-party robberies, riots, looting, burglaries and thefts. The Company may also be subject to liability as a result of crimes at its pawn stores.
The AFF business experiences significantly higher originations in the fourth quarter associated with holiday shopping, which also generally positively impacts retail sales in the Company’s pawn stores in the fourth quarter, and reduced demand in the first and second quarters as retail expenditures are generally lower in these quarters.
The AFF business experiences significantly higher originations in the fourth quarter associated with holiday shopping, which shopping also generally positively impacts retail sales in the Company’s pawn stores in the fourth quarter, and reduced demand in the first and second quarters as retail expenditures are generally lower in these quarters.
The Company’s products and services are subject to extensive regulation and supervision under various federal, state and local laws, ordinances and regulations in both the U.S. and Latin America. Federal and state regulatory authorities are increasingly focused on consumer finance and retail POS payment products for credit-constrained consumers such as those offered by the Company.
The Company’s products and services are subject to extensive regulation and supervision under various federal, state and local laws, ordinances and regulations in both the U.S. and Latin America. Federal and state regulatory authorities are increasingly focused on consumer finance and retail POS payment products, such as those offered by the Company, for credit-constrained consumers.
The Company may also be required to modify its business practices in the event of an unfavorable determination in the lawsuit, which could result in increased operational costs and negatively impact demand for its products and customer satisfaction.
The Company may also be required to modify its business practices in the event of an unfavorable determination in the lawsuit, which could result in increased operational costs and could negatively impact demand for its products and customer satisfaction.
The CFPB’s examination authority permits its examiners to inspect the books and records of providers of short-term, small dollar loans and ask questions about their business practices. As a result of these examinations of non-bank providers of consumer credit, the Company could be subject to specific enforcement action, including monetary penalties, which could adversely affect the Company.
The CFPB’s examination authority permits its examiners to inspect the books and records of providers of short-term, small dollar loans and to ask questions about their business practices. As a result of these examinations of non-bank providers of consumer credit, the Company could be subject to specific enforcement action, including monetary penalties, which could adversely affect the Company.
They may also interpret or enforce existing requirements in new ways that could restrict the Company’s ability to continue its current methods of operation or to expand operations, impose significant additional compliance costs, and could have a material adverse effect on the Company’s financial condition and results of operations.
They may also interpret or enforce existing requirements in new ways that could restrict the Company’s ability to continue its current methods of operation or to expand operations, could impose significant additional compliance costs, and could have a material adverse effect on the Company’s financial condition and results of operations.
The occurrence of weather events and natural disasters such as rain, cold weather, snow, wind, storms, hurricanes, earthquakes, volcanic eruptions, or health epidemics in the Company’s markets could adversely affect consumer traffic, retail sales, pawn loan and pawn redemption activities and LTO, RISA and installment loan originations and have a material adverse effect on the Company’s results of operations.
The occurrence of weather events and natural disasters such as rain, cold weather, snow, wind, storms, hurricanes, earthquakes, volcanic eruptions, or health epidemics in the Company’s markets could adversely affect consumer traffic, retail sales, pawn loan and pawn redemption activities and LTO, RISA and installment loan originations and could have a material adverse effect on the Company’s results of operations.
The potential errors or inaccuracies in AFF’s decisioning platform and models may be material and effect a significant number of transactions, which could have a material and adverse effect on AFF’s business. If AFF is unable to collect on its leases, RISAs and bank loans, the performance of its lease and loan portfolio would be adversely affected.
The potential errors or inaccuracies in AFF’s decisioning platform and models may be material and affect a significant number of transactions, which could have a material and adverse effect on AFF’s business. If AFF is unable to collect on its leases, RISAs and bank loans, the performance of its lease and loan portfolio would be adversely affected.
The Company's level of indebtedness could: • Make it more difficult for it to satisfy its obligations with respect to the Company’s senior unsecured notes and its other indebtedness, resulting in possible defaults on and acceleration of such indebtedness; • Require it to dedicate a substantial portion of its cash flow from operations to the payment of principal and interest on its indebtedness, thereby reducing the availability of such cash flows to fund originations in the AFF business, working capital, acquisitions, new store openings, capital expenditures and other general corporate purposes; • Limit its ability to obtain additional financing for working capital, financing originations from the AFF business, acquisitions, new store openings, capital expenditures, debt service requirements and other general corporate purposes; • Limit its ability to refinance indebtedness or cause the associated costs of such refinancing to increase; • restrict the ability of its subsidiaries to pay dividends or otherwise transfer assets to the Company, which could limit its ability to, among other things, make required payments on its debt; • Increase the Company’s vulnerability to general adverse economic and industry conditions, including interest rate fluctuations (because a portion of its borrowings are at variable rates of interest); and 36 Table of Contents • Place the Company at a competitive disadvantage compared to other companies with proportionately less debt or comparable debt at more favorable interest rates who, as a result, may be better positioned to withstand economic downturns.
The Company's level of indebtedness could: • make it more difficult for the Company to satisfy its obligations with respect to its senior unsecured notes and its other indebtedness, resulting in possible defaults on and acceleration of such indebtedness; • require the Company to dedicate a substantial portion of its cash flow from operations to the payment of principal and interest on its indebtedness, thereby reducing the availability of such cash flows to fund originations in the AFF business, working capital, acquisitions, new store openings, capital expenditures and other general corporate purposes; • limit the Company’s ability to obtain additional financing for working capital, financing originations from the AFF business, acquisitions, new store openings, capital expenditures, debt service requirements and other general corporate purposes; • limit the Company’s ability to refinance indebtedness or cause the associated costs of such refinancing to increase; • restrict the ability of the Company’s subsidiaries to pay dividends or otherwise transfer assets to the Company, which could limit its ability to, among other things, make required payments on its debt; • increase the Company’s vulnerability to general adverse economic and industry conditions, including interest rate fluctuations (because a portion of its borrowings are at variable rates of interest); and • place the Company at a competitive disadvantage compared to other companies with proportionately less debt or comparable debt at more favorable interest rates who, as a result, may be better positioned to withstand economic downturns.
Management has processes in place to monitor these judgments and assumptions, but these processes may not ensure that the judgments and assumptions are correct. The Company maintains an allowance for lease and loan losses at a level sufficient to cover estimated lifetime losses expected to be incurred in the lease and loan portfolio.
Management has processes in place to monitor these judgments and assumptions, but these processes may not ensure that the judgments and assumptions are correct. The Company maintains an allowance for lease and loan losses at a level believed to be sufficient to cover estimated lifetime losses expected to be incurred in the lease and loan portfolio.
The Company’s future success, including its ability to achieve its growth and profitability goals, is dependent on the ability of its management team to execute on its long-term business strategy, which requires them to, among other things: (1) pursue organic growth by opening new pawn stores and expanding AFF’s network of merchant partners, (2) identify attractive acquisition opportunities, close on such acquisitions on favorable terms and successfully integrate acquired businesses, (3) encourage and improve customer traffic at its pawn stores and the utilization of AFF’s products with its existing merchant partners, (4) improve the customer experience at its pawn stores and for AFF’s merchant partners and customers, (5) enhance productivity of its pawn stores, including through investments in technology, (6) control expenses in line with current projections, (7) keep pace with technological change and improve the Company’s proprietary pawn point-of-sale and loan management system and AFF’s proprietary lease and loan management system and decisioning platform, and (8) effectively maintain its compliance programs and respond to regulatory developments and changes that impact its business.
The Company’s future success, including its ability to achieve its growth and profitability goals, is dependent on the ability of its management team to execute its long-term business strategy, which requires them to, among other things: (1) pursue organic growth by opening new pawn stores and expanding AFF’s network of merchant partners, (2) identify attractive acquisition opportunities, close on such acquisitions on favorable terms and successfully integrate acquired businesses, (3) encourage and improve customer traffic at its pawn stores and the utilization of AFF’s products with its existing merchant partners, (4) improve the customer experience at its pawn stores and for AFF’s merchant partners and customers, (5) enhance productivity of its pawn stores, including through investments in technology, (6) control expenses in line with current projections, (7) keep pace with technological change and improve the Company’s proprietary pawn POS and loan management system and AFF’s proprietary lease and loan management system and decisioning platform, and (8) effectively maintain its compliance programs and respond to regulatory developments and changes that impact its business.
This estimate is highly dependent upon the reasonableness of its assumptions and the predictability of the relationships that drive the results of its valuation methodologies. The Company performs a quantitative analysis to compute historical losses to estimate the allowance for lease and loan losses.
This estimate is highly dependent upon the reasonableness of its assumptions and the predictability of the relationships that drive the results of its valuation methodologies. The Company performs a quantitative analysis to compute historical losses to estimate the allowance for future lease and loan losses.
The degree to which these merchants successfully integrate the AFF platform into their website or in their store, such as by prominently featuring its platform on their websites or in their stores, has a material impact on AFF’s transaction volume.
The degree to which these merchants successfully integrate the AFF platform into their website or in their store, such as by prominently featuring the platform on such websites or in such stores, has a material impact on AFF’s transaction volume.
A sustained or rapid downturn in economic conditions generally results in lower consumer confidence and demand for discretionary consumer goods and services weakening demand for AFF’s products and also demand for pre-owned merchandise sold in the Company’s pawnshops.
A sustained or rapid downturn in economic conditions generally results in lower consumer confidence and demand for discretionary consumer goods and services, weakening demand for AFF’s products and demand for pre-owned merchandise sold in the Company’s pawnshops.
Furthermore, federal, state or local legislated increases in the minimum wage, as well as increases in additional labor cost components such as employee benefit costs, workers’ compensation insurance rates, compliance costs, fines and, in Mexico, additional costs associated with labor agreements, unions and profit sharing requirements, would increase the Company’s labor costs, which could have a material adverse effect on its business, prospects, results of operations and financial condition.
Furthermore, federal, state or locally legislated increases in the minimum wage, as well as increases in additional labor cost components such as employee benefit costs, workers’ compensation insurance rates, compliance costs, fines and, in Mexico, additional costs associated with labor agreements, unions and profit sharing requirements, would increase the Company’s labor costs, which could have a material adverse effect on its business, prospects, results of operations and financial condition.
Furthermore, under the current presidential administration in the U.S., the CFPB has been more aggressive in their exercise of the enforcement powers making it more likely, as evidenced by the CFPB’s action against the Company related to alleged violations of the MLA, that future enforcement actions will be brought against consumer finance companies providing services and products to credit-constrained customers.
Furthermore, under the current presidential administration in the U.S., the CFPB has been more aggressive in its exercise of the enforcement powers, making it more likely, as evidenced by the CFPB’s action against the Company related to alleged violations of the MLA, that future enforcement actions will be brought against consumer finance companies providing services and products to credit-constrained customers.
In the event of such a challenge or if its arrangements with the Bank were to end for any reason, AFF would need to find and rely on an alternative bank relationship, rely on existing state licenses, obtain new state licenses, pursue a bank charter, offer consumer loans and/or be subject to the interest rate limitations of certain states.
In the event of such a challenge or if AFF’s arrangements with the Bank were to end for any reason, AFF would need to find and rely on an alternative bank relationship, rely on existing state licenses, obtain new state licenses, pursue a bank charter, offer consumer loans and/or be subject to the interest rate limitations of certain states.
Governments, including agencies at the national, state and local levels, may seek to enforce or impose new laws, regulatory restrictions, licensing requirements or taxes that affect the Company’s products or services it offers, the terms on which it may offer them, and the disclosure, compliance and reporting obligations it must fulfill in connection with its business.
Governments, including agencies at the national, state and local levels, may seek to enforce or impose new laws, regulatory restrictions, licensing requirements or taxes that affect the Company’s products or services it offers, the terms on which it may offer such products and services, and the disclosure, compliance and reporting obligations it must fulfill in connection with its business.
In particular, the Company may be involved in lawsuits or regulatory actions related to consumer finance and protection, employment, marketing, unclaimed property, competition matters, and other matters, including class action lawsuits brought against it for alleged violations of the Fair Labor Standards Act, state wage and hour laws, state or federal advertising laws, consumer protection, lending and other laws.
In particular, the Company may be involved in lawsuits, arbitration claims or regulatory actions related to consumer finance and protection, employment, marketing, unclaimed property, competition matters, and other matters, including class action lawsuits brought against it for alleged violations of the Fair Labor Standards Act, state wage and hour laws, state or federal advertising laws, consumer protection, lending and other laws.
However, the insurance program generally has large deductibles and may not be adequate to cover all such losses. The Company could also experience liability or adverse publicity arising from such crimes. Any such event may have a material and adverse effect on the Company’s business, prospects, results of operations and financial condition.
However, the insurance program generally has large deductibles and co-insurance requirements and may not be adequate to cover all such losses. The Company could also experience liability or adverse publicity arising from such crimes. Any such event may have a material and adverse effect on the Company’s business, prospects, results of operations and financial condition.
If adopted as proposed, the guidance would result in increased supervisory attention of institutions that engage in significant lending activities through third-parties, including at least one examination every 12 months, as well as supervisory expectations for a third-party lending risk management program and third-party lending policies that contain certain minimum requirements, such as self-imposed limits as a percentage of total capital for each third-party lending relationship and for the overall loan program, relative to origination volumes, credit exposures (including pipeline risk), growth, loan types, and acceptable credit quality.
If adopted as proposed, the guidance would result in increased supervisory attention of institutions 28 Table of Contents that engage in significant lending activities through third parties, including at least one examination every 12 months, as well as supervisory expectations for a third-party lending risk management program and third-party lending policies that contain certain minimum requirements, such as self-imposed limits as a percentage of total capital for each third-party lending relationship and for the overall loan program, relative to origination volumes, credit exposures (including pipeline risk), growth, loan types, and acceptable credit quality.
While retail sales at the Company’s pawnshops, due in part to the “deep value” nature of the products sold at its pawnshops, and demand for pawn loans have not been adversely affected by such economic trends in 2022, there is no guarantee that they will not be adversely affected should economic conditions deteriorate further.
While retail sales at the Company’s pawnshops, due in part to the “deep value” nature of the products sold at its pawnshops, and demand for pawn loans have not been adversely affected by such economic trends in 2023, there is no guarantee that they will not be adversely affected should economic conditions deteriorate further.
Additional states may elect to implement similar limits or states with existing limits may elect to further lower the total cost that AFF may charge a customer to achieve ownership of the leased merchandise at the end of the lease term, which could have an adverse effect on the Company’s results of operation and financial condition.
Additional states may elect to implement similar limits or states with existing limits may elect to further lower the total cost that AFF may charge a customer to achieve ownership of the leased merchandise at the end of the lease term, which could have an adverse effect on the Company’s results of operations and financial condition.
Defense or filing of any lawsuit or administrative proceeding, even if successful, could require substantial time, resources, and attention of the Company’s management and could require the expenditure of significant amounts for legal fees and other related costs. Settlement of lawsuits or administrative proceedings may also result in significant payments and modifications to the Company’s operations.
Defense or filing of any lawsuit, arbitration claims or administrative proceeding, even if successful, could require substantial time, resources, and attention of the Company’s management and could require the expenditure of significant amounts for legal fees and other related costs. Settlement of lawsuits or administrative proceedings may also result in significant payments and modifications to the Company’s operations.
Failure to comply with such tax provisions or a successful assertion by a jurisdiction requiring AFF to collect taxes in a location or for transactions where AFF presently does not, could result in substantial tax liabilities, including for past sales and leases, as well as penalties and interest.
Failure to comply with such tax provisions or a successful assertion by a jurisdiction requiring AFF to collect taxes in a location or for transactions where or for which AFF presently does not, could result in substantial tax liabilities, including those for past sales and leases, as well as penalties and interest.
In addition, the Company’s borrowings under its unsecured credit facilities bear interest at variable rates based on a fixed spread over the prevailing secured overnight rate (“SOFR”) and, as a result of the recent increase in interest rates, the Company’s borrowing expenses under its unsecured credit facilities increased in 2022.
In addition, the Company’s borrowings under its unsecured credit facilities bear interest at variable rates based on a fixed spread over the prevailing secured overnight rate (“SOFR”) and, as a result of the recent increase in interest rates, the Company’s borrowing expenses under its unsecured credit facilities increased in 2023.
An important component of the Company’s business involves collection, storage, use, disclosure, processing, transfer and other handling of a wide variety of sensitive, regulated and/or confidential information, including personally identifiable information, for various purposes in its business .
An important component of the Company’s business involves collection, storage, use, disclosure, processing, transfer and other handling of a wide variety of sensitive, regulated and/or confidential information, including personally identifiable information, for various purposes in its business with customers.
Although the Company actively manages its product and service offerings to ensure that such offerings meet the needs and preferences of its customer base and merchant partners, in the case of the AFF business, the demand for a particular product or service may decrease due to a variety of factors, including many that the Company may not be able to control, anticipate or respond to in a timely manner, such as the availability and pricing of competing products or technology, changes in customers’ financial conditions as a result of changes in unemployment levels, declines in consumer spending habits related to general economic conditions, inflation, weather events, public health and safety issues, fuel prices, interest rates, government sponsored economic stimulus programs, social welfare or benefit programs, real or perceived loss of consumer confidence or regulatory restrictions that increase or reduce customer access to particular products.
Although the Company actively manages its product and service offerings to ensure that such offerings meet the needs and preferences of its customer base (and merchant partners, in the case of the AFF business), the demand for a particular product or service may decrease due to a variety of factors, including many that the Company may not be able to control, anticipate or respond to in a timely manner, such as the availability and pricing of competing products or technology, adoption of digital wallets and currencies, changes in customers’ financial conditions as a result of changes in unemployment levels, declines in consumer spending habits related to general economic conditions, inflation, weather events, public health and safety issues, fuel prices, interest rates, government-sponsored economic stimulus programs, social welfare or benefit programs, minimum wage increase, real or perceived loss of consumer confidence or regulatory restrictions that increase or reduce customer access to particular products.
It’s also important that AFF partner with merchants with growing sales across a diverse mix of retail channels to mitigate risk associated with changing consumer spending behavior, economic conditions and other factors that may affect a particular type of merchant or industry. Additionally, AFF’s agreements with its merchant partners are generally terminable for convenience.
It is also important that AFF partner with merchants with growing sales across a diverse mix of retail channels to mitigate risk associated with changing consumer spending behavior, economic conditions and other factors that may affect a particular type of merchant or industry. Additionally, AFF’s agreements with its merchant partners are generally terminable for convenience.
If the Company’s estimates and assumptions prove incorrect and its allowance for lease and loan losses are insufficient, it may incur net charge-offs in excess of its reserves, or it could be required to increase its provision for lease and loan losses, either of which would adversely affect its results of operations. 37 Table of Contents The Company is subject to goodwill impairment risk.
If the Company’s estimates and assumptions prove incorrect and its allowance for lease and loan losses are insufficient, it may incur net charge-offs in excess of its reserves, or it could be required to increase its provision for lease and loan losses, either of which would adversely affect its results of operations. The Company is subject to goodwill impairment risk.
The Company or its subsidiaries has been, is, or may become involved in lawsuits, regulatory or administrative proceedings, examinations, investigations, consent orders, memorandums of understanding, audits, other actions arising in the ordinary course of business, including those related to consumer financial protection, federal or state wage and hour laws, product liability, unclaimed property, employment, personal injury and other matters that could cause it to incur substantial expenditures and generate adverse publicity.
The Company or its subsidiaries has been, is, or may become involved in lawsuits, arbitration claims (including mass arbitrations); regulatory or administrative proceedings; examinations; investigations; consent orders; memorandums of understanding; audits; other actions arising in the ordinary course of business, including those related to consumer financial protection, federal or state wage and hour laws, product liability, unclaimed property, employment, personal injury; and other matters that could cause it to incur substantial expenditures and generate adverse publicity.
In these proceedings, the FTC can seek consent orders, confidential memorandums of understandings, cease and desist orders (which can include orders for redisclosure, restitution or rescission of contracts, as well as affirmative or injunctive relief) and monetary penalties.
In these proceedings, the FTC can seek consent orders, confidential memorandums of understanding, cease and desist orders (which can include orders for redisclosure, restitution or rescission of contracts, as well as affirmative or injunctive relief) and monetary penalties.
Furthermore, federal and state regulators and many federal and state laws and regulations require notice of any data security breaches that involve personal information. These mandatory disclosures regarding a security breach are costly to implement and often lead to widespread negative publicity, which may cause consumers to lose confidence in the effectiveness of the Company’s data security measures.
Furthermore, federal and state regulators and many federal and state laws and regulations require notice of any data security breaches that involve personal information. These mandatory disclosures are costly to implement and often lead to widespread negative publicity, which may cause consumers to lose confidence in the effectiveness of the Company’s data security measures.
Moreover, certain states limit the total amount or rate of finance charge that AFF may charge a customer in order for the customer to achieve ownership of the leased merchandise at the end of the lease term.
Moreover, certain states limit the total amount or rate of finance charge that AFF may charge a customer for the customer to achieve ownership of the leased merchandise at the end of the lease term.
Increased competition or aggressive marketing and pricing practices by these competitors could result in decreased revenue, margins and inventory turnover rates in the Company’s retail operations. A decrease in demand for the Company’s products and services and the failure of the Company to adapt to such decreases could adversely affect the Company’s results of operations.
Increased competition or aggressive marketing and pricing practices by these competitors could result in decreased revenue, margins and inventory turnover rates in the Company’s retail operations. 21 Table of Contents A decrease in demand for the Company’s products and services and the failure of the Company to adapt to such decreases could adversely affect the Company’s results of operations.
The consequences of defending proceedings or an adverse ruling in any current or future litigation, judicial or administrative proceeding, including consent orders or memorandums of understanding, could cause the Company to incur substantial legal fees, have to refund fees and/or interest collected, refund the principal amount of advances, pay treble or other multiples of damages, pay monetary penalties, fines, and/or modify or terminate the Company’s operations in particular states or countries.
The consequences of defending proceedings or an adverse ruling in any current or future litigation, arbitration claims (including mass arbitrations), judicial or administrative proceeding, including consent orders or memorandums of understanding, could cause the Company to incur substantial legal fees, have to refund fees and/or interest collected, refund the principal amount of advances, pay treble or other multiples of damages, pay monetary penalties, fines, and/or modify or terminate the Company’s operations in particular states or countries.
The success of the Company’s business depends to a certain extent upon the value associated with its intellectual property rights, including its proprietary, internally developed point-of-sale and loan management system that is in use in its pawn stores and its proprietary application and decisioning technology that is used by the AFF business.
The success of the Company’s business depends to a certain extent upon the value associated with its intellectual property rights, including its proprietary, internally developed POS and loan management system that is in use in its pawn stores and its proprietary application and decisioning technology that is used by the AFF business.
Specifically, the Company has significant exposure to fluctuations and devaluations of the Mexican peso and the health of the Mexican economy, which, in each case, may be negatively impacted by changes in U.S. trade treaties, including the United States-Mexico-Canada Agreement and corporate tax policy.
Specifically, the Company has significant exposure to fluctuations and devaluations of the Mexican peso and the health of the Mexican economy, which, in each case, may be negatively impacted by changes in U.S. trade treaties, including the United States-Mexico-Canada 32 Table of Contents Agreement and corporate tax policy.
An accounting estimate is considered critical if it requires that management make assumptions about matters that were highly uncertain at the time the accounting estimate was made. If actual results differ from the judgments and assumptions, then it may have an adverse impact on the results of operations and cash flows.
An accounting estimate is considered critical if it requires that management make assumptions about matters that were highly uncertain at the time the accounting estimate was made. If actual results differ from the judgments and assumptions, such differences may have an adverse impact on the results of operations and cash flows.
Risks Related to the AFF Business • The AFF business is dependent on merchant partners for its transaction volume, and its growth is primarily driven by the success of its existing merchant partners and its ability to attract additional merchants and retain and grow its relationships with its existing merchant partners. • The AFF business derives a significant portion of its revenue from several top merchant partners.
Risks Related to the AFF Business • The AFF business is dependent on merchant partners for its transaction volume, and its growth is primarily driven by the success of its existing merchant partners, its ability to retain and grow its relationships with existing merchant partners, and its ability to attract new merchant relationships. • The AFF business derives a significant portion of its revenue from several top merchant partners.
Strategic and Business Risks Increased competition from other pawnshops, point-of-sale consumer finance companies, other short-term consumer lenders, other LTO companies, governmental entities and other organizations offering similar financial services and retail products offered by the Company could adversely affect the Company’s results of operations.
Strategic and Business Risks Increased competition from other pawnshops, POS consumer finance companies, other short-term consumer lenders, other LTO companies, governmental entities and other organizations offering similar financial services and retail products offered by the Company could adversely affect the Company’s results of operations.
The loss of services of any of the members of the Company’s senior management, including AFF’s management, could adversely affect the Company’s business until a suitable replacement can be found, if at all.
The loss of services of any member of the Company’s senior management, including AFF’s management, could adversely affect the Company’s business until a suitable replacement can be found, if at all.
Furthermore, a significant increase in the costs to retain any members of the Company’s senior management could adversely affect the Company’s business and operations. 23 Table of Contents The Company depends on hiring, training and retaining an adequate number of qualified employees to run its businesses.
Furthermore, a significant increase in the costs to retain any members of the Company’s senior management could adversely affect the Company’s business and operations. The Company depends on hiring, training and retaining an adequate number of qualified employees to run its businesses.
Typically, the Company’s pawn business experiences seasonal growth of service fees in the third and fourth quarter of each year due to loan balance growth.
The Company’s pawn business usually experiences seasonal growth of service fees in the third and fourth quarter of each year due to loan balance growth.
In addition, AFF owns a customer service call center operating in Jamaica and utilizes third-party call center services located in the Dominican Republic and Mexico.
In addition, AFF owns customer service call centers operating in Jamaica and Mexico and utilizes third-party call center services located in the Dominican Republic and Mexico.
As of December 31, 2022, approximately 59% of the Company’s pawn loans were collateralized with jewelry, which is primarily gold, and 50% of its inventories consisted of jewelry, which is also primarily gold. The Company sells significant quantities of gold, other precious metals and diamonds acquired through collateral forfeitures or direct purchases from customers.
As of December 31, 2023, approximately 61% of the Company’s pawn loans were collateralized with jewelry, which is primarily gold, and 50% of its inventories consisted of jewelry, which is also primarily gold. The Company sells significant quantities of gold, other precious metals and diamonds acquired through collateral forfeitures or direct purchases from customers.
AFF could be subject to litigation, whether private or governmental, or administrative action regarding the above claims. The potential consequences of an adverse determination could include the inability to collect loans at the interest rates contracted for, licensing violations, the loans being found to be unenforceable or void, the reduction of interest or principal, or other penalties or damages.
AFF could be subject to litigation, whether private or governmental, or administrative action regarding the above claims. The potential consequences of an adverse determination could include the inability to collect loans at the contracted interest rates, licensing violations, loans deemed unenforceable or void, the reduction of interest or principal, or other penalties or damages.
A significant and sustained decline in gold and/or other precious metal and diamond prices could result in decreased merchandise sales and related margins, decreased inventory valuations and sub-standard collateralization of outstanding pawn loans.
A significant and sustained decline in gold and/or other precious metal and diamond prices could result in decreased merchandise sales and related margins, 36 Table of Contents decreased inventory valuations and sub-standard collateralization of outstanding pawn loans.
In addition, the AFF business is also subject to certain states’ laws which regulate and require licensing, registration, notice filing or other approval by parties that engage in certain activity regarding consumer finance transactions, including facilitating and assisting such transactions in certain circumstances.
In addition, the AFF business is also subject to certain states’ laws which regulate and require licensing, registration, notice filing or other approval by parties that engage in certain activity regarding consumer finance transactions, including facilitating and assisting 31 Table of Contents such transactions in certain circumstances.
The loss of business, transaction volumes or platform support from one or more of these top merchant partners could have a material adverse effect on the AFF business. • The AFF business relies extensively on its proprietary decisioning platform and if such platform is not effective, it could have a material impact on the AFF business and its financial condition and results of operations. • If the AFF business is unable to collect on its leases, RISAs and bank loans, the performance of its lease and loan portfolio would be adversely affected.
The loss of business, transaction volumes or platform support from one or more of these top merchant partners could have a material adverse effect on the AFF business. • The AFF business relies extensively on its proprietary decisioning platform and, if such platform is not effective, it could have a material impact on the AFF business and its financial condition and results of operations. 20 Table of Contents • If the AFF business is unable to collect on its leases, RISAs and bank loans, the performance of its lease and finance receivables portfolio would be adversely affected.
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.
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.
Actual or anticipated cyber attacks may cause the Company to incur substantial costs, including costs to prevent future attacks and investigate actual attacks, deploy additional personnel and 24 Table of Contents protection technologies, train employees and engage third-party experts and consultants.
Actual or anticipated cyber attacks may cause the Company to incur substantial costs, including costs to prevent future attacks and investigate actual attacks, deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants.
Under this arrangement, AFF purchases a portion of the cash flows originated by the Bank and sub-services the loans thereafter. AFF does not originate or ultimately control the pricing or functionality of the loans. The Bank makes all key decisions regarding the marketing, underwriting, product features and pricing.
Under this arrangement, AFF purchases a portion of the cash flows originated by the Bank and sub-services the loans thereafter while the Bank retains ownership of the loans at all times. AFF does not originate or ultimately control the pricing or functionality of the loans. The Bank makes all key decisions regarding the marketing, underwriting, product features and pricing.
Because the Company accepts firearms as pawn collateral and buys and sells firearms, ammunition and certain related accessories in many of its U.S. pawn locations, the Company is required to comply with federal, state and local laws and regulations pertaining to the pawning, purchase, storage, transfer and sale of such products, and the Company is subject to reputational harm if a customer purchases or pawns a firearm that is later used in a deadly shooting.
Because the Company accepts firearms as pawn collateral and buys and sells firearms, ammunition and certain related accessories in many of its U.S. pawn locations, the Company is required to comply with federal, state and local laws and regulations pertaining to the pawning, purchase, storage, transfer and sale of such products, and the Company is subject to reputational harm if a customer purchases or redeems a pawned firearm that is later involved in a shooting or other crime.
Additionally, any acquisition has the risk that the Company may not realize a return on the acquisition or the Company’s investment. The Company’s future success is largely dependent upon the ability of its management team to successfully execute its business strategy.
Additionally, any acquisition carries the risk that the Company may not realize a return on the acquisition or the Company’s investment. 22 Table of Contents The Company’s future success is largely dependent upon the ability of its management team to successfully execute its business strategy.
As in many developing markets, there are also uncertainties as to how both local law and U.S. federal law is applied, including areas involving commercial transactions and foreign investment.
As in many developing markets, there are also uncertainties as to how both local law and U.S. federal law is applied, including laws related to commercial transactions and foreign investment.
Risk Factor Summary Risks Related to the Company’s Strategy, Business and Operations • The Company faces significant competition from banks, credit unions, internet-based lenders, point-of-sale consumer finance companies, other short-term consumer lenders, LTO companies, general and specialty retailers, governmental entities and other organizations offering similar financial services and retail products to those offered by the Company. • A decrease in demand for the Company’s products and services and the failure of the Company to adapt to such decreases could adversely affect the Company’s results of operations. • The Company’s future success is largely dependent upon the ability of its management team to successfully execute its business strategy and drive organic growth. • The inability to successfully identify attractive acquisition targets, realize administrative and operational synergies and integrate completed acquisitions could adversely affect results. • The Company depends on its senior management and hiring, training and retaining an adequate number of qualified employees to run its businesses. • Security breaches, cyber attacks or fraudulent activity could result in damage to the Company’s operations or lead to reputational damage and expose the Company to significant liabilities. • The Company’s businesses are typically subject to seasonality, which causes the Company’s revenues and operating cash flows to fluctuate. • The Company’s financial position and results of operations may fluctuate significantly due to fluctuations in currency exchange rates in Latin American markets. • Changes impacting international trade and corporate tax and other related regulatory provisions may have an adverse effect on the Company’s financial condition and results of operations.
Additional risks not currently known to the Company or that it currently deems to be immaterial also may materially and adversely affect its business, financial condition or results of operations in future periods. 19 Table of Contents Risk Factor Summary Risks Related to the Company’s Strategy, Business and Operations • The Company faces significant competition from other pawnshops, branch-based consumer lenders, banks, credit unions, online lenders, POS consumer finance companies, LTO companies; general, specialty and online retailers; governmental entities and other organizations offering similar financial services and retail products to those offered by the Company. • A decrease in demand for the Company’s products and services and the failure of the Company to adapt to such decreases could adversely affect the Company’s results of operations. • The Company’s future success is largely dependent upon the ability of its management team to successfully execute its business strategy and drive organic growth. • The inability to successfully identify attractive acquisition targets, realize administrative and operational synergies and integrate completed acquisitions could adversely affect results. • The Company depends on its senior management and hiring, training and retaining an adequate number of qualified employees to run its businesses. • Security breaches, cyber attacks or fraudulent activity could result in damage to the Company’s operations or lead to reputational damage and could expose the Company to significant liabilities. • The Company’s businesses are typically subject to seasonality, which causes the Company’s revenues and operating cash flows to fluctuate. • The Company’s financial position and results of operations may fluctuate significantly due to fluctuations in currency exchange rates in Latin American markets. • Changes impacting international trade and corporate tax and other related regulatory provisions may have an adverse effect on the Company’s financial condition and results of operations.
Risks Related to the Company’s Regulatory, Legislative and Legal Environment • The Company’s products and services are subject to extensive regulation and supervision under various federal, state and local laws, ordinances and regulations in both the U.S. and Latin America and consumer finance companies that serve credit-constrained consumers, like the Company, face increasing regulatory scrutiny under the current presidential administration in the U.S. and regulatory environment. • The adoption of new laws or regulations or adverse changes in, or the interpretation or enforcement of, existing laws or regulations affecting the Company’s products and services could adversely affect its financial condition and operating results. • The Company is the subject of a lawsuit initiated by the CFPB alleging violations of the MLA and the Company’s predecessor company’s consent order with the CFPB and related securities litigation. • If AFF’s originating bank partner model is successfully challenged or deemed impermissible, it could be found to be in violation of licensing, interest rate limit, lending or brokering laws and face penalties, fines, determination that certain of the loans are void or voidable, litigation or regulatory enforcement. • Media reports, statements made by regulators and elected officials and public perception in general of pawnshops, LTO and retail finance products for credit-constrained consumers as being predatory or abusive could materially adversely affect the Company’s businesses. 20 Table of Contents • Current and future litigation or regulatory proceedings, both in the U.S. and Latin America, could have a material adverse effect on the Company’s business, prospects, results of operations and financial condition. • The sale and pawning of firearms, ammunition and certain related accessories is subject to current and potential regulation and exposes the Company to reputational and litigation risk if such firearms, ammunition and related accessories are utilized in the commission of a crime.
Risks Related to the Company’s Regulatory, Legislative and Legal Environment • The Company’s products and services are subject to extensive regulation and supervision under various federal, state and local laws, ordinances and regulations in both the U.S. and Latin America, and all consumer finance companies that serve credit-constrained consumers, including the Company, face increasing regulatory scrutiny under the current presidential administration in the U.S. and in the current regulatory environment. • The adoption of new laws or regulations or adverse changes in, or the interpretation or enforcement of, existing laws or regulations affecting the Company’s products and services could adversely affect its financial condition and operating results. • The Company is the subject of a lawsuit initiated by the CFPB alleging (i) violations of the MLA and (ii) violations of a consent order the Company’s predecessor entered into with the CFPB. • If the bank partner loan origination model used by AFF is successfully challenged or deemed impermissible, AFF could be found to be in violation of licensing, interest rate limit, lending or brokering laws and could face penalties, fines, a determination that certain of the loans are void or voidable, litigation or regulatory enforcement. • Media reports, statements made by regulators and elected officials and the general public perception that pawnshops, LTO and retail finance products for credit-constrained consumers are predatory or abusive could have a material adverse effect on the Company’s businesses. • Current and future litigation or regulatory proceedings, both in the U.S. and Latin America, could have a material adverse effect on the Company’s business, prospects, results of operations and financial condition. • The sale and pawning of firearms, ammunition and certain related accessories is subject to current and potential regulation and exposes the Company to reputational and litigation risk if such firearms, ammunition and related accessories lead to deaths, injuries or are utilized in the commission of a crime.
At December 31, 2022, the Company had $1,581.4 million of goodwill on its consolidated balance sheet, all of which represents assets capitalized in connection with the Company’s acquisitions and business combinations. Accounting for goodwill requires significant management estimates and judgment.
At December 31, 2023, the Company had $1,727.7 million of goodwill on its consolidated balance sheet, all of which represents assets capitalized in connection with the Company’s acquisitions and business combinations. Accounting for goodwill requires significant management estimates and judgment.
The proposed guidance elaborates on previously-issued agency guidance on managing third-party risks and specifically addresses third-party lending arrangements where an FDIC-supervised institution relies on a third party to perform a significant aspect of the lending process.
The proposed guidance elaborates on previously-issued agency guidance on managing third-party risks and specifically addresses third-party lending arrangements where an FDIC-supervised institution relies on a third party to perform one or more significant aspects of the lending process.
The Company expects borrowing expenses in 2023 to further increase from 2022 levels due to interest rates remaining higher for the entire year. Furthermore, the Company has, in the past, accessed the debt capital markets to refinance existing debt obligations and to obtain capital to finance growth.
The Company expects borrowing expenses in 2024 to further increase from 2023 levels due to interest rates remaining higher for the entire year. 35 Table of Contents Furthermore, the Company has, in the past, accessed the debt capital markets to refinance existing debt obligations and to obtain capital to finance growth.
Media reports, statements made by regulators and elected officials and public perception in general of pawnshops, LTO and retail finance products for credit-constrained consumers as being predatory or abusive could materially adversely affect the Company’s businesses.
Media reports, statements made by regulators and elected officials and the general public perception that pawnshops, LTO and retail finance products for credit-constrained consumers are predatory or abusive could materially adversely affect the Company’s businesses.
The Company’s business, reputation and ability to attract and retain employees may also be harmed if the Company’s response to climate change is perceived to be ineffective or insufficient. 39 Table of Contents Adverse real estate market fluctuations and/or the inability to renew and extend store operating leases could affect the Company’s profits.
The Company’s business, reputation and ability to attract and retain employees may also be harmed if the Company’s response to climate change is perceived to be ineffective or insufficient. Adverse real estate market fluctuations and/or the inability to renew and extend store operating leases could affect the Company’s profits. The Company leases most of its pawn store locations.
Risks Related to Economic and Market Environment • A sustained deterioration of economic conditions or an economic crisis and government actions taken to limit the impact of such an economic crisis could reduce demand or profitability for the Company’s products and services which would result in reduced earnings. • A material worsening of the COVID-19 pandemic or other health emergency and government stimulus programs related thereto could materially and adversely impact the Company’s business and results of operations. • Climate change, including increased frequency of extreme weather events, and related regulations could adversely affect the Company’s business and damage our reputation.
Risks Related to Economic and Market Environment • A sustained deterioration of economic conditions or an economic crisis, and government actions taken to limit the impact of such an economic crisis, could reduce demand or profitability for the Company’s products and services which would result in reduced earnings. • A severe public health or safety emergency and government stimulus programs related thereto could materially and adversely impact the Company’s business and results of operations. • Climate change, including increased frequency of extreme weather events, and related regulations could adversely affect the Company’s business and results of operations.
In particular, if AFF’s merchant partners are acquired by entities that are not also AFF’s merchant partners, that do not use its solutions or that have more favorable contract terms with a competitor and choose to discontinue, reduce or change the terms of their use of AFF’s solutions, the AFF business and its operating results could be materially and adversely affected. 34 Table of Contents AFF’s transaction volume is dependent on the support of its platform by its merchant partners.
In particular, if AFF’s merchant partners are acquired by entities that are not also AFF’s merchant partners, that do not use its solutions or that have more favorable contract terms with a competitor and choose to discontinue, reduce or change the terms of their use of AFF’s solutions, the AFF business and its operating results could be materially and adversely affected.
AFF depends on its merchants to drive transaction volume by supporting its platform over alternative payment options for credit-constrained customers and prominently presenting AFF’s platform as an attractive payment option for these customers.
AFF’s transaction volume is dependent on the support of its platform by its merchant partners. AFF depends on its merchants to drive transaction volume by supporting its platform over alternative payment options for credit-constrained customers and by prominently presenting AFF’s platform as an attractive payment option for these customers.
Therefore, it is possible that the Company’s consumer arbitration agreements will be rendered unenforceable. Additionally, Congress has considered legislation that would generally limit or prohibit mandatory dispute arbitration in certain consumer contracts, and it has adopted such prohibitions with respect to certain mortgage loans and certain consumer loans to active-duty members of the military and their dependents.
Additionally, Congress has considered legislation that would generally limit or prohibit mandatory dispute arbitration in certain consumer contracts, and it has adopted such prohibitions with respect to certain mortgage loans and certain consumer loans to active-duty members of the military and their dependents.
AFF’s top five merchant partners accounted for an aggregate of 5% of 2022 revenues and future revenues and transaction volume of AFF may be similarly concentrated.
AFF’s top five merchant partners accounted for an aggregate of 15% of 2023 consolidated revenues, and future revenues and transaction volume of AFF may be similarly concentrated.
The Company leases most of its pawn store locations. Many of the store leases, especially in Latin America, include annual rent escalations tied to the local consumer price index.
Many of the store leases, especially in Latin America, include annual rent escalations tied to the local consumer price index.
See “Item 1. Business—Government Regulation” for a further discussion of the regulatory authority of the CFPB. The FDIC has issued examination guidance affecting AFF’s unaffiliated third-party lender and these or subsequent new rules and regulations could have a significant impact on AFF’s products originated by the Bank.
See “Item 1. Business—Governmental Regulation” for a further discussion of the regulatory authority of the CFPB. The FDIC has issued examination guidance affecting AFF’s unaffiliated third-party lender and these or subsequent new rules and regulations could have a significant impact on AFF’s Bank-originated products. The installment loans are originated by the Bank using technology and marketing services provided by AFF.
As of December 31, 2022, including the Company's senior unsecured notes and the Company’s unsecured credit facilities, the Company had outstanding principal indebtedness of $1,389.0 million and availability of $278.8 million under its unsecured credit facilities, subject to certain financial covenants.
As of December 31, 2023, including the Company's senior unsecured notes and the Company’s unsecured credit facilities, the Company had outstanding principal indebtedness of $1,618.0 million and availability of $104.7 million under its unsecured credit facilities, subject to certain financial covenants.
The sale and pawning of firearms, ammunition and certain related accessories is subject to current and potential regulation, which could have a material adverse effect on the Company’s reputation, business, prospects, results of operations and financial condition.
Any of these events could have a material adverse effect on the Company’s business, prospects, results of operations and financial condition and could impair the Company’s ability to continue current operations. 30 Table of Contents The sale and pawning of firearms, ammunition and certain related accessories is subject to current and potential regulation, which could have a material adverse effect on the Company’s reputation, business, prospects, results of operations and financial condition.
In addition, banks and consumer finance companies are developing retail POS payment products and services designed to compete for the credit-constrained customer, many of which have greater financial resources and brand recognition than the Company.
In addition, banks, credit card issuers, consumer finance companies and retailers continue to develop and enhance lending and retail POS payment products and services designed to compete for the credit-constrained customer, many of which have greater financial resources and brand recognition than the Company.
If the FDIC or the Utah Department of Financial Institutions considers any aspect of the products originated by the Bank to be inconsistent with its guidance, the Bank may be required to alter or discontinue the product.
The Bank is supervised and examined by both the State of Utah, which charters the Bank, and the FDIC. If the FDIC or the Utah Department of Financial Institutions considers any aspect of the Bank-originated products to be inconsistent with its guidance, the Bank may be required to alter or discontinue the product.
A significant rise in real estate prices or real property taxes could also result in an increase in store lease costs as the Company opens new locations and renews leases for existing locations, thereby negatively impacting the Company’s results of operations. The Company also owns certain developed and undeveloped real estate, which could be impacted by adverse market fluctuations.
A significant rise in real estate prices or real property taxes could also result in an increase in store lease costs as the Company opens new locations and renews leases for existing locations, thereby negatively impacting the Company’s results of operations.
As of December 31, 2022, the Company had 1,771 store locations in Latin America, including 1,682 in Mexico, 61 in Guatemala, 14 in Colombia and 14 in El Salvador, and the Company plans to open or acquire additional stores in Latin America in the future.
As of December 31, 2023, the Company had 1,814 pawn store locations in Latin America, including 1,721 in Mexico, 65 in Guatemala, 14 in Colombia and 14 in El Salvador, and the Company plans to open or acquire additional pawn stores in Latin America in the future.
An unfavorable result in these matters could have a material impact on the Company’s financial condition and results of operations. 28 Table of Contents The FTC and the CFPB have regulatory, supervisory and enforcement powers over providers of consumer financial products and services in the U.S., and each could exercise its enforcement powers in ways that could have a material adverse effect on the Company’s business and financial results.
The FTC and the CFPB have regulatory, supervisory and enforcement powers over providers of consumer financial products and services in the U.S., and each could exercise its enforcement powers in ways that could have a material adverse effect on the Company’s business and financial results.
Lastly, the Company’s cyber and other insurance policies carry retention and coverage limits which may not be adequate to reimburse for losses caused by security breaches, and the Company may not be able to collect fully, if at all, under these insurance policies.
For additional information on cybersecurity, see “Item 1C. Cybersecurity.” 24 Table of Contents Lastly, the Company’s cyber and other insurance policies carry retention and coverage limits, which may not be adequate to reimburse for losses caused by security breaches, and the Company may not be able to collect fully, if at all, under these insurance policies.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAll store leases provide for specified periodic rental payments ranging from approximately $1,000 to $25,000 per month as of December 31, 2022. For more information about the Company’s pawn store locations, see “Item 1.
Biggest changeAll store leases provide for specified periodic rental payments ranging from approximately $1,000 to $25,000 per month as of December 31, 2023. In addition, the Company leases call center space in Jamaica and Mexico to support the AFF customer service operations. For more information about the Company’s pawn store locations, see “Item 1.
Item 2. Properties While the Company generally leases its pawnshop locations, the Company also purchases real estate for its pawnshop locations as opportunities arise at prices that the Company believes are attractive, whether through store acquisitions or through purchases from its landlords at existing stores.
Item 2. Properties While the Company generally leases its pawnshop locations, the Company also purchases real estate for its pawnshop locations as opportunities arise at prices that the Company believes are attractive, whether through new store acquisitions or through purchases from its landlords at existing stores.
Business—Pawn Store Locations.” The following table details material corporate locations leased by the Company (dollars in thousands): Description Location Square Footage Lease Expiration Date Monthly Rental Payment Administrative offices Monterrey, Mexico 50,000 July 31, 2027 $ 50 Administrative offices Coppell, Texas 26,000 June 30, 2029 47 Administrative offices Mexico City, Mexico 8,000 March 31, 2024 19 Most leases require the Company to maintain the property and pay the cost of insurance and property taxes.
Business—Pawn Store Locations.” The following table details material corporate locations leased by the Company (dollars in thousands): Description Location Square Footage Lease Expiration Date Monthly Rental Payment Administrative offices Monterrey, Mexico 50,000 July 31, 2027 $ 59 Administrative offices Coppell, Texas 26,000 June 30, 2029 47 Administrative offices Mexico City, Mexico 8,000 March 31, 2024 21 Most leases require the Company to maintain the property and pay the cost of insurance and property taxes.
The Company believes termination of any particular lease would not have a material adverse effect on the Company’s operations. The Company believes the facilities currently owned and leased by it as pawn stores are suitable for such purpose and considers its equipment, furniture and fixtures to be in good condition.
The Company believes termination of any particular lease would not have a material adverse effect on the Company’s operations. The Company believes the facilities currently owned and leased by it as pawn stores are suitable for such purpose and considers its equipment, furniture and fixtures to be in good condition. 40 Table of Contents
Leased facilities are generally leased for a term of three to five years with one or more options to renew. A majority of the store leases can be terminated early upon an adverse change in law which negatively affects the store’s profitability. The Company’s leases expire on dates ranging between 2023 and 2045.
Leased facilities are generally leased for a term of three to five years with one or more options to renew. A majority of the store leases can be terminated early upon an adverse change in law which negatively affects the store’s profitability. The Company’s leases expire on dates ranging from 2024 to 2045.
As of December 31, 2022, the Company owned the real estate and buildings for 298 of its pawn stores and its Company’s corporate headquarters building in Fort Worth, Texas. As of December 31, 2022, the Company leased 2,590 pawn store locations that were open or were in the process of opening.
As of December 31, 2023, the Company owned the real estate and buildings for 342 of its pawn stores and its Company’s corporate headquarters in Fort Worth, Texas. As of December 31, 2023, the Company leased 2,682 pawn store locations that were open or were in the process of opening.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings The description of the shareholder securities class action lawsuit, CFPB lawsuit and other lawsuits contained in Note 13 - Commitments and Contingencies of Notes to Consolidated Financial Statements contained in Part IV, Item 15 of this report is incorporated to this Part I, Item 3 by reference.
Biggest changeSee Note 13 - Commitments and Contingencies of Notes to Consolidated Financial Statements contained in Part IV, Item 15 of this report, which is incorporated to this Part I, Item 3 by reference, for a further discussion of the Company’s legal proceedings.
The Company is also a defendant in certain routine litigation matters and regulatory actions encountered in the ordinary course of its business. Certain of these matters are covered to an extent by insurance.
Item 3. Legal Proceedings The Company is a defendant in litigation and arbitration matters and regulatory actions encountered in the ordinary course of its business. Certain of these matters are covered to an extent by insurance.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table provides purchases made by the Company of shares of its common stock during each month a share repurchase program was in effect during the three months ended December 31, 2022 (dollars in thousands, except per share amounts): Total Number Of Shares Purchased Average Price Paid Per Share Total Number Of Shares Purchased As Part Of Publicly Announced Plans Approximate Dollar Value Of Shares That May Yet Be Purchased Under The Plans October 1 through October 31, 2022 169,000 $ 77.78 169,000 $ 14,353 November 1 through November 30, 2022 — — — 14,353 December 1 through December 31, 2022 — — — 14,353 Total 169,000 77.78 169,000 The following table provides purchases made by the Company of shares of its common stock under each share repurchase program in effect during 2022 (dollars in thousands): Plan Announcement Date Plan Completion Date Dollar Amount Authorized Shares Purchased in 2022 Dollar Amount Purchased in 2022 Remaining Dollar Amount Authorized For Future Purchases January 28, 2021 March 28, 2022 $ 100,000 1,048,000 $ 72,217 $ — April 28, 2022 Currently active 100,000 1,156,000 85,647 14,353 October 27, 2022 Currently active 100,000 — — 100,000 Total 2,204,000 $ 157,864 $ 114,353 41 Table of Contents Performance Graph The graph set forth below compares the cumulative total stockholder return on the common stock of the Company for the period from December 31, 2017 through December 31, 2022, with the cumulative total return on the Standard & Poor’s (“S&P”) MidCap 400 Index and the Russell 2000 Index, representing broad-based equity market indexes, and the S&P MidCap 400 Financials Index and the S&P MidCap 400 Consumer Discretionary Index, representing industry-based indexes, over the same period (assuming the investment of $100 on December 31, 2017 and assuming the reinvestment of all dividends on the date paid).
Biggest changeIssuer Purchases of Equity Securities The following table provides information about purchases made by the Company of shares of its common stock during the three months ended December 31, 2023 (dollars in thousands, except per share amounts): Total Number Of Shares Purchased Average Price Paid Per Share Total Number Of Shares Purchased As Part Of Publicly Announced Plans Approximate Dollar Value Of Shares That May Yet Be Purchased Under The Plans (1) October 1 through October 31, 2023 — $ — — $ 200,000 November 1 through November 30, 2023 — — — 200,000 December 1 through December 31, 2023 — — — 200,000 Total — — — (1) In July 2023, the Company’s Board of Directors authorized an additional common stock repurchase program for up to $200.0 million of the Company’s outstanding common stock, of which the entire $200.0 million is currently remaining. 42 Table of Contents Performance Graph The graph set forth below compares the cumulative total stockholder return on the common stock of the Company for the period from December 31, 2018 through December 31, 2023, with the cumulative total return on the Standard & Poor’s (“S&P”) MidCap 400 Index and the Russell 2000 Index, representing broad-based equity market indexes, and the S&P MidCap 400 Financials Index and the S&P MidCap 400 Consumer Discretionary Index, representing industry-based indexes, over the same period (assuming the investment of $100 on December 31, 2018 and assuming the reinvestment of all dividends on the date paid).
In February 2023, the Company’s Board declared a $0.33 per share first quarter cash dividend on common shares outstanding, or an aggregate of $15.3 million based on the December 31, 2022 share count, to be paid on February 28, 2023 to stockholders of record as of February 14, 2023.
In January 2024, the Company’s Board declared a $0.35 per share first quarter cash dividend on common shares outstanding, or an aggregate of $15.8 million based on the December 31, 2023 share count, to be paid on February 28, 2024 to stockholders of record as of February 14, 2024.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities General Market Information The Company’s common stock is quoted on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “FCFS.” On February 1, 2023, there were approximately 221 stockholders of record of the Company’s common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities General Market Information The Company’s common stock is quoted on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “FCFS.” On January 31, 2024, there were approximately 209 stockholders of record of the Company’s common stock.
Removed
Issuer Purchases of Equity Securities During 2022, the Company repurchased a total of 2,204,000 shares of common stock at an aggregate cost of $157.9 million and an average cost per share of $71.63, and during 2021, repurchased 688,000 shares of common stock at an aggregate cost of $49.6 million and an average cost per share of $72.10.
Added
Note that historic performance is not necessarily indicative of future performance.
Removed
The Company intends to continue repurchases under its active share repurchase programs, including 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, liquidity needs, credit availability, debt covenant restrictions, general business and economic conditions, regulatory requirements, the market price of the Company’s stock, the Company’s dividend policy and the availability of alternative investment opportunities.
Removed
The Company has previously included a peer group index, however, believes the comparison to the above mentioned industry-based indexes is a more applicable comparison. As a result, the performance graph below does not include a peer group index. Note that historic performance is not necessarily indicative of future performance.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest change(2) See Note 3 and Note 6 of Notes to Consolidated Financial Statements. 64 Table of Contents The following table provides a reconciliation of the gross amounts, the impact of income taxes and the net amounts for the adjustments included in the table above (unaudited, in thousands): Year Ended December 31, 2022 2021 2020 Pre-tax Tax After-tax Pre-tax Tax After-tax Pre-tax Tax After-tax Merger and acquisition expenses $ 3,739 $ 861 $ 2,878 $ 15,449 $ 3,577 $ 11,872 $ 1,316 $ 325 $ 991 Non-cash foreign currency (gain) loss related to lease liability (1,329) (399) (930) 644 193 451 1,249 375 874 AFF purchase accounting adjustments (1) 107,055 24,623 82,432 48,413 11,135 37,278 — — — Gain on revaluation of contingent acquisition consideration (109,549) (19,514) (90,035) (17,871) (4,110) (13,761) — — — Other expenses (income), net (2,731) (628) (2,103) 949 219 730 9,064 2,085 6,979 Loss on extinguishment of debt — — — — — — 11,737 2,700 9,037 Accrual of pre-merger Cash America income tax liability — — — — — — — (693) 693 Total adjustments $ (2,815) $ 4,943 $ (7,758) $ 47,584 $ 11,014 $ 36,570 $ 23,366 $ 4,792 $ 18,574 (1) The following table details AFF purchase accounting adjustments (in thousands): Year Ended December 31, 2022 2021 Pre-tax Tax After-tax Pre-tax Tax After-tax Amortization of fair value adjustment on acquired finance receivables $ 42,657 $ 9,811 $ 32,846 $ 1,708 $ 392 $ 1,316 Amortization of fair value adjustment on acquired leased merchandise 7,697 1,772 5,925 404 93 311 Amortization of acquired intangible assets 56,701 13,040 43,661 2,051 472 1,579 Provision for loan losses (establish initial allowance for expected lifetime credit losses for non-purchase credit deteriorated (”PCD”) loans) — — — 44,250 10,178 34,072 Total AFF purchase accounting adjustments $ 107,055 $ 24,623 $ 82,432 $ 48,413 $ 11,135 $ 37,278 The fair value adjustments on acquired finance receivables and leased merchandise resulted from the recognition of these acquired assets at fair value in purchase accounting, the amortization of which is non-cash.
Biggest changeThe following table provides a reconciliation between net income and diluted earnings per share, calculated in accordance with GAAP, to adjusted net income and adjusted diluted earnings per share, which are shown net of tax (unaudited, in thousands, except per share amounts): Year Ended December 31, 2023 2022 2021 In Thousands Per Share In Thousands Per Share In Thousands Per Share Net income and diluted earnings per share, as reported $ 219,301 $ 4.80 $ 253,495 $ 5.36 $ 124,909 $ 3.04 Adjustments, net of tax: Merger and acquisition expenses 6,089 0.13 2,878 0.06 11,872 0.29 Non-cash foreign currency (gain) loss related to lease liability (1,778) (0.04) (930) (0.02) 451 0.01 AFF purchase accounting and other adjustments (1) 54,341 1.19 82,432 1.74 37,278 0.91 Gain on revaluation of contingent acquisition consideration — — (90,035) (1.91) (13,761) (0.33) Other expenses (income), net (1,079) (0.02) (2,103) (0.04) 730 0.02 Adjusted net income and diluted earnings per share $ 276,874 $ 6.06 $ 245,737 $ 5.19 $ 161,479 $ 3.94 (1) See detail of the AFF purchase accounting and other adjustments in tables below. 64 Table of Contents The following table provides a reconciliation of the gross amounts, the impact of income taxes and the net amounts for the adjustments included in the table above (unaudited, in thousands): Year Ended December 31, 2023 2022 2021 Pre-tax Tax After-tax Pre-tax Tax After-tax Pre-tax Tax After-tax Merger and acquisition expenses $ 7,922 $ 1,833 $ 6,089 $ 3,739 $ 861 $ 2,878 $ 15,449 $ 3,577 $ 11,872 Non-cash foreign currency (gain) loss related to lease liability (2,540) (762) (1,778) (1,329) (399) (930) 644 193 451 AFF purchase accounting and other adjustments (i) 70,574 16,233 54,341 107,055 24,623 82,432 48,413 11,135 37,278 Gain on revaluation of contingent acquisition consideration — — — (109,549) (19,514) (90,035) (17,871) (4,110) (13,761) Other expenses (income), net (1,402) (323) (1,079) (2,731) (628) (2,103) 949 219 730 Total adjustments $ 74,554 $ 16,981 $ 57,573 $ (2,815) $ 4,943 $ (7,758) $ 47,584 $ 11,014 $ 36,570 (i) The following table details AFF purchase accounting and other adjustments (in thousands): 65 Table of Contents Year Ended December 31, 2023 2022 2021 Pre-tax Tax After-tax Pre-tax Tax After-tax Pre-tax Tax After-tax Amortization of fair value adjustment on acquired finance receivables $ — $ — $ — $ 42,657 $ 9,811 $ 32,846 $ 1,708 $ 392 $ 1,316 Amortization of fair value adjustment on acquired leased merchandise — — — 7,697 1,772 5,925 404 93 311 Amortization of acquired intangible assets 56,606 13,020 43,586 56,701 13,040 43,661 2,051 472 1,579 Other non-recurring costs included in administrative expenses related to a discontinued finance product 13,968 3,213 10,755 — — — — — — Provision for loan losses (establish initial allowance for expected lifetime credit losses for non-purchase credit deteriorated (”PCD”) loans) — — — — — — 44,250 10,178 34,072 Total AFF purchase accounting and other adjustments $ 70,574 $ 16,233 $ 54,341 $ 107,055 $ 24,623 $ 82,432 $ 48,413 $ 11,135 $ 37,278 66 Table of Contents 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.
Other material capital requirements include operating expenses (see Note 4 of Notes to Consolidated Financial Statements regarding operating lease commitments), maintenance capital expenditures related to its facilities, technology-related capital expenditures, general corporate operating activities, income tax payments and debt service, among others.
Other material capital requirements include operating expenses (see Note 4 of Notes to Consolidated Financial Statements regarding operating lease commitments), maintenance capital expenditures related to its facilities, technology platforms, general corporate operating activities, income tax payments and debt service, among others.
Finance receivables and revenue recognition - The Company purchases and services retail finance receivables, the term of which typically range from six and 24 months, directly from its merchant partners or from its bank partner.
Finance receivables and revenue recognition — The Company purchases and services retail finance receivables, the term of which typically range from six to 24 months, directly from its merchant partners or from its bank partner.
See “Non-GAAP Financial Information” for additional discussion of non-GAAP financial measures. 47 Table of Contents Operating Results for the Twelve Months Ended December 31, 2022 Compared to the Twelve Months Ended December 31, 2021 The COVID-19 pandemic and government responses thereto had an initial adverse and material impact on pawn loan demand in 2020, which negatively impacted pawn receivables, inventories and revenues.
See “Non-GAAP Financial Information” for additional discussion of non-GAAP financial measures. 47 Table of Contents Operating Results for the Twelve Months Ended December 31, 2023 Compared to the Twelve Months Ended December 31, 2022 The COVID-19 pandemic and government responses thereto had an initial adverse and material impact on pawn loan demand in 2020, which negatively impacted pawn receivables, inventories and revenues.
Unamortized origination fees, discounts and premiums are recognized in full upon early payoff or charge-off. The Company offers customers an early payoff discount on most of its finance receivables, whereby the customer has between 90 and 105 days to pay the full principal balance without incurring any interest charge.
Unamortized origination fees, discounts and premiums are recognized in full upon early payoff or charge-off. The Company offers customers an early payoff discount on most of its finance receivables, whereby the customer has between 90 and 101 days to pay the full principal balance without incurring any interest charge.
Operating expenses include salary and benefit expense of pawn-store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the pawn stores. Year Ended December 31, 2022 2021 Increase U.S.
Operating expenses include salary and benefit expense of pawn store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the pawn stores. Year Ended December 31, 2023 2022 Increase U.S.
Throughout 2021 and 2022, as the contributory impacts of the pandemic normalized, pawn loan demand steadily recovered and pawn receivables, inventories and revenues are now ahead of pre-pandemic levels. Inflationary pressures on the Company’s customer base helped drive further demand for consumer credit, especially among its customer base, which contributed to the recovery in pawn loan demand.
Throughout 2021 and 2022, as the contributory impacts of the pandemic normalized, pawn loan demand steadily recovered and pawn receivables, inventories and revenues are now ahead of pre-pandemic levels. Inflationary pressures on the Company’s customer base helped drive further demand for consumer credit, which contributed to the recovery in pawn loan demand.
The following tables and related discussion set forth key operating and financial data for the Company’s operations by reporting segment as of and for the years ended December 31, 2022 and 2021.
The following tables and related discussion set forth key operating and financial data for the Company’s operations by reporting segment as of and for the years ended December 31, 2023 and 2022.
Pawn stores also generate retail sales primarily from the merchandise acquired through collateral forfeitures and over-the-counter purchases from customers. With the AFF Acquisition, the Company is also a leading provider of technology-driven, retail POS payment solutions focused on serving credit-constrained consumers.
Pawn stores also generate retail sales primarily from the merchandise acquired through collateral forfeitures and over-the-counter purchases from customers. The Company is also a leading provider of technology-driven, retail POS payment solutions focused on serving credit-constrained consumers.
The U.S. pawn segment consists of all pawn operations in the U.S. and the Latin America pawn segment consists of all pawn operations in Mexico, Guatemala, Colombia and El Salvador. The retail POS payment solutions segment consists of the operations of AFF in the U.S. and Puerto Rico.
The U.S. pawn segment consists of pawn operations in the U.S., while the Latin America pawn segment consists of pawn operations in Mexico, Guatemala, Colombia and El Salvador. The retail POS payment solutions segment consists of the operations of AFF in the U.S. and Puerto Rico.
Liquidity and Capital Resources Material Capital Requirements The Company’s primary capital requirements include: • Expand pawn operations through growth of pawn receivables and inventories in existing stores, new store openings, strategic acquisition 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 of capital to shareholders through dividends and stock repurchases.
Liquidity and Capital Resources Material Capital Requirements The Company’s primary capital requirements include the following: • Expand pawn operations through growth of pawn receivables and inventories in existing stores, new store openings, strategic acquisitions of pawn stores and purchases of underlying 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.
For similar operating and financial data and discussion of the Company’s 2021 results compared to its 2020 results, refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 28, 2022.
For similar operating and financial data and discussion of the Company’s 2022 results compared to its 2021 results, refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 6, 2023.
The Company elected to repatriate cash of $47.5 million from certain foreign subsidiaries during 2022. 61 Table of Contents 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, interest rates, tax rates, gold prices, foreign currency exchange rates and the pace of new pawn store expansion and acquisitions.
The Company elected to repatriate cash of $31.0 million from certain foreign subsidiaries during 2023. 61 Table of Contents 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.
Unamortized fees, discounts and premiums are recognized in full upon early buyout or charge-off. 44 Table of Contents The Company accrues lease income earned but not yet collected as accrued rent receivable, which is included in accounts receivable, net in the accompanying consolidated balance sheets.
Unamortized fees, discounts and premiums are recognized in full upon early buyout or charge-off. The Company accrues lease income earned but not yet collected as accrued rent receivable, which is included in accounts receivable, net in the accompanying consolidated balance sheets.
Business—Governmental Regulation.” 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.
Business—Governmental Regulation.” 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 utilizing other structured financing arrangements, the leveraging of currently unencumbered real estate owned by the Company and/or changes to its management of current assets.
Some jewelry inventory is melted and processed at third-party facilities, 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.
Some jewelry inventory is melted and processed at third-party facilities, and the precious metal and diamond content is sold at either 44 Table of Contents prevailing market commodity prices or a previously agreed upon price with a commodity buyer.
The Company purchased the real estate at 44 store locations, primarily from landlords at existing stores, for a cumulative purchase price of $82.9 million during 2022. Expand Retail POS Payment Solutions Operations AFF expects to expand its business by promoting and expanding relationships with both new and existing customers and retail merchant partners.
The Company purchased the real estate at 44 store locations, primarily from landlords at existing stores, for a cumulative purchase price of $70.5 million during 2023. Expand Retail POS Payment Solutions Operations AFF expects to expand its business primarily by promoting and expanding relationships with both new and existing customers and retail merchant partners.
The translated value of Latin American earning assets as of December 31, 2022 compared to December 31, 2021 also benefited from a 6% favorable change in the end-of-period value of the Mexican peso compared to the U.S. dollar.
The translated value of Latin American earning assets as of December 31, 2023 compared to December 31, 2022 also benefited from a 13% favorable change in the end-of-period Mexican peso compared to the U.S. dollar.
In addition to utilizing cash flows generated from their own operations to fund expected 2023 growth, AFF has access to the additional sources of liquidity described below if needed to fund further expansion activities.
In addition to utilizing cash flows generated from its own operations to fund expected 2024 growth, AFF has access to the additional sources of liquidity described below if needed to fund further expansion activities.
Return of Capital to Shareholders In February 2023, the Company’s Board declared a $0.33 per share first quarter cash dividend on common shares outstanding, or an aggregate of $15.3 million based on the December 31, 2022 share count, to be paid on February 28, 2023 to stockholders of record as of February 14, 2023.
Return of Capital to Shareholders In January 2024, the Company’s Board declared a $0.35 per share first quarter cash dividend on common shares outstanding, or an aggregate of $15.8 million based on the December 31, 2023 share count, to be paid on February 28, 2024 to stockholders of record as of February 14, 2024.
The customer has the right to acquire the title either through an early buyout option or through payment of all required lease payments. The Company maintains ownership of the leased merchandise until all payment obligations are satisfied under the lease agreement.
The customer has the right to acquire the title either through an early buyout option or through payment of all required lease payments. The Company maintains ownership of the leased merchandise until all payment obligations are satisfied under the lease agreement. The customer has the right to cancel the lease at any time by returning the merchandise.
Inventories aged greater than one year in Latin America were 1% at both December 31, 2022 and 2021. 53 Table of Contents Pawn Lending Operations Latin America pawn loan receivables increased 18% (12% on a constant currency basis) as of December 31, 2022 compared to December 31, 2021, on both a total and same-store basis.
Inventories aged greater than one year in Latin America were 1% at both December 31, 2023 and 2022. 53 Table of Contents Pawn Lending Operations Latin America pawn loan receivables increased 18% (3% on a constant currency basis) as of December 31, 2023 compared to December 31, 2022.
Net borrowings on the credit facilities were $80.0 million during 2022 compared to net borrowings of $136.0 million during 2021. During 2022, the Company paid debt issuance costs of $1.8 million.
Net borrowings on the credit facilities were $230.3 million during 2023 compared to net borrowings of $80.0 million during 2022. The Company paid debt issuance costs of $0.3 million during 2023 compared to $1.8 million during 2022.
The Company performs its goodwill impairment assessment annually and between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company historically assessed goodwill for impairment as of December 31 each year.
The Company performs its goodwill impairment assessment annually as of October 1, and between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
The increase in operating expenses was primarily due to inflationary increases in wages and other certain operating costs and increased store-level incentive compensation driven by increased revenues and segment profit during 2022.
The increase in operating expenses was primarily due to acquired stores and a 5% increase in same-store operating expenses 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 2023 compared to 2022.
Segment Pre-Tax Operating Income The segment pre-tax operating income for 2022 was $142.0 million, which generated a pre-tax segment operating margin of 21% compared to $121.8 million and 21% in the prior year, respectively.
Segment Pre-Tax Operating Income The segment pre-tax operating income for 2023 was $156.2 million, which generated a pre-tax segment operating margin of 19% compared to $142.0 million and 21% in the prior year, respectively.
As of December 31, 2022, the Company’s primary sources of liquidity were $117.3 million in cash and cash equivalents and $278.8 million of available and unused funds under the Company's revolving unsecured credit facilities, subject to certain financial covenants (see Note 11 of Notes to Consolidated Financial Statements).
As of December 31, 2023, the Company’s primary sources of liquidity were $127.0 million in cash and cash equivalents and $104.7 million of available and unused funds under the Company's revolving unsecured credit facilities, subject to certain financial covenants (see Note 11 of Notes to Consolidated Financial Statements).
Segment Pre-Tax Operating Income The U.S. segment pre-tax operating income for 2022 was $291.1 million, which generated a pre-tax segment operating margin of 23% compared to $232.8 million and 22% in the prior year, respectively.
Segment Pre-Tax Operating Income The U.S. segment pre-tax operating income for 2023 was $336.3 million, which generated a pre-tax segment operating margin of 25% compared to $291.1 million and 23% in the prior year, respectively.
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. The Company believes constant currency results provide valuable supplemental information regarding the underlying performance of its business operations in Latin America, consistent with how the Company’s management evaluates such performance and operating results.
The Company believes constant currency results provide valuable supplemental information regarding the underlying performance of its business operations in Latin America, consistent with how the Company’s management evaluates such performance and operating results.
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 finance receivables, are included in investing activities. The portion of the AFF Acquisition consideration paid in cash, net of cash acquired, was $25.0 million.
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.
See “Non-GAAP Financial Information” for additional discussion of constant currency operating results. 43 Table of Contents Critical Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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.
Critical Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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.
The following table provides a reconciliation of net income to EBITDA and adjusted EBITDA (unaudited, in thousands): Year Ended December 31, 2022 2021 2020 Net income $ 253,495 $ 124,909 $ 106,579 Income taxes 70,138 41,593 37,120 Depreciation and amortization 103,832 45,906 42,105 Interest expense 70,708 32,386 29,344 Interest income (1,313) (696) (1,540) EBITDA 496,860 244,098 213,608 Adjustments: Merger and acquisition expenses 3,739 15,449 1,316 Non-cash foreign currency (gain) loss related to lease liability (1,329) 644 1,249 AFF purchase accounting adjustments (1) 50,354 46,362 — Gain on revaluation of contingent acquisition consideration (109,549) (17,871) — Other expenses (income), net (2,731) 949 9,064 Loss on extinguishment of debt — — 11,737 Adjusted EBITDA $ 437,344 $ 289,631 $ 236,974 (1) Excludes $56.7 million and $2.1 million of amortization expense related to identifiable intangible assets as a result of the AFF Acquisition for the twelve months ended December 31, 2022 and 2021, respectively, which is already included in the add-back of depreciation and amortization to net income used to calculate EBITDA.
The following table provides a reconciliation of net income to EBITDA and adjusted EBITDA (unaudited, in thousands): Year Ended December 31, 2023 2022 2021 Net income $ 219,301 $ 253,495 $ 124,909 Income taxes 73,548 70,138 41,593 Depreciation and amortization 109,161 103,832 45,906 Interest expense 93,243 70,708 32,386 Interest income (1,469) (1,313) (696) EBITDA 493,784 496,860 244,098 Adjustments: Merger and acquisition expenses 7,922 3,739 15,449 Non-cash foreign currency (gain) loss related to lease liability (2,540) (1,329) 644 AFF purchase accounting and other adjustments (1) 13,968 50,354 46,362 Gain on revaluation of contingent acquisition consideration — (109,549) (17,871) Other expenses (income), net (1,402) (2,731) 949 Adjusted EBITDA $ 511,732 $ 437,344 $ 289,631 (1) Excludes $56.6 million, $56.7 million and $2.1 million of amortization expense related to identifiable intangible assets as a result of the AFF Acquisition for 2023, 2022 and 2021, respectively, which is already included in the add-back of depreciation and amortization to net income used to calculate EBITDA.
The gross profit margin on retail merchandise sales was 36% during 2022 compared to 37% during 2021. Latin America inventories increased 30% (23% on a constant currency basis) from $65.8 million at December 31, 2021 to $85.7 million at December 31, 2022.
The gross profit margin on retail merchandise sales was 35% during 2023 compared to 36% during 2022. Latin America inventories increased 5% (8% decrease on a constant currency basis) from $85.7 million at December 31, 2022 to $90.2 million at December 31, 2023.
The following table reconciles cash flow from operating activities to free cash flow and adjusted free cash flow (unaudited, in thousands): 66 Table of Contents Year Ended December 31, 2022 2021 2020 Cash flow from operating activities $ 469,305 $ 223,304 $ 222,264 Cash flow from investing activities: Pawn loans, net (1) (35,817) (73,340) 105,418 Finance receivables, net (85,353) (5,844) 1,590 Purchases of furniture, fixtures, equipment and improvements (35,586) (42,022) (37,543) Free cash flow 312,549 102,098 291,729 Merger and acquisition expenses paid, net of tax benefit 2,878 11,872 991 Adjusted free cash flow $ 315,427 $ 113,970 $ 292,720 (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.
The following table reconciles cash flow from operating activities to free cash flow and adjusted free cash flow (unaudited, in thousands): 67 Table of Contents Year Ended December 31, 2023 2022 2021 Cash flow from operating activities $ 416,142 $ 469,305 $ 223,304 Cash flow from investing activities: Pawn loans, net (1) (34,978) (35,817) (73,340) Finance receivables, net (115,442) (85,353) (5,844) Purchases of furniture, fixtures, equipment and improvements (60,148) (35,586) (42,022) Free cash flow 205,574 312,549 102,098 Merger and acquisition expenses paid, net of tax benefit 6,089 2,878 11,872 Adjusted free cash flow $ 211,663 $ 315,427 $ 113,970 (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.
Charges for late fees and insufficient fund fees are recognized as income when collected. Initial direct costs related to the Companyʼs lease agreements are added to the basis of the leased property and recognized over the lease term in proportion to the recognition of lease income.
Initial direct costs related to the Companyʼs lease agreements are added to the basis of the leased property and recognized over the lease term in proportion to the recognition of lease income.
The increase in the segment pre-tax operating income and margin reflected a 13% increase in net revenue, further leveraged by a 7% increase in segment expenses. 51 Table of Contents Latin America Pawn Segment Latin American results of operations for 2022 compared to 2021 benefited from a 1% favorable change in the average value of the Mexican peso compared to the U.S. dollar.
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. 51 Table of Contents Latin America Pawn Segment Latin America pawn segment pre-tax operating income for 2023 compared to 2022 benefited from an 11% favorable change in the average value of the Mexican peso compared to the U.S. dollar.
During 2022, the Company repurchased 2,204,000 shares of common stock at an aggregate cost of $157.9 million and an average cost per share of $71.63, and during 2021, repurchased 688,000 shares of common stock at an aggregate cost of $49.6 million and an average cost per share of $72.10.
The Company incurred $1.1 million of excise taxes during 2023. During 2022, the Company repurchased 2,204,000 shares of common stock at an aggregate cost of $157.9 million and an average cost per share of $71.63.
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): Year Ended December 31, 2022 2021 2020 Cash flow provided by operating activities $ 469,305 $ 223,304 $ 222,264 Cash flow used in investing activities (336,443) (744,637) (20,352) Cash flow (used in) provided by financing activities (139,273) 576,993 (186,502) As of December 31, 2022 2021 2020 Working capital $ 835,133 $ 737,151 $ 418,159 Current ratio 3.8:1 2.9:1 3.0:1 Cash Flow Provided by Operating Activities Net cash provided by operating activities increased $246.0 million, or 110%, from $223.3 million for 2021 to $469.3 million for 2022, due to 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), and an increase in net income of $128.6 million.
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): Year Ended December 31, 2023 2022 2021 Cash flow provided by operating activities $ 416,142 $ 469,305 $ 223,304 Cash flow used in investing activities (462,332) (336,443) (744,637) Cash flow provided by (used in) financing activities 51,313 (139,273) 576,993 As of December 31, 2023 2022 2021 Working capital $ 971,009 $ 835,133 $ 737,151 Current ratio 3.9:1 3.8:1 2.9:1 Cash Flow Provided by Operating Activities Net cash provided by operating activities decreased $53.2 million, or 11%, from $469.3 million for 2022 to $416.1 million for 2023, as a decrease in net income of $34.2 million was partially 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).
See Note 14 of Notes to Consolidated Financial Statements. 46 Table of Contents Results of Operations 2022 Consolidated Operating Results Highlights The following table sets forth revenue, net income, diluted earnings per share, adjusted net income, adjusted diluted earnings per share, EBITDA and adjusted EBITDA for the year ended December 31, 2022 as compared to the year ended December 31, 2021 (in thousands, except per share amounts): Year Ended December 31, As Reported (GAAP) Adjusted (Non-GAAP) 2022 2021 2022 2021 Revenue $ 2,728,942 $ 1,698,965 $ 2,771,599 $ 1,700,673 Net income $ 253,495 $ 124,909 $ 245,737 $ 161,479 Diluted earnings per share $ 5.36 $ 3.04 $ 5.19 $ 3.94 EBITDA (non-GAAP measure) $ 496,860 $ 244,098 $ 437,344 $ 289,631 Weighted-average diluted shares 47,330 41,024 47,330 41,024 See “Non-GAAP Financial Information—Adjusted Net Income and Adjusted Diluted Earnings Per Share and —Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA” below.
See Note 14 of Notes to Consolidated Financial Statements. 46 Table of Contents Results of Operations 2023 Consolidated Operating Results Highlights The following table sets forth revenue, net income, diluted earnings per share, adjusted net income, adjusted diluted earnings per share, EBITDA and adjusted EBITDA for the year ended December 31, 2023 as compared to the year ended December 31, 2022 (in thousands, except per share amounts): Year Ended December 31, As Reported (GAAP) Adjusted (Non-GAAP) 2023 2022 2023 2022 Revenue $ 3,151,796 $ 2,728,942 $ 3,151,796 $ 2,771,599 Net income $ 219,301 $ 253,495 $ 276,874 $ 245,737 Diluted earnings per share $ 4.80 $ 5.36 $ 6.06 $ 5.19 EBITDA (non-GAAP measure) $ 493,784 $ 496,860 $ 511,732 $ 437,344 Weighted-average diluted shares 45,693 47,330 45,693 47,330 See “Non-GAAP Financial Information—Adjusted Net Income and Adjusted Diluted Earnings Per Share and —Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA” below.
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.
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.
While the Company intends to continue repurchases under its active share repurchase programs, 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, the Company’s dividend policy and the availability of alternative investment opportunities.
The Company intends to continue repurchases under its active share repurchase program, including 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, liquidity needs, credit availability, debt covenant restrictions, general business and economic conditions, regulatory requirements, the market price of the Company’s stock, the Company’s dividend policy and the availability of alternative investment opportunities.
The following charts present net income, adjusted net income, diluted earnings per share, adjusted diluted earnings per share, EBITDA, adjusted EBITDA and earning assets, which consist of pawn loans, finance receivables, inventories and leased merchandise, as of and for the years ended December 31, 2022, 2021 and 2020 (in millions, except per share amounts): * Non-GAAP financial measures.
The following charts present net income, adjusted net income, diluted earnings per share, adjusted diluted earnings per share, EBITDA, adjusted EBITDA, revenue and adjusted revenue for the years ended December 31, 2023, 2022 and 2021 (in millions, except per share amounts): * Non-GAAP financial measures.
Although viewed by management as a discretionary expenditure not required to operate its pawn stores, the Company may continue to purchase real estate from its landlords at existing stores or in conjunction with pawn store acquisitions, as opportunities arise at reasonable valuations.
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. 60 Table of Contents Although viewed by management as a discretionary expenditure not required to operate its pawn stores, the Company may continue to strategically purchase real estate from its landlords at existing stores or in conjunction with pawn store acquisitions as opportunities arise at reasonable valuations.
The Company believes that net cash provided by operating activities and available and unused funds under its revolving unsecured credit facilities will be adequate to meet its liquidity and capital needs for these items in the short-term over the next 12 months and also in the long-term beyond the next 12 months. 60 Table of Contents Expand Pawn Operations The Company intends to continue expansion through the growth of earning assets at existing locations, new store openings and acquisitions.
The Company believes that net cash provided by operating activities and available and unused funds under its revolving unsecured credit facilities will be adequate to meet its liquidity and capital needs for these items over the next 12 months and also in the longer term beyond the next 12 months.
In addition, AFF customers generally exercise the early buyout option on their existing lease or finance receivable more frequently during the first quarter due to tax refund proceeds. Retail sales are seasonally higher in the fourth quarter associated with holiday shopping and, to a lesser extent, in the first quarter due to tax refunds in the U.S.
In addition, AFF customers generally exercise the early buyout option on their existing lease or finance receivable more frequently during the first quarter due to tax refund proceeds.
The Company also recognized a $4.6 million permanent domestic tax benefit during 2022 pursuant to the $109.5 million gain on revaluation of certain contingent consideration related to the AFF Acquisition as described above. See Note 12 of Notes to Consolidated Financial Statements.
The Company recognized a gain on revaluation of contingent acquisition consideration of $109.5 million during 2022 as a result of a decrease in the liability for the estimated fair value of certain contingent consideration related to the AFF Acquisition. See Note 6 of Notes to Consolidated Financial Statements.
The following table presents segment pre-tax operating income as reported and as adjusted to exclude the impacts of purchase accounting for the year ended December 31, 2022 (in thousands).
The following table presents segment pre-tax operating income and other operating metrics of the Latin America pawn segment for the year ended December 31, 2023 as compared to the year ended December 31, 2022 (dollars in thousands).
The increase in total and same-store pawn receivables was primarily due to the continued recovery in pawn loan demand during 2022 to pre-pandemic levels. Latin America pawn loan fees increased 10% (also 10% on a constant currency basis), totaling $188.0 million during 2022 compared to $170.4 million for 2021.
Latin America pawn loan fees increased 19% (5% on a constant currency basis), to $222.8 million during 2023 compared to $188.0 million for 2022. Same-store pawn loan fees increased 18% (5% on a constant currency basis) during 2023 compared to 2022. The increase in total and same-store constant currency pawn loan fees was primarily due to increased pawn receivable balances.
The Company accrues interest income during the early payoff discount period but records a reserve for loans expected to pay the full principal balance prior to the expiration of the early payoff discount period based on historical payment patterns.
The Company accrues interest income during the early payoff discount period but records a reserve for loans expected to pay the full principal balance prior to the expiration of the early payoff discount period based on historical payment patterns. 45 Table of Contents Provision for loan losses — Expected lifetime losses on finance receivables are recognized upon loan purchase, which requires the Company to make its best estimate of probable lifetime losses at the time of purchase.
Year Ended December 31, 2022 As Reported Adjusted (GAAP) Adjustments (Non-GAAP) Retail POS Payment Solutions Segment Revenue: Leased merchandise income $ 622,163 $ — $ 622,163 Interest and fees on finance receivables 181,280 42,657 223,937 Total revenue 803,443 42,657 846,100 Cost of revenue: Depreciation of leased merchandise 354,104 (7,697) 346,407 Provision for lease losses 140,118 — 140,118 Provision for loan losses 118,502 — 118,502 Total cost of revenue 612,724 (7,697) 605,027 Net revenue 190,719 50,354 241,073 Segment expenses: Operating expenses 128,616 — 128,616 Depreciation and amortization 2,912 — 2,912 Total segment expenses 131,528 — 131,528 Segment pre-tax operating income $ 59,191 $ 50,354 $ 109,545 57 Table of Contents The following table presents segment pre-tax operating income as reported and as adjusted to exclude the impacts of purchase accounting for the period from December 17, 2021 through December 31, 2021 (in thousands).
Adjusted (1) Year Ended Year Ended December 31, December 31, 2022 Increase 2023 2022 Increase (Non-GAAP) (Non-GAAP) Retail POS Payment Solutions Segment Revenue: Leased merchandise income $ 752,682 $ 622,163 21 % $ 622,163 21 % Interest and fees on finance receivables 233,818 181,280 29 % 223,937 4 % Total revenue 986,500 803,443 23 % 846,100 17 % Cost of revenue: Depreciation of leased merchandise 413,546 354,104 17 % 346,407 19 % Provision for lease losses 177,418 140,118 27 % 140,118 27 % Provision for loan losses 123,030 118,502 4 % 118,502 4 % Total cost of revenue 713,994 612,724 17 % 605,027 18 % Net revenue 272,506 190,719 43 % 241,073 13 % Segment expenses: Operating expenses 137,460 128,616 7 % 128,616 7 % Depreciation and amortization 3,030 2,912 4 % 2,912 4 % Total segment expenses 140,490 131,528 7 % 131,528 7 % Segment pre-tax operating income $ 132,016 $ 59,191 123 % $ 109,545 21 % (1) As a result of purchase accounting, AFF’s as reported amounts for 2022 contain significant fair value adjustments.
See the retail POS payment solutions segment tables in “Results of Operations” above for additional segment-level reconciliations. Constant Currency Results The Company’s reporting currency is the U.S. dollar. However, certain performance metrics discussed in this report are presented on a “constant currency” basis, which is considered a non-GAAP financial measure.
The adjusted amounts for 2022 and 2021 exclude these fair value purchase accounting adjustments. Constant Currency Results The Company’s reporting currency is the U.S. dollar, however, certain performance metrics discussed in this report are presented on a “constant currency” basis, which is considered a non-GAAP financial measure.
Business operations in Mexico, Guatemala and Colombia are transacted in Mexican pesos, Guatemalan quetzales and Colombian pesos. The Company also has operations in El Salvador, where the reporting and functional currency is the U.S. dollar.
The Company’s management uses constant currency results to evaluate operating results of business operations in Latin America, which are transacted in local currencies in Mexico, Guatemala and Colombia. The Company also has operations in El Salvador where the reporting and functional currency is the U.S. dollar.
The Company also paid $71.8 million in cash related to current and prior-year pawn store acquisitions, $35.6 million for furniture, fixtures, equipment and improvements and $82.9 million for discretionary pawn store real property purchases during 2022 compared to $462.1 million, $81.8 million, $42.0 million and $79.5 million in 2021, respectively.
During 2022, the portion of the AFF Acquisition consideration paid in cash, net of cash acquired, was $25.0 million. The Company paid $60.1 million for furniture, fixtures, equipment and improvements and $70.5 million for discretionary pawn store real property purchases during 2023 compared to $35.6 million and $82.9 million in 2022, respectively.
If an account is deemed to be uncollectible prior to this date, the Company will charge off the finance receivable at the point in time it is deemed uncollectible. 45 Table of Contents Business combinations - Business combination accounting requires the Company to determine the fair value of all assets acquired, including identifiable intangible assets, liabilities assumed and contingent consideration issued in a business combination.
Business combinations — Business combination accounting requires the Company to determine the fair value of all assets acquired, including identifiable intangible assets, liabilities assumed and contingent consideration issued in a business combination.
The Company funded $157.9 million for share repurchases and paid dividends of $59.6 million during 2022, compared to funding $49.6 million of share repurchases and dividends paid of $47.5 million during 2021.
The Company funded $114.4 million for share repurchases and paid dividends of $61.9 million during 2023, compared to funding $157.9 million of share repurchases and dividends paid of $59.6 million during 2022. In addition, the Company paid withholding taxes on net share settlements of restricted stock awards during 2023 of $2.5 million.
See Note 3 of Notes to Consolidated Financial Statements. 58 Table of Contents Consolidated Results of Operations The following table reconciles pre-tax operating income of the Company’s U.S. pawn segment, Latin America pawn segment and retail POS payment solutions segment, discussed above, to consolidated net income for the year ended December 31, 2022 as compared to the year ended December 31, 2021 (dollars in thousands): Year Ended December 31, Increase / 2022 2021 (Decrease) Consolidated Results of Operations Segment pre-tax operating income (loss): U.S. pawn $ 291,113 $ 232,833 25 % Latin America pawn 142,027 121,812 17 % Retail POS payment solutions (1) 59,191 (40,515) 246 % Intersegment eliminations (2) (1,096) — — % Consolidated segment pre-tax operating income 491,235 314,130 56 % Corporate expenses and other income: Administrative expenses 147,943 111,259 33 % Depreciation and amortization 59,390 5,716 939 % Interest expense 70,708 32,386 118 % Interest income (1,313) (696) 89 % (Gain) loss on foreign exchange (585) 436 (234) % Merger and acquisition expenses 3,739 15,449 (76) % Gain on revaluation of contingent acquisition consideration (109,549) (17,871) (513) % Other expenses (income), net (2,731) 949 (388) % Total corporate expenses and other income 167,602 147,628 14 % Income before income taxes 323,633 166,502 94 % Provision for income taxes 70,138 41,593 69 % Net income $ 253,495 $ 124,909 103 % (1) The AFF segment results are significantly impacted by certain purchase accounting adjustments, as noted in the retail POS payment solutions segment results of operations above.
Consolidated Results of Operations The following table reconciles pre-tax operating income of the Company’s U.S. pawn segment, Latin America pawn segment and retail POS payment solutions segment, discussed above, to consolidated net income for the year ended December 31, 2023 as compared to the year ended December 31, 2022 (dollars in thousands): Year Ended December 31, Increase / 2023 2022 (Decrease) Consolidated Results of Operations Segment pre-tax operating income: U.S. pawn $ 336,306 $ 291,113 16 % Latin America pawn 156,222 142,027 10 % Retail POS payment solutions (1) 132,016 59,191 123 % Intersegment eliminations (2) 581 (1,096) (153) % Consolidated segment pre-tax operating income 625,125 491,235 27 % Corporate expenses and other income: Administrative expenses 176,315 147,943 19 % Depreciation and amortization 59,196 59,390 — % Interest expense 93,243 70,708 32 % Interest income (1,469) (1,313) 12 % Gain on foreign exchange (1,529) (585) 161 % Merger and acquisition expenses 7,922 3,739 112 % Gain on revaluation of contingent acquisition consideration — (109,549) 100 % Other expenses (income), net (1,402) (2,731) 49 % Total corporate expenses and other income 332,276 167,602 98 % Income before income taxes 292,849 323,633 (10) % Provision for income taxes 73,548 70,138 5 % Net income $ 219,301 $ 253,495 (13) % (1) The AFF segment results for 2022 are significantly impacted by certain purchase accounting adjustments, as noted in the retail POS payment solutions segment results of operations above.
Inventories aged greater than one year in the U.S. were 1% at both December 31, 2022 and 2021. 50 Table of Contents Pawn Lending Operations U.S. pawn loan receivables as of December 31, 2022 increased 10% in total and 8% on a same-store basis compared to December 31, 2021.
Pawn Lending Operations U.S. pawn loan receivables as of December 31, 2023 increased 22% in total and 14% on a same-store basis compared to December 31, 2022.
The Company depreciates leased merchandise over the life of the lease and assumes no salvage value. Depreciation is accelerated upon an early buyout. All of the Company’s leased merchandise represents on-lease merchandise and all leases are operating leases. Lease income is recognized over the lease term and is recorded net of any sales taxes collected.
All of the Company’s leased merchandise represents on-lease merchandise and all leases are operating leases. Lease income is recognized over the lease term and is recorded net of any sales taxes collected. Charges for late fees and insufficient fund fees are recognized as income when collected.
Recent Accounting Pronouncements See discussion in Note 2 of Notes to Consolidated Financial Statements.
See Note 12 of Notes to Consolidated Financial Statements.
Pawn Segment Earning assets: Pawn loans $ 282,089 $ 256,311 10 % Inventories 202,594 197,486 3 % $ 484,683 $ 453,797 7 % Average outstanding pawn loan amount (in ones) $ 247 $ 222 11 % Composition of pawn collateral: General merchandise 30 % 34 % Jewelry 70 % 66 % 100 % 100 % Composition of inventories: General merchandise 41 % 45 % Jewelry 59 % 55 % 100 % 100 % Percentage of inventory aged greater than one year 1 % 1 % Inventory turnover (trailing twelve months cost of merchandise sales divided by average inventories) 2.7 times 2.8 times 49 Table of Contents The following table presents segment pre-tax operating income and other operating metrics of the U.S. pawn segment for the year ended December 31, 2022 compared to the year ended December 31, 2021 (dollars in thousands).
Pawn Segment Earning assets: Pawn loans $ 344,152 $ 282,089 22 % Inventories 221,843 202,594 10 % $ 565,995 $ 484,683 17 % Average outstanding pawn loan amount (in ones) $ 258 $ 247 4 % Composition of pawn collateral: General merchandise 30 % 30 % Jewelry 70 % 70 % 100 % 100 % Composition of inventories: General merchandise 43 % 41 % Jewelry 57 % 59 % 100 % 100 % Percentage of inventory aged greater than one year 1 % 1 % Inventory turnover (trailing twelve months cost of merchandise sales divided by average inventories) 2.8 times 2.7 times Retail Merchandise Sales Operations U.S. retail merchandise sales increased 4% to $854.2 million during 2023 compared to $818.5 million for 2022.
Cash Flow Used in Investing Activities Net cash used in investing activities decreased $408.2 million, or 55%, from $744.6 million during 2021 to $336.4 million during 2022.
Cash Flow Used in Investing Activities Net cash used in investing activities increased $125.9 million, or 37%, from $336.4 million during 2022 to $462.3 million during 2023.
See Note 11 of Notes to Consolidated Financial Statements and “Liquidity and Capital Resources.” Merger and acquisition expenses decreased to $3.7 million during 2022 compared to $15.4 million during 2021, reflecting timing of transaction costs primarily related to the AFF Acquisition in 2021. Approximately $1.5 million of the 2022 expense related to pawn acquisitions.
See Note 11 of Notes to Consolidated Financial Statements and “Liquidity and Capital Resources.” Merger and acquisition expenses increased 112% to $7.9 million during 2023 compared to $3.7 million during 2022, reflecting an increased level of acquisition activity in 2023 compared to 2022.
The increase in total and same-store pawn receivables was primarily due to the continued recovery in pawn loan demand to pre-pandemic levels, combined with inflationary pressures driving additional demand for consumer credit. U.S. pawn loan fees increased 22% to $373.4 million during 2022 compared to $305.4 million for 2021. Same-store pawn fees increased 20% during 2022 compared to 2021.
The increase in total pawn receivables was due to incremental pawn loans from acquired stores and an increase in same-store pawn receivables, which the Company believes was primarily due to continued inflationary pressures driving additional demand for pawn loans and tightened underwriting for other competing forms of consumer credit. 50 Table of Contents U.S. pawn loan fees increased 17% to $435.8 million during 2023 compared to $373.4 million for 2022.
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): Year Ended December 31, 2022 2021 2020 Total revenue, as reported $ 2,728,942 $ 1,698,965 $ 1,631,284 AFF purchase accounting adjustments (1) 42,657 1,708 — Adjusted total revenue $ 2,771,599 $ 1,700,673 $ 1,631,284 (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.
Additionally, the following table provides reconciliations of total revenue and total net revenue, presented in accordance with GAAP, to adjusted total revenue and adjusted net revenue, which excludes the impacts of purchase accounting (in thousands): Year Ended December 31, 2023 2022 2021 Total revenue, as reported $ 3,151,796 $ 2,728,942 $ 1,698,965 AFF purchase accounting and other adjustments (1) — 42,657 1,708 Adjusted total revenue $ 3,151,796 $ 2,771,599 $ 1,700,673 Total net revenue, as reported $ 1,507,239 $ 1,264,586 $ 919,152 AFF purchase accounting and other adjustments (1) — 50,354 46,362 Adjusted total net revenue $ 1,507,239 $ 1,314,940 $ 965,514 (1) As a result of purchase accounting, AFF’s as reported amounts for 2022 and 2021 contain significant fair value adjustments.
While the Company expects some level of 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.
Net interest expense is expected to increase in 2024 compared to 2023 due to (i) increased borrowings primarily undertaken to fund recent acquisitions and (ii) anticipated higher floating interest rates on the borrowings under the revolving credit facilities.
The following table provides exchange rates for the Mexican peso, Guatemalan quetzal and Colombian peso for the current and prior-year periods: 2022 2021 2020 Rate % Change Over Prior- Year Period Favorable / (Unfavorable) Rate % Change Over Prior- Year Period Favorable / (Unfavorable) Rate Mexican peso / U.S. dollar exchange rate: End-of-period 19.4 6 % 20.6 (4) % 19.9 Twelve months ended 20.1 1 % 20.3 6 % 21.5 Guatemalan quetzal / U.S. dollar exchange rate: End-of-period 7.9 (3) % 7.7 1 % 7.8 Twelve months ended 7.7 — % 7.7 — % 7.7 Colombian peso / U.S. dollar exchange rate: End-of-period 4,810 (21) % 3,981 (16) % 3,433 Twelve months ended 4,253 (14) % 3,742 (1) % 3,693 The Company’s management reviews and analyzes operating results in Latin America on a constant currency basis because the Company believes this better represents the Company’s underlying business trends.
See the Latin America pawn segment tables in “Results of Operations” above for additional reconciliation of certain constant currency amounts to as reported GAAP amounts. 68 Table of Contents The following table provides exchange rates for the Mexican peso, Guatemalan quetzal and Colombian peso for the current and prior-year periods: 2023 2022 2021 Rate % Change Over Prior- Year Period Favorable / (Unfavorable) Rate % Change Over Prior- Year Period Favorable / (Unfavorable) Rate Mexican peso / U.S. dollar exchange rate: End-of-period 16.9 13 % 19.4 6 % 20.6 Twelve months ended 17.8 11 % 20.1 1 % 20.3 Guatemalan quetzal / U.S. dollar exchange rate: End-of-period 7.8 1 % 7.9 (3) % 7.7 Twelve months ended 7.8 (1) % 7.7 — % 7.7 Colombian peso / U.S. dollar exchange rate: End-of-period 3,822 21 % 4,810 (21) % 3,981 Twelve months ended 4,328 (2) % 4,253 (14) % 3,742 Effects of Inflation While the impacts of inflation have been widely reported and may be ongoing into the foreseeable future, the Company does not believe inflation had a material effect on the Company’s overall results of operations in 2023.
The Company funded a net increase in pawn loans of $35.8 million during 2022 and $73.3 million during 2021. The Company funded a net increase in finance receivables of $85.4 million during 2022 and $5.8 million during 2021.
The Company paid $181.3 million in cash related to pawn store acquisitions during 2023 compared to $71.8 million during 2022. The Company funded a net increase in pawn loans of $35.0 million during 2023 and $35.8 million during 2022.
Segment Expenses Store operating expenses increased 8% (7% on a constant currency basis) to $193.3 million during 2022 compared to $179.0 million during 2021, reflecting continued store growth and inflationary pressure on labor and other operating expenses during the current period. Same-store operating expenses increased 7% (6% on a constant currency basis) compared to the prior-year period.
Segment Expenses Store operating expenses increased 26% (13% on a constant currency basis) to $243.1 million during 2023 compared to $193.3 million during 2022. Same-store operating expenses increased 24% (11% on a constant currency basis) compared to the prior year.
Cash Flow Used in Financing Activities 62 Table of Contents Net cash provided by financing activities decreased $716.3 million, or 124%, from net cash provided by financing activities of $577.0 million during 2021 to net cash used in financing activities of $139.3 million during 2022.
The Company funded a net increase in finance receivables of $115.4 million during 2023 and $85.4 million during 2022. 62 Table of Contents Cash Flow Provided by Financing Activities Net cash provided by financing activities increased $190.6 million, or 137%, from net cash used in financing activities of $139.3 million during 2022 to net cash provided by financing activities of $51.3 million during 2023.
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.
See detail of AFF purchase accounting and other adjustments in the “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section above. 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.
Financial information regarding the Company’s revenue and long-lived assets by geographic areas is provided in Note 17 of Notes to Consolidated Financial Statements. Business operations in Mexico, Guatemala and Colombia are transacted in Mexican pesos, Guatemalan quetzales and Colombian pesos. The Company also has operations in El Salvador, where the reporting and functional currency is the U.S. dollar.
Financial information regarding the Company’s revenue and long-lived assets by geographic area is provided in Note 17 of Notes to Consolidated Financial Statements.
Same-store retail sales increased 8% during 2022 compared to 2021. The increase in total and same-store retail sales was primarily due to increased inventory levels during 2022 compared to 2021 and greater demand for value-priced consumer goods, with such demand driven in part by inflationary pressures on the Company’s customers.
The increase in total and same-store retail sales was primarily due to greater demand for value-priced consumer goods, with such demand believed to be driven in part by the impact of increases in government-mandated minimum wage and benefit programs in Mexico benefiting many cash-constrained consumers.
Adjusted retail POS payment solutions segment pre-tax operating income, excluding such purchase accounting adjustments, was $109.5 million for 2022 and $5.8 million for 2021. The year ended December 31, 2021 includes the results of operations for AFF for the period December 17, 2021 to December 31, 2021.
Adjusted retail POS payment solutions segment pre-tax operating income, excluding such purchase accounting adjustments, was $109.5 million for 2022. (2) Represents the elimination of intersegment transactions related to the Company offering AFF’s LTO payment solution in its U.S. pawn stores.
Pawn Segment The following table details earning assets, which consist of pawn loans and inventories as well as other earning asset metrics of the U.S. pawn segment, as of December 31, 2022 as compared to December 31, 2021 (dollars in thousands, except as otherwise noted): As of December 31, 2022 2021 Increase U.S.
Pawn Segment The following table presents segment pre-tax operating income and other operating metrics of the U.S. pawn segment for the year ended December 31, 2023 compared to the year ended December 31, 2022 (dollars in thousands).
The Company evaluates potential acquisitions based upon growth potential, purchase price, available liquidity, strategic fit and quality of management personnel, among other factors. During 2022, the Company acquired 30 pawn stores in the U.S. and one store in Guatemala for an aggregate purchase price of $73.0 million, net of cash acquired and subject to future post-closing adjustments.
The Company evaluates potential acquisitions based upon growth potential, purchase price, available liquidity, strategic fit and quality of management personnel, among other factors. For 2024, the Company expects to add approximately 75 store locations through new store openings and acquisitions.
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 December 31, 2022 as compared to December 31, 2021 (dollars in thousands, except as otherwise noted): Constant Currency Basis As of December 31, As of December 31, 2022 Increase 2022 2021 Increase (Non-GAAP) (Non-GAAP) Latin America Pawn Segment Earning assets: Pawn loans $ 108,528 $ 91,662 18 % $ 102,573 12 % Inventories 85,745 65,825 30 % 81,013 23 % $ 194,273 $ 157,487 23 % $ 183,586 17 % Average outstanding pawn loan amount (in ones) $ 83 $ 77 8 % $ 79 3 % Composition of pawn collateral: General merchandise 67 % 67 % Jewelry 33 % 33 % 100 % 100 % Composition of inventories: General merchandise 71 % 68 % Jewelry 29 % 32 % 100 % 100 % Percentage of inventory aged greater than one year 1 % 1 % Inventory turnover (trailing twelve months cost of merchandise sales divided by average inventories) 4.2 times 4.2 times 52 Table of Contents The following table presents segment pre-tax operating income and other operating metrics of the Latin America pawn segment for the year ended December 31, 2022 as compared to the year ended December 31, 2021 (dollars in thousands).
Constant Currency Basis Year Ended Year Ended December 31, Increase / December 31, 2023 (Decrease) 2023 2022 Increase (Non-GAAP) (Non-GAAP) Latin America Pawn Segment Revenue: Retail merchandise sales $ 533,612 $ 447,523 19 % $ 474,744 6 % Pawn loan fees 222,774 187,974 19 % 198,013 5 % Wholesale scrap jewelry sales 46,917 39,969 17 % 46,917 17 % Total revenue 803,303 675,466 19 % 719,674 7 % Cost of revenue: Cost of retail merchandise sold 345,309 288,449 20 % 307,442 7 % Cost of wholesale scrap jewelry sold 37,276 33,411 12 % 33,006 (1) % Total cost of revenue 382,585 321,860 19 % 340,448 6 % Net revenue 420,718 353,606 19 % 379,226 7 % Segment expenses: Operating expenses 243,146 193,254 26 % 217,507 13 % Depreciation and amortization 21,350 18,325 17 % 19,199 5 % Total segment expenses 264,496 211,579 25 % 236,706 12 % Segment pre-tax operating income $ 156,222 $ 142,027 10 % $ 142,520 — % Operating metrics: Retail merchandise sales margin 35 % 36 % 35 % Net revenue margin 52 % 52 % 53 % Segment pre-tax operating margin 19 % 21 % 20 % 52 Table of Contents 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 December 31, 2023 as compared to December 31, 2022 (dollars in thousands, except as otherwise noted): Constant Currency Basis As of December 31, Increase / As of December 31, 2023 (Decrease) 2023 2022 Increase (Non-GAAP) (Non-GAAP) Latin America Pawn Segment Earning assets: Pawn loans $ 127,694 $ 108,528 18 % $ 112,110 3 % Inventories 90,246 85,745 5 % 79,218 (8) % $ 217,940 $ 194,273 12 % $ 191,328 (2) % Average outstanding pawn loan amount (in ones) $ 95 $ 83 14 % $ 84 1 % Composition of pawn collateral: General merchandise 63 % 67 % Jewelry 37 % 33 % 100 % 100 % Composition of inventories: General merchandise 67 % 71 % Jewelry 33 % 29 % 100 % 100 % Percentage of inventory aged greater than one year 1 % 1 % Inventory turnover (trailing twelve months cost of merchandise sales divided by average inventories) 4.4 times 4.2 times Retail Merchandise Sales Operations Latin America retail merchandise sales increased 19% (6% on a constant currency basis) to $533.6 million during 2023 compared to $447.5 million for 2022.
Pawn Segment Revenue: Retail merchandise sales $ 818,548 $ 742,374 10 % Pawn loan fees 373,416 305,350 22 % Wholesale scrap jewelry sales 63,004 27,163 132 % Total revenue 1,254,968 1,074,887 17 % Cost of revenue: Cost of retail merchandise sold 478,718 416,039 15 % Cost of wholesale scrap jewelry sold 54,893 22,886 140 % Total cost of revenue 533,611 438,925 22 % Net revenue 721,357 635,962 13 % Segment expenses: Operating expenses 407,039 380,895 7 % Depreciation and amortization 23,205 22,234 4 % Total segment expenses 430,244 403,129 7 % Segment pre-tax operating income $ 291,113 $ 232,833 25 % Operating metrics: Retail merchandise sales margin 42 % 44 % Net revenue margin 57 % 59 % Segment pre-tax operating margin 23 % 22 % Retail Merchandise Sales Operations U.S. retail merchandise sales increased 10% to $818.5 million during 2022 compared to $742.4 million for 2021.
Pawn Segment Revenue: Retail merchandise sales $ 854,190 $ 818,548 4 % Pawn loan fees 435,762 373,416 17 % Wholesale scrap jewelry sales 78,571 63,004 25 % Total revenue 1,368,523 1,254,968 9 % Cost of revenue: Cost of retail merchandise sold 490,544 478,718 2 % Cost of wholesale scrap jewelry sold 64,545 54,893 18 % Total cost of revenue 555,089 533,611 4 % Net revenue 813,434 721,357 13 % Segment expenses: Operating expenses 451,543 407,039 11 % Depreciation and amortization 25,585 23,205 10 % Total segment expenses 477,128 430,244 11 % Segment pre-tax operating income $ 336,306 $ 291,113 16 % Operating metrics: Retail merchandise sales margin 43 % 42 % Net revenue margin 59 % 57 % Segment pre-tax operating margin 25 % 23 % 49 Table of Contents The following table details earning assets, which consist of pawn loans and inventories as well as other earning asset metrics of the U.S. pawn segment, as of December 31, 2023 as compared to December 31, 2022 (dollars in thousands, except as otherwise noted): As of December 31, 2023 2022 Increase U.S.
Same-store pawn fees increased 9% (also 9% on a constant currency basis) during 2022 compared to 2021. The increase in total and same-store constant currency pawn loan fees was primarily due to the continued recovery of pawn loan receivables.
On a same-store basis, pawn loan receivables increased 17% (3% on a constant currency basis) as of December 31, 2023 compared to December 31, 2022.
Corporate depreciation and amortization expenses increased 939% to $59.4 million during 2022 compared to $5.7 million in 2021, primarily due to $56.7 million in amortization expense during 2022, the majority of which related to identified intangible assets in the AFF Acquisition, compared to $2.1 million during 2021. 59 Table of Contents Interest expense increased 118% to $70.7 million during 2022 compared to $32.4 million for 2021, primarily due to an increase in the Company’s outstanding senior unsecured notes and higher interest rates and higher average balances outstanding on the Company’s unsecured credit facilities.
As a percentage of revenue, administrative expenses increased from 5% during 2022 to 6% during 2023. Interest expense increased 32% to $93.2 million during 2023 compared to $70.7 million for 2022, primarily due to both higher floating interest rates and increased amounts outstanding on the Company’s unsecured bank credit facilities.
The Company believes the change in goodwill impairment testing date does not represent a material change to its method of applying an accounting principle in light of its internal controls and requirements to assess goodwill impairment upon certain triggering events. The Company’s reporting units, which are tested for impairment, are U.S. pawn, Latin America pawn and retail POS payment solutions.
The Company’s reporting units, which are tested for impairment, are U.S. pawn, Latin America pawn and retail POS payment solutions.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInterest Rate Risk The Company is potentially exposed to market risk in the form of interest rate risk for its long-term unsecured lines of credit. At December 31, 2022, the Company had $339.0 million outstanding under its U.S. revolving line of credit.
Biggest changeThe impact of foreign exchange rates in Guatemala and Colombia is not material to the Company’s financial position or results of operations. 70 Table of Contents Interest Rate Risk The Company is potentially exposed to market risk in the form of interest rate risk for its long-term unsecured lines of credit.
At December 31, 2022, the fair value of the Company’s fixed rate debt was approximately $932.0 million and the outstanding principal of the Company’s fixed rate debt was $1,050.0 million. The fair value estimate of the Company’s fixed rate debt was estimated based on quoted prices in markets that are not active.
At December 31, 2023, the fair value of the Company’s fixed rate debt was approximately $987.0 million and the outstanding principal of the Company’s fixed rate debt was $1,050.0 million. The fair value estimate of the Company’s fixed rate debt was estimated based on quoted prices in markets that are not active.
The Company’s continued Latin America expansion increases exposure to exchange rate fluctuations and, as a result, such fluctuations could have a significant impact on future results of operations. The average value of the Mexican peso to the U.S. dollar exchange rate for 2022 was 20.1 to 1 compared to 20.3 to 1 in 2021 and 21.5 to 1 in 2020.
The Company’s continued Latin America expansion increases exposure to exchange rate fluctuations and, as a result, such fluctuations could have a significant impact on future results of operations. The average value of the Mexican peso to the U.S. dollar exchange rate for 2023 was 17.8 to 1 compared to 20.1 to 1 in 2022 and 20.3 to 1 in 2021.
The Company also has operations in El Salvador, where the reporting and functional currency is the U.S. dollar. 68 Table of Contents On a dollar-translated basis, Latin America revenues and cost of revenues accounted for 25% and 22%, respectively, of consolidated amounts for the year ended December 31, 2022.
The Company also has operations in El Salvador where the reporting and functional currency is the U.S. dollar. On a dollar-translated basis, Latin America revenues and cost of revenues accounted for 25% and 23%, respectively, of consolidated amounts for the year ended December 31, 2023.
For the year ended December 31, 2022, the Company’s Latin America revenues and pre-tax operating income would have been approximately $4.4 million and $1.0 million lower, respectively, had foreign currency exchange rates remained consistent with those for the year ended December 31, 2021. See “Item 7.
For the year ended December 31, 2023, the Company’s Latin America revenues and pre-tax operating income would have been approximately $83.6 million and $13.7 million lower, respectively, had foreign currency exchange rates remained consistent with those for the year ended December 31, 2022. See “Item 7.
Based on the $339.0 million in outstanding borrowings at December 31, 2022, a 1% (100 basis points) increase in interest rates would have increased the Company’s annual interest expense by approximately $3.4 million for 2022.
Based on the $568.0 million in outstanding borrowings at December 31, 2023, a 1% (100 basis points) increase in interest rates would have increased the Company’s annual interest expense by approximately $5.7 million for 2023.
During 2022, the average market price of gold slightly increased from $1,799 to $1,800 per ounce. The price of gold at December 31, 2022 was $1,814 per ounce compared to $1,806 at December 31, 2021.
During 2023, the average market price of gold increased by 8% from $1,800 to $1,942 per ounce. The price of gold at December 31, 2023 was $2,078 per ounce compared to $1,814 at December 31, 2022.
The revolving lines of credit are generally priced with a variable rate based on a fixed spread over SOFR or the Mexican Central Bank’s interbank equilibrium rate (“TIIE”) and repriced with any changes in SOFR or TIIE.
At December 31, 2023, the Company had $568.0 million outstanding under its U.S. revolving line of credit. The revolving lines of credit are generally priced with a variable rate based on a fixed spread over SOFR or the Mexican Central Bank’s interbank equilibrium rate (“TIIE”) and repriced with any changes in SOFR or TIIE.
At December 31, 2022, the Company held approximately $144.2 million in jewelry inventories, which were primarily gold, representing 50% of total inventory. In addition, approximately $230.5 million, or 59%, of total pawn loans were collateralized by jewelry, which was also primarily gold. Of the Company’s total retail merchandise revenue during 2022, approximately $466.6 million, or 37%, was from jewelry sales.
At December 31, 2023, the Company held approximately $156.0 million in jewelry inventories, which were primarily gold, representing 50% of total inventory. In addition, approximately $287.8 million, or 61%, of total pawn loans were collateralized by jewelry, which was also primarily gold. Of the Company’s total retail merchandise revenue during 2023, approximately $524.9 million, or 38%, was from jewelry sales.
A one point change in the average Mexican peso to the U.S. dollar exchange rate would have impacted 2022 annual earnings by approximately $3.0 million. The impact of foreign exchange rates in Guatemala and Colombia is not material to the Company’s financial position or results of operations.
A one-point change in the average Mexican peso to the U.S. dollar exchange rate would have impacted 2023 annual earnings by approximately $3.5 million.

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