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

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

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

Commission file number 001-10960
fcfslogo.jpg
FIRSTCASH HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware87-3920732
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

1600 West 7th Street, Fort Worth, Texas 76102
(Address of principal executive offices) (Zip code)

(817) 335-1100
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.01 per shareFCFSThe Nasdaq Stock Market

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

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


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

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

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

As of October 25, 2023, there were 45,107,912 shares of common stock outstanding.




FIRSTCASH HOLDINGS, INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2023

INDEX


CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS

Forward-Looking Information

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

While the Company believes the expectations reflected in forward-looking statements are reasonable, there can be no assurances such expectations will prove to be accurate. Security holders are cautioned that such forward-looking statements involve risks and uncertainties. Certain factors may cause results to differ materially from those anticipated by the forward-looking statements made in this quarterly report. Such factors may include, without limitation, risks related to the extensive regulatory environment in which the Company operates; risks associated with the legal and regulatory proceedings that the Company is a party to, or may become a party to in the future, including the Consumer Financial Protection Bureau (the “CFPB”) lawsuit filed against the Company; risks related to the Company’s acquisitions, including the failure of the Company’s acquisitions, to deliver the estimated value and benefits expected by the Company and the ability of the Company to continue to identify and consummate acquisitions on favorable terms; potential changes in consumer behavior and shopping patterns which could impact demand for the Company’s pawn loan, retail, lease-to-own (“LTO”) and retail finance products, including, as a result to, changes in the general economic conditions; labor shortages and increased labor costs; a deterioration in the economic conditions in the United States and Latin America, including as a result of inflation and rising interest rates, which potentially could have an impact on discretionary consumer spending and demand for the Company’s products; currency fluctuations, primarily involving the Mexican peso; competition the Company faces from other retailers and providers of retail payment solutions; the ability of the Company to successfully execute on its business strategies; and other risks discussed and described in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”), including the risks described in Part 1, Item 1A, “Risk Factors” thereof, and other reports filed with the SEC. Many of these risks and uncertainties are beyond the ability of the Company to control, nor can the Company predict, in many cases, all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. The forward-looking statements contained in this quarterly report speak only as of the date of this quarterly report, and the Company expressly disclaims any obligation or undertaking to report any updates or revisions to any such statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law.


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 September 30,December 31,
 202320222022
ASSETS   
Cash and cash equivalents$86,547 $100,620 $117,330 
Accounts receivable, net72,336 58,435 57,792 
Pawn loans483,785 404,227 390,617 
Finance receivables, net113,307 111,945 103,494 
Inventories314,382 295,428 288,339 
Leased merchandise, net143,169 132,097 153,302 
Prepaid expenses and other current assets21,114 38,322 19,788 
Total current assets1,234,640 1,141,074 1,130,662 
Property and equipment, net604,673 535,584 538,681 
Operating lease right of use asset312,097 299,052 307,009 
Goodwill1,713,354 1,523,699 1,581,381 
Intangible assets, net291,690 345,512 330,338 
Other assets10,057 9,133 9,415 
Deferred tax assets, net8,052 6,906 7,381 
Total assets$4,174,563 $3,860,960 $3,904,867 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Accounts payable and accrued liabilities$146,873 $175,964 $139,460 
Customer deposits and prepayments71,752 63,066 63,125 
Lease liability, current98,745 91,115 92,944 
Total current liabilities317,370 330,145 295,529 
Revolving unsecured credit facilities560,229 338,000 339,000 
Senior unsecured notes1,037,151 1,035,226 1,035,698 
Deferred tax liabilities, net139,713 155,263 151,759 
Lease liability, non-current202,516 197,171 203,115 
Total liabilities2,256,979 2,055,805 2,025,101 
Stockholders’ equity:   
Common stock573 573 573 
Additional paid-in capital1,737,497 1,732,500 1,734,528 
Retained earnings1,164,228 995,669 1,060,603 
Accumulated other comprehensive loss(64,521)(127,366)(106,573)
Common stock held in treasury, at cost(920,193)(796,221)(809,365)
Total stockholders’ equity1,917,584 1,805,155 1,879,766 
Total liabilities and stockholders’ equity$4,174,563 $3,860,960 $3,904,867 
The accompanying notes are an integral part of these consolidated financial statements.
1

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
 Three Months EndedNine Months Ended
 September 30,September 30,
 2023202220232022
Revenue:    
Retail merchandise sales$335,081 $300,899 $983,860 $901,975 
Pawn loan fees174,560 145,727 480,298 411,613 
Leased merchandise income189,382 158,089 562,625 455,736 
Interest and fees on finance receivables61,413 48,846 174,247 135,039 
Wholesale scrap jewelry sales25,865 18,582 98,632 75,235 
Total revenue786,301 672,143 2,299,662 1,979,598 
Cost of revenue:    
Cost of retail merchandise sold199,719 182,199 590,991 543,722 
Depreciation of leased merchandise103,698 86,519 307,824 262,830 
Provision for lease losses39,736 31,916 141,674 109,771 
Provision for loan losses33,096 31,956 90,571 83,453 
Cost of wholesale scrap jewelry sold21,405 16,261 79,012 64,371 
Total cost of revenue397,654 348,851 1,210,072 1,064,147 
Net revenue388,647 323,292 1,089,590 915,451 
Expenses and other income:    
Operating expenses211,524 185,547 615,366 539,398 
Administrative expenses45,056 36,951 124,428 110,882 
Depreciation and amortization27,365 25,971 81,526 77,495 
Interest expense24,689 18,282 66,657 50,749 
Interest income(328)(206)(1,253)(1,104)
(Gain) loss on foreign exchange
(286)255 (1,905)(198)
Merger and acquisition expenses3,387 733 3,670 1,712 
Gain on revaluation of contingent acquisition consideration
— (19,800)— (82,789)
Other expenses (income), net(384)164 (260)(2,721)
Total expenses and other income311,023 247,897 888,229 693,424 
Income before income taxes77,624 75,395 201,361 222,027 
Provision for income taxes20,480 16,079 51,649 48,598 
Net income$57,144 $59,316 $149,712 $173,429 
Earnings per share:    
Basic$1.27 $1.26 $3.29 $3.65 
Diluted$1.26 $1.26 $3.27 $3.64 
The accompanying notes are an integral part of these consolidated financial statements.
2

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
 Three Months EndedNine Months Ended
 September 30,September 30,
 2023202220232022
Net income$57,144 $59,316 $149,712 $173,429 
Other comprehensive income:    
Currency translation adjustment(15,263)(7,372)42,052 3,933 
Comprehensive income$41,881 $51,944 $191,764 $177,362 
 The accompanying notes are an integral part of these consolidated financial statements.

3

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited, in thousands, except per share amounts)
Nine Months Ended September 30, 2023
Common
Stock		Additional
Paid-In
Capital		Retained
Earnings		Accum-
ulated
Other
Compre-
hensive
Loss		Common Stock
Held in Treasury		Total
Stock-
holders’
Equity
 SharesAmount   SharesAmount 
As of 12/31/202257,322 $573 $1,734,528 $1,060,603 $(106,573)11,030 $(809,365)$1,879,766 
Shares issued under share-based compensation plan, net of 28 shares net-settled
— — (7,156)— — (64)4,693 (2,463)
Share-based compensation expense
— — 3,375 — — — — 3,375 
Net income— — — 47,388 — — — 47,388 
Cash dividends ($0.33 per share)
— — — (15,294)— — — (15,294)
Currency translation adjustment
— — — — 29,513 — — 29,513 
Purchases of treasury stock, including excise tax— — — — — 782 (71,411)(71,411)
As of 3/31/2023 57,322 $573 $1,730,747 $1,092,697 $(77,060)11,748 $(876,083)$1,870,874 
Share-based compensation expense
— — 3,375 — — — — 3,375 
Net income— — — 45,180 — — — 45,180 
Cash dividends ($0.33 per share)
— — — (15,298)— — — (15,298)
Currency translation adjustment
— — — — 27,802 — — 27,802 
Purchases of treasury stock, including excise tax— — — — — 371 (35,214)(35,214)
As of 6/30/2023 57,322 $573 $1,734,122 $1,122,579 $(49,258)12,119 $(911,297)$1,896,719 
Share-based compensation expense— — 3,375 — — — — 3,375 
Net income— — — 57,144 — — — 57,144 
Cash dividends ($0.35 per share)
— — — (15,495)— — — (15,495)
Currency translation adjustment
— — — — (15,263)— — (15,263)
Purchases of treasury stock, including excise tax— — — — — 95 (8,896)(8,896)
As of 9/30/2023 57,322 $573 $1,737,497 $1,164,228 $(64,521)12,214 $(920,193)$1,917,584 
The accompanying notes are an integral part of these consolidated financial statements.

4

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
CONTINUED
(unaudited, in thousands, except per share amounts)
Nine Months Ended September 30, 2022
Common
Stock		Additional
Paid-In
Capital		Retained
Earnings		Accum-
ulated
Other
Compre-
hensive
Loss		Common Stock
Held in Treasury		Total
Stock-
holders’
Equity
 SharesAmount   SharesAmount 
As of 12/31/202157,322 $573 $1,724,956 $866,679 $(131,299)8,843 $(652,782)$1,808,127 
Shares issued under share-based compensation plan— — (1,281)— — (17)1,281 — 
Share-based compensation expense— — 3,075 — — — — 3,075 
Net income— — — 28,005 — — — 28,005 
Cash dividends ($0.30 per share)
— — — (14,546)— — — (14,546)
Currency translation adjustment— — — — 11,789 — — 11,789 
Purchases of treasury stock— — — — — 1,048 (72,217)(72,217)
As of 3/31/2022 57,322 $573 $1,726,750 $880,138 $(119,510)9,874 $(723,718)$1,764,233 
Share-based compensation expense— — 2,875 — — — — 2,875 
Net income— — — 86,108 — — — 86,108 
Cash dividends ($0.30 per share)
— — — (14,235)— — — (14,235)
Currency translation adjustment— — — — (484)— — (484)
Purchases of treasury stock— — — — — 301 (20,499)(20,499)
As of 6/30/2022 57,322 $573 $1,729,625 $952,011 $(119,994)10,175 $(744,217)$1,817,998 
Share-based compensation expense— — 2,875 — — — — 2,875 
Net income— — — 59,316 — — — 59,316 
Cash dividends ($0.33 per share)
— — — (15,658)— — — (15,658)
Currency translation adjustment— — — — (7,372)— — (7,372)
Purchases of treasury stock— — — — — 686 (52,004)(52,004)
As of 9/30/2022 57,322 $573 $1,732,500 $995,669 $(127,366)10,861 $(796,221)$1,805,155 
The accompanying notes are an integral part of these consolidated financial statements.
5

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 Nine Months Ended
September 30,
 20232022
Cash flow from operating activities:  
Net income$149,712 $173,429 
Adjustments to reconcile net income to net cash flow provided by operating activities:  
Depreciation of leased merchandise307,824 262,830 
Provision for lease losses141,674 109,771 
Provision for loan losses90,571 83,453 
Share-based compensation expense10,125 8,825 
Depreciation and amortization expense81,526 77,495 
Amortization of debt issuance costs2,067 2,208 
Net amortization of premiums, discounts and unearned origination fees on finance receivables(12,390)35,257 
Gain on revaluation of contingent acquisition consideration
— (82,789)
Impairments and dispositions of certain other assets346 482 
Deferred income taxes, net(12,000)46,142 
Changes in operating assets and liabilities, net of business combinations:  
Accounts receivable, net(9,998)(2,953)
Inventories purchased directly from customers, wholesalers or manufacturers(939)(11,017)
Leased merchandise, net(439,365)(360,755)
Prepaid expenses and other assets(427)(2,144)
Accounts payable, accrued liabilities and other liabilities(7,594)7,256 
Income taxes15,905 (21,692)
Net cash flow provided by operating activities
317,037 325,798 
Cash flow from investing activities:  
Pawn loans, net (1)
(59,426)(74,707)
Finance receivables, net(87,994)(49,634)
Purchases of furniture, fixtures, equipment and improvements(46,723)(29,630)
Purchases of store real property(46,677)(77,689)
Acquisitions of pawn stores, net of cash acquired(168,353)(7,072)
Net cash flow used in investing activities
(409,173)(238,732)
Cash flow from financing activities:  
Borrowings from unsecured credit facilities545,835 196,000 
Repayments of unsecured credit facilities(322,967)(117,000)
Debt issuance costs paid(90)(1,745)
Purchases of treasury stock(115,521)(140,391)
Payment of withholding taxes on net share settlements of restricted stock unit awards(2,463)— 
Dividends paid(46,087)(44,439)
Net cash flow provided by (used in) financing activities
58,707 (107,575)
6

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONTINUED
(unaudited, in thousands)
Nine Months Ended
September 30,
20232022
Effect of exchange rates on cash2,646 1,083 
Change in cash and cash equivalents(30,783)(19,426)
Cash and cash equivalents at beginning of the period117,330 120,046 
Cash and cash equivalents at end of the period$86,547 $100,620 

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

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

7

FIRSTCASH HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 1 - General

Basis of Presentation

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

These unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include certain information and disclosures required for comprehensive financial statements. These interim period financial statements should be read in conjunction with the Company’s audited consolidated financial statements, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 6, 2023. The consolidated financial statements as of September 30, 2023 and 2022, and for the three month and nine month periods ended September 30, 2023 and 2022, are unaudited, but in management’s opinion include all adjustments (consisting of only normal recurring adjustments) considered necessary to present fairly the financial position, results of operations and cash flow for such interim periods. Operating results for the periods ended September 30, 2023 are not necessarily indicative of the results that may be expected for the full year.

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

Use of Estimates

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

Recent Accounting Pronouncements

In March 2022, the Financial Accounting Standards Board issued ASU No 2022-02, “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”). ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for entities. Except for expanded disclosures to the Company’s vintage disclosures, ASU 2022-02 did not have a material effect on the Company’s current financial position, results of operations or financial statements. See Note 6.

8

Note 2 - Earnings Per Share

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

Three Months EndedNine Months Ended
September 30,September 30,
 2023202220232022
Numerator:    
Net income$57,144 $59,316 $149,712 $173,429 
Denominator:    
Weighted-average common shares for calculating basic earnings per share45,114 46,902 45,531 47,518 
Effect of dilutive securities:    
Restricted stock unit awards260 120 216 84 
Weighted-average common shares for calculating diluted earnings per share45,374 47,022 45,747 47,602 
Earnings per share:    
Basic$1.27 $1.26 $3.29 $3.65 
Diluted$1.26 $1.26 $3.27 $3.64 

Note 3 - Acquisitions

Consistent with the Company’s strategy to continue its expansion of pawn stores in strategic markets, during the nine months ended September 30, 2023, the Company acquired 83 pawn stores in the U.S. in five separate transactions and acquired two pawn licenses that were used to open two new pawn stores in the state of Nevada. The aggregate purchase price for these acquisitions totaled $168.1 million, net of cash acquired and subject to future post-closing adjustments. The aggregate purchase price was composed of $167.6 million in cash paid during the nine months ended September 30, 2023, which included the repayment and extinguishment of $59.7 million of debt of the acquired businesses at closing and remaining short-term amounts payable to certain of the sellers of approximately $0.5 million.

The purchase price of each of the 2023 acquisitions was allocated to assets acquired and liabilities assumed based upon the estimated fair values at the date of acquisition. The excess purchase price over the estimated fair value of the net assets acquired has been recorded as goodwill. The goodwill arising from these acquisitions consists largely of the synergies and economies of scale expected from combining the operations of the Company and the pawn stores acquired. These acquisitions were not material individually or in the aggregate to the Company’s consolidated financial statements.


9

The estimated fair value of the assets acquired and liabilities assumed are preliminary, as the Company is gathering information to finalize the valuation of these assets and liabilities. The preliminary allocation of the aggregate purchase prices for these individually immaterial acquisitions during the nine months ended September 30, 2023 is as follows (in thousands):

Pawn loans$26,026 
Accounts receivable
3,219 
Inventories15,336 
Prepaid expenses and other current assets
996 
Property and equipment2,906 
Goodwill (1)
119,299 
Intangible assets4,330 
Other non-current assets280 
Current liabilities(4,265)
Aggregate purchase price$168,127 

(1)Substantially all of the goodwill is expected to be deductible for U.S. income tax purposes.

The results of operations for the acquired stores have been consolidated since the respective acquisition dates. During 2023, revenue from the acquired stores was $14.5 million and the earnings from the combined acquisitions since the acquisition dates (including $2.8 million of transaction and integration costs, net of tax) was less than $0.1 million.

Note 4 - Operating Leases

Lessor

For information about the Company’s revenue-generating activities as a lessor, refer to Note 2 to the consolidated financial statements included in the Company’s 2022 Annual Report on Form 10-K. All of the Company’s lease agreements are considered operating leases.

Lessee

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

Leased facilities are generally leased for a term of three to five years with one or more options to renew for an additional three to five years, typically at the Company’s sole discretion. In addition, the majority of these leases can be terminated early upon an adverse change in law which negatively affects the store’s profitability. The Company regularly evaluates renewal and termination options to determine if the Company is reasonably certain to exercise the option, and excludes these options from the lease term included in the recognition of the operating lease right of use asset and lease liability until such certainty exists. The weighted-average remaining lease term for operating leases was 3.9 years as of September 30, 2023 and 4.1 years as of September 30, 2022.

The operating lease right of use asset and lease liability is recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The Company’s leases do not provide an implicit rate, and therefore, it uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. The Company utilizes a portfolio approach for determining the incremental borrowing rate to apply to groups of leases with similar characteristics. The weighted-average discount rate used to measure the lease liability as of September 30, 2023 and 2022 was 7.7% and 6.3%, respectively.


10

The Company has certain operating leases in Mexico which are denominated in U.S. dollars. The liability related to these leases is considered a monetary liability and requires remeasurement each reporting period into the functional currency (Mexican pesos) using reporting date exchange rates. The remeasurement results in the recognition of foreign currency exchange gains or losses each reporting period, which can produce a certain level of earnings volatility. The Company recognized a foreign currency loss of $0.6 million and $0.4 million during the three months ended September 30, 2023 and 2022, respectively, related to the remeasurement of these U.S. dollar denominated operating leases, which is included in (gain) loss on foreign exchange in the accompanying consolidated statements of income. During the nine months ended September 30, 2023 and 2022, the Company recognized a foreign currency gain of $1.7 million and $0.4 million, respectively, related to these U.S. dollar denominated leases.

Lease expense is recognized on a straight-line basis over the lease term, with variable lease expense recognized in the period such payments are incurred. The following table details the components of lease expense included in operating expenses in the consolidated statements of income during the three and nine months ended September 30, 2023 and 2022 (in thousands):

Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Operating lease expense$36,687 $31,988 $104,702 $95,590 
Variable lease expense (1)
4,744 4,216 13,777 12,619 
Total operating lease expense$41,431 $36,204 $118,479 $108,209 

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

The following table details the maturity of lease liabilities for all operating leases as of September 30, 2023 (in thousands):

Three months ending December 31, 2023
$31,578 
2024111,094 
202582,037 
202658,384 
202732,329 
Thereafter33,064 
Total$348,486 
Less amount of lease payments representing interest(47,225)
Total present value of lease payments$301,261 

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

Nine Months Ended
September 30,
20232022
Cash paid for amounts included in the measurement of operating lease liabilities$92,233 $87,040 
Leased assets obtained in exchange for new operating lease liabilities$72,663 $66,442 


11

Note 5 - Fair Value of Financial Instruments

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

Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.

Recurring Fair Value Measurements

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

Estimated Fair Value
Fair Value Measurements Using
Level 1Level 2Level 3
Financial liabilities (1):
Contingent consideration as of September 30, 2022
$— $— $26,760 
Contingent consideration as of December 31, 2022
— — — 

(1)Under the American First Finance (“AFF”) purchase agreement, the seller parties had the right to receive up to $50.0 million of additional consideration if AFF achieved certain adjusted EBITDA targets for the first half of 2023. AFF did not achieve the threshold adjusted EBITDA target for the first half of 2023 and, therefore, the $50.0 million of additional consideration was not earned by the seller parties. As of June 30, 2023, there was no remaining contingent consideration available to the seller parties. The contingent consideration related to the AFF acquisition is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheet as of September 30, 2022.

The changes in financial assets and liabilities that are measured and recorded at fair value on a recurring basis using Level 3 fair value measurements for the three and nine months ended September 30, 2023 and September 30, 2022 are as follows (in thousands):

Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Contingent consideration at beginning of the period$— $46,560 $— $109,549 
Change in fair value (1)
— (19,800)— (82,789)
Contingent consideration at end of the period$— $26,760 $— $26,760 

(1)The Company recognized a gain of $19.8 million and $82.8 million during the three and nine months ended September 30, 2022, respectively, as a result of the change in fair value of the contingent consideration, which is included in gain on revaluation of contingent acquisition consideration in the accompanying consolidated statements of income.

There were no transfers in or out of Level 1, 2 or 3 during the three and nine months ended September 30, 2023 and September 30, 2022.


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Fair Value Measurements on a Non-Recurring Basis

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

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

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

Carrying ValueEstimated Fair Value
September 30,September 30,Fair Value Measurements Using
20232023Level 1Level 2Level 3
Financial assets:
Cash and cash equivalents$86,547 $86,547 $86,547 $— $— 
Accounts receivable, net72,336 72,336 — — 72,336 
Pawn loans483,785 483,785 — — 483,785 
Finance receivables, net (1)
113,307 230,357 — — 230,357 
$755,975 $873,025 $86,547 $— $786,478 
Financial liabilities:
Revolving unsecured credit facilities
$560,229 $560,229 $— $560,229 $— 
Senior unsecured notes (outstanding principal)1,050,000 938,000 — 938,000 — 
$1,610,229 $1,498,229 $— $1,498,229 $— 

(1)Finance receivables, gross as of September 30, 2023 was $224.6 million. See Note 6.

Carrying ValueEstimated Fair Value
September 30,September 30,Fair Value Measurements Using
20222022Level 1Level 2Level 3
Financial assets:
Cash and cash equivalents$100,620 $100,620 $100,620 $— $— 
Accounts receivable, net58,435 58,435 — — 58,435 
Pawn loans404,227 404,227 — — 404,227 
Finance receivables, net (1)
111,945 193,750 — — 193,750 
$675,227 $757,032 $100,620 $— $656,412 
Financial liabilities:
Revolving unsecured credit facilities$338,000 $338,000 $— $338,000 $— 
Senior unsecured notes (outstanding principal)1,050,000 887,000 — 887,000 — 
$1,388,000 $1,225,000 $— $1,225,000 $— 

(1)Finance receivables, gross as of September 30, 2022 was $188.9 million. See Note 6.

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Carrying ValueEstimated Fair Value
December 31,December 31,Fair Value Measurements Using
20222022Level 1Level 2Level 3
Financial assets:
Cash and cash equivalents$117,330 $117,330 $117,330 $— $— 
Accounts receivable, net57,792 57,792 — — 57,792 
Pawn loans390,617 390,617 — — 390,617 
Finance receivables, net (1)
103,494 201,895 — — 201,895 
$669,233 $767,634 $117,330 $— $650,304 
Financial liabilities:
Revolving unsecured credit facilities$339,000 $339,000 $— $339,000 $— 
Senior unsecured notes (outstanding principal)1,050,000 932,000 — 932,000 — 
$1,389,000 $1,271,000 $— $1,271,000 $— 

(1)Finance receivables, gross as of December 31, 2022 were $196.0 million. See Note 6.

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

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

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

Note 6 - Finance Receivables, Net

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

As of September 30,As of
December 31,
202320222022
Finance receivables, gross$224,618 $188,897 $195,987 
Fair value premium on non-purchase credit deteriorated (”PCD”) finance receivables (1)
— 6,839 — 
Merchant partner discounts and premiums, net(9,730)(2,044)(3,517)
Unearned origination fees(4,897)(3,334)(4,143)
Finance receivables, amortized cost209,991 190,358 188,327 
Less allowance for loan losses(96,684)(78,413)(84,833)
Finance receivables, net$113,307 $111,945 $103,494 

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

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

Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Balance at beginning of period$93,054 $73,936 $84,833 $75,574 
Provision for loan losses33,096 31,956 90,571 83,453 
Charge-offs(30,890)(28,642)(83,281)(84,629)
Recoveries1,424 1,163 4,561 4,015 
Balance at end of period$96,684 $78,413 $96,684 $78,413 

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

Origination Year
202320222021Total
As of September 30, 2023
Delinquency:
1 to 30 days past due$14,764 $4,150 $179 $19,093 
31 to 60 days past due9,036 2,792 148 11,976 
61 to 89 days past due (1)
7,109 2,816 173 10,098 
Total past due finance receivables