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

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

For the Quarterly Period Ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________

Commission file number 001-10960
https://cdn.kscope.io/281db954170d26448acfa5e5cb38a165-fcfs-20220630_g1.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 filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

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

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

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





FIRSTCASH HOLDINGS, INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2022

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

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



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 June 30,December 31,
 202220212021
ASSETS   
Cash and cash equivalents$110,414 $50,061 $120,046 
Accounts receivable, net55,924 40,183 55,356 
Pawn loans385,708 312,166 347,973 
Finance receivables, net125,619  181,021 
Inventories260,528 216,955 263,311 
Leased merchandise, net118,924  143,944 
Prepaid expenses and other current assets21,125 19,022 17,707 
Total current assets1,078,242 638,387 1,129,358 
Property and equipment, net519,836 404,283 462,526 
Operating lease right of use asset301,979 299,223 306,061 
Goodwill1,522,192 1,017,273 1,536,178 
Intangible assets, net359,716 83,372 388,184 
Other assets8,345 9,406 8,531 
Deferred tax assets, net6,231 4,489 5,614 
Total assets$3,796,541 $2,456,433 $3,836,452 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Accounts payable and accrued liabilities$198,967 $103,700 $244,327 
Customer deposits and prepayments59,754 44,486 57,310 
Lease liability, current90,804 89,027 90,570 
Total current liabilities349,525 237,213 392,207 
Revolving unsecured credit facilities274,000 163,000 259,000 
Senior unsecured notes1,034,761 493,303 1,033,904 
Deferred tax liabilities, net121,046 75,912 126,098 
Lease liability, non-current199,211 196,189 203,166 
Other liabilities  13,950 
Total liabilities1,978,543 1,165,617 2,028,325 
Stockholders’ equity:   
Common stock573 493 573 
Additional paid-in capital1,729,625 1,219,948 1,724,956 
Retained earnings952,011 828,040 866,679 
Accumulated other comprehensive loss(119,994)(115,790)(131,299)
Common stock held in treasury, at cost(744,217)(641,875)(652,782)
Total stockholders’ equity1,817,998 1,290,816 1,808,127 
Total liabilities and stockholders’ equity$3,796,541 $2,456,433 $3,836,452 
The accompanying notes are an integral part of these consolidated financial statements.
1


FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
 Three Months EndedSix Months Ended
 June 30,June 30,
 2022202120222021
Revenue:    
Retail merchandise sales$298,257 $265,567 $601,076 $537,609 
Pawn loan fees134,067 109,909 265,886 225,431 
Leased merchandise income147,700  297,647  
Interest and fees on finance receivables43,744  86,193  
Wholesale scrap jewelry sales23,848 14,102 56,653 34,477 
Total revenue647,616 389,578 1,307,455 797,517 
Cost of revenue:    
Cost of retail merchandise sold179,309 153,424 361,523 310,577 
Depreciation of leased merchandise82,605  176,311  
Provision for lease losses38,035  77,855  
Provision for loan losses26,800  51,497  
Cost of wholesale scrap jewelry sold19,895 11,932 48,110 29,129 
Total cost of revenue346,644 165,356 715,296 339,706 
Net revenue300,972 224,222 592,159 457,811 
Expenses and other income:    
Operating expenses180,555 139,128 353,851 276,452 
Administrative expenses37,068 27,398 73,931 58,397 
Depreciation and amortization25,982 10,902 51,524 21,514 
Interest expense16,246 7,198 32,467 14,428 
Interest income(222)(119)(898)(277)
Loss (gain) on foreign exchange27 (577)(453)(310)
Merger and acquisition expenses314 1,086 979 1,252 
Gain on revaluation of contingent acquisition consideration(65,559) (62,989) 
Other expenses (income), net(3,062)401 (2,885)1,279 
Total expenses and other income191,349 185,417 445,527 372,735 
Income before income taxes109,623 38,805 146,632 85,076 
Provision for income taxes23,515 10,378 32,519 22,934 
Net income$86,108 $28,427 $114,113 $62,142 
Earnings per share:    
Basic$1.82 $0.70 $2.39 $1.52 
Diluted$1.81 $0.70 $2.38 $1.52 
The accompanying notes are an integral part of these consolidated financial statements.
2


FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
 Three Months EndedSix Months Ended
 June 30,June 30,
 2022202120222021
Net income$86,108 $28,427 $114,113 $62,142 
Other comprehensive income:    
Currency translation adjustment(484)14,977 11,305 2,642 
Comprehensive income$85,624 $43,404 $125,418 $64,784 
 The accompanying notes are an integral part of these consolidated financial statements.

3


FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited, in thousands, except per share amounts)
Six Months Ended June 30, 2022
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accum-
ulated
Other
Compre-
hensive
Loss
Common Stock
Held in Treasury
Total
Stock-
holders’
Equity
 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 
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)
Six Months Ended June 30, 2021
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accum-
ulated
Other
Compre-
hensive
Loss
Common Stock
Held in Treasury
Total
Stock-
holders’
Equity
 SharesAmount   SharesAmount 
As of 12/31/202049,276 $493 $1,221,788 $789,303 $(118,432)8,238 $(609,337)$1,283,815 
Shares issued under share-based compensation plan, net of 28 shares net-settled
— — (7,090)— — (73)5,427 (1,663)
Share-based compensation expense— — 3,625 — — — — 3,625 
Net income— — — 33,715 — — — 33,715 
Cash dividends ($0.27 per share)
— — — (11,097)— — — (11,097)
Currency translation adjustment— — — — (12,335)— — (12,335)
Purchases of treasury stock— — — — — 84 (4,967)(4,967)
As of 3/31/2021 49,276 $493 $1,218,323 $811,921 $(130,767)8,249 $(608,877)$1,291,093 
Share-based compensation expense— — 1,625 — — — — 1,625 
Net income— — — 28,427 — — — 28,427 
Cash dividends ($0.30 per share)
— — — (12,308)— — — (12,308)
Currency translation adjustment— — — — 14,977 — — 14,977 
Purchases of treasury stock— — — — — 452 (32,998)(32,998)
As of 6/30/2021 49,276 $493 $1,219,948 $828,040 $(115,790)8,701 $(641,875)$1,290,816 
The accompanying notes are an integral part of these consolidated financial statements.
5


FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 Six Months Ended
June 30,
 20222021
Cash flow from operating activities:  
Net income$114,113 $62,142 
Adjustments to reconcile net income to net cash flow provided by operating activities:  
Depreciation of leased merchandise176,311  
Provision for lease losses77,855  
Provision for loan losses51,497  
Share-based compensation expense5,950 5,250 
Depreciation and amortization expense51,524 21,514 
Amortization of debt issuance costs1,473 793 
Net amortization of premiums, discounts and unearned origination fees on finance receivables27,451  
Gain on revaluation of contingent acquisition consideration(62,989) 
Impairments and dispositions of certain other assets318 1,279 
Deferred income taxes, net12,702 4,444 
Changes in operating assets and liabilities, net of business combinations:  
Accounts receivable, net(224)1,369 
Inventories purchased directly from customers, wholesalers or manufacturers1,804 (9,173)
Leased merchandise, net(229,146) 
Prepaid expenses and other assets(1,672)(2,107)
Accounts payable, accrued liabilities and other liabilities(4,846)26,748 
Income taxes4,646 1,490 
Net cash flow provided by operating activities226,767 113,749 
Cash flow from investing activities:  
Pawn loans, net (1)
(32,265)(8,492)
Finance receivables, net(23,546) 
Purchases of furniture, fixtures, equipment and improvements(19,686)(21,025)
Purchases of store real property(58,559)(29,096)
Acquisitions of pawn stores, net of cash acquired(2,343)(49,334)
Net cash flow used in investing activities(136,399)(107,947)
Cash flow from financing activities:  
Borrowings from unsecured credit facilities126,000 227,000 
Repayments of unsecured credit facilities(111,000)(187,000)
Debt issuance costs paid(475) 
Purchases of treasury stock(87,727)(36,427)
Payment of withholding taxes on net share settlements of restricted stock unit awards and stock options exercised (1,663)
Dividends paid(28,781)(23,405)
Net cash flow used in financing activities(101,983)(21,495)
6


FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONTINUED
(unaudited, in thousands)
Six Months Ended
June 30,
20222021
Effect of exchange rates on cash1,983 (96)
Change in cash and cash equivalents(9,632)(15,789)
Cash and cash equivalents at beginning of the period120,046 65,850 
Cash and cash equivalents at end of the period$110,414 $50,061 

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

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

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

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

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

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

Use of Estimates

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

Reclassification

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

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board issued ASU No 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank-offered rates to alternative reference rates. ASU 2020-04 was effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company does not expect ASU 2020-04 to have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.
8


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

Note 2 - Earnings Per Share

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

Three Months EndedSix Months Ended
June 30,June 30,
 2022202120222021
Numerator:    
Net income$86,108 $28,427 $114,113 $62,142 
Denominator:    
Weighted-average common shares for calculating basic earnings per share47,425 40,754 47,831 40,893 
Effect of dilutive securities:    
Stock options and restricted stock unit awards74 48 66 36 
Weighted-average common shares for calculating diluted earnings per share47,499 40,802 47,897 40,929 
Earnings per share:    
Basic$1.82 $0.70 $2.39 $1.52 
Diluted$1.81 $0.70 $2.38 $1.52 


9


Note 3 - Acquisitions

American First Finance Acquisition

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

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

December 31,2022June 30,
2021Adjustments2022
Accounts receivable$11,660 $ $11,660 
Finance receivables 225,261  225,261 
Leased merchandise139,649  139,649 
Prepaid expenses and other current assets4,474 (238)4,236 
Property and equipment11,670  11,670 
Operating lease right of use asset491  491 
Goodwill503,106 (16,893)486,213 
Intangible assets305,100  305,100 
Accounts payable and accrued liabilities(28,357)(1,083)(29,440)
Customer deposits and prepayments(11,014) (11,014)
Lease liability, current(10) (10)
Deferred tax liabilities (1)
(42,608)18,214 (24,394)
Lease liability, non-current(481) (481)
Purchase price$1,118,941 $ $1,118,941 

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

Note 4 - Operating Leases

Lessor

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

Lessee

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

Leased facilities are generally leased for a term of three to five years with one or more options to renew for an additional three to five years, typically at the Company’s sole discretion. In addition, the majority of these leases can be terminated early upon an adverse change in law which negatively affects the store’s profitability. The Company regularly evaluates renewal and termination options to determine if the Company is reasonably certain to exercise the option, and excludes these options from
10


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

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

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

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

Three Months EndedSix Months Ended
June 30,June 30,
2022202120222021
Operating lease expense$32,074 $31,374 $63,602 $62,439 
Variable lease expense (1)
4,229 3,939 8,403 7,773 
Total operating lease expense$36,303 $35,313 $72,005 $70,212 

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

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

Six months ending December 31, 2022$55,095 
202396,437 
202473,362 
202546,588 
202627,112 
Thereafter28,529 
Total$327,123 
Less amount of lease payments representing interest(37,108)
Total present value of lease payments$290,015 


11


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

Six Months Ended
June 30,
20222021
Cash paid for amounts included in the measurement of operating lease liabilities$58,343 $56,570 
Leased assets obtained in exchange for new operating lease liabilities$41,991 $49,209 

Note 5 - Fair Value of Financial Instruments

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

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

Recurring Fair Value Measurements

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

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

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

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

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

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


12


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

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

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

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

Fair Value Measurements on a Non-Recurring Basis

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

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

The Company’s financial assets and liabilities as of June 30, 2022, 2021 and December 31, 2021 that are not measured at fair value in the consolidated balance sheets are as follows (in thousands):

Carrying ValueEstimated Fair Value
June 30,June 30,Fair Value Measurements Using
20222022Level 1Level 2Level 3
Financial assets:
Cash and cash equivalents$110,414 $110,414 $110,414 $ $ 
Accounts receivable, net55,924 55,924   55,924 
Pawn loans385,708 385,708