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

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

For the Quarterly Period Ended June 30, 2023
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/4d6c495f3979e606e92cf196336ab4ce-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 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 26, 2023, there were 45,107,912 shares of common stock outstanding.





FIRSTCASH HOLDINGS, INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 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 any material acquisition, including the American First Finance (“AFF”) acquisition, to deliver the estimated value and benefits expected by the Company and the ability of the Company to continue to identify and consummate acquisitions on favorable terms; potential changes in consumer behavior and shopping patterns which could impact demand for the Company’s pawn loan, retail, lease-to-own (“LTO”) and retail finance products, including, as a result to, changes in the general economic conditions; labor shortages and increased labor costs; a deterioration in the economic conditions in the United States and Latin America, including as a result of inflation and rising interest rates, which potentially could have an impact on discretionary consumer spending and demand for the Company’s products; currency fluctuations, primarily involving the Mexican peso; competition the Company faces from other retailers and providers of retail payment solutions; the ability of the Company to successfully execute on its business strategies; and other risks discussed and described in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”), including the risks described in Part 1, Item 1A, “Risk Factors” thereof, and other reports filed with the SEC. Many of these risks and uncertainties are beyond the ability of the Company to control, nor can the Company predict, in many cases, all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. The forward-looking statements contained in this quarterly report speak only as of the date of this quarterly report, and the Company expressly disclaims any obligation or undertaking to report any updates or revisions to any such statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law.



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FIRSTCASH HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 June 30,December 31,
 202320222022
ASSETS   
Cash and cash equivalents$104,598 $110,414 $117,330 
Accounts receivable, net63,337 55,924 57,792 
Pawn loans426,165 385,708 390,617 
Finance receivables, net110,555 125,619 103,494 
Inventories267,142 260,528 288,339 
Leased merchandise, net143,145 118,924 153,302 
Prepaid expenses and other current assets30,102 21,125 19,788 
Total current assets1,145,044 1,078,242 1,130,662 
Property and equipment, net587,934 519,836 538,681 
Operating lease right of use asset305,513 301,979 307,009 
Goodwill1,600,068 1,522,192 1,581,381 
Intangible assets, net303,642 359,716 330,338 
Other assets9,586 8,345 9,415 
Deferred tax assets, net7,770 6,231 7,381 
Total assets$3,959,557 $3,796,541 $3,904,867 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Accounts payable and accrued liabilities$146,163 $198,967 $139,460 
Customer deposits and prepayments70,056 59,754 63,125 
Lease liability, current96,215 90,804 92,944 
Total current liabilities312,434 349,525 295,529 
Revolving unsecured credit facilities376,000 274,000 339,000 
Senior unsecured notes1,036,660 1,034,761 1,035,698 
Deferred tax liabilities, net140,609 121,046 151,759 
Lease liability, non-current197,135 199,211 203,115 
Total liabilities2,062,838 1,978,543 2,025,101 
Stockholders’ equity:   
Common stock573 573 573 
Additional paid-in capital1,734,122 1,729,625 1,734,528 
Retained earnings1,122,579 952,011 1,060,603 
Accumulated other comprehensive loss(49,258)(119,994)(106,573)
Common stock held in treasury, at cost(911,297)(744,217)(809,365)
Total stockholders’ equity1,896,719 1,817,998 1,879,766 
Total liabilities and stockholders’ equity$3,959,557 $3,796,541 $3,904,867 
The accompanying notes are an integral part of these consolidated financial statements.
1


FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
 Three Months EndedSix Months Ended
 June 30,June 30,
 2023202220232022
Revenue:    
Retail merchandise sales$320,864 $298,257 $648,779 $601,076 
Pawn loan fees154,178 134,067 305,738 265,886 
Leased merchandise income189,805 147,700 373,243 297,647 
Interest and fees on finance receivables58,192 43,744 112,834 86,193 
Wholesale scrap jewelry sales27,583 23,848 72,767 56,653 
Total revenue750,622 647,616 1,513,361 1,307,455 
Cost of revenue:    
Cost of retail merchandise sold192,271 179,309 391,272 361,523 
Depreciation of leased merchandise102,521 82,605 204,126 176,311 
Provision for lease losses52,873 38,035 101,938 77,855 
Provision for loan losses28,190 26,800 57,475 51,497 
Cost of wholesale scrap jewelry sold21,880 19,895 57,607 48,110 
Total cost of revenue397,735 346,644 812,418 715,296 
Net revenue352,887 300,972 700,943 592,159 
Expenses and other income:    
Operating expenses204,781 180,555 403,842 353,851 
Administrative expenses40,355 37,068 79,372 73,931 
Depreciation and amortization27,050 25,982 54,161 51,524 
Interest expense21,071 16,246 41,968 32,467 
Interest income(408)(222)(925)(898)
(Gain) loss on foreign exchange
(817)27 (1,619)(453)
Merger and acquisition expenses252 314 283 979 
Gain on revaluation of contingent acquisition consideration
 (65,559) (62,989)
Other expenses (income), net79 (3,062)124 (2,885)
Total expenses and other income292,363 191,349 577,206 445,527 
Income before income taxes60,524 109,623 123,737 146,632 
Provision for income taxes15,344 23,515 31,169 32,519 
Net income$45,180 $86,108 $92,568 $114,113 
Earnings per share:    
Basic$0.99 $1.82 $2.02 $2.39 
Diluted$0.99 $1.81 $2.01 $2.38 
The accompanying notes are an integral part of these consolidated financial statements.
2


FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
 Three Months EndedSix Months Ended
 June 30,June 30,
 2023202220232022
Net income$45,180 $86,108 $92,568 $114,113 
Other comprehensive income:    
Currency translation adjustment27,802 (484)57,315 11,305 
Comprehensive income$72,982 $85,624 $149,883 $125,418 
 The accompanying notes are an integral part of these consolidated financial statements.

3


FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited, in thousands, except per share amounts)
Six Months Ended June 30, 2023
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accum-
ulated
Other
Compre-
hensive
Loss
Common Stock
Held in Treasury
Total
Stock-
holders’
Equity
 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 
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, 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.
5


FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 Six Months Ended
June 30,
 20232022
Cash flow from operating activities:  
Net income$92,568 $114,113 
Adjustments to reconcile net income to net cash flow provided by operating activities:  
Depreciation of leased merchandise204,126 176,311 
Provision for lease losses101,938 77,855 
Provision for loan losses57,475 51,497 
Share-based compensation expense6,750 5,950 
Depreciation and amortization expense54,161 51,524 
Amortization of debt issuance costs1,375 1,473 
Net amortization of premiums, discounts and unearned origination fees on finance receivables(7,411)27,451 
Gain on revaluation of contingent acquisition consideration
 (62,989)
Impairments and dispositions of certain other assets124 318 
Deferred income taxes, net(10,571)12,702 
Changes in operating assets and liabilities, net of business combinations:  
Accounts receivable, net(3,551)(224)
Inventories purchased directly from customers, wholesalers or manufacturers11,476 1,804 
Leased merchandise, net(295,907)(229,146)
Prepaid expenses and other assets(4,696)(1,672)
Accounts payable, accrued liabilities and other liabilities(2,936)(4,846)
Income taxes748 4,646 
Net cash flow provided by operating activities
205,669 226,767 
Cash flow from investing activities:  
Pawn loans, net (1)
188 (32,265)
Finance receivables, net(57,125)(23,546)
Purchases of furniture, fixtures, equipment and improvements(28,348)(19,686)
Purchases of store real property(34,542)(58,559)
Acquisitions of pawn stores, net of cash acquired(5,472)(2,343)
Net cash flow used in investing activities
(125,299)(136,399)
Cash flow from financing activities:  
Borrowings from unsecured credit facilities180,000 126,000 
Repayments of unsecured credit facilities(143,000)(111,000)
Debt issuance costs paid (475)
Purchases of treasury stock(101,843)(87,727)
Payment of withholding taxes on net share settlements of restricted stock unit awards(2,463) 
Dividends paid(30,592)(28,781)
Net cash flow used in financing activities
(97,898)(101,983)
6


FIRSTCASH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONTINUED
(unaudited, in thousands)
Six Months Ended
June 30,
20232022
Effect of exchange rates on cash4,796 1,983 
Change in cash and cash equivalents(12,732)(9,632)
Cash and cash equivalents at beginning of the period117,330 120,046 
Cash and cash equivalents at end of the period$104,598 $110,414 

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

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

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 June 30, 2023 and 2022, and for the three month and six month periods ended June 30, 2023 and 2022, are unaudited, but in management’s opinion include all adjustments (consisting of only normal recurring adjustments) considered necessary to present fairly the financial position, results of operations and cash flow for such interim periods. Operating results for the periods ended June 30, 2023 are not necessarily indicative of the results that may be expected for the full year.

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

Use of Estimates

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

Recent Accounting Pronouncements

In March 2022, the Financial Accounting Standards Board issued ASU No 2022-02, “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”). ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for entities. Except for expanded disclosures to the Company’s vintage disclosures, ASU 2022-02 did not have a material effect on the Company’s current financial position, results of operations or financial statements. See Note 5.

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 EndedSix Months Ended
June 30,June 30,
 2023202220232022
Numerator:    
Net income$45,180 $86,108 $92,568 $114,113 
Denominator:    
Weighted-average common shares for calculating basic earnings per share45,455 47,425 45,799 47,831 
Effect of dilutive securities:    
Restricted stock unit awards223 74 194 66 
Weighted-average common shares for calculating diluted earnings per share45,678 47,499 45,993 47,897 
Earnings per share:    
Basic$0.99 $1.82 $2.02 $2.39 
Diluted$0.99 $1.81 $2.01 $2.38 

Note 3 - Operating Leases

Lessor

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

Lessee

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

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

The operating lease right of use asset and lease liability is recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The Company’s leases do not provide an implicit rate, and therefore, it uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. The Company utilizes a portfolio approach for determining the incremental borrowing rate to apply to groups of leases with similar characteristics. The weighted-average discount rate used to measure the lease liability as of June 30, 2023 and 2022 was 7.3% and 6.0%, respectively.


9


The Company has certain operating leases in Mexico which are denominated in U.S. dollars. The liability related to these leases is considered a monetary liability and requires remeasurement each reporting period into the functional currency (Mexican pesos) using reporting date exchange rates. The remeasurement results in the recognition of foreign currency exchange gains or losses each reporting period, which can produce a certain level of earnings volatility. The Company recognized a foreign currency gain of $1.1 million and less than $0.1 million during the three months ended June 30, 2023 and 2022, respectively, related to the remeasurement of these U.S. dollar denominated operating leases, which is included in (gain) loss on foreign exchange in the accompanying consolidated statements of income. During the six months ended June 30, 2023 and 2022, the Company recognized a foreign currency gain of $2.3 million and $0.7 million, respectively, related to these U.S. dollar denominated leases.

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

Three Months EndedSix Months Ended
June 30,June 30,
2023202220232022
Operating lease expense$34,475 $32,074 $68,015 $63,602 
Variable lease expense (1)
4,561 4,229 9,033 8,403 
Total operating lease expense$39,036 $36,303 $77,048 $72,005 

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

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

Six months ending December 31, 2023$59,618 
2024101,384 
202572,721 
202649,375 
202725,547 
Thereafter28,781 
Total$337,426 
Less amount of lease payments representing interest(44,076)
Total present value of lease payments$293,350 

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

Six Months Ended
June 30,
20232022
Cash paid for amounts included in the measurement of operating lease liabilities$60,660 $58,343 
Leased assets obtained in exchange for new operating lease liabilities$35,392 $41,991 


10


Note 4 - Fair Value of Financial Instruments

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

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

Recurring Fair Value Measurements

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

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

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

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

Three Months EndedSix Months Ended
June 30,June 30,
2023202220232022
Contingent consideration at beginning of the period$ $112,119 $ $109,549 
Change in fair value (1)
 (65,559) (62,989)
Contingent consideration at end of the period$ $46,560 $ $46,560 

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

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


11


Fair Value Measurements on a Non-Recurring Basis

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

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

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

Carrying ValueEstimated Fair Value
June 30,June 30,Fair Value Measurements Using
20232023Level 1Level 2Level 3
Financial assets:
Cash and cash equivalents$104,598 $104,598 $104,598 $ $ 
Accounts receivable, net63,337 63,337   63,337 
Pawn loans426,165 426,165   426,165 
Finance receivables, net (1)
110,555 225,195   225,195 
$704,655 $819,295 $104,598 $ $714,697 
Financial liabilities:
Revolving unsecured credit facility$376,000 $376,000 $ $376,000 $ 
Senior unsecured notes (outstanding principal)1,050,000 941,000  941,000  
$1,426,000 $1,317,000 $ $1,317,000 $ 

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

Carrying 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   385,708 
Finance receivables, net (1)
125,619 196,210   196,210 
$677,665 $748,256 $110,414 $ $637,842 
Financial liabilities:
Revolving unsecured credit facilities$274,000 $274,000 $ $274,000 $ 
Senior unsecured notes (outstanding principal)1,050,000 900,000  900,000  
$1,324,000 $1,174,000 $ $1,174,000 $ 

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

12


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

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

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

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

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

Note 5 - Finance Receivables, Net

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

As of June 30,As of
December 31,
202320222022
Finance receivables, gross$216,037 $190,256 $195,987 
Fair value premium on non-purchase credit deteriorated (”PCD”) finance receivables (1)
 13,003  
Merchant partner discounts and premiums, net(7,812)(1,002)(3,517)
Unearned origination fees(4,616)(2,702)(4,143)
Finance receivables, amortized cost203,609 199,555 188,327 
Less allowance for loan losses(93,054)(73,936)(84,833)
Finance receivables, net$110,555 $125,619 $103,494 

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

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

Three Months EndedSix Months Ended
June 30,June 30,
2023202220232022
Balance at beginning of period$88,610 $72,332 $84,833 $75,574 
Provision for loan losses28,190 26,800 57,475 51,497 
Charge-offs(25,274)(26,579)(52,391)(55,987)
Recoveries1,528 1,383 3,137 2,852 
Balance at end of period$93,054 $73,936 $93,054 $73,936 

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

Origination Year
202320222021Total
As of June 30, 2023
Delinquency:
1 to 30 days past due$10,963 $6,371 $580 $17,914 
31 to 60 days past due5,973 4,141 410 10,524 
61 to 89 days past due (1)
4,200 4,000 401 8,601 
Total past due finance receivables21,136 14,512 1,391 37,039 
Current finance receivables110,611 51,481 4,478 166,570 
Finance receivables, amortized cost$131,747 $65,993 $5,869 $203,609 
Origination Year
202220212020Total
As of June 30, 2022
Delinquency:
1 to 30 days past due$8,919 $7,849 $478 $17,246 
31 to 60 days past due4,467 5,275 286 10,028 
61 to 89 days past due (1)
3,014 4,837 293 8,144 
Total past due finance receivables before fair value adjustments16,400 17,961 1,057 35,418 
Current finance receivables before fair value adjustments89,414 57,852 3,868 151,134 
Finance receivables before fair value adjustments$105,814 $75,813 $4,925 186,552 
Fair value premium on non-PCD finance receivables13,003 
Finance receivables, amortized cost$199,555 

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

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

Origination Year
202320222021Total
Finance receivables gross charge-offs:
Gross charge-offs during the six months ended June 30, 2023
$6,110 $39,770 $6,511 $52,391 


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Note 6 - Leased Merchandise, Net

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

As of June 30,As of
December 31,
202320222022
Leased merchandise (1)
$369,547 $255,559 $335,038 
Processing fees(4,313)(2,882)(4,124)
Merchant partner discounts and premiums, net2,735 1,862 2,456 
Accumulated depreciation(113,852)(66,514)(100,879)
Leased merchandise, before allowance for lease losses254,117 188,025 232,491 
Less allowance for lease losses(110,972)(69,101)(79,189)
Leased merchandise, net$143,145 $118,924 $153,302 

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

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

Three Months EndedSix Months Ended
June 30,June 30,
 2023202220232022
Balance at beginning of period$93,149 $40,364 $79,189 $5,442 
Provision for lease losses52,873 38,035 101,938 77,855 
Charge-offs(36,723)(10,301)(73,501)(16,321)
Recoveries1,673 1,003 3,346 2,125 
Balance at end of period$110,972 $69,101 $110,972 $69,101 


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Note 7 - Long-Term Debt

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

As of June 30,As of
December 31,
202320222022
Revolving unsecured credit facility, maturing 2027 (1)
$376,000 $274,000 $339,000 
Senior unsecured notes:
4.625% senior unsecured notes due 2028 (2)
493,981 492,981 493,475 
5.625% senior unsecured notes due 2030 (3)
542,679 541,780 542,223 
Total senior unsecured notes