# FirstCash Holdings, Inc. (FCFS) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from FirstCash Holdings, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/840489/000084048925000032/fcfs-20241231.htm
Accession: 0000840489-25-000032
Filing date: 2025-02-03
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/FCFS/
All MD&A years: /company/FCFS/mda/
Previous year: /company/FCFS/mda/fy2023/ (FY 2023)
Next year: /company/FCFS/mda/fy2025/ (FY 2025)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The Company’s primary business line is the operation of retail pawn stores, also known as “pawnshops,” which focus on serving cash- and credit-constrained consumers. The Company is the leading operator of pawn stores in the U.S. and Latin America. Pawn stores help customers meet small short-term cash needs by providing non-recourse pawn loans and buying merchandise directly from customers. Personal property, such as jewelry, electronics, tools, appliances, sporting goods and musical instruments, is pledged and held as collateral for the pawn loans over the typical 30-day term of the loan. Pawn stores also generate retail sales primarily from the merchandise acquired through collateral forfeitures and over-the-counter purchases from customers.

The Company is also a leading provider of technology-driven, retail POS payment solutions focused on serving credit-constrained consumers. The Company’s retail POS payment solutions business line consists solely of the operations of AFF, which focuses on LTO products and facilitating other retail financing payment options across a large network of traditional and e-commerce merchant partners in the U.S. and Puerto Rico. AFF’s retail partners provide consumer goods and services to their customers and use AFF’s LTO and retail finance solutions to facilitate payments on such transactions.

The Company’s two business lines are organized into three reportable segments. The U.S. pawn segment consists of pawn operations in the U.S. while the Latin America pawn segment consists of pawn operations in Mexico, Guatemala, El Salvador and Colombia. The retail POS payment solutions segment consists of the operations of AFF in the U.S. and Puerto Rico. Financial information regarding the Company’s revenue and long-lived assets by geographic area is provided in Note 17 of Notes to Consolidated Financial Statements.

Critical Accounting Estimates

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

The critical accounting policies and estimates that could have a significant impact on the Company’s results of operations are described in Note 2 of Notes to Consolidated Financial Statements. The Company believes the following critical accounting policies describe the more significant judgments and estimates used in the preparation of its consolidated financial statements.

Pawn loans and revenue recognition — Pawn loans are secured by the customer’s pledge of tangible personal property, which the Company holds during the term of the loan. If a pawn loan defaults, the Company relies on the sale of the pawned property to recover the principal amount of an unpaid pawn loan, plus a yield on the investment, as the Company’s pawn loans are non-recourse against the customer. The Company accrues pawn loan fee revenue on a constant-yield basis over the life of the pawn loan for all pawns for which the Company deems collection to be probable based on historical pawn redemption statistics, which is included in accounts receivable, net in the accompanying consolidated balance sheets. If the pawn loan is not repaid prior to the expiration of the pawn loan term, including any extension or grace period, if applicable, the principal amount loaned becomes the inventory carrying value of the forfeited collateral, which is typically recovered through sales of the forfeited items at prices well above the carrying value. The Company has determined no allowance related to credit losses on pawn loans is required, as the fair value of the pledged collateral is significantly in excess of the pawn loan amount.

Leased merchandise and revenue recognition — The Company provides merchandise, consisting primarily of furniture and mattresses, appliances, jewelry, electronics and automotive products, to customers of its merchant partners for lease under certain terms agreed to by the customer. The customer has the right to acquire the title either through an early buyout option or through payment of all required lease payments. The Company maintains ownership of the leased merchandise until all payment obligations are satisfied under the lease agreement. The customer has the right to cancel the lease at any time by returning the merchandise. Leased merchandise contracts can typically be renewed for weekly, bi-weekly, semi-monthly, and monthly renewal periods and are generally renewed for between six and 24 months. Leased merchandise is stated at depreciated cost. The Company depreciates leased merchandise over the life of the lease and assumes no salvage value. Depreciation is accelerated upon an early buyout. All of the Company’s leased merchandise represents on-lease merchandise and all leases are operating leases.

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Lease income is recognized over the lease term and is recorded net of any sales taxes collected. Charges for late fees and insufficient fund fees are recognized as income when collected. Initial direct costs related to the Companyʼs lease agreements are added to the basis of the leased property and recognized over the lease term in proportion to the recognition of lease income. The Company typically charges the customer a non-refundable processing fee at lease inception and may also receive a discount from or pay a premium to certain merchant partners for leases originated at their locations, which are deferred and amortized using the straight-line method as adjustments to lease income over the contractual life of the related leased merchandise. Unamortized fees, discounts and premiums are recognized in full upon early buyout or charge-off.

The Company accrues lease income earned but not yet collected as accrued rent receivable, which is included in accounts receivable, net in the accompanying consolidated balance sheets. Alternatively, lease payments received in excess of the amount earned are recognized as deferred revenue, which is included in customer deposits and prepayments in the accompanying consolidated balance sheets. Customer payments are first applied to applicable sales tax and scheduled lease payments, then applied to any uncollected fees, such as late fees and insufficient fund fees. The Company collects sales taxes on behalf of the customer and remits all applicable sales taxes collected to the respective jurisdiction.

Provision for lease losses — The Company records a provision for lease losses on an allowance method, which estimates the leased merchandise losses incurred but not yet identified by management as of the end of the accounting period. The allowance for lease losses is based primarily upon historical loss experience, with consideration given to recent and forecasted business trends including, but not limited to, loss trends, delinquency levels, economic conditions, underwriting and collection practices.

The Company charges off leased merchandise when a lease is 90 days or more contractually past due. If an account is deemed to be uncollectible prior to this date, the Company will charge off the leased merchandise at the point in time it is deemed uncollectible.

Finance receivables and revenue recognition — The Company purchases and services retail finance receivables, the term of which typically range from six to 24 months, directly from its merchant partners or from its bank partner. The Company has a partnership with a Utah state-chartered bank that requires the Company to purchase the rights to the cash flows associated with finance receivables marketed to retail consumers on the bank’s behalf. The bank establishes the underwriting criteria for the finance receivables originated by the bank.

Interest income is recognized using the interest method over the life of the finance receivable for all loans for which the Company deems collection to be probable based on historical loan redemption statistics and stops accruing interest upon charge-off. Charges for late fees and insufficient fund fees are recognized as income when collected. The Company receives an origination fee on newly purchased bank loans and may receive a discount from or pay a premium to certain merchant partners for finance receivables purchased from them, which are deferred and amortized using the interest method as adjustments to yield over the contractual life of the related finance receivable. Unamortized origination fees, discounts and premiums are recognized in full upon early payoff or charge-off.

The Company offers customers an early payoff discount on most of its finance receivables, whereby the customer has between 90 and 101 days to pay the full principal balance without incurring any interest charge. If the borrower does not pay the full principal balance prior to the expiration of the early payoff discount period, interest charges are applied retroactively to the inception date of the loan. The Company accrues interest income during the early payoff discount period but records a reserve for loans expected to pay the full principal balance prior to the expiration of the early payoff discount period based on historical payment patterns.

Provision for loan losses — Expected lifetime losses on finance receivables are recognized upon loan purchase, which requires the Company to make its best estimate of probable lifetime losses at the time of purchase. The Company segments its finance receivable portfolio into pools of receivables with similar risk characteristics, which include loan product and monthly origination vintage, and evaluates each pool for impairment.

The Company calculates the allowance for loan losses based on historical loss information and incorporates observable and forecasted economic conditions over a reasonable and supportable forecast period covering the full contractual life of finance receivables. Incorporating observable and forecasted economic conditions could have a material impact on the measurement of the allowance to the extent that forecasted economic conditions change significantly. The Company may also consider other qualitative factors to address recent and forecasted business trends in estimating the allowance, as necessary, including, but not limited to, loss trends, delinquency levels, economic conditions, underwriting and collection practices. The allowance for loan losses is maintained at a level considered appropriate to cover expected lifetime losses on the finance receivable portfolio, and the appropriateness of the allowance is evaluated at each period end.

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The Company charges off finance receivables when a receivable is 90 days or more contractually past due. If an account is deemed to be uncollectible prior to this date, the Company will charge off the finance receivable at the point in time it is deemed uncollectible.

Business combinations — Business combination accounting requires the Company to determine the fair value of all assets acquired, including identifiable intangible assets, liabilities assumed and contingent consideration issued in a business combination. The total consideration of the acquisition is allocated to the assets and liabilities in amounts equal to the estimated fair value of each asset and liability as of the acquisition date, and any remaining acquisition consideration is classified as goodwill. This allocation process requires extensive use of estimates and assumptions. When appropriate, the Company utilizes independent valuation experts to advise and assist in determining the fair value of the assets acquired and liabilities assumed in connection with a business acquisition, in determining appropriate amortization methods and periods for identified intangible assets and in determining the fair value of contingent consideration, which is reviewed at each subsequent reporting period with changes in the fair value of the contingent consideration recognized in the consolidated statement of income. See Note 3 of Notes to Consolidated Financial Statements.

Goodwill and other indefinite-lived intangible assets — Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in each business combination. The Company performs its goodwill impairment assessment annually as of October 1, and between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company’s reporting units, which are tested for impairment, are U.S. pawn, Latin America pawn and retail POS payment solutions. The Company may assess goodwill for impairment at a reporting unit level by first assessing a range of qualitative factors, including, but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for the Company’s products and services, regulatory and political developments, entity specific factors, such as strategy and changes in key personnel, and overall financial performance. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company proceeds to the quantitative impairment testing methodology, or at the Company’s option, it may proceed directly to the quantitative impairment testing methodology for a reporting unit. See Note 14 of Notes to Consolidated Financial Statements.

The Company’s other material, indefinite-lived intangible assets consist of certain trade names and pawn licenses. The Company performs its indefinite-lived intangible asset impairment assessment annually as of December 31, and between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of an indefinite-lived intangible asset below its carrying amount. See Note 14 of Notes to Consolidated Financial Statements.

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Results of Operations

2024 Consolidated Operating Results Highlights

The following table sets forth revenue, net income, diluted earnings per share, adjusted net income, adjusted diluted earnings per share, EBITDA and adjusted EBITDA for the year ended December 31, 2024 as compared to the year ended December 31, 2023 (in thousands, except per share amounts):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","As Reported (GAAP)","","Adjusted (Non-GAAP)"],["","","2024","","2023","","2024","","2023"],["Revenue","","$","3,388,514","","","$","3,151,796","","","$","3,388,514","","","$","3,151,796"],["Net income","","$","258,815","","","$","219,301","","","$","302,680","","","$","276,874"],["Diluted earnings per share","","$","5.73","","","$","4.80","","","$","6.70","","","$","6.06"],["EBITDA (non-GAAP measure)","","$","551,008","","","$","493,784","","","$","558,437","","","$","511,732"],["Weighted-average diluted shares","","45,168","","","45,693","","","45,168","","","45,693"]]
[[/GREPCENT_TABLE]]

See “Non-GAAP Financial Information—Adjusted Net Income and Adjusted Diluted Earnings Per Share and —Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA” below.

The following charts present net income, adjusted net income, diluted earnings per share, adjusted diluted earnings per share, EBITDA, adjusted EBITDA, revenue and adjusted revenue for the years ended December 31, 2024, 2023 and 2022 (in millions, except per share amounts):

* Non-GAAP financial measures. See “Non-GAAP Financial Information” for additional discussion of non-GAAP financial measures.

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Operating Results for the Twelve Months Ended December 31, 2024 Compared to the Twelve Months Ended December 31, 2023

The following tables and related discussion set forth key operating and financial data for the Company’s operations by reporting segment as of and for the years ended December 31, 2024 and 2023. For similar operating and financial data and discussion of the Company’s 2023 results compared to its 2022 results, refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 5, 2024.

Stores included in the same-store calculations presented in the U.S. pawn segment and Latin America pawn segment sections below are those stores that were opened or acquired prior to the beginning of the prior-year comparative period and remained open through the end of the reporting period. Also included are stores that were relocated during the applicable period within a specified distance and are serving the same market, where there is not a significant change in store size, and where there is not a significant overlap or gap in timing between the opening of the new store and the closing of the existing store.

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U.S. Pawn Segment

The following table presents segment pre-tax operating income and other operating metrics of the U.S. pawn segment for the year ended December 31, 2024 compared to the year ended December 31, 2023 (dollars in thousands). Operating expenses include salary and benefit expense of pawn store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the pawn stores.

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 31,"],["","2024","","2023","","Increase"],["U.S. Pawn Segment"],["Revenue:"],["Retail merchandise sales (1)","$","969,371","","","$","854,190","","","","13","%"],["Pawn loan fees","","505,262","","","","435,762","","","","16","%"],["Wholesale scrap jewelry sales","","93,923","","","","78,571","","","","20","%"],["Total revenue","","1,568,556","","","","1,368,523","","","","15","%"],["Cost of revenue:"],["Cost of retail merchandise sold (2)","","560,970","","","","490,544","","","","14","%"],["Cost of wholesale scrap jewelry sold","","77,683","","","","64,545","","","","20","%"],["Total cost of revenue","","638,653","","","","555,089","","","","15","%"],["Net revenue","","929,903","","","","813,434","","","","14","%"],["Segment expenses:"],["Operating expenses","","503,630","","","","451,543","","","","12","%"],["Depreciation and amortization","","28,980","","","","25,585","","","","13","%"],["Total segment expenses","","532,610","","","","477,128","","","","12","%"],["Segment pre-tax operating income","$","397,293","","","$","336,306","","","","18","%"],["Operating metrics:"],["Retail merchandise sales margin","42","%","","43","%"],["Net revenue margin","59","%","","59","%"],["Segment pre-tax operating margin","25","%","","25","%"]]
[[/GREPCENT_TABLE]]

(1)Includes $4.1 million and $6.5 million of retail merchandise sales from intersegment transactions during 2024 and 2023, respectively, related to the Company offering AFF’s LTO payment solution in its U.S. pawn stores that are eliminated upon consolidation. Excluding these intersegment sales, consolidated U.S. retail merchandise sales during 2024 and 2023 totaled $965.3 million and $847.7 million, respectively.

(2)Includes $2.2 million and $3.5 million of cost of retail merchandise sold from intersegment transactions during 2024 and 2023, respectively, related to the Company offering AFF’s LTO payment solution in its U.S. pawn stores that are eliminated upon consolidation. Excluding these intersegment sales, consolidated U.S. cost of retail merchandise sold during 2024 and 2023 totaled $558.8 million and $487.1 million, respectively.

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The following table details earning assets, which consist of pawn loans and inventories as well as other earning asset metrics of the U.S. pawn segment, as of December 31, 2024 as compared to December 31, 2023 (dollars in thousands, except as otherwise noted):

[[GREPCENT_TABLE]]
[["","As of December 31,"],["","2024","","2023","","Increase"],["U.S. Pawn Segment"],["Earning assets:"],["Pawn loans","$","396,667","","","$","344,152","","","","15","%"],["Inventories","","245,492","","","","221,843","","","","11","%"],["","$","642,159","","","$","565,995","","","","13","%"],["Average outstanding pawn loan amount (in ones)","$","283","","","$","258","","","","10","%"],["Composition of pawn collateral:"],["General merchandise","28","%","","30","%"],["Jewelry","72","%","","70","%"],["","100","%","","100","%"],["Composition of inventories:"],["General merchandise","41","%","","43","%"],["Jewelry","59","%","","57","%"],["","100","%","","100","%"],["Percentage of inventory aged greater than one year","1","%","","1","%"],["Inventory turnover (trailing twelve months cost of merchandise sales divided by average inventories)","2.8 times","","2.8 times"],["Store count","","1,200","","","","1,183","","","","1","%"],["Average store count","","1,195","","","","1,135","","","","5","%"]]
[[/GREPCENT_TABLE]]

Retail Merchandise Sales Operations

U.S. retail merchandise sales increased 13% to $969.4 million during 2024 compared to $854.2 million for 2023. Same-store retail sales increased 6% during 2024 compared to 2023. The increase in total retail sales was primarily due to incremental sales contributions from acquired stores and an increase in same-store sales. During 2024, the gross profit margin on retail merchandise sales in the U.S. was 42% compared to a margin of 43% during 2023, reflecting continued demand for value-priced, pre-owned merchandise and low levels of aged inventory.

U.S. inventories increased 11% to $245.5 million at December 31, 2024 compared to $221.8 million at December 31, 2023. The increase was primarily due to incremental inventories from acquired stores and an increase in same-store inventories as a result of the higher pawn loan balances noted below. Inventories aged greater than one year in the U.S. were 1% at both December 31, 2024 and 2023.

Pawn Lending Operations

U.S. pawn loan receivables as of December 31, 2024 increased 15% in total and 12% on a same-store basis compared to December 31, 2023. The Company believes the increase in same-store pawn receivables was primarily due to continued inflationary pressures driving additional demand for pawn loans and higher gold prices, which increased customers’ jewelry collateral value.

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U.S. pawn loan fees increased 16% to $505.3 million during 2024 compared to $435.8 million for 2023. Same-store pawn loan fees increased 11% during 2024 compared to 2023. The increase in total and same-store pawn loan fees was primarily due to store growth and increased same-store pawn receivables.

Segment Expenses

U.S. store operating expenses increased 12% to $503.6 million during 2024 compared to $451.5 million during 2023 while same-store operating expenses increased 5% compared with the prior year. The increase in operating expenses was primarily due to an increase in the average store count.

Segment Pre-Tax Operating Income

The U.S. segment pre-tax operating income for 2024 was $397.3 million, which generated a pre-tax segment operating margin of 25% compared to $336.3 million and 25% in the prior year, respectively. The increase in the segment pre-tax operating income reflected increased net revenue from both acquired and existing stores, partially offset by an increase in segment expenses.

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Latin America Pawn Segment

Latin America pawn segment pre-tax operating income for 2024 compared to 2023 was impacted by a 3% unfavorable change in the average value of the Mexican peso compared to the U.S. dollar. The translated value of Latin American earning assets as of December 31, 2024 compared to December 31, 2023 was also impacted by a 20% unfavorable change in the end-of-period Mexican peso compared to the U.S. dollar. Constant currency results are non-GAAP financial measures, which exclude the effects of foreign currency translation and are calculated by translating current-year results at prior-year average exchange rates. See the “Constant Currency Results” section in “Non-GAAP Financial Information” below for additional discussion of constant currency operating results.

The following table presents segment pre-tax operating income and other operating metrics of the Latin America pawn segment for the year ended December 31, 2024 as compared to the year ended December 31, 2023 (dollars in thousands). Operating expenses include salary and benefit expense of pawn store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the pawn stores.

[[GREPCENT_TABLE]]
[["","","","","","","","","","","","Constant Currency Basis"],["","","","","","","","","Year Ended"],["","Year Ended","","","","","","December 31,","","Increase /"],["","December 31,","","Increase /","","2024","","(Decrease)"],["","2024","","2023","","(Decrease)","","(Non-GAAP)","","(Non-GAAP)"],["Latin America Pawn Segment"],["Revenue:"],["Retail merchandise sales","$","541,787","","","$","533,612","","","","2","%","","","$","556,686","","","","4","%"],["Pawn loan fees","","231,864","","","","222,774","","","","4","%","","","238,305","","","","7","%"],["Wholesale scrap jewelry sales","","38,237","","","","46,917","","","","(19)","%","","","38,237","","","","(19)","%"],["Total revenue","","811,888","","","","803,303","","","","1","%","","","833,228","","","","4","%"],["Cost of revenue:"],["Cost of retail merchandise sold","","350,906","","","","345,309","","","","2","%","","","360,452","","","","4","%"],["Cost of wholesale scrap jewelry sold","","31,086","","","","37,276","","","","(17)","%","","","31,977","","","","(14)","%"],["Total cost of revenue","","381,992","","","","382,585","","","","\u2014","%","","","392,429","","","","3","%"],["Net revenue","","429,896","","","","420,718","","","","2","%","","","440,799","","","","5","%"],["Segment expenses:"],["Operating expenses","","259,307","","","","243,146","","","","7","%","","","266,102","","","","9","%"],["Depreciation and amortization","","20,369","","","","21,350","","","","(5)","%","","","20,855","","","","(2)","%"],["Total segment expenses","","279,676","","","","264,496","","","","6","%","","","286,957","","","","8","%"],["Segment pre-tax operating income","$","150,220","","","$","156,222","","","","(4)","%","","","$","153,842","","","","(2)","%"],["Operating metrics:"],["Retail merchandise sales margin","35","%","","35","%","","","","","35","%"],["Net revenue margin","53","%","","52","%","","","","","53","%"],["Segment pre-tax operating margin","19","%","","19","%","","","","","18","%"]]
[[/GREPCENT_TABLE]]

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The following table details earning assets, which consist of pawn loans and inventories as well as other earning asset metrics of the Latin America pawn segment, as of December 31, 2024 as compared to December 31, 2023 (dollars in thousands, except as otherwise noted):

[[GREPCENT_TABLE]]
[["","","","","","","","","","","","Constant Currency Basis"],["","","","","","","","","","","","As of"],["","","","","","","","","","","","December 31,"],["","As of December 31,","","","","2024","","Increase"],["","2024","","2023","","(Decrease)","","(Non-GAAP)","","(Non-GAAP)"],["Latin America Pawn Segment"],["Earning assets:"],["Pawn loans","$","121,200","","","$","127,694","","","","(5)","%","","","$","143,805","","","","13","%"],["Inventories","","89,088","","","","90,246","","","","(1)","%","","","105,686","","","","17","%"],["","$","210,288","","","$","217,940","","","","(4)","%","","","$","249,491","","","","14","%"],["Average outstanding pawn loan amount (in ones)","$","87","","","$","95","","","","(8)","%","","","$","103","","","","8","%"],["Composition of pawn collateral:"],["General merchandise","58","%","","63","%"],["Jewelry","42","%","","37","%"],["","100","%","","100","%"],["Composition of inventories:"],["General merchandise","65","%","","67","%"],["Jewelry","35","%","","33","%"],["","100","%","","100","%"],["Percentage of inventory aged greater than one year","1","%","","1","%"],["Inventory turnover (trailing twelve months cost of merchandise sales divided by average inventories)","4.2 times","","4.4 times"],["Store count","","1,826","","","","1,814","","","","1","%"],["Average store count","","1,821","","","","1,791","","","","2","%"]]
[[/GREPCENT_TABLE]]

Retail Merchandise Sales Operations

Latin America retail merchandise sales increased 2% (4% on a constant currency basis) to $541.8 million during 2024 compared to $533.6 million for 2023. Same-store retail sales increased 1% (4% on a constant currency basis) during 2024 compared to 2023. The increase in total and same-store retail sales was primarily due to increased inventory levels throughout 2024 and greater demand for value-priced, pre-owned merchandise. The gross profit margin on retail merchandise sales was 35% during both 2024 and 2023.

Latin America inventories decreased 1% (17% increase on a constant currency basis) to $89.1 million at December 31, 2024 compared to $90.2 million at December 31, 2023. The increase in constant currency inventories was primarily due to increases in pawn loan receivable balances over the past several quarters creating more forfeited inventory. Inventories aged greater than one year in Latin America were 1% at both December 31, 2024 and 2023.

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Pawn Lending Operations

Latin America pawn loan receivables decreased 5% (13% increase on a constant currency basis) as of December 31, 2024 compared to December 31, 2023. On a same-store basis, pawn loan receivables decreased 6% (12% increase on a constant currency basis) as of December 31, 2024 compared to December 31, 2023. The increase in constant currency total and same-store pawn receivables is primarily due to increasing demand for pawn loans and larger loan sizes, driven in part by higher gold prices and a slightly increased mix of higher value jewelry loans.

Latin America pawn loan fees increased 4% (7% on a constant currency basis) to $231.9 million during 2024 compared to $222.8 million for 2023. Same-store pawn loan fees also increased 4% (7% on a constant currency basis) during 2024 compared to 2023. The constant currency increase in total and same-store pawn loan fees was primarily due to increased average pawn receivable balances outstanding during 2024.

Segment Expenses

Operating expenses increased 7% (9% on a constant currency basis) to $259.3 million during 2024 compared to $243.1 million during 2023. Same-store operating expenses increased 6% (9% on a constant currency basis) compared to the prior year. The increase in total and same-store operating expenses was primarily driven by increased store counts, accelerated store opening activity, general inflationary impacts and continued increases in the federally mandated minimum wage and increased costs associated with required employee benefit programs.

Segment Pre-Tax Operating Income

The segment pre-tax operating income for 2024 was $150.2 million, which generated a pre-tax segment operating margin of 19% compared to $156.2 million and 19% in the prior year, respectively. The decrease in the segment pre-tax operating income reflected an increase in segment expenses, partially offset by the increase in net revenue.

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Retail POS Payment Solutions Segment

Retail POS Payment Solutions Operating Results

The following table presents segment pre-tax operating income of the retail POS payment solutions segment for the year ended December 31, 2024 as compared to the year ended December 31, 2023 (dollars in thousands). Operating expenses include salary and benefit expenses of certain operations-focused departments, merchant partner incentives, bank and other payment processing charges, credit reporting costs, information technology costs, advertising costs and other operational costs incurred by AFF. Administrative expenses and amortization expense of intangible assets related to the purchase of AFF are not included in the segment pre-tax operating income.

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 31,","","Increase /"],["","2024","","2023","","(Decrease)"],["Retail POS Payment Solutions Segment"],["Revenue:"],["Leased merchandise income","$","766,241","","","$","752,682","","","","2","%"],["Interest and fees on finance receivables","245,891","","","233,818","","","","5","%"],["Total revenue","1,012,132","","","986,500","","","","3","%"],["Cost of revenue:"],["Depreciation of leased merchandise (1)","434,915","","","413,546","","","","5","%"],["Provision for lease losses (2)","163,937","","","177,418","","","","(8)","%"],["Provision for loan losses","143,827","","","123,030","","","","17","%"],["Total cost of revenue","742,679","","","713,994","","","","4","%"],["Net revenue","269,453","","","272,506","","","","(1)","%"],["Segment expenses:"],["Operating expenses","138,041","","","137,460","","","","\u2014","%"],["Depreciation and amortization","2,783","","","3,030","","","","(8)","%"],["Total segment expenses","140,824","","","140,490","","","","\u2014","%"],["Segment pre-tax operating income","$","128,629","","","$","132,016","","","","(3)","%"]]
[[/GREPCENT_TABLE]]

(1)Includes $1.6 million and $2.1 million of depreciation of leased merchandise from intersegment transactions during 2024 and 2023, respectively, related to the Company offering AFF’s LTO payment solution in its U.S. pawn stores that are eliminated upon consolidation. Excluding these intersegment transactions, consolidated depreciation of leased merchandise during 2024 and 2023 totaled $433.3 million and $411.5 million, respectively.

(2)Includes $0.5 million and $1.6 million of provision for lease losses from intersegment transactions during 2024 and 2023, respectively, related to the Company offering AFF’s LTO payment solution in its U.S. pawn stores that are eliminated upon consolidation. Excluding these intersegment transactions, consolidated provision for lease losses during 2024 and 2023 totaled $163.4 million and $175.9 million, respectively.

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The following table provides a detail of gross transaction volumes originated during the year ended December 31, 2024 as compared to the year ended December 31, 2023 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended"],["","December 31,","Increase /"],["","2024","","2023","","(Decrease)"],["Leased merchandise","$","568,635","","","$","623,069","","","","(9)","%"],["Finance receivables","510,231","","","405,765","","","","26","%"],["Total gross transaction volume","$","1,078,866","","","$","1,028,834","","","","5","%"]]
[[/GREPCENT_TABLE]]

The following table details retail POS payment solutions earning assets as of December 31, 2024 as compared to December 31, 2023 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","As of December 31,","","Increase /"],["","2024","","2023","","(Decrease)"],["Leased merchandise, net:"],["Leased merchandise, before allowance for lease losses","$","209,333","","","$","267,458","","","","(22)","%"],["Less allowance for lease losses","(80,661)","","","(95,752)","","","","(16)","%"],["Leased merchandise, net (1)","$","128,672","","","$","171,706","","","","(25)","%"],["Finance receivables, net:"],["Finance receivables, before allowance for loan losses","$","264,506","","","$","210,355","","","","26","%"],["Less allowance for loan losses","(117,005)","","","(96,454)","","","","21","%"],["Finance receivables, net","$","147,501","","","$","113,901","","","","29","%"]]
[[/GREPCENT_TABLE]]

(1)Includes $0.2 million and $0.5 million of intersegment transactions as of December 31, 2024 and 2023, respectively, related to the Company offering AFF’s LTO payment solution in its U.S. pawn stores that are eliminated upon consolidation. Excluding these intersegment transactions, consolidated net leased merchandise as of December 31, 2024 and 2023 totaled $128.4 million and $171.2 million, respectively.

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The following table details the changes in the allowance for lease and loan losses and other portfolio metrics during the year ended December 31, 2024 as compared to the year ended December 31, 2023 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 31,","","Increase /"],["","","2024","","","2023","","(Decrease)"],["Allowance for lease losses:"],["Balance at beginning of period","","$","95,752","","","","$","79,576","","","","20","%"],["Provision for lease losses (1)","","163,937","","","","177,418","","","","(8)","%"],["Charge-offs","","(186,123)","","","","(167,952)","","","","11","%"],["Recoveries","","7,095","","","","6,710","","","","6","%"],["Balance at end of period","","$","80,661","","","","$","95,752","","","","(16)","%"],["Leased merchandise portfolio metrics:"],["Provision rate (2)","29","%","","28","%"],["Average monthly net charge-off rate (3)","6.3","%","","5.4","%"],["Delinquency rate (4)","24.4","%","","21.7","%"],["Allowance for loan losses:"],["Balance at beginning of period","","$","96,454","","","","$","84,833","","","","14","%"],["Provision for loan losses","","143,827","","","","123,030","","","","17","%"],["Charge-offs","","(130,812)","","","","(117,961)","","","","11","%"],["Recoveries","","7,536","","","","6,552","","","","15","%"],["Balance at end of period","","$","117,005","","","","$","96,454","","","","21","%"],["Finance receivables portfolio metrics:"],["Provision rate (2)","28","%","","30","%"],["Average monthly net charge-off rate (3)","4.3","%","","4.7","%"],["Delinquency rate (4)","20.0","%","","21.8","%"]]
[[/GREPCENT_TABLE]]

(1)Includes $0.5 million and $1.6 million of provision for lease losses from intersegment transactions during 2024 and 2023, respectively, related to the Company offering AFF’s LTO payment solution in its U.S. pawn stores that are eliminated upon consolidation. Excluding these intersegment transactions, consolidated provision for lease losses during 2024 and 2023 totaled $163.4 million and $175.9 million, respectively.

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

(3)Calculated as charge-offs, net of recoveries, as a percentage of the respective average earning asset balance before allowance for lease or loan losses.

(4)Calculated as the percentage of the respective contractual earning asset balance owed that is 1 to 89 days past due (the Company charges off leases and finance receivables when they are 90 days or more contractually past due).

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LTO Operations

Leased merchandise, before allowance for lease losses, decreased 22% as of December 31, 2024 compared to December 31, 2023. The decrease was primarily due to decreased gross transaction volumes originated due to weakness in furniture originations and the bankruptcy filings in 2024 for two of AFF’s larger retail furniture merchant partners.

The allowance for lease losses decreased 16% to $80.7 million as of December 31, 2024 compared to $95.8 million as of December 31, 2023, which was primarily due to the decrease in leased merchandise, partially offset by slightly higher lease loss provisioning rates used during 2024 as compared to 2023. As a percentage of lease merchandise, the allowance was 39% at December 31, 2024 and 36% at December 31, 2023.

Leased merchandise income increased 2% to $766.2 million during 2024 compared to $752.7 million during 2023, which was primarily due to slightly higher average rental rates, partially offset by slightly lower average leased merchandise balances outstanding during 2024 compared to 2023.

Depreciation of leased merchandise increased 5% to $434.9 million during 2024 compared to $413.5 million during 2023. As a percentage of leased merchandise income, depreciation of leased merchandise increased to 57% during 2024 compared to 55% during 2023, primarily as a result of a slight increase in customers taking advantage of early buyout or other early payment options.

Provision for lease losses decreased 8% to $163.9 million during 2024 compared to $177.4 million during 2023, which was primarily due to the 9% decrease in gross transaction volumes. As a percentage of gross transaction volume, the provision for lease losses increased to 29% during 2024 compared to 28% during 2023.

Retail Finance Operations

Finance receivables, before allowance for loan losses, increased 26% as of December 31, 2024 compared to December 31, 2023. The increase was primarily due to increased gross transaction volumes in certain non-furniture industry verticals.

The allowance for loan losses increased 21% to $117.0 million as of December 31, 2024 compared to $96.5 million as of December 31, 2023, which was primarily due to the increase in finance receivables, partially offset by slightly lower loan loss provisioning rates used during 2024 as compared to 2023. As a percentage of finance receivables, the allowance was 44% at December 31, 2024 compared to 46% at December 31, 2023.

Interest and fees on finance receivables increased 5% to $245.9 million during 2024 compared to $233.8 million during 2023. The increase was primarily due to the higher year-over-year finance receivable balances, partially offset by a slight decline in portfolio yield primarily as a result of AFF expanding its offerings and merchant relationships in certain services sector verticals during 2024, some of which are provided at lower interest rates.

Provision for loan losses increased 17% to $143.8 million during 2024 compared to $123.0 million during 2023, which was primarily due to the 26% increase in gross transaction volumes, partially offset by a slight decrease in the net provisioning rates used during 2024 based on lower than expected loss rates on older vintages. As a percentage of gross transaction volume, the provision for loan losses decreased to 28% during 2024 compared to 30% during 2023.

Segment Expenses

Operating expenses were flat at $138.0 million during 2024 compared to $137.5 million during 2023. As a percentage of segment revenues, operating expenses were 14% during both 2024 and 2023.

Segment Pre-Tax Operating Income

The retail POS payment solutions segment pre-tax operating income during 2024 was $128.6 million compared to $132.0 million during 2023. The decrease was primarily the result of the slight decrease in net revenue.

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Consolidated Results of Operations

The following table reconciles pre-tax operating income of the Company’s U.S. pawn segment, Latin America pawn segment and retail POS payment solutions segment, discussed above, to consolidated net income for the year ended December 31, 2024 as compared to the year ended December 31, 2023 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","Increase /"],["","","2024","","2023","","(Decrease)"],["Consolidated Results of Operations"],["Segment pre-tax operating income:"],["U.S. pawn","","$","397,293","","","$","336,306","","","","18","%"],["Latin America pawn","","150,220","","","156,222","","","","(4)","%"],["Retail POS payment solutions","","128,629","","","132,016","","","","(3)","%"],["Intersegment eliminations (1)","","280","","","581","","","","(52)","%"],["Consolidated segment pre-tax operating income","","676,422","","","625,125","","","","8","%"],["Corporate expenses and other income:"],["Administrative expenses","","173,199","","","176,315","","","","(2)","%"],["Depreciation and amortization","","52,809","","","59,196","","","","(11)","%"],["Interest expense","","105,226","","","93,243","","","","13","%"],["Interest income","","(1,935)","","","(1,469)","","","","32","%"],["Loss (gain) on foreign exchange","","2,641","","","(1,529)","","","","(273)","%"],["Merger and acquisition expenses","","2,228","","","7,922","","","","(72)","%"],["Other expenses (income), net","","(522)","","","(1,402)","","","","(63)","%"],["Total corporate expenses and other income","","333,646","","","332,276","","","","\u2014","%"],["Income before income taxes","","342,776","","","292,849","","","","17","%"],["Provision for income taxes","","83,961","","","73,548","","","","14","%"],["Net income","","$","258,815","","","$","219,301","","","","18","%"]]
[[/GREPCENT_TABLE]]

(1)Represents the elimination of intersegment transactions related to the Company offering AFF’s LTO payment solution in its U.S. pawn stores. For further detail, see Note 17 of Notes to Consolidated Financial Statements.

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Corporate Expenses and Taxes

Administrative expenses decreased 2% to $173.2 million during 2024 compared to $176.3 million during 2023. As a percentage of revenue, administrative expenses decreased to 5% during 2024 compared to 6% during 2023.

Depreciation and amortization decreased 11% to $52.8 million during 2024 compared to $59.2 million during 2023, primarily due to a scheduled $6.9 million decrease in amortization of acquired AFF intangible assets.

Interest expense increased 13% to $105.2 million during 2024 compared to $93.2 million for 2023, primarily due to higher average total long-term debt balances outstanding. See Note 11 of Notes to Consolidated Financial Statements and “Liquidity and Capital Resources.”

Merger and acquisition expenses decreased 72% to $2.2 million during 2024 compared to $7.9 million during 2023, reflecting a decreased level of acquisition activity in 2024 compared to 2023.

Consolidated effective income tax rates for 2024 and 2023 were 24.5% and 25.1%, respectively. The decrease in the effective tax rate was primarily due to an increase in U.S.-sourced income as a result of the U.S. store acquisition activity since the beginning of 2023, which is taxed at a lower rate than the Latin American countries in which the Company operates. See Note 12 of Notes to Consolidated Financial Statements.

Liquidity and Capital Resources

Material Capital Requirements

The Company’s primary capital requirements include:

•The expansion of pawn operations through growth of pawn receivables and inventories in existing stores, new store openings, strategic acquisitions of pawn stores and purchases of underlying real estate at existing locations;

•The expansion of retail POS payment solutions operations through growth of the business generated from new and existing merchant partners; and

•The return of capital to shareholders through dividends and stock repurchases.

Other material capital requirements include operating expenses (see Note 4 of Notes to Consolidated Financial Statements regarding operating lease commitments), maintenance capital expenditures related to its facilities, technology platforms, general corporate operating activities, income tax payments and debt service, among others. The Company believes that net cash provided by operating activities and available and unused funds under its revolving unsecured credit facilities will be adequate to meet its liquidity and capital needs for these items over the next 12 months and also in the longer term beyond the next 12 months.

Expand Pawn Operations

The Company intends to continue expansion of its pawn operations through growth of pawn receivables and inventories in existing stores along with new store openings and acquisitions.

During 2024, the Company acquired 28 pawn stores in the U.S., acquired 10 pawn stores in Mexico and acquired one pawn license that was used to open a new pawn store in the state of Nevada for a cumulative purchase price of $107.6 million, net of cash acquired and subject to future post-closing adjustments. The Company evaluates potential acquisitions based upon growth potential, purchase price, available liquidity, strategic fit and quality of management personnel, among other factors. During 2024, the Company also opened 60 new locations in Latin America and one location in the U.S. The combined investment in leasehold improvements and other fixed assets for these new locations totaled $19.3 million.

For 2025, the Company expects to continue adding store locations through new (“de novo”) store openings and acquisitions. Future store openings and acquisitions are subject to the Company’s ability to identify acquisition opportunities and new location sites in markets with attractive demographics and favorable regulatory environments.

Although viewed by management as a discretionary expenditure not required to operate its pawn stores, the Company may continue to strategically purchase real estate from its landlords at existing stores or in conjunction with pawn store acquisitions as opportunities arise at reasonable valuations. The Company purchased the real estate at 58 store locations, primarily from landlords at existing stores, for a cumulative purchase price of $86.1 million during 2024.

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Expand Retail POS Payment Solutions Operations

AFF expects to expand its business primarily by promoting and expanding relationships with both new and existing customers and retail merchant partners. In addition, AFF has made, and intends to continue to make, investments in its customer and merchant support operations and facilities, its technology platforms and its proprietary decisioning platforms and processes. In addition to utilizing cash flows generated from its own operations to fund expected 2025 growth, AFF has access to the additional sources of liquidity described below if needed to fund further expansion activities.

Return of Capital to Shareholders

In January 2025, the Company’s Board declared a $0.38 per share first quarter cash dividend on common shares outstanding, or an aggregate of $17.0 million based on the December 31, 2024 share count, to be paid on February 28, 2025 to stockholders of record as of February 14, 2025. While the Company currently expects to continue the payment of quarterly cash dividends, the amount, declaration and payment of cash dividends in the future (quarterly or otherwise) will be made by the Board, from time to time, subject to the Company’s financial condition, results of operations, business requirements, compliance with legal requirements, debt covenant restrictions and other relevant factors.

During 2024, the Company repurchased a total of 721,000 shares of common stock at an aggregate cost of $85.0 million and an average cost per share of $117.90. During 2023, the Company repurchased 1,248,000 shares of common stock at an aggregate cost of $114.4 million and an average cost per share of $91.58. The aggregate cost and average cost per share do not include the effect of the 1% excise tax on certain share repurchases enacted under the inflation Reduction Act of 2022. The Company incurred $0.9 million and $1.1 million of excise taxes during 2024 and 2023, respectively.

In July 2023, the Board authorized a common stock repurchase program for up to $200.0 million of the Company’s outstanding common stock, of which $115.0 million is currently remaining. The Company intends to continue repurchases under its active share repurchase program, including through open market transactions under trading plans in accordance with Rule 10b5-1 and Rule 10b-18 under the Exchange Act subject to a variety of factors, including, but not limited to, the level of cash balances, liquidity needs, credit availability, debt covenant restrictions, general business and economic conditions, regulatory requirements, the market price of the Company’s stock, the Company’s dividend policy and the availability of alternative investment opportunities.

Sources of Liquidity

The Company regularly evaluates opportunities to optimize its capital structure, including through consideration of the issuance of debt or equity, to refinance existing debt and to enter into interest rate hedge transactions, such as interest rate swap agreements. As of December 31, 2024, the Company’s primary sources of liquidity were $175.1 million in cash and cash equivalents and $528.9 million of available and unused funds under the Company's revolving unsecured credit facilities, subject to certain financial covenants (see Note 11 of Notes to Consolidated Financial Statements). The Company had working capital of $1,064.3 million as of December 31, 2024.

The Company’s cash and cash equivalents as of December 31, 2024 included $70.9 million held by its foreign subsidiaries. These cash balances, which are primarily held in Mexican pesos, are associated with foreign earnings the Company has asserted are indefinitely reinvested and which the Company primarily plans to use to support its continued growth plans outside the U.S. through funding of capital expenditures, acquisitions, operating expenses or other similar cash needs of the Company’s foreign operations.

The Company’s liquidity is affected by a number of factors, including changes in general customer traffic and demand, pawn loan balances, loan-to-value ratios, collection of pawn fees, merchandise sales, inventory levels, LTO merchandise, finance receivable balances, collection of lease and finance receivable payments, seasonality, operating expenses, administrative expenses, expenses related to merger and acquisition activities, litigation-related expenses, tax rates, gold prices, foreign currency exchange rates and the pace of new pawn store expansion and acquisitions. Additionally, a prolonged reduction in earnings and EBITDA could limit the Company’s future ability to fully borrow on its credit facilities under current leverage covenants. Regulatory developments affecting the Company’s operations may also impact profitability and liquidity. See “Item 1. Business—Governmental Regulation.”

If needed, the Company could seek to raise additional funds from a variety of sources, including, but not limited to, repatriation of excess cash held in Latin America, the sale of assets, reductions in operating expenses, capital expenditures and dividends, the forbearance or deferral of operating expenses, the issuance of debt or equity utilizing other structured financing arrangements, the leveraging of currently unencumbered real estate owned by the Company and/or changes to its management

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of current assets. The characteristics of the Company’s current assets, specifically the ability to rapidly liquidate gold jewelry inventory, which accounts for 52% of total inventory, give the Company flexibility to quickly increase cash flow if necessary.

Cash Flows and Liquidity Metrics

The following tables set forth certain historical information with respect to the Company’s sources and uses of cash and other key indicators of liquidity (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","2023","","2022"],["Cash flow provided by operating activities","","$","539,958","","","$","416,142","","","$","469,305"],["Cash flow used in investing activities","","(441,591)","","","(462,332)","","","(336,443)"],["Cash flow (used in) provided by financing activities","","(38,193)","","","51,313","","","(139,273)"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","As of December 31,"],["","","2024","","2023","","2022"],["Working capital","","$","1,064,344","","","$","971,009","","","$","835,133"],["Current ratio","4.1:1","3.9:1","3.8:1"]]
[[/GREPCENT_TABLE]]

Cash Flow Provided by Operating Activities

Net cash provided by operating activities increased $123.8 million, or 30%, from $416.1 million for 2023 to $540.0 million for 2024 due to net changes in certain non-cash adjustments to reconcile net income to operating cash flow and net changes in other operating assets and liabilities (as detailed in the consolidated statements of cash flows) and an increase in net income of $39.5 million.

Cash Flow Used in Investing Activities

Net cash used in investing activities decreased $20.7 million, or 4%, from $462.3 million during 2023 to $441.6 million during 2024. Cash flows from investing activities are utilized primarily to fund acquisitions, purchases of furniture, fixtures, equipment and improvements, which includes capital expenditures for improvements to existing pawn stores and for new pawn store openings and other corporate assets, and discretionary purchases of store real property. In addition, cash flows related to the funding of new pawn loans, net of cash repayments and recovery of principal through the sale of inventories acquired from forfeiture of pawn collateral and changes in net finance receivables, are included in investing activities. The Company paid $68.2 million for furniture, fixtures, equipment and improvements and $86.1 million for discretionary pawn store real property purchases during 2024 compared to $60.1 million and $70.5 million in 2023, respectively. The Company paid $76.0 million in cash related to pawn store acquisitions during 2024 compared to $181.3 million during 2023. The Company funded a net increase in pawn loans of $72.0 million during 2024 and $35.0 million during 2023. The Company funded a net increase in finance receivables of $139.3 million during 2024 and $115.4 million during 2023.

Cash Flow Used in Financing Activities

Net cash provided by financing activities decreased $89.5 million, or 174%, from net cash provided by financing activities of $51.3 million during 2023 to net cash used in financing activities of $38.2 million during 2024. Net payments on the credit facilities were $370.0 million during 2024 compared to net borrowings of $230.3 million during 2023. During 2024, the Company received $500.0 million in proceeds from the private offering of senior unsecured notes which was used to repay a portion of the outstanding balance on the Credit Facility, after payment of fees and expenses related to the offering. The Company paid debt issuance costs of $10.4 million during 2024 compared to $0.3 million during 2023. The Company funded $85.0 million for share repurchases and paid dividends of $65.8 million during 2024, compared to funding $114.4 million of share repurchases and dividends paid of $61.9 million during 2023. In addition, the Company paid withholding taxes on net share settlements of restricted stock awards during 2024 of $7.0 million compared to $2.5 million during 2023.

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Non-GAAP Financial Information

The Company uses certain financial calculations such as adjusted net income, adjusted diluted earnings per share, EBITDA, adjusted EBITDA, free cash flow, adjusted free cash flow, adjusted retail POS payment solutions segment metrics and constant currency results as factors in the measurement and evaluation of the Company’s operating performance and period-over-period growth. The Company derives these financial calculations on the basis of methodologies other than GAAP, primarily by excluding from a comparable GAAP measure certain items the Company does not consider to be representative of its actual operating performance. These financial calculations are “non-GAAP financial measures” as defined under the SEC rules. The Company uses these non-GAAP financial measures in operating its business because management believes they are less susceptible to variances in actual operating performance that can result from the excluded items, other infrequent charges and currency fluctuations. The Company presents these financial measures to investors because management believes they are useful to investors in evaluating the primary factors that drive the Company’s core operating performance and provide greater transparency into the Company’s results of operations. However, items that are excluded and other adjustments and assumptions that are made in calculating these non-GAAP financial measures are significant components in understanding and assessing the Company’s financial performance. These non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, the Company’s GAAP financial measures. Further, because these non-GAAP financial measures are not determined in accordance with GAAP, and are thus susceptible to varying calculations, the non-GAAP financial measures, as presented, may not be comparable to other similarly-titled measures of other companies.

While acquisitions are an important part of the Company’s overall strategy, the Company has adjusted the applicable financial calculations to exclude merger and acquisition expenses and amortization of acquired AFF intangible assets. The Company does not consider these items to be related to the organic operations of the acquired businesses or its continuing operations and are generally not relevant to assessing or estimating the long-term performance of the acquired businesses. In addition, excluding these items allows for more accurate comparisons of the financial results to prior periods. Merger and acquisition expenses include incremental costs directly associated with merger and acquisition activities, including professional fees, legal expenses, severance, retention and other employee-related costs, contract breakage costs and costs related to the consolidation of technology systems and corporate facilities, among others.

The Company has certain leases in Mexico which are denominated in U.S. dollars. The lease liability of these U.S.-dollar-denominated leases, which is considered a monetary liability, is remeasured into Mexican pesos using current period exchange rates, resulting in the recognition of foreign currency exchange gains or losses. The Company has adjusted the applicable financial measures to exclude these remeasurement gains or losses (1) because they are non-cash, non-operating items that could create volatility in the Company’s consolidated results of operations due to the magnitude of the end of period lease liability being remeasured and (2) to improve comparability of current periods presented with prior periods.

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Adjusted Net Income and Adjusted Diluted Earnings Per Share

Management believes the presentation of adjusted net income and adjusted diluted earnings per share provides investors with greater transparency and provides a more complete understanding of the Company’s financial performance and prospects for the future by excluding items that management believes are non-operating in nature and are not representative of the Company’s core operating performance. In addition, management believes the adjustments shown below are useful to investors in order to allow them to compare the Company’s financial results for the current periods presented with the prior periods presented.

The following table provides a reconciliation between net income and diluted earnings per share, calculated in accordance with GAAP, to adjusted net income and adjusted diluted earnings per share, which are shown net of tax (unaudited, in thousands, except per share amounts):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023","","2022","","2024","","2023","","2022"],["","In Thousands","","In Thousands","","In Thousands","","Per Share","","Per Share","","Per Share"],["Net income and diluted earnings per share, as reported","$","258,815","","","$","219,301","","","$","253,495","","","$","5.73","","","$","4.80","","","$","5.36"],["Adjustments, net of tax:"],["Merger and acquisition expenses","1,706","","","6,089","","","2,878","","","0.04","","","0.13","","","0.06"],["Non-cash foreign currency loss (gain) related to lease liability","2,627","","","(1,778)","","","(930)","","","0.06","","","(0.04)","","","(0.02)"],["AFF purchase accounting and other adjustments","38,289","","","54,341","","","82,432","","","0.85","","","1.19","","","1.74"],["Gain on revaluation of contingent acquisition consideration","\u2014","","","\u2014","","","(90,035)","","","\u2014","","","\u2014","","","(1.91)"],["Other expenses (income), net","1,243","","","(1,079)","","","(2,103)","","","0.02","","","(0.02)","","","(0.04)"],["Adjusted net income and diluted earnings per share","$","302,680","","","$","276,874","","","$","245,737","","","$","6.70","","","$","6.06","","","$","5.19"]]
[[/GREPCENT_TABLE]]

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Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA

The Company defines EBITDA as net income before income taxes, depreciation and amortization, interest expense and interest income and adjusted EBITDA as EBITDA adjusted for certain items, as listed below, that management considers to be non-operating in nature and not representative of its actual operating performance. The Company believes EBITDA and adjusted EBITDA are commonly used by investors to assess a company’s financial performance, and adjusted EBITDA is used as a starting point in the calculation of the consolidated total debt ratio as defined in the Company’s senior unsecured notes. The following table provides a reconciliation of net income to EBITDA and adjusted EBITDA (unaudited, in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023","","2022"],["Net income","$","258,815","","","$","219,301","","","$","253,495"],["Income taxes","83,961","","","73,548","","","70,138"],["Depreciation and amortization (1)","104,941","","","109,161","","","103,832"],["Interest expense","105,226","","","93,243","","","70,708"],["Interest income","(1,935)","","","(1,469)","","","(1,313)"],["EBITDA","551,008","","","493,784","","","496,860"],["Adjustments:"],["Merger and acquisition expenses","2,228","","","7,922","","","3,739"],["Non-cash foreign currency loss (gain) related to lease liability","3,755","","","(2,540)","","","(1,329)"],["AFF purchase accounting and other adjustments (2)","\u2014","","","13,968","","","50,354"],["Gain on revaluation of contingent acquisition consideration","\u2014","","","\u2014","","","(109,549)"],["Other expenses (income), net","1,446","","","(1,402)","","","(2,731)"],["Adjusted EBITDA","$","558,437","","","$","511,732","","","$","437,344"]]
[[/GREPCENT_TABLE]]

(1)Includes $49.7 million, $56.6 million and $56.7 million of amortization expense related to identifiable intangible assets as a result of the AFF acquisition for 2024, 2023 and 2022, respectively.

(2)The following table details AFF purchase accounting and other adjustments (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023","","2022"],["","Pre-tax","","Pre-tax","","Pre-tax"],["Amortization of fair value adjustment on acquired finance receivables","$","\u2014","","","$","\u2014","","","$","42,657"],["Amortization of fair value adjustment on acquired leased merchandise","\u2014","","","\u2014","","","7,697"],["Other non-recurring costs included in administrative expenses related to a discontinued finance product","\u2014","","","13,968","","","\u2014"],["Total AFF purchase accounting and other adjustments","$","\u2014","","","$","13,968","","","$","50,354"]]
[[/GREPCENT_TABLE]]

Free Cash Flow and Adjusted Free Cash Flow

For purposes of its internal liquidity assessments, the Company considers free cash flow and adjusted free cash flow. The Company defines free cash flow as cash flow from operating activities less purchases of furniture, fixtures, equipment and improvements and net fundings/repayments of pawn loan and finance receivables, which are considered to be operating in nature by the Company but are included in cash flow from investing activities. Adjusted free cash flow is defined as free cash flow adjusted for merger and acquisition expenses paid that management considers to be non-operating in nature.

Free cash flow and adjusted free cash flow are commonly used by investors as additional measures of cash, generated by business operations, that may be used to repay scheduled debt maturities and debt service or, following payment of such debt obligations and other non-discretionary items, that may be available to invest in future growth through new business development activities or acquisitions, repurchase stock, pay cash dividends or repay debt obligations prior to their maturities. These metrics can also be used to evaluate the Company’s ability to generate cash flow from business operations and the impact that this cash flow has on the Company’s liquidity. However, free cash flow and adjusted free cash flow have limitations as analytical tools and should not be considered in isolation or as a substitute for cash flow from operating activities or other

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income statement data prepared in accordance with GAAP. The following table reconciles cash flow from operating activities to free cash flow and adjusted free cash flow (unaudited, in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023","","2022"],["Cash flow from operating activities","$","539,958","","","$","416,142","","","$","469,305"],["Cash flow from investing activities:"],["Pawn loans, net (1)","","(71,999)","","","","(34,978)","","","","(35,817)"],["Finance receivables, net","","(139,314)","","","","(115,442)","","","","(85,353)"],["Purchases of furniture, fixtures, equipment and improvements","","(68,245)","","","","(60,148)","","","","(35,586)"],["Free cash flow","","260,400","","","","205,574","","","","312,549"],["Merger and acquisition expenses paid, net of tax benefit","","1,706","","","","6,089","","","","2,878"],["Adjusted free cash flow","$","262,106","","","$","211,663","","","$","315,427"]]
[[/GREPCENT_TABLE]]

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

Retail POS Payment Solutions Segment Purchase Accounting Adjustments

Management believes the presentation of certain retail POS payment solutions segment metrics, adjusted to exclude the impacts of purchase accounting, provides investors with greater transparency and provides a more complete understanding of AFF’s financial performance and prospects for the future by excluding the impacts of purchase accounting, which management believes is non-operating in nature and not representative of AFF’s core operating performance.

Additionally, the following table provides reconciliations of total revenue and total net revenue, presented in accordance with GAAP, to adjusted total revenue and adjusted net revenue, which excludes the impacts of purchase accounting (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023","","2022"],["Total revenue, as reported","$","3,388,514","","","$","3,151,796","","","$","2,728,942"],["AFF purchase accounting and other adjustments (1)","\u2014","","","\u2014","","","42,657"],["Adjusted total revenue","$","3,388,514","","","$","3,151,796","","","$","2,771,599"],["Total net revenue, as reported","$","1,629,532","","","$","1,507,239","","","$","1,264,586"],["AFF purchase accounting and other adjustments (1)","\u2014","","","\u2014","","","50,354"],["Adjusted total net revenue","$","1,629,532","","","$","1,507,239","","","$","1,314,940"]]
[[/GREPCENT_TABLE]]

(1)As a result of purchase accounting, AFF’s as reported amount for 2022 contains significant fair value adjustments. The adjusted amount for 2022 excludes these fair value purchase accounting adjustments.

Constant Currency Results

The Company’s reporting currency is the U.S. dollar, however, certain performance metrics discussed in this report are presented on a “constant currency” basis, which is considered a non-GAAP financial measure. The Company’s management uses constant currency results to evaluate operating results of business operations in Latin America, which are transacted in local currencies in Mexico, Guatemala and Colombia. The Company also has operations in El Salvador, where the reporting and functional currency is the U.S. dollar.

The Company believes constant currency results provide valuable supplemental information regarding the underlying performance of its business operations in Latin America, consistent with how the Company’s management evaluates such performance and operating results. Constant currency results reported herein are calculated by translating certain balance sheet and income statement items denominated in local currencies using the exchange rate from the prior-year comparable period, as opposed to the current comparable period, in order to exclude the effects of foreign currency rate fluctuations for purposes of

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evaluating period-over-period comparisons. See the Latin America pawn segment tables in “Results of Operations” above for additional reconciliation of certain constant currency amounts to as reported GAAP amounts.

The following table provides exchange rates for the Mexican peso, Guatemalan quetzal and Colombian peso for the current and prior-year periods:  

[[GREPCENT_TABLE]]
[["","","2024","","2023","","2022"],["","","Rate","","% Change Over Prior- Year Period Favorable / (Unfavorable)","","Rate","","% Change Over Prior- Year Period Favorable / (Unfavorable)","","Rate"],["Mexican peso / U.S. dollar exchange rate:"],["End-of-period","","20.3","","","(20)","%","","","16.9","","","13","%","","","19.4"],["Twelve months ended","","18.3","","","(3)","%","","","17.8","","","11","%","","","20.1"],["Guatemalan quetzal / U.S. dollar exchange rate:"],["End-of-period","","7.7","","","1","%","","","7.8","","","1","%","","","7.9"],["Twelve months ended","","7.8","","","\u2014","%","","","7.8","","","(1)","%","","","7.7"],["Colombian peso / U.S. dollar exchange rate:"],["End-of-period","","4,409","","","(15)","%","","","3,822","","","21","%","","","4,810"],["Twelve months ended","","4,071","","","6","%","","","4,328","","","(2)","%","","","4,253"]]
[[/GREPCENT_TABLE]]

Effects of Inflation

While the impacts of inflation have been widely reported and may be ongoing into the foreseeable future, the Company does not believe inflation had a material effect on the Company’s overall results of operations in 2024. Depending on the severity and persistence of these inflationary pressures, the Company could see a negative impact on its customers’ ability to pay for its goods and services, including an impact on the collectability of its accounts receivable, which could result in increased charge-offs of AFF’s finance receivables and leased merchandise as well as increases in wages and other operating costs. However, inflationary economic environments could also benefit the Company by increasing customer demand for value-priced products, lending services in its pawn stores and demand for POS payment solutions provided by AFF.

Seasonality

The Company’s business is subject to seasonal variations, and operating results for each quarter and year-to-date periods are not necessarily indicative of the results of operations for the full year. Typically, the Company experiences seasonal growth of pawn service fees in the third and fourth quarter of each year due to pawn loan balance growth. Pawn service fees generally decline in the first and second quarter of each year after the typical repayment period of pawn loans due to statutory bonuses received by customers in the fourth quarter in Mexico and with tax refund proceeds received by customers in the first quarter in the U.S. In addition, AFF customers generally exercise the early buyout option on their existing lease or finance receivable more frequently during the first quarter due to tax refund proceeds. Retail sales are seasonally higher in the fourth quarter as a result of holiday shopping and, to a lesser extent, in the first quarter due to the disbursement of tax refunds in the U.S.

Recent Accounting Pronouncements

See discussion in Note 2 of Notes to Consolidated Financial Statements.

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