EZCORP INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements ITEM 8 Page Report of Independent Registered Public Accounting Firm 37 Consolidated Financial Statements: Consolidated Balance Sheets as of September 30, 202 1 and 20 20 39 Consolidated Statements of Operations for each of the three years ended September 30, 2021, 2020 and 2019 40 Consolidated Statements of Comprehensive Income (Loss) for each of the three years ended September 30, 2021, 2020 and 2019 41 Consolidated Statements of Stockholders’ Equity for each of the three years ended September 30, 2021, 2020 and 2019 42 Consolidated Statements of Cash Flows for each of the three years ended September 30, 2021, 2020 and 2019 43 Notes to Consolidated Financial Statements 44 Note 1: Organization and Summary of Significant Accounting Policies 44 Note 2: Other Charges 50 Note 3: Acquisitions 51 Note 4: Earnings (Loss) Per Share 53 Note 5: Strategic Investments 53 Note 6: Fair Value Measurements 54 Note 7: Property and Equipment 55 Note 8: Goodwill and Intangible Assets 55 Note 9: Debt 56 Note 10: Common Stock and Stock Compensation 60 Note 11: Income Taxes 62 Note 12: Leases 64 Note 13: Contingencies 66 Note 14: Segment Information 66 Note 15: Supplemental Consolidated Financial Information 69 Note 16: Subsequent Events 71 Note 17: Quarterly Information (Unaudited) 72 36 Table of Contents Report of Independent Registered Public Accounting Firm Stockholders and Board of Directors EZCORP, Inc. Rollingwood, Texas Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of EZCORP, Inc. (the “Company”) as of September 30, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated November 17, 2021 expressed an unqualified opinion thereon. Adoption of New Accounting Standard As is discussed in Notes 1 and 12 to the consolidated financial statements, the Company changed its method of accounting for leases in the year ended September 30, 2020, due to adoption of ASC Topic 842, Leases . Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accounting for Bajio Leases As described in Note 3 to the Company’s consolidated financial statements, the Company recorded approximately $10.7 million of right-of-use assets and lease liabilities on June 8, 2021, in connection with the Company’s acquisition of 100% of the common shares of PLO del Bajio S. de R.L. de C.V. (“Bajio”). These leases primarily relate to the 128 pawn stores which were added to the Company’s geographic footprint within Mexico as a result of the acquisition. We identified the accounting for the leases recorded as a result of the Bajio acquisition as a critical audit matter. Accounting for the acquired leases required management’s individual assessment of the varying terms of the large volume of leases acquired, and the estimation of the appropriate incremental borrowing rate for each lease. Auditing these elements involved especially challenging audit effort due to the volume 37 Table of Contents of leases acquired, as well as the specialized skills and knowledge required to assess the reasonableness of the incremental borrowing rates estimated by management. The primary procedures we performed to address this critical audit matter included: • Examining a sample of lease agreements, which required language translation, to determine that the varying terms were appropriately interpreted and accurately utilized in management’s calculation of the right-of-use asset and lease liability balances. • Verifying that the lease liability balances were properly recognized as of the acquisition date, by testing the accuracy of the initial measurement of the lease liabilities for a sample of leases, including verifying that the present value of the lease payments was clerically accurate and the Company correctly applied the provisions of ASC 842. • Utilizing personnel with specialized knowledge and skills in valuation to assist in assessing the reasonableness of the incremental borrowing rates estimated by management. /s/ BDO USA, LLP We have served as the Company’s auditor since 2015. Dallas, Texas November 17, 2021 38 Table of Contents EZCORP, Inc. CONSOLIDATED BALANCE SHEETS September 30, (in thousands, except share and per share amounts) 2021 2020 Assets: Current assets: Cash and cash equivalents $ 253,667 $ 304,542 Restricted cash 9,957 8,011 Pawn loans 175,901 131,323 Pawn service charges receivable, net 29,337 20,580 Inventory, net 110,989 95,891 Prepaid expenses and other current assets 31,010 32,903 Total current assets 610,861 593,250 Investments in unconsolidated affiliates 37,724 32,458 Property and equipment, net 53,811 56,986 Right-of-use asset, net 200,990 183,809 Goodwill 285,758 257,582 Intangible assets, net 62,104 58,638 Notes receivable, net 1,181 1,148 Deferred tax asset, net 9,746 8,931 Other assets 4,736 4,221 Total assets $ 1,266,911 $ 1,197,023 Liabilities and equity: Current liabilities: Current maturities of long-term debt, net $ — $ 213 Accounts payable, accrued expenses and other current liabilities 90,268 71,504 Customer layaway deposits 12,557 11,008 Lease liability 52,263 49,742 Total current liabilities 155,088 132,467 Long-term debt, net 264,186 251,016 Deferred tax liability, net 3,684 524 Lease liability 161,330 153,040 Other long-term liabilities 10,385 10,849 Total liabilities 594,673 547,896 Commitments and contingencies (Note 13) Stockholders’ equity: Class A Non-Voting Common Stock, par value $ 0.01 per share; shares authorized: 100 million; 53,086,438 issued and outstanding as of September 30, 2021; and issued and outstanding of 52,332,848 as of September 30, 2020 530 521 Class B Voting Common Stock, convertible, par value $ 0.01 per share; shares authorized: 3 million; issued and outstanding: 2,970,171 as of September 30, 2021 and 2020 30 30 Additional paid-in capital 403,312 398,475 Retained earnings 326,781 318,169 Accumulated other comprehensive loss ( 58,415 ) ( 68,068 ) Total equity 672,238 649,127 Total liabilities and equity $ 1,266,911 $ 1,197,023 See accompanying notes to consolidated financial statements. 39 EZCORP, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS Fiscal Year Ended September 30, (in thousands, except per share amounts) 2021 2020 2019 Revenues: Merchandise sales $ 442,798 $ 498,213 $ 453,375 Jewelry scrapping sales 26,025 47,953 60,445 Pawn service charges 260,196 272,638 327,366 Other revenues 532 3,973 6,043 Total revenues 729,551 822,777 847,229 Merchandise cost of goods sold 257,218 334,481 297,508 Jewelry scrapping cost of goods sold 22,848 38,041 52,935 Other cost of revenues — 1,054 2,338 Net revenues 449,485 449,201 494,448 Operating expenses: Store expenses 330,837 336,770 350,578 General and administrative 56,495 54,133 63,665 Impairment of goodwill, intangible and other assets — 54,666 — Depreciation and amortization 30,672 30,827 28,797 Loss on sale or disposal of assets and other 83 801 4,399 Other charges 229 20,388 — Total operating expenses 418,316 497,585 447,439 Operating income (loss) 31,169 ( 48,384 ) 47,009 Interest expense 22,177 22,472 32,637 Interest income ( 2,477 ) ( 3,173 ) ( 11,086 ) Equity in net (income) loss of unconsolidated affiliates ( 3,803 ) 2,429 135 Impairment of investment in unconsolidated affiliates — — 19,725 Other (income) expense ( 790 ) ( 17 ) 1,424 Income (loss) from continuing operations before income taxes 16,062 ( 70,095 ) 4,174 Income tax expense (benefit) 7,450 ( 1,632 ) 2,406 Income (loss) from continuing operations, net of tax 8,612 ( 68,463 ) 1,768 Loss from discontinued operations, net of tax — — ( 457 ) Net income (loss) 8,612 ( 68,463 ) 1,311 Net loss attributable to noncontrolling interest — — ( 1,230 ) Net income (loss) attributable to EZCORP, Inc. $ 8,612 $ ( 68,463 ) $ 2,541 Basic earnings (loss) per share attributable to EZCORP, Inc. — continuing operations $ 0.15 $ ( 1.24 ) $ 0.05 Diluted earnings (loss) per share attributable to EZCORP, Inc. — continuing operations $ 0.15 $ ( 1.24 ) $ 0.05 Weighted-average basic shares outstanding 55,744 55,313 55,341 Weighted-average diluted shares outstanding 55,949 55,313 55,984 See accompanying notes to consolidated financial statements. 40 Table of Contents EZCORP, Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Fiscal Year Ended September 30, (in thousands) 2021 2020 2019 Net income (loss) $ 8,612 $ ( 68,463 ) $ 1,311 Other comprehensive income ( loss): Foreign currency translation adjustment, net of tax 9,653 ( 15,678 ) ( 10,042 ) Comprehensive income (loss) 18,265 ( 84,141 ) ( 8,731 ) Comprehensive loss attributable to noncontrolling interest — — ( 1,230 ) Comprehensive income (loss) attributable to EZCORP, Inc. $ 18,265 $ ( 84,141 ) $ ( 7,501 ) See accompanying notes to consolidated financial statements. 41 Table of Contents EZCORP, Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Noncontrolling Interest Total Equity (in thousands) Shares Par Value Retained Earnings Balances as of October 1, 2018 54,585 $ 546 $ 397,927 $ 386,622 $ ( 42,356 ) $ ( 3,331 ) $ 739,408 Stock compensation — — 9,794 — — — 9,794 Release of restricted stock 950 10 — — — — 10 Taxes paid related to net share settlement of equity awards — — ( 3,288 ) — — — ( 3,288 ) Transfer of subsidiary shares to noncontrolling interest — — 3,195 — — ( 3,195 ) — Foreign currency translation loss — — — — ( 10,042 ) — ( 10,042 ) Deconsolidation of subsidiary — — — — — 7,756 7,756 Net income (loss) — — — 2,541 — ( 1,230 ) 1,311 Balances as of September 30, 2019 55,535 $ 556 $ 407,628 $ 389,163 $ ( 52,398 ) $ — $ 744,949 Stock compensation — — ( 5,094 ) — — — ( 5,094 ) Release of restricted stock 711 6 — — — — 6 Taxes paid related to net share settlement of equity awards — — ( 1,435 ) — — — ( 1,435 ) Foreign currency translation loss — — — ( 8 ) ( 15,670 ) — ( 15,678 ) Purchase and retirement of treasury stock ( 943 ) ( 11 ) ( 2,624 ) ( 2,523 ) — — ( 5,158 ) Net loss — — — ( 68,463 ) — — ( 68,463 ) Balances as of September 30, 2020 55,303 $ 551 $ 398,475 $ 318,169 $ ( 68,068 ) $ — $ 649,127 Stock compensation — — 3,946 — — — 3,946 Transfer of consideration for current period acquisition 213 2 1,545 — — — 1,547 Transfer of consideration for prior period acquisition 33 — 185 — — — 185 Release of restricted stock 508 7 — — — — 7 Taxes paid related to net share settlement of equity awards — — ( 839 ) — — — ( 839 ) Foreign currency translation gain — — — — 9,653 — 9,653 Net income — — — 8,612 — — 8,612 Balances as of September 30, 2021 56,057 $ 560 $ 403,312 $ 326,781 $ ( 58,415 ) $ — $ 672,238 See accompanying notes to consolidated financial statements. 42 Table of Contents EZCORP, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended September 30, (in thousands) 2021 2020 2019 Operating activities: Net income (loss) $ 8,612 $ ( 68,463 ) $ 1,311 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 30,672 30,827 28,797 Amortization of debt discount and deferred financing costs 13,797 13,200 19,759 Amortization of right-of-use asset 48,480 45,649 — Accretion of notes receivable discount and deferred compensation fee — ( 821 ) ( 4,524 ) Deferred income taxes 3,283 ( 8,393 ) 1,616 Impairment of goodwill, intangibles and other assets — 54,666 — Other adjustments ( 185 ) 1,652 5,776 Provision for inventory reserve ( 8,003 ) 2,577 536 Reserve on jewelry scrap receivable — — 3,646 Stock compensation expense 3,946 ( 5,094 ) 9,751 Equity in net (income) loss from investment in unconsolidated affiliates ( 3,803 ) 2,429 135 Impairment of investment in unconsolidated affiliates — — 19,725 Changes in operating assets and liabilities, net of business acquisitions: Service charges and fees receivable ( 7,332 ) 11,021 ( 732 ) Inventory 371 14,466 ( 1,029 ) Prepaid expenses, other current assets and other assets 7,373 ( 875 ) 5,732 Accounts payable, accrued expenses and other liabilities ( 54,209 ) ( 37,401 ) 22,246 Customer layaway deposits 1,256 ( 1,647 ) 1,176 Income taxes 2,180 ( 4,715 ) ( 10,404 ) Net cash provided by operating activities 46,438 49,078 103,517 Investing activities: Loans made ( 601,638 ) ( 568,368 ) ( 737,585 ) Loans repaid 351,092 394,469 434,142 Recovery of pawn loan principal through sale of forfeited collateral 208,551 304,323 288,502 Capital expenditures, net ( 23,601 ) ( 28,526 ) ( 38,839 ) Acquisitions, net of cash acquired ( 19,015 ) — ( 8,116 ) Principal collections on notes receivable — 8,000 34,067 Net cash (used in) provided by investing activities ( 84,611 ) 109,898 ( 27,829 ) Financing activities: Taxes paid related to net share settlement of equity awards ( 839 ) ( 1,459 ) ( 3,288 ) Payout of deferred consideration — ( 350 ) — Proceeds from borrowings, net of issuance costs — 912 1,064 Payments on assumed debt and other borrowings ( 15,414 ) ( 198 ) ( 196,093 ) Repurchase of common stock — ( 5,158 ) — Net cash used in financing activities ( 16,253 ) ( 6,253 ) ( 198,317 ) Effect of exchange rate changes on cash and cash equivalents and restricted cash 5,497 ( 2,612 ) ( 507 ) Net (decrease) increase in cash and cash equivalents and restricted cash ( 48,929 ) 150,111 ( 123,136 ) Cash and cash equivalents and restricted cash at beginning of period 312,553 162,442 285,578 Cash and cash equivalents and restricted cash at end of period $ 263,624 $ 312,553 $ 162,442 Supplemental disclosure of cash flow information Cash and cash equivalents $ 253,667 $ 304,542 $ 157,567 Restricted cash 9,957 8,011 4,875 Total cash and cash equivalents and restricted cash $ 263,624 $ 312,553 $ 162,442 Cash paid during the period for interest $ 8,230 $ 8,489 $ 12,900 Cash paid during the period for income taxes, net $ 3,696 $ 9,753 $ 11,132 Non-cash investing and financing activities: Pawn loans forfeited and transferred to inventory $ 212,756 $ 241,252 $ 301,357 Transfer of consideration for current period acquisition 1,545 — — Acquisition earn-out contingency 4,608 — — Accrued acquisition consideration held as restricted cash 1,986 — — See accompanying notes to consolidated financial statements. 43 Table of Contents Notes to Consolidated Financial Statements NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business EZCORP, Inc. was founded in 1989 and is a leading provider of pawn services in the United States and Latin America. At our pawn stores, we advance cash against the value of collateralized personal property. We also sell merchandise, primarily collateral forfeited from pawn activities and pre-owned merchandise purchased from customers. We are dedicated to satisfying the short-term cash needs of consumers, with a focus on delivering an industry-leading customer experience. As of September 30, 2021, we operated a total of 1,148 locations, consisting of: • 516 United States pawn stores (operating primarily as EZPAWN or Value Pawn & Jewelry); • 508 Mexico pawn stores (operating primarily as Empeño Fácil and Cash Apoyo Efectivo); and • 124 pawn stores in Guatemala, El Salvador and Honduras (operating as GuatePrenda and MaxiEfectivo). We have an equity interest ( 35.65 % as of September 30, 2021) in Cash Converters International Limited (“Cash Converters”), a publicly traded company (ASX:CCV) headquartered in Perth, Western Australia. Cash Converters and its controlled companies comprise a diverse group generating revenues from franchising, store operations, personal finance (including pawn transactions) and vehicle finance, controlling over 700 stores across 15 countries. See Note 16: Subsequent Events . We also own 13.14 % of Rich Data Corporation (“RDC”), a Singapore-based software-as-a-service company that utilizes global financial services expertise, advanced artificial intelligence and non-traditional data to deliver a next-generation credit scoring and decisioning platform. Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles and are expressed in U.S. dollars. They include the accounts of EZCORP, Inc., and its wholly-owned subsidiaries. We use the equity method of accounting for entities over which we exercise significant influence, but in which we have a 50% or less investment. We account for equity investments in entities over which we do not exercise significant influence, and do not have a readily determinable fair value, at cost. If we obtain evidence the fair value of such an investment has declined below its cost, we reduce the recorded cost to the lower value through an impairment charge recorded in the Consolidated Statements of Operations. All inter-company accounts and transactions have been eliminated in consolidation. We have reclassified certain amounts in prior-period financial statements to conform to the current period’s presentation. Use of Estimates and Assumptions The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We regularly evaluate estimates and judgments, including those related to revenue recognition, inventory, loan loss allowances, long-lived and intangible assets, share-based compensation, income taxes, contingencies and litigation. We base our estimates on historical experience, observable trends and various other assumptions we believe are reasonable, the results of which form the basis for making judgements about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. Actual results may differ materially from the estimates under different assumptions or conditions. Pawn Loans and Revenue Recognition Our pawn loans are fully collateralized and the carrying values are based on the initial amounts loaned to customers. We record pawn service charges using the effective interest method over the life of the pawn loans for all pawn loans we believe to be collectible. We base our estimate of collectability on several inputs, including recent redemption rates, historical trends in redemption rates and the amount of loans due in the following months. Unexpected variations in any of these factors could change our estimate of collectibality and affect our results of operations and financial condition. If a pawn loan is not repaid, the forfeited collateral is recorded as inventory at the lower of the principal balance of the pawn loan or the net realizable value of the item. Of our consolidated pawn loans outstanding balance of $ 175.9 million as of September 30, 2021, $ 63.9 million ( 36 %) is attributable to stores in Texas and $ 19.8 million ( 11 %) is attributable to stores in Florida. 44 Table of Contents Merchandise Sales Revenue Recognition Our performance obligations for merchandise sales primarily relate to point in time retail sales in our stores. We recognize the satisfaction of the performance obligations and record merchandise sales revenue and the related costs when merchandise inventory is sold and delivered to the customer or, in the case of a layaway sale, when we receive the final payment. Customers have a limited period of time to return merchandise for a refund or exchange, and actual returns for refunds are not material. Sales taxes collected on sales of inventory are excluded from the amounts recognized as merchandise sales and are recorded as “Accounts payable, accrued expenses and other current liabilities” in our Consolidated Balance Sheets until remitted to the appropriate governmental authorities. For precious metals and stones sold as scrap, we recognize the satisfaction of the performance obligations and record the revenues and the related costs when the inventory is legally transferred to the refiner and the refiner obtains control of the inventory. The accounts receivable outstanding at the end of a given reporting period from such transactions are not material as payments are generally received within a short period of time after the legal transfer of the inventory. Our transaction prices are explicitly stated within the contracts with our customers. Inventory and Cost of Goods Sold If a pawn loan is not redeemed, the forfeited collateral is recorded as inventory at the lower of the principal balance of the pawn loan or the net realizable value of the item. We do not record a loan loss allowance or charge-off expense on the principal portion of forfeited pawn loans, as such loans are fully collateralized. Inventory is recorded using the specific identification method of accounting. In order to state inventory at the lower of cost or net realizable value, we record an allowance for excess, obsolete or slow-moving inventory based on the type and age of the underlying merchandise. Our inventory consists primarily of general merchandise and jewelry. “Merchandise cost of goods sold" as recorded in our Consolidated Statements of Operations includes the historical cost of inventory sold, inventory shrinkage and any change in the allowance for inventory shrinkage and valuation. We include the costs of operating our central jewelry processing unit as “Jewelry scrapping cost of goods sold” in our Consolidated Statements of Operations as such costs relate directly to sales of precious metals and stones to refiners. We consider our estimates of obsolete or slow-moving inventory and shrinkage critical to the determination of the appropriate overall valuation allowance for inventory. We continually monitor our sales margins for each type of inventory and compare the current margins to historical margins. Significant variances in those margins may require a revision to future inventory reserve estimates. We determine our reserve estimates pertaining to jewelry inventory based on the current and projected prices of gold. Future declines in the value of gold may result in an increase in reserves pertaining to jewelry inventory. Situations that may result in excess or obsolete inventory include changes in business and economic conditions, changes in consumer confidence caused by changes in market conditions, decreases in demand for our products or inventory obsolescence resulting from changes in technology. Included in “Merchandise cost of goods sold” during fiscal 2020, is $ 2.6 million of expense for inventory provisions primarily related to the write-off of excess and obsolete inventory due to the impacts of COVID-19. Such charges were not material during fiscal 2021. With respect to our Mexico pawn operations, we do not own the forfeited collateral. However, we assume the risk of loss on such collateral and are solely responsible for its care and disposition and, therefore, record such collateral as inventory in our Consolidated Balance Sheets. As of September 30, 2021 and 2020, respectively, $ 22.6 million and $ 12.9 million of the balance recorded as inventory in our Consolidated Balance Sheets was from our Mexico pawn operations. Cash and Cash Equivalents and Cash Concentrations Cash and cash equivalents consist primarily of cash on deposit or highly liquid investments with original contractual maturities of three months or less, or money market mutual funds. We hold cash at major financial institutions in amounts that often exceed FDIC insured limits. We manage our credit risk associated with cash and cash equivalents and cash concentrations by maintaining our cash deposits in high quality financial institutions and by periodically evaluating the credit quality of the primary financial institutions issuing investments or holding such deposits. Historically, we have not experienced any losses due to such cash concentrations. Restricted Cash Restricted cash consists of $ 8.0 million held in escrow pending the resolution of a pre-closing tax indemnity claim related to the sale of Grupo Finmart and $ 2.0 million related to the acquisition of PLO del Bajio S. de. R.L. de C.V. as discussed in Note 3: Acquisitions. 45 Table of Contents Equity Method Investments We account for our investment in Cash Converters and RDC under the equity method. Because the fiscal year of Cash Converters ends three months before our fiscal year, we record our interest from the results of Cash Converters on a three-month lag. Thus, the results of our operations reported for the fiscal years ended September 30, 2021, 2020 and 2019 include our percentage interest in the results of Cash Converters for the twelve-month periods ended June 30, 2021, 2020 and 2019, respectively. We record our percentage interest in the results of Cash Converters for the three months ended June 30 based on an estimate of the results of Cash Converters for the three months ended March 31 of that year. Similarly, we record our percentage interest in the results of Cash Converters for the three months ended December 31 using the estimated results of Cash Converters for the three months ended September 30 of that year. Cash Converters files semi-annual financial reports with the Australian Securities & Investments Commission and the Australian Stock Exchange as of and for the periods ended June 30 and December 31. We use these publicly available financial reports to adjust the estimated amounts we recorded. The actual results of Cash Converters may vary from our estimates. Leases We enter into operating lease agreements for real estate related to pawn locations and corporate offices. We determine if an arrangement contains a lease at inception by determining whether there is an identified asset and whether the arrangement conveys the right to control the use of the identified asset. Operating lease liabilities are recognized at the lease commencement date based on the present value of fixed lease payments using the Company’s incremental borrowing rate. As our leases generally do not include an implicit rate, we compute our incremental borrowing rate based on information available at the lease commencement date applying the portfolio approach to groups of leases with similar characteristics. Right-of-use operating assets are recognized based on the initial present value of fixed lease payments over the lease term. Our lease terms include options to extend the lease when it is reasonably certain we will exercise its option. We used incremental borrowing rates that match the duration of the remaining lease terms of our operating leases on a fully collateralized basis to initially measure our lease liability. We evaluate renewal options periodically for any changes in assumptions. Effective October 1, 2019, we adopted ASC Topic 842: Leases (“ASC 842”). Upon adoption, we elected to utilize the modified retrospective method, including not to account for lease and non-lease components separately. Lease components generally include rent, taxes and insurance, and non-lease components generally include common area maintenance. Right-of-use assets are tested for impairment in the same manner as long-lived assets. We recognize lease expense on a straight-line basis over the lease term with variable lease expense recognized in the period in which the costs are incurred. Our lease portfolio consists of pawn locations and corporate offices with lease terms ranging from three to ten years , including options to renew. We generally account for the initial lease term of our pawn locations as up to ten years . Our primary corporate office is leased through March 2029 with annual escalating rent payments and includes two , five-year extension options at the end of the initial lease term. Goodwill and Indefinite-Lived Intangible Assets Goodwill represents the excess of the purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business combination measured at fair value. We evaluate goodwill for impairment annually on September 30 and upon the occurrence of certain triggering events or substantive changes in circumstances that indicate that the fair value of goodwill may be impaired. We consider the assessment of the occurrence of triggering events or substantive changes in circumstances that may indicate the fair value of goodwill may be impaired to be a critical estimate. Impairment of goodwill is tested at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment, referred to as a “component.” A component of an operating segment is required to be identified as a reporting unit if the component is a business for which discrete financial information is available and segment management regularly reviews its operating results. When testing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not the estimated fair value of a reporting unit is less than its carrying amount. If we elect to perform a qualitative assessment and determine that an impairment is more-likely-than-not, we are then required to perform a quantitative impairment test; otherwise, no further analysis is required. We also may elect not to perform a qualitative assessment and, instead, proceed directly to a quantitative impairment test. When performing a quantitative impairment test, we apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. When we perform a quantitative goodwill impairment test, we estimate the fair value of the reporting unit using an income approach based on the present value of expected future cash flows, including terminal value, utilizing a market-based weighted average cost of capital (“WACC”) determined separately for each reporting unit. The determination of fair value involves the use of estimates and assumptions, including revenue growth rates, operating margins and terminal growth rates discounted by an estimated WACC derived from other publicly traded 46 Table of Contents companies that are similar but not identical to us from an operational and economic standpoint. We use discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and in our internally developed forecasts. We test indefinite-lived intangible assets for impairment by first assessing qualitative factors to determine whether it is necessary to perform a quantitative impairment test. If we believe as a result of its qualitative assessment that it is more-likely-than-not the fair value of the indefinite-lived intangible asset is less than its carrying amount, a quantitative impairment test is required. Otherwise, no further testing is required. Property and Equipment We record property and equipment at cost. We depreciate these assets on a straight-line basis using estimated useful lives of 30 years for buildings and two to seven years for furniture, equipment and software development costs. We depreciate leasehold improvements over the shorter of their estimated useful life (typically 10 years) or the reasonably assured lease term at the inception of the lease. Valuation of Long-Lived Assets The carrying values of long-lived assets, inclusive of right of use (ROU) assets, are periodically reviewed whenever events or changes in circumstances indicate the carrying value may not be recoverable, such as historical operating losses or plans to close stores before the end of their previously estimated useful lives. A potential impairment has occurred if projected future undiscounted cash flows are less than the carrying value of the assets. The estimate of cash flows includes management's assumptions of cash inflows and outflows directly resulting from the use of those assets in operations. We consider the assumptions associated with the determination of projected future cash flows to be a critical estimate. When a potential impairment has occurred, an impairment write-down is recorded if the carrying value of the long-lived asset exceeds its fair value. Software Development Costs and Cloud Computing Arrangements We capitalize certain costs incurred in connection with developing or obtaining software for internal use and amortize the costs on a straight-line basis over the estimated useful lives of the software, typically five years . Net capitalized development costs are included in “Capital expenditures, net” in our Consolidated Statements of Cash Flows. In evaluating whether our cloud computing arrangements include a software license, we consider whether we have the contractual right to take possession of the software at any time during the hosting period without significant penalty and whether it is feasible for us to either run the software on our own hardware or contract with another party unrelated to the vendor to host the software. If a cloud computing arrangement includes a software license, we account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, we account for the arrangement as a service contract. Business Combinations We allocate the total acquisition price to the fair value of assets and liabilities acquired under the acquisition method with goodwill representing the excess of purchase price over the fair value of net assets acquired. We expense transaction costs as incurred. We recognize any adjustments to provisional amounts and goodwill that are identified during the measurement period in the reporting period in which the adjustment amounts are determined, with the effect on current period earnings of changes in depreciation, amortization or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Convertible Debt Securities In accounting for our convertible debt securities at issuance, we separated the securities into debt and equity components pursuant to the accounting standards for convertible debt instruments that may be fully or partially settled in cash upon conversion. The carrying value of the liability components was calculated by measuring the fair value of similar liabilities that do not have an associated conversion feature, including discount rates of approximately 8 %. The excess of the principal amount over the fair value of the liability component was recorded as a discount with a corresponding increase in additional paid-in capital. The debt discounts will be accreted to “Interest expense” over the respective terms of the convertible debt securities using the effective interest method. The amount recorded to “Additional paid-in capital” will not be remeasured as long as they continue to meet the conditions for equity classification. We account for the conversion premium of the convertible debt securities under the treasury method in accordance with our accounting policy, which assumes settlement of the conversion premium (equal to the as-converted value over the face principal amount) in shares of our Class A Common Stock. 47 Table of Contents Foreign Currency Our foreign subsidiaries use the local currency of their respective countries as their functional currency. Assets and liabilities of our foreign subsidiaries' balance sheet accounts and our equity method investments are translated from their respective functional currencies into United States dollars at the exchange rate at the end of each quarter, and their earnings are translated into United States dollars at the average exchange rate each quarter. We present resulting translation adjustments as a separate component of stockholders’ equity. Foreign currency transaction gains and losses not accounted for as translations are included in “Other expense (income)” in our Consolidated Statements of Operations. These gains were $ 0.1 million, $ 0.5 million and $ 0.3 million for fiscal 2021, 2020 and 2019, respectively. Store Expenses Included in “Store expenses” are costs related to operating our stores and any direct costs of support offices. These costs include labor, other direct expenses such as utilities, supplies and banking fees and indirect expenses such as store rent, building repairs and maintenance, advertising, store property taxes and insurance and regional and area management expenses . General and Administrative Expense Included in “General and administrative” expense are costs related to our executive and administrative offices. This includes executive and administrative salaries, wages, stock and incentive compensation, professional fees, license fees, costs related to the operation of our administrative offices such as rent, property taxes, insurance, information technology and other corporate costs. Advertising Advertising costs are expensed as incurred and included primarily under “Operations” expense in our Consolidated Statements of Operations. These costs were $ 1.6 million, $ 2.0 million and $ 2.0 million for fiscal 2021, 2020 and 2019, respectively. Stock Compensation We measure share-based compensation expense at the grant date based on the price of underlying shares at that date and recognize it as expense, net of estimated forfeitures, ratably over the vesting or service period, as applicable, of the stock award. Our policy is to recognize expense on performance-based awards, where satisfaction of the performance condition is probable, ratably over the awards’ vesting period and recognize expense on awards that only have service requirements on a straight-line basis. Income Taxes We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying value of assets and liabilities and their tax basis and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized when the rate change is enacted. We consider the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. We have not recorded a deferred tax liability related to the U.S. federal and state income taxes and foreign withholding taxes of our undistributed earnings of foreign subsidiaries indefinitely invested outside the U.S. We may be subject to income tax audits by the respective tax authorities in any or all of the jurisdictions in which we operate or have operated within a relevant period. Significant judgment is required in determining uncertain tax positions. We utilize the required two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments, and which may not accurately forecast actual outcomes. We adjust these reserves in light of changing facts and circumstances, such as the closing of an audit or the refinement of an estimate. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We believe adequate provisions for income taxes have been made for all periods. We recognize interest and penalties related to unrecognized tax benefits as “Income tax expense” in our Consolidated Statements of Operations. We consider our assessment of the recognition of deferred tax assets as well as estimates of uncertain tax positions to be critical estimates. 48 Table of Contents Earnings per Share and Common Stock We compute basic earnings per share based on the weighted average number of shares of common stock outstanding during the period. We compute diluted earnings per share based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding, including conversion features embedded in our outstanding convertible debt, during the period using the treasury stock method. Dilutive potential common shares include outstanding restricted stock awards as well as shares issuable on conversion of our outstanding convertible debt securities and exercise of outstanding warrants. Potential common shares are required to be excluded from the computation of diluted earnings per share if the assumed proceeds upon exercise or vest are greater than the cost to re-acquire the same number of shares at the average market price, and therefore the effect would be anti-dilutive. There were no participating securities outstanding during fiscal 2021, 2020 and 2019 requiring the application of the two-class method. When we are in a loss position for the period, dilutive securities are excluded from the calculation of earnings per share, as they would have an anti-dilutive effect. Our capital stock consists of two classes of common stock designated as Class A Non-Voting Common Stock (“Class A Common Stock”) and Class B Voting Common Stock (“Class B Common Stock”). The rights, preferences and privileges of the Class A and Class B Common Stock are similar except that each share of Class B Common Stock has one vote and each share of Class A Common Stock has no voting privileges, except as required by law. All Class A Common Stock is publicly held. Holders of Class B Common Stock may, individually or as a class, convert some or all of their shares into Class A Common Stock on a one -to-one basis. Class A Common Stock becomes voting common stock upon the conversion of all Class B Common Stock to Class A Common Stock. We are required to reserve the number of authorized but unissued shares of Class A Common Stock that would be issuable upon conversion of all outstanding shares of Class B Common Stock. Impact of COVID-19 The COVID-19 pandemic continues to affect the U.S. and global economies, and as previously disclosed in our 2020 Annual Report, the pandemic also affected our businesses in a variety of ways beginning in the second quarter of fiscal 2020 and continuing into fiscal 2021. We cannot estimate the length or severity of the COVID-19 pandemic or the related financial consequences on our business and operations, including whether and when historic economic and operating conditions will resume or the extent to which the disruption may impact our business, financial position, results of operations or cash flows. Our estimates, judgments and assumptions related to COVID-19 could ultimately differ over time. Recently Adopted Accounting Policies In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 modifies the measurement of expected credit losses of certain financial instruments, requiring entities to estimate an expected lifetime credit loss on financial assets. The ASU amends the impairment model to utilize an expected loss methodology and replaces the incurred loss methodology for financial instruments including trade receivables. The amendment requires entities to consider other factors, such as historical loss experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 was effective on October 1, 2020. We adopted ASU 2016-13 effective October 1, 2020 using the modified retrospective approach. There was no net cumulative effect adjustment to retained earnings as of October 1, 2020 as a result of this adoption. This amendment did not have a material impact on our balance sheets or cash flows from operations and did not have a material impact on our operating results. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform ( Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-004”). ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate. ASU 2020-04 is effective upon issuance through December 31, 2022. This ASU has not had a significant impact on our consolidated financial statements and related disclosures to date. We will continue to assess the applicability to any future arrangements. Effective October 1, 2019, we adopted Accounting Standards Codification (“ASC”) 842, Leases, which requires companies to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet using the modified retrospective method provided under ASU 2018-11, Leases (Topic 842) — Targeted Improvements . Additionally, we elected the package of practical expedients under ASC 842 as well as the transition guidance elections to not separate lease and non-lease components for leases under ASC 842. Further, we have elected an accounting policy to not record right-of-use assets and lease liabilities for leases that have a duration of 12 months or less. See Note 12: Leases for additional discussion. Recently Issued Accounting Pronouncements In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40) , (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU 49 Table of Contents 2020-06 amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We plan to early adopt this standard as of October 1, 2021 under the modified retrospective basis. Under this transition method, prior period financial information and disclosures will not be adjusted and will continue to be reported under the accounting standards that were in effect prior to our adoption of ASU 2020-06. The cash conversion model, which the Company has historically used to account for its convertible debt instruments, was eliminated by ASU 2020-06.The adoption of ASU 2020-06 will reduce non-cash interest expense in future periods due to the derecognition of the debt discount associated with the bifurcated equity component of our convertible notes. The treasury stock method for calculating earnings per share will no longer be allowed for convertible debt instruments whose principal amount may be settled using shares, instead the if-converted method will be required to determine the dilutive effect of our convertible notes. NOTE 2: OTHER CHARGES During the fourth quarter of fiscal 2020, we began to implement strategic initiatives to refocus on our core pawn business and optimize our cost structure in order to improve our bottom line performance and position us for sustainable growth. The initiatives focused on workforce reductions, closure of our CASHMAX operations, store closures, write-offs and other miscellaneous charges. We recorded $ 0.2 million of charges for the fiscal year ended September 30, 2021 related to the closure of store operations in Peru. (in thousands) Accrued Charges at September 30, 2020 Charges Payments and Adjustments Accrued Charges at September 30, 2021 Cash charges: Labor reduction costs $ 5,946 $ — $ 5,623 $ 323 CASHMAX shutdown costs 800 — 800 — Store closure costs 1,806 229 1,806 229 Other 2,166 — 166 2,000 $ 10,718 $ 229 $ 8,395 $ 2,552 We recorded $ 20.4 million of charges for the fiscal year ended September 30, 2020, as summarized below: • $ 6.4 million in severance and other payroll-related costs related to a headcount reduction in the corporate office; • $ 4.9 million in costs related to the closure of the CASHMAX business and related operations, primarily consisting of severance and other payroll-related costs, net asset write-offs, impairment of internally developed software and contract termination costs; • $ 4.1 million in costs primarily related to the closure of four stores in U.S. Pawn and three stores in Latin America Pawn, consisting primarily of severance and other payroll-related costs and reserves on net assets; and • $ 5.0 million in other miscellaneous charges, primarily consisting of impairment of internally developed software and contract termination costs. 50 Table of Contents (in thousands) Accrued Charges at September 30, 2019 Charges Payments and Adjustments Accrued Charges at September 30, 2020 Cash charges: Labor reduction costs $ — $ 6,438 $ 492 $ 5,946 CASHMAX shutdown costs — 1,751 951 800 Store closure costs — 1,806 — 1,806 Other — 2,486 320 2,166 $ — $ 12,481 $ 1,763 $ 10,718 Non-cash charges: Labor reduction costs $ — CASHMAX shutdown costs 3,092 Store closure costs 2,328 Other 2,485 $ 20,386 NOTE 3: ACQUISITIONS Fiscal 2021 Acquisitions On June 8, 2021, we completed the acquisition of 100 % of the common shares of PLO del Bajio S. de R.L. de C.V. (“Bajio”) and gained control of the entity, further expanding our geographic footprint within Mexico with the addition of 128 pawn stores. These stores operate under the name "Cash Apoyo Efectivo" and are located principally in the Mexico City metropolitan area. The total consideration for Bajio was $ 23.6 million, consisting of $ 17.4 million of cash, and 212,870 shares of our Class A Non-Voting Common Stock valued at $ 1.6 million. In addition, t he sellers are entitled to additional payments of up to $ 4.6 million to be paid in two payments over the next two years , contingent on the growth of the loan portfolios of the acquired stores. Up to 50 % of any future contingent payments can be made in shares of our Class A Non-Voting Common Stock at our discretion. The value of the contingent consideration was included in the total consideration as the metrics were considered achievable on the date of acquisition. Cash paid at closing was $ 11.6 million and $ 3.8 million was paid in the fourth quarter of the fiscal year. Of the remaining $ 2.0 million, $ 1.6 million is expected to be paid prior to June 30, 2022, and $ 0.4 million is expected to be paid on or around the fifth anniversary of the date of acquisition . The assets acquired and liabilities assumed are based upon the estimated fair values at the date of acquisition. The excess purchase price over the estimated fair market value of the new assets acquired has been recorded as goodwill. The purchase price allocation is as follows, in thousands: Cash and cash equivalents $ 308 Pawn loans 4,619 Pawn service charges receivable 1,335 Inventory 1,319 Property and equipment 2,025 Right-of-use assets 10,651 Goodwill 26,100 Intangible assets 3,965 Deferred tax asset, net 381 Other assets 746 Accounts payable, accrued expenses and other liabilities ( 2,290 ) Debt ( 14,931 ) Lease liabilities ( 10,651 ) Total consideration $ 23,577 Intangible assets acquired consist of indefinite-lived trade names. 51 Table of Contents The factors contributing to the recognition of goodwill, which is recorded in our Latin America Pawn segment, were based on several strategic and synergistic benefits we expect to realize from the acquisition, including expansion of our store base as well as the ability to further leverage our pawn expertise, investments in information technology and other back office and support functions of our existing Mexico pawn business. We expect none of the goodwill resulting from this business combination will be deductible for income tax purposes. The results of Bajio have been included in our condensed consolidated financial statements from the date of acquisition in our Latin America Pawn segment. The acquired business contributed revenues of $ 9.6 million and net loss of $ 0.1 million during the period subsequent to acquisition. On June 9, 2021, we repaid $ 14.9 million of Bajio’s existing debt assumed in the acquisition. The following unaudited pro forma summary presents consolidated information for us as if the business combination had occurred on October 1, 2019. The pro forma information is not necessarily indicative of our results of operations had the acquisitions been completed on the above date, nor is it necessarily indicative of our future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the acquisitions, nor does it reflect additional revenue opportunities following the acquisition. The pro forma adjustments reflected in the table below are subject to change as additional analysis is performed. Fiscal Years Ended September 30, (in thousands, except per share amounts) 2021 2020 Revenue $ 748,957 $ 854,926 Net income (loss) $ 8,828 $ ( 65,206 ) Basic earnings (loss) per common share $ 0.16 $ ( 1.18 ) Diluted earnings (loss) per common share $ 0.16 $ ( 1.18 ) We did not have any material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma net revenue and net income. During the fiscal year end ended September 30, 2021, we incurred total acquisition-related costs of $ 0.8 million. The acquisition-related costs were primarily related to legal, accounting and consulting services and were expensed as incurred through September 30, 2021, and are included in general and administrative expenses in the Consolidated Statements of Operations. In May 2021, we acquired substantially all of the assets associated with 11 pawn stores in the Houston, Texas area, enhancing our position in this strategically important market. We have concluded that this acquisition was immaterial to our overall consolidated financial position and consolidated results of operations, and, therefore, have omitted information that would otherwise be required. 52 Table of Contents NOTE 4: EARNINGS (LOSS) PER SHARE The following table reconciles the number of common shares used to compute basic and diluted earnings per share attributable to EZCORP Inc., shareholders: Fiscal Year Ended September 30, (in thousands, except per share amounts) 2021 2020 2019 Net income (loss) $ 8,612 $ ( 68,463 ) $ 2,541 Earnings per common share Average common share outstanding (denominator) 55,744 55,313 55,341 Earnings (loss) per common share $ 0.15 $ ( 1.24 ) $ 0.05 Diluted earnings per common share Average common share outstanding 55,744 55,313 55,341 Dilutive effect of restricted stock and convertible notes* 205 — 643 Diluted average common shares outstanding (denominator) 55,949 55,313 55,984 Diluted earnings (loss) per common share $ 0.15 $ ( 1.24 ) $ 0.05 Potential common shares excluded from the calculation of diluted earnings per share above: Restricted stock** 1,233 2,786 2,121 * Includes time-based share-based awards and performance-based restricted stock units. See Note 9: Debt for discussion of the terms and conditions of the potential impact of the 2024 Convertible Notes and 2025 Convertible Notes. There is no dilutive impact for the Convertible Notes for the periods presented. This amount excludes all potential common shares for periods when there is a loss from continuing operations. ** Includes antidilutive share-based awards as well as performance-based share-based awards that are contingently issuable, but for which the condition for issuance has not been met as of the end of the reporting period. NOTE 5: STRATEGIC INVESTMENTS As of September 30, 2021, we owned 223,702,991 shares, or approximately 35.65 %, of Cash Converters. We acquired our original investment (representing approximately 30 % of the outstanding shares) in November 2009 and have increased our ownership through the acquisition of additional shares periodically since that time. In April 2021, we acquired 9,519,277 shares through the Cash Converters Dividend Reinvestment Plan, bringing our total ownership to 35.65 % as indicated above. Since September 30 2021, we have acquired an additional 13 million shares, bringing our total ownership as of November 1, 2021 to 236,702,991 shares representing an ownership interest of 37.72 %. See Note 16: Subsequent Events. Our equity in Cash Converters’s net income was $ 4.3 million in fiscal 2021, and our equity in net loss was $ 2.1 million and $ 0.1 million in fiscal 2020 and 2019, respectively. Cash Converters did not declare or pay a dividend in fiscal 2020 or 2019. Cash Converters’s accumulated undistributed after-tax earnings included in our consolidated retained earnings were $ 18.0 million as of September 30, 2021. The following tables present summary financial information for Cash Converters’s most recently reported results as applicable after translation to U.S. dollars: June 30, (in thousands) 2021 2020 Current assets $ 167,553 $ 157,183 Non-current assets 191,788 172,833 Total assets $ 359,341 $ 330,016 Current liabilities $ 61,395 $ 68,028 Non-current liabilities 57,511 51,275 Shareholders’ equity 240,435 210,713 Total liabilities and shareholders’ equity $ 359,341 $ 330,016 53 Table of Contents Fiscal Year Ended June 30, (in thousands) 2021 2020 2019 Gross revenues $ 150,165 $ 187,025 $ 201,365 Gross profit $ 105,851 $ 112,511 $ 111,932 Net profit (loss) $ 12,081 $ ( 7,032 ) $ ( 1,210 ) At September 30, 2021 , the fai r value of our investment in Cash Converters, as estimated by reference to its quoted market price per share, was greater than its carrying value. For the first and second quarters of fiscal 2019, we determined that our investment was impaired and that such impairment was "other-than-temporary." In reaching this conclusion, we considered all available evidence, including evidence in existence as of September 30, 2018. Additionally, we noted the following developments subsequent to September 30, 2018: (i) continued decline in Cash Converters's share price; and (ii) ongoing uncertainty around the Queensland, Australia class action lawsuit regarding historical lending practices by Cash Converters, for which a settlement agreement was reached subsequent to September 30, 2019. As a result, we recognized an other-than-temporary impairment loss in Cash Converters of $ 19.8 million ($ 15.3 million, net of taxes) during fiscal 2019. The fair value of our investment in Cash Converters was $ 6.2 million below its carrying value as of September 30, 2019, which we determined was not other-than temporary primarily as a result of the subsequent settlement of the remaining Queensland, Australia class action lawsuit and recovery of share price. We will continue to monitor the fair value of our investment in Cash Converters for other-than-temporary impairments in future reporting periods and may record additional impairment charges should the fair value of our investment in Cash Converters decline below its carrying value for an extended period of time. See Note 6: Fair Value Measurements for the fair value and carrying value of our investment in Cash Converters. We hold a 13.14 % ownership in "RDC" and recognized a $ 0.4 million, $ 0.3 million and $ 0.2 million net loss for the fiscal years ended 2021, 2020 and 2019 respe ctively. NOTE 6: FAIR VALUE MEASUREMENTS The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories: • Level 1 — Quoted market prices in active markets for identical assets or liabilities. • Level 2 — Other observable market-based inputs or unobservable inputs that are corroborated by market data. • Level 3 — Unobservable inputs that are not corroborated by market data. Financial Assets and Liabilities Not Measured at Fair Value The tables below present our financial assets and liabilities that were not measured at fair value: Carrying Value Estimated Fair Value September 30, 2021 September 30, 2021 Fair Value Measurement Using (in thousands) Level 1 Level 2 Level 3 Financial assets: 2.89 % promissory note receivable due April 2024 $ 1,181 $ 1,181 $ — $ — $ 1,181 Investments in unconsolidated affiliates 37,724 48,954 41,638 — 7,316 Financial liabilities: 2024 Convertible Notes $ 123,543 $ 153,281 $ — $ 153,281 $ — 2025 Convertible Notes 140,643 155,250 — 155,250 — Carrying Value Estimated Fair Value September 30, 2020 September 30, 2020 Fair Value Measurement Using (in thousands) Level 1 Level 2 Level 3 Financial assets: 2.89 % promissory note receivable due April 2024 $ 1,148 $ 1,148 $ — $ — $ 1,148 Investments in unconsolidated affiliates 32,458 32,597 24,833 — 7,764 Financial liabilities: 2024 Convertible Notes $ 117,193 $ 129,979 $ — $ 129,979 $ — 2025 Convertible Notes 133,164 137,569 — 137,569 — 8.5 % unsecured debt due 2024 872 872 — — 872 Based primarily on the short-term nature of cash and cash equivalents, pawn loans, pawn service charges receivable and other debt, we estimate that their carrying value approximates fair value. We consider our cash and cash equivalents to be measured using Level 1 inputs and our pawn loans, pawn service charges receivable and other debt to be measured using Level 3 inputs. Significant increases or decreases in the underlying assumptions used to value pawn loans, pawn service charges receivable, consumer loans, fees and interest receivable and other debt could significantly increase or decrease these fair value estimates. Included in “ Accounts payable, accrued expenses and other current liabilities “ in our Consolidated Balance Sheets is $ 4.6 million which represents the fair value of acquisition-related contingent consideration as discussed in Note 3: Acquisitions. The key assumptions used to determine the fair value of acquisition-related contingent consideration are estimated by management, not observable in the market and, therefore considered Level 3 inputs within the fair value hierarchy. In September 2020, we received the final payment from AlphaCredit on the notes receivable related to the sale of Grupo Finmart and recorded the amount under “Restricted cash” in our consolidated balance sheet as of September 30, 2021 and 2020, respectively. In August 2019, AlphaCredit notified us of an indemnity claim for certain pre-closing taxes, but the nature, extent and validity of such claim has yet to be determined. The inputs used to generate the fair value of the investment in Cash Converters were considered Level 1 inputs. These inputs consist of (a) the quoted stock price on the Australian Stock Exchange multiplied by (b) the number of shares we owned multiplied by (c) the applicable foreign currency exchange rate as of the end of our reporting period. We included no control premium for owning a large percentage of outstanding shares. We use the equity method of accounting for our 13.14 % ownership in a previously consolidated variable interest entity, RDC, over which we no longer have the power to direct the activities that most significantly affect its economic performance. We believe its fair value approximates carrying value although such fair value is highly variable and includes significant unobservable inputs. We measured the fair value of the 2024 and 2025 Convertible Notes using quoted price inputs. The notes are not actively traded, and thus the price inputs represent a Level 2 measurement. As the quoted price inputs are highly variable from day to day, the fair value estimates disclosed above could significantly increase or decrease. In March 2019, we received $ 1.1 million in previously escrowed seller funds as a result of settling certain indemnification claims with the seller of GPMX. In April 2019, we loaned the $ 1.1 million back to the seller of GPMX in exchange for a promissory note. The note bears interest at the rate of 2.89 % per annum and is secured by certain marketable securities owned by the seller and held in a U.S. brokerage account. All principal and accrued interest is due and payable in April 2024. The principal amount of the note approximated its carrying value as of September 30, 2021 and 2020, respectively. 54 Table of Contents NOTE 7: PROPERTY AND EQUIPMENT Major classifications of property and equipment were as follows: September 30, 2021 2020 (in thousands) Carrying Amount Accumulated Depreciation Net Book Value Carrying Amount Accumulated Depreciation Net Book Value Land $ 4 $ — $ 4 $ 4 $ — $ 4 Buildings and improvements 113,015 ( 85,521 ) 27,494 105,137 ( 75,445 ) 29,692 Furniture and equipment 137,828 ( 111,944 ) 25,884 127,793 ( 101,888 ) 25,905 Software 33,981 ( 33,591 ) 390 33,729 ( 33,190 ) 539 Construction in progress 39 — 39 846 — 846 $ 284,867 $ ( 231,056 ) $ 53,811 $ 267,509 $ ( 210,523 ) $ 56,986 The depreciation of property and equipment is recorded as depreciation expense and included under “Depreciation and amortization” recorded in our Consolidated Statements of Operations. These amounts were $ 19.4 million, $ 19.6 million and $ 21.0 million for fiscal 2021, 2020 and 2019, respectively. NOTE 8: GOODWILL AND INTANGIBLE ASSETS We evaluate goodwill for impairment annually on September 30 and upon the occurrence of certain triggering events or substantive changes in circumstances that indicate that the fair value of goodwill may be impaired. As of September 30, 2021, we assessed qualitative factors and determined that it was not more-likely-than-not that the fair values of our reporting units were less than their carrying values as of the testing date. As a result of our assessment, no goodwill impairment charge was recorded during the fiscal year ended September 30, 2021. During the second quarter of fiscal 2020, the decline in our market capitalization indicated a possible impairment in the carrying value of goodwill. We elected to perform a quantitative analysis as of March 31, 2020, using the income approach with discount rates from 11 % to 19 %. As a result of our quantitative analysis, we determined the fair value of each of our reporting units was below its carrying value, primarily as a result of the impact of the COVID-19 pandemic on typical customer behavior, which led to a significant decline in pawn loan balances, and the mandated closure of stores in our GPMX countries. We recorded a goodwill impairment charge of $ 41.3 million in the second quarter of fiscal 2020 as “Impairment of goodwill, intangible and other assets” in our Consolidated Statements of Operations. No further indicators of goodwill impairment were noted as of September 30, 2020. We test indefinite-lived intangible assets for impairment by first assessing qualitative factors to determine whether it is necessary to perform a quantitative impairment test. Based on our assessment of qualitative factors as of September 30, 2021, no impairment charges were recorded related to intangible assets or long-lived asset groups. In connection with the analysis of goodwill as of March 31, 2020, we determined that the fair values of the trade names associated with acquired entities in our Mexico and GPMX reporting units were also impaired and recorded an impairment charge of $ 2.9 million and $ 1.7 million, respectively. Furthermore, we determined the carrying amount of certain long-lived asset groups were not recoverable and recorded an impairment charge of $ 1.1 million in the second quarter of 2020 related to these asset groups. These impairment charges were recorded as “Impairment of goodwill, intangible and other assets” in our Consolidated Statements of Operations. No additional indicators of impairment of intangible assets or long-lived asset groups were noted as of September 30, 2020. The following table presents the changes in the carrying value of goodwill by segment: (in thousands) U.S. Pawn Latin America Pawn Consolidated Balances as of September 30, 2019 $ 251,752 $ 48,775 $ 300,527 Measurement period adjustments 176 ( 149 ) 27 Goodwill impairment * ( 10,000 ) ( 31,340 ) ( 41,340 ) Effect of foreign currency translation changes — ( 1,632 ) ( 1,632 ) Balances as of September 30, 2020 $ 241,928 $ 15,654 $ 257,582 Acquisitions 2,543 26,100 28,643 Effect of foreign currency translation changes — ( 467 ) ( 467 ) Balances as of September 30, 2021 $ 244,471 $ 41,287 $ 285,758 55 Table of Contents * Represents cumulative goodwill impairment. The following table presents the balance of each major class of intangible assets: September 30, (in thousands) 2021 2020 Non-amortizing intangible assets: Trade names $ 23,036 $ 19,094 Accumulated impairment losses ( 4,598 ) ( 4,598 ) 18,438 14,496 Pawn licenses 9,694 9,509 $ 28,132 $ 24,005 Amortizing intangible assets: Internally developed software $ 78,174 $ 67,457 Accumulated amortization ( 43,710 ) ( 33,646 ) Accumulated impairment losses ( 2,579 ) ( 2,579 ) $ 31,885 $ 31,232 Non-compete agreements $ 3,502 $ 3,417 Accumulated amortization ( 3,502 ) ( 3,394 ) $ — $ 23 Other $ 4,452 $ 5,600 Accumulated amortization ( 2,365 ) ( 2,222 ) $ 2,087 $ 3,378 Intangible assets, net $ 62,104 $ 58,638 The amortization of most definite-lived intangible assets is recorded as amortization expense and included under “Depreciation and amortization” expense in our Consolidated Statements of Operations. These amounts were $ 11.3 million, $ 11.2 million and $ 7.8 million for fiscal 2021, 2020 and 2019, respectively. As of September 30, 2021, our estimate of future amortization expense for definite-lived intangible assets is as follows (in thousands): 2022 $ 11,301 2023 9,240 2024 7,332 2025 4,211 2026 1,769 As acquisitions and dispositions occur in the future, amortization expense may vary from these estimates. NOTE 9: DEBT The following tables present our debt instruments outstanding, contractual maturities and interest expense: September 30, 2021 September 30, 2020 (in thousands) Gross Amount Debt Discount and Issuance Costs Carrying Amount Gross Amount Debt Discount and Issuance Costs Carrying Amount 2024 Convertible Notes $ 143,750 $ ( 20,207 ) $ 123,543 $ 143,750 $ ( 26,557 ) $ 117,193 2025 Convertible Notes 172,500 ( 31,857 ) 140,643 172,500 ( 39,336 ) 133,164 8.5 % unsecured debt due 2024* — — — 872 — 872 Total $ 316,250 $ ( 52,064 ) $ 264,186 $ 317,122 $ ( 65,893 ) $ 251,229 Less current portion — — — 213 — 213 Total long-term debt $ 316,250 $ ( 52,064 ) $ 264,186 $ 316,909 $ ( 65,893 ) $ 251,016 * Amounts translated from Guatemalan quetzales as of the applicable period end. 56 Table of Contents Schedule of Contractual Maturities (in thousands) Total Less Than 1 Year 1 - 3 Years 3 - 5 Years 2024 Convertible Notes* $ 143,750 $ — $ 143,750 $ — 2025 Convertible Notes* 172,500 — — 172,500 Total $ 316,250 $ — $ 143,750 $ 172,500 * Excludes the potential impact of embedded derivatives. Fiscal Year Ended September 30, (in thousands) 2021 2020 2019 2019 Convertible Notes: Contractual interest expense $ — $ — $ 3,074 Amortization of debt discount and deferred financing costs — — 7,556 Total interest expense $ — $ — $ 10,630 2024 Convertible Notes: Contractual interest expense $ 4,133 $ 4,133 $ 4,133 Amortization of debt discount and deferred financing costs 6,349 5,883 5,452 Total interest expense $ 10,482 $ 10,016 $ 9,585 2025 Convertible Notes: Contractual interest expense $ 4,097 $ 4,097 $ 4,097 Amortization of debt discount and deferred financing costs 7,479 6,954 6,468 Total interest expense $ 11,576 $ 11,051 $ 10,565 2.375 % Convertible Senior Notes Due 2025 In May 2018, we issued $ 172.5 million aggregate principal amount of 2.375 % Convertible Senior Notes Due 2025 (the “2025 Convertible Notes”). All of the 2025 Convertible Notes were issued pursuant to an indenture dated May 14, 2018 (the "2018 Indenture") by and between us and Wells Fargo Bank, National Association, as the trustee. Effective October 1, 2019, Branch Banking and Trust Company (“BB&T”), a North Carolina Bank, has assumed the duties and responsibilities as trustee under the 2018 Indenture. The 2025 Convertible Notes were issued in a private offering and resold under Rule 144A under the Securities Act of 1933. The 2025 Convertible Notes pay interest semi-annually in arrears at a rate of 2.375 % per annum on May 1 and November 1 of each year, commencing November 1, 2018, and will mature on May 1, 2025 (the "2025 Maturity Date"), unless converted, redeemed or repurchased in accordance with their terms prior to such date. At maturity, the holders of the 2025 Convertible Notes will be entitled to receive cash equal to the principal amount of the 2025 Convertible Notes plus unpaid accrued interest. The 2025 Convertible Notes are convertible based on an initial conversion rate of 62.8931 shares of Class A Non-Voting Common Stock (“Class A Common Stock”) per $1,000 principal amount (equivalent to an initial conversion price of $ 15.90 per share). The conversion rate will not be adjusted for any accrued and unpaid interest. The 2025 Convertible Notes contain certain make-whole fundamental change premiums and customary anti-dilution adjustments. Upon conversion, we may settle in cash, shares of Class A Common Stock or any combination thereof, at our election. We account for the Class A Common Stock issuable upon conversion under the treasury stock method. If our average share price is over $ 15.90 per share for any fiscal quarter, we are required to recognize incremental dilution of our earnings per share. Prior to November 1, 2024, the 2025 Convertible Notes are convertible only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ended on June 30, 2018 (and only during such fiscal quarter), if the last reported sale price of our Class A Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 % of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price, as defined in the 2018 Indenture, per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our Class A Common Stock and the conversion rate on such trading day; (3) if we call any or all of the 2025 Convertible Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events, as defined in the 2018 Indenture. On or after November 1, 2024 until the close of business on the business day immediately preceding the 2025 Maturity Date, holders of 2025 Convertible Notes may, at their option, convert their 2025 Convertible Notes at any time, regardless of the foregoing circumstances. We may not redeem the 2025 Convertible Notes prior to May 1, 2022. At our option, we may redeem for cash all or any portion of the 2025 Convertible Notes on or after May 1, 2022, if the last reported sale price of the Class A Common Stock has been at least 130 % of the 57 Table of Contents conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. The redemption price will be equal to 100 % of the principal amount of the 2025 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. We measured the fair value of the liability component of the 2025 Convertible Notes under a discounted cash flow approach considering our synthetic credit rating, as determined with external consultation, including inputs that are not observable in the market. The fair value of the liability component was estimated by calculating the present value of the cash flows using a discoun t rate of 8 % for a similarly stru ctured liability with no conversion feature, maturing in seven years . Our estimate resulted in an initial carrying value of the liability component of the 2025 Convertible Notes of $ 121.3 million with an associated original issue discount of $ 51.2 million, exclusive of deferred financing costs, accreted to the face value of the 2025 Convertible Notes based on the effective interest method through the 2025 Maturity Date. We accounted for the conversion feature of the 2025 Convertible Notes as a separate equity-classified instrument (“2025 Convertible Notes Embedded Derivative”). The carrying amount of the 2025 Convertible Notes conversion feature (the “2025 Convertible Notes Embedded Derivative”) is currently included under “Additional paid-in capital” in our Consolidated Balance Sheets of September 30, 2021 and was initially calculated as $ 49.6 million ($ 39.1 million, net of tax). We incurred transaction costs of $ 5.5 million related to the issuance of the 2025 Convertible Notes, which we recorded as deferred financing costs and are included under “Long-term debt, net” and “Additional paid-in capital” in our Consolidated Balance Sheets. The effective interest rate for fiscal 2021 was appro ximately 9 %. As o f September 30, 2021, the remaining unamortized debt discount and issuance costs will be amortized through the 2025 Maturity Date assuming no early conversion. As of September 30, 2021, the 2025 Convertible Notes were not convertible as no conditions of conversion had been met. Accordingly, the net balance of the 2025 Convertible Notes was classified as a non-current liability in our Consolidated Balance Sheets as of September 30, 2021. The classification of the 2025 Convertible Notes as current or non-current in the Consolidated Balance Sheets is evaluated at each balance sheet date and may change from time to time depending on whether any of the conversion conditions has been met. If one of the conversion conditions is met in any future fiscal quarter, we will classify our net liability under the 2025 Convertible Notes as a current liability in the Consolidated Balance Sheets as of the end of that fiscal quarter. If none of the conversion conditions have been met in a future fiscal quarter prior to the one-year period immediately preceding the 2025 Maturity Date, we will classify our net liability under the 2025 Convertible Notes as a non-current liability in the Consolidated Balance Sheets as of the end of that fiscal quarter. If the note holders elect to convert their 2025 Convertible Notes prior to maturity, any unamortized discount and transaction costs will be recognized as expense at the time of conversion. If the entire outstanding principal amount had been converted on September 30, 2021, we would have recorded an expense associated with the conversion, comprised of $ 31.9 million of unamortized debt discount and issuance costs. As of September 30, 2021, none of the note holders had elected to convert their 2025 Convertible Notes. As of September 30, 2021, the if-converted value of the 2025 Convertible Notes did not exceed the principal amount. 2.875 % Convertible Senior Notes Due 2024 In July 2017, we issued $ 143.75 million aggregate principal amount of 2.875 % Convertible Senior Notes Due 2024 (the “2024 Convertible Notes”). All of the 2024 Convertible Notes were issued pursuant to an indenture dated July 5, 2017 (the “2017 Indenture”) by and between us and Wells Fargo Bank, National Association, as the trustee. Effective October 1, 2019, BB&T has assumed the duties and responsibilities as trustee under the 2017 Indenture. The 2024 Convertible Notes were issued in a private offering and resold under Rule 144A under the Securities Act of 1933. The 2024 Convertible Notes pay interest semi-annually in arrears at a rate of 2.875 % per annum on January 1 and July 1 of each year, commencing January 1, 2018, and will mature on July 1, 2024 (the “2024 Maturity Date”), unless converted, redeemed or repurchased in accordance with their terms prior to such date. At maturity, the holders of the 2024 Convertible Notes will be entitled to receive cash equal to the principal amount of the 2024 Convertible Notes plus unpaid accrued interest. The 2024 Convertible Notes are convertible based on an initial conversion rate of 100 shares of Class A Common Stock per $1,000 principal amount (equivalent to an initial conversion price of $ 10.00 per share). The conversion rate will not be adjusted for any accrued and unpaid interest. The 2024 Convertible Notes contain certain make-whole fundamental change premiums and customary anti-dilution adjustments. Upon conversion, we may settle in cash, shares of Class A Common Stock or any combination thereof, at our election. We account for the Class A Common Stock issuable upon conversion under the treasury stock method. If our share price increases over $ 10.00 per share, we are required to recognize incremental dilution of our earnings per share. Prior to January 1, 2024, the 2024 Convertible Notes will be convertible only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on September 30, 2017 (and only during such fiscal quarter), if the last reported sale price of our Class A Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on 58 Table of Contents the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 % of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price, as defined in the 2017 Indenture, per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our Class A Common Stock and the conversion rate on such trading day; (3) if we call any or all of the 2024 Convertible Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events, as defined in the 2017 Indenture. On or after January 1, 2024 until the close of business on the business day immediately preceding the 2024 Maturity Date, holders of 2024 Convertible Notes may, at their option, convert their 2024 Convertible Notes at any time, regardless of the foregoing circumstances. We may not redeem the 2024 Convertible Notes prior to July 6, 2021. At our option, we may redeem for cash all or any portion of the 2024 Convertible Notes on or after July 6, 2021, if the last reported sale price of the Class A Common Stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. The redemption price will be equal to 100 % of the principal amount of the 2024 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. We measured the fair value of the liability component of the 2024 Convertible Notes under a discounted cash flow approach considering our synthetic credit rating, as determined with external consultation, including inputs that are not observable in the market. The fair value of the liability component was estimated by calculating the present value of the cash flows using discount rates slightly above 8 % for a similarly structured liability with no conversion feature, maturing in seven years . Our estimate resulted in an initial carrying value of the liability component of the 2024 Convertible Notes of $ 102.7 million with an associated original issue discount of $ 41.0 million, exclusive of deferred financing costs, accreted to the face value of the 2024 Convertible Notes based on the effective interest method through the 2024 Maturity Date. We accounted for the conversion feature of the 2024 Convertible Notes as a separate equity-classified instrument (the “2024 Convertible Notes Embedded Derivative”), initially recorded as $ 39.8 million ($ 25.3 million, net of tax), inclusive of deferred financing costs, on the issuance date and included under “Additional paid-in capital” in our Consolidated Balance Sheets, including an allocated portion of the deferred financing costs.The carrying amount of the 2024 Convertible Notes Embedded Derivative included under “Additional paid-in capital” in our Consolidated Balance Sheets of September 30, 2021 was $ 25.3 million. We incurred transaction costs of $ 4.2 million related to the issuance of the 2024 Convertible Notes, which we recorded as deferred financing costs and are included under “Long-term debt, net” and “Additional paid-in capital” in our Consolidated Balance Sheets . Deferred financing costs recorded under “Long-term debt, net” are being amortized to interest expense over the expected term of the 2024 Convertible Notes. The effective interest rate for fiscal 2021 was approximately 9 %. As of September 30, 2021, the remaining unamortized debt discount and issuance costs will be amortized through the 2024 Maturity Date assuming no early conversion. As of September 30, 2021, the 2024 Convertible Notes were not convertible as no conditions of conversion had been met. Accordingly, the net balance of the 2024 Convertible Notes was classified as a non-current liability in our Consolidated Balance Sheets as of September 30, 2021. The classification of the 2024 Convertible Notes as current or non-current in the Consolidated Balance Sheets is evaluated at each balance sheet date and may change from time to time depending on whether any of the conversion conditions has been met. If one of the conversion conditions is met in any future fiscal quarter, we will classify our net liability under the 2024 Convertible Notes as a current liability in the Consolidated Balance Sheets as of the end of that fiscal quarter. If none of the conversion conditions have been met in a future fiscal quarter prior to the one-year period immediately preceding the 2024 Maturity Date, we will classify our net liability under the 2024 Convertible Notes as a non-current liability in the Consolidated Balance Sheets as of the end of that fiscal quarter. If the note holders elect to convert their 2024 Convertible Notes prior to maturity, any unamortized discount and transaction costs will be recognized as expense at the time of conversion. If the entire outstanding principal amount had been converted on September 30, 2021, we would have recorded an expense associated with the conversion, comprised of $ 20.2 million of unamortized debt discount and issuance costs. As of September 30, 2021, none of the note holders had elected to convert their 2024 Convertible Notes. As of September 30, 2021, the if-converted value of the 2024 Convertible Notes did not exceed the principal amount. 2.125 % Cash Convertible Senior Notes Due 2019 In June 2014, we issued $ 200 million aggregate principal amount of 2.125 % Cash Convertible Senior Notes Due 2019 (the “2019 Convertible Notes”), with an additional $ 30 million principal amount being issued in July 2014. In July 2017, we used $ 34.4 million of net proceeds from the 2024 Convertible Notes offering to repurchase and retire $ 35.0 million aggregate principal amount of 2019 Convertible Notes. The 2019 Convertible Notes paid interest semi-annually in arrears at a rate of 2.125 % per annum on June 15 and December 15 of each year. The 2019 Convertible Notes matured on June 15, 2019 (the "2019 Maturity Date") , and the remaining $ 195.0 million aggregate principal amount outstanding plus accrued interest was repaid using cash on hand. 59 Table of Contents 2019 Convertible Notes Warrants In connection with the issuance of the 2019 Convertible Notes, we also sold net-share-settled warrants (the “2019 Convertible Notes Warrants”). The 2019 Convertible Notes Warrants allowed for the purchase of up to approximately 14.3 million shares of our Class A Common Stock at a strike price of $ 20.83 per share. We accounted for the Class A Common Stock issuable upon exercise under the treasury stock method. The 2019 Convertible Notes Warrants began to expire on a daily basis after we repaid the 2019 Convertible Notes and the last of the unexpired 2019 Convertible Notes Warrants expired in May 2020. As of September 30, 2020, there were no 2019 Convertible Notes Warrants outstanding, and no shares of Class A Common Stock were ever issued pursuant to the 2019 Convertible Notes Warrants. CASHMAX Secured Borrowing Facility In November 2018, we entered into a receivable's securitization facility with a third-party lender to provide funding for installment loan originations in our Canadian CASHMAX business. We terminated this facility in September 2020 as part of the closure of the operations of our CASHMAX business. NOTE 10: COMMON STOCK AND STOCK COMPENSATION Common Stock Repurchase Program In December 2019, our Board of Directors (the "Board") authorized the repurchase of up to $ 60.0 million of our Class A Common Stock over three years . Repurchases under the program were suspended in March 2020 in order to preserve liquidity as a result of uncertainties regarding the COVID-19 pandemic, and no share repurchases under the program have been executed since then. Through March 2020, we repurchased and retired 943,149 shares of our Class A Common Stock for $ 5.2 million, which amount was allocated between "Additional paid-in capital" and "Retained earnings" in our Consolidated Balance Sheets. Stock Compensation Our Long-Term Incentive Plan (the “LTI Plan”) permits grants of options, restricted stock awards and stock appreciation rights covering up to 5,485,649 shares of our Class A Common Stock plus any shares that become available for issuance under either the LTI Plan or prior plans as a result of forfeitures or cancellations of awards without delivery of shares or as a result of withholding shares to satisfy tax withholding obligations. The purpose of the LTI Plan is to retain the services of valued employees and directors and to incentivize such persons to make contributions to our company and motivate excellent performance. Under the LTI Plan, we grant awards of restricted stock or restricted stock units to employees and non-employee directors. Awards granted to employees are typically subject to performance and service conditions. Awards granted to non-employee directors are time-based awards subject only to service conditions. Awards are measured at the grant date fair value with compensation costs associated with the awards recognized over the requisite service period, usually the vesting period, on a straight-line basis. Board of Director Awards In February 2021, we granted 127,744 shares of restricted stock to the non-employee directors who were elected to serve one-year terms at the 2021 Annual Meeting of Stockholders. Those shares are scheduled to vest at the 2022 Annual Meeting of Stockholders (but in no event later than March 31, 2022), subject only to service conditions. In December 2020, we granted 143,145 shares of restricted stock to the non-employee directors serving at that time. Those shares were scheduled to vest on March 31, 2021, subject only to service conditions. The vesting of 79,525 of such shares was accelerated to February 18, 2021 (the date of the 2021 Annual Meeting of Stockholders) when the term of service for five of the non-employee directors ended. The remaining 63,620 shares vested on March 31, 2021. In May 2020, we granted 12,346 shares of restricted stock to a newly-elected non-employee director, and in November 2019, we granted 222,912 shares of restricted stock to the non-employee directors serving at that time. The vesting of these shares was subject only to service conditions, and all of such shares vested on September 30, 2020. In May 2019 and April 2019, we granted a total of 60,088 shares of restricted stock to our seven newly-elected non-employee directors, and in November 2018, we granted 59,812 shares of restricted stock to our non-employee directors serving at that time. The vesting of these shares was subject only to service conditions, and all of the shares vested on September 30, 2019. 60 Table of Contents Employee Awards All LTI Plan awards are reviewed and approved by the People and Compensation Committee of the Board of Directors (the “Committee”). FY21 Awards — In February 2021, we granted 1,177,214 shares of restricted stock to employees. The awards have a three-year performance period consisting of fiscal 2021, fiscal 2022 and fiscal 2023. For each award, the total number of shares was allocated equally among the three fiscal years in the performance period, with each tranche having separate performance conditions. The number of shares available to vest from each tranche can range from 0 to 150 % and is dependent on the achievement of the performance condition for that tranche. All of the shares that become available to vest based on the achievement of the performance conditions will vest on September 30, 2023, subject to continuous, active employment with the Company through that date. Performance targets for the fiscal 2021 tranche were determined and communicated in February 2021. Grant dates for the other two tranches will be determined when the applicable performance targets are established for these tranches. As of September 30, 2021, we considered the performance targets for the fiscal 2021 tranche to be probable of achievement at the 150 % level. In August 2021, we granted an additional 4,722 shares of restricted stock to employees under similar terms as those granted in February 2021. FY20 Awards — In January 2020, the Committee approved restricted stock awards for employees but did not finalize the performance targets at that time. In November 2020, the Committee approved the applicable performance targets and we granted 550,224 shares of restricted stock to employees. We consider the awards to have a three-year performance period consisting of fiscal 2020, fiscal 2021 and fiscal 2022, with a service condition applicable to fiscal 2020 and then separate performance conditions applicable to fiscal 2021 and 2022. For each award, the total number of shares was allocated equally among fiscal 2021 and fiscal 2022, with each tranche having separate performance conditions. The number of shares available to vest from each tranche is dependent on the achievement of the performance condition for that tranche and can range from 0 to 100 %. All of the shares that become available to vest based on the achievement of the performance conditions will vest on September 30, 2022, subject to continuous, active employment with the Company through that date. Performance targets for the fiscal 2021 tranche were communicated in January 2021. Grant dates for the fiscal 2022 tranche will be determined when performance targets are established for that tranche. As of September 30, 2021, we considered the performance targets for the fiscal 2021 tranche to be probable of achievement at the 100 % level. FY19 Awards — In July 2019 and November 2018, we granted 61,138 shares of restricted stock and 971,615 shares of restricted stock, respectively, to employees. The awards had a three-year performance period consisting of fiscal 2019, fiscal 2020 and fiscal 2021, and were subject to a single three-year performance condition as well as a service condition through the end of the performance period. In November 2020, the Committee determined that the stated performance target for such awards was not probable of achievement and approved a modification of such awards that reduced the number of shares available for vesting and established a new one-year performance condition (in addition to the continuing service condition) applicable to the vesting of the remaining shares. We treated this modification as a cancellation of the existing awards and the grant of new awards subject to a new performance condition, which resulted in (1) the cancellation of awards covering 458,960 shares and the reversal of $ 2.9 million of previously recognized stock compensation expense and (2) the grant of 358,883 shares of restricted stock. These awards are scheduled to vest on September 30, 2021, subject to the achievement of the specified performance target, which will be determined in November 2021. As of September 30, 2021, we considered that performance target to be probable of achievement. FY18 Awards — In December 2017, we granted 1,308,533 shares of restricted stock to employees. The awards had a three-year performance period consisting of fiscal 2018, fiscal 2019 and fiscal 2020, and were subject to a single three-year performance condition as well as a service condition through the end of the performance period. Awards covering 190,725 shares vested on September 30, 2018. In November 2020, the Committee determined that the performance target applicable to the awards was only partially achieved,and approved the vesting of 295,723 shares in December 2020. Awards covering 81,896 shares were cancelled, resulting in a reversal of $ 0.8 million of previously recognized stock compensation expense. FY17 Awards — In November and December 2016 and April 2017, we granted 931,260 shares of restricted stock to employees. The awards had a three-year performance period consisting of fiscal 2017, fiscal 2018 and fiscal 2019, and were subject to a single three-year performance condition as well as a service condition through the end of the performance period. Following the end of fiscal 2019, the Committee determined that the applicable performance target had been achieved, and the awards that remained outstanding at that time (covering 463,467 shares) vested. As of September 30, 2021, the unamortized fair value, exclusive of forfeitures, of share awards to be amortized over their remaining vesting periods was approximately $ 1.2 million. The weighted-average period over which these costs will be amortized is approximately two years . 61 Table of Contents The following table presents amounts related to our stock compensation arrangements: Fiscal Year Ended September 30, (in thousands) 2021 2020 2019 Share-based compensation costs $ 3,946 $ ( 5,094 ) $ 9,751 Income tax expense (benefit) on share-based compensation 561 420 ( 1,098 ) The following table presents a summary of stock compensation activity: Shares Weighted Average Grant Date Fair Value Outstanding as of September 30, 2020 1,108,920 $ 5.65 Granted 1,811,708 4.92 Released (a) ( 675,475 ) 7.59 Cancelled ( 26,376 ) 6.20 Outstanding as of September 30, 2021 2,218,777 $ 4.86 (a) 168,653 shares were withheld to satisfy related income tax withholding. The following table presents a summary of the fair value of shares granted: Fiscal Year Ended September 30, (in millions except per share amounts) 2021 2020 2019 Weighted average grant date fair value per share granted (a) $ 4.92 $ 5.73 $ 9.29 Total market value of shares released $ 3.4 $ 5.1 $ 11.8 (a) Awards with performance and time-based vesting provisions are generally valued based upon the underlying share price as of the issuance date. Other We have not declared or paid any dividends and currently do not anticipate paying any dividends in the immediate future. As described in Note 9: Debt, payment of a dividend requires an adjustment to the conversion rate of our Convertible Notes . Should we pay dividends in the future, our certificate of incorporation provides that cash dividends on common stock, when declared, must be declared and paid at the same per share amounts on both classes of stock. Any future determination to pay cash dividends will be at the discretion of our Board of Directors. NOTE 11: INCOME TAXES The following table presents the components of our income from continuing operations before income taxes, including inter-segment amounts: Fiscal Year Ended September 30, (in thousands) 2021 2020 2019 Domestic* $ 2,320 $ ( 31,989 ) $ ( 9,609 ) Foreign 13,742 ( 38,106 ) 13,783 $ 16,062 $ ( 70,095 ) $ 4,174 * Includes the majority of our corporate administrative costs. See Note 14: Segment Information for information pertaining to segment contribution. The following table presents the significant components of the income tax provision: Fiscal Year Ended September 30, (in thousands) 2021 2020 2019 Current: Federal $ ( 479 ) $ ( 6,631 ) $ 431 State and foreign 4,646 10,544 704 4,167 3,913 1,135 Deferred: Federal 3,202 ( 1,561 ) ( 4,264 ) State and foreign 81 ( 3,984 ) 5,535 3,283 ( 5,545 ) 1,271 Total income tax (benefit) expense $ 7,450 $ ( 1,632 ) $ 2,406 62 Table of Contents The following table presents a reconciliation of income taxes calculated at the statutory rate and the provision for income taxes: Fiscal Year Ended September 30, (in thousands) 2021 2020 2019 Income tax expense (benefit) at the federal statutory rate $ 3,374 $ ( 14,720 ) $ 878 State taxes, net of federal benefit 931 951 184 Mexico inflation adjustment ( 1,217 ) ( 1,120 ) ( 801 ) Non-deductible items 2,087 772 2,088 Tax credits — — ( 551 ) Foreign rate differential 1,111 ( 1,671 ) 1,080 Change in valuation allowance ( 137 ) 962 1,601 Stock compensation 293 598 ( 711 ) Uncertain tax positions 208 2,849 ( 1,596 ) Non-deductible impairment — 9,093 — Deferred tax true-up 896 — — Other ( 96 ) 654 234 Total income tax expense (benefit) $ 7,450 $ ( 1,632 ) $ 2,406 Effective tax rate 46 % 2 % 58 % The following table shows significant components of our deferred tax assets and liabilities: September 30, (in thousands) 2021 2020 Deferred tax assets: Cash Converters $ 13,848 $ 15,049 Tax over book inventory 7,595 9,737 Accrued liabilities 7,731 8,924 Pawn service charges receivable 1,195 1,019 Stock compensation 643 1,565 Foreign tax credit 2,484 1,696 State and foreign net operating loss carryforwards 19,414 15,990 Book over tax depreciation 7,250 4,651 Other 3,562 4,350 Total deferred tax assets before valuation allowance 63,722 62,981 Valuation allowance ( 19,135 ) ( 18,524 ) Total deferred tax assets, net 44,587 44,457 Deferred tax liabilities: Tax over book amortization 23,674 22,444 Note receivable discount 13,483 12,257 Prepaid expenses 1,368 1,349 Total deferred tax liabilities 38,525 36,050 Net deferred tax asset $ 6,062 $ 8,407 As of September 30, 2021, we had federal and state net operating loss carryforwards of approximately $ 100.6 million, which begin to expire in 2022 if not utilized. We also had foreign net operating loss carryforwards of $ 56.9 million, which will begin to expire in 2030 if not utilized. Additionally, we have a $ 1.7 million foreign tax credit that will expire between 2024 to 2027 if not utilized. Deferred tax assets and liabilities are recorded for the estimated tax impact of temporary differences between the tax basis and book basis of assets and liabilities. The Company has elected to account for the tax on Global Intangible Low-Taxed Income (“GILTI”) as a period cost and therefore has not recorded deferred taxes related to GILTI on its foreign subsidiaries. A valuation allowance is established against a deferred tax asset when it is more likely than not that the deferred tax asset will not be realized. Our valuation allowance has been established to offset certain state and foreign net operating loss carryforwards and foreign tax credit carryforwards that are not more likely than not to be utilized prior to expiration. The valuation allowance increased by $ 0.6 million in fiscal 2021, primarily due to the recording of a valuation allowance for losses generated during the year in certain foreign jurisdictions which we believe are not more likely than not to be utilized. We believe our results from future operations will generate sufficient taxable income in the appropriate jurisdictions such that it is more likely than not that the remaining deferred tax assets will be realized. 63 Table of Contents Deferred taxes are not provided for undistributed earnings of foreign subsidiaries of approximately $ 70.0 million which are intended to be reinvested outside of the U.S. Accordingly, no provision for foreign withholding taxes associated with a distribution of those earnings has been made. We estimate that, upon distribution of our share of these earnings, we would be subject to withholding taxes of approximately $ 3.8 million as of September 30, 2021. We provided deferred income taxes on all undistributed earnings from Cash Converters. The following table presents a roll-forward of unrecognized tax benefits: Fiscal Year Ended September 30, (in thousands) 2021 2020 2019 Beginning balance $ 3,085 $ 1,435 $ 3,091 Increase for tax positions taken during a prior period 2,135 1,401 — Increase for tax positions taken during the current period — 249 — Decrease for tax positions as a result of the lapse of the statute of limitations ( 457 ) — ( 1,656 ) Ending balance $ 4,763 $ 3,085 $ 1,435 All of the above unrecognized tax benefits, if recognized, would impact our effective tax rate for the respective period of each ending balance. The statute of limitations will expire within the next twelve months with respect to approximately $ 2.2 million of foreign uncertain tax positions. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During 2021, 2020, and 2019, the Company recognized income tax expense consisting of interest and penalties of $ 0.3 million, $ 1.2 million, and $ 0.2 million, respectively, due to the accrual of current year interest and penalties on existing positions offset by the reversal of previous accruals due to the lapse of the statute of limitations. The total amount of accrued interest and penalties was $ 1.8 million, $ 1.5 million and $ 0.3 million in 2021, 2020 and 2019, respectively. We are subject to U.S., Mexico, Canada, Guatemala, Honduras, El Salvador, Peru and the Netherlands income taxes as well as income taxes levied by various state and local jurisdictions. With few exceptions, we are no longer subject to examinations by tax authorities for years before the tax year ended September 30, 2014. We believe that adequate provisions have been made for any adjustments that may result from tax examinations. NOTE 12: LEASES The weighted-average remaining lease term for operating leases as of September 30, 2021 was 5.08 years, which includes options to extend when it is reasonably certain that we will exercise the option. We used incremental borrowing rates that match the duration of the remaining lease terms of our operating leases on a fully collateralized basis upon adoption as of October 1, 2019 to initially measure our lease liability. The weighted average incremental borrowing rate used to measure the lease liability as of September 30, 2021 was 5.92 %. The details of our right-of-use asset and lease liability recognized upon adoption of ASC 842 was computed based on the consumer price index and foreign currency exchange rate as applicable then in effect and excluding executory costs on October 1, 2019, were as follows (in thousands): Right-of-use asset $ 246,028 Straight-line rent accrual ( 8,479 ) Net right-of-use asset $ 237,549 Lease liability, current $ 45,272 Lease liability, non-current 200,756 Total lease liability $ 246,028 64 Table of Contents The table below presents balances of our operating leases: (in thousands) September 30, 2021 September 30, 2020 Right-of-use asset $ 200,990 $ 183,809 Lease liability, current $ 52,263 $ 49,742 Lease liability, non-current 161,330 153,040 Total lease liability $ 213,593 $ 202,782 The table below provides the composition of our lease costs: Fiscal Year Ended September 30, (in thousands) 2021 2020 Operating lease expense $ 61,980 $ 62,925 Variable lease expense 13,000 11,846 Total lease expense $ 74,980 $ 74,771 As of September 30, 2021, maturities of lease liabilities under ASC 842 by fiscal year were as follows (in thousands): Fiscal 2022 $ 66,434 Fiscal 2023 55,068 Fiscal 2024 43,072 Fiscal 2025 32,833 Fiscal 2026 23,502 Thereafter 39,390 Total lease liabilities 260,299 Less: portion representing interest 46,706 Total net lease liabilities 213,593 Less: current portion 52,263 Total long term net lease liabilities $ 161,330 In December 2014, we entered into a non-cancelable 13 -year operating lease for our corporate offices, with rent payments beginning February 2016 and ending March 2029. Annual rent, net of square footage subsequently terminated as a result of negotiations with the landlord, escalate from $ 2.5 million at lease inception to $ 3.9 million in the terminal year of the lease. The lease includes two five-year extension options at the end of the initial lease term. The estimated minimum future rental payments under the lease are approximately $ 27.9 million as of September 30, 2021. During fiscal 2017 and 2016, we initiated subleases for a portion of our corporate operating office lease for estimated minimum future sublease payments of approximately $ 12.2 million. In addition to the above subleases, during fiscal 2018 we entered into an amendment to the operating lease surrendering another 15 % of the initial leased premises. As a result, sublease payments were expected to fully offset our original operating lease obligations through August 2022, with renewal options available until the end of the master operating lease in March 2029. During the second quarter of fiscal 2015, we entered into cancellable subleases for our Miami office for an estimated minimum future sublease payment of approximately $ 2.9 million. Sublease payments are expected to offset substantially all of our original operating lease obligations over the nine-year period beginning March 2015 and ending September 2024. The following table presents the amount of net rent recognized as expense under ASC Topic 840 — Leases (in thousands): Fiscal Year Ended September 30, 2019 Gross rent expense from continuing operations $ 65,295 Sublease rent revenue from continuing operations ( 35 ) Net rent expense from continuing operations $ 65,260 As a result of the COVID-19 pandemic, we believe there was a significant adverse change in the business climate that impacted the office leasing market and a significant decrease in the market prices of an asset or asset group that affected the value of the right of use asset for our corporate office. We determined the undiscounted cash flows of the subleases did not exceed the net book value of the right of use asset. We then determined the discounted cash flows of the subleases did not exceed the book value of the right of use asset, and an impairment 65 Table of Contents charge of $ 5.0 million was recorded in the fourth quarter of fiscal 2020 and is recorded under “Impairment of goodwill, intangible and other assets” in the Consolidated Statements of Operations. No such charge was taken in fiscal year 2021. We recorded $ 62.8 million and $ 29.2 million in non-cash additions to our right of use assets and lease liabilities for the fiscal year ended September 30, 2021 and 2020, respectively. NOTE 13: CONTINGENCIES Currently, and from time to time, we are involved in various claims, disputes, lawsuits, investigations and legal and regulatory proceedings. We accrue for contingencies if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because these matters are inherently unpredictable and unfavorable developments or resolutions can occur, assessing contingencies requires judgments and is highly subjective about future events. The amount of resulting loss may differ from these estimates. While we are unable to determine the ultimate outcome of any current litigation or regulatory actions, we do not believe the resolution of any particular matter will have a material adverse effect on our financial condition, results of operations or liquidity. NOTE 14: SEGMENT INFORMATION Our operations are primarily managed on a geographical basis and consist of three reportable segments. The factors for determining our reportable segments include the manner in which our chief operating decision maker (CODM) evaluates performance for purposes of allocating resources and assessing performance. During the first quarter of fiscal 2021, the financial information of our Lana business activities were no longer reviewed by the CODM for evaluating performance since Lana no longer has business activities but, rather, offers support activities to our U.S. Pawn and Latin America Pawn operating segments. As a result, Lana is no longer an operating or reportable segment. Our historical segment results have been recast to conform to current presentation. We currently report our segments as follows: • U.S. Pawn — All pawn activities in the United States; • Latin America Pawn — All pawn activities in Mexico and other parts of Latin America; and • Other International — Primarily our equity interest in the net income of Cash Converters and RDC. There are no inter-segment revenues presented below, and the amounts below were determined in accordance with the same accounting principles used in our condensed consolidated financial statements. The following tables present revenue for each reportable segment, disaggregated revenue within our three reportable segments and Corporate, segment profits and segment contribution. 66 Table of Contents Fiscal Year Ended September 30, 2021 (in thousands) U.S. Pawn Latin America Pawn Other International Total Segments Corporate Items Consolidated Revenues: Merchandise sales $ 341,495 $ 101,303 $ — $ 442,798 $ — $ 442,798 Jewelry scrapping sales 15,260 10,765 — 26,025 — 26,025 Pawn service charges 196,721 63,475 — 260,196 — 260,196 Other revenues 105 7 420 532 — 532 Total revenues 553,581 175,550 420 729,551 — 729,551 Merchandise cost of goods sold 191,039 66,179 — 257,218 — 257,218 Jewelry scrapping cost of goods sold 13,001 9,847 — 22,848 — 22,848 Net revenues 349,541 99,524 420 449,485 — 449,485 Segment and corporate expenses (income): Store expenses 253,344 77,493 — 330,837 — 330,837 General and administrative — — — — 56,495 56,495 Depreciation and amortization 10,650 7,371 — 18,021 12,651 30,672 Gain (loss) on sale or disposal of assets and other 27 ( 6 ) — 21 62 83 Other Charges — 229 — 229 — 229 Interest expense — — — — 22,177 22,177 Interest income — ( 2,016 ) — ( 2,016 ) ( 461 ) ( 2,477 ) Equity in net income of unconsolidated affiliates — — ( 3,803 ) ( 3,803 ) — ( 3,803 ) Other (income) expense — ( 840 ) ( 173 ) ( 1,013 ) 223 ( 790 ) Segment contribution $ 85,520 $ 17,293 $ 4,396 $ 107,209 Income (loss) from continuing operations before income taxes $ 107,209 $ ( 91,147 ) $ 16,062 Fiscal Year Ended September 30, 2020 (in thousands) U.S. Pawn Latin America Pawn Other International Total Segments Corporate Items Consolidated Revenues: Merchandise sales $ 391,921 $ 106,292 $ — $ 498,213 $ — $ 498,213 Jewelry scrapping sales 36,691 11,262 — 47,953 — 47,953 Pawn service charges 210,081 62,557 — 272,638 — 272,638 Other revenues 150 — 3,823 3,973 — 3,973 Total revenues 638,843 180,111 3,823 822,777 — 822,777 Merchandise cost of goods sold 251,544 82,937 — 334,481 — 334,481 Jewelry scrapping cost of goods sold 28,064 9,977 — 38,041 — 38,041 Other cost of revenues — 101 953 1,054 — 1,054 Net revenues 359,235 87,096 2,870 449,201 — 449,201 Operating expenses (income): Store expenses 261,608 69,916 5,246 336,770 — 336,770 General and administrative — — — — 54,133 54,133 Impairment of goodwill, intangible and other assets 10,000 35,938 1,149 47,087 7,579 54,666 Depreciation and amortization 11,030 7,315 68 18,413 12,414 30,827 Gain (loss) on sale or disposal of assets 385 ( 72 ) ( 20 ) 293 508 801 Other Charges 3,106 1,715 3,802 8,623 11,765 20,388 Interest expense — 685 549 1,234 21,238 22,472 Interest income — ( 1,586 ) — ( 1,586 ) ( 1,587 ) ( 3,173 ) Equity in net loss of unconsolidated affiliates — — 2,429 2,429 — 2,429 Other (income) expense — ( 156 ) 6 ( 150 ) 133 ( 17 ) Segment contribution (loss) $ 73,106 $ ( 26,659 ) $ ( 10,359 ) $ 36,088 Income (loss) from continuing operations before income taxes $ 36,088 $ ( 106,183 ) $ ( 70,095 ) 67 Table of Contents Fiscal Year Ended September 30, 2019 (in thousands) U.S. Pawn Latin America Pawn Other International Total Segments Corporate Items Consolidated Revenues: Merchandise sales $ 355,996 $ 97,379 $ — $ 453,375 $ — $ 453,375 Jewelry scrapping sales 45,815 14,630 — 60,445 — 60,445 Pawn service charges 248,369 78,997 — 327,366 — 327,366 Other revenues 233 179 5,631 6,043 — 6,043 Total revenues 650,413 191,185 5,631 847,229 — 847,229 Merchandise cost of goods sold 225,136 72,372 — 297,508 — 297,508 Jewelry scrapping cost of goods sold 39,318 13,617 — 52,935 — 52,935 Other cost of revenues — — 2,338 2,338 — 2,338 Net revenues 385,959 105,196 3,293 494,448 — 494,448 Operating expenses (income): Store expenses 269,003 74,199 7,376 350,578 — 350,578 General and administrative — — — — 63,665 63,665 Depreciation and amortization 11,879 6,267 219 18,365 10,432 28,797 Loss on sale or disposal of assets 3,402 691 282 4,375 24 4,399 Interest expense — 1,609 491 2,100 30,537 32,637 Interest income — ( 1,601 ) — ( 1,601 ) ( 9,485 ) ( 11,086 ) Equity in net loss of unconsolidated affiliates — — 135 135 — 135 Impairment of investment in unconsolidated affiliates — — 19,725 19,725 — 19,725 Other (income) expense — ( 93 ) 1,895 1,802 ( 378 ) 1,424 Segment contribution (loss) $ 101,675 $ 24,124 $ ( 26,830 ) $ 98,969 Income (loss) from continuing operations before income taxes $ 98,969 $ ( 94,795 ) $ 4,174 The following table presents separately identified segment assets: (in thousands) U.S. Pawn Latin America Pawn Other International Corporate Total Assets as of September 30, 2021 Pawn loans $ 135,931 $ 39,970 $ — $ — $ 175,901 Pawn service charges receivable, net 24,365 4,972 — — 29,337 Inventory, net 82,386 28,603 — — 110,989 Total assets 779,271 233,347 38,993 215,300 1,266,911 Assets as of September 30, 2020 Pawn loans $ 106,340 $ 24,983 $ — $ — 131,323 Pawn service charges receivable, net 17,931 2,649 — — 20,580 Inventory, net 75,807 20,084 — — 95,891 Total assets 690,157 191,827 34,118 280,921 1,197,023 The net assets of our Latin America Pawn segment, exclusive of intercompany amounts and inclusive of certain other assets not separately identified above, were $ 199.2 million as of September 30, 2021. 68 Table of Contents The following tables provide geographic information: Fiscal Year Ended September 30, (in thousands) 2021 2020 2019 Revenues: United States $ 553,581 $ 638,844 $ 650,413 Mexico 128,773 131,965 138,897 Other Latin America 46,777 48,146 52,288 Canada and other 420 3,822 5,631 Total revenues $ 729,551 $ 822,777 $ 847,229 September 30, (in thousands) 2021 2020 Long-lived tangible assets: United States $ 30,651 $ 36,361 Mexico 19,255 $ 15,141 Other Latin America 3,905 $ 5,484 Total long-lived tangible assets $ 53,811 $ 56,986 NOTE 15: SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION Supplemental Consolidated Financial Information The following table provides information on net amounts included in our Consolidated Balance Sheets: September 30, (in thousands) 2021 2020 Gross pawn service charges receivable $ 37,360 $ 27,259 Allowance for uncollectible pawn service charges receivable ( 8,023 ) ( 6,679 ) Pawn service charges receivable, net $ 29,337 $ 20,580 Gross inventory $ 115,300 $ 108,205 Inventory reserves ( 4,311 ) ( 12,314 ) Inventory, net $ 110,989 $ 95,891 Prepaid expenses and other $ 5,386 $ 10,614 Accounts receivable and other 9,322 6,991 Income taxes prepaid and receivable 16,302 15,298 Prepaid expenses and other current assets $ 31,010 $ 32,903 Accounts payable $ 22,462 $ 19,114 Accrued payroll 9,093 12,993 Incentive accrual 16,868 4,895 Other payroll related expenses 10,695 9,071 Accrued sales and VAT taxes 10,936 9,291 Other current liabilities 20,214 16,140 Account payable, accrued expenses and other current liabilities $ 90,268 $ 71,504 Unrecognized tax benefits, non-current $ 2,571 $ 4,214 Other long-term liabilities 7,814 6,635 Other long-term liabilities $ 10,385 $ 10,849 69 Table of Contents Valuation and Qualifying Accounts The following table provides information on our valuation and qualifying accounts not disclosed elsewhere: Additions (in thousands) Balance at Beginning of Period Charged to Expense Charged to Revenue Deductions Balance at End of Period Allowance for valuation of inventory: Year Ended September 30, 2021 $ 12,314 $ — $ 8,003 $ 4,311 Year Ended September 30, 2020 9,737 2,577 — — 12,314 Year Ended September 30, 2019 9,201 536 — — 9,737 Allowance for uncollectible pawn service charges receivable: Year Ended September 30, 2021 $ 6,679 $ 1,344 $ — $ — $ 8,023 Year Ended September 30, 2020 10,036 — — 3,357 6,679 Year Ended September 30, 2019 9,760 — 276 — 10,036 Allowance for uncollectible consumer loan fees and interest receivable: Year Ended September 30, 2021 $ — $ — $ — — $ — Year Ended September 30, 2020 540 — — 540 — Year Ended September 30, 2019 331 — 209 — 540 Allowance for valuation of deferred tax assets: Year Ended September 30, 2021 $ 18,524 611 $ — $ — $ 19,135 Year Ended September 30, 2020 18,094 430 — — 18,524 Year Ended September 30, 2019 20,254 — — 2,160 18,094 70 Table of Contents NOTE 16: SUBSEQUENT EVENTS On October 1, 2021, we purchased an additional 13 million shares of Cash Converters for $ 2.5 million. This purchase increased our total ownership in Cash Converters to 236,702,991 shares, representing a 37.72 % ownership interest. Additionally, in October 2021, we received a cash dividend of $ 1.7 million from Cash Converters. On October 6, 2021, the Company invested $ 15.0 million in exchange for a non-redeemable voting participating preferred equity interest in Founders One, LLC (“Founders”), a newly-formed entity with one other member. Founders used that $ 15.0 million to acquire an equity interest in Simple Management Group, Inc. (“SMG”) which owns and operates more than 20 pawn stores principally in the Caribbean region, with plans to build and acquire more stores in that region. This investment in Founders is accounted for utilizing the measurement alternative within ASC 321, Investments — Equity Securities. 71 Table of Contents NOTE 17: QUARTERLY INFORMATION (UNAUDITED) (in thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter Year Ended September 30, 2021 Total revenues $ 178,135 $ 184,939 $ 174,033 $ 192,444 Net revenues $ 108,390 $ 113,748 $ 108,021 $ 119,326 Net income (loss) $ 4,299 $ 5,330 $ ( 2,570 ) $ 1,553 Basic earnings (loss) per share $ 0.08 $ 0.10 $ ( 0.05 ) $ 0.03 Diluted earnings (loss) per share $ 0.08 $ 0.10 $ ( 0.05 ) $ 0.03 (in thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter Year Ended September 30, 2020 Total revenues $ 222,435 $ 223,280 $ 210,224 $ 166,839 Net revenues $ 130,069 $ 127,362 $ 102,175 $ 89,596 Net income (loss) $ 1,238 $ ( 40,874 ) $ ( 5,487 ) $ ( 23,340 ) Basic earnings (loss) per share $ 0.02 $ ( 0.74 ) $ ( 0.10 ) $ ( 0.42 ) Diluted earnings (loss) per share $ 0.02 $ ( 0.74 ) $ ( 0.10 ) $ ( 0.42 ) 72 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.