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 (BDO USA, P.C. ; Dallas, Texas; PCAOB ID # 243 ) 38 Consolidated Financial Statements: Consolidated Balance Sheets as of September 30, 2023 and 2022 40 Consolidated Statements of Operations for each of the three years ended September 30, 2023, 2022 and 2021 41 Consolidated Statements of Comprehensive Income for three years ended September 30, 2023, 2022 and 2021 42 Consolidated Statements of Stockholders’ Equity for each of the three years ended September 30, 2023, 2022 and 2021 43 Consolidated Statements of Cash Flows for each of the three years ended September 30, 2023, 2022 and 2021 44 Notes to Consolidated Financial Statements 45 Note 1: Organization and Summary of Significant Accounting Policies 45 Note 2: Other Charges 51 Note 3: Acquisitions 52 Note 4: Earnings Per Share 54 Note 5 : Strategic Investments 55 Note 6 : Fair Value Measurements 56 Note 7 : Property and Equipment 56 Note 8 : Goodwill and Intangible Assets 57 Note 9 : Debt 58 Note 10 : Common Stock and Stock Compensation 62 Note 1 1 : Income Taxes 65 Note 1 2 : Leases 68 Note 1 3 : Contingencies 70 Note 1 4 : Segment Information 70 Note 1 5 : Supplemental Consolidated Financial Information 74 Note 1 6 : Subsequent Events 75 37 Table of Contents Report of Independent Registered Public Accounting Firm Shareholders 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, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2023, 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, 2023, 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 15, 2023, expressed an unqualified opinion thereon. Change in Accounting Principle As is discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for convertible debt as of October 1, 2021, due to the adoption of Accounting Standards Update 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. 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 our especially challenging, subjective, or complex judgments. The communication of 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 separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. Accounting for Convertible Debt As described in Note 9 to the Company’s consolidated financial statements, in December 2022, the Company issued $230.0 million aggregate principal amount of 3.750% Convertible Senior Notes Due 2029 (the “2029 Convertible Notes”). The 2029 Convertible Notes contain certain conversion, redemption, and other embedded features that require the Company to assess if such features are embedded derivatives that require bifurcation from the 2029 Convertible Notes, and are to be accounted for separately. The Company determined the embedded features did not require bifurcation from the 2029 Convertible Notes, and therefore were not accounted for separately. 38 Table of Contents We identified the Company’s accounting for the 2029 Convertible Notes as a critical audit matter. Determination of the accounting treatment for the 2029 Convertible Notes required complex evaluation in order to: (a) identify the embedded conversion, redemption, and other features present within the 2029 Convertible Notes, and (b) assess if the conditions requiring one or more of the identified embedded features to be bifurcated were satisfied. Auditing management’s conclusions required an increased level of audit effort, including the involvement of professionals with specialized skill and knowledge in the accounting treatment for embedded derivatives. The primary procedures we performed to address this critical audit matter included: • Analyzing the terms included in the 2029 Convertible Notes Indenture, to assess the appropriateness of management's conclusion on the accounting treatment for the 2029 Convertible Notes. • Utilizing personnel with specialized skill and knowledge in the relevant technical accounting guidance to (a) assist with identifying the embedded conversion, redemption and other features present within the 2029 Convertible Notes, and (b) assist with evaluating the appropriateness of management’s conclusions regarding bifurcation of the embedded features. /s/ BDO USA, P.C. We have served as the Company’s auditor since 2015. Dallas, Texas November 15, 2023 39 EZCORP, Inc. CONSOLIDATED BALANCE SHEETS September 30, (in thousands, except share and per share amounts) 2023 2022 Assets: Current assets: Cash and cash equivalents $ 220,595 $ 206,028 Restricted cash 8,373 8,341 Pawn loans 245,766 210,009 Pawn service charges receivable, net 38,885 33,476 Inventory, net 166,477 151,615 Prepaid expenses and other current assets 39,623 34,694 Total current assets 719,719 644,163 Investments in unconsolidated affiliates 10,987 37,733 Other investments 36,220 24,220 Property and equipment, net 68,096 56,725 Right-of-use assets, net 234,388 221,405 Goodwill 302,372 286,828 Intangible assets, net 58,216 56,819 Notes receivable, net — 1,215 Deferred tax asset, net 25,702 12,145 Other assets, net 12,011 6,625 Total assets $ 1,467,711 $ 1,347,878 Liabilities and equity: Current liabilities: Current maturities of long-term debt, net $ 34,265 $ — Accounts payable, accrued expenses and other current liabilities 81,605 84,509 Customer layaway deposits 18,920 16,023 Operating lease liabilities, current 57,182 52,334 Total current liabilities 191,972 152,866 Long-term debt, net 325,847 312,903 Deferred tax liability, net 435 373 Operating lease liabilities 193,187 180,756 Other long-term liabilities 10,502 8,749 Total liabilities 721,943 655,647 Commitments and contingencies (Note 13) Stockholders’ equity: Class A Non-Voting Common Stock, par value $ 0.01 per share; shares authorized: 100 million; 51,869,569 issued and outstanding as of September 30, 2023; and issued and outstanding of 53,454,885 as of September 30, 2022 519 534 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, 2023 and 2022 30 30 Additional paid-in capital 346,181 345,330 Retained earnings 431,140 402,006 Accumulated other comprehensive loss ( 32,102 ) ( 55,669 ) Total equity 745,768 692,231 Total liabilities and equity $ 1,467,711 $ 1,347,878 See accompanying notes to consolidated financial statements. 40 EZCORP, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS Fiscal Year Ended September 30, (in thousands, except per share amounts) 2023 2022 2021 Revenues: Merchandise sales $ 615,446 $ 532,886 $ 442,798 Jewelry scrapping sales 49,528 32,033 26,025 Pawn service charges 383,772 320,865 260,196 Other revenues 295 441 532 Total revenues 1,049,041 886,225 729,551 Merchandise cost of goods sold 394,779 329,382 257,218 Jewelry scrapping cost of goods sold 44,424 28,696 22,848 Gross profit 609,838 528,147 449,485 Operating expenses: Store expenses 418,574 357,417 330,837 General and administrative 67,529 64,342 56,495 Impairment of other assets 4,343 — — Depreciation and amortization 32,131 32,140 30,672 Loss (gain) on sale or disposal of assets and other 208 ( 674 ) 83 Other (income) expense ( 5,097 ) — 229 Total operating expenses 517,688 453,225 418,316 Operating income 92,150 74,922 31,169 Interest expense 16,456 9,972 22,177 Interest income ( 7,470 ) ( 817 ) ( 2,477 ) Equity in net loss (income) of unconsolidated affiliates 28,459 ( 1,779 ) ( 3,803 ) Other expense (income) 3,072 ( 167 ) ( 790 ) Income before income taxes 51,633 67,713 16,062 Income tax expense 13,170 17,553 7,450 Net income $ 38,463 $ 50,160 $ 8,612 Basic earnings per share $ 0.69 $ 0.89 $ 0.15 Diluted earnings per share $ 0.53 $ 0.70 $ 0.15 Weighted-average basic shares outstanding 55,586 56,498 55,744 Weighted-average diluted shares outstanding 80,865 82,400 55,949 See accompanying notes to consolidated financial statements. 41 Table of Contents EZCORP, Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Fiscal Year Ended September 30, (in thousands) 2023 2022 2021 Net income $ 38,463 $ 50,160 $ 8,612 Other comprehensive income: Foreign currency translation adjustment, net of income tax expense for our investment in unconsolidated affiliate of $ 666 , $ 229 and $ 280 for the years ended September 30, 2023, 2022 and 2021, respectively 23,567 2,746 9,653 Comprehensive income $ 62,030 $ 52,906 $ 18,265 See accompanying notes to consolidated financial statements. 42 Table of Contents EZCORP, Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Total Equity (in thousands) Shares Par Value Retained Earnings Balances as of October 1, 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 Stock compensation — — 5,053 — — 5,053 Transfer of consideration for other investment 213 2 1,498 — — 1,500 Release of restricted stock 393 4 — — — 4 Taxes paid related to net share settlement of equity awards — — ( 792 ) — — ( 792 ) Cumulative effect of adoption of ASU 2020-06 (Note 1) — — ( 62,804 ) 26,166 — ( 36,638 ) Foreign currency translation gain — — — — 2,746 2,746 Purchase and retirement of treasury stock ( 238 ) ( 2 ) ( 937 ) ( 1,101 ) — ( 2,040 ) Net income — — — 50,160 — 50,160 Balances as of September 30, 2022 56,425 $ 564 $ 345,330 $ 402,006 $ ( 55,669 ) $ 692,231 Stock compensation — — 9,539 — — 9,539 Transfer of equity consideration for acquisition 10 — 99 — — 99 Release of restricted stock, net of shares withheld for taxes 373 5 — — — 5 Taxes paid related to net share settlement of equity awards ( 1 ) — ( 1,148 ) — — ( 1,148 ) Foreign currency translation gain — — — — 23,567 23,567 Purchase and retirement of treasury stock ( 1,967 ) ( 20 ) ( 7,639 ) ( 9,329 ) — ( 16,988 ) Net income — — — 38,463 — 38,463 Balances as of September 30, 2023 54,840 $ 549 $ 346,181 $ 431,140 $ ( 32,102 ) $ 745,768 S ee accompanying notes to consolidated financial statements. 43 Table of Contents EZCORP, Inc . CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended September 30, (in thousands) 2023 2022 2021 Operating activities: Net income $ 38,463 $ 50,160 $ 8,612 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 32,131 32,140 30,672 Amortization of debt discount and deferred financing costs 1,561 1,433 13,797 Non-cash lease expense 56,937 52,201 48,480 Deferred income taxes ( 12,802 ) 4,945 3,283 Impairment of other assets 4,343 — — Other adjustments ( 2,890 ) 2,511 ( 185 ) Provision for inventory reserve 603 ( 2,253 ) ( 8,003 ) Stock compensation expense 9,539 5,053 3,946 Equity in net loss (income) from investment in unconsolidated affiliates 28,459 ( 1,779 ) ( 3,803 ) Net loss on extinguishment of debt 3,545 — — Changes in operating assets and liabilities, net of business acquisitions: Service charges and fees receivable ( 4,204 ) ( 4,572 ) ( 7,332 ) Inventory ( 4,810 ) ( 15,341 ) 371 Prepaid expenses, other current assets and other assets ( 1,814 ) 3,238 7,373 Accounts payable, accrued expenses and other liabilities ( 61,522 ) ( 65,141 ) ( 54,209 ) Customer layaway deposits 1,376 3,359 1,256 Income taxes 12,919 ( 2,785 ) 2,180 Dividends from unconsolidated affiliates — 3,366 — Net cash provided by operating activities 101,834 66,535 46,438 Investing activities: Loans made ( 821,725 ) ( 740,057 ) ( 601,638 ) Loans repaid 458,854 410,523 351,092 Recovery of pawn loan principal through sale of forfeited collateral 336,349 274,423 208,551 Capital expenditures, net ( 40,446 ) ( 31,895 ) ( 23,601 ) Acquisitions, net of cash acquired ( 14,874 ) ( 1,850 ) ( 19,015 ) Issuance of note receivable ( 15,500 ) ( 1,000 ) — Investment in unconsolidated affiliate ( 2,133 ) ( 6,927 ) — Investment in other investments ( 15,000 ) ( 16,500 ) — Dividends from unconsolidated affiliates 3,589 — — Net cash used in investing activities ( 110,886 ) ( 113,283 ) ( 84,611 ) Financing activities: Taxes paid related to net share settlement of equity awards ( 1,148 ) ( 792 ) ( 839 ) Proceeds from borrowings 230,000 — — Debt issuance cost ( 7,458 ) — — Cash paid on extinguishment of debt ( 1,951 ) — — Payments on assumed debt and other borrowings ( 178,488 ) — ( 15,414 ) Purchase and retirement of treasury stock ( 16,988 ) ( 2,040 ) — Payments of finance leases ( 275 ) — — Net cash provided by (used in) financing activities 23,692 ( 2,832 ) ( 16,253 ) Effect of exchange rate changes on cash and cash equivalents and restricted cash ( 41 ) 325 5,497 Net increase (decrease) in cash and cash equivalents and restricted cash 14,599 ( 49,255 ) ( 48,929 ) Cash and cash equivalents and restricted cash at beginning of period 214,369 263,624 312,553 Cash and cash equivalents and restricted cash at end of period $ 228,968 $ 214,369 $ 263,624 See accompanying notes to consolidated financial statements. 44 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 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 fulfill short-term cash needs to consumers, with a focus on delivering an industry-leading customer experience. As of September 30, 2023, we operated a total of 1,231 locations, consisting of: • 529 United States pawn stores (operating primarily as EZPAWN or Value Pawn & Jewelry); • 549 Mexico pawn stores (operating primarily as Empeño Fácil and Cash Apoyo Efectivo); and • 153 pawn stores in Guatemala, El Salvador and Honduras (operating as GuatePrenda and MaxiEfectivo). We have an equity interest ( 43.7 % as of September 30, 2023) 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, in over 600 stores across 14 countries. Additionally, we own a preferred interest in Founders One, LLC (“Founders”) that has majority ownership in Simple Management Group, Inc. (“SMG”). 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. 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 collectability 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. As of September 30, 2023, consolidated pawn loans outstanding was $ 245.8 million, of which $ 95.5 million ( 39 %) is attributable to stores in Texas and $ 25.7 million ( 10 %) is attributable to stores in Florida. 45 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. Customer layaway deposits are recorded as liabilities when a customer provides a deposit for merchandise. Customer layaway deposits are generally refundable upon cancellation. Our customer layaway deposits balance as of September 30, 2023, 2022 and 2021 was $ 18.9 million, $ 16.0 million and $ 12.6 million, respectively, and are generally recognized as revenue within a one-year period. 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 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. 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, 2023 and 2022, inventory related to our Mexico pawn operations was $ 31.4 million and $ 29.8 million, respectively. 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 $ 0.3 million related to the acquisition of PLO del Bajio S. de. R.L. de C.V. as discussed in Note 3: Acquisitions and $ 8.1 million held in escrow pending the resolution of a pre-closing tax indemnity claim related to the sale of Grupo Finmart. 46 Table of Contents Investments We account for our investment in Cash Converters 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, 2023, 2022 and 2021 include our percentage interest in the results of Cash Converters for the twelve-month periods ended June 30, 2023, 2022 and 2021, respectively. During the first quarter of our fiscal year, 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, during the third quarter of our fiscal year, 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. Refer to Note 5: Strategic Investments for further details on our investment in Cash Converters. We account for our investment in Rich Data Corporation (“RDC”) in accordance with ASC 321, Investments — Equity Securities, and we have elected to use the measurement alternative to measure this investment at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer, if any. As of September 30, 2023 and 2022, the carrying value of our investment in RDC was $ 6.2 million. Refer to Note 5: Strategic Investments for details on our investment in Founders. Leases We determine if an arrangement contains a lease at inception. We have elected not to recognize on the balance sheet leases with terms of one year or less as a practical expedient. Operating lease assets are included in Right-of-use assets, net and financing lease assets are included in Other assets, net on the Consolidated Balance Sheets. We enter into operating lease agreements for real estate related to pawn locations and corporate offices. We have entered into financing lease agreements mainly for motor vehicles. Operating and financing 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. 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. We do not 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 operating lease portfolio consists of pawn locations and corporate offices with lease terms ranging from three to ten years , including options to renew. Our financing lease terms range from two to five years . 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. 47 Table of Contents 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 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. For cloud computing arrangements that meet the definition of a service contract, the Company capitalizes implementation costs incurred during the application development stage and until the software is ready for its intended use within Other assets, net in our Consolidated Balance Sheets and then amortizes the costs on a straight-line basis over the term of the contract. The hosting service fees are not considered an implementation cost and are treated as a prepaid expense and then the Company amortizes the costs on a straight-line basis over the term of the contract. Costs related to data conversion, training and other maintenance activities are expensed as incurred. 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. 48 Table of Contents Convertible Debt Securities On October 1, 2021, we early adopted Accounting Standards Update 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”) on a modified retrospective basis. Under ASU 2020-06, we no longer separate the convertible senior notes into liability and equity components. We recognized a cumulative effect of initially applying the ASU as an adjustment to the October 1, 2021 opening balance of retained earnings. The conversion option that was previously accounted for in equity under the cash conversion model was recombined into the convertible debt outstanding, and as a result, additional paid in capital and the related unamortized debt discount on the convertible senior notes were reduced. The removal of the remaining debt discounts recorded for this previous separation has the effect of increasing our net debt balance. The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods. Prior to our adoption of Accounting Standards Update 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”) , on October 1, 2021, we accounted for our convertible debt securities at issuance, by separating the securities into debt and equity components pursuant to the prior accounting standards for convertible debt instruments. The carrying value of the liability components were calculated by measuring the fair value of similar liabilities that did not have an associated conversion feature. The excess of the principal amount over the fair value of the liability component were recorded as a discount with a corresponding increase in additional paid-in capital. The debt discounts were accreted to “Interest expense” over the respective terms of the convertible debt securities using the effective interest method. The conversion premium of the convertible debt securities were accounted for under the treasury method in accordance with our previous accounting policy, which assumed settlement of the conversion premium (equal to the as-converted value over the face principal amount) in shares of our Class A Common Stock. 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. The cumulative translation adjustments associated with the net assets of foreign subsidiaries are the only amounts recorded in Accumulated Other Comprehensive Loss in the accompanying Consolidated Statements 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. 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 within “Store expenses” in our Consolidated Statements of Operations. These costs were $ 4.9 million, $ 2.3 million and $ 1.6 million for fiscal 2023, 2022 and 2021, respectively. During fiscal years 2023 and 2022, we incurred $ 2.9 million and $ 0.3 million, respectively, related to digital advertising. The remaining for each year relates to general advertising costs. 49 Table of Contents 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 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. We recognize forfeitures as they occur when calculating share-based compensation expense. 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 treat taxes due on future U.S. inclusions in taxable income related to Global Intangible Low-Taxed Income (“GILTI”) as a current-period expense when incurred. 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. Our policy is to release income tax effects from accumulated other comprehensive income on a segregated unit of account basis. We consider our assessment of the recognition of deferred tax assets as well as estimates of uncertain tax positions to be critical estimates. 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. Upon our adoption of ASU 2020-06 on October 1, 2021, interest charges on the convertible debt are required to be added to net income and we calculate diluted earnings per share during the period using the if-converted method. Diluted net income (loss) and diluted weighted-average shares outstanding are adjusted to account for the impact of the assumed issuance of potential common shares that are dilutive, subject to dilution sequencing rules. Dilutive potential common shares include outstanding restricted stock awards as well as shares issuable on conversion of our outstanding convertible debt securities. 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 2023, 2022 and 2021 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. Prior to our adoption of ASU 2020-06 on October 1, 2021, diluted earnings per share included the effect of dilutive potential associated with the conversion features embedded in our outstanding convertible debt using the treasury stock method. 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. 50 Table of Contents Recently Adopted Accounting Policies 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 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 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 adopted this standard as of October 1, 2021 under the modified retrospective basis. Under this transition method, prior period financial information and disclosures were not adjusted and continued 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 reduced non-cash interest expense for the year ending September 30, 2022 and 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. Impact of the Adoption of ASU 2020-06 On October 1, 2021, we early adopted ASU 2020-06 on a modified retrospective basis. Under ASU 2020-06, we no longer separate the convertible senior notes into liability and equity components. We recognized a cumulative effect of initially applying the ASU as an adjustment to the October 1, 2021 opening balance of retained earnings. The conversion option that was previously accounted for in equity under the cash conversion model was recombined into the convertible debt outstanding, and as a result, additional paid in capital and the related unamortized debt discount on the convertible senior notes were reduced. The removal of the remaining debt discounts recorded for this previous separation has the effect of increasing our net debt balance. The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods. The impact of adoption on our consolidated statements of operations for the fiscal year ended September 30, 2022 was primarily to decrease interest expense by $ 13.9 million. This had the effect of increasing both our basic and diluted earnings per share for the fiscal year ended September 30, 2022 by $ 0.19 , and $ 0.01 , respectively. Additionally, adoption of the standard requires interest charges on the convertible debt to be added to net income as well as the use of the “if-converted” method to calculate diluted earnings per common share. (in thousands) As Reported September 30, 2021 Adjustments Under ASU 2020-06 October 1, 2021 Principal $ 316,250 $ — $ 316,250 Unamortized debt discount ( 48,785 ) 48,785 — Deferred financing costs, net ( 3,279 ) ( 1,500 ) ( 4,779 ) Net carrying amount 264,186 47,285 311,471 Deferred tax asset 9,746 6,607 16,353 Deferred tax liability 3,684 ( 4,040 ) ( 356 ) Additional paid-in capital 403,312 ( 62,804 ) 340,508 Retained earnings 326,781 26,166 352,947 Recently Issued Accounting Pronouncements We reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact on our Consolidated Financial Statements. 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. 51 Table of Contents Accrued charges at September 30, 2023 and 2022 were $ 2.0 million and $ 2.2 million, respectively, and are included within Accounts payable, accrued expenses and other current liabilities in our Consolidated Balance Sheets. Accrued charges includes $ 2.0 million related to other costs at September 30, 2023 and 2022 and $ 0.2 million related to store closure costs at September 30, 2022. There were no charges recorded for fiscal years ended September 30, 2023 and 2022 and we recorded $ 0.2 million of charges for the fiscal year ended September 30, 2021 related to the closure of store operations in Peru. 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. At the time of acquisition, 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, the sellers were entitled to additional payments of up to $ 4.6 million to be paid in two payments over the following two years , contingent on the growth of the loan portfolios of the acquired stores. We had the right, in our discretion, to pay up to 50 % of any contingent payment in the form of shares of our Class A Non-Voting Common Stock. The value of the contingent consideration was included in the total consideration as the metrics were considered achievable as of the date of acquisition. Cash paid at closing was $ 11.6 million, and $ 3.8 million was paid during the fourth quarter of 2021. During the first quarter of fiscal 2022, both parties completed the formal working capital reconciliation stipulated within the purchase agreement. As part of the working capital reconciliation, the Company and the seller agreed to reduce the purchase price, which was held in restricted cash as of September 30, 2021, by $ 1.3 million. As the working capital adjustment was recorded as of September 30, 2021, this reduction to the purchase price is a measurement period adjustment, and resulted in a $ 1.3 million reduction to goodwill during the period ended December 31, 2021. This reduced the total consideration for Bajio to $ 22.3 million. As the future payments decreased, we released $ 1.3 million of the previously held $ 2.0 million in restricted cash to our unrestricted cash. Of the remaining $ 0.6 million in restricted cash as of June 30, 2022, $ 0.3 million was paid during July 2022, and the remaining $ 0.3 million is expected to be paid on or around the fifth anniversary of the date of acquisition. During the second quarter of fiscal 2022, we obtained new information about the seller's calculation of pawn service charges receivable balance as of the date of acquisition, which resulted in a $ 0.7 million measurement period adjustment to reduce pawn service charges receivable and increase goodwill. The remeasurement of the acquisition-related contingent obligation resulted in a reduction of the obligation to zero as of September 30, 2023, resulting in a $ 5.1 million reduction of the obligation with an offset recorded to “Other (income) expense” as an operating item in our consolidated statements of operations during year ended September 30, 2023. There is no remaining obligation in our Consolidated Balance Sheet as of September 30, 2023. As of September 30, 2022, the estimated fair value of the contingent obligation was $ 4.6 million and was included in “Accounts payable, accrued expenses and other current liabilities“ in our Consolidated Balance Sheets as of such date. Reductions of acquisition-related contingent obligation after the measurement period adjustment have no impact to goodwill. 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 691 Inventory 1,319 Property and equipment 2,025 Right-of-use assets 10,651 Goodwill 25,422 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 $ 22,255 52 Table of Contents Intangible assets acquired consist of indefinite-lived trade names. 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 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 fiscal year 2021, the year of 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, 2020. 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. Fiscal Year Ended September 30, (in thousands, except per share amounts) 2021 Revenue $ 748,957 Net income $ 8,828 Basic earnings per common share $ 0.16 Diluted earnings per common share $ 0.16 We did not have any material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma gross profit and net income. These pro forma amounts have been calculated after applying the Company's accounting policies and adjusting the results to reflect the additional amortization that would have been incurred assuming the amortization of the trade name had been applied from October 1, 2020. 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 . 53 Table of Contents NOTE 4: EARNINGS PER SHARE The following table reconciles the number of common shares used to compute basic and diluted earnings per common share: Fiscal Year Ended September 30, (in thousands, except per share amounts) 2023 2022 2021 Basic earnings per common share: Net Income - Basic $ 38,463 $ 50,160 $ 8,612 Weighted shares outstanding - Basic 55,586 56,498 55,744 Basic earnings per common share $ 0.69 $ 0.89 $ 0.15 Diluted earnings per common share: Net Income - Basic $ 38,463 $ 50,160 $ 8,612 Add: Convertible Notes interest expense, net of tax* 4,327 7,489 — Net Income - Diluted $ 42,790 $ 57,649 $ 8,612 Weighted shares outstanding - basic 55,586 56,498 55,744 Equity-based compensation awards - effect of dilution** 1,482 678 205 Convertible Notes - effect of dilution 23,797 25,224 — Weighted Shares Outstanding - Diluted 80,865 82,400 55,949 Diluted earnings per common share $ 0.53 $ 0.70 $ 0.15 Potential common shares excluded from the calculation of diluted earnings per share above: Convertible Notes*** 5,596 — — Restricted stock**** 801 1,975 1,233 Total 6,397 1,975 1,233 * The year ended September 30, 2023 includes $ 5.4 million gain on the partial extinguishment of debt, associated with the 2025 Convertible Notes, which was recorded to “Interest expense” in the Company’s consolidated statement of operations. See Note 9: Debt for additional information. ** Includes time-based share-based awards and performance based awards for which targets for fiscal year tranches have been achieved and vesting is subject only to achievement of service conditions. *** See Note 9: Debt for conversion price and initial conversion rate of the 2024 Convertible Notes, 2025 Convertible Notes and 2029 Convertible Notes. The 2024 Convertible Notes are considered anti-dilutive in the sequencing calculation for the fiscal year ended September 30, 2023. **** 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. 54 Table of Contents NOTE 5: STRATEGIC INVESTMENTS Cash Converters International Limited The following table presents the Company’s ownership in Cash Converters International Limited (“Cash Converters”) for the periods presented: Date of purchase Purchase amount (in thousands) Shares purchased Shares owned Ownership percentage October 1, 2021 $ 2,500 13,000,000 236,702,991 37.7 % March 10, 2022 $ 1,000 5,500,000 242,239,157 38.6 % April 5, 2022 $ 2,500 13,000,000 255,239,157 40.7 % September 15, 2022 $ 900 5,700,000 260,939,157 41.6 % November 2, 2022 $ 2,100 13,000,000 273,939,157 43.7 % In October 2021, April 2022, November 2022 and April 2023, we received cash dividends of $ 1.7 million, $ 1.7 million, $ 1.8 million and $ 1.8 million, respectively, from Cash Converters. As of September 30, 2023, we owned 273,939,157 shares, or approximately 43.7 %, 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. 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) 2023 2022 Current assets $ 189,563 $ 158,987 Non-current assets 103,595 170,798 Total assets $ 293,158 $ 329,785 Current liabilities $ 97,630 $ 59,256 Non-current liabilities 58,777 53,045 Shareholders’ equity 136,751 217,484 Total liabilities and shareholders’ equity $ 293,158 $ 329,785 Fiscal Year Ended June 30, (in thousands) 2023 2022 2021 Gross revenues $ 203,608 $ 178,215 $ 150,165 Gross profit $ 125,709 $ 116,106 $ 105,851 Net (loss) profit $ ( 65,351 ) $ 8,099 $ 12,081 Our equity in Cash Converters’s net loss was $ 28.5 million in fiscal 2023. This includes $ 32.4 million of our share of their non-cash goodwill impairment charge. Our equity in Cash Converters’s net income was $ 2.9 million and $ 4.3 million in fiscal 2022 and 2021, respectively. Cash Converters’s accumulated undistributed after-tax loss included in our consolidated retained earnings were $ 16.2 million as of September 30, 2023. At September 30, 2023, 2022 and 2021, the fair value of our investment in Cash Converters, as estimated by reference to its quoted market price per share, was greater than its carrying value. Founders One, LLC In October 2021, we invested $ 15.0 million in exchange for a non-redeemable voting participating preferred equity interest in Founders, a newly-formed entity with one other member. Founders used that $ 15.0 million to acquire an equity interest in SMG. On December 2, 2022, we contributed an additional $ 15.0 million to Founders associated with our preferred interest, which proceeds were used by Founders to acquire additional common stock in SMG. In addition, we loaned $ 15.0 million to Founders in exchange for a Demand Promissory Note secured by the common interest in Founders held by the other member. Founders then loaned that $ 15.0 million to SMG in exchange for a Subordinated Promissory Note. 55 Table of Contents We have an interest in Founders, a variable interest entity, but because the Company is not the primary beneficiary, we do not consolidate Founders. Further, as we are not the appointed manager, we do not have the ability to direct the activities of the investment entity that most significantly impact its economic performance. Consequently, our equity investment in Founders is accounted for utilizing the measurement alternative within Accounting Standards Codification (“ASC”) 321, Investments — Equity Securities. As of September 30, 2023, our $ 30.0 million carrying value of the investment and $ 15.0 million Demand Promissory Note are included in “Other investments” and “Prepaid expenses and other current assets” in our consolidated balance sheets, respectively. As of September 30, 2023, our maximum exposure for losses related to our investment in Founders was our $ 30.0 million equity investment and $ 15.0 million Demand Promissory Note plus accrued and unpaid interest. In October 2023, we contributed an additional $ 15.0 million to Founders associated with our preferred interest, for a total equity investment of $ 45.0 million. See Note 16: Subsequent Events. 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, 2023 September 30, 2023 Fair Value Measurement Using (in thousands) Level 1 Level 2 Level 3 Financial assets: 2.89 % promissory note receivable due April 2024 $ 1,251 $ 1,251 $ — $ — $ 1,251 12.00 % promissory note receivable from Founders 16,500 16,500 — — 16,500 Investments in unconsolidated affiliate 10,987 35,998 35,998 — — Financial liabilities: 2024 Convertible Notes $ 34,265 $ 35,765 $ — $ 35,765 $ — 2025 Convertible Notes 102,563 96,137 — 96,137 — 2029 Convertible Notes 223,284 224,112 — 224,112 — Carrying Value Estimated Fair Value September 30, 2022 September 30, 2022 Fair Value Measurement Using (in thousands) Level 1 Level 2 Level 3 Financial assets: 2.89 % promissory note receivable due April 2024 $ 1,215 $ 1,215 $ — $ — $ 1,215 Investments in unconsolidated affiliate 37,733 40,279 40,279 — — Financial liabilities: 2024 Convertible Notes $ 142,575 $ 157,727 $ — $ 157,727 $ — 2025 Convertible Notes 170,328 147,488 — 147,488 — Based primarily on the short-term nature of cash and cash equivalents, pawn loans, pawn service charges receivable and other liabilities, 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 liabilities 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. 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 measured the fair value of the 2024, 2025 and 2029 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. Based primarily on the short-term nature of the note, we estimate that its carrying value approximates fair value as of September 30, 2023. In December 2022, we loaned $ 15.0 million to Founders in exchange for a Demand Promissory Note secured by the common interest in Founders held by the other member. As of September 30, 2023, the interest rate on the note was 12.00 % per annum, and all principal and accrued interest is due on demand. Based primarily on the short-term nature of the note, we estimate that its carrying value approximates fair value as of September 30, 2023. In October 2023, the interest rate on the demand promissory note from Founders was increased to 15.00 % per annum. See “Note 16: Subsequent Events.” The Company remeasures its acquisition-related contingent obligation associated with the acquisition of Bajio at the end of each reporting period. This remeasurement resulted in a $ 5.1 million reduction of the obligation with an offset recorded to “Other” as an operating item in our consolidated statements of operations during year ended September 30, 2023. There is no remaining obligation in our Consolidated Balance Sheet as of September 30, 2023. As of September 30, 2022, the estimated fair value of the contingent obligation was $ 4.6 million and was included in “Accounts payable, accrued expenses and other current liabilities“ in our Consolidated Balance Sheets. 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. See “Note 12: Leases” for discussion on the non-recurring fair value adjustment related to our corporate office lease during fiscal year 2023. NOTE 7: PROPERTY AND EQUIPMENT Major classifications of property and equipment were as follows: September 30, 2023 2022 (in thousands) Carrying Amount Accumulated Depreciation Net Book Value Carrying Amount Accumulated Depreciation Net Book Value Land $ 4 $ — $ 4 $ 4 $ — $ 4 Buildings and improvements 146,687 ( 109,710 ) 36,977 123,434 ( 95,666 ) 27,768 Furniture and equipment 164,818 ( 133,870 ) 30,948 148,675 ( 120,747 ) 27,928 Software 33,952 ( 33,785 ) 167 33,803 ( 33,529 ) 274 Construction in progress — — — 751 — 751 $ 345,461 $ ( 277,365 ) $ 68,096 $ 306,667 $ ( 249,942 ) $ 56,725 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 $ 22.1 million, $ 20.4 million and $ 19.4 million for fiscal 2023, 2022 and 2021, respectively. 56 Table of Contents 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, 2023, we assessed qualitative and quantitative 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, 2023. There was no impairment charge during the fiscal year ended September 30, 2022. Accumulated goodwill impairment losses of $ 41.3 million were recorded prior to 2021 associated with the U.S. Pawn ($ 10.0 million) and Latin America Pawn ($ 31.3 million) segments because 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. 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, 2021 $ 244,471 $ 41,287 $ 285,758 Acquisitions 1,032 — 1,032 Measurement period adjustments — ( 678 ) ( 678 ) Effect of foreign currency translation changes — 716 716 Balances as of September 30, 2022 $ 245,503 $ 41,325 $ 286,828 Acquisitions 10,439 — 10,439 Effect of foreign currency translation changes — 5,105 5,105 Balances as of September 30, 2023 $ 255,942 $ 46,430 $ 302,372 During the first quarter of fiscal 2023, we acquired nine pawn stores located in Houston, Texas and one luxury pawn store in Las Vegas, Nevada for total cash consideration of $ 13.0 million , inclusive of all ancillary arrangements, of which $ 9.5 million was recorded as goodwill. During the fourth quarter of fiscal 2023, we acquired one pawn store located in Nashville, Tennessee and one store in San Antonio, Texas for total cash consideration of $ 1.9 million, inclusive of all ancillary arrangements, of which $ 0.9 million was recorded as goodwill. Th ese acquisitions expand our position in these strategic markets, a nd the luxury pawn transaction expands our offerings by providing a dedicated and targeted focus on higher-end products. These acquisitions were immaterial, individually and in the aggregate, and we have therefore omitted or aggregated certain disclosures. As of September 30, 2023, we assessed qualitative and quantitative factors and determined that it was not more-likely-than-not that the fair values of our indefinite-lived intangible assets were less than their carrying values. Based on our assessment as of September 30, 2023, no impairment charges were recorded related to intangible assets or long-lived asset groups. The following table presents the balance of each major class of intangible assets: September 30, (in thousands) 2023 2022 Non-amortizing intangible assets: Trade names $ 19,793 $ 18,591 Pawn licenses 9,535 9,535 $ 29,328 $ 28,126 Amortizing intangible assets: Internally developed software $ 89,488 $ 79,146 Accumulated amortization ( 60,628 ) ( 50,600 ) $ 28,860 $ 28,546 Other $ 2,346 $ 2,344 Accumulated amortization ( 2,318 ) ( 2,197 ) $ 28 $ 147 Intangible assets, net $ 58,216 $ 56,819 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 $ 10.0 million, $ 11.7 million and $ 11.3 million for fiscal 2023, 2022 and 2021, respectively. 57 Table of Contents A charge of $ 2.4 million was recorded during fiscal 2022 to ”General and administrative” expenses in our Consolidated Statements of Operations related to an asset write-down associated with an information technology software infrastructure migration. As of September 30, 2023, our estimate of future amortization expense for definite-lived intangible assets is as follows (in thousands): 2024 $ 8,297 2025 4,931 2026 2,976 2027 1,947 2028 1,378 Thereafter 9,359 $ 28,888 As acquisitions and dispositions occur in the future, amortization expense may vary from these estimates. NOTE 9: DEBT The following table presents the Company’s debt instruments outstanding: September 30, 2023 September 30, 2022 (in thousands) Gross Amount Debt Issuance Costs Carrying Amount Gross Amount Debt Issuance Costs Carrying Amount 2029 Convertible Notes $ 230,000 $ ( 6,716 ) $ 223,284 $ — $ — $ — 2025 Convertible Notes 103,373 ( 810 ) 102,563 172,500 ( 2,172 ) 170,328 2024 Convertible Notes 34,389 ( 124 ) 34,265 143,750 ( 1,175 ) 142,575 Total $ 367,762 $ ( 7,650 ) $ 360,112 $ 316,250 $ ( 3,347 ) $ 312,903 Less current portion 34,389 ( 124 ) 34,265 — — — Total long-term debt $ 333,373 $ ( 7,526 ) $ 325,847 $ 316,250 $ ( 3,347 ) $ 312,903 The following table presents the Company’s contractual maturities related to the debt instruments as of September 30, 2023 Schedule of Contractual Maturities (in thousands) 2029 Convertible Notes 2025 Convertible Notes 2024 Convertible Notes Total Fiscal 2024 $ — $ — $ 34,389 $ 34,389 Fiscal 2025 — 103,373 — 103,373 Fiscal 2026 — — — — Fiscal 2027 — — — — Fiscal 2028 — — — — Thereafter 230,000 — — 230,000 Total long-term debt $ 230,000 $ 103,373 $ 34,389 $ 367,762 58 Table of Contents The following table presents the Company’s interest expense related to the Convertible Notes: Fiscal Year Ended September 30, (in thousands) 2023 2022 2021 2029 Convertible Notes: Contractual interest expense $ 6,900 $ — $ — Amortization of deferred financing costs 742 — — Total interest expense $ 7,642 $ — $ — 2025 Convertible Notes: Contractual interest expense $ 2,779 $ 4,097 $ 4,097 Amortization of deferred financing costs 559 797 560 Amortization of debt discount — — 6,919 Gain on extinguishment ( 5,389 ) — — Total interest expense $ ( 2,051 ) $ 4,894 $ 11,576 2024 Convertible Notes: Contractual interest expense $ 1,609 $ 4,133 $ 4,133 Amortization of deferred financing costs 260 635 446 Amortization of debt discount — — 5,903 Loss on extinguishment 8,935 — — Total interest expense $ 10,804 $ 4,768 $ 10,482 3.750 % Convertible Senior Notes Due 2029 In December 2022, we issued $ 230.0 million aggregate principal amount of 3.750 % Convertible Senior Notes Due 2029 (the “2029 Convertible Notes”), for which $ 230.0 million remains outstanding as of September 30, 2023. The 2029 Convertible Notes were issued pursuant to an indenture dated December 12, 2022 (the “2022 Indenture”) by and between the Company and Truist Bank, as trustee. The 2029 Convertible Notes were issued in a private offering under Rule 144A under the Securities Act of 1933. The 2029 Convertible Notes pay interest semi-annually in arrears at a rate of 3.750 % per annum on June 15 and December 15 of each year, commencing June 15, 2023, and mature on December 15, 2029 (the “2029 Maturity Date”), unless converted, redeemed or repurchased in accordance with the terms prior to such date. At maturity, the holders of the 2029 Convertible Notes will be entitled to receive cash equal to the principal of the 2029 Convertible Notes plus accrued interest. The effective interest rate for fiscal 2023 was approximately 4.28 %. As of September 30, 2023, the remaining unamortized debt issuance costs will be amortized using the effective interest method through the 2029 Maturity Date assuming no early conversion. The 2029 Convertible Notes are convertible based on an initial conversion rate of 89.0313 shares of Class A Common Stock per $1,000 principal amount (equivalent to an initial conversion price of $ 11.23 per share). The conversion rate will not be adjusted for any accrued and unpaid interest. The 2029 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. Prior to June 15, 2029, the 2029 Convertible Notes will be convertible only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on March 31, 2023 (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 2022 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 2029 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 2022 Indenture. On or after June 15, 2029 until the close of business on the business day immediately preceding the 2029 Maturity Date, holders of 2029 Convertible Notes may, at their option, convert their 2029 Convertible Notes at any time, regardless of the foregoing circumstances. We may not redeem the Notes prior to December 21, 2026. At our option, we may redeem for cash all or any portion of the 2029 Convertible Notes on or after December 21, 2026, 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 2029 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. 59 Table of Contents As of September 30, 2023, the 2029 Convertible Notes were not convertible as no conditions of conversion had been met. Accordingly, the net balance of the 2029 Convertible Notes was classified as a non-current liability in our Consolidated Balance Sheets as of September 30, 2023. The classification of the 2029 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 2029 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 2029 Maturity Date, we will classify our net liability under the 2029 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 2029 Convertible Notes prior to maturity, any unamortized debt issuance costs will be recognized as expense at the time of conversion. If the entire outstanding principal amount had been converted on September 30, 2023, we would have recorded an expense associated with the conversion, comprised of $ 6.7 million of unamortized debt issuance costs. As of September 30, 2023, none of the note holders had elected to convert their 2029 Convertible Notes. The stock trading price condition and other triggers are measured on a quarter-by-quarter basis and were not met as of September 30, 2023. As of September 30, 2023, the if-converted value of the 2029 Convertible Notes did not exceed the principal amount. Note Repurchases In December 2022, we repurchased approximately $ 109.4 million aggregate principal amount of 2.875 % Convertible Senior Notes Due 2024 for approximately $ 117.5 million plus accrued interest and approximately $ 69.1 million aggregate principal amount of 2.375 % Convertible Senior Notes Due 2025 for approximately $ 62.9 million plus accrued interest and recognized a $ 3.5 million loss on extinguishment of debt recorded to “Interest expense” in our Consolidated Statement of Operations. 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”), for which $ 103.4 million remains outstanding as of September 30, 2023. The 2025 Convertible Notes were issued pursuant to an indenture dated May 14, 2018 (the “2018 Indenture”) by and between the Company and Wells Fargo Bank, National Association, as the original trustee. Effective October 1, 2019, Truist (formerly BB&T) assumed the duties and responsibilities as trustee under the 2018 Indenture. The 2025 Convertible Notes were issued in a private offering 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 mature on May 1, 2025 (the “2025 Maturity Date”), unless converted, redeemed or repurchased in accordance with the terms prior to such date. The effective interest rate for fiscal 2023 was approximately 2.88 % for the 2025 Convertible Notes. As of September 30, 2023, the remaining unamortized debt issuance costs will be amortized using the effective interest method through the 2025 Maturity Date assuming no early conversion. The 2025 Convertible Notes are convertible based on an initial conversion rate of 62.8931 shares of 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. 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. 60 Table of Contents 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 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. As of September 30, 2023, 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, 2023. 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 debt issuance costs will be recognized as expense at the time of conversion. If the entire outstanding principal amount had been converted on September 30, 2023, we would have recorded an expense associated with the conversion, comprised of $ 0.8 million of unamortized debt issuance costs. As of September 30, 2023, none of the note holders had elected to convert their 2025 Convertible Notes. The stock trading price condition and other triggers are measured on a quarter-by-quarter basis and were not met as of September 30, 2023. As of September 30, 2023, 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”), for which $ 34.4 million remains outstanding as of September 30, 2023. The 2024 Convertible Notes were issued pursuant to an indenture dated July 5, 2017 (the “2017 Indenture”) by and between the Company and Wells Fargo Bank, National Association, as the original trustee. Effective October 1, 2019, Truist (formerly BB&T) assumed the duties and responsibilities as trustee under the 2017 Indenture. The 2024 Convertible Notes were issued in a private offering 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 mature on July 1, 2024 (the “2024 Maturity Date”), unless converted, redeemed or repurchased in accordance with the terms prior to such date. At maturity, the holders of the 2024 Convertible Notes will be entitled to receive cash equal to the principal of the 2024 Convertible Notes plus accrued interest. The effective interest rate for fiscal 2023 was approximately 3.35 %. As of September 30, 2023, the remaining unamortized debt issuance costs will be amortized using the effective interest method through the 2024 Maturity Date assuming no early conversion. 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. 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 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. 61 Table of Contents 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. As of September 30, 2023, the 2024 Convertible Notes were not convertible as no conditions of conversion had been met. The 2024 Convertible Notes mature on July 1, 2024, accordingly, the balance was classified as a current liability in our Consolidated Balance Sheets as of September 30, 2023. If the note holders elect to convert their 2024 Convertible Notes prior to maturity, any unamortized debt issuance costs will be recognized as expense at the time of conversion. If the entire outstanding principal amount had been converted on September 30, 2023, we would have recorded an expense associated with the conversion, comprised of $ 0.1 million of unamortized debt issuance costs. As of September 30, 2023, none of the note holders had elected to convert their 2024 Convertible Notes. The stock trading price condition and other triggers are measured on a quarter-by-quarter basis and were not met as of September 30, 2023. As of September 30, 2023, the if-converted value of the 2024 Convertible Notes did not exceed the principal amount. NOTE 10: COMMON STOCK AND STOCK COMPENSATION Common Stock Repurchase Program On May 3, 2022, our Board of Directors (the “Board”) authorized the repurchase of up to $ 50 million of our Class A Common Stock over three years (the “Common Stock Repurchase Program”). Execution of the program will be responsive to fluctuating market conditions and valuations, liquidity needs and the expected return on investment compared to other opportunities. The amount and timing of purchases will be dependent on a variety of factors, including stock price, trading volume, general market conditions, legal and regulatory requirements, general business conditions, the level of cash flows, and corporate considerations determined by management and the Board, such as liquidity and capital needs and the availability of attractive alternative investment opportunities. The Board has reserved the right to modify, suspend or terminate the program at any time. As of September 30, 2023, we had repurchased and retired 1,627,045 shares of our Class A Common Stock for $ 14.0 million under the Common Stock Repurchase Program, of which 1,389,102 shares were repurchased and retired for $ 12.0 million during fiscal year ended September 30, 2023. The repurchase amount is allocated between “Additional paid-in capital” and “Retained earnings” in our Consolidated Balance Sheets. Other Common Stock Repurchases During December 2022, we used approximately $ 5.0 million of the net proceeds from the 2029 Convertible Notes offering to repurchase for cash 578,703 shares of our Class A Common Stock from purchasers of the notes in privately negotiated transactions. Such transactions were authorized separately from, and not considered a part of, the publicly announced Common Stock Repurchase Program discussed above. The repurchase amount is allocated between “Additional paid-in capital” and “Retained earnings” in our consolidated balance sheets. Stock Compensation We utilize equity-based awards as a long-term incentive to attract and retain qualified employees, consultants and directors and motivate them to achieve long-term goals, thereby promoting the long-term financial interests of the Company and enhancing long-term stockholder return. 2022 LTI Plan On March 1, 2022, we adopted the 2022 Long-Term Incentive Plan (the “2022 LTI Plan”), which gives us the ability to grant equity-based incentive compensation awards, in the form of restricted stock or restricted stock units, to its employees, members of the Board of Directors and consultants, independent contractors or advisors who are determined to have a direct and significant effect on the Company’s performance. The total number of shares of Class A Common Stock that may be issued pursuant to awards under the 2022 LTI Plan (“Authorized Shares”) is such number that is from time to time approved by the holder of the Company’s Class B Voting Common Stock (the “Voting Stockholder”). At the time the 2022 LTI Plan was adopted, 400,000 shares of our Class A Common Stock were added as Authorized Shares. That number was increased to 1,900,000 in October 2022 and to 3,300,000 in November 2023. At any time, the number of shares that are available for issuance under future awards (“Available Shares”) is equal to the number of Authorized Shares reduced by the number of shares previously issued and the number of shares that may be issued under outstanding awards. The number of Available Shares is increased for shares covered by awards that are forfeited, cancelled or otherwise terminated without the issuance of shares or shares that are withheld at the request of a participant to satisfy such participant’s tax withholding obligations. 62 Table of Contents The 2022 LTI Plan is administered by the People and Compensation Committee of the Board of Directors (the “Committee”). The Committee generally determines and recommends the type, recipient, amount and terms for all awards issued under the 2022 LTI Plan, but each award issuance requires the approval of the full Board of Directors. Restricted stock awards are generally subject to continued service over a specified period (typically one -to- three years ) and expensed straight-line over the service period. Restricted stock units are generally subject to the achievement of performance goals in addition to continued service, and they are expensed, on a tranche-by-tranche basis, ratably over the service period beginning with the start of the measurement of performance. 2010 LTI Plan The 2022 LTI Plan replaced the 2010 Long-Term Incentive Plan (the “2010 LTI Plan”) for all long-term incentive awards issued from and after January 1, 2022. The 2010 LTI Plan remains effective, but only with respect to LTI awards issued and outstanding as of December 31, 2021, and any authorized but unissued shares remaining in the 2010 LTI Plan are available only to satisfy such awards. Under the 2010 LTI Plan, we granted awards of restricted stock or restricted stock units to employees and non-employee directors. Awards granted to employees were typically subject to performance and service conditions. Awards granted to non-employee directors were time-based awards subject only to service conditions. Awards were 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 Immediately after our 2023 Annual Meeting of Stockholders in March 2023, we granted each of the five non-employee directors a restricted stock award covering 18,038 shares ( 90,190 shares in total). Those shares are scheduled to vest on the day immediately preceding the 2024 Annual Meeting of Stockholders (but in no event later than March 31, 2024), subject only to service conditions. In March 2022, we granted each of the five non-employee directors a restricted stock award covering 26,490 shares ( 132,450 shares in total). Those shares vested on the day immediately preceding the 2023 Annual Meeting of Stockholders in March 2023. In February 2021, we granted each of the four non-employee directors serving at that time a restricted stock award covering 31,936 shares ( 127,744 shares in total). Those shares vested on the day immediately preceding our 2022 Annual Meeting of Stockholders in March 2022. In December 2020, we granted each of the nine non-employee directors serving at that time a restricted stock award covering 15,905 shares ( 143,145 shares in total). 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. Employee Awards FY23 Awards — In October 2022, we granted restricted stock unit awards covering a total of 912,524 shares to our executive officers and other key employees. These awards were issued as part of our annual LTI program for fiscal 2023. The awards have a three-year performance period consisting of fiscal 2023, fiscal 2024 and fiscal 2025. For each award, 60 % of the total number of shares was allocated equally among the three fiscal years in the performance period ( 20 % each), with each tranche having separate performance conditions. In addition, 20 % of the total number of shares was allocated to a three-year cumulative performance condition applicable to the entire three-year performance period, and 20 % was subject only to continued service. The number of shares available to vest from each performance-based tranche can range from 0 to 150 % and is dependent on the achievement of the performance conditions for that tranche. All of the performance-based shares that become available to vest based on the achievement of the performance conditions, along with the time-based tranche, will vest on September 30, 2025, so long as the recipient continues active employment with the Company through that date. Performance targets for the fiscal 2023 tranche and the three-year cumulative tranche were determined and communicated at the time of grant. Grant dates for the fiscal 2024 and fiscal 2025 tranches will be determined when the applicable performance targets are established for those tranches. As of September 30, 2023, we considered the performance targets for the fiscal 2023 tranche to be probable of achievement at the 147.3 % level and the cumulative performance target for the three-year cumulative tranche to be probable of achievement at the 100 % level. During fiscal 2023, we granted restricted stock unit awards covering an additional 8,036 shares to key employees in connection with promotions or new hires. These additional awards carry the same terms as those granted in October 2022. 63 Table of Contents FY22 Awards — In October and November 2021, we granted restricted stock unit awards covering a total of 981,327 shares to our executive officers and other key employees. These awards were issued as part of our annual LTI program for fiscal 2022. The awards have a three-year performance period consisting of fiscal 2022, fiscal 2023 and fiscal 2024. 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, 2024, so long as the recipient continues active employment with the Company through that date. Performance targets for the fiscal 2022 tranche were determined and communicated at the time of grant. Grant dates for the other two tranches will be determined when the applicable performance targets are established for these tranches. As of September 30, 2022, we considered the performance targets for the fiscal 2022 tranche to be probable of achievement at the 150 % level, and as of September 30, 2023, we considered the performance targets for the fiscal 2023 tranche to be probable of achievement at the 147.3 % level. During fiscal 2022, we granted restricted stock unit awards covering an additional 161,265 shares to executive officers and other key employees in connection with promotions or new hires. These additional awards carry the same terms as those granted in October and November 2021. In October 2021, we granted a restricted stock award covering 29,722 to an executive officer as a special performance and retention award. This awards vests ratably over three years (fiscal 2022, fiscal 2023 and fiscal 2024), subject only to continued service. FY21 Awards — In February 2021, we granted restricted stock units covering a total of 1,177,214 shares to our executive officers and other key 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, so long as the recipient continues active employment with the Company through that date. Performance targets for the fiscal 2021 tranche were determined and communicated in February 2021, and performance targets for the fiscal 2022 tranche were determined and communicated in October 2021. The grant date for the fiscal 2023 tranche will be determined when the applicable 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 150 % level, as of September 30, 2022, we considered the performance targets for the fiscal 2022 tranche to be probable of achievement at the 150 % level, and as of September 30, 2023, we considered the performance targets for the fiscal 2023 tranche to be probable of achievement at the 135.4 % level. During fiscal 2021, we granted restricted stock unit awards covering an additional 4,722 shares of restricted stock to employees in connection with promotions or new hires. These additional awards carry the same terms as those granted in February 2021. FY20 Awards — In January 2020, the Committee approved restricted stock unit awards for executive officers and key employees, but did not finalize the performance targets at that time. In January 2021, the Committee approved the applicable performance targets and we granted restricted stock unit awards covering a total of 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, so long as the recipient continues active employment with the Company through that date. Performance targets for the fiscal 2021 tranche were communicated in January 2021, and performance targets for the fiscal 2022 tranche were determined and communicated in October 2021. As of September 30, 2021, we considered the performance targets for the fiscal 2021 tranche to be probable of achievement at the 100 % level, and as of September 30, 2022, we considered the performance targets for the fiscal 2022 tranche to be probably of achievement at the 100 % level. All of these awards vested in November 2022, after the Committee determined that the performance condition had been met. FY19 Awards — In December 2018, we granted restricted stock unit awards covering a total of 971,615 shares to executive officers and other key 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. During fiscal 2021, we granted restricted stock unit awards covering an additional 61,138 shares of restricted stock to employees in connection with promotions or new hires. These additional awards carried the same terms as those granted in December 2018. All of these awards vested in November 2021, after the Committee determined that the performance condition had been met. 64 Table of Contents As of September 30, 2023, the unamortized fair value of share awards to be amortized over their remaining vesting periods was approximately $ 10.6 million. The weighted-average period over which these costs will be amortized is approximately two years . The following table presents amounts related to our stock compensation arrangements: Fiscal Year Ended September 30, (in thousands) 2023 2022 2021 Share-based compensation costs $ 9,539 $ 5,053 $ 3,946 Income tax (benefit) expense on share-based compensation ( 1,125 ) ( 557 ) 561 The following table presents a summary of stock compensation activity: Shares Weighted Average Grant Date Fair Value Outstanding as of September 30, 2022 2,113,323 $ 5.88 Granted 1,010,750 7.82 Released (a) ( 490,145 ) 4.94 Cancelled ( 78,029 ) 6.70 Outstanding as of September 30, 2023 2,555,899 $ 6.80 (a) 118,011 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) 2023 2022 2021 Weighted average grant date fair value per share granted (a) $ 7.82 $ 7.24 $ 4.92 Total market value of shares released $ 4.7 $ 3.7 $ 3.4 (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 before income taxes, including inter-segment amounts: Fiscal Year Ended September 30, (in thousands) 2023 2022 2021 Domestic* $ 26,209 $ 49,937 $ 2,320 Foreign 25,424 17,776 13,742 $ 51,633 $ 67,713 $ 16,062 * Includes the majority of our corporate administrative costs. See Note 14: Segment Information for information pertaining to segment contribution. 65 Table of Contents The following table presents the significant components of the income tax provision: Fiscal Year Ended September 30, (in thousands) 2023 2022 2021 Current: Federal $ 18,753 $ 9,465 $ ( 479 ) State and foreign 7,219 3,143 4,646 25,972 12,608 4,167 Deferred: Federal ( 11,182 ) 983 3,202 State and foreign ( 1,620 ) 3,962 81 ( 12,802 ) 4,945 3,283 Total income tax expense $ 13,170 $ 17,553 $ 7,450 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) 2023 2022 2021 Income tax expense (benefit) at the federal statutory rate $ 10,843 $ 14,223 $ 3,374 State taxes, net of federal benefit 1,814 1,728 931 Mexico inflation adjustment ( 1,787 ) ( 2,089 ) ( 1,217 ) Non-deductible items 2,655 1,705 2,087 Foreign rate differential 2,381 1,306 1,111 Change in valuation allowance 311 660 ( 137 ) Stock compensation ( 62 ) ( 161 ) 293 Uncertain tax positions ( 174 ) ( 2,025 ) 208 Deferred tax true-up ( 165 ) 3,811 896 Dividends received deduction ( 754 ) ( 699 ) — Non-deductible loss on debt restructuring 1,710 — — U.S. GAAP/statutory book adjustments ( 1,143 ) — — Other ( 2,459 ) ( 906 ) ( 96 ) Total income tax expense $ 13,170 $ 17,553 $ 7,450 Effective tax rate 26 % 26 % 46 % The following table shows significant components of our deferred tax assets and liabilities: September 30, (in thousands) 2023 2022 Deferred tax assets: Cash Converters $ 20,364 $ 14,299 Tax over book inventory 8,186 7,942 Accrued liabilities 11,043 8,384 Pawn service charges receivable 2,764 2,507 Stock compensation 1,645 887 Foreign tax credit 1,696 1,696 State and foreign net operating loss carryforwards 14,547 16,220 Book over tax depreciation 7,298 5,574 Other 7,612 3,943 Total deferred tax assets before valuation allowance 75,155 61,452 Valuation allowance ( 16,885 ) ( 17,966 ) Total deferred tax assets, net 58,270 43,486 Deferred tax liabilities: Tax over book amortization 30,906 29,663 Prepaid expenses 2,097 2,051 Total deferred tax liabilities 33,003 31,714 Net deferred tax asset $ 25,267 $ 11,772 66 Table of Contents As of September 30, 2023, we had state net operating loss carryforwards of approximately $ 25.9 million, which begin to expire in 2024 if not utilized. We also had foreign net operating loss carryforwards of $ 52.7 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 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 decreased by $ 1.1 million in fiscal 2023, primarily due to the expiration of the statute of limitations on certain state NOL’s for which a valuation allowance had been recorded as well as a reduction of fully reserved net operating loss carryforward and other deferred tax assets in Canada. 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. Deferred taxes are not provided for undistributed earnings of foreign subsidiaries of approximately $ 99.8 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 $ 5.0 million as of September 30, 2023. 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) 2023 2022 2021 Beginning balance $ 3,568 $ 4,763 $ 3,085 Increase for tax positions taken during a prior period 396 547 2,135 Decrease for settlement for tax positions taken during a prior period ( 259 ) — — Decrease for tax positions as a result of the lapse of the statute of limitations ( 412 ) ( 1,742 ) ( 457 ) Ending balance $ 3,293 $ 3,568 $ 4,763 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 $ 0.8 million of foreign uncertain tax positions. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During 2023, the Company recognized income tax expense of $ 0.2 million offset by the reversal of previously accrued interest and penalties of $ 0.4 million due to the lapse of the statute of limitations on the associated tax position and an income tax benefit of $ 0.8 million during 2022 and an income tax expense of $ 0.3 million during 2021, related to interest and penalties. The total amount of accrued interest and penalties was $ 0.7 million, $ 1.0 million and $ 1.8 million in 2023, 2022 and 2021, 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, 2016. We believe that adequate provisions have been made for any adjustments that may result from tax examinations. 67 Table of Contents NOTE 12: LEASES The table below presents balances of our lease assets and liabilities and their balance sheet locations for both operating and financing leases: (in thousands) September 30, 2023 September 30, 2022 Lease assets: Operating lease right-of-use assets Right-of-use assets, net $ 234,388 $ 221,405 Financing lease assets Other assets, net 2,178 181 Total lease assets $ 236,566 $ 221,586 Lease liabilities: Current: Operating lease liabilities Operating lease liabilities, current $ 57,182 $ 52,334 Financing lease liabilities Accounts payable, accrued expenses and other current liabilities 530 37 Total current lease liabilities $ 57,712 $ 52,371 Non-current: Operating Lease liabilities Operating lease liabilities $ 193,187 $ 180,756 Financing lease liabilities Other long-term liabilities 1,715 148 Total non-current lease liabilities $ 194,902 $ 180,904 Total lease liabilities $ 252,614 $ 233,275 The table below provides major components of our lease costs: Fiscal Year Ended September 30, (in thousands) 2023 2022 2021 Operating lease cost: Operating lease cost * $ 74,086 $ 67,414 $ 61,980 Variable lease cost 16,315 15,229 13,000 Total operating lease cost $ 90,401 $ 82,643 $ 74,980 Financing lease cost: Amortization of financing lease assets $ 327 $ 3 $ — Interest on financing lease liabilities 145 1 — Total financing lease cost $ 472 $ 4 $ — Total lease cost $ 90,873 $ 82,647 $ 74,980 * Includes a reduction for sublease rental income of $ 3.7 million, $ 3.6 million and $ 3.4 million for fiscal years ending September 2023, 2022 and 2021, respectively. Lease expense is recognized on a straight-line basis over the lease term with variable lease expense recognized in the period in which the costs are incurred. The components of lease expense are included in “Store expenses” and “General and administrative” expense, based on the underlying lease use. Cash paid for operating leases was $ 76.7 million and $ 72.3 million for the fiscal years ended September 30, 2023 and 2022, respectively. Cash paid for principal and interest on finance leases was $ 0.3 million and $ 0.1 million, respectively, for the fiscal year ended September 30, 2023. There was no cash paid for finance leases for the fiscal years ended September 30, 2022 and 2021. 68 Table of Contents The weighted- average term and discount rates for leases are as follows: Fiscal Year Ended September 30, 2023 2022 Weighted-average remaining lease term (years): Operating leases 4.97 5.12 Financing leases 3.67 4.10 Weighted-average discount rate: Operating leases 8.51 % 8.32 % Financing leases 11.14 % 11.14 % As of September 30, 2023, maturities of lease liabilities under ASC 842 by fiscal year were as follows (in thousands): Operating Leases Financing Leases Fiscal 2024 $ 75,510 $ 780 Fiscal 2025 66,798 751 Fiscal 2026 55,735 751 Fiscal 2027 41,903 450 Fiscal 2028 27,005 — Thereafter 40,592 — Total lease liabilities $ 307,543 $ 2,732 Less: portion representing Imputed interest 57,174 487 Total net lease liabilities $ 250,369 $ 2,245 Less: current portion 57,182 530 Total long term net lease liabilities $ 193,187 $ 1,715 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 $ 24.4 million as of September 30, 2023. As of September 30, 2023, we have subleases in place for a portion of our corporate operating office lease for estimated minimum future sublease payments of approximately $ 6.3 million. We assessed the recoverability of the right-of-use asset for our corporate office, primarily due to the termination of a significant sublease. We determined the undiscounted cash flows of the relative corporate lease and sublease did not exceed the net book value of the right-of-use asset. We then determined the fair value of the corporate lease and sublease did not exceed the book value of the right-of-use asset, and an impairment charge of $ 4.3 million was recorded in fiscal year 2023 to “Impairment of other assets” in the Consolidated Statements of Operations. The following table presents our corporate office lease measured at fair value as a result of the aforementioned impairment charges aggregated by the level in the fair value hierarchy within which measurements fall on a non-recurring basis at September 30, 2023, and the related impairment charge recorded (in thousands): Fair Value as of September 30, 2023 Fiscal Year Ended 2023 Level 1 Level 2 Level 3 Total Impairment Charges Corporate office $ — $ — $ 6,233 $ 6,233 $ 4,343 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. During the fourth quarter of fiscal 2022, the Miami office lease and sublease were terminated with no fees, and the deposit to the subtenant was returned. We recorded $ 66.5 million and $ 69.4 million in non-cash additions to our operating right-of-use assets and lease liabilities for the fiscal year ended September 30, 2023 and 2022, respectively. We recorded $ 2.5 million in non-cash additions to our finance right-of-use assets and lease liabilities for the year ended September 30, 2023. 69 Table of Contents 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, and the amount of resulting loss may differ from these estimates. 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 four 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. 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. • Cash Converters — Represents our equity interest in the net loss (income) of Cash Converters. Our equity in Cash Converters’s net loss was $ 28.5 million in fiscal 2023, which includes $ 32.4 million of our share of their non-cash goodwill impairment charge. As a result of this one-time impairment charge, our share of the absolute value of Cash Converters’s reported loss meets the 10 percent threshold to be considered its own reporting segment. Our equity in their net income was $ 2.9 million and $ 4.3 million for fiscal 2022 and 2021, respectively. Refer to Note 5: Strategic Investments and Note 6: Fair Value Measurements for additional details on our investment in Cash Converters. • Other Investments — Represents our investment in RDC and our investment in and notes receivable from Founders. There are no inter-segment revenues presented below, and the amounts below were determined in accordance with the same accounting principles used in our consolidated financial statements. 70 Table of Contents The following income (loss) before income taxes tables present revenue for each reportable segment, disaggregated revenue within our reportable segments and Corporate, segment profits and segment contribution. We have continued to include the Cash Converters reporting segment within the “Other Investments” columns below as the investments in RDC and Founders do not have a material impact on our statements of operations due to the investments being accounted for under the measurement alternative within ASC 321. Fiscal Year Ended September 30, 2023 (in thousands) U.S. Pawn Latin America Pawn Other Investments Total Segments Corporate Items Consolidated Revenues: Merchandise sales $ 432,578 $ 182,868 $ — $ 615,446 $ — $ 615,446 Jewelry scrapping sales 43,305 6,223 — 49,528 — 49,528 Pawn service charges 285,919 97,853 — 383,772 — 383,772 Other revenues 119 121 55 295 — 295 Total revenues 761,921 287,065 55 1,049,041 — 1,049,041 Merchandise cost of goods sold 267,874 126,905 — 394,779 — 394,779 Jewelry scrapping cost of goods sold 37,709 6,715 — 44,424 — 44,424 Gross profit 456,338 153,445 55 609,838 — 609,838 Segment and corporate expenses (income): Store expenses 299,319 119,255 — 418,574 — 418,574 General and administrative — ( 3 ) — ( 3 ) 67,532 67,529 Impairment of other assets — — — — 4,343 4,343 Depreciation and amortization 10,382 9,191 — 19,573 12,558 32,131 Loss (gain) on sale or disposal of assets and other 115 ( 289 ) — ( 174 ) 382 208 Other income — ( 5,097 ) — ( 5,097 ) — ( 5,097 ) Interest expense — — — — 16,456 16,456 Interest income ( 2 ) ( 1,139 ) ( 1,500 ) ( 2,641 ) ( 4,829 ) ( 7,470 ) Equity in net loss of unconsolidated affiliates — — 28,459 28,459 — 28,459 Other (income) expense — ( 131 ) 31 ( 100 ) 3,172 3,072 Segment contribution $ 146,524 $ 31,658 $ ( 26,935 ) $ 151,247 Income (loss) before income taxes $ 151,247 $ ( 99,614 ) $ 51,633 71 Table of Contents Fiscal Year Ended September 30, 2022 (in thousands) U.S. Pawn Latin America Pawn Other Investments Total Segments Corporate Items Consolidated Revenues: Merchandise sales $ 391,958 $ 140,928 $ — $ 532,886 $ — $ 532,886 Jewelry scrapping sales 25,739 6,294 — 32,033 — 32,033 Pawn service charges 240,982 79,883 — 320,865 — 320,865 Other revenues 83 247 111 441 — 441 Total revenues 658,762 227,352 111 886,225 — 886,225 Merchandise cost of goods sold 230,241 99,141 — 329,382 — 329,382 Jewelry scrapping cost of goods sold 22,755 5,941 — 28,696 — 28,696 Gross profit 405,766 122,270 111 528,147 — 528,147 Segment and corporate expenses (income): Store expenses 266,114 91,303 — 357,417 — 357,417 General and administrative — — — — 64,342 64,342 Depreciation and amortization 10,552 7,913 — 18,465 13,675 32,140 Loss (gain) on sale or disposal of assets 51 ( 37 ) — 14 ( 688 ) ( 674 ) Interest expense — — — — 9,972 9,972 Interest income ( 2 ) ( 815 ) — ( 817 ) — ( 817 ) Equity in net income of unconsolidated affiliates — — ( 1,779 ) ( 1,779 ) — ( 1,779 ) Other (income) expense — ( 148 ) 52 ( 96 ) ( 71 ) ( 167 ) Segment contribution $ 129,051 $ 24,054 $ 1,838 $ 154,943 Income (loss) before income taxes $ 154,943 $ ( 87,230 ) $ 67,713 Fiscal Year Ended September 30, 2021 (in thousands) U.S. Pawn Latin America Pawn Other Investments 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 Gross profit 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 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 loss 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) before income taxes $ 107,209 $ ( 91,147 ) $ 16,062 72 Table of Contents The following table presents separately identified segment assets: (in thousands) U.S. Pawn Latin America Pawn Cash Converters Other Investments Corporate Total Assets as of September 30, 2023 Pawn loans $ 190,624 $ 55,142 $ — $ — $ — $ 245,766 Pawn service charges receivable, net 34,318 4,567 — — — 38,885 Inventory, net 128,901 37,576 — — — 166,477 Total assets 984,539 313,164 10,987 52,720 106,301 1,467,711 Assets as of September 30, 2022 Pawn loans $ 163,484 $ 46,525 $ — $ — $ — 210,009 Pawn service charges receivable, net 29,441 4,035 — — — 33,476 Inventory, net 114,951 36,664 — — — 151,615 Total assets 872,959 258,702 37,733 3,601 174,883 1,347,878 The following tables provide geographic information: Fiscal Year Ended September 30, (in thousands) 2023 2022 2021 Revenues: United States $ 761,921 $ 658,762 $ 553,581 Mexico 223,765 173,122 128,773 Other Latin America 63,300 54,230 46,777 Canada and other 55 111 420 Total revenues $ 1,049,041 $ 886,225 $ 729,551 September 30, (in thousands) 2023 2022 Property and equipment, net: United States $ 37,695 $ 32,594 Mexico 24,033 $ 19,805 Other Latin America 6,368 $ 4,326 Property and equipment, net $ 68,096 $ 56,725 73 Table of Contents 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) 2023 2022 Gross pawn service charges receivable $ 50,881 $ 44,192 Allowance for uncollectible pawn service charges receivable ( 11,996 ) ( 10,716 ) Pawn service charges receivable, net $ 38,885 $ 33,476 Gross inventory $ 169,138 $ 153,673 Inventory reserves ( 2,661 ) ( 2,058 ) Inventory, net $ 166,477 $ 151,615 Prepaid expenses and other $ 4,106 $ 8,336 Accounts receivable, notes receivable and other 30,548 8,435 Income taxes prepaid and receivable 4,969 17,923 Prepaid expenses and other current assets $ 39,623 $ 34,694 Accounts payable $ 23,022 $ 24,056 Accrued payroll 11,472 8,365 Incentive accrual 18,544 17,403 Other payroll related expenses 5,262 9,592 Accrued sales and VAT taxes 5,565 7,279 Accrued income taxes payable 2,628 2,663 Other current liabilities 15,112 15,151 Account payable, accrued expenses and other current liabilities $ 81,605 $ 84,509 Unrecognized tax benefits, non-current $ 2,226 $ 2,241 Other non-current liabilities 8,276 6,508 Other long-term liabilities $ 10,502 $ 8,749 Valuation and Qualifying Accounts The following table provides information on our valuation and qualifying accounts not disclosed elsewhere: (in thousands) Balance at Beginning of Period Charged to Expense Deductions Balance at End of Period Allowance for valuation of inventory: Year Ended September 30, 2023 $ 2,058 $ 603 $ — $ 2,661 Year Ended September 30, 2022 4,311 — 2,253 2,058 Year Ended September 30, 2021 12,314 — 8,003 4,311 Allowance for uncollectible pawn service charges receivable: Year Ended September 30, 2023 $ 10,716 $ 1,280 $ — $ 11,996 Year Ended September 30, 2022 8,023 2,693 — 10,716 Year Ended September 30, 2021 6,679 1,344 — 8,023 Allowance for valuation of deferred tax assets: Year Ended September 30, 2023 $ 17,966 $ 311 $ 1,392 $ 16,885 Year Ended September 30, 2022 19,135 660 1,829 17,966 Year Ended September 30, 2021 18,524 611 — 19,135 74 Table of Contents The following table provides supplemental disclosure of Consolidated Statements of Cash Flows information: Fiscal Year Ended September 30, (in thousands) 2023 2022 2021 Supplemental disclosure of cash flow information Cash and cash equivalents $ 220,595 $ 206,028 $ 253,667 Restricted cash 8,373 8,341 9,957 Total cash and cash equivalents and restricted cash $ 228,968 $ 214,369 $ 263,624 Cash paid during the period for interest $ 11,143 $ 8,230 $ 8,230 Cash paid during the period for income taxes, net $ 11,415 $ 15,899 $ 3,696 Non-cash investing and financing activities: Pawn loans forfeited and transferred to inventory $ 330,947 $ 300,487 $ 212,756 Transfer of consideration for other investment — 1,500 — Transfer of equity consideration for acquisition 99 — 1,545 Acquisition earn-out contingency 2,000 — 4,608 Accrued acquisition consideration 1,412 — 1,986 NOTE 16: SUBSEQUENT EVENTS In October 2023, we contributed an additional $ 15.0 million to Founders associated with our preferred equity interest, bringing our total equity investment in Founders to $ 45.0 million. Additionally, the interest rate on our $ 15.0 million demand promissory note from Founders was increased to 15.00 % per annum. In October 2023, we received a cash dividend of $ 1.7 million from Cash Converters. 75 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.