What changed in this filing

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Item 1. Business

2024-02-05 compared with 2023-02-06 · 226 added, 214 removed, 303 unchanged (59% of the section changed)

FirstCash Holdings, Inc., along with its wholly owned subsidiaries (together, the “Company”), is the leading operator of pawn stores in the U.S.

and Latin America, and, following its acquisition of AFF in December 2021 (the “AFF Acquisition”), is a leading provider of technology-driven, retail point-of-sale (“POS”) payment solutions focused on serving credit-constrained consumers.

and Latin America and is also a leading provider of technology-driven, retail point-of-sale (“POS”) payment solutions focused on serving credit-constrained consumers in the U.S and Puerto Rico.

The Company operates two business lines, pawn operations and retail POS payment solutions, which are organized into three reportable segments.

pawn segment consists of all pawn operations in 25 U.S.

states and the District of Columbia, while the Latin America pawn segment consists of all pawn operations in Mexico, Guatemala, Colombia and El Salvador.

The retail POS payment solutions segment consists of the operations of AFF in all 50 states in the U.S., the District of Columbia and Puerto Rico.

The Company’s primary business line continues to be the operation of retail pawn stores, also known as “pawnshops,” which focus on serving cash and credit-constrained consumers.

pawn segment consists of pawn operations in 29 U.S.

states and the District of Columbia, while the Latin America pawn segment consists of pawn operations in Mexico, Guatemala, Colombia and El Salvador.

The retail POS payment solutions segment consists of the operations of American First Finance, LLC (“AFF”) in all 50 states in the U.S., the District of Columbia and Puerto Rico.

The Company’s primary line of business is the operation of retail pawn stores, also known as “pawnshops,” which focus on serving cash and credit-constrained consumers.

As of December 31, 2023, the Company operated almost 3,000 pawnshops across its network.

Pawn stores help customers meet small, short-term cash needs by providing non-recourse pawn loans and buying merchandise directly from customers.

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Net revenues (gross profit) from pawn operations comprised 82% of consolidated net revenues in 2023.

The Company’s retail POS payment solutions business line consists solely of the operations of AFF, which focuses on LTO products and facilitating other retail financing payment options across a large network of traditional and e-commerce merchant partners.

The Company’s retail POS payment solutions business line consists solely of the operations of AFF, which it acquired in 2021 (the “AFF Acquisition”).

AFF focuses on LTO products and facilitating other retail financing payment options across a large network of traditional and e-commerce merchant partners.

AFF’s retail partners provide consumer goods and services to their customers and use AFF’s LTO and retail finance solutions to facilitate payments on such transactions.

As one of the largest omni-channel providers of “no credit required” payment options, AFF’s technology set provides consumers with seamless leasing and financing experiences in-store, online, in-cart and on mobile devices.

The accompanying audited consolidated results of operations for the year ended December 31, 2022 includes the results of operations for AFF while the comparable prior-year period includes the results of operations for AFF for the period December 17, 2021 to December 31, 2021, affecting the comparability of 2022 and 2021 amounts.

See Note 3 of Notes to Consolidated Financial Statements for additional information about the AFF Acquisition.

The accompanying audited consolidated results of operations for the year ended December 31, 2023 and 2022 include the results of operations for AFF for the full respective period, while the comparable 2021 period includes the results of operations for AFF for the period December 17, 2021 to December 31, 2021, affecting the comparability of 2023 and 2022 amounts to 2021 amounts.

The Company’s principal executive offices are located at 1600 West 7th Street, Fort Worth, Texas 76102, and its telephone number is (817) 335-1100.

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The pawn industry in the U.S.

is well established, with the highest concentration of pawn stores located in states that have favorable customer demographics and maintain regulations most conducive to profitable pawn operations.

Generally, these states are located in the Southeast, Midwest and Southwest regions of the country, which is where the majority of the Company’s U.S.

is well established, with the highest concentration of pawn stores located in states that have favorable customer demographics, high population growth and maintain regulations most conducive to profitable pawn operations.

Generally, these states are located in the Southeast, Midwest, Southwest and Mountain West regions of the country, which is where the majority of the Company’s U.S.

stores are located.

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The Company also melts certain quantities of scrap jewelry and sells the gold, silver and diamonds in the commodity markets.

Merchandise sales accounted for 50% of the Company’s revenue during 2022.

Merchandise sales accounted for 48% of the Company’s consolidated revenue during 2023.

Merchandise inventory is acquired primarily through forfeited pawn loan collateral and, to a lesser extent, through purchases of used goods directly from the general public.

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Merchandise acquired by the Company through forfeited pawn loan collateral is carried in inventory at the amount of the related pawn loan, exclusive of any accrued service fees, and purchased inventory is carried at cost.

Beginning in the third quarter of 2022, the Company offers a LTO payment option at its U.S.

pawn stores through AFF (as further described below).

In addition, customers can purchase merchandise on an interest-free “layaway” plan.

Retail customers can use cash or credit cards for retail purchases or can purchase merchandise on an interest-free “layaway” plan.

Should the customer fail to make a required payment pursuant to a layaway plan, the item is returned to inventory and all or a portion of previous payments are typically forfeited to the Company.

Deposits and interim payments from customers on layaway sales are recorded as deferred revenue and subsequently recorded as retail merchandise sales revenue when the merchandise is delivered to the customer upon receipt of final payment or when previous payments are forfeited to the Company.

Retail sales are seasonally highest in the fourth quarter, associated with holiday shopping and, to a lesser extent, in the first quarter associated with tax refunds in the U.S.

Pawn Lending Activities

The Company’s pawn store locations make pawn loans to their customers in order to help them meet instant or short-term cash needs.

All pawn loans are collateralized by personal property such as jewelry, electronics, tools, appliances, sporting goods and musical instruments.

In addition, the Company offers a LTO option at its U.S.

pawn stores through AFF (as further described below).

Retail sales are seasonally highest in the fourth quarter, associated with holiday shopping, and, to a lesser extent, in the first quarter, due to tax refund proceeds received by customers in the U.S.

The Company’s pawn store locations make pawn loans to customers in order to help them meet instant or short-term cash needs.

All pawn loans are collateralized by personal property such as jewelry, electronics, tools, appliances, sporting goods, musical instruments and other items.

The pledged collateral provides the only security to the Company for the repayment of the loan.

The Company does not investigate the creditworthiness of the borrower, primarily relying instead on the marketability and sales value of pledged goods as a basis for its credit decision.

The Company does not investigate the creditworthiness of the borrower, primarily relying instead on the marketability and expected sales value of pledged goods as a basis for the amount loaned.

Pawn loans are non-recourse loans, and a customer does not have a legal obligation to repay a pawn loan.

There is no collections process and the decision to not repay the loan will not affect the customer’s credit score with any credit reporting agency.

There is no collections process, and the decision to not repay the loan will not affect the customer’s credit score with any credit reporting agency and rarely affects their ability to obtain a subsequent pawn loan from the Company.

The average amount of a pawn loan at December 31, 2023 was $258 in the U.S.

and $95 in Latin America.

At the time a pawn loan transaction is entered into, an agreement or pawn contract, commonly referred to as a “pawn ticket,” is presented to the borrower for signature that includes, among other items, the borrower’s name and identification information, a description of the pledged goods, amount financed, pawn service fee, maturity date, total amount that must be paid to redeem the pledged goods on the maturity date and the annual percentage rate.

The term of a pawn loan is typically 30 days plus an additional grace period of 14 to 90 days, depending on geographic markets and local or state regulations.

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As required by applicable law, the amounts of these charges are disclosed to the customer on the pawn ticket.

Pawn loan fees accounted for 21% of the Company’s revenue during 2022.

Pawn loan fees accounted for 21% of the Company’s consolidated revenue during 2023.

The amount the Company is willing to finance for a pawn loan is primarily based on a percentage of the estimated retail value of the collateral.

There are no minimum or maximum pawn loan to fair market value restrictions in connection with the Company’s lending activities.

In order to estimate the value of the collateral, the Company utilizes its proprietary point-of-sale and loan management system to recall recent selling prices of similar merchandise in its own stores.

In order to estimate the value of the collateral, the Company utilizes its proprietary POS and loan management system to recall recent selling prices of similar merchandise in its own stores.

The basis for the Company’s determination of the retail value also includes such sources as precious metals spot markets, catalogs, blue books, online auction sites and retailer advertisements.

These sources, together with the employees’ skills and experience in selling similar items of merchandise in particular stores, influence the determination of the estimated retail value of such items.

The Company typically experiences seasonal growth in its pawn loan balances in the third and fourth quarters following lower balances in the first two quarters due to the typical repayment of pawn loans associated with statutory bonuses received by customers in the fourth quarter in Mexico and with tax refund proceeds typically received by customers in the first quarter in the U.S.

These sources, together with the employees’ inspection of the collateral along with their skills and experience in selling similar items of merchandise in particular stores, influence the determination of the estimated retail value of such items.

The Company typically experiences seasonal growth in its pawn loan balances in the third and fourth quarters preceded by lower balances in the first two quarters due to the typical repayment of pawn loans associated with statutory bonuses received by customers in the fourth quarter in Mexico and with tax refund proceeds typically received by customers in the first quarter in the U.S.

Pawn Business Strategy

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New Store Openings

The Company typically opens new stores in under-served markets and neighborhoods, primarily in Latin America.

After a suitable location has been identified and a lease and the appropriate licenses are obtained, a new store can typically be open for business within six and 12 weeks.

The Company typically opens new stores in under-served markets and neighborhoods.

After a suitable location has been identified and a lease and the appropriate licenses are obtained, a new store can typically open for business within six to 12 weeks.

The investment required to open a new location includes store operating cash, inventory, funds for pawn loans, leasehold improvements, store fixtures, security systems, computer equipment and other start-up costs.

Due to the fragmented nature of the pawn industry, the Company believes attractive acquisition opportunities will continue to arise in both Latin America and the U.S.

Due to the fragmented nature of the pawn industry, the Company believes attractive acquisition opportunities will continue to arise in both the U.S.

and Latin America.

Specific pawn store acquisition criteria include an evaluation of the volume of merchandise sales and pawn transactions, outstanding customer pawn loan balances, historical pawn yields, merchandise sales margins, pawn loan redemption rates, the condition and quantity of inventory on hand, licensing restrictions or requirements, and the location, physical condition, and lease terms of the stores to be acquired.

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The primary factors affecting the profitability of the Company’s existing store base are the volume and gross profit of merchandise sales, the volume of and yield on pawn loans and store operating expenses.

To encourage customer traffic and repeat business, which management believes is a key determinant of a store’s success, the Company has taken several steps to distinguish its stores and to make customers feel more comfortable and secure.

To increase customer traffic and encourage repeat business, which management believes is a key determinant of a store’s success, the Company has taken several steps to distinguish its stores and to make customers feel more comfortable and secure.

In addition to a clean and secure physical store facility, the stores’ exteriors typically display attractive and distinctive signage similar to that used by contemporary specialty retailers.

The Company believes the profitability of its pawnshops is dependent, among other factors, upon its employees’ skills and ability to engage with customers and provide prompt and courteous service.

The Company has employee-training programs that promote customer service, productivity, professionalism, regulatory compliance and cyber and information security.

The Company’s proprietary point-of-sale and loan management system tracks certain key transactional performance measures, including pawn loan yields and merchandise sales margins, and permits a store manager or clerk to instantly recall the cost of an item in inventory and the date it was purchased, including the prior transaction history of a particular customer.

The Company has employee training programs that promote customer service, productivity, professionalism, regulatory compliance and information privacy and security.

The Company’s proprietary POS and loan management system tracks certain key transactional performance measures, including pawn loan yields and merchandise sales margins, and permits a store manager or clerk to instantly recall the cost of an item in inventory and the date it was purchased, including the prior transaction history of a particular customer.

It also facilitates the timely valuation of goods by showing values assigned to similar goods.

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Many of the Company’s acquired stores in Latin America tend to be smaller than its U.S.

stores, especially those located in dense urban markets, which may not have dedicated parking.

stores, especially those located in dense urban markets that may not have dedicated parking.

Management has established a standard store design intended to facilitate operations and provide a positive customer experience.

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states and the District of Columbia, 1,721 stores in 32 states in Mexico, 65 stores in Guatemala, 14 stores in Colombia and 14 stores in El Salvador.

The following table details store count activity for the twelve months ended December 31, 2022:

The following table details store count activity for the year ended December 31, 2023:

Latin America Total

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Total locations, end of period 1,183 1,814 2,997

(1) In addition to new store openings, the Company strategically relocated two stores in the U.S.

and two stores in Latin America during the twelve months ended December 31, 2022.

(2) Store consolidations were primarily acquired locations over the past six years which have been combined with overlapping stores and for which the Company expects to maintain a significant portion of the acquired customer base in the consolidated location.

(1) In addition to new store openings, the Company strategically relocated four stores in the U.S.

and two stores in Latin America during 2023.

(2) Store consolidations were primarily acquired locations over the past seven years which have been combined with overlapping stores and for which the Company expects to maintain a significant portion of the acquired customer base in the consolidated location.

As of December 31, 2023, the Company’s pawn stores were located in the following countries and states:

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North Carolina 54 Puebla 114

Tennessee 49 Tamaulipas 99

Georgia 43 Nuevo Leon 87

Washington 30 Baja California 81

Louisiana 29 Jalisco 81

Maryland 28 Estado de Ciudad de Mexico (State of Mexico City) 68

Arizona 27 Chiapas 66

Nevada 27 Oaxaca 58

South Carolina 27 Coahuila 52

Colorado 25 Hidalgo 51

Illinois 25 Guanajuato 48

Kentucky 24 Chihuahua 47

Alabama 23 Tabasco 47

Missouri 23 Sonora 41

Indiana 22 Sinaloa 31

Oklahoma 17 Quintana Roo 30

Alaska 6 Michoacan 28

Utah 6 Morelos 26

Virginia 6 Guerrero 24

District of Columbia 3 San Luis Potosi 23

Mississippi 2 Durango 21

Nebraska 1 Aguascalientes 20

Wyoming 1 Queretaro 19

total 1,101 Campeche 18

Baja California Sur 13

49 Tamaulipas 99

48 Nuevo Leon 95

36 Baja California 81

Nevada 30 Estado de Ciudad de Mexico (State of Mexico City) 71

29 Chiapas 67

28 Coahuila 55

South Carolina

27 Hidalgo 54

25 Guanajuato 51

24 Tabasco 46

23 Chihuahua 45

22 Quintana Roo 31

Oklahoma 19 Sinaloa 30

13 Michoacan 29

6 San Luis Potosi 26

5 Guerrero 24

District of Columbia 3 Durango 22

3 Aguascalientes 21

3 Queretaro 21

2 Campeche 18

1 Tlaxcala 18

Nebraska 1 Yucatan 18

Wyoming 1 Zacatecas 18

total 1,183 Baja California Sur 13

El Salvador 14

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In addition, the Company competes with other lenders and retailers to attract and retain employees with competitive compensation programs.

Many of the competitors have significantly greater size, financial resources and human capital than the Company.

The Company’s retail business competitors include numerous retail and wholesale merchants, including jewelry stores, rent-to-own operators, discount retail stores, “second-hand” stores, consumer electronics stores, other specialty retailers, online retailers, online auction sites, online classified advertising sites and other pawnshops.

Many of the competitors’ individual retail locations have significantly greater size, financial resources and human capital than the Company.

Competitive factors in the Company’s retail operations include the ability to provide the customer with a variety of merchandise items at attractive prices.

The Company’s pawn lending business competes primarily with other pawn store operators and other specialty consumer finance operators, including online lenders.

The Company’s pawn lending business competes primarily with other specialty consumer finance lenders, including pawn store operators, payday loan stores, branch-based lenders and other specialty consumer finance operators, including online lenders.

The pawnshop and other specialty consumer finance industries are characterized by a large number of independent owner-operators, some of whom own and operate multiple locations.

In addition, the Company competes with other non-pawn lenders, such as banks and consumer finance companies, which generally lend on an unsecured as well as a secured basis.

Other lenders may, and do, lend money on financial terms more favorable than those offered by the Company.

In addition, the Company competes with other non-specialty consumer finance lenders, such as banks, credit card providers and other consumer finance companies, which generally lend on an unsecured as well as a secured basis.

Other non-specialty lenders may, and do, lend money on financial terms more favorable than those offered by the Company.

Management believes the pawn industry remains highly fragmented with an estimated 12,000 to 14,000 total pawnshops in the U.S.

and 7,000 to 8,000 pawnshops in Mexico.

and 7,000 to 8,000 total pawnshops in Mexico.

Including the Company, there are two publicly-held, U.S.-based pawnshop operators, both of which have pawn operations in the U.S., Mexico, Guatemala and El Salvador.

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Retail POS Payment Solutions Operations

On December 17, 2021, the Company completed the AFF Acquisition, resulting in AFF becoming a wholly owned subsidiary of and new business line for the Company.

AFF facilitates customized LTO and retail finance programs to its merchant partners that allows those merchant partners to complete sales by providing their customers with a retail POS payment solution.

AFF facilitates customized LTO and retail finance programs to its merchant partners, allowing those merchant partners to complete sales by providing their customers with a retail POS payment solution.

Customers can apply for AFF’s products online or through their mobile devices and complete the process electronically or in person at one of AFF’s merchant partner locations.

AFF primarily serves customers who are credit-constrained who may not qualify for prime or near prime retail payment options.

Net revenues (gross profit) from AFF accounted for 15% of the Company’s total net revenues during 2022.

Net revenues (gross profit) from AFF accounted for 18% of the Company’s consolidated net revenues during 2023.

Products Offered by AFF

AFF’s merchant partners may provide consumer goods and services to their customers using one of AFF’s retail POS payment options, including an LTO product, a merchant-based retail installment sales agreement (“RISA”) or a bank-originated installment loan, to facilitate payments on such transactions.

The merchant partners generally choose a single solution from one of these three available options to offer to their customers at a given location.

The merchant’s selection of the appropriate retail POS payment option depends upon which payment options are allowable under applicable state law, whether AFF’s bank partner makes loans in the state where the merchant is located and the type of products or services offered by the merchant.

AFF’s merchant partners may provide consumer goods and services to their customers using one of AFF’s retail POS payment options, including a LTO product, a merchant-based retail installment sales agreement (“RISA”) or a bank-originated installment loan, to facilitate payments on such transactions.

The merchant partners provide a single retail POS payment solution from one of these three available options to offer to all of their customers at a given location.

The merchant’s selection of the appropriate retail POS payment option depends upon applicable regulations in the state in which the merchant operates, including which payment options are allowable under applicable state law, whether AFF’s bank partner makes loans in the state where the merchant is located and which type of products or services are offered by the merchant.

The majority of AFF’s originations are facilitated with the LTO product, with retailers of furniture and other tangible personal property most commonly using the LTO product.

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Each of these retail POS payment options is subject to AFF’s (or AFF’s partner bank’s) proprietary technology-driven decisioning process as further described below.

AFF’s ability to customize the technology and offer a choice between retail POS payment options provides its merchant partners the ability to pick and choose the most effective solution for its business and customers.

AFF’s ability to customize the technology and offer a choice between retail POS payment options provides its merchant partners the ability to identify the most effective solution for its business and customers.

The following is a description of the three primary retail POS payment options offered by AFF:

• LTO - LTO transactions involve the purchase by AFF of tangible personal property directly from the merchant partner and a subsequent lease of that merchandise by AFF to the customer.

The initial term of the leased merchandise contracts are typically 60 days and can be renewed for a total term of between six and 24 months.

The customer has the right to acquire ownership of the leased merchandise either through an early buyout option, another early purchase

option after the early buyout option expires, or through payment of all required lease renewal payments.

• LTO — LTO transactions involve the purchase by AFF of tangible personal property directly from the merchant partner and a subsequent lease of that merchandise by AFF to the customer through a consumer rental purchase agreement under applicable state laws.

Customers can cancel their agreements at any time, without penalty, by

returning the merchandise.

The terms of the leased merchandise contracts generally provide for weekly, bi-weekly, semi-monthly, or monthly rental periods and give the customers the option to acquire ownership of the merchandise over a fixed term, typically between six and 24 months, if the customer leases the merchandise through that term.

The customer has the right to acquire ownership of the leased merchandise either through an early buyout option, through another early purchase option after the early buyout option expires, or through payment of all required lease renewal payments.

To take advantage of the early buyout option, the customer generally has between 90 and 101 days to pay the cash price of the leased merchandise, plus a nominal early buyout fee.

The customer can still utilize a purchase option after the early buyout period ends and obtain ownership before the end of the lease by paying a certain percentage of the remaining lease renewal payments (usually established by applicable state law).

The customer can still utilize an early purchase option after the early buyout period ends and obtain ownership before the end of the lease by paying a certain percentage of the remaining lease renewal payments (usually established by applicable state law).

The customer can also obtain ownership of the merchandise by simply paying all of the remaining lease renewal payments as they become due.

Conversely, the customer has the right to choose not to renew the lease at any time by returning the merchandise and making all scheduled payments due through the initial lease term.

Conversely, the customer has the right to choose not to renew the lease at any time by returning the merchandise.

AFF offers the LTO retail POS payment option to merchant partners in 45 U.S.

states, the District of Columbia and Puerto Rico and it accounted for 77% of AFF’s total revenues during 2022.

states, the District of Columbia and Puerto Rico, and such option accounted for 76% of AFF’s total revenues during 2023.

• RISA — The RISA transaction involves the purchase of either tangible personal property or services from the merchant partner by the customer.

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The customer can take advantage of an early payoff discount, whereby the customer generally has between 90 and 101 days to pay the original principal amount, plus a nominal early payoff discount fee (equal to or less than the accrued interest charges), without incurring any additional interest charges.

RISA finance receivables typically have a term ranging from six and 24 months, and when utilized for the purchase of tangible personal property, are generally secured by such tangible personal property.

RISA finance receivables typically have a term ranging from six to 24 months, and when utilized for the purchase of tangible personal property, are generally secured by such tangible personal property.

AFF facilitates the RISA retail POS payment option with merchant partners in 20 U.S.

states and it accounted for 11% of AFF’s total revenues during 2022.

• Bank-originated installment loans - The customer enters into an installment loan directly with FinWise Bank (the “Bank”) for the purchase of a good or service from the merchant partner.

states, and such option accounted for 10% of AFF’s total revenues during 2023.

• Bank-originated installment loans — The customer enters into an installment loan directly with a Utah state-chartered non-member bank (the “Bank”), for the purchase of a good or service from the merchant partner.

After origination of the loan by the Bank, AFF purchases the rights to the cash flows of the loan from the Bank but does not purchase the loan itself.

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The customer can take advantage of an early payoff discount, whereby the customer generally has between 90 and 101 days to pay the original principal amount (including any origination fee) without paying any interest charges.

Bank-originated loans typically have a term ranging from six and 24 months and can be either secured by tangible personal property or unsecured.

Bank-originated loans typically have a term ranging from six to 24 months and can be either secured by tangible personal property or unsecured.

Approximately 71% of these loans are related to the purchase of property or services while approximately 29% are loans with cash proceeds issued directly to the customer.

The bank-originated installment loan retail POS payment option is made available to merchant partners in 34 U.S.

states and it accounted for 12% of AFF’s total revenues during 2022.

states, and such option accounted for 14% of AFF’s total revenues during 2023.

Decisioning Process

AFF has made substantial investments in the development of its unique and proprietary decisioning platform that is customizable to individual merchants and/or merchandise categories.

The platform is supported by an experienced and robust data science team that use data analytics to continually improve the performance of the decisioning platform.

This proprietary decisioning platform is used to determine whether a particular applicant meets AFF’s (or the Bank’s as applicable) LTO, RISA or loan qualifications for a particular amount.

The platform is supported by an experienced and robust data science team that uses data analytics to continually improve the performance of the decisioning platform.

This proprietary decisioning platform is used to determine whether a particular applicant meets AFF’s LTO or RISA decisioning criteria or the Bank’s loan qualifications for a particular amount.

The sophisticated algorithms consider external and internal data points beyond traditional credit scores, allowing AFF or the Bank to approve customers that do not have a credit score.

AFF employs an automated application decisioning process, creating a highly efficient, scalable model.

While the Bank partner utilizes AFF’s technology platform to process and evaluate consumer applications originated by the Bank, all credit underwriting and approval criteria used by the Bank to underwrite the loans are provided and approved by the Bank.

While the Bank utilizes AFF’s technology platform to process and evaluate consumer applications originated by the Bank, all credit underwriting and approval criteria used by the Bank to underwrite the loans are provided and approved under the Bank’s exclusive authority.

Customer Service

AFF believes its strong focus on building a positive relationship with the customer and ensuring high levels of customer satisfaction generates repeat customer business and long-lasting relationships with its merchant partners.

AFF strives to make the application process for its LTO, RISA or bank loan products user-friendly for its customers.

AFF customers can apply for the AFF products via text-2-apply, QR codes, web applications on merchant websites, merchant portal applications, in-cart plug-in experiences and third-party waterfall applications.

Upon submission of an application, AFF’s platform typically communicates a decision (either directly for LTO or RISA products or on behalf of the Bank for the bank

loan product) within seconds, providing a near immediate response to the customer.

The customer then purchases goods or services using the POS payment option applicable for that particular merchant location and makes scheduled payments, which can be managed by the customer via phone or online.

Customers receive an introductory email from AFF’s customer service team to welcome them as new customers to AFF, answer any questions they may have about their new account and remind them of their payment schedule.

Existing customers have access to AFF’s customer service team and online customer portal to answer questions about their lease, RISA or loan or to provide comments or complaints about merchant partners.

For those customers that utilize AFF’s LTO solution and wish to choose not to renew their lease, AFF’s customer service team can also assist with the non-renewal process.

The amount and timing of a customer’s contractual periodic payment (i.e., weekly, bi-weekly, semi-monthly, or monthly) is generally based on a customer's pay frequency and the term of the contract.

For those customers that utilize AFF’s LTO solution and choose not to renew their lease, AFF’s customer service team can also assist with the non-renewal process.

The amount and timing of a customer’s contractual periodic payment (e.g., weekly, bi-weekly, semi-monthly, or monthly) is generally based on a customer's pay frequency and the term of the contract.

Customer payments are typically processed through automated clearing house payments or debits to the customer’s payment card (e.g., through a Visa or MasterCard network).

Consumers can choose between scheduling automated payments to process on their accounts or make manual, non-recurring payments on each due date.

If a payment attempt is unsuccessful, collection activities are managed through AFF’s call centers and/or AFF’s network of third-party debt collection agencies.

The call center contacts customers through several communication channels to encourage the customer to keep their lease, RISA or loan current and discuss all available payment options.

Business—Government Regulation” for further information about applicable collections laws AFF is subject to.

AFF has also made significant investments to make the application process for its LTO, RISA or bank loan products user-friendly for its customers.

Upon submission of an application, AFF’s platform typically communicates a decision (either on behalf of AFF or the Bank) within seconds, providing a near immediate response to the customer.

Consumers can choose between scheduling automated payments to process on their accounts and making manual, non-recurring payments on each due date.

If a customer account becomes delinquent, collection activities are managed through AFF’s call centers and/or AFF’s network of third-party debt collection agencies.

The call center contacts customers through several communication channels to assist the customer with keeping their lease, RISA or loan current.

These channels include phone calls, text messages, emails, and chat.

AFF utilizes a number of tools to ensure the quality of its call center operations, including call-monitoring software, manual call reviews, quality assurance score cards, role-based training, automated on-screen scripts, regular call calibrations, and real-time alerts to supervisors.

Business—Governmental Regulation” for further information about applicable collections laws to which AFF is subject.

Merchant Relationships

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AFF also constantly monitors consumer preferences and trends to ensure that the solutions offered through their merchant partners are aligned with the needs of the merchant partner and its customers.

AFF markets to new merchants through various channels including field sales representatives, national sales, independent sales representatives, buying groups, AFF’s website and strategic integrations via waterfall lending platforms.

AFF attracts and sources new merchants through various channels, including field sales representatives, national sales, independent sales representatives, buying groups, AFF’s website and strategic integrations via waterfall lending platforms.

To ensure merchant quality, each prospective merchant goes through a vetting and approval process and, once approved, they must sign a merchant agreement that identifies the roles and responsibilities of both the merchant and AFF.

Merchants also receive appropriate training so they can properly represent AFF’s retail POS payment solutions to their customers and ensure regulatory compliance.

Existing merchant partners are subject to regular monitoring.

Approved merchant partners are subject to regular monitoring.

AFF’s monitoring procedures are designed to identify merchant partners that do not meet AFF’s merchant standards.

Merchant partners are subject to suspension and/or termination if, based upon the results of AFF’s monitoring, they are found to be out of compliance with the merchant agreement, have low lease or loan quality performance, have elevated customer complaint volume or fail to comply with applicable law.

AFF currently has a large network of over 9,200 active retail merchant partner locations and e-commerce platforms offering its leasing and financing products.

AFF currently has approximately 11,600 active retail merchant partner locations and e-commerce platforms offering its leasing and financing products.

Those merchant partners offer a wide array of goods and services spanning 26 vertical channels.

The following table shows the percentage of AFF's 2022 originations attributable to these certain vertical channels:

The following table shows the percentage of AFF's 2023 originations attributable to these vertical channels:

Year Ended December 31, 2023

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For a discussion of the risks associated with the possible loss of one of AFF’s top merchant partners or a significant reduction in transaction volumes with one of its top merchant partners, refer to “Item 1A.

Risk Factors.”

Retail POS Payment Solutions Business Strategy

AFF’s business model is primarily driven by a scalable technology-based platform that does not require significant increases in operating overhead to support incremental origination growth.

Thus, AFF generally achieves more operating leverage as transaction volume grows.

Additionally, AFF does not have any of the costs associated with operating physical retail stores, the personnel needed to operate physical store locations, or any of the costs associated with buying, storing and shipping inventory.

AFF’s business strategy is to continue building market share through additional expansion of both its brick-and-mortar and online merchant base while increasing customer utilization rates by continuous improvement and enhancement of its omni-channel user experience.

AFF continues to expand its digital marketing and search engine optimization strategies to harvest more consumer searches and to drive quality repeat customers back to its merchant partners.

With an ongoing focus toward improving application conversion rates combined with an enhanced risk segmentation of its applications, AFF believes that it has numerous opportunities to gain additional market share and expand its large and fast-growing merchant and customer base to achieve greater levels of revenue and profitability.

With an ongoing focus toward improving application conversion rates for qualified applicants combined with an enhanced risk segmentation of its applications, AFF believes that it has numerous opportunities to gain additional market share and expand its large and fast-growing merchant and customer base to achieve greater levels of revenue and profitability.

Retail POS Payment Solutions Competitive Environment

AFF’s retail POS payment solutions business competes with national, regional and local LTO stores, virtual LTO companies, rental stores that do not offer their customers a purchase option and various other types of consumer finance companies that may enable customers to shop at traditional or online retailers on credit.

AFF’s retail POS payment solutions business competes with national, regional and local LTO stores, virtual LTO companies, rental stores that do not offer their customers a purchase option, buy now / pay later providers, and various other types of consumer finance companies that may enable customers to shop at traditional or online retailers on credit.

In addition, banks and consumer finance companies are developing POS payment products and services designed to compete for the credit-constrained customer.

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The Company relies on a combination of trademarks, trade dress, trade secrets, proprietary software, website domain names and other rights, including confidentiality procedures and contractual provisions, to protect its proprietary technology, processes and other intellectual property.

The Company’s competitors may develop products that are similar to its technology, such as the Company’s proprietary pawn point-of-sale and loan management software, AFF’s proprietary lease, financing and loan management software, AFF’s proprietary decisioning platform and other developed technology.

The Company’s competitors may develop products that are similar to its own technology, such as the Company’s proprietary pawn POS and loan management software, AFF’s proprietary lease, financing and loan management software, AFF’s proprietary decisioning platform and other developed technology.

The Company enters into agreements with its employees, consultants and partners, and through these and other confidentiality or non-compete agreements, the Company attempts to control access to and distribution of its software, documentation and other proprietary technology and information.

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The Company cannot be certain that the steps it has taken or will take in the future will prevent misappropriations of its technology or intellectual property rights.

Environmental, Social and Governance (ESG) Overview

Pawnshops are neighborhood-based stores which contribute to the modern “circular economy.” Each of the Company’s 2,872 pawn locations provide access to a quick and convenient source of short-term cash through its non-recourse pawn loans, and is a neighborhood-based market for consumers to buy and resell pre-owned and popular consumer products in a safe environment.

Through AFF, the Company provides point-of-sale payment solutions through technology-enabled virtual LTO and consumer finance platforms with minimal environmental impact.

The Company provides its customers with rapid access to capital while operating its business in a manner that results in a positive impact on its employees, communities and the environment.

Environmental, Social and Governance Overview

Pawnshops are neighborhood-based stores that contribute to the modern “circular economy” which encourages reduced resource consumption and waste, decreased environmental footprints and emissions along with economic growth and job creations.

Each of the Company’s 2,997 pawn locations provides consumers a neighborhood-based market to buy and resell pre-owned and popular consumer products in a safe environment along with access to a quick and convenient source of short-term cash through non-recourse pawn transactions.

In addition, through AFF, the Company provides POS payment solutions through technology-enabled virtual LTO and consumer finance platforms with minimal environmental impact.

In summary, the Company provides millions of customers with rapid access to capital while operating its business in a manner that results in a positive impact on its employees, communities and the environment.

Environmental Sustainability

The Company’s pawn business extends the lifecycle and utilization of popular consumer products.

The Company’s pawn business extends the life cycle and utilization of popular consumer products.

Most of the Company’s merchandise inventories are pre-owned items sourced directly from local customers in each store’s immediate geographic neighborhood.

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During 2023, the Company estimates that it recycled over 50,000 ounces of gold and approximately 40,000 carats of diamonds with a combined market value of over $125 million.

This process helps reduce demand for mined precious metals and diamonds, thereby reducing carbon emissions and water usage.

This process helps reduce demand for mined precious metals and diamonds, which benefits the environment by reducing carbon emissions, water usage and other harmful environmental impacts of mining.

Unlike most brick-and-mortar or online retailers, the Company does not rely on supply chains or manufacturing of its inventories, as it sources the majority of its inventory from forfeited pawn loan collateral and merchandise purchased directly from customers.

Accordingly, the Company does not own, operate or contract for manufacturing, supply chain, warehousing or distribution facilities to support its pawn operations.

Accordingly, the Company generally does not own, operate or contract for manufacturing, supply chain, warehousing or distribution facilities to support its pawn operations.

Almost all retail sales and pawn loans are made to customers who live or work within a tight geographic radius of the Company’s stores.

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The Company is working to further reduce energy consumption by retrofitting buildings with LED lighting and reducing corporate travel by utilizing remote work and meeting technologies.

Pawn Stores Offer Safe Lending Solutions in Underserved Communities

Safe Capital Access Solutions in Underserved Communities

It is estimated by multiple studies and surveys that approximately 25% of U.S.

households remain unbanked or under-banked.

In Latin America, the number of unbanked or under-banked consumers can be as much as 75% of the population in countries such as Mexico.

In Latin America, the number of unbanked or under-banked consumers can be as much as 75% of the population.

As a result, the majority of the Company’s customers have limited access to traditional forms of credit or capital.

The Company contributes to its communities by providing these customers with instant access to capital through very small, non-recourse pawn loans or buying merchandise from its customers.

The Company contributes to its communities by providing these customers with instant access to capital through very small, non-recourse pawn loans or by purchasing merchandise from such customers.

The average credit provided by the Company’s pawn business to a customer is $258 in the U.S.

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All terms are provided in short, easy-to-read contracts that allow the Company’s customers to make well-informed decisions before obtaining a loan.

Pawn loans differ from most other forms of small-dollar lending because the Company does not engage in any post-default collection efforts on delinquent loans, does not take legal actions against its customers for defaulted loans, does not ban its customers for nonpayment, nor does it issue any negative credit information to external credit agencies but rather, relies only on the resale of the pawn collateral for recovery.

Pawn loans differ from most other forms of small-dollar lending as the Company does not engage in post-default collection efforts on delinquent loans, does not take legal actions against its customers for defaulted loans, does not ban its customers for nonpayment, nor does it issue any negative credit information to external credit agencies, but rather relies only on the resale of the pawn collateral for recovery.

POS Payment Solutions Products Provide Technology-Driven Solutions with Low Environmental Impact

AFF utilizes a paperless online application process for its LTO, RISA or bank loan products.

Applicants can apply for AFF products via text-2-apply, QR codes, web applications on merchant websites, merchant portal applications, in-cart plug-in experiences and third-party waterfall applications.

Upon submission of an application, AFF’s platform typically communicates a decision (either on behalf of AFF or the Bank) electronically within seconds, providing a near immediate response to the applicant.

AFF utilizes a paperless online application process for its POS payment solutions products.

Upon submission of an application, AFF’s platform typically communicates a decision (either directly for LTO or RISA products or on behalf of the Bank for the bank loan product) electronically within seconds, providing a near-immediate response to the applicant.

Upon approval, the applicant then electronically signs their agreement, officially becoming a customer of AFF, and completes their purchase of goods or services using the POS payment option applicable for that particular merchant location.

Customers can begin making scheduled payments, which can be managed by the customer via phone or online.

Most other customer communications are handled by phone, online or electronic communications as well.

Most other customer communications are handled by phone, online or electronic communications.

The virtual nature of AFF’s business model means it operates no retail or consumer facing facilities and has a limited administrative facilities footprint of less than 46,000 square feet.

Focus on Social and Corporate Responsibility

The Company promotes a strong corporate culture which emphasizes ethics, accountability and treating customers fairly.

Social and Corporate Responsibility

The Company promotes a strong corporate culture that emphasizes ethics, accountability and treating customers fairly.

This culture is supported by a governance framework with board level oversight of the Company's compliance and internal audit functions and includes the following:

• The Company’s pawn and POS payment solutions operations are licensed and supervised in every jurisdiction in which the Company operates and it is subject to regular regulatory exams in almost all of these jurisdictions.

• A formal compliance management system is maintained by the Company in all markets in which it operates.

• A “single point of contact” issue resolution function is available to all customers.

• The Company’s pawn and POS payment solutions operations are licensed and supervised in every jurisdiction in which the Company operates and are subject to regular regulatory exams in almost all of these jurisdictions.

• A formal compliance management system for both pawn and POS payment solutions operations is maintained by the Company in all markets in which it operates.

The Audit Committee of the Board of Directors (the “Board”) receives quarterly updates regarding compliance matters and customer complaint activity.

• Consumer-facing marketing materials and other POS advertising operations must comply with established Company policies.

All such materials undergo an internal review and approval process to ensure such materials include legally required consumer disclosures, which helps consumers make informed financial decisions before entering into any agreements.

• Debt collection activities performed within the Company’s POS payment solutions operations are also governed by Company policies.

An ongoing process of monitoring, training, and auditing staff adherence to these policies is an integral part of the Company’s daily operations, which helps to both minimize consumer complaints and ensure that debt collection activities are performed in accordance with applicable federal and state collections laws.

Given that pawn loans are non-recourse, the Company’s pawn stores do not perform any debt collection activities.

• A “single point of contact” issue resolution function is available to all customers, including customer service hotlines and websites.

• Strict data privacy and protection policies are maintained for personal information of customers and employees.

• Introduction of any significant new products, services and business lines are subject to approval by the Board.

The Company has significant operations in Mexico, where the majority of its employees and customers reside.

Accordingly, the Company has focused significant time and resources on corporate and social responsibility initiatives in supporting disadvantaged people who live and work in this market.

The Company is certified as an Empresa Socialmente Responsable (“ESR”), or a socially responsible company, in Mexico under the XII Latin American Meeting of Corporate Social Responsibility Framework.

This ESR certification is granted to companies that meet a series of criteria that generally cover the economic, social and environmental sustainability of its operations, which include corporate ethics, good governance, the quality of life of the Company’s employees and a proven commitment to the betterment of the community where it operates, including the care and preservation of the environment.

The Company has also established relationships and supports certain foundations and social programs in Mexico, which provide internships, reading initiatives and recycling programs for disadvantaged citizens.

The Company is certified in Mexico as an Empresa Socialmente Responsable (“ESR”), or a socially responsible company under the XII Latin American Meeting of Corporate Social Responsibility Framework.

This ESR certification is granted to companies that meet a series of criteria that generally cover the economic, social and environmental sustainability of its operations, including corporate ethics, good governance, the quality of life of the Company’s employees and a proven commitment to the betterment of the community where it operates, including the care and preservation of the environment.

The Company has also established relationships and supports certain foundations and social programs in Mexico that provide internships, reading initiatives and recycling programs for disadvantaged citizens.

For instance, the Company participated in the Government Program of Youth Building the Future in Mexico in 2023 by providing year-long apprenticeships to female participants aspiring to build careers in legal, human resources, and information technology.

The Mexico Secretary of Labor awarded the Company the Recognition of Social Commitment as a result of the Company’s participation in this program.

In North Texas, where the Company is headquartered, the Company has made meaningful investments in the local community in the form of employee volunteer service hours and matching certain employee-donations to non-profits.

The Communities Foundation of Texas has recognized AFF as a Be In Good Company member for AFF’s community engagement.

Human Capital Resources

In managing its human capital resources, the Company aims to attract a qualified and diverse workforce through an inclusive and accessible recruiting process that utilizes online recruiting platforms, campus outreach, internships and job fairs.

The workforce of the Company’s pawn business is composed primarily of employees who work on an hourly basis.

The AFF business also relies on customer service personnel that are primarily hourly employees.

In order to increase retention among its hourly employees, the Company is focused on providing competitive and attractive wages and benefits, which includes a store-level profit-sharing program for its pawn store employees and extensive training and advancement opportunities as well as fostering a diverse, safe, healthy and secure workplace.

In order to increase retention of its employees, the Company is focused on providing competitive and attractive wages and benefits (which includes a store-level profit-sharing program for its pawn store employees) and extensive training and advancement opportunities as well as fostering a diverse, safe, healthy and secure workplace.

The Company believes that it complies with all applicable state, local and international laws governing nondiscrimination in employment in jurisdictions in which the Company operates.

All applicants and employees are treated with the same high level of respect regardless of their gender, ethnicity, religion, national origin, age, marital status, political affiliation, sexual orientation, gender identity, disability or protected veteran status.

The Company maintains a whistleblower hotline available to all employees and external stakeholders to report (anonymously if desired) any matter of concern.

The Company maintains complaint resolution policies and procedures as well as a whistleblower hotline available to all employees and external stakeholders to report (anonymously if desired) any matter of concern.

The communications hotline is managed by an independent third party, and such communications are routed to appropriate functions such as Human Resources, Legal or Compliance.

All communications made to the whistleblower hotline are reported to the Board of Directors of the Company (the “Board”) for review and further investigation, if warranted.

The Company operates a whistleblower hotline review committee which includes members from Human Resources, Legal and Compliance to review all cases as a group before any case is closed.

Complaint trends and statistics compiled from the Company’s internal complaint resolution procedures and along with all communications made to the whistleblower hotline are reported to the Board quarterly for review and further investigation, if warranted.

Employee Development and Career Opportunities

The Company believes in attracting top talent with a competitive wage and benefits offering and retaining them by providing an environment where employees can see that their career has a clear path of growth.

The Company believes in attracting top talent by offering a competitive wage and employee-selected benefit options and retaining them by providing an environment where employees can see that their career has a clear path of growth.

To help facilitate that growth, the Company provides tools, resources and programs that adapt and grow with its team members.

These efforts include:

• Providing all store support team members and all management across the Company access to a library of third-party courses enabling the development of new skills that contribute to career growth and development.

These efforts include the following:

• Providing all store support team members and all management across the Company access to a library of third-party courses enabling the development of new employment-related skills that contribute to career growth and development.

• Delivering an in-house designed continuous learning program to avail store team members a career path with the destination of their choosing while using custom learning solutions designed to add and confirm both competencies and proficiencies throughout all levels of their career.

The learning takes a blended approach involving formal courses, self-directed learning and on-the-job applications.

• Coordinating and enrolling training at least annually to all of the Company’s management-level team members, including compliance, ethics and leadership training.

• Providing team members with recurring training on critical issues such as safety and security, compliance, ethics and integrity, and information security.

• Coordinating and enrolling training, at least annually, including compliance and anti-harassment training to all team members, as well as ethics and leadership training to all management-level team members.

• Providing team members with recurring training on critical issues such as safety and security, lending and collection practices, ethics and integrity, information security and other compliance matters.

• Offering a tuition reimbursement program to U.S.

employees that provides eligible team members up to $2,000 per year for courses related to current or future roles at the Company and also discounted tuition rates to select universities.

employees for courses related to current or future roles at the Company and also discounted tuition rates to select universities.

• Offering all U.S.

eligible employees health insurance benefits and a comprehensive suite of well-being offerings, including unlimited health coaching sessions, unlimited financial coaching sessions with a certified financial planner and counseling/emotional support through the Company’s Employee Assistance program.

• Almost all employees in Latin American are provided statutorily required public healthcare and other statutory benefits.

In Mexico, the Company’s largest Latin American market, most management-level employees and tenured store and administrative employees are provided private healthcare insurance.

All Mexico employees also participate in a statutory profit sharing program.

• Matching team members’ 401(k) plan contributions on eligible pay after one year of service.

eligible employees health and life insurance benefits and a comprehensive suite of well-being offerings, including unlimited health coaching sessions, unlimited financial coaching sessions with a certified financial planner and counseling/emotional support through the Company’s Employee Assistance program.

• Matching team members’ 401(k) plan contributions for all U.S.

employees after one year of service.

• Offering access to thousands of partner discounts for services and products through the partner portal.

• Offering a “work now - paid tomorrow” program through the Earned Wage Access Program.

Employee Profile and Diversity

As of December 31, 2022, the Company had approximately 18,000 employees across five countries (the U.S., Mexico, Guatemala, Colombia and El Salvador).

• Providing all employees in Latin America public healthcare and other statutory benefits where required by statute.

In Mexico, the Company’s largest Latin American market, most management-level employees and tenured store and administrative employees are provided private health insurance.

All eligible employees in Mexico also participate in a statutory profit sharing program.

Workplace Profile

As of December 31, 2023, the Company had approximately 19,000 employees across six countries (the U.S., Mexico, Guatemala, Colombia, El Salvador and Jamaica).

The Company employed approximately 7,800 employees in the U.S.

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Among managers in the Company’s U.S.

operations, 45% identify as Hispanic, 15% as Black, 1% as Asian, 4% as two or more races or Other and 35% as White as of December 31, 2022.

operations as of December 31, 2023, 46% identify as Hispanic, 15% as Black, 1% as Asian, 3% as two or more races or Other and 35% as White.

Employee Empowerment

The Company is committed to creating a safe, trusted and diverse environment in which its employees can thrive.

Its employees’ wages are typically above the minimum wage standards in each country in which it operates.

Total employee compensation is typically above the minimum wage standards in each country in which it operates.

The Company also believes in fairly compensating its employees by providing the ability to share in the Company’s profitability.

For example, the majority of the Company’s front-line, store-based employees participate in a non-qualified profit sharing program which pays up to 8% of the gross profit an employee personally produced through assigned customer service activities.

For example, the majority of the Company’s front-line, store-based employees participate in a non-qualified profit sharing program that pays up to 8% of the gross profit an employee personally produces through assigned customer service activities.

Health and Safety

The Company is committed to the health, safety and wellness of its employees.

The Company provides its employees and their families with access to a variety of flexible and convenient health and wellness programs, including benefits that provide protection and security so they can have peace of mind concerning events that may require time away from work or that impact their financial well-being, that support their physical and mental health by providing tools and resources to help them improve or maintain their health status and encourage engagement in healthy behaviors, and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families.

The operation of the Company’s stores is critically dependent on the ability of customers and employees to safely conduct transactions at each location.

The COVID-19 pandemic presented unprecedented challenges in many parts of the Company’s business and operations, including with respect to keeping employees safe.

Accordingly, the Company developed and implemented new procedures and protocols to minimize the risk to the health and safety of its employees while allowing the Company to continue to operate its pawnshops and serve its customers.

The Company implemented social distancing and mask-wearing protocols in its stores and corporate offices, remote working for its corporate employees, provided additional cleaning supplies to facilitate the sanitation of high traffic areas, installed plexiglass dividers at store point-of-sale counters and prohibited all domestic and international non-essential travel for all employees, among other things.

The Company continues to actively monitor its COVID-19 safety protocols and updates these protocols to respond to the current situation in its specific geographies.

The Company has consistently been able to meet customers’ demands for its products, while at the same time making the necessary investments to ensure that the Company prioritizes the health, safety and welfare of its employees.

In addition, during the pandemic, the Company has prioritized the welfare of its employees by maintaining their paid employment status.

The Board and the Nominating and Corporate Governance Committee of the Board routinely assess the composition and size of the Board and aim to strike a balance between the knowledge and understanding of the business that comes from longer-term service on the Board and the fresh ideas and perspective that can come from adding new members.

As part of this assessment, the Board and the Nominating and Corporate Governance Committee take diversity-related considerations into account and seek a board that includes directors from diverse professional and personal backgrounds with a broad spectrum of experience and expertise and a reputation for integrity.

The Board considers gender, race, nationality, language skills and other personal characteristics in this process and the extent to which the Board reflect the gender, racial, ethnic and global diversity of the Company’s stockholders, employees and customers.

In part as a result of these assessments, the Board has added three new directors since 2021, including two female directors, one of whom is racially diverse.

The Company provides its employees and their families with access to a variety of flexible and convenient health and wellness programs, including benefits that provide protection and security so they can have peace of mind when navigating events that may require time away from work or that impact their financial well-being, that support their physical and mental health by providing tools and resources to help them improve or maintain their health status and encourage engagement in healthy behaviors, and that offer choice, where possible, so they can customize their benefits to meet their needs and the needs of their families.

The operation of the Company’s stores is critically dependent on the ability of customers and employees to safely work and conduct transactions.

The Company continues to make and maintain significant investments in its physical security infrastructure and monitoring capabilities in both its corporate facilities and individual store locations.

In addition, there are strict procedures and protocols in the pawn stores to promote a safe, clean and healthy environment for employees and customers.

A number of the Company’s Mexico locations are designated as an orange dot (“Punto Naranja”) by IMMUJER, the Mexico Municipal Women’s Institute.

An orange dot is a designated safe space for women who have been victims of community sexual violence or harassment and that is equipped to provide support to such women and contact emergency authorities.

As part of this assessment, the Board and the Nominating and Corporate Governance Committee seek a board that includes directors from diverse professional and personal backgrounds with a broad spectrum of experience and expertise and a reputation for integrity.

The Board considers gender, race, nationality, language skills and other personal characteristics in this process and strives to reflect the gender, racial, ethnic and global diversity of the Company’s stockholders, employees and customers.

In part due to these assessments, the Board has added three new directors since 2021, including two female directors, one of whom is racially diverse.

Governmental Regulation

General Overview

The Company’s pawn, LTO and retail finance businesses are subject to significant regulation through various laws, regulations, ordinances and regulatory pronouncements from federal, state and municipal governmental entities in the U.S.

The Company’s pawn and retail POS payments solutions businesses are subject to significant regulation by various laws, regulations, ordinances and regulatory pronouncements from federal, state and municipal governmental entities in the U.S.

and Latin America, all of which are constantly evolving and subject to potentially significant changes.

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In addition, the current presidential administration in the U.S.

has taken a more aggressive enforcement stance against consumer finance companies serving credit-constrained customers like the Company.

has taken a more aggressive enforcement stance against all consumer finance companies that, like the Company, serve credit-constrained customers.

For a discussion of the risks related to the Company’s regulatory environment, see “Item 1A.

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government and its agencies have significant regulatory authority over the Company’s activities, and its business is subject to a variety of federal laws, including but not limited to the following:

Federal Trade Commission (“FTC”) Act and Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) - The FTC and the CFPB regulate advertising, marketing of and practices related to financial products and services.

Federal Trade Commission (“FTC”) Act and Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) — The FTC and the CFPB regulate advertising for, the marketing of, and practices related to the origination and servicing of financial products and services.

The FTC is charged with preventing, investigating and remediating unfair or deceptive acts or practices and false or misleading advertisements, and the CFPB is charged with preventing unfair, deceptive or abusive acts or practices.

The CFPB has regulatory, supervisory and enforcement powers over certain providers of consumer financial products and services.

The CFPB also has the authority to issue civil investigative demands and pursue administrative proceedings or litigation for actual or perceived violations of federal consumer laws (including the CFPB’s own rules).

In these proceedings, the CFPB can seek consent orders, confidential memorandums of understandings, cease and desist orders (which can include orders for redisclosure, restitution or rescission of contracts, as well as affirmative or injunctive relief) and monetary penalties.

In these proceedings, the CFPB can seek consent orders, confidential memorandums of understanding, cease and desist orders (which can include orders for redisclosure, restitution or rescission of contracts, as well as affirmative or injunctive relief) and monetary penalties.

On November 12, 2021, the Company was named as a defendant in a lawsuit brought by the CFPB alleging violations of the Military Lending Act (“MLA”) as discussed elsewhere herein.

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Traditional possessory, non-recourse pawn loans are not covered under the SDL Rule.

The SDL Rule does, however, define consumer loan products, both short-term loans and installment loans offered by the Company before June 30, 2020, as loans covered under the rule.

The SDL Rule also defines some of the RISA transactions that AFF purchases and some of the installment loans that AFF sub-services as loans covered under the rule.

On October 19, 2022, the Fifth Circuit Court of Appeals invalidated the SDL Rule, and the CFPB then filed a petition for a writ of certiorari with the Supreme Court, asking the Supreme Court to uphold the SDL Rule.

The petition is currently pending.

Equal Credit Opportunity Act (“ECOA”) - The ECOA and its implementing Regulation, Regulation B, is a consumer protection law intended to promote the availability of credit to all creditworthy applicants without regard to race, color, religion, or other prohibited bases, and to prevent discrimination on the basis of any of those factors in any aspect of a credit transaction.

The SDL Rule defines some of the RISA transactions that AFF purchases and some of the bank loans that AFF sub-services as transactions that are covered under the rule.

On October 19, 2022, in a challenge to the SDL Rule, the Fifth Circuit Court of Appeals held that the CFPB’s funding mechanism was unconstitutional, rendering the SDL Rule invalid.

The CFPB then filed a petition for a writ of certiorari with the U.S.

Supreme Court, asking the Supreme Court to uphold the CFPB’s funding mechanism to be constitutional, which would render the SDL Rule valid.

The Supreme Court accepted review of the Fifth Circuit’s decision and heard oral arguments on October 3, 2023.

The SDL Rule will remain on hold during the pendency of the Supreme Court’s decision with respect to the appeal.

Equal Credit Opportunity Act (“ECOA”) — The ECOA and its implementing regulation known as Regulation B, is a consumer protection law stating that individuals applying for loans and other credit products can be evaluated only using factors directly related to their creditworthiness.

The law is intended to promote the availability of credit to all creditworthy applicants without regard to race, color, religion, or other prohibited bases, and to prevent discrimination on the basis of any of those factors in any aspect of a credit transaction.

The ECOA also imposes certain disclosure obligations with respect to action taken on an application for credit and is applicable to the Company’s RISA and bank loan products.

Electronic Fund Transfer Act (“EFTA ”) - The EFTA and its implementing Regulation, Regulation E, is a consumer protection law affecting electronic fund transfers, including one-time and recurring preauthorized transactions.

Consumers with whom the Company conducts business may elect to repay through the use of electronic funds transfers, requiring the Company to obtain the appropriate authorization from the consumer to enter into such transactions.

The EFTA imposes certain disclosure and practice restriction requirements upon the Company, and at the same time grants certain rights to consumers.

Electronic Fund Transfer Act (“EFTA ”) — The EFTA and its implementing Regulation known as Regulation E, is a consumer protection law affecting electronic fund transfers, including one-time and recurring preauthorized transactions utilized by the retail POS payment solutions business.

AFF customers may elect to repay through the use of electronic funds transfers, requiring the Company to obtain the appropriate authorization from the consumer to enter into such transactions.

The EFTA imposes certain disclosure and practice restriction requirements upon the Company and also grants certain rights to consumers.

MLA — The MLA requires the provision of certain disclosures at certain times and restricts, among other things, the interest rate and other terms that can be offered to active military personnel and their dependents on most types of consumer credit.

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Servicemembers Civil Relief Act (“SCRA”) — The federal SCRA and similar state laws apply to certain transactions between the Company and servicemembers called to active duty in the United States military as defined within the SCRA, and may include reservists and members of the National Guard.

The SCRA limits the rate of interest a covered servicemember may be charged, including certain fees, as well as the actions that can be taken while the consumer is a covered servicemember, including limitations on the ability to maintain legal action and obtain default judgments.

Truth in Lending Act (“TILA”) - TILA and its implementing regulations known as Regulation Z require creditors to deliver disclosures to borrowers during the life cycle of a loan or RISA, including when publishing certain advertisements, at application, at account opening and at consummation.

The SCRA limits the rate of interest, including certain fees, that a covered servicemember may be charged, as well as the actions, including limitations on the ability to maintain legal action and obtain default judgments, that can be taken while the consumer is a covered servicemember.

Truth in Lending Act (“TILA”) — TILA and its implementing regulation known as Regulation Z, require creditors to deliver disclosures to borrowers at certain points during the life cycle of a loan or RISA, including when publishing certain advertisements, at application, at account opening and at consummation.

The requirements may vary based upon product type (e.g., open-end versus closed-end credit products), as well as the timing and nature of certain events (e.g., post-consummation events).

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The GLBA and other laws also require the Company to safeguard personal information.

The FTC regulates the safeguarding requirements of the GLBA for non-bank lenders through its Safeguard Rules and recently amended the Safeguards Rules, which are currently scheduled to become effective on June 9, 2023, and with which the Company is required to comply.

Fair Credit Reporting Act (“FCRA”) - The Company is subject to the FCRA and its implementing regulation known as Regulation V, as both a user of consumer reports and a furnisher of consumer credit information to credit reporting agencies.

The FCRA regulates the use of consumer reports and reporting of information to credit reporting agencies.

Specifically, the FCRA establishes requirements that apply to the use of “consumer reports” and similar data, including certain notifications to consumers, including when an adverse action, such as a loan declination, is based on information contained in a consumer report.

The FTC regulates the safeguarding requirements of the GLBA for non-bank lenders through its Safeguard Rules and recently amended the Safeguard Rules, which became effective on June 9, 2023, and with which the Company is required to comply.

Since that time, the FTC further amended the Safeguards Rule on October 27, 2023, which will become effective on May 13, 2024, and with which the Company will be required to comply.

Fair Credit Reporting Act (“FCRA”) — The Company is subject to the FCRA and its implementing regulation known as Regulation V, which regulate the use of consumer reports and reporting of information to credit reporting agencies.

Specifically, the FCRA establishes requirements that apply to the use of “consumer reports” and similar data, including certain notifications to consumers, such as when an adverse action (e.g.

loan declination), is based on information contained in a consumer report.

The Company only obtains and uses consumer reports subject to the permissible purpose requirements under the FCRA, which also permits the Company to share its experiential information, information obtained from consumer reporting agencies and other customer information with affiliates.

The Company complies with notice and opt-out requirements for prescreen solicitations and for certain information sharing under the FCRA and conducts reasonable investigations of disputes as applicable.

The Company also has implemented an identity theft prevention program to fulfill the requirements of the Red Flags Regulations and Guidelines issued under the Fair and Accurate Credit Transactions Act (the “FACTA”).

Anti-Corruption — The Company is subject to the U.S.

Foreign Corrupt Practices Act (the “FCPA”) and other similar laws in other jurisdictions which generally prohibit companies and their agents or intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits.

Brady Handgun Violence Prevention Act (“Brady Act”) - Each U.S.

pawn store location that handles pawned firearms or buys and sells firearms must comply with the Brady Act.

Foreign Corrupt Practices Act (“FCPA”) and other similar laws in other jurisdictions, which generally prohibit companies and their agents or intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits.

Brady Handgun Violence Prevention Act (“Brady Act”) — U.S.

pawn store locations that handle pawned firearms or buy and sell firearms must comply with the Brady Act.

The Brady Act requires that federally licensed firearms dealers conduct a background check in connection with releasing, selling or otherwise disposing of firearms.

In addition, the Company must also comply with various state law provisions and the regulations of the U.S.

Department of Justice-Bureau of Alcohol, Tobacco and

Firearms that require each pawn lending location dealing in guns to obtain a Federal Firearm License (“FFL”) and maintain a permanent record of all receipts and dispositions of firearms.

Department of Justice-Bureau of Alcohol, Tobacco and Firearms that require each pawn lending location dealing in guns to obtain a Federal Firearm License (“FFL”) and maintain a permanent record of all receipts and dispositions of firearms.

Telephone Consumer Protection Act — The Company is subject to the Telephone Consumer Protection Act and its implementing regulations (together, the “TCPA”) and the regulations of the Federal Communications Commission.

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Pawn Business — The Company operates pawn stores in 29 U.S.

states and the District of Columbia, all of which have licensing and/or fee regulations on pawnshop operations and employees, and are subject to regular state level regulatory audits.

In general, state statutes and regulations establish licensing requirements for pawnbrokers and may regulate various aspects of pawn transactions, including the purchase and sale of merchandise, service charges, interest rates, the content and form of the pawn transaction agreement and the length of time a pawnbroker must hold a purchased item or forfeited pawn before it is made available for sale.

states and the District of Columbia, all of which jurisdictions have licensing and/or fee regulations on pawnshop operations and employees, and are subject to regular regulatory audits in many states.

In general, state statutes and regulations establish licensing requirements for pawnbrokers and may regulate various aspects of pawn transactions, including the purchase and sale of merchandise, service charges, fees and interest rates, the content and form of the pawn transaction agreement and the length of time a pawnbroker must hold a purchased item or forfeited pawn before it is made available for sale.

Additionally, these statutes and regulations in various jurisdictions restrict or prohibit the Company from transferring and/or relocating its pawn licenses and restrict or prohibit the issuance of new licenses.

Many of the Company’s pawn locations are also subject to local ordinances that require, among other things, local permits, licenses, record keeping requirements and procedures, reporting of daily transactions, and adherence to local law enforcement “do-not-buy-lists” by checking databases created and maintained by law enforcement.

AFF Business - In addition to federal regulatory oversight, currently, nearly every state specifically regulates LTO transactions via state statutes and regulations.

Many of the Company’s pawn locations are also subject to local ordinances that require, among other things, local permits, licenses, record keeping requirements and procedures, daily transactions reports, and adherence to local law enforcement “do-not-buy-lists” by checking databases created and maintained by law enforcement.

AFF Business — In addition to federal regulatory oversight, nearly every state currently and specifically regulates LTO transactions via state statutes and regulations.

This includes states in which AFF operates through existing merchant partners.

The scope of state LTO regulation, including permissible rental rates, fees and terms, varies from state to state.

The scope of LTO regulation, including permissible rental rates, fees and terms, varies from state to state.

Some states require specific disclosures, mandate or prohibit certain terms and limit the total cost of ownership and fees that may be charged.

Most state LTO laws require LTO companies to disclose to their customers the total number of payments, total amount and timing of all payments to acquire ownership of an item, any other charges that may be imposed and miscellaneous other items.

Most state LTO laws require LTO companies to disclose to their customers the total number of payments, total amount and timing of all payments to acquire ownership of an item, and any other charges that may be imposed.

The more restrictive state LTO laws limit the retail price for an item, limit the total cost of ownership that a customer may be required to pay to obtain ownership of an item, and/or regulate the "cost-of-rental" amount that LTO companies may charge on LTO transactions, generally defining "cost-of-rental" as lease fees paid in excess of the "retail" price of the goods.

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Some states also specifically regulate via statutes and regulations the RISA transactions that AFF purchases from merchants.

The scope of state RISA regulation varies from state to state.

Most state RISA laws require certain consumer-facing disclosures.

Some state RISA laws require AFF, as a purchaser of RISA transactions, to obtain a license or file a registration or notification with the applicable state regulator.

The scope of such RISA regulation varies from state to state.

Most state RISA laws require certain consumer-facing disclosures, and some state RISA laws require AFF, as a purchaser of RISA transactions, to obtain a license or file a registration or notification with the applicable state regulator.

Where licensing or registration is required, AFF is subject to extensive state rules, licensing and examination.

Failure to comply with these requirements may result in, among other things, refunds of excess charges, monetary penalties, revocation of required licenses, voiding of RISA transactions and other administrative enforcement actions.

With respect to AFF’s servicing of the Bank’s loans in which AFF holds an interest in the receivables, certain state statutes and regulations require that AFF maintain certain licenses and provide periodic reporting of activities related to that servicing activity.

As a result of such licensure, AFF may also be subject to periodic supervisory examination by the applicable state regulator to review AFF’s business activities during the servicing process for compliance with applicable state laws.

Failure to maintain required licenses or act in compliance with applicable law may result in adverse findings, including potential enforcement, as well as refunds of excess charges, monetary penalties, revocation of licenses, and other administrative or enforcement actions.

Failure to comply with these requirements may result in, among other things, refunds of excess charges, monetary penalties, revocation of required licenses, and voiding of RISA transactions.

With respect to AFF’s sub-servicing of the Bank’s loans in which AFF holds an interest in the receivables, certain state statutes and regulations require that AFF maintain certain licenses and provide periodic reporting of activities related to that servicing activity.

As a result of such licensure, AFF may also be subject to periodic supervisory examination by the applicable state regulator to review AFF’s business activities during the sub-servicing process for compliance with applicable state laws.

Failure to maintain required licenses or act in compliance with applicable law may result in adverse findings, including, among others, potential enforcement, refunds of excess charges, monetary penalties and/or revocation of licenses.

In addition, from time to time, state regulatory agencies and state attorneys general have directed investigations or regulatory initiatives toward the Company’s industry or toward certain companies within the industry.

Mexico Regulations

The Company’s pawn business in Mexico is subject to various federal, state and local regulatory regimes affecting the pawn industry, as well as general business regulations in the areas of tax compliance, customs, consumer protections, anti-money laundering, public safety and employment matters, among others, by various federal, state and local governmental agencies.

Procuraduria Federal del Consumidor (“PROFECO”) - The Company’s pawn business in Mexico is regulated by PROFECO, Mexico’s primary federal consumer protection agency, which requires the Company to annually register its pawn stores, approve pawn contracts and disclose the interest rate and fees charged on pawn transactions.

PROFECO regulates the form and non-financial terms of pawn contracts and defines certain operating standards and procedures for pawnshops, including retail operations, consumer disclosures and establishes reporting requirements and requires all pawn businesses and their owners to register annually with and be approved by PROFECO in order to legally operate.

In addition, all operators must comply with additional customer notice and disclosure provisions, bonding and insurance requirements to insure against loss or insolvency, reporting of certain types of suspicious transactions, and reporting to state law enforcement officials of certain transactions (or series of transactions) or suspicious transactions on a monthly basis to states’ attorneys general offices.

The Company’s pawn business in Mexico is subject to various federal, state and local regulatory regimes affecting the pawn industry, as well as general business regulations in the areas of tax compliance, customs, consumer protection, anti-money laundering, public safety and employment matters, among others, by various federal, state and local governmental agencies.

Procuraduria Federal del Consumidor (“PROFECO”) — The Company’s pawn business in Mexico is regulated by PROFECO, Mexico’s primary federal consumer protection agency, which requires the Company to annually register its pawn stores, approve pawn contracts and disclose the interest rates and fees charged on pawn transactions.

PROFECO regulates the form and non-financial terms of pawn contracts and defines certain operating standards and procedures for pawnshops and consumer disclosures, establishes reporting requirements and requires all pawn businesses and their owners to register annually with and be approved by PROFECO in order to legally operate.

Furthermore, as part of the new pawnshop application requirements, employees of new stores must obtain a pawnbroker certification.

All operators must also comply with additional customer notice and disclosure provisions, bonding and insurance requirements to insure against loss or insolvency, reporting of certain types of suspicious transactions, and reporting to state law enforcement officials of certain transactions (or

series of transactions) on a monthly basis to states’ attorneys general offices.

There are significant fines and sanctions, including license revocation and operating suspensions, for failure to register and/or comply with PROFECO’s rules and regulations.

Anti-Money Laundering — Mexico’s anti-money laundering regulations, The Federal Law for the Prevention and Identification of Transactions with Funds From Illegal Sources, requires monthly reporting of certain transactions (or series of transactions) exceeding certain monetary limits, imposes strict maintenance of customer identification records and controls, and requires reporting of all foreign (non-Mexican) customer transactions.

Privacy Laws - Mexico’s Federal Personal Information Protection Act requires companies to protect their customers’ personal information, among other things.

Mexico State and Local Regulations

Certain state and local governmental entities in Mexico also regulate pawn and retail businesses through state laws and local zoning and permitting ordinances.

For example, in certain states where the Company has significant or concentrated operations, states have enacted legislation or implemented regulations which require items such as special state operating permits for pawn stores, certification of pawn employees trained in valuation of merchandise, strict customer identification controls, collateral ownership certifications and/or detailed and specified transactional reporting of customers and operations.

Certain other states have proposed similar legislation but have not yet enacted such legislation.

Privacy Laws — Mexico’s Federal Personal Information Protection Act requires companies to protect, among other things, their customers’ personal information.

State and Local Regulations — Certain state and local governmental entities in Mexico also regulate pawn and retail businesses through state laws and local zoning and permitting ordinances.

For example, in certain states where the Company has significant or concentrated operations, states have enacted legislation or implemented regulations which require special state operating permits for pawn stores, certification of pawn employees trained in valuation of merchandise, strict customer identification controls, collateral ownership certifications and/or detailed and specified transactional reporting of customers and operations.

Certain other states have proposed, but have not yet enacted, similar legislation.

Furthermore, certain municipalities in Mexico have attempted to further regulate or limit the operation of new and existing pawn stores through additional local business licensing, such as operating licenses, signage permits and safety permits, in addition to reporting requirements and the enactment of transaction taxes on certain pawn transactions.

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The Company’s primary corporate website is www.firstcash.com .

The Company makes available, free of charge, at its corporate website, its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after they are electronically filed with the Securities and Exchange Commission (“SEC”).

The Company makes available, free of charge, on its corporate website, its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after they are electronically filed with the SEC.

The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business