Firstcash Holdings Inc.

02/09/2026 | Press release | Distributed by Public on 02/09/2026 14:56

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
General
The Company's primary business line is the operation of retail pawn stores, also known as "pawnshops," which focus on serving cash- and credit-constrained consumers. The Company is the leading operator of pawn stores in the U.S., Latin America and the U.K. Pawn stores help customers meet small short-term cash needs by providing non-recourse pawn loans and buying merchandise directly from customers. Personal property, such as jewelry, electronics, tools, appliances, sporting goods and musical instruments, is pledged and held as collateral for the pawn loans over the term of the loan. Pawn stores also generate retail sales primarily from the merchandise acquired through collateral forfeitures and over-the-counter purchases from customers.
The Company completed the acquisition of H&T, the leading pawn operator in the United Kingdom with 286 store locations, on August 14, 2025, the date which the balance sheet and operating results of H&T were included in the Company's consolidated financial results. For further detail, see Note 3 of Notes to Consolidated Financial Statements.
The Company is also a leading provider of customer payment solutions at the POS for retailers of consumer goods and services, which it conducts solely through AFF. The Company's customer payment solutions business line focuses on LTO products and facilitating other retail financing payment options across a large network of traditional and e-commerce merchant partners in the U.S. AFF's retail partners provide consumer goods and services to their customers and use AFF's LTO and retail finance solutions to facilitate payments on such transactions.
The Company's two business lines are organized into four reportable segments. The U.S. pawn segment consists of pawn operations in 29 U.S. states and the District of Columbia; the Latin America pawn segment consists of pawn operations in Mexico, Guatemala, El Salvador and Colombia; and the U.K. pawn segment consists of pawn operations in England, Scotland and Wales. The retail POS payment solutions segment consists of the operations of AFF in the U.S. Financial information regarding the Company's revenue and long-lived assets by geographic area is provided in Note 17 of Notes to Consolidated Financial Statements.
Critical Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities, related revenue and expenses, and disclosure of gain and loss contingencies at the date of the financial statements. Such estimates, assumptions and judgments are subject to a number of risks and uncertainties, which may cause actual results to differ materially from the Company's estimates.
The critical accounting policies and estimates that could have a significant impact on the Company's results of operations are described in Note 2 of Notes to Consolidated Financial Statements. The Company believes the following critical accounting policies describe the more significant judgments and estimates used in the preparation of its consolidated financial statements.
Pawn loans and revenue recognition- Pawn loans are secured by the customer's pledge of tangible personal property, which the Company holds during the term of the loan. If a pawn loan defaults, the Company relies on the sale of the pawned property to recover the principal amount of an unpaid pawn loan, plus a yield on the investment, as the Company's pawn loans are non-recourse against the customer. The Company accrues pawn loan fee revenue on a constant-yield basis over the life of the pawn loan for all pawns for which the Company deems collection to be probable based on historical pawn redemption statistics, which is included in accounts receivable, net in the accompanying consolidated balance sheets. If the pawn loan is not repaid prior to the expiration of the pawn loan term, including any extension or grace period, if applicable, the principal amount loaned becomes the inventory carrying value of the forfeited collateral, which is typically recovered through sales of the forfeited items at prices well above the carrying value. The Company has determined no allowance related to credit losses on pawn loans is required, as the fair value of the pledged collateral is significantly in excess of the pawn loan amount.
Leased merchandise and revenue recognition- The Company provides merchandise, consisting primarily of furniture and mattresses, appliances, jewelry, electronics and automotive products, to customers of its merchant partners for lease under certain terms agreed to by the customer. The customer has the right to acquire the title either through an early buyout option or through payment of all required lease payments. The Company maintains ownership of the leased merchandise until all payment obligations are satisfied under the lease agreement. The customer has the right to cancel the lease at any time by returning the merchandise. Leased merchandise contracts can typically be renewed for weekly, bi-weekly, semi-monthly, and monthly renewal periods and are generally renewed for between six and 24 months. Leased merchandise is stated at depreciated cost. The Company depreciates leased merchandise over the life of the lease and assumes no salvage value. Depreciation is
accelerated upon an early buyout. All of the Company's leased merchandise represents on-lease merchandise and all leases are operating leases.
Lease income is recognized over the lease term and is recorded net of any sales taxes collected. Charges for late fees and insufficient fund fees are recognized as income when collected. Initial direct costs related to the Companyʼs lease agreements are added to the basis of the leased property and recognized over the lease term in proportion to the recognition of lease income. The Company typically charges the customer a non-refundable processing fee at lease inception and may also receive a discount from or pay a premium to certain merchant partners for leases originated at their locations, which are deferred and amortized using the straight-line method as adjustments to lease income over the contractual life of the related leased merchandise. Unamortized fees, discounts and premiums are recognized in full upon early buyout or charge-off.
The Company accrues lease income earned but not yet collected as accrued rent receivable, which is included in accounts receivable, net in the accompanying consolidated balance sheets. Alternatively, lease payments received in excess of the amount earned are recognized as deferred revenue, which is included in customer deposits and prepayments in the accompanying consolidated balance sheets. Customer payments are first applied to applicable sales tax and scheduled lease payments, then applied to any uncollected fees, such as late fees and insufficient fund fees. The Company collects sales taxes on behalf of the customer and remits all applicable sales taxes collected to the respective jurisdiction.
Provision for lease losses - The Company records a provision for lease losses on an allowance method, which estimates the leased merchandise losses incurred but not yet identified by management as of the end of the accounting period. The allowance for lease losses is based primarily upon historical loss experience, with consideration given to recent and forecasted business trends including, but not limited to, loss trends, delinquency levels, economic conditions, underwriting and collection practices.
The Company charges off leased merchandise when a lease is 90 days or more contractually past due. If an account is deemed to be uncollectible prior to this date, the Company will charge off the leased merchandise at the point in time it is deemed uncollectible.
Finance receivables and revenue recognition - The Company purchases and services retail finance receivables, the term of which typically range from six to 24 months, directly from its merchant partners or from its bank partner. The Company has a partnership with a Utah state-chartered bank that requires the Company to purchase the rights to the cash flows associated with certain finance receivables marketed to retail consumers on the bank's behalf. The bank establishes the underwriting criteria for the finance receivables originated by the bank.
Interest income is recognized using the interest method over the life of the finance receivable for all loans for which the Company deems collection to be probable based on historical loan redemption statistics and stops accruing interest upon charge-off. Charges for late fees and insufficient fund fees are recognized as income when collected. The Company receives an origination fee on newly purchased bank loans and may receive a discount from or pay a premium to certain merchant partners for finance receivables purchased from them, which are deferred and amortized using the interest method as adjustments to yield over the contractual life of the related finance receivable. Unamortized origination fees, discounts and premiums are recognized in full upon early payoff or charge-off.
The Company offers customers an early payoff discount on most of its finance receivables, whereby the customer has between 90 and 101 days to pay the full principal balance without incurring any interest charge. If the borrower does not pay the full principal balance prior to the expiration of the early payoff discount period, interest charges are applied retroactively to the inception date of the loan. The Company accrues interest income during the early payoff discount period but records a reserve for loans expected to pay the full principal balance prior to the expiration of the early payoff discount period based on historical payment patterns.
Provision for loan losses - Expected lifetime losses on finance receivables are recognized upon loan purchase, which requires the Company to make its best estimate of probable lifetime losses at the time of purchase. The Company segments its finance receivable portfolio into pools of receivables with similar risk characteristics, which include loan product and monthly origination vintage, and evaluates each pool for impairment.
The Company calculates the allowance for loan losses based on historical loss information and incorporates observable and forecasted economic conditions over a reasonable and supportable forecast period covering the full contractual life of finance receivables. Incorporating observable and forecasted economic conditions could have a material impact on the measurement of the allowance to the extent that forecasted economic conditions change significantly. The Company may also consider other qualitative factors to address recent and forecasted business trends in estimating the allowance, as necessary, including, but not limited to, loss trends, delinquency levels, economic conditions, underwriting and collection practices. The allowance for loan
losses is maintained at a level considered appropriate to cover expected lifetime losses on the finance receivable portfolio, and the appropriateness of the allowance is evaluated at each period end.
The Company charges off finance receivables when a receivable is 90 days or more contractually past due. If an account is deemed to be uncollectible prior to this date, the Company will charge off the finance receivable at the point in time it is deemed uncollectible.
Off-balance sheet installment loans - During the third quarter of 2025, the Company began assisting certain customers in applying for an OBS Loan that is underwritten and fully retained by a bank partner. After origination of the OBS Loan by the bank, the Company assumes responsibility for servicing the loan on behalf of the bank for the remaining term of the loan. The Company does not purchase the loan or the rights to a portion of the cash flows of the loan from the bank. As such, these loans are not reflected on the Company's balance sheet as a finance receivable.
The Company receives certain servicing and other fees associated with performing OBS Loans from the bank, which are included in interest and fees on finance receivables in the accompanying consolidated statements of income. However, if an OBS Loan becomes 90 days contractually past due, the Company is obligated to reimburse the bank for the outstanding principal amount plus accrued interest. This obligation constitutes an off-balance sheet credit exposure for which the Company is required to recognize, upon inception of the obligation, a liability for the expected lifetime losses, which is included in accrued liabilities in the accompanying consolidated balance sheets.
The Company calculates the liability for expected lifetime losses based on historical loss information and incorporates observable and forecasted economic conditions over a reasonable and supportable forecast period covering the full contractual life of the off-balance sheet credit exposure. Incorporating observable and forecasted economic conditions could have a material impact on the measurement of the liability to the extent that forecasted economic conditions change significantly. The Company may also consider other qualitative factors to address recent and forecasted business trends in estimating the liability, as necessary, including, but not limited to, loss trends, delinquency levels, economic conditions, underwriting and collection practices. The liability for off-balance sheet credit exposure is maintained at a level considered appropriate to cover expected lifetime losses of the off-balance sheet credit exposure, and the appropriateness of the liability is evaluated at each period end.
Business combinations- Business combination accounting requires the Company to determine the fair value of all assets acquired, including identifiable intangible assets, liabilities assumed and contingent consideration issued in a business combination. The total consideration of the acquisition is allocated to the assets and liabilities in amounts equal to the estimated fair value of each asset and liability as of the acquisition date, and any remaining acquisition consideration is classified as goodwill. This allocation process requires extensive use of estimates and assumptions. When appropriate, the Company utilizes independent valuation experts to advise and assist in determining the fair value of the assets acquired and liabilities assumed in connection with a business acquisition, in determining appropriate amortization methods and periods for identified intangible assets and in determining the fair value of contingent consideration, which is reviewed at each subsequent reporting period with changes in the fair value of the contingent consideration recognized in the consolidated statement of income. See Note 3 of Notes to Consolidated Financial Statements.
Goodwill and other indefinite-lived intangible assets- Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in each business combination. The Company performs its goodwill impairment assessment annually as of October 1, and between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company's reporting units, which are tested for impairment, are U.S. pawn, Latin America pawn, U.K. pawn and retail POS payment solutions. The Company may assess goodwill for impairment at a reporting unit level by first assessing a range of qualitative factors, including, but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for the Company's products and services, regulatory and political developments, entity specific factors, such as strategy and changes in key personnel, and overall financial performance. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company proceeds to the quantitative impairment testing methodology, or at the Company's option, it may proceed directly to the quantitative impairment testing methodology for a reporting unit. See Note 14 of Notes to Consolidated Financial Statements.
The Company's other material, indefinite-lived intangible assets consist of certain trade names and pawn licenses. The Company performs its indefinite-lived intangible asset impairment assessment annually as of December 31, and between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of an indefinite-lived intangible asset below its carrying amount. See Note 14 of Notes to Consolidated Financial Statements.
Results of Operations
2025 Consolidated Operating Results Highlights
The following table sets forth revenue, net income, diluted earnings per share, adjusted net income, adjusted diluted earnings per share, EBITDA and adjusted EBITDA for the year ended December 31, 2025 as compared to the year ended December 31, 2024 (in thousands, except per share amounts):
Year Ended December 31,
As Reported (GAAP) Adjusted (Non-GAAP)
Increase / Increase /
2025 2024 (Decrease) 2025 2024 (Decrease)
Revenue $ 3,661,043 $ 3,388,514 8 % $ 3,661,043 $ 3,388,514 8 %
Net income $ 330,375 $ 258,815 28 % $ 390,142 $ 302,680 29 %
Diluted earnings per share $ 7.42 $ 5.73 29 % $ 8.76 $ 6.70 31 %
EBITDA (non-GAAP measure) $ 677,727 $ 551,008 23 % $ 698,389 $ 558,437 25 %
Weighted-average diluted shares 44,526 45,168 (1) % 44,526 45,168 (1) %
See "Non-GAAP Financial Information-Adjusted Net Income and Adjusted Diluted Earnings Per Share and -Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA" below.
The following charts present net income, adjusted net income, diluted earnings per share, adjusted diluted earnings per share, EBITDA, adjusted EBITDA and revenue for the years ended December 31, 2025, 2024 and 2023 (in millions, except per share amounts):
* Non-GAAP financial measures. See "Non-GAAP Financial Information" for additional discussion of non-GAAP financial measures.
The following charts present total assets and earning assets as of December 31, 2025, 2024 and 2023 (in millions):
The following charts present share repurchases, dividends paid, operating cash flow and adjusted free cash flow for the years ended December 31, 2025, 2024 and 2023 (in millions):
* Non-GAAP financial measures. See "Non-GAAP Financial Information" for additional discussion of non-GAAP financial measures.
Operating Results for the Twelve Months Ended December 31, 2025 Compared to the Twelve Months Ended December 31, 2024
The following tables and related discussion set forth key operating and financial data for the Company's operations by reporting segment as of and for the years ended December 31, 2025 and 2024. For similar operating and financial data and discussion of the Company's 2024 results compared to its 2023 results, refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations"under Part II of the Company's Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 3, 2025.
Stores included in the same-store calculations presented in the U.S. pawn segment and Latin America pawn segment sections below are those stores that were opened or acquired prior to the beginning of the prior-year comparative period and remained open through the end of the reporting period. Also included are stores that were relocated during the applicable period within a specified distance and are serving the same market, where there is not a significant change in store size, and where there is not a significant overlap or gap in timing between the opening of the new store and the closing of the existing store.
The following tables present segment information for the year ended December 31, 2025 as compared to the year ended December 31, 2024 (in thousands). Operating expenses include salary and benefit expenses of pawn store-level employees and certain of AFF's operations-focused departments, occupancy costs, bank and other payment processing charges, data analytics and decisioning costs, information technology costs, advertising costs, security, insurance, utilities, supplies, other costs incurred by the pawn stores and other operational costs incurred by AFF. Administrative expenses and amortization expense of acquired intangible assets are not included in the segment pre-tax operating income.
Year Ended December 31, 2025
U.S.
Pawn 		Latin
America
Pawn
U.K.
Pawn (1)
Retail POS
Payment
Solutions 		Corporate/
Intersegment Eliminations 		Consolidated
Revenue:
Retail merchandise sales $ 1,046,258 $ 584,129 $ 40,767 $ - $ (2,744)
(2)
$ 1,668,410
Pawn loan fees 555,035 254,061 44,640 - - 853,736
Leased merchandise income - - - 559,028 - 559,028
Interest and fees on finance receivables - - - 311,189 - 311,189
Wholesale scrap jewelry sales 152,089 51,334 59,167 - - 262,590
Other revenue - - 6,090 - - 6,090
Total revenue 1,753,382 889,524 150,664 870,217 (2,744) 3,661,043
Cost of revenue:
Cost of retail merchandise sold 601,943 378,538 29,125 - (1,458)
(2)
1,008,148
Depreciation of leased merchandise - - - 320,106 (985)
(2)
319,121
Provision for lease losses - - - 120,701 (339)
(2)
120,362
Provision for loan losses - - - 162,706 - 162,706
Cost of wholesale scrap jewelry sold 129,926 43,725 35,034 - - 208,685
Other cost of revenue - - 1,414 - - 1,414
Total cost of revenue 731,869 422,263 65,573 603,513 (2,782) 1,820,436
Net revenue 1,021,513 467,261 85,091 266,704 38 1,840,607
Expenses and other income:
Operating expenses 536,552 272,060 30,329 94,788 - 933,729
Administrative expenses - - - - 232,844 232,844
Depreciation and amortization 32,393 17,755 2,276 2,790 56,592 111,806
Interest expense - - - - 121,293 121,293
Interest income - - - - (2,935) (2,935)
Gain on foreign exchange
- - - - (2,178) (2,178)
Merger and acquisition expenses - - - - 14,369 14,369
Other income, net
- - - - (15,884) (15,884)
Total expenses and other income 568,945 289,815 32,605 97,578 404,101 1,393,044
Income (loss) before income taxes $ 452,568 $ 177,446 $ 52,486 $ 169,126 $ (404,063) $ 447,563
(1)Reflects the operations of H&T for the period August 14, 2025 to December 31, 2025 as a result of the completion of the H&T Acquisition on August 14, 2025.
(2)Represents the elimination of intersegment transactions related to the Company offering AFF's LTO payment solution in its U.S. pawn stores.
Year Ended December 31, 2024
U.S.
Pawn 		Latin
America
Pawn
U.K.
Pawn
Retail POS
Payment
Solutions 		Corporate/
Intersegment Eliminations 		Consolidated
Revenue:
Retail merchandise sales $ 969,371 $ 541,787 $ - $ - $ (4,062)
(1)
$ 1,507,096
Pawn loan fees 505,262 231,864 - - - 737,126
Leased merchandise income - - - 766,241 - 766,241
Interest and fees on finance receivables - - - 245,891 - 245,891
Wholesale scrap jewelry sales 93,923 38,237 - - - 132,160
Total revenue 1,568,556 811,888 - 1,012,132 (4,062) 3,388,514
Cost of revenue:
Cost of retail merchandise sold 560,970 350,906 - - (2,191)
(1)
909,685
Depreciation of leased merchandise - - - 434,915 (1,609)
(1)
433,306
Provision for lease losses - - - 163,937 (542)
(1)
163,395
Provision for loan losses - - - 143,827 - 143,827
Cost of wholesale scrap jewelry sold 77,683 31,086 - - - 108,769
Total cost of revenue 638,653 381,992 - 742,679 (4,342) 1,758,982
Net revenue 929,903 429,896 - 269,453 280 1,629,532
Expenses and other income:
Operating expenses 503,630 259,307 - 138,041 - 900,978
Administrative expenses - - - - 177,978 177,978
Depreciation and amortization 28,980 20,369 - 2,783 52,809 104,941
Interest expense - - - - 105,226 105,226
Interest income - - - - (1,935) (1,935)
Loss on foreign exchange
- - - - 2,641 2,641
Merger and acquisition expenses - - - - 2,228 2,228
Other income, net
- - - - (5,301) (5,301)
Total expenses and other income 532,610 279,676 - 140,824 333,646 1,286,756
Income (loss) before income taxes $ 397,293 $ 150,220 $ - $ 128,629 $ (333,366) $ 342,776
(1)Represents the elimination of intersegment transactions related to the Company offering AFF's LTO payment solution in its U.S. pawn stores.
The following tables detail earning assets, which consist of pawn loans and inventories as well as other earning asset metrics of the pawn segments, as of December 31, 2025 as compared to December 31, 2024 (dollars in thousands, except as otherwise noted):
As of December 31, 2025
U.S.
Pawn
Latin America
Pawn
U.K.
Pawn
Total
Pawn
Earning assets:
Pawn loans $ 450,516 $ 167,438 $ 213,543 $ 831,497
Inventories 286,102 129,269 71,861 487,232
$ 736,618 $ 296,707 $ 285,404 $ 1,318,729
Average outstanding pawn loan amount (in ones) $ 312 $ 112 $ 825 $ 259
Composition of pawn collateral:
Jewelry 73 % 48 % 98 % 75 %
General merchandise 27 % 52 % 2 % 25 %
100 % 100 % 100 % 100 %
Composition of inventories:
Jewelry 62 % 43 % 99 % 62 %
General merchandise 38 % 57 % 1 % 38 %
100 % 100 % 100 % 100 %
Percentage of inventory aged greater than one year 1.8 % 1.4 % 13.3 % 3.4 %
Inventory turns (trailing twelve months cost of merchandise sales divided by average inventories) 2.8 times 4.0 times 2.5 times 3.1 times
Store count 1,207 1,837 286 3,330
Average store count 1,197 1,831 119 3,147
As of December 31, 2024
U.S.
Pawn
Latin America
Pawn
U.K.
Pawn
Total
Pawn
Earning assets:
Pawn loans $ 396,667 $ 121,200 $ - $ 517,867
Inventories 245,492 89,088 - 334,580
$ 642,159 $ 210,288 $ - $ 852,447
Average outstanding pawn loan amount (in ones) $ 283 $ 87 $ - $ 185
Composition of pawn collateral:
Jewelry 72 % 42 % - % 65 %
General merchandise 28 % 58 % - % 35 %
100 % 100 % - % 100 %
Composition of inventories:
Jewelry 59 % 35 % - % 52 %
General merchandise 41 % 65 % - % 48 %
100 % 100 % - % 100 %
Percentage of inventory aged greater than one year 1.5 % 1.4 % - % 1.4 %
Inventory turns (trailing twelve months cost of merchandise sales divided by average inventories) 2.8 times 4.2 times - 3.2 times
Store count 1,200 1,826 - 3,026
Average store count 1,195 1,821 - 3,016
U.S. Pawn Segment
Retail Merchandise Sales Operations
U.S. retail merchandise sales increased 8% to $1,046.3 million during 2025 compared to $969.4 million for 2024. Same-store retail sales increased 6% during 2025 compared to 2024. The increase in total and same-store retail sales was primarily due to continued strong demand for value priced merchandise and increased inventory levels during 2025 compared to 2024. The gross profit margin on retail merchandise sales in the U.S. was 42% during both 2025 and 2024.
U.S. inventories increased 17% to $286.1 million at December 31, 2025 compared to $245.5 million at December 31, 2024. The increase was primarily due to increases in pawn loan receivable balances creating more forfeited inventory. Inventories aged greater than one year in the U.S. were 1.8% at December 31, 2025 compared to 1.5% at December 31, 2024.
Pawn Lending Operations
U.S. pawn loan receivables as of December 31, 2025 increased 14% in total and 12% on a same-store basis compared to December 31, 2024. The Company believes the increase in same-store pawn receivables was primarily due to continued strong customer demand from a combination of more customer transactions and larger loan amounts requested by the Company's customers.
U.S. pawn loan fees increased 10% to $555.0 million during 2025 compared to $505.3 million for 2024. Same-store pawn loan fees increased 9% during 2025 compared to 2024. The increase in total and same-store pawn loan fees was primarily due to higher pawn loan balances.
Segment Expenses
U.S. store operating expenses increased 7% to $536.6 million during 2025 compared to $503.6 million during 2024 while same-store operating expenses increased 6% compared with the prior year. The increase in operating expenses was primarily due to increased labor and variable compensation expenses.
Segment Pre-Tax Operating Income
The U.S. segment pre-tax operating income for 2025 was $452.6 million, which generated a pre-tax segment operating margin of 26% compared to $397.3 million and 25% in the prior year, respectively. The increase in the segment pre-tax operating income and margin reflected increased net revenue, partially offset by an increase in segment expenses.
Latin America Pawn Segment
Latin America pawn segment pre-tax operating income for 2025 compared to 2024 was impacted by a 5% unfavorable change in the average value of the Mexican peso compared to the U.S. dollar. The translated value of Latin American earning assets as of December 31, 2025 compared to December 31, 2024 benefited from a 11% favorable change in the end-of-period Mexican peso compared to the U.S. dollar. Constant currency results are non-GAAP financial measures, which exclude the effects of foreign currency translation and are calculated by translating current-year results at prior-year average exchange rates. See the "Constant Currency Results" section in "Non-GAAP Financial Information" below for additional discussion of constant currency operating results.
Retail Merchandise Sales Operations
Latin America retail merchandise sales increased 8% (13% on a constant currency basis) to $584.1 million during 2025 compared to $541.8 million for 2024. Same-store retail sales increased 7% (12% on a constant currency basis) during 2025 compared to 2024. The increase in total and same-store retail sales was primarily due to strong demand for value priced merchandise and increased inventory levels during 2025 compared to 2024. The gross profit margin on retail merchandise sales was 35% during both 2025 and 2024.
Latin America inventories increased 45% (29% increase on a constant currency basis) to $129.3 million at December 31, 2025 compared to $89.1 million at December 31, 2024. The increase in constant currency inventories was primarily due to increases in pawn loan receivable balances over the past several quarters creating more forfeited inventory and a slightly increased mix of higher value jewelry inventory. Inventories aged greater than one year in Latin America were 1.4% at both December 31, 2025 and 2024.
Pawn Lending Operations
Latin America pawn loan receivables increased 38% (23% increase on a constant currency basis) as of December 31, 2025 compared to December 31, 2024. On a same-store basis, pawn loan receivables also increased 38% (23% increase on a constant currency basis) as of December 31, 2025 compared to December 31, 2024. The increase in constant currency total and same-store pawn receivables is primarily due to increasing demand for pawn loans and larger loan sizes, driven in part by higher gold prices and a slightly increased mix of higher value jewelry loans.
Latin America pawn loan fees increased 10% (15% on a constant currency basis) to $254.1 million during 2025 compared to $231.9 million for 2024. Same-store pawn loan fees increased 9% (14% on a constant currency basis) during 2025 compared to 2024. The constant currency increase in total and same-store pawn loan fees was primarily due to increased constant currency pawn receivables.
Segment Expenses
Operating expenses increased 5% (10% on a constant currency basis) to $272.1 million during 2025 compared to $259.3 million during 2024. Same-store operating expenses also increased 5% (10% on a constant currency basis) compared to the prior year. The constant currency increase in total and same-store operating expenses was primarily driven by general inflationary impacts and continued increases in the federally mandated minimum wage.
Segment Pre-Tax Operating Income
The segment pre-tax operating income for 2025 was $177.4 million, which generated a pre-tax segment operating margin of 20% compared to $150.2 million and 19% in the prior year, respectively. The increase in the segment pre-tax operating income and margin reflected the increase in net revenue, partially offset by an increase in operating expenses.
U.K. Pawn Segment
The segment contribution reflects the results of operations of H&T for the period August 14, 2025 to December 31, 2025 as a result of the completion of the H&T Acquisition on August 14, 2025. See Note 3 of Notes to Consolidated Financial Statements for additional information about the H&T Acquisition.
The U.K. pawn segment contributed $150.7 million in revenue and $52.5 million in pre-tax segment operating income for 2025. The resulting pre-tax segment operating margin was 35%.
U.K. pawn loan receivables were $213.5 million and inventories were $71.9 million as of December 31, 2025.
Retail POS Payment Solutions Segment
The following table details retail POS payment solutions gross transaction volumes originated during the year ended December 31, 2025 as compared to the year ended December 31, 2024 (dollars in thousands):
Year Ended December 31,
2025 2024
Leased merchandise $ 435,750 $ 568,635
Finance receivables(1)
586,115 510,231
Total gross transaction volume $ 1,021,865 $ 1,078,866
(1) For the year ended December 31, 2025 includes $32.6 million of OBS Loans the Company began offering during the third quarter of 2025.
The following table details retail POS payment solutions earning assets as of December 31, 2025 as compared to December 31, 2024 (dollars in thousands):
As of December 31,
2025 2024
Leased merchandise, net:
Leased merchandise, before allowance for lease losses $ 179,396 $ 209,333
Less allowance for lease losses (64,916) (80,661)
Leased merchandise, net (1)
$ 114,480 $ 128,672
Finance receivables, net:
Finance receivables, before allowance for loan losses $ 256,600 $ 264,506
Less allowance for loan losses (106,326) (117,005)
Finance receivables, net $ 150,274 $ 147,501
(1)Includes $0.2 million of intersegment transactions as of both December 31, 2025 and 2024, respectively, related to the Company offering AFF's LTO payment solution in its U.S. pawn stores that are eliminated upon consolidation.
The following table details the changes in the allowance for lease and loan losses and other portfolio metrics during the year ended December 31, 2025 as compared to the year ended December 31, 2024 (dollars in thousands):
Year ended December 31,
2025 2024
Leased merchandise portfolio metrics:
Provision rate (1)
27.7 % 28.8 %
Average monthly net charge-off rate (2)
5.9 % 6.3 %
Delinquency rate (3)
23.5 % 24.4 %
Finance receivables portfolio metrics:
Provision rate (1)
27.8 % 28.2 %
Average monthly net charge-off rate (2)
5.1 % 4.3 %
Delinquency rate (3)
21.2 % 20.0 %
(1)Calculated as provision for lease or loan losses as a percentage of the respective gross transaction volume originated.
(2)Calculated as charge-offs, net of recoveries, as a percentage of the respective average earning asset balance before allowance for lease or loan losses.
(3)Calculated as the percentage of the respective contractual earning asset balance owed that is 1 to 89 days past due (the Company charges off leases and finance receivables when they are 90 days or more contractually past due).
LTO Operations
Leased merchandise, before allowance for lease losses, decreased 14% as of December 31, 2025 compared to December 31, 2024. The decrease was primarily due to decreased gross transaction volumes originated resulting from the bankruptcy filings in late 2024 for two of AFF's larger retail furniture merchant partners, A-Freight and Conn's.
The allowance for lease losses decreased 20% to $64.9 million as of December 31, 2025 compared to $80.7 million as of December 31, 2024, which was primarily due to the decrease in leased merchandise and lower lease loss provisioning rates used during 2025 as compared to 2024. As a percentage of lease merchandise, the allowance was 36% at December 31, 2025 and 39% at December 31, 2024.
Leased merchandise income decreased 27% to $559.0 million during 2025 compared to $766.2 million during 2024, which was primarily due to lower average leased merchandise balances outstanding during 2025 compared to 2024.
Depreciation of leased merchandise decreased 26% to $320.1 million during 2025 compared to $434.9 million during 2024, primarily due to the decrease in leased merchandise balances outstanding. As a percentage of leased merchandise income, depreciation of leased merchandise was 57% during both 2025 and 2024.
Provision for lease losses decreased 26% to $120.7 million during 2025 compared to $163.9 million during 2024, which was primarily due to the 23% decrease in gross transaction volumes. As a percentage of gross transaction volume, the provision for lease losses decreased to 27.7% during 2025 compared to 28.8% during 2024.
Retail Finance and Lending Operations
Finance receivables, before allowance for loan losses, decreased 3% as of December 31, 2025 compared to December 31, 2024. The decrease was primarily due to decreased gross transaction volumes in the later part of 2025 compared to the later part of 2024, in part as a result of shifting a portion of transaction volume to OBS Loans beginning in the third quarter of 2025.
The allowance for loan losses decreased 9% to $106.3 million as of December 31, 2025 compared to $117.0 million as of December 31, 2024, which was primarily due to the decrease in finance receivables and lower loan loss provisioning rates used during 2025 as compared to 2024. As a percentage of finance receivables, the allowance was 41% at December 31, 2025 compared to 44% at December 31, 2024.
Interest and fees on finance receivables increased 27% to $311.2 million during 2025 compared to $245.9 million during 2024. The increase was primarily due to the higher average finance receivable balances outstanding during 2025 compared to 2024, partially offset by a slight decline in portfolio yield primarily as a result of AFF expanding its offerings and merchant relationships in certain services sector verticals, some of which are provided at lower interest rates.
Provision for loan losses increased 13% to $162.7 million during 2025 compared to $143.8 million during 2024, which was primarily due to the 15% increase in gross transaction volumes. As a percentage of gross transaction volume, the provision for loan losses decreased to 27.8% during 2025 compared to 28.2% during 2024.
Segment Expenses
Operating expenses decreased 31% to $94.8 million during 2025 compared to $138.0 million during 2024. The decrease was primarily due to the elimination of certain expenses associated with supporting the A-Freight and Conn's relationships along with continued realization of operating synergies, primarily in technology and development infrastructure, coupled with other cost reduction initiatives. As a percentage of segment revenues, operating expenses decreased to 11% during 2025 from 14% during 2024.
Segment Pre-Tax Operating Income
The retail POS payment solutions segment pre-tax operating income during 2025 was $169.1 million, which generated a pre-tax segment operating margin of 19% compared to $128.6 million and 13% in the prior year, respectively. The increase in the segment pre-tax operating income and margin was primarily the result of the decrease in operating expenses, partially offset by a decrease in segment net revenue.
Corporate Expenses and Taxes
Administrative expenses increased 31% to $232.8 million during 2025 compared to $178.0 million during 2024, primarily due to the CFPB litigation settlement in 2025, the incremental administrative expenses of H&T since the acquisition date, increased variable compensation expense and general inflationary impacts, partially offset by a 5% change in the average value of the Mexican peso resulting in lower U.S. dollar translated administrative expenses in Latin America. As a percentage of revenue, administrative expenses increased to 6% during 2025 compared to 5% during 2024.
Depreciation and amortization increased 7% to $56.6 million during 2025 compared to $52.8 million during 2024, primarily due to the addition of depreciation and amortization expenses of H&T during 2025.
Interest expense increased 15% to $121.3 million during 2025 compared to $105.2 million for 2024, primarily due to increased outstanding long-term debt balances associated with 2025 acquisition activity. See Note 11 of Notes to Consolidated Financial Statements and "Liquidity and Capital Resources."
Merger and acquisition expenses increased 545% to $14.4 million during 2025 compared to $2.2 million during 2024. The increase was due primarily to expenses associated with the H&T Acquisition.
Consolidated effective income tax rates for 2025 and 2024 were 26.2% and 24.5%, respectively. The increase in the effective tax rate was primarily due to certain non-deductible expenses incurred in 2025 related to the settlement of the CFPB lawsuit and certain acquisition costs associated with the H&T Acquisition. See Note 12 of Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
Material Capital Requirements
The Company's primary capital requirements include:
•Expansion of pawn operations through growth of pawn receivables and inventories in existing stores, new store openings, strategic acquisitions and purchases of underlying real estate at new and existing locations;
•Growth of earning assets in the retail POS payment solutions operations through transaction volumes generated from new and existing merchant partners; and
•Return of capital to shareholders through dividends and stock repurchases.
Other material capital requirements include operating expenses (see Note 4 of Notes to Consolidated Financial Statements regarding operating lease commitments), maintenance capital expenditures related to its facilities, technology platforms, general corporate operating activities, income tax payments and debt service, among others. The Company believes that net cash provided by operating activities and available and unused funds under its revolving credit facilities will be adequate to meet its liquidity and capital needs for these items over the next 12 months and also in the longer term beyond the next 12 months.
Expand Pawn Operations
The Company intends to continue expansion of its pawn operations through growth of pawn receivables and inventories in existing stores along with new store openings and acquisitions.
On August 14, 2025, the Company completed its previously announced acquisition of H&T, the leading pawn operator in the United Kingdom with 286 store locations. Under the terms of the H&T Acquisition, H&T shareholders received 650 pence per share in cash. The total equity value for the H&T Acquisition, including cash consideration for the shares, was £289.1 million ($392.4 million USD using the August 13, 2025 closing GBP/USD exchange rate of 1.36). H&T had outstanding indebtedness of £79.6 million as of August 14, 2025 ($108.0 million USD using the August 13, 2025 closing GBP/USD exchange rate of 1.36), which the Company assumed upon closing. The Company also incurred additional costs, expenses and fees for professional services, financing and other transaction and integration costs in connection with the H&T Acquisition and expects to continue to incur additional integration costs during 2026. The substantial majority of these costs will be non-recurring expenses relating to the H&T Acquisition. The Company financed the H&T Acquisition and other costs with available funds under the Credit Facility.
During 2025, the Company also acquired 23 pawn stores in the U.S. for a cumulative purchase price of $106.3 million, net of cash acquired and subject to future post-closing adjustments. The Company evaluates potential acquisitions based upon growth potential, purchase price, available liquidity, strategic fit and quality of management personnel, among other factors. During 2025, the Company also opened 32 new locations in Latin America, two new stores in the U.S. and one new store in the U.K.
For 2026, the Company expects to continue adding store locations through new store openings and acquisitions. Future store openings and acquisitions are subject to the Company's ability to identify acquisition opportunities and new location sites in markets with attractive demographics and favorable regulatory environments. The Company currently has no other contractual commitments for materially significant future acquisitions, business combinations or capital commitments.
Although viewed by management as a discretionary expenditure not required to operate its pawn stores, the Company may continue to strategically purchase real estate from its landlords at existing stores or in conjunction with pawn store acquisitions as opportunities arise at reasonable valuations. During 2025, the Company purchased the real estate at 43 store locations, primarily from landlords at existing stores, for a cumulative purchase price of $61.9 million. As of December 31, 2025, the Company owned the real estate at a total of 443 pawn locations, primarily in the U.S., along with its corporate headquarters building in Fort Worth, Texas.
Expand Retail POS Payment Solutions Operations
AFF expects to expand its business primarily by promoting and expanding relationships with both new and existing customers and retail merchant partners. In addition, AFF has made, and intends to continue to make, investments in its customer and merchant support operations and facilities, its technology platforms and its proprietary decisioning platforms and processes. In addition to utilizing cash flows generated from its own operations to fund expected 2026growth, AFF has access to the additional sources of liquidity described below if needed to fund further expansion activities.
Return of Capital to Shareholders
During 2025, the Company paid quarterly cash dividends to its shareholders totaling $70.9 million. In January 2026, the Board declared a $0.42 per share first quarter cash dividend on common shares outstanding, or an aggregate of $18.5 million based on the December 31, 2025 share count, to be paid on February 27, 2026 to stockholders of record as of February 18, 2026. While the Company currently expects to continue the payment of quarterly cash dividends, the amount, declaration and payment of cash dividends in the future (quarterly or otherwise) will be made by the Board, from time to time, subject to the Company's financial condition, results of operations, business requirements, compliance with legal requirements, debt covenant restrictions and other relevant factors.
In July 2023, the Board authorized a common stock repurchase program for up to $200.0 million of the Company's outstanding common stock. During 2025, the Company repurchased a total of 912,000 shares of common stock at an aggregate cost of $115.0 million and an average cost per share of $126.03, which completed the share repurchase program authorized in July 2023. The Company incurred $1.2 million and $0.9 million of excise taxes during 2025 and 2024, respectively.
In October 2025, the Board authorized an additional common stock repurchase program for up to $150.0 million of the Company's outstanding common stock, of which the entire $150.0 million is currently remaining. The Company intends to continue repurchases under its active share repurchase program, including through open market transactions under trading plans in accordance with Rule 10b5-1 and Rule 10b-18 under the Exchange Act subject to a variety of factors, including, but not limited to, the level of cash balances, liquidity needs, credit availability, debt covenant restrictions, general business and economic conditions, regulatory requirements, the market price of the Company's stock, the Company's dividend policy and the availability of alternative investment opportunities.
Sources of Liquidity
The Company regularly evaluates opportunities to optimize its capital structure, including through consideration of the issuance of debt or equity, to refinance existing debt and to enter into interest rate hedge transactions, such as interest rate swap agreements. As of December 31, 2025, the Company's primary sources of liquidity were $125.2 million in cash and cash equivalents, $171.9 million of available and unused funds under the Company's revolving unsecured credit facilities and $6.1 million of available and unused funds under the Company's revolving secured credit facility, subject to certain financial covenants (see Note 11 of Notes to Consolidated Financial Statements). The Company had working capital of $1,448.7 million as of December 31, 2025.
The Company's cash and cash equivalents as of December 31, 2025 included $43.8 million held by its foreign subsidiaries. These cash balances, which are primarily held in Mexican pesos and British pounds sterling, are associated with foreign earnings the Company has asserted are indefinitely reinvested and which the Company plans to use to support its continued growth plans outside the U.S. through funding of capital expenditures, acquisitions, operating expenses or other similar cash needs of the Company's foreign operations.
The Company's liquidity is affected by a number of factors, including changes in general customer traffic and demand, pawn loan balances, collection of pawn fees, merchandise sales, inventory levels, LTO merchandise, finance receivable balances, collection of lease and finance receivable payments, seasonality, operating expenses, administrative expenses, expenses related to merger and acquisition activities, litigation-related expenses, tax rates, gold prices, foreign currency exchange rates and the pace of new pawn store expansion and acquisitions. Additionally, a prolonged reduction in earnings and EBITDA could limit the Company's future ability to fully borrow on its credit facilities under current leverage covenants. Regulatory developments affecting the Company's operations may also impact profitability and liquidity. See "Item 1. Business-Governmental Regulation."
If needed, the Company could seek to raise additional funds from a variety of sources, including, but not limited to, the sale of assets, reductions in operating expenses, capital expenditures and dividends, the forbearance or deferral of certain operating expenses, the issuance of debt or equity securities, utilizing other structured financing arrangements, the leveraging of currently unencumbered real estate owned by the Company and/or changes to its management of current assets. The characteristics of the Company's current assets, specifically the ability to rapidly liquidate gold jewelry inventory, which accounts for 62% of total inventory, give the Company flexibility to quickly increase cash flow if necessary.
Cash Flows and Liquidity Metrics
The following tables set forth certain historical information with respect to the Company's sources and uses of cash and other key indicators of liquidity (dollars in thousands):
Year Ended December 31,
2025 2024 2023
Cash flow provided by operating activities
$ 585,942 $ 539,958 $ 416,142
Cash flow used in investing activities
(828,045) (441,591) (462,332)
Cash flow provided by (used in) financing activities
176,408 (38,193) 51,313
As of December 31,
2025 2024 2023
Working capital $ 1,448,654 $ 1,064,344 $ 971,009
Current ratio 4.6:1 4.1:1 3.9:1
Cash Flow Provided by Operating Activities
Net cash provided by operating activities increased $46.0 million, or 9%, from $540.0 million for 2024 to $585.9 million for 2025 due to net changes in certain non-cash adjustments to reconcile net income to operating cash flow and net changes in other operating assets and liabilities (as detailed in the consolidated statements of cash flows) and an increase in net income of $71.6 million.
Cash Flow Used in Investing Activities
Net cash used in investing activities increased $386.5 million, or 88%, from $441.6 million during 2024 to $828.0 million during 2025. Cash flows from investing activities are utilized primarily to fund acquisitions, purchases of furniture, fixtures, equipment and improvements, which includes capital expenditures for improvements to existing pawn stores and for new pawn store openings and other corporate assets, and discretionary purchases of store real property. In addition, cash flows related to the funding of new pawn loans, net of cash repayments and recovery of principal through the sale of inventories acquired from forfeiture of pawn collateral and changes in net finance receivables, are included in investing activities. The Company paid $54.9 million for furniture, fixtures, equipment and improvements and $61.9 million for discretionary pawn store real property purchases during 2025 compared to $68.2 million and $86.1 million in 2024, respectively. The Company paid $475.1 million in cash related to pawn store acquisitions during 2025 compared to $76.0 million during 2024. The Company funded a net
increase in pawn loans of $137.9 million during 2025 and $72.0 million during 2024. The Company funded a net increase in finance receivables of $98.3 million during 2025 and $139.3 million during 2024.
Cash Flow Provided by Financing Activities
Net cash used in financing activities decreased $214.6 million, or 562%, from net cash used in financing activities of $38.2 million during 2024 to net cash provided by financing activities of $176.4 million during 2025. Net borrowings on credit facilities were $368.9 million during 2025 compared to net payments of $370.0 million during 2024. During 2024, the Company received $500.0 million in proceeds from the private offering of senior unsecured notes which was used to repay a portion of the outstanding balance on the Credit Facility, after payment of fees and expenses related to the offering. The Company paid debt issuance costs of $10.4 million during 2024. The Company funded $115.8 million for share repurchases during 2025, compared to $85.0 million during 2024. The Company paid dividends of $70.9 million during 2025 compared to $65.8 million during 2024. In addition, the Company paid withholding taxes of $5.8 million on net share settlements of restricted stock awards during 2025 compared to $7.0 million during 2024.
Non-GAAP Financial Information
The Company uses certain financial calculations such as adjusted net income, adjusted diluted earnings per share, EBITDA, adjusted EBITDA, free cash flow, adjusted free cash flow and constant currency results as factors in the measurement and evaluation of the Company's operating performance and period-over-period growth. The Company derives these financial calculations on the basis of methodologies other than GAAP, primarily by excluding from a comparable GAAP measure certain items the Company does not consider to be representative of its actual operating performance. These financial calculations are "non-GAAP financial measures" as defined under the SEC rules. The Company uses these non-GAAP financial measures in operating its business because management believes they are less susceptible to variances in actual operating performance that can result from the excluded items, other infrequent charges and currency fluctuations. The Company presents these financial measures to investors because management believes they are useful to investors in evaluating the primary factors that drive the Company's core operating performance and provide greater transparency into the Company's results of operations. However, items that are excluded and other adjustments and assumptions that are made in calculating these non-GAAP financial measures are significant components in understanding and assessing the Company's financial performance. These non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, the Company's GAAP financial measures. Further, because these non-GAAP financial measures are not determined in accordance with GAAP, and are thus susceptible to varying calculations, the non-GAAP financial measures, as presented, may not be comparable to other similarly-titled measures of other companies.
The Company has adjusted the applicable financial calculations to exclude merger and acquisition expenses and amortization of acquired intangible assets, the CFPB litigation settlement and certain other income and expenses. The Company does not consider these items to be related to the organic operations of the Company's businesses or its continuing operations and are generally not relevant to assessing or estimating the long-term performance of the Company. In addition, excluding these items allows for more accurate comparisons of the financial results to prior periods. Merger and acquisition expenses include incremental costs directly associated with merger and acquisition activities, including professional fees, legal expenses, severance, retention and other employee-related costs, contract breakage costs and costs related to the consolidation of technology systems and corporate facilities, among others.
Adjusted Net Income and Adjusted Diluted Earnings Per Share
Management believes the presentation of adjusted net income and adjusted diluted earnings per share provides investors with greater transparency and provides a more complete understanding of the Company's financial performance and prospects for the future by excluding items that management believes are non-operating in nature and are not representative of the Company's core operating performance. In addition, management believes the adjustments shown below are useful to investors in order to allow them to compare the Company's financial results for the current periods presented with the prior periods presented.
The following table provides a reconciliation between net income and diluted earnings per share, calculated in accordance with GAAP, to adjusted net income and adjusted diluted earnings per share, which are shown net of tax (unaudited, in thousands, except per share amounts):
Year Ended December 31,
2025 2024 2023 2025 2024 2023
In Thousands In Thousands In Thousands Per Share Per Share Per Share
Net income and diluted earnings per share, as reported $ 330,375 $ 258,815 $ 219,301 $ 7.42 $ 5.73 $ 4.80
Adjustments, net of tax:
Merger and acquisition expenses 12,271 1,706 6,089 0.27 0.04 0.13
Purchase accounting and other adjustments 41,055 38,289 54,341 0.92 0.85 1.19
CFPB litigation settlement 9,390 - - 0.21 - -
Other (income) expense, net
(2,949) 3,870 (2,857) (0.06) 0.08 (0.06)
Adjusted net income and diluted earnings per share $ 390,142 $ 302,680 $ 276,874 $ 8.76 $ 6.70 $ 6.06
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA
The Company defines EBITDA as net income before income taxes, depreciation and amortization, interest expense and interest income and adjusted EBITDA as EBITDA adjusted for certain items, as listed below, that management considers to be non-operating in nature and not representative of its actual operating performance. The Company believes EBITDA and adjusted EBITDA are commonly used by investors to assess a company's financial performance, and adjusted EBITDA is used as a starting point in the calculation of the consolidated total debt ratio as defined in the Company's senior unsecured notes. The following table provides a reconciliation of net income to EBITDA and adjusted EBITDA (unaudited, in thousands):
Year Ended December 31,
2025 2024 2023
Net income $ 330,375 $ 258,815 $ 219,301
Income taxes 117,188 83,961 73,548
Depreciation and amortization(1)
111,806 104,941 109,161
Interest expense 121,293 105,226 93,243
Interest income (2,935) (1,935) (1,469)
EBITDA 677,727 551,008 493,784
Adjustments:
Merger and acquisition expenses 14,369 2,228 7,922
Purchase accounting and other adjustments(2)
- - 13,968
CFPB litigation settlement 11,000 - -
Other (income) expense, net
(4,707) 5,201 (3,942)
Adjusted EBITDA $ 698,389 $ 558,437 $ 511,732
(1)Includes $53.5 million, $49.7 million and $56.6 million of amortization expense related to identifiable intangible assets for 2025, 2024 and 2023, respectively.
(2)For 2023, amount represents other non-recurring costs included in administrative expenses related to a discontinued finance product.
Free Cash Flow and Adjusted Free Cash Flow
For purposes of its internal liquidity assessments, the Company considers free cash flow and adjusted free cash flow. The Company defines free cash flow as cash flow from operating activities less purchases of furniture, fixtures, equipment and improvements and net fundings/repayments of pawn loan and finance receivables, which are considered to be operating in nature by the Company but are included in cash flow from investing activities. Adjusted free cash flow is defined as free cash flow adjusted for merger and acquisition expenses paid that management considers to be non-operating in nature.
Free cash flow and adjusted free cash flow are commonly used by investors as additional measures of cash, generated by business operations, that may be used to repay scheduled debt maturities and debt service or, following payment of such debt obligations and other non-discretionary items, that may be available to invest in future growth through new business development activities or acquisitions, repurchase stock, pay cash dividends or repay debt obligations prior to their maturities. These metrics can also be used to evaluate the Company's ability to generate cash flow from business operations and the impact that this cash flow has on the Company's liquidity. However, free cash flow and adjusted free cash flow have limitations as analytical tools and should not be considered in isolation or as a substitute for cash flow from operating activities or other income statement data prepared in accordance with GAAP. The following table reconciles cash flow from operating activities to free cash flow and adjusted free cash flow (unaudited, in thousands):
Year Ended December 31,
2025 2024 2023
Cash flow from operating activities $ 585,942 $ 539,958 $ 416,142
Cash flow from investing activities:
Pawn loans made
(2,094,228) (1,720,158) (1,572,010)
Pawn loans repaid
1,197,038 1,003,752 933,092
Recovery of pawn loan principal through sale of forfeited collateral
759,333 644,407 603,940
Investments in finance receivables (440,576) (425,817) (363,789)
Proceeds from finance receivables 342,272 286,503 248,347
Purchases of furniture, fixtures, equipment and improvements (54,906) (68,245) (60,148)
Free cash flow 294,875 260,400 205,574
Merger and acquisition expenses paid, net of tax benefit 12,271 1,706 6,089
Adjusted free cash flow $ 307,146 $ 262,106 $ 211,663
Constant Currency Results
The Company's reporting currency is the U.S. dollar, however, certain performance metrics discussed in this report are presented on a "constant currency" basis, which is considered a non-GAAP financial measure. The Company's management uses constant currency results to evaluate operating results of business operations in Latin America and the U.K., which are transacted in local currencies in Mexico, Guatemala, Colombia and the U.K. The Company also has operations in El Salvador, where the reporting and functional currency is the U.S. dollar.
The Company believes constant currency results provide valuable supplemental information regarding the underlying performance of its business operations in Latin America and the U.K., consistent with how the Company's management evaluates such performance and operating results. Constant currency results reported herein are calculated by translating certain balance sheet and income statement items denominated in local currencies using the exchange rate from the prior-year comparable period, as opposed to the current comparable period, in order to exclude the effects of foreign currency rate fluctuations for purposes of evaluating period-over-period comparisons.
The following table presents segment information for the Latin America pawn segment for the year ended December 31, 2025 using the exchange rate from the prior-year comparable periods (unaudited, in thousands):
Year Ended December 31, 2025
Currency
Constant Currency
Exchange Rate
Basis
U.S. Dollar Basis
Fluctuations
(Non-GAAP)
Revenue:
Retail merchandise sales $ 584,129 $ 27,664 $ 611,793
Pawn loan fees 254,061 12,057 266,118
Wholesale scrap jewelry sales 51,334 - 51,334
Total revenue 889,524 39,721 929,245
Cost of revenue:
Cost of retail merchandise sold 378,538 17,798 396,336
Cost of wholesale scrap jewelry sold 43,725 2,125 45,850
Total cost of revenue 422,263 19,923 442,186
Net revenue 467,261 19,798 487,059
Segment expenses:
Operating expenses 272,060 12,472 284,532
Depreciation
17,755 782 18,537
Total segment expenses 289,815 13,254 303,069
Segment pre-tax operating income $ 177,446 $ 6,544 $ 183,990
The following table presents earning assets and average outstanding pawn loan amount for the Latin America pawn segment as of December 31, 2025 using the exchange rate from the prior-year comparable period (unaudited, in thousands, except as otherwise noted):
As of December 31, 2025
Currency
Constant Currency
Exchange Rate
Basis
U.S. Dollar Basis
Fluctuations
(Non-GAAP)
Earning assets:
Pawn loans $ 167,438 $ (17,990) $ 149,448
Inventories 129,269 (13,933) 115,336
$ 296,707 $ (31,923) $ 264,784
Average outstanding pawn loan amount (in ones) $ 112 $ (12) $ 100
The following table provides exchange rates for the Mexican peso, Guatemalan quetzal, Colombian peso and British pound sterling for the current and prior-year periods:
2025 2024 2023
Rate % Change
Over Prior-
Year Period
Favorable /
(Unfavorable) 		Rate % Change
Over Prior-
Year Period
Favorable /
(Unfavorable) 		Rate
U.S. dollar / Mexican peso exchange rate:
End-of-period 18.0 11 % 20.3 (20) % 16.9
Twelve months ended 19.2 (5) % 18.3 (3) % 17.8
U.S. dollar / Guatemalan quetzal exchange rate:
End-of-period 7.7 - % 7.7 1 % 7.8
Twelve months ended 7.7 1 % 7.8 - % 7.8
U.S. dollar / Colombian peso exchange rate:
End-of-period 3,757 15 % 4,409 (15) % 3,822
Twelve months ended 4,053 - % 4,071 6 % 4,328
British pound sterling / U.S. dollar exchange rate:
End-of-period 1.35 8 % 1.25 (2) % 1.27
Twelve months ended 1.32 3 % 1.28 3 % 1.24
Off-Balance Sheet Arrangements
During the third quarter of 2025, the Company began assisting certain customers in applying for an OBS Loan that is underwritten and fully retained by a bank partner. After origination of the OBS Loan by the bank, the Company assumes responsibility for servicing the loan on behalf of the bank for the remaining term of the loan. The Company does not purchase the loan or the rights to a portion of the cash flows of the loan from the bank. As such, these loans are not reflected on the Company's balance sheet as a finance receivable. As of December 31, 2025, the outstanding amount of OBS Loans originated and held by the bank was $28.1 million.
The Company receives certain servicing and other fees associated with performing OBS Loans from the bank, which are included in interest and fees on finance receivables in the accompanying consolidated statements of income. However, if an OBS Loan becomes 90 days contractually past due, the Company is obligated to reimburse the bank for the outstanding principal amount plus accrued interest. This obligation constitutes an off-balance sheet credit exposure for which the Company is required to recognize, upon inception of the obligation, a liability for the expected lifetime losses. As of December 31, 2025, a liability of $13.8 million was included in accrued liabilities in the accompanying consolidated balance sheets.
The liability for off-balance sheet credit exposure is maintained at a level considered appropriate to cover expected lifetime losses of the off-balance sheet credit exposure, and the appropriateness of the liability is evaluated at each period end. For further detail, see the "Off-balance sheet installment loans" section in Note 2 of Notes to Consolidated Financial Statements.
Effects of Inflation
While the impacts of inflation have been widely reported and may be ongoing into the foreseeable future, the Company does not believe inflation had a material effect on the Company's overall results of operations in 2025. Depending on the severity and persistence of these inflationary pressures, the Company could see a negative impact on its customers' ability to pay for its goods and services, including an impact on the collectability of its accounts receivable, which could result in increased charge-offs of AFF's finance receivables and leased merchandise. The Company could also see increases in wages and other operating costs. Furthermore, inflation could also weaken sales at AFF's merchant partners, negatively impacting AFF's originations.
However, inflationary economic environments could also benefit the Company by increasing customer demand for value-priced products, lending services in its pawn stores and demand for POS payment solutions provided by AFF.
Seasonality
The Company's business is subject to seasonal variations, and operating results for each quarter and year-to-date periods are not necessarily indicative of the results of operations for the full year. Typically, the Company experiences seasonal growth of pawn service fees in the third and fourth quarter of each year due to pawn loan balance growth. Pawn service fees generally decline in the first and second quarter of each year after the typical repayment period of pawn loans due to statutory bonuses received by customers in the fourth quarter in Mexico and with tax refund proceeds received by customers in the first quarter in the U.S. In addition, AFF customers generally exercise the early buyout option on their existing lease or finance receivable more frequently during the first quarter due to tax refund proceeds. Retail sales are seasonally higher in the fourth quarter as a result of holiday shopping and, to a lesser extent, in the first quarter due to the disbursement of tax refunds in the U.S.
Recent Accounting Pronouncements
See discussion in Note 2 of Notes to Consolidated Financial Statements.
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