UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2018September 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to__________
Commission File Number 1-38315
CURO GROUP HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware90-0934597
(State or other jurisdiction
Of incorporation or organization)		(I.R.S. Employer Identification No.)
Delaware90-0934597
(State or other jurisdiction
Of incorporation or organization)
(I.R.S. Employer Identification No.)
35273615 North Ridge Road, Wichita, KS67205
(Address of principal executive offices)(Zip Code)


Registrant’s telephone number, including area code: (316) 425-1410772-3801
Former name, former address and former fiscal year, if changed since last report: No Changes


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.001 par value per shareCURONew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☐☒
Non-accelerated filer☒☐(Do not check if a smaller reporting company)
Smaller reporting company☐☒Emerging growth company☒☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes ☐    No ☒
At May 1, 2018As of October 29, 2021 there were 45,561,41940,452,336 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.






CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
FORM 10-Q
FIRSTTHIRD QUARTER ENDED MARCH 31, 2018September 30, 2021
INDEX
Page
PART I – FINANCIAL INFORMATION
Item 1.Financial Statements (unaudited)
Condensed Consolidated Balance Sheets –
March 31, 2018September 30, 2021 (unaudited) and December 31, 20172020
Condensed Consolidated Statements of IncomeOperations –
Three and nine months ended March 31, 2018September 30, 2021 and 20172020 (unaudited)
46
Condensed Consolidated Statements of Comprehensive (Loss) Income –
Three and nine months ended March 31, 2018September 30, 2021 and 20172020 (unaudited)
57
Condensed Consolidated Statements of Cash Flows -–
Three and nine months ended March 31, 2018September 30, 2021 and 20172020 (unaudited)
68
Notes to InterimCondensed Consolidated Financial Statements
710
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
3239
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
5166
Item 4.
PART 2 – OTHER INFORMATION
Item 1.
Legal Proceedings
5266
Item 1A.
Risk Factors
5267
Item 2.
Item 3.
5267
Item 4.
Mine Safety Disclosures
5267
Item 5.
5267
Item 6.
X68
SIGNATURES
69




2


PART I.     FINANCIAL INFORMATION


GLOSSARY

Terms and abbreviations used throughout this report are defined below.
Term or abbreviationDefinition
2017 Final CFPB RuleThe final rule issued by the CFPB in 2017 regarding Payday, Vehicle Title and Certain high Cost Installment loans
2019 Proposed RuleThe subsequent CFPB rulemaking process which proposed to rescind the mandatory underwriting provisions of the 2017 Final CFPB Rule
2020 Form 10-KAnnual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 5, 2021
7.50% Senior Secured Notes7.50% Senior Secured Notes, issued in July 2021 for $750.0 million, which mature in August 2028
8.25% Senior Secured Notes8.25% Senior Secured Notes, issued in August 2018 for $690.0 million, which we extinguished during the third quarter of 2021
Ad AstraAd Astra Recovery Services, Inc., a wholly-owned subsidiary of the Company, which, prior to acquisition in January 2020, was our exclusive provider of third-party collection services for the U.S. business
Adjusted EBITDAEBITDA plus or minus certain non-cash and other adjusting items; Refer to "Supplemental Non-GAAP Financial Information" for additional details
ALLAllowance for loan losses
Allowance coverageAllowance for loan losses as a percentage of gross loans receivable
AOCIAccumulated Other Comprehensive Income (Loss)
ASCAccounting Standards Codification
ASUAccounting Standards Update
Average gross loans receivableUtilized to calculate product yield and NCO rates; calculated as average of beginning of quarter and end of quarter gross loans receivable
BNPLBuy-Now-Pay-Later
bpsBasis points
C$Canadian dollar
CABCredit Access Business
CARES ActCoronavirus Aid, Relief, and Economic Security Act enacted by the U.S. Federal government on March 27, 2020 in response to the COVID-19 pandemic
CURO CanadaCURO Canada Corp, a wholly-owned Canadian subsidiary of the Company, formerly known as Cash Money Cheque Cashing Inc.
Cash Money Revolving Credit FacilityC$10.0 million revolving credit facility with Royal Bank of Canada, maintained by CURO Canada
CDORCanadian Dollar Offered Rate
CFPBConsumer Financial Protection Bureau
CFSACommunity Financial Services Association
CFTCCURO Financial Technologies Corp., a wholly-owned subsidiary of the Company
CODMChief Operating Decision Maker
Condensed Consolidated Financial StatementsThe condensed consolidated financial statements presented in this Form 10-Q
CSOCredit services organization
EBITDAEarnings Before Interest, Taxes, Depreciation and Amortization
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
FinServFinServ Acquisition Corp., a publicly traded special purpose acquisition company (trading symbol FSRV)
FinTechFinancial Technology; the term used to describe any technology that delivers financial services through software, such as online banking, mobile payment apps or cryptocurrency
FlexitiFlexiti Financial Inc., a wholly-owned Canadian subsidiary of the Company, which we acquired on March 10, 2021
Form 10-QThis report on Form 10-Q for the quarter September 30, 2021
Gross Combined Loans ReceivableGross loans receivable plus loans originated by third-party lenders which are Guaranteed by the Company
Guaranteed by the CompanyLoans originated by third-party lenders through the CSO program which we guarantee but are not included in the Condensed Consolidated Financial Statements
3


Term or abbreviationDefinition
KatapultKatapult Holdings, Inc. a lease-to-own platform for online platform for online, brick and mortar and omni-channel retailers.
LFLLFL Group, Canada's largest home furnishings retailer.
LIBORLondon Inter-Bank Offered Rate
MDRMerchant discount revenue
NCONet charge-off; total charge-offs less total recoveries
NOLNet operating loss
Non-Recourse Canada SPV FacilityA four-year revolving credit facility with Waterfall Asset Management, LLC, with capacity up to C$250.0 million
Non-Recourse Flexiti SPE FacilityA revolving credit facility, entered into concurrent with the acquisition of Flexiti, with capacity up to C$500.0 million
Non-Recourse U.S. SPV FacilityA four-year, asset-backed revolving credit facility with Atalaya Capital Management with capacity up to $200.0 million if certain conditions are met
POSPoint-of-sale
ROURight of use
RSURestricted Stock Unit
SECSecurities and Exchange Commission
Senior RevolverSenior Secured Revolving Loan Facility with borrowing capacity of $50.0 million
SequentialThe change from one quarter to the next quarter
SPACSpecial Purpose Acquisition Company
SPESpecial Purpose Entity
SPVSpecial Purpose Vehicle
SRCSmaller Reporting Company as defined by the SEC
TDRTroubled Debt Restructuring. Debt restructuring in which a concession is granted to the borrower as a result of economic or legal reasons related to the borrower's financial difficulties
U.S.United States of America
U.S. GAAPGenerally accepted accounting principles in the United States
Verge Credit loansLoans originated and funded by a third-party bank
VIEVariable Interest Entity; our wholly-owned, bankruptcy-remote special purpose subsidiaries

4



ITEM 1.         FINANCIAL STATEMENTS


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 30, 2021 (unaudited)December 31,
2020
ASSETS
Cash and cash equivalents$205,785 $213,343 
Restricted cash (includes restricted cash of consolidated VIEs of $42,214 and $31,994 as of September 30, 2021 and December 31, 2020, respectively)66,168 54,765 
Gross loans receivable (includes loans of consolidated VIEs of $700,834 and $360,431 as of September 30, 2021 and December 31, 2020, respectively)882,356 553,722 
Less: Allowance for loan losses (includes allowance for loan losses of consolidated VIEs of $51,642 and $54,129 as of September 30, 2021 and December 31, 2020, respectively)(72,543)(86,162)
Loans receivable, net809,813 467,560 
Income taxes receivable23,806 32,062 
Prepaid expenses and other (includes prepaid expenses and other of consolidated VIEs of $0 and $388 as of September 30, 2021 and December 31, 2020, respectively)31,558 27,994 
Property and equipment, net48,001 59,749 
Investments in Katapult14,919 27,370 
Right of use asset - operating leases102,296 115,032 
Deferred tax assets7,850 — 
Goodwill175,973 136,091 
Intangibles, net96,524 40,425 
Other assets9,430 8,595 
Total Assets$1,592,123 $1,182,986 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities (includes accounts payable and accrued liabilities of consolidated VIEs of $6,840 and $34,055 as of September 30, 2021 and December 31, 2020, respectively)$75,701 $49,624 
Deferred revenue15,243 5,394 
Lease liability - operating leases108,655 122,648 
Contingent consideration related to acquisition24,129 — 
Accrued interest (includes accrued interest of consolidated VIEs of $1,418 and $1,147 as of September 30, 2021 and December 31, 2020, respectively)11,106 20,123 
Liability for losses on CSO lender-owned consumer loans7,007 7,228 
Debt (includes debt and issuance costs of consolidated VIEs of $407,214 and $9,749 as of September 30, 2021 and $147,427 and $7,766 as of December 31, 2020, respectively)1,131,998 819,661 
Other long-term liabilities16,185 15,382 
Deferred tax liabilities4,616 11,021 
Total Liabilities1,394,640 1,051,081 
Commitments and contingencies (Note 12)00
Stockholders' Equity
Preferred stock - $0.001 par value, 25,000,000 shares authorized; no shares were issued— — 
Common stock - $0.001 par value; 225,000,000 shares authorized; 47,961,467 and 47,525,807 shares issued; and 40,737,111 and 41,370,504 shares outstanding at the respective period ends9 9 
Treasury stock, at cost - 7,224,356 and 6,155,303 shares at the respective period ends(95,544)(77,852)
Paid-in capital88,408 79,812 
Retained earnings236,784 160,068 
Accumulated other comprehensive loss(32,174)(30,132)
Total Stockholders' Equity197,483 131,905 
Total Liabilities and Stockholders' Equity$1,592,123 $1,182,986 
 March 31,
2018		 December 31,
2017
 (Unaudited)  
ASSETS
Cash$130,739
 $162,374
Restricted cash (includes restricted cash of consolidated VIEs of $12,268 and $6,871 as of March 31, 2018 and December 31, 2017, respectively)17,656
 12,117
Gross loans receivable (includes loans of consolidated VIEs of $186,492 and $213,846 as of March 31, 2018 and December 31, 2017, respectively)389,838
 432,837
Less: allowance for loan losses (includes loans of consolidated VIEs of $36,619 and $46,140 as of March 31, 2018 and December 31, 2017, respectively)(60,886) (69,568)
Loans receivable, net328,952
 363,269
Deferred income taxes1,817
 772
Income taxes receivable—
 3,455
Prepaid expenses and other32,753
 42,512
Property and equipment, net83,522
 87,086
Goodwill145,764
 145,607
Other intangibles, net of accumulated amortization of $42,540 and $41,156 as of March 31, 2018 and December 31, 2017, respectively)31,961
 32,769
Other12,217
 9,770
Total Assets$785,381
 $859,731
LIABILITIES AND STOCKHOLDER’S EQUITY
Accounts payable and accrued liabilities$52,860
 $55,792
Deferred revenue10,152
 11,984
Income taxes payable8,734
 4,120
Accrued interest (includes accrued interest of consolidated VIEs of $1,263 and $1,266 as of March 31, 2018 and December 31, 2017, respectively)6,384
 25,467
Credit services organization guarantee liability10,412
 17,795
Deferred rent11,732
 11,577
Long-term debt (includes long-term debt and issuance costs of consolidated VIEs of $115,071 and $3,921 as of March 31, 2018 and $124,590 and $4,188 as of December 31, 2017, respectively)622,644
 706,225
Subordinated shareholder debt2,322
 2,381
Other long-term liabilities6,199
 5,768
Deferred tax liabilities11,393
 11,486
Total Liabilities742,832
 852,595
Commitments and contingencies

 

Stockholder's Equity

 

Preferred stock - $0.001 par value, 25,000,000 shares authorized and no shares were issued at either period end—
 —
Class A common stock - $0.001 par value; 225,000,000 shares authorized; issued and outstanding of 45,561,419 and 44,561,419 as of March 31, 2018 and December 31, 2017, respectively)9
 8
Paid-in capital61,056
 46,079
Retained earnings27,279
 3,988
Accumulated other comprehensive loss(45,795) (42,939)
Total Stockholder’s Equity42,549
 7,136
Total Liabilities and Stockholder’s Equity$785,381
 $859,731

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

5


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS
(in thousands)thousands, except per share data)
(unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2021202020212020
Revenue$209,280 $182,003 $593,524 $645,318 
Provision for losses70,718 54,750 152,028 218,979 
Net revenue138,562 127,253 441,496 426,339 
Cost of providing services
Salaries and benefits26,544 24,246 77,515 74,976 
Occupancy and office20,762 18,936 56,811 55,469 
Other costs of providing services7,635 6,076 21,759 23,732 
Advertising9,697 14,425 24,824 32,394 
Total cost of providing services64,638 63,683 180,909 186,571 
Gross margin73,924 63,570 260,587 239,768 
Operating expense (income)
Corporate, district and other expenses61,745 36,658 170,206 116,246 
Interest expense25,805 18,383 68,784 54,018 
Loss (income) from equity method investment1,582 (3,530)(676)(2,653)
Gain from equity method investment— — (135,387)— 
Total operating expense89,132 51,511 102,927 167,611 
Other expense
Loss on extinguishment of debt40,206 — 40,206 — 
Total other expense40,206 — 40,206 — 
(Loss) income from continuing operations before income taxes(55,414)12,059 117,454 72,157 
(Benefit) provision for income taxes(13,375)(822)29,241 2,183 
Net (loss) income from continuing operations(42,039)12,881 88,213 69,974 
Income from discontinued operations, before income tax— — — 1,714 
Income tax expense related to disposition— — — 429 
Net income from discontinued operations— — — 1,285 
Net (loss) income$(42,039)$12,881 $88,213 $71,259 
Basic (loss) earnings per share:
Continuing operations$(1.02)$0.32 $2.13 $1.71 
Discontinued operations— — — 0.03 
Basic (loss) earnings per share$(1.02)$0.32 $2.13 $1.74 
Diluted (loss) earnings per share:
Continuing operations$(1.02)$0.31 $2.03 $1.68 
Discontinued operations— — — 0.03 
Diluted (loss) earnings per share$(1.02)$0.31 $2.03 $1.71 
Weighted average common shares outstanding:
Basic41,220 40,885 41,459 40,838 
Diluted41,220 41,775 43,422 41,660 
 Three Months Ended
March 31,
 2018 2017
Revenue$261,758
 $224,580
Provision for losses81,031
 61,736
Net revenue180,727
 162,844
    
Cost of providing services   
Salaries and benefits26,918
 26,433
Occupancy13,427
 14,095
Office6,981
 4,868
Other costs of providing services14,400
 14,855
Advertising9,756
 7,688
Total cost of providing services71,482
 67,939
Gross margin109,245
 94,905
    
Operating expense   
Corporate, district and other40,454
 32,993
Interest expense22,349
 23,366
Loss on extinguishment of debt11,683
 12,458
Total operating expense74,486
 68,817
Net income before income taxes34,759
 26,088
Provision for income taxes11,467
 9,450
Net income$23,292
 $16,638
    
Weighted average common shares outstanding:   
Basic45,506
 37,895
Diluted47,416
 38,959
Net income per common share:   
Basic earnings per share$0.51
 $0.44
Diluted earnings per share:$0.49
 $0.43

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.Statements.

6



CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands)
(unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2021202020212020
Net (loss) income$(42,039)$12,881 $88,213 $71,259 
Other comprehensive (loss) income:
Foreign currency translation adjustment, net of tax(10,611)5,591 (2,042)(6,341)
Other comprehensive (loss) income(10,611)5,591 (2,042)(6,341)
Comprehensive (loss) income$(52,650)$18,472 $86,171 $64,918 
 Three Months Ended
March 31,
 2018 2017
Net income$23,292
 $16,638
Other comprehensive income (loss):

 

Cash flow hedges, net of $0 tax in all periods54
 (42)
Foreign currency translation adjustment, net of $0 tax in all periods(2,910) 2,790
Other comprehensive income (loss)(2,856) 2,748
Comprehensive income$20,436
 $19,386

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.



7

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTSSTATEMENT OF CASH FLOWS
(dollars in thousands)thousands, unaudited)
(unaudited)
Nine Months Ended
September 30,
20212020
Cash flows from operating activities
Net income from continuing operations$88,213 $69,974 
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Depreciation and amortization19,685 13,312 
Provision for loan losses152,028 218,979 
Amortization of debt issuance costs and bond discount4,794 2,756 
Loss on extinguishment of debt40,206 — 
Deferred income tax (benefit) expense(10,730)14,187 
Loss on disposal of property and equipment6,816 145 
Income from equity method investment(676)(2,653)
Gain from equity method investment(135,387)— 
Change in fair value of contingent consideration3,825 — 
Share-based compensation10,148 9,896 
Changes in operating assets and liabilities:
Accrued interest on loans receivable19,619 26,566 
Prepaid expenses and other assets(2,989)7,362 
Accounts payable and accrued liabilities16,591 (10,439)
Deferred revenue10,084 (4,843)
Income taxes receivable8,270 (23,790)
Accrued interest(9,017)(14,092)
Other long-term liabilities(770)2,386 
Net cash provided by continuing operating activities220,710 309,746 
Net cash provided by discontinued operating activities— 1,714 
Net cash provided by operating activities220,710 311,460 
Cash flows from investing activities
Purchase of property, equipment and software(14,924)(7,401)
Loans receivable originated or acquired(985,603)(951,803)
Loans receivable repaid661,456 836,915 
Proceeds from (Investment in) Katapult146,878 (11,187)
Acquisition of Ad Astra, net of acquiree's cash received— (14,418)
Acquisition of Flexiti, net of acquiree's cash received(91,203)— 
Net cash used in investing activities (1)
(283,396)(147,894)
Cash flows from financing activities
Proceeds from Non-Recourse SPV and SPE facilities93,307 58,563 
Payments on Non-Recourse SPV and SPE facilities(9,153)(42,131)
Debt issuance costs paid(15,957)(6,991)
Proceeds from credit facilities20,931 69,853 
Payments on credit facilities(20,931)(69,853)
Extinguishment of 8.25% Senior Secured Notes(690,000)— 
Proceeds from issuance of 7.50% Senior Secured Notes750,000 — 
Payments of call premiums from early debt extinguishments(31,250)— 
Proceeds from exercise of stock options266 126 
Payments to net settle restricted stock units vesting(1,818)(641)
Repurchase of common stock(17,191)(5,908)
Dividends paid to stockholders(11,497)(6,750)
Net cash provided by (used in) financing activities (1)
66,707 (3,732)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(176)(257)
Net increase in cash, cash equivalents and restricted cash3,845 159,577 
Cash, cash equivalents and restricted cash at beginning of period268,108 110,021 
Cash, cash equivalents and restricted cash at end of period$271,953 $269,598 
 Three Months Ended March 31,
 2018 2017
Cash flows from operating activities   
Net income$23,292
 $16,638
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization4,660
 4,654
Provision for loan losses81,031
 61,736
Amortization of debt issuance costs(34) 770
Amortization of bond discount/(premium)1,163
 14
Deferred income tax benefit(1,094) (504)
Loss on disposal of property and equipment478
 10
Loss on extinguishment of debt11,683
 12,458
Call premium payment from debt extinguishment(9,300) —
Increase in cash surrender value of life insurance(1,482) (502)
Share-based compensation expense1,842
 126
Changes in operating assets and liabilities:   
Loans receivable(55,975) (34,818)
Prepaid expenses and other assets9,739
 4,792
Accounts payable and accrued liabilities(3,239) (9,345)
Deferred revenue(1,734) (1,715)
Income taxes payable19,629
 (841)
Income taxes receivable(7,411) 3,816
Deferred rent180
 194
Accrued Interest(19,084) (292)
Other liabilities443
 (266)
Net cash provided by operating activities54,787
 56,925
Cash flows from investing activities   
Purchase of property, equipment and software(1,609) (3,093)
Cash paid for Cognical Holdings preferred shares(958) —
Changes in restricted cash(5,403) (6,993)
Net cash (used in) investing activities(7,970) (10,086)
Cash flows from financing activities   
Net proceeds from issuance of common stock13,135
 —
Proceeds from Non-Recourse U.S. SPV facility and ABL facility3,000
 19,802
Payments on Non-Recourse U.S. SPV facility and ABL facility(12,519) (11,797)
Proceeds from issuance of 12.00% Senior Secured Notes—
 461,329
Payments on 10.75% Senior Secured Notes—
 (426,034)
Payments on 12.00% Senior Secured Notes(77,500) —
Payments on 12.00% Senior Cash Pay Notes—
 (125,000)
Debt issuance costs paid(71) (13,690)
Proceeds from credit facilities10,000
 —
Payments on credit facilities(10,000) —
Net cash (used in) financing activities(73,955) (95,390)
  Effect of exchange rate changes on cash
(4,497) 829
Net (decrease) in cash(31,635) (47,722)
Cash at beginning of period162,374
 193,525
Cash at end of period$130,739
 $145,803
8

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands, unaudited)
(1) Investing activities and Financing activities were not impacted by discontinued operations.

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

SUPPLEMENTAL CASH FLOW INFORMATION

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and 2020 to the cash, cash equivalents and restricted cash used in the Statement of Cash Flows (in thousands):
September 30,
20212020
Cash and cash equivalents$205,785 $207,071 
Restricted cash (includes restricted cash of consolidated VIEs of $42,214 and $33,696 as of September 30, 2021 and September 30, 2020, respectively)66,168 62,527 
Total cash, cash equivalents and restricted cash used in the Statement of Cash Flows$271,953 $269,598 



9


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)



NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS
BasisNature of PresentationOperations


The terms “CURO," "CGHC," "we,” “our,” “us,”“CURO" and the “Company,”“Company” refer to CURO Group Holdings Corp. and its directlydirect and indirectly ownedindirect subsidiaries as a combined entity, except where otherwise stated. The term "CFTC" refers to CURO Financial Technologies Corp., a subsidiary of CURO, and its directly and indirectly owned subsidiaries as a consolidated entity, except where otherwise stated.


The Company is a tech-enabled, omni-channel consumer finance company serving a full spectrum of non-prime consumers in the U.S and non-prime and prime consumers in Canada. Effective with its acquisition of Flexiti on March 10, 2021, CURO provides a BNPL solution for customers in Canada.

Basis of Presentation

The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”),U.S. GAAP and with the accounting policies described in our 2017 Annual Report onits 2020 Form 10-K. CertainInterim results of operations are not necessarily indicative of results that might be expected for future interim periods or for the year ending December 31, 2021.

Following the acquisition of Flexiti, the Company reports Flexiti operations as the "Canada POS Lending" segment throughout this Form 10-Q. Refer to Note 11, "Segment Reporting" for further information.

While certain information and note disclosures normally included in our annual financial statements prepared in accordance with USU.S. GAAP have been condensed or omitted, although we believethe Company believes that the disclosures are adequate to enable a reasonable understanding of the information presented. Additionally, the Company will continue to take advantage of the scaled disclosure requirements permitted by the SEC for. SRCs for the quarter-to-date and year-to-date periods presented. SRC status is determined on an annual basis as of the last business day of the most recently completed second fiscal quarter. The Company qualified as an SRC until June 30, 2021, but after that date, the Company no longer qualified as an SRC and thus will begin to report as a non-SRC beginning with the first quarter of 2022.


The unaudited Condensed Consolidated Financial Statements and the accompanying notes (the “Interim Statements”) reflect all adjustments of a normal and recurring nature, which are, in the opinion of management, necessary to present fairly ourthe Company's results of operations, financial position and cash flows for the periods presented. The adjustments consist solelyDuring the first quarter of normal recurring adjustments. The Interim Statements should be read in conjunction with2021, the Consolidated Financial StatementsCompany combined the previously separate "Occupancy" and related Notes included in our 2017 Annual Report on Form 10-K. Interim results of operations are not necessarily indicative of results that may be expected for future interim periods or for the entire year ending December 31, 2018.

We completed our initial public offering ("IPO") in December 2017. Prior to our IPO we filed a certificate of amendment to our certificate of incorporation that effected a 36-for-1 split of our common stock. All share"Office" line items into "Occupancy and per share data have been retroactively adjusted for all periods presented to reflect the stock split as if the stock split had occurred at the beginning of the earliest period presented.

We qualify as an “emerging growth company” as definedoffice" in the Jumpstart Our Business Startups Actunaudited Condensed Consolidated Statements of 2012, or the JOBS Act. An emerging growth company may take advantageOperations as of specified reduced reportingSeptember 30, 2021 and other requirements that are otherwise generally applicable to public companies. We have elected to take advantage of these reduced reporting and other requirements available to us.2020.


Principles of Consolidation


The unaudited Condensed Consolidated Financial Statements includereflect the accounts of CURO and its wholly-owned subsidiaries.direct and indirect subsidiaries, including Flexiti, which was acquired on March 10, 2021, and Ad Astra, which was acquired on January 3, 2020. Refer to Note 15, "Acquisitions" for further disclosures related to these acquisitions. Intercompany transactions and balances have been eliminated in consolidation.


Use of Estimates


The preparation of the unaudited Condensed Consolidated Financial Statements in conformity with USU.S. GAAP requires management to make estimates and assumptions, including those impacted by COVID-19, that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. EstimatesSome estimates may also affect the reported amounts of revenues and expenses during the periods reported. Some of the significantpresented. Significant estimates that we havethe Company made in the accompanying unaudited Condensed Consolidated Financial Statements include allowances for loan losses,ALL, certain assumptions related to equity investments, goodwill and intangibles, accruals related to self-insurance, Credit Services Organization ("CSO") guaranteeCSO liability andfor losses, estimated tax liabilities.liabilities and the accounting for the Flexiti acquisition. Actual results may differ from those estimates.


NatureAcquisition of OperationsFlexiti


We areOn March 10, 2021, CURO closed its acquisition of Flexiti, a growth-oriented, technology-enabled, highly-diversified consumer finance company servingPOS and BNPL provider, in a wide rangetransaction accounted for as a business combination. Flexiti is one of underbanked consumers inCanada's fastest-growing POS lenders, offering customers flexible payment plans at retailers that sell large-scale goods such as furniture, appliances, jewelry and electronics. Through its BNPL platform, customers can be approved instantly to shop with their FlexitiCard, which they can use online or in-store to make multiple purchases, within their credit limit, without needing to reapply. Refer to Note 15, "Acquisitions" for further information regarding the United States,acquisition and Note 14, "Goodwill" for the United Kingdom and Canada.impact to the Company's goodwill balance as a result of the acquisition.

10


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Change in Accounting Principle Related to Equity Method Investment in Katapult


Recently Adopted Accounting PronouncementsKatapult is an e-commerce focused, FinTech company offering an innovative lease financing solution to consumers and enabling essential transactions at the merchant POS. CURO first invested in Katapult in 2017 as the Company identified multiple catalysts for Katapult's future success: an innovative e-commerce POS business model, a focus on the large and under-penetrated non-prime financing market and a clear and compelling value proposition for merchants and consumers. The Company accounts for its investment in Katapult under the equity method of accounting as of September 30, 2021. Refer to Note 8, "Fair Value Measurements" for further disclosures regarding the accounting for the Company's investment in Katapult.


In May 2017,Historically, the Financial Accounting Standards Board ("FASB") issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting ("ASU 2017-09"). Under modification accounting, an entity is required to re-valueCompany reported income and loss from its equity awards each time theremethod investment in Katapult on a two-month reporting lag. The merger between Katapult and FinServ in June 2021 triggered a change in Katapult's control environment and reporting structure to coincide with SEC reporting requirements. As a result, during the first quarter of 2021 the Company applied a change in accounting principle to reflect the Company's share of Katapult's historical and ongoing results from a two-month reporting lag to a one-quarter reporting lag. The Company believes this change in accounting principle is preferable as it provides the Company with the ability to present the results of its equity method investment after Katapult’s results are publicly available and related internal controls have been completed. The Company has not retrospectively applied the change in accounting principle because the impact on the financial statements was immaterial for all periods presented.

Continuing Impacts of COVID-19

The COVID-19 pandemic continues to cause significant uncertainty and impacts. Macroeconomic conditions, in general, and the Company's operations, specifically, have been significantly affected by COVID-19. Government responses to the pandemic, either through the form of mandated lockdowns or a modificationvariety of stimulus programs to mitigate the impact of the pandemic, suppressed loan demand in 2020 and into the first quarter of 2021. For details regarding the effect COVID-19 had on the Company's operations in 2020, the Company's response to mitigate the impact of the pandemic and the U.S. and Canadian federal and local responses to the pandemic, refer to the 2020 Form 10-K. During the second quarter of 2021, the runoff of additional federal stimulus programs in the U.S. resulted in the stabilization of the Company's U.S. loan portfolio and resulted in moderately higher NCO and past-due trends, though still at relatively low levels compared to pre-COVID-19 trends. For further information regarding the impact the pandemic had on loan balances as of September 30, 2021, refer to Note 3, "Loans Receivable and Revenue."

Troubled Debt Restructuring
If a borrower experiences financial difficulties, the Company may modify the terms of its loans receivable, known as TDRs. As a result of COVID-19 and the awards. Company's response to provide relief for customers through its Customer Care Program, the Company began modifying loans that qualified as TDRs beginning in the second quarter of 2020. Refer to Note 3, "Loans Receivable and Revenue" for further information on TDRs as of and for the three and nine months ended September 30, 2021.

Loans Receivable on a Non-Accrual Basis

The provisionsCompany may place loans receivable on non-accrual status due to statutory requirements or, if in ASU 2017-09 provide guidance about which changesmanagement’s judgment, the timely collection of principal and interest becomes uncertain. After a loan is placed on non-accrual status, no further interest is accrued. Loans are not typically returned to accrual status and thus remain on non-accrual status until they are paid or charged-off. Payments are applied initially to any outstanding past due loan balances prior to current loan balances. The Company's policy for determining past due status is consistent with that of the Company's accrual loans, depending on the product. Refer to Note 3, "Loans Receivable and Revenue" for further information on non-accrual loans for the three and nine months ended September 30, 2021.

Goodwill

The annual impairment review for goodwill consists of performing a qualitative assessment to determine whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount, as a basis for determining whether or not further testing is required. The Company may elect to bypass the qualitative assessment and proceed directly to the terms or conditions of a share-based payment award require an entity to accounttwo-step process, for the effects of a modification, unless certain conditions are met.any reporting unit in any period. The amendments in this update were effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. ASU 2017-09 was effective for us as of January 1, 2018. The adoption of this amendment did not have a material impact on our Consolidated Financial Statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive income ("ASU 2018-02"). Current US GAAP requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the period the change is enacted, including items of other comprehensive income for which the related tax effects are presented in other comprehensive income (“stranded tax effects”). ASU 2018-02 allows, but does not require, companies to reclassify stranded tax effects caused by the 2017 Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. Additionally, ASU 2018-02 requires new disclosures by all companies, whether they opt to do the reclassification or not. The provisions of ASU 2018-02 are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Companies should apply the proposed amendments either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We are currently assessing the impact adoption of ASU 2018-02 will have on our Consolidated Financial Statements.

In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments ("ASU 2017-13"). ASU 2017-13 amends the early adoption date option for public business entities related to the adoption of ASU No. 2014-09 and ASU No. 2016-02. We are currently assessing the impact adoption of Topic 606 and Topic 842 will have on our Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). The amendments in ASU 2017-04 simplified the goodwill impairment test by eliminating Step 2 of the test which requires an entity to compute the implied fair value of goodwill. Instead, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, and is limited to the amount of total goodwill allocated to that reporting unit. Under ASU 2017-04, an entity still has the option to performCompany can resume the qualitative assessment for aany reporting unit to determine ifin any subsequent period. If the quantitative impairment testCompany determines, on the basis of qualitative factors, that it is necessary. The provisions of ASU 2017-04 are effective for a public entity's annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and effective for us, as an emerging growth company, in fiscal years beginning after December 15, 2021. We are currently assessing the impact adoption of ASU 2017-04 will have on our Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the definition of a Business ("ASU 2017-01"). The amendments in ASU 2017-01 narrow the definition of a business and provide a frameworkmore likely than not that gives an entity a basis for making reasonable judgments about whether a transaction involves an asset or a business and provide a screen to determine when a set (an integrated set of assets and activities) is not a business. The screen requires a determination that when substantially all of the fair value of the gross assets acquiredreporting unit is concentrated inless than the carrying amount, the Company will then apply a single identifiable asset or a grouptwo-step process of similar identifiable assets,(i) determining the set is not a business. Iffair value of the screen is not met, the amendments in ASU 2017-01 (i) require that to be considered a business, a set must include, at a minimum, an inputreporting unit and a substantive process that together significantly contribute(ii) comparing it to the abilitycarrying value of the net assets allocated to createthe reporting unit. When performing the two-step process, if the fair value of the reporting unit exceeds its carrying value, no further analysis or write-down of goodwill is required. In the event the estimated fair value of a reporting unit is less than the carrying value, the Company would recognize an impairment loss equal to such excess, which could significantly and adversely impact reported results of operations and stockholders’ equity.

At September 30, 2021, the goodwill balance includes the amount recognized as a result of the acquisition of Flexiti. Refer to Note 15, "Acquisitions" for further information regarding the acquisition and Note 14, "Goodwill" for the impact to the Company's goodwill balance as a result of the acquisition.

11


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


outputDuring the fourth quarter of 2020, the Company performed a quantitative assessment for the U.S. and (ii) removeCanada Direct Lending reporting units. Management concluded that the evaluationestimated fair values of whether a market participant could replace missing elements.these 2 reporting units were greater than their respective carrying values. During the three and nine months ended September 30, 2021, the Company did not identify triggering events that indicate an impairment existed and did not record an impairment related to goodwill. The amendments provide a frameworkCompany has not yet completed its annual impairment review for goodwill, which is performed as of October 1.

Refer to assist entities in evaluating whether both an input and a substantive process are present. Note 14, "Goodwill" for further information.

Recently Adopted Accounting Pronouncements

ASU 2017-01 is effective prospectively for public companies for annual periods beginning after December 15, 2017 including interim periods therein, and it will be effective for us, as an emerging growth company, for annual periods beginning after December 15, 2018 and interim periods beginning after December 15, 2019. We are currently assessing the impact adoption of ASU 2017-01 will have on our Consolidated Financial Statements.2020-01


In November 2016,January 2020, the FASB issued ASU 2016-18, Statement2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (ASU 2020-01). ASU 2020-01 clarifies the interaction of Cash Flows (Topic 230): Restricted Cash ("the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323 and the accounting for certain forward contracts and purchased options in Topic 815. The Company adopted ASU 2016-18"). The amendments in ASU 2016-18 require that2020-01 as of January 1, 2021, which did not have a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shownmaterial impact on the statement of cash flows. ASU 2016-18 is effective for public companies for fiscal years beginning after December 15, 2017 and interim periods therein, and it will be effective for us, as an emerging growth company, for fiscal years beginning after December 15, 2018 and interim periods beginning after December 15, 2019. The amendments should be applied using a retrospective transition method to each period presented. We are currently assessing the impact adoption of ASU 2016-18 will have on ourunaudited Condensed Consolidated Financial Statements.


ASU 2019-12

In August 2016,December 2019, the FASB issued ASU 2016-15, Statement of Cash Flows2019-12, Income Taxes (Topic 230)740): Classification of Certain Cash Receipts and Cash Payments (a consensus ofSimplifying the Emerging Issues Task Force) (“ASU 2016-15”)Accounting for Income Taxes (Topic 740). The amendmentsASU intends to simplify various aspects related to accounting for income taxes and removes certain exceptions to the general principles in Topic 740. Additionally, the ASU 2016-15 provideclarifies and amends existing guidance to improve consistent application of its requirements. The Company adopted ASU 2019-12 as of January 1, 2021, which did not have a material impact on eight specific cash flow issues, including debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, distributions received from equity method investees and beneficial interests in securitization transactions. the Company's unaudited Condensed Consolidated Financial Statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

ASU 2016-15 is effective for public companies for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and it will be effective for us, as an emerging growth company, for fiscal years beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2019. We are currently assessing the potential impact ASU 2016-15 will have on our Consolidated Statements of Cash Flows.2016-13


In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” (" and subsequent amendments to the guidance: ASU 2016-13"). This2018-19 in November 2018, ASU modifies2019-04 in April 2019, ASU 2019-05 in May 2019, ASU 2019-10 and -11 in November 2019 and ASU 2020-02 in February 2020. The amended standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace the impairmentcurrent “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. The amendment will affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to utilize an expected loss methodology in place ofreceive cash.

ASU 2019-10 amends the currently used incurred loss methodology, which willmandatory effective date for ASU 2016-13. As a result, in the more timely recognition of losses. ASU 2016-13 will beand related amendments are effective for public companies for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, and it will be effective2022 for us,entities that qualified as an emerging growth company,SRC as of June 30, 2019, such as the Company. ASU 2016-13 and its amendments should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic. Early adoption is permitted. The Company is evaluating its alternatives with respect to the available accounting methods under ASU 2016-13, including the fair value option. If the fair value option is not utilized, adoption of ASU 2016-13 will increase the allowance for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. We arecredit losses, with a resulting negative adjustment to retained earnings on the date of adoption. The Company deferred the adoption of ASU 2016-13 as permitted under ASU 2019-10. The Company is currently assessing the impact that adoption of ASU 2016-13 will have on our Consolidated Financial Statements.

In February 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payment arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged and lessees will no longer be provided with a source of off-balance sheet financing. ASU 2016-02 will be effective for public companies for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, and it will be effective for us, as an emerging growth company, for fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. We are currently assessing the impact ASU 2016-02 will have on our Consolidated Financial Statements.



12


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

ASU 2020-04 and subsequent amendments

In January 2016,March 2020, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”) which requires (i) equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation2020-04, Reference Rate Reform - Facilitation of the investee)Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional expedients and exceptions to be measuredU.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the upcoming market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by this reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at fair value with changes in fair value recognized in net income, (ii) public business entitiesthe modification date or reassess a previous accounting determination. Entities also can elect various optional expedients that would allow them to use the exit price notion when measuring the fair value of financial instrumentscontinue applying hedge accounting for disclosure purposes and (iii) separate presentation of financial assets and financial liabilitieshedging relationships affected by measurement category and form of financial asset (i.e., securities or loans and receivables). ASU 2016-01 eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU 2016-01reference rate reform if certain criteria are met. The guidance is effective for public companies for fiscal years beginning afterupon issuance and generally can be applied through December 15, 201731, 2022. The FASB also issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope in January 2021. It clarifies that certain optional expedients and interim periods within those fiscal years, and it will be effective for us, as an emerging growth company, for fiscal years beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2019. Weexceptions in Topic 848 apply to derivatives that are currently assessingaffected by the impactdiscounting transition. The amendments in this ASU will have on our Consolidated Financial Statements.

In November 2015,affect the FASB issuedguidance in ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“2020-04 and are effective in the same timeframe as ASU 2015-17”). ASU 2015-07 eliminates the requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. ASU 2015-17 was effective for public companies for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years, and it will be effective for us, as an emerging growth company, for fiscal years beginning after December 15, 2017 and interim periods within fiscal years beginning after December 15, 2018. We do2020-04. The Company does not expect thatthe adoption of this amendment willthese ASUs to have a material impact on our Consolidated Financial Statements.its financial statements.


In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) (“ASU 2015-14”), which deferred the effect date of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), for public companies to fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and it will be effective for us, as an emerging growth company, for fiscal years beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2019. If we are no longer an emerging growth company as of December 31, 2018, we will be required to adopt the provision of this standard retroactively as of January 1, 2018. In May 2014, the FASB issued ASU 2014-09 which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. We do not expect that adoption of ASU 2014-09 will have a material impact on our Consolidated Financial Statements.

NOTE 2 - VARIABLE INTEREST ENTITIES


We hold aAs of September 30, 2021, the Company had 3 credit facilityfacilities whereby certain loan receivables areloans receivable were sold to wholly-owned, bankruptcy-remote special purpose subsidiaries (VIEs) andVIEs to collateralize debt incurred under each facility. See Note 5, "Debt" for additional debt is incurred throughdetails on the Non-Recourse U.S. SPV facility (See Note 5, "Long-Term Debt," for further discussion) that is collateralized by these underlying loan receivables.Facility, entered into in April 2020, the Non-Recourse Canada SPV Facility, entered into in August 2018, and the Non-Recourse Flexiti SPE Facility, entered into concurrent with the Company's acquisition of Flexiti in March 2021.


We haveThe Company has determined that we areit is the primary beneficiary of the VIEs and areis required to consolidate them. We includeThe Company includes the assets and liabilities related to the VIEs in ourthe unaudited Condensed Consolidated Financial Statements and we account for them as secured borrowings. We parenthetically disclose on our Consolidated Balance Sheets the VIEs’ assets that can only be used to settle the VIEs' obligations and liabilities if the VIEs’ creditors have no recourse against our general credit.Statements.


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


The carrying amounts of consolidated VIEs' assets and liabilities associated with our special purpose subsidiaries were as follows:follows (in thousands):

September 30,
2021		December 31,
2020
Assets
Restricted cash$42,214 $31,994 
Loans receivable, net649,192 306,302 
Intercompany receivable(1)
84,811 15,382 
Prepaid expenses and other— 388 
Deferred tax assets105 105 
      Total Assets$776,322 $354,171 
Liabilities
Accounts payable and accrued liabilities$6,840 $34,055 
Deferred revenue110 136 
Accrued interest1,418 1,147 
Debt397,465 139,661 
      Total Liabilities$405,833 $174,999 
(1) Intercompany receivable VIE balances eliminate upon consolidation.

(in thousands)March 31, 2018 December 31, 2017
Assets   
Restricted Cash$12,268
 $6,871
Loans receivable less allowance for loan losses149,873
 167,706
      Total Assets$162,141
 $174,577
Liabilities   
Accounts payable and accrued liabilities$15
 $12
Accrued interest1,263
 1,266
Long-term debt111,150
 120,402
      Total Liabilities$112,428
 $121,680

NOTE 3 – LOANS RECEIVABLE AND REVENUE


Revolving LOC revenues include interest income on outstanding revolving balances, MDR related to Canada POS Lending and other usage or maintenance fees as permitted by underlying statutes. Unsecured and Secured Installment revenue includes interest income and non-sufficient-funds or returned-items fees on late or defaulted payments on past-due loans, known as late fees. Late fees comprise less than 1% of Installment revenues. Single-Pay revenues represent deferred presentment or other fees as defined by the underlying state, provincial or national regulations. Ancillary revenue includes revenue from a number of ancillary financial products such as check cashing, proprietary general-purpose reloadable prepaid debit cards (Opt+), demand deposit accounts (Revolve Finance), credit protection insurance in the Canadian market, retail installment sales and money transfer services.
13


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


The following table summarizes revenue by product for the periods indicated:(in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revolving LOC$78,262 $58,711 $209,033 $186,429 
Unsecured Installment72,056 67,408 213,233 260,328 
Secured Installment13,743 16,692 41,591 62,379 
Single-Pay26,568 25,084 75,298 92,973 
Total Installment112,367 109,184 330,122 415,680 
Ancillary18,651 14,108 54,369 43,209 
   Total revenue(1)
$209,280 $182,003 $593,524 $645,318 
(1) Includes revenue from CSO programs of $43.4 million and $36.7 million for the three months ended September 30, 2021 and 2020, respectively, and $119.7 million and $142.5 million for the nine months ended September 30, 2021 and 2020.
 Three Months Ended March 31,
(in thousands)2018 2017
Unsecured Installment$132,946
 $109,431
Secured Installment26,856
 23,669
Open-End27,223
 17,907
Single-Pay63,705
 63,790
Ancillary11,028
 9,783
   Total revenue$261,758
 $224,580


The following tables summarize Loansloans receivable by product and the related delinquent loans receivable at March 31, 2018:(in thousands):
September 30, 2021
Revolving LOCUnsecured InstallmentSecured Installment
Single-Pay(1)
Total Installment - Company OwnedTotal
Current loans receivable$665,130 $61,852 $31,911 $40,331 $134,094 $799,224 
Delinquent loans receivable54,924 20,953 7,255 — 28,208 83,132 
   Total loans receivable720,054 82,805 39,166 40,331 162,302 882,356 
   Less: allowance for losses(52,262)(14,330)(3,482)(2,469)(20,281)(72,543)
Loans receivable, net$667,792 $68,475 $35,684 $37,862 $142,021 $809,813 
(1) Of the $40.3 million of Single-Pay receivables, $11.1 million relate to mandated extended payment options for certain Canada Single-Pay loans.

September 30, 2021
Revolving LOCUnsecured InstallmentSecured InstallmentTotal Installment - Company OwnedTotal
Delinquent loans receivable
0-30 days past due$27,449 $7,933 $3,667 $11,600 $39,049 
31-60 days past due12,721 5,914 1,876 7,790 20,511 
61 + days past due14,754 7,106 1,712 8,818 23,572 
Total delinquent loans receivable$54,924 $20,953 $7,255 $28,208 $83,132 

December 31, 2020
Revolving LOCUnsecured InstallmentSecured Installment
Single-Pay(1)
Total Installment - Company OwnedTotal
Current loans receivable$321,105 $78,235 $40,358 $43,780 $162,373 $483,478 
Delinquent loans receivable37,779 24,190 8,275 — 32,465 70,244 
   Total loans receivable358,884 102,425 48,633 43,780 194,838 553,722 
   Less: allowance for losses(51,958)(24,073)(7,047)(3,084)(34,204)(86,162)
Loans receivable, net$306,926 $78,352 $41,586 $40,696 $160,634 $467,560 
(1) Of the $43.8 million of Single-Pay receivables, $11.2 million relate to mandated extended payment options for certain Canada Single-Pay loans.

14

  March 31, 2018
(in thousands) Single-PayUnsecured InstallmentSecured InstallmentOpen-EndTotal
Current loans receivable $87,075
$132,159
$65,448
$51,564
$336,246
Delinquent loans receivable —
39,273
14,319
—
53,592
   Total loans receivable 87,075
171,432
79,767
51,564
389,838
   Less: allowance for losses (4,485)(37,916)(11,639)(6,846)(60,886)
Loans receivable, net $82,590
$133,516
$68,128
$44,718
$328,952



CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

December 31, 2020
Revolving LOCUnsecured InstallmentSecured InstallmentTotal Installment - Company OwnedTotal
Delinquent loans receivable
0-30 days past due$17,517 $10,361 $3,764 $14,125 $31,642 
31-60 days past due9,276 7,124 2,199 9,323 18,599 
61 + days past due10,986 6,705 2,312 9,017 20,003 
Total delinquent loans receivable$37,779 $24,190 $8,275 $32,465 $70,244 
  March 31, 2018
(in thousands) Unsecured InstallmentSecured InstallmentTotal
Delinquent loans receivable    
0-30 days past due $13,133
$6,274
$19,407
31-60 days past due 12,500
4,366
16,866
61-90 days past due 13,640
3,679
17,319
Total delinquent loans receivable $39,273
$14,319
$53,592

The following tables summarize Loans receivable by product and the related delinquent loans receivable at December 31, 2017:
  December 31, 2017
(in thousands) Single-PayUnsecured InstallmentSecured InstallmentOpen-EndTotal
Current loans receivable $99,400
$151,343
$73,165
$47,949
$371,857
Delinquent loans receivable —
44,963
16,017
—
60,980
   Total consumer loans receivable 99,400
196,306
89,182
47,949
432,837
   Less: allowance for losses (5,916)(43,754)(13,472)(6,426)(69,568)
   Consumer loans receivable, net $93,484
$152,552
$75,710
$41,523
$363,269

  December 31, 2017
(in thousands) Unsecured InstallmentSecured InstallmentTotal
Delinquent loans receivable   

0-30 days past due $18,358
$8,116
$26,474
31-60 days past due 12,836
3,628
16,464
61-90 days past due 13,769
4,273
18,042
Total delinquent loans receivable $44,963
$16,017
$60,980


The following tables summarize loans guaranteedGuaranteed by usthe Company under our CSO programs and the related delinquent receivables at March 31, 2018:(in thousands):
September 30, 2021
Unsecured InstallmentSecured InstallmentTotal Installment - Guaranteed by the Company
Current loans receivable Guaranteed by the Company$34,090 $740 $34,830 
Delinquent loans receivable Guaranteed by the Company8,385 207 8,592 
Total loans receivable Guaranteed by the Company42,475 947 43,422 
Less: Liability for losses on CSO lender-owned consumer loans(6,973)(34)(7,007)
Loans receivable Guaranteed by the Company, net$35,502 $913 $36,415 

September 30, 2021
Unsecured InstallmentSecured InstallmentTotal Installment - Guaranteed by the Company
Delinquent loans receivable
0-30 days past due$6,798 $166 $6,964 
31-60 days past due1,247 35 1,282 
61+ days past due340 6 346 
Total delinquent loans receivable$8,385 $207 $8,592 

December 31, 2020
Unsecured InstallmentSecured InstallmentTotal Installment - Guaranteed by the Company
Current loans receivable Guaranteed by the Company$37,096 $775 $37,871 
Delinquent loans receivable Guaranteed by the Company6,079 155 6,234 
Total loans receivable Guaranteed by the Company43,175 930 44,105 
Less: Liability for losses on CSO lender-owned consumer loans(7,160)(68)(7,228)
Loans receivable Guaranteed by the Company, net$36,015 $862 $36,877 

December 31, 2020
Unsecured InstallmentSecured InstallmentTotal Installment - Guaranteed by the Company
Delinquent loans receivable
0-30 days past due$5,435 $103 $5,538 
31-60 days past due490 37 527 
61 + days past due154 15 169 
Total delinquent loans receivable$6,079 $155 $6,234 

15

  March 31, 2018
(in thousands) Unsecured InstallmentSecured InstallmentTotal
Current loans receivable guaranteed by the Company $45,922
$2,329
$48,251
Delinquent loans receivable guaranteed by the Company 8,410
437
8,847
Total loans receivable guaranteed by the Company 54,332
2,766
57,098
Less: CSO guarantee liability (9,886)(526)(10,412)
Loans receivable guaranteed by the Company, net $44,446
$2,240
$46,686



CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

  March 31, 2018
(in thousands) Unsecured InstallmentSecured InstallmentTotal
Delinquent loans receivable   

0-30 days past due $6,358
$379
$6,737
31-60 days past due 1,078
30
1,108
61-90 days past due 974
28
1,002
Total delinquent loans receivable $8,410
$437
$8,847

The following tables summarize loans guaranteed by us under our CSO programs and the related delinquent receivables at December 31, 2017:    
  December 31, 2017
(in thousands) Unsecured InstallmentSecured InstallmentTotal
Current loans receivable guaranteed by the Company $62,676
$3,098
$65,774
Delinquent loans receivable guaranteed by the Company 12,480
537
13,017
Total loans receivable guaranteed by the Company 75,156
3,635
78,791
Less: CSO guarantee liability (17,073)(722)(17,795)
Loans receivable guaranteed by the Company, net $58,083
$2,913
$60,996

  December 31, 2017
(in thousands) Unsecured InstallmentSecured InstallmentTotal
Delinquent loans receivable    
0-30 days past due $10,477
$459
$10,936
31-60 days past due 1,364
41
1,405
61-90 days past due 639
37
676
Total delinquent loans receivable $12,480
$537
$13,017

The following table summarizes activity in the allowanceALL and the liability for loan losses during the three months ended March 31, 2018:
on CSO lender-owned consumer loans in total (in thousands):
Three Months Ended
September 30, 2021
Three Months Ended March 31, 2018Revolving LOCUnsecured InstallmentSecured InstallmentSingle-PayTotal InstallmentOtherTotal
(in thousands)Single-PayUnsecured InstallmentSecured InstallmentOpen-EndOtherTotal
Allowance for loan losses:Allowance for loan losses:
Balance, beginning of period$5,916
$43,754
$13,472
$6,426
$—
$69,568
Balance, beginning of period$44,847 $16,701 $3,880 $2,432 $23,013 $— $67,860 
Charge-offs(47,707)(39,377)(11,485)(20,349)(675)(119,593)Charge-offs(27,974)(18,400)(4,252)(24,640)(47,292)(869)(76,135)
Recoveries35,009
5,967
2,866
9,377
47
53,266
Recoveries8,564 4,811 1,996 18,493 25,300 401 34,265 
Net charge-offs(12,698)(33,410)(8,619)(10,972)(628)(66,327)Net charge-offs(19,410)(13,589)(2,256)(6,147)(21,992)(468)(41,870)
Provision for losses11,302
27,477
6,786
11,428
628
57,621
Provision for losses27,800 11,223 1,858 6,223 19,304 468 47,572 
Effect of foreign currency translation(35)95
—
(36)—
24
Effect of foreign currency translation(975)(5)— (39)(44)— (1,019)
Balance, end of period$4,485
$37,916
$11,639
$6,846
$—
$60,886
Balance, end of period$52,262 $14,330 $3,482 $2,469 $20,281 $— $72,543 
Allowance for loan losses as a percentage of gross loan receivables5.2%22.1%14.6%13.3%N/A
15.6%
Liability for losses on CSO lender-owned consumer loans:Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of periodBalance, beginning of period$— $5,234 $31 $— $5,265 $— $5,265 
Increase in liabilityIncrease in liability— 1,739 3 — 1,742 — 1,742 
Balance, end of periodBalance, end of period$— $6,973 $34 $— $7,007 $— $7,007 

Three Months Ended
September 30, 2020
Revolving LOCUnsecured InstallmentSecured InstallmentSingle-PayTotal InstallmentOtherTotal
Allowance for loan losses:
Balance, beginning of period$47,319 $18,798 $7,883 $2,802 $29,483 $— $76,802 
Charge-offs(22,781)(14,781)(6,648)(21,473)(42,902)(972)(66,655)
Recoveries4,618 5,186 2,635 17,034 24,855 498 29,971 
Net charge-offs(18,163)(9,595)(4,013)(4,439)(18,047)(474)(36,684)
Provision for losses21,655 9,647 3,239 4,799 17,685 474 39,814 
Effect of foreign currency translation606 9 — 35 44 — 650 
Balance, end of period$51,417 $18,859 $7,109 $3,197 $29,165 $— $80,582 
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period$— $5,128 $36 $— $5,164 $— $5,164 
Increase in liability— 1,002 32 — 1,034 — 1,034 
Balance, end of period$— $6,130 $68 $— $6,198 $— $6,198 


16


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Nine Months Ended
September 30, 2021
Revolving LOCUnsecured InstallmentSecured InstallmentSingle-PayTotal InstallmentOtherTotal
Allowance for loan losses:
Balance, beginning of period$51,958 $24,073 $7,047 $3,084 $34,204 $— $86,162 
Charge-offs(81,175)(58,337)(14,979)(68,680)(141,996)(2,525)(225,696)
Recoveries23,351 16,811 6,756 57,321 80,888 1,331 105,570 
Net charge-offs(57,824)(41,526)(8,223)(11,359)(61,108)(1,194)(120,126)
Provision for losses58,274 31,782 4,658 10,743 47,183 1,194 106,651 
Effect of foreign currency translation(146)1 — 1 2 — (144)
Balance, end of period$52,262 $14,330 $3,482 $2,469 $20,281 $— $72,543 
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period$— $7,160 $68 $— $7,228 $— $7,228 
Decrease in liability— (187)(34)— (221)— (221)
Balance, end of period$— $6,973 $34 $— $7,007 $— $7,007 

Nine Months Ended
September 30, 2020
Revolving LOCUnsecured InstallmentSecured InstallmentSingle-PayTotal InstallmentOtherTotal
Allowance for loan losses:
Balance, beginning of period$55,074 $35,587 $10,305 $5,869 $51,761 $— $106,835 
Charge-offs(104,074)(83,468)(31,505)(83,162)(198,135)(3,000)(305,209)
Recoveries17,129 17,982 8,505 68,804 95,291 1,475 113,895 
Net charge-offs(86,945)(65,486)(23,000)(14,358)(102,844)(1,525)(191,314)
Provision for losses83,987 48,766 19,804 11,850 80,420 1,525 165,932 
Effect of foreign currency translation(699)(8)— (164)(172)— (871)
Balance, end of period$51,417 $18,859 $7,109 $3,197 $29,165 $— $80,582 
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period$— $10,553 $70 $— $10,623 $— $10,623 
Decrease in liability— (4,423)(2)— (4,425)— (4,425)
Balance, end of period$— $6,130 $68 $— $6,198 $— $6,198 

As of September 30, 2021, Revolving LOC and Installment loans classified as nonaccrual were $5.1 million and $6.1 million, respectively. As of December 31, 2020, Revolving LOC and Installment loans classified as nonaccrual were $4.4 million and $6.2 million, respectively. The following table summarizes activityCompany's loans receivable inherently considers nonaccrual loans in its estimate of the CSO guarantee liability duringALL as delinquencies are a primary input into the three months ended March 31, 2018:Company's roll rate-based model.

 Three Months Ended
March 31, 2018
(in thousands)Unsecured InstallmentSecured InstallmentTotal
Balance, beginning of period$17,073
$722
$17,795
Charge-offs(41,719)(1,219)(42,938)
Recoveries10,976
1,169
12,145
Net charge-offs(30,743)(50)(30,793)
Provision for losses23,556
(146)23,410
Balance, end of period$9,886
$526
$10,412
TDR Loans Receivable


The following table summarizes activity inIn certain circumstances, the allowanceCompany modifies the terms of its loans receivable for loan lossesborrowers. Under U.S. GAAP, a modification of loans receivable terms is considered a TDR if the borrower is experiencing financial difficulty and the CSO guarantee liability,Company grants a concession to the borrower it would not have otherwise granted under the terms of the original agreement. In response to COVID-19 in total, during2020, the three months ended March 31, 2018:Company established an enhanced Customer Care Program, which enables its team members to provide relief to customers in various ways, ranging from due date changes, interest or fee forgiveness, payment waivers or extended payment plans, depending on a customer’s individual circumstances. The Company modifies loans only if it believes the customer has the ability to pay under the restructured terms. The Company continues to accrue and collect interest on these loans in accordance with the restructured terms.

17

 Three Months Ended March 31, 2018
(in thousands)Single-PayUnsecured InstallmentSecured InstallmentOpen-EndOtherTotal
Balance, beginning of period$5,916
$60,827
$14,194
$6,426
$—
$87,363
Charge-offs(47,707)(81,096)(12,704)(20,349)(675)(162,531)
Recoveries35,009
16,943
4,035
9,377
47
65,411
Net charge-offs(12,698)(64,153)(8,669)(10,972)(628)(97,120)
Provision for losses11,302
51,033
6,640
11,428
628
81,031
Effect of foreign currency translation(35)95
—
(36)—
24
Balance, end of period$4,485
$47,802
$12,165
$6,846
$—
$71,298



CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

The followingCompany records its ALL related to TDRs by discounting the estimated cash flows associated with the respective TDR at the effective interest rate immediately after the loan modification and records any difference between the discounted cash flows and the carrying value as an allowance adjustment. A loan that has been classified as a TDR remains so classified until the loan is paid off or charged off. A TDR is charged off consistent with the Company's policies for the related loan product. For additional information on the Company's loss recognition policy, see the 2020 Form 10-K.

The table summarizes activitybelow presents TDRs that are related to the Customer Care Program implemented in response to COVID-19, included in both gross loans receivable and the impairment included in the allowance for loan lossesALL (in thousands):

As of
September 30, 2021
As of
December 31, 2020
Current TDR gross receivables$11,754 $13,563 
Delinquent TDR gross receivables4,196 6,309 
Total TDR gross receivables15,950 19,872 
Less: Impairment included in the allowance for loan losses(2,829)(3,482)
Less: Additional allowance(2,536)(4,497)
Outstanding TDR receivables, net of impairment$10,585 $11,893 

The tables below present loans modified and classified as TDRs during the periods presented (in thousands):

Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Pre-modification TDR loans receivable$3,586 $9,007 $11,953 $37,948 
Post-modification TDR loans receivable3,182 8,186 10,654 34,195 
Total concessions included in gross charge-offs$404 $821 $1,299 $3,753 

There were $2.9 million and $5.1 million of loans classified as TDRs that were charged off and included as a reduction in the ALL during the three months ended March 31, 2017:September 30, 2021 and 2020, respectively, and $11.0 million and $6.0 million during the nine months ended September 30, 2021 and 2020, respectively. The Company had commitments to lend additional funds of approximately $2.1 million to customers with available and unfunded Revolving LOC loans classified as TDRs as of September 30, 2021.
 Three Months Ended March 31, 2017
(in thousands)Single-PayUnsecured InstallmentSecured InstallmentOpen-EndOtherTotal
Balance, beginning of period$5,425
$17,853
$10,737
$5,179
$—
$39,194
Charge-offs(44,885)—
—
(9,229)(1,139)(55,253)
Recoveries33,227
4,840
3,028
5,353
752
47,200
Net charge-offs(11,658)4,840
3,028
(3,876)(387)(8,053)
Provision for losses10,894
19,309
6,504
3,265
387
40,359
Effect of foreign currency translation58
38
1
4
—
101
Balance, end of period$4,719
$42,040
$20,270
$4,572
$—
$71,601
Allowance for loan losses as a percentage of gross loan receivables5.9%32.0%30.0%17.8%N/A
23.5%


The following table summarizes activitybelow presents the Company's average outstanding TDR loans receivable, interest income recognized on TDR loans and number of TDR loans for the periods presented (dollars in the CSO guarantee liability during the three months ended March 31, 2017:thousands):

Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Average outstanding TDR loans receivable$16,190 $20,484 $17,911 $21,011 
Interest income recognized4,155 6,510 14,277 10,907 
Number of TDR loans2,624 5,361 8,872 22,190 

 Three Months Ended March 31, 2017
(in thousands)Single-PayUnsecured InstallmentSecured InstallmentTotal
Balance, beginning of period$274
$15,630
$1,148
$17,052
Charge-offs(1,821)(27,647)(3,163)(32,631)
Recoveries659
10,957
2,371
13,987
Net charge-offs(1,162)(16,690)(792)(18,644)
Provision for losses904
19,542
931
21,377
Balance, end of period$16
$18,482
$1,287
$19,785

The following table summarizes activity in the allowance for loan losses and the CSO guarantee liability, in total, during the three months ended March 31, 2017:
 Three Months Ended March 31, 2017
(in thousands)Single-PayUnsecured InstallmentSecured InstallmentOpen-EndOtherTotal
Balance, beginning of period$5,699
$33,483
$11,885
$5,179
$—
$56,246
Charge-offs(46,706)(27,647)(3,163)(9,229)(1,139)(87,884)
Recoveries33,886
15,797
5,399
5,353
752
61,187
Net charge-offs(12,820)(11,850)2,236
(3,876)(387)(26,697)
Provision for losses11,798
38,851
7,435
3,265
387
61,736
Effect of foreign currency translation58
38
1
4
—
101
Balance, end of period$4,735
$60,522
$21,557
$4,572
$—
$91,386

NOTE 4 – CREDIT SERVICES ORGANIZATION
The CSO fee receivable amounts under our CSO programsreceivables were $9.9$5.2 million and $14.5$5.0 million at March 31, 2018September 30, 2021 and December 31, 2017, respectively. As noted, we bear2020, respectively, and are reflected in "Prepaid expenses and other" in the unaudited Condensed Consolidated Balance Sheets. The Company bears the risk of loss through ourits guarantee to purchase any defaulted customer loans from the lenders.that are charged-off. The terms of these loans range from threeup to eighteensix months. This guarantee represents an obligation to purchase specific loans that go into default. See Note 1, "Summary of Significant Accounting Policies and Nature of Operations" of the 2020 Form 10-K for further details of the Company's accounting policy.

As of March 31, 2018September 30, 2021 and December 31, 2017,2020, the incremental maximum amount payable under all such guarantees was $48.0$35.3 million and $65.2$36.6 million, respectively. This liability is not included in the Company's unaudited Condensed Consolidated Balance Sheets. If the Company is required to pay any portion of the total amount of the loans it has guaranteed, it will attempt to recover the entire amount or a portion from the applicable customers. The Company holds no collateral in respect of the guarantees. The Company estimates a liability for losses associated with the guaranty provided to the CSO lenders, which was $7.0 million and $7.2 million at September 30, 2021 and December 31, 2020, respectively. This liability is reflected in "Liability for losses on CSO lender-owned consumer loans" in the unaudited Condensed Consolidated Balance Sheets.


18


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

respectively. Our guarantee liability was $10.4The Company placed $5.1 million and $17.8 million at March 31, 2018 and December 31, 2017, respectively.

We have placed $13.3 million and $17.9$5.5 million in collateral accounts for the benefit of lenders at March 31, 2018September 30, 2021 and December 31, 2017,2020, respectively, which is reflected in "Prepaid expenses and other" in the unaudited Condensed Consolidated Balance Sheets. The balances required to be maintained in these collateral accounts vary based uponby lender, but are typically based on a percentage of the outstanding loan balances held by the lender. The percentage of outstanding loan balances required for collateral is defined withinnegotiated between the terms agreed to between usCompany and each such lender.


Deferred revenue associated with the CSO program was immaterial as of September 30, 2021 and December 31, 2020, and there were no costs to obtain, or costs to fulfill, capitalized under the program. See Note 3, "Loans Receivable and Revenue" for additional information related to loan balances and the revenue recognized under the program.

NOTE 5 – LONG-TERM DEBT
Long-term debtDebt consisted of the following:
following (in thousands):
(in thousands) March 31, 2018 December 31, 2017
2017 Senior secured notes (due 2022) $511,493
 $585,823
Non-Recourse U.S. SPV Facility 111,151
 120,402
Senior Revolver —
 —
     Long-term debt $622,644
 $706,225
September 30, 2021December 31, 2020
7.50% Senior Secured Notes$734,533 $— 
8.25% Senior Secured Notes— 680,000 
Non-Recourse U.S. SPV Facility44,940 43,586 
Non-Recourse Canada SPV Facility96,821 96,075 
Non-Recourse Flexiti SPE Facility255,704 — 
     Debt$1,131,998 $819,661 

7.50% Senior Secured Notes


In February and November 2017, CFTCJuly 2021, the Company issued $470.0$750.0 million and $135.0 million, respectively, of 12.00%7.50% Senior Secured Notes due Marchwhich mature on August 1, 2022 ("Senior Secured Notes"). The2028. Interest on the notes is payable semiannually, in arrears, on February issuance refinanced similar notes that were nearing maturity,1 and the extinguishment of the existing notes resulted in a pretax loss of $12.5 million in the three months ended March 31, 2017.August 1. In connection with these 2017 debt issuances we capitalizedthe 7.50% Senior Secured Notes, financing costs of approximately $18.3$15.5 million the balancewere capitalized, net of which isamortization, and included in the Interimunaudited Condensed Consolidated Balance Sheets as a component of “Long-term debt,” and is"Debt." These costs are amortized over the term of the 7.50% Senior Secured Notes as a component of interest expense.

8.25% Senior Secured Notes

In August 2018, the Company issued $690.0 million of 8.25% Senior Secured Notes maturing on September 1, 2025. In connection with the 8.25% Senior Secured Notes, the Company capitalized financing costs of $13.9 million, which were being amortized over the term of the 8.25% Senior Secured Notes and included as a component of interest expense.


On February 5, 2018 CFTC issued a noticeDuring the third quarter of redemption for $77.5 million of its Senior Secured Notes (the transaction whereby2021, the 8.25% Senior Secured Notes were partially redeemed,extinguished using proceeds from the “Redemption”) that were issued by CFTC.7.50% Senior Secured Notes described above. The Redemption occurred on March 7, 2018 at a price equal to 112.00%early extinguishment of the principal amount of the8.25% Senior Secured Notes redeemed, plus accrued and unpaid interest paid thereon, to the date of Redemption. The Redemption price and the amortization of a corresponding portion of the capitalized financing costs resulted in a loss on Redemption of $11.7$40.2 million. Following the Redemption, $527.5 million of the original outstanding principal amount of the Senior Secured Notes remain outstanding. CFTC conducted the Redemption pursuant to the Indenture governing the Senior Secured Notes (the “Indenture”), dated as of February 15, 2017, by and among CFTC, the guarantors party thereto and TMI Trust Company, as trustee and collateral agent. Consistent with the terms of the Indenture, CFTC used a portion of the cash proceeds from our IPO, completed in December 2017, to redeem such Senior Secured Notes.

As of March 31, 2018, CFTC was in full compliance with the covenants and other provisions of the Senior Secured Notes.


Non-Recourse U.S. SPV Facility


In November 2016,April 2020, CURO Receivables Finance I,II, LLC, a Delaware limited liability company (the “SPV Borrower”) and a wholly-owned subsidiary of the Company, entered into a five-year revolving credit facility with Victory Park Management, LLC and certain other lenders that provides an $80.0 million term loan and $70.0 million revolving borrowing capacity that can expand over time (“Non-Recourse U.S. SPV Facility”). As of March 31, 2018, the SPV Borrower was in full compliance with the covenants and other provisions of the Non-Recourse U.S. SPV Facility.Facility with Midtown Madison Management LLC, as administrative agent, and Atalaya Asset Income Fund VI LP, as the initial lender. As of September 30, 2021, the Non-Recourse U.S. SPV Facility provided for $200.0 million of borrowing capacity.


As of September 30, 2021, the effective interest rate on the Company's borrowings was one-month LIBOR plus 6.25%. The borrower pays the lenders a monthly commitment fee at an annual rate of 0.50% on the unused portion of the commitments. The Company is currently evaluating the impact of the upcoming transition from LIBOR to an alternative reference rate.

As of September 30, 2021, outstanding borrowings under the Non-Recourse U.S. SPV Facility were $44.9 million, net of deferred financing costs of $4.5 million. For further information on the Non-Recourse U.S. SPV Facility, refer to Note 2, "Variable Interest Entities."

The Non-Recourse U.S. SPV Facility matures on April 8, 2024.


19


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Non-Recourse Canada SPV Facility

In August 2018, CURO Canada Receivables Limited Partnership, a wholly-owned subsidiary of the Company, entered into the Non-Recourse Canada SPV Facility with Waterfall Asset Management, LLC. The Non-Recourse Canada SPV Facility currently provides for C$175.0 million of borrowing capacity and the ability to expand such capacity up to C$250.0 million. As of September 30, 2021, the effective interest rate was three-month CDOR plus 6.75%. The borrower also pays a 0.50% per annum commitment fee on the unused portion of the commitments. The Non-Recourse Canada SPV Facility matures on September 2, 2023.

As of September 30, 2021, outstanding borrowings under the Non-Recourse Canada SPV Facility were $96.8 million, net of deferred financing costs of $1.0 million. For further information on the Non-Recourse Canada SPV Facility, refer to Note 2, "Variable Interest Entities."

Non-Recourse Flexiti SPE Facility

In March 2021, concurrently with the acquisition of Flexiti, Flexiti Financing SPE Corp., a wholly-owned Canadian subsidiary of the Company, refinanced and increased its Non-Recourse Flexiti SPE Facility to C$500.0 million, with a maturity on March 10, 2024. As of September 30, 2021, the effective interest rate was three-month CDOR plus 4.40%. The borrower also pays a 0.50% to 1.00% per annum commitment fee on the unused portion of the commitments.

As of September 30, 2021, outstanding borrowings under the Non-Recourse Flexiti SPE Facility were $255.7 million, net of deferred financing costs of $4.2 million. For further information on the Non-Recourse Flexiti SPE Facility, refer to Note 2, "Variable Interest Entities."

Senior Revolver


In September 2017, CFTC and CURO Intermediate Holdings Corp. entered into a $25.0 million Senior Secured Revolving Loan Facility with BayCoast Bank (the “Senior Revolver”). The terms ofCompany maintains the Senior Revolver generally conform to the related provisions in the Indenture dated February 15, 2017 for our Senior Secured Notes and complements our other financing sources, while providing seasonal short-term liquidity. In February 2018, the Senior Revolverthat provides $50.0 million of borrowing capacity, was increased to $29.0 million as permitted by the Indenture to the Senior Secured Notes based upon consolidated tangible assets. The Senior Revolver is now syndicated with participation by a second bank.

There is $29.0 million maximum availability under the Senior Revolver, including up to $5.0 million of standby letters of credit, for a one-year term, renewable for successive terms following annual review. The current term expires June 30, 2022. The Senior Revolver accrues interest at one-month LIBOR plus 5.00%. The Senior Revolver is syndicated among 4 banks. The Company is currently evaluating the impact of the upcoming transition from LIBOR to an alternative reference rate.

The Senior Revolver is guaranteed by all subsidiaries that guarantee the 7.50% Senior Secured Notes, and is secured by a lien on substantially all assets of CURO and the guarantor subsidiaries that are senior to the lien securing the 7.50% Senior Secured Notes.

The revolver was undrawn at March 31, 2018September 30, 2021 and December 31, 2017.2020.

Cash Money Revolving Credit Facility

CURO Canada maintains the Cash Money Revolving Credit Facility, a C$10.0 million revolving credit facility with Royal Bank of Canada, which provides short-term liquidity for the Company's Canadian direct lending operations. As of MarchSeptember 30, 2021, the borrowing capacity under the Cash Money Revolving Credit Facility was C$9.9 million, net of C$0.1 million in outstanding stand-by letters of credit.

The Cash Money Revolving Credit Facility is collateralized by substantially all of CURO Canada’s assets and contains various covenants that require, among other things, that the aggregate borrowings outstanding under the facility not exceed the borrowing base, as well as restrictions on the encumbrance of assets and the creation of indebtedness. Borrowings under the Cash Money Revolving Credit Facility bear interest per annum at the prime rate of a Canadian chartered bank plus 1.95%.

The Cash Money Revolving Credit Facility was undrawn at September 30, 2021 and December 31, 2018, CFTC and CURO Intermediate Holdings Corp. were in full compliance with the covenants and other provisions of the Senior Revolver.2020.


NOTE 6 – SHARE-BASED COMPENSATION


On November 8, 2017, the Company’s shareholders approved a new incentive plan (“2017 Incentive Plan”). The Company's 2017 Incentive Plan provides for the issuance of up to 5.05 million shares, subject to certain adjustment provisions describedadjustments, which may be issued in the 2017 Incentive Plan, for the grantingform of stock options, restricted stock awards, restricted stock units (“RSUs”),RSUs, stock appreciation rights, performance awards andor other awards thatawards. Grants issued to date under the plan may be settled in or based upon ouron common stock. Awards may be granted to certain of our officers, employees, consultants and directors. The 2017 Incentive Plan provides that shares of common stock subject to awards granted become available for issuancere-issuance if such awards expire, terminate,or are canceled, for any reason,forfeited, settled in cash or are forfeited by the recipient.otherwise terminated.


On February 5, 2018,
20


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

RSUs

As of September 30, 2021, the Company issued additionalhas granted 3 types of RSUs: time-based, market-based and, in connection with the Flexiti acquisition, performance-based.

Grants of time-based RSUs under the 2017 Incentive Plan. RSUs are typically valued at the grant date of grant based on the valueclosing market price of ourthe Company's common stock and are expensed using the straight-line method over the service period. Time-based RSUs typically vest over a three-year period.

Grants of market-based RSUs doare valued using the Monte Carlo simulation pricing model. The market-based RSUs granted to date vest after three years if the Company's total stockholder return over the three-year performance period meets a specified target relative to other companies in its selected peer group. Expense recognition for market-based RSUs occurs over the service period using the straight-line method.

Upon closing of the Flexiti acquisition in March 2021, the Company granted performance-based RSUs to certain Flexiti employees. Grants of performance-based RSUs are valued at the grant date based on the closing market price of the Company's common stock. The performance-based RSUs vest over two years if Flexiti achieves specified internal targets, including revenue less NCOs and loan originations metrics. Expense recognition for performance-based RSUs occurs ratably over the service period if it is probable that the targets will be achieved as of each period end. If such results are not confer full stockholder rights such as voting rightsprobable, no share-based compensation expense is recognized and cash dividends, but provide for additional dividend equivalent RSU awards in lieu of cash dividends. any previously recognized share-based compensation expense is reversed.

Unvested shares of restricted stock may beRSUs generally are forfeited upon termination of employment, with the Company depending on the circumstances of the termination, or failure to achieve the required performance condition, if applicable.


A summary of the statusactivity of non-vested restricted stocktime-based, market-based and performance-based unvested RSUs as of March 31, 2018,September 30, 2021 and changes during the period,nine months ended September 30, 2021 is presented in the following table:

Number of RSUs
Time-BasedMarket-BasedPerformance-BasedWeighted Average
Grant Date Fair Value per Share
December 31, 20201,012,792 758,713 — $10.26 
Granted1,089,372 299,053 253,310 15.34 
Vested(489,858)— — 11.06 
Forfeited(58,610)(51,032)— 11.22 
September 30, 20211,553,696 1,006,734 253,310 $13.05 
Non-vested Restricted StockShares 
Weighted
Average
Grant Date
Fair Value
December 31, 20171,516,241
 $14.00
Granted32,857
 $17.14
Vested—
 —
Forfeited—
 —
March 31, 20181,549,098
 $14.07


Share-based compensation expense for the three months ended March 31, 2018September 30, 2021 and 2017,2020, which includes compensation costs from stock options and RSUs, was $1.8$4.0 million and $0.1$3.4 million, respectively, and during the nine months ended September 30, 2021 and 2020 was $10.1 million and $9.9 million, respectively. Share-based compensation expense is included in the Interimunaudited Condensed Consolidated Statements of IncomeOperations as a component of "Corporate, district and other" expense. The increased expense in the three months ended March 31, 2018 is primarily due to grants of RSUs in 2017, as further disclosed in our 2017 Annual Report on Form 10-K.other expenses."


As of March 31, 2018,September 30, 2021, there was $20.2$24.7 million of total unrecognized compensation cost net of estimated forfeitures, related to share-based awards, which westock options and RSUs. Total unrecognized compensation costs will recognizebe recognized over a weighted-average period of 2.71.9 years.


NOTE 7 – INCOME TAXES

The Company's effective income tax rate was 24.9% and 3.0% for the nine months ended September 30, 2021 and 2020, respectively.

The effective income tax rate for the nine months ended September 30, 2021, was lower compared to the blended federal and state/provincial statutory rate of approximately 26%, primarily as a result of proportionally more net income in lower-tax rate jurisdictions, driven by the $146.9 million gain on the Katapult merger in the second quarter of 2021 and the $40.2 million loss on extinguishment of debt in the third quarter of 2021. Additionally, the effective tax rate also includes (i) the release of a valuation allowance of $0.4 million due to the Company's share of Katapult's income, (ii) tax benefits related to share-based compensation of $0.2 million, (iii) $1.3 million of tax expense related to the non-deductible transaction costs and the change in fair value of contingent consideration, (iv) $0.3 million tax expense of additional Texas accrual for 2020 due to the settlement of 2013 to 2019 Texas returns and (v) a tax benefit of $0.9 million for the recognition of the research and development tax credit.

The lower effective income tax rate for the nine months ended September 30, 2020 was primarily due to a tax benefit from the CARES Act. The CARES Act, among other things, allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid Federal income taxes. The Company recorded an income tax

21


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

NOTE 7 – INCOME TAXES

Our effectivebenefit of $9.1 million related to the carry-back of NOLs from tax rate was 33.0% and 36.2% for the three months ended March 31,years 2018 and 2017, respectively. On December 22, 2017, H.R. 1, commonly referred to as2019, which offset its tax liability for prior years and generated a refund of previously paid taxes at a 35% statutory rate. In addition, the Tax Cuts and Jobs Act of 2017 (“the 2017 Tax Act”) was signed by the U.S. President, which enacted various changes to the U.S. corporate tax law. Some of the most significant provisions affecting us includeCompany released a reduced U.S. corporate income tax rate from 35% to 21% effective in 2018, a one-time “deemed repatriation” tax on unremitted earnings accumulated in non-U.S. jurisdictions and reported on the 2017 corporate income tax return, and a 2018 and forward minimum tax on global intangible low-taxed income ("GILTI"). At 2017 year-end, we recorded an estimated provisional deemed repatriation tax of $8.1 million. Subsequently, the IRS issued additional guidance regarding the calculation of the deemed repatriation tax and we recorded an additional accrual of $1.2 million increasing the effective tax rate by 3.5%. In 2018, we recorded an estimated GILTI taxvaluation allowance of $0.6 million increasingagainst the effective tax rate by 1.7%. Additionally, we have notlosses from its investment in Katapult and, in the second quarter of 2020, the Company recorded a tax benefit of $4.6 million from the release of a valuation allowance previously recorded against NOLs for lossescertain entities in Canada. These benefits were partially offset by uncertain tax position reserve adjustments in the UK resulting in an increaseU.S. of 1.6% and 2.3% to the effective tax rate for the three months ended March 31, 2018 and March 31, 2017, respectively.$1.1 million.


As of March 31, 2018, we estimated and provided U.S. net tax of $9.9 million on our cumulative undistributed non-US earnings as part of the 2017 repatriation tax provision and the 2018 GILTI tax in the 2017 Tax Act.  We intendThe Company intends to reinvest our foreignCanada earnings indefinitely in our non-U.S.its Canadian operations and therefore havehas not provided for any non-U.S. withholding tax that would be assessed on dividend distributions. If the accumulated earnings in Canada of $160.0$222.7 million were distributed to the U.S., we legal entities, the Company would be subject to estimated Canadian withholding taxes of approximately $8.0an estimated $11.1 million. In the event the earnings wereare distributed to the U.S., we would legal entities, the Company will adjust ourthe income tax provision for the applicable period and would determine the amount of foreign tax credit that would be available.


NOTE 8 – FINANCIAL INSTRUMENTSFAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. We areThe Company is required to use valuation techniques that are consistent with the market approach, income approach and/or cost approach. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability based on observable market data obtained from independent sources, or unobservable, meaning those that reflect ourthe Company's own estimatejudgment about the assumptions market participants would use in pricing the asset or liability based on the best information available infor the specific circumstances. Accounting standards establish a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The hierarchy requires usthe Company to maximize the use of observable inputs and minimize the use of unobservable inputs.
The three levels of inputs used to measure fair value are listed below.


Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we havethe Company has access to at the measurement date.


Level 2 – Inputs include quoted market prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).


Level 3 – Unobservable inputs reflecting ourthe Company's own judgments about the assumptions market participants would use in pricing the asset or liability sinceas a result of limited market data exists. We developdata. The Company develops these inputs based on the best information available, including ourits own data.



22


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Financial Assets and Liabilities Carried at Fair Value

The table below presents the assets and liabilities that were carried at fair value on the unaudited Condensed Consolidated Balance Sheets at September 30, 2021 (in thousands):

Estimated Fair Value
Carrying Value September 30,
2021		Level 1Level 2Level 3Total
Financial assets:
Cash Surrender Value of Life Insurance$7,994 $7,994 $— $— $7,994 
Financial liabilities:
Non-qualified deferred compensation plan$4,945 $4,945 $— $— $4,945 
Contingent consideration related to acquisition24,129 — — 24,129 24,129 

Contingent consideration related to acquisition

In connection with the acquisition of Flexiti during the first quarter of 2021, the Company recorded a liability for contingent consideration based on the achievement of revenue less NCOs and loan origination targets over the two years following closing of the acquisition that could result in additional cash consideration up to $32.8 million to Flexiti's former stockholders. The fair value of the liability is estimated using the option-based income approach using a Monte Carlo simulation model discounted back to the reporting date. The significant unobservable inputs (Level 3) used to estimate the fair value included the expected future tax benefits associated with the acquisition, the probability that the risk adjusted-revenue and origination targets will be achieved and discount rates. The contingent consideration measured at fair value using unobservable inputs increased from the initial measurement of $20.6 million as of March 31, 2021 to $24.1 million as of September 30, 2021. For additional information on Flexiti and the related contingent consideration, refer to Note 15, "Acquisitions."

The table below presents the assets and liabilities that were carried at fair value on the unaudited Condensed Consolidated Balance Sheets at December 31, 2020 (in thousands):
Estimated Fair Value
Carrying Value December 31,
2020		Level 1Level 2Level 3Total
Financial assets:
Cash Surrender Value of Life Insurance$7,140 $7,140 $— $— $7,140 
Financial liabilities:
Non-qualified deferred compensation plan$4,690 $4,690 $— $— $4,690 

Financial Assets and Liabilities Not MeasuredCarried at Fair Value


The table below presents the assets and liabilities that were not measuredcarried at fair value on the unaudited Condensed Consolidated Balance Sheets at March 31, 2018.September 30, 2021 (in thousands):
Estimated Fair Value
Carrying Value September 30,
2021		Level 1Level 2Level 3Total
Financial assets:
Cash and cash equivalents$205,785 $205,785 $— $— $205,785 
Restricted cash66,168 66,168 — — 66,168 
Loans receivable, net809,813 — — 809,813 809,813 
Financial liabilities:
Liability for losses on CSO lender-owned consumer loans$7,007 $— $— $7,007 $7,007 
7.50% Senior Secured Notes734,533 — 757,650 — 757,650 
Non-Recourse U.S. SPV facility44,940 — — 49,456 49,456 
Non-Recourse Canada SPV facility96,821 — — 97,818 97,818 
Non-Recourse Flexiti SPE facility255,704 — — 259,940 259,940 
23


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

  Estimated Fair Value
(dollars in thousands)Carrying Value March 31,
2018		Level 1Level 2Level 3March 31, 2018
Financial assets:     
Cash$130,739
$130,739
$—
$—
$130,739
Restricted cash17,656
17,656
—
—
17,656
Loans receivable, net328,952
—
—
328,952
328,952
Investment6,600
—
—
6,600
6,600
Financial liabilities:     
Credit services organization guarantee liability$10,412
$—
$—
$10,412
$10,412
Senior secured notes511,493
—
—
583,406
583,406
Non-Recourse U.S. SPV facility111,151
—
—
115,071
115,071
Senior Revolver—
—
—
—
—


The table below presents the assets and liabilities that were not measuredcarried at fair value on the unaudited Condensed Consolidated Balance Sheets at December 31, 2017.2020 (in thousands):
Estimated Fair Value
Carrying Value December 31,
2020		Level 1Level 2Level 3Total
Financial assets:
Cash and cash equivalents$213,343 $213,343 $— $— $213,343 
Restricted cash54,765 54,765 — — 54,765 
Loans receivable, net467,560 — — 467,560 467,560 
Financial liabilities:
Liability for losses on CSO lender-owned consumer loans$7,228 $— $— $7,228 $7,228 
8.25% Senior Secured Notes680,000 — 646,000 — 646,000 
Non-Recourse U.S. SPV facility43,586 — — 49,456 49,456 
Non-Recourse Canada SPV facility96,075 — — 97,971 97,971 
  Estimated Fair Value
(dollars in thousands)Carrying Value December 31,
2017		Level 1Level 2Level 3December 31, 2017
Financial assets:     
Cash$162,374
$162,374
$—
$—
$162,374
Restricted cash12,117
12,117
—
—
12,117
Loans receivable, net363,269
—
—
363,269
363,269
Investment5,600
—
—
5,600
5,600
Financial liabilities:     
Credit services organization guarantee liability17,795
—
—
17,795
17,795
2017 Senior Secured notes585,823
—
—
663,472
663,472
Non-Recourse U.S. SPV facility120,402
—
—
124,590
124,590


Loans Receivable, Net

Loans receivable are carried on the Interimunaudited Condensed Consolidated Balance Sheets net of the allowance for estimated loan losses, which we calculate primarily based upon models that back-test subsequent collections history for each type of loan product.ALL. The unobservable inputs used to calculate the carrying valuevalues include additional quantitative factors, such as current default trends and changes to the portfolio mix are alsotrends. Also considered in evaluating the accuracy of the models as well as additional qualitative factors such asare changes to the loan portfolio mix, the impact of new loan products, changes to underwriting criteria or lending policies, new store development or entrance into new markets, changes in jurisdictional regulations or laws, recent credit trends and general economic conditions. Loans have terms ranging up to 60 months. The carrying value of loans receivable approximates their fair value. Refer to Note 3, "Loans Receivable and Revenue" for additional information. Loans receivable acquired as part of the Flexiti acquisition, which represent $82.3 million of the $809.8 million, are carried at gross contractual balance less unamortized fair value discount and ALL. For additional information on the determination of the fair value.value discount, refer to Note 15, "Acquisitions."


CSO Program

In connection with our CSO programs, we guaranteethe Company guarantees consumer loan payment obligations to unrelated third-party lenders for loans that we arrangethe Company arranges for consumers on the third-party lenders’ behalf. We areThe Company is required to purchase from the lender defaultedcharged-off loans we havethat it has guaranteed. Refer to Note 3, "Loans Receivable and Revenue" and Note 4, Credit Services Organization" for additional information.

7.50% Senior Secured Notes, 8.25% Senior Secured Notes, Non-Recourse U.S. Facility, Non-Recourse Canada SPV Facility and Non-Recourse Flexiti SPE Facility

The estimated fair value disclosure for the 7.50% Senior Secured Notes as of September 30, 2021 and 8.25% Senior Secured Notes as of December 31, 2020 were based on observable market trading data. The fair values of the guarantee liability related to CSO loans we have guaranteed was $10.4 millionNon-Recourse U.S. SPV Facility, Non-Recourse Canada SPV Facility and $17.8 million as of March 31, 2018 and December 31, 2017, respectively. We recordNon-Recourse Flexiti SPE Facility were based on the initial measurement of this guarantee liability at fair value using Level 3 inputs with subsequent measurement of the liability measured as a contingent loss. The unobservable inputs used to calculatecash needed for their respective final settlements.


24


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Investment in Katapult
fair value include
The table below presents the natureCompany's investment in Katapult (in thousands):
Equity Method Investment
Measurement Alternative (1)
Total Investment in Katapult
Balance at December 31, 2019$10,068 $— $10,068 
Equity method (loss) - Q1 2020(1,618)— (1,618)
Balance at March 31, 20208,450 — 8,450 
Equity method income - Q2 2020741 741
Balance at June 30, 20209,191 — 9,191 
Equity method income - Q3 20203,530 — 3,530 
Accounting policy change for certain securities from equity method investment to measurement alternative(12,452)12,452 — 
Purchases of common stock warrants and preferred shares4,030 7,157 11,187 
Balance at September 30, 20204,299 19,609 23,908 
Equity method income - Q4 20201,893 — 1,893 
Purchases of common stock1,570 — 1,570 
Balance at December 31, 20207,762 19,609 27,371 
Equity method income - Q1 2021546 — 546 
Balance at March 31, 20218,308 19,609 27,917 
Equity method income - Q2 20211,712 — 1,712 
Conversion of investment(2)
6,481 (19,609)(13,128)
Balance at June 30, 202116,501 — 16,501 
Equity method loss - Q3 2021(1,582)$— (1,582)
Balance at September 30, 2021$14,919 $— $14,919 
Classification as of December 31, 2020Level 3, not carried at fair valueLevel 3, carried at measurement alternative
Classification as of September 30, 2021Level 3, not carried at fair valueN/A
(1) The Company elected to measure this equity security without a readily determinable fair value equal to its cost minus impairment. If the Company identifies an observable price change in orderly transactions for same or similar investment in Katapult, it will measure the equity security at fair value as of the date that the observable transaction occurred.
(2) On June 9, 2021, Katapult completed its merger with FinServ. Immediately prior to the merger, the Company first converted all of its preferred stock and exercised all common stock warrants, and then exchanged all shares of Katapult common stock for $146.9 million in cash and 18.9 million shares of common stock in the resulting public company, Katapult (NASDAQ: KPLT). The Company's entire investment in Katapult is now accounted for under the equity method of accounting. The Company recorded a related net gain of $135.4 million on its equity method investment in Katapult, based on the pro rata cost basis of the investment and the discharge of the guarantee provided during the second quarter of 2021.

Prior to September 2020, the Company owned 42.5% of the loan products,outstanding shares (excluding unexercised options) of Katapult, comprised of multiple classes of equity, including preferred stock and certain common stock warrants, which met the creditworthinessaccounting criteria for in-substance common stock at the time of their acquisition. This financial asset was not carried at fair value. The Company accounted for this investment under the equity method, and recognized a proportionate share of Katapult’s income or loss on a two-month lag.

In September 2020, the Company acquired common stock warrants and preferred shares of Katapult from existing shareholders for $11.2 million in cash. This transaction resulted in the reevaluation of the borrowers in the customer base, our historical loan default historyaccounting for similar loans, industry loan default history, historical collection rates on similar products, current default trends, past-due account roll rates, changes to underwriting criteria or lending policies, new store development or entrance into new markets, changes in jurisdictional regulations or laws, recent credit trends and general economic conditions.

The fair value of our Senior Secured Notes was based on broker quotations. The fair valueall of the Non-Recourse U.S. SPV facility was based on the cash needed for final settlement.

Derivative Financial Instrument

Company’s holdings in Katapult. The Company seeksdetermined that its holdings of certain common stock warrants qualified as in-substance common stock and were required to minimize risksbe accounted for using the equity method. The Company’s holdings in preferred stock and certain other common stock warrants did not meet the criteria for in-substance common stock and therefore were carried at cost minus impairment under the measurement alternative. As a result, the Company (i) reclassified $12.5 million from foreign currency rate fluctuations on anticipated transactions inan equity method investment to cost minus impairment under the ordinary coursemeasurement alternative, (ii) recorded a purchase of business throughcommon stock warrants for $4.0 million determined to be in-substance common stock within its equity method investment and (iii) recorded a purchase of preferred stock for $7.2 million that was accounted for under the usemeasurement alternative.

In October and November 2020, the Company acquired common stock of cash flow hedges. As of March 31, 2018, we entered into a series of cash flow hedges in which the hedging instruments were forwards toKatapult from existing shareholders for an aggregate $1.6 million. The Company recorded this purchase GBP £6.4 million. These contracts will complete in the third quarter of 2018.within its equity method investment.

25
We performed an assessment that determined all critical terms of the hedging instrument and the hedged transaction match and, as such, have qualitatively concluded that changes in the hedge instrument’s intrinsic value will completely offset the change in the expected cash flows based on changes in the spot rate. Since the effectiveness of this hedge is assessed based on changes in the hedge instrument’s intrinsic value, the change in the time value of the contract would be excluded from the assessment of hedge effectiveness. We recorded changes in the hedge instrument’s intrinsic value, to the extent that they were effective as a hedge, in "Other comprehensive income." As of March 31, 2018 we have recorded an unrealized gain of $0.1 million in "Other comprehensive income" associated with this hedge.


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
Purchase of Cognical Holdings Inc. Preferred SharesNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



During the first quarter of 2018, we purchased 560,872 additional preferred shares2021, the Company changed the two-month reporting lag to a one-quarter reporting lag, as discussed in Note 1, "Summary of Cognical Holdings, Inc. ("Cognical")Significant Accounting Policies and Nature of Operations." The Company recorded a loss of $1.6 million for $1.0 million.the three months ended September 30, 2021 and income of $0.7 million for the nine months ended September 30, 2021, based on its share of Katapult’s earnings for the respective periods.

On June 9, 2021, Katapult completed its merger with FinServ. As a result, the Company received $146.9 million in cash and 18.9 million shares of this transaction, along with share purchases during 2017, we currently own 10.4%common stock of the resulting public company, Katapult (NASDAQ: KPLT), which are subject to a six-month trading restriction. The Company recorded a related net gain of $135.4 million on its equity method investment in Katapult during the second quarter of Cognical. We record these purchases2021. Additionally, as part of the merger, CURO received 3.0 million earn-out warrants and holds 2 of the 7 board of director seats for Katapult. For further information regarding the merger between Katapult and FinServ and its impact on CURO, refer to the description immediately following the table above.

Both the equity method investment and the previously recognized investment measured at cost minus impairment are presented within "Investments in "Other assets'Katapult" on ourthe unaudited Condensed Consolidated Balance Sheets.Sheet.


The Company's total ownership of Katapult's shares, on a fully diluted basis, was 19.3% as of September 30, 2021.



26


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 9 – STOCKHOLDERSSTOCKHOLDERS' EQUITY

The following table summarizes the changes in stockholders' equity for the three and nine months ended September 30, 2021 and 2020 (in thousands, except Common Stock data):

Common StockTreasury Stock, at costPaid-in capitalRetained Earnings (Deficit)
AOCI (1)
Total Stockholders' Equity
Shares OutstandingPar Value
Balance at December 31, 202041,370,504 $9 $(77,852)$79,812 $160,068 $(30,132)$131,905 
Net income from continuing operations— — — — 25,735 — 25,735 
Foreign currency translation adjustment— — — — — 3,855 3,855 
Dividends— — — — (2,368)— (2,368)
Share based compensation expense— — — 2,683 — — 2,683 
Proceeds from exercise of stock options15,852 — — 48 — — 48 
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes
237,423 — — (1,668)— — (1,668)
Balance at March 31, 202141,623,779 $9 $(77,852)$80,875 $183,435 $(26,277)$160,190 
Net income from continuing operations— — — — 104,517 — 104,517 
Foreign currency translation adjustment— — — — — 4,714 4,714 
Dividends— — — — (4,582)— (4,582)
Share based compensation expense— — — 3,467 — — 3,467 
Proceeds from exercise of stock options43,920 — — 191 — — 191 
Repurchase of common stock(104,487)— (1,752)— — — (1,752)
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes116,329 — — (43)— — (43)
Balance at June 30, 202141,679,541 $9 $(79,604)$84,490 $283,370 $(21,563)$266,702 
Net loss from continuing operations— — — — (42,039)— (42,039)
Foreign currency translation adjustment— — — — — (10,611)(10,611)
Dividends— — — — (4,547)— (4,547)
Share based compensation expense— — — 3,998 — — 3,998 
Proceeds from exercise of stock options7,200 — — 27 — — 27 
Repurchase of common stock(964,566)— (15,940)— — — (15,940)
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes14,936 — — (107)— — (107)
Balance at September 30 202140,737,111 $9 $(95,544)$88,408 $236,784 $(32,174)$197,483 
(1) Accumulated other comprehensive income (loss)
27


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


Common StockTreasury Stock, at costPaid-in capitalRetained Earnings (Deficit)
AOCI (1)
Total Stockholders' Equity
Shares OutstandingPar Value
Balance at December 31, 201941,156,224 $9 $(72,343)$68,087 $93,423 $(38,663)$50,513 
Net income from continuing operations— — — — 36,013 — 36,013 
Net income from discontinued operations— — — — 292 — 292 
Foreign currency translation adjustment— — — — — (22,193)(22,193)
Dividends— — — — (2,256)— (2,256)
Share based compensation expense— — — 3,194 — — 3,194 
Proceeds from exercise of stock options42,094 — — 126 — — 126 
Repurchase of common stock(540,762)— (5,509)— — — (5,509)
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes
121,891 — — (609)— — (609)
Balance at March 31, 202040,779,447 $9 $(77,852)$70,798 $127,472 $(60,856)$59,571 
Net income from continuing operations— — — — 21,080 — 21,080 
Net income from discontinued operations— — — — 993 — 993 
Foreign currency translation adjustment— — — — — 10,261 10,261 
Dividends— — — — (2,244)— (2,244)
Share based compensation expense— — — 3,310 — — 3,310 
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes105,098 — — (29)— — (29)
Balances at June 30, 202040,884,545 $9 $(77,852)$74,079 $147,301 $(50,595)$92,942 
Net income from continuing operations— — — — 12,881 — 12,881 
Foreign currency translation adjustment— — — — — 5,591 5,591 
Dividends— — — — (2,250)— (2,250)
Share based compensation expense— — — 3,392 — — 3,392 
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes568 — — (3)— — (3)
Balance at September 30, 202040,885,113 $9 $(77,852)$77,468 $157,932 $(45,004)$112,553 
(1) Accumulated other comprehensive income (loss)

28


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Dividends

The table below summarizes the Company's quarterly dividends for 2021.
Dividends Paid
Date of declarationRecord dateDate paidDividend per share(in thousands)
Q1 2021January 29, 2021February 16, 2021March 2, 2021$0.055 $2,284 
Q2 2021May 3, 2021May 14, 2021May 27, 2021$0.110 $4,580 
Q3 2021July 28, 2021August 9, 2021August 19, 2021$0.110 $4,556 

In connection with our IPO in December 2017,October 2021, the underwriters hadCompany's Board of Directors declared a 30-day option to purchase up to andividend under the program of $0.11 per share. See Note 18, "Subsequent Events" for additional 1.0 million shares at the initial public offering prices, less the underwriting discount to over-allotments, if any. The underwriters exercised this option and purchased 1.0 million shares on January 5, 2018. The exercise of this option provided additional proceeds to us of $13.1 million.information.


NOTE 10 – EARNINGS PER SHARE


The following table presents the computation of basic and diluted earnings per share (in thousands, except per share amounts):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2021202020212020
Net income from continuing operations$(42,039)$12,881 $88,213 $69,974 
Net income from discontinued operations, net of tax— — — 1,285 
Net income$(42,039)$12,881 $88,213 $71,259 
Weighted average common shares - basic41,220 40,885 41,459 40,838 
Dilutive effect of stock options and restricted stock units— 890 1,963 822 
Weighted average common shares - diluted41,220 41,775 43,422 41,660 
Basic earnings per share:
Continuing operations$(1.02)$0.32 $2.13 $1.71 
Discontinued operations— — — 0.03 
Basic earnings per share$(1.02)$0.32 $2.13 $1.74 
Diluted earnings per share:
Continuing operations$(1.02)$0.31 $2.03 $1.68 
Discontinued operations— — — 0.03 
Diluted earnings per share$(1.02)$0.31 $2.03 $1.71 
 Three Months Ended
March 31,
 2018 2017
Basic: (1)
   
Net income$23,292
 $16,638
Weight average common shares45,506
 37,895
Basic earnings per share$0.51

$0.44
(1) The share and per share information have been adjusted to reflect the 36-to-1 stock split of our common stock, which occurred during the fourth quarter of 2017.



CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

The following computation reconciles the differences between the basic and diluted earnings per share presentations (in thousands, except per share amounts):
 Three Months Ended
March 31,
 2018 2017
Diluted: (1)
   
Net income$23,292
 $16,638
Weighted average common shares - basic45,506
 37,895
Dilutive effect of stock options and restricted stock units1,910
 1,064
Weighted average common shares - diluted47,416
 38,959
Diluted earnings per share$0.49

$0.43
(1) The share and per share information have been adjusted to reflect the 36-to-1 stock split of our common stock, which occurred during the fourth quarter of 2017.

Potential shares of common sharesstock that would have the effect of increasing diluted earnings per share or decreasing diluted loss per share are considered to be anti-dilutive and as such, we do not includeanti-dilutive; therefore, these shares are not included in calculating "Diluteddiluted earnings per share." For the three and nine months ended March 31, 2018and 2017,September 30, 2021, there were no0.1 million and 0.1 million, respectively, and for the three and nine months ended September 30, 2020, there were 1.7 million and 1.3 million, respectively, of potential shares of common sharesstock excluded from the calculation of diluted earnings per share because their effect was anti-dilutive.


The Company utilizes the "control number" concept in the computation of diluted earnings per share to determine whether potential common stock instruments are dilutive. The control number used is income from continuing operations. The control number concept requires that the same number of potentially dilutive securities applied in computing diluted earnings per share from continuing operations is applied to all other categories of income or loss, regardless of their anti-dilutive effect on such categories.
NOTE 11 – SUPPLEMENTAL CASH FLOW INFORMATION

29
The following table provides supplemental cash flow information:

 Three Months Ended
March 31,
(dollars in thousands)2018 2017
Cash paid for:   
Interest$40,225
 $22,824
Income taxes4,431
 7,700
Non-cash investing activities:   
Property and equipment accrued in accounts payable$317
 $126


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 1211 – SEGMENT REPORTING
We prepare segmentSegment information is prepared on the same basis that our chief operating decision makerthe Company's CODM reviews financial information for operational decision making purposes. We have threepurposes, including revenues, net revenue, gross margin, segment operating income and other items.
On March 10, 2021, the Company acquired Flexiti, as described in Note 14, "Goodwill" and Note 15, "Acquisitions." Under ASC 280, Segment Reporting, Flexiti met the definition of a separate reportable operating segments: the U.S., Canada and the U.K.
The segment performance measure below is based on gross margin.segment. In management’s evaluation of performance, certain costs, such as corporate expenses, district expenses and interest expense, are not allocated by segment, and accordingly the following reporting segment results do not include such allocated costs. There are no intersegment revenues, and we determined the amounts below in accordanceconjunction with the same accounting principles usedacquisition, the Company made required disclosures for Flexiti as a separate reportable segment known as "Canada POS Lending," further described below. The Company also renamed the "Canada" reportable segment to the "Canada Direct Lending" reportable segment.
Reportable Segments
U.S.As of September 30, 2021, the Company operated a total of 160 U.S. retail locations and had an online presence in our Consolidated Financial Statements.27 states. Refer to Note 17, "Store Closures" for additional details related to recent store closures. The Company provides Revolving LOC loans and Installment loans, which include Single-Pay and vehicle title loans, check cashing, money transfer services, reloadable prepaid debit cards and a number of other ancillary financial products and services to its customers in the U.S. As disclosed in Note 15, "Acquisitions," the acquisition of Ad Astra closed in January 2020. The results of Ad Astra are included within the U.S. reporting segment.

Canada Direct Lending. As of September 30, 2021, the Company operated a total of 201 stores across 8 Canadian provinces and territories and had an online presence in 7 provinces. The Company provides Revolving LOC loans and Installment loans, which include Single-Pay loans, insurance products to Revolving LOC and Installment loan customers, check cashing, money transfer services, foreign currency exchange, reloadable prepaid debit cards and a number of other ancillary financial products and services to its customers in Canada.

Canada POS Lending. As of September 30, 2021, the Company served Canadian customers through POS financing available at approximately 7,400 retail locations and online with nearly 2,350 merchant partners across 10 provinces and 2 territories. The Company provides Revolving LOC loans and a number of other ancillary financial products to its customers in Canada. Results of operations for the nine months ended September 30, 2021 from Canada POS Lending represent results from the date of Flexiti's acquisition, March 10, 2021, through September 30, 2021.


30


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

The following table illustrates summarized financial information concerning our reportable segments.
segments (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
Three Months Ended March 31,2021202020212020
(dollars in thousands)2018 2017
Revenues by segment:   
Revenues by segment: (1)
Revenues by segment: (1)
U.S.$204,593
 $174,322
U.S.$131,674 $132,848 $386,960 $491,936 
Canada46,250
 41,566
U.K.10,915
 8,692
Canada Direct LendingCanada Direct Lending66,190 49,155 186,510 153,382 
Canada POS LendingCanada POS Lending11,416 — 20,054 — 
Consolidated revenue$261,758
 $224,580
Consolidated revenue$209,280 $182,003 $593,524 $645,318 
Net revenues by segment:Net revenues by segment:
U.S.U.S.$83,244 $89,363 $278,852 $320,880 
Canada Direct LendingCanada Direct Lending52,187 37,890 154,717 105,459 
Canada POS LendingCanada POS Lending3,131 — 7,927 — 
Consolidated net revenueConsolidated net revenue$138,562 $127,253 $441,496 $426,339 
Gross margin by segment:   Gross margin by segment:
U.S.$91,344
 $77,133
U.S.$39,228 $43,384 $157,614 $187,784 
Canada14,502
 14,300
U.K.3,399
 3,472
Canada Direct LendingCanada Direct Lending32,188 20,186 96,271 51,984 
Canada POS LendingCanada POS Lending2,508 — 6,702 — 
Consolidated gross margin$109,245
 $94,905
Consolidated gross margin$73,924 $63,570 $260,587 $239,768 
Segment operating (loss) income:Segment operating (loss) income:
U.S.U.S.$(62,099)$(696)$75,909 $44,587 
Canada Direct LendingCanada Direct Lending23,744 12,755 71,334 27,570 
Canada POS LendingCanada POS Lending(17,059)— (29,789)— 
Consolidated operating incomeConsolidated operating income$(55,414)$12,059 $117,454 $72,157 
Expenditures for long-lived assets by segment:   Expenditures for long-lived assets by segment:
U.S.$788
 $1,672
U.S.$4,402 $2,273 $9,226 $6,801 
Canada754
 1,291
U.K.67
 130
Canada Direct LendingCanada Direct Lending481 67 991 764 
Canada POS LendingCanada POS Lending2,603 — 5,134 — 
Consolidated expenditures for long-lived assets$1,609
 $3,093
Consolidated expenditures for long-lived assets$7,486 $2,340 $15,351 $7,565 
(1) For revenue by product, see Note 3, "Loans Receivable and Revenue."
(1) For revenue by product, see Note 3, "Loans Receivable and Revenue."
The following table provides the proportion of gross loans receivable by segment:segment (in thousands):
September 30,
2021		December 31,
2020
U.S.$189,183 $223,451 
Canada Direct Lending390,824 330,271 
Canada POS Lending302,349 — 
Total gross loans receivable$882,356 $553,722 
(dollars in thousands)March 31,
2018		 December 31,
2017
U.S.$266,731
 $308,696
Canada102,597
 104,551
U.K.20,510
 19,590
Total gross loans receivable$389,838
 $432,837


The following table illustrates ourrepresents the Company's net long-lived assets, comprised of property and equipment, by geographic region.segment. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the asset is physically located:located (in thousands):
September 30,
2021		December 31,
2020
U.S.$26,333 $36,258 
Canada Direct Lending21,076 23,491 
Canada POS Lending592 — 
Total net long-lived assets$48,001 $59,749 
(dollars in thousands)March 31, 2018 December 31, 2017
U.S.$50,614
 $52,627
Canada31,390
 32,924
U.K.1,518
 1,535
Total net long-lived assets$83,522
 $87,086


Our chief operating decision makerThe Company's CODM does not review assets by segment for purposes of allocating resources or
decision-making purposes; therefore, total assets by segment are not disclosed.

31

NOTE 13 – CONTINGENT LIABILITIES
Harrison, et al v. Principal Investments, Inc. et al

During the period relevant to this class action litigation, we pursued in excess of 16,000 claims in the limited actions and jurisdiction court in Clark County, Nevada, seeking payment of loans on which customers had defaulted. We utilized outside counsel to file these debt collection lawsuits. On Scene Mediations, a process serving company, was employed to serve the summons and petitions in the majority of these cases. In an unrelated matter, the principal of On Scene Mediations was convicted of multiple accounts of perjury and filing false affidavits to obtain judgments


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


on behalf
NOTE 12 – COMMITMENTS AND CONTINGENCIES
Securities Litigation and Enforcement

In 2018, a putative securities fraud class action lawsuit was filed against the Company and certain of its officers and directors and other related parties in the United States District Court for the District of Kansas, captioned Yellowdog Partners, LP v. CURO Group Holdings Corp., Donald F. Gayhardt, William Baker and Roger W. Dean, Civil Action No. 18-2662 (the "Yellowdog Action"). The suit alleged the Company made misleading statements and omitted material information regarding the Company's efforts to transition the Canadian inventory of products from Installment loans to Revolving LOC loans.

On December 18, 2020, the Court granted final approval of a Las Vegas collection agency. $9.0 million settlement and dismissed the case with prejudice. The Company's directors' and officers' insurance policy required the Company to pay the first $2.5 million in fees and settlement and the insurance carriers paid the remaining amounts. For the three and nine months ended September 30, 2021, there was no further expense related to the litigation.

In September 2010, weJune and July 2020, 3 shareholder derivative lawsuits were sued by four former customers in a proposed class action suit filed in the United States District Court for the District of Delaware against the Company, certain of its directors and officers, and in Clark County, Nevada. The plaintiffs in this case claimed that they,2 of the 3 lawsuits, a large stockholder. Plaintiffs generally allege the same underlying facts of the Yellowdog Action. In July 2021, the derivative lawsuits were voluntarily dismissed and othersPlaintiffs refiled 2 cases in the proposed class, were not properly served notice of the debt collection lawsuits by the Company.

On June 7, 2017, the parties reached a settlement in this matter and we accrued approximately $2.3 million as a result of this settlement. At a July 24, 2017 hearing beforeUnited States District Court for the District Court in Clark County, Nevada,of Kansas. While the court granted preliminary approvalCompany is vigorously contesting these derivative lawsuits, it cannot determine the timing or nature of the settlement, and on October 30, 2017, the court issued final approval of the class settlement. We paid the approved settlement amount and released the related liability.

Reimbursement Offer; Possible Changes in Payment Practices

During 2017, it was determinedtheir ultimate resolution. The Company does not expect that these derivative lawsuits will have a limited universe of borrowers may have incurred bank overdraft or non-sufficient funds fees because of possible confusion about certain electronic payments we initiated on their loans. As a result, we decided to reimburse such fees through payments or credits against outstanding loan balances, subject to per-customer dollar limitations, upon receipt of (1) claims from potentially affected borrowers stating that they were in fact confused by our practices and (2) bank statements from such borrowers showing that fees for which reimbursement is sought were incurred at a time that such borrowers might reasonably have been confused about our practices. We recorded a $2.0 million liability for this matter.

Additionally, we also decided that, in June 2018, we will discontinue the use of secondary payment cards for affected borrowers who do not explicitly reauthorize the use of secondary payment cards.  For these borrowers, in the event we cannot obtain payment through the bank account or payment card listedmaterial adverse impact on the borrower’s application, we will need to rely exclusively on other collection methods such as delinquency notices and/Company's results of operations or collection calls.  The discontinuation for affected borrowers of our current use of secondary cards will increase collections costs and reduce collections effectiveness.financial condition.


City of Austin


We wereThe Company was cited onin July 5, 2016 by the City of Austin, Texas for alleged violations of thean Austin ordinance addressing products offered by CSOs. The Austin ordinanceCSOs, which regulates aspects of products offered under our Credit Access Business programs, including loan sizes and repayment terms. We believethe Company's CAB program. The Company believes that: (i) the Austin ordinance (like(similar to its counterparts elsewhere in the state)Texas) conflicts with Texas state law and (ii) our product in any event, the Company's product complies with thethis ordinance, when the ordinance is properly construed. TheIn 2017, the Austin Municipal Court agreed with ourthe Company's position that thethis ordinance conflicts with Texas law and, accordingly, did not address ourthe second argument. In September 2017, the Travis County Court reversed the Municipal Court’s decision and remanded the case for further proceedings. SubsequentTo date, a hearing and trial on the merits have not been scheduled.

On May 15, 2020, the City of Austin proposed a second ordinance that became effective June 1, 2020, and implemented restrictions on CSO transactions and revised certain definitions included in the original Austin ordinance. These revisions potentially affect the foundation upon which the Company's previous arguments in municipal court were based.

The City of Austin notified the Company that it would begin auditing stores beginning in January 2021. In addition, the Company created and launched a new product during the second quarter of 2021. The city has since deferred these audits, and the Company is in discussions with the City to determine a potential resolution to the denialoutstanding matters.

On January 27, 2021, the City of our appealDallas adopted an ordinance identical to the second ordinance in the City of Austin.

Given the County Court's decision in October 2017, we were notified during the quarter ended March 31, 2018change that the case could potentially goCompany has made in its products in response to trial inthese ordinances, the summer of 2018. We doCompany does not anticipate having a final determination ofthat the lawfulness of our CAB program under the Austin ordinance (and similar ordinances in other Texas cities) in the near future. A final adverse decision could potentiallyprogram’s past operations will result in material monetary liability in Austin andor elsewhere in Texas at this time.

Delisle and Kato Class Action Lawsuits

In August of 2018, a class action lawsuit, Delisle v. Speedy Cash, was filed against Speedy Cash, a wholly-owned subsidiary of the Company, in the Southern District of California. The complaint alleged that Speedy Cash charged unconscionable interest rates on loans of $2,500 or above, in violation of consumer protection statutes, and sought restitution and public injunctive relief. In October 2018, Speedy Cash filed a motion to compel arbitration and stay proceedings. The District Court denied the motion. On July 2, 2021, the California District Court granted the parties’ joint motion to dismiss and the case was dismissed in its entirety with prejudice as to Plaintiffs’ individual claims and without prejudice as to the claims of the putative class members.

On September 3, 2021, a putative class action lawsuit, Kato v. Speedy Cash, was filed against Speedy Cash in the Superior Court of Los Angeles County, alleging similar facts as in Delisle. On October 14th, 2021, the case was removed to the United States District Court for the Central District of California. While Speedy Cash is vigorously contesting this lawsuit, it is too early to determine the final outcome, when it will be resolved, or whether it may be material.
32


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

2017 and 2020 CFPB Final Payday, Vehicle Title and Certain High-Cost Loans Rules (collectively, the "CFPB Rules")
The payment provisions of the CFPB Rules apply to short-term consumer loans (i.e., loans with terms of 45 days or less), longer-term balloon payment loans (i.e., any payments more than twice the size of other payments) and to longer-term loans with (i) annual percentage rates exceeding 36% and (ii) lender access to the consumer’s account, whether by ACH, card payment, check or otherwise (i.e., a “leveraged payment mechanism”). The payment provisions of the CFPB Rules generally prohibit lenders from seeking payment, without explicit borrower reauthorization, when two consecutive payments have failed due to insufficient funds; and, also require a series of prescribed notices for initial payments and “unusual” payments (e.g., amount, payment date or payment modality), and a consumer rights notice after two consecutive payment attempts have failed due to insufficient funds.

The 2017 Final CFPB Rule was originally scheduled to go into effect by August 2019. However, in April 2018, the CFSA and the Consumer Service Alliance of Texas, two industry trade groups (collectively, “Plaintiffs”), brought a lawsuit against the CFPB in a federal district court in Texas which resulted in a court-ordered stay of the CFPB Rules. In August 2020, both the Plaintiffs and the CFPB agreed to a briefing schedule related to their cross-motions for summary judgment. On August 31, 2021, the U.S. District Court granted the CFPB’s motion for summary judgment and denied the Plaintiffs’ motion for summary judgment, and ordered compliance with the CFPB Rules 286 days from the date of the Order.

Following the Court’s August 31, 2021 Order, Plaintiffs filed a Notice of Appeal with the Fifth Circuit. Plaintiffs also filed a Motion for Stay Pending Appeal, asking to stay the compliance date until after their appeal is fully and finally resolved. On October 14, 2021, in its unanimous decision, the Fifth Circuit granted the motion by Plaintiffs to extend the compliance date until 286 days after resolution of their appeal.

We cannot provide assurance that Plaintiffs will prevail at the appellate level. In the event Plaintiffs are unsuccessful at the appellate level, compliance with the payment provisions of the CFPB Rules would force usrequire significant modifications to restructureour payment, customer notification and compliance systems and will create delays in initiating consumer-authorized automated collection attempts when payments we initiate are unsuccessful. These modifications would increase the loans we originate in AustinCompany’s costs and elsewhere in Texas.reduce revenues. Accordingly, unless the payment provisions are declared invalid, they may have a material adverse effect on our results of operations.


Other Legal Matters
We are alsoThe Company is a defendant in certain routineother litigation matters encountered from time-to-time in the ordinary course of our business. Certainbusiness, some of these matterswhich may be covered to an extent by insurance. InWhile it is difficult to predict the opinion of management, based upon the advice of legal counsel, the likelihood is remote that the impactoutcome of any pending legal proceedings and claims, either individually or inparticular proceeding, the aggregate, wouldCompany does not believe the result of any of these matters will have a material adverse effect on ourthe Company's business, results of operations or financial condition.

NOTE 13 – LEASES

Leases entered into by the Company are primarily for retail stores in certain U.S. states and Canadian provinces. Upon entering into an agreement, the Company determines if an arrangement is a lease.

Typically, a contract constitutes a lease if it conveys the right to control the use of an identified property, plant or equipment (an identified asset) for a period of time, in exchange for consideration. To determine whether a contract conveys the right to control the use of an identified asset for a period of time, the Company must assess whether, throughout the period of use, the customer has both (i) the right to obtain substantially all of the economic benefits from use of the identified asset and (ii) the right to direct the use of the identified asset. If the customer has the right to control the use of an identified asset for only a portion of the term of the contract, the contract contains a lease for that portion of the term.

Leases classified as finance were immaterial to the Company as of September 30, 2021. Operating leases expire at various times through 2032. Operating leases are included in "Right of use asset - operating leases" and "Lease liability - operating leases" in the unaudited Condensed Consolidated Financial Statements.Balance Sheets.


The Company recognizes ROU assets and lease liabilities based on the present value of lease payments over the lease term at commencement date. The interest rates implicit in the Company's leases typically are not readily determinable. As a result, the Company uses its estimated incremental borrowing rate, as allowed by ASC 842, Leases, in determining the present value of lease payments. The incremental borrowing rate is based on internal and external information available at the lease commencement date and is determined using a portfolio approach (i.e., using the weighted average terms of all outstanding leases). This rate is the theoretical rate the Company would pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term as that of the lease portfolio.

The Company uses quoted interest rates obtained from financial institutions as an input, adjusted for Company-specific factors, to derive the incremental borrowing rate as the discount rate for the leases. As new leases are added each period, the Company evaluates whether the incremental borrowing rate has changed. If the incremental borrowing rate has changed, the Company will apply the rate to new leases if not doing so would result in a material difference to the ROU asset and lease liability presented on the balance sheet.

33

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)



The majority of leases have an original term of five years plus 2 five-year renewal options. The Consumer Price Index is generally used in determining future lease payments and for purposes of calculating operating lease liabilities. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Most of the leases have escalation clauses and certain leases also require payment of period costs, including maintenance, insurance and property taxes. The Company has elected to combine lease and non-lease components and to exclude short-term leases, defined as having an initial term of 12 months or less, from the unaudited Condensed Consolidated Balance Sheets. Some of the leases are with related parties and have terms similar to the non-related party leases. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The following table summarizes the operating lease costs and other information for the three and nine months ended September 30, 2021 and September 30,2020 (dollars in thousands):
Three Months Ended
September 30,		Nine Months Ended September 30,
2021202020212020
Operating lease costs:
Third-Party$8,043 $8,567 $24,604 $22,947 
Related-Party551 6 1,649 2,538 
Total operating lease costs$8,594 $8,573 $26,253 $25,485 
Operating cash flow - Operating leases$26,556 $25,329 
New ROU assets - Operating leases$9,893 $10,885 
Weighted average remaining lease term - Operating leases5.3 years6.0 years
Weighted average discount rate - Operating leases9.1 %10.1 %

The following table summarizes the aggregate operating lease payments that the Company was contractually obligated to make under operating leases as of September 30, 2021 (in thousands):
Third-PartyRelated-PartyTotal
Remainder of 2021$8,250 $646 $8,896 
202231,419 2,468 33,887 
202326,202 551 26,753 
202420,594 174 20,768 
202514,856 54 14,910 
202610,778 50 10,828 
Thereafter22,347 — 22,347 
Total134,446 3,943 138,389 
Less: Imputed interest(29,394)(340)(29,734)
Operating lease liabilities$105,052 $3,603 $108,655 

There were no material leases entered into subsequent to the balance sheet date.

NOTE 14 – CONDENSED CONSOLIDATING FINANCIAL INFORMATIONGOODWILL


In February 2017, CFTC issued $470.0 million aggregate principal amount Senior Secured Notes,The change in the proceeds of which were used together with available cash, to (i) redeem the outstanding 10.75% Senior Secured Notes due 2018 of our wholly owned subsidiary, CURO Intermediate, (ii) redeem the outstanding 12.00% Senior Cash Pay Notes due 2017 and (iii) pay fees, expenses, premiums and accrued interest in connection with the offering. CFTC sold the Senior Secured Notes to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”); or outside the U.S. to non-U.S. persons in compliance with Regulation S of the Securities Act.

In November 2017, CFTC issued $135.0 million aggregate principalcarrying amount of additional Senior Secured Notes in a private offering exempt fromgoodwill by operating segment for the registration requirements of the Securities Act (the "Additional Notes Offering"). CFTC used the proceeds from the Additional Notes Offering, together with available cash, to (i) pay a cash dividend, in an amount of $140.0 million to us, CFTC’s sole stockholder, and ultimately our stockholders and (ii) pay fees, expenses, premiums and accrued interest in connection with the Additional Notes Offering. CFTC received the consent of the holders holding a majority in the outstanding principal amount outstanding of the current Senior Secured Notes to a one-time waiver with respect to the restrictions contained in Section 5.07(a) of the indenture governing the Senior Secured Notes to permit the dividend.nine months ended September 30, 2021 was as follows (in thousands):

U.S.Canada Direct LendingCanada POS LendingTotal
Goodwill at December 31, 2020$105,922 $30,169 $— $136,091 
Acquisition (Note 15)— — 44,901 44,901 
Foreign currency translation— (48)(491)(539)
Measurement period adjustment— — (4,480)(4,480)
Goodwill at September 30, 2021$105,922 $30,121 $39,930 $175,973 
On March 7, 2018, CFTC redeemed $77.5 million of the Senior Secured Notes at a price equal to 112.00% of the principal amount plus accrued and unpaid interest to the date of redemption. Following the redemption, $527.5 million of the original outstanding principal amount of the Senior Secured Notes remain outstanding. The redemption was conducted pursuant to the indenture governing the Senior Secured Notes, dated as of February 15, 2017, by and among CFTC, the guarantors party thereto and TMI Trust Company, as trustee and collateral agent. Consistent with the terms of the indenture, CFTC used a portion of the cash proceeds from our IPO, completed in December 2017, to redeem such Senior Secured Notes. See Note 5, "Long-Term Debt," for additional details.

The following condensed consolidating financing information, which has been prepared in accordance with the requirements for presentation of Rule 3-10(d) of Regulation S-X promulgated under the Securities Act, presents the condensed consolidating financial information separately for:

(i)CFTC as the issuer of the Senior Secured Notes;
(ii)CURO Intermediate as the issuer of the 10.75% senior secured notes that were redeemed in February 2017;
(iii)Our subsidiary guarantors, which are comprised of our domestic subsidiaries, excluding CFTC and CURO Intermediate (the “Subsidiary Guarantors”), on a consolidated basis, which are 100% owned by CURO, and which are guarantors of the Senior Secured Notes issued in February 2017 and the 10.75% senior secured notes redeemed in February 2017;
(iv)Our other subsidiaries on a consolidated basis, which are not guarantors of the Senior Secured Notes (the “Subsidiary Non-Guarantors”)
(v)Consolidating and eliminating entries representing adjustments to:
a.eliminate intercompany transactions between or among us, the Subsidiary Guarantors and the Subsidiary Non-Guarantors; and
b.eliminate the investments in our subsidiaries;
(vi)Us and our subsidiaries on a consolidated basis.



34

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


The Company tests goodwill at least annually for potential impairment, as of October 1, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist. The indicators include, among others, declines in sales, earning or cash flows or the development of a material adverse change in business climate. The Company assesses goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a reporting unit. See Note 1, "Summary of Significant Accounting Policies and Nature of Operations" of the 2020 Form 10-K for additional information on the Company's policy for assessing goodwill for impairment.

In the third quarter of 2021, the Company performed an interim review of triggering events for each reporting unit, which would indicate whether a quantitative or qualitative assessment of goodwill impairment was necessary. As a result of the interim triggering event review, the Company concluded an additional assessment was not necessary and did not record an impairment loss during the three months ended September 30, 2021.

Flexiti Acquisition

The Company completed the acquisition of Flexiti on March 10, 2021. Provisional goodwill was estimated at $44.9 million, based on the preliminary valuation. The Company recorded an additional $4.5 million in net assets acquired during 2021 as part of the measurement period, which caused a decrease in the provisional goodwill to be $39.9 million, net of the foreign currency translation impact, as of September 30, 2021, based on the excess of the purchase price of the business combination over the fair value of the acquired net assets. See Note 15, "Acquisitions" for more information related to the business combination.

NOTE 15 – ACQUISITIONS

Flexiti

On March 10, 2021, the Company acquired 100% of the outstanding stock of Flexiti. The fair value of total consideration paid was $86.5 million in cash, $6.3 million in debt costs in conjunction with the acquisition and $20.6 million in contingent cash consideration subject to future operating metrics, including revenue less NCOs and loan originations. Flexiti provides POS financing solution to retailers across Canada and will provide the Company capability and scale opportunity in Canada’s credit card and POS financing markets. It enhances the Company's long-term growth and financial and risk profiles, and allows access to the full spectrum of Canadian consumers by adding an established private label credit card platform and POS financing capabilities. The Company now reaches consumers in Canada through all the ways they access credit, directly both in-store and online, via credit cards or at the POS.

The Company began consolidating the financial results of Flexiti in the unaudited Condensed Consolidating Balance SheetsConsolidated Financial Statements on March 10, 2021. Flexiti contributed $3.1 million of net revenue and incurred $19.6 million of operating expenses during the three months ended September 30, 2021, and contributed $7.9 million of net revenue and incurred $36.5 million of operating expenses during the nine months ended September 30, 2021.

This transaction has been accounted for using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The Company was the acquirer for purposes of accounting for the business combination. The values assigned to the acquired assets and liabilities assumed are provisional based on the preliminary fair value estimates as of the acquisition date. The values assigned to the assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the date of this Form 10-Q and may be adjusted during the measurement period of up to 12 months from the date of acquisition as further information becomes available. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.
35

 March 31, 2018
(dollars in thousands)CFTCCURO Intermediate
Subsidiary
Guarantors
Subsidiary
Non-Guarantors
SPV SubsEliminationsConsolidatedCUROEliminationsCURO
Consolidated
Assets:          
Cash$—
$—
$82,358
$48,381
$—
$—
$130,739
$—
$—
$130,739
Restricted cash—
—
1,678
3,710
12,268
—
17,656
—
—
17,656
Loans receivable, net—
—
68,304
110,775
149,873
—
328,952
—
—
328,952
Deferred income taxes—
1,002
(3,313)4,128
—
—
1,817
—
—
1,817
Prepaid expenses and other—
—
29,304
3,449
—
—
32,753
—
—
32,753
Property and equipment, net—
—
50,613
32,909
—
—
83,522
—
—
83,522
Goodwill—
—
91,130
54,634
—
—
145,764
—
—
145,764
Other intangibles, net16
—
5,024
26,921
—
—
31,961
—
—
31,961
Intercompany receivable—
37,877
19,236
(17,249)—
(39,864)—
—
—
—
Investment in subsidiaries31,067
981,468
—
—
—
(1,012,535)—
(62,855)62,855
—
Other6,668
—
4,499
1,050
—
—
12,217
—
—
12,217
Total assets$37,751
$1,020,347
$348,833
$268,708
$162,141
$(1,052,399)$785,381
$(62,855)$62,855
$785,381
Liabilities and Stockholder's equity:          
Accounts payable and accrued liabilities$2,346
$16
$33,274
$17,176
$15
$—
$52,827
$33
$—
$52,860
Deferred revenue—
—
5,031
5,145
(24)—
10,152
—
—
10,152
Income taxes payable(56,738)87,519
(18,566)269
—
—
12,484
(3,750)—
8,734
Accrued interest5,121
—
—
—
1,263
—
6,384
—
—
6,384
Payable to CURO Holdings Corp.38,848
—
62,839
—
—
—
101,687
(101,687)—
—
CSO guarantee liability—
—
10,412
—
—
—
10,412
—
—
10,412
Deferred rent—
—
9,837
1,895
—
—
11,732
—
—
11,732
Long-term debt (excluding current maturities)511,494
—
—
—
111,150
—
622,644
—
—
622,644
Subordinated shareholder debt—
—
—
2,322
—
—
2,322
—
—
2,322
Intercompany payable(398,033)894,896
(370,086)39,864
(126,777)(39,864)—
—
—
—
Other long-term liabilities—
—
4,539
1,660
—
—
6,199
—
—
6,199
Deferred tax liabilities(2,432)6,849
(276)7,252
—
—
11,393
—
—
11,393
Total liabilities100,606
989,280
(262,996)75,583
(14,373)(39,864)848,236
(105,404)—
742,832
Stockholder’s equity(62,855)31,067
611,829
193,125
176,514
(1,012,535)(62,855)42,549
62,855
42,549
Total liabilities and stockholder’s equity$37,751
$1,020,347
$348,833
$268,708
$162,141
$(1,052,399)$785,381
$(62,855)$62,855
$785,381

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


The following table presents the preliminary purchase price allocation recorded in the Company’s Condensed Consolidated Balance Sheet as of the date of acquisition (in thousands):

Amounts acquired on March 10, 2021Measurement period adjustmentsAmounts acquired on March 10, 2021 (as adjusted)
Assets
Cash and cash equivalents$1,267 $— $1,267 
Gross loans receivable(1)
196,138 — 196,138 
Prepaid expenses and other687 — 687 
Property and equipment460 — 460 
Right-of-use assets616 — 616 
Intangibles50,876 3,572 54,448 
Deferred tax assets2,741 908 3,649 
Total assets$252,785 $4,480 $257,265 
Liabilities
Accounts payable and accrued liabilities$9,356 $— $9,356 
Credit facilities174,367 — 174,367 
Lease liabilities616 — 616 
Total liabilities$184,339 $— $184,339 
Net assets acquired$68,446 $4,480 $72,926 
Total consideration paid113,347 113,347 
Goodwill$44,901 $(4,480)$40,421 
(1) The gross contractual loans receivables as of March 10, 2021 were $208.6 million, of which the Company estimates $12.5 million will not be collected.

We are in the process of refining the valuation of acquired assets and liabilities, including goodwill, and expect to finalize the purchase price allocation prior to March 31, 2022. During the nine months ended September 30, 2021, the Company recorded a cumulative net measurement period adjustment that decreased goodwill by $4.5 million. The measurement period adjustment would have resulted in an insignificant increase in amortization expense related to the merchant relationships intangible asset during the three months ended March 31, 2021. The Company made these measurement period adjustments to reflect facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date. As of September 30, 2021, the primary areas that remain preliminary relate to the valuation of certain loans receivable, intangible assets and certain tax-related balances.

The following table sets forth the components of identifiable intangible assets acquired, as adjusted for measurement period adjustments, and their estimated useful lives as of the date of acquisition (dollars in thousands):

Fair ValueUseful Life
Developed technology$31,827 5.0 years
Merchant relationships19,684 5.0 years
Customer relationships2,937 3.0 years
Total identified intangible assets$54,448 

Goodwill of $40.4 million represents the excess of the consideration paid over the fair value of the net tangible and intangible assets acquired. The goodwill was primarily attributed to expected synergies created with the Company’s future product offerings and the value of the combined workforce. Goodwill and the intangibles from this transaction are not deductible for Canadian income tax purposes because this was a stock acquisition.

In connection with the acquisition, the Company recognized contingent cash consideration of $20.6 million as of the acquisition date. The contingent consideration is based on Flexiti achieving certain operating metrics from April 1, 2021 through March 31, 2023, including revenue less NCOs and loan originations. Cash consideration can range from zero to $32.8 million over the period. As of September 30, 2021, the estimated value of the contingent cash consideration increased to $24.1 million. Refer to Note 8, "Fair Value Measurements" for additional information regarding fair value inputs related to the contingent cash consideration.
36

 December 31, 2017
(dollars in thousands)CFTCCURO IntermediateSubsidiary
Guarantors		Subsidiary
Non-Guarantors		SPV SubsEliminationsConsolidatedCUROEliminationsCURO
Consolidated
Assets:          
Cash$—
$—
$117,379
$44,915
$—
$—
$162,294
$80
$—
$162,374
Restricted cash—
—
1,677
3,569
6,871
—
12,117
—
—
12,117
Loans receivable, net—
—
84,912
110,651
167,706
—
363,269
—
—
363,269
Deferred income taxes—
2,154
(4,646)3,502
—
—
1,010
(238)—
772
Income taxes receivable—
—
—
—
—
—
—
3,455
—
3,455
Prepaid expenses and other—
—
38,277
3,353
—
—
41,630
882
—
42,512
Property and equipment, net—
—
52,627
34,459
—
—
87,086
—
—
87,086
Goodwill—
—
91,131
54,476
—
—
145,607
—
—
145,607
Other intangibles, net16
—
5,418
27,335
—
—
32,769
—
—
32,769
Intercompany receivable—
37,877
33,062
(30,588)—
(40,351)—
—
—
—
Investment in subsidiaries(14,504)899,371
—
—
—
(884,867)—
(84,889)84,889
—
Other5,713
—
3,017
1,040
—
—
9,770
—
—
9,770
Total assets$(8,775)$939,402
$422,854
$252,712
$174,577
$(925,218)$855,552
$(80,710)$84,889
$859,731
Liabilities and Stockholder's equity:          
Accounts payable and accrued liabilities$2,606
$13
$35,753
$15,954
$12
$—
$54,338
$1,454
$—
$55,792
Deferred revenue—
—
6,529
5,455
—
—
11,984
—
—
11,984
Income taxes payable(49,738)70,231
(18,450)2,077
—
—
4,120
—
—
4,120
Accrued interest24,201
—
—
—
1,266
—
25,467
—
—
25,467
Payable to CURO Holdings Corp.184,348
—
(95,048)—
—
—
89,300
(89,300)—
—
CSO guarantee liability—
—
17,795
—
—
—
17,795
—
—
17,795
Deferred rent—
—
9,896
1,681
—
—
11,577
—
—
11,577
Long-term debt585,823
—
—
—
120,402
—
706,225
—
—
706,225
Subordinated shareholder debt—
—
—
2,381
—
—
2,381
—
—
2,381
Intercompany payable(668,536)876,869
(124,332)40,351
(84,001)(40,351)—
—
—
—
Other long-term liabilities—
—
3,969
1,799
—
—
5,768
—
—
5,768
Deferred tax liabilities(2,590)6,793
(143)7,426
—
—
11,486
—
—
11,486
Total liabilities76,114
953,906
(164,031)77,124
37,679
(40,351)940,441
(87,846)—
852,595
Stockholder’s equity(84,889)(14,504)586,885
175,588
136,898
(884,867)(84,889)7,136
84,889
7,136
Total liabilities and stockholder’s equity$(8,775)$939,402
$422,854
$252,712
$174,577
$(925,218)$855,552
$(80,710)$84,889
$859,731


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)



In connection with the acquisition, the Company also granted RSUs to certain Flexiti employees who joined the Company, with grant-date fair value totaling approximately $8.1 million. Of that total, $4.0 million relates to RSU contingent consideration structured similar to the contingent cash consideration described above. All RSU grants to Flexiti employees will be ratably recognized as stock-based compensation over the requisite service period of two years. Refer to Note 6, "Share-based Compensation" for further information related to these RSUs.

The Company incurred costs related to this acquisition of $3.4 million that were recorded in Corporate, district and other expenses in the U.S. segment in the accompanying unaudited Condensed ConsolidatingConsolidated Statement of Operations for the nine months ended September 30, 2021.

Ad Astra

On January 3, 2020, the Company acquired 100% of the outstanding stock of Ad Astra, a related party at the time, for $14.4 million, net of cash received. Prior to the acquisition, Ad Astra had been the Company's exclusive provider of third-party collection services for owned and managed loans in the U.S. that are in later-stage delinquency.
The Company began consolidating the financial results of this acquisition in the unaudited Condensed Consolidated Financial Statements on January 3, 2020. Subsequent to the acquisition, operating costs for Ad Astra are included within "Corporate, district and other expenses," consistent with presentation of Incomeother internal collection costs. Ad Astra incurred $2.6 million of operating expense during the nine months ended September 30, 2021.

The transaction was accounted for using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The Company was the acquirer for purposes of accounting for the business combination. The values assigned to the assets acquired and liabilities assumed were based on estimates of fair value, which the Company completed based on the information available in March 2020.

The following table summarizes the allocation of the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
(in thousands)Amounts acquired on January 3, 2020
Assets
Cash and cash equivalents$3,360 
Accounts receivable465 
Property and equipment358 
Intangible assets1,101 
Goodwill14,791 
Operating lease asset235 
Total assets$20,310 
Liabilities
Accounts payable and accrued liabilities$2,264 
Operating lease liabilities235 
Total liabilities$2,499 
Total cash consideration transferred$17,811 

Goodwill of $14.8 million represents the excess over the fair value of the net tangible and intangible assets acquired. The goodwill was primarily attributed to expected synergies created through cost and process efficiencies in the collections process. The total estimated tax-deductible Goodwill as a result of this transaction is $15.4 million.

NOTE 16 – SHARE REPURCHASE PROGRAM
 Three Months Ended March 31, 2018
(dollars in thousands)CFTCCURO IntermediateSubsidiary
Guarantors		Subsidiary
Non-Guarantors		SPV SubsEliminationsConsolidatedCUROEliminationsCURO
Consolidated
Revenue$—
$—
$128,408
$57,165
$76,185
$—
$261,758
$—
$—
$261,758
Provision for losses—
—
35,769
16,698
28,564
—
81,031
—
—
81,031
Net revenue—
—
92,639
40,467
47,621
—
180,727
—
—
180,727
Cost of providing services:         

Salaries and benefits—
—
18,018
8,900
—
—
26,918
—
—
26,918
Occupancy—
—
7,646
5,781
—
—
13,427
—
—
13,427
Office—
—
5,582
1,399
—
—
6,981
—
—
6,981
Other costs of providing services—
—
12,030
1,889
481
—
14,400
—
—
14,400
Advertising—
—
5,159
4,597
—
—
9,756
—
—
9,756
Total cost of providing services—
—
48,435
22,566
481
—
71,482
—
—
71,482
Gross margin—
—
44,204
17,901
47,140
—
109,245
—
—
109,245
Operating (income) expense:         

Corporate, district and other448
7
27,992
9,922
30
—
38,399
2,055
—
40,454
Intercompany management fee—
—
(6,902)3,494
3,408
—
—
—
—
—
Interest expense18,322
—
(112)52
4,087
—
22,349
—
—
22,349
Loss on extinguishment of debt11,683
—
—
—
—
—
11,683
—
—
11,683
Intercompany interest (income) expense—
(880)(79)959
—
—
—
—
—
—
Total operating expense30,453
(873)20,899
14,427
7,525
—
72,431
2,055
—
74,486
Net income (loss) before income taxes(30,453)873
23,305
3,474
39,615
—
36,814
(2,055)—
34,759
Provision for income tax expense (benefit)(6,841)18,497
(1,585)1,929
—
—
12,000
(533)—
11,467
Net income (loss)(23,612)(17,624)24,890
1,545
39,615
—
24,814
(1,522)—
23,292
Equity in net income (loss) of subsidiaries:         

CFTC—
—
—
—
—
—
—
24,814
(24,814)—
CURO Intermediate(17,624)—
—
—
—
17,624
—
—
—
—
Guarantor Subsidiaries24,890
—
—
—
—
(24,890)—
—
—
—
Non-Guarantor Subsidiaries1,545
—
—
—
—
(1,545)—
—
—
—
SPV Subs39,615
—
—
—
—
(39,615)—
—
—
—
Net income (loss) attributable to CURO$24,814
$(17,624)$24,890
$1,545
$39,615
$(48,426)$24,814
$23,292
$(24,814)$23,292


In May 2021, the Company's Board of Directors authorized a new share repurchase program for up to $50.0 million of its common stock.






The table below summarizes share repurchase activity during the three and nine months ended September 30, 2021 (in thousands, except for per share amounts and number of share amounts):

37

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)



Three Months Ended
September 30, 2021		Nine Months Ended
September 30, 2021
Total number of shares repurchased964,566 1,069,053 
Average price paid per share$16.53 $16.55 
Total value of shares repurchased$15,940 $17,692 
Total authorized repurchase amount for the period presented$48,248 $50,000 
Total value of shares repurchased$15,940 $17,692 
Total remaining authorized repurchase amount$32,308 $32,308 

Refer to Note 18, "Subsequent Events" for repurchases during October 2021.

NOTE 17 – STORE CLOSURES
 Three Months Ended March 31, 2017
(dollars in thousands)CFTCCURO IntermediateSubsidiary GuarantorsSubsidiary Non-GuarantorsSPV SubsEliminations
CFTC
Consolidated
CUROEliminationsCURO Consolidated
Revenue$—
$—
$112,123
$50,258
$62,199
$—
$224,580
$—
$—
$224,580
Provision for losses—
—
28,056
12,542
21,138
—
61,736
—
—
61,736
Net revenue—
—
84,067
37,716
41,061
—
162,844
—
—
162,844
Cost of providing services:         

Salaries and benefits—
—
17,853
8,580
—
—
26,433
—
—
26,433
Occupancy—
—
8,145
5,950
—
—
14,095
—
—
14,095
Office—
—
3,764
1,104
—
—
4,868
—
—
4,868
Other store operating expenses—
—
13,504
1,316
35
—
14,855
—
—
14,855
Advertising—
—
4,694
2,994
—
—
7,688
—
—
7,688
Total cost of providing services—
—
47,960
19,944
35
—
67,939
—
—
67,939
Gross Margin—
—
36,107
17,772
41,026
—
94,905
—
—
94,905
Operating (income) expense:         

Corporate, district and other530
8
19,358
10,888
115
—
30,899
2,094
—
32,993
Interest expense7,282
9,613
1
21
3,139
—
20,056
3,310
—
23,366
Intercompany interest (income) expense—
(1,148)(2,022)1,314
1,856
—
—
—
—
—
Loss on extinguishment of debt—
11,884
—
—
—
—
11,884
574
—
12,458
Total operating expense7,812
20,357
17,337
12,223
5,110
—
62,839
5,978
—
68,817
Net (loss) income before income taxes(7,812)(20,357)18,770
5,549
35,916
—
32,066
(5,978)—
26,088
Provision for income tax (benefit) expense(3,960)16,611
(2,975)2,044
—
—
11,720
(2,270)—
9,450
Net income (loss)(3,852)(36,968)21,745
3,505
35,916
—
20,346
(3,708)—
16,638
Equity in net income (loss) of subsidiaries:         

CFTC—
—
—
—
—
—
—
20,346
(20,346)—
CURO Intermediate(36,968)—
—
—
—
36,968
—
—
—
—
Guarantor Subsidiaries21,745
—
—
—
—
(21,745)—
—
—
—
Non-Guarantor Subsidiaries3,505
—
—
—
—
(3,505)—
—
—
—
SPV Subs35,916
—
—
—
—
(35,916)—
—
—
—
Net income (loss) attributable to CURO$(15,570)$(36,968)$21,745
$3,505
$35,916
$11,718
$20,346
$16,638
$(20,346)$16,638


The Company closed or did not renew leases for 49 certain U.S. stores in Illinois (8), Oregon (2), Colorado (2), Washington (1), Texas (31), California (2), Louisiana (1), Nevada (1) and Tennessee (1), of which 19 and 30 closed in the second and third quarters of 2021, respectively. The Company exited Illinois entirely given that state's legislative changes that effectively eliminated the Company's product offerings. The store closure decisions in other states were made after extensive analysis and in response to ongoing migration of customer transactions toward the online channel and the impact of COVID-19 on store traffic and profitability.



The Company incurred $5.7 million and $11.4 million of total one-time charges associated with the U.S. store closures for the three and nine months ended September 30, 2021, respectively, as follows:



(in thousands)
Three Months Ended
September 30, 2021 (1)
Nine Months Ended
September 30, 2021 (2)
Store closure costs
Severance and employee costs$2,714 $3,655 
Lease termination costs453 1,018 
Net accelerated depreciation and write-off of ROU assets and lease liabilities2,484 6,741 
Total store closure costs$5,651 $11,414 
(1) During the three months ended September 30, 2021, $0.7 million and $4.9 million of store closure costs were recorded within "Corporate, district and other expenses" and within "Cost of providing services," respectively, on the Statement of Operations.
(2) During the nine months ended September 30, 2021, the Statement of Operations included $5.7 million of store closure costs recorded within "Corporate, district and other expenses" and $5.7 million recorded within "Cost of providing services."
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


Condensed Consolidating Statements of Cash Flows

Three Months Ended March 31, 2018
(dollars in thousands)CFTCCURO IntermediateSubsidiary Guarantors
Subsidiary
 Non-Guarantors
SPV SubsEliminationsCFTC
Consolidated		CUROEliminationsCURO Consolidated
Cash flows from operating activities













   
Net cash provided (used)$78,529
$—
$(34,233)$4,868
$14,916
$3,922
$68,002
$(13,215)$—
$54,787
Cash flows from investing activities:













  

Purchase of property, equipment and software—
—
(788)(821)—
—
(1,609)—
—
(1,609)
Cash paid for Cognical Holdings preferred shares(958)—
—
—
—
—
(958)—
—
(958)
Change in restricted cash—
—
—
(6)(5,397)—
(5,403)—
—
(5,403)
Net cash provided (used)(958)—
(788)(827)(5,397)—
(7,970)—
—
(7,970)
Cash flows from financing activities:













  

Proceeds from Non-Recourse U.S. SPV facility—
—
—
—
3,000
—
3,000
—
—
3,000
Payments on Non-Recourse U.S. SPV facility—
—
—
—
(12,519)—
(12,519)—
—
(12,519)
Proceeds from revolving credit facilities10,000
—
—
—
—
—
10,000
—
—
10,000
Payments on revolving credit facilities(10,000)—
—
—
—
—
(10,000)—
—
(10,000)
Proceeds from issuance of common stock—
—
—
—
—
—
—
13,135
—
13,135
Payments on 12.00% Senior Secured Notes(77,500)—
—
—
—
—
(77,500)—
—
(77,500)
Debt issuance costs paid(71)—
—
—
—
—
(71)—
—
(71)
Net cash provided (used)(77,571)—
—
—
(9,519)—
(87,090)13,135
—
(73,955)
Effect of exchange rate changes on cash—
—
—
(575)—
(3,922)(4,497)—
—
(4,497)
Net increase (decrease) in cash—
—
(35,021)3,466
—
—
(31,555)(80)—
(31,635)
Cash at beginning of period—
—
117,379
44,915
—
—
162,294
80
 162,374
Cash at end of period$—
$—
$82,358
$48,381
$—
$—
$130,739
$—
$—
$130,739


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


 Three Months Ended March 31, 2017
(dollars in thousands)CFTCCURO IntermediateSubsidiary Guarantors
Subsidiary
 Non-Guarantors
SPV SubsEliminations
CFTC
Consolidated
CUROEliminationsCURO
Consolidated
Cash flows from operating activities          
Net cash (used) provided$(317,556)$427,790
$(33,328)$(13,996)$(891)$(11)$62,008
$(5,083)$—
$56,925
Cash flows from investing activities:          
Purchase of property, equipment and software—
—
(1,672)(1,421)—
—
(3,093)—
—
(3,093)
Change in restricted cash—
—
—
121
(7,114)—
(6,993)—
—
(6,993)
Net cash used—
—
(1,672)(1,300)(7,114)—
(10,086)—
—
(10,086)
Cash flows from financing activities:          
Proceeds from Non-Recourse U.S. SPV facility and ABL facility—
—
—
—
19,802
—
19,802
—
—
19,802
Payments on Non-Recourse U.S. SPV facility and ABL facility—
—
—
—
(11,797)—
(11,797)—
—
(11,797)
Proceeds from issuance of 12.00% Senior Secured Notes461,329
—
—
—
—
—
461,329
—
—
461,329
Payments on 10.75% Senior Secured Notes—
(426,034)—
—
—
—
(426,034)—
—
(426,034)
Payments on 12.00% Senior Cash Pay Notes—
—
—
—
—
—
—
(125,000)—
(125,000)
Dividends (paid) received(130,083)—
—
—
—
—
(130,083)130,083
—
—
Debt issuance costs paid(13,690)—
—
—
—
—
(13,690)—
—
(13,690)
Net cash provided (used)317,556
(426,034)—
—
8,005
—
(100,473)5,083
—
(95,390)
Effect of exchange rate changes on cash—
—
—
818
—
11
829
—
—
829
Net increase (decrease) in cash—
1,756
(35,000)(14,478)—
—
(47,722)—
—
(47,722)
Cash at beginning of period—
1,954
127,712
63,779
—
—
193,445
80
—
193,525
Cash at end of period$—
$3,710
$92,712
$49,301
$—
$—
$145,723
$80
$—
$145,803


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

NOTE 15 -18 – SUBSEQUENT EVENTS
Excess Cash Flow Offer

Share Repurchase Program
Subject
In October 2021, the Company repurchased 286,629 shares from October 1, 2021 through October 29, 2021 under the share repurchase program initiated in May 2021, as further discussed in Note 16, "Share Repurchase Program." The total value of shares repurchased was $5.3 million at an average price per share of $18.33.

Dividend

The Company's Board of Directors declared a quarterly dividend of $0.11 per share, payable on November 22, 2021, to the provisionsstockholders of its Senior Secured Notes, CFTC is required to make an offer to purchase the maximum principal amountrecord as of Senior Secured Notes that may be redeemed with 50% of its Excess Cash Flow (as defined in the agreement) within 125 days after the end of each fiscal year commencing with the fiscal year ended December 31, 2017. CFTC is not required to make an offer unless its Excess Cash Flow exceeds $5.0 million (with lesser amounts being carried forward for purposes of determining whether the $5.0 million threshold has been met for any future period).  Upon completion of each Excess Cash Flow offer, the Excess Cash Flow amount will be reset at zero.November 12, 2021.

38
On April 5, 2018, CFTC initiated an offer to purchase up to $37.7 million of its Senior Secured Notes at par, which represented 50% of its Excess Cash Flow for the fiscal year ended December 31, 2017. The offer expired on May 2, 2018 and did not result in the tender of any Notes.  According to the terms of the Indenture, the Excess Cash Flow amount has been reset at zero.



CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


ITEM 2.         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Forward LookingForward-Looking Statements


The following discussion of financial condition, results of operations, liquidity and capital resources, our regulatory environment and certain factors that may affect future results, including company-specific, economic and industry-wide factors, should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and accompanying notes included herein. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. The matters discussed in these forward-looking statements are subject to risk, uncertainties and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Except as required by applicable law and regulations, we undertake no obligation to update any forward-looking statements or other statements we may make in the following discussion or elsewhere in this document even though these statements may be affected by events or circumstances occurring after the forward-looking statements or other statements were made. Please see the sections titled "Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” in our 2017 Annual Report on2020 Form 10-K for a discussion of the uncertainties, risks and assumptions associated with these statements.


Overview


We are a growth-oriented, technology-enabled, highly-diversifiedtech-enabled, omni-channel consumer finance company serving a wide rangefull spectrum of underbankednon-prime and prime consumers in the United States, CanadaU.S. and the United Kingdom and are a market leader in our industry based on revenues.Canada.


History


The CURO business was founded in 1997 to meet the growing needs of consumers looking for alternative access to credit. The Company set out toWith nearly 25 years of experience, we offer a variety of convenient, easily-accessibleeasily accessible financial and loan services and over its 20 yearsin all of operations, expanded across the United States, Canadaour markets. The terms “CURO," "we,” “our,” “us” and the United Kingdom.

CURO Financial Technologies Corp. ("CFTC") (then known as Speedy Cash Holdings Corp.), was incorporated in Delaware on July 16, 2008. On September 10, 2008, our founders sold or otherwise contributed all of the outstanding equity of the various operating entities that comprised the CURO business to a wholly-owned subsidiary of CFTC in connection with an investment in CFTC by Friedman Fleischer & Lowe Capital Partners II, L.P. and its affiliated funds, or FFL Partners. CURO Group Holdings Corp. (then known as Speedy Group Holdings Corp.) was incorporated in Delaware on February 7, 2013 as the parent company of CFTC. On May 11, 2016, we changed the name of Speedy Group Holdings Corp.“Company” refer to CURO Group Holdings Corp. We similarly changed the names of some ofand its subsidiaries.directly and indirectly owned subsidiaries as a combined entity, except where otherwise stated.


Our growth has been fueled by acquisitions inIn the U.S., we operate under "Speedy Cash," "Rapid Cash" and "Avio Credit" for Installment and Revolving LOC products. In 2019, we launched Revolve Finance, a checking account solution, with FDIC-insured deposits, that combines a Visa-branded debit card, a number of technology-enabled tools and optional overdraft protection. In Canada, our direct-lending stores are branded "Cash Money" and we offer "LendDirect" Installment and Revolving LOC loans online and at certain stores. As of September 30, 2021, our direct lending network consisted of 361 locations across 13 U.S. states and eight Canadian provinces, and we offered our online services in 27 U.S. states and seven Canadian provinces.

On March 10, 2021, we completed the acquisition of Flexiti, one of Canada's fastest-growing POS and BNPL lenders, offering customers flexible payment plans at retailers that sell big-ticket goods such as furniture, appliances, jewelry and electronics. Through Flexiti's award-winning BNPL platform, customers can be approved instantly to shop with their FlexitiCard®, accepted at nearly 7,400 locations, which they can use online or in-store to make multiple purchases, within their credit limit, without needing to reapply. Refer to "—Recent Developments" below for additional information about the acquisition.

In 2017, we made our first investment in Katapult, a privately owned lease-to-own platform for online, brick and mortar and omni-channel retailers. Katapult provides the retailers' customers with payment options in store or via the Katapult link on a retailer's website. In June 2021, the Katapult and FinServ merger was completed, resulting in a new publicly traded company (NASDAQ: KPLT). Refer to "—Recent Developments," below, for details regarding the merger and the United Kingdom, as well as organically, including the launchbenefit recognized by us. As of new brands. Recent brand launches include the March 2016 launch of LendDirect, an online installment loan brandSeptember 30, 2021, our fully-diluted ownership in Alberta, Canada, that is now offered in four provinces, and the June 2017 launch of Avio Credit, an online Installment Loan brand in the U.S. market that is currently available in four states.Katapult was 19.3%.


Recent Developments


7.50% Senior Secured Notes.On AprilJuly 30, 2018,2021, we issued $750.0 million of 7.50% Senior Secured Notes, due 2028. Interest on the notes is payable semiannually, in arrears, on February 1 and August 1, beginning February 1, 2022. The net proceeds from the sale of the notes were used (i) to redeem our outstanding $690.0 million, 8.25% Senior Secured Notes due 2025, (ii) to pay fees, expenses, premiums and accrued interest in connection therewith and (iii) for general corporate purposes.

Store Closures. On July 13, 2021, we announced the closure of 49 U.S. stores in response to evolving customer channel preferences that we expectwere accelerated by the impacts of COVID-19. The store closures, which occurred during the second and third quarters of 2021, represented nearly 25% of our U.S. stores and, other than Illinois, represented strategic consolidation of locations in dense local markets. The impacted locations generated only 8% of our U.S. store revenue in 2020. Our omni-channel platform allows customers to begin offering consumers withinseamlessly transition online, to an adjacent store, or to contact centers, helping to increase the United Stateslikelihood of retaining a new linelarge percentage of creditcustomers that had utilized the impacted stores.

The 49 U.S. stores were in Illinois (8), Oregon (2), Colorado (2), Washington (1) Texas (31), California (2), Louisiana (1), Nevada (1) and Tennessee (1). We exited Illinois entirely given that state's legislative changes that effectively eliminated our product through a relationship with MetaBank® ("Meta"); a wholly-owned subsidiary
39


offerings. The store closure decisions in other states were made after extensive analysis and in response to ongoing migration of Meta Financial Group, Inc. CUROcustomer transactions toward the online channel and Meta expect to finalize supporting agreementsthe impact of COVID-19 on store traffic and diligenceprofitability. Of the 49 stores affected, 19 were in the second quarter of 20182021 and then structure30 were in the third quarter of 2021.

The store closure decisions followed an extensive evaluation that considered (i) comprehensive store-level score cards, (ii) market-level store density and the related addressable local market, (iii) the lingering and potential future COVID-19 impacts on store volume, traffic and profitability and (iv) continued migration of customer transactions toward the online channel. Of the 31 stores closed in Texas, 25 were from The Money Box acquisition in 2012. While historically successful, these stores did not have the high-profile, high-traffic advantages of our Speedy/Rapid Cash stores, thus their profitability declined more during COVID-19. As of September 30, 2021, we operated 160 stores in the U.S. and 201 stores in Canada.

Flexiti acquisition and growth. On March 10, 2021, we completed the acquisition of Flexiti in a pilot launch. Under the program partnership agreement, Meta may holdtransaction that included cash at closing of $86.5 million and contingent cash consideration of up to $350$32.8 million based on the achievement of product receivablesrevenue less NCOs and loan origination targets on the acquisition's first and second annual anniversaries. The Flexiti acquisition provides us capability and scale opportunity in Canada’s credit card and POS financing markets. It enhances our long-term growth and financial and risk profiles, and allows us to access the full spectrum of Canadian consumers by adding an established private label credit card platform and POS financing capabilities. We now reach consumers in Canada through all the ways they generally access credit, directly both in-store and online, via credit cards or at the POS.

Subsequent to the acquisition, Flexiti continued its balance sheethistorical growth trends as a result of gaining new merchant partners. Effective July 1, 2021, Flexiti commenced a 10-year agreement to become the exclusive POS financing partner to LFL, Canada's largest home furnishings retailer. LFL operates over 300 stores in Canada under multiple banners, including Leon's and The Brick. Flexiti estimates that the LFL POS relationship will generate over C$800 million in annualized loan originations beginning mid-2022, when fully onboarded. Year over year, given the signing and onboarding of LFL, as well as other top-tier Canadian merchants, Flexiti's third quarter 2021 originations increased 173.8%, or C$126.9 million, to C$199.8 million.

Katapult Investment. The Katapult and FinServ merger closed on June 9, 2021. As a result, we received cash of $146.9 million and 18.9 million shares of common stock of the resulting public company, Katapult (NASDAQ: KPLT). Additionally, we received 3.0 million earn-out warrants, which will vest if certain share price levels are met and expire six years from the closing of the merger. Our fully diluted ownership of Katapult as of September 30, 2021 was 19.3%, which assumes full pay-out of earn-out shares. Refer to our 2020 Form 10-K for additional information about the merger and its benefits to us.

Continuing Impact of COVID-19. As a result of COVID-19, our customers and their overall credit performance were impacted through the three and nine months ended September 30, 2021. Throughout much of 2020 and the first three yearshalf of 2021, the U.S. and Canadian governments instituted several initiatives to ease the personal burden of the relationship, although there can be no assurance aspandemic, including various federal and provincial financial aid and economic stimulus programs. During the second half of 2020, consumer demand gradually increased, reflecting both the gradual lifting of certain regions' stay-at-home and self-quarantine orders in response to the levelpandemic's easing and the expiration of successgovernmental stimulus programs. There was an additional round of stimulus in sellingthe U.S. in March 2021 which contributed to the decrease in loan balances and ALL during the first quarter of 2021. With stimulus programs running off in the U.S. and continued demand in Canada for loan products, loan balances generally increased between March 31, 2021 and September 30, 2021. We have maintained our historical allowance approach, but have adjusted estimates for changes in past-due gross loans receivable due to market conditions. As of September 30, 2021, we reduced the allowance as a percentage of receivables as a result of recent market trends. The estimates and assumptions used to determine an appropriate ALL and liability for losses on CSO lender-owned consumer loans are those that are available through the filing of this credit product. Successful launchForm 10-Q and are indicative of conditions as of September 30, 2021.

As government stimulus programs have winded down, U.S. Company Owned loan balances have stabilized modestly increasing from $185.8 million as of March 31, 2021 to $189.2 million as of September 30, 2021. While NCOs have increased sequentially for total U.S. Company Owned gross loans receivable, they remain at low levels relative to most periods in 2020, with the exception of the program is conditioned upon executionsecond quarter of supporting agreements2020, and completionperiods prior to the onset of diligence. COVID-19.



In Canada, despite recent COVID-19 lockdown mandates and resurgences in the first half of 2021, on a sequential basis, Canada Direct Lending gross loans receivable and Canada POS Lending gross loans receivable grew 8.2% and 36.5%, respectively, while the NCO rate for Canada Direct Lending and the past due rate for Canada POS Lending decreased. The NCO rate for Canada POS Lending was 0.7% in the third quarter of 2021.


Additionally, as a result of COVID-19, we enhanced our Customer Care Program and began modifying loans for borrowers that experienced financial distress, as described in more detail in Note 1, "Summary of Significant Accounting Policies and Nature of Operations" and the "—TDR Loans Receivable" tables below.
40


Verge Credit. We launched Verge installment loans, originated by Stride Bank, in the fourth quarter of 2019 and executed pilot programs in several states. After testing various offers, rates, terms and approval criteria, Stride informed us in the first quarter of 2021 that it planned to focus on near-prime loans as they represented a larger addressable market and offered greater opportunity to scale. As a result, Stride discontinued new Verge Credit loans in April 2021. Verge loan balances totaled $11.5 million as of September 30, 2021. We expect an orderly run-off of these balances over the next 18 months.

Revenue by Product and Segment and Related Loan Portfolio Performance


Consolidated Revenue by Product and Segment


The following table summarizes revenue by product, including CSO fees, for the periodsperiod indicated:
Three Months Ended
September 30, 2021September 30, 2020
(in thousands, unaudited)U.S.Canada Direct LendingCanada POS LendingTotal% of TotalU.S.Canada Direct LendingCanada POS LendingTotal% of Total
Revolving LOC$ 27,377 $ 40,239 $ 10,646 $ 78,262 37.4 %$ 30,431 $ 28,280 $ — $ 58,711 32.2 %
Installment101,036 11,331 — 112,367 53.7 %98,946 10,238 — 109,184 60.0 %
Ancillary3,261 14,620 770 18,651 8.9 %3,471 10,637 — 14,108 7.8 %
   Total revenue$ 131,674 $ 66,190 $ 11,416 $ 209,280 100.0 %$ 132,848 $ 49,155 $ — $ 182,003 100.0 %
  Three Months Ended Three Months Ended
  March 31, 2018 March 31, 2017
(in thousands) U.S.CanadaU.K.Total U.S.CanadaU.K.Total
Unsecured Installment $120,476
$4,903
$7,567
$132,946
 $100,754
$3,420
$5,257
$109,431
Secured Installment 26,856
—
—
26,856
 23,669
—
—
23,669
Open-End 25,834
1,389
—
27,223
 17,907
—
—
17,907
Single-Pay 26,065
34,292
3,348
63,705
 26,327
34,179
3,284
63,790
Ancillary 5,362
5,666
—
11,028
 5,665
3,967
151
9,783
   Total revenue $204,593
$46,250
$10,915
$261,758
 $174,322
$41,566
$8,692
$224,580


During the three months ended March 31, 2018,September 30, 2021, total lending revenue (excluding revenues from ancillary products) grew $35.9increased $27.3 million, or 16.7%15.0%, to $250.7$209.3 million, compared to the prior-year period. The year-over-year increase was primarily due to an increase in Canada Direct Lending revenue of $17.0 million, or 34.7%, and $11.4 million of Canada POS Lending revenue. This increase was partially offset by a decrease in U.S. revenue of $1.2 million, or 0.9%, as a result of regulatory changes in California impacting certain Installment products, effective January 1, 2020, and regulatory changes in Virginia impacting Revolving LOC products, effective January 1, 2021. Excluding the impacted California and Virginia loans, total U.S. revenue increased $14.2 million, or 12.9%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

Canada POS Lending revenue includes MDR, which is recognized over the life of the underlying loan term. On March 10, 2021, we completed the acquisition of Flexiti. For the three months ended September 30, 2021, Canada POS Lending results were impacted by adjustments that reduced revenue by $1.8 million and net revenue by $4.3 million ("acquisition-related adjustments"). The acquisition included a loan portfolio with a fair value of approximately $196.1 million ("Acquired Portfolio"). The fair value discount of $12.5 million was based on estimated future net cash flows and is recognized in net revenue over the expected life of the Acquired Portfolio (approximately 12 months). This amortization resulted in an increase of $2.5 million for both revenue and loan loss provision for the three months ended September 30, 2021. The Acquired Portfolio also included $14.1 million of unearned MDR and annual and administrative fees, which are not amortized to revenue for the Acquired Portfolio because they do not represent future cash flows. For the third quarter of 2021, Canada POS Lending revenue and net revenue were both lower by $4.3 million ("acquisition-related adjustments") compared to what would have been reported if the unearned MDR and fees had been recognized over the expected life of the Acquired Portfolio. See "Reconciliation of Net Income from Continuing Operations and Diluted Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings per Share" for additional detail. The acquisition-related adjustments related to the unearned MDR annual and administrative fees will decline each quarter, until becoming fully amortized by the end of the first quarter of 2022.

41


The table below recaps acquisition-related adjustments to Flexiti's revenue and net revenue for the periods indicated:

Three months ended September 30, 2021Nine months ended September 30, 2021
(in thousands, unaudited)Canada POS LendingAcquisition-related adjustmentsAdjusted Canada POS LendingCanada POS LendingAcquisition-related adjustmentsAdjusted Canada POS Lending
Interest income$7,409 $(2,523)(1)$4,886 $14,414 $(4,115)(1)$10,299 
Other revenue4,007 4,278 (2)8,285 5,640 9,924 (2)15,564 
Total revenue$11,416 $1,755 $13,171 $20,054 $5,809 $25,863 
Provision for losses8,285 (2,526)(1)5,759 12,127 (3,945)(1)8,182 
Net revenue$3,131 $4,281 $7,412 $7,927 $9,754 $17,681 
(1) Acquisition-related adjustments for interest income and provision for losses relate to the amortization of the fair value discount of the Acquired Portfolio.
(2) Acquisition-related adjustments for other revenue represents the unearned MDR and annual and administrative fees, which were not included in the opening balance sheet as they did not represent future cash flows as of March 10, 2021, and thus, are not amortized to revenue for the Acquired Portfolio. The acquisition-related adjustments related to the unearned MDR and annual and administrative fees will decline each quarter with the Acquired Portfolio and will be fully amortized by the end of the first quarter of 2022.

From a product perspective, Revolving LOC revenue for the three months ended September 30, 2021 increased $19.6 million, or 33.3%, year over year, primarily driven by growth in Canada Direct Lending revenue of $12.0 million, or 42.3%, and Canada POS lending of $10.6 million, partially offset by a decline in U.S. revenue of $3.1 million, or 10.0%. Excluding the effects of the Virginia runoff portfolio, U.S. Revolving LOC revenue increased $3.6 million, or 16.2%, for the three months ended September 30, 2021 compared to the prior-year period.

For the three months ended September 30, 2021, Installment revenue increased $3.2 million, or 2.9%, compared to the prior-year period. Excluding the run-off of California Installment loan portfolios, U.S. Installment revenue increased $10.9 million, or 12.7%.

Ancillary revenue increased $4.5 million, or 32.2%, versus the prior-year period, primarily due to the sale of insurance products to Revolving LOC and Installment loan customers in Canada.

The following table summarizes revenue by product, including CSO fees, for the period indicated:

Nine Months Ended
September 30, 2021September 30, 2020
(in thousands, unaudited)U.S.Canada Direct LendingCanada POS LendingTotal% of TotalU.S.Canada Direct LendingCanada POS LendingTotal% of Total
Revolving LOC$ 78,391 $ 112,057 $ 18,585 $ 209,033 35.2 %$ 103,338 $ 83,091 $ — $ 186,429 28.9 %
Installment297,803 32,319 — 330,122 55.6 %377,158 38,522 — 415,680 64.4 %
Ancillary10,766 42,134 1,469 54,369 9.2 %11,440 31,769 — 43,209 6.7 %
   Total revenue$ 386,960 $ 186,510 $ 20,054 $ 593,524 100.0 %$ 491,936 $ 153,382 $ — $ 645,318 100.0 %

For the nine months ended September 30, 2021, total revenue declined $51.8 million, or 8.0%, to $593.5 million, compared to the prior year. Geographically, U.S. revenues declined 21.3%, while Canada Direct Lending revenues increased 21.6% due to the continued popularity and growth of Revolving LOC loans in Canada. Excluding the impacted California and Virginia loans, U.S. revenue decreased 11.5% for the nine months ended September 30, 2021 compared to the prior-year period. For the nine months ended September 30, 2021, Canada POS Lending revenue was $20.1 million, inclusive of acquisition-related adjustments which reduced total revenue by $5.8 million.

As described above, certain acquisition-related adjustments related to the amortization of the fair value discount on acquired loans receivable increased Canada POS Lending revenue and net revenue for the nine months ended September 30, 2021 by $4.1 million and $0.1 million, respectively. For the nine months ended September 30, 2021, Canada POS Lending revenue and net revenue were both lower by $9.9 million compared to what would have been reported if the unearned MDR and fees had been recognized over the expected life of the Acquired Portfolio.

From a product perspective, Revolving LOC revenues increased $22.6 million, or 12.1%, compared to the prior year, period, predominantly driven byprimarily due to growth in Canada Direct Lending revenue of $29.0 million, or 34.9%, and Canada POS Lending of $18.6 million, partially offset by declines in U.S. revenue of $24.9 million, or 24.1%. Excluding the impacted Virginia portfolio, U.S. Revolving LOC revenue decreased $3.6 million, or 4.8%, for the nine months ended September 30, 2021 compared to the prior-year period.
42



For the nine months ended September 30, 2021, Installment revenues decreased $85.6 million, or 20.6%, compared to the prior year. Excluding the effects of the impacted California Installment loan portfolios, Installment revenue in all three countries. Unsecured Installment loan revenues rose 21.5% and Secured Installment revenues rose 13.5% because of loan growth. Single-Pay revenues were flat year-over-year. The effect of Single-Pay receivables growth was offset by regulatory changes in Ontario, Canada. Open-End revenues rose 52.0% on organic growth in the U.S. and the introduction of Open-End products in Virginia and Canada. decreased 13.6%.

Ancillary revenues increased 12.7%$11.2 million, or 25.8%, versus the same quarter aprior year ago primarily duefrom the sale of insurance products to non-lending revenueRevolving LOC and Installment loan customers in Canada.


The following charts presenttable presents online revenue composition,and online transaction compositions, including CSO fees, of the products and services that we currently offer:offer within the U.S. and Canada Direct Lending segments:
chart-8d06b2c141b47cc780ba03.jpgchart-b78aeae2d4e580bd5ada03.jpg
For the three months ended March 31, 2018 and 2017,
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Online revenue as a percentage of consolidated revenue48.0 %48.8 %48.8 %47.8 %
Online transactions as a percentage of consolidated transactions61.0 %57.2 %60.5 %53.4 %

Online revenue generated through our online channel was 43% and 36%, respectively, of consolidated revenue.

Loan Volume and Portfolio Performance Analysis

Unsecured Installment Loans

Unsecured Installment revenue and gross combined loans receivable increased from the prior year quarter due to growth in the United States, primarily in California; growth in Canada, primarily in Alberta; and growth in the United


Kingdom. Gross combined Unsecured Installment Loan balances grew$40.4 million, or 21.8%, compared to March 31, 2017.

Loss provision rates as a percentage of originations for Company Owned loansconsolidated revenue increased sequentially from 22.1% to 27.6% to maintain allowance coverage. Loss provision rates for loans Guaranteed by the Company remained consistent sequentially from the fourth quarter of 2017. Net charge offs for Company Owned loans and loans Guaranteed by the Company were consistent and improved, respectively, versus the fourth quarter of 2017.

Unsecured Installment Allowance for loan losses as a percentage of Unsecured Installment gross loans receivable was consistent sequentially from the fourth quarter of 2017. Unsecured Installment CSO guarantee liability as a percentage of Unsecured Installment gross loans Guaranteed by the Company declined from the end of 2017 because of improved net charge offs and delinquencies. The delinquency rate for Company Owned Unsecured Installment gross loans was flat to the fourth quarter of 2017 and up slightly versus the same quarter a year ago, while the delinquency rate for Unsecured Installment gross loans Guaranteed by the Company improved sequentially and year-over-year.




 2018 2017
(dollars in thousands, except average loan amount, unaudited)First
Quarter		 Fourth
Quarter		Third
Quarter		Second
Quarter		First
Quarter
Unsecured Installment loans:      
Revenue - Company Owned$66,004
 $67,800
$61,653
$52,550
$51,206
Provision for losses - Company Owned27,477
 29,917
29,079
17,845
19,309
Net revenue - Company Owned$38,527
 $37,883
$32,574
$34,705
$31,897
Net charge-offs - Company Owned$33,410
 $32,894
$23,858
$18,858
$(4,918)
Revenue - Guaranteed by the Company$66,942
 $69,078
$67,132
$52,599
$58,225
Provision for losses - Guaranteed by the Company23,556
 32,915
36,212
23,575
19,940
Net revenue - Guaranteed by the Company$43,386
 $36,163
$30,920
$29,024
$38,285
Net charge-offs - Guaranteed by the Company$30,743
 $31,898
$34,904
$27,309
$17,088
Unsecured Installment gross combined loans receivable:
  


Company owned$171,432
 $196,306
$181,831
$156,075
$131,386
Guaranteed by the Company (1) (2)
54,332
 75,156
67,438
58,289
53,978
Unsecured Installment gross combined loans receivable (1)(2)
$225,764
 $271,462
$249,269
$214,364
$185,364


  


Unsecured Installment Allowance for loan losses (3)
$37,916
 $43,755
$46,938
$41,406
$42,040
Unsecured Installment CSO guarantee liability (3)
$9,886
 $17,072
$16,056
$14,748
$18,482
Unsecured Installment Allowance for loan losses as a percentage of Unsecured Installment gross loans receivable22.1% 22.3%25.8%26.5%32.0%
Unsecured Installment CSO guarantee liability as a percentage of Unsecured Installment gross loans guaranteed by the Company18.2% 22.7%23.8%25.3%34.2%
Unsecured Installment past-due balances:
  


Unsecured Installment gross loans receivable$39,273
 $44,963
$41,353
$33,534
$28,913
Unsecured Installment gross loans guaranteed by the Company$8,410
 $12,480
$10,462
$8,204
$11,196
Past-due Unsecured Installment gross loans receivable -- percentage (2)
22.9% 22.9%22.7%21.5%22.0%
Past-due Unsecured Installment gross loans guaranteed by the Company -- percentage (2)
15.5% 16.6%15.5%14.1%20.7%
Unsecured Installment other information:
  


Originations - Company owned (4)
$99,418
 $135,284
$137,618
$119,636
$98,691
Average loan amount - Company owned$666
 $714
$730
$697
$687
Originations - Guaranteed by the Company (1) (4)
$60,593
 $82,326
$83,680
$68,338
$55,112
Average loan amount - Guaranteed by the Company$523
 $526
$526
$485
$482
Unsecured Installment ratios:
  


Provision as a percentage of originations - Company Owned27.6% 22.1%21.1%14.9%19.6%
Provision as a percentage of gross loans receivable - Company Owned16.0% 15.2%16.0%11.4%14.7%
Provision as a percentage of originations - Guaranteed by the Company38.9% 40.0%43.3%34.5%36.2%
Provision as a percentage of gross loans receivable - Guaranteed by the Company43.4% 43.8%53.7%40.4%36.9%
(1)  Includes loans originated by third-party lenders through CSO programs, which are not included in our consolidated financial statements.
(2) Non-GAAP measure.
(3) Allowance for loan losses is reported as a contra-asset reducing gross loans receivable while the CSO guarantee liability is reported as a liability on our Condensed Consolidated Balance Sheets.
(4) We have revised previously-reported origination statistics to conform to current year methodology.



Secured Installment Loans

Secured Installment gross combined loans receivable balances increased by $11.3 million, or 15.9%, compared to March 31, 2017 primarily due to growth in California and Arizona. Secured Installment Allowance for loan losses and CSO guarantee liability as a percentage of Secured Installment gross loans receivable settled at a more normalized range in the fourth quarter of 2017 and remained consistent sequentially through the first quarter of 2018. Delinquency rates were stable and net charge offs improved versus the fourth quarter of 2017.

 2018 2017
(dollars in thousands, except average loan amount, unaudited)
First
Quarter
 
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Secured Installment loans:      
Revenue$26,856
 $27,732
$26,407
$23,173
$23,669
Provision for losses6,640
 10,051
6,512
4,955
7,436
Net revenue$20,216
 $17,681
$19,895
$18,218
$16,233
Net charge-offs$8,669
 $10,802
$11,597
$6,481
$(2,235)
Secured Installment gross combined loan balances:      
Secured Installment gross combined loans receivable(1)(2)
$82,534
 $92,817
$88,730
$80,077
$71,213
Secured Installment Allowance for loan losses and CSO guarantee liability (3)
$12,165
 $14,194
$14,945
$20,030
$21,557
Secured Installment Allowance for loan losses and CSO guarantee liability as a percentage of Secured Installment gross combined loans receivable14.7% 15.3%16.8%25.0%30.3%
Secured Installment past-due balances:      
Secured Installment past-due gross loans receivable and gross loans guaranteed by the Company$14,756
 $16,554
$15,265
$12,630
$10,186
Past-due Secured Installment gross loans receivable and gross loans guaranteed by the Company -- percentage (2)
17.9% 17.8%17.2%15.8%14.3%
Secured Installment other information:      
Originations (1)(4)
$34,750
 $48,577
$52,526
$45,596
$37,641
Average loan amount (1)(4)
$1,222
 $1,303
$1,299
$1,231
$1,326
Secured Installment ratios:      
Provision as a percentage of originations19.1% 20.7%12.4%10.9%19.8%
Provision as a percentage of gross combined loans receivable8.0% 10.8%7.3%6.2%10.4%
(1)  Includes loans originated by third-party lenders through CSO programs, which are not included in our consolidated financial statements.
(2) Non-GAAP measure.
(3) Allowance for loan losses is reported as a contra-asset reducing gross loans receivable while the CSO guarantee liability is reported as a liability on our Condensed Consolidated Balance Sheets.
(4) We have revised previously-reported origination statistics to conform to current year methodology.


Open-End Loans

Open-End loan balances increased by $25.9 million compared to March 31, 2017 from year-over-year growth in Kansas and Tennessee of 12.2% and 8.6%, respectively, the 2017 launch of Open-End in Virginia and conversion in the fourth quarter of 2017 of a portion of Canada Unsecured Installment loans to Open-End loans. The provision for losses and Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable remained consistent with the previous quarter. The decline year-over-year in Allowance as a percentage of Open-End gross receivables compared to March 31, 2017 is primarily due to geographic mix and seasoning in the U.S.

 2018 2017
(dollars in thousands, except average loan amount, unaudited)
First
Quarter
 
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Open-End loans:      
Revenue$27,223
 $21,154
$18,630
$15,805
$17,907
Provision for losses11,428
 8,334
6,348
4,298
3,265
Net revenue$15,795
 $12,820
$12,282
$11,507
$14,642
Net charge-offs$10,972
 $6,799
$5,991
$4,343
$3,876
Open-End gross combined loan balances:      
Open-End gross loans receivable$51,564
 $47,949
$32,133
$26,771
$25,626
Allowance for loan losses$6,846
 $6,426
$4,880
$4,523
$4,572
Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable13.3% 13.4%15.2%16.9%17.8%
Open-End other information:      
Average loan amount (1)
$702
 $579
$463
$451
$454
Open-End ratios:      
Provision as a percentage of gross combined loans receivable22.2% 17.4%19.8%16.1%12.7%
(1) We have revised previously-reported origination statistics to conform to current year methodology.



Single-Pay

Single-Pay revenue and combined loans receivable during the three and nine months ended March 31, 2018 were affected primarily by regulatory changes in Canada (rate changes in OntarioSeptember 30, 2021, as a result of our store closures during the second and British Columbia) andthird quarters of 2021, as well as the continued product shift from Single-Paytransition of customers to Installment and Open-End loans in all countries. Single-Pay loan balances grew 8.3% (primarily in Canada) but revenue was flat versus the same quarter a year ago because of lower yields in Canada. Credit quality and metrics for Single-Pay remain stable.our online channel.


 2018 2017
(dollars in thousands, unaudited)
First
Quarter
 
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Single-pay loans:      
Revenue$63,705
 $70,868
$70,895
$63,241
$63,790
Provision for losses11,302
 17,952
20,632
14,289
11,399
Net revenue$52,403
 $52,916
$50,263
$48,952
$52,391
Net charge-offs$12,698
 $17,362
$20,515
$13,849
$12,499
Single-Pay gross combined loan balances:      
Single-Pay gross combined loans receivable (1) (2)
$87,075
 $99,400
$94,476
$91,230
$80,423
Single-Pay Allowance for loan losses and CSO guarantee liability (3)
$4,485
 $5,915
$5,342
$5,313
$4,736
Single-Pay Allowance for loan losses and CSO guarantee liability as a percentage of Single-Pay gross combined loans receivable5.2% 6.0%5.7%5.8%5.9%
(1)  Includes loans originated by third-party lenders through CSO programs, which are not included in our consolidated financial statements.
(2) Non-GAAP measure.
(3) Allowance for loan losses is reported as a contra-asset reducing gross loans receivable while the CSO guarantee liability is reported as a liability on our Condensed Consolidated Balance Sheets.

Gross CombinedConsolidated Loans Receivable


The following table summarizesreconciles Company Owned gross loans receivable, a GAAPGAAP-basis balance sheet measure, and reconciles it to grossGross combined loans receivable, a non-GAAP measure including(1). Gross combined loans receivables includes loans originated by third-party lenders through CSO programs, which are not included in ourthe unaudited Condensed Consolidated Financial Statements but from which we earn revenue and for which we provideby providing a guarantee to the lender. Management believes this analysis provides investors with important information needed to evaluate overall lending performance.unaffiliated lender (in thousands, unaudited):


As of
September 30, 2021June 30, 2021March 31, 2021December 31, 2020September 30, 2020
Company Owned gross loans receivable$882,356 $769,228 $731,014 $553,722 $497,442 
Gross loans receivable Guaranteed by the Company43,422 37,093 32,439 44,105 39,768 
Gross combined loans receivable (1)
$925,778 $806,321 $763,453 $597,827 $537,210 
(1) See "Non-GAAP Financial Measures" below for definition and additional information.

43

 Three Months Ended
(in millions)March 31, 2018December 31, 2017September 30, 2017June 30, 2017March 31, 2017
Company-owned gross loans receivable$389.8
$432.8
$393.4
$350.3
$304.8
Gross loans receivable guaranteed by the Company57.1
78.8
71.2
62.1
57.8
Gross combined loans receivable$446.9
$511.6
$464.6
$412.4
$362.6




Gross combined loans receivable by product areis presented below:
chart-13e0666d93a75a3285aa03.jpg

curo-20210930_g1.jpg

Gross combined loans receivable increased $84.3$388.6 million, or 23.2%72.3%, to $446.9$925.8 million as of September 30, 2021, from $537.2 million as of September 30, 2020. The increase was driven by Canada Direct Lending growth of $98.7 million, or 33.8%, and Canada POS Lending gross loans receivables, as a result of our acquisition of Flexiti in March 2021, of $302.3 million. Excluding Canada POS Lending loan balances, gross combined loans receivable increased $86.2 million, or 16.0% year over year. U.S. gross combined loans receivable declined $12.5 million, or 5.1%, due to (i) COVID-19 Impacts, (ii) the runoff of California Installment and Virginia Revolving LOC loans as a result of regulatory impacts, and (iii) additional government stimulus in the first half of 2021. Excluding the California and Virginia runoff portfolios, U.S. gross combined loans receivable grew 14.9%.

Sequentially, gross combined loans receivable increased $119.5 million, or 14.8%, as consumer demand increased. Geographically, U.S. and Canada grew sequentially by 4.0% and 19.0%, respectively, primarily driven by Canada POS Lending growth of $80.9 million, or 36.5%, and Canada Direct Lending Revolving LOC growth of $28.8 million, or 8.5%. Gross combined loans receivable performance by product is described further in the following sections.

44


Consolidated Results of Operations

Condensed Consolidated Statements of Operations
(in thousands, unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
20212020Change $Change %20212020Change $Change %
Revenue$ 209,280 $ 182,003 $ 27,277 15.0 %$ 593,524 $ 645,318 ($ 51,794)(8.0)%
Provision for losses70,718 54,750 15,968 29.2 %152,028 218,979 (66,951)(30.6)%
Net revenue138,562 127,253 11,309 8.9 %441,496 426,339 15,157 3.6 %
Advertising9,697 14,425 (4,728)(32.8)%24,824 32,394 (7,570)(23.4)%
Non-advertising costs of providing services54,941 49,258 5,683 11.5 %156,085 154,177 1,908 1.2 %
Total cost of providing services64,638 63,683 955 1.5 %180,909 186,571 (5,662)(3.0)%
Gross margin73,924 63,570 10,354 16.3 %260,587 239,768 20,819 8.7 %
Operating expense (income)
Corporate, district and other expenses61,745 36,658 25,087 68.4 %170,206 116,246 53,960 46.4 %
Interest expense25,805 18,383 7,422 40.4 %68,784 54,018 14,766 27.3 %
Loss (income) from equity method investment1,582 (3,530)5,112 #(676)(2,653)1,977 (74.5)
Gain from equity method investment— — — #(135,387)— (135,387)#
Total operating expense89,132 51,511 37,621 73.0 %102,927 167,611 (64,684)(38.6)%
Other expense
Loss on extinguishment of debt40,206 — 40,206 #40,206 — 40,206 #
Total other expense40,206 — 40,206 #40,206 — 40,206 #
(Loss) income from continuing operations before income taxes(55,414)12,059 (67,473)#117,454 72,157 45,297 62.8 %
(Benefit) provision for income taxes(13,375)(822)(12,553)#29,241 2,183 27,058 #
Net (loss) income from continuing operations(42,039)12,881 (54,920)#88,213 69,974 18,239 26.1 %
Net income from discontinued operations, net of tax— — — #— 1,285 (1,285)#
Net (loss) income($ 42,039)$ 12,881 ($ 54,920)#$ 88,213 $ 71,259 $ 16,954 23.8 %
# - Variance greater than 100% or not meaningful

For the Three Months Ended September 30, 2021 and 2020

Revenue and Net Revenue
For a discussion of revenue, see "Consolidated Revenue by Product and Segment" above.

Provision for losses increased by $16.0 million, or 29.2%, for the three months ended March 31, 2018 compared to $362.6 million for the three months ended March 31, 2017 with solid growth in all categories of Company Owned loans. Gross combined loans receivable decreased sequentially from December 31, 2017 because of seasonality as the Company's customers use tax refunds to repay balances.



Results of Operations

  Three Months Ended
March 31,		 Change
(dollars in thousands, unaudited) 20182017 $%
Condensed Consolidated Statements of Income:      
Revenue $261,758
$224,580
 $37,178
16.6 %
Provision for losses 81,031
61,736
 19,295
31.3 %
Net revenue 180,727
162,844
 17,883
11.0 %
Advertising costs 9,756
7,688
 2,068
26.9 %
Non-advertising costs of providing services 61,726
60,251
 1,475
2.4 %
Total cost of providing services 71,482
67,939
 3,543
5.2 %
Gross Margin 109,245
94,905
 14,340
15.1 %
Operating expense     

Corporate, district and other 40,454
32,993
 7,461
22.6 %
Interest expense 22,349
23,366
 (1,017)(4.4)%
Loss on extinguishment of debt 11,683
12,458
 (775)(6.2)%
Total operating expense 74,486
68,817
 5,669
8.2 %
Net income before taxes 34,759
26,088
 8,671
33.2 %
Provision for income taxes 11,467
9,450
 2,017
21.3 %
Net income $23,292
$16,638
 $6,654
40.0 %

Revenue and Net Revenue

Revenue increased $37.2 million, or 16.6%, to $261.8 million for the three months ended March 31, 2018 from $224.6 million for the three months ended March 31, 2017. U.S. revenue increased 17.4% on volume growth, U.K. revenue increased by 25.6%, and revenue in Canada increased 11.3% where volume growth offset regulatory impacts on rates and product mix.

Provision for losses increased $19.3 million, or 31.3%, to $81.0 million for the three months ended March 31, 2018 from $61.7 million for the three months ended March 31, 2017. This is explained more fully in the segment analysis that follows.

Cost of Providing Services

The total cost of providing services increased $3.5 million, or 5.2%, to $71.5 million in the three months ended March 31, 2018, compared to $67.9 million in the three months ended March 31, 2017 primarily because of higher customer acquisition spend.

Operating Expenses

Corporate, district and other expense increased $7.5 million, or 22.6% primarily due to $4.1 additional compensation expense from increased marketing, collections and technology headcount and $1.7 million of additional share-based compensation expense.

Provision for Income Taxes

The effective tax rate for the three months ended March 31, 2018 was 33.0% compared to 36.2% for the three months ended March 31, 2017. As a result of the Tax Cuts and Jobs Act of 2017 ("2017 Tax Act"), the corporate income tax rate for U.S. decreased from 35% to 21%, effective in 2018. The provision for income tax as of March 31, 2018 includes an additional accrual of $1.2 million for adjustments to estimates of the tax on prior years' foreign repatriation and an estimated GILTI ("Global Intangible Low-Taxed Income") tax of $0.6 million. The $1.2 million additional provision on prior years' foreign repatriation was the result of additional interpretative guidance from the IRS issued during the first quarter of 2018 while the GILTI provision is a new, continuous requirement under the 2017 Tax Act. These items


increased the effective tax rate by 5.2%. Excluding the impact of these items, the effective rate for the three months ended March 31, 2018 was 27.8%.

Three Months Ended March 31, 2018 Compared with Three Months Ended March 31, 2017 - Segment Analysis

We report financial results for three reportable segments: the United States, Canada and the United Kingdom. Following are a recap of results of operations for the segment and period indicated:
U.S. Segment Results      
  Three Months Ended
March 31,		 Change
(dollars in thousands, unaudited) 20182017 $%
Revenue $204,593
$174,322
 $30,271
17.4 %
Provision for losses 64,333
49,194
 15,139
30.8 %
Net revenue 140,260
125,128
 15,132
12.1 %
Advertising costs 5,159
4,694
 465
9.9 %
Non-advertising costs of providing services 43,757
43,301
 456
1.1 %
   Total cost of providing services 48,916
47,995
 921
1.9 %
Gross margin 91,344
77,133
 14,211
18.4 %
Corporate, district and other 30,532
25,049
 5,483
21.9 %
Interest expense 22,297
23,345
 (1,048)(4.5)%
Loss on extinguishment of debt 11,683
12,458
 (775)(6.2)%
Total operating expense 64,512
60,852
 3,660
6.0 %
Segment operating income 26,832
16,281
 10,551
64.8 %
Interest expense 22,297
23,345
 (1,048)(4.5)%
Depreciation and amortization 3,407
3,360
 47
1.4 %
EBITDA 52,536
42,986
 9,550
22.2 %
Loss on extinguishment of debt 11,683
12,458
 (775)(6.2)%
Other adjustments (59)6
 (65)#
Share-based cash and non-cash compensation 1,842
126
 1,716
#
Transaction related costs —
2,254
 (2,254)#
Adjusted EBITDA $66,002
$57,830
 $8,172
14.1 %
# - Variance greater than 100% or not meaningful.      

First quarter U.S. revenues grew by $30.3 million or 17.4% to $204.6 million.

U.S revenue growth was driven by a $51.3 million, or 18.8%, increase in gross combined loans receivable to $323.8 million at March 31, 2018 compared to $272.5 million in the prior year period. We experienced volume growth primarily from Unsecured Installment receivables, which increased year-over-year $30.3 million, or 21.2%. Secured Installment receivables increased from the prior year period by $11.3 million or 15.9%, and Open-End receivables increased $8.9 million, or 34.8%September 30, 2021 compared to the prior yearprior-year period. Open-end growth was driven by year-over-year expansion in Kansas and Tennessee of 12.2% and 8.6%, respectively, and the 2017 launch of Open-End in Virginia.

The increase of $15.1 million or 30.8% in provision for loan losses was primarily driven by the increase in combined loans receivable as previously discussed.

U.S. cost of providing services remained consistent with the same period in the prior year. The total cost of providing services for the three months ended March 31, 2018 were $48.9 million, a slight increase of $0.9 million, or 1.9%, compared to $48.0 million for the three months ended March 31, 2017.

The $5.5 million increase of corporate, district and other operating expenses includes $3.0 million of additional compensation expense, primarily due to increased marketing, collections and technology headcount and $1.7 million of additional share-based compensation expense.


Canada Segment Results      
  Three Months Ended
March 31,		 Change
(dollars in thousands, unaudited) 20182017 $%
Revenue $46,250
$41,566
 $4,684
11.3 %
Provision for losses 12,550
10,228
 2,322
22.7 %
Net revenue 33,700
31,338
 2,362
7.5 %
Advertising costs 2,726
1,781
 945
53.1 %
Non-advertising costs of providing services 16,472
15,257
 1,215
8.0 %
   Total cost of providing services 19,198
17,038
 2,160
12.7 %
Gross margin 14,502
14,300
 202
1.4 %
Corporate, district and other 4,897
3,375
 1,522
45.1 %
Interest expense 57
29
 28
96.6 %
Total operating expense 4,954
3,404
 1,550
45.5 %
Segment operating income 9,548
10,896
 (1,348)(12.4)%
Interest expense 57
29
 28
96.6 %
Depreciation and amortization 1,128
1,119
 9
0.8 %
EBITDA 10,733
12,044
 (1,311)(10.9)%
Other adjustments 16
(314) 330
#
Adjusted EBITDA $10,749
$11,730
 $(981)(8.4)%
# - Variance greater than 100% or not meaningful.      

Revenue in Canada was impacted by the product transition in Alberta from Single-Pay to Unsecured Installment and Open-End loans and the impact of regulatory rate(i) changes in Ontarioloan balances and British Columbia. Canada revenue improved $4.7 million, or 11.3% to $46.3 million for the three months ended March 31, 2018 from $41.6 million in the prior year period. On a constant currency basis, revenue was up $2.6 million, or 6.3%.

Single-Pay revenue increased $0.1 million, or 0.3% to $34.3 million for the three months ended March 31, 2018 due to 17.9%(ii) higher origination volumesNCO and past-due rates as COVID-19 Impacts lessened compared to the same period in the prior year. Single-Pay ending receivablesRefer to "Loan Volume and Portfolio Performance Analysis" and "Segment Analysis" sections below for additional details.

Cost of Providing Services

Advertising costs decreased $4.7 million, or 32.8%. The prior-year period included costs for Verge Installment loans which have since been suspended, as described further in "Segment Analysis" below.

Non-advertising costs of providing services increased $5.7 million, or 13.1%11.5%, to $48.7 million from $43.1$54.9 million in the prior year period.three months ended September 30, 2021, compared to $49.3 million in the three months ended September 30, 2020. The increase was due to (i) higher collection and financial services fees, (ii) the timing and level of performance-based variable compensation and (iii) store closure and severance costs, as described above in "Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA." These increases were partially offset by cost savings from our store closures in the second and third quarters of 2021.


Canadian non-Single-Pay revenue grew $4.6
45


Corporate, District and Other Expenses

Corporate, district and other expenses were $61.7 million for the three months ended September 30, 2021, an increase of $25.1 million, or 61.9%68.4%, compared to the samethree months ended September 30, 2020. The year-over-year increase was primarily due to (i) $15.7 million of Flexiti operating expenses incurred in 2021, following our acquisition of that company during the first quarter a year ago on $22.0of 2021, (ii) the timing and extent of performance-based variable compensation, for which the underlying plans were cancelled in 2020 due to COVID-19 Impacts, and (iii) higher professional fees related to strategic initiatives. Refer to the "Segment Analysis" sections below for further details.

Interest Expense

Interest expense for the three months ended September 30, 2021 increased $7.4 million, or 68.8% growth40.4%, primarily related to interest on debt acquired with the acquisition of Flexiti and higher year-over-year borrowings on our Non-Recourse U.S. SPV Facility. An additional $2.1 million of interest was incurred for the three months ended September 30, 2021, which represents interest on the 8.25% Senior Secured Notes for the period between July 30, 2021 and August 12, 2021. This is the period during which the 8.25% Senior Secured Notes and 7.50% Senior Secured Notes were outstanding.

Equity Method Investment

Refer to the "Katapult Update for the Three and Nine Months Ended September 30, 2021 and 2020" below for details.

Loss on Extinguishment of Debt

Loss on extinguishment of debt for the three months ended September 30, 2021 was due to the early redemption of the 8.25% Senior Secured Notes.

Provision for Income Taxes

The effective income tax rate for the three months ended September 30, 2021 was 24.1%. The effective income tax rate was lower than the blended federal and state/provincial statutory rate of approximately 26%, primarily as a result of proportionally more losses in lower-tax rate jurisdictions, driven by the loss on extinguishment of debt of $40.2 million. In addition, we recorded an income tax benefit of $0.9 million from the recognition of a research and development tax credit. This benefit was offset by a nondeductible expense item related to the change in fair value of contingent consideration. The effective income tax rate of adjusted tax expense included in Adjusted Net Income for the three months ended September 30, 2021 was 24.0%.

For the Nine Months Ended September 30, 2021 and 2020

Revenue and Net Revenue

For a discussion of revenue, see "Consolidated Revenue by Product and Segment" above.

Provision for losses decreased by $67.0 million, or 30.6%, for the nine months ended September 30, 2021 compared to the prior year. The decrease in provision for loan balances.losses was primarily a result of (i) favorable adjustments to allowance coverage from continued improved credit quality, and (ii) sustained NCO rates. Refer to "Loan Volume and Portfolio Performance Analysis" and "Segment Analysis" sections below for additional details.


Cost of Providing Services

Advertising costs decreased $7.6 million, or 23.4%, year over year, due to (i) the runoff of Verge Installment products and (ii) COVID-19 Impacts as the full effect of COVID-19 did not impact our advertising expenses until the second quarter of 2020.

Non-advertising costs of providing services decreased $1.9 million, or 1.2%, to $156.1 million in the nine months ended September 30, 2021, compared to $154.2 million in the nine months ended September 30, 2020. The decrease was primarily driven by (i) lower collection costs resulting from stimulus-related pay-downs and (ii) lower variable costs as a result of lower demand in the U.S., partially offset by (i) store closure costs, as described above, and (ii) the timing and level of performance-based variable compensation.

46


Corporate, District and Other Expenses

Corporate, district and other expenses were $170.2 million for the nine months ended September 30, 2021, an increase of $54.0 million, or 46.4%, compared to the nine months ended September 30, 2020. The year-over-year increase was primarily due to (i) $28.2 million of Flexiti operating expense during the nine months ended September 30, 2021, (ii) $6.5 million of transaction costs related to the merger of Katapult and FinServ and the acquisition of Flexiti as described above in "Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA," (iii) $5.7 million of costs related to our store closures and (iv) the timing and extent of performance-based variable compensation. Refer to the "Segment Analysis" sections below for further details.

Interest Expense

Interest expense for the nine months ended September 30, 2021 increased $14.8 million, or 27.3%, primarily related to interest on debt acquired as part of the acquisition of Flexiti and higher year-over-year borrowings on our Non-Recourse U.S. SPV Facility. An additional $2.1 million of interest was incurred for the nine months ended September 30, 2021, which represents interest on the 8.25% Senior Secured Notes for the period between July 30, 2021 and August 12, 2021. This is the period during which the 8.25% Senior Secured Notes and 7.50% Senior Secured Notes were outstanding.

Equity Method Investment

Refer to the "Katapult Update for the Three and Nine Months Ended September 30, 2021 and 2020" below for details.

Loss on Extinguishment of Debt

Loss on extinguishment of debt for the nine months ended September 30, 2021 was due to the redemption of the 8.25% Senior Secured Notes.

Provision for Income Taxes

The effective income tax rate for the nine months ended September 30, 2021 was 24.9%. The effective income tax rate was lower than the blended federal and state/provincial statutory rate of approximately 26%, primarily as a result of proportionally more net income in lower-tax rate jurisdictions, driven by the gain on the Katapult transaction of $146.9 million in the second quarter of 2021 and the loss on extinguishment of debt of $40.2 million in the third quarter of 2021.

Additionally, the effective tax rate also includes the release of a valuation allowance of $0.4 million due to our share of Katapult's income, tax benefits related to share-based compensation of $0.2 million, $1.3 million tax expense related to the non-deductible transaction costs and the change in fair value of contingent consideration, $0.3 million tax expense of additional Texas accrual for 2020 due to the settlement of 2013 to 2019 Texas returns, and a tax benefit of $0.9 million for the recognition of research and development tax credit.

The effective income tax rate of adjusted tax expense included in Adjusted Net Income for the nine months ended September 30, 2021 was 23.1%.

Katapult Update for the Three and Nine Months Ended September 30, 2021 and 2020

We account for our investment in Katapult using the equity method of accounting. The investment is included in "Investments in Katapult" on the unaudited Condensed Consolidated Balance Sheet. Our share of Katapult's loss was $1.6 million and of its earnings $0.7 million for the three months and nine months ended September 30, 2021, respectively. We recognize our share of Katapult’s earnings or loss on a one-quarter lag.

The Katapult and FinServ merger closed in June 2021. As part of the merger, we received cash consideration of $146.9 million and retained ownership through shares after the merger. As of September 30, 2021, our total cash investment in Katapult is $27.5 million. As of September 30, 2021, we maintain a 19.3% fully diluted ownership in the newly formed public company. Refer to Note 8, Fair Value Measurements, for additional details.

Segment Analysis

Beginning in the first quarter of 2021, when we acquired Flexiti, we report financial results for three reportable segments: U.S., Canada Direct Lending and Canada POS Lending. Following is a summary of portfolio performance and results of operations for the segment and period indicated (all periods unaudited except for Q4 2020).

47


U.S. Portfolio Performance
(in thousands, except percentages)Q3 2021Q2 2021Q1 2021Q4 2020Q3 2020
Gross combined loans receivable (1)
Revolving LOC$ 51,196$ 47,277$ 43,387$ 55,561$ 56,727
Installment loans - Company Owned137,987139,234142,396167,890148,569
Total U.S. Company Owned gross loans receivable189,183186,511185,783223,451205,296
Installment loans - Guaranteed by the Company (2)
43,42237,09332,43944,10539,768
Total U.S. gross combined loans receivable (1)
$ 232,605$ 223,604$ 218,222$ 267,556$ 245,064
Lending Revenue:
Revolving LOC$ 27,377$ 24,091$ 26,923$ 31,111$ 30,431
Installment loans - Company Owned57,65955,91864,51668,92762,215
Installment loans - Guaranteed by the Company (2)
43,37734,90841,42542,97236,731
Total U.S. lending revenue$ 128,413$ 114,917$ 132,864$ 143,010$ 129,377
Lending Provision:
Revolving LOC$ 8,140$ 6,621$ 5,039$ 11,583$ 11,904
Installment loans - Company Owned16,79214,04811,15924,62916,259
Installment loans - Guaranteed by the Company (2)
23,14612,5839,64822,62114,936
Total U.S. lending provision$ 48,078$ 33,252$ 25,846$ 58,833$ 43,099
Lending Net Revenue
Revolving LOC$ 19,237$ 17,470$ 21,884$ 19,528$ 18,527
Installment loans - Company Owned40,86741,87053,35744,29845,956
Installment loans - Guaranteed by the Company (2)
20,23122,32531,77720,35121,795
Total U.S. lending net revenue$ 80,335$ 81,665$ 107,018$ 84,177$ 86,278
NCOs
Revolving LOC$ 8,329$ 7,271$ 9,904$ 12,500$ 10,595
Installment loans - Company Owned19,54818,61717,31319,62016,758
Installment loans - Guaranteed by the Company (2)
21,40412,04412,15021,59013,902
Total U.S. NCOs$ 49,281$ 37,932$ 39,367$ 53,710$ 41,255
NCO rate (3)
Revolving LOC16.9%16.0%20.0%22.3%19.3%
Installment loans - Company Owned14.1%13.2%11.2%12.4%11.4%
Total U.S. Company Owned NCO rate14.8%13.9%13.3%15.0%13.5%
Installment loans - Guaranteed by the Company (2)
53.2%34.6%31.7%51.5%37.6%
Total U.S. NCO rate21.6%17.2%16.2%21.0%17.2%
ALL and CSO Liability for Losses (4)
Revolving LOC$ 13,480$ 13,669$ 14,319$ 19,185$ 20,101
Installment loans - Company Owned18,49121,24625,81531,97126,961
Installment loans - Guaranteed by the Company (2)
7,0075,2654,7277,2286,198
48


(in thousands, except percentages)Q3 2021Q2 2021Q1 2021Q4 2020Q3 2020
Total U.S. ALL and CSO Liability for Losses$ 38,978$ 40,180$ 44,861$ 58,384$ 53,260
ALL and CSO Liability for Losses rate (5)
Revolving LOC26.3%28.9%33.0%34.5%35.4%
Installment loans - Company Owned13.4%15.3%18.1%19.0%18.1%
Total U.S. Company Owned ALL rate16.9%18.7%21.6%22.9%22.9%
Installment loans - Guaranteed by the Company (2)
16.1%14.2%14.6%16.4%15.6%
Total ALL and CSO Liability for Losses rate16.8%18.0%20.6%21.8%21.7%
Past-due rate (5)
Revolving LOC30.5%26.6%26.3%30.7%27.9%
Installment loans - Company Owned20.1%18.7%18.0%19.0%16.6%
Total U.S. Company Owned past-due rate22.9%20.7%19.9%21.9%19.8%
Installment loans - Guaranteed by the Company (2)
19.8%17.4%12.8%14.1%15.4%
(1) Non-GAAP measure. For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."
(2) Includes loans originated by third-party lenders through CSO programs. Installment gross loans receivable Guaranteed by the Company are not included in the Condensed Consolidated Financial Statements.
(3) We calculate NCO rate as total NCOs divided by Average gross loans receivables.
(4) We report ALL as a contra-asset reducing gross loans receivable and the CSO Liability for Losses as a liability on the Condensed Consolidated Balance Sheets.
(5) We calculate (i) ALL and CSO Liability for losses rate and (ii) past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.

U.S. Net Revenue

U.S. revenues decreased by $1.2 million, or 0.9%, to $131.7 million, compared to the prior-year period for the three months ended September 30, 2021, primarily as a result of the COVID-19 Impacts on gross combined loans receivable and the runoff of California Installment and Virginia Revolving LOC loans due to regulatory changes. See the loan performancediscussions below for further details. Excluding the impacted California and Virginia loan portfolios, U.S. revenues increased $14.2 million, or 12.9%.

The provision for losses increased $2.3$4.9 million, or 22.7%11.4%, year over year, primarily as a result of relative sequential change in loan balances and higher NCO and past-due rates as COVID-19 Impacts lessen compared to $12.6 millionthe same period in the prior year. U.S. past-due rates, including loans Guaranteed by the Company, increased by 325 bps, or 17.2%, year over year, and 215 bps, or 10.6%, sequentially. For the three months ended March 31, 2018September 30, 2021, U.S. NCO rate increased 440 bps, or 25.4%, year over year, and increased 440 bps, or 25.8%, sequentially.

U.S. Revolving LOC loan performance

U.S. Revolving LOC loan balances as of September 30, 2021 decreased $5.5 million, or 9.8%, compared to the prior year, resulting in a related revenue decrease of $3.1 million, or 10.0%, primarily due to the runoff of Virginia Revolving LOC loans. Excluding the impacted Virginia loans, U.S. Revolving LOC gross loans receivable increased $6.1 million, or 14.5%, year over year, and related revenue increased $3.6 million, or 16.2%. Sequentially, U.S. Revolving LOC loan balances increased $3.9 million, or 8.3%. The Revolving LOC allowance coverage decreased year over year from $10.235.4% to 26.3% for the three months ended September 30, 2021. The decrease was due to a decline in TDR loans as a percentage of total gross loans receivable and sustained favorable NCO trends during the first nine months of 2021. For the three months ended September 30, 2021, NCO rates improved from 19.3% to 16.9% year over year.

U.S. Installment loan performance - Company Owned

U.S. Installment loan balances as of September 30, 2021 decreased $10.6 million, or 7.1%, and revenue decreased $4.6 million, or 7.3%, compared to the prior year, primarily due to COVID-19 Impacts and regulatory changes in California effective January 1, 2020. Excluding the run-off of California loans, U.S. Installment loans increased $18.0 million, or 17.2%, year over year, and related revenue increased $4.2 million, or 8.7%. The Installment loans allowance coverage decreased from 18.1% in the prior year period,to 13.4% as of September 30, 2021, largely due to sustained favorable trends in NCOs. Sequentially, allowance coverage decreased from 15.3% to 13.4%.

49


We launched Verge installment loans originated by Stride Bank in the fourth quarter of 2019 and executed pilot programs in several states. After testing various offers, rates, terms and approval criteria, Stride informed us in the first quarter of 2021 that it planned to focus on near-prime loans as they represented a larger addressable market and offered greater opportunity to scale. As a result, Stride discontinued new Verge Credit loans in April 2021. Verge loan balances totaled $11.5 million as of September 30, 2021. We expect an orderly run-off of these balances over approximately the next 18 months.

U.S. Installment loan performance - Guaranteed by the Company

U.S. Installment loans Guaranteed by the Company increased $3.7 million, or 9.2%, year over year and increased $6.3 million, or 17.1%, sequentially. The CSO liability for losses rate increased from 15.6% to 16.1% year over year due to continued higher NCO and past-due rates as government stimulus payments runoff. Sequentially, the CSO liability for losses coverage increased from 14.2% to 16.1% for the three months ended September 30, 2021. For the three months ended September 30, 2021, the NCO rate for U.S. Installment loans Guaranteed by the Company increased 1,550 bps, or 41.2%, year over year, and increased 1,850 bps, or 53.5%, sequentially. The increase in NCO rates for both periods is primarily due to relative loan volumesgrowth, and within this growth a shift to more new borrowers versus seasoned borrowers and more online originations versus store-based, both of which carry higher risk in their early stages.

Following is a summary of results of operations for the mix shift from Single-Pay loans to Unsecured InstallmentU.S. segment for the periods indicated.

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands, unaudited)20212020Change $Change %20212020Change $Change %
Revenue$ 131,674 $ 132,848 ($ 1,174)(0.9)%$ 386,960 $ 491,936 ($ 104,976)(21.3)%
Provision for losses48,430 43,485 4,945 11.4 %108,108 171,056 (62,948)(36.8)%
Net revenue83,244 89,363 (6,119)(6.8)%278,852 320,880 (42,028)(13.1)%
Advertising8,297 13,405 (5,108)(38.1)%21,527 29,619 (8,092)(27.3)%
Non-advertising costs of providing services35,719 32,574 3,145 9.7 %99,711 103,477 (3,766)(3.6)%
   Total cost of providing services44,016 45,979 (1,963)(4.3)%121,238 133,096 (11,858)(8.9)%
Gross margin39,228 43,384 (4,156)(9.6)%157,614 187,784 (30,170)(16.1)%
Corporate, district and other expenses40,058 31,503 8,555 27.2 %124,385 98,784 25,601 25.9 %
Interest expense19,481 16,107 3,374 20.9 %53,177 47,066 6,111 13.0 %
Loss (income) from equity method investment1,582 (3,530)5,112 #(676)(2,653)1,977 (74.5)%
Gain from equity method investment— — — #(135,387)— (135,387)#
Total operating expense61,121 44,080 17,041 38.7 %41,499 143,197 (101,698)(71.0)%
Loss on extinguishment of debt40,206 — 40,206 #40,206 — 40,206 #
Total other expense40,206 — 40,206 #40,206 — 40,206 #
Segment operating (loss) income(62,099)(696)(61,403)#75,909 44,587 31,322 70.2 %
Interest expense19,481 16,107 3,374 20.9 %53,177 47,066 6,111 13.0 %
Depreciation and amortization3,020 3,228 (208)(6.4)%9,154 9,914 (760)(7.7)%
EBITDA (1)
(39,598)18,639 (58,237)#138,240 101,567 36,673 36.1 %
Restructuring costs5,651 — 5,651 11,414 — 11,414 
Legal and other costs370 1,029 (659)370 2,779 (2,409)
Loss (income) from equity method investment1,582 (3,530)5,112 (676)(2,653)1,977 
Gain from equity method investment— — — (135,387)— (135,387)
Transaction costs141 386 (245)6,482 723 5,759 
Loss on extinguishment of debt40,206 —��40,206 40,206 — 40,206 
Share-based compensation3,998 3,392 606 10,148 9,896 252 
Other adjustments(195)(105)(90)(600)59 (659)
Adjusted EBITDA (1)
$ 12,155 $ 19,811 ($ 7,656)(38.6)%$ 70,197 $ 112,371 ($ 42,174)(37.5)%
# - Variance greater than 100% or not meaningful.
(1) These are non-GAAP metrics. For a description of each non-GAAP addback, see the applicable reconciliations contained under "Consolidated Results of Operations." For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."

50


U.S. Segment Results - For the Three Months Ended September 30, 2021 and Open-End loans. On2020

For a constant currency basis,discussion of revenue, provision for losses increased $1.8and related gross combined loans receivables for the three months ended September 30, 2021 and 2020, see "U.S. Portfolio Performance," above.

Advertising costs for the three months ended September 30, 2021 were $8.3 million, a decrease of $5.1 million, or 17.2%.

The cost of providing services in Canada increased $2.2 million, or 12.7%38.1%, compared to $19.2$13.4 million for the three months ended March 31, 2018, compared to $17.0 million in the prior year period. The increase wasSeptember 30, 2020, primarily due primarily to $0.9 million, or 53.1%, higher advertising costs compared to the prior year period and an increase in occupancy expense from higher store counts. We have opened five LendDirect stores since the first quarterrunoff of 2017. On a constant currency basis, costVerge Installment loans, as previously described.

Non-advertising costs of providing services increased $1.3 million, or 7.6%.

Operating expenses increased $1.6 million, or 45.5%, to $5.0 million infor the three months ended March 31, 2018, from $3.4September 30, 2021 were $35.7 million, in the prior year period, due to increased collections and customer support payroll expenses from seasonality, increased volumes, expansionan increase of the LendDirect business, and product shifts from Single-Pay loans to Unsecured Installment and Open-End loans. On a constant currency basis, operating expenses increased $1.3$3.1 million, or 39.2%.


U.K. Segment Results      
  Three Months Ended
March 31,		 Change
(dollars in thousands, unaudited) 20182017 $%
Revenue $10,915
$8,692
 $2,223
25.6 %
Provision for losses 4,148
2,314
 1,834
79.3 %
Net revenue 6,767
6,378
 389
6.1 %
Advertising costs 1,871
1,213
 658
54.2 %
Non-advertising costs of providing services 1,497
1,693
 (196)(11.6)%
   Total cost of providing services 3,368
2,906
 462
15.9 %
Gross margin 3,399
3,472
 (73)(2.1)%
Corporate, district and other 5,025
4,569
 456
10.0 %
Interest income (5)(8) 3
(37.5)%
Total operating expense 5,020
4,561
 459
10.1 %
Segment operating loss (1,621)(1,089) (532)48.9 %
Interest income (5)(8) 3
(37.5)%
Depreciation and amortization 126
175
 (49)(28.0)%
EBITDA (1,500)(922) (578)62.7 %
Other adjustments (36)(6) (30)#
Adjusted EBITDA $(1,536)$(928) $(608)(65.5)%
# - Variance greater than 100% not meaningful.      

U.K. revenue improved $2.2 million, or 25.6%9.7%, compared to $10.9$32.6 million for the three months ended March 31, 2018 from $8.7 million in the prior year period. On a constant currency basis, revenue was up $1.0 million, or 11.8%. Provision for losses increased $1.8 million, and increased $1.4 million, or 59.6%, on a constant currency basis,September 30, 2020, primarily due to growth in Installment Loan receivables.severance costs related to store closures, as further described below.

The cost of providing services in the U.K. increased $0.5 million or 15.9% during the three months ended March 31, 2018 as compared to prior year period due to additional customer acquisition spend. On a constant currency basis the cost of providing services increased $0.1 million, or 3.2%.


Corporate, district and other expenses increased $0.5 million, or 10.1%, to $5.0were $40.1 million for the three months ended March 31, 2018September 30, 2021, an increase of $8.6 million, or 27.2%, compared to the prior-year period. The year-over-year increase was primarily due to (i) personnel investments in our technology and operation teams, (ii) higher discretionary variable compensation, and (iii) increased professional fees related to strategic initiatives.

As previously announced, we closed 49 U.S. stores, 30 of which occurred in the third quarter, in response to evolving customer channel preferences that were accelerated by the impacts of COVID-19. The store closures represented nearly 25% of our U.S. stores and, other than Illinois, which were closed earlier in the year due to regulatory changes, reflect strategic consolidation of locations in dense local markets. The impacted locations generated only 8% of our U.S. store revenue in 2020. As our omni-channel platform allows customers to transition seamlessly online, to an adjacent store or to contact centers, this consolidation reduces annual operating costs by approximately $20 million while maximizing the likelihood of retaining a large percentage of customers that had utilized the impacted stores.

As a result of the store closures, we incurred $5.7 million of closure-related charges during the three months ended September 30, 2021 and $11.4 million during the nine months ended September 30, 2021. These costs consisted of (i) severance and employee costs, (ii) lease termination costs and (iii) net accelerated depreciation and write-off of ROU assets and liabilities. As of September 30, 2021, we operated 160 stores in the U.S. and 201 stores in Canada.

U.S. interest expense for the three months ended September 30, 2021 increased $3.4 million, or 20.9%, primarily related to higher year-over-year borrowings on our Non-Recourse U.S. SPV Facility. An additional $2.1 million of interest was incurred for the nine months ended September 30, 2021, which represents interest on the 8.25% Senior Secured Notes for the period between July 30, 2021 and August 12, 2021. This is the period during which the 8.25% Senior Secured Notes and 7.50% Senior Secured Notes were outstanding.

As previously described, we recognize our share of Katapult’s income or loss on a one-quarter lag. We recorded a loss of $1.6 million for the three months ended September 30, 2021.

Loss on extinguishment of debt of $40.2 million for the three months ended September 30, 2021 was due to the redemption of the 8.25% Senior Secured Notes due 2025.

U.S. Segment Results - For the Nine Months Ended September 30, 2021 and 2020

U.S. revenues decreased $105.0 million, or 21.3%, compared to the prior-year period for the nine months ended September 30, 2021 as a result of decreases in combined gross loans receivable from COVID-19 Impacts and the continued run-off of California Installment and Virginia Revolving LOC loans due to regulatory changes. Excluding the impact of California Installment and Virginia Revolving LOC loan runoff, U.S. revenues decreased $46.9 million, or 11.5%.

The provision for losses decreased $62.9 million, or 36.8%, for the nine months ended September 30, 2021, compared to the prior-year period, primarily as a result of (i) favorable adjustments to allowance coverage from continued improved credit quality, and (ii) sustained lower NCO rates.

Advertising costs were $21.5 million for the nine months ended September 30, 2021, a decrease of $8.1 million, or 27.3%, compared to the prior-year period due to (i) the runoff of Verge Installment products and (ii) COVID-19 Impacts as the full effect of COVID-19 did not impact our advertising spend until the second quarter of 2020.

Non-advertising costs of providing services for the nine months ended September 30, 2021 were $99.7 million, a decrease of $3.8 million, or 3.6%, compared to $103.5 million for the nine months ended September 30, 2020. The decrease was primarily driven by lower collection costs resulting from stimulus-related pay-downs and lower variable costs as a result of store closures. The decreases were partially offset by higher performance-based variable compensation and certain store closure costs as previously described.
51



Corporate, district and other expenses were $124.4 million for the nine months ended September 30, 2021, an increase of $25.6 million, or 25.9%, compared to the nine months ended September 30, 2020. The increase was primarily due to (i) the timing and level of performance-based variable compensation, (ii) additional costs related to our technology and operations personnel and (iii) certain costs related to our store closures as discussed above.

U.S. interest expense for the nine months ended September 30, 2021 increased $6.1 million, or 13.0%, primarily related to higher year-over-year borrowings on our Non-Recourse U.S. SPV Facility. An additional $2.1 million of interest was incurred for the nine months ended September 30, 2021, which represents interest on the 8.25% Senior Secured Notes for the period between July 30, 2021 and August 12, 2021. This is the period during which the 8.25% Senior Secured Notes and 7.50% Senior Secured Notes were outstanding.

As previously described, we recognize our share of Katapult’s income or loss on a one-quarter lag and recorded income of $0.7 million for the nine months ended September 30, 2021. As a result of the merger between Katapult and FinServ, which closed during the second quarter of 2021, we recorded an additional gain of $135.4 million during the nine months ended September 30, 2021, which represents cash we received, net of the basis of our investment in Katapult.

Loss on extinguishment of debt of $40.2 million for the nine months ended September 30, 2021 was due to the redemption of the 8.25% Senior Secured Notes due 2025.

Canada Direct Lending and Canada POS Lending Portfolio Performance

(in thousands, except percentages)Q3 2021Q2 2021Q1 2021Q4 2020Q3 2020
Gross loans receivable
Canada Direct Lending Revolving LOC$ 366,509$ 337,700$ 319,307$ 303,323$ 265,507
Canada Direct Lending Installment loans24,31523,56424,38526,94826,639
Total Canada Direct Lending gross loans receivable$ 390,824$ 361,264$ 343,692$ 330,271$ 292,146
Total Canada POS Lending gross loans receivable$ 302,349$ 221,453$ 201,539$ —$ —
Lending Revenue:
Canada Direct Lending Revolving LOC$ 40,239$ 37,450$ 34,368$ 31,962$ 28,280
Canada Direct Lending Installment loans11,33110,54110,44711,10610,238
Total Canada Direct Lending - lending revenue$ 51,570$ 47,991$ 44,815$ 43,068$ 38,518
Canada POS Lending - lending revenue$ 10,646$ 6,495$ 1,383$ —$ —
Lending Provision:
Canada Direct Lending Revolving LOC$ 11,375$ 7,066$ 7,909$ 8,679$ 9,751
Canada Direct Lending Installment loans2,5121,4381,2341,9721,426
Total Canada Direct Lending - lending provision$ 13,887$ 8,504$ 9,143$ 10,651$ 11,177
Canada POS Lending - lending provision$ 8,285$ 2,986$ 855$ —$ —
Lending Net Revenue
Canada Direct Lending Revolving LOC$ 28,864$ 30,384$ 26,459$ 23,283$ 18,529
Canada Direct Lending Installment loans8,8199,1039,2139,1348,812
Total Canada Direct Lending - lending net revenue$ 37,683$ 39,487$ 35,672$ 32,417$ 27,341
Canada POS Lending - lending net revenue$ 2,361$ 3,509$ 528$ —$ —
NCOs
Canada Direct Lending Revolving LOC$ 9,887$ 10,838$ 11,097$ 8,907$ 7,568
Canada Direct Lending Installment loans2,4441,5131,6692,0601,289
52


(in thousands, except percentages)Q3 2021Q2 2021Q1 2021Q4 2020Q3 2020
Total Canada Direct Lending NCOs$ 12,331$ 12,351$ 12,766$ 10,967$ 8,857
Canada POS Lending NCOs (1)
$ 1,827$ 1,509$ 213$ —$ —
NCO rate (2)
Canada Direct Lending Revolving LOC2.8%3.3%3.6%3.1%3.0%
Canada Direct Lending Installment loans10.2%6.3%6.5%7.7%5.0%
Total Canada Direct Lending NCO rate3.3%3.5%3.8%3.5%3.2%
Canada POS Lending NCO rate0.7%0.7 %
NM (3)
—%—%
ALL (4)
Canada Direct Lending Revolving LOC$ 27,429$ 26,602$ 29,916$ 32,773$ 31,316
Canada Direct Lending Installment loans1,7901,7671,8192,2332,204
Total Canada Direct Lending ALL$ 29,219$ 28,369$ 31,735$ 35,006$ 33,520
Canada POS Lending ALL (5)
$ 11,353$ 4,577$ 519$ —$ —
ALL rate (6)
Canada Direct Lending Revolving LOC7.5 %7.9 %9.4 %10.8 %11.8 %
Canada Direct Lending Installment loans7.4 %7.5 %7.5 %8.3 %8.3 %
Total Canada Direct Lending ALL rate7.5 %7.9 %9.2 %10.6 %11.5 %
Canada POS Lending ALL rate3.8 %2.1 %0.3 %— %— %
Past-due rate (6)
Canada Direct Lending Revolving LOC6.8 %5.8 %6.4 %6.8 %6.0 %
Canada Direct Lending Installment loans2.0 %2.3 %2.1 %2.1 %2.9 %
Total Canada Direct Lending past-due rate6.5 %5.5 %6.1 %6.4 %5.7 %
Canada POS Lending past-due rate4.8 %5.4 %5.7 %— %— %
(1) For the second and third quarters of 2021, NCOs presented above include $2.4 million and $0.6 million, respectively, of NCO's related to the fair value discount, which are excluded from provision.
(2) We calculate NCO rate as total NCOs divided by Average gross loans receivables.
(3) Not material or not meaningful.
(4) We report ALL as a contra-asset reducing gross loans receivable on the Condensed Consolidated Balance Sheets.
(5) Loans originated pre-acquisition have been adjusted to fair value at the acquisition date and included estimates of future losses. The ALL represents estimated incurred losses for loans originated after acquisition plus incurred losses for acquired loans in excess of the remaining fair value discount.
(6) We calculate ALL rate and past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.

Canada Direct Lending Net Revenue

Canada Direct Lending revenue increased year over year by $17.0 million, or 34.7%, ($13.4 million, or 27.3%, on a constant currency basis), for the three months ended September 30, 2021, due to the growth of Revolving LOC loans in Canada. Sequentially, Canada Direct Lending revenue increased $4.3 million, or 7.0%.

The provision for losses increased $2.7 million, or 24.3%, ($2.0 million, or 17.4%, on a constant currency basis), to $14.0 million for the three months ended September 30, 2021, compared to $11.3 million in the prior-year period. The increase in provision for loan losses was primarily due to higher past-due rates, which increased from 5.7% to 6.5% year over year. NCO rates remained
53


consistent year over year and improved from 3.5% to 3.3% sequentially. As of September 30, 2021, allowance coverage decreased sequentially by approximately 40 bps, or 4.8%.

Canada Direct Lending Revolving LOC loan performance

Canada Direct Lending Revolving LOC gross loans receivable increased $101.0 million, or 38.0%, ($83.3 million, or 31.4%, on a constant currency basis) year over year and $28.8 million, or 8.5% ($37.8 million, or 11.2%, on a constant currency basis) sequentially. Revolving LOC revenue increased $12.0 million, or 42.3%, year over year and $2.8 million, or 7.4%, sequentially ($9.7 million, or 34.5%, and $3.8 million, or 10.2%, respectively, on a constant currency basis). The allowance coverage decreased year over year from 11.8% to 7.5% as of September 30, 2021 primarily due to favorable trends in NCOs and lower TDRs as a percentage of total gross loans receivable. The quarterly NCO rate improved by 25 bps, or 7.7%, year-over-year and 50 bps, or 14.9%, sequentially.

Canada Direct Lending Installment loan performance

Canada Direct Lending Installment revenue increased $1.1 million, or 10.7%, ($0.5 million, or 4.6%, on a constant currency basis) year over year. Installment gross loans receivable decreased $2.3 million, or 8.7% ($3.5 million, or 13.1%, on a constant currency basis) year over year. The year-over-year decrease in Installment loans was due to a continued shift to Revolving LOC loans, as well as COVID-19 related constraints on demand, particularly as related to store-originated Installment loans. The Installment allowance coverage decreased year over year from 8.3% to 7.4% as a result of lower TDRs as a percentage of total gross loans receivable and favorable trends in past-due balances. The year-over-year past-due rate for Installment loans improved by 90 bps, or 31.1%. Sequentially, Installment gross loans receivable increased $0.8 million, or 3.2%, ($1.3 million, or 5.7%, on a constant currency basis) and related revenue increased $0.8 million, or 7.5% ($1.1 million, or 10.2%, on a constant currency basis).

Canada POS Lending Revolving LOC loan performance

Canada POS Lending Revolving LOC gross loans receivable as of September 30, 2021 was $302.3 million, including a discount of $5.6 million related to purchase accounting adjustments ($307.9 million prior to purchase accounting adjustments). For the three months ended September 30, 2021, Canada POS Lending revenue was $11.4 million, net of a $1.8 million reduction from acquisition-related adjustments for the period. For a full discussion of the purchase accounting and acquisition-related adjustments, refer to "Consolidated Revenue by Product and Segment" above. Revolving LOC gross loans receivable generally charge-off at 180 days past due. NCOs were $1.8 million for the three months ended September 30, 2021. The Canada POS Lending NCO and past-due rates for the quarter were 0.7% and 4.8%, respectively.

Originations for the three months ended September 30, 2021 were $199.8 million in C$, an increase of C$126.9 million, or 173.8%, from the prior-year period of C$73.0 million. Sequentially, Canada POS Revolving LOC gross loans receivable increased $80.9 million, or 36.5%.

54


Canada Direct Lending Results of Operations

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands, unaudited)20212020Change $Change %20212020Change $Change %
Revenue$ 66,190 $ 49,155 $ 17,035 34.7 %$ 186,510 $ 153,382 $ 33,128 21.6 %
Provision for losses14,003 11,265 2,738 24.3 %31,793 47,923 (16,130)(33.7)%
Net revenue52,187 37,890 14,297 37.7 %154,717 105,459 49,258 46.7 %
Advertising1,139 1,020 119 11.7 %2,821 2,775 46 1.7 %
Non-advertising costs of providing services18,860 16,684 2,176 13.0 %55,625 50,700 4,925 9.7 %
Total cost of providing services19,999 17,704 2,295 13.0 %58,446 53,475 4,971 9.3 %
Gross margin32,188 20,186 12,002 59.5 %96,271 51,984 44,287 85.2 %
Corporate, district and other expenses6,004 5,155 849 16.5 %17,644 17,462 182 1.0 %
Interest expense2,440 2,276 164 7.2 %7,293 6,952 341 4.9 %
Total operating expense8,444 7,431 1,013 13.6 %24,937 24,414 523 2.1 %
Segment operating income23,744 12,755 10,989 86.2 %71,334 27,570 43,764 #
Interest expense2,440 2,276 164 7.2 %7,293 6,952 341 4.9 %
Depreciation and amortization1,124 1,130 (6)(0.5)%3,394 3,398 (4)(0.1)%
EBITDA (1)
27,308 16,161 11,147 69.0 %82,021 37,920 44,101 #
Canada GST adjustment— — — — 2,160 (2,160)
Other adjustments94 143 (49)242 580 (338)
Adjusted EBITDA (1)
$ 27,402 $ 16,304 $ 11,098 68.1 %$ 82,263 $ 40,660 $ 41,603 102.3 %
# - Variance greater than 100% or not meaningful.
(1) These are non-GAAP metrics. For a description of each non-GAAP addback, see the applicable reconciliations contained under "Results of Consolidated Operations." For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."

Canada Direct Lending Segment Results - For the Three Months Ended September 30, 2021 and 2020
For a discussion of revenue, provision for losses and related gross combined loans receivables for the three months ended September 30, 2021 and 2020, see "Canada Direct Lending and Canada POS Lending Portfolio Performance" above.
Canada Direct Lending cost of providing services were $20.0 million for the three months ended September 30, 2021, an increase of $2.3 million, or 13.0%, ($1.2 million, or 6.8%, on a constant currency basis), compared to the prior year, period. Onprimarily due to higher store operating costs, because the prior year was impacted by COVID-19 shutdowns.

Canada Direct Lending operating expenses increased to $8.4 million for the three months ended September 30, 2021 compared to $7.4 million for the three months ended September 30, 2020.

Canada Direct Lending Segment Results - For the Nine Months Ended September 30, 2021 and 2020

Canada Direct Lending revenue increased $33.1 million, or 21.6%, ($19.1 million, or 12.5%, on a constant currency basis, corporate, district and other expenses increased $0.1basis), to $186.5 million for the nine months ended September 30, 2021, from $153.4 million in the prior year, primarily due to higher consumer demand as COVID-19 Impacts lessened. Canada Direct Lending Revolving LOC gross loans receivable grew $101.0 million, or 2.0%38.0%, and is consistent with quarterly run ratesyear over year, contributing to related revenue growth of $29.0 million, or 34.9%, for the full year 2017nine months ended September 30, 2021 compared to the prior-year period.

The provision for losses decreased $16.1 million, or 33.7%, ($18.4 million, or 38.5% on a constant currency basis), to $31.8 million for the nine months ended September 30, 2021, compared to $47.9 million in the prior-year period. The decrease in provision for loan losses was the result of lower NCOs and represent normal baselinethe related impact of changes in allowance coverage due to an increase in credit quality for Revolving LOC loans. Refer to "Canada Direct Lending and Canada POS Lending Portfolio Performance" above for additional details on quarterly loss and allowance rates.

Canada Direct Lending cost of providing services for the nine months ended September 30, 2021 was $58.4 million, an increase of $5.0 million, or 9.3%, ($0.6 million, or 1.1%, on a constant currency basis), compared to $53.5 million for the nine months ended September 30, 2020, primarily related to volume-driven variable costs, such as financial services fees and higher store operating costs for the U.K.nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.


55


Canada Direct Lending operating expenses for the nine months ended September 30, 2021 were $24.9 million for the nine months ended September 30, 2021 compared to $24.4 million for the nine months ended September 30, 2020.

Canada POS Lending Results of Operations
Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands, unaudited)20212021
Revenue$ 11,416 $ 20,054 
Provision for losses8,285 12,127 
Net revenue3,131 7,927 
Advertising261 476 
Non-advertising costs of providing services362 749 
Total cost of providing services623 1,225 
Gross margin2,508 6,702 
Corporate, district and other expenses15,683 28,177 
Interest expense3,884 8,314 
Total operating expense19,567 36,491 
Segment operating loss(17,059)(29,789)
Interest expense3,884 8,314 
Depreciation and amortization3,141 7,137 
EBITDA (1)
(10,034)(14,338)
Acquisition-related adjustments4,292 9,787 
Change in fair value of contingent consideration3,825 3,825 
Other adjustments(17)(34)
Adjusted EBITDA (1)
($ 1,934)($ 760)
# - Variance greater than 100% or not meaningful.
(1) These are non-GAAP metrics. For a description of each non-GAAP addback, see the applicable reconciliations contained under "Consolidated Results of Operations." For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."

Canada POS Lending Segment Results - For the Three and Nine Months Ended September 30, 2021

For a discussion of revenue, provision for losses and related gross loans receivables, see the "Canada Direct Lending and Canada POS Lending Portfolio Performance," above for the three months ended September 30, 2021. Canada POS Lending segment revenue includes revenue from merchant discounts and ancillary products. MDR represents the discount merchant partners provide to help facilitate customer credit card purchases at merchant locations. The fee is recognized over the estimated average loan term of 12 months. Ancillary revenue includes administrative fees, annual fees, insurance product fees and other fees charged to customers.

For the nine months ended September 30, 2021, Canada POS Lending revenue was $20.1 million, and included a $5.8 million reduction as a result of acquisition-related adjustments. For a full discussion of acquisition-related adjustments, refer to "Consolidated Revenue by Product and Segment" earlier within this Form 10-Q.

Provision for losses for the nine months ended September 30, 2021 was $12.1 million. Refer to "Canada Direct Lending and Canada POS Lending Portfolio Performance," above for additional details on quarterly loss and allowance rates.

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Supplemental Non-GAAP Financial Information


Non-GAAP Financial Measures


In addition to the financial information prepared in conformity with U.S. GAAP, we provide certain “non-GAAP financial measures” as defined under SEC rules,measures,” including:

•Adjusted Net Income and Adjusted Earnings Per Share, or the Adjusted Earnings Measures (net income from continuing operations plus or minus gain (loss) on extinguishment of debt, restructuringcertain legal and other costs, income or loss from equity method investment, goodwill and intangible asset impairments, transaction-related costs, restructuring costs, loss on extinguishment of debt, adjustments related to acquisition accounting, share-based compensation, intangible asset amortization, certain tax adjustments and impacts from tax law changes and cumulative tax effect of applicable adjustments, on a total and per share basis);
•EBITDA (earnings before interest, income taxes, depreciation and amortization);
•Adjusted EBITDA (EBITDA plus or minus certain non-cash and other adjusting items);
•Adjusted effective income tax rate (effective tax rate plus or minus certain non-cash and other adjusting items); and
•Gross Combined Loans Receivable (includes loans originated by third-party lenders through CSO programs which are not included in our consolidated financial statements)the Consolidated Financial Statements).



We believe that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of ourthe Company's operations. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of ourthe business that, when viewed with itsthe Company's U.S. GAAP results, provide a more complete understanding of factors and trends affecting ourthe business.
We believe that investors regularly rely on non-GAAP financial measures, such as Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA, to assess operating performance and that such measures may highlight trends in ourthe business that may not otherwise be apparent when relying on financial measures calculated in accordance with U.S. GAAP. WeIn addition, we believe that the adjustments shown belowabove are useful to investors in order to allow them to compare our financial results during the periods shown without the effect of each of these income or expense items. In addition, we believe that Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of public companies in our industry, many of which present Adjusted Net Income, Adjusted Earnings per Share, EBITDA and/or Adjusted EBITDA when reporting their results.

In addition to reporting loans receivable information in accordance with U.S. GAAP, we provide Gross Combined Loans Receivable consisting of owned loans receivable plus loans originated by third-party lenders through the CSO programs, which we guarantee but do not include in the Condensed Consolidated Financial Statements. Management believes this analysis provides investors with important information needed to evaluate overall lending performance.

We provide non-GAAP financial information for informational purposes and to enhance understanding of ourthe U.S. GAAP consolidated financial statements.Consolidated Financial Statements. Adjusted Net Income, Adjusted Earnings per Share, EBITDA, Adjusted EBITDA and Gross Combined Loans Receivable should not be considered as alternatives to income from continuing operations, segment operating income, or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flows from operating activities or any other liquidity measure derived in accordance with U.S. GAAP. Rather, these measures should be considered in addition to results prepared in accordance with U.S. GAAP, but should not be considered a substitute for, or superior to, U.S. GAAP results. Readers should consider the information in addition to, but not instead of or superior to, ourthe financial statements prepared in accordance with U.S. GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

Description and Reconciliations of Non-GAAP Financial Measures

Adjusted Net Income, Adjusted Earnings Measures,per Share, EBITDA and Adjusted EBITDA Measures have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our income or cash flows as reported under U.S. GAAP. Some of these limitations are:

•they do not include our cash expenditures or future requirements for capital expenditures or contractual commitments;
•they do not include changes in, or cash requirements for, our working capital needs;
•they do not include the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
•depreciation and amortization are non-cash expense items reported in ourthe statements of cash flows; and
•other companies in our industry may calculate these measures differently, limiting their usefulness as comparative measures.

We evaluate our stores based oncalculate Adjusted Earnings per Share utilizing diluted shares outstanding at year-end. If the Company records a loss from continuing operations under U.S. GAAP, shares outstanding utilized to calculate Diluted Earnings per Share from continuing operations are equivalent to basic shares outstanding. Shares outstanding utilized to calculate Adjusted Earnings per Share from
57


continuing operations reflect the number of diluted shares the Company would have reported if reporting net income from continuing operations under U.S. GAAP.

As noted above, Gross Combined Loans Receivable includes loans originated by third-party lenders through CSO programs which are not included in the consolidated financial statements but from which we earn revenue per store, net charge-offs at each store and EBITDA per store, with consideration givenfor which we provide a guarantee to the length of time a store has been open and its geographic location. We monitor newer stores for their progresslender. Management believes this analysis provides investors with important information needed to profitability and their rate of revenue growth.evaluate overall lending performance.

We believe Adjusted Net Income, Adjusted Earnings Measures,per Share, EBITDA and Adjusted EBITDA are used by investors to analyze operating performance and to evaluate our ability to incur and service debt and ourthe capacity for making capital expenditures. Adjusted EBITDA is also useful to investors to help assess our estimated enterprise value. The computation of Adjusted EBITDA as presented belowin this Form 10-Q may differ from the computation of similarly-titled measures provided by other companies.



58



Reconciliation of Net (Loss) Income from Continuing Operations and Diluted Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings per Share, non-GAAP measures (in thousands, except per share data, unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
20212020Change $Change %20212020Change $Change %
Net (loss) income from continuing operations($ 42,039)$ 12,881 ($ 54,920)#$ 88,213 $ 69,974 $ 18,239 26.1 %
Adjustments:
Restructuring costs (1)
5,651 — 11,414 — 
Legal and other costs (2)
370 1,029 370 2,779 
Loss (income) from equity method investment (3)
1,582 (3,530)(676)(2,653)
Gain from equity method investment (4)
— — (135,387)— 
Transaction costs (5)
141 386 6,482 723 
Acquisition-related adjustments (6)
4,292 — 9,787 — 
Change in fair value of contingent consideration (7)
3,825 — 3,825 — 
Loss on extinguishment of debt (8)
42,262 — 42,262 — 
Share-based compensation (9)
3,998 3,392 10,148 9,896 
Intangible asset amortization (10)
1,774 750 4,471 2,246 
Canada GST adjustment (11)
— — — 2,160 
Income tax valuations (12)
— — — (3,472)
Impact of tax law changes (13)
— (2,137)— (11,251)
Cumulative tax effect of adjustments (14)
(15,411)(1,445)13,058 (4,630)
Adjusted Net Income$ 6,445 $ 11,326 ($ 4,881)(43.1)%$ 53,967 $ 65,772 ($ 11,805)(17.9)%
Net (loss) income from continuing operations($ 42,039)$ 12,881 $ 88,213 $ 69,974 
Diluted Weighted Average Shares Outstanding41,220 41,775 43,422 41,660 
Adjusted Diluted Weighted Average Shares Outstanding43,285 41,775 43,422 41,660 
Diluted Earnings per Share from continuing operations($ 1.02)$ 0.31 ($ 1.33)#$ 2.03 $ 1.68 $ 0.35 20.8 %
Per Share impact of adjustments to Net income from continuing operations1.17 (0.04)(0.79)(0.10)
Adjusted Diluted Earnings per Share$ 0.15 $ 0.27 ($ 0.12)(44.4)%$ 1.24 $ 1.58 ($ 0.34)(21.5)%
Note: Footnotes follow Reconciliation of Net income table on the next page

59

 Three Months Ended
March 31,		 Change
(in thousands except per share data)20182017 $%
Net income$23,292
$16,638
 $6,654
40.0%
Adjustments:     
Loss on extinguishment of debt (1)
11,683
12,458
   
Transaction related costs (2)
—
2,254
   
Share-based compensation (3)
1,842
126
   
Intangible asset amortization676
583
   
Impact of tax law changes(6)
1,800
—
   
Cumulative tax effect of adjustments(3,692)(5,582)   
Adjusted Net Income$35,601
$26,477
 $9,124
34.5%
      
Net income$23,292
$16,638
   
Diluted Weighted Average Shares Outstanding (4)
47,416
38,959
   
Diluted Earnings per Share (4)
$0.49
$0.43
 $0.06
14.0%
Per Share impact of adjustments to Net Income (4)
0.26
0.25
   
Adjusted Diluted Earnings per Share (4)
$0.75
$0.68
 $0.07
10.3%



Reconciliation of Net income(Loss) Income from Continuing Operations to EBITDA and Adjusted EBITDA, non-GAAP measures (in thousands, except per share data, unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands, unaudited)20212020Change $Change %20212020Change $Change %
Net (loss) income from continuing operations($ 42,039)$ 12,881 ($ 54,920)#$ 88,213 $ 69,974 $ 18,239 26.1 %
(Benefit) provision for income taxes(13,375)(822)(12,553)#29,241 2,183 27,058 #
Interest expense25,805 18,383 7,422 40.4 %68,784 54,018 14,766 27.3 %
Depreciation and amortization7,285 4,358 2,927 67.2 %19,685 13,312 6,373 47.9 %
EBITDA(22,324)34,800 (57,124)#205,923 139,487 66,436 47.6 %
Restructuring costs (1)
5,651 — 11,414 — 
Legal and other costs (2)
370 1,029 370 2,779 
Loss (income) from equity method investment (3)
1,582 (3,530)(676)(2,653)
Gain from equity method investment (4)
— — (135,387)— 
Transaction costs (5)
141 386 6,482 723 
Acquisition-related adjustments (6)
4,292 — 9,787 — 
Change in fair value of contingent consideration (7)
3,825 — 3,825 — 
Loss on extinguishment of debt (8)
40,206 — 40,206 — 
Share-based compensation (9)
3,998 3,392 10,148 9,896 
Canada GST adjustment (11)
— — — 2,160 
Other adjustments (15)
(118)38 (392)639 
Adjusted EBITDA$ 37,623 $ 36,115 $ 1,508 4.2 %$ 151,700 $ 153,031 ($ 1,331)(0.9)%
Adjusted EBITDA Margin18.0 %19.8 %25.6 %23.7 %
# - Change greater than 100% or not meaningful

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Three Months Ended
March 31,		 Change
(dollars in thousands)20182017 $%
Net income$23,292
$16,638
 $6,654
40.0 %
Provision for income taxes11,467
9,450
 2,017
21.3 %
Interest expense22,349
23,366
 (1,017)(4.4)%
Depreciation and amortization4,661
4,654
 7
0.2 %
EBITDA61,769
54,108
 $7,661
14.2 %
Loss on extinguishment of debt (1)
11,683
12,458
   
Transaction related costs (2)
—
2,254
   
Share-based compensation (3)
1,842
126
   
Other adjustments (5)
(79)(314)   
Adjusted EBITDA75,215
68,632
 6,583
9.6 %
Adjusted EBITDA Margin28.7%30.6%   
(1) For the three months ended March 31, 2017, the $12.5 million loss from extinguishment of debt was due to the redemption of CURO Intermediate Holding Corp's 10.75% Senior Secured Notes due 2018 and the 12.00% Senior Cash Pay Notes due 2017. For the three months ended March 31, 2018, the $11.7 million loss from the extinguishment of debt was due to the redemption of CFTC's 12.00% Senior Secured Notes due 2022.
(2) Transaction-related costs include professional fees paid in connection with potential transactions and the original issuance of $470.0 million of Senior Secured Notes due 2022 in the first quarter of 2017.
(3) The Company approved the adoption of a share-based compensation plans during 2010 and 2017 for key members of its senior management team. The estimated fair value of share-based awards is recognized as non-cash compensation expense on a straight-line basis over the vesting period.
(4) The share and per share information have been adjusted to give effect to the 36-to-1 stock split of the Company's common stock that occurred during the fourth quarter of 2017.
(5) Other adjustments include deferred rent and the intercompany foreign exchange impact. Deferred rent represents the non-cash component of rent expense. Rent expense is recognized ratably on a straight-line basis over the lease term.
(6) As a result of the 2017 Tax Act, which was signed into law on December 22, 2017, the Company provided an estimate of the new repatriation tax as of December 31, 2017. Subsequent to further guidance published in the first quarter of 2018, the Company has booked an additional tax expense of $1.2 million for the 2017 repatriation tax. Additionally, the Tax Act provided for a new GILTI (Global Intangible Low-Taxed Income) tax starting in 2018 and the Company has estimated and provided tax expense of $0.6 million as of March 31, 2018.

(1)Restructuring costs for the three and nine months ended September 30, 2021 resulted from U.S. store closures and consisted of (i) severance costs for store employees, (ii) lease termination costs, and (iii) accelerated depreciation, partially offset by the net write-off of ROU assets and lease liabilities.
(2)
Legal and other costs for the three and nine months ended September 30, 2021 included costs related to certain legal matters.

Legal and other costs for the three and nine months ended September 30, 2020 included (i) settlement costs related to certain legal matters (ii) costs for certain securities litigation and related matters and (iii) severance costs for certain corporate employees separate from restructuring costs.
(3)The amount reported is our share of Katapult's U.S. GAAP net (income) loss, recognized on a one quarter lag.
(4)During the nine months ended September 30, 2021, we recorded an additional gain on our investment in Katapult of $135.4 million. The gain represents cash we received, net of the basis of our investment in Katapult, upon the completion of the business combination between Katapult and FinServ. Refer to "Katapult Update for the Three and Nine Months Ended September 30, 2021 and 2020" below for additional details.
(5)
Transaction costs for the nine months ended September 30, 2021 relate to Katapult and FinServ business combination and the Flexiti acquisition.

Transaction costs for the nine months ended September 30, 2020 relate to the acquisition of Ad Astra and legal and advisory costs related to the Flexiti acquisition.
(6)During the nine months ended September 30, 2021, $9.8 million of acquisition-related adjustments relate to the acquired Flexiti loan portfolio as of March 10, 2021. Refer to "Consolidated Revenue by Product and Segment" for additional details.
(7)In connection with our acquisition of Flexiti, we recorded a $3.8 million adjustment related to the fair value of the contingent consideration for the three and nine months ended September 30, 2021.
(8)On July 30, 2021, we entered into new 7.50% Senior Secured Notes due 2028, which were used on August 12, 2021 to extinguish the 8.25% Senior Secured Notes due 2025. During the three and nine months ended September 30, 2021, $40.2 million from the loss on the extinguishment of debt in determining Adjusted EBITDA was due to the early redemption of the 8.25% Senior Secured Notes due 2025. An additional $2.1 million of interest was incurred for the three and nine months ended September 30, 2021 in determining Adjusted Net income, which represents interest on the 8.25% Senior Secured Notes due 2025 for the period between July 30, 2021 and August 12, 2021. This is the period during which both Senior Secured Notes were outstanding.
(9)The estimated fair value of share-based awards was recognized as non-cash compensation expense on a straight-line basis over the vesting period.
(10)Intangible asset amortization primarily included amortization of identifiable intangible assets established in connection with the acquisition of Flexiti.
(11)We received a Notice of Adjustment from Canadian tax authority auditors in the second quarter 2020 related to the treatment of certain expenses in prior years for purposes of calculating the Goods and Services Tax ("GST") due.
(12)During the nine months ended September 30, 2020, a Texas court ruling related to the apportionment of income to the state for an unrelated company resulted in a change in estimate regarding the realization of a tax benefit previously taken. Accordingly, we recorded a $1.1 million liability for our estimated exposure related to this position, which was settled in April 2021. Also in the nine months ended September 30, 2020, we released a $4.6 million valuation allowance related to NOLs for certain entities in Canada.
(13)On March 27, 2020, the CARES Act was enacted by the U.S. Federal government in response to the COVID-19 pandemic. The CARES Act, among other things, allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. For the nine months ended September 30, 2020, we recorded an income tax benefit of $11.3 million related to the carryback of NOL from tax years 2018 and 2019.
(14)Cumulative tax effect of adjustments included in Reconciliation of Net income from continuing operations Adjusted Net Income table is calculated using the estimated incremental tax rate by country.
(15)Other adjustments primarily reflect the intercompany foreign-currency exchange impact.


Currency Information


We operate in the United States,U.S. and Canada and the U.K. and report our consolidated results are reported in U.S. dollars.


Changes in our reported revenues and net income include the effect of changes in currency exchange rates. AllWe translate all balance sheet accounts are translated into U.S. dollars at the currency exchange rate in effect at the end of each period. The incomeWe translate the statement is translatedof operations at the average rates of exchange for the period. CurrencyWe record currency translation adjustments are recorded as a component of Accumulated Other Comprehensive Income in stockholders’ equity.Stockholders’ Equity.


Constant Currency Analysis


We have operations in the U.S., Canada, and the U.K.Canada. In the three months ended March 31, 2018September 30, 2021 and 2017, approximately 21.8%2020, 37.1% and 22.4%27.0%, respectively, of our revenues from continuing operations were originated in currencies other thanCanada. For the U.S. Dollar.nine months ended September 30, 2021 and 2020, 34.8% and 23.8%, respectively, of our revenues from continuing operations were originated in Canada. As a result, changes in our reported results include the impacts of changes in foreign currency exchange rates for the Canadian DollarDollar.

Income Statement
Three Months Ended September 30,Nine Months Ended September 30,
20212020$ Change% Change20212020$ Change% Change
Average Exchange Rates for the Canadian Dollar0.7941 0.7504 0.0437 5.8 %$0.7993 $0.7391 $0.0602 8.1 %

Balance Sheet - Exchange Rate as of September 30, 2021 and the British Pound Sterling.December 31, 2020
September 30,December 31,Change
20212020$%
Exchange Rate for the Canadian Dollar0.7851 0.7863 (0.0012)(0.2)%
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 Average Exchange Rates  
 Three Months Ended March 31, Change
 20182017 $%
Canadian Dollar$0.7912
$0.7557
 
$0.0355
4.7%
British Pound Sterling$1.3916
$1.2390
 
$0.1526
12.3%


The following constant currency analysis removes the impact of the fluctuation in foreign exchange rates and utilizes constant currency results in our analysis of the Canada Direct Lending segment performance. The fluctuation in foreign exchange rates between March 10, 2021 and September 30, 2021 was minimal and thus the constant currency impact on our Canada POS Lending segment was not material. Our constant currency assessment assumes foreign


exchange rates in the current fiscal periods remained the same as in the prior fiscal periods. All conversion rates below are based on the U.S. Dollar equivalent to one of the applicable foreign currencies.Canadian Dollar. We believe that the constant currency assessment below is a useful measure in assessing the comparable growth and profitability of our operations.


TheFor our Canada Direct Lending segment, we calculated the revenues and gross margin below forduring the three and nine months ended March 31, 2018 were calculatedSeptember 30, 2021 using the actual average exchange rate forduring the three and nine months ended MarchSeptember 30, 2020 (in thousands, unaudited).
Three Months Ended September 30,Nine Months Ended September 30,
20212020$ Change% Change20212020$ Change% Change
Canada Direct Lending – constant currency basis:
Revenues$62,551 $49,155 $13,396 27.3 %$172,484 $153,382 $19,102 12.5 %
Gross Margin30,430 20,186 10,244 50.7 %88,948 51,984 36,964 71.1 %

We calculated gross loans receivable below as of September 30, 2021 using the actual exchange rate as of December 31, 2017.
2020 (in thousands, unaudited).
  Three Months Ended
March 31,		 Change
(dollars in thousands) 2018 2017 $ % 
Revenues – constant currency basis:         
Canada $44,183
 $41,566
 $2,617
 6.3 % 
United Kingdom 9,720
 8,692
 1,028
 11.8 % 
Gross margin - constant currency basis:         
Canada 13,860
 14,300
 (440) (3.1)% 
United Kingdom 3,029
 3,472
 (443) (12.8)% 
September 30,December 31,Change
20212020$%
Canada Direct Lending – constant currency basis:
Gross loans receivable$391,438 $330,271 $61,167 18.5 %


LIQUIDITY AND CAPITAL RESOURCES


Our principal sources of liquidity to fund the loans we make to our customers are cash provided by operations, our Senior Revolver, Cash Money Revolving Credit Facility, Non-Recourse U.S. SPV Facility, Non-Recourse Canada SPV Facility, Non-Recourse Flexiti SPE Facility, and funds from third partythird-party lenders under our CSO programs, and our Non-Recourse U.S. SPV Facility, which finances the originations of eligible U.S. Unsecured and Secured Installment Loans at an advance rate of 80%.programs. In 2017,July 2021, we issued our 12.00%$750.0 million of 7.50% Senior Secured Notes, due March 1, 2022 ("2028. The net proceeds from the sale of the 7.50% Senior Secured Notes")Notes were used (i) to refinance similar notes that were nearing maturity andredeem our outstanding 8.25% Senior Secured Notes, (ii) to pay dividendsfees, expenses, premiums and accrued interest in connection therewith and (iii) for general corporate purposes. Refer to our stockholders. Note 5, "Debt" of the Notes to the unaudited Condensed Consolidated Financial Statements for additional details.

As of March 31, 2018,September 30, 2021, we were in compliance with all financial ratios, covenants and other requirements set forth in our debt agreements. We anticipate that our primary use of cash will be to fund growth in our working capital, finance capital expenditures to further our growth strategy in both the U.S. and Canada, and meet our debt obligations. We may also use cash for potential strategic investments in and acquisitions of other companies that help us extend our reach and product portfolio. Additionally, we may use cash to fund a return on capital for our stockholders through share repurchase programs, or in the form of dividends. In the first quarter of 2021, our Board of Directors increased the quarterly dividend to $0.11 per share, an increase of 100%. Additionally, in May 2021 our Board of Directors authorized a new share repurchase program for up to $50.0 million of our common stock. Refer to Note 16, "Share Repurchase Program" of the Notes to the unaudited Condensed Consolidated Financial Statements for further details of the program.

Our level of cash flow provided by operating activities typically experiences, someunder normal (i.e., non-pandemic) circumstances, seasonal fluctuation related to our levels of net income and changes in working capital levels, particularly loans receivable.

Unexpected changes in our financial condition or other unforeseen factors may result in our inability to obtain third-party financing or could increase our borrowing costs in the future. We have the ability to adjust our volume of lending to consumers which would reduce cash outflow requirements while increasing cash inflows through loan repayments to the extent we experience any short-term or long-term funding shortfalls. shortfalls, such as tightening our credit approval practices (as we did during the COVID-19 pandemic), which has the effect of reducing cash outflow requirements while increasing cash inflows through loan repayments.

We may also sell or securitize our assets, draw on our available revolving credit facility or line of credit, enter into additional refinancing agreements andor reduce our capital spending in order to generate additional liquidity. Our cash on hand and total liquidity remains at elevated levels as of September 30, 2021 due to a number of factors, including (i) a one-time cash inflow of $146.9 million from the monetization of a significant portion of our investment in Katapult, (ii) a recent increase in accelerated loan repayments as customers benefited from COVID-19-related government stimulus programs, (iii) favorable customer credit performance, and (iv)
62


the runoff of California Installment and Virginia Revolving LOC loans following regulatory changes. The elevated cash on hand was partially offset by our use of cash for the acquisition of Flexiti and payment of fees related to the extinguishment of the 8.25% Senior Secured Notes. These factors resulted in our available cash on hand of $205.8 million and our total liquidity of $377.1 million as of September 30, 2021. We believe our cash on hand and available borrowings provide us with sufficient liquidity for at least the next twelve12 months.


Borrowings

Our long-term debt consistedrecent acquisition of Flexiti, which closed on March 10, 2021, has increased our product offerings to include customers in the prime space. The acquisition also allows us to tailor our current product structure to Flexiti's POS model, potentially expanding to sub-prime customers. These initiatives to expand our product offerings and grow the Flexiti line of business can materially impact our future cash flows. For further information regarding the Flexiti acquisition, refer to Note 1, "Summary of Significant Accounting Policies and Nature of Operations,"Note 14, "Goodwill," and Note 15, "Acquisitions" of the following as of March 31, 2018 and December 31, 2017 (netNotes to the unaudited Condensed Consolidated Financial Statements.

We have no additional material commitments or demands that are likely to affect our liquidity.

Debt Capitalization Summary
(in thousands, net of deferred financing costs):
  March 31, December 31,
(dollars in thousands) 2018 2017
2017 Senior secured notes (due 2022) $511,493
 $585,823
Non-Recourse U.S. SPV Facility 111,151
 120,402
Senior Revolver —
 —
     Long-term debt $622,644

$706,225
CapacityInterest RateMaturityCounterpartiesBalance as of September 30, 2021 (in USD)
Non-Recourse Canada SPV Facility (1)
C$175.0 million3-Mo CDOR + 6.75%September 2, 2023Waterfall Asset Management$ 96,281 
Senior Secured Revolving Credit Facility$50.0 million1-Mo LIBOR + 5.00%June 30, 2022BayCoast Bank; Stride Bank; Hancock-Whitney Bank; Metropolitan Commercial Bank— 
Non-Recourse U.S. SPV Facility$200.0 million1-Mo LIBOR + 6.25%April 8, 2024Atalaya Capital Management, MetaBank44,940 
Non-Recourse Flexiti SPE Facility (1)
C$500.0 million3-Mo CDOR + 4.40%March 10, 2024Credit Suisse (Class A); SPF (Class B)255,704 
Cash Money Revolving Credit Facility (1)
C$10.0 millionCanada Prime Rate +1.95%On-demandRoyal Bank of Canada— 
7.50% Senior Secured Notes (due 2028) (2)
$750.0 million7.50%August 1, 2028734,533 
(1) Capacity amounts are denominated in Canadian dollars, while outstanding balances as of September 30, 2021 are denominated in U.S. dollars.
(2) On July 30, 2021, we closed our $750 million aggregate principal amount of new 7.50% Senior Secured Notes, which was used to redeem our $690.0 million 8.25% Senior Secured Notes due 2025.



Available Credit Facilities and Other Resources

12.00% Senior Secured Notes

In February and November 2017, CFTC issued $470.0 million and $135.0 million, respectively, Senior Secured Notes. InterestRefer to Note 5, "Debt," for details on the Senior Secured Notes is payable semiannually, in arrears, on March 1 and September 1 of each year, beginning on September 1, 2017. The February issuance refinanced similar notes that were nearing maturity. The extinguishment of the existing notes resulted in a pretax loss of $12.5 million in the three months ended March 31, 2017. In connection with these 2017 debt issuances we capitalized financing costs of approximately $18.3 million, the balance of which is included in the Interim Consolidated Balance Sheets as a component of “Long-Term Debt,” and is being amortized over the term of the Senior Secured Notes and included as a component of interest expense.

On March 7, 2018, CFTC redeemed $77.5 million of its Senior Secured Notes (the transaction whereby the Senior Secured Notes were partially redeemed, the “Redemption”) at a price equal to 112.00% of the principal amount of the Senior Secured Notes redeemed, plus accrued and unpaid interest paid thereon to the date of Redemption. Following the Redemption, $527.5 million of the original outstanding principal amount of the Senior Secured Notes remain outstanding. The Redemption was conducted pursuant to the Indenture governing the Senior Secured Notes (the “Indenture”), dated as of February 15, 2017, by and among CFTC, the guarantors party thereto and TMI Trust Company, as trustee and collateral agent. Consistent with the terms of the Indenture, CFTC used a portion of the cash proceeds from our initial public offering, completed in December 2017, to redeem such Senior Secured Notes.

Non-Recourse U.S. SPV Facility

In November 2016, CURO Receivables Finance I, LLC, a Delaware limited liability company (the “SPV Borrower”) and a wholly-owned subsidiary, entered into a five-year revolving credit facility with Victory Park Management, LLC and certain other lenders that provides an $80.0 million term loan and $70.0 million of revolving borrowing capacity that can expand time (“Non-Recourse U.S. SPV Facility”).

Senior Revolver

In September 2017, we closed a $25.0 million Senior Secured Revolving Loan Facility, or the Senior Revolver. In February 2018, the Senior Revolver capacity was increased to $29.0 million as permitted by the Indenture to the Senior Secured Notes based upon consolidated tangible assets. The Senior Revolver is now syndicated with participation by a second bank. The negative covenants of the Senior Revolver generally conform to the related provisions in the Indenture for our 12.00% Senior Secured Notes. We believe this facility complements our other financing sources, while providing seasonal short-term liquidity. Under the Senior Revolver, there is $29.0 million maximum availability, including up to $5.0 million of standby letters of credit, for a one-year term, renewable for successive terms following annual review. The Senior Revolver accrues interest at the one-month LIBOR (which may not be negative) plus 5.00% per annum and is repayable on demand. The terms of the Senior Revolver require that the outstanding balance be reduced to $0 for at least 30 consecutive days in each calendar year. The Senior Revolver is guaranteed by all subsidiaries of CURO that guarantee our 12.00% Senior Secured Notes and is secured by a lien on substantially all assets of CURO and the guarantor subsidiaries that is senior to the lien securing our 12.00% Senior Secured Notes. The Senior Revolver was undrawn at March 31, 2018.

Cash Money Revolving Credit Facility

Cash Money Cheque Cashing, Inc., one of our Canadian subsidiaries, maintains a C$7.3 million revolving credit facility with Royal Bank of Canada. The Cash Money Revolving Credit Facility provides short-term liquidity required to meet the working capital needs of our Canadian operations. Aggregate draws under the revolving credit facility are limited to the lesser of: (i) the borrowing base, which is defined as a percentage of cash, deposits in transitfacilities and accounts receivable, and (ii) C$7.3 million. As of December 31, 2017, the borrowing capacity under our revolving credit facility was reduced by C$0.3 million in stand-by-letters of credit.resources.



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The Cash Money Revolving Credit Facility is collateralized by substantially all of Cash Money’s assets and contains various covenants that include, among other things, that the aggregate borrowings outstanding under the facility not exceed the borrowing base, restrictions on the encumbrance of assets and the creation of indebtedness. Borrowings under the Cash Money Revolving Credit Facility bear interest (per annum) at the prime rate of a Canadian chartered bank plus 1.95%. The Cash Money Revolving Credit Facility was undrawn at March 31, 2018 and December 31, 2017.


Cash Flows


The following highlights our cash flow activity and the sources and uses of funding during the periods indicated:indicated (in thousands):
Nine Months Ended September 30,
20212020
Net cash provided by operating activities from continuing operations$220,710 $309,746 
Net cash used in investing activities from continuing operations(283,396)(147,894)
Net cash provided by (used in) financing activities from continuing operations66,707 (3,732)
  Three Months Ended
(dollars in thousands) March 31, 2018 March 31, 2017
Net cash provided by operating activities $54,787
 $56,925
Net cash used in investing activities (7,970) (10,086)
Net cash used in financing activities (73,955) (95,390)


As previously described, year-over-year comparisons were impacted by COVID-19 Impacts and the runoff of California Installment loans and Virginia Revolving LOC loans from regulatory changes.

Operating activitiesActivities from Continuing Operations


Net cash provided by operating activities from continuing operations for the threenine months ended March 31, 2018September 30, 2021 was $54.8 million. Contributing$220.7 million, attributable to current year net cash provided by operating activities were net income from continuing operations of $23.3$88.2 million, the effect of non-cash reconciling items of $90.7 million, and non-cash expenses of $88.9 million. Major components of non-cash expenses include depreciation and amortization, provision for loan losses, and loss on debt extinguishment. Contributions from net income and non-cash expenses were partially offset by changes in our operating assets and liabilities of $57.5$41.8 million. Our loans receivable change represented $56.0non-cash reconciling items of $90.7 million of the total change in operating assets and liabilities.

Net cash provided by operating activities for the three months ended March 31, 2017 was $56.9 million. Contributing to net cash provided by operating activities were net income of $16.6primarily included (i) $152.0 million and non-cash expenses, such as depreciation and amortization, theof provision for loan losses, and(ii) a gain of $0.7 million related to our investment in Katapult, (iii) a $40.2 million loss on debtthe extinguishment for a total of $78.8our 8.25% Senior Secured Notes and (iv) $19.7 million partially offset byof depreciation and amortization. Our changes in our operating assets and liabilities of $38.4 million. The most significant change within operating assets and liabilities was a $34.8$41.8 million increase inwere primarily related to (i) $19.6 million of higher accrued interest on our gross loans receivable netdue to increased demand, (ii) $16.6 million of provision for losses.

Loans receivable will fluctuate from period to period depending onhigher accounts payable and accrued liabilities as a result of the timing and extent of loan issuancesvariable compensation and collections. A seasonal decline in consumer(iii) $10.1 million of higher deferred revenue, primarily as a result of Canada POS Lending gross loans receivable typically takes place during the first quarterreceivables as of the year and is driven by income tax refunds in the United States. Typically, customers will use the proceeds from income tax refunds to pay outstanding loan balances, resulting in an increase of our net cash balances and a decrease of our consumer loans receivable balances. Consumer loans receivable balances typically reflect growth during the remainder of the year.September 30, 2021.


Investing activitiesActivities from Continuing Operations


Net cash used in investing activities from continuing operations for the threenine months ended March 31, 2018September 30, 2021 was $8.0 million. We$283.4 million, primarily reflecting the acquisition of Flexiti for $91.2 million, net of cash received, and the net origination of loans of $324.1 million, partially offset by $146.9 million of cash we received as a result of the Katapult and FinServ merger. In addition, we used cash to purchase approximately $1.6$14.9 million of property and equipment, including software licenses, andan increase from last year due to purchase $1.0 million of Cognical Holdings preferred shares. Additionally, the increase in restricted cash of $5.4 million was primarily attributable to our Non-Recourse U.S. SPV Facility.Flexiti.


Financing Activities from Continuing Operations

Net cash used in investingprovided by financing activities from continuing operations for the threenine months ended March 31, 2017September 30, 2021 was $10.1$66.7 million. Restricted cash increased by approximately $7.0During the third quarter of 2021, we extinguished our $690.0 million primarily attributable to our Non-Recouse U.S. SPV Facility. Additionally, we purchased approximately $3.1 million of property and equipment, including software licenses.



Financing activities

Net cash used in financing activities for the three months ended March 31, 2018 was $74.0 million. We redeemed $77.5 million of our 12.00%8.25% Senior Secured Notes for $86.8 million (which included $9.3 million of call premium). The underwriters from our 2017 initial public offering exercised their option on January 5, 2018 and acquired one million shares of our common stock, providing net proceeds of $13.1 million. We also had net borrowings of $9.5 million from our U.S. SPV Facility and our ABL Facility.

Net cash used in financing activities for the three months ended March 31, 2017 was $95.4 million. During 2017, CFTC extinguished its 10.75% Senior Secured Notes for $426.0 million (which included $8.9 million of call premium) and extinguished our Senior Cash Pay Notes for $125.0 million. These payments were partially financed by proceeds of $447.6 million (net of $13.7 million of debt issuance costs and $8.5 million of discount on notes issued) from the issuance of our 12.00%7.50% Senior Secured Notes of $750.0 million. As part of the refinancing, we paid a $31.3 million call premium and debt issuance costs of $16.0 million. In addition, net cash provided by financing activities included $84.2 million of net proceeds from our Non-Recourse Flexiti SPE Facility, partially offset by $11.5 million of cash dividends and $17.2 million of share repurchases in the third quarter of 2021.

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

As of September 30, 2021, we do not have unaudited condensed consolidating financial information to present as required by our 7.50% Senior Secured Notes. We also had net borrowings of $8.0 million from our U.S. SPV Facility and our ABL Facility.Refer to Note 5, "Debt" for additional details.


Contractual Obligations


There have been no significant developments with respect to our contractual obligations since December 31, 2017,2020, as discloseddescribed in our Annual Report on2020 Form 10-K, except for the acquired Non-Recourse Flexiti SPE Facility in March 2021 and 7.50% Senior Secured Notes, issued in July 2021. Refer to Note 5, "Debt" of the Notes to the unaudited Condensed Consolidated Financial Statements for additional details.

Critical Accounting Policies and Estimates

Certain accounting policies that involve a higher degree of judgment and complexity are discussed further in Part II - Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates, in our 2020 Form 10-K.


Business Combinations and Contingent Consideration. We include the results of operations of acquired businesses from the date of acquisition. We determine the fair value of the assets acquired and liabilities assumed based on their estimated fair value as of the date of acquisition. The excess purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill.
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Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and selection of comparable companies. Our estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

During the measurement period, not to exceed one year from the date of acquisition, we may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill. After the conclusion of the measurement period, any subsequent adjustments are reflected in the consolidated statements of operations. When we grant equity to employees of the selling stockholders in connection with an acquisition, we evaluate whether the awards are compensatory. This evaluation includes whether stock award vesting is contingent on the continued employment beyond the acquisition date. If continued employment is required for stock awards to vest, the award is treated as compensation for post-acquisition services and is recognized as compensation expense.

Transaction costs associated with business combinations are expensed as incurred and are included in Corporate, district and other expenses in our unaudited Condensed Consolidated Statements of Operations.

On March 10, 2021, we acquired 100% of the outstanding stock of Flexiti. The fair value of total consideration paid as part of the acquisition was comprised of $86.5 million in cash, $6.3 million in debt costs in conjunction with the acquisition and $20.6 million in contingent cash consideration subject to future operating metrics, including revenue less NCOs and loan originations. Net assets acquired were $68.5 million, resulting in goodwill of $39.9 million. During the second quarter of 2021, we recorded $5.0 million of additional net assets acquired as of the acquisition date, as a measurement period adjustment, resulting in a $5.0 million decrease in goodwill. During the third quarter of 2021, we recorded a $0.5 million decrease to net assets acquired as of the acquisition date, as a measurement period adjustment, resulting in a $0.5 million increase in goodwill. Changes in the fair value of contingent consideration is recognized each reporting period and included in our unaudited Condensed Consolidated Statements of Operations. For the three months ended September 30, 2021, we recorded a $3.8 million expense related to the increase in fair value of contingent consideration.

Goodwill. We exercise judgment in evaluating assets for impairment. Goodwill is tested for impairment annually, or when circumstances arise which could more likely than not reduce the fair value of a reporting unit below its carrying value. These tests require comparing carrying values to estimated fair values of the reporting unit under review.

Following the acquisition of Flexiti during the first quarter of 2021, our reporting units consist of the U.S., Canada Direct Lending and Canada POS Lending segments, as defined by FASB’s ASC 280, Segment Reporting, for which we assess goodwill for impairment. As of the most recent annual goodwill impairment testing date (October 1, 2020), the U.S. and Canada Direct Lending reporting units' estimated fair values exceeded their carrying value. As described in our 2020 Form 10-K, an impairment would occur if the carrying amount of a reporting unit exceeded the fair value of that reporting unit. Events or circumstances that could indicate an impairment include a significant change in the business climate, a change in strategic direction, legal factors, operating performance indicators, a change in the competitive environment, the sale or disposition of a significant portion of a reporting unit or economic outlook. These and other macroeconomic factors were considered when performing the annual test as of October 1, 2020.

For the three months ended September 30, 2021, we reviewed goodwill for triggering events that would indicate a need for an interim quantitative or qualitative assessment of goodwill impairment. As a result of the review, no additional assessment was deemed necessary, and thus there was no goodwill impairment for either reporting unit.

There continues to be uncertainty surrounding macroeconomic factors that could impact our reporting units. Changes in the expected length of the current economic downturn, timing of recovery, or long-term revenue growth or profitability for these reporting units could increase the likelihood of a future goodwill impairment. Additionally, changes in market participant assumptions such as an increased discount rate or further share price reductions could increase the likelihood of a future impairment.

The following table summarizes the segment allocation of recorded goodwill on our unaudited Condensed Consolidated Balance Sheets as of September 30, 2021:
(in thousands)September 30, 2021Percent of TotalDecember 31, 2020Percent of Total
U.S.$105,922 60.2 %$105,922 77.8 %
Canada Direct Lending30,121 17.1 %30,169 22.2 %
Canada POS Lending39,930 22.7 %— — %
Total Goodwill$175,973 $136,091 

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Regulatory Environment and Compliance


There have been no significantFor further information about developments with respect to our regulatory environment and compliance, since December 31, 2017,refer to Note 12, "Commitments and Contingencies" in this Report and our disclosures as described in our Annual Report on2020 Form 10-K, other than the following:10-K.


Recent developments regarding the CFPB Rule

The CFPB adopted a new rule applicable to payday vehicle title, and certain high-cost installment loans in November 2017, which we refer to in our 10-K as the CFPB Rule, with most provisions currently scheduled to become effective in August 2019. In January 2018, the CFPB announced that it intends to engage in a rulemaking process to reconsider the CFPB Rule pursuant to the Administrative Procedure Act (APA). Since the release of our 2017 Annual Report on Form 10-K, on April 9, 2018, the Community Financial Services Association of America (CFSA) and the Consumer Service Alliance of Texas filed a lawsuit against the CFPB in the U.S. District Court for the Western District of Texas, Austin Division, seeking to invalidate the CFPB Rule. The lawsuit alleges that the rule violates the APA because it exceeds the Bureau’s statutory authority and is arbitrary, capricious, and unsupported by substantial evidence. The lawsuit also argues that the CFPB’s structure is unconstitutional under the Constitution’s separation of powers because the agency’s powers are concentrated in a single, unchecked Director who is improperly insulated from both presidential supervision and congressional appropriation, and hence unaccountable to the American people. Additionally, as of the date of this Report, the CFPB Rule remains subject to potential override by disapproval under the Congressional Review Act.  It is impossible to predict whether and when the CFPB Rule will go into effect and, if so, whether and how it might be modified.
California legislative activity

Three bills have been introduced in the California Assembly which would directly impact the products currently offered by us.  Assembly Bill 2500 would impose a 36% APR cap on all consumer loans between $2,500 and $5,000 and, a 24% APR cap on all consumer loans between $5,000 and $10,000.  Assembly Bill 2953 would impose a 36% APR cap on auto title loans $2,500 or more. Assembly Bill 3010 would limit borrowers to one outstanding payday loan at a time across all lenders using a common database to enforce the one loan restriction.
Assembly Bills 2500, 2953, and 3010 have passed out of the Assembly Committee on Banking and Finance and Assembly Bill 3010 has also passed out of the Assembly Committee on Privacy and Consumer Protection.  All three bills have been referred to the Assembly Committee on Appropriations and may be called for a vote by the entire Assembly on or before June 1, 2018. June 1, 2018 is the deadline for bills originating in the Assembly to cross over


to the Senate with a majority vote on the Assembly floor. Should any of these bills receive a majority vote in the Assembly and move to the Senate, they will be initially assigned to the Senate Rules Committee.
These bills are still in the early stages of the legislative process.  It is impossible to predict if any of these bills will ultimately pass both chambers by the August 31, 2018 deadline, either in their original form or an amended form. Until the legislative process has concluded, we cannot estimate the impact to our business or results of operations, if any. For the quarter ending March 31, 2018, California represented 22.7% of our total US revenues.

ITEM 3.         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


For quantitative and qualitative disclosures about our market risks, see "Quantitative and Qualitative Disclosures about Market Risk" in our 2017 Annual Report on2020 Form 10-K. There have been no material changes to the amountsquantitative and qualitative information presented therein except for the following:therein.


Foreign Currency Exchange Rate Risk

As foreign currency exchange rates change, translation of the financial results of the United Kingdom and Canadian operations into U.S. Dollars will be impacted. Our operations in Canada and the United Kingdom represent a significant portion of our total operations, and as a result, a material change in foreign currency exchange rates in either country could have a significant impact on our consolidated financial position, results of operations or cash flows. From time to time, we may elect to purchase financial instruments as hedges against foreign exchange rate risks with the objective of protecting our results of operations in the United Kingdom and/or Canada against foreign currency fluctuations. We typically hedge anticipated cash flows between our foreign subsidiaries and domestic subsidiaries.

As of March 31, 2018, we entered into a series of cash flow hedges in which the hedging instruments were forwards to purchase GBP 6.4 million. These contracts will complete in the third quarter of 2018.

We performed an assessment that determined all critical terms of the hedging instrument and the hedged transaction match and, as such, have qualitatively concluded that changes in the hedge instrument’s intrinsic value will completely offset the change in the expected cash flows based on changes in the spot rate. Since the effectiveness of this hedge is assessed based on changes in the hedge instrument’s intrinsic value, the change in the time value of the contract would be excluded from the assessment of hedge effectiveness. We recorded changes in the hedge instrument’s intrinsic value, to the extent that they were effective as a hedge, in "Other comprehensive income."

ITEM 4.         CONTROLS AND PROCEDURES


Disclosure controlsControls and proceduresProcedures 


We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including without limitation, controls and procedures designed to ensure that information required to be disclosed in reports that it fileswe file under the Exchange Act is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

In conducting the evaluation of the effectiveness of its internal control over financial reporting as of September 30, 2021, the Company has excluded the operations of Flexiti as permitted by the guidance issued by the Office of the Chief Accountant of the SEC (not to extend more than one year beyond the date of the acquisition or for more than one annual reporting period). The Flexiti acquisition was completed on March 10, 2021. As of September 30, 2021, Flexiti's assets represented approximately 25% of the Company’s consolidated assets and for the three and nine months ended September 30, 2021, its revenues represented approximately 5% and 3%, respectively, of the Company’s consolidated revenues.

See Note 15, "Acquisitions" of the Notes to the unaudited Condensed Consolidated Financial Statements for additional details on our acquisition of Flexiti and its impact on our unaudited Condensed Consolidated Financial Statements.

Based on an evaluation of our disclosure controls and procedures as of the end of the period covered by this report conducted by our management, with the participation of the Chief Executive Officer and Chief Financial Officer, the Chief Executive Officer and Chief Financial Officer concluded that these controls and procedures were effective as of March 31, 2018. September 30, 2021.


InternalLimitation on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. A control system also can be circumvented by collusion or improper management override. Because of such limitations, disclosure controls and internal control over financial reporting cannot prevent or detect all misstatements, whether unintentional errors or fraud. However, these inherent limitations are known features of the financial reporting process, therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.



Internal Control over Financial Reporting
There
The Company is working to integrate Flexiti into its overall internal control over financial reporting processes. Except for changes made in connection with the integration of Flexiti, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) during the quarternine months ended March 31, 2018,September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART 2.II.     OTHER INFORMATION

ITEMItem 1.         LEGAL PROCEEDINGSLegal Proceedings
The information required by this item is included in Note 13, “Contingent Liabilities”12, "Commitments and Contingencies" of the Notes to the unaudited Condensed Consolidated Financial Statements in this Quarterly ReportForm 10-Q and is incorporated herein by reference.


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ITEMItem 1A.     RISK FACTORSRisk Factors
There were no material changes to our risk factors as described in our Annual Report on2020 Form 10-K for the year ended December 31, 2017 other than the following:2020.


The CFPB promulgated new rules applicable to our loans that could have a material adverse effect on our business and results of operations.

First, in January 2018, the CFPB announced that it intends to engage in a rulemaking process to reconsider the CFPB Rule pursuant to the Administrative Procedure Act (APA). Second, on April 9 2018, the Community Financial Services Association of America (CFSA) and the Consumer Service Alliance of Texas filed a lawsuit against the CFPB in the U.S. District Court for the Western District of Texas, Austin Division, seeking to invalidate the CFPB Rule. The lawsuit alleges that the rule violates the APA because it exceeds the Bureau’s statutory authority and is arbitrary, capricious, and unsupported by substantial evidence. The lawsuit also argues that the CFPB’s structure is unconstitutional under the Constitution’s separation of powers because the agency’s powers are concentrated in a single, unchecked Director who is improperly insulated from both presidential supervision and congressional appropriation, and hence unaccountable to the American people.

ITEMItem 2.         UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSUnregistered Sales of Equity Securities and Use of Proceeds


None.There were no unregistered sales of our common stock during the period covered by this Quarterly Report on Form 10-Q.


Issuer Purchases of Equity Securities

In May 2021, our Board of Directors authorized a share repurchase program providing for the repurchase of up to $50.0 million of our common stock.

The following table provides information with respect to purchases we made of our common stock during the quarter ended September 30, 2021.

PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Dollar Value of Shares that may yet be Purchased under the Plans or Programs(1)
(in millions)
July 2021316,282 $16.48 316,282 $43.0 
August 2021333,455 16.42 333,455 37.6 
September 2021314,829 16.68 314,829 32.3 
Total964,566 $16.53 964,566 
(1) As of the end of the period.

ITEMItem 3.         DEFAULTS UPON SENIOR SECURITIESDefaults Upon Senior Securities


None.


ITEMItem 4.         MINE SAFETY DISCLOSURESMine Safety Disclosures


None.


ITEMItem 5.         OTHER INFORMATIONOther Information


(a)    Disclosure of Unreported 8-K Information


None.


(b)    Material Changes to Director Nominee Procedures


None.


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ITEMItem 6.        EXHIBITSExhibits

Exhibit no.Exhibit DescriptionFiled/Incorporated by Reference from FormIncorporated by Reference from Exhibit NumberFiling Date
3.1
Amended and Restated Certificate of Incorporation
10-Q10.18/5/2020
3.2
Amended and Restated Bylaws
8-K3.212/11/17
4.1
Form of common stock certificate
S-14.111/28/17
4.2
Amended and Restated Investor Rights Agreement between the Company and the investors listed on the signature pages thereto
S-14.211/28/17
4.3
Amendment to Amended and Restated Investors Rights Agreement, dated May 14, 2018, between the Company and the investors listed on the signature page thereto
S-14.310/24/17
4.4
Description of the Company's Securities
10-K4.43/9/20
31.1 
Certifications of Chief Executive Officer of the Company under Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Filed herewith
31.2 
Certifications of Chief Financial Officer of the Company under Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Filed herewith
32.1 
Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This certification accompanies this report and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of §18 of the Securities Exchange Act of 1934, as amended
Filed herewith
101
The following unaudited financial information from the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2021, filed with the SEC on November 1, 2021, formatted in Extensible Business Reporting Language (“XBRL”) includes: (i) Condensed Consolidated Balance Sheets at September 30, 2021 and December 31, 2020, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020, and (v) Notes to Condensed Consolidated Financial Statements*
Filed herewith




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Exhibit no.Exhibit Description
3.1
Amended and Restated Certificate of Incorporation of the Registrant #

3.2
Form of Amended and Restated Bylaws of the Registrant #
10.69
First Amendment to Revolving Loan Agreement *
31.1
Certifications of Chief Executive Officer of the Company under Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2
Certifications of Chief Financial Officer of the Company under Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1
Certifications of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This certification accompanies this report and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of §18 of the Securities Exchange Act of 1934, as amended **
32.2
Certifications of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This certification accompanies this report and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of §18 of the Securities Exchange Act of 1934, as amended **
101The following unaudited financial information from CGHC's Quarterly Report on Form 10-Q for the period ended March 31, 2018, filed with the SEC on May 3, 2018, formatted in Extensible Business Reporting Language (“XBRL”) includes: (i) Condensed Consolidated Balance Sheets at March 31, 2018 and December 31, 2017, (ii) Condensed Consolidated Statements of Income for the three months ended March 31, 2018 and 2017, (iii) Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2018 and 2017, (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017, and (v) Notes to Condensed Consolidated Financial Statements*
*Filed herewith.
**Furnished herewith.
#Previously filed.

Signature


SIGNATURE


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Dated: May 3, 2018November 1, 2021                CURO Group Holdings Corp.

By:/s/ Roger Dean
Roger Dean
By:/s/ ROGER DEAN
Roger Dean
Executive Vice-President &Vice President and Chief Financial Officer

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