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,September 30, 2020
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.)
3527 North Ridge Road, Wichita, KS67205
(Address of principal executive offices)(Zip Code)


Registrant’s telephone number, including area code: (316) 772-3801
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 every Interactive Data File required to be submitted 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 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☐
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,October 29, 2020 there were 40,789,68740,885,113 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,SEPTEMBER 30, 2020
INDEX
Page
PART I – FINANCIAL INFORMATION
Item 1.Financial Statements (unaudited)
Condensed Consolidated Balance Sheets –
March 31,September 30, 2020 and December 31, 2019
Condensed Consolidated Statements of Operations –
Three and nine months ended March 31,September 30, 2020 and 2019
6
Condensed Consolidated Statements of Comprehensive Income –
Three and nine months ended March 31,September 30, 2020 and 2019
7
Condensed Consolidated Statements of Cash Flows –
ThreeNine months ended March 31,September 30, 2020 and 2019
8
Notes to Condensed Consolidated Financial Statements
10
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
3239
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
5775
Item 4.
PART 2 – OTHER INFORMATION
Item 1.
Legal Proceedings
5776
Item 1A.
Risk Factors
5876
Item 2.
Item 3.
5876
Item 4.
Mine Safety Disclosures
5876
Item 5.
5877
Item 6.
5978
SIGNATURES
6079



2


GLOSSARY


Terms and abbreviations used throughout this report are defined below.
Term or abbreviationDefinition
12.00% Senior Secured Notes12.00% Senior Secured Notes, issued in February and November 2017 for a total of $470.0 million due March 1, 2022, fully extinguished September 2018
2017 Tax ActTax Cuts and Jobs Act of 2017
2017 Final CFPB RuleThe final rule issued by the CFPB in 2017 in 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.
2019 Form 10-KAnnual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 9, 2020.
8.25% Senior Secured Notes8.25% Senior Secured Notes, issued in August 2018 for $690.0 million, which mature on September 1, 2025
Ad AstraAd Astra Recovery Services, Inc., our former exclusive provider of third-party collection services for the U.S. business that we acquired in January 2020
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 BuildIncremental COVID-related provision expense as a result of additions to the Allowance 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
CABbpsBasis points
CABCredit access bureau
CARES ActCoronavirus Aid, Relief, and Economic Security Act
Cash MoneyCash Money Cheque Cashing Inc., a Canadian subsidiary
Cash Money Revolving Credit FacilityC$10.0 million revolving credit facility with Royal Bank of Canada
CECLCDORCurrent expected credit lossCanadian Dollar Offered Rate
CFTC
CFPBConsumer Financial Protection Bureau
CFTCCURO Financial Technologies Corp., a wholly-owned subsidiary of the Company
CODMChief Operating Decision Maker
Condensed Consolidated Financial StatementsThe unaudited condensed consolidated financial statements presented in this Form 10-Q
COVID-19An infectious disease caused by the 2019 novel coronavirus disease
CSOCredit services organization
EBITDA
EBITDAEarnings Before Interest, Taxes, Depreciation and Amortization
EPSEarnings per share
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
FFLFriedman Fleischer & Lowe Capital Partners II, L.P. and its affiliated investment funds, a related party to the Company
Form 10-QQuarterly Report on Form 10-Q for the three and nine months period ended September 30, 2020
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 CSO program which we guarantee but are not includeincluded in the Condensed Consolidated Financial Statements
KatapultCognicalKatapult Holdings, Inc. (formerly known as Zibby), a private lease-to-own platform for online, brick and mortar and omni-channel retailers
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 U.S. SPV FacilityA four year,four-year, asset-backed revolving credit facility with Atalaya Capital Management with capacity up to $200.0 million if certain conditions are met
ROURight of use

OCCCTexas Office of Consumer Credit Commissioner
3


Term or abbreviationDefinition
RSUROURight of use
RSURestricted Stock Unit
SECSecurities and Exchange Commission
Senior RevolverSenior Secured Revolving Loan Facility with borrowing capacity of $50.0 million
SRCSequentialThe change from the second quarter of 2020 to the third quarter of 2020
SRCSmaller Reporting Company as defined by the SEC
Stride BankIn 2019, we partnered with Stride Bank, N.A. to launch a bank-sponsored Unsecured Installment loan originated by Stride Bank. We market and service loans on behalf of Stride Bank and the bank licenses our proprietary credit decisioning for Stride Bank's scoring and approval.
U.S.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.K. SubsidiariesCollectively, Curo Transatlantic Limited and SRC Transatlantic Limited
U.S.United States of America
USU.S. GAAPGenerally accepted accounting principles in the United States
VIEVariable Interest Entity; our wholly-owned, bankruptcy-remote special purpose subsidiarysubsidiaries




4


PART I.     FINANCIAL INFORMATION


ITEM 1.         FINANCIAL STATEMENTS


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
March 31, 2020 December 31,
2019		September 30,
2020		December 31,
2019
 
ASSETSASSETSASSETS
Cash$138,714
 $75,242
Restricted cash (includes restricted cash of consolidated VIEs of $22,317 and $17,427 as of March 31, 2020 and December 31, 2019, respectively)41,527
 34,779
Gross loans receivable (includes loans of consolidated VIEs of $231,258 and $244,492 as of March 31, 2020 and December 31, 2019, respectively)564,437
 665,828
Less: allowance for loan losses (includes allowance for losses of consolidated VIEs of $27,421 and $24,425 as of March 31, 2020 and December 31, 2019, respectively)(99,842) (106,835)
Cash and cash equivalentsCash and cash equivalents$207,071 $75,242 
Restricted cash (includes restricted cash of consolidated VIEs of $33,696 and $17,427 as of September 30, 2020 and December 31, 2019, respectively)Restricted cash (includes restricted cash of consolidated VIEs of $33,696 and $17,427 as of September 30, 2020 and December 31, 2019, respectively)62,527 34,779 
Gross loans receivable (includes loans of consolidated VIEs of $327,242 and $244,492 as of September 30, 2020 and December 31, 2019, respectively)Gross loans receivable (includes loans of consolidated VIEs of $327,242 and $244,492 as of September 30, 2020 and December 31, 2019, respectively)497,442 665,828 
Less: allowance for loan losses (includes allowance for losses of consolidated VIEs of $53,183 and $24,425 as of September 30, 2020 and December 31, 2019, respectively)Less: allowance for loan losses (includes allowance for losses of consolidated VIEs of $53,183 and $24,425 as of September 30, 2020 and December 31, 2019, respectively)(80,582)(106,835)
Loans receivable, net464,595

558,993
Loans receivable, net416,860 558,993 
Income taxes receivable24,435
 11,426
Income taxes receivable35,214 11,426 
Prepaid expenses and other34,120
 35,890
Prepaid expenses and other (includes prepaid expenses and other of consolidated VIEs of $1,165 as of September 30, 2020)Prepaid expenses and other (includes prepaid expenses and other of consolidated VIEs of $1,165 as of September 30, 2020)28,259 35,890 
Property and equipment, net66,787
 70,811
Property and equipment, net61,681 70,811 
InvestmentsInvestments23,908 10,068 
Right of use asset - operating leases114,272
 117,453
Right of use asset - operating leases111,055 117,453 
Deferred tax assets—
 5,055
Deferred tax assets0 5,055 
Goodwill132,825
 120,609
Goodwill134,589 120,609 
Other intangibles, net33,944
 33,927
Other intangibles, net37,219 33,927 
Other assets15,547
 17,710
Other assets8,151 7,642 
Total Assets$1,066,766
 $1,081,895
Total Assets$1,126,534 $1,081,895 
LIABILITIES AND STOCKHOLDERS' EQUITYLIABILITIES AND STOCKHOLDERS' EQUITYLIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities   Liabilities
Accounts payable and accrued liabilities (includes accounts payable and accrued liabilities of consolidated VIEs of $13,267 and $13,462 as of March 31, 2020 and December 31, 2019, respectively)$53,603
 $60,083
Accounts payable and accrued liabilities (includes accounts payable and accrued liabilities of consolidated VIEs of $26,665 and $13,462 as of September 30, 2020 and December 31, 2019, respectively)Accounts payable and accrued liabilities (includes accounts payable and accrued liabilities of consolidated VIEs of $26,665 and $13,462 as of September 30, 2020 and December 31, 2019, respectively)$51,747 $60,083 
Deferred revenue6,655
 10,170
Deferred revenue5,220 10,170 
Lease liability - operating leases121,715
 124,999
Lease liability - operating leases118,831 124,999 
Accrued interest (includes accrued interest of consolidated VIEs of $627 and $871 as of March 31, 2020 and December 31, 2019, respectively)5,392
 19,847
Accrued interest (includes accrued interest of consolidated VIEs of $983 and $871 as of September 30, 2020 and December 31, 2019, respectively)Accrued interest (includes accrued interest of consolidated VIEs of $983 and $871 as of September 30, 2020 and December 31, 2019, respectively)5,728 19,847 
Liability for losses on CSO lender-owned consumer loans9,189
 10,623
Liability for losses on CSO lender-owned consumer loans6,198 10,623 
Debt (includes debt and issuance costs of consolidated VIEs of $87,365 and $2,491 as of March 31, 2020 and $115,243 and $3,022 as of December 31, 2019, respectively)788,451
 790,544
Debt (includes debt and issuance costs of consolidated VIEs of $128,302 and $8,408 as of September 30, 2020 and $115,243 and $3,022 as of December 31, 2019, respectively)Debt (includes debt and issuance costs of consolidated VIEs of $128,302 and $8,408 as of September 30, 2020 and $115,243 and $3,022 as of December 31, 2019, respectively)799,460 790,544 
Other long-term liabilities9,095
 10,664
Other long-term liabilities13,376 10,664 
Deferred tax liabilities13,095
 4,452
Deferred tax liabilities13,421 4,452 
Total Liabilities1,007,195
 1,031,382
Total Liabilities1,013,981 1,031,382 
Commitments and contingencies (Note 13)

 

Commitments and contingencies (Note 13)
Stockholders' Equity

 

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; 46,934,750 and 46,770,765 shares issued; and 40,779,447 and 41,156,224 shares outstanding at the respective period ends9
 9
Treasury stock, at cost - 6,155,303 and 5,614,541 shares as of the respective period ends(77,852) (72,343)
Preferred stock - $0.001 par value, 25,000,000 shares authorized; 0 shares were issuedPreferred stock - $0.001 par value, 25,000,000 shares authorized; 0 shares were issued0 0 
Common stock - $0.001 par value; 225,000,000 shares authorized; 47,040,416 and 46,770,765 shares issued; and 40,885,113 and 41,156,224 shares outstanding at the respective period endsCommon stock - $0.001 par value; 225,000,000 shares authorized; 47,040,416 and 46,770,765 shares issued; and 40,885,113 and 41,156,224 shares outstanding at the respective period ends9 9 
Treasury stock, at cost - 6,155,303 and 5,614,541 shares at the respective period endsTreasury stock, at cost - 6,155,303 and 5,614,541 shares at the respective period ends(77,852)(72,343)
Paid-in capital70,798
 68,087
Paid-in capital77,468 68,087 
Retained earnings127,472
 93,423
Retained earnings157,932 93,423 
Accumulated other comprehensive loss(60,856) (38,663)Accumulated other comprehensive loss(45,004)(38,663)
Total Stockholders' Equity59,571
 50,513
Total Stockholders' Equity112,553 50,513 
Total Liabilities and Stockholders' Equity$1,066,766
 $1,081,895
Total Liabilities and Stockholders' Equity$1,126,534 $1,081,895 


See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

5


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 31,		Three Months Ended
September 30,		Nine Months Ended
September 30,
2020 20192020201920202019
Revenue$280,806
 $277,939
Revenue$182,003 $297,264 $645,318 $839,503 
Provision for losses113,536
 102,385
Provision for losses54,750 123,867 218,979 338,262 
Net revenue167,270
 175,554
Net revenue127,253 173,397 426,339 501,241 
   
Cost of providing services   Cost of providing services
Salaries and benefits26,007
 28,701
Salaries and benefits24,246 27,462 74,976 82,249 
Occupancy14,016
 14,237
Occupancy13,878 14,036 40,937 42,205 
Office5,674
 5,113
Office5,058 5,993 14,532 16,563 
Other costs of providing services9,655
 14,220
Other costs of providing services6,076 12,843 23,732 39,917 
Advertising12,219
 7,786
Advertising14,425 16,424 32,394 36,990 
Total cost of providing services67,571
 70,057
Total cost of providing services63,683 76,758 186,571 217,924 
Gross margin99,699
 105,497
Gross margin63,570 96,639 239,768 283,317 
   
Operating expense   
Operating expense (income)Operating expense (income)
Corporate, district and other expenses42,807
 49,088
Corporate, district and other expenses36,658 38,665 116,246 123,043 
Interest expense17,324
 17,690
Interest expense18,383 17,364 54,018 52,077 
Loss from equity method investment1,618
 —
(Income) loss from equity method investment(Income) loss from equity method investment(3,530)1,384 (2,653)5,132 
Total operating expense61,749
 66,778
Total operating expense51,511 57,413 167,611 180,252 
Income from continuing operations before income taxes37,950
 38,719
Income from continuing operations before income taxes12,059 39,226 72,157 103,065 
Provision for income taxes1,937
 10,046
(Benefit) provision for income taxes(Benefit) provision for income taxes(822)11,239 2,183 28,738 
Net income from continuing operations36,013

28,673
Net income from continuing operations12,881 27,987 69,974 74,327 
Net income (loss) from discontinued operations, before income tax390
 (39,048)Net income (loss) from discontinued operations, before income tax0 0 1,714 (39,048)
Income tax expense (benefit) related to disposition

98
 (47,423)Income tax expense (benefit) related to disposition0 598 429 (45,991)
Net income from discontinued operations292
 8,375
Net (loss) income from discontinued operationsNet (loss) income from discontinued operations0 (598)1,285 6,943 
Net income$36,305

$37,048
Net income$12,881 $27,389 $71,259 $81,270 
   
Basic earnings per share:   
Basic earnings (loss) per share:Basic earnings (loss) per share:
Continuing operations$0.88
 $0.62
Continuing operations$0.32 $0.63 $1.71 $1.63 
Discontinued operations0.01
 0.18
Discontinued operations0 (0.01)0.03 0.15 
Basic earnings per share$0.89
 $0.80
Basic earnings per share$0.32 $0.62 $1.74 $1.78 
   
Diluted earnings per share:   
Diluted earnings (loss) per share:Diluted earnings (loss) per share:
Continuing operations$0.86
 $0.61
Continuing operations$0.31 $0.61 $1.68 $1.59 
Discontinued operations0.01
 0.18
Discontinued operations0 (0.01)0.03 0.15 
Diluted earnings per share$0.87
 $0.79
Diluted earnings per share$0.31 $0.60 $1.71 $1.74 
   
Weighted average common shares outstanding:   Weighted average common shares outstanding:
Basic40,817
 46,424
Basic40,885 44,422 40,838 45,759 
Diluted41,892
 47,319
Diluted41,775 46,010 41,660 46,887 


See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

6


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
Net income$12,881 $27,389 $71,259 $81,270 
Other comprehensive income (loss):
Foreign currency translation adjustment, net of $0 tax in all periods5,591 (1,954)(6,341)18,376 
Other comprehensive income (loss)5,591 (1,954)(6,341)18,376 
Comprehensive income$18,472 $25,435 $64,918 $99,646 
 Three Months Ended
March 31,
 2020 2019
Net income$36,305
 $37,048
Other comprehensive (loss) income:
 
Foreign currency translation adjustment, net of $0 tax in both periods(22,193) 16,695
Other comprehensive (loss) income(22,193) 16,695
Comprehensive income$14,112
 $53,743


See accompanying Notes to unaudited Condensed Consolidated Financial Statements.




7

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands, unaudited)

Nine Months Ended September 30,
20202019
Cash flows from operating activities
Net income from continuing operations$69,974 $74,327 
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Depreciation and amortization13,312 14,180 
Provision for loan losses218,979 338,262 
Amortization of debt issuance costs and bond discount2,756 2,273 
Deferred income tax (benefit) expense14,187 (3,147)
Loss on disposal of property and equipment145 47 
(Income) loss from equity method investment(2,653)5,132 
Increase in cash surrender value of life insurance(418)0 
Share-based compensation9,896 7,587 
Changes in operating assets and liabilities:
Accrued interest on loans receivable26,566 (11,446)
Prepaid expenses and other assets7,362 14,275 
Other assets79 (8,439)
Accounts payable and accrued liabilities(10,439)13,596 
Deferred revenue(4,843)(533)
Income taxes payable0 25,117 
Income taxes receivable(23,790)5,598 
Accrued interest(14,092)(15,303)
Other long-term liabilities2,725 2,767 
Net cash provided by continuing operating activities309,746 464,293 
Net cash provided by (used in) discontinued operating activities1,714 (504)
Net cash provided by operating activities311,460 463,789 
Cash flows from investing activities
Purchase of property and equipment(7,401)(8,667)
Loans receivable originated or acquired(951,803)(1,369,644)
Loans receivable repaid836,915 995,291 
Investments in Katapult(11,187)(8,168)
Acquisition of Ad Astra, net of acquiree's cash received(14,418)0 
Net cash used in continuing investing activities(147,894)(391,188)
Net cash used in discontinued investing activities0 (14,213)
Net cash used in investing activities(147,894)(405,401)
Cash flows from financing activities
Proceeds from Non-Recourse U.S. SPV facility35,206 0 
Proceeds from Non-Recourse Canada SPV facility23,357 15,992 
Payments on Non-Recourse Canada SPV facility(42,131)(24,835)
Debt issuance costs paid(6,991)(198)
Proceeds from credit facilities69,853 179,811 
Payments on credit facilities(69,853)(174,811)
Payments on subordinated stockholder debt0 (2,252)
Proceeds from exercise of stock options126 87 
Payments to net share settle restricted stock units vesting(641)(110)
Repurchase of common stock(5,908)(52,172)
Dividends paid to stockholders(6,750)0 
Net cash used in financing activities (1)
(3,732)(58,488)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(257)1,204 
Net increase in cash, cash equivalents and restricted cash159,577 1,104 
Cash, cash equivalents and restricted cash at beginning of period110,021 99,857 
Cash, cash equivalents and restricted cash at end of period$269,598 $100,961 
(1) Financing activities were not impacted by discontinued operations


8

 Three Months Ended March 31,
 2020 2019
Cash flows from operating activities   
Net income from continuing operations$36,013
 $28,673
Adjustments to reconcile net income to net cash provided by continuing operating activities:   
Depreciation and amortization4,537
 4,920
Provision for loan losses113,536
 102,385
Amortization of debt issuance costs and bond discount688
 872
Deferred income tax (benefit) expense14,093
 (10,343)
Loss on disposal of property and equipment44
 991
Loss from equity method investment1,618
 —
Share-based compensation3,194
 2,172
Changes in operating assets and liabilities:   
Accrued interest on loans receivable16,671
 1,937
Prepaid expenses and other assets982
 9,938
Other assets332
 (6,374)
Accounts payable and accrued liabilities(7,492) 2,326
Deferred revenue(3,276) (1,709)
Income taxes payable—
 29,562
Income taxes receivable(13,134) (9,890)
Accrued interest(14,389) (15,329)
Other liabilities(1,548) 868
Net cash provided by continuing operating activities151,869
 140,999
Net cash provided by (used in) discontinued operating activities390
 (504)
Net cash provided by operating activities152,259
 140,495
Cash flows from investing activities   
Purchase of property, equipment and software(3,658) (3,119)
Loans receivable originated or acquired(439,244) (420,568)
Loans receivable repaid378,843
 355,621
Investments in Katapult—
 (1,568)
Acquisition of Ad Astra, net of acquiree's cash received(14,418) —
Net cash used in continuing investing activities(78,477) (69,634)
Net cash used in discontinued investing activities—
 (14,213)
Net cash used in investing activities(78,477) (83,847)
Cash flows from financing activities   
Proceeds from Non-Recourse Canada SPV facility23,560
 3,762
Payments on Non-Recourse Canada SPV facility(42,497) (24,831)
Debt issuance costs paid(150) (199)
Proceeds from credit facilities69,938
 30,478
Payments on credit facilities(44,938) (50,478)
Proceeds from exercise of stock options126
 40
Payments to net share settle restricted stock units vesting(609) (37)
Repurchase of common stock(5,908) —
Dividends paid to stockholders(2,247) —
Net cash used in financing activities (1)
(2,725) (41,265)
Effect of exchange rate changes on cash and restricted cash(837) 1,938
Net increase in cash and restricted cash70,220
 17,321
Cash and restricted cash at beginning of period110,021
 99,857
Cash and restricted cash at end of period180,241
 117,178
(1) Financing activities were not impacted by discontinued operations


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands, unaudited)


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, 2020 and 2019 to the totals above:cash, cash equivalents and restricted cash used in the Statement of Cash Flows:

September 30,
20202019
Cash and cash equivalents$207,071 $62,207 
Restricted cash (includes restricted cash of consolidated VIEs of $33,696 and $21,897 as of September 30, 2020 and September 30, 2019, respectively)62,527 38,754 
Total cash, cash equivalents and restricted cash used in the Statement of Cash Flows$269,598 $100,961 
  March 31,
  2020 2019
Cash $138,714
 $82,859
Restricted cash (includes restricted cash of consolidated VIEs of $22,317 and $15,460 as of March 31, 2020 and March 31, 2019, respectively) 41,527
 34,319
Total cash and restricted cash used in the Statements of Cash Flows 180,241
 117,178


See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

9


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



NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS
Nature of Operations and Basis of Presentation


The terms “CURO" and the “Company” refer to CURO Group Holdings Corp. and its wholly-owned subsidiaries as a consolidated entity, except where otherwise stated.


CURO is a growth-oriented, technology-enabled, highly-diversified consumer finance company serving a wide range of underbankednon-prime consumers in the U.S., Canada and, through February 25, 2019, the U.K.United Kingdom.


The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements in accordance with USU.S. GAAP, and with the accounting policies described in its 2019 Form 10-K filed with the SEC on March 9, 2020.10-K. Interim results of operations are not necessarily indicative of the results that might be expected for future interim periods or for the year ending December 31, 2020.


Certain information and note disclosures normally included in annual financial statements prepared in accordance with USU.S. GAAP have been condensed or omitted, although the Company believes that the disclosures are adequate to enable a reasonable understanding of the information presented. Additionally, the Company qualifies as an SRC, as defined by the SEC, which allows registrantsit to report information under scaledreduced SEC disclosure requirements. SRC status is determined on an annual basis as of the last business day of the most recently completed second fiscal quarter. Under these rules, the Company met the definition of an SRC as of June 30, 2019,2020, and it will reevaluate its status as of June 30, 2020.2021.


The unaudited Condensed Consolidated Financial Statements and the accompanying notes reflect all adjustments (consisting only of adjustments of a normal and recurring nature) which are, in the opinion of management, necessary to present fairly the Company's results of operations, financial position and cash flows for the periods presented.


COVID-19


A novel strain of coronavirus,The COVID-19 pandemic, which surfaced in late 2019 and has subsequently spread worldwide, including to the U.S. and Canada. On March 11, 2020, the World Health Organization categorized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency.Canada, continues to cause global uncertainty. Macroeconomic conditions, in general, and the Company's operations have been significantly affected by the COVID-19 pandemic and there arecontinues to be no reliable estimates of how long the pandemic will last or the scope or magnitude of its near-term or long-term impact.impacts. Resurgences of the pandemic in various states and provinces in which the Company operates also adds uncertainty as jurisdictions establish or re-institute protocols to lessen the burden of these cases, as described further below. In response, variousrecent months, efforts to produce a vaccine and more effective treatments for those that have been infected by COVID-19 have progressed rapidly. However, it is not possible to predict if a viable vaccine will in fact be developed, the timing of any such vaccine, and the timing and ability to scale such a vaccine for the general population.

Federal, state/provincial, and local governments continue to monitor COVID-19 cases and resurgences. Decrees were issued by regional governmental bodies have issued decreesentities prohibiting certain businesses from continuing to operate and certain classes of workers from reporting to work. However,work during the height of the pandemic or in cases of resurgences. Although CURO's operations have been designated asare considered essential financial services byservice under federal guidelines and most local regulations. regulations in both the U.S. and Canada, the Company experienced a decline in product demand as a result of the macroeconomic conditions, particularly in the second quarter of 2020, which reflected the first full quarter of the pandemic's impact in both countries. During the quarter ended September 30, 2020, CURO experienced a modest sequential increase in demand for its loan products as the effect of government stimulus programs in both countries subsided. The extent of the impact of COVID-19 on the Company's business is highly uncertain and difficult to predict, as information is rapidly evolving with respect to the duration and severity of the pandemic. Therefore, the impact of the COVID-19 pandemic will not be fully realized in the Company's results of operations and overall financial performance until future periods. Refer to Note 3, "Loans Receivable and Revenue" for an explanation of the effect of the pandemic on the Company's loans receivable and the allowance for loan losses as of September 30, 2020. Refer to Note 7, "Income Taxes" for the impact on the Company's provision for income taxes due to the CARES Act.

As a provider of an essential service, the Company remains focused on protecting the health and wellbeingwell-being of its employees, customers and the communities in which it operates, whileas well as assuring the continuity of its business operations. While CURO continues serving its customers through both store and online channels, store hours are reduced, enhanced cleaning protocols for all facilities are in place, and social distancing guidelines are in effect to aid in combating the spread of the pandemic.


10


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

U.S. Response to COVID-19

On March 27, 2020, the U.S. government enactedpresident of the United States signed the CARES Act which includes modificationsinto law. The CARES Act was intended to respond to the COVID-19 pandemic and its impact on the economy, public health, state and local governments, individuals, and businesses. The CARES Act also provides supplemental appropriations for federal agencies to respond to the COVID-19 pandemic.

The CARES Act modified the limitation on business interest expense and net operating loss provisions, and providesprovided a payment delay of employer payroll taxes during 2020incurred after the date of enactment. The Company expects to delay payment of employerthe Company's portion of the employees' Social Security payroll taxes, otherwise due in 2020 with 50% due by December 31, 2021 and the remaining 50% due by December 31, 2022.


Refer to Note 7, "Income Taxes"The CARES Act also included two provisions that directly impacted the demand for the Company's loan products as well as its customers’ ability to make payments on their existing loans. The CARES Act impactincluded one-time payments of up to $1,200 per adult for individuals whose income was less than $99,000 (or $198,000 for tax joint filers), $500 per child under 17 years old, and up to $3,400 for a family of four if certain eligibility criteria were met. The CARES Act also provided unemployment benefit expansion, including (i) an additional $600 federal stimulus payment automatically added to each week of state benefits received between March 29 and July 25, 2020; (ii) expanded pandemic unemployment assistance coverage to self-employed workers, independent contractors, people with limited employment history and people who had used all of their regular unemployment insurance benefits; and (iii) pandemic emergency unemployment compensation, which extends unemployment insurance benefits from 26 weeks to 39 weeks within a 12-month benefit year.

With the expiration of the $600 federal stimulus payment on July 25, 2020, the president signed an executive order to extend unemployment benefits with an additional $300 per week from the federal government, which is subject to state-by-state implementation efforts. Although the $300 benefit was expected to remain through the end of 2020, most states exhausted the available funds under this plan by October 2020. However, four states in which CURO operates, (Nevada, Kansas, Virginia and Wisconsin), have yet to distribute additional funds under this executive order.

Canada Response to COVID-19

On March 18, 2020, the Canadian government announced a set of pandemic measures as part of the Government of Canada’s COVID-19 Economic Response Plan. This plan included several provisions that directly impacted the demand for the Company's provisionproducts as well as its customers’ ability to make payments on their existing loans, including (i) the Canada Emergency Response Benefit, which provides a $2,000 benefit every four weeks for income taxes.

In light of COVID-19, the Company also considered implications of the pandemic on its estimates and assumptions as of March 31, 2020. After review of the information available regarding conditions as of March 31, 2020, the Company increased its allowance for loan losses, as disclosed in Note 3, "Loans and Receivable and Revenue." The increase in volatility of foreign currency exchange rates between the U.S. dollar and Canadian dollar,24 weeks to eligible workers who become unemployed or under-employed as a result of COVID-19; (ii) a $300 per child Canada Child Benefit paid on May 20, 2020; (iii) a one-time special payment through Canada’s Goods and Services Tax credit for low and modest-income families that averages $400 for individuals and $600 for couples; and (iv) temporary wage increases for low-income essential workers funded at the federal level but disbursed at the provincial level. The Canada Emergency Response Benefit plan expired on September 26, 2020.

Under the Economic Response Plan, the Canadian government also expanded its Employment Insurance Program ("EI Program"), which provides up to $500 per week of temporary income support to unemployed workers while looking for employment by extending the period of time to determine if sufficient hours were worked to be eligible for this program. The expanded program remains active.

The Economic Response Plan also includes the Canada Recovery Benefit program, which provides $500 per week for up to 26 weeks for workers who have stopped working or had their income reduced by at least 50% due to COVID-19, and other factors such as oil price volatility, hadwho are not eligible for the EI Program. This program remains active. Canadian citizens may apply for up to a material impact on the Company's Condensed Consolidated Balance Sheet. Gross loans receivable in Canada decreased $26.5 million, or 8.7%, as a resulttotal of fluctuations in the foreign currency exchange rate from December 31, 2019 to March 31,13 eligibility periods (26 weeks) between September 27, 2020 between the U.S dollar and Canadian dollar.September 25, 2021.

The effect of the COVID-19 pandemic will not be fully reflected in the Company's results of operations and overall financial performance until future periods. The extent of the impact of COVID-19 on the Company's business is highly uncertain and difficult to predict, as information is rapidly evolving with respect to the duration and severity of the pandemic.


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



Principles of Consolidation


The unaudited Condensed Consolidated Financial Statements include the accounts of CURO and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.


11


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

Ad Astra Acquisition
On January 3, 2020, the Company acquired 100% of the outstanding stock of Ad Astra, a related party, for total consideration of $14.4 million, net of cash received. Prior to the acquisition, Ad Astra was 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. Ad Astra, now a wholly-owned subsidiary, is included in the unaudited Condensed Consolidated Financial Statements. Prior to the acquisition, all costs related to Ad Astra were included in "Other costs of providing services." Following the acquisition, operating costs for Ad Astra are included within "Corporate, district and other expenses," consistent with presentation of other internal collection costs. See Note 17,17, "Acquisition" for further information.
U.K. Segment Placed into Administration


On February 25, 2019, the Company placed its U.K. segment into administration, which resulted in the treatment of the U.K. segment as discontinued operations for all periods presented. Throughout this Form 10-Q, current and prior period financial information is presented on a continuing operations basis, excluding the results and positions of the U.K. segment. See Note 15,15, "Discontinued Operations" for additional information.


Equity InvestmentSecurity Investments in Unconsolidated EntityKatapult


The Company holds an equity investment in Katapult is a privateprivately-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. As

During the three months ended September 30, 2020, as a result of March 31, 2020,additional investments, the Company ownedhad a change in accounting methodology for its investments in preferred stock of Katapult from the equity method to the measurement alternative under ASC 321 for investments without a readily determinable fair value. As a result, these investments were reclassified from the equity method to investment at cost minus impairment. Other investments are considered in-substance common stock and continue to be accounted for under the equity method of accounting as of September 30, 2020. The Company recognized 42.5% of Katapult.Katapult's earnings for the quarter ended September 30, 2020 under the equity method of accounting, which is the Company's proportionate share recognized on a two-month lag. The Company records both the equity method investment and the investment at cost minus impairment in "Other assets""Investments" on the unaudited Condensed Consolidated Balance Sheets. See Note 8 "Fair, "Fair Value Measurements"Measurements" for additional detail on Katapult's fair value considerations.regarding the Company's investment in Katapult.


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, such asincluding those posedimpacted 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 presented. Some of the significantSignificant estimates that the Company made in the accompanying unaudited Condensed Consolidated Financial Statements include allowances for loan losses, certain assumptions related to equity investments, goodwill and intangibles, accruals related to self-insurance, CSO liability for losses and estimated tax liabilities. Actual results may differ from those estimates.


Troubled Debt Restructuring

In certain circumstances, the Company modifies the terms of its loans receivable for borrowers. Under U.S. GAAP, a modification of loans receivable terms is considered a TDR if the borrower is experiencing financial difficulty and the Company grants a concession to the borrower it would not have otherwise granted under the terms of the original agreement. In light of COVID-19, the 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.

The Company records its allowance for loan losses 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 Company's 2019 Form 10-K.
12


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


Refer to Note 3, "Loans Receivable and Revenue" for further information on TDRs as of September 30, 2020.

Loans Receivable on a Non-Accrual Basis

The Company may place loans receivable on nonaccrual status due to statutory requirements or at management’s judgment if the timely collection of principal and interest becomes uncertain. After a loan is placed on nonaccrual status, no further interest is accrued. Loans are not typically returned to accrual status and thus remain on nonaccrual 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.

Goodwill


The annual impairment review for goodwill, done onperformed annually as of October 1, 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 in turn for determining whether or not further testing is required. The Company may elect to bypass the qualitative assessment and proceed directly to the two-step process, for any reporting unit, in any period. The Company can resume the qualitative assessment for any reporting unit in any subsequent period. If the Company determines, on the basis of qualitative factors, that it is more likely than not that the fair value of the reporting unit is less than the carrying amount, the Company will then apply a two-step process of (i) determining the fair value of the reporting unit and (ii) comparing it to the carrying value of the net assets allocated to the 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. The Company may elect to bypass the qualitative assessment and proceed directly to the two-step process, for any reporting unit, in any period. The Company can resume the qualitative assessment for any reporting unit in any subsequent period.


During the fourth quarter of 2019, the Company performed a quantitative assessment for the U.S. and Canada reporting units. Management concluded that the estimated fair values of these two2 reporting units were greater than their respective carrying values. Due to COVID-19,During the three and nine months ended September 30, 2020, the Company determined that adid 0t record an impairment related to goodwill. The Company has not yet completed its annual impairment review for goodwill, impairment evaluation triggering event occurred during the three months ended March 31, 2020. After performing an interim review of impairmentperformed as of March 31, 2020, both reporting units continue to have estimated fair values greater than their respective carrying values.October 1.


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



Refer to Note 16,16, "Goodwill" for further information.


Recently Adopted Accounting Pronouncements


ASU 2018-15


In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (“ASU 2018-15”). ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the non-cancellable term of the cloud computing arrangements plus any optional renewal periods (i) that are reasonably certain to be exercised by the customer or (ii) for which exercise of the renewal option is controlled by the cloud service provider. The Company adopted ASU 2018-15 on a prospective basis as of January 1, 2020. The adoption of ASU 2018-15 did not have a material impact on the unaudited Condensed Consolidated Financial Statements.


ASU 2018-13


In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which amends ASC 820, Fair Value Measurement.Measurement. ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. The Company adopted ASU 2018-13 as of January 1, 2020, which did not have a material impact on the unaudited Condensed Consolidated Financial Statements.


Recently Issued Accounting Pronouncements Not Yet Adopted


ASU 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 2018-19 in November 2018, ASU 2019-04 in April 2019, ASU 2019-05 in May 2019, ASU 2019-10 and 11-11 in November 2019, and ASU 2020-02 in February
13


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

2020. The amended standard as amended, 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 current “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they currently do under the other-than-temporary impairment model. The standard also simplifies the accounting model for purchased credit-impaired debt securities and loans. 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 receive cash. ASU 2019-04 clarifies that equity instruments without readily determinable fair values for which an entity has elected the measurement alternative should be remeasured to fair value as of the date that an observable transaction occurred. ASU 2019-05 provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. ASU 2019-10 amends the mandatory effective date for ASU 2016-13. The amendments are effective for fiscal years beginning after December 15, 2022 for entities that are eligible to be defined by the SECqualify as aan SRC, for which the Company currently qualifies. ASU 2019-11 provides clarity and improves the codification to ASU 2016-13. The amendments should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic. As issued, ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein.permitted. The Company is evaluating its alternatives with respect to the available accounting methods under ASU 2016 13,2016-13, including the fair value option. If the fair value option is not utilized, adoption of ASU 2016-13 will increase the allowance for credit losses, with a resulting negative adjustment to retained earnings on the date of adoption. The Company does not expect to adoptdeferred the adoption of ASU 2016-13 until at least January 1, 2021 as permitted under ASU 2019-10. The Company is currently assessing the impact thethat adoption of ASU 2016-13 will have on its unaudited Condensed Consolidated Financial Statements.


ASU 2020-01


In January 2020, the FASB issued ASU 2020-01, 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 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. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently assessing the impact thethat adoption of ASU 2020-01 will have on its unaudited Condensed Consolidated Financial Statements.


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



ASU 2020-04


In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides temporary optional expedients and exceptions to USU.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected 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 the modification date or reassess a previous accounting determination. Entities also can also elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently assessing the impact thethat adoption of ASU 2020-04 will have on its unaudited Condensed Consolidated Financial Statements.


ASU 2019-12


In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (Topic 740). The ASU intends to simplify various aspects related to accounting for income taxes and removes certain exceptions to the general principles in the standard.Topic 740. Additionally, the ASU clarifies and amends existing guidance to improve consistent application of its requirements. The amendments of the ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The adoption of ASU 2019-12 is not expected to have a material impact on the Company's unaudited Condensed Consolidated Financial Statements.


14


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

NOTE 2 - VARIABLE INTEREST ENTITIES


In August 2018,As of September 30, 2020, the Company closed the Non-Recourse Canada SPV facility,had 2 credit facilities whereby certain loanloans receivables were sold to the wholly-owned VIEVIEs to collateralize debt incurred under theeach facility. See Note 5, "Debt" for additional details on the Non-Recourse U.S. SPV facility, entered into in April 2020, and the Non-Recourse Canada SPV facility.facility, entered into in August 2018.


The Company has determined that it is the primary beneficiary of the VIEVIEs and is required to consolidate the entity.entities. The Company includes the assets and liabilities related to the VIEVIEs in the unaudited Condensed Consolidated Balance Sheets. As required, CURO parenthetically discloses on the unaudited Condensed Consolidated Balance Sheets the VIE'sVIEs' assets that can only be used to settle the VIE'sVIEs' obligations and liabilities if the VIE'sVIEs' creditors have no recourse against the Company's general credit.


The carrying amounts of consolidated VIE'sVIEs' assets and liabilities associated with the VIE subsidiarysubsidiaries were as follows (in thousands):
September 30,
2020		December 31,
2019
Assets
Restricted cash$33,696 $17,427 
Loans receivable less allowance for loan losses274,059 220,067 
Prepaid expenses and other1,165 0 
Deferred tax assets100 0 
      Total Assets$309,020 $237,494 
Liabilities
Accounts payable and accrued liabilities$26,665 $13,462 
Deferred revenue137 46 
Accrued interest983 871 
Intercompany payable35,181 69,639 
Debt119,894 112,221 
      Total Liabilities$182,860 $196,239 
  March 31, 2020 December 31, 2019
Assets    
Restricted cash $22,317
 $17,427
Loans receivable less allowance for loan losses 203,837
 220,067
      Total Assets $226,154
 $237,494
Liabilities    
Accounts payable and accrued liabilities $13,267
 $13,462
Deferred revenue 39
 46
Accrued interest 627
 871
Intercompany payable 80,240
 69,639
Debt 84,874
 112,221
      Total Liabilities $179,047
 $196,239


On April 8, 2020, the Company entered into the Non-Recourse U.S. SPV Facility to provide financing for U.S. Unsecured Installment and Open-End receivables, including those generated under its technology, marketing and servicing relationship with Stride Bank. Refer to Note 19, "Subsequent Events" for additional details.

NOTE 3 – LOANS RECEIVABLE AND REVENUE


The COVID-19 pandemic hasCURO's customers and overall credit performance have been impacted customers, which has resulted in past-due gross loans receivable and gross combined loans receivables guaranteed by the Company,2020 as a percentageresult of total gross combined loans receivable,COVID-19. During the third quarter of 2020, consumer demand gradually increased as stay-at-home and self-quarantine orders were lifted in some jurisdictions in response to increase aslower COVID-19 infection rates and the expiration of March 31, 2020 comparedgovernmental stimulus programs. Ongoing impacts from and risks related to December 31, 2019. Additionally, it has createdCOVID-19 have caused continued uncertainty regarding the performance of net-charge offs

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


NCOs over the loss-development period.period as of September 30, 2020. The Company has maintained its historical allowance approach, but has adjusted future loss estimates for an increasechanges in past-due gross loans receivable due to adverse market conditions leading up to and at March 31,September 30, 2020 caused by COVID-19. The estimates and assumptions used to determine an appropriate allowance for loan losses and liability for losses on CSO lender-owned consumer loans are those that are available through the filing of this Form 10-Q and which are indicative of conditions occurring as of March 31,September 30, 2020.

As a result of future loss estimates due to uncertainty caused by COVID-19, the Company enhanced its Customer Care Program and began modifying loans for borrowers that experienced financial distress, as discussed in more detail in Note 1, "Summary of Significant Accounting Policies and Nature of Operations" and the related impact to past due loans receivable as of March 31, 2020, "TDR Loans Receivable" tables below.

15


CURO has determined an additional $12.0 million allowance for loan loss was required.GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


The following table summarizes revenue by product (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Unsecured Installment$67,408 $137,233 $260,328 $395,119 
Secured Installment16,692 28,270 62,379 81,823 
Open-End58,711 66,120 186,429 173,961 
Single-Pay25,084 49,312 92,973 141,605 
Ancillary14,108 16,329 43,209 46,995 
   Total revenue(1)
$182,003 $297,264 $645,318 $839,503 
(1) Includes revenue from CSO programs of $36.7 million and $72.8 million for the three months ended September 30, 2020 and 2019, respectively, and $142.5 million and $199.9 million for the nine months ended September 30, 2020 and 2019, respectively.
  Three Months Ended March 31,
  2020 2019
Unsecured Installment $122,409
 $135,778
Secured Installment 26,286
 27,477
Open-End 70,982
 52,869
Single-Pay 45,157
 46,761
Ancillary 15,972
 15,054
   Total revenue(1)
 $280,806
 $277,939
(1) Includes revenue from CSO programs of $68.1 million and $71.7 million for the three months ended March 31, 2020 and 2019, respectively.


The following tables summarize loans receivable by product and the related delinquent loans receivable (in thousands):
September 30, 2020
Single-Pay(1)
Unsecured InstallmentSecured InstallmentOpen-EndTotal
Current loans receivable$41,274 $67,017 $41,433 $290,427 $440,151 
Delinquent loans receivable0 17,942 7,542 31,807 57,291 
   Total loans receivable41,274 84,959 48,975 322,234 497,442 
   Less: allowance for losses(3,197)(18,859)(7,109)(51,417)(80,582)
Loans receivable, net$38,077 $66,100 $41,866 $270,817 $416,860 
(1) Of the $41.3 million of Single-Pay receivables, $10.1 million relate to mandated extended payment options for certain Canada Single-Pay loans.
  March 31, 2020
  
Single-Pay(1)
Unsecured InstallmentSecured InstallmentOpen-EndTotal
Current loans receivable $54,728
$88,152
$57,284
$264,019
$464,183
Delinquent loans receivable —
34,966
15,301
49,987
100,254
   Total loans receivable 54,728
123,118
72,585
314,006
564,437
   Less: allowance for losses (4,693)(28,965)(9,726)(56,458)(99,842)
Loans receivable, net $50,035
$94,153
$62,859
$257,548
$464,595
(1) Of the $54.7 million of Single-Pay receivables, $16.4 million relate to mandated extended payment options for certain Canada Single-Pay loans.


September 30, 2020
Unsecured InstallmentSecured InstallmentOpen-EndTotal
Delinquent loans receivable
0-30 days past due$7,098 $3,576 $14,988 $25,662 
31-60 days past due4,758 1,883 7,505 14,146 
61 + days past due6,086 2,083 9,314 17,483 
Total delinquent loans receivable$17,942 $7,542 $31,807 $57,291 

December 31, 2019
Single-Pay(1)
Unsecured InstallmentSecured InstallmentOpen-EndTotal
Current loans receivable$81,447 $117,682 $70,565 $285,452 $555,146 
Delinquent loans receivable0 43,100 17,510 50,072 110,682 
   Total loans receivable81,447 160,782 88,075 335,524 665,828 
   Less: allowance for losses(5,869)(35,587)(10,305)(55,074)(106,835)
Loans receivable, net$75,578 $125,195 $77,770 $280,450 $558,993 
(1) Of the $81.4 million of Single-Pay receivables, $22.4 million relate to mandated extended payment options for certain Canada Single-Pay loans.

16

  March 31, 2020
  Unsecured InstallmentSecured InstallmentOpen-EndTotal
Delinquent loans receivable     
0-30 days past due $12,511
$7,168
$21,381
$41,060
31-60 days past due 9,566
3,991
12,390
25,947
61 + days past due 12,889
4,142
16,216
33,247
Total delinquent loans receivable $34,966
$15,301
$49,987
$100,254


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



December 31, 2019
Unsecured InstallmentSecured InstallmentOpen-EndTotal
Delinquent loans receivable
0-30 days past due$15,369 $8,039 $21,823 $45,231 
31-60 days past due12,403 4,885 13,191 30,479 
61 + days past due15,328 4,586 15,058 34,972 
Total delinquent loans receivable$43,100 $17,510 $50,072 $110,682 

  December 31, 2019
  
Single-Pay(1)
Unsecured InstallmentSecured InstallmentOpen-EndTotal
Current loans receivable $81,447
$117,682
$70,565
$285,452
$555,146
Delinquent loans receivable —
43,100
17,510
50,072
110,682
   Total loans receivable 81,447
160,782
88,075
335,524
665,828
   Less: allowance for losses (5,869)(35,587)(10,305)(55,074)(106,835)
Loans receivable, net $75,578
$125,195
$77,770
$280,450
$558,993
(1) Of the $81.4 million of Single-Pay receivables, $22.4 million relate to mandated extended payment options for certain Canada Single-Pay loans.

  December 31, 2019
  Unsecured InstallmentSecured InstallmentOpen-EndTotal
Delinquent loans receivable    

0-30 days past due $15,369
$8,039
$21,823
$45,231
31-60 days past due 12,403
4,885
13,191
30,479
61 + days past due 15,328
4,586
15,058
34,972
Total delinquent loans receivable $43,100
$17,510
$50,072
$110,682


The following tables summarize loans guaranteedGuaranteed by the Company under CSO programs and the related delinquent receivables (in thousands):
September 30, 2020
Unsecured InstallmentSecured InstallmentTotal
Current loans receivable Guaranteed by the Company$32,869 $786 $33,655 
Delinquent loans receivable Guaranteed by the Company5,953 160 6,113 
Total loans receivable Guaranteed by the Company38,822 946 39,768 
Less: Liability for losses on CSO lender-owned consumer loans(6,130)(68)(6,198)
Loans receivable Guaranteed by the Company, net$32,692 $878 $33,570 
  March 31, 2020
  Unsecured InstallmentSecured InstallmentTotal
Current loans receivable guaranteed by the Company $44,865
$1,509
$46,374
Delinquent loans receivable guaranteed by the Company 9,232
311
9,543
Total loans receivable guaranteed by the Company 54,097
1,820
55,917
Less: Liability for losses on CSO lender-owned consumer loans (9,142)(47)(9,189)
Loans receivable guaranteed by the Company, net $44,955
$1,773
$46,728


September 30, 2020
Unsecured InstallmentSecured InstallmentTotal
Delinquent loans receivable
0-30 days past due$5,404 $111 $5,515 
31-60 days past due433 9 442 
61+ days past due116 40 156 
Total delinquent loans receivable$5,953 $160 $6,113 

December 31, 2019
Unsecured InstallmentSecured InstallmentTotal
Current loans receivable Guaranteed by the Company$61,840 $1,944 $63,784 
Delinquent loans receivable Guaranteed by the Company12,477 392 12,869 
Total loans receivable Guaranteed by the Company74,317 2,336 76,653 
Less: Liability for losses on CSO lender-owned consumer loans(10,553)(70)(10,623)
Loans receivable Guaranteed by the Company, net$63,764 $2,266 $66,030 

December 31, 2019
Unsecured InstallmentSecured InstallmentTotal
Delinquent loans receivable
0-30 days past due$10,392 $326 $10,718 
31-60 days past due1,256 40 1,296 
61 + days past due829 26 855 
Total delinquent loans receivable$12,477 $392 $12,869 
17

  March 31, 2020
  Unsecured InstallmentSecured InstallmentTotal
Delinquent loans receivable   

0-30 days past due $7,589
$255
$7,844
31-60 days past due 939
32
971
61+ days past due 704
24
728
Total delinquent loans receivable $9,232
$311
$9,543


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




  December 31, 2019
  Unsecured InstallmentSecured InstallmentTotal
Current loans receivable guaranteed by the Company $61,840
$1,944
$63,784
Delinquent loans receivable guaranteed by the Company 12,477
392
12,869
Total loans receivable guaranteed by the Company 74,317
2,336
76,653
Less: Liability for losses on CSO lender-owned consumer loans (10,553)(70)(10,623)
Loans receivable guaranteed by the Company, net $63,764
$2,266
$66,030

  December 31, 2019
  Unsecured InstallmentSecured InstallmentTotal
Delinquent loans receivable    
0-30 days past due $10,392
$326
$10,718
31-60 days past due 1,256
40
1,296
61 + days past due 829
26
855
Total delinquent loans receivable $12,477
$392
$12,869


The following table summarizes activity in the allowance for loan losses (in thousands):
 Three Months Ended March 31, 2020
 Single-PayUnsecured InstallmentSecured InstallmentOpen-EndOtherTotal
Balance, beginning of period$5,869
$35,587
$10,305
$55,074
$—
$106,835
Charge-offs(40,521)(38,558)(13,110)(43,509)(1,279)(136,977)
Recoveries30,004
5,783
2,909
6,411
575
45,682
Net charge-offs(10,517)(32,775)(10,201)(37,098)(704)(91,295)
Provision for losses9,639
26,182
9,622
40,991
704
87,138
Effect of foreign currency translation(298)(29)—
(2,509)—
(2,836)
Balance, end of period$4,693
$28,965
$9,726
$56,458
$—
$99,842
Allowance for loan losses as a percentage of gross loan receivables8.6%23.5%13.4%18.0%N/A
17.7%

The following table summarizes activity in the liability for losses on CSO lender-owned consumer loans (in thousands):
 Three Months Ended March 31, 2020
 Unsecured InstallmentSecured InstallmentTotal
Balance, beginning of period$10,553
$70
$10,623
Charge-offs(41,511)(862)(42,373)
Recoveries13,762
779
14,541
Net charge-offs(27,749)(83)(27,832)
Provision for losses26,338
60
26,398
Balance, end of period$9,142
$47
$9,189


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


The following table summarizestables summarize activity in the allowance for loan losses and the liability for losses on CSO lender-owned consumer loans in total (in thousands):
Three Months Ended September 30, 2020
Single-PayUnsecured InstallmentSecured InstallmentOpen-EndOtherTotal
Allowance for loan losses:
Balance, beginning of period$2,802 $18,798 $7,883 $47,319 $0 $76,802 
Charge-offs(21,473)(14,781)(6,648)(22,781)(972)(66,655)
Recoveries17,034 5,186 2,635 4,618 498 29,971 
Net charge-offs(4,439)(9,595)(4,013)(18,163)(474)(36,684)
Provision for losses4,799 9,647 3,239 21,655 474 39,814 
Effect of foreign currency translation35 9 0 606 0 650 
Balance, end of period$3,197 $18,859 $7,109 $51,417 $0 $80,582 
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period$0 $5,128 $36 $0 $0 $5,164 
Increase in liability0 (1,002)(32)0 0 (1,034)
Balance, end of period$— $6,130 $68 $0 $0 $6,198 
 Three Months Ended March 31, 2020
 Single-PayUnsecured InstallmentSecured InstallmentOpen-EndOtherTotal
Balance, beginning of period$5,869
$46,140
$10,375
$55,074
$—
$117,458
Charge-offs(40,521)(80,069)(13,972)(43,509)(1,279)(179,350)
Recoveries30,004
19,545
3,688
6,411
575
60,223
Net charge-offs(10,517)(60,524)(10,284)(37,098)(704)(119,127)
Provision for losses9,639
52,520
9,682
40,991
704
113,536
Effect of foreign currency translation(298)(29)—
(2,509)—
(2,836)
Balance, end of period$4,693
$38,107
$9,773
$56,458
$—
$109,031


Three Months Ended September 30, 2019
Single-PayUnsecured InstallmentSecured InstallmentOpen-EndOtherTotal
Allowance for loan losses:
Balance, beginning of period$4,941 $35,223 $9,996 $51,717 $0 $101,877 
Charge-offs(40,512)(34,252)(10,592)(31,993)(1,382)(118,731)
Recoveries26,599 5,279 2,445 3,791 845 38,959 
Net charge-offs(13,913)(28,973)(8,147)(28,202)(537)(79,772)
Provision for losses14,736 31,891 8,514 31,220 537 86,898 
Effect of foreign currency translation(102)(14)0 (502)0 (618)
Balance, end of period$5,662 $38,127 $10,363 $54,233 $0 $108,385 
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period$0 $9,433 $71 $0 $0 $9,504 
(Increase) / decrease in liability0 (748)3 0 0 (745)
Balance, end of period$0 $10,181 $68 $0 $0 $10,249 
The following table summarizes activity in the allowance for loan losses (in thousands):
18

 Three Months Ended March 31, 2019
 Single-PayUnsecured InstallmentSecured InstallmentOpen-EndOtherTotal
Balance, beginning of period$4,189
$37,716
$12,191
$19,901
$—
$73,997
Charge-offs(36,521)(44,237)(12,671)(3,638)(1,351)(98,418)
Recoveries27,911
6,318
3,123
5,159
898
43,409
Net charge-offs(8,610)(37,919)(9,548)1,521
(453)(55,009)
Provision for losses8,268
33,845
7,153
25,317
453
75,036
Effect of foreign currency translation50
24
—
224
—
298
Balance, end of period$3,897
$33,666
$9,796
$46,963
$—
$94,322
Allowance for loan losses as a percentage of gross loan receivables5.6%20.8%12.1%19.5%N/A
17.0%

The following table summarizes activity in the liability for losses on CSO lender-owned consumer loans (in thousands):
 Three Months Ended March 31, 2019
 Unsecured InstallmentSecured InstallmentTotal
Balance, beginning of period$11,582
$425
$12,007
Charge-offs(40,980)(1,076)(42,056)
Recoveries10,560
802
11,362
Net charge-offs(30,420)(274)(30,694)
Provision for losses27,422
(73)27,349
Balance, end of period$8,584
$78
$8,662



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



Nine Months Ended September 30, 2020
Single-PayUnsecured InstallmentSecured InstallmentOpen-EndOtherTotal
Allowance for loan losses:
Balance, beginning of period$5,869 $35,587 $10,305 $55,074 $0 $106,835 
Charge-offs(83,162)(83,468)(31,505)(104,074)(3,000)(305,209)
Recoveries68,804 17,982 8,505 17,129 1,475 113,895 
Net charge-offs(14,358)(65,486)(23,000)(86,945)(1,525)(191,314)
Provision for losses11,850 48,766 19,804 83,987 1,525 165,932 
Effect of foreign currency translation(164)(8)0 (699)0 (871)
Balance, end of period$3,197 $18,859 $7,109 $51,417 $0 $80,582 
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period$0 $10,553 $70 $0 $0 $10,623 
Decrease in liability0 4,423 2 0 0 4,425 
Balance, end of period$0 $6,130 $68 $0 $0 $6,198 


Nine Months Ended September 30, 2019
Single-PayUnsecured InstallmentSecured InstallmentOpen-EndOtherTotal
Allowance for loan losses:
Balance, beginning of period$4,189 $37,716 $12,191 $19,901 $0 $73,997 
Charge-offs(112,792)(115,825)(33,558)(66,319)(4,075)(332,569)
Recoveries78,811 16,963 8,261 14,487 2,565 121,087 
Net charge-offs(33,981)(98,862)(25,297)(51,832)(1,510)(211,482)
Provision for losses35,450 99,250 23,469 85,910 1,510 245,589 
Effect of foreign currency translation4 23 0 254 0 281 
Balance, end of period$5,662 $38,127 $10,363 $54,233 $0 $108,385 
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period$0 $11,582 $425 $0 $0 $12,007 
Decrease in liability0 1,401 357 0 0 1,758 
Balance, end of period$0 $10,181 $68 $0 $0 $10,249 


As of September 30, 2020, Installment and Open-End loans classified as nonaccrual were $5.4 million and $4.1 million, respectively. As of December 31, 2019, Installment and Open-End loans classified as nonaccrual were $16.6 million and $7.9 million, respectively. The Company's loans receivable inherently considers nonaccrual loans in its estimate of the allowance for loan losses as delinquencies are a primary input into the Company's roll rate-based model.


19


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

TDR LOANS RECEIVABLE

The following table summarizes activitybelow presents TDRs included in gross loans receivable and the impairment included in the allowance for loan losses and the liability for losses on CSO lender-owned consumer loans, a non-GAAP metric, in total (in thousands):

As of
September 30, 2020
Current TDR gross receivables$14,085 
Delinquent TDR gross receivables6,547 
Total TDR gross receivables20,632 
Less: Impairment included in the allowance for loan losses(6,622)
Less: Additional allowance(2,086)
Outstanding TDR receivables, net of impairment$11,924 

There were 0 TDR's as of December 31, 2019.
The tables below reflect new loans modified and classified as TDRs during the periods presented (in thousands):
 Three Months Ended March 31, 2019
 Single-PayUnsecured InstallmentSecured InstallmentOpen-EndOtherTotal
Balance, beginning of period$4,189
$49,298
$12,616
$19,901
$—
$86,004
Charge-offs(36,521)(85,217)(13,747)(3,638)(1,351)(140,474)
Recoveries27,911
16,878
3,925
5,159
898
54,771
Net charge-offs(8,610)(68,339)(9,822)1,521
(453)(85,703)
Provision for losses8,268
61,267
7,080
25,317
453
102,385
Effect of foreign currency translation50
24
—
224
—
298
Balance, end of period$3,897
$42,250
$9,874
$46,963
$—
$102,984


Three Months Ended
September 30, 2020		Nine Months Ended
September 30, 2020
Pre-modification TDR loans receivable$9,007 $37,948 
Post-modification TDR loans receivable8,186 34,195 
Total concessions included in gross charge-offs$821 $3,753 

There were $5.1 million and $6.0 million of loans classified as TDRs that were charged off and included as a reduction in the allowance for loan losses during the three and nine months ended September 30, 2020, respectively. The Company had commitments to lend additional funds of approximately $2.2 million to customers with available and unfunded Open-End loans classified as TDRs as of September 30, 2020.

The table below presents the Company's average outstanding TDR loans receivable, interest income recognized on TDR loans and number of TDR loans for the three and nine months ended September 30, 2020 (dollars in thousands):

Three Months Ended
September 30, 2020		Nine Months Ended
September 30, 2020
Average outstanding TDR loans receivable (1)
$20,484 $21,011 
Interest income recognized6,510 10,907 
Number of TDR loans5,361 22,190 
(1) For the three months ended September 30, 2020, the average is calculated using a simple average of the ending TDR balance as of June 30, 2020 and September 30, 2020. For the nine months ended September 30, 2020, the average is calculated based on the amount immediately after the loan was classified as a TDR and the ending TDR balance as of September 30, 2020 as there were 0 TDRs prior to April 1, 2020.

There were 0 loans classified as TDRs during the three and nine month periods ended September 30, 2019.

NOTE 4 – CREDIT SERVICES ORGANIZATION
The CSO fee receivables under CSO programs were $6.8$4.6 million and $14.7 million at March 31,September 30, 2020 and December 31, 2019, respectively, and are reflected in "Prepaid expenses and other" in the unaudited Condensed Consolidated Balance Sheets. The Company bears the risk of loss through its guarantee to purchase specific customer loans that are in default with the lenders. The terms of these loans range up to six months. See Note 1, "Summary of Significant Accounting Policies and Nature of Operations" of the 2019 Form 10-K for further details of the Company's accounting policy.


As of March 31,September 30, 2020 and December 31, 2019, the incremental maximum amount payable under all such guarantees was $45.7$32.8 million and $62.7 million, respectively. If the Company is required to pay any portion of the total amount of the loans it has guaranteed, it will attempt to recover some or 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, using assumptions and methodologies similar to the Allowance for loan losses, which it recognizes for its consumer loans. Liability for incurred losses on CSO loans Guaranteed by the Company was $9.2$6.2 million and $10.6 million at March 31,September 30, 2020 and December 31, 2019, respectively.

20


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


The Company placed $5.7$4.9 million and $6.2 million in collateral accounts for the benefit of lenders at March 31,September 30, 2020 and December 31, 2019, 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 by lender, typically based on a percentage of the outstanding loan balances held by the lender. The percentage of outstanding loan balances required for collateral is negotiated between the Company and each such lender.


Deferred revenue associated with the CSO program was immaterial as of March 31,September 30, 2020 and December 31, 2019 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 – DEBT
Debt consisted of the following (in thousands):
September 30, 2020December 31, 2019
8.25% Senior Secured Notes$679,566 $678,323 
Non-Recourse U.S. SPV Facility28,884 0 
Non-Recourse Canada SPV Facility91,010 112,221 
     Debt$799,460 $790,544 
  March 31, 2020 December 31, 2019
8.25% Senior Secured Notes (due 2025) $678,727
 $678,323
Non-Recourse Canada SPV Facility 84,724
 112,221
Senior Revolver 25,000
 —
     Debt $788,451
 $790,544


8.25% Senior Secured Notes


In August 2018, the Company issued $690.0 million of 8.25% Senior Secured Notes which mature on September 1, 2025. Interest on the notes is payable semiannually, in arrears, on March 1 and September 1. In connection with the 8.25% Senior Secured Notes, the remaining balance of capitalized financing costs of $11.3$10.4 million, net of amortization, is included in the unaudited Condensed Consolidated Balance Sheets as a component of "Debt." These costs are amortized over the term of the 8.25% Senior Secured Notes as a component of interest expense.


Non-Recourse U.S. SPV Facility

In April 2020, Curo Receivables Finance II, LLC, a bankruptcy-remote special purpose vehicle (the “U.S. SPV Borrower”) and an indirect wholly-owned subsidiary of the Company, entered into the Non-Recourse U.S. SPV Facility with Midtown Madison Management LLC, as administrative agent, and Atalaya Asset Income Fund VI LP, as the initial lender. As of September 30, 2020, the Non-Recourse U.S. SPV Facility provided for $200.0 million of borrowing capacity, which was increased from $100.0 million on July 31, 2020 after obtaining additional commitments.

The Non-Recourse U.S. SPV Facility is secured by a first lien against all assets of the U.S. SPV Borrower. The lenders will make advances against the principal balance of the eligible Installment, Open-End and bank partner loans sold to the U.S. SPV Borrower. Interest accrues at an annual rate of one-month LIBOR (with a floor of 1.65%) plus the lesser of (a) 6.95% and (b) the sum of (i) 6.25% on balances up to $145.5 million, and (ii) 9.75% on balances greater than $145.5 million. The U.S. SPV Borrower will pay the lenders additional interest if it does not borrow minimum specified percentages of the available commitments and a monthly 0.50% per annum commitment fee on the unused portion of the commitments. The Non-Recourse U.S. SPV Facility may not be prepaid prior to April 8, 2021. Prepayments incur a fee equal to (a) prior to September 8, 2021, 3.0% of the aggregate commitments, (b) thereafter, until March 8, 2022, 2.0% of the aggregate commitments, and (c) thereafter, 0. The Company is currently evaluating the impact of the expected transition from LIBOR to alternative reference rates.

As of September 30, 2020, outstanding borrowers under the Non-Recourse U.S. SPV Facility were $28.9 million, net of deferred financing costs of $6.3 million. For further information on the Non-Recourse U.S. SPV Facility, refer to Note 2, "Variable Interest Entities."

21


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




The Company used the proceeds of this issuance (i) to redeem the outstanding 12.00% Senior Secured Notes of CFTC, (ii) to repay a portion of the outstanding indebtedness under the five-year revolving credit facility of CURO Receivables Finance I, LLC, a wholly-owned subsidiary, which consisted of a term loan and revolving borrowing capacity, (iii) for general corporate purposes and (iv) to pay fees, expenses, premiums and accrued interest in connection therewith.

Non-Recourse Canada SPV Facility


On August 2, 2018, CURO Canada Receivables Limited Partnership, a newly created, bankruptcy-remote special purpose vehicle (the "Canada SPV Borrower") and a wholly-owned subsidiary, entered into a four-year revolving credit facilitythe Non-Recourse Canada SPV Facility with Waterfall Asset Management, LLC that provided for C$175.0 million of initial borrowing capacity and the ability to expand such capacity up to C$250.0 million ("Non-Recourse Canada SPV Facility").million. The loans bear interest at an annual rate of 6.75% plus the three-month CDOR. The Canada SPV Borrower also pays a 0.50% per annum commitment fee on the unused portion of the commitments. In April 2019, the facility's maturity date was extended one year, to September 2, 2023.


As of March 31,September 30, 2020, outstanding borrowings under the Non-Recourse Canada SPV Facility were $84.7$91.0 million, net of deferred financing costs of $2.6$2.1 million. For further information on the Non-Recourse Canada SPV, refer to Note 2, "Variable Interest Entities."


Senior Revolver


On September 1, 2017, theThe Company entered intomaintains the Senior Revolver with $25.0that provides $50.0 million of capacity. In November 2018, the Senior Revolverborrowing capacity, was increased to $50.0 million as permitted by the Indenture to the 8.25% Senior Secured Notes. The Senior Revolver is now syndicated with participation by four banks.

Under the Senior Revolver, there is $50.0 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 current term has been extended toexpires June 30, 2021. The Senior Revolver accrues interest at one-month LIBOR plus 5.00% (subject to a 5% overall minimum). The Senior Revolver is syndicated with participation by 4 banks. The Company is currently evaluating the impact of no longer using LIBOR as a benchmark rate.


The terms of the Senior Revolver also require that its outstanding balance be zero0 for at least 30 consecutive days in each calendar year. The Senior Revolver is guaranteed by all subsidiaries that guarantee the 8.25% 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 the 8.25% Senior Secured Notes. Additionally, the negative covenants of the Senior Revolver generally conform to the related provisions in the Indenture for the 8.25% Senior Secured Notes. The revolver had an outstanding balance of $25.0 million at March 31, 2020.


The Senior Revolver contains various conditions to borrowing and affirmative, negative and financial maintenance covenants. Certain of the more significant covenants are (i) minimum eligible collateral value, (ii) consolidated interest coverage ratio and (iii) consolidated leverage ratio. The Senior Revolver also contains various events of default, the occurrence of which could result in termination of the lenders’ commitments to lend and the acceleration of all obligations under the Senior Revolver. 


The Senior Revolver was undrawn at September 30, 2020.

Cash Money Revolving Credit Facility


Cash Money Cheque Cashing, Inc., a Canadian subsidiary ("maintains the Cash Money"), maintainsMoney Revolving Credit Facility, a C$10.0 million revolving credit facility with Royal Bank of Canada, (the "Cash Money Revolving Credit Facility"), which provides short-term liquidity required to meet the working capital needs of the Company's Canadian operations. Aggregate draws under the revolving credit facility are limited to the lesser of: (i) the borrowing base, which is defined as athe percentage of cash, deposits in transit and accounts receivable, and (ii) C$10.0 million. As of March 31,September 30, 2020, the borrowing capacity under the Cash Money Revolving Credit Facility which 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 Cash Money’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 March 31, 2020 and December 31, 2019.September 30, 2020.


Non-Recourse U.S. SPV Facility

Refer to Note 19, "Subsequent Events" for additional information regarding a new Asset-Backed Revolving Credit Facility entered into on April 8, 2020.

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



NOTE 6 – SHARE-BASED COMPENSATION


The Company's stockholder-approved 2017 Incentive Plan provides for the issuance of up to 5.0 million shares, subject to certain adjustment provisions,adjustments, which may be issued in the form of stock options, restricted stock awards, RSUs, stock appreciation rights, performance awards and other awards that may be settled in or based on common stock. Awards may be granted to officers, employees, consultants and directors. The 2017 Incentive Plan provides that shares of common stock subject to awards granted become available for re-issuance if such awards expire, terminate, are canceled for any reason or are forfeited by the recipient.


22


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

Restricted Stock Units
Grants of time-based RSUs are valued at the date of grant based on the closing market price of common stock and are expensed using the straight-line method over the service period. TheseTime-based RSUs are subject to time-based vesting and typically vest over a three-year period.


Grants of market-based RSUs are 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 the market-based awardsRSUs occurs over the service period using the straight-line method.


Unvested shares of RSUs may begenerally are forfeited upon termination of employment, depending on the circumstances of the termination, or failure to achieve the required performance condition, if applicable.


A summary of the activity of time-based and market-based unvested RSUs as of March 31,September 30, 2020 and changes during the threenine months ended March 31,September 30, 2020 are presented in the following table:
Number of RSUs
Time-BasedMarket-BasedWeighted Average
Grant Date Fair Value per Share
December 31, 20191,061,753 394,861 $11.47 
Granted679,413 368,539 10.42 
Vested(308,140)0 11.34 
Forfeited(24,025)(4,687)11.99 
September 30, 20201,409,001 758,713 $10.97 
 Number of RSUs  
 Time-BasedMarket-Based 
Weighted Average
Grant Date Fair Value per Share
December 31, 20191,061,753
394,861
 $11.47
Granted571,773
368,539
 10.55
Vested(197,859)—
 11.39
Forfeited(12,756)(2,613) 12.07
March 31, 20201,422,911
760,787
 $11.08


Share-based compensation expense for the three months ended March 31,September 30, 2020 and 2019, which includes compensation costs from stock options and RSUs, was $3.2$3.4 million and $2.2$2.8 million, respectively, and during the nine months ended September 30, 2020 and 2019 was $9.9 million and $7.6 million, respectively. Share-based compensation expense is included in the unaudited Condensed Consolidated Statements of Operations as a component of "Corporate, district and other expenses."


As of March 31,September 30, 2020, there was $19.6$13.8 million of total unrecognized compensation cost related to stock options and RSUs, of which $13.8$9.3 million related to time-based RSUs and $5.6$4.4 million related to market-based RSUs. Total unrecognized compensation costs will be recognized over a weighted-average period of 2.11.8 years.


NOTE 7 – INCOME TAXES


The Company's effective income tax rate was 5.1%3.0% and 25.9%27.9% for the threenine months ended March 31,September 30, 2020 and 2019, respectively. The decrease in effective income tax rate was primarily due to a tax benefit from the CARES Act, which was enacted by the U.S. Federal government onin March 27, 2020 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-paidpreviously paid Federal income taxes. In the first quarter of 2020, theThe Company recorded an income tax benefit of $9.1$11.3 million related to the carry-back NOLof NOLs from tax years 2018 and 2019, which will offset income earned inits tax liability for prior years prior to tax reform and generate a refund of previously paid taxes at a 35%. statutory rate. In addition, the Company released a valuation allowance of $0.6 million against the losses from the Company's equity methodits investment in Katapult are notand, in the second quarter of 2020, the Company recorded a tax deductible, thus increasingbenefit of $4.6 million from the March 31, 2020 effectiverelease of a valuation allowance previously recorded against NOLs for certain entities in Canada. These benefits were partially offset by uncertain tax rate.position reserve adjustments in the U.S. of $1.1 million.


The Company intends to reinvest Canada earnings indefinitely in its Canadian operations and therefore has not provided for any non-U.S. withholding tax that would be assessed on dividend distributions. If the earnings in Canada of $153.8$187.1 million were distributed to the U.S., legal entities, the Company would be subject to Canadian withholding taxes of an estimated $7.7$9.4 million. In the event the earnings

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


were distributed to the U.S., legal entities, the Company would adjust the income tax provision for the applicable period and would determine the amount of foreign tax credit that would be available.


23


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

NOTE 8 – FAIR 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. The 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 the Company's own estimate about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. Accounting standards establish a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The hierarchy requires the 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 the 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 the Company's own judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Company develops these inputs based on the best information available, including its own data.


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 March 31,September 30, 2020 (in thousands):
Estimated Fair Value
Carrying Value September 30,
2020		Level 1Level 2Level 3Total
Financial assets:
Cash Surrender Value of Life Insurance$6,757 $6,757 $0 $0 $6,757 
Financial liabilities:
Non-qualified deferred compensation plan$4,474 $4,474 $0 $0 $4,474 
  Estimated Fair Value
 Carrying Value March 31,
2020		Level 1Level 2Level 3Total
Financial assets:     
Cash Surrender Value of Life Insurance$5,696
$5,696
$—
$—
$5,696
Financial liabilities:     
Non-qualified deferred compensation plan$3,818
$3,818
$—
$—
$3,818


The table below presents the assets and liabilities that were carried at fair value on the unaudited Condensed Consolidated Balance Sheets at December 31, 2019 (in thousands):

Estimated Fair Value
Carrying Value December 31,
2019		Level 1Level 2Level 3Total
Financial assets:
Cash Surrender Value of Life Insurance$6,171 $6,171 $0 $0 $6,171 
Financial liabilities:
Non-qualified deferred compensation plan$4,666 $4,666 $0 $0 $4,666 
24

  Estimated Fair Value
 Carrying Value December 31,
2019		Level 1Level 2Level 3Total
Financial assets:     
Cash Surrender Value of Life Insurance$6,171
$6,171
$—
$—
$6,171
Financial liabilities:     
Non-qualified deferred compensation plan$4,666
$4,666
$—
$—
$4,666


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





Financial Assets and Liabilities Not Carried at Fair Value


The table below presents the assets and liabilities that were not carried at fair value on the unaudited Condensed Consolidated Balance Sheets at March 31,September 30, 2020 (in thousands):
Estimated Fair Value
Carrying Value September 30,
2020		Level 1Level 2Level 3Total
Financial assets:
Cash and cash equivalents$207,071 $207,071 $0 $0 $207,071 
Restricted cash62,527 62,527 0 0 62,527 
Loans receivable, net416,860 0 0 416,860 416,860 
Financial liabilities:
Liability for losses on CSO lender-owned consumer loans$6,198 $0 $0 $6,198 $6,198 
8.25% Senior Secured Notes679,566 0 569,137 0 569,137 
Non-Recourse U.S. SPV facility28,884 0 0 35,206 35,206 
Non-Recourse Canada SPV facility91,010 0 0 93,096 93,096 
  Estimated Fair Value
 Carrying Value March 31,
2020		Level 1Level 2Level 3Total
Financial assets:     
Cash$138,714
$138,714
$—
$—
$138,714
Restricted cash41,527
41,527
—
—
41,527
Loans receivable, net464,595
—
—
464,595
464,595
Equity method investment8,450
—
—
8,450
8,450
Financial liabilities:     
Liability for losses on CSO lender-owned consumer loans$9,189
$—
$—
$9,189
$9,189
8.25% Senior Secured Notes678,727
—
478,503
—
478,503
Non-Recourse Canada SPV facility84,724
—
—
87,365
87,365
Senior Revolver25,000
—
—
25,000
25,000


The table below presents the assets and liabilities that were not carried at fair value on the unaudited Condensed Consolidated Balance Sheets at December 31, 2019 (in thousands):
Estimated Fair Value
Carrying Value December 31,
2019		Level 1Level 2Level 3Total
Financial assets:
Cash and cash equivalents$75,242 $75,242 $0 $0 $75,242 
Restricted cash34,779 34,779 0 0 34,779 
Loans receivable, net558,993 0 0 558,993 558,993 
Financial liabilities:
Liability for losses on CSO lender-owned consumer loans$10,623 $0 $0 $10,623 $10,623 
8.25% Senior Secured Notes678,323 0 596,924 0 596,924 
Non-Recourse Canada SPV facility112,221 0 0 115,243 115,243 
  Estimated Fair Value
 Carrying Value December 31,
2019		Level 1Level 2Level 3Total
Financial assets:     
Cash$75,242
$75,242
$—
$—
$75,242
Restricted cash34,779
34,779
—
—
34,779
Loans receivable, net558,993
—
—
558,993
558,993
Equity method investment10,068
—
—
10,068
10,068
Financial liabilities:     
Liability for losses on CSO lender-owned consumer loans$10,623
$—
$—
$10,623
$10,623
8.25% Senior Secured Notes678,323
—
596,924
—
596,924
Non-Recourse Canada SPV facility112,221
—
—
115,243
115,243


Loans Receivable

Loans receivable are carried on the unaudited Condensed Consolidated Balance Sheets net of the Allowance for loan losses. The unobservable inputs used to calculate the carrying values include quantitative factors, such as current default trends. Also considered in evaluating the accuracy of the models are 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. The carrying value of loans receivable approximates their fair value. Refer to Note 3, "Loans Receivable and Revenue" for additional information.


During 2019, Katapult completed an incremental equity round at a value per share less than the value per share raised in prior raises. This round included additional investments from existing shareholders and investments by new investors, and was considered indicative of the fair value of shares in Katapult. Accordingly, the Company recognized a $3.7 million loss on its investment to adjust it to market value. As of March 31, 2020, the Company owned approximately 42.5% of the outstanding shares of Katapult.CSO Program


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


25


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



8.25% Senior Secured Notes and Non-Recourse U.S. and Canada SPV Facilities


The 8.25% Senior Secured Notes fair value disclosure was based on broker quotations. The fair values of the Non-Recourse U.S. SPV Facility and Non-Recourse Canada SPV facility and the Senior RevolverFacility were based on the cash needed for their respective final settlements.


Investment in Katapult

The table below represents the Company's investment in Katapult (in thousands):
Equity Method Investment
Measurement Alternative (1)
Balance at December 31, 2019$10,068 $— 
Equity method (loss) - Q1 2020(1,618)— 
Balance at March 31, 20208,450 — 
Equity method income - Q2 2020741 
Balance at June 30, 20209,191 0 
Equity method income - Q3 20203,530 0 
Accounting policy change for certain securities from equity method investment to cost less impairment(12,452)12,452 
Purchases of common stock warrants and preferred shares4,030 7,157 
Balance at September 30, 2020$4,299 $19,609 
Classification as of December 31, 2019Level 3, not carried at fair valueN/A
Classification as of September 30, 2020Level 3, not carried at fair valueLevel 3, carried at fair value
(1) The Company elected to measure this equity security without a readily determinable fair value that does not qualify for the practical expedient to estimate fair value at its cost minus impairment. If the Company identifies an observable price changes in orderly transactions for the identical or a similar investment of the same issuer, it will measure the equity security at fair value as of the date that the observable transaction occurred.

Prior to September 2020, the Company owned 42.5% of the outstanding shares (excluding unexercised options) of Katapult comprised of multiple classes of equity, including preferred stock and certain common stock warrants. All met the accounting criteria for in-substance common stock at the time of 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 on a two-month lag. The Company’s share of Katapult’s periodic income was $3.5 million for the three months ended September 30, 2020 and $2.7 million for the nine months ended September 30, 2020. The Company recorded losses on its equity method investments in Katapult for the three and nine months ended September 30, 2019 of $1.2 million and $5.1 million, respectively. During 2019, Katapult completed an incremental equity issuance round at a value per share less than the value per share raised in prior raises. This round included investments from both existing and new shareholders and was considered indicative of the fair value of shares in Katapult. Accordingly, the Company recognized a $3.7 million loss on its investment to adjust it to market value during the nine months ended September 30, 2019, which is included in the above $5.1 million loss.

In September 2020, the Company acquired common stock warrants and preferred shares of Katapult from existing shareholders for $11.2 million. This transaction resulted in the reevaluation of the accounting for all of the Company’s holdings in Katapult. The Company determined that its holdings of certain common stock warrants qualified as in-substance common stock required to be 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 are carried at cost less impairment instead of applying the equity method. As a result, Company (i) reclassified $12.5 million from an equity method investment to cost minus impairment, (ii) recorded a purchase of common 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 shares for $7.2 million that was determined to not be in-substance common stock and thus held at cost less impairment.

26


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

Both the equity method investment and the investment measured at cost minus impairment are presented within "Investments" on the unaudited Condensed Consolidated Balance Sheet. The Company elected the practical expedient available under ASC 321-10-35-2 to only remeasure the investment in Katapult at fair value upon an indication of impairment or upon the existence of an observable price change in an orderly transaction for the identical or similar security. There were no such transactions with respect to the securities that would indicate the fair value of the Investment in Katapult through September 30, 2020.

On a fully diluted basis, which includes common stock warrants held in Katapult accounted for under the equity method and preferred shares accounted for at cost less impairment under the measurement alternative, the Company's total ownership of Katapult's shares, excluding unexercised options, was 46.6% as of September 30, 2020.


27


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

NOTE 9 – STOCKHOLDERS' EQUITY
The following table summarizes the changes in stockholders' equity for the three and nine months ended March 31,September 30, 2020 and 2019 (in thousands):
Common Stock Treasury Stock Paid-in capital Retained Earnings (Deficit) 
AOCI (1)
 Total Stockholders' EquityCommon StockTreasury Stock, at costPaid-in capitalRetained Earnings (Deficit)
AOCI (1)
Total Stockholders' Equity
Shares Outstanding Par Value   Shares OutstandingPar Value
Balances at December 31, 201941,156,224
 $9
 $(72,343) $68,087
 $93,423
 $(38,663) $50,513
Balances 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 continuing operations— — — — 36,013 — 36,013 
Net income from discontinued operations—
 —
 —
 —
 292
 —
 292
Net income from discontinued operations— — — — 292 — 292 
Foreign currency translation adjustment—
 —
 —
 —
 —
 (22,193) (22,193)Foreign currency translation adjustment— — — — — (22,193)(22,193)
Dividends—
 —
 —
 —
 (2,256)—
—
 (2,256)Dividends— — — — (2,256)— — (2,256)
Share based compensation expense—
 —
 —
 3,194
 —
 —
 3,194
Share based compensation expense— — — 3,194 — — 3,194 
Proceeds from exercise of stock options42,094
 —
 —
 126
 —
 —
 126
Proceeds from exercise of stock options42,094 — — 126 — — 126 
Repurchase of common stock(540,762) —
 (5,509) —
 —
 —
 (5,509)Repurchase of common stock(540,762)— (5,509)— — — (5,509)
Common stock issued for RSU's vesting, net of shares withheld and withholding paid for employee taxes

121,891
 —
 —
 (609) —
 —
 (609)
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes
121,891 — — (609)— — (609)
Balances at March 31, 202040,779,447
 $9
 $(77,852) $70,798

$127,472
 $(60,856) $59,571
Balances at March 31, 202040,779,447 $9 $(77,852)$70,798 $127,472 $(60,856)$59,571 
Net income from continuing operationsNet income from continuing operations— — — — 21,080 — 21,080 
Net income from discontinued operationsNet income from discontinued operations— — — — 993 — 993 
Foreign currency translation adjustmentForeign currency translation adjustment— — — — — 10,261 10,261 
DividendsDividends— — — — (2,244)— (2,244)
Share based compensation expenseShare based compensation expense— — — 3,310 — — 3,310 
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxesCommon stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes105,098 — — (29)— — (29)
Balances at June 30, 2020Balances at June 30, 202040,884,545 $9 $(77,852)$74,079 $147,301 $(50,595)$92,942 
Net income from continuing operationsNet income from continuing operations— — — — 12,881 — 12,881 
Foreign currency translation adjustmentForeign currency translation adjustment— — — — — 5,591 5,591 
DividendsDividends— — — — (2,250)— (2,250)
Share based compensation expenseShare based compensation expense— — — 3,392 — — 3,392 
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxesCommon stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes568 — — (3)— — (3)
Balance at September 30, 2020Balance at September 30, 202040,885,113 $9 $(77,852)$77,468 $157,932 $(45,004)$112,553 
(1) Accumulated other comprehensive income (loss)

(1) Accumulated other comprehensive income (loss)

(1) Accumulated other comprehensive income (loss)
28

 Common Stock Treasury Stock Paid-in capital Retained Earnings (Deficit) 
AOCI (1)
 Total Stockholders' Equity (Deficit)
 Shares Outstanding Par Value     
Balances at December 31, 201846,412,231
 $9
 $—
 $60,015
 $(18,065) $(61,060) $(19,101)
Net income from continuing operations—
 —
 —
 —
 28,673
 —
 28,673
Net income from discontinued operations—
 —
 —
 —
 8,375
 —
 8,375
Foreign currency translation adjustment—
 —
 —
 —
 —
 16,695
 16,695
Share based compensation expense—
 —
 —
 2,172
 —
 —
 2,172
Proceeds from exercise of stock options7,888
 —
 —
 40
 —
 —
 40
Common stock issued for RSU's vesting, net of shares withheld and withholding paid for employee taxes11,170
 —
 —
 (110) —
 —
 (110)
Balances at March 31, 201946,431,289
 $9
 $—
 $62,117
 $18,983
 $(44,365) $36,744
(1) Accumulated other comprehensive income (loss)

Dividend

On February 5, 2020, the Company's Board of Directors announced the initiation of a dividend program and declared its first cash dividend of $0.055 per share. A dividend of $2.2 million was paid on March 2, 2020 to stockholders of record as of the close of


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 (Deficit)
Shares OutstandingPar Value
Balances at December 31, 201846,412,231 $9 $0 $60,015 $(18,065)$(61,060)$(19,101)
Net income from continuing operations— — — — 28,673 — 28,673 
Net income from discontinued operations— — — — 8,375 — 8,375 
Foreign currency translation adjustment— — — — — 16,695 16,695 
Share based compensation expense— — — 2,172 — — 2,172 
Proceeds from exercise of stock options7,888 — — 40 — — 40 
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes11,170 — — (110)— — (110)
Balances at March 31, 201946,431,289 $9 $0 $62,117 $18,983 $(44,365)$36,744 
Net income from continuing operations— — — — 17,667 — 17,667 
Net loss from discontinued operations— — — — (834)— (834)
Foreign currency translation adjustment— — — — — 3,635 3,635 
Share based compensation expense— — — 2,644 — — 2,644 
Proceeds from exercise of stock options4,908 — — 29 — — 29 
Repurchase of common stock(244,200)— (2,507)— — — (2,507)
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes63,285 — — — — — 0 
Balances at June 30, 201946,255,282 $9 $(2,507)$64,790 $35,816 $(40,730)$57,378 
Net income from continuing operations— — — — 27,987 — 27,987 
Net loss from discontinued operations— — — — (598)— (598)
Foreign currency translation adjustment— — — — — (1,954)(1,954)
Share based compensation expense— — — 2,771 — — 2,771 
Proceeds from exercise of stock options3,924 — — 18 — — 18 
Repurchase of common stock (2)
(3,912,041)— (50,557)— — — (50,557)
Balances at September 30, 201942,347,165 $9 $(53,064)$67,579 $63,205 $(42,684)$35,045 
(1) Accumulated other comprehensive income (loss)
(2) Includes the repurchase of 2.0 million shares of common stock from FFL for $13.55 per share. See Note 18, "Share Repurchase Program" for additional information.
business on February 18,
29


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

Dividends

The table below summarizes the Company's quarterly dividends since the dividend policy was instituted during the first quarter of 2020. Subsequently, on April 30,
Dividends Paid
Date of declarationStockholders of recordDate paidDividend per share(in thousands)
Q1 2020February 5, 2020February 18, 2020March 2, 2020$0.055 $2,247 
Q2 2020April 30, 2020May 13, 2020May 27, 2020$0.055 $2,243 
Q3 2020August 3, 2020August 13, 2020August 24, 2020$0.055 $2,249 

On October 29, 2020, the Company's Board of Directors declared a dividend.its fourth dividend under the program of $0.055 per share. See Note 19 "Subsequent, "Subsequent Events" for moreadditional 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,
2020201920202019
Net income from continuing operations$12,881 $27,987 $69,974 $74,327 
Net income (loss) from discontinued operations, net of tax0 (598)1,285 6,943 
Net income$12,881 $27,389 $71,259 $81,270 
Weighted average common shares - basic40,885 44,422 40,838 45,759 
Dilutive effect of stock options and restricted stock units890 1,588 822 1,128 
Weighted average common shares - diluted41,775 46,010 41,660 46,887 
Basic earnings (loss) per share:
Continuing operations$0.32 $0.63 $1.71 $1.63 
Discontinued operations0 (0.01)0.03 0.15 
Basic earnings per share$0.32 $0.62 $1.74 $1.78 
Diluted earnings (loss) per share:
Continuing operations$0.31 $0.61 $1.68 $1.59 
Discontinued operations0 (0.01)0.03 0.15 
Diluted earnings per share$0.31 $0.60 $1.71 $1.74 
 Three Months Ended
March 31,
 2020 2019
Net income from continuing operations$36,013
 $28,673
Net income from discontinued operations, net of tax292
 8,375
Net income$36,305
 $37,048
    
Weighted average common shares - basic40,817
 46,424
Dilutive effect of stock options and restricted stock units1,075
 895
Weighted average common shares - diluted41,892
 47,319
    
Basic earnings per share:   
Continuing operations$0.88
 $0.62
Discontinued operations0.01
 0.18
Basic earnings per share$0.89

$0.80
    
Diluted earnings per share:   
Continuing operations$0.86
 $0.61
Discontinued operations0.01
 0.18
Diluted earnings per share$0.87
 $0.79


Potential shares of common stock 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, these shares are not included in calculating "Diluteddiluted earnings per share." For the three and nine months ended March 31,September 30, 2020 and March 31, 2019, there were 1.7 million and 1.3 million, respectively, and 1.4for the three and nine months ended September 30, 2019, there were 0.1 million and 0.3 million, respectively, of potential shares of common stock excluded from the calculation of Diluteddiluted earnings per share because their effect was anti-dilutive.


The Company utilizes the "control number" concept in the computation of Diluteddiluted 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 Diluteddiluted earnings per share from continuing operations be applied to all other categories of income or loss, regardless of their anti-dilutive effect on such categories.

NOTE 11 – SUPPLEMENTAL CASH FLOW INFORMATION

The following table provides supplemental cash flow information (in thousands):


30

 Three Months Ended
March 31,
 2020 2019
Cash paid for:   
Interest$31,184
 $32,195
Income taxes, net of refunds1,065
 1,456
Non-cash investing activities:   
Property and equipment accrued in accounts payable$869
 $349



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



NOTE 11 – SUPPLEMENTAL CASH FLOW INFORMATION

The following table provides supplemental cash flow information (in thousands):
Nine Months Ended
September 30,
20202019
Cash paid for:
Interest$65,807 $65,627 
Income taxes, net of refunds13,034 2,029 
Non-cash investing activities:
Property and equipment accrued in accounts payable and accrued liabilities$466 $604 

NOTE 12 – SEGMENT REPORTING
Segment information is prepared on the same basis that the Company's Chief Operating Decision Maker ("CODM")CODM reviews financial information for operational decision making purposes, including revenues, net revenue, gross margin, segment operating income and other items.
U.S.As of March 31,September 30, 2020, the Company operated a total of 214210 U.S. retail locations and hashad an online presence in 2733 states. The Company provides Single-Pay loans, Installment loans and Open-End loans, 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 17,17, "Acquisition," the acquisition of Ad Astra closed during the three months ended March 31,in January 2020. The results of Ad Astra are included within the U.S. reporting segment.


Canada. As of March 31,September 30, 2020, the Company operated a total of 202204 stores across seven7 Canadian provinces and territories and hashad an online presence in five5 provinces. The Company provides Single-Pay loans, Installment loans and Open-End loans, insurance products to Open-End 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.

The following table illustrates summarized financial information concerning reportable segments (in thousands):
31

  Three Months Ended
March 31,
  2020 2019
Revenues by segment: (1)
    
U.S. $221,768
 $226,119
Canada 59,038
 51,820
Consolidated revenue $280,806
 $277,939
Net revenues by segment:    
U.S. $135,727
 $141,139
Canada 31,543
 34,415
Consolidated net revenue $167,270
 $175,554
Gross margin by segment:    
U.S. $87,540
 $89,803
Canada 12,159
 15,694
Consolidated gross margin $99,699
 $105,497
Segment operating income (loss):    
U.S. $33,426
 $31,195
Canada 4,524
 7,524
Consolidated operating profit $37,950
 $38,719
Expenditures for long-lived assets by segment:    
U.S. $4,280
 $2,430
Canada 553
 689
Consolidated expenditures for long-lived assets $4,833
 $3,119
(1) For revenue by product, see Note 3, "Loans Receivable and Revenue."



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



The following table illustrates summarized financial information concerning reportable segments (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
Revenues by segment: (1)
U.S.$132,848 $237,069 $491,936 $673,234 
Canada49,155 60,195 153,382 166,269 
Consolidated revenue$182,003 $297,264 $645,318 $839,503 
Net revenues by segment:
U.S.$89,363 $134,072 $320,880 $392,705 
Canada37,890 39,325 $105,459 108,536 
Consolidated net revenue$127,253 $173,397 $426,339 $501,241 
Gross margin by segment:
U.S.$43,384 $77,250 $187,784 $232,120 
Canada20,186 19,389 51,984 51,197 
Consolidated gross margin$63,570 $96,639 $239,768 $283,317 
Segment operating (loss) income:
U.S.$(696)$28,092 $44,587 $76,316 
Canada12,755 11,134 27,570 26,749 
Consolidated operating income$12,059 $39,226 $72,157 $103,065 
Expenditures for long-lived assets by segment:
U.S.$2,273 $2,890 $6,801 $7,888 
Canada67 216 764 1,382 
Consolidated expenditures for long-lived assets$2,340 $3,106 $7,565 $9,270 
(1) For revenue by product, see Note 3, "Loans Receivable and Revenue."
The following table provides the proportion of gross loans receivable by segment (in thousands):
September 30,
2020		December 31,
2019
U.S.$205,296 $363,453 
Canada292,146 302,375 
Total gross loans receivable$497,442 $665,828 
  March 31,
2020		 December 31,
2019
U.S. $288,127
 $363,453
Canada 276,310
 302,375
Total gross loans receivable $564,437
 $665,828


The following table represents the Company's net long-lived assets, comprised of property and equipment, by segment. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the asset is physically located (in thousands):
September 30,
2020		December 31,
2019
U.S.$38,047 $43,618 
Canada23,634 27,193 
Total net long-lived assets$61,681 $70,811 
  March 31, 2020 December 31, 2019
U.S. $42,536
 $43,618
Canada 24,251
 27,193
Total net long-lived assets $66,787
 $70,811


The 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.


NOTE 13 – COMMITMENTS AND CONTENGENCIESCONTINGENCIES
Securities Litigation and Enforcement


On December 5, 2018, a putative securities fraud class action lawsuit was filed against the Company and its chief executive officer, chief financial officer and chief operating officer in the United States District Court for the District of Kansas, captioned
32


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

Yellowdog Partners, LP v. CURO Group Holdings Corp., Donald F. Gayhardt, William Baker and Roger W. Dean, Civil Action No. 18-2662.18-2662 (the "Yellowdog Action"). On May 31, 2019, plaintiffsplaintiff filed a consolidated complaint naming Doug Rippel, Chad Faulkner, Mike McKnight, Friedman Fleischer & Lowe Capital Partners II, L.P., FFL Executive Partners II, L.P., and FFL Parallel Fund II, L.P. (collectively, the "FFL Defendants") as additional defendants. The complaint alleges that the Company and the individual defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and that certain defendants also violated Section 20(a) of the Exchange Act as "control persons" of CURO. Plaintiffs purportPlaintiff purports to bring these claims on behalf of a class of investors who purchased Company common stock between April 27, 2018 and October 24, 2018.


Plaintiffs allegePlaintiff generally alleges that, during the putative class period, the Company made misleading statements and omitted material information regarding its efforts to transition the Canadian inventory of products from Single-Pay loans to Open-End loans. Plaintiffs assertPlaintiff asserts that the Company and the individual defendants made these misstatements and omissions to keep the stock price high. Plaintiffs seekPlaintiff seeks unspecified damages and other relief.


On May 27, 2020, the parties accepted a mediator’s proposal to settle the action for $9.0 million.On September 4, 2020, the Court granted preliminary approval of the settlement and scheduled the final settlement approval hearing for December 18, 2020. The Company's directors' and officers' insurance carriers will pay the amount in excess of the $2.5 million retention under the policy and, as such, the Company recorded $2.5 million in expense in 2019. As of September 30, 2020, the entire $9.0 million settlement was paid with $1.3 million of it paid by the Company. As a result, the Company has a remaining $1.3 million receivable in "Other assets," which will be collected from the insurance carrier, and no remaining liability related to the settlement. No expense was incurred for the three months ended September 30, 2020 related to the settlement.

On June 25, 2020, July 2, 2020 and July 16, 2020, 3 shareholder derivative lawsuits were filed in the United States District Court for the District of Delaware against certain directors and officers of the Company, the Company, and in 2 of the 3 lawsuits, the FFL Defendants. Plaintiffs generally allege the same underlying facts of the Yellowdog Action.

While the Company is vigorously contesting this lawsuit,these lawsuits, it cannot determine the final resolution or when itthey might be resolved. In addition to the expenses incurred in defending this litigationthese litigations and any damages in excess of insurance coverages that may be awarded in the event of anany adverse ruling,rulings, management’s efforts and attention may be diverted from the ordinary business operations to address these claims. Regardless of the outcome, this litigationoutcomes, these legal matters may have a material adverse impact on results becauseof operations or financial condition as a result of defense costs, including costs related to indemnification obligations, diversion of resources and other factors.


During the first quarter of 2019, the Company received an inquiry from the SEC regarding the Company's public disclosures surrounding its efforts to transition the Canadian inventory of products from Single-Pay loans to Open-End loans. During the second and third quarters of 2020, the SEC requested information from the Company concerning information cited in plaintiff's complaint in the Yellowdog Action, and the mediation process described above.


City of Austin


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

On May 15, 2020, the City of Austin proposed an ordinance in direct response to a recent Texas Attorney General’s opinion which would arguably allow CSO’s to provide signature loans outside the regulatory authority of the OCCC and the City of Austin. The proposed ordinance was effective June 1, 2020. The City not only implemented restrictions on CSO transactions, but also revised certain definitions found in the ordinance. These revisions potentially affect the foundation upon which the Company's previous arguments in municipal court were based.

On June 8, 2020, another company within CURO's industry filed a Petition for Declaratory Relief, Application for Temporary Restraining Order, and Application for Temporary and Permanent Injunction against the City. The Temporary Restraining Order was granted and is still currently in place. During the pendency of the Temporary Restraining Order, the revised ordinance is stayed as to its effectiveness for all impacted companies, including the Company.

33


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

The Company does not anticipate having a final determination of the lawfulness of its CAB program under the Austin ordinanceordinances (and similar ordinances in other Texas cities) in the near future. A final adverse decision could result in material monetary liability

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


in Austin and elsewhere in Texas, and wouldcould force the Company to restructure the loans it originates in Austin and elsewhere in Texas.


Other Legal Matters
The Company is a defendant in certain litigation matters encountered from time-to-time in the ordinary course of business. Certain of these matters may be covered to an extent by insurance. While it is difficult to predict the outcome of any particular proceeding, the Company does not believe the result of any of these matters will have a material adverse effect on the Company's business, results of operations or financial condition.


NOTE 14 – LEASES


Operating leases entered into by the Company are primarily for retail stores in certain U.S. states and Canadian provinces. Leases classified as finance are immaterial to the Company as of March 31,September 30, 2020. Operating leases expire at various times through 2032. The Company determines if an arrangement is a lease at inception. Operating leases are included in "Right of use asset - operating leases" and "Lease liability - operating leases" on the unaudited Condensed Consolidated Balance Sheets.


Typically, a contract is or containsconstitutes 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, an entity shallthe 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.


The Company recognizes ROU assets and lease liabilities based on the present value of lease payments over the lease term at commencement date. The rate 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 leases in the Company's portfolio). 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 portfolio.


The Company uses quoted interest rates obtained from financial institutions as an input, adjusted for Company specificCompany-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.


The majority of the leases have an original term of five years with twoplus 2 five-year renewal options. The consumer price indexConsumer Price Index is used in determining future lease payments and for purposes of calculating operating lease liabilities, leaseliabilities. 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. 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.


34

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

The following table summarizes the operating lease costs and other information for the three and nine months ended March 31,September 30, 2020 and March 31,September 30,2019 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Operating lease costs:
Third-Party$8,567 $7,687 $22,947 $23,000 
Related-Party6 865 2,538 2,595 
Total operating lease costs$8,573 $8,552 $25,485 $25,595 
Operating cash flow - Operating leases$25,329 $26,001 
New ROU assets - Operating leases$10,885 $11,088 
Weighted average remaining lease term - Operating leases6.0 years6.3 years
Weighted average discount rate - Operating leases10.1 %10.3 %
 Three Months Ended March 31,
 20202019
Operating lease costs:  
Third-Party$7,626
$7,621
Related-Party864
847
Total operating lease costs$8,490
$8,468
   
Operating cash flow - Operating leases$8,433
$8,615
New ROU assets - Operating leases$5,647
$—
Weighted average remaining lease term - Operating leases6.3 years
6.1 years
Weighted average discount rate - Operating leases10.3%10.3%


The following table summarizes the aggregate operating lease maturitiespayments that the Company is contractually obligated to make under operating leases as of March 31,September 30, 2020 (in thousands):
Third-PartyRelated-PartyTotal
Remainder of 2020$7,795 $926 $8,721 
202129,593 3,768 33,361 
202226,682 3,665 30,347 
202321,803 1,320 23,123 
202416,799 965 17,764 
202512,227 865 13,092 
Thereafter31,155 2,665 33,820 
Total146,054 14,174 160,228 
Less: Imputed interest(38,189)(3,208)(41,397)
Operating lease liabilities$107,865 $10,966 $118,831 
  Third-Party Related-Party Total
Remainder of 2020 $22,437
 $2,809
 $25,246
2021 27,464
 3,767
 31,231
2022 24,640
 3,661
 28,301
2023 19,995
 1,316
 21,311
2024 15,343
 962
 16,305
2025 11,178
 861
 12,039
Thereafter 30,416
 2,655
 33,071
Total 151,473
 16,031
 167,504
Less: Imputed interest (41,963) (3,826) (45,789)
Operating lease liabilities $109,510
 $12,205
 $121,715


As a result of the COVID-19 pandemic that began during the three months ended March 31, 2020, CURO reviewed ROU assets for indicators of impairment. Under US GAAP, the model used to review ROU assets for impairment is consistent to that used for other long-lived assets, such as fixed assets. In applying the appropriate guidance, the Company noted there was no indicators of impairment as of March 31, 2020 related to its ROU assets.

NOTE 15 – DISCONTINUED OPERATIONS


On February 25, 2019, in accordance with the provisions of the U.K. Insolvency Act 1986 and as approved by the Boards of Directors of the U.K. Subsidiaries, insolvency practitioners from KPMG were appointed as Administrators for the U.K. Subsidiaries.subsidiaries. The effect of the U.K. Subsidiaries’ entry into administration was to place their management, affairs, business and property of the U.K. Subsidiaries under the direct control of the Administrators. Accordingly, the Company deconsolidated the U.K. Subsidiaries, which comprised the U.K. reportable operating segment, as of February 25, 2019 and classified them as Discontinued Operations for all periods presented.


35

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

The following table presents the results of operations of the U.K. Subsidiaries, which meet the criteria of Discontinued Operations and, therefore, are excluded from the Company's results of continuing operations (in thousands):
 Three Months Ended
March 31,		Three Months Ended September 30,Nine Months Ended September 30,
 2020 
2019(1)
202020192020
2019(1)
Revenue $—
 $6,957
Revenue$0 $0 $0 $6,957 
Provision for losses ��
 1,703
Provision for losses0 0 0 1,703 
Net revenue —
 5,254
Net revenue0 0 0 5,254 
    
Cost of providing services    
Office —
 246
Other costs of providing services —
 61
Advertising —
 775
Total cost of providing services —
 1,082
Total cost of providing services0 0 0 1,082 
Gross margin —
 4,172
Gross margin0 0 0 4,172 
Operating (income) expense    Operating (income) expense
Corporate, district and other expenses —
 3,810
Corporate, district and other expenses0 0 0 3,806 
Interest income —
 (4)
(Gain) loss on disposition (390) 39,414
(Gain) loss on disposition0 0 (1,714)39,414 
Total operating (income) expense (390) 43,220
Total operating (income) expense0 0 (1,714)43,220 
Pre-tax income (loss) from operations of discontinued operations 390
 (39,048)Pre-tax income (loss) from operations of discontinued operations0 0 1,714 (39,048)
Income tax expense (benefit) related to disposition 98
 (47,423)Income tax expense (benefit) related to disposition0 598 429 (45,991)
Net income from discontinued operations $292
 $8,375
Net income (loss) from discontinued operationsNet income (loss) from discontinued operations$0 $(598)$1,285 $6,943 
(1) Includes U.K. Subsidiaries financial results from January 1, 2019 to February 25, 2019.(1) Includes U.K. Subsidiaries financial results from January 1, 2019 to February 25, 2019.(1) Includes U.K. Subsidiaries financial results from January 1, 2019 to February 25, 2019.


Revenue and expenses related to discontinued operations included activity prior to the deconsolidation of the U.K. subsidiaries effective February 25, 2019. For the threenine months ended March 31,September 30, 2019, "(Gain) loss on disposition" of $39.4 million included the non-cash effect of eliminating assets and liabilities of the U.K. Subsidiaries as of the date of deconsolidation, as well as the effect of cumulative currency exchange rate differences on the U.S. investment in the U.K.


In connection with the disposition of the U.K. Subsidiaries, the U.S. entity that owned the Company's interests in the U.K. Subsidiaries recognized a loss on investment. This loss resulted in an estimated U.S. Federal and state income tax benefit of $47.4$46.0 million, as of March 31, 2019,was will be available to be applied againstoffset future income tax obligations. Subsequently, in 2019, the Company revised the estimated U.S. Federal and statetax basis in the U.K. Subsidiaries, resulting in a $0.6 million reduction in the income tax benefit to $46.6 million. as of September 30, 2019.

During the threenine months ended March 31,September 30, 2020, the Company received $0.4 million of disbursementsits final distributions from the AdministratorAdministrators related to the wind-down of the U.K. Subsidiaries.


As of March 31,September 30, 2020 and December 31, 2019, the unaudited Condensed Consolidated Balance Sheets were not impacted by the U.K. Subsidiaries, as all balances were written off when the U.K. segment entered into administration during the first quarter of 2019.


The following table presents cash flows of the U.K. Subsidiaries (in thousands):
Nine Months Ended September 30,
2020
2019(1)
Net cash provided by (used in) discontinued operating activities$1,714 $(504)
Net cash used in discontinued investing activities0 (14,213)
Net cash used in discontinued financing activities0 0 
(1) Includes U.K. Subsidiaries financial results from January 1, 2019 to February 25, 2019.

36

 Three Months Ended
March 31,
 2020 
2019(1)
Net cash provided by (used in) discontinued operating activities$390
 $(504)
Net cash used in discontinued investing activities—
 (14,213)
Net cash used in discontinued financing activities—
 —
(1) Includes U.K. Subsidiaries financial results from January 1, 2019 to February 25, 2019.  



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



NOTE 16 – GOODWILL


The change in the carrying amount of Goodwillgoodwill by operating segment for the threenine months ended March 31,September 30, 2020 was as follows (in thousands):
U.S.CanadaTotal
Goodwill at December 31, 2019$91,131 $29,478 $120,609 
Acquisition (Note 17)14,791 0 14,791 
Foreign currency translation0 (811)(811)
Goodwill at September 30, 2020$105,922 $28,667 $134,589 
 U.S. Canada Total
Goodwill at December 31, 2019$91,131
 $29,478
 $120,609
Acquisition (Note 17)14,791
 —
 14,791
Foreign currency translation—
 (2,575) (2,575)
Goodwill at March 31, 2020105,922
 26,903
 132,825


The Company tests goodwill at least annually for impairment (the Company has elected to annually test for potential impairment as of goodwill on October 1)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 2019 Form 10-K filed with the SEC on March 9, 2020, for additional information on the Company's policy for assessing goodwill for impairment.


U.S.In the third quarter of 2020, the Company performed an interim review of triggering events for both reporting units, which would indicate whether a quantitative or qualitative assessment of goodwill impairment is necessary. As a result of the interim triggering event review, the Company concluded an additional assessment was not necessary and Canada Reporting Units

Duringdid 0t record an impairment loss during the three months ended March 31, 2020, the Company determined a triggering event had occurred for the U.S. and Canada reporting units as a result of COVID-19. The global crisis caused by the pandemic drove significant declines in macroeconomic market conditions and altered the assumptions usedSeptember 30, 2020. Similarly, no impairment losses were recorded in the Company's forecast for both reporting units. After performing an interim review, the Company concluded that the fair valuefirst and second quarters of each reporting unit was in excess of its respective carrying value.2020.


Ad Astra Acquisition


The Company completed the acquisition of Ad Astra on January 3, 2020. Goodwill of $14.8 million was recorded onin the U.S. reporting unit during the threenine months ended March 31,September 30, 2020, based on the excess of the purchase price of the business combination over the fair value of the acquired net assets. See Note 17, "Acquisition" for more information related to the business combination.


NOTE 17 – ACQUISITION


On January 3, 2020, the Company acquired 100% of the outstanding stock of Ad Astra, a related party, for total consideration of $14.4 million, net of cash received. Prior to the acquisition, Ad Astra washad 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. For the threenine months ended March 31,September 30, 2019, prior to the acquisition, $4.7$11.9 million of costs related to Ad Astra were included in "Other costs of providing services." Subsequent to the acquisition, operating costs for Ad Astra are included within "Corporate, district and other expenses," consistent with presentation of other internal collection costs. Ad Astra incurred $3.5$7.3 million of operating expense during the threenine months ended March 31,September 30, 2020.

The transaction has beenwas 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 arewere based on their estimates of fair value available as of March 31, 2020. As of March 31, 2020, theavailable. The Company completed the determination of the fair values of the acquired identifiable assets and liabilities based on the information available.available in March 2020.

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

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
Cash consideration transferred:$17,811 
Cash and cash equivalents3,360 
Accounts receivable465 
Property and equipment358 
Intangible assets1,101 
Goodwill14,791 
Operating lease asset235 
Accounts payable and accrued liabilities(2,264)
Operating lease liabilities(235)
Total$17,811 
(in thousands)Amounts acquired on January 3, 2020
Cash consideration transferred:$17,811
  
Cash and cash equivalents3,360
Accounts receivable465
Property and equipment358
Intangible assets1,101
Goodwill14,791
Operating lease asset235
Accounts payable and accrued liabilities(2,264)
Operating lease liabilities(235)
Total$17,811




Goodwill of $14.8 million represents the excess over the fair value of the net tangible and intangible assets acquired. Goodwill is not deductible for income tax purposes.


NOTE 18 – SHARE REPURCHASE PROGRAM


In February 2020, the Company's Board of Directors authorized a new share repurchase program for up to $25.0 million of its common stock. Under the program, shares were repurchased in the open market or in privately negotiated transactions at times and amounts considered appropriate by CURO. Due to uncertainty caused by COVID-19, the Board suspended the program on March 15, 2020. There were no material purchases inunder the program during the threenine months ended March 31,September 30, 2020.


In April 2019, the Company's Board of Directors authorized a share repurchase program providing for the repurchase of up to $50.0 million of its common stock. The repurchase program, which commenced June 2019, was completed in February 2020. Under this program, the Company repurchased 455,255 shares of its common stock at an average price of $10.45 per share for total consideration of $4.8 million during the threenine months ended March 31,September 30, 2020. Purchases under the program were made from time-to-time in the open market, in privately negotiated transactions, or both, at the Company's discretion and subject to market conditions and other factors. Any repurchased shares are available for use in connection with equity plans or other corporate purposes.


Separately, in August 2019, the Company entered into a Share Repurchase Agreement (the “Share Repurchase Agreement”) with FFL, a related party. Pursuant to the Share Repurchase Agreement, the Company repurchased 2,000,000 shares of its common stock, par value $0.001 per share, owned by FFL, in a private transaction at a purchase price equal to $13.55 per share of Common Stock. The purchase price was determined by using the Company's closing common stock price on August 29, 2019 of $13.97, less a discount of 3.0%. This transaction occurred outside of the share repurchase program authorized in April 2019.


NOTE 19 – SUBSEQUENT EVENTS

New Non-Recourse U.S. SPV Facility

On April 8, 2020, the Company entered into a Non-Recourse U.S. SPV Facility to provide financing for U.S. Unsecured Installment and Open-End receivables, including those generated under its technology, marketing and servicing relationship with Stride Bank. The Non-Recourse U.S. SPV Facility provides for $100.0 million of borrowing capacity, subject to the borrowing base of eligible collateral and certain other conditions. Concurrent with the closing, the Company drew $35.2 million on the facility.


Dividend


On April 30,October 29, 2020, the Company's Board of Directors declared a dividend under its previously announcedpreviously-announced dividend program, of $0.055 per share to be paidpayable on May 27,November 19, 2020 to stockholders of record as of the close of business on May 13,November 9, 2020.




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


Forward-Looking Statements


The following discussion of financial condition, results of operations, liquidity and capital resources 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 “Risk Factors” in our 2019 Form 10-K, Quarterly Report on Form 10-Q for the yearquarter ended DecemberMarch 31, 2019 filed with the SEC on March 9, 2020, and our Current Report on Form 8-K, filed with the SEC on April 8, 2020, and Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 for a discussion of the uncertainties, risks and assumptions associated with these statements.


Overview


We are a growth-oriented, technology-enabled, highly-diversified, multi-channel and multi-product consumer finance company serving a wide range of underbanked consumers in the U.S. and Canada.


History


CURO was founded in 1997 to meet the growing needs of underbanked consumers looking for alternative access to credit. With more than 20nearly 25 years of experience, we seek to offer a variety of convenient, easily-accessible financial and loan services in all of our markets.


CURO Financial Technologies Corp., previously known as Speedy Cash Holdings Corp. ("CFTC"), was incorporated in Delaware in July 2008. CURO Group Holdings Corp., previously known as Speedy Group Holdings Corp., was incorporated in Delaware in 2013 as the parent company of CFTC. The terms “CURO," "we,” “our,” “us” and the “Company” refer to CURO Group Holdings Corp. and its directly and indirectly owned subsidiaries as a combined entity, except where otherwise stated.


In the U.S., our stores operate under "Speedy Cash" and "Rapid Cash." In the second quarter of 2017, we launched "Avio Credit," an online Installment and Open-End brand. In February 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 stores are branded "Cash Money" and we offer "LendDirect" Installment and Open-End loans online and at certain stores. As of March 31,September 30, 2020, our network consisted of 416414 locations across 14 U.S. states and seven Canadian provinces and we offered our online services in 2733 U.S. states and five Canadian provinces.


In April 2017, we invested 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. We have continued to make opportunistic investments in Katapult as it continues to grow. A portion of the investment is accounted for as an equity method investment and the remainder is carried at cost less impairment, with both included in "Investments" in the unaudited Condensed Consolidated Balance Sheets. As of September 30, 2020, we owned 46.6% of Katapult on a fully diluted basis. See Note 8, "FairValue Measurements" for additional details about our investment in Katapult and fair value considerations.

In the fourth quarter of 2019, we partnered with Stride Bank to launch a bank-sponsored Unsecured Installment loan product, Verge Credit, originated by Stride Bank, which are included in "Gross loans receivable" on the unaudited Condensed Consolidated Balance Sheets. We market and service loans on behalf of Stride Bank, and the bank licenses our proprietary credit decisioning for its loan scoring and approval. As of September 30, 2020, Verge Credit loans are offered in 14 states.

Recent Developments


COVID-19. A novel strain of coronavirus, known as COVID-19, surfaced in late 2019 and has spread around the world, including to the U.S. and Canada. In March 2020, the World Health Organization categorized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. In response toAs the COVID-19 pandemic various governmental bodies have issued decrees prohibiting certain businesses from continuingcontinues to operate and certain classes of workers from reporting to work. However, CURO's operations have been designated as essential financial services by federal guidelines and local regulations. As a provider of an essential service,affect economies worldwide, we remain focused on protecting the health and wellbeingwell-being of our employees, customers, and the communities in which we operate, while assuring the continuity of our business operations. In responseWe are considered an essential financial service under federal guidelines, in both the U.S. and Canada, and under local regulations, and as such, remain open to facilitate the needs of our customers during local government lock down orders. While resurgences of the pandemic have occurred and could continue to occur in both our U.S. and Canadian
39


jurisdictions, with local governmental bodies issuing guidelines on reopening procedures depending on the severity of resurgences, we have established processes and procedures during the crisis to help ensure we can continue to operate safely for both our employees and customers.

As previously disclosed, we have taken the following steps to ensure our financial stability while maintaining the health and wellbeingwell-being of our employees and customers:


Full-year 2020 earnings guidance was withdrawn.
Cancellation•cancellation of the 2020 Short-Term Incentive Plan.Plan;
Suspension•suspension of our $25 million share repurchase program previously announcedthat was approved in February 2020.2020;
Establishment•establishment of an enhanced Customer Care Program, as described further below;
•adjustment of our credit underwriting models to tighten approval rates and enhance our employment and income verification practices for both store and on-line lending platforms; and
•implementation of work-from-home for virtually all 1,100 of the Company’s contact center and corporate support personnel in Wichita, Toronto and Chicago.

For our communities, we committed $500,000 to support local healthcare workers battling COVID-19. To date, in addition to providing financial support to Frontline Foods chapters as previously disclosed, our CURO volunteers have personally coordinated more than 25,000 meals to area hospitals in Wichita, KS and Toronto, ON.

Refer to Note 1, "Summary of Significant Accounting Policies and Nature of Operations" for a description of the U.S. and Canadian government responses to the COVID-19 pandemic, the impact to our customers, and the potential impact on our unaudited Condensed Consolidated Financial Statements.

Customer Care Program. To better serve our customers during the COVID-19 pandemic as they face unprecedented economic challenges and uncertainties.uncertainties, we established an enhanced Customer Care Program. The program enables our team members to provide relief to customers in various ways, ranging from due date extensions, interest or fee forgiveness, payment waivers or extended payment plans, depending on a customer’s individual circumstances. As of September 30, 2020, we had granted concessions on more than 55,000 loans, or 11% of our active loans, and waived over $5.0 million in payments and fees. We also temporarily suspended all returned item fees.


Designation of most stores across both the U.S. and Canada as an essential service, allowing stores to remain open during local governments' lock down orders.
Adjustment of our credit underwriting models to tighten approval rates and enhance our employment and income verification practices for both the store and on-line lending platforms.
Implementation of work-from-home for virtually all 1,100 Approximately 22,000 of the Company’s contact centerloans on which we granted concessions for qualified as a TDR as of September 30, 2020. See Note 3, "Loans Receivable and corporate support personnelRevenue" of the Notes to the unaudited Condensed Consolidated Financial Statements for additional information.

Katapult Investment. Katapult is a private lease-to-own platform for online, brick and mortar and omni-channel retailers. Katapult provides the retailers' customers with payment options in Wichita, Torontostore or via the Katapult link on a retailer's website. Since our initial acquisition of certain equity securities in Katapult in April 2017, we have continued to increase our investment opportunistically. After additional investments in September 2020, we owned 46.6% of Katapult on a fully diluted basis. See Note 8, "Fair Value Measurements" for additional details about our investment in Katapult and Chicago.
fair value considerations.


Through the nine months ended September 30, 2020, Katapult's originations increased by over 160% compared to the same period in 2019.

Ad Astra Acquisition. On January 3, 2020, we acquired Ad Astra, previously our exclusive provider of third-party collection services for the U.S. business. The acquisition allows us to bringbrings all U.S. servicing and recovery in-house, drivedrives operational and financial synergies to ensure all aspects of the recovery portfolio are coordinated, reducereduces operational redundancy and increaseincreases peak volume management, improve compliance synergies, and facilitatefacilitates integrated and personalized CRM strategies and campaign management across the servicing and recovery lifecycle. See Note 17,17, "Acquisition" of the Notes to the unaudited Condensed Consolidated Financial Statements for additional information.


Credit Facilities. On April 8, 2020, we entered into incremental asset-backed revolving credit facilitythe Non-Recourse U.S. SPV Facility to provide financing for U.S. Installment and Open-End receivables, including those generated under our technology, marketing and servicing relationship with Stride Bank. The credit facility, provides for an initialwhich was initially entered into with a borrowing capacity of $100.0 million, was expanded in August 2020 to $200.0 million and is dependent upon the borrowing base of eligible collateral and certain other conditions, as described in Note 19, "Subsequent Events.5, "Debt." For recent developments related to our Senior Secured Notes, Non-Recourse Canada SPV facility and other capital resources, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”


California Assembly Bill 539. On September 13, 2019, the California legislature passed Assembly Bill 539, which imposes an interest rate cap of 36%, plus the Federal Funds Rate, on all consumer loans between $2,500 and $10,000 of 36%, plus the Federal Funds Rate.$10,000. The bill became effective on January 1, 2020. Revenue from California Unsecured and Secured Installment loans amounted to 7.6% and 8.8% of total revenue for the
40


three and nine months ended March 31, 2020.September 30, 2020, respectively, compared to 11.8% and 12.8% for the three and nine months ended September 30, 2019, respectively. See "Regulatory Environment and Compliance" in our 2019 10-K for additional details.


CFPB Rule on Small Dollar Lending. On July 7, 2020, the CFPB issued its decision on the 2019 Proposed Rule and rescinded the mandatory underwriting provisions of the 2017 Final CFPB Rule. However, the CFPB did not rescind or alter the payment provisions of the 2017 Final CFPB Rule. We cannot predict when the payment provisions of the 2017 Final CFPB Rule will come into effect, given that the rule is currently stayed as a result of an industry legal challenge. See "Regulatory Environment and Compliance" below for additional details of the CFPB rulemaking initiatives related to small dollar lending.

Revenue by Product and Segment and Related Loan Portfolio Performance


Revenue by Product


We exclude financial results of our former U.K. operationssubsidiaries for all periods presented, as they were discontinued for accounting and reporting purposes in February 2019. See Note 15,15, "Discontinued Operations" for additional details.


The following tables summarizetable summarizes revenue by product, including CSO fees, for the periodsperiod indicated (in thousands, unaudited):
For the Three Months Ended
September 30, 2020September 30, 2019
U.S.CanadaTotalU.S.CanadaTotal
Unsecured Installment$66,204 $1,204 $67,408 $135,541 $1,692 $137,233 
Secured Installment16,692 — 16,692 28,270 — 28,270 
Open-End30,431 28,280 58,711 39,605 26,515 66,120 
Single-Pay16,050 9,034 25,084 29,140 20,172 49,312 
Ancillary3,471 10,637 14,108 4,513 11,816 16,329 
   Total revenue$132,848 $49,155 $182,003 $237,069 $60,195 $297,264 
  For the Three Months Ended
  March 31, 2020 March 31, 2019
  U.S.CanadaTotal U.S.CanadaTotal
Unsecured Installment $120,829
$1,580
$122,409
 $134,003
$1,775
$135,778
Secured Installment 26,286
—
26,286
 27,477
—
27,477
Open-End 41,990
28,992
70,982
 32,593
20,276
52,869
Single-Pay 28,154
17,003
45,157
 27,168
19,593
46,761
Ancillary 4,509
11,463
15,972
 4,878
10,176
15,054
   Total revenue $221,768
$59,038
$280,806
 $226,119
$51,820
$277,939


During the three months ended March 31,September 30, 2020, total revenue grew $2.9declined $115.3 million, or 1.0%38.8%, to $280.8$182.0 million, compared to the prior-year period. Geographically, the 1.9% decline in U.S. and Canada revenues was offset by a 13.9% increase in Canada revenues. declined 44.0% and 18.3%, respectively.

From a product perspective, Unsecured Installment and Secured Installment revenues decreased 9.8%$69.8 million, or 50.9%, and 4.3%$11.6 million, or 41.0%, respectively, due tobecause of COVID-19 Impacts and regulatory changes in California that were effective January 1, 2020,2020. Excluding California, Unsecured Installment and regulatory changes for CSOs in Ohio, effective May 1, 2019. Secured Installment revenues decreased $53.7 million, or 48.1%, and $6.4 million, or 33.9%, respectively.

Single-Pay revenue declined $1.6$24.2 million, or 3.4%49.1%, for the three months ended March 31,September 30, 2020, compared to the prior-year period, primarily due to lower volumeCOVID-19 impacts on loan volumes and balances, which declined $36.8 million, or 47.1%, year over year. Single-Pay loan volumes were particularly affected by the broad reduction in storefront usage by customers during the last two weeksperiod of self-quarantine and stay-at-home orders, as well as by increased payments as a result of government stimulus programs. Demand remained low in both the firstU.S. and Canada through the third quarter of 2020 attributable primarilyas compared to historical levels. However, for the impactthree months ended September 30, 2020, Single-Pay revenues increased sequentially $2.4 million, or 10.3%, on related loan growth of COVID-19.$5.1 million, or 14.2%, as quarantine and stay-at-home restrictions eased in certain jurisdictions during the third quarter.

For the three months ended September 30, 2020, Open-End loansrevenues increased sequentially $2.0 million, or 3.5%, on related loan growth of $37.1 million, or 13.0%. Open-End loan balances in Canada grew $56.2$28.2 million, or 30.5%11.9%, from March 31,September 30, 2019, with related revenue growth of $8.7$1.8 million, or 43.0%6.7%. Open-End growth in Canada was partially offset by a decrease in U.S. Open-End revenue rose 28.8% on related loan growthloans of $17.0$20.9 million, or 30.0%27.0%, with a related revenue decrease of $9.2 million, or 23.2%. Open-End loan balances in both countries were also affected by COVID-19 Impacts; namely, our decision to initially tighten credit, continued reduced application volumes and lower utilization of approved credit lines.


Ancillary revenues, increased 6.1% versus the prior-year period, primarily due towhich include the sale of insurance products to Open-End and Installment loan customers in Canada. Ancillary revenueCanada, decreased $2.2 million, or 13.6%, versus the prior-year period, stemming primarily from lower check cashing fees and additional insurance claims for consumers impacted by COVID-19 during the third quarter of 2020. Sequentially, ancillary
41


revenues increased $0.9 million, or 6.8%, for the three months ended September 30, 2020, due to the aforementioned sequential growth in Canada Open-End loans.

The following table summarizes revenue by product, including CSO fees, for the first quarterperiod indicated (in thousands, unaudited):

For the Nine Months Ended
September 30, 2020September 30, 2019
U.S.CanadaTotalU.S.CanadaTotal
Unsecured Installment$256,258 $4,070 $260,328 $390,026 $5,093 $395,119 
Secured Installment62,379 — 62,379 81,823 — 81,823 
Open-End103,338 83,091 186,429 104,516 69,445 173,961 
Single-Pay58,521 34,452 92,973 82,733 58,872 141,605 
Ancillary11,440 31,769 43,209 14,136 32,859 46,995 
Total revenue$491,936 $153,382 $645,318 $673,234 $166,269 $839,503 

Year-over-year comparisons for the nine-month periods were also influenced by COVID-19 Impacts. During the nine months ended September 30, 2020, total revenue declined $194.2 million, or 23.1%, to $645.3 million, compared to the prior-year period. Geographically, U.S. and Canada revenues declined 26.9% and 7.8%, respectively.
From a product perspective, Unsecured Installment and Secured Installment revenues decreased 34.1% and 23.8%, respectively, because of COVID-19 Impacts, regulatory changes in California that were effective January 1, 2020 included $9.1and regulatory changes for CSOs in Ohio that were effective May 1, 2019.

Single-Pay revenue declined $48.6 million, or 34.3%, for the nine months ended September 30, 2020, compared to the prior-year period, primarily due to COVID-19 impacts on loan volume and balances, which declined $36.8 million, or 47.1%, year over year. Single-Pay loan volumes were particularly affected by the broad reduction in storefront usage by customers during the period of revenue relatedself-quarantine and stay-at-home orders, as well as government stimulus programs.

Open-End revenues grew $12.5 million, or 7.2%, compared to the prior-year period, primarily due to $28.2 million, or 11.9%, of Open-End loan growth in Canada, partially offset by a $20.9 million, or 27.0%, decline in the U.S. Additionally, Open-End loan balances in both countries were affected by COVID-19 Impacts.

Ancillary revenues, which included the sale of insurance products. The $9.1products to Open-End and Installment loan customers in Canada, decreased $3.8 million, of revenue is comprised of $5.8 million of commissions earnedor 8.1%, versus the prior-year period, primarily stemming from lower check cashing fees during the sale of third-party insurance premiums at the time of sale and $3.3 million from a profit-sharing arrangement with this third-party. The amount we earn under the profit-sharing arrangement is dependent upon the level of claims adjudicated, which are related to our customers. We maintain no guarantees as to the level of profit earned by the third party and do not have anynine months ended September 30, 2020.



obligations under the terms of the agreement with the third-party. Recoveries under the insurance program are recognized as they are approved by the insurance provider.

The following charts depict the revenue contribution,Revenue contributions, including CSO fees, of the products and services that we currently offer was as follows for the periods indicated:
chart-c7308d7f4c514b8f6e7.jpgchart-f3932709aa444e0a967.jpg
curo-20200930_g1.jpgcuro-20200930_g2.jpg

42


Online revenue as a percentage of consolidated revenue increased during the three and nine months ended September 30, 2020, from COVID-19 Impacts and the resulting transition of customers using our online channel which provides customers a safe and contactless option. For the three months ended March 31,September 30, 2020 and 2019, revenue generated through our online channel was 47%49% and 46%, respectively, of consolidated revenue. For the three months ended September 30, 2020, online transactions accounted for 57% of our total loan transactions, compared to 46% for the prior-year period.


curo-20200930_g3.jpgcuro-20200930_g4.jpg

For the nine months ended September 30, 2020 and 2019, revenue generated through our online channel was 48% and 45%, respectively, of consolidated revenue. For the nine months ended September 30, 2020, online transactions accounted for 53% of our total loan transactions, compared to 45% for the prior-year period.

Gross Combined Loans Receivable


The following table reconciles Company Owned gross loans receivable, a GAAP-basis balance sheet measure, with reconciliation to Gross combined loans receivable, a non-GAAP measure(1). Gross combined loans receivables includes loans originated by third-party lenders through CSO programs, which are not included in our unaudited Condensed Consolidated Financial Statements but from which we earn revenue by providing a guarantee to the unaffiliated lender (in millions, unaudited):

As of
September 30, 2020June 30, 2020March 31, 2020December 31, 2019September 30, 2019
Company Owned gross loans receivable$497.4 $456.5 $564.4 $665.8 $657.6 
Gross loans receivable Guaranteed by the Company39.8 34.1 55.9 76.7 73.1 
Gross combined loans receivable (1)
$537.2 $490.6 $620.3 $742.5 $730.7 
(1) See "Non-GAAP Financial Measures" below for definition and additional information.

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 As of
 March 31, 2020December 31, 2019September 30, 2019June 30, 2019March 31, 2019
Company Owned gross loans receivable$564.4
$665.8
$657.6
$609.6
$553.2
Gross loans receivable Guaranteed by the Company55.9
76.7
73.1
67.3
61.9
Gross combined loans receivable (1)
$620.3
$742.5
$730.7
$676.9
$615.1
(1) See "Non-GAAP Financial Measures" below for definition and additional information.




Gross combined loans receivable by product is presented below:


chart-f98590102e9155548bf.jpgcuro-20200930_g5.jpg

Gross combined loans receivable increased $5.3decreased $193.5 million, or 0.9%26.5%, to $620.4$537.2 million as of March 31,September 30, 2020, from $615.1$730.7 million as of March 31, 2019,September 30, 2019. The decrease was driven by COVID-19 Impacts and, for Installment loans, the impact of regulatory changes in California that were effective January 1, 2020. Sequentially, gross combined loans receivable increased $46.6 million, or 9.5%, as growth in Open-End loans of 30.0% and 30.5% indemand increased during the U.S. and Canada, respectively, offset the decline in Installment CSO and Single-Pay loans and any decrease in volume in the last two weeks of March 2020 as a result of COVID-19. third quarter.

Gross combined loans receivable performance by product is explained further in the following sections.

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Loan Volume and Portfolio Performance Analysis


Unsecured Installment Loans - Company Owned


Company Owned Unsecured Installment revenue for the three months ended September 30, 2020 and related gross combined loans receivable decreased $13.4$34.6 million, or 9.8%52.6%, and $44.2$89.5 million, or 20.0%51.3%, respectively, from the prior-year period, primarily due to COVID-19 Impacts and regulatory changes in California that were effective January 1, 2020.2020, partially offset by growth in Verge Credit loans.


Unsecured Installment loans in California represented $51.5were $27.4 million, or 41.8%32.2%, of total Company Owned Unsecured Installment loans as of March 31,September 30, 2020, a decrease of $38.1 million from $89.6$59.0 million, or 55.4%68.3%, as of March 31,from September 30, 2019. Sequentially, California Unsecured Installment loans decreased $9.6 million. Excluding California, Company Owned Unsecured Installment loans receivable decreased $0.5$30.5 million, or 0.7%34.6%, from the prior-year period, while revenues increased $0.1for the three months ended September 30, 2020 decreased $18.5 million, or 0.3%46.2%, year-over-year.compared to the prior-year period, due to COVID-19 Impacts. Sequentially, excluding California and Verge Credit loans, Company Owned Unsecured Installment loans receivable increased $5.4 million, or 12.1%, from June 30, 2020, while revenue decreased $0.2 million, or 0.8%. The receivable increase was due to normal seasonality and reduced quarantine and stay-at-home orders during the third quarter.


The Unsecured Installment quarterly NCO rate improved approximately 560 bps year over year, as a result of COVID-19 Impacts. Sequentially, the quarterly NCO rate decreased from 22.6% in the second quarter to 11.5% in the third quarter of 2020.

The Unsecured Installment allowance coverage increased year over year, from 21.9% as of September 30, 2019, to 22.2% as of September 30, 2020, as a result of certain loan modifications under the Customer Care Program, which were classified as TDRs. Loans classified as TDRs are included within Company Owned gross loans receivable. Amounts waived on these loans are immediately charged-off and the impairment for these loans is included within the Allowance for loan losses. Determination of the impairment for TDRs includes an estimate of their lifetime losses, which is greater than estimated incurred losses at a point in time. TDRs increased our total Unsecured Installment allowance coverage by nearly 160 bps from the allowance coverage that would have otherwise been required. Sequentially, the allowance coverage decreased from 22.6% to 22.2%, as a result of improvement in past-due balances from 21.8% to 21.1%, as well as the aforementioned decline in the NCO rate.

Unsecured Installment Loans - Guaranteed by the Company

Unsecured Installment loans Guaranteed by the Company declined $5.6$31.9 million year-over-year due to regulatory changes in Ohio, effective May 1, 2019. As a result, we no longer operate as a CSO in Ohio, which accounted for $5.1 million of Unsecured Installment loans Guaranteed by the Company as of March 31, 2019. Unsecured Installment loan balances Guaranteed by the Company declined in the last two weeks of the first quarter of 2020 due primarily to the impacts of COVID-19.

The NCO rate for Company Owned Unsecured Installment gross loans receivable in the first quarter of 2020 increased approximately 155 basis points ("bps") year-over-year,year over year, primarily due to a mix shift away from California as a result of regulatory changes. California NCO rates for Unsecured Installment loans are historically lower than our other major states. California comprised 46.4% of total U.S. Company Owned Unsecured Installment loans as of March 31, 2020 compared to 60.7% as of March 31, 2019.COVID-19 Impacts.

The Unsecured Installment Company Owned allowance coverage increased year-over-year, from 20.8% as of March 31, 2019 to 23.5% as of March 31, 2020, primarily as a result of the previously mentioned increase in U.S. NCO rates and Allowance Build. Sequentially (described within this release as the change from the fourth quarter of 2019 to the first quarter of 2020), allowance coverage and past-due balances increased from 22.1% to 23.5% and from 26.8% to 28.4%, respectively, as of March 31, 2020.


NCO rates for Unsecured Installment loans Guaranteed by the Company improved 115 bps comparedyear over year from 52.9% to 38.6%. Sequentially, the prior-year period.NCO rate increased from 35.4% to 38.6%, as demand and new customer volume improved. The CSO liability for losses as a percentage of loans Guaranteed by the Company increased year-over-year,year over year from 14.4% for the first quarterto 15.8% as of 2019 to 16.9% for the first quarter of 2020, due primarily to Allowance Build.September 30, 2020. Sequentially, allowance coverage and past-due balances as a percent of gross loans receivable increased from 14.2%12.1% to 16.9%15.3% and the CSO liability for losses increased from 16.8%15.5% to 17.1%, respectively, for15.8% during the three months ended March 31,September 30, 2020.

45




20202019
(dollars in thousands, unaudited)Third QuarterSecond QuarterFirst QuarterFourth QuarterThird Quarter
Unsecured Installment loans:
Revenue - Company Owned$31,168 $33,405 $55,569 $63,428 $65,809 
Provision for losses - Company Owned9,647 12,932 26,182 33,183 31,891 
Net revenue - Company Owned$21,521 $20,473 $29,387 $30,245 $33,918 
Net charge-offs - Company Owned$9,595 $23,110 $32,775 $35,729 $28,973 
Revenue - Guaranteed by the Company (1)
$36,240 $37,024 $66,840 $72,183 $71,424 
Provision for losses - Guaranteed by the Company (1)
14,884 11,418 26,338 34,858 36,664 
Net revenue - Guaranteed by the Company (1)
$21,356 $25,606 $40,502 $37,325 $34,760 
Net charge-offs - Guaranteed by the Company (1)
$13,882 $15,432 $27,749 $34,486 $35,916 
Unsecured Installment gross combined loans receivable:
Company Owned$84,959 $81,601 $123,118 $160,782 $174,489 
Guaranteed by the Company (1)
38,822 33,082 54,097 74,317 70,704 
Unsecured Installment gross combined loans receivable (1)(2)
$123,781 $114,683 $177,215 $235,099 $245,193 
Average gross loans receivable:
Average Unsecured Installment gross loans receivable - Company Owned (3)
$83,280 $102,360 $141,950 $167,636 $169,606 
Average Unsecured Installment gross loans receivable - Guaranteed by the Company (1)(3)
$35,952 $43,590 $64,207 $72,511 $67,880 
Allowance for loan losses and CSO liability for losses:
Unsecured Installment Allowance for loan losses (4)
$18,859 $18,451 $28,965 $35,587 $38,127 
Unsecured Installment CSO liability for losses (1)(4)
$6,130 $5,128 $9,142 $10,553 $10,181 
Unsecured Installment Allowance for loan losses as a percentage of Unsecured Installment gross loans receivable22.2 %22.6 %23.5 %22.1 %21.9 %
Unsecured Installment CSO liability for losses as a percentage of Unsecured Installment gross loans Guaranteed by the Company (1)
15.8 %15.5 %16.9 %14.2 %14.4 %
Unsecured Installment past-due balances:
Unsecured Installment gross loans receivable - Company Owned$17,942 $17,766 $34,966 $43,100 $46,537 
Unsecured Installment gross loans - Guaranteed by the Company (1)
$5,953 $4,019 $9,232 $12,477 $11,842 
Past-due Unsecured Installment Company Owned gross loans receivable -- percentage21.1 %21.8 %28.4 %26.8 %26.7 %
Past-due Unsecured Installment gross loans Guaranteed by the Company -- percentage (1)
15.3 %12.1 %17.1 %16.8 %16.7 %
Unsecured Installment other information:
Originations - Company Owned
$49,833 $24,444 $55,941 $87,080 $107,275 
Originations - Guaranteed by the Company (1)
$51,433 $33,700 $64,836 $91,004 $89,644 
Unsecured Installment ratios:
NCO rate - Company Owned (5)
11.5 %22.6 %23.1 %21.3 %17.1 %
NCO rate - Guaranteed by the Company (1)(5)
38.6 %35.4 %43.2 %47.6 %52.9 %
(1) Includes loans originated by third-party lenders through CSO programs, which are not included in our unaudited Condensed Consolidated Financial Statements.
(2) Non-GAAP measure. For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."
(3) We calculate Average gross loans receivable, which we utilize to calculate product yield and NCO rates, as average of beginning of quarter and end of quarter gross loans receivable.
(4) We report Allowance for loan losses as a contra-asset reducing gross loans receivable and the CSO liability for losses as a liability on our unaudited Condensed Consolidated Balance Sheets.
(5) We calculate NCO rate as NCOs divided by Average gross loans receivables.

46

 2020 2019
(dollars in thousands, unaudited)First Quarter Fourth QuarterThird QuarterSecond QuarterFirst
Quarter
Unsecured Installment loans:      
Revenue - Company Owned$55,569
 $63,428
$65,809
$59,814
$65,542
Provision for losses - Company Owned26,182
 33,183
31,891
33,514
33,845
Net revenue - Company Owned$29,387
 $30,245
$33,918
$26,300
$31,697
Net charge-offs - Company Owned$32,775
 $35,729
$28,973
$31,970
$37,919
Revenue - Guaranteed by the Company$66,840
 $72,183
$71,424
$62,298
$70,236
Provision for losses - Guaranteed by the Company26,338
 34,858
36,664
28,336
27,422
Net revenue - Guaranteed by the Company$40,502
 $37,325
$34,760
$33,962
$42,814
Net charge-offs - Guaranteed by the Company$27,749
 $34,486
$35,916
$27,486
$30,421
Unsecured Installment gross combined loans receivable:      
Company Owned$123,118
 $160,782
$174,489
$164,722
$161,716
Guaranteed by the Company (1)(2)
54,097
 74,317
70,704
65,055
59,740
Unsecured Installment gross combined loans receivable (1)(2)
$177,215
 $235,099
$245,193
$229,777
$221,456
Average gross loans receivable:      
Average Unsecured Installment gross loans receivable - Company Owned (3)
$141,950
 $167,636
$169,606
$163,219
$176,060
Average Unsecured Installment gross loans receivable - Guaranteed by the Company (3)
$64,207
 $72,511
$67,880
$62,398
$68,596
Allowance for loan losses and CSO liability for losses:      
Unsecured Installment Allowance for loan losses (3)
$28,965
 $35,587
$38,127
$35,223
$33,666
Unsecured Installment CSO liability for losses (3)
$9,142
 $10,553
$10,181
$9,433
$8,583
Unsecured Installment Allowance for loan losses as a percentage of Unsecured Installment gross loans receivable23.5% 22.1%21.9%21.4%20.8%
Unsecured Installment CSO liability for losses as a percentage of Unsecured Installment gross loans guaranteed by the Company16.9% 14.2%14.4%14.5%14.4%
Unsecured Installment past-due balances:      
Unsecured Installment gross loans receivable$34,966
 $43,100
$46,537
$38,037
$40,801
Unsecured Installment gross loans guaranteed by the Company$9,232
 $12,477
$11,842
$10,087
$7,967
Past-due Unsecured Installment gross loans receivable -- percentage (2)
28.4% 26.8%26.7%23.1%25.2%
Past-due Unsecured Installment gross loans guaranteed by the Company -- percentage (2)
17.1% 16.8%16.7%15.5%13.3%
Unsecured Installment other information:      
Originations - Company Owned$55,941
 $87,080
$107,275
$102,792
$78,515
Originations - Guaranteed by the Company (1)
$64,836
 $91,004
$89,644
$80,445
$68,899
Unsecured Installment ratios:      
Provision as a percentage of gross loans receivable - Company Owned21.3% 20.6%18.3%20.3%20.9%
Provision as a percentage of gross loans receivable - Guaranteed by the Company48.7% 46.9%51.9%43.6%45.9%
(1)  Includes loans originated by third-party lenders through CSO programs, which are not included in our unaudited Condensed Consolidated Financial Statements.
(2) Non-GAAP measure. For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."
(3) We calculate Average gross loans receivable, which we utilize to calculate product yield and NCO rates, as average of beginning of quarter and end of quarter gross loans receivable.
(4) We report Allowance for loan losses as a contra-asset reducing gross loans receivable and the CSO liability for losses as a liability on our unaudited Condensed Consolidated Balance Sheets.




Secured Installment Loans


Secured Installment revenue and the related gross combined loans receivable for the three months ended March 31,September 30, 2020 decreased 4.3%41.0% and 10.4%46.0%, respectively, compared to the prior-year period, primarily as a result ofperiod. The decreases were due to COVID-19 Impacts and regulatory changes in California that were effective January 1, 2020. California accounted for $28.6$16.9 million, or 38.5%33.8%, of total Secured Installment gross combined loans receivable as of March 31,September 30, 2020, as compared to $41.4 million, or 44.8%, as of September 30, 2019, a decrease of $14.8$24.5 million from $43.5year over year. Excluding California, Secured Installment loans receivable decreased $18.0 million, or 52.3%35.3%, as of March 31, 2019.from the prior-year period, while revenues decreased $6.4 million, or 33.9%, year over year, due to COVID-19 Impacts.

The Secured Installment NCO rate improved 170 bps compared to the prior-year period. Secured Installment Allowance for loan losses and CSO liability for losses as a percentage of Secured Installment gross combined loans receivable increased year-over-yearto 14.4% as of September 30, 2020 from 11.9%,11.3% in the corresponding period in 2019. The increase was primarily attributable to the classification of certain loan modifications under the Customer Care Program as TDRs, partially offset by the impact of lower past-due receivables as of September 30, 2020. TDRs increased our total Secured Installment allowance coverage by over 280 bps from the allowance coverage that would otherwise have been required. Sequentially, the Secured Installment Allowance for loan losses and sequentially from 11.5% to 13.1%CSO liability for the three months ended March 31, 2020, due to Allowance Build.losses as a percentage of Secured Installment gross combined loans receivable was unchanged.

20202019
(dollars in thousands, unaudited)Third QuarterSecond QuarterFirst QuarterFourth QuarterThird Quarter
Secured Installment loans:
Revenue$16,692 $19,401 $26,286 $28,690 $28,270 
Provision for losses3,291 7,238 9,682 11,492 8,819 
Net revenue$13,401 $12,163 $16,604 $17,198 $19,451 
Net charge-offs$4,033 $9,092 $10,284 $11,548 $8,455 
Secured Installment gross combined loan balances:
Secured Installment gross combined loans receivable (1)(2)
$49,921 $54,635 $74,405 $90,411 $92,478 
Average Secured Installment gross combined loans receivable (3)$52,278 $64,520 $82,408 $91,445 $90,098 
Secured Installment Allowance for loan losses and CSO liability for losses (4)
$7,177 $7,919 $9,773 $10,375 $10,431 
Secured Installment Allowance for loan losses and CSO liability for losses as a percentage of Secured Installment gross combined loans receivable (1)
14.4 %14.5 %13.1 %11.5 %11.3 %
Secured Installment past-due balances:
Secured Installment past-due gross combined loans receivable (1)(2)
$7,703 $9,072 $15,612 $17,902 $17,645 
Past-due Secured Installment gross combined loans receivable -- percentage (1)
15.4 %16.6 %21.0 %19.8 %19.1 %
Secured Installment other information:
Originations (2)
$19,216 $11,242 $20,990 $40,961 $45,990 
Secured Installment ratios:
NCO Rate (5)
7.7 %14.1 %12.5 %12.6 %9.4 %
(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, which are not included in our unaudited Condensed Consolidated Financial Statements.
(3) We calculate Average gross loans receivable, which we utilize to calculate product yield and NCO rates, as beginning of quarter and end of quarter gross loans receivable.
(4) We report Allowance for loan losses as a contra-asset reducing gross loans receivable and the CSO liability for losses as a liability on our unaudited Condensed Consolidated Balance Sheets.
(5) We calculate NCO rate as NCOs divided by Average gross loans receivables.
47

 2020 2019
(dollars in thousands, unaudited)First Quarter Fourth QuarterThird QuarterSecond QuarterFirst
Quarter
Secured Installment loans:      
Revenue$26,286
 $28,690
$28,270
$26,076
$27,477
Provision for losses9,682
 11,492
8,819
7,821
7,080
Net revenue$16,604
 $17,198
$19,451
$18,255
$20,397
Net charge-offs$10,284
 $11,548
$8,455
$7,630
$9,822
Secured Installment gross combined loan balances:      
Secured Installment gross combined loans receivable (1)(2)
$74,405
 $90,411
$92,478
$87,718
$83,087
Average Secured Installment gross combined loans receivable (3)
$82,408
 $91,445
$90,098
$85,403
$89,505
Secured Installment Allowance for loan losses and CSO liability for losses (4)
$9,773
 $10,375
$10,431
$10,067
$9,874
Secured Installment Allowance for loan losses and CSO liability for losses as a percentage of Secured Installment gross combined loans receivable13.1% 11.5%11.3%11.5%11.9%
Secured Installment past-due balances:      
Secured Installment past-due gross loans receivable and gross loans guaranteed by the Company$15,612
 $17,902
$17,645
$14,570
$13,866
Past-due Secured Installment gross loans receivable and gross loans guaranteed by the Company -- percentage (1)(2)
21.0% 19.8%19.1%16.6%16.7%
Secured Installment other information:      
Originations (2)
$20,990
 $40,961
$45,990
$49,051
$33,490
Secured Installment ratios:      
Provision as a percentage of gross combined loans receivable13.0% 12.7%9.5%8.9%8.5%
(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, which are not included in our unaudited Condensed Consolidated Financial Statements.
(3) We calculate Average gross loans receivable, which we utilize to calculate product yield and NCO rates, as beginning of quarter and end of quarter gross loans receivable.
(4) We report Allowance for loan losses as a contra-asset reducing gross loans receivable and the CSO liability for losses as a liability on our unaudited Condensed Consolidated Balance Sheets.



Open-End Loans


Open-End loan balances as of March 31,September 30, 2020 increased $73.2$7.3 million, or 30.4%2.3% ($89.710.2 million, or 37.2%3.2%, on a constant-currency basis), compared to March 31,September 30, 2019, on 30.5% (39.5%11.9% (13.1% on a constant-currency basis) growth in Canada, and 30.0% growthoffset by a decline in the U.S.

Consolidated of $20.9 million, or 27.0%. Open-End NCO rate during the three months ended March 31,loan balances as of September 30, 2020 improved 160 bps versus the prior-year period, primarily as a result of seasoning of the Canada portfolio, which improved 165 bps year-over-yearincreased $37.1 million, or 13.0% ($43.1 million, or 15.1%, on a pro forma basis as described below. constant-currency basis), sequentially due to normal seasonality and faster reopening of our markets in Canada than in the U.S. Sequentially, U.S. and Canada Open-End loan receivables increased $3.5 million, or 6.6%, and $33.6 million, or 14.5%, respectively.

The Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable increaseddecreased sequentially from 16.4%16.6% to 18.0% for16.0% as of September 30, 2020. The decrease was due to a shift in the three months ended March 31, 2020 becausegeographic mix of Allowance Build.receivables from the U.S. to Canada, the sequential decline in past-due balances as a percentage of gross loans receivable from 10.9% to 9.9% and a 460 bps sequential improvement in Open-End NCO rates. Similar to our other products, Open-End allowance coverage was impacted by TDRs under the Customer Care Program and increased our total Open-End allowance coverage by 86 bps from the allowance coverage that would otherwise have been required. Year over year, NCO rates improved 340 bps due to a decline in past-due balances as a percentage of gross loans receivable.


Q1 2019 Open-End Loss Recognition Change


Effective January 1, 2019, we modified the timeframe over which we charge-off Open-End loans and made related refinements to our loss provisioning methodology. Prior to January 1, 2019, we deemed Open-End loans uncollectible and charged-off when a customer missed a scheduled payment and the loan was considered past-due. Because of our continuing shift to Open-End loans in Canada and our analysis of payment patterns on early-stage versus late-stage delinquencies, we revised our estimates and now consider Open-End loans uncollectible when the loan has been contractually past-due for 90 consecutive days. Consequently, past-due Open-End loans and related accrued interest now remain in loans receivable for 90 days before being charged off against the allowance for loan losses. All recoveries on charged-off loans are credited to the allowance for loan losses. We evaluate the adequacy of the allowance for loan losses compared to the related gross loans receivable balances that include accrued interest.


Prospectively from January 1, 2019, past-due, unpaid balances plus related accrued interest charge-off on day 91.


The aforementionedThis change was treated as a change in accounting estimate for accounting purposes and applied prospectively beginning January 1, 2019.

The following table reports 2019 Open-End loan performance including the effect of the Q1 2019 Open-End Loss Recognition Change:
48


 2020 2019
(dollars in thousands, unaudited)First Quarter Fourth QuarterThird QuarterSecond QuarterFirst
Quarter
Open-End loans:      
Revenue$70,982
 $71,295
$66,120
$54,972
$52,869
Provision for losses40,991
 37,816
31,220
29,373
25,317
Net revenue$29,991
 $33,479
$34,900
$25,599
$27,552
Net charge-offs (1)
$37,098
 $37,426
$28,202
$25,151
$(1,521)
Open-End gross loan balances:      
Open-End gross loans receivable$314,006
 $335,524
$314,971
$283,311
$240,790
Average Open-End gross loans receivable (1)
$324,765
 $325,248
$299,141
$262,051
$224,062
Open-End allowance for loan losses:      
Allowance for loan losses$56,458
 $55,074
$54,233
$51,717
$46,963
Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable18.0% 16.4%17.2%18.3%19.5%
Open-End past-due balances:      
Open-End past-due gross loans receivable$49,987
 $50,072
$46,053
$35,395
$32,444
Past-due Open-End gross loans receivable - percentage15.9% 14.9%14.6%12.5%13.5%
(1)  We calculate Average gross loans receivable, which we utilize to calculate product yield and NCO rates, as average of beginning of quarter and end of quarter gross loans receivable.


20202019
(dollars in thousands, unaudited)Third QuarterSecond QuarterFirst QuarterFourth QuarterThird Quarter
Open-End loans:
Revenue$58,711 $56,736 $70,982 $71,295 $66,120 
Provision for losses21,655 21,341 40,991 37,816 31,220 
Net revenue$37,056 $35,395 $29,991 $33,479 $34,900 
Net charge-offs$18,163 $31,684 $37,098 $37,426 $28,202 
Open-End gross loan balances:
Open-End gross loans receivable$322,234 $285,156 $314,006 $335,524 $314,971 
Average Open-End gross loans receivable (1)
$303,695 $299,581 $324,765 $325,248 $299,141 
Open-End allowance for loan losses:
Allowance for loan losses$51,417 $47,319 $56,458 $55,074 $54,233 
Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable16.0 %16.6 %18.0 %16.4 %17.2 %
Open-End past-due balances:
Open-End past-due gross loans receivable$31,807 $31,208 $49,987 $50,072 $46,053 
Past-due Open-End gross loans receivable - percentage9.9 %10.9 %15.9 %14.9 %14.6 %
Open-End ratios:
NCO rate (2)
6.0 %10.6 %11.4 %11.5 %9.4 %
(1) We calculate Average gross loans receivable, which we utilize to calculate product yield and NCO rates, as average of beginning of quarter and end of quarter gross loans receivable.
(2) We calculate NCO rate as NCOs divided by Average gross loans receivables.
The
In addition, the following table illustrates, on a non-GAAP pro forma basis, the 2019 quarterly results as if the Q1 2019 Open-End Loss Recognition Change had been applied to our outstanding Open-End loan portfolio as of December 31, 2018. This table is illustrative of retrospective application to determine the NCOs that would have been incurred in each quarter of 2019 from the December 31, 2018 loan book. The primary purpose of this pro forma illustration is to provide a representative level of NCO rates from applying the Q1 2019 Open-End Loss Recognition Change.



Pro Forma2019
(dollars in thousands, unaudited)Fourth QuarterThird QuarterSecond QuarterFirst Quarter
Open-End loans:
Pro Forma NCOs$38,748 $29,762 $29,648 $31,788 
Open-End gross loan balances:
Open-End gross loans receivable$335,524 $314,971 $283,311 $240,790 
Pro Forma Average Open-End gross loans receivable (1)
$325,248 $299,141 $262,051 $245,096 
Pro Forma NCO rate (2)
11.9 %9.9 %11.3 %13.0 %
(1) We calculate Average gross loans receivable, which we utilize to calculate product yield and NCO rates, as average of beginning of quarter and end of quarter gross loans receivable.
(2) We calculate NCO rate as NCOs divided by Average gross loans receivables.


49

Pro Forma 2019
(dollars in thousands, unaudited) Fourth QuarterThird QuarterSecond QuarterFirst Quarter
Open-End loans:     
Pro Forma Net charge-offs $38,748
$29,762
$29,648
$31,788
Open-End gross loan balances:     
Open-End gross loans receivable $335,524
$314,971
$283,311
$240,790
Pro Forma Average Open-End gross loans receivable (1)
 $325,248
$299,141
$262,051
$245,096
Pro Forma Net-charge offs as a percentage of average gross loans receivable 11.9%9.9%11.3%13.0%
(1)  We calculate Average gross loans receivable, which we utilize to calculate product yield and NCO rates, as average of beginning of quarter and end of quarter gross loans receivable.


Single-Pay


Single-Pay revenue declined $1.6$24.2 million, or 3.4%49.1%, year over year, while related receivables declined $36.8 million, or 47.1%, for the three months ended March 31,September 30, 2020, compared to the prior-year period, primarily due to lowerCOVID-19 Impacts. Single-Pay loan volume was particularly affected by the reduction in store traffic as customers self-quarantined and the increased repayments from government stimulus programs. Sequentially, Single-Pay revenues increased $2.4 million, or 10.3%, on related loan growth of $5.1 million, or 14.2%, due to normal seasonality and reduced quarantine and stay-at-home orders during the last two weeks of the first quarter of 2020, attributable primarily to the impact of COVID-19.third quarter. The Single-Pay Allowance for loan losses as a percentage of Single-Pay gross loans receivable increased sequentially from 7.2% to 8.6% because of Allowance Build.remained consistent sequentially.
20202019
(dollars in thousands, unaudited)Third QuarterSecond QuarterFirst QuarterFourth QuarterThird Quarter
Single-pay loans:
Revenue$25,084 $22,732 $45,157 $49,844 $49,312 
Provision for losses4,799 (2,588)9,639 12,289 14,736 
Net revenue$20,285 $25,320 $35,518 $37,555 $34,576 
Net charge-offs$4,439 $(598)$10,517 $12,145 $13,913 
Single-Pay gross loan balances:
Single-Pay gross loans receivable$41,274 $36,130 $54,728 $81,447 $78,039 
Average Single-Pay gross loans receivable (1)
$38,702 $45,429 $68,088 $78,787 $77,083 
Single-Pay Allowance for loan losses$3,197 $2,802 $4,693 $5,869 $5,662 
Single-Pay Allowance for loan losses as a percentage of Single-Pay gross loans receivable7.7 %7.8 %8.6 %7.2 %7.3 %
NCO rate (2)
11.5 %(1.3)%15.4 %15.4 %18.0 %
(1) We calculate Average gross loans receivable, which we utilize to calculate product yield and NCO rates, as average of beginning of quarter and end of quarter gross loans receivable.
(2) We calculate NCO rate as NCOs divided by Average gross loans receivables.

50

 2020 2019
(dollars in thousands, unaudited)First Quarter Fourth QuarterThird QuarterSecond QuarterFirst
Quarter
Single-pay loans:      
Revenue$45,157
 $49,844
$49,312
$45,528
$46,761
Provision for losses9,639
 12,289
14,736
12,446
8,268
Net revenue$35,518
 $37,555
$34,576
$33,082
$38,493
Net charge-offs$10,517
 $12,145
$13,913
$11,458
$8,610
Single-Pay gross loan balances:      
Single-Pay gross loans receivable$54,728
 $81,447
$78,039
$76,126
$69,753
Average Single-Pay gross loans receivable (1)
$68,088
 $78,787
$77,083
$72,940
$75,288
Single-Pay Allowance for loan losses$4,693
 $5,869
$5,662
$4,941
$3,897
Single-Pay Allowance for loan losses as a percentage of Single-Pay gross loans receivable8.6% 7.2%7.3%6.5%5.6%
(1)  We calculate Average gross loans receivable, which we utilize to calculate product yield and NCO rates, as average of beginning of quarter and end of quarter gross loans receivable.




Consolidated Results of Operations
Condensed Consolidated Statements of Operations
(in thousands, unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
20202019Change $Change %20202019Change $Change %
Revenue$182,003 $297,264 $(115,261)(38.8)%$645,318 $839,503 $(194,185)(23.1)%
Provision for losses54,750 123,867 (69,117)(55.8)%218,979 338,262 (119,283)(35.3)%
Net revenue127,253 173,397 (46,144)(26.6)%426,339 501,241 (74,902)(14.9)%
Advertising14,425 16,424 (1,999)(12.2)%32,394 36,990 (4,596)(12.4)%
Non-advertising costs of providing services49,258 60,334 (11,076)(18.4)%154,177 180,934 (26,757)(14.8)%
Total cost of providing services63,683 76,758 (13,075)(17.0)%186,571 217,924 (31,353)(14.4)%
Gross margin63,570 96,639 (33,069)(34.2)%239,768 283,317 (43,549)(15.4)%
Operating expense
Corporate, district and other expenses36,658 38,665 (2,007)(5.2)%116,246 123,043 (6,797)(5.5)%
Interest expense18,383 17,364 1,019 5.9 %54,018 52,077 1,941 3.7 %
(Income) loss from equity method investment(3,530)1,384 (4,914)#(2,653)5,132 (7,785)#
Total operating expense51,511 57,413 (5,902)(10.3)%167,611 180,252 (12,641)(7.0)%
Income from continuing operations before income taxes12,059 39,226 (27,167)(69.3)%72,157 103,065 (30,908)(30.0)%
(Benefit) provision for income taxes(822)11,239 (12,061)#2,183 28,738 (26,555)(92.4)%
Net income from continuing operations12,881 27,987 (15,106)(54.0)%69,974 74,327 (4,353)(5.9)%
Net income (loss) from discontinued operations, net of tax— (598)598 #1,285 6,943 (5,658)(81.5)%
Net income$12,881 $27,389 $(14,508)(53.0)%$71,259 $81,270 $(10,011)(12.3)%
# - Variance greater than 100% or not meaningful
 Three Months Ended March 31,
20202019Change $Change %
Revenue$280,806
$277,939
$2,867
1.0 %
Provision for losses113,536
102,385
11,151
10.9 %
Net revenue167,270
175,554
(8,284)(4.7)%
Advertising costs12,219
7,786
4,433
56.9 %
Non-advertising costs of providing services55,352
62,271
(6,919)(11.1)%
Total cost of providing services67,571
70,057
(2,486)(3.5)%
Gross margin99,699
105,497
(5,798)(5.5)%
     
Operating expense    
Corporate, district and other expenses42,807
49,088
(6,281)(12.8)%
Interest expense17,324
17,690
(366)(2.1)%
Loss from equity method investment1,618
—
1,618
#
Total operating expense61,749
66,778
(5,029)(7.5)%
Income from continuing operations before income taxes37,950
38,719
(769)(2.0)%
Provision for income taxes1,937
10,046
(8,109)(80.7)%
Net income from continuing operations36,013
28,673
7,340
25.6 %
Net income from discontinued operations, net of tax292
8,375
(8,083)(96.5)%
Net income$36,305
$37,048
$(743)(2.0)%
# - Variance greater than 100% or not meaningful


For the three months ended March 31,Three Months Ended September 30, 2020 and 2019


Revenue and Net Revenue
Revenue increased $2.9decreased $115.3 million, or 1.0%38.8%, to $280.8$182.0 million for the three months ended March 31,September 30, 2020, from $277.9$297.3 million for the three months ended March 31, 2019.September 30, 2019, as a result of the declines in combined gross loan receivables discussed previously. Year over year, U.S. revenueand Canada revenues decreased 1.9% primarily due to regulatory changes in California. Excluding California, U.S. revenue increased 4.6%44.0% and 18.3%, primarily driven by Open-End growth. Canadian revenue increased 13.9% primarily due to growth in Open-End loans and the sale of payment protection insurance to Canadian Installment and Open-End customers.respectively.


Provision for losses increaseddecreased by $11.2$69.1 million, or 10.9%55.8%, for the three months ended March 31,September 30, 2020 compared to the prior-year period. The increasedecrease in provision for loan losses was primarily from $12.0 million of Allowance Build,due to lower sequential quarterly loan growth in 2020 compared to 2019 and significantly improved NCO rates year over year as discussed in more detail in the "—Loan"Loan Volume and Portfolio Performance Analysis" above and "—Segment"Segment Analysis" below.sections.


Cost of Providing Services


Non-advertising costs of providing services decreased $6.9$11.1 million, or 11.1%18.4%, to $55.4$49.3 million in the three months ended March 31,September 30, 2020, compared to $62.3$60.3 million in the three months ended March 31,September 30, 2019. Of the $6.9$11.1 million decrease, $4.7$3.6 million iswas related to third-party collection costs incurred in 2019 related to Ad Astra, which were included in Non-advertising costs of providing services. FollowingSubsequent to our acquisition of Ad Astra, onwhich became our wholly owned subsidiary as of January 3, 2020, its operating costs are included within "Corporate, district and other expenses," consistent with presentation of our other internal collection costs. The remaining decrease year-over-yearyear over year in Non-advertising costs of providing services is from headcount reductions in the three months ended March 31, 2019was due to (i) lower underwriting and other variable costs as a result of lower demand, (ii) lower collection costs after stimulus-related pay-downs and (iii) lower discretionary variable compensation comparisons.compensation.


Advertising costs increased $4.4decreased $2.0 million, or 56.9%12.2%, year-over-year. We historically reduced advertising and customer acquisition costs seasonally in the first quarter of the year (concentrated in February)over year because of the impact on customers of U.S. federal income tax refunds. In the three months ended March 31, 2020, based on improved underwritingCOVID-19 Impacts.

51


Corporate, District and evaluation of the seasonal opportunity, we increased advertising costs through the traditional tax refund season. We subsequently reduced advertising costs in the last three weeks of March 2020 because of COVID-19-related considerations.



OperatingOther Expenses


Corporate, district and other expenses were $42.8$36.7 million for the three months ended March 31,September 30, 2020, a decrease of $6.3$2.0 million, or 12.8%5.2%, compared to the three months ended March 31,September 30, 2019. Corporate, district and other expenses in the three months ended March 31,September 30, 2020 include $3.5included $1.7 million of collection costs related to Ad Astra, which werewe included in Non-advertising costs of providing services prior to its acquisition. For the three months ended March 31,September 30, 2020, corporate, district and other expenses includealso included (i) $1.1$3.4 million of share-based compensation costs and (ii) $1.4 million of legal and otherrelated costs described in our reconciliation to Adjusted Net Income in "—Supplemental Non-GAAP Financial Information" below, and (ii) $3.2 million of share-based compensation costs.above. For the three months ended March 31,September 30, 2019, corporate district and other expenses includecosts included (i) share-based compensation costs of $2.8 million, (ii) $0.9 million of legal and related costs described in our reconciliation to Adjusted Net Income above, and (iii) U.K. related costs of $7.8 million and severance costs of $1.8$0.3 million as described in our reconciliation to Adjusted Net Income in "—Supplemental Non-GAAP Financial Information" below, and (ii) share-basedabove. Share-based compensation costs increased primarily as a result of $2.2 million.awards granted in the first quarter of 2020.


Excluding Ad Astra costs, share-based compensation expense and other costs described above, comparable corporate, district and other expenses decreased $2.4$4.6 million year-over-year,year over year, primarily due to the timing and extent of variable compensation in the three months ended March 31, 2019 and market-based changes in deferred compensation plan assets and liabilities.other cost reductions, such as work-from-home initiatives to manage COVID-19 Impacts.


We account for our investment in Katapult under the equity method. We record our pro rata share of Katapult's income or losses in the unaudited Condensed Consolidated Statement of Operations with a corresponding adjustmentEquity Method Investment

Refer to the carrying value of our investment in "Other assets" on"Katapult Update for the unaudited Condensed Consolidated Balance Sheet. For the three months ended March 31,Three and Nine Months Ended September 30, 2020 our share of Katapult's loss was $1.6 million.and 2019" below for details.


Interest Expense


Interest expense for the three months ended March 31,September 30, 2020 remained consistent with the prior-year period on flat year-over-year average borrowing.borrowings.


Provision for Income Taxes


The effective income tax rate for the three months ended March 31,September 30, 2020 was 5.1%6.8%, compared to athe effective income tax rate of 25.9%28.7% for the three months ended March 31,September 30, 2019. The decrease in the effective income tax rate was primarily duethe result of an adjustment as a result of changes in IRS guidance to aan estimated tax benefit recorded in the first quarter of 2020 from the CARES Act, which was enacted on March 27, 2020 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 and to generate a refund of previously paid Federal income taxes.taxes at a statutory rate of 35%. In the first quarter of 2020, we recorded an income tax benefit of $9.1 million related to the carry-back of NOLNOLs from tax years 2018 and 2019. In the third quarter of 2020, we increased this benefit by $2.1 million after finalizing the calculation of the 2019 which will offset pre-tax reform years and generate a refund of previously paid taxes at 35%.taxable loss. In addition, losseswe recognized income from our equity method investment in Katapult, are not tax deductible.which was entirely offset by prior accumulated losses. Excluding the impact of the CARES ActNOL benefit in the U.S. and our investment in Katapult, our adjusted effective income tax rate for the three months ended MarchSeptember 30, 2020 was 18.1%.

For the Nine Months Ended September 30, 2020 and 2019

Revenue and Net Revenue
Revenue decreased $194.2 million, or 23.1%, to $645.3 million for the nine months ended September 30, 2020, from $839.5 million for the nine months ended September 30, 2019, as a result of the declines in combined gross loans receivable discussed above. Year over year, U.S. and Canada revenues decreased 26.9% and 7.8%, respectively.

Provision for losses decreased by $119.3 million, or 35.3%, for the nine months ended September 30, 2020 compared to the prior-year period. The decrease in provision for loan losses was primarily due to lower loan volume and lower NCOs as a result of COVID-19 Impacts as discussed in more detail in the "Loan Volume and Portfolio Performance Analysis" and "Segment Analysis" sections.

52


Cost of Providing Services

Non-advertising costs of providing services decreased $26.8 million, or 14.8%, to $154.2 million in the nine months ended September 30, 2020, compared to $180.9 million in the nine months ended September 30, 2019. Of the $26.8 million decrease, $11.9 million was related to third-party collection costs incurred in 2019 related to Ad Astra, which were included in Non-advertising costs of providing services prior to the acquisition. Subsequent to our acquisition of Ad Astra, we include its operating costs within "Corporate, district and other expenses," consistent with the presentation of our other internal collection costs. The remaining decrease year over year in Non-advertising costs of providing services was due to (i) lower underwriting and other variable costs as a result of lower demand, (ii) lower collection costs after governmental stimulus-related pay-downs and (iii) lower discretionary variable compensation.

Advertising costs decreased $4.6 million, or 12.4%, year over year because of COVID-19 Impacts.

Corporate, District and Other Expenses

Corporate, district and other expenses were $116.2 million for the nine months ended September 30, 2020, a decrease of $6.8 million, or 5.5%, compared to the nine months ended September 30, 2019. Corporate, district and other expenses in the nine months ended September 30, 2020 included $7.3 million of collection costs related to Ad Astra, which prior to our acquisition of it in January 2020 were included in Non-advertising costs of providing services. For the nine months ended September 30, 2020, corporate, district and other expenses also included (i) $9.9 million of share-based compensation costs, (ii) $2.2 million of Canadian GST described in our reconciliation to Adjusted Net Income above and (iii) $3.5 million of legal and other costs described in our reconciliation to Adjusted Net Income above. For the nine months ended September 30, 2019, corporate district and other costs included (i) U.K.-related costs of $8.8 million, (ii) $7.6 million of share-based compensation and (iii) $2.6 million of legal and other costs as described in our reconciliation to Adjusted Net Income above. Share-based compensation costs increased primarily as a result of awards granted in the first quarter of 2020.

Excluding Ad Astra costs, share-based compensation expense and other costs described above, comparable corporate, district and other expenses decreased $10.6 million year over year, primarily due to the timing and extent of variable compensation and other cost reductions, including work-from-home initiatives to manage COVID-19 Impacts.

Equity Method Investment

Refer to the "Katapult Update for the Three and Nine Months Ended September 30, 2020 and 2019" below for details.

Interest Expense

Interest expense for the nine months ended September 30, 2020 remained consistent with the prior-year period on flat year-over-year average borrowings.

Provision for Income Taxes

The effective income tax rate for the nine months ended September 30, 2020 was 3.0%, compared to the effective income tax rate of 27.9% for the nine months ended September 30, 2019. The decrease in the effective income tax rate was the result of two discrete, one-time developments related to usage of NOLs. First, given the CARES Act impact on treatment of NOLs as described above, we recorded an income tax benefit of $11.3 million related to the carry-back of NOLs from tax years 2018 and 2019, which offsets our tax liability for years prior to tax reform and will generate a refund of previously paid taxes at a 35% statutory rate. Second, we recorded a tax benefit of $4.6 million related to the release of a valuation allowance previously recorded against NOLs for certain entities in Canada. In addition, we released a valuation allowance of $1.0 million against the losses from our investment in Katapult. These benefits were partially offset by uncertain tax position reserve adjustments in the U.S. of $1.1 million. Excluding the impact of the CARES Act, the valuation allowance release benefit in Canada, the uncertain tax position reserve adjustment and our investment in Katapult, our adjusted effective income tax rate for the nine months ended September 30, 2020 was 24.3%.

53


Katapult Update for the Three and Nine Months Ended September 30, 2020 and 2019

We recognize our share of Katapult’s income or loss on a two-month lag using the equity method of accounting, with a corresponding adjustment to the carrying value of the investment included in "Investments" on the unaudited Condensed Consolidated Balance Sheet. Our investment in Katapult through July 31, 2020 was 27.9%accounted for using the equity method and, as a result, we recognized 42.5% of Katapult's income or loss through that date. We recorded income of $3.5 million for the third quarter of 2020 and $2.7 million for the first three quarters of 2020, as compared with losses of $1.4 million and $5.1 million for the three and nine months ended September 30, 2019, respectively.

Through the nine months ended September 30, 2020, Katapult's originations increased by over 160% compared to the same period in 2019.

In September 2020, we acquired additional shares of Katapult from certain existing owners. As a result of these acquisitions, a portion of our Katapult ownership will continue to be recognized under the equity method of accounting and a portion has been reclassified and will be measured at cost less impairment. As of September 30, 2020, our total ownership of Katapult, excluding unexercised stock options, was 46.6%.




Segment Analysis


We report financial results for two reportable segments: the U.S. and Canada. Following is a summary of results of operations for the segment and period indicated (in thousands, unaudited):
U.S. Segment ResultsThree Months Ended September 30,Nine Months Ended September 30,
20202019Change $Change %20202019Change $Change %
Revenue$132,848 $237,069 $(104,221)(44.0)%$491,936 $673,234 $(181,298)(26.9)%
Provision for losses43,485 102,997 (59,512)(57.8)%171,056 280,529 (109,473)(39.0)%
Net revenue89,363 134,072 (44,709)(33.3)%320,880 392,705 (71,825)(18.3)%
Advertising13,405 14,186 (781)(5.5)%29,619 31,719 (2,100)(6.6)%
Non-advertising costs of providing services32,574 42,636 (10,062)(23.6)%103,477 128,866 (25,389)(19.7)%
   Total cost of providing services45,979 56,822 (10,843)(19.1)%133,096 160,585 (27,489)(17.1)%
Gross margin43,384 77,250 (33,866)(43.8)%187,784 232,120 (44,336)(19.1)%
Corporate, district and other expenses31,503 32,897 (1,394)(4.2)%98,784 106,426 (7,642)(7.2)%
Interest expense16,107 14,877 1,230 8.3 %47,066 44,246 2,820 6.4 %
(Income) loss from equity method investment(3,530)1,384 (4,914)#(2,653)5,132 (7,785)#
Total operating expense44,080 49,158 (5,078)(10.3)%143,197 155,804 (12,607)(8.1)%
Segment operating (loss) income(696)28,092 (28,788)#44,587 76,316 (31,729)(41.6)
Interest expense16,107 14,877 1,230 8.3 %47,066 44,246 2,820 6.4 %
Depreciation and amortization3,228 3,390 (162)(4.8)%9,914 10,553 (639)(6.1)%
EBITDA(1)
18,639 46,359 (27,720)(59.8)%101,567 131,115 (29,548)(22.5)
Legal and related costs1,415 870 545 3,502 2,487 1,015 
Other adjustments(105)42 (147)59 (206)265 
U.K. related costs— 348 (348)— 8,844 (8,844)
Share-based compensation3,392 2,771 621 9,896 7,587 2,309 
(Income) loss from equity method investment(3,530)1,384 (4,914)(2,653)5,132 (7,785)
Adjusted EBITDA(1)
$19,811 $51,774 $(31,963)(61.7)%$112,371 $154,959 $(42,588)(27.5)%
(1) These are non-GAAP metrics. For a description and reconciliation of each Non-GAAP metric, see "Supplemental Non-GAAP Financial Information."
# - Variance greater than 100% or not meaningful.

54

U.S. Segment ResultsThree Months Ended March 31,
 20202019Change $Change %
Revenue$221,768
$226,119
$(4,351)(1.9)%
Provision for losses86,041
84,980
1,061
1.2 %
Net revenue135,727
141,139
(5,412)(3.8)%
Advertising costs10,945
6,354
4,591
72.3 %
Non-advertising costs of providing services37,242
44,982
(7,740)(17.2)%
   Total cost of providing services48,187
51,336
(3,149)(6.1)%
Gross margin87,540
89,803
(2,263)(2.5)%
Corporate, district and other expenses37,650
43,880
(6,230)(14.2)%
Interest expense14,846
14,728
118
0.8 %
Loss from equity method investment1,618
—
1,618
#
Total operating expense54,114
58,608
(4,494)(7.7)%
Segment operating income33,426
31,195
2,231
7.2 %
Interest expense14,846
14,728
118
0.8 %
Depreciation and amortization3,377
3,726
(349)(9.4)%
EBITDA51,649
49,649
2,000
4.0 %
Legal and other costs1,149
1,617
(468) 
Other adjustments(141)(105)(36) 
U.K. related costs—
7,817
(7,817) 
Share-based compensation3,194
2,172
1,022
 
Loss from equity method investment1,618
—
1,618
 
Adjusted EBITDA$57,469
$61,150
$(3,681)(6.0)%
# - Variance greater than 100% or not meaningful.


U.S. Segment Results - For the three months ended March 31,Three Months Ended September 30, 2020 and 2019


U.S. revenues decreased by $4.4$104.2 million, or 1.9%44.0%, to $221.8$132.8 million, compared to the prior-year period for the three months ended March 31,September 30, 2020, primarily due toas a result of the declines in combined gross loans receivable discussed above. Excluding the impact of California Installment loan runoff stemming from regulatory changes in California.that were effective January 1, 2020, U.S. revenues decreased $82.9 million, or 41.1%. Sequentially, U.S. revenues decreased $4.5 million, or 3.3%. Excluding California, U.S. revenues increased by $7.8decreased $1.1 million, or 4.6%1.0%, driven by a $17.0 million, or 30.0%, increase in Open-End loan growth.sequentially.


The provision for losses decreased $1.1$59.5 million, or 1.2%57.8%, primarily as a result of lower loan volume and lower NCOs, as previously discussed. U.S. NCOs decreased by $55.1 million, or 57.2% year over year and the decline in total gross combined loans receivable, because of California regulatory changes, offsetU.S. NCO rate improved by changes in NCO rates and $5.3 million Allowance Build. For540 bps to 17.2% for the three months ended March 31, 2020, quarterly NCO rates increased approximately 140 bps compared to the pro-forma prior-year period due to the Installment portfolio mix shift to higher loss states, as well as loan balance declines late in MarchSeptember 30, 2020 from COVID-19 impacts, which affected simple-average NCO rate calculations.22.6% in the prior-year period.


Non-advertising costs of providing services for the three months ended March 31,September 30, 2020 of $37.2$32.6 million, decreased of $7.7$10.1 million, or 17.2%23.6%, compared to $45.0$42.6 million for the three months ended March 31,September 30, 2019. The decrease was primarily driven by the aforementioned $4.7 million of Ad Astra costs subsequentof $3.6 million, which prior to ourits acquisition by us were included in Non-advertising costs of it.providing services. The remaining decrease year-over-yearyear over year in Non-advertising costs of providing services was from headcount reductions in the three months ended March 31, 2019due to (i) lower underwriting and other variable costs as a result of lower demand, (ii) lower collection costs after governmental stimulus-related pay-downs and (iii) lower discretionary variable compensation comparisons.compensation.


Advertising costs increased $4.6decreased $0.8 million, or 72.3%5.5%, year-over-year. We historically reduced advertising costs and customer acquisition costs seasonally in the first quarter of the year (concentrated in February)over year because of the impact on customers of U.S. Federal income tax refunds. In the three months ended March 31, 2020, based on improved underwriting and evaluation of the seasonal opportunity, we increased advertising costs through the traditional tax refund season. We subsequently reduced advertising costs in the last three weeks of March 2020 because of COVID-19-related considerations.COVID-19 Impacts.




Corporate, district and other expenses were $37.7of $31.5 million for the three months ended March 31,September 30, 2020, a decrease of $6.2decreased $1.4 million, or 14.2%4.2%, compared to the three months ended March 31, 2019.prior-year period. Corporate, district and other expenses for the three months ended March 31,September 30, 2020 include $3.5included $1.7 million of collection costs related to Ad Astra, which were historically included in Non-advertising costs of providing services. For the three months ended March 31,September 30, 2020, corporate, district and other expenses includecosts included (i) $1.1$1.4 million of legal and other costs described in our reconciliation to Adjusted Net Income in "—Supplemental Non-GAAP Financial Information" belowabove and (ii) $3.2$3.4 million of share-based compensation costs. For the three months ended March 31,September 30, 2019, corporate, district and other expenses includeincluded (i) U.K. relatedU.K.-related costs of $7.8 million and severance costs of $1.4$0.3 million as described in our reconciliation to Adjusted Net Income above, (ii) $0.9 million of legal and related costs, also described in "—Supplemental Non-GAAP Financial Information" below,our reconciliation to Adjusted Net Income above and (ii) share-based compensation costs of $2.2$2.8 million. Share-based compensation costs increased primarily as a result of awards granted in the first quarter of 2020.


Excluding thesethe aforementioned items, comparable corporate, district and other expenses decreased $2.6$3.9 million year-over-year,year over year, primarily due to the timing and extent of variable compensation for the three months ended March 31, 2019 and market-based changes in deferred compensation plan assets and liabilities.certain cost reductions, including work-from-home initiatives, to manage COVID-19 Impacts.


U.S. interest expense for the three months ended March 31,September 30, 2020 remained consistent withincreased $1.2 million, or 8.3%, primarily related to the new Non-Recourse U.S. SPV Facility, on which we drew $35.2 million when it closed in April 2020.

As described above, we recognize our share of Katapult’s income on a two-month lag and recorded income of $3.5 million for the three months ended September 30, 2020.

U.S. Segment Results - For the Nine Months Ended September 30, 2020 and 2019

U.S. revenues decreased by $181.3 million, or 26.9%, to $491.9 million for the nine months ended September 30, 2020 compared to the prior-year period.period as a result of decreases in combined gross loans receivable. Excluding the aforementioned impact of California Installment loan runoff, U.S. revenues decreased by $130.1 million, or 23.0%.


The provision for losses decreased $109.5 million, or 39.0%, for the nine months ended September 30, 2020, compared to the prior-year period, primarily as a result of lower loan volume and lower NCOs. Year-over-year U.S. NCOs decreased $82.4 million, or 28.8%.

Non-advertising costs of providing services for the nine months ended September 30, 2020 of $103.5 million, decreased $25.4 million, or 19.7%, compared to $128.9 million for the nine months ended September 30, 2019. The decrease was primarily driven by Ad Astra costs of $11.9 million, which prior to its acquisition by us were included in Non-advertising costs of providing services. The remaining decrease year over year in Non-advertising costs of providing services was due to (i) lower underwriting and other variable costs as a result of lower demand, (ii) lower collection costs after stimulus-related pay-downs and (iii) lower discretionary variable compensation.

Advertising costs decreased $2.1 million, or 6.6%, year over year because of COVID-19 Impacts.
55


Canada Segment ResultsThree Months Ended March 31,
 20202019Change $Change %
Revenue$59,038
$51,820
$7,218
13.9 %
Provision for losses27,495
17,405
10,090
58.0 %
Net revenue31,543
34,415
(2,872)(8.3)%
Advertising costs1,274
1,432
(158)(11.0)%
Non-advertising costs of providing services18,110
17,289
821
4.7 %
Total cost of providing services19,384
18,721
663
3.5 %
Gross margin12,159
15,694
(3,535)(22.5)%
Corporate, district and other expenses5,157
5,208
(51)(1.0)%
Interest expense2,478
2,962
(484)(16.3)%
Total operating expense7,635
8,170
(535)(6.5)%
Segment operating income (loss)4,524
7,524
(3,000)(39.9)%
Interest expense2,478
2,962
(484)(16.3)%
Depreciation and amortization1,160
1,194
(34)(2.8)%
EBITDA8,162
11,680
(3,518)(30.1)%
Legal and other costs—
135
(135)

Other adjustments156
(111)267
 
Adjusted EBITDA$8,318
$11,704
$(3,386)(28.9)%
# - Change greater than 100% or not meaningful.  


Corporate, district and other expenses were $98.8 million for the nine months ended September 30, 2020, a decrease of $7.6 million, or 7.2%, compared to the nine months ended September 30, 2019. Corporate, district and other expenses for the nine months ended September 30, 2020 included $7.3 million of collection costs related to Ad Astra, which were historically included in Non-advertising costs of providing services. For the nine months ended September 30, 2020, corporate, district and other costs included (i) $3.5 million of legal and related costs described in our reconciliation to Adjusted Net Income above and (ii) $9.9 million of share-based compensation costs. For the nine months ended September 30, 2019, corporate, district and other expenses included (i) U.K. related costs of $8.8 million as described in our reconciliation to Adjusted Net Income above, (ii) $2.5 million of legal and related costs also described in our reconciliation to Adjusted Net Income above and (iii) share-based compensation costs of $7.6 million. Share-based compensation costs increased primarily as a result of awards granted in the first quarter of 2020.

Excluding these items, comparable corporate, district and other expenses decreased $9.4 million year over year, primarily due to the timing and extent of variable compensation and certain cost reductions, including work-from-home initiatives, to manage COVID-19 Impacts for the nine months ended September 30, 2020.

As described above, and given the two-month lag, we recorded equity income from our investment in Katapult of $2.7 million for the nine months ended September 30, 2020.

U.S. interest expense for the nine months ended September 30, 2020 increased $2.8 million, or 6.4%, primarily related to the new Non-Recourse U.S. SPV Facility, on which we drew $35.2 million when it closed in April 2020.

Canada Segment ResultsThree Months Ended September 30,Nine Months Ended September 30,
20202019Change $Change %20202019Change $Change %
Revenue$49,155 $60,195 $(11,040)(18.3)%$153,382 $166,269 $(12,887)(7.8)%
Provision for losses11,265 20,870 (9,605)(46.0)%47,923 57,733 (9,810)(17.0)%
Net revenue37,890 39,325 (1,435)(3.6)%105,459 108,536 (3,077)(2.8)%
Advertising1,020 2,238 (1,218)(54.4)%2,775 5,271 (2,496)(47.4)%
Non-advertising costs of providing services16,684 17,698 (1,014)(5.7)%50,700 52,068 (1,368)(2.6)%
Total cost of providing services17,704 19,936 (2,232)(11.2)%53,475 57,339 (3,864)(6.7)%
Gross margin20,186 19,389 797 4.1 %51,984 51,197 787 1.5 %
Corporate, district and other expenses5,155 5,768 (613)(10.6)%17,462 16,617 845 5.1 %
Interest expense2,276 2,487 (211)(8.5)%6,952 7,831 (879)(11.2)%
Total operating expense7,431 8,255 (824)(10.0)%24,414 24,448 (34)(0.1)%
Segment operating income12,755 11,134 1,621 14.6 %27,570 26,749 821 3.1 %
Interest expense2,276 2,487 (211)(8.5)%6,952 7,831 (879)(11.2)%
Depreciation and amortization1,130 1,219 (89)(7.3)%3,398 3,627 (229)(6.3)%
EBITDA(1)
16,161 14,840 1,321 8.9 %37,920 38,207 (287)(0.8)%
Legal and related costs— — — — 135 (135)
Canada GST adjustment— — — 2,160 — 2,160 
Other adjustments143 441 (298)580 297 283 
Adjusted EBITDA(1)
$16,304 $15,281 $1,023 6.7 %$40,660 $38,639 $2,021 5.2 %
(1) These are non-GAAP metrics. For a description and reconciliation of each Non-GAAP metric, see "Supplemental Non-GAAP Financial Information."

56


Canada Segment Results - For the three months ended March 31,Three Months Ended September 30, 2020 and 2019
Canada revenue increased $7.2decreased $11.0 million, or 13.9%18.3% ($7.710.6 million, or 14.9%17.6%, on a constant-currency basis), to $59.0$49.2 million for the three months ended March 31,September 30, 2020, from $51.8$60.2 million in the prior year due to loan growth.prior-year period, as a result of the declines in gross loans receivable discussed previously. Sequentially, Canada revenue increased $4.0 million, or 8.8%, driven by increases in Open-End, Single-Pay and ancillary revenue.


Canada non-Single-Pay revenue increased $9.8$0.1 million, or 30.4%0.2% ($10.20.5 million, or 31.7%1.2%, on a constant-currency basis), to $42.0$40.1 million, compared to $32.2$40.0 million in the prior-year period, on growth of $54.2$23.9 million, or 27.3%9.5% ($71.526.9 million, or 36.1%10.7%, on a constant-currency basis), in related loan balances. The increase was driven by continued significant growth of Open-End loans. Additionally, with increased Open-End loan volume and customer acquisition, ancillaryloans despite COVID-19 Impacts. Ancillary revenue, increased $1.3 million versus the prior-year period, primarily driven by an increase inwhich includes sales of insurance to Open-End loan customers.customers, decreased $1.2 million, or 10.0% ($1.1 million, or 9.1% on a constant-currency basis). The decrease was driven by additional insurance claims from consumers impacted by COVID-19 during the third quarter of 2020.


Single-Pay revenue decreased $2.6$11.1 million, or 13.2%55.2% ($2.511.1 million, or 12.6%54.8%, on a constant-currency basis), to $17.0$9.0 million for the three months ended March 31,September 30, 2020, and Single-Pay receivables decreased $9.6$18.4 million, or 28.7%52.5% ($8.018.3 million, or 23.8%52.0% on a constant-currency basis), to $23.8$16.7 million, from $33.4$35.1 million, in the prior-year period. The decreases in Single-Pay revenue and receivables were due to a continued shift to Open-End loans from Single-Pay, as well as a significant decline in demand attributable to COVID-19 Impacts.

The provision for losses decreased $9.6 million, or 46.0% ($9.5 million, or 45.5%, on a constant-currency basis), to $11.3 million for the three months ended September 30, 2020, compared to $20.9 million in the prior-year period. The decrease in provision for loan losses was primarily a result of lower loan volume and lower NCOs as a result of COVID-19 Impacts as discussed previously. On a quarterly basis, loss rates improved approximately 380 bps, or 53.8%, year over year due to government stimulus-related pay-downs and overall portfolio maturation.

Canada cost of providing services for the three months ended September 30, 2020 was $17.7 million, a decrease of $2.2 million, or 11.2% ($2.1 million, or 10.3%, on a constant-currency basis), compared to $19.9 million for the three months ended September 30, 2019, primarily related to certain cost reductions to manage COVID-19 Impacts and efficient advertising efforts while managing growth during the third quarter of 2020.

Canada operating expenses for the three months ended September 30, 2020 were $7.4 million, a decrease of $0.8 million, or 10.0% ($0.8 million, or 9.2%, on a constant-currency basis), compared to $8.3 million in the prior-year period, primarily as a result of certain cost reductions to manage COVID-19 Impacts.

Canada Segment Results - For the Nine Months Ended September 30, 2020 and 2019

Canada revenue decreased $12.9 million, or 7.8% (increased $10.2 million, or 6.2%, on a constant-currency basis), to $153.4 million for the nine months ended September 30, 2020, from $166.3 million in the prior year, as a result of the declines in gross loans receivable.

Canada non-Single-Pay revenue increased $11.5 million, or 10.7% ($13.7 million, or 12.7%, on a constant-currency basis), to $118.9 million, compared to $107.4 million in the prior-year period, on growth of $23.9 million, or 9.5% ($26.9 million, or 10.7%, on a constant-currency basis), in related loan balances. The increase was driven by continued growth of Open-End loan despite COVID-19 related impacts. Ancillary revenue, which includes sales of insurance to Open-End loan customers, remained flat year over year due to increased insurance claims from consumers impacted by COVID-19 during the nine months ended September 30, 2020.

Single-Pay revenue decreased $24.4 million, or 41.5% ($23.9 million, or 40.6%, on a constant-currency basis), to $34.5 million for the nine months ended September 30, 2020, and Single-Pay receivables decreased $18.4 million, or 52.5% ($18.3 million, or 52.0% on a constant-currency basis), to $16.7 million from $35.1 million, in the prior year. The decreases in Single-Pay revenue and receivables were due to product mix shift in Canada from Single-Pay loans to Open-End loans, aas well as significant declinedeclines in demand over the last two weeks of March attributable to COVID-19 and changes in Canada's currency exchange rate.Impacts.




The provision for losses increased $10.1decreased $9.8 million, or 58.0%17.0% ($10.59.0 million, or 60.4%15.5%, on a constant-currency basis), to $27.5$47.9 million for the threenine months ended March 31,September 30, 2020, compared to $17.4$57.7 million in the prior-year period. The increasedecrease in provision for loan losses was primarily a result of $6.7 million of Allowance Build. On a quarterly basis, despite the impact of lower demand over the last two weeks of March 2020NCOs and unfavorable currency exchange rates on ending receivable balances, loss rates improved approximately 100 bps year over year. Excluding the aforementioned incremental provision expensefavorable loan performance as a result of changes in the Allowance for Loan Losses, due to lower loss rates, provision expense increased $3.3COVID-19 Impacts as discussed previously. Year-over-year Canada NCOs decreased $17.2 million, compared to the $7.2 million increase in revenue.or 28.4%.


57


Canada cost of providing services for the threenine months ended March 31,September 30, 2020 were $19.4was $53.5 million, an increasea decrease of $0.7$3.9 million, or 3.5%6.7% ($0.82.9 million, or 4.4%5.1%, on a constant-currency basis), compared to $18.7$57.3 million for the threenine months ended March 31, 2019.September 30, 2019, primarily related to certain cost reductions to manage COVID-19 Impacts, as well as efficient and strategic advertising efforts through the course of 2020 to manage growth in Canada.


Canada operating expenses for the threenine months ended March 31,September 30, 2020 were $7.6$24.4 million, a decrease of $0.5 million, or 6.5%, compared to $8.2 million inunchanged from the prior-year period, primarily related to lower interest expense. There was no material impact on a constant-currency basis.period.


Supplemental Non-GAAP Financial Information


Non-GAAP Financial Measures


In addition to the financial information prepared in conformity with USU.S. GAAP, we provide certain “non-GAAP financial measures,” including:
•Adjusted Net Income and Adjusted Earnings Per Share, or the Adjusted Earnings Measures (net income from continuing operations plus or minus restructuring and other costs, certain legal and related costs, income or loss from equity method investment, goodwill and intangible asset impairments, certain costs related to the disposition of U.K., transaction-related costs, 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 (net income from continuing operations(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 unaudited Condensed Consolidated Financial Statements).


We believe that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of the Company's operations. We believe that these non-GAAP financial measures offer another way to view aspects of our business that, when viewed with our USU.S. GAAP results, provide a more complete understanding of factors and trends affecting our 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 the business that may not otherwise be apparent when relying on financial measures calculated in accordance with USU.S. GAAP. In addition, we believe that the adjustments shown below 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 USU.S. GAAP, we provide Gross Combined Loans Receivable consisting of Company-Owned loans receivable plus loans originated by third-party lenders through the CSO programs, which we guarantee but do not include in the unaudited Condensed Consolidated Financial Statements ("GuaranteedStatements. We refer to these as "Guaranteed by the Company").Company." 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 our USU.S. GAAP unaudited Condensed 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 USU.S. GAAP, or as an alternative to cash flows from operating activities or any other liquidity measure derived in accordance with USU.S. GAAP. Readers should consider the information in addition to, but not instead of or superior to, the financial statements prepared in accordance with USU.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.

58



Description and Reconciliations of Non-GAAP Financial Measures
Adjusted Net Income, Adjusted Earnings 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 USU.S. GAAP. Some of these limitations are:
•they do not include cash expenditures or future requirements for capital expenditures or contractual commitments;
•they do not include changes in, or cash requirements for, working capital needs;
•they do not include the interest expense, or the cash requirements necessary to service interest or principal payments on debt;
•depreciation and amortization are non-cash expense items reported in the statements of cash flows; and
•other companies in our industry may calculate these measures differently, limiting their usefulness as comparative measures.


We calculate Adjusted Earnings per Share utilizing diluted shares outstanding at year-end. If we record a loss from continuing operations under USU.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 continuing operations reflect the number of diluted shares we would have reported if reporting net income from continuing operations under USU.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 unaudited Condensed Consolidated Financial Statements but from which we earn revenue and for which we provide a guarantee to the lender. Management believes this analysis provides investors with important information needed to evaluate overall lending performance.


We believe Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA are used by investors to analyze operating performance and evaluate our ability to incur and service debt and the 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 in this Form 10-Q may differ from the computation of similarly-titled measures provided by other companies.


59


Reconciliation of Net incomeIncome from continuing operationsContinuing Operations and Diluted Earnings per Share to Adjusted Net incomeIncome 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,
20202019Change $Change %20202019Change $Change %
Net income from continuing operations$12,881 $27,987 $(15,106)(54.0)%$69,974 $74,327 $(4,353)(5.9)
Adjustments:
Legal and related costs (1)
1,415 870 3,502 2,622 
U.K. related costs (2)
— 348 — 8,844 
(Income) loss from equity method investment (3)
(3,530)1,384 (2,653)5,132 
Share-based compensation (4)
3,392 2,771 9,896 7,587 
Intangible asset amortization750 751 2,246 2,308 
Canada GST adjustment (5)
— — 2,160 — 
Income tax valuations (6)
— — (3,472)— 
Impact of tax law changes (7)
(2,137)— (11,251)— 
Cumulative tax effect of adjustments (8)
(1,445)(1,232)(4,630)(5,554)
Adjusted Net Income$11,326 $32,879 $(21,553)(65.6)%$65,772 $95,266 $(29,494)(31.0)%
Net income from continuing operations$12,881 $27,987 $69,974 $74,327 
Diluted Weighted Average Shares Outstanding
41,775 46,010 41,660 46,887 
Diluted Earnings per Share from continuing operations$0.31 $0.61 $(0.30)(49.2)%$1.68 $1.59 $0.09 5.7 
Per Share impact of adjustments to Net income(0.04)0.10 (0.10)0.44 
Adjusted Diluted Earnings per Share$0.27 $0.71 $(0.44)(62.0)%$1.58 $2.03 $(0.45)(22.2)%
Note: Footnotes follow Reconciliation of Adjusted EBITDA table immediately below.
60

 Three Months Ended March 31,
 20202019Change $Change %
Net income from continuing operations$36,013
$28,673
$7,340
25.6 %
Adjustments:   

Legal and related costs (1)
1,149
1,752
 

U.K. related costs (2)
—
7,817
 

Loss from equity method investment (3)
1,618
—
 

Share-based compensation (4)
3,194
2,172
 

Intangible asset amortization737
796
 

Impact of tax law changes (5)
(9,114)—
 

Cumulative tax effect of adjustments (6)
(1,321)(3,260) 

Adjusted Net Income$32,276
$37,950
$(5,674)(15.0)%
    

Net income from continuing operations$36,013
$28,673
 

Diluted Weighted Average Shares Outstanding 
41,892
47,319
 

Diluted Earnings per Share from continuing operations$0.86
$0.61
$0.25
41.0 %
Per Share impact of adjustments to Net income(0.09)0.19
 

Adjusted Diluted Earnings per Share$0.77
$0.80
$(0.03)(3.8)%
Note: Footnotes follow Reconciliation of Adjusted EBITDA table immediately below.



Reconciliation of Net incomeIncome from continuing operationsContinuing 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,
20202019Change $Change %20202019Change $Change %
Net income from continuing operations$12,881 $27,987 $(15,106)(54.0)%$69,974 $74,327 $(4,353)(5.9)
(Benefit) provision for income taxes(822)11,239 (12,061)#2,183 28,738 (26,555)(92.4)
Interest expense18,383 17,364 1,019 5.9 %54,018 52,077 1,941 3.7 
Depreciation and amortization4,358 4,609 (251)(5.4)%13,312 14,180 (868)(6.1)%
EBITDA34,800 61,199 (26,399)(43.1)%139,487 169,322 (29,835)(17.6)
Legal and related costs (1)
1,415 870 3,502 2,622 
U.K. related costs (2)
— 348 — 8,844 
(Income) loss from equity method investment (3)
(3,530)1,384 (2,653)5,132 
Share-based compensation (4)
3,392 2,771 9,896 7,587 
Canada GST adjustment (5)
— — 2,160 — 
Other adjustments (9)
38 483 639 91 
Adjusted EBITDA$36,115 $67,055 $(30,940)(46.1)%$153,031 $193,598 $(40,567)(21.0)%
Adjusted EBITDA Margin19.8 %22.6 %23.7 23.1 %

Three Months Ended March 31,
 20202019Change $Change %
Net income from continuing operations$36,013
$28,673
$7,340
25.6 %
Provision for income taxes1,937
10,046
(8,109)(80.7)%
Interest expense17,324
17,690
(366)(2.1)%
Depreciation and amortization4,537
4,920
(383)(7.8)%
EBITDA59,811
61,329
(1,518)(2.5)%
Legal and related costs (1)
1,149
1,752
 

U.K. related costs (2)
—
7,817
 

Loss from equity method investment (3)
1,618
—
 

Share-based compensation (4)
3,194
2,172
 

Other adjustments (7)
15
(216) 

Adjusted EBITDA$65,787
$72,854
$(7,067)(9.7)%
Adjusted EBITDA Margin23.4%26.2%  

(1)
Legal and otherrelated costs for the threenine months ended March 31,September 30, 2020 includeincluded (i) settlement costs related to certain legal matters, (ii) estimated costs for certain ongoing legal matters, (iii) costs related to certain securities litigation and related matter, (ii)(iv) advisory costs, (v) severance costs for certain corporate employees and (iii)(vi) legal and advisory costs related to the purchase of Ad Astra.



Legal and otherrelated costs of $1.8 million for the threenine months ended March 31,September 30, 2019 wereincluded (i) $1.8 million due to eliminating 121 positions in North America. The store employee reductions helped better align store staffing with in-store customer traffic and volume patterns, as more of our growth comes from online channels and as store customers require less timeAmerica in stores as they conduct more of the follow-up activities online. The elimination of certain corporate positionsfirst quarter, (ii) costs related to efficiency initiativescertain securities litigation and has allowedrelated matters of $0.6 million and (iii) legal and advisory costs of $0.3 million related to the Company to reallocate investment to strategic growth activities.
repurchase of shares from FFL.
(2)
(2)U.K. related costs of $7.8$8.8 million for the threenine months ended March 31,September 30, 2019 relate to placing the U.K. subsidiaries into administration on February 25, 2019, which included $7.6 million to obtain consent from the holders of the 8.25% Senior Secured Notes to deconsolidate the U.K. Segmentsegment and $0.2$1.2 million for other costs.

(3)
(3)
The Lossincome from equity method investment for the threenine months ended March 31,September 30, 2020 of $1.6$2.7 million includes our share of the estimated U.S. GAAP net income of Katapult.

The loss from equity method investment for the nine months ended September 30, 2019 of $5.1 million includes (i) our share of the estimated U.S. GAAP net loss of Katapult. AsKatapult and (ii) a $3.7 million market value adjustment recognized during the second quarter of March 31, 2020, we owned 42.5%2019 as a result of an equity raising round from April through July of 2019 that implied a value per share less than the outstanding shares of Katapult.value per share raised in prior raises.
(4)We approved the adoption of share-based compensation plans during 2010 and 2017 for key members of senior management. The estimated fair value of share-based awards is recognized as non-cash compensation expense on a straight-line basis over the vesting period.
(5)On March 27,
(5)We received a Notice of Adjustment from Canadian tax authority auditors in the second quarter 2020 the CARES Act was enacted by the U.S. Federal government in responserelated to the COVID-19 pandemic. The CARES Act, among other things, allowstreatment of certain expenses in prior years for purposes of calculating the Goods and Services Tax ("GST") due.
(6)During the nine months ended September 30, 2020, a Texas court ruling related to the apportionment of income to the state for another 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. Also in the nine months ended September 30, 2020, we released a $4.6 million valuation allowance related to NOLs incurredfor certain entities in 2018, 2019, andCanada.
(7)For the nine months ended September 30, 2020, to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. Wewe recorded an income tax benefit of $9.1$11.3 million related to the carryback of NOL from tax years 2018 and 2019.2019 due to the provisions of the CARES Act..
(6)(8)Cumulative tax effect of adjustments included in Reconciliation of Net income from continuing operations to EBITDA and Adjusted EBITDA table is calculated using the estimated incremental tax rate by country.
(7)(9)Other adjustments primarily include the intercompany foreignforeign-currency exchange impact.


Currency Information


We operate in the U.S. and Canada and 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. We translate all balance sheet accounts into U.S. dollars at the currency exchange rate in effect at the end of each period. We translate the statement of operations at the average rates of exchange for the period. We record currency translation adjustments as a component of Accumulated Other Comprehensive Income in Stockholders’ Equity.


61


Constant Currency Analysis


We have operations in the U.S. and Canada. In the three months ended March 31,September 30, 2020 and 2019, 21.0%27.0% and 18.6%20.2%, respectively, of our revenues from continuing operations were originated in Canadian Dollars. In the nine months ended September 30, 2020 and 2019, 23.8% and 19.8%, respectively, of our revenues from continuing operations were originated in Canadian Dollars. As a result, changes in our reported results include the impacts of changes in foreign currency exchange rates for the Canadian Dollar.


Income Statement - Three Months Ended March 31, 2020 and 2019
Three Months Ended September 30,Nine Months Ended September 30,
20202019$ Change% Change20202019$ Change% Change
Average Exchange Rates for the Canadian Dollar$0.7504 $0.7576 ($0.0072)(1.0)%$0.7391 $0.7526 ($0.0135)(1.8)%
 Average Exchange Rates  
 Three Months Ended March 31, Change
 20202019 $%
Canadian Dollar$0.7456
$0.7525
 
($0.0069)(0.9)%




Balance Sheet - Exchange rateRate as of March 31,September 30, 2020 and December 31, 2019
September 30,December 31,Change
20202019$%
Exchange Rate for the Canadian Dollar$0.7472 $0.7683 ($0.0211)(2.7)%
 Exchange Rate as of  
 March 31,December 31, Change
 20202019 $%
Canadian Dollar$0.7012
$0.7683
 
($0.0671)(8.7)%


The following constant currency analysis removes the impact of the fluctuation in foreign exchange rates and utilizes constant currency results in our analysis of segment performance. 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 the Canadian Dollar. We believe that the constant currency assessment below is a useful measure in assessing the comparable growth and profitability of our operations.


We calculated the revenues and gross margin below during the three and nine months ended March 31,September 30, 2020 using the actual average exchange rate during the three and nine months ended March 31, 2019.September 30, 2019 (in thousands, unaudited).
Three Months Ended September 30,Nine Months Ended September 30,
20202019$ Change% Change20202019$ Change% Change
Canada – constant currency basis:
Revenues$49,618 $60,195 $(10,577)(17.6)%$156,026 $166,269 $(10,243)(6.2)%
Gross Margin20,365 19,389 976 5.0 %52,861 51,197 1,664 3.3 %
  Three Months Ended March 31, Change
(in thousands, unaudited) 2020 2019 $ %
Canada – constant currency basis:        
Revenues $59,563
 $51,820
 $7,743
 14.9 %
Gross Margin 12,090
 15,694
 (3,604) (23.0)%


We calculated gross loans receivable below as of March 31,September 30, 2020 using the actual exchange rate as of December 31, 2019.2019 (in thousands, unaudited).
September 30,December 31,Change
20202019$%
Canada – constant currency basis:
Gross loans receivable$300,409 $302,375 $(1,966)(0.7)%
  March 31,December 31, Change
(in thousands, unaudited) 20202019 $ %
Canada – constant currency basis:       
Gross loans receivable $302,762
$302,376
 $386
 0.1%


LIQUIDITY AND CAPITAL RESOURCES


Our principal sources of liquidity to fund the loans we make to our customers are cash provided by operations,operations; our Senior Revolver, our Cash Money Revolving Credit Facility, Non-Recourse U.S. SPV Facility, Non-Recourse Canada SPV Facility, and funds from third-party lenders under our CSO programs, and our Non-Recourse Canada SPV Facility. Duringprograms. Additionally, in August 2018, we issued $690.0 million 8.25% Senior Secured Notes due September 2025 (i) to redeem the outstanding 12.00% Senior Secured Notes due 2022 of CFTC, (ii) to repay a portion of the outstanding indebtedness under the five-year revolving credit facility of CURO Receivables Finance I, LLC, our wholly-owned subsidiary, which consists of a term loan and revolving borrowing capacity, (iii) for general corporate purposes and (iv) to pay fees, expenses, premiums and accrued interest in connection with the foregoing.2025.


As of March 31,September 30, 2020, 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, and meet our debt obligations. As we did for our share repurchase programs announced in April 2019 and February 2020 (which we have(the latter of which was suspended in March 2020, as previously disclosed), we may also use cash to fund a
62


return on capital for our stockholders through share repurchase programs, or as we previously announced in February 2020, in the form of dividends.


Our level of cash flow provided by operating activities typically experiences some 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 have done 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. Although consumer demand increased sequentially during the third quarter of 2020, our cash on hand and total liquidity remains at elevated levels due to a combination of factors, including (i) a sharp decrease in demand immediately following the onset of the COVID-19 pandemic, (ii) increased or accelerated repayments as customers benefited from government stimulus programs, (iii) our decision to tighten credit and the resulting favorable credit performance, and (iv) the runoff of California Installment loans following that state's regulatory changes effective January 1, 2020. These factors resulted in our available cash on hand of $207.1 million and our total liquidity of $302.1 million as of September 30, 2020. We believe our cash on hand and available borrowings provide us with sufficient liquidity for at least the next 12 months.




Borrowings


Our debt consisted of the following as of March 31,September 30, 2020, (netnet of deferred financing costs)costs (in thousands):

CapacityInterest RateMaturityCounter-partiesBalance as of September 30, 2020
Non-Recourse Canada SPV Facility (1)
C$175.0 million3-Mo CDOR + 6.75%September 2, 2023Waterfall Asset Management$91,010 
Senior Secured Revolving Credit Facility$50.0 million1-Mo LIBOR + 5.00%June 30, 2021BayCoast Bank; Stride Bank; Hancock-Whitney Bank; Metropolitan Commercial Bank— 
Non-Recourse U.S. SPV Facility$200.0 million
1-Mo LIBOR + 6.25(2)
April 8, 2024Atalaya Capital Management28,884 
Cash Money Revolving Credit Facility (1)
C$10.0 millionCanada Prime Rate +1.95%On-demandRoyal Bank of Canada— 
8.25% Senior Secured Notes (due 2025)$690.0 million8.25%September 1, 2025679,566 
(1) Capacity amounts are denominated in Canadian dollars, while outstanding balances as of September 30, 2020 are denominated in U.S. dollars.
(2) The Non-Recourse U.S. SPV Facility initially provided for $100.0 million of borrowing capacity and, on July 31, 2020, additional commitments were obtained increasing capacity to $200.0 million. As a result of the increase in commitments, interest now accrues at an annual rate of one-month LIBOR (with a floor of 1.65%) plus the lesser of (a) 6.95% and (b) the sum of (i) 6.25% on balances up to $145.5 million and (ii) 9.75% on balances greater than $145.5 million.

  CapacityInterest RateMaturityCounter-partiesBalance as of March 31, 2020
Non-Recourse Canada SPV Facility (1)
 C$175.0 million3-Mo CDOR + 6.75%September 2, 2023Waterfall Asset Management$84,724
Senior Secured Revolving Credit Facility $50.0 million1-Mo LIBOR + 5.00%June 30, 2021BayCoast Bank; Stride Bank; Hancock-Whitney Bank; Metropolitan Commercial Bank25,000
Non-Recourse U.S. SPV Facility (2)
 $100.0 million
1-Mo LIBOR + 5.75% or 9.75%(3)
April 8, 2024Atalaya Capital Management—
Cash Money Revolving Credit Facility (1)
 C$10.0 millionCanada Prime Rate +1.95%On-demandRoyal Bank of Canada—
8.25% Senior Secured Notes (due 2025) $690.0 million8.25%September 1, 2025 $678,727
(1) Capacity amounts are denominated in Canadian dollars, while outstanding balances as of March 31, 2020 are denominated in U.S. dollars.
(2) We entered into the Non-Recourse U.S. SPV Facility on April 8, 2020, and drew $35.2 million on the facility at such time.
(3) The Non-Recourse U.S. SPV Facility provides for $100.0 million of borrowing capacity and, subject to obtaining additional commitments thereunder, the ability to expand such capacity up to $200.0 million. Prior to the increase in commitments, interest accrues at an annual rate of one-month LIBOR plus 9.75% and after the increase in commitments, one-month LIBOR plus 5.75%.


Refer to Note 5, "Debt," for details on each of our credit facilities and resources. Refer to Note 19, "Subsequent Events" for additional details on the Non-Recourse U.S. SPV Facility that we closed on April 8, 2020.


63


CONDENSED CONSOLIDATING FINANCIAL INFORMATION


The following unaudited condensed consolidating financial information is presented separately for:

(i)CURO as the issuer of the 8.25% Senior Secured Notes;
(ii)The Company's subsidiary guarantors, which are comprised of certain of its domestic subsidiaries, including (x) CFTC, as the issuer of the 12.00% Senior Secured Notes that were redeemed in August 2018, (y) CURO Intermediate and (z) U.S. SPV as the issuer of the Non-Recourse U.S. SPV Facility that was extinguished in October 2018, but excluding Canada SPV (the “Subsidiary Guarantors”), on a consolidated basis, which are 100% owned by CURO, and which are guarantors of the 8.25% Senior Secured Notes issued in August 2018;
(iii)The Non-Recourse Canada SPV facility, a wholly-owned, bankruptcy-remote special purpose subsidiary;
(iv)The Company's other subsidiaries on a consolidated basis, which are not guarantors of the 8.25% 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, the Non-Recourse Canada SPV facility and the Subsidiary Non-Guarantors; and
b.eliminate the investments in subsidiaries; and
(vi)The Company and its subsidiaries on a consolidated basis.


(i)CURO as the issuer of the 8.25% Senior Secured Notes;
(ii)The Company's subsidiary guarantors, which are comprised of certain of its domestic subsidiaries, including (x) CFTC, as the issuer of the 12.00% Senior Secured Notes that were redeemed in August 2018, (y) CURO Intermediate Holdings Corp., but excluding the U.S. SPV and Canada SPV (the “Subsidiary Guarantors”), on a consolidated basis, which are 100% owned by CURO, and which are guarantors of the 8.25% Senior Secured Notes issued in August 2018;
(iii)The Non-Recourse U.S. SPV facility, a wholly-owned, bankruptcy-remote special purpose subsidiary, created in April 2020;
(iv)The Non-Recourse Canada SPV facility, a wholly-owned, bankruptcy-remote special purpose subsidiary;
(v)The Company's other subsidiaries on a consolidated basis, which are not guarantors of the 8.25% Senior Secured Notes (the “Subsidiary Non-Guarantors”);
(vi)Consolidating and eliminating entries representing adjustments to:
1.eliminate intercompany transactions between or among us, the Subsidiary Guarantors, the Non-Recourse U.S. SPV facility, the Non-Recourse Canada SPV facility and the Subsidiary Non-Guarantors; and
2.eliminate the investments in subsidiaries; and
(vii)The Company and its subsidiaries on a consolidated basis.

For additional details, see Note 5, "Debt."



64


Condensed Consolidating Balance Sheets
September 30, 2020
(dollars in thousands)CUROSubsidiary
Guarantors		U.S. SPVCanada SPVSubsidiary
Non-Guarantors		EliminationsCURO
Consolidated
Assets:
Cash and cash equivalents$— $148,530 $— $— $58,541 $— $207,071 
Restricted cash— 25,797 9,179 24,517 3,034 — 62,527 
Loans receivable, net— 102,858 55,376 218,683 39,943 — 416,860 
Income taxes receivable57,303 (24,444)— — 2,355 — 35,214 
Prepaid expenses and other— 20,028 455 710 7,066 — 28,259 
Property and equipment, net— 38,047 — — 23,634 — 61,681 
Investments— 23,908 — — — — 23,908 
Right of use asset - operating leases— 71,632 — — 39,423 — 111,055 
Deferred tax assets18,245 (18,245)— — — — — 
Goodwill— 105,922 — — 28,667 — 134,589 
Other intangibles, net— 15,477 — — 21,742 — 37,219 
Intercompany receivable— 154,020 — — — (154,020)— 
Investment in subsidiaries160,797 — — — — (160,797)— 
Other assets— 7,488 — — 663 — 8,151 
Total assets$236,345 $671,018 $65,010 $243,910 $225,068 $(314,817)$1,126,534 
Liabilities and Stockholders' equity (deficit):
Accounts payable and accrued liabilities$(52)$40,921 $— $26,665 $(15,787)$— $51,747 
Deferred revenue— 3,367 105 32 1,716 — 5,220 
Lease liability - operating leases— 79,439 — — 39,392 — 118,831 
Income taxes payable(8,164)8,164 — — — — — 
Accrued interest4,745 — 300 683 — — 5,728 
Liability for losses on CSO lender-owned consumer loans— 6,198 — — — — 6,198 
Debt679,566 — 28,884 91,010 — — 799,460 
Intercompany payable— 2,330 (2,330)37,511 116,509 (154,020)— 
Payable to CURO Holdings Corp.(565,230)565,230 — — — — — 
Other long-term liabilities— 13,311 — — 65 — 13,376 
Deferred tax liabilities12,927 — — (100)594 — 13,421 
Total liabilities123,792 718,960 26,959 155,801 142,489 (154,020)1,013,981 
Stockholders' equity (deficit)112,553 (47,942)38,051 88,109 82,579 (160,797)112,553 
Total liabilities and stockholders' equity (deficit)$236,345 $671,018 $65,010 $243,910 $225,068 $(314,817)$1,126,534 
65


March 31, 2020December 31, 2019
(dollars in thousands)CURO
Subsidiary
Guarantors
Canada SPVSubsidiary
Non-Guarantors		EliminationsCURO
Consolidated		(dollars in thousands)CUROSubsidiary
Guarantors		Canada SPVSubsidiary
Non-Guarantors		EliminationsCURO
Consolidated
Assets: Assets:
Cash$—
$107,208
$—
$31,506
$—
$138,714
Cash and cash equivalentsCash and cash equivalents$— $44,727 $— $30,515 $— $75,242 
Restricted cash—
17,069
22,317
2,141
—
41,527
Restricted cash— 14,958 17,427 2,394 — 34,779 
Loans receivable, net—
221,408
203,837
39,350
—
464,595
Loans receivable, net— 286,881 220,067 52,045 — 558,993 
Right of use asset - operating leases—
76,528
—
37,744
—
114,272
Deferred income taxes13,190
(13,190)—
—
—
—
Income taxes receivable47,236
(24,444)—
1,643
—
24,435
Income taxes receivable19,690 (8,987)— 723 — 11,426 
Prepaid expenses and other—
26,008
—
8,112
—
34,120
Prepaid expenses and other— 26,623 — 9,267 — 35,890 
Property and equipment, net—
42,536
—
24,251
—
66,787
Property and equipment, net— 43,618 — 27,193 — 70,811 
InvestmentsInvestments— 10,068 — — — 10,068 
Right of use asset - operating leasesRight of use asset - operating leases— 74,845 — 42,608 — 117,453 
Deferred tax assetDeferred tax asset8,561 (3,506)— — — 5,055 
Goodwill—
105,922
—
26,903
—
132,825
Goodwill— 91,131 — 29,478 — 120,609 
Other intangibles, net—
13,540
—
20,404
—
33,944
Other intangibles, net— 11,569 — 22,358 — 33,927 
Intercompany receivable—
135,608
—
—
(135,608)—
Intercompany receivable— 113,599 — — (113,599)— 
Investment in subsidiaries91,206
—
—
—
(91,206)—
Investment in subsidiaries84,514 — — — (84,514)— 
Other assets—
14,910
—
637
—
15,547
Other assets— 6,938 — 704 — 7,642 
Total assets$151,632
$723,103
$226,154
$192,691
$(226,814)$1,066,766
Total assets$112,765 $712,464 $237,494 $217,285 $(198,113)$1,081,895 
Liabilities and Stockholders' equity (deficit): 
Liabilities and Stockholder's equity (deficit):Liabilities and Stockholder's equity (deficit):
Accounts payable and accrued liabilities$(2)$43,133
$13,267
$(2,795)$—
$53,603
Accounts payable and accrued liabilities$465 $48,333 $13,462 $(2,177)$— $60,083 
Deferred revenue—
4,427
39
2,189
—
6,655
Deferred revenue— 6,828 46 3,296 — 10,170 
Lease liability - operating leases—
84,135
—
37,580
—
121,715
Lease liability - operating leases— 82,593 — 42,406 — 124,999 
Accrued interest4,744
21
627
—
—
5,392
Accrued interest18,975 1 871 — — 19,847 
Payable to CURO Holdings Corp.(600,336)600,336
—
—
—
—
Payable to CURO Holdings Corp.(635,511)635,511 — — — — 
CSO liability for losses—
9,189
—
—
—
9,189
Liability for losses on CSO lender-owned consumer loansLiability for losses on CSO lender-owned consumer loans— 10,623 — — — 10,623 
Debt678,727
24,850
84,874
—
—
788,451
Debt678,323 — 112,221 — — 790,544 
Intercompany payable—
—
80,240
55,368
(135,608)—
Intercompany payable— — 69,639 43,960 (113,599)— 
Other liabilities—
8,932
—
163
—
9,095
Other liabilities— 10,285 — 379 — 10,664 
Deferred tax liabilities8,928
—
—
4,167
—
13,095
Liabilities from discontinued operationsLiabilities from discontinued operations— — — 4,452 — 4,452 
Total liabilities92,061
775,023
179,047
96,672
(135,608)1,007,195
Total liabilities62,252 794,174 196,239 92,316 (113,599)1,031,382 
Stockholders' equity (deficit)59,571
(51,920)47,107
96,019
(91,206)59,571
Stockholders' equity (deficit)50,513 (81,710)41,255 124,969 (84,514)50,513 
Total liabilities and stockholders' equity$151,632
$723,103
$226,154
$192,691
$(226,814)$1,066,766
Total liabilities and stockholders' equity (deficit)Total liabilities and stockholders' equity (deficit)$112,765 $712,464 $237,494 $217,285 $(198,113)$1,081,895 


66


 December 31, 2019
(dollars in thousands)CUROSubsidiary
Guarantors		Canada SPVSubsidiary
Non-Guarantors		EliminationsCURO
Consolidated
Assets:      
Cash$—
$44,727
$—
$30,515
$—
$75,242
Restricted cash—
14,958
17,427
2,394
—
34,779
Loans receivable, net—
286,881
220,067
52,045
—
558,993
Right of use asset - operating leases—
74,845
—
42,608
—
117,453
Deferred tax asset8,561
(3,506)—
—
—
5,055
Income taxes receivable19,690
(8,987)—
723
—
11,426
Prepaid expenses and other—
26,623
—
9,267
—
35,890
Property and equipment, net—
43,618
—
27,193
—
70,811
Goodwill—
91,131
—
29,478
—
120,609
Other intangibles, net—
11,569
—
22,358
—
33,927
Intercompany receivable—
113,599
—
—
(113,599)—
Investment in subsidiaries84,514
—
—
—
(84,514)—
Other assets—
17,006
—
704
—
17,710
Total assets$112,765
$712,464
$237,494
$217,285
$(198,113)$1,081,895
Liabilities and Stockholder's equity:      
Accounts payable and accrued liabilities$465
$48,333
$13,462
$(2,177)$—
$60,083
Deferred revenue—
6,828
46
3,296
—
10,170
Lease liability - operating leases—
82,593
—
42,406
—
124,999
Accrued interest18,975
1
871
—
—
19,847
Payable to CURO Holdings Corp.(635,511)635,511
—
—
—
—
CSO liability for losses—
10,623
—
—
—
10,623
Debt678,323
—
112,221
—
—
790,544
Intercompany payable—
—
69,639
43,960
(113,599)—
Other liabilities—
10,285
—
379
—
10,664
Liabilities from discontinued operations—
—
—
4,452
—
4,452
Total liabilities(73,013)794,174
196,239
142,668
(113,599)1,031,382
Stockholders' equity50,513
(81,710)41,255
$124,969
(84,514)50,513
Total liabilities and stockholders' equity$(92,114)$712,464
$237,494
$267,637
$(198,113)$1,081,895


Condensed Consolidating Statements of Operations
Three Months Ended September 30, 2020
(dollars in thousands)CUROSubsidiary
Guarantors		U.S. SPVCanada SPVSubsidiary
Non-Guarantors		EliminationsCURO
Consolidated
Revenue$— $89,212 $43,636 $32,936 $16,219 $— $182,003 
Provision for losses— 24,016 19,469 9,191 2,074 — 54,750 
Net revenue— 65,196 24,167 23,745 14,145 — 127,253 
Cost of providing services:
Salaries and benefits— 16,075 — — 8,171 — 24,246 
Occupancy— 7,896 — — 5,982 — 13,878 
Office— 3,858 — — 1,200 — 5,058 
Other costs of providing services— 4,745 — — 1,331 — 6,076 
Advertising— 13,405 — — 1,020 — 14,425 
Total cost of providing services— 45,979 — — 17,704 — 63,683 
Gross margin— 19,217 24,167 23,745 (3,559)— 63,570 
Operating expense (income):
Corporate, district and other expenses3,558 27,836 109 139 5,016 — 36,658 
Intercompany management fee— (3,995)— 1,209 2,786 — — 
Interest expense (income)14,653 29 1,425 2,356 (80)— 18,383 
Income from equity method investment— (3,530)— — — — (3,530)
Intercompany interest (income) expense— (5,090)— 560 4,530 — — 
Total operating expense18,211 15,250 1,534 4,264 12,252 — 51,511 
(Loss) income from continuing operations before income taxes(18,211)3,967 22,633 19,481 (15,811)— 12,059 
(Benefit) provision for income taxes(10,189)8,346 — (101)1,122 — (822)
Net (loss) income from continuing operations(8,022)(4,379)22,633 19,582 (16,933)— 12,881 
Net income on discontinued operations— — — — — — — 
Net (loss) income(8,022)(4,379)22,633 19,582 (16,933)— 12,881 
Equity in net income (loss) of subsidiaries:
CFTC20,903 — — — — (20,903)— 
Guarantor Subsidiaries— (4,379)— — — 4,379 — 
Non-Guarantor Subsidiaries— (16,933)— — — 16,933 — 
U.S. SPV— 22,633 — — — (22,633)— 
Canada SPV— 19,582 — — — (19,582)— 
Net income (loss) attributable to CURO$12,881 $16,524 $22,633 $19,582 $(16,933)$(41,806)$12,881 
67


Three Months Ended March 31, 2020Three Months Ended September 30, 2019
(dollars in thousands)CUROSubsidiary
Guarantors		Canada SPVSubsidiary
Non-Guarantors		EliminationsCURO
Consolidated		(dollars in thousands)CUROSubsidiary
Guarantors		Canada SPVSubsidiary
Non-Guarantors		EliminationsCURO
Consolidated
Revenue$—
$221,768
$34,026
$25,012
$—
$280,806
Revenue$— $237,069 $30,211 $29,984 $— $297,264 
Provision for losses—
86,041
19,732
7,763
—
113,536
Provision for losses— 102,997 13,679 7,191 — 123,867 
Net revenue—
135,727
14,294
17,249
—
167,270
Net revenue— 134,072 16,532 22,793 — 173,397 
Cost of providing services: 

Cost of providing services:
Salaries and benefits—
16,912
—
9,095
—
26,007
Salaries and benefits— 18,301 — 9,161 — 27,462 
Occupancy—
7,825
—
6,191
—
14,016
Occupancy— 8,249 — 5,787 — 14,036 
Office—
4,301
—
1,373
—
5,674
Office— 4,611 — 1,382 — 5,993 
Other costs of providing services—
8,204
—
1,451
—
9,655
Other costs of providing services— 11,475 — 1,368 — 12,843 
Advertising—
10,945
—
1,274
—
12,219
Advertising— 14,186 — 2,238 — 16,424 
Total cost of providing services—
48,187
—
19,384
—
67,571
Total cost of providing services— 56,822 — 19,936 — 76,758 
Gross margin—
87,540
14,294
(2,135)—
99,699
Gross margin— 77,250 16,532 2,857 — 96,639 
Operating expense (income): 

Operating (income) expense:Operating (income) expense:
Corporate, district and other expenses3,395
34,255
174
4,983
—
42,807
Corporate, district and other expenses2,967 29,930 472 5,296 — 38,665 
Intercompany management fee—
(3,800)730
3,070
—
—
Intercompany management fee— (3,276)8 3,268 — — 
Interest expense14,636
210
2,620
(142)—
17,324
Interest expense14,619 258 2,463 24 — 17,364 
Loss from equity method investment—
1,618
—
—
—
1,618
Loss from equity method investment— 1,384 — — — 1,384 
Intercompany interest (income) expense—
(1,441)550
891
—
—
Intercompany interest (income) expense— (1,462)569 893 — — 
Total operating expense18,031
30,842
4,074
8,802
—
61,749
Total operating expense17,586 26,834 3,512 9,481 — 57,413 
Income (loss) from continuing operations before income taxes(18,031)56,698
10,220
(10,937)—
37,950
Income (loss) from continuing operations before income taxes(17,586)50,416 13,020 (6,624)— 39,226 
Provision (benefit) for income tax expense(23,247)24,998
—
186
—
1,937
Net income (loss) from continuing operations5,216
31,700
10,220
(11,123)—
36,013
Discontinued operations: 
Net income on discontinued operations—
—
—
292
—
292
Net income (loss)5,216
31,700
10,220
(10,831)—
36,305
(Benefit) provision for income taxes(Benefit) provision for income taxes(4,447)13,700 — 1,986 — 11,239 
Net (loss) income from continuing operationsNet (loss) income from continuing operations(13,139)36,716 13,020 (8,610)— 27,987 
Net loss on discontinued operationsNet loss on discontinued operations— — — (598)— (598)
Net (loss) incomeNet (loss) income(13,139)36,716 13,020 (9,208)— 27,389 
Equity in net income (loss) of subsidiaries: Equity in net income (loss) of subsidiaries:
CFTC31,089
—
—
—
(31,089)—
CFTC40,528 — — — (40,528)— 
Guarantor Subsidiaries—
31,700
—
—
(31,700)—
Guarantor Subsidiaries— 36,716 — — (36,716)— 
Non-Guarantor Subsidiaries—
(10,831)—
—
10,831
—
Non-Guarantor Subsidiaries— (9,208)— — 9,208 — 
SPV Subs 10,220
—
—
(10,220)—
Canada SPVCanada SPV— 13,020 — (13,020)— 
Net income (loss) attributable to CURO$36,305
$62,789
$10,220
$(10,831)$(62,178)$36,305
Net income (loss) attributable to CURO$27,389 $77,244 $13,020 $(9,208)$(81,056)$27,389 
68


Three Months Ended March 31, 2019Nine Months Ended September 30, 2020
(dollars in thousands)CUROSubsidiary
Guarantors		Canada SPVSubsidiary
Non-Guarantors		EliminationsCURO
Consolidated		(dollars in thousands)CUROSubsidiary
Guarantors		U.S. SPVCanada SPVSubsidiary
Non-Guarantors		EliminationsCURO
Consolidated
Revenue$—
$226,119
$25,046
$26,774
$—
$277,939
Revenue$— $408,465 $83,471 $97,334 $56,048 $— $645,318 
Provision for losses—
84,980
13,306
4,099
—
102,385
Provision for losses— 128,409 42,647 38,167 9,756 — 218,979 
Net revenue—
141,139
11,740
22,675
—
175,554
Net revenue— 280,056 40,824 59,167 46,292 — 426,339 
Cost of providing services: Cost of providing services:
Salaries and benefits—
19,951
—
8,750
—
28,701
Salaries and benefits— 49,650 — — 25,326 — 74,976 
Occupancy—
8,010
—
6,227
—
14,237
Occupancy— 23,307 — — 17,630 — 40,937 
Office—
3,889
—
1,224
—
5,113
Office— 10,935 — — 3,597 — 14,532 
Other costs of providing services—
13,132
—
1,088
—
14,220
Other costs of providing services— 19,585 — — 4,147 — 23,732 
Advertising—
6,354
—
1,432
—
7,786
Advertising— 29,619 — — 2,775 — 32,394 
Total cost of providing services—
51,336
—
18,721
—
70,057
Total cost of providing services— 133,096 — — 53,475 — 186,571 
Gross margin—
89,803
11,740
3,954
—
105,497
Gross margin— 146,960 40,824 59,167 (7,183)— 239,768 
Operating expense (income): Operating expense (income):
Corporate, district and other expenses2,342
41,538
25
5,183
—
49,088
Corporate, district and other expenses10,350 88,289 145 416 17,046 — 116,246 
Intercompany management fee—
(3,403)8
3,395
—
—
Intercompany management fee— (11,139)— 2,584 8,555 — — 
Interest expense14,438
290
2,891
71
—
17,690
Interest expense43,937 496 2,633 7,089 (137)— 54,018 
Income from equity method investmentIncome from equity method investment— (2,653)— — — — (2,653)
Intercompany interest (income) expense—
(1,071)—
1,071
—
—
Intercompany interest (income) expense— (7,973)— 1,643 6,330 — — 
Total operating expense16,780
37,354
2,924
9,720
—
66,778
Total operating expense54,287 67,020 2,778 11,732 31,794 — 167,611 
Income (loss) from continuing operations before income taxes(16,780)52,449
8,816
(5,766)—
38,719
Income (loss) from continuing operations before income taxes(54,287)79,940 38,046 47,435 (38,977)— 72,157 
Provision (benefit) for income tax expense(5,008)14,020
—
1,034
—
10,046
Net (loss) income from continuing operations(11,772)38,429
8,816
(6,800)—
28,673
Discontinued operations: 

Net loss on discontinued operations—
—
—
8,375
—
8,375
Net (loss) income(11,772)38,429
8,816
1,575
—
37,048
(Benefit) provision for income taxes(Benefit) provision for income taxes(36,308)40,848 — (101)(2,256)— 2,183 
Net income (loss) from continuing operationsNet income (loss) from continuing operations(17,979)39,092 38,046 47,536 (36,721)— 69,974 
Net income on discontinued operationsNet income on discontinued operations— — — — 1,285 — 1,285 
Net income (loss)Net income (loss)(17,979)39,092 38,046 47,536 (35,436)— 71,259 
Equity in net income (loss) of subsidiaries: Equity in net income (loss) of subsidiaries:
CFTC48,820
—
—
—
(48,820)—
CFTC89,238 — — — — (89,238)— 
Guarantor Subsidiaries—
38,429
—
—
(38,429)—
Guarantor Subsidiaries— 39,092 — — — (39,092)— 
Non-Guarantor Subsidiaries—
1,575
—
—
(1,575)—
Non-Guarantor Subsidiaries— (35,436)— — — 35,436 — 
SPV Subs—
8,816
—
 (8,816)—
U.S. SPVU.S. SPV— 38,046 — — — (38,046)— 
Canada SPVCanada SPV— 47,536 — — — (47,536)— 
Net income (loss) attributable to CURO$37,048
$87,249
$8,816
$1,575
$(97,640)$37,048
Net income (loss) attributable to CURO$71,259 $128,330 $38,046 $47,536 $(35,436)$(178,476)$71,259 

69



Nine Months Ended September 30, 2019
(dollars in thousands)CUROSubsidiary
Guarantors		Canada SPVSubsidiary
Non-Guarantors		EliminationsCURO
Consolidated
Revenue$— $673,234 $81,349 $84,920 $— $839,503 
Provision for losses— 280,529 40,099 17,634 — 338,262 
Net revenue— 392,705 41,250 67,286 — 501,241 
Cost of providing services:
Salaries and benefits— 55,675 — 26,574 — 82,249 
Occupancy— 24,292 — 17,913 — 42,205 
Office— 12,504 — 4,059 — 16,563 
Other costs of providing services— 36,395 — 3,522 — 39,917 
Advertising— 31,719 — 5,271 — 36,990 
Total cost of providing services— 160,585 — 57,339 — 217,924 
Gross margin— 232,120 41,250 9,947 — 283,317 
Operating expense (income):
Corporate, district and other expenses7,940 98,486 (283)16,900 — 123,043 
Intercompany management fee— (9,576)23 9,553 — — 
Interest expense43,671 575 7,728 103 — 52,077 
Loss from equity method investment— 5,132 — — — 5,132 
Intercompany interest (income) expense— (3,855)1,192 2,663 — — 
Total operating expense51,611 90,762 8,660 29,219 — 180,252 
Income (loss) from continuing operations before income taxes(51,611)141,358 32,590 (19,272)— 103,065 
(Benefit) provision for income taxes(12,686)37,309 — 4,115 — 28,738 
Net (loss) income from continuing operations(38,925)104,049 32,590 (23,387)— 74,327 
Net income on discontinued operations— — — 6,943 — 6,943 
Net (loss) income(38,925)104,049 32,590 (16,444)— 81,270 
Equity in net income (loss) of subsidiaries:
CFTC120,195 — — — (120,195)— 
Guarantor Subsidiaries— 104,049 — — (104,049)— 
Non-Guarantor Subsidiaries— (16,444)— — 16,444 — 
Canada SPV32,590 — — (32,590)— 
Net income (loss) attributable to CURO$81,270 $224,244 $32,590 $(16,444)$(240,390)$81,270 
70


Condensed Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2020
(dollars in thousands)CUROSubsidiary GuarantorsU.S. SPVCanada SPVSubsidiary
Non-Guarantors		EliminationsCURO Consolidated
Cash flows from operating activities:
Net cash provided by continuing operating activities$6,549 $143,190 $62,286 $69,115 $29,333 $(727)$309,746 
Net cash used in discontinued operating activities— — — — 1,714 — 1,714 
Cash flows from investing activities:
Purchase of property and equipment— (6,875)— — (526)— (7,401)
Originations of loans, net— 10,556 (81,322)(42,854)(1,268)— (114,888)
Investments in Katapult— (11,187)— — — — (11,187)
Acquisition of Ad Astra, net of acquiree's cash received— (14,418)— — — — (14,418)
Net cash provided by (used in) continuing investing activities— (21,924)(81,322)(42,854)(1,794)— (147,894)
Cash flows from financing activities:
Proceeds from Non-Recourse Canada SPV facility— — — 23,357 — — 23,357 
Payments on Non-Recourse Canada SPV facility— — — (42,131)— — (42,131)
Proceeds from Non-Recourse U.S. SPV facility— — 35,206 — — — 35,206 
Proceeds from credit facilities— 60,000 — — 9,853 — 69,853 
Payments on credit facilities— (60,000)— — (9,853)— (69,853)
Payments to net share settle RSUs(641)— — — — — (641)
Proceeds from exercise of stock options— 126 — — — — 126 
Debt issuance costs paid— — (6,991)— — — (6,991)
Repurchase of common stock(5,908)— — — — — (5,908)
Dividends paid to CURO Group Holdings Corp.6,750 (6,750)— — — — — 
Dividends paid to stockholders(6,750)— — — — — (6,750)
Net cash (used in) provided by financing activities (1)
(6,549)(6,624)28,215 (18,774)— — (3,732)
Effect of exchange rate changes on cash, cash equivalents and restricted cash— — — (397)(587)727 (257)
Net increase in cash, cash equivalents and restricted cash— 114,642 9,179 7,090 28,666 — 159,577 
Cash, cash equivalents and restricted cash at beginning of period— 59,685 — 17,427 32,909 — 110,021 
Cash, cash equivalents and restricted cash at end of period$— $174,327 $9,179 $24,517 $61,575 $— $269,598 

71


Three months ended March 31, 2020Nine Months Ended September 30, 2019
(dollars in thousands)CUROSubsidiary GuarantorsCanada SPV
Subsidiary
 Non-Guarantors
EliminationsCURO Consolidated(dollars in thousands)CUROSubsidiary GuarantorsCanada SPVSubsidiary
Non-Guarantors		EliminationsCURO Consolidated
Cash flows from operating activities: Cash flows from operating activities:
Net cash provided by continuing operating activities$6,517
$89,412
$48,035
$12,102
$(4,197)$151,869
Net cash provided by continuing operating activities$52,311 $273,564 $119,898 $17,201 $1,319 $464,293 
Net cash used in discontinued operating activities—
—
—
390
—
390
Net cash used in discontinued operating activities— — — (504)— (504)
Cash flows from investing activities: 

Cash flows from investing activities:
Purchase of property, equipment and software—
(3,237)—
(421)—
(3,658)
Purchase of property and equipmentPurchase of property and equipment— (7,351)— (1,316)— (8,667)
Originations of loans, net—
(29,894)(22,280)(8,227)—
(60,401)Originations of loans, net— (261,073)(102,238)(11,042)— (374,353)
Acquisition of Ad Astra, net of acquiree's cash received—
(14,418)—
—
—
(14,418)
Investments in KatapultInvestments in Katapult— (8,168)— — — (8,168)
Net cash used in continuing investing activities—
(47,549)(22,280)(8,648)—
(78,477)Net cash used in continuing investing activities— (276,592)(102,238)(12,358)— (391,188)
Net cash used in discontinued investing activitiesNet cash used in discontinued investing activities— — — (14,213)— (14,213)
Cash flows from financing activities: 

Cash flows from financing activities:
Proceeds from Non-Recourse Canada SPV facility—
—
23,560
—
—
23,560
Proceeds from Non-Recourse Canada SPV facility— — 15,992 — — 15,992 
Payments on Non-Recourse Canada SPV facility—
—
(42,497)—
—
(42,497)Payments on Non-Recourse Canada SPV facility— — (24,835)— — (24,835)
Proceeds from credit facilities—
60,000
—
9,938
—
69,938
Proceeds from credit facilities— 120,000 — 59,811 — 179,811 
Payments on credit facilities—
(35,000)—
(9,938)—
(44,938)Payments on credit facilities— (115,000)— (59,811)— (174,811)
Payments on subordinated stockholder debtPayments on subordinated stockholder debt— — — (2,252)— (2,252)
Proceeds from exercise of stock optionsProceeds from exercise of stock options— 87 — — — 87 
Payments to net share settle RSUs(609)—
—
—
—
(609)Payments to net share settle RSUs(110)— — — — (110)
Proceeds from exercise of stock options—
126
—
—
—
126
Debt issuance costs paid—
(150)—
—
—
(150)Debt issuance costs paid(29)— (169)— — (198)
Repurchase of common stock(5,908)—
—
—
—
(5,908)Repurchase of common stock(52,172)— — — — (52,172)
Dividends paid to CURO Group Holdings Corp.2,247
(2,247)—
—
—
—
Dividends paid to stockholders(2,247)—
—
—
—
(2,247)
Net cash (used in) provided by financing activities (1)
(6,517)22,729
(18,937)—
—
(2,725)
Net cash used in provided by financing activities (1)
Net cash used in provided by financing activities (1)
(52,311)5,087 (9,012)(2,252)— (58,488)
 

Effect of exchange rate changes on cash and restricted cash—
—
(1,928)(3,106)4,197
(837)
Net increase in cash and restricted cash—
64,592
4,890
738
—
70,220
Cash and restricted cash at beginning of period—
59,685
17,427
32,909
—
110,021
Cash at end of period$—
$124,277
$22,317
$33,647
$—
$180,241
Effect of exchange rate changes on cash, cash equivalents and restricted cashEffect of exchange rate changes on cash, cash equivalents and restricted cash— — 409 2,114 (1,319)1,204 
Net increase (decrease) in cash, cash equivalents and restricted cashNet increase (decrease) in cash, cash equivalents and restricted cash— 2,059 9,057 (10,012)— 1,104 
Cash, cash equivalents and restricted cash at beginning of periodCash, cash equivalents and restricted cash at beginning of period— 52,397 12,840 34,620 — 99,857 
Cash, cash equivalents and restricted cash at end of periodCash, cash equivalents and restricted cash at end of period$— $54,456 $21,897 $24,608 $— $100,961 
(1) Financing activities include continuing operations only and were not impacted by discontinued operations.(1) Financing activities include continuing operations only and were not impacted by discontinued operations.





72

 Three months ended March 31, 2019
(dollars in thousands)CUROSubsidiary GuarantorsCanada SPV
Subsidiary
 Non-Guarantors
EliminationsCURO Consolidated
Cash flows from operating activities:      
Net cash provided by continuing operating activities$67
$88,291
$53,969
$(1,574)$246
$140,999
Net cash used in discontinued operating activities—
—
—
(504)—
(504)
Cash flows from investing activities:      
Purchase of property, equipment and software—
(2,430)—
(689)—
(3,119)
Originations of loans, net—
(38,226)(30,373)3,652
—
(64,947)
Cash paid for Katapult investment—
(1,568)—
—
—
(1,568)
Net cash used in continuing investing activities—
(42,224)(30,373)2,963
—
(69,634)
Net cash used in discontinued investing activities—
—
—
(14,213)—
(14,213)
Cash flows from financing activities:      
Proceeds from Non-Recourse Canada SPV facility—
—
3,762
—
—
3,762
Payments on Non-Recourse Canada SPV facility—
—
(24,831)—
—
(24,831)
Proceeds from credit facilities—
15,000
—
15,478
—
30,478
Payments on credit facilities—
(35,000)—
(15,478)—
(50,478)
Payments to net share settle RSUs(37)—
—
—
—
(37)
Proceeds from exercise of stock options—
40
—
—
—
40
Debt issuance costs paid(30)—
(169)—
—
(199)
Net cash used in provided by financing activities (1)
(67)(19,960)(21,238)—
—
(41,265)
       
Effect of exchange rate changes on cash and restricted cash—
—
262
1,922
(246)1,938
Net increase (decrease) in cash and restricted cash—
26,107
2,620
(11,406)—
17,321
Cash and restricted cash at beginning of period—
52,397
12,840
34,620
—
99,857
Cash at end of period$—
$78,504
$15,460
$23,214
$—
$117,178
(1) Financing activities include continuing operations only and were not impacted by discontinued operations.






Cash Flows


The following highlights our cash flow activity and the sources and uses of funding during the periods indicated (in thousands):
Nine Months Ended September 30,
20202019
Net cash provided by operating activities from continuing operations$309,746 $464,293 
Net cash used in investing activities from continuing operations(147,894)(391,188)
Net cash used in financing activities from continuing operations(3,732)(58,488)
  Three Months Ended March 31,
  2020 2019
Net cash provided by continuing operating activities $151,869
 $140,999
Net cash used in continuing investing activities (78,477) (69,634)
Net cash used in continuing financing activities (2,725) (41,265)


Continuing Operating Activities from Continuing Operations


Net cash provided by continuing operating activities from continuing operations for the threenine months ended March 31,September 30, 2020 was $151.9$309.7 million, primarily attributable to net income from continuing operations of $70.0 million the effect of non-cash reconciling items of $137.7$256.2 million, which includes provision for loan losses of $113.5 million,partially offset by changes in our operating assets and liabilities which provided $21.9of $16.4 million. Our non-cash reconciling items of $256.2 million included (i) provision for loan losses of $219.0 million, (ii) changes in deferred income tax of $14.2 million and (iii) $13.3 million of depreciation and amortization. Our changes in operating assets and liabilities of $16.4 million related to a higher income tax receivable of $23.8 million and $14.1 million of lower accrued interest on our 8.25% Senior Secured Notes, partially offset by a $26.6 million decline in accrued interest on our gross loans receivable due to overall volume decline, as previously discussed.


Net cash provided by continuing operating activities from continuing operations for the threenine months ended March 31,September 30, 2019 was $141.0$464.3 million, primarily attributable to net income from continuing operations of $28.7$74.3 million, the effect of non-cash reconciling items of $364.3 million, which includes provision for loan losses of $102.4$338.3 million, and changes in our operating assets and liabilities of $12.1 million, partially offset by other non-cash expenses of $2.1which provided $25.6 million. Major components of non-cash expenses include depreciation and amortization, provision for loan losses and share-based compensation expense.


Continuing Investing Activities from Continuing Operations


Net cash used in continuing investing activities from continuing operations for the threenine months ended March 31,September 30, 2020 was $78.5$147.9 million, primarily reflecting (i) the net origination of loans of $60.4$114.9 million, and(ii) the acquisition of Ad Astra for $14.4 million, net of cash received. Net origination of loans includes $30.1received, and (iii) $11.2 million of additional equity interests in Katapult. In addition, we used cash inflows for California Unsecuredto purchase $7.4 million of property and Secured Installment loans from December 31, 2019 to March 31, 2020 due to regulatory changes, effective January 1, 2020.equipment.


Net cash used in continuing investing activities from continuing operations for the threenine months ended March 31,September 30, 2019 was $69.6$391.2 million, primarily reflecting the net origination of loans of $64.9$374.4 million. In addition, we used cash to purchase approximately $3.1$8.7 million of property and equipment, including software licenses.licenses and $8.2 million of additional equity interests in Katapult.


Origination of loans will fluctuate from period-to-period, depending on the timing of loan issuances and collections. A seasonal decline in consumer loans receivable typically occurs during the first quarter of the year and is driven by income tax refunds in the U.S. Typically, customers will use the proceeds from income tax refunds to pay outstanding loan balances, resulting in an increase in our net cash balances and a decrease in our consumer loans receivable balances. Year-over-year comparisons were impacted by factors related to COVID-19, including lower consumer demand, increased or accelerated repayments as customers benefited from government stimulus programs and our decision to tighten credit which resulted in lower originations, as well as the runoff of California Installment loans from regulatory changes effective January 1, 2020.


Continuing Financing Activities from Continuing Operations


Net cash used in continuing financing activities from continuing operations for the threenine months ended March 31,September 30, 2020 was $2.7$3.7 million, primarily due to $6.1$35.2 million of net proceeds on our debt facilities,Non-Recourse U.S. SPV Facility, partially offset by a net pay-down on our Non-Recourse Canada SPV Facility of $18.8 million, common stock repurchases of $5.9 million, and cash dividends of $2.2 million.$6.8 million and debt issuance costs of $7.0 million related to the Non-Recourse U.S. SPV Facility.


Net cash provided by continuingused in financing activities from continuing operations for the threenine months ended March 31,September 30, 2019 was $41.3 million. During$58.5 million, primarily due to (i) $27.1 million of cash used to repurchase 2,000,000 shares of our common stock, at a price of $13.55 per share, owned by FFL and (ii) $25.1 million of cash used to repurchase 2,089,644 shares of our common stock under the share repurchase program which began during the second quarter we made a $20.0 million payment on the Senior Revolver to reduce the outstanding balance to zero and made net repayments of $20.9 million on the Non-Recourse Canada SPV Facility.2019.


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Contractual Obligations


There have been no significant developments with respect to our contractual obligations since December 31, 2019, as described in our 2019 Form 10-K.10-K, except for the Non-Recourse U.S. SPV Facility in April 2020. 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 judgement 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 2019 Form 10-K.

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.


The U.S. and Canada operations are our two reporting units, 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, 2019), both reporting units' estimated fair valuedvalues exceeded itstheir carrying value. As described in our 2019 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 in general, were considered when performing the annual test onas of October 1, 2019.


InFor the first quarter ofthree months ended September 30, 2020, we performedreviewed goodwill for triggering events that would indicate a need for an interim quantitative or qualitative assessment of goodwill on both reporting units to consider whether current events or circumstances, attributable to uncertainty caused by COVID-19, resulted inimpairment. As a more likely than not reduction in the fair valueresult of the reporting units below their respective carrying values.

Canada Reporting Unit

As part of our quantitative testing process for goodwill of the Canada reporting unit, we estimated fair values using a discounted cash flow approach from the perspective of a market participant. Significant assumptions used in the discounted cash flow approach are revenue growth rates, gross margin, EBITDA margins, discount ratereview, no additional assessment was deemed necessary, and long-term revenue growth rate. The cash flow forecasts of the reporting unit, which we updated to reflect the uncertainty caused by COVID-19, are based on management’s long-term view of our markets and are the forecasts that senior management and the Board of Directors use to evaluate the Company's overall and individual reporting unit operating performance. The discount rate utilized is management’s estimate of what the market’s weighted average cost of capital is for a company with a similar debt rating and stock volatility, as measured by beta. The terminal business value is determined by applying the long-term growth rate to the latest year for which a forecast exists. As part of our goodwill quantitative testing process, we evaluate whetherthus there are reasonably likely changes to management’s estimates that would have a material impact on the results of thewas no goodwill impairment testing.

As of March 31, 2020, no impairment of goodwill existed for the Canadaeither reporting unit. Testing did indicate that the fair value of the Canada reporting unit exceeded its carrying value by less than 5%. This reduction in fair value of the Canada reporting unit, which was previously greater than 10% at the time of the October 1, 2019 annual impairment test, was primarily driven by significant uncertainty surrounding the effect that the COVID-19 pandemic will have on the reporting unit’s near-term cash flows, triggering a decrease in the reporting unit's forecasted near-term cash flows. The length of time and extent to which the pandemic will impact our customers remains unclear, and assumptions used in the discounted cash flow approach reflect management's estimates as of the date of this filing.

U.S. Reporting Unit

After performing a similar interim impairment test for the U.S. reporting unit as that for the Canada reporting unit utilizing a discounted cash flow method, which was adjusted for considerations related to COVID-19, we concluded that the fair value continues to be significantly in excess of the carrying value.

The following table summarizes the segment allocation of recorded goodwill on our unaudited Condensed Consolidated Balance Sheets as of March 31, 2020:

(in thousands)March 31, 2020Percent of Total December 31, 2019Percent of Total
U.S.$105,922
79.7% $91,131
75.6%
Canada26,903
20.3% 29,478
24.4%
Total Goodwill$132,825
  $120,609
 


There continues to be uncertainty surrounding the macroeconomic factors forthat could impact the U.S. and Canada reporting unit.units. Changes in the expected length of the current economic downturn, timing of recovery, or long-term revenue growth or profitability for thisthese reporting unitunits 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, 2020:
(in thousands)September 30, 2020Percent of TotalDecember 31, 2019Percent of Total
U.S.$105,922 78.7 %$91,131 75.6 %
Canada28,667 21.3 %29,478 24.4 %
Total Goodwill$134,589 $120,609 

Regulatory Environment and Compliance


There have been no significant developments with respect to our regulatory environment and compliance since December 31, 2019, as described in our 2019 Form 10-K.10-K and our Quarterly Report on Form 10-Q filed with the SEC on August 5, 2020, except for the following:



CFPB Rulemaking Update

On July 7, 2020, the CFPB issued its decision on the 2019 Proposed Rule. With respect to the 2019 Proposed Rule, the CFBP rescinded the mandatory underwriting provisions of the 2017 Final CFPB Rule. However, the CFPB did not rescind or alter the payment provisions of the 2017 Final CFPB Rule. Furthermore, on July 7, 2020, the CFPB ratified prior regulatory actions which included the payments provisions of the 2017 Final CFPB Rule. The effective date for compliance with the payment provisions of the 2017 Final CFPB Rule is currently unknown. The 2017 Final CFPB rule is currently stayed as a result of an industry legal challenge. On August 20, 2020, the Federal District Court for the Western District of Texas issued an Order establishing, among other things, a scheduling order for additional motions and amended complaints and responses in the
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pending industry legal challenge. The final filing date set by the Court is December 18, 2020, when the CFPB is scheduled to file its reply in support of its cross-motion for summary judgment. In light of the industry challenge to the 2017 Final CFPB Rule, we cannot predict when the 2017 Final CFPB Rule as it relates to payments will ultimately go into effect; nor can we quantify its potential effect on our results of operations or financial condition.

Additionally, in 2016, the CFPB issued an outline of proposals intended to increase consumer protection pertaining to third-party debt collectors and others covered by the Fair Debt Collection Practices Act (“FDCPA”). These proposals would apply to the attempts of our third-party collection agenc(ies) to collect debt originated by other lenders, including under our CSO programs ("2016 CFPB Outline"). The proposals would not apply to our attempts to collect debt that we originate; however, the CFPB has announced that it plans to address consumer protection issues involving first-party debt collectors and creditors separately. The final rule addressing third party debt collections and others covered by the FDCPA was released on October 30, 2020. Given that these final rules were released on the same date as this Form 10-Q, we are still reviewing the final rules and have not yet determined what effect the rules will have on our business.

California Consumer Privacy Act

In 2018, the California Consumer Privacy Act was passed into law, effective January 1, 2020, and the California Attorney General has enforcement authority as of July 1, 2020.

A state ballot initiative, which would have additional impact, will be decided by vote in November 2020.

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 2019 Form 10-K and our Quarterly Report on Form 10-Q for the yearquarter ended December 31, 2019.June 30, 2020. There have been no material changes to the amountsquantitative and qualitative information presented therein.


LIBOR is used as a reference rate for certain of our financial instruments, such as our revolving credit facilities. LIBOR is set to be phased out at the end of 2021. We are currently reviewing how the LIBOR phase-out will affect the Company, but we do not expect the impact to be material.

ITEM 4.         CONTROLS AND PROCEDURES


Disclosure controls and procedures 


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 we 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. 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,September 30, 2020.


Limitation 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 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 three months ended March 31,September 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.     OTHER INFORMATION


Item 1.         Legal Proceedings
The information required by this item is included in Note 13, "Contingent Liabilities"13, "Commitments and Contingencies" of the Notes to the unaudited Condensed Consolidated Financial Statements in this Form 10-Q and is incorporated herein by reference.




Item 1A.     Risk Factors
There were no material changes to ourThe Company is supplementing the risk factors as describedpreviously disclosed in ourthe Company's 2019 Form 10-K, for the year ended December 31, 2019 or in our CurrentQuarterly Report on Form 8-K filed on April 8, 2020, except10-Q for the following:quarter ended March 31, 2020 and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, as follows:


The failure to comply with debt collection regulations, or the failure of our third-party collection agencies to comply with debt collection regulations, could subject us to fines and other liabilities, which could harm our reputation and business.

In January 2020, we acquired Ad Astra, our exclusive provider of third-party collection services for our U.S. operations. The FDCPA regulates persons who regularly collect or attempt to collect, directly or indirectly, consumer debts owed or asserted to be owed to another person. Many states impose additional requirements on debt collection communications, and some of those requirements may be more stringent than the federal requirements. Moreover, regulations governing debt collection are subject to changing interpretations that differ from jurisdiction to jurisdiction. We have covenantsused in the past, and may continue to use in the future, third-party collections agencies to collect on debts incurred by consumers of our credit products. Regulatory changes could make it more difficult for us and collections agencies to effectively collect on the loans we originate.

In 2016, the CFPB issued the 2016 CFPB Outline intended to increase consumer protection pertaining to third-party debt agreements which may restrictcollectors and others covered by the FDCPA. The 2016 CFPB Outline would apply to the attempts of our flexibilitythird-party collection agenc(ies) to operatecollect debt originated by other lenders, including under our business. IfCSO programs. The proposals would not apply to our attempts to collect debt that we dooriginate; however, the CFPB has announced that it plans to address consumer protection issues involving first-party debt collectors and creditors separately. The final rule addressing third-party debt collections and others covered by the FDCPA was released on October 30, 2020. Given that these final rules were released on the same date as this Form 10-Q, we are still reviewing the final rules. As such, we have not comply withyet determined what effect the rules will have on our business and are not able to give any assurance that the effect of these covenants, our failure couldnew rules will not have a material adverse effectimpact on our results of operations or financial condition.


Our debt agreements contain customary restrictive covenants, including limitations on consolidated indebtedness, liens, investments, subsidiary investments and asset dispositions, and require us to maintain certain leverage and interest coverage ratios. Failure to comply with these covenantsA change in the United States' presidential administration and/or composition of Congress in the upcoming 2020 election could result in new legislation, rules and regulatory and enforcement policies with an adverse impact on our business.

On June 29, 2020, in Seila Law LLC v. CFPB, the U.S. Supreme Court ruled that the single-director structure of the CFPB is unconstitutional. The Court noted the agency's structure vests too much power in the hands of one person, and that a president has broad constitutional authority to appoint and remove agency heads (with or without cause). In the event a president appoints a director who has a negative view of default that, if not cured our business and/or waived,industry, the Seila ruling could have far-reaching implications to our business. Similarly, changes in the presidential administration and/or composition of Congress more generally as a result of the November 2020 U.S. elections could result in reduced liquidity andother rule changes, rulings or interpretations that could have a material adverse effect on our operating results and financial condition. In addition, an event of default under one of our debt agreements may result in our then-outstanding debt to become immediately due and payable.

In addition, Our Non-Recourse Canada SPV Facility and Non-Recourse U.S. SPV Facility contain default, delinquency and net spread ratio limits and our Non-Recourse U.S. SPV Facility also contains a cash collection percentage limit on the receivables pledged to each facility. If these limits were exceeded, it would potentiallyadversely impact our ability to draw under the terms of these agreements. Further, in certain instances, if ratios are exceeded, we may be required to redirect all excess cash to the credit providers. These limits are calculated based on the portfolio collateralizing the respective credit line.business.


Failure to comply with our debt covenants could have a material adverse effect on our liquidity, results of operation or financial condition if we are either unable to access capital at such time that it is critical to our business or if we are required to reduce our outstanding indebtedness.

Item 2.         Unregistered Sales of Equity Securities and Use of Proceeds


Issuer Purchases of Equity SecuritiesNone.


The 2017 Incentive Plan permits the netting of common stock upon vesting of restricted stock units to satisfy individual tax withholding requirements. See Note 6, "Share-Based Compensation" for additional information regarding the 2017 Incentive Plan. During the quarter ended March 31, 2020, we reacquired 75,968 shares of common stock related to such tax withholdings. See Note 18, "Share Repurchase Program" for additional information regarding share repurchases during the first quarter of 2020.

The following table provides information with respect to purchases we made of our common stock during the quarter ended March 31, 2020.
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)
January 2020408,059
$10.53
397,500
$0.6
February 202085,695
10.11
81,544
24.8
March 2020122,976
6.87
61,718
—
Total616,730
$9.74
540,762
$—
(1) Includes shares withheld from employees as tax payments for shares issued under our stock-based compensation plans. See Note 6, "Share-Based Compensation" of the Notes to unaudited Consolidated Financial Statements for additional details on our stock-based compensation plans.
(2) As of the end of the period.

Item 3.         Defaults Upon Senior Securities


None.


Item 4.         Mine Safety Disclosures


None.


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Item 5.         Other Information


(a)    Disclosure of Unreported 8-K Information


On March 25, 2020, the Company and two of its wholly owned subsidiaries (CURO Canada Receivables GP Inc. and CURO Canada Receivables Limited Partnership, by its General Partner, CURO Canada Receivables GP Inc.) entered into an Amendment Agreement to Credit Agreement and Guaranty (the “Amendment”), which amended the (i) Credit Agreement, dated as of August 2, 2018, among CURO Canada Receivables Limited Partnership, by its General partner, CURO Canada Receivables GP Inc., WF Marlie 2018-1, Ltd., as Lender, Waterfall Asset Management, LLC, as Administrative Agent and the other Lenders party thereto and the (ii) Guaranty, dated as of August 2, 2018, among CURO Group Holdings Corp., LendDirect Corp., Cash Money Cheque Cashing Inc., CURO Canada Receivables Limited Partnership, CURO Canada Receivables GP Inc., WF Marlie 2018-1, Ltd. and Waterfall Asset Management, LLC (the “Guaranty”). The Amendment aligns the measurement of the net worth covenant to the Company’s reporting of GAAP Stockholders’ Equity and establishes the minimum that the Company is required to maintain, which will be tested as of the end of each fiscal quarter beginning with the quarter ended March 31, 2020. The Amendment also includes immaterial administrative amendments to the Guaranty.None


(b)    Material Changes to Director Nominee Procedures


None.


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Item 6.        Exhibits

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, 2020, filed with the SEC on November 4, 2020, formatted in Extensible Business Reporting Language (“XBRL”) includes: (i) Condensed Consolidated Balance Sheets at September 30, 2020 and December 31, 2019, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019, and (v) Notes to Condensed Consolidated Financial Statements*
Filed herewith




78

Exhibit no.Exhibit Description
10.1
Loan and Security Agreement by and among CURO Receivables Finance II, LLC; Atalaya Asset Income Fund VI LP; and Midtown Madison Management LLC, as administrative agent, dated as of April 8, 2020.*+

10.2
Indemnity Guaranty by CURO Financial Technologies Corp.; CURO Group Holdings Corp.; CURO Intermediate Holdings Corp.; CURO Receivables Holdings II, LLC; and CURO Management LLC for the benefit of Midtown Madison Management, LLC, dated as of April 8, 2020.*
10.3
Servicing Agreement between CURO Receivables Finance II, LLC and CURO Management, LLC, dated as of April 8, 2020.*
10.4
Loan Purchase Agreement (Tier I) by and between CURO Receivables Holdings II, LLC and certain wholly-owned subsidiaries of CURO Group Holdings Corp., dated as of April 8, 2020.*
10.5
Loan Purchase Agreement (Tier II) by and between CURO Receivables Finance II, LLC and CURO Receivables Holdings II, LLC, dated as of April 8, 2020.*
10.6
Amendment Agreement to Credit Agreement and Guaranty by and among CURO Canada Receivables Limited Partnership, by its general partner, CURO Canada Receivables GP Inc.; CURO Canada Receivables, Inc.; CURO Group Holdings Corp.; WF Marlie 2018-1, LTD; Waterfall Asset Management, LLC; LendDirect Corp.; and Cash Money Cheque Cashing Inc., dated as of March 25, 2020.* +
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 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
101
The following unaudited financial information from the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2020, filed with the SEC on May 4, 2020, formatted in Extensible Business Reporting Language (“XBRL”) includes: (i) Condensed Consolidated Balance Sheets at March 31, 2020 and December 31, 2019, (ii) Condensed Consolidated Statements of Operations for the quarter ended March 31, 2020 and 2019, (iii) Condensed Consolidated Statements of Comprehensive Income for the quarter ended March 31, 2020 and 2019, (iv) Condensed Consolidated Statements of Cash Flows for the quarter ended March 31, 2020 and 2019, and (v) Notes to Condensed Consolidated Financial Statements*

* Filed herewith.
+ Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K because they are not material and would likely cause competitive harm to the Company if publicly disclosed.



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 4,October 30, 2020                CURO Group Holdings Corp.

By:/s/ Roger Dean
Roger Dean
Executive Vice President and Chief Financial Officer

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