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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to__________
Commission File Number 1-38315
CURO GROUP HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware90-0934597
(State or other jurisdiction
Of incorporation or organization)		(I.R.S. Employer Identification No.)
3615 North Ridge Road, Wichita, KS
67205
(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 ☒
As of July 27, 2021 there were 41,429,641 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.



CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
FORM 10-Q
SECOND QUARTER ENDED June 30, 2021
INDEX
Page
Item 1.
Financial Statements (unaudited)
June 30, 2021 and December 31, 2020
Three and six months ended June 30, 2021 and 2020
Three and six months ended June 30, 2021 and 2020
Three and six months ended June 30, 2021 and 2020
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

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 Final CFPB RuleThe final rule issued by the CFPB in 2017 regarding Payday, Vehicle Title and Certain high Cost Installment loans
2019 Proposed RuleThe subsequent CFPB rulemaking process which proposed to rescind the mandatory underwriting provisions of the 2017 Final CFPB Rule
2020 Form 10-KAnnual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 5, 2021
7.50% Senior Secured Notes7.50% Senior Secured Notes, which we expect to close on July 30, 2021, for $750.0 million, which mature on August 2028
8.25% Senior Secured Notes8.25% Senior Secured Notes, issued in August 2018 for $690.0 million, which mature on September 1, 2025
Ad AstraAd Astra Recovery Services, Inc., which, prior to acquisition in January 2020, was our exclusive provider of third-party collection services for the U.S. business
Adjusted EBITDAEBITDA plus or minus certain non-cash and other adjusting items; Refer to "Supplemental Non-GAAP Financial Information" for additional details
ALLAllowance for loan losses
Allowance coverageAllowance for loan losses as a percentage of gross loans receivable
AOCIAccumulated Other Comprehensive Income (Loss)
ASCAccounting Standards Codification
ASUAccounting Standards Update
Average gross loans receivableUtilized to calculate product yield and NCO rates; calculated as average of beginning of quarter and end of quarter gross loans receivable
BNPLBuy-Now-Pay-Later
bpsBasis points
C$Canadian dollar
CABCredit access bureau
CARES ActCoronavirus Aid, Relief, and Economic Security Act enacted by the U.S. Federal government on March 27, 2020 in response to the COVID-19 pandemic
Cash MoneyCash Money Cheque Cashing Inc., a wholly-owned Canadian subsidiary of the Company
Cash Money Revolving Credit FacilityC$10.0 million revolving credit facility with Royal Bank of Canada
CDORCanadian Dollar Offered Rate
CFPBConsumer Financial Protection Bureau
CFTCCURO Financial Technologies Corp., a wholly-owned subsidiary of the Company
CODMChief Operating Decision Maker
Condensed Consolidated Financial StatementsThe condensed consolidated financial statements presented in this Form 10-Q
CSOCredit services organization
EBITDAEarnings Before Interest, Taxes, Depreciation and Amortization
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
FinServFinServ Acquisition Corp., a publicly traded special purpose acquisition company (trading symbol FSRV)
FinTechFinancial Technology; the term used to describe any technology that delivers financial services through software, such as online banking, mobile payment apps or cryptocurrency
FlexitiFlexiti Financial Inc., a wholly-owned Canadian subsidiary of the Company, which we acquired on March 10, 2021
Form 10-QQuarterly Report on Form 10-Q for the six month period ended June 30, 2021
Gross Combined Loans ReceivableGross loans receivable plus loans originated by third-party lenders which are Guaranteed by the Company
Guaranteed by the CompanyLoans originated by third-party lenders through CSO program which we guarantee but are not included in the Condensed Consolidated Financial Statements
3


Term or abbreviationDefinition
KatapultKatapult Holdings, Inc. a lease-to-own platform for online platform for online, brick and mortar and omni-channel retailers. On June 9, 2021, Katapult merged with FinServ and is now a publicly traded company (NASDAQ: KPLT)
LFLLFL Group, Canada's largest home furnishings retailer.
MDRMerchant discount revenue
NCONet charge-off; total charge-offs less total recoveries
NOLNet operating loss
Non-Recourse Canada SPV FacilityA four-year revolving credit facility with Waterfall Asset Management, LLC with capacity up to C$250.0 million
Non-Recourse Flexiti SPE FacilityA revolving credit facility, entered into concurrent with the acquisition of Flexiti, with capacity up to C$421.0 million for Class A borrowings and C$79.0 million for Class B borrowings.
Non-Recourse U.S. SPV FacilityA four-year, asset-backed revolving credit facility with Atalaya Capital Management with capacity up to $200.0 million if certain conditions are met
POSPoint-of-sale
ROURight of use
RSURestricted Stock Unit
SECSecurities and Exchange Commission
Senior RevolverSenior Secured Revolving Loan Facility with borrowing capacity of $50.0 million
SequentialThe change from one quarter to the next quarter
SPACSpecial Purpose Acquisition Company
SRCSmaller Reporting Company as defined by the SEC
TDRTroubled Debt Restructuring. Debt restructuring in which a concession is granted to the borrower as a result of economic or legal reasons related to the borrower's financial difficulties
U.K. SubsidiariesCollectively, Curo Transatlantic Limited and SRC Transatlantic Limited
U.S.United States of America
U.S. GAAPGenerally accepted accounting principles in the United States
Verge Credit loansLoans originated and funded by a third-party bank
VIEVariable Interest Entity; our wholly-owned, bankruptcy-remote special purpose subsidiaries

4


PART I.     FINANCIAL INFORMATION

ITEM 1.         FINANCIAL STATEMENTS

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, 2021 (unaudited)December 31,
2020
ASSETS
Cash and cash equivalents$276,367 $213,343 
Restricted cash (includes restricted cash of consolidated VIEs of $43,553 and $31,994 as of June 30, 2021 and December 31, 2020, respectively)
69,299 54,765 
Gross loans receivable (includes loans of consolidated VIEs of $592,283 and $360,431 as of June 30, 2021 and December 31, 2020, respectively)
769,228 553,722 
Less: allowance for loan losses (includes allowance for losses of consolidated VIEs of $44,605 and $54,129 as of June 30, 2021 and December 31, 2020, respectively)
(67,861)(86,162)
Loans receivable, net
701,367 467,560 
Income taxes receivable2,175 32,062 
Prepaid expenses and other (includes prepaid expenses and other of consolidated VIEs of $0 and $388 as of June 30, 2021 and December 31, 2020, respectively)
31,209 27,994 
Property and equipment, net51,170 59,749 
Investments in Katapult16,501 27,370 
Right of use asset - operating leases106,698 115,032 
Deferred tax assets6,264 — 
Goodwill and intangibles, net274,119 176,516 
Other assets9,296 8,595 
Total Assets$1,544,465 $1,182,986 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities (includes accounts payable and accrued liabilities of consolidated VIEs of $6,078 and $34,055 as of June 30, 2021 and December 31, 2020, respectively)
$64,406 $49,624 
Deferred revenue10,394 5,394 
Lease liability - operating leases113,415 122,648 
Contingent consideration related to acquisition21,239 — 
Accrued interest (includes accrued interest of consolidated VIEs of $1,435 and $1,147 as of June 30, 2021 and December 31, 2020, respectively)
20,411 20,123 
Liability for losses on CSO lender-owned consumer loans5,265 7,228 
Debt (includes debt and issuance costs of consolidated VIEs of $349,311 and $11,077 as of June 30, 2021 and $147,427 and $7,766 as of December 31, 2020, respectively)
1,019,127 819,661 
Other long-term liabilities13,796 15,382 
Deferred tax liabilities9,710 11,021 
Total Liabilities1,277,763 1,051,081 
Commitments and contingencies (Note 12)
Stockholders' Equity
Preferred stock - $0.001 par value, 25,000,000 shares authorized; no shares were issued
— — 
Common stock - $0.001 par value; 225,000,000 shares authorized; 47,939,331 and 47,525,807 shares issued; and 41,679,541 and 41,370,504 shares outstanding at the respective period ends
9 9 
Treasury stock, at cost - 6,259,790 and 6,155,303 shares at the respective period ends
(79,604)(77,852)
Paid-in capital84,490 79,812 
Retained earnings283,370 160,068 
Accumulated other comprehensive loss(21,563)(30,132)
Total Stockholders' Equity266,702 131,905 
Total Liabilities and Stockholders' Equity$1,544,465 $1,182,986 

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
June 30,		Six Months Ended
June 30,
2021202020212020
Revenue$187,693 $182,509 $384,244 $463,315 
Provision for loan losses45,165 50,693 81,310 164,229 
Net revenue142,528 131,816 302,934 299,086 
Cost of providing services
Salaries and benefits26,056 24,723 50,971 50,730 
Occupancy and office17,745 16,843 36,049 36,533 
Other costs of providing services7,033 8,001 14,124 17,656 
Advertising7,043 5,750 15,127 17,969 
Total cost of providing services57,877 55,317 116,271 122,888 
Gross margin84,651 76,499 186,663 176,198 
Operating expense (income)
Corporate, district and other expenses59,621 36,781 108,461 79,588 
Interest expense23,440 18,311 42,979 35,635 
(Income) loss from equity method investment(1,712)(741)(2,258)877 
Gain from equity method investment(135,387)— (135,387)— 
Total operating (income) expense(54,038)54,351 13,795 116,100 
Income from continuing operations before income taxes138,689 22,148 172,868 60,098 
Provision for income taxes34,172 1,068 42,616 3,005 
Net income from continuing operations104,517 21,080 130,252 57,093 
Net income from discontinued operations, before income tax— 1,324 — 1,714 
Income tax expense related to disposition— 331 — 429 
Net income from discontinued operations— 993 — 1,285 
Net income$104,517 $22,073 $130,252 $58,378 
Basic earnings per share:
Continuing operations$2.51 $0.52 $3.13 $1.40 
Discontinued operations— 0.02 — 0.03 
Basic earnings per share$2.51 $0.54 $3.13 $1.43 
Diluted earnings per share:
Continuing operations$2.39 $0.51 $2.99 $1.37 
Discontinued operations— 0.02 — 0.03 
Diluted earnings per share$2.39 $0.53 $2.99 $1.40 
Weighted average common shares outstanding:
Basic41,655 40,810 41,580 40,814 
Diluted43,672 41,545 43,556 41,686 

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
June 30,		Six Months Ended
June 30,
2021202020212020
Net income$104,517 $22,073 $130,252 $58,378 
Other comprehensive income (loss):
Foreign currency translation adjustment, net of $0 tax in all periods
4,714 10,261 8,569 (11,932)
Other comprehensive income (loss)4,714 10,261 8,569 (11,932)
Comprehensive income$109,231 $32,334 $138,821 $46,446 

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)
Six Months Ended
June 30,
20212020
Cash flows from operating activities
Net income from continuing operations$130,252 $57,093 
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Depreciation and amortization12,400 8,954 
Provision for loan losses81,310 164,229 
Amortization of debt issuance costs and bond discount2,954 1,600 
Deferred income tax (benefit) expense(3,481)9,861 
Loss on disposal of property and equipment4,322 116 
(Income) loss from equity method investment(2,258)877 
Gain from equity method investment(135,387)— 
Share-based compensation 6,150 6,504 
Changes in operating assets and liabilities:
Accrued interest on loans receivable30,527 28,654 
Prepaid expenses and other assets(2,320)3,286 
Accounts payable and accrued liabilities4,303 965 
Deferred revenue4,999 (5,040)
Income taxes receivable29,910 (7,413)
Accrued interest271 200 
Other long-term liabilities(1,057)914 
Net cash provided by continuing operating activities162,895 270,800 
Net cash provided by discontinued operating activities— 1,714 
Net cash provided by operating activities162,895 272,514 
Cash flows from investing activities
Purchase of property and equipment(7,169)(4,724)
Loans receivable originated or acquired
(563,327)(648,044)
Loans receivable repaid
421,123 616,223 
Proceeds from Investment in Katapult146,878 — 
Acquisition of Ad Astra, net of acquiree's cash received
— (14,418)
Acquisition of Flexiti, net of acquiree's cash received(91,203)— 
Net cash used in continuing investing activities (1)
(93,698)(50,963)
Cash flows from financing activities
Proceeds from Non-Recourse SPV and SPE facilities26,990 58,386 
Payments on Non-Recourse SPV and SPE facilities(9,229)(41,812)
Debt issuance costs paid— (3,531)
Proceeds from credit facilities20,934 69,778 
Payments on credit facilities(20,934)(69,778)
Proceeds from exercise of stock options239 126 
Payments to net share settle restricted stock units vesting(1,711)(638)
Repurchase of common stock(1,251)(5,908)
Dividends paid to stockholders(6,950)(4,500)
Net cash provided by continuing financing activities (1)
8,088 2,123 
Effect of exchange rate changes on cash, cash equivalents and restricted cash273 (1,079)
Net increase in cash, cash equivalents and restricted cash77,558 222,595 
Cash, cash equivalents and restricted cash at beginning of period268,108 110,021 
Cash, cash equivalents and restricted cash at end of period$345,666 $332,616 
(1) Investing activities and Financing activities were not impacted by discontinued operations

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

8

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

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited Condensed Consolidated Balance Sheets as of June 30, 2021 and 2020 to the cash, cash equivalents and restricted cash used in the Statement of Cash Flows (in thousands):
June 30,
20212020
Cash and cash equivalents$276,367 $269,342 
Restricted cash (includes restricted cash of consolidated VIEs of $43,553 and $39,248 as of June 30, 2021 and June 30, 2020, respectively)
69,299 63,274 
Total cash, cash equivalents and restricted cash used in the Statement of Cash Flows$345,666 $332,616 


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

The terms “CURO" and the “Company” refer to CURO Group Holdings Corp. and its direct and indirect subsidiaries as a combined entity, except where otherwise stated.

The Company is a tech-enabled, omni-channel consumer finance company serving a full spectrum of non-prime and prime consumers in the U.S. and Canada. Effective with its acquisition of Flexiti on March 10, 2021, CURO provides customers in Canada a BNPL solution. Flexiti is one of Canada's fastest-growing POS lenders, offering customers flexible payment plans at retailers that sell large-scale goods such as furniture, appliances, jewelry and electronics. Through its BNPL platform, customers can be approved instantly to shop with their FlexitiCard, which they can use online or in-store to make multiple purchases, within their credit limit, without needing to reapply. Refer to Note 16, "Acquisitions" for further disclosures related to the acquisition of Flexiti.

Basis of Presentation

The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements in accordance with U.S. GAAP, and with the accounting policies described in its 2020 Form 10-K. Interim results of operations are not necessarily indicative of results that might be expected for future interim periods or for the year ending December 31, 2021.

Following the acquisition of Flexiti on March 10, 2021, the Company reports Flexiti operations as the "Canada POS Lending" segment throughout this Form 10-Q. Refer to Note 11, "Segment Reporting" for further information.

Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.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 for the year-to-date and quarter-to-date periods presented, which allows registrants to report information under scaled 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 until June 30, 2021. However, at the reevaluation of its status as of June 30, 2021, CURO no longer met SRC status and will be required to report under non-SRC registrant rules beginning with the first quarter of 2022.

The unaudited Condensed Consolidated Financial Statements and the accompanying notes reflect 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. During the first quarter of 2021, the Company combined the previous "Occupancy" and "Office" line items into "Occupancy and office" which are presented as such on the unaudited Condensed Consolidated Statements of Operations as of June 30, 2021 and 2020.

Principles of Consolidation

The unaudited Condensed Consolidated Financial Statements reflect the accounts of CURO and its direct and indirect subsidiaries, including Flexiti, which was acquired on March 10, 2021, and Ad Astra, which was acquired on January 3, 2020. Refer to Note 16, "Acquisitions" for further disclosures related to the acquisition of Flexiti and Ad Astra. Intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

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

Acquisition of Flexiti

On March 10, 2021, CURO closed its acquisition of Flexiti, a POS and BNPL provider, in a transaction accounted for as a business combination. Refer to Note 16, "Acquisitions" for further information regarding the acquisition and Note 15, "Goodwill" for the impact to the Company's goodwill balance as a result of the acquisition.
10


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

Change in Accounting Principle Related to Equity Method Investment in Katapult

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

Historically, the Company reported income and loss from its equity method interest in Katapult on a two-month reporting lag. The merger agreement between Katapult and FinServ triggered a change in Katapult's control environment and reporting structure to coincide with SEC reporting requirements. As a result, during the first quarter of 2021, the Company applied a change in accounting principle to reflect the Company's share of Katapult's historical and ongoing results from a two-month reporting lag to a one-quarter reporting lag. The Company believes this change in accounting principle is preferable as it provides the Company with the ability to present the results of its equity method interest after Katapult’s results are publicly available and related internal controls have been completed. The Company has not retrospectively applied the change in accounting principle because the impact on the financial statements was immaterial for all periods presented.

Continuing Impacts of COVID-19

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

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

Loans Receivable on a Non-Accrual Basis

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

Goodwill

The annual impairment review for goodwill consists of performing a qualitative assessment to determine whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount, as a basis for determining whether or not further testing is required. The Company may elect to bypass the qualitative assessment and proceed directly to the 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.

At June 30, 2021, the goodwill balance includes the amount recognized as a result of the acquisition of Flexiti. Refer to Note 16, "Acquisitions" for further information regarding the acquisition and Note 15, "Goodwill" for the impact to the Company's goodwill balance as a result of the acquisition.

11


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

During the fourth quarter of 2020, the Company performed a quantitative assessment for the U.S. and Canada Direct Lending reporting units. Management concluded that the estimated fair values of these two reporting units were greater than their respective carrying values. During the three and six months ended June 30, 2021, the Company did not identify triggering events that indicate an impairment exists and did not record an impairment related to goodwill.

Refer to Note 15, "Goodwill" for further information.

Recently Adopted Accounting Pronouncements

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. The Company adopted ASU 2020-01 as of January 1, 2021, which did not have a material impact on the 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 Topic 740. Additionally, the ASU clarifies and amends existing guidance to improve consistent application of its requirements. The Company adopted ASU 2019-12 as of January 1, 2021, which did not have a material impact on the Company's 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 in November 2019 and ASU 2020-02 in February 2020. The amended standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace the 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 qualified as an SRC as of June 30, 2019, which the Company did. 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. Early adoption is permitted. The Company is evaluating its alternatives with respect to the available accounting methods under ASU 2016-13, including the fair value option. If the fair value option is not utilized, adoption of ASU 2016-13 will increase the allowance for credit losses, with a resulting negative adjustment to retained earnings on the date of adoption. The Company deferred the adoption of ASU 2016-13 as permitted under ASU 2019-10. The Company is currently assessing the impact that adoption of ASU 2016-13 will have on its financial statements.

12


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

ASU 2020-04 and subsequent amendments

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 U.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 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 FASB also issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope in January 2021. It clarifies that certain optional expedients and exceptions in Topic 848 apply to derivatives that are affected by the discounting transition. The amendments in this ASU affect the guidance in ASU 2020-04 and are effective in the same timeframe as ASU 2020-04. The Company does not expect the adoption of these ASUs to have a material impact on its financial statements.

NOTE 2 - VARIABLE INTEREST ENTITIES

As of June 30, 2021, the Company had three credit facilities whereby certain loans receivable were sold to wholly-owned VIEs to collateralize debt incurred under each facility. See Note 5, "Debt" for additional details on the Non-Recourse U.S. SPV facility, entered into in April 2020, the Non-Recourse Canada SPV facility, entered into in August 2018, and the Non-Recourse Flexiti SPE Facility, entered into concurrent with the completion of the Company's acquisition of Flexiti in March 2021.

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

The carrying amounts of consolidated VIEs' assets and liabilities associated with the Company's special purpose subsidiaries were as follows (in thousands):
June 30,
2021		December 31,
2020
Assets
Restricted cash$43,553 $31,994 
Loans receivable, net547,678 306,302 
Intercompany receivable(1)
86,692 15,382 
Prepaid expenses and other— 388 
Deferred tax assets108 105 
      Total Assets$678,031 $354,171 
Liabilities
Accounts payable and accrued liabilities$6,078 $34,055 
Deferred revenue109 136 
Accrued interest 1,435 1,147 
Debt338,234 139,661 
      Total Liabilities$345,856 $174,999 
(1) Intercompany receivable VIE balances eliminate upon consolidation.

NOTE 3 – LOANS RECEIVABLE AND REVENUE

As a result of COVID-19, CURO's customers and its overall credit performance continue to be impacted through the three and six months ended June 30, 2021. Throughout much of 2020 and the first half of 2021, the U.S. and Canadian governments instituted several initiatives to ease the personal burden of the pandemic, including various federal and provincial financial aid and economic stimulus programs. During the second half of 2020, consumer demand gradually increased, reflecting both the gradual lifting of certain regions' stay-at-home and self-quarantine orders in response to the pandemic's easing and the expiration of governmental stimulus programs. Subsequently, a new round of government stimulus payments in the U.S. resulted in a decrease in loan balances and allowance for loan losses as of June 30, 2021. With stimulus programs running off in the U.S. and continued demand in Canada for loan products, loan balances have increased sequentially as of June 30, 2021. The Company has maintained its historical allowance approach, but has adjusted estimates for changes in past-due gross loans receivable due to market conditions and as of June 30, 2021, has reduced allowance as a percentage of receivables as a result of recent market trends. The estimates
13


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

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 as of June 30, 2021.

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

Revenue and Receivable Characteristics by Product

Revolving LOC revenues include interest income on outstanding revolving balances, MDR related to Canada POS Lending, and other usage or maintenance fees as permitted by underlying statutes. Unsecured and Secured Installment revenue includes interest income and non-sufficient-funds or returned-items fees on late or defaulted payments on past-due loans, known as late fees. Late fees comprise less than 1.0% of Installment revenues. Single-Pay revenues represent deferred presentment or other fees as defined by the underlying state, provincial or national regulations. Ancillary revenue includes revenue from a number of ancillary financial products such as check cashing, proprietary general-purpose reloadable prepaid debit cards (Opt+), demand deposit accounts (Revolve Finance), credit protection insurance in the Canadian market, retail installment sales and money transfer services.

The following table summarizes revenue by product (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Revolving LOC$68,036 $56,736 $130,771 $127,718 
Unsecured Installment64,783 70,429 141,177 192,838 
Secured Installment12,821 19,401 27,848 45,687 
Single-Pay23,763 22,732 48,730 67,889 
Total Installment101,367 112,562 217,755 306,414 
Ancillary18,290 13,211 35,718 29,183 
   Total revenue(1)
$187,693 $182,509 $384,244 $463,315 
(1) Includes revenue from CSO programs of $34.9 million and $37.8 million for the three months ended June 30, 2021 and 2020, respectively, and $76.4 million and $105.8 million for the six months ended June 30, 2021 and 2020.

The following tables summarize loans receivable by product and the related delinquent loans receivable (in thousands):
June 30, 2021
Revolving LOCUnsecured InstallmentSecured Installment
Single-Pay(1)
Total Installment - Company OwnedTotal
Current loans receivable$562,497 $65,603 $31,824 $38,760 $136,187 $698,684 
Delinquent loans receivable43,933 21,035 5,576 — 26,611 70,544 
   Total loans receivable606,430 86,638 37,400 38,760 162,798 769,228 
   Less: allowance for losses(44,848)(16,701)(3,880)(2,432)(23,013)(67,861)
Loans receivable, net$561,582 $69,937 $33,520 $36,328 $139,785 $701,367 
(1) Of the $38.8 million of Single-Pay receivables, $10.0 million relate to mandated extended payment options for certain Canada Single-Pay loans.

June 30, 2021
Revolving LOCUnsecured InstallmentSecured InstallmentTotal Installment - Company OwnedTotal
Delinquent loans receivable
0-30 days past due$22,288 $8,474 $2,835 $11,309 $33,597 
31-60 days past due8,659 5,767 1,307 7,074 15,733 
61 + days past due12,986 6,794 1,434 8,228 21,214 
Total delinquent loans receivable$43,933 $21,035 $5,576 $26,611 $70,544 
14


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


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

December 31, 2020
Revolving LOCUnsecured InstallmentSecured InstallmentTotal Installment - Company OwnedTotal
Delinquent loans receivable
0-30 days past due$17,517 $10,361 $3,764 $14,125 $31,642 
31-60 days past due9,276 7,124 2,199 9,323 18,599 
61 + days past due10,986 6,705 2,312 9,017 20,003 
Total delinquent loans receivable$37,779 $24,190 $8,275 $32,465 $70,244 

The following tables summarize loans Guaranteed by the Company under CSO programs and the related delinquent receivables (in thousands):
June 30, 2021
Unsecured InstallmentSecured InstallmentTotal Installment - Guaranteed by the Company
Current loans receivable Guaranteed by the Company$29,981 $658 $30,639 
Delinquent loans receivable Guaranteed by the Company6,359 95 6,454 
Total loans receivable Guaranteed by the Company36,340 753 37,093 
Less: Liability for losses on CSO lender-owned consumer loans(5,234)(31)(5,265)
Loans receivable Guaranteed by the Company, net$31,106 $722 $31,828 

June 30, 2021
Unsecured InstallmentSecured InstallmentTotal Installment - Guaranteed by the Company
Delinquent loans receivable
0-30 days past due$5,574 $88 $5,662 
31-60 days past due625 4 629 
61+ days past due160 3 163 
Total delinquent loans receivable$6,359 $95 $6,454 
15


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


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

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

The following tables summarize activity in the ALL and the liability for losses on CSO lender-owned consumer loans in total (in thousands):
Three Months Ended June 30, 2021
Revolving LOCUnsecured InstallmentSecured InstallmentSingle-PayTotal InstallmentOtherTotal
Allowance for loan losses:
Balance, beginning of period$44,754 $20,394 $5,023 $2,217 $27,634 $— $72,388 
Charge-offs(24,487)(18,812)(4,384)(22,107)(45,303)(802)(70,592)
Recoveries7,280 5,383 2,216 17,574 25,173 378 32,831 
Net charge-offs(17,207)(13,429)(2,168)(4,533)(20,130)(424)(37,761)
Provision for losses16,672 9,734 1,025 4,727 15,486 424 32,582 
Effect of foreign currency translation629 2 — 21 23 — 652 
Balance, end of period$44,848 $16,701 $3,880 $2,432 $23,013 $— $67,861 
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period$— $4,670 $57 $— $4,727 $— $4,727 
Decrease in liability— (564)26 — (538)— (538)
Balance, end of period$— $5,234 $31 $— $5,265 $— $5,265 
16


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

Three Months Ended
June 30, 2020
Revolving LOCUnsecured InstallmentSecured InstallmentSingle-PayTotal InstallmentOtherTotal
Allowance for loan losses:
Balance, beginning of period$56,458 $28,965 $9,726 $4,693 $43,384 $— $99,842 
Charge-offs(37,784)(30,129)(11,747)(21,168)(63,044)(750)(101,578)
Recoveries6,100 7,019 2,961 21,766 31,746 398 38,244 
Net charge-offs(31,684)(23,110)(8,786)598 (31,298)(352)(63,334)
Provision for losses21,341 12,584 6,943 (2,588)16,939 352 38,632 
Effect of foreign currency translation1,204 12 — 99 111 — 1,315 
Balance, end of period$47,319 $18,451 $7,883 $2,802 $29,136 $— $76,455 
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period$— $9,142 $47 $— $9,189 $— $9,189 
Decrease in liability— 4,014 11 — 4,025 — 4,025 
Balance, end of period$— $5,128 $36 $— $5,164 $— $5,164 

Six Months Ended
June 30, 2021
Revolving LOCUnsecured InstallmentSecured InstallmentSingle-PayTotal InstallmentOtherTotal
Allowance for loan losses:
Balance, beginning of period$51,958 $24,073 $7,047 $3,084 $34,204 $— $86,162 
Charge-offs(53,201)(39,937)(10,727)(44,040)(94,704)(1,656)(149,561)
Recoveries14,787 12,000 4,760 38,828 55,588 930 71,305 
Net charge-offs(38,414)(27,937)(5,967)(5,212)(39,116)(726)(78,256)
Provision for losses30,474 20,559 2,800 4,520 27,879 726 59,079 
Effect of foreign currency translation830 6 — 40 46 — 876 
Balance, end of period$44,848 $16,701 $3,880 $2,432 $23,013 $— $67,861 
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period$— $7,160 $68 $— $7,228 $— $7,228 
Decrease in liability— 1,926 37 — 1,963 — 1,963 
Balance, end of period$— $5,234 $31 $— $5,265 $— $5,265 

17


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

Six Months Ended
June 30, 2020
Revolving LOCUnsecured InstallmentSecured InstallmentSingle-PayTotal InstallmentOtherTotal
Allowance for loan losses:
Balance, beginning of period$55,074 $35,587 $10,305 $5,869 $51,761 $— $106,835 
Charge-offs(81,293)(68,687)(24,857)(61,689)(155,233)(2,028)(238,554)
Recoveries12,511 12,802 5,870 51,770 70,442 977 83,930 
Net charge-offs(68,782)(55,885)(18,987)(9,919)(84,791)(1,051)(154,624)
Provision for losses62,332 38,766 16,565 7,051 62,382 1,051 125,765 
Effect of foreign currency translation(1,305)(17)— (199)(216)— (1,521)
Balance, end of period$47,319 $18,451 $7,883 $2,802 $29,136 $— $76,455 
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period$— $10,553 $70 $— $10,623 $— $10,623 
Decrease in liability— 5,425 34 — 5,459 — 5,459 
Balance, end of period$— $5,128 $36 $— $5,164 $— $5,164 

As of June 30, 2021, Revolving LOC and Installment loans classified as nonaccrual were $4.2 million and $5.1 million, respectively. As of December 31, 2020, Revolving LOC and Installment loans classified as nonaccrual were $4.4 million and $6.2 million, respectively. The Company's loans receivable inherently considers nonaccrual loans in its estimate of the ALL as delinquencies are a primary input into the Company's roll rate-based model.

TDR Loans Receivable

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 response to COVID-19, the Company established an enhanced Customer Care Program in 2020, 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 ALL related to TDRs by discounting the estimated cash flows associated with the respective TDR at the effective interest rate immediately after the loan modification and records any difference between the discounted cash flows and the carrying value as an allowance adjustment. A loan that has been classified as a TDR remains so classified until the loan is paid off or charged off. A TDR is charged off consistent with the Company's policies for the related loan product. For additional information on the Company's loss recognition policy, see the 2020 Form 10-K.

The table below presents TDRs, which are related to the Customer Care Program implemented in response to COVID-19, included in gross loans receivable and the impairment included in the ALL (in thousands):

As of
June 30, 2021
As of
December 31, 2020
Current TDR gross receivables$12,137 $13,563 
Delinquent TDR gross receivables4,293 6,309 
Total TDR gross receivables 16,430 19,872 
Less: Impairment included in the allowance for loan losses(2,455)(3,482)
Less: Additional allowance(3,130)(4,497)
Outstanding TDR receivables, net of impairment$10,845 $11,893 

18


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

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

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Pre-modification TDR loans receivable$3,504 $24,069 $8,367 $24,069 
Post-modification TDR loans receivable3,197 21,390 7,472 21,390 
Total concessions included in gross charge-offs$307 $2,679 $895 $2,679 

There were $3.3 million and $0.9 million of loans classified as TDRs that were charged off and included as a reduction in the ALL during the three months ended June 30, 2021 and 2020, respectively, and $8.1 million and $0.9 million during the six months ended June 30, 2021 and 2020, respectively. The Company had commitments to lend additional funds of approximately $2.0 million to customers with available and unfunded Revolving LOC loans classified as TDRs as of June 30, 2021.

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 periods presented (dollars in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Average outstanding TDR loans receivable$16,967 $20,864 $17,936 $20,864 
Interest income recognized4,604 4,396 10,122 4,396 
Number of TDR loans(1)
2,468 21,512 6,248 21,512 
(1) Presented in ones


NOTE 4 – CREDIT SERVICES ORGANIZATION
The CSO fee receivables under CSO programs were $4.3 million and $5.0 million at June 30, 2021 and December 31, 2020, 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 customer loans that are charged-off. The terms of these loans range up to six months. See Note 1, "Summary of Significant Accounting Policies and Nature of Operations" of the 2020 Form 10-K for further details of the Company's accounting policy.

As of June 30, 2021 and December 31, 2020, the incremental maximum amount payable under all such guarantees was $30.3 million and $36.6 million, respectively. This liability is not included in the Company's unaudited Condensed Consolidated Balance Sheets. If the Company is required to pay any portion of the total amount of the loans it has guaranteed, it will attempt to recover the entire amount or a portion from the applicable customers. The Company holds no collateral in respect of the guarantees. The Company estimates a liability for losses associated with the guaranty provided to the CSO lenders, which was $5.3 million and $7.2 million at June 30, 2021 and December 31, 2020, respectively.

The Company placed $4.4 million and $5.5 million in collateral accounts for the benefit of lenders at June 30, 2021 and December 31, 2020, respectively, which is reflected in "Prepaid expenses and other" in the unaudited Condensed Consolidated Balance Sheets. The balances required to be maintained in these collateral accounts vary 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 lender.

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

19


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

NOTE 5 – DEBT
Debt consisted of the following (in thousands):
June 30, 2021December 31, 2020
8.25% Senior Secured Notes
$680,893 $680,000 
Non-Recourse U.S. SPV Facility44,489 43,586 
Non-Recourse Canada SPV Facility98,881 96,075 
Non-Recourse Flexiti SPE Facility194,864 — 
     Debt$1,019,127 $819,661 

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 $9.1 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.

On July 16, 2021, the Company priced its offering of 7.50% Senior Secured Notes of $750 million aggregate principal amount due 2028. The 7.50% Senior Secured Notes will be used, among other things, to fully redeem the 8.25% Senior Secured Notes due 2025. Refer to Note 19, Subsequent Events for additional details.

Non-Recourse U.S. SPV Facility

In April 2020, CURO Receivables Finance II, LLC 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 June 30, 2021, 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.

As of June 30, 2021, the effective interest rate on the Company's borrowings was one-month LIBOR plus 6.25%, or 7.90%. 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 Company is currently evaluating the impact of the expected transition from LIBOR to alternative reference rates.

As of June 30, 2021, outstanding borrowings under the Non-Recourse U.S. SPV Facility were $44.5 million, net of deferred financing costs of $5.0 million. For further information on the Non-Recourse U.S. SPV Facility, refer to Note 2, "Variable Interest Entities."

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

Non-Recourse Canada SPV Facility

In August 2018, CURO Canada Receivables Limited Partnership entered into the Non-Recourse Canada SPV Facility with Waterfall Asset Management, LLC. The Non-Recourse Canada SPV Facility currently provides for C$175.0 million of borrowing capacity and the ability to expand such capacity up to C$250.0 million. As of June 30, 2021, the effective interest rate on our borrowings was three-month CDOR plus 6.75%, or 8.60%. 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.
20


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


As of June 30, 2021, outstanding borrowings under the Non-Recourse Canada SPV Facility were $98.9 million, net of deferred financing costs of $1.3 million. For further information on the Non-Recourse Canada SPV, refer to Note 2, "Variable Interest Entities."

Non-Recourse Flexiti SPE Facility

In March 2021, concurrently with the acquisition of Flexiti, Flexiti Financing SPE Corp. refinanced and expanded their Non-Recourse Flexiti SPE Facility to C$421 million for Class A borrowings and to C$79 million for Class B borrowings, with a maturity on March 10, 2024. As of June 30, 2021, the weighted average interest rate on our borrowings was three-month CDOR plus 4.40%, or 5.40%. The Flexiti SPE borrower also pays a 1.00% per annum commitment fee on the unused portion of the commitments.

As of June 30, 2021, outstanding borrowings under the Non-Recourse Flexiti SPE Facility were $194.9 million, net of deferred financing costs of $4.8 million. For further information on the Non-Recourse Flexiti SPE, refer to Note 2, "Variable Interest Entities."

Senior Revolver

The Company maintains the Senior Revolver that provides $50.0 million of borrowing capacity, including up to $5.0 million of standby letters of credit, for a one-year term, renewable for successive terms following annual review. The current term expires June 30, 2022. The Senior Revolver accrues interest at one-month LIBOR plus 5.00% (subject to a 5% overall minimum). The Senior Revolver is syndicated among four banks. The Company is currently evaluating the impact of no longer using LIBOR as a benchmark rate.

The terms of the Senior Revolver require that its outstanding balance be zero 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 are 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 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 revolver was undrawn at June 30, 2021 and December 31, 2020.

Cash Money Revolving Credit Facility

Cash Money maintains the Cash Money Revolving Credit Facility, a C$10.0 million revolving credit facility with Royal Bank of Canada, which provides short-term liquidity required to meet the working capital needs of the Company's Canadian direct lending operations. Aggregate draws under the revolving credit facility are limited to the lesser of: (i) the borrowing base, which is the percentage of cash, deposits in transit and accounts receivable, and (ii) C$10.0 million. As of June 30, 2021, the borrowing capacity under the Cash Money Revolving Credit Facility was C$9.9 million, net of C$0.1 million in outstanding stand-by-letters of credit.

The Cash Money Revolving Credit Facility is collateralized by substantially all of 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%, or 4.40% interest as of June 30, 2021.

The Cash Money Revolving Credit Facility was undrawn at June 30, 2021 and December 31, 2020.

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 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.

21


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

Restricted Stock Units

As of June 30, 2021, the Company has granted three types of RSUs, which are known as time-based, market-based and, as a result of the Flexiti acquisition, performance-based.

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

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

Upon closing of the Flexiti acquisition in March 2021, the Company granted performance-based RSUs to Flexiti employees. Grants of performance-based RSUs are valued at the grant date based on the closing market price of common stock. The performance-based RSUs vest over two years if Flexiti achieves specified internal targets, including revenue less NCOs and originations metrics. Expense recognition for the performance-based RSUs occurs ratably over the service period if it is probable that the targets will be achieved as of each period end. If such results are not probable, no share-based compensation expense is recognized and any previously recognized share-based compensation expense is reversed.

Unvested shares of RSUs generally are forfeited upon termination of employment, or failure to achieve the required performance condition, if applicable.

A summary of the activity of time-based, market-based and performance-based unvested RSUs as of June 30, 2021 and changes during the six months ended June 30, 2021 are presented in the following table:
Number of RSUs
Time-BasedMarket-BasedPerformance-BasedWeighted Average
Grant Date Fair Value per Share
December 31, 20201,012,792 758,713 — $10.26 
Granted1,010,075 299,053 253,310 15.28 
Vested(468,626)— — 11.06 
Forfeited(42,737)(48,252)— 10.91 
June 30, 20211,511,504 1,009,514 253,310 $12.93 

Share-based compensation expense for the three months ended June 30, 2021 and 2020, which includes compensation costs from stock options and RSUs, was $3.5 million and $3.3 million, respectively, and during the six months ended June 30, 2021 and 2020 was $6.2 million and $6.5 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 June 30, 2021, there was $27.7 million of total unrecognized compensation cost related to stock options and RSUs. Total unrecognized compensation costs will be recognized over a weighted-average period of 2.0 years.

NOTE 7 – INCOME TAXES

The Company's effective income tax rate was 24.7% and 5.0% for the six months ended June 30, 2021 and 2020, respectively. The effective income tax rate was lower compared to the federal and state/provincial statutory rates of approximately 26%, primarily as a result of proportionally more income in lower rate jurisdictions, driven by the gain on the Katapult transaction of $146.9 million. Additionally, the effective tax rate also includes the release of a valuation allowance of $0.4 million due to the Company's share of Katapult's income, excess tax benefits related to share-based compensation of $0.4 million, $0.3 million tax expense related to the non-deductible transaction costs and $0.3 million tax expense of additional Texas accrual for 2020 due to the settlement of 2013 to 2019 Texas returns.

The effective income tax rate for the six months ended June 30, 2021 was primarily due to a tax benefit from the CARES Act. The CARES Act, among other things, allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid Federal income taxes. The Company recorded an income tax benefit of $9.1 million related to the carry-back of NOLs from tax years 2018 and 2019, which offset its tax liability for prior years and generated a refund of previously paid taxes at a 35% statutory rate.

22


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

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 accumulated earnings in Canada of $213.4 million were distributed to the U.S. legal entities, the Company would be subject to Canadian withholding taxes of an estimated $10.7 million. In the event the earnings are distributed to the U.S. legal entities, the Company will adjust the income tax provision for the applicable period and determine the amount of foreign tax credit that would be available.

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 judgement about the assumptions market participants would use in pricing the asset or liability based on the best information available for the specific circumstances. Accounting standards establish a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The hierarchy requires 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 as a result of limited market data. The Company develops these inputs based on the best information available, including its own data.

23


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

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 June 30, 2021 (in thousands):

Estimated Fair Value
Carrying Value June 30,
2021		Level 1Level 2Level 3Total
Financial assets:
Cash Surrender Value of Life Insurance$7,838 $7,838 $— $— $7,838 
Financial liabilities:
Non-qualified deferred compensation plan$4,854 $4,854 $— $— $4,854 
Contingent consideration related to acquisition21,239 — — 21,239 21,239 


Contingent consideration related to acquisition

In connection with the acquisition of Flexiti during the first quarter of 2021, the Company recorded a liability for contingent consideration based on the achievement of revenue less NCOs and origination targets over the two years following closing of the acquisition that could result in cash consideration paid up to $32.8 million to Flexiti's former stockholders. The fair value of the liability is estimated using probability-weighted, discounted future cash flows at current tax rates. The significant unobservable inputs (Level 3) used to estimate the fair value include the expected future tax benefits associated with the acquisition, the probability that the risk adjusted-revenue and origination targets will be achieved, and discount rates. The contingent consideration measured at fair value using unobservable inputs as of June 30, 2021 is $21.2 million. For additional information on Flexiti and the related contingent consideration, refer to Note 16, "Acquisitions."

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

Financial Assets and Liabilities Not 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 June 30, 2021 (in thousands):
Estimated Fair Value
Carrying Value June 30,
2021		Level 1Level 2Level 3Total
Financial assets:
Cash and cash equivalents$276,367 $276,367 $— $— $276,367 
Restricted cash69,299 69,299 — — 69,299 
Loans receivable, net701,367 — — 701,367 701,367 
Financial liabilities:
Liability for losses on CSO lender-owned consumer loans
$5,265 $— $— $5,265 $5,265 
8.25% Senior Secured Notes
680,893 — 714,150 — 714,150 
Non-Recourse U.S. SPV facility44,489 — — 49,456 49,456 
Non-Recourse Canada SPV facility98,881 — — 100,209 100,209 
Non-Recourse Flexiti SPE facility194,864 — — 199,646 199,646 
24


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


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, 2020 (in thousands):
Estimated Fair Value
Carrying Value December 31,
2020		Level 1Level 2Level 3Total
Financial assets:
Cash and cash equivalents$213,343 $213,343 $— $— $213,343 
Restricted cash54,765 54,765 — — 54,765 
Loans receivable, net467,560 — — 467,560 467,560 
Financial liabilities:
Liability for losses on CSO lender-owned consumer loans$7,228 $— $— $7,228 $7,228 
8.25% Senior Secured Notes
680,000 — 646,000 — 646,000 
Non-Recourse U.S. SPV facility43,586 — — 49,456 49,456 
Non-Recourse Canada SPV facility96,075 — — 97,971 97,971 

Loans Receivable, Net

Loans receivable are carried on the unaudited Condensed Consolidated Balance Sheets net of the ALL. 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. Loans receivable acquired as part of the Flexiti acquisition, which represent $125.0 million of the $701.4 million, are carried at gross contractual balance less unamortized fair value discount and ALL. For additional information on the determination of the fair value discount, refer to Note 16, "Acquisitions."

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 charged-off loans that it has guaranteed. Refer to Note 3, "Loans Receivable and Revenue" and Note 4, Credit Services Organization" for additional information.

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

The fair value disclosure for the 8.25% Senior Secured Notes was based on observable market trading data. The fair values of the Non-Recourse U.S. SPV Facility, Non-Recourse Canada SPV Facility and Non-Recourse Flexiti SPE Facility were based on the cash needed for their respective final settlements.

25


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

Investment in Katapult

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

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, which met the accounting criteria for in-substance common stock at the time of their acquisition. This financial asset was not carried at fair value. The Company accounted for this investment under the equity method, and recognized a proportionate share of Katapult’s income on a two-month lag.

In September 2020, the Company acquired common stock warrants and preferred shares of Katapult from existing shareholders for $11.2 million in cash. This transaction resulted in the reevaluation of the 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 and were 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 minus impairment under the measurement alternative. As a result, the Company (i) reclassified $12.5 million from an equity method investment to cost minus impairment under the measurement alternative, (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 accounted for under the measurement alternative.

In October and November 2020, the Company acquired common stock of Katapult from existing shareholders for $1.6 million. The Company recorded this purchase within its equity method investment.

26


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

During the first quarter of 2021, the Company changed the two-month reporting lag to a one-quarter reporting lag, as discussed in Note 1, "Summary of Significant Accounting Policies and Nature of Operations." The Company’s share of Katapult’s income was $1.7 million and $2.3 million for the three and six months ended June 30, 2021, respectively.

On June 9, 2021, Katapult completed its merger with FinServ. As a result, the Company received $146.9 million in cash and 18.9 million common shares of the resulting public company, Katapult (NASDAQ: KPLT). The Company recorded a related net gain of $135.4 million on its equity method investment in Katapult for the three months ended June 30, 2021. The 18.9 million common shares are subject to a six month trading restriction. Additionally, as part of the merger, CURO received 3.0 million earn-out warrants and will hold two of the seven board of director seats for Katapult. For further information regarding the merger between Katapult and FinServ and its implication to CURO, refer to the description immediately following the table above. As of June 30, 2021, the value of our retained investment in Katapult based on the NASDAQ quoted market price was $204.3 million.

Both the equity method investment and the previously-recognized investment measured at cost minus impairment are presented within "Investments" on the unaudited Condensed Consolidated Balance Sheet.

The Company's total ownership of Katapult's shares, on a fully diluted basis, was 20.7% as of June 30, 2021.

NOTE 9 – STOCKHOLDERS' EQUITY
The following table summarizes the changes in stockholders' equity for the three and six months ended June 30, 2021 and 2020 (in thousands):

Common StockTreasury Stock, at costPaid-in capitalRetained Earnings (Deficit)
AOCI (1)
Total Stockholders' Equity
Shares OutstandingPar Value
Balance at December 31, 202041,370,504 $9 $(77,852)$79,812 $160,068 $(30,132)$131,905 
Net income— — — — 25,735 — 25,735 
Foreign currency translation adjustment— — — — — 3,855 3,855 
Dividends— — — — (2,368)— (2,368)
Share based compensation expense— — — 2,683 — — 2,683 
Proceeds from exercise of stock options15,852 — — 48 — — 48 
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes
237,423 — — (1,668)— — (1,668)
Balance at March 31, 202141,623,779 $9 $(77,852)$80,875 $183,435 $(26,277)$160,190 
Net income— — — — 104,517 — 104,517 
Foreign currency translation adjustment— — — — — 4,714 4,714 
Dividends— — — — (4,582)— (4,582)
Share based compensation expense— — — 3,467 — — 3,467 
Proceeds from exercise of stock options43,920 — — 191 — — 191 
Repurchase of common stock(104,487)— (1,752)— — — (1,752)
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes116,329 — — (43)— — (43)
Balance at June 30, 202141,679,541 $9 $(79,604)$84,490 $283,370 $(21,563)$266,702 
(1) Accumulated other comprehensive income (loss)

27


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

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

Dividends

The table below summarizes the Company's quarterly dividends for 2021. The dividend policy was first instituted during the first quarter of 2020.
Dividends Paid
Date of declarationRecord dateDate paidDividend per share(in thousands)
Q1 2021February 4, 2021February 16, 2021March 2, 2021$0.055 $2,284 
Q2 2021May 3, 2021May 14, 2021May 27, 2021$0.11 $4,580 

In July 2021, the Company's Board of Directors declared a dividend under the program of $0.11 per share. See Note 19, "Subsequent Events" for additional information.

28


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

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
June 30,		Six Months Ended
June 30,
2021202020212020
Net income from continuing operations$104,517 $21,080 $130,252 $57,093 
Net income from discontinued operations, net of tax— 993 — 1,285 
Net income$104,517 $22,073 $130,252 $58,378 
Weighted average common shares - basic41,655 40,810 41,580 40,814 
Dilutive effect of stock options and restricted stock units2,017 735 1,976 872 
Weighted average common shares - diluted43,672 41,545 43,556 41,686 
Basic earnings per share:
Continuing operations$2.51 $0.52 $3.13 $1.40 
Discontinued operations— 0.02 — 0.03 
Basic earnings per share$2.51 $0.54 $3.13 $1.43 
Diluted earnings per share:
Continuing operations$2.39 $0.51 $2.99 $1.37 
Discontinued operations— 0.02 — 0.03 
Diluted earnings per share$2.39 $0.53 $2.99 $1.40 

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 diluted earnings per share. For the three and six months ended June 30, 2021, there were 0.1 million and 0.1 million, respectively, and for the three and six months ended June 30, 2020, there were 2.3 million and 1.7 million, respectively, of potential shares of common stock excluded from the calculation of diluted earnings per share because their effect was anti-dilutive.

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

NOTE 11 – SEGMENT REPORTING
Segment information is prepared on the same basis that the Company's CODM reviews financial information for operational decision making purposes, including revenues, net revenue, gross margin, segment operating income and other items.
On March 10, 2021, the Company acquired Flexiti, as described in Note 15, "Goodwill" and Note 16, "Acquisitions." Under ASC 280, Segment Reporting, Flexiti met the definition of a separate reportable segment. In conjunction with the acquisition, the Company made required disclosures for Flexiti as a separate reportable segment known as "Canada POS Lending," further described below. The Company also renamed the "Canada" reportable segment to the "Canada Direct Lending" reportable segment.
Reportable Segments
U.S. As of June 30, 2021, the Company operated a total of 190 U.S. retail locations and had an online presence in 35 states. Refer to Note 18, "Store Closures" for additional details related to recent store closures. The Company provides Revolving LOC loans and Installment loans, which include Single-Pay and vehicle title loans, check cashing, money transfer services, reloadable prepaid debit cards and a number of other ancillary financial products and services to its customers in the U.S. As disclosed in Note 16, "Acquisitions," the acquisition of Ad Astra closed in January 2020. The results of Ad Astra are included within the U.S. reporting segment.

Canada Direct Lending. As of June 30, 2021, the Company operated a total of 201 stores across seven Canadian provinces and territories and had an online presence in five provinces. The Company provides Revolving LOC loans and Installment loans, which include Single-Pay loans, insurance products to Revolving LOC and Installment loan customers, check cashing, money transfer
29


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

services, foreign currency exchange, reloadable prepaid debit cards, and a number of other ancillary financial products and services to its customers in Canada.

Canada POS Lending. The Company serves Canadian customers through POS financing available at approximately 6,600 retail locations and online with nearly 2,100 merchant partners across ten provinces. The Company provides Revolving LOC loans and a number of other ancillary financial products to its customers in Canada. Results of operations for the six months ended June 30, 2021 from Canada POS Lending represent results from the date of acquisition, March 10, 2021 through June 30, 2021.

30


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
June 30,		Six Months Ended
June 30,
2021202020212020
Revenues by segment: (1)
U.S.$118,794 $137,320 $255,286 $359,088 
Canada Direct Lending61,880 45,189 120,320 104,227 
Canada POS Lending7,019 — 8,638 — 
Consolidated revenue$187,693 $182,509 $384,244 $463,315 
Net revenues by segment:
U.S. $85,172 $95,790 $195,608 $231,517 
Canada Direct Lending53,324 36,026 102,530 67,569 
Canada POS Lending4,032 — 4,796 — 
Consolidated net revenue$142,528 $131,816 $302,934 $299,086 
Gross margin by segment:
U.S.$47,246 $56,860 $118,386 $144,400 
Canada Direct Lending33,863 19,639 64,083 31,798 
Canada POS Lending3,542 — 4,194 — 
Consolidated gross margin$84,651 $76,499 $186,663 $176,198 
Segment operating (loss) income:
U.S.$123,277 $11,857 $138,008 $45,283 
Canada Direct Lending25,343 10,291 47,590 14,815 
Canada POS Lending(9,931)— (12,730)— 
Consolidated operating income$138,689 $22,148 $172,868 $60,098 
Expenditures for long-lived assets by segment:
U.S.$2,162 $248 $4,824 $4,528 
Canada Direct Lending361 144 510 697 
Canada POS Lending2,112 — 2,531 — 
Consolidated expenditures for long-lived assets$4,635 $392 $7,865 $5,225 
(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):
June 30,
2021		December 31,
2020
U.S.$186,511 $223,451 
Canada Direct Lending361,264 330,271 
Canada POS Lending221,453 — 
Total gross loans receivable$769,228 $553,722 

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):
June 30,
2021		December 31,
2020
U.S.$28,399 $36,258 
Canada Direct Lending22,270 23,491 
Canada POS Lending501 — 
Total net long-lived assets$51,170 $59,749 

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.
31


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


NOTE 12 – COMMITMENTS AND CONTINGENCIES
Securities Litigation and Enforcement

In December 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 Yellowdog Partners, LP v. CURO Group Holdings Corp., Donald F. Gayhardt, William Baker and Roger W. Dean, Civil Action No. 18-2662 (the "Yellowdog Action"). In May 2019, plaintiff filed a consolidated complaint naming the Company's founders and FFL as additional defendants. The complaint alleged that the Company and the individual defendants violated Section 10(b) of the Exchange Act and that certain defendants also violated Section 20(a) of the Exchange Act as "control persons" based on alleged misleading statements and omitted material information regarding the Company's efforts to transition the Canadian inventory of products from Installment loans to Revolving LOC loans. Plaintiff brought the claims on behalf of a class of investors who purchased Company common stock between April 27, 2018 and October 24, 2018.

The Company's directors' and officers' insurance policy required the Company to pay the first $2.5 million in fees and settlement and the insurance carriers paid the remaining amounts. The Company recorded this $2.5 million of expense in 2019 and subsequently paid legal fees of $2.5 million. On December 18, 2020, the Court granted final approval of the $9.0 million settlement and dismissed the case with prejudice. For the three and six months ended June 30, 2021, there was no further expense related to the litigation.

In June and July 2020, three shareholder derivative lawsuits were filed in the United States District Court for the District of Delaware against the Company, certain of its directors and officers, and in two of the three lawsuits, FFL. Plaintiffs generally allege the same underlying facts of the Yellowdog Action. In July 2021, the derivative lawsuits were voluntarily dismissed and Plaintiffs refiled two cases in the United States District Court for the District of Kansas.

While the Company is vigorously contesting these lawsuits, it cannot determine the timing or nature of their ultimate resolution. The Company does not expect that these lawsuits will have a material adverse impact on the Company's results of operations or financial condition.

City of Austin

The Company was cited in July 2016 by the City of Austin, Texas for alleged violations of an Austin ordinance addressing products offered by CSOs, which 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 this ordinance, when the ordinance is properly construed. In 2017, the Austin Municipal Court agreed with the Company's position that this 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 a second ordinance in direct response to a Texas Attorney General’s opinion which would arguably allow CSO’s to provide signature loans outside the regulatory authority of the Texas Office of Consumer Credit Commissioner and the City of Austin. This proposed ordinance became effective June 1, 2020, and implemented restrictions on CSO transactions and revised certain definitions included in the original Austin ordinance. These revisions potentially affect the foundation upon which the Company's previous arguments in municipal court were based.

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 of Austin. The Temporary Restraining Order was granted on June 12, 2020, but was ultimately lifted on November 17, 2020.

Subsequent to lifting the Temporary Restraining Order, the city of Austin notified the Company that it would begin auditing stores beginning in January 2021. In addition, the Company created and launched a new product during the second quarter of 2021. The city has since deferred these audits, and the Company is in preliminary discussions with the city to determine next steps and a potential resolution to the outstanding matters.

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

The Company does not anticipate having a final determination of the legality of its CAB program under either Austin ordinance (and similar ordinances in other Texas cities) in the near future. A final adverse decision could result in material monetary liability in Austin and elsewhere in Texas, and could force the Company to restructure the loans it originates in Austin and elsewhere in Texas.

32


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

Other Legal Matters
The Company is a defendant in certain litigation matters encountered from time-to-time in the ordinary course of business, some of which 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 13 – LEASES

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

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

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

The Company recognizes ROU assets and lease liabilities based on the present value of lease payments over the lease term at commencement date. The 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 outstanding leases). This rate is the theoretical rate the Company would pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term as that of the lease portfolio.

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

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

The following table summarizes the operating lease costs and other information for the three and six months ended June 30, 2021 and June 30, 2020 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Operating lease costs:
Third-Party
$7,959 $7,576 $15,962 $15,221 
Related-Party
849 845 1,696 1,691 
Total operating lease costs$8,808 $8,421 $17,658 $16,912 
Operating cash flow - Operating leases$18,303 $16,545 
New ROU assets - Operating leases$4,964 $6,922 
Weighted average remaining lease term - Operating leases5.4 years6.1 years
Weighted average discount rate - Operating leases9.4 %10.3 %
33

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

The following table summarizes the aggregate operating lease payments that the Company is contractually obligated to make under operating leases as of June 30, 2021 (in thousands):
Third-PartyRelated-PartyTotal
Remainder of 2021$16,391 $1,899 $18,290 
202230,144 3,678 33,822 
202324,889 1,333 26,222 
202419,137 973 20,110 
202513,581 870 14,451 
20269,483 883 10,366 
Thereafter21,239 1,794 23,033 
Total134,864 11,430 146,294 
Less: Imputed interest(30,439)(2,440)(32,879)
Operating lease liabilities$104,425 $8,990 $113,415 

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

NOTE 14 – 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. The effect of the U.K. Subsidiaries’ entry into administration was to place their management, affairs, business and property 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. During the three and six months ended June 30, 2020, the Company received $1.3 million and $1.7 million, respectively, of disbursements from the Administrator related to the wind-down of the U.K. Subsidiaries.

NOTE 15 – GOODWILL

The change in the carrying amount of goodwill by operating segment for the six months ended June 30, 2021 was as follows (in thousands):
U.S.Canada Direct LendingCanada POS LendingTotal
Goodwill at December 31, 2020$105,922 $30,169 $— $136,091 
Acquisition (Note 16)— — 44,901 44,901 
Foreign currency translation — 689 585 1,274 
Measurement period adjustment— — (4,980)(4,980)
Goodwill at June 30, 2021$105,922 $30,858 $40,506 $177,286 

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

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

Flexiti Acquisition

The Company completed the acquisition of Flexiti on March 10, 2021. Provisional goodwill was estimated at $44.9 million, based on the preliminary valuation. The Company recorded an additional $5.0 million in net assets acquired during the second quarter of 2021 as part of the measurement period, which caused a decrease in the provisional goodwill to be $40.5 million, net of the foreign
34

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
currency translation impact, as of June 30, 2021, based on the excess of the purchase price of the business combination over the fair value of the acquired net assets. See Note 16, "Acquisitions" for more information related to the business combination.

NOTE 16 – ACQUISITIONS

Flexiti

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

The Company began consolidating the financial results of Flexiti in the unaudited Condensed Consolidated Financial Statements on March 10, 2021. Flexiti contributed $4.0 million of net revenue and incurred $13.5 million of operating expenses during the three months ended June 30, 2021.

This transaction has been accounted for using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The Company was the acquirer for purposes of accounting for the business combination. The values assigned to the acquired assets and liabilities assumed are provisional based on the preliminary fair value estimates available as of the acquisition date. The values assigned to the assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the date of this Form 10-Q and may be adjusted during the measurement period of up to 12 months from the date of acquisition as further information becomes available. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.
The following table presents the preliminary purchase price allocation recorded in the Company’s Condensed Consolidated Balance Sheet as of the date of acquisition (in thousands):

Amounts acquired on March 10, 2021Measurement period adjustmentsAmounts acquired on March 10, 2021 (as adjusted)
Assets
Cash and cash equivalents
$1,267 $— $1,267 
Gross loans receivable(1)
196,138 — 196,138 
Prepaid expenses and other687 — 687 
Property and equipment460 — 460 
Right-of-use assets
616 — 616 
Intangibles
50,876 3,572 54,448 
Deferred tax assets
2,741 1,408 4,149 
Total assets$252,785 $4,980 $257,765 
Liabilities
Accounts payable and accrued liabilities $9,356 $— $9,356 
Credit facilities 174,367 — 174,367 
Lease liabilities 616 — 616 
Total liabilities$184,339 $— $184,339 
Net assets acquired$68,446 $4,980 $73,426 
Total consideration paid113,347 113,347 
Goodwill $44,901 $(4,980)$39,921 
(1) The gross contractual loans receivables as of March 10, 2021 were $208.6 million, of which the Company estimates $12.5 million will not be collected.

35

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
We are in the process of refining the valuation of acquired assets and liabilities, including goodwill, and expect to finalize the purchase price allocation prior to March 31, 2022. During the three months ended June 30, 2021, the Company recorded a cumulative net measurement period adjustment that decreased goodwill by $5.0 million. The measurement period adjustment would have resulted in an insignificant increase in amortization expense related to the merchant relationships intangible asset during the three months ended March 31, 2021. The Company made these measurement period adjustments to reflect facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date. As of June 30, 2021, the primary areas that remain preliminary relate to the valuation of certain loans receivable, intangible assets, and certain tax-related balances.

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

Fair ValueUseful Life
Developed technology$31,827 5.0 years
Merchant relationships19,684 8.0 years
Customer relationships2,937 8.0 years
Total identified intangible assets $54,448 

Goodwill of $39.9 million represents the excess of the consideration paid over the fair value of the net tangible and intangible assets acquired. The goodwill was primarily attributed to expected synergies created with the Company’s future product offerings and the value of the assembled workforce. Goodwill and the intangibles from this transaction are not deductible for Canadian income tax purposes because this was a stock acquisition.

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

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

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

Ad Astra

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

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

36

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
Assets
Cash and cash equivalents
$3,360 
Accounts receivable
465 
Property and equipment
358 
Intangible assets
1,101 
Goodwill
14,791 
Operating lease asset
235 
Total assets$20,310 
Liabilities
Accounts payable and accrued liabilities
$2,264 
Operating lease liabilities
235 
Total liabilities$2,499 
Total cash consideration transferred$17,811 

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

NOTE 17 – SHARE REPURCHASE PROGRAM

In May 2021, the Company's Board of Directors authorized a new share repurchase program for up to $50.0 million of its common stock. Under this program, the Company repurchased 104,487 shares of its common stock at an average price of $16.77 for a total cost of $1.8 million during the three and six months ended June 30, 2021. Refer to Note 19, "Subsequent Events" for repurchases during July 2021.

In February 2020, the Company's Board of Directors authorized a repurchase program for up to $25.0 million of its common stock. Due to uncertainty caused by COVID-19, the Board terminated the program on March 15, 2020, prior to any material purchases having been made.

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 3,614,541 shares of its common stock at an average price of $12.52 for a total cost of $45.2 million for the year ended December 31, 2019, and repurchased 455,255 shares of its common stock at an average price of $10.45 per share for the remaining consideration of $4.8 million during the six months ended June 30, 2020.

NOTE 18 – STORE CLOSURES

During the three months ended June 30, 2021, CURO closed or did not renew leases for 19 U.S. stores in Illinois (8), Oregon (2), Colorado (2), Washington (1) and Texas (6). CURO exited Illinois given the legislative changes that eliminated its product offerings. The store closure decisions in other states were made after extensive analysis and in response to ongoing migration of customer transactions toward the online channel and the impact of COVID-19 on store traffic and profitability.

37

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
CURO incurred $5.8 million of total one-time charges associated with the second quarter U.S. store closures as follows:

(in thousands)Three Months Ended
June 30, 2021
Store closure costs
Severance and employee costs$940 
Lease termination costs565 
Net accelerated depreciation and write-off of ROU assets and lease liabilities4,258 
Total store closure costs (1)
$5,763 
(1) All costs were recorded within "Corporate, district and other expenses" on the Statement of Operations and related to the U.S. reporting segment.

In July 2021, CURO established a plan to close an additional 30 U.S. stores. Refer to Note 19, "Subsequent Events" for further details regarding the third quarter 2021 store closures.

NOTE 19 – SUBSEQUENT EVENTS

7.50% Senior Secured Notes

On July 16, 2021, the Company priced its previously announced offering of 7.50% Senior Secured Notes, due 2028, and upsized the offering's aggregate principal amount from $700.0 million to $750.0 million. Closing is expected to occur to July 30, 2021. Interest on the 7.50% Senior Secured Notes is payable semiannually, in arrears, on February 1 and August 1, beginning February 1, 2022. The net proceeds from the sale of the 7.50% Senior Secured Notes will be used (i) to redeem the Company’s outstanding 8.25% Senior Secured Notes due 2025, (ii) to pay fees, expenses, premiums and accrued interest in connection therewith and (iii) for general corporate purposes.

July 2021 U.S. Store Rationalization

As part of the continuing evaluation of U.S. store performance in the first half of 2021, CURO made the decision in July 2021 to close an additional 30 U.S. stores in Texas (25), California (2), Louisiana (1), Nevada (1) and Tennessee (1). With these closures, the Company currently expects to incur $5.7 million of total one-time charges in the third quarter of 2021 consisting of (i) severance and employee costs of $2.5 million, (ii) lease termination costs of $0.9 million and (iii) net accelerated depreciation and write-off of ROU assets and liabilities of $2.3 million.

Share Repurchase Program

In July 2021, the Company repurchased 271,393 shares from July 1, 2021 through July 27, 2021 under the share repurchase program initiated in May 2021 as further discussed in Note 17, "Share Repurchase Program." The total value of shares repurchased was $4.5 million at an average price per share of $16.44.

Dividend

The Company's Board of Directors declared a quarterly dividend of $0.11 per share, payable on August 19, 2021, to stockholders of record as of August 9, 2021.
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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 2020 Form 10-K for a discussion of the uncertainties, risks and assumptions associated with these statements.

Overview

We are a tech-enabled, omni-channel consumer finance company serving a full spectrum of non-prime and prime consumers in the U.S. and Canada.

History

CURO was founded in 1997 to meet the growing needs of consumers looking for alternative access to credit. With nearly 25 years of experience, we seek to offer a variety of convenient, easily accessible financial and loan services in all of our markets. 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" and online under "Avio Credit" for Installment and Revolving LOC products. 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 direct-lending stores are branded "Cash Money" and we offer "LendDirect" Installment and Revolving LOC loans online and at certain stores. As of July 27, 2021, our direct lending network consisted of 391 locations across 13 U.S. states and seven Canadian provinces and we offered our online services in 27 U.S. states and five Canadian provinces.

On March 10, 2021, we completed the acquisition of Flexiti, one of Canada's fastest-growing POS and BNPL lenders, offering customers flexible payment plans at retailers that sell big-ticket goods such as furniture, appliances, jewelry and electronics. Through Flexiti's award-winning BNPL platform, customers can be approved instantly to shop with their FlexitiCard®, accepted at nearly 6,600 locations, which they can use online or in-store to make multiple purchases, within their credit limit, without needing to reapply. Refer to "—Recent Developments" below for additional information about the acquisition.

In April 2017, we first 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. In December 2020, we announced that we were in a position to benefit from Katapult's announced merger with FinServ, a publicly traded SPAC. In June 2020, the Katapult and FinServ merger was completed, resulting in a new publicly traded company (NASDAQ: KPLT). Refer to "—Recent Developments," below, for details regarding the merger and the benefit recognized by us. The merger reduced our fully-diluted ownership in Katapult from 47.7% to its current 20.7%.

Recent Developments

Flexiti acquisition and growth. On March 10, 2021, we completed the acquisition of Flexiti in a transaction that included cash at closing of $86.5 million and contingent cash consideration of up to $32.8 million based on the achievement of revenue less NCOs and origination targets over the next two years. The Flexiti acquisition provides us capability and scale opportunity in Canada’s credit card and POS financing markets. It enhances our long-term growth and financial and risk profiles, and allows us to access the full spectrum of Canadian consumers by adding an established private label credit card platform and POS financing capabilities. We now reach consumers in Canada through all the ways they generally access credit, directly both in-store and online, via credit cards or at the POS.

39


Flexiti continued its historical growth trends as a result of gaining new merchant partners. On June 1, 2021, Flexiti signed a 10-year agreement to become the exclusive POS financing partner to LFL, Canada's largest home furnishings retailer. LFL operates over 300 stores in Canada under multiple banners including Leon's and The Brick. Flexiti estimates that the LFL POS relationship will generate over C$800 million in annual POS finance beginning mid-2022 when fully onboarded. Year over year, Flexiti's second quarter 2021 originations increased 117.8%, or C$56.2 million, to C$103.9 million, as it continued to pursue new merchant partnerships.

In conjunction with the acquisition, we guaranteed the obligations of Flexiti under its amended credit facility, which provides for C$500.0 million in total borrowing capacity of the following maximum amounts: C$421.0 million as the Class A revolving commitment and C$79.0 million as the Class B revolving commitment.

Katapult Investment. The Katapult and FinServ merger closed on June 9, 2021. As a result, we received cash of $146.9 million and Katapult (NASDAQ: KPLT) stock with a value of $192.0 million as of July 27, 2021. Our fully-diluted ownership of Katapult as of June 30, 2021 was 20.7%, which assumes full pay-out of the earn-out shares. Refer to our 2020 Form 10-K for additional information about the merger agreement and its benefits to us.

Store Closure. On July 13, 2021, we announced the closure of 49 U.S. stores in response to evolving customer channel preferences that were accelerated by the impacts of COVID-19. The store closures represent nearly 25% of the Company’s U.S. stores and, other than Illinois, reflect strategic consolidation of locations in dense local markets. CURO’s omni-channel platform allows customers to seamlessly transition online, to an adjacent store, or to contact centers, helping maximize the likelihood of retaining a large percentage of customers that had utilized the impacted stores.

During the second quarter of 2021, we closed or did not renew leases for 19 U.S. stores in Illinois (8), Oregon (2), Colorado (2), Washington (1) and Texas (6). We exited Illinois given the legislative changes that eliminated its product offerings. The store closure decisions in other states were made after extensive analysis and in response to ongoing migration of customer transactions toward the online channel and the impact of COVID-19 on store traffic and profitability. During July 2021, we made the decision to close an additional 30 U.S. stores in Texas (25), California (2), Louisiana (1), Nevada (1) and Tennessee (1).

The store closure decisions followed an extensive evaluation that considered (i) comprehensive store-level score cards, (ii) market-level store density and the related addressable local market, (iii) the lingering and potential future COVID-19 impacts on store volume, traffic and profitability and (iv) continued migration of customer transactions toward the online channel. Of the stores closed in Texas in both quarters, 25 were from The Money Box acquisition in 2012. While historically successful, these stores did not have the high-profile, high-traffic advantages of our Speedy/Rapid Cash stores, so their profitability has declined more through COVID. All of the impacted stores are scheduled to be closed by the end of August 2021. Following these closures, we will operate 160 stores in the U.S. and 202 stores in Canada.

7.50% Senior Secured Notes. On July 16, 2021, we priced our previously announced offering of 7.50% Senior Secured Notes, due 2028, and upsized it from $700.0 million to $750.0 million aggregate principal amount. Interest on the notes is payable semiannually, in arrears, on February 1 and August 1 of each year, beginning February 1, 2022. The net proceeds from the sale of the notes will be used (i) to redeem the Company’s outstanding 8.25% Senior Secured Notes due 2025, (ii) to pay fees, expenses, premiums and accrued interest in connection therewith and (iii) for general corporate purposes. The closing of the 7.50% Senior Secured Notes offering is expected on July 30, 2021.

Continuing Impact of COVID-19. From the second quarter of 2020 through the first quarter of 2021, we experienced lower customer demand, good credit performance, increased or accelerated repayments and favorable payment trends as customers were aided by government stimulus programs while periodically enduring pandemic lockdowns (collectively "COVID-19 Impacts"). Second quarter of 2021 was impacted less by COVID-19 Impacts but was still affected by loan demand in the U.S. lower than pre-COVID-19 levels and additional pandemic lockdowns in Canada. Refer to our 2020 Form 10-K for additional information regarding the impact of COVID-19 and the actions we took to mitigate them, our designation as an essential financial service, and our Customer Care Program which provides various forms of relief to our customers during the pandemic. As these programs wind down, U.S. Company Owned loan balances have stabilized entering the second quarter of 2021 with them modestly increasing from $185.8 million for the period ending March 31, 2021 to $186.5 million for the period ending June 30, 2021. While NCOs have increased sequentially for total U.S. Company Owned gross loans receivable, they remain at low levels relative to most periods in 2020, with the exception of the second quarter of 2020, and prior to the onset of COVID-19.

In Canada, despite new lockdown mandates and recent resurgences, both Canada Direct Lending gross loans receivable and Canada POS Lending gross loans receivable grew 5.1% and 9.9%, sequentially, while the NCO rate for Canada Direct Lending and the past due rate for both Canadian segments decreased sequentially. The NCO rate for Canada POS Lending was 0.7%.

Verge Credit. We launched Verge installment loans, originated by Stride Bank, in the fourth quarter of 2019 and executed pilot programs in several states. After testing various offers, rates, terms and approval criteria, Stride informed us in the first quarter of 2021 that it plans to focus on near-prime loans as they represent a larger addressable market and offer greater opportunity to scale. As a result, Stride discontinued new Verge Credit loans in April 2021. Verge loan balances totaled $21.5 million as of June
40


30, 2021. We expect an orderly run-off of these balances over the next 21 months. We continue to maintain various relationships with Stride and are working together to develop additional products that meet customer needs.

Revenue by Product and Segment and Related Loan Portfolio Performance

Consolidated Revenue by Product and Segment

The following table summarizes revenue by product, including CSO fees, for the period indicated:
Three Months Ended
June 30, 2021June 30, 2020
(in thousands, unaudited)U.S.Canada Direct LendingCanada POS LendingTotal% of TotalU.S.Canada Direct LendingCanada POS LendingTotal% of Total
Revolving LOC$ 24,091 $ 37,450 $ 6,495 $ 68,036 36.3 %$ 30,917 $ 25,819 $ — $ 56,736 31.1 %
Installment90,826 10,541 — 101,367 54.0 %102,861 9,701 — 112,562 61.7 %
Ancillary3,877 13,889 524 18,290 9.7 %3,542 9,669 — 13,211 7.2 %
   Total revenue$ 118,794 $ 61,880 $ 7,019 $ 187,693 100.0 %$ 137,320 $ 45,189 $ — $ 182,509 100.0 %

During the three months ended June 30, 2021, total revenue increased $5.2 million, or 2.8%, to $187.7 million, compared to the prior-year period. The year-over-year increase was primarily due to an increase in Canada Direct Lending revenue of $16.7 million, or 36.9%, and $7.0 million of Canada POS Lending revenue from a full post-acquisition quarter for Flexiti. This increase was partially offset by a decrease in U.S. revenue of $18.5 million, or 13.5%.

Canada POS Lending revenue includes MDR, which is recognized over the life of the underlying loan term. The Flexiti gross acquired loan portfolio ("Acquired Portfolio"), prior to the fair value discount recorded as a result of purchase accounting, was $208.6 million as of March 10, 2021 (date of acquisition). The Acquired Portfolio was remeasured at fair value of $196.1 million as of the date of acquisition. The fair value discount is based on estimated future net cash flows and is recognized in net revenue over the expected life of the Acquired Portfolio (approximately 12 months). This amortization resulted in an increase in revenue and an increase in loan loss provision of $1.6 million and $1.5 million, respectively, for the three months ended June 30, 2021. The Acquired Portfolio also included $14.1 million of unearned MDR, annual and administrative fees, which are recognized over the expected life of the Acquired Portfolio. Since those unrecognized amounts do not represent future cash flows from the Acquired Portfolio, the unearned MDR, annual and administrative fees were not included in the opening balance sheet as of March 10, 2021, and thus, are not amortized to revenue for the Acquired Portfolio. For the second quarter of 2021, Canada POS Lending revenue and net revenue was lower by $5.6 million and $5.5 million, respectively, ("acquisition-related adjustments") compared to what would have been reported if the unearned MDR and fees had been recognized over the expected life of the Acquired Portfolio. To assist users of our financial statements in analyzing the expected future performance of the Flexiti loan portfolio (for example, expected yields for loans originated post-acquisition) and earnings, we have provided results with and without these acquisition-related adjustments. See "Reconciliation of Net Income from Continuing Operations and Diluted Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings per Share" for additional detail. The acquisition-related adjustments will decline each quarter with the Acquired Portfolio and will be fully amortized by the second quarter of 2022.

From a product perspective, Revolving LOC revenue for the three months ended June 30, 2021 increased $11.3 million, or 19.9%, year over year, primarily driven by growth in Canada Direct Lending revenue of $11.6 million, or 45.0%, and Canada POS lending of $6.5 million, partially offset by a decline in U.S. revenue of $6.8 million, or 22.1%. Excluding the effects of the Virginia runoff portfolio, U.S. Revolving LOC revenue decreased $0.3 million, or 1.3% for the three months ended June 30, 2021 compared to the prior-year period.

For the three months ended June 30, 2021, Installment revenue decreased $11.2 million, or 9.9%, compared to the prior-year period. Excluding the effects of the impacted California Installment loan portfolios, U.S. Installment revenue decreased $0.5 million, or 0.6%.

Ancillary revenue increased $5.1 million, or 38.4% versus the prior-year period, primarily due to the sale of insurance products to Revolving LOC and Installment loan customers in Canada.

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

Six Months Ended
June 30, 2021June 30, 2020
(in thousands, unaudited)U.S.Canada Direct LendingCanada POS LendingTotal% of TotalU.S.Canada Direct LendingCanada POS LendingTotal% of Total
Revolving LOC$ 51,014 $ 71,818 $ 7,939 $ 130,771 34.0 %$ 72,907 $ 54,811 $ — $ 127,718 27.6 %
Installment196,767 20,988 — 217,755 56.7 %278,130 28,284 — 306,414 66.1 %
Ancillary7,505 27,514 699 35,718 9.3 %8,051 21,132 — 29,183 6.3 %
   Total revenue$ 255,286 $ 120,320 $ 8,638 $ 384,244 100.0 %$ 359,088 $ 104,227 $ — $ 463,315 100.0 %

Year-over-year comparisons were also influenced by COVID-19 Impacts. For the six months ended June 30, 2021, total revenue declined $79.1 million, or 17.1%, to $384.2 million, compared to the prior year. Geographically, U.S. revenues declined 28.9% while Canada Direct Lending revenues increased 15.4% due to the continued popularity and growth of Revolving LOC loans in Canada. For the six months ended June 30, 2021, Canada POS Lending revenue was $8.6 million, which included a $4.0 million reduction related to acquisition-related adjustments for the period.

From a product perspective, Revolving LOC revenues increased $3.1 million, or 2.4%, compared to the prior year, primarily due to growth in Canada Direct Lending revenue of $17.0 million, or 31.0%, and Canada POS Lending of $7.9 million, partially offset by declines in U.S. revenue of $21.9 million, or 30.0%. Excluding the effects of the Virginia runoff portfolio, U.S. Revolving LOC revenue decreased $7.2 million, or 13.7%, for the six months ended June 30, 2021 compared to the prior-year period.

For the six months ended June 30, 2021, Installment revenues decreased $88.7 million, or 28.9%, compared to the prior year. Excluding the effects of the impacted California Installment loan portfolios, Installment revenue decreased 23.1%.

Ancillary revenues increased $6.5 million, or 22.4%, versus the prior year from the sale of insurance products to Revolving LOC and Installment loan customers in Canada.

The following table presents online revenue and online transaction compositions, including CSO fees, of the products and services that we currently offer within the U.S. and Canada Direct Lending segments:

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Online revenue as a percentage of consolidated revenue47.6 %47.1 %49.3 %47.3 %
Online transactions as a percentage of consolidated transactions58.3 %57.6 %60.1 %51.8 %

Online revenue as a percentage of consolidated revenue increased during the three and six months ended June 30, 2021 due to COVID-19 Impacts and the resulting transition of customers using our online channel which allows for a safe and contactless option.


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Consolidated Loans Receivable

The following table reconciles Company Owned gross loans receivable, a GAAP-basis balance sheet measure, 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 the unaudited Condensed Consolidated Financial Statements but from which we earn revenue by providing a guarantee to the unaffiliated lender (in thousands, unaudited):

As of
June 30, 2021March 31, 2021December 31, 2020September 30, 2020June 30, 2020
Company Owned gross loans receivable$769,228 $731,014 $553,722 $497,442 $456,512 
Gross loans receivable Guaranteed by the Company37,093 32,439 44,105 39,768 34,092 
Gross combined loans receivable (1)
$806,321 $763,453 $597,827 $537,210 $490,604 
(1) See "Non-GAAP Financial Measures" below for definition and additional information.

Gross combined loans receivable by product is presented below:

curo-20210630_g1.jpg

Gross combined loans receivable increased $315.7 million, or 64.4%, to $806.3 million as of June 30, 2021, from $490.6 million as of June 30, 2020. The increase was driven by Canada Direct Lending growth of $104.5 million, or 40.7%, and Canada POS Lending gross loans receivables of $221.5 million. Excluding Flexiti loan balances, gross combined loans receivable increased $94.3 million, or 19.2%, year over year. U.S. gross combined loans receivable declined $10.2 million, or 4.4%, due to (i) COVID-19 Impacts, (ii) the runoff of California Installment and Virginia Revolving LOC loans as a result of regulatory impacts, and (iii) additional government stimulus in the first half of 2021. Excluding the California and Virginia runoff portfolios, U.S. gross combined loans receivable grew 24.2%.

Sequentially, gross combined loans receivable increased $42.9 million, or 5.6%, as markets continued to reopen and consumer demand increased. Geographically, U.S. and Canada grew sequentially by 2.5% and 6.9%, respectively, primarily driven by Canada POS Lending growth of $19.9 million, or 9.9% and Canada Direct Lending Revolving LOC growth of $18.4 million, or 5.8%. Gross combined loans receivable performance by product is described further in the following sections.

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Consolidated Results of Operations

Condensed Consolidated Statements of Operations
(in thousands, unaudited)
Three Months Ended June 30,Six Months Ended June 30,
20212020Change $Change %20212020Change $Change %
Revenue$ 187,693 $ 182,509 $ 5,184 2.8 %$ 384,244 $ 463,315 ($ 79,071)(17.1)%
Provision for losses45,165 50,693 (5,528)(10.9)%81,310 164,229 (82,919)(50.5)%
Net revenue142,528 131,816 10,712 8.1 %302,934 299,086 3,848 1.3 %
Advertising7,043 5,750 1,293 22.5 %15,127 17,969 (2,842)(15.8)%
Non-advertising costs of providing services50,834 49,567 1,267 2.6 %101,144 104,919 (3,775)(3.6)%
Total cost of providing services57,877 55,317 2,560 4.6 %116,271 122,888 (6,617)(5.4)%
Gross margin84,651 76,499 8,152 10.7 %186,663 176,198 10,465 5.9 %
Operating expense (income)
Corporate, district and other expenses59,621 36,781 22,840 62.1 %108,461 79,588 28,873 36.3 %
Interest expense23,440 18,311 5,129 28.0 %42,979 35,635 7,344 20.6 %
(Income) loss from equity method investment(1,712)(741)(971)#(2,258)877 (3,135)#
Gain on equity method investment(135,387)— (135,387)#(135,387)— (135,387)#
Total operating (income) expense(54,038)54,351 (108,389)#13,795 116,100 (102,305)(88.1)%
Income from continuing operations before income taxes138,689 22,148 116,541 #172,868 60,098 112,770 #
Provision for income taxes34,172 1,068 33,104 #42,616 3,005 39,611 #
Net income from continuing operations104,517 21,080 83,437 #130,252 57,093 73,159 #
Net income from discontinued operations, net of tax— 993 (993)#— 1,285 (1,285)#
Net income$ 104,517 $ 22,073 $ 82,444 #$ 130,252 $ 58,378 $ 71,874 #
# - Variance greater than 100% or not meaningful

For the Three Months Ended March 31, 2021 and 2020

Revenue and Net Revenue
Revenue increased $5.2 million, or 2.8%, to $187.7 million for the three months ended June 30, 2021, from $182.5 million for the three months ended June 30, 2020, due to an increase in Canada Direct Lending revenues of $16.7 million, or 36.9% ($9.6 million, or 21.4% on a constant currency basis), and $7.0 million of Canada POS Lending revenue from a full-post acquisition quarter for Flexiti, partially offset by a decrease in U.S. revenues of $18.5 million, or 13.5%. Excluding the impacted California and Virginia loans, total revenue increased $23.4 million, or 15.0%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Provision for losses decreased by $5.5 million, or 10.9%, for the three months ended June 30, 2021 compared to the prior-year period. The decrease in provision for loan losses was due to (i) relative sequential change in loan balances, (ii) favorable adjustments to allowance coverage from continued improved credit quality, and (iii) significantly improved NCO rates year over year in both U.S. and Canada, as discussed in more detail in the "Segment Analysis" sections.

Cost of Providing Services

Advertising costs increased $1.3 million, or 22.5%, year over year in response to product demand changes during the three months ended June 30, 2021 compared to the three months ended June 30, 2020. Quarter-over-quarter application volume and quality improved this quarter as the prior-year quarter was influenced by April 2020 government stimulus and pandemic-induced lockdowns.

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Non-advertising costs of providing services increased $1.3 million, or 2.6%, to $50.8 million in the three months ended June 30, 2021, compared to $49.6 million in the three months ended June 30, 2020. The increase was due to (i) volume-driven variable costs, such as underwriting data and financial services fees, (ii) timing and level of performance-based variable compensation and (iii) severance costs as described below in "Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA." These increases were partially offset by lower store operating costs and collection costs.

Corporate, District and Other Expenses

Corporate, district and other expenses were $59.6 million for the three months ended June 30, 2021, an increase of $22.8 million, or 62.1%, compared to the three months ended June 30, 2020. The year-over-year increase was primarily due to (i) $5.8 million of restructuring costs as described below in "Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA," (ii) $3.2 million of transaction costs related to the merger of Katapult and FinServ and the Flexiti acquisition also described previously, (iii) $9.9 million of Flexiti operating expenses and (iv) the timing and extent of performance-based variable compensation compared to the prior-year period. Refer to the "Segment Analysis" sections below for further details.

Equity Method Investment

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

Interest Expense

Interest expense for the three months ended June 30, 2021 increased $5.1 million, or 28.0%, primarily due to interest on debt acquired with the acquisition of Flexiti, and modestly higher year-over-year non-recourse borrowings in the U.S.

Provision for Income Taxes

The effective income tax rate for the three months ended June 30, 2021 was 24.6%. The effective income tax rate was lower compared to the federal and state/provincial statutory rates of approximately 26%, primarily as a result of proportionally more income in lower rate jurisdictions, driven by the gain on the Katapult transaction of $146.9 million. The transaction resulted in (i) a current cash tax liability related to the $146.9 million cash consideration and (ii) a deferred tax asset related to the recognized tax gain over book gain, combined with the release of the valuation allowance established prior to the gain. The effective income tax rate of adjusted tax expense included in the Adjusted Net Income for the three months ended June 30, 2021 was 18.6%.

For the Six Months Ended June 30, 2021 and 2020

Revenue and Net Revenue

Revenue decreased $79.1 million, or 17.1%, to $384.2 million for the six months ended June 30, 2021 from $463.3 million for the six months ended June 30, 2020, as a result of the declines in combined gross loans receivables in the U.S. from COVID-19 Impacts, partially offset by growth in Canada Direct Lending and the addition of Canada POS Lending as discussed previously. Year over year, U.S. revenue decreased 28.9%. Excluding the impacted California and Virginia loans, U.S. revenue decreased 20.7% for the six months ended June 30, 2021 compared to the prior-year period. Canada Direct Lending revenue increased 15.4% (5.6% on a constant-currency basis) as a result of growth in Revolving LOC loans. For the six months ended June 30, 2021, we also recognized $8.6 million of Canada POS Lending revenue, which included a $4.0 million reduction related to acquisition-related adjustments for the period.

Provision for losses decreased by $82.9 million, or 50.5%, for the six months ended June 30, 2021 compared to the prior year. The decrease in provision for loan losses was primarily due to (i) relative sequential change in loan balances, (ii) favorable adjustments to allowance coverage from continued improved credit quality, and (iii) improved NCO rates in both the U.S. and Canada as discussed in "Loan Volume and Portfolio Performance Analysis" and "Segment Analysis" sections.

Cost of Providing Services

Advertising costs decreased $2.8 million, or 15.8%, year over year, influenced by COVID-19 Impacts. Year over year, application volume and quality improved in the second quarter of 2021 while the second quarter of 2020 and first quarter of 2021 were influenced by U.S. government stimulus and pandemic-induced lockdowns.

Non-advertising costs of providing services decreased $3.8 million, or 3.6%, to $101.1 million in the six months ended June 30, 2021, compared to $104.9 million in the six months ended June 30, 2020. The decrease was primarily driven by lower collection costs resulting from stimulus-related pay-downs and lower variable costs as a result of lower demand in the U.S., partially offset by timing and level of performance-based variable compensation.

45


Corporate, District and Other Expenses

Corporate, district and other expenses were $108.5 million for the six months ended June 30, 2021, an increase of $28.9 million, or 36.3%, compared to the six months ended June 30, 2020. The year-over-year increase was primarily due to (i) $ 5.8 million of restructuring costs as described below in "Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA," (ii) $ 6.3 million of transaction costs related to the merger of Katapult and FinServ and the acquisition of Flexiti also as described previously, and (iii) $12.5 million of Flexiti operating expenses post-closing. Excluding these costs, comparable corporate, district and other expenses increased $4.3 million, or 5.4% year over year, primarily due to the timing and level of performance-based variable compensation compared to the prior-year period. Refer to the "Segment Analysis" sections below for further details.

Equity Method Investment

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

Interest Expense

Interest expense for the six months ended June 30, 2021 increased $7.3 million, or 20.6%, primarily due to interest on debt acquired with the acquisition of Flexiti, and modestly higher year-over-year non-recourse borrowings in the U.S.

Provision for Income Taxes

The effective income tax rate for the six months ended June 30, 2021 was 24.7%. The effective income tax rate was lower compared to the federal and state/provincial statutory rates of approximately 26%, primarily as a result of proportionally more income in lower rate jurisdictions, driven by the gain on the Katapult transaction of $146.9 million. The transaction resulted in (i) a current cash tax liability related to the $146.9 million cash consideration and (ii) a deferred tax asset related to the recognized tax gain over book gain, combined with the release of the valuation allowance established prior to the gain. The effective income tax rate of adjusted tax expense included in Adjusted Net Income for the six months ended June 30, 2021 was 23.1%.

Katapult Update for the Three and Six Months Ended June 30, 2021 and 2020

Katapult is accounted for using the equity method of accounting and is included in "Investments in Katapult" on the unaudited Condensed Consolidated Balance Sheet. Our share of Katapult's earnings was $1.7 million for the three months ended June 30, 2021 and $2.3 million for the six months ended June 30, 2021. We recognize our share of Katapult’s earnings on a one-quarter lag.

The Katapult and FinServ merger closed in June 2021. As part of the merger, we received cash consideration of $146.9 million and retained ownership through shares after the merger. Based on market prices as of July 27, 2021, the total market value of the retained shares is $192.0 million. As of June 30, 2021, our total cash investment in Katapult is $27.5 million. After closing of the merger, we now maintain a 20.7% fully diluted ownership in the newly formed public company. Refer to Note 8, Fair Value Measurements, for additional details.

Segment Analysis

Following our acquisition of Flexiti on March 10, 2021, and beginning in the first quarter of 2021, we report financial results for three reportable segments: U.S., Canada Direct Lending and Canada POS Lending. Following is a summary of portfolio performance and results of operations for the segment and period indicated.

U.S. Portfolio Performance
(in thousands, except percentages)Q2 2021Q1 2021Q4 2020Q3 2020Q2 2020
Gross combined loans receivable (1)
Revolving LOC$ 47,277$ 43,387$ 55,561$ 56,727$ 53,239
Installment loans - Company Owned139,234142,396167,890148,569146,495
Total U.S. Company Owned gross loans receivable186,511185,783223,451205,296199,734
Installment loans - Guaranteed by the Company (2)
37,09332,43944,10539,76834,092
Total U.S. gross combined loans receivable (1)
$ 223,604$ 218,222$ 267,556$ 245,064$ 233,826
Lending Revenue:
Revolving LOC$ 24,091$ 26,923$ 31,111$ 30,431$ 30,917
Installment loans - Company Owned55,91864,51668,92762,21565,104
Installment loans - Guaranteed by the Company (2)
34,90841,42542,97236,73137,757
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(in thousands, except percentages)Q2 2021Q1 2021Q4 2020Q3 2020Q2 2020
Total U.S. lending revenue$ 114,917$ 132,864$ 143,010$ 129,377$ 133,778
Lending Provision:
Revolving LOC$ 6,621$ 5,039$ 11,583$ 11,904$ 11,984
Installment loans - Company Owned14,04811,15924,62916,25917,550
Installment loans - Guaranteed by the Company (2)
12,5839,64822,62114,93611,713
Total U.S. lending provision$ 33,252$ 25,846$ 58,833$ 43,099$ 41,247
Lending Net Revenue
Revolving LOC$ 17,470$ 21,884$ 19,528$ 18,527$ 18,933
Installment loans - Company Owned41,87053,35744,29845,95647,554
Installment loans - Guaranteed by the Company (2)
22,32531,77720,35121,79526,044
Total U.S. lending net revenue$ 81,665$ 107,018$ 84,177$ 86,278$ 92,531
NCOs
Revolving LOC$ 7,271$ 9,904$ 12,500$ 10,595$ 20,090
Installment loans - Company Owned18,61717,31319,62016,75829,905
Installment loans - Guaranteed by the Company (2)
12,04412,15021,59013,90215,738
Total U.S. NCOs$ 37,932$ 39,367$ 53,710$ 41,255$ 65,733
NCO rate (3)
Revolving LOC16.0%20.0%22.3%19.3%31.7%
Installment loans - Company Owned13.2%11.2%12.4%11.4%16.6%
Total U.S. Company Owned NCO rate13.9%13.3%15.0%13.5%20.5%
Installment loans - Guaranteed by the Company (2)
34.6%31.7%51.5%37.6%35.0%
Total U.S. NCO rate17.2%16.2%21.0%17.2%22.8%
ALL and CSO Liability for Losses (4)
Revolving LOC$ 13,669$ 14,319$ 19,185$ 20,101$ 18,793
Installment loans - Company Owned21,24625,81531,97126,96127,112
Installment loans - Guaranteed by the Company (2)
5,2654,7277,2286,1985,164
47


(in thousands, except percentages)Q2 2021Q1 2021Q4 2020Q3 2020Q2 2020
Total U.S. ALL and CSO Liability for Losses$ 40,180$ 44,861$ 58,384$ 53,260$ 51,069
ALL and CSO Liability for Losses rate (5)
Revolving LOC28.9%33.0%34.5%35.4%35.3%
Installment loans - Company Owned15.3%18.1%19.0%18.1%18.5%
Total U.S. Company Owned ALL rate18.7%21.6%22.9%22.9%23.0%
Installment loans - Guaranteed by the Company (2)
14.2%14.6%16.4%15.6%15.1%
Total ALL and CSO Liability for Losses rate18.0%20.6%21.8%21.7%21.8%
Past-due rate (5)
Revolving LOC26.6%26.3%30.7%27.9%26.6%
Installment loans - Company Owned18.7%18.0%19.0%16.6%17.6%
Total U.S. Company Owned past-due rate20.7%19.9%21.9%19.8%20.0%
Installment loans - Guaranteed by the Company (2)
17.4%12.8%14.1%15.4%12.1%
(1) Non-GAAP measure. For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."
(2) Includes loans originated by third-party lenders through CSO programs. Installment gross loans receivable Guaranteed by the Company are not included in the Condensed Consolidated Financial Statements.
(3) We calculate NCO rate as total NCOs divided by Average gross loans receivables.
(4) We report ALL as a contra-asset reducing gross loans receivable and the CSO Liability for Losses as a liability on the Condensed Consolidated Balance Sheets.
(5) We calculate (i) ALL and CSO Liability for losses rate and (ii) past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.

U.S. Net Revenue

U.S. revenues decreased by $18.5 million, or 13.5%, to $118.8 million, compared to the prior-year period for the three months ended June 30, 2021, primarily as a result of the COVID-19 impacts on gross combined loans receivable and the runoff of California Installment and Virginia Revolving LOC loans due to regulatory changes. See the loan performance discussions below for further details.

The provision for losses decreased $7.9 million, or 19.0%, primarily as a result of (i) relative sequential change in loan balances, (ii) favorable adjustments to allowance coverage from continued improved credit quality and (iii) improved NCO rates year over year. U.S. NCOs, including loans Guaranteed by the Company, decreased by $27.8 million, or 42.3% year over year, and $1.4 million, or 3.6%, sequentially. For the three months ended June 30, 2021, U.S. NCO rate improved 550 bps, or 24.5% year over year, and increased 100 bps, or 5.9%, sequentially.

U.S. Revolving LOC loan performance

U.S. Revolving LOC loan balances as of June 30, 2021 decreased $6.0 million, or 11.2%, compared to the prior year, resulting in a related revenue decrease of $6.8 million, or 22.1%, primarily due to the runoff of Virginia Revolving LOC loans. Excluding the impacted Virginia loans, U.S. Revolving LOC gross loans receivable increased $4.9 million or 12.8%, year over year. The Revolving LOC allowance coverage decreased year over year from 35.3% to 28.9% for the three months ended June 30, 2021. The decrease was due to sustained favorable past-due rates and improved NCO trends. For the three months ended June 30, 2021, NCO rates improved from 31.7% to 16.0% year over year and from 20.0% to 16.0% sequentially.

U.S. Installment loan performance - Company Owned

U.S. Installment loan balances as of June 30, 2021 decreased $7.3 million, or 5.0%, and revenue decreased $9.2 million, or 14.1%, compared to the prior year, primarily due to COVID-19 Impacts and regulatory changes in California, effective January 1, 2020 that affected Installment products. Excluding the impacted California loans, U.S. Installment loans increased $30.9 million, or 35.1%, year over year, and related revenue increased $2.4 million, or 5.0%. The Installment loans allowance coverage decreased from 18.5% in the prior year to 15.3% as of June 30, 2021, largely due to sustained favorable trends in NCOs, which improved year over year by 335 bps. Sequentially, allowance coverage decreased from 18.1% to 15.3% primarily from a decline in TDR loans as a percentage of total gross loans receivable and the runoff of Verge Installment loans.

48


We launched Verge installment loans originated by Stride Bank in the fourth quarter of 2019 and executed pilot programs in several states. After testing various offers, rates, terms and approval criteria, Stride informed us in the first quarter of 2021 that it plans to focus on near-prime loans as they represent a larger addressable market and offer greater opportunity to scale. As a result, Stride discontinued new Verge Credit loans in April 2021. Verge loan balances totaled $21.5 million as of June 30, 2021. We expect an orderly run-off of these balances over the next 21 months. We continue to maintain various relationships with Stride and are working together to develop additional products that meet customer needs.

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

U.S. Installment loans Guaranteed by the Company increased $3.0 million, or 8.8%, year over year. The allowance coverage decreased 95 bps year over year due to sustained favorable NCO and past-due rates as a result of government stimulus-related pay-downs. Sequentially, allowance coverage declined from 14.6% to 14.2% for the three months ended June 30, 2021, primarily from a decline in TDR loans as a percentage of total gross loans receivable.

Following is a summary of results of operations for the U.S. segment for the periods indicated.

Three Months Ended June 30,Six Months Ended June 30,
(dollars in thousands, unaudited)20212020Change $Change %20212020Change $Change %
Revenue$ 118,794 $ 137,320 ($ 18,526)(13.5)%$ 255,286 $ 359,088 ($ 103,802)(28.9)%
Provision for losses33,622 41,530 (7,908)(19.0)%59,678 127,571 (67,893)(53.2)%
Net revenue85,172 95,790 (10,618)(11.1)%195,608 231,517 (35,909)(15.5)%
Advertising6,089 5,269 820 15.6 %13,230 16,214 (2,984)(18.4)%
Non-advertising costs of providing services31,837 33,661 (1,824)(5.4)%63,992 70,903 (6,911)(9.7)%
   Total cost of providing services37,926 38,930 (1,004)(2.6)%77,222 87,117 (9,895)(11.4)%
Gross margin47,246 56,860 (9,614)(16.9)%118,386 144,400 (26,014)(18.0)%
Corporate, district and other expenses43,730 29,631 14,099 47.6 %84,327 67,281 17,046 25.3 %
Interest expense17,338 16,113 1,225 7.6 %33,696 30,959 2,737 8.8 %
(Income) loss from equity method investment(1,712)(741)(971)#(2,258)877 (3,135)#
Gain from equity method investment(135,387)— (135,387)#(135,387)— (135,387)#
Total operating expense(76,031)45,003 (121,034)#(19,622)99,117 (118,739)#
Segment operating income123,277 11,857 111,420 #138,008 45,283 92,725 #
Interest expense17,338 16,113 1,225 7.6 %33,696 30,959 2,737 8.8 %
Depreciation and amortization3,008 3,309 (301)(9.1)%6,134 6,686 (552)(8.3)%
EBITDA (1)
143,623 31,279 112,344 #177,838 82,928 94,910 #
Restructuring costs5,763 — 5,763 5,763 — 5,763 
Legal and other costs— 847 (847)— 1,750 (1,750)
(Income) loss from equity method investment(1,712)(741)(971)(2,258)877 (3,135)
Gain from equity method investment(135,387)— (135,387)(135,387)— (135,387)
Transaction costs3,181 91 3,090 6,341 337 6,004 
Share-based compensation3,467 3,310 157 6,150 6,504 (354)
Other adjustments(159)305 (464)(405)164 (569)
Adjusted EBITDA (1)
$ 18,776 $ 35,091 ($ 16,315)(46.5)%$ 58,042 $ 92,560 ($ 34,518)(37.3)%
(1) These are non-GAAP metrics. For a description of each non-GAAP addback, see the applicable reconciliations contained under "Consolidated Results of Operations." For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."
# - Variance greater than 100% or not meaningful.

U.S. Segment Results - For the Three Months Ended June 30, 2021 and 2020

For a discussion of revenue, provision for losses and related gross combined loans receivables, see "U.S. Portfolio Performance," above.

49


Advertising costs increased $0.8 million, or 15.6%, year over year in response to product demand changes during the three months ended June 30, 2021 compared to the three months ended June 30, 2020. Quarter-over-quarter application volume and quality improved in this year's quarter after the prior-year quarter had been influenced by April 2020 government stimulus and pandemic-induced lockdowns.

Non-advertising costs of providing services for the three months ended June 30, 2021 were $31.8 million, a decrease of $1.8 million, or 5.4%, compared to $33.7 million for the three months ended June 30, 2020, primarily driven by lower store operating and collection costs year over year.

Corporate, district and other expenses were $43.7 million for the three months ended June 30, 2021, an increase of $14.1 million, or 47.6%, compared to the prior-year period. The year-over-year increase was primarily due to (i) $ 5.8 million of restructuring costs as described further below and in "Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA," (ii) $3.2 million of transaction costs related to the merger of Katapult and FinServ and the Flexiti acquisition also as described previously, and (iii) the timing and level of performance-based variable compensation compared to the prior-year period.

As previously described, we closed, or intend to close, 49 U.S. stores, 19 of which occurred in the second quarter, in response to evolving customer channel preferences that were accelerated by the impacts of COVID-19. The store closures represent nearly 25% of the Company’s U.S. stores and, other than Illinois, which were closed earlier in the year due to regulatory changes, reflect strategic consolidation of locations in dense local markets. As CURO’s omni-channel platform allows customers to transition seamlessly online, to an adjacent store, or to contact centers, this consolidation reduces annual operating costs by approximately $20 million, while providing our customers who used those impacted stores alternate ways to access our services.

The 19 U.S. stores closed during the second quarter of 2021 were in Illinois (8), Oregon (2), Colorado (2), Washington (1) and Texas (6) (“Q2 2021 U.S. Store Closures”). We exited Illinois given the legislative changes that eliminated our product offerings. The store closure decisions in other states were made after extensive analysis and in response to ongoing migration of customer transactions toward the online channel and the impact of COVID-19 on store traffic and profitability. We incurred $5.8 million of total one-time charges associated with the Q2 2021 U.S. Store Closures consisting of (i) severance and employee costs of $0.9 million, (ii) lease termination costs of $0.6 million and (iii) net accelerated depreciation and write-off of ROU assets and liabilities of $4.3 million.

During July 2021, we announced the remaining 30 of the 49 U.S. stores were closing in Texas (25), California (2), Louisiana (1), Nevada (1) and Tennessee (1) (“Q3 2021 U.S. Store Closures”). In connection with the Q3 2021 U.S. Store Closures, we expect to incur $5.7 million of total one-time charges consisting of (i) severance and employee costs of $2.5 million, (ii) lease termination costs of $0.9 million and (iii) net accelerated depreciation and write-off of ROU assets and liabilities of $2.3 million. These costs will be reflected in the third quarter 2021 results.

The store closure decisions followed an extensive evaluation that considered (i) comprehensive store-level score cards, (ii) market-level store density and the related addressable local market, (iii) the lingering and potential future COVID-19 impacts on store volume, traffic and profitability and (iv) continued migration of customer transactions toward the online channel. Of the stores closed in Texas in both quarters, 25 were from The Money Box acquisition in 2012. While historically successful, these stores did not have the high-profile, high-traffic advantages of our Speedy/Rapid Cash stores, so their profitability has declined more through COVID. All of the impacted stores are scheduled to be closed by the end of August 2021. Following these closures, we will operate 160 stores in the U.S. and 201 stores in Canada.

U.S. interest expense for the three months ended June 30, 2021 increased $1.2 million, or 7.6%, primarily related to the Non-Recourse U.S. SPV Facility, which we entered into in April 2020.

As previously described, we recognize our share of Katapult’s income on a one-quarter lag. We recorded income of $1.7 million for the three months ended June 30, 2021. As a result of the merger between Katapult and FinServ, which closed during the second quarter of 2021, we recorded an additional gain of $135.4 million for the three months ended June 30, 2021, which represents cash we received, net of the basis of our investment in Katapult.

U.S. Segment Results - For the Six Months Ended June 30, 2021 and 2020

U.S. revenues decreased $103.8 million, or 28.9%, compared to the prior-year period for the six months ended June 30, 2021, as a result of decreases in combined gross loans receivable from COVID-19 impacts and the continued run-off of California Installment loans due to regulatory changes. Excluding the aforementioned impact of California Installment and Virginia Revolving LOC loan runoff, U.S. revenues decreased $61.1 million, or 20.7%.

The provision for losses decreased $67.9 million, or 53.2%, for the six months ended June 30, 2021, compared to the prior-year period, primarily as a result of (i) relative sequential change in loan balances, (ii) favorable adjustments to allowance coverage from continued improved credit quality, and (iii) improved NCO rates year over year.
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Non-advertising costs of providing services for the six months ended June 30, 2021 were $64.0 million, a decrease of $6.9 million, or 9.7%, compared to $70.9 million for the six months ended June 30, 2020. The decrease was primarily driven by lower collection costs resulting from stimulus-related pay-downs and lower variable costs as a result of lower demand, partially offset by higher performance-based variable compensation.

Advertising costs were $13.2 million for the six months ended June 30, 2021, a decrease of $3.0 million, or 18.4%, compared to the prior-year period as the full effect of COVID-19 did not impact our advertising spend until the second quarter of 2020.

Corporate, district and other expenses were $84.3 million for the six months ended June 30, 2021, an increase of $17.0 million, or 25.3%, compared to the six months ended June 30, 2020. For the six months ended June 30, 2021, as described in our Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA, Non-GAAP Measures above, corporate, district and other costs included (i) $6.3 million of transaction costs (ii) $6.2 million of share-based compensation costs, and (iii) $5.8 million of restructuring costs. For the six months ended June 30, 2020, corporate, district and other expenses included (i) $1.8 million of legal and other costs and (ii) share-based compensation costs of $6.5 million. Excluding these items, comparable corporate, district and other expenses increased $7.0 million year over year, primarily due to the timing and level of performance-based variable compensation, partially offset by certain cost reductions, including work-from-home initiatives, to manage COVID-19 Impacts for the six months ended June 30, 2021.

As previously described, we recognize our share of Katapult’s income on a one-quarter lag and recorded income of $2.3 million for the six months ended June 30, 2021. As a result of the merger between Katapult and FinServ, which closed during the second quarter of 2021, we recorded an additional gain of $135.4 million as of June 30, 2021, which represents cash we received, net of the basis of our investment in Katapult.

U.S. interest expense for the six months ended June 30, 2021 increased $2.7 million, or 8.8%, as a result of higher borrowings year-over-year, including the new Non-Recourse U.S. SPV Facility, which we entered into in April 2020.

Canada Direct Lending and Canada POS Lending Portfolio Performance

(in thousands, except percentages)Q2 2021Q1 2021Q4 2020Q3 2020Q2 2020
Gross loans receivable
Canada Direct Lending Revolving LOC$ 337,700$ 319,307$ 303,323$ 265,507$ 231,917
Canada Direct Lending Installment loans 23,56424,38526,94826,63924,861
Total Canada Direct Lending gross loans receivable$ 361,264$ 343,692$ 330,271$ 292,146$ 256,778
Total Canada POS Lending gross loans receivable$ 221,500$ 201$ —$ —$ —
Lending Revenue:
Canada Direct Lending Revolving LOC$ 37,450$ 34,368$ 31,962$ 28,280$ 25,819
Canada Direct Lending Installment loans 10,54110,44711,10610,2389,701
Total Canada Direct Lending - lending revenue$ 47,991$ 44,815$ 43,068$ 38,518$ 35,520
Canada POS Lending - lending revenue$ 6,495$ 1,383$ —$ —$ —
Lending Provision:
Canada Direct Lending Revolving LOC$ 7,066$ 7,909$ 8,679$ 9,751$ 9,357
Canada Direct Lending Installment loans1,4381,2341,9721,426(263)
Total Canada Direct Lending - lending provision$ 8,504$ 9,143$ 10,651$ 11,177$ 9,094
Canada POS Lending - lending provision$ 2,986$ 855$ —$ —$ —
Lending Net Revenue
Canada Direct Lending Revolving LOC$ 30,384$ 26,459$ 23,283$ 18,529$ 16,462
Canada Direct Lending Installment loans9,1039,2139,1348,8129,964
Total Canada Direct Lending - lending net revenue$ 39,487$ 35,672$ 32,417$ 27,341$ 26,426
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(in thousands, except percentages)Q2 2021Q1 2021Q4 2020Q3 2020Q2 2020
Canada POS Lending - lending net revenue$ 3,509$ 528$ —$ —$ —
NCOs
Canada Direct Lending Revolving LOC$ 10,838$ 11,097$ 8,907$ 7,568$ 11,594
Canada Direct Lending Installment loans1,5131,6692,0601,2891,393
Total Canada Direct Lending NCOs$ 12,351$ 12,766$ 10,967$ 8,857$ 12,987
Canada POS Lending NCOs (1)
$ 1,509$ 213$ —$ —$ —
NCO rate (2)
Canada Direct Lending Revolving LOC3.3%3.6%3.1%3.0%4.9%
Canada Direct Lending Installment loans6.3%6.5%7.7%5.0%4.6%
Total Canada Direct Lending NCO rate3.5%3.8%3.5%3.2%4.9%
Canada POS Lending NCO rate0.7%
NM (3)
—%—%—%
ALL (4)
Canada Direct Lending Revolving LOC$ 26,602$ 29,916$ 32,773$ 31,316$ 28,526
Canada Direct Lending Installment loans1,7671,8192,2332,2042,024
Total Canada Direct Lending ALL$ 28,369$ 31,735$ 35,006$ 33,520$ 30,550
Canada POS Lending ALL (5)
$ 4,577$ 519$ —$ —$ —
ALL rate (6)
Canada Direct Lending Revolving LOC7.9 %9.4 %10.8 %11.8 %12.3 %
Canada Direct Lending Installment loans7.5 %7.5 %8.3 %8.3 %8.1 %
Total Canada Direct Lending ALL rate7.9 %9.2 %10.6 %11.5 %11.9 %
Canada POS Lending ALL rate2.1 %0.3 %— %— %— %
Past-due rate (6)
Canada Direct Lending Revolving LOC5.8 %6.4 %6.8 %6.0 %7.3 %
Canada Direct Lending Installment loans2.3 %2.1 %2.1 %2.9 %3.7 %
Total Canada Direct Lending past-due rate5.5 %6.1 %6.4 %5.7 %7.0 %
Canada POS Lending past-due rate5.4 %5.7 %— %— %— %
(1) For the second quarter of 2021, NCO's presented above include $2.4 million of NCO's related to the fair value discount, which are excluded from provision.
(2) We calculate NCO rate as total NCOs divided by Average gross loans receivables.
(3) Not material or not meaningful.
(4) We report ALL as a contra-asset reducing gross loans receivable on the Condensed Consolidated Balance Sheets.
(5) Loans originated pre-acquisition have been adjusted to fair value at the acquisition date and included estimates of future losses. The ALL represents estimated incurred losses for loans originated after acquisition plus incurred losses for acquired loans in excess of the remaining fair value discount.
(6) We calculate ALL rate and past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.

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Canada Direct Lending Net Revenue

Canada Direct Lending revenue increased year over year by $16.7 million, or 36.9%, ($9.6 million, or 21.4%, on a constant-currency basis), for the three months ended June 30, 2021, due to the continued popularity and growth of Revolving LOC loans in Canada. Sequentially, Canada Direct Lending revenue increased $3.4 million, or 5.9%, driven by increases in Revolving LOC and ancillary revenue, partially offset by a decrease in Installment revenue.

The provision for losses decreased $0.6 million, or 6.6% ($1.6 million, or 17.1%, on a constant-currency basis), to $8.6 million for the three months ended June 30, 2021, compared to $9.2 million in the prior-year period. The decrease in provision for loan losses was the result of lower NCOs and the related impact of changes in allowance coverage due to improved credit quality for Revolving LOC loans. As of June 30, 2021, allowance coverage decreased sequentially by 140 basis points, or 15.0%. On a quarterly basis, NCO rates improved approximately 140 bps, or 28.1%, year over year.

Canada Direct Lending Revolving LOC loan performance

Canada Direct Lending Revolving LOC gross loans receivable increased $105.8 million, or 45.6% ($75.1 million, or 32.4%, on a constant-currency basis) year over year and $18.4 million, or 5.8% ($14.0 million, or 4.4%, on a constant-currency basis) sequentially. Revolving LOC revenue increased $11.6 million, or 45.0%, year over year and $3.1 million, or 9.0%, sequentially ($7.4 million, or 28.5%, and $2.0 million, or 5.7%, respectively, on a constant-currency basis). The allowance coverage decreased year over year from 12.3% to 7.9% as of June 30, 2021 due to sustained favorable trends in NCOs and continued lower past-due balances as a percentage of total gross loans receivable. The year-over-year NCO rate and past-due rate for Revolving LOC gross loans receivable improved by 160 bps and 155 bps, respectively.

Canada Direct Lending Installment loan performance

Canada Direct Lending Installment revenue increased $0.8 million, or 8.7%, (and decreased $0.4 million, or 3.7%, on a constant-currency basis) year over year. Installment gross loans receivable decreased $1.3 million, or 5.2% ($3.4 million, or 13.8%, on a constant-currency basis) year over year. The decreases in Installment loans and related revenue were due to a continued shift to Revolving LOC loans, as well as COVID-19 related constraints on demand, particularly as related to store-driven Installment loans. The Installment allowance coverage decreased year over year from 8.1% to 7.5% as a result of favorable trends in past-due balances. The year-over-year past-due rate for Installment loans improved by 145 bps. Sequentially, Installment gross loans receivable decreased $0.8 million, or 3.4%, ($1.1 million, or 4.6%, on a constant-currency basis) and related revenue increased $0.1 million, or 0.9% (and decreased $0.2 million, or 1.9%, on a constant-currency basis).

Canada POS Lending Revolving LOC loan performance

Canada POS Lending Revolving LOC gross loans receivable as of June 30, 2021 was $221.5 million, including a discount of $8.9 million related to purchase accounting adjustments ($230.4 million prior to purchase accounting adjustments). For the three months ended June 30, 2021, Canada POS Lending revenue was $7.0 million, which included a $4.0 million reduction as a result of acquisition-related adjustments for the period. For a full discussion of the purchase accounting and acquisition-related adjustments, refer to "Consolidated Revenue by Product and Segment" above. Revolving LOC gross loans receivable generally charge-off at 180 days past due. NCOs were $1.5 million for the three months ended June 30, 2021. The Canada Lending NCO and past-due rates for the quarter were 0.7% and 5.4%, respectively.

Originations for the three months ended June 30, 2021 were C$103.9 million, an increase of C$56.2 million, or 117.8%, from the prior-year period of C$47.7 million. Sequentially, Canada POS Revolving LOC gross loans receivable increased $19.9 million, or 9.9%.

53


Canada Direct Lending Results of Operations

Three Months Ended June 30,Six Months Ended June 30,
(dollars in thousands, unaudited)20212020Change $Change %20212020Change $Change %
Revenue$ 61,880 $ 45,189 $ 16,691 36.9 %$ 120,320 $ 104,227 $ 16,093 15.4 %
Provision for losses8,556 9,163 (607)(6.6)%17,790 36,658 (18,868)(51.5)%
Net revenue53,324 36,026 17,298 48.0 %102,530 67,569 34,961 51.7 %
Advertising778 481 297 61.7 %1,682 1,755 (73)(4.2)%
Non-advertising costs of providing services18,683 15,906 2,777 17.5 %36,765 34,016 2,749 8.1 %
Total cost of providing services19,461 16,387 3,074 18.8 %38,447 35,771 2,676 7.5 %
Gross margin33,863 19,639 14,224 72.4 %64,083 31,798 32,285 #
Corporate, district and other expenses6,022 7,150 (1,128)(15.8)%11,640 12,307 (667)(5.4)%
Interest expense2,498 2,198 300 13.6 %4,853 4,676 177 3.8 %
Total operating expense8,520 9,348 (828)(8.9)%16,493 16,983 (490)(2.9)%
Segment operating income25,343 10,291 15,052 #47,590 14,815 32,775 #
Interest expense2,498 2,198 300 13.6 %4,853 4,676 177 3.8 %
Depreciation and amortization1,144 1,108 36 3.2 %2,270 2,268 2 0.1 %
EBITDA (1)
28,985 13,597 15,388 #54,713 21,759 32,954 #
Canada GST adjustment— 2,160 (2,160)— 2,160 (2,160)
Other adjustments107 281 (174)148 437 (289)
Adjusted EBITDA (1)
$ 29,092 $ 16,038 $ 13,054 81.4 %$ 54,861 $ 24,356 $ 30,505 125.2 %
# - Variance greater than 100% or not meaningful.
(1) These are non-GAAP metrics. For a description of each non-GAAP addback, see the applicable reconciliations contained under "Results of Consolidated Operations." For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."

Canada Direct Lending Segment Results - For the Three Months Ended June 30, 2021 and 2020
For a discussion of revenue, provision for losses and related gross combined loans receivables, see "Canada Direct Lending Portfolio Performance," above.
Canada Direct Lending cost of providing services were $19.5 million for the three months ended June 30, 2021, an increase of $3.1 million, or 18.8% ($0.9 million or 5.2%, on a constant currency basis), compared to the prior year, primarily due to timing and level of performance-based variable compensation and higher store operating costs.

Canada Direct Lending operating expenses decreased to $8.5 million for the three months ended June 30, 2021 compared to $9.3 million for the three months ended June 30, 2020.

Canada Direct Lending Segment Results - For the Six Months Ended June 30, 2021 and 2020

Canada Direct Lending revenue increased $16.1 million, or 15.4% ($5.8 million, or 5.6%, on a constant currency basis), to $120.3 million for the six months ended June 30, 2021, from $ 104.2 million in the prior year, primarily due to higher consumer demand as COVID-19 Impacts lessen. Canada Direct Lending Revolving LOC gross loans receivable grew $105.8 million, or 45.6%, year over year, contributing to related revenue growth of $17.0 million, or 31.0% for the six months ended June 30, 2021 compared to the prior-year period.

The provision for losses decreased $18.9 million, or 51.5% ($20.3 million, or 55.4% on a constant currency basis), to $17.8 million for the six months ended June 30, 2021, compared to $36.7 million in the prior-year period. The decrease in provision for loan losses was the result of lower NCOs and the related impact of changes in allowance coverage due to an increase in credit quality for Revolving LOC loans. Refer to "Canada Direct Lending and Canada POS Lending Portfolio Performance," above for additional details on quarterly loss and allowance rates.

Canada Direct Lending cost of providing services for the six months ended June 30, 2021 were $38.4 million, an increase of $2.7 million, or 7.5% ($0.6 million, or 1.7%, on a constant-currency basis), compared to $35.8 million for the six months ended June 30, 2020, primarily related to volume-driven variable costs, such as underwriting data and financial services fees and higher store operating costs for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

54


Canada Direct Lending operating expenses for the six months ended June 30, 2021 were $16.5 million for the six months ended June 30, 2021 compared to $17.0 million for the six months ended June 30, 2020.

Canada POS Lending Results of Operations
Three Months Ended June 30,Six Months Ended June 30,
(dollars in thousands, unaudited)20212021
Revenue$ 7,019 $ 8,638 
Provision for losses2,987 3,842 
Net revenue4,032 4,796 
Advertising176 215 
Non-advertising costs of providing services314 387 
Total cost of providing services490 602 
Gross margin3,542 4,194 
Corporate, district and other expenses9,869 12,494 
Interest expense3,604 4,430 
Total operating expense13,473 16,924 
Segment operating loss(9,931)(12,730)
Interest expense3,604 4,430 
Depreciation and amortization3,283 3,996 
EBITDA (1)
(3,044)(4,304)
Acquisition accounting adjustment5,495 5,495 
Other adjustments(17)(17)
Adjusted EBITDA (1)
$ 2,434 $ 1,174 
# - Variance greater than 100% or not meaningful.
(1) These are non-GAAP metrics. For a description of each non-GAAP addback, see the applicable reconciliations contained under "Consolidated Results of Operations." For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."

Canada POS Lending Segment Results - For the Three and Six Months Ended June 30, 2021

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

For the six months ended June 30, 2021, Canada POS Lending revenues were $8.6 million and included a $4.0 million reduction as a result of acquisition-related adjustments. For a full discussion of acquisition-related adjustments, refer to "Consolidated Revenue by Product and Segment" above.

Provision for losses for the six months ended June 30, 2021 was $3.8 million. Refer to "Canada Direct Lending and Canada POS Lending Portfolio Performance," above for additional details on quarterly loss and allowance rates.

Supplemental Non-GAAP Financial Information

Non-GAAP Financial Measures

In addition to the financial information prepared in conformity with U.S. GAAP, we provide certain “non-GAAP financial measures,” including:
•Adjusted Net Income and Adjusted Earnings Per Share, or the Adjusted Earnings Measures (net income from continuing operations plus or minus certain legal and other costs, income or loss from equity method investment, goodwill and intangible asset impairments, transaction-related costs, restructuring costs, adjustments related to acquisition accounting, share-based compensation, certain intangible asset amortization, certain tax adjustments and impacts from tax law changes and cumulative tax effect of applicable adjustments, on a total and per share basis);
•EBITDA (earnings before interest, income taxes, depreciation and amortization);
•Adjusted EBITDA (EBITDA plus or minus certain non-cash and other adjusting items);
55


•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 the Consolidated Financial Statements).

We believe that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of the Company's operations. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of the business that, when viewed with the Company's U.S. GAAP results, provide a more complete understanding of factors and trends affecting the 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 U.S. GAAP. In addition, we believe that the adjustments shown above are useful to investors in order to allow them to compare our financial results during the periods shown without the effect of each of these income or expense items. In addition, we believe that Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of public companies in our industry, many of which present Adjusted Net Income, Adjusted Earnings per Share, EBITDA and/or Adjusted EBITDA when reporting their results.

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

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

Description and Reconciliations of Non-GAAP Financial Measures
Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA Measures have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our income or cash flows as reported under U.S. GAAP. Some of these limitations are:
•they do not include 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 the Company records a loss from continuing operations under U.S. GAAP, shares outstanding utilized to calculate Diluted Earnings per Share from continuing operations are equivalent to basic shares outstanding. Shares outstanding utilized to calculate Adjusted Earnings per Share from continuing operations reflect the number of diluted shares the Company would have reported if reporting net income from continuing operations under U.S. GAAP.

As noted above, Gross Combined Loans Receivable includes loans originated by third-party lenders through CSO programs which are not included in the consolidated financial statements but from which we earn revenue 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 to 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 release may differ from the computation of similarly-titled measures provided by other companies.

56


Reconciliation of Net Income from Continuing Operations and Diluted Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings per Share, non-GAAP measures (in thousands, except per share data, unaudited)
Three Months Ended
June 30,		Six Months Ended
June 30,
20212020Change $Change %20212020Change $Change %
Net income from continuing operations$ 104,517 $ 21,080 $ 83,437 #$ 130,252 $ 57,093 $ 73,159 #
Adjustments:
Restructuring costs (1)
5,763 — 5,763 — 
Legal and other costs (2)
— 847 — 1,750 
(Income) loss from equity method investment (3)
(1,712)(741)(2,258)877 
Gain from equity method investment (4)
(135,387)— (135,387)— 
Transaction costs (5)
3,181 91 6,341 337 
Acquisition-related adjustments (6)
5,495 — 5,495 — 
Share-based compensation (7)
3,467 3,310 6,150 6,504 
Intangible asset amortization (8)
1,866 759 2,697 1,496 
Canada GST adjustment (9)
— 2,160 — 2,160 
Income tax valuations (10)
— (3,472)— (3,472)
Impact of tax law changes (11)
— — — (9,114)
Cumulative tax effect of adjustments (12)
30,204 (1,864)28,469 (3,185)
Adjusted Net Income$ 17,394 $ 22,170 ($ 4,776)(22)%$ 47,522 $ 54,446 ($ 6,924)(13)%
Net income from continuing operations$ 104,517 $ 21,080 $ 130,252 $ 57,093 
Diluted Weighted Average Shares Outstanding43,672 41,545 43,556 41,686 
Diluted Earnings per Share from continuing operations$ 2.39 $ 0.51 $ 1.88 #$ 2.99 $ 1.37 $ 1.62 #
Per Share impact of adjustments to Net income from continuing operations(1.99)0.02 (1.90)(0.06)
Adjusted Diluted Earnings per Share$ 0.40 $ 0.53 ($ 0.13)(24.5)%$ 1.09 $ 1.31 ($ 0.22)(16.8)%
Note: Footnotes follow Reconciliation of Net income table on the next page

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Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA, non-GAAP measures (in thousands, except per share data, unaudited)
Three Months Ended
June 30,		Six Months Ended
June 30,
(in thousands, unaudited)20212020Change $Change %20212020Change $Change %
Net income from continuing operations$ 104,517$ 21,080$ 83,437 #$ 130,252$ 57,093$ 73,159 #
Provision for income taxes34,1721,06833,104 #42,6163,00539,611 #
Interest expense23,44018,3115,129 28.0 %42,97935,6357,344 20.6 %
Depreciation and amortization7,4354,4173,018 68.3 %12,4008,9543,446 38.5 %
EBITDA169,56444,876124,688 #228,247104,687123,560 #
Restructuring costs (1)
5,763—5,763—
Legal and other costs (2)
—847—1,750
(Income) loss from equity method investment (3)
(1,712)(741)(2,258)877
Gain from equity method investment (4)
(135,387)—(135,387)—
Transaction costs (5)
3,181916,341337
Acquisition-related adjustments (6)
5,495—5,495—
Share-based compensation (7)
3,4673,3106,1506,504
Canada GST adjustment (9)
—2,160—2,160
Other adjustments (13)
(69)586(274)601
Adjusted EBITDA$ 50,302$ 51,129($ 827)(1.6)%$ 114,077$ 116,916($ 2,839)(2.4)%
Adjusted EBITDA Margin26.8 %28.0 %29.7 %25.2 %
# - Change greater than 100% or not meaningful

(1)Restructuring costs for the three and six months ended June 30, 2021 resulted from U.S. store closures and consisted of (i) severance costs for store employees, (ii) lease termination costs, and (iii) accelerated depreciation, partially offset by the net write-off of ROU assets and lease liabilities.
(2)Legal and other costs for the six months ended June 30, 2020 included (i) settlement costs related to certain legal matters (ii) costs for certain securities litigation and related matters and (iii) severance costs for certain corporate employees.
(3)
The amount reported is our share of the estimated U.S. GAAP net (income) loss of Katapult.
(4)
During the three months ended June 30, 2021, we recorded an additional gain on our investment in Katapult of $135.4 million. The gain represents cash we received, net of the basis of our investment in Katapult, upon the completion of the business combination between Katapult and FinServ. Refer to "Katapult Update for the Three and Six Months Ended June 30, 2021 and 2020" for additional details.
(5)
Transaction costs for the six months ended June 30, 2021 relate to Katapult and FinServ business combination and the Flexiti acquisition.

Transaction costs for the six months ended June 30, 2020 relate to the acquisition of Ad Astra.
(6)Acquisition-related adjustments for the six months ended June 30, 2021 relate to the acquired Flexiti loan portfolio as of March 10, 2021. Refer to "Consolidated Revenue by Product and Segment" for additional details.
(7)The estimated fair value of share-based awards is recognized as non-cash compensation expense on a straight-line basis over the vesting period.
(8)The intangible asset amortization primarily includes amortization of identifiable intangible assets established in connection with the acquisition of Flexiti.
(9)
We received a Notice of Adjustment from Canadian tax authority auditors in the second quarter 2020 related to the treatment of certain expenses in prior years for purposes of calculating the GST due.
(10)
In the second quarter of 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, which was settled in April 2021. Also in the second quarter of 2020, we released a $4.6 million valuation allowance related to NOLs for certain entities in Canada.
(11)On March 27, 2020, the CARES Act was enacted by the U.S. Federal government in response to the COVID-19 pandemic. The CARES Act, among other things, allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. For the six months ended June 30, 2020, we recorded an income tax benefit of $9.1 million related to the carryback of NOL from tax years 2018 and 2019.
(12)
Cumulative tax effect of adjustments included in Reconciliation of Net income from continuing operations Adjusted Net Income table is calculated using the estimated incremental tax rate by country.
(13)Other adjustments primarily include the intercompany foreign-currency exchange impact.

58


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.

Constant Currency Analysis

We have operations in the U.S. and Canada. In the three months ended June 30, 2021 and 2020, 36.7% and 24.8%, respectively, of our revenues from continuing operations were originated in Canadian Dollars. For the six months ended June 30, 2021 and 2020, 33.6% and 22.5%, 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 June 30,Six Months Ended June 30,
20212020$ Change% Change20212020$ Change% Change
Average Exchange Rates for the Canadian Dollar0.8141 0.7215 0.0926 12.8 %$0.8019 $0.7335 $0.0684 9.3 %

Balance Sheet - Exchange Rate as of June 30, 2021 and December 31, 2020
June 30,December 31,Change
20212020$%
Exchange Rate for the Canadian Dollar0.8042 0.7863 0.0179 2.3 %

The following constant currency analysis removes the impact of the fluctuation in foreign exchange rates and utilizes constant currency results in our analysis of the Canada Direct Lending segment performance. The constant currency impact on our Canada POS Lending segment was not material as we acquired it on March 10, 2021. 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.

For our Canada Direct Lending segment, we calculated the revenues and gross margin below during the three and six months ended June 30, 2021 using the actual average exchange rate during the three and six months ended June 30, 2020 (in thousands, unaudited).
Three Months Ended June 30,Six Months Ended June 30,
20212020$ Change% Change20212020$ Change% Change
Canada Direct Lending – constant currency basis:
Revenues$54,838 $45,189 $9,649 21.4 %$110,027 $104,227 $5,800 5.6 %
Gross Margin29,993 19,639 10,354 52.7 %58,524 31,798 26,726 84.0 %

We calculated gross loans receivable below as of June 30, 2021 using the actual exchange rate as of December 31, 2020 (in thousands, unaudited).
June 30,December 31,Change
20212020$%
Canada Direct Lending – constant currency basis:
Gross loans receivable$353,196 $330,271 $22,925 6.9 %

59


LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity to fund the loans we make to our customers are cash provided by operations, our Senior Revolver, Cash Money Revolving Credit Facility, Non-Recourse U.S. SPV Facility, Non-Recourse Canada SPV Facility, Non-Recourse Flexiti SPE Facility, and funds from third-party lenders under our CSO programs. Additionally, in August 2018, we issued $690.0 million 8.25% Senior Secured Notes due September 2025, which as described below we plan to redeem with proceeds of a larger Notes issuance upon its expected closing on July 30, 2021.

As of June 30, 2021, we were in compliance with all financial ratios, covenants and other requirements 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. We may also use cash for potential strategic investments in and acquisitions of other companies that help us extend our reach and product portfolio. Additionally, we may use cash to fund a return on capital for our stockholders through share repurchase programs, or in the form of dividends. In the first quarter of 2021, our Board of Directors increased the quarterly dividend to $0.11 per share, an increase of 100%. Additionally, in May 2021 our Board of Directors authorized a new share repurchase program for up to $50.0 million of our common stock. Refer to Note 17, "Share Repurchase Program" of the Notes to the unaudited Condensed Consolidated Financial Statements for further details of the program.

Our level of cash flow provided by operating activities typically experiences, in normal times, 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 to the extent we experience any short-term or long-term funding shortfalls, such as tightening our credit approval practices (as we did during the COVID-19 pandemic), which has the effect of reducing cash outflow requirements while increasing cash inflows through loan repayments.

We may also sell or securitize our assets, draw on our available revolving credit facility or line of credit, enter into additional refinancing agreements or reduce our capital spending to generate additional liquidity. Our cash on hand and total liquidity remains at elevated levels as of June 30, 2021 due to a number of factors, including (i) a one-time cash inflow of $146.9 million from the monetization of a significant portion of our investment in Katapult, (ii) lower consumer demand and increased or accelerated repayments as customers benefited from COVID-19-related government stimulus programs, (iii) favorable credit performance, and (iv) the runoff of California Installment and Virginia Revolving LOC loans following regulatory changes, partially offset by our use of cash of the acquisition of Flexiti. These factors resulted in our available cash on hand of $276.4 million and our total liquidity of $435.2 million as of June 30, 2021. We believe our cash on hand and available borrowings provide us with sufficient liquidity for at least the next 12 months.

Our recent acquisition of Flexiti, which closed on March 10, 2021, has increased our product offerings to include customers in the prime space. The acquisition also allows us to tailor our current product structure to Flexiti's POS model, potentially expanding to sub-prime customers. These initiatives to expand our product offerings and grow the Flexiti line of business can materially impact our future cash flows. For further information regarding the Flexiti acquisition, refer to Note 1, "Summary of Significant Accounting Policies and Nature of Operations," Note 15, "Goodwill," and Note 16, "Acquisitions" of the Notes to the unaudited Condensed Consolidated Financial Statements.

As previously described, our offering of 7.50% Senior Secured Notes, due 2028, for $750 million aggregate principal amount, is expected to close on July 30, 2021. Refer to "Recent Developments" for additional details. We have no additional material commitments or demands that are likely to affect our liquidity.

60


Debt Capitalization Summary
(in thousands, net of deferred financing costs)
CapacityInterest RateMaturityCounter-partiesBalance as of June 30, 2021 (in USD)
Non-Recourse Canada SPV Facility (1)
C$175.0 million3-Mo CDOR + 6.75%September 2, 2023Waterfall Asset Management$ 98,881 
Senior Secured Revolving Credit Facility$50.0 million1-Mo LIBOR + 5.00%June 30, 2022BayCoast Bank; Stride Bank; Hancock-Whitney Bank; Metropolitan Commercial Bank— 
Non-Recourse U.S. SPV Facility$200.0 million
1-Mo LIBOR + 6.25%(2)
April 8, 2024Atalaya Capital Management, MetaBank44,489 
Non-Recourse Flexiti SPE Facility (1)(3)
C$500.0 million3-Mo CDOR + 4.40%March 10, 2024Credit Suisse (Class A); SPF (Class B)194,864 
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) (4)
$690.0 million8.25%September 1, 2025680,893 
(1) Capacity amounts are denominated in Canadian dollars, while outstanding balances as of June 30, 2021 are denominated in U.S. dollars.
(2) The Non-Recourse U.S. SPV Facility initially provided for $100.0 million of borrowing capacity, which increased to $200.0 million on July 31, 2020 following additional commitments. As of June 30, 2021 interest accrues at an annual rate of one-month LIBOR (with a floor of 1.65%) plus 6.25%.
(3) The current Non-Recourse Flexiti SPE Facility was entered into concurrent with the Flexiti acquisition. Interest accrues at an annual rate of three-month CDOR plus 4.40%.
(4) On July 16, 2021, we announced the pricing of our $750 million aggregate principal amount of new 7.50% Senior Secured Notes, which will be used to redeem our $690.0 million 8.25% Senior Secured Notes upon the expected closing on July 30, 2021.

Refer to Note 5, "Debt," for details on each of our credit facilities and resources.

61


Cash Flows

The following highlights our cash flow activity and the sources and uses of funding during the periods indicated (in thousands):
Six Months Ended June 30,
20212020
Net cash provided by operating activities from continuing operations$162,895 $270,800 
Net cash used in investing activities from continuing operations(93,698)(50,963)
Net cash provided by financing activities from continuing operations8,088 2,123 

As previously described, year-over-year comparisons were impacted by COVID-19 Impacts and the runoff of California Installment loans from regulatory changes effective January 1, 2020.

Operating Activities from Continuing Operations

Net cash provided by operating activities from continuing operations for the six months ended June 30, 2021 was $162.9 million, attributable to net income from continuing operations of $130.3 million, the effect of non-cash reconciling items of $34.0 million, and changes in our operating assets and liabilities of $66.6 million. Our non-cash reconciling items of $34.0 million primarily included (i) $81.3 million of provision for loan losses, (ii) $12.4 million of depreciation and amortization, and (iii) a gain of $135.4 million related to our investment in Katapult. Our changes in operating assets and liabilities of $66.6 million were primarily related to a $30.5 million decline in accrued interest on our gross loans receivable due to overall volume decline and $29.9 million of lower income tax receivable as of June 30, 2021.

Investing Activities from Continuing Operations

Net cash used in investing activities from continuing operations for the six months ended June 30, 2021 was $93.7 million, primarily reflecting the acquisition of Flexiti for $91.2 million, net of cash received, and the net origination of loans of $142.2 million, partially offset by $146.9 million of cash we received as a result of the Katapult and FinServ merger. In addition, we used cash to purchase $7.2 million of property and equipment, an increase from last year due to Flexiti.

Financing Activities from Continuing Operations

Net cash used in financing activities from continuing operations for the six months ended June 30, 2021 was $8.1 million, primarily due to (i) cash dividends of $7.0 million, (ii) $1.7 million of payments to net share settle vesting of RSUs, and (iii) $1.3 million of share repurchases in the second quarter of 2021, partially offset by $17.8 million of net proceeds from our Non-Recourse Flexiti SPE Facility.

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 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)U.S. SPV, a wholly-owned, bankruptcy-remote special purpose subsidiary;
(iv)Canada SPV, a wholly-owned, bankruptcy-remote special purpose subsidiary;
(v)Flexiti SPE, a wholly-owned, bankruptcy-remote special purpose subsidiary, acquired in March 2021;
(vi)The Company's other subsidiaries on a consolidated basis, which are not guarantors of the 8.25% Senior Secured Notes (the “Subsidiary Non-Guarantors”);
(vii)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
(viii)The Company and its subsidiaries on a consolidated basis.

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

62


Condensed Consolidating Balance Sheets
June 30, 2021
(dollars in thousands)CUROSubsidiary
Guarantors		U.S. SPVCanada SPVFlexiti SPESubsidiary
Non-Guarantors		EliminationsCURO
Consolidated
Assets:
Cash and cash equivalents$— $209,964 $— $— $— $66,403 $— $276,367 
Restricted cash— 22,346 8,846 28,892 5,815 3,400 — 69,299 
Loans receivable, net— 99,126 52,469 278,333 216,876 54,563 — 701,367 
Income taxes receivable25,916 (24,447)— — — 706 — 2,175 
Prepaid expenses and other— 18,622 — (11)21 12,577 — 31,209 
Property and equipment, net— 28,399 — — — 22,771 — 51,170 
Investment in Katapult— 16,501 — — — — — 16,501 
Right of use asset - operating leases— 65,552 — — — 41,146 — 106,698 
Deferred tax assets13,757 (13,757)— — — 6,264 — 6,264 
Goodwill and Intangibles, net— 125,367 — — — 148,752 — 274,119 
Intercompany receivable— 274,280 — — — 97,676 (371,956)— 
Investment in subsidiaries350,422 — — — — — (350,422)— 
Other assets— 8,588 — — — 708 — 9,296 
Total assets$390,095 $830,541 $61,315 $307,214 $222,712 $454,966 $(722,378)$1,544,465 
Liabilities and Stockholders' equity (deficit):
Accounts payable and accrued liabilities$432 $42,056 $— $2,487 $3,591 $15,840 $— $64,406 
Deferred revenue— 3,196 84 25 — 7,089 — 10,394 
Lease liability - operating leases— 72,431 — — — 40,984 — 113,415 
Contingent consideration related to acquisition— — — — — 21,239 — 21,239 
Income taxes payable(63,954)63,954 — — — — — — 
Accrued interest18,975 1 700 735 — — — 20,411 
Liability for losses on CSO lender-owned consumer loans— 5,265 — — — — — 5,265 
Debt680,893 — 44,489 98,882 194,863 — — 1,019,127 
Intercompany payable— 94,845 (94,846)29,913 (21,759)363,803 (371,956)— 
Payable to CURO Holdings Corp.(523,046)523,046 — — — — — — 
Other long-term liabilities— 13,785 — — — 11 — 13,796 
Deferred tax liabilities10,093 (1,730)— (108)— 1,455 — 9,710 
Total liabilities
123,393 816,849 (49,573)131,934 176,695 450,421 (371,956)1,277,763 
Stockholders' equity (deficit)266,702 13,692 110,888 175,280 46,017 4,545 (350,422)266,702 
Total liabilities and stockholders' equity (deficit)$390,095 $830,541 $61,315 $307,214 $222,712 $454,966 $(722,378)$1,544,465 
63


December 31, 2020
(dollars in thousands)CUROSubsidiary
Guarantors		U.S. SPVCanada SPVSubsidiary
Non-Guarantors		EliminationsCURO
Consolidated
Assets:
Cash and cash equivalents$— $158,941 $— $— $54,402 $— $213,343 
Restricted cash— 19,181 2,665 29,329 3,590 — 54,765 
Loans receivable, net— 113,940 58,355 247,947 47,318 — 467,560 
Income taxes receivable55,460 (24,444)— — 1,046 — 32,062 
Prepaid expenses and other— 19,212 396 (8)8,394 — 27,994 
Property and equipment, net— 36,258 — — 23,491 — 59,749 
Investments in Katapult— 27,370 — — — — 27,370 
Right of use asset - operating leases— 73,744 — — 41,288 — 115,032 
Deferred tax asset13,757 (13,757)— — — — — 
Goodwill— 105,922 — — 30,169 — 136,091 
Other intangibles, net— 17,466 — — 22,959 — 40,425 
Intercompany receivable— 164,615 — — — (164,615)— 
Investment in subsidiaries192,011 — — — — (192,011)— 
Other assets— 7,898 — — 697 — 8,595 
Total assets$261,228 $706,346 $61,416 $277,268 $233,354 $(356,626)$1,182,986 
Liabilities and Stockholder's equity (deficit):
Accounts payable and accrued liabilities$14 $38,344 $— $34,055 $(22,789)$— $49,624 
Deferred revenue— 3,546 106 30 1,712 — 5,394 
Lease liability - operating leases— 81,435 — — 41,213 — 122,648 
Income taxes payable(15,916)15,916 — — — — — 
Accrued interest18,975 1 405 742 — — 20,123 
Liability for losses on CSO lender-owned consumer loans— 7,228 — — — — 7,228 
Debt680,000 — 43,585 96,076 — — 819,661 
Intercompany payable— 46,119 (46,119)30,737 133,878 (164,615)— 
Payable to CURO Group Holdings Corp. (563,585)563,585 — — — — — 
Other long-term liabilities— 15,276 — — 106 — 15,382 
Deferred tax liabilities9,835 — — (105)1,291 — 11,021 
Total liabilities
129,323 771,450 (2,023)161,535 155,411 (164,615)1,051,081 
Stockholders' equity (deficit)131,905 (65,104)63,439 115,733 77,943 (192,011)131,905 
Total liabilities and stockholders' equity (deficit)$261,228 $706,346 $61,416 $277,268 $233,354 $(356,626)$1,182,986 

64


Condensed Consolidating Statements of Operations
Three Months Ended June 30, 2021
(dollars in thousands)CUROSubsidiary
Guarantors		U.S. SPVCanada SPVFlexiti SPESubsidiary
Non-Guarantors		EliminationsCURO
Consolidated
Revenue$— $82,321 $36,473 $40,407 $5,627 $22,865 $— $187,693 
Provision for losses— 20,197 13,425 5,612 3,029 2,902 — 45,165 
Net revenue— 62,124 23,048 34,795 2,598 19,963 — 142,528 
Cost of providing services:
Salaries and benefits— 16,306 — — — 9,750 — 26,056 
Occupancy and office— 10,515 — — — 7,230 — 17,745 
Other costs of providing services— 5,016 — — — 2,017 — 7,033 
Advertising— 6,089 — — — 954 — 7,043 
Total cost of providing services— 37,926 — — — 19,951 — 57,877 
Gross margin— 24,198 23,048 34,795 2,598 12 — 84,651 
Operating expense (income):
Corporate, district and other expenses3,342 40,353 35 183 1,958 13,750 — 59,621 
Intercompany management fee— (5,388)— 1,413 — 3,975 — — 
Interest expense (income)14,685 150 2,503 2,526 3,598 (22)— 23,440 
Income from equity method investment— (1,712)— — — — — (1,712)
Gain from equity method investment— (135,387)— — — — — (135,387)
Intercompany interest (income) expense— (3,806)— 603 — 3,203 — — 
Total operating expense18,027 (105,790)2,538 4,725 5,556 20,906 — (54,038)
(Loss) income from continuing operations before income taxes(18,027)129,988 20,510 30,070 (2,958)(20,894)— 138,689 
(Benefit) provision for income taxes(4,619)37,104 — — — 1,687 — 34,172 
Net (loss) income from continuing operations(13,408)92,884 20,510 30,070 (2,958)(22,581)— 104,517 
Equity in net income (loss) of subsidiaries:
CURO$117,925 $— $— $— $— $— $(117,925)$— 
Guarantor Subsidiaries— 92,884 — — — — (92,884)— 
Non-Guarantor Subsidiaries— (22,581)— — — — 22,581 — 
U.S. SPV— 20,510 — — — — (20,510)— 
Canada SPV— 30,070 — — — — (30,070)— 
Flexiti SPE— (2,958)— — — — 2,958 — 
Net income (loss) attributable to CURO$104,517 $210,809 $20,510 $30,070 $(2,958)$(22,581)$(235,850)$104,517 
65


Three Months Ended June 30, 2020
(dollars in thousands)CUROSubsidiary
Guarantors		U.S. SPVCanada SPVSubsidiary
Non-Guarantors		EliminationsCURO
Consolidated
Revenue$— $97,485 $39,835 $30,372 $14,817 $— $182,509 
Provision for losses— 18,352 23,178 9,244 (81)— 50,693 
Net revenue— 79,133 16,657 21,128 14,898 — 131,816 
Cost of providing services:
Salaries and benefits— 16,663 — — 8,060 — 24,723 
Occupancy and office— 10,363 — — 6,480 — 16,843 
Other costs of providing services— 6,635 — — 1,366 — 8,001 
Advertising— 5,269 — — 481 — 5,750 
Total cost of providing services— 38,930 — — 16,387 — 55,317 
Gross margin— 40,203 16,657 21,128 (1,489)— 76,499 
Operating (income) expense:
Corporate, district and other expenses3,398 26,197 37 104 7,045 — 36,781 
Intercompany management fee— (3,345)— 645 2,700 — — 
Interest expense14,647 258 1,208 2,112 86 — 18,311 
Income from equity method investment— (741)— — — — (741)
Intercompany interest (income) expense— (1,442)— 533 909 — — 
Total operating expense18,045 20,927 1,245 3,394 10,740 — 54,351 
Income (loss) from continuing operations before income taxes(18,045)19,276 15,412 17,734 (12,229)— 22,148 
(Benefit) provision for income taxes(2,872)7,504 — — (3,564)— 1,068 
Net (loss) income from continuing operations(15,173)11,772 15,412 17,734 (8,665)— 21,080 
Net income on discontinued operations— — — — 993 — 993 
Net income (loss)(15,173)11,772 15,412 17,734 (7,672)— 22,073 
Equity in net income (loss) of subsidiaries:
CFTC37,246 — — — — (37,246)— 
Guarantor Subsidiaries— 11,772 — — — (11,772)— 
Non-Guarantor Subsidiaries— (7,672)— — — 7,672 — 
U.S. SPV— 15,412 — — — (15,412)— 
Canada SPV— 17,734 — — (17,734)— 
Net income (loss) attributable to CURO$22,073 $49,018 $15,412 $17,734 $(7,672)$(74,492)$22,073 
66


Six Months Ended June 30, 2021
(dollars in thousands)CUROSubsidiary
Guarantors		U.S. SPVCanada SPVFlexiti SPESubsidiary
Non-Guarantors		EliminationsCURO
Consolidated
Revenue$— $177,132 $78,154 $78,360 $7,009 $43,589 $— $384,244 
Provision for losses— 33,184 26,494 12,628 3,838 5,166 — 81,310 
Net revenue— 143,948 51,660 65,732 3,171 38,423 — 302,934 
Cost of providing services:
Salaries and benefits— 32,280 — — — 18,691 — 50,971 
Occupancy and office— 21,464 — — — 14,585 — 36,049 
Other costs of providing services— 10,248 — — — 3,876 — 14,124 
Advertising— 13,230 — — — 1,897 — 15,127 
Total cost of providing services— 77,222 — — — 39,049 — 116,271 
Gross margin— 66,726 51,660 65,732 3,171 (626)— 186,663 
Operating expense (income):
Corporate, district and other expenses6,041 78,202 84 286 2,381 21,467 — 108,461 
Intercompany management fee— (10,022)— 2,498 — 7,524 — — 
Interest expense29,356 210 4,130 4,956 4,422 (95)— 42,979 
Income from equity method investment— (2,258)— — — — — (2,258)
Gain from equity method investment— (135,387)— — — — — (135,387)
Intercompany interest (income) expense— (7,144)— 1,181 — 5,963 — — 
Total operating expense35,397 (76,399)4,214 8,921 6,803 34,859 — 13,795 
Income (loss) from continuing operations before income taxes(35,397)143,125 47,446 56,811 (3,632)(35,485)— 172,868 
(Benefit) provision for income taxes(9,005)46,905 — — — 4,716 — 42,616 
Net income (loss) from continuing operations(26,392)96,220 47,446 56,811 (3,632)(40,201)— 130,252 
Net income on discontinued operations— — — — — — — — 
Net income (loss) (26,392)96,220 47,446 56,811 (3,632)(40,201)— 130,252 
Equity in net income (loss) of subsidiaries:
CFTC156,644 — — — — — (156,644)— 
Guarantor Subsidiaries— 96,220 — — — — (96,220)— 
Non-Guarantor Subsidiaries— (40,201)— — — — 40,201 — 
U.S. SPV— 47,446 — — — — (47,446)— 
Canada SPV— 56,811 — — — — (56,811)— 
Canada SPV— (3,632)— — — — 3,632 — 
Net income (loss) attributable to CURO$130,252 $252,864 $47,446 $56,811 $(3,632)$(40,201)$(313,288)$130,252 

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Six months ended June 30, 2020
(dollars in thousands)CUROSubsidiary
Guarantors		U.S. SPVCanada SPVSubsidiary
Non-Guarantors		EliminationsCURO
Consolidated
Revenue$— $319,253 $39,835 $64,398 $39,829 $— $463,315 
Provision for losses— 104,393 23,178 28,976 7,682 — 164,229 
Net revenue— 214,860 16,657 35,422 32,147 — 299,086 
Cost of providing services:
Salaries and benefits— 33,575 — — 17,155 — 50,730 
Occupancy and office— 22,488 — — 14,045 — 36,533 
Other costs of providing services— 14,840 — — 2,816 — 17,656 
Advertising— 16,214 — — 1,755 — 17,969 
Total cost of providing services— 87,117 — — 35,771 — 122,888 
Gross margin— 127,743 16,657 35,422 (3,624)— 176,198 
Operating expense (income):
Corporate, district and other expenses6,791 60,453 37 278 12,029 — 79,588 
Intercompany management fee— (7,144)— 1,375 5,769 — — 
Interest expense29,284 467 1,208 4,733 (57)— 35,635 
Loss from equity method investment— 877 — — — — 877 
Intercompany interest (income) expense— (2,883)— 1,083 1,800 — — 
Total operating expense36,075 51,770 1,245 7,469 19,541 — 116,100 
Income (loss) from continuing operations before income taxes(36,075)75,973 15,412 27,953 (23,165)— 60,098 
(Benefit) provision for income taxes(26,119)32,502 — — (3,378)— 3,005 
Net (loss) income from continuing operations(9,956)43,471 15,412 27,953 (19,787)— 57,093 
Net income on discontinued operations— — — — 1,285 — 1,285 
Net (loss) income(9,956)43,471 15,412 27,953 (18,502)— 58,378 
Equity in net income (loss) of subsidiaries:
CFTC68,334 — — — — (68,334)— 
Guarantor Subsidiaries— 43,471 — — — (43,471)— 
Non-Guarantor Subsidiaries— (18,502)— — — 18,502 — 
U.S. SPV— 15,412 — — — (15,412)— 
Canada SPV— 27,953 — — — (27,953)— 
Net income (loss) attributable to CURO$58,378 $111,805 $15,412 $27,953 $(18,502)$(136,668)$58,378 


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Condensed Consolidating Statements of Cash Flows
Three Months Ended June 30, 2021
(dollars in thousands)CUROSubsidiary GuarantorsU.S. SPVCanada SPVFlexiti SPESubsidiary
Non-Guarantors		EliminationsCURO Consolidated
Cash flows from operating activities:
Net cash provided by continuing operating activities$2,962 $67,342 $30,608 $35,240 $209 $24,852 $1,682 $162,895 
Cash flows from investing activities:
Purchase of property, equipment and software$— $(4,129)$— $— $— $(3,040)$— $(7,169)
Originations of loans, net— (57,989)(24,427)(36,343)(12,116)(11,329)— (142,204)
Investments in Katapult— 146,878 — 146,878 
Acquisition of Flexiti, net of acquiree's cash received— (91,203)— — — — — (91,203)
Net cash provided by (used in) continuing investing activities$— $(6,443)$(24,427)$(36,343)$(12,116)$(14,369)$— $(93,698)
Cash flows from financing activities:
Proceeds from Non-Recourse Flexiti SPE facility$— $— $— $— $26,990 $— $— $26,990 
Payments on Non-Recourse Flexiti SPE facility— — — — (9,229)— — (9,229)
Proceeds from credit facilities— 20,000 — — — 934 — 20,934 
Payments on credit facilities— (20,000)— — — (934)— (20,934)
Payments to net share settle RSUs(1,711)— — — — — — (1,711)
Proceeds from exercise of stock options— 239 — — — — — 239 
Repurchase of common stock(1,251)— — — — — — (1,251)
Dividends paid to CURO Group Holdings Corp.6,950 (6,950)— — — — — — 
Dividends paid to stockholders(6,950)— — — — — — (6,950)
Net cash (used in) provided by financing activities$(2,962)$(6,711)$— $— $17,761 $— $— $8,088 
Effect of exchange rate changes on cash, cash equivalents and restricted cash$— $— $— $666 $(39)$1,328 $(1,682)$273 
Net increase in cash, cash equivalents and restricted cash— 54,188 6,181 (437)5,815 11,811 — 77,558 
Cash, cash equivalents and restricted cash at beginning of period— 178,122 2,665 29,329 — 57,992 — 268,108 
Cash, cash equivalents and restricted cash at end of period$— $232,310 $8,846 $28,892 $5,815 $69,803 $— $345,666 

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Six Months Ended June 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$6,546 $146,503 $41,569 $39,603 $38,099 $(1,520)$270,800 
Net cash provided by discontinued operating activities— — — — 1,714 — 1,714 
Cash flows from investing activities:
Purchase of property, equipment and software— (4,240)— — (484)— (4,724)
Originations of loans, net— 31,591 (56,789)(14,746)8,123 — (31,821)
Investments in Katapult— (14,418)— — — — (14,418)
Net cash used in continuing investing activities— 12,933 (56,789)(14,746)7,639 — (50,963)
Cash flows from financing activities:
Proceeds from Non-Recourse Canada SPV facility— — — 23,180 — — 23,180 
Payments on Non-Recourse Canada SPV facility— — — (41,812)— — (41,812)
Proceeds from Non-Recourse U.S. SPV facility— — 35,206 — — — 35,206 
Proceeds from credit facilities— 60,000 — — 9,778 — 69,778 
Payments on credit facilities— (60,000)— — (9,778)— (69,778)
Proceeds from exercise of stock options— 126 — — — — 126 
Payments to net share settle RSUs(638)— — — — — (638)
Debt issuance costs paid— — (3,531)— — — (3,531)
Repurchase of common stock(5,908)— — — — — (5,908)
Dividends paid to CURO Group Holdings Corp.4,500 (4,500)— — — — — 
Dividends paid to stockholders(4,500)— — — — — (4,500)
Net cash (used in) provided by financing activities (1)
(6,546)(4,374)31,675 (18,632)— — 2,123 
Effect of exchange rate changes on cash, cash equivalents and restricted cash— — — (859)(1,740)1,520 (1,079)
Net increase in cash, cash equivalents and restricted cash— 155,062 16,455 5,366 45,712 — 222,595 
Cash, cash equivalents and restricted cash at beginning of period— 59,685 — 17,427 32,909 — 110,021 
Cash, cash equivalents and restricted cash at end of period$— $214,747 $16,455 $22,793 $78,621 $— $332,616 
(1) Financing activities include continuing operations only and were not impacted by discontinued operations.

Contractual Obligations

There have been no significant developments with respect to our contractual obligations since December 31, 2020, as described in our 2020 Form 10-K, except for the acquired Non-Recourse Flexiti SPE Facility in March 2021. Refer to Note 5, "Debt" of the Notes to the unaudited Condensed Consolidated Financial Statements for additional details.

Refer to Note 19, Subsequent Events, for additional details on our new 7.50% Senior Secured Notes, expected to close July 30, 2021.

Critical Accounting Policies and Estimates

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

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

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

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

On March 10, 2021, the Company acquired 100% of the outstanding stock of Flexiti. The fair value of total consideration paid as part of the acquisition was comprised of $86.5 million in cash, $6.3 million in debt costs in conjunction with the acquisition and $20.6 million in contingent cash consideration subject to future operating metrics, including revenue less NCOs and originations. Net assets acquired were $68.5 million, resulting in goodwill of $39.9 million. During Q2 2021, the Company recorded $5.0 million of additional net assets acquired as of the acquisition date, as a measurement period adjustment, resulting in a $5.0 million decrease in goodwill.

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

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

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

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

The following table summarizes the segment allocation of recorded goodwill on our unaudited Condensed Consolidated Balance Sheets as of June 30, 2021:
(in thousands)June 30, 2021Percent of TotalDecember 31, 2020Percent of Total
U.S.$105,922 59.7 %$105,922 77.8 %
Canada Direct Lending30,858 17.4 %30,169 22.2 %
Canada POS Lending40,506 22.8 %— — %
Total Goodwill$177,286 $136,091 

Regulatory Environment and Compliance

There have been no significant developments with respect to our regulatory environment and compliance since December 31, 2020, as described in our 2020 Form 10-K, other than the following:

Subsequent to the California Supreme Court’s decision in De La Torre v. CashCall, Inc., a class action lawsuit was filed against Speedy Cash in the Southern District of California in August 2018. The complaint alleged that Speedy Cash charged unconscionable interest rates, in violation of consumer protection statutes, and sought restitution and public injunctive relief. Speedy Cash filed a motion to compel arbitration and stay proceedings in October 2018. The District Court denied the motion. On July 2, 2021, the California District Court granted the parties’ joint motion to dismiss and dismissed the case in its entirety with prejudice as to Plaintiffs’ individual claims and without prejudice as to the claims of the putative class members.


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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 2020 Form 10-K. There have been no material changes to the quantitative and qualitative information presented therein.

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 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.

In conducting the evaluation of the effectiveness of its internal control over financial reporting as of June 30, 2021, the Company has excluded the operations of Flexiti as permitted by the guidance issued by the Office of the Chief Accountant of the SEC (not to extend more than one year beyond the date of the acquisition or for more than one annual reporting period). The Flexiti acquisition was completed on March 10, 2021. As of and for the six months ended June 30, 2021, Flexiti's assets represented approximately 21% of the Company’s consolidated assets and its revenues represented approximately 2% of the Company’s consolidated revenues.

See Note 16, "Acquisitions" of the Notes to the unaudited Condensed Consolidated Financial Statements for additional details on the Company’s acquisition of Flexiti and its impact on the Company’s Condensed Consolidated Financial Statements.

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

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

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

PART II.     OTHER INFORMATION

Item 1.         Legal Proceedings
The information required by this item is included in Note 12, "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 our risk factors as described in our 2020 Form 10-K for the year ended December 31, 2020.

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

None.

Item 3.         Defaults Upon Senior Securities

None.

Item 4.         Mine Safety Disclosures

None.

Item 5.         Other Information

(a)    Disclosure of Unreported 8-K Information

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
3.110-Q10.18/5/2020
3.28-K3.212/11/17
4.1S-14.111/28/17
4.2S-14.211/28/17
4.3S-14.310/24/17
4.410-K4.43/9/20
10.1Filed herewith
10.2Filed herewith
10.3Filed herewith
31.1 Filed herewith
31.2 Filed herewith
32.1 Filed herewith
101
The following unaudited financial information from the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2021, filed with the SEC on July 28, 2021, formatted in Extensible Business Reporting Language (“XBRL”) includes: (i) Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020, 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 are of the type of information that the registrant both customarily and actually treats and private and confidential.




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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: July 28, 2021                CURO Group Holdings Corp.
By:/s/ Roger Dean
Roger Dean
Executive Vice President, Chief Financial Officer
and Acting Chief Accounting Officer
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