CURO Group Holdings Corp. - Quarter Report: 2019 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐ 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)



Delaware		90-0934597
(State or other jurisdiction Of incorporation or organization)		(I.R.S. Employer Identification No.)

3527 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 class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value per share	CURO	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐
Smaller reporting company	☒	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

At August 2, 2019 there were 45,267,762 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, 2019

INDEX



		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets –
	June 30, 2019 and December 31, 2018	3
	Condensed Consolidated Statements of Operations –
	Three and six months ended June 30, 2019 and 2018	4
	Condensed Consolidated Statements of Comprehensive Income –
	Three and six months ended June 30, 2019 and 2018	5
	Condensed Consolidated Statements of Cash Flows -
	Six months ended June 30, 2019 and 2018	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	64
Item 4.	Controls and Procedures	64
PART 2 – OTHER INFORMATION
Item 1.	Legal Proceedings	66
Item 1A.	Risk Factors	66
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 3.	Defaults Upon Senior Securities	67
Item 4.	Mine Safety Disclosures	68
Item 5.	Other Information	68
Item 6.	Exhibits	68

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, 2019			December 31, 2018
	(unaudited)			December 31, 2018
ASSETS
Cash	$	92,297		$	61,175
Restricted cash (includes restricted cash of consolidated VIEs of $14,819 and $12,840 as of June 30, 2019 and December 31, 2018, respectively)	33,712			25,439
Gross loans receivable (includes loans of consolidated VIEs of $215,309 and $148,876 as of June 30, 2019 and December 31, 2018, respectively)	609,593			571,531
Less: allowance for loan losses (includes allowance for losses of consolidated VIEs of $25,188 and $12,688 as of June 30, 2019 and December 31, 2018, respectively)	(101,877		)	(73,997		)
Loans receivable, net	507,716			497,534
Right of use asset - operating leases (Note 1)	140,982			—
Deferred income taxes	2,637			1,534
Income taxes receivable	37,579			16,741
Prepaid expenses and other	30,241			43,588
Property and equipment, net	72,993			76,750
Goodwill	120,450			119,281
Other intangibles, net of accumulated amortization	30,657			29,784
Other	16,091			12,930
Assets from discontinued operations (Note 15)	—			34,861
Total Assets	$	1,085,355		$	919,617
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities	$	59,274		$	49,146
Deferred revenue	8,712			9,483
Lease liability - operating leases (Note 1)	148,843			—
Income taxes payable	—			1,579
Accrued interest (includes accrued interest of consolidated VIEs of $713 and $831 as of June 30, 2019 and December 31, 2018, respectively)	19,690			20,904
Liability for losses on CSO lender-owned consumer loans	9,504			12,007
Deferred rent	—			10,851
Long-term debt (includes long-term debt and issuance costs of consolidated VIEs of $94,565 and $3,588 as of June 30, 2019 and $111,335 and $3,856 as of December 31, 2018, respectively)	768,512			804,140
Subordinated stockholder debt	—			2,196
Other long-term liabilities	8,594			5,800
Deferred tax liabilities	4,848			13,730
Liabilities from discontinued operations (Note 15)	—			8,882
Total Liabilities	1,027,977			938,718
Commitments and contingencies (Note 13)
Stockholders' Equity
Preferred stock - $0.001 par value, 25,000,000 shares authorized; no shares were issued at either period end	—			—
Common stock - $0.001 par value; 225,000,000 shares authorized; 46,499,482 and 46,412,231 shares issued as of June 30, 2019 and December 31, 2018, respectively; and 46,255,282 and 46,412,231 shares outstanding as of June 30, 2019 and December 31, 2018, respectively	9			9
Treasury stock, at cost - 244,200 shares as of June 30, 2019	(2,507		)	—
Paid-in capital	64,790			60,015
Retained earnings (accumulated deficit)	35,816			(18,065		)
Accumulated other comprehensive loss	(40,730		)	(61,060		)
Total Stockholders' Equity	57,378			(19,101		)
Total Liabilities and Stockholders' Equity	$	1,085,355		$	919,617

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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,
	2019			2018			2019		2018
Revenue	$	264,300		$	237,169		$	542,239	$	488,012
Provision for losses	112,010			86,347			214,395		163,230
Net revenue	152,290			150,822			327,844		324,782

Cost of providing services
Salaries and benefits	26,086			26,908			54,787		53,826
Occupancy	13,932			13,320			28,169		26,747
Office	5,457			5,532			10,570		11,985
Other costs of providing services	12,854			12,601			27,074		26,032
Advertising	12,780			15,113			20,566		22,998
Total cost of providing services	71,109			73,474			141,166		141,588
Gross margin	81,181			77,348			186,678		183,194

Operating expense
Corporate, district and other expenses	39,038			32,980			88,126		68,409
Interest expense	17,023			20,472			34,713		42,826
Loss on extinguishment of debt	—			—			—		11,683
Total operating expense	56,061			53,452			122,839		122,918
Income from continuing operations before income taxes	25,120			23,896			63,839		60,276
Provision for income taxes	7,453			5,178			17,499		16,645
Net income from continuing operations	17,667			18,718			46,340		43,631
Net (loss) income from discontinued operations, net of tax	(834		)	(2,743		)	7,541		(4,364		)
Net income	$	16,833		$	15,975		$	53,881	$	39,267

Weighted average common shares outstanding:
Basic	46,451			45,650			46,438		45,578
Diluted	47,107			47,996			47,335		47,757

Basic income (loss) per share:
Continuing operations	$	0.38		$	0.41		$	1.00	$	0.96
Discontinued operations	(0.02		)	(0.06		)	0.16		(0.10		)
Basic income per share	$	0.36		$	0.35		$	1.16	$	0.86

Diluted income (loss) per share:
Continuing operations	$	0.38		$	0.39		$	0.98	$	0.92
Discontinued operations	(0.02		)	(0.06		)	0.16		(0.10		)
Diluted income per share	$	0.36		$	0.33		$	1.14	$	0.82

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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,
	2019		2018			2019		2018
Net income	$	16,833	$	15,975		$	53,881	$	39,267
Other comprehensive income (loss):
Cash flow hedges, net of $0 tax in both periods	—		(439		)	—		(385		)
Foreign currency translation adjustment, net of $0 tax in both periods	3,635		(6,752		)	20,330		(9,663		)
Other comprehensive income (loss)	3,635		(7,191		)	20,330		(10,048		)
Comprehensive income	$	20,468	$	8,784		$	74,211	$	29,219

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(dollars in thousands, unaudited)



	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities
Net income from continuing operations	$	46,340		$	43,631
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Depreciation and amortization	9,571			9,005
Provision for loan losses	214,395			163,230
Amortization of debt issuance costs and bond (premium)/discount	1,568			2,117
Deferred income tax (benefit) expense	(3,596		)	3,199
Loss on disposal of property and equipment	1,834			517
Loss on extinguishment of debt	—			11,683
Increase in cash surrender value of life insurance	(991		)	(2,223		)
Share-based compensation expense	4,816			4,023
Changes in operating assets and liabilities:
Accrued fees and service charges on loans receivable	(1,171		)	2,928
Prepaid expenses and other assets	16,344			5,853
Other assets	(3,790		)	—
Accounts payable and accrued liabilities	9,527			(2,080		)
Deferred revenue	(915		)	(1,193		)
Income taxes payable	25,123			26,727
Income taxes receivable	(8,253		)	(18,436		)
Deferred rent	—			127
Accrued Interest	(1,247		)	(3,284		)
Other liabilities	2,764			909
Net cash provided by continuing operating activities	312,319			246,733
Net cash (used in) provided by discontinued operating activities	(504		)	5,458
Net cash provided by operating activities	311,815			252,191
Cash flows from investing activities
Purchase of property, equipment and software	(6,164		)	(2,957		)
Loans receivable originated or acquired	(879,081		)	(1,063,072		)
Loans receivable repaid	661,882			868,436
Investments in Cognical Holdings	(4,368		)	(958		)
Net cash used in continuing investing activities	(227,731		)	(198,551		)
Net cash used in discontinued investing activities	(14,213		)	(14,349		)
Net cash used in investing activities	(241,944		)	(212,900		)
Cash flows from financing activities
Net proceeds from issuance of common stock	—			12,431
Proceeds from Non-Recourse U.S. SPV facility	—			13,000
Payments on Non-Recourse U.S. SPV facility	—			(19,163		)
Proceeds from Non-Recourse Canada SPV facility	3,750			—
Payments on Non-Recourse Canada SPV facility	(24,752		)	—
Payments on 12.00% Senior Secured Notes	—			(77,500		)
Debt issuance costs paid	(198		)	(168		)
Proceeds from credit facilities	68,002			18,798
Payments on credit facilities	(88,002		)	(18,798		)
Payments on subordinated stockholder debt	(2,245		)	—
Payments of call premiums from early debt extinguishments	—			(9,300		)
Proceeds from exercise of stock options	27			39
Repurchase of common stock	(1,762		)	—
Net cash used in financing activities ⁽¹⁾	(45,180		)	(80,661		)

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(dollars in thousands, unaudited)



Effect of exchange rate changes on cash and restricted cash	1,461		(4,189		)
Net increase (decrease) in cash and restricted cash	26,152		(45,559		)
Cash and restricted cash at beginning of period	99,857		174,491
Cash and restricted cash at end of period	126,009		128,932
Less: Cash and restricted cash of discontinued operations at end of period	—		12,460
Cash and restricted cash of continuing operations at end of period	$	126,009	$	116,472
(1) Financing activities include continuing operations only, and were not impacted by discontinued operations

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS

Basis of Presentation

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

The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements ("Condensed Consolidated Financial Statements") in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), and with the accounting policies described in its Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission (the "SEC") on March 18, 2019 ("2018 Form 10-K"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with US 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, in September 2018, and subsequently expanded in June 2019, the SEC changed the definition of a smaller reporting company ("SRC"). The change in definition of an SRC would allow more registrants to qualify to report under scaled disclosure requirements. Under these rules, CURO meets the definition of an SRC as of June 30, 2019.

The Condensed Consolidated Financial Statements and the accompanying notes reflect all adjustments, 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. On February 25, 2019, the Company's United Kingdom ("U.K.") operations were placed into administration, which resulted in treatment of the segment as discontinued operations for all periods presented. Throughout this Quarterly Report on Form 10-Q ("Form 10-Q"), current and prior period financial information is presented as if the U.K. segment was excluded from continuing operations. For further information about the placement of the segment into administration, refer to "--Nature of Operations" below.

The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related Notes included in the 2018 Form 10-K. Interim results of operations are not necessarily indicative of results that may be expected for future interim periods or for the year ending December 31, 2019.

Principles of Consolidation

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

Equity Investment in Unconsolidated Entity

In April 2019, as part of a broader capital structure reorganization by the investee company, the Company made an additional $2.8 million cash investment in Cognical Holdings, which operates under the Zibby brand. See Note 8 - "Financial Instruments" for additional detail on the adjustment to fair value for the quarter ended June 30, 2019.

Use of Estimates

The preparation of Condensed Consolidated Financial Statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the periods reported. Some of the significant estimates that the Company made in the accompanying Condensed Consolidated Financial Statements include allowances for loan losses, certain assumptions related to goodwill and intangibles, accruals related to self-insurance, credit services organization ("CSO") liability for losses and estimated tax liabilities. Actual results may differ from those estimates.

Nature of Operations

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

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

U.K. Segment Placed into Administration

On February 25, 2019, the Company announced that a proposed Scheme of Arrangement ("SOA"), as described in the Company's Current Report on Form 8-K filed January 31, 2019, would not be implemented. In accordance with the provisions of the U.K. Insolvency Act 1986 and as approved by the boards of directors of the Company’s U.K. subsidiaries, Curo Transatlantic Limited and SRC Transatlantic Limited (collectively, “the U.K. Subsidiaries”), insolvency practitioners from KPMG were appointed as administrators (“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 as of February 25, 2019 and presented the U.K. Subsidiaries as Discontinued Operations for all periods presented in this Form 10-Q.

Open-End Loss Recognition

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

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

The change affects comparability to prior periods as follows:


•	Gross combined loans receivable: balances as of June 30, 2019 include $35.4 million of Open-End loans that are up to 90 days past-due with related accrued interest, while such balances for periods prior to March 31, 2019 do not include any past due loans.


•	Revenues: for the three and six months ended June 30, 2019, gross revenues include interest earned on past-due loan balances of approximately $12 million and $21 million, respectively, while revenues in prior-year periods do not include comparable amounts.

•

Provision for Losses: prospectively, past-due, unpaid balances plus related accrued interest charge-off on day 91. Provision expense is affected by total charge-offs less total recoveries ("NCOs") plus changes to the Allowance for loan losses. Because NCOs prospectively include unpaid principal and up to 90 days of related accrued interest, NCO amounts and rates are higher and the Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable is higher. The Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable increased to 18.3% at June 30, 2019, compared to 10.7% in the same prior-year period.

Correction of Immaterial Errors in Previously-Issued Financial Statements

During the year ended December 31, 2018, the Company corrected immaterial errors to its prior presentation of cash flows for loan originations and collections on principal. The Company determined that the historical presentation was in error by not conforming to US GAAP because it included outflows for loan originations and receipts on collections in Cash provided by operating activities rather than in Cash used in investing activities. Accordingly the Company corrected previously filed financial statements by reclassifying cash outflows for loan originations and receipts on collections of principal of $48.2 million from net Cash provided by operating activities to net Cash used in investing activities for the six months ended June 30, 2018. Total cash flows for each period presented did not change. The Company concluded that the errors were immaterial to the unaudited Condensed Consolidated Financial Statements included in the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2018. The Company has revised its Condensed Consolidated Financial Statements for the six months ended June 30, 2018 presented in this Form 10-Q. A summary of the correction follows:

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



(dollars in thousands)	Six Months Ended June 30, 2018
As Reported:⁽¹⁾
Net cash provided by continuing operating activities	$	52,097
Net cash used in continuing investing activities	(3,915		)

As Corrected:
Net cash provided by continuing operating activities	246,733
Net cash used in continuing investing activities	(198,551		)
(1) "As reported" balances include amounts from continuing operations historically presented within these captions.

Recently Adopted Accounting Pronouncements

ASU 2016-02

In February 2016, the Financial Accounting Standards Board ("FASB") issued Topic 842, Leases, by issuing ASU No. 2016-02, which requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements. The Company adopted ASU 2016-02 as of January 1, 2019, using the modified retrospective approach, which provides a method for recording existing leases at adoption and in comparative periods that approximates the results of a full retrospective approach.

Due to the adoption of the new standard, the right of use assets ("ROU assets") and additional operating lease liabilities ("lease liabilities") as of June 30, 2019 were $141.0 million and $148.8 million, respectively. Prepaid rent of $2.7 million and deferred liability of $10.9 million were included in ROU assets and lease liabilities, respectively. The standard did not materially impact the Company's consolidated net earnings. See Note 14 - "Leases" for additional information and disclosures required by Topic 842.

ASU 2018-12

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive income ("ASU 2018-02"), which permits the reclassification to retained earnings of disproportionate tax effects in accumulated other comprehensive income (loss) caused by the Tax Cuts and Jobs Act of 2017 ("2017 Tax Act"). The Company adopted ASU 2018-02 as of January 1, 2019, which did not have a material impact on the Condensed Consolidated Financial Statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

Accounting Pronouncements Related to the Current Expected Credit Loss ("CECL") Standard

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, and ASU 2019-05 in May 2019. The standard, as amended, changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace the current “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they currently do under the other-than-temporary impairment model. The standard also simplifies the accounting model for purchased credit-impaired debt securities and loans. The amendment will affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2019-04 clarifies that equity instruments without readily determinable fair values for which an entity has elected the measurement alternative should be remeasured to fair value as of the date that an observable transaction occurred. ASU 2019-05 provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. The amendments should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic. As issued, this ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. 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. Additionally, as disclosed below, the Company is evaluating the impact of the FASB's definition of a SRC to the adoption of ASU 2016-13.

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

ASU 2019-05

In May 2019, the FASB issued ASU 2019-05, which amends ASU 2016-13 to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that (i) were previously recorded at amortized cost and (ii) are within the scope of ASC 326-203 if the instruments are eligible for the fair value option under ASC 825-10. The fair value option election does not apply to held-to-maturity debt securities. Entities are required to make this election on an instrument-by-instrument basis. ASU 2019-05’s amendments should be applied on a modified-retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings in the statement of financial position as of the date that an entity adopted the amendments in ASU 2016-13. For entities that have adopted ASU 2016-13, the amendments in ASU 2019-05 are effective for fiscal years beginning after December 15, 2019, including interim periods therein. An entity may early adopt the ASU in any interim period after its issuance if the entity has adopted ASU 2016-13. For all other entities, the effective date will be the same as the effective date for ASU 2016-13. We are currently evaluating the methods and impact of adopting this new standard on the Condensed Consolidated Financial Statements.

ASU 2019-04

In May 2019, the FASB issued ASU 2019-04, which clarifies certain aspects of accounting for credit losses, hedging activities, and financial instruments. The ASU’s amendments apply to all entities within the scope of the affected guidance. Accrued interest - Amortized cost basis is defined in ASU 2016-13 as "the amount at which a financing receivable or investment is originated or acquired, adjusted for applicable accrued interest, accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, write-offs, foreign exchange, and fair value hedge accounting adjustments". To address stakeholders’ concerns that the inclusion of accrued interest in the definition of amortized cost basis could make application of the credit loss guidance operationally burdensome, ASU 2019-04 provides certain alternatives for the measurement of the allowance for credit losses (ALL) on accrued interest receivable (AIR). These measurement alternatives include (1) measuring an ALL on AIR separately, (2) electing to provide separate disclosure of the AIR component of amortized cost as a practical expedient, and (3) making accounting policy elections to simplify certain aspects of the presentation and measurement of such AIR. As issued, for entities that have adopted ASU 2016-13, the amendments in ASU 2019-04 related to ASU 2016-13 are effective for fiscal years beginning after December 15, 2019, and interim periods therein. ASU 2019-04’s amendments should be applied "on a modified-retrospective basis by means of a cumulative-effect adjustment to the opening retained earnings balance in the statement of financial position as of the date an entity adopted the amendments in ASU 2016-13." Certain disclosures are also required. For all other entities, the effective date will be the same as the effective date in ASU 2016-13.

FASB Definition of a Smaller Reporting Company ("SRC") as related to the CECL standard and evaluation of the impact of the CECL standard

On July 17, 2019, the FASB issued for a 30-day comment period a draft proposal that would reconsider its philosophy for establishing effective dates for major projects for certain classes of companies, including SRCs. Under current SEC definitions, CURO meets the definition of an SRC as of June 30, 2019. The proposed standard would defer required adoption of the CECL standard for SRCs until fiscal periods beginning after December 15, 2022. The Company will continue to monitor the standard setting activities of the FASB and evaluate their potential impact on the adoption of accounting standards such as ASU 2016-13 and ASU 2019-04. We are currently evaluating the methods and impact of adopting the CECL standard on the Condensed Consolidated Financial Statements.

SEC Disclosure Update

In August 2018, the SEC adopted final rules under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that had become redundant, duplicative, overlapping, outdated or superseded. Other than the amendment's expanded disclosure requirement for interim financial statements to disclose both current and comparative quarter and year-to-date reconciliations of changes in stockholders' equity, it did not have a material impact on the Company's Condensed Consolidated Financial Statements or Notes thereto for the three and six months ended June 30, 2019, nor is it expected to have a material impact on the Company's annual disclosures or financial statements.

NOTE 2 - VARIABLE INTEREST ENTITIES

In August 2018, the Company closed the Non-Recourse Canada SPV facility, whereby certain loan receivables were sold to wholly-owned, bankruptcy-remote special purpose subsidiaries ("VIEs") to collateralize debt incurred under the facility.

As the Company is the primary beneficiary of the VIEs, it includes the assets and liabilities related to the VIEs in its Condensed Consolidated Financial Statements. As required, the Company parenthetically discloses on the Consolidated Balance Sheets the

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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 VIE subsidiaries were as follows:



(in thousands)	June 30, 2019		December 31, 2018
Assets
Restricted cash	$	14,819	$	12,840
Gross loans receivable less allowance for loan losses	190,121		136,187
Total Assets	$	204,940	$	149,027
Liabilities
Accounts payable and accrued liabilities	$	15,020	$	4,980
Deferred revenue	45		40
Accrued interest	713		831
Long-term debt	90,977		107,479
Total Liabilities	$	106,755	$	113,330

NOTE 3 – LOANS RECEIVABLE AND REVENUE

The following table summarizes revenue by product for the periods indicated:



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018
Unsecured Installment	$	122,112	$	114,936	$	257,890	$	240,315
Secured Installment	26,076		25,777		53,553		52,633
Open-End	54,972		27,222		107,841		54,445
Single-Pay	45,528		58,325		92,289		118,682
Ancillary	15,612		10,909		30,666		21,937
Total revenue	$	264,300	$	237,169	$	542,239	$	488,012

The following tables summarize Loans receivable by product and the related delinquent loans receivable at June 30, 2019:



	June 30, 2019
(in thousands)	Single-Pay			Unsecured Installment			Secured Installment			Open-End			Total
Current loans receivable	$	76,126		$	126,685		$	71,218		$	247,915		$	521,944
Delinquent loans receivable	—			38,037			14,216			35,396			87,649
Total loans receivable	76,126			164,722			85,434			283,311			609,593
Less: allowance for losses	(4,941		)	(35,223		)	(9,996		)	(51,717		)	(101,877		)
Loans receivable, net	$	71,185		$	129,499		$	75,438		$	231,594		$	507,716



	June 30, 2019
(in thousands)	Unsecured Installment		Secured Installment		Open-End		Total
Delinquent loans receivable
0-30 days past due	$	14,995	$	7,096	$	14,997	$	37,088
31-60 days past due	11,176		3,358		9,455		23,989
61-90 days past due	11,866		3,762		10,944		26,572
Total delinquent loans receivable	$	38,037	$	14,216	$	35,396	$	87,649

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following tables summarize Loans receivable by product and the related delinquent loans receivable at December 31, 2018:



	December 31, 2018
(in thousands)	Single-Pay			Unsecured Installment			Secured Installment			Open-End			Total
Current loans receivable	$	80,823		$	141,316		$	75,583		$	207,333		$	505,055
Delinquent loans receivable	—			49,087			17,389			—			66,476
Total loans receivable	80,823			190,403			92,972			207,333			571,531
Less: allowance for losses	(4,189		)	(37,716		)	(12,191		)	(19,901		)	(73,997		)
Loans receivable, net	$	76,634		$	152,687		$	80,781		$	187,432		$	497,534



	December 31, 2018
(in thousands)	Unsecured Installment		Secured Installment		Total
Delinquent loans receivable
0-30 days past due	$	17,850	$	7,870	$	25,720
31-60 days past due	14,705		4,725		19,430
61-90 days past due	16,532		4,794		21,326
Total delinquent loans receivable	$	49,087	$	17,389	$	66,476

The following tables summarize loans guaranteed by the Company under CSO programs and the related delinquent receivables at June 30, 2019:



	June 30, 2019
(in thousands)	Unsecured Installment			Secured Installment			Total
Current loans receivable guaranteed by the Company	$	54,968		$	1,930		$	56,898
Delinquent loans receivable guaranteed by the Company	10,087			354			10,441
Total loans receivable guaranteed by the Company	65,055			2,284			67,339
Less: Liability for losses on CSO lender-owned consumer loans	(9,433		)	(71		)	(9,504		)
Loans receivable guaranteed by the Company, net	$	55,622		$	2,213		$	57,835



	June 30, 2019
(in thousands)	Unsecured Installment		Secured Installment		Total
Delinquent loans receivable
0-30 days past due	$	8,511	$	299	$	8,810
31-60 days past due	1,052		37		1,089
61-90 days past due	524		18		542
Total delinquent loans receivable	$	10,087	$	354	$	10,441

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following tables summarize loans guaranteed by the Company under CSO programs and the related delinquent receivables at December 31, 2018:



	December 31, 2018
(in thousands)	Unsecured Installment			Secured Installment			Total
Current loans receivable guaranteed by the Company	$	65,743		$	2,504		$	68,247
Delinquent loans receivable guaranteed by the Company	11,708			446			12,154
Total loans receivable guaranteed by the Company	77,451			2,950			80,401
Less: Liability for losses on CSO lender-owned consumer loans	(11,582		)	(425		)	(12,007		)
Loans receivable guaranteed by the Company, net	$	65,869		$	2,525		$	68,394



	December 31, 2018
(in thousands)	Unsecured Installment		Secured Installment		Total
Delinquent loans receivable
0-30 days past due	$	9,684	$	369	$	10,053
31-60 days past due	1,255		48		1,303
61-90 days past due	769		29		798
Total delinquent loans receivable	$	11,708	$	446	$	12,154

The following table summarizes activity in the allowance for loan losses during the three months ended June 30, 2019:



	Three Months Ended June 30, 2019
(in thousands)	Single-Pay			Unsecured Installment			Secured Installment			Open-End			Other			Total
Balance, beginning of period	$	3,897		$	33,666		$	9,796		$	46,963		$	—		$	94,322
Charge-offs	(35,759		)	(37,336		)	(10,295		)	(30,688		)	(1,342		)	(115,420		)
Recoveries	24,301			5,366			2,693			5,537			822			38,719
Net charge-offs	(11,458		)	(31,970		)	(7,602		)	(25,151		)	(520		)	(76,701		)
Provision for losses	12,446			33,514			7,802			29,373			520			83,655
Effect of foreign currency translation	56			13			—			532			—			601
Balance, end of period	$	4,941		$	35,223		$	9,996		$	51,717		$	—		$	101,877
Allowance for loan losses as a percentage of gross loan receivables	6.5		%	21.4		%	11.7		%	18.3		%	N/A			16.7		%

The following table summarizes activity in the liability for losses on CSO lender-owned consumer loans during the three months ended June 30, 2019:



	Three Months Ended June 30, 2019
(in thousands)	Unsecured Installment			Secured Installment			Total
Balance, beginning of period	$	8,583		$	78		$	8,661
Charge-offs	(34,564		)	(683		)	(35,247		)
Recoveries	7,078			657			7,735
Net charge-offs	(27,486		)	(26		)	(27,512		)
Provision for losses	28,336			19			28,355
Balance, end of period	$	9,433		$	71		$	9,504

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table summarizes activity in the allowance for loan losses and the liability for losses on CSO lender-owned consumer loans, in total, during the three months ended June 30, 2019:



	Three Months Ended June 30, 2019
(in thousands)	Single-Pay			Unsecured Installment			Secured Installment			Open-End			Other			Total
Balance, beginning of period	$	3,897		$	42,249		$	9,874		$	46,963		$	—		$	102,983
Charge-offs	(35,759		)	(71,900		)	(10,978		)	(30,688		)	(1,342		)	(150,667		)
Recoveries	24,301			12,444			3,350			5,537			822			46,454
Net charge-offs	(11,458		)	(59,456		)	(7,628		)	(25,151		)	(520		)	(104,213		)
Provision for losses	12,446			61,850			7,821			29,373			520			112,010
Effect of foreign currency translation	56			13			—			532			—			601
Balance, end of period	$	4,941		$	44,656		$	10,067		$	51,717		$	—		$	111,381

The following table summarizes activity in the allowance for loan losses during the three months ended June 30, 2018:



	Three Months Ended June 30, 2018
(in thousands)	Single-Pay			Unsecured Installment			Secured Installment			Open-End			Other			Total
Balance, beginning of period	$	3,514		$	33,638		$	11,639		$	6,846		$	—		$	55,637
Charge-offs	(41,242		)	(31,612		)	(11,082		)	(23,807		)	(593		)	(108,336		)
Recoveries	28,266			5,085			2,296			11,883			38			47,568
Net charge-offs	(12,976		)	(26,527		)	(8,786		)	(11,924		)	(555		)	(60,768		)
Provision for losses	13,101			23,219			7,533			14,848			555			59,256
Effect of foreign currency translation	(35		)	(39		)	—			(53		)	—			(127		)
Balance, end of period	$	3,604		$	30,291		$	10,386		$	9,717		$	—		$	53,998
Allowance for loan losses as a percentage of gross loan receivables	4.3		%	18.9		%	12.3		%	10.7		%	N/A			12.8		%

The following table summarizes activity in the liability for losses on CSO lender-owned consumer loans during the three months ended June 30, 2018:



	Three Months Ended June 30, 2018
(in thousands)	Unsecured Installment			Secured Installment			Total
Balance, beginning of period	$	9,886		$	526		$	10,412
Charge-offs	(33,017		)	(993		)	(34,010		)
Recoveries	7,350			776			8,126
Net charge-offs	(25,667		)	(217		)	(25,884		)
Provision for losses	26,974			117			27,091
Balance, end of period	$	11,193		$	426		$	11,619

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table summarizes activity in the allowance for loan losses and the liability for losses on CSO lender-owned consumer loans, in total, during the three months ended June 30, 2018:



	Three Months Ended June 30, 2018
(in thousands)	Single-Pay			Unsecured Installment			Secured Installment			Open-End			Other			Total
Balance, beginning of period	$	3,514		$	43,524		$	12,165		$	6,846		$	—		$	66,049
Charge-offs	(41,242		)	(64,629		)	(12,075		)	(23,807		)	(593		)	(142,346		)
Recoveries	28,266			12,435			3,072			11,883			38			55,694
Net charge-offs	(12,976		)	(52,194		)	(9,003		)	(11,924		)	(555		)	(86,652		)
Provision for losses	13,101			50,193			7,650			14,848			555			86,347
Effect of foreign currency translation	(35		)	(39		)	—			(53		)	—			(127		)
Balance, end of period	$	3,604		$	41,484		$	10,812		$	9,717		$	—		$	65,617

The following table summarizes activity in the allowance for loan losses during the six months ended June 30, 2019:



	Six Months Ended June 30, 2019
(in thousands)	Single-Pay			Unsecured Installment			Secured Installment			Open-End			Other			Total
Balance, beginning of period	$	4,189		$	37,716		$	12,191		$	19,901		$	—		$	73,997
Charge-offs	(72,280		)	(81,573		)	(22,966		)	(34,326		)	(2,693		)	(213,838		)
Recoveries	52,212			11,684			5,816			10,696			1,721			82,129
Net charge-offs	(20,068		)	(69,889		)	(17,150		)	(23,630		)	(972		)	(131,709		)
Provision for losses	20,714			67,359			14,955			54,690			972			158,690
Effect of foreign currency translation	106			37			—			756			—			899
Balance, end of period	$	4,941		$	35,223		$	9,996		$	51,717		$	—		$	101,877
Allowance for loan losses as a percentage of gross loan receivables	6.5		%	21.4		%	11.7		%	18.3		%	N/A			16.7		%

The following table summarizes activity in the liability for losses on CSO lender-owned consumer loans during the six months ended June 30, 2019:



	Six Months Ended June 30, 2019
(in thousands)	Unsecured Installment			Secured Installment			Total
Balance, beginning of period	$	11,582		$	425		$	12,007
Charge-offs	(75,545		)	(1,760		)	(77,305		)
Recoveries	17,638			1,459			19,097
Net charge-offs	(57,907		)	(301		)	(58,208		)
Provision for losses	55,758			(53		)	55,705
Balance, end of period	$	9,433		$	71		$	9,504

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table summarizes activity in the allowance for loan losses and the liability for losses on CSO lender-owned consumer loans, in total, during the six months ended June 30, 2019:



	Six Months Ended June 30, 2019
(in thousands)	Single-Pay			Unsecured Installment			Secured Installment			Open-End			Other			Total
Balance, beginning of period	$	4,189		$	49,298		$	12,616		$	19,901		$	—		$	86,004
Charge-offs	(72,280		)	(157,118		)	(24,726		)	(34,326		)	(2,693		)	(291,143		)
Recoveries	52,212			29,322			7,275			10,696			1,721			101,226
Net charge-offs	(20,068		)	(127,796		)	(17,451		)	(23,630		)	(972		)	(189,917		)
Provision for losses	20,714			123,117			14,902			54,690			972			214,395
Effect of foreign currency translation	106			37			—			756			—			899
Balance, end of period	$	4,941		$	44,656		$	10,067		$	51,717		$	—		$	111,381

The following table summarizes activity in the allowance for loan losses during the six months ended June 30, 2018:



	Six Months Ended June 30, 2018
(in thousands)	Single-Pay			Unsecured Installment			Secured Installment			Open-End			Other			Total
Balance, beginning of period	$	5,204		$	38,977		$	13,472		$	6,426		$	—		$	64,079
Charge-offs	(85,578		)	(66,831		)	(22,567		)	(44,156		)	(1,268		)	(220,400		)
Recoveries	61,084			10,303			5,162			21,260			85			97,894
Net charge-offs	(24,494		)	(56,528		)	(17,405		)	(22,896		)	(1,183		)	(122,506		)
Provision for losses	22,993			47,958			14,319			26,276			1,183			112,729
Effect of foreign currency translation	(99		)	(116		)	—			(89		)	—			(304		)
Balance, end of period	$	3,604		$	30,291		$	10,386		$	9,717		$	—		$	53,998
Allowance for loan losses as a percentage of gross loan receivables	4.3		%	18.9		%	12.3		%	10.7		%	N/A			12.8		%

The following table summarizes activity in the liability for losses on CSO lender-owned consumer loans during the six months ended June 30, 2018:



	Six Months Ended June 30, 2018
(in thousands)	Unsecured Installment			Secured Installment			Total
Balance, beginning of period	$	17,073		$	722		$	17,795
Charge-offs	(74,736		)	(2,212		)	(76,948		)
Recoveries	18,326			1,945			20,271
Net charge-offs	(56,410		)	(267		)	(56,677		)
Provision for losses	50,530			(29		)	50,501
Balance, end of period	$	11,193		$	426		$	11,619

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table summarizes activity in the allowance for loan losses and the liability for losses on CSO lender-owned consumer loans, in total, during the six months ended June 30, 2018:



	Six Months Ended June 30, 2018
(in thousands)	Single-Pay			Unsecured Installment			Secured Installment			Open-End			Other			Total
Balance, beginning of period	$	5,204		$	56,050		$	14,194		$	6,426		$	—		$	81,874
Charge-offs	(85,578		)	(141,567		)	(24,779		)	(44,156		)	(1,268		)	(297,348		)
Recoveries	61,084			28,629			7,107			21,260			85			118,165
Net charge-offs	(24,494		)	(112,938		)	(17,672		)	(22,896		)	(1,183		)	(179,183		)
Provision for losses	22,993			98,488			14,290			26,276			1,183			163,230
Effect of foreign currency translation	(99		)	(116		)	—			(89		)	—			(304		)
Balance, end of period	$	3,604		$	41,484		$	10,812		$	9,717		$	—		$	65,617

NOTE 4 – CREDIT SERVICES ORGANIZATION

The CSO fee receivable amounts under CSO programs were $12.0 million and $14.3 million at June 30, 2019 and December 31, 2018, respectively. The Company bears the risk of loss through its guarantee to purchase specific customer loans that are in default with the lenders. The terms of these loans range from six to 18 months. See the 2018 Form 10-K for further details of the Company's accounting policy. As of June 30, 2019 and December 31, 2018, the maximum amount payable under all such guarantees was $56.0 million and $66.9 million, respectively. If the Company is required to pay any portion of the total amount of the loans it has guaranteed, it will attempt to recover some or the entire amount from the applicable customers. The Company holds no collateral in respect of the guarantees. The Company estimates a liability for losses associated with the guaranty provided to the CSO lenders using assumptions and methodologies similar to the Allowance for loan losses, which it recognizes for its consumer loans. Liability for incurred losses on CSO loans Guaranteed by the Company was $9.5 million and $12.0 million at June 30, 2019 and December 31, 2018, respectively.

The Company placed $5.8 million and $17.2 million in collateral accounts for the benefit of lenders at June 30, 2019 and December 31, 2018, respectively, which is reflected in "Prepaid expenses and other" in the Condensed Consolidated Balance Sheets. The balances required to be maintained in these collateral accounts vary by lender, typically based on a percentage of the outstanding loan balances held by the lender. The percentage of outstanding loan balances required for collateral is negotiated between the Company and each such lender.

NOTE 5 – LONG-TERM DEBT

Long-term debt consisted of the following:



(in thousands)	June 30, 2019		December 31, 2018
8.25% Senior Secured Notes (due 2025)	$	677,535	$	676,661
Non-Recourse Canada SPV Facility	90,977		107,479
Senior Revolver	—		20,000
Long-term debt	$	768,512	$	804,140

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 ("8.25% Senior Secured Notes"). 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 balance of capitalized financing costs of approximately $12.8 million, net of amortization, is included in the Condensed Consolidated Balance Sheets as a component of "Long-term debt." These costs are amortized over the term of the 8.25% Senior Secured Notes as a component of interest expense.

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

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

As of June 30, 2019 and December 31, 2018, the Company was in full compliance with the covenants and other provisions of the 8.25% Senior Secured Notes.

12.00% Senior Secured Notes

In February and November 2017, CFTC issued $470.0 million and $135.0 million, respectively, of 12.00% Senior Secured Notes due March 1, 2022. In connection with these 12.00% Senior Secured Notes, the Company capitalized financing costs of approximately $18.3 million. These costs were being amortized over the term of the 12.00% Senior Secured Notes as a component of interest expense.

On March 7, 2018, CFTC redeemed $77.5 million of its 12.00% Senior Secured Notes using a portion of the proceeds from the Company's initial public offering, as required by the underlying indenture (the transaction whereby the 12.00% Senior Secured Notes were partially redeemed, the “Redemption”), at a price equal to 112.00% of the principal amount of the 12.00% Senior Secured Notes redeemed, plus accrued and unpaid interest paid thereon, to the date of Redemption. The Redemption price and the amortization of a corresponding portion of the capitalized financing costs resulted in a loss on Redemption of $11.7 million for the three months ended March 31, 2018. Following the Redemption, $527.5 million of the original outstanding principal amount of the 12.00% Senior Secured Notes remained outstanding. The Redemption was conducted pursuant to the Indenture governing the 12.00% Senior Secured Notes (the “Indenture”), dated as of February 15, 2017, by and among CFTC, the guarantors party thereto and TMI Trust Company, as trustee and collateral agent.

The remainder of the 12.00% Senior Secured Notes were extinguished effective September 7, 2018 using proceeds from the 8.25% Senior Secured Notes as described above. The early extinguishment of the 12.00% Senior Secured Notes resulted in a pretax loss of $69.2 million during the year ended December 31, 2018.

Non-Recourse Canada SPV Facility

On August 2, 2018, CURO Canada Receivables Limited Partnership, a newly created, bankruptcy-remote special purpose vehicle (the "Canada SPV Borrower") and a wholly-owned subsidiary, entered into a four-year revolving credit facility with Waterfall Asset Management, LLC that provided for C$175.0 million of initial borrowing capacity and the ability to expand such capacity up to C$250.0 million ("Non-Recourse Canada SPV Facility"). The loans bear interest at an annual rate of 6.75% plus the three-month CDOR. The Canada SPV Borrower also pays a 0.50% per annum commitment fee on the unused portion of the commitments. In April 2019, the facility's maturity date was extended one year, to 2023. As of June 30, 2019, the Canada SPV Borrower was in full compliance with the covenants and other provisions of the Non-Recourse Canada SPV Facility.

As of June 30, 2019, outstanding borrowings under the Non-Recourse Canada SPV Facility were $91.0 million, net of deferred financing costs of $3.6 million. For further information on the Non-Recourse Canada SPV, refer to Note 2, "Variable Interest Entities."

Non-Recourse U.S. SPV Facility

In November 2016, CURO Receivables and a wholly-owned subsidiary entered into a five-year revolving credit facility with Victory Park Management, LLC and certain other lenders that provided for an $80.0 million term loan and $70.0 million revolving borrowing capacity that could expand over time (collectively, “Non-Recourse U.S. SPV Facility”). Borrowings under this facility bore interest at an annual rate of up to 12.00% plus the greater of (i) 1.0% per annum and (ii) the three-month LIBOR. The SPV Borrower also paid a 0.50% per annum fee on the unused portion of the commitments. In connection with this facility, the capitalized financing costs at the time of extinguishment, as discussed below, were approximately $5.3 million, net of amortization. These capitalized financing costs were included in the Condensed Consolidated Balance Sheet as a component of "Long-term debt" and were amortized over the term of the Non-Recourse U.S. SPV Facility.

On September 30, 2018, a portion of the proceeds from the 8.25% Senior Secured Notes were used to extinguish the revolver's balance of $42.4 million. In October 2018, the Company extinguished the remaining term loan balance of $80.0 million and made the final termination payment of $2.7 million, resulting in a loss on the extinguishment of debt of $9.7 million during the year ended December 31, 2018.

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Senior Revolver

On September 1, 2017, the Company entered into a $25.0 million Senior Secured Revolving Loan Facility (the “Senior Revolver”). The terms of the Senior Revolver generally conform to the related provisions in the Indenture dated February 15, 2017 for the 12.00% Senior Secured Notes and complements the Company's other financing sources, while providing seasonal short-term liquidity. In February 2018, the Senior Revolver capacity was increased to $29.0 million as permitted by the Indenture to the 12.00% Senior Secured Notes, based upon consolidated tangible assets. Additionally, in November 2018, the Senior Revolver capacity was increased to $50.0 million, as permitted by the Indenture to the 8.25% Senior Secured Notes. The Senior Revolver is now syndicated with participation by four banks.

Under the Senior Revolver, there is $50.0 million maximum availability, including up to $5.0 million of standby letters of credit, for a one-year term, renewable for successive terms following annual review. The current term expires June 30, 2020. The Senior Revolver accrues interest at one-month LIBOR plus 5.00% (subject to a 5% overall minimum) and is repayable on demand.

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 is senior to the lien securing the 8.25% Senior Secured Notes. Additionally, the negative covenants of the Senior Revolver generally conform to the related provisions in the Indenture for the 8.25% Senior Secured Notes. The revolver was undrawn at June 30, 2019.

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. As of June 30, 2019, the Company was in full compliance with the covenants and other provisions of the Senior Revolver.

Cash Money Revolving Credit Facility

Cash Money Cheque Cashing, Inc., a Canadian subsidiary ("Cash Money"), maintains a C$10.0 million revolving credit facility with Royal Bank of Canada (the "Cash Money Revolving Credit Facility"), which provides short-term liquidity required to meet the working capital needs of the Company's Canadian operations. Aggregate draws under the revolving credit facility are limited to the lesser of: (i) the borrowing base, which is defined as a percentage of cash, deposits in transit and accounts receivable, and (ii) C$10.0 million. As of June 30, 2019, the borrowing capacity under the Cash Money Revolving Credit Facility, which was C$9.7 million, was reduced by C$0.3 million for outstanding stand-by-letters of credit.

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

The Cash Money Revolving Credit Facility was undrawn at June 30, 2019 and December 31, 2018.

Subordinated Stockholder Debt

As part of the acquisition of Cash Money in 2011, the Company received indemnification for certain claims through issuance of an escrow note to the seller. This note bears interest at 10.0% per annum, and quarterly interest payments are due until the note matures. The balance of this note was repaid in full as of June 30, 2019.

NOTE 6 – SHARE-BASED COMPENSATION

The Company's stockholder-approved 2017 Incentive Plan provides for the issuance of up to 5.0 million shares, subject to certain adjustment provisions, which may be issued in the form of stock options, restricted stock awards, restricted stock units (“RSUs”), stock appreciation rights, performance awards and other awards that may be settled in or based upon 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.

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Restricted Stock Units

Grants of time-based RSUs are valued at the date of grant based on the value of our common stock and are expensed using the straight-line method over the service period. These RSUs are subject to time-based vesting and typically vest over a three-year period.

In March 2019, the Company awarded market-based RSUs designed to drive the performance of the management team toward achievement of key corporate objectives. The market-based RSUs vest after three years depending upon the Company's total stockholder return over the three-year performance period relative to other companies in its selected peer group. These awards are valued using the Monte Carlo simulation pricing model. Expense recognition for the market-based awards occurs over the service period using the straight-line method.

Grants of RSUs do not confer full stockholder rights such as voting rights and cash dividends, but provide for additional dividend equivalent RSU awards in lieu of cash dividends. Unvested shares of RSUs may be forfeited upon termination of employment depending on the circumstances of the termination, or failure to achieve the required performance condition, if applicable.

A summary of the status of time-based and market-based RSUs as of June 30, 2019 and changes during the six months ended June 30, 2019 are presented in the following table:



	Number of RSUs
	Time-Based		Market-Based	Weighted Average Grant Date Fair Value per Share
December 31, 2018	1,060,350		—	$	14.29
Granted	579,540		394,755	10.07
Vested	(83,481	)	—	15.59
Forfeited	(68,778	)	—	14.05
June 30, 2019	1,487,631		394,755	$	12.06

Share-based compensation expense for the three months ended June 30, 2019 and 2018, which includes compensation costs from stock options and RSUs, was $2.6 million and $2.2 million, respectively, and during the six months ended June 30, 2019 and 2018 was $4.8 million and $4.0 million, respectively, and is included in the Condensed Consolidated Statements of Operations as a component of "Corporate, district and other expenses."

As of June 30, 2019, there was $18.5 million of total unrecognized compensation cost related to stock options and RSUs, of which $15.4 million related to stock options and time-based RSUs and $3.1 million related to market-based 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 from continuing operations was 27.4% and 27.6% for the six months ended June 30, 2019 and 2018, respectively.

On December 22, 2017, the 2017 Tax Act became law, which reduced the statutory U.S. Federal corporate income tax rate from 35% to 21%, enacted a one-time “deemed repatriation” tax on unremitted earnings accumulated in non-U.S. jurisdictions and imposed a new minimum tax on global intangible low-taxed income ("GILTI"). The Company provided an estimate of the deemed repatriation tax as of December 31, 2017 and pursuant to further IRS guidance, the Company recorded an additional accrual of $1.2 million during the six months ended June 30, 2018. The Company recorded an estimated GILTI tax of $0.5 million and $0.6 million during the six months ended June 30, 2019 and 2018, respectively.

The Company intends to reinvest Canada earnings indefinitely in its Canadian operations and therefore has not provided for any non-U.S. withholding tax that would be assessed on dividend distributions. If the earnings of $159.3 million were distributed to the U.S., the Company would be subject to Canadian withholding taxes of estimated $8.0 million. In the event the earnings were distributed to the U.S., the Company would adjust the income tax provision for the applicable period and would determine the amount of foreign tax credit that would be available.

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

NOTE 8 – FINANCIAL INSTRUMENTS

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

The three levels of inputs used to measure fair value are listed below.

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

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

Level 3 – Unobservable inputs reflecting the Company's own judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Company develops these inputs based on the best information available, including its own data.

Financial Assets and Liabilities Not Carried at Fair Value

The table below presents the assets and liabilities that were not carried at fair value on the Condensed Consolidated Balance Sheets at June 30, 2019:



			Estimated Fair Value
(in thousands)	Carrying Value June 30, 2019		Level 1		Level 2		Level 3		Total
Financial assets:
Cash	$	92,297	$	92,297	$	—	$	—	$	92,297
Restricted cash	33,712		33,712		—		—		33,712
Loans receivable, net	507,716		—		—		507,716		507,716
Investment in Cognical	7,178		—		—		7,178		7,178
Financial liabilities:
Liability for losses on CSO lender-owned consumer loans	$	9,504	$	—	$	—	$	9,504	$	9,504
8.25% Senior Secured Notes	677,535		—		—		574,211		574,211
Non-Recourse Canada SPV facility	90,977		—		—		94,565		94,565

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The table below presents the assets and liabilities that were not carried at fair value on the Condensed Consolidated Balance Sheets at December 31, 2018:



			Estimated Fair Value
(in thousands)	Carrying Value December 31, 2018		Level 1		Level 2		Level 3		Total
Financial assets:
Cash	$	61,175	$	61,175	$	—	$	—	$	61,175
Restricted cash	25,439		25,439		—		—		25,439
Loans receivable, net	497,534		—		—		497,534		497,534
Investment in Cognical	6,558		—		—		6,558		6,558
Financial liabilities:
Liability for losses on CSO lender-owned consumer loans	$	12,007	$	—	$	—	$	12,007	$	12,007
8.25% Senior Secured notes	676,661		—		—		531,179		531,179
Non-Recourse Canada SPV facility	107,479		—		—		111,335		111,335
Senior Revolver	20,000		—		—		20,000		20,000

Loans receivable are carried on the Condensed Consolidated Balance Sheets net of the Allowance for estimated loan losses. The unobservable inputs used to calculate the carrying values include quantitative factors, such as 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.

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 defaulted loans that it has guaranteed.

During the second quarter of 2019, Zibby completed an equity raising round at a value per share less than the value per share raised in prior raises. This round included additional investments from existing shareholders and investments by new investors and is considered indicative of the fair value of shares in Zibby. Accordingly, we recognized a $3.7 million impairment in our investment in Zibby to adjust it to market value. As of June 30, 2019, we owned approximately 30% of the outstanding shares of Zibby on a fully diluted basis. See Note 18 - "Subsequent Events" for information regarding additional investments in Zibby in July 2019.

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

NOTE 9 – STOCKHOLDERS' EQUITY

In connection with the Company's initial public offering in December 2017, the underwriters had a 30-day option to purchase up to an additional 1.0 million shares of the Company's common stock at the initial public offering price, less the underwriting discount for over-allotments, if any. The underwriters exercised this option and purchased 1.0 million shares on January 5, 2018. The exercise of this option provided additional proceeds of $13.1 million.

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table summarizes the changes in stockholders' equity for the three and six months ended June 30, 2018 and 2019:



	Common Stock			Paid-in capital		Retained Earnings (Deficit)			AOCI ⁽¹⁾			Total Stockholders' Equity
(dollars in thousands)	Shares Outstanding	Par Value		Paid-in capital		Retained Earnings (Deficit)			AOCI ⁽¹⁾			Total Stockholders' Equity
Balances at December 31, 2017	44,561,419	$	8	$	46,079	$	3,988		$	(42,939	)	$	7,136
Net income from continuing operations	—	—		—		24,913			—			24,913
Net loss from discontinued operations	—	—		—		(1,621		)	—			(1,621		)
Foreign currency translation adjustment	—	—		—		—			(2,910		)	(2,910		)
Cash flow hedge expiration	—	—		—		—			54			54
Share based compensation expense	—	—		1,842		—			—			1,842
Initial Public Offering, Net Proceeds (underwriter shares)	1,000,000	1		13,135		—			—			13,136
Balances at March 31, 2018	45,561,419	$	9	$	61,056	$	27,280		$	(45,795	)	$	42,550
Net income from continuing operations	—	—		—		18,718			—			18,718
Net loss from discontinued operations	—	—		—		(2,743		)	—			(2,743		)
Foreign currency translation adjustment	—	—		—		—			(6,754		)	(6,754		)
Cash flow hedge expiration	—	—		—		—			(439		)	(439		)
Share based compensation expense	—	—		1,478		—			—			1,478
Proceeds from exercise of stock options	209,132	—		39		—			—			39
Common stock issued for RSU's vesting	49,994	—		—		—			—			—
Balances at June 30, 2018	45,820,545	$	9	$	62,573	$	43,255		$	(52,988	)	$	52,849
⁽¹⁾Accumulated other comprehensive income (loss)

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



	Common Stock				Paid-in capital			Treasury Stock			Retained Earnings (Deficit)			AOCI ⁽¹⁾			Total Stockholders' Equity
(dollars in thousands)	Shares Outstanding		Par Value		Paid-in capital			Treasury Stock			Retained Earnings (Deficit)			AOCI ⁽¹⁾			Total Stockholders' Equity
Balances at December 31, 2018	46,412,231		$	9	$	60,015		$	—		$	(18,065	)	$	(61,060	)	$	(19,101	)
Net income from continuing operations	—		—		—			—			28,673			—			28,673
Net income from discontinued operations	—		—		—			—			8,375			—			8,375
Foreign currency translation adjustment	—		—		—			—			—			16,695			16,695
Share based compensation expense	—		—		2,172			—			—			—			2,172
Proceeds from exercise of stock options	7,888		—		40			—			—			—			40
Common stock issued for RSU's vesting, net of shares withheld and withholding paid for employee taxes	11,170		—		(110		)	—			—			—			(110		)
Balances at March 31, 2019	46,431,289		$	9	$	62,117		$	—		$	18,983		$	(44,365	)	$	36,744
Net income from continuing operations	—		—		—			—			17,667			—			17,667
Net income from discontinued operations	—		—		—			—			(834		)	—			(834		)
Foreign currency translation adjustment	—		—		—			—			—			3,635			3,635
Share based compensation expense	—		—		2,644			—			—			—			2,644
Proceeds from exercise of stock options	4,908		—		29			—			—			—			29
Purchase of shares under the stock repurchase program	(244,200	)	—		—			(2,507		)	—			—			(2,507		)
Common stock issued for RSU's vesting, net of shares withheld and withholding paid for employee taxes	63,285		—		—			—			—			—			—
Balances at June 30, 2019	46,255,282		$	9	$	64,790		$	(2,507	)	$	35,816		$	(40,730	)	$	57,378
⁽¹⁾ Accumulated other comprehensive income (loss)

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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,
	2019			2018			2019		2018
Net income from continuing operations	$	17,667		$	18,718		$	46,340	$	43,631
Net income (loss) from discontinued operations, net of tax	(834		)	(2,743		)	$	7,541	$	(4,364	)
Net income	$	16,833		$	15,975		$	53,881	$	39,267

Weighted average common shares - basic	46,451			45,650			46,438		45,578
Dilutive effect of stock options and restricted stock units	656			2,346			897		2,179
Weighted average common shares - diluted	47,107			47,996			47,335		47,757

Basic income (loss) per share:
Continuing operations	$	0.38		$	0.41		$	1.00	$	0.96
Discontinued operations	(0.02		)	(0.06		)	0.16		(0.10		)
Basic income per share	$	0.36		$	0.35		$	1.16	$	0.86

Diluted income (loss) per share:
Continuing operations	$	0.38		$	0.39		$	0.98	$	0.92
Discontinued operations	(0.02		)	(0.06		)	0.16		(0.10		)
Diluted income per share	$	0.36		$	0.33		$	1.14	$	0.82

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, 2019, there were 1.3 million and 1.2 million, respectively, of potential shares of common stock excluded from the calculation of diluted earnings per share because their effect was anti-dilutive. There was no effect for the three and six months ended June 30, 2018.

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 – SUPPLEMENTAL CASH FLOW INFORMATION

The following table provides supplemental cash flow information:



	Six Months Ended June 30,
(dollars in thousands)	2019		2018
Cash paid for:
Interest	$	34,678	$	44,250
Income taxes	4,231		11,621
Non-cash investing activities:
Property and equipment accrued in accounts payable	$	105	$	595

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

NOTE 12 – SEGMENT REPORTING

Segment information is prepared on the same basis that the Company's Chief Operating Decision Maker ("CODM") reviews financial information for operational decision making purposes. During the first quarter of 2019, the U.K. Subsidiaries met discontinued operations criteria, resulting in two reportable operating segments: the U.S. and Canada.

Management’s evaluation of performance utilizes gross margin and operating profit before the allocation of interest expense and professional services. The following reporting segment results reflect this basis for evaluation and were determined in accordance with the same accounting principles used in the Condensed Consolidated Financial Statements.

The following table illustrates summarized financial information concerning reportable segments.



	Three Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands)	2019		2018		2019		2018
Revenues by segment:
U.S.	$	210,046	$	190,126	$	436,165	$	394,719
Canada	54,254		47,043		106,074		93,293
Consolidated revenue	$	264,300	$	237,169	$	542,239	$	488,012
Gross margin by segment:
U.S.	$	65,067	$	64,048	$	154,870	$	155,392
Canada	16,114		13,300		31,808		27,802
Consolidated gross margin	$	81,181	$	77,348	$	186,678	$	183,194
Segment operating income:
U.S.	$	17,029	$	15,362	$	48,224	$	42,194
Canada	8,091		8,534		15,615		18,082
Consolidated operating profit	$	25,120	$	23,896	$	63,839	$	60,276
Expenditures for long-lived assets by segment:
U.S.	$	2,568	$	1,195	$	4,998	$	1,983
Canada	477		220		1,166		974
Consolidated expenditures for long-lived assets	$	3,045	$	1,415	$	6,164	$	2,957

The following table provides gross loans receivable by segment:



(dollars in thousands)	June 30, 2019		December 31, 2018
U.S.	$	340,968	$	361,473
Canada	268,625		210,058
Total gross loans receivable	$	609,593	$	571,531

The following table provides 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:



(dollars in thousands)	June 30, 2019		December 31, 2018
U.S.	$	44,209	$	47,918
Canada	28,784		28,832
Total net long-lived assets	$	72,993	$	76,750

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.

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

NOTE 13 – CONTINGENT LIABILITIES

Securities Litigation

On December 5, 2018, a putative securities fraud class action lawsuit was filed against the Company and its chief executive officer, chief financial officer and chief operating officer in the United States District Court for the District of Kansas, captioned Yellowdog Partners, LP v. CURO Group Holdings Corp., Donald F. Gayhardt, William Baker and Roger W. Dean, Civil Action No. 18-2662. On May 31, 2019, plaintiffs filed a consolidated complaint naming Doug Rippel, Chad Faulkner, Mike McKnight, Friedman Fleischer & Lowe Capital Partners II, L.P., FFL Executive Partners II, L.P., and FFL Parallel Fund II, L.P. as additional defendants. The complaint alleges that the Company and the individual defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and that certain defendants also violated Section 20(a) of the Exchange Act as "control persons" of CURO. Plaintiffs purport to bring these claims on behalf of a class of investors who purchased Company common stock between April 27, 2018 and October 24, 2018.

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

While the Company is vigorously contesting this lawsuit, it cannot determine the final resolution or when it might be resolved. In addition to the expenses incurred in defending this litigation and any damages that may be awarded in the event of an adverse ruling, management’s efforts and attention may be diverted from the ordinary business operations to address these claims. Regardless of the outcome, this litigation may have a material adverse impact on results because of defense costs, including costs related to indemnification obligations, diversion of resources and other factors.

The Company has also received an inquiry from the SEC regarding the Company's public disclosures surrounding its efforts to transition the Canadian inventory of products from Single-Pay loans to Open-End loans.

City of Austin

The Company was cited in July 2016 by the City of Austin, Texas for alleged violations of the Austin ordinance addressing products offered by CSOs. The Austin ordinance regulates aspects of products offered under the Company's credit access bureau ("CAB") program, including loan sizes and repayment terms. The Company believes that: (i) the Austin ordinance (similar to its counterparts elsewhere in Texas) conflicts with Texas state law and (ii) in any event, the Company's product complies with the ordinance, when the ordinance is properly construed. The Austin Municipal Court agreed with the Company's position that the ordinance conflicts with Texas law and, accordingly, did not address the second argument. In September 2017, the Travis County Court reversed the Municipal Court’s decision and remanded the case for further proceedings. To date, a hearing and trial on the merits have not been scheduled. The Company does not anticipate having a final determination of the lawfulness of its CAB program under the Austin ordinance (and similar ordinances in other Texas cities) in the near future. A final adverse decision could potentially result in material monetary liability in Austin and elsewhere in Texas, and would force the Company to restructure the loans it originates in Austin and elsewhere in Texas.

Other Legal Matters

The Company is a defendant in certain litigation matters encountered in the ordinary course of business. Certain of these matters may be covered to an extent by insurance. In the opinion of management, based upon the advice of legal counsel, the likelihood is remote that the impact of any of these pending litigation matters, either individually or in the aggregate, would have a material adverse effect on the Company's consolidated financial condition, results of operations or cash flows.

NOTE 14 – LEASES

The Company entered into operating leases for the buildings in which it operates that expire at various times through 2040. The Company determines if an arrangement is a lease at inception. Operating leases are included in "Right of use asset - operating leases" and "Lease liability - operating leases" in the Condensed Consolidated Balance Sheets. The Company currently has finance leases which in the aggregate are immaterial and not presented in the Condensed Consolidated Balance Sheets.

ROU assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate of return, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The majority of the leases have an original term of five years with two, five-year renewal options. For purposes of calculating operating lease liabilities, lease terms may be deemed to 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 several also require payment of certain period costs, including maintenance, insurance and property taxes. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company had operating lease costs of approximately $17.0 million for the period ended June 30, 2019. Some of the leases are with related parties and have terms similar to the non-related party leases previously described. Operating lease costs for unrelated third-party leases were $15.3 million and for related party leases were $1.7 million for the three months ended June 30, 2019.

During the six months ended June 30, 2019, cash paid for amounts included in the measurement of the liabilities and the operating cash flows were $17.4 million.

The following table summarizes the future minimum lease payments that the Company is contractually obligated to make under operating leases as of June 30, 2019:



(in thousands)	Third-Party			Related-Party			Total
2019	$	15,517		$	1,840		$	17,357
2020	30,735			3,752			34,487
2021	30,344			3,852			34,196
2022	29,353			3,909			33,262
2023	25,280			3,616			28,896
Thereafter	44,277			10,883			55,160
Total	175,506			27,852			203,358
Less: Imputed interest	(45,852		)	(8,663		)	(54,515		)
Operating lease liabilities	$	129,654		$	19,189		$	148,843

As of June 30, 2019, the weighted average remaining lease term was 6.3 years, and the weighted average operating discount rate used to determine the operating lease liability was 10.3%.

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

NOTE 15 – DISCONTINUED OPERATIONS

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

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

In connection with the disposition of the U.K. Subsidiaries, the U.S. entity that owned the Company's interests in the U.K. Subsidiaries recognized a loss on investment. This loss resulted in an estimated U.S. federal and state income tax benefit of $46.6 million, which will be available to offset the Company's future U.S. federal and state income tax obligations. In the second quarter of 2019, the Company revised the estimate of the tax basis in the U.K. Subsidiaries, resulting in a $0.8 million reduction in the income tax benefit recorded in the first quarter of 2019.

The following table presents financial results of the U.K. Subsidiaries, which meet the criteria of Discontinued Operations and, therefore, are excluded from the Company's results of continuing operations:



	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2019			2018			2019⁽¹⁾			2018
Revenue	$	—		$	11,814		$	6,957		$	22,729
Provision for losses	—			5,639			1,703			9,787
Net revenue	—			6,175			5,254			12,942

Cost of providing services
Office	—			545			246			1,073
Other costs of providing services	—			125			61			1,094
Advertising	—			2,441			775			4,312
Total cost of providing services	—			3,111			1,082			6,479
Gross margin	—			3,064			4,172			6,463
Operating expense (income)
Corporate, district and other expenses	—			5,675			3,810			10,700
Interest income	—			(7		)	(4		)	(12		)
Loss on disposition	—			—			39,414			—
Total operating expense	—			5,668			43,220			10,688
Pre-tax (loss) income from operations of discontinued operations	—			(2,604		)	(39,048		)	(4,225		)
Income tax expense (benefit) related to disposition	834			139			(46,589		)	139
Net income (loss) from discontinued operations	$	(834	)	$	(2,743	)	$	7,541		$	(4,364	)
(1) Includes U.K. Subsidiaries financial results from January 1, 2019 to February 25, 2019.

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table presents the aggregate carrying amounts of the assets and liabilities of the U.K. Subsidiaries:



(in thousands)	June 30, 2019		December 31, 2018
ASSETS
Cash	$	—	$	9,859
Restricted cash	—		3,384
Gross loans receivable	—		25,256
Less: allowance for loan losses	—		(5,387		)
Loans receivable, net	—		19,869
Prepaid expenses and other	—		1,482
Other	—		267
Total assets classified as discontinued operations in the Condensed Consolidated Balance Sheets	$	—	$	34,861
LIABILITIES
Accounts payable and accrued liabilities	$	—	$	8,136
Deferred revenue	—		180
Accrued interest	—		(5		)
Deferred rent	—		149
Other long-term liabilities	—		422
Total liabilities classified as discontinued operations in the Condensed Consolidated Balance Sheets	$	—	$	8,882

The following table presents cash flows of the U.K. Subsidiaries:



	Six Months Ended June 30,
(in thousands)	2019⁽¹⁾			2018
Net cash (used in) / provided by discontinued operating activities	$	(504	)	$	5,458
Net cash used in discontinued investing activities	(14,213		)	(14,349		)
Net cash used in discontinued financing activities	—			—
(1) Includes U.K. Subsidiaries financial results from January 1, 2019 to February 25, 2019.

NOTE 16 – CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In August 2018, CGHC issued $690.0 million of 8.25% Senior Secured Notes due September 1, 2025. The proceeds from issuance of the 8.25% Senior Secured Notes were used to extinguish the February and November 2017 12.00% Senior Secured Notes due March 1, 2022. The redemption was conducted pursuant to the indenture governing the 8.25% Senior Secured Notes. See Note 5, "Long-Term Debt," for additional details.

In August 2018, CURO Canada Receivables Limited Partnership, a newly created, bankruptcy-remote special purpose vehicle (the "Canada SPV Borrower") and a wholly-owned subsidiary, entered into a four-year revolving credit facility with Waterfall Asset Management, LLC that provided for C$175.0 million of initial borrowing capacity and the ability to expand such capacity up to C$250.0 million ("Non-Recourse Canada SPV Facility"). See Note 5. "Long-Term Debt" for additional details.

In March 2018, CFTC redeemed $77.5 million of the 12.00% Senior Secured Notes at a price equal to 112.00% of the principal amount plus accrued and unpaid interest to the date of redemption. The redemption was conducted pursuant to the indenture governing the 12.00% Senior Secured Notes, dated as of February 15, 2017, by and among CFTC, the guarantors party thereto and TMI Trust Company, as trustee and collateral agent. Consistent with the terms of the Indenture, CFTC used a portion of the cash proceeds from the Company's initial public offering, to redeem the 12.00% Senior Secured Notes.

In November 2017, CFTC issued $135.0 million aggregate principal amount of additional 12.00% Senior Secured Notes in a private offering exempt from the registration requirements of the Securities Act (the "Additional Notes Offering"). CFTC used the proceeds from the Additional Notes Offering, together with available cash, to (i) pay a cash dividend, in an amount of $140.0 million to the Company, CFTC’s sole stockholder, and ultimately the Company's stockholders and (ii) pay fees, expenses, premiums and accrued interest in connection with the Additional Notes Offering. CFTC received the consent of the holders of a majority of

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

the outstanding principal amount of the current Senior Secured Notes to a one-time waiver with respect to the restrictions contained in Section 5.07(a) of the indenture governing the 12.00% Senior Secured Notes to permit the dividend.

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

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


(i)	CURO as the issuer of the 8.25% Senior Secured Notes;

(ii)

The Company's subsidiary guarantors, which are comprised of its domestic subsidiaries, including CFTC as the issuer of the 12.00% Senior Secured Notes that were redeemed in August 2018, CURO Intermediate, and U.S. SPV as the issuer of the Non-Recourse U.S. SPV Facility that was extinguished in October 2018, and excluding Canada SPV (the “Subsidiary Guarantors”), on a consolidated basis, which are 100% owned by CURO, and which are guarantors of the 8.25% Senior Secured Notes issued in August 2018;


(iii)	The Company's other subsidiaries on a consolidated basis, which are not guarantors of the 8.25% Senior Secured Notes (the “Subsidiary Non-Guarantors”)


(iv)	Consolidating and eliminating entries representing adjustments to:


a.	eliminate intercompany transactions between or among us, the Subsidiary Guarantors and the Subsidiary Non-Guarantors; and


b.	eliminate the investments in subsidiaries;


(v)	The Company and its subsidiaries on a consolidated basis.

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Condensed Consolidating Balance Sheets



	June 30, 2019
(dollars in thousands)	Subsidiary Guarantors			Subsidiary Non-Guarantors			Canada SPV		CURO			Eliminations			CURO Consolidated
Assets:
Cash	$	68,354		$	23,943		$	—	$	—		$	—		$	92,297
Restricted cash	16,198			2,695			14,819		—			—			33,712
Loans receivable, net	269,298			48,297			190,121		—			—			507,716
Right of use asset - operating leases	79,000			61,982			—		—			—			140,982
Deferred income taxes	(7,848		)	—			—		10,485			—			2,637
Income taxes receivable	(470		)	6,395			—		31,654			—			37,579
Prepaid expenses and other	23,038			7,203			—		—			—			30,241
Property and equipment, net	44,209			28,784			—		—			—			72,993
Goodwill	91,131			29,319			—		—			—			120,450
Other intangibles, net	8,420			22,237			—		—			—			30,657
Intercompany receivable	107,251			—			—		—			(107,251		)	—
Investment in subsidiaries	—			—			—		(1,515		)	1,515			—
Other	15,401			690			—		—			—			16,091
Total assets	$	713,982		$	231,545		$	204,940	$	40,624		$	(105,736	)	$	1,085,355
Liabilities and Stockholders' equity:
Accounts payable and accrued liabilities	$	44,667		$	(1,166	)	$	15,020	$	753		$	—		$	59,274
Deferred revenue	5,237			3,430			45		—			—			8,712
Lease liability - operating leases	86,685			62,158			—		—			—			148,843
Income taxes payable	(18,731		)	—			—		18,731			—			—
Accrued interest	2			—			713		18,975			—			19,690
Payable to CURO Holdings Corp.	736,920			—			—		(736,920		)	—			—
CSO liability for losses	9,504			—			—		—			—			9,504
Long-term debt	—			—			90,976		677,536			—			768,512
Intercompany payable	—			20,002			87,249		—			(107,251		)	—
Other liabilities	7,999			595			—		—			—			8,594
Deferred tax liabilities	(4,171		)	4,848			—		4,171			—			4,848
Total liabilities	868,112			89,867			194,003		(16,754		)	(107,251		)	1,027,977
Stockholder’s equity	(154,130		)	141,678			10,937		57,378			1,515			57,378
Total liabilities and stockholder’s equity	$	713,982		$	231,545		$	204,940	$	40,624		$	(105,736	)	$	1,085,355

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



	December 31, 2018
(dollars in thousands)	Subsidiary Guarantors			Subsidiary Non-Guarantors		Canada SPV			CURO			Eliminations			CURO Consolidated
Assets:
Cash	$	42,403		$	18,772	$	—		$	—		$	—		$	61,175
Restricted cash	9,993			2,606		12,840			—			—			25,439
Loans receivable, net	304,542			56,805		136,187			—			—			497,534
Deferred income taxes	—			1,534		—			—			—			1,534
Income taxes receivable	7,190			—		—			9,551			—			16,741
Prepaid expenses and other	37,866			5,722		—			—			—			43,588
Property and equipment, net	47,918			28,832		—			—			—			76,750
Goodwill	91,131			28,150		—			—			—			119,281
Other intangibles, net	8,418			21,366		—			—			—			29,784
Intercompany receivable	77,009			—		—			—			(77,009		)	—
Investment in subsidiaries	—			—		—			(101,665		)	101,665			—
Other	12,253			677		—			—			—			12,930
Assets from discontinued operations	—			2,406		—			—			32,455			34,861
Total assets	$	638,723		$	166,870	$	149,027		$	(92,114	)	$	57,111		$	919,617
Liabilities and Stockholder's equity:
Accounts payable and accrued liabilities	$	38,240		$	5,734	$	4,980		$	192		$	—		$	49,146
Deferred revenue	5,981			3,462		40			—			—			9,483
Income taxes payable	—			1,579		—			—			—			1,579
Accrued interest	149			—		831			19,924			—			20,904
Payable to CURO Holdings Corp.	768,345			—		—			(768,345		)	—			—
CSO liability for losses	12,007			—		—			—			—			12,007
Deferred rent	9,559			1,292		—			—			—			10,851
Long-term debt	20,000			—		107,479			676,661			—			804,140
Subordinated shareholder debt	—			2,196		—			—			—			2,196
Intercompany payable	—			224		44,330			—			(44,554		)	—
Other liabilities	4,967			833		—			—			—			5,800
Deferred tax liabilities	15,175			—		—			(1,445		)	—			13,730
Liabilities from discontinued operations	—			8,882		—			—			—			8,882
Total liabilities	874,423			24,202		157,660			(73,013		)	(44,554		)	938,718
Stockholder’s equity	(235,700		)	142,668		(8,633		)	(19,101		)	101,665			(19,101		)
Total liabilities and stockholder’s equity	$	638,723		$	166,870	$	149,027		$	(92,114	)	$	57,111		$	919,617

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Condensed Consolidating Statements of Operations



	Three Months Ended June 30, 2019
(dollars in thousands)	Subsidiary Guarantors			Subsidiary Non-Guarantors			Canada SPV			CURO			Eliminations			CURO Consolidated
Revenue	$	210,046		$	28,162		$	26,092		$	—		$	—		$	264,300
Provision for losses	92,552			6,344			13,114			—			—			112,010
Net revenue	117,494			21,818			12,978			—			—			152,290
Cost of providing services:
Salaries and benefits	17,422			8,664			—			—			—			26,086
Occupancy	8,033			5,899			—			—			—			13,932
Office	4,004			1,453			—			—			—			5,457
Other costs of providing services	11,789			1,065			—			—			—			12,854
Advertising	11,179			1,601			—			—			—			12,780
Total cost of providing services	52,427			18,682			—			—			—			71,109
Gross margin	65,067			3,136			12,978			—			—			81,181
Operating (income) expense:
Corporate, district and other expenses	30,766			6,422			(781		)	2,631			—			39,038
Intercompany management fee	(3,237		)	3,229			8			—			—			—
Interest expense	27			7			2,375			14,614			—			17,023
Intercompany interest (income) expense	(1,513		)	890			623			—			—			—
Total operating expense	26,043			10,548			2,225			17,245			—			56,061
Income (loss) from continuing operations before income taxes	39,024			(7,412		)	10,753			(17,245		)	—			25,120
Provision (benefit) for income tax expense	9,591			1,094			—			(3,232		)	—			7,453
Net income (loss) from continuing operations	29,433			(8,506		)	10,753			(14,013		)	—			17,667
Net loss on discontinued operations	—			(834		)	—			—			—			(834		)
Net (loss) income	29,433			(9,340		)	10,753			(14,013		)	—			16,833
Equity in net income (loss) of subsidiaries:
CFTC	—			—			—			30,846			(30,846		)	—
Guarantor Subsidiaries	29,433			—			—			—			(29,433		)	—
Non-Guarantor Subsidiaries	(9,340		)	—			—			—			9,340			—
SPV Subs	10,753			—			—			—			(10,753		)	—
Net income (loss) attributable to CURO	$	60,279		$	(9,340	)	$	10,753		$	16,833		$	(61,692	)	$	16,833

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



	Three Months Ended June 30, 2018
(dollars in thousands)	CFTC			CURO Intermediate			Subsidiary Guarantors			Subsidiary Non-Guarantors			SPV Subs		Eliminations			CFTC Consolidated			CURO			Eliminations			CURO Consolidated
Revenue	$	—		$	—		$	118,034		$	47,043		$	72,092	$	—		$	237,169		$	—		$	—		$	237,169
Provision for losses	—			—			46,320			14,360			25,667		—			86,347			—			—			86,347
Net revenue	—			—			71,714			32,683			46,425		—			150,822			—			—			150,822
Cost of providing services:
Salaries and benefits	—			—			18,070			8,838			—		—			26,908			—			—			26,908
Occupancy	—			—			7,643			5,677			—		—			13,320			—			—			13,320
Office	—			—			4,247			1,285			—		—			5,532			—			—			5,532
Other store operating expenses	—			—			11,254			881			466		—			12,601			—			—			12,601
Advertising	—			—			12,409			2,704			—		—			15,113			—			—			15,113
Total cost of providing services	—			—			53,623			19,385			466		—			73,474			—			—			73,474
Gross Margin	—			—			18,091			13,298			45,959		—			77,348			—			—			77,348
Operating (income) expense:
Corporate, district and other expenses	458			18			25,383			4,759			46		—			30,664			2,316			—			32,980
Intercompany management fee	—			—			(6,920		)	3,281			3,639		—			—			—			—			—
Interest expense	16,585			—			(60		)	7			3,940		—			20,472			—			—			20,472
Intercompany interest (income) expense	—			(904		)	(180		)	1,084			—		—			—			—			—			—
Loss on extinguishment of debt	—			—			—			—			—		—			—			—			—			—
Total operating expense	17,043			(886		)	18,223			9,131			7,625		—			51,136			2,316			—			53,452
(Loss) income from continuing operations before income taxes	(17,043		)	886			(132		)	4,167			38,334		—			26,212			(2,316		)	—			23,896
(Benefit) provision for income tax expense	(5,418		)	13,668			(4,458		)	1,962			—		—			5,754			(576		)	—			5,178
Net (loss) income from continuing operations	(11,625		)	(12,782		)	4,326			2,205			38,334		—			20,458			(1,740		)	—			18,718
Net loss from discontinued operations	—			—			—			(2,743		)	—		—			(2,743		)	—			—			(2,743		)
Net (loss) income	(11,625		)	(12,782		)	4,326			(538		)	38,334		—			17,715			(1,740		)	—			15,975
Equity in net income (loss) of subsidiaries:
CFTC	—			—			—			—			—		—			—			20,458			(20,458		)	—
CURO Intermediate	(12,782		)	—			—			—			—		12,782			—			—			—			—
Guarantor Subsidiaries	4,326			—			—			—			—		(4,326		)	—			—			—			—
Non-Guarantor Subsidiaries	2,205			—			—			—			—		(2,205		)	—			—			—			—
SPV Subs	38,334			—			—			—			—		(38,334		)	—			—			—			—
Net income (loss) attributable to CURO	$	20,458		$	(12,782	)	$	4,326		$	(538	)	$	38,334	$	(32,083	)	$	17,715		$	18,718		$	(20,458	)	$	15,975

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



	Six Months Ended June 30, 2019
(dollars in thousands)	Subsidiary Guarantors			Subsidiary Non-Guarantors			Canada SPV			CURO			Eliminations			CURO Consolidated
Revenue	$	436,165		$	54,936		$	51,138		$	—		$	—		$	542,239
Provision for losses	177,532			10,443			26,420			—			—			214,395
Net revenue	258,633			44,493			24,718			—			—			327,844
Cost of providing services:
Salaries and benefits	37,373			17,414			—			—			—			54,787
Occupancy	16,043			12,126			—			—			—			28,169
Office	7,893			2,677			—			—			—			10,570
Other costs of providing services	24,921			2,153			—			—			—			27,074
Advertising	17,533			3,033			—			—			—			20,566
Total cost of providing services	103,763			37,403			—			—			—			141,166
Gross margin	154,870			7,090			24,718			—			—			186,678
Operating (income) expense:
Corporate, district and other expenses	72,304			11,604			(755		)	4,973			—			88,126
Intercompany management fee	(6,300		)	6,284			16			—			—			—
Interest expense	317			79			5,265			29,052			—			34,713
Intercompany interest (income) expense	(2,393		)	1,770			623			—			—			—
Total operating expense	63,928			19,737			5,149			34,025			—			122,839
Income (loss) from continuing operations before income taxes	90,942			(12,647		)	19,569			(34,025		)	—			63,839
Provision (benefit) for income tax expense	23,610			2,129			—			(8,240		)	—			17,499
Net income (loss) from continuing operations	67,332			(14,776		)	19,569			(25,785		)	—			46,340
Net loss on discontinued operations	—			7,541			—			—			—			7,541
Net (loss) income	67,332			(7,235		)	19,569			(25,785		)	—			53,881
Equity in net income (loss) of subsidiaries:
CFTC	—			—			—			79,666			(79,666		)	—
Guarantor Subsidiaries	67,332			—			—			—			(67,332		)	—
Non-Guarantor Subsidiaries	(7,235		)	—			—			—			7,235			—
SPV Subs	19,569			—			—			—			(19,569		)	—
Net income (loss) attributable to CURO	$	146,998		$	(7,235	)	$	19,569		$	53,881		$	(159,332	)	$	53,881

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



	Six Months Ended June 30, 2018
(dollars in thousands)	CFTC			CURO Intermediate			Subsidiary Guarantors			Subsidiary Non-Guarantors			SPV Subs		Eliminations			CFTC Consolidated			CURO			Eliminations			CURO Consolidated
Revenue	$	—		$	—		$	246,442		$	93,293		$	148,277	$	—		$	488,012		$	—		$	—		$	488,012
Provision for losses	—			—			82,089			26,910			54,231		—			163,230			—			—			163,230
Net revenue	—			—			164,353			66,383			94,046		—			324,782			—			—			324,782
Cost of providing services:
Salaries and benefits	—			—			36,089			17,737			—		—			53,826			—			—			53,826
Occupancy	—			—			15,289			11,458			—		—			26,747			—			—			26,747
Office	—			—			9,830			2,155			—		—			11,985			—			—			11,985
Other store operating expenses	—			—			23,284			1,801			947		—			26,032			—			—			26,032
Advertising	—			—			17,568			5,430			—		—			22,998			—			—			22,998
Total cost of providing services	—			—			102,060			38,581			947		—			141,588			—			—			141,588
Gross Margin	—			—			62,293			27,802			93,099		—			183,194			—			—			183,194
Operating (income) expense:
Corporate, district and other expenses	906			25			53,375			9,656			76		—			64,038			4,371			—			68,409
Intercompany management fee	—			—			(13,822		)	6,775			7,047		—			—			—			—			—
Interest expense	34,907			—			(172		)	64			8,027		—			42,826			—			—			42,826
Intercompany interest (income) expense	—			(1,784		)	(259		)	2,043			—		—			—			—			—			—
Loss on extinguishment of debt	11,683			—			—			—			—		—			11,683			—			—			11,683
Total operating expense	47,496			(1,759		)	39,122			18,538			15,150		—			118,547			4,371			—			122,918
(Loss) income from continuing operations before income taxes	(47,496		)	1,759			23,171			9,264			77,949		—			64,647			(4,371		)	—			60,276
(Benefit) provision for income tax expense	(12,259		)	32,165			(6,043		)	3,891			—		—			17,754			(1,109		)	—			16,645
Net (loss) income from continuing operations	(35,237		)	(30,406		)	29,214			5,373			77,949		—			46,893			(3,262		)	—			43,631
Net loss from discontinued operations	—			—			—			(4,364		)	—		—			(4,364		)	—			—			(4,364		)
Net (loss) income	(35,237		)	(30,406		)	29,214			1,009			77,949		—			42,529			(3,262		)	—			39,267
Equity in net income (loss) of subsidiaries:
CFTC	—			—			—			—			—		—			—			42,529			(42,529		)	—
CURO Intermediate	(30,406		)	—			—			—			—		30,406			—			—			—			—
Guarantor Subsidiaries	29,214			—			—			—			—		(29,214		)	—			—			—			—
Non-Guarantor Subsidiaries	1,009			—			—			—			—		(1,009		)	—			—			—			—
SPV Subs	77,949			—			—			—			—		(77,949		)	—			—			—			—
Net income (loss) attributable to CURO	$	42,529		$	(30,406	)	$	29,214		$	1,009		$	77,949	$	(77,766	)	$	42,529		$	39,267		$	(42,529	)	$	39,267

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Condensed Consolidating Statements of Cash Flows



	Six Months Ended June 30, 2019
(dollars in thousands)	Subsidiary Guarantors			Subsidiary Non-Guarantors			Canada SPV			CURO			Eliminations			CURO Consolidated
Cash flows from operating activities
Net cash provided by (used in) continuing operating activities	$	204,323		$	10,929		$	93,690		$	1,833		$	1,544		$	312,319
Net cash used in discontinued operating activities	—			(504		)	—			—			—			(504		)
Cash flows from investing activities:
Purchase of property, equipment and software	(4,998		)	(1,166		)	—			—			—			(6,164		)
Investment in Cognical Holdings	(4,368		)	—			—			—			—			(4,368		)
Originations of loans, net	(142,871		)	(3,227		)	(71,101		)	—			—			(217,199		)
Net cash (used in) provided by continuing investing activities	(152,237		)	(4,393		)	(71,101		)	—			—			(227,731		)
Net cash used in discontinued investing activities	—			(14,213		)	—			—			—			(14,213		)
Cash flows from financing activities:
Proceeds from Non-Recourse U.S. SPV facility	—			—			—			—			—			—
Payments on Non-Recourse U.S. SPV facility	—			—			—			—			—			—
Proceeds from Non-Recourse Canada SPV facility	—			—			3,750			—			—			3,750
Payments on Non-Recourse Canada SPV facility	—			—			(24,752		)	—			—			(24,752		)
Proceeds from revolving credit facilities	30,000			38,002			—			—			—			68,002
Payments on revolving credit facilities	(50,000		)	(38,002		)	—			—			—			(88,002		)
Payments on subordinated stockholder debt	—			(2,245		)	—			—			—			(2,245		)
Proceeds from exercise of stock options	69			—			—			(42		)	—			27
Debt issuance costs paid	—			—			(169		)	(29		)	—			(198		)
Repurchase of common stock	—			—			—			(1,762		)	—			(1,762		)
Net cash used in provided by financing activities ⁽¹⁾	(19,931		)	(2,245		)	(21,171		)	(1,833		)	—			(45,180		)

Effect of exchange rate changes on cash and restricted cash	—			2,444			561			—			(1,544		)	1,461
Net increase (decrease) in cash and restricted cash	32,155			(7,982		)	1,979			—			—			26,152
Cash and restricted cash at beginning of period	52,397			34,620			12,840			—			—			99,857
Cash at end of period	$	84,552		$	26,638		$	14,819		$	—		$	—		$	126,009
(1) Financing activities include continuing operations only and were not impacted by discontinued operations

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



	Six Months Ended June 30, 2018
(dollars in thousands)	CFTC			CURO Intermediate		Subsidiary Guarantors			Subsidiary Non-Guarantors			SPV Subs			Eliminations			CFTC Consolidated			CURO			CURO Consolidated
Cash flows from operating activities:
Net cash provided (used) in continuing operating activities	$	87,848		$	—	$	38,259		$	53,104		$	67,767		$	12,305		$	259,283		$	(12,550	)	$	246,733
Net cash provided by (used in) discontinued operating activities	—			—		—			14,225			—			(8,767		)	5,458			—			5,458
Net cash provided by (used in) operating activities	87,848			—		38,259			67,329			67,767			3,538			264,741			(12,550		)	252,191
Cash flows from investing activities:
Purchase of property, equipment and software	—			—		(1,983		)	(974		)	—			—			(2,957		)	—			(2,957		)
Originations of loans, net	—			—		(84,640		)	(48,795		)	(61,201		)	—			(194,636		)	—			(194,636		)
Investment in Cognical Holdings	(958		)	—		—			—			—			—			(958		)	—			(958		)
Net cash (used in) provided by continuing investing activities	(958		)	—		(86,623		)	(49,769		)	(61,201		)	—			(198,551		)	—			(198,551		)
Net cash provided by (used in) discontinued investing activities	—			—		—			(14,349		)	—			—			(14,349		)	—			(14,349		)
Net cash provided by (used in) investing activities	(958		)	—		(86,623		)	(64,118		)	(61,201		)	—			(212,900		)	—			(212,900		)
Cash flows from financing activities:
Proceeds from Non-Recourse U.S. SPV facility	—			—		—			—			13,000			—			13,000			—			13,000
Payments on Non-Recourse U.S. SPV facility	—			—		—			—			(19,163		)	—			(19,163		)	—			(19,163		)
Proceeds from revolving credit facilities	10,000			—		—			8,798			—			—			18,798			—			18,798
Payments on revolving credit facilities	(10,000		)	—		—			(8,798		)	—			—			(18,798		)	—			(18,798		)
Net proceeds from issuance of common stock	—			—		—			—			—			—			—			12,431			12,431
Proceeds from exercise of stock options	—			—		—			—			—			—			—			39			39
Payments on 12.00% Senior Secured Notes	(77,500		)	—		—			—			—			—			(77,500		)	—			(77,500		)
Payments of call premiums from early debt extinguishments	(9,300		)	—		—			—			—			—			(9,300		)	—			(9,300		)
Debt issuance costs paid	(90		)	—		—			(78		)	—			—			(168		)	—			(168		)
Net cash (used in) provided by financing activities⁽¹⁾	(86,890		)	—		—			(78		)	(6,163		)	—			(93,131		)	12,470			(80,661		)

Effect of exchange rate changes on cash	—			—		—			(651		)	—			(3,538		)	(4,189		)	—			(4,189		)
Net (decrease) increase in cash and restricted cash	—			—		(48,364		)	2,482			403			—			(45,479		)	(80		)	(45,559		)
Cash and restricted cash at beginning of period	—			—		119,056			48,484			6,871			—			174,411			80			174,491
Cash and restricted cash at end of period	—			—		70,692			50,966			7,274			—			128,932			—			128,932
Less: Cash and restricted cash at end of period of Discontinued Operations	—			—		—			12,460			—			—			12,460			—			12,460
Cash and restricted cash at end of period of Continuing Operations	$	—		$	—	$	70,692		$	38,506		$	7,274		$	—		$	116,472		$	—		$	116,472

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

NOTE 17 – SHARE REPURCHASE PROGRAM

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, will continue until completed or terminated. CURO expects the purchases to be made from time-to-time in the open market, in privately negotiated transactions or both, at the Company's discretion and subject to market conditions and other factors. Any repurchased shares will be available for use in connection with equity plans or other corporate purposes.

Under this program, the Company has repurchased 244,200 shares of common stock through June 30, 2019. The table below summarizes share repurchase activity during the three and six months ended June 30, 2019:



	Six Months Ended June 30,
(in thousands, except per share amounts and number of share amounts)	2019
Total number of shares repurchased	244,200
Average price paid per share	$	10.26
Total value of shares repurchased	$	2,507

Total authorized repurchase amount	$	50,000
Total value of shares repurchased	2,507
Total remaining authorized repurchase amount	$	47,493

NOTE 18 – SUBSEQUENT EVENTS

Cognical Investment

During July 2019, as part of the broader capital structure reorganization by the investee company described in Note 1 - "Summary of Significant Accounting Policies and Nature of Operations" and Note 8 - "Financial Instruments", the Company purchased 10,695,187 additional preferred shares of Zibby for $4.0 million. As a result of this transaction, the Company's fully-diluted ownership in Zibby increased to 42.3%.

Share Repurchase Program

The Company repurchased 989,500 shares from July 1, 2019 through August 2, 2019:



	July 1 - August 2
(in thousands, except per share amounts and number of share amounts)	2019
Total number of shares repurchased	989,500
Average price paid per share	$	10.85
Total value of shares repurchased	$	10,731

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 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 Annual Report on Form 10-K for

the year ended December 31, 2018 filed with the Securities and Exchange Commissions (the "SEC") on March 18, 2019 ("the "2018 Form 10-K") for a discussion of the uncertainties, risks and assumptions associated with these statements.

Overview

We are a growth-oriented, technology-enabled, highly-diversified, multi-channel and multi-product consumer finance company serving a wide range of underbanked consumers in the United States ("U.S."), Canada and, through February 25, 2019, the United Kingdom ("U.K.").

History

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

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

Our growth has been fueled by acquisitions in the U.S. and Canada, as well as organically, including the launch of new brands. Recent brand launches include the March 2016 launch of LendDirect, a primarily online Installment and Open-End brand in Alberta, Canada, the June 2017 launch of Avio Credit, an online Installment and Open-End Loan brand in the U.S. market that is currently available in 11 states, and the February 2019 launch of Revolve Finance, discussed immediately below.

Recent Developments

Revolve Finance. In February 2019, we launched Revolve Finance, sponsored by Republic Bank of Chicago, which is being introduced across the Company's U.S. stores. This product provides customers 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.

Share Repurchase Program. Our Board of Directors authorized a share repurchase program in April 2019 providing for the repurchase of up to $50.0 million of our common stock. The repurchase program, which commenced June 2019, will continue until completed or terminated. We expect the purchases to be made from time-to-time in the open market and/or in privately negotiated transactions at our discretion, subject to market conditions and other factors. Any repurchased shares will be available for use in connection with equity plans and for other corporate purposes. Under this program, the Company has repurchased 244,200 shares of common stock through June 30, 2019.

Credit facilities. For recent developments related to our Senior Secured Notes, SPV facilities and other capital resources, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

U.K. Developments. On February 25, 2019, we announced that a proposed Scheme of Arrangement ("SOA"), as described in our Current Report on Form 8-K filed with the SEC on January 31, 2019, related to Curo Transatlantic Limited and SRC Transatlantic Limited (collectively the "U.K. Subsidiaries"), would not be implemented. We also announced that effective February 25, 2019, in accordance with the provisions of the U.K. Insolvency Act 1986 and as approved by the boards of directors of our U.K. Subsidiaries, insolvency practitioners from KPMG were appointed as administrators ("Administrators") for the U.K. Subsidiaries. The effect of the U.K. Subsidiaries’ entry into administration was to place the management, affairs, business and property of the U.K. Subsidiaries under the direct control of the Administrators. As a result, we deconsolidated the U.K. Subsidiaries as of February 25, 2019 and presented the U.K. Subsidiaries as Discontinued Operations in this Quarterly Report on Form 10-Q ("Form 10-Q").

In our Current Report on Form 8-K filed with the SEC on January 31, 2019, our results of operations included a $30.3 million expense comprised of (i) a proposed $23.6 million fund to settle historical redress claims and (ii) $6.7 million in advisory and other costs that would be required to execute the SOA. We subsequently concluded that pursuant to ASC 450, Contingencies, the SOA did not represent an estimate of loss for the redress loss contingency but instead was offered in ongoing negotiation of a potential compromised settlement with creditors. Therefore, the settlement offered through the SOA did not meet the recognition threshold pursuant to ASC 450 and should not have been accrued as a contingent liability for customer redress claims as of December 31, 2018. Our Current Report on Form 8-K filed with the SEC on March 1, 2019 appropriately included $4.6 million of fourth quarter 2018 redress costs and related charges which represented known claims as of December 31, 2018. See "Controls and Procedures" in our 2018 Form 10-K for further discussion.

Refer to the “Regulatory Environment and Compliance” below for additional information regarding recent regulatory developments that may impact our business.

Discussion of Revenue by Product and Segment and Related Loan Portfolio Performance

Revenue by Product

Year-over-year comparisons for Open-End were affected by the Q1 2019 Open-End Loss Recognition Change. Throughout this Form 10-Q, we do not include information for our U.K. Subsidiaries as they were discontinued in February 2019.

The following tables summarize revenue by product, including fees for credit services organization ("CSO"), for the periods indicated.



	For the Three Months Ended
	June 30, 2019						June 30, 2018
(in thousands, unaudited)	U.S.		Canada		Total		U.S.		Canada		Total
Unsecured Installment	$	120,482	$	1,630	$	122,112	$	111,244	$	3,692	$	114,936
Secured Installment	26,076		—		26,076		25,777		—		25,777
Open-End	32,318		22,654		54,972		23,261		3,961		27,222
Single-Pay	26,425		19,103		45,528		24,978		33,347		58,325
Ancillary	4,745		10,867		15,612		4,866		6,043		10,909
Total revenue	$	210,046	$	54,254	$	264,300	$	190,126	$	47,043	$	237,169

During the three months ended June 30, 2019, total revenue grew $27.1 million, or 11.4%, to $264.3 million, compared to the prior-year period, predominantly driven by growth in Unsecured Installment loans in the U.S. and Open-End loans in both countries. Geographically, total revenue in the U.S. and Canada grew 10.5% and 15.3%, respectively. From a product perspective, Unsecured Installment revenues rose 6.2%, driven by related loan growth while Secured Installment revenues and related receivables were consistent year-over-year. Year-over-year Canadian Single-Pay usage and product profitability were negatively impacted by regulatory changes in Ontario effective July 1, 2018 and the strategic transition of qualifying customers to Open-End loans. Open-End revenues rose 101.9% on organic growth in legacy states and the newer Virginia market in the U.S. Open-End loan growth in Canada was driven primarily by the introduction of Open-End loans in Ontario during the third quarter of 2018. Open-End loans in Canada grew $35.1 million, or 19.1%, sequentially (defined within this Form 10-Q as the change from the first quarter of 2019 to the second quarter of 2019, or comparable periods for 2018 sequential metrics). Single-Pay loan balances stabilized in Canada sequentially. Ancillary revenues increased 43.1% versus the same quarter a year ago, primarily due to the sale of insurance products to Installment and Open-End loan customers in Canada.



	For the Six Months Ended
	June 30, 2019						June 30, 2018
(in thousands, unaudited)	U.S.		Canada		Total		U.S.		Canada		Total
Unsecured Installment	$	254,485	$	3,405	$	257,890	$	231,720	$	8,595	$	240,315
Secured Installment	53,553		—		53,553		52,633		—		52,633
Open-End	64,911		42,930		107,841		49,095		5,350		54,445
Single-Pay	53,593		38,696		92,289		51,043		67,639		118,682
Ancillary	9,623		21,043		30,666		10,228		11,709		21,937
Total revenue	$	436,165	$	106,074	$	542,239	$	394,719	$	93,293	$	488,012

For the six months ended June 30, 2019, total revenue grew $54.2 million, or 11.1%, to $542.2 million, compared to the prior-year period, predominantly driven by growth in Unsecured Installment loans in the U.S. and Open-End loans in both countries. Geographically, total revenue in the U.S. and Canada grew 10.5% and 13.7%, respectively. From a product perspective, Unsecured Installment revenues rose 7.3%, driven by related loan growth while Secured Installment revenues and related receivables were consistent year-over-year. Year-over-year Canadian Single-Pay usage and product profitability were negatively impacted by regulatory changes in Ontario effective July 1, 2018 and the strategic transition of qualifying customers to Open-End loans. Open-End revenues rose 98.1% on organic growth in legacy states and the newer Virginia market in the U.S. Open-End loan growth in Canada was driven primarily by the introduction of Open-End loans in Ontario during the third quarter of 2018. Ancillary revenues

increased 39.8% versus the same quarter a year ago, primarily due to the sale of insurance to Installment and Open-End loan customers in Canada.

The following charts present revenue composition, including CSO fees, of the products and services that we currently offer for the periods indicated:

For the three months ended June 30, 2019 and 2018, revenue generated through our online channel was 44% and 40%, respectively, of consolidated revenue.

For the six months ended June 30, 2019 and 2018, revenue generated through our online channel was 45% and 41%, respectively, of consolidated revenue.

Loan Volume and Portfolio Performance Analysis

Unsecured Installment Loans

Unsecured Installment revenue and gross combined loans receivable increased from the prior-year quarter due to growth in the U.S., primarily in California and Texas. Unsecured Installment gross combined loans receivable grew $3.1 million, or 1.4%, compared to June 30, 2018, despite a decline in Canada of $9.1 million due to mix shift to Open-End loans. In the U.S., Unsecured Installment gross combined loans receivable increased 6.0% year-over-year. Unsecured Installment loans Guaranteed by the Company declined $1.3 million year-over-year due to a regulatory change in Ohio and the subsequent conversion of Ohio CSO volume to Company-Owned loans, partially offset by growth in Texas.

The net charge-off ("NCO") rate for Company Owned Unsecured Installment gross loans receivables in the second quarter of 2019 increased approximately 281 bps from the second quarter of 2018, due to geographic mix shift from Canada to the U.S. and increases in U.S. NCO rates due to product and credit policy decisions. Canada Unsecured Installment balances declined

$9.1 million compared to the prior year due to shifting customer preferences from Unsecured Installment to Open-End, while U.S. balances grew $13.5 million due to customer demand. As a result, the U.S. percentage mix of total Company Owned Unsecured Installment gross loans receivable rose from 85.4% last year to 91.3% this year. NCO rates in the U.S. are higher than Canada, so the relative growth in the U.S. balances resulted in an overall increase in the consolidated NCO rate for Company Owned Unsecured Installment loans. In addition, the NCO rate in the U.S. rose from 18.6% in the second quarter of 2018 to 21.3% in the second quarter of 2019 due primarily to credit-line increases and expansion of the Avio brand. As an immature portfolio, Avio has higher relative NCO rates.

The Unsecured Installment Allowance for loan losses as a percentage of Company Owned Unsecured Installment gross loans receivable ("allowance coverage") increased sequentially from 20.8% as of March 31, 2019, to 21.4% as of June 30, 2019, primarily as a result of related higher NCO rates as the past due rate rose only 60 bps versus the same quarter a year ago.

NCO rates for Unsecured Installment loans Guaranteed by the Company increased 150 bps compared to the same quarter in 2018 because of credit-line increases and wind down of the Ohio portfolio. The CSO liability for losses remained consistent sequentially from 14.4% last quarter to 14.5% during the second quarter of 2019, as the past-due rate was flat versus the second quarter of last year.



	2019						2018
(dollars in thousands, unaudited)	Second Quarter			First Quarter			Fourth Quarter			Third Quarter			Second Quarter
Unsecured Installment loans:
Revenue - Company Owned	$	59,814		$	65,542		$	69,748		$	64,146		$	54,868
Provision for losses - Company Owned	33,514			33,845			39,565			32,946			23,219
Net revenue - Company Owned	$	26,300		$	31,697		$	30,183		$	31,200		$	31,649
Net charge-offs - Company Owned	$	31,970		$	37,919		$	37,951		$	27,308		$	26,527
Revenue - Guaranteed by the Company	$	62,298		$	70,236		$	75,559		$	73,514		$	60,069
Provision for losses - Guaranteed by the Company	28,336			27,422			37,352			39,552			26,974
Net revenue - Guaranteed by the Company	$	33,962		$	42,814		$	38,207		$	33,962		$	33,095
Net charge-offs - Guaranteed by the Company	$	27,486		$	30,421		$	38,522		$	37,995		$	25,667
Unsecured Installment gross combined loans receivable:
Company Owned	$	164,722		$	161,716		$	190,403		$	185,130		$	160,285
Guaranteed by the Company ⁽¹⁾⁽²⁾	65,055			59,740			77,451			75,807			66,351
Unsecured Installment gross combined loans receivable ⁽¹⁾⁽²⁾	$	229,777		$	221,456		$	267,854		$	260,937		$	226,636
Average gross loans receivable:
Average Unsecured Installment gross loans receivable - Company Owned	$	163,219		$	176,060		$	187,767		$	172,708		$	158,121
Average Unsecured Installment gross loans receivable - Guaranteed by the Company	$	62,398		$	68,596		$	76,629		$	71,079		$	60,342
Allowance for loan losses and CSO liability for losses:
Unsecured Installment Allowance for loan losses ⁽³⁾	$	35,223		$	33,666		$	37,716		$	36,160		$	30,291
Unsecured Installment CSO liability for losses ⁽³⁾	$	9,433		$	8,584		$	11,582		$	12,750		$	11,193
Unsecured Installment Allowance for loan losses as a percentage of Unsecured Installment gross loans receivable	21.4		%	20.8		%	19.8		%	19.5		%	18.9		%
Unsecured Installment CSO liability for losses as a percentage of Unsecured Installment gross loans guaranteed by the Company	14.5		%	14.4		%	15.0		%	16.8		%	16.9		%
Unsecured Installment past-due balances:
Unsecured Installment gross loans receivable	$	38,037		$	40,801		$	49,087		$	49,637		$	36,125
Unsecured Installment gross loans guaranteed by the Company	$	10,087		$	7,967		$	11,708		$	12,120		$	10,319
Past-due Unsecured Installment gross loans receivable -- percentage ⁽²⁾	23.1		%	25.2		%	25.8		%	26.8		%	22.5		%
Past-due Unsecured Installment gross loans guaranteed by the Company -- percentage ⁽²⁾	15.5		%	13.3		%	15.1		%	16.0		%	15.6		%
Unsecured Installment other information:
Originations - Company Owned	$	102,792		$	78,515		$	114,182		$	121,415		$	114,038
Originations - Guaranteed by the Company ⁽¹⁾	$	80,445		$	68,899		$	89,319		$	91,828		$	84,082
Unsecured Installment ratios:
Provision as a percentage of gross loans receivable - Company Owned	20.3		%	20.9		%	20.8		%	17.8		%	14.5		%
Provision as a percentage of gross loans receivable - Guaranteed by the Company	43.6		%	45.9		%	48.2		%	52.2		%	40.7		%
(1) Includes loans originated by third-party lenders through CSO programs, which are not included in the Condensed Consolidated Financial Statements.
(2) Non-GAAP measure - Refer to "Non-GAAP Financial Measures" for further details.
(3) Allowance for loan losses is reported as a contra-asset reducing gross loans receivable while the CSO liability for losses is reported as a liability on the Condensed Consolidated Balance Sheets.

Secured Installment Loans

Secured Installment revenue and related gross combined loans receivable balances as of June 30, 2019 remained consistent year-over-year. Both the NCO and past-due rates decreased modestly year-over-year. Secured Installment Allowance for loan losses and CSO liability for losses as a percentage of Secured Installment gross combined loans receivable decreased sequentially from 11.9% last quarter to 11.5% during the second quarter of 2019, based primarily on NCO rate improvement.



	2019						2018
(dollars in thousands, unaudited)	Second Quarter			First Quarter			Fourth Quarter			Third Quarter			Second Quarter
Secured Installment loans:
Revenue	$	26,076		$	27,477		$	29,482		$	28,562		$	25,777
Provision for losses	7,821			7,080			12,035			10,188			7,650
Net revenue	$	18,255		$	20,397		$	17,447		$	18,374		$	18,127
Net charge-offs	$	7,630		$	9,822		$	11,132		$	9,285		$	9,003
Secured Installment gross combined loan balances:
Secured Installment gross combined loans receivable ⁽¹⁾⁽²⁾	$	87,718		$	83,087		$	95,922		$	94,194		$	87,434
Average Secured Installment gross combined loans receivable	$	85,403		$	89,505		$	95,058		$	90,814		$	84,984
Secured Installment Allowance for loan losses and CSO liability for losses ⁽²⁾	$	10,067		$	9,874		$	12,616		$	11,714		$	10,812
Secured Installment Allowance for loan losses and CSO liability for losses as a percentage of Secured Installment gross combined loans receivable	11.5		%	11.9		%	13.2		%	12.4		%	12.4		%
Secured Installment past-due balances:
Secured Installment past-due gross loans receivable and gross loans guaranteed by the Company	$	14,570		$	13,866		$	17,835		$	17,754		$	15,246
Past-due Secured Installment gross loans receivable and gross loans guaranteed by the Company -- percentage ⁽¹⁾	16.6		%	16.7		%	18.6		%	18.8		%	17.4		%
Secured Installment other information:
Originations⁽³⁾	$	49,051		$	33,490		$	49,217		$	51,742		$	53,597
Secured Installment ratios:
Provision as a percentage of gross combined loans receivable	8.9		%	8.5		%	12.5		%	10.8		%	8.7		%
(1) Non-GAAP measure - Refer to "Non-GAAP Financial Measures" for further details.
(2) Allowance for loan losses is reported as a contra-asset reducing gross loans receivable while the CSO liability for losses is reported as a liability on the Condensed Consolidated Balance Sheets.
(3) Includes loans originated by third-party lenders through CSO programs, which are not included in the Condensed Consolidated Financial Statements.

Open-End Loans

Open-End loan balances as of June 30, 2019 increased by $192.3 million compared to June 30, 2018, primarily due to the launch of Open-End loans in Canada in late 2017, which accounted for $167.9 million of the year-over-year growth. Also, the Q1 2019 Open-End Loss Recognition Change affected comparability with the inclusion of $35.4 million of past-due Open-End loans as of June 30, 2019. Open-End balances in Canada grew $35.1 million sequentially from the first quarter of 2019 ($30.8 million on a constant currency basis) due to organic growth of the product. Remaining year-over-year loan growth was driven by the organic growth in seasoned markets, such as Tennessee and Kansas, and the relatively new Virginia market.

The Open-End NCO rate during the second quarter of 2019 was 9.6% compared to 16.7% in the same quarter in the prior year, as a result of a modest improvement in the U.S. and overall mix shift to Canada. NCO rates are lower in Canada, and Open-End loans in Canada comprised 77.4% of total Open-End loans as of June 30, 2019, compared to 56.4% as of June 30, 2018. Sequentially, on a non-GAAP pro forma basis, as described below, NCO rates improved 170 bps, primarily on portfolio improvements in Canada.

Q1 2019 Open-End Loss Recognition Change

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

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

The change affects comparability to prior periods as follows:


•	Gross combined loans receivable: balances as of June 30, 2019 include $35.4 million of Open-End loans that are up to 90 days past-due with related accrued interest, while such balances for periods prior to March 31, 2019 do not include any past-due loans.


•	Revenues: for the quarter ended June 30, 2019, gross revenues include interest earned on past-due loan balances of approximately $12 million, while revenues in prior-year periods do not include comparable amounts. Gross revenue for the six-month ended June 30, 2019 included interest earned on past-due loan balances of approximately $21 million.

•

Provision for Losses: prospectively, past-due, unpaid balances plus related accrued interest charge-off on day 91. Provision expense is affected by NCOs (total charge-offs less total recoveries) plus changes to the Allowance for loan losses. Because NCOs prospectively include unpaid principal and up to 90 days of related accrued interest, NCO amounts and rates are higher and the Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable is higher. The Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable increased to 18.3% at June 30, 2019 compared to 10.7% in the same prior-year period.

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



	2019						2018
(dollars in thousands, unaudited)	Second Quarter			First Quarter			Fourth Quarter			Third Quarter			Second Quarter
Open-End loans:
Revenue	$	54,972		$	52,869		$	47,228		$	40,290		$	27,222
Provision for losses	29,373			25,317			28,337			31,686			14,848
Net revenue	$	25,599		$	27,552		$	18,891		$	8,604		$	12,374
Net charge-offs ⁽¹⁾	$	25,151		$	(1,521	)	$	25,218		$	23,579		$	11,924
Open-End gross loan balances:
Open-End gross loans receivable	$	283,311		$	240,790		$	207,333		$	184,067		$	91,033
Average Open-End gross loans receivable	$	262,051		$	224,062		$	195,700		$	137,550		$	71,299
Open-End allowance for loan losses:
Allowance for loan losses	$	51,717		$	46,963		$	19,901		$	18,013		$	9,717
Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable	18.3		%	19.5		%	9.6		%	9.8		%	10.7		%
Open-End past-due balances:
Open-End past-due gross loans receivable	$	35,395		$	32,444		$	—		$	—		$	—
Past-due Open-End gross loans receivable - percentage	12.5		%	13.5		%	—		%	—		%	—		%
(1) Excluding the impact of the Q1 2019 Open-End Loss Recognition Change, NCOs for the first quarter 2019 were $31,788.

In addition, the following table illustrates, on a non-GAAP pro forma basis, the first and second quarter of 2019 results as if the Q1 2019 Open-End Loss Recognition Change had been applied to our outstanding Open-End loan portfolio as of December 31, 2018. This table is illustrative of retrospective application to determine the NCOs that would have been incurred in the first and second quarters of 2019 from the December 31, 2018 loan book. The primary purpose of this pro forma illustration is to provide a representative level of NCO rates from applying the Q1 2019 Open-End Loss Recognition Change.



Pro Forma	2019			2019
(dollars in thousands, unaudited)	Second Quarter			First Quarter
Open-End loans:
Revenue	$	54,972		$	52,869
Provision for losses	29,373			25,317
Net revenue	$	25,599		$	27,552
Net charge-offs	$	29,648		$	31,788
Open-End gross loan balances:
Open-End gross loans receivable	$	283,311		$	240,790
Average Open-End gross loans receivable	$	262,051		$	245,096
Net-charge offs as a percentage of average gross loans receivable	11.3		%	13.0		%
Open-End allowance for loan losses:
Allowance for loan losses	$	51,717		$	46,963
Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable	18.3		%	19.5		%
Open-End past-due balances:
Open-End past-due gross loans receivable	$	35,395		$	32,444
Past-due Open-End gross loans receivable - percentage	12.5		%	13.5		%

Single-Pay

Single-Pay revenue and related loans receivable during the three months ended June 30, 2019 declined year-over-year compared to the three months ended June 30, 2018, primarily due to regulatory changes in Canada (rate and product changes in Ontario and British Columbia) that accelerated the shift to Open-End loans. The aforementioned Open-End growth in Canada ($167.9

million year-over-year), in part, contributed to the decrease in Single-Pay loan balances, which shrank year-over-year by $12.2 million. The Single-Pay NCO rate remained consistent year-over-year.



	2019						2018
(dollars in thousands, unaudited)	Second Quarter			First Quarter			Fourth Quarter			Third Quarter			Second Quarter
Single-pay loans:
Revenue	$	45,528		$	46,761		$	49,696		$	50,614		$	58,325
Provision for losses	12,446			8,268			12,825			12,757			13,101
Net revenue	$	33,082		$	38,493		$	36,871		$	37,857		$	45,224
Net charge-offs	$	11,458		$	8,610		$	11,838		$	12,892		$	12,976
Single-Pay gross loan balances:
Single-Pay gross loans receivable	$	76,126		$	69,753		$	80,823		$	77,390		$	84,665
Average Single-Pay gross loans receivable	$	72,940		$	75,288		$	79,107		$	81,028		$	83,353
Single-Pay Allowance for loan losses	$	4,941		$	3,897		$	4,189		$	3,293		$	3,604
Single-Pay Allowance for loan losses as a percentage of Single-Pay gross loans receivable	6.5		%	5.6		%	5.2		%	4.3		%	4.3		%

Gross Combined Loans Receivable

The following table summarizes Company Owned gross loans receivable, a GAAP-basis balance sheet measure, and reconciles it to gross combined loans receivable, a non-GAAP measure⁽¹⁾, including loans originated by third-party lenders through CSO programs, which are not included in our Condensed Consolidated Financial Statements but from which we earn revenue and for which we provide a guarantee to the unaffiliated lender:



	As of
(in millions, unaudited)	June 30, 2019		March 31, 2019		December 31, 2018		September 30, 2018		June 30, 2018
Company Owned gross loans receivable	$	609.6	$	553.2	$	571.5	$	537.8	$	420.6
Gross loans receivable Guaranteed by the Company	67.3		61.9		80.4		78.8		69.2
Gross combined loans receivable ⁽¹⁾	$	676.9	$	615.1	$	651.9	$	616.6	$	489.8
(1) See "Non-GAAP Financial Measures" below for definition and additional information.

Gross combined loans receivable by product are presented below (year-over-year sequential comparisons for Open-End are affected by the Q1 2019 Open-End Loss Recognition Change):

Gross combined loans receivable increased $187.1 million, or 38.1%, to $676.9 million as of June 30, 2019 from $489.8 million as of June 30, 2018. Geographically, gross combined loans receivable grew 11.0% and 120.1%, respectively, in the U.S. and Canada, explained further by product in the following sections.

Results of Operations - CURO Group Consolidated Operations

Condensed Consolidated Statements of Operations



(in thousands, unaudited)	Three Months Ended June 30,											Six Months Ended June 30,
	2019			2018			Change $			Change %		2019		2018			Change $			Change %
Revenue	$	264,300		$	237,169		$	27,131		11.4	%	$	542,239	$	488,012		$	54,227		11.1	%
Provision for losses	112,010			86,347			25,663			29.7	%	214,395		163,230			51,165			31.3	%
Net revenue	152,290			150,822			1,468			1.0	%	327,844		324,782			3,062			0.9	%
Advertising costs	12,780			15,113			(2,333		)	(15.4	)%	20,566		22,998			(2,432		)	(10.6	)%
Non-advertising costs of providing services	58,329			58,361			(32		)	(0.1	)%	120,600		118,590			2,010			1.7	%
Total cost of providing services	71,109			73,474			(2,365		)	(3.2	)%	141,166		141,588			(422		)	(0.3	)%
Gross margin	81,181			77,348			3,833			5.0	%	186,678		183,194			3,484			1.9	%

Operating expense
Corporate, district and other expenses	39,038			32,980			6,058			18.4	%	88,126		68,409			19,717			28.8	%
Interest expense	17,023			20,472			(3,449		)	(16.8	)%	34,713		42,826			(8,113		)	(18.9	)%
Loss on extinguishment of debt	—			—			—			#		—		11,683			(11,683		)	#
Total operating expense	56,061			53,452			2,609			4.9	%	122,839		122,918			(79		)	(0.1	)%
Income from continuing operations before income taxes	25,120			23,896			1,224			5.1	%	63,839		60,276			3,563			5.9	%
Provision for income taxes	7,453			5,178			2,275			43.9	%	17,499		16,645			854			5.1	%
Net income from continuing operations	17,667			18,718			(1,051		)	(5.6	)%	46,340		43,631			2,709			6.2	%
Net income (loss) from discontinued operations, net of tax	(834		)	(2,743		)	1,909			(69.6	)%	7,541		(4,364		)	11,905			#
Net income	$	16,833		$	15,975		$	858		5.4	%	$	53,881	$	39,267		$	14,614		37.2	%

For the three months ended June 30, 2019 and 2018

Revenue and Net Revenue

Revenue increased $27.1 million, or 11.4%, to $264.3 million for the three months ended June 30, 2019 from $237.2 million for the three months ended June 30, 2018. Revenue for the three months ended June 30, 2019 included interest earned on past-due Open-End loan balances of approximately $12 million from the Q1 2019 Open-End Loss Recognition Change, offset by a higher provision rate and the higher allowance discussed further below. U.S. revenue increased 10.5% driven by volume growth. Canadian revenue increased 15.3% (19.5% on a constant currency basis), as volume growth offset yield compression from negative regulatory impacts on Single-Pay loan rates and the significant product mix-shift to Open-End loans.

Provision for losses increased $25.7 million, or 29.7%, to $112.0 million for the three months ended June 30, 2019, from $86.3 million for the three months ended June 30, 2018, primarily due to changes in the allowance coverage in the second quarter of 2018. The second quarter of 2018 included $11.0 million of provision benefit from changes in allowance coverage rates whereas the second quarter of 2019 included $1.6 million of benefit. Excluding the impact of the allowance coverage change, provision for losses increased $16.3 million, or 16.7%, because of the Q1 2019 Open-End Loss Recognition Change and increased earning asset volume year-over-year as further described in "Segment Analysis" below.

Cost of Providing Services

The total cost of providing services decreased $2.4 million, or 3.2%, to $71.1 million in the three months ended June 30, 2019, compared to $73.5 million in the three months ended June 30, 2018, primarily because of lower advertising costs analyzed further in "Segment Analysis" below.

Operating Expenses

Corporate, district and other expenses increased $6.1 million, or 18.4%, primarily as a result of a $3.7 million non-cash impairment charge related to our investment in Cognical Holdings, Inc. ("Zibby") and higher performance-based variable compensation. During the second quarter of 2019, Zibby conducted an equity capital raise that closed on July 11, 2019, primarily with existing equity holders. We invested cash of $2.8 million in the second quarter of 2019 and an additional $4.0 million of cash in July 2019, which in aggregate, increased our fully-diluted ownership to 42.3%. Because the offering was at a valuation below previous rounds, the non-cash impairment charge was required. Excluding the Zibby impairment charge, share-based compensation costs in both periods presented and U.K. related costs, operating expenses increased by $1.2 million.

Provision for Income Taxes

The effective income tax rate from continuing operations for the three months ended June 30, 2019 was 29.7%, compared to 21.7.0% for the three months ended June 30, 2018. Excluding the non-tax-deductible impairment of our investment in Zibby, our effective income tax rate from continuing operations for the three months ended June 30, 2019 was 25.8%.

For the six months ended June 30, 2019 and 2018

Revenue and Net Revenue

Revenue increased $54.2 million, or 11.1%, to $542.2 million for the six months ended June 30, 2019 from $488.0 million for the six months ended June 30, 2018. Revenue for the six months ended June 30, 2019 included interest earned on past-due Open-End loan balances of approximately $21 million from the Q1 2019 Open-End Loss Recognition Change, offset by a higher provision rate and the higher allowance discussed further below. U.S. revenue increased 10.5%, driven by volume growth. Canadian revenue increased 13.7% (18.7% on a constant currency basis), as volume growth offset yield compression from negative regulatory impacts on Single-Pay loan rates and the significant product mix-shift to Open-End loans.

Provision for losses increased $51.2 million, or 31.3%, to $214.4 million for the six months ended June 30, 2019, from $163.2 million for the six months ended June 30, 2018, primarily due to changes in the allowance coverage in the second quarter of 2018. The first half of 2018 included $14.7 million of provision benefit from changes which included allowance coverage rates whereas the first half of 2019 included $1.0 million of benefit. Excluding the impact of the allowance coverage change, provision for losses increased $37.5 million, or 21.1%, because of the Q1 2019 Open-End Loss Recognition Change and increased earning asset volume year-over-year as further described in "Segment Analysis" below.

Cost of Providing Services

The total cost of providing services decreased $0.4 million, or 0.3%, to $141.2 million in the six months ended June 30, 2019, compared to $141.6 million in the six months ended June 30, 2018, primarily because of lower advertising costs, offset by increased loan servicing costs on higher volume.

Operating Expenses

Corporate, district and other expenses increased $19.7 million, or 28.8%, primarily as a result of $8.5 million for obtaining the consent of our holders of the 8.25% Senior Secured Notes and our bondholders associated with discontinuing our U.K. operations and other related U.K. separation costs, $1.8 million of restructuring costs from our reduction-in-force implemented in January 2019, higher professional fees associated with our first year-end for full compliance with Sarbanes-Oxley, and a $3.7 million impairment charge related to our investment in Zibby. Excluding the Zibby impairment charge, share-based compensation costs in both periods presented and U.K. related costs, operating expenses increased by $6.7 million.

Provision for Income Taxes

The effective income tax rate from continuing operations for the six months ended June 30, 2019 was 27.4%, compared to 29.9% for the six months ended June 30, 2018. Excluding the non-tax-deductible impairment of our investment in Zibby, our effective income tax rate from continuing operations for the six months ended June 30, 2019 was 25.9%

Segment Analysis

We report financial results for two reportable segments: the U.S. and Canada. Following is a summary of results of operations for the segment and period indicated:



U.S. Segment Results	Three Months Ended June 30,											Six Months Ended June 30,
(dollars in thousands, unaudited)	2019			2018			Change $			Change %		2019			2018			Change $			Change %
Revenue	$	210,046		$	190,126		$	19,920		10.5	%	$	436,165		$	394,719		$	41,446		10.5	%
Provision for losses	92,552			71,987			20,565			28.6	%	177,532			136,320			41,212			30.2	%
Net revenue	117,494			118,139			(645		)	(0.5	)%	258,633			258,399			234			0.1	%
Advertising costs	11,179			12,409			(1,230		)	(9.9	)%	17,533			17,568			(35		)	(0.2	)%
Non-advertising costs of providing services	41,248			41,682			(434		)	(1.0	)%	86,230			85,439			791			0.9	%
Total cost of providing services	52,427			54,091			(1,664		)	(3.1	)%	103,763			103,007			756			0.7	%
Gross margin	65,067			64,048			1,019			1.6	%	154,870			155,392			(522		)	(0.3	)%
Corporate, district and other expenses	33,397			28,221			5,176			18.3	%	77,277			58,753			18,524			31.5	%
Interest expense	14,641			20,465			(5,824		)	(28.5	)%	29,369			42,762			(13,393		)	(31.3	)%
Loss on extinguishment of debt	—			—			—			#		—			11,683			(11,683		)	#
Total operating expense	48,038			48,686			(648		)	(1.3	)%	106,646			113,198			(6,552		)	(5.8	)%
Segment operating income	17,029			15,362			1,667			10.9	%	48,224			42,194			6,030			14.3	%
Interest expense	14,641			20,465			(5,824		)	(28.5	)%	29,369			42,762			(13,393		)	(31.3	)%
Depreciation and amortization	3,437			3,379			58			1.7	%	7,163			6,786			377			5.6	%
EBITDA	35,107			39,206			(4,099		)	(10.5	)%	84,756			91,742			(6,986		)	(7.6	)%
Loss on extinguishment of debt	—			—			—					—			11,683			(11,683		)
Restructuring costs	—			—			—					1,617			—			1,617
Other adjustments	(143		)	(66		)	(77		)			(248		)	(125		)	(123		)
U.K. related costs	679			—			679					8,496			—			8,496
Share-based cash and non-cash compensation	2,644			2,181			463					4,816			4,023			793
Impairment of equity method	3,748			—			3,748					3,748						3,748
Adjusted EBITDA	$	42,035		$	41,321		$	714		1.7	%	$	103,185		$	107,323		$	(4,138	)	(3.9	)%
# - Change greater than 100% or not meaningful.

U.S. Segment Results - For the three months ended June 30, 2019 and 2018

Second quarter 2019 U.S. revenues increased by $19.9 million, or 10.5%, to $210.0 million, compared to the comparable prior-year period. U.S. revenue growth was driven by a $40.6 million, or 11.0%, increase in gross combined loans receivable to $408.3 million at June 30, 2019, compared to $367.7 million at June 30, 2018. Additionally, U.S. revenue for the three months ended June 30, 2019 included interest earned on past-due Open-End loan balances of approximately $10 million from the Q1 2019 Open-End Loss Recognition Change, offset by a related higher provision for losses. Unsecured Installment combined receivables increased year-over-year by $12.2 million, or 6.0%. Open-End receivables increased $24.4 million, or 61.4%, year-over-year led by growth in Virginia, Tennessee and Kansas and inclusion of past-due receivables as a result of the Q1 2019 Open-End Loss Recognition Change. Secured Installment gross combined receivables remained flat compared to the prior-year period, while Single-Pay receivables grew $3.7 million, or 9.9%.

The provision for losses' increase of $20.6 million, or 28.6%, was primarily due to changes in allowance coverage in the second quarter of 2018. The second quarter of 2018 included $9.9 million of provision benefit from changes in the allowance coverage rates, whereas the second quarter of 2019 included $0.3 million of incremental expense. Excluding the impact of the allowance coverage change, provision for losses increased $10.3 million, or 12.6%, because of the Q1 2019 Open-End Loss Recognition Change and increased earning asset volume year-over-year.

U.S. cost of providing services for the three months ended June 30, 2019 was $52.4 million, a decrease of $1.7 million, or 3.1%, compared to $54.1 million for the three months ended June 30, 2018, primarily due to lower advertising costs.

Corporate, district and other operating expenses increased $5.2 million, or 18.3%, compared to the same period in the prior year, primarily due to a $3.7 million impairment charge related to our investment in Zibby, $0.7 million of U.K. disposition-related costs and $1.0 million higher performance-based variable compensation costs. Excluding the Zibby impairment charge, share-based compensation costs in both periods presented and U.K. related costs, operating expenses increased by $0.3 million.

U.S. interest expense for the second quarter of 2019 decreased by $5.8 million compared to the prior-year period, primarily due to our refinancing activities in 2018. During the third quarter of 2018, we issued $690.0 million of 8.25% Senior Secured Notes and used the proceeds from the issuance to extinguish our $527.5 million 12.00% Senior Secured Notes. In addition, we entered

into a Non-Recourse Canada SPV Facility in the third quarter of 2018 with a lower interest rate than our previous U.S. SPV facility, which we fully repaid with the proceeds from the 8.25% Senior Secured Notes.

U.S. Segment Results - For the six months ended June 30, 2019 and 2018

For the six months ended June 30, 2019, U.S. revenues increased by $41.4 million, or 10.5%, to $436.2 million. U.S. revenue growth was driven by a $40.6 million, or 11.0%, increase in gross combined loans receivable, to $408.3 million at June 30, 2019, compared to $367.7 million at June 30, 2018. Additionally, U.S. revenue for the six months ended June 30, 2019 included interest earned on past-due Open-End loan balances of approximately $18 million from the Q1 2019 Open-End Loss Recognition Change, offset by related higher provision rate and higher provision for losses. Unsecured Installment receivables increased year-over-year $12.2 million, or 6.0%. Open-End receivables increased $24.4 million, or 61.4%, year-over-year, led by growth in Virginia, Tennessee and Kansas. Secured Installment gross combined receivables increased from the prior-year period by $0.3 million, or 0.3%, while Single-Pay receivables grew $3.7 million, or 9.9%.

The provision for losses' increase of $41.2 million, or 30.2%, was primarily due to changes in allowance coverage in the first half of 2018. The first half of 2018 included $12.6 million of provision benefit from changes in allowance coverage rates, whereas the first half of 2019 included $0.8 million of incremental expense. Excluding the impact of the allowance coverage change, provision for losses increased $27.7 million, or 18.6%, because of the Q1 2019 Open-End Loss Recognition Change and increased earning asset volume year-over-year.

U.S. cost of providing services for the six months ended June 30, 2019 was $103.8 million, an increase of $0.8 million, or 0.7%, compared to $103.0 million for the six months ended June 30, 2018.

Corporate, district and other operating expenses increased $18.5 million, or 31.5%, compared to the same period in the prior year, primarily due to $8.5 million of U.K. disposition-related costs, a $3.7 million impairment charge related to our investment in Zibby, $3.2 million higher performance-based variable compensation costs, $1.6 million of restructuring costs and $0.5 million higher professional fees. Excluding the Zibby impairment charge, share-based compensation costs in both periods presented and U.K. related costs, operating expenses increased by $5.5 million.

U.S. interest expense for the first six months of 2019 decreased by $13.4 million compared to the prior-year period, primarily due to our refinancing activities in 2018. During the third quarter of 2018, we issued $690.0 million of 8.25% Senior Secured Notes and used the proceeds from the issuance to extinguish our $527.5 million 12.00% Senior Secured Notes. In addition, we entered into a Non-Recourse Canada SPV Facility in the third quarter of 2018 with a lower interest rate than our previous U.S. SPV facility, which we fully repaid with the proceeds from the 8.25% Senior Secured Notes.



Canada Segment Results	Three Months Ended June 30,										Six Months Ended June 30,
(dollars in thousands, unaudited)	2019			2018		Change $			Change %		2019			2018		Change $			Change %
Revenue	$	54,254		$	47,043	$	7,211		15.3	%	$	106,074		$	93,293	$	12,781		13.7	%
Provision for losses	19,458			14,360		5,098			35.5	%	36,863			26,910		9,953			37.0	%
Net revenue	34,796			32,683		2,113			6.5	%	69,211			66,383		2,828			4.3	%
Advertising costs	1,601			2,704		(1,103		)	(40.8	)%	3,033			5,430		(2,397		)	(44.1	)%
Non-advertising costs of providing services	17,081			16,679		402			2.4	%	34,370			33,151		1,219			3.7	%
Total cost of providing services	18,682			19,383		(701		)	(3.6	)%	37,403			38,581		(1,178		)	(3.1	)%
Gross margin	16,114			13,300		2,814			21.2	%	31,808			27,802		4,006			14.4	%
Corporate, district and other expenses	5,641			4,759		882			18.5	%	10,849			9,656		1,193			12.4	%
Interest expense	2,382			7		2,375			#		5,344			64		5,280			#
Total operating expense	8,023			4,766		3,257			68.3	%	16,193			9,720		6,473			66.6	%
Segment operating income	8,091			8,534		(443		)	(5.2	)%	15,615			18,082		(2,467		)	(13.6	)%
Interest expense	2,382			7		2,375			#		5,344			64		5,280			#
Depreciation and amortization	1,214			1,091		123			11.3	%	2,408			2,219		189			8.5	%
EBITDA	11,687			9,632		2,055			21.3	%	23,367			20,365		3,002			14.7	%
Restructuring costs	—			—		—					135			—		135
Other adjustments	(33		)	157		(190		)			(144		)	173		(317		)
Adjusted EBITDA	$	11,654		$	9,789	$	1,865		19.1	%	$	23,358		$	20,538	$	2,820		13.7	%
# - Change greater than 100% or not meaningful.

Canada Segment Results - For the three months ended June 30, 2019 and 2018

Canada revenue increased $7.2 million, or 15.3%, to $54.3 million for the three months ended June 30, 2019, from $47.0 million in the prior-year period. On a constant currency basis, revenue increased $9.2 million, or 19.5%. Revenue growth in Canada was impacted favorably by the significant asset growth and the product transition from Single-Pay and Unsecured Installment loans to Open-End loans. Additionally, Canada revenue for the three months ended June 30, 2019 included interest earned on past-due Open-End loan balances of approximately $2 million from the Q1 2019 Open-End Loss Recognition Change, offset by a higher provision rate and higher provision for losses. Single-Pay yields were negatively affected by regulatory rate changes in Ontario and British Columbia.

Single-Pay revenue decreased $14.2 million, or 42.7%, to $19.1 million for the three months ended June 30, 2019, and Single-Pay receivables decreased $12.2 million, or 25.8%, to $35.1 million from $47.3 million in the prior year. The decreases in Single-Pay revenue and receivables were due to the continued product mix shift in Canada from Single-Pay loans to Open-End loans and by regulatory changes effective January and July 2018 that lowered Single Pay pricing year-over-year.

Canada non-Single-Pay revenue increased $21.5 million, or 156.7%, to $35.2 million compared to $13.7 million the same quarter a year ago, on $158.8 million, or 212.5%, growth in related loan balances. The increase was primarily related to the launches of Open-End products in Alberta and Ontario in the fourth quarter of 2017, and significant expansion of the Open-End product in Ontario in late 2018. Additionally, as a result of the increase in Open-End loans, ancillary revenue increased $4.8 million versus the same quarter a year ago, primarily driven by an increase in sales of insurance to Open-End loan customers.

The provision for losses increased $5.1 million, or 35.5%, to $19.5 million for the three months ended June 30, 2019, compared to $14.4 million in the prior-year period, because of mix shift from Single-Pay loans to Unsecured Installment and Open-End loans and corresponding higher allowance and therefore provision expense level. Total Open-End and Installment loans grew by $35.2 million sequentially during the second quarter of 2019, compared to sequential growth of $20.9 million in the second quarter of 2018. On a constant currency basis, provision for losses increased by $5.8 million, or 40.5% compared to the prior-year period.

The total cost of providing services in Canada declined modestly for the three months ended June 30, 2019 compared to the prior-year period. Advertising costs were lower by $1.1 million, or 40.8%, partially offset by an increase in non-advertising cost of providing services of $0.4 million. There was no material impact on the cost of providing services from exchange rate changes.

Canada operating expenses increased $3.3 million, or 68.3%, to $8.0 million in the three months ended June 30, 2019 from $4.8 million in the prior-year period, primarily due to interest expense on the Non-Recourse Canada SPV Facility that began in August 2018.

Canada Segment Results - For the six months ended June 30, 2019 and 2018

Canada revenue increased $12.8 million, or 13.7%, to $106.1 million for the six months ended June 30, 2019 from $93.3 million in the prior-year period. On a constant currency basis, revenue increased $17.5 million, or 18.7%. Revenue growth in Canada was impacted favorably by the significant asset growth and product transition from Single-Pay and Unsecured Installment loans to Open-End loans that have a lower yield. Additionally, Canada revenues for the six months ended June 30, 2019 included interest earned on past-due Open-End loan balances of approximately $3 million from the Q1 2019 Open-End Loss Recognition Change, offset by higher provision rate and higher provision for losses. Single-Pay yields were negatively affected by regulatory rate changes in Ontario and British Columbia.

Single-Pay revenue decreased $28.9 million, or 42.8%, to $38.7 million for the six months ended June 30, 2019, and Single-Pay receivables decreased $12.2 million, or 25.8%, to $35.1 million from $47.3 million in the prior year. The decreases in Single-Pay revenue and receivables were due to the continued product mix shift in Canada from Single-Pay loans to Open-End loans and by regulatory changes effective January and July 2018 that lowered Single Pay pricing year-over-year.

Canadian non-Single-Pay revenue increased $41.7 million, or 162.6%, to $67.4 million compared to $25.7 million the same period a year ago, on $158.8 million, or 212.5%, growth in related loan balances. The increase was primarily related to the launch of Open-End products in Alberta and Ontario in the fourth quarter of 2017, and significant expansion of the Open-End product in Ontario in late 2018. As a result of the increase in Open-End loans, ancillary revenue increased $9.3 million versus the same period a year ago, primarily driven by an increase in sales of insurance to Open-End loan customers.

The provision for losses increased $10.0 million, or 37.0%, to $36.9 million for the six months ended June 30, 2019 compared to $26.9 million in the prior-year period primarily due to provisioning on Open-End loans and mix shift from Single-Pay loans and Unsecured Installment to Open-End loans. Total Open-End and Installment loans grew by $35.2 million sequentially during the second quarter of 2019, compared to sequential growth of $20.9 million in the second quarter of 2018. On a constant currency basis, provision for losses increased by $11.6 million, or 43.0% compared to the prior-year period.

The total cost of providing services in Canada declined modestly for the six months ended June 30, 2019 compared to the prior-year period. Advertising costs decreased by $2.4 million, or 44.1%, partially offset by an increase in non-advertising cost of providing services of $1.2 million. There was no material impact on the cost of providing services from exchange rate changes.

Canada operating expenses increased $6.5 million, or 66.6%, to $16.2 million in the six months ended June 30, 2019 from $9.7 million in the prior year period primarily due to interest expense on the Non-Recourse Canada SPV Facility that began in August 2018.

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 gain (loss) on extinguishment of debt, restructuring and other costs, impairment of equity method investment, goodwill and intangible asset impairments, transaction-related costs, share-based compensation, intangible asset amortization and cumulative tax effect of 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); and


•	Gross Combined Loans Receivable (includes loans originated by third-party lenders through CSO programs which are not included in our Condensed Consolidated Financial Statements).

We believe that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of the Company's operations. We believe that these non-GAAP financial measures offer another way to view aspects of our business that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business.

We believe that investors regularly rely on non-GAAP financial measures, such as Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA, to assess operating performance and that such measures may highlight trends in the business that may not otherwise be apparent when relying on financial measures calculated in accordance with U.S. GAAP. In addition, we believe that the adjustments shown below are useful to investors in order to allow them to compare our financial results during the periods shown without the effect of each of these income or expense items. In addition, we believe that Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of public companies in our industry, many of which present Adjusted Net Income, Adjusted Earnings per Share, EBITDA and/or Adjusted EBITDA when reporting their results.

In addition to reporting loans receivable information in accordance with 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 our U.S. GAAP Condensed Consolidated Financial Statements. Adjusted Net Income, Adjusted Earnings per Share, EBITDA, Adjusted EBITDA and Gross Combined Loans Receivable should not be considered as alternatives to income from continuing operations, segment operating income or any other performance measure derived in accordance with 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 we record 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 we 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 Condensed Consolidated Financial Statements but from which we earn revenue and for which we provide a guarantee to the lender. Management believes this analysis provides investors with important information needed to evaluate overall lending performance.

We evaluate our stores based on revenue per store, provision for losses at each store and store-level EBITDA, with consideration given to the length of time a store has been open and its geographic location. We monitor newer stores for their progress to profitability and their rate of revenue growth.

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

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



	Three Months Ended June 30,											Six Months Ended June 30,
(in thousands except per share data, unaudited)	2019			2018			Change $			Change %		2019			2018			Change $		Change %
Net income from continuing operations	$	17,667		$	18,718		$	(1,051	)	(5.6	)%	$	46,340		$	43,631		$	2,709	6.2	%
Adjustments:
Loss on extinguishment of debt ⁽¹⁾	—			—								—			11,683
Restructuring costs ⁽²⁾	—			—								1,752			—
U.K. related costs ⁽³⁾	679			—								8,496			—
Impairment of equity method investment ⁽⁴⁾	3,748			—								3,748			—
Share-based cash and non-cash compensation ⁽⁵⁾	2,644			2,181								4,816			4,023
Intangible asset amortization	761			640								1,557			1,303
Impact of tax law changes ⁽⁶⁾	—			—								—			1,800
Cumulative tax effect of adjustments	(1,062		)	(705		)						(4,322		)	(4,394		)
Adjusted Net Income	$	24,437		$	20,834		$	3,603		17.3	%	$	62,387		$	58,046		$	4,341	7.5	%

Net income from continuing operations	$	17,667		$	18,718							$	46,340		$	43,631
Diluted Weighted Average Shares Outstanding	47,107			47,996								47,335			47,757
Diluted Earnings per Share from continuing operations	$	0.38		$	0.39		$	(0.01	)	(2.6	)%	$	0.98		$	0.92		$	0.06	6.5	%
Per Share impact of adjustments to Net Income	0.14			0.04								0.34			0.29
Adjusted Diluted Earnings per Share	$	0.52		$	0.43		$	0.09		20.9	%	$	1.32		$	1.21		$	0.11	9.1	%

Reconciliation of Net income from continuing operations to EBITDA and Adjusted EBITDA, non-GAAP measures



	Three Months Ended June 30,											Six Months Ended June 30,
(in thousands, except per share data, unaudited)	2019			2018			Change $			Change %		2019			2018			Change $			Change %
Net income from continuing operations	$	17,667		$	18,718		$	(1,051	)	(5.6	)%	$	46,340		$	43,631		$	2,709		#
Provision for income taxes	7,453			5,178			2,275			43.9	%	17,499			16,645			854			5.1	%
Interest expense	17,023			20,472			(3,449		)	(16.8	)%	34,713			42,826			(8,113		)	(18.9	)%
Depreciation and amortization	4,651			4,470			181			4.0	%	9,571			9,005			566			6.3	%
EBITDA	46,794			48,838			(2,044		)	(4.2	)%	108,123			112,107			(3,984		)	(3.6	)%
Loss on extinguishment of debt ⁽¹⁾	—			—								—			11,683
Restructuring costs ⁽²⁾	—			—								1,752			—
U.K. related costs ⁽³⁾	679			—								8,496			—
Impairment of equity method investment ⁽⁴⁾	3,748			—								3,748			—
Share-based cash and non-cash compensation ⁽⁵⁾	2,644			2,181								4,816			4,023
Other adjustments ⁽⁷⁾	(176		)	91								(392		)	48
Adjusted EBITDA	$	53,689		$	51,110		$	2,579		5.0	%	$	126,543		$	127,861		$	(1,318	)	(1.0	)%
Adjusted EBITDA Margin	20.3		%	21.6		%						23.3		%	26.2		%



(1)	For the six months ended June 30, 2018, the $11.7 million of loss on extinguishment of debt was for the redemption of $77.5 million of the CURO Financial Technologies Corp.'s ("CFTC") 12.00% Senior Secured Notes due 2022.
(2)	Restructuring costs of $1.8 million for the six months ended June 30, 2019 were due to eliminating 121 positions in North America. The store employee reductions help better align store staffing with in-store customer traffic and volume patterns, as more of our growth comes from online channels and as store customers require less time in stores as they conduct more of the follow-up activities online. The elimination of certain corporate positions relate to efficiency initiatives and has allowed the Company to reallocate investment to strategic growth activities.
(3)	U.K. related costs of $8.5 million for the six months ended June 30, 2019 relate to placing the U.K. subsidiaries into administration on February 25, 2019, which included $7.6 million to obtain consent from the holders of the 8.25% Senior Secured Notes to deconsolidate the U.K. Segment and $0.9 million for other costs.
(4)	During April through July of 2019, Cognical Holdings (“Zibby”) completed an equity raising round at a value per share less than the value per share raised in prior raises. This round included additional investments from existing shareholders and investments by new investors and is considered indicative of the fair value of shares in Zibby. Accordingly, we recognized a $3.7 million impairment in our investment in Zibby to adjust it to market value. As of June 30, 2019, we owned approximately 30% of the outstanding shares of Zibby on a fully diluted basis.
(5)	We approved the adoption of share-based compensation plans during 2010 and 2017 for key members of senior management. The estimated fair value of share-based awards is recognized as non-cash compensation expense on a straight-line basis over the vesting period.
(6)	As a result of the Tax Cuts and Jobs Act of 2017 ("2017 Tax Act"), which became law on December 22, 2017, we provided an estimate of the new repatriation tax as of December 31, 2017. Subsequent to further guidance published in the first quarter of 2018, we booked additional tax expense of $1.2 million for the 2017 repatriation tax. Additionally, the 2017 Tax Act provided for a new GILTI ("Global Intangible Low-Taxed Income") tax starting in 2018 and we estimated and provided tax expense of $0.6 million as of June 30, 2018.
(7)	Other adjustments include deferred rent and the intercompany foreign exchange impact. Deferred rent represents the non-cash component of rent expense.

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, 2019 and 2018, approximately 20.5% and 19.8%, respectively, of our revenues 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.

Three Months Ended June 30, 2019 and 2018



	Average Exchange Rates
	Three Months Ended June 30,				Change
	2019		2018		$			%
Canadian Dollar	$	0.7477	$	0.7749		($0.0272	)	(3.5	)%

Six Months Ended June 30, 2019 and 2018



	Average Exchange Rates
	Six Months Ended June 30,				Change
	2019		2018		$			%
Canadian Dollar	$	0.7501	$	0.7831		($0.0330	)	(4.2	)%

The following constant currency analysis removes the impact of the fluctuation in foreign exchange rates and utilizes constant currency results in our analysis of segment performance. Our constant currency assessment assumes foreign exchange rates in the current fiscal periods remained the same as in the prior fiscal periods. All conversion rates below are based on the U.S. Dollar equivalent to the Canadian Dollar. We believe that the constant currency assessment below is a useful measure in assessing the comparable growth and profitability of our operations.

The revenues and gross margin below during the three months ended June 30, 2019 were calculated using the actual average exchange rate during the three months ended June 30, 2018.



	Three Months Ended June 30,				Change
(dollars in thousands, unaudited)	2019		2018		$		%
Canada – constant currency basis:
Revenues	$	56,224	$	47,043	$	9,181	19.5	%
Gross Margin	16,691		13,300		3,391		25.5	%

The revenues and gross margin below during the six months ended June 30, 2019 were calculated using the actual average exchange rate during the six months ended June 30, 2018.



	Six Months Ended June 30,				Change
(dollars in thousands, unaudited)	2019		2018		$		%
Canada – constant currency basis:
Revenues	$	110,754	$	93,293	$	17,461	18.7	%
Gross Margin	33,211		27,802		5,409		19.5	%

LIQUIDITY AND CAPITAL RESOURCES

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

As of June 30, 2019, we were in compliance with all financial ratios, covenants and other requirements set forth in our debt agreements. We anticipate that our primary use of cash will be to fund growth in our working capital, finance capital expenditures, meet our debt obligations, and fund our share repurchase program. Our level of cash flow provided by operating activities typically experiences some seasonal fluctuation related to our levels of net income and changes in working capital levels, particularly loans receivable.

Unexpected changes in our financial condition or other unforeseen factors may result in our inability to obtain third-party financing or could increase our borrowing costs in the future. We have the ability to adjust our volume of lending to consumers which would reduce cash outflow requirements while increasing cash inflows through loan repayments to the extent we experience any short-term or long-term funding shortfalls. We may also sell or securitize our assets, draw on our available revolving credit facility or line of credit, enter into additional refinancing agreements and reduce our capital spending in order to generate additional liquidity. We believe our cash on hand and available borrowings provide us with sufficient liquidity for at least the next 12 months.

Borrowings

Our long-term debt consisted of the following as of June 30, 2019 and December 31, 2018 (net of deferred financing costs):



	June 30,		December 31,
(dollars in thousands)	2019		2018
8.25% Senior Secured Notes (due 2025)	$	677,535	$	676,661
Non-Recourse Canada SPV Facility	90,977		107,479
Senior Revolver	—		20,000
Long-term debt	$	768,512	$	804,140

Available Credit Facilities and Other Resources

8.25% Senior Secured Notes

As noted above, we issued our 8.25% Senior Secured Notes in August 2018. Interest on the notes is payable semiannually, in arrears, on March 1 and September 1 of each year. In connection with the 8.25% Senior Secured Notes, we capitalized financing costs of approximately $12.9 million, the balance of which is included in the Condensed Consolidated Balance Sheets as a component of Long-Term Debt, and is being amortized over the term of the 8.25% Senior Secured Notes and included as a component of interest expense.

12.00% Senior Secured Notes

In February and November 2017, CFTC issued $470.0 million and $135.0 million, respectively, of 12.00% Senior Secured Notes ("12.00% Senior Secured Notes"). Interest on the 12.00% Senior Secured Notes is payable semiannually, in arrears, on March 1 and September 1 of each year, beginning on September 1, 2017. The February 2017 issuance refinanced similar notes that were nearing maturity. The extinguishment of the existing notes resulted in a pretax loss of $11.7 million during September 2018. In connection with these 2017 debt issuances we capitalized financing costs of approximately $18.3 million, the balance of which is included in the Condensed Consolidated Balance Sheets as a component of Long-Term Debt, and is being amortized over the term of the 12.00% Senior Secured Notes as a component of interest expense.

On March 7, 2018, CFTC redeemed $77.5 million of its 12.00% Senior Secured Notes using a portion of the proceeds from our initial public offering as required by the underlying indentures (the transaction whereby the 12.00% Senior Secured Notes were partially redeemed, the “Redemption”) at a price equal to 112.00% of the principal amount of the 12.00% Senior Secured Notes redeemed, plus accrued and unpaid interest paid thereon to the date of Redemption. Following the Redemption, $527.5 million of the original outstanding principal amount of the 12.00% Senior Secured Notes remain outstanding. The Redemption was conducted pursuant to the Indenture governing the 12.00% Senior Secured Notes (the “Indenture”), dated as of February 15, 2017, by and among CFTC, the guarantors party thereto and TMI Trust Company, as trustee and collateral agent.

The remainder of the 12.00% Senior Secured Notes were extinguished effective September 7, 2018 as a result of the issuance of the 8.25% Senior Secured Notes as described above.

Non-Recourse U.S. SPV Facility

In November 2016, CURO Receivables Finance I, LLC, a Delaware limited liability company (the “SPV Borrower”) and a wholly-owned subsidiary, entered into a five-year revolving credit facility with Victory Park Management, LLC and certain other lenders that provided for an $80.0 million term loan and $70.0 million of revolving borrowing capacity that could expand over time (“Non-Recourse U.S. SPV Facility”). The loans bore interest at an annual rate of up to 12.00% plus the greater of (i) 1.0% per annum and (ii) three-month LIBOR. The SPV Borrower also pays a 0.50% per annum fee on the unused portion of the commitments. In connection with this facility, the capitalized financing costs at the time of extinguishment, as discussed below, were approximately $5.3 million, net of amortization. These capitalized financing costs were included in the Condensed Consolidated Balance Sheet as a component of "Long-term debt" and were amortized over the term of the Non-Recourse U.S. SPV Facility. During September 2018, a portion of the proceeds from the 8.25% Senior Secured Notes were used to extinguish the revolver's balance of $42.4 million.

On October 11, 2018, we extinguished the remaining term loan balance of $80.0 million. We made the final termination payment of $2.7 million on October 26, 2018, resulting in a loss on the extinguishment of debt of $9.7 million for the quarter ended December 31, 2018.

Non-Recourse Canada SPV Facility

On August 2, 2018, CURO Canada Receivables Limited Partnership, a newly created, bankruptcy-remote special purpose vehicle (the “Canada SPV Borrower”) and a wholly-owned subsidiary, entered into a four-year revolving credit facility with Waterfall Asset Management, LLC that provides for C$175.0 million of initial borrowing capacity and the ability to expand such capacity up to C$250.0 million (“Non-Recourse Canada SPV Facility”). The loans bear interest at an annual rate of 6.75% plus the three-month CDOR. As of June 30, 2019, outstanding borrowings under the Non-Recourse Canada SPV Facility were $91.0 million, net of deferred financing costs of $3.6 million, and after a reduction of net balances drawn of $20.9 million during the quarter.

Senior Revolver

On September 1, 2017, we closed on a $25.0 million Senior Secured Revolving Loan Facility (the "Senior Revolver"). In February 2018, the Senior Revolver capacity was increased to $29.0 million. In November 2018, the Senior Revolver capacity was increased to $50.0 million as permitted by the Indenture to the Senior Secured Notes. The Senior Revolver is now syndicated with participation by four banks. The negative covenants of the Senior Revolver generally conform to the related provisions in the Indenture for our 8.25% Senior Secured Notes. We believe this facility complements our other financing sources, while providing seasonal short-term liquidity. Under the Senior Revolver, there is $50.0 million maximum availability, including up to $5.0 million of standby letters of credit, for a one-year term, renewable for successive terms following annual review. The Senior Revolver accrues interest at the one-month LIBOR (which may not be negative) plus 5% per annum and is repayable on demand. The terms of the Senior Revolver require that the outstanding balance be zero for at least 30 consecutive days in each calendar year. The Senior Revolver is guaranteed by all of our subsidiaries that guarantee our 8.25% Senior Secured Notes and is secured by a lien on substantially all of our assets and the guarantor subsidiaries that is senior to the lien securing our 8.25% Senior Secured Notes. The Senior Revolver was undrawn at June 30, 2019.

In connection with this facility we capitalized financing costs of approximately $0.1 million, the balance of which we included in the Condensed Consolidated Balance Sheets as a component of “Other assets,” and are being amortized over the term of the facility and included as a component of interest expense.

Cash Money Revolving Credit Facility

Cash Money Cheque Cashing, Inc., one of our Canadian subsidiaries, maintains a C$10 million revolving credit facility with Royal Bank of Canada. The Cash Money Revolving Credit Facility provides short-term liquidity required to meet the working capital needs of our Canadian operations. Aggregate draws under the revolving credit facility are limited to the lesser of: (i) the borrowing base, which is defined as a percentage of cash, deposits in transit and accounts receivable, and (ii) C$10 million. As of June 30, 2019 and December 31, 2018, the borrowing capacity under our revolving credit facility was reduced by C$0.3 million in 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 include, among other things, that the aggregate borrowings outstanding under the facility not exceed the borrowing base, restrictions on the encumbrance of assets and the creation of indebtedness. Borrowings under the Cash Money Revolving Credit Facility bear interest (per annum) at the prime rate of a Canadian chartered bank plus 1.95%.

The Cash Money Revolving Credit Facility was undrawn at June 30, 2019 and December 31, 2018.

Cash Flows

The following highlights our cash flow activity and the sources and uses of funding during the periods indicated:



	Six Months Ended June 30,
(dollars in thousands)	2019			2018
Net cash provided by continuing operating activities	$	312,319		$	246,733
Net cash used in continuing investing activities	(227,731		)	(198,551		)
Net cash used in continuing financing activities	(45,180		)	(80,661		)

Continuing Operating Activities

Net cash provided by continuing operating activities for the six months ended June 30, 2019 was $312.3 million, primarily attributable to net income from continuing operations of $46.3 million, the effect of non-cash reconciling items of $227.6 million, which includes provision for loan losses of $214.4 million, and changes in our operating assets and liabilities which provided $38.4 million.

Net cash provided by continuing operating activities for the six months ended June 30, 2018 was $246.7 million, primarily attributable to net income from continuing operations of $43.6 million, the effect of non-cash reconciling items, such as depreciation and amortization and the provision for loan losses for a total of $191.6 million, and changes in our operating assets and liabilities

of $11.6 million. Fees and service charges on our loans receivable change represented $2.9 million of the total change in operating assets and liabilities.

Continuing Investing Activities

Net cash used in continuing investing activities for the six months ended June 30, 2019 was $227.7 million, primarily reflecting the net origination of loans of $217.2 million. In addition, we used cash to purchase approximately $6.2 million of property and equipment, including software licenses and $4.4 million of additional investment in Zibby.

Net cash used in continuing investing activities for the six months ended June 30, 2018 was $198.6 million, primarily reflecting the net origination of loans of $194.6 million. In addition, we used cash to purchase approximately $3.0 million of property and equipment, including software licenses, and to purchase $1.0 million of Zibby preferred shares.

Origination of loans will fluctuate from period-to-period, depending on the timing of loan issuances and collections. A seasonal decline in consumer loans receivable typically occurs during the first quarter of the year and is driven by income tax refunds in the U.S. Typically, customers will use the proceeds from income tax refunds to pay outstanding loan balances, resulting in an increase in our net cash balances and a decrease in our consumer loans receivable balances. Consumer loans receivable balances typically reflect growth during the remainder of the year.

Continuing Financing Activities

Net cash used in continuing financing activities for the six months ended June 30, 2019 was $45.2 million. During the quarter, we made a $20.0 million payment on the Senior Revolver to reduce the outstanding balance to zero and made net repayments of $21.0 million on the Non-Recourse Canada SPV Facility.

Net cash used in continuing financing activities for the six months ended June 30, 2018 was $80.7 million. We redeemed $77.5 million of our 12.00% Senior Secured Notes for $86.8 million (which included $9.3 million of call premium). The underwriters of our 2017 initial public offering exercised their over-allotment option on January 5, 2018 and acquired one million shares of our common stock, providing net proceeds to us of $12.4 million. We also had net borrowings of $6.2 million from our U.S. SPV Facility and our ABL Facility during the six months June 30, 2018.

Contractual Obligations

There have been no significant developments with respect to our contractual obligations since December 31, 2018, as described in our 2018 Form 10-K.

Regulatory Environment and Compliance

There have been no significant developments with respect to our regulatory environment and compliance since December 31, 2018, as described in our 2018 Form 10-K except for the following:

California Assembly Bill 539

On June 26, 2019, the California Senate Banking and Financial Institutions Committees passed Assembly Bill 539, which imposes an interest rate cap on all consumer loans between $2,500 and $10,000 of 36% plus the Federal Funds Rate. On July 9, 2019, the California Senate Judiciary Committee also passed Assembly Bill 539 and the bill was referred to the Senate Appropriations Committee. The deadline for Assembly Bill 539 to pass both houses is September 13, 2019, and the deadline to be signed by the Governor and passed into law is October 13th, 2019. Revenue from California Unsecured and Secured Installment loans amounted to 13.3% of total revenue from continuing operations for the trailing 12 months ended June 30, 2019. As of June 30, 2019, California Unsecured and Secured Installment gross loans receivable were $86.5 million and $42.3 million, respectively. We continue to evaluate the effect on our results of operations and financial condition as a result of this bill and alternatives available to service customers in the California market.

California Consumer Privacy Act

In 2018, the California Consumer Privacy Act (“CCPA”) was passed into law, effective January 1, 2020. CCPA broadens consumer rights with respect to their personal information, imposing expanded obligations to disclose the categories and uses of personal information a business collects, providing consumers a right to access that information, a right to opt out of the sale of personal information and the right to request that a business delete personal information about the consumer subject to certain exemptions. CCPA provides for civil penalties for violations, as well as a private right of action for data breaches, which may increase the costs of data breach litigation. CCPA contains a number of ambiguities, was previously amended and we anticipate further amendments before its effective date. Other states and possibly the federal government may adopt laws similar to the CCPA. While it is too early to know its full impact, these developments could ultimately result in the imposition of requirements on CURO and other consumer financial service providers that could increases costs or otherwise adversely affect our business.

British Columbia Business Practices and Consumer Amendment Act

Effective January 1, 2017, the British Columbia Ministry of Public Safety and Solicitor General (the "Ministry") reduced the total cost of borrowing from C$23 per C$100 lent to C$17 per C$100 lent. A further reduction to C$15 per C$100 lent came into effect on September 1, 2018. On February 26, 2019, the Minister of Public Safety and Solicitor General introduced in Parliament Bill 7 titled “Business Practices and Consumer Amendment Act." This bill received Royal Assent on May 16, 2019 and became law. There are no material changes to our current operations as a result of this legislation. The bill primarily allows the Ministry to i) define a high cost credit product and ii) require licensing and consumer protection oversight. It also authorizes the Ministry to prescribe regulations regarding high cost credit products including a cooling off period between loans, cost/optional services disclosure requirements, and prohibition of concurrent loan products. It is too early to predict the outcome of the regulations setting process and its impact on our operations.

CFPB Rulemaking Update

In February 2019, the CFPB issued two notices of proposed rulemaking proposing (i) to delay the August 19, 2019 compliance date for the so-called "Mandatory Underwriting Provisions" of the 2017 Final Payday, Vehicle Title, and Certain High-Cost Installment Loans (the "2017 Final Rule") Rule to November 19, 2020 and (ii) to rescind such Mandatory Underwriting Provisions (the “2019 Proposed Rule”). The CFPB issued a final rule on June 6, 2019 delaying the compliance date for the Mandatory Underwriting Provisions of the 2017 Final Rule to November 19, 2020. The Mandatory Underwriting Provisions which the 2019 Proposed Rule would rescind which are still under consideration include: (i) provide that it is an unfair and abusive practice for a lender to make a covered short-term or longer-term balloon-payment loan, including our payday and vehicle title loans with a term of 45 days or less, without reasonably determining that consumers have the ability to repay those loans according to their terms; (ii) prescribe mandatory underwriting requirements for making this ability-to-repay determination; (iii) exempt certain loans from the mandatory underwriting requirements; and (iv) establish related definitions, reporting, and recordkeeping requirements.

The compliance date for the "Payment Provision" of the 2017 Final Rule remains August 19, 2019, but is currently stayed pursuant to the Western District of Texas, Austin Division's Ruling ("Court Order") on May 30, 2019. Under these provisions:

•

If two consecutive attempts to collect money from a particular account of the borrower, made through any channel (e.g., paper check, ACH, prepaid card) are returned for insufficient funds, the lender cannot make any further attempts to collect from such account unless the borrower has provided a new and specific authorization for additional payment transfers. The 2017 Final CFPB Rule contains specific requirements and conditions for the authorization. While the CFPB has explained that these provisions are designed to limit bank penalty fees to which consumers may be subject, and while banks do not charge penalty fees on debit card authorization requests, the 2017 Final CFPB Rule nevertheless treats card authorization requests as payment attempts subject to these limitations.

•

A lender generally must give the consumer at least three business days advance notice before attempting to collect payment by accessing a consumer’s checking, savings, or prepaid account. The notice must include information such as the date of the payment request, payment channel and payment amount (broken down by principal, interest, fees, and other charges), as well as additional information for “unusual attempts,” such as when the payment is for a different amount than the regular payment, initiated on a date other than the date of a regularly scheduled payment or initiated in a different channel that the immediately preceding payment attempt. A lender must also provide the borrower with a "consumer rights notice" in a prescribed form after two consecutive failed payment attempts.

The CFPB has indicated it has received a formal request to revisit the treatment of debt cards under the Payment Provisions and intends to examine the Payment Provisions further. If the CFPB determines that further action is warranted, it may commence a separate rulemaking initiative.

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 2018 Form 10-K for the year ended December 31, 2018. There have been no material changes to the amounts 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 Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including without limitation, controls and procedures designed to ensure that information required to be disclosed in reports we file under the Exchange Act is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on an evaluation of our disclosure controls and procedures as disclosed in Item 9A of our 2018 Form 10-K for the year ended December 31, 2018, our management concluded that our internal control over financial reporting was not effective at December 31, 2018 because of the identification of a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Remediation and changes in internal control over financial reporting

We are taking actions to improve our internal control over financial reporting, including implementing plans as identified in Item 9A of our 2018 Form 10-K, filed with the SEC on March 18, 2019, to address our material weakness. The material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed in 2019.

Except as noted above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) during the three months ended June 30, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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.

PART 2. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information required by this item is included in Note 13 - "Contingent Liabilities" of the Notes to the 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 2018 Form 10-K for the year ended December 31, 2018, except for the following:

Our industry is strictly regulated everywhere we operate, and these regulations could have a material adverse effect on our business and results of operations.

We are subject to substantial regulation everywhere we operate. In the U.S. and Canada, our business is subject to a variety of statutes and regulations enacted by government entities at the federal, state or provincial, and municipal levels. These regulations affect our business in many ways, and include regulations relating to:


•	the amount we may charge in interest rates and fees;


•	the terms of our loans (such as maximum and minimum durations), repayment requirements and limitations, number and frequency of loans, maximum loan amounts, renewals and extensions, required repayment plans and reporting and use of state-wide databases;


•	underwriting requirements;


•	collection and servicing activity, including initiation of payments from consumer accounts;


•	the establishment and operation of CSOs or CABs;


•	licensing, reporting and document retention;


•	unfair, deceptive and abusive acts and practices;


•	discrimination;


•	disclosures, notices, advertising and marketing;


•	loans to members of the military and their dependents;


•	requirements governing electronic payments, transactions, signatures and disclosures;


•	check cashing;


•	money transmission;


•	currency and suspicious activity recording and reporting;


•	privacy and use of personally identifiable information and consumer data, including credit reports;


•	anti-money laundering and counter-terrorist financing requirements, including currency and suspicious transaction recording and reporting;


•	posting of fees and charges; and


•	repossession practices in certain jurisdictions where we operate as a title lender, including requirements regarding notices and prompt remittance of excess proceeds for the sale of repossessed automobiles.

For a more detailed description of the regulations to which we are subject and the regulatory environment in the jurisdictions in which we operate see “Regulatory Environment and Compliance” in our 2018 Form 10-K and in this Form 10-Q.

These regulations, outside of our control, affect our business in many ways, including affecting the loans and other products we can offer, the prices we can charge, the other terms of our loans and other products, the customers to whom we are allowed to lend, how we obtain our customers, how we communicate with our customers, how we pursue repayment of our loans and many others. Consequently, these restrictions adversely affect our loan volume, revenues, delinquencies and other aspects of our business, including our results of operations.

For example, in June 2018, we discontinued the use of secondary payment cards for affected borrowers who do not explicitly reauthorize the use of secondary payment cards. For these borrowers, in the event we cannot obtain payment through the bank account or payment card listed on the borrower’s application and as authorized by the borrower, we must rely exclusively on other collection methods, such as delinquency notices and/or collection calls. The discontinuation for affected borrowers of our current use of secondary cards which have not been reauthorized by the borrower will increase collections costs and reduce collections effectiveness. Even in advance of the effective date of the 2017 Final CFPB Rule (and even if the 2017 Final CFPB Rule does not become effective), it is possible that we will make further changes to our payment practices in a manner that will increase costs and/or reduce revenues.

In addition, on June 26, 2019, the California Senate Banking and Financial Institutions Committees passed Assembly Bill 539, which imposes an interest rate cap on all consumer loans between $2,500 and $10,000 of 36% plus the Federal Funds Rate. On July 9, 2019, the California Senate Judiciary Committee also passed Assembly Bill 539 and the bill was referred to the Senate Appropriations Committee. The deadline for Assembly Bill 539 to pass both houses is September 13, 2019, and the deadline to be signed by the Governor and passed into law is October 13th, 2019. Revenue from California Unsecured and Secured Installment loans amounted to 13.3% of total revenue from continuing operations for the trailing twelve months ended June 30, 2019. As of June 30, 2019, California Unsecured and Secured Installment gross loans receivable were $86.5 million and $42.3 million, respectively. We continue to evaluate the effect on our results of operations and financial condition as a result of this bill and alternatives available to service customers in the California market. If we are unsuccessful in managing the transition of our California business and operations from affected installment loans to existing and alternative products, Assembly Bill 539 could have a material adverse effect on our business and results of operations.

Further, during 2018, the California Consumer Privacy Act (“CCPA”) was passed into law, effective January 1, 2020. CCPA broadens consumer rights with respect to their personal information, imposing expanded obligations to disclose the categories and uses of personal information a business collects, providing consumers a right to access that information, a right to opt out of the sale of personal information and the right to request that a business delete personal information about the consumer subject to certain exemptions. CCPA provides for civil penalties for violations, as well as a private right of action for data breaches, which may increase the costs of data breach litigation. CCPA contains a number of ambiguities, was previously amended and we anticipate further amendments before its effective date. Other states and possibly the federal government may adopt laws similar to the CCPA. While it is too early to know its full impact, these developments could ultimately result in the imposition of requirements on CURO and other consumer financial service providers that could increases costs or otherwise adversely affect our business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The 2017 Incentive Plan permits the netting of common stock upon vesting of restricted stock units to satisfy individual tax withholding requirements. During the quarter ended June 30, 2019, we reacquired 2,790 shares of common stock with a weighted average fair market value of $12.14 as a result of such tax withholdings.

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, will continue until completed or terminated. CURO expects the purchases to be made from time-to-time in the open market, in privately negotiated transactions, or both, at the Company's discretion and subject to market conditions and other factors. Any repurchased shares will be available for use in connection with equity plans or other corporate purposes.

The following table provides information with respect to purchases we made of our common stock during the quarter ended June 30, 2019.



Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Dollar Value of Shares that may yet be Purchased under the Plans or Programs⁽²⁾ (In milions)
April 2019	2,790	$	12.14	—	$	—
May 2019	—	—		—
June 2019	—	—		244,200	47.5
Total	2,790	$	12.14	244,200	$	47.5
(1) Represents shares withheld from employees as tax payments for shares issued under our stock-based compensation plans. See Note 11, "Share-Based Compensation" of the Notes to Consolidated Financial Statements for additional details on our stock-based compensation plans.
(2) As of the end of the period.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

(a) Disclosure of Unreported 8-K Information

None.

(b) Material Changes to Director Nominee Procedures

None.

ITEM 6. EXHIBITS



Exhibit no.		Exhibit Description
3.1		Amended and Restated Certificate of Incorporation of the Registrant (previously filed as Exhibit 3.1 to the Current Report on Form 8-K filed on December 11, 2017)
3.2		Form of Amended and Restated Bylaws of the Registrant (previously filed as Exhibit 3.2 to the Current Report on Form 8-K filed on December 11, 2017)
31.1		Certifications of Chief Executive Officer of the Company under Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certifications of Chief Financial Officer of the Company under Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This certification accompanies this report and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of §18 of the Securities Exchange Act of 1934, as amended
101		The following unaudited financial information from the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2019, filed with the SEC on August 5, 2019, formatted in Extensible Business Reporting Language (“XBRL”) includes: (i) Condensed Consolidated Balance Sheets at June 30, 2019 and December 31, 2018, (ii) Condensed Consolidated Statements of Operations for the quarter ended June 30, 2019 and 2018, (iii) Condensed Consolidated Statements of Comprehensive Income for the quarter ended June 30, 2019 and 2018, (iv) Condensed Consolidated Statements of Cash Flows for the quarter ended June 30, 2019 and 2018, and (v) Notes to Condensed Consolidated Financial Statements*

* Filed herewith.

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: August 5, 2019 CURO Group Holdings Corp.



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