Segment Analysis
We report financial results for two reportable segments: the U.S. and Canada. Following is a summary of results of operations for the segment and period indicated (in thousands, unaudited):
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U.S. Segment Results
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Three Months Ended June 30,
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Six Months Ended June 30,
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2020
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2019
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Change $
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Change %
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2020
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2019
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Change $
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Change %
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Revenue
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$
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137,320
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$
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210,046
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$
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(72,726)
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(34.6)
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%
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$
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359,088
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$
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436,165
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$
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(77,077)
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(17.7)
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%
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Provision for losses
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41,530
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92,552
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(51,022)
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(55.1)
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%
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127,571
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177,532
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(49,961)
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(28.1)
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%
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Net revenue
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95,790
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117,494
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(21,704)
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(18.5)
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%
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231,517
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258,633
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(27,116)
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(10.5)
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%
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Advertising
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5,269
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11,179
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(5,910)
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(52.9)
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%
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16,214
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17,533
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(1,319)
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(7.5)
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%
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Non-advertising costs of providing services
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33,661
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41,248
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(7,587)
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(18.4)
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%
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70,903
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86,230
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(15,327)
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(17.8)
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%
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Total cost of providing services
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38,930
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52,427
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(13,497)
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(25.7)
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%
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87,117
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103,763
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(16,646)
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(16.0)
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%
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Gross margin
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56,860
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65,067
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(8,207)
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(12.6)
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%
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144,400
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154,870
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(10,470)
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(6.8)
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%
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Corporate, district and other expenses
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29,631
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29,649
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(18)
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(0.1)
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%
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67,281
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73,529
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(6,248)
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(8.5)
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%
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Interest expense
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16,113
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14,641
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1,472
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10.1
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%
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30,959
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29,369
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1,590
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5.4
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%
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(Gain) loss from equity method investment
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(741)
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3,748
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(4,489)
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#
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877
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3,748
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(2,871)
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(76.6)
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Total operating expense
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45,003
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48,038
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(3,035)
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(6.3)
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%
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99,117
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106,646
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(7,529)
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(7.1)
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%
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Segment operating income
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11,857
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17,029
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(5,172)
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(30.4)
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%
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45,283
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48,224
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(2,941)
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(6.1)
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Interest expense
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16,113
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14,641
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1,472
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10.1
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%
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30,959
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29,369
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1,590
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5.4
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%
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Depreciation and amortization
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3,309
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3,437
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(128)
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(3.7)
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%
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6,686
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7,163
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(477)
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(6.7)
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%
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EBITDA(1)
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31,279
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35,107
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(3,828)
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(10.9)
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%
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82,928
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84,756
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(1,828)
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(2.2)
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Legal and other costs
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938
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—
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938
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2,087
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1,617
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470
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Other adjustments
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305
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(143)
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448
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164
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(248)
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412
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U.K. related costs
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—
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679
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(679)
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—
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8,496
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(8,496)
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Share-based compensation
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3,310
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2,644
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666
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6,504
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4,816
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1,688
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(Gain) loss from equity method investment
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(741)
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3,748
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(4,489)
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877
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3,748
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(2,871)
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Adjusted EBITDA(1)
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$
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35,091
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$
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42,035
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$
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(6,944)
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(16.5)
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%
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$
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92,560
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$
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103,185
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$
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(10,625)
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(10.3)
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%
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(1) These are non-GAAP metrics. For a description and reconciliation of each Non-GAAP metric, see "Supplemental Non-GAAP Financial Information."
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# - Variance greater than 100% or not meaningful.
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U.S. Segment Results - For the three months ended June 30, 2020 and 2019
U.S. revenues decreased by $72.7 million, or 34.6%, to $137.3 million, compared to the prior-year period for the three months ended June 30, 2020, as a result of the declines in combined gross loans receivable discussed above. Excluding the impact of California Installment loan runoff stemming from regulatory changes effective January 1, 2020, U.S. revenues decreased $56.0 million, or 31.9%.
The provision for losses decreased $51.0 million, or 55.1%, primarily as a result of lower loan volume, as previously discussed.
Non-advertising costs of providing services for the three months ended June 30, 2020 of $33.7 million, decreased $7.6 million, or 18.4%, compared to $41.2 million for the three months ended June 30, 2019. The decrease was primarily driven by Ad Astra costs of $3.7 million, which prior to its acquisition were included in Corporate, district and other expenses. The remaining decrease year-over-year in Non-advertising costs of providing services was due to (i) lower underwriting and other variable costs as a result of lower demand, (ii) lower collection costs after governmental stimulus-related pay-downs and (iii) lower discretionary variable compensation.
Advertising costs decreased $5.9 million, or 52.9%, year-over-year because of COVID-19 Impacts.
Corporate, district and other expenses of $29.6 million for the three months ended June 30, 2020, were flat compared to the prior-year period. Corporate, district and other expenses for the three months ended June 30, 2020 included $2.1 million of collection costs related to Ad Astra, which were historically included in Non-advertising costs of providing services. For the three months ended June 30, 2020, corporate, district and other costs included (i) $0.9 million of legal and other costs described in our reconciliation to Adjusted Net Income above and (ii) $3.3 million of share-based compensation costs. For the three months ended June 30, 2019, corporate, district and other expenses included (i) U.K. related costs of $0.7 million as described in our reconciliation to Adjusted Net Income above and (ii) share-based compensation costs of $2.6 million.
Excluding the aforementioned items, comparable corporate district and other expenses decreased $3.1 million year-over-year, primarily due to the timing and extent of variable compensation and certain cost reductions, including work-from-home initiatives, to manage COVID-19 Impacts.
We hold a 42.5% ownership stake in Katapult and account for this ownership under the equity method of accounting. During the second quarter of 2020, Katapult’s leasing volumes benefited from the shift to online shopping during COVID-19 stay-at-home and quarantine orders. Katapult posted its highest weekly origination volumes and highest historical approval rates during the height of COVID-19 as stay-at-home consumers shopped online due to retail store closings and prime and near-prime online financing providers tightened credit and drove more customers to Katapult. Through the end of June, Katapult originated approximately $100 million in leases year-to-date compared to $30 million in the first half of 2019. Currently, one retail partner accounts for a majority of Katapult's volume. Credit trends have continued to improve even with the outsized growth in volume such that Katapult has turned profitable to us during the second quarter. We recognize our share of Katapult’s income on a two-month lag, from which we recorded income of $0.7 million for the second quarter of 2020 and a loss of $0.9 million for the six months ended June 30, 2020.
U.S. interest expense for the three months ended June 30, 2020 increased $1.5 million, or 10.1%, primarily related to the new Non-Recourse U.S. SPV Facility, on which we drew $35.2 million when it closed in April 2020.
U.S. Segment Results - For the six months ended June 30, 2020 and 2019
U.S. revenues decreased by $77.1 million, or 17.7%, to $359.1 million, compared to the prior-year period for the six months ended June 30, 2020, as a result of decreases in combined gross loans receivable. Excluding the aforementioned impact of California Installment loan runoff, U.S. revenues decreased by $47.2 million, or 13.0%.
The provision for losses decreased $50.0 million, or 28.1%, for the six months ended June 30, 2020, compared to the prior-year period, primarily as a result of lower loan volume.
Non-advertising costs of providing services for the six months ended June 30, 2020 of $70.9 million, decreased $15.3 million, or 17.8%, compared to $86.2 million for the six months ended June 30, 2019. The decrease was primarily driven by Ad Astra costs of $8.4 million, which prior to its acquisition were included in Corporate, district and other expenses. The remaining decrease year-over-year in Non-advertising costs of providing services was due to (i) lower underwriting and other variable costs as a result of lower demand, (ii) lower collection costs after stimulus-related pay-downs and (iii) lower discretionary variable compensation.
Advertising costs decreased $1.3 million, or 7.5%, year-over-year because of COVID-19 Impacts.
Corporate, district and other expenses were $67.3 million for the six months ended June 30, 2020, a decrease of $6.2 million, or 8.5%, compared to the three months ended June 30, 2019. Corporate, district and other expenses for the six months ended June 30, 2020 included $5.6 million of collection costs related to Ad Astra, which were historically included in Non-advertising costs of providing services. For the six months ended June 30, 2020, corporate, district and other costs included (i) $2.1 million of legal and other costs described in our reconciliation to Adjusted Net Income above and (ii) $6.5 million of share-based compensation costs. For the six months ended June 30, 2019, corporate, district and other expenses included (i) U.K. related costs of $8.5 million as described in our reconciliation to Adjusted Net Income above, and (ii) share-based compensation costs of $4.8 million.
Excluding these items, comparable corporate, district and other expenses decreased $5.5 million year-over-year, primarily due to the timing and extent of variable compensation and certain cost reductions, including work-from-home initiatives, to manage COVID-19 Impacts for the six months ended June 30, 2020.
As described above, we recognize our share of Katapult's income on a two-month lag and recorded a loss of $0.9 million for the first half of 2020.
U.S. interest expense for the six months ended June 30, 2020 increased $1.6 million, or 5.4%, primarily related to the new Non-Recourse U.S. SPV Facility, on which we drew $35.2 million when it closed in April 2020.
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Canada Segment Results
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Three Months Ended June 30,
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Six Months Ended June 30,
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2020
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2019
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Change $
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Change %
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2020
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2019
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Change $
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Change %
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Revenue
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$
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45,189
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$
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54,254
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$
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(9,065)
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(16.7)
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%
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$
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104,227
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$
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106,074
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$
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(1,847)
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(1.7)
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%
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Provision for losses
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9,163
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19,458
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(10,295)
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(52.9)
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%
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36,658
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36,863
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(205)
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(0.6)
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%
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Net revenue
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36,026
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|
34,796
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|
1,230
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|
3.5
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%
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67,569
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69,211
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(1,642)
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(2.4)
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%
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Advertising
|
481
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|
1,601
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(1,120)
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(70.0)
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%
|
|
1,755
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|
3,033
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(1,278)
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(42.1)
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%
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Non-advertising costs of providing services
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15,906
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|
17,081
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(1,175)
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(6.9)
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%
|
|
34,016
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|
34,370
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(354)
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(1.0)
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%
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Total cost of providing services
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16,387
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|
18,682
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(2,295)
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(12.3)
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%
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35,771
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37,403
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(1,632)
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(4.4)
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%
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Gross margin
|
19,639
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|
16,114
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|
3,525
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21.9
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%
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31,798
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|
31,808
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(10)
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—
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%
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Corporate, district and other expenses
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7,150
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|
5,641
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|
1,509
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26.8
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%
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|
12,307
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10,849
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|
1,458
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|
13.4
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%
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Interest expense
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2,198
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|
2,382
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(184)
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(7.7)
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%
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|
4,676
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|
5,344
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(668)
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(12.5)
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%
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Total operating expense
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9,348
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|
8,023
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|
1,325
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16.5
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%
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|
16,983
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|
16,193
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|
790
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|
4.9
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%
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Segment operating income
|
10,291
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|
8,091
|
|
2,200
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|
27.2
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%
|
|
14,815
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|
15,615
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(800)
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(5.1)
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%
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Interest expense
|
2,198
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|
2,382
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(184)
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(7.7)
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%
|
|
4,676
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|
5,344
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(668)
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(12.5)
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%
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Depreciation and amortization
|
1,108
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|
1,214
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(106)
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(8.7)
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%
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2,268
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|
2,408
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(140)
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(5.8)
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%
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EBITDA(1)
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13,597
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|
11,687
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|
1,910
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|
16.3
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%
|
|
21,759
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|
23,367
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(1,608)
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(6.9)
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%
|
|
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Legal and other costs
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
135
|
|
(135)
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|
|
|
|
|
|
|
|
|
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|
|
Canada GST adjustment
|
2,160
|
|
—
|
|
2,160
|
|
|
|
2,160
|
|
—
|
|
2,160
|
|
|
Other adjustments
|
281
|
|
(33)
|
|
314
|
|
|
|
437
|
|
(144)
|
|
581
|
|
|
Adjusted EBITDA(1)
|
$
|
16,038
|
|
$
|
11,654
|
|
$
|
4,384
|
|
37.6
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%
|
|
$
|
24,356
|
|
$
|
23,358
|
|
$
|
998
|
|
4.3
|
%
|
(1) These are non-GAAP metrics. For a description and reconciliation of each Non-GAAP metric, see "Supplemental Non-GAAP Financial Information."
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Canada Segment Results - For the three months ended June 30, 2020 and 2019
Canada revenue decreased $9.1 million, or 16.7% ($7.4 million, or 13.6%, on a constant-currency basis), to $45.2 million for the three months ended June 30, 2020, from $54.3 million in the prior year, as a result of the declines in gross loans receivable discussed previously.
Canada non-Single-Pay revenue increased $1.6 million, or 4.6% ($3.0 million, or 8.5%, on a constant-currency basis), to $36.8 million, compared to $35.2 million in the prior-year period, on growth of $9.1 million, or 3.9% ($20.0 million, or 8.6%, on a constant-currency basis), in related loan balances. The increase was driven by continued growth of Open-End loans despite COVID-19 Impacts. Ancillary revenue, which includes sales of insurance to Open-End loan customers, decreased $1.2 million, or 11.0% ($0.8 million, or 7.7%, on a constant-currency basis). The decrease was driven by additional insurance claims from consumers impacted by COVID-19 during the second quarter of 2020.
Single-Pay revenue decreased $10.7 million, or 55.9% ($10.4 million, or 54.3%, on a constant-currency basis), to $8.4 million for the three months ended June 30, 2020, and Single-Pay receivables decreased $20.9 million, or 59.6% ($20.3 million, or 57.7%, on a constant-currency basis), to $14.2 million, from $35.1 million, in the prior year. The decreases in Single-Pay revenue and receivables were due to a significant decline in demand attributable to COVID-19 Impacts.
The provision for losses decreased $10.3 million, or 52.9% ($10.0 million, or 51.3%, on a constant-currency basis), to $9.2 million for the three months ended June 30, 2020, compared to $19.5 million in the prior-year period. The decrease in provision for loan losses was primarily a result of lower loan volume and lower NCOs as a result of COVID-19 Impacts as discussed previously. On a quarterly basis, despite COVID-19 Impacts, loss rates improved approximately 190 bps, or 28.4%, year over year due to stimulus-related pay-downs and overall portfolio maturation.
Canada cost of providing services for the three months ended June 30, 2020 was $16.4 million, a decrease of $2.3 million, or 12.3% ($1.7 million, or 9.1%, on a constant-currency basis), compared to $18.7 million for the three months ended June 30,
2019, primarily related to certain cost reductions to manage COVID-19 Impacts and reduced advertising efforts during the second quarter of 2020.
Canada operating expenses for the three months ended June 30, 2020 were $9.3 million, an increase of $1.3 million, or 16.5% ($1.6 million, or 20.0%, on a constant-currency basis), compared to $8.0 million in the prior-year period, primarily related to $2.2 million of Canadian GST described in our reconciliation to Adjusted Net Income above.
Canada Segment Results - For the six months ended June 30, 2020 and 2019
Canada revenue decreased $1.8 million, or 1.7% (increased $0.3 million, or 0.3%, on a constant-currency basis), to $104.2 million for the six months ended June 30, 2020, from $106.1 million in the prior year as a result of the declines in gross loans receivable.
Canada non-Single-Pay revenue increased $11.4 million, or 17.0% ($12.9 million, or 19.2%, on a constant-currency basis), to $78.8 million, compared to $67.4 million in the prior-year period, on growth of $9.1 million, or 3.9% ($20.0 million, or 8.6%, on a constant-currency basis), in related loan balances. The increase was driven by continued growth of Open-End loan despite COVID-19 related impacts. Ancillary revenue, which includes sales of insurance to Open-End loan customers, remained flat year-over-year due to increased insurance claims from consumers impacted by COVID-19 during the second quarter of 2020.
Single-Pay revenue decreased $13.3 million, or 34.3% ($12.9 million, or 33.5%, on a constant-currency basis), to $25.4 million for the six months ended June 30, 2020, and Single-Pay receivables decreased $20.9 million, or 59.6% ($20.3 million, or 57.7% on a constant-currency basis), to $14.2 million from $35.1 million, in the prior year. The decreases in Single-Pay revenue and receivables were due to product mix shift from Single-Pay loans to Open-End loans, as well as significant declines in demand attributable to COVID-19 Impacts.
The provision for losses decreased $0.2 million, or 0.6% (increased $0.5 million, or 1.3%, on a constant-currency basis), to $36.7 million for the six months ended June 30, 2020, compared to $36.9 million in the prior-year period. The decrease in provision for loan losses was primarily a result lower loan volume and lower NCOs as a result of COVID-19 Impacts as discussed previously. On a quarterly basis, despite COVID-19 Impacts, loss rates improved approximately 190 bps, or 28.4%, year over year due to stimulus-related pay-downs.
Canada cost of providing services for the six months ended June 30, 2020 was $35.8 million, a decrease of $1.6 million, or 4.4% ($0.9 million, or 2.3%, on a constant-currency basis), compared to $37.4 million for the six months ended June 30, 2019, primarily related to certain cost reductions to manage COVID-19 Impacts and reduced advertising efforts through the second quarter of 2020.
Canada operating expenses for the six months ended June 30, 2020 were $17.0 million, an increase of $0.8 million, or 4.9% ($1.1 million, or 7.1%, on a constant-currency basis), compared to $16.2 million in the prior-year period, primarily related to $2.2 million of Canadian GST described in our reconciliation to Adjusted Net Income above, partially offset by lower interest expense.
Supplemental Non-GAAP Financial Information
Non-GAAP Financial Measures
In addition to the financial information prepared in conformity with US GAAP, we provide certain “non-GAAP financial measures,” including:
•Adjusted Net Income and Adjusted Earnings Per Share, or the Adjusted Earnings Measures (net income from continuing operations plus or minus restructuring and other costs, certain legal and related costs, gain or loss from equity method investment, goodwill and intangible asset impairments, certain costs related to the disposition of U.K., transaction-related costs, share-based compensation, intangible asset amortization. certain tax adjustments and impacts from tax law changes and cumulative tax effect of applicable adjustments, on a total and per share basis);
•EBITDA (net income from continuing operations before interest, income taxes, depreciation and amortization);
•Adjusted EBITDA (EBITDA plus or minus certain non-cash and other adjusting items);
•Adjusted effective income tax rate (effective tax rate plus or minus certain non-cash and other adjusting items); and
•Gross Combined Loans Receivable (includes loans originated by third-party lenders through CSO programs which are not included in our unaudited Condensed Consolidated Financial Statements).
We believe that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of the Company's operations. We believe that these non-GAAP financial measures offer another way to view aspects of our business that, when viewed with our US 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 US 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 US GAAP, we provide Gross Combined Loans Receivable consisting of Company-Owned loans receivable plus loans originated by third-party lenders through the CSO programs, which we guarantee but do not include in the unaudited Condensed Consolidated Financial Statements ("Guaranteed by the Company"). Management believes this analysis provides investors with important information needed to evaluate overall lending performance.
We provide non-GAAP financial information for informational purposes and to enhance understanding of our US GAAP unaudited Condensed Consolidated Financial Statements. Adjusted Net Income, Adjusted Earnings per Share, EBITDA, Adjusted EBITDA and Gross Combined Loans Receivable should not be considered as alternatives to income from continuing operations, segment operating income or any other performance measure derived in accordance with US GAAP, or as an alternative to cash flows from operating activities or any other liquidity measure derived in accordance with US GAAP. Readers should consider the information in addition to, but not instead of or superior to, the financial statements prepared in accordance with US 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 US 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 US 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 US GAAP.
As noted above, Gross Combined Loans Receivable includes loans originated by third-party lenders through CSO programs which are not included in the unaudited Condensed Consolidated Financial Statements but from which we earn revenue and for which we provide a guarantee to the lender. Management believes this analysis provides investors with important information needed to evaluate overall lending performance.
We believe Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA are used by investors to analyze operating performance and evaluate our ability to incur and service debt and the capacity for making capital expenditures. Adjusted EBITDA is also useful to investors to help assess our estimated enterprise value. The computation of
Adjusted EBITDA as presented in this Form 10-Q may differ from the computation of similarly-titled measures provided by other companies.
Reconciliation of Net income from continuing operations and Diluted Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings per Share, non-GAAP measures (in thousands, except per share data, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
2019
|
Change $
|
Change %
|
|
2020
|
2019
|
Change $
|
Change %
|
Net income from continuing operations
|
$
|
21,080
|
|
$
|
17,667
|
|
$
|
3,413
|
|
19.3
|
%
|
|
$
|
57,093
|
|
$
|
46,340
|
|
$
|
10,753
|
|
23.2
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal and related costs (1)
|
938
|
|
—
|
|
|
|
|
2,087
|
|
1,752
|
|
|
|
U.K. related costs (2)
|
—
|
|
679
|
|
|
|
|
—
|
|
8,496
|
|
|
|
(Gain) loss from equity method investment (3)
|
(741)
|
|
3,748
|
|
|
|
|
877
|
|
3,748
|
|
|
|
Share-based compensation (4)
|
3,310
|
|
2,644
|
|
|
|
|
6,504
|
|
4,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible asset amortization
|
759
|
|
761
|
|
|
|
|
1,496
|
|
1,557
|
|
|
|
Canada GST adjustment (5)
|
2,160
|
|
—
|
|
|
|
|
2,160
|
|
—
|
|
|
|
Income tax valuations (6)
|
(3,472)
|
|
—
|
|
|
|
|
(3,472)
|
|
—
|
|
|
|
Impact of tax law changes (7)
|
—
|
|
—
|
|
|
|
|
(9,114)
|
|
—
|
|
|
|
Cumulative tax effect of adjustments (8)
|
(1,864)
|
|
(1,062)
|
|
|
|
|
(3,185)
|
|
(4,322)
|
|
|
|
Adjusted Net Income
|
$
|
22,170
|
|
$
|
24,437
|
|
$
|
(2,267)
|
|
(9.3)
|
%
|
|
$
|
54,446
|
|
$
|
62,387
|
|
$
|
(7,941)
|
|
(12.7)
|
%
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
$
|
21,080
|
|
$
|
17,667
|
|
|
|
|
$
|
57,093
|
|
$
|
46,340
|
|
|
|
Diluted Weighted Average Shares Outstanding
|
41,545
|
|
47,107
|
|
|
|
|
41,686
|
|
47,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share from continuing operations
|
$
|
0.51
|
|
$
|
0.38
|
|
$
|
0.13
|
|
34.2
|
%
|
|
$
|
1.37
|
|
$
|
0.98
|
|
$
|
0.39
|
|
39.8
|
|
Per Share impact of adjustments to Net income
|
0.02
|
|
0.14
|
|
|
|
|
(0.06)
|
|
0.34
|
|
|
|
Adjusted Diluted Earnings per Share
|
$
|
0.53
|
|
$
|
0.52
|
|
$
|
0.01
|
|
1.9
|
%
|
|
$
|
1.31
|
|
$
|
1.32
|
|
$
|
(0.01)
|
|
(0.8)
|
%
|
Note: Footnotes follow Reconciliation of Adjusted EBITDA table immediately below.
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net income from continuing operations to EBITDA and Adjusted EBITDA, non-GAAP measures (in thousands, except per share data, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
2019
|
Change $
|
Change %
|
|
2020
|
2019
|
Change $
|
Change %
|
Net income from continuing operations
|
$
|
21,080
|
|
$
|
17,667
|
|
$
|
3,413
|
|
19.3
|
%
|
|
$
|
57,093
|
|
$
|
46,340
|
|
$
|
10,753
|
|
23.2
|
|
Provision for income taxes
|
1,068
|
|
7,453
|
|
(6,385)
|
|
(85.7)
|
%
|
|
3,005
|
|
17,499
|
|
(14,494)
|
|
(82.8)
|
|
Interest expense
|
18,311
|
|
17,023
|
|
1,288
|
|
7.6
|
%
|
|
35,635
|
|
34,713
|
|
922
|
|
2.7
|
|
Depreciation and amortization
|
4,417
|
|
4,651
|
|
(234)
|
|
(5.0)
|
%
|
|
8,954
|
|
9,571
|
|
(617)
|
|
(6.4)
|
%
|
EBITDA
|
44,876
|
|
46,794
|
|
(1,918)
|
|
(4.1)
|
%
|
|
104,687
|
|
108,123
|
|
(3,436)
|
|
(3.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal and related costs (1)
|
938
|
|
—
|
|
|
|
|
2,087
|
|
1,752
|
|
|
|
U.K. related costs (2)
|
—
|
|
679
|
|
|
|
|
—
|
|
8,496
|
|
|
|
(Gain) loss from equity method investment (3)
|
(741)
|
|
3,748
|
|
|
|
|
877
|
|
3,748
|
|
|
|
Share-based compensation (4)
|
3,310
|
|
2,644
|
|
|
|
|
6,504
|
|
4,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada GST adjustment (5)
|
2,160
|
|
—
|
|
|
|
|
2,160
|
|
—
|
|
|
|
Other adjustments (9)
|
586
|
|
(176)
|
|
|
|
|
601
|
|
(392)
|
|
|
|
Adjusted EBITDA
|
$
|
51,129
|
|
$
|
53,689
|
|
$
|
(2,560)
|
|
(4.8)
|
%
|
|
$
|
116,916
|
|
$
|
126,543
|
|
$
|
(9,627)
|
|
(7.6)
|
%
|
Adjusted EBITDA Margin
|
28.0
|
%
|
20.3
|
%
|
|
|
|
25.2
|
|
23.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Legal and other costs for the six months ended June 30, 2020 included (i) settlement costs related to certain legal matters (ii) costs related to certain securities litigation and related matter, (iii) severance costs for certain corporate employees and (iv) legal and advisory costs related to the purchase of Ad Astra.
Legal and other 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 helped better align store staffing with in-store customer traffic and volume patterns, as more of our growth comes from online channels and as store customers require less time in stores as they conduct more of the follow-up activities online. The elimination of certain corporate positions related to efficiency initiatives and has allowed the Company to reallocate investment to strategic growth activities.
|
|
|
|
|
(2)
|
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.
|
|
|
(3)
|
The Loss from equity method investment for the six months ended June 30, 2020 of $0.9 million includes our share of the estimated GAAP net loss of Katapult. As of June 30, 2020, we owned 42.5% of the outstanding shares of Katapult.
The Loss from equity method investment for the six months ended June 30, 2019 of $3.7 million represented the market value adjustment recognized during the second quarter of 2019 as a result of an equity raising round from April through July of 2019 that implied a value per share less than the value per share raised in prior raises.
|
(4)
|
We approved the adoption of share-based compensation plans during 2010 and 2017 for key members of senior management. The estimated fair value of share-based awards is recognized as non-cash compensation expense on a straight-line basis over the vesting period.
|
|
|
(5)
|
We received a Notice of Adjustment from Canadian tax authority auditors in the second quarter 2020 related to the treatment of certain expenses in prior years for purposes of calculating the GST due.
|
(6)
|
In the second quarter of 2020, a Texas court ruling related to the apportionment of income to the state for another company resulted in a change in estimate regarding the realization of a tax benefit previously taken. Accordingly, we recorded a $1.1 million liability for our estimated exposure related to this position. Also in the second quarter of 2020, we released a $4.6 million valuation allowance related to NOLs for certain entities in Canada.
|
(7)
|
On March 27, 2020, the CARES Act was enacted by the U.S. Federal government in response to the COVID-19 pandemic. The CARES Act, among other things, allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. For the six months ended June 30, 2020, we recorded an income tax benefit of $9.1 million related to the carryback of NOL from tax years 2018 and 2019.
|
(8)
|
Cumulative tax effect of adjustments included in Reconciliation of Net income from continuing operations to EBITDA and Adjusted EBITDA table is calculated using the estimated incremental tax rate by country.
|
(9)
|
Other adjustments primarily include the intercompany foreign-currency exchange impact.
|
Currency Information
We operate in the U.S. and Canada and our consolidated results are reported in U.S. dollars.
Changes in our reported revenues and net income include the effect of changes in currency exchange rates. We translate all balance sheet accounts into U.S. dollars at the currency exchange rate in effect at the end of each period. We translate the statement of operations at the average rates of exchange for the period. We record currency translation adjustments as a component of Accumulated Other Comprehensive Income in Stockholders’ Equity.
Constant Currency Analysis
We have operations in the U.S. and Canada. In the three months ended June 30, 2020 and 2019, 24.8% and 20.5%, respectively, of our revenues from continuing operations were originated in Canadian Dollars. In the six months ended June 30, 2020 and 2019, 22.5% and 19.6%, respectively, of our revenues from continuing operations were originated in Canadian Dollars. As a result, changes in our reported results include the impacts of changes in foreign currency exchange rates for the Canadian Dollar.
Income Statement - Three Months Ended June 30, 2020 and 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Exchange Rates
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Change
|
|
|
2020
|
2019
|
|
$
|
%
|
Canadian Dollar
|
$
|
0.7215
|
|
$
|
0.7477
|
|
|
($0.0262)
|
|
(3.5)
|
%
|
|
|
|
|
|
|
Income Statement - Six Months Ended June 30, 2020 and 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Exchange Rates
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
Change
|
|
|
2020
|
2019
|
|
$
|
%
|
Canadian Dollar
|
$
|
0.7335
|
|
$
|
0.7501
|
|
|
($0.0166)
|
|
(2.2)
|
%
|
Balance Sheet - Exchange rate as of June 30, 2020 and December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange Rate as of
|
|
|
|
|
|
June 30,
|
December 31,
|
|
Change
|
|
|
2020
|
2019
|
|
$
|
%
|
Canadian Dollar
|
$
|
0.7312
|
|
$
|
0.7683
|
|
|
($0.0371)
|
|
(4.8)
|
%
|
|
|
|
|
|
|
The following constant currency analysis removes the impact of the fluctuation in foreign exchange rates and utilizes constant currency results in our analysis of segment performance. Our constant currency assessment assumes foreign exchange rates in the current fiscal periods remained the same as in the prior fiscal periods. All conversion rates below are based on the U.S. Dollar equivalent to the Canadian Dollar. We believe that the constant currency assessment below is a useful measure in assessing the comparable growth and profitability of our operations.
We calculated the revenues and gross margin below during the three months ended June 30, 2020 using the actual average exchange rate during the three months ended June 30, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Change
|
|
|
(in thousands, unaudited)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
Canada – constant currency basis:
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
46,858
|
|
|
$
|
54,254
|
|
|
$
|
(7,396)
|
|
|
(13.6)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
$
|
20,406
|
|
|
$
|
16,114
|
|
|
$
|
4,292
|
|
|
26.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We calculated the revenues and gross margin below during the six months ended June 30, 2020 using the actual average exchange rate during the three months ended June 30, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
Change
|
|
|
(in thousands, unaudited)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
Canada – constant currency basis:
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
106,382
|
|
|
$
|
106,074
|
|
|
$
|
308
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
$
|
32,523
|
|
|
$
|
31,808
|
|
|
$
|
715
|
|
|
2.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We calculated gross loans receivable below as of June 30, 2020 using the actual exchange rate as of December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
Change
|
|
|
(in thousands, unaudited)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
Canada – constant currency basis:
|
|
|
|
|
|
|
|
|
Gross loans receivable
|
|
$
|
269,802
|
|
|
$
|
302,376
|
|
|
$
|
(32,574)
|
|
|
(10.8)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, our Non-Recourse U.S. SPV Facility and Non-Recourse Canada SPV Facility. Additionally, in August 2018, we issued $690.0 million 8.25% Senior Secured Notes due September 2025.
As of June 30, 2020, we were in compliance with all financial ratios, covenants and other requirements set forth in our debt agreements. We anticipate that our primary use of cash will be to fund growth in our working capital, finance capital expenditures, and meet our debt obligations. As we did for our share repurchase programs announced in April 2019 and February 2020 (which we have suspended, as previously disclosed), we may also use cash to fund a return on capital for our stockholders through share repurchase programs, or as we previously announced in the form of dividends.
Our level of cash flow provided by operating activities typically experiences some seasonal fluctuation related to our levels of net income and changes in working capital levels, particularly loans receivable. Unexpected changes in our financial condition or other unforeseen factors may result in our inability to obtain third-party financing or could increase our borrowing costs in the future. We have the ability to adjust our volume of lending to consumers to the extent we experience any short-term or long-term funding shortfalls, such as tightening our credit approval practices (as we have done during the COVID-19 pandemic), which has the effect of reducing cash outflow requirements while increasing cash inflows through loan repayments. We may also sell or securitize our assets, draw on our available revolving credit facility or line of credit, enter into additional refinancing agreements or reduce our capital spending in order to generate additional liquidity. As a result of lower consumer demand, increased or accelerated repayments as customers benefited from government stimulus programs, our decision to tighten credit and the resulting favorable credit performance, and the runoff of California Installment loans, our available cash on hand was $269.3 million and our total liquidity was $363.4 million as of June 30, 2020. We believe our cash on hand and available borrowings provide us with sufficient liquidity for at least the next 12 months.
Borrowings
Our debt consisted of the following as of June 30, 2020, net of deferred financing costs (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capacity
|
Interest Rate
|
Maturity
|
Counter-parties
|
Balance as of June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Recourse Canada SPV Facility (1)
|
|
C$175.0 million
|
3-Mo CDOR + 6.75%
|
September 2, 2023
|
Waterfall Asset Management
|
$
|
88,789
|
|
Senior Secured Revolving Credit Facility
|
|
$50.0 million
|
1-Mo LIBOR + 5.00%
|
June 30, 2021
|
BayCoast Bank; Stride Bank; Hancock-Whitney Bank; Metropolitan Commercial Bank
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Recourse U.S. SPV Facility
|
|
$200.0 million
|
1-Mo LIBOR + 6.25(2)
|
April 8, 2024
|
Atalaya Capital Management
|
31,896
|
|
Cash Money Revolving Credit Facility (1)
|
|
C$10.0 million
|
Canada Prime Rate +1.95%
|
On-demand
|
Royal Bank of Canada
|
—
|
|
8.25% Senior Secured Notes (due 2025)
|
|
$690.0 million
|
8.25%
|
September 1, 2025
|
|
$
|
679,143
|
|
(1) Capacity amounts are denominated in Canadian dollars, while outstanding balances as of June 30, 2020 are denominated in U.S. dollars.
|
|
|
|
|
|
|
(2) The Non-Recourse U.S. SPV Facility initially provided for $100.0 million of borrowing capacity and, on July 31, 2020, additional commitments were obtained increasing capacity to $200.0 million. As a result of the increase in commitments, interest now accrues at an annual rate of one-month LIBOR (with a floor of 1.65%) plus 6.25% on balances up to $145.5 million. Balances over that amount accrue interest at an annual rate of one-month LIBOR (with a floor of 1.65%) plus 9.75%.
|
|
|
|
|
|
|
Refer to Note 5, "Debt," for details on each of our credit facilities and resources.
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following condensed consolidating financial information is presented separately for:
(i)CURO as the issuer of the 8.25% Senior Secured Notes;
(ii)The Company's subsidiary guarantors, which are comprised of certain of its domestic subsidiaries, including (x) CFTC, as the issuer of the 12.00% Senior Secured Notes that were redeemed in August 2018, (y) CURO Intermediate, but excluding the U.S. SPV and Canada SPV (the “Subsidiary Guarantors”), on a consolidated basis, which are 100% owned by CURO, and which are guarantors of the 8.25% Senior Secured Notes issued in August 2018;
(iii)The Non-Recourse U.S. SPV facility, a wholly-owned, bankruptcy-remote special purpose subsidiary, created in April 2020;
(iv)The Non-Recourse Canada SPV facility, a wholly-owned, bankruptcy-remote special purpose subsidiary;
(v)The Company's other subsidiaries on a consolidated basis, which are not guarantors of the 8.25% Senior Secured Notes (the “Subsidiary Non-Guarantors”);
(vi)Consolidating and eliminating entries representing adjustments to:
1.eliminate intercompany transactions between or among us, the Subsidiary Guarantors, the Non-Recourse U.S. SPV facility, the Non-Recourse Canada SPV facility and the Subsidiary Non-Guarantors; and
2.eliminate the investments in subsidiaries; and
(vii)The Company and its subsidiaries on a consolidated basis.
Condensed Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
|
|
|
(dollars in thousands)
|
CURO
|
Subsidiary
Guarantors
|
U.S. SPV
|
Canada SPV
|
Subsidiary
Non-Guarantors
|
Eliminations
|
CURO
Consolidated
|
Assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
$
|
193,605
|
|
$
|
—
|
|
$
|
—
|
|
$
|
75,737
|
|
$
|
—
|
|
$
|
269,342
|
|
Restricted cash
|
—
|
|
21,142
|
|
16,455
|
|
22,793
|
|
2,884
|
|
—
|
|
63,274
|
|
Loans receivable, net
|
—
|
|
105,903
|
|
47,925
|
|
194,915
|
|
31,314
|
|
—
|
|
380,057
|
|
Income taxes receivable
|
42,755
|
|
(24,444)
|
|
—
|
|
—
|
|
494
|
|
—
|
|
18,805
|
|
Prepaid expenses and other
|
—
|
|
24,616
|
|
—
|
|
699
|
|
7,545
|
|
—
|
|
32,860
|
|
Property and equipment, net
|
—
|
|
39,974
|
|
—
|
|
—
|
|
24,285
|
|
—
|
|
64,259
|
|
Right of use asset - operating leases
|
—
|
|
73,402
|
|
—
|
|
—
|
|
38,458
|
|
—
|
|
111,860
|
|
Deferred tax assets
|
14,230
|
|
(14,230)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Goodwill
|
—
|
|
105,922
|
|
—
|
|
—
|
|
28,055
|
|
—
|
|
133,977
|
|
Other intangibles, net
|
—
|
|
14,429
|
|
—
|
|
—
|
|
21,278
|
|
—
|
|
35,707
|
|
Intercompany receivable
|
—
|
|
142,884
|
|
—
|
|
—
|
|
—
|
|
(142,884)
|
|
—
|
|
Investment in subsidiaries
|
136,508
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(136,508)
|
|
—
|
|
Other assets
|
—
|
|
16,366
|
|
—
|
|
—
|
|
652
|
|
—
|
|
17,018
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
193,493
|
|
$
|
699,569
|
|
$
|
64,380
|
|
$
|
218,407
|
|
$
|
230,702
|
|
$
|
(279,392)
|
|
$
|
1,127,159
|
|
Liabilities and Stockholders' equity (deficit):
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
(15)
|
|
$
|
49,273
|
|
$
|
240
|
|
$
|
20,327
|
|
$
|
(5,865)
|
|
$
|
—
|
|
$
|
63,960
|
|
Deferred revenue
|
—
|
|
3,202
|
|
77
|
|
34
|
|
1,661
|
|
—
|
|
4,974
|
|
Lease liability - operating leases
|
—
|
|
81,314
|
|
—
|
|
—
|
|
38,453
|
|
—
|
|
119,767
|
|
Income taxes payable
|
(6,796)
|
|
6,796
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Accrued interest
|
18,975
|
|
—
|
|
362
|
|
668
|
|
—
|
|
—
|
|
20,005
|
|
Liability for losses on CSO lender-owned consumer loans
|
—
|
|
5,164
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,164
|
|
Debt
|
679,143
|
|
—
|
|
31,896
|
|
88,789
|
|
—
|
|
—
|
|
799,828
|
|
Intercompany payable
|
—
|
|
(16,393)
|
|
16,393
|
|
41,443
|
|
101,441
|
|
(142,884)
|
|
—
|
|
Payable to CURO Holdings Corp.
|
(600,167)
|
|
600,167
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Other long-term liabilities
|
—
|
|
11,402
|
|
—
|
|
—
|
|
59
|
|
—
|
|
11,461
|
|
Deferred tax liabilities
|
9,411
|
|
—
|
|
—
|
|
—
|
|
(353)
|
|
—
|
|
9,058
|
|
Total liabilities
|
100,551
|
|
740,925
|
|
48,968
|
|
151,261
|
|
135,396
|
|
(142,884)
|
|
1,034,217
|
|
Stockholders' equity (deficit)
|
92,942
|
|
(41,356)
|
|
15,412
|
|
67,146
|
|
95,306
|
|
(136,508)
|
|
92,942
|
|
Total liabilities and stockholders' equity (deficit)
|
$
|
193,493
|
|
$
|
699,569
|
|
$
|
64,380
|
|
$
|
218,407
|
|
$
|
230,702
|
|
$
|
(279,392)
|
|
$
|
1,127,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
(dollars in thousands)
|
CURO
|
Subsidiary
Guarantors
|
|
Canada SPV
|
Subsidiary
Non-Guarantors
|
Eliminations
|
CURO
Consolidated
|
Assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
$
|
44,727
|
|
|
$
|
—
|
|
$
|
30,515
|
|
$
|
—
|
|
$
|
75,242
|
|
Restricted cash
|
—
|
|
14,958
|
|
|
17,427
|
|
2,394
|
|
—
|
|
34,779
|
|
Loans receivable, net
|
—
|
|
286,881
|
|
|
220,067
|
|
52,045
|
|
—
|
|
558,993
|
|
Right of use asset - operating leases
|
—
|
|
74,845
|
|
|
—
|
|
42,608
|
|
—
|
|
117,453
|
|
Deferred tax asset
|
8,561
|
|
(3,506)
|
|
|
—
|
|
—
|
|
—
|
|
5,055
|
|
Income taxes receivable
|
19,690
|
|
(8,987)
|
|
|
—
|
|
723
|
|
—
|
|
11,426
|
|
Prepaid expenses and other
|
—
|
|
26,623
|
|
|
—
|
|
9,267
|
|
—
|
|
35,890
|
|
Property and equipment, net
|
—
|
|
43,618
|
|
|
—
|
|
27,193
|
|
—
|
|
70,811
|
|
Goodwill
|
—
|
|
91,131
|
|
|
—
|
|
29,478
|
|
—
|
|
120,609
|
|
Other intangibles, net
|
—
|
|
11,569
|
|
|
—
|
|
22,358
|
|
—
|
|
33,927
|
|
Intercompany receivable
|
—
|
|
113,599
|
|
|
—
|
|
—
|
|
(113,599)
|
|
—
|
|
Investment in subsidiaries
|
84,514
|
|
—
|
|
|
—
|
|
—
|
|
(84,514)
|
|
—
|
|
Other assets
|
—
|
|
17,006
|
|
|
—
|
|
704
|
|
—
|
|
17,710
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
112,765
|
|
$
|
712,464
|
|
|
$
|
237,494
|
|
$
|
217,285
|
|
$
|
(198,113)
|
|
$
|
1,081,895
|
|
Liabilities and Stockholder's equity (deficit):
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
465
|
|
$
|
48,333
|
|
|
$
|
13,462
|
|
$
|
(2,177)
|
|
$
|
—
|
|
$
|
60,083
|
|
Deferred revenue
|
—
|
|
6,828
|
|
|
46
|
|
3,296
|
|
—
|
|
10,170
|
|
Lease liability - operating leases
|
—
|
|
82,593
|
|
|
—
|
|
42,406
|
|
—
|
|
124,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
18,975
|
|
1
|
|
|
871
|
|
—
|
|
—
|
|
19,847
|
|
Payable to CURO Holdings Corp.
|
(635,511)
|
|
635,511
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
CSO liability for losses
|
—
|
|
10,623
|
|
|
—
|
|
—
|
|
—
|
|
10,623
|
|
|
|
|
|
|
|
|
|
Debt
|
678,323
|
|
—
|
|
|
112,221
|
|
—
|
|
—
|
|
790,544
|
|
|
|
|
|
|
|
|
|
Intercompany payable
|
—
|
|
—
|
|
|
69,639
|
|
43,960
|
|
(113,599)
|
|
—
|
|
Other liabilities
|
—
|
|
10,285
|
|
|
—
|
|
379
|
|
—
|
|
10,664
|
|
|
|
|
|
|
|
|
|
Liabilities from discontinued operations
|
—
|
|
—
|
|
|
—
|
|
4,452
|
|
—
|
|
4,452
|
|
Total liabilities
|
62,252
|
|
794,174
|
|
|
196,239
|
|
92,316
|
|
(113,599)
|
|
1,031,382
|
|
Stockholders' equity (deficit)
|
50,513
|
|
(81,710)
|
|
|
41,255
|
|
124,969
|
|
(84,514)
|
|
50,513
|
|
Total liabilities and stockholders' equity (deficit)
|
$
|
112,765
|
|
$
|
712,464
|
|
|
$
|
237,494
|
|
$
|
217,285
|
|
$
|
(198,113)
|
|
$
|
1,081,895
|
|
Condensed Consolidating Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020
|
|
|
|
|
|
|
(dollars in thousands)
|
CURO
|
Subsidiary
Guarantors
|
U.S. SPV
|
Canada SPV
|
Subsidiary
Non-Guarantors
|
Eliminations
|
CURO
Consolidated
|
Revenue
|
$
|
—
|
|
$
|
97,485
|
|
$
|
39,835
|
|
$
|
30,372
|
|
$
|
14,817
|
|
$
|
—
|
|
$
|
182,509
|
|
Provision for losses
|
—
|
|
18,352
|
|
23,178
|
|
9,244
|
|
(81)
|
|
—
|
|
50,693
|
|
Net revenue
|
—
|
|
79,133
|
|
16,657
|
|
21,128
|
|
14,898
|
|
—
|
|
131,816
|
|
Cost of providing services:
|
|
|
|
|
|
|
|
Salaries and benefits
|
—
|
|
16,663
|
|
—
|
|
—
|
|
8,060
|
|
—
|
|
24,723
|
|
Occupancy
|
—
|
|
7,586
|
|
—
|
|
—
|
|
5,457
|
|
—
|
|
13,043
|
|
Office
|
—
|
|
2,777
|
|
—
|
|
—
|
|
1,023
|
|
—
|
|
3,800
|
|
Other costs of providing services
|
—
|
|
6,635
|
|
—
|
|
—
|
|
1,366
|
|
—
|
|
8,001
|
|
Advertising
|
—
|
|
5,269
|
|
—
|
|
—
|
|
481
|
|
—
|
|
5,750
|
|
Total cost of providing services
|
—
|
|
38,930
|
|
—
|
|
—
|
|
16,387
|
|
—
|
|
55,317
|
|
Gross margin
|
—
|
|
40,203
|
|
16,657
|
|
21,128
|
|
(1,489)
|
|
—
|
|
76,499
|
|
Operating expense (income):
|
|
|
|
|
|
|
|
Corporate, district and other expenses
|
3,398
|
|
26,197
|
|
37
|
|
104
|
|
7,045
|
|
—
|
|
36,781
|
|
Intercompany management fee
|
—
|
|
(3,345)
|
|
—
|
|
645
|
|
2,700
|
|
—
|
|
—
|
|
Interest expense
|
14,647
|
|
258
|
|
1,208
|
|
2,112
|
|
86
|
|
—
|
|
18,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain from equity method investment
|
—
|
|
(741)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(741)
|
|
|
|
|
|
|
|
|
|
Intercompany interest (income) expense
|
—
|
|
(1,442)
|
|
—
|
|
533
|
|
909
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
Total operating expense
|
18,045
|
|
20,927
|
|
1,245
|
|
3,394
|
|
10,740
|
|
—
|
|
54,351
|
|
Income (loss) from continuing operations before income taxes
|
(18,045)
|
|
19,276
|
|
15,412
|
|
17,734
|
|
(12,229)
|
|
—
|
|
22,148
|
|
Provision (benefit) for income tax expense
|
(2,872)
|
|
7,504
|
|
—
|
|
—
|
|
(3,564)
|
|
—
|
|
1,068
|
|
Net income (loss) from continuing operations
|
(15,173)
|
|
11,772
|
|
15,412
|
|
17,734
|
|
(8,665)
|
|
—
|
|
21,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income on discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
|
993
|
|
—
|
|
993
|
|
Net income (loss)
|
(15,173)
|
|
11,772
|
|
15,412
|
|
17,734
|
|
(7,672)
|
|
—
|
|
22,073
|
|
Equity in net income (loss) of subsidiaries:
|
|
|
|
|
|
|
|
CFTC
|
37,246
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(37,246)
|
|
—
|
|
Guarantor Subsidiaries
|
—
|
|
11,772
|
|
—
|
|
—
|
|
—
|
|
(11,772)
|
|
—
|
|
Non-Guarantor Subsidiaries
|
—
|
|
(7,672)
|
|
—
|
|
—
|
|
—
|
|
7,672
|
|
—
|
|
U.S. SPV
|
—
|
|
15,412
|
|
—
|
|
—
|
|
—
|
|
(15,412)
|
|
—
|
|
Canada SPV
|
—
|
|
17,734
|
|
—
|
|
—
|
|
—
|
|
(17,734)
|
|
—
|
|
Net income (loss) attributable to CURO
|
$
|
22,073
|
|
$
|
49,018
|
|
$
|
15,412
|
|
$
|
17,734
|
|
$
|
(7,672)
|
|
$
|
(74,492)
|
|
$
|
22,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
|
|
|
|
(dollars in thousands)
|
CURO
|
Subsidiary
Guarantors
|
Canada SPV
|
Subsidiary
Non-Guarantors
|
Eliminations
|
CURO
Consolidated
|
Revenue
|
$
|
—
|
|
$
|
210,046
|
|
$
|
26,092
|
|
$
|
28,162
|
|
$
|
—
|
|
$
|
264,300
|
|
Provision for losses
|
—
|
|
92,552
|
|
13,114
|
|
6,344
|
|
—
|
|
112,010
|
|
Net revenue
|
—
|
|
117,494
|
|
12,978
|
|
21,818
|
|
—
|
|
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
|
|
12,978
|
|
3,136
|
|
—
|
|
81,181
|
|
Operating (income) expense:
|
|
|
|
|
|
|
Corporate, district and other expenses
|
2,631
|
|
30,766
|
|
(781)
|
|
6,422
|
|
—
|
|
39,038
|
|
Intercompany management fee
|
—
|
|
(3,237)
|
|
8
|
|
3,229
|
|
—
|
|
—
|
|
Interest expense
|
14,614
|
|
27
|
|
2,375
|
|
7
|
|
—
|
|
17,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany interest (income) expense
|
—
|
|
(1,513)
|
|
623
|
|
890
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
Total operating expense
|
17,245
|
|
26,043
|
|
2,225
|
|
10,548
|
|
—
|
|
56,061
|
|
Income (loss) from continuing operations before income taxes
|
(17,245)
|
|
39,024
|
|
10,753
|
|
(7,412)
|
|
—
|
|
25,120
|
|
Provision (benefit) for income tax expense
|
(3,232)
|
|
9,591
|
|
—
|
|
1,094
|
|
—
|
|
7,453
|
|
Net (loss) income from continuing operations
|
(14,013)
|
|
29,433
|
|
10,753
|
|
(8,506)
|
|
—
|
|
17,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss on discontinued operations
|
—
|
|
—
|
|
—
|
|
(834)
|
|
—
|
|
(834)
|
|
Net (loss) income
|
(14,013)
|
|
29,433
|
|
10,753
|
|
(9,340)
|
|
—
|
|
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
|
|
—
|
|
Canada SPV
|
—
|
|
10,753
|
|
—
|
|
|
(10,753)
|
|
—
|
|
Net income (loss) attributable to CURO
|
$
|
16,833
|
|
$
|
60,279
|
|
$
|
10,753
|
|
$
|
(9,340)
|
|
$
|
(61,692)
|
|
$
|
16,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020
|
|
|
|
|
|
|
(dollars in thousands)
|
CURO
|
Subsidiary
Guarantors
|
U.S. SPV
|
Canada SPV
|
Subsidiary
Non-Guarantors
|
Eliminations
|
CURO
Consolidated
|
Revenue
|
$
|
—
|
|
$
|
319,253
|
|
$
|
39,835
|
|
$
|
64,398
|
|
$
|
39,829
|
|
$
|
—
|
|
$
|
463,315
|
|
Provision for losses
|
—
|
|
104,393
|
|
23,178
|
|
28,976
|
|
7,682
|
|
—
|
|
164,229
|
|
Net revenue
|
—
|
|
214,860
|
|
16,657
|
|
35,422
|
|
32,147
|
|
—
|
|
299,086
|
|
Cost of providing services:
|
|
|
|
|
|
|
|
Salaries and benefits
|
—
|
|
33,575
|
|
—
|
|
—
|
|
17,155
|
|
—
|
|
50,730
|
|
Occupancy
|
—
|
|
15,411
|
|
—
|
|
—
|
|
11,648
|
|
—
|
|
27,059
|
|
Office
|
—
|
|
7,077
|
|
—
|
|
—
|
|
2,397
|
|
—
|
|
9,474
|
|
Other costs of providing services
|
—
|
|
14,840
|
|
—
|
|
—
|
|
2,816
|
|
—
|
|
17,656
|
|
Advertising
|
—
|
|
16,214
|
|
—
|
|
—
|
|
1,755
|
|
—
|
|
17,969
|
|
Total cost of providing services
|
—
|
|
87,117
|
|
—
|
|
—
|
|
35,771
|
|
—
|
|
122,888
|
|
Gross margin
|
—
|
|
127,743
|
|
16,657
|
|
35,422
|
|
(3,624)
|
|
—
|
|
176,198
|
|
Operating expense (income):
|
|
|
|
|
|
|
|
Corporate, district and other expenses
|
6,791
|
|
60,453
|
|
37
|
|
278
|
|
12,029
|
|
—
|
|
79,588
|
|
Intercompany management fee
|
—
|
|
(7,144)
|
|
—
|
|
1,375
|
|
5,769
|
|
—
|
|
—
|
|
Interest expense
|
29,284
|
|
467
|
|
1,208
|
|
4,733
|
|
(57)
|
|
—
|
|
35,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from equity method investment
|
—
|
|
877
|
|
—
|
|
—
|
|
—
|
|
—
|
|
877
|
|
|
|
|
|
|
|
|
|
Intercompany interest (income) expense
|
—
|
|
(2,883)
|
|
—
|
|
1,083
|
|
1,800
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
Total operating expense
|
36,075
|
|
51,770
|
|
1,245
|
|
7,469
|
|
19,541
|
|
—
|
|
116,100
|
|
Income (loss) from continuing operations before income taxes
|
(36,075)
|
|
75,973
|
|
15,412
|
|
27,953
|
|
(23,165)
|
|
—
|
|
60,098
|
|
Provision (benefit) for income tax expense
|
(26,119)
|
|
32,502
|
|
—
|
|
—
|
|
(3,378)
|
|
—
|
|
3,005
|
|
Net income (loss) from continuing operations
|
(9,956)
|
|
43,471
|
|
15,412
|
|
27,953
|
|
(19,787)
|
|
—
|
|
57,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income on discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
|
1,285
|
|
—
|
|
1,285
|
|
Net income (loss)
|
(9,956)
|
|
43,471
|
|
15,412
|
|
27,953
|
|
(18,502)
|
|
—
|
|
58,378
|
|
Equity in net income (loss) of subsidiaries:
|
|
|
|
|
|
|
|
CFTC
|
68,334
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(68,334)
|
|
—
|
|
Guarantor Subsidiaries
|
—
|
|
43,471
|
|
—
|
|
—
|
|
—
|
|
(43,471)
|
|
—
|
|
Non-Guarantor Subsidiaries
|
—
|
|
(18,502)
|
|
—
|
|
—
|
|
—
|
|
18,502
|
|
—
|
|
U.S. SPV
|
—
|
|
15,412
|
|
—
|
|
—
|
|
—
|
|
(15,412)
|
|
—
|
|
Canada SPV
|
—
|
|
27,953
|
|
—
|
|
—
|
|
—
|
|
(27,953)
|
|
—
|
|
Net income (loss) attributable to CURO
|
$
|
58,378
|
|
$
|
111,805
|
|
$
|
15,412
|
|
$
|
27,953
|
|
$
|
(18,502)
|
|
$
|
(136,668)
|
|
$
|
58,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
|
|
|
|
|
(dollars in thousands)
|
CURO
|
Subsidiary
Guarantors
|
Canada SPV
|
Subsidiary
Non-Guarantors
|
Eliminations
|
CURO
Consolidated
|
Revenue
|
$
|
—
|
|
$
|
436,165
|
|
$
|
51,138
|
|
$
|
54,936
|
|
$
|
—
|
|
$
|
542,239
|
|
Provision for losses
|
—
|
|
177,532
|
|
26,420
|
|
10,443
|
|
—
|
|
214,395
|
|
Net revenue
|
—
|
|
258,633
|
|
24,718
|
|
44,493
|
|
—
|
|
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
|
|
24,718
|
|
7,090
|
|
—
|
|
186,678
|
|
Operating expense (income):
|
|
|
|
|
|
|
Corporate, district and other expenses
|
4,973
|
|
72,304
|
|
(755)
|
|
11,604
|
|
—
|
|
88,126
|
|
Intercompany management fee
|
—
|
|
(6,300)
|
|
16
|
|
6,284
|
|
—
|
|
—
|
|
Interest expense
|
29,052
|
|
317
|
|
5,265
|
|
79
|
|
—
|
|
34,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany interest (income) expense
|
—
|
|
(2,393)
|
|
623
|
|
1,770
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
Total operating expense
|
34,025
|
|
63,928
|
|
5,149
|
|
19,737
|
|
—
|
|
122,839
|
|
Income (loss) from continuing operations before income taxes
|
(34,025)
|
|
90,942
|
|
19,569
|
|
(12,647)
|
|
—
|
|
63,839
|
|
Provision (benefit) for income tax expense
|
(8,240)
|
|
23,610
|
|
—
|
|
2,129
|
|
—
|
|
17,499
|
|
Net (loss) income from continuing operations
|
(25,785)
|
|
67,332
|
|
19,569
|
|
(14,776)
|
|
—
|
|
46,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income on discontinued operations
|
—
|
|
—
|
|
—
|
|
7,541
|
|
—
|
|
7,541
|
|
Net (loss) income
|
(25,785)
|
|
67,332
|
|
19,569
|
|
(7,235)
|
|
—
|
|
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
|
|
—
|
|
Canada SPV
|
|
19,569
|
|
—
|
|
—
|
|
(19,569)
|
|
—
|
|
Net income (loss) attributable to CURO
|
$
|
53,881
|
|
$
|
146,998
|
|
$
|
19,569
|
|
$
|
(7,235)
|
|
$
|
(159,332)
|
|
$
|
53,881
|
|
Condensed Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020
|
|
|
|
|
|
|
(dollars in thousands)
|
CURO
|
Subsidiary Guarantors
|
U.S. SPV
|
Canada SPV
|
Subsidiary
Non-Guarantors
|
Eliminations
|
CURO Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net cash provided by continuing operating activities
|
$
|
6,546
|
|
$
|
146,503
|
|
$
|
41,569
|
|
$
|
39,603
|
|
$
|
38,099
|
|
$
|
(1,520)
|
|
$
|
270,800
|
|
Net cash used in discontinued operating activities
|
—
|
|
—
|
|
—
|
|
—
|
|
1,714
|
|
—
|
|
1,714
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
—
|
|
(4,240)
|
|
—
|
|
—
|
|
(484)
|
|
—
|
|
(4,724)
|
|
Originations of loans, net
|
—
|
|
31,591
|
|
(56,789)
|
|
(14,746)
|
|
8,123
|
|
—
|
|
(31,821)
|
|
|
|
|
|
|
|
|
|
Acquisition of Ad Astra, net of acquiree's cash received
|
—
|
|
(14,418)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(14,418)
|
|
Net cash provided by (used in) continuing investing activities
|
—
|
|
12,933
|
|
(56,789)
|
|
(14,746)
|
|
7,639
|
|
—
|
|
(50,963)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from Non-Recourse Canada SPV facility
|
—
|
|
—
|
|
—
|
|
23,180
|
|
—
|
|
—
|
|
23,180
|
|
Payments on Non-Recourse Canada SPV facility
|
—
|
|
—
|
|
—
|
|
(41,812)
|
|
—
|
|
—
|
|
(41,812)
|
|
Proceeds from Non-Recourse U.S. SPV facility
|
—
|
|
—
|
|
35,206
|
|
—
|
|
—
|
|
—
|
|
35,206
|
|
Proceeds from credit facilities
|
—
|
|
60,000
|
|
—
|
|
—
|
|
9,778
|
|
—
|
|
69,778
|
|
Payments on credit facilities
|
—
|
|
(60,000)
|
|
—
|
|
—
|
|
(9,778)
|
|
—
|
|
(69,778)
|
|
|
|
|
|
|
|
|
|
Payments to net share settle RSUs
|
(638)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(638)
|
|
Proceeds from exercise of stock options
|
—
|
|
126
|
|
—
|
|
—
|
|
—
|
|
—
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt issuance costs paid
|
—
|
|
—
|
|
(3,531)
|
|
—
|
|
—
|
|
—
|
|
(3,531)
|
|
Repurchase of common stock
|
(5,908)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(5,908)
|
|
Dividends paid to CURO Group Holdings Corp.
|
4,500
|
|
(4,500)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Dividends paid to stockholders
|
(4,500)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(4,500)
|
|
Net cash (used in) provided by financing activities (1)
|
(6,546)
|
|
(4,374)
|
|
31,675
|
|
(18,632)
|
|
—
|
|
—
|
|
2,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
—
|
|
—
|
|
—
|
|
(859)
|
|
(1,740)
|
|
1,520
|
|
(1,079)
|
|
Net increase in cash, cash equivalents and restricted cash
|
—
|
|
155,062
|
|
16,455
|
|
5,366
|
|
45,712
|
|
—
|
|
222,595
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
—
|
|
59,685
|
|
—
|
|
17,427
|
|
32,909
|
|
—
|
|
110,021
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
—
|
|
$
|
214,747
|
|
$
|
16,455
|
|
$
|
22,793
|
|
$
|
78,621
|
|
$
|
—
|
|
$
|
332,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
|
|
|
|
|
(dollars in thousands)
|
CURO
|
Subsidiary Guarantors
|
Canada SPV
|
Subsidiary
Non-Guarantors
|
Eliminations
|
CURO Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net cash provided by continuing operating activities
|
$
|
1,833
|
|
$
|
204,323
|
|
$
|
93,690
|
|
$
|
10,929
|
|
$
|
1,544
|
|
$
|
312,319
|
|
Net cash used in discontinued operating activities
|
—
|
|
—
|
|
—
|
|
(504)
|
|
—
|
|
(504)
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Purchase of property and equipment
|
—
|
|
(4,998)
|
|
—
|
|
(1,166)
|
|
—
|
|
(6,164)
|
|
Originations of loans, net
|
—
|
|
(142,871)
|
|
(71,101)
|
|
(3,227)
|
|
—
|
|
(217,199)
|
|
Cash paid for Katapult investment
|
—
|
|
(4,368)
|
|
—
|
|
—
|
|
—
|
|
(4,368)
|
|
Net cash used in continuing investing activities
|
—
|
|
(152,237)
|
|
(71,101)
|
|
(4,393)
|
|
—
|
|
(227,731)
|
|
Net cash used in discontinued investing activities
|
—
|
|
—
|
|
—
|
|
(14,213)
|
|
—
|
|
(14,213)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from Non-Recourse Canada SPV facility
|
—
|
|
—
|
|
3,750
|
|
—
|
|
—
|
|
3,750
|
|
Payments on Non-Recourse Canada SPV facility
|
—
|
|
—
|
|
(24,752)
|
|
—
|
|
—
|
|
(24,752)
|
|
Proceeds from credit facilities
|
—
|
|
30,000
|
|
—
|
|
38,002
|
|
—
|
|
68,002
|
|
Payments on credit facilities
|
—
|
|
(50,000)
|
|
—
|
|
(38,002)
|
|
—
|
|
(88,002)
|
|
Payments on subordinated stockholder debt
|
—
|
|
—
|
|
—
|
|
(2,245)
|
|
—
|
|
(2,245)
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
(42)
|
|
69
|
|
—
|
|
—
|
|
—
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt issuance costs paid
|
(29)
|
|
—
|
|
(169)
|
|
—
|
|
—
|
|
(198)
|
|
Repurchase of common stock
|
(1,762)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,762)
|
|
Net cash used in provided by financing activities (1)
|
(1,833)
|
|
(19,931)
|
|
(21,171)
|
|
(2,245)
|
|
—
|
|
(45,180)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
—
|
|
—
|
|
561
|
|
2,444
|
|
(1,544)
|
|
1,461
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
—
|
|
32,155
|
|
1,979
|
|
(7,982)
|
|
—
|
|
26,152
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
—
|
|
52,397
|
|
12,840
|
|
34,620
|
|
—
|
|
99,857
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
—
|
|
$
|
84,552
|
|
$
|
14,819
|
|
$
|
26,638
|
|
$
|
—
|
|
$
|
126,009
|
|
(1) Financing activities include continuing operations only and were not impacted by discontinued operations.
|
|
|
|
|
|
|
Cash Flows
The following highlights our cash flow activity and the sources and uses of funding during the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
Net cash provided by continuing operating activities
|
|
$
|
270,800
|
|
|
$
|
312,319
|
|
Net cash used in continuing investing activities
|
|
(50,963)
|
|
|
(227,731)
|
|
Net cash provided by (used in) continuing financing activities
|
|
2,123
|
|
|
(45,180)
|
|
|
|
|
|
|
Continuing Operating Activities
Net cash provided by continuing operating activities for the six months ended June 30, 2020 was $270.8 million, primarily attributable to net income from continuing operations of $57.1 million, the effect of non-cash reconciling items of $192.1 million, which includes provision for loan losses of $164.2 million, and changes in our operating assets and liabilities which provided $21.6 million.
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.
Continuing Investing Activities
Net cash used in continuing investing activities for the six months ended June 30, 2020 was $51.0 million, primarily reflecting the net origination of loans of $31.8 million and the acquisition of Ad Astra for $14.4 million, net of cash received. In addition, we used cash to purchase $4.7 million of property and equipment.
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 Katapult.
Origination of loans will fluctuate from period-to-period, depending on the timing of loan issuances and collections. A seasonal decline in consumer loans receivable typically occurs during the first quarter of the year and is driven by income tax refunds in the U.S. Typically, customers will use the proceeds from income tax refunds to pay outstanding loan balances, resulting in an increase in our net cash balances and a decrease in our consumer loans receivable balances. Year-over-year comparisons were impacted by factors related to COVID-19, including lower consumer demand, increased or accelerated repayments as customers benefited from government stimulus programs and our decision to tighten credit which resulted in lower originations, as well as the runoff of California Installment loans from regulatory changes effective January 1, 2020.
Continuing Financing Activities
Net cash provided by continuing financing activities for the six months ended June 30, 2020 was $2.1 million, primarily due to $35.2 million of proceeds on our Non-Recourse U.S. SPV Facility, partially offset by a net pay-down on our Non-Recourse Canada SPV Facility of $18.6 million, common stock repurchases of $5.9 million, cash dividends of $4.5 million and debt issuance costs of $3.5 million related to the Non-Recourse U.S. SPV facility.
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.
Contractual Obligations
There have been no significant developments with respect to our contractual obligations since December 31, 2019, as described in our 2019 Form 10-K, except for the new Non-Recourse U.S. SPV Facility, entered into during April 2020. Refer to Note 5, "Debt" of the Notes to the unaudited Condensed Consolidated Financial Statements for additional details.
Critical Accounting Policies and Estimates
Certain accounting policies that involve a higher degree of judgement and complexity are discussed further in Part II - Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates, in our 2019 Form 10-K.
Goodwill. We exercise judgment in evaluating assets for impairment. Goodwill is tested for impairment annually, or when circumstances arise which could more likely than not reduce the fair value of a reporting unit below its carrying value. These tests require comparing carrying values to estimated fair values of the reporting unit under review.
The U.S. and Canada operations are our two reporting units, as defined by FASB’s ASC 280 - Segment Reporting, for which we assess goodwill for impairment. As of the most recent annual goodwill impairment testing date (October 1, 2019), both reporting units' estimated fair valued exceeded its carrying value. As described in our 2019 Form 10-K, an impairment would occur if the carrying amount of a reporting unit exceeded the fair value of that reporting unit. Events or circumstances that could indicate an impairment include a significant change in the business climate, a change in strategic direction, legal factors, operating performance indicators, a change in the competitive environment, the sale or disposition of a significant portion of a reporting unit or economic outlook. These and other macroeconomic factors, in general, were considered when performing the annual test on October 1, 2019.
In the second quarter of 2020, we performed an interim qualitative assessment of goodwill on both reporting units to consider whether current events or circumstances, attributable to uncertainty caused by COVID-19, resulted in a more likely than not reduction in the fair value of the reporting units below their respective carrying values. We did not record any impairment losses during the six months ended June 30, 2020 as a result of our interim qualitative assessment on either reporting unit.
There continues to be uncertainty surrounding the macroeconomic factors for the U.S. and Canada reporting units. Changes in the expected length of the current economic downturn, timing of recovery, or long-term revenue growth or profitability for these reporting units could increase the likelihood of a future impairment. Additionally, changes in market participant assumptions such as an increased discount rate or further share price reductions could increase the likelihood of a future impairment.
The following table summarizes the segment allocation of recorded goodwill on our unaudited Condensed Consolidated Balance Sheets as of June 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
June 30, 2020
|
Percent of Total
|
|
December 31, 2019
|
Percent of Total
|
U.S.
|
$
|
105,922
|
|
79.1
|
%
|
|
$
|
91,131
|
|
75.6
|
%
|
Canada
|
28,055
|
|
20.9
|
%
|
|
29,478
|
|
24.4
|
%
|
Total Goodwill
|
$
|
133,977
|
|
|
|
$
|
120,609
|
|
|
Regulatory Environment and Compliance
There have been no significant developments with respect to our regulatory environment and compliance since December 31, 2019, as described in our 2019 Form 10-K, except for the following:
CFPB Rulemaking Update
On July 7, 2020, the CFPB issued its decision on the 2019 Proposed Rule. With respect to the 2019 Proposed Rule, the CFBP rescinded the mandatory underwriting provisions of the 2017 Final CFPB Rule. However, the CFPB did not rescind or alter the payment provisions of the 2017 Final CFPB Rule. Furthermore, on July 7, 2020, the CFPB ratified prior regulatory actions which included the payments provisions of the 2017 Final CFPB Rule. The effective date of the payment provisions of the 2017 Final CFPB Rule is currently unknown. The 2017 Final CFPB rule is currently stayed as a result of an industry legal challenge. The next status conference is scheduled for September 11, 2020. In light of the industry challenge to the 2017 Final CFPB Rule, we cannot predict when the 2017 Final CFPB Rule as it relates to payments will ultimately go into effect; nor can we quantify its potential effect on our results of operations or financial condition.
California Consumer Privacy Act:
In 2018, the California Consumer Privacy Act (“CCPA”) was passed into law, effective January 1, 2020, and the California Attorney General has enforcement authority as of July 1, 2020.
A ballot initiative, which would have additional impact, will be voted on in November 2020.
Legal Proceedings
Subsequent to the California Supreme Court’s decision in De La Torre v. CashCall, which found that the interest rate on a consumer loan of $2,500 or more can render the loans unconscionable under Cal. Fin. Code § 22303, a class action lawsuit entitled Delisle, et al. v. Speedy Cash was filed against Speedy Cash in the Southern District of California on August 31, 2018. The complaint alleges that Speedy Cash charges unconscionable interest rates, in violation of consumer protection statutes, and seeks restitution and public injunctive relief. A motion to compel arbitration and stay proceedings was filed by Speedy Cash on October 30, 2018. A District Court order denying that motion was entered on June 10, 2019. On June 9, 2020, the Ninth Circuit Court of Appeals entered a memorandum vacating and remanding the District Court’s opinion, and directing the District Court to consider what effect, if any, California Financial Code § 22304.5(a) has on its analysis.
On January 1, 2020, during the course of the Delisle proceedings, Cal. Fin. Code § 22304.5(a) took effect prohibiting finance lenders from issuing loans between $2,500 and $10,000 with charges over 36% calculated as an annual simple interest rate (plus the prior month’s Federal Funds Rate).