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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to__________
Commission File Number 1-38315
CURO GROUP HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware 90-0934597
(State or other jurisdiction
Of incorporation or organization)
(I.R.S. Employer Identification No.)
3527 North Ridge Road, Wichita, KS
67205
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (316) 772-3801
Former name, former address and former fiscal year, if changed since last report: No Changes

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, $0.001 par value per share CURO New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer
Smaller reporting company Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes ☐    No ☒
At August 3, 2020 there were 40,885,113 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.




CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
FORM 10-Q
SECOND QUARTER ENDED JUNE 30, 2020
INDEX
Page
Item 1.
Financial Statements (unaudited)
June 30, 2020 and December 31, 2019
5
Three and six months ended June 30, 2020 and 2019
6
Three and six months ended June 30, 2020 and 2019
7
Six months ended June 30, 2020 and 2019
8
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2



GLOSSARY

Terms and abbreviations used throughout this report are defined below.
Term or abbreviation Definition
12.00% Senior Secured Notes 12.00% Senior Secured Notes, issued in February and November 2017 for a total of $470.0 million due March 1, 2022, fully extinguished September 2018
2017 Final CFPB Rule The final rule issued by the CFPB in 2017 in Payday, Vehicle Title and Certain high Cost Installment loans.
2019 Proposed Rule The subsequent CFPB rulemaking process which proposed to rescind the mandatory underwriting provisions of the 2017 Final CFPB Rule.
2019 Form 10-K Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 9, 2020.
8.25% Senior Secured Notes 8.25% Senior Secured Notes, issued in August 2018 for $690.0 million, which mature on September 1, 2025
Ad Astra Ad Astra Recovery Services, Inc., our former provider of third-party collection services for the U.S. business that we acquired in January 2020
Adjusted EBITDA EBITDA plus or minus certain non-cash and other adjusting items; Refer to "Supplemental Non-GAAP Financial Information" for additional details.
Allowance coverage Allowance for loan losses as a percentage of gross loans receivable
AOCI Accumulated Other Comprehensive Income (Loss)
ASC Accounting Standards Codification
ASU Accounting Standards Update
Average gross loans receivable Utilized to calculate product yield and NCO rates; calculated as average of beginning of quarter and end of quarter gross loans receivable
Bps Basis points
CAB Credit access bureau
CARES Act Coronavirus Aid, Relief, and Economic Security Act
Cash Money Cash Money Cheque Cashing Inc., a Canadian subsidiary
Cash Money Revolving Credit Facility C$10.0 million revolving credit facility with Royal Bank of Canada
CECL Current expected credit loss
CFPB Consumer Financial Protection Bureau
CFTC CURO Financial Technologies Corp., a wholly-owned subsidiary of the Company
CODM Chief Operating Decision Maker
Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements presented in this Form 10-Q
COVID-19 An infectious disease caused by the 2019 novel coronavirus
CSO Credit services organization
EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization
EPS Earnings per share
Exchange Act Securities Exchange Act of 1934
FASB Financial Accounting Standards Board
FFL Friedman Fleischer & Lowe Capital Partners II, L.P. and its affiliated investment funds, a related party to the Company
Form 10-Q Quarterly Report on Form 10-Q for the three and six months period ended June 30, 2020
Gross Combined Loans Receivable Gross loans receivable plus loans originated by third-party lenders which are Guaranteed by the Company
Guaranteed by the Company Loans originated by third-party lenders through CSO program which we guarantee but are not include in the Condensed Consolidated Financial Statements
Katapult Cognical Holdings, Inc. (formerly known as Zibby), a private lease-to-own platform for online, brick and mortar and omni-channel retailers
NCO Net charge-off; total charge-offs less total recoveries
NOL Net operating loss
Non-Recourse Canada SPV Facility A four-year revolving credit facility with Waterfall Asset Management, LLC with capacity up to C$250.0 million
Non-Recourse U.S. SPV Facility A four year, asset-backed revolving credit facility with Atalaya Capital Management with capacity up to $200.0 million if certain conditions are met
3



Term or abbreviation Definition
OCCC Texas Office of Consumer Credit Commissioner
ROU Right of use
RSU Restricted Stock Unit
SEC Securities and Exchange Commission
Senior Revolver Senior Secured Revolving Loan Facility
SRC Smaller Reporting Company as defined by the SEC
Stride Bank In 2019, we partnered with Stride Bank, N.A. to launch a bank-sponsored Unsecured Installment loan originated by Stride Bank. We market and service loans on behalf of Stride Bank and the bank licenses our proprietary credit decisioning for Stride Bank's scoring and approval.
TDR Troubled Debt Restructuring. Debt restructuring in which a concession is granted to the borrower as a result of economic or legal reasons related to the borrower's financial difficulties.
U.K. Subsidiaries collectively, Curo Transatlantic Limited ("CTL") and SRC Transatlantic Limited
U.S. United States of America
US GAAP Generally accepted accounting principles in the United States
VIE Variable Interest Entity; our wholly-owned, bankruptcy-remote special purpose subsidiaries

4



PART I.  FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
June 30,
2020
December 31,
2019
ASSETS
Cash and cash equivalents $ 269,342    $ 75,242   
Restricted cash (includes restricted cash of consolidated VIEs of $39,248 and $17,427 as of June 30, 2020 and December 31, 2019, respectively)
63,274    34,779   
Gross loans receivable (includes loans of consolidated VIEs of $290,828 and $244,492 as of June 30, 2020 and December 31, 2019, respectively)
456,512    665,828   
Less: allowance for loan losses (includes allowance for losses of consolidated VIEs of $47,988 and $24,425 as of June 30, 2020 and December 31, 2019, respectively)
(76,455)   (106,835)  
Loans receivable, net
380,057    558,993   
Income taxes receivable 18,805    11,426   
Prepaid expenses and other 32,860    35,890   
Property and equipment, net
64,259    70,811   
Right of use asset - operating leases 111,860    117,453   
Deferred tax assets —    5,055   
Goodwill 133,977    120,609   
Other intangibles, net 35,707    33,927   
Other assets 17,018    17,710   
Total Assets $ 1,127,159    $ 1,081,895   
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities (includes accounts payable and accrued liabilities of consolidated VIEs of $20,567 and $13,462 as of June 30, 2020 and December 31, 2019, respectively)
$ 63,960    $ 60,083   
Deferred revenue 4,974    10,170   
Lease liability - operating leases 119,767    124,999   
Accrued interest (includes accrued interest of consolidated VIEs of $1,030 and $871 as of June 30, 2020 and December 31, 2019, respectively)
20,005    19,847   
Liability for losses on CSO lender-owned consumer loans 5,164    10,623   
Debt (includes debt and issuance costs of consolidated VIEs of $126,315 and $5,630 as of June 30, 2020 and $115,243 and $3,022 as of December 31, 2019, respectively)
799,828    790,544   
Other long-term liabilities 11,461    10,664   
Deferred tax liabilities 9,058    4,452   
Total Liabilities 1,034,217    1,031,382   
Commitments and contingencies (Note 13)
Stockholders' Equity
Preferred stock - $0.001 par value, 25,000,000 shares authorized; no shares were issued
—    —   
Common stock - $0.001 par value; 225,000,000 shares authorized; 47,039,848 and 46,770,765 shares issued; and 40,884,545 and 41,156,224 shares outstanding at the respective period ends
   
Treasury stock, at cost - 6,155,303 and 5,614,541 shares as of the respective period ends
(77,852)   (72,343)  
Paid-in capital 74,079    68,087   
Retained earnings 147,301    93,423   
Accumulated other comprehensive loss (50,595)   (38,663)  
Total Stockholders' Equity 92,942    50,513   
Total Liabilities and Stockholders' Equity $ 1,127,159    $ 1,081,895   

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.
5



CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2020 2019 2020 2019
Revenue $ 182,509    $ 264,300    $ 463,315    $ 542,239   
Provision for losses 50,693    112,010    164,229    214,395   
Net revenue 131,816    152,290    299,086    327,844   
Cost of providing services
Salaries and benefits 24,723    26,086    50,730    54,787   
Occupancy 13,043    13,932    27,059    28,169   
Office 3,800    5,457    9,474    10,570   
Other costs of providing services 8,001    12,854    17,656    27,074   
Advertising 5,750    12,780    17,969    20,566   
Total cost of providing services 55,317    71,109    122,888    141,166   
Gross margin 76,499    81,181    176,198    186,678   
Operating expense
Corporate, district and other expenses 36,781    35,290    79,588    84,378   
Interest expense 18,311    17,023    35,635    34,713   
(Gain) loss from equity method investment (741)   3,748    877    3,748   
Total operating expense 54,351    56,061    116,100    122,839   
Income from continuing operations before income taxes 22,148    25,120    60,098    63,839   
Provision for income taxes 1,068    7,453    3,005    17,499   
Net income from continuing operations 21,080    17,667    57,093    46,340   
Net income (loss) from discontinued operations, before income tax 1,324    —    1,714    (39,048)  
Income tax expense (benefit) related to disposition
331    834    $ 429    $ (46,589)  
Net income (loss) from discontinued operations 993    (834)   $ 1,285    $ 7,541   
Net income $ 22,073    $ 16,833    $ 58,378    $ 53,881   
Basic earnings (loss) per share:
Continuing operations $ 0.52    $ 0.38    $ 1.40    $ 1.00   
Discontinued operations 0.02    (0.02)   0.03    0.16   
Basic earnings per share $ 0.54    $ 0.36    $ 1.43    $ 1.16   
Diluted earnings (loss) per share:
Continuing operations $ 0.51    $ 0.38    $ 1.37    $ 0.98   
Discontinued operations 0.02    (0.02)   0.03    0.16   
Diluted earnings per share $ 0.53    $ 0.36    $ 1.40    $ 1.14   
Weighted average common shares outstanding:
Basic 40,810    46,451    40,814    46,438   
Diluted 41,545    47,107    41,686    47,335   

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.
6



CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2020 2019 2020 2019
Net income $ 22,073    $ 16,833    $ 58,378    $ 53,881   
Other comprehensive (loss) income:
Foreign currency translation adjustment, net of $0 tax in both periods
10,261    3,635    (11,932)   20,330   
Other comprehensive (loss) income 10,261    3,635    (11,932)   20,330   
Comprehensive income $ 32,334    $ 20,468    $ 46,446    $ 74,211   

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.


7


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands, unaudited)
Six Months Ended June 30,
2020 2019
Cash flows from operating activities
Net income from continuing operations $ 57,093    $ 46,340   
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Depreciation and amortization 8,954    9,571   
Provision for loan losses 164,229    214,395   
Amortization of debt issuance costs and bond discount 1,600    1,568   
Deferred income tax (benefit) expense 9,861    (3,596)  
Loss on disposal of property and equipment 116    1,834   
Loss from equity method investment 877    3,748   
Share-based compensation 6,504    4,816   
Changes in operating assets and liabilities:
Accrued interest on loans receivable 28,654    (1,171)  
Prepaid expenses and other assets 3,286    16,344   
Other assets 99    (6,893)  
Accounts payable and accrued liabilities 965    9,527   
Deferred revenue (5,040)   (915)  
Income taxes payable —    25,123   
Income taxes receivable (7,413)   (8,253)  
Accrued interest 200    (1,247)  
Other liabilities 815    1,128   
Net cash provided by continuing operating activities 270,800    312,319   
Net cash provided by (used in) discontinued operating activities 1,714    (504)  
Net cash provided by operating activities
272,514    311,815   
Cash flows from investing activities
Purchase of property and equipment (4,724)   (6,164)  
Loans receivable originated or acquired
(648,044)   (879,081)  
Loans receivable repaid
616,223    661,882   
Investments in Katapult
—    (4,368)  
Acquisition of Ad Astra, net of acquiree's cash received
(14,418)   —   
Net cash used in continuing investing activities (50,963)   (227,731)  
Net cash used in discontinued investing activities —    (14,213)  
Net cash used in investing activities (50,963)   (241,944)  
Cash flows from financing activities
Proceeds from Non-Recourse U.S. SPV facility 35,206    —   
Proceeds from Non-Recourse Canada SPV facility 23,180    3,750   
Payments on Non-Recourse Canada SPV facility (41,812)   (24,752)  
Debt issuance costs paid (3,531)   (198)  
Proceeds from credit facilities 69,778    68,002   
Payments on credit facilities (69,778)   (88,002)  
Payments on subordinated stockholder debt —    (2,245)  
Proceeds from exercise of stock options 126    27   
Payments to net share settle restricted stock units vesting (638)   —   
Repurchase of common stock (5,908)   (1,762)  
Dividends paid to stockholders (4,500)   —   
Net cash provided by (used in) financing activities (1)
2,123    (45,180)  
Effect of exchange rate changes on cash, cash equivalents and restricted cash (1,079)   1,461   
Net increase in cash, cash equivalents and restricted cash 222,595    26,152   
Cash, cash equivalents and restricted cash at beginning of period 110,021    99,857   
Cash, cash equivalents and restricted cash at end of period $ 332,616    $ 126,009   
(1) Financing activities were not impacted by discontinued operations


8


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands, unaudited)
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited Condensed Consolidated Balance Sheets as of June 30, 2020 and 2019 to the cash, cash equivalents and restricted cash used in the Statement of Cash Flows:
June 30,
2020 2019
Cash and cash equivalents $ 269,342    $ 92,297   
Restricted cash (includes restricted cash of consolidated VIEs of $39,248 and $14,819 as of June 30, 2020 and June 30, 2019, respectively)
63,274    33,712   
Total cash, cash equivalents and restricted cash used in the Statement of Cash Flows $ 332,616    $ 126,009   

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.
9



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

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

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

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

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

Certain information and note disclosures normally included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted, although the Company believes that the disclosures are adequate to enable a reasonable understanding of the information presented. Additionally, the Company qualifies as an SRC as defined by the SEC, which allows registrants to report information under scaled disclosure requirements. SRC status is determined on an annual basis as of the last business day of the most recently completed second fiscal quarter. Under these rules, the Company met the definition of an SRC as of June 30, 2020, and it will reevaluate its status as of June 30, 2021.

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

COVID-19

A novel strain of coronavirus, COVID-19, surfaced in late 2019 and has subsequently spread worldwide, including to the U.S. and Canada. On March 11, 2020, the World Health Organization categorized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. Macroeconomic conditions, in general, and the Company's operations have been significantly affected by the COVID-19 pandemic and there are no reliable estimates of how long the pandemic will last or the scope or magnitude of its near-term or long-term impact. Resurgences of the pandemic in various states in which the Company operates also adds uncertainty as jurisdictions establish protocols to lessen the burden of these cases, as described further below. Refer to Note 3, "Loans Receivable and Revenue" for an explanation of the effect of the pandemic on the Company's loans receivable and the allowance for loan losses as of June 30, 2020.

In response to the pandemic, various governmental bodies have issued decrees prohibiting certain businesses from continuing to operate and certain classes of workers from reporting to work. However, CURO's operations have been designated as essential financial services by federal guidelines and local regulations. As a provider of an essential service, the Company remains focused on protecting the health and well being of its employees, customers and the communities in which it operates while assuring the continuity of its business operations. While CURO continues serving its customers through both store and online channels, store hours are reduced, enhanced cleaning protocols for all facilities are in place, and social distancing guidelines are in effect to aid in combating the spread of the pandemic.

On March 27, 2020, the U.S. government enacted the CARES Act, which includes modifications to the limitation on business interest expense and net operating loss provisions, and provides a payment delay of employer payroll taxes incurred subsequent to the date of enactment. The Company expects to delay payment of employer payroll taxes otherwise due in 2020 with 50% due by December 31, 2021 and the remaining 50% by December 31, 2022.

The CARES Act also included two provisions that directly impacted the demand for the Company's products as well as its customers’ ability to make payments on their existing loans. The CARES Act included one-time Economic Impact Payments to American households of up to $1,200 per adult for individuals whose income was less than $99,000 (or $198,000 for tax joint filers) and $500 per child under 17 years old, up to $3,400 for a family of four if certain eligibility criteria were met. The CARES Act also provided Unemployment benefit expansion, including (i) an additional $600 federal stimulus payment automatically added to each week of state benefits received between March 29 and July 25, 2020; (ii) expanded Pandemic Unemployment Assistance coverage to self-employed workers, independent contractors, people with limited employment history and people who have used all of their regular unemployment insurance benefits; and (iii) Pandemic Emergency Unemployment Compensation, which extends unemployment insurance benefits from 26 weeks to 39 weeks within a 12-month benefit year.
10



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


On March 18, 2020, the Canadian government announced a set of pandemic measures as part of the Government of Canada’s COVID-19 Economic Response Plan. This plan included several provisions that directly impacted the demand for the Company's products as well as its customers’ ability to make payments on their existing loans, including (i) the Canada Emergency Response Benefit which provides a $2,000 benefit every four weeks for 24 weeks to eligible workers who become unemployed or under-employed as a result of COVID-19; (ii) a $300 per child Canada Child Benefit paid on May 20, 2020; (iii) a one-time special payment through Canada’s Goods and Services Tax credit for low and modest-income families that averages $400 for individuals and $600 for couples; and iv) temporary wage increases for low-income essential workers funded at the federal level but disbursed at the provincial level.

Refer to Note 7, "Income Taxes" for the CARES Act impact to the Company's provision for income taxes.

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

Principles of Consolidation

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

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

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

Equity Investment in Unconsolidated Entity

The Company holds an equity investment in Katapult, a private lease-to-own platform for online, brick and mortar and omni-channel retailers. Katapult provides the retailers' customers with payment options in store or via the Katapult link on a retailer's website. As of June 30, 2020, the Company owned 42.5% of Katapult. The Company records the equity method investment in "Other assets" on the unaudited Condensed Consolidated Balance Sheets. See Note 8, "Fair Value Measurements" for additional detail on Katapult's fair value considerations.

Use of Estimates

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

11



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

Troubled Debt Restructuring

In certain circumstances, the Company modifies the terms of its loans receivable for borrowers. Under US GAAP, a modification of loans receivable terms is considered a TDR if the borrower is experiencing financial difficulty and the Company grants a concession to the borrower it would not have otherwise granted. In light of the COVID-19 pandemic, the Company established an enhanced Customer Care Program, which enables its team members to provide relief to customers in various ways, ranging from due date changes, interest or fee forgiveness, payment waivers or extended payment plans, depending on a customer’s individual circumstances. The Company modifies loans only if it believes the customer has the ability to pay under the restructured terms. The Company continues to accrue and collect interest on these loans in accordance with the restructured terms.

The Company records its allowance for loan losses related to TDRs by discounting the estimated cash flows associated with the respective TDR at the effective interest rate immediately after the loan modification and records any difference between the discounted cash flows and the carrying value as an allowance adjustment. A loan that has been classified as a TDR remains so until the loan is paid off or charged off. A TDR is charged off consistent with the Company's policies for the related loan product. For additional information on the Company's loss recognition policy, see the Company's 2019 Form 10-K.

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

Goodwill

The annual impairment review for goodwill, performed as of October 1, consists of performing a qualitative assessment to determine whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount as a basis for determining whether or not further testing is required. The Company may elect to bypass the qualitative assessment and proceed directly to the two-step process, for any reporting unit, in any period. The Company can resume the qualitative assessment for any reporting unit in any subsequent period. If the Company determines, on the basis of qualitative factors, that it is more likely than not that the fair value of the reporting unit is less than the carrying amount, the Company will then apply a two-step process of (i) determining the fair value of the reporting unit and (ii) comparing it to the carrying value of the net assets allocated to the reporting unit. When performing the two-step process, if the fair value of the reporting unit exceeds its carrying value, no further analysis or write-down of goodwill is required. In the event the estimated fair value of a reporting unit is less than the carrying value, the Company would recognize an impairment loss equal to such excess, which could significantly and adversely impact reported results of operations and stockholders’ equity.

During the fourth quarter of 2019, the Company performed a quantitative assessment for the U.S. and Canada reporting units. Management concluded that the estimated fair values of these two reporting units were greater than their respective carrying values. In the second quarter of 2020, the Company 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 determination that the fair values of the reporting units fell below their respective carrying values. The Company did not record an impairment loss during the six months ended June 30, 2020 as a result of its interim qualitative assessment of either reporting unit.

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

Recently Adopted Accounting Pronouncements

ASU 2018-15

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

12



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

ASU 2018-13

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

Recently Issued Accounting Pronouncements Not Yet Adopted

ASU 2016-13

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” and subsequent amendments to the guidance: ASU 2018-19 in November 2018, ASU 2019-04 in April 2019, ASU 2019-05 in May 2019, ASU 2019-10 and 11 in November 2019, and ASU 2020-02 in February 2020. The amended standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace the current “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they currently do under the other-than-temporary impairment model. The standard also simplifies the accounting model for purchased credit-impaired debt securities and loans. The amendment will affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2019-04 clarifies that equity instruments without readily determinable fair values for which an entity has elected the measurement alternative should be remeasured to fair value as of the date that an observable transaction occurred. ASU 2019-05 provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. ASU 2019-10 amends the mandatory effective date for ASU 2016-13. The amendments are effective for fiscal years beginning after December 15, 2022 for entities that qualify as an SRC, for which the Company currently qualifies. ASU 2019-11 provides clarity and improves the codification to ASU 2016-13. The amendments should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic. As issued, ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods therein. Early adoption is permitted. The Company is evaluating its alternatives with respect to the available accounting methods under ASU 2016-13, including the fair value option. If the fair value option is not utilized, adoption of ASU 2016-13 will increase the allowance for credit losses, with a resulting negative adjustment to retained earnings on the date of adoption. The Company deferred the adoption of ASU 2016-13 as permitted under ASU 2019-10. The Company is currently assessing the impact that adoption of ASU 2016-13 will have on its Consolidated Financial Statements.

ASU 2020-01

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (ASU 2020-01). ASU 2020-01 clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently assessing the impact the adoption of ASU 2020-01 will have on its Consolidated Financial Statements.

ASU 2020-04

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides temporary optional expedients and exceptions to US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by this reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can also elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently assessing the impact that adoption of ASU 2020-04 will have on its Consolidated Financial Statements.

13



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

ASU 2019-12

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

NOTE 2 - VARIABLE INTEREST ENTITIES

As of June 30, 2020, the Company held two credit facilities whereby certain loans receivables were sold to wholly-owned VIEs to collateralize debt incurred under each facility. See Note 5, "Debt" for additional details on the Non-Recourse U.S. SPV facility, entered into in April 2020, and the Non-Recourse Canada SPV facility, entered into in August 2018.

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

The carrying amounts of consolidated VIEs' assets and liabilities associated with the VIE subsidiaries were as follows (in thousands):
June 30,
2020
December 31,
2019
Assets
Restricted cash $ 39,248    $ 17,427   
Loans receivable less allowance for loan losses 242,840    220,067   
Prepaid expenses and other 699    —   
      Total Assets $ 282,787    $ 237,494   
Liabilities
Accounts payable and accrued liabilities $ 20,567    $ 13,462   
Deferred revenue 111    46   
Accrued interest 1,030    871   
Intercompany payable 57,836    69,639   
Debt 120,685    112,221   
      Total Liabilities $ 200,229    $ 196,239   

NOTE 3 – LOANS RECEIVABLE AND REVENUE

COVID-19 impacted CURO's customers and overall credit performance. During the second quarter of 2020, federal governments in the U.S. and Canada provided various stimulus and income stability payments, which, among other impacts, resulted in lower demand for the Company's products and lower than expected NCOs. Ongoing impacts from and risks related to COVID-19 have caused continued uncertainty regarding the performance of NCOs over the loss-development period as of June 30, 2020. The Company has maintained its historical allowance approach, but has adjusted future loss estimates for changes in past-due gross loans receivable due to market conditions at June 30, 2020 caused by COVID-19. The estimates and assumptions used to determine an appropriate allowance for loan losses and liability for losses on CSO lender-owned consumer loans are those that are available through the filing of this Form 10-Q and which are indicative of conditions occurring as of June 30, 2020.

Additionally, as a result of COVID-19, the Company enhanced its Customer Care Program and began modifying loans for borrowers that experienced financial distress, as discussed in more detail in Note 1, "Summary of Significant Accounting Policies and Nature of Operations" and the tables below.
14



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


The following table summarizes revenue by product (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Unsecured Installment $ 70,429    $ 122,112    $ 192,838    $ 257,890   
Secured Installment 19,401    26,076    45,687    53,553   
Open-End 56,736    54,972    127,718    107,841   
Single-Pay 22,732    45,528    67,889    92,289   
Ancillary 13,211    15,612    29,183    30,666   
   Total revenue(1)
$ 182,509    $ 264,300    $ 463,315    $ 542,239   
(1) Includes revenue from CSO programs of $37.8 million and $63.6 million for the three months ended June 30, 2020 and 2019, respectively, and $105.8 million and $127.8 million for the six months ended June 30, 2020 and 2019, respectively.

The following tables summarize loans receivable by product and the related delinquent loans receivable (in thousands):
June 30, 2020
Single-Pay(1)
Unsecured Installment Secured Installment Open-End Total
Current loans receivable $ 36,130    $ 63,835    $ 44,675    $ 253,948    $ 398,588   
Delinquent loans receivable —    17,766    8,950    31,208    57,924   
   Total loans receivable 36,130    81,601    53,625    285,156    456,512   
   Less: allowance for losses (2,802)   (18,451)   (7,883)   (47,319)   (76,455)  
Loans receivable, net $ 33,328    $ 63,150    $ 45,742    $ 237,837    $ 380,057   
(1) Of the $36.1 million of Single-Pay receivables, $8.1 million relate to mandated extended payment options for certain Canada Single-Pay loans.

June 30, 2020
Unsecured Installment Secured Installment Open-End Total
Delinquent loans receivable
0-30 days past due $ 5,207    $ 3,500    $ 11,743    $ 20,450   
31-60 days past due 3,825    2,157    7,225    13,207   
61 + days past due 8,734    3,293    12,240    24,267   
Total delinquent loans receivable $ 17,766    $ 8,950    $ 31,208    $ 57,924   

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

15



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

December 31, 2019
Unsecured Installment Secured Installment Open-End Total
Delinquent loans receivable
0-30 days past due $ 15,369    $ 8,039    $ 21,823    $ 45,231   
31-60 days past due 12,403    4,885    13,191    30,479   
61 + days past due 15,328    4,586    15,058    34,972   
Total delinquent loans receivable $ 43,100    $ 17,510    $ 50,072    $ 110,682   

The following tables summarize loans guaranteed by the Company under CSO programs and the related delinquent receivables (in thousands):
June 30, 2020
Unsecured Installment Secured Installment Total
Current loans receivable guaranteed by the Company $ 29,063    $ 887    $ 29,950   
Delinquent loans receivable guaranteed by the Company 4,019    123    4,142   
Total loans receivable guaranteed by the Company 33,082    1,010    34,092   
Less: Liability for losses on CSO lender-owned consumer loans (5,128)   (36)   (5,164)  
Loans receivable guaranteed by the Company, net $ 27,954    $ 974    $ 28,928   

June 30, 2020
Unsecured Installment Secured Installment Total
Delinquent loans receivable
0-30 days past due $ 3,411    $ 104    $ 3,515   
31-60 days past due 347    11    358   
61+ days past due 261      269   
Total delinquent loans receivable $ 4,019    $ 123    $ 4,142   

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

December 31, 2019
Unsecured Installment Secured Installment Total
Delinquent loans receivable
0-30 days past due $ 10,392    $ 326    $ 10,718   
31-60 days past due 1,256    40    1,296   
61 + days past due 829    26    855   
Total delinquent loans receivable $ 12,477    $ 392    $ 12,869   
16



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


The following tables summarize activity in the allowance for loan losses and the liability for losses on CSO lender-owned consumer loans in total (in thousands):
Three Months Ended June 30, 2020
Single-Pay Unsecured Installment Secured Installment Open-End Other Total
Allowance for loan losses:
Balance, beginning of period $ 4,693    $ 28,965    $ 9,726    $ 56,458    $ —    $ 99,842   
Charge-offs (21,168)   (30,129)   (11,747)   (37,784)   (750)   (101,578)  
Recoveries 21,766    7,019    2,961    6,100    398    38,244   
Net charge-offs 598    (23,110)   (8,786)   (31,684)   (352)   (63,334)  
Provision for losses (2,588)   12,584    6,943    21,341    352    38,632   
Effect of foreign currency translation 99    12    —    1,204    —    1,315   
Balance, end of period $ 2,802    $ 18,451    $ 7,883    $ 47,319    $ —    $ 76,455   
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period $ —    $ 9,142    $ 47    $ —    $ —    $ 9,189   
Decrease in liability —    4,014    11    —    —    4,025   
Balance, end of period $ —    $ 5,128    $ 36    $ —    $ —    $ 5,164   

Three Months Ended June 30, 2019
Single-Pay Unsecured Installment Secured Installment Open-End Other Total
Allowance for loan losses:
Balance, beginning of period $ 3,897    $ 33,666    $ 9,796    $ 46,963    $ —    $ 94,322   
Charge-offs (35,759)   (37,336)   (10,295)   (30,688)   (1,342)   (115,420)  
Recoveries 24,301    5,366    2,693    5,537    822    38,719   
Net charge-offs (11,458)   (31,970)   (7,602)   (25,151)   (520)   (76,701)  
Provision for losses 12,446    33,514    7,802    29,373    520    83,655   
Effect of foreign currency translation 56    13    —    532    —    601   
Balance, end of period $ 4,941    $ 35,223    $ 9,996    $ 51,717    $ —    $ 101,877   
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period $ —    $ 8,583    $ 78    $ —    $ —    $ 8,661   
Increase in liability —    (850)     —    —    (843)  
Balance, end of period $ —    $ 9,433    $ 71    $ —    $ —    $ 9,504   

17



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

Six Months Ended June 30, 2020
Single-Pay Unsecured Installment Secured Installment Open-End Other Total
Allowance for loan losses:
Balance, beginning of period $ 5,869    $ 35,587    $ 10,305    $ 55,074    $ —    $ 106,835   
Charge-offs (61,689)   (68,687)   (24,857)   (81,293)   (2,028)   (238,554)  
Recoveries 51,770    12,802    5,870    12,511    977    83,930   
Net charge-offs (9,919)   (55,885)   (18,987)   (68,782)   (1,051)   (154,624)  
Provision for losses 7,051    38,766    16,565    62,332    1,051    125,765   
Effect of foreign currency translation (199)   (17)   —    (1,305)   —    (1,521)  
Balance, end of period $ 2,802    $ 18,451    $ 7,883    $ 47,319    $ —    $ 76,455   
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period $ —    $ 10,553    $ 70    $ —    $ —    $ 10,623   
Decrease in liability —    5,425    34    —    —    5,459   
Balance, end of period $ —    $ 5,128    $ 36    $ —    $ —    $ 5,164   


Six Months Ended June 30, 2019
Single-Pay Unsecured Installment Secured Installment Open-End Other Total
Allowance for loan losses:
Balance, beginning of period $ 4,189    $ 37,716    $ 12,191    $ 19,901    $ —    $ 73,997   
Charge-offs (72,280)   (81,573)   (22,966)   (34,326)   (2,693)   (213,838)  
Recoveries 52,212    11,684    5,816    10,696    1,721    82,129   
Net charge-offs (20,068)   (69,889)   (17,150)   (23,630)   (972)   (131,709)  
Provision for losses 20,714    67,359    14,955    54,690    972    158,690   
Effect of foreign currency translation 106    37    —    756    —    899   
Balance, end of period $ 4,941    $ 35,223    $ 9,996    $ 51,717    $ —    $ 101,877   
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period $ —    $ 11,582    $ 425    $ —    $ —    $ 12,007   
Decrease (increase) in liability —    2,149    354    —    —    2,503   
Balance, end of period $ —    $ 9,433    $ 71    $ —    $ —    $ 9,504   


As of June 30, 2020, Installment and Open-End loans classified as nonaccrual were approximately $8.9 million and $5.3 million, respectively. As of December 31, 2019, Installment and Open-End loans classified as nonaccrual were approximately $16.6 million and $7.9 million, respectively. The Company's loans receivable inherently considers nonaccrual loans in its estimate of the allowance for loan losses as delinquencies are a primary input into the Company's roll rate-based model.


18



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

TDR LOANS RECEIVABLE

The table below presents TDRs included in gross loans receivable and the impairment included in the allowance for loan losses (in thousands):

As of
June 30, 2020
Current TDR gross receivables $ 13,803   
Delinquent TDR gross receivables 6,534   
Total TDR gross receivables 20,337   
Less: Impairment included in the allowance for loan losses (9,043)  
Outstanding TDR receivables, net of impairment $ 11,294   

There were no TDR's as of December 31, 2019.
The tables below reflect new loans modified and classified as TDRs during the periods presented (in thousands):

Three and Six Months Ended June 30, 2020
Pre-modification TDR loans receivable $ 24,069   
Post-modification TDR loans receivable 21,390   
Total concessions included in gross charge-offs $ 2,679   

There was $0.9 million of loans classified as TDRs that were charged off and included as a reduction in the allowance for loan losses during the three and six months ended June 30, 2020. The Company had commitments to lend additional funds of approximately $1.8 million to customers with available and unfunded Open-End loans classified as TDRs as of June 30, 2020.

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

Three and Six Months Ended June 30, 2020
Average outstanding TDR loans receivable (1)
$ 20,864   
Interest income recognized 4,396   
Number of TDR loans (2)
21,512   
(1) As there were no TDRs prior to April 1, 2020, the average outstanding TDR loans receivable is calculated based on the amount immediately after the loan was classified as a TDR and the ending TDR balance as of June 30, 2020.
(2) Presented in ones

There were no loans classified as TDRs during the three and six month periods ended June 30, 2019.

NOTE 4 – CREDIT SERVICES ORGANIZATION
The CSO fee receivables under CSO programs were $3.8 million and $14.7 million at June 30, 2020 and December 31, 2019, respectively, and are reflected in "Prepaid expenses and other" in the unaudited Condensed Consolidated Balance Sheets. The Company bears the risk of loss through its guarantee to purchase specific customer loans that are in default with the lenders. The terms of these loans range up to six months. See the 2019 Form 10-K for further details of the Company's accounting policy.

As of June 30, 2020 and December 31, 2019, the incremental maximum amount payable under all such guarantees was $28.6 million and $62.7 million, respectively. If the Company is required to pay any portion of the total amount of the loans it has guaranteed, it will attempt to recover some or the entire amount from the applicable customers. The Company holds no collateral in respect of the guarantees. The Company estimates a liability for losses associated with the guaranty provided to the CSO lenders. Liability for losses on CSO loans Guaranteed by the Company was $5.2 million and $10.6 million at June 30, 2020 and December 31, 2019, respectively.
19



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


The Company placed $3.4 million and $6.2 million in collateral accounts for the benefit of lenders at June 30, 2020 and December 31, 2019, respectively, which is reflected in "Prepaid expenses and other" in the unaudited Condensed Consolidated Balance Sheets. The balances required to be maintained in these collateral accounts vary by lender, typically based on a percentage of the outstanding loan balances held by the lender. The percentage of outstanding loan balances required for collateral is negotiated between the Company and each lender.

Deferred revenue associated with the CSO program was immaterial as of June 30, 2020 and December 31, 2019 and there were no costs to obtain, or costs to fulfill, capitalized under the program. See Note 3, "Loans Receivable and Revenue" for additional information related to loan balances and the revenue recognized under the program.

NOTE 5 – DEBT
Debt consisted of the following (in thousands):
June 30, 2020 December 31, 2019
8.25% Senior Secured Notes (due 2025)
$ 679,143    $ 678,323   
Non-Recourse U.S. SPV Facility 31,896    —   
Non-Recourse Canada SPV Facility 88,789    112,221   
     Debt $ 799,828    $ 790,544   

8.25% Senior Secured Notes

In August 2018, the Company issued $690.0 million of 8.25% Senior Secured Notes which mature on September 1, 2025. Interest on the notes is payable semiannually, in arrears, on March 1 and September 1. In connection with the 8.25% Senior Secured Notes, the remaining balance of capitalized financing costs of $10.9 million, net of amortization, is included in the unaudited Condensed Consolidated Balance Sheets as a component of "Debt." These costs are amortized over the term of the 8.25% Senior Secured Notes as a component of interest expense.

Non-Recourse U.S. SPV Facility

In April, 2020, Curo Receivables Finance II, LLC, a bankruptcy-remote special purpose vehicle (the “U.S. SPV Borrower”) and an indirect wholly-owned subsidiary of the Company, entered into the Non-Recourse U.S. SPV Facility with Midtown Madison Management LLC, as administrative agent, and Atalaya Asset Income Fund VI LP, as the initial lender. As of June 30, 2020, the Non-Recourse U.S. SPV Facility provided for $100.0 million of borrowing capacity. On July 31, 2020, the Company obtained additional commitments, which increased its capacity to $200.0 million. See Note 19, "Subsequent Events" for additional information.

The Non-Recourse U.S. SPV Facility is secured by a first lien against all assets of the U.S. SPV Borrower. The lenders will make advances against the principal balance of the eligible Installment, Open-End and bank partner loans sold to the U.S. SPV Borrower. The initial advance rate is 65% and, subject to certain conditions, may increase to up to 90% beginning October 1, 2020. Interest accrues at an annual rate of one-month LIBOR plus (i) prior to the increase in commitments, 9.75% and (ii) from and after the increase in commitments, 5.75%. The U.S. SPV Borrower will pay the lenders additional interest if it does not borrow minimum specified percentages of the available commitments and a monthly 0.50% per annum commitment fee on the unused portion of the commitments. Advances under the Non-Recourse U.S. SPV Facility will be subject to a 1.0% original issue discount against the maximum commitment. The Non-Recourse U.S. SPV Facility may not be prepaid prior to April 8, 2021. Prepayments incur a fee equal to (a) prior to September 8, 2021, 3.0% of the aggregate commitments, (b) thereafter, until March 8, 2022, 2.0% of the aggregate commitments, and (c) thereafter, zero.

As of June 30, 2020, outstanding borrowers under the Non-Recourse U.S. SPV Facility were $31.9 million, net of deferred financing costs of $3.3 million. For further information on the Non-Recourse U.S. SPV Facility, refer to Note 2, "Variable Interest Entities."

20



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

Non-Recourse Canada SPV Facility

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

As of June 30, 2020, outstanding borrowings under the Non-Recourse Canada SPV Facility were $88.8 million, net of deferred financing costs of $2.3 million. For further information on the Non-Recourse Canada SPV, refer to Note 2, "Variable Interest Entities."

Senior Revolver

The Company maintains the Senior Revolver that provides $50.0 million of borrowing capacity, including up to $5.0 million of standby letters of credit, for a one-year term, renewable for successive terms following annual review. The current term has been extended to June 30, 2021. The Senior Revolver accrues interest at one-month LIBOR plus 5.00% (subject to a 5% overall minimum). The Senior Revolver is syndicated with participation by four banks.

The terms of the Senior Revolver also require that its outstanding balance be zero for at least 30 consecutive days in each calendar year. The Senior Revolver is guaranteed by all subsidiaries that guarantee the 8.25% Senior Secured Notes and is secured by a lien on substantially all assets of CURO and the guarantor subsidiaries that is senior to the lien securing the 8.25% Senior Secured Notes. Additionally, the negative covenants of the Senior Revolver generally conform to the related provisions in the Indenture for the 8.25% Senior Secured Notes.

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

The revolver was undrawn at June 30, 2020.

Cash Money Revolving Credit Facility

Cash Money maintains the Cash Money Revolving Credit Facility, a C$10.0 million revolving credit facility with Royal Bank of Canada, which provides short-term liquidity required to meet the working capital needs of the Company's Canadian operations. Aggregate draws under the revolving credit facility are limited to the lesser of: (i) the borrowing base, which is the percentage of cash, deposits in transit and accounts receivable, and (ii) C$10.0 million. As of June 30, 2020, the borrowing capacity under the Cash Money Revolving Credit Facility, was C$9.9 million, net of C$0.1 million in outstanding stand-by-letters of credit.

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

The Cash Money Revolving Credit Facility was undrawn at June 30, 2020.

NOTE 6 – SHARE-BASED COMPENSATION

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

21



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

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

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

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

A summary of the activity of time-based and market-based unvested RSUs as of June 30, 2020 and changes during the six months ended June 30, 2020 are presented in the following table:
Number of RSUs
Time-Based Market-Based Weighted Average
Grant Date Fair Value per Share
December 31, 2019 1,061,753    394,861    $ 11.47   
Granted 679,413    368,539    10.42   
Vested (307,142)   —    11.34   
Forfeited (24,025)   (4,687)   11.99   
June 30, 2020 1,409,999    758,713    $ 10.97   

Share-based compensation expense for the three months ended June 30, 2020 and 2019, which includes compensation costs from stock options and RSUs, was $3.3 million and $2.6 million, respectively, and during the six months ended June 30, 2020 and 2019 was $6.5 million and $4.8 million, respectively. Share-based compensation expense is included in the unaudited Condensed Consolidated Statements of Operations as a component of "Corporate, district and other expenses."

As of June 30, 2020, there was $17.2 million of total unrecognized compensation cost related to stock options and RSUs, of which $12.0 million related to time-based RSUs and $5.0 million related to market-based RSUs. Total unrecognized compensation costs will be recognized over a weighted-average period of 1.9 years.