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 September 30,
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Nine Months Ended September 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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132,848
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$
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237,069
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$
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(104,221)
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(44.0)
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%
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$
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491,936
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$
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673,234
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$
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(181,298)
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(26.9)
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%
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Provision for losses
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43,485
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102,997
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(59,512)
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(57.8)
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%
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171,056
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280,529
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(109,473)
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(39.0)
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%
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Net revenue
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89,363
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134,072
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(44,709)
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(33.3)
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%
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320,880
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392,705
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(71,825)
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(18.3)
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%
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Advertising
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13,405
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14,186
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(781)
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(5.5)
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%
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29,619
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31,719
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(2,100)
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(6.6)
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%
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Non-advertising costs of providing services
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32,574
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42,636
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(10,062)
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(23.6)
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%
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103,477
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128,866
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(25,389)
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(19.7)
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%
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Total cost of providing services
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45,979
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56,822
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(10,843)
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(19.1)
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%
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133,096
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160,585
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(27,489)
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(17.1)
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%
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Gross margin
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43,384
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77,250
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(33,866)
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(43.8)
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%
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187,784
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232,120
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(44,336)
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(19.1)
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%
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Corporate, district and other expenses
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31,503
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32,897
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(1,394)
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(4.2)
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%
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98,784
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106,426
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(7,642)
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(7.2)
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%
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Interest expense
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16,107
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14,877
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1,230
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8.3
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%
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47,066
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44,246
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2,820
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6.4
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%
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(Income) loss from equity method investment
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(3,530)
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1,384
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(4,914)
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#
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(2,653)
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5,132
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(7,785)
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#
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Total operating expense
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44,080
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49,158
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(5,078)
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(10.3)
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%
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143,197
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155,804
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(12,607)
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(8.1)
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%
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Segment operating (loss) income
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(696)
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28,092
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(28,788)
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#
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44,587
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76,316
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(31,729)
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(41.6)
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Interest expense
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16,107
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14,877
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1,230
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8.3
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%
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47,066
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44,246
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2,820
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6.4
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%
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Depreciation and amortization
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3,228
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3,390
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(162)
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(4.8)
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%
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9,914
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10,553
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(639)
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(6.1)
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%
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EBITDA(1)
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18,639
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46,359
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(27,720)
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(59.8)
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%
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101,567
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131,115
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(29,548)
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(22.5)
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Legal and related costs
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1,415
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870
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545
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3,502
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2,487
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1,015
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Other adjustments
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(105)
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42
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(147)
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59
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(206)
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265
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U.K. related costs
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—
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348
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(348)
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—
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8,844
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(8,844)
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Share-based compensation
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3,392
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2,771
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621
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9,896
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7,587
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2,309
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(Income) loss from equity method investment
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(3,530)
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1,384
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(4,914)
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(2,653)
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5,132
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(7,785)
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Adjusted EBITDA(1)
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$
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19,811
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$
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51,774
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$
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(31,963)
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(61.7)
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%
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$
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112,371
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$
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154,959
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$
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(42,588)
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(27.5)
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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 September 30, 2020 and 2019
U.S. revenues decreased by $104.2 million, or 44.0%, to $132.8 million, compared to the prior-year period for the three months ended September 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 that were effective January 1, 2020, U.S. revenues decreased $82.9 million, or 41.1%. Sequentially, U.S. revenues decreased $4.5 million, or 3.3%. Excluding California, U.S. revenues decreased $1.1 million, or 1.0%, sequentially.
The provision for losses decreased $59.5 million, or 57.8%, primarily as a result of lower loan volume and lower NCOs, as previously discussed. U.S. NCOs decreased by $55.1 million, or 57.2% year over year and the U.S. NCO rate improved by 540 bps to 17.2% for the three months ended September 30, 2020 from 22.6% in the prior-year period.
Non-advertising costs of providing services for the three months ended September 30, 2020 of $32.6 million, decreased $10.1 million, or 23.6%, compared to $42.6 million for the three months ended September 30, 2019. The decrease was primarily driven by Ad Astra costs of $3.6 million, which prior to its acquisition by us were included in Non-advertising costs of providing services. The remaining decrease year over year in Non-advertising costs of providing services was due to (i) lower underwriting and other variable costs as a result of lower demand, (ii) lower collection costs after governmental stimulus-related pay-downs and (iii) lower discretionary variable compensation.
Advertising costs decreased $0.8 million, or 5.5%, year over year because of COVID-19 Impacts.
Corporate, district and other expenses of $31.5 million for the three months ended September 30, 2020, decreased $1.4 million, or 4.2%, compared to the prior-year period. Corporate, district and other expenses for the three months ended September 30, 2020 included $1.7 million of collection costs related to Ad Astra, which were historically included in Non-advertising costs of providing services. For the three months ended September 30, 2020, corporate, district and other costs included (i) $1.4 million of legal and other costs described in our reconciliation to Adjusted Net Income above and (ii) $3.4 million of share-based compensation costs. For the three months ended September 30, 2019, corporate, district and other expenses included (i) U.K.-related costs of $0.3 million as described in our reconciliation to Adjusted Net Income above, (ii) $0.9 million of legal and related costs, also described in our reconciliation to Adjusted Net Income above and (ii) share-based compensation costs of $2.8 million. Share-based compensation costs increased primarily as a result of awards granted in the first quarter of 2020.
Excluding the aforementioned items, comparable corporate, district and other expenses decreased $3.9 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.
U.S. interest expense for the three months ended September 30, 2020 increased $1.2 million, or 8.3%, primarily related to the new Non-Recourse U.S. SPV Facility, on which we drew $35.2 million when it closed in April 2020.
As described above, we recognize our share of Katapult’s income on a two-month lag and recorded income of $3.5 million for the three months ended September 30, 2020.
U.S. Segment Results - For the Nine Months Ended September 30, 2020 and 2019
U.S. revenues decreased by $181.3 million, or 26.9%, to $491.9 million for the nine months ended September 30, 2020 compared to the prior-year period as a result of decreases in combined gross loans receivable. Excluding the aforementioned impact of California Installment loan runoff, U.S. revenues decreased by $130.1 million, or 23.0%.
The provision for losses decreased $109.5 million, or 39.0%, for the nine months ended September 30, 2020, compared to the prior-year period, primarily as a result of lower loan volume and lower NCOs. Year-over-year U.S. NCOs decreased $82.4 million, or 28.8%.
Non-advertising costs of providing services for the nine months ended September 30, 2020 of $103.5 million, decreased $25.4 million, or 19.7%, compared to $128.9 million for the nine months ended September 30, 2019. The decrease was primarily driven by Ad Astra costs of $11.9 million, which prior to its acquisition by us were included in Non-advertising costs of providing services. The remaining decrease year over year in Non-advertising costs of providing services was due to (i) lower underwriting and other variable costs as a result of lower demand, (ii) lower collection costs after stimulus-related pay-downs and (iii) lower discretionary variable compensation.
Advertising costs decreased $2.1 million, or 6.6%, year over year because of COVID-19 Impacts.
Corporate, district and other expenses were $98.8 million for the nine months ended September 30, 2020, a decrease of $7.6 million, or 7.2%, compared to the nine months ended September 30, 2019. Corporate, district and other expenses for the nine months ended September 30, 2020 included $7.3 million of collection costs related to Ad Astra, which were historically included in Non-advertising costs of providing services. For the nine months ended September 30, 2020, corporate, district and other costs included (i) $3.5 million of legal and related costs described in our reconciliation to Adjusted Net Income above and (ii) $9.9 million of share-based compensation costs. For the nine months ended September 30, 2019, corporate, district and other expenses included (i) U.K. related costs of $8.8 million as described in our reconciliation to Adjusted Net Income above, (ii) $2.5 million of legal and related costs also described in our reconciliation to Adjusted Net Income above and (iii) share-based compensation costs of $7.6 million. Share-based compensation costs increased primarily as a result of awards granted in the first quarter of 2020.
Excluding these items, comparable corporate, district and other expenses decreased $9.4 million year over year, primarily due to the timing and extent of variable compensation and certain cost reductions, including work-from-home initiatives, to manage COVID-19 Impacts for the nine months ended September 30, 2020.
As described above, and given the two-month lag, we recorded equity income from our investment in Katapult of $2.7 million for the nine months ended September 30, 2020.
U.S. interest expense for the nine months ended September 30, 2020 increased $2.8 million, or 6.4%, primarily related to the new Non-Recourse U.S. SPV Facility, on which we drew $35.2 million when it closed in April 2020.
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Canada Segment Results
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Three Months Ended September 30,
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Nine Months Ended September 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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49,155
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$
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60,195
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$
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(11,040)
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(18.3)
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%
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$
|
153,382
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$
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166,269
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$
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(12,887)
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(7.8)
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%
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Provision for losses
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11,265
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|
20,870
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(9,605)
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(46.0)
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%
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47,923
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|
57,733
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(9,810)
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(17.0)
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%
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Net revenue
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37,890
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|
39,325
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(1,435)
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(3.6)
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%
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105,459
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|
108,536
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(3,077)
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(2.8)
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%
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Advertising
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1,020
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|
2,238
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(1,218)
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(54.4)
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%
|
|
2,775
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|
5,271
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(2,496)
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(47.4)
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%
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Non-advertising costs of providing services
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16,684
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|
17,698
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(1,014)
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(5.7)
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%
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50,700
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|
52,068
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(1,368)
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(2.6)
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%
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Total cost of providing services
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17,704
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|
19,936
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(2,232)
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(11.2)
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%
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53,475
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|
57,339
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(3,864)
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(6.7)
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%
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Gross margin
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20,186
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|
19,389
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|
797
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4.1
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%
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|
51,984
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|
51,197
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|
787
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|
1.5
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%
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Corporate, district and other expenses
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5,155
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|
5,768
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(613)
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(10.6)
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%
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|
17,462
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|
16,617
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|
845
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5.1
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%
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Interest expense
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2,276
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|
2,487
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(211)
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(8.5)
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%
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|
6,952
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7,831
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(879)
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(11.2)
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%
|
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Total operating expense
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7,431
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8,255
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(824)
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(10.0)
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%
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24,414
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24,448
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(34)
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(0.1)
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%
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Segment operating income
|
12,755
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|
11,134
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|
1,621
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|
14.6
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%
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|
27,570
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|
26,749
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|
821
|
|
3.1
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%
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Interest expense
|
2,276
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|
2,487
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|
(211)
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(8.5)
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%
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|
6,952
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7,831
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(879)
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(11.2)
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%
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Depreciation and amortization
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1,130
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|
1,219
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(89)
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(7.3)
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%
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3,398
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|
3,627
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(229)
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(6.3)
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%
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EBITDA(1)
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16,161
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|
14,840
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|
1,321
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|
8.9
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%
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|
37,920
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|
38,207
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(287)
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(0.8)
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%
|
|
|
|
|
|
|
|
|
|
|
Legal and related costs
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
135
|
|
(135)
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|
|
|
|
|
|
|
|
|
|
|
|
Canada GST adjustment
|
—
|
|
—
|
|
—
|
|
|
|
2,160
|
|
—
|
|
2,160
|
|
|
Other adjustments
|
143
|
|
441
|
|
(298)
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|
|
|
580
|
|
297
|
|
283
|
|
|
Adjusted EBITDA(1)
|
$
|
16,304
|
|
$
|
15,281
|
|
$
|
1,023
|
|
6.7
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%
|
|
$
|
40,660
|
|
$
|
38,639
|
|
$
|
2,021
|
|
5.2
|
%
|
(1) These are non-GAAP metrics. For a description and reconciliation of each Non-GAAP metric, see "Supplemental Non-GAAP Financial Information."
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|
Canada Segment Results - For the Three Months Ended September 30, 2020 and 2019
Canada revenue decreased $11.0 million, or 18.3% ($10.6 million, or 17.6%, on a constant-currency basis), to $49.2 million for the three months ended September 30, 2020, from $60.2 million in the prior-year period, as a result of the declines in gross loans receivable discussed previously. Sequentially, Canada revenue increased $4.0 million, or 8.8%, driven by increases in Open-End, Single-Pay and ancillary revenue.
Canada non-Single-Pay revenue increased $0.1 million, or 0.2% ($0.5 million, or 1.2%, on a constant-currency basis), to $40.1 million, compared to $40.0 million in the prior-year period, on growth of $23.9 million, or 9.5% ($26.9 million, or 10.7%, on a constant-currency basis), in related loan balances. The increase was driven by continued growth of Open-End loans despite COVID-19 Impacts. Ancillary revenue, which includes sales of insurance to Open-End loan customers, decreased $1.2 million, or 10.0% ($1.1 million, or 9.1% on a constant-currency basis). The decrease was driven by additional insurance claims from consumers impacted by COVID-19 during the third quarter of 2020.
Single-Pay revenue decreased $11.1 million, or 55.2% ($11.1 million, or 54.8%, on a constant-currency basis), to $9.0 million for the three months ended September 30, 2020, and Single-Pay receivables decreased $18.4 million, or 52.5% ($18.3 million, or 52.0% on a constant-currency basis), to $16.7 million, from $35.1 million, in the prior-year period. The decreases in Single-Pay revenue and receivables were due to a continued shift to Open-End loans from Single-Pay, as well as a significant decline in demand attributable to COVID-19 Impacts.
The provision for losses decreased $9.6 million, or 46.0% ($9.5 million, or 45.5%, on a constant-currency basis), to $11.3 million for the three months ended September 30, 2020, compared to $20.9 million in the prior-year period. The decrease in provision for loan losses was primarily a result of lower loan volume and lower NCOs as a result of COVID-19 Impacts as discussed previously. On a quarterly basis, loss rates improved approximately 380 bps, or 53.8%, year over year due to government stimulus-related pay-downs and overall portfolio maturation.
Canada cost of providing services for the three months ended September 30, 2020 was $17.7 million, a decrease of $2.2 million, or 11.2% ($2.1 million, or 10.3%, on a constant-currency basis), compared to $19.9 million for the three months ended September 30, 2019, primarily related to certain cost reductions to manage COVID-19 Impacts and efficient advertising efforts while managing growth during the third quarter of 2020.
Canada operating expenses for the three months ended September 30, 2020 were $7.4 million, a decrease of $0.8 million, or 10.0% ($0.8 million, or 9.2%, on a constant-currency basis), compared to $8.3 million in the prior-year period, primarily as a result of certain cost reductions to manage COVID-19 Impacts.
Canada Segment Results - For the Nine Months Ended September 30, 2020 and 2019
Canada revenue decreased $12.9 million, or 7.8% (increased $10.2 million, or 6.2%, on a constant-currency basis), to $153.4 million for the nine months ended September 30, 2020, from $166.3 million in the prior year, as a result of the declines in gross loans receivable.
Canada non-Single-Pay revenue increased $11.5 million, or 10.7% ($13.7 million, or 12.7%, on a constant-currency basis), to $118.9 million, compared to $107.4 million in the prior-year period, on growth of $23.9 million, or 9.5% ($26.9 million, or 10.7%, on a constant-currency basis), in related loan balances. The increase was driven by continued growth of Open-End loan despite COVID-19 related impacts. Ancillary revenue, which includes sales of insurance to Open-End loan customers, remained flat year over year due to increased insurance claims from consumers impacted by COVID-19 during the nine months ended September 30, 2020.
Single-Pay revenue decreased $24.4 million, or 41.5% ($23.9 million, or 40.6%, on a constant-currency basis), to $34.5 million for the nine months ended September 30, 2020, and Single-Pay receivables decreased $18.4 million, or 52.5% ($18.3 million, or 52.0% on a constant-currency basis), to $16.7 million from $35.1 million, in the prior year. The decreases in Single-Pay revenue and receivables were due to product mix shift 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 $9.8 million, or 17.0% ($9.0 million, or 15.5%, on a constant-currency basis), to $47.9 million for the nine months ended September 30, 2020, compared to $57.7 million in the prior-year period. The decrease in provision for loan losses was primarily a result of lower NCOs and favorable loan performance as a result of COVID-19 Impacts as discussed previously. Year-over-year Canada NCOs decreased $17.2 million, or 28.4%.
Canada cost of providing services for the nine months ended September 30, 2020 was $53.5 million, a decrease of $3.9 million, or 6.7% ($2.9 million, or 5.1%, on a constant-currency basis), compared to $57.3 million for the nine months ended September 30, 2019, primarily related to certain cost reductions to manage COVID-19 Impacts, as well as efficient and strategic advertising efforts through the course of 2020 to manage growth in Canada.
Canada operating expenses for the nine months ended September 30, 2020 were $24.4 million, unchanged from the prior-year period.
Supplemental Non-GAAP Financial Information
Non-GAAP Financial Measures
In addition to the financial information prepared in conformity with U.S. GAAP, we provide certain “non-GAAP financial measures,” including:
•Adjusted Net Income and Adjusted Earnings Per Share, or the Adjusted Earnings Measures (net income from continuing operations plus or minus restructuring and other costs, certain legal and related costs, income or loss from equity method investment, goodwill and intangible asset impairments, certain costs related to the disposition of U.K., transaction-related costs, share-based compensation, intangible asset amortization, certain tax adjustments and impacts from tax law changes and cumulative tax effect of applicable adjustments, on a total and per share basis);
•EBITDA (earnings before interest, income taxes, depreciation and amortization);
•Adjusted EBITDA (EBITDA plus or minus certain non-cash and other adjusting items);
•Adjusted effective income tax rate (effective tax rate plus or minus certain non-cash and other adjusting items); and
•Gross Combined Loans Receivable (includes loans originated by third-party lenders through CSO programs which are not included in our unaudited Condensed Consolidated Financial Statements).
We believe that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of the Company's operations. We believe that these non-GAAP financial measures offer another way to view aspects of our business that, when viewed with our U.S. GAAP results, provide a more complete understanding of factors and trends affecting our business.
We believe that investors regularly rely on non-GAAP financial measures, such as Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA, to assess operating performance and that such measures may highlight trends in the business that may not otherwise be apparent when relying on financial measures calculated in accordance with U.S. GAAP. In addition, we believe that the adjustments shown below are useful to investors in order to allow them to compare our financial results during the periods shown without the effect of each of these income or expense items. In addition, we believe that Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of public companies in our industry, many of which present Adjusted Net Income, Adjusted Earnings per Share, EBITDA and/or Adjusted EBITDA when reporting their results.
In addition to reporting loans receivable information in accordance with U.S. GAAP, we provide Gross Combined Loans Receivable consisting of 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. We refer to these as "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 U.S. GAAP unaudited Condensed Consolidated Financial Statements. Adjusted Net Income, Adjusted Earnings per Share, EBITDA, Adjusted EBITDA and Gross Combined Loans Receivable should not be considered as alternatives to income from continuing operations, segment operating income or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flows from operating activities or any other liquidity measure derived in accordance with U.S. GAAP. Readers should consider the information in addition to, but not instead of or superior to, the financial statements prepared in accordance with U.S. GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.
Description and Reconciliations of Non-GAAP Financial Measures
Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA measures have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our income or cash flows as reported under U.S. GAAP. Some of these limitations are:
•they do not include cash expenditures or future requirements for capital expenditures or contractual commitments;
•they do not include changes in, or cash requirements for, working capital needs;
•they do not include the interest expense, or the cash requirements necessary to service interest or principal payments on debt;
•depreciation and amortization are non-cash expense items reported in the statements of cash flows; and
•other companies in our industry may calculate these measures differently, limiting their usefulness as comparative measures.
We calculate Adjusted Earnings per Share utilizing diluted shares outstanding at year-end. If we record a loss from continuing operations under U.S. GAAP, shares outstanding utilized to calculate Diluted Earnings per Share from continuing operations are equivalent to basic shares outstanding. Shares outstanding utilized to calculate Adjusted Earnings per Share from continuing operations reflect the number of diluted shares we would have reported if reporting net income from continuing operations under U.S. GAAP.
As noted above, Gross Combined Loans Receivable includes loans originated by third-party lenders through CSO programs which are not included in the 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)
|
|
|
|
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|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2020
|
2019
|
Change $
|
Change %
|
|
2020
|
2019
|
Change $
|
Change %
|
Net income from continuing operations
|
$
|
12,881
|
|
$
|
27,987
|
|
$
|
(15,106)
|
|
(54.0)
|
%
|
|
$
|
69,974
|
|
$
|
74,327
|
|
$
|
(4,353)
|
|
(5.9)
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal and related costs (1)
|
1,415
|
|
870
|
|
|
|
|
3,502
|
|
2,622
|
|
|
|
U.K. related costs (2)
|
—
|
|
348
|
|
|
|
|
—
|
|
8,844
|
|
|
|
(Income) loss from equity method investment (3)
|
(3,530)
|
|
1,384
|
|
|
|
|
(2,653)
|
|
5,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation (4)
|
3,392
|
|
2,771
|
|
|
|
|
9,896
|
|
7,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible asset amortization
|
750
|
|
751
|
|
|
|
|
2,246
|
|
2,308
|
|
|
|
Canada GST adjustment (5)
|
—
|
|
—
|
|
|
|
|
2,160
|
|
—
|
|
|
|
Income tax valuations (6)
|
—
|
|
—
|
|
|
|
|
(3,472)
|
|
—
|
|
|
|
Impact of tax law changes (7)
|
(2,137)
|
|
—
|
|
|
|
|
(11,251)
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|
—
|
|
|
|
Cumulative tax effect of adjustments (8)
|
(1,445)
|
|
(1,232)
|
|
|
|
|
(4,630)
|
|
(5,554)
|
|
|
|
Adjusted Net Income
|
$
|
11,326
|
|
$
|
32,879
|
|
$
|
(21,553)
|
|
(65.6)
|
%
|
|
$
|
65,772
|
|
$
|
95,266
|
|
$
|
(29,494)
|
|
(31.0)
|
%
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
$
|
12,881
|
|
$
|
27,987
|
|
|
|
|
$
|
69,974
|
|
$
|
74,327
|
|
|
|
Diluted Weighted Average Shares Outstanding
|
41,775
|
|
46,010
|
|
|
|
|
41,660
|
|
46,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share from continuing operations
|
$
|
0.31
|
|
$
|
0.61
|
|
$
|
(0.30)
|
|
(49.2)
|
%
|
|
$
|
1.68
|
|
$
|
1.59
|
|
$
|
0.09
|
|
5.7
|
|
Per Share impact of adjustments to Net income
|
(0.04)
|
|
0.10
|
|
|
|
|
(0.10)
|
|
0.44
|
|
|
|
Adjusted Diluted Earnings per Share
|
$
|
0.27
|
|
$
|
0.71
|
|
$
|
(0.44)
|
|
(62.0)
|
%
|
|
$
|
1.58
|
|
$
|
2.03
|
|
$
|
(0.45)
|
|
(22.2)
|
%
|
Note: Footnotes follow Reconciliation of Adjusted EBITDA table immediately below.
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|
|
Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA, non-GAAP measures (in thousands, except per share data, unaudited)
|
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|
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|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2020
|
2019
|
Change $
|
Change %
|
|
2020
|
2019
|
Change $
|
Change %
|
Net income from continuing operations
|
$
|
12,881
|
|
$
|
27,987
|
|
$
|
(15,106)
|
|
(54.0)
|
%
|
|
$
|
69,974
|
|
$
|
74,327
|
|
$
|
(4,353)
|
|
(5.9)
|
|
(Benefit) provision for income taxes
|
(822)
|
|
11,239
|
|
(12,061)
|
|
#
|
|
2,183
|
|
28,738
|
|
(26,555)
|
|
(92.4)
|
|
Interest expense
|
18,383
|
|
17,364
|
|
1,019
|
|
5.9
|
%
|
|
54,018
|
|
52,077
|
|
1,941
|
|
3.7
|
|
Depreciation and amortization
|
4,358
|
|
4,609
|
|
(251)
|
|
(5.4)
|
%
|
|
13,312
|
|
14,180
|
|
(868)
|
|
(6.1)
|
%
|
EBITDA
|
34,800
|
|
61,199
|
|
(26,399)
|
|
(43.1)
|
%
|
|
139,487
|
|
169,322
|
|
(29,835)
|
|
(17.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal and related costs (1)
|
1,415
|
|
870
|
|
|
|
|
3,502
|
|
2,622
|
|
|
|
U.K. related costs (2)
|
—
|
|
348
|
|
|
|
|
—
|
|
8,844
|
|
|
|
(Income) loss from equity method investment (3)
|
(3,530)
|
|
1,384
|
|
|
|
|
(2,653)
|
|
5,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation (4)
|
3,392
|
|
2,771
|
|
|
|
|
9,896
|
|
7,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada GST adjustment (5)
|
—
|
|
—
|
|
|
|
|
2,160
|
|
—
|
|
|
|
Other adjustments (9)
|
38
|
|
483
|
|
|
|
|
639
|
|
91
|
|
|
|
Adjusted EBITDA
|
$
|
36,115
|
|
$
|
67,055
|
|
$
|
(30,940)
|
|
(46.1)
|
%
|
|
$
|
153,031
|
|
$
|
193,598
|
|
$
|
(40,567)
|
|
(21.0)
|
%
|
Adjusted EBITDA Margin
|
19.8
|
%
|
22.6
|
%
|
|
|
|
23.7
|
|
23.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Legal and related costs for the nine months ended September 30, 2020 included (i) settlement costs related to certain legal matters, (ii) estimated costs for certain ongoing legal matters, (iii) costs related to certain securities litigation and related matter, (iv) advisory costs, (v) severance costs for certain corporate employees and (vi) legal and advisory costs related to the purchase of Ad Astra.
Legal and related costs for the nine months ended September 30, 2019 included (i) $1.8 million due to eliminating 121 positions in North America in the first quarter, (ii) costs related to certain securities litigation and related matters of $0.6 million and (iii) legal and advisory costs of $0.3 million related to the repurchase of shares from FFL.
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|
|
|
|
(2)
|
U.K. related costs of $8.8 million for the nine months ended September 30, 2019 relate to placing the U.K. subsidiaries into administration on February 25, 2019, which included $7.6 million to obtain consent from the holders of the 8.25% Senior Secured Notes to deconsolidate the U.K. segment and $1.2 million for other costs.
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|
|
(3)
|
The income from equity method investment for the nine months ended September 30, 2020 of $2.7 million includes our share of the estimated U.S. GAAP net income of Katapult.
The loss from equity method investment for the nine months ended September 30, 2019 of $5.1 million includes (i) our share of the estimated U.S. GAAP net loss of Katapult and (ii) a $3.7 million 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)
|
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 Goods and Services Tax ("GST") due.
|
(6)
|
During the nine months ended September 30, 2020, a Texas court ruling related to the apportionment of income to the state for another company resulted in a change in estimate regarding the realization of a tax benefit previously taken. Accordingly, we recorded a $1.1 million liability for our estimated exposure related to this position. Also in the nine months ended September 30, 2020, we released a $4.6 million valuation allowance related to NOLs for certain entities in Canada.
|
(7)
|
For the nine months ended September 30, 2020, we recorded an income tax benefit of $11.3 million related to the carryback of NOL from tax years 2018 and 2019 due to the provisions of the CARES Act..
|
(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.
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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 September 30, 2020 and 2019, 27.0% and 20.2%, respectively, of our revenues from continuing operations were originated in Canadian Dollars. In the nine months ended September 30, 2020 and 2019, 23.8% and 19.8%, respectively, of our revenues from continuing operations were originated in Canadian Dollars. As a result, changes in our reported results include the impacts of changes in foreign currency exchange rates for the Canadian Dollar.
Income Statement
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2020
|
2019
|
|
$ Change
|
% Change
|
|
2020
|
2019
|
|
$ Change
|
% Change
|
Average Exchange Rates for the Canadian Dollar
|
$
|
0.7504
|
|
$
|
0.7576
|
|
|
($0.0072)
|
|
(1.0)
|
%
|
|
$
|
0.7391
|
|
$
|
0.7526
|
|
|
($0.0135)
|
|
(1.8)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet - Exchange Rate as of September 30, 2020 and December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
December 31,
|
|
Change
|
|
2020
|
2019
|
|
$
|
%
|
Exchange Rate for the Canadian Dollar
|
$
|
0.7472
|
|
$
|
0.7683
|
|
|
($0.0211)
|
|
(2.7)
|
%
|
|
|
|
|
|
|
The following constant currency analysis removes the impact of the fluctuation in foreign exchange rates and utilizes constant currency results in our analysis of segment performance. Our constant currency assessment assumes foreign exchange rates in the current fiscal periods remained the same as in the prior fiscal periods. All conversion rates below are based on the U.S. Dollar equivalent to the Canadian Dollar. We believe that the constant currency assessment below is a useful measure in assessing the comparable growth and profitability of our operations.
We calculated the revenues and gross margin below during the three and nine months ended September 30, 2020 using the actual average exchange rate during the three and nine months ended September 30, 2019 (in thousands, unaudited).
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2020
|
2019
|
|
$ Change
|
% Change
|
|
2020
|
2019
|
|
$ Change
|
% Change
|
Canada – constant currency basis:
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
49,618
|
|
$
|
60,195
|
|
|
$
|
(10,577)
|
|
(17.6)
|
%
|
|
$
|
156,026
|
|
$
|
166,269
|
|
|
$
|
(10,243)
|
|
(6.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
20,365
|
|
19,389
|
|
|
976
|
|
5.0
|
%
|
|
52,861
|
|
51,197
|
|
|
1,664
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We calculated gross loans receivable below as of September 30, 2020 using the actual exchange rate as of December 31, 2019 (in thousands, unaudited).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
Change
|
|
|
2020
|
|
2019
|
|
$
|
%
|
Canada – constant currency basis:
|
|
|
|
|
|
|
|
Gross loans receivable
|
|
$
|
300,409
|
|
|
$
|
302,375
|
|
|
$
|
(1,966)
|
|
(0.7)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity to fund the loans we make to our customers are cash provided by operations; our Senior Revolver, Cash Money Revolving Credit Facility, Non-Recourse U.S. SPV Facility, Non-Recourse Canada SPV Facility, and funds from third-party lenders under our CSO programs. Additionally, in August 2018, we issued $690.0 million 8.25% Senior Secured Notes due September 2025.
As of September 30, 2020, we were in compliance with all financial ratios, covenants and other requirements set forth in our debt agreements. We anticipate that our primary use of cash will be to fund growth in our working capital, finance capital expenditures, and meet our debt obligations. As we did for our share repurchase programs announced in April 2019 and February 2020 (the latter of which was suspended in March 2020, 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 to generate additional liquidity. Although consumer demand increased sequentially during the third quarter of 2020, our cash on hand and total liquidity remains at elevated levels due to a combination of factors, including (i) a sharp decrease in demand immediately following the onset of the COVID-19 pandemic, (ii) increased or accelerated repayments as customers benefited from government stimulus programs, (iii) our decision to tighten credit and the resulting favorable credit performance, and (iv) the runoff of California Installment loans following that state's regulatory changes effective January 1, 2020. These factors resulted in our available cash on hand of $207.1 million and our total liquidity of $302.1 million as of September 30, 2020. We believe our cash on hand and available borrowings provide us with sufficient liquidity for at least the next 12 months.
Borrowings
Our debt consisted of the following as of September 30, 2020, net of deferred financing costs (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capacity
|
Interest Rate
|
Maturity
|
Counter-parties
|
Balance as of September 30, 2020
|
Non-Recourse Canada SPV Facility (1)
|
|
C$175.0 million
|
3-Mo CDOR + 6.75%
|
September 2, 2023
|
Waterfall Asset Management
|
$
|
91,010
|
|
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
|
28,884
|
|
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
|
|
679,566
|
|
(1) Capacity amounts are denominated in Canadian dollars, while outstanding balances as of September 30, 2020 are denominated in U.S. dollars.
|
(2) The Non-Recourse U.S. SPV Facility initially provided for $100.0 million of borrowing capacity and, on July 31, 2020, additional commitments were obtained increasing capacity to $200.0 million. As a result of the increase in commitments, interest now accrues at an annual rate of one-month LIBOR (with a floor of 1.65%) plus the lesser of (a) 6.95% and (b) the sum of (i) 6.25% on balances up to $145.5 million and (ii) 9.75% on balances greater than $145.5 million.
|
Refer to Note 5, "Debt," for details on each of our credit facilities and resources.
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following unaudited condensed consolidating financial information is presented separately for:
(i)CURO as the issuer of the 8.25% Senior Secured Notes;
(ii)The Company's subsidiary guarantors, which are comprised of certain of its domestic subsidiaries, including (x) CFTC, as the issuer of the 12.00% Senior Secured Notes that were redeemed in August 2018, (y) CURO Intermediate Holdings Corp., but excluding the U.S. SPV and Canada SPV (the “Subsidiary Guarantors”), on a consolidated basis, which are 100% owned by CURO, and which are guarantors of the 8.25% Senior Secured Notes issued in August 2018;
(iii)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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
(dollars in thousands)
|
CURO
|
Subsidiary
Guarantors
|
U.S. SPV
|
Canada SPV
|
Subsidiary
Non-Guarantors
|
Eliminations
|
CURO
Consolidated
|
Assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
$
|
148,530
|
|
$
|
—
|
|
$
|
—
|
|
$
|
58,541
|
|
$
|
—
|
|
$
|
207,071
|
|
Restricted cash
|
—
|
|
25,797
|
|
9,179
|
|
24,517
|
|
3,034
|
|
—
|
|
62,527
|
|
Loans receivable, net
|
—
|
|
102,858
|
|
55,376
|
|
218,683
|
|
39,943
|
|
—
|
|
416,860
|
|
Income taxes receivable
|
57,303
|
|
(24,444)
|
|
—
|
|
—
|
|
2,355
|
|
—
|
|
35,214
|
|
Prepaid expenses and other
|
—
|
|
20,028
|
|
455
|
|
710
|
|
7,066
|
|
—
|
|
28,259
|
|
Property and equipment, net
|
—
|
|
38,047
|
|
—
|
|
—
|
|
23,634
|
|
—
|
|
61,681
|
|
Investments
|
—
|
|
23,908
|
|
—
|
|
—
|
|
—
|
|
—
|
|
23,908
|
|
Right of use asset - operating leases
|
—
|
|
71,632
|
|
—
|
|
—
|
|
39,423
|
|
—
|
|
111,055
|
|
Deferred tax assets
|
18,245
|
|
(18,245)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Goodwill
|
—
|
|
105,922
|
|
—
|
|
—
|
|
28,667
|
|
—
|
|
134,589
|
|
Other intangibles, net
|
—
|
|
15,477
|
|
—
|
|
—
|
|
21,742
|
|
—
|
|
37,219
|
|
Intercompany receivable
|
—
|
|
154,020
|
|
—
|
|
—
|
|
—
|
|
(154,020)
|
|
—
|
|
Investment in subsidiaries
|
160,797
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(160,797)
|
|
—
|
|
Other assets
|
—
|
|
7,488
|
|
—
|
|
—
|
|
663
|
|
—
|
|
8,151
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
236,345
|
|
$
|
671,018
|
|
$
|
65,010
|
|
$
|
243,910
|
|
$
|
225,068
|
|
$
|
(314,817)
|
|
$
|
1,126,534
|
|
Liabilities and Stockholders' equity (deficit):
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
(52)
|
|
$
|
40,921
|
|
$
|
—
|
|
$
|
26,665
|
|
$
|
(15,787)
|
|
$
|
—
|
|
$
|
51,747
|
|
Deferred revenue
|
—
|
|
3,367
|
|
105
|
|
32
|
|
1,716
|
|
—
|
|
5,220
|
|
Lease liability - operating leases
|
—
|
|
79,439
|
|
—
|
|
—
|
|
39,392
|
|
—
|
|
118,831
|
|
Income taxes payable
|
(8,164)
|
|
8,164
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Accrued interest
|
4,745
|
|
—
|
|
300
|
|
683
|
|
—
|
|
—
|
|
5,728
|
|
Liability for losses on CSO lender-owned consumer loans
|
—
|
|
6,198
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,198
|
|
Debt
|
679,566
|
|
—
|
|
28,884
|
|
91,010
|
|
—
|
|
—
|
|
799,460
|
|
Intercompany payable
|
—
|
|
2,330
|
|
(2,330)
|
|
37,511
|
|
116,509
|
|
(154,020)
|
|
—
|
|
Payable to CURO Holdings Corp.
|
(565,230)
|
|
565,230
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Other long-term liabilities
|
—
|
|
13,311
|
|
—
|
|
—
|
|
65
|
|
—
|
|
13,376
|
|
Deferred tax liabilities
|
12,927
|
|
—
|
|
—
|
|
(100)
|
|
594
|
|
—
|
|
13,421
|
|
Total liabilities
|
123,792
|
|
718,960
|
|
26,959
|
|
155,801
|
|
142,489
|
|
(154,020)
|
|
1,013,981
|
|
Stockholders' equity (deficit)
|
112,553
|
|
(47,942)
|
|
38,051
|
|
88,109
|
|
82,579
|
|
(160,797)
|
|
112,553
|
|
Total liabilities and stockholders' equity (deficit)
|
$
|
236,345
|
|
$
|
671,018
|
|
$
|
65,010
|
|
$
|
243,910
|
|
$
|
225,068
|
|
$
|
(314,817)
|
|
$
|
1,126,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
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
|
|
Investments
|
—
|
|
10,068
|
|
|
—
|
|
—
|
|
—
|
|
10,068
|
|
Right of use asset - operating leases
|
—
|
|
74,845
|
|
|
—
|
|
42,608
|
|
—
|
|
117,453
|
|
Deferred tax asset
|
8,561
|
|
(3,506)
|
|
|
—
|
|
—
|
|
—
|
|
5,055
|
|
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
|
—
|
|
6,938
|
|
|
—
|
|
704
|
|
—
|
|
7,642
|
|
|
|
|
|
|
|
|
|
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
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Liability for losses on CSO lender-owned consumer loans
|
—
|
|
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 September 30, 2020
|
(dollars in thousands)
|
CURO
|
Subsidiary
Guarantors
|
U.S. SPV
|
Canada SPV
|
Subsidiary
Non-Guarantors
|
Eliminations
|
CURO
Consolidated
|
Revenue
|
$
|
—
|
|
$
|
89,212
|
|
$
|
43,636
|
|
$
|
32,936
|
|
$
|
16,219
|
|
$
|
—
|
|
$
|
182,003
|
|
Provision for losses
|
—
|
|
24,016
|
|
19,469
|
|
9,191
|
|
2,074
|
|
—
|
|
54,750
|
|
Net revenue
|
—
|
|
65,196
|
|
24,167
|
|
23,745
|
|
14,145
|
|
—
|
|
127,253
|
|
Cost of providing services:
|
|
|
|
|
|
|
|
Salaries and benefits
|
—
|
|
16,075
|
|
—
|
|
—
|
|
8,171
|
|
—
|
|
24,246
|
|
Occupancy
|
—
|
|
7,896
|
|
—
|
|
—
|
|
5,982
|
|
—
|
|
13,878
|
|
Office
|
—
|
|
3,858
|
|
—
|
|
—
|
|
1,200
|
|
—
|
|
5,058
|
|
Other costs of providing services
|
—
|
|
4,745
|
|
—
|
|
—
|
|
1,331
|
|
—
|
|
6,076
|
|
Advertising
|
—
|
|
13,405
|
|
—
|
|
—
|
|
1,020
|
|
—
|
|
14,425
|
|
Total cost of providing services
|
—
|
|
45,979
|
|
—
|
|
—
|
|
17,704
|
|
—
|
|
63,683
|
|
Gross margin
|
—
|
|
19,217
|
|
24,167
|
|
23,745
|
|
(3,559)
|
|
—
|
|
63,570
|
|
Operating expense (income):
|
|
|
|
|
|
|
|
Corporate, district and other expenses
|
3,558
|
|
27,836
|
|
109
|
|
139
|
|
5,016
|
|
—
|
|
36,658
|
|
Intercompany management fee
|
—
|
|
(3,995)
|
|
—
|
|
1,209
|
|
2,786
|
|
—
|
|
—
|
|
Interest expense (income)
|
14,653
|
|
29
|
|
1,425
|
|
2,356
|
|
(80)
|
|
—
|
|
18,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from equity method investment
|
—
|
|
(3,530)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(3,530)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany interest (income) expense
|
—
|
|
(5,090)
|
|
—
|
|
560
|
|
4,530
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
Total operating expense
|
18,211
|
|
15,250
|
|
1,534
|
|
4,264
|
|
12,252
|
|
—
|
|
51,511
|
|
(Loss) income from continuing operations before income taxes
|
(18,211)
|
|
3,967
|
|
22,633
|
|
19,481
|
|
(15,811)
|
|
—
|
|
12,059
|
|
(Benefit) provision for income taxes
|
(10,189)
|
|
8,346
|
|
—
|
|
(101)
|
|
1,122
|
|
—
|
|
(822)
|
|
Net (loss) income from continuing operations
|
(8,022)
|
|
(4,379)
|
|
22,633
|
|
19,582
|
|
(16,933)
|
|
—
|
|
12,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income on discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Net (loss) income
|
(8,022)
|
|
(4,379)
|
|
22,633
|
|
19,582
|
|
(16,933)
|
|
—
|
|
12,881
|
|
Equity in net income (loss) of subsidiaries:
|
|
|
|
|
|
|
|
CFTC
|
20,903
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(20,903)
|
|
—
|
|
Guarantor Subsidiaries
|
—
|
|
(4,379)
|
|
—
|
|
—
|
|
—
|
|
4,379
|
|
—
|
|
Non-Guarantor Subsidiaries
|
—
|
|
(16,933)
|
|
—
|
|
—
|
|
—
|
|
16,933
|
|
—
|
|
U.S. SPV
|
—
|
|
22,633
|
|
—
|
|
—
|
|
—
|
|
(22,633)
|
|
—
|
|
Canada SPV
|
—
|
|
19,582
|
|
—
|
|
—
|
|
—
|
|
(19,582)
|
|
—
|
|
Net income (loss) attributable to CURO
|
$
|
12,881
|
|
$
|
16,524
|
|
$
|
22,633
|
|
$
|
19,582
|
|
$
|
(16,933)
|
|
$
|
(41,806)
|
|
$
|
12,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019
|
(dollars in thousands)
|
CURO
|
Subsidiary
Guarantors
|
Canada SPV
|
Subsidiary
Non-Guarantors
|
Eliminations
|
CURO
Consolidated
|
Revenue
|
$
|
—
|
|
$
|
237,069
|
|
$
|
30,211
|
|
$
|
29,984
|
|
$
|
—
|
|
$
|
297,264
|
|
Provision for losses
|
—
|
|
102,997
|
|
13,679
|
|
7,191
|
|
—
|
|
123,867
|
|
Net revenue
|
—
|
|
134,072
|
|
16,532
|
|
22,793
|
|
—
|
|
173,397
|
|
Cost of providing services:
|
|
|
|
|
|
|
Salaries and benefits
|
—
|
|
18,301
|
|
—
|
|
9,161
|
|
—
|
|
27,462
|
|
Occupancy
|
—
|
|
8,249
|
|
—
|
|
5,787
|
|
—
|
|
14,036
|
|
Office
|
—
|
|
4,611
|
|
—
|
|
1,382
|
|
—
|
|
5,993
|
|
Other costs of providing services
|
—
|
|
11,475
|
|
—
|
|
1,368
|
|
—
|
|
12,843
|
|
Advertising
|
—
|
|
14,186
|
|
—
|
|
2,238
|
|
—
|
|
16,424
|
|
Total cost of providing services
|
—
|
|
56,822
|
|
—
|
|
19,936
|
|
—
|
|
76,758
|
|
Gross margin
|
—
|
|
77,250
|
|
16,532
|
|
2,857
|
|
—
|
|
96,639
|
|
Operating (income) expense:
|
|
|
|
|
|
|
Corporate, district and other expenses
|
2,967
|
|
29,930
|
|
472
|
|
5,296
|
|
—
|
|
38,665
|
|
Intercompany management fee
|
—
|
|
(3,276)
|
|
8
|
|
3,268
|
|
—
|
|
—
|
|
Interest expense
|
14,619
|
|
258
|
|
2,463
|
|
24
|
|
—
|
|
17,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from equity method investment
|
—
|
|
1,384
|
|
—
|
|
—
|
|
—
|
|
1,384
|
|
Intercompany interest (income) expense
|
—
|
|
(1,462)
|
|
569
|
|
893
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
Total operating expense
|
17,586
|
|
26,834
|
|
3,512
|
|
9,481
|
|
—
|
|
57,413
|
|
Income (loss) from continuing operations before income taxes
|
(17,586)
|
|
50,416
|
|
13,020
|
|
(6,624)
|
|
—
|
|
39,226
|
|
(Benefit) provision for income taxes
|
(4,447)
|
|
13,700
|
|
—
|
|
1,986
|
|
—
|
|
11,239
|
|
Net (loss) income from continuing operations
|
(13,139)
|
|
36,716
|
|
13,020
|
|
(8,610)
|
|
—
|
|
27,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss on discontinued operations
|
—
|
|
—
|
|
—
|
|
(598)
|
|
—
|
|
(598)
|
|
Net (loss) income
|
(13,139)
|
|
36,716
|
|
13,020
|
|
(9,208)
|
|
—
|
|
27,389
|
|
Equity in net income (loss) of subsidiaries:
|
|
|
|
|
|
|
CFTC
|
40,528
|
|
—
|
|
—
|
|
—
|
|
(40,528)
|
|
—
|
|
Guarantor Subsidiaries
|
—
|
|
36,716
|
|
—
|
|
—
|
|
(36,716)
|
|
—
|
|
Non-Guarantor Subsidiaries
|
—
|
|
(9,208)
|
|
—
|
|
—
|
|
9,208
|
|
—
|
|
Canada SPV
|
—
|
|
13,020
|
|
—
|
|
|
(13,020)
|
|
—
|
|
Net income (loss) attributable to CURO
|
$
|
27,389
|
|
$
|
77,244
|
|
$
|
13,020
|
|
$
|
(9,208)
|
|
$
|
(81,056)
|
|
$
|
27,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020
|
(dollars in thousands)
|
CURO
|
Subsidiary
Guarantors
|
U.S. SPV
|
Canada SPV
|
Subsidiary
Non-Guarantors
|
Eliminations
|
CURO
Consolidated
|
Revenue
|
$
|
—
|
|
$
|
408,465
|
|
$
|
83,471
|
|
$
|
97,334
|
|
$
|
56,048
|
|
$
|
—
|
|
$
|
645,318
|
|
Provision for losses
|
—
|
|
128,409
|
|
42,647
|
|
38,167
|
|
9,756
|
|
—
|
|
218,979
|
|
Net revenue
|
—
|
|
280,056
|
|
40,824
|
|
59,167
|
|
46,292
|
|
—
|
|
426,339
|
|
Cost of providing services:
|
|
|
|
|
|
|
|
Salaries and benefits
|
—
|
|
49,650
|
|
—
|
|
—
|
|
25,326
|
|
—
|
|
74,976
|
|
Occupancy
|
—
|
|
23,307
|
|
—
|
|
—
|
|
17,630
|
|
—
|
|
40,937
|
|
Office
|
—
|
|
10,935
|
|
—
|
|
—
|
|
3,597
|
|
—
|
|
14,532
|
|
Other costs of providing services
|
—
|
|
19,585
|
|
—
|
|
—
|
|
4,147
|
|
—
|
|
23,732
|
|
Advertising
|
—
|
|
29,619
|
|
—
|
|
—
|
|
2,775
|
|
—
|
|
32,394
|
|
Total cost of providing services
|
—
|
|
133,096
|
|
—
|
|
—
|
|
53,475
|
|
—
|
|
186,571
|
|
Gross margin
|
—
|
|
146,960
|
|
40,824
|
|
59,167
|
|
(7,183)
|
|
—
|
|
239,768
|
|
Operating expense (income):
|
|
|
|
|
|
|
|
Corporate, district and other expenses
|
10,350
|
|
88,289
|
|
145
|
|
416
|
|
17,046
|
|
—
|
|
116,246
|
|
Intercompany management fee
|
—
|
|
(11,139)
|
|
—
|
|
2,584
|
|
8,555
|
|
—
|
|
—
|
|
Interest expense
|
43,937
|
|
496
|
|
2,633
|
|
7,089
|
|
(137)
|
|
—
|
|
54,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from equity method investment
|
—
|
|
(2,653)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,653)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany interest (income) expense
|
—
|
|
(7,973)
|
|
—
|
|
1,643
|
|
6,330
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
Total operating expense
|
54,287
|
|
67,020
|
|
2,778
|
|
11,732
|
|
31,794
|
|
—
|
|
167,611
|
|
Income (loss) from continuing operations before income taxes
|
(54,287)
|
|
79,940
|
|
38,046
|
|
47,435
|
|
(38,977)
|
|
—
|
|
72,157
|
|
(Benefit) provision for income taxes
|
(36,308)
|
|
40,848
|
|
—
|
|
(101)
|
|
(2,256)
|
|
—
|
|
2,183
|
|
Net income (loss) from continuing operations
|
(17,979)
|
|
39,092
|
|
38,046
|
|
47,536
|
|
(36,721)
|
|
—
|
|
69,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income on discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
|
1,285
|
|
—
|
|
1,285
|
|
Net income (loss)
|
(17,979)
|
|
39,092
|
|
38,046
|
|
47,536
|
|
(35,436)
|
|
—
|
|
71,259
|
|
Equity in net income (loss) of subsidiaries:
|
|
|
|
|
|
|
|
CFTC
|
89,238
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(89,238)
|
|
—
|
|
Guarantor Subsidiaries
|
—
|
|
39,092
|
|
—
|
|
—
|
|
—
|
|
(39,092)
|
|
—
|
|
Non-Guarantor Subsidiaries
|
—
|
|
(35,436)
|
|
—
|
|
—
|
|
—
|
|
35,436
|
|
—
|
|
U.S. SPV
|
—
|
|
38,046
|
|
—
|
|
—
|
|
—
|
|
(38,046)
|
|
—
|
|
Canada SPV
|
—
|
|
47,536
|
|
—
|
|
—
|
|
—
|
|
(47,536)
|
|
—
|
|
Net income (loss) attributable to CURO
|
$
|
71,259
|
|
$
|
128,330
|
|
$
|
38,046
|
|
$
|
47,536
|
|
$
|
(35,436)
|
|
$
|
(178,476)
|
|
$
|
71,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019
|
(dollars in thousands)
|
CURO
|
Subsidiary
Guarantors
|
Canada SPV
|
Subsidiary
Non-Guarantors
|
Eliminations
|
CURO
Consolidated
|
Revenue
|
$
|
—
|
|
$
|
673,234
|
|
$
|
81,349
|
|
$
|
84,920
|
|
$
|
—
|
|
$
|
839,503
|
|
Provision for losses
|
—
|
|
280,529
|
|
40,099
|
|
17,634
|
|
—
|
|
338,262
|
|
Net revenue
|
—
|
|
392,705
|
|
41,250
|
|
67,286
|
|
—
|
|
501,241
|
|
Cost of providing services:
|
|
|
|
|
|
|
Salaries and benefits
|
—
|
|
55,675
|
|
—
|
|
26,574
|
|
—
|
|
82,249
|
|
Occupancy
|
—
|
|
24,292
|
|
—
|
|
17,913
|
|
—
|
|
42,205
|
|
Office
|
—
|
|
12,504
|
|
—
|
|
4,059
|
|
—
|
|
16,563
|
|
Other costs of providing services
|
—
|
|
36,395
|
|
—
|
|
3,522
|
|
—
|
|
39,917
|
|
Advertising
|
—
|
|
31,719
|
|
—
|
|
5,271
|
|
—
|
|
36,990
|
|
Total cost of providing services
|
—
|
|
160,585
|
|
—
|
|
57,339
|
|
—
|
|
217,924
|
|
Gross margin
|
—
|
|
232,120
|
|
41,250
|
|
9,947
|
|
—
|
|
283,317
|
|
Operating expense (income):
|
|
|
|
|
|
|
Corporate, district and other expenses
|
7,940
|
|
98,486
|
|
(283)
|
|
16,900
|
|
—
|
|
123,043
|
|
Intercompany management fee
|
—
|
|
(9,576)
|
|
23
|
|
9,553
|
|
—
|
|
—
|
|
Interest expense
|
43,671
|
|
575
|
|
7,728
|
|
103
|
|
—
|
|
52,077
|
|
Loss from equity method investment
|
—
|
|
5,132
|
|
—
|
|
—
|
|
—
|
|
5,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany interest (income) expense
|
—
|
|
(3,855)
|
|
1,192
|
|
2,663
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
Total operating expense
|
51,611
|
|
90,762
|
|
8,660
|
|
29,219
|
|
—
|
|
180,252
|
|
Income (loss) from continuing operations before income taxes
|
(51,611)
|
|
141,358
|
|
32,590
|
|
(19,272)
|
|
—
|
|
103,065
|
|
(Benefit) provision for income taxes
|
(12,686)
|
|
37,309
|
|
—
|
|
4,115
|
|
—
|
|
28,738
|
|
Net (loss) income from continuing operations
|
(38,925)
|
|
104,049
|
|
32,590
|
|
(23,387)
|
|
—
|
|
74,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income on discontinued operations
|
—
|
|
—
|
|
—
|
|
6,943
|
|
—
|
|
6,943
|
|
Net (loss) income
|
(38,925)
|
|
104,049
|
|
32,590
|
|
(16,444)
|
|
—
|
|
81,270
|
|
Equity in net income (loss) of subsidiaries:
|
|
|
|
|
|
|
CFTC
|
120,195
|
|
—
|
|
—
|
|
—
|
|
(120,195)
|
|
—
|
|
Guarantor Subsidiaries
|
—
|
|
104,049
|
|
—
|
|
—
|
|
(104,049)
|
|
—
|
|
Non-Guarantor Subsidiaries
|
—
|
|
(16,444)
|
|
—
|
|
—
|
|
16,444
|
|
—
|
|
Canada SPV
|
|
32,590
|
|
—
|
|
—
|
|
(32,590)
|
|
—
|
|
Net income (loss) attributable to CURO
|
$
|
81,270
|
|
$
|
224,244
|
|
$
|
32,590
|
|
$
|
(16,444)
|
|
$
|
(240,390)
|
|
$
|
81,270
|
|
Condensed Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 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
|
$
|
6,549
|
|
$
|
143,190
|
|
$
|
62,286
|
|
$
|
69,115
|
|
$
|
29,333
|
|
$
|
(727)
|
|
$
|
309,746
|
|
Net cash used in discontinued operating activities
|
—
|
|
—
|
|
—
|
|
—
|
|
1,714
|
|
—
|
|
1,714
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
—
|
|
(6,875)
|
|
—
|
|
—
|
|
(526)
|
|
—
|
|
(7,401)
|
|
Originations of loans, net
|
—
|
|
10,556
|
|
(81,322)
|
|
(42,854)
|
|
(1,268)
|
|
—
|
|
(114,888)
|
|
Investments in Katapult
|
—
|
|
(11,187)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(11,187)
|
|
Acquisition of Ad Astra, net of acquiree's cash received
|
—
|
|
(14,418)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(14,418)
|
|
Net cash provided by (used in) continuing investing activities
|
—
|
|
(21,924)
|
|
(81,322)
|
|
(42,854)
|
|
(1,794)
|
|
—
|
|
(147,894)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from Non-Recourse Canada SPV facility
|
—
|
|
—
|
|
—
|
|
23,357
|
|
—
|
|
—
|
|
23,357
|
|
Payments on Non-Recourse Canada SPV facility
|
—
|
|
—
|
|
—
|
|
(42,131)
|
|
—
|
|
—
|
|
(42,131)
|
|
Proceeds from Non-Recourse U.S. SPV facility
|
—
|
|
—
|
|
35,206
|
|
—
|
|
—
|
|
—
|
|
35,206
|
|
Proceeds from credit facilities
|
—
|
|
60,000
|
|
—
|
|
—
|
|
9,853
|
|
—
|
|
69,853
|
|
Payments on credit facilities
|
—
|
|
(60,000)
|
|
—
|
|
—
|
|
(9,853)
|
|
—
|
|
(69,853)
|
|
|
|
|
|
|
|
|
|
Payments to net share settle RSUs
|
(641)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(641)
|
|
Proceeds from exercise of stock options
|
—
|
|
126
|
|
—
|
|
—
|
|
—
|
|
—
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt issuance costs paid
|
—
|
|
—
|
|
(6,991)
|
|
—
|
|
—
|
|
—
|
|
(6,991)
|
|
Repurchase of common stock
|
(5,908)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(5,908)
|
|
Dividends paid to CURO Group Holdings Corp.
|
6,750
|
|
(6,750)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Dividends paid to stockholders
|
(6,750)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(6,750)
|
|
Net cash (used in) provided by financing activities (1)
|
(6,549)
|
|
(6,624)
|
|
28,215
|
|
(18,774)
|
|
—
|
|
—
|
|
(3,732)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
—
|
|
—
|
|
—
|
|
(397)
|
|
(587)
|
|
727
|
|
(257)
|
|
Net increase in cash, cash equivalents and restricted cash
|
—
|
|
114,642
|
|
9,179
|
|
7,090
|
|
28,666
|
|
—
|
|
159,577
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
—
|
|
59,685
|
|
—
|
|
17,427
|
|
32,909
|
|
—
|
|
110,021
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
—
|
|
$
|
174,327
|
|
$
|
9,179
|
|
$
|
24,517
|
|
$
|
61,575
|
|
$
|
—
|
|
$
|
269,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 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
|
$
|
52,311
|
|
$
|
273,564
|
|
$
|
119,898
|
|
$
|
17,201
|
|
$
|
1,319
|
|
$
|
464,293
|
|
Net cash used in discontinued operating activities
|
—
|
|
—
|
|
—
|
|
(504)
|
|
—
|
|
(504)
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Purchase of property and equipment
|
—
|
|
(7,351)
|
|
—
|
|
(1,316)
|
|
—
|
|
(8,667)
|
|
Originations of loans, net
|
—
|
|
(261,073)
|
|
(102,238)
|
|
(11,042)
|
|
—
|
|
(374,353)
|
|
Investments in Katapult
|
—
|
|
(8,168)
|
|
—
|
|
—
|
|
—
|
|
(8,168)
|
|
Net cash used in continuing investing activities
|
—
|
|
(276,592)
|
|
(102,238)
|
|
(12,358)
|
|
—
|
|
(391,188)
|
|
Net cash used in discontinued investing activities
|
—
|
|
—
|
|
—
|
|
(14,213)
|
|
—
|
|
(14,213)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from Non-Recourse Canada SPV facility
|
—
|
|
—
|
|
15,992
|
|
—
|
|
—
|
|
15,992
|
|
Payments on Non-Recourse Canada SPV facility
|
—
|
|
—
|
|
(24,835)
|
|
—
|
|
—
|
|
(24,835)
|
|
Proceeds from credit facilities
|
—
|
|
120,000
|
|
—
|
|
59,811
|
|
—
|
|
179,811
|
|
Payments on credit facilities
|
—
|
|
(115,000)
|
|
—
|
|
(59,811)
|
|
—
|
|
(174,811)
|
|
Payments on subordinated stockholder debt
|
—
|
|
—
|
|
—
|
|
(2,252)
|
|
—
|
|
(2,252)
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
—
|
|
87
|
|
—
|
|
—
|
|
—
|
|
87
|
|
Payments to net share settle RSUs
|
(110)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(110)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt issuance costs paid
|
(29)
|
|
—
|
|
(169)
|
|
—
|
|
—
|
|
(198)
|
|
Repurchase of common stock
|
(52,172)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(52,172)
|
|
Net cash used in provided by financing activities (1)
|
(52,311)
|
|
5,087
|
|
(9,012)
|
|
(2,252)
|
|
—
|
|
(58,488)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
—
|
|
—
|
|
409
|
|
2,114
|
|
(1,319)
|
|
1,204
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
—
|
|
2,059
|
|
9,057
|
|
(10,012)
|
|
—
|
|
1,104
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
—
|
|
52,397
|
|
12,840
|
|
34,620
|
|
—
|
|
99,857
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
—
|
|
$
|
54,456
|
|
$
|
21,897
|
|
$
|
24,608
|
|
$
|
—
|
|
$
|
100,961
|
|
(1) Financing activities include continuing operations only and were not impacted by discontinued operations.
|
Cash Flows
The following highlights our cash flow activity and the sources and uses of funding during the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2020
|
|
2019
|
Net cash provided by operating activities from continuing operations
|
|
$
|
309,746
|
|
|
$
|
464,293
|
|
Net cash used in investing activities from continuing operations
|
|
(147,894)
|
|
|
(391,188)
|
|
Net cash used in financing activities from continuing operations
|
|
(3,732)
|
|
|
(58,488)
|
|
|
|
|
|
|
Operating Activities from Continuing Operations
Net cash provided by operating activities from continuing operations for the nine months ended September 30, 2020 was $309.7 million, primarily attributable to net income from continuing operations of $70.0 million the effect of non-cash reconciling items of $256.2 million, partially offset by changes in our operating assets and liabilities of $16.4 million. Our non-cash reconciling items of $256.2 million included (i) provision for loan losses of $219.0 million, (ii) changes in deferred income tax of $14.2 million and (iii) $13.3 million of depreciation and amortization. Our changes in operating assets and liabilities of $16.4 million related to a higher income tax receivable of $23.8 million and $14.1 million of lower accrued interest on our 8.25% Senior Secured Notes, partially offset by a $26.6 million decline in accrued interest on our gross loans receivable due to overall volume decline, as previously discussed.
Net cash provided by operating activities from continuing operations for the nine months ended September 30, 2019 was $464.3 million, primarily attributable to net income from continuing operations of $74.3 million, the effect of non-cash reconciling items of $364.3 million, which includes provision for loan losses of $338.3 million, and changes in our operating assets and liabilities which provided $25.6 million.
Investing Activities from Continuing Operations
Net cash used in investing activities from continuing operations for the nine months ended September 30, 2020 was $147.9 million, primarily reflecting (i) the net origination of loans of $114.9 million, (ii) the acquisition of Ad Astra for $14.4 million, net of cash received, and (iii) $11.2 million of additional equity interests in Katapult. In addition, we used cash to purchase $7.4 million of property and equipment.
Net cash used in investing activities from continuing operations for the nine months ended September 30, 2019 was $391.2 million, primarily reflecting the net origination of loans of $374.4 million. In addition, we used cash to purchase approximately $8.7 million of property and equipment, including software licenses and $8.2 million of additional equity interests in Katapult.
Origination of loans will fluctuate from period-to-period, depending on the timing of loan issuances and collections. A seasonal decline in consumer loans receivable typically occurs during the first quarter of the year and is driven by income tax refunds in the U.S. Typically, customers will use the proceeds from income tax refunds to pay outstanding loan balances, resulting in an increase in our net cash balances and a decrease in our consumer loans receivable balances. Year-over-year comparisons were impacted by factors related to COVID-19, including lower consumer demand, increased or accelerated repayments as customers benefited from government stimulus programs and our decision to tighten credit which resulted in lower originations, as well as the runoff of California Installment loans from regulatory changes effective January 1, 2020.
Financing Activities from Continuing Operations
Net cash used in financing activities from continuing operations for the nine months ended September 30, 2020 was $3.7 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 $18.8 million, common stock repurchases of $5.9 million, cash dividends of $6.8 million and debt issuance costs of $7.0 million related to the Non-Recourse U.S. SPV Facility.
Net cash used in financing activities from continuing operations for the nine months ended September 30, 2019 was $58.5 million, primarily due to (i) $27.1 million of cash used to repurchase 2,000,000 shares of our common stock, at a price of $13.55 per share, owned by FFL and (ii) $25.1 million of cash used to repurchase 2,089,644 shares of our common stock under the share repurchase program which began during the second quarter of 2019.
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 Non-Recourse U.S. SPV Facility in April 2020. Refer to Note 5, "Debt" of the Notes to the unaudited Condensed Consolidated Financial Statements for additional details.
Critical Accounting Policies and Estimates
Certain accounting policies that involve a higher degree of judgement and complexity are discussed further in Part II - Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates, in our 2019 Form 10-K.
Goodwill. We exercise judgment in evaluating assets for impairment. Goodwill is tested for impairment annually, or when circumstances arise which could more likely than not reduce the fair value of a reporting unit below its carrying value. These tests require comparing carrying values to estimated fair values of the reporting unit under review.
The U.S. and Canada operations are our two reporting units, as defined by FASB’s ASC 280, Segment Reporting, for which we assess goodwill for impairment. As of the most recent annual goodwill impairment testing date (October 1, 2019), both reporting units' estimated fair values exceeded their 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 were considered when performing the annual test as of October 1, 2019.
For the three months ended September 30, 2020, we reviewed goodwill for triggering events that would indicate a need for an interim quantitative or qualitative assessment of goodwill impairment. As a result of the review, no additional assessment was deemed necessary, and thus there was no goodwill impairment for either reporting unit.
There continues to be uncertainty surrounding macroeconomic factors that could impact 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 goodwill impairment. Additionally, changes in market participant assumptions such as an increased discount rate or further share price reductions could increase the likelihood of a future impairment.
The following table summarizes the segment allocation of recorded goodwill on our unaudited Condensed Consolidated Balance Sheets as of September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
September 30, 2020
|
Percent of Total
|
|
December 31, 2019
|
Percent of Total
|
U.S.
|
$
|
105,922
|
|
78.7
|
%
|
|
$
|
91,131
|
|
75.6
|
%
|
Canada
|
28,667
|
|
21.3
|
%
|
|
29,478
|
|
24.4
|
%
|
Total Goodwill
|
$
|
134,589
|
|
|
|
$
|
120,609
|
|
|
Regulatory Environment and Compliance
There have been no significant developments with respect to our regulatory environment and compliance since December 31, 2019, as described in our 2019 Form 10-K and our Quarterly Report on Form 10-Q filed with the SEC on August 5, 2020, except for the following:
CFPB Rulemaking Update
On July 7, 2020, the CFPB issued its decision on the 2019 Proposed Rule. With respect to the 2019 Proposed Rule, the CFBP rescinded the mandatory underwriting provisions of the 2017 Final CFPB Rule. However, the CFPB did not rescind or alter the payment provisions of the 2017 Final CFPB Rule. Furthermore, on July 7, 2020, the CFPB ratified prior regulatory actions which included the payments provisions of the 2017 Final CFPB Rule. The effective date for compliance with the payment provisions of the 2017 Final CFPB Rule is currently unknown. The 2017 Final CFPB rule is currently stayed as a result of an industry legal challenge. On August 20, 2020, the Federal District Court for the Western District of Texas issued an Order establishing, among other things, a scheduling order for additional motions and amended complaints and responses in the
pending industry legal challenge. The final filing date set by the Court is December 18, 2020, when the CFPB is scheduled to file its reply in support of its cross-motion for summary judgment. In light of the industry challenge to the 2017 Final CFPB Rule, we cannot predict when the 2017 Final CFPB Rule as it relates to payments will ultimately go into effect; nor can we quantify its potential effect on our results of operations or financial condition.
Additionally, in 2016, the CFPB issued an outline of proposals intended to increase consumer protection pertaining to third-party debt collectors and others covered by the Fair Debt Collection Practices Act (“FDCPA”). These proposals would apply to the attempts of our third-party collection agenc(ies) to collect debt originated by other lenders, including under our CSO programs ("2016 CFPB Outline"). The proposals would not apply to our attempts to collect debt that we originate; however, the CFPB has announced that it plans to address consumer protection issues involving first-party debt collectors and creditors separately. The final rule addressing third party debt collections and others covered by the FDCPA was released on October 30, 2020. Given that these final rules were released on the same date as this Form 10-Q, we are still reviewing the final rules and have not yet determined what effect the rules will have on our business.
California Consumer Privacy Act
In 2018, the California Consumer Privacy Act was passed into law, effective January 1, 2020, and the California Attorney General has enforcement authority as of July 1, 2020.
A state ballot initiative, which would have additional impact, will be decided by vote in November 2020.