September 2020 Investor Presentation
Disclaimer IMPORTANT: You must read the following information before continuing to the rest of the presentation, which is being provided to you for informational purposes only. Forward-Looking Statements This presentation contains forward-looking statements. These forward-looking statements include assumptions about customer demand trends; growth opportunities created by competitive landscape changes; opportunities from ancillary card products and Katapult; our expectations for third quarter performance; our profitability and earnings levels; the growth opportunities provided through our relationship with Stride Bank and the timing of the expected expansion; financial performance of our Canadian business for the remainder of 2020 and 2021; the resiliency of our business model, funding sources, liquidity and leverage; and our belief that we are well positioned to manage through COVID-19 and to grow after the crisis abates. In addition, words such as “guidance,” “estimate,” “anticipate,” “believe,” “forecast,” “step,” “plan,” “predict,” “focused,” “project,” “is likely,” “expect,” “intend,” “should,” “will,” “confident,” variations of such words and similar expressions are intended to identify forward-looking statements. Our ability to achieve these forward-looking statements is based on certain assumptions and judgments, including the effects on our business of COVID-19, its impact on our ability to continue to service our customers, our revenue and overall financial performance and the manner in which we are able to conduct our operations, increases in charge-offs in light of the impact of COVID-19, our ability to execute on our business strategy and our ability to accurately predict our future financial results. These assumptions and judgments may prove to be inaccurate in the future. These forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. There are important factors both within and outside of our control that could cause our actual results to differ materially from those in the forward-looking statements. These factors include the impact of COVID-19 on the macro-economic environment and how that may impact our customers and other parties with whom we do business, our dependence on third- party lenders to provide the cash we need to fund our loans and our ability to affordably access third-party financing; errors in our internal forecasts; our level of indebtedness; our ability to integrate acquired businesses; our dependence on third-party lenders to provide the cash we need to fund our loans and our ability to affordably access third-party financing; actions of regulators and the negative impact of those actions on our business; our ability to protect our proprietary technology and analytics and keep up with that of our competitors; disruption of our information technology systems that adversely affect our business operations; ineffective pricing of the credit risk of our prospective or existing customers; inaccurate information supplied by customers or third parties could lead to errors in judging customers’ qualifications to receive loans; improper disclosure of customer personal data; failure of third parties who provide products, services or support to us; any failure of third-party lenders upon whom we rely to conduct business in certain states; disruption to our relationships with banks and other third-party electronic payment solutions providers; disruption caused by employee or third-party theft and errors in our stores as well as other factors discussed in our filings with the Securities and Exchange Commission. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual future results. We undertake no obligation to provide guidance for future periods as is included in this presentation and no obligation to update, amend or clarify any forward-looking statement for any reason. Non-GAAP Financial Measures In addition to the financial information prepared in conformity with U.S. GAAP, we provide in this presentation certain “non-GAAP financial measures,” including: Adjusted Net Income (Net Income from continuing operations minus certain non-cash and other adjusting items); Adjusted Earnings Per Share (Adjusted net income divided by diluted weighted average shares outstanding); Adjusted EBITDA (EBITDA plus or minus certain non-cash and other adjusting items); Gross Combined Loans Receivable (includes loans originated by third-party lenders through CSO programs which are not included in our consolidated financial statements); and Adjusted Return on Average Assets. Such measures are intended as a supplemental measure of the Company’s performance that are not required by, or presented in accordance with, GAAP. The Company presents Adjusted Net Income, Adjusted Earnings Per Share, Adjusted EBITDA, Gross Combined Loans Receivable and Adjusted Return on Average Assets because it believes that, when viewed with the Company’s GAAP results and the accompanying reconciliation, such measures provide useful information for comparing the Company’s performance over various reporting periods as they remove from the Company’s operating results the impact of items that the Company believes do not reflect its core operating performance. Adjusted Net Income, Adjusted Earnings Per Share, Adjusted EBITDA, Gross Combined Loans Receivable and Adjusted Return on Average Assets are not substitutes for net earnings, cash flows provided by operating activities or any other measure prescribed by GAAP. There are limitations to using non-GAAP measures such as Adjusted Net Income, Adjusted Earnings Per Share, Adjusted EBITDA, Gross Combined Loans Receivable and Adjusted Return on Average Assets. Although the Company believes that Adjusted Net Income, Adjusted Earnings Per Share, Adjusted EBITDA, Gross Combined Loans Receivable and Adjusted Return on Average Assets can make an evaluation of its operating performance more consistent because they remove items that do not reflect its core operations, other companies in the Company’s industry may define Adjusted Net Income, Adjusted Earnings Per Share, Adjusted EBITDA, Gross Combined Loans Receivable and Adjusted Return on Average Assets differently than the Company does. As a result, it may be difficult to use Adjusted Net Income, Adjusted Earnings Per Share, Adjusted EBITDA, Gross Combined Loans Receivable and Adjusted Return on Average Assets to compare the performance of those companies to the Company’s performance. Adjusted Net Income, Adjusted Earnings Per Share, Adjusted EBITDA, Gross Combined Loans Receivable and Adjusted Return on Average Assets should not be considered as measures of the income generated by the Company’s business or discretionary cash available to it to invest in the growth of its business. The Company’s management compensates for these limitations by reference to its GAAP results and using Adjusted Net Income, Adjusted Earnings Per Share, Adjusted EBITDA, Gross Combined Loans Receivable and Adjusted Return on Average Assets as supplemental measures. Reconciliations of non-GAAP metrics utilized in this presentation to their closest GAAP measures can be found in slides 28 – 32. The presentation is confidential and may not be reproduced, redistributed, published or passed on to any other person, directly or indirectly, in whole or in part, for any purpose. This document may not be removed from the premises, and by accepting this document and attending the presentation, you agree to be bound by the foregoing limitations. If this document has been received in error it must be returned immediately to us. 2
3 Company Introduction
Business Overview • Founded in 1997, CURO is a tech-enabled, multi-channel and multi-product consumer finance company serving a wide range of underbanked consumers in the U.S. and Canada, and a market leader in the industry based on revenues • Strong position in each of its markets • Rapidly gaining market share in large fragmented markets • Large online lending presence • United States: 27 states • Canada: Alberta, Nova Scotia, Ontario, Saskatchewan and British Columbia • Dominant storefront presence with 414 total locations • United States: 211 stores in 14 states • Canada: 203 stores in 7 provinces and territories • Loans originated online through our relationship with Stride Bank in 12 states Strong and Expanding Portfolio of Brands Evolving Geographic and Product Mix (Gross Revenue in $Millions) (1) CURO at a Glance 4 (1) Gross Revenue from Continuing Operations. 61.5%, U.S. Multi-Pay and Ancillary 69.1%, U.S. Multi-Pay and Ancillary 14.8%, U.S. Single-Pay 9.6%, U.S. Single-Pay 21.9%, Canada Single-Pay 6.1%, Canada Single-Pay 1.8%, Canada Multi-Pay and Ancillary 15.2%, Canada Multi-Pay and Ancillary $- $200 $400 $600 $800 $1,000 $1,200 2016 TTM Q2 2020
5 $ $200 $400 $600 $800 $1,000 $1,200 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Leading Large-Scale Lender To Underbanked Consumers With Track Record of Profitability Across Credit Cycles (1) Leading large-scale lender in terms of revenue. 1997 – 2007 2008 – 2013 2014 – Present Annual Revenue ($ millions) Focused branch development in U.S. Company founded with first location in Riverside, California Launched analytical brand marketing Expanded into additional states Channel, product and geographic diversification Began offering installment loans Launched online lending platforms International expansion to Canada Broad product diversification and brand development; omni-channel Installment loan and open-end credit product expansion Mobile optimized sites and apps Refined best-in-class omni-channel platform (1)
SERVING THE NON-PRIME CUSTOMER Powering Innovation for Underbanked Consumers 6 Differentiated, omni- channel platform, with balanced store/online mix Multi-faceted marketing approach and sophisticated customer analytics Recession-resilient business – strong financial position and diversified funding sources Strong competitive position in attractive and stable markets New Revolve bank account product and bank-sponsored Verge Credit product expand growth opportunities Proprietary credit decisioning model, with a 20+ year track record of profitability across credit cycles
7 Market Overview
Large Addressable Market in US is Underserved 21.8% 20.2% 16.2% 13.0% 9.6% 8.1% 6.8% 4.2% > 800 750–799 700–749 650–699 600–649 550–599 500–549 < 500 Providers of credit to U.S. population by FICO band (5) Over 100 million Americans are underserved by traditional finance companies Specialized consumer lenders Non-prime Credit cards Marketplace lenders Credit unionsBanks Specialized consumer lenders Marketplace lenders Broker dealers Credit cards Large Total Addressable Market Favorable Customer Trends • 80% of respondents in a 2018 study bank online at least monthly and 71% conduct transactions using a mobile banking app (3) • Preference for installment and open-end loan products • Over 100 million potential underbanked borrowers (1) • 39% of American adults could not cover an emergency expense of $400 without assistance (2) (1) In the U.S. (internal / Experian) (2) May 2019 Federal Reserve System Board of Governors Report on the Economic Well-Being of U.S. Households in 2018 (3) May 2018 Deloitte global consumer survey on digital banking (filtered for U.S. only) (4) Clarity Services Inc. 2019 Alternative Financial Services Lending Trends; 2014 indexed at 100 for comparative growth illustration; funded loan volume measure in dollars. (5) April 2018; FICO. • Funded online installment loans have increased over 600% since 2014 vs. online single-pay loans which have increased approximately 100% (4) 8
Subprime Credit Card Limits Cut as Banks Tighten 9 Change in credit card limits during 2Q20 (1) Banks are tightening credit card standards (2) (1) TransUnion and Bloomberg (2) The Federal Reserve’s Senior Loan Officer Survey and Charge-Off and Delinquency Rates on Loans and Leases at Commercial Banks • Banks are lowering subprime credit card limits(1) • Limits for subprime borrowers were cut by 19% in 2Q20 compared to an average reduction of 1.2% across all accounts • Subprime limits for store credit cards dropped by 24% in 2Q20 • Subprime utilization rates (outstanding balances compared to available credit) are 16x higher than super-prime customers, so these limit reductions are impactful • The Senior Loan Officer Survey shows standards tightening meaningfully(2) • 72% of banks tightened credit card standards in the July survey compared to only 39% in the April survey • Credit card charge-offs tend to track changes in credit card standards on a lagged basis
Consumer spending/activity stabilizing after rebounding off the lows Mobility and Engagement Index (3) Positioned to benefit as trends improve Year-over-year % change in seated diners (4) U.S. credit and debit card spend vs. Jan. 2020 (1) (1) Opportunity Insights based on data from Affinity Solutions; change in average consumer credit and debit card spending, indexed to January 2020 (2) Apple Maps Mobility Trends Report (3) The Dallas Fed Mobility and Engagement Index based on geolocation data collected from a large sample of mobile devices to gain insight into the economic impact of COVID-19. (4) OpenTable; the state of the restaurant industry Change in direction requests since 1/13/20 (2) 10
11 Evolving U.S. Competitive Landscape Online Only Branch / Omni-channel Near Prime Non-Prime Under- banked
Very Attractive Canadian Market • Approximately 30 million credit- active Canadian adults as of Q4 2019 (1) • 12% of credit-active Canadian adults (over 3 million) are considered sub- prime in the 300-639 FICO score range (1) • Non-prime credit addressable market estimated at approximately $200 billion CAD (2) • Total non-prime customers have continued to increase YoY; balances outstanding to these customers remain stable despite current market volatility (2) • Canadian market share led by CURO’s Cash Money and Lend Direct brands as well as Go Easy and Money Mart (1) TransUnion Credit Vision Risk data through December 2019 (2) Beacon Securities Limited, February 13, 2020 Source: TransUnion Industry Insights Summary, 2nd Quarter 2020 Only Two Competitors at Scale Canadian Consumers Total Debt by Risk Tier Large Stable Addressable Market Below- prime 30.4% Prime 15.7% Prime plus 15.7% Super-prime 38.3% 12
Canada – Successful Launch of Multi-Pay Loans • CURO’s Open-End product is unique in the Canadian market • Multi-payment loans regulated at the national level at rates that result in yields of approximately 47% • CURO offers optional third-party insurance product for multi-payment loans • Covers up to 6 months of payments up to $2,000 in the event of job loss or disability • Approximately 64% of all multi-payment loans have active insurance coverage • Over 1% of active loans have payments currently made by insurance Sustained and diversified loan portfolio growth Revenue mix shift ($ in millions, USD) ($ in millions, CAD) CURO Provides Product Leadership 13 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 $400.0 $450.0 Open End Single Pay Unsecured Installment $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 2015 2016 2017 2018 2019 TTM Q2 2020 Open End Single Pay Unsecured Installment Ancillary
Comprehensive Product Offerings and Diversified Revenue (1) (1) As of 6/30/20 (2) Includes CSO loans. (3) Weighted average of the contractual interest rates for the portfolio as of 6/30/20. Excludes CSO. Q2 2020 Channel Distribution Installment & Open-End 80.4% U.S. Single-pay 7.8% Canada Single-pay 4.6% Ancillary 7.2% $183 million Q2 2020 Consolidated Revenue (% of revenue)(% of revenue) Channel Average Loan Size Duration Pricing Loans Receivable Online & in-store: 8 U.S. states and Canada $892 Revolving / Open-ended Daily interest rates ranging from 0.13% in Canada and 0.55% to 0.99% in the U.S. $285 million Open-End (Line of Credit) Online & in-store: 14 U.S. states and Canada $563 (2) Up to 60 months 15.3% $115 million (2) Average monthly interest rate (3) Unsecured Installment $1,099 (2) Online & in-store: 6 U.S. states Up to 24 months 12.4% $55 million (2) Average monthly interest rate (3) Secured Installment $314 Online and in-store: 12 U.S. states & Canada Up to 62 days Fees ranging from $13 to $25 per $100 borrowed $36 million Single-Pay 53% 47% Online Stores Increasing Installment & Open-End Focus 19% 59% 80% FY 2010 FY 2016 Q2 2020 (% of revenue) 14
15 Company Performance during COVID-19
Operating Highlights 16 Customer trends 2020 Weekly Application Volume Loan Balances (1) Balance sheet and credit Financial performance (1) Includes Company-Owned Loans and Loans Guaranteed by the Company under CSO programs. (2) Reconciliation of non-GAAP metrics to the closest comparable GAAP metrics on slides 28 and 29. ($ in millions) 2020 Transaction Mix (week ended) Payment Assistance Provided (loan count) Cash Balances Early-stage delinquencies Revenue Adjusted EBITDA (2) Adjusted EPS (2) $615 $677 $731 $743 $620 $491 $497$531 $0 $150 $300 $450 $600 $750 $900 $83 $92 $62 $75 $139 $269 $266 $246 $0 $50 $100 $150 $200 $250 $300 ($ in millions) $0 $100 $200 $300 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 Revenue Net revenue ($ in millions) $0.80 $0.52 $0.71 $0.80 $0.77 $0.53 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 ($ in millions) $73 $54 $67 $68 $66 $51 10% 15% 20% 25% 30% $0 $20 $40 $60 $80 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 Adjusted EBITDA Adjusted EBITDA (%) -40% -30% -20% -10% 0% 10% 20% 0% 2% 4% 6% 8% 10% Dec-18Mar-19 Jun-19 Sep-19Dec-19Mar-20 Jun-20 Early Stage Delinquencies YoY Change in Early Stage Delinquencies YoY Change - 2,000 4,000 6,000 8,000 10,000 U.S. Canada 30% 40% 50% 60% 70% 1/ 19 2/ 23 3/ 22 4/ 26 5/ 24 6/ 28 7/ 26 8/ 23 9/ 20 Internet Store 20% 40% 60% 80% 100% 120%
Customers are Managing their Finances Prudently 17 2020 Weekly Loan Application Volumes (indexed to week of 3/7) 2020 Weekly Loan Approval Rates (indexed to week of 3/7) Pre-COVID financial health, lockdowns, pandemic-induced uncertainty and stimulus = low demand 2020 Loan Originations (indexed to week of 3/7) 0% 50% 100% 150% 200% 2019 2020 0% 20% 40% 60% 80% 100 2019 2020 0% 50% 100% 150% 200 2019 2020
2020 weekly delinquent loans as percentage of total (excluding Single Pay loans) 18 Customers are Managing their Finances Prudently (cont’d) YoY Change in Past Due AR Past Due AR % -35% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 0% 5% 10% 15% 20% 1-30 DPD 31-60 DPD 61+ DPD YOY Change in Past Due
Core Operating Expense Trends (1) 19 Continuing to Manage Expenses Carefully • Lowered operating expenses across several major categories in mid-March • Reduced advertising and variable compensation costs, froze hiring, suspended merit increases and drove savings from work-from-home initiatives • Realized targeted $11 million to $13 million in cost savings vs. operating plan in Q2 2020 and year-over-year cost savings of $14 million • Expense control measures to remain in place until business volume normalizes ($ in millions) $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 YTD 2019 YTD 2020 Advertising Adjusted NACOPS Adjusted Corporate, district and other (1) Adjusted Non-Advertising Costs and Adjusted Corporate, district and other excludes Depreciation and Amortization and other expenses excluded in reconciliation Net Income to Adjusted Net Income. Reconciliation of non-GAAP metrics to the closest comparable GAAP metrics included on slide 32.
COVID-19 Customer Care Plan Reinforces our Commitment to Service and Responsible Lending 20 Waived 214k Returned Item fees saving customers over $5.2 million Cashed stimulus checks worth $65 million free of charge saving customers over $1 million 25k Due Date Changes, and 10k Payment Plans Over $5.0 million of Payments Waived on 22k accounts Through September 20, 2020, we have provided substantial financial support to our customers in the form of Payment Waivers, Due Date Changes and Payment Plans on over 75,000 loans or 15% of our active loans Committed $500,000 to Frontline Foods to help feed healthcare workers
Trends to Watch for Remainder of 2020 21 • Customer demand increasing as the reopening process gains momentum • Potential additional stimulus measures impacting demand and credit trends • Seasonal demand lift from back-to-school shopping activity • Competitive landscape changes creating growth opportunities • Smaller, branch-only competitors are under considerable stress • Prime and near-prime lenders have tightened their credit boxes • Canadian open-end loan product resuming its upward trajectory • Customer assistance requests remaining low and stable with recent levels • Continued transaction mix shift toward online in U.S. and Canada • Ongoing expansion of Verge Credit product • Now offered in 12 U.S. states • Growing contributions from ancillary card products and Katapult • Q3 monthly trends – expect profitability for the quarter with trends that signal Q3 as the trough • Exited Q2 with loan balances down 27.3% year-over-year; loan balances down 25.7% year-over-year at end of August (Canada up 3.8%, US excluding California down 37.1%) • Revenue trends impacted by declining loan balances in US and resulting loan mix; revenue pressure partially offset by favorable NCO comparisons, with monthly risk-adjusted revenue down ~30% year-over-year • Adjusted Diluted Earnings per share expected in the range of $0.12 - $0.15 (1) • Excludes income from equity method investment in Katapult and customarily excluded items (1) (1) Excludes share-based compensation costs, intangible asset amortization and legal and related costs consistent with definitions for comparable items in prior quarters as presented on slide 29; assumes approximately 42.1 million fully diluted weighted average shares outstanding for the three months ended September 30, 2020.
22 Liquidity and Value Drivers
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Senior Notes 8.25% U.S. SPV (3) 1-Mo LIBOR + 6.25% (3) Canada SPV 3-Mo CDOR + 6.75% U.S. Revolver 1-Mo LIBOR + 5.00% Canada Revolver Canada Prime Rate +1.95% Interest Rate Counterparties Maturity Dates 2020 2021 2022 2023 2024 2025 Strong Debt Capitalization and Liquidity 23 Note: Debt balances are reflected net of deferred interest costs. Subtotals may not sum due to rounding. (1) Reconciliation of non-GAAP metrics to the closest comparable GAAP metrics included within slides 28 – 32. (2) Net Debt excludes U.S. and Canada SPV debt. (3) The Non-Recourse U.S. SPV Facility (“U.S. SPV”) was entered into on April 8, 2020. Concurrent with the closing, we drew $35.2 million on the facility. The Non-Recourse U.S. SPV Facility initially provided for $100.0 million of borrowing capacity and, on July 31, 2020, additional commitments were obtained increasing capacity to $200.0 million. As a result of the increase in commitments, interest now accrues at an annual rate of one-month LIBOR (with a floor of 1.65%) plus 6.25% on balances up to $145.5 million. Balances over that amount accrue interest at an annual rate of one-month LIBOR (with a floor of 1.65%) plus 9.75%. Proven Access to Diverse Funding Sources Well-positioned Funding for Growth Supported by High-Quality Partners Strong Liquidity with Stable Leverage ($ in millions) $695 $765 $877 $877 $977 $- $200 $400 $600 $800 $1,000 $1,200 12/31/2016 12/31/2017 12/31/2018 12/31/2019 6/30/2020 Senior Notes U.S. SPV Commitment (3) Canada SPV Commitment U.S. Revolver Capacity Ca ad Rev lv r Capacity ($ in millions) 2016 2017 2018 2019 Unrestrict d cash 182.9$ 153.5$ 61.2$ 75.2$ 138.7$ 269.3$ 245.6$ Total Liquidity 205.6$ 363.4$ 341.6$ Debt / LTM adjusted EBITDA (1) 3.2x 3.0x 3.7x 3.0x 3.1x 3.2x Net Debt / LTM adjusted EBITDA (1, 2) 2.7x 2.5x 3.2x 2.6x 2.8x 2.7x December 31, March, 31 2020 June 30, 2020 August 31, 2020
• Virtual lease-to-own platform for online, brick and mortar and omni- channel retailers • Significantly increases retailer sales by providing payment options for nonprime customers • Marquee brands and partners, such as Wayfair, Lenovo and Affirm Diversification Provides New Growth Opportunities • Launched in 2019 • Combines a Visa-branded debit card and optional overdraft protection • Customers have loaded over $135 million on over 33,000 unique cards through July 31, 2020 • Sponsored by Republic Bank of Chicago and rolling out across U.S. store network • Card and mobile-app enabled checking account with FDIC-insured deposits • Launched in Q4 2019 • Unsecured Installment loans originated by Stride Bank • CURO drives customer acquisition and services the loans • Stride Bank licenses CURO’s proprietary decisioning platform • Significant US market expansion opportunity • Ramp up expected to drive earnings growth in 2021+ • Currently available in 12 states; 19 states by end of 2020 • As of June 30, 2020, CURO owns 42.5% • Capitalizing on shift to work- and shop-from- home
17.3x 11.9x 9.2x 8.3x 0x 4x 8x 12x 16x 20x 2018 2019 2020E 2021E EPS (3) $3.56 $5.17 $6.65 $7.39 25 Canada Market Comparisons CURO’s business in Canada is proving very resilient Canadian competitor GSY P/E multiples $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 2018 2019 2020E 2021E Net revenue Adj. EBITDA (US $ in millions) • Only two real competitors of comparable scale • Best direct comparable company is goeasy Ltd (TSX:GSY) • Canada has a more stable, federally defined regulatory market for multi-payment loans, resulting in higher multiples than U.S. peers • CURO’s Open-end loans reach both sub-prime and near-prime customers (2)(2) (1) Reconciliation of non-GAAP metrics to the closest comparable GAAP metrics on slide 30. (2) Estimates based on company forecasts; Canada Adjusted EBITDA calculated as segment operating income plus $5 million of Depreciation and Amortization, $15 million and $12 million of interest expense in 2020 and 2021, respectively and any foreign currency exchange rate impacts (3) FactSet consensus estimates for goeasy (1)(1) GSY share price = $61.50 (CAD 9/21/20)
Katapult – The New Way to Pay, for Everyday People Leader in greenfield ecommerce non-prime space Strong revenue growth trends Weekly origination volume remains robust (1) Ecommerce wins enhance growth opportunities (year-over-year growth rate) Triple digit weekly volume (by $) increases during the pandemic (1) Origination volumes indexed to the week ended March 7 Partnerships with Affirm and Wayfair started in 2019 0% 50% 100% 150% 200% 250% Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 YOY Growth Rate Growth Rate vs week of 3/7 0% 100% 200% 00% 400% 500% 600% 0% 50% 100% 150% 200% 250% 300% 2020 2019 YoY Increase 26
27 Appendix
Historical Consolidated Adjusted EBITDA Reconciliation 28 ($Millions) (1) U.K. related costs of $8.8 million for the year ended December 31, 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. (2) The Loss from equity method investment for the six months ended June 30, 2020 of $0.9 million includes our share of the estimated GAAP net loss of Cognical Holdings, Inc. ("Katapult"). As of June 30, 2020, we owned 42.5% of the outstanding shares of Katapult. For the year ended December 31, 2019, $6.3 million includes (a) our share of the estimated GAAP net loss of Katapult and (b) 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. (3) We approved the adoption of share-based compensation plans during 2010 and 2017 for key members of senior management. The estimated fair value of share-based awards is recognized as non-cash compensation expense on a straight-line basis over the vesting period. (4) Legal and other costs for the six months ended June 30, 2020 included (i) settlement costs related to certain legal matters, (ii) costs related to certain securities litigation and related matter, (iii) severance costs for certain corporate employees and (iv) legal and advisory costs related to the purchase of Ad Astra. Legal and other costs for the year ended December 31, 2019 include (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 $2.5 million, (iii) legal and advisory costs of $0.3 million related to the repurchase of shares from FFL and (iv) $0.3 million of legal and advisory costs related to the purchase of Ad Astra. (5) The Company received a Notice of Adjustment from Canadian tax authority auditors in the second quarter 2020 related to the treatment of certain expenses in prior years for purposes of calculating the GST due. (6) Other adjustments include the intercompany foreign exchange impact. Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Net Income from continuing operations 28.7$ 17.7$ 28.0$ 29.6$ 36.0$ 21.1$ Provision for Income Taxes 10.0 7.5 11.2 9.8 1.9 1.1 Interest Expense 17.7 17.0 17.4 17.7 17.3 18.3 Depreciation and Amortization 4.9 4.7 4.6 4.5 4.6 4.4 EBITDA 61.3$ 46.8$ 61.2$ 61.5$ 59.8$ 44.9$ U.K. related costs (1) 7.8 0.7 0.3 - - - Loss (gain) from equity method investment (2) - 3.7 1.4 1.2 1.6 (0.7) Share-based compensation (3) 2.2 2.6 2.8 2.7 1.2 3.3 Legal and related costs (4) 1.8 - 0.9 2.2 3.2 0.9 Canada GST adjustment (5) - - - - - 2.2 Other Adjustments (6) (0.2) (0.2) 0.5 (0.1) - 0.6 Adjusted EBITDA 72.9$ 53.7$ 67.1$ 67.5$ 65.8$ 51.1$ Adjusted EBITDA Margin 26.2% 20.3% 22.6% 22.3% 23.4% 28.0%
Historical Consolidated Adjusted Net Income Reconciliation 29 ($Millions) (1) Legal and other costs for the six months ended June 30, 2020 included (i) settlement costs related to certain legal matters (ii) costs related to certain securities litigation and related matter, (iii) severance costs for certain corporate employees and (iv) legal and advisory costs related to the purchase of Ad Astra. Legal and other costs for the year ended December 31, 2019 include (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 $2.5 million, (iii) legal and advisory costs of $0.3 million related to the repurchase of shares from FFL and (iv) $0.3 million of legal and advisory costs related to the purchase of Ad Astra. (2) U.K. related costs of $8.8 million for the year ended December 31, 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. (3) The Loss from equity method investment for the six months ended June 30, 2020 of $0.9 million includes our share of the estimated GAAP net loss of Cognical Holdings, Inc. ("Katapult"). As of June 30, 2020, we owned 42.5% of the outstanding shares of Katapult. For the year ended December 31, 2019, $6.3 million includes (a) our share of the estimated GAAP net loss of Katapult and (b) 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) We approved the adoption of share-based compensation plans during 2010 and 2017 for key members of senior management. The estimated fair value of share-based awards is recognized as non-cash compensation expense on a straight-line basis over the vesting period. (5) The Company received a Notice of Adjustment from Canadian tax authority auditors in the second quarter 2020 related to the treatment of certain expenses in prior years for purposes of calculating the GST due. (6) In the second quarter of 2020, a Texas court ruling related to the apportionment of income to the state for another company resulted in a change in estimate regarding the realization of a tax benefit previously taken. Accordingly, we recorded a $1.1 million liability for our estimated exposure related to this position. Also in the second quarter of 2020, we released a $4.6 million valuation allowance related to NOLs for certain entities in Canada. (7) On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was enacted by the U.S. Federal government in response to the COVID-19 pandemic. The CARES Act, among other things, allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. For the six months ended June 30, 2020, we recorded an income tax benefit of $9.1 million related to the carryback of NOL from tax years 2018 and 2019. (8) Cumulative tax effect of adjustments included in Reconciliation of Net income from continuing operations to EBITDA and Adjusted EBITDA table is calculated using the estimated incremental tax rate by country. Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Net Income from continuing operations 28.7$ 17.7$ 28.0$ 29.6$ 36.0$ 21.1$ Legal and related costs (1) 1.8 - 0.9 2.2 1.1 0.9 U.K. related costs (2) 7.8 0.7 0.3 - - - Loss (gain) from equity method investment (3) - 3.7 1.4 1.2 1.6 (0.7) Share-based compensation (4) 2.2 2.6 2.8 2.7 3.2 3.3 Intangible asset amortization 0.8 0.8 0.7 0.6 0.7 0.8 Canada GST adjustment (5) - - - - - 2.2 Income tax valuations (6) - - - - - (3.5) Impact of tax law changes (7) - - - - (9.1) - Cumulative tax effect of adjustments (8) (3.3) (1.1) (1.2) (1.4) (1.3) (1.9) Adjusted net income from continuing operations 38.0$ 24.4$ 32.9$ 34.8$ 32.2$ 22.2$ Net income from continuing operations 28.7$ 17.7$ 28.0$ 29.6$ 36.0$ 21.1$ Diluted Weighted Average Shares Outstanding 47.3 47.1 46.0 43.2 41.9 41.5 Diluted Earnings per Share from Continuing Operations 0.61$ 0.38$ 0.61$ 0.68$ 0.86$ 0.51$ Per share impact of adjustments to net income 0.19$ 0.14$ 0.10$ 0.12$ (0.09)$ 0.02$ Adjusted Diluted Earnings per Share from Continuing Operations 0.80$ 0.52$ 0.71$ 0.80$ 0.77$ 0.53$
Canada Adjusted EBITDA Reconciliation 30 ($Millions) Canada Income Statement Revenue 228.3$ 191.9$ Provision for losses 76.4 73.0 Net revenue 151.8 118.9 Advertising costs 6.7 10.5 Non-advertising costs of providing services 69.5 67.8 Total cost of providing services 76.2 78.3 Gross margin 75.7 40.6 Corporate, district and other 21.9 19.6 Interest expense 10.4 4.0 Total operating expense 32.4 23.6 Segment operating income 43.3 17.0 Interest expense 10.4 4.0 Depreciation and amortization 4.8 4.5 EBITDA 58.6 25.5 Legal and related costs (1) - 0.1 Other adjustments (1) 0.3 0.3 Adjusted EBITDA 58.9 25.9$ Adjusted EBITDA Margin 25.8% 13.5% 2019 2018 For the year ended December 31, (1) For a description of legal and related costs and other adjustments used in the reconciliation to Adjusted EBITDA, refer to sl ide 28.
Historical Gross Combined Loan Receivables and Adjusted ROAA Reconciliations 31 Note: Subtotals may not sum due to rounding. The above table summarizes Company-owned gross loans receivable, a GAAP balance sheet measure, and reconciles it to gross combined loans receivable, a non-GAAP measure including loans originated by third-party lenders through CSO programs, which are not included in our Condensed Consolidated Financial Statements but from which we earn revenue and for which we provide a guarantee to the lender. (in millions) Dec. 31, 2016 Dec. 31, 2017 Dec. 31, 2018 Dec. 31, 2019 Jun. 30, 2020 Company-owned gross loans receivable $273.2 $413.2 $571.6 $665.8 $456.5 Gross loans receivable guaranteed by the Company 68.0 78.8 80.4 76.7 34.1 Gross combined loans receivable $341.2 $492.0 $652.0 $742.5 $490.6 (in millions) Dec. 31, 2016 Dec. 31, 2017 Dec. 31, 2018 Dec. 31, 2019 Jun. 30, 2020 Total assets $727.4 $802.1 $884.8 $1,081.9 $1,127.2 Average assets 661.7 764.8 843.4 983.3 1,104.5 LTM Adjusted Net Income from Continuing Operations 74.5 86.8 92.3 130.1 122.1 LTM Adjusted ROAA 11.3% 11.3% 10.9% 13.2% 11.1% Period ending
32 Core Operating Expense Reconciliation (1) Refer to footnotes for similar captions on slides 28 – 29. (2) Prior to our acquisition of Ad Astra in January 2020, costs associated with this third party collection entity were classified within Non-advertising costs of providing services. Subsequent to acquisition, direct costs related to Ad Astra and are classified within Corporate, district and other, consistent with our internal collection costs. Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 1H 2019 1H 2020 Corporate, district and other 49.1$ 35.3$ 38.7$ 37.1$ 42.8$ 36.8$ 84.4$ 79.6$ Less: Depreciation and Amortization 2.1 1.8 1.8 1.8 1.9 1.9 4.0 3.8 Share-based compensation (1) 2.2 2.6 2.8 2.7 3.2 3.3 4.8 6.5 Legal and other (1) 1.8 - 0.9 2.2 1.1 0.9 1.8 2.1 U.K. related costs (1) 7.8 0.7 0.3 - - - 8.5 - Canada GST Adjustment (1) - - - - - 2.2 - 2.2 Add: Reclass Ad Astra pre-acquisition (2) 4.7 3.7 3.6 3.6 - - 8.4 - Adjusted Corporate, district and other 62.3$ 58.3$ 60.3$ 60.3$ 55.4$ 49.6$ 120.6$ 104.9$ Non-advertising costs of providing services 62.3$ 58.3$ 60.3$ 60.3$ 55.4$ 49.6$ 120.6$ 104.9$ Less: Depreciation 2.8 2.8 2.8 2.7 2.6 2.6 5.6 5.2 Reclass Ad Astra pre-acquisition (2) 4.7 3.7 3.6 3.6 - - 8.4 - Adjusted Non-advertising costs of providing services 54.8$ 51.8$ 54.0$ 54.0$ 52.7$ 47.0$ 106.6$ 99.7$ Advertising 7.8$ 12.8$ 16.4$ 16.4$ 12.2$ 5.8$ 20.6$ 18.0$ Adjusted Non-advertising costs of providing services 54.8 51.8 54.0 54.0 52.7 47.0 106.6 99.7 Adjusted Corporate, district and other 62.3 58.3 60.3 60.3 55.4 49.6 120.6 104.9 Total Core Costs 124.9$ 122.9$ 130.8$ 130.7$ 120.3$ 102.3$ 247.8$ 222.6$ ($Millions)