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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to__________
Commission File Number: 1-38315
CURO GROUP HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware90-0934597
(State or other jurisdiction
Of incorporation or organization)		(I.R.S. Employer Identification No.)
200 W Hubbard Street, 8th Floor, Chicago, IL
60654
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (312) 470-2000
Former name, former address and former fiscal year, if changed since last report: No Changes

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes ☐    No ☒
As of October 27, 2023 there were 41,300,542 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.
1



CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

FORM 10-Q
THIRD QUARTER ENDED SEPTEMBER 30, 2023
INDEX
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Exhibits, Financial Statement Schedules
2


GLOSSARY

Terms and abbreviations used throughout this report are defined below.
Term or abbreviationDefinition
2022 Form 10-KAnnual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 10, 2023
1.0L 18.00% Senior Secured Term Loan
$150.0 million first lien credit facility, executed in May 2023, which matures in August 2027
1.5L 7.50% Senior Secured Notes
$682.3 million of the 7.50% Senior Secured Notes which participated in the May 2023 Exchange Agreement
2.0L 7.50% Senior Secured Notes
$317.7 million aggregate principal amount of the 7.50% Senior Secured Notes which did not participate in the May 2023 Exchange Agreement
7.50% Senior Secured Notes
7.50% Senior Secured Notes, issued in July 2021 for $750.0 million, which mature in August 2028
ABLAsset-Backed Lending
ACLAllowance for credit losses
AOCIAccumulated other comprehensive income (loss)
ASCAccounting Standards Codification
ASUAccounting Standards Update
Average gross loans receivableUtilized to calculate product yield and NCO rates; calculated as average of beginning of quarter and end of quarter gross loans receivable
BNPLBuy-Now-Pay-Later
bpsBasis points
C$Canadian dollar
Canada SPV
A revolving credit facility with capacity up to C$400.0 million
Canada SPV II
A revolving credit facility with capacity up to C$110.0 million
CECLAccounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
CDORCanadian Dollar Offered Rate
CODMChief Operating Decision Maker
CSOCredit services organization
CURO CanadaCURO Canada Corp., a wholly-owned Canadian subsidiary of the Company
DTADeferred Tax Asset
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
First HeritageFirst Heritage Credit, LLC, a wholly-owned U.S. subsidiary of the Company, which we acquired in July 2022
First Heritage SPVA revolving credit facility with capacity up to $225.0 million
Flexiti
Flexiti Financial Inc., a wholly-owned Canadian subsidiary of the Company, which we acquired in March 2021 and divested in August 2023
Flexiti Divestiture
Flexiti was sold to Questrade Financial Group Inc. on August 31, 2023
Flexiti Securitization
A revolving credit facility with capacity up to C$526.5 million
Flexiti SPV
A revolving credit facility with capacity up to C$535.0 million
Form 10-Q
This Quarterly Report on Form 10-Q for the quarter ended September 30, 2023
HeightsSouthernCo, Inc., a Delaware corporation d/b/a Heights Finance, a wholly-owned U.S. subsidiary of
the Company, which we acquired in December 2021
Heights SPV
A revolving credit facility with capacity up to $425.0 million
KatapultKatapult Holdings, Inc., a lease-to-own platform for online, brick and mortar and omni-channel retailers
Legacy U.S. Direct Lending BusinessU.S. Direct Lending operating under the Speedy Cash, Rapid Cash and Avio Credit brands, sold to Community Choice Financial in July 2022
NCO
Net charge-off; which equals gross charge-offs less total recoveries
NYSE
New York Stock Exchange
POSPoint-of-sale
3


Term or abbreviationDefinition
Questrade Financial Group Inc.
Questrade Financial Group Inc., an online brokerage and wealth management company based in Canada, which we sold Flexiti to on August 31, 2023
ROURight of use
RSURestricted Stock Unit
SECSecurities and Exchange Commission
Senior Revolver
Senior Secured Revolving Loan Facility with borrowing capacity of $40.0 million, which was paid off by proceeds from the 1.0L 18.0% Senior Secured Term Loan in May 2023
SOFRSecured Overnight Financing Rate
SPVSpecial Purpose Vehicle
SRCSmaller Reporting Company as defined by the SEC
TDRTroubled Debt Restructuring
U.S.United States of America
U.S. GAAPGenerally Accepted Accounting Principles in the U.S.
VIEVariable Interest Entity; our wholly-owned, bankruptcy-remote special purpose subsidiaries

4



ITEM 1. FINANCIAL STATEMENTS
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 30, 2023 (unaudited)
December 31,
2022
ASSETS
Cash and cash equivalents$82,550 $50,856 
Restricted cash (includes restricted cash of consolidated VIEs of $24,613 and $20,177 as of September 30, 2023 and December 31, 2022, respectively)
53,818 59,645 
Gross loans receivable (includes loans of consolidated VIEs of $1,165,529 and $1,130,837 as of September 30, 2023 and December 31, 2022, respectively)
1,254,401 1,254,395 
Less: Allowance for credit losses (includes allowance for credit losses of consolidated VIEs of $185,669 and $67,609 as of September 30, 2023 and December 31, 2022, respectively)
(199,739)(81,185)
Loans receivable, net
1,054,662 1,173,210 
Income taxes receivable58,064 23,984 
Prepaid expenses and other (includes prepaid expenses and other of consolidated VIEs of $16 and $5,069 as of September 30, 2023 and December 31, 2022, respectively)
61,441 51,081 
Property and equipment, net23,903 29,232 
Investment in Katapult16,915 23,915 
Right of use asset - operating leases51,413 58,177 
Deferred tax assets (includes deferred tax assets of consolidated VIEs of $99 and $3,735 as of September 30, 2023 and December 31, 2022, respectively)
14,194 18,138 
Goodwill276,269 276,269 
Intangibles, net74,336 70,913 
Other assets9,387 8,370 
Assets, discontinued operations
— 945,403 
Total Assets$1,776,952 $2,789,193 
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Liabilities
Accounts payable and accrued liabilities (includes accounts payable and accrued liabilities of consolidated VIEs of $3,006 and $6,704 as of September 30, 2023 and December 31, 2022, respectively)
$62,992 $45,595 
Deferred revenue (includes deferred revenue of consolidated VIEs of $14 and $31 as of September 30, 2023 and December 31, 2022, respectively)
2,358 3,467 
Lease liability - operating leases51,579 59,396 
Income taxes payable 2,537 — 
Accrued interest (includes accrued interest of consolidated VIEs of $8,284 and $7,023 as of September 30, 2023 and December 31, 2022, respectively)
20,953 38,460 
Debt (includes debt and issuance costs of consolidated VIEs of $897,720 and $11,979 as of September 30, 2023 and $878,103 and $13,428 as of December 31, 2022, respectively)
2,024,934 1,882,608 
Other long-term liabilities9,620 11,736 
Liabilities, discontinued operations
— 802,065 
Total Liabilities2,174,973 2,843,327 
Commitments and contingencies (Note 7)
Stockholders' (Deficit) Equity
Preferred stock - $0.001 par value, 25,000,000 shares authorized; no shares were issued
— — 
Common stock - $0.001 par value; 225,000,000 shares authorized; 50,998,655 and 50,216,165 shares issued; and 41,300,542 and 40,518,052 shares outstanding at the respective period ends
23 23 
Treasury stock, at cost - 9,698,113 shares at the respective period ends
(136,832)(136,832)
Paid-in capital127,877 124,483 
(Accumulated deficit)/retained earnings(332,464)4,268 
Accumulated other comprehensive loss(56,625)(46,076)
Total Stockholders' Deficit(398,021)(54,134)
Total Liabilities and Stockholders' (Deficit) Equity$1,776,952 $2,789,193 
See accompanying Notes to unaudited Condensed Consolidated Financial Statements.
5



ITEM 1. FINANCIAL STATEMENTS
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Revenue
Interest and fees revenue$143,493 $155,940 $429,563 $659,725 
Insurance and other income24,370 30,469 74,684 77,822 
Total revenue167,863 186,409 504,247 737,547 
Provision for losses49,009 65,020 161,128 277,421 
Net revenue118,854 121,389 343,119 460,126 
Operating Expenses
Salaries and benefits52,148 49,179 161,911 196,121 
Occupancy10,454 12,419 32,683 46,442 
Advertising2,819 4,676 6,785 27,342 
Direct operations12,176 8,288 33,953 41,438 
Depreciation and amortization5,390 5,683 16,119 17,070 
Other operating expense11,207 22,595 37,179 56,354 
Total operating expenses94,194 102,840 288,630 384,767 
Other expense (income)
Interest expense55,798 38,155 150,303 103,840 
Loss from equity method investment1,453 2,309 7,000 2,053 
Extinguishment or modification of debt costs— 3,702 8,864 3,702 
Gain on sale of business— (68,443)2,027 (68,443)
Miscellaneous expenses— — 1,435 — 
Total other expense (income)57,251 (24,277)169,629 41,152 
(Loss) income from continuing operations before income taxes(32,591)42,826 (115,140)34,207 
Provision for income taxes from continuing operations1,021 21,709 27,445 22,109 
Net (loss) income from continuing operations(33,612)21,117 (142,585)12,098 
Net (loss) income from discontinued operations(70,830)4,536 (80,655)(11,189)
Net (loss) income$(104,442)$25,653 $(223,240)$909 
Basic (loss) earnings per share:
Continuing operations$ (0.81)$0.52 $ (3.48)$0.30 
Discontinued operations(1.72)0.11 (1.97)(0.28)
Basic (loss) earnings per share
$(2.53)$0.63 $(5.45)$0.02 
Diluted (loss) earnings per share:
Continuing operations$ (0.81)$ 0.52 $ (3.48)$ 0.30 
Discontinued operations(1.72)0.11 (1.97)(0.28)
Diluted (loss) earnings per share
$(2.53)$0.63 $(5.45)$0.02 
Weighted average common shares outstanding:
Basic41,267 40,479 41,018 40,203 
Diluted41,267 40,835 41,018 40,754 

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.
6



ITEM 1. FINANCIAL STATEMENTS
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands)
(unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Net (loss) income
$(104,442)$25,653 $(223,240)$909 
Other comprehensive income (loss) from continuing operations, net of tax:
Foreign currency translation adjustment, net of tax(5,737)(4,951)777 (6,860)
Other comprehensive income (loss) from discontinued operations, net of tax:
Change in derivative instruments designated as cash flow hedges, net of tax(11,419)4,567 (5,333)4,567 
Foreign currency translation adjustment, net of tax(7,866)(13,321)(5,993)(15,299)
Other comprehensive income (loss), net of tax(25,022)(13,705)(10,549)(17,592)
Comprehensive (loss) income
$(129,464)$11,948 $(233,789)$(16,683)

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

7



ITEM 1. FINANCIAL STATEMENTS
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN (DEFICIT) EQUITY
(in thousands, except share data)
(unaudited)
Common StockTreasury Stock, at costPaid-in capitalRetained Earnings (Deficit)AOCITotal Stockholders' Deficit
Shares OutstandingPar Value
Balances at December 31, 2022
40,518,052 $23 $ (136,832)$ 124,483 $ 4,268 $ (46,076)$ (54,134)
Cumulative effect of Adoption of ASU 2016-13, net of tax
— — — — (113,019)— (113,019)
Net loss— — — — (59,471)— (59,471)
Other comprehensive loss, net of tax— — — — — (2,720)(2,720)
Dividends— — — — (326)— (326)
Share-based compensation expense— — — 1,636 — — 1,636 
Net settlement of share-based awards441,995 — — (782)— — (782)
Balances at March 31, 202340,960,047 $23 $ (136,832)$ 125,337 $ (168,548)$ (48,796)$ (228,816)
Net loss— — — — (59,327)— (59,327)
Other comprehensive income, net of tax— — — — — 17,193 17,193 
Dividends— — — — (25)— (25)
Share-based compensation expense— — — 2,618 — — 2,618 
Net settlement of share-based awards181,976 — — (16)— — (16)
Balances at June 30, 2023
41,142,023 $23 $ (136,832)$ 127,939 $ (227,900)$ (31,603)$ (268,373)
Net loss— — — — (104,442)— (104,442)
Other comprehensive loss, net of tax
— — — — — (25,022)(25,022)
Dividends— — — — (122)— (122)
Share-based compensation expense— — — 98 — — 98 
Net settlement of share-based awards158,519 — — (160)— — (160)
Balances at September 30, 2023
41,300,542 $23 $ (136,832)$ 127,877 $ (332,464)$ (56,625)$ (398,021)

8



ITEM 1. FINANCIAL STATEMENTS
Common StockTreasury Stock, at costPaid-in capitalRetained Earnings AOCITotal Stockholders' Equity
Shares OutstandingPar Value
Balance at December 31, 2021
40,810,444 $23 $(124,302)$113,520 $203,467 $(32,378)$160,330 
Net income— — — — 1,336 — 1,336 
Other comprehensive income, net of tax— — — — — 6,633 6,633 
Dividends— — — — (4,791)— (4,791)
Share-based compensation expense— — — 4,093 — — 4,093 
Proceeds from exercise of stock options— — — — — — — 
Repurchase of common stock(824,477)— (12,530)— — — (12,530)
Net settlement of share-based awards362,815 — — (2,284)— — (2,284)
Balance at March 31, 202240,348,782 $23 $(136,832)$115,329 $200,012 $(25,745)$152,787 
Net loss— — — — (26,080)— (26,080)
Other comprehensive loss, net of tax— — — — — (10,520)(10,520)
Dividends— — — — (4,434)— (4,434)
Share-based compensation expense— — — 4,415 — — 4,415 
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes108,969 — — (588)— — (588)
Balance at June 30, 2022
40,457,751 $23 $(136,832)$119,156 $169,498 $(36,265)$115,580 
Net income— — — — 25,653 — 25,653 
Other comprehensive loss, net of tax
— — — — — (13,705)(13,705)
Dividends— — — — (4,466)— (4,466)
Share-based compensation expense— — — 1,448 — — 1,448 
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes27,630 — — (58)— — (58)
Balance at September 30, 202240,485,381 $23 $(136,832)$120,546 $190,685 $(49,970)$124,452 

See the accompanying Notes to unaudited Condensed Consolidated Financial Statements
9

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands, unaudited)
Nine Months Ended
September 30,
20232022
Cash flows from operating activities:
Net (loss) income from continuing operations
$(142,585)$12,098 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization16,119 17,070 
Provision for losses161,128 277,421 
Amortization of debt issuance costs and bond discount13,076 2,943 
Extinguishment or modification of debt costs8,864 3,702 
Deferred income tax benefit22,482 (15,470)
(Gain) loss on disposal of property and equipment(19)60 
Gain on disposal of Legacy U.S. Direct Lending Business
— (68,443)
Loss from equity method investment
7,000 2,053 
Share-based compensation 4,352 8,465 
Changes in operating assets and liabilities:
Accrued interest on loans receivable(4,608)52,785 
Prepaid expenses and other assets8,281 8,029 
Accounts payable and accrued liabilities17,885 (50,246)
Deferred revenue(1,107)4,956 
Income taxes payable2,558 (679)
Income taxes receivable(34,052)17,544 
Accrued interest(12,492)(17,827)
Other long-term liabilities(28,776)(4,363)
Net cash provided by continuing operating activities38,106 250,098 
Net cash (used in) provided by discontinued operating activities
(18,525)45,633 
Net cash provided by operating activities19,581 295,731 
Cash flows from investing activities:
Purchase of property, equipment and software(9,213)(19,160)
Loans receivable originated or acquired(675,321)(1,109,119)
Loans receivable repaid568,752 631,430 
Divestiture of Legacy U.S. Direct Lending Business, net of cash provided(2,027)288,980 
Acquisition of First Heritage, net of acquiree's cash received
— (131,012)
Net cash used in continuing investing activities(117,809)(338,881)
Net cash used in discontinued investing activities(84,994)(290,411)
Net cash used in investing activities(202,803)(629,292)
Cash flows from financing activities
Proceeds from SPV facilities185,917 822,590 
Payments on SPV facilities(166,084)(697,337)
Debt issuance costs paid(27,436)(9,801)
Proceeds from credit facilities155,000 137,812 
Payments on credit facilities(40,000)(137,812)
Payments to net share settle equity awards(959)(2,930)
Repurchase of common stock— (13,531)
Dividends paid to stockholders(473)(13,691)
Net cash provided by continuing financing activities105,965 85,300 
Net cash provided by discontinued financing activities47,828 282,350 
Net cash provided by financing activities153,793 367,650 
Effect of exchange rate changes on cash, cash equivalents and restricted cash120 (6,461)
Net increase (decrease) in cash, cash equivalents and restricted cash(29,309)27,628 
Cash, cash equivalents and restricted cash at beginning of period165,677 162,075 
Cash, cash equivalents and restricted cash at end of period$136,368 $189,703 




See the accompanying Notes to unaudited Condensed Consolidated Financial Statements


10

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands, unaudited)
SUPPLEMENTAL CASH FLOW INFORMATION

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited Condensed Consolidated Balance Sheets as of September 30, 2023 and 2022 to the cash, cash equivalents and restricted cash used in the unaudited Condensed Consolidated Statement of Cash Flows (in thousands):

September 30,
20232022
Cash and cash equivalents$82,550 $40,068 
Restricted cash (includes restricted cash of consolidated VIEs of $24,613 and $20,263 as of September 30, 2023 and September 30, 2022, respectively)
53,818 66,962 
Cash, discontinued operations ($5,615 cash and cash equivalents and $77,058 restricted cash as of September 30, 2022)
— 82,673 
Total cash, cash equivalents and restricted cash used in the Statement of Cash Flows$136,368 $189,703 
See accompanying Notes to unaudited Condensed Consolidated Financial Statements.
11


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

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

The terms “CURO" and the “Company” refer to CURO Group Holdings Corp. and its direct and indirect subsidiaries as a combined entity, except where otherwise stated.

The Company is an omni-channel consumer finance company serving customers in the U.S. and Canada for over 25 years. Our roots in the consumer finance market run deep. We have worked diligently to provide customers a variety of convenient, easily accessible financial services. Our decades of alternative data power a hard-to-replicate underwriting and scoring engine, mitigating risk across the full spectrum of credit products.

Basis of Presentation

The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements in accordance with U.S. GAAP and the accounting policies described in its 2022 Form 10-K. Interim results of operations are not necessarily indicative of results that might be expected for future interim periods or for the year ending December 31, 2023.

While certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, the Company believes that the disclosures are adequate to enable a reasonable understanding of the information presented. Additionally, the Company qualifies as an SRC, which allows it to report information under scaled disclosure requirements. SRC status is determined on an annual basis as of June 30th. The Company met the definition of an SRC as of June 30, 2023 and will evaluate its status as of June 30, 2024.

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

On August 31, 2023, the Company completed the divestiture of Flexiti to Questrade Financial Group Inc. Flexiti constituted the entirety of the Company’s Canada POS Lending operating segment, which resulted in treatment of the Canada POS Lending operating segment as discontinued operations for all periods presented. Throughout this report, current and prior period financial information is presented on a continuing operations basis, excluding the results and positions of the Canada POS Lending operating segment, unless otherwise noted. See Note 14, "Discontinued Operations" for additional information.

Beginning January 1, 2023, the Company began reporting "Insurance and other income" in place of the previously reported "Insurance premiums and commissions" and "Other revenue" line items in the unaudited Condensed Consolidated Statements of Operations. Prior period amounts have been reclassified to conform with current period presentation.

Beginning January 1, 2023, the Company renamed the previously reported Allowance for loan losses to Allowance for credit losses on the unaudited Condensed Consolidated Balance Sheet. Prior period amounts have been reclassified to conform with current period presentation.

Principles of Consolidation

The unaudited Condensed Consolidated Financial Statements reflect the accounts of CURO and its direct and indirect subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of the unaudited Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Some estimates may also affect the reported amounts of revenues and expenses during the periods presented. Significant estimates that the Company made in the accompanying unaudited Condensed Consolidated Financial Statements include ACL, certain assumptions related to equity investments, goodwill and intangibles, accruals related to self-insurance, estimated tax liabilities and the accounting for acquisitions. Actual results may differ from those estimates.

Allowance for Credit Losses

The FASB has changed the impairment model for estimating credit losses on financial assets. The previous incurred loss impairment model required the recognition of credit losses when it was probable that a loss had been incurred. The incurred loss
12


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
model was replaced by the CECL model, which requires entities to estimate the lifetime expected credit loss on financial instruments and to record an allowance to offset the amortized cost basis of the financial asset. The CECL model requires earlier recognition of credit losses as compared to the incurred loss approach. The Company adopted this standard effective January 1, 2023. The initial impact of adoption on continuing operations was a $89.6 million increase to Accumulated deficit ($121.1 million increase to the ACL, net of $31.4 million in taxes). For the three months ended March 31, 2023, the Company recorded a valuation allowance against the U.S. DTAs. See Note 8 - Income Taxes for further information. As a result, the Company decreased the tax impact to Accumulated deficit by $13.0 million as a result of the valuation allowance for the three months ended March 31, 2023. As of adoption on January 1, 2023, the impact of CECL for continuing operations was recorded as a $102.7 million increase to Accumulated deficit ($121.2 million increase to the ACL, net of $18.5 million in taxes). The ACL on gross loans receivables reduces the outstanding gross loans receivables balance in the unaudited Condensed Consolidated Balance Sheets. After adoption, all changes in the ACL, net of charge-offs and recoveries, are recorded as “Provision for losses” in the unaudited Condensed Consolidated Statements of Operations.

The ACL is based on an analysis of historical loss, charge-off rates and recoveries. The Company also considers delinquency trends, impact of new loan products, changes to underwriting criteria or lending policies, changes in jurisdictional regulations or laws, recent credit trends and reasonable and supportable economic forecasts, which cover the life of the loan. The Company will also adjust for quantitative and qualitative factors that are not fully reflected in the historical data. If a loan is deemed to be uncollectible before it is fully reserved based on received information (e.g., receipt of customer bankruptcy notice or death), the Company charges off the loan at that time. The Company charges credit losses, including accrued interest, against the allowance when the account reaches 180 days contractually delinquent, subject to certain exceptions. Any recoveries on loans previously charged to the ACL are credited to the ACL when collected.

The Company selected a static pool Probability of Default (“PD”) / Loss Given Default (“LGD”) / Exposure at Default ("EAD") model to estimate its base allowance for credit losses, in which the estimated loss is equal to the product of PD, LGD and EAD. Historical static pools of net loans receivables are tracked over the term of the pools to identify the probability of loss (PD) and the average size of losses, net of recoveries (LGD and EAD).

As loans receivable are originated, provisions for credit losses are recorded in amounts sufficient to maintain an ACL at an adequate level to provide for estimated losses over the contractual term of the loan receivables. Subsequent changes to the contractual terms resulting from re-underwriting are not included in the loan receivable’s expected life. The Company uses its historical loss experience to forecast expected credit losses. Historical information about losses generally provides a basis for the estimate of expected credit losses. The Company also considers the need to adjust historical information to reflect the extent to which current conditions differ from the conditions that existed for the period over which historical information was evaluated. These adjustments to historical loss information may be qualitative or quantitative in nature.

Reasonable and supportable macroeconomic forecasts are required for the Company’s ACL model. The projected change in creditworthiness is modeled using Congressional Budget Office data such as unemployment rate and personal income. The Company adjusts the historical loss experience by relevant qualitative factors for these expectations.

Canada Loss Recognition

Effective January 1, 2023, the Company modified the timeframe over which it charges-off loans within the loans in Canada and made related refinements to its loss provisioning methodology. Prior to January 1, 2023, the Company deemed the loans in Canada uncollectible and charged-off on day 91 past-due. As part of our policy alignment, the Company revised its estimates and now considers a loan in Canada uncollectible and charged-off when they have been contractually past-due for more than 180 consecutive days. Consequently, such past-due loans and related accrued interest now remain in loans receivable for 180 days before being charged-off against the ACL. All recoveries on charged-off loans are credited to the ACL when received. The Company evaluates the adequacy of the ACL compared to the related gross loans receivable balances that include accrued interest.

The aforementioned change was treated as a change in accounting estimate and applied prospectively effective January 1, 2023.

The change affects comparability to prior periods as follows:
•Gross loans receivable: balances as of September 30, 2023 include $21.7 million of loans that are between 91 and 180 days past-due with related accrued interest, while such balances for prior periods do not include any loans that are between 91 and 180 days past-due.
•Revenues: for the three and nine month periods ended September 30, 2023, revenues include accrued interest on the loans between 91 and 180 days past-due of $1.4 million and $3.9 million respectively, while revenues in prior periods do not include any loans that are between 91 and 180 days past-due.
13


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
•Provision for Losses: effective January 1, 2023, past-due, unpaid balances plus related accrued interest on the loans charge off on day 181. Provision expense is affected by NCOs plus changes to the required ACL. Because NCOs now include unpaid principal and up to 180 days of related accrued interest, as compared to prior periods, NCO amounts and rates are higher and the required ACL as a percentage of gross loans receivable is higher. The Company recognized $63.9 million in charge offs related to the loans for the nine months ended September 30, 2023 and, absent the policy change, would have recognized $84.7 million for the nine months ended September 30, 2023 in gross charge offs on those loans. There was no impact on the provision for losses in the three months ended September 30, 2023.

Continued Listing Standard Notice from NYSE

On October 16, 2023, the Company received a written notice (the “Market Cap Notice”) from the NYSE that the Company was not in compliance with the continued listing criteria set forth in Section 802.01B of the NYSE’s Listed Company Manual with respect to the minimum market capitalization and shareholders' equity requirements, as the average market capitalization of the Company over a consecutive 30 trading-day period was less than $50 million and, at the same time, the Company’s last reported stockholders’ equity was less than $50 million. As of October 16, 2023, the 30 trading-day average market capitalization was approximately $44.7 million, and its last reported stockholders’ deficit was $398.0 million ($268.4 million as of June 30, 2023). Within 45 days of receipt of the Market Cap Notice, the Company will respond to the NYSE with a business plan aimed to demonstrate the definitive actions the Company has taken, or is taking, to regain compliance with the continued listing standards within 18 months of the Market Cap Notice. Should the Listings Operations Committee of the NYSE review and approve the plan, the Company's common stock will continue to be listed and traded on the NYSE during the 18-month cure period, subject to the Company's compliance with the other continued listing criteria of the NYSE and the periodic monitoring of the business plan by the NYSE.

On October 27, 2023, the Company received written notice from the NYSE that the Company was not in compliance with the continued listing criteria set forth in 802.01C of the NYSE's Listed Company Manual with respect to stock price requirements (the "Stock Price Notice"). The Company has a period of six months following the receipt of the Stock Price Notice to regain compliance. As a result, the Company has until April 27, 2024 to regain compliance. If the Company determines that in order to cure the price condition it is necessary to take an action that requires shareholder approval, it must obtain shareholder approval by no later than its 2024 annual meeting and must implement the action promptly thereafter.

The Market Cap Notice and Stock Price Notice do not affect the Company’s reporting obligations with the Securities and Exchange Commission, and they do not conflict with or cause an event of default under any of the Company’s material debt or other agreements.

Recently Issued Accounting Pronouncements Recently Adopted
ASU 2023-03
In July 2023, the FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. This ASU amends various paragraphs in the accounting codification pursuant to the issuance of Commission Staff Bulletin number 120. As the ASU does not provide any new guidance, there is no transition or effective date associated with its adoption. Accordingly, the Company adopted ASU 2023-03 immediately upon its issuance. The adoption of ASU 2023-03 did not have any impact on the Company’s consolidated financial statement presentation or related disclosures.
ASU 2016-13 and Subsequent Amendments

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent amendments to the guidance: ASU 2018-19 in November 2018, ASU 2019-04 in April 2019, ASU 2019-05 in May 2019, ASU 2019-10 and -11 in November 2019, ASU 2020-02 in February 2020 and ASU 2022-02 in March 2022.

As a result of the adoption of CECL on January 1, 2023, through a modified-retrospective approach, the Company recorded an increase to the continuing operations ACL of $121.1 million and a corresponding one-time, cumulative reduction to continuing operations retained earnings of $102.7 million (net of $18.5 million in taxes) in the unaudited Condensed Consolidated Balance Sheet as of January 1, 2023. The Company’s continuing operations ACL increased from 6.5% to 16.1% as a percentage of the amortized cost basis on January 1, 2023.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which removes the accounting guidance for troubled debt restructurings and requires entities to evaluate whether a modification provided to a customer results in a new loan or continuation of an existing loan. The amendments enhance existing disclosures and require new disclosures for receivables when there has been a modification in contractual cash flows due
14


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
to a customer experiencing financial difficulties. Additionally, the amendments require disclosure of gross charge-off information by year of origination in the vintage disclosures. The Company adopted this guidance as of January 1, 2023 using the modified retrospective method. Adoption of this standard did not have a material impact on our unaudited Condensed Consolidated Financial Statements.

As result of the adoption of ASU 2016-13, several of our significant accounting policies have changed to reflect the requirements of the new standard. See above for these updated significant accounting policies as of January 1, 2023.

ASU 2021-08

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with ASC 606, Revenue from Contracts with Customers. The adoption of ASU 2021-08 at January 1, 2023 did not have a material effect on the Company's unaudited Condensed Consolidated Financial Statements.

NOTE 2 – LOANS RECEIVABLE AND REVENUE

Effective with the sale of the Legacy U.S. Direct Lending Business on July 8, 2022, the Company no longer guarantees loans originated by third-party lenders through CSO programs.

The following table summarizes revenue by product (in thousands):

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Revolving LOC$51,039 $52,461 $149,614 $200,565 
Installment92,454 103,479 279,949 459,160 
Total interest and fees revenue143,493 155,940 429,563 659,725 
Insurance and other income24,370 30,469 74,684 77,822 
   Total revenue$167,863 $186,409 $504,247 $737,547 

The following tables summarize loans receivable by product and the related delinquent loans receivable (in thousands):
September 30, 2023
Revolving LOCInstallmentTotal
Current loans receivable$408,817 $651,326 $1,060,143 
1-30 days past-due20,025 67,141 87,166 
Delinquent:
31-60 days past-due10,572 20,272 30,844 
61-90 days past-due8,705 12,314 21,019 
91 + days past-due20,922 34,307 55,229 
Total delinquent loans receivable40,199 66,893 107,092 
   Total loans receivable469,041 785,360 1,254,401 
   Less: allowance for credit losses(119,183)(80,556)(199,739)
Loans receivable, net$349,858 $704,804 $1,054,662 


15


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Revolving LOCInstallmentTotal
Current loans receivable$409,615 $649,262 $1,058,877 
1-30 days past-due22,991 76,709 99,700 
Delinquent:
31-60 days past-due9,403 21,480 30,883 
61-90 days past-due7,878 14,143 22,021 
91 + days past-due1,190 41,724 42,914 
Delinquent loans receivable18,471 77,347 95,818 
   Total loans receivable451,077 803,318 1,254,395 
   Less: allowance for credit losses(37,972)(43,213)(81,185)
Loans receivable, net$413,105 $760,105 $1,173,210 

16


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following tables summarize activity in the ACL (in thousands) for the three and nine months ended September 30, 2023, including the impact of the adoption of ASU 2016-13 as discussed in Note 1, "Summary of Significant Accounting Policies and Nature of Operations":

Three Months Ended
September 30, 2023
Revolving LOCInstallmentOtherTotal
Allowance for credit losses:
Balance, beginning of period$125,650 $84,643 $— $210,293 
Charge-offs(26,080)(45,801)(1,669)(73,550)
Recoveries4,057 12,459 155 16,671 
Net charge-offs(22,023)(33,342)(1,514)(56,879)
Provision for losses19,031 28,464 1,514 49,009 
Effect of foreign currency translation(3,475)791 — (2,684)
Balance, end of period$119,183 $80,556 $— $199,739 


Nine Months Ended
September 30, 2023
Revolving LOCInstallmentOtherTotal
Allowance for credit losses:
Balance, beginning of period, prior to adoption of ASU 2016-13$37,972 $43,213 $— $81,185 
Impact of adoption of ASU 2016-1369,655 51,566 — 121,221 
Balance, January 1, 2023107,627 94,779 — 202,406 
Charge-offs(60,131)(142,721)(5,313)(208,165)
Recoveries10,095 32,830 619 43,544 
Net charge-offs(50,036)(109,891)(4,694)(164,621)
Provision for losses61,659 94,775 4,694 161,128 
Effect of foreign currency translation(67)893 — 826 
Balance, end of period$119,183 $80,556 $— $199,739 

The following table presents an analysis of the activity in the ACL and the liability for losses on CSO lender-owned consumer loans (in thousands) for the three and nine months ended September 30, 2022, prior to the adoption of ASU 2016-13, as defined by the accounting guidance in effect at that time:


17


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended
September 30, 2022
Revolving LOCInstallmentOtherTotal
Allowance for credit losses:
Balance, beginning of period$46,648 $45,057 $— $91,705 
Charge-offs(27,974)(45,544)(3,319)(76,837)
Recoveries3,181 15,741 217 19,139 
Net charge-offs(24,793)(29,803)(3,102)(57,698)
Provision for losses28,408 33,510 3,102 65,020 
Divestiture (1)
(13,555)(13,691)— (27,246)
Effect of foreign currency translation(2,084)(162)— (2,246)
Balance, end of period$34,624 $34,911 $— $69,535 
Liability for losses on CSO lender-owned consumer loans (2):
Balance, beginning of period$— $8,083 $— $8,083 
Divestiture (1)
— (8,083)— (8,083)
Balance, end of period$— $— $— $— 
(1) Write off of the ACL or liability for losses on CSO lender-owned consumer loans related to loan balance sold or guarantees transferred from the Company on July 8, 2022 upon the completion of the divestiture of the Legacy U.S. Direct Lending Business.
(2) All balances in connection with the CSO programs were disposed of on July 8, 2022 upon the divestiture of the Legacy U.S. Direct Lending Business.

Nine Months Ended
September 30, 2022
Revolving LOCInstallmentOtherTotal
Allowance for credit losses:
Balance, beginning of period$45,951 $19,420 $— $65,371 
Charge-offs(102,549)(172,466)(9,630)(284,645)
Recoveries15,702 74,477 1,250 91,429 
Net charge-offs(86,847)(97,989)(8,380)(193,216)
Provision for losses91,614 127,368 8,380 227,362 
Divestiture (1)
(13,555)(13,691)— (27,246)
Effect of foreign currency translation(2,539)(197)— (2,736)
Balance, end of period$34,624 $34,911 $— $69,535 
Liability for losses on CSO lender-owned consumer loans (2):
Balance, beginning of period$— $6,908 $— $6,908 
Divestiture (1)
— (6,908)— (6,908)
Balance, end of period$— $— $— $— 
(1) Write off of the ACL or liability for losses on CSO lender-owned consumer loans related to loan balance sold or guarantees transferred from the Company on July 8, 2022 upon the completion of the divestiture of the Legacy U.S. Direct Lending Business.
(2) All balances in connection with the CSO programs were disposed of on July 8, 2022 upon the divestiture of the Legacy U.S. Direct Lending Business.

Credit Quality Indicators for Revolving LOC and Installment Loans

The credit quality of the Company's gross loans receivable is dependent on the Company's ability to enforce sound underwriting standards, maintain diligent servicing of the portfolio and respond to changing economic conditions. The Company uses loan type and loan delinquency as key data points in determining the ACL. Delinquencies are an indicator of credit quality at a point in time. A loan balance is considered delinquent when contractual payments on the loan become more than 30 days past due. This indicator is important to understand the overall credit performance of the Company's customers and their ability to repay.
18


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

The tables below presents key credit quality indicators, by origination year for installment loans, as of and for the three and nine months ended September 30, 2023 (in thousands):

Gross loans receivables by origination year, as of September 30, 2023
Delinquent
Current1-30 days past-due31-60 days past-due61-90 days past-due91+ days past dueTotal DelinquentTotal Loans Receivable
Revolving LOC$408,817 $20,025 $10,572 $8,705 $20,922 $40,199 $469,041 
Installment loans
2023$446,354 $36,658 $10,031 $6,144 $13,392 $29,567 $512,579 
2022163,528 23,028 7,717 4,921 16,831 29,469 216,025 
202137,511 6,694 2,288 1,090 3,738 7,116 51,321 
20203,145 650 216 139 298 653 4,448 
2019376 73 8 15 34 57 506 
Prior412 38 12 5 14 31 481 
Total installment loans$651,326 $67,141 $20,272 $12,314 $34,307 $66,893 $785,360 
Total loans receivables$1,060,143 $87,166 $30,844 $21,019 $55,229 $107,092 $1,254,401 


Activity by origination year
Three Months Ended
September 30, 2023		Nine Months Ended
September 30, 2023
Gross charge-offs
Gross recoveriesNet charge-offs
Gross charge-offs
Gross recoveriesNet charge-offs
Revolving LOC$(26,080)$4,057 $(22,023)$(60,131)$10,095 $(50,036)
Installment loans
2023$(15,406)$6,342 $(9,064)$(32,514)$15,411 $(17,103)
2022(25,520)1,602 (23,918)(89,145)6,151 (82,994)
2021(4,206)1,558 (2,648)(18,526)3,768 (14,758)
2020(330)634 304 (1,510)1,686 176 
2019(38)547 509 (154)1,566 1,412 
Prior(301)1,776 1,475 (872)4,248 3,376 
Total installment loans$(45,801)$12,459 $(33,342)$(142,721)$32,830 $(109,891)
Total loans receivables$(71,881)$16,516 $(55,365)$(202,852)$42,925 $(159,927)

19


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Delinquent and Non-accrual Loans

The accrual of interest revenue on loans receivable is generally suspended when it has been 90 days past due for Direct Lending, or due to statutory requirements. If a loan is charged off, the accrued interest is charged against the allowance. The Company inherently considers non-accrual loans in its estimate of the ACL.

The following table provides information on our delinquent and non-accrual loans (in thousands):
September 30, 2023
31-60 days past-due61-90 days past-due91 + days past-due
Total delinquent
91 or more days delinquent and accruing
Total non-accruing (1)
Revolving LOC$10,572 $8,705 $20,922 $40,199 $4,398 $18,001 
Installment20,272 12,314 34,307 66,893 1,406 35,766 
Total delinquent loans$30,844 $21,019 $55,229 $107,092 $5,804 $53,767 
Percentage of total loan receivables2.5 %1.7 %4.4 %8.5 %0.5 %4.3 %
(1) The gross interest income that was recognized related to non-accruing loans was $1.0 million and $4.7 million for the three and nine months ended September 30, 2023.


As of December 31, 2022, Revolving LOC and Installment loans classified as non-accrual were $4.5 million and $54.6 million, respectively.

Loan Modifications to Customers Experiencing Financial Difficulty

The Company adopted ASU 2022-02 as of January 1, 2023 on a modified retrospective basis through a cumulative adjustment to retained earnings. The new guidance is applicable for all loans modified to customers experiencing financial difficulties as of the beginning of 2023. Following the adoption of this guidance, we evaluate all loan receivables modifications according to the accounting guidance to determine whether such loan modification should be accounted for as a new loan or a continuation of the existing loan. The Company offers loan modifications to customers experiencing financial difficulty through forgiveness of unpaid principal and accrued interest balances.

The following table provides information on the financial effect of the loan modifications to customers experiencing financial difficulty in the period during the period presented (in thousands):

Three Months Ended
September 30, 2023		Nine Months Ended
September 30, 2023
Amount% of Loan ReceivablesAmount% of Loan Receivables
Revolving LOC modifications
Principal / accrued interest forgiven$1,844 0.1 %$3,151 0.3 %
Installment modifications
Principal / accrued interest forgiven41 — %87 — %
Total principal/ accrued interest modifications$1,885 0.2 %$3,238 0.3 %
20


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

Performance of Loans Modified to Customers Experiencing Financial Difficulty

The following table provides information on the performance of loans modified to customers experiencing financial difficulty which have been modified subsequent to January 1, 2023 and remain outstanding at September 30, 2023 (in thousands):

Amortized Cost Basis, as of September 30, 2023
Delinquent
Current1-30 days past-due31-60 days past-due61-90 days past-due91+ days past-dueTotal delinquent
Revolving LOC$12,550 $1,667 $1,222 $1,006 $3,685 $5,913 
Installment26 4 10 12 34 56 
Total delinquent modified loans$12,576 $1,671 $1,232 $1,018 $3,719 $5,969 
Percentage of total loan receivables1.0 %0.1 %0.1 %0.1 %0.3 %0.5 %

Payment Defaults

The following table presents the type, number and amount of loans to customers experiencing financial difficulty that modified their loans between January 1, 2023 and September 30, 2023, and experienced a payment default as evidenced by a charged-off loan during the period presented (dollars in thousands):
Three Months Ended
September 30, 2023		Nine Months Ended
September 30, 2023
Number of Accounts defaulted (charged-off)Value of accounts defaulted (charged-off)Number of Accounts defaulted (charged-off)Value of accounts defaulted (charged-off)
Revolving LOC611 $2,128 2,484 $2,142 
Installment57 98 233 345 
Total defaults668 $2,226 2,717 $2,487 

Troubled Debt Restructurings (Prior to 2023)

Prior to the adoption of ASU 2022-02, the Company considered a modified loan in which a concession had been granted to the customer to be a TDR based generally on the size of the concession compared to the underlying loan balance and credit quality of the customer. Due to differences between the legacy TDR requirements and current loan modification disclosure requirements, information presented in the disclosures below is not directly comparable to the disclosures under the current guidance.

The table below presents TDRs that are related to the Company's Customer Care Program implemented in response to COVID-19, included in both gross loans receivable and the impairment included in the ACL (in thousands) as of September 30, 2022:

As of
September 30, 2022
Current TDR gross receivables$9,564 
Delinquent TDR gross receivables2,920 
Total TDR gross receivables 12,484 
Less: Impairment included in the allowance for credit losses(2,645)
Less: Additional allowance(759)
Outstanding TDR receivables, net of impairment $9,080 

21


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The tables below present loans modified and classified as TDRs during the periods presented (in thousands):

Three Months Ended September 30,Nine Months Ended September 30,
20222022
Pre-modification TDR loans receivable$2,020 $7,600 
Post-modification TDR loans receivable1,945 7,324 
Total concessions included in gross charge-offs$75 $276 

There were $1.3 million and $4.0 million of loans classified as TDRs that were charged off and included as a reduction in the ACL during the three and nine months ended September 30, 2022.

The table below presents the Company's average outstanding TDR loans receivable, interest income recognized on TDR loans and number of TDR loans for the periods presented (dollars in thousands):

Three Months Ended September 30,Nine Months Ended September 30,
20222022
Average outstanding TDR loans receivable$12,424 $11,391 
Interest income recognized$1,448 $3,855 
Number of TDR loans828 2,949 

22


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – VARIABLE INTEREST ENTITIES

As of September 30, 2023, the Company had four credit facilities, whereby certain loans receivable were sold to VIEs to collateralize debt incurred under each facility. Refer to Note 6, "Debt" for additional details on each facility.

The Company has determined that it is the primary beneficiary of the VIEs and is required to consolidate them. The Company includes the assets and liabilities related to the VIEs in the unaudited Condensed Consolidated Financial Statements. The assets of a VIE can be used only to settle liabilities of that VIE. Creditors (or beneficial interest holders) of the VIEs do not have recourse to the Company's general credit.

The carrying amounts of consolidated VIEs' assets and liabilities were as follows (in thousands):
September 30,
2023		December 31,
2022
Assets
Restricted cash$24,613 $20,177 
Loans receivable, net979,860 1,063,228 
Prepaid expenses and other16 5,069 
Deferred tax assets99 3,735 
Total Assets$1,004,588 $1,092,209 
Liabilities
Accounts payable and accrued liabilities$3,006 $6,704 
Deferred revenue 14 31 
Accrued interest8,284 7,023 
Income Taxes Payable— 7,850 
Debt885,741 864,675 
Total Liabilities$897,045 $886,283 

NOTE 4 – GOODWILL

Goodwill

The change in the carrying amount of goodwill by reporting unit for the nine months ended September 30, 2023 was as follows (in thousands):

Total
Goodwill at December 31, 2022$276,269 
Foreign currency translation— 
Goodwill at September 30, 2023$276,269 

The Company tests goodwill at least annually for potential impairment, as of October 1, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist. The potential indicators include, among various factors, declining sales, earnings or cash flows or the development of a material adverse change in business climate. The Company assesses goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a reporting unit. See Note 1, "Summary of Significant Accounting Policies and Nature of Operations" of the 2022 Form 10-K for additional information on the Company's policy for assessing goodwill for possible impairment.

During the fourth quarter of 2022, the Company performed a quantitative assessment for each of its reporting units. Management utilized the income and the guideline public company approaches, in equal weightings, in determining a fair value for each of the U.S. Direct Lending and Canada Direct Lending reporting units for purposes of testing goodwill. The income approach estimates fair value using the present value of future cash flows, whereas the guideline public company approach estimates fair value using the fair value of publicly traded businesses in a similar line of business. As a result, the Company recognized a non-cash pre-tax impairment charge of $107.8 million on the U.S. Direct Lending reporting unit to write down the carrying values of goodwill. Management concluded that the estimated fair value of the Canada Direct Lending reporting unit was greater than its carrying value, as of the annual assessment date; as such, no impairment charge was required.
23


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

In the three months ended March 31, 2023, the Company combined the Legacy U.S. Direct Lending and Canada Direct Lending reporting units into a single Direct Lending reporting unit. Refer to Note 12, "Segment and Geographic Data" for further information. In the third quarter of 2023, the Company performed an interim review of triggering events for the Direct Lending reporting unit, which would indicate whether a quantitative or qualitative assessment of goodwill impairment was necessary. As a result of the interim triggering event review, the Company concluded an additional assessment was not necessary.

Heights Acquisition

The Company completed the acquisition of Heights on December 27, 2021. Provisional goodwill was estimated at $253.9 million, based on the preliminary valuation. The Company recorded $11.8 million of net adjustments during fiscal year 2022, resulting in a goodwill balance of $265.7 million as of December 31, 2022, excluding the impairment charge on the Legacy U.S. Direct Lending reporting unit, now included in the Direct Lending reporting unit, recorded in the fourth quarter of 2022. See Note 13,"Acquisitions and Divestitures" for more information related to the business combination.

Legacy U.S. Direct Lending Business Divestiture

On July 8, 2022, the Company completed the divestiture of its Legacy U.S. Direct Lending Business to Community Choice Financial, for total sale proceeds of $349.2 million, net of working capital adjustments, comprised of $314.2 million of cash received at close and $35.0 million in cash payable in monthly installment payments over the subsequent 12 months. The divestiture resulted in a gain of $68.4 million during the year ended 2022 which was recorded in "Gain on sale of business" in the unaudited Condensed Consolidated Statements of Operations. The Company reduced the gain by $2.0 million for the nine months ended September 30, 2023, based on expected uncollectible amounts. There was no change to the gain during the three months ended September 30, 2023. As part of the sale, $91.1 million of goodwill was written off. See Note 13,"Acquisitions and Divestiture" for more information related to the divestiture.
First Heritage Acquisition

On July 13, 2022, the Company completed the acquisition of First Heritage, a consumer lender that provides near-prime installment loans along with customary opt-in insurance and other financial products, for a total purchase price of $140.0 million in cash. Provisional goodwill was recorded at $75.4 million, excluding the impairment charge on the Legacy U.S. Direct Lending reporting unit, now included in the Direct Lending reporting unit, recorded in the fourth quarter 2022. No adjustments were recorded during the measurement period which resulted in a final goodwill balance of $75.4 million. See Note 13, "Acquisitions and Divestiture" for more information related to the business combination.

NOTE 5 – FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Company is required to use valuation techniques that are consistent with the market approach, income approach and/or cost approach. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability based on observable market data obtained from independent sources, or unobservable inputs, meaning those that reflect the Company's judgment about the assumptions market participants would use in pricing the asset or liability based on the best information available for the specific circumstances. Accounting standards establish a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The hierarchy requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs.
The three levels of inputs used to measure fair value are listed below.

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

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

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

24


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Financial Assets and Liabilities Carried at Fair Value

The table below presents the assets and liabilities that were carried at fair value on the unaudited Condensed Consolidated Balance Sheets at September 30, 2023 (in thousands):

Estimated Fair Value
Carrying Value September 30,
2023		Level 1Level 2Level 3Total
Financial assets:
Cash Surrender Value of Life Insurance$5,693 $5,693 $— $— $5,693 
Financial liabilities:
Non-qualified deferred compensation plan$4,212 $4,212 $— $— $4,212 

The table below presents the assets and liabilities that were carried at fair value on the unaudited Condensed Consolidated Balance Sheets at December 31, 2022 (in thousands):

Estimated Fair Value
Carrying Value December 31,
2022		Level 1Level 2Level 3Total
Financial assets:
Cash Surrender Value of Life Insurance$7,591 $7,591 $— $— $7,591 
Financial liabilities:
Non-qualified deferred compensation plan$5,149 $5,149 $— $— $5,149 

Cash Surrender Value of Life Insurance and Non-qualified deferred compensation plan

The cash surrender value of life insurance is included in Other assets in the Company’s unaudited Condensed Consolidated Balance Sheets. The non-qualified deferred compensation plan offsetting liability is included in Accounts payable and accrued liabilities in the Company’s unaudited Condensed Consolidated Balance Sheets.

Financial Assets and Liabilities Not Carried at Fair Value

The table below presents the assets and liabilities that were not carried at fair value on the unaudited Condensed Consolidated Balance Sheets at September 30, 2023 (in thousands):
Estimated Fair Value
Carrying Value September 30,
2023		Level 1Level 2Level 3Total
Financial assets:
Cash and cash equivalents $82,550 $82,550 $— $— $82,550 
Restricted cash
53,818 53,818 — — 53,818 
Loans receivable, net 1,054,662 — — 1,054,662 1,054,662 
Investment in Katapult16,915 8,827 — — 8,827 
Financial liabilities:
1.0L 18.00% Senior Secured Term Loan
$154,401 $— $— $172,506 $172,506 
1.5L 7.50% Senior Secured Notes
671,922 — 272,920 — 272,920 
2.0L 7.50% Senior Secured Notes
312,870 — 74,660 — 74,660 
Heights SPV419,521 — — 425,000 425,000 
First Heritage SPV 150,104 — — 152,765 152,765 
Canada SPV243,066 — — 244,946 244,946 
Canada SPV II73,050 — — 75,009 75,009 
25


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

The table below presents the assets and liabilities that were not carried at fair value on the unaudited Condensed Consolidated Balance Sheets at December 31, 2022 (in thousands):
Estimated Fair Value
Carrying Value December 31,
2022		Level 1Level 2Level 3Total
Financial assets:
Cash and cash equivalents$50,856 $50,856 $— $— $50,856 
Restricted cash59,645 59,645 — — 59,645 
Loans receivable, net1,173,210 — — 1,173,210 1,173,210 
Investment in Katapult23,915 20,624 — — 20,624 
Financial liabilities:
7.50% Senior Secured Notes
$982,934 $— $466,500 $— $466,500 
Heights SPV393,181 — — 393,181 393,181 
First Heritage SPV178,622 — — 182,751 182,751 
Canada SPV292,872 — — 294,594 294,594 
Senior Revolver 35,000 — — 35,000 35,000 

Loans Receivable, Net

Loans receivable are carried on the unaudited Condensed Consolidated Balance Sheets net of the ACL. The unobservable inputs used to calculate the carrying values include quantitative factors, such as current default trends. Also considered in evaluating the accuracy of the models are changes to the loan portfolio mix, the impact of new loan products, changes to underwriting criteria or lending policies, new store development or entrance into new markets, changes in jurisdictional regulations or laws, recent credit trends and macroeconomic conditions, including unemployment rate and customer income. The net carrying value of loans receivable approximates their fair value. Refer to Note 2, "Loans Receivable and Revenue" for additional information.

1.0L 18.00% Senior Secured Term Loans, 1.5L 7.50% Senior Secured Notes, 2.0L 7.50% Senior Secured Notes, Heights SPV, First Heritage SPV, Canada SPV, Canada SPV II and Senior Revolver

The fair value disclosures for the 1.5L 7.50% Senior Secured Notes and 2.0L 7.50% Senior Secured Notes as of September 30, 2023 and the 7.50% Senior Secured Notes as of December 31, 2022 were based on observable market trading data. The fair values of the 1.0L 18.00% Senior Secured Term Loans, Heights SPV, First Heritage SPV, Canada SPV, Canada SPV II and Senior Revolver were based on the cash needed for their respective final settlements. Refer to Note 6, "Debt" for additional information.


26


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

The table below presents the Company's investment in Katapult (in thousands):
Investment in Katapult
Balance at December 31, 2021$27,900 
Equity method income - Q1 20221,584 
Balance at March 31, 202229,484 
Equity method loss - Q2 2022(1,328)
Balance at June 30, 202228,156 
Equity method loss - Q3 2022(2,309)
Balance at September 30, 202225,847 
Equity method loss - Q4 2022(1,932)
Balance at December 31, 202223,915 
Equity method loss - Q1 2023(3,413)
Balance at March 31, 202320,502 
Equity method loss - Q2 2023(2,134)
Balance at June 30, 202318,368 
Equity method loss - Q3 2023(1,453)
Balance at September 30, 2023$16,915 

The Company has an equity method investment in Katapult and records its share of earnings and losses on a one-quarter reporting lag. The Company recorded a loss of $1.5 million and $7.0 million for the three and nine ended September 30, 2023 respectively, based on its share of Katapult’s earnings. The equity method investment is presented within "Investment in Katapult" on the unaudited Condensed Consolidated Balance Sheets.

The Company owns 22.7% of Katapult's outstanding common and in-substance common stock as of September 30, 2023.
27


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – DEBT
The Company's debt instruments and balances outstanding as of September 30, 2023 and December 31, 2022, including maturity date, effective interest rate and borrowing capacity, subject to borrowing base limitations, were as follows (dollars in thousands):
Effective interest rateOutstanding as of
Maturity DateBorrowing CapacitySeptember 30, 2023December 31, 2022
Corporate Debt:
1.0L 18.00% Senior Secured Term Loan
August 2, 202718.00 %$172,506 $— 
1.5L 7.50% Senior Secured Notes
August 1, 20287.50 %682,298 — 
2.0L 7.50% Senior Secured Notes
August 1, 20287.50 %317,702 — 
7.5% Senior Secured Notes
August 1, 20287.50 %— 1,000,000 
Total corporate debt1,172,506 1,000,000 
Funding Debt:
Heights SPVJuly 15, 2025
1-Mo SOFR + 5.42%
$425.0 million$425,000 $400,758 
First Heritage SPVJuly 13, 2025
1-Mo SOFR + 4.25%
$225.0 million152,765 182,751 
Canada SPV (1)
August 2, 2026
3-Mo CDOR + 6.00%
C$400.0 million244,946 294,594 
Canada SPV II (1)
November 12, 2025
3-Mo CDOR + 8.00%
C$110.0 million75,009 — 
Senior Revolver (2)
— 35,000 
Total funding debt$ 897,720 $ 913,103 
Less: debt issuance costs(45,292)(30,495)
Total Debt$ 2,024,934 $ 1,882,608 
(1) Capacity amounts are denominated in Canadian dollars, whereas outstanding balances as of September 30, 2023 and December 31, 2022 are denominated in U.S. dollars. The exchange rate applied at September 30, 2023 was 0.7365 and the exchange rate at December 31, 2022 was 0.7365.
(2) On May 15, 2023, the Company utilized the proceeds from the $150.0 million 1.0L 18.00% Senior Secured Term Loan to pay off the Senior Revolver.

Corporate Debt

1.0 Lien 18.00% Senior Secured Term Loan

On May 15, 2023, the Company entered into a new $150.0 million first lien term loan, which matures on August 2, 2027. Interest is payable quarterly, in arrears, on March 31, June 30, September 30 and December 31. The principal loan balance and any unpaid accrued interest are due to the lender on the maturity date. The 1.0L 18.00% Senior Secured Term Loan are senior secured obligations of the Company and rank senior in right of payment to all of its existing and any future unsecured senior debt. The 1.0L 18.00% Senior Secured Term Loan accrues interest at a rate of 18.0% per annum. The Company may elect to pay up to 12.00% per annum in kind during the first year following the closing and up to 9.00% per annum in kind thereafter. The Company elected to pay 12.00% interest per annum in kind for the three months ended September 30, 2023. The 1.0L 18.00% Senior Secured Term Loan contains financial and other covenant requirements, including, but not limited to, financial covenants that require the Company to maintain certain liquidity levels. In connection with the 1.0L 18.00% Senior Secured Term Loan, the Company has a remaining balance of $18.1 million of capitalized financing costs, net of amortization, included in the unaudited Condensed Consolidated Balance Sheets as a component of Debt, as of September 30, 2023. These costs are amortized over the term of the 1.0L 18.00% Senior Secured Term Loan as a component of Interest expense.

7.50% Senior Secured Notes, 1.5L 7.50% Senior Secured Notes and 2.0L 7.50% Senior Secured Notes

In July 2021, the Company issued $750.0 million of 7.50% Senior Secured Notes which mature on August 1, 2028. Interest on the notes is payable semiannually, in arrears, on February 1 and August 1. In December 2021, the Company issued an additional $250.0 million of 7.50% Senior Secured Notes, also maturing on August 1, 2028, to fund the acquisition of Heights. Refer to Note 13, "Acquisitions and Divestitures" for additional details. On May 15, 2023, the Company closed on an exchange agreement with approximately 68.2% of the 7.50% Senior Secured Notes holders, who agreed to exchange approximately $682.3 million aggregate principal amount of the 7.50% Senior Secured Notes for approximately $682.3 million of 1.5L 7.50% Senior Secured Notes due August 1, 2028. The 1.5L 7.50% Senior Secured Notes retain all the same terms and conditions of the 7.50% Senior Secured Notes except that they rank senior in lien priority to the remaining $317.7 million 2.0L 7.50% Senior Secured Notes.

28


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Except for the 2.0L 7.50% Senior Secured Notes, the 1.5L 7.50% Senior Secured Notes rank junior in right of payment to all existing and future secured debt of senior lien priority, including the 1.0L 18.00% Senior Secured Term Loan, and are senior in right of payment to all other existing and any future senior debt. No incremental Deferred Financing Costs were incurred in relation to the exchange of the 1.5L 7.50% Senior Secured Notes.

The 2.0L 7.50% Senior Secured Notes have a maturity of August 1, 2028. Interest on the notes is payable semiannually, in arrears, on February 1 and August 1. The principal amount of the 2.0L 7.50% Senior Secured Notes is $317.7 million. The 2.0L 7.50% Senior Secured Notes rank junior in right of payment to all existing and any future secured debt of senior lien priority, including the 1.0L 18.00% Senior Secured Term Loan and 1.5L 7.50% Senior Secured Notes, and are senior in right of payment to all other existing and any future senior debt. The 2.0L 7.50% Senior Secured Notes retain all other terms and conditions of the 7.50% Senior Secured Notes.

In connection with the 7.50% Senior Secured Notes, the Company has a remaining balance of $15.2 million of capitalized financing costs included in the unaudited Condensed Consolidated Balance Sheets as a component of Debt, as of September 30, 2023. These costs are amortized over the term of the 7.50% Senior Secured Notes as a component of Interest expense.

Funding Debt

As of September 30, 2023, the Company had four credit facilities whereby loans receivable were sold to VIEs to collateralize debt incurred under each facility. The following debt arrangements are issued by the Company’s wholly owned, bankruptcy-remote SPVs, which are considered VIEs under U.S. GAAP and are consolidated into the financial statements of their respective primary beneficiary: (i) Heights SPV, (ii) First Heritage SPV, (iii) Canada SPV and (iv) Canada SPV II. For further information on these facilities, refer to Note 3, "Variable Interest Entities."

Assets transferred to each SPV are legally isolated from the Company and its affiliates, as well as the claims of the Company’s and its affiliates’ creditors. Further, the assets of each SPV are owned by such SPV and are not available to satisfy the debts or other obligations of the Company or any of its affiliates.

These debts are supported by the expected cash flows from the underlying collateralized finance receivables. Advances on the funding debt are determined based on the contractually agreed upon advance rates. Under the terms of each SPV credit facility, the effective advance rates vary from stated advanced rates based on certain eligibility requirements. Collections on these finance receivables are remitted to restricted cash collection accounts, which totaled $24.6 million and $20.2 million as of September 30, 2023 and December 31, 2022, respectively. The increase in restricted cash is based on the contractual requirements of the SPVs related to the total value and performance of the underlying collateralized finance receivables.

Heights SPV

On July 15, 2022, the Company entered into a $425.0 million non-recourse revolving warehouse facility to replace the incumbent lender's facility and finance future loans originated by Heights. The effective interest rate is stated as 1-month SOFR plus a fixed contractual rate determined based on the relative amount of Class A and Class B pledged receivables. The rate was 1-month SOFR plus 5.42% at September 30, 2023. The Company also pays a 0.50% per annum commitment fee on the unused portion of the commitments. The warehouse revolving period matures on July 15, 2024.

First Heritage SPV
On July 13, 2022, concurrently with the closing of the First Heritage acquisition, the Company entered into a $225.0 million non-recourse revolving warehouse facility to replace the incumbent lender's facility and finance future loans originated by First Heritage. The effective interest rate is 1-month SOFR plus 4.25%. The Company also pays a 0.50% per annum commitment fee on the unused portion of the commitments. The warehouse revolving period matures on July 13, 2024.

Canada SPV

In August 2018, as amended in the fourth quarter of 2021 and first quarter of 2022, CURO Canada Receivables Limited Partnership, a wholly-owned subsidiary of the Company, entered into the Canada SPV. The effective interest rate was 3-month CDOR plus 6.00%. The borrower also pays a 0.50% per annum commitment fee on the unused portion of the commitments. The warehouse revolving period matures on July 2, 2024.

Canada SPV II

On May 15, 2023, the Company closed on a C$110.0 million non-recourse revolving warehouse facility to finance loans in Canada. The facility includes a C$40.0 million accordion that is triggered upon the Company's request at the lenders' discretion. The effective interest is three-month CDOR plus 8.00%. The Company also pays a 0.50% per annum commitment fee on the unused portion of the commitments. The warehouse revolving period matures on November 12, 2025.
29



Senior Revolver

The Company maintained the Senior Revolver that provided $40.0 million of borrowing capacity, including up to $4.0 million of standby letters of credit, for a one-year term, renewable for successive terms following annual review. The most recent term expired August 31, 2023. The Senior Revolver accrued interest at one-month SOFR plus 5.00%.

On May 15, 2023, the Company fully paid off the outstanding borrowings of $40.3 million of principal and accrued interest under the Senior Revolver, using proceeds from the 1.0L 18.0% Senior Secured Term Loan described above. The early extinguishment of the Senior Revolver resulted in a loss of $0.1 million.

Curo Canada Revolving Credit Facility

Curo Canada maintained the Curo Canada Revolving Credit Facility, which provided short-term liquidity for the Company's Canadian direct lending operations.

On December 21, 2022, the borrowing capacity under the Curo Canada Revolving Credit Facility was reduced from C$10.0 million to C$5.0 million, and the facility was cancelled on January 6, 2023.

On May 15, 2023, the Company executed the Third Supplemental Indenture, which amends the underlying indenture to, among other things, eliminate or amend substantially all of the restrictive covenants contained in the indenture other than those related to the payment of principal and interest. The Company incurred fees of $1.7 million, net of amortization, related to the debt covenant amendments for the foregoing SPV facilities. These fees were capitalized, and included in the unaudited Condensed Consolidated Balance Sheets as a component of Debt. These costs are amortized over the term of the SPV facilities as a component of Interest expense.

NOTE 7 – COMMITMENTS AND CONTINGENCIES
Prior to the Company acquiring Heights, Heights received four Civil Investigative Demands (each, a “CID”) from the Consumer Financial Protection Bureau (“CFPB”). In May and June 2022, Heights participated in the CFPB’s Notice and Opportunity to Respond and Advise (“NORA”) process, and submitted a NORA response addressing the potential violations raised by the CFPB during the NORA process. Following this process, on August 22, 2023 the CFPB filed a civil complaint in the U.S. District Court for the District of South Carolina against Heights and seven of its state-licensed subsidiaries alleging violations of the Consumer Financial Protection Act. The CFPB is seeking injunctive relief, redress for allegedly affected consumers and civil monetary penalties. On October 9, 2023, Heights and the other defendants filed a Motion to Stay pending the U.S. Supreme Court decision in CFPB v. Cmty. Fin. Servs. Ass'n of Am., Ltd., No. 22-448 (U.S. argued Oct. 3, 2023) (“CFSA”), regarding the constitutionality of the CFPB’s funding mechanism. On October 23, 2023, the CFPB filed its opposition to the Motion to Stay. Heights and the other defendants filed an answer to the complaint on October 24, 2023, and filed a reply in support of the Motion to Stay on October 30, 2023.

On the terms and subject to the conditions set forth in the definitive agreement to acquire Heights, the former owners of Heights agreed to indemnify the Company for certain losses arising after the consummation of the transaction, including relating to the CFPB’s enforcement action. The indemnification obligations of the former owners of Heights are limited to an indemnity holdback of $10 million cash plus $20 million of CURO stock valued as of the date of close, which was escrowed at the closing of the transaction, and will be the Company’s sole recourse against the former owners of Heights with respect to all of the indemnifiable claims under the definitive transaction agreement. The value of the stock portion of the escrow as of September 30, 2023 is $1.2 million.

The Company believes that the CFPB’s claims are without merit and will vigorously defend the lawsuit. Nevertheless, at this time, the Company cannot predict or determine the timing or outcome of this matter or the effect that any adverse determinations the lawsuit may have on its business, financial condition or results of operations. There can be no assurance that the escrowed amount will be sufficient to address all covered losses. However, the imposition of damages, fines, penalties, restitution, other monetary liabilities, sanctions, settlements or changes to the Company’s business practices or operations could materially and adversely affect the Company’s business, financial condition, results of operations or reputation.

Other Legal Matters. The Company is involved in litigation matters related to amounts due in connection with the sale of the Legacy U.S. Direct Lending Business. The Company is a defendant in certain other litigation matters encountered from time-to-time in the ordinary course of business, some of which may be covered to an extent by insurance. While it is difficult to predict the outcome of any particular proceeding, the Company does not believe that any of these matters will have a material adverse effect on the Company's business, results of operations or financial condition.
30


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

NOTE 8 – INCOME TAXES

The Company's effective income tax rate from continuing operations was (23.8)% and 64.6% for the nine months ended September 30, 2023 and 2022, respectively.

The effective income tax rate from continuing operations for the nine months ended September 30, 2023 was lower than the blended federal and state/provincial statutory rate of approximately 26.0%, primarily as a result of recording a valuation allowance against U.S. DTAs of $52.5 million, partially offset by releasing Canada Direct Lending DTAs of $(0.7) million, and lost tax benefits related to share-based compensation of $2.0 million.

The effective income tax rate from continuing operations for the nine months ended September 30, 2022, was higher than the blended federal and state/provincial statutory rate of approximately 26.0%, primarily as a result of lost tax benefits related to the divestiture of the Legacy U.S. Direct Lending Business of $8.4 million, share-based compensation of $0.9 million, officers’ compensation of $1.0 million and non-deductible transaction costs of $0.2 million.

For the nine months ended September 30, 2023, we continued to evaluate evidence to estimate whether sufficient future sources of income will be generated to permit the use of the existing DTAs in the U.S. from continuing operations. During the first quarter of 2023, we determined that negative evidence outweighs the positive evidence of our ability to realize the U.S. DTAs. On this basis, we recorded a valuation allowance of $65.4 million against the U.S. DTAs from continuing operations, including $52.5 million recorded as Provision for income taxes and $13.0 million in Accumulated deficit related to the adoption of CECL.

The Company intends to reinvest Canada earnings indefinitely in its Canadian operations and therefore has not provided for any non-U.S. withholding tax that would be assessed on dividend distributions. If the accumulated earnings in Canada of $232.4 million were distributed to the U.S. legal entities, the Company would be subject to Canadian withholding taxes of an estimated $11.6 million. The determination of the U.S. state income taxes upon a potential foreign earnings distribution is impractical. In the event the earnings are distributed to the U.S. legal entities, the Company will adjust the income tax provision for the applicable period and determine the amount of foreign tax credit that would be available.

NOTE 9 – EARNINGS PER SHARE

The following table presents the computation of basic and diluted earnings per share (in thousands, except per share amounts):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Net (loss) income from continuing operations$(33,612)$21,117 $(142,585)$12,098 
Net (loss) income from discontinued operations(70,830)4,536 (80,655)(11,189)
Net (loss) income$(104,442)$25,653 $(223,240)$909 
Weighted average common shares - basic41,267 40,479 41,018 40,203 
Dilutive effect of stock options and restricted stock units— 356 — 551 
Weighted average common shares - diluted41,267 40,835 41,018 40,754 
Basic (loss) earnings per share:
Continuing operations$(0.81)$0.52 $(3.48)$0.30 
Discontinued operations(1.72)0.11 (1.97)(0.28)
Basic (loss) earnings per share$(2.53)$0.63 $(5.45)$0.02 
Diluted (loss) earnings per share:
Continuing operations$(0.81)$0.52 $(3.48)$0.30 
Discontinued operations(1.72)0.11 (1.97)(0.28)
Diluted (loss) earnings per share$(2.53)$0.63 $(5.45)$0.02 

Potential shares of common stock that would have the effect of increasing diluted earnings per share or decreasing diluted loss per share are considered to be anti-dilutive; therefore, these shares are not included in calculating diluted earnings per share. For the three and nine months ended September 30, 2023, there were 4.4 million and 4.4 million, respectively, and for the three and nine
31


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
months ended September 30, 2022, there were 3.5 million and 2.4 million, respectively, of potential shares of common stock excluded from the calculation of diluted earnings per share because their effect was anti-dilutive.

The Company utilizes the "control number" concept in the computation of diluted earnings per share to determine whether potential common stock instruments are dilutive. The control number used is income. The control number concept requires that the same number of potentially dilutive securities applied in computing diluted earnings per share is applied to all other categories of income or loss, regardless of their anti-dilutive effect on such categories.

NOTE 10 – LEASES

Leases entered into by the Company are primarily for retail stores in certain U.S. states and Canadian provinces.

Leases classified as finance leases were immaterial to the Company as of September 30, 2023. Operating leases expire at various times through 2033. Operating leases are included in "Right of use asset - operating leases" and "Lease liability - operating leases" in the unaudited Condensed Consolidated Balance Sheets. Operating lease costs are included in "Occupancy" in the unaudited Condensed Consolidated Statements of Operations. The majority of leases have an original term up to five years plus renewal options under similar terms.

The Company recorded $0.8 million and $8.3 million of expense during the three and nine months ended September 30, 2023 for lease abandonment costs related to restructuring actions. For further information, refer to Note 15, "Restructuring."
The following table summarizes the operating lease costs and other information for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Operating lease costs:
Third-Party
$5,832 $6,983 $17,937 $25,791 
Related-Party
157 332 470 1,986 
Total operating lease costs$5,989 $7,315 $18,407 $27,777 
Cash paid for amounts included in the measurement of operating lease liabilities$18,705 $29,421 
ROU assets obtained$9,174 $(29,965)
Weighted average remaining lease term - Operating leases4.0 years4.6 years
Weighted average discount rate - Operating leases8.5 %8.1 %

The following table summarizes the aggregate operating lease payments that the Company was contractually obligated to make under operating leases as of September 30, 2023 (in thousands):
Third-PartyRelated-PartyTotal
Remainder of 2023$5,623 $156 $5,779 
202419,088 632 19,720 
202513,568 649 14,217 
20267,547 667 8,214 
20274,542 685 5,227 
20282,611 667 3,278 
Thereafter4,527 326 4,853 
Total57,506 3,782 61,288 
Less: Imputed interest(8,763)(946)(9,709)
Operating lease liabilities$48,743 $2,836 $51,579 

There were no material leases entered into subsequent to the balance sheet date.

32


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – DIVIDENDS
Dividend Program

In October 2022, the Company's Board of Directors suspended its previously authorized quarterly dividend of $0.11 per share ($0.44 per share annualized). There were no dividends paid in the nine months ended September 30, 2023, except those related to previously declared dividends on RSUs vested during the nine months ended September 30, 2023 related to the unvested period.

NOTE 12 – SEGMENT AND GEOGRAPHIC DATA
During the quarter ended September 30, 2023, we completed the sale of Flexiti, which comprised our entire Canada POS Lending operating segment. See Note 14, "Discontinued Operations" for more information. The Company determined the Flexiti operations met the criteria for discontinued operations in the third quarter of 2023. As a result, the Flexiti operations are presented in the accompanying unaudited Condensed Consolidated Balance Sheet, unaudited Condensed Consolidated Statements of Operations and Cash Flows as discontinued operations for all applicable periods presented. Consequently, we now report our results in a single reportable segment, Direct Lending, which reflects how the Company's CODM allocates resources and evaluates our financial results. The U.S. and Canada have similar economic and operating characteristics, including the nature of products and services offered, operating procedures and risks, customer bases and shared corporate resources, which led the CODM to conclude that these separate segments combine to form one operating segment. Because we have a single reportable segment, all required financial segment information can be found directly in the unaudited Consolidated Financial Statements.
As of September 30, 2023, the Company operated over 490 U.S. retail locations in 13 states. As of September 30, 2023, the Company operated nearly 150 stores across eight Canadian provinces and had an online presence in eight provinces and one territory.

Geographic Data

The following table presents total revenues by geographic region:

Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
U.S.$87,906 $107,430 $269,731 $511,540 
Canada79,957 78,979 234,516 226,007 
Total revenue$167,863 $186,409 $504,247 $737,547 

The following table presents the proportion of gross loans receivable by geographic region:
September 30,
2023		December 31,
2022
U.S.$751,869 $773,380 
Canada502,532 481,015 
Total gross loans receivable$1,254,401 $1,254,395 

The following table presents the Company's net long-lived assets, comprised of property and equipment, by geographic region. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the asset is physically located (in thousands):
September 30,
2023		December 31,
2022
U.S.$10,330 $13,993 
Canada13,573 15,239 
Total net long-lived assets$23,903 $29,232 


33


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 – ACQUISITIONS AND DIVESTITURES

ACQUISITIONS
First Heritage

On July 13, 2022, the Company closed the acquisition of First Heritage, a consumer lender that provides near-prime installment loans along with customary opt-in insurance and other financial products, for a purchase price of $140.0 million in cash, subject to certain customary working capital and other adjustments. The Company began consolidating the financial results of First Heritage in the unaudited Condensed Consolidated Financial Statements on July 13, 2022 within the Direct Lending operating segment.

This transaction was accounted for using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The Company was the acquirer for purposes of accounting for the business combination. The values assigned to the acquired assets and liabilities assumed are provisional based on the preliminary fair value estimates as of the acquisition date. The values assigned to the assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the date of this Form 10-Q and may be adjusted during the measurement period of up to 12 months from the date of acquisition as further information becomes available. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. As of September 30, 2023, the Company completed the determination of the fair values of the acquired identifiable assets and liabilities.
34


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

The following table presents the purchase price allocation recorded in the Company’s unaudited Condensed Consolidated Balance Sheet as of the date of acquisition (in thousands):

Amounts acquired on July 13, 2022
Assets
Cash and cash equivalents
$31,396 
Restricted cash1,933 
Gross loans receivable(1)
218,011 
Prepaid expenses and other1,285 
Property and equipment345 
Right-of-use assets
4,241 
Intangibles, net10,670 
Total assets$267,880 
Liabilities
Accounts payable and accrued liabilities $4,270 
Lease liabilities 4,241 
Debt170,392 
Total liabilities$178,904 
Net assets acquired$88,976 
Total consideration paid164,341 
Goodwill $75,365 
(1) The gross contractual loans receivables as of July 13, 2022 were $236.1 million, of which the Company estimates $18.1 million will not be collected.

The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands):

Fair ValueUseful Life
Trade name$3,790 10.0 years
Customer relationships6,880 3.5 years
Total identified intangible assets $10,670 

Goodwill of $75.4 million represents the excess of the consideration paid over the fair value of the net tangible and intangible assets acquired. The goodwill was primarily attributable to expected synergies created with the Company’s future product offerings and the value of the combined workforce. Goodwill from this transaction is deductible for income tax purposes.

Heights

On December 27, 2021, the Company acquired 100% of the outstanding stock of Heights for $360.0 million, consisting of $335.0 million in cash and $25.0 million of the Company's common stock. Heights is a consumer finance company that provides secured and unsecured Installment loans to near-prime and non-prime consumers, and offers customary opt-in insurance and other financial products across 390 branches in 11 U.S. states.

The Company began consolidating the financial results of Heights in the unaudited Condensed Consolidated Financial Statements on December 27, 2021 within the Direct Lending operating segment.

35


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2021, the Company completed the determination of the fair values of the acquired identifiable assets and liabilities. During the year ended December 31, 2022, the Company recorded measurement period adjustments that increased goodwill by $11.8 million. The measurement period adjustment related to the fair value of the loan portfolio and would have resulted in $7.7 million of incremental interest and fee revenue during the three months ended March 31, 2022 and no impact on the year ended December 31, 2022. The Company recorded a measurement period adjustment in the fourth quarter of 2022 that decreased goodwill by $3.5 million related to the final true-up of deferred tax balances after the pre-acquisition income tax returns were filed in October 2022. The Company made these measurement period adjustments to reflect the correct deferred tax balances that existed as of the acquisition date and not from events subsequent to such date. Additionally, in the fourth quarter of 2022, a measurement period adjustment was recorded related to tax filings for pre-acquisition activity which resulted in $4.2 million of income tax receivables and an increase to accounts payable for the same amount. As of December 31, 2022, the Company completed the determination of the fair values of the acquired identifiable assets and liabilities.

The following table presents the purchase price allocation recorded in the Company’s unaudited Condensed Consolidated Balance Sheet as of the date of acquisition of Heights (in thousands):

Amounts acquired on December 27, 2021Measurement period adjustmentsAmounts acquired on December 27, 2021 (as adjusted)
Assets
Cash and cash equivalents
$13,564 $— $13,564 
Restricted cash33,630 — 33,630 
Gross loans receivable(1)
471,630 (15,379)456,251 
Income tax receivable3,526 4,209 7,735 
Prepaid expenses and other7,410 — 7,410 
Property and equipment4,748 — 4,748 
Right-of-use assets
16,111 — 16,111 
Intangibles, net11,900 — 11,900 
Deferred tax asset— 2,477 2,477 
Other assets98 — 98 
Total assets$562,617 $(8,693)$553,924 
Liabilities
Accounts payable and accrued liabilities $19,186 $4,209 $23,395 
Lease liabilities 16,315 — 16,315 
Deferred tax liability 1,077 (1,077)— 
Accrued interest on debt1,781 — 1,781 
Debt350,000 — 350,000 
Total liabilities$388,359 $3,132 $391,491 
Net assets acquired$174,258 $(11,825)$162,433 
Total consideration paid428,115 428,115 
Goodwill $253,857 $265,682 
(1) The gross contractual loans receivables as of December 27, 2021 were $485.4 million, of which the Company estimates $29.1 million will not be collected.

DIVESTITURES

Flexiti

On August 31, 2023, the Company completed the previously announced sale of Flexiti to Questrade for total base consideration of $40.6 million, subject to an adjustment based on Flexiti’s tangible book value, unrestricted cash at closing and certain other adjustments. In total, the Company received net proceeds of $63.7 million. Refer to Note 14, "Discontinued Operations" for further discussion.

36


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Legacy U.S. Direct Lending Business

On July 8, 2022, the Company completed the divestiture of its Legacy U.S. Direct Lending Business to Community Choice Financial, for total sale proceeds of $349.2 million, net of working capital adjustments, comprised of $314.2 million of cash received at close and $35.0 million in cash payable in monthly installment payments over the subsequent 12 months.

The divestiture resulted in a gain of $68.4 million for the year ended December 31, 2022, which was recorded in "Gain on sale of business" on the unaudited Condensed Consolidated Statements of Operations. Per ASC 205: Presentation of Financial Statements, the sale of the business is not classified as discontinued operations in the Company’s operations or financial results.

The Company reduced the gain by $2.0 million in the nine months ended September 30, 2023 based on expected uncollectible amounts. There was no change to this calculation in the three months ended September 30, 2023.

The following table presents the amounts attributable to each category recorded in the Company’s unaudited Condensed Consolidated Balance Sheet as of the date of divestiture of the Legacy U.S. Direct Lending Business, as adjusted (in thousands):


Amounts divested of on July 8, 2022Subsequent adjustmentsAmounts divested of on July 8, 2022 (as adjusted)
Assets
Cash, cash equivalents and restricted cash$21,292 $— $21,292 
Loans receivable162,147 — 162,147 
Right of use asset39,326 — 39,326 
Goodwill91,131 — 91,131 
Other assets (1)
30,690 (2,027)28,663 
Total assets$344,586 $(2,027)$342,559 
Liabilities
Accounts payable and accrued liabilities $(8,947)$— $(8,947)
Right of use liability(43,433)— (43,433)
Liability for losses on CSO lender-owned consumer loans (5,628)— (5,628)
Other long term liabilities (2)
(5,815)— (5,815)
Total liabilities$(63,823)$— $(63,823)
Net assets sold$280,763 $280,763 
Total proceeds349,207 (2,027)347,180 
Total pretax gain on sale of business$68,444 $66,417 
(1) Includes income tax receivable, property and equipment, intangibles, deferred tax assets and other assets.
(2) Includes deferred revenue, income taxes payable, deferred tax liability and other long-term liabilities

The Legacy U.S. Direct Lending Business had pre-tax net income of $3.6 million and $60.7 million for the three and nine months ended September 30, 2022, respectively. Pre-tax net income is comprised of net revenue and expenses directly related to the Legacy U.S. Direct Lending Business, which does not include certain costs recorded in the Legacy U.S. Direct Lending operating segment that are not classified as disposed of, such as interest expense on the 7.50% Senior Secured Notes and certain corporate expenses.


37


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 – DISCONTINUED OPERATIONS

Flexiti

On August 31, 2023, the Company completed the divestiture of Flexiti to Questrade Financial Group Inc. The Company received total sales proceeds of $63.7 million, including $28.6 million in cash, after $12.3 million of transaction costs paid out of proceeds, on the closing date and $22.9 million in escrow receivables. The total sales proceeds are net of adjustments to the gross purchase price for Flexiti's tangible book value and unrestricted cash as of the closing date. The Company paid total transaction costs of $13.0 million related to the sale of Flexiti. Flexiti constituted the entirety of the Company’s Canada POS Lending operating segment. The divestiture resulted in a loss of $93.2 million in the three and nine months ended September 30, 2023, which was recorded in Net (loss) income from discontinued operations on the unaudited Condensed Consolidated Statements of Operations. As part of the transaction, the Company also entered into a Transition Service Agreement to support Questrade in the transition by continuing to provide call center and select finance support services to Flexiti, for a period of six months following the closing date. As consideration for these services, Questrade will reimburse the Company for the salaries and benefits expenses incurred on behalf of the services rendered based upon an agreed upon blended rate and for applicable call center licenses. Income from the transition service agreement is recorded as a reduction to the corresponding expense within the unaudited Consolidated Statements of Operations.

After consideration of the relevant facts related to the Flexiti divestiture, the Company concluded the proposed disposal activities represented a strategic shift that has a major effect on the Company’s operations and financial results as Flexiti (i) provides Buy-Now-Pay-Later / Point of Sale services through its merchant partner network, (ii) engaged in merchant partnerships as a source of customer acquisition and revenue, (iii) primarily engaged with prime customers and (iv) offered interest free or deferred periods on certain of its loans, unlike the Company's remaining Direct Lending operations. As such, Flexiti qualified for presentation as discontinued operations. Accordingly, the financial results of Flexiti are presented in the accompanying unaudited Condensed Consolidated Financial Statements for all periods presented as discontinued operations. Refer to Note 1, "Summary of Significant Accounting Policies and Nature of Operations" for further information.

Assets and liabilities related to the divested operations have been reclassified in the unaudited Condensed Consolidated Balance Sheet as of December 31, 2022, which are detailed in the table below:


December 31, 2022
Assets
Cash, cash equivalents, and restricted cash$55,176 
Loans receivable, net
792,596 
Prepaid expenses and other1,976 
Property and equipment, net
2,725 
Right-of-use assets3,020 
Deferred tax assets
31,755 
Intangibles
52,764 
Other assets (1)
5,391 
Assets, discontinued operations
$945,403 
Liabilities
Accounts payable and accrued liabilities $28,233 
Deferred revenue
28,792 
Right-of-use liability3,451 
Contingent consideration related to acquisition
16,884 
Debt
724,705 
Liabilities, discontinued operations
$802,065 
(1) Includes income tax receivable and other assets.

The operating results of Flexiti have been reclassified as discontinued operations in the unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2023, respectively, as detailed in the table below:



38


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

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands, unaudited)2023202220232022
Revenue
Interest and fees revenue$26,253 $24,575 $98,606 $64,077 
Insurance and other income3,451 3,136 13,430 7,096 
Total revenue29,704 27,711 112,036 71,173 
Provision for losses11,449 13,379 41,860 28,055 
Net revenue18,255 14,332 70,176 43,118 
Operating expenses
Salaries and benefits3,436 4,234 19,824 19,448 
Occupancy247 408 957 929 
Advertising79 568 419 1,109 
Direct operations2,357 3,441 9,138 10,858 
Depreciation and amortization2,574 3,816 10,007 10,915 
Other operating expense16,354 1,051 16,610 2,455 
Total operating expenses25,047 13,518 56,955 45,714 
Other expense
Loss on sale
93,245 — 93,245 — 
Interest expense11,128 11,994 41,667 26,843 
(Gain) loss on change in fair value of contingent consideration
— (11,355)2,728 (7,605)
Total other expense104,373 639 137,640 19,238 
(Loss) income from discontinued operations
(111,165)175 (124,419)(21,834)
Benefit for income taxes
(40,335)(4,361)(43,764)(10,645)
Net (loss) income from discontinued operations
$(70,830)$4,536 $(80,655)$(11,189)

The Company's effective income tax rate from discontinued operations was 35.2% and 48.8% for the nine months ended September 30, 2023 and 2022, respectively. The effective income tax rate from discontinued operations for the nine months ended September 30, 2023 of 35.2% was higher than the blended federal and provincial statutory rate of approximately 26%, primarily as a result of recording a current tax benefit realized from the loss on the divestiture. The effective income tax rate from discontinued operations for the nine months ended September 30, 2022 of 48.8% was higher than the blended federal and provincial statutory rate of approximately 26%, primarily as a result of $2.1 million change in value of contingent consideration.

NOTE 15 – RESTRUCTURING

On October 5, 2022, the Company's Board of Directors approved restructuring actions to reduce operating expenses through store closures and headcount reductions in both the U.S. and Canada, and the elimination of duplicative corporate office functions in the U.S. Both the workforce reduction and store closures were aimed at reducing duplicative corporate functions and stores with overlapping customer populations as a result of the acquisitions of Heights in December of 2021 and First Heritage in July of 2022. For the year ended December 31, 2022, the Company incurred $16.0 million of expense related to our restructuring actions, of which $7.9 million related to employee termination benefits resulting from the workforce reduction of approximately 150 employees, and $8.2 million related to lease abandonment costs resulting from the closure of 89 stores in the U.S. and Canada.
For the three and nine months ended September 30, 2023, the Company incurred an additional $4.0 million and $14.0 million, respectively, of expense related to our restructuring actions, of which $3.0 million and $5.5 million related to employee termination benefits, and $0.8 million and $8.3 million, respectively, related to lease abandonment costs resulting from the closure of stores in the U.S. and Canada.
39


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table shows the total restructuring costs incurred during the three and nine months ended September 30, 2023, (in thousands):

Three months ended September 30, 2023
Nine months ended September 30, 2023
Employee Termination BenefitsLease Exit Costs
Other Related Costs
Total Restructuring CostsEmployee Termination BenefitsLease Exit Costs
Other Related Costs
Total Restructuring Costs
Salaries and Benefits$3,045 $— $— $3,045 $4,562 $— $— $4,562 
Other Operating Expense— 800 189 989 958 8,281 189 9,428 
Total$3,045 $800 $189 $4,034 $5,520 $8,281 $189 $13,990 

The following table shows the total amount incurred and liability, which is recorded in accounts payables and other accrued liabilities in the unaudited Condensed Consolidated Balance Sheets, for restructuring-related costs as of September 30, 2023 and for the three and nine months ended September 30, 2023, (in thousands):

Accrued restructuring costs as of December 31, 2022$4,746 
Restructuring costs incurred during the three months ended March 31, 20239,956 
Amount paid during the three months ended March 31, 2023(4,641)
Accrued restructuring costs as of March 31, 2023$10,061 
Restructuring costs incurred during the three months ended June 30, 2023— 
Amount paid during the three months ended June 30, 2023(2,904)
Accrued restructuring costs as of June 30, 2023$7,157 
Restructuring costs incurred during the three months ended September 30, 20234,034 
Amount paid during the three months ended September 30, 2023(3,234)
Accrued restructuring costs as of September 30, 2023$7,957 

NOTE 16 – SHARE REPURCHASE PROGRAM

In February 2022, the Company's Board of Directors authorized a new share repurchase program for the repurchase of up to $25.0 million of its common stock. In March 2023, the Board of Directors terminated the program. There were no repurchases under this program.

In May 2021, the Company's Board of Directors authorized a share repurchase program for up to $50.0 million of its common stock. The program commenced in June 2021 and was completed in February 2022. The Company repurchased 824,477 shares of common stock under the plan at an average price of $15.20 for a total cost of $12.5 million during the nine months ended September 30, 2022.

40


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 – SUBSEQUENT EVENTS

On October 16, 2023, the Company received a written notice (the “Market Cap Notice”) from the NYSE that the Company was not in compliance with the continued listing criteria set forth in Section 802.01B of the NYSE’s Listed Company Manual with respect to the minimum market capitalization and shareholders' equity requirements, because the average market capitalization of the Company over a consecutive 30 trading-day period was less than $50 million and, at the same time, the Company’s last reported stockholders’ equity was less than $50 million. As of October 16, 2023, the 30 trading-day average market capitalization was approximately $44.7 million, and the Company's last reported stockholders’ deficit was $398.0 million ($268.4 million as of June 30, 2023). Within 45 days of receipt of the Market Cap Notice, the Company will respond to the NYSE with a business plan aimed to demonstrate the definitive actions the Company has taken, or will take, to regain compliance with the continued listing standards within 18 months of the Market Cap Notice. Should the Listings Operations Committee of the NYSE review and approve the plan, the Company's common stock will continue to be listed and traded on the NYSE during the 18-month cure period, subject to the Company's compliance with the other continued listing criteria of the NYSE and the periodic monitoring of the business plan by the NYSE.

On October 27, 2023, the Company received written notice from the NYSE that the Company was not in compliance with the continued listing criteria set forth in 802.01C of the NYSE's Listed Company Manual with respect to stock price requirements (the "Stock Price Notice"). The Company has a period of six months following the receipt of the Stock Price Notice to regain compliance. As a result, the Company has until April 27, 2024 to regain compliance. If the Company determines that in order to cure the price condition it is necessary to take an action that requires shareholder approval, it must obtain shareholder approval no later than its 2024 annual meeting and must implement the action promptly thereafter.

The Market Cap Notice and Stock Price Notice do not affect the Company’s reporting obligations with the Securities and Exchange Commission, and they do not conflict with or cause an event of default under any of the Company’s material debt or other agreements.

At October 30, 2023, the Company had $22.9 million in escrow receivables, of which $19.9 million related to Flexiti's tangible book value and unrestricted cash, as of the closing date. On October 30, 2023, the Company received the final Flexiti tangible book value and unrestricted cash amounts from Questrade needed to finalize the purchase price. No adjustments to the proceeds or loss on sale of Flexiti calculation were required.
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ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements. These forward-looking statements include projections, estimates and assumptions about various matters, including future financial and operational performance, and may be identified by words such as "guidance," "estimate," "anticipate," "believe," "forecast," "step," "plan," "predict," "focused," "project," "is likely," "is possible," "expect," "anticipate," "intend," "should," "will," 'may," "confident," "trend" and variations of such words and similar expressions. The matters discussed in these forward-looking statements are based on management's beliefs, assumptions, current expectations and estimates and projections, and are subject to risk, uncertainties and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Except as required by applicable law and regulations, we undertake no obligation to update any forward-looking statements or other statements we may make in the following discussion or elsewhere in this document even though these statements may be affected by events or circumstances occurring after the forward-looking statements or other statements were made. Please see the sections titled “Risk Factors” in our 2022 Form 10-K and "Risk Factors" in Item 1A of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and this Form 10-Q for a discussion of the uncertainties, risks and assumptions associated with our business.

Company Overview

We are an omni-channel consumer finance company serving consumers in portions of the U.S. and Canada. CURO was founded over 25 years ago to meet the growing needs of consumers looking for additional ways to access credit. We continuously update our products and technology platform to offer a variety of convenient and accessible financial and loan services. We design our customer experience to allow consumers to apply for, update and manage their loans in the channels they prefer—in branch, via mobile device or over the phone. Our high customer satisfaction scores speak to our ability to anticipate and exceed customers’ needs.
In the U.S., we operate under several principal brands, including "Heights Finance," "Southern Finance" "Covington Credit," "Quick Credit," and "First Heritage Credit" direct lending brands. In Canada, we operate under “Cash Money” and “LendDirect” direct lending brands. As of September 30, 2023, we operated over 490 store locations across 13 U.S. states and nearly 150 stores in eight Canadian provinces and had an online presence in eight provinces and one territory. Until the sale of our Legacy U.S. Direct Lending Business in July 2022, we also operated under brands that included "Speedy Cash," "Rapid Cash" and "Avio Credit." We also offered demand deposit accounts in the U.S. under the "Revolve Finance" brand and credit card programs under the "First Phase" brand, until the fourth quarter of 2022. In Canada, we also operated under the brand "Flexiti" until the sale of Flexiti on August 31, 2023.

Recent Business Developments

Discontinued Operations

On August 31, 2023, we completed the divestiture of Flexiti to Questrade for total sale proceeds of $63.7 million, inclusive of the Flexiti tangible book value and unrestricted cash adjustments. The divestiture resulted in a loss of $93.4 million in the three and nine months ended September 30, 2023, which was recorded in Net (loss) income from discontinued operations on the unaudited Condensed Consolidated Statements of Operations. Refer to Note 14, "Discontinued Operations" for further discussion. Additionally, as discussed in “Note 1, Summary of Significant Accounting Policies and Nature of Operations," we determined the Flexiti Divestiture met the criteria for discontinued operations beginning in the third quarter of 2023. As a result, Flexiti is presented in the accompanying unaudited Condensed Consolidated Financial Statements as discontinued operations for all periods presented.

Flexiti comprised the entirety of our former Canada POS Lending operating segment. As a result, we now report results in a single reportable segment.

Notice of Non-Compliance with NYSE Continued Listing Standards
42






On October 16, 2023, the Company received a written notice (the “Market Cap Notice”) from the NYSE that the Company was not in compliance with the continued listing criteria set forth in Section 802.01B of the NYSE’s Listed Company Manual with respect to the minimum market capitalization and shareholders' equity requirements, as the average market capitalization of the Company over a consecutive 30 trading-day period was less than $50 million and, at the same time, the Company’s last reported stockholders’ equity was less than $50 million. As of October 16, 2023, the 30 trading-day average market capitalization was approximately $44.7 million, and its last reported stockholders’ deficit was $398.0 million ($268.4 million as of June 30, 2023). Within 45 days of receipt of the Market Cap Notice, the Company will respond to the NYSE with a business plan aimed to demonstrate the definitive actions the Company has taken, or is taking, to regain compliance with the continued listing standards within 18 months of the Market Cap Notice. Should the Listings Operations Committee of the NYSE review and approve the plan, the Company's common stock will continue to be listed and traded on the NYSE during the 18-month cure period, subject to the Company's compliance with the other continued listing criteria of the NYSE and the periodic monitoring of the business plan by the NYSE.

On October 27, 2023, the Company received written notice from the NYSE that the Company was not in compliance with the continued listing criteria set forth in 802.01C of the NYSE's Listed Company Manual with respect to stock price requirements (the "Stock Price Notice"). The Company has a period of six months following the receipt of the Stock Price Notice to regain compliance. As a result, the Company has until April 27, 2024 to regain compliance. If the Company determines that in order to cure the price condition it is necessary to take an action that requires shareholder approval, it must obtain shareholder approval by no later than its 2024 annual meeting and must implement the action promptly thereafter.

The Market Cap Notice and Stock Price Notice do not affect the Company’s reporting obligations with the Securities and Exchange Commission, and they do not conflict with or cause an event of default under any of the Company’s material debt or other agreements.

Finalization of the Flexiti Purchase Price

At October 30, 2023, the Company had $22.9 million in escrow receivables, of which $19.9 million related to Flexiti's tangible book value and unrestricted cash, as of the closing date. On October 30, 2023, the Company received the final Flexiti tangible book value and unrestricted cash amounts from Questrade needed to finalize the purchase price. No adjustments to the proceeds or loss on sale of Flexiti calculation were required.

Regulatory Developments

See "Regulatory Environment and Compliance" for a description of the regulatory environment in which we operate in the U.S. and Canada and related developments in the third quarter of 2023.

RESULTS OF OPERATIONS
Consolidated Revenue by Product
On August 31, 2023, we completed the divestiture of Flexiti to Questrade. Flexiti comprised the entirety of our Canada POS Lending operating segment. This transaction resulted in treatment of the Canada POS Lending operating segment as discontinued operations for all periods presented in the unaudited Condensed Consolidated Financial Statements. Unless otherwise indicated, the discussion on our results of operations provided below relates to our continuing operations and we have recast prior-period amounts for purposes of historical comparisons. See Note 14, "Discontinued Operations" for further information.
Beginning January 1, 2023, we started reporting "Insurance and other income" in place of the previously reported "Insurance premiums and commissions" and "Other revenue" line items in the unaudited Condensed Consolidated Statements of Operations. Prior period amounts have been reclassified to conform with current period presentation.
Beginning January 1, 2023, we renamed the previously reported Allowance for loan losses to Allowance for credit losses on the unaudited Condensed Consolidated Statements of Operations. Prior period amounts have been reclassified to conform with current period presentation.
As a result of the sale of the Legacy U.S. Direct Lending Business in July 2022, we no longer guarantee loans originated by third-party lenders through CSO programs. As such, our results of operations discussed below only include the results from the CSO program for the three months and nine months ended September 30, 2022. Refer to Note 13, "Acquisitions and Divestitures" for additional information.
The following table summarizes revenue by product for the period indicated:
43





For the Three Months Ended
September 30, 2023September 30, 2022
(in thousands)
Total
% of Total
Total
% of TotalChange $Change %
Revolving LOC$ 51,039 30.4 %$ 52,461 28.1 %(1,422)(2.7)%
Installment92,454 55.1 %103,479 55.5 %(11,025)(10.7)%
Total interest and fees revenue143,493 85.5 %155,940 83.7 %(12,447)(8.0)%
Insurance and other income24,370 14.5 %30,469 16.3 %(6,099)(20.0)%
   Total revenue$ 167,863 100.0 %$ 186,409 100.0 %(18,546)(9.9)%

During the three months ended September 30, 2023, total revenue decreased $18.5 million, or 9.9%, to $167.9 million, compared to the prior-year period, primarily related to a product mix shift and the sale of the Legacy U.S. Direct Lending Business in July 2022, which caused a shift to longer term, higher credit quality and lower yielding loans.
Product Revenue for the Three Months Ended September 30, 2023
•Revolving LOC
◦Revolving LOC revenue for the three months ended September 30, 2023 remained relatively flat at $51.0 million, a decrease of $1.4 million, or 2.7%.

•Installment
◦Installment revenue for the three months ended September 30, 2023 decreased $11.0 million, or 10.7%, compared to the prior-year period, primarily due to the sale of the Legacy U.S. Direct Lending Business in July 2022 and a product mix shift to higher credit quality lower yielding loans in the U.S.

•Insurance and other income
◦Insurance and other income for the three months ended September 30, 2023 decreased $6.1 million, or 20.0%, compared to the prior-year period, primarily related to a product mix shift in the current period compared to the prior period leading to lower other product income.


For the Nine Months Ended
September 30, 2023
September 30, 2022
(in thousands)
Total
% of Total
Total
% of TotalChange $Change %
Revolving LOC$ 149,614 29.7 %$ 200,565 27.2 %(50,951)(25.4)%
Installment279,949 55.5 %459,160 62.3 %(179,211)(39.0)%
Total interest and fees revenue429,563 85.2 %659,725 89.4 %(230,162)(34.9)%
Insurance and other income74,684 14.8 %77,822 10.6 %(3,138)(4.0)%
   Total revenue$ 504,247 100.0 %$ 737,547 100.0 %(233,300)(31.6)%

During the nine months ended September 30, 2023, total revenue decreased $233.3 million, or 31.6%, to $504.2 million, compared to the prior-year period, primarily due to the sale of the Legacy U.S. Direct Lending Business in July 2022, partially offset by the acquisition of First Heritage in July 2022 and revenue growth in Canada. These transactions furthered our shift to longer term, higher credit quality and lower yielding loans.
Product Revenue for the Nine Months Ended September 30, 2023
•Revolving LOC
◦Revolving LOC revenue for the nine months ended September 30, 2023 decreased $51.0 million, or 25.4%, compared to the prior-year period, primarily due to the impact of the sale of the Legacy U.S. Direct Lending Business in July 2022, partially offset by growth in Canada of $6.3 million, or 4.4%.

•Installment
◦Installment revenue for the nine months ended September 30, 2023 decreased $179.2 million, or 39.0%, compared to the prior-year period, primarily due to the sale of the Legacy U.S. Direct Lending Business in July 2022, partially offset by revenue following the acquisition of First Heritage in July 2022.

•Insurance and other income
◦Insurance and other income for the nine months ended September 30, 2023 decreased $3.1 million, or 4.0%,
44





compared to the prior-year period, primarily due to the sale of the Legacy U.S. Direct Lending Business in July 2022, partially offset by revenue following the acquisition of First Heritage in July 2022.
45





Consolidated Results of Operations
The table below presents our consolidated results of operations.
(in thousands, unaudited)Three Months Ended September 30,Nine Months Ended September 30,
20232022Change $Change %20232022Change $Change %
Revenue
Interest and fees revenue$143,493 $155,940 $(12,447)(8.0)%$429,563 $659,725 $(230,162)(34.9)%
Insurance and other income24,370 30,469 (6,099)(20.0)%74,684 77,822 (3,138)(4.0)%
Total revenue167,863 186,409 (18,546)(9.9)%504,247 737,547 ($ 233,300)(31.6)%
Provision for losses49,009 65,020 (16,011)(24.6)%161,128 277,421 (116,293)(41.9)%
Net revenue118,854 121,389 (2,535)(2.1)%343,119 460,126 (117,007)(25.4)%
Operating Expenses
Salaries and benefits52,148 49,179 2,969 6.0 %161,911 196,121 (34,210)(17.4)%
Occupancy10,454 12,419 (1,965)(15.8)%32,683 46,442 (13,759)(29.6)%
Advertising2,819 4,676 (1,857)(39.7)%6,785 27,342 (20,557)(75.2)%
Direct operations12,176 8,288 3,888 46.9 %33,953 41,438 (7,485)(18.1)%
Depreciation and amortization5,390 5,683 (293)(5.2)%16,119 17,070 (951)(5.6)%
Other operating expense11,207 22,595 (11,388)(50.4)%37,179 56,354 (19,175)(34.0)%
Total operating expenses94,194 102,840 (8,646)(8.4)%288,630 384,767 (96,137)(25.0)%
Other expense (income)
Interest expense55,798 38,155 17,643 46.2 %150,303 103,840 46,463 44.7 %
Loss from equity method investment1,453 2,309 (856)(37.1)%7,000 2,053 4,947 #
Extinguishment or modification of debt costs— 3,702 (3,702)#8,864 3,702 5,162 #
Gain on sale of business— (68,443)68,443 #2,027 (68,443)70,470 #
Miscellaneous expenses— — — #1,435 — 1,435 #
Total other expense (income)57,251 (24,277)81,528 #169,629 41,152 128,477 #
Income (loss) before income taxes(32,591)42,826 (75,417)#(115,140)34,207 (149,347)#
Provision for income taxes from continuing operations1,021 21,709 (20,688)(95.3)%27,445 22,109 5,336 24.1 %
Net (loss) income from continuing operations$(33,612)$21,117 $(54,729)#$(142,585)$12,098 $(154,683)#
#- Change greater than 100% or not meaningful
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Consolidated Portfolio Performance

(in thousands, except percentages, unaudited)Q3 2023Q2 2023Q1 2023Q4 2022Q3 2022
Gross loans receivable
Revolving LOC$ 469,041$ 472,902$ 461,443$ 451,077$ 439,117
Installment loans 785,360754,713748,133803,318765,041
Total gross loans receivable$ 1,254,401$ 1,227,615$ 1,209,576$ 1,254,395$ 1,204,158
Lending Revenue
Revolving LOC$ 51,039$ 49,483$ 49,092$ 49,915$ 52,461
Installment loans92,45492,28395,212100,435103,478
Total lending revenue$ 143,493$ 141,766$ 144,304$ 150,350$ 155,939
Lending Provision
Revolving LOC$19,031$27,089$15,539$ 29,620$ 28,408
Installment loans28,46435,17131,13946,44233,511
Total lending provision$ 47,495$ 62,260$ 46,678$ 76,062$ 61,919
NCOs
Revolving LOC$22,023$21,780$6,234$ 26,715$ 24,793
Installment loans 33,34235,48341,07838,16829,783
Total NCOs$ 55,365$ 57,263$ 47,312$ 64,883$ 54,576
NCO rate (annualized) (1)
Revolving LOC18.6 %18.7%5.5%23.8%20.9 %
Installment loans 17.2 %18.9%21.5%19.3%16.7 %
Total NCO rate17.7 %18.8%15.6%20.9%18.4 %
ACL rate (2) (3)
Revolving LOC25.4 %26.6 %25.6 %8.4 %7.9 %
Installment loans 10.3 %11.2 %11.3 %5.4 %4.6 %
Total ACL rate15.9 %17.1 %16.8 %6.5 %5.8 %
31+ days past-due rate (2)
Revolving LOC8.6 %8.5 %8.4 %4.1 %5.1 %
Installment loans 8.5 %8.1 %8.2 %9.6 %10.2 %
Total past-due rate8.5 %8.3 %8.3 %7.6 %8.3 %
(1) We calculate NCO rate as total quarterly NCOs divided by Average gross loans receivable, then we annualize the rate. The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications and the periodic sale of charged off loans.
(2) We calculate (i) ACL rate and (ii) 31+ days past-due rate as the respective totals divided by gross loans receivable at each quarter end.
(3) We adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" on January 1, 2023, which requires us to estimate the lifetime expected credit loss on financial instruments. Our previous model required the recognition of credit losses when it was probable that a loss had been incurred.

Comparison of Consolidated Results of Operations for the Three Months Ended September 30, 2023 and 2022

Revenue

For a discussion of revenue, see "Consolidated Revenue by Product" above.
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Provision for Losses

We adopted CECL on January 1, 2023, as further described in Note 1, "Summary of Significant Accounting Policies and Nature of Operations". Provision for losses decreased by $16.0 million, or 24.6%, for the three months ended September 30, 2023 compared to the prior-year period, primarily driven by a lower allowance for credit losses rate due to a decrease in net charge off rates and overall credit improvement during the quarter.
Operating Expenses

Operating expenses for the three months ended September 30, 2023 decreased $8.6 million, or 8.4%, compared to the prior-year period, primarily driven by:

Salaries and benefits. Salaries and benefits expense was $52.1 million for the three months ended September 30, 2023, an increase of $3.0 million, or 6.0%, compared to the prior-year period. The increase is largely due to $3.0 million of restructuring costs incurred during the three months ended September 30, 2023, as further described in Note 15, "Restructuring."

Occupancy. Occupancy expense was $10.5 million for the three months ended September 30, 2023, a decrease of $2.0 million, or 15.8%, compared to the prior-year period. The decrease was largely due to the closure of Canada stores and reduction of corporate office space resulting from restructuring initiatives begun in the fourth quarter of 2022, partially offset by additional store costs as a result of the acquisition of First Heritage and its 106 stores in July 2022.

Advertising. Advertising expense was $2.8 million for the three months ended September 30, 2023, a decrease of $1.9 million, or 39.7%, compared to the prior-year period primarily due to the sale of our Legacy U.S. Direct Lending Business in July 2022 which required high spend to attract business and the current approach to marketing our brands.

Direct operations. Direct operations expense was $12.2 million for the three months ended September 30, 2023, an increase of $3.9 million, or 46.9%, compared to the prior-year period. The increase is primarily driven by an increase in technology costs necessary to run the business, including our migration of all U.S. Direct Lending loans to one consolidated loan management system which was completed in the quarter ended September 30, 2023.

Depreciation and amortization. Depreciation and amortization expense for the three months ended September 30, 2023 was $5.4 million, a decrease of $0.3 million, or 5.2%, compared to the prior-year period, primarily due to a decrease in Canada stores related to restructuring initiatives begun in the fourth quarter of 2022.

Other operating expenses. Other operating expenses were $11.2 million for the three months ended September 30, 2023, a decrease of $11.4 million, or 50.4%, compared to the prior-year period, primarily driven by a decrease in professional fees associated with the First Heritage acquisition and the divestiture of the Legacy U.S. Direct Lending Business incurred in the same period last year.

Other Expense (Income)

Other expenses for the three months ended September 30, 2023 were $57.3 million, compared to Other income of $24.3 million for the three months ended September 30, 2022, an increase of $81.5 million compared to the prior-year period, primarily driven by:

Interest expense. Interest expense for the three months ended September 30, 2023 increased $17.6 million, or 46.2%, compared to the prior-year period, primarily driven by (i) the new $150 million 1.0L 18.00% Senior Secured Term Loan and Canada SPV II entered into on May 15, 2023, (ii) increased non-recourse ABL borrowing to support organic loan growth and acquired loans and (iii) an increase in benchmark rates on variable-rate debt.

Equity method investment. Our share of Katapult's losses were $1.5 million and $2.3 million of loss for the three months ended September 30, 2023 and 2022, respectively.

Extinguishment or modification of debt costs. We incurred $3.7 million of expenses related to the extinguishment or modification of debt during the three months ended September 30, 2022.

Gain on sale of business. We recorded a gain of $68.4 million on the sale of our Legacy U.S. Direct Lending Business in the three months ended September 30, 2022.




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Provision for Income Taxes

The effective income tax rate for the three months ended September 30, 2023 from continuing operations was (3.1)%. The effective income tax rate for the three months ended September 30, 2023 from continuing operations was lower than the blended federal and state/provincial statutory rate of approximately 26.0%, primarily as a result of recording a valuation allowance against U.S. DTAs of $9.0 million, partially offset by releasing valuation allowance of Canada Direct Lending DTAs of $(0.7) million, and lost tax benefits related to share-based compensation of $0.4 million.


Comparison of Consolidated Results of Operations for the Nine Months Ended September 30, 2023 and 2022

Revenue

For a discussion of revenue, see "Consolidated Revenue by Product" above.

Provision for Losses

We adopted CECL on January 1, 2023, as further described in Note 1, "Summary of Significant Accounting Policies and Nature of Operations". Provision for losses decreased by $116.3 million, or 41.9%, for the nine months ended September 30, 2023 compared to the prior-year period, primarily driven by our Legacy U.S. Direct Lending Business divestiture of $107.8 million, which is a higher loss rate product, partially offset by the impact of adopting CECL and growth in our business.


Operating Expenses

Operating expenses for the nine months ended September 30, 2023 decreased $96.1 million, or 25.0%, compared to the prior-year period, primarily driven by:

Salaries and benefits. Salaries and benefits expense was $161.9 million for the nine months ended September 30, 2023, a decrease of $34.2 million, or 17.4%, compared to the prior-year period. The decrease was largely due to the July 2022 divestiture of our Legacy U.S. Direct Lending Business and lower headcount as a result of restructuring initiatives implemented in the fourth quarter of 2022, partially offset by the increase of store employees of the acquired First Heritage business.

Occupancy. Occupancy expense was $32.7 million for the nine months ended September 30, 2023, a decrease of $13.8 million, or 29.6%, compared to the prior-year period. The decrease was largely due to the 160 stores that were part of the July 2022 divestiture of our Legacy U.S. Direct Lending Business, partially offset by the acquisition of First Heritage and its 106 stores.

Advertising. Advertising expense was $6.8 million for the nine months ended September 30, 2023, a decrease of $20.6 million, or 75.2%, compared to the prior-year period primarily due to the sale of our Legacy U.S. Direct Lending Business in July 2022 and the current approach to marketing our brands.

Direct operations. Direct operations expense was $34.0 million for the nine months ended September 30, 2023, a decrease of $7.5 million, or 18.1%, compared to the prior-year period. The decrease is primarily driven by the divestiture of the Legacy U.S. Direct Lending Business, partially offset by the lower cost First Heritage business acquired in July 2022.

Depreciation and amortization. Depreciation and amortization expense for the nine months ended September 30, 2023 was $16.1 million, a decrease of $1.0 million, or 5.6%, compared to the prior-year period. The decrease is primarily driven by the July 2022 divestiture of our Legacy U.S. Direct Lending Business and store closures as a result of the restructuring initiatives implemented in the fourth quarter of 2022, partially offset by increased amortization expense of intangibles assets related to the acquisition of First Heritage.

Other operating expenses. Other operating expenses were $37.2 million for the nine months ended September 30, 2023, a decrease of $19.2 million, or 34.0%, compared to the prior-year period, primarily driven by a decrease in professional fees associated with the First Heritage acquisition and the divestiture of the Legacy U.S. Direct Lending Business incurred in the same period last year.

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Other Expense (Income)

Other expenses for the nine months ended September 30, 2023 were $169.6 million, an increase of $128.5 million, or 312.2%, compared to the prior-year period, primarily driven by:

Interest expense. Interest expense for the nine months ended September 30, 2023, increased $46.5 million, or 44.7%, compared to the prior-year period, primarily driven by the new 1.0L 18.00% Senior Secured Term Loan entered into on May 15, 2023, increased non-recourse ABL borrowing to support organic loan growth and an increase in benchmark rates on variable-rate debt.

Equity method investment. Our share of Katapult's losses was $7.0 million of loss for the nine months ended September 30, 2023 and $2.1 million of income for the nine months ended September 30, 2022.

Extinguishment or modification of debt costs. We incurred $8.9 million of expenses during the nine months ended September 30, 2023 of which approximately $8.8 million of the expenses were related to costs incurred to third parties as part of the new 1.0L 18.00% Senior Secured Term Loan and uptiering 1.5L 7.50% Senior Secured Notes with the remaining $0.1 million related to the extinguishment of the Senior Revolver.
Gain on sale of business. During the nine months ended September 30, 2023, we recorded a $2.0 million reduction to the gain on the July 2022 sale of our Legacy U.S. Direct Lending Business, based on expected uncollectible amounts. We recorded a gain of $68.4 million on the sale of our Legacy U.S. Direct Lending Business in the corresponding prior year period.

Miscellaneous expenses. We incurred $1.4 million of miscellaneous expenses during the nine months ended September 30, 2023 related to the termination of contracts utilized by the Legacy U.S. Direct Lending Business.

Provision for Income Taxes

The effective income tax rate for the nine months ended September 30, 2023 from continuing operations was (23.8)%. The effective income tax rate for the nine months ended September 30, 2023 was lower than the blended federal and state/provincial statutory rate of approximately 26.0%, primarily as a result of recording a valuation allowance against U.S. DTAs of $52.5 million, partially offset by releasing valuation allowance of Canada Direct Lending DTAs of $(0.7) million, and lost tax benefits related to share-based compensation of $2.0 million.

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 (loss) income include the effect of changes in currency exchange rates. We translate the unaudited Condensed Consolidated Balance Sheet into U.S. dollars at the currency exchange rate in effect at the end of each period. We translate the unaudited Condensed Consolidated Statements of Operations at the average rates of exchange for the period. We record currency translation adjustments as a component of Accumulated other comprehensive loss in Stockholders’ (Deficit) Equity.

Constant Currency Analysis

We have operations in the U.S. and Canada. For the three months ended September 30, 2023 and 2022, 47.6% and 42.4%, respectively, of our revenues were originated in Canadian Dollars. For the nine months ended September 30, 2023 and 2022, 46.5% and 30.6%, respectively, of our revenues were originated in Canadian Dollars. As a result, changes in our reported results include the impacts of changes in foreign currency exchange rates of the Canadian Dollar.

Statement of Operations - Exchange Rate for the three and nine month periods ended September 30, 2023 and 2022
Three Months Ended September 30,Nine Months Ended September 30,
20232022$ Change% Change20232022$ Change% Change
Average Exchange Rates for the Canadian Dollar0.7453 0.7661 (0.0208)(2.7)%0.7427 0.7831 (0.0404)(5.2)%

Balance Sheet - Exchange Rate as of September 30, 2023 and December 31, 2022
September 30,December 31,Change
20232022$%
Exchange Rate for the Canadian Dollar0.7365 0.7365 0.0000 0.0 %
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The following constant currency analysis removes the impact of the fluctuation in foreign exchange rates and utilizes constant currency results in our analysis of the Canadian operations. 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 for our reportable segments during the three and nine months ended September 30, 2023 using the actual average exchange rate during the three and nine months ended September 30, 2022 (in thousands).
Three Months Ended September 30,Nine Months Ended September 30,
20232022$ Change% Change20232022$ Change% Change
Constant currency basis:
Revenues$171,544 $186,409 $(14,865)(8.0)%$515,910 $737,547 $(221,637)(30.1)%
Net revenue121,459 121,389 70 0.1 %350,988 460,126 (109,138)(23.7)%
Loss before income taxes(31,380)42,826 (74,206)(173.3)%(112,165)34,207 (146,372)(427.9)%

We calculated gross loans receivable for our reportable segments below as of September 30, 2023 using the actual exchange rate as of December 31, 2022 (in thousands).
September 30,December 31,Change
20232022$%
Constant currency basis:
Gross loans receivable$1,254,401 $1,254,395 $6 — %

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity to fund the loans we make to our customers are cash provided by operations and our non-recourse funding facilities, as further described in Note 6, "Debt" of the Notes to the unaudited Condensed Consolidated Financial Statements.

We anticipate that our primary uses of cash will be to fund growth in our working capital, finance capital expenditures to further our business strategy in both the U.S. and Canada and meet our debt service obligations. Refer to Note 16, "Share Repurchase Program" of the Notes to the unaudited Condensed Consolidated Financial Statements for details of our share repurchases. The Board of Directors suspended the quarterly dividend payment in October 2022.

Our level of cash flow provided by operating activities typically experiences seasonal fluctuations 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, which has the effect of reducing cash outflow requirements while maintaining cash inflows through loan repayments.

Our credit agreements contain performance and financial covenants (both at the parent and SPV level), including restrictions on indebtedness, liens, restricted payments and dividends, investments, asset sales and similar covenants, and contain customary events of default.

We may also sell or securitize our assets, enter into additional refinancing agreements or reduce our capital spending to generate additional liquidity. The impacts to cash as described in "Cash Flows" below and other factors resulted in our available unrestricted cash on hand of $82.6 million as of September 30, 2023. We believe cash on hand, available borrowings and cash provided by other sources should provide us with sufficient liquidity for at least the next 12 months.

As of September 30, 2023, we were in compliance with all financial ratios, covenants and other requirements in our debt agreements or had received any necessary waivers.

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Debt Capitalization Summary
(in thousands, except capacity, net of deferred financing costs)

CapacityInterest RateMaturity
Balance as of September 30, 2023 (in USD)
Corporate Debt:
1.0L 18.00% Senior Secured Term Loan18.00%August 2, 2027$ 154,401 
1.5L 7.50% Senior Secured Notes (due 2028) 7.50%August 1, 2028671,922 
2.0L 7.50% Senior Secured Notes (due 2028) 7.50%August 1, 2028312,870 
Funding Debt:
Heights SPV$425.0 million1-Mo SOFR + 5.42%July 15, 2025419,521 
First Heritage SPV$225.0 million1-Mo SOFR + 4.25%July 13, 2025150,104 
Canada SPV(1)
C$400.0 million3-Mo CDOR + 6.00%August 2, 2026243,066 
Canada SPV II(1)
C$110.0 million3-Mo CDOR + 8.00%November 12, 202573,050 
(1) Capacity amounts are denominated in Canadian dollars, while outstanding balances as of September 30, 2023 are denominated in U.S. dollars.
Refer to Note 6, "Debt," for details on each of our credit facilities and resources.

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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,
20232022
Net cash provided by continuing operating activities$38,106 $250,098 
Net cash used in continuing investing activities(117,809)(338,881)
Net cash provided by continuing financing activities105,965 85,300 

Nine Months Ended September 30, 2023 and 2022

Continuing Operating Activities

Net cash provided by continuing operating activities for the nine months ended September 30, 2023 was $38.1 million, which is primarily attributable to the effect of non-cash reconciling items of $233.0 million, which primarily included $161.1 million of provision for credit losses, $22.5 million of deferred income taxes and $16.1 million of depreciation and amortization, offset by a net loss from continuing operations of $142.6 million and changes in our operating assets and liabilities of $52.3 million. Our changes in operating assets and liabilities of $52.3 million were primarily related to $34.1 million of higher income taxes receivable $4.6 million of lower accrued interest on our gross loans receivable and $12.5 million of lower accrued interest, offset by $17.9 million of higher accounts payable and accrued liabilities.

Continuing Investing Activities

Net cash used in continuing investing activities for the nine months ended September 30, 2023 was $117.8 million, primarily due to net origination of loans for continuing investing activities of $106.6 million, in addition to cash to purchase $9.2 million of property, equipment and software and a $2.0 million reduction to the gain on sale from the divestiture of Legacy U.S. Direct Lending Business in July 2022 based on expected uncollectible amounts.

Continuing Financing Activities

Net cash provided by continuing financing activities for the nine months ended September 30, 2023 was $106.0 million primarily due to $115.0 million in net proceeds from credit facilities due to the 1.0L 18.00% Senior Secured Term Loan offset by the payoff of the Senior Revolver in May of 2023, and $19.8 million of net proceeds from our non-recourse debt facilities, partially offset by $27.4 million in debt issuance costs paid.

Critical Accounting Policies and Estimates

We describe our critical accounting estimates used in the preparation of our consolidated financial statements in Part II - Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates, in our 2022 Form 10-K. We consider the following policies to be our most critical accounting policies because they involve critical accounting estimates and a significant degree of management judgment:
•ACL,
•business combinations and considerations and
•goodwill.

There has been one change in our critical accounting policies from those disclosed in our 2022 Form 10-K related to adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent amendments to the guidance: ASU 2018-19 in November 2018, ASU 2019-04 in April 2019, ASU 2019-05 in May 2019, ASU 2019-10 and -11 in November 2019, ASU 2020-02 in February 2020 and ASU 2022-02 in March 2022.

Allowance for Credit Losses

We adopted ASC 326 for measurement of current expected credit losses on January 1, 2023. CECL is not prescriptive in the methodology used to determine the expected credit loss estimate. Therefore, management has flexibility in selecting the methodology. However, the expected credit losses must be estimated over a financial asset's remaining expected life, adjusted for prepayments, utilizing quantitative and qualitative factors. The estimate of current expected credit losses is based on relevant information about past events, current conditions, and reasonable and supportable economic forecasts that affect the collectability of the reported amounts. Historical loss experience is the starting point for estimating expected credit losses. Adjustments are
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made to historical loss experience to reflect differences in asset-specific risk characteristics, such as underwriting standards, portfolio mix or asset terms, and differences in economic conditions - both current conditions and reasonable and supportable forecasts. When we are not able to make or obtain reasonable and supportable forecasts for the entire life of the financial asset, we have estimated expected credit losses for the remaining life after the forecasted period using an approach that reverts to historical credit loss information.

We begin consideration of credit losses by determining loan groups of similar qualitative criteria. We identified seven loan groups based on qualitative factors including, financial asset type, loan term, size, geographic location and risk ratings. The loan groups are further disaggregated and analyzed by number of days past due. We selected a static pool Probability of Default (“PD”) / Loss Given Default (“LGD”) / Exposure at Default ("EAD") model to estimate base allowance for credit losses, in which the estimated loss is equal to the product of PD, LGD and EAD. Each of these methods use historical loss experience to forecast expected credit losses. Historical information about losses generally provides a basis for the estimate of expected credit losses. We also consider the need to adjust historical information to reflect the extent to which current conditions differ from the conditions that existed for the period over which historical information was evaluated. These adjustments to historical loss information may be qualitative or quantitative in nature.

Reasonable and supportable macroeconomic forecasts are required for the ACL model. We review macroeconomic forecasts to use in ACL. The projected change in creditworthiness is modeled using Congressional Budget Office data, such as unemployment rate, labor participation rate and personal income. We adjust the historical loss experience by relevant qualitative factors for these expectations.

As loans receivable are originated, provisions for credit losses are recorded in amounts sufficient to maintain an ACL at an adequate level to provide for estimated losses over the remaining expected life of the finance receivables. Subsequent changes to the contractual terms that are a result of re-underwriting are not included in the loans receivable’s expected life. We use our historical loss experience and macroeconomic factors to forecast expected credit losses.

While we utilize a systematic methodology in determining our allowance, the allowance is based on estimates, and ultimate losses may vary from current estimates. The estimates are reviewed periodically and, as adjustments become necessary, are reported in earnings in the periods in which they become known.

See Note 1, "Summary of Significant Accounting Policies and Nature of Operations" for additional information.

Regulatory Environment and Compliance

There have been no significant developments with respect to our regulatory environment and compliance since December 31, 2022, as described in our 2022 Form 10-K except for the following, which we disclosed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023:

Canada Regulations

Unsecured Installment Loans and Revolving LOC Loans

Unsecured Installment loans and Revolving LOC loans products are regulated at both the federal and provincial level in Canada. At the federal level, such lending products are subject to the criminal rate of interest provisions of the Criminal Code, which prohibits receiving (or entering into an agreement to receive) interest at an Effective Annual Rate that exceeds 60% on the credit advanced under the loan agreement. These provisions have been in place since 1980. In March 2023, the federal government of Canada announced, in connection with its proposed federal budget, its intent to introduce legislation to reduce the maximum allowable rate of interest under its criminal code from an Effective Annual Rate of 60%, or annual percentage rate of 47%, to 35%. While the 2023 Budget includes language effectuating this change, we are waiting for the final regulations to be proposed, a comment period to pass and final regulations presented before any final rule or law will be effective. In addition, there may be an implementation period before the industry will need to adhere to the new law. Further, a new consultation period has begun wherein the federal government is looking into whether the criminal rate cap should be further reduced below the yet not implemented new 35% rate cap. Any further reduction in the rate cannot be by regulation and would have to proceed through the traditional legislative process. We are currently in the comment period in response to the consultation, which will close November 30, 2023.

However, we expect this legislation, if adopted in its current form and/or if further reduction is required, would adversely affect the pricing for newly originated loans and may require us to reevaluate our underwriting criteria. We expect that our results of operations would be adversely impacted as a result. See the Risk Factors in our 2022 Form 10-K for more information on how changes in regulations such as this change can adversely impact our business.

We are also subject to provincial legislation that requires lenders to provide cost of credit disclosures and extend consumer protection rights to customers, such as prepayment rights, and prohibits the charging of certain default fees.

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In addition, some provinces have enacted legislation that regulates high-cost lenders. These laws define a high-cost credit product and require licensing and additional consumer protection oversight.

Single-Pay

Canadian federal legislation exempts from the criminal rate of interest provisions of the Criminal Code cash advance loans of $1,500 or less if the term of the loan is 62 days or less (“payday loans”) and the lender is licensed under provincial legislation as a short-term cash advance lender and the province has been designated under the Criminal Code. In March 2023, the federal government of Canada announced in connection with its proposed Federal budget its intent to create regulations to set the maximum charge on payday loans in any province where payday loans are regulated. Similar to the above, we await final language and effective date decisions by the Canadian government.

Check Cashing

In Canada, the federal government generally does not regulate check cashing businesses, other than federally regulated financial institutions (and other than the prohibition noted above regarding charging or receiving in excess of 60% annual interest rate on the credit advanced for the fee of a check cashing transaction), nor do most provincial governments impose regulations specific to the check cashing industry. There are some minor exceptions in various provinces.

ITEM 3.         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about our market risks, see "Quantitative and Qualitative Disclosures about Market Risk" in our 2022 Form 10-K. There have been no material changes to the quantitative and qualitative information presented therein.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures 

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including without limitation, controls and procedures designed to ensure that information required to be disclosed in reports we file under the Exchange Act is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

See Note 13,"Acquisitions and Divestitures" of the Notes to the unaudited Condensed Consolidated Financial Statements for additional details on our acquisition of Heights and First Heritage and its impact on our unaudited Condensed Consolidated Financial Statements.

Based on an evaluation of our disclosure controls and procedures as of the end of the period covered by this report conducted by our management, with the participation of the Chief Executive Officer and Chief Financial Officer, the Chief Executive Officer and Chief Financial Officer concluded that these controls and procedures were effective as of September 30, 2023.

Limitation on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. A control system also can be circumvented by collusion or improper management override. Because of such limitations, disclosure controls and internal control over financial reporting cannot prevent or detect all misstatements, whether unintentional errors or fraud. However, these inherent limitations are known features of the financial reporting process, therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Changes in Internal Control over Financial Reporting

During the third quarter of 2023, we completed our migration of all U.S. Direct Lending loans to one consolidated loan management system. The migration was performed in the ordinary course of business to standardize technology used for purposes of loan
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management. In connection with the migration, where applicable, modifications were made to the design of the control environment associated with the new loan management system and related technology.

During the third quarter of 2023, as part of the preparation of the discontinued operations presentation in the consolidated financial statements as a result of the sale of Flexiti, we implemented changes to internal controls to meet the related reporting and disclosure requirements.

There were no other changes in our internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II.     OTHER INFORMATION

Item 1.         Legal Proceedings
The information required by this item is included in Note 7, "Commitments and Contingencies" of the Notes to the unaudited Condensed Consolidated Financial Statements in this Form 10-Q and is incorporated herein by reference.

Item 1A.     Risk Factors
Aside from the items listed below, there have been no material changes to the risk factors previously disclosed in our 2022 Form 10-K and in our Form 10-Q for the quarter ended March 31, 2023.
There can be no assurance that we will be able to comply with the continued listing standards of the NYSE.

On October 16, 2023, we received written notice from the NYSE that we were not in compliance with the continued listing criteria set forth in Section 802.01B of the NYSE's Listed Company Manual with respect to the minimum market capitalization and shareholders' equity requirements. We are committed to regaining and maintaining compliance with the continued listing standards within the 18-month cure period following receipt of notice.

On October 27, 2023, we received written notice from the NYSE that we are not in compliance with the continued listing criteria set forth in 802.01C of the NYSE's Listed Company Manual with respect to stock price requirements. We are committed to regaining and maintaining compliance with the continued listing standards within the six-month cure period. The Company has a period of six months following the receipt of this notice to regain compliance. As a result, the Company has until April 27, 2024 to regain compliance. If we determine that in order to cure the price condition it is necessary to take an action that requires shareholder approval, we must obtain shareholder approval no later than our 2024 annual meeting and must implement the action promptly thereafter.

There can be no assurance that we will be able to comply with the continued listing standards of the NYSE. Our common stock is currently listed on the NYSE. If the NYSE delists our securities from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant material adverse consequences including:

•a limited availability of market quotations for our securities;
•a determination that the common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for the common stock;
•a limited amount of analyst coverage; and
•a decreased ability to issue additional securities or obtain additional financing in the future.

If we fail to regain and maintain compliance with the NYSE continued listing standards, including but not limited to the above, the NYSE may take steps to delist our securities. There can be no assurance that we will continue to meet the minimum market capitalization, shareholders' equity, stock price requirements or any other NYSE listing requirement in the future. If our common stock was to be delisted, the liquidity of our common stock would be adversely affected, our market prices could decrease and our ability to raise equity capital and our reputation and relationships with business partners could be materially impaired.

The outcome of a CFPB civil complaint regarding certain of Heights’s business practices is uncertain and could materially and adversely affect our business.

The CFPB has filed a complaint against Heights related to certain business practices before we acquired it.
Refer to Note 7, "Commitments and Contingencies" for information related to this complaint. The complaint is in its early stages and we are unable to predict the ultimate timing or outcome of the CFPB investigation. The former owners of Heights agreed to indemnify us for certain losses arising after the consummation of the transaction, including relating to underlying matters in the CFPB complaint.

The indemnification obligations of the former owners of Heights are limited to an indemnity holdback of $10 million cash plus $20 million of CURO stock valued as of the date of close, which was escrowed at the closing of the transaction, and will be the Company’s sole recourse against the former owners of Heights with respect to all of the indemnifiable claims under the definitive transaction agreement. The value of the stock portion of the escrow as of September 30, 2023 is $1.2 million.

We can provide no assurance that the escrowed amount will be sufficient to address all covered losses related to this matter. However, the imposition of damages, fines, penalties, restitution, other monetary liabilities, sanctions, settlements or changes to our business practices or operations could materially and adversely affect the Company’s business, financial condition, results of operations or reputation.

We face risks associated with our business strategy, including those related to acquisitions and dispositions.

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We have expanded our products and markets in part through strategic acquisitions, including the acquisitions of Heights and First Heritage. Acquisitions involve numerous risks, including risks inherent in entering new markets in which we may not have prior experience; failure to advance our strategic objectives or generate satisfactory synergies or return on investment; potential loss of significant customers or key personnel of the acquired business; not obtaining the expected benefits of the acquisition on a timely basis or at all; managing geographically-remote operations or different technology platforms; or potential diversion of management's attention from other aspects of our business operations.

Acquisitions may also cause us to incur debt or result in dilutive issuances of equity securities, additional write-offs of goodwill and substantial amortization expenses associated with acquired intangible assets. We may not be able to obtain financing for future acquisitions on favorable terms, making any such acquisitions more expensive. Any such financing may have terms that restrict our operations. In addition, acquisitions may involve unanticipated costs and liabilities, including litigation and new or increased regulatory exposure, which may not be covered, either in part or full, by indemnity or escrow provisions in the acquisition agreements. We may not be able to successfully integrate the operations of any acquired businesses into our operations and achieve the expected benefits of any acquisitions. The failure to successfully integrate newly acquired businesses or achieve the expected benefits of strategic acquisitions in the future, or consummate a potential acquisition after incurring material costs, could have an adverse effect on our business, results of operations and financial position.

As business circumstances dictate, we may also decide to dispose of assets or businesses. We may not be successful in identifying or managing the risks involved in any divestiture, including our ability to obtain a reasonable purchase price for the assets, potential liabilities that may continue to apply to us following the divestiture, potential tax implications, employee issues or other matters. Our inability to address these risks could adversely affect our business, results of operations and financial condition.

In addition, our interest in deferred consideration received from dispositions may not be fully realizable. As partial consideration for the disposition of assets, we may receive certain deferred cash arrangements, such as we did in the disposition of our Legacy U.S. Direct Lending Business. We are currently involved in litigation matters related to amounts due in connection with the sale of the Legacy U.S. Direct Lending Business and we can provide no assurance that we will be able to realize the full value of the deferred consideration in such transaction.


Item 2.         Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales or issuer repurchases of our common stock during the period covered by this Quarterly Report on Form 10-Q.

Item 3.         Defaults Upon Senior Securities

None.

Item 4.         Mine Safety Disclosures

None.

Item 5.         Other Information

(a)    Disclosure of Unreported 8-K Information

None.

(b)    Material Changes to Director Nominee Procedures

None.
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Item 6.        Exhibits
Exhibit no.Exhibit DescriptionFiled/Incorporated by Reference from FormIncorporated by Reference from Exhibit NumberFiling Date
2.1
8-K/A
2.1
8/3/2023
2.2
8-K
2.2
9/5/2023
3.110-Q10.18/5/2020
3.28-K3.212/11/17
4.1S-14.111/28/17
4.2S-14.211/28/17
31.1 Filed herewith
31.2 Filed herewith
32.1 Filed herewith
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The following unaudited financial information from the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2023, filed with the SEC on November 2, 2023, formatted in Extensible Business Reporting Language (“XBRL”) includes: (i) Condensed Consolidated Balance Sheets at September 30, 2023 and December 31, 2022, (ii) Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2023 and 2022, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended September 30, 2023 and 2022, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 and (v) Notes to Condensed Consolidated Financial Statements*
Filed herewith
*
Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally to the SEC a copy of any omitted schedule or exhibit upon request by the SEC.




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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: November 2, 2023                CURO Group Holdings Corp.
By:/s/ Ismail Dawood
Ismail Dawood
Chief Financial Officer
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