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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to__________
Commission File Number 1-38315
CURO GROUP HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware 90-0934597
(State or other jurisdiction
Of incorporation or organization) 		(I.R.S. Employer Identification No.)
3615 North Ridge Road, Wichita, KS
67205
(Address of principal executive offices) (Zip Code)

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes ☐    No ☒
As of July 27, 2021 there were 41,429,641 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.



CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
FORM 10-Q
SECOND QUARTER ENDED June 30, 2021
INDEX
Page
Item 1.
Financial Statements (unaudited)
June 30, 2021 and December 31, 2020
5
Three and six months ended June 30, 2021 and 2020
6
Three and six months ended June 30, 2021 and 2020
7
Three and six months ended June 30, 2021 and 2020
8
10
Item 2.
39
Item 3.
72
Item 4.
72
Item 1.
72
Item 1A.
72
Item 2.
73
Item 3.
73
Item 4.
73
Item 5.
73
Item 6.
74
75

2


GLOSSARY

Terms and abbreviations used throughout this report are defined below.
Term or abbreviation Definition
12.00% Senior Secured Notes 12.00% Senior Secured Notes, issued in February and November 2017 for a total of $470.0 million due March 1, 2022, fully extinguished September 2018
2017 Final CFPB Rule The final rule issued by the CFPB in 2017 regarding Payday, Vehicle Title and Certain high Cost Installment loans
2019 Proposed Rule The subsequent CFPB rulemaking process which proposed to rescind the mandatory underwriting provisions of the 2017 Final CFPB Rule
2020 Form 10-K Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 5, 2021
7.50% Senior Secured Notes 7.50% Senior Secured Notes, which we expect to close on July 30, 2021, for $750.0 million, which mature on August 2028
8.25% Senior Secured Notes 8.25% Senior Secured Notes, issued in August 2018 for $690.0 million, which mature on September 1, 2025
Ad Astra Ad Astra Recovery Services, Inc., which, prior to acquisition in January 2020, was our exclusive provider of third-party collection services for the U.S. business
Adjusted EBITDA EBITDA plus or minus certain non-cash and other adjusting items; Refer to "Supplemental Non-GAAP Financial Information" for additional details
ALL Allowance for loan losses
Allowance coverage Allowance for loan losses as a percentage of gross loans receivable
AOCI Accumulated Other Comprehensive Income (Loss)
ASC Accounting Standards Codification
ASU Accounting Standards Update
Average gross loans receivable Utilized to calculate product yield and NCO rates; calculated as average of beginning of quarter and end of quarter gross loans receivable
BNPL Buy-Now-Pay-Later
bps Basis points
C$ Canadian dollar
CAB Credit access bureau
CARES Act Coronavirus Aid, Relief, and Economic Security Act enacted by the U.S. Federal government on March 27, 2020 in response to the COVID-19 pandemic
Cash Money Cash Money Cheque Cashing Inc., a wholly-owned Canadian subsidiary of the Company
Cash Money Revolving Credit Facility C$10.0 million revolving credit facility with Royal Bank of Canada
CDOR Canadian Dollar Offered Rate
CFPB Consumer Financial Protection Bureau
CFTC CURO Financial Technologies Corp., a wholly-owned subsidiary of the Company
CODM Chief Operating Decision Maker
Condensed Consolidated Financial Statements The condensed consolidated financial statements presented in this Form 10-Q
CSO Credit services organization
EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization
Exchange Act Securities Exchange Act of 1934, as amended
FASB Financial Accounting Standards Board
FinServ FinServ Acquisition Corp., a publicly traded special purpose acquisition company (trading symbol FSRV)
FinTech Financial Technology; the term used to describe any technology that delivers financial services through software, such as online banking, mobile payment apps or cryptocurrency
Flexiti Flexiti Financial Inc., a wholly-owned Canadian subsidiary of the Company, which we acquired on March 10, 2021
Form 10-Q Quarterly Report on Form 10-Q for the six month period ended June 30, 2021
Gross Combined Loans Receivable Gross loans receivable plus loans originated by third-party lenders which are Guaranteed by the Company
Guaranteed by the Company Loans originated by third-party lenders through CSO program which we guarantee but are not included in the Condensed Consolidated Financial Statements
3


Term or abbreviation Definition
Katapult Katapult Holdings, Inc. a lease-to-own platform for online platform for online, brick and mortar and omni-channel retailers. On June 9, 2021, Katapult merged with FinServ and is now a publicly traded company (NASDAQ: KPLT)
LFL LFL Group, Canada's largest home furnishings retailer.
MDR Merchant discount revenue
NCO Net charge-off; total charge-offs less total recoveries
NOL Net operating loss
Non-Recourse Canada SPV Facility A four-year revolving credit facility with Waterfall Asset Management, LLC with capacity up to C$250.0 million
Non-Recourse Flexiti SPE Facility A revolving credit facility, entered into concurrent with the acquisition of Flexiti, with capacity up to C$421.0 million for Class A borrowings and C$79.0 million for Class B borrowings.
Non-Recourse U.S. SPV Facility A four-year, asset-backed revolving credit facility with Atalaya Capital Management with capacity up to $200.0 million if certain conditions are met
POS Point-of-sale
ROU Right of use
RSU Restricted Stock Unit
SEC Securities and Exchange Commission
Senior Revolver Senior Secured Revolving Loan Facility with borrowing capacity of $50.0 million
Sequential The change from one quarter to the next quarter
SPAC Special Purpose Acquisition Company
SRC Smaller Reporting Company as defined by the SEC
TDR Troubled Debt Restructuring. Debt restructuring in which a concession is granted to the borrower as a result of economic or legal reasons related to the borrower's financial difficulties
U.K. Subsidiaries Collectively, Curo Transatlantic Limited and SRC Transatlantic Limited
U.S. United States of America
U.S. GAAP Generally accepted accounting principles in the United States
Verge Credit loans Loans originated and funded by a third-party bank
VIE Variable Interest Entity; our wholly-owned, bankruptcy-remote special purpose subsidiaries

4


PART I.     FINANCIAL INFORMATION

ITEM 1.         FINANCIAL STATEMENTS

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, 2021 (unaudited) December 31,
2020
ASSETS
Cash and cash equivalents $ 276,367  $ 213,343 
Restricted cash (includes restricted cash of consolidated VIEs of $43,553 and $31,994 as of June 30, 2021 and December 31, 2020, respectively)
69,299  54,765 
Gross loans receivable (includes loans of consolidated VIEs of $592,283 and $360,431 as of June 30, 2021 and December 31, 2020, respectively)
769,228  553,722 
Less: allowance for loan losses (includes allowance for losses of consolidated VIEs of $44,605 and $54,129 as of June 30, 2021 and December 31, 2020, respectively)
(67,861) (86,162)
Loans receivable, net
701,367  467,560 
Income taxes receivable 2,175  32,062 
Prepaid expenses and other (includes prepaid expenses and other of consolidated VIEs of $0 and $388 as of June 30, 2021 and December 31, 2020, respectively)
31,209  27,994 
Property and equipment, net 51,170  59,749 
Investments in Katapult 16,501  27,370 
Right of use asset - operating leases 106,698  115,032 
Deferred tax assets 6,264  — 
Goodwill and intangibles, net 274,119  176,516 
Other assets 9,296  8,595 
Total Assets $ 1,544,465  $ 1,182,986 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities (includes accounts payable and accrued liabilities of consolidated VIEs of $6,078 and $34,055 as of June 30, 2021 and December 31, 2020, respectively)
$ 64,406  $ 49,624 
Deferred revenue 10,394  5,394 
Lease liability - operating leases 113,415  122,648 
Contingent consideration related to acquisition 21,239  — 
Accrued interest (includes accrued interest of consolidated VIEs of $1,435 and $1,147 as of June 30, 2021 and December 31, 2020, respectively)
20,411  20,123 
Liability for losses on CSO lender-owned consumer loans 5,265  7,228 
Debt (includes debt and issuance costs of consolidated VIEs of $349,311 and $11,077 as of June 30, 2021 and $147,427 and $7,766 as of December 31, 2020, respectively)
1,019,127  819,661 
Other long-term liabilities 13,796  15,382 
Deferred tax liabilities 9,710  11,021 
Total Liabilities 1,277,763  1,051,081 
Commitments and contingencies (Note 12)
Stockholders' Equity
Preferred stock - $0.001 par value, 25,000,000 shares authorized; no shares were issued
—  — 
Common stock - $0.001 par value; 225,000,000 shares authorized; 47,939,331 and 47,525,807 shares issued; and 41,679,541 and 41,370,504 shares outstanding at the respective period ends
9  9 
Treasury stock, at cost - 6,259,790 and 6,155,303 shares at the respective period ends
(79,604) (77,852)
Paid-in capital 84,490  79,812 
Retained earnings 283,370  160,068 
Accumulated other comprehensive loss (21,563) (30,132)
Total Stockholders' Equity 266,702  131,905 
Total Liabilities and Stockholders' Equity $ 1,544,465  $ 1,182,986 

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.
5


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
June 30, 		Six Months Ended
June 30,
2021 2020 2021 2020
Revenue $ 187,693  $ 182,509  $ 384,244  $ 463,315 
Provision for loan losses 45,165  50,693  81,310  164,229 
Net revenue 142,528  131,816  302,934  299,086 
Cost of providing services
Salaries and benefits 26,056  24,723  50,971  50,730 
Occupancy and office 17,745  16,843  36,049  36,533 
Other costs of providing services 7,033  8,001  14,124  17,656 
Advertising 7,043  5,750  15,127  17,969 
Total cost of providing services 57,877  55,317  116,271  122,888 
Gross margin 84,651  76,499  186,663  176,198 
Operating expense (income)
Corporate, district and other expenses 59,621  36,781  108,461  79,588 
Interest expense 23,440  18,311  42,979  35,635 
(Income) loss from equity method investment (1,712) (741) (2,258) 877 
Gain from equity method investment (135,387) —  (135,387) — 
Total operating (income) expense (54,038) 54,351  13,795  116,100 
Income from continuing operations before income taxes 138,689  22,148  172,868  60,098 
Provision for income taxes 34,172  1,068  42,616  3,005 
Net income from continuing operations 104,517  21,080  130,252  57,093 
Net income from discontinued operations, before income tax —  1,324  —  1,714 
Income tax expense related to disposition —  331  —  429 
Net income from discontinued operations —  993  —  1,285 
Net income $ 104,517  $ 22,073  $ 130,252  $ 58,378 
Basic earnings per share:
Continuing operations $ 2.51  $ 0.52  $ 3.13  $ 1.40 
Discontinued operations —  0.02  —  0.03 
Basic earnings per share $ 2.51  $ 0.54  $ 3.13  $ 1.43 
Diluted earnings per share:
Continuing operations $ 2.39  $ 0.51  $ 2.99  $ 1.37 
Discontinued operations —  0.02  —  0.03 
Diluted earnings per share $ 2.39  $ 0.53  $ 2.99  $ 1.40 
Weighted average common shares outstanding:
Basic 41,655  40,810  41,580  40,814 
Diluted 43,672  41,545  43,556  41,686 

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.
6


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended
June 30, 		Six Months Ended
June 30,
2021 2020 2021 2020
Net income $ 104,517  $ 22,073  $ 130,252  $ 58,378 
Other comprehensive income (loss):
Foreign currency translation adjustment, net of $0 tax in all periods
4,714  10,261  8,569  (11,932)
Other comprehensive income (loss) 4,714  10,261  8,569  (11,932)
Comprehensive income $ 109,231  $ 32,334  $ 138,821  $ 46,446 

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.


7

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands, unaudited)
Six Months Ended
June 30,
2021 2020
Cash flows from operating activities
Net income from continuing operations $ 130,252  $ 57,093 
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Depreciation and amortization 12,400  8,954 
Provision for loan losses 81,310  164,229 
Amortization of debt issuance costs and bond discount 2,954  1,600 
Deferred income tax (benefit) expense (3,481) 9,861 
Loss on disposal of property and equipment 4,322  116 
(Income) loss from equity method investment (2,258) 877 
Gain from equity method investment (135,387) — 
Share-based compensation 6,150  6,504 
Changes in operating assets and liabilities:
Accrued interest on loans receivable 30,527  28,654 
Prepaid expenses and other assets (2,320) 3,286 
Accounts payable and accrued liabilities 4,303  965 
Deferred revenue 4,999  (5,040)
Income taxes receivable 29,910  (7,413)
Accrued interest 271  200 
Other long-term liabilities (1,057) 914 
Net cash provided by continuing operating activities 162,895  270,800 
Net cash provided by discontinued operating activities —  1,714 
Net cash provided by operating activities 162,895  272,514 
Cash flows from investing activities
Purchase of property and equipment (7,169) (4,724)
Loans receivable originated or acquired
(563,327) (648,044)
Loans receivable repaid
421,123  616,223 
Proceeds from Investment in Katapult 146,878  — 
Acquisition of Ad Astra, net of acquiree's cash received
—  (14,418)
Acquisition of Flexiti, net of acquiree's cash received (91,203) — 
Net cash used in continuing investing activities (1)
(93,698) (50,963)
Cash flows from financing activities
Proceeds from Non-Recourse SPV and SPE facilities 26,990  58,386 
Payments on Non-Recourse SPV and SPE facilities (9,229) (41,812)
Debt issuance costs paid —  (3,531)
Proceeds from credit facilities 20,934  69,778 
Payments on credit facilities (20,934) (69,778)
Proceeds from exercise of stock options 239  126 
Payments to net share settle restricted stock units vesting (1,711) (638)
Repurchase of common stock (1,251) (5,908)
Dividends paid to stockholders (6,950) (4,500)
Net cash provided by continuing financing activities (1)
8,088  2,123 
Effect of exchange rate changes on cash, cash equivalents and restricted cash 273  (1,079)
Net increase in cash, cash equivalents and restricted cash 77,558  222,595 
Cash, cash equivalents and restricted cash at beginning of period 268,108  110,021 
Cash, cash equivalents and restricted cash at end of period $ 345,666  $ 332,616 
(1) Investing activities and Financing activities were not impacted by discontinued operations

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

8

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars 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 June 30, 2021 and 2020 to the cash, cash equivalents and restricted cash used in the Statement of Cash Flows (in thousands):
June 30,
2021 2020
Cash and cash equivalents $ 276,367  $ 269,342 
Restricted cash (includes restricted cash of consolidated VIEs of $43,553 and $39,248 as of June 30, 2021 and June 30, 2020, respectively)
69,299  63,274 
Total cash, cash equivalents and restricted cash used in the Statement of Cash Flows $ 345,666  $ 332,616 


9


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

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

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 a tech-enabled, omni-channel consumer finance company serving a full spectrum of non-prime and prime consumers in the U.S. and Canada. Effective with its acquisition of Flexiti on March 10, 2021, CURO provides customers in Canada a BNPL solution. Flexiti is one of Canada's fastest-growing POS lenders, offering customers flexible payment plans at retailers that sell large-scale goods such as furniture, appliances, jewelry and electronics. Through its BNPL platform, customers can be approved instantly to shop with their FlexitiCard, which they can use online or in-store to make multiple purchases, within their credit limit, without needing to reapply. Refer to Note 16, "Acquisitions" for further disclosures related to the acquisition of Flexiti.

Basis of Presentation

The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements in accordance with U.S. GAAP, and with the accounting policies described in its 2020 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, 2021.

Following the acquisition of Flexiti on March 10, 2021, the Company reports Flexiti operations as the "Canada POS Lending" segment throughout this Form 10-Q. Refer to Note 11, "Segment Reporting" for further information.

Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, although the Company believes that the disclosures are adequate to enable a reasonable understanding of the information presented. Additionally, the Company qualifies as an SRC for the year-to-date and quarter-to-date periods presented, which allows registrants to report information under scaled disclosure requirements. SRC status is determined on an annual basis as of the last business day of the most recently completed second fiscal quarter. Under these rules, the Company met the definition of an SRC until June 30, 2021. However, at the reevaluation of its status as of June 30, 2021, CURO no longer met SRC status and will be required to report under non-SRC registrant rules beginning with the first quarter of 2022.

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. During the first quarter of 2021, the Company combined the previous "Occupancy" and "Office" line items into "Occupancy and office" which are presented as such on the unaudited Condensed Consolidated Statements of Operations as of June 30, 2021 and 2020.

Principles of Consolidation

The unaudited Condensed Consolidated Financial Statements reflect the accounts of CURO and its direct and indirect subsidiaries, including Flexiti, which was acquired on March 10, 2021, and Ad Astra, which was acquired on January 3, 2020. Refer to Note 16, "Acquisitions" for further disclosures related to the acquisition of Flexiti and Ad Astra. 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, including those impacted by COVID-19, that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. 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 ALL, certain assumptions related to equity investments, goodwill and intangibles, accruals related to self-insurance, CSO liability for losses, estimated tax liabilities and the accounting for the acquisition of Flexiti. Actual results may differ from those estimates.

Acquisition of Flexiti

On March 10, 2021, CURO closed its acquisition of Flexiti, a POS and BNPL provider, in a transaction accounted for as a business combination. Refer to Note 16, "Acquisitions" for further information regarding the acquisition and Note 15, "Goodwill" for the impact to the Company's goodwill balance as a result of the acquisition.
10


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

Change in Accounting Principle Related to Equity Method Investment in Katapult

Katapult is an e-commerce focused FinTech company offering an innovative lease financing solution to consumers and enabling essential transactions at the merchant POS. CURO first invested in Katapult in 2017 as the Company identified multiple catalysts for Katapult's future success: an innovative e-commerce POS business model, a focus on the large and under-penetrated non-prime financing market and a clear and compelling value proposition for merchants and consumers. The Company accounts for its investment in Katapult under the equity method of accounting as of June 30, 2021. Refer to Note 8, "Fair Value Measurements" for further disclosures regarding the accounting of the Company's investment in Katapult.

Historically, the Company reported income and loss from its equity method interest in Katapult on a two-month reporting lag. The merger agreement between Katapult and FinServ triggered a change in Katapult's control environment and reporting structure to coincide with SEC reporting requirements. As a result, during the first quarter of 2021, the Company applied a change in accounting principle to reflect the Company's share of Katapult's historical and ongoing results from a two-month reporting lag to a one-quarter reporting lag. The Company believes this change in accounting principle is preferable as it provides the Company with the ability to present the results of its equity method interest after Katapult’s results are publicly available and related internal controls have been completed. The Company has not retrospectively applied the change in accounting principle because the impact on the financial statements was immaterial for all periods presented.

Continuing Impacts of COVID-19

The COVID-19 pandemic continues to cause significant uncertainty and impacts. Macroeconomic conditions, in general, and the Company's operations, specifically, have been significantly affected by COVID-19. Government responses to the pandemic, either through the form of mandated lockdowns or a variety of stimulus programs to mitigate the impact of the pandemic, suppressed loan demand in 2020 and into the start of 2021. For details regarding the effect COVID-19 had on the Company's operations in 2020, the Company's response to mitigate the impact of the pandemic and the U.S. and Canadian federal and local responses to the pandemic, refer to the 2020 Form 10-K. During the second quarter of 2021, the runoff of additional federal stimulus programs in the U.S. resulted in the stabilization of the Company's U.S. loan portfolio and resulted in moderately higher NCO and past-due trends, though still low compared to pre-COVID-19 levels. For further information regarding the impact the pandemic had on loan balances as of June 30, 2021, refer to Note 3, "Loans Receivable and Revenue."

Troubled Debt Restructuring
If a borrower experiences financial difficulties, the Company may modify the terms of its loans receivable, known as TDRs. As a result of COVID-19 and our response to provide relief for customers through our Customer Care Program, we began modifying loans that qualified as TDRs beginning in the second quarter of 2020. Refer to Note 3, "Loans Receivable and Revenue" for further information on TDRs as of and for the three and six months ended June 30, 2021.

Loans Receivable on a Non-Accrual Basis

The Company may place loans receivable on non-accrual status due to statutory requirements or, if in management’s judgment, the timely collection of principal and interest becomes uncertain. After a loan is placed on non-accrual status, no further interest is accrued. Loans are not typically returned to accrual status and thus remain on non-accrual status until they are paid or charged-off. Payments are applied initially to any outstanding past due loan balances prior to current loan balances. The Company's policy for determining past due status is consistent with that of the Company's accrual loans, depending on the product. Refer to Note 3, "Loans Receivable and Revenue" for further information on non-accrual loans for the three and six months ended June 30, 2021.

Goodwill

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

At June 30, 2021, the goodwill balance includes the amount recognized as a result of the acquisition of Flexiti. Refer to Note 16, "Acquisitions" for further information regarding the acquisition and Note 15, "Goodwill" for the impact to the Company's goodwill balance as a result of the acquisition.

11


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

During the fourth quarter of 2020, the Company performed a quantitative assessment for the U.S. and Canada Direct Lending reporting units. Management concluded that the estimated fair values of these two reporting units were greater than their respective carrying values. During the three and six months ended June 30, 2021, the Company did not identify triggering events that indicate an impairment exists and did not record an impairment related to goodwill.

Refer to Note 15, "Goodwill" for further information.

Recently Adopted Accounting Pronouncements

ASU 2020-01

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (ASU 2020-01). ASU 2020-01 clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323 and the accounting for certain forward contracts and purchased options in Topic 815. The Company adopted ASU 2020-01 as of January 1, 2021, which did not have a material impact on the unaudited Condensed Consolidated Financial Statements.

ASU 2019-12

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (Topic 740). The ASU intends to simplify various aspects related to accounting for income taxes and removes certain exceptions to the general principles in Topic 740. Additionally, the ASU clarifies and amends existing guidance to improve consistent application of its requirements. The Company adopted ASU 2019-12 as of January 1, 2021, which did not have a material impact on the Company's unaudited Condensed Consolidated Financial Statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

ASU 2016-13

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent amendments to the guidance: ASU 2018-19 in November 2018, ASU 2019-04 in April 2019, ASU 2019-05 in May 2019, ASU 2019-10 and -11 in November 2019 and ASU 2020-02 in February 2020. The amended standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace the current “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they currently do under the other-than-temporary impairment model. The standard also simplifies the accounting model for purchased credit-impaired debt securities and loans. The amendment will affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2019-04 clarifies that equity instruments without readily determinable fair values for which an entity has elected the measurement alternative should be remeasured to fair value as of the date that an observable transaction occurred. ASU 2019-05 provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. ASU 2019-10 amends the mandatory effective date for ASU 2016-13. The amendments are effective for fiscal years beginning after December 15, 2022 for entities that qualified as an SRC as of June 30, 2019, which the Company did. ASU 2019-11 provides clarity and improves the codification to ASU 2016-13. The amendments should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic. Early adoption is permitted. The Company is evaluating its alternatives with respect to the available accounting methods under ASU 2016-13, including the fair value option. If the fair value option is not utilized, adoption of ASU 2016-13 will increase the allowance for credit losses, with a resulting negative adjustment to retained earnings on the date of adoption. The Company deferred the adoption of ASU 2016-13 as permitted under ASU 2019-10. The Company is currently assessing the impact that adoption of ASU 2016-13 will have on its financial statements.

12


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

ASU 2020-04 and subsequent amendments

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional expedients and exceptions to U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by this reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities also can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The FASB also issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope in January 2021. It clarifies that certain optional expedients and exceptions in Topic 848 apply to derivatives that are affected by the discounting transition. The amendments in this ASU affect the guidance in ASU 2020-04 and are effective in the same timeframe as ASU 2020-04. The Company does not expect the adoption of these ASUs to have a material impact on its financial statements.

NOTE 2 - VARIABLE INTEREST ENTITIES

As of June 30, 2021, the Company had three credit facilities whereby certain loans receivable were sold to wholly-owned VIEs to collateralize debt incurred under each facility. See Note 5, "Debt" for additional details on the Non-Recourse U.S. SPV facility, entered into in April 2020, the Non-Recourse Canada SPV facility, entered into in August 2018, and the Non-Recourse Flexiti SPE Facility, entered into concurrent with the completion of the Company's acquisition of Flexiti in March 2021.

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. As required, the Company parenthetically discloses on the unaudited Condensed Consolidated Balance Sheets the VIEs' assets that can only be used to settle the VIEs' obligations and liabilities if the VIEs' creditors have no recourse against the Company's general credit.

The carrying amounts of consolidated VIEs' assets and liabilities associated with the Company's special purpose subsidiaries were as follows (in thousands):
June 30,
2021 		December 31,
2020
Assets
Restricted cash $ 43,553  $ 31,994 
Loans receivable, net 547,678  306,302 
Intercompany receivable(1)
86,692  15,382 
Prepaid expenses and other —  388 
Deferred tax assets 108  105 
      Total Assets $ 678,031  $ 354,171 
Liabilities
Accounts payable and accrued liabilities $ 6,078  $ 34,055 
Deferred revenue 109  136 
Accrued interest 1,435  1,147 
Debt 338,234  139,661 
      Total Liabilities $ 345,856  $ 174,999 
(1) Intercompany receivable VIE balances eliminate upon consolidation.

NOTE 3 – LOANS RECEIVABLE AND REVENUE

As a result of COVID-19, CURO's customers and its overall credit performance continue to be impacted through the three and six months ended June 30, 2021. Throughout much of 2020 and the first half of 2021, the U.S. and Canadian governments instituted several initiatives to ease the personal burden of the pandemic, including various federal and provincial financial aid and economic stimulus programs. During the second half of 2020, consumer demand gradually increased, reflecting both the gradual lifting of certain regions' stay-at-home and self-quarantine orders in response to the pandemic's easing and the expiration of governmental stimulus programs. Subsequently, a new round of government stimulus payments in the U.S. resulted in a decrease in loan balances and allowance for loan losses as of June 30, 2021. With stimulus programs running off in the U.S. and continued demand in Canada for loan products, loan balances have increased sequentially as of June 30, 2021. The Company has maintained its historical allowance approach, but has adjusted estimates for changes in past-due gross loans receivable due to market conditions and as of June 30, 2021, has reduced allowance as a percentage of receivables as a result of recent market trends. The estimates
13


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

and assumptions used to determine an appropriate allowance for loan losses and liability for losses on CSO lender-owned consumer loans are those that are available through the filing of this Form 10-Q and which are indicative of conditions as of June 30, 2021.

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

Revenue and Receivable Characteristics by Product

Revolving LOC revenues include interest income on outstanding revolving balances, MDR related to Canada POS Lending, and other usage or maintenance fees as permitted by underlying statutes. Unsecured and Secured Installment revenue includes interest income and non-sufficient-funds or returned-items fees on late or defaulted payments on past-due loans, known as late fees. Late fees comprise less than 1.0% of Installment revenues. Single-Pay revenues represent deferred presentment or other fees as defined by the underlying state, provincial or national regulations. Ancillary revenue includes revenue from a number of ancillary financial products such as check cashing, proprietary general-purpose reloadable prepaid debit cards (Opt+), demand deposit accounts (Revolve Finance), credit protection insurance in the Canadian market, retail installment sales and money transfer services.

The following table summarizes revenue by product (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Revolving LOC $ 68,036  $ 56,736  $ 130,771  $ 127,718 
Unsecured Installment 64,783  70,429  141,177  192,838 
Secured Installment 12,821  19,401  27,848  45,687 
Single-Pay 23,763  22,732  48,730  67,889 
Total Installment 101,367  112,562  217,755  306,414 
Ancillary 18,290  13,211  35,718  29,183 
   Total revenue(1)
$ 187,693  $ 182,509  $ 384,244  $ 463,315 
(1) Includes revenue from CSO programs of $34.9 million and $37.8 million for the three months ended June 30, 2021 and 2020, respectively, and $76.4 million and $105.8 million for the six months ended June 30, 2021 and 2020.

The following tables summarize loans receivable by product and the related delinquent loans receivable (in thousands):
June 30, 2021
Revolving LOC Unsecured Installment Secured Installment
Single-Pay(1)
Total Installment - Company Owned Total
Current loans receivable $ 562,497  $ 65,603  $ 31,824  $ 38,760  $ 136,187  $ 698,684 
Delinquent loans receivable 43,933  21,035  5,576  —  26,611  70,544 
   Total loans receivable 606,430  86,638  37,400  38,760  162,798  769,228 
   Less: allowance for losses (44,848) (16,701) (3,880) (2,432) (23,013) (67,861)
Loans receivable, net $ 561,582  $ 69,937  $ 33,520  $ 36,328  $ 139,785  $ 701,367 
(1) Of the $38.8 million of Single-Pay receivables, $10.0 million relate to mandated extended payment options for certain Canada Single-Pay loans.

June 30, 2021
Revolving LOC Unsecured Installment Secured Installment Total Installment - Company Owned Total
Delinquent loans receivable
0-30 days past due $ 22,288  $ 8,474  $ 2,835  $ 11,309  $ 33,597 
31-60 days past due 8,659  5,767  1,307  7,074  15,733 
61 + days past due 12,986  6,794  1,434  8,228  21,214 
Total delinquent loans receivable $ 43,933  $ 21,035  $ 5,576  $ 26,611  $ 70,544 
14


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


December 31, 2020
Revolving LOC Unsecured Installment Secured Installment
Single-Pay(1)
Total Installment - Company Owned Total
Current loans receivable $ 321,105  $ 78,235  $ 40,358  $ 43,780  $ 162,373  $ 483,478 
Delinquent loans receivable 37,779  24,190  8,275  —  32,465  70,244 
   Total loans receivable 358,884  102,425  48,633  43,780  194,838  553,722 
   Less: allowance for losses (51,958) (24,073) (7,047) (3,084) (34,204) (86,162)
Loans receivable, net $ 306,926  $ 78,352  $ 41,586  $ 40,696  $ 160,634  $ 467,560 
(1) Of the $43.8 million of Single-Pay receivables, $11.2 million relate to mandated extended payment options for certain Canada Single-Pay loans.

December 31, 2020
Revolving LOC Unsecured Installment Secured Installment Total Installment - Company Owned Total
Delinquent loans receivable
0-30 days past due $ 17,517  $ 10,361  $ 3,764  $ 14,125  $ 31,642 
31-60 days past due 9,276  7,124  2,199  9,323  18,599 
61 + days past due 10,986  6,705  2,312  9,017  20,003 
Total delinquent loans receivable $ 37,779  $ 24,190  $ 8,275  $ 32,465  $ 70,244 

The following tables summarize loans Guaranteed by the Company under CSO programs and the related delinquent receivables (in thousands):
June 30, 2021
Unsecured Installment Secured Installment Total Installment - Guaranteed by the Company
Current loans receivable Guaranteed by the Company $ 29,981  $ 658  $ 30,639 
Delinquent loans receivable Guaranteed by the Company 6,359  95  6,454 
Total loans receivable Guaranteed by the Company 36,340  753  37,093 
Less: Liability for losses on CSO lender-owned consumer loans (5,234) (31) (5,265)
Loans receivable Guaranteed by the Company, net $ 31,106  $ 722  $ 31,828 

June 30, 2021
Unsecured Installment Secured Installment Total Installment - Guaranteed by the Company
Delinquent loans receivable
0-30 days past due $ 5,574  $ 88  $ 5,662 
31-60 days past due 625  4  629 
61+ days past due 160  3  163 
Total delinquent loans receivable $ 6,359  $ 95  $ 6,454 
15


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


December 31, 2020
Unsecured Installment Secured Installment Total Installment - Guaranteed by the Company
Current loans receivable Guaranteed by the Company $ 37,096  $ 775  $ 37,871 
Delinquent loans receivable Guaranteed by the Company 6,079  155  6,234 
Total loans receivable Guaranteed by the Company 43,175  930  44,105 
Less: Liability for losses on CSO lender-owned consumer loans (7,160) (68) (7,228)
Loans receivable Guaranteed by the Company, net $ 36,015  $ 862  $ 36,877 

December 31, 2020
Unsecured Installment Secured Installment Total Installment - Guaranteed by the Company
Delinquent loans receivable
0-30 days past due $ 5,435  $ 103  $ 5,538 
31-60 days past due 490  37  527 
61 + days past due 154  15  169 
Total delinquent loans receivable $ 6,079  $ 155  $ 6,234 

The following tables summarize activity in the ALL and the liability for losses on CSO lender-owned consumer loans in total (in thousands):
Three Months Ended June 30, 2021
Revolving LOC Unsecured Installment Secured Installment Single-Pay Total Installment Other Total
Allowance for loan losses:
Balance, beginning of period $ 44,754  $ 20,394  $ 5,023  $ 2,217  $ 27,634  $ —  $ 72,388 
Charge-offs (24,487) (18,812) (4,384) (22,107) (45,303) (802) (70,592)
Recoveries 7,280  5,383  2,216  17,574  25,173  378  32,831 
Net charge-offs (17,207) (13,429) (2,168) (4,533) (20,130) (424) (37,761)
Provision for losses 16,672  9,734  1,025  4,727  15,486  424  32,582 
Effect of foreign currency translation 629  2  —  21  23  —  652 
Balance, end of period $ 44,848  $ 16,701  $ 3,880  $ 2,432  $ 23,013  $ —  $ 67,861 
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period $ —  $ 4,670  $ 57  $ —  $ 4,727  $ —  $ 4,727 
Decrease in liability —  (564) 26  —  (538) —  (538)
Balance, end of period $ —  $ 5,234  $ 31  $ —  $ 5,265  $ —  $ 5,265 
16


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

Three Months Ended
June 30, 2020
Revolving LOC Unsecured Installment Secured Installment Single-Pay Total Installment Other Total
Allowance for loan losses:
Balance, beginning of period $ 56,458  $ 28,965  $ 9,726  $ 4,693  $ 43,384  $ —  $ 99,842 
Charge-offs (37,784) (30,129) (11,747) (21,168) (63,044) (750) (101,578)
Recoveries 6,100  7,019  2,961  21,766  31,746  398  38,244 
Net charge-offs (31,684) (23,110) (8,786) 598  (31,298) (352) (63,334)
Provision for losses 21,341  12,584  6,943  (2,588) 16,939  352  38,632 
Effect of foreign currency translation 1,204  12  —  99  111  —  1,315 
Balance, end of period $ 47,319  $ 18,451  $ 7,883  $ 2,802  $ 29,136  $ —  $ 76,455 
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period $ —  $ 9,142  $ 47  $ —  $ 9,189  $ —  $ 9,189 
Decrease in liability —  4,014  11  —  4,025  —  4,025 
Balance, end of period $ —  $ 5,128  $ 36  $ —  $ 5,164  $ —  $ 5,164 

Six Months Ended
June 30, 2021
Revolving LOC Unsecured Installment Secured Installment Single-Pay Total Installment Other Total
Allowance for loan losses:
Balance, beginning of period $ 51,958  $ 24,073  $ 7,047  $ 3,084  $ 34,204  $ —  $ 86,162 
Charge-offs (53,201) (39,937) (10,727) (44,040) (94,704) (1,656) (149,561)
Recoveries 14,787  12,000  4,760  38,828  55,588  930  71,305 
Net charge-offs (38,414) (27,937) (5,967) (5,212) (39,116) (726) (78,256)
Provision for losses 30,474  20,559  2,800  4,520  27,879  726  59,079 
Effect of foreign currency translation 830  6  —  40  46  —  876 
Balance, end of period $ 44,848  $ 16,701  $ 3,880  $ 2,432  $ 23,013  $ —  $ 67,861 
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period $ —  $ 7,160  $ 68  $ —  $ 7,228  $ —  $ 7,228 
Decrease in liability —  1,926  37  —  1,963  —  1,963 
Balance, end of period $ —  $ 5,234  $ 31  $ —  $ 5,265  $ —  $ 5,265 

17


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

Six Months Ended
June 30, 2020
Revolving LOC Unsecured Installment Secured Installment Single-Pay Total Installment Other Total
Allowance for loan losses:
Balance, beginning of period $ 55,074  $ 35,587  $ 10,305  $ 5,869  $ 51,761  $ —  $ 106,835 
Charge-offs (81,293) (68,687) (24,857) (61,689) (155,233) (2,028) (238,554)
Recoveries 12,511  12,802  5,870  51,770  70,442  977  83,930 
Net charge-offs (68,782) (55,885) (18,987) (9,919) (84,791) (1,051) (154,624)
Provision for losses 62,332  38,766  16,565  7,051  62,382  1,051  125,765 
Effect of foreign currency translation (1,305) (17) —  (199) (216) —  (1,521)
Balance, end of period $ 47,319  $ 18,451  $ 7,883  $ 2,802  $ 29,136  $ —  $ 76,455 
Liability for losses on CSO lender-owned consumer loans:
Balance, beginning of period $ —  $ 10,553  $ 70  $ —  $ 10,623  $ —  $ 10,623 
Decrease in liability —  5,425  34  —  5,459  —  5,459 
Balance, end of period $ —  $ 5,128  $ 36  $ —  $ 5,164  $ —  $ 5,164 

As of June 30, 2021, Revolving LOC and Installment loans classified as nonaccrual were $4.2 million and $5.1 million, respectively. As of December 31, 2020, Revolving LOC and Installment loans classified as nonaccrual were $4.4 million and $6.2 million, respectively. The Company's loans receivable inherently considers nonaccrual loans in its estimate of the ALL as delinquencies are a primary input into the Company's roll rate-based model.

TDR Loans Receivable

In certain circumstances, the Company modifies the terms of its loans receivable for borrowers. Under U.S. GAAP, a modification of loans receivable terms is considered a TDR if the borrower is experiencing financial difficulty and the Company grants a concession to the borrower it would not have otherwise granted under the terms of the original agreement. In response to COVID-19, the Company established an enhanced Customer Care Program in 2020, which enables its team members to provide relief to customers in various ways, ranging from due date changes, interest or fee forgiveness, payment waivers or extended payment plans, depending on a customer’s individual circumstances. The Company modifies loans only if it believes the customer has the ability to pay under the restructured terms. The Company continues to accrue and collect interest on these loans in accordance with the restructured terms.

The Company records its ALL related to TDRs by discounting the estimated cash flows associated with the respective TDR at the effective interest rate immediately after the loan modification and records any difference between the discounted cash flows and the carrying value as an allowance adjustment. A loan that has been classified as a TDR remains so classified until the loan is paid off or charged off. A TDR is charged off consistent with the Company's policies for the related loan product. For additional information on the Company's loss recognition policy, see the 2020 Form 10-K.

The table below presents TDRs, which are related to the Customer Care Program implemented in response to COVID-19, included in gross loans receivable and the impairment included in the ALL (in thousands):

As of
June 30, 2021
As of
December 31, 2020
Current TDR gross receivables $ 12,137  $ 13,563 
Delinquent TDR gross receivables 4,293  6,309 
Total TDR gross receivables 16,430  19,872 
Less: Impairment included in the allowance for loan losses (2,455) (3,482)
Less: Additional allowance (3,130) (4,497)
Outstanding TDR receivables, net of impairment $ 10,845  $ 11,893 

18


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

The tables below reflect loans modified and classified as TDRs during the periods presented (in thousands):

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Pre-modification TDR loans receivable $ 3,504  $ 24,069  $ 8,367  $ 24,069 
Post-modification TDR loans receivable 3,197  21,390  7,472  21,390 
Total concessions included in gross charge-offs $ 307  $ 2,679  $ 895  $ 2,679 

There were $3.3 million and $0.9 million of loans classified as TDRs that were charged off and included as a reduction in the ALL during the three months ended June 30, 2021 and 2020, respectively, and $8.1 million and $0.9 million during the six months ended June 30, 2021 and 2020, respectively. The Company had commitments to lend additional funds of approximately $2.0 million to customers with available and unfunded Revolving LOC loans classified as TDRs as of June 30, 2021.

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 June 30, Six Months Ended June 30,
2021 2020 2021 2020
Average outstanding TDR loans receivable $ 16,967  $ 20,864  $ 17,936  $ 20,864 
Interest income recognized 4,604  4,396  10,122  4,396 
Number of TDR loans(1)
2,468  21,512  6,248  21,512 
(1) Presented in ones


NOTE 4 – CREDIT SERVICES ORGANIZATION
The CSO fee receivables under CSO programs were $4.3 million and $5.0 million at June 30, 2021 and December 31, 2020, respectively, and are reflected in "Prepaid expenses and other" in the unaudited Condensed Consolidated Balance Sheets. The Company bears the risk of loss through its guarantee to purchase customer loans that are charged-off. The terms of these loans range up to six months. See Note 1, "Summary of Significant Accounting Policies and Nature of Operations" of the 2020 Form 10-K for further details of the Company's accounting policy.

As of June 30, 2021 and December 31, 2020, the incremental maximum amount payable under all such guarantees was $30.3 million and $36.6 million, respectively. This liability is not included in the Company's unaudited Condensed Consolidated Balance Sheets. If the Company is required to pay any portion of the total amount of the loans it has guaranteed, it will attempt to recover the entire amount or a portion from the applicable customers. The Company holds no collateral in respect of the guarantees. The Company estimates a liability for losses associated with the guaranty provided to the CSO lenders, which was $5.3 million and $7.2 million at June 30, 2021 and December 31, 2020, respectively.

The Company placed $4.4 million and $5.5 million in collateral accounts for the benefit of lenders at June 30, 2021 and December 31, 2020, respectively, which is reflected in "Prepaid expenses and other" in the unaudited Condensed Consolidated Balance Sheets. The balances required to be maintained in these collateral accounts vary by lender, typically based on a percentage of the outstanding loan balances held by the lender. The percentage of outstanding loan balances required for collateral is negotiated between the Company and each lender.

Deferred revenue associated with the CSO program was immaterial as of June 30, 2021 and December 31, 2020 and there were no costs to obtain, or costs to fulfill, capitalized under the program. See Note 3, "Loans Receivable and Revenue" for additional information related to loan balances and the revenue recognized under the program.

19


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

NOTE 5 – DEBT
Debt consisted of the following (in thousands):
June 30, 2021 December 31, 2020
8.25% Senior Secured Notes
$ 680,893  $ 680,000 
Non-Recourse U.S. SPV Facility 44,489  43,586 
Non-Recourse Canada SPV Facility 98,881  96,075 
Non-Recourse Flexiti SPE Facility 194,864  — 
     Debt $ 1,019,127  $ 819,661 

8.25% Senior Secured Notes

In August 2018, the Company issued $690.0 million of 8.25% Senior Secured Notes which mature on September 1, 2025. Interest on the notes is payable semiannually, in arrears, on March 1 and September 1. In connection with the 8.25% Senior Secured Notes, the remaining balance of capitalized financing costs of $9.1 million, net of amortization, is included in the unaudited Condensed Consolidated Balance Sheets as a component of "Debt." These costs are amortized over the term of the 8.25% Senior Secured Notes as a component of interest expense.

On July 16, 2021, the Company priced its offering of 7.50% Senior Secured Notes of $750 million aggregate principal amount due 2028. The 7.50% Senior Secured Notes will be used, among other things, to fully redeem the 8.25% Senior Secured Notes due 2025. Refer to Note 19, Subsequent Events for additional details.

Non-Recourse U.S. SPV Facility

In April 2020, CURO Receivables Finance II, LLC entered into the Non-Recourse U.S. SPV Facility with Midtown Madison Management LLC, as administrative agent, and Atalaya Asset Income Fund VI LP, as the initial lender. As of June 30, 2021, the Non-Recourse U.S. SPV Facility provided for $200.0 million of borrowing capacity, which was increased from $100.0 million on July 31, 2020 after obtaining additional commitments.

As of June 30, 2021, the effective interest rate on the Company's borrowings was one-month LIBOR plus 6.25%, or 7.90%. The U.S. SPV Borrower will pay the lenders additional interest if it does not borrow minimum specified percentages of the available commitments and a monthly 0.50% per annum commitment fee on the unused portion of the commitments. The Company is currently evaluating the impact of the expected transition from LIBOR to alternative reference rates.

As of June 30, 2021, outstanding borrowings under the Non-Recourse U.S. SPV Facility were $44.5 million, net of deferred financing costs of $5.0 million. For further information on the Non-Recourse U.S. SPV Facility, refer to Note 2, "Variable Interest Entities."

The Non-Recourse U.S. SPV Facility matures on April 8, 2024.

Non-Recourse Canada SPV Facility

In August 2018, CURO Canada Receivables Limited Partnership entered into the Non-Recourse Canada SPV Facility with Waterfall Asset Management, LLC. The Non-Recourse Canada SPV Facility currently provides for C$175.0 million of borrowing capacity and the ability to expand such capacity up to C$250.0 million. As of June 30, 2021, the effective interest rate on our borrowings was three-month CDOR plus 6.75%, or 8.60%. The Canada SPV Borrower also pays a 0.50% per annum commitment fee on the unused portion of the commitments. In April 2019, the facility's maturity date was extended one year, to September 2, 2023.
20


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


As of June 30, 2021, outstanding borrowings under the Non-Recourse Canada SPV Facility were $98.9 million, net of deferred financing costs of $1.3 million. For further information on the Non-Recourse Canada SPV, refer to Note 2, "Variable Interest Entities."

Non-Recourse Flexiti SPE Facility

In March 2021, concurrently with the acquisition of Flexiti, Flexiti Financing SPE Corp. refinanced and expanded their Non-Recourse Flexiti SPE Facility to C$421 million for Class A borrowings and to C$79 million for Class B borrowings, with a maturity on March 10, 2024. As of June 30, 2021, the weighted average interest rate on our borrowings was three-month CDOR plus 4.40%, or 5.40%. The Flexiti SPE borrower also pays a 1.00% per annum commitment fee on the unused portion of the commitments.

As of June 30, 2021, outstanding borrowings under the Non-Recourse Flexiti SPE Facility were $194.9 million, net of deferred financing costs of $4.8 million. For further information on the Non-Recourse Flexiti SPE, refer to Note 2, "Variable Interest Entities."

Senior Revolver

The Company maintains the Senior Revolver that provides $50.0 million of borrowing capacity, including up to $5.0 million of standby letters of credit, for a one-year term, renewable for successive terms following annual review. The current term expires June 30, 2022. The Senior Revolver accrues interest at one-month LIBOR plus 5.00% (subject to a 5% overall minimum). The Senior Revolver is syndicated among four banks. The Company is currently evaluating the impact of no longer using LIBOR as a benchmark rate.

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

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

The revolver was undrawn at June 30, 2021 and December 31, 2020.

Cash Money Revolving Credit Facility

Cash Money maintains the Cash Money Revolving Credit Facility, a C$10.0 million revolving credit facility with Royal Bank of Canada, which provides short-term liquidity required to meet the working capital needs of the Company's Canadian direct lending operations. Aggregate draws under the revolving credit facility are limited to the lesser of: (i) the borrowing base, which is the percentage of cash, deposits in transit and accounts receivable, and (ii) C$10.0 million. As of June 30, 2021, the borrowing capacity under the Cash Money Revolving Credit Facility was C$9.9 million, net of C$0.1 million in outstanding stand-by-letters of credit.

The Cash Money Revolving Credit Facility is collateralized by substantially all of Cash Money’s assets and contains various covenants that require, among other things, that the aggregate borrowings outstanding under the facility not exceed the borrowing base, as well as restrictions on the encumbrance of assets and the creation of indebtedness. Borrowings under the Cash Money Revolving Credit Facility bear interest per annum at the prime rate of a Canadian chartered bank plus 1.95%, or 4.40% interest as of June 30, 2021.

The Cash Money Revolving Credit Facility was undrawn at June 30, 2021 and December 31, 2020.

NOTE 6 – SHARE-BASED COMPENSATION

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

21


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

Restricted Stock Units

As of June 30, 2021, the Company has granted three types of RSUs, which are known as time-based, market-based and, as a result of the Flexiti acquisition, performance-based.

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

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

Upon closing of the Flexiti acquisition in March 2021, the Company granted performance-based RSUs to Flexiti employees. Grants of performance-based RSUs are valued at the grant date based on the closing market price of common stock. The performance-based RSUs vest over two years if Flexiti achieves specified internal targets, including revenue less NCOs and originations metrics. Expense recognition for the performance-based RSUs occurs ratably over the service period if it is probable that the targets will be achieved as of each period end. If such results are not probable, no share-based compensation expense is recognized and any previously recognized share-based compensation expense is reversed.

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

A summary of the activity of time-based, market-based and performance-based unvested RSUs as of June 30, 2021 and changes during the six months ended June 30, 2021 are presented in the following table:
Number of RSUs
Time-Based Market-Based Performance-Based Weighted Average
Grant Date Fair Value per Share
December 31, 2020 1,012,792  758,713  —  $ 10.26 
Granted 1,010,075  299,053  253,310  15.28 
Vested (468,626) —  —  11.06 
Forfeited (42,737) (48,252) —  10.91 
June 30, 2021 1,511,504  1,009,514  253,310  $ 12.93 

Share-based compensation expense for the three months ended June 30, 2021 and 2020, which includes compensation costs from stock options and RSUs, was $3.5 million and $3.3 million, respectively, and during the six months ended June 30, 2021 and 2020 was $6.2 million and $6.5 million, respectively. Share-based compensation expense is included in the unaudited Condensed Consolidated Statements of Operations as a component of "Corporate, district and other expenses."

As of June 30, 2021, there was $27.7 million of total unrecognized compensation cost related to stock options and RSUs. Total unrecognized compensation costs will be recognized over a weighted-average period of 2.0 years.

NOTE 7 – INCOME TAXES

The Company's effective income tax rate was 24.7% and 5.0% for the six months ended June 30, 2021 and 2020, respectively. The effective income tax rate was lower compared to the federal and state/provincial statutory rates of approximately 26%, primarily as a result of proportionally more income in lower rate jurisdictions, driven by the gain on the Katapult transaction of $146.9 million. Additionally, the effective tax rate also includes the release of a valuation allowance of $0.4 million due to the Company's share of Katapult's income, excess tax benefits related to share-based compensation of $0.4 million, $0.3 million tax expense related to the non-deductible transaction costs and $0.3 million tax expense of additional Texas accrual for 2020 due to the settlement of 2013 to 2019 Texas returns.

The effective income tax rate for the six months ended June 30, 2021 was primarily due to a tax benefit from the CARES Act. The CARES Act, among other things, allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid Federal income taxes. The Company recorded an income tax benefit of $9.1 million related to the carry-back of NOLs from tax years 2018 and 2019, which offset its tax liability for prior years and generated a refund of previously paid taxes at a 35% statutory rate.

22


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

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 $213.4 million were distributed to the U.S. legal entities, the Company would be subject to Canadian withholding taxes of an estimated $10.7 million. 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 8 – 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, meaning those that reflect the Company's own judgement 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 own 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.

23


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

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 June 30, 2021 (in thousands):

Estimated Fair Value
Carrying Value June 30,
2021 		Level 1 Level 2 Level 3 Total
Financial assets:
Cash Surrender Value of Life Insurance $ 7,838  $ 7,838  $ —  $ —  $ 7,838 
Financial liabilities:
Non-qualified deferred compensation plan $ 4,854  $ 4,854  $ —  $ —  $ 4,854 
Contingent consideration related to acquisition 21,239  —  —  21,239  21,239 


Contingent consideration related to acquisition

In connection with the acquisition of Flexiti during the first quarter of 2021, the Company recorded a liability for contingent consideration based on the achievement of revenue less NCOs and origination targets over the two years following closing of the acquisition that could result in cash consideration paid up to $32.8 million to Flexiti's former stockholders. The fair value of the liability is estimated using probability-weighted, discounted future cash flows at current tax rates. The significant unobservable inputs (Level 3) used to estimate the fair value include the expected future tax benefits associated with the acquisition, the probability that the risk adjusted-revenue and origination targets will be achieved, and discount rates. The contingent consideration measured at fair value using unobservable inputs as of June 30, 2021 is $21.2 million. For additional information on Flexiti and the related contingent consideration, refer to Note 16, "Acquisitions."

The table below presents the assets and liabilities that were carried at fair value on the unaudited Condensed Consolidated Balance Sheets at December 31, 2020 (in thousands):
Estimated Fair Value
Carrying Value December 31,
2020 		Level 1 Level 2 Level 3 Total
Financial assets:
Cash Surrender Value of Life Insurance $ 7,140  $ 7,140  $ —  $ —  $ 7,140 
Financial liabilities:
Non-qualified deferred compensation plan $ 4,690  $ 4,690  $ —  $ —  $ 4,690 

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 June 30, 2021 (in thousands):
Estimated Fair Value
Carrying Value June 30,
2021 		Level 1 Level 2 Level 3 Total
Financial assets:
Cash and cash equivalents $ 276,367  $ 276,367  $ —  $ —  $ 276,367 
Restricted cash 69,299  69,299  —  —  69,299 
Loans receivable, net 701,367  —  —  701,367  701,367 
Financial liabilities:
Liability for losses on CSO lender-owned consumer loans
$ 5,265  $ —  $ —  $ 5,265  $ 5,265 
8.25% Senior Secured Notes
680,893  —  714,150  —  714,150 
Non-Recourse U.S. SPV facility 44,489  —  —  49,456  49,456 
Non-Recourse Canada SPV facility 98,881  —  —  100,209  100,209 
Non-Recourse Flexiti SPE facility 194,864  —  —  199,646  199,646 
24


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


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, 2020 (in thousands):
Estimated Fair Value
Carrying Value December 31,
2020 		Level 1 Level 2 Level 3 Total
Financial assets:
Cash and cash equivalents $ 213,343  $ 213,343  $ —  $ —  $ 213,343 
Restricted cash 54,765  54,765  —  —  54,765 
Loans receivable, net 467,560  —  —  467,560  467,560 
Financial liabilities:
Liability for losses on CSO lender-owned consumer loans $ 7,228  $ —  $ —  $ 7,228  $ 7,228 
8.25% Senior Secured Notes
680,000  —  646,000  —  646,000 
Non-Recourse U.S. SPV facility 43,586  —  —  49,456  49,456 
Non-Recourse Canada SPV facility 96,075  —  —  97,971  97,971 

Loans Receivable, Net

Loans receivable are carried on the unaudited Condensed Consolidated Balance Sheets net of the ALL. 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 general economic conditions. The carrying value of loans receivable approximates their fair value. Refer to Note 3, "Loans Receivable and Revenue" for additional information. Loans receivable acquired as part of the Flexiti acquisition, which represent $125.0 million of the $701.4 million, are carried at gross contractual balance less unamortized fair value discount and ALL. For additional information on the determination of the fair value discount, refer to Note 16, "Acquisitions."

CSO Program

In connection with CSO programs, the Company guarantees consumer loan payment obligations to unrelated third-party lenders for loans that the Company arranges for consumers on the third-party lenders’ behalf. The Company is required to purchase from the lender charged-off loans that it has guaranteed. Refer to Note 3, "Loans Receivable and Revenue" and Note 4, Credit Services Organization" for additional information.

8.25% Senior Secured Notes, Non-Recourse U.S. Facility, Non-Recourse Canada SPV Facility and Non-Recourse Flexiti SPE Facility

The fair value disclosure for the 8.25% Senior Secured Notes was based on observable market trading data. The fair values of the Non-Recourse U.S. SPV Facility, Non-Recourse Canada SPV Facility and Non-Recourse Flexiti SPE Facility were based on the cash needed for their respective final settlements.

25


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

Investment in Katapult

The table below presents the Company's investment in Katapult (in thousands):
Equity Method Investment
Measurement Alternative (1)
Total Investment in Katapult
Balance at December 31, 2019 $ 10,068  $ —  $ 10,068 
Equity method (loss) - Q1 2020 (1,618) —  (1,618)
Balance at March 31, 2020 8,450  —  8,450 
Equity method income - Q2 2020 741  741
Balance at June 30, 2020 9,191  —  9,191 
Equity method income - Q3 2020 3,530  —  3,530 
Accounting policy change for certain securities from equity method investment to measurement alternative (12,452) 12,452  — 
Purchases of common stock warrants and preferred shares 4,030  7,157  11,187 
Balance at September 30, 2020 4,299  19,609  23,908 
Equity method income - Q4 2020 1,893  —  1,893 
Purchases of common stock 1,570  —  1,570 
Balance at December 31, 2020 7,762  19,609  27,371 
Equity method income - Q1 2021 546  —  546 
Balance at March 31, 2021 8,308  19,609  27,917 
Equity method income - Q2 2021 1,712  —  1,712 
Conversion of investment(2)
6,481  (19,609) (13,128)
Balance at June 30, 2021 $ 16,501  $ —  $ 16,501 
Classification as of December 31, 2020 Level 3, not carried at fair value Level 3, carried at measurement alternative
Classification as of June 30, 2021 Level 3, not carried at fair value N/A
(1) The Company elected to measure this equity security without a readily determinable fair value equal to its cost minus impairment. If the Company identifies an observable price change in orderly transactions for the identical or a similar investment of the same issuer, it will measure the equity security at fair value as of the date that the observable transaction occurred.
(2) On June 9, 2021, Katapult completed its previously announced merger with FinServ. As required by the merger agreement, immediately prior to the completion of the merger, the Company converted all of its preferred shares and exercised all common stock warrants. Upon this transaction, the Company’s entire investment in Katapult is accounted for under the equity method of accounting. The Company then exchanged all common shares of Katapult, immediately prior to its merger with FinServ, for $146.9 million in cash and 18.9 million common shares of the resulting public company, Katapult (NASDAQ: KPLT). The Company recorded a related net gain of $135.4 million on its equity method investment in Katapult, based on the pro rata cost basis of the investment and the discharge of the guarantee provided, for the three months ended June 30, 2021.

Prior to September 2020, the Company owned 42.5% of the outstanding shares (excluding unexercised options) of Katapult, comprised of multiple classes of equity, including preferred stock and certain common stock warrants, which met the accounting criteria for in-substance common stock at the time of their acquisition. This financial asset was not carried at fair value. The Company accounted for this investment under the equity method, and recognized a proportionate share of Katapult’s income on a two-month lag.

In September 2020, the Company acquired common stock warrants and preferred shares of Katapult from existing shareholders for $11.2 million in cash. This transaction resulted in the reevaluation of the accounting for all of the Company’s holdings in Katapult. The Company determined that its holdings of certain common stock warrants qualified as in-substance common stock and were required to be accounted for using the equity method. The Company’s holdings in preferred stock and certain other common stock warrants did not meet the criteria for in-substance common stock and therefore are carried at cost minus impairment under the measurement alternative. As a result, the Company (i) reclassified $12.5 million from an equity method investment to cost minus impairment under the measurement alternative, (ii) recorded a purchase of common stock warrants for $4.0 million determined to be in-substance common stock within its equity method investment and (iii) recorded a purchase of preferred shares for $7.2 million that was accounted for under the measurement alternative.

In October and November 2020, the Company acquired common stock of Katapult from existing shareholders for $1.6 million. The Company recorded this purchase within its equity method investment.

26


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

During the first quarter of 2021, the Company changed the two-month reporting lag to a one-quarter reporting lag, as discussed in Note 1, "Summary of Significant Accounting Policies and Nature of Operations." The Company’s share of Katapult’s income was $1.7 million and $2.3 million for the three and six months ended June 30, 2021, respectively.

On June 9, 2021, Katapult completed its merger with FinServ. As a result, the Company received $146.9 million in cash and 18.9 million common shares of the resulting public company, Katapult (NASDAQ: KPLT). The Company recorded a related net gain of $135.4 million on its equity method investment in Katapult for the three months ended June 30, 2021. The 18.9 million common shares are subject to a six month trading restriction. Additionally, as part of the merger, CURO received 3.0 million earn-out warrants and will hold two of the seven board of director seats for Katapult. For further information regarding the merger between Katapult and FinServ and its implication to CURO, refer to the description immediately following the table above. As of June 30, 2021, the value of our retained investment in Katapult based on the NASDAQ quoted market price was $204.3 million.

Both the equity method investment and the previously-recognized investment measured at cost minus impairment are presented within "Investments" on the unaudited Condensed Consolidated Balance Sheet.

The Company's total ownership of Katapult's shares, on a fully diluted basis, was 20.7% as of June 30, 2021.

NOTE 9 – STOCKHOLDERS' EQUITY
The following table summarizes the changes in stockholders' equity for the three and six months ended June 30, 2021 and 2020 (in thousands):

Common Stock Treasury Stock, at cost Paid-in capital Retained Earnings (Deficit)
AOCI (1)
Total Stockholders' Equity
Shares Outstanding Par Value
Balance at December 31, 2020 41,370,504  $ 9  $ (77,852) $ 79,812  $ 160,068  $ (30,132) $ 131,905 
Net income —  —  —  —  25,735  —  25,735 
Foreign currency translation adjustment —  —  —  —  —  3,855  3,855 
Dividends —  —  —  —  (2,368) —  (2,368)
Share based compensation expense —  —  —  2,683  —  —  2,683 
Proceeds from exercise of stock options 15,852  —  —  48  —  —  48 
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes
237,423  —  —  (1,668) —  —  (1,668)
Balance at March 31, 2021 41,623,779  $ 9  $ (77,852) $ 80,875  $ 183,435  $ (26,277) $ 160,190 
Net income —  —  —  —  104,517  —  104,517 
Foreign currency translation adjustment —  —  —  —  —  4,714  4,714 
Dividends —  —  —  —  (4,582) —  (4,582)
Share based compensation expense —  —  —  3,467  —  —  3,467 
Proceeds from exercise of stock options 43,920  —  —  191  —  —  191 
Repurchase of common stock (104,487) —  (1,752) —  —  —  (1,752)
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes 116,329  —  —  (43) —  —  (43)
Balance at June 30, 2021 41,679,541  $ 9  $ (79,604) $ 84,490  $ 283,370  $ (21,563) $ 266,702 
(1) Accumulated other comprehensive income (loss)

27


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

Common Stock Treasury Stock, at cost Paid-in capital Retained Earnings (Deficit)
AOCI (1)
Total Stockholders' Equity
Shares Outstanding Par Value
Balance at December 31, 2019 41,156,224  $ 9  $ (72,343) $ 68,087  $ 93,423  $ (38,663) $ 50,513 
Net income from continuing operations —  —  —  —  36,013  —  36,013 
Net income from discontinued operations —  —  —  —  292  —  292 
Foreign currency translation adjustment —  —  —  —  —  (22,193) (22,193)
Dividends —  —  —  —  (2,256) —  (2,256)
Share based compensation expense —  —  —  3,194  —  —  3,194 
Proceeds from exercise of stock options 42,094  —  —  126  —  —  126 
Repurchase of common stock (540,762) —  (5,509) —  —  —  (5,509)
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes
121,891  —  —  (609) —  —  (609)
Balance at March 31, 2020 40,779,447  $ 9  $ (77,852) $ 70,798  $ 127,472  $ (60,856) $ 59,571 
Net income from continuing operations —  —  —  —  21,080  —  21,080 
Net income from discontinued operations —  —  —  —  993  —  993 
Foreign currency translation adjustment —  —  —  —  —  10,261  10,261 
Dividends —  —  —  —  (2,244) —  (2,244)
Share based compensation expense —  —  —  3,310  —  —  3,310 
Common stock issued for RSUs vesting, net of shares withheld and withholding paid for employee taxes 105,098  —  —  (29) —  —  (29)
Balances at June 30, 2020 40,884,545  $ 9  $ (77,852) $ 74,079  $ 147,301  $ (50,595) $ 92,942 
(1) Accumulated other comprehensive income (loss)

Dividends

The table below summarizes the Company's quarterly dividends for 2021. The dividend policy was first instituted during the first quarter of 2020.
Dividends Paid
Date of declaration Record date Date paid Dividend per share (in thousands)
Q1 2021 February 4, 2021 February 16, 2021 March 2, 2021 $ 0.055  $ 2,284 
Q2 2021 May 3, 2021 May 14, 2021 May 27, 2021 $ 0.11  $ 4,580 

In July 2021, the Company's Board of Directors declared a dividend under the program of $0.11 per share. See Note 19, "Subsequent Events" for additional information.

28


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

NOTE 10 – 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
June 30, 		Six Months Ended
June 30,
2021 2020 2021 2020
Net income from continuing operations $ 104,517  $ 21,080  $ 130,252  $ 57,093 
Net income from discontinued operations, net of tax —  993  —  1,285 
Net income $ 104,517  $ 22,073  $ 130,252  $ 58,378 
Weighted average common shares - basic 41,655  40,810  41,580  40,814 
Dilutive effect of stock options and restricted stock units 2,017  735  1,976  872 
Weighted average common shares - diluted 43,672  41,545  43,556  41,686 
Basic earnings per share:
Continuing operations $ 2.51  $ 0.52  $ 3.13  $ 1.40 
Discontinued operations —  0.02  —  0.03 
Basic earnings per share $ 2.51  $ 0.54  $ 3.13  $ 1.43 
Diluted earnings per share:
Continuing operations $ 2.39  $ 0.51  $ 2.99  $ 1.37 
Discontinued operations —  0.02  —  0.03 
Diluted earnings per share $ 2.39  $ 0.53  $ 2.99  $ 1.40 

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 and as such, these shares are not included in calculating diluted earnings per share. For the three and six months ended June 30, 2021, there were 0.1 million and 0.1 million, respectively, and for the three and six months ended June 30, 2020, there were 2.3 million and 1.7 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 from continuing operations. The control number concept requires that the same number of potentially dilutive securities applied in computing diluted earnings per share from continuing operations be applied to all other categories of income or loss, regardless of their anti-dilutive effect on such categories.

NOTE 11 – SEGMENT REPORTING
Segment information is prepared on the same basis that the Company's CODM reviews financial information for operational decision making purposes, including revenues, net revenue, gross margin, segment operating income and other items.
On March 10, 2021, the Company acquired Flexiti, as described in Note 15, "Goodwill" and Note 16, "Acquisitions." Under ASC 280, Segment Reporting, Flexiti met the definition of a separate reportable segment. In conjunction with the acquisition, the Company made required disclosures for Flexiti as a separate reportable segment known as "Canada POS Lending," further described below. The Company also renamed the "Canada" reportable segment to the "Canada Direct Lending" reportable segment.
Reportable Segments
U.S. As of June 30, 2021, the Company operated a total of 190 U.S. retail locations and had an online presence in 35 states. Refer to Note 18, "Store Closures" for additional details related to recent store closures. The Company provides Revolving LOC loans and Installment loans, which include Single-Pay and vehicle title loans, check cashing, money transfer services, reloadable prepaid debit cards and a number of other ancillary financial products and services to its customers in the U.S. As disclosed in Note 16, "Acquisitions," the acquisition of Ad Astra closed in January 2020. The results of Ad Astra are included within the U.S. reporting segment.

Canada Direct Lending. As of June 30, 2021, the Company operated a total of 201 stores across seven Canadian provinces and territories and had an online presence in five provinces. The Company provides Revolving LOC loans and Installment loans, which include Single-Pay loans, insurance products to Revolving LOC and Installment loan customers, check cashing, money transfer
29


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

services, foreign currency exchange, reloadable prepaid debit cards, and a number of other ancillary financial products and services to its customers in Canada.

Canada POS Lending. The Company serves Canadian customers through POS financing available at approximately 6,600 retail locations and online with nearly 2,100 merchant partners across ten provinces. The Company provides Revolving LOC loans and a number of other ancillary financial products to its customers in Canada. Results of operations for the six months ended June 30, 2021 from Canada POS Lending represent results from the date of acquisition, March 10, 2021 through June 30, 2021.

30


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

The following table illustrates summarized financial information concerning reportable segments (in thousands):
Three Months Ended
June 30, 		Six Months Ended
June 30,
2021 2020 2021 2020
Revenues by segment: (1)
U.S. $ 118,794  $ 137,320  $ 255,286  $ 359,088 
Canada Direct Lending 61,880  45,189  120,320  104,227 
Canada POS Lending 7,019  —  8,638  — 
Consolidated revenue $ 187,693  $ 182,509  $ 384,244  $ 463,315 
Net revenues by segment:
U.S. $ 85,172  $ 95,790  $ 195,608  $ 231,517 
Canada Direct Lending 53,324  36,026  102,530  67,569 
Canada POS Lending 4,032  —  4,796  — 
Consolidated net revenue $ 142,528  $ 131,816  $ 302,934  $ 299,086 
Gross margin by segment:
U.S. $ 47,246  $ 56,860  $ 118,386  $ 144,400 
Canada Direct Lending 33,863  19,639  64,083  31,798 
Canada POS Lending 3,542  —  4,194  — 
Consolidated gross margin $ 84,651  $ 76,499  $ 186,663  $ 176,198 
Segment operating (loss) income:
U.S. $ 123,277  $ 11,857  $ 138,008  $ 45,283 
Canada Direct Lending 25,343  10,291  47,590  14,815 
Canada POS Lending (9,931) —  (12,730) — 
Consolidated operating income $ 138,689  $ 22,148  $ 172,868  $ 60,098 
Expenditures for long-lived assets by segment:
U.S. $ 2,162  $ 248  $ 4,824  $ 4,528 
Canada Direct Lending 361  144  510  697 
Canada POS Lending 2,112  —  2,531  — 
Consolidated expenditures for long-lived assets $ 4,635  $ 392  $ 7,865  $ 5,225 
(1) For revenue by product, see Note 3, "Loans Receivable and Revenue."
The following table provides the proportion of gross loans receivable by segment (in thousands):
June 30,
2021 		December 31,
2020
U.S. $ 186,511  $ 223,451 
Canada Direct Lending 361,264  330,271 
Canada POS Lending 221,453  — 
Total gross loans receivable $ 769,228  $ 553,722 

The following table represents the Company's net long-lived assets, comprised of property and equipment, by segment. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the asset is physically located (in thousands):
June 30,
2021 		December 31,
2020
U.S. $ 28,399  $ 36,258 
Canada Direct Lending 22,270  23,491 
Canada POS Lending 501  — 
Total net long-lived assets $ 51,170  $ 59,749 

The Company's CODM does not review assets by segment for purposes of allocating resources or decision-making purposes; therefore, total assets by segment are not disclosed.
31


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


NOTE 12 – COMMITMENTS AND CONTINGENCIES
Securities Litigation and Enforcement

In December 2018, a putative securities fraud class action lawsuit was filed against the Company and its chief executive officer, chief financial officer and chief operating officer in the United States District Court for the District of Kansas, captioned Yellowdog Partners, LP v. CURO Group Holdings Corp., Donald F. Gayhardt, William Baker and Roger W. Dean, Civil Action No. 18-2662 (the "Yellowdog Action"). In May 2019, plaintiff filed a consolidated complaint naming the Company's founders and FFL as additional defendants. The complaint alleged that the Company and the individual defendants violated Section 10(b) of the Exchange Act and that certain defendants also violated Section 20(a) of the Exchange Act as "control persons" based on alleged misleading statements and omitted material information regarding the Company's efforts to transition the Canadian inventory of products from Installment loans to Revolving LOC loans. Plaintiff brought the claims on behalf of a class of investors who purchased Company common stock between April 27, 2018 and October 24, 2018.

The Company's directors' and officers' insurance policy required the Company to pay the first $2.5 million in fees and settlement and the insurance carriers paid the remaining amounts. The Company recorded this $2.5 million of expense in 2019 and subsequently paid legal fees of $2.5 million. On December 18, 2020, the Court granted final approval of the $9.0 million settlement and dismissed the case with prejudice. For the three and six months ended June 30, 2021, there was no further expense related to the litigation.

In June and July 2020, three shareholder derivative lawsuits were filed in the United States District Court for the District of Delaware against the Company, certain of its directors and officers, and in two of the three lawsuits, FFL. Plaintiffs generally allege the same underlying facts of the Yellowdog Action. In July 2021, the derivative lawsuits were voluntarily dismissed and Plaintiffs refiled two cases in the United States District Court for the District of Kansas.

While the Company is vigorously contesting these lawsuits, it cannot determine the timing or nature of their ultimate resolution. The Company does not expect that these lawsuits will have a material adverse impact on the Company's results of operations or financial condition.

City of Austin

The Company was cited in July 2016 by the City of Austin, Texas for alleged violations of an Austin ordinance addressing products offered by CSOs, which regulates aspects of products offered under the Company's CAB program, including loan sizes and repayment terms. The Company believes that: (i) the Austin ordinance (similar to its counterparts elsewhere in Texas) conflicts with Texas state law and (ii) in any event, the Company's product complies with this ordinance, when the ordinance is properly construed. In 2017, the Austin Municipal Court agreed with the Company's position that this ordinance conflicts with Texas law and, accordingly, did not address the second argument. In September 2017, the Travis County Court reversed the Municipal Court’s decision and remanded the case for further proceedings. To date, a hearing and trial on the merits have not been scheduled.

On May 15, 2020, the City of Austin proposed a second ordinance in direct response to a Texas Attorney General’s opinion which would arguably allow CSO’s to provide signature loans outside the regulatory authority of the Texas Office of Consumer Credit Commissioner and the City of Austin. This proposed ordinance became effective June 1, 2020, and implemented restrictions on CSO transactions and revised certain definitions included in the original Austin ordinance. These revisions potentially affect the foundation upon which the Company's previous arguments in municipal court were based.

On June 8, 2020, another company within CURO's industry filed a Petition for Declaratory Relief, Application for Temporary Restraining Order, and Application for Temporary and Permanent Injunction against the City of Austin. The Temporary Restraining Order was granted on June 12, 2020, but was ultimately lifted on November 17, 2020.

Subsequent to lifting the Temporary Restraining Order, the city of Austin notified the Company that it would begin auditing stores beginning in January 2021. In addition, the Company created and launched a new product during the second quarter of 2021. The city has since deferred these audits, and the Company is in preliminary discussions with the city to determine next steps and a potential resolution to the outstanding matters.

On January 27, 2021, the City of Dallas adopted an ordinance identical to the second ordinance in the City of Austin.

The Company does not anticipate having a final determination of the legality of its CAB program under either Austin ordinance (and similar ordinances in other Texas cities) in the near future. A final adverse decision could result in material monetary liability in Austin and elsewhere in Texas, and could force the Company to restructure the loans it originates in Austin and elsewhere in Texas.

32


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

Other Legal Matters
The Company is a defendant in certain 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 the result of any of these matters will have a material adverse effect on the Company's business, results of operations or financial condition.

NOTE 13 – LEASES

Leases entered into by the Company are primarily for retail stores in certain U.S. states and Canadian provinces. Upon entering into an agreement, the Company determines if an arrangement is a lease.

Typically, a contract constitutes a lease if it conveys the right to control the use of an identified property, plant or equipment (an identified asset) for a period of time in exchange for consideration. To determine whether a contract conveys the right to control the use of an identified asset for a period of time, the Company must assess whether, throughout the period of use, the customer has both (i) the right to obtain substantially all of the economic benefits from use of the identified asset and (ii) the right to direct the use of the identified asset. If the customer has the right to control the use of an identified asset for only a portion of the term of the contract, the contract contains a lease for that portion of the term.

Leases classified as finance are immaterial to the Company as of June 30, 2021. Operating leases expire at various times through 2032. Operating leases are included in "Right of use asset - operating leases" and "Lease liability - operating leases" on the unaudited Condensed Consolidated Balance Sheets.

The Company recognizes ROU assets and lease liabilities based on the present value of lease payments over the lease term at commencement date. The rate implicit in the Company's leases typically are not readily determinable. As a result, the Company uses its estimated incremental borrowing rate, as allowed by ASC 842, Leases, in determining the present value of lease payments. The incremental borrowing rate is based on internal and external information available at the lease commencement date and is determined using a portfolio approach (i.e., using the weighted average terms of all outstanding leases). This rate is the theoretical rate the Company would pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term as that of the lease portfolio.

The Company uses quoted interest rates obtained from financial institutions as an input, adjusted for Company-specific factors, to derive the incremental borrowing rate as the discount rate for the leases. As new leases are added each period, the Company evaluates whether the incremental borrowing rate has changed. If the incremental borrowing rate has changed, the Company will apply the rate to new leases if not doing so would result in a material difference to the ROU asset and lease liability presented on the balance sheet.

The majority of leases have an original term of five years plus two five-year renewal options. The Consumer Price Index is generally used in determining future lease payments and for purposes of calculating operating lease liabilities. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Most of the leases have escalation clauses and certain leases also require payment of period costs, including maintenance, insurance and property taxes. The Company has elected to combine lease and non-lease components and to exclude short-term leases, defined as having an initial term of 12 months or less, from the unaudited Condensed Consolidated Balance Sheets. Some of the leases are with related parties and have terms similar to the non-related party leases. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The following table summarizes the operating lease costs and other information for the three and six months ended June 30, 2021 and June 30, 2020 (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Operating lease costs:
Third-Party
$ 7,959  $ 7,576  $ 15,962  $ 15,221 
Related-Party
849  845  1,696  1,691 
Total operating lease costs $ 8,808  $ 8,421  $ 17,658  $ 16,912 
Operating cash flow - Operating leases $ 18,303  $ 16,545 
New ROU assets - Operating leases $ 4,964  $ 6,922 
Weighted average remaining lease term - Operating leases 5.4 years 6.1 years
Weighted average discount rate - Operating leases 9.4  % 10.3  %
33

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

The following table summarizes the aggregate operating lease payments that the Company is contractually obligated to make under operating leases as of June 30, 2021 (in thousands):
Third-Party Related-Party Total
Remainder of 2021 $ 16,391  $ 1,899  $ 18,290 
2022 30,144  3,678  33,822 
2023 24,889  1,333  26,222 
2024 19,137  973  20,110 
2025 13,581  870  14,451 
2026 9,483  883  10,366 
Thereafter 21,239  1,794  23,033 
Total 134,864  11,430  146,294 
Less: Imputed interest (30,439) (2,440) (32,879)
Operating lease liabilities $ 104,425  $ 8,990  $ 113,415 

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

NOTE 14 – DISCONTINUED OPERATIONS

On February 25, 2019, in accordance with the provisions of the U.K. Insolvency Act 1986 and as approved by the Boards of Directors of the U.K. Subsidiaries, insolvency practitioners from KPMG were appointed as Administrators for the U.K. Subsidiaries. The effect of the U.K. Subsidiaries’ entry into administration was to place their management, affairs, business and property under the direct control of the Administrators. Accordingly, the Company deconsolidated the U.K. Subsidiaries, which comprised the U.K. reportable operating segment, as of February 25, 2019 and classified them as Discontinued Operations for all periods presented. During the three and six months ended June 30, 2020, the Company received $1.3 million and $1.7 million, respectively, of disbursements from the Administrator related to the wind-down of the U.K. Subsidiaries.

NOTE 15 – GOODWILL

The change in the carrying amount of goodwill by operating segment for the six months ended June 30, 2021 was as follows (in thousands):
U.S. Canada Direct Lending Canada POS Lending Total
Goodwill at December 31, 2020 $ 105,922  $ 30,169  $ —  $ 136,091 
Acquisition (Note 16) —  —  44,901  44,901 
Foreign currency translation —  689  585  1,274 
Measurement period adjustment —  —  (4,980) (4,980)
Goodwill at June 30, 2021 $ 105,922  $ 30,858  $ 40,506  $ 177,286 

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 indicators include, among others, declines in sales, earning 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 2020 Form 10-K for additional information on the Company's policy for assessing goodwill for impairment.

In the second quarter of 2021, the Company performed an interim review of triggering events for each 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 and did not record an impairment loss during the three months ended June 30, 2021.

Flexiti Acquisition

The Company completed the acquisition of Flexiti on March 10, 2021. Provisional goodwill was estimated at $44.9 million, based on the preliminary valuation. The Company recorded an additional $5.0 million in net assets acquired during the second quarter of 2021 as part of the measurement period, which caused a decrease in the provisional goodwill to be $40.5 million, net of the foreign
34

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
currency translation impact, as of June 30, 2021, based on the excess of the purchase price of the business combination over the fair value of the acquired net assets. See Note 16, "Acquisitions" for more information related to the business combination.

NOTE 16 – ACQUISITIONS

Flexiti

On March 10, 2021, the Company acquired 100% of the outstanding stock of Flexiti. The fair value of total consideration paid as part of the acquisition was comprised of $86.5 million in cash, $6.3 million in debt costs in conjunction with the acquisition and $20.6 million in contingent cash consideration subject to future operating metrics, including revenue less NCOs and originations. Flexiti provides POS financing solution to retailers across Canada and with the acquisition, will provide the Company capability and scale opportunity in Canada’s credit card and POS financing markets. It enhances the Company's long-term growth and financial and risk profiles, and allows access to the full spectrum of Canadian consumers by adding an established private label credit card platform and POS financing capabilities. The Company now reaches consumers in Canada through all the ways they access credit, directly both in-store and online, via credit cards or at the POS

The Company began consolidating the financial results of Flexiti in the unaudited Condensed Consolidated Financial Statements on March 10, 2021. Flexiti contributed $4.0 million of net revenue and incurred $13.5 million of operating expenses during the three months ended June 30, 2021.

This transaction has been 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 available 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.
The following table presents the preliminary purchase price allocation recorded in the Company’s Condensed Consolidated Balance Sheet as of the date of acquisition (in thousands):

Amounts acquired on March 10, 2021 Measurement period adjustments Amounts acquired on March 10, 2021 (as adjusted)
Assets
Cash and cash equivalents
$ 1,267  $ —  $ 1,267 
Gross loans receivable(1)
196,138  —  196,138 
Prepaid expenses and other 687  —  687 
Property and equipment 460  —  460 
Right-of-use assets
616  —  616 
Intangibles
50,876  3,572  54,448 
Deferred tax assets
2,741  1,408  4,149 
Total assets $ 252,785  $ 4,980  $ 257,765 
Liabilities
Accounts payable and accrued liabilities $ 9,356  $ —  $ 9,356 
Credit facilities 174,367  —  174,367 
Lease liabilities 616  —  616 
Total liabilities $ 184,339  $ —  $ 184,339 
Net assets acquired $ 68,446  $ 4,980  $ 73,426 
Total consideration paid 113,347  113,347 
Goodwill $ 44,901  $ (4,980) $ 39,921 
(1) The gross contractual loans receivables as of March 10, 2021 were $208.6 million, of which the Company estimates $12.5 million will not be collected.

35

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
We are in the process of refining the valuation of acquired assets and liabilities, including goodwill, and expect to finalize the purchase price allocation prior to March 31, 2022. During the three months ended June 30, 2021, the Company recorded a cumulative net measurement period adjustment that decreased goodwill by $5.0 million. The measurement period adjustment would have resulted in an insignificant increase in amortization expense related to the merchant relationships intangible asset during the three months ended March 31, 2021. The Company made these measurement period adjustments to reflect facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date. As of June 30, 2021, the primary areas that remain preliminary relate to the valuation of certain loans receivable, intangible assets, and certain tax-related balances.

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

Fair Value Useful Life
Developed technology $ 31,827  5.0 years
Merchant relationships 19,684  8.0 years
Customer relationships 2,937  8.0 years
Total identified intangible assets $ 54,448 

Goodwill of $39.9 million represents the excess of the consideration paid over the fair value of the net tangible and intangible assets acquired. The goodwill was primarily attributed to expected synergies created with the Company’s future product offerings and the value of the assembled workforce. Goodwill and the intangibles from this transaction are not deductible for Canadian income tax purposes because this was a stock acquisition.

In connection with the acquisition, the Company recognized contingent cash consideration of $20.6 million as of the acquisition date. The contingent consideration is based on Flexiti achieving certain operating metrics from April 1, 2021 through March 31, 2023, including revenue less NCOs and originations. Cash consideration can range from zero to $32.8 million over the period. Refer to Note 8, "Fair Value Measurements" for additional information regarding fair value inputs related to the contingent cash consideration.

In connection with the acquisition, the Company also granted RSUs to Flexiti employees who joined the Company upon the effective date of the acquisition, with grant-date fair value totaling approximately $8.1 million. Of that total, $4.0 million relates to RSU contingent consideration structured similar to the contingent cash consideration described above. All RSU grants to Flexiti employees will be ratably recognized as stock-based compensation over the requisite service period of two years. Refer to Note 6, "Share-based Compensation" for further information related to these RSUs.

The Company incurred costs related to this acquisition of $3.4 million that were recorded in Corporate, district and other expenses in the U.S. segment in the accompanying Condensed Consolidated Statement of Operations for the six months ended June 30, 2021.

Ad Astra

On January 3, 2020, the Company acquired 100% of the outstanding stock of Ad Astra, a related party at the time, for $14.4 million, net of cash received. Prior to the acquisition, Ad Astra had been the Company's exclusive provider of third-party collection services for owned and managed loans in the U.S. that are in later-stage delinquency.
The Company began consolidating the financial results of this acquisition in the unaudited Condensed Consolidated Financial Statements on January 3, 2020. Subsequent to the acquisition, operating costs for Ad Astra are included within "Corporate, district and other expenses," consistent with presentation of other internal collection costs. Ad Astra incurred $2.6 million of operating expense during the six months ended June 30, 2021.

The 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 assets acquired and liabilities assumed were based on their estimates of fair value available. The Company completed the determination of the fair values of the acquired identifiable assets and liabilities based on the information available in March 2020.

36

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table summarizes the allocation of the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
(in thousands) Amounts acquired on January 3, 2020
Assets
Cash and cash equivalents
$ 3,360 
Accounts receivable
465 
Property and equipment
358 
Intangible assets
1,101 
Goodwill
14,791 
Operating lease asset
235 
Total assets $ 20,310 
Liabilities
Accounts payable and accrued liabilities
$ 2,264 
Operating lease liabilities
235 
Total liabilities $ 2,499 
Total cash consideration transferred $ 17,811 

Goodwill of $14.8 million represents the excess over the fair value of the net tangible and intangible assets acquired. The goodwill was primarily attributed to expected synergies created through cost and process efficiencies in the collections process. The total estimated tax-deductible Goodwill as a result of this transaction is $15.4 million.

NOTE 17 – SHARE REPURCHASE PROGRAM

In May 2021, the Company's Board of Directors authorized a new share repurchase program for up to $50.0 million of its common stock. Under this program, the Company repurchased 104,487 shares of its common stock at an average price of $16.77 for a total cost of $1.8 million during the three and six months ended June 30, 2021. Refer to Note 19, "Subsequent Events" for repurchases during July 2021.

In February 2020, the Company's Board of Directors authorized a repurchase program for up to $25.0 million of its common stock. Due to uncertainty caused by COVID-19, the Board terminated the program on March 15, 2020, prior to any material purchases having been made.

In April 2019, the Company's Board of Directors authorized a share repurchase program providing for the repurchase of up to $50.0 million of its common stock. The repurchase program, which commenced June 2019, was completed in February 2020. Under this program, the Company repurchased 3,614,541 shares of its common stock at an average price of $12.52 for a total cost of $45.2 million for the year ended December 31, 2019, and repurchased 455,255 shares of its common stock at an average price of $10.45 per share for the remaining consideration of $4.8 million during the six months ended June 30, 2020.

NOTE 18 – STORE CLOSURES

During the three months ended June 30, 2021, CURO closed or did not renew leases for 19 U.S. stores in Illinois (8), Oregon (2), Colorado (2), Washington (1) and Texas (6). CURO exited Illinois given the legislative changes that eliminated its product offerings. The store closure decisions in other states were made after extensive analysis and in response to ongoing migration of customer transactions toward the online channel and the impact of COVID-19 on store traffic and profitability.

37

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
CURO incurred $5.8 million of total one-time charges associated with the second quarter U.S. store closures as follows:

(in thousands) Three Months Ended
June 30, 2021
Store closure costs
Severance and employee costs $ 940 
Lease termination costs 565 
Net accelerated depreciation and write-off of ROU assets and lease liabilities 4,258 
Total store closure costs (1)
$ 5,763 
(1) All costs were recorded within "Corporate, district and other expenses" on the Statement of Operations and related to the U.S. reporting segment.

In July 2021, CURO established a plan to close an additional 30 U.S. stores. Refer to Note 19, "Subsequent Events" for further details regarding the third quarter 2021 store closures.

NOTE 19 – SUBSEQUENT EVENTS

7.50% Senior Secured Notes

On July 16, 2021, the Company priced its previously announced offering of 7.50% Senior Secured Notes, due 2028, and upsized the offering's aggregate principal amount from $700.0 million to $750.0 million. Closing is expected to occur to July 30, 2021. Interest on the 7.50% Senior Secured Notes is payable semiannually, in arrears, on February 1 and August 1, beginning February 1, 2022. The net proceeds from the sale of the 7.50% Senior Secured Notes will be used (i) to redeem the Company’s outstanding 8.25% Senior Secured Notes due 2025, (ii) to pay fees, expenses, premiums and accrued interest in connection therewith and (iii) for general corporate purposes.

July 2021 U.S. Store Rationalization

As part of the continuing evaluation of U.S. store performance in the first half of 2021, CURO made the decision in July 2021 to close an additional 30 U.S. stores in Texas (25), California (2), Louisiana (1), Nevada (1) and Tennessee (1). With these closures, the Company currently expects to incur $5.7 million of total one-time charges in the third quarter of 2021 consisting of (i) severance and employee costs of $2.5 million, (ii) lease termination costs of $0.9 million and (iii) net accelerated depreciation and write-off of ROU assets and liabilities of $2.3 million.

Share Repurchase Program

In July 2021, the Company repurchased 271,393 shares from July 1, 2021 through July 27, 2021 under the share repurchase program initiated in May 2021 as further discussed in Note 17, "Share Repurchase Program." The total value of shares repurchased was $4.5 million at an average price per share of $16.44.

Dividend

The Company's Board of Directors declared a quarterly dividend of $0.11 per share, payable on August 19, 2021, to stockholders of record as of August 9, 2021.
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ITEM 2.         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

The following discussion of financial condition, results of operations, liquidity and capital resources and certain factors that may affect future results, including company-specific, economic and industry-wide factors, should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and accompanying notes included herein. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. The matters discussed in these forward-looking statements 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 “Risk Factors” in our 2020 Form 10-K for a discussion of the uncertainties, risks and assumptions associated with these statements.

Overview

We are a tech-enabled, omni-channel consumer finance company serving a full spectrum of non-prime and prime consumers in the U.S. and Canada.

History

CURO was founded in 1997 to meet the growing needs of consumers looking for alternative access to credit. With nearly 25 years of experience, we seek to offer a variety of convenient, easily accessible financial and loan services in all of our markets. The terms “CURO," "we,” “our,” “us” and the “Company” refer to CURO Group Holdings Corp. and its directly and indirectly owned subsidiaries as a combined entity, except where otherwise stated.

In the U.S., our stores operate under "Speedy Cash" and "Rapid Cash" and online under "Avio Credit" for Installment and Revolving LOC products. In February 2019, we launched Revolve Finance, a checking account solution, with FDIC-insured deposits, that combines a Visa-branded debit card, a number of technology-enabled tools and optional overdraft protection. In Canada, our direct-lending stores are branded "Cash Money" and we offer "LendDirect" Installment and Revolving LOC loans online and at certain stores. As of July 27, 2021, our direct lending network consisted of 391 locations across 13 U.S. states and seven Canadian provinces and we offered our online services in 27 U.S. states and five Canadian provinces.

On March 10, 2021, we completed the acquisition of Flexiti, one of Canada's fastest-growing POS and BNPL lenders, offering customers flexible payment plans at retailers that sell big-ticket goods such as furniture, appliances, jewelry and electronics. Through Flexiti's award-winning BNPL platform, customers can be approved instantly to shop with their FlexitiCard®, accepted at nearly 6,600 locations, which they can use online or in-store to make multiple purchases, within their credit limit, without needing to reapply. Refer to "—Recent Developments" below for additional information about the acquisition.

In April 2017, we first invested in Katapult, a privately owned lease-to-own platform for online, brick and mortar and omni-channel retailers. Katapult provides the retailers' customers with payment options in store or via the Katapult link on a retailer's website. In December 2020, we announced that we were in a position to benefit from Katapult's announced merger with FinServ, a publicly traded SPAC. In June 2020, the Katapult and FinServ merger was completed, resulting in a new publicly traded company (NASDAQ: KPLT). Refer to "—Recent Developments," below, for details regarding the merger and the benefit recognized by us. The merger reduced our fully-diluted ownership in Katapult from 47.7% to its current 20.7%.

Recent Developments

Flexiti acquisition and growth. On March 10, 2021, we completed the acquisition of Flexiti in a transaction that included cash at closing of $86.5 million and contingent cash consideration of up to $32.8 million based on the achievement of revenue less NCOs and origination targets over the next two years. The Flexiti acquisition provides us capability and scale opportunity in Canada’s credit card and POS financing markets. It enhances our long-term growth and financial and risk profiles, and allows us to access the full spectrum of Canadian consumers by adding an established private label credit card platform and POS financing capabilities. We now reach consumers in Canada through all the ways they generally access credit, directly both in-store and online, via credit cards or at the POS.

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Flexiti continued its historical growth trends as a result of gaining new merchant partners. On June 1, 2021, Flexiti signed a 10-year agreement to become the exclusive POS financing partner to LFL, Canada's largest home furnishings retailer. LFL operates over 300 stores in Canada under multiple banners including Leon's and The Brick. Flexiti estimates that the LFL POS relationship will generate over C$800 million in annual POS finance beginning mid-2022 when fully onboarded. Year over year, Flexiti's second quarter 2021 originations increased 117.8%, or C$56.2 million, to C$103.9 million, as it continued to pursue new merchant partnerships.

In conjunction with the acquisition, we guaranteed the obligations of Flexiti under its amended credit facility, which provides for C$500.0 million in total borrowing capacity of the following maximum amounts: C$421.0 million as the Class A revolving commitment and C$79.0 million as the Class B revolving commitment.

Katapult Investment. The Katapult and FinServ merger closed on June 9, 2021. As a result, we received cash of $146.9 million and Katapult (NASDAQ: KPLT) stock with a value of $192.0 million as of July 27, 2021. Our fully-diluted ownership of Katapult as of June 30, 2021 was 20.7%, which assumes full pay-out of the earn-out shares. Refer to our 2020 Form 10-K for additional information about the merger agreement and its benefits to us.

Store Closure. On July 13, 2021, we announced the closure of 49 U.S. stores in response to evolving customer channel preferences that were accelerated by the impacts of COVID-19. The store closures represent nearly 25% of the Company’s U.S. stores and, other than Illinois, reflect strategic consolidation of locations in dense local markets. CURO’s omni-channel platform allows customers to seamlessly transition online, to an adjacent store, or to contact centers, helping maximize the likelihood of retaining a large percentage of customers that had utilized the impacted stores.

During the second quarter of 2021, we closed or did not renew leases for 19 U.S. stores in Illinois (8), Oregon (2), Colorado (2), Washington (1) and Texas (6). We exited Illinois given the legislative changes that eliminated its product offerings. The store closure decisions in other states were made after extensive analysis and in response to ongoing migration of customer transactions toward the online channel and the impact of COVID-19 on store traffic and profitability. During July 2021, we made the decision to close an additional 30 U.S. stores in Texas (25), California (2), Louisiana (1), Nevada (1) and Tennessee (1).

The store closure decisions followed an extensive evaluation that considered (i) comprehensive store-level score cards, (ii) market-level store density and the related addressable local market, (iii) the lingering and potential future COVID-19 impacts on store volume, traffic and profitability and (iv) continued migration of customer transactions toward the online channel. Of the stores closed in Texas in both quarters, 25 were from The Money Box acquisition in 2012. While historically successful, these stores did not have the high-profile, high-traffic advantages of our Speedy/Rapid Cash stores, so their profitability has declined more through COVID. All of the impacted stores are scheduled to be closed by the end of August 2021. Following these closures, we will operate 160 stores in the U.S. and 202 stores in Canada.

7.50% Senior Secured Notes. On July 16, 2021, we priced our previously announced offering of 7.50% Senior Secured Notes, due 2028, and upsized it from $700.0 million to $750.0 million aggregate principal amount. Interest on the notes is payable semiannually, in arrears, on February 1 and August 1 of each year, beginning February 1, 2022. The net proceeds from the sale of the notes will be used (i) to redeem the Company’s outstanding 8.25% Senior Secured Notes due 2025, (ii) to pay fees, expenses, premiums and accrued interest in connection therewith and (iii) for general corporate purposes. The closing of the 7.50% Senior Secured Notes offering is expected on July 30, 2021.

Continuing Impact of COVID-19. From the second quarter of 2020 through the first quarter of 2021, we experienced lower customer demand, good credit performance, increased or accelerated repayments and favorable payment trends as customers were aided by government stimulus programs while periodically enduring pandemic lockdowns (collectively "COVID-19 Impacts"). Second quarter of 2021 was impacted less by COVID-19 Impacts but was still affected by loan demand in the U.S. lower than pre-COVID-19 levels and additional pandemic lockdowns in Canada. Refer to our 2020 Form 10-K for additional information regarding the impact of COVID-19 and the actions we took to mitigate them, our designation as an essential financial service, and our Customer Care Program which provides various forms of relief to our customers during the pandemic. As these programs wind down, U.S. Company Owned loan balances have stabilized entering the second quarter of 2021 with them modestly increasing from $185.8 million for the period ending March 31, 2021 to $186.5 million for the period ending June 30, 2021. While NCOs have increased sequentially for total U.S. Company Owned gross loans receivable, they remain at low levels relative to most periods in 2020, with the exception of the second quarter of 2020, and prior to the onset of COVID-19.

In Canada, despite new lockdown mandates and recent resurgences, both Canada Direct Lending gross loans receivable and Canada POS Lending gross loans receivable grew 5.1% and 9.9%, sequentially, while the NCO rate for Canada Direct Lending and the past due rate for both Canadian segments decreased sequentially. The NCO rate for Canada POS Lending was 0.7%.

Verge Credit. We launched Verge installment loans, originated by Stride Bank, in the fourth quarter of 2019 and executed pilot programs in several states. After testing various offers, rates, terms and approval criteria, Stride informed us in the first quarter of 2021 that it plans to focus on near-prime loans as they represent a larger addressable market and offer greater opportunity to scale. As a result, Stride discontinued new Verge Credit loans in April 2021. Verge loan balances totaled $21.5 million as of June
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30, 2021. We expect an orderly run-off of these balances over the next 21 months. We continue to maintain various relationships with Stride and are working together to develop additional products that meet customer needs.

Revenue by Product and Segment and Related Loan Portfolio Performance

Consolidated Revenue by Product and Segment

The following table summarizes revenue by product, including CSO fees, for the period indicated:
Three Months Ended
June 30, 2021 June 30, 2020
(in thousands, unaudited) U.S. Canada Direct Lending Canada POS Lending Total % of Total U.S. Canada Direct Lending Canada POS Lending Total % of Total
Revolving LOC $ 24,091  $ 37,450  $ 6,495  $ 68,036  36.3  % $ 30,917  $ 25,819  $ —  $ 56,736  31.1  %
Installment 90,826  10,541  —  101,367  54.0  % 102,861  9,701  —  112,562  61.7  %
Ancillary 3,877  13,889  524  18,290  9.7  % 3,542  9,669  —  13,211  7.2  %
   Total revenue $ 118,794  $ 61,880  $ 7,019  $ 187,693  100.0  % $ 137,320  $ 45,189  $ —  $ 182,509  100.0  %

During the three months ended June 30, 2021, total revenue increased $5.2 million, or 2.8%, to $187.7 million, compared to the prior-year period. The year-over-year increase was primarily due to an increase in Canada Direct Lending revenue of $16.7 million, or 36.9%, and $7.0 million of Canada POS Lending revenue from a full post-acquisition quarter for Flexiti. This increase was partially offset by a decrease in U.S. revenue of $18.5 million, or 13.5%.

Canada POS Lending revenue includes MDR, which is recognized over the life of the underlying loan term. The Flexiti gross acquired loan portfolio ("Acquired Portfolio"), prior to the fair value discount recorded as a result of purchase accounting, was $208.6 million as of March 10, 2021 (date of acquisition). The Acquired Portfolio was remeasured at fair value of $196.1 million as of the date of acquisition. The fair value discount is based on estimated future net cash flows and is recognized in net revenue over the expected life of the Acquired Portfolio (approximately 12 months). This amortization resulted in an increase in revenue and an increase in loan loss provision of $1.6 million and $1.5 million, respectively, for the three months ended June 30, 2021. The Acquired Portfolio also included $14.1 million of unearned MDR, annual and administrative fees, which are recognized over the expected life of the Acquired Portfolio. Since those unrecognized amounts do not represent future cash flows from the Acquired Portfolio, the unearned MDR, annual and administrative fees were not included in the opening balance sheet as of March 10, 2021, and thus, are not amortized to revenue for the Acquired Portfolio. For the second quarter of 2021, Canada POS Lending revenue and net revenue was lower by $5.6 million and $5.5 million, respectively, ("acquisition-related adjustments") compared to what would have been reported if the unearned MDR and fees had been recognized over the expected life of the Acquired Portfolio. To assist users of our financial statements in analyzing the expected future performance of the Flexiti loan portfolio (for example, expected yields for loans originated post-acquisition) and earnings, we have provided results with and without these acquisition-related adjustments. See "Reconciliation of Net Income from Continuing Operations and Diluted Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings per Share" for additional detail. The acquisition-related adjustments will decline each quarter with the Acquired Portfolio and will be fully amortized by the second quarter of 2022.

From a product perspective, Revolving LOC revenue for the three months ended June 30, 2021 increased $11.3 million, or 19.9%, year over year, primarily driven by growth in Canada Direct Lending revenue of $11.6 million, or 45.0%, and Canada POS lending of $6.5 million, partially offset by a decline in U.S. revenue of $6.8 million, or 22.1%. Excluding the effects of the Virginia runoff portfolio, U.S. Revolving LOC revenue decreased $0.3 million, or 1.3% for the three months ended June 30, 2021 compared to the prior-year period.

For the three months ended June 30, 2021, Installment revenue decreased $11.2 million, or 9.9%, compared to the prior-year period. Excluding the effects of the impacted California Installment loan portfolios, U.S. Installment revenue decreased $0.5 million, or 0.6%.

Ancillary revenue increased $5.1 million, or 38.4% versus the prior-year period, primarily due to the sale of insurance products to Revolving LOC and Installment loan customers in Canada.

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The following table summarizes revenue by product, including CSO fees, for the period indicated:

Six Months Ended
June 30, 2021 June 30, 2020
(in thousands, unaudited) U.S. Canada Direct Lending Canada POS Lending Total % of Total U.S. Canada Direct Lending Canada POS Lending Total % of Total
Revolving LOC $ 51,014  $ 71,818  $ 7,939  $ 130,771  34.0  % $ 72,907  $ 54,811  $ —  $ 127,718  27.6  %
Installment 196,767  20,988  —  217,755  56.7  % 278,130  28,284  —  306,414  66.1  %
Ancillary 7,505  27,514  699  35,718  9.3  % 8,051  21,132  —  29,183  6.3  %
   Total revenue $ 255,286  $ 120,320  $ 8,638  $ 384,244  100.0  % $ 359,088  $ 104,227  $ —  $ 463,315  100.0  %

Year-over-year comparisons were also influenced by COVID-19 Impacts. For the six months ended June 30, 2021, total revenue declined $79.1 million, or 17.1%, to $384.2 million, compared to the prior year. Geographically, U.S. revenues declined 28.9% while Canada Direct Lending revenues increased 15.4% due to the continued popularity and growth of Revolving LOC loans in Canada. For the six months ended June 30, 2021, Canada POS Lending revenue was $8.6 million, which included a $4.0 million reduction related to acquisition-related adjustments for the period.

From a product perspective, Revolving LOC revenues increased $3.1 million, or 2.4%, compared to the prior year, primarily due to growth in Canada Direct Lending revenue of $17.0 million, or 31.0%, and Canada POS Lending of $7.9 million, partially offset by declines in U.S. revenue of $21.9 million, or 30.0%. Excluding the effects of the Virginia runoff portfolio, U.S. Revolving LOC revenue decreased $7.2 million, or 13.7%, for the six months ended June 30, 2021 compared to the prior-year period.

For the six months ended June 30, 2021, Installment revenues decreased $88.7 million, or 28.9%, compared to the prior year. Excluding the effects of the impacted California Installment loan portfolios, Installment revenue decreased 23.1%.

Ancillary revenues increased $6.5 million, or 22.4%, versus the prior year from the sale of insurance products to Revolving LOC and Installment loan customers in Canada.

The following table presents online revenue and online transaction compositions, including CSO fees, of the products and services that we currently offer within the U.S. and Canada Direct Lending segments:

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Online revenue as a percentage of consolidated revenue 47.6  % 47.1  % 49.3  % 47.3  %
Online transactions as a percentage of consolidated transactions 58.3  % 57.6  % 60.1  % 51.8  %

Online revenue as a percentage of consolidated revenue increased during the three and six months ended June 30, 2021 due to COVID-19 Impacts and the resulting transition of customers using our online channel which allows for a safe and contactless option.


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Consolidated Loans Receivable

The following table reconciles Company Owned gross loans receivable, a GAAP-basis balance sheet measure, to Gross combined loans receivable, a non-GAAP measure(1). Gross combined loans receivables includes loans originated by third-party lenders through CSO programs, which are not included in the unaudited Condensed Consolidated Financial Statements but from which we earn revenue by providing a guarantee to the unaffiliated lender (in thousands, unaudited):

As of
June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020
Company Owned gross loans receivable $ 769,228  $ 731,014  $ 553,722  $ 497,442  $ 456,512 
Gross loans receivable Guaranteed by the Company 37,093  32,439  44,105  39,768  34,092 
Gross combined loans receivable (1)
$ 806,321  $ 763,453  $ 597,827  $ 537,210  $ 490,604 
(1) See "Non-GAAP Financial Measures" below for definition and additional information.

Gross combined loans receivable by product is presented below:

CURO-20210630_G1.JPG

Gross combined loans receivable increased $315.7 million, or 64.4%, to $806.3 million as of June 30, 2021, from $490.6 million as of June 30, 2020. The increase was driven by Canada Direct Lending growth of $104.5 million, or 40.7%, and Canada POS Lending gross loans receivables of $221.5 million. Excluding Flexiti loan balances, gross combined loans receivable increased $94.3 million, or 19.2%, year over year. U.S. gross combined loans receivable declined $10.2 million, or 4.4%, due to (i) COVID-19 Impacts, (ii) the runoff of California Installment and Virginia Revolving LOC loans as a result of regulatory impacts, and (iii) additional government stimulus in the first half of 2021. Excluding the California and Virginia runoff portfolios, U.S. gross combined loans receivable grew 24.2%.

Sequentially, gross combined loans receivable increased $42.9 million, or 5.6%, as markets continued to reopen and consumer demand increased. Geographically, U.S. and Canada grew sequentially by 2.5% and 6.9%, respectively, primarily driven by Canada POS Lending growth of $19.9 million, or 9.9% and Canada Direct Lending Revolving LOC growth of $18.4 million, or 5.8%. Gross combined loans receivable performance by product is described further in the following sections.

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Consolidated Results of Operations

Condensed Consolidated Statements of Operations
(in thousands, unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 Change $ Change % 2021 2020 Change $ Change %
Revenue $ 187,693  $ 182,509  $ 5,184  2.8  % $ 384,244  $ 463,315  ($ 79,071) (17.1) %
Provision for losses 45,165  50,693  (5,528) (10.9) % 81,310  164,229  (82,919) (50.5) %
Net revenue 142,528  131,816  10,712  8.1  % 302,934  299,086  3,848  1.3  %
Advertising 7,043  5,750  1,293  22.5  % 15,127  17,969  (2,842) (15.8) %
Non-advertising costs of providing services 50,834  49,567  1,267  2.6  % 101,144  104,919  (3,775) (3.6) %
Total cost of providing services 57,877  55,317  2,560  4.6  % 116,271  122,888  (6,617) (5.4) %
Gross margin 84,651  76,499  8,152  10.7  % 186,663  176,198  10,465  5.9  %
Operating expense (income)
Corporate, district and other expenses 59,621  36,781  22,840  62.1  % 108,461  79,588  28,873  36.3  %
Interest expense 23,440  18,311  5,129  28.0  % 42,979  35,635  7,344  20.6  %
(Income) loss from equity method investment (1,712) (741) (971) # (2,258) 877  (3,135) #
Gain on equity method investment (135,387) —  (135,387) # (135,387) —  (135,387) #
Total operating (income) expense (54,038) 54,351  (108,389) # 13,795  116,100  (102,305) (88.1) %
Income from continuing operations before income taxes 138,689  22,148  116,541  # 172,868  60,098  112,770  #
Provision for income taxes 34,172  1,068  33,104  # 42,616  3,005  39,611  #
Net income from continuing operations 104,517  21,080  83,437  # 130,252  57,093  73,159  #
Net income from discontinued operations, net of tax —  993  (993) # —  1,285  (1,285) #
Net income $ 104,517  $ 22,073  $ 82,444  # $ 130,252  $ 58,378  $ 71,874  #
# - Variance greater than 100% or not meaningful

For the Three Months Ended March 31, 2021 and 2020

Revenue and Net Revenue
Revenue increased $5.2 million, or 2.8%, to $187.7 million for the three months ended June 30, 2021, from $182.5 million for the three months ended June 30, 2020, due to an increase in Canada Direct Lending revenues of $16.7 million, or 36.9% ($9.6 million, or 21.4% on a constant currency basis), and $7.0 million of Canada POS Lending revenue from a full-post acquisition quarter for Flexiti, partially offset by a decrease in U.S. revenues of $18.5 million, or 13.5%. Excluding the impacted California and Virginia loans, total revenue increased $23.4 million, or 15.0%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Provision for losses decreased by $5.5 million, or 10.9%, for the three months ended June 30, 2021 compared to the prior-year period. The decrease in provision for loan losses was due to (i) relative sequential change in loan balances, (ii) favorable adjustments to allowance coverage from continued improved credit quality, and (iii) significantly improved NCO rates year over year in both U.S. and Canada, as discussed in more detail in the "Segment Analysis" sections.

Cost of Providing Services

Advertising costs increased $1.3 million, or 22.5%, year over year in response to product demand changes during the three months ended June 30, 2021 compared to the three months ended June 30, 2020. Quarter-over-quarter application volume and quality improved this quarter as the prior-year quarter was influenced by April 2020 government stimulus and pandemic-induced lockdowns.

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Non-advertising costs of providing services increased $1.3 million, or 2.6%, to $50.8 million in the three months ended June 30, 2021, compared to $49.6 million in the three months ended June 30, 2020. The increase was due to (i) volume-driven variable costs, such as underwriting data and financial services fees, (ii) timing and level of performance-based variable compensation and (iii) severance costs as described below in "Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA." These increases were partially offset by lower store operating costs and collection costs.

Corporate, District and Other Expenses

Corporate, district and other expenses were $59.6 million for the three months ended June 30, 2021, an increase of $22.8 million, or 62.1%, compared to the three months ended June 30, 2020. The year-over-year increase was primarily due to (i) $5.8 million of restructuring costs as described below in "Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA," (ii) $3.2 million of transaction costs related to the merger of Katapult and FinServ and the Flexiti acquisition also described previously, (iii) $9.9 million of Flexiti operating expenses and (iv) the timing and extent of performance-based variable compensation compared to the prior-year period. Refer to the "Segment Analysis" sections below for further details.

Equity Method Investment

Refer to the "Katapult Update for the Three and Six Months Ended June 30, 2021 and 2020" below for details.

Interest Expense

Interest expense for the three months ended June 30, 2021 increased $5.1 million, or 28.0%, primarily due to interest on debt acquired with the acquisition of Flexiti, and modestly higher year-over-year non-recourse borrowings in the U.S.

Provision for Income Taxes

The effective income tax rate for the three months ended June 30, 2021 was 24.6%. The effective income tax rate was lower compared to the federal and state/provincial statutory rates of approximately 26%, primarily as a result of proportionally more income in lower rate jurisdictions, driven by the gain on the Katapult transaction of $146.9 million. The transaction resulted in (i) a current cash tax liability related to the $146.9 million cash consideration and (ii) a deferred tax asset related to the recognized tax gain over book gain, combined with the release of the valuation allowance established prior to the gain. The effective income tax rate of adjusted tax expense included in the Adjusted Net Income for the three months ended June 30, 2021 was 18.6%.

For the Six Months Ended June 30, 2021 and 2020

Revenue and Net Revenue

Revenue decreased $79.1 million, or 17.1%, to $384.2 million for the six months ended June 30, 2021 from $463.3 million for the six months ended June 30, 2020, as a result of the declines in combined gross loans receivables in the U.S. from COVID-19 Impacts, partially offset by growth in Canada Direct Lending and the addition of Canada POS Lending as discussed previously. Year over year, U.S. revenue decreased 28.9%. Excluding the impacted California and Virginia loans, U.S. revenue decreased 20.7% for the six months ended June 30, 2021 compared to the prior-year period. Canada Direct Lending revenue increased 15.4% (5.6% on a constant-currency basis) as a result of growth in Revolving LOC loans. For the six months ended June 30, 2021, we also recognized $8.6 million of Canada POS Lending revenue, which included a $4.0 million reduction related to acquisition-related adjustments for the period.

Provision for losses decreased by $82.9 million, or 50.5%, for the six months ended June 30, 2021 compared to the prior year. The decrease in provision for loan losses was primarily due to (i) relative sequential change in loan balances, (ii) favorable adjustments to allowance coverage from continued improved credit quality, and (iii) improved NCO rates in both the U.S. and Canada as discussed in "Loan Volume and Portfolio Performance Analysis" and "Segment Analysis" sections.

Cost of Providing Services

Advertising costs decreased $2.8 million, or 15.8%, year over year, influenced by COVID-19 Impacts. Year over year, application volume and quality improved in the second quarter of 2021 while the second quarter of 2020 and first quarter of 2021 were influenced by U.S. government stimulus and pandemic-induced lockdowns.

Non-advertising costs of providing services decreased $3.8 million, or 3.6%, to $101.1 million in the six months ended June 30, 2021, compared to $104.9 million in the six months ended June 30, 2020. The decrease was primarily driven by lower collection costs resulting from stimulus-related pay-downs and lower variable costs as a result of lower demand in the U.S., partially offset by timing and level of performance-based variable compensation.

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Corporate, District and Other Expenses

Corporate, district and other expenses were $108.5 million for the six months ended June 30, 2021, an increase of $28.9 million, or 36.3%, compared to the six months ended June 30, 2020. The year-over-year increase was primarily due to (i) $ 5.8 million of restructuring costs as described below in "Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA," (ii) $ 6.3 million of transaction costs related to the merger of Katapult and FinServ and the acquisition of Flexiti also as described previously, and (iii) $12.5 million of Flexiti operating expenses post-closing. Excluding these costs, comparable corporate, district and other expenses increased $4.3 million, or 5.4% year over year, primarily due to the timing and level of performance-based variable compensation compared to the prior-year period. Refer to the "Segment Analysis" sections below for further details.

Equity Method Investment

Refer to the "Katapult Update for the Three and Six Months Ended June 30, 2021 and 2020" below for details.

Interest Expense

Interest expense for the six months ended June 30, 2021 increased $7.3 million, or 20.6%, primarily due to interest on debt acquired with the acquisition of Flexiti, and modestly higher year-over-year non-recourse borrowings in the U.S.

Provision for Income Taxes

The effective income tax rate for the six months ended June 30, 2021 was 24.7%. The effective income tax rate was lower compared to the federal and state/provincial statutory rates of approximately 26%, primarily as a result of proportionally more income in lower rate jurisdictions, driven by the gain on the Katapult transaction of $146.9 million. The transaction resulted in (i) a current cash tax liability related to the $146.9 million cash consideration and (ii) a deferred tax asset related to the recognized tax gain over book gain, combined with the release of the valuation allowance established prior to the gain. The effective income tax rate of adjusted tax expense included in Adjusted Net Income for the six months ended June 30, 2021 was 23.1%.

Katapult Update for the Three and Six Months Ended June 30, 2021 and 2020

Katapult is accounted for using the equity method of accounting and is included in "Investments in Katapult" on the unaudited Condensed Consolidated Balance Sheet. Our share of Katapult's earnings was $1.7 million for the three months ended June 30, 2021 and $2.3 million for the six months ended June 30, 2021. We recognize our share of Katapult’s earnings on a one-quarter lag.

The Katapult and FinServ merger closed in June 2021. As part of the merger, we received cash consideration of $146.9 million and retained ownership through shares after the merger. Based on market prices as of July 27, 2021, the total market value of the retained shares is $192.0 million. As of June 30, 2021, our total cash investment in Katapult is $27.5 million. After closing of the merger, we now maintain a 20.7% fully diluted ownership in the newly formed public company. Refer to Note 8, Fair Value Measurements, for additional details.

Segment Analysis

Following our acquisition of Flexiti on March 10, 2021, and beginning in the first quarter of 2021, we report financial results for three reportable segments: U.S., Canada Direct Lending and Canada POS Lending. Following is a summary of portfolio performance and results of operations for the segment and period indicated.

U.S. Portfolio Performance
(in thousands, except percentages) Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020
Gross combined loans receivable (1)
Revolving LOC $ 47,277 $ 43,387 $ 55,561 $ 56,727 $ 53,239
Installment loans - Company Owned 139,234 142,396 167,890 148,569 146,495
Total U.S. Company Owned gross loans receivable 186,511 185,783 223,451 205,296 199,734
Installment loans - Guaranteed by the Company (2)
37,093 32,439 44,105 39,768 34,092
Total U.S. gross combined loans receivable (1)
$ 223,604 $ 218,222 $ 267,556 $ 245,064 $ 233,826
Lending Revenue:
Revolving LOC $ 24,091 $ 26,923 $ 31,111 $ 30,431 $ 30,917
Installment loans - Company Owned 55,918 64,516 68,927 62,215 65,104
Installment loans - Guaranteed by the Company (2)
34,908 41,425 42,972 36,731 37,757
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(in thousands, except percentages) Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020
Total U.S. lending revenue $ 114,917 $ 132,864 $ 143,010 $ 129,377 $ 133,778
Lending Provision:
Revolving LOC $ 6,621 $ 5,039 $ 11,583 $ 11,904 $ 11,984
Installment loans - Company Owned 14,048 11,159 24,629 16,259 17,550
Installment loans - Guaranteed by the Company (2)
12,583 9,648 22,621 14,936 11,713
Total U.S. lending provision $ 33,252 $ 25,846 $ 58,833 $ 43,099 $ 41,247
Lending Net Revenue
Revolving LOC $ 17,470 $ 21,884 $ 19,528 $ 18,527 $ 18,933
Installment loans - Company Owned 41,870 53,357 44,298 45,956 47,554
Installment loans - Guaranteed by the Company (2)
22,325 31,777 20,351 21,795 26,044
Total U.S. lending net revenue $ 81,665 $ 107,018 $ 84,177 $ 86,278 $ 92,531
NCOs
Revolving LOC $ 7,271 $ 9,904 $ 12,500 $ 10,595 $ 20,090
Installment loans - Company Owned 18,617 17,313 19,620 16,758 29,905
Installment loans - Guaranteed by the Company (2)
12,044 12,150 21,590 13,902 15,738
Total U.S. NCOs $ 37,932 $ 39,367 $ 53,710 $ 41,255 $ 65,733
NCO rate (3)
Revolving LOC 16.0% 20.0% 22.3% 19.3% 31.7%
Installment loans - Company Owned 13.2% 11.2% 12.4% 11.4% 16.6%
Total U.S. Company Owned NCO rate 13.9% 13.3% 15.0% 13.5% 20.5%
Installment loans - Guaranteed by the Company (2)
34.6% 31.7% 51.5% 37.6% 35.0%
Total U.S. NCO rate 17.2% 16.2% 21.0% 17.2% 22.8%
ALL and CSO Liability for Losses (4)
Revolving LOC $ 13,669 $ 14,319 $ 19,185 $ 20,101 $ 18,793
Installment loans - Company Owned 21,246 25,815 31,971 26,961 27,112
Installment loans - Guaranteed by the Company (2)
5,265 4,727 7,228 6,198 5,164
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(in thousands, except percentages) Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020
Total U.S. ALL and CSO Liability for Losses $ 40,180 $ 44,861 $ 58,384 $ 53,260 $ 51,069
ALL and CSO Liability for Losses rate (5)
Revolving LOC 28.9% 33.0% 34.5% 35.4% 35.3%
Installment loans - Company Owned 15.3% 18.1% 19.0% 18.1% 18.5%
Total U.S. Company Owned ALL rate 18.7% 21.6% 22.9% 22.9% 23.0%
Installment loans - Guaranteed by the Company (2)
14.2% 14.6% 16.4% 15.6% 15.1%
Total ALL and CSO Liability for Losses rate 18.0% 20.6% 21.8% 21.7% 21.8%
Past-due rate (5)
Revolving LOC 26.6% 26.3% 30.7% 27.9% 26.6%
Installment loans - Company Owned 18.7% 18.0% 19.0% 16.6% 17.6%
Total U.S. Company Owned past-due rate 20.7% 19.9% 21.9% 19.8% 20.0%
Installment loans - Guaranteed by the Company (2)
17.4% 12.8% 14.1% 15.4% 12.1%
(1) Non-GAAP measure. For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."
(2) Includes loans originated by third-party lenders through CSO programs. Installment gross loans receivable Guaranteed by the Company are not included in the Condensed Consolidated Financial Statements.
(3) We calculate NCO rate as total NCOs divided by Average gross loans receivables.
(4) We report ALL as a contra-asset reducing gross loans receivable and the CSO Liability for Losses as a liability on the Condensed Consolidated Balance Sheets.
(5) We calculate (i) ALL and CSO Liability for losses rate and (ii) past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.

U.S. Net Revenue

U.S. revenues decreased by $18.5 million, or 13.5%, to $118.8 million, compared to the prior-year period for the three months ended June 30, 2021, primarily as a result of the COVID-19 impacts on gross combined loans receivable and the runoff of California Installment and Virginia Revolving LOC loans due to regulatory changes. See the loan performance discussions below for further details.

The provision for losses decreased $7.9 million, or 19.0%, primarily as a result of (i) relative sequential change in loan balances, (ii) favorable adjustments to allowance coverage from continued improved credit quality and (iii) improved NCO rates year over year. U.S. NCOs, including loans Guaranteed by the Company, decreased by $27.8 million, or 42.3% year over year, and $1.4 million, or 3.6%, sequentially. For the three months ended June 30, 2021, U.S. NCO rate improved 550 bps, or 24.5% year over year, and increased 100 bps, or 5.9%, sequentially.

U.S. Revolving LOC loan performance

U.S. Revolving LOC loan balances as of June 30, 2021 decreased $6.0 million, or 11.2%, compared to the prior year, resulting in a related revenue decrease of $6.8 million, or 22.1%, primarily due to the runoff of Virginia Revolving LOC loans. Excluding the impacted Virginia loans, U.S. Revolving LOC gross loans receivable increased $4.9 million or 12.8%, year over year. The Revolving LOC allowance coverage decreased year over year from 35.3% to 28.9% for the three months ended June 30, 2021. The decrease was due to sustained favorable past-due rates and improved NCO trends. For the three months ended June 30, 2021, NCO rates improved from 31.7% to 16.0% year over year and from 20.0% to 16.0% sequentially.

U.S. Installment loan performance - Company Owned

U.S. Installment loan balances as of June 30, 2021 decreased $7.3 million, or 5.0%, and revenue decreased $9.2 million, or 14.1%, compared to the prior year, primarily due to COVID-19 Impacts and regulatory changes in California, effective January 1, 2020 that affected Installment products. Excluding the impacted California loans, U.S. Installment loans increased $30.9 million, or 35.1%, year over year, and related revenue increased $2.4 million, or 5.0%. The Installment loans allowance coverage decreased from 18.5% in the prior year to 15.3% as of June 30, 2021, largely due to sustained favorable trends in NCOs, which improved year over year by 335 bps. Sequentially, allowance coverage decreased from 18.1% to 15.3% primarily from a decline in TDR loans as a percentage of total gross loans receivable and the runoff of Verge Installment loans.

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We launched Verge installment loans originated by Stride Bank in the fourth quarter of 2019 and executed pilot programs in several states. After testing various offers, rates, terms and approval criteria, Stride informed us in the first quarter of 2021 that it plans to focus on near-prime loans as they represent a larger addressable market and offer greater opportunity to scale. As a result, Stride discontinued new Verge Credit loans in April 2021. Verge loan balances totaled $21.5 million as of June 30, 2021. We expect an orderly run-off of these balances over the next 21 months. We continue to maintain various relationships with Stride and are working together to develop additional products that meet customer needs.

U.S. Installment loan performance - Guaranteed by the Company

U.S. Installment loans Guaranteed by the Company increased $3.0 million, or 8.8%, year over year. The allowance coverage decreased 95 bps year over year due to sustained favorable NCO and past-due rates as a result of government stimulus-related pay-downs. Sequentially, allowance coverage declined from 14.6% to 14.2% for the three months ended June 30, 2021, primarily from a decline in TDR loans as a percentage of total gross loans receivable.

Following is a summary of results of operations for the U.S. segment for the periods indicated.

Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands, unaudited) 2021 2020 Change $ Change % 2021 2020 Change $ Change %
Revenue $ 118,794  $ 137,320  ($ 18,526) (13.5) % $ 255,286  $ 359,088  ($ 103,802) (28.9) %
Provision for losses 33,622  41,530  (7,908) (19.0) % 59,678  127,571  (67,893) (53.2) %
Net revenue 85,172  95,790  (10,618) (11.1) % 195,608  231,517  (35,909) (15.5) %
Advertising 6,089  5,269  820  15.6  % 13,230  16,214  (2,984) (18.4) %
Non-advertising costs of providing services 31,837  33,661  (1,824) (5.4) % 63,992  70,903  (6,911) (9.7) %
   Total cost of providing services 37,926  38,930  (1,004) (2.6) % 77,222  87,117  (9,895) (11.4) %
Gross margin 47,246  56,860  (9,614) (16.9) % 118,386  144,400  (26,014) (18.0) %
Corporate, district and other expenses 43,730  29,631  14,099  47.6  % 84,327  67,281  17,046  25.3  %
Interest expense 17,338  16,113  1,225  7.6  % 33,696  30,959  2,737  8.8  %
(Income) loss from equity method investment (1,712) (741) (971) # (2,258) 877  (3,135) #
Gain from equity method investment (135,387) —  (135,387) # (135,387) —  (135,387) #
Total operating expense (76,031) 45,003  (121,034) # (19,622) 99,117  (118,739) #
Segment operating income 123,277  11,857  111,420  # 138,008  45,283  92,725  #
Interest expense 17,338  16,113  1,225  7.6  % 33,696  30,959  2,737  8.8  %
Depreciation and amortization 3,008  3,309  (301) (9.1) % 6,134  6,686  (552) (8.3) %
EBITDA (1)
143,623  31,279  112,344  # 177,838  82,928  94,910  #
Restructuring costs 5,763  —  5,763  5,763  —  5,763 
Legal and other costs —  847  (847) —  1,750  (1,750)
(Income) loss from equity method investment (1,712) (741) (971) (2,258) 877  (3,135)
Gain from equity method investment (135,387) —  (135,387) (135,387) —  (135,387)
Transaction costs 3,181  91  3,090  6,341  337  6,004 
Share-based compensation 3,467  3,310  157  6,150  6,504  (354)
Other adjustments (159) 305  (464) (405) 164  (569)
Adjusted EBITDA (1)
$ 18,776  $ 35,091  ($ 16,315) (46.5) % $ 58,042  $ 92,560  ($ 34,518) (37.3) %
(1) These are non-GAAP metrics. For a description of each non-GAAP addback, see the applicable reconciliations contained under "Consolidated Results of Operations." For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."
# - Variance greater than 100% or not meaningful.

U.S. Segment Results - For the Three Months Ended June 30, 2021 and 2020

For a discussion of revenue, provision for losses and related gross combined loans receivables, see "U.S. Portfolio Performance," above.

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Advertising costs increased $0.8 million, or 15.6%, year over year in response to product demand changes during the three months ended June 30, 2021 compared to the three months ended June 30, 2020. Quarter-over-quarter application volume and quality improved in this year's quarter after the prior-year quarter had been influenced by April 2020 government stimulus and pandemic-induced lockdowns.

Non-advertising costs of providing services for the three months ended June 30, 2021 were $31.8 million, a decrease of $1.8 million, or 5.4%, compared to $33.7 million for the three months ended June 30, 2020, primarily driven by lower store operating and collection costs year over year.

Corporate, district and other expenses were $43.7 million for the three months ended June 30, 2021, an increase of $14.1 million, or 47.6%, compared to the prior-year period. The year-over-year increase was primarily due to (i) $ 5.8 million of restructuring costs as described further below and in "Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA," (ii) $3.2 million of transaction costs related to the merger of Katapult and FinServ and the Flexiti acquisition also as described previously, and (iii) the timing and level of performance-based variable compensation compared to the prior-year period.

As previously described, we closed, or intend to close, 49 U.S. stores, 19 of which occurred in the second quarter, in response to evolving customer channel preferences that were accelerated by the impacts of COVID-19. The store closures represent nearly 25% of the Company’s U.S. stores and, other than Illinois, which were closed earlier in the year due to regulatory changes, reflect strategic consolidation of locations in dense local markets. As CURO’s omni-channel platform allows customers to transition seamlessly online, to an adjacent store, or to contact centers, this consolidation reduces annual operating costs by approximately $20 million, while providing our customers who used those impacted stores alternate ways to access our services.

The 19 U.S. stores closed during the second quarter of 2021 were in Illinois (8), Oregon (2), Colorado (2), Washington (1) and Texas (6) (“Q2 2021 U.S. Store Closures”). We exited Illinois given the legislative changes that eliminated our product offerings. The store closure decisions in other states were made after extensive analysis and in response to ongoing migration of customer transactions toward the online channel and the impact of COVID-19 on store traffic and profitability. We incurred $5.8 million of total one-time charges associated with the Q2 2021 U.S. Store Closures consisting of (i) severance and employee costs of $0.9 million, (ii) lease termination costs of $0.6 million and (iii) net accelerated depreciation and write-off of ROU assets and liabilities of $4.3 million.

During July 2021, we announced the remaining 30 of the 49 U.S. stores were closing in Texas (25), California (2), Louisiana (1), Nevada (1) and Tennessee (1) (“Q3 2021 U.S. Store Closures”). In connection with the Q3 2021 U.S. Store Closures, we expect to incur $5.7 million of total one-time charges consisting of (i) severance and employee costs of $2.5 million, (ii) lease termination costs of $0.9 million and (iii) net accelerated depreciation and write-off of ROU assets and liabilities of $2.3 million. These costs will be reflected in the third quarter 2021 results.

The store closure decisions followed an extensive evaluation that considered (i) comprehensive store-level score cards, (ii) market-level store density and the related addressable local market, (iii) the lingering and potential future COVID-19 impacts on store volume, traffic and profitability and (iv) continued migration of customer transactions toward the online channel. Of the stores closed in Texas in both quarters, 25 were from The Money Box acquisition in 2012. While historically successful, these stores did not have the high-profile, high-traffic advantages of our Speedy/Rapid Cash stores, so their profitability has declined more through COVID. All of the impacted stores are scheduled to be closed by the end of August 2021. Following these closures, we will operate 160 stores in the U.S. and 201 stores in Canada.

U.S. interest expense for the three months ended June 30, 2021 increased $1.2 million, or 7.6%, primarily related to the Non-Recourse U.S. SPV Facility, which we entered into in April 2020.

As previously described, we recognize our share of Katapult’s income on a one-quarter lag. We recorded income of $1.7 million for the three months ended June 30, 2021. As a result of the merger between Katapult and FinServ, which closed during the second quarter of 2021, we recorded an additional gain of $135.4 million for the three months ended June 30, 2021, which represents cash we received, net of the basis of our investment in Katapult.

U.S. Segment Results - For the Six Months Ended June 30, 2021 and 2020

U.S. revenues decreased $103.8 million, or 28.9%, compared to the prior-year period for the six months ended June 30, 2021, as a result of decreases in combined gross loans receivable from COVID-19 impacts and the continued run-off of California Installment loans due to regulatory changes. Excluding the aforementioned impact of California Installment and Virginia Revolving LOC loan runoff, U.S. revenues decreased $61.1 million, or 20.7%.

The provision for losses decreased $67.9 million, or 53.2%, for the six months ended June 30, 2021, compared to the prior-year period, primarily as a result of (i) relative sequential change in loan balances, (ii) favorable adjustments to allowance coverage from continued improved credit quality, and (iii) improved NCO rates year over year.
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Non-advertising costs of providing services for the six months ended June 30, 2021 were $64.0 million, a decrease of $6.9 million, or 9.7%, compared to $70.9 million for the six months ended June 30, 2020. The decrease was primarily driven by lower collection costs resulting from stimulus-related pay-downs and lower variable costs as a result of lower demand, partially offset by higher performance-based variable compensation.

Advertising costs were $13.2 million for the six months ended June 30, 2021, a decrease of $3.0 million, or 18.4%, compared to the prior-year period as the full effect of COVID-19 did not impact our advertising spend until the second quarter of 2020.

Corporate, district and other expenses were $84.3 million for the six months ended June 30, 2021, an increase of $17.0 million, or 25.3%, compared to the six months ended June 30, 2020. For the six months ended June 30, 2021, as described in our Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA, Non-GAAP Measures above, corporate, district and other costs included (i) $6.3 million of transaction costs (ii) $6.2 million of share-based compensation costs, and (iii) $5.8 million of restructuring costs. For the six months ended June 30, 2020, corporate, district and other expenses included (i) $1.8 million of legal and other costs and (ii) share-based compensation costs of $6.5 million. Excluding these items, comparable corporate, district and other expenses increased $7.0 million year over year, primarily due to the timing and level of performance-based variable compensation, partially offset by certain cost reductions, including work-from-home initiatives, to manage COVID-19 Impacts for the six months ended June 30, 2021.

As previously described, we recognize our share of Katapult’s income on a one-quarter lag and recorded income of $2.3 million for the six months ended June 30, 2021. As a result of the merger between Katapult and FinServ, which closed during the second quarter of 2021, we recorded an additional gain of $135.4 million as of June 30, 2021, which represents cash we received, net of the basis of our investment in Katapult.

U.S. interest expense for the six months ended June 30, 2021 increased $2.7 million, or 8.8%, as a result of higher borrowings year-over-year, including the new Non-Recourse U.S. SPV Facility, which we entered into in April 2020.

Canada Direct Lending and Canada POS Lending Portfolio Performance

(in thousands, except percentages) Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020
Gross loans receivable
Canada Direct Lending Revolving LOC $ 337,700 $ 319,307 $ 303,323 $ 265,507 $ 231,917
Canada Direct Lending Installment loans 23,564 24,385 26,948 26,639 24,861
Total Canada Direct Lending gross loans receivable $ 361,264 $ 343,692 $ 330,271 $ 292,146 $ 256,778
Total Canada POS Lending gross loans receivable $ 221,500 $ 201 $ — $ — $ —
Lending Revenue:
Canada Direct Lending Revolving LOC $ 37,450 $ 34,368 $ 31,962 $ 28,280 $ 25,819
Canada Direct Lending Installment loans 10,541 10,447 11,106 10,238 9,701
Total Canada Direct Lending - lending revenue $ 47,991 $ 44,815 $ 43,068 $ 38,518 $ 35,520
Canada POS Lending - lending revenue $ 6,495 $ 1,383 $ — $ — $ —
Lending Provision:
Canada Direct Lending Revolving LOC $ 7,066 $ 7,909 $ 8,679 $ 9,751 $ 9,357
Canada Direct Lending Installment loans 1,438 1,234 1,972 1,426 (263)
Total Canada Direct Lending - lending provision $ 8,504 $ 9,143 $ 10,651 $ 11,177 $ 9,094
Canada POS Lending - lending provision $ 2,986 $ 855 $ — $ — $ —
Lending Net Revenue
Canada Direct Lending Revolving LOC $ 30,384 $ 26,459 $ 23,283 $ 18,529 $ 16,462
Canada Direct Lending Installment loans 9,103 9,213 9,134 8,812 9,964
Total Canada Direct Lending - lending net revenue $ 39,487 $ 35,672 $ 32,417 $ 27,341 $ 26,426
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(in thousands, except percentages) Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020
Canada POS Lending - lending net revenue $ 3,509 $ 528 $ — $ — $ —
NCOs
Canada Direct Lending Revolving LOC $ 10,838 $ 11,097 $ 8,907 $ 7,568 $ 11,594
Canada Direct Lending Installment loans 1,513 1,669 2,060 1,289 1,393
Total Canada Direct Lending NCOs $ 12,351 $ 12,766 $ 10,967 $ 8,857 $ 12,987
Canada POS Lending NCOs (1)
$ 1,509 $ 213 $ — $ — $ —
NCO rate (2)
Canada Direct Lending Revolving LOC 3.3% 3.6% 3.1% 3.0% 4.9%
Canada Direct Lending Installment loans 6.3% 6.5% 7.7% 5.0% 4.6%
Total Canada Direct Lending NCO rate 3.5% 3.8% 3.5% 3.2% 4.9%
Canada POS Lending NCO rate 0.7%
NM (3)
—% —% —%
ALL (4)
Canada Direct Lending Revolving LOC $ 26,602 $ 29,916 $ 32,773 $ 31,316 $ 28,526
Canada Direct Lending Installment loans 1,767 1,819 2,233 2,204 2,024
Total Canada Direct Lending ALL $ 28,369 $ 31,735 $ 35,006 $ 33,520 $ 30,550
Canada POS Lending ALL (5)
$ 4,577 $ 519 $ — $ — $ —
ALL rate (6)
Canada Direct Lending Revolving LOC 7.9  % 9.4  % 10.8  % 11.8  % 12.3  %
Canada Direct Lending Installment loans 7.5  % 7.5  % 8.3  % 8.3  % 8.1  %
Total Canada Direct Lending ALL rate 7.9  % 9.2  % 10.6  % 11.5  % 11.9  %
Canada POS Lending ALL rate 2.1  % 0.3  % —  % —  % —  %
Past-due rate (6)
Canada Direct Lending Revolving LOC 5.8  % 6.4  % 6.8  % 6.0  % 7.3  %
Canada Direct Lending Installment loans 2.3  % 2.1  % 2.1  % 2.9  % 3.7  %
Total Canada Direct Lending past-due rate 5.5  % 6.1  % 6.4  % 5.7  % 7.0  %
Canada POS Lending past-due rate 5.4  % 5.7  % —  % —  % —  %
(1) For the second quarter of 2021, NCO's presented above include $2.4 million of NCO's related to the fair value discount, which are excluded from provision.
(2) We calculate NCO rate as total NCOs divided by Average gross loans receivables.
(3) Not material or not meaningful.
(4) We report ALL as a contra-asset reducing gross loans receivable on the Condensed Consolidated Balance Sheets.
(5) Loans originated pre-acquisition have been adjusted to fair value at the acquisition date and included estimates of future losses. The ALL represents estimated incurred losses for loans originated after acquisition plus incurred losses for acquired loans in excess of the remaining fair value discount.
(6) We calculate ALL rate and past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.

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Canada Direct Lending Net Revenue

Canada Direct Lending revenue increased year over year by $16.7 million, or 36.9%, ($9.6 million, or 21.4%, on a constant-currency basis), for the three months ended June 30, 2021, due to the continued popularity and growth of Revolving LOC loans in Canada. Sequentially, Canada Direct Lending revenue increased $3.4 million, or 5.9%, driven by increases in Revolving LOC and ancillary revenue, partially offset by a decrease in Installment revenue.

The provision for losses decreased $0.6 million, or 6.6% ($1.6 million, or 17.1%, on a constant-currency basis), to $8.6 million for the three months ended June 30, 2021, compared to $9.2 million in the prior-year period. The decrease in provision for loan losses was the result of lower NCOs and the related impact of changes in allowance coverage due to improved credit quality for Revolving LOC loans. As of June 30, 2021, allowance coverage decreased sequentially by 140 basis points, or 15.0%. On a quarterly basis, NCO rates improved approximately 140 bps, or 28.1%, year over year.

Canada Direct Lending Revolving LOC loan performance

Canada Direct Lending Revolving LOC gross loans receivable increased $105.8 million, or 45.6% ($75.1 million, or 32.4%, on a constant-currency basis) year over year and $18.4 million, or 5.8% ($14.0 million, or 4.4%, on a constant-currency basis) sequentially. Revolving LOC revenue increased $11.6 million, or 45.0%, year over year and $3.1 million, or 9.0%, sequentially ($7.4 million, or 28.5%, and $2.0 million, or 5.7%, respectively, on a constant-currency basis). The allowance coverage decreased year over year from 12.3% to 7.9% as of June 30, 2021 due to sustained favorable trends in NCOs and continued lower past-due balances as a percentage of total gross loans receivable. The year-over-year NCO rate and past-due rate for Revolving LOC gross loans receivable improved by 160 bps and 155 bps, respectively.

Canada Direct Lending Installment loan performance

Canada Direct Lending Installment revenue increased $0.8 million, or 8.7%, (and decreased $0.4 million, or 3.7%, on a constant-currency basis) year over year. Installment gross loans receivable decreased $1.3 million, or 5.2% ($3.4 million, or 13.8%, on a constant-currency basis) year over year. The decreases in Installment loans and related revenue were due to a continued shift to Revolving LOC loans, as well as COVID-19 related constraints on demand, particularly as related to store-driven Installment loans. The Installment allowance coverage decreased year over year from 8.1% to 7.5% as a result of favorable trends in past-due balances. The year-over-year past-due rate for Installment loans improved by 145 bps. Sequentially, Installment gross loans receivable decreased $0.8 million, or 3.4%, ($1.1 million, or 4.6%, on a constant-currency basis) and related revenue increased $0.1 million, or 0.9% (and decreased $0.2 million, or 1.9%, on a constant-currency basis).

Canada POS Lending Revolving LOC loan performance

Canada POS Lending Revolving LOC gross loans receivable as of June 30, 2021 was $221.5 million, including a discount of $8.9 million related to purchase accounting adjustments ($230.4 million prior to purchase accounting adjustments). For the three months ended June 30, 2021, Canada POS Lending revenue was $7.0 million, which included a $4.0 million reduction as a result of acquisition-related adjustments for the period. For a full discussion of the purchase accounting and acquisition-related adjustments, refer to "Consolidated Revenue by Product and Segment" above. Revolving LOC gross loans receivable generally charge-off at 180 days past due. NCOs were $1.5 million for the three months ended June 30, 2021. The Canada Lending NCO and past-due rates for the quarter were 0.7% and 5.4%, respectively.

Originations for the three months ended June 30, 2021 were C$103.9 million, an increase of C$56.2 million, or 117.8%, from the prior-year period of C$47.7 million. Sequentially, Canada POS Revolving LOC gross loans receivable increased $19.9 million, or 9.9%.

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Canada Direct Lending Results of Operations

Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands, unaudited) 2021 2020 Change $ Change % 2021 2020 Change $ Change %
Revenue $ 61,880  $ 45,189  $ 16,691  36.9  % $ 120,320  $ 104,227  $ 16,093  15.4  %
Provision for losses 8,556  9,163  (607) (6.6) % 17,790  36,658  (18,868) (51.5) %
Net revenue 53,324  36,026  17,298  48.0  % 102,530  67,569  34,961  51.7  %
Advertising 778  481  297  61.7  % 1,682  1,755  (73) (4.2) %
Non-advertising costs of providing services 18,683  15,906  2,777  17.5  % 36,765  34,016  2,749  8.1  %
Total cost of providing services 19,461  16,387  3,074  18.8  % 38,447  35,771  2,676  7.5  %
Gross margin 33,863  19,639  14,224  72.4  % 64,083  31,798  32,285  #
Corporate, district and other expenses 6,022  7,150  (1,128) (15.8) % 11,640  12,307  (667) (5.4) %
Interest expense 2,498  2,198  300  13.6  % 4,853  4,676  177  3.8  %
Total operating expense 8,520  9,348  (828) (8.9) % 16,493  16,983  (490) (2.9) %
Segment operating income 25,343  10,291  15,052  # 47,590  14,815  32,775  #
Interest expense 2,498  2,198  300  13.6  % 4,853  4,676  177  3.8  %
Depreciation and amortization 1,144  1,108  36  3.2  % 2,270  2,268  2  0.1  %
EBITDA (1)
28,985  13,597  15,388  # 54,713  21,759  32,954  #
Canada GST adjustment —  2,160  (2,160) —  2,160  (2,160)
Other adjustments 107  281  (174) 148  437  (289)
Adjusted EBITDA (1)
$ 29,092  $ 16,038  $ 13,054  81.4  % $ 54,861  $ 24,356  $ 30,505  125.2  %
# - Variance greater than 100% or not meaningful.
(1) These are non-GAAP metrics. For a description of each non-GAAP addback, see the applicable reconciliations contained under "Results of Consolidated Operations." For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."

Canada Direct Lending Segment Results - For the Three Months Ended June 30, 2021 and 2020
For a discussion of revenue, provision for losses and related gross combined loans receivables, see "Canada Direct Lending Portfolio Performance," above.
Canada Direct Lending cost of providing services were $19.5 million for the three months ended June 30, 2021, an increase of $3.1 million, or 18.8% ($0.9 million or 5.2%, on a constant currency basis), compared to the prior year, primarily due to timing and level of performance-based variable compensation and higher store operating costs.

Canada Direct Lending operating expenses decreased to $8.5 million for the three months ended June 30, 2021 compared to $9.3 million for the three months ended June 30, 2020.

Canada Direct Lending Segment Results - For the Six Months Ended June 30, 2021 and 2020

Canada Direct Lending revenue increased $16.1 million, or 15.4% ($5.8 million, or 5.6%, on a constant currency basis), to $120.3 million for the six months ended June 30, 2021, from $ 104.2 million in the prior year, primarily due to higher consumer demand as COVID-19 Impacts lessen. Canada Direct Lending Revolving LOC gross loans receivable grew $105.8 million, or 45.6%, year over year, contributing to related revenue growth of $17.0 million, or 31.0% for the six months ended June 30, 2021 compared to the prior-year period.

The provision for losses decreased $18.9 million, or 51.5% ($20.3 million, or 55.4% on a constant currency basis), to $17.8 million for the six months ended June 30, 2021, compared to $36.7 million in the prior-year period. The decrease in provision for loan losses was the result of lower NCOs and the related impact of changes in allowance coverage due to an increase in credit quality for Revolving LOC loans. Refer to "Canada Direct Lending and Canada POS Lending Portfolio Performance," above for additional details on quarterly loss and allowance rates.

Canada Direct Lending cost of providing services for the six months ended June 30, 2021 were $38.4 million, an increase of $2.7 million, or 7.5% ($0.6 million, or 1.7%, on a constant-currency basis), compared to $35.8 million for the six months ended June 30, 2020, primarily related to volume-driven variable costs, such as underwriting data and financial services fees and higher store operating costs for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

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Canada Direct Lending operating expenses for the six months ended June 30, 2021 were $16.5 million for the six months ended June 30, 2021 compared to $17.0 million for the six months ended June 30, 2020.

Canada POS Lending Results of Operations
Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands, unaudited) 2021 2021
Revenue $ 7,019  $ 8,638 
Provision for losses 2,987  3,842 
Net revenue 4,032  4,796 
Advertising 176  215 
Non-advertising costs of providing services 314  387 
Total cost of providing services 490  602 
Gross margin 3,542  4,194 
Corporate, district and other expenses 9,869  12,494 
Interest expense 3,604  4,430 
Total operating expense 13,473  16,924 
Segment operating loss (9,931) (12,730)
Interest expense 3,604  4,430 
Depreciation and amortization 3,283  3,996 
EBITDA (1)
(3,044) (4,304)
Acquisition accounting adjustment 5,495  5,495 
Other adjustments (17) (17)
Adjusted EBITDA (1)
$ 2,434  $ 1,174 
# - Variance greater than 100% or not meaningful.
(1) These are non-GAAP metrics. For a description of each non-GAAP addback, see the applicable reconciliations contained under "Consolidated Results of Operations." For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."

Canada POS Lending Segment Results - For the Three and Six Months Ended June 30, 2021

For a discussion of revenue, provision for losses and related gross loans receivables, see the "Canada Direct Lending and Canada POS Lending Portfolio Performance," above for the three months ended June 30, 2021. Canada POS Lending segment revenue includes revenue from merchant discounts and ancillary products. MDR represents the discount merchant partners provide to help facilitate customer credit card purchases at merchant locations. The fee is recognized over the estimated average loan term of 12 months. Ancillary revenue includes administrative fees, annual fees, insurance product fees and other fees charged to customers.

For the six months ended June 30, 2021, Canada POS Lending revenues were $8.6 million and included a $4.0 million reduction as a result of acquisition-related adjustments. For a full discussion of acquisition-related adjustments, refer to "Consolidated Revenue by Product and Segment" above.

Provision for losses for the six months ended June 30, 2021 was $3.8 million. Refer to "Canada Direct Lending and Canada POS Lending Portfolio Performance," above for additional details on quarterly loss and allowance rates.

Supplemental Non-GAAP Financial Information

Non-GAAP Financial Measures

In addition to the financial information prepared in conformity with U.S. GAAP, we provide certain “non-GAAP financial measures,” including:
•Adjusted Net Income and Adjusted Earnings Per Share, or the Adjusted Earnings Measures (net income from continuing operations plus or minus certain legal and other costs, income or loss from equity method investment, goodwill and intangible asset impairments, transaction-related costs, restructuring costs, adjustments related to acquisition accounting, share-based compensation, certain intangible asset amortization, certain tax adjustments and impacts from tax law changes and cumulative tax effect of applicable adjustments, on a total and per share basis);
•EBITDA (earnings before interest, income taxes, depreciation and amortization);
•Adjusted EBITDA (EBITDA plus or minus certain non-cash and other adjusting items);
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•Adjusted effective income tax rate (effective tax rate plus or minus certain non-cash and other adjusting items); and
•Gross Combined Loans Receivable (includes loans originated by third-party lenders through CSO programs which are not included in the Consolidated Financial Statements).

We believe that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of the Company's operations. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of the business that, when viewed with the Company's U.S. GAAP results, provide a more complete understanding of factors and trends affecting the business.

We believe that investors regularly rely on non-GAAP financial measures, such as Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA, to assess operating performance and that such measures may highlight trends in the business that may not otherwise be apparent when relying on financial measures calculated in accordance with U.S. GAAP. In addition, we believe that the adjustments shown above are useful to investors in order to allow them to compare our financial results during the periods shown without the effect of each of these income or expense items. In addition, we believe that Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of public companies in our industry, many of which present Adjusted Net Income, Adjusted Earnings per Share, EBITDA and/or Adjusted EBITDA when reporting their results.

In addition to reporting loans receivable information in accordance with U.S. GAAP, we provide Gross Combined Loans Receivable consisting of owned loans receivable plus loans originated by third-party lenders through the CSO programs, which we guarantee but do not include in the Condensed Consolidated Financial Statements. Management believes this analysis provides investors with important information needed to evaluate overall lending performance.

We provide non-GAAP financial information for informational purposes and to enhance understanding of the U.S. GAAP Consolidated Financial Statements. Adjusted Net Income, Adjusted Earnings per Share, EBITDA, Adjusted EBITDA and Gross Combined Loans Receivable should not be considered as alternatives to income from continuing operations, segment operating income, or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flows from operating activities or any other liquidity measure derived in accordance with U.S. GAAP. Readers should consider the information in addition to, but not instead of or superior to, the financial statements prepared in accordance with U.S. GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

Description and Reconciliations of Non-GAAP Financial Measures
Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA Measures have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our income or cash flows as reported under U.S. GAAP. Some of these limitations are:
•they do not include cash expenditures or future requirements for capital expenditures or contractual commitments;
•they do not include changes in, or cash requirements for, working capital needs;
•they do not include the interest expense, or the cash requirements necessary to service interest or principal payments on debt;
•depreciation and amortization are non-cash expense items reported in the statements of cash flows; and
•other companies in our industry may calculate these measures differently, limiting their usefulness as comparative measures.

We calculate Adjusted Earnings per Share utilizing diluted shares outstanding at year-end. If the Company records a loss from continuing operations under U.S. GAAP, shares outstanding utilized to calculate Diluted Earnings per Share from continuing operations are equivalent to basic shares outstanding. Shares outstanding utilized to calculate Adjusted Earnings per Share from continuing operations reflect the number of diluted shares the Company would have reported if reporting net income from continuing operations under U.S. GAAP.

As noted above, Gross Combined Loans Receivable includes loans originated by third-party lenders through CSO programs which are not included in the consolidated financial statements but from which we earn revenue and for which we provide a guarantee to the lender. Management believes this analysis provides investors with important information needed to evaluate overall lending performance.

We believe Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA are used by investors to analyze operating performance and to evaluate our ability to incur and service debt and the capacity for making capital expenditures. Adjusted EBITDA is also useful to investors to help assess our estimated enterprise value. The computation of Adjusted EBITDA as presented in this release may differ from the computation of similarly-titled measures provided by other companies.

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Reconciliation of Net Income from Continuing Operations and Diluted Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings per Share, non-GAAP measures (in thousands, except per share data, unaudited)
Three Months Ended
June 30, 		Six Months Ended
June 30,
2021 2020 Change $ Change % 2021 2020 Change $ Change %
Net income from continuing operations $ 104,517  $ 21,080  $ 83,437  # $ 130,252  $ 57,093  $ 73,159  #
Adjustments:
Restructuring costs (1)
5,763  —  5,763  — 
Legal and other costs (2)
—  847  —  1,750 
(Income) loss from equity method investment (3)
(1,712) (741) (2,258) 877 
Gain from equity method investment (4)
(135,387) —  (135,387) — 
Transaction costs (5)
3,181  91  6,341  337 
Acquisition-related adjustments (6)
5,495  —  5,495  — 
Share-based compensation (7)
3,467  3,310  6,150  6,504 
Intangible asset amortization (8)
1,866  759  2,697  1,496 
Canada GST adjustment (9)
—  2,160  —  2,160 
Income tax valuations (10)
—  (3,472) —  (3,472)
Impact of tax law changes (11)
—  —  —  (9,114)
Cumulative tax effect of adjustments (12)
30,204  (1,864) 28,469  (3,185)
Adjusted Net Income $ 17,394  $ 22,170  ($ 4,776) (22) % $ 47,522  $ 54,446  ($ 6,924) (13) %
Net income from continuing operations $ 104,517  $ 21,080  $ 130,252  $ 57,093 
Diluted Weighted Average Shares Outstanding 43,672  41,545  43,556  41,686 
Diluted Earnings per Share from continuing operations $ 2.39  $ 0.51  $ 1.88  # $ 2.99  $ 1.37  $ 1.62  #
Per Share impact of adjustments to Net income from continuing operations (1.99) 0.02  (1.90) (0.06)
Adjusted Diluted Earnings per Share $ 0.40  $ 0.53  ($ 0.13) (24.5) % $ 1.09  $ 1.31  ($ 0.22) (16.8) %
Note: Footnotes follow Reconciliation of Net income table on the next page

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Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA, non-GAAP measures (in thousands, except per share data, unaudited)
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in thousands, unaudited) 2021 2020 Change $ Change % 2021 2020 Change $ Change %
Net income from continuing operations $ 104,517 $ 21,080 $ 83,437  # $ 130,252 $ 57,093 $ 73,159  #
Provision for income taxes 34,172 1,068 33,104  # 42,616 3,005 39,611  #
Interest expense 23,440 18,311 5,129  28.0  % 42,979 35,635 7,344  20.6  %
Depreciation and amortization 7,435 4,417 3,018  68.3  % 12,400 8,954 3,446  38.5  %
EBITDA 169,564 44,876 124,688  # 228,247 104,687 123,560  #
Restructuring costs (1)
5,763 — 5,763 —
Legal and other costs (2)
— 847 — 1,750
(Income) loss from equity method investment (3)
(1,712) (741) (2,258) 877
Gain from equity method investment (4)
(135,387) — (135,387) —
Transaction costs (5)
3,181 91 6,341 337
Acquisition-related adjustments (6)
5,495 — 5,495 —
Share-based compensation (7)
3,467 3,310 6,150 6,504
Canada GST adjustment (9)
— 2,160 — 2,160
Other adjustments (13)
(69) 586 (274) 601
Adjusted EBITDA $ 50,302 $ 51,129 ($ 827) (1.6) % $ 114,077 $ 116,916 ($ 2,839) (2.4) %
Adjusted EBITDA Margin 26.8  % 28.0  % 29.7  % 25.2  %
# - Change greater than 100% or not meaningful

(1) Restructuring costs for the three and six months ended June 30, 2021 resulted from U.S. store closures and consisted of (i) severance costs for store employees, (ii) lease termination costs, and (iii) accelerated depreciation, partially offset by the net write-off of ROU assets and lease liabilities.
(2) Legal and other costs for the six months ended June 30, 2020 included (i) settlement costs related to certain legal matters (ii) costs for certain securities litigation and related matters and (iii) severance costs for certain corporate employees.
(3)
The amount reported is our share of the estimated U.S. GAAP net (income) loss of Katapult.
(4)
During the three months ended June 30, 2021, we recorded an additional gain on our investment in Katapult of $135.4 million. The gain represents cash we received, net of the basis of our investment in Katapult, upon the completion of the business combination between Katapult and FinServ. Refer to "Katapult Update for the Three and Six Months Ended June 30, 2021 and 2020" for additional details.
(5)
Transaction costs for the six months ended June 30, 2021 relate to Katapult and FinServ business combination and the Flexiti acquisition.

Transaction costs for the six months ended June 30, 2020 relate to the acquisition of Ad Astra.
(6) Acquisition-related adjustments for the six months ended June 30, 2021 relate to the acquired Flexiti loan portfolio as of March 10, 2021. Refer to "Consolidated Revenue by Product and Segment" for additional details.
(7) The estimated fair value of share-based awards is recognized as non-cash compensation expense on a straight-line basis over the vesting period.
(8) The intangible asset amortization primarily includes amortization of identifiable intangible assets established in connection with the acquisition of Flexiti.
(9)
We received a Notice of Adjustment from Canadian tax authority auditors in the second quarter 2020 related to the treatment of certain expenses in prior years for purposes of calculating the GST due.
(10)
In the second quarter of 2020, a Texas court ruling related to the apportionment of income to the state for another company resulted in a change in estimate regarding the realization of a tax benefit previously taken. Accordingly, we recorded a $1.1 million liability for our estimated exposure related to this position, which was settled in April 2021. Also in the second quarter of 2020, we released a $4.6 million valuation allowance related to NOLs for certain entities in Canada.
(11) On March 27, 2020, the CARES Act was enacted by the U.S. Federal government in response to the COVID-19 pandemic. The CARES Act, among other things, allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. For the six months ended June 30, 2020, we recorded an income tax benefit of $9.1 million related to the carryback of NOL from tax years 2018 and 2019.
(12)
Cumulative tax effect of adjustments included in Reconciliation of Net income from continuing operations Adjusted Net Income table is calculated using the estimated incremental tax rate by country.
(13) Other adjustments primarily include the intercompany foreign-currency exchange impact.

58


Currency Information

We operate in the U.S. and Canada and our consolidated results are reported in U.S. dollars.

Changes in our reported revenues and net income include the effect of changes in currency exchange rates. We translate all balance sheet accounts into U.S. dollars at the currency exchange rate in effect at the end of each period. We translate the statement of operations at the average rates of exchange for the period. We record currency translation adjustments as a component of Accumulated Other Comprehensive Income in Stockholders’ Equity.

Constant Currency Analysis

We have operations in the U.S. and Canada. In the three months ended June 30, 2021 and 2020, 36.7% and 24.8%, respectively, of our revenues from continuing operations were originated in Canadian Dollars. For the six months ended June 30, 2021 and 2020, 33.6% and 22.5%, respectively, of our revenues from continuing operations were originated in Canadian Dollars. As a result, changes in our reported results include the impacts of changes in foreign currency exchange rates for the Canadian Dollar.

Income Statement
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 $ Change % Change 2021 2020 $ Change % Change
Average Exchange Rates for the Canadian Dollar 0.8141  0.7215  0.0926  12.8  % $ 0.8019  $ 0.7335  $0.0684  9.3  %

Balance Sheet - Exchange Rate as of June 30, 2021 and December 31, 2020
June 30, December 31, Change
2021 2020 $ %
Exchange Rate for the Canadian Dollar 0.8042  0.7863  0.0179  2.3  %

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 Canada Direct Lending segment performance. The constant currency impact on our Canada POS Lending segment was not material as we acquired it on March 10, 2021. 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.

For our Canada Direct Lending segment, we calculated the revenues and gross margin below during the three and six months ended June 30, 2021 using the actual average exchange rate during the three and six months ended June 30, 2020 (in thousands, unaudited).
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 $ Change % Change 2021 2020 $ Change % Change
Canada Direct Lending – constant currency basis:
Revenues $ 54,838  $ 45,189  $ 9,649  21.4  % $ 110,027  $ 104,227  $ 5,800  5.6  %
Gross Margin 29,993  19,639  10,354  52.7  % 58,524  31,798  26,726  84.0  %

We calculated gross loans receivable below as of June 30, 2021 using the actual exchange rate as of December 31, 2020 (in thousands, unaudited).
June 30, December 31, Change
2021 2020 $ %
Canada Direct Lending – constant currency basis:
Gross loans receivable $ 353,196  $ 330,271  $ 22,925  6.9  %

59


LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity to fund the loans we make to our customers are cash provided by operations, our Senior Revolver, Cash Money Revolving Credit Facility, Non-Recourse U.S. SPV Facility, Non-Recourse Canada SPV Facility, Non-Recourse Flexiti SPE Facility, and funds from third-party lenders under our CSO programs. Additionally, in August 2018, we issued $690.0 million 8.25% Senior Secured Notes due September 2025, which as described below we plan to redeem with proceeds of a larger Notes issuance upon its expected closing on July 30, 2021.

As of June 30, 2021, we were in compliance with all financial ratios, covenants and other requirements in our debt agreements. We anticipate that our primary use of cash will be to fund growth in our working capital, finance capital expenditures, and meet our debt obligations. We may also use cash for potential strategic investments in and acquisitions of other companies that help us extend our reach and product portfolio. Additionally, we may use cash to fund a return on capital for our stockholders through share repurchase programs, or in the form of dividends. In the first quarter of 2021, our Board of Directors increased the quarterly dividend to $0.11 per share, an increase of 100%. Additionally, in May 2021 our Board of Directors authorized a new share repurchase program for up to $50.0 million of our common stock. Refer to Note 17, "Share Repurchase Program" of the Notes to the unaudited Condensed Consolidated Financial Statements for further details of the program.

Our level of cash flow provided by operating activities typically experiences, in normal times, some seasonal fluctuation related to our levels of net income and changes in working capital levels, particularly loans receivable. Unexpected changes in our financial condition or other unforeseen factors may result in our inability to obtain third-party financing or could increase our borrowing costs in the future. We have the ability to adjust our volume of lending to consumers to the extent we experience any short-term or long-term funding shortfalls, such as tightening our credit approval practices (as we did during the COVID-19 pandemic), which has the effect of reducing cash outflow requirements while increasing cash inflows through loan repayments.

We may also sell or securitize our assets, draw on our available revolving credit facility or line of credit, enter into additional refinancing agreements or reduce our capital spending to generate additional liquidity. Our cash on hand and total liquidity remains at elevated levels as of June 30, 2021 due to a number of factors, including (i) a one-time cash inflow of $146.9 million from the monetization of a significant portion of our investment in Katapult, (ii) lower consumer demand and increased or accelerated repayments as customers benefited from COVID-19-related government stimulus programs, (iii) favorable credit performance, and (iv) the runoff of California Installment and Virginia Revolving LOC loans following regulatory changes, partially offset by our use of cash of the acquisition of Flexiti. These factors resulted in our available cash on hand of $276.4 million and our total liquidity of $435.2 million as of June 30, 2021. We believe our cash on hand and available borrowings provide us with sufficient liquidity for at least the next 12 months.

Our recent acquisition of Flexiti, which closed on March 10, 2021, has increased our product offerings to include customers in the prime space. The acquisition also allows us to tailor our current product structure to Flexiti's POS model, potentially expanding to sub-prime customers. These initiatives to expand our product offerings and grow the Flexiti line of business can materially impact our future cash flows. For further information regarding the Flexiti acquisition, refer to Note 1, "Summary of Significant Accounting Policies and Nature of Operations," Note 15, "Goodwill," and Note 16, "Acquisitions" of the Notes to the unaudited Condensed Consolidated Financial Statements.

As previously described, our offering of 7.50% Senior Secured Notes, due 2028, for $750 million aggregate principal amount, is expected to close on July 30, 2021. Refer to "Recent Developments" for additional details. We have no additional material commitments or demands that are likely to affect our liquidity.

60


Debt Capitalization Summary
(in thousands, net of deferred financing costs)
Capacity Interest Rate Maturity Counter-parties Balance as of June 30, 2021 (in USD)
Non-Recourse Canada SPV Facility (1)
C$175.0 million 3-Mo CDOR + 6.75% September 2, 2023 Waterfall Asset Management $ 98,881 
Senior Secured Revolving Credit Facility $50.0 million 1-Mo LIBOR + 5.00% June 30, 2022 BayCoast Bank; Stride Bank; Hancock-Whitney Bank; Metropolitan Commercial Bank — 
Non-Recourse U.S. SPV Facility $200.0 million
1-Mo LIBOR + 6.25%(2)
April 8, 2024 Atalaya Capital Management, MetaBank 44,489 
Non-Recourse Flexiti SPE Facility (1)(3)
C$500.0 million 3-Mo CDOR + 4.40% March 10, 2024 Credit Suisse (Class A); SPF (Class B) 194,864 
Cash Money Revolving Credit Facility (1)
C$10.0 million Canada Prime Rate +1.95% On-demand Royal Bank of Canada — 
8.25% Senior Secured Notes (due 2025) (4)
$690.0 million 8.25% September 1, 2025 680,893 
(1) Capacity amounts are denominated in Canadian dollars, while outstanding balances as of June 30, 2021 are denominated in U.S. dollars.
(2) The Non-Recourse U.S. SPV Facility initially provided for $100.0 million of borrowing capacity, which increased to $200.0 million on July 31, 2020 following additional commitments. As of June 30, 2021 interest accrues at an annual rate of one-month LIBOR (with a floor of 1.65%) plus 6.25%.
(3) The current Non-Recourse Flexiti SPE Facility was entered into concurrent with the Flexiti acquisition. Interest accrues at an annual rate of three-month CDOR plus 4.40%.
(4) On July 16, 2021, we announced the pricing of our $750 million aggregate principal amount of new 7.50% Senior Secured Notes, which will be used to redeem our $690.0 million 8.25% Senior Secured Notes upon the expected closing on July 30, 2021.

Refer to Note 5, "Debt," for details on each of our credit facilities and resources.

61


Cash Flows

The following highlights our cash flow activity and the sources and uses of funding during the periods indicated (in thousands):
Six Months Ended June 30,
2021 2020
Net cash provided by operating activities from continuing operations $ 162,895  $ 270,800 
Net cash used in investing activities from continuing operations (93,698) (50,963)
Net cash provided by financing activities from continuing operations 8,088  2,123 

As previously described, year-over-year comparisons were impacted by COVID-19 Impacts and the runoff of California Installment loans from regulatory changes effective January 1, 2020.

Operating Activities from Continuing Operations

Net cash provided by operating activities from continuing operations for the six months ended June 30, 2021 was $162.9 million, attributable to net income from continuing operations of $130.3 million, the effect of non-cash reconciling items of $34.0 million, and changes in our operating assets and liabilities of $66.6 million. Our non-cash reconciling items of $34.0 million primarily included (i) $81.3 million of provision for loan losses, (ii) $12.4 million of depreciation and amortization, and (iii) a gain of $135.4 million related to our investment in Katapult. Our changes in operating assets and liabilities of $66.6 million were primarily related to a $30.5 million decline in accrued interest on our gross loans receivable due to overall volume decline and $29.9 million of lower income tax receivable as of June 30, 2021.

Investing Activities from Continuing Operations

Net cash used in investing activities from continuing operations for the six months ended June 30, 2021 was $93.7 million, primarily reflecting the acquisition of Flexiti for $91.2 million, net of cash received, and the net origination of loans of $142.2 million, partially offset by $146.9 million of cash we received as a result of the Katapult and FinServ merger. In addition, we used cash to purchase $7.2 million of property and equipment, an increase from last year due to Flexiti.

Financing Activities from Continuing Operations

Net cash used in financing activities from continuing operations for the six months ended June 30, 2021 was $8.1 million, primarily due to (i) cash dividends of $7.0 million, (ii) $1.7 million of payments to net share settle vesting of RSUs, and (iii) $1.3 million of share repurchases in the second quarter of 2021, partially offset by $17.8 million of net proceeds from our Non-Recourse Flexiti SPE Facility.

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The following unaudited condensed consolidating financial information is presented separately for:

(i)CURO as the issuer of the 8.25% Senior Secured Notes;
(ii)The Company's subsidiary guarantors, which are comprised of certain of its domestic subsidiaries, including (x) CFTC, as the issuer of the 12.00% Senior Secured Notes that were redeemed in August 2018, (y) CURO Intermediate Holdings Corp., but excluding the U.S. SPV and Canada SPV (the “Subsidiary Guarantors”), on a consolidated basis, which are 100% owned by CURO, and which are guarantors of the 8.25% Senior Secured Notes issued in August 2018;
(iii)U.S. SPV, a wholly-owned, bankruptcy-remote special purpose subsidiary;
(iv)Canada SPV, a wholly-owned, bankruptcy-remote special purpose subsidiary;
(v)Flexiti SPE, a wholly-owned, bankruptcy-remote special purpose subsidiary, acquired in March 2021;
(vi)The Company's other subsidiaries on a consolidated basis, which are not guarantors of the 8.25% Senior Secured Notes (the “Subsidiary Non-Guarantors”);
(vii)Consolidating and eliminating entries representing adjustments to:
1.eliminate intercompany transactions between or among us, the Subsidiary Guarantors, the Non-Recourse U.S. SPV facility, the Non-Recourse Canada SPV facility and the Subsidiary Non-Guarantors; and
2.eliminate the investments in subsidiaries; and
(viii)The Company and its subsidiaries on a consolidated basis.

For additional details, see Note 5, "Debt."

62


Condensed Consolidating Balance Sheets
June 30, 2021
(dollars in thousands) CURO Subsidiary
Guarantors 		U.S. SPV Canada SPV Flexiti SPE Subsidiary
Non-Guarantors 		Eliminations CURO
Consolidated
Assets:
Cash and cash equivalents $ —  $ 209,964  $ —  $ —  $ —  $ 66,403  $ —  $ 276,367 
Restricted cash —  22,346  8,846  28,892  5,815  3,400  —  69,299 
Loans receivable, net —  99,126  52,469  278,333  216,876  54,563  —  701,367 
Income taxes receivable 25,916  (24,447) —  —  —  706  —  2,175 
Prepaid expenses and other —  18,622  —  (11) 21  12,577  —  31,209 
Property and equipment, net —  28,399  —  —  —  22,771  —  51,170 
Investment in Katapult —  16,501  —  —  —  —  —  16,501 
Right of use asset - operating leases —  65,552  —  —  —  41,146  —  106,698 
Deferred tax assets 13,757  (13,757) —  —  —  6,264  —  6,264 
Goodwill and Intangibles, net —  125,367  —  —  —  148,752  —  274,119 
Intercompany receivable —  274,280  —  —  —  97,676  (371,956) — 
Investment in subsidiaries 350,422  —  —  —  —  —  (350,422) — 
Other assets —  8,588  —  —  —  708  —  9,296 
Total assets $ 390,095  $ 830,541  $ 61,315  $ 307,214  $ 222,712  $ 454,966  $ (722,378) $ 1,544,465 
Liabilities and Stockholders' equity (deficit):
Accounts payable and accrued liabilities $ 432  $ 42,056  $ —  $ 2,487  $ 3,591  $ 15,840  $ —  $ 64,406 
Deferred revenue —  3,196  84  25  —  7,089  —  10,394 
Lease liability - operating leases —  72,431  —  —  —  40,984  —  113,415 
Contingent consideration related to acquisition —  —  —  —  —  21,239  —  21,239 
Income taxes payable (63,954) 63,954  —  —  —  —  —  — 
Accrued interest 18,975  1  700  735  —  —  —  20,411 
Liability for losses on CSO lender-owned consumer loans —  5,265  —  —  —  —  —  5,265 
Debt 680,893  —  44,489  98,882  194,863  —  —  1,019,127 
Intercompany payable —  94,845  (94,846) 29,913  (21,759) 363,803  (371,956) — 
Payable to CURO Holdings Corp. (523,046) 523,046  —  —  —  —  —  — 
Other long-term liabilities —  13,785  —  —  —  11  —  13,796 
Deferred tax liabilities 10,093  (1,730) —  (108) —  1,455  —  9,710 
Total liabilities
123,393  816,849  (49,573) 131,934  176,695  450,421  (371,956) 1,277,763 
Stockholders' equity (deficit) 266,702  13,692  110,888  175,280  46,017  4,545  (350,422) 266,702 
Total liabilities and stockholders' equity (deficit) $ 390,095  $ 830,541  $ 61,315  $ 307,214  $ 222,712  $ 454,966  $ (722,378) $ 1,544,465 
63


December 31, 2020
(dollars in thousands) CURO Subsidiary
Guarantors 		U.S. SPV Canada SPV Subsidiary
Non-Guarantors 		Eliminations CURO
Consolidated
Assets:
Cash and cash equivalents $ —  $ 158,941  $ —  $ —  $ 54,402  $ —  $ 213,343 
Restricted cash —  19,181  2,665  29,329  3,590  —  54,765 
Loans receivable, net —  113,940  58,355  247,947  47,318  —  467,560 
Income taxes receivable 55,460  (24,444) —  —  1,046  —  32,062 
Prepaid expenses and other —  19,212  396  (8) 8,394  —  27,994 
Property and equipment, net —  36,258  —  —  23,491  —  59,749 
Investments in Katapult —  27,370  —  —  —  —  27,370 
Right of use asset - operating leases —  73,744  —  —  41,288  —  115,032 
Deferred tax asset 13,757  (13,757) —  —  —  —  — 
Goodwill —  105,922  —  —  30,169  —  136,091 
Other intangibles, net —  17,466  —  —  22,959  —  40,425 
Intercompany receivable —  164,615  —  —  —  (164,615) — 
Investment in subsidiaries 192,011  —  —  —  —  (192,011) — 
Other assets —  7,898  —  —  697  —  8,595 
Total assets $ 261,228  $ 706,346  $ 61,416  $ 277,268  $ 233,354  $ (356,626) $ 1,182,986 
Liabilities and Stockholder's equity (deficit):
Accounts payable and accrued liabilities $ 14  $ 38,344  $ —  $ 34,055  $ (22,789) $ —  $ 49,624 
Deferred revenue —  3,546  106  30  1,712  —  5,394 
Lease liability - operating leases —  81,435  —  —  41,213  —  122,648 
Income taxes payable (15,916) 15,916  —  —  —  —  — 
Accrued interest 18,975  1  405  742  —  —  20,123 
Liability for losses on CSO lender-owned consumer loans —  7,228  —  —  —  —  7,228 
Debt 680,000  —  43,585  96,076  —  —  819,661 
Intercompany payable —  46,119  (46,119) 30,737  133,878  (164,615) — 
Payable to CURO Group Holdings Corp. (563,585) 563,585  —  —  —  —  — 
Other long-term liabilities —  15,276  —  —  106  —  15,382 
Deferred tax liabilities 9,835  —  —  (105) 1,291  —  11,021 
Total liabilities
129,323  771,450  (2,023) 161,535  155,411  (164,615) 1,051,081 
Stockholders' equity (deficit) 131,905  (65,104) 63,439  115,733  77,943  (192,011) 131,905 
Total liabilities and stockholders' equity (deficit) $ 261,228  $ 706,346  $ 61,416  $ 277,268  $ 233,354  $ (356,626) $ 1,182,986 

64


Condensed Consolidating Statements of Operations
Three Months Ended June 30, 2021
(dollars in thousands) CURO Subsidiary
Guarantors 		U.S. SPV Canada SPV Flexiti SPE Subsidiary
Non-Guarantors 		Eliminations CURO
Consolidated
Revenue $ —  $ 82,321  $ 36,473  $ 40,407  $ 5,627  $ 22,865  $ —  $ 187,693 
Provision for losses —  20,197  13,425  5,612  3,029  2,902  —  45,165 
Net revenue —  62,124  23,048  34,795  2,598  19,963  —  142,528 
Cost of providing services:
Salaries and benefits —  16,306  —  —  —  9,750  —  26,056 
Occupancy and office —  10,515  —  —  —  7,230  —  17,745 
Other costs of providing services —  5,016  —  —  —  2,017  —  7,033 
Advertising —  6,089  —  —  —  954  —  7,043 
Total cost of providing services —  37,926  —  —  —  19,951  —  57,877 
Gross margin —  24,198  23,048  34,795  2,598  12  —  84,651 
Operating expense (income):
Corporate, district and other expenses 3,342  40,353  35  183  1,958  13,750  —  59,621 
Intercompany management fee —  (5,388) —  1,413  —  3,975  —  — 
Interest expense (income) 14,685  150  2,503  2,526  3,598  (22) —  23,440 
Income from equity method investment —  (1,712) —  —  —  —  —  (1,712)
Gain from equity method investment —  (135,387) —  —  —  —  —  (135,387)
Intercompany interest (income) expense —  (3,806) —  603  —  3,203  —  — 
Total operating expense 18,027  (105,790) 2,538  4,725  5,556  20,906  —  (54,038)
(Loss) income from continuing operations before income taxes (18,027) 129,988  20,510  30,070  (2,958) (20,894) —  138,689 
(Benefit) provision for income taxes (4,619) 37,104  —  —  —  1,687  —  34,172 
Net (loss) income from continuing operations (13,408) 92,884  20,510  30,070  (2,958) (22,581) —  104,517 
Equity in net income (loss) of subsidiaries:
CURO $ 117,925  $ —  $ —  $ —  $ —  $ —  $ (117,925) $ — 
Guarantor Subsidiaries —  92,884  —  —  —  —  (92,884) — 
Non-Guarantor Subsidiaries —  (22,581) —  —  —  —  22,581  — 
U.S. SPV —  20,510  —  —  —  —  (20,510) — 
Canada SPV —  30,070  —  —  —  —  (30,070) — 
Flexiti SPE —  (2,958) —  —  —  —  2,958  — 
Net income (loss) attributable to CURO $ 104,517  $ 210,809  $ 20,510  $ 30,070  $ (2,958) $ (22,581) $ (235,850) $ 104,517 
65


Three Months Ended June 30, 2020
(dollars in thousands) CURO Subsidiary
Guarantors 		U.S. SPV Canada SPV Subsidiary
Non-Guarantors 		Eliminations CURO
Consolidated
Revenue $ —  $ 97,485  $ 39,835  $ 30,372  $ 14,817  $ —  $ 182,509 
Provision for losses —  18,352  23,178  9,244  (81) —  50,693 
Net revenue —  79,133  16,657  21,128  14,898  —  131,816 
Cost of providing services:
Salaries and benefits —  16,663  —  —  8,060  —  24,723 
Occupancy and office —  10,363  —  —  6,480  —  16,843 
Other costs of providing services —  6,635  —  —  1,366  —  8,001 
Advertising —  5,269  —  —  481  —  5,750 
Total cost of providing services —  38,930  —  —  16,387  —  55,317 
Gross margin —  40,203  16,657  21,128  (1,489) —  76,499 
Operating (income) expense:
Corporate, district and other expenses 3,398  26,197  37  104  7,045  —  36,781 
Intercompany management fee —  (3,345) —  645  2,700  —  — 
Interest expense 14,647  258  1,208  2,112  86  —  18,311 
Income from equity method investment —  (741) —  —  —  —  (741)
Intercompany interest (income) expense —  (1,442) —  533  909  —  — 
Total operating expense 18,045  20,927  1,245  3,394  10,740  —  54,351 
Income (loss) from continuing operations before income taxes (18,045) 19,276  15,412  17,734  (12,229) —  22,148 
(Benefit) provision for income taxes (2,872) 7,504  —  —  (3,564) —  1,068 
Net (loss) income from continuing operations (15,173) 11,772  15,412  17,734  (8,665) —  21,080 
Net income on discontinued operations —  —  —  —  993  —  993 
Net income (loss) (15,173) 11,772  15,412  17,734  (7,672) —  22,073 
Equity in net income (loss) of subsidiaries:
CFTC 37,246  —  —  —  —  (37,246) — 
Guarantor Subsidiaries —  11,772  —  —  —  (11,772) — 
Non-Guarantor Subsidiaries —  (7,672) —  —  —  7,672  — 
U.S. SPV —  15,412  —  —  —  (15,412) — 
Canada SPV —  17,734  —  —  (17,734) — 
Net income (loss) attributable to CURO $ 22,073  $ 49,018  $ 15,412  $ 17,734  $ (7,672) $ (74,492) $ 22,073 
66


Six Months Ended June 30, 2021
(dollars in thousands) CURO Subsidiary
Guarantors 		U.S. SPV Canada SPV Flexiti SPE Subsidiary
Non-Guarantors 		Eliminations CURO
Consolidated
Revenue $ —  $ 177,132  $ 78,154  $ 78,360  $ 7,009  $ 43,589  $ —  $ 384,244 
Provision for losses —  33,184  26,494  12,628  3,838  5,166  —  81,310 
Net revenue —  143,948  51,660  65,732  3,171  38,423  —  302,934 
Cost of providing services:
Salaries and benefits —  32,280  —  —  —  18,691  —  50,971 
Occupancy and office —  21,464  —  —  —  14,585  —  36,049 
Other costs of providing services —  10,248  —  —  —  3,876  —  14,124 
Advertising —  13,230  —  —  —  1,897  —  15,127 
Total cost of providing services —  77,222  —  —  —  39,049  —  116,271 
Gross margin —  66,726  51,660  65,732  3,171  (626) —  186,663 
Operating expense (income):
Corporate, district and other expenses 6,041  78,202  84  286  2,381  21,467  —  108,461 
Intercompany management fee —  (10,022) —  2,498  —  7,524  —  — 
Interest expense 29,356  210  4,130  4,956  4,422  (95) —  42,979 
Income from equity method investment —  (2,258) —  —  —  —  —  (2,258)
Gain from equity method investment —  (135,387) —  —  —  —  —  (135,387)
Intercompany interest (income) expense —  (7,144) —  1,181  —  5,963  —  — 
Total operating expense 35,397  (76,399) 4,214  8,921  6,803  34,859  —  13,795 
Income (loss) from continuing operations before income taxes (35,397) 143,125  47,446  56,811  (3,632) (35,485) —  172,868 
(Benefit) provision for income taxes (9,005) 46,905  —  —  —  4,716  —  42,616 
Net income (loss) from continuing operations (26,392) 96,220  47,446  56,811  (3,632) (40,201) —  130,252 
Net income on discontinued operations —  —  —  —  —  —  —  — 
Net income (loss) (26,392) 96,220  47,446  56,811  (3,632) (40,201) —  130,252 
Equity in net income (loss) of subsidiaries:
CFTC 156,644  —  —  —  —  —  (156,644) — 
Guarantor Subsidiaries —  96,220  —  —  —  —  (96,220) — 
Non-Guarantor Subsidiaries —  (40,201) —  —  —  —  40,201  — 
U.S. SPV —  47,446  —  —  —  —  (47,446) — 
Canada SPV —  56,811  —  —  —  —  (56,811) — 
Canada SPV —  (3,632) —  —  —  —  3,632  — 
Net income (loss) attributable to CURO $ 130,252  $ 252,864  $ 47,446  $ 56,811  $ (3,632) $ (40,201) $ (313,288) $ 130,252 

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Six months ended June 30, 2020
(dollars in thousands) CURO Subsidiary
Guarantors 		U.S. SPV Canada SPV Subsidiary
Non-Guarantors 		Eliminations CURO
Consolidated
Revenue $ —  $ 319,253  $ 39,835  $ 64,398  $ 39,829  $ —  $ 463,315 
Provision for losses —  104,393  23,178  28,976  7,682  —  164,229 
Net revenue —  214,860  16,657  35,422  32,147  —  299,086 
Cost of providing services:
Salaries and benefits —  33,575  —  —  17,155  —  50,730 
Occupancy and office —  22,488  —  —  14,045  —  36,533 
Other costs of providing services —  14,840  —  —  2,816  —  17,656 
Advertising —  16,214  —  —  1,755  —  17,969 
Total cost of providing services —  87,117  —  —  35,771  —  122,888 
Gross margin —  127,743  16,657  35,422  (3,624) —  176,198 
Operating expense (income):
Corporate, district and other expenses 6,791  60,453  37  278  12,029  —  79,588 
Intercompany management fee —  (7,144) —  1,375  5,769  —  — 
Interest expense 29,284  467  1,208  4,733  (57) —  35,635 
Loss from equity method investment —  877  —  —  —  —  877 
Intercompany interest (income) expense —  (2,883) —  1,083  1,800  —  — 
Total operating expense 36,075  51,770  1,245  7,469  19,541  —  116,100 
Income (loss) from continuing operations before income taxes (36,075) 75,973  15,412  27,953  (23,165) —  60,098 
(Benefit) provision for income taxes (26,119) 32,502  —  —  (3,378) —  3,005 
Net (loss) income from continuing operations (9,956) 43,471  15,412  27,953  (19,787) —  57,093 
Net income on discontinued operations —  —  —  —  1,285  —  1,285 
Net (loss) income (9,956) 43,471  15,412  27,953  (18,502) —  58,378 
Equity in net income (loss) of subsidiaries:
CFTC 68,334  —  —  —  —  (68,334) — 
Guarantor Subsidiaries —  43,471  —  —  —  (43,471) — 
Non-Guarantor Subsidiaries —  (18,502) —  —  —  18,502  — 
U.S. SPV —  15,412  —  —  —  (15,412) — 
Canada SPV —  27,953  —  —  —  (27,953) — 
Net income (loss) attributable to CURO $ 58,378  $ 111,805  $ 15,412  $ 27,953  $ (18,502) $ (136,668) $ 58,378 


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Condensed Consolidating Statements of Cash Flows
Three Months Ended June 30, 2021
(dollars in thousands) CURO Subsidiary Guarantors U.S. SPV Canada SPV Flexiti SPE Subsidiary
Non-Guarantors 		Eliminations CURO Consolidated
Cash flows from operating activities:
Net cash provided by continuing operating activities $ 2,962  $ 67,342  $ 30,608  $ 35,240  $ 209  $ 24,852  $ 1,682  $ 162,895 
Cash flows from investing activities:
Purchase of property, equipment and software $ —  $ (4,129) $ —  $ —  $ —  $ (3,040) $ —  $ (7,169)
Originations of loans, net —  (57,989) (24,427) (36,343) (12,116) (11,329) —  (142,204)
Investments in Katapult —  146,878  —  146,878 
Acquisition of Flexiti, net of acquiree's cash received —  (91,203) —  —  —  —  —  (91,203)
Net cash provided by (used in) continuing investing activities $ —  $ (6,443) $ (24,427) $ (36,343) $ (12,116) $ (14,369) $ —  $ (93,698)
Cash flows from financing activities:
Proceeds from Non-Recourse Flexiti SPE facility $ —  $ —  $ —  $ —  $ 26,990  $ —  $ —  $ 26,990 
Payments on Non-Recourse Flexiti SPE facility —  —  —  —  (9,229) —  —  (9,229)
Proceeds from credit facilities —  20,000  —  —  —  934  —  20,934 
Payments on credit facilities —  (20,000) —  —  —  (934) —  (20,934)
Payments to net share settle RSUs (1,711) —  —  —  —  —  —  (1,711)
Proceeds from exercise of stock options —  239  —  —  —  —  —  239 
Repurchase of common stock (1,251) —  —  —  —  —  —  (1,251)
Dividends paid to CURO Group Holdings Corp. 6,950  (6,950) —  —  —  —  —  — 
Dividends paid to stockholders (6,950) —  —  —  —  —  —  (6,950)
Net cash (used in) provided by financing activities $ (2,962) $ (6,711) $ —  $ —  $ 17,761  $ —  $ —  $ 8,088 
Effect of exchange rate changes on cash, cash equivalents and restricted cash $ —  $ —  $ —  $ 666  $ (39) $ 1,328  $ (1,682) $ 273 
Net increase in cash, cash equivalents and restricted cash —  54,188  6,181  (437) 5,815  11,811  —  77,558 
Cash, cash equivalents and restricted cash at beginning of period —  178,122  2,665  29,329  —  57,992  —  268,108 
Cash, cash equivalents and restricted cash at end of period $ —  $ 232,310  $ 8,846  $ 28,892  $ 5,815  $ 69,803  $ —  $ 345,666 

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Six Months Ended June 30, 2020
(dollars in thousands) CURO Subsidiary Guarantors U.S. SPV Canada SPV Subsidiary
Non-Guarantors 		Eliminations CURO Consolidated
Cash flows from operating activities:
Net cash provided by continuing operating activities $ 6,546  $ 146,503  $ 41,569  $ 39,603  $ 38,099  $ (1,520) $ 270,800 
Net cash provided by discontinued operating activities —  —  —  —  1,714  —  1,714 
Cash flows from investing activities:
Purchase of property, equipment and software —  (4,240) —  —  (484) —  (4,724)
Originations of loans, net —  31,591  (56,789) (14,746) 8,123  —  (31,821)
Investments in Katapult —  (14,418) —  —  —  —  (14,418)
Net cash used in continuing investing activities —  12,933  (56,789) (14,746) 7,639  —  (50,963)
Cash flows from financing activities:
Proceeds from Non-Recourse Canada SPV facility —  —  —  23,180  —  —  23,180 
Payments on Non-Recourse Canada SPV facility —  —  —  (41,812) —  —  (41,812)
Proceeds from Non-Recourse U.S. SPV facility —  —  35,206  —  —  —  35,206 
Proceeds from credit facilities —  60,000  —  —  9,778  —  69,778 
Payments on credit facilities —  (60,000) —  —  (9,778) —  (69,778)
Proceeds from exercise of stock options —  126  —  —  —  —  126 
Payments to net share settle RSUs (638) —  —  —  —  —  (638)
Debt issuance costs paid —  —  (3,531) —  —  —  (3,531)
Repurchase of common stock (5,908) —  —  —  —  —  (5,908)
Dividends paid to CURO Group Holdings Corp. 4,500  (4,500) —  —  —  —  — 
Dividends paid to stockholders (4,500) —  —  —  —  —  (4,500)
Net cash (used in) provided by financing activities (1)
(6,546) (4,374) 31,675  (18,632) —  —  2,123 
Effect of exchange rate changes on cash, cash equivalents and restricted cash —  —  —  (859) (1,740) 1,520  (1,079)
Net increase in cash, cash equivalents and restricted cash —  155,062  16,455  5,366  45,712  —  222,595 
Cash, cash equivalents and restricted cash at beginning of period —  59,685  —  17,427  32,909  —  110,021 
Cash, cash equivalents and restricted cash at end of period $ —  $ 214,747  $ 16,455  $ 22,793  $ 78,621  $ —  $ 332,616 
(1) Financing activities include continuing operations only and were not impacted by discontinued operations.

Contractual Obligations

There have been no significant developments with respect to our contractual obligations since December 31, 2020, as described in our 2020 Form 10-K, except for the acquired Non-Recourse Flexiti SPE Facility in March 2021. Refer to Note 5, "Debt" of the Notes to the unaudited Condensed Consolidated Financial Statements for additional details.

Refer to Note 19, Subsequent Events, for additional details on our new 7.50% Senior Secured Notes, expected to close July 30, 2021.

Critical Accounting Policies and Estimates

Certain accounting policies that involve a higher degree of judgment and complexity are discussed further in Part II - Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates, in our 2020 Form 10-K.

Business Combinations. We include the results of operations of acquired businesses from the date of acquisition. We determine the fair value of the assets acquired and liabilities assumed based on their estimated fair value as of the date of acquisition. The excess purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and selection of comparable companies. Our estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

During the measurement period, not to exceed one year from the date of acquisition, we may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill. At the conclusion of the measurement period, any subsequent adjustments are reflected in the consolidated statements of operations. When we grant equity to employees of the
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selling stockholders in connection with an acquisition, we evaluate whether the awards are compensatory. This evaluation includes whether stock award vesting is contingent on the continued employment beyond the acquisition date. If continued employment is required for stock awards to vest, the award is treated as compensation for post-acquisition services and is recognized as compensation expense.

Transaction costs associated with business combinations are expensed as incurred and are included in Corporate, District and Other expenses in our unaudited Condensed Consolidated Statements of Operations.

On March 10, 2021, the Company acquired 100% of the outstanding stock of Flexiti. The fair value of total consideration paid as part of the acquisition was comprised of $86.5 million in cash, $6.3 million in debt costs in conjunction with the acquisition and $20.6 million in contingent cash consideration subject to future operating metrics, including revenue less NCOs and originations. Net assets acquired were $68.5 million, resulting in goodwill of $39.9 million. During Q2 2021, the Company recorded $5.0 million of additional net assets acquired as of the acquisition date, as a measurement period adjustment, resulting in a $5.0 million decrease in goodwill.

Goodwill. We exercise judgment in evaluating assets for impairment. Goodwill is tested for impairment annually, or when circumstances arise which could more likely than not reduce the fair value of a reporting unit below its carrying value. These tests require comparing carrying values to estimated fair values of the reporting unit under review.

Following the acquisition of Flexiti during the first quarter of 2021, our reporting units consist of the U.S., Canada Direct Lending and Canada POS Lending segments, as defined by FASB’s ASC 280, Segment Reporting, for which we assess goodwill for impairment. As of the most recent annual goodwill impairment testing date (October 1, 2020), the U.S. and Canada Direct Lending reporting units' estimated fair values exceeded their carrying value. As described in our 2020 Form 10-K, an impairment would occur if the carrying amount of a reporting unit exceeded the fair value of that reporting unit. Events or circumstances that could indicate an impairment include a significant change in the business climate, a change in strategic direction, legal factors, operating performance indicators, a change in the competitive environment, the sale or disposition of a significant portion of a reporting unit or economic outlook. These and other macroeconomic factors were considered when performing the annual test as of October 1, 2020.

For the three months ended June 30, 2021, we reviewed goodwill for triggering events that would indicate a need for an interim quantitative or qualitative assessment of goodwill impairment. As a result of the review, no additional assessment was deemed necessary, and thus there was no goodwill impairment for either reporting unit.

There continues to be uncertainty surrounding macroeconomic factors that could impact our reporting units. Changes in the expected length of the current economic downturn, timing of recovery, or long-term revenue growth or profitability for these reporting units could increase the likelihood of a future goodwill impairment. Additionally, changes in market participant assumptions such as an increased discount rate or further share price reductions could increase the likelihood of a future impairment.

The following table summarizes the segment allocation of recorded goodwill on our unaudited Condensed Consolidated Balance Sheets as of June 30, 2021:
(in thousands) June 30, 2021 Percent of Total December 31, 2020 Percent of Total
U.S. $ 105,922  59.7  % $ 105,922  77.8  %
Canada Direct Lending 30,858  17.4  % 30,169  22.2  %
Canada POS Lending 40,506  22.8  % —  —  %
Total Goodwill $ 177,286  $ 136,091 

Regulatory Environment and Compliance

There have been no significant developments with respect to our regulatory environment and compliance since December 31, 2020, as described in our 2020 Form 10-K, other than the following:

Subsequent to the California Supreme Court’s decision in De La Torre v. CashCall, Inc., a class action lawsuit was filed against Speedy Cash in the Southern District of California in August 2018. The complaint alleged that Speedy Cash charged unconscionable interest rates, in violation of consumer protection statutes, and sought restitution and public injunctive relief. Speedy Cash filed a motion to compel arbitration and stay proceedings in October 2018. The District Court denied the motion. On July 2, 2021, the California District Court granted the parties’ joint motion to dismiss and dismissed the case in its entirety with prejudice as to Plaintiffs’ individual claims and without prejudice as to the claims of the putative class members.


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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 2020 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.

In conducting the evaluation of the effectiveness of its internal control over financial reporting as of June 30, 2021, the Company has excluded the operations of Flexiti as permitted by the guidance issued by the Office of the Chief Accountant of the SEC (not to extend more than one year beyond the date of the acquisition or for more than one annual reporting period). The Flexiti acquisition was completed on March 10, 2021. As of and for the six months ended June 30, 2021, Flexiti's assets represented approximately 21% of the Company’s consolidated assets and its revenues represented approximately 2% of the Company’s consolidated revenues.

See Note 16, "Acquisitions" of the Notes to the unaudited Condensed Consolidated Financial Statements for additional details on the Company’s acquisition of Flexiti and its impact on the Company’s 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 June 30, 2021.

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.

Internal Control over Financial Reporting

The Company is working to integrate Flexiti into its overall internal control over financial reporting processes. Except for changes made in connection with the integration of Flexiti, there were no 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 six months ended June 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.     OTHER INFORMATION

Item 1.         Legal Proceedings
The information required by this item is included in Note 12, "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
There were no material changes to our risk factors as described in our 2020 Form 10-K for the year ended December 31, 2020.

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

None.

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 Description Filed/Incorporated by Reference from Form Incorporated by Reference from Exhibit Number Filing Date
3.1 10-Q 10.1 8/5/2020
3.2 8-K 3.2 12/11/17
4.1 S-1 4.1 11/28/17
4.2 S-1 4.2 11/28/17
4.3 S-1 4.3 10/24/17
4.4 10-K 4.4 3/9/20
10.1 Filed herewith
10.2 Filed herewith
10.3 Filed herewith
31.1   Filed herewith
31.2   Filed herewith
32.1   Filed herewith
101
The following unaudited financial information from the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2021, filed with the SEC on July 28, 2021, formatted in Extensible Business Reporting Language (“XBRL”) includes: (i) Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020, and (v) Notes to Condensed Consolidated Financial Statements*
Filed herewith
¥ Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K because they are not material and are of the type of information that the registrant both customarily and actually treats and private and confidential.




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Signature

Pursuant to the requirements of Section 13 or 15(d) 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: July 28, 2021                CURO Group Holdings Corp.
By: /s/ Roger Dean
Roger Dean
Executive Vice President, Chief Financial Officer
and Acting Chief Accounting Officer
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CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
IMAGE_0A.JPG

MERCHANT AGREEMENT
THIS MERCHANT AGREEMENT is entered into as of May 26, 2021 (the “Effective Date”) by and between Flexiti Financial Inc. (“Flexiti”) and Leon's Furniture Limited (“LFL”), The Brick Ltd., The Brick Warehouse LP, by its general partner, The Brick GP Ltd., (each of Leon’s Furniture Limited, The Brick Ltd., and The Brick Warehouse LP are referred to collectively and individually as “Merchant”, as the context requires), pursuant to which Merchant desires to offer its customers the consumer financing programs offered by Flexiti.
For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Flexiti and Merchant hereby agree as follows:
1.Definitions and Schedules. In this Agreement, all capitalized terms shall have the meanings set forth in Schedule “A”. This Agreement includes the following schedules, which are attached hereto and form part of this Agreement:
•Schedule “A” – Definitions
•Schedule “B” – Merchant Discount Rates
•Schedule “C” – Administrative and Annual Fees
•Schedule “D” – Merchant Procedures
•Schedule “E” – Reports

2.Program; Obligations of the Parties.
2.1.Provision of Program. Subject to this Section, commencing on the Launch Date, in accordance with the terms of this Agreement, Flexiti shall provide Merchant with a consumer financing program (the “Program”) under which Flexiti will provide revolving financing to qualified Customers to finance purchases (a) in person at a physical location where Merchant is carrying on business; and (b) online through Merchant’s Websites. Flexiti is responsible for the Program’s compliance with Applicable Law.
2.2.Franchisees. During the Term, Flexiti will make the Program available to Franchisees. Merchant shall introduce, refer, support and actively promote the Program and the use thereof to its Franchisees. Merchant shall only promote Flexiti to its Franchisees as its exclusive supplier of consumer financing services except as permitted under Section 3.2. [***] At Flexiti’s request, Merchant will provide to Flexiti the information requested by it in respect of Merchant’s franchisee qualification and ongoing monitoring processes. Merchant shall cause Franchisees to enter into separate merchant agreements with Flexiti. Merchant shall promptly notify Flexiti of any termination of a Franchisee relationship. For clarity, Merchant is not responsible for its Franchisees’ obligations to Flexiti.
2.3.Credit Cards.
(a)Credit Decisions. Flexiti, in its sole discretion, will determine whether a Customer who has completed an Application meets Flexiti’s credit criteria (which criteria shall be in Flexiti’s sole discretion) to become a Cardholder and whether to establish a Credit Card Account in such Customer’s name.
(b)Issuance of Credit Cards. Merchant Originated Cardholders approved by Flexiti for a Credit Card Account will be issued an electronic form or method to access the Credit Card Account and a Flexiti-branded plastic card for purchasing Goods and/or Services pursuant to the Program (a “Credit Card”).
(c)[***]
(d)Targeted Approval Rates. Flexiti shall use commercially reasonable efforts to approve Applications, in accordance with the following targeted approval rates:
11/201
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
IMAGE_0A.JPG

i.If the Applicant’s credit score is [***] or greater, the targeted approval rate is [***];
ii.If the Applicant’s credit score is between [***], inclusive, the targeted approval rate is [***]; and
iii.If the Applicant’s credit score is between [***], inclusive, the targeted approval rate is [***].
(the targeted approval rates above are collectively referred herein to as “Targeted Approval Rates”)
If Approval Rates are [***] basis points or more below the applicable Targeted Approval Rate, measured over the most recent three consecutive month period for which reporting was provided to Merchant, Merchant may refer this matter to the Program Committee for resolution, and upon such referral, Flexiti will present a corrective action plan to the Program Committee to cure the Targeted Approval Rates variance within thirty (30) days. If Flexiti is unable to provide a corrective action plan to cure the Targeted Approval Rates variance, or, ninety (90) days following the implementation of the corrective action plan, the Approval Rates continue to be [***] basis points or more below the applicable Targeted Approval Rates, Merchant may refer the matter to the Executive Committee. [***]
(e)Credit Card Account Terms. The cardholder agreements that apply to the Credit Card Accounts are, as of the Effective Date, posted at cardholder.flexiti.com/EN.pdf and https://w3.flexiti.com/EN/AgreementQC. Flexiti may amend the cardholder agreements and the terms that apply to Credit Card Accounts at any time in its sole discretion. Flexiti shall provide Merchant with prior written notice, as soon as is commercially practicable, of any modifications to the cardholder agreements, provided that Flexiti shall not amend such cardholder agreements in any manner that would be unfavourable to Merchant Originated Cardholders without consulting with Merchant in advance via the Program Committee, except for amendments that are necessitated by Applicable Law. Flexiti shall, at Merchant’s request, make appropriate Personnel available to discuss any modifications to the cardholder agreements with Merchant and Flexiti shall consider Merchant’s comments on such changes in good faith.
(f)Program Monitoring. Flexiti shall on a continuous basis, monitor the competitive landscape for point-of-sale financing in Canada (in-person and online) and provide a competitive product offering to all Cardholders. Merchant may escalate any matter regarding Flexiti’s product offering to the Program Committee.
(g)Ownership of Credit Card Accounts. Flexiti will establish and own all Credit Card Accounts and is the party extending the credit on the Credit Card Accounts as provided in this Agreement. All information relating to Cardholders, including all Flexiti Personal Information but excluding Merchant Personal Information, is owned by Flexiti and may be used by Flexiti for any purpose deemed appropriate by Flexiti, subject to compliance with Applicable Law.
(h)Securitization of Accounts. Flexiti may in its discretion securitize all or a portion of its portfolio of Credit Card Accounts arising under this Agreement, and the transferee shall have all applicable rights under this Agreement necessary to administer and realize upon the Credit Card Accounts.
(i)Sale of Accounts. If Flexiti seeks to sell the Portfolio to an arm’s length third party, Flexiti will provide LFL with a first right of refusal to purchase the Portfolio (the “First Right of Refusal”), as follows: (1) Prior to accepting an offer from an arm’s length third party to purchase the Portfolio (a “Third Party Offer”), Flexiti shall provide LFL with information regarding the material terms of the Third
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Party Offer, and LFL shall have ten (10) days to notify Flexiti in writing that it elects to match the Third Party Offer; and (2) If LFL does not respond within such ten (10) day period, or notifies Flexiti in writing that it will not match the Third Party Offer, then Flexiti may proceed with the proposed transaction, in which case the First Right of Refusal will be at an end. If Flexiti does not complete the proposed transaction, LFL’s First Right of Refusal will continue to apply with respect to a subsequent proposed sale of the Portfolio to an arm’s length third party. If Flexiti seeks to sell the Portfolio to an arm’s length third party as part of a larger sale of Flexiti’s other credit card portfolios, Flexiti shall provide LFL with a right of first refusal in respect of the Portfolio.
(j)Collection Procedures. Flexiti may pursue, in accordance with Applicable Law, and in a manner that would not reasonably be expected to have an adverse impact on Merchant’s reputation, any collection procedures deemed appropriate by Flexiti in connection with Credit Card Accounts, including modifying the Cardholder’s credit or payment terms or charging-off Credit Card Accounts which Flexiti deems to be uncollectible.
2.4.Volume Rebates. On an annual basis, if applicable, Flexiti will provide a rebate to Merchant in an amount equal to the applicable percentage of the Eligible Volume for the preceding Contract Year in accordance with the thresholds set out below (the “Annual Rebate”):
(a)[***]
(b)[***]
(c)[***]
(d)[***]
(e)[***]
(f)[***]
(g)[***]
(h)[***]
The Annual Rebate is not cumulative and is payable only once for each Contract Year within thirty (30) days following the end of the preceding Contract Year (unless none of above thresholds have been met for the previous Contract year). Flexiti shall pay the Annual Rebate to LFL in respect of each Merchant. If this Agreement is terminated by either party, the Annual Rebate payable in respect of the Contract Year or portion thereof that immediately preceded the date of termination or expiration will be payable by Flexiti within ninety (90) days following termination or expiration of this Agreement.
2.5.Warrants. In consideration for Flexiti being Merchant’s exclusive financing services provider, Flexiti will make available to LFL a 19.99% ownership stake available at LFL’s option upon a monetization event in respect of Flexiti, issued in the form of warrants that expire ten (10) years following the Effective Date (the “Warrants”). The terms of the Warrants will be set out in the warrant certificates that document their issuance. It is understood that it is the intention of the parties that LFL’s purchase price for such ownership will be no more than the aggregate investment, including all deferred amounts (on a prorated basis), paid by the purchaser for the acquisition of Flexiti’s parent company in March 2021.
2.6.Payments.
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(a)Payment to Merchant. Flexiti shall transfer funds to Merchant’s bank account for the amount of each Credit Transaction less any applicable Merchant Discount and any amounts set-off in accordance with Section 2.6(b) within two (2) Business Days following receipt of the transaction on Flexiti’s system, subject to Flexiti’s due diligence procedures. If Merchant receives any payment from Flexiti not owed to Merchant under this Agreement, Merchant shall promptly notify Flexiti and return such payment to Flexiti upon discovering such overpayment.
(b)Payments to Flexiti. Flexiti may withhold and set-off from any payment due to Merchant monies owed to Flexiti by Merchant, provided that Flexiti shall provide at least thirty (30) days’ prior written notice to Merchant of any proposed set-offs in respect of amounts that do not relate to Merchant Discounts, In-Store Payments, returns or adjustments. Merchant may escalate any concern regarding a proposed set-off to the Program Committee and/or Executive Committee. Any balance which may be still due and owing to Flexiti after accounting for any amount set-off will be invoiced and payable in full by Merchant within thirty (30) days of such invoice.
2.7.Promotional Plans and Merchant Discount Rates.
(a)Promotional Plans. Flexiti may offer promotional consumer financing plans (“Promotional Plans”) for Merchant to offer to Customers, subject to such terms and conditions as Flexiti may determine from time to time. LFL acknowledges that it is the parties’ expectation that total annual Eligible Volume financed by way of equal monthly payment plans will not represent more than [***] of total annual Eligible Volume (relative to the Eligible Volume financed by way of deferred plans), excluding non-prime and regular credit purchases. If this expectation is not met, Flexiti may escalate this matter to the Program Committee.
(b)Merchant Discount. Each applicable Merchant Discount is payable to Flexiti by Merchant upon completion of the corresponding Credit Transaction. If Merchant processes a return, cancellation or adjustment within sixty (60) days following completion of a Credit Transaction, Flexiti shall credit Merchant for the full Merchant Discount (for a return or cancellation) or for the applicable portion thereof (for an adjustment) that was charged in connection with the Credit Transaction. [***]
(c)Initial MDRs. As of the Effective Date, the MDRs in effect for Promotional Plans are set out in Schedule “B”. Inclusion of a Promotional Plan in Schedule “B” reflects the applicable MDR for such Promotional Plan and does reflect an obligation of Flexiti to offer such Promotional Plan to Customer.
(d)[***]
(e)[***]
(f)Adjustments due to Interest Rate Fluctuations. Flexiti may amend MDRs during the Term in the event of a change to the Prime Rate by an amount that reflects the change to the Prime Rate, adjusted for the term lengths and types of Promotional Plans offered by Merchant (on the basis that the Prime Rate is an annual rate, MDRs for Promotional Plans with terms shorter or longer than one year would be adjusted on a prorated basis), on or after the next business day following such change. Flexiti will provide ninety (90) days’ written notice for changes to MDRs made in accordance with this paragraph. If Flexiti has increased MDRs in accordance with this paragraph, and the Prime Rate subsequently decreases, Flexiti shall, within forty-five (45) days following the Prime Rate decrease, decrease MDRs by an amount that reflects the decrease to the Prime Rate, adjusted for the term lengths and types of Promotional Plans offered by the Merchant, provided that (i) Flexiti shall not be required to reduce MDRs in connection with any Prime Rate decrease if it has not increased MDRs during the Term; (ii)
11/204
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the MDRs in effect as of the Effective Date are the minimum MDRs for the Term. However, if the Prime Rate decreases such that it is lower than the Prime Rate in effect as of the Effective Date (which for clarity is 2.45%), Merchant may, via the Program Committee, request a reduction in MDRs and Flexiti shall reasonably consider such request on timely basis, having regard to the performance of the Program. [***]
(g)Administrative and Annual Fees. The administrative and annual fees (effective as of the Launch Date) that apply in connection with the Program are set forth in Schedule “D”. In accordance with Schedule “D”, if Merchant charges (or Flexiti charges and remits to Merchant) an administrative fee in connection with Credit Transactions, Merchant shall comply with the minimum purchase amounts for Promotional Plans in connection with which administrative fees are charged.
(h)[***]
2.8.Creditor Insurance. Flexiti will promote and offer creditor insurance to Applicants and Cardholders electronically during the Application and/or Credit Transaction process. Provided that a written agreement is in effect between Flexiti and TGI, and subject to Applicable Law and appropriate support from TGI as issuer of the creditor insurance product, Flexiti agrees to serve as the distributor of creditor insurance issued by TGI to Cardholders for the Province of Quebec, and will work with LFL and TGI towards the launch or relaunch of a compliant creditor insurance program in the Province of Quebec. Provided that Trans Global Insurance Company and Trans Global Life Insurance Company (collectively, “TGI”) remain Affiliates of Merchant, Flexiti agrees that it will only promote creditor insurance provided by TGI in connection with the Program, provided that TGI and Flexiti have a written agreement in effect in connection with same.
2.9.Ancillary Services; Right of First Refusal. If Flexiti seeks to provide Cardholders an additional product or service that is not an extension of credit (each an “Ancillary Service”) via an arm’s length third party provider (each an “Ancillary Service Provider”), and LFL or an Affiliate of LFL already provides such Ancillary Service to Customers, then prior to entering into an agreement with an Ancillary Service Provider (other than a short-term pilot agreement), Flexiti will provide LFL with a right of first refusal to provide such Ancillary Service (directly or via an Affiliate of LFL) on the same material terms as those proposed by the Ancillary Service Provider.
2.10. [***]
2.11.Reporting. Flexiti and Merchant will work together to determine the type and frequency of reporting required by Merchant in connection with the Program. Flexiti will provide agreed reports to Merchant in a timely manner, including but not limited to those listed in Schedule “E”.
2.12.Loyalty Program. If Merchant chooses to launch a loyalty program, Flexiti will, at Merchant’s request, work together with Merchant to determine how Flexiti can help facilitate the loyalty program.
2.13.Governance.
(a)Program Committee. Each party shall appoint an individual to act as the principal point of contact on all Program-related issues and to lead that party’s efforts in executing its obligations hereunder (the “Flexiti Program Manager” and the “Merchant Program Manager”, as applicable, and collectively, the “Program Managers”). The parties will establish a Program Committee comprised of both Program Managers and up to two additional representatives of each party (unless otherwise agreed by the other party) (the “Program Committee”). The Program Committee will meet on a frequency set by it to monitor the Program and review results.
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(b)Executive Committee. The parties will establish an executive committee, comprised of at least one senior executive from each of Flexiti and Merchant (the “Executive Committee”). The Executive Committee will meet at least once annually to review the performance of the Program.
(c)Escalation of Matters. Either Flexiti or Merchant may refer an unresolved matter for review by the Program Committee. The Program Committee will meet and in good faith attempt to resolve the matter. If the Program Committee cannot agree on a resolution within thirty (30) days of the date the matter was brought to the Program Committee, then the Program Committee or either party may refer the matter to the Executive Committee for resolution. The Executive Committee will meet and in good faith attempt to resolve the matter.
(d)Meetings. Meetings of the Program Committee and the Executive Committee may be held either in person or virtually.
2.14.Training. Flexiti will provide resources to assist in coordinating and implementing a train-the-trainer type training program prior to Launch. Flexiti will also provide on-going training material that Merchant may use in its Learning Management System (LMS) to keep its Personnel up to date on the Program.
2.15.Flexiti’s Systems. Flexiti will use commercially reasonable efforts to make the Merchant App and the Online Financing Service (collectively “Flexiti’s Systems”) available at least [***] of the time during each month of the Term (“System Availability”), excluding when the Flexiti’s Systems are not available owing to an Exception (defined below).
Downtime of Flexiti’s Systems owing to any of the following events will not be included in calculating Availability (collectively, “Exceptions”):
(a)Merchant’s failure to meet any minimum hardware or software requirements set forth by Flexiti during the integration process;
(b)Any downtime that Merchant experiences as a result of Merchant’s own network connectivity issues;
(c)Merchant’s misuse of the Service, including use in violation of the terms and conditions of this Agreement;
(d)Any Force Majeure event; and
(e)Any Scheduled Downtime (defined below). 
From time to time, Flexiti may need to schedule downtime for maintenance, upgrades, enhancement, or any other reason, during which Flexiti’s Systems will not be available to Merchant (collectively, “Scheduled Downtime”). Flexiti (a) will notify Merchant at least one (1) week prior to any Scheduled Downtime which will result in the unavailability of the critical functionality of Flexiti’s Systems, (b) agrees that each individual period of Scheduled Downtime shall not exceed [***], unless approved by Merchant, (c) all Scheduled Downtime shall be during the hours of 12:00 am and 8:00 am Eastern Time; and (d) Scheduled Downtime will not occur on Thursday, Friday, Saturday, or Sunday during: 1) the first week of the following months: January, February, March, May, June, July, September and November in any year; 2) the second week of August or September in any year; 3) the third week in September of any year; and 4) the fourth week of each of November and December in any year.
11/206
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For the purpose of this section, System Availability for a calendar month is calculated in accordance with the following formula: System Availability = (Total minutes per calendar month – Total minutes where Flexiti’s Systems are unavailable per calendar month) / (Total minutes per calendar month).
If Flexiti fails to meet this service level in any [***], Flexiti shall present to the Program Committee a corrective action plan within thirty (30) days following the [***] of this service level failure. The Program Committee will discuss a course of action to remedy the failure to Merchant’s satisfaction including milestones, timelines and deadlines, as necessary. If the Program Committee does not put forward a course of action that is acceptable to Flexiti and Merchant, either party may refer this matter to the Executive Committee for resolution.
2.16. [***]
2.17. [***]
2.18. [***]
2.19.Optimal Program Structure. Flexiti will work with LFL from time to time and in good faith to consider LFL’s requests to adjust the operational structure of the Program to better address LFL’s strategic requirements.
2.20. [***]
2.21.Credit Application Platform. Flexiti shall provide a credit application platform for LFL’s customers to engage with Flexiti, however, if LFL chooses to use a third party or proprietary platform for collecting customer information for Applications, Flexiti will work with LFL in good faith to enable Flexiti to receive Application information securely, and in accordance with Applicable Law and Flexiti’s internal requirements, in a way that accommodates such platform.
3.Merchant Obligations.
3.1.Promotion by Merchant. Commencing on the Launch Date, Merchant shall actively promote the Program to Customers at Merchant’s store locations, on Merchant’s Websites, and in Merchant’s marketing materials and channels, to encourage Customers to make Applications and Purchases, using an accurate representation of the FlexitiCard image.
3.2.Program Priority. Commencing on the Launch Date, Merchant and its Franchisees shall not offer, accept, advertise or promote any financing for Goods and/or Services other than in connection with the Program, except as follows (i) Merchant and its Franchisees may offer financing for Customers who have applied for Flexiti financing and been declined; (ii) Merchant and its Franchisees may accept network-branded general purpose credit cards or debit cards and may identify its acceptance of such cards to Customers (provided that no such financing offered or accepted by Merchant or its Franchisees to Customers may be branded with a Merchant Mark); and (iii) [***]. Notwithstanding the above, until December 31, 2021 only, LFL shall be entitled to accept Accord D credit cards for promotional plan financing. Until December 31, 2021 only, LFL shall be entitled to continue to refer to the cards provided by Flexiti as “Brick Card” and “Leon’s Card” notwithstanding the appearance of such cards. After December 31, 2021, LFL shall be permitted to refer to the cards provided by Flexiti as “The Brick FlexitiCard” and the “Leon’s FlexitiCard”.
3.3.Merchant Card Processing. Commencing on the Launch Date, Merchant shall accept all Credit Cards for payment for its Goods and/or Services by the Cardholder. For clarity, all Credit Cards are usable within the Flexiti Network.
11/207
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3.4.General Obligations. Merchant hereby agrees:
(a)to maintain policies and procedures in effect to ensure compliance with its obligations under this Agreement and Applicable Laws;
(b)to comply with all reasonable and not overly burdensome instructions and procedures provided by Flexiti, including Merchant Procedures, as such may be amended from time to time by Flexiti;
(c)to use commercially reasonable efforts to promptly and fairly resolve all Unresolved Cardholder Disputes with respect to transactions on Credit Card Accounts, including refunds, exchanges, returns and adjustments on purchases;
(d)to ensure that its Personnel receive periodic training as required relating to the availability of the Program, compliance with the Merchant Procedures;
(e)to ensure that any of its Personnel which are required under any Applicable Law to be licensed to sell, install and/or service the Goods and/or Services is duly licensed;
(f)to comply in all material respects with all Applicable Laws including those that apply to Merchant’s business, any Customer Materials, and any Credit Transaction, and without limiting the generality of the foregoing, treat Flexiti Personal Information in compliance with all applicable Privacy Laws;
(g)to provide reasonable assistance and cooperation as may be required to enable the Customer to pursue the fulfillment of any warranties made by the manufacturer of the Goods or other party;
(h)to advise Flexiti forthwith if it receives any notice in respect of any inquiry, investigation or allegation by any Governmental Authority or other Person that the Program, or Merchant’s participation in the Program, is not in compliance with Applicable Law, and shall thereafter take such steps as are reasonably required by Flexiti to respond to such notice;
(i)to allow Flexiti, in the event of a concern, to audit its premises, practices, and procedures to confirm compliance with Merchant Procedures and this Agreement upon at least thirty (30) days’ written notice, provided that (1) Flexiti shall not unreasonably interfere with Merchant’s ongoing business operations during any audit; (2) Flexiti’s Personnel who are on site at any Merchant location during any audit will comply with Merchant’s safety, security, confidentiality and other policies, notice of which will be given by Merchant to Flexiti in writing, and any Flexiti Personnel who fail to comply may be refused access to Merchant’s locations; and (3) Flexiti’s Personnel shall be accompanied by a member of the Program Committee from LFL or a designated employee of the Merchant; and
(j)to advise Flexiti in writing at least one (1) Business Day prior to closing any store location.
3.5.Merchant Systems. Merchant has and will retain sole responsibility for the security of its systems and infrastructure, including safeguards to restrict undesired traffic, including but not limited to, (i) computer virus, Trojan horse, trap door, back door, Easter egg, worm, time bomb, cancelbot, scripts, macros; (ii) programs or links to macros, scripts, or programs, and (iii) other harmful code.
3.6.Presentation of Flexiti Online. Merchant shall: (i) present Customers with the means to initiate an Application or pay for a Purchase before or no later than at the same time Customers are presented with other payment options; and (ii) promote acceptance of Flexiti financing as a payment option with equal prominence to other payment options accepted by Merchant.
11/208
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3.7.Payments from Cardholders. Merchant is not authorized to receive payments from Cardholders or other Persons in connection with the Credit Card Accounts on its own account. Flexiti has the sole right to receive payments on all Credit Card Accounts. Merchant shall not accept payments from Cardholders on Credit Card Accounts, except as expressly permitted by Flexiti under this Agreement.
3.8.In-Store Payments. Flexiti shall provide Cardholders with instructions for making payments directly to Flexiti. However, Merchant may, at its option, receive payment for Credit Card Accounts at Merchant’s premises (“In-Store Payments”), which payments may be received by Merchant from Cardholders as cash or debit payments only, and which shall not exceed $9,999.99 from each Cardholder during any 24-hour period. For greater certainty, Merchant shall not accept In- Store Payments by way of cheque or money order. Merchant shall process In-Store Payments in accordance with the Merchant Procedures. Merchant shall inform Flexiti of any data entry errors without delay and shall take such steps as are reasonably necessary to correct such error. Flexiti shall deduct the amount of the In-Store Payments received by Merchant from any remittance due to Merchant, and any balance of the In-Store Payments received is payable in accordance with Section 2.6(b). Merchant acknowledges that In-Store Payments are received on behalf of and in trust for Flexiti, whether the receipts are maintained separate and apart or are intermingled with other funds. In the event of a Cardholder dispute regarding In-Store Payments, Section 4 applies.
3.9.Future Performance Obligations. Merchant agrees that no prepaid card, gift card, gift certificate or any other voucher or device for the future supply of goods or services is to be financed under the Program except with the prior written consent of Flexiti.
4.Chargebacks.
4.1.Chargeback Process. Flexiti may charge back to Merchant any Credit Transaction which Flexiti has taken reasonable steps to collect upon and reasonably deems to be uncollectible as a result of an Unresolved Cardholder Dispute, Improper Sales Procedures, or a breach of Merchant’s representations, warranties, obligations or covenants under this Agreement (each, a “Chargeback”) after providing Merchant with notice of its intent to charge back the transaction and providing Merchant at least thirty (30) days to respond, and in the case of an Unresolved Cardholder Dispute, the opportunity to attempt resolution directly with the Cardholder. Merchant has the option of escalating any Chargeback related matter to the Program Committee and/or Executive Committee. Flexiti may provide an invoice for such amount, which Merchant shall pay in accordance with paragraph 2.6(b).
4.2.[***]
5.License to Merchant App and API
5.1.License Grant. Subject to the terms and conditions set forth in this Agreement, Flexiti grants Merchant a limited, revocable, non-transferrable, non-exclusive, non-sublicensable license to use the Merchant App and the
5.2. API for the purpose of offering the Program to its customers in person and online.
5.3.Use Restrictions. Merchant shall not use the Merchant App or the API for any purpose beyond the scope of the license granted in this Agreement. Without limiting the foregoing, and except as expressly set forth in this Agreement, Merchant shall not at any time, and shall not permit others to (i) copy, modify or create derivative works of the Merchant App or the API, in whole or in part; (ii) rent, lease, lend, sell, sublicense, assign, distribute, publish, transfer or otherwise make available the Merchant App or the API; (iii) reverse engineer, disassemble, decompile, decode, adapt, or otherwise attempt to derive or gain access to any
11/209
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software component of the Merchant App or API, in whole or in part; (iv) remove any proprietary notices from the Merchant App or the API; (v) combine or integrate the Merchant App or the API with any software, technology, services or materials not authorized by Flexiti; or (vi) design or permit any applications that interact with the Merchant App or API to disable, override, or otherwise interfere with any Flexiti-implemented communications to end-users.
5.4.Merchant Responsibilities. Merchant is responsible for all uses of the Merchant App and API resulting from access provided by it, directly or indirectly. Without limiting the generality of the foregoing, Merchant is responsible for all acts and omissions of its Personnel in connection with their use of the Merchant App and the API. Merchant will use commercially reasonable efforts to safeguard the Merchant App and the API from infringement, misappropriation, theft, misuse and unauthorized access.
6.Advertising Displays and Marketing Materials.
6.1.Flexiti Materials. Merchant may display Flexiti’s signs, decals, or other identification of Flexiti’s Program (“Flexiti Materials”) at Merchant’s place of business and on Merchant’s Websites or other marketing channels during the Term.
6.2.Review of Customer Materials Produced by Merchant. Merchant shall provide any promotional or other materials produced by Merchant that relate to Flexiti financing of Purchases, including any descriptions of the availability of financing or of the credit terms of the Credit Card Accounts (“Customer Materials”) to Flexiti for review prior to publication or use. Flexiti shall review Customer Materials in a timely manner. Based on its review of any Customer Materials, Flexiti may approve or not approve the publication of such Customer Materials and Merchant shall not print or otherwise publish or distribute Customer Materials that have not been approved by Flexiti. Notwithstanding Flexiti’s review of Customer Materials, Merchant is solely responsible for the accuracy, completeness, and compliance of all Customer Materials with Applicable Laws. It is understood between the Parties that once Flexiti has approved the standard format of its Customer Materials, Merchant shall not be required to obtain approval from Flexiti for any subsequent use of the Customer Materials, unless Flexiti otherwise notifies Merchant in respect of specific Customer Materials.
6.3.Joint Marketing Initiatives. Flexiti commits to work co-operatively with LFL’s senior financial leadership team to design, plan, and implement marketing initiatives to promote the Program to Customers of each of Merchant’s individual banners.
6.4.Marketing Restrictions. Flexiti shall not deliver marketing materials to Merchant Originated Cardholders that: (i) relate to Goods and/or Services that directly compete with those offered by Merchant; or (ii) that would reasonably be expected to have an adverse effect on the reputation, image or business operations of Merchant. This paragraph does not apply to Flexiti’s marketing of the Flexiti Network generally or to marketing materials that have been approved by Merchant.
6.5.Flexiti Trademarks. All Flexiti service marks, trademarks, logos, domain names, distinguishing features, and designs, whether registered or not, developed by Flexiti and used in connection with the marketing of the Program or Flexiti’s Credit Card (individually a “Mark” and collectively, “Marks”) are the sole and exclusive property of Flexiti. Flexiti hereby grants Merchant a non-exclusive, royalty-free, non-transferable right and license to use any such Mark permitted in connection with marketing and completing Credit Transactions in accordance with the terms of this Agreement. Merchant has no right, title or interest in or to the Marks except the right of use specified herein. Merchant acknowledges that upon termination of this Agreement for any reason whatsoever, (i) Merchant’s license to use any such Marks immediately terminates; (ii) Merchant shall immediately cease the use of any Marks for which Merchant has received prior approval
11/2010
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from Flexiti to use; and (iii) Merchant has no interest in or right to use any Marks for any purpose thereafter. Merchant shall not use the Marks in any way which might prejudice the validity or the goodwill associated with the Marks.
6.6.Merchant Trademarks. Merchant grants Flexiti a royalty-free, non-exclusive right and license to use the Merchant Marks, in accordance with Merchant’s approved brand guidelines as communicated to Flexiti by Merchant, if any, in connection with this Agreement or for the purpose of identifying Merchant as a member of the Flexiti Network. Flexiti has no right, title or interest in or to Merchant Marks except the right of use specified herein. Flexiti acknowledges that upon termination of this Agreement for any reason whatsoever, (i) Flexiti’s license to use any such Merchant Marks immediately terminates; (ii) Flexiti shall immediately cease the use of any Merchant Marks; and (iii) Flexiti has no interest in or right to use any Merchant Marks for any purpose thereafter. Flexiti shall not use the Merchant Marks in any way which might prejudice the validity or the goodwill associated with Merchant Marks.
6.7.Credit Card Account Statement Branding. Unless Merchant requests otherwise, Flexiti shall include Merchant Marks on Credit Card Account statements for Merchant Originated Cardholders as soon as practical after Launch.
7.Flexiti Representations. Flexiti hereby represents, warrants, covenants and agrees with Merchant as follows:
(a)Flexiti is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization;
(b)Flexiti has full right, power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and all action required to be taken for the due and proper execution and delivery of this Agreement and the performance of Flexiti’s obligations under this Agreement has been taken; and
(c)Flexiti has all necessary right to use and grant Merchant the right to use the Marks.
(d)[***]
8.Merchant Representations, Warranties and Covenants.
8.1.Merchant hereby represents and warrants that:
(a)Merchant is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization;
(b)Merchant owns and operates the business known as Leon’s Furniture, The Brick, The Brick Outlet, furniture.ca, and Appliance Canada;
(c)Merchant has full right, power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and all action required to be taken for the due and proper execution and delivery of this Agreement and the performance of Merchant’s obligations under this Agreement has been taken;
(d)Merchant has all necessary right to use and grant Flexiti the right to use the Merchant Marks;
(e)Merchant has disclosed to Flexiti all material information related to its ability to participate in the Program and in compliance with this Agreement;
(f)Merchant is not insolvent and is able to meet its liabilities as they become due; and
11/2011
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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(g)Merchant’s participation in the Program, including, without limitation, taking Applications, communicating with Applicants and Customers, and processing of Purchases is in compliance with Applicable Law.
8.2.LFL represents and warrants that each of the legal entities that it owns and controls, directly and indirectly, that sell Goods and/or Services to residents of Canada, are named as Merchants under this Agreement. LFL shall provide Flexiti with notice as soon as reasonably practical before (i) acquiring any legal entity (directly or indirectly) that sells Goods and/or Services to residents of Canada; or (ii) commencing business operations that include the sale of Goods and/or Services to residents of Canada via a legal entity other than the entities that have entered into this Agreement, provided that if LFL cannot practically provide advance notice of same because of restrictions under Applicable Law, LFL shall provide notice as soon as reasonably practical following such occurrence. LFL shall cause any acquired or new legal entity for its Goods and/or Services (each, a “New Merchant”) to comply with Section 3.2 of this Agreement as if it were included as a Merchant, and at Flexiti’s request, shall cause each New Merchant to sign a merchant agreement on the same terms as this Agreement, except to the extent that by doing so such New Merchant would breach provisions of its existing contractual arrangements relating to financing of its Goods and/or Services (provided that such contractual arrangements were entered into prior to acquisition by LFL).
8.3.Merchant shall provide Flexiti with ninety (90) days’ advance written notice prior to opening a store location in the territory of Nunavut to allow Flexiti sufficient time to register in that jurisdiction.
9.Merchant Warranties re: Credit Transactions. At the time that each Credit Transaction takes place and at all times thereafter, Merchant represents and warrants that:
(a)the Credit Transaction is genuine and represents a valid payment obligation on a Credit Card Account of a bona fide Cardholder;
(b)The Credit Transaction has been submitted to and approved by Flexiti prior to Merchant completing the sale;
(c)the Credit Transaction was not previously processed by Merchant for financing with another credit grantor (if such transaction was approved by the other credit grantor);
(d)any Goods sold are free from liens, set-offs, counterclaims and other defences;
(e)the Goods and/or Services comprising the Credit Transaction are of the type and the nature normally sold by Merchant to Customers in the ordinary course of business;
(f)the Goods and/or Services comprising the Credit Transaction were purchased in a bona fide, valid, enforceable and legally binding transaction with Merchant, and such transaction complies with all Applicable Laws; and
(g)Merchant has not knowingly engaged in any deceptive or misleading advertising in connection with the sale of the Goods and/or Services included in the Credit Transaction.
10.Term and Termination.
10.1.Term. The term of this Agreement shall begin on the Effective Date and shall continue for a period of ten (10) years unless terminated earlier in accordance with the provisions of Section 10 (the “Initial Term”), and will thereafter renew for further consecutive terms of two (2) years (each, a “Renewal Term”) unless
11/2012
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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written notice of termination is delivered by either party at least one (1) year prior to the expiry of the then-current Initial Term or Renewal Term.
10.2.Termination by Flexiti. Flexiti may terminate this Agreement:
(a)immediately upon written notice in the event of the commencement of a bankruptcy petition or proceeding either by or against Merchant, or if Merchant commits an act of insolvency;
(b)upon at least ninety (90) days’ written notice if Merchant has breached any material term, condition, covenant, warranty, or other provision of this Agreement, including compliance with Merchant Procedures, and, if such breach is capable of cure, the breach is not cured within sixty (60) days of Merchant’s receipt of written notice from Flexiti of such breach, provided that if the parties (via the Program Committee or the Executive Committee) agree to a remediation plan in connection with any such breach, Flexiti will, in good faith, extend the relevant cure period to allow Merchant a reasonable period of time to cure the breach; and
(c)in accordance with Section 2.18.
10.3.Termination by Merchant – Throughout the Term: Merchant may terminate this Agreement:
(a)immediately upon written notice in the event of the commencement of a bankruptcy petition or proceeding either by or against Flexiti, or if Flexiti commits an act of insolvency;
(b)upon at least thirty (30) days’ written notice if Flexiti has breached any material term, condition, covenant, warranty, or other provision of this Agreement, and, if such breach is capable of cure, the breach is not cured within sixty (60) days of Flexiti’s receipt of written notice from Merchant of such breach, provided that the cure period in respect of a payment default on the part of Flexiti shall be two (2) Business Days, and provided further that if the parties (via the Program Committee or the Executive Committee) agree to a remediation plan in connection with any such breach, Merchant will, in good faith, extend the relevant cure period to allow Flexiti a reasonable period of time to cure the breach; and
(c)in accordance with Section 2.18.
10.4.Termination on Notice by Merchant – Limited Rights. Except as provided in this Section, Merchant may terminate this Agreement:
(a)in accordance with paragraph 2.7(e); and
(b)upon one-hundred and eighty (180) days’ prior written notice to Flexiti if Merchant determines, in its sole reasonable discretion, that the Program is no longer suitable for Merchant and/or its Customers, provided that if the issues leading to such a decision can reasonably be cured by Flexiti in a timely fashion, then Merchant shall ensure Flexiti has the opportunity to remedy such issues in a reasonable amount of time (the timing and satisfaction of which, would be determined by Merchant, acting reasonably), prior to Merchant exercising this termination right.
The termination rights of Merchant set out in this Section (the “Limited Termination Rights”) will no longer apply once the conditions for the exercise of any Warrants have been met.
10.5.Obligations on Early Termination. In the event of early termination or suspension of this Agreement, each party shall pay any sums owing to the other party in accordance with this Agreement.
11/2013
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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10.6.Termination or Suspension Effect. Termination or suspension of this Agreement shall not affect the rights, liabilities or obligations of the parties with respect to transactions entered into before the effective date of the suspension or termination.
10.7.Cooperation. During any period between the giving of a termination notice and the effective date of termination, the parties will cooperate in good faith to provide for an orderly termination and transition of the Program and any other programs in which Merchant may be participating with Flexiti at the time of termination.
11.Purchase of Portfolio.
11.1.Right to Purchase. Subject to the terms and conditions set out in this section, upon any expiration or early termination of this Agreement, and subject to any requirements of Flexiti’s financing provider(s) and/or securitization participants, Merchant shall have the option to purchase, or arrange for a third party nominated by Merchant (the “Nominated Purchaser”), to purchase the Credit Card Accounts of Merchant Originated Cardholders, the associated Credit Card Account receivables, and the books and records and assets and liabilities related to such Credit Card Accounts (the “Portfolio”) in accordance with the terms set out below in this section (“Purchase Option”). The Purchase Option is exercisable by the Merchant serving written notice (the "Purchase Notice") (i) in the case of expiration of the Term, by no later than six (6) months prior to expiration of the Term, and (ii) in the case of termination by notice pursuant to Section 10, by no later than thirty (30) days after the date on which the termination is effective. The sale of the Portfolio shall be subject to the negotiation and execution of a purchase and sale agreement (the “Purchase Agreement”) upon terms that are satisfactory to Flexiti and the Merchant or the Nominated Purchaser, as applicable (the “Portfolio Purchaser”). Such Purchase Agreement shall contain terms and conditions that are customary in private label credit card portfolio purchase agreements, except as may be otherwise required by either of the prospective parties to the Purchase Agreement, acting reasonably. Flexiti and the Portfolio Purchaser shall negotiate the terms of the Purchase Agreement in good faith and shall each use commercially reasonable efforts to conclude the negotiation of the Purchase Agreement (including agreeing to end such negotiations if they have not resulted in a final Purchase Agreement) within [***] following the expiration of this Agreement or [***] following early termination of this Agreement, as applicable (the “Purchase Agreement Negotiation Period”). Notwithstanding anything to the contrary in this Agreement, Flexiti will have no obligation to sell the Portfolio to the Portfolio Purchaser if the Purchase Agreement is not completed within the Purchase Agreement Negotiation Period, but such period will be extended upon mutual agreement of the parties (each acting reasonably and in good faith) to the extent that negotiations towards a final Purchase Agreement are continuing in good faith among the parties.
11.2.Program Information and Due Diligence. Upon request from Merchant after a notice of termination or non-renewal, Flexiti further agrees to use commercially reasonable efforts to provide appropriate due diligence information on the Portfolio to not more than three (3) prospective Portfolio Purchasers, as may reasonably be requested by Merchant, in order to enable the prospective Portfolio Purchasers to evaluate the potential purchase transaction. Notwithstanding the foregoing, prior to providing any prospective Portfolio Purchaser with access to any of the information described above, the Merchant shall cause such prospective Portfolio Purchaser to enter into a non-disclosure agreement directly with and on terms acceptable to Flexiti that requires the prospective Portfolio Purchaser to maintain the confidentiality of such information and not to use the information other than for the evaluation of whether to make an offer to purchase the Portfolio or to conduct due diligence investigations in connection with the purchase transaction. Each party will be responsible for its respective costs and expenses incurred in connection with the due diligence process.
11/2014
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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11.3.Option not Exercised or Purchase Agreement not Finalized. If Merchant does not exercise its Purchase Option under paragraph 11.1 within the timeframe set out therein or if Merchant delivers a Purchase Notice but the parties do not finalize a Purchase Agreement within the Purchase Agreement Negotiation Period, Merchant shall have no further rights in connection with the Portfolio.
11.4.Purchase Price. The purchase price for the Portfolio shall be as mutually agreed upon by Flexiti and the Portfolio Purchaser, provided that if such parties cannot reach agreement on the purchase price, the price shall be the fair market value as determined by an independent appraiser (the “Fair Market Value”). In the event an independent appraisal is required, each party shall designate an independent appraiser with experience in valuing credit card portfolios, to value the Portfolio. In determining the Fair Market Value of the Portfolio, the independent appraiser shall (i) assume that Merchant will continue its participation in a card program with a comparable rewards program; (ii) consider the performance of the Credit Card Accounts during the preceding twelve-month period; (iii) consider the value of the Portfolio based on sales of other comparable private label portfolios; (iv) assume an arms-length transaction between a willing buyer and willing seller; and (v) assume that there would be no material changes in the features, benefits and uses of the Credit Card Accounts unless there is good reason to believe otherwise. The Fair Market Value shall be the average of the two valuations provided by the independent appraisers, provided, however, if the two valuations are greater than two percent (2%) apart, the independent appraisers shall select a third independent appraiser to value the Portfolio, and the Fair Market Value shall be the average of the two closest valuations. The Portfolio Purchaser shall be responsible for all fees, costs and expenses of each independent appraiser who provides an appraisal in accordance with this paragraph.
11.5.Closing and Conversion. Flexiti, Merchant and the Portfolio Purchaser shall use commercially reasonable efforts to cause the sale of the Portfolio to occur as soon as reasonably practicable after entering into the Purchase Agreement. Merchant shall use commercially reasonable efforts to assist the Portfolio Purchaser in converting the Credit Card Accounts following such sale. The Portfolio Purchaser shall be responsible for all costs and expenses incurred by Flexiti associated with such conversion, which shall be invoiced by Flexiti to the Portfolio Purchaser, provided any such costs and expenses must be determined, agreed upon, and approved in advance. During the period between the termination date of this Agreement and the conversion, at the request of the Portfolio Purchaser, Flexiti shall continue to service the Portfolio on behalf of the Portfolio Purchaser, provided that Flexiti’s servicing fees have been agreed upon by the parties in writing.
11.6.Communications to Cardholders. Following execution of a Purchase Agreement but prior to the closing of the Portfolio purchase transaction, Flexiti shall, at the Portfolio Purchaser’s expense, notify all Cardholders whose Credit Card Accounts are being purchased that Flexiti will no longer be the owner of their Credit Card Accounts. Flexiti shall have the right to communicate with Cardholders (at its expense) for the purpose of marketing or offering new accounts to Cardholders that will be usable in the Flexiti Network following closing of the Portfolio purchase. For the avoidance of doubt, following the execution of a Purchase Agreement, in no event shall Flexiti be permitted to communicate with Cardholders, except pursuant to this Section 11.6 or as reasonably necessary to discharge its obligations hereunder.
11.7.Transition Matters. Merchant and Flexiti shall cooperate in facilitating the transition to the Portfolio Purchaser, and Merchant shall use commercially reasonable efforts to ensure appropriate cooperation on the part of the Portfolio Purchaser.
11/2015
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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12.Effect of Merchant Bankruptcy. In the event of the commencement of a bankruptcy petition or proceeding either by or against Merchant, Merchant agrees that it is no longer authorized to and shall not (i) accept or honour Credit Cards issued by Flexiti and/or (ii) distribute or make available Applications.
13.Errors and Omissions. Merchant shall notify Flexiti of any error or omission in writing with respect to fees, payments or credits promptly upon discovery of any such error or omission.
14.Obligation to Remedy. In the event of a breach by any party of representation, warranty or covenant set out in in this Agreement, the party in breach will forthwith take all actions necessary to remedy such breach, if capable of remedy.
15.Limitations of Liability, Indemnification; Injunctive Relief.
15.1.Interruptions in Service. Merchant shall not hold Flexiti liable for the malfunction or interruption of service to the Merchant App, including equipment breakdown or property related to Merchant’s internet provider, nor for damages caused by any hardware used to run the Merchant App, the electric, cable, or telephone system it is patched into, or any other event that is beyond the control of Flexiti.
15.2.Disclaimer of Warranties. Flexiti makes no warranty of any kind that the Program and related services, including the Merchant App and the API, will (a) operate without interruption; (b) be compatible or work with any software, system or other services except if and to the extent expressly set forth in the API Documentation; or (c) be secure, accurate, complete, free of harmful code or error free.
15.3.Limitation of Liability. Flexiti’s aggregate liability to Merchant under this Agreement shall not exceed the total amount of Merchant fees paid by Merchant to Flexiti in the six (6) months immediately preceding the date the claim arose. Notwithstanding the foregoing, Flexiti shall not be liable to Merchant for any indirect, special, incidental or consequential damages, whether based on breach of contract, tort (including negligence), or otherwise.
15.4.Indemnification by Flexiti. Flexiti will indemnify, defend and hold harmless Merchant, its Affiliates and their respective Personnel, from any and all claims or defences, losses, damages, expenses and liabilities including legal fees and any other costs incurred in connection with any defences (the “Damages”), incurred or suffered by any of them arising from or relating to:
(a)any breach by Flexiti, or its Personnel of any term, condition, covenant, warranty or other provision of this Agreement or any other agreement between the parties that forms part of this Agreement;
(b)any advertisements, solicitations or other promotions of the Program conducted by or on behalf of Flexiti, excluding those conducted by Merchant; and
(c)any activities, acts or omissions of any third party to whom Confidential Information is transferred or made available on behalf of Flexiti.
15.5.Indemnification by Merchant. Merchant will indemnify, defend and hold harmless Flexiti, its Affiliates and their respective Personnel from and against any and all Damages incurred or suffered by any of them arising from or relating to:
(a)any breach by Merchant or its Personnel of any term, condition, covenant, warranty or other provision of this Agreement or any other agreement between the parties that forms part of this Agreement, including the Merchant Procedures;
11/2016
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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(b)any action or inaction of Merchant or its Personnel with respect to, Merchant’s business, any Customer Materials, the purchase and sale of creditor insurance, the purchase and sale of any warranty;
(c)any alleged violation by Merchant of any Applicable Law, including violations caused by Merchant’s incomplete compliance or noncompliance with Flexiti’s instructions and/or procedures (including Merchant Procedures);
(d)any intentional or malicious misuse of Flexiti API by Merchant or its Personnel;
(e)any deficiency in the Goods and/or Services, however such deficiency is caused or may arise;
(f)a Cardholder rescinding or exercising any right to cancel a Credit Transaction;
(g)any personal or bodily injury or property damage alleged to be caused by the sale of the Goods and/or Services by Merchant;
(h)any third-party claim, suit, action, or proceeding arising out of a breach or alleged breach of the provisions of Section 6 by Merchant;
(i) any advertisement, solicitation, or other promotion of the Program conducted by Merchant, excluding any Damages caused, or to the extent caused, by Merchant’s use, in accordance with this Agreement, of Customer Materials approved by Flexiti; and
(j) any activity, act or omission of any third party to whom Confidential Information is transferred or made available by Merchant.
16.Confidentiality.
16.1.Definition of Confidential Information. In this Agreement, “Confidential Information” means all information, in any form, furnished or made available directly or indirectly by a party (including that of its subsidiaries and Affiliates) that is disclosed by such party (the “Disclosing Party”) to the other party (the “Receiving Party”) or that is otherwise learned by the Receiving Party in the course of its dealings with, or its access to the premises or systems of, the Disclosing Party, and that is (i) marked “confidential”, “proprietary”, or the equivalent, or (ii) disclosed orally and identified as confidential at the time of disclosure, or (iii) by its nature or the circumstances surrounding disclosure would reasonably be known by the Receiving Party to be confidential. Without limitation, Confidential Information includes: Personal Information, Merchant Procedures, all training materials provided by Flexiti to Merchant, all object code and documentation related to the Merchant App and the API, all information of or about an officer, director, employee, customer or potential customer, customer lists, customer data, price lists, know-how, source code, data, patents, copyrights, trade secrets, processes, techniques, programs, designs, formulae, marketing, advertising, financial, commercial, sales or programming materials, equipment configurations, system access codes and passwords, written materials, compositions, drawings, diagrams, computer programs, studies, works in progress, visual demonstrations, ideas, concepts, and other data, in oral, written, graphic, electronic, or any other form or medium. Notwithstanding the foregoing, Confidential Information (other than Personal Information) does not include information or material:
(a)which is now or which hereafter becomes publicly known or available through no act or failure on the part of the Receiving Party, whether through breach of this Agreement or otherwise;
11/2017
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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(b)which is known to the Receiving Party prior to the time of receipt of such Confidential Information, where such actual knowledge can be established by evidence that would be acceptable to a court of competent jurisdiction;
(c)which is furnished to Receiving Party by a third party who has rightfully obtained the Confidential Information without restriction on disclosure; or
(d)which is independently developed by the Receiving Party without any use of or reference to the Confidential Information of the Disclosing Party and which such independent development can be established by evidence that would be acceptable to a court of competent jurisdiction.
16.2.Obligations in Respect of Confidential Information.
(a)Restriction on access. Receiving Party will restrict access to Confidential Information to its Personnel who have a legitimate business need for Confidential Information for the purpose of exercising Receiving Party’s rights or fulfilling Receiving Party’s obligations under this Agreement. Before granting such access, Receiving Party will advise such Personnel of the sensitive and confidential nature of the Confidential Information and of the terms and conditions of this Agreement. Receiving Party will ensure that its Personnel comply with the provisions of this Agreement and will be fully liable for any breach of the terms of this Agreement by its Personnel.
(b)Use and Disclosure of Confidential Information. The Receiving Party will not use Confidential Information of the Disclosing Party for any purpose other than to exercise its rights and fulfill its obligations under this Agreement and the purpose for which such information was disclosed by the Disclosing Party, or as otherwise approved in writing by the Disclosing Party. The Receiving Party agrees not to disclose, copy, or disseminate the Confidential Information of the Disclosing Party other than as permitted by this Agreement. The Receiving Party will not reverse-engineer, decompile, or disassemble any hardware or software provided to it. The Receiving Party will take the same degree of care to ensure the Disclosing Party’s Confidential Information is safeguarded as it takes to protect its own similar Confidential Information, and in no event less than commercially reasonable care.
(c)Legal Obligation to Disclose. Unless otherwise prohibited by Applicable Law, if the Receiving Party becomes legally obligated to disclose Confidential Information, the Receiving Party will give the Disclosing Party prompt written notice sufficient to allow the Disclosing Party to seek a protective order or other appropriate remedy, and in the event the Receiving Party is unable to do so, the Receiving Party will advise the Disclosing Party immediately subsequent to such disclosure. The Receiving Party will disclose only such information as is required, in the opinion of its counsel, and will use commercially reasonable efforts to obtain confidential treatment for any Confidential Information that is so disclosed.
(d)Unauthorized Disclosure of Confidential Information. If there is any unauthorized access to, disclosure or loss of, or inability to account for, any Confidential Information of the Disclosing Party, the Receiving Party will promptly: (i) notify the Disclosing Party; (ii) take such actions as may be necessary or reasonably requested by the Disclosing Party to minimize the disclosure or loss; and (iii) cooperate in all reasonable respects with the Disclosing Party to minimize the impact of the disclosure or loss and any damage resulting therefrom.
(e)Non-disclosure of Terms of Agreement. The parties agree that the terms of this Agreement shall be treated as Confidential Information of the other party, and neither party shall disclose the terms of
11/2018
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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this Agreement (including MDRs) to any Person who is not a party or Personnel of that party, without the prior written consent of the other party.
(f)Return and/or Destruction of Confidential Information. At the Disclosing Party’s request, the Receiving Party will promptly return or destroy and verify in writing its destruction of all tangible and electronic material in any form embodying Confidential Information of the Disclosing Party. In carrying out any return or destruction of Confidential Information, the Receiving Party will protect Confidential Information in accordance with the terms of this Agreement. Notwithstanding the foregoing, a Receiving Party may retain a copy of Confidential Information that (i) is retained as part of routine information technology backup or archival process, and/or (ii) such Confidential Information that is required to be retained in accordance with Applicable Law, provided in each case that such Confidential Information continues to be stored in a manner consistent with the Receiving Party’s obligations under this Agreement for as long as it is retained.
16.3.Flexiti Personal Information. Merchant will not collect, use, store, transfer, transmit, disclose, retain or otherwise handle Flexiti Personal Information that is not Merchant Personal Information, except as necessary to offer the Program pursuant to this Agreement and in compliance with Applicable Laws.
17.Notices. All notices and other communications required or permitted to be given to a party pursuant to this Agreement will be in writing, and will be deemed duly given: (i) on the date delivered if personally delivered; (ii) on the date sent by email (iii) on the Business Day after being sent by overnight courier service; or (iv) two (2) Business Days after mailing, if mailed by Canada Post registered mail, in each case addressed to:
Flexiti at:
130 King St. W, Suite 1740
PO Box 332
Toronto, Ontario M5X 1E1
Attention: Legal Department
Email: notices@flexiti.com with a copy to contracts@flexiti.com

Merchant at:
[***]

Merchant shall advise Flexiti promptly of any address change or other information to keep Flexiti’s records current. Flexiti will not be responsible for the failure of Merchant to receive notification if Flexiti sends such notice to the last address appearing in Flexiti’s records.
18.Force Majeure. If, by reason of Force Majeure, either party (the “Frustrated Party”) is delayed or unable, in whole or in part, to perform or comply with any of its obligations under this Agreement, then, subject to the remainder of this Section, it will be relieved of liability and will suffer no prejudice for failing to perform to the extent that the inability was caused by Force Majeure. The Frustrated Party will give the other party prompt written notice of each of the commencement and the cessation of Force Majeure. In the event of Force Majeure, the obligations of either party in providing any services will be postponed for such time as is required to resume performance of its obligations hereunder, after resolution of the event of Force Majeure, so long as such party is using its reasonable efforts to resolve the event of Force Majeure.
19.Assignment, Successors. Neither Party may assign, in whole or in part, its rights and obligations under this Agreement, without the prior written consent of the other Party.
11/2019
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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20.General.
20.1.Interpretation. For purposes of this Agreement: (a) the words "include," "includes," and "including" are deemed to be followed by the words "without limitation"; (b) the word "or" is not exclusive; (c) the words "herein," "hereof," "hereby," "hereto," and "hereunder" refer to this Agreement as a whole; (d) words denoting the singular have a comparable meaning when used in the plural, and vice versa; and (e) words denoting any gender include all genders. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The inclusion of headings in this Agreement are for convenience of reference only and will not affect the construction or interpretation of this Agreement.
20.2.Entire Agreement. Except as provided in this paragraph, this Agreement contains the entire agreement between the parties, and all existing agreements with respect to the subject matter hereof, and no representations, warranty, promises or conditions, whether oral or written, in connection with the subject matter hereof, not set forth herein, will be binding on either party. This Agreement supersedes any prior agreements, representations or understandings with respect to the subject matter herein. The parties acknowledge that contemporaneously with entering into this Agreement, they or their Affiliates are entering into or amending the following agreements and such agreements are binding upon the parties to them in accordance with their terms:
(a)Program Agreement between Flexiti and TGI, as amended May 26, 2021 (“TGI Program Agreement”);
(b)Warrant Certificate issued by Flexiti to LFL dated May 26, 2021; and
(c)Letter from CURO Group Holdings Corp. to LFL dated May 26, 2021 regarding TGI insurance programs.
20.3.Severability, Enforceability. If any provision of this Agreement is held invalid or unenforceable for any reason, such invalidity will not affect the validity of the remaining provisions of this Agreement, and the parties shall substitute for the invalid provision a valid provision which most closely approximates the intent and economic effect of the invalid provision.
20.4.Governing Law and Attornment. This Agreement and all matters arising in relation to it will be governed by, and construed and enforced in accordance with, the laws of the Province of Ontario. In the event of any controversy, claim or dispute between the parties arising out of or relating to this Agreement, such controversy, claim or dispute will be resolved by the courts of the Province of Ontario, without a jury, and the parties hereby irrevocably consent to the exclusive jurisdiction of such courts.
20.5.Dispute Resolution. The parties shall act reasonably in interpreting this Agreement. In the event of an issue arising in relation to this Agreement, such dispute shall first be addressed between the parties’ Program Managers. If either Program Manager then determines that the dispute is material and cannot be resolved between them, then either party may issue a dispute notice. Thereafter the parties shall each appoint a senior executive and shall convene a meeting between the appointed executives within five (5) Business Days to address the dispute further. Neither party shall institute legal proceedings prior to attempting a resolution pursuant to this paragraph except if the dispute relates to a matter which a party reasonably believes may give rise to irreparable harm that cannot be compensated for in damages.
20.6.Currency. All amounts owing by the parties pursuant to this Agreement are stated and will be paid in the lawful currency of Canada.
11/2020
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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20.7.Amendment to Comply with Applicable Laws. Any changes required by Flexiti to this Agreement or Merchant Procedures in order to comply with Applicable Laws may be implemented by Flexiti and shall be deemed to have been approved and agreed to by Merchant. Flexiti shall use reasonable efforts to provide Merchant with at least ninety (90) days’ notice of any amendment made pursuant to this Section, unless a shorter period is required by Applicable Law.
20.8.Waiver. Waiver by either party of any breach of this Agreement, or of any portion or provisions thereof, will not be construed as a waiver of any subsequent or other breach; nor will failure of either party to exercise any right, remedy, privilege or option granted to it under this Agreement operate as a waiver thereof or give rise to any estoppel in favour of the other party. No waiver by either party will be effective unless it is a duly authorized and signed by the party giving the waiver, and then only to the extent specifically stated.
20.9.Remedies Cumulative. Notwithstanding any other provision of this Agreement, and unless otherwise expressly stated herein, all rights and remedies of any party under this Agreement are in addition to such party’s other rights and remedies and are cumulative, not alternative.
20.10.Survival. All provisions of this Agreement that give rise to a party’s ongoing obligation will survive termination of this Agreement, including all provisions necessary for the interpretation, observance or performance thereof.
20.11.Limited Relationship. Flexiti will perform its obligation under this Agreement as an independent contractor. Nothing herein will be construed to place Flexiti or Merchant in a relationship of principal and agent, partners or joint venturers, and neither Flexiti nor Merchant will have the power to obligate or bind the other in any manner whatsoever.
20.12.Further Assurances. On and after the date hereof, each party will, at the other party’s request, execute, acknowledge and deliver all such acknowledgments and other instruments as may be reasonably necessary or appropriate to fully and effectively carry out the transactions contemplated hereby.
20.13.Language for Dealings in Quebec. The parties confirm that it is their wish that this Agreement as well as all other documents relating to this Agreement, including notices, be drawn up in English only. Les parties aux présentes confirment que c’est leur volonté que la présente convention de même que tous les documents, y compris les avis, s’y rattachant, soient rédigés en Anglais seulement.
20.14.Electronic Agreement and Communication. Merchant consents to: (i) using electronic signatures to execute this Agreement; (ii) accepting and being bound by this Agreement with the same force as though Merchant’s authorized signing officer had affixed his or her signature on paper; and (iii) receiving from Flexiti all documents, required disclosures, notices and statements electronically.
[signature page follows]

11/2021
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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20.15.Counterparts. The parties may execute this Agreement in one or more counterparts, each of which is an original, and all of which constitute only one agreement between the parties.

FLEXITI FINANCIAL INC.
By: /s/
Name:
Title:
Date:

THE BRICK LTD.
By: /s/
Name:
Title:
Date:

THE BRICK WAREHOUSE LP, by its general partner, THE BRICK GP LTD.
By: /s/
Name:
Title:
Date:

LEON'S FURNITURE LIMITED
By: /s/ Edward F. Leon
Name:     Edward F. Leon
Title:     CEO
Date:

11/2022
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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Schedule “A” - Definitions

“Affiliate” means for any Person, a Person which, directly or indirectly, Controls, is Controlled by or is under common Control with another Person. For the purposes of this definition, “Control” means, with regard to any Person, having the legal or beneficial ownership, directly or indirectly, of fifty percent (50%) or more of the shares (or other ownership interest, if not a corporation) of such entity ordinarily having voting rights or control in fact through the exercise of rights pursuant to any agreement, and “Controlled” has the corresponding definition;
“Agreement” means this Merchant Agreement and all schedules attached to this Merchant Agreement, in each case as they may be amended or supplemented from time to time;
“API” means the application programming interface and any API Documentation or other API materials made available by Flexiti to Merchant, including any updates;
“API Documentation” means the API documentation made available by Flexiti to Merchant from time to time;
“Applicable Law” means any law, rule, statute, regulation, order, judgment, decree, treaty, directive or other requirement in force at any time during the Term which applies to or is otherwise intended to govern or regulate any Person (including either or both parties), any Credit Card Accounts, any Cardholder, any property, transaction, activity, event or other matter and includes all Privacy Laws;
“Applicant” means an individual who is a Customer of a Merchant who applies for a Credit Card Account under the Program;
“Application” means a Customer’s application for a Credit Card Account;
“Approval Rate” means the percentage, measured on a monthly basis, calculated by dividing the number of Applications that are approved by Flexiti during the month by the number of Applications received by Flexiti during the same month, in each case excluding Incomplete Applications and Invalid Applications.
“Business Day” means each day other than a Saturday, a Sunday, a day on which banking institutions in Ontario are authorized or obliged by law to be closed, or a statutory holiday in Ontario or in the province in which Merchant receives notices pursuant to Section 17;
“Cardholder” means any individual to whom a Credit Card or a Credit Card Account has been issued by Flexiti;
“Chargeback” has the meaning given to it in Section 4;
“Confidential Information” has the meaning given to it in Section 16.1.
“Contract Year” means the one-year period commencing on the Effective Date, and thereafter each one-year period commencing on an anniversary of the Effective Date;
“Credit Card” has the meaning given to it in Section 2.3(b);
“Credit Card Account” means the credit card account, established by Flexiti for a Cardholder;
“Credit Transaction” means a transaction in which the Customer charges the amount of a Purchase, and if applicable, Taxes, fees and shipping costs related to the Purchase, to the Customer’s Credit Card Account;
“Customer” means a customer of Merchant;
“Effective Date” has the meaning given to it on the first page of this Agreement;
11/2023
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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“Eligible Volume” for a period means the net amount of principal financed by Customers on Promotional Plans (not including Regular Credit Purchase Volume) in approved and completed Credit Transactions conducted under the Program during that period, excluding credits and returns. To be clear, ‘completed’ as used in this definition shall mean that the card transaction itself has been completed, but does not require that product has been delivered;
“Executive Committee” has the meaning given to it in Section 2.13(b);
“Flexiti Network” means the network of retailers that accept Credit Cards issued by Flexiti;
“Flexiti Personal Information” means Personal Information that was collected by or became accessible to a party as a result of such party participating in the Program;
“Force Majeure” includes, but shall not be limited to, acts of God or of the public enemy, acts of a Governmental Authority in either its sovereign or contractual capacity, fires, floods, pandemics, epidemics, quarantine restrictions, strikes, shortages of labour or materials, freight embargoes, unusually severe weather, breakdowns, operational failures, electrical power failures, communication failures, unavoidable delays, the errors or failures of third party systems, or other similar causes beyond such party’s control;
“Franchisee” means any independent merchant that operates under the LFL or The Brick retail banners in Canada or any other banners owned by LFL or its Affiliates.
“Goods and/or Services” means those goods and merchandise (also referred to solely as “Goods” in this Agreement”) or services (also referred to solely as “Services” in this Agreement) sold by Merchant to Cardholders through stores, person to person, catalogue, the internet or any other method mutually agreed upon by Merchant and Flexiti;
“Governmental Authority” means (i) any government, governmental department, agency, commission, board, tribunal, dispute settlement panel or body, bureau, official, minister, crown corporation, or court or other law, rule or regulation-making entity; and (ii) any regulatory authority, self-regulatory organization or other entity having jurisdiction over Flexiti, Merchant, Cardholder, Credit Card Account, or any Person, property, transaction, activity, event or other matter related to this Agreement;
“Improper Sales Procedures” means, with regard to a Credit Transaction, any of the following events or conditions, and only if a Cardholder refuses to pay such related amount:
i.the Credit Transaction is a duplicate of a Credit Transaction previously submitted for the same Purchase;
ii.the price for the Goods/and or Services charged to the Cardholder’s Credit Card Account differs from that communicated by Merchant to the Cardholder at the time of the Credit Transaction; and
iii.Merchant enabled the Credit Transaction to be improperly accepted by Flexiti by exploiting the Merchant App and/or the API;
“In-Store Payments” has the meaning given to it in Section 3.8;

“Incomplete Application” means an (1) an Application that is abandoned prior to completion and in advance of Flexiti requesting a credit check from a credit bureau in respect of the Applicant; and (2) an Application that is in pending status for manual review that has not yet been completed;

“Initial Term” has the meaning given to it in Section 10.1.
11/2024
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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“Invalid Application” means an Application that is cancelled, duplicate of another Application, from an Applicant who is a current Cardholder, and/or declined due to fraud, bankruptcy, or regulatory reasons;
“Launch Date” means July 1, 2021 for The Brick and September 1, 2021 for all other banners, provided that such date may be modified by the parties in accordance with Section 2.1;
“Merchant App” means Flexiti’s electronic software for taking and processing in-person Applications, Credit Transactions and other Credit Card Account transactions (such as returns and credit adjustments);
“Merchant Discount” means the amount payable by Merchant to Flexiti in connection with a completed Credit Transaction, calculated by multiplying the MDR by the Credit Transaction amount;
“Merchant Discount Rate” or “MDR” means the percentage rate established by Flexiti from time to time and notified to Merchant in accordance with this Agreement to determine the Merchant Discount applicable to each Credit Transaction;
“Merchant Mark” means a trademark, service mark, logo, trade name, or other legally protected distinguishing feature of Merchant;
[***]
“Merchant Personal Information” means Personal Information that was collected by or became accessible to Merchant as a result of Merchant carrying on its business other than in connection with Merchant offering the Program or Merchant’s business relationship with Flexiti;
“Merchant Procedures” means the Merchant Procedures attached as Schedule ”D”, which may be modified by Flexiti from time to time upon prior written notice to Merchant;
“Merchant’s Websites” means all websites from which Merchant offers Goods and/or Services to customers in Canada, including for clarity, leons.ca, thebrick.com, and furniture.ca;
“Online Financing Service” means Flexiti’s online facility to process Applications and Purchases made by Customers through one of Merchant’s Websites;
“Online Transaction” means a Credit Transaction conducted online through one of Merchant’s Websites;
“Person” means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, Governmental Authority, or entity however designated or constituted;
“Personal Information” means personal information as defined under applicable Privacy Laws about an Applicant or a Cardholder;
“Personnel” means the officers, directors, employees, Affiliates, agents, advisors, contractors, consultants and other representatives of a party;
“Portfolio” has the meaning given to it in Section 11.1;
“Portfolio Purchaser” has the meaning given to it in Section 11.1;
“Prime Rate” means the prime rate established by the Royal Bank of Canada, or such other bank listed in Schedule I to the Bank Act as Flexiti may designate from time to time;
11/2025
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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“Privacy Laws” means the Personal Information Protection and Electronic Documents Act (Canada), as amended or supplemented from time to time, and any similar or other federal or provincial legislation now in force or that may in the future come into force in Canada governing the protection of personal information in the private sector applicable to the parties or to the activities contemplated under this Agreement;
“Program” has the meaning given to it in Section 2.1;
“Program Committee” has the meaning given to it in Section 2.13(a);
“Promotional Plans” has the meaning given to it in Section 2.7(a);
Purchase” means a purchase by a Customer from Merchant that is charged to a Credit Card Account;
“Purchase Agreement” has the meaning given to it in Section 11.1;
“Purchase Agreement Negotiation Period” has the meaning given to it in Section 11.1;
“Purchase Option” has the meaning given to it in Section 11.1;
“Renewal Term” has the meaning given to it in Section 10.1;
“Regular Credit Purchase Volume” for a period means the net dollar amount of Purchases charged to Credit Card Accounts as regular credit purchases (not on a Promotional Plan) during that period, excluding credits and returns;
[***]
“System Availability” is calculated in accordance with Section 2.15;
“Taxes” means all sales, goods and services, use or other similar taxes, levies and charges, chargeable by or payable to any federal, provincial, local or municipal taxation authority;
“Term” means the Initial Term and all Renewal Terms, if any;
“TGI” has the meaning given to it in Section 2.8;
“TGI Program Agreement” has the meaning given to it in Section 20.2;
[***]
[***]
“Unresolved Cardholder Dispute” includes, without limitation, any of the following disputes, controversies or disagreements, in which a Cardholder fails or refuses to pay an amount due under a Credit Transaction:
i.if the Application was made in-person at a Merchant location and the Cardholder denies having made the Application for the Credit Card to which the Credit Transaction was charged;
ii.the Cardholder provides a reasonable factual basis for a claim that he or she (1) has not received the Goods and/or Services; (2) is not satisfied with the Goods and/or Services, provided that any Goods received by the Cardholder have been returned to Merchant in the condition and timing specified by and in accordance with Merchant’s standard return policies;
iii.a credit adjustment was requested within the parameters of Merchant’s documented return policies and was refused, or a credit adjustment was issued by Merchant, but the Cardholder did not receive the credit, as a result of Merchant’s failure to properly process the credit adjustment;
11/2026
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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iv.the Credit Transaction is not a bona fide transaction in Merchant’s ordinary course of business;
v.for Online Transactions only, Goods were shipped or delivered to an address other than the Cardholder’s billing address without Flexiti’s prior approval; and
vi.the Credit Transaction was processed by Merchant in-store (whether or not the Cardholder was present in at the time of the Credit Transaction) without authorization by the Cardholder via their PIN; and
“Warrants” has the meaning given to it in Section 2.5.
11/2027
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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Schedule “B”
[***]
11/2028
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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Schedule “C” –

[***]


11/2029
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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Schedule “D” –
[***]


11/2030
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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Schedule “E” –
[***]







11/2031
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.
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Schedule “F” –
[***]
11/2032

CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND IS OF THE TYPE OF INFORMATION THAT THE REGISTRANT BOTH CUSTOMARILY AND ACTUALLY TREATS AS PRIVATE AND CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN OMITTED.


WARRANT CERTIFICATE


This Warrant Certificate is effective as of May 26, 2021.

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER THE LATER OF (I) MAY 26, 2021, AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY OF CANADA.

THE WARRANTS REPRESENTED BY THIS CERTIFICATE WILL BE VOID AND OF NO VALUE UNLESS EXERCISED BY 5:00 P.M. (TORONTO TIME) ON MAY 26, 2031.


Certificate
Number
W-5
FLEXITI FINANCIAL INC.
 (INCORPORATED UNDER THE
CANADA BUSINESS CORPORATIONS ACT)
372,489
Warrants



LEON’S FURNITURE LTD.
(INCORPORATED UNDER THE ONTARIO BUSINESS CORPORATIONS ACT)
45 Gordon Mackay Road, Toronto, ON M9N 3X3


(hereinafter referred to as the Holder) is the holder of 372,489 share purchase warrants (Warrants) of Flexiti Financial Inc. (the Corporation), entitling the Holder to, subject to adjustments, subscribe for and purchase one (1) fully paid and non-assessable common share in the capital of the Corporation (a Share) for every one (1) Warrant held by the Holder, without nominal or par value of the Corporation, upon the terms and conditions as hereinafter set forth.

•Exercise Price

The exercise price of the Warrants shall, subject to adjustments, be $83.38 per Share purchased, payable in lawful money of Canada (the Exercise Price).

•Exercise of Warrants

(a)Subject to the restrictions herein contained, the Warrants may be exercised, in whole or in part solely upon the occurrence a Liquidity Event (as defined below) that occurs before 5:00 P.M. (Toronto Time) on May 26, 2031 (the Expiry Date), pursuant to Section 4(a) (the Exercise Date), by the Holder by:

(i)duly completing and executing the exercise form and investor certification form attached hereto in the manner indicated for that number of Shares to which the Holder is entitled and desires to purchase and delivering the same to the Corporation, including indicating the means by which such Holder is an “Accredited Investor” under National Instrument 45-106 or a person that otherwise qualifies under Section 2.4 of National Instrument 45-106 and confirms the truth and accuracy of all statements made therein;

(ii)surrendering, on or prior to the Exercise Date, this Warrant Certificate and the duly completed and executed exercise form and investor certification form to the Corporation at its registered office at 130 King St W, Suite 1740, Toronto ON, M5X 1E1, Attention: Legal Department; and

(iii)paying the purchase price for the Warrants subscribed for in the form of cash, a certified cheque, bank draft, wire transfer or money order in same day immediately payable funds payable to the order of the Corporation in an amount equal to the Exercise Price multiplied by the number of Shares subscribed for.




(b)The Corporation shall notify the Holder in writing of any change of address of its registered office. These Warrants shall be deemed to be so surrendered only upon personal delivery thereof or, if sent by post or other means of transmission, upon actual receipt thereof by the Corporation at its registered office at such time of delivery. Upon the surrender, payment and delivery described above, the person or persons in whose name or names the Shares issuable upon exercise of the Warrants are to be issued shall be deemed for all purposes the holder or holders of record of such Shares and the Corporation covenants that following such surrender, payment and delivery, it will cause a certificate or certificates to be delivered or mailed to such person or persons at the address or addresses specified in such exercise form evidencing the Shares subscribed for.

(c)Notwithstanding anything to the contrary, Holder acknowledges and agrees that Holder shall not be entitled to exercise Warrants if the exercise of such Warrants results in Holder beneficially owning or exercising control over greater than 19.9% of the issued and outstanding Shares of the Corporation immediately following an Initial Public Offering.

•Adjustments

(a)If the Corporation, between the date hereof and the earlier of the Expiry Date or the Exercise Date:

(i)consolidates its Shares into a lesser number of shares, subdivides its Shares into a greater number of shares or reclassifies its Shares, then, when the right to acquire Shares pursuant hereto is exercised, the Holder shall have the right to receive and the obligation to take Shares in such number and description as the Holder would otherwise have if the Holder had exercised the right of acquisition before such event or the first of such events, if more than one, and had held the Shares which the Holder would have received until the actual exercise of the right of acquisition;

(ii)undertakes an amalgamation, arrangement, merger or other consolidation or combination with any other corporation, then when the right to acquire pursuant hereto is exercised the Holder shall have the right to receive and the obligation to take such securities in the consolidated, amalgamated, arranged, merged, consolidated, or combined corporation as the Holder would otherwise have if the Holder had exercised the right of acquisition before such event and had held the securities the Holder would have received until the actual exercise of the right of acquisition;

(iii)pays any stock dividend or makes any other distribution of any securities of the Corporation to all of the holders of the Shares, then when the right of acquisition attaching to these Warrants is exercised the Holder shall have the right to receive the additional number of securities of the appropriate class payable pursuant to the stock dividend or other distribution as if the Holder had exercised the right of acquisition before the payment of such stock dividend or other distribution and had held the securities the Holder would have received until the actual exercise of the right of acquisition; or

(iv)transfers all or substantially all of its assets, then when the right of acquisition attaching to the Warrants is exercised the Holder shall have the right to receive and the obligation to take the securities in the number and description or other property as if the Holder had exercised the right of acquisition before such event and had held the securities the Holder would have received until the actual exercise of the right of acquisition.

On the occurrence of each and every event enumerated in the foregoing, the applicable provisions of this Warrant Certificate shall be deemed to be amended accordingly and the Corporation shall take all necessary action so as to comply with such provisions as so amended.

(b)The adjustments in the number of Shares issuable pursuant to the rights attaching to this Warrant Certificate provided for above are to be cumulative, and all such adjustments as are applicable to the acquisition of Shares shall be made. If and whenever any action is taken which requires an adjustment in the number of Shares issuable upon the exercise of the right of acquisition attaching to the Warrants, the Corporation shall forthwith deliver to the Holder a certificate of the Corporation setting forth the details of the action taken and the adjusted number of Shares issuable upon the exercise of the Warrants and the details of the calculation of such adjustment. In the event of any question arising with respect to the
2


number of Shares issuable as the result of any such events, such questions shall be conclusively determined by the board of directors of the Corporation (the Board), acting reasonably and in good faith.

•Liquidity Event.

(a)Exercise. Subject in each case to this Section and to Section 4(b) and notwithstanding anything else herein to the contrary, if an agreement is entered into respecting a transaction that would, if completed, result in a Change of Control or Initial Public Offering (each as defined below, and the entering into of such an agreement in each case a Liquidity Event), the Corporation shall deliver to the Holder written notice regarding the material particulars and expected date of the Change of Control or Initial Public Offering. Such notice shall also state the number of Shares issuable on exercise of the Warrants. The Board may, without the consent of the Holder and without any sum or compensation payable to the Holder, elect that all Warrants terminate on the date to be set out in the notice to the Holder pursuant to an expected Change of Control or Initial Public Offering transaction. If the Board so elects, such election shall be stated in the notice and the Holder shall have ten (10) business days after the date of such notice to advise the Corporation whether it will irrevocably exercise all or any portion of the Warrants, with any such exercise to be effected not later than ten (10) business days immediately prior to consummation of the Change of Control or Initial Public Offering. All Warrants not exercised by the time required herein or as further specified in such notice to Holder, notwithstanding anything herein contained, shall immediately terminate and will be void, of no value, and of no further force or effect whatsoever. Notwithstanding the foregoing, no Warrants may be exercised after a party has provided notice of termination of the merchant agreement between the Corporation and Holder dated May 26, 2021 (the Merchant Agreement), in accordance with its terms, unless and until such notice has been revoked or cancelled in writing or the parties to the Merchant Agreement have agreed in writing to continue the term of the Merchant Agreement beyond the date of termination provided in such notice.

(b)Cashless Surrender. Notwithstanding anything else in this Warrant Certificate, the Board may, in connection with a Liquidity Event and at its sole option and without the consent of the Holder, take such steps as are necessary or desirable with respect to any or all Warrants and/or Shares issued or issuable pursuant to the Warrants, that are in the best interests of the Corporation, including determining that any or all Warrants and/or Shares issued or issuable pursuant to the Warrants will be purchased by the Corporation or one or more other persons or entities designated by it (each, a Designee) at the Liquidity Event Price (as defined below) less the applicable Exercise Price; provided that the Warrants and/or Shares may only be purchased by the Corporation or a Designee, as described above, if the Liquidity Event Price is higher than the Exercise Price, and the Corporation may (by written notice delivered in connection with such Liquidity Event) cancel (for no consideration) the Warrants if the applicable Exercise Price is greater than the Liquidity Event Price. Notwithstanding the foregoing, if the Liquidity Event is an Initial Public Offering, the Board will only take steps with respect to this Section 4(b) if it determines in good faith, in consultation with its advisors, that the exercise of the Warrants could have a negative impact on the Corporation or the Initial Public Offering. The Holder shall execute such documents and instruments and take such other actions, including exercise of Warrants pursuant to Section 4(a), as may be required consistent with the foregoing; provided, however, that the exercise of Warrants pursuant to Section 4(a), or any cancellation or sale of this Warrant Certificate and/or Shares pursuant to this Section 4(b), shall be subject to the completion of the Liquidity Event. Liquidity Event Price means the cash value of all amounts payable in respect of each Share upon the occurrence of the Liquidity Event, including any adjustment made pursuant to Section 4(d), as determined by the Board in good faith.

(c)Change of Control shall mean the occurrence of any of the following:

(i)the purchase or acquisition of voting securities of the Corporation or, if applicable, the Combined Entity (as defined below) (Voting Securities) and/or securities convertible into Voting Securities or carrying the right to acquire Voting Securities (Convertible Securities) as a result of which a person, group of persons, or persons acting jointly or in concert, or persons associated or affiliated within the meaning of the Securities Act (Ontario) with any such person, group of persons, or any of such persons acting jointly or in concert (collectively the Acquirors) beneficially own or exercise control or direction over Voting Securities and/or Convertible Securities such that, assuming the conversion or other exercise of all Convertible Securities, the Acquirors would have the right to cast more than fifty percent (50%) of the votes attached to all Voting Securities; or

(ii)the completion of:
3



(A)an amalgamation, arrangement, merger or other consolidation or combination of the Corporation or, if applicable, the Combined Entity with another corporation or other entity pursuant to which the shareholders or equity holders of the Corporation or the Combined Entity immediately thereafter do not own securities of the successor or continuing corporation or other entity which would, assuming the exercise of all convertible securities, entitle them to cast more than fifty (50%) percent of the votes attaching to all of the shares or other equity in the capital of the successor or continuing corporation or other entity which may be cast to elect directors (or similar governing persons) of that corporation or other entity;

(B)a liquidation, dissolution or winding-up of the Corporation or the Combined Entity; or

(C)the sale, lease or other disposition of all or substantially all of the assets of the Corporation or the Combined Entity,

that, in any such case, does not include an internal reorganization, restructuring or similar transaction in respect of the Corporation or the Combined Entity.

(d)[***]

(e)Initial Public Offering means any transaction pursuant to which the Shares or Equity Securities of the Corporation or the Combined Entity (or of any issuer resulting from any transaction including, without limitation, any consolidation, amalgamation, merger, plan of arrangement, reverse take-over, qualifying transaction, change of business or any other business combination or similar transaction of the Corporation or the Combined Entity) (in each case, the IPO Issuer) have been listed on any recognized stock exchange in Canada or the United States. Equity Securities means any shares in the capital of the IPO Issuer equity interest or other ownership interest or profit participation or similar right with respect to the IPO Issuer, including without limitation, any Share, preferred share, note or debt security having or containing equity or profit participation features, or any option, warrant or other security or right which is directly or indirectly convertible into or exercisable or exchangeable for any Equity Securities.

(f)If the Board makes a determination to undertake an Initial Public Offering, upon notice from the Board to the Holder, the IPO Issuer and the Holder shall cooperate in good faith to negotiate and complete a customary registration rights agreement consistent with the terms described in Exhibit B and the Holder hereby covenants to the Corporation to cooperate in good faith with the IPO Issuer to execute such documents and perform such actions as are necessary or desirable in order to comply with applicable securities laws and any regulatory authorities having jurisdiction over the Equity Securities and/or Holder.

•Termination. Notwithstanding the foregoing, immediately upon: (i) the Merchant Agreement is terminated in accordance with its terms; or (ii) the Corporation ceasing to be the exclusive provider of point-of-sale financing for Holder, its affiliates and its franchisees, except (for item (ii) only) if this is in accordance with an agreement signed by the Corporation (each a Termination Event), the Board may, without the consent of the Holder, without any sum or compensation payable to the Holder and upon notice to the Holder, elect that all Warrants immediately terminate upon the occurrence of such Termination Event. For clarification, the Corporation may terminate the Warrants pursuant to this Section without terminating (or having any obligation to terminate) the Merchant Agreement. Upon the occurrence of a Termination Event all Warrants issued to the Holder shall immediately terminate and will be void, of no value, and of no further force or effect whatsoever.

•Exercise in Whole or in Part
The Holder may subscribe for and acquire any lesser number of Shares than the number of Shares exercisable under the Warrant Certificate. Any Warrants not exercised by the time required under Section 4(a), shall terminate and be cancelled on the consummation of the Change of Control or Initial Public Offering notwithstanding anything otherwise contained herein.


•Share Certificates

(a)Upon compliance with the terms and conditions hereof, the Corporation will cause to be issued to the person or persons in whose name or names the Shares so subscribed for are to be issued the number of fully paid and non-assessable Shares subscribed for, and such person or persons shall be deemed upon
4


payment, delivery and surrender as set forth herein to be the holder or holders of record of such Shares. Following compliance of the conditions aforesaid, the Corporation will cause to be couriered or delivered to the holder at the address or addresses specified in the exercise form attached hereto, a certificate or certificates evidencing the number of Shares subscribed for.

(b)The Holder acknowledges that any certificates evidencing the Shares issuable pursuant to the exercise of the Warrants may be subject to a hold period, escrow, or lock-up agreement required by any underwriter, dealer, stock exchange, regulatory authority or under applicable securities law without compensation to the Holder, and may bear the following legend or any other legend required by such hold period, escrow, lock-up agreement or as required by law:

"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER THE LATER OF (I) MAY 26, 2021 AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY".

•Securities Law Exemption

The Holder represents, warrants, certifies, and covenants that it is an “Accredited Investor” within the meaning of National Instrument 45-106 or a person that otherwise qualifies under Section 2.4 of National Instrument 45-106 and has properly completed and duly executed the investor certification form (and will do so upon the exercise of any Warrant) in each case indicating the means by which such Holder is an “Accredited Investor” under National Instrument 45-106 or a person that otherwise qualifies under Section 2.4 of National Instrument 45-106 and confirms the truth and accuracy of all statements made therein.

•No Fractional Shares

No fractional Shares will be issued upon exercise of the Warrants, nor shall any compensation be made for such fractional Shares, if any. To the extent that the Holder would otherwise be entitled to purchase a fraction of a Share, the number of Shares to be received shall be rounded down to the next whole number of Shares and the Holder shall not be entitled to any payment or compensation in respect of any such fractional Share.

•No Rights of Shareholder Until Exercise; Agreement to be Bound by Shareholder Agreement Following Exercise

(a)This certificate and the Warrants represented hereby do not confer any rights of a shareholder on the Holder (including any right to receive dividends or other distribution to shareholders or to vote at a meeting of the shareholders of the Corporation), other than in respect of Shares which the Holder shall have exercised his, her or its right to purchase hereunder and which the Holder shall have actually subscribed and paid for. The Holder agrees to become party to any shareholder agreement by and among the shareholders of the Corporation either then in effect or to be implemented, and without variation or changes by the Holder whatsoever, immediately prior to or concurrently with the issuance of the Shares issuable upon the exercise of the Warrants.

(b)Subject as hereinafter provided, all or any of the rights conferred upon the Holder by the terms hereof may be enforced by the Holder by appropriate legal proceedings. No recourse under or upon any obligation, covenant or agreement contained herein shall be had against any shareholder, director or officer of the Corporation either directly or through the Corporation, it being expressly agreed and declared that the obligations under this Warrant Certificate are solely corporate obligations and that no personal liability whatever shall attach to or be incurred by the shareholders, directors or officers of the Corporation or any of them in respect thereof, any and all rights and claims against every such shareholder, officer or director being hereby expressly waived as a condition of and as a consideration for the issue of the Warrants.

•No U.S. Registration

The Warrants evidenced by this Warrant Certificate have not been and will not be registered under the United States Securities Act of 1933, as amended, (the U.S. Securities Act), and may not be offered or sold to a person in the United States, except pursuant to an exemption from registration under the U.S. Securities Act. Compliance with the securities laws of any jurisdiction is the responsibility of the Holder.

5


•Covenants and Representations

(a)The Corporation covenants and agrees that so long as any Warrants evidenced hereby remain outstanding:

(i)it is duly authorized to create and issue this Warrant Certificate and the Shares to be issued hereunder;

(ii)this Warrant Certificate, when originally signed by the Corporation as herein provided, will be a valid and enforceable obligation of the Corporation in accordance with the provisions hereof;

(iii)subject to the provisions hereof, it will cause the Shares from time to time subscribed for and acquired in the manner herein provided, and the certificates evidencing such Shares, to be duly issued;

(iv)at all times up to and including the earlier of the Expiry Date, the Exercise Date, or termination of this Warrant Certificate pursuant to the terms hereof, while this Warrant Certificate shall be outstanding, it shall reserve and there shall remain unissued out of its authorized capital a sufficient number of Shares to satisfy the right of acquisition attaching to this Warrant Certificate;

(v)all Shares which shall be issued upon the exercise of the right of acquisition attaching to this Warrant Certificate, upon payment therefor of the amount at which such Shares may at the time be acquired pursuant to the provisions hereof, shall be issued as fully paid and non-assessable shares of the Corporation, free from any and all taxes, liens and charges, and the holders thereof shall not be liable to the Corporation or its creditors in respect thereof;

(vi)the entering into of this Warrant Certificate and the performance of its obligations contemplated by this Warrant Certificate do not, and will not constitute an event that would (or with the lapse of time or action by a third party or both, could) result in a violation of any of the terms or provisions of any law applicable to the Corporation or any of the Corporation’s constating documents, or any agreement to which such the Corporation is a party or by which it is bound; and

(vii)the Corporation shall (a) comply in all material respects with the securities legislation applicable to it; and (b) shall use commercially reasonable efforts to do or cause to be done all things necessary to preserve and maintain its corporate existence.

(b)The Holder represents, warrants and covenants to the Corporation (and acknowledges that the Corporation and its counsel, are relying thereon) that both at the date hereof and at the date that any Warrant is issued:

(i)it is an entity, duly organized, validly existing and in good standing under the laws of its jurisdiction of organization;

(ii)the entering into of this Warrant Certificate and the performance of its obligations contemplated by this Warrant Certificate do not, and will not constitute an event that would (or with the lapse of time or action by a third party or both, could) result in a violation of any of the terms or provisions of any law applicable to the Holder or any of the Holder’s constating documents, or any agreement to which such the Holder is a party or by which it is bound; and

(iii)it is duly authorized to execute and deliver this Warrant Certificate and all other necessary documentation in connection with the transactions contemplated by this Warrant Certificate and that this Warrant Certificate has been duly and validly authorized, executed and delivered by, and constitutes a legal, valid, binding and enforceable obligation of, the Holder.
•Notice

Any notices, consents or other communication required to be sent or given hereunder to the Holder shall in every case be in writing and shall be deemed to be received by the Holder on the date of the occurrence of the following:

(a)Hand delivery to the Holder;

6


(b)Three (3) business days following the mailing of such notice by registered or certified mail, in all such cases with first class postage prepaid, return receipt requested;

(c)Delivered by e-mail to [***] and [***]; or

(d)Delivered by a recognized overnight courier service.


•Miscellaneous

(a)The Warrants evidenced by this Warrant Certificate are not transferable, assignable and do not include any similar right or privilege, whether directly or indirectly, unless the prior written consent of the Board and Corporation has been expressly provided to the Holder, and in each case which may be withheld.

(b)The Corporation may treat the Holder for all purposes as the absolute owner hereof and shall not be affected by any notice or knowledge of the contrary.

(c)This Warrant Certificate shall not be valid for any purpose whatsoever unless and until it has been signed by or on behalf of the Corporation.

(d)If the Warrant Certificate is stolen, lost, mutilated or destroyed, the Corporation may, on such terms as to indemnity or otherwise as it may in its sole discretion impose, issue a new Warrant Certificate of like denomination, tenure and date as the Warrant Certificate so stolen, lost, mutilated or destroyed.

(e)This Warrant Certificate shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.

(f)All references herein to monetary amounts are references to lawful money of Canada.

(g)Time shall be of the essence hereof.

[signature page follows]

7





IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to be signed by its duly authorized officer effective as of the date first written above.


FLEXITI FINANCIAL INC.
Per: /s/
Name:
Title:


Acknowledged and agreed:
LEON’S FURNITURE LTD.
Per: /s/
Name:
Title:





8


EXHIBITS

[***]

IMAGE_1.JPG

SEPARATION AGREEMENT AND FULL RELEASE


EMPLOYEE is advised to consult with an attorney prior to
executing this Separation Agreement and Full Release.
This Separation Agreement and Full Release (this “Agreement”) is made and entered into effective the 30th day of June, 2021, between Terry Pittman (“EMPLOYEE”) and CURO Management LLC, and other parties defined below (“COMPANY”) (individually, each a “Party,” and collectively, the “Parties”). COMPANY includes CURO Management LLC and all of its direct and indirect subsidiaries, parent companies (including CURO Group Holdings Corp. (“CURO”)), affiliates, and their officers, directors, agents, employees, representatives, successors or assigns.

In consideration of the compensation set forth below, the mutual terms and conditions and such other, good and valuable consideration, the receipt and sufficiency is acknowledged, and intending to be legally bound, the Parties agree as follows:

A.    Separation Date. EMPLOYEE has been employed by COMPANY. The EMPLOYEE has been separated from employment with the COMPANY effective June 30th, 2021 (“Separation Date”). This Agreement should not be construed as evidence of wrongdoing by either Party.

B.    Consideration. As consideration for EMPLOYEE entering into this Agreement, including but not limited to the release set forth in section C. below, COMPANY agrees to provide severance payments, on COMPANY’S normal payroll cycle, as further detailed in EMPLOYEE’s Employment Agreement dated October 24, 2019 (the “Employment Agreement”), consisting of EMPLOYEE’s annual base salary of $452,368 for a twelve (12) month period following the Separation Date (the “Separation Payments”), as well as reimbursement for COBRA payments for a twelve (12) month period, subject to EMPLOYEE’s election of COBRA’s continuation coverage under the COMPANY’S group health plan. EMPLOYEE understands the COMPANY will continue to be required to deduct from the EMPLOYEE’s base salary certain federal and state taxes and other sums as required by law. In addition, the vesting of twenty thousand two hundred thirty-three (20,233) restricted stock units of CURO subject to time-based vesting shall be accelerated to the date this Agreement becomes enforceable against EMPLOYEE and COMPANY. CURO will net settle the restricted stock units under normal vesting practice, and EMPLOYEE understands that any additional state and federal taxes incurred subsequent to the accelerated vesting are the responsibility of EMPLOYEE.

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C.    General Release of All Claims. In consideration of the Separation Payments and other valuable consideration from COMPANY to EMPLOYEE as detailed in Paragraph B above, EMPLOYEE fully releases, acquits, discharges and settles in favor of COMPANY:

1.Any and all claims, damages, injuries, causes of action, attorneys’ fees, costs, expenses or other rights that EMPLOYEE has or may bring against COMPANY, including, but not limited to, claims arising out of EMPLOYEE’s employment, claims for compensation, termination, harassment, discrimination, or any claims arising out of EMPLOYEE’s employment with COMPANY, known or unknown, up to and including the date of this Agreement;

2.Any and all known or unknown claims, expenses, injuries, losses, rights of contribution or indemnity, as well as any other statutory rights, attorneys’ fees and damages, without limitation, which now exist or may ever develop, which are in any way connected with, based upon, or arise out of EMPLOYEE’s employment with COMPANY up to and including the date this Agreement becomes enforceable against EMPLOYEE and COMPANY.; and

3.Any and all claims for monies, damages, emotional distress, stress, physical injuries, bodily injury, medical expenses, and reinstatement to employment. This Agreement also includes a release for any claim under state, federal, or local law or authority, including but not limited to any claim relating to conditions of employment, wrongful discharge, retaliation, or discrimination in employment, and including any claim under Title VII of the Civil Rights Act of 1964; the Post Civil War Acts (42 USC §§ 1981-1988); the Americans with Disabilities Act (“ADA”); the Equal Pay Act of 1963; the Occupational Safety and Health Act; the Age Discrimination in Employment Act (“ADEA”); the Contract Worker Hours and Safety Act; any regulations under or amendments of such authorities; and any applicable contract, tort, or other common law or statutory law theories.

4.EMPLOYEE understands and agrees that this Agreement constitutes a full and final compromise, satisfaction and settlement of all claims and rights against COMPANY, in any way connected with, based upon, or arising out of his employment with COMPANY up to and including the date this Agreement becomes enforceable against EMPLOYEE and COMPANY.


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D.    Claims Not Released. EMPLOYEE is not waiving any rights he may have to: (a) his own vested accrued employee benefits under COMPANY’s health, welfare, or retirement benefit plans as of the Separation Date; (b) benefits and/or the right to seek benefits under applicable workers’ compensation and/or unemployment compensation statutes; (c) pursue claims which by law cannot be waived by signing this Agreement; and/or (d) enforce this Agreement.

E.    Governmental Agencies. Nothing in this Agreement prohibits, prevents, or otherwise limits EMPLOYEE from filing a charge with or participating, testifying, or assisting in any investigation, hearing, or other proceeding before any federal, state, or local government agency (e.g., EEOC, NLRB, SEC, etc.) or in any legislative or judicial proceeding nor does anything in this Agreement preclude, prohibit or otherwise limit, in any way, EMPLOYEE’s rights and abilities to contact, communicate with or report matters to federal, state, or local officials for investigation or otherwise participate in any whistleblower program administered by any such agencies. However, to the maximum extent permitted by law, EMPLOYEE agrees that if such an administrative claim is made, EMPLOYEE shall not be entitled to recover any individual monetary relief or other individual remedies.

F.    Collective/Class Action Waiver. If any claim is not subject to release, to the extent permitted by law, EMPLOYEE waives any right or ability to be a class or collective action representative or to otherwise participate in any putative or certified class, collective or multi-party action or proceeding based on such a claim in which COMPANY is a party.

G.    Company Property. By signing this Agreement, EMPLOYEE agrees and acknowledges that Employee has returned to the COMPANY all originals and copies of COMPANY documents and all COMPANY property.
H.    Non-Disparagement. The post termination covenants included in Section 9 of EMPLOYEE’S Employment Agreement survive for the Designated Period (as defined in the Employment Agreement).
I.    Entire Agreement. This Agreement is the entire agreement between COMPANY and EMPLOYEE, and all previous agreements or promises, whether written or oral, between the COMPANY and EMPLOYEE are superseded and voided; provided however, that any provisions in the Employment Agreement that by their terms do not terminate upon termination of employment shall continue in full force and effect for the intended duration. The Agreement may not be modified except by a writing signed by each of the Parties hereto, or their duly authorized representatives. The language of this Agreement shall be construed as a whole according to its fair meaning and not strictly for or against any of the Parties.

CURO Management Separation Agreement and Full Release June 2021    3 of 6


J.    Acknowledgements.
1.The Parties acknowledge, warrant, represent, and agree that in executing and delivering the Agreement, they do so freely, knowingly, and voluntarily, that they had an opportunity to or did discuss its terms and the implications thereof with legal counsel, that they are fully aware of the contents and effect thereof and that such execution and delivery is not the result of any fraud, duress, mistake, or undue influence whatsoever. The Parties warrant that no other party or any agent or attorney of any other party has made any promise, representation, or warranty whatsoever not contained herein to induce them to execute this Agreement. All Parties represent that they have not executed this Agreement in reliance on any promise, representation, or warranty not contained herein.
2.Each Party represents that it has not filed any complaint, charge, claim or action against the other Party with any state, federal or local agency or court and that it will not file any claim at any time regarding the matters except as otherwise expressly permitted by this Agreement.
3.    EMPLOYEE affirms that EMPLOYEE has been reimbursed for all necessary expenses or losses incurred by EMPLOYEE within the scope of EMPLOYEE’s employment. EMPLOYEE affirms that EMPLOYEE has been granted any leave to which EMPLOYEE was entitled under the Family and Medical Leave Act or state or local leave or disability accommodation laws. EMPLOYEE further affirms that EMPLOYEE has no known workplace injuries or occupational diseases.
4. This Agreement is intended to comply with and be enforceable under the Older Workers Benefit Protection Act. EMPLOYEE acknowledges and agrees that he/she is specifically waiving rights and claims under the Age Discrimination in Employment Act.

5. EMPLOYEE has been given twenty-one (21) days to consider the terms of this Agreement.

6. EMPLOYEE will have seven (7) days after signing this Agreement to revoke his/her decision by delivering a written notice of revocation to the COMPANY at CURO Management LLC c/o Jillian Slagter, 200 W Hubbard, Chicago, IL 60654. The COMPANY acknowledges that this Agreement shall not become valid or enforceable until the expiration of the 7-day revocation period.

K.    Consequences of Breach. In the event of a material breach of the representations or the obligations set forth in the preceding paragraphs the

CURO Management Separation Agreement and Full Release June 2021    4 of 6


prevailing party in any action brought to enforce the terms or conditions of this Agreement shall be entitled to recover all provable damages, in addition to such other remedies as may be available under this Agreement at law or in equity as well as the prevailing party's attorneys’ fees and costs, including expenses, fees and costs for any mediation, arbitration, administrative hearing or appeal.
L.    Governing Law. This contract shall be governed and construed in accordance with the laws of Kansas, excluding that State’s choice-of-law principles, and all claims relating to or arising out of this contract, or the breach thereof, whether sounding in contract, tort or otherwise, shall likewise be governed by the laws of Kansas, excluding that State’s choice-of-law principles.
M.    Severability. The provisions of this Agreement are severable; if any provision of this Agreement is held invalid or unenforceable, this Agreement shall be enforced to the maximum extent permissible and the remaining terms of this Agreement shall remain in full force and effect.
N.    Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original. All counterparts shall constitute one agreement binding on all Parties.
O.    Liability. Nothing in this Agreement shall be construed as an admission of liability by either Party or its/hers officers, agents, employees, representatives, successors or assigns.


THE PARTIES HAVE READ THIS AGREEMENT. THEY UNDERSTAND IT AND ARE SIGNING IT VOLUNTARILY AND KNOWINGLY. THEY ACKNOWLEDGE THAT THEY HAVE HAD AN OPPORTUNITY TO CONSULT WITH AN ATTORNEY PRIOR TO AGREEING AND SIGNING. FURTHER, EMPLOYEE UNDERSTANDS THAT NOTHING IN THIS AGREEMENT IS INTENDED TO OR SHALL INTERFERE WITH EMPLOYEE’S RIGHT TO PARTICPATE IN A PROCEEDING WITH ANY APPROPRIATE FEDERAL, STATE OR LOCAL GOVERNMENT AGENCY ENFORCING DISCRIMINATION LAWS, NOR SHALL THIS AGREEMENT PROHIBIT EMPLOYEE FROM COOPERATING WITH ANY SUCH AGENCY IN ITS INVESTIGATION.


Employee

By: Terry Pittman

Signature: _/s/ Terry Pittman_________________________

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Date: __________________________________________
    

CURO Management, LLC

By: Jillian Slagter

Title: Chief HR Officer

Signature: _/s/ Jillian Slagter__________________________

Date: __________________________________________

    
CURO Group Holding Corp.

By: Jillian Slagter

Title: Chief HR Officer

Signature: _/s/ Jillian Slagter__________________________

Date: __________________________________________













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CERTIFICATIONS
I, Don Gayhardt, certify that:

1.I have reviewed this Quarterly report on Form 10-Q of CURO Group Holdings Corp. (the “registrant”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 28, 2021

                    
By: /s/ Don Gayhardt
Don Gayhardt
Chief Executive Officer


CERTIFICATIONS
I, Roger Dean, certify that:

1.I have reviewed this Quarterly report on Form 10-Q of CURO Group Holdings Corp. (the “registrant”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 28, 2021
                    
By: /s/ Roger Dean
Roger Dean
Treasurer, Executive Vice President, Chief Financial Officer
and Acting Chief Accounting Officer



CERTIFICATIONS


Solely for the purpose of complying with 18 U.S.C. § 1350, each of the undersigned hereby certifies in his capacity as an officer of CURO Group Holdings Corp. (the “Company”) that the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such report fairly presents, in all material respects, the financial condition of the Company at the end of such period and the results of operations of the Company for such period.

Date: July 28, 2021
_/s/ Don Gayhardt_____________
Don Gayhardt
Chief Executive Officer
(Principal Executive Officer)


_/s/ Roger Dean___________
Roger Dean
Treasurer, Executive Vice President, Chief Financial Officer
and Acting Chief Accounting Officer
(Principal Financial Officer)