CURO Group Holdings Corp. Announces Third Quarter 2019 Financial Results and Raises 2019 Adjusted Earnings Guidance

CURO Group Holdings Corp. (NYSE: CURO) (“CURO” or the “Company”), a market leader in providing short-term credit to underbanked consumers, today announced financial results for its third quarter ended September 30, 2019.

“We are pleased to report another excellent quarter that again exceeded our expectations,” said Don Gayhardt, President and Chief Executive Officer. “Our Adjusted Net Income nearly tripled year-over-year on strong loan portfolio growth and performance and operating expense discipline. We believe that general economic conditions continue to be strong for our customers and we are very focused on making disciplined credit and customer acquisition spending decisions. Our Canadian business delivered $15.3 million of non-GAAP Adjusted EBITDA versus a $3.4 million AEBITDA loss in the prior-year quarter and validated our decision to undertake a significant product transition in our Ontario operations. Our U.S. business continued to perform well with quarterly year-over-year growth of 6.2% in revenues, 11.7% in Net revenues and 23.3% in AEBITDA. Finally, we remain optimistic about the balance of the year and we are increasing our 2019 earnings and earnings per share guidance.”

Consolidated Summary Results - Unaudited

Third quarter 2019 developments include:

• Revenue increase of $27.8 million, or 10.3%, over the prior-year period, driven primarily by growth in revenue from Open-End loans in both the U.S. and Canada.
• Growth in Company Owned gross loans receivable and Gross combined loans receivables of 22.3% and 18.5%, respectively, versus the prior-year period. Year-over-year comparisons benefited from the Q1 2019 Open-End Loss Recognition Change. Excluding the impact of this change, Company Owned gross loans receivable and Gross combined loans receivables grew 13.7% and 11.0%, respectively.
• Consolidated quarterly net charge-off ("NCO") rates improvement of over 350 bps compared to the same quarter a year ago.
• Adjusted Diluted Earnings per Share increase to $0.71 from $0.24 in the prior-year quarter; Diluted Earnings Per Share from continuing operations of $0.61.
• Cumulative open market purchases of 2,853,241 shares for $35.0 million through October 23, 2019 under the terms of our $50 million share repurchase program that was announced in April 2019, plus the purchase of 2,000,000 shares from Friedman Fleischer & Lowe Capital Partners II, L.P. and its affiliated investment funds ("FFL"), a related party to the Company.
• Addition of two independent directors to our Board of Directors, which adds both compliance and human resources experience and insight, as announced in our Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") on July 22, 2019.

Year-to-date 2019 developments include:

• Revenue increase of $82.0 million, or 10.8%, over the prior-year period. Year-over-year revenue comparisons include an estimated $35 million benefit from the Q1 2019 Open-End Loss Recognition Change, offset by a similar increase in provision expense.
• Adjusted Net Income and Adjusted Diluted Earnings per Share growth of 37.2% and 40.0%, respectively, over the prior-year period; Net Income from continuing operations of $74.3 million and Diluted Earnings per Share of $1.59.
• Continued success with the Canada Open-End product transition, as the portfolio matures and NCO rates improve. Canada AEBITDA increase of $21.5 million over the prior-year period; gross margin increase of $22.9 million over the same period.
• During April through July 2019, invested an additional $3.8 million in Zibby, an on-line virtual lease-to-own platform. As a result of this transaction, the Company's fully-diluted ownership of Zibby increased to 42.3%.
• Completed the exit from the U.K. market during the first quarter of 2019, resulting in favorable tax consequences related to the disposal.
• The successful launch of our new demand deposit account, Revolve Finance, sponsored by Republic Bank of Chicago. Revolve is being rolled out across our U.S. branches, as well as online, and provides customers with a checking account solution that combines a Visa-branded debit card, a number of technology-enabled tools and optional overdraft protection. Through the end of the third quarter, customers have loaded $42.5 million on over 31,000 unique cards.

Fiscal 2019 Outlook

The Company has increased its full-year 2019 earnings guidance for Adjusted Net Income, Adjusted EBITDA and Adjusted Diluted Earnings per Share from its guidance included in its Current Report on Form 8-K filed with the SEC on July 29, 2019, as follows:

• Revenue in the range of $1.145 billion to $1.150 billion, a decrease from prior guidance of $1.154 billion to $1.170 billion due to California Installment loan repositioning
• Adjusted Net Income in the range of $125 million to $135 million, narrowing prior guidance of $120 million to $135 million
• Adjusted EBITDA in the range of $260 million to $270 million, an increase from prior guidance of $250 million to $265 million
• Adjusted Diluted Earnings per Share in the range of $2.75 to $2.85, an increase from prior guidance of $2.55 to $2.80
• Adjusted effective income tax rate in the range of 26% to 27%

For a reconciliation of each non-GAAP metric to the nearest GAAP metric, see the specific reconciliations contained under "Fiscal 2019 Outlook - Reconciliations" at the end of this release. For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."

Consolidated Revenue by Product and Segment

Year-over-year comparisons for Open-End were affected by the Q1 2019 Open-End Loss Recognition Change. Additionally, throughout this release, we removed financial results of our former U.K. operations for all periods presented, as it was discontinued for accounting and reporting purposes in February 2019. See “Results of Discontinued Operations” within this release for additional information.

The following tables summarize revenue by product, including credit services organization ("CSO") fees, for the periods indicated:

During the three months ended September 30, 2019, total revenue grew $27.8 million, or 10.3%, to $297.3 million, compared to the prior-year period, predominantly driven by growth in Open-End loans in both countries. Geographically, total revenue in the U.S. and Canada grew 6.2% and 30.3%, respectively. From a product perspective, Unsecured Installment revenues rose 0.4% in the U.S., offset by a decrease in Canada of 35.7% due to the continued transition to Open-End loans. Secured Installment revenues and related receivables were consistent year-over-year. Single-Pay loan balances stabilized in Canada sequentially but year-over-year Single-Pay usage and product profitability were impacted negatively by regulatory changes in Ontario effective July 1, 2018, and the strategic transition of qualifying customers to Open-End loans during the third quarter of 2018. Open-End loans in Canada grew $18.1 million, or 8.3%, sequentially (defined within this release as the change from the second quarter of 2019 to the third quarter of 2019, or comparable periods for 2018 sequential metrics). Open-End loans in Canada grew $98.6 million, or 71.1%, from September 30, 2018, resulting in year-over-year revenue growth of $13.8 million, or 108.2%. U.S. Open-End revenue rose 43.7% on related loan growth of 71.2%. Ancillary revenues increased 32.2% versus the same quarter a year ago, primarily due to the sale of insurance products to Installment and Open-End loan customers in Canada.

For the nine months ended September 30, 2019, total revenue grew $82.0 million, or 10.8%, to $839.5 million, compared to the prior-year period, predominantly driven by growth in Open-End loans in both countries. Geographically, total revenue in the U.S. and Canada grew 8.9% and 19.2%, respectively. From a product perspective, Unsecured Installment revenues rose 6.3% in the U.S., offset by a decrease in Canada of 54.6% due to the continued transition to Open-End loans. Secured Installment revenues and related receivables remained consistent year-over-year. Canadian Single-Pay usage and product profitability were impacted negatively year-over-year by regulatory changes in Ontario effective July 1, 2018, and the strategic transition of qualifying customers to Open-End loans. Open-End revenues rose 83.6% on related loan growth in both countries. Ancillary revenues increased 37.0% versus the same quarter a year ago, primarily due to the sale of insurance to Installment and Open-End loan customers in Canada.

The following table presents revenue composition, including CSO fees, of the products and services that we currently offer:

For the three months ended September 30, 2019 and 2018, revenue generated through the online channel as a percentage of consolidated revenue was 46% and 44%, respectively. For the nine months ended September 30, 2019 and 2018, revenue generated through the online channel as a percentage of consolidated revenue was 45% and 42%, respectively.

Loan Volume and Portfolio Performance Analysis

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

(1) See "Non-GAAP Financial Measures" at the end of this release for definition and more information.

Gross combined loans receivable by product is presented below. Year-over-year comparisons for Open-End are affected by the Q1 2019 Open-End Loss Recognition Change. Excluding the impact of the Q1 2019 Open-End Loss Recognition Change, Open-End receivables increased $84.9 million, or 46.1% year-over-year.

Gross combined loans receivable increased $114.1 million, or 18.5%, to $730.7 million as of September 30, 2019, from $616.6 million as of September 30, 2018. Geographically, gross combined loans receivable grew 5.0% and 48.1%, respectively, in the U.S. and Canada, explained further by product in the following sections.

Unsecured Installment Loans

Unsecured Installment revenue and gross combined loans receivable decreased from the prior-year quarter due to the continued mix shift to Open-End loans in Canada and portfolio optimization in California to manage upcoming January 1, 2020 regulatory changes. Unsecured Installment gross combined loans receivable decreased $15.7 million, or 6.0%, compared to September 30, 2018. Unsecured Installment loans Guaranteed by the Company declined $5.1 million year-over-year due to regulatory change in Ohio, effective April 2019, and the subsequent conversion of Ohio CSO volume to Company-Owned loans, partially offset by growth in Texas.

The NCO rate for Company Owned Unsecured Installment gross loans receivables in the third quarter of 2019 increased approximately 125 bps from the third quarter of 2018 due to geographic mix shift from Canada to the U.S. and increases in U.S. NCO rates due to product and credit policy decisions. The NCO rate in the U.S. rose from 16.8% in the third quarter of 2018 to 18.5% in the third quarter of 2019, primarily due to credit limit increases. While credit limit increases generally result in modestly higher NCO rates in the related loan vintages, the growth in net revenue over the life of such vintages historically has more than covered the higher NCO rates.

The Unsecured Installment Allowance for loan losses as a percentage of Company Owned Unsecured Installment gross loans receivable ("allowance coverage") increased year-over-year from 19.5% as of September 30, 2018 to 21.9% as of September 30, 2019, primarily as a result of related higher NCO rates. Past due receivables as a percentage of total Gross Receivables remained consistent to the same quarter a year ago. Sequentially, the allowance coverage increased slightly from 21.4% to 21.9% as of September 30, 2019.

NCO rates for Unsecured Installment loans Guaranteed by the Company improved nearly 60 bps compared to the same quarter a year ago. The CSO liability for losses remained consistent sequentially from 14.5% to 14.4% for the third quarter of 2019.

Secured Installment Loans

Secured Installment revenue and the related gross combined loans receivable balance as of September 30, 2019 remained consistent year-over-year. Secured Installment Allowance for loan losses and CSO liability for losses as a percentage of Secured Installment gross combined loans receivable decreased year-over-year from 12.4% to 11.3% for the third quarter of 2019 and decreased sequentially from 11.5% to 11.3% during the third quarter of 2019, primarily as a result of an 80 bps improvement in the NCO rate.

Open-End Loans

Open-End loan balances as of September 30, 2019 increased by $130.9 million when compared to September 30, 2018, primarily due to the continued growth in Canada. The Q1 2019 Open-End Loss Recognition Change, discussed further below, impacted comparability as Canada included $19.2 million of past-due Open-End loans as of September 30, 2019 that would have been charged off under the former policy. Sequentially, Open-End balances in Canada grew $18.1 million ($20.9 million on a constant currency basis) due to organic growth of the product and the introduction of Open-End loans in British Columbia during the third quarter of 2019. Remaining year-over-year loan growth was driven by the organic growth in seasoned U.S. markets, such as Tennessee and Kansas, and the relatively newer Virginia market. Similar to Canada, the Q1 2019 Open-End Loss Recognition Change affected comparability in the U.S., with the inclusion of $26.8 million of past-due Open-End loans as of September 30, 2019 that would have been charged off under the former policy.

The Open-End NCO rate during the third quarter of 2019 was 9.4%, compared to 17.1% in the same quarter in the prior year, as a result of a modest improvement in the U.S. and seasoning of the Canada portfolio. Sequentially, on a non-GAAP pro forma basis, as described below, NCO rates improved 130 bps, primarily on portfolio improvements in Canada.

Q1 2019 Open-End Loss Recognition Change

Effective January 1, 2019, we modified the timeframe in which we charge-off Open-End loans and made related refinements to our loss provisioning methodology. Prior to January 1, 2019, we deemed Open-End loans uncollectible and charged-off when a customer missed a scheduled payment and the loan was considered past-due. Because of our continuing shift to Open-End loans in Canada and our analysis of payment patterns on early-stage versus late-stage delinquencies, we revised our estimates and now consider Open-End loans uncollectible when the loan has been contractually past-due for 90 consecutive days. Consequently, past-due Open-End loans and related accrued interest now remain in loans receivable for 90 days before being charged off against the allowance for loan losses. All recoveries on charged-off loans are credited to the allowance for loan losses. We evaluate the adequacy of the allowance for loan losses compared to the related gross loans receivable balances that include accrued interest.

The aforementioned change was treated as a change in accounting estimate for accounting purposes and applied prospectively beginning January 1, 2019.

The change affects comparability to prior periods as follows:

• Gross combined loans receivable: balances as of September 30, 2019 include $46.1 million of Open-End loans that are up to 90 days past-due with related accrued interest, while such balances for periods prior to March 31, 2019 do not include any past-due loans.

• Revenues: for the three and nine months ended September 30, 2019, gross revenues include interest earned on past-due loan balances of approximately $15 million and $35 million, respectively, while revenues in prior-year periods do not include comparable amounts.

• Provision for Losses: prospectively from January 1, 2019, past-due, unpaid balances plus related accrued interest charge-off on day 91. Provision expense is affected by NCOs (total charge-offs less total recoveries) plus changes to the Allowance for loan losses. Because NCOs prospectively include unpaid principal and up to 90 days of related accrued interest, NCO amounts and rates are higher and the Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable is higher. The Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable increased to 17.2% at September 30, 2019, compared to 9.8% in the comparable prior-year period.

The following table reports 2019 Open-End loan performance, including the effect of the Q1 2019 Open-End Loss Recognition Change:

In addition, the following table illustrates, on a non-GAAP pro forma basis, the 2019 quarterly results as if the Q1 2019 Open-End Loss Recognition Change had been applied to our outstanding Open-End loan portfolio as of December 31, 2018. This table is illustrative of retrospective application to determine the NCOs that would have been incurred in each quarter of 2019 from the December 31, 2018 loan book. The primary purpose of this pro forma illustration is to provide a representative level of NCO rates from applying the Q1 2019 Open-End Loss Recognition Change.

Single-Pay

Single-Pay revenue during the three months ended September 30, 2019 decreased compared to the three months ended September 30, 2018, primarily due to regulatory changes in Canada (rate and product changes in Ontario and British Columbia) that accelerated the shift to Open-End products. U.S. Single-Pay receivables increased $1.7 million, or 4.1%, offset by a decrease in Canada receivables of $1.0 million, or 2.8%. Canada Single-Pay balances were stable sequentially from the second quarter of 2019. The Single-Pay Allowance for loan losses as a percentage of Single-Pay gross loans receivable increased sequentially from 6.5% to 7.3%, and the NCO rate increased 215 bps year-over-year, as a result of mandated extended payment options for certain Canada Single-Pay loans.

Results of Operations - CURO Group Consolidated Operations

Condensed Consolidated Statements of Operations

Reconciliation of Net income (loss) from continuing operations and Diluted Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings per Share, non-GAAP measures

Reconciliation of Net income (loss) from continuing operations to EBITDA and Adjusted EBITDA, non-GAAP measures

For the three months ended September 30, 2019 and 2018

Revenue and Net Revenue

Revenue increased $27.8 million, or 10.3%, to $297.3 million for the three months ended September 30, 2019, from $269.5 million for the three months ended September 30, 2018. Revenue for the three months ended September 30, 2019 included interest earned on past-due Open-End loan balances of approximately $15 million from the Q1 2019 Open-End Loss Recognition Change. U.S. revenue increased 6.2%, driven by volume growth. Canadian revenue increased 30.3% (31.6% on a constant currency basis), as volume growth offset yield compression from negative regulatory impacts on Single-Pay loan rates and the significant product mix-shift to Open-End loans.

Provision for losses decreased $3.8 million, or 3.0%, to $123.9 million for the three months ended September 30, 2019, from $127.7 million for the three months ended September 30, 2018. This decrease included incremental provision expense from the Q1 2019 Open-End Loss Recognition Change, consistent with the incremental revenue impact. Excluding the impact of the Q1 2019 Open-End Loss Recognition Change, provision expense declined year-over-year, primarily due to lower sequential loan growth than in the prior-year's quarter. For the three months ended September 30, 2019, gross combined loans receivable grew sequentially by $53.7 million, or 7.9%, compared to sequential growth of $126.8 million, or 25.9% for the three months ended September 30, 2018.

Cost of Providing Services

The total cost of providing services decreased $4.4 million, or 5.5%, to $76.8 million in the three months ended September 30, 2019, compared to $81.2 million in the three months ended September 30, 2018, primarily because of lower advertising costs. The decline in advertising costs was primarily the result of repositioning of our California Installment loan portfolio in advance of regulatory changes and mix-shift, and stability in our Canadian portfolio following the Ontario deployment of Open-End loans in the third quarter of 2018.

Operating Expenses

Excluding share-based compensation of $2.8 million, legal and related costs of $0.9 million and U.K. related costs of $0.3 million, corporate, district and other expenses increased $8.1 million, or 30.4%, primarily due to higher variable compensation tied to our financial performance.

Our investment in Zibby is accounted for under the equity method. We record our pro rata share of Zibby's income or losses in the income statement with a corresponding adjustment to the carrying value of our investment in "Other" on the Condensed Consolidated Balance Sheet. Our share of estimated losses for the three months ended September 30, 2019 was $1.4 million.

Interest Expense

Interest expense for the third quarter of 2019 decreased by $6.0 million compared to the prior-year period, primarily due to our refinancing activities in 2018. During the third quarter of 2018, we issued $690.0 million of 8.25% Senior Secured Notes and used the proceeds from the issuance to extinguish our $527.5 million 12.00% Senior Secured Notes and our Non-Recourse U.S. SPV Facility. In addition, we entered into a Non-Recourse Canada SPV Facility in the third quarter of 2018 with a lower interest rate than our previous Non-Recourse U.S. SPV Facility.

Provision for Income Taxes

The effective income tax rate for the three months ended September 30, 2019 was 28.7%, compared to 28.4% for the three months ended September 30, 2018. The third quarter 2019 effective income tax rate included unfavorable impacts from the non-tax deductible loss on our equity method investment and changes in state income apportionment and a mix shift in taxable income between the U.S. and Canada. Excluding the impact of the loss on equity method investment, the effective tax rate for the three months ended September 30, 2019 was 27.7%.

For the nine months ended September 30, 2019 and 2018

Revenue and Net Revenue

Revenue increased $82.0 million, or 10.8%, to $839.5 million for the nine months ended September 30, 2019 from $757.5 million for the nine months ended September 30, 2018. Revenue for the nine months ended September 30, 2019 included interest earned on past-due Open-End loan balances of approximately $35 million from the Q1 2019 Open-End Loss Recognition Change, offset by a higher provision rate and the higher allowance discussed further below. U.S. revenue increased 8.9%, driven by volume growth. Canadian revenue increased 19.2% (23.1% on a constant currency basis), as volume growth more than offset yield compression from negative regulatory impacts on Single-Pay loan rates and the significant product mix-shift to Open-End loans.

Provision for losses increased $47.3 million, or 16.3%, to $338.3 million for the nine months ended September 30, 2019, from $290.9 million for the nine months ended September 30, 2018, primarily due to the Q1 2019 Open-End Loss Recognition Change. The nine months ended September 30, 2018 included $14.6 million of provision benefit from changes which included allowance coverage rates whereas the nine months ended 2019 included $5.1 million of benefit. Excluding the impact of the allowance coverage change, provision for losses increased $37.9 million, or 12.4%, because of the Q1 2019 Open-End Loss Recognition Change and increased earning asset volume year-over-year as further described in "Segment Analysis" below.

Cost of Providing Services

The total cost of providing services decreased $4.9 million, or 2.2%, to $217.9 million in the nine months ended September 30, 2019, compared to $222.8 million in the nine months ended September 30, 2018, primarily because of lower advertising costs, offset by increased loan servicing costs on higher volume. The decline in advertising costs was primarily the result of repositioning of our California Installment loan portfolio in advance of regulatory changes and mix-shift, and stability in our Canadian portfolio following the Ontario deployment of Open-End loans in the third quarter of 2018.

Operating Expenses

Corporate, district and other expenses increased $27.1 million, or 28.3%, primarily as a result of $8.8 million for obtaining the consent of our holders of the 8.25% Senior Secured Notes and our bondholders associated with discontinuing our U.K. operations and other related U.K. separation costs, $2.0 million of legal and related costs as described above, $1.8 million of restructuring costs from our reduction-in-force implemented in January 2019 and $1.5 million of additional share-based compensation. Excluding these aforementioned costs, corporate, district and other expenses increased by $13.0 million, or 14.3%, primarily due to higher professional fees associated with our second year-end for full compliance with Sarbanes-Oxley and higher variable compensation tied to our financial performance.

Our investment in Zibby is accounted for under the equity method. We record our pro rata share of Zibby's income or losses in the income statement with a corresponding adjustment to the carrying value of our investment in "Other" on the Condensed Consolidated Balance Sheet. Our share of estimated losses for the nine months ended September 30, 2019 was $5.1 million, which includes the $3.7 million of loss recognized in the second quarter of 2019, and $1.4 million of our share of estimated losses.

Interest Expense

Interest expense decreased by $14.2 million compared to the prior-year period, primarily due to our refinancing activities in 2018. During the third quarter of 2018, we issued $690.0 million of 8.25% Senior Secured Notes and used the proceeds from the issuance to extinguish our $527.5 million 12.00% Senior Secured Notes and our Non-Recourse U.S. SPV Facility. In addition, we entered into a Non-Recourse Canada SPV Facility in the third quarter of 2018 with a lower interest rate than our previous Non-Recourse U.S. SPV Facility.

Provision for Income Taxes

The effective income tax rate for the nine months ended September 30, 2019 was 27.9%, compared to (34.8%) for the nine months ended September 30, 2018. Excluding the non-tax-deductible loss from our equity method investment, the effective income tax rate from continuing operations for the nine months ended September 30, 2019 was 26.6%. Excluding non-GAAP adjustments to Net income related to the 2017 Tax Act as presented in the reconciliation of Net Income to Adjusted Net Income, the effective income tax rate from continuing operations for the nine months ended September 30, 2018 was 24.1%.

Segment Analysis

We report financial results for two reportable segments: the U.S. and Canada. Following is a summary of results of operations for the segment and period indicated:

U.S. Segment Results - For the three months ended September 30, 2019 and 2018

Third quarter 2019 U.S. revenues increased by $13.8 million, or 6.2%, to $237.1 million, compared to the prior-year period. U.S. revenue growth was driven by a $21.0 million, or 5.0%, increase in gross combined loans receivable to $444.0 million at September 30, 2019, compared to $423.0 million at September 30, 2018. Additionally, U.S. revenue for the three months ended September 30, 2019 included interest earned on past-due Open-End loan balances of approximately $13 million from the Q1 2019 Open-End Loss Recognition Change.

The provision for losses was consistent year-over-year despite the increase in loan receivables. The year-over-year provision change included incremental provision expense from the Q1 2019 Open-End Loss Recognition Change, consistent with the incremental revenue impact. Excluding the impact of the Q1 2019 Open-End Loss Recognition Change, provision expense declined year-over-year due to lower sequential growth in gross loans receivable compared to the prior year, offset by the aforementioned NCO rate increases. U.S. gross combined loans receivable grew $35.7 million, or 8.7%, sequentially during the third quarter of 2019, compared to sequential growth of $55.3 million, or 15.0%, during the prior-year period.

U.S. cost of providing services for the three months ended September 30, 2019 was $56.8 million, a decrease of $3.1 million, or 5.2%, compared to $59.9 million for the three months ended September 30, 2018, primarily due to lower advertising costs associated with repositioning of our California Installment loan portfolio in advance of regulatory changes.

Corporate, district and other operating expenses increased $10.5 million, or 47.1%, compared to the same period in the prior year, primarily due to $5.3 million of higher performance-based variable compensation costs, $0.9 million related to certain litigation matters and $0.7 million of additional share-based compensation.

U.S. interest expense for the third quarter of 2019 decreased by $7.3 million compared to the prior-year period, primarily due to our refinancing activities in 2018. During the third quarter of 2018, we issued $690.0 million of 8.25% Senior Secured Notes and used the proceeds from the issuance to extinguish our $527.5 million 12.00% Senior Secured Notes and U.S. SPV facility.

U.S. Segment Results - For the nine months ended September 30, 2019 and 2018

For the nine months ended September 30, 2019, U.S. revenues increased by $55.2 million, or 8.9%, to $673.2 million. U.S. revenue growth was driven by a $21.0 million, or 5.0%, increase in gross combined loans receivable, to $444.0 million at September 30, 2019, compared to $423.0 million at September 30, 2018. Additionally, U.S. revenue for the nine months ended September 30, 2019 included interest earned on past-due Open-End loan balances of approximately $30 million from the Q1 2019 Open-End Loss Recognition Change, offset by related higher provision rate and higher provision for losses.

The provision for losses' increase of $41.0 million, or 17.1%, was primarily due to changes in allowance coverage in the prior year. The nine months ended September 30, 2018 included $12.5 million of provision benefit from changes in allowance coverage rates, whereas the nine months ended September 30, 2019 included $1.7 million of incremental expense. Excluding the impact of the allowance coverage change, provision for losses increased $30.1 million, or 12.0%, because of the Q1 2019 Open-End Loss Recognition Change.

U.S. cost of providing services for the nine months ended September 30, 2019 was $160.6 million, a decrease of $2.3 million, or 1.4%, compared to $162.9 million for the nine months ended September 30, 2018, primarily due to lower advertising costs associated with repositioning our California Installment loan portfolio in advance of regulatory changes.

Corporate, district and other operating expenses increased $25.3 million, or 31.2%, compared to the same period in the prior year, primarily due to $8.8 million of U.K. disposition-related costs, $7.7 million higher performance-based variable compensation costs, $3.1 million higher professional fees and $1.6 million of restructuring costs.

U.S. interest expense for the first nine months of 2019 decreased by $20.7 million compared to the prior-year period, primarily due to our refinancing activities in 2018. During the third quarter of 2018, we issued $690.0 million of 8.25% Senior Secured Notes and used the proceeds from the issuance to extinguish our $527.5 million 12.00% Senior Secured Notes and our U.S. SPV facility.

Canada Segment Results - For the three months ended September 30, 2019 and 2018

Canada revenue increased $14.0 million, or 30.3%, to $60.2 million for the three months ended September 30, 2019, from $46.2 million in the prior-year period. On a constant currency basis, revenue increased $14.6 million, or 31.6%. Revenue growth in Canada was impacted favorably by the significant asset growth and the product transition from Single-Pay and Unsecured Installment loans to Open-End loans. Additionally, Canada revenue for the three months ended September 30, 2019 included interest earned on past-due Open-End loan balances of approximately $2 million from the Q1 2019 Open-End Loss Recognition Change.

Single-Pay revenue decreased $2.7 million, or 11.6%, to $20.2 million for the three months ended September 30, 2019, and Single-Pay receivables decreased $1.0 million, or 2.8%, to $35.1 million from $36.1 million in the prior year. The decreases in Single-Pay revenue and receivables were due to the continued product mix shift in Canada from Single-Pay loans to Open-End loans and by regulatory changes effective January and July 2018 that lowered Single Pay pricing year-over-year.

Canada non-Single-Pay revenue increased $16.6 million, or 71.1%, to $40.0 million compared to $23.4 million the same quarter a year ago, on growth of $94.1 million, or 59.8%, in related loan balances. The increase was primarily related to the launch of Open-End products in Alberta and Ontario in the fourth quarter of 2017, and significant expansion of the Open-End product in Ontario in late 2018. Additionally, as a result of the increase in Open-End loans, ancillary revenue increased $3.8 million versus the same quarter a year ago, primarily driven by an increase in sales of insurance to Open-End loan customers.

The provision for losses decreased $3.6 million, or 14.6%, to $20.9 million for the three months ended September 30, 2019, compared to $24.4 million in the prior-year period. This decrease included incremental provision expense from the Q1 2019 Open-End Loss Recognition Change, consistent with the incremental revenue impact. Excluding the impact of the Q1 2019 Open-End Loss Recognition Change, provision expense declined year-over-year because of lower sequential gross receivable growth and seasoning of the Open-End loans. Total Open-End and Installment loans grew $18.0 million sequentially during the third quarter of 2019, compared to sequential growth of $82.7 million during the same prior-year period. Total Canada NCO rates improved 425 bps year-over-year due to the seasoning of Open-End loans. On a constant currency basis, provision for losses decreased by $3.4 million, or 13.8%, compared to the prior-year period.

Canada cost of providing services for the three months ended September 30, 2019 was $19.9 million, a decrease of $1.3 million, or 6.3%, compared to $21.3 million for the three months ended September 30, 2019, primarily due to lower advertising costs from mix-shift and stability in our Canadian portfolio following the Ontario deployment of Open-End loans in the third quarter of 2018. There was no material impact on the cost of providing services from exchange rate changes.

Canada operating expenses increased $1.9 million, or 29.6%, to $8.3 million in the three months ended September 30, 2019 from $6.4 million in the prior-year period, primarily due to interest expense on the Non-Recourse Canada SPV Facility that began in August 2018.

Canada Segment Results - For the nine months ended September 30, 2019 and 2018

Canada revenue increased $26.8 million, or 19.2%, to $166.3 million for the nine months ended September 30, 2019 from $139.5 million in the prior-year period. On a constant currency basis, revenue increased $32.2 million, or 23.1%. Revenue growth in Canada was impacted favorably by the significant asset growth and product transition from Single-Pay and Unsecured Installment loans to Open-End loans that have a lower yield. Additionally, Canada revenues for the nine months ended September 30, 2019 included interest earned on past-due Open-End loan balances of approximately $5 million from the Q1 2019 Open-End Loss Recognition Change, offset by higher provision rate and higher provision for losses.

Single-Pay revenue decreased $31.6 million, or 34.9%, to $58.9 million for the nine months ended September 30, 2019, and Single-Pay receivables decreased $1.0 million, or 2.8%, to $35.1 million from $36.1 million in the prior year. The decreases in Single-Pay revenue and receivables were due to the continued product mix shift in Canada from Single-Pay loans to Open-End loans and by regulatory changes effective January and July 2018 that lowered Single Pay pricing year-over-year.

Canada non-Single-Pay revenue increased $58.4 million, or 119.0%, to $107.4 million compared to $49.0 million for the prior-year period, on $94.1 million, or 59.8%, growth in related loan balances. The increase was primarily related to the launch of Open-End products in Alberta and Ontario in the fourth quarter of 2017, and significant expansion of the Open-End product in Ontario in late 2018. As a result of the increase in Open-End loans, ancillary revenue increased $13.1 million versus the same period a year ago, primarily driven by an increase in sales of insurance to Open-End loan customers.

The provision for losses increased $6.4 million, or 12.4%, to $57.7 million for the nine months ended September 30, 2019 compared to $51.3 million in the prior-year period primarily due to provisioning on Open-End loans and mix shift from Single-Pay loans and Unsecured Installment to Open-End loans. Total Open-End loans grew by $18.1 million sequentially during the third quarter of 2019, compared to sequential growth of $87.4 million in the third quarter of 2018. On a constant currency basis, provision for losses increased by $8.3 million, or 16.1%, compared to the prior-year period.

The total cost of providing services in Canada decreased $2.5 million, or 4.2%, to $57.3 million for the nine months ended September 30, 2019 compared to $59.9 million in the prior-year period. Advertising costs decreased by $3.9 million, or 42.4%, primarily from mix-shift and stability in our Canadian portfolio following the Ontario deployment of Open-End loans in the third quarter of 2018, partially offset by an increase in non-advertising cost of providing services of $1.4 million. There was no material impact on the cost of providing services from exchange rate changes.

Canada operating expenses increased $8.4 million, or 52.0%, to $24.4 million in the nine months ended September 30, 2019 from $16.1 million in the prior-year period primarily due to interest expense on the Non-Recourse Canada SPV Facility that began in August 2018.

Results of 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 our U.K. subsidiaries, Curo Transatlantic Limited ("CTL") and SRC Transatlantic Limited (collectively with CTL, “the U.K. Subsidiaries”), insolvency practitioners from KPMG were appointed as administrators (“Administrators”) in respect of the U.K. Subsidiaries. The effect of the U.K. Subsidiaries’ entry into administration was to place the management, affairs, business and property of the U.K. Subsidiaries under the direct control of the Administrators. Accordingly, we deconsolidated the U.K. Subsidiaries as of February 25, 2019 and classified them as Discontinued Operations beginning the first quarter of 2019. The following is a summary of the financial results of the U.K. business, which meet the criteria of Discontinued Operations and, therefore, are excluded from our results of continuing operations: