Exhibit 99.2
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS OF OPERATIONS
On December 28, 2021, CURO Group Holdings Corp. (the “Company” or “CURO”) filed a Current Report on Form 8-K with the Securities and Exchange Commission to report the completion of its acquisition of SouthernCo, Inc., a Delaware corporation d/b/a Heights Finance (“Heights”) (collectively “Combined Company”), from SouthernCo Holdings, LLC, a Delaware limited liability company (“Seller”), pursuant to that certain stock purchase agreement dated as of November 17, 2021 (the “Purchase Agreement” or “SPA”). Pursuant to the Purchase Agreement, the Company agreed to purchase from the Seller all of the issued and outstanding common stock of Heights for a purchase price of $360 million, consisting of (i) $335 million in cash and (ii) shares of the Company’s common stock valued at $25 million in accordance with the formula set forth in the Purchase Agreement, subject to customary working capital and certain other adjustments (the “Acquisition”). The Company completed the acquisition effective December 27, 2021.
The following unaudited pro forma combined statement of operations of CURO and Heights present the combination of the historical consolidated statement of operations of CURO and Heights adjusted to give effect to the Acquisition. A pro forma balance sheet as of December 31, 2021 is not presented because CURO’s audited consolidated balance sheet as of December 31, 2021, filed in the Company’s Annual Report on Form 10-K with the SEC on March 7, 2022, includes the assets acquired and liabilities assumed from the acquisition of Heights. The following unaudited pro forma combined statement of operations have been prepared in accordance with Article 11 of Regulation S-X, Pro Forma Financial Information.
The unaudited pro forma combined statement of operations for the year ended December 31, 2021 combines the historical statement of operations of CURO and Heights on a pro forma basis as if the Acquisition had been consummated on January 1, 2021.
The unaudited pro forma combined statement of operations is based upon available information and certain assumptions that the Company and management believes are reasonable under the circumstances. The unaudited pro forma combined statement of operations should be read in conjunction with the consolidated financial statements, and related notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 7, 2022. The unaudited pro forma combined statement of operations are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations of the Combined Company would have been had the Acquisition occurred on the date assumed, nor are they necessarily indicative of future consolidated results of operations.
The historical consolidated statement of operations of Heights have been adjusted by Company management to reflect certain reclassifications to conform with current financial statement presentation. The unaudited pro forma combined statement of operations does not reflect the costs of any integration activities or benefits that may result from realization of future cost savings from operating efficiencies or revenue synergies expected to result from the Acquisition. The pro forma adjustments may differ materially from this provisional determination as the Company completes the analysis of the fair value of assets acquired and liabilities assumed at the date of the Acquisition.
The preparation of the Unaudited Pro Forma Combined Statement of Operations and related adjustments required management to make certain assumptions and estimates. The Pro Forma Statement of Income should be read together with:
•The accompanying notes to the Unaudited Pro Forma Statement of Operations;
•CURO’s audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2021, included in CURO’s Form 10-K filed with the SEC on March 7, 2022; and
•Heights’ audited historical consolidated financial statements and accompanying notes as of and for the years ended December 31, 2020 and 2019 included as Exhibit 99.1 in this Current Report on Form 8-K
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2021
(in thousands, except per share data)
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| CURO Group Holdings Corp. Historical (includes Heights from December 27 to December 31, 2021) | Heights As Adjusted from January 1 to December 26, 2021 (Note 3) | Transaction Accounting Adjustments | Ref.
(Note 4)
(Note 6) | CURO Group Holdings Corp. and Heights Pro Forma Combined |
| Revenue | $ | 817,843 | | $ | 235,700 | | $ | 22,160 | | (4b), (4c) | $ | 1,075,703 | |
| Provision for losses | 245,668 | | 45,292 | | (33,671) | | (4b), (4c) | 257,289 | |
| Net revenue | 572,175 | | 190,408 | | 55,831 | | | 818,414 | |
| Operating expenses | | | | | |
| Salaries and benefits | 237,109 | | 75,944 | | 9,729 | | (4b) | 322,782 | |
| Occupancy | 55,559 | | 16,681 | | — | | | 72,240 | |
| Advertising | 38,762 | | 11,299 | | — | | | 50,061 | |
| Direct operations | 60,056 | | 12,969 | | 570 | | (4b) | 73,595 | |
| Depreciation and amortization | 26,955 | | 5,615 | | 405 | | (4b), (4c) | 32,975 | |
| Other operating expense | 74,682 | | 13,310 | | (1,529) | | (4a), (4b) | 86,463 | |
| Total operating expenses | 493,123 | 135,818 | 9,175 | | | 638,116 |
| Other (income) expense | | | | | |
| Interest expense | 97,334 | | 24,968 | | 10,097 | | (4a), (4b), (4d) | 132,399 | |
| Income from equity method investment | (3,658) | | — | | — | | | (3,658) | |
| Gain from equity method investment | (135,387) | | — | | — | | | (135,387) | |
| Loss on extinguishment of debt | 40,206 | | — | | — | | | 40,206 | |
| Total other (income) expense | (1,505) | 24,968 | 10,097 | | | 33,560 | |
| Income from continuing operations before income taxes | 80,557 | | 29,622 | 36,559 | | | 146,738 | |
| Provision (benefit) for income taxes | 21,223 | | 9,396 | | 9,505 | | (4e) | 40,124 | |
| Net income from continuing operations | 59,334 | | 20,226 | | 27,054 | | | 106,614 | |
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| Basic earnings per share from continuing operations: | $ | 1.44 | | | | (6) | $ | 2.50 | |
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| Diluted earnings per share from continuing operations: | $ | 1.38 | | | | (6) | $ | 2.39 | |
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The accompanying notes are an integral part of the unaudited pro forma combined statement of operations.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Note 1 - Basis of Pro Forma Presentation
The pro forma statement of operations was prepared in accordance with Article 11 of SEC Regulation S-X, which requires the presentation of the most recent fiscal year end for which a balance sheet is required. Pursuant to Article 11, no pro forma balance sheet is included because CURO’s audited consolidated balance sheet as of December 31, 2021, filed on March 7, 2022, includes the assets acquired and liabilities assumed from the acquisition of Heights.
The unaudited pro forma combined statement of operations was prepared using the acquisition method of accounting for business combinations pursuant to the provisions of Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). Under the guidance of ASC 805, the Company is considered the acquirer of Heights for accounting purposes. Accordingly, consideration given by the Company to complete the acquisition was allocated to the assets and liabilities of Heights based upon their estimated fair values as of the date of the acquisition. As of the date of this Current Report, the Company has not completed the valuation analysis of identifiable assets acquired and liabilities assumed. Accordingly, the adjustments are provisional and are subject to further adjustments as additional information becomes available and as additional analyses are performed. The provisional pro forma adjustments have been made solely for the purpose of providing the unaudited pro forma combined statement of operations. Increases or decreases in the fair value of relevant balance sheet amounts will result in adjustments to the statement of operations until the allocation of consideration is finalized, which will be made as soon as practicable but not later than one year from the acquisition date. There can be no assurance that such finalization will not result in material changes.
The unaudited pro forma combined statement of operations presents the pro forma combined results of operations of the Combined Company based upon the historical financial statement of the Company and Heights, after giving effect to the acquisition and the adjustments described in these notes. The unaudited pro forma combined statement of operations is presented for illustrative purposes only and is not intended to reflect the results of operations which would have actually resulted had the acquisition been completed on the date indicated. Further, the unaudited pro forma combined statement of operations does not reflect the costs of integration activities or benefits from the realization of future cost savings due to operating efficiencies or revenue synergies expected to result from the acquisition.
The unaudited pro forma combined statement of operations give effect to the acquisition as if it had been consummated on January 1, 2021.
Note 2 - Accounting Policies
As part of preparing the pro forma statement of operations, the Company conducted a review of the accounting policies of Heights and did not note any material differences in accounting policies that would require pro forma adjustments to conform to the Company’s accounting policies.
The accounting policies used in the preparation of the unaudited pro forma combined statement of operations are those set out in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2021.
Note 3 - Reclassification Adjustments
The unaudited pro forma combined statement of operations has been adjusted to reflect certain reclassifications of Heights’ financial statements to conform to the Company’s financial statement presentation.
Financial information presented in the “Heights As Adjusted” column in the unaudited pro forma combined statement of operations for the period between January 1, 2021 through December 26, 2021 has been reclassified to conform to the Company’s presentation as indicated in the table below (in thousands):
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| Presentation in Heights Financial Statements | Presentation in unaudited pro forma combined consolidated statement of operations | For the period January 1 to December 26, 2021 |
| Personnel | Salaries and benefits | $ | 75,944 | |
| Other operating expense | 67 | |
| Professional fees | Other operating expense | 5,898 | |
| Occupancy and equipment | Occupancy | 12,588 | |
| Other operating expense | 425 | |
| Marketing | Advertising | 11,115 | |
| Other | Direct operations | 12,969 | |
| Other operating expense | 6,920 | |
| Occupancy | 4,093 | |
| Advertising | 184 | |
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CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Note 4 - Transaction Accounting Adjustments
(a) Activity excluded from acquisition
Certain activity was excluded from the transaction activity based on it not being purchased per the terms of the SPA or relating to a balance settled upon close of the Acquisition. The activity excluded from the unaudited combined statement of operations was (in thousands):
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| Account | Financial Statement Caption | For the period January 1 to December 26, 2021 |
| Debt related interest and fees | Interest expense | $ | (2,095) | |
| Management fees | Other operating expense | (2,099) | |
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(b) Reflects the write-off of certain activity in accordance with the acquisition method of accounting. The activity removed from the unaudited pro forma combined statement of operations was (in thousands):
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| Account | Financial Statement Caption | Increase (decrease)
for the period January 1 to December 26, 2021 |
| Amortization of deferred loan origination costs | Revenue | $ | 10,539 | |
| Provision for loan losses / insurance claims and expenses | Provision for losses | (45,292) | |
| Deferral of loan origination costs | Salaries and benefits | 9,729 | |
| Deferral of loan origination costs | Direct operations | 570 | |
| Deferral of loan origination costs | Other operating expense | 570 | |
| Amortization of debt related fees | Interest expense | (4,996) | |
| Amortization of intangible assets | Depreciation and amortization | (2,558) | |
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(c) Reflects the fair value adjustments in accordance with the acquisition method of accounting. The activity added to the unaudited pro forma combined statement of operations was (in thousands):
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| Account | Financial Statement Caption | For the period January 1 to December 26, 2021 |
| Amortization of fair value discount on unsecured loans | Revenue | $ | 11,621 | |
| Amortization of fair value discount on unsecured loans | Provision for losses | 11,621 | |
| Amortization of intangible assets | Depreciation and amortization | 2,963 | |
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(d) To adjust Interest expense for the issuance of an additional $250 million of 7.50% Senior Notes, which were issued on December 3, 2021. The $250 million of 7.50% Senior Notes were used to fund the Acquisition and have been adjusted to give effect to pro forma operations for the period January 1, 2021 through December 2, 2021, as follows (in thousands):
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| Corporate Debt | Financial Statement Caption | For the year ended December 31, 2021 |
| 7.50% Senior Notes | Interest expense | $ | 17,188 | |
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(e) To adjust for the income tax impact of the Transaction Accounting Adjustments at the blended federal and state statutory rate of approximately 26%, as follows (in thousands):
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| Account | Financial Statement Caption | For the period January 1 to December 26, 2021 |
| Income tax expenses | Provision for income taxes | $ | 9,505 | |
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Note 5 - Calculation of Provisional Purchase Price and Purchase Price Allocation
Information regarding the acquisition is provisional and based on information available in the limited time since December 27, 2021. Due to the timing of the close of the acquisition, the information described below will be finalized in subsequent periods as prescribed in ASC 805.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
The provisional purchase price includes cash consideration and the fair value of CURO’s common stock issued to the Sellers. The provisional purchase price was calculated as follows (in thousands, except per share data):
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| Cash consideration | |
Cash consideration paid at closing (1) | $ | 335,000 | |
| Cash consideration paid to extinguish Seller pre-existing debt not acquired | 56,716 | |
| Working capital true up adjustment | 1,371 | |
| Cash payment for cash acquired | 10,659 | |
| Total cash consideration paid | $ | 403,746 | |
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| Equity consideration | |
| Shares of CURO common stock issued | 1,446 | |
Price per share (2) | $ | 16.85 | |
| Equity consideration of CURO shares issued | $ | 24,369 | |
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| Total consideration paid | $ | 428,115 | |
| (1) Calculated in accordance with the Purchase Agreement as the base purchase price |
| (2) Based on the closing stock price on December 27, 2021. |
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The following table presents the provisional purchase price allocation recorded in the Company’s Consolidated Balance Sheet as of the date of acquisition (in thousands):
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| | | Amounts acquired on December 27, 2021 (as adjusted) |
| Assets | | | |
| Cash and cash equivalents | | | $ | 13,564 | |
| Restricted cash | | | 33,630 | |
Gross loans receivable(1) | | | 471,630 | |
| Income tax receivable | | | 3,526 | |
| Prepaid expenses and other | | | 7,410 | |
| Property and equipment | | | 4,748 | |
| Right-of-use assets | | | 16,111 | |
| Intangibles, net | | | 11,900 | |
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| Other assets | | | 98 | |
| Total assets | | | $ | 562,617 | |
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| Liabilities | | | |
| Accounts payable and accrued liabilities | | | $ | 19,186 | |
| Lease liabilities | | | 16,315 | |
| Deferred tax liability | | | 1,077 | |
| Accrued interest on debt | | | 1,781 | |
| Debt | | | 350,000 | |
| Total liabilities | | | $ | 388,359 | |
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| Net assets acquired | | | $ | 174,258 | |
| Total consideration paid | | | 428,115 | |
| Goodwill | | | $ | 253,857 | |
| (1) The gross contractual loans receivables as of December 27, 2021 were $485.4 million of which the Company estimates $13.7 million will not be collected. |
Goodwill of $253.9 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 combined workforce.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands):
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
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| Fair Value | Useful Life | | | |
| Trade name | $ | 4,300 | | 10.0 years | | | |
| Customer relationships | 7,600 | | 3.0 years | | | |
| Total identified intangible assets | $ | 11,900 | | | | | |
Note 6 - EPS
The preliminary pro forma calculation of earnings per share has been adjusted to give effect to the issuance of 1.4 million shares of CURO common stock as equity consideration, as discussed in Note 6.
Pro forma basic and diluted earnings per share from continuing operations (in thousands, except per share data):
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| Basic EPS from continuing operations | |
| Combined pro forma net income from continuing operations | $ | 106,614 | |
| CURO historical basic weighed average common shares outstanding | 41,155 |
Weighted average number of common shares issued by CURO(1) | 1,427 |
| Pro forma weighted average common shares outstanding | 42,582 |
| Basic EPS from continuing operations | $ | 2.50 | |
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| Diluted EPS from continuing operations | |
| Combined pro forma net income from continuing operations | 106,614 |
| CURO historical diluted weighed average common shares outstanding | 1,987 |
| Pro forma weighted average common shares outstanding | 44,569 |
| Diluted EPS from continuing operations | $ | 2.39 | |
| (1) Reflects the 1.4 million common shares issued in the acquisition on December 27, 2021, weighted for the period of January 1, 2021 to December 26, 2021, as the shares are reflected in the CURO historical weighted-average number of basic shares beginning December 27, 2021. |
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