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CURO Group Holdings Corp. (CURO)
Q3Â 2020 Earnings Call
Oct 30, 2020, 8:15 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning and welcome to CURO Group Holdings Third Quarter 2020 Conference Call. [Operator Instructions] I would now like to turn the conference over to Matt Keating, Investor Relations for CURO. Please go ahead.
Matt Keating -- Investor Relations
Thank you and good morning, everyone. After the market close yesterday, CURO released results for the third quarter of 2020, which are available on the Investors section of our website at ir.curo.com. With me on today's call are CURO's President and Chief Executive Officer, Don Gayhardt; Chief Operating Officer, Bill Baker; Chief Financial Officer, Roger Dean; and Chief Accounting Officer, Dave Strano. This call is being webcast and will be archived on the Investors section of our website.
Before I turn the call over to Don, I'd like to note that today's discussion will contain forward-looking statements based on the business environment as we currently see it. As such, it does include certain risks and uncertainties. Please refer to our press release issued last night, and our forms 10-K and 10-Q for more information on the specific risk factors that could cause our actual results to differ materially from the projections described in today's discussion. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events.
In addition to US GAAP reporting, we report certain financial measures that do not conform to generally accepted accounting principles. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliations between these GAAP and non-GAAP measures are included in the tables found in yesterday's press release.
With that, I would like to turn the call over to Don.
Don Gayhardt -- President & Chief Executive Officer
Thanks, Matt. Good morning and thank you for joining our call today. I hope to find you and your families and your colleagues are all safe and healthy.
Before we begin our third quarter update, I'd like to point out that we have again prepared a supplemental investor presentation to highlight key trends through last week. We'll be referencing this presentation in our remarks and you can find it on the Events and Presentations section of our IR website.
Our results for the third quarter were positively impacted by gradual increase in loan demand, our decisions to selectively adjust our credit scoring to raise approval rates, reduced quarantine and stay-at-home orders, and historically low delinquencies and net charge-off rates. Canada remained a bright spot, posting another quarter of sequential loan balances, revenue and bottom line growth. We continue to experience solid demand and improving credit trends for Open-End loans in Canada, which drove the third quarter's impressive results.
We believe that our strong results in Canada are reflective of two things. One, our strong market position and our market-leading omni-channel product offerings. And second, the more pronounced economic rebound in Canada where approximately 80% of the jobs lost due to COVID have been recovered compared to just under 60% here in the US.
In our US business, we finally started to see some growth return in August and September. Credit has held steady at very strong levels, so far. We also continue to gain traction with the Verge Credit product, and are now offering that product in 14 states. Although there are signs of progress in the US business, the impact of COVID-19 in terms of reducing loan demand and increasing loan repayments remains a challenge. And we still have work to do to get to bottom line in the US back to more normalized levels.
Getting into the detail a bit more. We experienced steady weekly increases in loan applications and new loan volume overall as we moved through the third quarter. While these trends were still well below the same periods a year ago, they have, for now, turned the corner. Our total managed loan balances increased by 9.5% from the second quarter of 2020, with growth of 4.8% in the US and 13.8% in Canada. While managed loan balances were still down 26.5% year-over-year due to the impacts from COVID, the 9.5% sequential increase in this year's third quarter was better than 7.9% sequential growth in last year's third quarter. I should note that the year-over-year decline was 18.2% without the impact of a run off of our California Installment portfolios.
In addition, an unprecedented improvement in credit quality partially offset the impact of lower loan volume and on revenue. Total delinquencies were down more than 30% year-over-year for most of the third quarter. Through the week ended October 24, total delinquencies were down 28% compared to the same period a year ago.
Putting the pieces together from a P&L perspective for the third quarter, we posted a revenue decline of 38.8%, primarily due to COVID-19's impact on loan demand as well as the year-over-year impact of the California regulatory change that went into effect at the start of this year. Excluding the impact of our California Installment loans, revenue declined 35.8% compared to the year ago quarter, so COVID-19 is by far the main driver.
Adjusted EBITDA declined $30.9 million, or 46.1%, while net revenue declined $46.1 million year-over-year. Net revenue decline was offset by about $20 million of year-over-year cost reductions, which Roger will cover in more detail. As a result, adjusted diluted earnings per share declined 62% year-over-year to $0.27 per share for the third quarter.
We've said before that non-prime consumers consistently showed a greater ability to manage credit as measured by the relative change in their delinquency and charge-off data during an economic downturn in prime and near-prime customers. Our experience in this crisis certainly provides additional support for this view. Our delinquencies and net charge-offs in the US and Canada stayed low despite much of the government stimulus burning off.
The behavior of our customers through this period also demonstrates the value of our omni-channel platform and the investments that we have made to allow for a seamless transition from our store to digital channels. In the US, 67% of transactions occurred online during the third quarter of 2020 compared to 57% in the first quarter of 2020. In Canada, where online adoption has lagged the US, we saw similar shift toward online with 34% of transactions conducted online during the third quarter of 2020 compared to 23% in the first quarter of the year.
We remained focused on expanding our product set and strategic relationships. And as mentioned earlier, we're encouraged by the early results from our relationship with Stride Bank. As a reminder, Stride Bank licenses are underwriting, origination and servicing platforms to generate online installment loans using the Verge Credit brand. Verge is now offered in 14 states and we expect another five states to go live by the end of the fourth quarter. We remain optimistic about this product's growth potential and future contributions.
Another area where we are focusing good deal of our effort is in our card platforms. We currently have approximately 415,000 open accounts with a positive balance in our Opt+ and Revolve programs. We offer our Opt+ prepaid card in both the US and Canada, while our newest product, our Revolve bank account, is offered in the US. In all cases, we act as a program manager. And while we partner with banks for core functionality, we control pricing, marketing and future development for all of our card products, allowing us to capture greater economics than if we work as an agent for another program manager.
Revolve is particularly interesting as it offers the full functionality of a bank account to our customers, including direct deposit, early access to payroll direct deposits and overdraft protection, and in many cases, it's better and cheaper alternative to traditional bank accounts. These card-based or like bank accounts, which are also offered by companies like Chime, are proven very popular with non-prime consumers. And we believe that our branch network provides us with a great platform to market and fulfill new account relationships. To that end, our fourth quarter advertising spend includes a significant increase in advertising investment for the Revolve card, which, if successful, will continue on into 2021.
I'd now like to turn to our investment in Catapult, a leader in the rapidly growing virtual point-of-sale financing space. Catapult's origination volume and credit performance continues to be strong. Through the end of September, Catapult's originations increased by over 160% compared to the same period in 2019. We pick up our share of Catapult's income on a two-month lag. So we expect that its strong earnings trends will contribute considerably to our earnings in the fourth quarter of 2020.
It's important to note that our equity share of Catapult's earnings is not included in our adjusted EBITDA or other non-GAAP metrics. Specifically, our equity income from Catapult was $3.5 million in the third quarter of 2020, a $4.9 million improvement over last year's third quarter loss. We also increased our ownership of Catapult in the third quarter, spending $11.2 million, and we now own 46.6% of the primary shares and 41.2% of Catapult's fully diluted shares.
In what has been a very challenging environment, we also generated over $185 million in free cash flow from operations after loan funding and capital expenditures. Roger will highlight our continued strong liquidity position. While we have a fair amount of caution around the economic environment, we are carefully evaluating M&A and investment opportunities, focused around our key strategic growth areas in Canada and cards.
As we start the fourth quarter with higher loan balances and continued low delinquencies, we think this third quarter could be the trough for risk-adjusted revenue. With that said, we expect increase in new customer accounts, online mix shift and upfront loss provisioning on higher volumes to modestly impact risk-adjusted revenue margins in the near term. Even though recent economic data and our own indicators of customer health have been more constructive of late, there remains a significant amount of uncertainty.
As we have over the last couple of quarters, while we aren't going to provide guidance, we plan to continue to provide business updates as we move through the quarter. On Page 12 of our supplemental investor presentation, we've highlighted the trends and uncertainties that we think will affect the balance of 2020 and into 2021. We are prepared for a range of outcomes and are continuing to focus on supporting our customers and communities through this unprecedented time.
More broadly though, and as we discussed last quarter, we believe that we're still tracking to end 2020 with an upward trend in earning asset growth. Given our current business and product line mix, we think this growth trajectory points to a 2021 revenue picture that looks broadly in line with our results for 2019 although with a higher percentage of the total coming from our Canadian operations. However, there remains uncertainty around the extent to which higher advertising spend and upfront loan loss provisioning that come with hiring new account volumes will impact our bottom line results.
In summary, while business continues to show the effects of the pandemic, we feel great about the work that we've done to continue to move the Company forward, namely, managing through the pandemic, including extended work-from-home time for over 1,300 employees, continuing to invest in our technology and risk and analytics platform, the strength of which has helped us to quickly migrate customers to our online channel and to continue to refine our credit decisioning, supporting the growth of our Canadian operations, which accounted for more than 45% of our consolidated quarterly adjusted EBITDA and 57% of our gross earning assets at the end of the third quarter, growing and enhancing our card offerings, investing in the continued growth of Catapult and its market-leading e-commerce LTO solutions, and continuing to evaluate a number of M&A and corporate development opportunities that could offer further growth and diversification of our business lines.
I'd like to close by thanking our 3,900 key members who, despite the challenges created by the pandemic, continue to meet our customers' everyday needs for financial services and to execute on our strategic priorities, all while helping customers navigate financial hardship and other challenges. Like a lot of companies, on Tuesday, we're giving our US employees extending time off to vote. And I'm very pleased with the response that this plan has generated internally. We firmly believe that the strength of our Company lies in our people and our culture. I'm confident that, together, we will manage through these unprecedented times and emerge even stronger and more nimble than before.
And with that, I will turn it over to Roger.
Roger Dean -- Executive Vice President & Chief Financial Officer
Thanks, Don, and good morning, everyone. As Don mentioned earlier, consolidated revenue for the quarter was $182 million, down 38.8% compared to last year's third quarter. US loan balances and revenue decreased 44.8% and 44%, respectively, year-over-year, primarily due to the impact of COVID and some additional pressure from the run-off of the California Installment portfolios. Excluding California Installment loan balances, US loan balances finished the quarter down $115.4 million, or 36.5%, but grew $25.6 million from the end of second quarter.
Canada loan balances increased 1.9% year-over-year, reflecting a $28.2 million increase in Open-End balances, offset by an $18.4 million decline in Single-Pay balances from COVID-19-related impacts on store volumes. The sequential growth from the COIVD trough was strong at 13.8%.
Consolidated adjusted EBITDA came in at $36.1 million, down $30.9 million, or 46.1%, as revenue declines from lower loan balances were offset by lower provision for loan loss and cost reductions. Consolidated adjusted net income declined 65.4% and adjusted earnings per share declined 62% year-over-year. Again, note that our year-over-year improvement of $4.9 million from Catapult is not reflected in the numbers that I just cited.
Geographically, I'll start with Canada where the year-over-year performance continues to stand out despite COVID headwinds. In Canada, revenue declined 18.3% compared to the prior year quarter, entirely due to loan demand for the Single-Pay product declining from COVID-19 impacts. Our Open-End book in Canada increased 11.9% year-over-year with revenue up 6.7%. Net revenue declined only 3.6% largely due to a 380 basis point improvement in the net charge off rate year-over-year. Positive credit performance coupled with disciplined expense management drove a 6.7% year-over-year increase in Canadian adjusted EBITDA to $16.3 million for this quarter.
In the US, the continuing impact of COVID-19 was more pronounced with revenue down 44% from the prior year and adjusted EBITDA down $32 million, or 61.7%. In addition to COVID impacts, US comps were affected by the run-off of our California Installment portfolios. Excluding California Installment loans, US revenue declined 41.1% year-over-year. Loss rates in the US improved 540 basis points year-over-year and we've remained very controlled in our cost structure, which partially mitigated the effect on revenue of lower loan balances.
Don mentioned the key macro drivers of our P&L and balance sheet performance earlier, and I'll expand on that a bit now. First, demand and loan volume. Page 4 of our supplemental earnings presentation recaps the weekly trends through last week indexed to the week ended March 7. Weekly application volume has returned steadily to nearly 120% of what we experienced pre-COVID and loan balances have grown modestly week to week, more so in Canada.
However, we would normally expect application volume at this time of the year to be double what we see in the early part of the year in March. As we moved through third quarter, we selectively adjusted credit criteria, particularly for existing customers, while their percentage of loans originated to new customers also increased to an average of 11.5%, that's down slightly from 12.8% new customers in the third quarter of 2019 but nearly double the new customer percentage from the second quarter of 2020. But approval rates are still lower than a year ago due to the relative quality of the application volume. Loan balances have continued to grow in October with $10 million of sequential growth through October 28.
Second, delinquency and credit trends. Page 5 of our earnings supplement highlights weekly delinquency trends by bucket. As we moved through October, delinquency levels have moved slightly off the historical lows we saw for most of the third quarter. This is due predominantly to the aforementioned higher percentage of new customer originations, higher percentage online originations and California run off. Through the week ended October 24, total delinquency levels remained over 28% lower than the same period a year ago.
Our consolidated net charge off rate declined 675 basis points year-over-year with a 380 basis point improvement in Canada and a 540 basis point improvement in the US. Because of growth mix shifts toward Canada, the consolidated decline in our NCO rate is greater than the sum of each of the countries.
Third, provision for loan losses. Our allowance coverage rates declined modestly from second quarter. But we built allowance levels overall as the provision for loan losses exceeded net charge-offs this quarter by $4.6 million. Consolidated allowance coverage was 16.1% at the end of third quarter compared to 16.7% at the end of second quarter. The impact of changes in delinquencies and lower net charge-off rates on allowance coverage was offset qualitatively in our allowance of valuation by continued high levels of uncertainty for unemployment trends and expiring unemployment supplements as well as the impact of modified loans.
Fourth, operating expense reductions. As discussed on our last two quarterly conference calls, we took actions in mid-March to reduce operating expenses across several major categories, including advertising, variable compensation, a freeze on hiring, suspension of merit increases and savings from work-from-home initiatives. On a combined basis, we previously guided that these actions would drive $11 million to $13 million of quarterly cost reductions. The actual year-over-year reduction this quarter was $15.6 million, so we again came in better than expected.
We ended the third quarter with $207.1 million in cash and $302.1 million of liquidity, including undrawn capacity on revolving credit facilities. Of course, access through revolving lines depends on continued collateral performance for the ABL facilities and covenant compliance, both of which have been very good so far. In addition, on July 31, we closed participation for an additional $100 million of commitments for our US SPV Facility, which lowered the blended borrowing cost to 8.15% until $145.5 million is drawn on that facility.
We continue to believe we are well positioned to take advantages of opportunities as our customers and markets recover. But we also remain cautious in capital deployment. Our share repurchase program remains suspended and we continue to limit capital expenditures to essential maintenance and selective investments. Based on third quarter net income and the strong cash flows, our Board of Directors declared a quarterly dividend of $0.055 per share to be paid on November 19 to shareholders of record as of November 9.
This concludes our prepared remarks, and we'll now ask the operator to begin the Q&A.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Bob Napoli from William Blair & Company. Please go ahead.
Bob Napoli -- William Blair & Company -- Analyst
Good morning, everybody. Thanks for the question.
Don Gayhardt -- President & Chief Executive Officer
Hey. Good morning, Bob.
Bob Napoli -- William Blair & Company -- Analyst
I guess -- good morning, Don. So, just on, I guess, a couple of strategic items. On Catapult, the earnings improvement there, obviously, pretty dramatic. What was the price that you paid for -- what's the valuation? What was the valuation of that -- or what's kind of the hidden value in CURO from the current private market valuation of Catapult? So what did you pay, I guess? How did do you decide that?
Don Gayhardt -- President & Chief Executive Officer
So Bob, I'm going to answer this way. So we paid more than we paid in the last round, but it was attractive to us. So, we're buying from some smaller holders and it was attractive to us given a pretty substantial liquidity discount. And I think it's pretty well disconnected from the true market value of the company. So I'm a little hesitant to kind of draw sort of a line on what we've done in this deal to an overall value. But it's -- I think there is -- the company is doing very well. We're super proud of Orlando and his team, and what they've been able to do with that business.
And everybody -- it's difficult for anybody manage through a pandemic. They've done extraordinarily well to continue to grow that business. So I think there is -- it's certainly something that should be really valuable for us down the road. This is, I think, kind of mortgage is some [Phonetic] kind of one-off opportunistic stuff that's kind of disconnected from the real value of the company. So I think it will become -- we report their earnings on a lag, but I think it will be a bit more clear down the road how well they are really doing.
Bob Napoli -- William Blair & Company -- Analyst
Great, thank you. Then just on Revolve. I mean, it sounds like you're trying to build like kind of essentially a neobank or challenger bank. I mean, you bring up Chime. I think they are a little bit upmarket from you. But I mean, you would be in the same area maybe as Square Cash. And is that the space that you're going after with that? And what's the size of that business? And what do you think it could be over time?
Don Gayhardt -- President & Chief Executive Officer
Yeah. So our overall -- all of our card products are in other revenue, which is just for competitive reason I won't break all of it. But all of our products are included in other revenue. And that's about 5% of our total revenue, a bit more now with the loan volumes [Indecipherable]. So, I think the -- but it's very high margin revenue. And I think other than sort of on some of the overdrafts there's really been -- there is no credit risk on that.
I think we're looking at it, I think -- I guess, I -- we have sort of an evolving view of this. I think we're trying to sort of look at and work with our customers and get a deeper understanding what their needs are beyond simply credit. And I think that -- I think that's really, I guess, it's -- in large measure there is a lot of sort of cross-sell opportunity to our -- I don't think people that are current loan customers that -- we have, actually, got lost track of how many -- 75 million loan applications that's in our database.
So we -- I think, trying to really make sure we've got a product offering. And you can go look at -- you can go, there is a Revolve website, there is an app you can download and sort of see how it works and see the features and functionality. So I think we're trying to figure out exactly what the right way to sort of sell that product to our customers and put the value proposition out for them. I think that's a lot of what we're doing.
Obviously, we have -- Republic Bank of Chicago is our partner on that product, so we work with them. And then we have card processors, etc., that we work through. It's a -- there is -- it's a -- there is a net kind of a whole ecosystem we had to build to sort of offer that client product. So it's not -- so making changes is a little bit -- it takes tick a bit more time because we're working with others who kind of do that.
So I think that we really want over time have our customers see us with more than just a place to get a loan. I think we've had good success. I would -- Opt+ as a debit card. And I think this -- with a -- we're going DDA -- a bank account or DDA product is kind of a natural extension of that, it's just a bit more functionality than an Opt+ debit card. For us, it about three times the monthly return in dollars per cardholder. For active cardholder, it's about three times what the -- what we get from an Opt+ card. So I suspect it'll -- it doesn't really will put some marketing money behind it. We're doing a lot of in-store promotions and incentives for our team. And I think this -- we see this would becoming a much, much bigger part of our business going forward.
Bob Napoli -- William Blair & Company -- Analyst
Great. And just last question just on credit. I mean, you're loosened up a little bit. The COVID cases are coming back and people are starting to shut down again in the cities, certainly in Chicago, they -- with our restaurants and bars are closed, I guess. What is...
Don Gayhardt -- President & Chief Executive Officer
We feel your pain, Bob.
Bob Napoli -- William Blair & Company -- Analyst
Yeah. It's a sad time in some ways. But is that affecting how -- I mean, would you retighten? Are you going to retighten, I guess, city by city or -- I mean, what are your thoughts on -- concerns about the credit with the acceleration in cases?
Don Gayhardt -- President & Chief Executive Officer
Yeah. It's a big question and a good one. I think there are areas where we have -- as we have increased new customer accounts and marketing spend and approvals, some of that, I think, by and large, that's going very well. We've see a few spots where we didn't like the quality of the new volume and we've quickly put in some changes to the model. So, we do watch it. I think that's [Indecipherable] we watch it on such a granular level by product, by state, we look at each channel, stores, online, and then our site to stores, or when people start online and get -- and close in the store.
So it's -- that's a very easy for us to put in changes when we decide. Again, deciding what to do is not necessarily easy, but once we make a decision, getting those changes into the models. And the other change -- the other part of this, obviously, is we have an ability to take certain volume and how that will be called pending process. We'll have some reasons. If it's online, who will be approved pending a discussion with one of our customer service reps to get to verify additional information, employment information, etc., etc. So there is a whole range of -- I guess, there is a lot of levers we can pull.
And I just said, we're -- if you look at the employment data, yesterday it was pretty positive. But obviously, the markets are sort of digesting more potential shutdown plus the concern about stimulus. Obviously, plus the election. So there is -- I think, certainly in the first two of those things, we're trying to balance out, that's why it's -- there's a lot of moving parts and big moving parts into giving our sort of forecasts and stuff.
We still feel like we're going to have a quarter sequential growth in the range of what we had from a percentage standpoint this quarter. So it will be more in dollars just as the same percentage on the bigger base, but we don't -- we're not -- I guess, the other thing is that is the holiday demand. And there is a lot of -- there is really a lot of discussion about what is holiday shopping going to look like relative to last year? And has COVID and stimulus and some other stuff have kind of pulled forward -- kind of shop from home kind of pulled forward some of that demand? So I think our forecast for the fourth quarter probably has a good deal of conservatism built in around a less -- a smaller bump from holiday shopping demand.
Bob Napoli -- William Blair & Company -- Analyst
Okay, thank you. Appreciate it.
Don Gayhardt -- President & Chief Executive Officer
Yeah, OK.
Operator
The next question comes from John Hecht from Jefferies. Please go ahead.
John Hecht -- Jefferies -- Analyst
Yes, good morning. Thanks and congrats on a good quarter. I guess, the first question is, you guys -- you're omni-channel, so you've got stores and digital. And then you've got -- you have a lot of products and you are developing, obviously, with Catapult and some of the Verge Credit concepts and stuff. So I'm just wondering kind of from a behavioral perspective, as we migrate through this wired time, are you seeing customers use different products in different ways than you maybe saw a year ago? And with that, how do you kind of envision the mix migrating next year?
Bill Baker -- Executive Vice President & Chief Operating Officer
Hey, John, it's Bill. I think you're -- I think we highlighted in the comments. I mean, we certainly have seen a mix to online during the pandemic, but that's been an ongoing kind of phenomenon for a while, which I think -- which benefits us for sure because we have the omni-channel. You highlighted the omni-channel efforts.
But I think going forward like some of it may be pulls back a little bit. We still think that Canada and the US are going to be more geared toward mobile, which we're obviously equipped to deal and kind of keeping cattle fortified, that's kind of a difference category. But I think certainly on the core business, I mean you will think that we're certainly equipped to handle both side of things, and still giving customers the opportunity to do, call quick or come in is still something that's pretty powerful for us. I think we highlighted last quarter that we still have this by phone at store, which is pretty powerful for us. So I think it's kind of a multi-channel opportunity that still remains pretty wide open for us.
Don Gayhardt -- President & Chief Executive Officer
But John, I don't know if this about I would say the -- solely the shift, if you look that where -- across our business lines, the Single-Pay product continues to sort of, I guess, as -- in terms of customer demand continues to be the most challenged. It's sort of been the most challenged of COVID. We look at Canada, where we have a -- everybody has -- there is some -- not everybody qualifies for a line of credit product. But if you exhibit good payment behaviors on the Single-Pay, you will nicely qualify for line of credit.
And I think that continues to -- that product was flexibility, that product continues to shows as our customers sort of favorite product one that the -- where the payment behaviors are really good. Unlike -- seriously, unlike like the marketing guys, I'd say the stickiness of it. So I think you're going to see less Single-Pay, less store, more line of credit, more installment and then more of the card-based products. And obviously, make sure Catapult is not taken as an investment for us. So it's going to continue to grow in what it contributes to us in earnings and obviously, it's value.
John Hecht -- Jefferies -- Analyst
Okay, that's very helpful. And then usually, obviously, going into -- well, there is usually seasonality every quarter. I think seasonality has certainly been a little bit obfuscated given what's become of coronavirus. I mean, what are you guys anticipating from a seasonality perspective this quarter? And part of that's tied to the fact that you did loosen up a little bit recently in the resurge -- well, the recovery in loan volume application -- loan application volume?
Bill Baker -- Executive Vice President & Chief Operating Officer
Yeah. So John, I think -- go ahead, Roger.
Roger Dean -- Executive Vice President & Chief Financial Officer
Yeah. John, I'll start. You asked about usage of the products. I think Q3 was pretty interesting because as we move through the quarter, on a weekly basis, we saw the same seasonality that we normally see. With back-to-school, we just saw less usage or less demand. But when you look at how we move through August and then back up a little bit in late September and early October, the core seasonality of the business seem to be pretty similar despite all the other factors, stimulus, all I kind of stuff.
I think Don mentioned on the call that as we move through the fourth quarter, we see an uptick in demand. Obviously, November will be stronger than October. But we, in our thinking, internally, we've hair cutted some of that just because of loan expectation uncertainty -- expectation around what could be a slower holiday season.
Don, I don't know if you want to expand on that?
Don Gayhardt -- President & Chief Executive Officer
Yeah. I mean, I think if you look at last year, John, we grew -- we did $302 million in revenue in the fourth quarter and we did $297 million in the third quarter, that's '19 actuals. So some of that's impact, we have -- we're getting this one slowdowns California a little bit. But not a big -- third quarter we get sort of back-to-school. And typically, that's a big bump from the second quarter. And the fourth quarter shows -- typically what you'll see is the end of the year, the very end of December [Indecipherable] for holiday shopping stuff, which then get paid down in the first quarter.
So I think this year, just given what we're talking about from -- first of all, we had good -- we had better loan demand and asset growth in the third quarter, but not all that shows up in the P&L in the third quarter. So it's kind of a just continuing out, we see some -- we see new customer accounts and assets growth continuing kind of on the same pace that it's been on in our internal forecast and that will bring a sequential -- pretty good sequential improvement in revenue, which you didn't really see. Obviously, third quarter this year is about the same as the second quarter. You will start to see the -- what we see increases in demand and volume show up in the top line in the P&L in the fourth quarter. It should grow in excess of at least 10% kind of sequentially fourth quarter over third quarter.
The other piece of that, obviously, it's -- and we talked about this in the releases is it's not just a different trend overall or seasonality. But then you have the US versus Canada, where we did -- we've seen -- we just didn't see as big of a trough in Canada. I mean, we had -- revenue in the US was down 44% in the third quarter versus the prior year, Canada we're rolling on 18% versus the prior year.
Now, we are -- the only thing, we are also growing about 15% in Canada pre-COVID, at a much smaller number than the US. So all of that, I think -- it's hard to look at. You can't just look at sort of just the US trends and US issues around shutdown and stimulus, etc., that's only -- that's 7% of the business and the other is just like different trends for the -- for Canada. And I would also say, Canada, while there is certainly -- not to go in a public health rant here, but there is differing COVID trends there.
And while there is certainly increases in case in Canada, if you look at it on a -- Canada has about the same number of cases as, on a daily basis, is around State of Wisconsin. And it's obviously a much, much bigger. It has -- per capita, it has about one-third of the cases that you see in the US. So they kind of done a better job handling it. I mentioned about 80% of the jobs that were lost during COVID recovered in Canada. And that number is -- depending on which sources you look at, 55% to 60% of the jobs lost in COVID have been recovered in the US. So, big gap in how things are going in Canada versus the US.
John Hecht -- Jefferies -- Analyst
All right, guys. Thanks very much for the details.
Operator
The next question comes from Moshe Orenbuch from Credit Suisse. Please go ahead.
Moshe Orenbuch -- Credit Suisse -- Analyst
Great. Thanks. Roger, you talked about the strong cash flow, but you're kind of staying tight right now. What is it that you're waiting to see? Is it a question of the economic environment? Is it a question of that kind of loan demand you might see? Like, what -- how do you think about the factors that would allow you to use that a little more aggressively?
Roger Dean -- Executive Vice President & Chief Financial Officer
I think it's predominantly discontinued uncertainty. I don't -- as we think about loan growth, even if when robust levels of loan growth return, the US and Canadian ABL facilities will fund 80% of that, I guess. So as we think about loan growth, we're going to need some cash when robust loan growth returns. But we do have the facilities to fund a lot of that. So I think it's more -- I'm not sure I think right now it's more around -- the uncertainty around the environment and the desire to keep some dry powder, because it's not mentioned in the prepared remarks. We are evaluating some M&A opportunities and things like that. We're seeing M&A and investment opportunities that we're also mindful of maintaining some dry powder in that regard as well.
Moshe Orenbuch -- Credit Suisse -- Analyst
Got you. And I think Don had mentioned in the comments about potential M&A opportunities in Canada, which makes a lot of sense. I think you also mentioned card. Are there M&A opportunities there? Is it other investments? What is it that you're looking at there?
Don Gayhardt -- President & Chief Executive Officer
Yeah. I got it. [Speech Overlap] I got it. So on the card side, Moshe, we've looked at everything from other sort of debit-based products. And then also secured and unsecured card opportunities. So, but we've -- that's also we're also well into sort of looking at internally developing additional card products, and investing in the development of that stuff internally.
And then more generally, yeah, we're looking at Canadian opportunities. We, like everybody else -- it's -- certainly M&A activities picking up, you're seeing some -- obviously, some monster deals get done here and there. But we're like everybody else, where -- because you're trying to do something in Canada where we have great people on the ground in Canada but the inability to travel to Canada and meet people kind of face to face as part of the due diligence process, just kind of -- it just, by definition, kind of slows things down.
Moshe Orenbuch -- Credit Suisse -- Analyst
Thanks so much.
Operator
The next question comes from John Rowan from Janney. Please go ahead.
John Rowan -- Janney -- Analyst
Good morning, guys. Roger, I think you said in your prepared remarks that the charge-offs were $4 million below the provision. Is that -- am I correct that the charge-offs, the total dollar value, just because there is several different figures in the press release. Is it about $50 million?
Roger Dean -- Executive Vice President & Chief Financial Officer
Yes. Hold on a second. Yes. But -- yes. And then the provision exceeded that by $4.6 million. So...
John Rowan -- Janney -- Analyst
Okay. And then maybe just -- after just -- to remind, if you could just shoot me the CSO revenue figure, that helps me with my model. Are you guys still comfortable with the $75 million adjusted EBITDA figure for Canada for next year?
Roger Dean -- Executive Vice President & Chief Financial Officer
Yeah. I mean, I think, this quarter probably -- I'll let Don go through. But I think this quarter probably helped us get even more confident. The whole -- I think, John, the way we broke that down, and again, we haven't done our operating plan yet. And you can probably tell -- we think there's still a lot of uncertainty.
But the way we broke down next year for Canada was our exit -- we'll exit this year or we expect to exit this year with earning asset levels in Canada above what we had in 2019. So, if you go back to 2019, that would imply the average earning assets are above what they were in the 2019, the revenue will be above what it was. But we've also seen dramatic net charge off improvement, net charge off rate improvement, there compared to what we were seeing in 2019, because in 2019 the portfolio was pretty unseasoned because we ramped it up so much in the second half of 2018.
So our thinking on Canada next year as the revenue -- we'll follow the assets, of course. And we think that the charge-off -- we don't -- in our own modeling, we don't model that the net charge-off rates in Canada will stay as little as they were in the third quarter, but we believe it will be below 2019. And if you just do -- you just roll the math out, it makes -- that's kind of what's driving that thought around 2021.
John Rowan -- Janney -- Analyst
Okay. And then just to be clear on the -- when you said revenue for 2021 will look a lot more like 2019. Are we talking about revenue from Canada or are we talking about consolidated revenue back to 2019 levels?
Roger Dean -- Executive Vice President & Chief Financial Officer
I was only answering the context of Canada.
John Rowan -- Janney -- Analyst
Okay.
Don Gayhardt -- President & Chief Executive Officer
But John, this is Don. But in -- here is in terms of Canada. But I think the comment we made in the script was around consolidated numbers. Now, the composition of that is going to look more like -- there'll be -- if the earning asset trend continue and we kind of roll everything forward, you could have a revenue picture -- consolidated revenue picture 2021 that looks broadly consistent with 2019. But you'll have -- obviously, Canada will be a bigger chunk of that.
John Rowan -- Janney -- Analyst
Okay. Yeah, I mean, well, just given that there has been a little bit of compression in the yield in Canada getting to -- there has to be a lot of growth in that product in Canada in 2021, at least by my model in order to get back to that consolidated revenue figure. So that's why I just want to make sure I was clear because obviously you said in the script that it was mostly weighted toward Canadian growth. So I just want to make sure that I was clear on that.
As far as Catapult goes, do you think $200 million is still -- or is an appropriate assumption for run rate originations on that business? Or are we even maybe trending better than that?
Don Gayhardt -- President & Chief Executive Officer
I want to be -- it's a private company. But I would -- I think that's a very conservative number.
John Rowan -- Janney -- Analyst
Okay.
Don Gayhardt -- President & Chief Executive Officer
For 2020.
John Rowan -- Janney -- Analyst
Okay. Lastly, I know you are not giving guidance, but I'm going to ask for something anyway. Prior to the third quarter, your comment was that third quarter earnings are going to be a trough. Do we still see third quarter as a trough with an upward sequential shift into the fourth quarter? Or is that -- because you came out better this quarter than your guidance, is that not an appropriate assumption anymore?
Don Gayhardt -- President & Chief Executive Officer
So Roger can come in as well. I think the thing about -- I think, we made the comment about risk-adjusted revenue. And I think the -- below that, you've got -- and that obviously picks up provision. So we think that asset growth even with higher provisioning associated with asset growth, risk-adjusted revenue, well, we think third quarter will be a trough.
The other pieces from there, you've got -- the biggest piece is, is going to be ad spend. We mentioned we're going to be spending a good deal more on the card side in the fourth quarter. We spent -- if you look at sort of sequentially, we spent, what, $7 million in the second quarter and a little more than $10 million in this quarter in advertising. So we would expect that number to go up in -- the $10.5 million number to go up in the fourth quarter. So getting all -- trying to sort of filter it all the way down to earnings is a little trickier.
John Rowan -- Janney -- Analyst
All right. Thank you guys.
Operator
The next question comes from Vincent Caintic from Stephens. Please go ahead.
Vincent Caintic -- Stephens -- Analyst
Hey, thanks. Good morning, guys. Thanks for taking my questions. Actually just a -- first a follow-up on the -- that comment about consolidated revenues in 2021 looking like 2019. Maybe if you could go through sort of what factors you're assuming to get there? So, is it sort of similar third quarter trends, those stimulus? It seems like the product mix is shifting a little bit more to line of credit. So that's been having some more strength of maybe continuing that? And then of course, your comment about Canada. So just kind of wondering if there's any additional details you can give on what you need for to 2021 to look like 2019?
Don Gayhardt -- President & Chief Executive Officer
Hey, this is Don. So on the stimulus side, the -- I guess it's -- we are not assuming any stimulus in 2020. And I think broadly speaking, I guess our 2021 view is that it's, you're likely to get -- we expect there to be some stimulus, but -- and I think we've got a discussion. In fact, if you got a -- if we get a blue wave and a -- the $2.5 trillion stimulus, I think that could, in the States, so that's, I think you're going to see some of the same behaviors you saw or how that [Indecipherable] some of the same ways as you saw this year, which is, it will tick down loan demand and we'll see a historically outsized downturn in charge-offs. That's just hard goal. If you know what's going to happen, but it's -- it's just so hard. I mean, it's just hard to [Indecipherable]. So I think our assumptions will be still be some [Indecipherable] some modest stimulus but not a lot of a blue wave $2.5 trillion number.
In Canada -- and we kind of talking with John. I think we do continue -- we see really good growth and good performance on the -- on that line of credit product. And you just don't have -- just as a baseline, we haven't seen as many people that have kind of permanently lost their job up there or continuing to be out of work. So we just didn't see the bigger dip and used it kind of build it back. So -- and that was a business that was growing. As I said, we had 15% revenue growth quarter-over-quarter -- year-over-year in the first quarter. So -- and I would expect that some of the recovery of demand, plus just the organic trends in that business and the appeal of that product is going to lead to a really good -- an excellent 2021 for the Canadian business.
Vincent Caintic -- Stephens -- Analyst
Okay, great. Thank you. And then on M&A, and it sounds like you've got something on Canada. To the extent you can give a description that would appreciated. I'm thinking it's probably not a portfolio, it would be more of a capability add, it sounds like. And then kind of broadly speaking, if we think five years out, what would you like to add whether it's M&A, or additional -- building it in-house capabilities, what are you thinking there? Thank you.
Don Gayhardt -- President & Chief Executive Officer
Yeah. I guess, when I think Canada, the opportunities, we certainly saw a range from sort of selected cited store additions to looking at businesses that have, I'd say, sort of complementary or adjacent products. But our -- first of all, that are probably more focused on online than branch-based, as a channel. So there's kind of a range of things we're looking at there.
I think looking out five years -- it's a great question. I think certainly the card capabilities and both as an account, as a bank account product, like we have with Revolve and the DDA product, and then being able to expand the way we lend money on to card-based applications, I think is really important. And then obviously, we're sort of doing it on the merchant side, on the POS side, doing it through the investment in Catapult. So if you think about that as a -- you sort of have stores and mobile stuff channels now and obviously, we do have phone as well, and expanding that to, I think cards has really -- the one part of sort of getting credits to consumers that were not really invested in and haven't build yet and then obviously, the B2B2C application that Catapult provides.
And then you look at Canada, we have mobile and stores. We don't have anything in -- on the card side, or the POS side in Canada. So sort of looking at the whole range of both account services plus how credits provided, I think as a whole there is a bunch of parts of those verticals that we're just not in right now. Now, some of that may be M&A and some of that may be that we think we have the capabilities to build those -- invest in those businesses and build those internally.
Vincent Caintic -- Stephens -- Analyst
Okay, great. Thank you.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Don Gayhardt for closing remarks.
Don Gayhardt -- President & Chief Executive Officer
Great. Thanks everybody for taking the time to join us today. So, let's just all stay healthy and safe. And we'll look forward to talking to you again in January. Thanks very much.
Operator
[Operator Closing Remarks]
Duration: 59 minutes
Call participants:
Matt Keating -- Investor Relations
Don Gayhardt -- President & Chief Executive Officer
Roger Dean -- Executive Vice President & Chief Financial Officer
Bill Baker -- Executive Vice President & Chief Operating Officer
Bob Napoli -- William Blair & Company -- Analyst
John Hecht -- Jefferies -- Analyst
Moshe Orenbuch -- Credit Suisse -- Analyst
John Rowan -- Janney -- Analyst
Vincent Caintic -- Stephens -- Analyst
