Consolidated Revenue Grew 62.2% in the Quarter
Compared to 2021
CURO Group Holdings Corp. (NYSE: CURO) (“CURO” or the
“Company”), a tech-enabled, omni-channel consumer finance company
serving a full spectrum of non-prime and prime consumers in the
U.S. and Canada, today announced financial results for its second
quarter ended June 30, 2022.
“It was a very busy and productive quarter for CURO. In July, we
successfully closed the transformative transactions that we
announced in May 2022 - the sale of our legacy US Direct Lending
business and acquisition of First Heritage Credit,” said Don
Gayhardt, CURO’s Chief Executive Officer. “These transactions
complete CURO’s strategic transition into longer term, higher
balance and lower rate credit products, simplify and improve the
future predictability of our business results, expand our access to
lower cost funding, and focuses our capital on higher-growth,
durable business lines. On the funding side, we also entered into
new non-recourse revolving warehouse facilities to fund the loan
portfolios and new originations for Heights Finance and First
Heritage at lower spreads and higher advance rates.
“I am proud of what our team accomplished during these trying
market conditions while still driving solid results in our Heights
Finance, Canada Direct Lending, and Flexiti businesses. Excluding
the sold U.S. Legacy Direct Lending business, loan balances grew
163.7% year-over-year and 9.4% sequentially compared to the first
quarter of 2022. As expected, this solid sequential loan growth and
normalization of net charge-off rates and loan loss provisions
caused a meaningful reduction in year-over-year earnings for the
quarter. As we enter the second half of the year, we will be
laser-focused on execution – integrating and capitalizing on the
Heights Finance and First Heritage acquisition synergies, careful
credit risk management, liquidity and optimizing our cost structure
in the wake of the sale of our U.S. Legacy Direct Lending
business.”
Consolidated Summary Results
We reported a Net loss of $26.1 million ($0.65 loss per share)
and Adjusted net loss of $11.3 million ($0.28 adjusted loss per
share) on revenue of $304.4 million for the three months ended June
30, 2022, compared with Net income of $104.5 million ($2.39 per
share) and Adjusted net income of $17.4 million ($0.40 adjusted
diluted earnings per share) on total revenue of $187.7 million for
the three months ended June 30, 2021.
The decline in Net income was primarily driven by (i)
year-over-year comparisons for the provision for loan losses which
continued to be affected by COVID-19 impacts during the second
quarter of 2021 and (ii), higher interest expense. During the
second quarter of 2021 Katapult became a public company via a SPAC
merger, generating a pretax gain of $135.4 million. Government
stimulus in March 2021 and pandemic-related consumer behavior
reduced demand, increased payment rates and lowered loss rates in
the second quarter of 2021, resulting in a provision for loan
losses that was $4.6 million less than net charge-offs (NCOs). In
this year's second quarter, credit normalization and strong
sequential loan growth resulted in a provision for loan losses that
exceeded NCOs by $24.3 million (including the impact of purchase
accounting for the Heights Finance portfolio acquired in December
2021). Interest expense increased because of our issuance of 7.50%
Senior Secured Notes in the fourth quarter of 2021 to finance, in
part, the Heights Finance acquisition, as well as the expansion of
non-recourse asset-backed facility borrowing to support loan
growth.
Below are additional highlights of our performance this
year:
- Revenue and Net Revenue
- Revenue increased $116.7 million, or 62.2%, year over year,
primarily driven by our December 27, 2021 acquisition of Heights
Finance, which accounted for $74.3 million of revenue for the
second quarter of 2022. Revenue for Canada POS Lending and Canada
Direct Lending grew 229.9% and 22.1%, respectively, year over
year.
- Sequentially, revenue increased $14.2 million, or 4.9%, driven
by growth of $2.8 million, or 14.0%, in Canada POS Lending, $4.1
million, or 5.7%, in Canada Direct Lending, and $7.3 million, or
3.7% in the U.S. Direct Lending.
- For the three months ended June 30, 2022, net revenue increased
$32.3 million, or 22.7%, year over year, and $17.8 million
sequentially. Excluding Heights Finance, net revenue decreased
$54.1 million, or 28.1%, year over year, because of the
aforementioned loan loss provision comparisons.
- Loans Receivable
- Year-over-year growth in Company Owned gross loans receivable
and combined gross loans receivable (gross loans receivable plus
loans originated by third-party lenders which are guaranteed by the
company) of $1,011.6 million, or 131.5%, and $1,025.8 million, or
127.2%, respectively, as a result of the acquisition of Heights
Finance. Excluding Heights Finance, combined gross loans
receivables increased $534.3 million, or 66.3%, year over year,
primarily driven by $405.7 million, or 183.2%, for Canada POS
Lending. Canada and U.S. Direct Lending (excluding Heights Finance)
combined gross loans receivable grew 29.4% and 10.0%, respectively,
versus the second quarter of 2021.
- Sequential loan growth in Company Owned gross loans receivable
and combined gross loans receivable of $152.3 million, or 9.4%, and
$159.2 million, or 9.5%, respectively, was primarily due to growth
in Canada POS Lending of $85.4 million, or 15.8%, and U.S. Direct
Lending of $54.3 million, or 7.9%.
- NCOs and Delinquency Metrics
- Consolidated quarterly NCO rates improved by 60 bps year over
year, primarily from the relative growth of Canada POS Lending and
the acquisition of Heights Finance, which shifts our loan portfolio
mix to lower loss-rate products offset by credit normalization in
the U.S. Direct Lending business.
- Sequentially, consolidated quarterly NCO rates improved by 80
bps, largely driven by loan growth at Heights and Canada POS
Lending, which have lower NCO rates, offset by credit normalization
in the U.S. Direct Lending business.
- Consolidated past-due rates increased 300 bps year over year as
credit continued to normalize compared to the first six months of
2021, which was affected by pandemic-related U.S. government
stimulus.
- Consolidated past-due rates increased by 100 bps sequentially,
primarily due to seasonality and credit normalization.
- Other Highlights
- On July 8, 2022, we completed the sale of our U.S. Legacy
Direct Lending business to Community Choice Financial, a consumer
financial services company based in Dublin, Ohio, for total cash
consideration of $345 million. The consideration included $310
million in cash paid at closing and $35 million payable in monthly
installment payments over the subsequent 12 months.
- On July 13, 2022, we completed the acquisition of First
Heritage Credit ("FHC"), a consumer lender that provides near-prime
installment loans along with customary opt-in insurance and other
financial products, based in Ridgeland, Mississippi, for a total
purchase price of $140 million in cash.
- On July 13, 2022, concurrently with the closing of the FHC
acquisition, we entered into a new $225 million non-recourse
revolving warehouse facility to replace FHC's incumbent lender's
facility and finance future loans originated by FHC.
- On July 15, 2022, we entered into a new $425 million
non-recourse revolving warehouse facility to replace the incumbent
lender's facility and finance future loans originated by Heights
Finance.
- On August 3, 2022 we declared the next quarterly dividend of
$0.11 per share, payable on August 26, 2022 to stockholders of
record as of August 15, 2022.
From the second quarter of 2020 through the first half of 2021,
we experienced lower customer demand in the U.S. and Canada Direct
Lending, relatively good credit performance, increased or
accelerated repayments and favorable payment trends, as customers
were aided by government stimulus programs while periodically
enduring pandemic lockdowns as a result of COVID-19. From the third
quarter of 2021 through the second quarter of 2022, our markets
were less affected by COVID-19, resulting in positive growth trends
in revenue and receivables, along with increases in charged off
accounts as stimulus programs waned and credit normalized.
Results of Consolidated Operations
Beginning January 1, 2022, we began reporting "Interest and fees
revenue," "Insurance premiums and commissions" and "Other revenue"
in place of our previously reported "Revenue" on our Statements of
Operations. Prior period presentations have been revised to conform
to the current period presentation.
Table 1 - Consolidated Statements of
Operations
(in thousands, unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
Change $
Change %
2022
2021
Change $
Change %
Revenue
Interest and fees revenue
$
278,331
$
169,403
$
108,928
64.3
%
543,287
348,526
194,761
55.9
%
Insurance premiums and commissions
18,653
11,853
6,800
57.4
%
36,913
23,422
13,491
57.6
%
Other revenue
7,420
6,437
983
15.3
%
14,400
12,296
2,104
17.1
%
Total revenue
304,404
187,693
116,711
62.2
%
594,600
384,244
210,356
54.7
%
Provision for losses
129,546
45,165
84,381
186.8
%
227,077
81,310
145,767
#
Net revenue
174,858
142,528
32,330
22.7
%
367,523
302,934
64,589
21.3
%
Operating Expenses
Salaries and benefits
82,427
58,320
24,107
41.3
%
162,156
113,237
48,919
43.2
%
Occupancy
17,507
13,783
3,724
27.0
%
34,544
28,130
6,414
22.8
%
Advertising
12,707
7,043
5,664
80.4
%
23,207
15,127
8,080
53.4
%
Direct operations
20,293
13,699
6,594
48.1
%
40,567
25,668
14,899
58.0
%
Depreciation and amortization
8,672
7,435
1,237
16.6
%
18,486
12,400
6,086
49.1
%
Other operating expense
22,801
17,218
5,583
32.4
%
38,913
30,170
8,743
29.0
%
Total operating expenses
164,407
117,498
46,909
39.9
%
317,873
224,732
93,141
41.4
%
Other expense (income)
Interest expense
42,193
23,440
18,753
80.0
%
80,534
42,979
37,555
87.4
%
Loss (income) from equity method
investment
1,328
(1,712
)
3,040
#
(256
)
(2,258
)
2,002
(88.7
)%
Gain from equity method investment
—
(135,387
)
135,387
#
—
(135,387
)
135,387
#
Total other expense (income)
43,521
(113,659
)
157,180
#
80,278
(94,666
)
174,944
#
(Loss) income before income taxes
(33,070
)
138,689
(171,759
)
#
(30,628
)
172,868
(203,496
)
#
(Benefit) Provision for incomes taxes
(6,990
)
34,172
(41,162
)
#
(5,884
)
42,616
(48,500
)
#
Net (loss) income
$
(26,080
)
$
104,517
$
(130,597
)
#
($
24,744
)
$
130,252
($
154,996
)
#
# - Variance greater than 100% or not
meaningful
Table 2 - Consolidated Balance
Sheets (in thousands)
June 30, 2022 (unaudited)
December 31, 2021
ASSETS
Cash and cash equivalents
$
37,394
$
63,179
Restricted cash
97,465
98,896
Gross loans receivable
1,592,815
1,548,318
Less: Allowance for loan losses
(90,286
)
(87,560
)
Loans receivable, net
1,502,529
1,460,758
Income taxes receivable
46,450
31,774
Prepaid expenses and other
25,370
42,038
Property and equipment, net
38,752
54,635
Investment in Katapult
28,157
27,900
Right of use asset - operating leases
64,602
116,300
Deferred tax assets
23,993
15,639
Goodwill
352,990
429,792
Intangibles, net
113,130
109,930
Other assets
8,558
9,755
Assets held for sale (1)
338,779
—
Total Assets
$
2,678,169
$
2,460,596
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued
liabilities
$
81,423
$
121,434
Deferred revenue
23,425
21,649
Lease liability - operating leases
67,339
122,431
Contingent consideration related to
acquisition
30,354
26,508
Income taxes payable
4
680
Accrued interest
34,970
34,974
Liability for losses on CSO lender-owned
consumer loans
—
6,908
Debt
2,189,431
1,945,793
Other long-term liabilities
12,146
13,845
Deferred tax liabilities
12,360
6,044
Liabilities held for sale (1)
111,137
—
Total Liabilities
2,562,589
2,300,266
Stockholders' Equity
Total Stockholders' Equity
115,580
160,330
Total Liabilities and Stockholders'
Equity
$
2,678,169
$
2,460,596
(1) Assets held for sale and Liabilities
held for sale represent the balance, as of June 30, 2022, for
assets and liabilities, respectively, associated with the announced
sale of the U.S. Legacy Direct Lending Business.
Table 3 - Consolidated Revenue by Product and Segment
The following table summarizes revenue by product, including
revenue related to loans Held for Sale and revenue we earn from
operating as a credit services organization ("CSO") by charging
customers a fee for arranging an unrelated third party to make a
loan to that customer, which we refer to as "CSO fees," for the
period indicated:
Three Months Ended
June 30, 2022
June 30, 2021
(in thousands, unaudited)
U.S.
Canada Direct Lending
Canada POS Lending
Total
% of Total
U.S.
Canada Direct Lending
Canada POS Lending
Total
% of Total
Revolving LOC
$
28,145
$
47,591
$
20,847
$
96,583
31.7 %
$
24,091
$
37,450
$
6,495
$
68,036
36.2 %
Installment
169,879
11,869
—
181,748
59.7 %
90,826
10,541
—
101,367
54.0 %
Total interest and fees
198,024
59,460
20,847
278,331
91.4 %
114,917
47,991
6,495
169,403
90.3 %
Insurance premiums and commissions
4,323
13,921
409
18,653
6.1 %
—
11,678
143
11,821
6.3 %
Other revenue
3,363
2,161
1,896
7,420
2.4 %
3,877
2,211
381
6,469
3.4 %
Total revenue
$
205,710
$
75,542
$
23,152
$
304,404
100.0 %
$
118,794
$
61,880
$
7,019
$
187,693
100.0 %
Six Months Ended
June 30, 2022
June 30, 2021
(in thousands, unaudited)
U.S.
Canada Direct Lending
Canada POS Lending
Total
% of Total
U.S.
Canada Direct Lending
Canada POS Lending
Total
% of Total
Revolving LOC
$
55,059
$
93,045
$
39,502
$
187,606
31.6 %
$
51,014
$
71,818
$
7,939
$
130,771
34.0 %
Installment
332,703
22,978
—
355,681
59.8 %
196,767
20,988
—
217,755
56.7 %
Total interest and fees
387,762
116,023
39,502
543,287
91.4 %
247,781
92,806
7,939
348,526
90.7 %
Insurance premiums and commissions
9,324
26,943
646
36,913
6.2 %
—
23,247
175
23,422
6.1 %
Other revenue
7,024
4,062
3,314
14,400
2.4 %
7,505
4,267
524
12,296
3.2 %
Total revenue
$
404,110
$
147,028
$
43,462
$
594,600
100.0 %
$
255,286
$
120,320
$
8,638
$
384,244
100.0 %
Table 4 - Consolidated Loans Receivable
The following table reconciles Company Owned gross loans
receivable, a GAAP-basis balance sheet measure, to Gross combined
loans receivable, a non-GAAP measure(1). Gross combined loans
receivable includes loans originated by third-party lenders through
CSO programs, which are not included in the Consolidated Financial
Statements but from which we earn revenue by providing a guarantee
to the unaffiliated lender.
As of
(in thousands, unaudited)
June 30, 2022
March 31, 2022
December 31, 2021
September 30, 2021
June 30, 2021
U.S.
Revolving LOC (2)
$
58,471
$
49,077
$
52,532
$
51,196
$
47,277
Installment - Company Owned (2)
627,651
589,652
609,413
137,987
139,234
Canada Direct Lending
Revolving LOC
442,738
424,485
402,405
366,509
337,700
Installment
24,817
23,578
24,792
24,315
23,564
Canada POS Lending
Revolving LOC
627,163
541,776
459,176
302,349
221,453
Company Owned gross loans receivable
$
1,780,840
$
1,628,568
$
1,548,318
$
882,356
$
769,228
Gross loans receivable Guaranteed by the
Company
51,323
44,420
46,317
43,422
37,093
Gross combined loans receivable (1)
$
1,832,163
$
1,672,988
$
1,594,635
$
925,778
$
806,321
(1) See "Non-GAAP Financial Measures" at
the end of this release for definition and more information.
(2) Includes loan balances classified as
Held for Sale.
Segment Analysis
The following is a summary of segment operating (loss) income
and portfolio performance for the segment and period indicated.
Included are results related to the business classified as Held for
Sale.
Table 5 - Summary of Segment Operating (Loss) Income
Three Months Ended June 30,
2022
Three Months Ended June 30,
2021
(dollars in thousands, unaudited)
U.S.
Canada Direct Lending
Canada POS Lending
U.S.
Canada Direct Lending
Canada POS Lending
Total revenue
$
205,711
$
75,540
$
23,153
$
118,794
$
61,880
$
7,019
Provision for losses
97,563
26,021
5,962
33,622
8,556
2,987
Net revenue
108,148
49,519
17,191
85,172
53,324
4,032
Total operating expenses
115,633
28,332
20,442
81,656
25,483
10,359
Non-recourse interest expense
7,544
6,147
8,223
2,503
2,498
3,604
Recourse interest expense
20,279
—
—
14,835
—
—
Segment operating (loss) income
$
(35,308
)
$
15,040
$
(11,474
)
$
(13,822
)
$
25,343
$
(9,931
)
Six Months Ended June 30,
2022
Six Months Ended June 30,
2021
(dollars in thousands, unaudited)
U.S.
Canada Direct Lending
Canada POS Lending
U.S.
Canada Direct Lending
Canada POS Lending
Total revenue
$
404,110
$
147,028
$
43,462
$
255,286
$
120,320
$
8,638
Provision for losses
164,388
48,013
14,676
59,678
17,790
3,842
Net revenue
239,722
99,015
28,786
195,608
102,530
4,796
Total operating expenses
226,574
55,353
35,946
161,549
50,087
13,096
Non-recourse interest expense
15,408
10,177
14,849
4,130
4,853
4,430
Recourse interest expense
40,100
—
—
29,566
—
—
Segment operating (loss) income
$
(42,360
)
$
33,485
$
(22,009
)
$
363
$
47,590
$
(12,730
)
Table 6 - Summary of Adjusted Segment Operating (Loss)
Income
Three Months Ended June 30,
2022
Three Months Ended June 30,
2021
(dollars in thousands, unaudited)
U.S.
Canada Direct Lending
Canada POS Lending
U.S.
Canada Direct Lending
Canada POS Lending
Total revenue
$
205,711
$
75,540
$
23,153
$
118,794
$
61,880
$
7,019
Provision for losses
97,563
26,021
5,962
33,622
8,556
2,987
Net revenue
108,148
49,519
17,191
85,172
53,324
4,032
Adjusted operating expense (1)
107,477
28,267
15,426
69,404
25,376
4,881
Non-recourse interest expense
7,544
6,147
8,223
2,503
2,498
3,604
Recourse interest expense
20,279
—
—
14,835
—
—
Adjusted segment operating (loss)
income (1)
$
(27,152
)
$
15,105
$
(6,458
)
$
(1,570
)
$
25,450
$
(4,453
)
(1) These are non-GAAP metrics. For a
description of each non-GAAP addback, see the applicable
reconciliations and descriptions of each non-GAAP metric, see
"Non-GAAP Financial Measures."
Six Months Ended June 30,
2022
Six Months Ended June 30,
2021
(dollars in thousands, unaudited)
U.S.
Canada Direct Lending
Canada POS Lending
U.S.
Canada Direct Lending
Canada POS Lending
Total revenue
$
404,110
$
147,028
$
43,462
$
255,286
$
120,320
$
8,638
Provision for losses
164,388
48,013
14,676
59,678
17,790
3,842
Net revenue
239,722
99,015
28,786
195,608
102,530
4,796
Adjusted operating expense (1)
213,833
55,086
30,431
143,700
49,939
7,618
Non-recourse interest expense
15,408
10,177
14,849
4,130
4,853
4,430
Recourse interest expense
40,100
—
—
29,566
—
—
Adjusted segment operating (loss)
income (1)
$
(29,619
)
$
33,752
$
(16,494
)
$
18,212
$
47,738
$
(7,252
)
(1) These are non-GAAP metrics. For a
description of each non-GAAP addback, see the applicable
reconciliations and descriptions of each non-GAAP metric, see
"Non-GAAP Financial Measures."
Table 7 - U.S. Portfolio Performance
(in thousands, except percentages)
Q2 2022(6)
Q1 2022
Q4 2021(1)
Q3 2021
Q2 2021
Gross combined loans
receivable (2)
Revolving LOC
$
58,471
$
49,077
$
52,532
$
51,196
$
47,277
Installment loans - Company Owned
627,651
589,652
137,782
137,987
139,234
Total U.S. Company Owned gross loans
receivable
686,122
638,729
190,314
189,183
186,511
Installment loans - Guaranteed by the
Company (3)
51,323
44,420
46,317
43,422
37,093
Total U.S. gross combined loans receivable
(2)
$
737,445
$
683,149
$
236,631
$
232,605
$
223,604
Lending
Revenue:
Revolving LOC
$
28,145
$
26,913
$
27,911
$
27,377
$
24,091
Installment loans - Company Owned
121,595
113,833
56,820
57,659
55,918
Installment loans - Guaranteed by the
Company (3)
48,283
48,991
47,348
43,377
34,908
Total U.S. lending revenue
$
198,023
$
189,737
$
132,079
$
128,413
$
114,917
Lending
Provision:
Revolving LOC
$
11,831
$
9,577
$
11,592
$
8,140
$
6,621
Installment loans - Company Owned
54,868
32,962
18,618
16,792
14,048
Installment loans - Guaranteed by the
Company (3)
28,313
21,749
25,967
23,146
12,583
Total U.S. lending provision
$
95,012
$
64,288
$
56,177
$
48,078
$
33,252
NCOs (7)
Revolving LOC
$
10,248
$
10,055
$
11,481
$
8,329
$
7,271
Installment loans - Company Owned
40,757
36,247
19,664
19,548
18,617
Installment loans - Guaranteed by the
Company (3)
27,395
21,492
26,065
21,404
12,044
Total U.S. NCOs
$
78,400
$
67,794
$
57,210
$
49,281
$
37,932
NCO rate (4)
(7)
Revolving LOC
19.1
%
19.8
%
22.1
%
16.9
%
16.0
%
Installment loans - Company Owned
6.7
%
6.0
%
14.3
%
14.1
%
13.2
%
Total U.S. Company Owned NCO rate
7.7
%
7.1
%
16.4
%
14.8
%
13.9
%
Installment loans - Guaranteed by the
Company (3)
57.2
%
47.4
%
58.1
%
53.2
%
34.6
%
Total U.S. NCO rate
11.0
%
14.7
%
24.4
%
21.6
%
17.2
%
ALL and CSO
Liability for Losses rate (5)
Revolving LOC
25.1
%
26.7
%
25.9
%
26.3
%
28.9
%
Installment loans - Company Owned
6.8
%
4.2
%
12.7
%
13.4
%
15.3
%
Total U.S. Company Owned ALL rate
8.4
%
5.9
%
16.3
%
16.9
%
18.7
%
Installment loans - Guaranteed by the
Company (3)
15.7
%
16.1
%
14.9
%
16.1
%
14.2
%
Total ALL and CSO Liability for Losses
rate
8.9
%
6.6
%
16.0
%
16.8
%
18.0
%
Past-due rate
(5)
Revolving LOC
29.3
%
29.7
%
30.5
%
30.5
%
26.6
%
Installment loans - Company Owned
20.6
%
19.1
%
19.4
%
20.1
%
18.7
%
Total U.S. Company Owned past-due rate
21.3
%
19.9
%
22.5
%
22.9
%
20.7
%
Installment loans - Guaranteed by the
Company (3)
19.0
%
18.5
%
17.7
%
19.8
%
17.4
%
(1) On December 27, 2021, we acquired
Heights Finance, which accounted for approximately $472 million of
U.S. Installment loans as of December 31, 2021. As the period
between December 27, 2021 and December 31, 2021 did not result in
material loan performance, we have excluded Heights Finance from
the table for the fourth quarter of 2021.
(2) Non-GAAP measure. For a description of
each non-GAAP metric, see "Non-GAAP Financial Measures."
(3) Includes loans originated by
third-party lenders through CSO programs. Installment gross loans
receivable Guaranteed by the Company are not included in the
Consolidated Financial Statements.
(4) We calculate NCO rate as total NCOs
divided by Average gross loans receivable.
(5) We calculate (i) Allowance for loan
losses (ALL) and CSO Liability for losses rate and (ii) past-due
rate as the respective totals divided by gross loans receivable at
each respective quarter end.
(6) Includes loan balances and activity
classified as Held for Sale.
(7) For the first and second quarters of
2022, NCOs presented above include $5.0 million and $10.3 million,
respectively, of NCO's related to the fair value discount, which
are excluded from provision.
Table 8 - Canada Direct Lending Portfolio Performance
(in thousands, except percentages)
Q2 2022
Q1 2022
Q4 2021
Q3 2021
Q2 2021
Gross loans
receivable
Revolving LOC
$
442,738
$
424,485
$
402,405
$
366,509
$
337,700
Installment loans
24,817
23,578
24,792
24,315
23,564
Total gross loans receivable
$
467,555
$
448,063
$
427,197
$
390,824
$
361,264
Lending
Revenue:
Revolving LOC
$
47,591
$
45,455
$
43,943
$
40,239
$
37,450
Installment loans
11,868
11,109
11,416
11,331
10,541
Total lending revenue
$
59,459
$
56,564
$
55,359
$
51,570
$
47,991
Lending
Provision:
Revolving LOC
$
22,641
$
19,156
$
20,080
$
11,375
$
7,066
Installment loans
3,303
2,723
2,945
2,512
1,438
Total lending provision
$
25,944
$
21,879
$
23,025
$
13,887
$
8,504
NCOs
Canada Direct Lending Revolving LOC
$
20,160
$
21,590
$
15,112
$
9,887
$
10,838
Canada Direct Lending Installment
loans
2,904
2,647
2,758
2,444
1,513
Total Canada Direct Lending NCOs
$
23,064
$
24,237
$
17,870
$
12,331
$
12,351
NCO rate
(1)
Revolving LOC
4.6
%
5.2
%
3.9
%
2.8
%
3.3
%
Installment loans
12.0
%
10.9
%
11.2
%
10.2
%
6.3
%
Total NCO rate
5.0
%
5.5
%
4.4
%
3.3
%
3.5
%
ALL rate
(2)
Revolving LOC
7.2
%
7.2
%
8.0
%
7.5
%
7.9
%
Installment loans
9.7
%
8.8
%
8.0
%
7.4
%
7.5
%
Total ALL rate
7.4
%
7.3
%
8.0
%
7.5
%
7.9
%
Past-due rate
(2)
Revolving LOC
8.7
%
8.0
%
8.9
%
6.8
%
5.8
%
Installment loans
1.8
%
2.0
%
2.2
%
2.0
%
2.3
%
Total past-due rate
8.3
%
7.7
%
8.5
%
6.5
%
5.5
%
(1) We calculate NCO rate as total NCOs
divided by Average gross loans receivables.
(2) We calculate ALL rate and past-due
rate as the respective totals divided by gross loans receivable at
each respective quarter end.
Table 9 - Canada POS Lending Portfolio Performance
(in thousands, except percentages)
Q2 2022
Q1 2022
Q4 2021
Q3 2021
Q2 2021
Revolving
LOC
Total gross loans receivable
$
627,163
$
541,776
$
459,176
$
302,349
$
221,453
Total lending revenue
$
20,846
$
18,655
$
13,704
$
10,646
$
6,495
Canada POS Lending NCOs (1)
$
3,537
$
2,727
$
1,731
$
1,827
$
1,509
NCO rate (1)(2)
0.6
%
0.5
%
0.5
%
0.7
%
0.7
%
ALL rate (3)
4.5
%
5.1
%
4.8
%
3.8
%
2.1
%
Past-due rate (3)(4)
5.3
%
4.2
%
4.1
%
4.8
%
5.4
%
(1) For the second, third and fourth
quarters of 2021, NCOs presented above include $2.4 million, $0.6
million and $0.8 million, respectively, of NCO's related to the
fair value discount, which are excluded from provision.
(2) We calculate NCO rate as total NCOs
divided by Average gross loans receivable.
(3) We calculate ALL rate and past-due
rate as the respective totals divided by gross loans receivable
(excluding the fair value discount on acquired loans) at each
respective quarter end.
(4) The past-due rate for Canada POS
Lending for loans 31+ days past-due were 2.2%, 1.9%, 2.1%, 2.6% and
3.0% for the three months ended March 31, 2022, December 31, 2021,
September 30, 2021, June 30, 2021 and March 31, 2021,
respectively.
Non-GAAP Financial Measures
In addition to the financial information prepared in conformity
with U.S. GAAP, we provide certain “non-GAAP financial measures,”
including:
- Adjusted Net Income ("ANI") and Adjusted Earnings Per Share, or
the Adjusted Earnings Measures (net income plus or minus certain
legal and other costs, income or loss from equity method
investment, goodwill and intangible asset impairments,
transaction-related costs, restructuring costs, loss on
extinguishment of debt, adjustments related to acquisition
accounting, share-based compensation, intangible asset
amortization, certain tax adjustments and impacts from tax law
changes and cumulative tax effect of applicable adjustments, on a
total and per share basis);
- EBITDA (earnings before interest, income taxes, depreciation
and amortization);
- Adjusted EBITDA (EBITDA plus or minus certain non-cash and
other adjusting items); and
- Gross Combined Loans Receivable (includes loans originated by
third-party lenders through CSO programs which are not included in
the Consolidated Financial Statements).
We believe that presentation of non-GAAP financial information
is meaningful and useful in understanding the activities and
business metrics of the Company's operations. We believe that these
non-GAAP financial measures reflect an additional way of viewing
aspects of the business that, when viewed with the Company's U.S.
GAAP results, provide a more complete understanding of factors and
trends affecting the business.
We believe that investors regularly rely on non-GAAP financial
measures, to assess operating performance and that such measures
may highlight trends in the business that may not otherwise be
apparent when relying on financial measures calculated in
accordance with U.S. GAAP. In addition, we believe that the
adjustments shown above are useful to investors to allow them to
compare our financial results during the periods shown without the
effect of each of these income or expense items. In addition, we
believe that these non-GAAP financial measures are frequently used
by securities analysts, investors and other interested parties in
the evaluation of public companies in our industry, many of which
present non-GAAP financial measures when reporting their
results.
In addition to reporting loans receivable information in
accordance with U.S. GAAP, we provide Gross Combined Loans
Receivable consisting of owned loans receivable plus loans
originated by third-party lenders through the CSO programs, which
we guarantee but do not include in the Consolidated Financial
Statements. Management believes this analysis provides investors
with important information needed to evaluate overall lending
performance.
We provide non-GAAP financial information for informational
purposes and to enhance understanding of the U.S. GAAP Consolidated
Financial Statements. Non-GAAP financial measures should not be
considered as alternatives to income, segment operating income, or
any other performance measure derived in accordance with U.S. GAAP,
or as an alternative to cash flows from operating activities or any
other liquidity measure derived in accordance with U.S. GAAP.
Readers should consider the information in addition to, but not
instead of or superior to, the financial statements prepared in
accordance with U.S. GAAP. This non-GAAP financial information may
be determined or calculated differently by other companies,
limiting the usefulness of those measures for comparative
purposes.
Description and Reconciliations of Non-GAAP Financial
Measures
Non-GAAP financial measures have limitations as analytical
tools, and you should not consider these measures in isolation or
as a substitute for analysis of our income or cash flows as
reported under U.S. GAAP. Some of these limitations are:
- they do not include cash expenditures or future requirements
for capital expenditures or contractual commitments;
- they do not include changes in, or cash requirements for,
working capital needs;
- they do not include the interest expense, or the cash
requirements necessary to service interest or principal payments on
debt;
- depreciation and amortization are non-cash expense items
reported in the statements of cash flows; and
- other companies in our industry may calculate these measures
differently, limiting their usefulness as comparative
measures.
We calculate Adjusted Earnings per Share utilizing diluted
shares outstanding at quarter-end. If we record a loss under U.S.
GAAP, shares outstanding utilized to calculate Diluted Loss per
Share are equivalent to basic shares outstanding. Shares
outstanding utilized to calculate Adjusted Earnings per Share
reflect the number of diluted shares we would have reported if
reporting net income under U.S. GAAP. If we record an Adjusted Loss
per Share, shares outstanding utilized to calculate Diluted Loss
per Share are equivalent to basic shares outstanding.
As noted above, Gross Combined Loans Receivable includes loans
originated by third-party lenders through CSO programs which are
not included in the consolidated financial statements but from
which we earn revenue and for which we provide a guarantee to the
lender. Management believes this analysis provides investors with
important information needed to evaluate overall lending
performance.
We believe investors use the non-GAAP measures we present to
analyze operating performance and to evaluate our ability to incur
and service debt and the capacity for making capital expenditures.
Adjusted EBITDA is also useful to investors to help assess our
estimated enterprise value.
Table 10 - Reconciliation of Net Income and Diluted Earnings
per Share to Adjusted Net Income and Adjusted Diluted Earnings per
Share, non-GAAP measures
(in thousands, except per share data,
unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
Change $
Change %
2022
2021
Change $
Change %
Net (loss) income
$
(26,080
)
$
104,517
$
(130,597
)
#
($
24,744
)
$
130,252
($
154,996
)
#
Adjustments:
Restructuring costs (1)
1,146
5,763
2,215
5,763
Legal and other costs (2)
950
—
1,037
—
Loss (income) from equity method
investment (3)
1,328
(1,712
)
(256
)
(2,258
)
Gain from equity method investment
(11)
—
(135,387
)
—
(135,387
)
Transaction costs (4)
(168
)
3,181
—
6,341
Acquisition-related adjustments (5)
3,371
5,495
3,592
5,495
Change in fair value of contingent
consideration (6)
4,014
—
3,750
—
Share-based compensation (7)
4,417
3,467
8,510
6,150
Intangible asset amortization (8)
3,524
1,866
6,501
2,697
Cumulative tax effect of adjustments
(9)
(3,788
)
30,204
(5,616
)
28,469
Adjusted net (loss) income
$
(11,286
)
$
17,394
$
(28,680
)
#
$
(5,011
)
$
47,522
$
(52,533
)
#
Net (loss) income
$
(26,080
)
$
104,517
($
24,744
)
$
130,252
Diluted weighted average shares
outstanding
40,376
43,672
40,372
43,556
Adjusted diluted average shares
outstanding
40,376
43,672
40,372
43,556
Diluted (loss) earnings per share
$
(0.65
)
$
2.39
$
(3.04
)
#
$
(0.61
)
$
2.99
$
(3.60
)
#
Per share impact of adjustments to net
(loss) income
0.37
(1.99
)
0.49
(1.90
)
Adjusted diluted (loss) earnings per
share
$
(0.28
)
$
0.40
$
(0.68
)
(170.0
) %
($
0.12
)
$
1.09
$
(1.21
)
(111.0
) %
Note: Footnotes follow Reconciliation of
Net income table on the next page
Table 11 - Reconciliation of Net Income to EBITDA and
Adjusted EBITDA, Non-GAAP Measures
Three Months Ended June 30,
Six Months Ended June 30,
(in thousands, unaudited)
2022
2021
Change $
Change %
2022
2021
Change $
Change %
Net (loss) income
$
(26,080
)
$
104,517
$
(130,597
)
#
($
24,744
)
$
130,252
$
(154,996
)
#
(Benefit) provision for income taxes
(6,990
)
34,172
(41,162
)
#
(5,884
)
42,616
(48,500
)
#
Interest expense
42,193
23,440
18,753
80.0
%
80,534
42,979
37,555
87.4%
Depreciation and amortization
8,672
7,435
1,237
16.6
%
18,486
12,400
6,086
49.1%
EBITDA
17,795
169,564
(151,769
)
(89.5
)%
68,392
228,247
(159,855
)
(70.0)%
Restructuring costs (1)
1,146
5,763
2,215
5,763
Legal and other costs (2)
950
—
1,037
—
Loss (income) from equity method
investment (3)
1,328
(1,712
)
(256
)
(2,258
)
Gain from equity method investment
(11)
—
(135,387
)
—
(135,387
)
Transaction costs (4)
(168
)
3,181
—
6,341
Acquisition-related adjustments (5)
3,371
5,495
3,592
5,495
Change in fair value of contingent
consideration (6)
4,014
—
3,750
—
Share-based compensation (7)
4,417
3,467
8,510
6,150
Other adjustments (10)
(493
)
(69
)
(581
)
(274
)
Adjusted EBITDA
$
32,360
$
50,302
$
(17,942
)
(35.7
)%
$
86,659
$
114,077
$
(27,418
)
(24.0)%
Adjusted EBITDA Margin
10.6
%
26.8
%
14.6
%
29.7
%
# - Change greater than 100% or not
meaningful
Table 12 - Reconciliation of Total Operating Expense to
Adjusted Operating
Three Months Ended June 30,
2022
Three Months Ended June 30,
2021
(dollars in thousands, unaudited)
U.S.
Canada Direct Lending
Canada POS Lending
U.S.
Canada Direct Lending
Canada POS Lending
Total operating expense
$
115,633
$
28,332
$
20,442
$
81,656
$
25,483
$
10,359
Less:
Restructuring costs (1)
1,146
—
—
5,763
—
—
Legal and other costs (2)
943
7
—
—
—
—
Transaction costs (4)
(168
)
—
—
3,181
—
—
Acquisition-related adjustments (5)
3,371
—
—
—
—
5,495
Change in fair value of contingent
consideration (6)
—
—
4,014
—
—
—
Share-based compensation (7)
3,259
129
1,029
3,467
—
—
Other adjustments (10)
(395
)
(71
)
(27
)
(159
)
107
(17
)
Adjusted operating expense
$
107,477
$
28,267
$
15,426
$
69,404
$
25,376
$
4,881
Six Months Ended June 30,
2022
Six Months Ended June 30,
2021
(dollars in thousands, unaudited)
U.S.
Canada Direct Lending
Canada POS Lending
U.S.
Canada Direct Lending
Canada POS Lending
Total operating expense
$
226,574
$
55,353
$
35,946
$
161,549
$
50,087
$
13,096
Less:
Restructuring costs (1)
2,215
—
—
5,763
—
—
Legal and other costs (2)
1,030
7
—
—
—
—
Transaction costs (4)
—
—
—
6,341
—
—
Acquisition-related adjustments (5)
3,374
—
218
—
—
5,495
Change in fair value of contingent
consideration (6)
—
—
3,750
—
—
—
Share-based compensation (7)
6,762
244
1,504
6,150
—
—
Other adjustments (10)
(640
)
16
43
(405
)
148
(17
)
Adjusted operating expense
$
213,833
$
55,086
$
30,431
$
143,700
$
49,939
$
7,618
(1)
Restructuring costs for the three and six
months ended June 30, 2022 resulted from U.S. store closures and
related costs and certain severance payments to eliminate duplicate
roles.
(2)
Legal and other costs for the three and
six months ended June 30, 2022 primarily related to settlement
costs related to certain legal matters.
(3)
The amount reported is our share of
Katapult's U.S. GAAP net income or loss, recognized on a one
quarter lag.
(4)
Transaction costs for the three and six
months ended June 30, 2022 relate to the acquisition of Heights
Finance in December 2021, the sale of the Legacy U.S. Direct
Lending business, and the acquisition of First Heritage Credit,
both of which closed in July 2022.
Transaction costs for the three and six
months ended June 30, 2021 relate to the acquisition of Flexiti in
March 2021.
(5)
During the three months and six months
ended June 30, 2022, acquisition-related adjustments related to the
acquired Heights loan portfolio as of December 27, 2021.
During the three months and six months
ended June 30, 2022, acquisition-related adjustments related to the
acquired Flexiti loan portfolio as of March 10, 2021.
(6)
In connection with our acquisition of
Flexiti, we recorded a $4.0 million and $3.8 million adjustment
related to the fair value of the contingent consideration for the
three and six months ended June 30, 2022, respectively.
(7)
The estimated fair value of share-based
awards was recognized as non-cash compensation expense on a
straight-line basis over the vesting period.
(8)
Intangible asset amortization in
determining ANI for the three and six months ended June 30, 2022
primarily included amortization of identifiable intangible assets
established in connection with the acquisitions of Flexiti and
Heights Finance.
(9)
Cumulative tax effect of adjustments
included in Reconciliation of Net income to Adjusted Net Income
table is calculated using the estimated incremental tax rate by
country.
(10)
Other adjustments primarily reflect the
intercompany foreign-currency exchange impact.
(11)
Gain on investment in Katapult of
$135.4 million recorded during the three and six months ended June
30, 2021 as a result of its reverse merger with FinServ.
Forward-Looking Statements
This press release contains forward-looking statements. These
forward-looking statements include projections, estimates and
assumptions about our business results and growth trends and our
ability to create value; our ability to accelerate our transition
into longer-term, higher-balance and lower-rate credit products;
our belief that recent acquisitions will solidify our position as a
full spectrum non-prime and prime consumer lender in the U.S. and
Canada and accelerate our long-term revenue and earnings growth
prospects; and our belief in the usefulness of the various non-GAAP
financial measures used in this release. In addition, words such as
“guidance,” “estimate,” “anticipate,” “believe,” “forecast,”
“step,” “plan,” “predict,” “focused,” “project,” “is likely,”
“expect,” “intend,” “should,” “will,” “confident,” variations of
such words and similar expressions are intended to identify
forward-looking statements. Our ability to achieve these
forward-looking statements is based on certain assumptions,
judgments and other factors, both within and outside of our
control, that could cause actual results to differ materially from
those in the forward-looking statements, including: errors in our
internal forecasts or those of companies in which we invest; the
effects of competition on our business or on those companies in
which we invest; our ability to attract and retain customers;
market, financial, political and legal conditions; actions of
regulators and the negative impact of those actions on our
business; the continuing impact of COVID-19 pandemic or any other
similar wide-spread event on our business and the global economy;
our dependence on third-party lenders to provide the cash we need
to fund our loans and our ability to affordably access third-party
financing; our level of indebtedness; our ability to successfully
integrate acquired businesses; our ability to protect our
proprietary technology and analytics and keep up with that of our
competitors; disruption of our information technology systems that
adversely affect our business operations; ineffective pricing of
the credit risk of our prospective or existing customers;
inaccurate information supplied by customers or third parties that
could lead to errors in judging customers’ qualifications to
receive loans; improper disclosure of customer personal data;
failure of third parties who provide products, services or support
to us; any failure of third-party lenders upon whom we rely to
conduct business in certain states; disruption to our relationships
with banks and other third-party electronic payment solutions
providers as well as other factors discussed in our filings with
the Securities and Exchange Commission. These projections,
estimates and assumptions may prove to be inaccurate in the future.
These forward-looking statements are not guarantees of future
performance and involve known and unknown risks and uncertainties
that are difficult to predict with regard to timing, extent,
likelihood and degree of occurrence. There may be additional risks
that CURO presently does not know or that it currently believes are
immaterial that could also cause actual results to differ from
those contained in the forward-looking statements. Given these
risks and uncertainties, investors should not place undue reliance
on forward-looking statements as a prediction of actual future
results. We undertake no obligation to update, amend or clarify any
forward-looking statement for any reason.
All product names, logos, brands, trademarks and registered
trademarks are property of their respective owners.
About CURO
CURO Group Holdings Corp. (NYSE: CURO) is a full-spectrum
consumer credit lender serving U.S. and Canadian customers for over
25 years. Our roots in the consumer finance market run deep. We’ve
worked diligently to provide customers a variety of convenient,
easily accessible financial services. Our decades of alternative
data power a hard-to-replicate underwriting and scoring engine,
mitigating risk across the full spectrum of credit products. We
operate a number of brands including Cash Money®, LendDirect®,
Flexiti®, Opt+®, Revolve Finance®, Heights Finance, Southern
Finance, Covington Credit, Quick Credit, First Phase, and First
Heritage Credit.
Conference Call
CURO will host a conference call to discuss these results at
5:00 p.m. Eastern Time on Monday, August 8, 2022. The live webcast
of the call can be accessed at the CURO Investor Relations website
at http://ir.curo.com/.
You may access the call at 1-833-953-2430 (1-412-317-5759 for
international callers). Please ask to join the CURO Group Holdings
call. A replay of the conference call will be available until
August 10, 2022, at 5:00 p.m. Eastern Time. An archived version of
the webcast will be available on the CURO Investors website for 90
days. You may access the conference call replay at 1-877-344-7529
(1-412-317-0088 for international callers). The replay access code
is 8785759.
Final Results
The financial results presented and discussed herein are on a
preliminary and unaudited basis; final unaudited data will be
included in the Company’s Quarterly Report on Form 10-Q for the
three and six months ended June 30, 2022.
(CURO-NWS)
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version on businesswire.com: https://www.businesswire.com/news/home/20220808005579/en/
Investor Relations: Roger Dean Executive Vice President and
Chief Financial Officer Phone: 844-200-0342 Email: IR@curo.com
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