CURO Group Holdings Corp. Announces Second Quarter 2022 Financial Results (2022)

“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)

CURO Group Holdings Corp. Announces Second Quarter 2022 Financial Results (1)

View source version on businesswire.com: https://www.businesswire.com/news/home/20220808005579/en/

The CURO Group Holdings Stock on the stock exchange NYSE has gained +1,67% at 7,93USD.

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