CURO Group Holdings Corp. Reports First Quarter 2023 Financial Results

By: CURO Group Holdings Corp. via Business Wire

May 10, 2023 at 06:00 AM EDT

CURO Group Holdings Corp. (NYSE: CURO) (“CURO” or the “Company”), a tech-enabled, omni-channel consumer finance company serving consumers in the U.S. and Canada, today announced financial results for its first quarter ended March 31, 2023.

Highlights

Net revenue increased 19.8% sequentially to $146.5 million
Operating expenses declined 6.2% sequentially to $118.2 million, and $35.5 million and 23.1% year over year
Gross loans receivables of $2.1 billion were slightly lower by 1.2% sequentially
Net charge-off rate improved 326 bps sequentially to 11.5%, and 30 bps sequentially to 14.5% excluding the changes in the Direct Lending brands in Canada charge-off policies
On May 9, 2023, finalized a $150.0 million term loan and a C$110.0 million non-recourse revolving warehouse facility

“Our first quarter results highlight the emerging benefits of our business transformation and differentiated operating model,” said Doug Clark, Chief Executive Officer of CURO. “Subsequent to the quarter, we successfully raised over $230 million in gross capital, a key step to executing our plan to profitability and demonstrates continued access to capital markets and supportive lending partners. We also delivered results that were favorable relative to our guidance expectations, including solid revenue, well-managed operating expenses and stable credit quality. With a close eye on the various challenges presented by the macro environment, we will continue to execute on our business plan, support our customers and remain focused on generating long-term sustainable returns for our investors.”

Consolidated Summary Results

For the three months ended March 31, 2023, the Company had total revenue of $209.5 million compared with total revenue of $217.2 million sequentially, primarily driven by product mix shift. Net revenue was $146.5 million, an increase of $24.2 million, or 19.8% sequentially, primarily driven by a lower provision for loan loss expense related to the decrease in the net charge-off rate.

For the three months ended March 31, 2023, the Company had total operating expenses of $118.2 million, a decrease of $7.8 million, or 6.2%, sequentially. The decline reflected lower restructuring charges and operating expenses, in both cases related to store closures and headcount reductions in the U.S. and Canada. One-time restructuring charges recognized in the first quarter of 2023 and the fourth quarter of 2022 were $10.0 million and $13.1 million, respectively, representing $3.1 million of the sequential decrease.

Net loss of $59.5 million ($1.46 per share) for the three months ended March 31, 2023, compared with Net loss of $186.4 million ($4.60 per share) for the three months ended December 31, 2022. The $126.9 million improvement in Net loss in the first quarter of 2023 compared to the prior quarter was driven by a $24.2 million increase in net revenue quarter over quarter due to product mix shift, the decline in Provision for loan loss, a $7.8 million decrease in total Operating expenses related to store closures and restructuring activities completed in the fourth quarter of 2022 and the $145.2 million Goodwill impairment charge in the fourth quarter of 2022, with no such charge in the first quarter of 2023, partially offset by a $29.0 million Provision for income taxes to create a valuation allowance on U.S. deferred tax assets, and a $4.0 million increase in Interest expense.

Gross loans receivable of $2.1 billion at March 31, 2023 were slightly lower by 1.2% sequentially, primarily driven by a decrease of $55.2 million, or 6.9%, in Direct Lending Installment Loans, partially offset by an increase of $19.8 million, or 2.4%, in Canada POS Lending.

As of January 1, 2023, the Company adopted Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("CECL"). This adoption resulted in a onetime pre-tax increase to our Allowance for loan losses of $135.2 million, which was recorded to opening Accumulated deficit and did not impact the Statement of Operations.

The Company's Net charge-off rate in the first quarter improved 326 bps, sequentially, to 11.5%, primarily driven by a change in our Direct Lending brands in Canada charge-off policies during the quarter, as part of the alignment of charge-off policies across the Company, as well as improved recoveries as a result of improvements to our credit collection processes. The Company's 91+ days delinquency ratio increased by 60 bps, sequentially, to 3.2% primarily driven by these policy changes.

	As of or for the Quarter Ended
	Mar 31,		Dec 31,		Sep 30,		Jun 30,		Mar 31,
Delinquency and Loss Ratios	2023		2022		2022		2022		2022
31-60 days delinquency ratio	1.8	%	1.9	%	2.5	%	2.4	%	2.1	%
61-90 days delinquency ratio	1.5	%	1.3	%	1.5	%	1.8	%	1.9	%
91+ days delinquency ratio	3.2	%	2.6	%	2.6	%	2.0	%	2.2	%
Net charge-offs	11.5	%	14.8	%	13.2	%	24.0	%	23.2	%

Funding and Liquidity

As of March 31, 2023, principal debt balances outstanding of $2.7 billion, which consisted of 65.5% of fixed rate or hedged variable rate debt and 34.5% of variable rate debt. We had $54.9 million of Cash and cash equivalents on the Consolidated Balance Sheet and available for general corporate purposes.

As of March 31, 2023, unrestricted cash and cash equivalents, together with $109.9 million in unused borrowing capacity and $140.1 million of unencumbered Gross loans receivable, provided approximately $303.6 million in available capital resources.

About CURO

CURO Group Holdings Corp. (NYSE: CURO) is a leading 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 diversified 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®, Heights Finance, Southern Finance, Covington Credit, Quick Credit and First Heritage Credit.

Conference Call

CURO will host a conference call to discuss these results at 8:30 a.m. Eastern Time on Wednesday, May 10, 2023. 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 May 17, 2023, 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 1314764.

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 months ended March 31, 2023.

Table 1 - Consolidated Statements of Operations

	Three Months Ended,
	Mar 31,			Dec 31,			Sept 30,			Jun 30,			Mar 31,
(in thousands, unaudited)	2023			2022			2022			2022			2022

Revenue
Interest and fees revenue	$	179,437		$	181,605		$	180,515		$	278,331		$	264,956
Insurance and other income		30,036			35,593			33,605			26,073			25,240
Total revenue		209,473			217,198			214,120			304,404			290,196
Provision for losses		62,932			94,849			78,399			129,546			97,531
Net revenue		146,541			122,349			135,721			174,858			192,665
Operating Expenses
Salaries and benefits		64,805			66,067			53,413			82,427			79,729
Occupancy		11,672			12,114			12,827			17,507			17,037
Advertising		2,175			3,692			5,244			12,707			10,500
Direct operations		13,092			11,832			11,729			20,293			20,274
Depreciation and amortization		9,021			8,337			9,499			8,672			9,814
Other operating expense		17,433			24,002			23,645			18,787			16,377
Total operating expenses		118,198			126,044			116,357			160,393			153,731
Other expense (income)
Interest expense		58,943			54,978			50,149			42,193			38,341
Loss (income) from equity method investment		3,413			1,932			2,309			1,328			(1,584	)
Goodwill impairment		—			145,241			—			—			—
Loss on extinguishment of debt		—			689			3,702			—			—
Loss (gain) on change in fair value of contingent consideration		2,728			—			(11,354	)		4,014			(265	)
Gain on sale of business		2,027			—			(68,443	)		—			—
Total other expense		67,111			202,840			(23,637	)		47,535			36,492
(Loss) income before income taxes		(38,768	)		(206,535	)		43,001			(33,070	)		2,442
Provision (benefit) for income taxes		20,703			(20,142	)		17,348			(6,990	)		1,106
Net (loss) income	$	(59,471	)	$	(186,393	)	$	25,653		$	(26,080	)	$	1,336

Basic (loss) earnings per share	$	(1.46	)	$	(4.60	)	$	0.63		$	(0.65	)	$	0.03
Diluted (loss) earnings per share	$	(1.46	)	$	(4.60	)	$	0.63		$	(0.65	)	$	0.03

Weighted average common shares outstanding:
Basic		40,783			40,488			40,479			40,376			40,368
Diluted		40,783			40,488			40,835			40,376			41,308

Table 2 - Consolidated Balance Sheets

	As of
	Mar 31,			Dec 31,			Sep 30,			Jun 30,			Mar 31,
(in thousands, unaudited)	2023			2022			2022			2022			2022
ASSETS
Cash and cash equivalents	$	54,935		$	73,932		$	45,683		$	37,394		$	60,209
Restricted cash		123,282			91,745			144,020			97,465			110,118
Gross loans receivable		2,062,829			2,087,833			1,894,427			1,592,815			1,628,568
Less: Allowance for loan losses		(259,959	)		(122,028	)		(102,743	)		(90,286	)		(98,168	)
Loans receivable, net		1,802,870			1,965,805			1,791,684			1,502,529			1,530,400
Income taxes receivable		20,100			21,918			13,469			46,450			28,664
Prepaid expenses and other		47,295			53,057			65,167			25,370			40,112
Property and equipment, net		29,867			31,957			37,402			38,752			54,865
Investment in Katapult		20,502			23,915			25,848			28,157			29,484
Right of use asset - operating leases		54,597			61,197			64,683			64,602			114,305
Deferred tax assets		53,474			49,893			31,986			23,993			20,066
Goodwill		276,487			276,269			424,292			352,990			430,967
Intangibles, net		127,387			123,677			120,345			113,130			113,640
Other assets		10,991			15,828			12,774			8,558			9,535
Assets held for sale ⁽¹⁾		—			—			—			338,779			—
Total Assets	$	2,621,787		$	2,789,193		$	2,777,353		$	2,678,169		$	2,542,365
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities	$	85,875		$	73,827		$	66,723		$	81,423		$	84,783
Deferred revenue		33,227			32,259			25,111			23,425			24,265
Lease liability - operating leases		55,468			62,847			66,370			67,339			120,593
Contingent consideration related to acquisition		18,128			16,884			15,770			30,354			26,687
Income taxes payable		—			—			—			4			—
Accrued interest		20,090			38,460			18,048			34,970			16,481
Liability for losses on CSO lender-owned consumer loans		—			—			—			—			7,166
Debt		2,627,263			2,607,314			2,449,316			2,189,431			2,090,085
Other long-term liabilities		10,552			11,736			11,563			12,146			13,679
Deferred tax liabilities		—			—			—			12,360			5,839
Liabilities held for sale ⁽¹⁾		—			—			—			111,137			—
Total Liabilities	$	2,850,603		$	2,843,327		$	2,652,901		$	2,562,589		$	2,389,578
Total Stockholders' (Deficit) Equity		(228,816	)		(54,134	)		124,452			115,580			152,787
Total Liabilities and Stockholders' (Deficit) Equity	$	2,621,787		$	2,789,193		$	2,777,353		$	2,678,169		$	2,542,365

(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 sale of the Legacy U.S. Direct Lending Business. The sale of the Legacy U.S. Direct Lending business closed in July 2022.

Table 3 - Consolidated Portfolio Performance

(in thousands, except percentages, unaudited)	Q1 2023			Q4 2022			Q3 2022			Q2 2022⁽¹⁾			Q1 2022
Gross loans receivable ⁽⁵⁾
Revolving LOC	$	1,314,695		$	1,284,515		$	1,129,387		$	1,128,372		$	1,015,338
Installment loans		748,134			803,318			765,040			652,468			613,230
Total gross loans receivable	$	2,062,829		$	2,087,833		$	1,894,427		$	1,780,840		$	1,628,568

Lending Revenue
Revolving LOC	$	84,225		$	81,170		$	77,037		$	96,582		$	91,023
Installment loans		95,212			100,435			103,478			181,749			173,933
Total lending revenue	$	179,437		$	181,605		$	180,515		$	278,331		$	264,956

Lending Provision
Revolving LOC	$	30,106		$	46,745		$	41,787		$	40,435		$	37,447
Installment loans		31,139			46,442			33,510			86,484			57,435
Total lending provision	$	61,245		$	93,187		$	75,297		$	126,919		$	94,882

NCOs ^{(2) (6)}
Revolving LOC	$	17,953		$	35,387		$	30,907		$	33,945		$	34,372
Installment loans ⁽⁵⁾		41,078			38,168			31,372			71,056			60,386
Total NCOs	$	59,031		$	73,555		$	62,279		$	105,001		$	94,758

NCO rate (annualized) ^{(2) (3) (5)}
Revolving LOC		5.6	%		11.6	%		10.8	%		12.8	%		14.4	%
Installment loans		21.5	%		19.6	%		17.6	%		44.8	%		38.8	%
Total NCO rate		11.5	%		14.8	%		13.2	%		24.0	%		23.2	%

ACL rate ^{(4) (5) (6)}
Revolving LOC		13.3	%		6.1	%		6.0	%		6.7	%		7.0	%
Installment loans		11.3	%		5.4	%		4.6	%		8.1	%		5.5	%
Total ACL rate		12.6	%		5.8	%		5.4	%		6.7	%		6.0	%

31+ days past-due rate ^{(4) (5)}
Revolving LOC		5.5	%		3.3	%		4.1	%		4.1	%		3.7	%
Installment loans		8.2	%		9.6	%		10.2	%		9.2	%		9.0	%
Total past-due rate		6.5	%		5.8	%		6.6	%		6.1	%		5.8	%

(1) Includes loan balances and activity classified as Held for Sale.
(2) NCOs presented above include $0.0 million, $0.0 million, $0.5 million, $10.3 million, and $5.0 million for the three months ended March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022, respectively, related to the purchase accounting fair value discount, which are excluded from provision.
(3) We calculate NCO rate as total quarterly NCOs divided by Average gross loans receivable; then we annualize the rate. The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications and the periodic sale of charged off loans.
(4) We calculate (i) Allowance for credit losses ("ACL") rate and (ii) 31+ days past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.
(5) All balances in connection with the CSO program were disposed of on July 8, 2022 upon the completion of the divestiture of the Legacy U.S. Direct Lending business, as such these balances have been excluded from this amount.
(6) We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2023, which requires us to estimate the lifetime expected credit loss on financial instruments. Our previous model required the recognition of credit losses when it was probable that a loss had been incurred.

Table 4 - Direct Lending Segment - Operating (Loss)/Income

	Three Months Ended,
	Mar 31,		Dec 31,			Sep 30,		Jun 30,		Mar 31,
(in thousands, unaudited)	2023		2022			2022		2022		2022

Total revenue	$	169,368	$	181,925		$	186,409	$	281,251	$	269,887
Provision for losses		48,364		77,724			65,020		123,584		88,817
Net revenue		121,004		104,201			121,389		157,667		181,070
Total operating expenses		103,151		111,632			102,840		143,965		137,963
Segment operating (loss) income	$	17,853	$	(7,431	)	$	18,549	$	13,702	$	43,107

Table 5 - Direct Lending Segment - Portfolio Performance

(in thousands, except percentages, unaudited)	Q1 2023			Q4 2022			Q3 2022			Q2 2022⁽¹⁾			Q1 2022
Gross loans receivable ⁽⁵⁾
Revolving LOC	$	461,443		$	451,077		$	439,117		$	501,209		$	473,562
Installment loans		748,133			803,318			765,041			652,467			613,231
Total gross loans receivable	$	1,209,576		$	1,254,395		$	1,204,158		$	1,153,676		$	1,086,793

Lending Revenue
Revolving LOC	$	49,092		$	49,915		$	52,461		$	75,736		$	72,368
Installment loans		95,212			100,435			103,478			181,747			173,934
Total lending revenue	$	144,304		$	150,350		$	155,939		$	257,483		$	246,302

Lending Provision
Revolving LOC	$	15,539		$	29,620		$	28,408		$	34,472		$	28,734
Installment loans		31,139			46,442			33,511			86,485			57,435
Total lending provision	$	46,678		$	76,062		$	61,919		$	120,957		$	86,169

NCOs ^{(2) (5)}
Revolving LOC	$	6,234		$	26,715		$	24,793		$	30,408		$	31,645
Installment loans		41,078			38,168			29,783			43,661			38,894
Total NCOs	$	47,312		$	64,883		$	54,576		$	74,069		$	70,539

NCO rate (annualized) ^{(2) (3) (5)}
Revolving LOC		5.5	%		23.8	%		20.9	%		25.0	%		27.6	%
Installment loans		21.5	%		19.3	%		16.7	%		27.7	%		25.3	%
Total NCO rate		15.6	%		20.9	%		18.4	%		26.5	%		26.3	%

ACL rate ^{(4) (5)} ⁽⁶⁾
Revolving LOC		25.6	%		8.4	%		7.9	%		9.3	%		9.2	%
Installment loans		11.3	%		5.4	%		4.6	%		6.9	%		4.4	%
Total ACL rate		16.8	%		6.5	%		5.8	%		7.9	%		6.5	%

31+ days past-due rate ⁽⁴⁾ ⁽⁵⁾
Revolving LOC		8.4	%		4.1	%		5.1	%		5.8	%		5.8	%
Installment loans		8.2	%		9.6	%		10.2	%		9.7	%		9.3	%
Total past-due rate		8.3	%		7.6	%		8.3	%		8.0	%		7.8	%

(1) Includes loan balances and activity classified as Held for Sale.
(2) NCOs presented above include $0.0 million, $0.0 million, $0.5 million, $10.3 million and $5.0 million for the three months ended March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022 and March 31, 2022, respectively, related to the purchase accounting fair value discount, which are excluded from provision.
(3) We calculate NCO rate as total quarterly NCOs divided by Average gross loans receivable, then we annualize the rate. The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications and the periodic sale of charged off loans.
(4) We calculate (i) ACL rate and (ii) 31+ days past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.
(5) All balances in connection with the CSO program were disposed of on July 8, 2022 upon the completion of the divestiture of the Legacy U.S. Direct Lending Business, as such these balances have been excluded from this amount.
(6) We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2023, which requires us to estimate the lifetime expected credit loss on financial instruments. Our previous model required the recognition of credit losses when it was probable that a loss had been incurred.

Table 6 - Canada POS Lending Segment - Operating Income/(Loss)

	Three Months Ended,
	Mar 31,		Dec 31,		Sept 30,		Jun 30,		Mar 31,
(in thousands, unaudited)	2023		2022		2022		2022		2022

Total revenue	$	40,105	$	35,273	$	27,710	$	23,154	$	20,309
Provision for losses		14,568		17,125		13,378		5,963		8,714
Net revenue		25,537		18,148		14,332		17,191		11,595
Total operating expenses		15,047		14,412		13,519		16,427		15,768
Segment operating income (loss)	$	10,490	$	3,736	$	813	$	764	$	(4,173	)

Table 7 - Canada POS Lending Segment - Portfolio Performance

(in thousands, except percentages, unaudited)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
Revolving LOC
Gross loans receivable	$	853,253		$	833,438		$	690,270		$	627,163		$	541,776
Lending revenue	$	35,133		$	31,255		$	24,575		$	20,846		$	18,655
Lending provision	$	14,568		$	17,125		$	13,379		$	5,963		$	8,714
NCOs	$	11,719		$	8,672		$	6,114		$	3,537		$	2,727
NCO rate (annualized) ⁽¹⁾		5.6	%		4.4	%		3.6	%		2.4	%		2.0	%
ACL rate ^{(2) (3)}		6.7	%		4.9	%		4.8	%		4.5	%		5.1	%
31+ days past-due rate ⁽²⁾		3.9	%		2.9	%		3.6	%		2.8	%		1.8	%
(1) We calculate NCO rate as total quarterly NCOs divided by Average gross loans receivable then we annualized the rate. The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications and the periodic sale of charged off loans.
(2) We calculate (i) ACL rate and (ii) 31+ days past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.
(3) We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2023, which requires us to estimate the lifetime expected credit loss on financial instruments. Our previous model required the recognition of credit losses when it was probable that a loss had been incurred.

Forward-Looking Statements

This press release contains forward-looking statements. These forward-looking statements include projections, estimates and assumptions about various matters, such as future financial and operational performance, including our belief in the benefits of our business transformation and differentiated operating model, our ability to execute on our plan to profitability and demonstrate continued access to capital markets and our ability to execute on our business plan, support our customers and remain focused on generating long-term sustainable returns for our investors. In addition, words such as “guidance,” “estimate,” “anticipate,” “believe,” “forecast,” “step,” “plan,” “predict,” “focused,” “project,” “is likely,” “expect,” "anticipate," “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: risks relating to the uncertainty of projected financial and operational information and forecasts, including errors in our internal forecasts; our ability to manage growth; 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; the effects of competition on our business; our ability to attract and retain customers; global economic, market, financial, political or health conditions or events; actions of regulators and the impact of those actions on our business; 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; 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 we presently do not know or that we currently believe 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.

(CURO-NWS)

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