CURO Group Holdings Corp. Reports Second Quarter 2023 Financial Results

By: CURO Group Holdings Corp. via Business Wire

August 03, 2023 at 06:00 AM EDT

-Gross loans receivables increased 3.7% sequentially to $2.1 billion-

-Total revenue of $209.2 million-

-Operating expenses declined 8.5% sequentially to $108.1 million-

-Net charge-off normalizes at 13%-

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 second quarter ended June 30, 2023.

“We delivered solid results in the second quarter as we continued to execute on all facets of our core business,” said Doug Clark, Chief Executive Officer. “Our fundamentals continued to gradually improve, with revenue, net charge-offs, gross loans receivable and expenses all matching or exceeding our expectations. As we look ahead, despite ongoing macro challenges, we are encouraged by opportunities present in both the U.S. and Canada while remaining mindful to balance future growth with further improving our bottom line. Our extensive industry experience, investments in automation and strong consumer demand for our products position us well for long term growth and shareholder value creation.”

Second Quarter 2023 Consolidated Summary Results

Gross loans receivable increased 3.7% sequentially to $2.1 billion, primarily driven by sequential increases in Canada POS Lending and Direct Lending Revolving LOC Loans of 6.9% and 2.5%, respectively.
Net revenue of $129.6 million, down 11.5% sequentially, primarily driven by a higher provision for loan loss expense related to the increase in charge offs and Allowance for loan loss build due to loans receivable growth and change in macroeconomic conditions.
Total operating expenses declined 8.5% sequentially, to $108.1 million, primarily related to one-time restructuring charges of $10.0 million recognized in the first quarter of 2023.
Net loss of $59.3 million ($1.45 per share) compared with Net loss of $59.5 million ($1.46 per share) for the first quarter of 2023. The $0.2 million improvement was primarily driven by favorable decreases of $18.4 million in provision for income taxes and $10.1 million in total operating expenses, partially offset by lower net revenue and a $7.2 million increase in Interest expense due to the new term loan secured in May 2023 as well as increased utilization of non-recourse revolving credit facilities and $8.9 million of extinguishment and modification costs arising from the second quarter's debt transactions.
Net charge-off rate increased 150 bps, sequentially to 13.0%, returning to normalized rates from the temporary lower rates we saw in our Direct Lending brands in Canada after the policy change we made in the first quarter of 2023. The Company's 91+ days delinquency ratio remained flat sequentially at 3.2%.

	As of or for the Quarter Ended
	Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,
Delinquency and Loss Ratios	2023		2023		2022		2022		2022
31-60 days delinquency ratio	1.9	%	1.8	%	1.9	%	2.5	%	2.4	%
61-90 days delinquency ratio	1.3	%	1.5	%	1.3	%	1.5	%	1.8	%
91+ days delinquency ratio	3.2	%	3.2	%	2.6	%	2.6	%	2.0	%
Net charge-offs	13.0	%	11.5	%	14.8	%	13.2	%	24.0	%

Funding and Liquidity

As of June 30, 2023, principal debt balances outstanding were $2.8 billion, consisting of 69.2% of fixed rate or hedged variable rate debt and 30.8% of non-hedged variable rate debt.

As of June 30, 2023, available capital resources were approximately $361.9 million, comprised of $111.3 million in unrestricted Cash and cash equivalents, $176.7 million in unused borrowing capacity and $74.0 million of unencumbered Gross loans receivable.

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 under 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 Thursday, August 3, 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 1-416-764-8658 (Toll free: 1-888-396-8049; Conference ID: 82661841). Please ask to join the CURO Group Holdings call. An archived version of the webcast will be available on the CURO Investors website for 90 days.

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, 2023.

Table 1 - Consolidated Statements of Operations

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

Revenue
Interest and fees revenue	$	178,986		$	179,437		$	181,605		$	180,515		$	278,331
Insurance and other income		30,257			30,036			35,593			33,605			26,073
Total revenue		209,243			209,473			217,198			214,120			304,404
Provision for losses		79,598			62,932			94,849			78,399			129,546
Net revenue		129,645			146,541			122,349			135,721			174,858
Operating Expenses
Salaries and benefits		61,346			64,805			66,067			53,413			82,427
Occupancy		11,267			11,672			12,114			12,827			17,507
Advertising		2,131			2,175			3,692			5,244			12,707
Direct operations		15,466			13,092			11,832			11,729			20,293
Depreciation and amortization		9,141			9,021			8,337			9,499			8,672
Other operating expense		8,796			17,433			24,002			23,645			18,787
Total operating expenses		108,147			118,198			126,044			116,357			160,393
Other expense (income)
Interest expense		66,101			58,943			54,978			50,149			42,193
Loss from equity method investment		2,134			3,413			1,932			2,309			1,328
Goodwill impairment		—			—			145,241			—			—
Extinguishment or modification of debt costs		8,864			—			689			3,702			—
Loss on change in fair value of contingent consideration		—			2,728			—			(11,354	)		4,014
Gain on sale of business		—			2,027			—			(68,443	)		—
Miscellaneous expenses		1,435			—			—			—			—
Total other expense (income)		78,534			67,111			202,840			(23,637	)		47,535
Income (loss) before income taxes		(57,036	)		(38,768	)		(206,535	)		43,001			(33,070	)
Provision (benefit) for income taxes		2,291			20,703			(20,142	)		17,348			(6,990	)
Net (loss) income	$	(59,327	)	$	(59,471	)	$	(186,393	)	$	25,653		$	(26,080	)

Basic (loss) earnings per share	$	(1.45	)	$	(1.46	)	$	(4.60	)	$	0.63		$	(0.65	)
Diluted (loss) earnings per share	$	(1.45	)	$	(1.46	)	$	(4.60	)	$	0.63		$	(0.65	)

Weighted average common shares outstanding:
Basic		41,002			40,783			40,488			40,479			40,376
Diluted		41,002			40,783			40,488			40,835			40,376

Table 2 - Consolidated Balance Sheets

	As of
	Jun 30,			Mar 31,			Dec 31,			Sep 30,			Jun 30,
(in thousands, unaudited)	2023			2023			2022			2022			2022
ASSETS
Cash and cash equivalents	$	112,531		$	54,935		$	73,932		$	45,683		$	37,394
Restricted cash		109,484			123,282			91,745			144,020			97,465
Gross loans receivable		2,139,865			2,062,829			2,087,833			1,894,427			1,592,815
Less: Allowance for loan losses		(272,615	)		(259,959	)		(122,028	)		(102,743	)		(90,286	)
Loans receivable, net		1,867,250			1,802,870			1,965,805			1,791,684			1,502,529
Income taxes receivable		20,854			20,100			21,918			13,469			46,450
Prepaid expenses and other		44,518			47,295			53,057			65,167			25,370
Property and equipment, net		28,418			29,867			31,957			37,402			38,752
Investment in Katapult		18,368			20,502			23,915			25,848			28,157
Right of use asset - operating leases		56,021			54,597			61,197			64,683			64,602
Deferred tax assets		54,102			53,474			49,893			31,986			23,993
Goodwill		277,069			276,487			276,269			424,292			352,990
Intangibles, net		133,947			127,387			123,677			120,345			113,130
Other assets		22,275			10,991			15,828			12,774			8,558
Assets held for sale ⁽¹⁾		—			—			—			—			338,779
Total Assets	$	2,744,837		$	2,621,787		$	2,789,193		$	2,777,353		$	2,678,169
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities	$	78,343		$	85,875		$	73,827		$	66,723		$	81,423
Deferred revenue		36,793			33,227			32,259			25,111			23,425
Lease liability - operating leases		56,585			55,468			62,847			66,370			67,339
Contingent consideration related to acquisition		18,499			18,128			16,884			15,770			30,354
Income taxes payable		788			—			—			—			4
Accrued interest		39,306			20,090			38,460			18,048			34,970
Debt		2,772,872			2,627,263			2,607,314			2,449,316			2,189,431
Other long-term liabilities		10,016			10,552			11,736			11,563			12,146
Deferred tax liabilities		8			—			—			—			12,360
Liabilities held for sale ⁽¹⁾		—			—			—			—			111,137
Total Liabilities	$	3,013,210		$	2,850,603		$	2,843,327		$	2,652,901		$	2,562,589
Total Stockholders' (Deficit) Equity		(268,373	)		(228,816	)		(54,134	)		124,452			115,580
Total Liabilities and Stockholders' (Deficit) Equity	$	2,744,837		$	2,621,787		$	2,789,193		$	2,777,353		$	2,678,169

(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, which closed in July 2022.

Table 3 - Consolidated Portfolio Performance

(in thousands, except percentages, unaudited)	Q2 2023			Q1 2023			Q4 2022			Q3 2022			Q2 2022⁽¹⁾
Gross loans receivable
Revolving LOC	$	1,385,152		$	1,314,695		$	1,284,515		$	1,129,387		$	1,128,372
Installment loans		754,713			748,134			803,318			765,040			652,468
Total gross loans receivable	$	2,139,865		$	2,062,829		$	2,087,833		$	1,894,427		$	1,780,840

Lending Revenue
Revolving LOC	$	86,703		$	84,225		$	81,170		$	77,037		$	96,582
Installment loans		92,283			95,212			100,435			103,478			181,749
Total lending revenue	$	178,986		$	179,437		$	181,605		$	180,515		$	278,331

Lending Provision
Revolving LOC	$	42,932		$	30,106		$	46,745		$	41,787		$	40,435
Installment loans		35,171			31,139			46,442			33,510			86,484
Total lending provision	$	78,103		$	61,245		$	93,187		$	75,297		$	126,919

NCOs ⁽²⁾
Revolving LOC	$	32,786		$	17,953		$	35,387		$	30,907		$	33,945
Installment loans		35,483			41,078			38,168			31,372			71,056
Total NCOs	$	68,269		$	59,031		$	73,555		$	62,279		$	105,001

NCO rate (annualized) ^{(2) (3)}
Revolving LOC		9.7	%		5.6	%		11.6	%		10.8	%		12.8	%
Installment loans		18.9	%		21.5	%		19.6	%		17.6	%		44.8	%
Total NCO rate		13.0	%		11.5	%		14.8	%		13.2	%		24.0	%

ACL rate ^{(4) (5)}
Revolving LOC		13.6	%		13.3	%		6.1	%		6.0	%		6.7	%
Installment loans		11.2	%		11.3	%		5.4	%		4.6	%		8.1	%
Total ACL rate		12.7	%		12.6	%		5.8	%		5.4	%		6.7	%

31+ days past-due rate ⁽⁴⁾
Revolving LOC		5.6	%		5.5	%		3.3	%		4.1	%		4.1	%
Installment loans		8.1	%		8.2	%		9.6	%		10.2	%		9.2	%
Total past-due rate		6.5	%		6.5	%		5.8	%		6.6	%		6.1	%

(1) Includes loan balances and activity classified as Held for Sale.
(2) NCOs include $0.5 million and $10.3 million, for the three months ended September 30, 2022 and June 30, 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 quarter end.
(5) 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 Income / (Loss)

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

Total revenue	$	167,016	$	169,368	$	181,925		$	186,409	$	281,251
Provision for losses		63,755		48,364		77,724			65,020		123,584
Net revenue		103,261		121,004		104,201			121,389		157,667
Total operating expenses		91,285		103,151		111,632			102,840		143,965
Segment operating income (loss)	$	11,976	$	17,853	$	(7,431	)	$	18,549	$	13,702

Table 5 - Direct Lending Segment - Portfolio Performance

(in thousands, except percentages, unaudited)	Q2 2023			Q1 2023			Q4 2022			Q3 2022			Q2 2022⁽¹⁾
Gross loans receivable
Revolving LOC	$	472,902		$	461,443		$	451,077		$	439,117		$	501,209
Installment loans		754,713			748,133			803,318			765,041			652,467
Total gross loans receivable	$	1,227,615		$	1,209,576		$	1,254,395		$	1,204,158		$	1,153,676

Lending Revenue
Revolving LOC	$	49,483		$	49,092		$	49,915		$	52,461		$	75,736
Installment loans		92,283			95,212			100,435			103,478			181,748
Total lending revenue	$	141,766		$	144,304		$	150,350		$	155,939		$	257,484

Lending Provision
Revolving LOC	$	27,089		$	15,539		$	29,620		$	28,408		$	34,472
Installment loans		35,171			31,139			46,442			33,511			86,485
Total lending provision	$	62,260		$	46,678		$	76,062		$	61,919		$	120,957

NCOs ⁽²⁾
Revolving LOC	$	21,780		$	6,234		$	26,715		$	24,793		$	30,408
Installment loans		35,483			41,078			38,168			29,783			43,661
Total NCOs	$	57,263		$	47,312		$	64,883		$	54,576		$	74,069

NCO rate (annualized) ^{(2) (3)}
Revolving LOC		18.7	%		5.5	%		23.8	%		20.9	%		25.0	%
Installment loans		18.9	%		21.5	%		19.3	%		16.7	%		27.7	%
Total NCO rate		18.8	%		15.6	%		20.9	%		18.4	%		26.5	%

ACL rate ^{(4) (5)}
Revolving LOC		26.6	%		25.6	%		8.4	%		7.9	%		9.3	%
Installment loans		11.2	%		11.3	%		5.4	%		4.6	%		6.9	%
Total ACL rate		17.1	%		16.8	%		6.5	%		5.8	%		7.9	%

31+ days past-due rate ⁽⁴⁾
Revolving LOC		8.5	%		8.4	%		4.1	%		5.1	%		5.8	%
Installment loans		8.1	%		8.2	%		9.6	%		10.2	%		9.7	%
Total past-due rate		8.3	%		8.3	%		7.6	%		8.3	%		8.0	%

(1) Includes loan balances and activity classified as Held for Sale.
(2) NCOs include $0.5 million and $10.3 million, for the three months ended September 30, 2022 and June 30, 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 quarter end.
(5) 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

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

Total revenue	$	42,227	$	40,105	$	35,273	$	27,711	$	23,153
Provision for losses		15,843		14,568		17,125		13,379		5,962
Net revenue		26,384		25,537		18,148		14,332		17,191
Total operating expenses		16,862		15,047		14,412		13,518		16,428
Segment operating income	$	9,522	$	10,490	$	3,736	$	814	$	763

Table 7 - Canada POS Lending Segment - Portfolio Performance

(in thousands, except percentages, unaudited)	Q2 2023			Q1 2023			Q4 2022			Q3 2022			Q2 2022
Revolving LOC
Gross loans receivable	$	912,250		$	853,253		$	833,438		$	690,270		$	627,163
Lending revenue	$	37,220		$	35,133		$	31,255		$	24,575		$	20,847
Lending provision	$	15,843		$	14,568		$	17,125		$	13,379		$	5,963
NCOs	$	11,006		$	11,719		$	8,672		$	6,114		$	3,537
NCO rate (annualized) ⁽¹⁾		5.0	%		5.6	%		4.4	%		3.6	%		2.4	%
ACL rate ^{(2) (3)}		6.8	%		6.7	%		4.9	%		4.8	%		4.5	%
31+ days past-due rate ⁽²⁾		4.0	%		3.9	%		2.9	%		3.6	%		2.8	%
(1) We calculate NCO rate as total quarterly NCOs divided by Average gross loans receivable and then 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.
(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 drivers of creating long term growth and shareholder value. 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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Email: IR@curo.com