CURO Group Holdings Corp. Announces Fourth Quarter 2022 Financial Results

By: CURO Group Holdings Corp. via Business Wire

February 23, 2023 at 06:00 AM EST

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 fourth quarter ended December 31, 2022.

Highlights

Gross Loans Receivables increased 34.8% year-over-year to $2.1 billion
Goodwill impairment of $107.8 million in U.S. Direct Lending and $37.4 million in Canada POS Lending

“2022 was a historical year for CURO as we completed our transformation into a full spectrum consumer lender focused on longer-term, lower credit risk products,” said Doug Clark, Chief Executive Officer. “While the macroeconomic headwinds associated with rising interest rates and inflationary and recessionary pressures on the consumer have delayed our ability to recognize all of the benefits of our transformation, we strongly believe in the strength and foundation of our businesses and ability to provide long-term value and returns to our investors.”

Consolidated Summary Results

We reported Net loss of $186.4 million ($4.60 loss per share) on total revenue of $217.2 million for the three months ended December 31, 2022, compared with Net loss of $28.9 million ($0.72 loss per share) on total revenue of $224.3 million for the three months ended December 31, 2021.

The $157.5 million increase in Net loss in the fourth quarter of 2022 compared to the same period in 2021 was primarily driven by a $174.9 million increase in other expense, offset by a favorable increase in benefit from income taxes of $12.1 million. The increase in other expense was primarily the result of a $107.8 million goodwill impairment charge recorded on the U.S. Direct Lending reporting unit during the quarter, a $37.4 million goodwill impairment charge recorded on the Canada POS Lending reporting unit, a $26.4 million increase in interest expense, $13.1 million of restructuring charges related to targeted U.S. and Canadian store closures and other cost saving initiatives and a $4.9 million net change in losses recognized on our equity method investment. The goodwill impairment charge on the U.S. Direct Lending Reporting unit was driven by rising interest rates, macroeconomic conditions and performance of recent acquisitions to date. The increase in interest expense in the fourth quarter of 2022 compared to the same period in 2021 was driven by (i) increased non-recourse asset-backed lending (ABL) borrowing to support organic loan growth and acquired portfolios, (ii) Senior Notes issued to fund in part our Q4 2021 Heights Finance acquisition, and (iii) an increase in benchmark rates on variable rate debt.

Net revenue decreased $8.3 million, or 6.4%, year over year for the three months ended December 31, 2022, primarily driven by lower interest and fees revenue attributable to our strategic change in product mix and the additional provision for loan losses driven by loan growth.

Year-over-year growth in Gross loans receivable of $539.5 million, or 34.8%, was primarily driven by an increase of $374.3 million or 81.5% in Canada POS lending as Flexiti continues to increase originations, and $111.4 million or 16.8%, due to the acquisitions of Heights Finance in Q4 2021 and First Heritage in Q3 2022 and an increase of $53.8 million, or 12.6%, for Canada Direct Lending due to organic loan growth, which was partially offset by the sale of the Legacy U.S. Direct Lending business in Q3 2022.

	As of or Quarter-to-Date
	Dec 31,		Sep 30,		Jun 30,		Mar 31,		Dec 31,
Delinquency and Loss Ratios	2022		2022		2022		2022		2021
31-60 days delinquency ratio	2.1	%	2.5	%	2.4	%	2.1	%	2.4	%
61-90 days delinquency ratio	1.2	%	1.5	%	1.8	%	1.9	%	2.0	%
91+ days delinquency ratio	2.5	%	2.6	%	2.0	%	2.2	%	2.0	%
Net charge-offs	14.8	%	13.2	%	24.0	%	23.2	%	24.4	%

Operating expense for the fourth quarter of 2022 was $126.0 million, a decrease of $13.6 million, or 9.7%, from $139.6 million in the prior year quarter primarily related to the divestiture of our Legacy U.S. Direct Lending business partially offset by the acquisitions of Heights Finance and First Heritage.

Funding and Liquidity

As of December 31, 2022, we had principal debt balances outstanding of $2.6 billion, which consisted of approximately 65.5% of fixed rate or hedged variable rate debt and 34.5% of variable rate debt. We had $73.9 million of cash and cash equivalents on the Consolidated Balance Sheet and available for general corporate purposes.

Unrestricted cash and cash equivalents, together with $125.6 million in unused borrowing capacity and $123.6 million of unencumbered Gross loans receivable, provides approximately $323.1 million in available capital resources.

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 8:30 a.m. Eastern Time on Thursday, February 23, 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 March 2, 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 3665641.

Final Results

The financial results presented and discussed herein are on a preliminary and unaudited basis; final audited data will be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Table 1 - Consolidated Statements of Operations

(in thousands, unaudited)	Three Months Ended,															Twelve Months Ended,
	Dec 31,			Sep 30,			Jun 30,			Mar 31,			Dec 31,			Dec 31,			Dec 31,
	2022			2022			2022			2022			2021			2022			2021

Revenue
Interest and fees revenue	$	181,605		$	180,515		$	278,331		$	264,956		$	204,581			905,407			743,735
Insurance premiums and commissions		26,831			24,746			18,653			18,260			13,389			88,490			49,411
Other revenue		8,762			8,859			7,420			6,980			6,349			32,021			24,697
Total revenue		217,198			214,120			304,404			290,196			224,319			1,025,918			817,843
Provision for losses		94,849			78,399			129,546			97,531			93,640			400,325			245,668
Net revenue		122,349			135,721			174,858			192,665			130,679			625,593			572,175
Operating Expenses
Salaries and benefits		66,067			53,413			82,427			79,729			61,762			281,636			237,109
Occupancy		12,114			12,827			17,507			17,037			13,698			59,485			55,559
Advertising		3,692			5,244			12,707			10,500			13,938			32,143			38,762
Direct operations		11,832			11,729			20,293			20,274			19,504			64,128			60,056
Depreciation and amortization		8,337			9,499			8,672			9,814			7,270			36,322			26,955
Other operating expense		24,002			23,645			18,787			16,377			23,452			82,811			68,473
Total operating expenses		126,044			116,357			160,393			153,731			139,624			556,525			486,914
Other expense (income)
Interest expense		54,978			50,149			42,193			38,341			28,550			185,661			97,334
Loss (income) from equity method investment		1,932			2,309			1,328			(1,584	)		(2,982	)		3,985			(3,658	)
Gain from equity method investment		—			—			—			—			—			—			(135,387	)
Goodwill impairment		145,241			—			—			—			—			145,241			—
Loss on extinguishment of debt		689			3,702			—			—			—			4,391			40,206
Gain on change in fair value of contingent consideration		—			(11,354	)		4,014			(265	)		2,384			(7,605	)		6,209
Gain on sale of business		—			(68,443	)		—			—			—			(68,443	)		—
Total other expense (income)		202,840			(23,637	)		47,535			36,492			27,952			263,230			4,704
(Loss) income before income taxes		(206,535	)		43,001			(33,070	)		2,442			(36,897	)		(194,162	)		80,557
(Benefit) provision for income taxes		(20,142	)		17,348			(6,990	)		1,106			(8,018	)		(8,678	)		21,223
Net (loss) income	$	(186,393	)	$	25,653		$	(26,080	)	$	1,336		$	(28,879	)	$	(185,484	)	$	59,334

Basic (loss) earnings per share	$	(4.60	)	$	0.63		$	(0.65	)	$	0.03		$	(0.72	)	$	(4.59	)	$	1.44
Diluted (loss) earnings per share	$	(4.60	)	$	0.63		$	(0.65	)	$	0.03		$	(0.72	)	$	(4.59	)	$	1.38

Weighted average common shares outstanding:
Basic		40,488			40,479			40,376			40,368			40,254			40,428			41,155
Diluted		40,488			40,835			40,376			41,308			40,254			40,428			43,143

Table 2 - Consolidated Balance Sheets

	As of
	Dec, 31			Sept 30,			Jun 30,			Mar 31,			Dec, 31
(in thousands, unaudited)	2022			2022			2022			2022			2021
ASSETS
Cash and cash equivalents	$	73,932		$	45,683		$	37,394		$	60,209		$	63,179
Restricted cash		91,745			144,020			97,465			110,118			98,896
Gross loans receivable		2,087,833			1,894,427			1,592,815			1,628,568			1,548,318
Less: Allowance for loan losses		(122,028	)		(102,743	)		(90,286	)		(98,168	)		(87,560	)
Loans receivable, net		1,965,805			1,791,684			1,502,529			1,530,400			1,460,758
Income taxes receivable		21,918			13,469			46,450			28,664			31,774
Prepaid expenses and other		53,057			65,167			25,370			40,112			42,038
Property and equipment, net		31,957			37,402			38,752			54,865			54,635
Investment in Katapult		23,915			25,848			28,157			29,484			27,900
Right of use asset - operating leases		61,197			64,683			64,602			114,305			116,300
Deferred tax assets		49,893			31,986			23,993			20,066			15,639
Goodwill		276,269			424,292			352,990			430,967			429,792
Intangibles, net		123,677			120,345			113,130			113,640			109,930
Other assets		15,828			12,774			8,558			9,535			9,755
Assets held for sale ⁽¹⁾		—			—			338,779			—			—
Total Assets	$	2,789,193		$	2,777,353		$	2,678,169		$	2,542,365		$	2,460,596
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities	$	73,827		$	66,723		$	81,423		$	84,783		$	121,434
Deferred revenue		32,259			25,111			23,425			24,265			21,649
Lease liability - operating leases		62,847			66,370			67,339			120,593			122,431
Contingent consideration related to acquisition		16,884			15,770			30,354			26,687			26,508
Income taxes payable		—			—			4			—			680
Accrued interest		38,460			18,048			34,970			16,481			34,974
Liability for losses on CSO lender-owned consumer loans		—			—			—			7,166			6,908
Debt		2,607,314			2,449,316			2,189,431			2,090,085			1,945,793
Other long-term liabilities		11,736			11,563			12,146			13,679			13,845
Deferred tax liabilities		—			—			12,360			5,839			6,044
Liabilities held for sale ⁽¹⁾		—			—			111,137			—			—
Total Liabilities	$	2,843,327		$	2,652,901		$	2,562,589		$	2,389,578		$	2,300,266
Total Stockholders' (Deficit) Equity		(54,134	)		124,452			115,580			152,787			160,330
Total Liabilities and Stockholders' (Deficit) Equity	$	2,789,193		$	2,777,353		$	2,678,169		$	2,542,365		$	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 sale of the U.S. Legacy 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)	Q4 2022			Q3 2022			Q2 2022⁽²⁾			Q1 2022			Q4 2021⁽¹⁾
Gross loans receivable
Revolving LOC	$	1,284,515		$	1,129,387		$	1,128,372		$	1,015,338		$	914,113
Installment loans		803,318			765,040			652,468			613,230			634,205
Total gross loans receivable ⁽³⁾	$	2,087,833		$	1,894,427		$	1,780,840		$	1,628,568		$	1,548,318
Lending Revenue:
Revolving LOC	$	81,170		$	77,037		$	96,582		$	91,023		$	85,558
Installment loans⁽⁴⁾		100,435			103,478			181,749			173,933			119,023
Total lending revenue		181,605			180,515			278,331			264,956			204,581
Lending Provision:
Revolving LOC	$	46,745		$	41,787		$	40,435		$	37,447		$	44,183
Installment loans⁽⁵⁾		46,442			33,510			86,484			57,435			47,529
Total lending provision	$	93,187		$	75,297		$	126,919		$	94,882		$	91,712
NCOs ⁽⁶⁾
Revolving LOC	$	35,387		$	30,907		$	33,945		$	34,372		$	28,324
Installment loans⁽⁷⁾		38,168			31,372			71,056			60,386			48,487
Total NCOs	$	73,555		$	62,279		$	105,001		$	94,758		$	76,811
NCO rate (annualized) ^{(6) (8)}
Revolving LOC		11.6	%		10.8	%		12.8	%		14.4	%		14.0	%
Installment loans		19.6	%		17.6	%		44.8	%		38.8	%		48.8	%
Total NCO rate⁽⁹⁾		14.8	%		13.2	%		24.0	%		23.2	%		24.4	%
ALL rate ⁽¹⁰⁾
Revolving LOC		6.1	%		6.0	%		6.7	%		7.0	%		7.5	%
Installment loans		5.4	%		4.6	%		8.1	%		5.5	%		4.2	%
Total ALL rate ⁽¹¹⁾		5.8	%		5.4	%		6.7	%		6.0	%		5.7	%
31+ days past-due rate ⁽¹⁰⁾
Revolving LOC		3.3	%		4.1	%		4.1	%		3.7	%		3.2	%
Installment loans		9.6	%		10.2	%		9.2	%		9.0	%		8.6	%
Total past-due rate⁽¹²⁾		5.8	%		6.6	%		6.1	%		5.8	%		5.5	%

(1) On December 27, 2021, we acquired Heights Finance, which accounted for approximately $472 million of U.S. Direct Lending 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) Includes loan balances and activity classified as Held for Sale.
(3) Total combined gross loans receivable including receivables from installment loans originated by third-party lenders through CSO programs and guaranteed by the Company were $1,832.2 million, $1,673.0 million and $1,594.6 million as of June 30, 2022, March 31, 2022 and December 31, 2021, respectively, including installment loans – guaranteed by the Company of $51.3 million, $44.4 million and $46.3 million as of June 30, 2022, March 31, 2022 and December 31, 2021, respectively. All balances in connection with the CSO programs were disposed of on July 8, 2022 upon the completion of the divestiture of the Legacy U.S. Direct Lending business. Total combined gross loans receivable and installment loans – guaranteed by the Company are non-GAAP measures. For a description of each non-GAAP metric, see "Non-GAAP Financial Measures.”
(4) Includes lending revenue from installment loans originated by third-party lenders through CSO programs and guaranteed by the Company of $3.9 million, $48.3 million, $49.0 million and $47.3 million for the three months ended September 30, 2022, June 30, 2022, March 31, 2022, and December 31, 2021, respectively. All balances in connection with the CSO programs were disposed of on July 8, 2022 upon closing of the divestiture of the Legacy U.S. Direct Lending business.
(5) Includes provision from installment loans originated by third-party lenders through CSO programs and guaranteed by the Company of $0.0, $28.3 million, $21.7 million and $26.0 million for the three months ended September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively. All balances in connection with the CSO programs were disposed of on July 8, 2022 upon closing of the divestiture of the Legacy U.S. Direct Lending business.
(6) NCOs presented above include $0.0 million, $0.5 million, $10.3 million, $5.0 million and $0.8 million for the three months ended December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively, related to the purchase accounting fair value discount, which are excluded from provision.
(7) Total consolidated NCOs included NCOs for installment loans originated by third-party lenders through CSO programs and guaranteed by the Company of $1.6 million, $27.4 million, $21.5 million and $26.1 million for the three months ended September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively. All balances in connection with the CSO programs were disposed of on July 8, 2022 upon closing of the divestiture of the Legacy U.S. Direct Lending business.
(8) 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.
(9) Total consolidated NCO rate included the NCO rate for installment loans originated by third-party lenders through CSO programs and guaranteed by the Company was 24.8%, 228.8%, 189.6% and 232.4% for the three months ended September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively. All balances in connection with the CSO programs were disposed of on July 8, 2022 upon closing of the divestiture of the Legacy U.S. Direct Lending business.
(10) We calculate (i) Allowance for loan losses (ALL) rate and (ii) past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.
(11) Total consolidated CSO liability for losses for installment loans originated by third-party lenders through CSO programs and guaranteed by the Company was 15.7%, 16.1% and 14.9% for the three months ended June 30, 2022, March 31, 2022 and December 31, 2021, respectively. All balances in connection with the CSO programs were disposed of on July 8, 2022 upon closing of the divestiture of the Legacy U.S. Direct Lending business. Total consolidated ALL and CSO liability for losses rate was 7.0%, 6.3% and 8.4% for the three months ended, June 30, 2022, March 31, 2022 and December 31, 2021, respectively.
(12) Total consolidated past-due rate included the past-due rate for installment loans originated by third-party lenders through CSO programs and guaranteed by the Company was 2.6%, 4.5% and 3.1% for the three months ended June 30, 2022, March 31, 2022 and December 31, 2021, respectively. All balances in connection with the CSO programs were disposed of on July 8, 2022 upon closing of the divestiture of the Legacy U.S. Direct Lending business.

Table 4 - U.S. Direct Lending Segment - Operating Loss/Income

(in thousands, unaudited)	Three Months Ended,														Twelve Months Ended,
	Dec 31,			Sep 30,			Jun 30,			Mar 31,		Dec 31,			Dec 31,			Dec 31,
	2022			2022			2022			2022		2021			2022			2021

Total revenue	$	104,182		$	107,430		$	205,711		$	198,399	$	139,002			615,722			525,962
Provision for losses		44,117			32,073			97,563			66,825		57,925			240,578			166,033
Net revenue		60,065			75,357			108,148			131,574		81,077			375,144			359,929
Total operating expenses		80,803			76,067			115,633			110,941		93,085			383,444			338,708
Segment operating (loss) income	$	(20,738	)	$	(710	)	$	(7,485	)	$	20,633	$	(12,008	)	$	(8,300	)	$	21,221

Table 5 - U.S. Direct Lending Segment - Portfolio Performance

(in thousands, except percentages, unaudited)	Q4 2022			Q3 2022			Q2 2022⁽²⁾			Q1 2022			Q4 2021⁽¹⁾
Gross loans receivable
Revolving LOC	$	—		$	—		$	58,471		$	49,077		$	52,532
Installment loans		773,380			739,100			627,651			589,652			137,782
Total gross loans receivable ⁽³⁾	$	773,380		$	739,100		$	686,122		$	638,729		$	190,314
Lending Revenue:
Revolving LOC	$	—		$	2,210		$	28,145		$	26,913		$	27,911
Installment loans ⁽⁴⁾		88,001			90,834			169,878			162,824			104,168
Total lending revenue	$	88,001		$	93,044		$	198,023		$	189,737		$	132,079
Lending Provision:
Revolving LOC	$	—		$	—		$	11,831		$	9,577		$	11,592
Installment loans ⁽⁵⁾		42,523			29,045			83,181			54,711			44,585
Total lending provision	$	42,523		$	29,045		$	95,012		$	64,288		$	56,177
NCOs ⁽⁶⁾
Revolving LOC	$	—		$	1,140		$	10,248		$	10,055		$	11,481
Installment loans ⁽⁷⁾		34,664			27,311			68,152			57,739			45,729
Total NCOs	$	34,664		$	28,451		$	78,400		$	67,794		$	57,210
NCO rate (annualized) ^{(6) (8)}
Revolving LOC		—	%		15.6	%		76.4	%		79.2	%		88.4	%
Installment loans		18.4	%		16.0	%		44.8	%		63.6	%		132.8	%
Total NCO rate ⁽⁹⁾		18.4	%		15.6	%		44.0	%		58.8	%		97.6	%
ALL rate ⁽¹⁰⁾
Revolving LOC		—	%		—	%		25.1	%		26.7	%		25.9	%
Installment loans		5.2	%		4.4	%		8.1	%		5.4	%		17.7	%
Total ALL rate ⁽¹¹⁾		5.2	%		4.4	%		8.9	%		6.6	%		16.0	%
31+ days past-due rate ⁽¹⁰⁾
Revolving LOC		—	%		—	%		17.4	%		19.1	%		19.2	%
Installment loans		9.9	%		10.5	%		20.5	%		19.0	%		19.0	%
Total past-due rate⁽¹²⁾		9.9	%		10.5	%		10.1	%		10.0	%		9.7	%
(1) On December 27, 2021, we acquired Heights Finance, which accounted for approximately $472 million of U.S. Direct Lending 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) Includes loan balances and activity classified as Held for Sale.
(3)Total combined gross loans receivable including receivables from installment loans originated by third-party lenders through CSO programs and guaranteed by the Company were $737.4 million, $683.1 million and $236.6 million as of June 30, 2022, March 31, 2022 and December 31, 2021, respectively, including installment loans – guaranteed by the Company of $51.3 million, $44.4 million and $46.3 million as of June 30, 2022, March 31, 2022 and December 31, 2021, respectively. All balances in connection with the CSO programs were disposed of on July 8, 2022 upon closing of the divestiture of the Legacy U.S. Direct Lending business. Total combined gross loans receivable and installment loans – guaranteed by the Company are non-GAAP measures. For a description of each non-GAAP metric, see "Non-GAAP Financial Measures.”
(4) Includes lending revenue from installment loans originated by third-party lenders through CSO programs and guaranteed by the Company of $3.9 million, $48.3 million, $49.0 million and $47.3 million for the three months ended September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively. All balances in connection with the CSO programs were disposed of on July 8, 2022 upon closing of the divestiture of the Legacy U.S. Direct Lending business.
(5) Includes provision from installment loans originated by third-party lenders through CSO programs and guaranteed by the Company of $28.3 million, $21.7 million and $26.0 million for the three months ended June 30, 2022, March 31, 2022 and December 31, 2021, respectively. All balances in connection with the CSO programs were disposed of on July 8, 2022 upon closing of the divestiture of the Legacy U.S. Direct Lending business.
(6) NCOs presented above include $0.0 million, $0.5 million, $10.3 million and $5.0 million, for the three months ended 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.
(7) Total NCOs included NCOs for installment loans originated by third-party lenders through CSO programs and guaranteed by the Company of $1.6 million, $27.4 million, $21.5 million and $26.07 million for the three months ended September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively. All balances in connection with the CSO programs were disposed of on July 8, 2022 upon closing of the divestiture of the Legacy U.S. Direct Lending business.
(8) 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.
(9) Total NCO rate included the NCO rate for installment loans originated by third-party lenders through CSO programs and guaranteed by the Company was 24.8%, 228.8%, 189.6% and 232.4% for the three months ended September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively. All balances in connection with the CSO programs were disposed of on July 8, 2022 upon closing of the divestiture of the Legacy U.S. Direct Lending business.
(10) We calculate (i) Allowance for loan losses (ALL) rate and (ii) past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.
(11)Total CSO liability for losses for installment loans originated by third-party lenders through CSO programs and guaranteed by the Company was 0%, 15.7%, 16.1% and 14.9% for the three months ended September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively. All balances in connection with the CSO programs were disposed of on July 8, 2022 upon closing of the divestiture of the Legacy U.S. Direct Lending business. Total U.S. Direct Lending ALL and CSO liability for losses rate was 8.9%, 6.6% and 16.0% for the three months ended June 30, 2022, March 31, 2022 and December 31, 2021, respectively.
(12) Total past-due rate included the past-due rate for installment loans originated by third-party lenders through CSO programs and guaranteed by the Company was 2.6%, 4.5% and 3.1% for the three months ended June 30, 2022, March 31, 2022 and December 31, 2021, respectively. All balances in connection with the CSO programs were disposed of on July 8, 2022 upon closing of the divestiture of the Legacy U.S. Direct Lending business.

Table 6 - Canada Direct Lending Segment - Operating Income

(in thousands, unaudited)	Three Months Ended,										Twelve Months Ended,
	Dec 31,		Sep 30,		Jun 30,		Mar 31,		Dec 31,		Dec 31,		Dec 31,
	2022		2022		2022		2022		2021		2022		2021

Total revenue	$	77,743	$	78,979	$	75,540	$	71,488	$	70,529		303,750		257,039
Provision for losses		33,607		32,947		26,021		21,992		23,204		114,567		54,997
Net revenue		44,136		46,032		49,519		49,496		47,325		189,183		202,042
Total operating expenses		30,829		26,773		28,332		27,021		27,423		112,955		103,513
Segment operating income	$	13,307	$	19,259	$	21,187	$	22,475	$	19,902	$	76,228	$	98,529

Table 7 - Canada Direct Lending Segment - Portfolio Performance

(in thousands, except percentages, unaudited)	Q4 2022			Q3 2022			Q2 2022			Q1 2022			Q4 2021
Gross loans receivable:
Revolving LOC	$	451,077		$	439,117		$	442,738		$	424,485		$	402,405
Installment loans		29,938			25,941			24,817			23,578			24,792
Total gross loans receivable	$	481,015		$	465,058		$	467,555		$	448,063		$	427,197
Lending Revenue:
Revolving LOC	$	49,915		$	50,251		$	47,591		$	45,455		$	43,943
Installment loans		12,434			12,645			11,868			11,109			11,416
Total lending revenue	$	62,349		$	62,896		$	59,459		$	56,564		$	55,359
Lending Provision:
Revolving LOC	$	29,620		$	28,408		$	22,641		$	19,156		$	20,080
Installment loans		3,919			4,466			3,303			2,723			2,945
Total lending provision	$	33,539		$	32,874		$	25,944		$	21,879		$	23,025
NCOs
Revolving LOC	$	26,715		$	23,652		$	20,160		$	21,590		$	15,112
Installment loans		3,504			4,061			2,904			2,647			2,758
Total NCOs	$	30,219		$	27,713		$	23,064		$	24,237		$	17,870
NCO rate (annualized) ⁽¹⁾
Revolving LOC		24.0	%		21.6	%		18.4	%		20.8	%		15.6	%
Installment loans		50.0	%		64.0	%		48.0	%		43.6	%		44.8	%
Total NCO rate		25.6	%		23.6	%		20.0	%		22.0	%		17.6	%
ALL rate ⁽²⁾
Revolving LOC		8.4	%		7.9	%		7.2	%		7.2	%		8.0	%
Installment loans		10.4	%		10.3	%		9.7	%		8.8	%		8.0	%
Total ALL rate		8.5	%		8.0	%		7.4	%		7.3	%		8.0	%
31+ days past-due rate ⁽²⁾
Revolving LOC		4.1	%		5.1	%		4.2	%		4.3	%		3.2	%
Installment loans		1.9	%		1.0	%		0.8	%		1.0	%		0.9	%
Total past-due rate		4.0	%		4.8	%		4.0	%		4.1	%		3.1	%

(1) 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.
(2) We calculate ALL rate and past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.

Table 8 - Canada POS Lending Segment - Operating Loss/Income



(in thousands, unaudited)	Three Months Ended,												Twelve Months Ended,
	Dec 31,		Sep 30,		Jun 30,		Mar 31,			Dec 31,			Dec 31,		Dec 31,
	2022		2022		2022		2022			2021			2022		2021

Total revenue	$	35,273	$	27,710	$	23,154	$	20,309		$	14,788			106,446		34,842
Provision for losses		17,125		13,378		5,963		8,714			12,511			45,180		24,638
Net revenue		18,148		14,332		17,191		11,595			2,277			61,266		10,204
Total operating expenses		14,412		13,519		16,427		15,768			19,116			60,126		44,693
Segment operating income (loss)	$	3,736	$	813	$	764	$	(4,173	)	$	(16,839	)	$	1,140	$	(34,489	)

Table 9 - Canada POS Lending Segment - Portfolio Performance

(in thousands, except percentages, unaudited)	Q4 2022			Q3 2022			Q2 2022			Q1 2022			Q4 2021
Revolving LOC
Total gross loans receivable	$	833,438		$	690,270		$	627,163		$	541,776		$	459,176
Total lending revenue	$	31,255		$	24,575		$	20,846		$	18,655		$	13,704
Total lending provision	$	17,125		$	13,379		$	5,963		$	8,714		$	12,511
NCOs ⁽¹⁾	$	8,672		$	6,114		$	3,537		$	2,727		$	1,731
NCO rate (annualized) ⁽¹⁾⁽²⁾		4.4	%		3.6	%		2.4	%		2.0	%		2.0	%
ALL rate ⁽³⁾		4.9	%		4.8	%		4.5	%		5.1	%		4.8	%
31⁺ days past-due rate ⁽³⁾		2.9	%		3.6	%		2.8	%		1.8	%		1.5	%
(1) NCOs presented above include $0.8 million for the three months ended December 31, 2021 of NCOs related to the purchase accounting fair value discount, which are excluded from provision.
(2) We calculate NCO rate as total quarterly NCOs divided by Average gross loans receivable then 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.
(3) We calculate ALL rate and past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.

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, gain on sale of business, changes in fair value of contingent consideration, certain tax adjustments and cumulative tax effect of applicable adjustments, on a total and per share basis); and
Gross Combined Loans Receivable (includes loans originated by third-party lenders through CSO programs which are not included in the Consolidated Financial Statements). As a result of the sale of the Legacy U.S. Direct Lending business, we no longer guarantee loans originated by third-party lenders through CSO programs.

We believe that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of our operations. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of the business that, when viewed with our 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 guaranteed but do not include in the Consolidated Financial Statements. Management believes this analysis provides investors with important information needed to evaluate overall lending performance. As noted above, we no longer provide these guarantees to third-party lenders as a result of the sale of the Legacy U.S. Direct Lending business.

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.

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.

Table 10 - Reconciliation of Net Income and Diluted Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings per Share, non-GAAP measures

	Three Months Ended,															Twelve Months Ended,
	Dec 31,			Sept 30,			Jun 30,			Mar 31,			Dec 31,			Dec 31,			Dec 31,
(in thousands, except per share data, unaudited)	2022			2022			2022			2022			2021			2022			2021
Net (loss) income	$	(186,393	)	$	25,653		$	(26,080	)	$	1,336		$	(28,879	)	($	185,484	)	$	59,334
Adjustments:
Restructuring costs ⁽¹⁾		13,084			739			1,146			1,069			1,303			16,038			12,717
Legal and other costs ⁽²⁾		406			46			950			87			1,764			1,489			2,134
Loss (income) from equity method investment ⁽³⁾		1,932			2,309			1,328			(1,584	)		(2,982	)		3,985			(3,658	)
Gain from equity method investment ⁽⁴⁾		—			—			—			—			—			—			(135,387	)
Transaction costs ⁽⁵⁾		1,116			10,063			(168	)		168			8,924			11,179			15,406
Acquisition-related adjustments ⁽⁶⁾		(2,713	)		(2,883	)		3,371			221			4,162			(2,004	)		13,949
Change in fair value of contingent consideration ⁽⁷⁾		—			(11,355	)		4,014			(264	)		2,384			(7,605	)		6,209
Loss on extinguishment of debt ⁽⁸⁾		689			3,702			—			—			—			4,391			42,262
Share-based compensation ⁽⁹⁾		3,998			1,448			4,417			4,093			3,828			13,956			13,976
Intangible asset amortization ⁽¹⁰⁾		3,101			3,151			3,524			2,977			1,811			12,753			6,282
Gain on sale of business ⁽¹¹⁾		—			(68,443	)		—			—			—			(68,443	)		—
Goodwill impairment ⁽¹²⁾		145,241			—			—			—			—			145,241			—
Cumulative tax effect of adjustments ⁽¹³⁾		(12,745	)		23,677			(3,788	)		(1,828	)		(4,603	)		5,316			8,455
Adjusted net (loss) income	$	(32,284	)	$	(11,893	)	$	(11,286	)	$	6,275		$	(12,288	)	$	(49,188	)	$	41,679

Net (loss) income	$	(186,393	)	$	25,653		$	(26,080	)	$	1,336		$	(28,879	)	($	185,484	)	$	59,334
Diluted weighted average shares outstanding		40,488			40,835			40,376			41,308			40,254			40,428			43,143
Adjusted diluted weighted average shares outstanding		40,488			40,835			40,376			41,308			42,389			40,428			43,143
Diluted (loss) earnings per share	$	(4.60	)	$	0.63		$	(0.65	)	$	0.03		$	(0.72	)	$	(4.59	)	$	1.38
Per share impact of adjustments to net income (loss)		3.80			(0.92	)		0.37			0.12			0.43			3.37			(0.41	)
Adjusted diluted (loss) earnings per share	$	(0.80	)	$	(0.29	)	$	(0.28	)	$	0.15		$	(0.29	)	($	1.22	)	$	0.97

(1)	Restructuring costs primarily related to U.S. and Canada store closures and other cost saving initiatives.
(2)	Legal and other costs primarily related to settlement costs related to certain legal matters.
(3)	Share of Katapult's U.S. GAAP net income or loss, recognized on a one quarter lag.
(4)	Gain on investment in Katapult recorded as a result of the completion of its reverse merger with FinServ.
(5)	Transaction costs primarily related to the sale of the Legacy U.S. Direct Lending business in July 2022, the acquisition of First Heritage in July 2022 and the acquisition of Heights Finance in December 2021.
(6)	During 2022, acquisition-related adjustments related to the Heights Finance and First Heritage acquisitions. During 2022 and 2021, acquisition-related adjustments related to the Flexiti acquisition.
(7)	Adjustments related to the fair value of the contingent consideration related to the acquisition of Flexiti.
(8)	On July 30, 2021, we entered into new 7.50% Senior Secured Notes due 2028, which were used on August 12, 2021 to extinguish the 8.25% Senior Secured Notes due 2025. During the three and nine months ended December 30, 2021, $40.2 million from the loss on the extinguishment of debt was due to the early redemption of the 8.25% Senior Secured Notes due 2025. An additional $2.1 million of interest was incurred for the year ended December 30, 2021, which represents interest on the 8.25% Senior Secured Notes due 2025 for the period between July 30, 2021 and August 12, 2021, the period during which the 8.25% Senior Secured Notes and 7.50% Senior Secured Notes were outstanding. During three months September 30, 2022, $3.1 million of the loss on extinguishment of debt was due to the early extinguishment of the U.S. SPV on July 8, 2022 upon the completion of the divestiture of our Legacy U.S.Direct Lending business to Community Choice Financial, and $0.6 million was due to the extinguishment of the Heights Finance SPV on July 15, 2022. During three months December 31, 2022, $0.7 million of the loss on extinguishment of debt was due to the Flexiti SPF loan settlement.
(9)	Estimated fair value of share-based awards was recognized as non-cash compensation expense on a straight-line basis over the vesting period.
(10)	Intangible asset amortization primarily included amortization of identifiable intangible assets established in connection with the acquisitions of Flexiti in March 2021, Heights Finance in December 2021 and First Heritage in July 2022.
(11)	Gain on the divestiture of its Legacy U.S. Direct Lending business to Community Choice Financial in July 2022.
(12)	Goodwill impairment charge of $107.8 million recorded on the U.S. Direct Lending reporting unit and $37.4 million recorded on the Canada POS Lending reporting unit during the fourth quarter of 2022.
(13)	Cumulative tax effect of adjustments included in Reconciliation of Net (loss) income to Adjusted net (loss) income table is calculated using the estimated incremental tax rate by country.

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 ability to provide long-term value and return to our investors, reduction in operating expenses 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,” "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-arty 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 negative 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.

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(CURO-NWS)

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Phone: 844-200-0342

Email: IR@curo.com

CURO Group Holdings Corp. Announces Fourth Quarter 2022 Financial Results

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