CURO Group Holdings Corp. Announces First Quarter 2022 Financial Results

Consolidated Revenue Grew 47.6% in the Quarter Compared to 2021

WICHITA, Kan., May 02, 2022--(BUSINESS WIRE)--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 first quarter ended March 31, 2022.

"We are very pleased to end the first quarter with over $1.6 billion of gross loans receivable – more than doubling our loan book year-over-year," said Don Gayhardt, CURO’s Chief Executive Officer. "Our Heights Finance acquisition added $462.9 million of growth, but excluding Heights Finance the rest of our company-owned businesses grew loans 59.5% compared to the first quarter of 2021. Sequentially, we grew loans over $80 million or 5.2% despite normal seasonality for U.S. federal tax refunds."

"Consolidated net charge-off rates improved 90bps compared to the first quarter of 2021 because of our managed portfolio mix shift to larger, longer-term, lower-yielding loans with lower loss rates. Credit performance continues to normalize with portfolio-level net charge-off and past-due rates up year-over-year but improved versus the fourth quarter of 2021."

"We are very pleased so far with our business results and the talent we added with the acquisition of Heights in December and our combined teams will continue to be intensely focused in the coming months to ensure we execute on the growth and value-creation opportunities."

"Finally, while we are pleased that we are moving into a more manageable phase of the pandemic in both the US and Canada, persistent inflation and related interest rate increases and changing shopping and borrowing habits are adding new complexities to daily operations as well as longer-range forecasting."

Consolidated Summary Results

We reported Net income of $1.3 million ($0.03 per share) and Adjusted Net Income of $6.3 million ($0.15 adjusted diluted earnings per share) on revenue of $290.2 million for the three months ended March 31, 2022, compared with Net income of $25.7 million ($0.59 per share) and Adjusted Net Income of $30.1 million ($0.69 adjusted diluted earnings per share) on total revenue of $196.6 million for the three months ended March 31, 2021.

The decline in Net income was primarily driven by year-over-year comparisons for the provision for loan losses and, secondarily, higher interest expense. Government stimulus and other pandemic-related behavior reduced demand, increased payment rates and lowered loss rates in the first quarter of 2021, resulting in a provision for loan losses that was $16.5 million less than net charge-offs ("NCOs"). Credit normalization and strong sequential loan growth in the first quarter of 2022 resulted in a provision for loan losses that exceeded NCOs by $12.1 million, which included the impact of purchase accounting. This shift resulted in a $28.7 million pretax swing year over year. Interest expense increased because of the additional 7.50% Senior Secured Notes issued to finance, in part, (i) the Heights Finance acquisition and (ii) the expansion of non-recourse asset-backed facilities to support loan growth.

Below are additional highlights of our performance during the three months ended March 31, 2022:

• Revenue and Net Revenue

  • Revenue increased $93.6 million, or 47.6%, year over year, primarily driven by our December 27, 2021 acquisition of Heights Finance, which accounted for $65.7 million of revenue for the first quarter of 2022, as well as a full quarter of Canada POS Lending revenue of $20.3 million, compared to a partial quarter of $1.6 million in the prior-year period.

  • Sequentially, revenue increased $65.9 million, or 29.4%, driven by growth of $59.4 million, or 42.7% in the U.S. due to our acquisition of Heights Finance, $5.5 million, or 37.3%, in Canada POS Lending and $1.0 million, or 1.4%, in Canada Direct Lending.

  • For the three months ended March 31, 2022, net revenue increased $32.3 million, or 20.1%, year over year, and $62.0 million, or 47.4%, sequentially. The sequential increase was due to seasonality and our acquisition of Heights Finance. Excluding Heights Finance, net revenue increased sequentially $17.0 million, or 13.0%.

• Loans Receivable

  • Sequential loan growth in Company Owned gross loans receivable and combined gross loans receivable of $80.3 million, or 5.2%, and $78.4 million, or 4.9%, respectively, was primarily due to growth in Canada POS Lending of $82.6 million, or 18.0%.

  • Year-over-year growth in Company Owned gross loans receivable and combined gross loans receivable of $897.6 million, or 122.8%, and $909.5 million, or 119.1%, respectively, which included Heights Finance. Excluding Heights Finance, combined gross loans receivables increased $446.7 million, or 58.5%, year over year, primarily driven by $340.2 million, or 168.8%, for Canada POS Lending.

• NCOs and Delinquency Metrics

  • Consolidated quarterly NCO rates improved year over year by 90 bps, primarily from the relative growth of Canada POS Lending and the acquisition of Heights Finance, which shifts portfolio mix to lower loss-rate products.

  • Sequentially, consolidated quarterly NCO rates improved 70 bps.

  • Consolidated past-due rates increased 190 bps year over year as credit continued to normalize compared to the first quarter of 2021 which was abnormally affected by pandemic-related U.S. government stimulus. Consolidated past-due rates improved by 110 bps sequentially, primarily due to our acquisition of Heights Finance.

• Other Highlights

  • Declaration of the next quarterly dividend of $0.11 per share, payable on May 23, 2022 to stockholders of record as of May 10, 2022.

  • On March 31, 2022, we expanded our Non-Recourse Canada SPV Facility from C$350.0 million to C$400.0 million, with the ability to expand its committed capacity by an additional C$50 million to support loan growth within Canada Direct Lending and Canada POS Lending.

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, 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 first quarter of 2022, our markets were less affected by COVID-19, resulting in positive growth trends in revenue and receivables.

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 March 31,
		2022				2021				Change $				Change %
Revenue
Interest and fees revenue		$	264,956			$	179,123			$	85,833			47.9%
Insurance premiums and commissions			18,260				11,569				6,691			57.8%
Other revenue			6,980				5,859				1,121			19.1%
Total revenue			290,196				196,551				93,645			47.6%
Change in allowance for loan losses			12,112				(16,545	)			28,657			#
Net-charge offs			85,419				52,690				32,729			62.1%
Provision for losses			97,531				36,145				61,386			169.8%
Net revenue			192,665				160,406				32,259			20.1%
Operating Expenses
Salaries and benefits			79,729				54,917				24,812			45.2%
Occupancy			17,037				14,347				2,690			18.7%
Advertising			10,500				8,084				2,416			29.9%
Direct operations			20,274				11,969				8,305			69.4%
Depreciation and amortization			9,814				4,965				4,849			97.7%
Other operating expense			16,112				12,952				3,160			24.4%
Total operating expenses			153,466				107,234				46,232			43.1%
Other expense (income)
Interest expense			38,341				19,539				18,802			96.2%
Income from equity method investment			(1,584	)			(546	)			(1,038	)		#
Total other expense (income)			36,757				18,993				17,764			93.5%
Income before income taxes			2,442				34,179				(31,737	)		(92.9) %
Provision for incomes taxes			1,106				8,444				(7,338	)		(86.9) %
Net income		$	1,336			$	25,735			$	(24,399	)		(94.8) %
# - Variance greater than 100% or not meaningful

Table 2 - Consolidated Balance Sheets (in thousands)
	March 31, 2022 (unaudited)				December 31, 2021
ASSETS
Cash and cash equivalents	$	60,209			$	63,179
Restricted cash		110,118				98,896
Gross loans receivable		1,628,568				1,548,318
Less: Allowance for loan losses		(98,168	)			(87,560	)
Loans receivable, net		1,530,400				1,460,758
Income taxes receivable		28,664				31,774
Prepaid expenses and other		40,112				42,038
Property and equipment, net		54,865				54,635
Investments in Katapult		29,484				27,900
Right of use asset - operating leases		114,305				116,300
Deferred tax assets		20,066				15,639
Goodwill		430,967				429,792
Intangibles, net		113,640				109,930
Other assets		9,535				9,755
Total Assets	$	2,542,365			$	2,460,596
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities	$	84,783			$	121,434
Deferred revenue		24,265				21,649
Lease liability - operating leases		120,593				122,431
Contingent consideration related to acquisition		26,687				26,508
Income taxes payable		—				680
Accrued interest		16,481				34,974
Liability for losses on CSO lender-owned consumer loans		7,166				6,908
Debt		2,090,085				1,945,793
Other long-term liabilities		13,679				13,845
Deferred tax liabilities		5,839				6,044
Total Liabilities		2,389,578				2,300,266
Stockholders' Equity
Total Stockholders' Equity		152,787				160,330
Total Liabilities and Stockholders' Equity	$	2,542,365			$	2,460,596

Table 3 - Consolidated Revenue by Product and Segment

The following table summarizes revenue by product, including 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
		March 31, 2022											March 31, 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		$	26,913	$	45,455	$	18,655	$	91,023	31.4	%		$	26,923	$	34,368	$	1,444	$	62,735	31.9	%
Installment			162,824		11,109		—		173,933	59.9	%			105,941		10,447		—		116,388	59.2	%
Total interest and fees			189,737		56,564		18,655		264,956	91.3	%			132,864		44,815		1,444		179,123	91.1	%
Insurance premiums and commissions			5,001		13,023		236		18,260	6.3	%			—		11,569		32		11,601	5.9	%
Other revenue			3,661		1,901		1,418		6,980	2.4	%			3,628		2,056		143		5,827	3.0	%
Total revenue		$	198,399	$	71,488	$	20,309	$	290,196	100.0	%		$	136,492	$	58,440	$	1,619	$	196,551	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)		March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
U.S.
Revolving LOC		$	49,077		$	52,532		$	51,196		$	47,277		$	43,387
Installment - Company Owned			589,652			609,413			137,987			139,234			142,396
Canada Direct Lending
Revolving LOC			424,485			402,405			366,509			337,700			319,307
Installment			23,578			24,792			24,315			23,564			24,385
Canada POS Lending
Revolving LOC			541,776			459,176			302,349			221,453			201,539
Company Owned gross loans receivable		$	1,628,568		$	1,548,318		$	882,356		$	769,228		$	731,014
Gross loans receivable Guaranteed by the Company			44,420			46,317			43,422			37,093			32,439
Gross combined loans receivable (1)		$	1,672,988		$	1,594,635		$	925,778		$	806,321		$	763,453
(1) See "Non-GAAP Financial Measures" at the end of this release for definition and more information.

Segment Analysis

The following is a summary of segment operating (loss) income and portfolio performance for the segment and period indicated (all periods unaudited except for Q4 2021).

Table 5 - Summary of Segment Operating (Loss) Income

	Three Months Ended March 31, 2022									Three Months Ended March 31, 2021
(dollars in thousands, unaudited)	U.S.			Canada Direct Lending		Canada POS Lending				U.S.			Canada Direct Lending		Canada POS Lending
Total revenue	$	198,399		$	71,488	$	20,309			$	136,492		$	58,440	$	1,619
Provision for losses		66,825			21,992		8,714				26,056			9,234		855
Net revenue		131,574			49,496		11,595				110,436			49,206		764
Total operating expenses		110,941			27,021		15,504				79,893			24,604		2,737
Non-recourse interest expense		7,864			4,030		6,626				1,627			2,355		826
Recourse interest expense		19,821			—		—				14,731			—		—
Income from equity method investment		(1,584	)		—		—				(546	)		—		—
Segment operating (loss) income	$	(5,468	)	$	18,445	$	(10,535	)		$	14,731		$	22,247	$	(2,799	)

Table 6 - Summary of Adjusted Segment Operating (Loss) Income

	Three Months Ended March 31, 2022									Three Months Ended March 31, 2021
(dollars in thousands, unaudited)	U.S.			Canada Direct Lending		Canada POS Lending				U.S.			Canada Direct Lending		Canada POS Lending
Total revenue	$	198,399		$	71,488	$	20,309			$	136,492		$	58,440	$	1,619
Provision for losses		66,825			21,992		8,714				26,056			9,234		855
Net revenue		131,574			49,496		11,595				110,436			49,206		764
Adjusted operating expense (1)		106,356			26,819		15,005				74,296			24,563		2,737
Non-recourse interest expense		7,864			4,030		6,626				1,627			2,355		826
Recourse interest expense		19,821			—		—				14,731			—		—
Income from equity method investment		(1,584	)		—		—				(546	)		—		—
Adjusted segment operating (loss) income (1)	$	(883	)	$	18,647	$	(10,036	)		$	20,328		$	22,288	$	(2,799	)
(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)		Q1 2022				Q4 2021(1)			Q3 2021			Q2 2021			Q1 2021
Gross combined loans receivable (2)
Revolving LOC		$	49,077			$	52,532		$	51,196		$	47,277		$	43,387
Installment loans - Company Owned			589,652				137,782			137,987			139,234			142,396
Total U.S. Company Owned gross loans receivable			638,729				190,314			189,183			186,511			185,783
Installment loans - Guaranteed by the Company (3)			44,420				46,317			43,422			37,093			32,439
Total U.S. gross combined loans receivable (2)		$	683,149			$	236,631		$	232,605		$	223,604		$	218,222
Lending Revenue:
Revolving LOC		$	26,913			$	27,911		$	27,377		$	24,091		$	26,923
Installment loans - Company Owned			113,833				56,820			57,659			55,918			64,516
Installment loans - Guaranteed by the Company (3)			48,991				47,348			43,377			34,908			41,425
Total U.S. lending revenue		$	189,737			$	132,079		$	128,413		$	114,917		$	132,864
Lending Provision:
Revolving LOC		$	9,577			$	11,592		$	8,140		$	6,621		$	...