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CURO Group Holdings Corp. Announces First Quarter 2022 Financial Results

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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

$

...