U.S. Markets closed

Edited Transcript of CURO.N earnings conference call or presentation 6-Feb-20 1:15pm GMT

Q4 2019 CURO Group Holdings Corp Earnings Call

Feb 13, 2020 (Thomson StreetEvents) -- Edited Transcript of CURO Group Holdings Corp earnings conference call or presentation Thursday, February 6, 2020 at 1:15:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Donald F. Gayhardt

CURO Group Holdings Corp. - President, CEO & Director

* Roger W. Dean

CURO Group Holdings Corp. - Executive VP, CFO & Treasurer

* William Baker

CURO Group Holdings Corp. - Executive VP & COO

================================================================================

Conference Call Participants

================================================================================

* John Hecht

Jefferies LLC, Research Division - MD & Equity Analyst

* John J. Rowan

Janney Montgomery Scott LLC, Research Division - Director of Specialty Finance

* Moshe Ari Orenbuch

Crédit Suisse AG, Research Division - MD and Equity Research Analyst

* Robert Paul Napoli

William Blair & Company L.L.C., Research Division - Partner and Co-Group Head of Financial Services & Technology

* Vincent Albert Caintic

Stephens Inc., Research Division - MD & Senior Specialty Finance Analyst

* Gar Jackson

National Investor Relations Institute - VP of Programs and Director

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Hello, and welcome to the CURO Holdings Fourth Quarter 2019 Earnings Call. (Operator Instructions). Please note, this event is being recorded. And now I'd like to turn the conference over to your host today, Gar Jackson, Investor Relations. Please go ahead.

--------------------------------------------------------------------------------

Gar Jackson, National Investor Relations Institute - VP of Programs and Director [2]

--------------------------------------------------------------------------------

Thank you, and good morning, everyone. After the market closed yesterday evening, CURO released results for the fourth quarter and full year 2019, which is available on the Investor section of our website at ir.curo.com. With me on today's call are CURO's President and Chief Executive Officer, Don Gayhardt; Chief Operating Officer, Bill Baker; Chief Financial Officer, Roger Dean; and Chief Accounting Officer, Dave Strano. This call is being webcast and will be archived on the Investor section of our website.

Before I turn the call over to Don, I would like to note that today's discussion contains forward-looking statements, which include, but are not limited to, our expectations regarding continued growth in Canada in 2020, macro factors impacting the U.S. economy and how those factors impact our customers, the geographical expansion of the Stride Bank product during 2020, investments in card products and resources, including market and people to support them, Katapult's addressable market and growth prospects, the strengths of our company and operational model and our ability to drive growth, our excess cash flow for 2020 and its expected uses and our financial guidance for full year 2020 and underlying assumptions. Please refer to our press release and our SEC filings for more information on the specific risk factors that could cause our actual results to differ materially from the statements made on today's call.

Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. In addition to U.S. GAAP reporting, we report certain financial measures that do not conform to generally accepted accounting principles. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliations between these GAAP and non-GAAP measures are included in the tables found in our earnings release. As noted in our earnings release, we have posted supplemental financial information on the investors portion of our website. With that, I would like to turn the call over to Don.

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [3]

--------------------------------------------------------------------------------

Great. Thanks, Gar, and thanks, everyone, for joining us today to discuss what was a very solid fourth quarter and the continuation of good results and momentum. The year ended December 31, 2019, we posted 26.5% growth in adjusted EBITDA, 40.8% adjusted net income growth and a 46.6% increase in adjusted diluted earnings per share.

We'll start in Canada, where, for the fourth quarter, our Canadian business delivered 18.3% revenue growth over the prior year quarter and $20.3 million of adjusted EBITDA, which is 30.1% of our consolidated adjusted EBITDA versus $8.8 million of adjusted EBITDA in the prior year quarter. Suffice to say that a year later, we are incredibly pleased with how the product transition to open-end loans has worked out in Canada. Our team in Canada has been extraordinary, and we once again demonstrated our ability to tackle product change on a very large-scale and do it in a way that works for us in terms of loan volume and credit, while delivering great value and service to our customers. We have a lot of momentum in Canada, and we're very optimistic about our prospects for continued growth there in 2020.

Our U.S. business also continues to perform well, with 6% growth in adjusted EBITDA versus the prior year quarter. The sequential deceleration in U.S. revenue versus the third quarter was almost entirely driven by the repositioning and the beginning of the runoff of our California installment loan portfolios ahead of the regulatory change effective January 1. Absent this California impact, our U.S. revenue grew 6.5% in the fourth quarter versus a 6.2% sequential growth in the third quarter. So very consistent and steady growth.

We continue to see strong growth in loan balances, revenue and net earnings. Overall, credit quality was solid with our quarterly net charge-off rate improving 210 basis points year-over-year. Much of the improvement is related to mix shift, but this is an important offshoot of the fact that our fastest-growing products are also our lower rate, lower net charge-off products most notably, our Canadian open-end product with a quarterly net charge-off rate was 6.3%, consistent with the third quarter and with our expectations for this product.

We believe that macroeconomic trends continue to be favorable for our customers in both Canada and the U.S. We look at a great deal of data, and not to oversimplify, but the most important indicators continue to be the credit quality of our new customers and the ability of our current customers to meet their repayment obligations. On the second point, I noted the lower NCO rates earlier. And the pace at which our customers cure a delinquency was the same in this fourth quarter as it was in the prior year period. Both of these are very good leading indicators, but we remain very disciplined.

By design, our application approval rates for the quarter were down modestly across the board, U.S., Canada stores and online, and work to keep cost per funded loan and loan vintage credit results performing well and meeting or exceeding our expectations. At the macro level, job growth and wage growth continue at very solid clips and the most recent consumer confidence numbers for January were at the highest level since August. These trends bode well for our business. In Canada, we remain focused on portfolio performance and growing share with our market-leading open-end product.

Canada's Q4 2019 revenue of $62 million was a record high. Canadian open-end balances stood at $252.1 million at December 31, 2019, and represented 83.4% of our consolidated gross combined Canadian receivables, up from 75.3% at December 31, 2018. Based on the success we've had in Ontario, we began rolling out the open-end product in British Columbia this January. British Columbia comprised 8.7% of Canadian revenue in 2019. So the transition is a much smaller undertaking than Ontario, and the effect of the transition is included in our 2020 earnings guidance.

During the fourth quarter, we launched our newest loan product, an unsecured installment loan originated by Stride Bank. We market and service loans on behalf of the bank, and they license and utilize our proprietary credit decisioning for scoring and approving loans. We're now offering this product in 2 states in the U.S., and we'll look to expand it geographically over the course of 2020. However, as we've mentioned in the past, this product will not be materially added in to 2020 earnings and may actually be slightly dilutive depending on the rollout pace.

We're very focused on building a sustainable and scrupulously compliant underwriting servicing platform with multiple products and partners. This will require ongoing investment in people, processes and technologies, and our 2020 guidance reflects a higher level of ongoing spend in all of these areas as well as higher spend for start-up marketing.

Two new opportunities where we continue to invest and are very pleased with the progress are Revolve Finance and Katapult, formerly Zibby. Revolve is our demand deposit account or DDA, sponsored by Republic Bank of Chicago that we introduced in March of 2019. This product provides our customers with full functionality of a bank account. Direct deposit of a customer's paycheck with access up to 3 days early. Debit card, bill payment, and even an optional overdraft protection in addition to an FDIC insured account for their deposits. We earn fees on account and card use, and for those customers who qualify, overdraft protection.

So far, we have loaded almost $68 million on over 24,000 unique cards, which is promising growth for a new product. Revolve is a logical extension and companion to our Opt+ general purpose reloadable card, which in U.S. is sponsored by Axiom Bank and Metropolitan Bank of New York.

In Canada, our bank sponsor is PACE Savings & Credit Union. Opt+ provides more core card functionality, including, later this quarter, optional overdraft protection. We currently have over 150,000 active cardholders. Cards are a small but important part of our product offerings, and we will continue to invest in these offerings to improve the features, mobile functionality and value to our consumers. 2020 will also see us invest more in marketing, promotions and employing training around our card offerings to drive growth, particularly through our branch network.

As discussed last quarter, we participated in 2 investment rounds in Katapult, our online virtual lease-to-own platform in 2019, and these investments brought our fully diluted ownership in this private company to approximately 44%. Katapult continues to perform well, particularly with key accounts such as Wayfair, Lenovo and Affirm. While Katapult is still a small player, but a growing player, they've almost doubled their leasing volumes over the last year. They work in a very large addressable market. We think that the non-prime segment of the consumer durables market it's approximately $50 billion, and it's a growing category, and we believe that Katapult's online integration, underwriting and service capabilities, give them a durable competitive advantage over competitors who focus on brick-and-mortar retailers.

Overall, we've laid a strong foundation going into the new decade and believe that 2020 will continue to provide growth for our continued Canadian success, product diversification and leveraging bank partnerships with both card and credit products.

Let me hit on a couple of other key topics before turning it over to Roger. First, a brief regulatory update. As everyone knows, the new California law took effect January 1, so we're only offering single-pay loan along with our DDA and other ancillary products in Canada. The wind down of the California installment book and related changes in the market are included in our 2020 guidance.

On the federal side, last February, the CFPB published a proposed rule, which will rescind the ability to repay a portion of its small dollar rule, and among other provisions, would narrow the scope of the rule. In addition, the CFPB pushed the implementation date back to November 2020. Also, in December of last year, a Texas court continued its stay on the payment portion of the rule until April of this year, at which point, it is believed that the CFPB will revisit that portion of the rule.

Finally, before I wrap it up, Roger will provide more details, but we're pleased to announce both the continuation of our share buyback plan as well as the initiation of a quarterly dividend, which based upon Tuesday's closing price, equates to an annualized yield of 2.3%. We think these represent meaningful steps to return capital to shareholders, but should still leave us with an excess of $120 million of free cash flow in 2020, to invest in our growing business lines, pursue strategic acquisitions and potentially pay down debt.

In summary, 2019 was another positive year for CURO. And I think the fourth quarter once again demonstrates the strength of our company and our operating model. We're a strong and growing company with strong free cash generation capabilities, we have the strongest omnichannel model in the consumer finance industry. We continue to prove our ability to navigate and rapidly adapt to regulatory and competitive changes across the markets we serve. We continue to invest across our company to remain at the forefront of innovation and to leverage this innovation as well as our scale for the benefit of our underbanked consumers. And with that, I will turn it over to Roger.

--------------------------------------------------------------------------------

Roger W. Dean, CURO Group Holdings Corp. - Executive VP, CFO & Treasurer [4]

--------------------------------------------------------------------------------

Thanks, Don, and good morning. As Don mentioned earlier, we closed 2019 with significant momentum in a number of areas, including outstanding profitability and earnings growth in Canada, managing the California transition while posting solid growth in the rest of the U.S. business, strong expense discipline and meaningful return of capital to shareholders. Consolidated revenue for the quarter was $302.3 million, up 5.1% compared with last year's fourth quarter. For the quarter, U.S. and Canadian revenues were $248.3 million and $62 million, respectively. Both are the highest in company history. U.S. loan balances decreased 0.4% to $440.1 million due to the California portfolio repositioning, Don mentioned earlier. I'll cover more on that in a minute. Adjusted EBITDA came at $67.5 million, up 26.5% year-over-year. Consolidated adjusted net income and adjusted EPS for the quarter rose dramatically year-over-year, up 52% and 66.7%, respectively. The high-growth was a result of: one, quarterly adjusted EBITDA growth in Canada of $11.5 million year-over-year; two, solid U.S. loan growth outside of California; three, disciplined expense management; four, interest savings from last year's refinancings and managed utilization of our Canadian ABL facility; and five, repurchases of common shares.

Next, I'll comment on advertising, customer accounts and cost per funded loan before moving on to loan portfolio performance. As a backdrop, it is important to note that there is a fundamental shift in the composition of our portfolios year-over-year that drives a meaningful change in advertising patterns and new customer accounts, especially in Canada. So while metrics on new customer accounts are lower they are as we expected. We are pleased with the new customer accounts, and just as importantly, the underlying credit quality and performance.

Looking at new customers and advertising stats, we added 164,500 new customers this quarter, down 9.9% from last year. For the year ended December 31, 2019, we acquired 602,000 new customers. Our site-to-store capability, a key competitive differentiator, added 29,000 new customers in Q4 and 112,000 for the full year. Consolidated cost per funded loan was $98 for the quarter.

Breaking down advertising and new customers by country. U.S. advertising expense was up $1.4 million or 10.2% for the quarter, but new customer accounts were down 9.2% year-over-year, primarily because of California and Ohio. We stopped acquiring new installment loan customers in California on October 1 of 2019, to prepare for the January 1 law changes that Don mentioned earlier. And our new customer volume in Ohio is much lower after the April 2019 law change there. Excluding these 2 states, new customer accounts were down 4%. The remaining decline is mostly on relative Avío product volumes as we allow machine learning models to mature. 58.9% of U.S. new customers were acquired online versus 53.5% in the fourth quarter of 2018. U.S. cost per funded loan was $104 for the quarter.

Moving on to Canada. Canadian advertising expense for the quarter was flat year-over-year as higher open-end loan advertising was offset by mix shift and fewer first loan promotions for single pay. Canada new customer counts were down 14.3% for the fourth quarter of 2019 compared to the fourth quarter of 2018. This is due to the initial outsized growth of the open-end portfolio in Ontario over the second half of last year and the overall shift from rapidly turning single-pay loans to longer-term open-end loans. Cost per funded loan in Canada was $60 for the quarter.

Next, I'll spend a little time covering overall loan growth and portfolio performance. First, I'll cover a few highlights at the product level. Company-owned unsecured installment loan balances declined $29.6 million or 15.6% versus the same quarter a year ago. The decline was almost entirely driven by California portfolio repositioning and optimization. Non-California U.S. grew slightly, and Canadian unsecured installment balances shrank modestly on mix shift to open-end loans. U.S. secured installment loan balances declined $4.9 million or 5.3% versus the same quarter a year ago, also because of California portfolio optimization. Excluding California, the portfolio grew 16.8% year-over-year.

CSO loan balances were down slightly year-over-year, but you'll recall that the law change in Ohio that eliminated the CSO model became effective in April of 2019. Subsequently, the CSO balance in Ohio have run off so good growth in Texas to largely replace that runoff. As expected, single-pay loan balances were affected by Canada's regulatory change and transition to multi-pay loan products. Canadian single-pay balances declined $800,000 or 2.1% versus the same quarter a year ago, but continue to be stable sequentially versus the third quarter of 2019. U.S. single-pay loan balances grew 3.2% year-over-year driven primarily by California.

Moving on to loan loss reserves and credit quality. Our consolidated net charge-off rate improved over 200 basis points versus the fourth quarter of 2018. Looking at credit metrics by product, open-end loan net charge-off rates improved 165 basis points year-over-year. The positive effect of Canadian open-end seasoning was partially offset by increased open-end net charge-off rates in the U.S. from a combination of loan growth, mix shift to more online volume and advertising channel shifts.

The CSO net charge-off rate improved 270 basis points versus the same quarter a year ago, partly because of higher relative loss rates in the former Ohio CSO portfolio and better credit performance in Texas. Unsecured and secured installment loan net charge-off rates were up 40 basis points and 90 basis points respectively, and were impacted by the fact that the California portfolios are running off with limited refinances and shrinking balances. U.S. unsecured installment net charge-off rates, excluding California, were down over 200 basis points year-over-year, while secured installment rates, excluding California, ticked up a little over 100 basis points on higher growth in Arizona. Single-pay net charge-off rates rose 30 basis points year-over-year. Canada was up 70 basis points from the fully phased-in effect -- impact of Ontario extended payment plan rules that went into effect over the second half of 2018. And while U.S. single-pay net charge-off rates improved 30 basis points year-over-year.

Turning to our capital structure and liquidity. Our total available liquidity position at the end of the quarter was $142 million, this was comprised of excess unrestricted cash of approximately $27 million U.S., revolver capacity of $50 million, Canadian revolver capacity of over $7 million and undrawn borrowing base availability on our Canadian SPV Facility of $58 million.

In addition, we are pleased to announce that earlier this week, we executed a nonbinding letter of intent for a $200 million nonrecourse revolving credit facility to fund our growing U.S. portfolio at very attractive terms. The facility has a 90% advance rate and a 5.75% LIBOR spread.

Our ending liquidity position and expectations of strong excess cash flow in 2020 is a good segue for the next 2 topics. As Don mentioned earlier, at our Board meeting last week, we authorized a new share repurchase program for open market or negotiated purchases of up to $25 million of our common stock. Secondly, we authorized a quarterly dividend program and declared our first dividend since becoming public. $0.055 per share or $0.22 per share annualized.

Finally, I'll close with our outlook for full year 2020. Revenue in the range of $1.165 billion to $1.195 billion. Adjusted net income in the range of $135 million to $145 million; adjusted EBITDA in the range of $265 million to $280 million. Adjusted diluted earnings per share in the range of $3.10 to $3.35 and an effective income tax rate in the range of 26% to 27%. This guidance reflects expectations that Don expressed earlier that is: mid-20% earnings growth for Canada, modest U.S. earnings growth as non-California growth will offset declines in California; up to $5 million of investment in new product launches; and disciplined accretive use of significant cash flow. This concludes our prepared remarks, and we'll now ask the operator to begin Q&A.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions). And your first question comes from John Hecht with Jefferies.

--------------------------------------------------------------------------------

John Hecht, Jefferies LLC, Research Division - MD & Equity Analyst [2]

--------------------------------------------------------------------------------

Congratulations on a great quarter and positive guidance. First question, just sort of an update on store trends versus online trends. Where is the mix been with respect to originations and so forth? And where do you see them going in terms of that mix?

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [3]

--------------------------------------------------------------------------------

John, this is Donald. I'll have some comments and Bill may have some thoughts on it as well. We -- I don't -- I think we continue to see the stores be really productive for us. And -- but the mix in the store originations continues to shift from what we call sort of organic stores, which is organic customers, which is customers who just kind of come to a store, see TV or radio, whatever, they come to a store versus the customers who come in from leads to stores. So the -- and probably over the last -- if you look at over a longer-term trend, from an organic base, probably somewhere in the neighborhood of the last couple -- probably like 1/3 -- our organic traffic is down by sort of 1/3, but we've been able to more than supplement that with the leads to store customers. So that -- so the growth in traffic -- the traffic at the stores continues to be really positive. Part of it also is, we can use the store because we are so heavily -- the mix -- the product mix is so heavily weighted to the installment line of credit products now. And a lot of those customers are on -- a huge percentage of customers are on auto pay. So whereas in the past, if we're doing a single-pay transaction, customers are having to visit the store much more frequently around type of refinancing cycles. Now customers that are on auto pay, they may come into the store and originate a loan and then we're simply using the auto pay feature to do payments every couple of weeks. So there's not as much traffic there and it frees the store up to be much more of a kind of an outbound marketing, but we make -- and Bill can give you the numbers, I mean, we make a lot of calls out of the store now from the store people out to prospective borrowers. And that's been a big lift there. So we don't really disclose the individual breakdown kind of for competitive reasons, but we've got -- obviously, we've gotten a question about California, if we don't have the installment products in California, what's the store base look like in California? And we've heard there's quite a number of competitors saying in California, they're simply going to exit the retail side of the market there. We're quite the opposite. We make -- our California store base is still even without the installment products still make a lot of money, and we're looking forward to hopefully picking up some share there. And it's also a great place. We talk about the card products, be able to sell the card products through the branches. California is going to be kind of at the fulcrum of that for us in 2020 to market and sell the card products through the branches. So I'll let Bill if he has any other thoughts on it. But I think that -- it's a good question, but stores continue to be overwhelmingly positive and a big part of the omnichannel strategy.

--------------------------------------------------------------------------------

William Baker, CURO Group Holdings Corp. - Executive VP & COO [4]

--------------------------------------------------------------------------------

Yes. I think, Don covered it. I think the only thing I would add is just that they continue to be important for the servicing component. And although all the stores are productive. Where we have stores, we actually do better online as well. So they are a nice complement. And I think it's just that buzz term omnichannel continues to be something we put into practice and I think it's really important.

--------------------------------------------------------------------------------

John Hecht, Jefferies LLC, Research Division - MD & Equity Analyst [5]

--------------------------------------------------------------------------------

Okay. Great. Just while you mentioned California, they're done. Roger, just a modeling question, how fast do we think about the runoff of the California portfolio that you're shifting?

--------------------------------------------------------------------------------

Roger W. Dean, CURO Group Holdings Corp. - Executive VP, CFO & Treasurer [6]

--------------------------------------------------------------------------------

Yes, I think it's front-loaded in 2020 because of tax season. We could easily see 1/3 of the balance being amortized by April. And then the rest -- and more ratably, thereafter. But we -- the way we think about it is -- and this would be the case, even if we hadn't stopped originating seasonally, but it's going to be more -- obviously, more accelerated with no new originations. So I think we could lose 30% to 40% of the -- lose, I mean, we get repayment on or get prepaid on 30% or 40% of the balances in the first 4 months of the year and then kind of a more ratable runoff after that.

--------------------------------------------------------------------------------

John Hecht, Jefferies LLC, Research Division - MD & Equity Analyst [7]

--------------------------------------------------------------------------------

Okay. And then last question is with respect to the Revolve and the card products, I know these are -- you're investing in them at this point, but how do we think that over the long-term as these scale and season, what the kind of product margins are in the, I guess, the revenue sources?

--------------------------------------------------------------------------------

William Baker, CURO Group Holdings Corp. - Executive VP & COO [8]

--------------------------------------------------------------------------------

Yes. John, this is Bill. So I think you're right. This is an important year for our card products as we invest a lot in them. Probably just slightly less than $5 million pretax this year, but that's a lot of marketing investment. And I think if you look at the drivers of that business, I mean, there are certainly fees, interchange. But as we mentioned in the opening remarks that we're excited to offer the optional overdraft protection, which, by the way, is much more competitive than you may get at a traditional bank from a pricing perspective and grace period perspective. And I think customers will adopt that. And that's also a big driver. I guess, the second point I would make that all the investment that has taken place to date is really within our universe. So our 4 walls in the stores and our online customers. We think there's a nice opportunity as we look to update the apps this year and offer some of these various product features to expand to other partners, whether that's just online direct-to-consumer or with other brick-and-mortar retail partners. We think we've got a very scalable solution. A lot of support from our bank sponsors. And keep in mind that we do all the servicing on our own. And I think we've proven over the years through our ability to take advantage of operating leverage and then to add scale. So I think the bottom line is it's an investment year this year, we're redoing some of the technology and then we would look to capture some of the pretax and revenue results certainly next year and out years.

--------------------------------------------------------------------------------

Operator [9]

--------------------------------------------------------------------------------

And the next question comes from Bob Napoli with William Blair.

--------------------------------------------------------------------------------

Robert Paul Napoli, William Blair & Company L.L.C., Research Division - Partner and Co-Group Head of Financial Services & Technology [10]

--------------------------------------------------------------------------------

And nice job on the quarter. And I guess, where the growth outside of California? What is the growth strategy outside of California? Where are you seeing opportunities to offset the shrinkage in California?

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [11]

--------------------------------------------------------------------------------

Yes. Bob, it's Don. So I think that -- I mean, obviously, our big markets are -- outside of California would be Texas, Arizona, Nevada, Tennessee, Kansas probably are our bigger markets. And I think in all those markets, we -- Bill mentioned, we talked about the -- those are big branch markets for us. So we've got the benefit of both really strong online channel, but the way the stores kind of work and supplement the online channel, the online advertising. So I think -- and we -- this happen to be from a demographic standpoint, population growth, and within those markets, wage growth, job growth, those are really, really strong market. So -- and I think, in general, that we -- I believe that we can -- as we talked, we grew kind of 6.5% outside of California in the fourth quarter. So it's -- and I think that we can probably -- we feel like we can do that, maybe do a little bit better, particularly from some of the card stuff. But it's not -- our guidance doesn't imply us kind of -- we're not necessarily going to sort of try to drive a lot more growth in other markets, we really feel like the strategy we have now, the way we're spending ad dollars, the way we're being disciplined on that, the way we're disciplined on credit, we're going to kind of continue that program in the other markets outside of California, and hopefully get some good growth in revenue. It probably isn't -- and Bill mentioned on the card side, it's not going to show up as much on the bottom line in 2020 because of a lot of spend both on the marketing side, the technology side. There's a lot of improvements in the mobile side of things. And that's -- so there's some investment there. So I think the message on the state -- the rest of the states is going to be -- I should say, we'll get a lot of good growth in our -- where we are now. We're going to -- we're with -- we had the Stride Bank product in 2 states now. And it is -- we're really kind of a pilot phase now to make sure that the functionality of the program works great and all the -- everything on the loan management side and processing payments and et cetera, all works great. That should give us some good asset growth as we get into the back half of the year and set us up in 2021 to see real meaningful earnings accretion from that program. And that's a product that will help us expand geographically online in some states where we don't operate right now.

--------------------------------------------------------------------------------

Robert Paul Napoli, William Blair & Company L.L.C., Research Division - Partner and Co-Group Head of Financial Services & Technology [12]

--------------------------------------------------------------------------------

That's helpful. And then what is the opportunity long-term in Canada? What do you -- I mean, you're growing nicely. You've converted some products. Is that -- do you think you can grow it in the 10% plus for the next 5 years opportunity? Or is that -- what do you think is reasonable for the market opportunity there?

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [13]

--------------------------------------------------------------------------------

Yes. So I think -- we think we can grow earnings probably 20-plus percent, we'll get revenue growth in maybe the mid-teens and some operating leverage and get over 20% earnings growth next year. I do think the opportunity is probably -- again, it's hard to just pick an exact number, but I would think it would -- we would be able to continue to grow certainly from a top line standpoint, in a double-digit range and get some operating leverage. The -- we were converting British Columbia on the line of credit product, which is going to help out this year and help next year. The other thing, Canada is still -- if you look at the -- we're kind of in the range of 20% or so of our new customers are coming online versus 65% in the U.S. and the ability to kind of close that gap. And some of that is -- I think we're doing a lot of stuff that starts to help close the gap but also just online financial services, in general the adoption rate in Canada just isn't what it is in the U.S. And I really think it's one of the good parts about Canada is that in the installment side of the business, it's kind of a -- it's us and it's Money Mart and [Easy Go], it's -- the parent company's [goeasy]. So it's -- a competitive standpoint, there's really kind of only 3 companies of any scale. But I think even within that market, we feel like we have the best online capability. So as the market continues to shift to more online versus retail, I think we're going to pick up share. We also haven't -- we're -- from the -- the line of credit product is a great product, I think possibly extending into even some larger longer-term installment loans, which is something that both of those companies do a lot of. It's something we're kind of taking a look at, we'll probably do some piloting on that as we get later in the year.

--------------------------------------------------------------------------------

Robert Paul Napoli, William Blair & Company L.L.C., Research Division - Partner and Co-Group Head of Financial Services & Technology [14]

--------------------------------------------------------------------------------

Last question. I mean, you guys have executed very well over a long period of time through very difficult regulatory, but your stock's trading at 3.5x earnings and you're buying back stock. And regulatory issues, obviously, are the reason, I guess, and there was a hearing yesterday about national rate caps, and maybe any thoughts around -- I mean, I've been around a long time, I've seen efforts to do that forever for the last 30 years. But what are your thoughts on that effort specifically or any other regulatory concerns? And do you feel that's why your stock is trading at such a depressed valuation despite good earnings?

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [15]

--------------------------------------------------------------------------------

Yes, Bob, I mean, obviously, we've -- this is a conversation you and I have had -- going on 15 or 20 -- a long, long time and I don't want to date either of us. But no, I mean, I think that's certainly an overwhelming piece of it. And I understand that investors can figure a lot of stuff out and are obviously really good at pricing risk. And part of what the regulatory questions bring about is -- are these priceable risks? And I would think that if you look at more specifically on sort of the national rate cap level, I think I would encourage everybody to kind of look at the outcome of that and some of the testimony in that hearing yesterday, which was structured to provide a forum for people that are in favor of rate caps. And if you just look at the lineup of academics, it was kind of 4 to 1 on the panel in terms of people favoring rate cap. But even there's a good article -- the American Banker article this morning is really -- I think, a really good summary of the concerns on the democratic side about are rate caps the right way to regulate small dollar loans? And it's really a good argument that -- and we've been advancing that argument in a lot of places over a very long period of time. And does a rate -- an arbitrary rate cap, will that -- I mean, our argument is quite simple, if you put an arbitrary rate cap of 36%, you're probably taking 40 million to 50 million Americans out of the credit economy, and they're going to be bouncing more checks, paying overdraft fees, having to pay deposits to get their utilities, where you know it's a -- the small dollar credit properly regulated, it's better, cheaper option for those consumers. So I -- look, it's not -- it's -- these arguments will go on. But I think yesterday's hearing was a great -- and as I said, I encourage everybody to kind of look at it, it was a really interesting debate, and healthy kind of debate about this. I think that one that we win over time, and I think we are kind of -- again, we don't win everywhere, but we didn't win in California, obviously, in last year. But I think more broadly, I think, it's -- California may actually, in some respects, it's turning out to be a good -- it'll be a good laboratory for us to sort of look at the effects of a -- on a broad basis in some of these arbitrary rate cuts and how consumers that are, call it, sub-620 FICO customers get kind of priced out of the credit economies.

--------------------------------------------------------------------------------

Robert Paul Napoli, William Blair & Company L.L.C., Research Division - Partner and Co-Group Head of Financial Services & Technology [16]

--------------------------------------------------------------------------------

I listened to that hearing, and I know it was set up to be pro rate caps and led by a lot of the California people. I was surprised how balanced it was and the concerns from the democratic side in many regards. It was pretty -- I agree, it was very interesting and worth investors listening to a replay.

--------------------------------------------------------------------------------

Operator [17]

--------------------------------------------------------------------------------

And the next question comes from Moshe Orenbuch with Crédit Suisse.

--------------------------------------------------------------------------------

Moshe Ari Orenbuch, Crédit Suisse AG, Research Division - MD and Equity Research Analyst [18]

--------------------------------------------------------------------------------

Just following up on that discussion, Don. Do you envision participating in any of those to kind of advance that point of view?

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [19]

--------------------------------------------------------------------------------

So would we participate in, like, in public a hearing?

--------------------------------------------------------------------------------

Moshe Ari Orenbuch, Crédit Suisse AG, Research Division - MD and Equity Research Analyst [20]

--------------------------------------------------------------------------------

Yes. You've been saying.

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [21]

--------------------------------------------------------------------------------

I mean, are you asking? I mean, I've not done one recently, I've done them in the past. I would -- there is another hearing scheduled, and it's currently on the docket for the end of the month of February. I'm not sure what the lineup is going to be, and it's meant to be more industry-focused as opposed to academic-focused. I'm just not sure what the -- what the lineup is going to look like. Remember, we're active in a lot of places. We're -- I'm certainly with our trade associations very active on the Hill. We're there a lot, we're in the state houses a lot. And we've got both sort of industry -- trade association-level people of industry, CEOs like me, we've got -- our Head of Government Relations is very active in the state. So whether we're in D.C. in public doing one of these, I'm not sure yet. But we're certainly very, very active in a lot of places, trying to advance this argument.

--------------------------------------------------------------------------------

Moshe Ari Orenbuch, Crédit Suisse AG, Research Division - MD and Equity Research Analyst [22]

--------------------------------------------------------------------------------

Got you. On the dividends. Can you talk a little bit about your thoughts about setting up a dividend? It's obviously a pretty bold move. Obviously, it kind of evidences your confidence and consistency of earnings. And what it means in terms of kind of buybacks in the future?

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [23]

--------------------------------------------------------------------------------

Yes. So just -- so we did initiate a dividend and are going to -- and we reauthorized $25 million in the buyback program. The dividend, it works out to be somewhere in the neighborhood of $9 million of annual distribution there. So taken together, it's -- call it, $35 million of planned, at this point, capital return. It is -- we talked about, we generated a lot of cash in 2019. We'll get a lot of good strong cash generation in 2020 in the core business, and then we get some additional benefit from the runoff of California. But even if you just look at the dividend, it’s kind of a payout ratio on net income, it's relatively modest. So we think it's a good place to start. And it is -- I would also -- we have a lot of availability in liquidity now, we're going to add to that. We announced we've got a new $200 million revolving facility to finance a line of credit and installment products in the U.S. that we're -- that we've signed a letter of intent on, we'll close that shortly at a really attractive rate. So we're kind of increasing our liquidity and flexibility there. So I think it's confidence in the businesses is today and where it's going to go forward. And I think it's a balance of both dividend and share repurchases. We're -- share repurchases are important, but we are -- we don't -- from a float standpoint, you bought back $75 million of stock or so over the last year. So we are a little bit -- we're always kind of mindful of not shrinking the float too much so that people that own the stock now and think out wanting to buy the stock, have a liquid tradable securities.

--------------------------------------------------------------------------------

Moshe Ari Orenbuch, Crédit Suisse AG, Research Division - MD and Equity Research Analyst [24]

--------------------------------------------------------------------------------

Understood. Last question. Just in terms of like the exit rate of earnings in 2020. How do you think that compares? And you talked a little bit about some of the things that will kind of give you a little bit of tailwind just in 2021. Maybe if you could, Roger, just talk about that a little bit?

--------------------------------------------------------------------------------

Roger W. Dean, CURO Group Holdings Corp. - Executive VP, CFO & Treasurer [25]

--------------------------------------------------------------------------------

Yes. Moshe, it's Roger. Yes, I think -- so we -- if you think about just breaking down 2020 versus 2019, and kind of what's implied in our guidance. We have -- the sequential earnings in Canada, obviously, have expanded since third quarter of last year consistently. I think we view that as -- we view Canada earnings growth to be, Don mentioned earlier, mid-20% range, on high teens revenue growth. The U.S. is -- the first 3 quarters of the year, the U.S. business isn't going to have any growth or much growth at all because of the -- mainly just because of California, year-over-year comps. But setting California aside, I think we'll see -- for the full year for the U.S., we see modest -- very modest earnings growth with mainly open-end and -- mainly open-end loans and new products offsetting the California runoff. So growth for the U.S. is probably a push to modest growth. And so overall, that's kind of what's implied, but the -- Don mentioned earlier, the state layout, but the growth in -- the growth on the legacy products is going to come from open end, both in Canada and the U.S. And then obviously, we are launching, although, it's not additive this year, it will certainly be accretive to 2021, the new product set.

--------------------------------------------------------------------------------

Operator [26]

--------------------------------------------------------------------------------

And the next question comes from Vincent Caintic with Stephens.

--------------------------------------------------------------------------------

Vincent Albert Caintic, Stephens Inc., Research Division - MD & Senior Specialty Finance Analyst [27]

--------------------------------------------------------------------------------

I wanted to talk about the Stride Bank partnership. And maybe if you could give a little bit more detail of how it rolls out over the course of 2020 and 2021, the product plans and kind of how quickly you could expand? And what's the thoughts once relationship matures?

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [28]

--------------------------------------------------------------------------------

Vince, it's Don. So as I mentioned, it's going to take us, well, I'd say, kind of a quarter and a half or so to make sure that fundamentally, that all of the engine kind of works properly. It's a good deal more complicated process to have the bank license our technologies and host those technologies and use those technologies. So it's -- we spent a lot of time, a lot of energy on it. It's been a very big -- as the developers like to say, a heavy lift from an IT standpoint. We just want to make sure all that works well. And as we get through the year, I think we'd like to -- our view is we'd like to exit the year with somewhere in the range of $50 million to $75 million of earning assets in that program. And that those are installment -- closed-end installment loans and probably be in -- we're in 2 states now and you probably -- as you're growing that business, maybe you exit the year and you're in 5 or 6 states by the time you exit the year. We've -- Stride is a really interesting, innovative, really entrepreneurial bank. We've done stuff with them on the payment side in the past. So it's a relationship we've had for a while. So we've known each other from a team standpoint for a long time. So I think from a -- I think probably, as I don't see it's sort of expanding outside of this closed-end installment product. As we look into probably -- I think that will probably, I would say, it would probably stick to the same kind of products all the way through 2021. Longer-term, it's kind of hard to speculate on what else we might be working on together because there's a lot of opportunity in some states that we don't operate in right now online to offer a really competitive installment product. So again, end the year 5 or 6 states, $50 million to $75 million of earning assets and have that kind of roll into really healthy business and a good earnings contribution in 2021.

--------------------------------------------------------------------------------

Vincent Albert Caintic, Stephens Inc., Research Division - MD & Senior Specialty Finance Analyst [29]

--------------------------------------------------------------------------------

Perfect. And is the -- so you're starting off with a couple of states, just to kind of test the waters on the technology. But is the conversations with Stride Bank, is it that they want to license your technology for all 50 states [using] there? And then when you talk with -- I suppose you're talking with other banks as well, sort of what's the appetite for licensing your technology and using them in all the different states?

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [30]

--------------------------------------------------------------------------------

Yes. I mean, obviously, one of the nice -- we think that the -- there is a potential to be in all 50 states. We don't -- again, we only have a -- what drives the conversation is really focused around a relatively small handful of states right now. And I'm not -- from a competitive standpoint, I'm not -- we're not going to kind of go in any more detail than that right now. We -- as I said in my remarks, we -- our view is we're going to have multiple partners and multiple products. So we do have some conversations going on with some other partners to look at other products. And hopefully, we'll have some more to talk about on that front later in the year. But again, that's a really -- really there's not a lot of granularity in that answer, but that's just the nature where the conversations are right now.

--------------------------------------------------------------------------------

Vincent Albert Caintic, Stephens Inc., Research Division - MD & Senior Specialty Finance Analyst [31]

--------------------------------------------------------------------------------

Got you. Yes. That's absolutely helpful. One kind of modeling question. So helpful to think about the U.S. kind of being flat overall in terms of loan growth for 2020 year-over-year just because of the -- what's going on with the California mix. Could you help us understand some of the other pieces that are being affected by the California runoff? So I'm assuming that 2020 has a less credit reserves as relative result of that? Or just maybe if you could help us just as from a modeling perspective, how we should be thinking about line-by-line, maybe there's also marketing costs or other things for the California runoff.

--------------------------------------------------------------------------------

Roger W. Dean, CURO Group Holdings Corp. - Executive VP, CFO & Treasurer [32]

--------------------------------------------------------------------------------

Yes. Vincent, it's Roger. Yes, I think that -- first of all, the -- we're going to have some -- even with the California runoff, we'll see loan growth in the U.S. and if you just think about -- we finished -- we disclosed this, we finished the year with -- the installment balances in California are about $108 million in total between the 2 products. If you assume that, I don't know, 75% of that prepays amortizes by the end of 2020, you've got 80 -- you've got $70 million, $80 million of loan runoff in California but we're still going to see loan -- I still -- our guidance implies that we'll still see overall loan growth in the U.S. by the fourth quarter of 2020, which means you're replacing more than $80 million of runoff with new growth and the provisioning that goes along with that. So I just -- when you add it all up, you don't -- we're not -- it's not like provision is going to be less than net charge offs or -- so I think there's going to be a pretty consistent relationship throughout the year of the provisioning versus revenue. And I think kind of that -- they're pretty much moving somewhat in lockstep, I mean, we're not adjusting any -- we're not -- our plans don't imply that we're going to see any big improvement in allowance coverage rates or big deterioration in allowance coverage rates. So it's kind of just -- the U.S., there's a lot of moving parts in the U.S. for 2020, as you point out, a lot of growth in the non-California products, but when you kind of add it all up, if our adjusted -- you can see our adjusted EBITDA guidance. If you back Canada out of that, you get flattish or very modest growth in the U.S. and that's from kind of the revenue and the provisioning moving in lockstep with some pretty strange in some -- for a couple of quarters, some pretty strange year-over-year comps because California peaked. The California portfolio peaked in mid last year, and it's going to be -- and it's run off from that point. So the U.S. won't have growth in the first 2 quarters year-over-year.

--------------------------------------------------------------------------------

Vincent Albert Caintic, Stephens Inc., Research Division - MD & Senior Specialty Finance Analyst [33]

--------------------------------------------------------------------------------

Okay. Got you. That's really helpful. And that's a positive message...

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [34]

--------------------------------------------------------------------------------

This is Don. I would just add on the -- you've got some of the rest of the opinion. I think the one thing you'll -- I think advertising costs as a percentage of revenue, those will probably go up. Some of that is just mix shift because it's -- the online business has more advertising costs but less operating costs, other operating costs. So mix shift will drive a -- some of that increase. And then on both the card side, the Stride side, and in general, I think there's -- we've built some more marketing balance. And so advertising as a percentage of revenue in 2020 will likely be 80 to 100 basis points higher as a percentage of revenue. But if you look at non-advertising costs, corporate and corporate expenses, we'll probably get some leverage there. And then interest expense, even though we're going to have some kind of carry costs on this new revolving credit facility, interest expense will probably -- some of that's just some debt pay down, interest expense overall will probably go down slightly in actual dollars in 2020. So more ad spend, some leverage on the corporate and sort of store and call center costs and flattish-to-down interest expense in 2020.

--------------------------------------------------------------------------------

Vincent Albert Caintic, Stephens Inc., Research Division - MD & Senior Specialty Finance Analyst [35]

--------------------------------------------------------------------------------

Okay. That's really helpful. And that's a pleasant surprise. I had thought that there would be a big reserve release because of the California wind down. Just last one for me, and maybe this is kind of an overall picture. But we've been -- stocks has volatile because of the political environment and so on. And I just maybe wanted to focus back to the consumer. So what have you been seeing in terms of the consumer demand? So we've been talking about supply issues and trying to have different products. But has the consumer demand continued to be strong? Have you seen the consumer tightening? And have you seen that consumer demand being met by the industry? Or what's the opportunity that remains out there?

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [36]

--------------------------------------------------------------------------------

Yes. Vincent, I'll try to -- it's a big, broad question. I'll try to be a little succinct in answer. I mean, I think, in general, from -- the demand and the health of the consumer continues to be really good, the biggest indicator. I think we've said for a long time there, the demand, we think, is most closely correlates to consumer confidence. People feel good about their financial situation, feel good about their jobs and their prospect for their job to continue; and their earnings to continue and hopefully go up. So confidence numbers have been good. The confidence numbers have bounced around more in the past 6 months. Some of that's -- you kind of read sort of the academic research on it and sort of the details of it, it's just somehow bounced -- lots of it bounced around based on sort of trade deals and stuff that's hard for consumers to sort of figure out what it ultimately means for them. Some -- I think some of the fact that the trade stuff, the tempered received have come down a lot on that has -- at least the stuff I've seen has led to more consumers feeling better about their prospects of their jobs won't somehow be interrupted by a trade war. I think from a -- we're certainly -- part of the reason why we've invested in Katapult is that we certainly -- if you look at that business, which is essentially financing, $800 to $1,000 purchases online. There's no question in our mind that some of that -- the demand that's going to the virtual rent-to-own company had been demanded in the past might have been met by unsecured installment or line of credit financing that we provide and others in our industry provide. So I still think the consumer is healthy. The market is growing overall. It is tipping more in the favor of larger companies that, with scale, both in terms of servicing platforms and underwriting technologies and ability to attract more and cheaper capital, so I think that's helping. But there's no question that some of the demand that used to sort of funnel to us and our unsecured lending competition has moved to the virtual RTO company. But in general, we think the economy in the U.S. is healthy. I think the recession-related fears, that seemed to sort of pop up -- popped up in the fourth -- third and fourth quarter of 2018 and maybe popped up again in the summer of '19, it still feels like that's -- we're in a pretty good spot, and then certainly, as we look out into 2020.

--------------------------------------------------------------------------------

Operator [37]

--------------------------------------------------------------------------------

And our last question comes from John Rowan with Janney.

--------------------------------------------------------------------------------

John J. Rowan, Janney Montgomery Scott LLC, Research Division - Director of Specialty Finance [38]

--------------------------------------------------------------------------------

So coming back to that hearing a little bit. I thought it was, I'll say, entertaining, but ironic that when some of the questioning came from, guys who were a little more aligned with the space, [Luc Demeyere] went toward Ms. [Lamone] and he simply asked her, what does someone do for a $300 or a $400 loan, something that's in the doughnut hole where the California regulations are, and she just, basically, didn't have an answer. She said there's a vibrant market and had absolutely no answer as to how that market was construed, who's lending and at what rate. So with that said, right, as we -- as you've exited and others have exited the $2,500-and-up segment, has there been a corresponding increase in the payday product because, again, she didn't have an answer to how are these people funding "more affordable loans" that she claims are generous at 36% when they just eliminated that market above $2,500.

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [39]

--------------------------------------------------------------------------------

John, it's Don. So I mean, look, we have -- I don't think others have said this, I mean, we've seen some -- it started in the fourth quarter as we -- as our installment folks started to run off. We've seen some increase in the single-pay business in California. It certainly helps take some of the sting out of the chain. But it doesn't it's not by no means of any kind of a one-for-one supplemental replacement for the installment side, mostly because -- and this is -- if you want to go online, they can Google California installment loans, whatever, you can see there are a large number of companies that aren't state licensed in California that still offer loans online. And this is part of the conversation that we had and tried to have in California, that simply passing a law isn't going to -- is it really -- we don't think it's really going to change that -- the availability of that kind of credit in California. And also that the -- and look, there are companies that operate in California in the sub-36% market, they're marketplace lenders. There is the traditional branch-based installment lenders like OneMain and Lendmark, all which are really good companies, but they simply don't offer the credit for customers -- and this is -- you can look at the trust data that's out there. And you can look at the loan tiers that the marketplace lenders report. And they're simply not offering credit for customers who are in the low 600s and high 500s from a FICO standpoint. So there -- the idea that a customer -- our customer in California is going to be able to sort of just instantly pop over to a marketplace lender or with the traditional branch-based lenders and get a loan, this -- from a -- I mean, it's just not our -- our customer is not a OneMain, Lendmark marketplace lending -- those customers are -- they make $10,000 to $15,000 more per year. Their stability metrics are better than our customers. And they're taking out loans that are -- the average loan in a lot of those securitizations are -- the unsecured loan is a $6,600 loan. So it's a much larger loan to a customer that's got 40 to 50 -- a customer needs 40 to 50 more FICO points to qualify for. So I look forward to being able to sit here a year from now, which I think a part of what came out with the testimony and look at what's happened in California for customers who formally borrowed money from us or Lenovo or Elevate, the unsecured lenders who operate in the low 600, high 500 kind of FICO range.

--------------------------------------------------------------------------------

John J. Rowan, Janney Montgomery Scott LLC, Research Division - Director of Specialty Finance [40]

--------------------------------------------------------------------------------

So do you think when they pass this regulation, they understood that there's -- they're not comparing apples-to-apples. When they say there's a liquid market at 36%, but they're not talking about $2,500 or even what would be great a $1,500 loan, whereas these other companies, again, good companies, I cover some of them, and I think they're great companies, provide a very different product, which at the end of the day, a $6,000 loan is at a lower rate, it's going to cost you more in interest if you really need a $1,500 loan, right? I mean, when you are talking to these regulators prior to this bill being passed, did they understand that? Because it didn't seem like they had an answer to that in yesterday's hearing. And frankly, they used just -- they tried to gloss over the issue of what the real health of the market is and what's a like-for-like comparison between your customers FICO scores and the loans that they actually need and what is actually available in market from state license lenders.

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [41]

--------------------------------------------------------------------------------

It's -- California was an incredibly frustrating set of conversations because I think there was a -- from a lot of people, a lot of people who, both on the legislative side, the regulatory side, I think there's a lot of people that understand it, but I think there is a feel-good aspect to a -- this idea that somehow customers are going to be "saved a lot of money" because they can do a calculation on $2 billion of loans that are over 36%, and if all those loans are suddenly rewritten to be sub-36%, that saves consumers a lot of money. And I understand the appeal of -- the politics of that. But it simply isn't -- it just belies an understand of what really happens. And there's a lot of academic research out there about markets that have put in rate caps or eliminated the small dollar lending. And I think also, in -- I don't want to go into too much. But in a market, pre-Internet, where you had basically branch-based stuff, you could really eliminate a lot of the products by simply not -- by having stores close. But with the online lending models and the way that the variety of those models and the way that a lot of those are not subject to state licensing, the credit's going to be there, it's already there in the donut hole, and it's significantly more expensive and we think with many more -- many fewer consumer protections that we offer. So I don't know. As I say it is a big state and I'm hopeful that -- and I think some of that came out in the testimony that you heard yesterday that California will be a really interesting kind of laboratory to look at and -- and I think unfortunately it's going to lead to a lot of bad outcomes for consumers, but hopefully in that experience we'll be able to point to that and chart a way forward from more kind of sensible reg -- we're not advocating for unlike -- no regulation, we believe and we had 425 regulatory exams across our business last year, so we believe in a license regulated and heavily and scrupulously compliant kind of environment and think we can operate in that kind of environment. But an arbitrary rate cap isn't a way forward that provides better outcomes for consumers there.

--------------------------------------------------------------------------------

John J. Rowan, Janney Montgomery Scott LLC, Research Division - Director of Specialty Finance [42]

--------------------------------------------------------------------------------

Okay, easier question. The decision to do dividends and repurchases, is that mostly a function of when the bonds are callable. And just remind me when they're callable and if they're callable, and then just also let me know exactly [in total] of repurchase authority between any of the open programs. That's it from me.

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [43]

--------------------------------------------------------------------------------

Again I think -- I'll let Roger sort of get into the details of it. But yes, I think certainly I just -- I mentioned we -- in my comments, again, I mentioned that between repurchases and dividends you're talking about probably $35 million there. And even after that we still think we can generate in excess of $120 million of free cash, and that we'll look throughout the year to -- it could be additional investment in the core business, it could be strategic acquisitions, but paying down debt is obviously -- and managing the right side of the balance sheet is something that we're -- we continue to be focused. And we think we can provide good returns to shareholders and balance that with a sensible debt reduction as well. So I'll let Roger kind of comment on the call dates, et cetera.

--------------------------------------------------------------------------------

Roger W. Dean, CURO Group Holdings Corp. - Executive VP, CFO & Treasurer [44]

--------------------------------------------------------------------------------

Yes. John, the bonds are mature in 2025. They're first callable at 3-year point, which should be August of 2021. And as you know, that's the first time they're callable at -- in the premium at that point, I think they're called premiums half the coupon. And then it goes down from there.

--------------------------------------------------------------------------------

Operator [45]

--------------------------------------------------------------------------------

Thank you. And as that concludes the question-and-answer session, I would like to return the floor to management for any concluding comments.

--------------------------------------------------------------------------------

Donald F. Gayhardt, CURO Group Holdings Corp. - President, CEO & Director [46]

--------------------------------------------------------------------------------

Okay. We appreciate everybody joining us. Thanks for all the questions. And we look forward to talk to you again after our first quarter. Thanks.

--------------------------------------------------------------------------------

Operator [47]

--------------------------------------------------------------------------------

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.