CURO Group Holdings Corp. Announces Fourth Quarter and Full Year 2020 Financial Results
CURO Group Holdings Corp. (NYSE: CURO) reported Q4 2020 financial results, highlighting a 33.2% revenue decline to $202.1 million compared to Q4 2019. While loan balances fell 19.5% year-over-year, sequential growth of 11.3% was recorded. Unrestricted cash surged 183.5% to $213.3 million. Notably, CURO anticipates receiving up to $130 million from its investment in Katapult, expected to enhance its liquidity. A recent acquisition of Flexiti Financial aims to broaden credit offerings in Canada. However, net income dropped 85.2%, reflecting tough market conditions.
- Sequential loan balance growth of 11.3% in Q4 2020 compared to Q3 2020.
- Unrestricted cash increased 183.5% to $213.3 million.
- Anticipated cash proceeds of up to $130 million from Katapult's merger.
- Acquisition of Flexiti Financial expected to enhance growth opportunities.
- Total revenue declined 33.2% year-over-year.
- Net income decreased 85.2% compared to Q4 2019.
- Loan balances finished 19.5% below prior year levels.
CURO Group Holdings Corp. (NYSE: CURO) (“CURO” or the “Company”), a market leader in providing credit to non-prime consumers, today announced financial results for its fourth quarter ended December 31, 2020.
“After being tested on many levels in 2020, we ended the year encouraged by our employees' resiliency and cautiously optimistic about our opportunities for 2021 and beyond,” said Don Gayhardt, President and Chief Executive Officer. “In the fourth quarter of 2020, we delivered quarterly sequential loan balance growth of
“As we announced in December, we also unlocked significant shareholder value from our
“Then, as we announced earlier this week, we agreed to acquire Flexiti Financial, one of Canada’s fastest-growing POS/BNPL providers with a market-leading omni-channel FinTech platform. This acquisition enhances our value creation opportunities in Canada by allowing us to serve customers across all channels in which they access credit and with an expanded product set. It also increases CURO’s long-term growth profile and provides further product and geographical diversification.”
Consolidated Summary Results - Unaudited
|
|
Three Months Ended December 31,(1) |
|
For the Year Ended December 31,(1) |
||||||||||
(in thousands, except per share data) |
|
2020 |
2019 |
Variance |
|
2020 |
2019 |
Variance |
||||||
Revenue |
|
|
|
|
|
(33.2) |
% |
|
|
|
|
|
(25.8) |
% |
Gross margin |
|
68,591 |
|
95,299 |
|
(28.0) |
% |
|
308,359 |
|
378,616 |
|
(18.6) |
% |
Company Owned gross loans receivable |
|
553,722 |
|
665,828 |
|
(16.8) |
% |
|
553,722 |
|
665,828 |
|
(16.8) |
% |
Unrestricted Cash |
|
213,343 |
|
75,242 |
|
183.5 |
% |
|
213,343 |
|
75,242 |
|
183.5 |
% |
Net income |
|
4,474 |
|
30,218 |
|
(85.2) |
% |
|
75,733 |
|
111,488 |
|
(32.1) |
% |
Adjusted Net Income (2) |
|
8,556 |
|
34,793 |
|
(75.4) |
% |
|
74,328 |
|
130,059 |
|
(42.9) |
% |
Diluted Earnings per Share from continuing operations |
|
|
|
|
|
(83.8) |
% |
|
|
|
|
|
(21.7) |
% |
Adjusted Diluted Earnings per Share (2) |
|
|
|
|
|
(75.0) |
% |
|
|
|
|
|
(37.5) |
% |
EBITDA (2) |
|
31,063 |
|
61,526 |
|
(49.5) |
% |
|
170,550 |
|
230,848 |
|
(26.1) |
% |
Adjusted EBITDA (2) |
|
34,332 |
|
67,534 |
|
(49.2) |
% |
|
187,363 |
|
261,132 |
|
(28.2) |
% |
Weighted Average Shares — diluted |
|
42,579 |
|
43,243 |
|
|
|
42,091 |
|
45,974 |
|
|
||
(1) Excludes discontinued operations; see "Results of Discontinued Operations" for additional details. |
||||||||||||||
(2) These are non-GAAP metrics. For a reconciliation of each non-GAAP metric to the nearest GAAP metric, see the applicable reconciliations contained under "Results of Operations." For a description of each non-GAAP metric, see "Non-GAAP Financial Measures." |
||||||||||||||
Fourth quarter 2020 and recent developments include:
-
Sequential increase (described within this release as the change from the third quarter to the fourth quarter) in Company Owned gross loans receivable and Gross combined loans receivable of
$56.3 million , or11.3% , and$60.6 million , or11.3% , respectively, compared to$8.2 million , or1.2% , and$11.8 million , or1.6% , of sequential growth for the quarter ended December 31, 2019. -
Consolidated Company Owned net charge-off ("NCO") rate decline of
48.3% , or 760 basis points ("bps"), compared to the fourth quarter of 2019. -
Year-over-year reduction in loan balances from COVID-19 effects on customer demand and regulatory changes that became effective January 1, 2020 for Unsecured and Secured Installment loans in California. Company Owned gross loans receivable declined
7.4% in 2020 excluding affected loan portfolios in California. -
Revenue decrease of
$100.2 million , or33.2% , versus the prior-year period, due to the decrease in loan balances, as well as a mix shift toward Canada, where products average less revenue than the U.S. -
Net Revenue decrease of
$39.8 million , or23.1% , year over year, as the impact of lower NCO rates partially mitigated the negative effect of lower loan balances. -
Definitive merger agreement between Katapult Holdings, Inc. ("Katapult") and Finserv Acquisition Corp., ("FinServ"). On our total minority investment of
$27.5 million , the merger is expected to provide us a combination of cash and stock consideration between$520 million and$540 million , based on current market prices and subject to FinServ shareholder redemptions. We expect our ownership stake in the resulting publicly traded entity to be no less than21% of its fully diluted shares. - Continued growth of our technology, marketing and servicing relationship for Verge Credit loans, issued and funded by a bank.
-
Entered into an agreement to acquire Flexiti Financial Inc. ("Flexiti"), an emerging growth Canadian Point-of-Sale / Buy Now Pay Later ("POS/BNPL") provider. Under the terms of the agreement, CURO will acquire Flexiti for cash at closing of
$85 million and contingent consideration of up to$36 million based on the achievement of risk-adjusted revenue and origination targets over the next two years. -
Diluted Earnings per Share from continuing operations decreased to
$0.11 from$0.68 . Adjusted Diluted Earnings per Share decreased to$0.20 compared to$0.80 for the fourth quarter of 2019. -
Our Board of Directors declared a
$0.05 5 per share dividend payable on March 2, 2021 to stockholders of record as of February 16, 2021.
Full-year 2020 developments include:
-
Revenue decrease of
$294.4 million , or25.8% , compared to the prior year, due to the aforementioned decrease in loan balances. California Installment revenues, which were impacted by January 1, 2020 regulatory changes, were$67.6 million for the year ended December 31, 2020, compared to$139.5 million for the year ended December 31, 2019. -
Net Revenue decline of
$114.7 million , or17.0% , and gross margin decline of$70.3 million , or18.6% , year-over-year as the revenue decline was partially offset by lower provision expense. -
Diluted Earnings per Share from continuing operations of
$1.77 compared to$2.26 in the prior year. Adjusted Diluted Earnings per Share of$1.77 compared to$2.83 for 2019. -
Ended the fourth quarter of 2020 with
$213.3 million in cash and$310.5 million of liquidity (including undrawn capacity on revolving credit facilities, which is subject to continued collateral performance for the asset backed facilities and covenant compliance) compared to$75.2 million in cash and$187.8 million of liquidity at the end of 2019. -
On April 8, 2020, we announced the closing of a new Asset-Backed Revolving Credit Facility to provide financing for U.S. Unsecured Installment and Open-End loans. On July 31, 2020, we closed on additional commitments bringing the total borrowing capacity on the Non-Recourse U.S. SPV Facility up to
$200.0 million , dependent upon the borrowing base of eligible collateral. - Completion of our acquisition of Ad Astra Recovery Services, Inc. ("Ad Astra"), which had been our exclusive provider of third-party collection services for the U.S. business, on January 3, 2020.
-
Implemented our COVID-19 Customer Care Program, which enables our team members to provide relief to customers affected by COVID-19 in various ways, ranging from due date extensions, interest or fee forgiveness, payment waivers or extended payment plans, depending on a customer’s individual circumstances. As of January 31, 2021, we have granted concessions on more than 84,000 loans, or
16% of our active loans, and waived over$6.0 million in payments and fees. We also temporarily suspended certain returned item fees. - Instituted a cash dividend policy in the first quarter of 2020, with dividend payments made to stockholders in February, May, August and November 2020.
Throughout this release, we exclude financial results of our former U.K. operations for all periods presented, as they were discontinued for accounting and reporting purposes in February 2019. See “Results of Discontinued Operations” below for additional information.
The COVID-19 pandemic began to have a pervasive impact in March 2020. Year-over-year comparisons for the three months and year ended December 31, 2020 were impacted by factors related to COVID-19, such as lower consumer demand, increased or accelerated repayments and favorable payment trends as customers benefited from government stimulus programs at the start of the pandemic, our decision to tighten credit, favorable credit performance as a result of these factors, and our approach to managing expenses (collectively, "COVID-19 Impacts"). Sequential loan growth, transaction volume and the related financial results of operations for the three months ended December 31, 2020 were impacted positively by normal seasonality and selectively returning credit scoring to pre-COVID-19 levels, together with continued historically low delinquencies and NCO rates.
Consolidated Revenue by Product and Segment
The following table summarizes revenue by product, including credit services organization ("CSO") fees, for the period indicated:
|
|
Three Months Ended |
||||||||||||||||
|
|
December 31, 2020 |
|
December 31, 2019 |
||||||||||||||
(in thousands, unaudited) |
|
U.S. |
Canada |
Total |
% of Total |
|
U.S. |
Canada |
Total |
% of Total |
||||||||
Open-End |
|
|
|
|
|
|
|
31.2 |
% |
|
|
|
|
|
|
|
23.6 |
% |
Unsecured Installment |
|
77,733 |
|
1,055 |
|
78,788 |
|
39.0 |
% |
|
133,953 |
|
1,658 |
|
135,611 |
|
44.9 |
% |
Secured Installment |
|
16,757 |
|
— |
|
16,757 |
|
8.3 |
% |
|
28,690 |
|
— |
|
28,690 |
|
9.5 |
% |
Single-Pay |
|
17,409 |
|
10,051 |
|
27,460 |
|
13.6 |
% |
|
30,192 |
|
19,652 |
|
49,844 |
|
16.5 |
% |
Ancillary |
|
3,578 |
|
12,422 |
|
16,000 |
|
7.9 |
% |
|
4,159 |
|
12,695 |
|
16,854 |
|
5.6 |
% |
Total revenue |
|
|
|
|
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
100.0 |
% |
During the three months ended December 31, 2020, total revenue declined
From a product perspective, Open-End revenues increased sequentially
For the three months ended December 31, 2020, Unsecured Installment and Secured Installment revenues decreased
Single-Pay revenue declined
Ancillary revenues, which include the sale of insurance products to Open-End and Installment loan customers in Canada, decreased
The following table summarizes revenue by product, including CSO fees, for the period indicated:
|
|
For the Year Ended |
||||||||||||||||
|
|
December 31, 2020 |
|
December 31, 2019 |
||||||||||||||
(in thousands, unaudited) |
|
U.S. |
Canada |
Total |
% of Total |
|
U.S. |
Canada |
Total |
% of Total |
||||||||
Open-End |
|
|
|
|
|
|
|
29.4 |
% |
|
|
|
|
|
|
|
21.5 |
% |
Unsecured Installment |
|
333,991 |
|
5,125 |
|
339,116 |
|
40.0 |
% |
|
523,979 |
|
6,751 |
|
530,730 |
|
46.5 |
% |
Secured Installment |
|
79,136 |
|
— |
|
79,136 |
|
9.3 |
% |
|
110,513 |
|
— |
|
110,513 |
|
9.7 |
% |
Single-Pay |
|
75,930 |
|
44,503 |
|
120,433 |
|
14.2 |
% |
|
112,925 |
|
78,524 |
|
191,449 |
|
16.8 |
% |
Ancillary |
|
15,018 |
|
44,191 |
|
59,209 |
|
7.0 |
% |
|
18,295 |
|
45,554 |
|
63,849 |
|
5.6 |
% |
Total revenue |
|
|
|
|
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
100.0 |
% |
Full-year comparisons also were influenced by COVID-19 Impacts. For the year ended December 31, 2020, total revenue declined
From a product perspective, Open-End revenues grew
For the year ended December 31, 2020, Unsecured Installment and Secured Installment revenues decreased
Single-Pay revenue declined
Ancillary revenues, which include the sale of insurance products to Open-End and Installment loan customers in Canada, decreased
The following table presents online revenue and online transaction compositions, including CSO fees, of the products and services that we currently offer:
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
Online revenues as a percentage of consolidated revenue |
|
50.9 |
% |
|
46.9 |
% |
|
48.5 |
% |
|
45.6 |
% |
Online transactions as a percentage of consolidated transactions |
|
58.5 |
% |
|
48.1 |
% |
|
54.7 |
% |
|
45.8 |
% |
Online revenue as a percentage of consolidated revenue increased during the three months and year ended December 31, 2020 due to COVID-19 Impacts and the resulting transition of customers using our online channel which provides customers a safe and contactless option.
Loan Volume and Portfolio Performance Analysis
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 millions, unaudited) |
|
December 31,
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|||||
Open-End |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Installment |
|
102.4 |
|
|
84.9 |
|
81.6 |
|
|
123.1 |
|
|
160.8 |
|
|
Secured Installment |
|
48.6 |
|
|
49.0 |
|
53.6 |
|
|
72.6 |
|
|
88.1 |
|
|
Single-Pay |
|
43.8 |
|
41.3 |
|
36.1 |
|
54.7 |
|
81.4 |
|||||
Company Owned gross loans receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross loans receivable Guaranteed by the Company |
|
44.1 |
|
|
39.8 |
|
34.1 |
|
|
55.9 |
|
|
76.7 |
|
|
Gross combined loans receivable (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) See "Non-GAAP Financial Measures" at the end of this release for definition and more information. |
|||||||||||||||
Gross combined loans receivable decreased
Gross combined loans receivable performance by product is described further in the following sections.
Open-End Loans
Open-End loan balances as of December 31, 2020 increased
The Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable ("allowance coverage") decreased sequentially from
|
2020 |
|
2019 |
|||
(dollars in thousands, unaudited) |
Fourth Quarter |
Third Quarter |
Second Quarter |
First Quarter |
|
Fourth Quarter |
Open-End loans: |
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
Provision for losses |
20,262 |
21,655 |
21,341 |
40,991 |
|
37,816 |
Net revenue |
|
|
|
|
|
|
Net charge-offs |
|
|
|
|
|
|
Open-End gross loan balances: |
|
|
|
|
|
|
Open-End gross loans receivable |
|
|
|
|
|
|
Average Open-End gross loans receivable (1) |
|
|
|
|
|
|
Open-End allowance for loan losses: |
|
|
|
|
|
|
Allowance for loan losses |
|
|
|
|
|
|
Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable |
|
|
|
|
|
|
Open-End past-due balances: |
|
|
|
|
|
|
Open-End past-due gross loans receivable |
|
|
|
|
|
|
Past-due Open-End gross loans receivable - percentage |
|
|
|
|
|
|
Open-End ratios: |
|
|
|
|
|
|
NCO rate (2) |
|
|
|
|
|
|
(1) Average gross loans receivable calculated as average of beginning of quarter and end of quarter gross loans receivable. |
||||||
(2) We calculate NCO rate as NCOs divided by Average gross loans receivables. |
||||||
Q1 2019 Open-End Loss Recognition Change
Effective January 1, 2019, we modified the timeframe over which we charge-off Open-End loans and made related refinements to our loss provisioning methodology. Prior to January 1, 2019, we deemed Open-End loans uncollectible and charged-off when a customer missed a scheduled payment and the loan was considered past-due. Because of our continuing shift to Open-End loans in Canada and our analysis of payment patterns on early-stage versus late-stage delinquencies, we revised our estimates and now consider Open-End loans uncollectible when the loan has been contractually past-due for 90 consecutive days. Consequently, past-due Open-End loans and related accrued interest now remain in loans receivable for 90 days before being charged off against the allowance for loan losses. All recoveries on charged-off loans are credited to the allowance for loan losses. We evaluate the adequacy of the allowance for loan losses compared to the related gross loans receivable balances that include accrued interest.
Prospectively from January 1, 2019, past-due, unpaid balances plus related accrued interest charge-off on day 91.
This change was treated as a change in accounting estimate for accounting purposes and applied prospectively beginning January 1, 2019.
In addition, the following table illustrates, on a non-GAAP pro forma basis, the 2019 quarterly results as if the Q1 2019 Open-End Loss Recognition Change had been applied to our outstanding Open-End loan portfolio as of December 31, 2018. This table is illustrative of retrospective application to determine the NCOs that would have been incurred in each quarter of 2019 from the December 31, 2018 loan book. The primary purpose of this pro forma illustration is to provide a representative level of NCO rates from applying the Q1 2019 Open-End Loss Recognition Change.
Pro Forma |
|
2019 |
|||||||
(dollars in thousands, unaudited) |
|
Fourth Quarter |
Third Quarter |
Second Quarter |
First Quarter |
||||
Open-End loans: |
|
|
|
|
|
||||
Pro Forma NCOs |
|
|
|
|
|
|
|
|
|
Open-End gross loan balances: |
|
|
|
|
|
||||
Open-End gross loans receivable |
|
|
|
|
|
|
|
|
|
Pro Forma Average Open-End gross loans receivable (1) |
|
|
|
|
|
|
|
|
|
Pro Forma NCO rate (2) |
|
11.9 |
% |
9.9 |
% |
11.3 |
% |
13.0 |
% |
(1) Average gross loans receivable calculated as average of beginning of quarter and end of quarter gross loans receivable. |
|||||||||
(2) We calculate NCO rate as NCOs divided by Average gross loans receivables. |
|||||||||
Unsecured Installment Loans - Company Owned
Company Owned Unsecured Installment revenue for the three months ended December 31, 2020 and related gross loans receivable decreased
Unsecured Installment loans in California were
The Unsecured Installment quarterly NCO rate improved approximately 920 bps year-over-year, as a result of COVID-19 Impacts. Sequentially, the quarterly NCO rate increased from
The Unsecured Installment allowance coverage increased year-over-year, from
Unsecured Installment Loans - Guaranteed by the Company
Unsecured Installment loans Guaranteed by the Company declined
NCO rates for Unsecured Installment loans Guaranteed by the Company increased year over year from
|
2020 |
|
2019 |
|||
(dollars in thousands, unaudited) |
Fourth Quarter |
Third Quarter |
Second Quarter |
First Quarter |
|
Fourth Quarter |
Unsecured Installment loans: |
|
|
|
|
|
|
Revenue - Company Owned |
|
|
|
|
|
|
Provision for losses - Company Owned |
16,506 |
9,647 |
12,932 |
26,182 |
|
33,183 |
Net revenue - Company Owned |
|
|
|
|
|
|
Net charge-offs - Company Owned |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue - Guaranteed by the Company (1) |
|
|
|
|
|
|
Provision for losses - Guaranteed by the Company (1) |
22,535 |
14,884 |
11,418 |
26,338 |
|
34,858 |
Net revenue - Guaranteed by the Company (1) |
|
|
|
|
|
|
Net charge-offs - Guaranteed by the Company (1) |
|
|
|
|
|
|
Unsecured Installment gross combined loans receivable: |
|
|
|
|
|
|
Company Owned |
|
|
|
|
|
|
Guaranteed by the Company (1) |
43,175 |
38,822 |
33,082 |
54,097 |
|
74,317 |
Unsecured Installment gross combined loans receivable (1)(2) |
|
|
|
|
|
|
Average gross loans receivable: |
|
|
|
|
|
|
Average Unsecured Installment gross loans receivable - Company Owned (3) |
|
|
|
|
|
|
Average Unsecured Installment gross loans receivable - Guaranteed by the Company (1)(3) |
|
|
|
|
|
|
Allowance for loan losses and CSO liability for losses: |
|
|
|
|
|
|
Unsecured Installment Allowance for loan losses (4) |
|
|
|
|
|
|
Unsecured Installment CSO liability for losses (1)(4) |
|
|
|
|
|
|
Unsecured Installment Allowance for loan losses as a percentage of Unsecured Installment gross loans receivable |
|
|
|
|
|
|
Unsecured Installment CSO liability for losses as a percentage of Unsecured Installment gross loans Guaranteed by the Company (1) |
|
|
|
|
|
|
Unsecured Installment past-due balances: |
|
|
|
|
|
|
Unsecured Installment gross loans receivable - Company Owned |
|
|
|
|
|
|
Unsecured Installment gross loans - Guaranteed by the Company (1) |
|
|
|
|
|
|
Past-due Unsecured Installment Company Owned gross loans receivable -- percentage |
|
|
|
|
|
|
Past-due Unsecured Installment gross loans Guaranteed by the Company -- percentage (1) |
|
|
|
|
|
|
Unsecured Installment other information: |
|
|
|
|
|
|
Originations - Company Owned |
|
|
|
|
|
|
Originations - Guaranteed by the Company (1) |
|
|
|
|
|
|
Unsecured Installment ratios: |
|
|
|
|
|
|
NCO rate - Company Owned (5) |
|
|
|
|
|
|
NCO rate - Guaranteed by the Company (1)(5) |
|
|
|
|
|
|
(1) Includes loans originated by third-party lenders through CSO programs, which are not included in the Condensed Consolidated Financial Statements. |
||||||
(2) Non-GAAP measure. For a description of each non-GAAP metric, see "Non-GAAP Financial Measures." |
||||||
(3) Average gross loans receivable calculated as average of beginning of quarter and end of quarter gross loans receivable. |
||||||
(4) We report Allowance for loan losses as a contra-asset reducing gross loans receivable and the CSO liability for losses as a liability on the Condensed Consolidated Balance Sheets. |
||||||
(5) We calculate NCO rate as NCOs divided by Average gross loans receivables. |
||||||
Secured Installment Loans
Secured Installment revenue and the related gross combined loans receivable for the three months ended December 31, 2020 decreased
The Secured Installment NCO rate improved 440 bps compared to the prior-year period. Secured Installment Allowance for loan losses and CSO liability for losses as a percentage of Secured Installment gross combined loans receivable increased from
|
2020 |
|
2019 |
|||
(dollars in thousands, unaudited) |
Fourth Quarter |
Third Quarter |
Second Quarter |
First Quarter |
|
Fourth Quarter |
Secured Installment loans: |
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
Provision for losses |
4,028 |
3,291 |
7,238 |
9,682 |
|
11,492 |
Net revenue |
|
|
|
|
|
|
Net charge-offs |
|
|
|
|
|
|
Secured Installment gross combined loan balances: |
|
|
|
|
|
|
Secured Installment gross combined loans receivable (1)(2) |
|
|
|
|
|
|
Average Secured Installment gross combined loans receivable (3) |
|
|
|
|
|
|
Secured Installment Allowance for loan losses and CSO liability for losses (4) |
|
|
|
|
|
|
Secured Installment Allowance for loan losses and CSO liability for losses as a percentage of Secured Installment gross combined loans receivable (1) |
|
|
|
|
|
|
Secured Installment past-due balances: |
|
|
|
|
|
|
Secured Installment past-due gross combined loans receivable (1)(2) |
|
|
|
|
|
|
Past-due Secured Installment gross combined loans receivable -- percentage (1) |
|
|
|
|
|
|
Secured Installment other information: |
|
|
|
|
|
|
Originations (2) |
|
|
|
|
|
|
Secured Installment ratios: |
|
|
|
|
|
|
NCO Rate (5) |
|
|
|
|
|
|
(1) Non-GAAP measure. For a description of each non-GAAP metric, see "Non-GAAP Financial Measures." |
||||||
(2) Includes loans originated by third-party lenders through CSO programs, which are not included in the Consolidated Financial Statements. |
||||||
(3) Average gross loans receivable calculated as average of beginning of quarter and end of quarter gross loans receivable. |
||||||
(4) We report Allowance for loan losses as a contra-asset reducing gross loans receivable and the CSO liability for losses as a liability on the Consolidated Balance Sheets. |
||||||
(5) We calculate NCO rate as NCOs divided by Average gross loans receivables. |
||||||
Single-Pay
Single-Pay revenue declined
|
2020 |
|
2019 |
|||
(dollars in thousands, unaudited) |
Fourth Quarter |
Third Quarter |
Second Quarter |
First Quarter |
|
Fourth Quarter |
Single-pay loans: |
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
Provision for losses |
6,153 |
4,799 |
(2,588) |
9,639 |
|
12,289 |
Net revenue |
|
|
|
|
|
|
Net charge-offs |
|
|
( |
|
|
|
Single-Pay gross loan balances: |
|
|
|
|
|
|
Single-Pay gross loans receivable |
|
|
|
|
|
|
Average Single-Pay gross loans receivable (1) |
|
|
|
|
|
|
Single-Pay Allowance for loan losses |
|
|
|
|
|
|
Single-Pay Allowance for loan losses as a percentage of Single-Pay gross loans receivable |
|
|
|
|
|
|
NCO rate (2) |
|
|
(1.3)% |
|
|
|
(1) We calculate Average gross loans receivable, which we utilize to calculate product yield and NCO rates, as average of beginning of quarter and end of quarter gross loans receivable. |
||||||
(2) We calculate NCO rate as NCOs divided by Average gross loans receivables. |
||||||
Results of Consolidated Operations
Condensed Consolidated Statements of Operations
(in thousands, unaudited) |
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||||
|
2020 |
2019 |
Change $ |
Change % |
|
2020 |
2019 |
Change $ |
Change % |
|||||||||
Revenue |
|
|
|
|
|
( |
|
(33.2) |
% |
|
|
|
|
|
( |
|
(25.8) |
% |
Provision for losses |
|
69,832 |
|
130,289 |
|
(60,457) |
|
(46.4) |
% |
|
288,811 |
|
468,551 |
|
(179,740) |
|
(38.4) |
% |
Net revenue |
|
132,246 |
|
172,005 |
|
(39,759) |
|
(23.1) |
% |
|
558,585 |
|
673,246 |
|
(114,661) |
|
(17.0) |
% |
Advertising |
|
12,158 |
|
16,408 |
|
(4,250) |
|
(25.9) |
% |
|
44,552 |
|
53,398 |
|
(8,846) |
|
(16.6) |
% |
Non-advertising costs of providing services |
|
51,497 |
|
60,298 |
|
(8,801) |
|
(14.6) |
% |
|
205,674 |
|
241,232 |
|
(35,558) |
|
(14.7) |
% |
Total cost of providing services |
|
63,655 |
|
76,706 |
|
(13,051) |
|
(17.0) |
% |
|
250,226 |
|
294,630 |
|
(44,404) |
|
(15.1) |
% |
Gross margin |
|
68,591 |
|
95,299 |
|
(26,708) |
|
(28.0) |
% |
|
308,359 |
|
378,616 |
|
(70,257) |
|
(18.6) |
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating expense |
|
|
|
|
|
|
|
|
|
|
||||||||
Corporate, district and other expenses |
|
43,607 |
|
37,060 |
|
6,547 |
|
17.7 |
% |
|
159,853 |
|
160,103 |
|
(250) |
|
(0.2) |
% |
Interest expense |
|
18,691 |
|
17,686 |
|
1,005 |
|
5.7 |
% |
|
72,709 |
|
69,763 |
|
2,946 |
|
4.2 |
% |
(Income) loss from equity method investment |
|
(1,893) |
|
1,163 |
|
(3,056) |
|
# |
|
(4,546) |
|
6,295 |
|
(10,841) |
|
# |
||
Total operating expense |
|
60,405 |
|
55,909 |
|
4,496 |
|
8.0 |
% |
|
228,016 |
|
236,161 |
|
(8,145) |
|
(3.4) |
% |
Income from continuing operations before income taxes |
|
8,186 |
|
39,390 |
|
(31,204) |
|
(79.2) |
% |
|
80,343 |
|
142,455 |
|
(62,112) |
|
(43.6) |
% |
Provision for income taxes |
|
3,712 |
|
9,819 |
|
(6,107) |
|
(62.2) |
% |
|
5,895 |
|
38,557 |
|
(32,662) |
|
(84.7) |
% |
Net income from continuing operations |
|
4,474 |
|
29,571 |
|
(25,097) |
|
(84.9) |
% |
|
74,448 |
|
103,898 |
|
(29,450) |
|
(28.3) |
% |
Net income from discontinued operations, net of tax |
|
— |
|
647 |
|
(647) |
|
# |
|
1,285 |
|
7,590 |
|
(6,305) |
|
(83.1) |
% |
|
Net income |
|
|
|
|
|
( |
|
(85.2) |
% |
|
|
|
|
|
( |
|
(32.1) |
% |
# - Variance greater than |
||||||||||||||||||
Reconciliation of Net Income from Continuing Operations and Diluted Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings per Share, non-GAAP measures
(in thousands, except per share data, unaudited) |
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||||
|
2020 |
2019 |
Change $ |
Change % |
|
2020 |
2019 |
Change $ |
Change % |
|||||||||
Net income from continuing operations |
|
|
|
|
|
( |
|
(84.9) |
% |
|
|
|
|
|
( |
|
(28.3) |
% |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
||||||||
Legal and other costs (1) |
|
2,160 |
|
2,173 |
|
|
|
|
5,662 |
|
4,795 |
|
|
|
||||
U.K. related costs (2) |
|
— |
|
— |
|
|
|
|
— |
|
8,844 |
|
|
|
||||
(Income) loss from equity method investment (3) |
|
(1,893) |
|
1,163 |
|
|
|
|
(4,546) |
|
6,295 |
|
|
|
||||
Share-based compensation (4) |
|
3,014 |
|
2,736 |
|
|
|
|
12,910 |
|
10,323 |
|
|
|
||||
Intangible asset amortization |
|
705 |
|
576 |
|
|
|
|
2,951 |
|
2,884 |
|
|
|
||||
Canada GST adjustment (5) |
|
— |
|
— |
|
|
|
|
2,160 |
|
— |
|
|
|
||||
Income tax valuations (6) |
|
— |
|
— |
|
|
|
|
(3,472) |
|
— |
|
|
|
||||
Impact of tax law changes (7) |
|
— |
|
— |
|
|
|
|
(11,251) |
|
— |
|
|
|
||||
Cumulative tax effect of adjustments (8) |
|
96 |
|
(1,426) |
|
|
|
|
(4,534) |
|
(6,980) |
|
|
|
||||
Adjusted Net Income |
|
|
|
|
|
( |
|
(75.4) |
% |
|
|
|
|
|
( |
|
(42.9) |
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted Weighted Average Shares Outstanding |
|
42,579 |
|
43,243 |
|
|
|
|
42,091 |
|
45,974 |
|
|
|
||||
Diluted Earnings per Share from continuing operations |
|
|
|
|
|
( |
|
(83.8) |
% |
|
|
|
|
|
( |
|
(21.7) |
% |
Per Share impact of adjustments to Net income from continuing operations |
|
0.09 |
|
0.12 |
|
|
|
|
— |
|
0.57 |
|
|
|
||||
Adjusted Diluted Earnings per Share |
|
|
|
|
|
( |
|
(75.0) |
% |
|
|
|
|
|
( |
|
(37.5) |
% |
Note: Footnotes follow Reconciliation of Net income table immediately below |
||||||||||||||||||
Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA, Non-GAAP Measures
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||||
(in thousands, except per share data, unaudited) |
|
2020 |
2019 |
Change $ |
Change % |
|
2020 |
2019 |
Change $ |
Change % |
||||||||
Net income from continuing operations |
|
|
|
|
|
( |
|
(84.9) |
% |
|
|
|
|
|
( |
|
(28.3) |
% |
Provision for income taxes |
|
3,712 |
|
9,819 |
|
(6,107) |
|
(62.2) |
% |
|
5,895 |
|
38,557 |
|
(32,662) |
|
(84.7) |
% |
Interest expense |
|
18,691 |
|
17,686 |
|
1,005 |
|
5.7 |
% |
|
72,709 |
|
69,763 |
|
2,946 |
|
4.2 |
% |
Depreciation and amortization |
|
4,186 |
|
4,450 |
|
(264) |
|
(5.9) |
% |
|
17,498 |
|
18,630 |
|
(1,132) |
|
(6.1) |
% |
EBITDA |
|
31,063 |
|
61,526 |
|
(30,463) |
|
(49.5) |
% |
|
170,550 |
|
230,848 |
|
(60,298) |
|
(26.1) |
% |
Legal and other costs (1) |
|
2,160 |
|
2,173 |
|
|
|
|
5,662 |
|
4,795 |
|
|
|
||||
U.K. related costs (2) |
|
— |
|
— |
|
|
|
|
— |
|
8,844 |
|
|
|
||||
(Income) loss from equity method investment (3) |
|
(1,893) |
|
1,163 |
|
|
|
|
(4,546) |
|
6,295 |
|
|
|
||||
Share-based compensation (4) |
|
3,014 |
|
2,736 |
|
|
|
|
12,910 |
|
10,323 |
|
|
|
||||
Canada GST adjustment (5) |
|
— |
|
— |
|
|
|
|
2,160 |
|
— |
|
|
|
||||
Other adjustments (9) |
|
(12) |
|
(64) |
|
|
|
|
627 |
|
27 |
|
|
|
||||
Adjusted EBITDA |
|
|
|
|
|
( |
|
(49.2) |
% |
|
|
|
|
|
( |
|
(28.2) |
% |
Adjusted EBITDA Margin |
|
17.0 |
% |
22.3 |
% |
|
|
|
22.1 |
% |
22.9 |
% |
|
|
||||
(1) |
Legal and other costs for the year ended December 31, 2020 included (i) costs for certain litigation and related matters of |
|
(2) |
U.K. related costs of |
|
(3) |
The income from equity method investment for the year ended December 31, 2020 of
The loss from equity method investment for the year ended December 31, 2019 of |
|
(4) |
The estimated fair value of share-based awards is recognized as non-cash compensation expense on a straight-line basis over the vesting period. |
|
(5) |
We received a Notice of Adjustment from Canadian tax authority auditors in the second quarter 2020 related to the treatment of certain expenses in prior years for purposes of calculating the Goods and Services Tax ("GST") due. |
|
(6) |
During the year ended December 31, 2020, a Texas court ruling related to the apportionment of income to the state for another company resulted in a change in estimate regarding the realization of a tax benefit previously taken. Accordingly, we recorded a |
|
(7) |
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was enacted by the U.S. Federal government in response to the COVID-19 pandemic. The CARES Act, among other things, allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. For the year ended December 31, 2020, we recorded an income tax benefit of |
|
(8) |
Cumulative tax effect of adjustments included in Reconciliation of Net income from continuing operations to EBITDA and Adjusted EBITDA table is calculated using the estimated incremental tax rate by country. Fourth quarter 2020 cumulative tax effect is impacted by certain non-deductible transaction costs included within Legal and other costs, share-based compensation vesting below share value at grant date, and IRS compensation deductibility limits. |
|
(9) |
Other adjustments primarily include the intercompany foreign-currency exchange impact. |
For the Three Months Ended December 31, 2020 and 2019
Revenue and Net Revenue
Revenue decreased
Provision for losses decreased by
Cost of Providing Services
Non-advertising costs of providing services decreased
Advertising costs decreased
Corporate, District and Other Expenses
Corporate, district and other expenses were
Equity Method Investment
Refer to the "Katapult Update for the Three Months and Year Ended December 31, 2020 and 2019" below for details.
Interest Expense
Interest expense for the three months ended December 31, 2020 increased
Provision for Income Taxes
The effective income tax rate for the three months ended December 31, 2020 was
Refer to the Reconciliation of Net Income from continuing operations to Adjusted Net Income for additional information. The effective income tax rate of adjusted tax expense included in the Adjusted Net Income for the three months ended December 31, 2020 was
For the Year Ended December 31, 2020 and 2019
Revenue and Net Revenue
Revenue decreased
Provision for losses decreased by
Cost of Providing Services
Non-advertising costs of providing services decreased
Advertising costs decreased
Corporate, District and Other Expenses
Corporate, district and other expenses were
Excluding Ad Astra costs, share-based compensation expense and other costs described above, comparable corporate, district and other expenses decreased
Equity Method Investment
Refer to the "Katapult Update for the Three Months and Year Ended December 31, 2020 and 2019" below for details.
Interest Expense
Interest expense for the year ended December 31, 2020 increased
Provision for Income Taxes
The effective income tax rate for the year ended December 31, 2020 was
First, given the CARES Act impact treatment of NOLs as described above, we recorded an income tax benefit of
Second, we recorded a tax benefit of
The tax benefits described above were partially offset by an increase in the reserve for uncertain tax positions in the U.S. of
The effective income tax rate of adjusted tax expense included in Adjusted Net Income for the year ended December 31, 2020 was
Katapult Update for the Three Months and Year Ended December 31, 2020 and 2019
A portion of our investment in Katapult is accounted for using the equity method of accounting. We recognize our share of its income or loss on a two-month lag with a corresponding adjustment to the carrying value of the investment included in "Investments" on the unaudited Consolidated Balance Sheet. As of December 31, 2020, our recognized share of Katapult's earnings through October 31, 2020 was
During the third quarter of 2020, we acquired additional equity interests in Katapult from certain existing owners for
In December 2020, we announced that Katapult and FinServ entered into a definitive merger agreement that, when completed, we expect will provide consideration to us in a combination of cash and stock. Based on market prices as of the date of this release, we expect to receive consideration with a total value between
The table below presents select financial information for Katapult for the periods presented:
|
|
For the Nine Months Ended September 30, (1) |
||||
(in thousands) |
|
2020 |
|
2019 |
||
Revenue |
|
|
|
|
|
|
Cost of revenue |
|
116,534 |
|
|
46,576 |
|
Gross profit |
|
57,308 |
|
|
12,903 |
|
|
|
|
|
|
||
Operating expenses |
|
28,195 |
|
|
22,611 |
|
Interest and loss on extinguishment of debt |
|
10,091 |
|
|
6,594 |
|
Income before income taxes |
|
19,022 |
|
|
(16,302) |
|
Net income |
|
|
|
|
( |
|
|
|
|
|
|
||
Originations |
|
|
|
|
|
|
Cash and restricted cash |
|
|
|
|
|
|
Gross property held for lease |
|
|
|
|
|
|
(1) Source: Katapult's Registration Statement on Form S-4, pages F-62, F-63, F-69 and 101, filed with the SEC on January 29, 2021. |
||||||
Segment Analysis
We report financial results for two reportable segments: the U.S. and Canada. Following is a summary of results of operations for the segment and period indicated:
U.S. Segment Results |
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||||
(dollars in thousands, unaudited) |
2020 |
2019 |
Change $ |
Change % |
|
2020 |
2019 |
Change $ |
Change % |
||||||||
Revenue |
|
|
|
|
( |
|
(39.0) |
% |
|
|
|
|
|
( |
|
(30.1) |
% |
Provision for losses |
59,108 |
|
111,576 |
|
(52,468) |
|
(47.0) |
% |
|
230,164 |
|
392,105 |
|
(161,941) |
|
(41.3) |
% |
Net revenue |
87,480 |
|
128,696 |
|
(41,216) |
|
(32.0) |
% |
|
408,360 |
|
521,401 |
|
(113,041) |
|
(21.7) |
% |
Advertising |
11,083 |
|
15,016 |
|
(3,933) |
|
(26.2) |
% |
|
40,702 |
|
46,735 |
|
(6,033) |
|
(12.9) |
% |
Non-advertising costs of providing services |
33,990 |
|
42,848 |
|
(8,858) |
|
(20.7) |
% |
|
137,467 |
|
171,714 |
|
(34,247) |
|
(19.9) |
% |
Total cost of providing services |
45,073 |
|
57,864 |
|
(12,791) |
|
(22.1) |
% |
|
178,169 |
|
218,449 |
|
(40,280) |
|
(18.4) |
% |
Gross margin |
42,407 |
|
70,832 |
|
(28,425) |
|
(40.1) |
% |
|
230,191 |
|
302,952 |
|
(72,761) |
|
(24.0) |
% |
Corporate, district and other expenses |
38,368 |
|
31,754 |
|
6,614 |
|
20.8 |
% |
|
137,152 |
|
138,180 |
|
(1,028) |
|
(0.7) |
% |
Interest expense |
16,347 |
|
15,079 |
|
1,268 |
|
8.4 |
% |
|
63,413 |
|
59,325 |
|
4,088 |
|
6.9 |
% |
(Income) loss from equity method investment |
(1,893) |
|
1,163 |
|
(3,056) |
|
# |
|
(4,546) |
|
6,295 |
|
(10,841) |
|
# |
||
Total operating expense |
52,822 |
|
47,996 |
|
4,826 |
|
10.1 |
% |
|
196,019 |
|
203,800 |
|
(7,781) |
|
(3.8) |
% |
Segment operating (loss) income |
(10,415) |
|
22,836 |
|
(33,251) |
|
# |
|
34,172 |
|
99,152 |
|
(64,980) |
|
(65.5) |
% |
|
Interest expense |
16,347 |
|
15,079 |
|
1,268 |
|
8.4 |
% |
|
63,413 |
|
59,325 |
|
4,088 |
|
6.9 |
% |
Depreciation and amortization |
3,078 |
|
3,263 |
|
(185) |
|
(5.7) |
% |
|
12,992 |
|
13,816 |
|
(824) |
|
(6.0) |
% |
EBITDA |
9,010 |
|
41,178 |
|
(32,168) |
|
(78.1) |
% |
|
110,577 |
|
172,293 |
|
(61,716) |
|
(35.8) |
% |
Legal and other costs |
2,160 |
|
2,173 |
|
(13) |
|
|
|
5,662 |
|
4,660 |
|
1,002 |
|
|
||
U.K. related costs |
— |
|
— |
|
— |
|
|
|
— |
|
8,844 |
|
(8,844) |
|
|
||
(Income) loss from equity method investment |
(1,893) |
|
1,163 |
|
(3,056) |
|
|
|
(4,546) |
|
6,295 |
|
(10,841) |
|
|
||
Share-based compensation |
3,014 |
|
2,736 |
|
278 |
|
|
|
12,910 |
|
10,323 |
|
2,587 |
|
|
||
Other adjustments |
(117) |
|
22 |
|
(139) |
|
|
|
(58) |
|
(184) |
|
126 |
|
|
||
Adjusted EBITDA |
|
|
|
|
( |
|
(74.2) |
% |
|
|
|
|
|
( |
|
(38.4) |
% |
# - Variance greater than |
|||||||||||||||||
U.S. Segment Results - For the Three Months Ended December 31, 2020 and 2019
U.S. revenues decreased by
The provision for losses decreased
Non-advertising costs of providing services for the three months ended December 31, 2020 were
Advertising costs decreased
Corporate, district and other expenses were
U.S. interest expense for the three months ended December 31, 2020 increased
As described above, we recognize our share of Katapult’s income on a two-month lag and recorded income of
U.S. Segment Results - For the Year Ended December 31, 2020 and 2019
U.S. revenues decreased by
The provision for losses decreased
Non-advertising costs of providing services for the year ended December 31, 2020 were
Advertising costs decreased
Corporate, district and other expenses were
Excluding these items, comparable corporate, district and other expenses decreased
As described above, and given the two-month lag, we recorded equity income from our investment in Katapult of
U.S. interest expense for the year ended December 31, 2020 increased
Canada Segment Results |
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||||
(dollars in thousands, unaudited) |
2020 |
2019 |
Change $ |
Change % |
|
2020 |
2019 |
Change $ |
Change % |
||||||||
Revenue |
|
|
|
|
( |
|
(10.5) |
% |
|
|
|
|
|
( |
|
(8.5) |
% |
Provision for losses |
10,724 |
|
18,713 |
|
(7,989) |
|
(42.7) |
% |
|
58,647 |
|
76,446 |
|
(17,799) |
|
(23.3) |
% |
Net revenue |
44,766 |
|
43,309 |
|
1,457 |
|
3.4 |
% |
|
150,225 |
|
151,845 |
|
(1,620) |
|
(1.1) |
% |
Advertising |
1,075 |
|
1,392 |
|
(317) |
|
(22.8) |
% |
|
3,850 |
|
6,663 |
|
(2,813) |
|
(42.2) |
% |
Non-advertising costs of providing services |
17,507 |
|
17,450 |
|
57 |
|
0.3 |
% |
|
68,207 |
|
69,518 |
|
(1,311) |
|
(1.9) |
% |
Total cost of providing services |
18,582 |
|
18,842 |
|
(260) |
|
(1.4) |
% |
|
72,057 |
|
76,181 |
|
(4,124) |
|
(5.4) |
% |
Gross margin |
26,184 |
|
24,467 |
|
1,717 |
|
7.0 |
% |
|
78,168 |
|
75,664 |
|
2,504 |
|
3.3 |
% |
Corporate, district and other expenses |
5,239 |
|
5,306 |
|
(67) |
|
(1.3) |
% |
|
22,701 |
|
21,923 |
|
778 |
|
3.5 |
% |
Interest expense |
2,344 |
|
2,607 |
|
(263) |
|
(10.1) |
% |
|
9,296 |
|
10,438 |
|
(1,142) |
|
(10.9) |
% |
Total operating expense |
7,583 |
|
7,913 |
|
(330) |
|
(4.2) |
% |
|
31,997 |
|
32,361 |
|
(364) |
|
(1.1) |
% |
Segment operating income |
18,601 |
|
16,554 |
|
2,047 |
|
12.4 |
% |
|
46,171 |
|
43,303 |
|
2,868 |
|
6.6 |
% |
Interest expense |
2,344 |
|
2,607 |
|
(263) |
|
(10.1) |
% |
|
9,296 |
|
10,438 |
|
(1,142) |
|
(10.9) |
% |
Depreciation and amortization |
1,108 |
|
1,187 |
|
(79) |
|
(6.7) |
% |
|
4,506 |
|
4,814 |
|
(308) |
|
(6.4) |
% |
EBITDA |
22,053 |
|
20,348 |
|
1,705 |
|
8.4 |
% |
|
59,973 |
|
58,555 |
|
1,418 |
|
2.4 |
% |
Legal and other costs |
— |
|
— |
|
— |
|
|
|
— |
|
135 |
|
(135) |
|
|
||
Canada GST adjustment |
— |
|
— |
|
— |
|
|
|
2,160 |
|
— |
|
2,160 |
|
|
||
Other adjustments |
105 |
|
(86) |
|
191 |
|
|
|
685 |
|
211 |
|
474 |
|
|
||
Adjusted EBITDA |
|
|
|
|
|
|
9.4 |
% |
|
|
|
|
|
|
|
6.7 |
% |
Canada Segment Results - For the Three Months Ended December 31, 2020 and 2019
Canada gross loans receivable increased
Canada non-Single-Pay revenue increased
Single-Pay revenue decreased
The provision for losses decreased
Canada cost of providing services for the three months ended December 31, 2020 was
Canada operating expenses for the three months ended December 31, 2020 were
Canada Segment Results - For the Year Ended December 31, 2020 and 2019
Canada revenue decreased
Canada non-Single-Pay revenue increased
Single-Pay revenue decreased
The provision for losses decreased
Canada cost of providing services for the year ended December 31, 2020 was
Canada operating expenses for the year ended December 31, 2020 were
Results of Discontinued Operations
On February 25, 2019, in accordance with the provisions of the U.K. Insolvency Act 1986 and as approved by the Boards of Directors of the U.K. Subsidiaries, insolvency practitioners from KPMG were appointed as Administrators for the U.K. Subsidiaries. The effect of the U.K. Subsidiaries’ entry into administration was to place their management, affairs, business and property of the U.K. Subsidiaries under the direct control of the Administrators. Accordingly, we deconsolidated the U.K. Subsidiaries, which comprised the U.K. reportable operating segment, as of February 25, 2019 and classified them as Discontinued Operations for all periods presented.
The following table presents the results of operations of the U.K. Subsidiaries, which meet the criteria of Discontinued Operations and, therefore, are excluded from our results of continuing operations:
(in thousands, unaudited) |
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||
2020 |
2019 |
|
2020 |
2019(1) |
|||||
Revenue |
$ — |
|
$ — |
|
|
$ — |
|
|
|
Provision for losses |
— |
|
— |
|
|
— |
|
1,703 |
|
Net revenue |
— |
|
— |
|
|
— |
|
5,254 |
|
Cost of providing services |
— |
|
— |
|
|
— |
|
1,082 |
|
Corporate, district and other expenses |
— |
|
— |
|
|
— |
|
3,806 |
|
(Gain) loss on disposition |
— |
|
— |
|
|
(1,714) |
|
39,414 |
|
Pre-tax income (loss) from Discontinued Operations |
— |
|
— |
|
|
1,714 |
|
(39,048) |
|
Income tax (benefit) expense related to disposition |
— |
|
(647) |
|
|
429 |
|
(46,638) |
|
Net income from discontinued operations |
$ — |
|
|
|
|
|
|
|
|
(1) Includes U.K. Subsidiaries financial results from January 1, 2019 to February 25, 2019. |
|||||||||
Revenue and expenses related to discontinued operations included activity prior to the deconsolidation of the U.K. subsidiaries effective February 25, 2019. For the year ended December 31, 2019, (Gain) Loss on disposition of
In connection with the disposition of the U.K. Subsidiaries, the U.S. entity that owned our interests in the U.K. Subsidiaries recognized a loss on investment. This loss resulted in an estimated U.S. Federal and state income tax benefit of
During the year ended December 31, 2020, we received our final distribution from the Administrators related to the wind-down of the U.K. Subsidiaries, in the amount of
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
|
December 31, 2020 (unaudited) |
|
December 31, 2019 |
||
ASSETS |
|||||
Cash and cash equivalents |
|
|
|
|
|
Restricted cash (includes restricted cash of consolidated VIEs of |
54,765 |
|
|
34,779 |
|
Gross loans receivable (includes loans of consolidated VIEs of |
553,722 |
|
|
665,828 |
|
Less: Allowance for loan losses (includes allowance for losses of consolidated VIEs of |
(86,162) |
|
|
(106,835) |
|
Loans receivable, net |
467,560 |
|
|
558,993 |
|
Income taxes receivable |
32,062 |
|
|
11,426 |
|
Prepaid expenses and other (includes prepaid expenses and other of consolidated VIEs of |
27,994 |
|
|
35,890 |
|
Property and equipment, net |
59,749 |
|
|
70,811 |
|
Investments |
27,370 |
|
|
10,068 |
|
Right of use asset - operating leases |
115,032 |
|
|
117,453 |
|
Deferred tax assets |
— |
|
|
5,055 |
|
Goodwill |
136,091 |
|
|
120,609 |
|
Other intangibles, net |
40,425 |
|
|
33,927 |
|
Other assets |
8,595 |
|
|
7,642 |
|
Total Assets |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||
Liabilities |
|
|
|
||
Accounts payable and accrued liabilities (includes accounts payable and accrued liabilities of consolidated VIEs of |
|
|
|
|
|
Deferred revenue |
5,394 |
|
|
10,170 |
|
Lease liability - operating leases |
122,648 |
|
|
124,999 |
|
Accrued interest (includes accrued interest of consolidated VIEs of |
20,123 |
|
|
19,847 |
|
Liability for losses on CSO lender-owned consumer loans |
7,228 |
|
|
10,623 |
|
Debt (includes debt and issuance costs of consolidated VIEs of |
819,661 |
|
|
790,544 |
|
Other long-term liabilities |
15,382 |
|
|
10,664 |
|
Deferred tax liabilities |
11,021 |
|
|
4,452 |
|
Total Liabilities |
|
|
|
|
|
Stockholders' Equity |
|
|
|
||
Total Stockholders' Equity |
|
|
|
|
|
Total Liabilities and Stockholders' Equity |
|
|
|
|
|
Balance Sheet Changes - December 31, 2020 Compared to December 31, 2019
Cash and cash equivalents - The increase in Cash from December 31, 2019 was primarily due to lower demand for loan products due to impacts from COVID-19 and the run-off of the California Installment loan portfolios stemming from regulatory changes effective January 1, 2020.
Restricted cash - The increase in Restricted cash from December 31, 2019 was primarily due to growth in our Canada receivables in which certain eligible receivables are pledged as collateral under the Non-Recourse Canada SPV Facility, growth in Revolve and Opt+ products, and our new Non-Recourse U.S. SPV Facility, which we closed in April 2020.
Gross loans receivable and Allowance for loan losses - As noted in "Loan Volume and Portfolio Performance Analysis" above, changes in Gross loans receivable and related Allowance for loan losses were due to expected lower customer demand and loan origination volumes as a result of COVID-19 impacts and regulatory changes in California effective January 1, 2020.
Income taxes receivable and Deferred tax liabilities - The change in Income taxes receivable and Deferred tax liabilities resulted from the NOL carry-backs, as allowed by the CARES Act. See "Results of Consolidated Operations" for additional details.
Investments - Investments include our equity method investment in Katapult as well as our investment in Katapult through preferred shares not subject to equity method accounting. Prior to the third quarter of 2020, our entire investment in Katapult was accounted for under the equity method and was presented within Prepaid expenses and other. The entire balance is now presented separate within Investments in the Consolidated Balance Sheets. The increase in Investments from December 31, 2019 is the result of the acquisition of additional interests from other investors for
Goodwill - The increase in Goodwill from December 31, 2019 was due to our acquisition of Ad Astra on January 3, 2020, which resulted in
Liability for losses on CSO lender-owned consumer loans - As noted in "Loan Volume and Portfolio Performance Analysis" above, changes in Liability for losses on CSO lender-owned consumer loans were due to expected lower customer demand and loan origination volumes as a result of COVID-19.
Debt - The increase in Debt from December 31, 2019 was due to
Debt Capitalization Summary
(December 31, 2020 balances in thousands, net of deferred financing costs)
|
|
Capacity |
Interest Rate |
Maturity |
Counter-parties |
Balance as of December 31, 2020 |
|
Non-Recourse Canada SPV Facility (1) |
|
C |
3-Mo CDOR + |
September 2, 2023 |
Waterfall Asset Management |
|
|
Senior Secured Revolving Credit Facility |
|
|
1-Mo LIBOR + |
June 30, 2021 |
BayCoast Bank; Stride Bank; Hancock-Whitney Bank; Metropolitan Commercial Bank |
— |
|
Non-Recourse U.S. SPV Facility |
|
|
1-Mo LIBOR + |
April 8, 2024 |
Atalaya Capital Management, MetaBank |
43,586 |
|
Cash Money Revolving Credit Facility (1) |
|
C |
Canada Prime Rate + |
On-demand |
Royal Bank of Canada |
— |
|
|
|
|
|
September 1, 2025 |
|
680,000 |
|
(1) Capacity amounts are denominated in Canadian dollars, while outstanding balances as of December 31, 2020 are denominated in U.S. dollars. |
|||||||
(2) The Non-Recourse U.S. SPV Facility initially provided for |
|||||||
Non-GAAP Financial Measures
In addition to the financial information prepared in conformity with U.S. GAAP, we provide certain “non-GAAP financial measures,” including:
- Adjusted Net Income and Adjusted Earnings Per Share, or the Adjusted Earnings Measures (net income from continuing operations plus or minus restructuring and other costs, certain legal and other costs, income or loss from equity method investment, goodwill and intangible asset impairments, certain costs related to the disposition of U.K., transaction-related costs, share-based compensation, intangible asset amortization, certain tax adjustments and impacts from tax law changes and cumulative tax effect of applicable adjustments, on a total and per share basis);
- EBITDA (earnings before interest, income taxes, depreciation and amortization);
- Adjusted EBITDA (EBITDA plus or minus certain non-cash and other adjusting items);
- Adjusted effective income tax rate (effective tax rate plus or minus certain non-cash and other adjusting items); and
- Gross Combined Loans Receivable (includes loans originated by third-party lenders through CSO programs which are not included in the Consolidated Financial Statements).
We believe that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of the Company's operations. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of the business that, when viewed with the Company's U.S. GAAP results, provide a more complete understanding of factors and trends affecting the business.
We believe that investors regularly rely on non-GAAP financial measures, such as Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA, to assess operating performance and that such measures may highlight trends in the business that may not otherwise be apparent when relying on financial measures calculated in accordance with U.S. GAAP. In addition, we believe that the adjustments shown above are useful to investors in order to allow them to compare our financial results during the periods shown without the effect of each of these income or expense items. In addition, we believe that Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of public companies in our industry, many of which present Adjusted Net Income, Adjusted Earnings per Share, EBITDA and/or Adjusted EBITDA when reporting their results.
In addition to reporting loans receivable information in accordance with U.S. GAAP, we provide Gross Combined Loans Receivable consisting of owned loans receivable plus loans originated by third-party lenders through the CSO programs, which we guarantee but do not include in the Consolidated Financial Statements. Management believes this analysis provides investors with important information needed to evaluate overall lending performance.
We provide non-GAAP financial information for informational purposes and to enhance understanding of the U.S. GAAP Consolidated Financial Statements. Adjusted Net Income, Adjusted Earnings per Share, EBITDA, Adjusted EBITDA and Gross Combined Loans Receivable should not be considered as alternatives to income from continuing operations, segment operating income, or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flows from operating activities or any other liquidity measure derived in accordance with U.S. GAAP. Readers should consider the information in addition to, but not instead of or superior to, the financial statements prepared in accordance with U.S. GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.
Description and Reconciliations of Non-GAAP Financial Measures
Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA Measures have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our income or cash flows as reported under U.S. GAAP. Some of these limitations are:
- they do not include cash expenditures or future requirements for capital expenditures or contractual commitments;
- they do not include changes in, or cash requirements for, working capital needs;
- they do not include the interest expense, or the cash requirements necessary to service interest or principal payments on debt;
- depreciation and amortization are non-cash expense items reported in the statements of cash flows; and
- other companies in our industry may calculate these measures differently, limiting their usefulness as comparative measures.
We calculate Adjusted Earnings per Share utilizing diluted shares outstanding at year-end. If the Company records a loss from continuing operations under U.S. GAAP, shares outstanding utilized to calculate Diluted Earnings per Share from continuing operations are equivalent to basic shares outstanding. Shares outstanding utilized to calculate Adjusted Earnings per Share from continuing operations reflect the number of diluted shares the Company would have reported if reporting net income from continuing operations under U.S. GAAP.
As noted above, 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 and for which we provide a guarantee to the lender. Management believes this analysis provides investors with important information needed to evaluate overall lending performance.
We believe Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA are used by investors to analyze operating performance and to evaluate our ability to incur and service debt and the capacity for making capital expenditures. Adjusted EBITDA is also useful to investors to help assess our estimated enterprise value. The computation of Adjusted EBITDA as presented in this release may differ from the computation of similarly-titled measures provided by other companies.
Forward-Looking Statements
This press release contains forward-looking statements. These forward-looking statements include projections, estimates and assumptions about the impact of the Katapult merger on us, including the potential value we expect to receive, the mix of cash and stock, potential earn out, and resulting ownership position; the expected timing of the Katapult merger; the expected financial and operational benefits of our acquisition of Flexiti Financial; and our belief in the usefulness of the various non-GAAP financial measures used in this release. In addition, words such as “guidance,” “estimate,” “anticipate,” “believe,” “forecast,” “step,” “plan,” “predict,” “focused,” “project,” “is likely,” “expect,” “intend,” “should,” “will,” “confident,” variations of such words and similar expressions are intended to identify forward-looking statements. Our ability to achieve these forward-looking statements is based on certain assumptions, judgments and other factors, both within and outside of our control, that could cause actual results to differ materially from those in the forward-looking statements, including: the inability of the parties to the Katapult transaction to successfully or timely consummate the proposed business combination, including the risk that any required regulatory approvals are not obtained, are delayed or are subject to unanticipated conditions that could adversely affect the combined company or the expected benefits of the proposed transaction or that the approval of FinServ stockholders is not obtained; failure to realize the anticipated benefits of the proposed Katapult transaction; risks relating to the uncertainty of projected financial information with respect to Katapult; the effects of competition on Katapult’s future business; Katapult’s ability to attract and retain customers; market, financial, political and legal conditions; the impact of COVID-19 pandemic on Katapult’s and our business and the global economy; risks related to the concentration of Katapult’s business among a relatively small number of merchants; the ability of FinServ or the combined company to issue equity or equity-linked securities or obtain debt financing in connection with the proposed business combination or in the future; our dependence on third-party lenders to provide the cash we need to fund our loans and our ability to affordably access third-party financing; errors in our internal forecasts; our level of indebtedness; our ability to integrate acquired businesses; our dependence on third-party lenders to provide the cash we need to fund our loans and our ability to affordably access third-party financing; actions of regulators and the negative impact of those actions on our business; our ability to protect our proprietary technology and analytics and keep up with that of our competitors; disruption of our information technology systems that adversely affect our business operations; ineffective pricing of the credit risk of our prospective or existing customers; inaccurate information supplied by customers or third parties that could lead to errors in judging customers’ qualifications to receive loans; improper disclosure of customer personal data; failure of third parties who provide products, services or support to us; any failure of third-party lenders upon whom we rely to conduct business in certain states; disruption to our relationships with banks and other third-party electronic payment solutions providers; disruption caused by employee or third-party theft and errors in our stores as well as other factors discussed in our filings with the Securities and Exchange Commission. These projections, estimates and assumptions may prove to be inaccurate in the future. These forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. There may be additional risks that CURO presently does not know or that it currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual future results. We undertake no obligation to update, amend or clarify any forward-looking statement for any reason.
About CURO
CURO Group Holdings Corp. (NYSE: CURO), operating in two countries and powered by its fully integrated technology platform, is a provider of credit to non-prime consumers. In 1997, the Company was founded in Riverside, California by three Wichita, Kansas childhood friends to meet the growing consumer need for short-term loans. Their success led to opening stores across the United States and expanding to offer online loans and financial services across two countries. Today, CURO combines its market expertise with a fully integrated technology platform, omni-channel approach and advanced credit decisioning to provide an array of credit products across all mediums. CURO operates under a number of brands including Speedy Cash®, Rapid Cash®, Cash Money®, LendDirect®, Avío Credit®, Opt+® and Revolve Finance®. With over 20 years of operating experience, CURO provides financial freedom to non-prime consumers.
Conference Call
CURO will host a conference call to discuss these results at 8:15 a.m. Eastern Time on Friday, February 5, 2021. The live webcast of the call can be accessed at the CURO Investor Relations website at http://ir.curo.com/.
You may access the call at 1-866-807-9684 (1-412-317-5415 for international callers). Please ask to join the CURO Group Holdings call. A replay of the conference call will be available until February 12, 2021, at 8:15 a.m. Eastern Time. An archived version of the webcast will be available on the CURO Investors website for 90 days. You may access the conference call replay at 1-877-344-7529 (1-412-317-0088 for international callers). The replay access code is 10151924.
Final Results
The financial results presented and discussed herein are on a preliminary and unaudited basis; final audited data will be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
(CURO-NWS)
View source version on businesswire.com: https://www.businesswire.com/news/home/20210204006081/en/
FAQ
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