CURO Group Holdings Corp. Announces Second Quarter 2021 Financial Results
CURO Group Holdings Corp. (CURO) reported its Q2 financial results for 2021, showing a modest revenue growth of 2.8% year-over-year to $187.7 million. Notably, net income surged to $104.5 million, reflecting a substantial increase of 373.5%. The Canadian operations demonstrated strong performance, with direct lending growing by 40.7%. CURO completed its acquisition of Flexiti, further enhancing its product offerings. However, total revenue for the first half of 2021 saw a 17.1% decline compared to the previous year, primarily due to COVID-19 impacts and reduced U.S. loan demand.
- Net income increased significantly to $104.5 million, up 373.5%
- Canada Direct Lending gross loans receivable grew 40.7%
- Acquisition of Flexiti is expected to generate C$800 million annually
- Successful closing of Katapult merger brings $146.9 million in cash
- Total revenue for the first half of 2021 decreased by 17.1%
- U.S. Company Owned gross loans receivable declined by 6.6%
- Adjusted EPS decreased by 24.5% year-over-year
CURO Group Holdings Corp. (NYSE: CURO) (“CURO” or the “Company”), a tech-enabled, omni-channel consumer finance company serving a full spectrum of non-prime and prime consumers in the U.S. and Canada, today announced financial results for its second quarter ended June 30, 2021.
“The second quarter was very busy for us as we made significant strides on every value-creation front – growth, profitability, margins, capital and scale. We are pleased to continue to mitigate risk while driving long-term value for our stakeholders,” said Don Gayhardt, CURO's Chief Executive Officer. “Our Canadian operations remained a bright spot in the second quarter, as our Canada Direct Lending and Canada POS segments delivered sequential loan growth of
“On June 1, 2021, we announced a major milestone for Flexiti with the signing of LFL Group, Canada's largest home furnishings retailer, to a 10-year exclusive point-of-sale merchant agreement. We believe this relationship generates more than C
“During the second quarter, we also began to monetize our investment in Katapult with the closing of the Katapult and FinServ merger on June 9, 2021. We received cash of
“We announced on July 13, 2021, the difficult decision to close 49 U.S. stores, or about
“We priced on July 16, 2021 a Senior Secured Notes offering of
"Finally, we continued to strengthen our management team and are pleased to announce that Dan Kirsche joined us this week as our new EVP and Chief Technology Officer. Dan has a great background leading software engineering for digital marking and consumer lending organizations and is very well-suited to help us execute on our technology priorities.”
Consolidated Summary Results - Unaudited
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||||
(in thousands, except per share data) |
|
2021 |
2020 |
Variance |
|
2021 |
2020 |
Variance |
||||||
Revenue |
|
|
|
|
|
2.8 |
% |
|
|
|
|
|
(17.1) |
% |
Net Revenue |
|
142,528 |
|
131,816 |
|
8.1 |
% |
|
302,934 |
|
299,086 |
|
1.3 |
% |
Company Owned gross loans receivable |
|
769,228 |
|
456,512 |
|
68.5 |
% |
|
769,228 |
|
456,512 |
|
68.5 |
% |
Unrestricted Cash |
|
276,367 |
|
269,342 |
|
2.6 |
% |
|
276,367 |
|
269,342 |
|
2.6 |
% |
Net income |
|
104,517 |
|
22,073 |
|
373.5 |
% |
|
130,252 |
|
58,378 |
|
# |
|
Adjusted Net Income (1) |
|
17,394 |
|
22,170 |
|
(21.5) |
% |
|
47,522 |
|
54,446 |
|
(12.7) |
% |
Diluted Earnings per Share from continuing operations |
|
|
|
|
|
# |
|
|
|
|
|
# |
||
Adjusted Diluted Earnings per Share from continuing operations (1) |
|
|
|
|
|
(24.5) |
% |
|
|
|
|
|
(16.8) |
% |
EBITDA (1) |
|
169,564 |
|
44,876 |
|
# |
|
228,247 |
|
104,687 |
|
# |
||
Adjusted EBITDA (1) |
|
50,302 |
|
51,129 |
|
(1.6) |
% |
|
114,077 |
|
116,916 |
|
(2.4) |
% |
Weighted Average Shares — diluted |
|
43,672 |
|
41,545 |
|
|
|
43,556 |
|
41,686 |
|
|
||
# - Variance greater than |
||||||||||||||
(1) 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." |
||||||||||||||
Second quarter 2021 and recent developments include:
-
Year-over-year growth in Company Owned gross loans receivable and combined gross loans receivable of
$312.7 million , or68.5% , and$315.7 million , or64.4% , respectively. -
Canada Direct Lending gross loans receivable grew
$104.5 million , or40.7% , year over year, and Canada point-of-sale ("POS") Lending gross loans receivable were$221.5 million . The Canada POS Lending segment was added with the acquisition of Flexiti Financial Inc. ("Flexiti") on March 10, 2021. -
U.S. Company Owned gross loans receivable declined
$13.2 million , or6.6% , year over year. Excluding the runoff of impacted loan portfolios in California and Virginia, U.S. Company Owned gross loans receivable grew$35.8 million , or28.3% , compared to the same period in the prior year. -
Sequentially, (described within this release as the change from the first quarter to the second quarter) Company Owned gross loans receivable and gross combined loans receivable increased
$38.2 million , or5.2% , and$42.9 million , or5.6% , respectively. -
Revenue and Net Revenue increased
$ 5.2 million , or2.8% , and$10.7 million , or8.1% , respectively year over year. - Consolidated net charge-off ("NCO") rates for U.S. and Canada Direct Lending improved 540 bps year over year and 50 bps sequentially. U.S. and Canada Direct Lending past-due loans improved 150 bps year over year and remained stable sequentially.
-
Diluted Earnings per Share from continuing operations of
$2.39 compared to$0.51 in the prior-year quarter, primarily affected by the closing of the Katapult Holdings Inc. ("Katapult") merger. Adjusted Diluted Earnings per Share of$0.40 compared to$0.53 for the second quarter of 2020. -
Katapult's merger with FinServ Acquisition Corp. ("FinServ") closed on June 9, 2021. As a result, we received cash of
$146.9 million and Katapult (NASDAQ: KPLT) stock with a value of$192.0 million as of July 27, 2021. Our fully-diluted ownership of Katapult as of June 30, 2021 was20.7% , including potential earn-out shares. -
On June 1, 2021, Flexiti signed a 10-year agreement to become the exclusive POS financing partner to the LFL Group ("LFL"), Canada's largest home furnishings retailer. LFL operates over 300 stores in Canada under multiple banners including Leon's and The Brick. Flexiti estimates that the LFL POS relationship will generate over C
$800 million in annual financed sales beginning in mid-2022 when fully on-boarded. -
Under the terms of our
$50.0 million share repurchase program announced in April 2021, we purchased in the open market 375,880 shares through July 27, 2021. -
Our Board of Directors declared an
$0.11 per share dividend payable on August 19, 2021 to stockholders of record as of August 9, 2021. - Closed, or announced the closing of, 49 U.S. stores to better align with changing customer trends and preferences for online transactions.
-
Priced and upsized to
$750 million a7.50% Senior Secured Notes Offering due 2028. The proceeds will be used to (i) redeem our8.25% Senior Secured Notes due 2025, (ii) to pay fees, expenses, premiums and accrued interest therewith and (iii) for general corporate purposes.
Year-to-date 2021 developments include:
-
Revenue decreased
$79.1 million , or17.1% , compared to the prior year, due to the effect of COVID-19 and two rounds of significant U.S. government stimulus that reduced U.S. loan balances. -
Net Revenue increased
$3.8 million , or1.3% , year over year as the negative effect on revenue of lower average loan balances was mitigated by significant improvements in credit quality and the effect of changes in loan balances on loan loss provisioning. -
Diluted Earnings per Share from continuing operations of
$2.99 compared to$1.37 in the prior year. Adjusted Diluted Earnings per Share of$1.09 compared to$1.31 for 2020.
From the second quarter of 2020 through the first quarter of 2021, we experienced lower customer demand, good credit performance, increased or accelerated repayments and favorable payment trends as customers were aided by government stimulus programs while periodically enduring pandemic lockdowns (collectively "COVID-19 Impacts"). Second quarter of 2021 was impacted less by COVID-19 Impacts but was still affected by loan demand in the U.S. than pre-COVID-19 levels and additional pandemic lockdowns in Canada.
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 |
||||||||||||||||||||
|
|
June 30, 2021 |
|
June 30, 2020 |
||||||||||||||||||
(in thousands, unaudited) |
|
U.S. |
Canada Direct Lending |
Canada POS Lending |
Total |
% of Total |
|
U.S. |
Canada Direct Lending |
Canada POS Lending |
Total |
% of Total |
||||||||||
Revolving LOC |
|
|
|
|
|
|
|
|
|
36.3 |
% |
|
|
|
|
|
$ — |
|
|
|
31.1 |
% |
Installment |
|
90,826 |
|
10,541 |
|
— |
|
101,367 |
|
54.0 |
% |
|
102,861 |
|
9,701 |
|
— |
|
112,562 |
|
61.7 |
% |
Ancillary |
|
3,877 |
|
13,889 |
|
524 |
|
18,290 |
|
9.7 |
% |
|
3,542 |
|
9,669 |
|
— |
|
13,211 |
|
7.2 |
% |
Total revenue |
|
|
|
|
|
|
|
|
|
100.0 |
% |
|
|
|
|
|
$ — |
|
|
|
100.0 |
% |
During the three months ended June 30, 2021, total revenue increased
Canada POS Lending revenue includes merchant discount revenue ("MDR"), which is recognized over the life of the underlying loan term. The Flexiti gross acquired loan portfolio ("Acquired Portfolio"), prior to the fair value discount recorded as a result of purchase accounting, was
From a product perspective, Revolving LOC revenue for the three months ended June 30, 2021 increased
For the three months ended June 30, 2021, Installment revenue decreased
Ancillary revenue increased
The following table summarizes revenue by product, including CSO fees, for the period indicated:
|
|
Six Months Ended |
||||||||||||||||||||
|
|
June 30, 2021 |
|
June 30, 2020 |
||||||||||||||||||
(in thousands, unaudited) |
|
U.S. |
Canada Direct Lending |
Canada POS Lending |
Total |
% of Total |
|
U.S. |
Canada Direct Lending |
Canada POS Lending |
Total |
% of Total |
||||||||||
Revolving LOC |
|
|
|
|
|
|
|
|
|
34.0 |
% |
|
|
|
|
|
$ — |
|
|
|
27.6 |
% |
Installment |
|
196,767 |
|
20,988 |
|
— |
|
217,755 |
|
56.7 |
% |
|
278,130 |
|
28,284 |
|
— |
|
306,414 |
|
66.1 |
% |
Ancillary |
|
7,505 |
|
27,514 |
|
699 |
|
35,718 |
|
9.3 |
% |
|
8,051 |
|
21,132 |
|
— |
|
29,183 |
|
6.3 |
% |
Total revenue |
|
|
|
|
|
|
|
|
|
100.0 |
% |
|
|
|
|
|
$ — |
|
|
|
100.0 |
% |
Year-over-year comparisons were also influenced by COVID-19 Impacts. For the six months ended June 30, 2021, total revenue declined
From a product perspective, Revolving LOC revenues increased
For the six months ended June 30, 2021, Installment revenues decreased
Ancillary revenues increased
The following table presents online revenue and online transaction compositions, including CSO fees, of the products and services that we currently offer within the U.S. and Canada Direct Lending segments:
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||
Online revenue as a percentage of consolidated revenue |
|
47.6 |
% |
|
47.1 |
% |
|
49.3 |
% |
|
47.3 |
% |
Online transactions as a percentage of consolidated transactions |
|
58.3 |
% |
|
57.6 |
% |
|
60.1 |
% |
|
51.8 |
% |
Online revenue as a percentage of consolidated revenue increased during the three and six months ended June 30, 2021 due to COVID-19 Impacts and the resulting transition of customers using our online channel which allows for a safe and contactless option.
Consolidated Loans Receivable
The following table reconciles Company Owned gross loans receivable, a GAAP-basis balance sheet measure, to Gross combined loans receivable, a non-GAAP measure(1). Gross combined loans receivable includes loans originated by third-party lenders through CSO programs, which are not included in the Condensed Consolidated Financial Statements but from which we earn revenue by providing a guarantee to the unaffiliated lender.
|
|
As of |
|||||||||||||
(in thousands, unaudited) |
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
|||||
U.S. |
|
|
|
|
|
|
|
|
|
|
|||||
Revolving LOC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installment - Company Owned |
|
139,234 |
|
|
142,396 |
|
|
167,890 |
|
|
148,569 |
|
|
146,495 |
|
Canada Direct Lending |
|
|
|
|
|
|
|
|
|
|
|||||
Revolving LOC |
|
337,700 |
|
|
319,307 |
|
|
303,323 |
|
|
265,507 |
|
|
231,917 |
|
Installment |
|
23,564 |
|
|
24,385 |
|
|
26,948 |
|
|
26,639 |
|
|
24,861 |
|
Canada POS Lending |
|
|
|
|
|
|
|
|
|
|
|||||
Revolving LOC |
|
221,453 |
|
|
201,539 |
|
|
— |
|
|
— |
|
|
— |
|
Company Owned gross loans receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross loans receivable Guaranteed by the Company |
|
37,093 |
|
|
32,439 |
|
|
44,105 |
|
|
39,768 |
|
|
34,092 |
|
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 increased
Sequentially, gross combined loans receivable increased
Results of Consolidated Operations
Condensed Consolidated Statements of Operations
(in thousands, unaudited) |
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||||||||
|
2021 |
2020 |
Change $ |
Change % |
|
2021 |
2020 |
Change $ |
Change % |
|||||||||
Revenue |
|
|
|
|
|
|
|
2.8 |
% |
|
|
|
|
|
( |
|
(17.1) |
% |
Provision for losses |
|
45,165 |
|
50,693 |
|
(5,528) |
|
(10.9) |
% |
|
81,310 |
|
164,229 |
|
(82,919) |
|
(50.5) |
% |
Net revenue |
|
142,528 |
|
131,816 |
|
10,712 |
|
8.1 |
% |
|
302,934 |
|
299,086 |
|
3,848 |
|
1.3 |
% |
Advertising |
|
7,043 |
|
5,750 |
|
1,293 |
|
22.5 |
% |
|
15,127 |
|
17,969 |
|
(2,842) |
|
(15.8) |
% |
Non-advertising costs of providing services |
|
50,834 |
|
49,567 |
|
1,267 |
|
2.6 |
% |
|
101,144 |
|
104,919 |
|
(3,775) |
|
(3.6) |
% |
Total cost of providing services |
|
57,877 |
|
55,317 |
|
2,560 |
|
4.6 |
% |
|
116,271 |
|
122,888 |
|
(6,617) |
|
(5.4) |
% |
Gross margin |
|
84,651 |
|
76,499 |
|
8,152 |
|
10.7 |
% |
|
186,663 |
|
176,198 |
|
10,465 |
|
5.9 |
% |
Operating expense (income) |
|
|
|
|
|
|
|
|
|
|
||||||||
Corporate, district and other expenses |
|
59,621 |
|
36,781 |
|
22,840 |
|
62.1 |
% |
|
108,461 |
|
79,588 |
|
28,873 |
|
36.3 |
% |
Interest expense |
|
23,440 |
|
18,311 |
|
5,129 |
|
28.0 |
% |
|
42,979 |
|
35,635 |
|
7,344 |
|
20.6 |
% |
(Income) loss from equity method investment |
|
(1,712) |
|
(741) |
|
(971) |
|
# |
|
(2,258) |
|
877 |
|
(3,135) |
|
# |
||
Gain on equity method investment |
|
(135,387) |
|
— |
|
(135,387) |
|
# |
|
(135,387) |
|
— |
|
(135,387) |
|
# |
||
Total operating (income) expense |
|
(54,038) |
|
54,351 |
|
(108,389) |
|
# |
|
13,795 |
|
116,100 |
|
(102,305) |
|
(88.1) |
% |
|
Income from continuing operations before income taxes |
|
138,689 |
|
22,148 |
|
116,541 |
|
# |
|
172,868 |
|
60,098 |
|
112,770 |
|
# |
||
Provision for income taxes |
|
34,172 |
|
1,068 |
|
33,104 |
|
# |
|
42,616 |
|
3,005 |
|
39,611 |
|
# |
||
Net income from continuing operations |
|
104,517 |
|
21,080 |
|
83,437 |
|
# |
|
130,252 |
|
57,093 |
|
73,159 |
|
# |
||
Net income from discontinued operations, net of tax |
|
— |
|
993 |
|
(993) |
|
# |
|
— |
|
1,285 |
|
(1,285) |
|
# |
||
Net income |
|
|
|
|
|
|
|
# |
|
|
|
|
|
|
|
# |
||
# - 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 June 30, |
|
Six Months Ended June 30, |
||||||||||||||
|
2021 |
2020 |
Change $ |
Change % |
|
2021 |
2020 |
Change $ |
Change % |
|||||||||
Net income from continuing operations |
|
|
|
|
|
|
|
# |
|
|
|
|
|
|
|
# |
||
Adjustments: |
|
|
|
|
|
|
|
|
|
|
||||||||
Restructuring costs (1) |
|
5,763 |
|
— |
|
|
|
|
5,763 |
|
— |
|
|
|
||||
Legal and other costs (2) |
|
— |
|
847 |
|
|
|
|
— |
|
1,750 |
|
|
|
||||
(Income) loss from equity method investment (3) |
|
(1,712) |
|
(741) |
|
|
|
|
(2,258) |
|
877 |
|
|
|
||||
Gain from equity method investment (4) |
|
(135,387) |
|
— |
|
|
|
|
(135,387) |
|
— |
|
|
|
||||
Transaction costs (5) |
|
3,181 |
|
91 |
|
|
|
|
6,341 |
|
337 |
|
|
|
||||
Acquisition-related adjustments (6) |
|
5,495 |
|
— |
|
|
|
|
5,495 |
|
— |
|
|
|
||||
Share-based compensation (7) |
|
3,467 |
|
3,310 |
|
|
|
|
6,150 |
|
6,504 |
|
|
|
||||
Intangible asset amortization (8) |
|
1,866 |
|
759 |
|
|
|
|
2,697 |
|
1,496 |
|
|
|
||||
Canada GST adjustment (9) |
|
— |
|
2,160 |
|
|
|
|
— |
|
2,160 |
|
|
|
||||
Income tax valuations (10) |
|
— |
|
(3,472) |
|
|
|
|
— |
|
(3,472) |
|
|
|
||||
Impact of tax law changes (11) |
|
— |
|
— |
|
|
|
|
— |
|
(9,114) |
|
|
|
||||
Cumulative tax effect of adjustments (12) |
|
30,204 |
|
(1,864) |
|
|
|
|
28,469 |
|
(3,185) |
|
|
|
||||
Adjusted Net Income |
|
|
|
|
|
( |
|
(22) |
% |
|
|
|
|
|
( |
|
(13) |
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted Weighted Average Shares Outstanding |
|
43,672 |
|
41,545 |
|
|
|
|
43,556 |
|
41,686 |
|
|
|
||||
Diluted Earnings per Share from continuing operations |
|
|
|
|
|
|
|
# |
|
|
|
|
|
|
|
# |
||
Per Share impact of adjustments to Net income from continuing operations |
|
(1.99) |
|
0.02 |
|
|
|
|
(1.90) |
|
(0.06) |
|
|
|
||||
Adjusted Diluted Earnings per Share |
|
|
|
|
|
( |
|
(24.5) |
% |
|
|
|
|
|
( |
|
(16.8) |
% |
Note: Footnotes follow Reconciliation of Net income table on the next page |
||||||||||||||||||
Reconciliation of Net Income from Continuing Operations to EBITDA and Adjusted EBITDA, Non-GAAP Measures
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||||||||
(in thousands, unaudited) |
|
2021 |
2020 |
Change $ |
Change % |
|
2021 |
2020 |
Change $ |
Change % |
||||||||
Net income from continuing operations |
|
|
|
|
|
|
|
# |
|
|
|
|
|
|
|
# |
||
Provision for income taxes |
|
34,172 |
|
1,068 |
|
33,104 |
|
# |
|
42,616 |
|
3,005 |
|
39,611 |
|
# |
||
Interest expense |
|
23,440 |
|
18,311 |
|
5,129 |
|
28.0 |
% |
|
42,979 |
|
35,635 |
|
7,344 |
|
20.6 |
% |
Depreciation and amortization |
|
7,435 |
|
4,417 |
|
3,018 |
|
68.3 |
% |
|
12,400 |
|
8,954 |
|
3,446 |
|
38.5 |
% |
EBITDA |
|
169,564 |
|
44,876 |
|
124,688 |
|
# |
|
228,247 |
|
104,687 |
|
123,560 |
|
# |
||
Restructuring costs (1) |
|
5,763 |
|
— |
|
|
|
|
5,763 |
|
— |
|
|
|
||||
Legal and other costs (2) |
|
— |
|
847 |
|
|
|
|
— |
|
1,750 |
|
|
|
||||
(Income) loss from equity method investment (3) |
|
(1,712) |
|
(741) |
|
|
|
|
(2,258) |
|
877 |
|
|
|
||||
Gain from equity method investment (4) |
|
(135,387) |
|
— |
|
|
|
|
(135,387) |
|
— |
|
|
|
||||
Transaction costs (5) |
|
3,181 |
|
91 |
|
|
|
|
6,341 |
|
337 |
|
|
|
||||
Acquisition-related adjustments (6) |
|
5,495 |
|
— |
|
|
|
|
5,495 |
|
— |
|
|
|
||||
Share-based compensation (7) |
|
3,467 |
|
3,310 |
|
|
|
|
6,150 |
|
6,504 |
|
|
|
||||
Canada GST adjustment (9) |
|
— |
|
2,160 |
|
|
|
|
— |
|
2,160 |
|
|
|
||||
Other adjustments (13) |
|
(69) |
|
586 |
|
|
|
|
(274) |
|
601 |
|
|
|
||||
Adjusted EBITDA |
|
|
|
|
|
( |
|
(1.6) |
% |
|
|
|
|
|
( |
|
(2.4) |
% |
Adjusted EBITDA Margin |
|
26.8 |
% |
28.0 |
% |
|
|
|
29.7 |
% |
25.2 |
% |
|
|
||||
# - Change greater than |
||||||||||||||||||
(1) |
Restructuring costs for the three and six months ended June 30, 2021 resulted from U.S. store closures and consisted of (i) severance costs for store employees, (ii) lease termination costs, and (iii) accelerated depreciation, partially offset by the net write-off of ROU assets and lease liabilities. |
|
(2) |
Legal and other costs for the six months ended June 30, 2020 included (i) settlement costs related to certain legal matters (ii) costs for certain securities litigation and related matters and (iii) severance costs for certain corporate employees. |
|
(3) |
The amount reported is our share of the estimated U.S. GAAP net (income) loss of Katapult. |
|
(4) |
During the three months ended June 30, 2021, we recorded an additional gain on our investment in Katapult of |
|
(5) |
Transaction costs for the six months ended June 30, 2021 relate to Katapult and FinServ business combination and the Flexiti acquisition.
Transaction costs for the six months ended June 30, 2020 relate to the acquisition of Ad Astra. |
|
(6) |
Acquisition-related adjustments for the six months ended June 30, 2021 relate to the acquired Flexiti loan portfolio as of March 10, 2021. Refer to "Consolidated Revenue by Product and Segment" for additional details. |
|
(7) |
The estimated fair value of share-based awards is recognized as non-cash compensation expense on a straight-line basis over the vesting period. |
|
(8) |
Intangible asset amortization primarily include amortization of identifiable intangible assets established in connection with the acquisition of Flexiti. |
|
(9) |
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. |
|
(10) |
In the second quarter of 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 |
|
(11) |
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 six months ended June 30, 2020, we recorded an income tax benefit of |
|
(12) |
Cumulative tax effect of adjustments included in Reconciliation of Net income from continuing operations Adjusted Net Income table is calculated using the estimated incremental tax rate by country. |
|
(13) |
Other adjustments primarily include the intercompany foreign-currency exchange impact. |
For the Three Months Ended June 30, 2021 and 2020
Revenue and Net Revenue
Revenue increased
Provision for losses decreased by
Cost of Providing Services
Advertising costs increased
Non-advertising costs of providing services increased
Corporate, District and Other Expenses
Corporate, district and other expenses were
Equity Method Investment
Refer to the "Katapult Update for the Three and Six Months Ended June 30, 2021 and 2020" below for details.
Interest Expense
Interest expense for the three months ended June 30, 2021 increased
Provision for Income Taxes
The effective income tax rate for the three months ended June 30, 2021 was
For the Six Months Ended June 30, 2021 and 2020
Revenue and Net Revenue
Revenue decreased
Provision for losses decreased by
Cost of Providing Services
Advertising costs decreased
Non-advertising costs of providing services decreased
Corporate, District and Other Expenses
Corporate, district and other expenses were
Equity Method Investment
Refer to the "Katapult Update for the Three and Six Months Ended June 30, 2021 and 2020" below for details.
Interest Expense
Interest expense for the six months ended June 30, 2021 increased
Provision for Income Taxes
The effective income tax rate for the six months ended June 30, 2021 was
Katapult Update for the Three and Six Months Ended June 30, 2021 and 2020
Katapult is accounted for using the equity method of accounting and is included in "Investments in Katapult" on the unaudited Condensed Consolidated Balance Sheet. Our share of Katapult's earnings was
The Katapult and FinServ merger closed in June 2021. As part of the merger, we received cash consideration of
The table below presents select financial information for Katapult for the periods indicated:
|
|
For the Three Months Ended March 31,(1) |
||||
(in thousands, unaudited) |
|
2021 |
|
2020 |
||
Revenue |
|
|
|
|
|
|
Cost of revenue |
|
52,882 |
|
|
27,333 |
|
Gross profit |
|
27,753 |
|
|
15,555 |
|
|
|
|
|
|
||
Operating expenses |
|
13,340 |
|
|
8,821 |
|
Interest and other |
|
4,498 |
|
|
2,985 |
|
Income before income taxes |
|
9,915 |
|
|
3,749 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
||
Originations |
|
|
|
|
|
|
|
|
|
|
|
||
|
|
As of |
||||
|
|
March 31, 2021 |
|
December 31, 2020 |
||
Cash and restricted cash |
|
|
|
|
|
|
Gross property held for lease |
|
|
|
|
|
|
(1) Source: Katapult's Registration Statement on Form S-1, pages F-54, and F-55, F-67 and 38, filed with the Securities and Exchange Commission on June 30, 2021. |
||||||
Segment Analysis
Following our acquisition of Flexiti on March 10, 2021, and beginning in the first quarter of 2021, we report financial results for three reportable segments: U.S., Canada Direct Lending and Canada POS Lending. Following is a summary of portfolio performance and results of operations for the segment and period indicated.
U.S. Portfolio Performance
(in thousands, except percentages) |
|
Q2 2021 |
Q1 2021 |
|
Q4 2020 |
Q3 2020 |
Q2 2020 |
Gross combined loans receivable (1) |
|
|
|
|
|
|
|
Revolving LOC |
|
|
|
|
|
|
|
Installment loans - Company Owned |
|
139,234 |
142,396 |
|
167,890 |
148,569 |
146,495 |
Total U.S. Company Owned gross loans receivable |
|
186,511 |
185,783 |
|
223,451 |
205,296 |
199,734 |
Installment loans - Guaranteed by the Company (2) |
|
37,093 |
32,439 |
|
44,105 |
39,768 |
34,092 |
Total U.S. gross combined loans receivable (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lending Revenue: |
|
|
|
|
|
|
|
Revolving LOC |
|
|
|
|
|
|
|
Installment loans - Company Owned |
|
55,918 |
64,516 |
|
68,927 |
62,215 |
65,104 |
Installment loans - Guaranteed by the Company (2) |
|
34,908 |
41,425 |
|
42,972 |
36,731 |
37,757 |
Total U.S. lending revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lending Provision: |
|
|
|
|
|
|
|
Revolving LOC |
|
|
|
|
|
|
|
Installment loans - Company Owned |
|
14,048 |
11,159 |
|
24,629 |
16,259 |
17,550 |
Installment loans - Guaranteed by the Company (2) |
|
12,583 |
9,648 |
|
22,621 |
14,936 |
11,713 |
Total U.S. lending provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lending Net Revenue |
|
|
|
|
|
|
|
Revolving LOC |
|
|
|
|
|
|
|
Installment loans - Company Owned |
|
41,870 |
53,357 |
|
44,298 |
45,956 |
47,554 |
Installment loans - Guaranteed by the Company (2) |
|
22,325 |
31,777 |
|
20,351 |
21,795 |
26,044 |
Total U.S. lending net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NCOs |
|
|
|
|
|
|
|
Revolving LOC |
|
|
|
|
|
|
|
Installment loans - Company Owned |
|
18,617 |
17,313 |
|
19,620 |
16,758 |
29,905 |
Installment loans - Guaranteed by the Company (2) |
|
12,044 |
12,150 |
|
21,590 |
13,902 |
15,738 |
Total U.S. NCOs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NCO rate (3) |
|
|
|
|
|
|
|
Revolving LOC |
|
|
|
|
|
|
|
Installment loans - Company Owned |
|
|
|
|
|
|
|
Total U.S. Company Owned NCO rate |
|
|
|
|
|
|
|
Installment loans - Guaranteed by the Company (2) |
|
|
|
|
|
|
|
Total U.S. NCO rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALL and CSO Liability for Losses (4) |
|
|
|
|
|
|
|
Revolving LOC |
|
|
|
|
|
|
|
Installment loans - Company Owned |
|
21,246 |
25,815 |
|
31,971 |
26,961 |
27,112 |
Installment loans - Guaranteed by the Company (2) |
|
5,265 |
4,727 |
|
7,228 |
6,198 |
5,164 |
Total U.S. ALL and CSO Liability for Losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALL and CSO Liability for Losses rate (5) |
|
|
|
|
|
|
|
Revolving LOC |
|
|
|
|
|
|
|
Installment loans - Company Owned |
|
|
|
|
|
|
|
Total U.S. Company Owned ALL rate |
|
|
|
|
|
|
|
Installment loans - Guaranteed by the Company (2) |
|
|
|
|
|
|
|
Total ALL and CSO Liability for Losses rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past-due rate (5) |
|
|
|
|
|
|
|
Revolving LOC |
|
|
|
|
|
|
|
Installment loans - Company Owned |
|
|
|
|
|
|
|
Total U.S. Company Owned past-due rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installment loans - Guaranteed by the Company (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. Installment gross loans receivable Guaranteed by the Company are not included in the Condensed Consolidated Financial Statements. |
|||||||
(3) We calculate NCO rate as total NCOs divided by Average gross loans receivables. |
|||||||
(4) We report ALL 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 (i) ALL and CSO Liability for losses rate and (ii) past-due rate as the respective totals divided by gross loans receivable at each respective quarter end. |
|||||||
U.S. Net Revenue
U.S. revenues decreased by
The provision for losses decreased
U.S. Revolving LOC loan performance
U.S. Revolving LOC loan balances as of June 30, 2021 decreased
U.S. Installment loan performance - Company Owned
U.S. Installment loan balances as of June 30, 2021 decreased
We launched Verge installment loans originated by Stride Bank in the fourth quarter of 2019 and executed pilot programs in several states. After testing various offers, rates, terms and approval criteria, Stride informed us in the first quarter of 2021 that it plans to focus on near-prime loans as they represent a larger addressable market and offer greater opportunity to scale. As a result, Stride discontinued new Verge Credit loans in April 2021. Verge loan balances totaled
U.S. Installment loan performance - Guaranteed by the Company
U.S. Installment loans Guaranteed by the Company increased
Following is a summary of results of operations for the U.S. segment for the periods indicated.
U.S. Results of Operations
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||||||||
(dollars in thousands, unaudited) |
2021 |
2020 |
Change $ |
Change % |
|
2021 |
2020 |
Change $ |
Change % |
||||||||
Revenue |
|
|
|
|
( |
|
(13.5) |
% |
|
|
|
|
|
( |
|
(28.9) |
% |
Provision for losses |
33,622 |
|
41,530 |
|
(7,908) |
|
(19.0) |
% |
|
59,678 |
|
127,571 |
|
(67,893) |
|
(53.2) |
% |
Net revenue |
85,172 |
|
95,790 |
|
(10,618) |
|
(11.1) |
% |
|
195,608 |
|
231,517 |
|
(35,909) |
|
(15.5) |
% |
Advertising |
6,089 |
|
5,269 |
|
820 |
|
15.6 |
% |
|
13,230 |
|
16,214 |
|
(2,984) |
|
(18.4) |
% |
Non-advertising costs of providing services |
31,837 |
|
33,661 |
|
(1,824) |
|
(5.4) |
% |
|
63,992 |
|
70,903 |
|
(6,911) |
|
(9.7) |
% |
Total cost of providing services |
37,926 |
|
38,930 |
|
(1,004) |
|
(2.6) |
% |
|
77,222 |
|
87,117 |
|
(9,895) |
|
(11.4) |
% |
Gross margin |
47,246 |
|
56,860 |
|
(9,614) |
|
(16.9) |
% |
|
118,386 |
|
144,400 |
|
(26,014) |
|
(18.0) |
% |
Corporate, district and other expenses |
43,730 |
|
29,631 |
|
14,099 |
|
47.6 |
% |
|
84,327 |
|
67,281 |
|
17,046 |
|
25.3 |
% |
Interest expense |
17,338 |
|
16,113 |
|
1,225 |
|
7.6 |
% |
|
33,696 |
|
30,959 |
|
2,737 |
|
8.8 |
% |
(Income) loss from equity method investment |
(1,712) |
|
(741) |
|
(971) |
|
# |
|
(2,258) |
|
877 |
|
(3,135) |
|
# |
||
Gain from equity method investment |
(135,387) |
|
— |
|
(135,387) |
|
# |
|
(135,387) |
|
— |
|
(135,387) |
|
# |
||
Total operating expense |
(76,031) |
|
45,003 |
|
(121,034) |
|
# |
|
(19,622) |
|
99,117 |
|
(118,739) |
|
# |
||
Segment operating income |
123,277 |
|
11,857 |
|
111,420 |
|
# |
|
138,008 |
|
45,283 |
|
92,725 |
|
# |
||
Interest expense |
17,338 |
|
16,113 |
|
1,225 |
|
7.6 |
% |
|
33,696 |
|
30,959 |
|
2,737 |
|
8.8 |
% |
Depreciation and amortization |
3,008 |
|
3,309 |
|
(301) |
|
(9.1) |
% |
|
6,134 |
|
6,686 |
|
(552) |
|
(8.3) |
% |
EBITDA (1) |
143,623 |
|
31,279 |
|
112,344 |
|
# |
|
177,838 |
|
82,928 |
|
94,910 |
|
# |
||
Restructuring costs |
5,763 |
|
— |
|
5,763 |
|
|
|
5,763 |
|
— |
|
5,763 |
|
|
||
Legal and other costs |
— |
|
847 |
|
(847) |
|
|
|
— |
|
1,750 |
|
(1,750) |
|
|
||
(Income) loss from equity method investment |
(1,712) |
|
(741) |
|
(971) |
|
|
|
(2,258) |
|
877 |
|
(3,135) |
|
|
||
Gain from equity method investment |
(135,387) |
|
— |
|
(135,387) |
|
|
|
(135,387) |
|
— |
|
(135,387) |
|
|
||
Transaction costs |
3,181 |
|
91 |
|
3,090 |
|
|
|
6,341 |
|
337 |
|
6,004 |
|
|
||
Share-based compensation |
3,467 |
|
3,310 |
|
157 |
|
|
|
6,150 |
|
6,504 |
|
(354) |
|
|
||
Other adjustments |
(159) |
|
305 |
|
(464) |
|
|
|
(405) |
|
164 |
|
(569) |
|
|
||
Adjusted EBITDA (1) |
|
|
|
|
( |
|
(46.5) |
% |
|
|
|
|
|
( |
|
(37.3) |
% |
(1) These are non-GAAP metrics. For a description of each non-GAAP addback, see the applicable reconciliations contained under "Results of Consolidated Operations." For a description of each non-GAAP metric, see "Non-GAAP Financial Measures." |
|||||||||||||||||
# - Variance greater than |
|||||||||||||||||
U.S. Segment Results - For the Three Months Ended June 30, 2021 and 2020
For a discussion of revenue, provision for losses and related gross combined loans receivables, see "U.S. Portfolio Performance," above.
Advertising costs increased
Non-advertising costs of providing services for the three months ended June 30, 2021 were
Corporate, district and other expenses were
As previously announced, we closed or announced the intent to close 49 U.S. stores, 19 of which occurred in the second quarter, in response to evolving customer channel preferences that were accelerated by the impacts of COVID-19. The store closures represent nearly
The 19 U.S. stores closed during the second quarter of 2021 were in Illinois (8), Oregon (2), Colorado (2), Washington (1) and Texas (6) (“Q2 2021 U.S. Store Closures”). CURO exited Illinois given the legislative changes that eliminated its product offerings. The store closure decisions in other states were made after extensive analysis and in response to ongoing migration of customer transactions toward the online channel and the impact of COVID-19 on store traffic and profitability. CURO incurred
During July 2021, we announced the remaining 30 of the 49 U.S. stores were closing in Texas (25), California (2), Louisiana (1), Nevada (1) and Tennessee (1) (“Q3 2021 U.S. Store Closures”). In connection with the Q3 2021 U.S. Store Closures, CURO currently expects to incur
The store closure decisions followed an extensive evaluation that considered (i) comprehensive store-level score cards, (ii) market-level store density and the related addressable local market, (iii) the lingering and potential future COVID-19 impacts on store volume, traffic and profitability and (iv) continued migration of customer transactions toward the online channel. Of the stores closed in Texas in both quarters, 25 were from The Money Box acquisition in 2012. While historically successful, these stores did not have the high-profile, high-traffic advantages of our Speedy/Rapid Cash stores, so their profitability has declined more through COVID. All of the impacted stores are scheduled to be closed by the end of August 2021. Following these closures, CURO will operate 160 stores in the U.S. and 202 stores in Canada.
U.S. interest expense for the three months ended June 30, 2021 increased
As previously described, we recognize our share of Katapult’s income on a one-quarter lag. We recorded income of
U.S. Segment Results - For the Six Months Ended June 30, 2021 and 2020
U.S. revenues decreased
The provision for losses decreased
Non-advertising costs of providing services for the six months ended June 30, 2021 were
Advertising costs were
Corporate, district and other expenses were
As previously described, we recognize our share of Katapult’s income on a one-quarter lag and recorded income of
U.S. interest expense for the six months ended June 30, 2021 increased
Canada Direct Lending and Canada POS Lending Portfolio Performance
(in thousands, except percentages) |
|
Q2 2021 |
Q1 2021 |
|
Q4 2020 |
Q3 2020 |
Q2 2020 |
|||||
Gross loans receivable |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Revolving LOC |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Installment loans |
|
23,564 |
24,385 |
|
26,948 |
26,639 |
24,861 |
|||||
Total Canada Direct Lending gross loans receivable |
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||||
Total Canada POS Lending gross loans receivable |
|
221,453 |
|
|
$ — |
$ — |
$ — |
|||||
|
|
|
|
|
|
|
|
|||||
Lending Revenue: |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Revolving LOC |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Installment loans |
|
10,541 |
10,447 |
|
11,106 |
10,238 |
9,701 |
|||||
Total Canada Direct Lending - lending revenue |
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||||
Canada POS Lending - lending revenue |
|
|
|
|
$ — |
$ — |
$ — |
|||||
|
|
|
|
|
|
|
|
|||||
Lending Provision: |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Revolving LOC |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Installment loans |
|
1,438 |
1,234 |
|
1,972 |
1,426 |
(263) |
|||||
Total Canada Direct Lending - lending provision |
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||||
Canada POS Lending - lending provision |
|
|
|
|
$ — |
$ — |
$ — |
|||||
|
|
|
|
|
|
|
|
|||||
Lending Net Revenue |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Revolving LOC |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Installment loans |
|
9,103 |
9,213 |
|
9,134 |
8,812 |
9,964 |
|||||
Total Canada Direct Lending - lending net revenue |
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||||
Canada POS Lending - lending net revenue |
|
|
|
|
$ — |
$ — |
$ — |
|||||
|
|
|
|
|
|
|
|
|||||
NCOs |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Revolving LOC |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Installment loans |
|
1,513 |
1,669 |
|
2,060 |
1,289 |
1,393 |
|||||
Total Canada Direct Lending NCOs |
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||||
Canada POS Lending NCOs (1) |
|
|
|
|
$ — |
$ — |
$ — |
|||||
|
|
|
|
|
|
|
|
|||||
NCO rate (2) |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Revolving LOC |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Installment loans |
|
|
|
|
|
|
|
|||||
Total Canada Direct Lending NCO rate |
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||||
Canada POS Lending NCO rate |
|
|
NM (3) |
|
—% |
—% |
—% |
|||||
|
|
|
|
|
|
|
|
|||||
ALL (4) |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Revolving LOC |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Installment loans |
|
1,767 |
1,819 |
|
2,233 |
2,204 |
2,024 |
|||||
Total Canada Direct Lending ALL |
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||||
Canada POS Lending ALL (5) |
|
|
|
|
$ — |
$ — |
$ — |
|||||
|
|
|
|
|
|
|
|
|||||
ALL rate (6) |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Revolving LOC |
|
7.9 |
% |
9.4 |
% |
|
10.8 |
% |
11.8 |
% |
12.3 |
% |
Canada Direct Lending Installment loans |
|
7.5 |
% |
7.5 |
% |
|
8.3 |
% |
8.3 |
% |
8.1 |
% |
Total Canada Direct Lending ALL rate |
|
7.9 |
% |
9.2 |
% |
|
10.6 |
% |
11.5 |
% |
11.9 |
% |
|
|
|
|
|
|
|
|
|||||
Canada POS Lending ALL rate |
|
2.1 |
% |
0.3 |
% |
|
— |
% |
— |
% |
— |
% |
|
|
|
|
|
|
|
|
|||||
Past-due rate (6) |
|
|
|
|
|
|
|
|||||
Canada Direct Lending Revolving LOC |
|
5.8 |
% |
6.4 |
% |
|
6.8 |
% |
6.0 |
% |
7.3 |
% |
Canada Direct Lending Installment loans |
|
2.3 |
% |
2.1 |
% |
|
2.1 |
% |
2.9 |
% |
3.7 |
% |
Total Canada Direct Lending past-due rate |
|
5.5 |
% |
6.1 |
% |
|
6.4 |
% |
5.7 |
% |
7.0 |
% |
|
|
|
|
|
|
|
|
|||||
Canada POS Lending past-due rate |
|
5.4 |
% |
5.7 |
% |
|
— |
% |
— |
% |
— |
% |
|
|
|
|
|
|
|
|
|||||
(1) For the second quarter of 2021, NCO's presented above include |
||||||||||||
(2) We calculate NCO rate as total NCOs divided by Average gross loans receivables. |
||||||||||||
(3) Not material or not meaningful. |
||||||||||||
(4) We report ALL as a contra-asset reducing gross loans receivable on the Condensed Consolidated Balance Sheets. |
||||||||||||
(5) Loans originated pre-acquisition have been adjusted to fair value at the acquisition date and included estimates of future losses. The ALL represents estimated incurred losses for loans originated after acquisition plus incurred losses for acquired loans in excess of the remaining fair value discount. |
||||||||||||
(6) We calculate ALL rate and past-due rate as the respective totals divided by gross loans receivable at each respective quarter end. |
||||||||||||
Canada Direct Lending Net Revenue
Canada Direct Lending revenue increased year over year by
The provision for losses decreased
Canada Direct Lending Revolving LOC loan performance
Canada Direct Lending Revolving LOC gross loans receivable increased
Canada Direct Lending Installment loan performance
Canada Direct Lending Installment revenue increased
Canada POS Lending Revolving LOC loan performance
Canada POS Lending Revolving LOC gross loans receivable as of June 30, 2021 was
Originations for the three months ended June 30, 2021 were
Canada Direct Lending Results of Operations
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||||||||
(dollars in thousands, unaudited) |
2021 |
2020 |
Change $ |
Change % |
|
2021 |
2020 |
Change $ |
Change % |
||||||||
Revenue |
|
|
|
|
|
|
36.9 |
% |
|
|
|
|
|
|
|
15.4 |
% |
Provision for losses |
8,556 |
|
9,163 |
|
(607) |
|
(6.6) |
% |
|
17,790 |
|
36,658 |
|
(18,868) |
|
(51.5) |
% |
Net revenue |
53,324 |
|
36,026 |
|
17,298 |
|
48.0 |
% |
|
102,530 |
|
67,569 |
|
34,961 |
|
51.7 |
% |
Advertising |
778 |
|
481 |
|
297 |
|
61.7 |
% |
|
1,682 |
|
1,755 |
|
(73) |
|
(4.2) |
% |
Non-advertising costs of providing services |
18,683 |
|
15,906 |
|
2,777 |
|
17.5 |
% |
|
36,765 |
|
34,016 |
|
2,749 |
|
8.1 |
% |
Total cost of providing services |
19,461 |
|
16,387 |
|
3,074 |
|
18.8 |
% |
|
38,447 |
|
35,771 |
|
2,676 |
|
7.5 |
% |
Gross margin |
33,863 |
|
19,639 |
|
14,224 |
|
72.4 |
% |
|
64,083 |
|
31,798 |
|
32,285 |
|
# |
|
Corporate, district and other expenses |
6,022 |
|
7,150 |
|
(1,128) |
|
(15.8) |
% |
|
11,640 |
|
12,307 |
|
(667) |
|
(5.4) |
% |
Interest expense |
2,498 |
|
2,198 |
|
300 |
|
13.6 |
% |
|
4,853 |
|
4,676 |
|
177 |
|
3.8 |
% |
Total operating expense |
8,520 |
|
9,348 |
|
(828) |
|
(8.9) |
% |
|
16,493 |
|
16,983 |
|
(490) |
|
(2.9) |
% |
Segment operating income |
25,343 |
|
10,291 |
|
15,052 |
|
# |
|
47,590 |
|
14,815 |
|
32,775 |
|
# |
||
Interest expense |
2,498 |
|
2,198 |
|
300 |
|
13.6 |
% |
|
4,853 |
|
4,676 |
|
177 |
|
3.8 |
% |
Depreciation and amortization |
1,144 |
|
1,108 |
|
36 |
|
3.2 |
% |
|
2,270 |
|
2,268 |
|
2 |
|
0.1 |
% |
EBITDA (1) |
28,985 |
|
13,597 |
|
15,388 |
|
# |
|
54,713 |
|
21,759 |
|
32,954 |
|
# |
||
Canada GST adjustment |
— |
|
2,160 |
|
(2,160) |
|
|
|
— |
|
2,160 |
|
(2,160) |
|
|
||
Other adjustments |
107 |
|
281 |
|
(174) |
|
|
|
148 |
|
437 |
|
(289) |
|
|
||
Adjusted EBITDA (1) |
|
|
|
|
|
|
81.4 |
% |
|
|
|
|
|
|
|
125.2 |
% |
# - Variance greater than |
|
|
|
|
|
|
|
||||||||||
(1) These are non-GAAP metrics. For a description of each non-GAAP addback, see the applicable reconciliations contained under "Results of Consolidated Operations." For a description of each non-GAAP metric, see "Non-GAAP Financial Measures." |
|||||||||||||||||
Canada Direct Lending Segment Results - For the Three Months Ended June 30, 2021 and 2020
For a discussion of revenue, provision for losses and related gross combined loans receivables, see "Canada Direct Lending and Canada POS Lending Portfolio Performance," above.
Canada Direct Lending cost of providing services were
Canada Direct Lending operating expenses decreased to
Canada Direct Lending Segment Results - For the Six Months Ended June 30, 2021 and 2020
Canada Direct Lending revenue increased
The provision for losses decreased
Canada Direct Lending cost of providing services for the six months ended June 30, 2021 were
Canada Direct Lending operating expenses for the six months ended June 30, 2021 were
Canada POS Lending Results of Operations
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||
(dollars in thousands, unaudited) |
2021 |
|
2021 |
||
Revenue |
|
|
|
|
|
Provision for losses |
2,987 |
|
|
3,842 |
|
Net revenue |
4,032 |
|
|
4,796 |
|
Advertising |
176 |
|
|
215 |
|
Non-advertising costs of providing services |
314 |
|
|
387 |
|
Total cost of providing services |
490 |
|
|
602 |
|
Gross margin |
3,542 |
|
|
4,194 |
|
Corporate, district and other expenses |
9,869 |
|
|
12,494 |
|
Interest expense |
3,604 |
|
|
4,430 |
|
Total operating expense |
13,473 |
|
|
16,924 |
|
Segment operating loss |
(9,931) |
|
|
(12,730) |
|
Interest expense |
3,604 |
|
|
4,430 |
|
Depreciation and amortization |
3,283 |
|
|
3,996 |
|
EBITDA (1) |
(3,044) |
|
|
(4,304) |
|
Acquisition accounting adjustment |
5,495 |
|
|
5,495 |
|
Other adjustments |
(17) |
|
|
(17) |
|
Adjusted EBITDA (1) |
|
|
|
|
|
# - Variance greater than |
|
|
|||
(1) These are non-GAAP metrics. For a description of each non-GAAP addback, see the applicable reconciliations contained under "Results of Consolidated Operations." For a description of each non-GAAP metric, see "Non-GAAP Financial Measures." |
|||||
Canada POS Lending Segment Results - For the Three and Six Months Ended June 30, 2021
For a discussion of revenue, provision for losses and related gross loans receivables, see the "Canada Direct Lending and Canada POS Lending Portfolio Performance," above for the three months ended June 30, 2021. Canada POS Lending segment revenue includes revenue from merchant discounts and ancillary products. MDR represents the discount merchant partners provide to help facilitate customer credit card purchases at merchant locations. The fee is recognized over the estimated average loan term of 12 months. Ancillary revenue includes administrative fees, annual fees, insurance product fees and other fees charged to customers.
For the six months ended June 30, 2021, Canada POS Lending revenues were
Provision for losses for the six months ended June 30, 2021 was
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) |
|||||
|
June 30, 2021 (unaudited) |
|
December 31, 2020 |
||
ASSETS |
|||||
Cash and cash equivalents |
|
|
|
|
|
Restricted cash (includes restricted cash of consolidated VIEs of |
69,299 |
|
|
54,765 |
|
Gross loans receivable (includes loans of consolidated VIEs of |
769,228 |
|
|
553,722 |
|
Less: Allowance for loan losses (includes allowance for losses of consolidated VIEs of |
(67,861) |
|
|
(86,162) |
|
Loans receivable, net |
701,367 |
|
|
467,560 |
|
Income taxes receivable |
2,175 |
|
|
32,062 |
|
Prepaid expenses and other (includes prepaid expenses and other of consolidated VIEs of |
31,209 |
|
|
27,994 |
|
Property and equipment, net |
51,170 |
|
|
59,749 |
|
Investment in Katapult |
16,501 |
|
|
27,370 |
|
Right of use asset - operating leases |
106,698 |
|
|
115,032 |
|
Deferred tax assets |
6,264 |
|
|
— |
|
Goodwill and Intangibles, net |
274,119 |
|
|
176,516 |
|
Other assets |
9,296 |
|
|
8,595 |
|
Total Assets |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||
Liabilities |
|
|
|
||
Accounts payable and accrued liabilities (includes accounts payable and accrued liabilities of consolidated VIEs of |
|
|
|
|
|
Deferred revenue |
10,394 |
|
|
5,394 |
|
Lease liability - operating leases |
113,415 |
|
|
122,648 |
|
Contingent consideration related to acquisition |
21,239 |
|
|
— |
|
Accrued interest (includes accrued interest of consolidated VIEs of |
20,411 |
|
|
20,123 |
|
Liability for losses on CSO lender-owned consumer loans |
5,265 |
|
|
7,228 |
|
Debt (includes debt and issuance costs of consolidated VIEs of |
1,019,127 |
|
|
819,661 |
|
Other long-term liabilities |
13,796 |
|
|
15,382 |
|
Deferred tax liabilities |
9,710 |
|
|
11,021 |
|
Total Liabilities |
|
|
|
|
|
Stockholders' Equity |
|
|
|
||
Total Stockholders' Equity |
|
|
|
|
|
Total Liabilities and Stockholders' Equity |
|
|
|
|
|
Balance Sheet Changes - June 30, 2021 Compared to December 31, 2020
Cash and cash equivalents - The increase in Cash and cash equivalents from December 31, 2020 was primarily due to the one-time cash inflow of
Restricted cash - The increase in Restricted cash from December 31, 2020 was primarily due to our Non-Recourse U.S. SPV Facility, our new Non-Recourse Flexiti SPE Facility entered into as part of our acquisition in March 2021, and growth in Opt+ products.
Gross loans receivable and Allowance for loan losses - The increase in Gross loans receivable from December 31, 2020 was primarily due to the acquisition of Flexiti, which accounted for
Investment in Katapult - The change in Investment in Katapult from December 31, 2020 was due to the Katapult and FinServ merger, which closed on June 9, 2021, impacting our ownership in Katapult. After the merger, we now maintain a
Goodwill and Intangible Assets - The increases in Goodwill and Intangible assets from December 31, 2020 were due to our acquisition of Flexiti on March 10, 2021, which accounted for
Debt - The increase in debt from December 31, 2020 is primarily due to our new Non-Recourse Flexiti SPE Facility entered into as part of our acquisition in March 2021.
Contingent Consideration related to acquisition - The acquisition of Flexiti on March 10, 2021 included an up-front purchase price as well as a cash earn-out of up to approximately
Debt Capitalization Summary
(in thousands, net of deferred financing costs)
|
|
Capacity |
Interest Rate |
Maturity |
Counter-parties |
Balance as of June 30, 2021 (in USD) |
|
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, 2022 |
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 |
44,489 |
|
Non-Recourse Flexiti SPE Facility (1)(3) |
|
C |
3-Mo CDOR + |
March 10, 2024 |
Credit Suisse (Class A); SPF (Class B) |
194,864 |
|
Cash Money Revolving Credit Facility (1) |
|
C |
Canada Prime Rate + |
On-demand |
Royal Bank of Canada |
— |
|
|
|
|
|
September 1, 2025 |
|
680,893 |
|
(1) Capacity amounts are denominated in Canadian dollars, while outstanding balances as of June 30, 2021 are denominated in U.S. dollars. |
|||||||
(2) The Non-Recourse U.S. SPV Facility initially provided for |
|||||||
(3) The current Non-Recourse Flexiti SPE Facility was entered into concurrent with the Flexiti acquisition. Interest accrues at an annual rate of three-month CDOR plus |
|||||||
(4) On July 16, 2021, we announced the pricing of our |
|||||||
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 certain legal and other costs, income or loss from equity method investment, goodwill and intangible asset impairments, transaction-related costs, restructuring costs, adjustments related to acquisition accounting, 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 Condensed 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 contributions of the LFL Group POS financing agreement; growth in Flexiti’s originations; reduced operating costs following store consolidations; increased liquidity from our new senior secured notes; the run-off of Verge loan balances; the operational and financial impact of our store consolidations; 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: errors in our internal forecasts; the effects of competition on the Company’s business; our ability to attract and retain customers; market, financial, political and legal conditions; actions of regulators and the negative impact of those actions on our business; the future impact of COVID-19 pandemic or any other similar wide-spread event on the Company’s business and the global economy; 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; our level of indebtedness; our ability to integrate acquired businesses; our ability to protect our proprietary technology and analytics and keep up with that of our competitors; disruption of our information technology systems that adversely affect our business operations; ineffective pricing of the credit risk of our prospective or existing customers; inaccurate information supplied by customers or third parties that could lead to errors in judging customers’ qualifications to receive loans; improper disclosure of customer personal data; failure of third parties who provide products, services or support to us; 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 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.
All product names, logos, brands, trademarks and registered trademarks are property of their respective owners.
About CURO
CURO Group Holdings Corp. (NYSE: CURO) serves the evolving needs of the financial consumer. 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, later expanding to offer online loans and financial services in the United States and Canada and now broadening into a full-spectrum consumer lender through the point-of-sale / buy-now-pay-later channel. CURO combines its market expertise with a fully integrated technology platforms, an 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®, Flexiti®, 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 Thursday, July 29, 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 1-844-407-9500 (1-862-298-0850 for international callers). Please ask to join the CURO Group Holdings call. A replay of the conference call will be available until August 4, 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 1-877-481-4010 (1-919-882-2331 for international callers). The replay access code is 42287.
Final Results
The financial results presented and discussed herein are on a preliminary and unaudited basis; final unaudited data will be included in the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2021.
(CURO-NWS)
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