CURO Group Holdings Corp. Reports First Quarter 2023 Financial Results

CHICAGO--(BUSINESS WIRE)-- CURO Group Holdings Corp. (NYSE: CURO) (“CURO” or the “Company”), a tech-enabled, omni-channel consumer finance company serving consumers in the U.S. and Canada, today announced financial results for its first quarter ended March 31, 2023.

Highlights

• Net revenue increased 19.8% sequentially to $146.5 million
• Operating expenses declined 6.2% sequentially to $118.2 million, and $35.5 million and 23.1% year over year
• Gross loans receivables of $2.1 billion were slightly lower by 1.2% sequentially
• Net charge-off rate improved 326 bps sequentially to 11.5%, and 30 bps sequentially to 14.5% excluding the changes in the Direct Lending brands in Canada charge-off policies
• On May 9, 2023, finalized a $150.0 million term loan and a C$110.0 million non-recourse revolving warehouse facility

“Our first quarter results highlight the emerging benefits of our business transformation and differentiated operating model,” said Doug Clark, Chief Executive Officer of CURO. “Subsequent to the quarter, we successfully raised over $230 million in gross capital, a key step to executing our plan to profitability and demonstrates continued access to capital markets and supportive lending partners. We also delivered results that were favorable relative to our guidance expectations, including solid revenue, well-managed operating expenses and stable credit quality. With a close eye on the various challenges presented by the macro environment, we will continue to execute on our business plan, support our customers and remain focused on generating long-term sustainable returns for our investors.”

Consolidated Summary Results

For the three months ended March 31, 2023, the Company had total revenue of $209.5 million compared with total revenue of $217.2 million sequentially, primarily driven by product mix shift. Net revenue was $146.5 million, an increase of $24.2 million, or 19.8% sequentially, primarily driven by a lower provision for loan loss expense related to the decrease in the net charge-off rate.

For the three months ended March 31, 2023, the Company had total operating expenses of $118.2 million, a decrease of $7.8 million, or 6.2%, sequentially. The decline reflected lower restructuring charges and operating expenses, in both cases related to store closures and headcount reductions in the U.S. and Canada. One-time restructuring charges recognized in the first quarter of 2023 and the fourth quarter of 2022 were $10.0 million and $13.1 million, respectively, representing $3.1 million of the sequential decrease.

Net loss of $59.5 million ($1.46 per share) for the three months ended March 31, 2023, compared with Net loss of $186.4 million ($4.60 per share) for the three months ended December 31, 2022. The $126.9 million improvement in Net loss in the first quarter of 2023 compared to the prior quarter was driven by a $24.2 million increase in net revenue quarter over quarter due to product mix shift, the decline in Provision for loan loss, a $7.8 million decrease in total Operating expenses related to store closures and restructuring activities completed in the fourth quarter of 2022 and the $145.2 million Goodwill impairment charge in the fourth quarter of 2022, with no such charge in the first quarter of 2023, partially offset by a $29.0 million Provision for income taxes to create a valuation allowance on U.S. deferred tax assets, and a $4.0 million increase in Interest expense.

Gross loans receivable of $2.1 billion at March 31, 2023 were slightly lower by 1.2% sequentially, primarily driven by a decrease of $55.2 million, or 6.9%, in Direct Lending Installment Loans, partially offset by an increase of $19.8 million, or 2.4%, in Canada POS Lending.

As of January 1, 2023, the Company adopted Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("CECL"). This adoption resulted in a onetime pre-tax increase to our Allowance for loan losses of $135.2 million, which was recorded to opening Accumulated deficit and did not impact the Statement of Operations.

The Company's Net charge-off rate in the first quarter improved 326 bps, sequentially, to 11.5%, primarily driven by a change in our Direct Lending brands in Canada charge-off policies during the quarter, as part of the alignment of charge-off policies across the Company, as well as improved recoveries as a result of improvements to our credit collection processes. The Company's 91+ days delinquency ratio increased by 60 bps, sequentially, to 3.2% primarily driven by these policy changes.

		As of or for the Quarter Ended
		Mar 31,			Dec 31,			Sep 30,			Jun 30,			Mar 31,
Delinquency and Loss Ratios		2023			2022			2022			2022			2022
31-60 days delinquency ratio		1.8	%		1.9	%		2.5	%		2.4	%		2.1	%
61-90 days delinquency ratio		1.5	%		1.3	%		1.5	%		1.8	%		1.9	%
91+ days delinquency ratio		3.2	%		2.6	%		2.6	%		2.0	%		2.2	%
Net charge-offs		11.5	%		14.8	%		13.2	%		24.0	%		23.2	%

Funding and Liquidity

As of March 31, 2023, principal debt balances outstanding of $2.7 billion, which consisted of 65.5% of fixed rate or hedged variable rate debt and 34.5% of variable rate debt. We had $54.9 million of Cash and cash equivalents on the Consolidated Balance Sheet and available for general corporate purposes.

As of March 31, 2023, unrestricted cash and cash equivalents, together with $109.9 million in unused borrowing capacity and $140.1 million of unencumbered Gross loans receivable, provided approximately $303.6 million in available capital resources.

About CURO

CURO Group Holdings Corp. (NYSE: CURO) is a leading consumer credit lender serving U.S. and Canadian customers for over 25 years. Our roots in the consumer finance market run deep. We’ve worked diligently to provide customers a variety of convenient, easily accessible financial services. Our decades of diversified data power a hard-to-replicate underwriting and scoring engine, mitigating risk across the full spectrum of credit products. We operate a number of brands including Cash Money®, LendDirect®, Flexiti®, Heights Finance, Southern Finance, Covington Credit, Quick Credit and First Heritage Credit.

Conference Call

CURO will host a conference call to discuss these results at 8:30 a.m. Eastern Time on Wednesday, May 10, 2023. 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 1-833-953-2430 (1-412-317-5759 for international callers). Please ask to join the CURO Group Holdings call. A replay of the conference call will be available until May 17, 2023, at 5:00 p.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 1314764.

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 months ended March 31, 2023.

Table 1 - Consolidated Statements of Operations
		Three Months Ended,
		Mar 31,				Dec 31,				Sept 30,				Jun 30,				Mar 31,
(in thousands, unaudited)		2023				2022				2022				2022				2022
Revenue
Interest and fees revenue		$	179,437			$	181,605			$	180,515			$	278,331			$	264,956
Insurance and other income			30,036				35,593				33,605				26,073				25,240
Total revenue			209,473				217,198				214,120				304,404				290,196
Provision for losses			62,932				94,849				78,399				129,546				97,531
Net revenue			146,541				122,349				135,721				174,858				192,665
Operating Expenses
Salaries and benefits			64,805				66,067				53,413				82,427				79,729
Occupancy			11,672				12,114				12,827				17,507				17,037
Advertising			2,175				3,692				5,244				12,707				10,500
Direct operations			13,092				11,832				11,729				20,293				20,274
Depreciation and amortization			9,021				8,337				9,499				8,672				9,814
Other operating expense			17,433				24,002				23,645				18,787				16,377
Total operating expenses			118,198				126,044				116,357				160,393				153,731
Other expense (income)
Interest expense			58,943				54,978				50,149				42,193				38,341
Loss (income) from equity method investment			3,413				1,932				2,309				1,328				(1,584	)
Goodwill impairment			—				145,241				—				—				—
Loss on extinguishment of debt			—				689				3,702				—				—
Loss (gain) on change in fair value of contingent consideration			2,728				—				(11,354	)			4,014				(265	)
Gain on sale of business			2,027				—				(68,443	)			—				—
Total other expense			67,111				202,840				(23,637	)			47,535				36,492
(Loss) income before income taxes			(38,768	)			(206,535	)			43,001				(33,070	)			2,442
Provision (benefit) for income taxes			20,703				(20,142	)			17,348				(6,990	)			1,106
Net (loss) income		$	(59,471	)		$	(186,393	)		$	25,653			$	(26,080	)		$	1,336
Basic (loss) earnings per share		$	(1.46	)		$	(4.60	)		$	0.63			$	(0.65	)		$	0.03
Diluted (loss) earnings per share		$	(1.46	)		$	(4.60	)		$	0.63			$	(0.65	)		$	0.03
Weighted average common shares outstanding:
Basic			40,783				40,488				40,479				40,376				40,368
Diluted			40,783				40,488				40,835				40,376				41,308

Table 2 - Consolidated Balance Sheets
		As of
		Mar 31,				Dec 31,				Sep 30,				Jun 30,				Mar 31,
(in thousands, unaudited)		2023				2022				2022				2022				2022
ASSETS
Cash and cash equivalents		$	54,935			$	73,932			$	45,683			$	37,394			$	60,209
Restricted cash			123,282				91,745				144,020				97,465				110,118
Gross loans receivable			2,062,829				2,087,833				1,894,427				1,592,815				1,628,568
Less: Allowance for loan losses			(259,959	)			(122,028	)			(102,743	)			(90,286	)			(98,168	)
Loans receivable, net			1,802,870				1,965,805				1,791,684				1,502,529				1,530,400
Income taxes receivable			20,100				21,918				13,469				46,450				28,664
Prepaid expenses and other			47,295				53,057				65,167				25,370				40,112
Property and equipment, net			29,867				31,957				37,402				38,752				54,865
Investment in Katapult			20,502				23,915				25,848				28,157				29,484
Right of use asset - operating leases			54,597				61,197				64,683				64,602				114,305
Deferred tax assets			53,474				49,893				31,986				23,993				20,066
Goodwill			276,487				276,269				424,292				352,990				430,967
Intangibles, net			127,387				123,677				120,345				113,130				113,640
Other assets			10,991				15,828				12,774				8,558				9,535
Assets held for sale (1)			—				—				—				338,779				—
Total Assets		$	2,621,787			$	2,789,193			$	2,777,353			$	2,678,169			$	2,542,365
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities		$	85,875			$	73,827			$	66,723			$	81,423			$	84,783
Deferred revenue			33,227				32,259				25,111				23,425				24,265
Lease liability - operating leases			55,468				62,847				66,370				67,339				120,593
Contingent consideration related to acquisition			18,128				16,884				15,770				30,354				26,687
Income taxes payable			—				—				—				4				—
Accrued interest			20,090				38,460				18,048				34,970				16,481
Liability for losses on CSO lender-owned consumer loans			—				—				—				—				7,166
Debt			2,627,263				2,607,314				2,449,316				2,189,431				2,090,085
Other long-term liabilities			10,552				11,736				11,563				12,146				13,679
Deferred tax liabilities			—				—				—				12,360				5,839
Liabilities held for sale (1)			—				—				—				111,137				—
Total Liabilities		$	2,850,603			$	2,843,327			$	2,652,901			$	2,562,589			$	2,389,578
Total Stockholders' (Deficit) Equity			(228,816	)			(54,134	)			124,452				115,580				152,787
Total Liabilities and Stockholders' (Deficit) Equity		$	2,621,787			$	2,789,193			$	2,777,353			$	2,678,169			$	2,542,365
(1) Assets held for sale and Liabilities held for sale represent the balance, as of June 30, 2022, for assets and liabilities, respectively, associated with the sale of the Legacy U.S. Direct Lending Business. The sale of the Legacy U.S. Direct Lending business closed in July 2022.

Table 3 - Consolidated Portfolio Performance
(in thousands, except percentages, unaudited)		Q1 2023				Q4 2022				Q3 2022				Q2 2022(1)				Q1 2022
Gross loans receivable (5)
Revolving LOC		$	1,314,695			$	1,284,515			$	1,129,387			$	1,128,372			$	1,015,338
Installment loans			748,134				803,318				765,040				652,468				613,230
Total gross loans receivable		$	2,062,829			$	2,087,833			$	1,894,427			$	1,780,840			$	1,628,568
Lending Revenue
Revolving LOC		$	84,225			$	81,170			$	77,037			$	96,582			$	91,023
Installment loans			95,212				100,435				103,478				181,749				173,933
Total lending revenue		$	179,437			$	181,605			$	180,515			$	278,331			$	264,956
Lending Provision
Revolving LOC		$	30,106			$	46,745			$	41,787			$	40,435			$	37,447
Installment loans			31,139				46,442				33,510				86,484				57,435
Total lending provision		$	61,245			$	93,187			$	75,297			$	126,919			$	94,882
NCOs (2) (6)
Revolving LOC		$	17,953			$	35,387			$	30,907			$	33,945			$	34,372
Installment loans (5)			41,078				38,168				31,372				71,056				60,386
Total NCOs		$	59,031			$	73,555			$	62,279			$	105,001			$	94,758
NCO rate (annualized) (2) (3) (5)
Revolving LOC			5.6	%			11.6	%			10.8	%			12.8	%			14.4	%
Installment loans			21.5	%			19.6	%			17.6	%			44.8	%			38.8	%
Total NCO rate			11.5	%			14.8	%			13.2	%			24.0	%			23.2	%
ACL rate (4) (5) (6)
Revolving LOC			13.3	%			6.1	%			6.0	%			6.7	%			7.0	%
Installment loans			11.3	%			5.4	%			4.6	%			8.1	%			5.5	%
Total ACL rate			12.6	%			5.8	%			5.4	%			6.7	%			6.0	%
31+ days past-due rate (4) (5)
Revolving LOC			5.5	%			3.3	%			4.1	%			4.1	%			3.7	%
Installment loans			8.2	%			9.6	%			10.2	%			9.2	%			9.0	%
Total past-due rate			6.5	%			5.8	%			6.6	%			6.1	%			5.8	%
(1) Includes loan balances and activity classified as Held for Sale.
(2) NCOs presented above include $0.0 million, $0.0 million, $0.5 million, $10.3 million, and $5.0 million for the three months ended March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022, respectively, related to the purchase accounting fair value discount, which are excluded from provision.
(3) We calculate NCO rate as total quarterly NCOs divided by Average gross loans receivable; then we annualize the rate. The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications and the periodic sale of charged off loans.
(4) We calculate (i) Allowance for credit losses ("ACL") rate and (ii) 31+ days past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.
(5) All balances in connection with the CSO program were disposed of on July 8, 2022 upon the completion of the divestiture of the Legacy U.S. Direct Lending business, as such these balances have been excluded from this amount.
(6) We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2023, which requires us to estimate the lifetime expected credit loss on financial instruments. Our previous model required the recognition of credit losses when it was probable that a loss had been incurred.

Table 4 - Direct Lending Segment - Operating (Loss)/Income
		Three Months Ended,
		Mar 31,				Dec 31,				Sep 30,				Jun 30,				Mar 31,
(in thousands, unaudited)		2023				2022				2022				2022				2022
Total revenue		$	169,368			$	181,925			$	186,409			$	281,251			$	269,887
Provision for losses			48,364				77,724				65,020				123,584				88,817
Net revenue			121,004				104,201				121,389				157,667				181,070
Total operating expenses			103,151				111,632				102,840				143,965				137,963
Segment operating (loss) income		$	17,853			$	(7,431	)		$	18,549			$	13,702			$	43,107

Table 5 - Direct Lending Segment - Portfolio Performance
(in thousands, except percentages, unaudited)		Q1 2023				Q4 2022				Q3 2022				Q2 2022(1)				Q1 2022
Gross loans receivable (5)
Revolving LOC		$	461,443			$	451,077			$	439,117			$	501,209			$	473,562
Installment loans			748,133				803,318				765,041				652,467				613,231
Total gross loans receivable		$	1,209,576			$	1,254,395			$	1,204,158			$	1,153,676			$	1,086,793
Lending Revenue
Revolving LOC		$	49,092			$	49,915			$	52,461			$	75,736			$	72,368
Installment loans			95,212				100,435				103,478				181,747				173,934
Total lending revenue		$	144,304			$	150,350			$	155,939			$	257,483			$	246,302
Lending Provision
Revolving LOC		$	15,539			$	29,620			$	28,408			$	34,472			$	28,734
Installment loans			31,139				46,442				33,511				86,485				57,435
Total lending provision		$	46,678			$	76,062			$	61,919			$	120,957			$	86,169
NCOs (2) (5)
Revolving LOC		$	6,234			$	26,715			$	24,793			$	30,408			$	31,645
Installment loans			41,078				38,168				29,783				43,661				38,894
Total NCOs		$	47,312			$	64,883			$	54,576			$	74,069			$	70,539
NCO rate (annualized) (2) (3) (5)
Revolving LOC			5.5	%			23.8	%			20.9	%			25.0	%			27.6	%
Installment loans			21.5	%			19.3	%			16.7	%			27.7	%			25.3	%
Total NCO rate			15.6	%			20.9	%			18.4	%			26.5	%			26.3	%
ACL rate (4) (5) (6)
Revolving LOC			25.6	%			8.4	%			7.9	%			9.3	%			9.2	%
Installment loans			11.3	%			5.4	%			4.6	%			6.9	%			4.4	%
Total ACL rate			16.8	%			6.5	%			5.8	%			7.9	%			6.5	%
31+ days past-due rate (4) (5)
Revolving LOC			8.4	%			4.1	%			5.1	%			5.8	%			5.8	%
Installment loans			8.2	%			9.6	%			10.2	%			9.7	%			9.3	%
Total past-due rate			8.3	%			7.6	%			8.3	%			8.0	%			7.8	%
(1) Includes loan balances and activity classified as Held for Sale.
(2) NCOs presented above include $0.0 million, $0.0 million, $0.5 million, $10.3 million and $5.0 million for the three months ended March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022 and March 31, 2022, respectively, related to the purchase accounting fair value discount, which are excluded from provision.
(3) We calculate NCO rate as total quarterly NCOs divided by Average gross loans receivable, then we annualize the rate. The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications and the periodic sale of charged off loans.
(4) We calculate (i) ACL rate and (ii) 31+ days past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.
(5) All balances in connection with the CSO program were disposed of on July 8, 2022 upon the completion of the divestiture of the Legacy U.S. Direct Lending Business, as such these balances have been excluded from this amount.
(6) We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2023, which requires us to estimate the lifetime expected credit loss on financial instruments. Our previous model required the recognition of credit losses when it was probable that a loss had been incurred.

Table 6 - Canada POS Lending Segment - Operating Income/(Loss)
		Three Months Ended,
		Mar 31,				Dec 31,				Sept 30,				Jun 30,				Mar 31,
(in thousands, unaudited)		2023				2022				2022				2022				2022
Total revenue		$	40,105			$	35,273			$	27,710			$	23,154			$	20,309
Provision for losses			14,568				17,125				13,378				5,963				8,714
Net revenue			25,537				18,148				14,332				17,191				11,595
Total operating expenses			15,047				14,412				13,519				16,427				15,768
Segment operating income (loss)		$	10,490			$	3,736			$	813			$	764			$	(4,173	)

Table 7 - Canada POS Lending Segment - Portfolio Performance
(in thousands, except percentages, unaudited)		Q1 2023				Q4 2022				Q3 2022				Q2 2022				Q1 2022
Revolving LOC
Gross loans receivable		$	853,253			$	833,438			$	690,270			$	627,163			$	541,776
Lending revenue		$	35,133			$	31,255			$	24,575			$	20,846			$	18,655
Lending provision		$	14,568			$	17,125			$	13,379			$	5,963			$	8,714
NCOs		$	11,719			$	8,672			$	6,114			$	3,537			$	2,727
NCO rate (annualized) (1)			5.6	%			4.4	%			3.6	%			2.4	%			2.0	%
ACL rate (2) (3)			6.7	%			4.9	%			4.8	%			4.5	%			5.1	%
31+ days past-due rate (2)			3.9	%			2.9	%			3.6	%			2.8	%			1.8	%
(1) We calculate NCO rate as total quarterly NCOs divided by Average gross loans receivable then we annualized the rate. The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications and the periodic sale of charged off loans.
(2) We calculate (i) ACL rate and (ii) 31+ days past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.
(3) We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2023, which requires us to estimate the lifetime expected credit loss on financial instruments. Our previous model required the recognition of credit losses when it was probable that a loss had been incurred.

Forward-Looking Statements

This press release contains forward-looking statements. These forward-looking statements include projections, estimates and assumptions about various matters, such as future financial and operational performance, including our belief in the benefits of our business transformation and differentiated operating model, our ability to execute on our plan to profitability and demonstrate continued access to capital markets and our ability to execute on our business plan, support our customers and remain focused on generating long-term sustainable returns for our investors. In addition, words such as “guidance,” “estimate,” “anticipate,” “believe,” “forecast,” “step,” “plan,” “predict,” “focused,” “project,” “is likely,” “expect,” "anticipate," “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: risks relating to the uncertainty of projected financial and operational information and forecasts, including errors in our internal forecasts; our ability to manage growth; 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; the effects of competition on our business; our ability to attract and retain customers; global economic, market, financial, political or health conditions or events; actions of regulators and the impact of those actions on our business; our ability to successfully 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; 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 we presently do not know or that we currently believe 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.

(CURO-NWS)

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Investor Relations:

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Email: IR@curo.com

Source: CURO Group Holdings Corp.