CURO Group Holdings Corp. Reports Second Quarter 2023 Financial Results

-Gross loans receivables increased 3.7% sequentially to $2.1 billion-

-Total revenue of $209.2 million-

-Operating expenses declined 8.5% sequentially to $108.1 million-

-Net charge-off normalizes at 13%-

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 second quarter ended June 30, 2023.

“We delivered solid results in the second quarter as we continued to execute on all facets of our core business,” said Doug Clark, Chief Executive Officer. “Our fundamentals continued to gradually improve, with revenue, net charge-offs, gross loans receivable and expenses all matching or exceeding our expectations. As we look ahead, despite ongoing macro challenges, we are encouraged by opportunities present in both the U.S. and Canada while remaining mindful to balance future growth with further improving our bottom line. Our extensive industry experience, investments in automation and strong consumer demand for our products position us well for long term growth and shareholder value creation.”

Second Quarter 2023 Consolidated Summary Results

• Gross loans receivable increased 3.7% sequentially to $2.1 billion, primarily driven by sequential increases in Canada POS Lending and Direct Lending Revolving LOC Loans of 6.9% and 2.5%, respectively.
• Net revenue of $129.6 million, down 11.5% sequentially, primarily driven by a higher provision for loan loss expense related to the increase in charge offs and Allowance for loan loss build due to loans receivable growth and change in macroeconomic conditions.
• Total operating expenses declined 8.5% sequentially, to $108.1 million, primarily related to one-time restructuring charges of $10.0 million recognized in the first quarter of 2023.
• Net loss of $59.3 million ($1.45 per share) compared with Net loss of $59.5 million ($1.46 per share) for the first quarter of 2023. The $0.2 million improvement was primarily driven by favorable decreases of $18.4 million in provision for income taxes and $10.1 million in total operating expenses, partially offset by lower net revenue and a $7.2 million increase in Interest expense due to the new term loan secured in May 2023 as well as increased utilization of non-recourse revolving credit facilities and $8.9 million of extinguishment and modification costs arising from the second quarter's debt transactions.
• Net charge-off rate increased 150 bps, sequentially to 13.0%, returning to normalized rates from the temporary lower rates we saw in our Direct Lending brands in Canada after the policy change we made in the first quarter of 2023. The Company's 91+ days delinquency ratio remained flat sequentially at 3.2%.

		As of or for the Quarter Ended
		Jun 30,			Mar 31,			Dec 31,			Sep 30,			Jun 30,
Delinquency and Loss Ratios		2023			2023			2022			2022			2022
31-60 days delinquency ratio		1.9	%		1.8	%		1.9	%		2.5	%		2.4	%
61-90 days delinquency ratio		1.3	%		1.5	%		1.3	%		1.5	%		1.8	%
91+ days delinquency ratio		3.2	%		3.2	%		2.6	%		2.6	%		2.0	%
Net charge-offs		13.0	%		11.5	%		14.8	%		13.2	%		24.0	%

Funding and Liquidity

As of June 30, 2023, principal debt balances outstanding were $2.8 billion, consisting of 69.2% of fixed rate or hedged variable rate debt and 30.8% of non-hedged variable rate debt.

As of June 30, 2023, available capital resources were approximately $361.9 million, comprised of $111.3 million in unrestricted Cash and cash equivalents, $176.7 million in unused borrowing capacity and $74.0 million of unencumbered Gross loans receivable.

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 under 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 Thursday, August 3, 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 1-416-764-8658 (Toll free: 1-888-396-8049; Conference ID: 82661841). Please ask to join the CURO Group Holdings call. An archived version of the webcast will be available on the CURO Investors website for 90 days.

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, 2023.

Table 1 - Consolidated Statements of Operations

(in thousands, except per share data, unaudited)		Three Months Ended,
		Jun 30,				Mar 31,				Dec 31,				Sept 30,				Jun 30,
		2023				2023				2022				2022				2022
Revenue
Interest and fees revenue		$	178,986			$	179,437			$	181,605			$	180,515			$	278,331
Insurance and other income			30,257				30,036				35,593				33,605				26,073
Total revenue			209,243				209,473				217,198				214,120				304,404
Provision for losses			79,598				62,932				94,849				78,399				129,546
Net revenue			129,645				146,541				122,349				135,721				174,858
Operating Expenses
Salaries and benefits			61,346				64,805				66,067				53,413				82,427
Occupancy			11,267				11,672				12,114				12,827				17,507
Advertising			2,131				2,175				3,692				5,244				12,707
Direct operations			15,466				13,092				11,832				11,729				20,293
Depreciation and amortization			9,141				9,021				8,337				9,499				8,672
Other operating expense			8,796				17,433				24,002				23,645				18,787
Total operating expenses			108,147				118,198				126,044				116,357				160,393
Other expense (income)
Interest expense			66,101				58,943				54,978				50,149				42,193
Loss from equity method investment			2,134				3,413				1,932				2,309				1,328
Goodwill impairment			—				—				145,241				—				—
Extinguishment or modification of debt costs			8,864				—				689				3,702				—
Loss on change in fair value of contingent consideration			—				2,728				—				(11,354	)			4,014
Gain on sale of business			—				2,027				—				(68,443	)			—
Miscellaneous expenses			1,435				—				—				—				—
Total other expense (income)			78,534				67,111				202,840				(23,637	)			47,535
Income (loss) before income taxes			(57,036	)			(38,768	)			(206,535	)			43,001				(33,070	)
Provision (benefit) for income taxes			2,291				20,703				(20,142	)			17,348				(6,990	)
Net (loss) income		$	(59,327	)		$	(59,471	)		$	(186,393	)		$	25,653			$	(26,080	)
Basic (loss) earnings per share		$	(1.45	)		$	(1.46	)		$	(4.60	)		$	0.63			$	(0.65	)
Diluted (loss) earnings per share		$	(1.45	)		$	(1.46	)		$	(4.60	)		$	0.63			$	(0.65	)
Weighted average common shares outstanding:
Basic			41,002				40,783				40,488				40,479				40,376
Diluted			41,002				40,783				40,488				40,835				40,376

Table 2 - Consolidated Balance Sheets

		As of
		Jun 30,				Mar 31,				Dec 31,				Sep 30,				Jun 30,
(in thousands, unaudited)		2023				2023				2022				2022				2022
ASSETS
Cash and cash equivalents		$	112,531			$	54,935			$	73,932			$	45,683			$	37,394
Restricted cash			109,484				123,282				91,745				144,020				97,465
Gross loans receivable			2,139,865				2,062,829				2,087,833				1,894,427				1,592,815
Less: Allowance for loan losses			(272,615	)			(259,959	)			(122,028	)			(102,743	)			(90,286	)
Loans receivable, net			1,867,250				1,802,870				1,965,805				1,791,684				1,502,529
Income taxes receivable			20,854				20,100				21,918				13,469				46,450
Prepaid expenses and other			44,518				47,295				53,057				65,167				25,370
Property and equipment, net			28,418				29,867				31,957				37,402				38,752
Investment in Katapult			18,368				20,502				23,915				25,848				28,157
Right of use asset - operating leases			56,021				54,597				61,197				64,683				64,602
Deferred tax assets			54,102				53,474				49,893				31,986				23,993
Goodwill			277,069				276,487				276,269				424,292				352,990
Intangibles, net			133,947				127,387				123,677				120,345				113,130
Other assets			22,275				10,991				15,828				12,774				8,558
Assets held for sale (1)			—				—				—				—				338,779
Total Assets		$	2,744,837			$	2,621,787			$	2,789,193			$	2,777,353			$	2,678,169
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities		$	78,343			$	85,875			$	73,827			$	66,723			$	81,423
Deferred revenue			36,793				33,227				32,259				25,111				23,425
Lease liability - operating leases			56,585				55,468				62,847				66,370				67,339
Contingent consideration related to acquisition			18,499				18,128				16,884				15,770				30,354
Income taxes payable			788				—				—				—				4
Accrued interest			39,306				20,090				38,460				18,048				34,970
Debt			2,772,872				2,627,263				2,607,314				2,449,316				2,189,431
Other long-term liabilities			10,016				10,552				11,736				11,563				12,146
Deferred tax liabilities			8				—				—				—				12,360
Liabilities held for sale (1)			—				—				—				—				111,137
Total Liabilities		$	3,013,210			$	2,850,603			$	2,843,327			$	2,652,901			$	2,562,589
Total Stockholders' (Deficit) Equity			(268,373	)			(228,816	)			(54,134	)			124,452				115,580
Total Liabilities and Stockholders' (Deficit) Equity		$	2,744,837			$	2,621,787			$	2,789,193			$	2,777,353			$	2,678,169
(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, which closed in July 2022.

Table 3 - Consolidated Portfolio Performance

(in thousands, except percentages, unaudited)		Q2 2023				Q1 2023				Q4 2022				Q3 2022				Q2 2022(1)
Gross loans receivable
Revolving LOC		$	1,385,152			$	1,314,695			$	1,284,515			$	1,129,387			$	1,128,372
Installment loans			754,713				748,134				803,318				765,040				652,468
Total gross loans receivable		$	2,139,865			$	2,062,829			$	2,087,833			$	1,894,427			$	1,780,840
Lending Revenue
Revolving LOC		$	86,703			$	84,225			$	81,170			$	77,037			$	96,582
Installment loans			92,283				95,212				100,435				103,478				181,749
Total lending revenue		$	178,986			$	179,437			$	181,605			$	180,515			$	278,331
Lending Provision
Revolving LOC		$	42,932			$	30,106			$	46,745			$	41,787			$	40,435
Installment loans			35,171				31,139				46,442				33,510				86,484
Total lending provision		$	78,103			$	61,245			$	93,187			$	75,297			$	126,919
NCOs (2)
Revolving LOC		$	32,786			$	17,953			$	35,387			$	30,907			$	33,945
Installment loans			35,483				41,078				38,168				31,372				71,056
Total NCOs		$	68,269			$	59,031			$	73,555			$	62,279			$	105,001
NCO rate (annualized) (2) (3)
Revolving LOC			9.7	%			5.6	%			11.6	%			10.8	%			12.8	%
Installment loans			18.9	%			21.5	%			19.6	%			17.6	%			44.8	%
Total NCO rate			13.0	%			11.5	%			14.8	%			13.2	%			24.0	%
ACL rate (4) (5)
Revolving LOC			13.6	%			13.3	%			6.1	%			6.0	%			6.7	%
Installment loans			11.2	%			11.3	%			5.4	%			4.6	%			8.1	%
Total ACL rate			12.7	%			12.6	%			5.8	%			5.4	%			6.7	%
31+ days past-due rate (4)
Revolving LOC			5.6	%			5.5	%			3.3	%			4.1	%			4.1	%
Installment loans			8.1	%			8.2	%			9.6	%			10.2	%			9.2	%
Total past-due rate			6.5	%			6.5	%			5.8	%			6.6	%			6.1	%
(1) Includes loan balances and activity classified as Held for Sale.
(2) NCOs include $0.5 million and $10.3 million, for the three months ended September 30, 2022 and June 30, 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 quarter end.
(5) 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 Income / (Loss)

(in thousands, unaudited)		Three Months Ended,
		Jun 30,			Mar 31,			Dec 31,				Sep 30,			Jun 30,
		2023			2023			2022				2022			2022
Total revenue		$	167,016		$	169,368		$	181,925			$	186,409		$	281,251
Provision for losses			63,755			48,364			77,724				65,020			123,584
Net revenue			103,261			121,004			104,201				121,389			157,667
Total operating expenses			91,285			103,151			111,632				102,840			143,965
Segment operating income (loss)		$	11,976		$	17,853		$	(7,431	)		$	18,549		$	13,702

Table 5 - Direct Lending Segment - Portfolio Performance

(in thousands, except percentages, unaudited)		Q2 2023				Q1 2023				Q4 2022				Q3 2022				Q2 2022(1)
Gross loans receivable
Revolving LOC		$	472,902			$	461,443			$	451,077			$	439,117			$	501,209
Installment loans			754,713				748,133				803,318				765,041				652,467
Total gross loans receivable		$	1,227,615			$	1,209,576			$	1,254,395			$	1,204,158			$	1,153,676
Lending Revenue
Revolving LOC		$	49,483			$	49,092			$	49,915			$	52,461			$	75,736
Installment loans			92,283				95,212				100,435				103,478				181,748
Total lending revenue		$	141,766			$	144,304			$	150,350			$	155,939			$	257,484
Lending Provision
Revolving LOC		$	27,089			$	15,539			$	29,620			$	28,408			$	34,472
Installment loans			35,171				31,139				46,442				33,511				86,485
Total lending provision		$	62,260			$	46,678			$	76,062			$	61,919			$	120,957
NCOs (2)
Revolving LOC		$	21,780			$	6,234			$	26,715			$	24,793			$	30,408
Installment loans			35,483				41,078				38,168				29,783				43,661
Total NCOs		$	57,263			$	47,312			$	64,883			$	54,576			$	74,069
NCO rate (annualized) (2) (3)
Revolving LOC			18.7	%			5.5	%			23.8	%			20.9	%			25.0	%
Installment loans			18.9	%			21.5	%			19.3	%			16.7	%			27.7	%
Total NCO rate			18.8	%			15.6	%			20.9	%			18.4	%			26.5	%
ACL rate (4) (5)
Revolving LOC			26.6	%			25.6	%			8.4	%			7.9	%			9.3	%
Installment loans			11.2	%			11.3	%			5.4	%			4.6	%			6.9	%
Total ACL rate			17.1	%			16.8	%			6.5	%			5.8	%			7.9	%
31+ days past-due rate (4)
Revolving LOC			8.5	%			8.4	%			4.1	%			5.1	%			5.8	%
Installment loans			8.1	%			8.2	%			9.6	%			10.2	%			9.7	%
Total past-due rate			8.3	%			8.3	%			7.6	%			8.3	%			8.0	%
(1) Includes loan balances and activity classified as Held for Sale.
(2) NCOs include $0.5 million and $10.3 million, for the three months ended September 30, 2022 and June 30, 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 quarter end.
(5) 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

(in thousands, unaudited)		Three Months Ended,
		Jun 30,			Mar 31,			Dec 31,			Sept 30,			Jun 30,
		2023			2023			2022			2022			2022
Total revenue		$	42,227		$	40,105		$	35,273		$	27,711		$	23,153
Provision for losses			15,843			14,568			17,125			13,379			5,962
Net revenue			26,384			25,537			18,148			14,332			17,191
Total operating expenses			16,862			15,047			14,412			13,518			16,428
Segment operating income		$	9,522		$	10,490		$	3,736		$	814		$	763

Table 7 - Canada POS Lending Segment - Portfolio Performance

(in thousands, except percentages, unaudited)		Q2 2023				Q1 2023				Q4 2022				Q3 2022				Q2 2022
Revolving LOC
Gross loans receivable		$	912,250			$	853,253			$	833,438			$	690,270			$	627,163
Lending revenue		$	37,220			$	35,133			$	31,255			$	24,575			$	20,847
Lending provision		$	15,843			$	14,568			$	17,125			$	13,379			$	5,963
NCOs		$	11,006			$	11,719			$	8,672			$	6,114			$	3,537
NCO rate (annualized) (1)			5.0	%			5.6	%			4.4	%			3.6	%			2.4	%
ACL rate (2) (3)			6.8	%			6.7	%			4.9	%			4.8	%			4.5	%
31+ days past-due rate (2)			4.0	%			3.9	%			2.9	%			3.6	%			2.8	%
(1) We calculate NCO rate as total quarterly NCOs divided by Average gross loans receivable and then 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.
(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 drivers of creating long term growth and shareholder value. 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:

Email: IR@curo.com

Source: CURO Group Holdings Corp.