CURO Group Holdings Corp. (NYSE: CURO) (“CURO” or the
“Company”), a market leader in providing short-term credit to
underbanked consumers, today announced financial results for its
second quarter ended June 30, 2019.
“We are pleased to report another very solid quarter with
momentum that raises our expectations for full-year 2019 earnings,”
said Don Gayhardt, President and Chief Executive Officer. “Our
Canadian business posted year-over-year non-GAAP Adjusted EBITDA
growth of 19.1% on continued improvement in credit quality. Our
U.S. business continues to perform well with year-over-year 10.5%
revenue growth on 11.0% loan growth. We believe that general
economic conditions continue to be favorable for our customers and
we are very focused on making disciplined credit and customer
acquisition spending decisions. Our strong operating cost controls
are helping to drive efficiencies and operating leverage, which
helped us to grow non-GAAP
Adjusted Diluted Earnings per Share by 20.9% year-over-year, to
$0.52 per share for the quarter.”
Consolidated Summary Results - Unaudited
For the Three Months Ended
(1)
For the Six Months Ended (1)
(in thousands, except per share data)
6/30/2019
6/30/2018
Variance
6/30/2019
6/30/2018
Variance
Revenue
$
264,300
$
237,169
11.4
%
$
542,239
$
488,012
11.1
%
Gross margin
81,181
77,348
5.0
%
186,678
183,194
1.9
%
Company Owned gross loans receivable
609,593
420,588
44.9
%
609,593
420,588
44.9
%
Net income from continuing operations
17,667
18,718
(5.6
)%
46,340
43,631
6.2
%
Adjusted Net Income (2)
24,437
20,834
17.3
%
62,387
58,046
7.5
%
Diluted Earnings per Share from continuing
operations
$
0.38
$
0.39
(2.6
)%
$
0.98
$
0.92
6.5
%
Adjusted Diluted Earnings per Share
(2)
$
0.52
$
0.43
20.9
%
$
1.32
$
1.21
9.1
%
EBITDA (2)
46,794
48,838
(4.2
)%
108,123
112,107
(3.6
)%
Adjusted EBITDA (2)
53,689
51,110
5.0
%
126,543
127,861
(1.0
)%
Weighted Average Shares - diluted
47,107
47,996
47,335
47,757
(1) Excludes discontinued operations; see
"Results of Discontinued Operations" for additional details of the
impact of discontinued operations
(2) These are non-GAAP metrics; see
"Results of Operations - CURO Group Consolidated Operations" for a
reconciliation to the nearest GAAP metric for each of these
non-GAAP metrics; see "Non-GAAP Financial Measures" for definition
of non-GAAP metric.
Second quarter 2019 developments include:
- At $264.3 million our revenue was a record for a second quarter
period. Revenue increased $27.1 million, or 11.4%, over the
prior-year period, driven primarily by organic growth in the U.S.
and Open-End growth in Canada. Year-over-year comparisons included
an estimated $12 million benefit from the Open-End loss recognition
change (“Q1 2019 Open-End Loss Recognition Change”) discussed below
offset by a similar increase in provision expense.
- Growth in Company Owned gross loans receivable and Gross
combined loans receivables of 44.9% and 38.2%, respectively, versus
the prior-year period. Year-over-year comparisons benefited from
the Q1 2019 Open-End Loss Recognition Change. Excluding the impact
of this change, Company Owned gross loans receivable and Gross
combined loans receivables grew 36.3% and 30.8%, respectively.
- Consolidated quarterly net charge-off ("NCO") rates improved
over 270 bps compared to the same quarter a year ago, with all
products improving except U.S. Unsecured Installment loans.
Year-over-year NCO rate comparisons for U.S. Unsecured Installment
loans continue to be negatively affected by credit-line increase
initiatives and mix shift.
- Adjusted Diluted Earnings per Share of $0.52, an increase of
20.9% over the prior-year period; Diluted Earnings per Share from
continuing operations of $0.38, a decrease of 2.6% versus the
prior-year period
- Under the terms of our $50 million share repurchase program
that was announced in April 2019 and commenced in June 2019, the
Company purchased in the open market 1,038,500 shares through July
26, 2019.
Year-to-date 2019 developments include:
- Record first half revenue of $542.2 million, an increase of
11.1% over the prior-year period (including an estimated $21
million benefit from the Q1 2019 Open-End Loss Recognition Change,
offset by a similar increase in provision expense).
- Net Income from continuing operations of $46.3 million, an
increase of 6.2% over the prior-year period
- Adjusted Net Income of $62.4 million, an increase of 7.5% over
the prior-year period.
- Continued success with the Canada Open-End product transition,
as the portfolio matures and NCO rates improve.
- Pay down of our Senior Secured Revolving Loan Facility from
$20.0 million to zero, and reduction of the net balances drawn on
our Non-Recourse Canada SPV Facility by $20.9 million, to $94.6
million as of June 30, 2019.
- The successful launch of our new demand deposit account,
Revolve Finance, sponsored by Republic Bank of Chicago. Revolve is
being rolled out across our U.S. branches, as well as online, and
provides customers with a checking account solution that combines a
Visa-branded debit card, a number of technology-enabled tools and
optional overdraft protection.
Fiscal 2019 Outlook
The Company has increased its full-year 2019 guidance for
Adjusted Net Income, Adjusted EBITDA and Adjusted Diluted Earnings
per Share from its guidance included in its Current Report on Form
8-K filed with the Securities and Exchange Commission on March 1,
2019, as follows:
- Revenue in the range of $1.154 billion to $1.170 billion,
unchanged from prior guidance
- Adjusted Net Income in the range of $120 million to $135
million, an increase from prior guidance of $112 million to $128
million
- Adjusted EBITDA in the range of $250 million to $265 million,
an increase from prior guidance of $240 million to $260
million
- Adjusted Diluted Earnings per Share in the range of $2.55 to
$2.80, an increase from prior guidance of $2.35 to $2.65
- Effective income tax rate in the range of 25% to 27%, unchanged
from prior guidance
See "Fiscal 2019 Outlook - Reconciliations" at the end of this
release for a reconciliation to the nearest GAAP metric and
"Non-GAAP Financial Measures" for a description of non-GAAP
metrics.
Discussion of Consolidated Revenue by Product and
Segment
Year-over-year comparisons for Open-End were affected by the Q1
2019 Open-End Loss Recognition Change. Throughout the release,
financial results of former U.K. operations have been removed for
all periods presented, as it was discontinued for accounting and
reporting purposes in February 2019.
The following tables summarize revenue by product, including
credit services organization ("CSO") fees, for the periods
indicated.
Three Months Ended
June 30, 2019
June 30, 2018
(in thousands, unaudited)
U.S.
Canada
Total
U.S.
Canada
Total
Unsecured Installment
$
120,482
$
1,630
$
122,112
$
111,244
$
3,692
$
114,936
Secured Installment
26,076
—
26,076
25,777
—
25,777
Open-End
32,318
22,654
54,972
23,261
3,961
27,222
Single-Pay
26,425
19,103
45,528
24,978
33,347
58,325
Ancillary
4,745
10,867
15,612
4,866
6,043
10,909
Total revenue
$
210,046
$
54,254
$
264,300
$
190,126
$
47,043
$
237,169
During the three months ended June 30, 2019, total revenue grew
$27.1 million, or 11.4%, to $264.3 million, compared to the
prior-year period, predominantly driven by growth in Unsecured
Installment loans in the U.S. and Open-End loans in both countries.
Geographically, total revenue in the U.S. and Canada grew 10.5% and
15.3%, respectively. From a product perspective, Unsecured
Installment revenues rose 6.2%, driven by related loan growth,
while Secured Installment revenues and related receivables were
consistent year-over-year. Year-over-year Canadian Single-Pay usage
and product profitability were negatively impacted by regulatory
changes in Ontario effective July 1, 2018, and the strategic
transition of qualifying customers to Open-End loans. Open-End
revenues rose 101.9% on organic growth in legacy states and the
newer Virginia market in the U.S. Open-End loan growth in Canada
was driven primarily by the introduction of Open-End loans in
Ontario during the third quarter of 2018. Open-End loans in Canada
grew $35.1 million, or 19.1%, sequentially (defined within this
release as the change from the first quarter of 2019 to the second
quarter of 2019, or comparable periods for 2018 sequential
metrics). Single-Pay loan balances stabilized in Canada
sequentially. Ancillary revenues increased 43.1% versus the same
quarter a year ago, primarily due to the sale of insurance products
to Installment and Open-End loan customers in Canada.
Six Months Ended
June 30, 2019
June 30, 2018
(in thousands, unaudited)
U.S.
Canada
Total
U.S.
Canada
Total
Unsecured Installment
$
254,485
$
3,405
$
257,890
$
231,720
$
8,595
$
240,315
Secured Installment
53,553
—
53,553
52,633
—
52,633
Open-End
64,911
42,930
107,841
49,095
5,350
54,445
Single-Pay
53,593
38,696
92,289
51,043
67,639
118,682
Ancillary
9,623
21,043
30,666
10,228
11,709
21,937
Total revenue
$
436,165
$
106,074
$
542,239
$
394,719
$
93,293
$
488,012
For the six months ended June 30, 2019, total revenue grew $54.2
million, or 11.1%, to $542.2 million, compared to the prior-year
period, predominantly driven by growth in Unsecured Installment
loans in the U.S. and Open-End loans in both countries.
Geographically, total revenue in the U.S. and Canada grew 10.5% and
13.7%, respectively. From a product perspective, Unsecured
Installment revenues rose 7.3%, driven by related loan growth,
while Secured Installment revenues and related receivables remained
consistent year-over-year. Year-over-year Canadian Single-Pay usage
and product profitability were negatively impacted by regulatory
changes in Ontario effective July 1, 2018, and the strategic
transition of qualifying customers to Open-End loans. Open-End
revenues rose 98.1% on organic growth in legacy states and the
newer Virginia market in the U.S. Open-End loan growth in Canada
was driven primarily by the introduction of Open-End loans in
Ontario during the third quarter of 2018. Ancillary revenues
increased 39.8% versus the same quarter a year ago, primarily due
to the sale of insurance to Installment and Open-End loan customers
in Canada.
The following table presents revenue composition, including CSO
fees, of the products and services that we currently offer:
Three Months Ended June 30,
Six Months Ended June 30,
2019
2018
2019
2018
Installment
56.1
%
59.3
%
57.4
%
59.9
%
Canada Single-Pay
7.2
%
14.1
%
7.1
%
13.9
%
U.S. Single-Pay
10.0
%
10.5
%
9.9
%
10.5
%
Open-End
20.8
%
11.5
%
19.9
%
11.2
%
Ancillary
5.9
%
4.6
%
5.7
%
4.5
%
Total
100.0
%
100.0
%
100.0
%
100.0
%
For the three months ended June 30, 2019 and 2018, revenue
generated through the online channel as a percentage of
consolidated revenue was 44% and 40%, respectively. For the six
months ended June 30, 2019 and 2018, revenue generated through the
online channel as a percentage of consolidated revenue was 45% and
41%, respectively.
Loan Volume and Portfolio Performance Analysis
The following table summarizes Company Owned gross loans
receivable, a GAAP-basis balance sheet measure, with reconciliation
to gross combined loans receivable, a non-GAAP measure(1). Gross
combined loans receivables include loans originated by third-party
lenders through CSO programs, which are not included in the
Consolidated Financial Statements but from which we earn revenue by
providing a guarantee to the unaffiliated lender:
As of
(in millions, unaudited)
June 30, 2019
March 31, 2019
December 31, 2018
September 30, 2018
June 30, 2018
Company Owned gross loans receivable
$
609.6
$
553.2
$
571.5
$
537.8
$
420.6
Gross loans receivable Guaranteed by the
Company
67.3
61.9
80.4
78.8
69.2
Gross combined loans receivable (1)
$
676.9
$
615.1
$
651.9
$
616.6
$
489.8
(1) See "Non-GAAP Financial Measures" at the end of this release
for definition and more information.
Gross combined loans receivable by product are presented below
(year-over-year and sequential comparisons for Open-End are
affected by the Q1 2019 Open-End Loss Recognition Change):
As of
(in millions, unaudited)
June 30, 2019
March 31, 2019
December 31, 2018
September 30, 2018
June 30, 2018
Unsecured Installment
$
164.7
$
161.7
$
190.4
$
185.1
$
160.3
Secured Installment
85.5
81.0
93.0
91.2
84.6
Single-Pay
76.1
69.7
80.8
77.4
84.7
Open-End
283.3
240.8
207.3
184.1
91.0
CSO
67.3
61.9
80.4
78.8
69.2
Total
$
676.9
$
615.1
$
651.9
$
616.6
$
489.8
Gross combined loans receivable increased $187.2 million, or
38.2%, to $676.9 million as of June 30, 2019, from $489.8 million
as of June 30, 2018. Geographically, gross combined loans
receivable grew 11.0% and 120.1%, respectively, in the U.S. and
Canada, explained further by product in the following sections.
Unsecured Installment Loans
Unsecured Installment revenue and gross combined loans
receivable increased from the prior-year quarter due to growth in
the U.S., primarily in California and Texas. Unsecured Installment
gross combined loans receivable grew $3.1 million, or 1.4%,
compared to June 30, 2018, despite a decline in Canada of $9.1
million due to mix shift to Open-End loans. In the U.S., Unsecured
Installment gross combined loans receivable increased 6.0%
year-over-year. Unsecured Installment loans Guaranteed by the
Company declined $1.3 million year-over-year due to a regulatory
change in Ohio and the subsequent conversion of Ohio CSO volume to
Company-Owned loans, partially offset by growth in Texas.
The NCO rate for Company Owned Unsecured Installment gross loans
receivables in the second quarter of 2019 increased approximately
281 bps from the second quarter of 2018, due to geographic mix
shift from Canada to the U.S. and increases in U.S. NCO rates due
to product and credit policy decisions. Canada Unsecured
Installment balances declined $9.1 million compared to the prior
year due to shifting customer preferences from Unsecured
Installment to Open-End, while U.S. balances grew $13.5 million due
to customer demand. As a result, the U.S. percentage mix of total
Company Owned Unsecured Installment gross loans receivable rose
from 85.4% last year to 91.3% this year. NCO rates in the U.S. are
higher than Canada, so the relative growth in the U.S. balances
resulted in an overall increase in the consolidated NCO rate for
Company Owned Unsecured Installment loans. In addition, the NCO
rate in the U.S. rose from 18.6% in the second quarter of 2018 to
21.3% in the second quarter of 2019, due primarily to credit-line
increases and expansion of the Avio brand. As an immature
portfolio, Avio has higher relative NCO rates.
The Unsecured Installment Allowance for loan losses as a
percentage of Company Owned Unsecured Installment gross loans
receivable ("allowance coverage") increased sequentially from 20.8%
as of March 31, 2019 to 21.4%, as of June 30, 2019, primarily as a
result of related higher NCO rates as the past due rate rose only
60 bps versus the same quarter a year ago.
NCO rates for Unsecured Installment loans Guaranteed by the
Company increased 150 bps compared to the same quarter in 2018
because of credit-line increases and wind down of the Ohio
portfolio. The CSO liability for losses remained consistent
sequentially from 14.4% last quarter to 14.5% during the second
quarter of 2019 as the past due rate was flat to the second quarter
of last year.
2019
2018
(dollars in thousands, unaudited)
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
Unsecured Installment loans:
Revenue - Company Owned
$
59,814
$
65,542
$
69,748
$
64,146
$
54,868
Provision for losses - Company Owned
33,514
33,845
39,565
32,946
23,219
Net revenue - Company Owned
$
26,300
$
31,697
$
30,183
$
31,200
$
31,649
Net charge-offs - Company Owned
$
31,970
$
37,919
$
37,951
$
27,308
$
26,527
Revenue - Guaranteed by the Company
$
62,298
$
70,236
$
75,559
$
73,514
$
60,069
Provision for losses - Guaranteed by the
Company
28,336
27,422
37,352
39,552
26,974
Net revenue - Guaranteed by the
Company
$
33,962
$
42,814
$
38,207
$
33,962
$
33,095
Net charge-offs - Guaranteed by the
Company
$
27,486
$
30,421
$
38,522
$
37,995
$
25,667
Unsecured Installment gross combined
loans receivable:
Company Owned
$
164,722
$
161,716
$
190,403
$
185,130
$
160,285
Guaranteed by the Company (1)(2)
65,055
59,740
77,451
75,807
66,351
Unsecured Installment gross combined loans
receivable (1)(2)
$
229,777
$
221,456
$
267,854
$
260,937
$
226,636
Average gross loans receivable:
Average Unsecured Installment gross loans
receivable - Company Owned
$
163,219
$
176,060
$
187,767
$
172,708
$
158,121
Average Unsecured Installment gross loans
receivable - Guaranteed by the Company
$
62,398
$
68,596
$
76,629
$
71,079
$
60,342
Allowance for loan losses and CSO
liability for losses:
Unsecured Installment Allowance for loan
losses (3)
$
35,223
$
33,666
$
37,716
$
36,160
$
30,291
Unsecured Installment CSO liability for
losses (3)
$
9,433
$
8,583
$
11,582
$
12,750
$
11,193
Unsecured Installment Allowance for loan
losses as a percentage of Unsecured Installment gross loans
receivable
21.4
%
20.8
%
19.8
%
19.5
%
18.9
%
Unsecured Installment CSO liability for
losses as a percentage of Unsecured Installment gross loans
guaranteed by the Company
14.5
%
14.4
%
15.0
%
16.8
%
16.9
%
Unsecured Installment past-due
balances:
Unsecured Installment gross loans
receivable
$
38,037
$
40,801
$
49,087
$
49,637
$
36,125
Unsecured Installment gross loans
guaranteed by the Company
$
10,087
$
7,967
$
11,708
$
12,120
$
10,319
Past-due Unsecured Installment gross loans
receivable -- percentage (2)
23.1
%
25.2
%
25.8
%
26.8
%
22.5
%
Past-due Unsecured Installment gross loans
guaranteed by the Company -- percentage (2)
15.5
%
13.3
%
15.1
%
16.0
%
15.6
%
Unsecured Installment other
information:
Originations - Company Owned
$
102,792
$
78,515
$
114,182
$
121,415
$
114,038
Originations - Guaranteed by the Company
(1)
$
80,445
$
68,899
$
89,319
$
91,828
$
84,082
Unsecured Installment ratios:
Provision as a percentage of gross loans
receivable - Company Owned
20.3
%
20.9
%
20.8
%
17.8
%
14.5
%
Provision as a percentage of gross loans
receivable - Guaranteed by the Company
43.6
%
45.9
%
48.2
%
52.2
%
40.7
%
(1) Includes loans originated by
third-party lenders through CSO programs, which are not included in
the Consolidated Financial Statements.
(2) Non-GAAP measure - Refer to "Non-GAAP
Financial Measures" for further details.
(3) Allowance for loan losses is reported
as a contra-asset reducing gross loans receivable while the CSO
liability for losses is reported as a liability on the Consolidated
Balance Sheets.
Secured Installment Loans
Secured Installment revenue and related gross combined loans
receivable balances as of June 30, 2019 remained consistent
year-over-year. Both the NCO and past-due rates decreased modestly
year-over-year. Secured Installment Allowance for loan losses and
CSO liability for losses as a percentage of Secured Installment
gross combined loans receivable decreased sequentially from 11.9%
last quarter to 11.5% during the second quarter of 2019, based
primarily on NCO rate improvement.
2019
2018
(dollars in thousands, unaudited)
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
Secured Installment loans:
Revenue
$
26,076
$
27,477
$
29,482
$
28,562
$
25,777
Provision for losses
7,821
7,080
12,035
10,188
7,650
Net revenue
$
18,255
$
20,397
$
17,447
$
18,374
$
18,127
Net charge-offs
$
7,630
$
9,822
$
11,132
$
9,285
$
9,003
Secured Installment gross combined loan
balances:
Secured Installment gross combined loans
receivable (1)(2)
$
87,718
$
83,087
$
95,922
$
94,194
$
87,434
Average Secured Installment gross combined
loans receivable
$
85,403
$
89,505
$
95,058
$
90,814
$
84,984
Secured Installment Allowance for loan
losses and CSO liability for losses (2)
$
10,067
$
9,874
$
12,616
$
11,714
$
10,812
Secured Installment Allowance for loan
losses and CSO liability for losses as a percentage of Secured
Installment gross combined loans receivable
11.5
%
11.9
%
13.2
%
12.4
%
12.4
%
Secured Installment past-due
balances:
Secured Installment past-due gross loans
receivable and gross loans guaranteed by the Company
$
14,570
$
13,866
$
17,835
$
17,754
$
15,246
Past-due Secured Installment gross loans
receivable and gross loans guaranteed by the Company -- percentage
(1)
16.6
%
16.7
%
18.6
%
18.8
%
17.4
%
Secured Installment other
information:
Originations (3)
$
49,051
$
33,490
$
49,217
$
51,742
$
53,597
Secured Installment ratios:
Provision as a percentage of gross
combined loans receivable
8.9
%
8.5
%
12.5
%
10.8
%
8.7
%
(1) Non-GAAP measure - Refer to "Non-GAAP
Financial Measures" for further details.
(2) Allowance for loan losses is reported
as a contra-asset reducing gross loans receivable while the CSO
liability for losses is reported as a liability on the Consolidated
Balance Sheets.
(3) Includes loans originated by
third-party lenders through CSO programs, which are not included in
the Consolidated Financial Statements.
Open-End Loans
Open-End loan balances as of June 30, 2019 increased by $192.3
million compared to June 30, 2018, primarily due to the launch of
Open-End loans in Canada in late 2017, which accounted for $167.9
million of the year-over-year growth. Also, the Q1 2019 Open-End
Loss Recognition Change affected comparability, with the inclusion
of $35.4 million of past-due Open-End loans as of June 30, 2019.
Open-End balances in Canada grew $35.1 million sequentially from
the first quarter of 2019 ($30.8 million on a constant currency
basis) due to organic growth of the product. Remaining
year-over-year loan growth was driven by the organic growth in
seasoned markets, such as Tennessee and Kansas, and the relatively
newer Virginia market.
The Open-End NCO rate during the second quarter of 2019 was
9.6%, compared to 16.7% in the same quarter in the prior year, as a
result of a modest improvement in the U.S. and overall mix shift to
Canada. NCO rates are lower in Canada, and Open-End loans in Canada
comprised 77.4% of total Open-End loans as of June 30, 2019,
compared to 56.4% as of June 30, 2018. Sequentially, on a non-GAAP
pro forma basis, as described below, NCO rates improved 170 bps,
primarily on portfolio improvements in Canada.
Q1 2019 Open-End Loss Recognition Change
Effective January 1, 2019, we modified the timeframe in which we
charge-off Open-End loans and made related refinements to our loss
provisioning methodology. Prior to January 1, 2019, we deemed
Open-End loans uncollectible and charged-off when a customer missed
a scheduled payment and the loan was considered past due. Because
of our continuing shift to Open-End loans in Canada and our
analysis of payment patterns on early-stage versus late-stage
delinquencies, we revised our estimates and now consider Open-End
loans uncollectible when the loan has been contractually past-due
for 90 consecutive days. Consequently, past-due Open-End loans and
related accrued interest now remain in loans receivable for 90 days
before being charged off against the allowance for loan losses. All
recoveries on charged-off loans are credited to the allowance for
loan losses. We evaluate the adequacy of the allowance for loan
losses compared to the related gross loans receivable balances that
include accrued interest.
The aforementioned change was treated as a change in accounting
estimate for accounting purposes and applied prospectively
beginning January 1, 2019.
The change affects comparability to prior periods as
follows:
- Gross combined loans receivable:
balances as of June 30, 2019 include $35.4 million of Open-End
loans that are up to 90 days past-due with related accrued
interest, while such balances for periods prior to March 31, 2019
do not include any past-due loans.
- Revenues: for the quarter ended
June 30, 2019, gross revenues include interest earned on past-due
loan balances of approximately $12 million, while revenues in
prior-year periods do not include comparable amounts. Revenue for
the six months ended June 30, 2019 included interest earned on
past-due loan balances of approximately $21 million.
- Provision for Losses:
prospectively, past-due, unpaid balances plus related accrued
interest charge-off on day 91. Provision expense is affected by
NCOs (total charge-offs less total recoveries) plus changes to the
Allowance for loan losses. Because NCOs prospectively include
unpaid principal and up to 90 days of related accrued interest, NCO
amounts and rates are higher and the Open-End Allowance for loan
losses as a percentage of Open-End gross loans receivable is
higher. The Open-End Allowance for loan losses as a percentage of
Open-End gross loans receivable increased to 18.3% at June 30,
2019, compared to 10.7% in the same prior-year period.
The following table reports 2019 Open-End loan performance,
including the effect of the Q1 2019 Open-End Loss Recognition
Change:
2019
2018
(dollars in thousands, unaudited)
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
Open-End loans:
Revenue
$
54,972
$
52,869
$
47,228
$
40,290
$
27,222
Provision for losses
29,373
25,317
28,337
31,686
14,848
Net revenue
$
25,599
$
27,552
$
18,891
$
8,604
$
12,374
Net charge-offs (1)
$
25,151
$
(1,521
)
$
25,218
$
23,579
$
11,924
Open-End gross loan balances:
Open-End gross loans receivable
$
283,311
$
240,790
$
207,333
$
184,067
$
91,033
Average Open-End gross loans
receivable
$
262,051
$
224,062
$
195,700
$
137,550
$
71,299
Open-End allowance for loan
losses:
Allowance for loan losses
$
51,717
$
46,963
$
19,901
$
18,013
$
9,717
Open-End Allowance for loan losses as a
percentage of Open-End gross loans receivable
18.3
%
19.5
%
9.6
%
9.8
%
10.7
%
Open-End past-due balances:
Open-End past-due gross loans
receivable
$
35,395
$
32,444
$
—
$
—
$
—
Past-due Open-End gross loans receivable -
percentage
12.5
%
13.5
%
—
%
—
%
—
%
(1) Excluding the impact of the Q1 2019
Open-End Loss Recognition Change, NCOs for the first quarter 2019
were $31,788.
In addition, the following table illustrates, on a non-GAAP pro
forma basis, the first and second quarter of 2019 results as if the
Q1 2019 Open-End Loss Recognition Change had been applied to our
outstanding Open-End loan portfolio as of December 31, 2018. This
table is illustrative of retrospective application to determine the
NCOs that would have been incurred in the first and second quarters
of 2019 from the December 31, 2018 loan book. The primary purpose
of this pro forma illustration is to provide a representative level
of NCO rates from applying the Q1 2019 Open-End Loss Recognition
Change.
Pro Forma
2019
2019
(dollars in thousands, unaudited)
Second Quarter
First Quarter
Open-End loans:
Revenue
$
54,972
$
52,869
Provision for losses
29,373
25,317
Net revenue
$
25,599
$
27,552
Net charge-offs
$
29,648
$
31,788
Open-End gross loan balances:
Open-End gross loans receivable
$
283,311
$
240,790
Average Open-End gross loans
receivable
$
262,051
$
245,096
Net-charge offs as a percentage of average
gross loans receivable
11.3
%
13.0
%
Open-End allowance for loan
losses:
Allowance for loan losses
$
51,717
$
46,963
Open-End Allowance for loan losses as a
percentage of Open-End gross loans receivable
18.3
%
19.5
%
Open-End past-due balances:
Open-End past-due gross loans
receivable
$
35,395
$
32,444
Past-due Open-End gross loans receivable -
percentage
12.5
%
13.5
%
Single-Pay
Single-Pay revenue and related loans receivable during the three
months ended June 30, 2019 declined year-over-year compared to the
three months ended June 30, 2018, primarily due to regulatory
changes in Canada (rate and product changes in Ontario and British
Columbia) that accelerated the shift to Open-End loans. The
aforementioned Open-End growth in Canada ($167.9 million
year-over-year), in part, contributed to the decrease in Single-Pay
loan balances, which shrank year-over-year by $12.2 million. The
Single-Pay NCO rate remained consistent year-over-year.
2019
2018
(dollars in thousands, unaudited)
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
Single-Pay loans:
Revenue
$
45,528
$
46,761
$
49,696
$
50,614
$
58,325
Provision for losses
12,446
8,268
12,825
12,757
13,101
Net revenue
$
33,082
$
38,493
$
36,871
$
37,857
$
45,224
Net charge-offs
$
11,458
$
8,610
$
11,838
$
12,892
$
12,976
Single-Pay gross loan balances:
Single-Pay gross loans receivable
$
76,126
$
69,753
$
80,823
$
77,390
$
84,665
Average Single-Pay gross loans
receivable
$
72,940
$
75,288
$
79,107
$
81,028
$
83,353
Single-Pay Allowance for loan losses
$
4,941
$
3,897
$
4,189
$
3,293
$
3,604
Single-Pay Allowance for loan losses as a
percentage of Single-Pay gross loans receivable
6.5
%
5.6
%
5.2
%
4.3
%
4.3
%
Results of Operations - CURO Group Consolidated
Operations
Condensed Consolidated Statements of Operations
(in thousands, unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2019
2018
Change $
Change %
2019
2018
Change $
Change %
Revenue
$
264,300
$
237,169
$
27,131
11.4
%
$
542,239
$
488,012
$
54,227
11.1
%
Provision for losses
112,010
86,347
25,663
29.7
%
214,395
163,230
51,165
31.3
%
Net revenue
152,290
150,822
1,468
1.0
%
327,844
324,782
3,062
0.9
%
Advertising costs
12,780
15,113
(2,333
)
(15.4
)%
20,566
22,998
(2,432
)
(10.6
)%
Non-advertising costs of providing
services
58,329
58,361
(32
)
(0.1
)%
120,600
118,590
2,010
1.7
%
Total cost of providing services
71,109
73,474
(2,365
)
(3.2
)%
141,166
141,588
(422
)
(0.3
)%
Gross margin
81,181
77,348
3,833
5.0
%
186,678
183,194
3,484
1.9
%
Operating expense
Corporate, district and other expenses
39,038
32,980
6,058
18.4
%
88,126
68,409
19,717
28.8
%
Interest expense
17,023
20,472
(3,449
)
(16.8
)%
34,713
42,826
(8,113
)
(18.9
)%
Loss on extinguishment of debt
—
—
—
#
—
11,683
(11,683
)
#
Total operating expense
56,061
53,452
2,609
4.9
%
122,839
122,918
(79
)
(0.1
)%
Net income from continuing operations
before income taxes
25,120
23,896
1,224
5.1
%
63,839
60,276
3,563
5.9
%
Provision for income taxes
7,453
5,178
2,275
43.9
%
17,499
16,645
854
5.1
%
Net income from continuing operations
17,667
18,718
(1,051
)
(5.6
)%
46,340
43,631
2,709
6.2
%
Net (loss) income from discontinued
operations, net of tax
(834
)
(2,743
)
1,909
(69.6
)%
7,541
(4,364
)
11,905
#
Net income
$
16,833
$
15,975
$
858
5.4
%
$
53,881
$
39,267
$
14,614
37.2
%
# - Variance greater than 100% or not
meaningful
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,
2019
2018
Change $
Change %
2019
2018
Change $
Change %
Net income from continuing operations
$
17,667
$
18,718
$
(1,051
)
(5.6
)%
$
46,340
$
43,631
$
2,709
6.2
%
Adjustments:
Loss on extinguishment of debt (1)
—
—
—
11,683
Restructuring costs (2)
—
—
1,752
—
U.K. related costs (3)
679
—
8,496
—
Impairment of equity method investment
(4)
3,748
—
3,748
—
Share-based cash and non-cash compensation
(5)
2,644
2,181
4,816
4,023
Intangible asset amortization
761
640
1,557
1,303
Impact of tax law changes (6)
—
—
—
1,800
Cumulative tax effect of adjustments
(1,062
)
(705
)
(4,322
)
(4,394
)
Adjusted Net Income
$
24,437
$
20,834
$
3,603
17.3
%
$
62,387
$
58,046
$
4,341
7.5
%
Net income from continuing operations
$
17,667
$
18,718
$
46,340
$
43,631
Diluted Weighted Average Shares
Outstanding
47,107
47,996
47,335
47,757
Diluted Earnings per Share from continuing
operations
$
0.38
$
0.39
$
(0.01
)
(2.6
)%
$
0.98
$
0.92
$
0.06
6.5
%
Per Share impact of adjustments to Net
Income
0.14
0.04
0.34
0.29
Adjusted Diluted Earnings per Share
$
0.52
$
0.43
$
0.09
20.9
%
$
1.32
$
1.21
$
0.11
9.1
%
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, except per share
data, unaudited)
2019
2018
Change $
Change %
2019
2018
Change $
Change %
Net income from continuing operations
$
17,667
$
18,718
$
(1,051
)
(5.6
)%
$
46,340
$
43,631
$
2,709
6.2
%
Provision for income taxes
7,453
5,178
2,275
43.9
%
17,499
16,645
854
5.1
%
Interest expense
17,023
20,472
(3,449
)
(16.8
)%
34,713
42,826
(8,113
)
(18.9
)%
Depreciation and amortization
4,651
4,470
181
4.0
%
9,571
9,005
566
6.3
%
EBITDA
46,794
48,838
(2,044
)
(4.2
)%
108,123
112,107
(3,984
)
(3.6
)%
Loss on extinguishment of debt (1)
—
—
—
11,683
Restructuring costs (2)
—
—
1,752
—
U.K. related costs (3)
679
—
8,496
—
Impairment of equity method investment
(4)
3,748
—
3,748
—
Share-based cash and non-cash compensation
(5)
2,644
2,181
4,816
4,023
Other adjustments (7)
(176
)
91
(392
)
48
Adjusted EBITDA
$
53,689
$
51,110
$
2,579
5.0
%
$
126,543
$
127,861
$
(1,318
)
(1.0
)%
Adjusted EBITDA Margin
20.3
%
21.6
%
23.3
%
26.2
%
(1)
For the six months ended June 30, 2018,
the $11.7 million of loss on extinguishment of debt was for the
redemption of $77.5 million of the CURO Financial Technologies
Corp.'s ("CFTC") 12.00% Senior Secured Notes due 2022.
(2)
Restructuring costs of $1.8 million for
the six months ended June 30, 2019 were due to eliminating 121
positions in North America. The store employee reductions help
better align store staffing with in-store customer traffic and
volume patterns, as more of our growth comes from online channels
and as store customers require less time in stores as they conduct
more of the follow-up activities online. The elimination of certain
corporate positions related to efficiency initiatives and has
allowed the Company to reallocate investment to strategic growth
activities.
(3)
U.K. related costs of $8.5 million for the
six months ended June 30, 2019 relate to placing the U.K.
subsidiaries into administration on February 25, 2019, which
included $7.6 million to obtain consent from the holders of the
8.25% Senior Secured Notes to deconsolidate the U.K. Segment and
$0.9 million for other costs.
(4)
During April through July of 2019,
Cognical Holdings (“Zibby”) completed an equity raising round at a
value per share less than the value per share raised in prior
raises. This round included additional investments from existing
shareholders and investments by new investors and is considered
indicative of the fair value of shares in Zibby. Accordingly, we
recognized a $3.7 million impairment in our investment in Zibby to
adjust it to market value. As of June 30, 2019, we owned
approximately 30% of the outstanding shares of Zibby on a fully
diluted basis.
(5)
We approved the adoption of share-based
compensation plans during 2010 and 2017 for key members of senior
management. The estimated fair value of share-based awards is
recognized as non-cash compensation expense on a straight-line
basis over the vesting period.
(6)
As a result of the Tax Cuts and Jobs Act
of 2017 ("2017 Tax Act"), which became law on December 22, 2017, we
provided an estimate of the new repatriation tax as of December 31,
2017. Subsequent to further guidance published in the first quarter
of 2018, we booked additional tax expense of $1.2 million for the
2017 repatriation tax. Additionally, the 2017 Tax Act provided for
a new GILTI ("Global Intangible Low-Taxed Income") tax starting in
2018 and we estimated and provided tax expense of $0.6 million as
of June 30, 2018.
(7)
Other adjustments include deferred rent
and the intercompany foreign exchange impact. Deferred rent
represents the non-cash component of rent expense.
For the three months ended June 30, 2019 and 2018
Revenue and Net Revenue
Revenue increased $27.1 million, or 11.4%, to $264.3 million for
the three months ended June 30, 2019, from $237.2 million for the
three months ended June 30, 2018. Revenue for the three months
ended June 30, 2019 included interest earned on past-due Open-End
loan balances of approximately $12 million from the Q1 2019
Open-End Loss Recognition Change, offset by a higher provision rate
and the higher allowance discussed further below. U.S. revenue
increased 10.5%, driven by volume growth. Canadian revenue
increased 15.3% (19.5% on a constant currency basis), as volume
growth offset yield compression from negative regulatory impacts on
Single-Pay loan rates and the significant product mix-shift to
Open-End loans.
Provision for losses increased $25.7 million, or 29.7%, to
$112.0 million for the three months ended June 30, 2019, from $86.3
million for the three months ended June 30, 2018, primarily due to
changes in the allowance coverage in the second quarter of 2018.
The second quarter of 2018 included $11.0 million of provision
benefit from changes in allowance coverage rates, whereas the
second quarter of 2019 included $1.6 million of benefit. Excluding
the impact of the allowance coverage change, provision for losses
increased $16.3 million, or 16.7%, because of the Q1 2019 Open-End
Loss Recognition Change and increased earning asset volume
year-over-year as further described in "Segment Analysis"
below.
Cost of Providing Services
The total cost of providing services decreased $2.4 million, or
3.2%, to $71.1 million in the three months ended June 30, 2019,
compared to $73.5 million in the three months ended June 30, 2018,
primarily because of lower advertising costs analyzed further in
"Segment Analysis" below.
Operating Expenses
Corporate, district and other expenses increased $6.1 million,
or 18.4%, primarily as a result of a $3.7 million impairment charge
related to our investment in Zibby and higher performance-based
variable compensation. During the second quarter of 2019, Zibby
conducted an equity capital raise that closed on July 11, 2019,
primarily with existing equity holders, at an attractive implied
pre-money valuation (the "offering"). We invested cash of $2.8
million in the second quarter of 2019 and an additional $4.0
million of cash in July 2019, which in aggregate, increased our
fully-diluted ownership to 42.3%. Because the offering was at a
valuation below previous rounds, the non-cash impairment charge was
required. Excluding the Zibby impairment charge, share-based
compensation costs in both periods presented and U.K. related
costs, operating expenses increased by $1.2 million.
Provision for Income Taxes
The effective income tax rate from continuing operations for the
three months ended June 30, 2019 was 29.7%, compared to 21.7% for
the three months ended June 30, 2018. Excluding the
non-tax-deductible impairment of our investment in Zibby, our
effective income tax rate from continuing operations for the three
months ended June 30, 2019 was 25.8%.
For the six months ended June 30, 2019 and 2018
Revenue and Net Revenue
Revenue increased $54.2 million, or 11.1%, to $542.2 million for
the six months ended June 30, 2019 from $488.0 million for the six
months ended June 30, 2018. Revenue for the six months ended June
30, 2019 included interest earned on past-due Open-End loan
balances of approximately $21 million from the Q1 2019 Open-End
Loss Recognition Change, offset by a higher provision rate and the
higher allowance discussed further below. U.S. revenue increased
10.5%, driven by volume growth. Canadian revenue increased 13.7%
(18.7% on a constant currency basis), as volume growth offset yield
compression from negative regulatory impacts on Single-Pay loan
rates and the significant product mix-shift to Open-End loans.
Provision for losses increased $51.2 million, or 31.3%, to
$214.4 million for the six months ended June 30, 2019, from $163.2
million for the six months ended June 30, 2018, primarily due to
changes in allowance coverage in the second quarter of 2018. The
first half of 2018 included $14.7 million of provision benefit from
changes which included allowance coverage rates whereas the first
half of 2019 included $1.0 million of benefit. Excluding the impact
of the allowance coverage change, provision for losses increased
$37.5 million, or 21.1%, because of the Q1 2019 Open-End Loss
Recognition Change and increased earning asset volume
year-over-year as further described in "Segment Analysis"
below.
Cost of Providing Services
The total cost of providing services decreased $0.4 million, or
0.3%, to $141.2 million in the six months ended June 30, 2019,
compared to $141.6 million in the six months ended June 30, 2018,
primarily because of lower advertising costs, offset by increased
loan servicing costs on higher volume.
Operating Expenses
Corporate, district and other expenses increased $19.7 million,
or 28.8%, primarily as a result of $8.5 million for obtaining the
consent of our holders of the 8.25% Senior Secured Notes and our
bondholders associated with discontinuing our U.K. operations and
other related U.K. separation costs, $1.8 million of restructuring
costs from our reduction-in-force implemented in January 2019,
higher professional fees associated with our first year-end for
full compliance with Sarbanes-Oxley, and a $3.7 million impairment
charge related to our investment in Zibby. Excluding the Zibby
impairment charge, share-based compensation costs in both periods
presented and U.K. related costs, operating expenses increased by
$6.7 million.
Provision for Income Taxes
The effective income tax rate from continuing operations for the
six months ended June 30, 2019 was 27.4%, compared to 27.6% for the
six months ended June 30, 2018. Excluding the non-tax-deductible
impairment of our investment in Zibby, our effective income tax
rate from continuing operations for the six months ended June 30,
2019 was 25.9%.
Segment Analysis
We report financial results for two reportable segments: the
U.S. and Canada. Following is a summary of results of operations
for the segment and period indicated:
U.S. Segment Results
Three Months Ended June 30,
Six Months Ended June 30,
(dollars in thousands,
unaudited)
2019
2018
Change $
Change %
2019
2018
Change $
Change %
Revenue
$
210,046
$
190,126
$
19,920
10.5
%
$
436,165
$
394,719
$
41,446
10.5
%
Provision for losses
92,552
71,987
20,565
28.6
%
177,532
136,320
41,212
30.2
%
Net revenue
117,494
118,139
(645
)
(0.5
)%
258,633
258,399
234
0.1
%
Advertising costs
11,179
12,409
(1,230
)
(9.9
)%
17,533
17,568
(35
)
(0.2
)%
Non-advertising costs of providing
services
41,248
41,682
(434
)
(1.0
)%
86,230
85,439
791
0.9
%
Total cost of providing services
52,427
54,091
(1,664
)
(3.1
)%
103,763
103,007
756
0.7
%
Gross margin
65,067
64,048
1,019
1.6
%
154,870
155,392
(522
)
(0.3
)%
Corporate, district and other expenses
33,397
28,221
5,176
18.3
%
77,277
58,753
18,524
31.5
%
Interest expense
14,641
20,465
(5,824
)
(28.5
)%
29,369
42,762
(13,393
)
(31.3
)%
Loss on extinguishment of debt
—
—
—
#
—
11,683
(11,683
)
#
Total operating expense
48,038
48,686
(648
)
(1.3
)%
106,646
113,198
(6,552
)
(5.8
)%
Segment operating income
17,029
15,362
1,667
10.9
%
48,224
42,194
6,030
14.3
%
Interest expense
14,641
20,465
(5,824
)
(28.5
)%
29,369
42,762
(13,393
)
(31.3
)%
Depreciation and amortization
3,437
3,379
58
1.7
%
7,163
6,786
377
5.6
%
EBITDA
35,107
39,206
(4,099
)
(10.5
)%
84,756
91,742
(6,986
)
(7.6
)%
Loss on extinguishment of debt
—
—
—
—
11,683
(11,683
)
Restructuring and other costs
—
—
—
1,617
—
1,617
Other adjustments
(143
)
(66
)
(77
)
(248
)
(125
)
(123
)
U.K. related costs
679
—
679
8,496
—
8,496
Share-based cash and non-cash
compensation
2,644
2,181
463
4,816
4,023
793
Impairment of equity method investment
3,748
—
3,748
3,748
—
3,748
Adjusted EBITDA
$
42,035
$
41,321
$
714
1.7
%
$
103,185
$
107,323
$
(4,138
)
(3.9
)%
U.S. Segment Results - For the three
months ended June 30, 2019 and 2018
Second quarter 2019 U.S. revenues increased by $19.9 million, or
10.5%, to $210.0 million, compared to the comparable prior-year
period. U.S. revenue growth was driven by a $40.6 million, or
11.0%, increase in gross combined loans receivable to $408.3
million at June 30, 2019, compared to $367.7 million at June 30,
2018. Additionally, U.S. revenue for the three months ended June
30, 2019 included interest earned on past-due Open-End loan
balances of approximately $10 million from the Q1 2019 Open-End
Loss Recognition Change, offset by a related higher provision for
losses. Unsecured Installment combined receivables increased
year-over-year by $12.2 million, or 6.0%. Open-End receivables
increased $24.4 million, or 61.4%, year-over-year, led by growth in
Virginia, Tennessee and Kansas and inclusion of past-due
receivables as a result of the Q1 2019 Open-End Loss Recognition
Change. Secured Installment gross combined receivables remained
flat compared to the prior-year period, while Single-Pay
receivables grew $3.7 million, or 9.9%.
The provision for losses' increase of $20.6 million, or 28.6%,
was primarily due to changes in allowance coverage in the second
quarter of 2018. The second quarter of 2018 included $9.9 million
of provision benefit from changes in allowance coverage rates,
whereas the second quarter of 2019 included $0.3 million of
incremental expense. Excluding the impact of the allowance coverage
change, provision for losses increased $10.3 million, or 12.6%,
because of the Q1 2019 Open-End Loss Recognition Change and
increased earning asset volume year-over-year.
U.S. cost of providing services for the three months ended June
30, 2019 was $52.4 million, a decrease of $1.7 million, or 3.1%,
compared to $54.1 million for the three months ended June 30, 2018,
primarily due to lower advertising costs.
Corporate, district and other operating expenses increased $5.2
million, or 18.3%, compared to the same period in the prior year,
primarily due to a $3.7 million impairment charge related to our
investment in Zibby, $0.7 million of U.K. disposition-related costs
and $1.0 million higher performance-based variable compensation
costs. Excluding the Zibby impairment charge, share-based
compensation costs in both periods presented and U.K. related
costs, operating expenses increased by $0.3 million.
U.S. interest expense for the second quarter of 2019 decreased
by $5.8 million compared to the prior-year period, primarily due to
our refinancing activities in 2018. During the third quarter of
2018, we issued $690.0 million of 8.25% Senior Secured Notes and
used the proceeds from the issuance to extinguish our $527.5
million 12.00% Senior Secured Notes. In addition, we entered into a
Non-Recourse Canada SPV Facility in the third quarter of 2018 with
a lower interest rate than our previous U.S. SPV facility, which we
fully repaid with the proceeds from the 8.25% Senior Secured
Notes.
U.S. Segment Results - For the six
months ended June 30, 2019 and 2018
For the six months ended June 30, 2019, U.S. revenues increased
by $41.4 million, or 10.5%, to $436.2 million. U.S. revenue growth
was driven by a $40.6 million, or 11.0%, increase in gross combined
loans receivable, to $408.3 million at June 30, 2019, compared to
$367.7 million at June 30, 2018. Additionally, U.S. revenue for the
six months ended June 30, 2019 included interest earned on past-due
Open-End loan balances of approximately $18 million from the Q1
2019 Open-End Loss Recognition Change, offset by related higher
provision rate and higher provision for losses. Unsecured
Installment receivables increased year-over-year $12.2 million, or
6.0%. Open-End receivables increased $24.4 million, or 61.4%,
year-over-year, led by growth in Virginia, Tennessee and Kansas.
Secured Installment gross combined receivables increased from the
prior-year period by $0.3 million, or 0.3%, while Single-Pay
receivables grew $3.7 million, or 9.9%.
The provision for losses' increase of $41.2 million, or 30.2%,
was primarily due to changes in allowance coverage in the first
half of 2018. The first half of 2018 included $12.6 million of
provision benefit from changes in allowance coverage rates, whereas
the first half of 2019 included $0.8 million of incremental
expense. Excluding the impact of the allowance coverage change,
provision for losses increased $27.7 million, or 18.6%, because of
the Q1 2019 Open-End Loss Recognition Change and increased earning
asset volume year-over-year.
U.S. cost of providing services for the six months ended June
30, 2019 was $103.8 million, an increase of $0.8 million, or 0.7%,
compared to $103.0 million for the six months ended June 30,
2018.
Corporate, district and other operating expenses increased $18.5
million, or 31.5%, compared to the same period in the prior year,
primarily due to $8.5 million of U.K. disposition-related costs, a
$3.7 million impairment charge related to our investment in Zibby,
$3.2 million higher performance-based variable compensation costs,
$1.6 million of restructuring costs and $0.5 million higher
professional fees. Excluding the Zibby impairment charge,
share-based compensation costs in both periods presented and U.K.
related costs, operating expenses increased by $5.5 million.
U.S. interest expense for the first six months of 2019 decreased
by $13.4 million compared to the prior-year period, primarily due
to our refinancing activities in 2018. During the third quarter of
2018, we issued $690.0 million of 8.25% Senior Secured Notes and
used the proceeds from the issuance to extinguish our $527.5
million 12.00% Senior Secured Notes. In addition, we entered into a
Non-Recourse Canada SPV Facility in the third quarter of 2018 with
a lower interest rate than our previous U.S. SPV facility, which we
fully repaid with the proceeds from the 8.25% Senior Secured
Notes.
Canada Segment Results
Three Months Ended June 30,
Six Months Ended June 30,
(dollars in thousands, unaudited)
2019
2018
Change $
Change %
2019
2018
Change $
Change %
Revenue
$
54,254
$
47,043
$
7,211
15.3
%
$
106,074
$
93,293
$
12,781
13.7
%
Provision for losses
19,458
14,360
5,098
35.5
%
36,863
26,910
9,953
37.0
%
Net revenue
34,796
32,683
2,113
6.5
%
69,211
66,383
2,828
4.3
%
Advertising costs
1,601
2,704
(1,103
)
(40.8
)%
3,033
5,430
(2,397
)
(44.1
)%
Non-advertising costs of providing
services
17,081
16,679
402
2.4
%
34,370
33,151
1,219
3.7
%
Total cost of providing services
18,682
19,383
(701
)
(3.6
)%
37,403
38,581
(1,178
)
(3.1
)%
Gross margin
16,114
13,300
2,814
21.2
%
31,808
27,802
4,006
14.4
%
Corporate, district and other expenses
5,641
4,759
882
18.5
%
10,849
9,656
1,193
12.4
%
Interest expense
2,382
7
2,375
#
5,344
64
5,280
#
Total operating expense
8,023
4,766
3,257
68.3
%
16,193
9,720
6,473
66.6
%
Segment operating income
8,091
8,534
(443
)
(5.2
)%
15,615
18,082
(2,467
)
(13.6
)%
Interest expense
2,382
7
2,375
#
5,344
64
5,280
#
Depreciation and amortization
1,214
1,091
123
11.3
%
2,408
2,219
189
8.5
%
EBITDA
11,687
9,632
2,055
21.3
%
23,367
20,365
3,002
14.7
%
Restructuring and other costs
—
—
—
135
—
135
Other adjustments
(33
)
157
(190
)
(144
)
173
(317
)
Adjusted EBITDA
$
11,654
$
9,789
$
1,865
19.1
%
$
23,358
$
20,538
$
2,820
13.7
%
# - Change greater than 100% or not
meaningful.
Canada Segment Results - For the three
months ended June 30, 2019 and 2018
Canada revenue increased $7.2 million, or 15.3%, to $54.3
million for the three months ended June 30, 2019, from $47.0
million in the prior-year period. On a constant currency basis,
revenue increased $9.2 million, or 19.5%. Revenue growth in Canada
was impacted favorably by the significant asset growth and the
product transition from Single-Pay and Unsecured Installment loans
to Open-End loans. Additionally, Canada revenue for the three
months ended June 30, 2019 included interest earned on past-due
Open-End loan balances of approximately $2 million from the Q1 2019
Open-End Loss Recognition Change, offset by a higher provision rate
and higher provision for losses. Single-Pay yields were negatively
affected by regulatory rate changes in Ontario and British
Columbia.
Single-Pay revenue decreased $14.2 million, or 42.7%, to $19.1
million for the three months ended June 30, 2019, and Single-Pay
receivables decreased $12.2 million, or 25.8%, to $35.1 million
from $47.3 million in the prior year. The decreases in Single-Pay
revenue and receivables were due to the continued product mix shift
in Canada from Single-Pay loans to Open-End loans and by regulatory
changes effective January and July 2018 that lowered Single Pay
pricing year-over-year.
Canada non-Single-Pay revenue increased $21.5 million, or
156.7%, to $35.2 million compared to $13.7 million the same quarter
a year ago, on $158.8 million, or 212.5%, growth in related loan
balances. The increase was primarily related to the launches of
Open-End products in Alberta and Ontario in the fourth quarter of
2017, and significant expansion of the Open-End product in Ontario
in late 2018. Additionally, as a result of the increase in Open-End
loans, ancillary revenue increased $4.8 million versus the same
quarter a year ago, primarily driven by an increase in sales of
insurance to Open-End loan customers.
The provision for losses increased $5.1 million, or 35.5%, to
$19.5 million for the three months ended June 30, 2019, compared to
$14.4 million in the prior-year period, because of mix shift from
Single-Pay loans to Unsecured Installment and Open-End loans and
corresponding higher allowance and therefore provision expense
level. Total Open-End and Installment loans grew by $35.2 million
sequentially during the second quarter of 2019, compared to
sequential growth of $20.9 million in the second quarter of 2018.
On a constant currency basis, provision for losses increased by
$5.8 million, or 40.5% compared to the prior-year period.
The total cost of providing services in Canada declined modestly
for the three months ended June 30, 2019 compared to the prior-year
period. Advertising costs were lower by $1.1 million, or 40.8%,
partially offset by an increase in non-advertising cost of
providing services of $0.4 million. There was no material impact on
the cost of providing services from exchange rate changes.
Canada operating expenses increased $3.3 million, or 68.3%, to
$8.0 million in the three months ended June 30, 2019 from $4.8
million in the prior-year period, primarily due to interest expense
on the Non-Recourse Canada SPV Facility that began in August
2018.
Canada Segment Results - For the six
months ended June 30, 2019 and 2018
Canada revenue increased $12.8 million, or 13.7%, to $106.1
million for the six months ended June 30, 2019 from $93.3 million
in the prior-year period. On a constant currency basis, revenue
increased $17.5 million, or 18.7%. Revenue growth in Canada was
impacted favorably by the significant asset growth and product
transition from Single-Pay and Unsecured Installment loans to
Open-End loans that have a lower yield. Additionally, Canada
revenues for the six months ended June 30, 2019 included interest
earned on past-due Open-End loan balances of approximately $3
million from the Q1 2019 Open-End Loss Recognition Change, offset
by higher provision rate and higher provision for losses.
Single-Pay yields were negatively affected by regulatory rate
changes in Ontario and British Columbia.
Single-Pay revenue decreased $28.9 million, or 42.8%, to $38.7
million for the six months ended June 30, 2019, and Single-Pay
receivables decreased $12.2 million, or 25.8%, to $35.1 million
from $47.3 million in the prior year. The decreases in Single-Pay
revenue and receivables were due to the continued product mix shift
in Canada from Single-Pay loans to Open-End loans and by regulatory
changes effective January and July 2018 that lowered Single Pay
pricing year-over-year.
Canadian non-Single-Pay revenue increased $41.7 million, or
162.6%, to $67.4 million compared to $25.7 million the same period
a year ago, on $158.8 million, or 212.5%, growth in related loan
balances. The increase was primarily related to the launch of
Open-End products in Alberta and Ontario in the fourth quarter of
2017, and significant expansion of the Open-End product in Ontario
in late 2018. As a result of the increase in Open-End loans,
ancillary revenue increased $9.3 million versus the same period a
year ago, primarily driven by an increase in sales of insurance to
Open-End loan customers.
The provision for losses increased $10.0 million, or 37.0%, to
$36.9 million for the six months ended June 30, 2019 compared to
$26.9 million in the prior-year period primarily due to
provisioning on Open-End loans and mix shift from Single-Pay loans
and Unsecured Installment to Open-End loans. Total Open-End and
Installment loans grew by $35.2 million sequentially during the
second quarter of 2019, compared to sequential growth of $20.9
million in the second quarter of 2018. On a constant currency
basis, provision for losses increased by $11.6 million, or 43.0%
compared to the prior-year period.
The total cost of providing services in Canada declined modestly
for the six months ended June 30, 2019 compared to the prior-year
period. Advertising costs decreased by $2.4 million, or 44.1%,
partially offset by an increase in non-advertising cost of
providing services of $1.2 million. There was no material impact on
the cost of providing services from exchange rate changes.
Canada operating expenses increased $6.5 million, or 66.6%, to
$16.2 million in the six months ended June 30, 2019 from $9.7
million in the prior year period primarily due to interest expense
on the Non-Recourse Canada SPV Facility that began in August
2018.
Results of Discontinued Operations
On February 25, 2019, in accordance with the provisions of the
U.K. Insolvency Act 1986 and as approved by the boards of directors
of our U.K. subsidiaries, Curo Transatlantic Limited ("CTL") and
SRC Transatlantic Limited (collectively with CTL, “the U.K.
Subsidiaries”), insolvency practitioners from KPMG were appointed
as administrators (“Administrators”) in respect of the U.K.
Subsidiaries. The effect of the U.K. Subsidiaries’ entry into
administration was to place the management, affairs, business and
property of the U.K. Subsidiaries under the direct control of the
Administrators. Accordingly, we deconsolidated the U.K.
Subsidiaries as of February 25, 2019 and classified them as
Discontinued Operations beginning the first quarter of 2019. The
following is a summary of the financial results of the U.K.
business, which meet the criteria of Discontinued Operations and,
therefore, are excluded from our results of continuing
operations:
(in thousands, unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2019
2018
2019
2018
Revenue (1)
$
—
$
11,814
$
6,957
$
22,729
Provision for losses (1)
—
5,639
1,703
9,787
Net revenue
—
6,175
5,254
12,942
Cost of providing services (1)
—
3,111
1,082
6,479
Corporate, district and other (1)
—
5,547
3,806
10,446
Interest income (1)
—
(7
)
—
(12
)
Depreciation and amortization (1)
—
128
—
254
Loss on disposition (1)
—
—
39,414
—
Pre-tax loss from Discontinued
Operations
—
(2,604
)
(39,048
)
(4,225
)
Income tax expense (benefit) related to
disposition
834
139
(46,589
)
139
Net (loss) income from discontinued
operations
$
(834
)
$
(2,743
)
$
7,541
$
(4,364
)
Net (loss) income from discontinued
operations
$
(834
)
$
(2,743
)
$
7,541
$
(4,364
)
Income tax expense (benefit) related to
disposition
834
139
(46,589
)
139
Interest income
—
(7
)
—
(12
)
Depreciation and amortization
—
128
—
254
EBITDA (2)
—
(2,483
)
(39,048
)
(3,983
)
U.K. disposition, redress and related
costs
—
—
40,845
—
Other adjustments
—
(6
)
(10
)
(42
)
Adjusted EBITDA (2)
$
—
$
(2,489
)
$
1,787
$
(4,025
)
(1) For the six months ended June 30,
2019, includes operations through February 25, 2019
(2) See "Non-GAAP Financial Measures" at
the end of this release for description of non-GAAP metric.
Revenue and expenses related to discontinued operations included
activity prior to the deconsolidation of the U.K. subsidiaries
effective February 25, 2019. In previously issued financial
statements, the $2.5 million and $4.0 million of Adjusted EBITDA
loss ascribed to discontinued operations for the three and six
months ended June 30, 2018 were included in consolidated Adjusted
EBITDA. For the six months ended June 30, 2019, "Loss on
disposition" of $39.4 million included the non-cash effect of
eliminating assets and liabilities of the U.K. Subsidiaries as of
the date of deconsolidation, as well as the effect of cumulative
currency exchange rate differences on the U.S. investment in the
U.K.
In connection with the disposition of the U.K. Subsidiaries, the
U.S. entity that owned our interests in the U.K. Subsidiaries
recognized a loss on investment. This loss resulted in an estimated
U.S. federal and state income tax benefit of $46.6 million, which
will be available to offset our future U.S. federal and state
income tax obligations. In the second quarter of 2019, we revised
the estimate of our tax basis in the U.K. Subsidiaries, resulting
in a $0.8 million reduction in the income tax benefit recorded in
the first quarter of 2019.
CURO GROUP HOLDINGS CORP. AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(in thousands)
June 30, 2019 unaudited)
December 31, 2018
ASSETS
Cash
$
92,297
$
61,175
Restricted cash (includes restricted cash
of consolidated VIEs of $14,819 and $12,840 as of June 30, 2019 and
December 31, 2018, respectively)
33,712
25,439
Gross loans receivable (includes loans of
consolidated VIEs of $215,309 and $148,876 as of June 30, 2019 and
December 31, 2018, respectively)
609,593
571,531
Less: allowance for loan losses (includes
allowance for losses of consolidated VIEs of $25,188 and $12,688 as
of June 30, 2019 and December 31, 2018, respectively)
(101,877
)
(73,997
)
Loans receivable, net
507,716
497,534
Right of use asset - operating leases
140,982
—
Deferred income taxes
9,032
1,534
Income taxes receivable
31,184
16,741
Prepaid expenses and other
30,241
43,588
Property and equipment, net
72,993
76,750
Goodwill
120,450
119,281
Other intangibles, net of accumulated
amortization
30,657
29,784
Other
16,091
12,930
Assets of discontinued operations
—
34,861
Total Assets
$
1,085,355
$
919,617
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable and accrued
liabilities
$
59,274
$
49,146
Deferred revenue
8,712
9,483
Lease liability - operating leases
148,843
—
Income taxes payable
—
1,579
Accrued interest (includes accrued
interest of consolidated VIEs of $713 and $831 as of June 30, 2019
and December 31, 2018, respectively)
19,690
20,904
Liability for losses on CSO lender-owned
consumer loans
9,504
12,007
Deferred rent
—
10,851
Long-term debt (includes long-term debt
and issuance costs of consolidated VIEs of $94,565 and $3,588 as of
June 30, 2019 and $111,335 and $3,856 as of December 31, 2018,
respectively)
768,512
804,140
Subordinated shareholder debt
—
2,196
Other long-term liabilities
8,594
5,800
Deferred tax liabilities
4,848
13,730
Liabilities of discontinued operations
—
8,882
Total Liabilities
$
1,027,977
$
938,718
Stockholders' Equity
Total Stockholders' Equity (Deficit)
$
57,378
$
(19,101
)
Total Liabilities and Stockholders'
Equity
$
1,085,355
$
919,617
Balance Sheet Changes - June 30, 2019 compared to December
31, 2018
Cash - Cash increased from December
31, 2018 primarily due to cash inflows generated from income and
the disposition of the U.K. segment which reduced U.S. federal and
state income taxes paid, partially offset by loans receivable
growth and combined $40.9 million net payments on the Senior
Revolver and Non-Recourse Canada SPV Facility.
Gross Loans Receivable and Allowance for
Loan Losses - As noted in "Loan Volume and Portfolio
Performance Analysis" above, changes in Gross Loans Receivable and
related Allowance for Loan Losses were due to normal seasonality
trends resulting from higher customer demand and loan origination
volumes during the fourth quarter of 2018, as well as the product
mix shift from Single-Pay to Installment and Open-End loans
(primarily in Canada).
Right of use asset and lease liability and
Deferred rent - Due to the adoption of ASU No. 2016-02,
Leases, which requires lessees to record leases on the balance
sheet and disclose key information about leasing arrangements, we
recorded a right of use asset of $141.0 million and a lease
liability of $148.8 million as of June 30, 2019.
Income taxes receivable - The
increase from December 31, 2018 is primarily due to the current tax
benefit realized from the loss on disposal of the U.K. entities.
See "Results of Discontinued Operations" section for additional
details.
Long-term debt (including current
maturities) and Accrued Interest - During the six months
ended June 30, 2019, we made a $20.0 million payment on the Senior
Revolver, reducing the outstanding balance to zero, and made net
repayments of $20.9 million on the Non-Recourse Canada SPV
Facility.
Fiscal 2019 Outlook - Reconciliations
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 (1)
(unaudited)
Fiscal 2019 Outlook
Year Ending December 31,
2019
(in thousands, except per share data)
Low
High
Net income from continuing
operations
$
100,000
$
115,000
Adjustments:
Non-cash rent expense and foreign currency
exchange rate impact (2)(3)
—
—
Restructuring costs
1,750
1,750
U.K. related costs
8,500
8,500
Impairment of equity method investment
3,750
3,750
Share-based cash and non-cash
compensation
9,000
9,000
Intangible asset amortization
2,500
2,500
Cumulative tax effect of adjustments
(5,500
)
(5,500
)
Adjusted Net Income
$
120,000
$
135,000
Net income
$
100,000
$
115,000
Diluted Weighted Average Shares
Outstanding
47,100
48,200
Diluted Earnings per Share
$
2.12
$
2.39
Per Share impact of adjustments to Net
Income
0.43
0.41
Adjusted Diluted Earnings per
Share
$
2.55
$
2.80
Reconciliation of Net Income from continuing operations to
EBITDA and Adjusted EBITDA, non-GAAP measures (1)
(unaudited)
Fiscal 2019 Outlook
Year Ending December 31,
2019
(in thousands)
Low
High
Net income from continuing
operations
$
100,000
$
115,000
Provision for income taxes
38,250
38,250
Interest expense
70,000
70,000
Depreciation and amortization
18,750
18,750
EBITDA
227,000
242,000
Non-cash rent expense and foreign currency
exchange rate impact (2)(3)
—
—
Restructuring costs
1,750
1,750
U.K. related costs
8,500
8,500
Impairment of equity method investment
3,750
3,750
Share-based cash and non-cash
compensation
9,000
9,000
Adjusted EBITDA
$
250,000
$
265,000
(1) See "Non-GAAP Financial Measures" at
the end of this release for more information.
(2) We have historically excluded the
impact of non-cash interest expense from adjusted earnings metrics.
With the adoption of ASU No.2016.02, Leases, effective January 1,
2019, we anticipate the difference between GAAP-basis rent expense
and cash rent paid will grow. However, we will continue to adjust
for this difference.
(3) We have historically excluded the
impact of foreign currency translation and hedges from adjusted
earnings metrics. We do not include the impact of any hedge
settlement or realized currency gains or losses in our outlook.
About CURO
CURO Group Holdings Corp. (NYSE: CURO), operating in two
countries and powered by its fully integrated technology platform,
is a market leader by revenues in providing short-term credit to
underbanked consumers. In 1997, the Company was founded in
Riverside, California by three Wichita, Kansas childhood friends to
meet the growing consumer need for short-term loans. Their success
led to opening stores across the United States and expanding to
offer online loans and financial services across two countries.
Today, CURO combines its market expertise with a fully integrated
technology platform, omni-channel approach and advanced credit
decisioning to provide an array of short-term credit products
across all mediums. CURO operates under a number of brands
including Speedy Cash®, Rapid Cash®, Cash Money®, LendDirect®, Avío
Credit®, Opt+® and Revolve Finance®. With over 20 years of
operating experience, CURO provides financial freedom to the
underbanked.
Conference Call
CURO will host a conference call to discuss these results at
8:15 a.m. Eastern Time on Tuesday, July 30, 2019. 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 1-800-239-9838 (1-786-789-4797 for
international callers). Please ask to join the CURO Group Holdings
call. A replay of the conference call will be available until
August 6, 2019, at 11:15 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 1-888-203-1112
(1-719-457-0820 for international callers). The replay access code
is 1876705.
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
period ended June 30, 2019.
Forward-Looking Statements
This press release contains forward-looking statements. These
forward-looking statements include statements related to our
expectations regarding general economic conditions and our fiscal
2019 outlook. In addition, words such as “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 and judgments, including our ability to execute
on our business strategy and our ability to accurately predict our
future financial results. These assumptions and judgments 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 are important factors both within and outside of our control
that could cause our actual results to differ materially from those
in the forward-looking statements. These factors include our level
of indebtedness; errors in our internal forecasts; our dependence
on third-party lenders to provide the cash we need to fund our
loans and our ability to affordably access third-party financing;
actions of regulators and the negative impact of those actions on
our business; our ability to protect our proprietary technology and
analytics and keep up with that of our competitors; disruption of
our information technology systems that adversely affect our
business operations; ineffective pricing of the credit risk of our
prospective or existing customers; inaccurate information supplied
by customers or third parties would could lead to errors in judging
customers’ qualifications to receive loans; improper disclosure of
customer personal data; failure or 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-part electronic payment solutions providers; disruption
caused by employee or third-party theft and errors in our stores as
well as other factors discussed in our filings with the Securities
and Exchange Commission. 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.
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 gain (loss) on extinguishment of debt, restructuring
and other costs, impairment of equity method investment, goodwill
and intangible asset impairments, transaction-related costs,
share-based compensation, intangible asset amortization and
cumulative tax effect of 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); and
- Gross Combined Loans Receivable (includes loans originated by
third-party lenders through CSO programs which are not included in
the Consolidated Financial Statements).
We believe that presentation of non-GAAP financial information
is meaningful and useful in understanding the activities and
business metrics of the Company's operations. We believe that these
non-GAAP financial measures reflect an additional way of viewing
aspects of the business that, when viewed with the Company's U.S.
GAAP results, provide a more complete understanding of factors and
trends affecting the business.
We believe that investors regularly rely on non-GAAP financial
measures, such as Adjusted Net Income, Adjusted Earnings per Share,
EBITDA and Adjusted EBITDA, to assess operating performance and
that such measures may highlight trends in the business that may
not otherwise be apparent when relying on financial measures
calculated in accordance with U.S. GAAP. In addition, we believe
that the adjustments shown above are useful to investors in order
to allow them to compare our financial results during the periods
shown without the effect of each of these income or expense items.
In addition, we believe that Adjusted Net Income, Adjusted Earnings
per Share, EBITDA and Adjusted EBITDA are frequently used by
securities analysts, investors and other interested parties in the
evaluation of public companies in our industry, many of which
present Adjusted Net Income, Adjusted Earnings per Share, EBITDA
and/or Adjusted EBITDA when reporting their results.
In addition to reporting loans receivable information in
accordance with U.S. GAAP, we provide Gross Combined Loans
Receivable consisting of owned loans receivable plus loans
originated by third-party lenders through the CSO programs, which
we guarantee but do not include in the Consolidated Financial
Statements. Management believes this analysis provides investors
with important information needed to evaluate overall lending
performance.
We provide non-GAAP financial information for informational
purposes and to enhance understanding of the U.S. GAAP Consolidated
Financial Statements. Adjusted Net Income, Adjusted Earnings per
Share, EBITDA, Adjusted EBITDA and Gross Combined Loans Receivable
should not be considered as alternatives to income from continuing
operations, segment operating income, or any other performance
measure derived in accordance with U.S. GAAP, or as an alternative
to cash flows from operating activities or any other liquidity
measure derived in accordance with U.S. GAAP. Readers should
consider the information in addition to, but not instead of or
superior to, the financial statements prepared in accordance with
U.S. GAAP. This non-GAAP financial information may be determined or
calculated differently by other companies, limiting the usefulness
of those measures for comparative purposes.
Description and Reconciliations of Non-GAAP Financial
Measures
Adjusted Net Income, Adjusted Earnings per Share, EBITDA and
Adjusted EBITDA Measures have limitations as analytical tools, and
you should not consider these measures in isolation or as a
substitute for analysis of our income or cash flows as reported
under U.S. GAAP. Some of these limitations are:
- they do not include cash expenditures or future requirements
for capital expenditures or contractual commitments;
- they do not include changes in, or cash requirements for,
working capital needs;
- they do not include the interest expense, or the cash
requirements necessary to service interest or principal payments on
debt;
- depreciation and amortization are non-cash expense items
reported in the statements of cash flows; and
- other companies in our industry may calculate these measures
differently, limiting their usefulness as comparative
measures.
We calculate Adjusted Earnings per Share utilizing diluted
shares outstanding at year-end. If the Company records a loss from
continuing operations under U.S. GAAP, shares outstanding utilized
to calculate Diluted Earnings per Share from continuing operations
are equivalent to basic shares outstanding. Shares outstanding
utilized to calculate Adjusted Earnings per Share from continuing
operations reflect the number of diluted shares the Company would
have reported if reporting net income from continuing operations
under U.S. GAAP.
As noted above, Gross Combined Loans Receivable includes loans
originated by third-party lenders through CSO programs which are
not included in the consolidated financial statements but from
which we earn revenue and for which we provide a guarantee to the
lender. Management believes this analysis provides investors with
important information needed to evaluate overall lending
performance.
We evaluate stores based on revenue per store, provision for
losses at each store and store-level EBITDA, with consideration
given to the length of time a store has been open and its
geographic location. We monitor newer stores for their progress to
profitability and their rate of revenue growth.
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.
(CURO-NWS)
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version on businesswire.com: https://www.businesswire.com/news/home/20190729005694/en/
Investor Relations: Roger Dean Executive Vice President and
Chief Financial Officer Phone: 844-200-0342 Email:
IR@curo.com Or Global IR Group Gar Jackson, Phone:
949-873-2789 Email: gar@globalirgroup.com
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