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
first quarter ended March 31, 2020.
“After a very promising start to the first quarter, our efforts
in March turned to managing the challenges presented by the spread
of COVID-19,” said Don Gayhardt, President and Chief Executive
Officer. “We took swift and prudent action to support our customers
and employees and to strengthen our liquidity ahead of a likely
economic downturn. I am extremely proud o f our team's response
over the past eight weeks.”
“We formalized a COVID-19 Customer Care Plan in mid-March that
empowers our customer care specialists to provide financial relief
ranging from due date changes to payment waivers depending on the
customer’s circumstances. We also temporarily suspended the
collection of returned item fees. Our stores have been designated
essential and remain open, albeit with reduced hours, to help
customers and, of course, we are continuing to serve them through
our online and mobile channels as well as through our contact
center personnel.”
“For our employees, we moved quickly to protect their health and
well-being by implementing enhanced cleaning protocols at all
facilities and adhering to strict social distancing guidelines in
store operations. We also added incremental sick pay plans,
work-from-home stipends and other measures to effectively maintain
full employment through May. Nearly 100% of our corporate and
contact center employees have been work-from-home since March 30th.
We are incredibly grateful for the urgency, effectiveness and
passion with which our team members have responded to this crisis.
Our energies and resources remain focused on taking care of our
customers, supporting our employees and the communities where we
operate and lending responsibly.”
“For our communities, we partnered with Frontline Foods to
support local healthcare workers battling COVID-19. Our team of
volunteers, with financial support from CURO, launched the
Frontline Foods Wichita chapter
(https://www.frontlinefoods.org/wichita/). In April, we delivered
over 1,500 meals each week to area hospitals and will continue to
deliver over 500 meals weekly through May. Additionally, our Canada
volunteers are mobilizing to provide meals for healthcare workers
in the Toronto area through the month of May. CURO has committed
$500,000 to these efforts.”
“Our first quarter 2020 financial results were solid but
certainly impacted by loan volume declines from credit tightening
and higher delinquency trends in the last two weeks of the quarter.
Diluted Earnings per share from continuing operations of $0.86 for
the quarter and Adjusted Diluted Earnings per share(1) of $0.77
include $0.21 per share ($12.0 million pre-tax) of incremental
COVID-related provision expense as a result of additions to our
Allowance for Loan Losses (the ‘Allowance Build’) over what
normally would have been required.”
“We finished the quarter with strong liquidity — unrestricted
cash was nearly $140.0 million — and we bolstered our liquidity
earlier this month with a new non-recourse U.S. revolving credit
facility. Finally, we extended the term of our Senior Secured
Revolving Credit Facility to June 30, 2021. We appreciate the
continued support of our banks and other capital partners that
allowed us to add to our liquidity capacity and to extend our
maturities. Our increased financial flexibility leaves us
well-positioned to manage through the COVID-19 pandemic and to grow
after the crisis abates.”
Consolidated Summary Results — Unaudited
Three Months Ended March
31,(2)
(in thousands, except per share data)
2020
2019
Variance
Revenue
$
280,806
$
277,939
1.0
%
Gross margin
99,699
105,497
(5.5
)%
Company Owned gross loans receivable
564,437
553,215
2.0
%
Unrestricted Cash
138,714
82,859
67.4
%
Net income from continuing operations
36,013
28,673
25.6
%
Adjusted Net Income (1)
32,276
37,950
(15.0
)%
Diluted Earnings per Share from continuing
operations
$
0.86
$
0.61
41.0
%
Adjusted Diluted Earnings per Share from
continuing operations (1)
$
0.77
$
0.80
(3.8
)%
EBITDA (1)
59,811
61,329
(2.5
)%
Adjusted EBITDA (1)
65,787
72,854
(9.7
)%
Weighted Average Shares — diluted
41,892
47,319
(1) These are non-GAAP metrics. For a
reconciliation of each non-GAAP metric to the nearest GAAP metric;
see the applicable reconciliations contained under “Results of
Operations.” For a description of each non-GAAP metric, see
“Non-GAAP Financial Measures.”
(2) Excludes discontinued operations; see
“Results of Discontinued Operations” for additional details.
First quarter 2020 and subsequent developments include:
- Revenue increase of $2.9 million, or 1.0%, over the prior-year
period. Revenue growth from Open-End loans in the U.S. and Canada
was partially offset by a year-over-year decline in Unsecured and
Secured Installment loan revenues resulting from California
regulatory changes.
- Company Owned gross loans receivable and Gross combined loans
receivables grew by 2.0% and 0.9%, respectively, versus the
prior-year period. Growth was impacted negatively by regulatory
changes affecting Unsecured and Secured Installment loans in
California and tightening of our credit standards in March 2020
related to COVID-19. Excluding California, Company Owned gross
loans receivable increased 16.7% year-over-year.
- Allowance Build of $12.0 million pre-tax ($0.21 per share of
incremental provision expense) over what normally would have been
required due to COVID-19.
- Diluted Earnings per Share from continuing operations increased
to $0.86 from $0.61 as compared to the prior-year quarter. Adjusted
Diluted Earnings per Share decreased to $0.77 from $0.80 for the
first quarter of 2019.
- The completion of our acquisition of Ad Astra Recovery
Services, Inc. ("Ad Astra"), our exclusive provider of third-party
collection services for the U.S. business, on January 3, 2020.
- Declaration of our first quarterly cash dividend of $0.055 per
share ($0.22 per share annualized), paid on March 2, 2020 to
stockholders of record as of the close of business on February 18,
2020. Subsequently, on April 30, 2020, our Board of Directors
declared a $0.055 per share dividend payable on May 27, 2020 to
stockholders of record as of May 13, 2020.
- On April 8, 2020, we announced the closing of a new
Asset-Backed Revolving Credit Facility to provide financing for
U.S. Unsecured Installment and Open-End receivables, including
those generated under our technology, marketing and servicing
relationship with Stride Bank ("Non-Recourse U.S. SPV Facility").
The Non-Recourse U.S. SPV Facility provides for $100.0 million of
borrowing capacity, dependent upon the borrowing base of eligible
collateral.
As previously announced on April 8, 2020, business and financial
developments directly related to uncertainties from COVID-19
include:
- Full-year 2020 earnings guidance was withdrawn.
- Cancellation of our 2020 Short-Term Incentive Plan.
- Suspension of our $25 million share repurchase program.
- Establishment of an enhanced Customer Care Program to better
serve our customers as they face economic challenges and
uncertainties. This program enables our team members to provide
relief to customers in various ways, ranging from due date
extensions, interest or fee forgiveness, payment waivers, or
extended payment plans, depending on a customer’s individual
circumstances. We also temporarily suspended all returned item
fees.
- The designation of most of our stores across both the U.S. and
Canada as essential, allowing them to remain open.
- Adjustments to our credit underwriting models to tighten
approval rates and enhance our employment and income verification
practices for both our store and on-line lending platforms.
- Implementation of work-from-home plans for virtually all 1,100
contact center and corporate support personnel in Wichita, Toronto
and Chicago.
For additional information on the impact of COVID-19, see our
press release issued on April 8, 2020.
Consolidated Revenue by Product and Segment
Throughout this release, we exclude financial results of our
former U.K. operations for all periods presented, as they were
discontinued for accounting and reporting purposes in February
2019. See “Results of Discontinued Operations” for additional
information.
The following tables summarize revenue by product, including
credit services organization ("CSO") fees, for the periods
indicated:
Three Months Ended
March 31, 2020
March 31, 2019
(in thousands, unaudited)
U.S.
Canada
Total
U.S.
Canada
Total
Unsecured Installment
$
120,829
$
1,580
$
122,409
$
134,003
$
1,775
$
135,778
Secured Installment
26,286
—
26,286
27,477
—
27,477
Open-End
41,990
28,992
70,982
32,593
20,276
52,869
Single-Pay
28,154
17,003
45,157
27,168
19,593
46,761
Ancillary
4,509
11,463
15,972
4,878
10,176
15,054
Total revenue
$
221,768
$
59,038
$
280,806
$
226,119
$
51,820
$
277,939
During the three months ended March 31, 2020, total revenue grew
$2.9 million, or 1.0%, to $280.8 million, compared to the
prior-year period. Geographically, the 1.9% decline in U.S.
revenues was offset by a 13.9% increase in Canada revenues. From a
product perspective, Unsecured Installment and Secured Installment
revenues decreased 9.8% and 4.3%, respectively, due to regulatory
changes in California, effective January 1, 2020, and regulatory
changes for CSOs in Ohio, effective May 1, 2019. Single-Pay revenue
declined $1.6 million, or 3.4%, for the three months ended March
31, 2020 compared to the prior-year period, primarily due to lower
volume during the last two weeks of the first quarter of 2020
attributable primarily to the impact of COVID-19. Open-End loans in
Canada grew $56.2 million, or 30.5%, from March 31, 2019, with
related revenue growth of $8.7 million, or 43.0%. U.S. Open-End
revenue rose 28.8% on related loan growth of $17.0 million, or
30.0%. Ancillary revenues increased 6.1% versus the prior-year
period, primarily due to the sale of insurance products to Open-End
and Installment 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 March 31,
2020
2019
Installment
53.0
%
58.7
%
Canada Single-Pay
6.1
%
7.0
%
U.S. Single-Pay
10.0
%
9.8
%
Open-End
25.3
%
19.0
%
Ancillary
5.6
%
5.5
%
Total
100.0
%
100.0
%
For the three months ended March 31, 2020 and 2019, revenue
generated through the online channel as a percentage of
consolidated revenue was 47% and 46%, 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 receivable 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)
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
Company Owned gross loans receivable
$
564.4
$
665.8
$
657.6
$
609.6
$
553.2
Gross loans receivable Guaranteed by the
Company
55.9
76.7
73.1
67.3
61.9
Gross combined loans receivable (1)
$
620.3
$
742.5
$
730.7
$
676.9
$
615.1
(1) See "Non-GAAP Financial Measures" at
the end of this release for definition and more information.
Gross combined loans receivable by product is presented
below:
As of
(in millions, unaudited)
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
Unsecured Installment
$
123.1
$
160.8
$
174.5
$
164.7
$
161.7
Secured Installment
72.6
88.1
90.1
85.5
81.0
Single-Pay
54.7
81.4
78.0
76.1
69.7
Open-End
314.0
335.5
315.0
283.3
240.8
CSO
55.9
76.7
73.1
67.3
61.9
Total
$
620.3
$
742.5
$
730.7
$
676.9
$
615.1
Gross combined loans receivable increased $5.3 million, or 0.9%,
to $620.3 million as of March 31, 2020, from $615.1 million as of
March 31, 2019, as growth in Open-End loans of 30.0% and 30.5% in
the U.S. and Canada, respectively, offset the decline in
Installment, CSO and Single-Pay loans. Gross combined loans
receivable performance by product is explained further in the
following sections.
Unsecured Installment Loans
Unsecured Installment revenue and related gross combined loans
receivable decreased $13.4 million, or 9.8%, and $44.2 million, or
20.0%, respectively, from the prior-year period, primarily due to
regulatory changes in California, effective January 1, 2020.
Unsecured Installment loans in California represented $51.5
million, or 41.8%, of total Company Owned Unsecured Installment
loans as of March 31, 2020, a decrease of $38.1 million from $89.6
million, or 55.4%, as of March 31, 2019. Excluding California,
Company Owned Unsecured Installment loans receivable decreased $0.5
million, or 0.7%, from the prior-year period, while revenues
increased $0.1 million, or 0.3%, year-over-year.
Unsecured Installment loans Guaranteed by the Company declined
$5.6 million year-over-year due to regulatory changes in Ohio,
effective May 1, 2019. As a result, we no longer operate as a CSO
in Ohio, which accounted for $5.1 million of Unsecured Installment
loans Guaranteed by the Company as of March 31, 2019. Unsecured
Installment loan balances Guaranteed by the Company declined in the
last two weeks of the first quarter of 2020 due primarily to the
impacts of COVID-19.
The NCO rate for Company Owned Unsecured Installment gross loans
receivables in the first quarter of 2020 increased approximately
155 basis points ("bps") year-over-year, primarily due to a mix
shift away from California as a result of regulatory changes.
California NCO rates for Unsecured Installment loans are
historically lower than our other major states. California
comprised 46.4% of total U.S. Company Owned Unsecured Installment
loans as of March 31, 2020, compared to 60.7% as of March 31,
2019.
The Unsecured Installment Allowance for loan losses as a
percentage of Company Owned Unsecured Installment gross loans
receivable ("allowance coverage") increased year-over-year, from
20.8% as of March 31, 2019 to 23.5% as of March 31, 2020, primarily
as a result of the previously mentioned increase in U.S. NCO rates
and Allowance Build. Sequentially (described within this release as
the change from the fourth quarter of 2019 to the first quarter of
2020), allowance coverage and past-due balances increased from
22.1% to 23.5% and 26.8% to 28.4%, respectively, as of March 31,
2020.
NCO rates for Unsecured Installment loans Guaranteed by the
Company improved 115 bps compared to the prior-year period. The CSO
liability for losses increased year-over-year, from 14.4% for the
first quarter of 2019 to 16.9% for the first quarter of 2020, due
primarily to Allowance Build. Sequentially, allowance coverage and
past-due balances increased from 14.2% to 16.9% and 16.8% to 17.1%,
respectively, for the three months ended March 31, 2020.
2020
2019
(dollars in thousands, unaudited)
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Unsecured Installment loans:
Revenue - Company Owned
$
55,569
$
63,428
$
65,809
$
59,814
$
65,542
Provision for losses - Company Owned
26,182
33,183
31,891
33,514
33,845
Net revenue - Company Owned
$
29,387
$
30,245
$
33,918
$
26,300
$
31,697
Net charge-offs - Company Owned
$
32,775
$
35,729
$
28,973
$
31,970
$
37,919
Revenue - Guaranteed by the Company
$
66,840
$
72,183
$
71,424
$
62,298
$
70,236
Provision for losses - Guaranteed by the
Company
26,338
34,858
36,664
28,336
27,422
Net revenue - Guaranteed by the
Company
$
40,502
$
37,325
$
34,760
$
33,962
$
42,814
Net charge-offs - Guaranteed by the
Company
$
27,749
$
34,486
$
35,916
$
27,486
$
30,421
Unsecured Installment gross combined
loans receivable:
Company Owned
$
123,118
$
160,782
$
174,489
$
164,722
$
161,716
Guaranteed by the Company (1)(2)
54,097
74,317
70,704
65,055
59,740
Unsecured Installment gross combined loans
receivable (1)(2)
$
177,215
$
235,099
$
245,193
$
229,777
$
221,456
Average gross loans receivable:
Average Unsecured Installment gross loans
receivable - Company Owned (3)
$
141,950
$
167,636
$
169,606
$
163,219
$
176,060
Average Unsecured Installment gross loans
receivable - Guaranteed by the Company (3)
$
64,207
$
72,511
$
67,880
$
62,398
$
68,596
Allowance for loan losses and CSO
liability for losses:
Unsecured Installment Allowance for loan
losses (4)
$
28,965
$
35,587
$
38,127
$
35,223
$
33,666
Unsecured Installment CSO liability for
losses (4)
$
9,142
$
10,553
$
10,181
$
9,433
$
8,583
Unsecured Installment Allowance for loan
losses as a percentage of Unsecured Installment gross loans
receivable
23.5
%
22.1
%
21.9
%
21.4
%
20.8
%
Unsecured Installment CSO liability for
losses as a percentage of Unsecured Installment gross loans
guaranteed by the Company
16.9
%
14.2
%
14.4
%
14.5
%
14.4
%
Unsecured Installment past-due
balances:
Unsecured Installment gross loans
receivable
$
34,966
$
43,100
$
46,537
$
38,037
$
40,801
Unsecured Installment gross loans
guaranteed by the Company
$
9,232
$
12,477
$
11,842
$
10,087
$
7,967
Past-due Unsecured Installment gross loans
receivable — percentage (2)
28.4
%
26.8
%
26.7
%
23.1
%
25.2
%
Past-due Unsecured Installment gross loans
guaranteed by the Company — percentage (2)
17.1
%
16.8
%
16.7
%
15.5
%
13.3
%
Unsecured Installment other
information:
Originations - Company Owned
$
55,941
$
87,080
$
107,275
$
102,792
$
78,515
Originations - Guaranteed by the Company
(1)
$
64,836
$
91,004
$
89,644
$
80,445
$
68,899
Unsecured Installment ratios:
Provision as a percentage of gross loans
receivable — Company Owned
21.3
%
20.6
%
18.3
%
20.3
%
20.9
%
Provision as a percentage of gross loans
receivable — Guaranteed by the Company
48.7
%
46.9
%
51.9
%
43.6
%
45.9
%
(1) Includes loans originated by
third-party lenders through CSO programs, which are not included in
the Condensed Consolidated Financial Statements.
(2) Non-GAAP measure. For a description of
each non-GAAP metric, see "Non-GAAP Financial Measures."
(3) We calculate Average gross loans
receivable, which we utilize to calculate product yield and NCO
rates, as average of beginning of quarter and end of quarter gross
loans receivable.
(4) We report Allowance for loan losses as
a contra-asset reducing gross loans receivable and the CSO
liability for losses as a liability on the Condensed Consolidated
Balance Sheets.
Secured Installment Loans
Secured Installment revenue and the related gross combined loans
receivable for the three months ended March 31, 2020 decreased 4.3%
and 10.4%, respectively, compared to the prior-year period,
primarily as a result of regulatory changes in California,
effective January 1, 2020. California accounted for $28.6 million,
or 38.5%, of total Secured Installment gross combined loans
receivable as of March 31, 2020, a decrease of $14.8 million from
$43.5 million as of March 31, 2019. Secured Installment Allowance
for loan losses and CSO liability for losses as a percentage of
Secured Installment gross combined loans receivable increased
year-over-year from 11.9%, and sequentially from 11.5%, to 13.1%,
for the three months ended March 31, 2020, due to Allowance
Build.
2020
2019
(dollars in thousands, unaudited)
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Secured Installment loans:
Revenue
$
26,286
$
28,690
$
28,270
$
26,076
$
27,477
Provision for losses
9,682
11,492
8,819
7,821
7,080
Net revenue
$
16,604
$
17,198
$
19,451
$
18,255
$
20,397
Net charge-offs
$
10,284
$
11,548
$
8,455
$
7,630
$
9,822
Secured Installment gross combined loan
balances:
Secured Installment gross combined loans
receivable (1)(2)
$
74,405
$
90,411
$
92,478
$
87,718
$
83,087
Average Secured Installment gross combined
loans receivable (3)
$
82,408
$
91,445
$
90,098
$
85,403
$
89,505
Secured Installment Allowance for loan
losses and CSO liability for losses (4)
$
9,773
$
10,375
$
10,431
$
10,067
$
9,874
Secured Installment Allowance for loan
losses and CSO liability for losses as a percentage of Secured
Installment gross combined loans receivable
13.1
%
11.5
%
11.3
%
11.5
%
11.9
%
Secured Installment past-due
balances:
Secured Installment past-due gross loans
receivable and gross loans guaranteed by the Company
$
15,612
$
17,902
$
17,645
$
14,570
$
13,866
Past-due Secured Installment gross loans
receivable and gross loans guaranteed by the Company — percentage
(1)
21.0
%
19.8
%
19.1
%
16.6
%
16.7
%
Secured Installment other
information:
Originations (2)
$
20,990
$
40,961
$
45,990
$
49,051
$
33,490
Secured Installment ratios:
Provision as a percentage of gross
combined loans receivable
13.0
%
12.7
%
9.5
%
8.9
%
8.5
%
(1) Non-GAAP measure. For a description of
each non-GAAP metric, see "Non-GAAP Financial Measures."
(2) Includes loans originated by
third-party lenders through CSO programs, which are not included in
the Condensed Consolidated Financial Statements.
(3) We calculate Average gross loans
receivable, which we utilize to calculate product yield and NCO
rates, as average of beginning of quarter and end of quarter gross
loans receivable.
(4) We report Allowance for loan losses as
a contra-asset reducing gross loans receivable and the CSO
liability for losses as a liability on the Condensed Consolidated
Balance Sheets.
Open-End Loans
Open-End loan balances as of March 31, 2020 increased $73.2
million, or 30.4% ($89.7 million, or 37.2%, on a constant-currency
basis), compared to March 31, 2019, on 30.5% (39.5% on a
constant-currency basis) growth in Canada and 30.0% growth in the
U.S.
Consolidated Open-End NCO rate during the three months ended
March 31, 2020 improved 160 bps versus the prior-year period,
primarily as a result of seasoning of the Canada portfolio, which
improved 165 bps year-over-year on a pro forma basis as described
below. The Open-End Allowance for loan losses as a percentage of
Open-End gross loans receivable increased sequentially from 16.4%
to 18.0% for the three months ended March 31, 2020 because of
Allowance Build.
Q1 2019 Open-End Loss Recognition Change
Effective January 1, 2019, we modified the timeframe over which
we charge-off Open-End loans and made related refinements to our
loss provisioning methodology. Prior to January 1, 2019, we deemed
Open-End loans uncollectible and charged-off when a customer missed
a scheduled payment and the loan was considered past-due. Because
of our continuing shift to Open-End loans in Canada and our
analysis of payment patterns on early-stage versus late-stage
delinquencies, we revised our estimates and now consider Open-End
loans uncollectible when the loan has been contractually past-due
for 90 consecutive days. Consequently, past-due Open-End loans and
related accrued interest now remain in loans receivable for 90 days
before being charged off against the allowance for loan losses. All
recoveries on charged-off loans are credited to the allowance for
loan losses. We evaluate the adequacy of the allowance for loan
losses compared to the related gross loans receivable balances that
include accrued interest.
Prospectively from January 1, 2019, past-due, unpaid balances
plus related accrued interest charge-off on day 91.
The aforementioned change was treated as a change in accounting
estimate for accounting purposes and applied prospectively
beginning January 1, 2019.
The following table reports Open-End loan performance:
2020
2019
(dollars in thousands, unaudited)
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Open-End loans:
Revenue
$
70,982
$
71,295
$
66,120
$
54,972
$
52,869
Provision for losses
40,991
37,816
31,220
29,373
25,317
Net revenue
$
29,991
$
33,479
$
34,900
$
25,599
$
27,552
Net charge-offs
$
37,098
$
37,426
$
28,202
$
25,151
$
(1,521
)
Open-End gross loan balances:
Open-End gross loans receivable
$
314,006
$
335,524
$
314,971
$
283,311
$
240,790
Average Open-End gross loans receivable
(1)
$
324,765
$
325,248
$
299,141
$
262,051
$
224,062
Open-End allowance for loan
losses:
Allowance for loan losses
$
56,458
$
55,074
$
54,233
$
51,717
$
46,963
Open-End Allowance for loan losses as a
percentage of Open-End gross loans receivable
18.0
%
16.4
%
17.2
%
18.3
%
19.5
%
Open-End past-due balances:
Open-End past-due gross loans
receivable
$
49,987
$
50,072
$
46,053
$
35,395
$
32,444
Open-End past-due gross loans receivable —
percentage
15.9
%
14.9
%
14.6
%
12.5
%
13.5
%
(1) Average gross loans receivable
calculated as average of beginning of quarter and end of quarter
gross loans receivable.
In addition, the following table illustrates, on a non-GAAP pro
forma basis, the 2019 quarterly results as if the Q1 2019 Open-End
Loss Recognition Change had been applied to our outstanding
Open-End loan portfolio as of December 31, 2018. This table is
illustrative of retrospective application to determine the NCOs
that would have been incurred in each quarter of 2019 from the
December 31, 2018 loan book. The primary purpose of this pro forma
illustration is to provide a representative level of NCO rates from
applying the Q1 2019 Open-End Loss Recognition Change.
Pro Forma
2019
(dollars in thousands, unaudited)
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Open-End loans:
Pro Forma Net charge-offs
$
38,748
$
29,762
$
29,648
$
31,788
Open-End gross loan balances:
Open-End gross loans receivable
$
335,524
$
314,971
$
283,311
$
240,790
Pro Forma Average Open-End gross loans
receivable (1)
$
325,248
$
299,141
$
262,051
$
245,096
Pro Forma Net-charge offs as a percentage
of average gross loans receivable
11.9
%
9.9
%
11.3
%
13.0
%
(1) We calculate Average gross loans
receivable, which we utilize to calculate product yield and NCO
rates, as average of beginning of quarter and end of quarter gross
loans receivable.
Single-Pay
Single-Pay revenue declined $1.6 million, or 3.4%, for the three
months ended March 31, 2020 compared to the prior-year period,
primarily due to lower volume during the last two weeks of the
first quarter of 2020, attributable primarily to the impact of
COVID-19. The Single-Pay Allowance for loan losses as a percentage
of Single-Pay gross loans receivable increased sequentially from
7.2% to 8.6% because of Allowance Build.
2020
2019
(dollars in thousands, unaudited)
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Single-Pay loans:
Revenue
$
45,157
$
49,844
$
49,312
$
45,528
$
46,761
Provision for losses
9,639
12,289
14,736
12,446
8,268
Net revenue
$
35,518
$
37,555
$
34,576
$
33,082
$
38,493
Net charge-offs
$
10,517
$
12,145
$
13,913
$
11,458
$
8,610
Single-Pay gross loan balances:
Single-Pay gross loans receivable
$
54,728
$
81,447
$
78,039
$
76,126
$
69,753
Average Single-Pay gross loans receivable
(1)
$
68,088
$
78,787
$
77,083
$
72,940
$
75,288
Single-Pay Allowance for loan losses
$
4,693
$
5,869
$
5,662
$
4,941
$
3,897
Single-Pay Allowance for loan losses as a
percentage of Single-Pay gross loans receivable
8.6
%
7.2
%
7.3
%
6.5
%
5.6
%
(1) We calculate Average gross loans
receivable, which we utilize to calculate product yield and NCO
rates, as average of beginning of quarter and end of quarter gross
loans receivable.
Results of Consolidated Operations
Condensed Consolidated Statements of Operations
(in thousands, unaudited)
Three Months Ended March 31,
2020
2019
Change $
Change %
Revenue
$
280,806
$
277,939
$
2,867
1.0
%
Provision for losses
113,536
102,385
11,151
10.9
%
Net revenue
167,270
175,554
(8,284
)
(4.7
)%
Advertising costs
12,219
7,786
4,433
56.9
%
Non-advertising costs of providing
services
55,352
62,271
(6,919
)
(11.1
)%
Total cost of providing services
67,571
70,057
(2,486
)
(3.5
)%
Gross margin
99,699
105,497
(5,798
)
(5.5
)%
Operating expense
Corporate, district and other expenses
42,807
49,088
(6,281
)
(12.8
)%
Interest expense
17,324
17,690
(366
)
(2.1
)%
Loss from equity method investment
1,618
—
1,618
#
Total operating expense
61,749
66,778
(5,029
)
(7.5
)%
Net income from continuing operations
before income taxes
37,950
38,719
(769
)
(2.0
)%
Provision for income taxes
1,937
10,046
(8,109
)
(80.7
)%
Net income from continuing operations
36,013
28,673
7,340
25.6
%
Net income from discontinued operations,
net of tax
292
8,375
(8,083
)
(96.5
)%
Net income
$
36,305
$
37,048
$
(743
)
(2.0
)%
# — 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 March 31,
2020
2019
Change $
Change %
Net income from continuing operations
$
36,013
$
28,673
$
7,340
25.6
%
Adjustments:
Legal and other costs (1)
1,149
1,752
U.K. related costs (2)
—
7,817
Loss from equity method investment (3)
1,618
—
Share-based compensation (4)
3,194
2,172
Intangible asset amortization
737
796
Impact of tax law changes (5)
(9,114
)
—
Cumulative tax effect of adjustments
(6)
(1,321
)
(3,260
)
Adjusted Net Income
$
32,276
$
37,950
$
(5,674
)
(15.0
)%
Net income from continuing operations
$
36,013
$
28,673
Diluted Weighted Average Shares
Outstanding
41,892
47,319
Diluted Earnings per Share from continuing
operations
$
0.86
$
0.61
$
0.25
41.0
%
Per Share impact of adjustments to Net
income from continuing operations
(0.09
)
0.19
Adjusted Diluted Earnings per Share
$
0.77
$
0.80
$
(0.03
)
(3.8
)%
Note: Footnotes follow Reconciliation of
Net income table immediately below
Reconciliation of Net income from continuing operations to
EBITDA and Adjusted EBITDA, non-GAAP measures
Three Months Ended March 31,
(in thousands, except per share data,
unaudited)
2020
2019
Change $
Change %
Net income from continuing operations
$
36,013
$
28,673
$
7,340
25.6
%
Provision for income taxes
1,937
10,046
(8,109
)
(80.7
)%
Interest expense
17,324
17,690
(366
)
(2.1
)%
Depreciation and amortization
4,537
4,920
(383
)
(7.8
)%
EBITDA
59,811
61,329
(1,518
)
(2.5
)%
Legal and other costs (1)
1,149
1,752
U.K. related costs (2)
—
7,817
Loss from equity method investment (3)
1,618
—
Share-based compensation (4)
3,194
2,172
Other adjustments (7)
15
(216
)
Adjusted EBITDA
$
65,787
$
72,854
$
(7,067
)
(9.7
)%
Adjusted EBITDA Margin
23.4
%
26.2
%
(1)
Legal and other costs for the three months
ended March 31, 2020 include (i) costs related to certain
securities litigation and related matter, (ii) severance costs for
certain corporate employees and (iii) legal and advisory costs
related to the purchase of Ad Astra.
Legal and other costs of $1.8 million for
the three months ended March 31, 2019 were due to eliminating 121
positions in North America. The store employee reductions helped
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.
(2)
U.K. related costs of $7.8 million for the
three months ended March 31, 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
$0.2 million for other costs.
(3)
The Loss from equity method investment for
the three months ended March 31, 2020 of $1.6 million includes our
share of the estimated GAAP net loss of Cognical Holdings, Inc.
("Katapult"). As of March 31, 2020, we owned 42.5% of the
outstanding shares of Katapult.
(4)
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.
(5)
On March 27, 2020, the Coronavirus Aid,
Relief and Economic Security Act ("CARES Act") was enacted by the
U.S. Federal government in response to the COVID-19 pandemic. The
CARES Act, among other things, allows net operating losses ("NOLs")
incurred in 2018, 2019, and 2020 to be carried back to each of the
five preceding taxable years to generate a refund of previously
paid income taxes. We recorded an income tax benefit of $9.1
million related to the carryback of NOL from tax years 2018 and
2019.
(6)
Cumulative tax effect of adjustments
included in Reconciliation of Net income from continuing operations
to EBITDA and Adjusted EBITDA table is calculated using the
estimated incremental tax rate by country.
(7)
Other adjustments primarily include the
intercompany foreign exchange impact.
For the three months ended March 31, 2020 and 2019
Revenue and Net Revenue
Revenue increased $2.9 million, or 1.0%, to $280.8 million for
the three months ended March 31, 2020, from $277.9 million for the
three months ended March 31, 2019. U.S. revenue decreased 1.9%
primarily due to regulatory changes in California. Excluding
California, U.S. revenue increased 4.6%, primarily driven by
Open-End growth. Canadian revenue increased 13.9% primarily due to
growth in Open-End loans and the sale of payment protection
insurance to Canadian Installment and Open-End customers.
Provision for losses increased by $11.2 million, or 10.9%, for
the three months ended March 31, 2020 compared to the prior-year
period. The increase in provision for loan losses was primarily
from $12.0 million of Allowance Build, as discussed in more detail
in the "Loan Product and Portfolio Performance" and "Segment
Analysis" sections.
Cost of Providing Services
Non-advertising costs of providing services decreased $6.9
million, or 11.1%, to $55.4 million in the three months ended March
31, 2020, compared to $62.3 million in the three months ended March
31, 2019. Of the $6.9 million decrease, $4.7 million is related to
third-party collection costs, incurred in 2019 related to Ad Astra,
which were included in Non-advertising costs of providing services.
Subsequent to our acquisition of Ad Astra, a wholly owned
subsidiary as of January 3, 2020, its operating costs are included
within "Corporate, district and other," consistent with
presentation of our other internal collection costs. The remaining
decrease year-over-year in Non-advertising costs of providing
services is from headcount reductions in the three months ended
March 31, 2019 and discretionary variable compensation
comparisons.
Advertising costs increased $4.4 million, or 56.9%,
year-over-year. We historically reduced advertising and customer
acquisition seasonally in the first quarter of the year
(concentrated in February) because of the impact on customers of
U.S. federal income tax refunds. In the three months ended March
31, 2020, based on improved underwriting and evaluation of the
seasonal opportunity, we increased advertising through the
traditional tax refund season. We subsequently reduced advertising
in the last three weeks of March 2020 because of COVID-19-related
considerations.
Operating Expenses
Corporate, district and other expenses were $42.8 million for
the three months ended March 31, 2020, a decrease of $6.3 million,
or 12.8%, compared to the three months ended March 31, 2019.
Corporate, district and other expenses in the three months ended
March 31, 2020 include $3.5 million of collection costs related to
Ad Astra, which prior to our acquisition of it in January 2020,
were included in Non-advertising costs of providing services. For
the three months ended March 31, 2020, corporate, district and
other expenses include (i) $1.1 million of legal and other costs
described in our reconciliation to Adjusted Net Income above and
(ii) $3.2 million of share-based compensation costs. For the three
months ended March 31, 2019, corporate district and other costs
include (i) U.K. related costs of $7.8 million and severance costs
of $1.8 million as described in our reconciliation to Adjusted Net
Income above, and (ii) share-based compensation costs of $2.2
million.
Excluding Ad Astra costs, share-based compensation expense and
other costs described above, comparable corporate, district and
other expenses decreased $2.4 million year-over-year, primarily due
to the timing and extent of variable compensation in the three
months ended March 31, 2019 and market-based changes in deferred
compensation plan assets and liabilities.
We account for our investment in Katapult under the equity
method. We record our pro rata share of Katapult's income or losses
in the Condensed Consolidated Statement of Operations with a
corresponding adjustment to the carrying value of our investment in
"Other assets" on the Condensed Consolidated Balance Sheet. For the
three months ended March 31, 2020, our share of Katapult's loss was
$1.6 million.
Interest Expense
Interest expense for the three months ended March 31, 2020
remained consistent with the prior-year period on flat
year-over-year average borrowing.
Provision for Income Taxes
The effective income tax rate for the three months ended March
31, 2020 was 5.1%, compared to a tax rate of 25.9% for the three
months ended March 31, 2019. The decrease in effective income tax
rate was primarily due to a tax benefit from the CARES Act, which
was enacted on March 27, 2020 in response to the COVID-19 pandemic.
The CARES Act, among other things, allows NOLs incurred in 2018,
2019, and 2020 to be carried back to each of the five preceding
taxable years to generate a refund of previously paid Federal
income taxes. In the first quarter of 2020, we recorded an income
tax benefit of $9.1 million related to the carry-back of NOL from
tax years 2018 and 2019, which will offset pre-tax reform years and
generate a refund of previously paid taxes at 35%. In addition,
losses from our equity method investment in Katapult are not tax
deductible. Excluding the impact of the CARES Act and Katapult, our
adjusted effective income tax rate for the three months ended March
31, 2020 was 27.9%.
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 March 31,
(dollars in thousands, unaudited)
2020
2019
Change $
Change %
Revenue
$
221,768
$
226,119
$
(4,351
)
(1.9
)%
Provision for losses
86,041
84,980
1,061
1.2
%
Net revenue
135,727
141,139
(5,412
)
(3.8
)%
Advertising costs
10,945
6,354
4,591
72.3
%
Non-advertising costs of providing
services
37,242
44,982
(7,740
)
(17.2
)%
Total cost of providing services
48,187
51,336
(3,149
)
(6.1
)%
Gross margin
87,540
89,803
(2,263
)
(2.5
)%
Corporate, district and other expenses
37,650
43,880
(6,230
)
(14.2
)%
Interest expense
14,846
14,728
118
0.8
%
Loss from equity method investment
1,618
—
1,618
#
Total operating expense
54,114
58,608
(4,494
)
(7.7
)%
Segment operating income
33,426
31,195
2,231
7.2
%
Interest expense
14,846
14,728
118
0.8
%
Depreciation and amortization
3,377
3,726
(349
)
(9.4
)%
EBITDA
51,649
49,649
2,000
4.0
%
Legal and other costs
1,149
1,617
(468
)
U.K. related costs
—
7,817
(7,817
)
Loss from equity method investment
1,618
—
—
Share-based compensation
3,194
2,172
(2,172
)
Other adjustments
(141
)
(105
)
(36
)
Adjusted EBITDA
$
57,469
$
61,150
$
(3,681
)
(6.0
)%
# — Variance greater than 100% or not
meaningful.
U.S. Segment Results
— For
the three months ended March 31, 2020 and 2019
U.S. revenues decreased by $4.4 million, or 1.9%, to $221.8
million, compared to the prior-year period for the three months
ended March 31, 2020, primarily due to regulatory changes in
California. Excluding California, U.S. revenues increased by $7.8
million, or 4.6%, driven by a $17.0 million, or 30.0% increase in
Open-End loan growth.
The provision for losses decreased $1.1 million, or 1.2%, as a
result of the decline in total gross combined loans receivable,
because of California regulatory changes, offset by changes in NCO
rates and $5.3 million Allowance Build. For the three months ended
March 31, 2020, quarterly NCO rates increased approximately 140 bps
compared to the pro-forma prior-year period due to the Installment
portfolio mix shift to higher loss states, as well as loan balance
declines late in the quarter from COVID-19 impacts, which affected
simple-average NCO rate calculations.
Non-advertising costs of providing services for the three months
ended March 31, 2020 of $37.2 million, decreased $7.7 million, or
17.2%, compared to $45.0 million for the three months ended March
31, 2019. The decrease was primarily driven by the aforementioned
$4.7 million of Ad Astra costs subsequent to our acquisition of it.
The remaining decrease year-over-year in Non-advertising costs of
providing services was from headcount reductions in the three
months ended March 31, 2019 and discretionary variable compensation
comparisons.
Advertising costs increased $4.6 million, or 72.3%,
year-over-year. We historically reduced advertising and customer
acquisition seasonally in the first quarter of the year
(concentrated in February) because of the impact on customers of
U.S. Federal income tax refunds. In the three months ended March
31, 2020, based on improved underwriting and evaluation of the
seasonal opportunity, we increased advertising through the
traditional tax refund season. We subsequently reduced advertising
in the last three weeks of March 2020 because of COVID-19-related
considerations.
Corporate, district and other expenses were $37.7 million for
the three months ended March 31, 2020, a decrease of $6.2 million,
or 14.2%, compared to the three months ended March 31, 2019.
Corporate, district and other expenses for the three months ended
March 31, 2020 include $3.5 million of collection costs related to
Ad Astra, which were historically included in Non-advertising costs
of providing services. For the three months ended March 31, 2020,
corporate, district and other costs include (i) $1.1 million of
legal and other costs described in our reconciliation to Adjusted
Net Income above and (ii) $3.2 million of share-based compensation
costs. For the three months ended March 31, 2019, corporate,
district and other expenses include (i) U.K. related costs of $7.8
million and severance costs of $1.4 million as described in our
reconciliation to Adjusted Net Income above, and (ii) share-based
compensation costs of $2.2 million.
Excluding these aforementioned items, comparable corporate
district and other expenses decreased $2.6 million year-over-year,
primarily due to the timing and extent of variable compensation for
the three months ended March 31, 2019 and market-based changes in
deferred compensation plan assets and liabilities.
U.S. interest expense for the three months ended March 31, 2020
remained consistent with the prior-year period.
Canada Segment Results
Three Months Ended March 31,
(dollars in thousands, unaudited)
2020
2019
Change $
Change %
Revenue
$
59,038
$
51,820
$
7,218
13.9
%
Provision for losses
27,495
17,405
10,090
58.0
%
Net revenue
31,543
34,415
(2,872
)
(8.3
)%
Advertising costs
1,274
1,432
(158
)
(11.0
)%
Non-advertising costs of providing
services
18,110
17,289
821
4.7
%
Total cost of providing services
19,384
18,721
663
3.5
%
Gross margin
12,159
15,694
(3,535
)
(22.5
)%
Corporate, district and other expenses
5,157
5,208
(51
)
(1.0
)%
Interest expense
2,478
2,962
(484
)
(16.3
)%
Total operating expense
7,635
8,170
(535
)
(6.5
)%
Segment operating income
4,524
7,524
(3,000
)
(39.9
)%
Interest expense
2,478
2,962
(484
)
(16.3
)%
Depreciation and amortization
1,160
1,194
(34
)
(2.8
)%
EBITDA
8,162
11,680
(3,518
)
(30.1
)%
Legal and other costs
—
135
(135
)
Other adjustments
156
(111
)
267
Adjusted EBITDA
$
8,318
$
11,704
$
(3,386
)
(28.9
)%
Canada Segment Results
— For
the three months ended March 31, 2020 and 2019
Canada revenue increased $7.2 million, or 13.9% ($7.7 million,
or 14.9%, on a constant-currency basis), to $59.0 million for the
three months ended March 31, 2020, from $51.8 million in the prior
year due to loan growth.
Canada non-Single-Pay revenue increased $9.8 million, or 30.4%
($10.2 million, or 31.7%, on a constant-currency basis), to $42.0
million, compared to $32.2 million in the prior-year period, on
growth of $54.2 million, or 27.3% ($71.5 million, or 36.1%, on a
constant-currency basis), in related loan balances. The increase
was driven by continued significant growth of Open-End loans.
Additionally, with increased Open-End loan volume and customer
acquisition, ancillary revenue increased $1.3 million versus the
prior-year period, primarily driven by an increase in sales of
insurance to Open-End loan customers.
Single-Pay revenue decreased $2.6 million, or 13.2% ($2.5
million, or 12.6%, on a constant-currency basis), to $17.0 million
for the three months ended March 31, 2020, and Single-Pay
receivables decreased $9.6 million, or 28.7% ($8.0 million, or
23.8% on a constant-currency basis), to $23.8 million from $33.4
million, in the prior year. The decreases in Single-Pay revenue and
receivables were due to product mix shift in Canada from Single-Pay
loans to Open-End loans, a significant decline in demand over the
last two weeks of March attributable to COVID-19, and changes in
Canada's currency exchange rate.
The provision for losses increased $10.1 million, or 58.0%
($10.5 million, or 60.4%, on a constant-currency basis), to $27.5
million for the three months ended March 31, 2020, compared to
$17.4 million in the prior-year period. The increase in provision
for loan losses was primarily a result of $6.7 million of Allowance
Build. On a quarterly basis, despite the impact of lower demand
over the last two weeks of March 2020 and unfavorable currency
exchange rates on ending receivable balances, loss rates improved
approximately 100 bps year over year. Excluding the aforementioned
incremental provision expense as a result of changes in the
Allowance for Loan Losses, due to lower loss rates, provision
expense increased $3.3 million compared to the $7.2 million
increase in revenue.
Canada cost of providing services for the three months ended
March 31, 2020 was $19.4 million, an increase of $0.7 million, or
3.5% ($0.8 million, or 4.4%, on a constant-currency basis),
compared to $18.7 million for the three months ended March 31,
2019.
Canada operating expenses for the three months ended March 31,
2020 were $7.6 million, a decrease of $0.5 million, or 6.5%,
compared to $8.2 million in the prior-year period, primarily
related to lower interest expense. There was no material impact on
a constant-currency basis.
Results of Discontinued Operations
On February 25, 2019, in accordance with the provisions of the
U.K. Insolvency Act 1986 and as approved by the Boards of Directors
of the U.K. Subsidiaries, insolvency practitioners from KPMG were
appointed as Administrators for the U.K. Subsidiaries. The effect
of the U.K. Subsidiaries’ entry into administration was to place
their management, affairs, business and property of the U.K.
Subsidiaries under the direct control of the Administrators.
Accordingly, we deconsolidated the U.K. Subsidiaries, which
comprised the U.K. reportable operating segment, as of February 25,
2019 and classified them as Discontinued Operations for all periods
presented.
The following table presents the results of operations of the
U.K. Subsidiaries, which meet the criteria of Discontinued
Operations and, therefore, are excluded from our results of
continuing operations:
(in thousands, unaudited)
Three Months Ended March 31,
2020
2019(1)
Revenue
$
—
$
6,957
Provision for losses
—
1,703
Net revenue
—
5,254
Cost of providing services
—
1,082
Corporate, district and other
—
3,806
(Gain) loss on disposition
(390
)
39,414
Pre-tax income (loss) from Discontinued
Operations
390
(39,048
)
Income tax expense (income) related to
disposition
98
(47,423
)
Net income (loss) from discontinued
operations
$
292
$
8,375
(1) For the three months ended March 31,
2019, includes operations through February 25, 2019
Revenue and expenses related to discontinued operations included
activity prior to the deconsolidation of the U.K. subsidiaries
effective February 25, 2019. For the three months ended March 31,
2019, "(Gain) 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 $47.4 million as of
March 31, 2019, to be applied against future income tax
obligations. Subsequently, in 2019, we revised the estimated U.S.
Federal and state income tax benefit to $46.6 million. During the
three months ended March 31, 2020, we received $0.4 million of
disbursements from the Administrator related to the wind-down of
the U.K. Subsidiaries.
CURO GROUP HOLDINGS CORP. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
(unaudited)
March 31, 2020
December 31, 2019
ASSETS
Cash
$
138,714
$
75,242
Restricted cash (includes restricted cash
of consolidated VIEs of $22,317 and $17,427 as of March 31, 2020
and December 31, 2019, respectively)
41,527
34,779
Gross loans receivable (includes loans of
consolidated VIEs of $219,543 and $244,492 as of March 31, 2020 and
December 31, 2019, respectively)
564,437
665,828
Less: allowance for loan losses (includes
allowance for losses of consolidated VIEs of $25,980 and $24,425 as
of March 31, 2020 and December 31, 2019, respectively)
(99,842
)
(106,835
)
Loans receivable, net
464,595
558,993
Right of use asset — operating leases
114,272
117,453
Deferred tax assets
—
5,055
Income taxes receivable
24,435
11,426
Prepaid expenses and other
42,437
35,890
Property and equipment, net
66,787
70,811
Goodwill
132,825
120,609
Other intangibles, net of accumulated
amortization
33,944
33,927
Other assets
15,547
17,710
Total Assets
$
1,075,083
$
1,081,895
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities
Accounts payable and accrued liabilities
(includes accounts payable and accrued liabilities of consolidated
VIEs of $12,668 and $13,462 as of March 31, 2020 and December 31,
2019, respectively)
$
61,920
$
60,083
Deferred revenue
6,655
10,170
Lease liability — operating leases
121,715
124,999
Accrued interest (includes accrued
interest of consolidated VIEs of $627 and $871 as of March 31, 2020
and December 31, 2019, respectively)
5,392
19,847
Liability for losses on CSO lender-owned
consumer loans
9,189
10,623
Debt (includes debt and issuance costs of
consolidated VIEs of $87,365 and $2,491 as of March 31, 2020 and
$115,243 and $3,022 as of December 31, 2019, respectively)
788,451
790,544
Other long-term liabilities
9,095
10,664
Deferred tax liabilities
13,095
4,452
Total Liabilities
$
1,015,512
$
1,031,382
Stockholders' Equity
Total Stockholders' Equity (Deficit)
$
59,571
$
50,513
Total Liabilities and Stockholders'
Equity
$
1,075,083
$
1,081,895
Balance Sheet Changes — March 31, 2020 compared
to December 31, 2019
Cash — The increase in Cash from
December 31, 2019 is primarily due to (i) seasonal declines in U.S.
gross receivables for federal income tax refund effects, (ii)
run-off of the California Installment loan portfolios and (iii)
$25.0 million draw on our Senior Revolver, partially offset by a
net pay-down on our Non-Recourse Canada SPV facility.
Restricted Cash — The increase in
Restricted cash from December 31, 2019 is primarily due to
increased consumer demand for loans meeting the Non-Recourse Canada
SPV Facility criteria as well as restricted cash balances related
to Revolve Finance, our new demand deposit account.
Gross Loans Receivable and Allowance for
Loan Losses — As noted in "Loan Volume and Portfolio
Performance Analysis" above, changes in Gross Loans Receivable and
related Allowance for Loan Losses were due to expected and normal
seasonality trends from lower customer demand and loan origination
volumes during the three months ended March 31, 2020, regulatory
changes in California and impacts from COVID-19 during the last two
weeks of the quarter.
Income Taxes Receivable and Deferred tax
liabilities — The change in Income taxes receivable and
Deferred tax liabilities resulted from the NOL carry-backs, as
allowed by the CARES Act, enacted in March 2020, in response to the
COVID-19 pandemic. See "Results of Consolidated Operations" above
for additional details.
Goodwill — The increase in Goodwill
from December 31, 2019 is due to our acquisition of Ad Astra on
January 3, 2020, which resulted in $14.8 million of goodwill as of
March 31, 2020, offset by foreign currency rate changes.
Accrued Interest — The decrease in
accrued interest is primarily due to interest payments on our 8.25%
Senior Secured Notes, which are due semi-annually on September 1
and March 1.
Debt Capitalization Summary (in thousands)
Capacity
Interest Rate
Maturity
Counter-parties
Balance as of
March 31, 2020
Non-Recourse Canada SPV Facility (1)
C$175.0 million
3-Mo CDOR + 6.75%
September 2, 2023
Waterfall Asset Management
$
84,724
Senior Secured Revolving Credit
Facility
$50.0 million
1-Mo LIBOR + 5.00%
June 30, 2021
BayCoast Bank; Stride Bank;
Hancock-Whitney Bank; Metropolitan Commercial Bank
25,000
Non-Recourse U.S. SPV Facility (2)
$100.0 million
1-Mo LIBOR + 5.75% or 9.75%(3)
April 8, 2024
Atalaya Capital Management
—
Cash Money Revolving Credit Facility
(1)
C$10.0 million
Canada Prime Rate +1.95%
On-demand
Royal Bank of Canada
—
8.25% Senior Secured Notes (due 2025)
$690.0 million
8.25%
September 1, 2025
$
678,727
(1) Capacity amounts are denominated in
Canadian dollars, while outstanding balances as of March 31, 2020
are denominated in U.S. dollars.
(2) The Non-Recourse U.S. SPV Facility was
entered into on April 8, 2020. Concurrent with the closing, we drew
$35.2 million on the facility.
(3) The Non-Recourse U.S. SPV Facility
provides for $100.0 million of borrowing capacity and, subject to
obtaining additional commitments thereunder, the ability to expand
such capacity up to $200.0 million. Prior to the increase in
commitments, interest accrues at an annual rate of one-month LIBOR
plus 9.75% and after the increase in commitments, one-month LIBOR
plus 5.75%.
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 Friday, May 1, 2020. The live webcast of
the call can be accessed at the CURO Investor Relations website at
http://ir.curo.com/.
You may access the call at 1-866-807-9684 (1-412-317-5415 for
international callers). Please ask to join the CURO Group Holdings
call. A replay of the conference call will be available until May
8, 2020, 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 1-877-344-7529
(1-412-317-0088 for international callers). The replay access code
is 10142978.
Final Results
The financial results presented and discussed herein are on a
preliminary and unaudited basis; final unaudited data will be
included in the Company’s Quarterly Report on Form 10-Q for the
three months ended March 31, 2020.
Forward-Looking Statements
This press release contains forward-looking statements. These
forward-looking statements include our assumptions about the impact
of COVID-19 on our financial results and our belief that we are
well positioned to manage through the COVID-19 pandemic and to grow
after the crisis abates. In addition, words such as “guidance,”
“estimate,” “anticipate,” “believe,” “forecast,” “step,” “plan,”
“predict,” “focused,” “project,” “is likely,” “expect,” “intend,”
“should,” “will,” “confident,” variations of such words and similar
expressions are intended to identify forward-looking statements.
Our ability to achieve these forward-looking statements is based on
certain assumptions and judgments, including the effects on our
business of the COVID-19 pandemic, its impact on our ability to
continue to service our customers, our revenue and overall
financial performance and the manner in which we are able to
conduct our operations, increases in charge-offs in light of the
impact of the COVID-19 pandemic, 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 the impact of
COVID-19 on the macro-economic environment and how that may impact
our customers, our dependence on third-party lenders to provide the
cash we need to fund our loans and our ability to affordably access
third-party financing; errors in our internal forecasts; our level
of indebtedness; our ability to integrate acquired businesses; our
dependence on third-party lenders to provide the cash we need to
fund our loans and our ability to affordably access third-party
financing; actions of regulators and the negative impact of those
actions on our business; our ability to protect our proprietary
technology and analytics and keep up with that of our competitors;
disruption of our information technology systems that adversely
affect our business operations; ineffective pricing of the credit
risk of our prospective or existing customers; inaccurate
information supplied by customers or third parties could lead to
errors in judging customers’ qualifications to receive loans;
improper disclosure of customer personal data; failure of third
parties who provide products, services or support to us; any
failure of third-party lenders upon whom we rely to conduct
business in certain states; disruption to our relationships with
banks and other third-party electronic payment solutions providers;
disruption caused by employee or third-party theft and errors in
our stores as well as other factors discussed in our filings with
the Securities and Exchange Commission. 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 restructuring and other costs, loss from equity
method investment, goodwill and intangible asset impairments,
certain legal settlements, certain costs related to the disposition
of U.K., 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);
- Adjusted effective income tax rate (effective tax rate plus or
minus certain non-cash and other adjusting items); and
- Gross Combined Loans Receivable (includes loans originated by
third-party lenders through CSO programs which are not included in
the Consolidated Financial Statements).
We believe that presentation of non-GAAP financial information
is meaningful and useful in understanding the activities and
business metrics of the Company's operations. We believe that these
non-GAAP financial measures reflect an additional way of viewing
aspects of the business that, when viewed with the Company's U.S.
GAAP results, provide a more complete understanding of factors and
trends affecting the business.
We believe that investors regularly rely on non-GAAP financial
measures, such as Adjusted Net Income, Adjusted Earnings per Share,
EBITDA and Adjusted EBITDA, to assess operating performance and
that such measures may highlight trends in the business that may
not otherwise be apparent when relying on financial measures
calculated in accordance with U.S. GAAP. In addition, we believe
that the adjustments shown above are useful to investors in order
to allow them to compare our financial results during the periods
shown without the effect of each of these income or expense items.
In addition, we believe that Adjusted Net Income, Adjusted Earnings
per Share, EBITDA and Adjusted EBITDA are frequently used by
securities analysts, investors and other interested parties in the
evaluation of public companies in our industry, many of which
present Adjusted Net Income, Adjusted Earnings per Share, EBITDA
and/or Adjusted EBITDA when reporting their results.
In addition to reporting loans receivable information in
accordance with U.S. GAAP, we provide Gross Combined Loans
Receivable consisting of owned loans receivable plus loans
originated by third-party lenders through the CSO programs, which
we guarantee but do not include in the Consolidated Financial
Statements. Management believes this analysis provides investors
with important information needed to evaluate overall lending
performance.
We provide non-GAAP financial information for informational
purposes and to enhance understanding of the U.S. GAAP Consolidated
Financial Statements. Adjusted Net Income, Adjusted Earnings per
Share, EBITDA, Adjusted EBITDA and Gross Combined Loans Receivable
should not be considered as alternatives to income from continuing
operations, segment operating income, or any other performance
measure derived in accordance with U.S. GAAP, or as an alternative
to cash flows from operating activities or any other liquidity
measure derived in accordance with U.S. GAAP. Readers should
consider the information in addition to, but not instead of or
superior to, the financial statements prepared in accordance with
US 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 US 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 US 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
US 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)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200430005972/en/
Investor Relations: Roger Dean Executive Vice President and
Chief Financial Officer Phone: 844-200-0342 Email: IR@curo.com or
Financial Profiles, Inc. Curo@finprofiles.com
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