CURO Group Holdings Corp. Announces First Quarter 2022 Financial Results
CURO Group Holdings Corp. (NYSE: CURO) (“CURO” or the “Company”), a tech-enabled, omni-channel consumer finance company serving a full spectrum of non-prime and prime consumers in the U.S. and Canada, today announced financial results for its first quarter ended March 31, 2022.
“We are very pleased to end the first quarter with over $1.6 billion of gross loans receivable – more than doubling our loan book year-over-year,” said Don Gayhardt, CURO’s Chief Executive Officer. “Our Heights Finance acquisition added $462.9 million of growth, but excluding Heights Finance the rest of our company-owned businesses grew loans 59.5% compared to the first quarter of 2021. Sequentially, we grew loans over $80 million or 5.2% despite normal seasonality for U.S. federal tax refunds.”
“Consolidated net charge-off rates improved 90bps compared to the first quarter of 2021 because of our managed portfolio mix shift to larger, longer-term, lower-yielding loans with lower loss rates. Credit performance continues to normalize with portfolio-level net charge-off and past-due rates up year-over-year but improved versus the fourth quarter of 2021.”
“We are very pleased so far with our business results and the talent we added with the acquisition of Heights in December and our combined teams will continue to be intensely focused in the coming months to ensure we execute on the growth and value-creation opportunities."
"Finally, while we are pleased that we are moving into a more manageable phase of the pandemic in both the US and Canada, persistent inflation and related interest rate increases and changing shopping and borrowing habits are adding new complexities to daily operations as well as longer-range forecasting."
Consolidated Summary Results
We reported Net income of $1.3 million ($0.03 per share) and Adjusted Net Income of $6.3 million ($0.15 adjusted diluted earnings per share) on revenue of $290.2 million for the three months ended March 31, 2022, compared with Net income of $25.7 million ($0.59 per share) and Adjusted Net Income of $30.1 million ($0.69 adjusted diluted earnings per share) on total revenue of $196.6 million for the three months ended March 31, 2021.
The decline in Net income was primarily driven by year-over-year comparisons for the provision for loan losses and, secondarily, higher interest expense. Government stimulus and other pandemic-related behavior reduced demand, increased payment rates and lowered loss rates in the first quarter of 2021, resulting in a provision for loan losses that was $16.5 million less than net charge-offs ("NCOs"). Credit normalization and strong sequential loan growth in the first quarter of 2022 resulted in a provision for loan losses that exceeded NCOs by $12.1 million, which included the impact of purchase accounting. This shift resulted in a $28.7 million pretax swing year over year. Interest expense increased because of the additional 7.50% Senior Secured Notes issued to finance, in part, (i) the Heights Finance acquisition and (ii) the expansion of non-recourse asset-backed facilities to support loan growth.
Below are additional highlights of our performance during the three months ended March 31, 2022:
Revenue and Net Revenue Revenue increased $93.6 million, or 47.6%, year over year, primarily driven by our December 27, 2021 acquisition of Heights Finance, which accounted for $65.7 million of revenue for the first quarter of 2022, as well as a full quarter of Canada POS Lending revenue of $20.3 million, compared to a partial quarter of $1.6 million in the prior-year period. Sequentially, revenue increased $65.9 million, or 29.4%, driven by growth of $59.4 million, or 42.7% in the U.S. due to our acquisition of Heights Finance, $5.5 million, or 37.3%, in Canada POS Lending and $1.0 million, or 1.4%, in Canada Direct Lending. For the three months ended March 31, 2022, net revenue increased $32.3 million, or 20.1%, year over year, and $62.0 million, or 47.4%, sequentially. The sequential increase was due to seasonality and our acquisition of Heights Finance. Excluding Heights Finance, net revenue increased sequentially $17.0 million, or 13.0%. Loans Receivable Sequential loan growth in Company Owned gross loans receivable and combined gross loans receivable of $80.3 million, or 5.2%, and $78.4 million, or 4.9%, respectively, was primarily due to growth in Canada POS Lending of $82.6 million, or 18.0%. Year-over-year growth in Company Owned gross loans receivable and combined gross loans receivable of $897.6 million, or 122.8%, and $909.5 million, or 119.1%, respectively, which included Heights Finance. Excluding Heights Finance, combined gross loans receivables increased $446.7 million, or 58.5%, year over year, primarily driven by $340.2 million, or 168.8%, for Canada POS Lending. NCOs and Delinquency Metrics Consolidated quarterly NCO rates improved year over year by 90 bps, primarily from the relative growth of Canada POS Lending and the acquisition of Heights Finance, which shifts portfolio mix to lower loss-rate products. Sequentially, consolidated quarterly NCO rates improved 70 bps. Consolidated past-due rates increased 190 bps year over year as credit continued to normalize compared to the first quarter of 2021 which was abnormally affected by pandemic-related U.S. government stimulus. Consolidated past-due rates improved by 110 bps sequentially, primarily due to our acquisition of Heights Finance. Other Highlights Declaration of the next quarterly dividend of $0.11 per share, payable on May 23, 2022 to stockholders of record as of May 10, 2022. On March 31, 2022, we expanded our Non-Recourse Canada SPV Facility from C$350.0 million to C$400.0 million, with the ability to expand its committed capacity by an additional C$50 million to support loan growth within Canada Direct Lending and Canada POS Lending.From the second quarter of 2020 through the first half of 2021, we experienced lower customer demand in the U.S. and Canada Direct Lending, good credit performance, increased or accelerated repayments and favorable payment trends, as customers were aided by government stimulus programs while periodically enduring pandemic lockdowns as a result of COVID-19. From the third quarter of 2021 through the first quarter of 2022, our markets were less affected by COVID-19, resulting in positive growth trends in revenue and receivables.
Results of Consolidated Operations
Beginning January 1, 2022, we began reporting "Interest and fees revenue," "Insurance premiums and commissions" and "Other revenue" in place of our previously reported "Revenue" on our Statements of Operations. Prior period presentations have been revised to conform to the current period presentation.
Table 1 - Consolidated Statements of Operations
(in thousands, unaudited)
Three Months Ended March 31,
2022
2021
Change $
Change %
Revenue
Interest and fees revenue
$
264,956
$
179,123
$
85,833
47.9%
Insurance premiums and commissions
18,260
11,569
6,691
57.8%
Other revenue
6,980
5,859
1,121
19.1%
Total revenue
290,196
196,551
93,645
47.6%
Change in allowance for loan losses
12,112
(16,545
)
28,657
#
Net-charge offs
85,419
52,690
32,729
62.1%
Provision for losses
97,531
36,145
61,386
169.8%
Net revenue
192,665
160,406
32,259
20.1%
Operating Expenses
Salaries and benefits
79,729
54,917
24,812
45.2%
Occupancy
17,037
14,347
2,690
18.7%
Advertising
10,500
8,084
2,416
29.9%
Direct operations
20,274
11,969
8,305
69.4%
Depreciation and amortization
9,814
4,965
4,849
97.7%
Other operating expense
16,112
12,952
3,160
24.4%
Total operating expenses
153,466
107,234
46,232
43.1%
Other expense (income)
Interest expense
38,341
19,539
18,802
96.2%
Income from equity method investment
(1,584
)
(546
)
(1,038
)
#
Total other expense (income)
36,757
18,993
17,764
93.5%
Income before income taxes
2,442
34,179
(31,737
)
(92.9) %
Provision for incomes taxes
1,106
8,444
(7,338
)
(86.9) %
Net income
$
1,336
$
25,735
$
(24,399
)
(94.8) %
# - Variance greater than 100% or not meaningful
Table 2 - Consolidated Balance Sheets
(in thousands)
March 31, 2022
(unaudited)
December 31, 2021
ASSETS
Cash and cash equivalents
$
60,209
$
63,179
Restricted cash
110,118
98,896
Gross loans receivable
1,628,568
1,548,318
Less: Allowance for loan losses
(98,168
)
(87,560
)
Loans receivable, net
1,530,400
1,460,758
Income taxes receivable
28,664
31,774
Prepaid expenses and other
40,112
42,038
Property and equipment, net
54,865
54,635
Investments in Katapult
29,484
27,900
Right of use asset - operating leases
114,305
116,300
Deferred tax assets
20,066
15,639
Goodwill
430,967
429,792
Intangibles, net
113,640
109,930
Other assets
9,535
9,755
Total Assets
$
2,542,365
$
2,460,596
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities
$
84,783
$
121,434
Deferred revenue
24,265
21,649
Lease liability - operating leases
120,593
122,431
Contingent consideration related to acquisition
26,687
26,508
Income taxes payable
—
680
Accrued interest
16,481
34,974
Liability for losses on CSO lender-owned consumer loans
7,166
6,908
Debt
2,090,085
1,945,793
Other long-term liabilities
13,679
13,845
Deferred tax liabilities
5,839
6,044
Total Liabilities
2,389,578
2,300,266
Stockholders' Equity
Total Stockholders' Equity
152,787
160,330
Total Liabilities and Stockholders' Equity
$
2,542,365
$
2,460,596
Table 3 - Consolidated Revenue by Product and Segment
The following table summarizes revenue by product, including revenue we earn from operating as a credit services organization ("CSO") by charging customers a fee for arranging an unrelated third party to make a loan to that customer, which we refer to as "CSO fees," for the period indicated:
Three Months Ended
March 31, 2022
March 31, 2021
(in thousands, unaudited)
U.S.
Canada
Direct
Lending
Canada
POS
Lending
Total
% of
Total
U.S.
Canada
Direct
Lending
Canada
POS
Lending
Total
% of
Total
Revolving LOC
$
26,913
$
45,455
$
18,655
$
91,023
31.4
%
$
26,923
$
34,368
$
1,444
$
62,735
31.9
%
Installment
162,824
11,109
—
173,933
59.9
%
105,941
10,447
—
116,388
59.2
%
Total interest and fees
189,737
56,564
18,655
264,956
91.3
%
132,864
44,815
1,444
179,123
91.1
%
Insurance premiums and commissions
5,001
13,023
236
18,260
6.3
%
—
11,569
32
11,601
5.9
%
Other revenue
3,661
1,901
1,418
6,980
2.4
%
3,628
2,056
143
5,827
3.0
%
Total revenue
$
198,399
$
71,488
$
20,309
$
290,196
100.0
%
$
136,492
$
58,440
$
1,619
$
196,551
100.0
%
Table 4 - Consolidated Loans Receivable
The following table reconciles Company Owned gross loans receivable, a GAAP-basis balance sheet measure, to Gross combined loans receivable, a non-GAAP measure(1). Gross combined loans receivable includes loans originated by third-party lenders through CSO programs, which are not included in the Consolidated Financial Statements but from which we earn revenue by providing a guarantee to the unaffiliated lender.
As of
(in thousands, unaudited)
March 31,
2022
December 31,
2021
September 30,
2021
June 30,
2021
March 31,
2021
U.S.
Revolving LOC
$
49,077
$
52,532
$
51,196
$
47,277
$
43,387
Installment - Company Owned
589,652
609,413
137,987
139,234
142,396
Canada Direct Lending
Revolving LOC
424,485
402,405
366,509
337,700
319,307
Installment
23,578
24,792
24,315
23,564
24,385
Canada POS Lending
Revolving LOC
541,776
459,176
302,349
221,453
201,539
Company Owned gross loans receivable
$
1,628,568
$
1,548,318
$
882,356
$
769,228
$
731,014
Gross loans receivable Guaranteed by the Company
44,420
46,317
43,422
37,093
32,439
Gross combined loans receivable (1)
$
1,672,988
$
1,594,635
$
925,778
$
806,321
$
763,453
(1) See "Non-GAAP Financial Measures" at the end of this release for definition and more information.
Segment Analysis
The following is a summary of segment operating (loss) income and portfolio performance for the segment and period indicated (all periods unaudited except for Q4 2021).
Table 5 - Summary of Segment Operating (Loss) Income
Three Months Ended March 31, 2022
Three Months Ended March 31, 2021
(dollars in thousands, unaudited)
U.S.
Canada Direct
Lending
Canada POS
Lending
U.S.
Canada Direct
Lending
Canada POS
Lending
Total revenue
$
198,399
$
71,488
$
20,309
$
136,492
$
58,440
$
1,619
Provision for losses
66,825
21,992
8,714
26,056
9,234
855
Net revenue
131,574
49,496
11,595
110,436
49,206
764
Total operating expenses
110,941
27,021
15,504
79,893
24,604
2,737
Non-recourse interest expense
7,864
4,030
6,626
1,627
2,355
826
Recourse interest expense
19,821
—
—
14,731
—
—
Income from equity method investment
(1,584
)
—
—
(546
)
—
—
Segment operating (loss) income
$
(5,468
)
$
18,445
$
(10,535
)
$
14,731
$
22,247
$
(2,799
)
Table 6 - Summary of Adjusted Segment Operating (Loss) Income
Three Months Ended March 31, 2022
Three Months Ended March 31, 2021
(dollars in thousands, unaudited)
U.S.
Canada Direct
Lending
Canada POS
Lending
U.S.
Canada Direct
Lending
Canada POS
Lending
Total revenue
$
198,399
$
71,488
$
20,309
$
136,492
$
58,440
$
1,619
Provision for losses
66,825
21,992
8,714
26,056
9,234
855
Net revenue
131,574
49,496
11,595
110,436
49,206
764
Adjusted operating expense (1)
106,356
26,819
15,005
74,296
24,563
2,737
Non-recourse interest expense
7,864
4,030
6,626
1,627
2,355
826
Recourse interest expense
19,821
—
—
14,731
—
—
Income from equity method investment
(1,584
)
—
—
(546
)
—
—
Adjusted segment operating (loss) income (1)
$
(883
)
$
18,647
$
(10,036
)
$
20,328
$
22,288
$
(2,799
)
(1) These are non-GAAP metrics. For a description of each non-GAAP addback, see the applicable reconciliations and descriptions of each non-GAAP metric, see "Non-GAAP Financial Measures."
Table 7 - U.S. Portfolio Performance
(in thousands, except percentages)
Q1 2022
Q4 2021(1)
Q3 2021
Q2 2021
Q1 2021
Gross combined loans receivable (2)
Revolving LOC
$
49,077
$
52,532
$
51,196
$
47,277
$
43,387
Installment loans - Company Owned
589,652
137,782
137,987
139,234
142,396
Total U.S. Company Owned gross loans receivable
638,729
190,314
189,183
186,511
185,783
Installment loans - Guaranteed by the Company (3)
44,420
46,317
43,422
37,093
32,439
Total U.S. gross combined loans receivable (2)
$
683,149
$
236,631
$
232,605
$
223,604
$
218,222
Lending Revenue:
Revolving LOC
$
26,913
$
27,911
$
27,377
$
24,091
$
26,923
Installment loans - Company Owned
113,833
56,820
57,659
55,918
64,516
Installment loans - Guaranteed by the Company (3)
48,991
47,348
43,377
34,908
41,425
Total U.S. lending revenue
$
189,737
$
132,079
$
128,413
$
114,917
$
132,864
Lending Provision:
Revolving LOC
$
9,577
$
11,592
$
8,140
$
6,621
$
5,039
Installment loans - Company Owned
32,962
18,618
16,792
14,048
11,159
Installment loans - Guaranteed by the Company (3)
21,749
25,967
23,146
12,583
9,648
Total U.S. lending provision
$
64,288
$
56,177
$
48,078
$
33,252
$
25,846
NCO rate (4)
Revolving LOC
19.8
%
22.1
%
16.9
%
16.0
%
20.0
%
Installment loans - Company Owned
6.0
%
14.3
%
14.1
%
13.2
%
11.2
%
Total U.S. Company Owned NCO rate
7.1
%
16.4
%
14.8
%
13.9
%
13.3
%
Installment loans - Guaranteed by the Company (3)
47.4
%
58.1
%
53.2
%
34.6
%
31.7
%
Total U.S. NCO rate
14.7
%
24.4
%
21.6
%
17.2
%
16.2
%
ALL and CSO Liability for Losses rate (4)
Revolving LOC
26.7
%
25.9
%
26.3
%
28.9
%
33.0
%
Installment loans - Company Owned
4.2
%
12.7
%
13.4
%
15.3
%
18.1
%
Total U.S. Company Owned ALL rate
5.9
%
16.3
%
16.9
%
18.7
%
21.6
%
Installment loans - Guaranteed by the Company (3)
16.1
%
14.9
%
16.1
%
14.2
%
14.6
%
Total ALL and CSO Liability for Losses rate
6.6
%
16.0
%
16.8
%
18.0
%
20.6
%
Past-due rate (5)
Revolving LOC
29.7
%
30.5
%
30.5
%
26.6
%
26.3
%
Installment loans - Company Owned
19.1
%
19.4
%
20.1
%
18.7
%
18.0
%
Total U.S. Company Owned past-due rate
19.9
%
22.5
%
22.9
%
20.7
%
19.9
%
Installment loans - Guaranteed by the Company (3)
18.5
%
17.7
%
19.8
%
17.4
%
12.8
%
(1) On December 27, 2021, we acquired Heights Finance, which accounted for approximately $472 million of U.S. Installment loans as of December 31, 2021. As the period between December 27, 2021 and December 31, 2021 did not result in material loan performance, we have excluded Heights Finance from the table for the fourth quarter of 2021.
(2) Non-GAAP measure. For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."
(3) Includes loans originated by third-party lenders through CSO programs. Installment gross loans receivable Guaranteed by the Company are not included in the Consolidated Financial Statements.
(4) We calculate NCO rate as total NCOs divided by Average gross loans receivables.
(5) We calculate (i) ALL and CSO Liability for losses rate and (ii) past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.
Table 8 - Canada Direct Lending Portfolio Performance
(in thousands, except percentages)
Q1 2022
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Gross loans receivable
Revolving LOC
$
424,485
$
402,405
$
366,509
$
337,700
$
319,307
Installment loans
23,578
24,792
24,315
23,564
24,385
Total gross loans receivable
$
448,063
$
427,197
$
390,824
$
361,264
$
343,692
Lending Revenue:
Revolving LOC
$
45,455
$
43,943
$
40,239
$
37,450
$
34,368
Installment loans
11,109
11,416
11,331
10,541
10,447
Total lending revenue
$
56,564
$
55,359
$
51,570
$
47,991
$
44,815
Lending Provision:
Revolving LOC
$
19,156
$
20,080
$
11,375
$
7,066
$
7,909
Installment loans
2,723
2,945
2,512
1,438
1,234
Total lending provision
$
21,879
$
23,025
$
13,887
$
8,504
$
9,143
NCO rate (1)
Revolving LOC
5.2
%
3.9
%
2.8
%
3.3
%
3.6
%
Installment loans
10.9
%
11.2
%
10.2
%
6.3
%
6.5
%
Total NCO rate
5.5
%
4.4
%
3.3
%
3.5
%
3.8
%
ALL rate (2)
Revolving LOC
7.2
%
8.0
%
7.5
%
7.9
%
9.4
%
Installment loans
8.8
%
8.0
%
7.4
%
7.5
%
7.5
%
Total ALL rate
7.3
%
8.0
%
7.5
%
7.9
%
9.2
%
Past-due rate (2)
Revolving LOC
8.0
%
8.9
%
6.8
%
5.8
%
6.4
%
Installment loans
2.0
%
2.2
%
2.0
%
2.3
%
2.1
%
Total past-due rate
7.7
%
8.5
%
6.5
%
5.5
%
6.1
%
(1) We calculate NCO rate as total NCOs divided by Average gross loans receivables.
(2) We calculate ALL rate and past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.
Table 9 - Canada POS Lending Portfolio Performance
(in thousands, except percentages)
Q1 2022
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Revolving LOC
Total gross loans receivable
$
541,776
$
459,176
$
302,349
$
221,453
$
201,539
Total lending revenue
$
18,655
$
13,704
$
10,646
$
6,495
$
1,383
Total lending provision
$
8,714
$
12,511
$
8,285
$
2,986
$
855
NCO rate (1)(2)
0.5
%
0.5
%
0.7
%
0.7
%
NM (3)
ALL rate (4)
5.1
%
4.8
%
3.8
%
2.1
%
0.3
%
Past-due rate (4)(5)
4.2
%
4.1
%
4.8
%
5.4
%
5.7
%
(1) For the second, third and fourth quarters of 2021, NCOs presented above include $2.4 million, $0.6 million and $0.8 million, respectively, of NCO's related to the fair value discount, which are excluded from provision.
(2) We calculate NCO rate as total NCOs divided by Average gross loans receivables.
(3) Not material or not meaningful.
(4) We calculate ALL rate and past-due rate as the respective totals divided by gross loans receivable (excluding the fair value discount on acquired loans) at each respective quarter end.
(5) The past-due rate for Canada POS Lending for loans 31+ days past-due were 2.2%, 1.9%, 2.1%, 2.6% and 3.0% for the three months ended March 31, 2022, December 31, 2021, September 30, 2021, June 30, 2021 and March 31, 2021, respectively.
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 ("ANI") and Adjusted Earnings Per Share, or the Adjusted Earnings Measures (net income plus or minus certain legal and other costs, income or loss from equity method investment, goodwill and intangible asset impairments, transaction-related costs, restructuring costs, loss on extinguishment of debt, adjustments related to acquisition accounting, share-based compensation, intangible asset amortization, certain tax adjustments and impacts from tax law changes and cumulative tax effect of applicable adjustments, on a total and per share basis); EBITDA (earnings before interest, income taxes, depreciation and amortization); Adjusted EBITDA (EBITDA plus or minus certain non-cash and other adjusting items); 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, 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 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 these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of public companies in our industry, many of which present non-GAAP financial measures 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. Non-GAAP financial measures should not be considered as alternatives to income, 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
Non-GAAP financial 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 we record a loss under U.S. GAAP, shares outstanding utilized to calculate Diluted Earnings per Share are equivalent to basic shares outstanding. Shares outstanding utilized to calculate Adjusted Earnings per Share reflect the number of diluted shares we would have reported if reporting net income under U.S. GAAP.
As noted above, Gross Combined Loans Receivable includes loans originated by third-party lenders through CSO programs which are not included in the consolidated financial statements but from which we earn revenue and for which we provide a guarantee to the lender. Management believes this analysis provides investors with important information needed to evaluate overall lending performance.
We believe investors use the non-GAAP measures we present 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.
Table 10 - Reconciliation of Net Income 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,
2022
2021
Change $
Change %
Net income
$
1,336
$
25,735
$
(24,399
)
(94.8
) %
Adjustments:
Restructuring costs (1)
1,069
—
Legal and other costs (2)
87
—
Income from equity method investment (3)
(1,584
)
(546
)
Transaction costs (4)
168
3,160
Acquisition-related adjustments (5)
221
—
Change in fair value of contingent consideration (6)
(264
)
—
Share-based compensation (7)
4,093
2,683
Intangible asset amortization (8)
2,977
831
Cumulative tax effect of adjustments (9)
(1,828
)
(1,735
)
Adjusted Net Income
$
6,275
$
30,128
$
(23,853
)
(79.2
) %
Net income
$
1,336
$
25,735
Diluted Weighted Average Shares Outstanding
41,308
43,596
Adjusted Diluted Average Shares Outstanding
41,308
43,596
Diluted Earnings per Share
$
0.03
$
0.59
$
(0.56
)
(94.9
) %
Per Share impact of adjustments to Net income
0.12
0.10
Adjusted Diluted Earnings per Share
$
0.15
$
0.69
$
(0.54
)
(78.3
) %
Note: Footnotes follow Reconciliation of Net income table on the next page
Table 11 - Reconciliation of Net Income to EBITDA and Adjusted EBITDA, Non-GAAP Measures
Three Months Ended
March 31,
(in thousands, unaudited)
2022
2021
Change $
Change %
Net income
$
1,336
$
25,735
$
(24,399
)
(94.8
) %
Provision for income taxes
1,106
8,444
(7,338
)
(86.9
) %
Interest expense
38,341
19,539
18,802
96.2
%
Depreciation and amortization
9,814
4,965
4,849
97.7
%
EBITDA
50,597
58,683
(8,086
)
(13.8
) %
Restructuring costs (1)
1,069
—
Legal and other costs (2)
87
—
Income from equity method investment (3)
(1,584
)
(546
)
Transaction costs (4)
168
3,160
Acquisition-related adjustments (5)
221
—
Change in fair value of contingent consideration (6)
(264
)
—
Share-based compensation (7)
4,093
2,683
Other adjustments (10)
(88
)
(205
)
Adjusted EBITDA
$
54,299
$
63,775
$
(9,476
)
(14.9
) %
Adjusted EBITDA Margin
18.7
%
32.4
%
# - Change greater than 100% or not meaningful
Table 12 - Reconciliation of Total Operating Expense to Adjusted Operating Expense
Three Months Ended March 31, 2022
Three Months Ended March 31, 2021
(dollars in thousands, unaudited)
U.S.
Canada Direct
Lending
Canada POS
Lending
U.S.
Canada Direct
Lending
Canada POS
Lending
Total operating expense
$
110,941
$
27,021
$
15,504
$
79,893
$
24,604
$
2,737
Less:
Restructuring costs (1)
1,069
—
—
—
—
—
Legal and other costs (2)
87
—
—
—
—
—
Transaction costs (4)
168
—
—
3,160
—
—
Acquisition-related adjustments (5)
3
—
218
—
—
—
Change in fair value of contingent consideration (6)
—
—
(264
)
—
—
—
Share-based compensation (7)
3,503
115
475
2,683
—
—
Other adjustments (10)
(245
)
87
70
(246
)
41
—
Adjusted operating expense
$
106,356
$
26,819
$
15,005
$
74,296
$
24,563
$
2,737
(1)
Restructuring costs for the three months ended March 31, 2022 resulted from U.S. store closures and related costs and certain severance payments to eliminate duplicate roles.
(2)
Legal and other costs for the three months ended March 31, 2022 primarily related to settlement costs related to certain legal matters.
(3)
The amount reported is our share of Katapult's U.S. GAAP net income, recognized on a one quarter lag.
(4)
Transaction costs for the three months ended March 31, 2022 relate to our Heights Finance acquisition in December 2021.
Transaction costs for the three months ended March 31, 2021 relate to the acquisition of Flexiti in March 2021.
(5)
During the three months ended March 31, 2022, $0.2 million of acquisition-related adjustments relate to the acquired Flexiti loan portfolio as of March 10, 2021.
(6)
In connection with our acquisition of Flexiti, we recorded a $0.3 million adjustment related to the fair value of the contingent consideration for the three months ended March 31, 2022.
(7)
The estimated fair value of share-based awards was recognized as non-cash compensation expense on a straight-line basis over the vesting period.
(8)
Intangible asset amortization in determining ANI for the three months ended March 31, 2022 primarily included amortization of identifiable intangible assets established in connection with the acquisitions of Flexiti and Heights Finance.
(9)
Cumulative tax effect of adjustments included in Reconciliation of Net income to Adjusted Net Income table is calculated using the estimated incremental tax rate by country.
(10)
Other adjustments primarily reflect the intercompany foreign-currency exchange impact.
Forward-Looking Statements
This press release contains forward-looking statements. These forward-looking statements include projections, estimates and assumptions about our business results and growth trends and our ability to create value; our ability to accelerate our transition into longer-term, higher-balance and lower-rate credit products; our belief that recent acquisitions will solidify our position as a full spectrum non-prime and prime consumer lender in the U.S. and Canada and accelerate our long-term revenue and earnings growth prospects; and our belief in the usefulness of the various non-GAAP financial measures used in this release. In addition, words such as “guidance,” “estimate,” “anticipate,” “believe,” “forecast,” “step,” “plan,” “predict,” “focused,” “project,” “is likely,” “expect,” “intend,” “should,” “will,” “confident,” variations of such words and similar expressions are intended to identify forward-looking statements. Our ability to achieve these forward-looking statements is based on certain assumptions, judgments and other factors, both within and outside of our control, that could cause actual results to differ materially from those in the forward-looking statements, including: errors in our internal forecasts or those of companies in which we invest; the effects of competition on our business or on those companies in which we invest; our ability to attract and retain customers; market, financial, political and legal conditions; actions of regulators and the negative impact of those actions on our business; the continuing impact of COVID-19 pandemic or any other similar wide-spread event on our business and the global economy; our dependence on third-party lenders to provide the cash we need to fund our loans and our ability to affordably access third-party financing; our level of indebtedness; our ability to successfully integrate acquired businesses; our ability to protect our proprietary technology and analytics and keep up with that of our competitors; disruption of our information technology systems that adversely affect our business operations; ineffective pricing of the credit risk of our prospective or existing customers; inaccurate information supplied by customers or third parties that could lead to errors in judging customers’ qualifications to receive loans; improper disclosure of customer personal data; failure of third parties who provide products, services or support to us; any failure of third-party lenders upon whom we rely to conduct business in certain states; disruption to our relationships with banks and other third-party electronic payment solutions providers as well as other factors discussed in our filings with the Securities and Exchange Commission. These projections, estimates and assumptions may prove to be inaccurate in the future. These forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. There may be additional risks that CURO presently does not know or that it currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual future results. We undertake no obligation to update, amend or clarify any forward-looking statement for any reason.
All product names, logos, brands, trademarks and registered trademarks are property of their respective owners.
About CURO
CURO Group Holdings Corp. (NYSE: CURO) is a full-spectrum consumer credit provider across the U.S. and Canada. The Company was founded in 1997 by three childhood friends in Kansas to meet the growing consumer need for short-term loans. Today, CURO operates a robust, omni-channel platform providing comprehensive credit solutions to help customers achieve their financial goals. CURO’s decades of experience with alternative data power the underwriting and scoring engine, mitigating risk across the full spectrum of credit products. CURO operates under a number of brands including Speedy Cash, Rapid Cash, Cash Money, LendDirect, Flexiti, Avío Credit, Opt+, Revolve Finance, Heights Finance, Southern Finance, Covington Credit, Quick Credit and First Phase. Our diversified product channels allows us to meet the changing needs and preferences of our customers.
Conference Call
CURO will host a conference call to discuss these results at 5:00 p.m. Eastern Time on Monday, May 2, 2022. The live webcast of the call can be accessed at the CURO Investor Relations website at http://ir.curo.com/.
You may access the call at 1-833-953-2430 (1-412-317-5759 for international callers). Please ask to join the CURO Group Holdings call. A replay of the conference call will be available until May 9, 2022, at 5:00 p.m. Eastern Time. An archived version of the webcast will be available on the CURO Investors website for 90 days. You may access the conference call replay at 1-877-344-7529 (1-412-317-0088 for international callers). The replay access code is 5460332.
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, 2022.
(CURO-NWS)
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