CURO Group Holdings Corp. Announces First Quarter 2022 Financial Results

Consolidated Revenue Grew 47.6% in the Quarter Compared to 2021

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 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:

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.

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

Table 6 - Summary of Adjusted Segment Operating (Loss) Income

Table 7 - U.S. Portfolio Performance

Table 8 - Canada Direct Lending Portfolio Performance

Table 9 - Canada POS Lending Portfolio Performance

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

Table 11 - Reconciliation of Net Income to EBITDA and Adjusted EBITDA, Non-GAAP Measures

Table 12 - Reconciliation of Total Operating Expense to Adjusted Operating Expense

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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