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CURO Group Holdings Corp. Announces Fourth Quarter and Full Year 2017 Financial Results and Issues 2018 Earnings Outlook

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CURO Group Holdings Corp. (NYSE:CURO) ("CURO" or the "Company"), a
market leader in providing short-term credit to underbanked consumers,
today announced its financial results for the fourth quarter and full
year 2017 and issued its outlook for 2018.

This press release features multimedia. View the full release here:
http://www.businesswire.com/news/home/20180201006717/en/

The charts present revenue contribution, including CSO fees, of the products and services that we cu ...

The charts present revenue contribution, including CSO fees, of the products and services that we currently offer (Graphic: Business Wire)

"We are pleased to report record results and accelerating revenue growth
in our first quarter as a public company," said Don Gayhardt, President
and Chief Executive Officer. "Our strong fourth quarter caps the most
successful year in our history and was fueled by excellent loan growth
in all three countries and gross margin expansion. Our U.S. business
grew revenue 26%, Canada outperformed our expectations and the U.K.
turned EBITDA positive."

Consolidated Summary Results

 
    For the Three Months Ended     For the Year Ended
(in thousands, except per share data)     12/31/2017     12/31/2016     Variance     12/31/2017     12/31/2016     Variance
Revenue $ 266,990     $ 218,904     22.0 % $ 963,633     $ 828,596     16.3 %
Gross Margin 92,164 63,197 45.8 % 349,237 293,256 19.1 %
Gross Loans Receivable 432,837 286,196 51.2 % 432,837 286,196 51.2 %
Net Income 6,410 9,585 (33.1 )% 49,153 65,444 (24.9 )%
Adjusted Net Income (1) 19,706 10,723 83.8 % 79,074 66,411 19.1 %
Diluted Earnings per Share $ 0.16 $ 0.25 (36.0 )% $ 1.25 $ 1.69 (26.0 )%
Adjusted Diluted Earnings per Share (1) $ 0.48 $ 0.27 77.8 % $ 2.01 $ 1.71 17.5 %
EBITDA (1) 45,705 37,937 20.5 % 193,250 191,260 1.0 %
Adjusted EBITDA (1) 58,958 39,101 50.8 % 232,215 189,361 22.6 %
Weighted Average Shares - diluted 40,524 38,902 39,277 38,803
(1) Non-GAAP Metric; see Results of Operations section for
reconciliation to nearest GAAP metric
 

Fourth quarter 2017 highlights include:

  • Total revenue of $267.0 million, up 22.0% year over year
  • Revenue growth in the U.S. and U.K. of 25.7% and 32.5%, respectively;
    Canada growth of 7.1% as volume and earning asset growth overcame
    regulatory changes
  • Gross margin of $92.2 million and 34.5% of revenue, up from $63.2
    million and 28.9% in prior year
  • GAAP Net Income of $6.4 million affected by (i) costs associated with
    completion of the Company's initial public offering and debt ($3.1
    million), (ii) stock-based compensation costs ($8.7 million), (iii)
    impacts of the Tax Cuts and Jobs Act of 2017 ("2017 Tax Act") ($4.6
    million) and (iv) legal settlement accruals ($2.0 million)
  • Adjusted Net Income of $19.7 million compared to $10.7 million in
    prior year
  • GAAP Diluted Earnings per Share of $0.16
  • Adjusted Diluted Earnings per Share of $0.48 compared to $0.27 in
    fourth quarter of prior year
  • Adjusted EBITDA of $59.0 million, a 50.8% increase year over year
  • Closed initial public offering of 6,666,667 shares of common stock at
    a price of $14.00 per share; underwriters subsequently exercised
    option for an additional 1,000,000 shares at the original offer price
    on January 5, 2018
  • Completed issuance of $135.0 million aggregate principal amount of
    additional 12.00% Senior Secured Notes due 2022 by CURO Financial
    Technologies Corp., a wholly-owned subsidiary

Full year 2017 highlights include:

  • Total revenue of $963.6 million, up 16.3% year over year
  • Revenue growth in the U.S. and U.K. of 21.6% and 17.1% respectively;
    Canada revenue decline of 0.9% due to regulatory changes
  • Gross margin of $349.2 million and 36.2% of revenue, up from $293.3
    million and 35.4% in prior year
  • Gross Loans receivable grew 51.2% year over year to $432.8 million
  • Installment loans grew $132.1 million or 56.9% year over year;
    increased from 65.5% to 71.2% of total earning assets
  • GAAP Net Income of $49.2 million affected by (i) fourth quarter items
    above, (ii) U.K. store closure costs ($7.4 million), (iii) prior legal
    settlement costs ($2.3 million) and (iv) debt extinguishment costs
    ($12.5 million)
  • Adjusted Net Income of $79.1 million compared to $66.4 million in
    prior year
  • GAAP Diluted Earnings per Share of $1.25
  • Adjusted Diluted Earnings per Share of $2.01 compared to $1.71 in
    fourth quarter of prior year
  • Adjusted EBITDA of $232.2 million, a 22.6% increase year over year
  • In addition to the aforementioned fourth quarter issuance of
    additional 12.00% Senior Secured Notes, refinanced and extended to
    2022 the maturities of $665.0 million of debt using corporate cash and
    the issuance of $470.0 million of 12% Senior Secured Notes during
    first quarter 2017

Fiscal 2018 Outlook

The Company is initiating its fiscal full-year 2018 adjusted earnings
guidance, a non-GAAP measure that excludes anticipated debt
extinguishment costs as we utilize proceeds from the initial public
offering to retire a portion of the 12.00% Senior Secured Notes due 2022
and stock-based compensation, as follows:

  • Revenue in the range of $1.025 billion to $1.080 billion
  • Net Income in the range of $110 million to $116 million
  • Adjusted EBITDA in the range of $245 million to $255 million
  • Estimated tax rate of 25% to 27% for the full year
  • Adjusted Diluted Earnings per Share of $2.25 to $2.40

Consolidated Revenue Summary

Fourth Quarter 2017

The following table summarizes revenue by product, including CSO fees,
for the periods indicated:

       
    For the Three Months Ended
      December 31, 2017     December 31, 2016
(in thousands) U.S.     Canada     U.K.     Total     U.S.     Canada     U.K.     Total
Unsecured Installment $ 123,861     $ 5,769     $ 7,248     $ 136,878 $ 89,102     $ 815     $ 4,397     $ 94,314
Secured Installment 27,732 27,732 21,107 21,107
Open-End 20,966 188 21,154 17,083 17,083
Single-Pay 28,592 38,941 3,335 70,868 31,309 42,917 3,407 77,633
Ancillary 4,666       5,692             10,358   5,091       3,493       183       8,767
Total revenue     $ 205,817       $ 50,590       $ 10,583       $ 266,990       $ 163,692       $ 47,225       $ 7,987       $ 218,904
 

During the three months ended December 31, 2017, total lending revenue
(excluding revenues from ancillary products) grew $46.5 million, or
22.1%, to $256.6 million, compared to the prior year period,
predominantly driven by growth in Installment loan revenue in all three
countries. Unsecured Installment loan revenues rose 45.1% and Secured
Installment revenues rose 31.4% on related origination volume and loan
growth. Single-Pay revenues were affected primarily by regulatory
changes in Canada (rate changes in Ontario and British Columbia and
product changes in Alberta). U.S. and U.K. Single-Pay revenues also
decreased 8.7% and 2.1%, respectively, because of continued mix shift
from Single-Pay to Installment and Open-End products. Ancillary revenues
increased 18.1% versus the same quarter a year ago primarily due to
insurance revenue in Canada, partially offset by a decline in check
cashing fees.

Full Year 2017

The following table summarizes revenue by product, including CSO fees,
for the periods indicated.

       
    For the Year Ended
      December 31, 2017     December 31, 2016
(in thousands) U.S.     Canada     U.K.     Total     U.S.     Canada     U.K.     Total
Unsecured Installment $ 435,745     $ 19,013     $ 25,485     $ 480,243 $ 318,460     $ 1,143     $ 11,110     $ 330,713
Secured Installment 100,981 100,981 81,453 81,453
Open-End 73,308 188 73,496 66,945 3 66,948
Single-Pay 107,553 147,617 13,624 268,794 117,609 173,779 21,888 313,276
Ancillary 20,142       19,591       386       40,119   22,332       13,155       719       36,206
Total revenue     $ 737,729       $ 186,409       $ 39,495       $ 963,633       $ 606,799       $ 188,077       $ 33,720       $ 828,596
 

For full year 2017, total lending revenue (excluding revenues from
ancillary products) grew $131.1 million, or 16.5%, to $923.5 million,
compared to the prior year period. Growth was driven predominantly by
Unsecured and Secured Installment loan revenue. Unsecured Installment
loan revenues rose 45.2% on related origination increase of 46.4%.
Secured Installment revenues increased 24.0%, on related origination
increase of 33.2%. Single-Pay revenues were affected primarily by
regulatory changes in Canada (rate changes in Ontario and British
Columbia and product changes in Alberta). U.S. and U.K. Single-Pay
revenues also decreased 8.6% and 37.8%, respectively, because of
continued mix shift from Single-Pay to Installment and Open-End
products. Ancillary revenues increased 10.8% versus the same period a
year ago primarily due to insurance revenue in Canada, partially offset
by a decrease in check cashing fees.

For the years ended December 31, 2017 and 2016, revenue generated
through the online channel was 38% and 33%, respectively, of
consolidated revenue.

Loan Volume and Portfolio Performance Analysis

The following table summarizes Company-owned gross loans receivable, a
GAAP balance sheet measure, and reconciles it to gross combined loans
receivable, a non-GAAP measure including 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:

   
      Three Months Ended
(in millions)    

December 31,
2017

   

September 30,
2017

   

June 30,
2017

   

March 31,
2017

   

December 31,
2016

   

September 30,
2016

   

June 30,
2016

   

March 31,
2016

Company-owned gross loans receivable $ 432.8     $ 393.4     $ 350.3     $ 304.8     $ 286.2     $ 244.6     $ 233.1     $ 220.7
Gross loans receivable guaranteed by the Company 78.8       71.2       62.1       57.8       68.0       58.7       52.6       45.4
Gross combined loans receivable     $ 511.6       $ 464.6       $ 412.4       $ 362.6       $ 354.2       $ 303.3       $ 285.7       $ 266.1
 

Gross combined loans receivable were $511.6 million and $354.2 million
at December 31, 2017 and 2016, respectively. The increase was a result
of Installment loan growth from higher originations and the Q1 Loss
Recognition Change that is further detailed in the Prospectus filed with
the S.E.C. pursuant to Rule 424(b)(4) on December 8, 2017. For 2017,
Installment loans that are up to 90 days past due are included in gross
combined loans receivable. Excluding the year-over-year effect of such
past-due loans, gross combined loans receivable increased $83.4 million
or 23.5% from December 31, 2016 to December 31, 2017.

Unsecured Installment Loans

Unsecured Installment revenue and gross combined loans receivable
increased from the prior year quarter due to growth in the United
States, primarily in Texas and California; growth in Canada, primarily
in Alberta; and growth in the United Kingdom. Gross combined Unsecured
Installment Loan balances (excluding past due loans) grew $49.6 million,
or 30.1%, compared to December 31, 2016.

Loss provision rates as a percentage of originations (or loss provision
rates) for Company Owned loans increased sequentially from 21.1% to
22.1%, reflecting normal seasonal trends and allowance coverage
evaluation. Fourth quarter 2017 provision rate was consistent with the
prior year provision rate of 22.0%. The effect of the Q1 Loss
Recognition Change, which caused higher provision rates in 2017 was
offset by improved underwriting and credit scoring, and seasoning.

Loss provision rates for loans Guaranteed by the Company decreased
sequentially from 43.3% to 40.0%. This is primarily due to the impact of
Hurricane Harvey relief during the third quarter of 2017 on Texas
operations. Fourth quarter 2017 provision rates increased compared to
the prior year quarter of 31.1%, primarily due to the Q1 Loss
Recognition Change, which caused higher provision rates in 2017, as well
as loan performance.

Unsecured Installment Allowance for loan losses as a percentage of
Unsecured Installment gross loans receivable and Unsecured Installment
CSO guarantee liability as a percentage of Unsecured Installment gross
loans Guaranteed by the Company both declined from the end of the third
quarter of 2017. This was a result of realization of the impacts of
Hurricane Harvey, seasonal patterns in net charge-offs and evaluation of
year-end allowance coverage based on underlying vintage performance.
Past-due Unsecured Installment gross loans receivable and Past-due
Unsecured Installment gross loans Guaranteed by the Company remained
consistent quarter over quarter.

             
    2017     2016

(dollars in thousands, except average loan amount, unaudited)

    Fourth Quarter   Third Quarter   Second Quarter   First Quarter Fourth Quarter
Unsecured Installment loans:      
Revenue - Company Owned $ 67,800 $ 61,653 $ 52,550 $ 51,206 $ 39,080
Provision for losses - Company Owned 29,917     29,079     17,845     19,309   24,557  
Net revenue - Company Owned $ 37,883     $ 32,574     $ 34,705     $ 31,897   $ 14,523  
Net charge-offs - Company Owned $ 32,894 $ 23,858 $ 18,858 $ (4,918 ) $ 18,836
Revenue - Guaranteed by the Company $ 69,078 $ 67,132 $ 52,599 $ 58,225 $ 55,234
Provision for losses - Guaranteed by the Company 32,915     36,212     23,575     19,940   22,364  
Net revenue - Guaranteed by the Company $ 36,163     $ 30,920     $ 29,024     $ 38,285   $ 32,870  
Net charge-offs - Guaranteed by the Company $ 31,898 $ 34,904 $ 27,309 $ 17,088 $ 21,144
Unsecured Installment gross combined loans receivable:
Company owned $ 196,306 $ 181,831 $ 156,075 $ 131,386 $ 102,090
Guaranteed by the Company (1) (2) 75,156     67,438     58,289     53,978   62,360  

Unsecured Installment gross combined loans receivable (1) (2)

$ 271,462     $ 249,269     $ 214,364     $ 185,364   $ 164,450  
 
Unsecured Installment Allowance for loan losses (3) $ 43,755 $ 46,938 $ 41,406 $ 42,040 $ 17,775
Unsecured Installment CSO guarantee liability (3) $ 17,072 $ 16,056 $ 14,748 $ 18,482 $ 15,630
Unsecured Installment Allowance for loan losses as a percentage of
Unsecured Installment gross loans receivable
22.3 % 25.8 % 26.5 % 32.0 % 17.4 %
Unsecured Installment CSO guarantee liability as a percentage of
Unsecured Installment gross loans guaranteed by the Company
22.7 % 23.8 % 25.3 % 34.2 % 25.1 %
Unsecured Installment past-due balances:
Unsecured Installment gross loans receivable (4) $ 44,963 $ 41,353 $ 33,534 $ 28,913
Unsecured Installment gross loans guaranteed by the Company (4) $ 12,480 $ 10,462 $ 8,204 $ 11,196
Past-due Unsecured Installment gross loans receivable -- percentage (2)
(4)
22.9 % 22.7 % 21.5 % 22.0 %
Past-due Unsecured Installment gross loans guaranteed by the Company
-- percentage (2) (4)
16.6 % 15.5 % 14.1 % 20.7 %
Unsecured Installment other information:
Originations - Company owned (5) $ 135,284 $ 137,618 $ 119,636 $ 98,691 $ 111,412
Average loan amount - Company owned $ 714 $ 730 $ 697 $ 687 $ 646
Originations - Guaranteed by the Company (1) (5) $ 82,326 $ 83,680 $ 68,338 $ 55,112 $ 71,858
Average loan amount - Guaranteed by the Company $ 526 $ 526 $ 485 $ 482 $ 478
Unsecured Installment ratios:
Provision as a percentage of originations - Company Owned 22.1 % 21.1 % 14.9 % 19.6 % 22.0 %
Provision as a percentage of gross loans receivable - Company Owned 15.2 % 16.0 % 11.4 % 14.7 % 24.1 %
Provision as a percentage of originations - Guaranteed by the Company 40.0 % 43.3 % 34.5 % 36.2 % 31.1 %
Provision as a percentage of gross loans receivable - Guaranteed by
the Company
    43.8 %   53.7 %   40.4 %   36.9 %     35.9 %

(1)

 

Includes loans originated by third-party lenders through CSO
programs, which are not included in the consolidated financial
statements.

(2)

Non-GAAP measure.

(3)

Allowance for loan losses is reported as a contra-asset
reducing gross loans receivable while the CSO guarantee liability
is reported as a liability on the Consolidated Balance Sheets.

(4)

As part of the Q1 Loan Loss Recognition Change past-due
receivables remain on the balance sheet until charged off. In all
prior periods loans were written-off when a customer missed a
scheduled payment.

(5)

We have revised previously-reported origination statistics to
conform to current year methodology.

 

Secured Installment Loans

Secured Installment loan revenue and gross combined loans receivable
increased from the prior year quarter due primarily to growth in
California and Arizona. Gross combined Secured Installment loan balances
(excluding past due loans) increased by $8.5 million, or 12.6%, compared
to December 31, 2016, on higher origination volumes. Secured Installment
Allowance for loan losses as a percentage of Secured Installment gross
loans receivable settled at a more normalized range in the fourth
quarter and improved slightly over the same quarter a year ago on
underlying vintage performance. The Past-due Secured Installment gross
loans receivable rate was consistent sequentially with third quarter.

 
    2017     2016
(dollars in thousands, except average loan amount, unaudited)     Fourth Quarter   Third Quarter   Second Quarter   First Quarter Fourth Quarter
Secured Installment loans:      
Revenue $ 27,732 $ 26,407 $ 23,173 $ 23,669 $ 21,107
Provision for losses 10,051     6,512     4,955     7,436     7,159  
Net revenue $ 17,681     $ 19,895     $ 18,218     $ 16,233     $ 13,948  
Net charge-offs $ 10,802 $ 11,597 $ 6,481 $ (2,235 ) $ 6,588
Secured Installment gross combined loan balances:
Secured Installment gross combined loans receivable (1)(2) $ 92,817 $ 88,730 $ 80,077 $ 71,213 $ 67,738
Secured Installment Allowance for loan losses and CSO guarantee
liability (3)
$ 14,194 $ 14,945 $ 20,030 $ 21,557 $ 11,885
Secured Installment Allowance for loan losses and CSO guarantee
liability as a percentage of Secured Installment gross combined
loans receivable
15.3 % 16.8 % 25.0 % 30.3 % 17.5 %
Secured Installment past-due balances:
Secured Installment past-due gross loans receivable and gross loans
guaranteed by the Company(4)
$ 16,554 $ 15,265 $ 12,630 $ 10,186 $
Past-due Secured Installment gross loans receivable and gross loans
guaranteed by the Company -- percentage (2)(4)
17.8 % 17.2 % 15.8 % 14.3 % %
Secured Installment other information:
Originations (1)(5) $ 48,577 $ 52,526 $ 45,596 $ 37,641 $ 43,803
Average loan amount (1)(5) $ 1,303 $ 1,299 $ 1,231 $ 1,326 $ 1,197
Secured Installment ratios:
Provision as a percentage of originations 20.7 % 12.4 % 10.9 % 19.8 % 16.3 %
Provision as a percentage of gross combined loans receivable     10.8 %   7.3 %   6.2 %   10.4 %     10.6 %

(1)

 

Includes loans originated by third-party lenders through CSO
programs, which are not included in the consolidated financial
statements.

(2)

Non-GAAP measure.

(3)

Allowance for loan losses is reported as a contra-asset
reducing gross loans receivable while the CSO guarantee liability
is reported as a liability on the Consolidated Balance Sheets.

(4)

As part of the Q1 Loan Loss Recognition Change past-due
receivables remain on the balance sheet until charged off. In all
prior periods loans were written-off when a customer missed a
scheduled payment.

(5)

We have revised previously-reported origination statistics to
conform to current year methodology.

 

Open-End Loans

Open-End loan balances increased by $17.5 million, or 57.4%, compared to
December 31, 2016, from year-over-year growth in Kansas and Tennessee of
21.3% and 24.2%, respectively, the 2017 launch of Open-End in Virginia
($6.2 million in balances at the end of 2017) and conversion in the
fourth quarter of 2017 of LendDirect Unsecured Installment loans to
Open-End in Canada ($7.2 million in balances at the end of 2017). The
provision for losses and Open-End Allowance for loan losses as a
percentage of Open-end gross loans receivable decreased due to improved
collection trends and portfolio performance for existing markets,
seasoning of the Tennessee loan book and the effect on mix of converting
LendDirect to Open-End - as with our experience with other products in
Canada, the LendDirect Open-End portfolio is expected to perform better
relative to U.S. products.

             
    2017     2016
(dollars in thousands, except average loan amount, unaudited)     Fourth Quarter   Third Quarter   Second Quarter   First Quarter Fourth Quarter
Open-End loans:      
Revenue $ 21,154 $ 18,630 $ 15,805 $ 17,907 $ 17,085
Provision for losses 8,334     6,348     4,298     3,265   6,283  
Net revenue $ 12,820     $ 12,282     $ 11,507     $ 14,642   $ 10,802  
Net charge-offs $ 6,799 $ 5,991 $ 4,343 $ 3,876 $ 6,085
 
Open-End gross loans receivable $ 47,949 $ 32,133 $ 26,771 $ 25,626 $ 30,462
Allowance for loan losses $ 6,426 $ 4,880 $ 4,523 $ 4,572 $ 5,179
Open-End Allowance for loan losses as a percentage of Open-End gross
loans receivable
13.4 % 15.2 % 16.9 % 17.8 % 17.0 %
Open-End other information:
Originations (1) $ 20,313 $ 9,388 $ 6,646 $ 5,463 $ 9,880
Average loan amount (1) $ 579 $ 463 $ 451 $ 454 $ 459
Open-End ratios:
Provision as a percentage of originations 41.0 % 67.6 % 64.7 % 59.8 % 63.6 %
Provision as a percentage of gross combined loans receivable     17.4 %   19.8 %   16.1 %   12.7 %     20.6 %

(1)

 

We have revised previously-reported origination statistics to
conform to current year methodology.

 

Single-Pay

Single-Pay revenue, provision and combined loans receivable during the
three and twelve months ended December 31, 2017 were affected primarily
by regulatory changes in Canada (rate changes in Ontario and British
Columbia and product shift from Single-Pay to Installment in Alberta).
Single-Pay revenue in the United States also declined compared to the
prior year due to the continued shift toward Installment and Open-End
products. The improvement in the provision for losses in the fourth
quarter of 2017 as compared to the fourth quarter of 2016 was primarily
due to a lower proportion of Single-Pay loans in the U.K. where loan
loss rates are higher than in the U.S. and Canada.

 
    2017     2016
(dollars in thousands, unaudited)     Fourth Quarter   Third Quarter   Second Quarter   First Quarter Fourth Quarter
Single-Pay loans:      
Revenue $ 70,868 $ 70,895 $ 63,241 $ 63,790 $ 77,617
Provision for losses 17,952     20,632     14,289     11,399   19,655  
Net revenue $ 52,916     $ 50,263     $ 48,952     $ 52,391   $ 57,962  
Net charge-offs $ 17,362 $ 20,515 $ 13,849 $ 12,499 $ 20,468
 
Single-Pay gross combined loans receivable (1) (2) $ 99,400 $ 94,476 $ 91,230 $ 80,423 $ 91,579
Single-Pay Allowance for loan losses and CSO guarantee liability (3) $ 5,915 $ 5,342 $ 5,313 $ 4,736 $ 5,775
Single-Pay Allowance for loan losses and CSO guarantee liability as
a percentage of Single-Pay gross loans receivable
    6.0 %   5.7 %   5.8 %   5.9 %     6.3 %

(1)

 

Includes loans originated by third-party lenders through CSO
programs, which are not included in our consolidated financial
statements.

(2)

Non-GAAP measure.

(3)

Allowance for loan losses is reported as a contra-asset
reducing gross loans receivable while the CSO guarantee liability
is reported as a liability on the Consolidated Balance Sheets.

 

Results of Operations - CURO Group Consolidated Operations

Condensed Consolidated Statements of Income

 
(in thousands, except per share data)   Three Months Ended December 31,     Year Ended December 31,
  2017   2016   Change $     Change % 2017   2016   Change $   Change %
Revenue $ 266,990   $ 218,904   $ 48,086   22.0 % $ 963,633   $ 828,596   $ 135,037   16.3 %
Provision for losses 99,703     80,987     18,716   23.1 % 326,226     258,289     67,937   26.3 %
Net revenue 167,287     137,917     29,370   21.3 % 637,407     570,307     67,100   11.8 %
Advertising costs 16,459 14,996 1,463 9.8 % 52,058 43,921 8,137 18.5 %
Non-advertising costs of providing services 58,664     59,724     (1,060 ) (1.8 )% 236,112     233,130     2,982   1.3 %
Total cost of providing services 75,123     74,720     403   0.5 % 288,170     277,051     11,119   4.0 %
Gross margin 92,164 63,197 28,967 45.8 % 349,237 293,256 55,981 19.1 %
 
Operating (income) expense
Corporate, district and other 51,176 29,270 21,906 74.8 % 154,973 124,274 30,699 24.7 %
Interest expense 21,990 16,155 5,835 36.1 % 82,684 64,334 18,350 28.5 %
Loss (gain) on extinguishment of debt 0 0

#

12,458 (6,991 ) 19,449

#

Restructuring costs     651     (651 ) # 7,393     3,618     3,775   #
Total operating expense 73,166     46,076     27,090   58.8 % 257,508     185,235     72,273   39.0 %
Net income before income taxes 18,998 17,121 1,877 11.0 % 91,729 108,021 (16,292 ) (15.1 )%
Provision for income taxes 12,588     7,536     5,052   67.0 % 42,576     42,577     (1 ) 0.0 %
Net income   6,410     9,585     (3,175 )   (33.1 )%     49,153     65,444     (16,291 )   (24.9 )%
# - Variance greater than 100% or not meaningful.
 

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)     Three Months Ended December 31,     Year Ended December 31,
    2017   2016   Change $   Change % 2017   2016   Change $   Change %
Net Income $ 6,410   $ 9,585   $ (3,175 )   (33.1 )% $ 49,153   $ 65,444   $ (16,291 )   (24.9 )%
Adjustments:
Loss (gain) on extinguishment of debt (1) 12,458 (6,991 )
Restructuring costs (2) 651 7,393 3,618
Legal settlements (3) 2,000 4,311
Transaction-related costs (4) 3,050 183 5,573 329
Share-based cash and non-cash compensation (5) 8,690 311 10,446 1,148
Intangible asset amortization 695 784 2,502 3,492
Impact of tax law changes (6) 4,635 4,635
Cumulative tax effect of adjustments (5,774 )   (791 )     (17,397 )   (629 )    
Adjusted Net Income $ 19,706 $ 10,723 $ 8,983 83.8 % $ 79,074 $ 66,411 $ 12,663 19.1 %
 
Net income $ 6,410 $ 9,585 $ 49,153 $ 65,444
Diluted Weighted Average Shares Outstanding 40,524 38,902 39,277 38,803
Diluted Earnings per Share $ 0.16 $ 0.25 $ (0.09 ) (36.0 )% $ 1.25 $ 1.69 $ (0.44 ) (26.0 )%
Per Share impact of adjustments to Net Income 0.33     0.02       0.76     0.02      
Adjusted Diluted earnings per share     $ 0.49     $ 0.27     $ 0.21     77.8 %     $ 2.01     $ 1.71     $ 0.30     17.5 %
 
 

Reconciliation of Net Income to EBITDA and Adjusted EBITDA,
non-GAAP measures

 
    Three Months Ended December 31,     Year Ended December 31,
      2017   2016   Change $   Change % 2017   2016   Change $   Change %
Net income $ 6,410   $ 9,585   $ (3,175 )   (33.1 )% $ 49,153   $ 65,444   $ (16,291 )   (24.9 )%
Provision for income taxes 12,588 7,536 5,052 67.0 % 42,576 42,577 (1 ) %
Interest expense 21,990 16,155 5,835 36.1 % 82,684 64,334 18,350 28.5 %
Depreciation and amortization 4,717     4,661     56   1.2 % 18,837     18,905     (68 ) (0.4 )%
EBITDA 45,705 37,937 7,768 20.5 % 193,250 191,260 1,990 1.0 %
Loss (gain) on extinguishment of debt (1) 12,458 (6,991 )
Restructuring costs (2) 651 7,393 3,618
Legal settlements (3) 2,000 4,311
Transaction-related costs (4) 3,050 183 5,573 329
Share-based cash and non-cash compensation (5) 8,690 311 10,446 1,148
Other adjustments (7) (487 )   19       (1,216 )   (3 )    
Adjusted EBITDA $ 58,958     $ 39,101     $ 19,857   50.8 % $ 232,215     $ 189,361     $ 42,854   22.6 %
Adjusted EBITDA Margin 22.1 % 17.9 % 24.1 % 22.9 %
(1)   For the year ended December 31, 2017, the $12.5 million loss from
the extinguishment of debt was due to the redemption of CURO
Intermediate Holding Corp.'s ("CURO Intermediate") 10.75% Senior
Secured Notes due 2018 and the 12.00% Senior Cash Pay Notes due
2017. For year ended December 31, 2016, the $7.0 million gain
resulted from the Company's purchase of CURO Intermediate's 10.75%
Senior Secured Notes in September 2016.
(2) Restructuring costs of $3.6 million for the year ended December 31,
2016 represented the elimination of certain corporate positions in
the Canadian headquarters and the costs incurred related to the
closure of seven underperforming stores in Texas. Restructuring
costs of $7.4 million for the year ended December 31, 2017 were due
to the closure of the remaining 13 U.K. stores.
(3) Legal settlements of $4.3 million for the year ended December 31,
2017 includes $2.3 million for the settlement of Harrison, et al v.
Principal Investments, Inc. et al., and $2.0 million for our offer
to reimburse certain bank overdraft or non-sufficient funds fees
because of possible borrower confusion about certain electronic
payments we initiated on their loans. See related discussion in the
Prospectus filed pursuant to Rule 424(b)(4) on December 8, 2017 for
further information.

(4)

Transaction-related costs include professional fees paid in
connection with potential transactions, expenses related to the
Company's Initial Public Offering on December 7, 2017 and expenses
related to issuance of $135.0 million of the Company's addition
Senior Notes due 2022 in the fourth quarter of 2017 and the original
issuance of $470.0 million of these notes in the first quarter of
2017.

(5)

The Company approved the adoption of a share-based compensation plan
during 2010 for key members of its senior management team. The
estimated fair value of share-based awards is recognized as non-cash
compensation expense on a straight-line basis over the vesting
period. During the second, third and fourth quarters of 2017, the
underlying option holders were paid a bonus in conjunction with
dividends paid during the respective quarters ("Special Bonuses").
The expense recognized during each quarter related to the payment of
the Special Bonuses on vested options. All deferred and unvested
Special Bonus amounts were accelerated upon the completion of the
Company's IPO in December 2017 so no further expense will be
incurred in future periods relating to the Special Bonuses.

(6)

As a result of the 2017 Tax Act, which was signed into law on
December 22, 2017, the Company revalued the deferred tax assets and
deferred tax liabilities to reflect expected value at utilization,
resulting in a $3.5 million net tax benefit. In addition, in
accordance with this law, the Company recognized an $8.1 million tax
expense related to the tax now assessed on un-repatriated earnings
from the Company's operations in Canada.

(7)

Other adjustments include deferred rent and the intercompany foreign
exchange impact. Deferred rent represents the non-cash component of
rent expense. Rent expense is recognized ratably on a straight-line
basis over the lease term.
 
 

For the three months ended December 31, 2017
and 2016

Revenue and Net Revenue

Revenue increased $48.1 million, or 22.0%, to $267.0 million for the
three months ended December 31, 2017 from $218.9 million for the three
months ended December 31, 2016. U.S. revenue increased 25.7% on volume
growth, U.K. revenue increased by 32.5%, and revenue in Canada increased
7.1% where volume growth overcame regulatory impacts on rates and
product mix.

Provision for losses increased $18.7 million, or 23.1%, to $99.7 million
for the three months ended December 31, 2017 from $81.0 million for the
three months ended December 31, 2016 because of related Unsecured
Installment originations increase of 18.7% and Secured Installment
originations increase of 10.9%. This is explained more fully in the
segment analysis that follows.

Cost of Providing Services

The total cost of providing services increased $0.4 million, or 0.5%, to
$75.1 million in the three months ended December 31, 2017, compared to
$74.7 million in the three months ended December 31, 2016 because of
higher customer acquisition spend.

Operating Expenses

Corporate, district and other expense increased $21.9 million, or 74.8%
primarily due to items described previously in the "Reconciliation of
Net Income and Diluted Earnings per Share to Adjusted Net Income and
Adjusted Diluted Earnings per Share, non-GAAP measures" as well as
increases in payroll primarily from increased headcount in technology
and analytics. Interest expense is higher because of increased debt
outstanding.

Provision for Income Taxes

The effective tax rate for the three months ended December 31, 2017 was
66.3% compared to 44.0% for the three months ended December 31, 2016. As
a result of the 2017 Tax Act, this quarter's effective tax rate includes
a net one-time charge of $4.6 million from adjustments to deferred tax
assets and liabilities and recognition of tax expense related to
Canadian earnings that have not been repatriated. Excluding the impact
of the 2017 Tax Act, the effective tax rate for the fourth quarter of
2017 was 41.8%.

For the year ended December 31, 2017 and 2016

Revenue and Net Revenue

Revenue increased $135.0 million, or 16.3% to $963.6 million for the
year ended December 31, 2017 from $828.6 million for the prior year
period. U.S. revenue increased $130.9 million on volume growth, the U.K.
increased $5.8 million, and Canada declined $1.7 million because of
regulatory impacts on rates and product mix.

Provision for losses increased $67.9 million, or 26.3% to $326.2 million
for the year ended December 31, 2017 from $258.3 million for the prior
year because of higher origination volumes and higher loan balances.

Cost of Providing Services

The total cost of providing services increased $11.1 million, or 4.0%,
to $288.2 million for the year ended December 31, 2017, compared to
$277.1 million for the year ended December 31, 2016, due primarily to
18.5% higher marketing spend as well as increases in occupancy, office
and other operating expenses.

Operating Expenses

Corporate, district and other expenses increased $30.7 million primarily
due to debt extinguishment costs, share-based cash and non-cash
compensation, IPO-related costs and legal settlement costs as described
above in the reconciliation of Net Income to Adjusted Net Income as well
as increases in payroll, collections, office and technology-related
costs.

Interest expense in the current year period increased by approximately
$18.4 million which was the result of accrued interest on the retired
notes through the redemption notice period, and increased debt
outstanding.

Provision for Income Taxes

The effective tax rate for the year ended December 31, 2017 was 46.4%
compared to 39.4% for the prior year. As a result of the 2017 Tax Act,
the full year effective tax rate includes a net one-time charge of $4.6
million from adjustments to deferred tax assets and liabilities and
recognition of tax expense related to Canadian earnings that have not
been repatriated. Excluding the impact of the 2017 Tax Act, the
effective tax rate for full-year 2017 was 41.3%.

The remaining change in the effective tax rate from the prior year was
primarily due to U.K. operations. In the 2017, U.K. results include $7.4
million of restructuring costs related to the closure of the remaining
13 U.K. stores. We recorded a 100% valuation allowance against the
resulting deferred tax asset and therefore did not recognize the related
tax benefit.

Segment Analysis

We report financial results for three reportable segments: the United
States, Canada and the United Kingdom. Following is a recap of results
of operations for the segment and period indicated:

 
U.S. Segment Results     Three Months Ended December 31,     Year Ended December 31,
        Change   Change
(dollars in thousands)     2017   2016   $   % 2017   2016   $   %
Revenue $ 205,817 $ 163,691 $ 42,126   25.7 % $ 737,729   $ 606,798 $ 130,931   21.6 %
Provision for losses 86,833     65,150     21,683   33.3 % 267,491     207,748     59,743   28.8 %
Net revenue 118,984 98,541 20,443 20.7 % 470,238 399,050 71,188 17.8 %
Advertising costs 11,552 11,393 159 1.4 % 36,148 30,340 5,808 19.1 %
Non-advertising costs of providing services 41,571     42,422     (851 ) (2.0 )% 166,875     164,382     2,493   1.5 %
Total cost of providing services 53,123     53,815     (692 ) (1.3 )% 203,023     194,722     8,301   4.3 %
Gross margin 65,861 44,726 21,135 47.3 % 267,215 204,328 62,887 30.8 %
Corporate, district and other 42,504 23,007 19,497 84.7 % 120,803 88,539 32,264 36.4 %
Interest expense 21,932 16,149 5,783 35.8 % 82,495 64,276 18,219 28.3 %
Loss (gain) on extinguishment of debt # 12,458 (6,991 ) 19,449 #
Restructuring and other costs     198     (198 ) #     1,726     (1,726 )

#

Total operating expense 64,436     39,354     25,082   63.7 % 215,756     147,550     68,206   46.2 %
Segment operating income 1,425 5,372 (3,947 ) (73.5 )% 51,459 56,778 (5,319 ) (9.4 )%
Interest expense 21,932 16,149 5,783 35.8 % 82,495 64,276 18,219 28.3 %
Depreciation and amortization 3,443     3,395     48   1.4 % 13,643     13,196     447   3.4 %
EBITDA 26,800 24,916 1,884 7.6 % 147,597 134,250 13,347 9.9 %
Loss (gain) on extinguishment of debt 12,458 (6,991 ) 19,449
Restructuring and other costs 198 (198 ) 1,726 (1,726 )
Legal settlement cost 2,000 2,000 4,311 4,311
Other adjustments (63 ) 18 (81 ) (110 ) 128 (238 )
Transaction related costs 3,050 183 2,867 5,573 329 5,244
Share-based cash and non-cash compensation 8,534     311     8,223   10,290     1,148     9,142  
Adjusted EBITDA     $ 40,321     $ 25,626     $ 14,695     57.3 %     $ 180,119     $ 130,590     $ 49,529     37.9 %
# - Variance greater than 100% or not meaningful.
 
 

U.S. Segment Results - For the three months
ended December 31, 2017 and 2016

Fourth quarter U.S. revenues grew by $42.1 million or 25.7% to $205.8
million.

U.S. revenue growth was driven by a $49.4 million, or 18.0%, increase in
gross combined loans receivable (excluding past due loans) to $323.6
million at December 31, 2017 compared to $274.2 million in the prior
year period. We experienced strong volume growth in Unsecured
Installment originations, which increased year-over-year $131.9 million,
or 27.4%. Secured Installment originations grew $45.9 million, or 33.2%,
compared to the same period a year ago.

The increase of $21.7 million, or 33.3%, in provision for losses was
primarily driven by the increase in combined loans receivable above, but
was also affected by the Q1 Loss Recognition Change as further described
in the Prospectus filed with the S.E.C. pursuant to Rule 424(b)(4) on
December 8, 2017. Core increases in origination volumes for installment
loans increased provision year over year by approximately $10 million.
The Q1 Loss Recognition Change requires higher provision rates to
compensate for accrued interest on delinquent loans through charge off
(the ‘rate effect'). The rate effect and performance of past due
receivable at the time of the change in estimate increased provision by
approximately $12 million.

U.S. cost of providing services remained consistent with the same period
in the prior year. The total cost of providing services for the three
months ended December 31, 2017 were $53.1 million, a slight decrease of
$0.7 million, or 1.3% compared to $53.8 million for the year ended
December 31, 2016.

All other U.S. operating expenses were $64.4 million for the three
months ended December 31, 2017, an increase of $25.1 million, compared
to $39.4 million in the prior year period. Excluding the effects of the
items discussed previously in "Reconciliation of Net Income and Diluted
Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings
per Share, non-GAAP measures" applicable to the U.S. as indicated in the
Segment table above, Corporate, district and other operating expenses
rose $6.4 million. This increase includes year-over-year incremental
variable compensation expense of $2.6 million for 2017 performance
versus the Company's Annual Operating Plan. Remaining operating expenses
increased $3.6 million or 16.5% primarily due to increased technology
and analytics headcount. Interest expense increased because of higher
debt balances.

U.S. Segment Results - For the year ended
December 31, 2017 and 2016

Full year U.S. revenues grew by $130.9 million, or 21.6% to $737.7
million. U.S. revenue growth was driven by a $49.4 million, or 18.0%,
increase in gross combined loans receivable (excluding past due loans)
to $323.6 million at December 31, 2017 compared to $274.2 million in the
prior year period. We experienced strong volume growth in Unsecured
Installment originations, which increased year-over-year $131.9 million,
or 27.4%. Secured Installment originations grew $45.9 million, or 33.2%,
compared to the same period a year ago.

The increase of $59.7 million, or 28.8%, in provision for losses was
primarily driven by the aforementioned increase in gross combined loans
receivable and related origination volumes as well as the Q1 Loss
Recognition Change.

U.S. cost of providing services for the year ended December 31, 2017
were $203.0 million, an increase of $8.3 million, or 4.3% compared to
$194.7 million for the year ended December 31, 2016. This increase was
due primarily to $5.8 million (19.1%) higher marketing spend, as well as
increases in volume-driven expenses and increases in store security and
maintenance costs.

All other U.S. operating expenses were $215.8 million for the year ended
December 31, 2017, an increase of $68.2 million, or 46.2%, compared to
$147.6 million in the prior year period. Excluding the effects of the
items discussed previously in "Reconciliation of Net Income and Diluted
Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings
per Share, non-GAAP measures" applicable to the U.S. as indicated in the
Segment table above, Corporate, district and other operating expenses
rose $13.6 million, or 15.6%, primarily due to increased technology and
analytics headcount.

 
Canada Segment Results     Three Months Ended December 31,     Year Ended December 31,
        Change   Change
(dollars in thousands)     2017   2016   $   % 2017   2016   $   %
Revenue $ 50,589 $ 47,226 $ 3,363   7.1 % $ 186,408   $ 188,078 $ (1,670 )   (0.9 )%
Provision for losses 8,829     12,124     (3,295 ) (27.2 )% 45,075     39,917     5,158   12.9 %
Net revenue 41,760 35,102 6,658 19.0 % 141,333 148,161 (6,828 ) (4.6 )%
Advertising costs 3,471 2,375 1,096 46.1 % 10,415 8,695 1,720 19.8 %
Non-advertising costs of providing services 16,250     15,038     1,212   8.1 % 62,968     60,827     2,141   3.5 %
Total cost of providing services 19,721     17,413     2,308   13.3 % 73,383     69,522     3,861   5.6 %
Gross margin 22,039 17,689 4,350 24.6 % 67,950 78,639 (10,689 ) (13.6 )%
Corporate, district and other 4,545 3,481 1,064 30.6 % 16,952 17,174 (222 ) (1.3 )%
Interest expense 59 12 47 # 201 85 116 #
Restructuring and other costs     (35 )   35   #     898     (898 ) #
Total operating expense 4,604     3,458     1,146   33.1 % 17,153     18,157     (1,004 ) (5.5 )%
Segment operating income 17,435 14,231 3,204 22.5 % 50,797 60,482 (9,685 ) (16.0 )%
Interest expense 59 12 47 # 201 85 116 #
Depreciation and amortization 1,157     1,065     92   8.6 % 4,546     4,827     (281 ) (5.8 )%
EBITDA 18,651 15,308 3,343 21.8 % 55,544 65,394 (9,850 ) (15.1 )%
Restructuring and other costs (35 ) 35 # 898 (898 ) #
Share-based cash and non-cash compensation 156 156 # 156 156 #
Other adjustments (417 )   (14 )   (403 ) # (1,071 )   (373 )   (698 ) #
Adjusted EBITDA     $ 18,390     $ 15,259     $ 3,131     20.5 %     $ 54,629     $ 65,919     $ (11,290 )   (17.1 )%
# - Variance greater than 100% or not meaningful.
 

Canada Segment Results - For the three months
ended December 31, 2017 and 2016

Revenue in Canada was affected by product transition in Alberta from
Single-Pay loans to Unsecured Installment loans and the impact of
regulatory rate changes in Ontario and British Columbia.

Non-Alberta Single-Pay revenue increased $0.2 million, or 0.5% to
$38.9 million for 2017 and was affected by lower rates from provincial
regulatory changes effective January 1, 2017. The impact of the rate
changes was offset by higher origination volumes resulting in a modest
increase in related revenue. Single-Pay ending receivables (excluding
Alberta) increased $9.1 million, or 20.9%, to $52.6 million from
$43.5 million in the prior year period.

Because of regulatory changes in Alberta, we converted Single-Pay
customers to Unsecured Installment loans during the first week of
December 2016, resulting in $22.7 million of Unsecured Installment loans
outstanding at the end of 2016. As of December 31, 2017, $43.7 million
of Unsecured Installment and Open-End receivables were outstanding in
Alberta.

The provision for losses decreased $3.3 million or 27.2% to $8.8 million
for the three months ended December 31, 2017 compared to $12.1 million
in the prior year period. The decrease was primarily due to relative
loan growth (December 2016 included provisioning on the conversion of
$8.9 million of Single-Pay to $18.1 million of Unsecured Installment
loan balances). In addition, Unsecured Installment provision rates and
allowance coverage has normalized as the portfolio has seasoned and we
have better insight into payment performance.

The cost of providing services in Canada increased $2.3 million, or
13.3%, to $19.7 million for the three months ended December 31, 2017,
compared to $17.4 million in the prior year period. The increase was due
primarily to $1.1 million, or 46.1% of higher marketing expense compared
to the prior year period, as well as an increase in occupancy expense,
based on a higher number of stores in operation during 2017.

Operating expenses increased $1.1 million, or 33.1%, to $4.6 million in
the year ended December 31, 2017, from $3.5 million in the prior year
period, due to $0.4 million of incremental bonus expense for 2017
performance, $0.2 million of share-based compensation and elevated spend
on third party collections.

Canada Segment Results - For the year ended
December 31, 2017 and 2016

Revenue in Canada was affected by product transition in Alberta from
Single-Pay loans to Unsecured Installment loans and the impact of
regulatory rate changes in Ontario and British Columbia.

Non-Alberta Single-Pay revenue decreased $1.1 million, or 0.8% to
$146.2 million for 2017 and was affected by lower rates from provincial
regulatory changes effective January 1, 2017. The impact of the rate
changes was offset by higher origination volumes resulting in a modest
decrease in related revenue. Single-Pay ending receivables (excluding
Alberta) increased $9.1 million, or 20.9%, to $52.6 million from
$43.5 million in the prior year period.

Because of regulatory changes in Alberta, we converted Single-Pay
customers to Unsecured Installment loans during the first week of
December 2016, resulting in $22.7 million of Unsecured Installment loans
outstanding at the end of 2016. As of December 31, 2017, $43.7 million
of Unsecured Installment and Open-End receivables were outstanding in
Alberta.

The provision for losses rose $5.2 million or 12.9% to $45.1 million for
full year 2017 compared to $39.9 million in the prior year period. As in
the U.S., the increase was due to higher loan origination volume and the
shift in Alberta from Single Pay to Unsecured Installment loans.

The cost of providing services in Canada increased $3.9 million, or
5.6%, to $73.4 million for the year ended December 31, 2017, compared to
$69.5 million in the prior year period due primarily to an increase in
occupancy expense, based on a higher number of stores in operation
during 2017 as compared to the prior year, as well as an increase in
store maintenance costs and higher marketing spend.

Operating expenses decreased $1.0 million, or 5.5%, to $17.2 million in
the year ended December 31, 2017, from $18.2 million in the prior year
period, due to the consolidation of certain back-office functions during
the third quarter of 2016.

 
U.K. Segment Results     Three Months Ended December 31,     Year Ended December 31,
        Change   Change
(dollars in thousands)     2017   2016   $   % 2017   2016   $   %
Revenue $ 10,584 $ 7,987 $ 2,597   32.5 % $ 39,496   $ 33,720 $ 5,776   17.1 %
Provision for losses 4,041     3,713     328   8.8 %

13,660

10,624

3,036

  28.6 %
Net revenue 6,543 4,274 2,269 53.1 % 25,836 23,096 2,740 11.9 %
Advertising costs 1,436 1,228 208 16.9 % 5,495 4,886 609 12.5 %
Non-advertising costs of providing services 843     2,264     (1,421 ) (62.8 )% 6,269     7,921     (1,652 ) (20.9 )%
Total cost of providing services 2,279     3,492     (1,213 ) (34.7 )% 11,764     12,807     (1,043 ) (8.1 )%
Gross margin 4,264 782 3,482 # 14,072 10,289 3,783 36.8 %
Corporate, district and other 4,127 2,782 1,345 48.3 % 17,218 18,561 (1,343 ) (7.2 )%
Interest income (1 ) (6 ) (5 ) (83.3 )% (12 ) (27 ) (15 ) (55.6 )%
Restructuring and other costs     488     (488 ) # 7,393     994     6,399   #
Total operating expense 4,126     3,264     862   26.4 % 24,599     19,528     5,071   26.0 %
Segment operating income (expense) 138 (2,482 ) 2,620 # (10,527 ) (9,239 ) (1,288 ) 13.9 %
Interest income (1 ) (6 ) (5 ) (83.3 )% (12 ) (27 ) (15 ) (55.6 )%
Depreciation and amortization 117     201     (84 ) (41.8 )% 648     882     (234 ) (26.5 )%
EBITDA 254 (2,287 ) 2,541 # (9,891 ) (8,384 ) (1,507 ) (18.0 )%
Other adjustments (7 ) 15 (22 ) # (35 ) 242 (277 ) #
Restructuring and other costs     488     (488 ) # 7,393     994     6,399   #
Adjusted EBITDA     $ 247     $ (1,784 )   $ 2,031     #     $ (2,533 )   $ (7,148 )   $ 4,615     64.6 %
# - Variance greater than 100% or not meaningful
 

U.K. Segment Results - For the three months
ended December 31, 2017 and 2016

U.K. revenue improved $2.6 million, or 32.5% to $10.6 million for the
year ended December 31, 2017 from $8.0 million in the prior year period.
On a constant currency basis, revenue was up $1.9 million, or 24.0%.
Provision for losses increased $0.3 million, or 8.8%, and increased
$0.5 million, or 15.8% on a constant currency basis, due to growth in
Installment Loan receivables.

The cost of providing services in the U.K. decreased $1.2 million, or
34.7%, for the three months ended December 31, 2017 as compared to prior
year period. The decrease is primarily because the 13 remaining stores
in the U.K. were closed in the third quarter of 2017. On a constant
currency basis the cost of providing services decreased $1.4 million, or
38.9%.

Corporate, district and other expenses of $4.1 million for the fourth
quarter of 2017 are consistent with quarterly run rates for the full
year 2017 and represent normal baseline costs for the U.K.

U.K. Segment Results - For the year ended
December 31, 2017 and 2016

U.K. revenue improved $5.8 million, or 17.1% to $39.5 million for the
year ended December 31, 2017 from $33.7 million in the prior year
period. On a constant currency basis, revenue was up $7.8 million, or
23.0%. Provision for losses increased $3.0 million, or 28.6%, and
increased $3.7 million, or 34.5% on a constant currency basis, due to
growth in Installment Loan receivables.

The cost of providing services in the U.K. decreased slightly from the
prior year period because of third quarter 2017 store closures. On a
constant currency basis the cost of providing services decreased
$0.4 million, or 3.1%.

Operating expenses increased $5.1 million, or 26.0%, from the prior year
period, and on a constant currency basis increased $6.3 million, or
32.4%, due to restructuring costs from closure of the 13 remaining
stores during the third quarter of 2017. Excluding the store closure
costs, operating expenses decreased $1.3 million (7.2%) because of
reduced headquarters and contact center headcount and lower professional
fees.

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 
      December 31, 2017     December 31, 2016
ASSETS
Cash     $ 162,374     $ 193,525
Restricted cash (includes restricted cash of consolidated VIEs of
$6,871 and $2,770 as of December 31, 2017 and 2016, respectively)
12,117 7,828
Gross loans receivable (includes loans of consolidated VIEs of
$214,066 and $130,199 as of December 31, 2017 and 2016, respectively)
432,837 286,196
Less: allowance for loan losses (includes allowance for losses of
consolidated VIEs of $46,140 and $22,134 as of December 31, 2017 and
2016, respectively)
(69,568 ) (39,192 )
Loans receivable, net 363,269 247,004
Deferred income taxes 772 12,635
Income taxes receivable 3,455 9,378
Prepaid expenses and other 42,512 39,248
Property and equipment, net 87,086 95,896
Goodwill 145,607 141,554
Other intangibles, net of accumulated amortization of $41,891 and
$37,670
32,769 30,901
Other 9,770   2,829  
Total Assets $ 859,731   $ 780,798  
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 55,792 $ 42,663
Deferred revenue 11,984 12,342
Income taxes payable 4,120 1,372
Current maturities of long-term debt 147,771
Accrued interest (includes accrued interest of consolidated VIEs of
$1,266 and $775 as of December 31, 2017 and 2016, respectively)
25,467 8,183
Credit services organization guarantee liability 17,795 17,052
Deferred rent 11,577 11,868
Long-term debt (includes long-term debt and issuance costs of
consolidated VIEs of $124,590 and $4,188 and $68,311 and $5,257 as
of December 31, 2017 and 2016, respectively)
706,225 477,136
Subordinated shareholder debt 2,381 2,227
Other long-term liabilities 5,768 5,016
Deferred tax liabilities 11,486   14,313  
Total Liabilities 852,595   739,943  
Commitments and contingencies
Stockholders' Equity
Preferred stock - $0.001 par value; 25,000,000 and no shares
authorized, respectively, and no shares were issued at either period
end
Common stock - $0.001 par value; 225,000,000 and 72,000,000 shares
authorized, and 44,561,419 and 37,894,752 issued and outstanding, at
the respective period ends
8 1
Dividends in excess of paid-in capital 46,079 (35,996 )
Retained earnings 3,988 136,835
Accumulated other comprehensive loss (42,939 ) (59,985 )
Total Stockholders' Equity 7,136   40,855
Total Liabilities and Stockholders' Equity     $ 859,731       $ 780,798  
 
 

Balance Sheet Changes - December 31, 2017 compared to December 31,
2016

Cash - Cash decreased from 2016 primarily
because of cash used in the redemption and refinancing of the Company's
12.00% Senior Cash Pay Notes due 2017 and CURO Intermediate's 10.75%
Senior Secured Notes due 2018 ("Former Senior Secured Notes"). On
February 15, 2017, CURO Financial Technologies Corp. ("CFTC"), a
wholly-owned subsidiary of the Company, issued $470.0 million of 12.00%
Senior Secured Notes due 2022. The proceeds, along with $122.5 million
of company cash, were used to redeem the $539.9 million outstanding of
Former Senior Secured Notes (including accrued interest, original-issue
discount, prepayment premium and transaction costs). The decrease in
cash from this refinancing was offset partially by cash generated by
operations during 2017 and net proceeds after transaction costs of $81.1
million from the Company's initial public offering of 6,666,667 shares
of common stock at a price of $14.00 per share. On November 2, 2017,
CFTC issued $135.0 million of additional 12.00% Senior Secured Notes due
2022. The proceeds of the notes offering and related issuance premium
were used to pay a $140.0 million cash dividend to the Company and,
ultimately, the Company's stockholders.

Gross Loans Receivable and Allowance for Loan
Losses
- The Company originated $780.7 million and $184.3 million
of Unsecured and Secured Installment Loans, respectively, during 2017 as
compared to $533.4 million and $138.4 million in the prior year. As
explained in the Loan Volume and Portfolio Performance Analysis section
above, changes in Gross Loans Receivable and related Allowance for Loan
Losses were due to high customer demand and loan origination volumes
during 2017 that were concentrated in Installment Loans.

Other Assets - Other assets increased
primarily because of the equity investment in Cognical Holdings, Inc. We
made a $5.0 million investment on April 20, 2017 and an additional $0.6
million investment in October 2017 that increased the Company's equity
ownership from 8.9% to 9.4%. Cognical Holdings, Inc. operates as a
business under an online website, www.zibby.com,
that facilities the purchase of household items and by underbanked
consumers.

Long-term debt (including current maturities) and
Accrued Interest
- Changes from year-end 2016 are due to the
refinancing of the Former Senior Secured Notes and the conversion of the
ABL Facility to the Non-Recourse U.S. SPV Facility. For more information
about the Company's long term debt, see Note 11, "Long-Term Debt" of the
Notes to Interim Consolidated Financial Statements included in the
prospectus dated December 8, 2017.

About CURO

CURO Group Holdings Corp. (NYSE:CURO), operating in three 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 three 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,
WageDayAdvance, Juo Loans, and Opt+. 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 8:30 a.m.
Eastern Time tomorrow, February 2, 2018. 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 February 9,
2018, at 11:59 p.m. Eastern Time. An archived version of the webcast
will be available on the CURO Investor Relations 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
10116490.

Final Results

The financial results discussed herein are presented on a preliminary
basis; final data will be included in the Company's Annual Report on
Form 10-K for the period ended December 31, 2017.

Forward-Looking Statements

This press release may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements may include, without limitation, any statements preceded by,
followed by or including words such as "target," "believe," "expect,"
"aim," "intend," "may," "anticipate," "assume," "budget," "continue,"
"estimate," "future," "objective," "outlook," "plan," "potential,"
"predict," "project," "will," "can have," "likely," "should," "would,"
"could" and other words and terms of similar meaning or the negative
thereof. Such forward-looking statements involve known and unknown
risks, uncertainties and other important factors beyond the Company's
control, as discussed by the Company's filings with SEC, that could
cause the Company's actual results, performance or achievements to be
materially different from the expected results, performance or
achievements expressed or implied by such forward-looking statements.
Such forward-looking statements are based on numerous assumptions
regarding the Company's present and future business strategies and the
environment in which it will operate in the future. Any forward-looking
statement made in this press release speaks only as the date hereof.

Forward-looking statements reflect our current expectations regarding
future events, results or outcomes. These expectations may or may not be
realized. Some of these expectations may be based upon assumptions or
judgments that prove to be incorrect. In addition, our business and
operations involve numerous risks and uncertainties, many of which are
beyond our control, which could result in our expectations not being
realized or otherwise materially affect our financial condition, results
of operations and cash flows. Except as required by law, the Company
assumes no obligation to update these forward-looking statements, or to
update the reasons actual results could differ materially from those
anticipated in the forward-looking statements, even if new information
becomes available in the future.

Our forward-looking statements are not guarantees of future performance,
and actual events, results and outcomes may differ materially from our
expectations suggested in any forward-looking statements due to a
variety of factors, including, among others, those set forth in the
section entitled "Risk Factors" in our Prospectus filed pursuant to Rule
424(b)(4) on December 8, 2017.

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 (Net Income minus certain non-cash and other
    adjusting items)
  • Adjusted Earnings per share (Earnings per share minus the per share
    impacts of certain non-cash and other adjusting items)
  • 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 its 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, Adjusting 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 GAAP.
In addition, we believe that the adjustments shown below are useful to
investors in order to allow them to compare the Company's 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, Adjusting 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 the Company's industry,
many of which present Adjusted Net Income, Adjusting Earnings per Share,
EBITDA and/or Adjusted EBITDA when reporting their results.

In addition to reporting loans receivable information in accordance with
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 GAAP consolidated financial statements.
Adjusted Net Income, Adjusting 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.
Rather, these measures should be considered in addition to results
prepared in accordance with U.S. GAAP, but should not be considered a
substitute for, or superior to, U.S. GAAP results. Readers should
consider the information in addition to, but not instead of or superior
to, the financial statements prepared in accordance with 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, Adjusting 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
the Company's 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 the Company's industry may calculate these measures
    differently, limiting their usefulness as comparative measures.

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, Adjusting Earnings per Share, EBITDA and
Adjusted EBITDA are used by investors to analyze operating performance
and evaluate the Company's ability to incur and service debt and the
capacity for making capital expenditures. Adjusted EBITDA is also useful
to investors to help assess the Company's estimated enterprise value.
The computation of Adjusted EBITDA as presented in this release may
differ from the computation of similarly-titled measures provided by
other companies.

(CURO-NWS)

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