Market Overview

CURO Group Holdings Corp. Announces First Quarter 2018 Financial Results

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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 first quarter 2018.

"It is great to start 2018 with a very solid quarter highlighted by
27.9% loan growth and 34.5% adjusted earnings growth," said Don
Gayhardt, President and Chief Executive Officer. "We finished the
quarter with our balance sheet and credit quality where we expected,
maintained solid year-over-year growth in our core loan products and saw
early success with our new product launches."

Consolidated Summary Results

 
    For the Three Months Ended
(in thousands, except per share data)     3/31/2018     3/31/2017     Variance
Revenue $ 261,758     $ 224,580     16.6 %
Gross Margin 109,245 94,905 15.1 %
Gross Loans Receivable 389,838 304,842 27.9 %
Net Income 23,292 16,638 40.0 %
Adjusted Net Income (1) 35,601 26,477 34.5 %
Diluted Earnings per Share $ 0.49 $ 0.43 14.0 %
Adjusted Diluted Earnings per Share (1) $ 0.75 $ 0.68 10.3 %
EBITDA (1) 61,769 54,108 14.2 %
Adjusted EBITDA (1) 75,215 68,632 9.6 %
Weighted Average Shares - diluted 47,416 38,959

(1) Non-GAAP Metric; see Results of Operations section for
reconciliation to nearest GAAP metric

 

First quarter 2018 year-over-year highlights include:

  • Total revenue of $261.8 million, an increase of 16.6%
  • Gross margin of $109.2 million, an increase of 15.1%
  • 27.9% loan growth
  • GAAP Net Income of $23.3 million, an increase of 40.0%
  • Adjusted Net Income of $35.6 million, an increase of 34.5%
  • GAAP Diluted Earnings per Share of $0.49, an increase of 14.0%
  • Adjusted Diluted Earnings per Share of $0.75, an increase of 10.3%
  • Underwriters exercised option for an additional 1,000,000 shares at
    the original offer price on January 5, 2018
  • Redeemed $77.5 million of our 12.00% Senior Secured Notes on March 7,
    2018

Fiscal 2018 Outlook

The Company affirms its full-year 2018 adjusted earnings guidance, a
non-GAAP measure that excludes the $11.7 million of debt extinguishment
costs from the retirement of $77.5 million 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

First Quarter 2018

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

 
    For the Three Months Ended
      March 31, 2018     March 31, 2017
(in thousands) U.S.     Canada     U.K.     Total U.S.     Canada     U.K.     Total
Unsecured Installment $ 120,476     $ 4,903     $ 7,567     $ 132,946 $ 100,754     $ 3,420     $ 5,257     $ 109,431
Secured Installment 26,856 26,856 23,669 23,669
Open-End 25,834 1,389 27,223 17,907 17,907
Single-Pay 26,065 34,292 3,348 63,705 26,327 34,179 3,284 63,790
Ancillary 5,362       5,666             11,028   5,665       3,967       151       9,783
Total revenue     $ 204,593       $ 46,250       $ 10,915       $ 261,758       $ 174,322       $ 41,566       $ 8,692       $ 224,580
 

During the three months ended March 31, 2018, total lending revenue
(excluding revenues from ancillary products) grew $35.9 million, or
16.7%, to $250.7 million, compared to the prior year period,
predominantly driven by growth in Installment loan revenue in all three
countries. Unsecured Installment loan revenues rose 21.5% and Secured
Installment revenues rose 13.5% because of loan growth. Single-Pay
revenues were flat year-over year. The effect of Single-Pay receivables
growth was offset by regulatory changes in Ontario, Canada. Open-End
revenues rose 52.0% on organic growth in the U.S. and the introduction
of Open-End products in Virginia and Canada. Ancillary revenues
increased 12.7% versus the same quarter a year ago primarily due to
non-lending revenue in Canada.

The following table presents revenue composition, including CSO fees, of
the products and services that we currently offer:

 
                Three Months Ended
March 31,
                  2018         2017
Installment 61.0 %         59.2 %
Canada Single-Pay 13.1 % 15.2 %
U.S. Single-Pay 10.0 % 11.7 %
U.K. Single-Pay 1.3 % 1.5 %
Open-End 10.4 % 8.0 %
Ancillary 4.2 %         4.4 %
Total                 100.0 %         100.0 %
 

For the three months ended March 31, 2018 and 2017, revenue generated
through the online channel was 43% and 36%, 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)    

March 31,
2018

   

December 31,
2017

   

September 30,
2017

   

June 30,
2017

   

March 31,
2017

Company-owned gross loans receivable     $ 389.8     $ 432.8     $ 393.4     $ 350.3     $ 304.8
Gross loans receivable guaranteed by the Company 57.1       78.8       71.2       62.1       57.8
Gross combined loans receivable     $ 446.9       $ 511.6       $ 464.6       $ 412.4       $ 362.6
 

Gross combined loans receivable by product are presented below:

 
    Three Months Ended

March 31,
2018

   

December 31,
2017

   

September 30,
2017

   

June 30,
2017

   

March 31,
2017

Unsecured Installment $ 171.4     $ 196.3     $ 181.8     $ 156.0     $ 131.4
Secured Installment 79.8 89.2 85.0 76.3 67.5
Single-Pay 87.1 99.4 94.5 91.2 80.3
Open-End 51.5 47.9 32.1 26.8 25.6
CSO 57.1       78.8       71.2       62.1       57.8
Total     $ 446.9       $ 511.6       $ 464.6       $ 412.4       $ 362.6
 

Gross combined loans receivable increased $84.3 million, or 23.3%, to
$446.9 million for the three months ended March 31, 2018 compared to
$362.6 million for the three months ended March 31, 2017 with solid
growth in all categories of Company Owned loans. Gross combined loans
receivable decreased sequentially from December 31, 2017 because of
seasonality as the Company's customers use tax refunds to repay balances.

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 California; growth in Canada, primarily in Alberta;
and growth in the United Kingdom. Gross combined Unsecured Installment
Loan balances grew $40.4 million, or 21.8%, compared to March 31, 2017.

Loss provision rates as a percentage of originations for Company Owned
loans increased sequentially from 22.1% to 27.6%, to maintain allowance
coverage. Loss provision rates for loans Guaranteed by the Company
remained consistent sequentially from the fourth quarter of 2017. Net
charge offs for Company Owned loans and loans Guaranteed by the Company
were consistent and improved, respectively, versus the fourth quarter of
2017.

Unsecured Installment Allowance for loan losses as a percentage of
Unsecured Installment gross loans receivable was consistent sequentially
from the fourth quarter of 2017. Unsecured Installment CSO guarantee
liability as a percentage of Unsecured Installment gross loans
Guaranteed by the Company declined from the end of 2017 because of
improved net charge offs and delinquencies. The delinquency rate for
Company Owned Unsecured Installment gross loans was flat to the fourth
quarter of 2017 and up slightly versus the same quarter a year ago,
while the delinquency rate for Unsecured Installment gross loans
Guaranteed by the Company improved sequentially and year-over-year.

 
        2018     2017
(dollars in thousands, except average loan amount, unaudited)         First Quarter Fourth Quarter     Third Quarter     Second Quarter     First Quarter
Unsecured Installment loans:            
Revenue - Company Owned $ 66,004 $ 67,800 $ 61,653 $ 52,550 $ 51,206
Provision for losses - Company Owned 27,477   29,917       29,079       17,845       19,309  
Net revenue - Company Owned $ 38,527   $ 37,883       $ 32,574       $ 34,705       $ 31,897  
Net charge-offs - Company Owned $ 33,410 $ 32,894 $ 23,858 $ 18,858 $ (4,918 )
Revenue - Guaranteed by the Company $ 66,942 $ 69,078 $ 67,132 $ 52,599 $ 58,225
Provision for losses - Guaranteed by the Company 23,556   32,915       36,212       23,575       19,940  
Net revenue - Guaranteed by the Company $ 43,386   $ 36,163       $ 30,920       $ 29,024       $ 38,285  
Net charge-offs - Guaranteed by the Company $ 30,743 $ 31,898 $ 34,904 $ 27,309 $ 17,088
Unsecured Installment gross combined loans receivable:
Company owned $ 171,432 $ 196,306 $ 181,831 $ 156,075 $ 131,386
Guaranteed by the Company (1) (2) 54,332   75,156       67,438       58,289       53,978  
Unsecured Installment gross combined loans receivable (1) (2) $ 225,764   $ 271,462       $ 249,269       $ 214,364       $ 185,364  
 
Unsecured Installment Allowance for loan losses (3) $ 37,916 $ 43,755 $ 46,938 $ 41,406 $ 42,040
Unsecured Installment CSO guarantee liability (3) $ 9,886 $ 17,072 $ 16,056 $ 14,748 $ 18,482
Unsecured Installment Allowance for loan losses as a percentage of
Unsecured Installment gross loans receivable
22.1 % 22.3 % 25.8 % 26.5 % 32.0 %
Unsecured Installment CSO guarantee liability as a percentage of
Unsecured Installment gross loans guaranteed by the Company
18.2 % 22.7 % 23.8 % 25.3 % 34.2 %
Unsecured Installment past-due balances:
Unsecured Installment gross loans receivable $ 39,273 $ 44,963 $ 41,353 $ 33,534 $ 28,913
Unsecured Installment gross loans guaranteed by the Company $ 8,410 $ 12,480 $ 10,462 $ 8,204 $ 11,196
Past-due Unsecured Installment gross loans receivable -- percentage (2) 22.9 % 22.9 % 22.7 % 21.5 % 22.0 %
Past-due Unsecured Installment gross loans guaranteed by the Company
-- percentage (2)
15.5 % 16.6 % 15.5 % 14.1 % 20.7 %
Unsecured Installment other information:
Originations - Company owned (4) $ 99,418 $ 135,284 $ 137,618 $ 119,636 $ 98,691
Average loan amount - Company owned $ 666 $ 714 $ 730 $ 697 $ 687
Originations - Guaranteed by the Company (1) (4) $ 60,593 $ 82,326 $ 83,680 $ 68,338 $ 55,112
Average loan amount - Guaranteed by the Company $ 523 $ 526 $ 526 $ 485 $ 482
Unsecured Installment ratios:
Provision as a percentage of originations - Company Owned 27.6 % 22.1 % 21.1 % 14.9 % 19.6 %
Provision as a percentage of gross loans receivable - Company Owned 16.0 % 15.2 % 16.0 % 11.4 % 14.7 %
Provision as a percentage of originations - Guaranteed by the Company 38.9 % 40.0 % 43.3 % 34.5 % 36.2 %
Provision as a percentage of gross loans receivable - Guaranteed by
the Company
        43.4 %     43.8 %     53.7 %     40.4 %     36.9 %

(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)

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

 
 

Secured Installment Loans

Secured Installment gross combined loans receivable balances increased
by $11.3 million, or 15.9%, compared to March 31, 2017 primarily due to
growth in California and Arizona. Secured Installment Allowance for loan
losses and CSO guarantee liability as a percentage of Secured
Installment gross loans receivable settled at a more normalized range in
the fourth quarter of 2017 and remained consistent sequentially through
the first quarter of 2018. Delinquency rates were stable and net charge
offs improved versus the fourth quarter of 2017.

                 
        2018     2017
(dollars in thousands, except average loan amount, unaudited)         First Quarter Fourth Quarter     Third Quarter     Second Quarter     First Quarter
Secured Installment loans:            
Revenue $ 26,856 $ 27,732 $ 26,407 $ 23,173 $ 23,669
Provision for losses 6,640   10,051       6,512       4,955       7,436  
Net revenue $ 20,216   $ 17,681       $ 19,895       $ 18,218       $ 16,233  
Net charge-offs $ 8,669 $ 10,802 $ 11,597 $ 6,481 $ (2,235 )
Secured Installment gross combined loan balances:
Secured Installment gross combined loans receivable (1)(2) $ 82,534 $ 92,817 $ 88,730 $ 80,077 $ 71,213
Secured Installment Allowance for loan losses and CSO guarantee
liability (3)
$ 12,165 $ 14,194 $ 14,945 $ 20,030 $ 21,557
Secured Installment Allowance for loan losses and CSO guarantee
liability as a percentage of Secured Installment gross combined
loans receivable
14.7 % 15.3 % 16.8 % 25.0 % 30.3 %
Secured Installment past-due balances:
Secured Installment past-due gross loans receivable and gross loans
guaranteed by the Company
$ 14,756 $ 16,554 $ 15,265 $ 12,630 $ 10,186
Past-due Secured Installment gross loans receivable and gross loans
guaranteed by the Company -- percentage (2)
17.9 % 17.8 % 17.2 % 15.8 % 14.3 %
Secured Installment other information:
Originations (1)(4) $ 34,750 $ 48,577 $ 52,526 $ 45,596 $ 37,641
Average loan amount (1)(4) $ 1,222 $ 1,303 $ 1,299 $ 1,231 $ 1,326
Secured Installment ratios:
Provision as a percentage of originations 19.1 % 20.7 % 12.4 % 10.9 % 19.8 %
Provision as a percentage of gross combined loans receivable         8.0 %     10.8 %     7.3 %     6.2 %     10.4 %

(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)

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

 
 

Open-End Loans

Open-End loan balances increased by $25.9 million compared to March 31,
2017 from year-over-year growth in Kansas and Tennessee of 12.2% and
8.6%, respectively, the 2017 launch of Open-End in Virginia and
conversion in the fourth quarter of 2017 of a portion of Canada
Unsecured Installment loans to Open-End loans. The provision for losses
and Open-End Allowance for loan losses as a percentage of Open-End gross
loans receivable remained consistent with the previous quarter. The
decline year-over-year in Allowance as a percentage of Open-End gross
receivables compared to March 31, 2017 is primarily due to geographic
mix and seasoning in the U.S.

 
        2018     2017
(dollars in thousands, except average loan amount, unaudited)         First Quarter Fourth Quarter     Third Quarter     Second Quarter     First Quarter
Open-End loans:            
Revenue $ 27,223 $ 21,154 $ 18,630 $ 15,805 $ 17,907
Provision for losses 11,428   8,334       6,348       4,298       3,265  
Net revenue $ 15,795   $ 12,820       $ 12,282       $ 11,507       $ 14,642  
Net charge-offs $ 10,972 $ 6,799 $ 5,991 $ 4,343 $ 3,876
Open-End gross combined loan balances:
Open-End gross loans receivable $ 51,564 $ 47,949 $ 32,133 $ 26,771 $ 25,626
Allowance for loan losses $ 6,846 $ 6,426 $ 4,880 $ 4,523 $ 4,572
Open-End Allowance for loan losses as a percentage of Open-End gross
loans receivable
13.3 % 13.4 % 15.2 % 16.9 % 17.8 %
Open-End other information:
Average loan amount (1) $ 702 $ 579 $ 463 $ 451 $ 454
Open-End ratios:
Provision as a percentage of gross combined loans receivable         22.2 %     17.4 %     19.8 %     16.1 %     12.7 %

(1)

 

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

 
 

Single-Pay

Single-Pay revenue and combined loans receivable during the three months
ended March 31, 2018 were affected primarily by regulatory changes in
Canada (rate changes in Ontario and British Columbia) and continued
product shift from Single-Pay to Installment and Open-End loans in all
countries. Single-Pay loan balances grew 8.3% (primarily in Canada) but
revenue was flat versus the same quarter a year ago because of lower
yields in Canada. Credit quality and metrics for Single-Pay remain
stable.

 
    2018     2017
(dollars in thousands, unaudited)     First Quarter Fourth Quarter     Third Quarter     Second Quarter     First Quarter
Single-Pay loans:            
Revenue $ 63,705 $ 70,868 $ 70,895 $ 63,241 $ 63,790
Provision for losses 11,302   17,952       20,632       14,289       11,399  
Net revenue $ 52,403   $ 52,916       $ 50,263       $ 48,952       $ 52,391  
Net charge-offs $ 12,698 $ 17,362 $ 20,515 $ 13,849 $ 12,499
Single-Pay gross combined loan balances:
Single-Pay gross combined loans receivable (1) (2) $ 87,075 $ 99,400 $ 94,476 $ 91,230 $ 80,423
Single-Pay Allowance for loan losses and CSO guarantee liability (3) $ 4,485 $ 5,915 $ 5,342 $ 5,313 $ 4,736
Single-Pay Allowance for loan losses and CSO guarantee liability as
a percentage of Single-Pay gross loans receivable
    5.2 %     6.0 %     5.7 %     5.8 %     5.9 %

(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

(Unaudited)

 
(in thousands, except per share data)     Three Months Ended March 31,
    2018     2017     Change $     Change %
Revenue $ 261,758     $ 224,580     $ 37,178     16.6 %
Provision for losses 81,031       61,736       19,295   31.3 %
Net revenue 180,727       162,844       17,883   11.0 %
Advertising costs 9,756 7,688 2,068 26.9 %
Non-advertising costs of providing services 61,726       60,251       1,475   2.4 %
Total cost of providing services 71,482       67,939       3,543   5.2 %
Gross margin 109,245 94,905 14,340 15.1 %
 
Operating (income) expense
Corporate, district and other 40,454 32,993 7,461 22.6 %
Interest expense 22,349 23,366 (1,017 ) (4.4 )%
Loss on extinguishment of debt 11,683       12,458       (775 ) (6.2 )%
Total operating expense 74,486       68,817       5,669   8.2 %
Net income before income taxes 34,759 26,088 8,671 33.2 %
Provision for income taxes 11,467       9,450       2,017   21.3 %
Net income     $ 23,292       $ 16,638       $ 6,654       40.0 %
 

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 March 31,
    2018     2017     Change $     Change %
Net Income $ 23,292     $ 16,638     $ 6,654     40.0 %
Adjustments:
Loss on extinguishment of debt (1) 11,683 12,458
Transaction-related costs (2) 2,254
Share-based cash and non-cash compensation (3) 1,842 126
Intangible asset amortization 676 583
Impact of tax law changes (6) 1,800
Cumulative tax effect of adjustments (3,692 )     (5,582 )      
Adjusted Net Income $ 35,601 $ 26,477 $ 9,124 34.5 %
 
Net income $ 23,292 $ 16,638
Diluted Weighted Average Shares Outstanding (4) 47,416 38,959
Diluted Earnings per Share (4) $ 0.49 $ 0.43 $ 0.06 14.0 %
Per Share impact of adjustments to Net Income (4) 0.26       0.25        
Adjusted Diluted earnings per share (4)     $ 0.75       $ 0.68       $ 0.07       10.3 %
 

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

 
    Three Months Ended March 31,
      2018     2017     Change $     Change %
Net income $ 23,292     $ 16,638     $ 6,654     40.0 %
Provision for income taxes 11,467 9,450 2,017 21.3 %
Interest expense 22,349 23,366 (1,017 ) (4.4 )%
Depreciation and amortization 4,661       4,654       7   0.2 %
EBITDA 61,769 54,108 7,661 14.2 %
Loss on extinguishment of debt (1) 11,683 12,458
Transaction-related costs (2) 2,254
Share-based cash and non-cash compensation (3) 1,842 126
Other adjustments (5) (79 )     (314 )      
Adjusted EBITDA $ 75,215       $ 68,632       $ 6,583   9.6 %
Adjusted EBITDA Margin 28.7 % 30.6 %

(1)

  For the three months ended March 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 the three months ended March 31, 2018, the $11.7 million
loss from the extinguishment of debt was due to the redemption of
CURO Financial Technologies Corp.'s ("CFTC") 12.00% Senior Secured
Notes due 2022.

(2)

Transaction-related costs include professional fees paid in
connection with potential transactions and the original issuance of
$470.0 million of Senior Secured Notes due 2022 in the first quarter
of 2017.
(3) The Company approved the adoption of a share-based compensation plan
during 2010 and 2017 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.
(4) The share and per share information have been adjusted to give
effect to the 36-to-1 stock split of the Company's common stock that
occurred during the fourth quarter of 2017.
(5) 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.
(6) As a result of the Tax Cuts and Jobs Act of 2017 ("2017 Tax Act"),
which was signed into law on December 22, 2017, the Company provided
an estimate of the new repatriation tax as of December 31, 2017. Due
to subsequent guidance published in the first quarter of 2018, the
Company has booked an additional tax expense of $1.2 million for the
2017 repatriation tax. Additionally, the Tax Act provided for a new
GILTI ("Global Intangible Low-Taxed Income") tax starting in 2018
and the Company has estimated and provided tax expense of $0.6
million as of March 31, 2018.
 
 

For the three months ended March 31, 2018 and
2017

Revenue and Net Revenue

Revenue increased $37.2 million, or 16.6%, to $261.8 million for the
three months ended March 31, 2018 from $224.6 million for the three
months ended March 31, 2017. U.S. revenue increased 17.4% on volume
growth, U.K. revenue increased by 25.6%, and revenue in Canada increased
11.3% where volume growth offset regulatory impacts on rates and product
mix.

Provision for losses increased $19.3 million, or 31.3%, to $81.0 million
for the three months ended March 31, 2018 from $61.7 million for the
three months ended March 31, 2017. This is explained more fully in the
segment analysis that follows.

Cost of Providing Services

The total cost of providing services increased $3.5 million, or 5.2%, to
$71.5 million in the three months ended March 31, 2018, compared to
$67.9 million in the three months ended March 31, 2017 primarily because
of higher customer acquisition spend.

Operating Expenses

Corporate, district and other expense increased $7.5 million, or 22.6%
primarily due to $4.1 million additional compensation expense from
increased marketing, collections and technology headcount and $1.7
million of additional share-based compensation expense.

Provision for Income Taxes

The effective tax rate for the three months ended March 31, 2018 was
33.0% compared to 36.2% for the three months ended March 31, 2017. As a
result of the Tax Cuts and Jobs Act of 2017 ("2017 Tax Act"), the
corporate income tax rate for the U.S. decreased from 35% to 21%,
effective in 2018. The provision for income tax as of March 31, 2018
includes an additional accrual of $1.2 million for adjustments to
estimates of the tax on prior years' foreign repatriation and an
estimated GILTI ("Global Intangible Low-Taxed Income") tax of $0.6
million. The $1.2 million additional provision on prior years' foreign
repatriation was the result of additional interpretative guidance from
the IRS issued during the first quarter of 2018 while the GILTI
provision is a new, continuous requirement under the 2017 Tax Act. These
items increased the effective tax rate by 5.2%. Excluding the impact of
these items, the effective rate for the three months ended March 31,
2018 was 27.8%.

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 March 31,
            Change
(dollars in thousands)     2018     2017     $     %
Revenue $ 204,593 $ 174,322 $ 30,271     17.4 %
Provision for losses 64,333       49,194       15,139   30.8 %
Net revenue 140,260 125,128 15,132 12.1 %
Advertising costs 5,159 4,694 465 9.9 %
Non-advertising costs of providing services 43,757       43,301       456   1.1 %
Total cost of providing services 48,916       47,995       921   1.9 %
Gross margin 91,344 77,133 14,211 18.4 %
Corporate, district and other 30,532 25,049 5,483 21.9 %
Interest expense 22,297 23,345 (1,048 ) (4.5 )%
Loss on extinguishment of debt 11,683       12,458       (775 ) (6.2 )%
Total operating expense 64,512       60,852       3,660   6.0 %
Segment operating income 26,832 16,281 10,551 64.8 %
Interest expense 22,297 23,345 (1,048 ) (4.5 )%
Depreciation and amortization 3,407       3,360       47   1.4 %
EBITDA 52,536 42,986 9,550 22.2 %
Loss on extinguishment of debt 11,683 12,458 (775 )
Other adjustments (59 ) 6 (65 )
Transaction related costs 2,254 (2,254 )
Share-based cash and non-cash compensation 1,842       126       1,716  
Adjusted EBITDA     $ 66,002       $ 57,830       $ 8,172       14.1 %
 

U.S. Segment Results - For the three months
ended March 31, 2018 and 2017

First quarter U.S. revenues grew by $30.3 million or 17.4% to $204.6
million.

U.S. revenue growth was driven by a $51.3 million, or 18.8%, increase in
gross combined loans receivable to $323.8 million at March 31, 2018
compared to $272.5 million in the prior year period. We experienced
volume growth primarily from Unsecured Installment receivables, which
increased year-over-year $30.3 million, or 21.2%. Secured Installment
receivables increased from the prior year period by $11.3 million or
15.9%, and Open-End receivables increased $8.9 million, or 34.8%
compared to the prior year period. Open-end growth was driven by
year-over-year expansion in Kansas and Tennessee of 12.2% and 8.6%,
respectively, and the 2017 launch of Open-End in Virginia.

The increase of $15.1 million, or 30.8%, in provision for losses was
primarily driven by the increase in combined loans receivable as
previously discussed.

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 March 31, 2018 were $48.9 million, a slight increase of
$0.9 million, or 1.9% compared to $48.0 million for the three months
ended March 31, 2017.

The $5.5 million increase of corporate, district and other operating
expenses includes $3.0 million of additional compensation expense,
primarily due to increased marketing, collections and technology
headcount and $1.7 million of additional share-based compensation
expense.

 
Canada Segment Results     Three Months Ended March 31,
(dollars in thousands)     2018     2017     Change $     Change %
Revenue     $ 46,250     $ 41,566     $ 4,684     11.3 %
Provision for losses 12,550       10,228       2,322   22.7 %
Net revenue 33,700 31,338 2,362 7.5 %
Advertising costs 2,726 1,781 945 53.1 %
Non-advertising costs of providing services 16,472       15,257       1,215   8.0 %
Total cost of providing services 19,198       17,038       2,160   12.7 %
Gross margin 14,502 14,300 202 1.4 %
Corporate, district and other 4,897 3,375 1,522 45.1 %
Interest expense 57       29       28   96.6 %
Total operating expense 4,954       3,404       1,550   45.5 %

Segment operating income

9,548 10,896 (1,348 ) (12.4 )%
Interest expense 57 29 28 96.6 %
Depreciation and amortization 1,128       1,119       9   0.8 %
EBITDA 10,733 12,044 (1,311 ) (10.9 )%
Other adjustments 16       (314 )     330  
Adjusted EBITDA     $ 10,749       $ 11,730       $ (981 )     (8.4 )%
 

Canada Segment Results - For the three months
ended March 31, 2018 and 2017

Revenue in Canada was impacted by the product transition in Alberta from
Single-Pay loans to Unsecured Installment and Open-End loans and the
impact of regulatory rate changes in Ontario and British Columbia.
Canada revenue improved $4.7 million, or 11.3% to $46.3 million for the
three months ended March 31, 2018 from $41.6 million in the prior year
period. On a constant currency basis, revenue was up $2.6 million, or
6.3%.

Single-Pay revenue increased $0.1 million, or 0.3% to $34.3 million for
the three months ended March 31, 2018 due to 17.9% higher origination
volumes compared to the same period in the prior year. Single-Pay ending
receivables increased $5.7 million, or 13.1%, to $48.7 million from
$43.1 million in the prior year period.

Canadian non-Single-Pay revenue grew $4.6 million, or 61.9% compared to
the same quarter a year ago on $22.0 million, or 68.8% growth in related
loan balances.

The provision for losses increased $2.3 million or 22.7% to $12.6
million for the three months ended March 31, 2018 compared to $10.2
million in the prior year period, primarily due to relative loan volumes
and mix shift from Single-Pay loans to Unsecured Installment and
Open-End loans. On a constant currency basis, provision for losses
increased $1.8 million, or 17.2%.

The cost of providing services in Canada increased $2.2 million, or
12.7%, to $19.2 million for the three months ended March 31, 2018,
compared to $17.0 million in the prior year period. The increase was due
primarily to $0.9 million, or 53.1%, higher advertising costs compared
to the prior year period and an increase in occupancy expense from
higher store counts. We have opened six LendDirect stores since the
first quarter of 2017. On a constant currency basis, cost of providing
services increased $1.3 million, or 7.6%.

Operating expenses increased $1.6 million, or 45.5%, to $5.0 million in
the three months ended March 31, 2018, from $3.4 million in the prior
year period, due to increased collections and customer support payroll
expenses from seasonality, increased volumes, expansion of the
LendDirect business, and product shifts from Single-Pay loans to
Unsecured Installment and Open-End loans. On a constant currency basis,
operating expenses increased $1.3 million, or 39.2%.

 
U.K. Segment Results     Three Months Ended March 31,
(dollars in thousands)     2018     2017     Change $     Change %
Revenue     $ 10,915     $ 8,692     $ 2,223     25.6 %
Provision for losses 4,148       2,314       1,834   79.3 %
Net revenue 6,767 6,378 389 6.1 %
Advertising costs 1,871 1,213 658 54.2 %
Non-advertising costs of providing services 1,497       1,693       (196 ) (11.6 )%
Total cost of providing services 3,368       2,906       462   15.9 %
Gross margin 3,399 3,472 (73 ) (2.1 )%
Corporate, district and other 5,025 4,569 456 10.0 %
Interest income (5 )     (8 )     (3 ) (37.5 )%
Total operating expense 5,020       4,561       459   10.1 %

Segment operating loss

(1,621 ) (1,089 ) (532 ) 48.9 %
Interest income (5 ) (8 ) (3 ) (37.5 )%
Depreciation and amortization 126       175       (49 ) (28.0 )%
EBITDA (1,500 ) (922 ) (578 ) 62.7 %
Other adjustments (36 )     (6 )     (30 )
Adjusted EBITDA     $ (1,536 )     $ (928 )     $ (608 )     65.5 %
 

U.K. Segment Results - For the three months
ended March 31, 2018 and 2017

U.K. revenue improved $2.2 million, or 25.6% to $10.9 million for the
three months ended March 31, 2018 from $8.7 million in the prior year
period. On a constant currency basis, revenue was up $1.0 million, or
11.8%. Provision for losses increased $1.8 million, and increased $1.4
million, or 59.6% on a constant currency basis, due to growth volume.

The cost of providing services in the U.K. increased $0.5 million, or
15.9%, for the three months ended March 31, 2018 as compared to prior
year period due to additional customer acquisition spend. On a constant
currency basis the cost of providing services increased $0.1 million, or
3.2%.

Corporate, district and other expenses increased $0.5 million, or 10.1%,
to $5.0 million for the three months ended March 31, 2018 as compared to
the prior year period. On a constant currency basis, corporate, district
and other expenses increased $0.1 million, or 2.0%, and is consistent
with quarterly run rates for the full year 2017 and represent normal
baseline costs for the U.K.

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 
    March 31, 2018     December 31, 2017
      (Unaudited)      
ASSETS
Cash $ 130,739 $ 162,374
Restricted cash (includes restricted cash of consolidated VIEs of
$12,268 and $6,871 as of March 31, 2018 and December 31, 2017,
respectively)
17,656 12,117
Gross loans receivable (includes loans of consolidated VIEs of
$186,492 and $213,846 as of March 31, 2018 and December 31, 2017,
respectively)
389,838 432,837
Less: allowance for loan losses (includes allowance for losses of
consolidated VIEs of $36,619 and $46,140 as of March 31, 2018 and
December 31, 2017, respectively)
(60,886 ) (69,568 )
Loans receivable, net 328,952 363,269
Deferred income taxes 1,817 772
Income taxes receivable 3,455
Prepaid expenses and other 32,753 42,512
Property and equipment, net 83,522 87,086
Goodwill 145,764 145,607
Other intangibles, net of accumulated amortization of $42,540 and
$41,156 as of March 31, 2018 and December 31, 2017, respectively
31,961 32,769
Other 12,217   9,770  
Total Assets $ 785,381   $ 859,731  
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 52,860 $ 55,792
Deferred revenue 10,152 11,984
Income taxes payable 8,734 4,120
Accrued interest (includes accrued interest of consolidated VIEs of
$1,263 and $1,266 as of March 31, 2018 and December 31, 2017,
respectively)
6,384 25,467
Credit services organization guarantee liability 10,412 17,795
Deferred rent 11,732 11,577
Long-term debt (includes long-term debt and issuance costs of
consolidated VIEs of $115,071 and $3,920 as of March 31, 2018 and
$124,590 and $4,188 as of December 31, 2017, respectively)
622,644 706,225
Subordinated shareholder debt 2,322 2,381
Other long-term liabilities 6,199 5,768
Deferred tax liabilities 11,393   11,486  
Total Liabilities $ 742,832   $ 852,595  
Stockholders' Equity
Preferred stock - $0.001 par value; 25,000,000 shares authorized,
respectively, and no shares were issued at either period end
$ $
Common stock - $0.001 par value; 225,000,000 shares authorized, and
issued and outstanding of 45,561,419 and 44,561,419 shares as of
March 31, 2018 and December 31, 2017, respectively
9 8
Paid-in capital 61,056 46,079
Retained earnings 27,279 3,988
Accumulated other comprehensive loss (45,795 ) (42,939 )
Total Stockholders' Equity $ 42,549   $ 7,136  
Total Liabilities and Stockholders' Equity     $ 785,381       $ 859,731  
 

Balance Sheet Changes - March 31, 2018 compared to December 31,
2017

Cash - Cash decreased from December 31,
2017 primarily because of cash used in the redemption of the 12.00%
Senior Secured Notes held by CURO Financial Technologies Corp. ("CFTC"),
a wholly-owned subsidiary of the Company. CFTC redeemed $77.5 million of
the 12.00% Senior Secured Notes at a price equal to 112.00% of the
principal amount plus accrued and unpaid interest to the date of
redemption. Following the redemption, $527.5 million of the original
outstanding principal amount of the Notes remain outstanding. The
redemption was conducted pursuant to the indenture governing the Notes,
dated as of February 15, 2017, by and among CFTC, the guarantors party
thereto and TMI Trust Company, as trustee and collateral agent. The
decrease in cash was offset by the 1.0 million of shares exercised by
the underwriters on January 5, 2018 in connection with our initial
public offering in December 2017. The exercise of this option provided
additional cash proceeds of $13.1 million.

Gross Loans Receivable and Allowance for Loan
Losses
- As previously explained in the Loan Volume and Portfolio
Performance Analysis section, changes in Gross Loans Receivable and
related Allowance for Loan Losses were due to seasonality resulting from
higher customer demand and loan origination volumes during the fourth
quarter of 2017 that were concentrated on Installment loans.

Other Assets - Other assets increased
because of a $1.5 million increase in the cash surrender value of life
insurance used to fund our non-qualified deferred compensation plan and
an additional $1.0 million investment we made in Cognical Holdings, Inc.
in March 2018 that increased the Company's equity ownership from 9.4% to
10.4%. Cognical Holdings, Inc. operates as a business under an online
website, www.zibby.com,
that facilitates the purchase of household items by underbanked
consumers.

Long-term debt (including current maturities) and
Accrued Interest
- Changes from year-end 2017 are due to the
redemption of the 12.00% Senior Secured Notes as previously discussed.
For more information about the Company's long term debt, see Note 11,
"Long-Term Debt" of the Notes to Consolidated Financial Statements
included in Company's Form 10-K filed with the SEC on March 13, 2018.

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 8:15 a.m.
Eastern Time on Friday, April 27, 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 May 4, 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 10119194.

Final Results

The financial results discussed herein are presented on a preliminary
basis; final data will be included in the Company's Quarterly Report on
Form 10-Q for the period ended March 31, 2018.

Forward-Looking Statements

This press release contains forward-looking statements. These
forward-looking statements include statements related to our fiscal 2018
outlook. In addition, words such as "as "guidance," "estimate,"
"anticipate," "believe," "forecast," "step," "plan," "predict,"
"focused," "project," "is likely," "expect," "intend," "should," "will,"
"confident," variations of such words and similar expressions are
intended to identify forward-looking statements. Our ability to achieve
these forward-looking statements is based on certain assumptions and
judgments, including our ability to execute on our business strategy and
our ability to accurately predict our future financial results. These
assumptions and judgments may prove to be inaccurate in the future.
These forward-looking statements are not guarantees of future
performance and involve known and unknown risks and uncertainties that
are difficult to predict with regard to timing, extent, likelihood and
degree of occurrence. There are important factors both within and
outside of our control that could cause the Company's actual results to
differ materially from those in the forward-looking statements. These
factors include our level of indebtedness; 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 ability to protect our
proprietary technology and analytics and keep up with that of our
competitors; disruption of our information technology systems that
adversely affect our business operations; ineffective pricing of the
credit risk of our prospective or existing customers; inaccurate
information supplied by customers or third parties would could lead to
errors in judging customers' qualifications to receive loans; improper
disclosure of customer personal data; failure or third parties who
provide products, services or support to us; any failure of
third-party-lenders upon whom we rely to conduct business in certain
states; disruption to our relationships with banks and other third-part
electronic payment solutions providers; disruption caused by employee or
third-party theft and errors in our stores as well as other factors
discussed in our filings with the Securities and Exchange Commission.
Given these risks and uncertainties, investors should not place undue
reliance on forward-looking statements as a prediction of actual future
results. We undertake no obligation to update, amend or clarify any
forward-looking statement for any reason.

Non-GAAP Financial Measures

In addition to the financial information prepared in conformity with
U.S. GAAP, we provide certain "non-GAAP financial measures," including:

  • Adjusted Net Income (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, Adjusted Earnings per Share, EBITDA and
Adjusted EBITDA, to assess operating performance and that such measures
may highlight trends in the business that may not otherwise be apparent
when relying on financial measures calculated in accordance with 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, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA are
frequently used by securities analysts, investors and other interested
parties in the evaluation of public companies in the Company's industry,
many of which present Adjusted Net Income, Adjusted Earnings per Share,
EBITDA and/or Adjusted EBITDA when reporting their results.

In addition to reporting loans receivable information in accordance with
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, Adjusted Earnings per Share, EBITDA, Adjusted
EBITDA and Gross Combined Loans Receivable should not be considered as
alternatives to income from continuing operations, segment operating
income, or any other performance measure derived in accordance with U.S.
GAAP, or as an alternative to cash flows from operating activities or
any other liquidity measure derived in accordance with U.S. GAAP.
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, Adjusted Earnings per Share, EBITDA and Adjusted
EBITDA Measures have limitations as analytical tools, and you should not
consider these measures in isolation or as a substitute for analysis of
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, Adjusted 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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