Company Announcements

CURO Group Holdings Corp. Announces Third Quarter 2022 Financial Results

Gross Loans Receivables Increased 115% year-over-year to $1.9 billion
Completed Divestiture of Legacy U.S. Business and Acquisition of First Heritage Credit
Completed $650 million of Non-recourse Warehouse Funding for U.S. Direct Lending
Upsized and Extended Flexiti Warehouse Funding

WICHITA, Kan.--(BUSINESS WIRE)--Nov. 2, 2022-- CURO Group Holdings Corp. (NYSE: CURO) (“CURO” or the “Company”), a tech-enabled, omni-channel consumer finance company serving a full spectrum of non-prime and prime consumers in the U.S. and Canada, today announced financial results for its third quarter ended September 30, 2022.

"With our strategic transformations completed, we are very pleased to end the third quarter with close to $1.9 billion of gross loans receivable across our three lines of business. These loans, which are more than double the same period last year, are longer duration, better credit quality and more resilient than our legacy portfolios," said Don Gayhardt, CURO's Chief Executive Officer. "Excluding the loans associated with our purchase of First Heritage and the sale of our legacy business, we grew our gross loans receivables by 10% sequentially in constant currency."

"Macroeconomic headwinds have continued to pressure our results on three fonts — benchmark interest rate increases, Canadian to U.S. dollar weakening and credit trends normalizing to pre-pandemic levels. We have begun taking actions — primarily to reduce ongoing operating expenses — that we expect will yield meaningful results beginning in the fourth quarter of 2022 and throughout 2023 to counterbalance these macroeconomic factors."

Summarized Financial Information

(in thousands, unaudited)

 

 

 

 

 

Revenue

Q3 2022

Q3 2021

 

 

Change $

Change %

Legacy U.S. Direct Lending (Divested) (1)

$

10,581

 

$

126,990

 

 

 

$

(116,409

)

(92

)%

US Direct Lending

 

96,849

 

 

4,684

 

 

 

 

92,165

 

1968

%

Canada Direct Lending

 

78,979

 

 

66,190

 

 

 

 

12,789

 

19

%

Canada POS

 

27,711

 

 

11,416

 

 

 

 

16,295

 

143

%

Total Revenue

$

214,120

 

$

209,280

 

 

 

$

4,840

 

2

%

 

 

 

 

 

 

 

Loans Receivable

Q3 2022

Q2 2022

Q3 2021

 

Change $

Change %

Legacy U.S. Direct Lending (Divested) (1)

$

 

$

201,364

 

$

217,053

 

 

$

(201,364

)

(100

)%

US Direct Lending

 

739,100

 

 

527,998

 

 

11,539

 

 

 

211,102

 

40

%

Canada Direct Lending

 

465,057

 

 

467,555

 

 

390,824

 

 

 

(2,498

)

(1

)%

Canada POS

 

690,270

 

 

627,163

 

 

302,349

 

 

 

63,107

 

10

%

Total Loans Receivable

$

1,894,427

 

$

1,824,080

 

$

921,765

 

 

$

70,347

 

4

%

 

 

 

 

 

 

 

NCO Rates

Q3 2022

Q2 2022

Q3 2021

 

 

 

Legacy U.S. Direct Lending (Divested) (1)

 

3.5

%

 

23.8

%

 

19.8

%

 

 

 

US Direct Lending

 

3.9

%

 

5.0

%

 

**

 

 

 

 

Canada Direct Lending

 

5.9

%

 

5.0

%

 

3.3

%

 

 

 

Canada POS

 

0.9

%

 

0.6

%

 

0.7

%

 

 

 

Consolidated NCO Rates

 

3.3

%

 

6.0

%

 

7.3

%

 

 

 

 

 

 

 

 

 

 

(1) Loans receivable and NCO rates for Legacy U.S. Direct Lending (Divested) represents gross combined loans receivable for the Legacy U.S. Direct Lending business. Gross combined loans receivable is a non-GAAP metric which represents gross loans receivable plus loans originated by third-party lenders which are Guaranteed by the Company. Legacy U.S. Direct Lending (Divested) revenue represents revenue related to gross combined loans receivable.

** Not meaningful

Consolidated Summary Results

We reported Net income of $25.7 million ($0.63 earnings per share) and Adjusted net loss of $11.9 million ($0.29 adjusted loss per share) on total revenue of $214.1 million for the three months ended September 30, 2022, compared with Net loss of $42.0 million ($1.02 per share) and Adjusted net income of $6.4 million ($0.15 adjusted diluted earnings per share) on total revenue of $209.3 million for the three months ended September 30, 2021.

On July 8, 2022, the Company completed the sale of our Legacy U.S. Direct Lending business to Community Choice Financial for $345.0 million, resulting in a gain on sale of business of $68.4 million recorded in the third quarter of 2022. On July 13, 2022, we completed the acquisition of First Heritage Credit, LLC (“First Heritage”), a consumer lender that provides near-prime installment loans along with customary opt-in insurance and other financial products, for $140.0 million in cash. On December 27, 2021, we closed the acquisition of Heights Finance, a consumer finance company that provides Installment loans and offers customary opt-in insurance and other financial products or a total purchase price of $360.0 million ($335.0 million in cash plus $25.0 million in stock). The completion of these transactions completed our strategic transition into longer term, higher balance and lower rate credit products.

The improvement in Net income in the third quarter of 2022 compared to the same period in 2021 was primarily driven by (i) the $68.4 million Gain on sale of business recorded in the third quarter resulting from the completion of the divestiture of our Legacy U.S. Direct Lending business in July 2022, (ii) a $11.4 million adjustment to the fair value of contingent consideration recorded in connection with our acquisition of Flexiti, and (iii) in the third quarter of 2021, a $40.2 million loss on the extinguishment and refinancing of our former senior notes ("8.25% Senior Secured Notes"), partially offset by a year-over-year $24.3 million increase in interest expense in the third quarter of 2022. The increase in interest expense in the third quarter of 2022 compared to the same period in 2021 was driven by (i) an increase in benchmark rates on variable rate debt, (ii) Senior Notes issued to fund in part our Heights Finance acquisition, and (iii) increased non-recourse asset-backed lending (ABL) borrowing to support organic loan growth and acquired portfolios.

Below are additional highlights of our performance this year:

  • Revenue and Net Revenue
    • Revenue increased $4.8 million, or 2.3%, year over year, primarily driven by revenue growth in Canada POS Lending and Canada Direct Lending of 142.7% and 19.3%, respectively, and revenue related to the Heights Finance and First Heritage acquisitions. U.S. revenue declined 18.4% primarily as a result of the July 2022 divestiture of our Legacy U.S. Direct Lending business. The strategic mix shift from the divested Legacy U.S. Direct Lending business' high-cost, short-term lending to the longer-duration, lower risk consumer finance acquisitions, also affected the relationship between loan growth and revenue growth.
    • Sequentially, revenue decreased $90.3 million, or 29.7%, driven by the July 2022 divestiture of our Legacy U.S. Direct Lending business.
    • For the three months ended September 30, 2022, net revenue decreased $2.8 million, or 2.1%, year over year, and $39.1 million, or 22.4%, sequentially primarily driven by lower revenue attributable to our strategic change in product mix and the additional provision for loan losses driven by loan growth.

  • Loans Receivable
    • Year-over-year growth in Gross loans receivable of $1,012.1 million, or 114.7%, was primarily driven by an increase of $549.9 million due to the acquisitions of Heights Finance and First Heritage offset by the sale of the Legacy U.S. Direct Lending business, as well as increases of $387.9 million for Canada POS Lending and $74.2 million for Canada Direct Lending.
    • Sequential loan growth in Gross loans receivable of $113.6 million, or 6.4% was primarily due to growth in Canada POS Lending of $63.1 million, or 10.1%, and growth in U.S. Lending of $53.0 million, or 7.7%, primarily due to the acquisition of First Heritage offset by the sale of the Legacy U.S. Direct Lending business.

  • NCOs and Delinquency Metrics
    • Consolidated quarterly NCO rates improved by 396 bps, and consolidated 31+ past due rates decreased 332 bps year over year, respectively, primarily attributable to mix shift from (i) the relative growth of Canada POS Lending, (ii) the acquisition of Heights Finance and First Heritage, and (iii) the sale of the Legacy U.S. Direct Lending business, all of which shifts our loan portfolio mix to lower loss-rate products.
    • Sequentially, consolidated quarterly NCO rates improved by 266 bps, and consolidated 31+ past-due rates decreased by 592 bps, respectively, largely driven by loan growth in (i) U.S. Direct Lending and Canada POS Lending, which have lower NCO rates, in addition to the sale of Legacy U.S. Direct Lending business, which was a higher expected loss-rate product.

  • Other Highlights
    • on July 13, 2022, concurrently with the closing of the First Heritage acquisition, we entered into a new $225.0 million non-recourse revolving warehouse facility to replace First Heritage's incumbent lender's facility and to finance future loans originated by First Heritage.
    • On July 15, 2022, we entered into a new $425.0 million non-recourse revolving warehouse facility to replace the incumbent lender's facility and finance future loans originated by Heights Finance.
    • On September 29, 2022, we amended the existing Flexiti credit facility to increase the borrowing capacity from C$500 million to C$535 million and extended its maturity to September 29, 2025.

Results of Consolidated Operations

Beginning January 1, 2022, we began reporting "Interest and fees revenue," "Insurance premiums and commissions" and "Other revenue" in place of our previously reported "Revenue" on our Statements of Operations. Prior period presentations have been revised to conform to the current period presentation.

Table 1 - Consolidated Statements of Operations 

(in thousands, unaudited)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2022

 

 

2021

 

Change $

Change %

 

 

2022

 

 

2021

 

Change $

Change %

Revenue

 

 

 

 

 

 

 

 

 

 

Interest and fees revenue

 

$

180,515

 

$

190,629

 

$

(10,114

)

(5.3

) %

 

 

723,802

 

 

539,155

 

 

184,647

 

34.2

%

Insurance premiums and commissions

 

 

24,746

 

 

12,599

 

 

12,147

 

96.4

%

 

 

61,659

 

 

36,021

 

 

25,638

 

71.2

%

Other revenue

 

 

8,859

 

 

6,052

 

 

2,807

 

46.4

%

 

 

23,259

 

 

18,348

 

 

4,911

 

26.8

%

Total revenue

 

 

214,120

 

 

209,280

 

 

4,840

 

2.3

%

 

 

808,720

 

 

593,524

 

 

215,196

 

36.3

%

Provision for losses

 

 

78,399

 

 

70,718

 

 

7,681

 

10.9

%

 

 

305,476

 

 

152,028

 

 

153,448

 

#

 

Net revenue

 

 

135,721

 

 

138,562

 

 

(2,841

)

(2.1

) %

 

 

503,244

 

 

441,496

 

 

61,748

 

14.0

%

Operating Expenses

 

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

53,413

 

 

62,110

 

 

(8,697

)

(14.0

) %

 

 

215,569

 

 

175,347

 

 

40,222

 

22.9

%

Occupancy

 

 

12,827

 

 

13,732

 

 

(905

)

(6.6

) %

 

 

47,371

 

 

41,862

 

 

5,509

 

13.2

%

Advertising

 

 

5,244

 

 

9,697

 

 

(4,453

)

(45.9

) %

 

 

28,451

 

 

24,824

 

 

3,627

 

14.6

%

Direct operations

 

 

11,729

 

 

14,883

 

 

(3,154

)

(21.2

) %

 

 

52,296

 

 

40,552

 

 

11,744

 

29.0

%

Depreciation and amortization

 

 

9,499

 

 

7,285

 

 

2,214

 

30.4

%

 

 

27,985

 

 

19,685

 

 

8,300

 

42.2

%

Other operating expense

 

 

23,646

 

 

14,851

 

 

8,795

 

59.2

%

 

 

58,809

 

 

45,020

 

 

13,789

 

30.6

%

Total operating expenses

 

 

116,358

 

 

122,558

 

 

(6,200

)

(5.1

) %

 

 

430,481

 

 

347,290

 

 

83,191

 

24.0

%

Other expense (income)

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

50,149

 

 

25,805

 

 

24,344

 

94.3

%

 

 

130,683

 

 

68,784

 

 

61,899

 

90.0

%

Loss (income) from equity method investment

 

 

2,309

 

 

1,582

 

 

727

 

46.0

%

 

 

2,053

 

 

(676

)

 

2,729

 

#

 

Gain from equity method investment

 

 

 

 

 

 

 

#

 

 

 

 

 

(135,387

)

 

135,387

 

#

 

Loss on extinguishment of debt

 

 

3,702

 

 

40,206

 

 

(36,504

)

(90.8

) %

 

 

3,702

 

 

40,206

 

 

(36,504

)

(90.8

) %

(Gain) loss on change in fair value of contingent consideration

 

 

(11,355

)

 

3,825

 

 

(15,180

)

#

 

 

 

(7,605

)

 

3,825

 

 

(11,430

)

#

 

Gain on sale of business

 

 

(68,443

)

 

 

 

(68,443

)

#

 

 

 

(68,443

)

 

 

 

(68,443

)

#

 

Total other (income) expense

 

 

(23,638

)

 

71,418

 

 

(95,056

)

#

 

 

 

60,390

 

 

(23,248

)

 

83,638

 

#

 

Income (loss) before income taxes

 

 

43,001

 

 

(55,414

)

 

98,415

 

#

 

 

 

12,373

 

 

117,454

 

 

(105,081

)

(89.5

) %

Provision (benefit) for income taxes

 

 

17,348

 

 

(13,375

)

 

30,723

 

#

 

 

 

11,464

 

 

29,241

 

 

(17,777

)

(60.8

) %

Net income (loss)

 

$

25,653

 

$

(42,039

)

$

67,692

 

#

 

 

$

909

 

$

88,213

 

$

(87,304

)

(99.0

) %

# - Variance greater than 100% or not meaningful

Table 2 - Consolidated Balance Sheets

(in thousands) 

 

September 30, 2022
(unaudited)

 

December 31, 2021

ASSETS

Cash and cash equivalents

$

45,683

 

 

$

63,179

 

Restricted cash

 

144,020

 

 

 

98,896

 

Gross loans receivable

 

1,894,427

 

 

 

1,548,318

 

Less: Allowance for loan losses

 

(102,743

)

 

 

(87,560

)

Loans receivable, net

 

1,791,684

 

 

 

1,460,758

 

Income taxes receivable

 

13,469

 

 

 

31,774

 

Prepaid expenses and other

 

65,167

 

 

 

42,038

 

Property and equipment, net

 

37,402

 

 

 

54,635

 

Investment in Katapult

 

25,848

 

 

 

27,900

 

Right of use asset - operating leases

 

64,683

 

 

 

116,300

 

Deferred tax assets

 

31,986

 

 

 

15,639

 

Goodwill

 

424,292

 

 

 

429,792

 

Intangibles, net

 

120,345

 

 

 

109,930

 

Other assets

 

12,774

 

 

 

9,755

 

Total Assets

$

2,777,353

 

 

$

2,460,596

 

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

 

 

 

Accounts payable and accrued liabilities

$

66,723

 

 

$

121,434

 

Deferred revenue

 

25,111

 

 

 

21,649

 

Lease liability - operating leases

 

66,370

 

 

 

122,431

 

Contingent consideration related to acquisition

 

15,770

 

 

 

26,508

 

Income taxes payable

 

 

 

 

680

 

Accrued interest

 

18,048

 

 

 

34,974

 

Liability for losses on CSO lender-owned consumer loans

 

 

 

 

6,908

 

Debt

 

2,449,316

 

 

 

1,945,793

 

Other long-term liabilities

 

11,563

 

 

 

13,845

 

Deferred tax liabilities

 

 

 

 

6,044

 

Total Liabilities

$

2,652,901

 

 

$

2,300,266

 

Total Stockholders' Equity

 

124,452

 

 

 

160,330

 

Total Liabilities and Stockholders' Equity

$

2,777,353

 

 

$

2,460,596

 

Table 3 - Consolidated Revenue by Product and Segment 

 

The following table summarizes revenue by product related to our business lines. 

 

 

Three Months Ended

 

 

September 30, 2022

 

September 30, 2021

(in thousands, unaudited)

 

U.S.

Canada Direct Lending

Canada POS Lending

Total

% of Total

 

U.S.

Canada Direct Lending

Canada POS Lending

Total

% of Total

Revolving LOC

 

$

2,210

$

50,251

$

24,575

$

77,036

36.0

%

 

$

27,377

$

40,239

$

10,646

$

78,262

37.4

%

Installment

 

 

90,834

 

12,645

 

 

103,479

48.3

%

 

 

101,036

 

11,331

 

 

112,367

53.7

%

Total interest and fees

 

 

93,044

 

62,896

 

24,575

 

180,515

84.3

%

 

 

128,413

 

51,570

 

10,646

 

190,629

91.1

%

Insurance premiums and commissions

 

 

9,986

 

14,045

 

715

 

24,746

11.6

%

 

 

 

12,506

 

93

 

12,599

6.0

%

Other revenue

 

 

4,400

 

2,038

 

2,421

 

8,859

4.1

%

 

 

3,261

 

2,114

 

677

 

6,052

2.9

%

Total revenue

 

$

107,430

$

78,979

$

27,711

$

214,120

100.0

%

 

$

131,674

$

66,190

$

11,416

$

209,280

100.0

%

 

 

Nine Months Ended

 

 

September 30, 2022

 

September 30, 2021

(in thousands, unaudited)

 

U.S.

Canada Direct Lending

Canada POS Lending

Total

% of Total

 

U.S.

Canada Direct Lending

Canada POS Lending

Total

% of Total

Revolving LOC

 

$

57,269

$

143,296

$

64,077

$

264,642

32.7

%

 

$

78,391

$

112,057

$

18,585

$

209,033

35.2

%

Installment

 

 

423,537

 

35,623

 

 

459,160

56.8

%

 

 

297,803

 

32,319

 

 

330,122

55.6

%

Total interest and fees

 

 

480,806

 

178,919

 

64,077

 

723,802

89.5

%

 

 

376,194

 

144,376

 

18,585

 

539,155

90.8

%

Insurance premiums and commissions

 

 

19,310

 

40,988

 

1,361

 

61,659

7.6

%

 

 

 

35,753

 

268

 

36,021

6.1

%

Other revenue

 

 

11,424

 

6,100

 

5,735

 

23,259

2.9

%

 

 

10,766

 

6,381

 

1,201

 

18,348

3.1

%

Total revenue

 

$

511,540

$

226,007

$

71,173

$

808,720

100.0

%

 

$

386,960

$

186,510

$

20,054

$

593,524

100.0

%

Table 4 - Consolidated Loans Receivable 

 

The following table presents our gross loans receivables. With the sale of the Legacy U.S. Direct Lending business, we no longer guarantee loans originated by third-party lenders through CSO programs. 

 

 

 

 

As of

(in thousands, unaudited)

 

September 30,
2022

 

June 30,
2022

 

March 31,
2022

 

December 31,
2021

 

September 30,
2021

U.S.

 

 

 

 

 

 

 

 

 

 

Revolving LOC

 

$

 

$

58,471

 

$

49,077

 

$

52,532

 

$

51,196

Installment - Company Owned

 

 

739,100

 

 

627,651

 

 

589,652

 

 

609,413

 

 

137,987

Canada Direct Lending

 

 

 

 

 

 

 

 

 

 

Revolving LOC

 

 

439,117

 

 

442,738

 

 

424,485

 

 

402,405

 

 

366,509

Installment

 

 

25,940

 

 

24,817

 

 

23,578

 

 

24,792

 

 

24,315

Canada POS Lending

 

 

 

 

 

 

 

 

 

 

Revolving LOC

 

 

690,270

 

 

627,163

 

 

541,776

 

 

459,176

 

 

302,349

Company Owned gross loans receivable

 

$

1,894,427

 

$

1,780,840

 

$

1,628,568

 

$

1,548,318

 

$

882,356

Gross loans receivable Guaranteed by the Company

 

 

 

 

51,323

 

 

44,420

 

 

46,317

 

 

43,422

Gross combined loans receivable (1)

 

$

1,894,427

 

$

1,832,163

 

$

1,672,988

 

$

1,594,635

 

$

925,778

(1) See "Non-GAAP Financial Measures" at the end of this release for definition and more information.

Segment Analysis

The following tables provide a summary of segment operating (loss) income and portfolio performance for the segment and period indicated.

Table 5 - Summary of Segment Operating (Loss) Income

 

Three Months Ended September 30, 2022

 

Three Months Ended September 30, 2021

(dollars in thousands, unaudited)

U.S.

Canada Direct Lending

Canada POS Lending

 

U.S.

Canada Direct Lending

Canada POS Lending

Total revenue

$

107,430

 

$

78,979

 

$

27,711

 

 

$

131,674

 

$

66,190

 

$

11,416

 

Provision for losses

 

32,073

 

 

32,947

 

 

13,379

 

 

 

48,430

 

 

14,003

 

 

8,285

 

Net revenue

 

75,357

 

 

46,032

 

 

14,332

 

 

 

83,244

 

 

52,187

 

 

3,131

 

Total operating expenses

 

76,067

 

 

26,773

 

 

13,518

 

 

 

84,074

 

 

26,003

 

 

12,481

 

Non-recourse interest expense

 

11,226

 

 

7,237

 

 

11,700

 

 

 

2,598

 

 

2,529

 

 

3,880

 

Recourse interest expense

 

19,739

 

 

(47

)

 

294

 

 

 

16,883

 

 

(89

)

 

4

 

Segment operating (loss) income

$

(31,675

)

$

12,069

 

$

(11,180

)

 

$

(20,311

)

$

23,744

 

$

(13,234

)

 

Nine Months Ended September 30, 2022

 

Nine Months Ended September 30, 2021

(dollars in thousands, unaudited)

U.S.

Canada Direct Lending

Canada POS Lending

 

U.S.

Canada Direct Lending

Canada POS Lending

Total revenue

$

511,540

 

$

226,007

 

$

71,173

 

 

$

386,960

 

$

186,510

 

$

20,054

 

Provision for losses

 

196,461

 

 

80,960

 

 

28,055

 

 

 

108,108

 

 

31,793

 

 

12,127

 

Net revenue

 

315,079

 

 

145,047

 

 

43,118

 

 

 

278,852

 

 

154,717

 

 

7,927

 

Total operating expenses

 

302,641

 

 

82,126

 

 

45,714

 

 

 

245,623

 

 

76,090

 

 

25,577

 

Non-recourse interest expense

 

26,635

 

 

17,442

 

 

25,998

 

 

 

6,728

 

 

7,562

 

 

8,302

 

Recourse interest expense

 

59,838

 

 

(75

)

 

845

 

 

 

46,449

 

 

(269

)

 

12

 

Segment operating (loss) income

$

(74,035

)

$

45,554

 

$

(29,439

)

 

$

(19,948

)

$

71,334

 

$

(25,964

)

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

 

Three Months Ended September 30, 2022

 

Three Months Ended September 30, 2021

(dollars in thousands, unaudited)

U.S.

Canada Direct Lending

Canada POS Lending

 

U.S.

Canada Direct Lending

Canada POS Lending

Total revenue

$

107,430

 

$

78,979

 

$

27,711

 

 

$

131,674

 

$

66,190

 

$

11,416

 

Provision for losses

 

32,073

 

 

32,947

 

 

13,379

 

 

 

48,430

 

 

14,003

 

 

8,285

 

Net revenue

 

75,357

 

 

46,032

 

 

14,332

 

 

 

83,244

 

 

52,187

 

 

3,131

 

Adjusted operating expense (1)

 

66,796

 

 

26,621

 

 

13,528

 

 

 

74,109

 

 

25,909

 

 

8,206

 

Non-recourse interest expense

 

11,226

 

 

7,237

 

 

11,700

 

 

 

2,598

 

 

2,529

 

 

3,880

 

Recourse interest expense

 

19,739

 

 

(47

)

 

294

 

 

 

16,883

 

 

(89

)

 

4

 

Adjusted segment operating (loss) income (1)

$

(22,404

)

$

12,221

 

$

(11,190

)

 

$

(10,346

)

$

23,838

 

$

(8,959

)

(1) See "Non-GAAP Financial Measures" at the end of this release for definition and more information.

 

Nine Months Ended September 30, 2022

 

Nine Months Ended September 30, 2021

(dollars in thousands, unaudited)

U.S.

Canada Direct Lending

Canada POS Lending

 

U.S.

Canada Direct Lending

Canada POS Lending

Total revenue

$

511,540

 

$

226,007

 

$

71,173

 

 

$

386,960

$

186,510

 

$

20,054

 

Provision for losses

 

196,461

 

 

80,960

 

 

28,055

 

 

 

108,108

 

31,793

 

 

12,127

 

Net revenue

 

315,079

 

 

145,047

 

 

43,118

 

 

 

278,852

 

154,717

 

 

7,927

 

Adjusted operating expense (1)

 

280,629

 

 

81,707

 

 

43,959

 

 

 

217,809

 

75,848

 

 

15,824

 

Non-recourse interest expense

 

26,635

 

 

17,442

 

 

25,998

 

 

 

6,728

 

7,562

 

 

8,302

 

Recourse interest expense

 

59,838

 

 

(75

)

 

845

 

 

 

46,449

 

(269

)

 

12

 

Adjusted segment operating (loss) income (1)

$

(52,023

)

$

45,972

 

$

(27,684

)

 

$

7,866

$

71,576

 

$

(16,211

)

(1) See "Non-GAAP Financial Measures" at the end of this release for definition and more information.

Table 7 - U.S. Portfolio Performance 

(in thousands, except percentages)

 

Q3 2022

Q2 2022(6)

Q1 2022

 

Q4 2021(1)

Q3 2021

Gross combined loans receivable (2)

 

 

 

 

 

 

 

Revolving LOC

 

$

 

$

58,471

 

$

49,077

 

 

$

52,532

 

$

51,196

 

Installment loans - Company Owned

 

 

739,100

 

 

627,651

 

 

589,652

 

 

 

137,782

 

 

137,987

 

Total U.S. Company Owned gross loans receivable

 

 

739,100

 

 

686,122

 

 

638,729

 

 

 

190,314

 

 

189,183

 

Installment loans - Guaranteed by the Company (3)

 

 

 

 

51,323

 

 

44,420

 

 

 

46,317

 

 

43,422

 

Total U.S. gross combined loans receivable (2)

 

$

739,100

 

$

737,445

 

$

683,149

 

 

$

236,631

 

$

232,605

 

 

 

 

 

 

 

 

 

Lending Revenue:

 

 

 

 

 

 

 

Revolving LOC

 

$

2,210

 

$

28,145

 

$

26,913

 

 

$

27,911

 

$

27,377

 

Installment loans - Company Owned

 

 

86,936

 

 

121,595

 

 

113,833

 

 

 

56,820

 

 

57,659

 

Installment loans - Guaranteed by the Company (3)

 

 

3,898

 

 

48,283

 

 

48,991

 

 

 

47,348

 

 

43,377

 

Total U.S. lending revenue

 

$

93,044

 

$

198,023

 

$

189,737

 

 

$

132,079

 

$

128,413

 

 

 

 

 

 

 

 

 

Lending Provision:

 

 

 

 

 

 

 

Revolving LOC

 

$

 

$

11,831

 

$

9,577

 

 

$

11,592

 

$

8,140

 

Installment loans - Company Owned

 

 

29,045

 

 

54,868

 

 

32,962

 

 

 

18,618

 

 

16,792

 

Installment loans - Guaranteed by the Company (3)

 

 

 

 

28,313

 

 

21,749

 

 

 

25,967

 

 

23,146

 

Total U.S. lending provision

 

$

29,045

 

$

95,012

 

$

64,288

 

 

$

56,177

 

$

48,078

 

 

 

 

 

 

 

 

 

NCOs (7)

 

 

 

 

 

 

 

Revolving LOC

 

$

1,140

 

$

10,248

 

$

10,055

 

 

$

11,481

 

$

8,329

 

Installment loans - Company Owned

 

 

25,722

 

 

40,757

 

 

36,247

 

 

 

19,664

 

 

19,548

 

Installment loans - Guaranteed by the Company (3)

 

 

1,589

 

 

27,395

 

 

21,492

 

 

 

26,065

 

 

21,404

 

Total U.S. NCOs

 

$

28,452

 

$

78,400

 

$

67,794

 

 

$

57,210

 

$

49,281

 

 

 

 

 

 

 

 

 

NCO rate (4) (7)

 

 

 

 

 

 

 

Revolving LOC

 

 

3.9

%

 

19.1

%

 

19.8

%

 

 

22.1

%

 

16.9

%

Installment loans - Company Owned

 

 

3.8

%

 

6.7

%

 

6.0

%

 

 

14.3

%

 

14.1

%

Total U.S. Company Owned NCO rate

 

 

3.8

%

 

7.7

%

 

7.1

%

 

 

16.4

%

 

14.8

%

Installment loans - Guaranteed by the Company (3)

 

 

6.2

%

 

57.2

%

 

47.4

%

 

 

58.1

%

 

53.2

%

Total U.S. NCO rate

 

 

3.9

%

 

11.0

%

 

14.7

%

 

 

24.4

%

 

21.6

%

 

 

 

 

 

 

 

 

ALL and CSO Liability for Losses rate (5)

 

 

 

 

 

 

 

Revolving LOC

 

 

%

 

25.1

%

 

26.7

%

 

 

25.9

%

 

26.3

%

Installment loans - Company Owned

 

 

4.4

%

 

6.8

%

 

4.2

%

 

 

12.7

%

 

13.4

%

Total U.S. Company Owned ALL rate

 

 

4.4

%

 

8.4

%

 

5.9

%

 

 

16.3

%

 

16.9

%

Installment loans - Guaranteed by the Company (3)

 

 

%

 

15.7

%

 

16.1

%

 

 

14.9

%

 

16.1

%

Total ALL and CSO Liability for Losses rate

 

 

4.4

%

 

8.9

%

 

6.6

%

 

 

16.0

%

 

16.8

%

 

 

 

 

 

 

 

 

31+ days past-due rate (5)

 

 

 

 

 

 

 

Revolving LOC

 

 

%

 

17.4

%

 

19.1

%

 

 

19.2

%

 

18.3

%

Installment loans - Company Owned

 

 

10.5

%

 

10.0

%

 

9.6

%

 

 

9.4

%

 

11.9

%

Total U.S. Company Owned past-due rate(8)

 

 

10.5

%

 

10.7

%

 

10.4

%

 

 

10.1

%

 

13.6

%

 

 

 

 

 

 

 

 

Installment loans - Guaranteed by the Company (3)

 

 

%

 

2.6

%

 

4.5

%

 

 

3.1

%

 

3.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) On December 27, 2021, we acquired Heights Finance, which accounted for approximately $472 million of U.S. Installment loans as of December 31, 2021. As the period between December 27, 2021 and December 31, 2021 did not result in material loan performance, we have excluded Heights Finance from the table for the fourth quarter of 2021.

(2) Non-GAAP measure. For a description of each non-GAAP metric, see "Non-GAAP Financial Measures."

(3) Includes loans originated by third-party lenders through CSO programs. Installment gross loans receivable Guaranteed by the Company are not included in the Consolidated Financial Statements. All balances in connection with the CSO programs were disposed of on July 8, 2022 upon the completion of the divestiture of the Legacy U.S. Direct Lending business.

(4) We calculate NCO rate as total NCOs divided by Average gross loans receivable. The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications and the periodic sale of charged off loans.

(5) We calculate (i) Allowance for loan losses (ALL) and CSO Liability for losses rate and (ii) past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.

(6) Includes loan balances and activity classified as Held for Sale.

(7) For the first, second and third quarters of 2022, NCOs presented above include $5.0 million, $10.3 million and $0.5 million, respectively, of NCO's related to the purchase accounting fair value discount, which are excluded from provision.

(8) The total past-due rate for U.S. Lending including loans 1-30 days past-due were 20.0%, 21.2%, 17.7%, 18.3% and 22.3% for the three months ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021, respectively.

Table 8 - Canada Direct Lending Portfolio Performance

(in thousands, except percentages)

 

Q3 2022

Q2 2022

Q1 2022

 

Q4 2021

Q3 2021

Gross loans receivable

 

 

 

 

 

 

 

Revolving LOC

 

$

439,117

 

$

442,738

 

$

424,485

 

 

$

402,405

 

$

366,509

 

Installment loans

 

 

25,941

 

 

24,817

 

 

23,578

 

 

 

24,792

 

 

24,315

 

Total gross loans receivable

 

$

465,058

 

$

467,555

 

$

448,063

 

 

$

427,197

 

$

390,824

 

 

 

 

 

 

 

 

 

Lending Revenue:

 

 

 

 

 

 

 

Revolving LOC

 

 

50,251

 

$

47,591

 

$

45,455

 

 

$

43,943

 

$

40,239

 

Installment loans

 

 

12,645

 

 

11,868

 

 

11,109

 

 

 

11,416

 

 

11,331

 

Total lending revenue

 

$

62,896

 

$

59,459

 

$

56,564

 

 

$

55,359

 

$

51,570

 

 

 

 

 

 

 

 

 

Lending Provision:

 

 

 

 

 

 

 

Revolving LOC

 

$

28,408

 

$

22,641

 

$

19,156

 

 

$

20,080

 

$

11,375

 

Installment loans

 

 

4,466

 

 

3,303

 

 

2,723

 

 

 

2,945

 

 

2,512

 

Total lending provision

 

$

32,874

 

$

25,944

 

$

21,879

 

 

$

23,025

 

$

13,887

 

 

 

 

 

 

 

 

 

NCOs

 

 

 

 

 

 

 

Revolving LOC

 

$

23,652

 

$

20,160

 

$

21,590

 

 

$

15,112

 

$

9,887

 

Installment loans

 

 

4,061

 

 

2,904

 

 

2,647

 

 

 

2,758

 

 

2,444

 

Total NCOs

 

$

27,713

 

$

23,064

 

$

24,237

 

 

$

17,870

 

$

12,331

 

 

 

 

 

 

 

 

 

NCO rate (1)

 

 

 

 

 

 

 

Revolving LOC

 

 

5.4

%

 

4.6

%

 

5.2

%

 

 

3.9

%

 

2.8

%

Installment loans

 

 

16.0

%

 

12.0

%

 

10.9

%

 

 

11.2

%

 

10.2

%

Total NCO rate

 

 

5.9

%

 

5.0

%

 

5.5

%

 

 

4.4

%

 

3.3

%

 

 

 

 

 

 

 

 

ALL rate (2)

 

 

 

 

 

 

 

Revolving LOC

 

 

7.9

%

 

7.2

%

 

7.2

%

 

 

8.0

%

 

7.5

%

Installment loans

 

 

10.3

%

 

9.7

%

 

8.8

%

 

 

8.0

%

 

7.4

%

Total ALL rate

 

 

8.0

%

 

7.4

%

 

7.3

%

 

 

8.0

%

 

7.5

%

 

 

 

 

 

 

 

 

31+ days past-due rate (2)

 

 

 

 

 

 

 

Revolving LOC

 

 

5.1

%

 

4.2

%

 

4.3

%

 

 

3.2

%

 

2.5

%

Installment loans

 

 

1.0

%

 

0.8

%

 

1.0

%

 

 

0.9

%

 

0.7

%

Total past-due rate(3)

 

 

4.8

%

 

4.0

%

 

4.1

%

 

 

3.1

%

 

2.4

%

 

 

 

 

 

 

 

 

(1) We calculate NCO rate as total NCOs divided by Average gross loans receivable. The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications and the periodic sale of charged off loans.

(2) We calculate ALL rate and past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.

(3) The total past-due rate for Canada Direct Lending including loans 1-30 days past-due were 9.5%, 8.3%, 7.7%, 6.7% and 5.1% for the three months ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021, respectively.

Table 9 - Canada POS Lending Portfolio Performance 

(in thousands, except percentages)

 

Q3 2022

Q2 2022

Q1 2022

 

Q4 2021

Q3 2021

Revolving LOC

 

 

 

 

 

 

 

Total gross loans receivable

 

$

690,270

 

$

627,163

 

$

541,776

 

 

$

459,176

 

$

302,349

 

Total lending revenue

 

$

24,575

 

$

20,846

 

$

18,655

 

 

$

13,704

 

$

10,646

 

Total lending provision

 

$

13,379

 

$

5,963

 

$

8,714

 

 

$

12,511

 

$

8,285

 

Canada POS Lending NCOs (1)

 

$

6,114

 

$

3,537

 

$

2,727

 

 

$

1,731

 

$

1,827

 

NCO rate (1)(2)

 

 

0.9

%

 

0.6

%

 

0.5

%

 

 

0.5

%

 

0.7

%

ALL rate (3)

 

 

4.8

%

 

4.5

%

 

5.1

%

 

 

4.8

%

 

3.8

%

31+ days past-due rate (3)(4)

 

 

3.6

%

 

2.8

%

 

2.2

%

 

 

1.9

%

 

2.1

%

 

 

 

 

 

 

 

 

(1) For the third and fourth quarters of 2021, NCOs presented above include $0.6 million and $0.8 million, respectively, of NCO's related to the fair value discount, which are excluded from provision.

(2) We calculate NCO rate as total NCOs divided by Average gross loans receivable.

(3) We calculate ALL rate and past-due rate as the respective totals divided by gross loans receivable at each respective quarter end.

(4) The total past-due rate for Canada POS Lending including loans 1-30 days past-due were 5.8%, 5.3%, 4.2%, 4.1% and 4.8% for the three months ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021, respectively.

Non-GAAP Financial Measures

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

  • Adjusted Net Income ("ANI") and Adjusted Earnings Per Share, or the Adjusted Earnings Measures (net income plus or minus certain legal and other costs, income or loss from equity method investment, goodwill and intangible asset impairments, transaction-related costs, restructuring costs, loss on extinguishment of debt, adjustments related to acquisition accounting, share-based compensation, intangible asset amortization, gain on sale of business, changes in fair value of contingent consideration, certain tax adjustments and cumulative tax effect of applicable adjustments, on a total and per share basis);
  • EBITDA (earnings before interest, income taxes, depreciation and amortization);
  • Adjusted EBITDA (EBITDA plus or minus certain non-cash and other adjusting items); and
  • Gross Combined Loans Receivable (includes loans originated by third-party lenders through CSO programs which are not included in the Consolidated Financial Statements). As a result of the sale of the Legacy U.S. Direct Lending business, we no longer guarantee loans originated by third-party lenders through CSO programs.

We believe that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of the Company's operations. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of the business that, when viewed with the Company's U.S. GAAP results, provide a more complete understanding of factors and trends affecting the business.

We believe that investors regularly rely on non-GAAP financial measures to assess operating performance and that such measures may highlight trends in the business that may not otherwise be apparent when relying on financial measures calculated in accordance with U.S. GAAP. In addition, we believe that the adjustments shown above are useful to investors to allow them to compare our financial results during the periods shown without the effect of each of these income or expense items. In addition, we believe that these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of public companies in our industry, many of which present non-GAAP financial measures when reporting their results.

In addition to reporting loans receivable information in accordance with U.S. GAAP, we provide Gross Combined Loans Receivable consisting of owned loans receivable plus loans originated by third-party lenders through the CSO programs, which we guaranteed but do not include in the Consolidated Financial Statements. Management believes this analysis provides investors with important information needed to evaluate overall lending performance. As noted above, the Company no longer provides these guarantees to third-party lenders as a result of the sale of the Legacy U.S. Direct Lending business.

Non-GAAP financial measures should not be considered as alternatives to income, segment operating income, or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flows from operating activities or any other liquidity measure derived in accordance with U.S. GAAP. Readers should consider the information in addition to, but not instead of or superior to, the financial statements prepared in accordance with U.S. GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

Description and Reconciliations of Non-GAAP Financial Measures

Non-GAAP financial measures have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our income or cash flows as reported under U.S. GAAP. Some of these limitations are:

  • they do not include cash expenditures or future requirements for capital expenditures or contractual commitments;
  • they do not include changes in, or cash requirements for, working capital needs;
  • they do not include the interest expense, or the cash requirements necessary to service interest or principal payments on debt;
  • depreciation and amortization are non-cash expense items reported in the statements of cash flows; and
  • other companies in our industry may calculate these measures differently, limiting their usefulness as comparative measures.

We calculate Adjusted Earnings per Share utilizing diluted shares outstanding at quarter-end. If we record a loss under U.S. GAAP, shares outstanding utilized to calculate Diluted Loss per Share are equivalent to basic shares outstanding. Shares outstanding utilized to calculate Adjusted Earnings per Share reflect the number of diluted shares we would have reported if reporting net income under U.S. GAAP. If we record an Adjusted Loss per Share, shares outstanding utilized to calculate Diluted Loss per Share are equivalent to basic shares outstanding.

We believe investors use the non-GAAP measures we present to analyze operating performance and to evaluate our ability to incur and service debt and the capacity for making capital expenditures. Adjusted EBITDA is also useful to investors to help assess our estimated enterprise value.

Table 10 - Reconciliation of Net Income and Diluted Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings per Share, non-GAAP measures 

(in thousands, except per share data, unaudited)

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2022

 

 

2021

 

Change $

Change %

 

 

2022

 

 

2021

 

Change $

Change %

Net income (loss)

 

$

25,653

 

$

(42,039

)

$

67,692

 

#

 

 

$

909

 

$

88,213

 

($

87,304

)

(99.0

) %

Adjustments:

 

 

 

 

 

 

 

 

 

 

Restructuring costs (1)

 

 

739

 

 

5,651

 

 

 

 

 

2,954

 

 

11,414

 

 

 

Legal and other costs (2)

 

 

46

 

 

370

 

 

 

 

 

1,083

 

 

370

 

 

 

Loss (income) from equity method investment (3)

 

 

2,309

 

 

1,582

 

 

 

 

 

2,053

 

 

(676

)

 

 

Gain from equity method investment (11)

 

 

 

 

 

 

 

 

 

 

 

(135,387

)

 

 

Transaction costs (4)

 

 

10,063

 

 

141

 

 

 

 

 

10,063

 

 

6,482

 

 

 

Acquisition-related adjustments (5)

 

 

(2,883

)

 

4,292

 

 

 

 

 

709

 

 

9,787

 

 

 

Change in fair value of contingent consideration (6)

 

 

(11,355

)

 

3,825

 

 

 

 

 

(7,605

)

 

3,825

 

 

 

Loss on extinguishment of debt (12)

 

 

3,702

 

 

42,262

 

 

 

 

 

3,702

 

 

42,262

 

 

 

Share-based compensation (7)

 

 

1,448

 

 

3,998

 

 

 

 

 

9,958

 

 

10,148

 

 

 

Intangible asset amortization (8)

 

 

3,151

 

 

1,774

 

 

 

 

 

9,652

 

 

4,471

 

 

 

Gain on sale of business (13)

 

 

(68,443

)

 

 

 

 

 

 

(68,443

)

 

 

 

 

Cumulative tax effect of adjustments (9)

 

 

23,677

 

 

(15,411

)

 

 

 

 

18,061

 

 

13,058

 

 

 

Adjusted net (loss) income

 

$

(11,893

)

$

6,445

 

$

(18,338

)

#

 

 

$

(16,904

)

$

53,967

 

$

(70,871

)

#

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

25,653

 

$

(42,039

)

 

 

 

$

909

 

$

88,213

 

 

 

Diluted weighted average shares outstanding

 

 

40,835

 

 

41,220

 

 

 

 

 

40,754

 

 

43,422

 

 

 

Adjusted diluted average shares outstanding

 

 

40,835

 

 

43,285

 

 

 

 

 

40,754

 

 

43,422

 

 

 

Diluted earnings (loss) per share

 

$

0.63

 

$

(1.02

)

$

1.65

 

#

 

 

$

0.02

 

$

2.03

 

$

(2.01

)

#

 

Per share impact of adjustments to net (loss) income

 

 

(0.92

)

 

1.17

 

 

 

 

 

(0.43

)

 

(0.79

)

 

 

Adjusted diluted (loss) earnings per share

 

$

(0.29

)

$

0.15

 

$

(0.44

)

(293.3

) %

 

($

0.41

)

$

1.24

 

$

(1.65

)

(133.1

) %

Note: Footnotes follow Reconciliation of Net income table on the next page

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

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

(in thousands, unaudited)

 

 

2022

 

 

2021

 

Change $

Change %

 

 

2022

 

 

2021

 

Change $

Change %

Net income (loss)

 

$

25,653

 

$

(42,039

)

$

67,692

#

 

 

$

909

 

$

88,213

 

$

(87,304

)

(99.0

) %

Provision (benefit) for income taxes

 

 

17,348

 

 

(13,375

)

 

30,723

#

 

 

 

11,464

 

 

29,241

 

 

(17,777

)

(60.8

) %

Interest expense

 

 

50,149

 

 

25,805

 

 

24,344

94.3

%

 

 

130,683

 

 

68,784

 

 

61,899

 

90.0

%

Depreciation and amortization

 

 

9,499

 

 

7,285

 

 

2,214

30.4

%

 

 

27,985

 

 

19,685

 

 

8,300

 

42.2

%

EBITDA

 

 

102,649

 

 

(22,324

)

 

124,973

#

 

 

 

171,041

 

 

205,923

 

 

(34,882

)

(16.9

) %

Restructuring costs (1)

 

 

739

 

 

5,651

 

 

 

 

 

2,954

 

 

11,414

 

 

 

Legal and other costs (2)

 

 

46

 

 

370

 

 

 

 

 

1,083

 

 

370

 

 

 

Loss (income) from equity method investment (3)

 

 

2,309

 

 

1,582

 

 

 

 

 

2,053

 

 

(676

)

 

 

Gain from equity method investment (11)

 

 

 

 

 

 

 

 

 

 

 

(135,387

)

 

 

Transaction costs (4)

 

 

10,063

 

 

141

 

 

 

 

 

10,063

 

 

6,482

 

 

 

Acquisition-related adjustments (5)

 

 

(2,883

)

 

4,292

 

 

 

 

 

709

 

 

9,787

 

 

 

Change in fair value of contingent consideration (6)

 

 

(11,355

)

 

3,825

 

 

 

 

 

(7,605

)

 

3,825

 

 

 

Loss on extinguishment of debt (12)

 

 

3,702

 

 

40,206

 

 

 

 

 

3,702

 

 

40,206

 

 

 

Gain on sale of business (13)

 

 

(68,443

)

 

 

 

 

 

 

(68,443

)

 

 

 

 

Share-based compensation (7)

 

 

1,448

 

 

3,998

 

 

 

 

 

9,958

 

 

10,148

 

 

 

Other adjustments (10)

 

 

 

 

(118

)

 

 

 

 

(581

)

 

(392

)

 

 

Adjusted EBITDA

 

$

38,275

 

$

37,623

 

$

652

1.7

%

 

$

124,934

 

$

151,700

 

$

(26,766

)

(17.6

) %

Adjusted EBITDA Margin

 

 

17.9

%

 

18.0

%

 

 

 

 

15.4

%

 

25.6

%

 

 

# - Change greater than 100% or not meaningful

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

 

Three Months Ended September 30, 2022

 

Three Months Ended September 30, 2021

(dollars in thousands, unaudited)

U.S.

Canada Direct Lending

Canada POS Lending

 

U.S.

Canada Direct Lending

Canada POS Lending

Total operating expense

$

76,067

 

$

26,773

$

13,518

 

 

$

84,074

 

$

26,003

$

12,481

 

Less:

 

 

 

 

 

 

 

Restructuring costs (1)

 

739

 

 

 

 

 

 

5,651

 

 

 

 

Legal and other costs (2)

 

46

 

 

 

 

 

 

370

 

 

 

 

Transaction costs (4)

 

10,063

 

 

 

 

 

 

141

 

 

 

 

Acquisition-related adjustments (5)

 

(2,883

)

 

 

 

 

 

 

 

 

4,292

 

Share-based compensation (7)

 

1,306

 

 

152

 

(10

)

 

 

3,998

 

 

 

 

Other adjustments (10)

 

 

 

 

 

 

 

(195

)

 

94

 

(17

)

Adjusted operating expense

$

66,796

 

$

26,621

$

13,528

 

 

$

74,109

 

$

25,909

$

8,206

 

 

Nine Months Ended September 30, 2022

 

Nine Months Ended September 30, 2021

(dollars in thousands, unaudited)

U.S.

Canada Direct Lending

Canada POS Lending

 

U.S.

Canada Direct Lending

Canada POS Lending

Total operating expense

$

302,641

 

$

82,126

$

45,714

 

 

245,623

 

 

76,090

 

25,577

 

Less:

 

 

 

 

 

 

 

Restructuring costs (1)

 

2,954

 

 

 

 

 

11,414

 

 

 

 

Legal and other costs (2)

 

1,076

 

 

7

 

 

 

370

 

 

 

 

Transaction costs (4)

 

10,063

 

 

 

 

 

6,482

 

 

 

 

Acquisition-related adjustments (5)

 

491

 

 

 

218

 

 

 

 

 

9,787

 

Share-based compensation (7)

 

8,068

 

 

396

 

1,494

 

 

10,148

 

 

 

 

Other adjustments (10)

 

(640

)

 

16

 

43

 

 

(600

)

 

242

 

(34

)

Adjusted operating expense

$

280,629

 

$

81,707

$

43,959

 

$

217,809

 

$

75,848

$

15,824

 

(1)

 

Restructuring costs for the three and nine months ended September 30, 2022 and the three and nine months ended September 30, 2021, respectively, resulted from U.S. store closures and related costs and certain severance payments to eliminate duplicate roles.

(2)

 

Legal and other costs for the three and nine months ended September 30, 2022 and the three and nine months ended September 30, 2021, respectively, primarily related to settlement costs related to certain legal matters.

(3)

 

The amount reported is our share of Katapult's U.S. GAAP net income or loss, recognized on a one quarter lag.

(4)

 

Transaction costs for the three and nine months ended September 30, 2022 relate to, the sale of the Legacy U.S. Direct Lending business, and the acquisition of First Heritage, both of which closed in July 2022. 

(5)

 

During the three months and nine months ended September 30, 2022, acquisition-related adjustments related to the acquired Heights Finance and First Heritage loan portfolios.

 

During the three months and nine months ended September 30, 2021, acquisition-related adjustments related to the acquired Flexiti loan portfolio.

(6)

 

In connection with our acquisition of Flexiti, we recorded a $11.4 million and $7.61 million adjustment related to the fair value of the contingent consideration for the three and nine months ended September 30, 2022, respectively. We recorded a $3.8 million and $3.8 million adjustment related to the fair value of the contingent consideration for the three and nine months ended September 30, 2021, respectively.

(7)

 

The estimated fair value of share-based awards was recognized as non-cash compensation expense on a straight-line basis over the vesting period.

(8)

 

Intangible asset amortization in determining ANI for the three and nine months ended September 30, 2022 primarily included amortization of identifiable intangible assets established in connection with the acquisitions of Flexiti, Heights Finance and First Heritage.

(9)

 

Cumulative tax effect of adjustments included in Reconciliation of Net income to Adjusted Net Income table is calculated using the estimated incremental tax rate by country.

(10)

 

During the three and nine months ended 2021 and during the nine months ended 2022, other adjustments primarily reflect the intercompany foreign-currency exchange impact.

(11)

 

Gain on investment in Katapult of $135.4 million recorded during the three and nine months ended September 30, 2021 as a result of its reverse merger with FinServ.

(12)

 

On July 30, 2021, we entered into new 7.50% Senior Secured Notes due 2028, which were used on August 12, 2021 to extinguish the 8.25% Senior Secured Notes due 2025. During the three and nine months ended September 30, 2021, $40.2 million from the loss on the extinguishment of debt was due to the early redemption of the 8.25% Senior Secured Notes due 2025. An additional $2.1 million of interest was incurred for the three and nine months ended September 30, 2021, which represents interest on the 8.25% Senior Secured Notes due 2025 for the period between July 30, 2021 and August 12, 2021. This is the period during which the 8.25% Senior Secured Notes and 7.50% Senior Secured Notes were outstanding.

 

During the three and nine months ended September 30, 2022, $3.1 million of the loss on extinguishment of debt was due to the early extinguishment of the U.S. SPV on July 8, 2022 upon the completion of the divestiture of our Legacy U.S. Direct Lending business to Community Choice Financial, and $0.6 million was due to the extinguishment of the Heights Finance SPV on July 15, 2022.

(13)

 

On July 8, 2022, the Company completed the divestiture of its Legacy U.S. Direct Lending business to Community Choice Financial, resulting in a gain of $68.4 million recorded to "Gain on sale of business" in the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2022.

Forward-Looking Statements

This press release contains forward-looking statements. These forward-looking statements include projections, estimates and assumptions about various matters, such as future financial and operational performance, including reduction in operating expenses, and our belief in the usefulness of the various non-GAAP financial measures used in this release. In addition, words such as “guidance,” “estimate,” “anticipate,” “believe,” “forecast,” “step,” “plan,” “predict,” “focused,” “project,” “is likely,” “expect,” “intend,” “should,” “will,” “confident,” variations of such words and similar expressions are intended to identify forward-looking statements. Our ability to achieve these forward-looking statements is based on certain assumptions, judgments and other factors, both within and outside of our control, that could cause actual results to differ materially from those in the forward-looking statements, including: errors in our internal forecasts or those of companies in which we invest; the effects of competition on our business or on those companies in which we invest; our ability to attract and retain customers; market, financial, political and legal conditions; actions of regulators and the negative impact of those actions on our business; the continuing impact of COVID-19 pandemic or any other similar wide-spread event on our business and the global economy; our dependence on third-party lenders to provide the cash we need to fund our loans and our ability to affordably access third-party financing; our level of indebtedness; our ability to successfully integrate acquired businesses; our ability to protect our proprietary technology and analytics and keep up with that of our competitors; disruption of our information technology systems that adversely affect our business operations; ineffective pricing of the credit risk of our prospective or existing customers; inaccurate information supplied by customers or third parties that could lead to errors in judging customers’ qualifications to receive loans; improper disclosure of customer personal data; failure of third parties who provide products, services or support to us; any failure of third-party lenders upon whom we rely to conduct business in certain states; disruption to our relationships with banks and other third-party electronic payment solutions providers as well as other factors discussed in our filings with the Securities and Exchange Commission. These projections, estimates and assumptions may prove to be inaccurate in the future. These forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. There may be additional risks that CURO presently does not know or that it currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual future results. We undertake no obligation to update, amend or clarify any forward-looking statement for any reason.

All product names, logos, brands, trademarks and registered trademarks are property of their respective owners.

About CURO

CURO Group Holdings Corp. (NYSE: CURO) is a full-spectrum consumer credit lender serving U.S. and Canadian customers for over 25 years. Our roots in the consumer finance market run deep. We’ve worked diligently to provide customers a variety of convenient, easily accessible financial services. Our decades of alternative data power a hard-to-replicate underwriting and scoring engine, mitigating risk across the full spectrum of credit products. We operate a number of brands including Cash Money®, LendDirect®, Flexiti®, Opt+®, Revolve Finance®, Heights Finance, Southern Finance, Covington Credit, Quick Credit, First Phase, and First Heritage Credit.

Conference Call

CURO will host a conference call to discuss these results at 5:00 p.m. Eastern Time on Wednesday, November 2, 2022. The live webcast of the call can be accessed at the CURO Investor Relations website at http://ir.curo.com/.

You may access the call at 1-833-953-2430 (1-412-317-5759 for international callers). Please ask to join the CURO Group Holdings call. A replay of the conference call will be available until November 9, 2022, at 5:00 p.m. Eastern Time. An archived version of the webcast will be available on the CURO Investors website for 90 days. You may access the conference call replay at 1-877-344-7529 (1-412-317-0088 for international callers). The replay access code is 3181575.

Final Results

The financial results presented and discussed herein are on a preliminary and unaudited basis; final unaudited data will be included in the Company’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2022.

(CURO-NWS)

Investor Relations:
Roger Dean
Executive Vice President and Chief Financial Officer
Phone: 844-200-0342
Email: IR@curo.com

Source: CURO Group Holdings Corp.