Press Release: CURO Group Holdings Corp. -9-

· 02/04/2021 16:00

Canada Segment Results Three Months Ended December 31, Year Ended December 31, (dollars in thousands, unaudited) 2020 2019 Change $ Change % 2020 2019 Change $ Change % ----------------------- -------- -------- --------- ---------- --------- --------- ---------- ---------- Revenue $ 55,490 $ 62,022 ($ 6,532) (10.5)% $ 208,872 $ 228,291 ($ 19,419) (8.5)% Provision for losses 10,724 18,713 (7,989) (42.7)% 58,647 76,446 (17,799) (23.3)% -------- -------- --------- --------- --------- ---------- Net revenue 44,766 43,309 1,457 3.4% 150,225 151,845 (1,620) (1.1)% Advertising 1,075 1,392 (317) (22.8)% 3,850 6,663 (2,813) (42.2)% Non-advertising costs of providing services 17,507 17,450 57 0.3% 68,207 69,518 (1,311) (1.9)% -------- -------- --------- --------- --------- ---------- Total cost of providing services 18,582 18,842 (260) (1.4)% 72,057 76,181 (4,124) (5.4)% -------- -------- --------- --------- --------- ---------- Gross margin 26,184 24,467 1,717 7.0% 78,168 75,664 2,504 3.3% Corporate, district and other expenses 5,239 5,306 (67) (1.3)% 22,701 21,923 778 3.5% Interest expense 2,344 2,607 (263) (10.1)% 9,296 10,438 (1,142) (10.9)% -------- -------- --------- --------- --------- ---------- Total operating expense 7,583 7,913 (330) (4.2)% 31,997 32,361 (364) (1.1)% -------- -------- --------- --------- --------- ---------- Segment operating income 18,601 16,554 2,047 12.4% 46,171 43,303 2,868 6.6% Interest expense 2,344 2,607 (263) (10.1)% 9,296 10,438 (1,142) (10.9)% Depreciation and amortization 1,108 1,187 (79) (6.7)% 4,506 4,814 (308) (6.4)% -------- -------- --------- --------- --------- ---------- EBITDA 22,053 20,348 1,705 8.4% 59,973 58,555 1,418 2.4% Legal and other costs -- -- -- -- 135 (135) Canada GST adjustment -- -- -- 2,160 -- 2,160 Other adjustments 105 (86) 191 685 211 474 -------- -------- --------- --------- --------- ---------- Adjusted EBITDA $ 22,158 $ 20,262 $ 1,896 9.4% $ 62,818 $ 58,901 $ 3,917 6.7% ----------------------- -------- -------- --------- ------ --------- --------- ---------- ------

The provision for losses decreased $161.9 million, or 41.3%, for the year ended December 31, 2020, compared to the prior year, primarily as a result of lower loan volume and lower NCOs. Year-over-year U.S. NCOs decreased $140.1 million, or 35.2%.

Non-advertising costs of providing services for the year ended December 31, 2020 were $137.5 million, a decrease of $34.2 million, or 19.9%, compared to $171.7 million for the year ended December 31, 2019. The decrease was primarily driven by Ad Astra costs of $15.5 million, which prior to its acquisition by us were included in Non-advertising costs of providing services. The remaining decrease year over year in Non-advertising costs of providing services was due to (i) lower underwriting and other variable costs as a result of lower demand, (ii) lower collection costs resulting from stimulus-related pay-downs and (iii) lower discretionary variable compensation.

Advertising costs decreased $6.0 million, or 12.9%, year over year because of COVID-19 Impacts.

Corporate, district and other expenses were $137.2 million for the year ended December 31, 2020, a decrease of $1.0 million, or 0.7%, compared to the year ended December 31, 2019. Corporate, district and other expenses for the year ended December 31, 2020 included $9.6 million of collection costs related to Ad Astra, which were historically included in Non-advertising costs of providing services. For the year ended December 31, 2020, corporate, district and other costs included (i) $5.7 million of legal and other costs described in our reconciliation to Adjusted Net Income above and (ii) $12.9 million of share-based compensation costs. For the year ended December 31, 2019, corporate, district and other expenses included (i) U.K. related costs of $8.8 million as described in our reconciliation to Adjusted Net Income above, (ii) $4.7 million of legal and other costs also described in our reconciliation to Adjusted Net Income above and (iii) share-based compensation costs of $10.3 million. Share-based compensation costs increased primarily as a result of awards granted in the first quarter of 2020.

Excluding these items, comparable corporate, district and other expenses decreased $5.4 million year over year, primarily due to the timing and extent of variable compensation and certain cost reductions, including work-from-home initiatives, to manage COVID-19 Impacts, partially offset by higher professional fees for the year ended December 31, 2020.

As described above, and given the two-month lag, we recorded equity income from our investment in Katapult of $4.5 million for the year ended December 31, 2020.

U.S. interest expense for the year ended December 31, 2020 increased $4.1 million, or 6.9%, as a result of higher borrowings year-over-year, including the new Non-Recourse U.S. SPV Facility, which we closed in April 2020.

Canada Segment Results - For the Three Months Ended December 31, 2020 and 2019

Canada gross loans receivable increased $27.9 million, or 9.2% ($20.3 million, or 6.7%, on a constant-currency basis) from the prior year. However, Canada revenue decreased $6.5 million, or 10.5% ($7.3 million, or 11.7%, on a constant-currency basis), to $55.5 million for the three months ended December 31, 2020, from $62.0 million in the prior-year period, as a result of the declines in Single-Pay gross loans receivable previously described, partially offset by increases in Open-End gross loans receivable. Sequentially, Canada revenue increased $6.3 million, or 12.9%, driven by increases in Open-End, Single-Pay and ancillary revenue.

Canada non-Single-Pay revenue increased $3.1 million, or 7.2% ($2.5 million, or 5.9%, on a constant-currency basis), to $45.4 million, compared to $42.4 million in the prior-year period, on growth of $45.6 million, or 17.1% ($38.5 million, or 14.4%, on a constant-currency basis), in related loan balances. Ancillary revenue, which includes sales of insurance to Open-End loan customers, decreased $0.3 million, or 2.2% ($0.4 million, or 3.4% on a constant-currency basis). The decrease was driven by additional insurance claims from consumers impacted by COVID-19 during the fourth quarter of 2020.

Single-Pay revenue decreased $9.6 million, or 48.9% ($9.7 million, or 49.5%, on a constant-currency basis), to $10.1 million for the three months ended December 31, 2020, and Single-Pay receivables decreased $17.7 million, or 49.6% ($18.2 million, or 50.7% on a constant-currency basis), to $18.1 million, from $35.8 million, in the prior-year period. The decreases in Single-Pay revenue and receivables were due to a continued shift to Open-End loans from Single-Pay, as well as a significant decline in demand attributable to COVID-19 Impacts. Sequentially, Single-Pay revenue increased $1.0 million, or 11.3%, on $1.4 million, or 8.3%, growth in related receivables, driven by normal seasonality.

The provision for losses decreased $8.0 million, or 42.7% ($8.1 million, or 43.2%, on a constant-currency basis), to $10.7 million for the three months ended December 31, 2020, compared to $18.7 million in the prior-year period. The decrease in provision for loan losses was primarily a result of lower loan volume and lower NCOs as a result of COVID-19 Impacts as previously described. On a quarterly basis, loss rates improved approximately 326 bps, or 48.0%, year over year due to favorable loan performance as a result of COVID-19 Impacts and overall portfolio maturation.

Canada cost of providing services for the three months ended December 31, 2020 was $18.6 million, a decrease of $0.3 million, or 1.4% ($0.5 million, or 2.6%, on a constant-currency basis), compared to $18.8 million for the three months ended December 31, 2019, primarily related to certain cost reductions to manage COVID-19 Impacts and closely targeted advertising efforts while managing growth during the fourth quarter of 2020.

Canada operating expenses for the three months ended December 31, 2020 were $7.6 million, a decrease of $0.3 million, or 4.2% ($0.4 million, or 5.5%, on a constant-currency basis), compared to $7.9 million in the prior-year period, primarily as a result of lower interest expense from lower year-over-year borrowings on our Non-Recourse Canada SPV Facility.

Canada Segment Results - For the Year Ended December 31, 2020 and 2019

Canada revenue decreased $19.4 million, or 8.5% ($17.5 million, or 7.7%, on a constant-currency basis), to $208.9 million for the year ended December 31, 2020, from $228.3 million in the prior year. Sequentially, revenue increased $6.3 million, or 12.9%, on growth of $38.1 million, or 13.0%, in related loan balances.

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February 04, 2021 16:00 ET (21:00 GMT)