CURO (CURO) - 2018 Q4 - Annual Report

Financial Performance - From 2010 to 2018, the company achieved a compound annual growth rate of 23.4% in revenue, 20.6% in Adjusted EBITDA, and 18.9% in Adjusted Net Income[38]. - Installment and Open-End products accounted for 74% of consolidated revenue for the year ended December 31, 2018, up from 19% in 2010[39]. - Revenue generated through the online channel represented 45% of consolidated revenue for the year ended December 31, 2018[60]. - The company acquired 2.2 million new customers in the U.S. from January 2015 to December 2018, with advertising as a percentage of U.S. revenue at 5.7%, 4.9%, and 5.0% for the years ended December 31, 2018, 2017, and 2016, respectively[78]. - Revenues from Texas, Ontario, and California represented approximately 24.9%, 11.0%, and 18.3% of consolidated total revenues for the year ended December 31, 2018[595]. Debt and Financing - The company has raised nearly $2.1 billion in debt financing since 2008, including $690 million in Senior Secured Notes due 2025 and a C$175 million nonrecourse revolving facility[37]. - As of December 31, 2018, the company had $107.5 million and $20.0 million of variable debt outstanding on the Non-Recourse Canada SPV Facility and the Senior Revolver, with weighted average interest rates of approximately 9.2% and 10.5%, respectively[604]. - A hypothetical 1% increase in the average market interest rate would result in an increase in annual interest expense of $1.4 million[602]. Customer and Product Insights - The average loan amount for Unsecured and Secured Installment loans increased to $633 and $1,405, respectively, for the year ended December 31, 2018, compared to $628 and $1,303 in 2017[48]. - Secured Installment loans accounted for 10.1%, 10.5%, and 9.8% of consolidated revenue for the years ended December 31, 2018, 2017, and 2016, respectively[64]. - Open-End loans represented 13.0%, 7.6%, and 8.1% of consolidated revenue for the years ended December 31, 2018, 2017, and 2016, respectively[65]. - Single-Pay loans comprised 21.0%, 27.9%, and 37.8% of consolidated revenue for the years ended December 31, 2018, 2017, and 2016, respectively[66]. - Ancillary products contributed 4.6%, 4.2%, and 4.4% to consolidated revenue for the years ended December 31, 2018, 2017, and 2016, respectively[67]. Regulatory Environment - The alternative financial services industry is regulated at federal, state, and local levels in the U.S., Canada, and the U.K., impacting operations significantly[92]. - Recent laws in Ohio and Colorado have impaired lending businesses, indicating potential adverse effects on product offerings and economic performance[94]. - The 2017 Final CFPB Rule, if enforced, could increase costs and lessen the effectiveness of loan servicing and collections, with potential significant negative impacts on business[94]. - The CFPB's proposed rule to rescind parts of the 2017 Final CFPB Rule may restrict access to credit and reduce competition for financial products[107]. - The Military Lending Act imposes a 36% cap on annual percentage rates for certain loans to active-duty military members, affecting the company's loan offerings[122]. Operational Insights - As of December 31, 2018, the company operated 413 stores across 14 U.S. states and seven provinces in Canada[57]. - The company employed approximately 4,300 employees worldwide, with about 3,000 working in stores[90]. - The company has expanded its LendDirect brand in Canada, opening three stores in Q4 2017 and seven during the year ended December 31, 2018[45]. - The company is enhancing compliance procedures and consumer disclosures to meet CFPB expectations, which may increase costs and reduce consolidated revenues[119]. Risk Management - The company has not experienced any losses due to cash concentration, managing risk by placing deposits in high-quality financial institutions[596]. - Regulatory risks vary significantly by jurisdiction, affecting the products and services provided, particularly payday advance loans[599]. - The company is subject to regular state examinations and audits, which may impact operations based on findings[150]. Market and Economic Factors - Revenue and net loss before income taxes would decrease by $23.7 million and $3.6 million, respectively, if average foreign exchange rates had declined by 10% against the U.S. dollar in 2018[605]. - The company supports fixed-rate lending with variable-rate borrowing, but does not believe there is material interest rate sensitivity associated with its customer loan portfolio due to their short duration[603].