CURO (US:CURO)2023-05-10 21:02Revenue Performance - Total revenue for the three months ended March 31, 2023, decreased by $80.7 million, or 27.8%, to $209.5 million compared to the prior-year period, primarily due to the sale of the Legacy U.S. Direct Lending Business in July 2022 [163]. - Interest and fees revenue for the same period decreased by $85.5 million, or 32.3%, to $179.4 million, while insurance and other income increased by $4.8 million, or 19.0%, to $30.0 million [166]. - Direct Lending total revenue for Q1 2023 decreased by $100.5 million, or 37.2%, compared to the prior-year period, primarily due to the divestiture of the Legacy U.S. Direct Lending business [191]. - Total revenue for the three months ended March 31, 2023, increased by $19.8 million, or 97.5%, driven by increased originations and a gross loan portfolio growth of $311.5 million, or 57.5% [199]. - Canada POS Lending revenue for Q1 2023 was $35.1 million, an increase of $16.5 million, or 88.4%, compared to Q1 2022 [196]. - The Canada POS Lending segment reported revenues of $42.8 million for the three months ended March 31, 2023, an increase of $22.5 million, or 110.7% [209]. Operating Expenses - Operating expenses for the three months ended March 31, 2023, decreased by $35.5 million, or 23.1%, to $118.2 million, driven by reductions in salaries and benefits, occupancy, and advertising expenses [171]. - Salaries and benefits expense was $64.8 million, a decrease of $14.9 million, or 18.7%, compared to the prior-year period, largely due to lower headcount from restructuring initiatives [171]. - Operating expenses for Q1 2023 were $103.2 million, a decrease of $34.8 million, or 25.2%, compared to the prior-year period, attributed to reduced salaries and benefits and lower advertising expenses [193]. - Operating expenses decreased by $0.7 million, or 4.6%, to $15.0 million for the three months ended March 31, 2023, compared to $15.8 million in the prior year [201]. Interest and Fees - Interest expense increased by $20.6 million, or 53.7%, to $58.9 million, driven by increased borrowing to support organic loan growth and acquired portfolios [177]. - Interest expense for Q1 2023 was $44.0 million, up from $31.7 million in Q1 2022, driven by increased non-recourse ABL borrowing and rising benchmark rates [194]. - Interest expense rose by $8.3 million, or 124.8%, primarily due to increased non-recourse asset-backed lending and higher benchmark rates on variable-rate debt [202]. Provision for Losses - Provision for losses decreased by $34.6 million, or 35.5%, primarily due to the divestiture of the Legacy U.S. Direct Lending Business, which had a higher loss rate [171]. - The provision for losses in Q1 2023 decreased by $40.5 million, or 45.5%, compared to the prior year, largely due to the divestiture of the Legacy U.S. Direct Lending business [192]. - Provision for losses increased by $5.9 million, or 67.2%, for the three months ended March 31, 2023, with total net charge-off (NCO) rates rising to 5.6% from 2.0% year over year [200]. Regulatory Environment - The Company expects potential adverse impacts on operations due to proposed legislation in Canada to reduce the maximum allowable interest rate from 60% to 35% [232]. - The Company is subject to provincial legislation requiring cost of credit disclosures and consumer protection rights, which may affect pricing and underwriting criteria [233]. - The federal government of Canada proposed legislation to cap interest rates on payday loans, awaiting final decisions on implementation [235]. - There have been no significant developments in the regulatory environment since December 31, 2022, except for the proposed changes in Canada [232]. Financial Position - As of March 31, 2023, the company had available unrestricted cash of $54.9 million, providing sufficient liquidity for at least the next 12 months [214]. - Net cash used in operating activities for the three months ended March 31, 2023, was $(4.1) million, primarily due to a net loss of $59.5 million [223]. - Net cash provided by investing activities was $7.0 million, mainly from net repayments of loans of $19.1 million [224]. - Net cash provided by financing activities for Q1 2023 was $9.1 million, primarily due to $12.4 million in net proceeds from non-recourse debt facilities [225]. Accounting Changes - The company recognized an increase to its opening accumulated deficit balance of approximately $113.0 million upon the implementation of CECL on January 1, 2023 [168]. - The Company adopted CECL on January 1, 2023, resulting in a pre-tax increase to the allowance for credit losses of approximately $121.2 million for the Direct Lending segment [192]. - The Company adopted ASC 326 for measuring current expected credit losses on January 1, 2023, allowing flexibility in selecting the methodology for estimating expected credit losses [226]. - The Company identified seven loan groups based on qualitative factors, utilizing a static pool Probability of Default (PD) / Loss Given Default (LGD) / Exposure at Default (EAD) model for estimating credit losses [228]. - The Company adjusts historical loss experience to reflect current conditions and reasonable economic forecasts, including factors like unemployment rate and personal income [229]. - Provisions for credit losses are recorded to maintain an adequate allowance for estimated losses over the expected life of finance receivables [230]. - The Company periodically reviews its estimates for credit losses, with adjustments reported in earnings as they become known [231].