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CURO Group Holdings Corp Announces Second Quarter 2018 Financial Results

July 30, 2018

WICHITA, Kan.--(BUSINESS WIRE)--Jul 30, 2018--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 its second quarter ended June 30, 2018.

“CURO continued its strong growth momentum in the second quarter of 2018,” said Don Gayhardt, President and Chief Executive Officer. “We are pleased to announce year-over-year loan growth of 26.9% and sequential loan growth of 14.1%, adjusted earnings growth in the first half of 2018 of 18.9%, and the execution of a milestone bank partner agreement that allows us to expand our lending footprint in the U.S. Our momentum, improvement in credit metrics and solid loan growth has further bolstered our confidence in our full year earnings guidance,” Gayhardt concluded.

Consolidated Summary Results

Second quarter 2018 highlights include:

Second quarter Revenue of $249.0 million, an increase of 14.8% over the prior year period Year-over-year loan growth of 26.9% and 14.1% sequential loan growth from first quarter of 2018 Gross margin and earnings declined year-over-year due to changes to our loan loss recognition methodology (our previously disclosed Q1 Loss Recognition Change) that affected the prior year period. The change had the effect of reducing loan loss provisioning for installment loans well below normalized levels for the second quarter of 2017. Notwithstanding the effects of accounting methodology changes in 2017 on provision comparisons, credit quality improved meaningfully. First-pay default rates (FPDs) improved year-over-year for all Installment and Open-End products in the U.S. and Canada and were stable for Single-Pay. Net charge-off rates for our largest portfolio, Company Owned Unsecured Installment, improved 488 basis points sequentially from last quarter. Executed agreement with MetaBank® to provide consumers within the United States an innovative and flexible line of credit product Completed a successful secondary offering for existing stockholders of over 5.5 million shares of common stock at $23 per share

Year-to-date 2018 highlights include:

Year-to-date Revenue of $510.7 million, an increase of 15.7% over the prior year period Year-to-date GAAP Net Income of $39.3 million, an increase of 19.1% Year-to-date Adjusted Net Income of $53.7 million, an increase of 18.9% 26.9% loan growth Completed a successful secondary offering for existing stockholders of over 5.5 million shares of common stock at $23 per share

Fiscal 2018 Outlook

We affirm our 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. Our solid results for the first half of 2018 and above-expectation loan growth has further bolstered our confidence in our guidance. Our full-year 2018 guidance is as follows:

Revenue in the range of $1.025 billion to $1.080 billion Adjusted 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

Three Months Ended June 30, 2018

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

During the three months ended June 30, 2018, total lending revenue (excluding revenues from ancillary products) grew $30.7 million, or 14.8%, to $238.1 million, compared to the prior year period, predominantly driven by growth in Installment and Open-End loans. Geographically, revenue in the U.S., Canada and the U.K. grew 16.1%, 7.9%, and 23.3%, respectively. From a product perspective, Unsecured Installment revenues rose 17.4% and Secured Installment revenues rose 11.2% driven by related loan growth. Single-Pay revenues were affected primarily by regulatory changes in Canada (rate changes in Alberta, Ontario and British Columbia) and continued product shift from Single-Pay to Installment and Open-End loans in all countries. Open-End revenues rose 72.2% on organic growth in the U.S. and the introduction of Open-End products in Virginia and Canada. Open-End adoption in Canada accelerated this quarter as related loan balances grew $34.3 million sequentially from the first quarter. Even with the accelerated Open-End growth, Single-Pay balances in Canada only shrank sequentially by $1.4 million. Ancillary revenues increased 13.9% versus the same quarter a year ago primarily due to non-lending revenue in Canada.

Six Months Ended June 30, 2018

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

During the six months ended June 30, 2018, total lending revenue (excluding revenues from ancillary products) grew $66.6 million, or 15.8%, to $488.8 million, compared to the prior year period, predominantly driven by growth in Installment loans in all three countries and Open-End loans in the U.S. and Canada. Geographically, revenue in the U.S., Canada and U.K. grew 16.8%, 9.5%, and 24.4%, respectively. From a product perspective, Unsecured Installment revenues rose 19.5% and Secured Installment revenues rose 12.4% because of loan growth. Single-Pay revenues and combined loans receivable were affected primarily by regulatory changes in Canada (rate changes in Alberta, Ontario and British Columbia) and continued product shift from Single-Pay to Installment and Open-End loans in all countries. Open-End revenues rose 61.5% on organic growth in the U.S. and the introduction of Open-End products in Virginia and Canada. Earning assets for our Open-End product in Canada, which we began offering in the fourth quarter of 2017, was $47.3 million as of June 30, 2018. Ancillary revenues increased 13.3% versus the same period 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:

For both the three and six months ended June 30, 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:

Gross combined loans receivable by product are presented below:

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