EX-99.1 2 ukshutdownex992-q42018doc.htm EXHIBIT 99.1 Exhibit


CURO Group Holdings Corp.
Revised Fourth Quarter and Full Year 2018 Financial Results and 2019 Outlook as a Result of U.K. Exit

Wichita, Kansas--March 1, 2019-CURO Group Holdings Corp. (NYSE: CURO) (“CURO” or the “Company”), a market leader in providing short-term credit to underbanked consumers, today announced revised financial results for its fourth quarter and full year ended December 31, 2018 and issued its revised outlook for 2019 as a result of the Company entering its U.K. subsidiaries, Curo Transatlantic Limited and SRC Transatlantic Limited (collectively, the “U.K. Subsidiaries”) into administration under the U.K. Insolvency Act 1986 on February 25, 2019.

As a result of not implementing the proposed Scheme of Arrangement (“SOA”) and placing the U.K. Subsidiaries into administration as described in Item 2.01 on this Form 8-K, the Company has revised is fourth quarter 2018 financial results. The effect of the U.K. Subsidiaries’ entry into administration was to place the management, affairs, business and property of the U.K. Subsidiaries under the direct control of KPMG, as administrators. Accordingly, the Company will deconsolidate the U.K. Subsidiaries as of February 25, 2019 and will present the U.K. Subsidiaries as Discontinued Operations in the first quarter of 2019.
In its announcement of Fourth Quarter and Full Year 2018 Financial results dated January 31, 2018, the Company, in connection with the proposed SOA that would have allowed the U.K. Subsidiaries to continue operations, reported $57.4 million in total U.K. redress and related settlement charges in the fourth quarter of 2018, comprised of (i) $22.5 million of non-cash goodwill impairment charges, (ii) $4.6 million of fourth quarter redress claims and related costs, (iii) a $23.6 million fund to settle historical redress claims and (iv) $6.7 million of advisory and other costs that the Company anticipated would be required to execute the SOA. The Company has subsequently determined the above liability in connection with the proposed SOA did not exist at December 31, 2018 and as a result, will not fund the $23.6 million to settle historical redress claims nor incur the $6.7 million advisory and other costs that were expected to be required to execute the SOA. However, the Company recorded an additional non-cash impairment charge in the fourth quarter of 2018 of approximately $5.1 million.
The Company will deconsolidate the U.K. Subsidiaries as of February 25, 2019 and will present the U.K. Subsidiaries as Discontinued Operations in the first quarter of 2019. Upon deconsolidation of the U.K. Subsidiaries, the Company will recognize an additional non-cash loss from discontinued operations in the first quarter of 2019 as remaining assets, liabilities and other comprehensive income are eliminated.
This exhibit contains the following tables that were included as Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on January 31, 2019 (the “January 8-K”) announcing the Company’s financial results for the year ended December 31, 2018: Consolidated Summary Results, Condensed Consolidated Statements of Income, U.K. Segment Results, Consolidated Balance Sheets, and Fiscal 2019 Outlook Reconciliations (the “Tables”) and updated 2019 earnings guidance. The Tables and updated 2019 earnings guidance has been revised to reflect the impact of the revision above on the unaudited fourth quarter 2018 financial results and projected operating results for 2019. The Tables supersede and replace in their entirety the corresponding tables included in the January 8-K. The updated 2019 earnings guidance supersedes and replaces in its entirety the corresponding 2019 earnings guidance included in the January 8-K. No other tables or information in the January 8-K have changed, and all such other tables and information are incorporated by reference into Exhibit 99.2. There have been no adjustments to the Company's financial results for the fourth quarter and full year 2018 other than the aforementioned reversal of accrued liabilities and the inclusion of a non-cash impairment charge.

Consolidated Summary Results
 
For the Three Months Ended
 
For the Year Ended
(in thousands, except per share data)
12/31/2018

12/31/2017

Variance

 
12/31/2018

12/31/2017

Variance

Revenue
$
300,566

$
266,990

12.6
 %
 
$
1,094,311

$
963,633

13.6
 %
Gross Margin
87,256

92,164

(5.3
)%
 
340,897

349,237

(2.4
)%
Gross Loans Receivable
596,787

432,837

37.9
 %
 
596,787

432,837

37.9
 %
Net (Loss) Income
(14,298
)
6,410

(323.1
)%
 
(22,053
)
49,153

(144.9
)%
Adjusted Net Income (1)
24,871

19,706

26.2
 %
 
89,523

79,074

13.2
 %
Diluted (Loss) Earnings per Share(2)
$
(0.31
)
$
0.16

(293.8
)%
 
$
(0.48
)
$
1.25

(138.4
)%
Adjusted Diluted Earnings per Share (1)(2)
$
0.52

$
0.48

8.3
 %
 
$
1.86

$
2.01

(7.5
)%
EBITDA (1)
10,160

45,705

(77.8
)%
 
82,630

193,250

(57.2
)%
Adjusted EBITDA (1)
55,600

58,958

(5.7
)%
 
217,790

232,215

(6.2
)%
Diluted Weighted Average Shares Outstanding(2)
46,158

40,524

 
 
45,815

39,277

 
Adjusted Diluted Weighted Average Shares Outstanding(2)
47,773

40,524

 
 
47,965

39,277

 
(1) Non-GAAP Metric; see "Results of Operations - CURO Group Consolidated Operations" for reconciliation to nearest GAAP metric
(2) We calculate Adjusted Earnings per Share utilizing diluted shares outstanding at year-end. If the Company records a loss from continuing operations under U.S. GAAP, shares outstanding utilized to calculate Diluted Earnings Per Share from continuing operations are equivalent to basic shares outstanding. Shares outstanding utilized to calculate Adjusted Earnings Per Share from continuing operations reflect the number of diluted shares the Company would have reported if reporting net income from continuing operations under U.S. GAAP.


1


2019 Outlook

As the result of discontinuing operations in the U.K., the Company is revising its full-year 2019 adjusted earnings guidance, including non-GAAP measures(1), as follows:

•
Revenue from continuing operations in the range of $1.154 billion to $1.173 billion
•
Adjusted Net Income from continuing operations in the range of $112.0 million to $128.0 million
•
Adjusted EBITDA from continuing operations in the range of $240.0 million to $260.0 million
•
Estimated tax rate on continuing operations in the range of 25% to 27%
•
Adjusted Diluted Earnings per Share from continuing operations in the range of $2.35 to $2.65

(1) See a description of Non-GAAP Financial Measures at the end of this release for a reconciliation to nearest GAAP metric and for more information.


Results of Operations - CURO Group Consolidated Operations
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, unaudited)
Three Months Ended December 31,
 
Year Ended December 31,
2018
2017
Change $
Change %
 
2018
2017
Change $
Change %
Revenue
$
300,566

$
266,990

$
33,576

12.6
 %
 
$
1,094,311

$
963,633

$
130,678

13.6
 %
Provision for losses
135,692

99,703

35,989

36.1
 %
 
443,232

326,226

117,006

35.9
 %
Net revenue
164,874

167,287

(2,413
)
(1.4
)%
 
651,079

637,407

13,672

2.1
 %
Advertising costs
16,909

16,459

450

2.7
 %
 
68,333

52,058

16,275

31.3
 %
Non-advertising costs of providing services
60,709

58,664

2,045

3.5
 %
 
241,849

236,112

5,737

2.4
 %
Total cost of providing services
77,618

75,123

2,495

3.3
 %
 
310,182

288,170

22,012

7.6
 %
Gross margin
87,256

92,164

(4,908
)
(5.3
)%
 
340,897

349,237

(8,340
)
(2.4
)%
 
 
 
 


 
 
 
 
 
Operating expense
 
 
 


 
 
 
 
 
Corporate, district and other
72,242

51,176

21,066

41.2
 %
 
186,536

154,973

31,563

20.4
 %
Interest expense
18,146

21,990

(3,844
)
(17.5
)%
 
84,356

82,684

1,672

2.0
 %
Loss on extinguishment of debt
9,686

—

9,686

#

 
90,569

12,458

78,111

#

Restructuring costs
—

—

—

#

 
—

7,393

(7,393
)
#

Total operating expense
100,074

73,166

26,908

36.8
 %
 
361,461

257,508

103,953

40.4
 %
Net income before income taxes
(12,818
)
18,998

(31,816
)
#

 
(20,564
)
91,729

(112,293
)
#

Provision for income taxes
1,480

12,588

(11,108
)
(88.2
)%
 
1,489

42,576

(41,087
)
(96.5
)%
Net income
$
(14,298
)
$
6,410

$
(20,708
)
#

 
$
(22,053
)
$
49,153

$
(71,206
)
#

# - Change greater than 100% or not meaningful.

2



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 December 31,
 
Year Ended December 31,
2018
2017
Change $
Change %
 
2018
2017
Change $
Change %
Net (loss) income
$
(14,298
)
$
6,410

$
(20,708
)
#

 
$
(22,053
)
$
49,153

$
(71,206
)
#

Adjustments:
 
 
 

 
 
 
 
 
Loss on extinguishment of debt and related costs (1) 
9,982

—




 
93,830

12,458

 
 
Restructuring costs (2)
—

—

 
 
 
—

7,393

 
 
U.K. redress and related costs (3)
32,276

—



 
36,228

—

 
 
Legal settlements (4)
889

2,000




 
(289
)
4,311

 
 
Transaction-related costs (5)
—

3,050



 
—

5,573

 
 
Share-based cash and non-cash compensation (6)
2,098

8,690




 
8,210

10,446

 
 
Intangible asset amortization
746

695



 
2,805

2,502

 
 
Impact of tax law changes (7)
(2,810
)
4,635




 
(1,610
)
4,635

 
 
Cumulative tax effect of adjustments
(4,012
)
(5,774
)
 
 
 
(27,598
)
(17,397
)
 
 
Adjusted Net Income
$
24,871

$
19,706

$
5,165

26.2
%
 
$
89,523

$
79,074

$
10,449

13.2
 %
 
 
 
 
 
 
 
 
 
 
Net (loss) income
$
(14,298
)
$
6,410




 
$
(22,053
)
$
49,153

 
 
Diluted Weighted Average Shares Outstanding (8)(10)
46,158

40,524



 
45,815

39,277

 
 
Adjusted Diluted Weighted Average Shares Outstanding (8)(10)
47,773

40,524

 
 
 
47,965

39,277

 
 
Diluted (Loss) Earnings per Share (8)(10)
$
(0.31
)
$
0.16

$
(0.47
)
#

 
$
(0.48
)
$
1.25

$
(1.73
)
#

Per Share impact of adjustments to Net Income (8)(10)
0.83

0.33

 
 
 
2.34

0.76

 
 
Adjusted Diluted Earnings per Share (8)(10)
$
0.52

$
0.49

$
0.03

6.1
%
 
$
1.86

$
2.01

$
(0.15
)
(7.5
)%
# - Change greater than 100% or not meaningful.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA, non-GAAP measures
 
Three Months Ended December 31,
 
Year Ended December 31,
(in thousands, except per share data, unaudited)
2018
2017
Change $
Change %
 
2018
2017
Change $
Change %
Net (loss) income
$
(14,298
)
$
6,410

$
(20,708
)
#

 
$
(22,053
)
$
49,153

$
(71,206
)
#

Provision for income taxes
1,480

12,588

(11,108
)
(88.2
)%
 
1,489

42,576

(41,087
)
(96.5
)%
Interest expense
18,146

21,990

(3,844
)
(17.5
)%
 
84,356

82,684

1,672

2.0
 %
Depreciation and amortization
4,832

4,717

115

2.4
 %
 
18,838

18,837

1

—
 %
EBITDA
10,160

45,705

(35,545
)
(77.8
)%
 
82,630

193,250

(110,620
)
(57.2
)%
Loss on extinguishment of debt (1)
9,686

—




 
90,569

12,458




Restructuring costs (2)
—

—

 
 
 
—

7,393

 
 
U.K. redress and related costs (3)
32,276

—




 
36,228

—




Legal settlements (4)
889

2,000




 
(289
)
4,311




Transaction-related costs(5)
—

3,050




 
—

5,573




Share-based cash and non-cash compensation(6)
2,098

8,690




 
8,210

10,446




Other adjustments(9)
491

(487
)



 
442

(1,216
)
 
 
Adjusted EBITDA
$
55,600

$
58,958

$
(3,358
)
(5.7
)%
 
$
217,790

$
232,215

$
(14,425
)
(6.2
)%
Adjusted EBITDA Margin
18.5
%
22.1
%
 
 
 
19.9
%
24.1
%
 
 
# - Change greater than 100% or not meaningful.

3


(1)
For the year ended December 31, 2018, the $90.6 million of loss on extinguishment of debt was comprised of (a) $11.7 million incurred in the first quarter of 2018 for the redemption of $77.5 million of the CURO Financial Technologies Corp.'s ("CFTC") 12.00% Senior Secured Notes due 2022, (b) $69.2 million incurred in the third quarter of 2018 for the redemption of the remaining $525.7 million of these notes and (c) $9.7 million incurred in the fourth quarter of 2018 for the redemption of the Non-Recourse U.S. SPV Facility. The $69.2 million of loss on extinguishment incurred in the third quarter was comprised of a $54.0 million make whole premium and $15.2 million of deferred financing costs, net of premium/discounts. An additional $3.3 million is included in related costs for the year ended December 31, 2018 for duplicative interest paid through October 11, 2018 prior to repayment of the remaining 12.00% Senior Secured Notes and the Non-Recourse U.S. SPV Facility.

For the year ended December 31, 2017, the $12.5 million loss from the extinguishment of debt was due to the redemption of CURO Intermediate Holding Corp.'s ("CURO Intermediate") 10.75% Senior Secured Notes due 2018 and the 12.00% Senior Cash Pay Notes due 2017.
(2)
Restructuring costs of $7.4 million for the year ended December 31, 2017 were due to the closure of the remaining 13 U.K. stores.
(3)
U.K. redress and related costs of $36.2 million for the year ended December 31, 2018 includes $13.7 million of customer redress claims and related costs and $22.5 million of goodwill impairment cost.
(4)
Legal settlements for the year ended December 31, 2018 includes (a) a $1.8 million reduction of the liability related to our offer to reimburse certain bank overdraft or non-sufficient funds fees because of possible borrower confusion about certain electronic payments we initiated on their loans, (b) a securities class action lawsuit and (c) settlement of certain matters in California and Canada. Legal settlements for the year ended December 31, 2017 includes $2.3 million for the settlement of the Harrison, et al v. Principal Investment, Inc. et al., and $2.0 million for our offer to reimburse certain bank overdraft or non-sufficient funds fees because of possible borrower confusion about certain electronic payments we initiated on their loans. For more information, see Note 18 - "Contingent Liabilities" of the Notes to Consolidated Financial Statements included in the Company's Form 10-K filed with the SEC on March 13, 2018.
(5)
Transaction-related costs include professional fees paid in connection with potential transactions, expenses related to the Company's initial public offering on December 7, 2017, expenses related to the issuance of $135.0 million additional Senior Secured Notes due 2022 in the fourth quarter of 2017 and the original issuance of $470.0 million of Senior Secured Notes due 2022 in the first quarter of 2017.
(6)
We approved the adoption of share-based compensation plans during 2010 and 2017 for key members of senior management. The estimated fair value of share-based awards is recognized as non-cash compensation expense on a straight-line basis over the vesting period.
(7)
As a result of the Tax Cuts and Jobs Act of 2017 ("2017 Tax Act"), which became law on December 22, 2017, we provided an estimate of the new repatriation tax as of December 31, 2017. Subsequent to further guidance published in the first quarter of 2018, we booked additional tax expense of $1.2 million for the 2017 repatriation tax; based upon additional interpretations and finalization of our 2017 income tax returns, the total repatriation tax was further adjusted in the fourth quarter of 2018, producing a tax benefit of $2.8 million in the fourth quarter. This resulted in a net tax benefit of $1.6 million for the full year.
(8)
The share and per share information have been adjusted to give effect to the 36-to-1 split of the Company's common stock that occurred during the fourth quarter of 2017.
(9)
Other adjustments include deferred rent and the intercompany foreign exchange impact. Deferred rent represents the non-cash component of rent expense. Rent expense is recognized ratably on a straight-line basis over the lease term.
(10)
We calculate Adjusted Earnings per Share utilizing diluted shares outstanding at year-end. If the Company records a loss from continuing operations under U.S. GAAP, shares outstanding utilized to calculate Diluted Earnings Per Share from continuing operations are equivalent to basic shares outstanding. Shares outstanding utilized to calculate Adjusted Earnings Per Share from continuing operations reflect the number of diluted shares the Company would have reported if reporting net income from continuing operations under U.S. GAAP.


Segment Analysis

We report financial results for three reportable segments: the U.S., Canada and the U.K. There have been no changes to the results of operations for the U.S. and Canada from what we reported in our Form 8-K on January 31, 2019. Financial results for the U.K. segment were revised as follows:

U.K. Segment Results
Three Months Ended December 31,
 
Year Ended December 31,
(dollars in thousands, unaudited)
2018
2017
Change $
Change %
 
2018
2017
Change $
Change %
Revenue
$
12,987

$
10,584

$
2,403

22.7
 %
 
$
49,238

$
39,496

$
9,742

24.7
 %
Provision for losses
5,014

4,041

973

24.1
 %
 
21,632

13,660

7,972

58.4
 %
Net revenue
7,973

6,543

1,430

21.9
 %
 
27,606

25,836

1,770

6.9
 %
Advertising costs
1,893

1,436

457

31.8
 %
 
8,970

5,495

3,475

63.2
 %
Non-advertising costs of providing services
506

843

(337
)
(40.0
)%
 
3,209

6,269

(3,060
)
(48.8
)%
Total cost of providing services
2,399

2,279

120

5.3
 %
 
12,179

11,764

415

3.5
 %
Gross margin
5,574

4,264

1,310

30.7
 %
 
15,427

14,072

1,355

9.6
 %
Corporate, district and other
35,745

4,127

31,618

#

 
54,135

17,218

36,917

#

Interest income
(7
)
(1
)
6

#

 
(26
)
(12
)
(14
)
#

Restructuring costs
—

—

—

#

 
—

7,393

(7,393
)
#

Total operating expense
35,738

4,126

31,612

#

 
54,109

24,599

29,510

#

Segment operating (loss) income
(30,164
)
138

(30,302
)
#

 
(38,682
)
(10,527
)
(28,155
)
#

Interest income
(7
)
(1
)
6

#

 
(26
)
(12
)
(14
)
#

Depreciation and amortization
123

117

6

5.1
 %
 
501

648

(147
)
(22.7
)%
EBITDA
(30,048
)
254

(30,302
)
#

 
(38,207
)
(9,891
)
(28,316
)
#

U.K. redress and related costs
32,276

—

32,276



 
36,228

—

36,228



Other adjustments
(6
)
(7
)
1



 
(54
)
(35
)
(19
)


Restructuring costs
—

—

—



 
—

7,393

(7,393
)


Adjusted EBITDA
$
2,222

$
247

$
1,975

#

 
$
(2,033
)
$
(2,533
)
$
500

(19.7
)%
# - Change greater than 100% or not meaningful

4


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)

December 31, 2018
 
December 31, 2017
ASSETS
Cash
$
71,034

 
$
162,374

Restricted cash (includes restricted cash of consolidated VIEs of $12,840 and $6,871 as of December 31, 2018 and 2017, respectively)
28,823

 
12,117

Gross loans receivable (includes loans of consolidated VIEs of $148,876 and $213,846 as of December 31, 2018 and 2017, respectively)
596,787

 
432,837

Less: allowance for loan losses (includes allowance for losses of consolidated VIEs of $12,688 and $46,140 as of December 31, 2018 and 2017, respectively)
(79,384
)
 
(69,568
)
Loans receivable, net
517,403

 
363,269

Deferred income taxes
1,534

 
772

Income taxes receivable
16,741

 
3,455

Prepaid expenses and other
45,070

 
42,512

Property and equipment, net
76,750

 
87,086

Goodwill
119,281

 
145,607

Other intangibles, net of accumulated amortization of $34,576 and $41,156 as of December 31, 2018 and 2017, respectively
29,784

 
32,769

Other
13,197

 
9,770

Total Assets
$
919,617

 
$
859,731

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities
$
57,282

 
$
55,792

Deferred revenue
9,663

 
11,984

Income taxes payable
1,579

 
4,120

Accrued interest (includes accrued interest of consolidated VIEs of $831 and $1,266 as of December 31, 2018 and 2017 respectively)
20,899

 
25,467

Credit services organization guarantee liability
12,007

 
17,795

Deferred rent
11,000

 
11,577

Long-term debt (includes long-term debt and issuance costs of consolidated VIEs of $111,335 and $3,856 as of December 31, 2018 and $124,590 and $4,188 as of December 31, 2017, respectively)
804,140

 
706,225

Subordinated shareholder debt
2,196

 
2,381

Other long-term liabilities
6,222

 
5,768

Deferred tax liabilities
13,730

 
11,486

Total Liabilities
$
938,718

 
$
852,595

Stockholders' Equity
 
 
 
Total Stockholders' Equity
$
(19,101
)
 
$
7,136

Total Liabilities and Stockholders' Equity
$
919,617

 
$
859,731




5


About CURO
CURO Group Holdings Corp. (NYSE: CURO), operating in the U.S. and Canada and powered by its fully integrated technology platform, is a market leader by revenues in providing short-term credit to underbanked consumers. In 1997, the Company was founded in Riverside, California by three Wichita, Kansas childhood friends to meet the growing consumer need for short-term loans. Their success led to opening stores across the United States and expanding to offer online loans and financial services across two countries. Today, CURO combines its market expertise with a fully integrated technology platform, omni-channel approach and advanced credit decisioning to provide an array of short-term credit products across all mediums. CURO operates under a number of brands including Speedy Cash, Rapid Cash, Cash Money, LendDirect, Avío Credit and Opt+. With over 20 years of operating experience, CURO provides financial freedom to the underbanked.
Final Results
The financial results presented and discussed herein are on a preliminary and unaudited basis; final audited data will be included in the Company’s Annual Report on Form 10-K for the period ended December 31, 2018.

Forward-Looking Statements
This 8-K contains forward-looking statements. These forward-looking statements include statements related to our expectations regarding the administration proceedings in the U.K., the impact to our financial statements from this action and our revised fiscal 2019 outlook. In addition, words such as “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 and judgments, including our ability to execute on our business strategy and our ability to accurately predict our future financial results. These assumptions and judgments 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 are important factors both within and outside of our control that could cause our actual results to differ materially from those in the forward-looking statements. These factors include our level of indebtedness; errors in our internal forecasts; 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; actions of regulators and the negative impact of those actions on our business; 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 would could lead to errors in judging customers’ qualifications to receive loans; improper disclosure of customer personal data; failure or 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-part electronic payment solutions providers; disruption caused by employee or third-party theft and errors in our stores as well as other factors discussed in our filings with the Securities and Exchange Commission. 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.


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Fiscal 2019 Outlook - Reconciliation of Net Income and Diluted Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings per share, non-GAAP measures (1) (unaudited)
 
Fiscal 2019 Outlook
 
Year Ending December 31, 2019
(in thousands, except per share data, unaudited)
Low
 
High
Net income
$
103,500

 
$
119,500

Adjustments:
 
 
 
Non-cash rent expense and foreign currency exchange rate impact (2) (3)
—

 
—

Share-based cash and non-cash compensation
9,000

 
9,000

Intangible asset amortization
2,500

 
2,500

Cumulative tax effect of adjustments
(3,000
)
 
(3,000
)
Adjusted Net Income
$
112,000


$
128,000

 
 
 
 
Net income
$
103,500

 
$
119,500

Diluted Weighted Average Shares Outstanding
47,700

 
48,300

Diluted Earnings per Share
$
2.17


$
2.47

Per Share impact of adjustments to Net Income
0.18


0.18

Adjusted Diluted Earnings per Share
$
2.35


$
2.65


Fiscal 2019 Outlook - Reconciliation of Net Income to EBITDA and Adjusted EBITDA, non-GAAP measures (1) (unaudited)
 
Fiscal 2019 Outlook
 
Year Ending December 31, 2019
(in thousands, unaudited)
Low
 
High
Net income
$
103,500

 
$
119,500

Provision for income taxes
36,200

 
40,200

Interest expense
73,000

 
73,000

Depreciation and amortization
18,300

 
18,300

EBITDA
231,000

 
251,000

Non-cash rent expense and foreign currency exchange rate impact (2) (3)
—

 
—

Share-based cash and non-cash compensation
9,000

 
9,000

Adjusted EBITDA
$
240,000

 
$
260,000

 
(1) See a description of Non-GAAP Financial Measures at the end of this release for more information.
(2) The Company has historically excluded the impact of non-cash interest from adjusted earnings metrics. With the adoption of ASU 842, effective January 1, 2019, the Company anticipates the difference between GAAP rent expense and cash rent paid will grow. However, the Company will continue to adjust for this difference. The Company is in the process of evaluating the impact of ASU 842 on rent expense.
(3) The Company has historically excluded the impact of foreign currency translation and hedges from adjusted earnings metrics; the Company does not include the impact of any hedge settlement or realized currency gains or losses in its outlook.

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 and Adjusted Earnings Per Share, or the Adjusted Earnings measures (net income plus or minus gain (loss) on extinguishment of debt, restructuring and other costs, goodwill and intangible asset impairments, transaction-related costs, share-based compensation, intangible asset amortization and cumulative tax effect of 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).

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

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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, such as Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA, 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 in order 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 Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of public companies in our industry, many of which present Adjusted Net Income, Adjusted Earnings per Share, EBITDA and/or Adjusted EBITDA 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 guarantee but do not include in the Consolidated Financial Statements. Management believes this analysis provides investors with important information needed to evaluate overall lending performance.
We provide non-GAAP financial information for informational purposes and to enhance understanding of the U.S. GAAP consolidated financial statements. Adjusted Net Income, Adjusted Earnings per Share, EBITDA, Adjusted EBITDA and Gross Combined Loans Receivable should not be considered as alternatives to income from continuing operations, 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
Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA 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.

As noted above, Gross Combined Loans Receivable includes 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. Management believes this analysis provides investors with important information needed to evaluate overall lending performance.

We evaluate stores based on revenue per store, provision for losses at each store and store-level EBITDA, with consideration given to the length of time a store has been open and its geographic location. We monitor newer stores for their progress to profitability and their rate of revenue growth.
We believe Adjusted Net Income, Adjusted Earnings per Share, EBITDA and Adjusted EBITDA are used by investors 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. The computation of Adjusted EBITDA as presented in this release may differ from the computation of similarly-titled measures provided by other companies.

Investor Relations:
Roger Dean
Executive Vice President and Chief Financial Officer
Phone: 844-200-0342
Email: IR@curo.com
Or
Global IR Group
Gar Jackson,
Phone: 949-873-2789
Email: gar@globalirgroup.com


(CURO-NWS)

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