CURO Group Holdings Corp: Analysis & Outlook for Retail Investors.
Mar 10th 2023, 11:10 am
Part 1: Analysis of Performance CURO Group Holdings Corp. operates in the consumer finance industry, offering loans and insurance products to customers. During the period ended July 8, 2022, the company experienced a significant change as it sold its Legacy U.S. Direct Lending Business. As a result of this divestiture, the company's results of operations only include the results from the CSO program. The core consumer finance products offered by the company include Revolving LOC and Installment loans, and revenues generated are recognized from interest income, MDR, finance charges, CSO fees, and insurance products. In terms of revenue, it is notable that the company acquired Heights Finance in December 2021 and First Heritage in July 2022, which has led to the expansion of the type of loans offered, now covering long-term large loans to customers. This expansion may have a positive impact on revenue as it diversifies the company's loan portfolio. However, the provisions for losses are an inherent part of outstanding loans receivable, and the company has maintained an ALL for gross loans receivable at a level estimated to be adequate to absorb such losses based primarily on its analysis of historical loss rates of products containing similar risk characteristics. This prudence suggests that the company is operating with an element of caution, which is a positive signal to investors. Operating expenses of the company are primarily categorized into salaries and benefits, occupancy, advertising, direct operations, depreciation and amortization, and other operating expenses. The company's operating expenses show a good level of expense control. This is an indicator of good management practices. In terms of non-operating expenses, the company's interest expenses are primarily related to its Senior Secured Notes, SPV facilities, and revolvers, including any unused portion of commitment fees. The company's share of Katapult's income or loss is also included. Investors should take into account that non-operating expenses are subject to change depending on various factors, including the company's future investment strategy. Part 2: Analysis of Forward-Looking Statements Looking forward, it is important to note the impact of the divestiture of the company's Legacy U.S. Direct Lending Business on its future financial performance. While it is too soon to predict how the company will fare, the strategic acquisitions of Heights Finance and First Heritage have expanded the company's loan portfolio, which may help offset any negative impact from the divestiture. It is also worth noting the impact of changing consumer trends on the company's business model, specifically relating to online lending and Fintech application in consumer finance. The company recently acquired a Fintech company, Katapult, which may help the company leverage these trends in their future operations. With regards to insurance offerings, a shift towards sustainable insurance products may present opportunities for the company to improve their insurance product offerings and make inroads in the market. CURO Group Holdings Corp. operates in a highly competitive market, and the company must continue to innovate and improve its existing products to stay relevant. The CEO, Don Gayhardt, stated in the company's recent earnings call, "As we look ahead, we remain focused on executing on our long-term strategic initiatives to enhance our core businesses, expand our product offerings and distribution channels and pursue selective acquisition opportunities that create value for our stakeholders". This statement highlights the company's focus on growth and expansion, which may present opportunities for investors in the future. In conclusion, CURO Group Holdings Corp. has shown good expense control in the past and has taken a cautious approach by maintaining adequate provisions for losses. The recent acquisitions may help to offset any negative impacts from the divestiture of the Legacy U.S. Direct Lending Business. The company's initiatives towards strategic expansion, Fintech application, and sustainable insurance products may be key determinants of future growth. Investors should be mindful of these factors when assessing the company's investment potential.