CURO Group Holdings Stock

CURO Group Holdings Corp. operates as a tech-enabled, omni-channel consumer finance company serving non-prime, near-prime and prime consumers in portions of the U.S. and Canada. CURO was founded to meet the growing needs of consumers looking for alternative access to credit. The company continuously updates its products and technology platform to offer a variety of convenient, accessible financial and loan services. The company designs its customer experience to allow consumers to apply for, update and manage their loans in the channels they prefer—in branch, and via mobile device or over the phone.

In the U.S., the company operates under several principal brands, including Covington Credit, Heights Finance, Quick Credit, Southern Finance and First Heritage. In Canada, the company operates under Cash Money and LendDirect direct lending brands and the Flexiti POS/BNPL brand. As of December 31, 2022, the company operated its direct lending and online services in eight Canadian provinces and one Canadian territory. The company’s point-of-sale operations are available at over 8,400 retail locations and over 3,500 merchant partners across 10 provinces and two territories. Until the sale of the company’s Legacy U.S. Direct Lending Business in July 2022, it also operated under brands that included Speedy Cash, Rapid Cash and Avio Credit. The company also offered demand deposit accounts in the U.S. under the Revolve Finance brand, and credit card programs under the First Phase brand, until the fourth quarter of 2022. As of December 31, 2022, the company’s store network consisted of 496 locations across 13 U.S. states.

On July 8, 2022, the company sold its Legacy U.S. Direct Lending Business, which operated under the Speedy Cash, Rapid Cash and Avio Credit brands, to Community Choice Financial.

First Heritage Acquisition

On July 13, 2022, the company purchased First Heritage Credit, LLC (First Heritage), a consumer lender that provides near-prime installment loans and customary opt-in insurance and other financial products in the U.S. This acquisition furthered the company’s strategic shift to broaden its presence in the near-prime consumer lending market in the U.S.

Products and Services

The company operates its business under three segments: U.S. Direct Lending, Canada Direct Lending and Canada POS Lending.

The company’s direct lending operations include a broad range of direct-to-consumer finance products focusing on revolving LOC, installment loans, insurance and other ancillary products, serving its customers' diversified needs as they address credit and related financial needs. The acquisitions of Heights Finance and First Heritage enable the company to expand the geographic reach of its Installment products in the U.S. Through the company’s acquisition of Flexiti in March 2021, it diversified its products, offering POS financing options for consumers in Canada. The company also provides a number of ancillary financial products, such as optional credit protection, demand deposit accounts, proprietary general-purpose credit cards, check cashing and money transfer services. The company’s products are licensed and governed by enabling federal and state legislation in the U.S. and federal and provincial regulations in Canada.

Installment Loans

Installment loan products range from unsecured, short-term loans in Canada whereby a customer receives cash in exchange for a post-dated personal check or a pre-authorized debit from the customer’s bank account, to fixed-term, fully amortizing loans with a fixed payment amount due each period during the term of the loan in both U.S. and Canada. Certain Installment loans are secured by a clear vehicle title or security interest in the vehicle. The customer receives the benefit of immediate cash and retains possession of the vehicle while the loan is outstanding. Payments are due bi-weekly or monthly to match the customer's pay cycle.

Revolving LOC Loans

Revolving LOC loans are lines of credit without a specified maturity date. The company earns interest on the outstanding loan balances. As of December 31 2022, Revolving LOC loans also included the Flexiti POS financing products, which are included in its Canada POS Lending segment and allow it to offer BNPL products, as well as Flexiti branded credit cards at merchant locations.

Insurance Premiums and Commissions

The company offers consumers a number of insurance products, including Credit Life and Disability, Involuntary Unemployment, Personal Property Collateral and Collateral Protection Plans. These products are optional and not a condition of the loan. The company owns a captive insurance company in the U.S. that reinsures a portion of its insurance sales. The company earns revenue from the sale of optional credit protection insurance, which it recognizes ratably over the term of the loan.

Other

Other products the company offers include general-purpose credit cards, ancillary financial products, including check cashing, prepaid cards, demand deposit and money transfer services. The company offers memberships for car club, home and auto related services. Check cashing, demand deposit and money transfer product lines in the U.S. ended with the divestiture of the Legacy U.S. Direct Lending Business and is only offered by Canada Direct Lending. Revenues from consumer products include credit card revenue, check cashing and miscellaneous fees, such as administrative fees, annual membership fees, over limit fees and deferral fees.

CSO Programs

Through its CSO programs, the company acted as a CSO/CAB on behalf of customers in accordance with applicable state laws. The company offered Installment loans with a maximum term of 180 days through CSO programs in stores and online in the state of Texas. As a CSO, the company earned revenue by charging the customer a CSO fee for arranging an unrelated third party to make a loan to that customer.

Geography

Retail: The company offers POS Lending in Canada at over 8,400 retail locations and over 3,500 merchant partners across 10 provinces and two territories.

Strategy

The company’s acquisitions of Flexiti, Heights Finance and First Heritage established it as a full-spectrum lender able to meet its target customers' evolving credit demands. The key elements of the company’s strategy are to focus on operating new business; and focus on customer experience.

Customers

The company’s U.S. Direct Lending and Canada Direct Lending customers require essential financial services and value timely, transparent, affordable and convenient alternatives to banks, credit card companies and other traditional financial services companies. The company’s U.S. Direct Lending and Canada Direct Lending customers typically earn between $10,000 and $60,000 annually while the average annual earnings of Canada POS Lending customers are approximately C$100,000.

The company’s Canada POS Lending consumers are looking for flexible payment solutions at the time of purchase, primarily at retail locations. The Flexiti card offers deferred payment solutions, for up to 24 months at 0% interest during the promotional period, monthly installment payment solutions of up to 72 months also at 0% interest during the promotional period provided that scheduled payments are made, or a revolving credit experience similar to a typical credit card.

Marketing

The company’s U.S Direct Lending and Canada Direct Lending Businesses use a multi-channel approach to attract new customers and retain valued customer relationships. The company engages with customers across targeted, direct response channels digitally, in stores and through its insourced contact centers. The company reaches out to its customers via email, text, direct mail and phone calls to enhance customer satisfaction and preference, which in turn results in customer recommendations to family and friends. The company’s most effective marketing techniques include paid and organic search, prescreen direct mail campaigns, email, local store marketing, send a friend promotions and asking customers to leave it an online review.

Information Systems

The company’s Canada Direct Lending business is powered by its proprietary loan management system, which is a platform that integrates activities related to customer acquisition, underwriting, scoring, servicing, collections, compliance and reporting.

The company’s proprietary, highly scalable scoring system employs various algorithms which are continuously reviewed and refreshed. The company’s U.S. Direct Lending business is powered by a combination of third party vendors, as well as proprietary software. The vendor solution provides the underpinnings for managing loan origination, decisioning and servicing. The company’s Canada POS Lending Business is powered by Flexiti’s proprietary POS technology platform, which powers the entire lifecycle of customer and merchant transactions.

Collections

The company operates collections through centralized and/or branch locations in the U.S. and Canada to enable store employees to focus primarily on customer service and to improve effectiveness and compliance management. The company uses a variety of collection strategies, including payment plans, settlements and adjustments to due dates. At Canada POS Lending, the company utilizes a combination of internal and external collection agencies to collect on past due and charged off accounts.

Seasonality

The company’s direct lending businesses in the U.S. and Canada typically experience the greatest demand during the third and fourth calendar quarters. In the U.S., this demand generally declines in the first calendar quarter as a result of federal income tax refunds and credits. Typically, the company’s cost of revenue for loan products, which represents its provision for losses, is lowest as a percentage of revenue in the first quarter of each year due to its customers’ receipt of income tax refunds, and increases as a percentage of revenue for the remainder of the year. As a result, the company experiences seasonal fluctuations in its the U.S. operating results and cash needs. The company’s direct lending business in Canada experiences less seasonality than its the U.S. direct lending business. The company’s Canada POS Lending sales are largely driven by the typical seasonality has some of the typical seasonality experienced in the Canadian retail markets, with 31% of 2022 sales falling in the last quarter of the year (year ended December 31, 2022).

Regulatory Environment and Compliance

The company business is heavily regulated and subject to a number of key Federal laws and regulations, including the following:

The Military Lending Act, which imposes a 36% cap on the all-in annual percentage rates charged on loans to active-duty members of the U.S. military, Reserves and National Guard and their dependents.

The Truth in Lending Act and Regulation Z, which require creditors to deliver disclosures to borrowers prior to consummation of both closed-end and open-end loans.

Equal Credit Opportunity Act and Regulation B, which prohibits discrimination based on protected bases. We must also deliver notices specifying the basis for credit denials, as well as certain other notices.

The Fair Credit Reporting Act, which regulates the use of consumer reports and reporting of information to credit reporting agencies.

The Electronic Signatures In Global And National Commerce Act, which governs the use of electronic signatures and disclosures.

The Electronic Funds Transfer Act and Regulation E, which define requirements related to electronic payments.

The Telephone Consumers Protection Act and CAN-SPAM (Controlling the Assault of Non-Solicited Pornography and Marketing Act), as well as rules from the Federal Communications Commission, which require limitations on telemarketing calls, auto-dialed calls, pre-recorded calls, text messages and unsolicited faxes.

Prohibition of dealing with a list of individuals and companies identified by the Office of Foreign Assets Control.

The Gramm-Leach-Bliley Act and (the Foreign Tax Credits) FTC’s Safeguards Rule and its implementing regulations, require the company to protect the confidentiality of its customers’ nonpublic personal information and to disclose to its customers its privacy policy and practices, including those regarding sharing customers’ nonpublic personal information with third parties.

History

The company was founded in 1997. It was incorporated in Delaware in 2013. The company was formerly known as Speedy Group Holdings Corp. and changed its name to CURO Group Holdings Corp. in 2016.