Financial News

goeasy Ltd. Reports Record Results for the Second Quarter

Loan Portfolio Increase of 40%, driven by Record New Customers
Revenue Increased from $123 million to $148 million, up 20%
Net Income Increased from $11.8 million to $19.6 million, up 66%
Quarterly Earnings Per Share Increased from $0.82 to $1.26, up 54%

MISSISSAUGA, Ontario, Aug. 07, 2019 (GLOBE NEWSWIRE) -- goeasy Ltd. (TSX: GSY), (“goeasy” or the “Company”), a leading full-service provider of goods and alternative financial services, announced its results for the second quarter ended June 30, 2019.

Second Quarter Results

During the quarter the Company generated $276 million of total loan originations, up 18% from the $234 million in the second quarter of 2018. The increased originations led to growth in the loan portfolio of $80.3 million, which reached $960 million at the end of the current quarter, up 40% from $687 million as at June 30, 2018.

Revenue for the second quarter increased to $148 million, up 20% over the same period in 2018, driven by the expansion of the consumer loan portfolio. The net charge-off rate for the quarter was 13.5%, up from 12.4% in the second quarter of 2018, as previously expected and within the Company’s targeted range of 11.5% to 13.5% for 2019.

Growing revenues and continued improvement in operating leverage led to record margins, net income, earnings per share and return on equity. Operating income grew to $40.9 million, up 53% from $26.8 million in the second quarter of 2018, while the operating margin expanded to 28% up from 22%. Net income in the second quarter was $19.6 million, up 66% from $11.8 million in 2018, which resulted in diluted earnings per share of $1.26, up 54% from the $0.82 in 2018.

“During the second quarter we launched our spring media campaign, which helped produce a record level of new customers and an 18% increase in loan application volume, leading to loan growth that nearly doubled the first quarter of the year,” said Jason Mullins, goeasy’s President & Chief Executive Officer. “With a sequential increase in our risk-adjusted yield, the credit quality in the province of Quebec performing close to the portfolio average and secured lending representing 11% of our originations, we are striking the right balance between loan growth, yield and credit risk management.”

“In addition to strong business results, the last several months have been a rewarding time for our Company, as we have received recognition for our culture and the engagement of our team,” Mr. Mullins continued, “After being named one of Canada’s Most Admired Corporate Cultures in 2018, we have also been named one of North America’s Top 50 Most Engaged Workplaces for 2019 by Achievers and one of Canada’s Top 50 FinTech Companies for 2019 by the Digital Finance Institute. These awards are a testament to the passion and dedication that our entire team has for helping our customers improve their financial outcomes. With 1 out of 3 easyfinancial customers graduating to prime credit and 60% experiencing an increase in their credit score within 12 months of borrowing from us, we are proud and inspired to see our vision brought to life.”

Other Key Second Quarter Highlights

easyfinancial

  • Total application volume increased 18%
  • Revenue grew to $113 million, up 27%
  • Secured loan portfolio grew to $89 million, up from $32 million
  • 66% of net loan advances in the quarter were issued to new customers, the highest level since 2012
  • Aided brand awareness of 83%, up from 75%
  • Average loan book per branch improved to $3.3 million, an increase of 32%
  • The delinquency rate on the final Saturday of the quarter was 4.3%, consistent with the 4.2% reported in the same period of 2018
  • Operating income of $46.9 million, up 41%
  • Operating margin of 41.4%, an increase from the 37.5% reported in the second quarter of 2018

             
easyhome

  • Revenue grew to $34.5 million, up slightly from $34.3 million
  • Same store revenue increased 3.8%, compared to 6.9%
  • Consumer lending portfolio within easyhome stores increased to $29.5 million, up from $12.8 million
  • Revenue from consumer lending increased to $3.9 million, up from $1.6 million
  • Operating income of $5.6 million, up 10%
  • Operating margin of 16.1%, an increase from the 14.9% reported in the second quarter of 2018

Overall

  • 37th consecutive quarter of same store sales growth
  • 72nd consecutive quarter of positive net income
  • Total same store revenue growth of 19.9%
  • Record return on equity of 25.2% in the quarter, up from 20.9%
  • Net external debt to net capitalization of 67% as at June 30, 2019, below the Company’s target leverage ratio of 70%
  • Repurchased 95,500 shares in the quarter under the Company’s Normal Course Issuer Bid, bringing total repurchases since November 2018 to 777,452 shares at a weighted average price of $40.01
  • Named one of North America’s Top 50 Most Engaged Workplaces for 2019 by Achievers
  • Named one of Canada’s Top 50 FinTech Companies for 2019 by the Digital Finance Institute 

Six Months Results

For the first six months of 2019, goeasy achieved revenues of $288 million, up 21% compared with $238 million in the same period of 2018. Operating income for the period was $79.7 million compared with $51.7 million in the first six months of 2018, an increase of $28 million or 54%. Net income for the first six months of 2019 was $37.8 million and diluted earnings per share was $2.44 compared with $22.9 million or $1.58 per share, increases of 65% and 54%, respectively.

Balance Sheet and Liquidity

Total assets were $1.1 billion as at June 30, 2019, an increase of 39% from $805 million as at June 30, 2018, driven by the growth in the consumer loan portfolio.

Cash provided by operating activities before the net issuance of consumer loans receivable and purchase of lease assets was $67.3 million in the second quarter of 2019, an increase of 81% from $37.2 million in the same period of 2018. 

Based on the cash on hand at the end of the quarter and the borrowing capacity under the Company’s amended revolving credit facility, goeasy had approximately $200 million in funding capacity, which will allow it to achieve its targets for the growth of its consumer loan portfolio through to the third quarter of 2020. The Company has historically been able to obtain the additional financing required to fund the growth of its business at steadily lower costs of borrowing, increasing rates of leverage and more favorable terms. The Company also estimates that once its existing and available sources of capital are fully utilized, it could continue to grow the loan portfolio by approximately $150 million per year solely from internal cash flows.

The Company also estimates that as of June 30, 2019 if it were to run-off its consumer loan and consumer leasing portfolios, the value of the total cash repayments paid to the Company over the remaining life of its contracts would be approximately $1.9 billion.

Outlook

The Company has reaffirmed its 3-year commercial targets for 2019 through 2021. The periods of 2020 and 2021 remain unchanged, with the goal to achieve a consumer loan portfolio between $1.5 and $1.7 billion and return on equity that exceeds 26% by 2021.

The Company continues to pursue a long-term strategy that includes expanding its product range, developing its channels of distribution and leveraging risk-based pricing offers, which increase the average loan size and extend the life of its customer relationships. As such, the total yield earned on its consumer loan portfolio will gradually decline, while net charge-off rates moderate and operating margins expand, resulting in an increase to return on equity.

  Updated 2019 Targets 2020 Targets 2021 Targets
Gross Loan Receivable Portfolio at Year End $1.1B - $1.2B $1.3B - $1.4B $1.5B - $1.7B
easyfinancial Total Revenue Yield 49% - 51% 46% - 48% 43% - 45%
New easyfinancial Locations 10 - 20 10 - 20 10 – 20
Net Charge-offs as a Percentage of Average Gross Consumer Loans Receivable 11.5% - 13.5% 11% - 13% 11% - 13%
easyfinancial Operating Margin 40% - 42% 44% - 46% 45% - 47%
Total Revenue Growth 20% - 22% 14 - 16% 10% - 12%
Return on Equity 24%+ 26%+ 26%+

“As we prepare to cross the $1 billion loan portfolio milestone in the next few weeks, the confidence in our strategy to provide everyday Canadians with a path to a better tomorrow, today, is stronger than ever, “said Mr. Mullins. “We continue to operate in a stable economic environment supported by wage growth that exceeds the level of inflation and unemployment at all-time lows. Furthermore, as we begin to utilize our lowest cost form of debt through the revolving credit facility, our average blended cost of interest has declined to 7.1% this quarter, from 7.6% a year ago, further reducing the borrowing costs for the business. Our balance sheet remains strong and well capitalized, with $200 million in available capital to fund the growth of our business through to the third quarter of 2020 and support our ambitious growth plan to become Canada’s top non-prime consumer lender.”

Dividend

The goeasy Board of Directors has approved a quarterly dividend of $0.31 per share payable on October 11, 2019 to the holders of common shares of record as at the close of business on September 27, 2019.

Forward-Looking Statements

All figures reported above with respect to outlook are targets established by the Company and are subject to change as plans and business conditions vary. Accordingly, investors are cautioned not to place undue reliance on the foregoing guidance. Actual results may differ materially.

This press release includes forward-looking statements about goeasy, including, but not limited to, its business operations, strategy, expected financial performance and condition, the estimated number of new locations to be opened, targets for growth of the consumer loans receivable portfolio, annual revenue growth targets, strategic initiatives, new product offerings and new delivery channels, anticipated cost savings, planned capital expenditures, anticipated capital requirements, liquidity of the Company, plans and references to future operations and results and critical accounting estimates. In certain cases, forward-looking statements are statements that are predictive in nature, depend upon or refer to future events or conditions, and/or can be identified by the use of words such as ‘expects’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘budgeted’, ‘estimates’, ‘forecasts’, ‘targets’ or negative versions thereof and similar expressions, and/or state that certain actions, events or results ‘may’, ‘could’, ‘would’, ‘might’ or ‘will’ be taken, occur or be achieved.

Forward-looking statements are based on certain factors and assumptions, including expected growth, results of operations and business prospects and are inherently subject to, among other things, risks, uncertainties and assumptions about the Company’s operations, economic factors and the industry generally, as well as those factors referred to in the Company’s most recent Annual Information Form and Management Discussion and Analysis, as available on www.sedar.com, in the section entitled “Risk Factors”. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those expressed or implied by forward-looking statements made by the Company, due to, but not limited to, important factors such as the Company’s ability to enter into new lease and/or financing agreements, collect on existing lease and/or financing agreements, open new locations on favourable terms, purchase products which appeal to customers at a competitive rate, respond to changes in legislation, react to uncertainties related to regulatory action, raise capital under favourable terms, manage the impact of litigation (including shareholder litigation), control costs at all levels of the organization and maintain and enhance the system of internal controls. The Company cautions that the foregoing list is not exhaustive.

The reader is cautioned to consider these, and other factors carefully and not place undue reliance on forward-looking statements, which may not be appropriate for other purposes. The Company is under no obligation (and expressly disclaims any such obligation) to update or alter the forward-looking statements whether as a result of new information, future events or otherwise, unless required by law.

About goeasy

goeasy Ltd. offers leasing and lending services in the alternative financial services market and provides everyday Canadians a path to a better tomorrow, today. goeasy Ltd. serves its customers through two key operating divisions, easyfinancial and easyhome. easyfinancial is a non-prime consumer lending business that bridges the gap between traditional financial institutions and costly payday loans. easyfinancial offers a range of unsecured and secured personal instalment loans supported by a strong central credit adjudication process and industry leading risk analytics. easyhome is Canada's largest lease-to-own company, offering brand-name household furniture, appliances and electronics to consumers under weekly or monthly leasing agreements through both corporate and franchise stores. Both operating divisions of goeasy Ltd. offer the highest level of customer service and enable customers to transact through an omni channel model that includes over 400 stores and branches across Canada and digital eCommerce enabled platforms.

goeasy Ltd.’s. common shares are listed for trading on the TSX under the trading symbol “GSY” and goeasy’s convertible debentures are traded on the TSX under the trading symbol “GSY-DB”.  goeasy is rated BB- with a stable trend from S&P and Ba3 with a stable trend from Moody’s. For more information, visit www.goeasy.com.

For further information contact:

Jason Mullins
President & Chief Executive Officer
(905) 272-2788

David Ingram
Executive Chairman of the Board
(905) 272-2788

goeasy Ltd.        
         
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION    
(Unaudited)        
(expressed in thousands of Canadian dollars)        
         
         
    As At As At  
    June 30, December 31,  
    2019 2018  
         
ASSETS         
Cash   29,263 100,188  
Amounts receivable   17,417 15,450  
Prepaid expenses   4,717 3,835  
Consumer loans receivable, net   901,401 782,864  
Lease assets   46,701 51,618  
Property and equipment   21,924 21,283  
Deferred tax assets   9,704 9,445  
Derivative financial asset   10,390 35,094  
Intangible assets   15,636 14,589  
Right-of-use assets   41,592 -  
Goodwill   21,310 21,310  
TOTAL ASSETS   1,120,055 1,055,676  
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Liabilities        
Accounts payable and accrued liabilities   41,508 45,103  
Income taxes payable   13,264 7,499  
Dividends payable   4,468 3,247  
Deferred lease inducements   - 1,234  
Unearned revenue   7,232 6,002  
Lease liabilities   48,180 -  
Revolving credit facility   20,000 -  
Convertible debentures   41,146 40,581  
Notes payable   624,935 650,481  
TOTAL LIABILITIES   800,733 754,147  
         
Shareholders' equity        
Share capital   142,224 138,090  
Contributed surplus   15,740 16,105  
Accumulated other comprehensive income   4,483 3,624  
Retained earnings   156,875 143,710  
TOTAL SHAREHOLDERS' EQUITY   319,322 301,529  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   1,120,055 1,055,676  
         

 

goeasy Ltd.          
           
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME      
(Unaudited)          
(expressed in thousands of Canadian dollars except earnings per share)      
           
           
    Three Months Ended Six Months Ended
    June 30, June 30, June 30, June 30,
    2019 2018   2019 2018  
           
REVENUE          
Interest income     82,560   60,775     159,290   114,566  
Lease revenue     28,352   30,133     57,834   60,802  
Commissions earned     33,352   29,188     63,432   56,127  
Charges and fees     3,590   3,247     7,158   6,625  
      147,854   123,343     287,714   238,120  
           
EXPENSES BEFORE DEPRECIATION AND AMORTIZATION          
Salaries and benefits     30,430   29,715     59,107   58,190  
Stock-based compensation     2,189   1,735     4,076   3,354  
Advertising and promotion     6,936   5,661     12,786   9,590  
Bad debts     35,765   27,549     70,159   51,927  
Occupancy     5,023   8,668     10,003   17,230  
Technology costs     3,019   2,666     5,757   5,632  
Other expenses     7,566   7,654     13,767   14,191  
      90,928   83,648     175,655   160,114  
           
DEPRECIATION AND AMORTIZATION          
Depreciation of lease assets     9,378   10,051     19,028   20,053  
Depreciation of property and equipment     1,549   1,391     3,050   3,009  
Depreciation of right-of-use assets     3,677   -      7,468   -   
Amortization of intangible assets     1,391   1,451     2,772   3,218  
      15,995   12,893     32,318   26,280  
           
Total operating expenses     106,923   96,541     207,973   186,394  
           
Operating income     40,931   26,802     79,741   51,726  
           
Finance costs          
Interest expenses and amortization of deferred financing charges   13,244   10,425     26,142   20,095  
Interest expense on lease liabilities     592   -      1,195   -   
      13,836   10,425     27,337   20,095  
           
Income before income taxes     27,095   16,377     52,404   31,631  
           
Income tax expense (recovery)          
Current     6,497   6,413     13,854   11,335  
Deferred     1,030   (1,857 )   709   (2,599 )
      7,527   4,556     14,563   8,736  
           
Net income     19,568   11,821     37,841   22,895  
           
Basic earnings per share     1.34   0.86     2.58   1.67  
Diluted earnings per share     1.26   0.82     2.44   1.58  
           

 

Segmented Reporting            
               
      Three Months Ended June 30, 2019  
($ in 000's except earnings per share)    easyfinancial easyhome Corporate Total  
               
Revenue             
  Interest income     79,817   2,743   -      82,560  
  Lease revenue     -    28,352   -      28,352  
  Commissions earned     31,277   2,075   -      33,352  
  Charges and fees     2,242   1,348   -      3,590  
        113,336   34,518   -      147,854  
               
Total operating expenses before            
  depreciation and amortization     63,085   17,172   10,671     90,928  
               
Depreciation and amortization            
  Depreciation and amortization of lease assets,
  property and equipment and intangible assets
    1,777   9,829   712     12,318  
  Depreciation of right-of-use assets     1,539   1,945   193     3,677  
        3,316   11,774   905     15,995  
               
Segment operating income (loss)     46,935   5,572   (11,576 )   40,931  
               
Finance costs            
  Interest expenses and amortization of
  deferred financing charges
          13,244  
  Interest expense on lease liabilities           592  
              13,836  
               
Income before income taxes           27,095  
               
Income taxes           7,527  
               
Net Income           19,568  
               
Diluted earnings per share           1.26  
               
      Three Months Ended June 30, 2018  
($ in 000's except earnings per share)    easyfinancial easyhome Corporate Total  
               
Revenue             
  Interest income     59,669   1,106   -      60,775  
  Lease revenue     -    30,133   -      30,133  
  Commissions earned     27,601   1,587   -      29,188  
  Charges and fees     1,745   1,502   -      3,247  
        89,015   34,328   -      123,343  
Total operating expenses before            
  depreciation and amortization     53,663   18,642   11,343     83,648  
               
Depreciation and amortization            
  Depreciation and amortization of lease assets,
  property and equipment and intangible assets
    1,996   10,588   309     12,893  
Segment operating income (loss)     33,356   5,098   (11,652 )   26,802  
               
Finance costs            
  Interest expense and amortization of
  deferred financing charges
          10,425  
Income before income taxes           16,377  
               
Income taxes           4,556  
               
Net Income           11,821  
               
Diluted earnings per share           0.82  
               
               
      Six Months Ended June 30, 2019  
($ in 000's except earnings per share)    easyfinancial easyhome Corporate Total  
               
Revenue             
  Interest income     154,234   5,056   -      159,290  
  Lease revenue     -    57,834   -      57,834  
  Commissions earned     59,323   4,109   -      63,432  
  Charges and fees     4,390   2,768   -      7,158  
        217,947   69,767   -      287,714  
Total operating expenses before            
  depreciation and amortization     123,011   33,090   19,554     175,655  
               
Depreciation and amortization            
  Depreciation and amortization of lease assets,
  property and equipment and intangible assets
    3,595   19,930   1,325     24,850  
  Depreciation of right-of-use assets     3,056   4,027   385     7,468  
        6,651   23,957   1,710     32,318  
               
Segment operating income (loss)     88,285   12,720   (21,264 )   79,741  
               
Finance costs            
  Interest expense and amortization of
  deferred financing charges
          26,142  
  Interest expense on lease liabilities           1,195  
              27,337  
               
Income before income taxes           52,404  
               
Income taxes           14,563  
               
Net Income           37,841  
               
Diluted earnings per share           2.44  
               
      Six Months Ended June 30, 2018  
($ in 000's except earnings per share)    easyfinancial easyhome Corporate Total  
               
Revenue             
  Interest income     112,755   1,811   -      114,566  
  Lease revenue     -    60,802   -      60,802  
  Commissions earned     53,101   3,026   -      56,127  
  Charges and fees     3,525   3,100   -      6,625  
        169,381   68,739   -      238,120  
               
Total operating expenses before            
  depreciation and amortization     102,200   37,073   20,841     160,114  
               
Depreciation and amortization            
  Depreciation and amortization of lease assets,
  property and equipment and intangible assets
    4,364   21,154   762     26,280  
Segment operating income (loss)     62,817   10,512   (21,603 )   51,726  
               
Finance costs            
  Interest expense and amortization of
  deferred financing charges
          20,095  
Income before income taxes           31,631  
               
Income taxes           8,736  
               
Net Income           22,895  
               
Diluted earnings per share           1.58  

 

Summary of Financial Results and Key Performance Indicators          
           
($ in 000’s except earnings per share and percentages) Three Months Ended Variance Variance    
June 30, 2019   June 30, 2018   $ / bps % change    
Summary Financial Results          
Revenue   147,854     123,343     24,511   19.9%    
Operating expenses before depreciation and amortization   90,928     83,648     7,280   8.7%    
EBITDA   47,548     29,644     17,904   60.4%    
EBITDA margin 32.2%   24.0%    820 bps   34.2%    
Depreciation and amortization expense   15,995     12,893     3,102   24.1%    
Operating income   40,931     26,802     14,129   52.7%    
Operating margin 27.7%   21.7%    600 bps   27.6%    
Finance costs   13,836     10,425     3,411   32.7%    
Effective income tax rate 27.8%   27.8%     -    -    
Net income   19,568     11,821     7,747   65.5%    
Diluted earnings per share   1.26     0.82     0.44   53.7%    
Return on equity 25.2%   20.9%    430 bps   20.6%    
           
Key Performance Indicators      
Same store revenue growth (overall) 19.9%   28.4%    (850 bps)   (29.9%)    
Same store revenue growth (easyhome) 3.8%   6.9%    (310 bps)   (44.9%)    
           
Segment Financials          
easyfinancial revenue   113,336     89,015     24,321   27.3%    
easyfinancial operating margin 41.4%   37.5%    390 bps   10.4%    
easyhome revenue   34,518     34,328     190   0.6%    
easyhome operating margin 16.1%   14.9%    120 bps   8.1%    
           
Portfolio Indicators          
Gross consumer loans receivable   959,708     686,573     273,135   39.8%    
Growth in consumer loans receivable   80,338     84,849     (4,511)   (5.3%)    
Gross loan originations   276,355     233,811     42,544   18.2%    
Total yield on consumer loans (including ancillary products) 50.4%   55.2%    (480 bps)   (8.7%)    
Net charge-offs as a percentage of average gross consumer
  loans receivable
13.5%   12.4%    110 bps   8.9%    
Potential monthly lease revenue   8,365     8,973     (608)   (6.8%)    
           
           
           
($ in 000’s except earnings per share and percentages) Six Months Ended Variance Variance    
June 30, 2019   June 30, 2018   $ / bps % change    
Summary Financial Results      
Revenue   287,714     238,120     49,594   20.8%    
Operating expenses before depreciation and amortization   175,655     160,114     15,541   9.7%    
EBITDA   93,031     57,953     35,078   60.5%    
EBITDA margin 32.3%   24.3%    800 bps   32.9%    
Depreciation and amortization expense   32,318     26,280     6,038   23.0%    
Operating income   79,741     51,726     28,015   54.2%    
Operating margin 27.7%   21.7%    600 bps   27.6%    
Finance costs   27,337     20,095     7,242   36.0%    
Effective income tax rate 27.8%   27.6%    20 bps   0.7%    
Net income   37,841     22,895     14,946   65.3%    
Diluted earnings per share   2.44     1.58     0.86   54.4%    
Return on equity 24.7%   20.6%    410 bps   19.9%    
           
Key Performance Indicators        
Same store revenue growth (overall) 20.3%   26.0%    (570 bps)   (21.9%)    
Same store revenue growth excluding easyfinancial (easyhome) 4.2%   6.1%    (190 bps)   (31.1%)    
           
Segment Financials          
easyfinancial revenue   217,947     169,381     48,566   28.7%    
easyfinancial operating margin 40.5%   37.1%    340 bps   9.2%    
easyhome revenue   69,767     68,739     1,028   1.5%    
easyhome operating margin 18.2%   15.3%    290 bps   19.0%    
           
Portfolio Indicators          
Gross consumer loans receivable   959,708     686,573     273,135   39.8%    
Growth in consumer loans receivable   125,929     160,027     (34,098)   (21.3%)    
Gross loan originations   495,793     436,177     59,616   13.7%    
Total yield on consumer loans (including ancillary products) 50.2%   55.6%    (540 bps)   (9.7%)    
Net charge-offs as a percentage of average gross consumer
  loans receivable
13.4%   12.4%    100 bps   8.1%    
Potential monthly lease revenue   8,365     8,973     (608)   (6.8%)    
           

 

 

 

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