Financial News

goeasy Ltd. Reports Record Results for the Third Quarter

Loan Portfolio Increased from $750 million to $1.04 billion, up 38%
Revenue Increased from $130 million to $156 million, up 20%
Net Income Increased from $14.3 million to $19.8 million, up 38%
Quarterly Earnings Per Share Increased from $0.97 to $1.28, up 32%

MISSISSAUGA, Ontario, Nov. 04, 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 third quarter ended September 30, 2019.
               
Third Quarter Results

During the quarter the Company generated a record $286 million of total loan originations, up 29% from the $221 million in the third quarter of 2018. The increased originations led to growth in the loan portfolio of $75.9 million, which reached $1.04 billion at the end of the current quarter, up 38% from $750 million as at September 30, 2018.

Revenue for the third quarter increased to $156 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 13.2%, up slightly from 12.9% in the third quarter of 2018, down sequentially from 13.5% in the second quarter of 2019 and within the Company’s targeted range of 11.5% to 13.5% for 2019.

Growing revenues and continued improvements in operating leverage led to elevated margins, with record net income and earnings per share. Operating income grew to $42.6 million, up 29% from $32.9 million in the third quarter of 2018, while the operating margin expanded to 27% up from 25%. Net income in the third quarter was $19.8 million, up 38% from $14.3 million in 2018, which resulted in diluted earnings per share of $1.28, up 32% from the $0.97 in 2018.

“We saw positive momentum from our new branded media campaign, which drove a 25% increase in loan application volume and a second straight quarter of record new customers, resulting in a 20% increase in loan growth over the prior year,” said Jason Mullins, goeasy’s President & Chief Executive Officer. “Credit performance also began to improve, as the annualized net charge-off rate for the quarter reduced sequentially by 30-bps, from 13.5% to 13.2%, while the risk-adjusted yield held flat. The strong revenue growth combined with continued operating leverage led to another quarter of record net income and earnings per share.”

“The last several months have also been highlighted by several major accomplishments on our journey to become Canada’s top non-prime consumer lender,” Mr. Mullins continued. “Our progress to improve the future credit quality of our portfolio, expand our channels of distribution through the strategic partnership and investment in PayBright, and strengthen our balance sheet with $120 million of increased capacity and reduce borrowing costs, provides further confidence to achieve our targets for 2019 and beyond. With the successful amendment of our revolving credit facility now completed, we will focus on exploring the opportunity to refinance our high yield notes and add new sources of capital that can further increase liquidity and optimize our balance sheet.”

Other Key Third Quarter Highlights

easyfinancial

  • Total application volume increased 25%
  • Revenue grew to $122 million, up 28%
  • Secured loan portfolio grew to $101 million, up from $41 million
  • 65% of net loan advances in the quarter were issued to new customers, up slightly from 63%
  • 46% of applications acquired online, up from 37%
  • Aided brand awareness of 84%, up from 80%
  • Average loan book per branch improved to $3.5 million, an increase of 35%
  • The delinquency rate on the final Saturday of the quarter was 4.6%, up slightly from 4.4%
  • Operating income of $47.5 million, up 26%
  • Operating margin of 39%, consistent with the third quarter of 2018             

easyhome

  • Revenue of $33.9 million, down slightly from $34.2 million
  • Same store revenue growth of 2.4%
  • Consumer lending portfolio within easyhome stores increased to $33.5 million, up from $17.2 million
  • Revenue from consumer lending increased to $4.6 million, up from $2.2 million
  • Operating income of $5.6 million, down slightly from $5.9 million
  • Operating margin of 16.6%, down slightly from the 17.2% reported in the third quarter of 2018
  • Acquired and merged 6 stores and the associated consumer leasing portfolios from Aarons Inc.

Overall

  • 38th consecutive quarter of same store sales growth
  • 73rd consecutive quarter of positive net income
  • Total same store revenue growth of 20.4%
  • Return on equity of 24.1% in the quarter, up from 23.8%
  • Net external debt to net capitalization of 69% as at September 30, 2019, below the Company’s target leverage ratio of 70%
  • Cash provided by operating activities before the net issuance of consumer loans receivable and purchase of lease assets during the quarter was a record $80.9 million
  • Repurchased 79,260 shares in the quarter under the Company’s Normal Course Issuer Bid, bringing total repurchases since November 2018 to 856,712 shares at a weighted average price of $41.19
  • Ranked in the inaugural TSX30 program as one of the 30 top-performing TSX stocks over a three-year period based on dividend-adjusted share price appreciation
  • Listed on the inaugural Report on Business list of Canada’s Top Growing Companies for its three-year cumulative revenue growth

Nine Months Results

For the first nine months of 2019, goeasy achieved revenues of $444 million, up 21% compared with $368 million in the same period of 2018. Operating income for the period was $122.3 million compared with $84.6 million in the first nine months of 2019, an increase of $37.7 million or 45%. Net income for the first nine months of 2019 was $57.7 million and diluted earnings per share was $3.72 compared with $37.2 million or $2.53 per share, increases of 55% and 47%, respectively.

Balance Sheet and Liquidity

Total assets were $1.24 billion as at September 30, 2019, an increase of 26% from $985 million as at September 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 $225 million during the first nine months of 2019, an increase of 32% from $170 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 $215 million in funding capacity, which will allow it to achieve its targets for the growth of its consumer loan portfolio through to the first quarter of 2021. 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 September 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 $2.1 billion.

Future Outlook

The Company has provided 3-year commercial targets for 2019 through 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. These targets remain unchanged and are as follows:

  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%+

Dividend

The goeasy Board of Directors has approved a quarterly dividend of $0.31 per share payable on January 10, 2020, to the holders of common shares of record as at the close of business on December  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., a Canadian company, headquartered in Mississauga, Ontario, provides non-prime leasing and lending services through its easyhome and easyfinancial divisions. With a wide variety of financial products and services including unsecured and secured instalment loans, goeasy aspires to help put Canadians on a path to a better financial future, as they rebuild their credit and graduate to prime lending. Customers can transact seamlessly with easyhome and easyfinancial through an omni-channel model that includes online and mobile, as well as over 400 leasing and lending locations across Canada supported by more than 1,900 employees.

Throughout the company’s history, it has served over 1 million Canadians and originated over $3.6 billion in loans, with one in three customers graduating to prime credit and 60% increasing their credit score within 12 months of borrowing.

goeasy is the proud recipient of several awards including Waterstone Canada’s Most Admired Corporate Cultures, Glassdoor Top CEO Award, Achievers Top 50 Most Engaged Workplaces in North America, the Digital Finance Institute’s Canada’s Top 50 FinTech Companies, ranking on the TSX30 and placing on the Report on Business ranking of Canada’s Top Growing Companies. The company and its employees believe strongly in giving back to the communities in which it operates and has raised over $2.7 million to support its long-standing partnerships with the Boys & Girls Clubs of Canada and Habitat for Humanity.

goeasy Ltd.’s. common shares are listed 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. 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  
    September 30, December 31,  
    2019 2018  
         
ASSETS        
Cash   29,723 100,188  
Amounts receivable   17,713 15,450  
Prepaid expenses   5,130 3,835  
Consumer loans receivable, net   971,467 782,864  
Investment   34,300 -  
Lease assets   45,987 51,618  
Property and equipment   22,300 21,283  
Deferred tax assets   8,132 9,445  
Derivative financial asset   23,905 35,094  
Intangible assets   17,031 14,589  
Right-of-use assets   43,648 -  
Goodwill   21,310 21,310  
TOTAL ASSETS   1,240,646 1,055,676  
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Liabilities        
Revolving credit facility   112,000 -  
Accounts payable and accrued liabilities   40,989 45,103  
Income taxes payable   4,078 7,499  
Dividends payable   4,447 3,247  
Deferred lease inducements   - 1,234  
Unearned revenue   7,323 6,002  
Lease liabilities   50,136 -  
Convertible debentures   40,797 40,581  
Notes payable   643,337 650,481  
TOTAL LIABILITIES   903,107 754,147  
         
Shareholders' equity        
Share capital   141,927 138,090  
Contributed surplus   17,438 16,105  
Accumulated other comprehensive income   9,325 3,624  
Retained earnings   168,849 143,710  
TOTAL SHAREHOLDERS' EQUITY   337,539 301,529  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   1,240,646 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 Nine Months Ended  
    September 30, September 30, September 30, September 30,  
    2019  2018  2019 2018   
             
REVENUE            
Interest income   90,304   67,597   249,594 182,163    
Lease revenue   27,134   29,506   84,968 90,308    
Commissions earned   34,909   29,387   98,341 85,514    
Charges and fees   3,786   3,421   10,944 10,046    
    156,133   129,911   443,847 368,031    
             
EXPENSES BEFORE DEPRECIATION AND AMORTIZATION            
Salaries and benefits   30,141   27,149   89,248 85,339    
Stock-based compensation   1,752   1,727   5,828 5,081    
Advertising and promotion   6,425   3,352   19,211 12,942    
Bad debts   43,326   32,867   113,485 84,794    
Occupancy   5,086   8,628   15,089 25,858    
Technology costs   3,314   2,660   9,071 8,292    
Other expenses   7,737   7,605   21,504 21,796    
    97,781   83,988   273,436 244,102    
             
DEPRECIATION AND AMORTIZATION            
Depreciation of lease assets   9,023   10,091   28,051 30,144    
Depreciation of property and equipment   1,607   1,461   4,657 4,470    
Depreciation of right-of-use assets   3,798   -   11,266 -    
Amortization of intangible assets   1,355   1,486   4,127 4,704    
    15,783   13,038   48,101 39,318    
             
Total operating expenses   113,564   97,026   321,537 283,420    
             
Operating income   42,569   32,885   122,310 84,611    
             
Finance costs            
Interest expenses and amortization of deferred financing charges   14,208   12,894   40,350 32,989    
Interest expense on lease liabilities   613   -   1,808 -    
    14,821   12,894   42,158 32,989    
             
Income before income taxes   27,748   19,991   80,152 51,622    
             
Income tax expense (recovery)            
Current   8,097   9,266   21,951 20,601    
Deferred   (174 ) (3,617 ) 535 (6,216 )  
    7,923   5,649   22,486 14,385    
             
Net income   19,825   14,342   57,666 37,237    
             
Basic earnings per share   1.35   1.03   3.94 2.70    
Diluted earnings per share   1.28   0.97   3.72 2.53    
             
             



Segmented Reporting            
               
      Three Months Ended September 30, 2019  
($ in 000's except earnings per share)   easyfinancial easyhome Corporate Total  
               
Revenue            
  Interest income   87,087 3,217 -   90,304  
  Lease revenue   - 27,134 -   27,134  
  Commissions earned   32,706 2,203 -   34,909  
  Charges and fees   2,463 1,323 -   3,786  
      122,256 33,877 -   156,133  
               
Total operating expenses before            
  depreciation and amortization   71,283 16,854 9,644   97,781  
               
Depreciation and amortization            
  Depreciation and amortization of lease assets, property and equipment and intangible assets   1,794 9,453 738   11,985  
  Depreciation of right-of-use assets   1,672 1,951 175   3,798  
      3,466 11,404 913   15,783  
               
Segment operating income (loss)   47,507 5,619 (10,557 ) 42,569  
               
Finance costs            
  Interest expenses and amortization of deferred financing charges         14,208  
  Interest expense on lease liabilities         613  
            14,821  
               
Income before income taxes         27,748  
               
Income taxes         7,923  
               
Net Income         19,825  
               
Diluted earnings per share         1.28  
               
      Three Months Ended September 30, 2018  
($ in 000's except earnings per share)   easyfinancial easyhome Corporate Total  
               
Revenue            
  Interest income   66,053 1,544 -   67,597  
  Lease revenue   - 29,506 -   29,506  
  Commissions earned   27,728 1,659 -   29,387  
  Charges and fees   1,877 1,544 -   3,421  
      95,658 34,253 -   129,911  
Total operating expenses before            
  depreciation and amortization   55,906 17,660 10,422   83,988  
               
Depreciation and amortization            
  Depreciation and amortization of lease assets, property and equipment and intangible assets   2,004 10,712 322   13,038  
Segment operating income (loss)   37,748 5,881 (10,744 ) 32,885  
               
Finance costs            
  Interest expense and amortization of deferred financing charges         12,894  
Income before income taxes         19,991  
               
Income taxes         5,649  
               
Net Income         14,342  
               
Diluted earnings per share         0.97  
               
               
      Nine Months Ended September 30, 2019  
($ in 000's except earnings per share)   easyfinancial easyhome Corporate Total  
               
Revenue            
  Interest income   241,321 8,273 -   249,594  
  Lease revenue   - 84,968 -   84,968  
  Commissions earned   92,029 6,312 -   98,341  
  Charges and fees   6,853 4,091 -   10,944  
      340,203 103,644 -   443,847  
Total operating expenses before            
  depreciation and amortization   194,294 49,944 29,198   273,436  
               
Depreciation and amortization            
  Depreciation and amortization of lease assets, property and equipment and intangible assets   5,389 29,383 2,063   36,835  
  Depreciation of right-of-use assets   4,728 5,978 560   11,266  
      10,117 35,361 2,623   48,101  
               
Segment operating income (loss)   135,792 18,339 (31,821 ) 122,310  
               
Finance costs            
  Interest expense and amortization of deferred financing charges         40,350  
  Interest expense on lease liabilities         1,808  
            42,158  
               
Income before income taxes         80,152  
               
Income taxes         22,486  
               
Net Income         57,666  
               
Diluted earnings per share         3.72  
               
      Nine Months Ended September 30, 2018  
($ in 000's except earnings per share)   easyfinancial easyhome Corporate Total  
               
Revenue            
  Interest income   178,808 3,355 -   182,163  
  Lease revenue   - 90,308 -   90,308  
  Commissions earned   80,829 4,685 -   85,514  
  Charges and fees   5,402 4,644 -   10,046  
      265,039 102,992 -   368,031  
               
Total operating expenses before            
  depreciation and amortization   158,106 54,733 31,263   244,102  
               
Depreciation and amortization            
  Depreciation and amortization of lease assets, property and equipment and intangible assets   6,368 31,866 1,084   39,318  
Segment operating income (loss)   100,565 16,393 (32,347 ) 84,611  
               
Finance costs            
  Interest expense and amortization of deferred financing charges         32,989  
Income before income taxes         51,622  
               
Income taxes         14,385  
               
Net Income         37,237  
               
Diluted earnings per share         2.53  



Summary of Financial Results and Key Performance Indicators          
           
($ in 000’s except earnings per share and percentages) Three Months Ended Variance Variance  
September 30, 2019 September 30, 2018 $ / bps % change  
Summary Financial Results          
Revenue 156,133   129,911   26,222   20.2 %  
Operating expenses before depreciation and amortization 97,781   83,988   13,793   16.4 %  
EBITDA 49,329   35,832   13,497   37.7 %  
EBITDA margin 31.6 % 27.6 % 400 bps   14.5 %  
Depreciation and amortization expense 15,783   13,038   2,745   21.1 %  
Operating income 42,569   32,885   9,684   29.4 %  
Operating margin 27.3 % 25.3 % 200 bps   7.9 %  
Finance costs 14,821   12,894   1,927   14.9 %  
Effective income tax rate 28.6 % 28.3 % 30 bps   1.1 %  
Net income 19,825   14,342   5,483   38.2 %  
Diluted earnings per share 1.28   0.97   0.31   32.0 %  
Return on equity 24.1 % 23.8 % 30 bps   1.3 %  
           
Key Performance Indicators      
Same store revenue growth (overall) 20.4 % 26.2 % (580 bps)   (22.1 %)  
Same store revenue growth (easyhome) 2.4 % 6.2 % (380 bps)   (61.3 %)  
           
Segment Financials          
easyfinancial revenue 122,256   95,658   26,598   27.8 %  
easyfinancial operating margin 38.9 % 39.5 % (60 bps)   (1.5 %)  
easyhome revenue 33,877   34,253   (376 ) (1.1 %)  
easyhome operating margin 16.6 % 17.2 % (60 bps)   (3.5 %)  
           
Portfolio Indicators          
Gross consumer loans receivable 1,035,596   749,581   286,015   38.2 %  
Growth in consumer loans receivable 75,888   63,008   12,880   20.4 %  
Gross loan originations 286,068   221,340   64,728   29.2 %  
Total yield on consumer loans (including ancillary products) 50.1 % 53.5 % (340 bps)   (6.4 %)  
Net charge-offs as a percentage of average gross consumer loans receivable 13.2 % 12.9 % 30 bps   2.3 %  
Potential monthly lease revenue 8,432   8,906   (474 ) (5.3 %)  
           
           
           
($ in 000’s except earnings per share and percentages) Nine Months Ended Variance Variance  
September 30, 2019 September 30, 2018 $ / bps % change  
Summary Financial Results      
Revenue 443,847   368,031   75,816   20.6 %  
Operating expenses before depreciation and amortization 273,436   244,102   29,334   12.0 %  
EBITDA 142,360   93,785   48,575   51.8 %  
EBITDA margin 32.1 % 25.5 % 660 bps   25.9 %  
Depreciation and amortization expense 48,101   39,318   8,783   22.3 %  
Operating income 122,310   84,611   37,699   44.6 %  
Operating margin 27.6 % 23.0 % 460 bps   20.0 %  
Finance costs 42,158   32,989   9,169   27.8 %  
Effective income tax rate 28.1 % 27.9 % 20 bps   0.7 %  
Net income 57,666   37,237   20,429   54.9 %  
Diluted earnings per share 3.72   2.53   1.19   47.0 %  
Return on equity 24.5 % 21.6 % 290 bps   13.4 %  
           
Key Performance Indicators        
Same store revenue growth (overall) 19.8 % 25.0 % (520 bps) (20.8 %)  
Same store revenue growth excluding easyfinancial (easyhome) 3.4 % 6.1 % (270 bps) (44.3 %)  
           
Segment Financials          
easyfinancial revenue 340,203   265,039   75,164   28.4 %  
easyfinancial operating margin 39.9 % 37.9 % 200 bps   5.3 %  
easyhome revenue 103,644   102,992   652   0.6 %  
easyhome operating margin 17.7 % 15.9 % 180 bps   11.3 %  
           
Portfolio Indicators          
Gross consumer loans receivable 1,035,596   749,581   286,015   38.2 %  
Growth in consumer loans receivable 201,817   223,035   (21,218 ) (9.5 %)  
Gross loan originations 781,861   657,517   124,344   18.9 %  
Total yield on consumer loans (including ancillary products) 50.2 % 54.8 % (460 bps)   (8.4 %)  
Net charge-offs as a percentage of average gross consumer loans receivable 13.3 % 12.6 % 71 bps   5.6 %  
Potential monthly lease revenue 8,432   8,906   (474 ) (5.3 %)  
           


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