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goeasy Ltd. Reports Results for the Fourth Quarter and Full Year

Record Revenues and Operating Income
Record Originations and Loan Book Growth
Dividend Increase of 25% to $0.90 Per Share

MISSISSAUGA, Ontario, Feb. 20, 2018 (GLOBE NEWSWIRE) -- goeasy Ltd. (TSX:GSY), (“goeasy” or the “Company”), a leading full-service provider of goods and alternative financial services that provides everyday Canadians with a chance for a better tomorrow, today, announced its results for the fourth quarter and year ended December 31, 2017.  The Company also announced a 25% increase in its annual dividend from $0.72 to $0.90 per share.

Results for the Fourth Quarter Ended December 31, 2017

Revenue for the fourth quarter of 2017 was $108.6 million, an increase of 18.9% from $91.3 million in the fourth quarter of 2016. The growth was driven by the expansion of easyfinancial and the related growth of its consumer loans receivable portfolio which reached $526.5 million by quarter's end, up 42.1% from December 31, 2016.

During the quarter, the Company generated record levels of loan originations and loan book growth on the back of its second largest quarter ever of net customer gain.  Loan originations in the quarter reached a record $176.4 million, an increase of 50.1% compared with the fourth quarter of 2016.  The record growth of the loan book in the quarter was $53.5 million compared to $26.8 million in the fourth quarter of 2016, an increase of 99.5%. The strong growth was fueled by the increased penetration of risk adjusted rate loans to more credit worthy borrowers, the Company’s expansion into Quebec and the introduction of the Company’s new secured loan product.  Additionally, strong growth in the quarter was supported by improved performance of the company’s digital marketing efforts and an increased investment in advertising, which increased by $2.0 million or 48%.

Operating income for the three-month period ended December 31, 2017 was $24.5 million, an increase of $7.3 million or 42.4% when compared to operating income in the fourth quarter of 2016.  Net income for the quarter, which included an $8.2 million before tax charge associated with the refinancing completed on November 1, 2017, was $5.4 million.  Excluding this charge, adjusted net income was $11.4 million, up $3.1 million or 36.6% from the net income of $8.3 million in the fourth quarter of 2016. Diluted earnings per share for the quarter was $0.38.  Adjusted diluted earnings per share was $0.79 per share, an increase of $0.19 or 31.7% from diluted earnings per share of $0.60 in the fourth quarter of 2016.

“The fourth quarter rounded out a record year for our Company which resulted in financial success and the accomplishment of many of our strategic goals,” said David Ingram, goeasy’s President and Chief Executive Officer.  “Consumer demand remains elevated and our product suite is clearly matching the right size of loan with the right interest rate as our overall credit performance continues to improve. I am particularly pleased that during the quarter we saw an improvement in charge-off rates from 15.8% to 12.8%.”

Other highlights for the fourth quarter of 2017 include:

easyfinancial

  • Revenue increased by 33.2% to $74.6 million from $56.0 million in the fourth quarter of 2016.
  • Delinquency rates on the final Saturday of the quarter improved to 5.3% from 5.8% on the final Saturday of 2016.
  • Operating margin for the fourth quarter of 2017 increased to 38.4% from 34.9% in the comparable period of 2016.
  • Cash generated from easyfinancial customer payments was $127.1 million in the fourth quarter of 2017 compared to $94.0 million in the fourth quarter of 2016.
  • easyfinancial now has the highest consumer awareness in Canada for non-prime installment lending.  

easyhome

  • Same store revenue increased 0.1%.
  • The operating margin for easyhome for the fourth quarter of 2017 was 14.3%, down from the 15.6% reported for the same period in 2016.

Overall

  • 31st consecutive quarter of same store sales growth.
  • 66th consecutive quarter of positive net income.
  • Operating margin was 22.5% for the quarter, up from 18.8% in the fourth quarter of 2016.
  • The Company’s normalized return on equity was 20.1% in the current quarter, up from 17.4% for the fourth quarter of 2016.

Full Year Results

For the full year, goeasy recorded revenues of $405.2 million, up 16.6% compared with $347.5 million in 2016. 

Operating income for 2017 was $87.4 million, net income was $36.1 million and diluted earnings per share was $2.56.  The 2017 results included an $8.2 million before tax charge associated with the refinancing completed on November 1, 2017.  The 2016 results included a $3.0 million gain on the sale of an investment and $6.4 million in transaction advisory costs that were not routine and non-recurring.  Excluding these items, adjusted net income for 2017 was $42.2 million compared with $33.2 million in 2016, an increase of $9.0 million or 27.2%; and adjusted diluted earnings per share for 2017 was $2.97 compared with $2.38 in 2016, an increase of $0.59 or 24.8%.

In addition to the strong financial performance during 2017, the Company also made significant progress on its strategic initiatives:

  • easyfinancial expanded into the province of Quebec.  At year end, the Quebec loan portfolio exceeded $23 million, significantly ahead of initial expectations.
  • Beginning in the second quarter of 2017, the Company introduced its easyfinancial unsecured loan product into almost 100 of its easyhome leasing stores.
  • During the fourth quarter of 2017, easyfinancial launched a new secured lending product  to qualifying borrowers who own and reside within their home and who are looking for lower cost forms of financing.
  • Also during the fourth quarter of 2017, the Company completed a recapitalization of the Company’s balance sheet.  The new debt structure provided by the North American capital markets and a group of national and international banks provides goeasy with a capital structure to fund its growth for the foreseeable future.

Balance Sheet and Liquidity

Total assets were $749.6 million as at December 31, 2017, an increase of 49.0% from $503.1 million as at December 31, 2016 and driven by the $156.0 million growth in the gross consumer loans receivable portfolio.

As at December 31, 2017, the Company had $109.4 million in cash on hand and an additional $110.0 million from committed facilities available to support future growth.

The Company believes that its cash and committed facilities, coupled with the cash flows provided by operations, will be sufficient to fund the planned growth through to the end of 2018 and into 2019.

Outlook

goeasy’s strategic focus continues to be driven by the following strategic imperatives:

  • Enhance its product offering
  • Evolve its delivery channels
  • Execute with efficiency and effectiveness
  • Deliver a best-in-class customer experience


The Company has previously provided 3 year targets for 2018 through 2020 that is:

  2018 2019 2020
       
New easyfinancial locations 20 - 30
openings
10 - 20
openings
10 - 20
Openings
       
Gross consumer loans receivable portfolio at year end $700 - $750
million
$875 - $950
million
$1.0 - $1.1
billion
       
easyfinancial total revenue yield 54% - 56% 49% - 51% 46% - 48%
       
Net charge-offs as a percentage of average gross consumer loans receivable 12% - 14% 11% - 13% 10% - 12%
       
easyfinancial operating margin 38% - 40% 40%+ 40%+
       
Total revenue growth 16% - 18% 14% - 16% 10% - 12%
       
Return on Equity 18% - 20% 20%+ 20%+

The achievement of these targets by the Company, however, is predicated on a number of factors, including the pace of expansion of easyfinancial.

"The significant progress made by goeasy over the past few years has positioned the Company to be the leading non-prime lender for everyday Canadians. Since 2001 on a normalized basis we have achieved compound annual growth rates of 12% for revenue and 29% for earnings per share. We remain unwavering in our commitment to provide our customers with the opportunity to achieve better financial outcomes and the ability to graduate towards prime credit,” said Mr. Ingram.  “We are better prepared than ever before to capture a greater share of the $165 billion non-prime consumer credit market. The previously announced debt financing provides us with both sufficient capital to fund our growth over the next several quarters and a long-term structure that will enable further access to debt capital as required”. Mr. Ingram concluded, “My thanks to our entire team who continue to work tirelessly to meet and exceed the needs of our customers who are underserved by traditional financial organizations. It is clear now more than ever, that goeasy is well organized for continued success.”

Dividend Increase

Based on its 2017 earnings and the Company’s confidence in its continued growth and access to capital going forward, the Board of Directors has approved an increase to the annual dividend from $0.72 per share to $0.90 per share, an increase of 25%.  As such, the Board of Directors has approved a quarterly dividend of $0.225 per share payable on April 13, 2018 to the holders of common shares of record as at the close of business on March 29, 2018.

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. is a leading full-service provider of goods and alternative financial services that provides everyday Canadians with a chance for a better tomorrow, today.  goeasy Ltd. serves its customers through two key operating divisions, easyfinancial and easyhome. easyfinancial is a non-prime consumer lender that bridges the gap between traditional financial institutions and costly payday lenders.  It is supported by a strong central credit adjudication process and industry leading risk analytics. easyfinancial also operates an indirect lending channel, offering loan products to consumers at the point-of-sale of third party merchants. 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 a national store and branch network and through its online and mobile 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:

David Ingram
President and Chief Executive Officer
(905) 272-2788

         -or-

Steve Goertz
Executive Vice President and Chief Financial Officer
(905) 272-2788

 

goeasy Ltd.        
         
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION      
         
(expressed in thousands of Canadian dollars)        
         
    As At As At  
    December 31, December 31,  
    2017 2016  
         
ASSETS         
Cash   109,370 24,928  
Amounts receivable   14,422 7,857  
Prepaid expenses   3,545 1,909  
Consumer loans receivable   513,425 354,499  
Lease assets   54,318 55,288  
Property and equipment   15,941 16,103  
Deferred tax assets   2,121 6,856  
Intangible assets   15,163 14,312  
Goodwill   21,310 21,310  
TOTAL ASSETS   749,615 503,062  
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Liabilities        
Accounts payable and accrued liabilities   42,706 31,879  
Income taxes payable   9,445 2,874  
Dividends payable   2,426 1,666  
Deferred lease inducements   1,294 1,506  
Unearned revenue   4,819 5,204  
Provisions   365 608  
Term loan   - 263,294  
Convertible debentures   47,985 -  
Notes payable   401,193 -  
Derivative financial instruments   11,138 -  
TOTAL LIABILITIES   521,371 307,031  
         
Shareholders' equity        
Share capital   85,874 82,598  
Contributed surplus   15,305 9,943  
Accumulated other comprehensive (loss) income   141 880  
Retained earnings   126,924 102,610  
TOTAL SHAREHOLDERS' EQUITY   228,244 196,031  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   749,615 503,062  
         
         

 

goeasy Ltd.            
             
CONSOLIDATED STATEMENTS OF INCOME            
             
(expressed in thousands of Canadian dollars except earnings per share)      
             
      Three Months Ended Year Ended
      December 31, December 31, December 31, December 31,  
      2017 2016 2017 2016  
             
REVENUE            
Interest income       49,748   37,477   175,812   138,782  
Lease revenue       31,918   33,832   130,527   137,849  
Other       26,920   19,985   98,885   70,874  
        108,586   91,294   405,224   347,505  
             
Other income       -    -    -    3,000  
             
EXPENSES BEFORE DEPRECIATION AND AMORTIZATION          
Salaries and benefits       26,696   23,014   102,666   91,557  
Stock-based compensation       1,527   1,190   5,623   4,323  
Advertising and promotion       6,356   4,242   20,150   13,457  
Bad debts       18,807   15,936   67,826   55,668  
Occupancy       8,132   8,324   33,100   32,867  
Other expenses       9,166   7,996   36,258   29,398  
Transaction advisory costs       -    -    -    6,382  
        70,684   60,702   265,623   233,652  
             
DEPRECIATION AND AMORTIZATION            
Depreciation of lease assets       10,240   10,789   41,221   44,230  
Depreciation of property and equipment       1,658   1,501   5,702   5,902  
Amortization of intangible assets       1,554   1,127   5,285   4,205  
        13,452   13,417   52,208   54,337  
             
Total operating expenses       84,136   74,119   317,831   287,989  
             
Operating income       24,450   17,175   87,393   62,516  
             
FINANCE COSTS            
Interest expense and amortisation of deferred financing charges   8,774   5,702   28,642   21,048  
Refinancing cost       8,198   -    8,198   -   
        16,972   5,702   36,840   21,048  
             
Income before income taxes       7,478   11,473   50,553   41,468  
             
Income tax expense (recovery)            
Current       1,779   2,045   10,854   11,362  
Deferred       333   1,086   3,567   (943 )
        2,112   3,131   14,421   10,419  
             
Net income       5,366   8,342   36,132   31,049  
             
Basic earnings per share       0.39   0.62   2.67   2.29  
Diluted earnings per share       0.38   0.60   2.56   2.23  
             

 

Segmented Reporting            
             
    Three Months Ended December 31, 2017  
($ in 000's except earnings per share)    easyfinancial easyhome Corporate   Total  
             
Revenue    74,573 34,013 -   108,586  
             
Total operating expenses before            
  depreciation and amortization   43,891 18,194 8,599   70,684  
Depreciation and amortization   2,068 10,955 429   13,452  
             
Operating income (loss)    28,614 4,864 (9,028 ) 24,450  
Finance costs            
  Interest expense and amortization of             
  deferred financing charges         8,774  
  Refinancing cost         8,198  
             
          16,972  
             
Income before income taxes         7,478  
Income taxes         2,112  
             
Net Income         5,366  
             
Diluted earnings per share         0.38  
             
             
    Three Months Ended December 31, 2016  
($ in 000's except earnings per share)    easyfinancial easyhome Corporate   Total  
             
Revenue    55,999 35,295 -   91,294  
             
Total operating expenses before            
  depreciation and amortization   34,772 18,244 7,686   60,702  
Depreciation and amortization   1,675 11,558 184   13,417  
             
Operating income (loss)    19,552 5,493 (7,870 ) 17,175  
Finance costs            
  Interest expense and amortization of             
  deferred financing charges         5,702  
             
          5,702  
             
Income before income taxes         11,473  
Income taxes         3,131  
             
Net Income         8,342  
             
Diluted earnings per share         0.60  
             
             
    Year Ended December 31, 2017  
($ in 000's except earnings per share)    easyfinancial easyhome Corporate   Total  
             
Revenue    267,964 137,260 -   405,224  
Other Income   - - -   -  
             
Total operating expenses before            
  depreciation and amortization   158,055 72,570 34,998   265,623  
Depreciation and amortization   7,255 43,808 1,145   52,208  
             
Operating income (loss)    102,654 20,882 (36,143 ) 87,393  
Finance costs            
  Interest expense and amortization of             
  deferred financing charges         28,642  
  Refinancing cost         8,198  
             
          36,840  
             
Income before income taxes         50,553  
Income taxes         14,421  
             
Net Income         36,132  
             
Diluted earnings per share         2.56  
             
             
    Year Ended December 31, 2016  
($ in 000's except earnings per share)    easyfinancial easyhome Corporate   Total  
             
Revenue    204,076 143,429 -   347,505  
Other Income   - - 3,000   3,000  
             
Total operating expenses before             
  depreciation and amortization and            
  transaction advisory costs   122,843 74,708 29,719   227,270  
Transaction advisory costs   - - 6,382   6,382  
Depreciation and amortization   6,479 47,184 674   54,337  
             
Operating income (loss)    74,754 21,537 (33,775 ) 62,516  
Finance costs            
  Interest expense and amortization of             
  deferred financing charges         21,048  
             
          21,048  
             
Income before income taxes         41,468  
Income taxes         10,419  
             
Net Income         31,049  
             
Diluted earnings per share         2.23  

 

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