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goeasy Ltd. Reports Record Results for the Third Quarter 2018

Loan book increase of 58%
Revenue increase of 26%
Net Income increase of 24%

MISSISSAUGA, Ontario, Nov. 07, 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 a path to a better tomorrow, today, announced its results for the third quarter ended September 30, 2018.

Third Quarter Results

Revenue for the third quarter of 2018 increased to a record $130 million, an increase of 26.5% over the same period in 2017. The increase was driven by the growth of the easyfinancial consumer loan portfolio, which reached $750 million by quarter's end, up 58.5% from $473 million as at September 30, 2017.

During the quarter the Company generated $221 million of loan originations, up 40.5% from the $158 million in the third quarter of 2017. The growth in originations was primarily fueled by consumer demand for the core unsecured loan product, further expansion of risk adjusted rate loans, the growth of secured lending and offering consumer loans through the easyhome leasing stores. The increased originations led to growth in the loan portfolio of $63.0 million in the quarter, up 32.0% from the $47.7 million in the third quarter of 2017. The net charge-off rate in the quarter was 12.9%, down from 13.1% in the third quarter of 2017 and at the midpoint of the Company’s guided range of 12% to 14% for 2018.

The result of growing revenues and increasing scale produced record operating income, margins, net income, earnings per share and return on equity. Operating income grew to $32.9 million, up 37.5% from $23.9 million in the third quarter of 2017, while operating margin expanded to 25.3% up from 23.3%. Net income in the third quarter was $14.3 million, up 23.6% from $11.6 million in 2017, which resulted in diluted earnings per share of $0.97, up 19.8% from the $0.81 in 2017. After adjusting for the effect of IFRS 9, which would have elevated the loan loss provision and bad debt expense in the prior year, diluted earnings per share were up 47.0% compared to the estimated $0.66 per share in the third quarter of 2017.
               
“It was a solid quarter for the company, highlighted by record financial results,” said David Ingram, goeasy’s Chief Executive Officer. “The strong revenue growth, combined with stable credit performance, led to improved margins, record earnings per share and a record return on equity of nearly 24%. We remain on track to finish 2018 near the mid-point of our guided range for both the ending consumer loan portfolio and the net charge-offs. During the quarter we also made several enhancements to our balance sheet. Securing lower cost capital in advance of its use reduced earnings per share by approximately $0.14 in the quarter, while the equity raise completed in October served to lower our total leverage.  Combined we were able to obtain the capital we need to fund our growth until the third quarter of 2020.”

Other Key Highlights

easyfinancial

  • Revenue increased to $95.7 million, up 39.2% from $68.7 million in the third quarter of 2017.
  • 61.9% of net loan advances year to date have been issued to new customers, consistent with 2017.
  • Average loan book per branch improved to $2.7 million from $1.9 million in the third quarter of 2017, an increase of 42.1%.
  • Average weekly delinquency rate throughout the quarter was 4.4%, consistent with the same period of 2017.

easyhome

  • Same store revenue increased 6.2%, up from 3.0% in the third quarter of 2017
  • Consumer lending portfolio within easyhome leasing stores of $17.2 million up from $2.9 million in the third quarter of 2017.
  • Revenue of $2.2 million from consumer lending, versus $0.3 million in the third quarter of 2017.
  • Operating margin of 17.2% for the quarter, an increase from the 16.4% reported in 2017.
  • Operating income of $5.9 million in the quarter compared with $5.6 million in the third quarter of 2017.

Overall

  • 34th consecutive quarter of same store sales growth.
  • 69th consecutive quarters of positive net income.
  • Total same store revenue growth of 26.2%, up from 21.3% in the third quarter of 2017.
  • Compound annual growth in diluted earnings per share of 37.0% since 2001.
  • Record return on equity of 23.8% in the quarter, up from 21.3% in the third quarter of 2017.
  • Net external debt to net capitalization of 68% as at September 30, 2018, below the Company’s target leverage ratio of 70%.

Future Outlook

In the second quarter of 2018, the Company provided revised 3-year targets for 2018 through 2020. These targets remain unchanged and are as follows:

  2018 2019 2020
Gross Loan Receivable Portfolio at Year End $825M - $875M $1.1B - $1.2B $1.3B - $1.4B
easyfinancial Total Revenue Yield 54% - 56% 49% - 51% 46% - 48%
New easyfinancial locations 20 - 30 10 - 20 10 - 20
Net charge-offs as a percentage of average gross consumer loans receivable 12% - 14% 11.5% - 13.5% 11% - 13%
easyfinancial Operating Margin 38% - 40% 42% - 44% 44% - 46%
Total Revenue Growth 26% - 28% 20% - 22% 14 - 16%
Return on Equity 21%+ 24%+ 26%+
       

“With the fourth quarter already off to a strong start, we remain excited by our future initiatives and our ability to execute against the targets set for the next 3 years.” Mr. Ingram concluded. “We are still at the early stages of a significant period for growth that will continue to build our leadership position in the non-prime lending space. To this end, I am extremely proud to have guided the Company for the last 18 years and have always been inspired by the meaningful relationships that our front-line staff have worked tirelessly to build with the customers in their communities. In January when I take on the role of Executive Chairman, I will pass the reigns over to Jason Mullins to assume the role of CEO, who has demonstrated during his eight years with our Company the qualities and commitment to be an outstanding leader for the future of our organization.”

Balance Sheet and Liquidity

Total assets were $985 million as at September 30, 2018, an increase of 62.8% from $605 million as at September 30, 2017, primarily driven by the growth in the consumer loan portfolio and the additional cash on hand to fund future growth.

During the quarter, the Company issued US$150 million of Notes Payable due on November 1, 2022, which generated net proceeds of C$203 million. The issuance of the Notes Payable was at a premium to par resulting in an attractive interest rate (excluding the effect of financing charges) of 6.17%. On October 10, 2018, the Company also closed its offering of 920,000 common shares, at a price of $50.50 per common share for aggregate net proceeds of $44.3 million.

Based on the cash on hand at the end of the quarter, borrowing capacity under the Company’s revolving credit facility and the equity issuance subsequent to the end of the quarter the Company had approximately $340 million, which will allow the Company to achieve its targets for the growth of its consumer loans portfolio through to the third quarter 2020.

Dividend

The Board of Directors has approved a quarterly dividend of $0.225 per share payable on January 11, 2019 to the holders of common shares of record as at the close of business on December 28, 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. 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:

David Ingram
Chief Executive Officer
(905) 272-2788

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,
  2018 2017 2018 2017
         
REVENUE        
Interest income   67,597     44,994     182,163     123,909
Lease revenue   29,506     30,892     90,308     94,327
Commissions earned   29,387     23,561     85,514     66,470
Charges and fees   3,421     3,246     10,046     9,778
    129,911     102,693     368,031     294,484
         
EXPENSES BEFORE DEPRECIATION AND AMORTIZATION        
Salaries and benefits   27,149     26,355     85,339     75,970
Stock-based compensation   1,727     1,764     5,081     4,096
Advertising and promotion   3,352     2,913     12,942     11,640
Bad debts   32,867     17,729     84,794     49,019
Occupancy   8,628     8,352     25,858     24,968
Other expenses   10,265     8,940     30,088     27,092
    83,988     66,053     244,102     192,785
         
DEPRECIATION AND AMORTIZATION        
Depreciation of lease assets   10,091     10,039     30,144     30,981
Depreciation of property and equipment   1,461     1,389     4,470     4,044
Amortization of intangible assets   1,486     1,288     4,704     3,731
    13,038     12,716     39,318     38,756
         
Total operating expenses   97,026     78,769     283,420     231,541
         
Operating income   32,885     23,924     84,611     62,943
         
Finance costs   12,894     7,465     32,989     19,868
         
Income before income taxes   19,991     16,459     51,622     43,075
         
Income tax expense (recovery)        
Current   9,266     4,938     20,601     9,075
Deferred   (3,617 )   (85 )   (6,216 )   3,234
    5,649     4,853     14,385     12,309
         
Net income   14,342     11,606     37,237     30,766
         
Basic earnings per share   1.03     0.86     2.70     2.28
Diluted earnings per share   0.97     0.81     2.53     2.17
         

goeasy Ltd.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(expressed in thousands of Canadian dollars)

     
  As At As At
  September 30, December 31,
  2018 2017
     
ASSETS     
Cash 141,450   109,370
Amounts receivable 15,249   14,422
Prepaid expenses 5,237   3,545
Consumer loans receivable 703,461   513,425
Lease assets 49,602   54,318
Property and equipment 19,934   15,941
Deferred tax assets 14,326   2,121
Intangible assets 14,602   15,163
Goodwill 21,310   21,310
TOTAL ASSETS 985,171   749,615
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Liabilities    
Accounts payable and accrued liabilities 41,527   43,071
Income taxes payable 7,846   9,445
Dividends payable 3,123   2,426
Deferred lease inducements 977   1,294
Unearned revenue 5,513   4,819
Convertible debentures 39,632   47,985
Notes payable 624,542   401,193
Derivative financial liability 10,692   11,138
TOTAL LIABILITIES 733,852   521,371
     
Shareholders' equity    
Share capital 97,262   85,874
Contributed surplus 14,350   15,305
Accumulated other comprehensive (loss) income (2,538 ) 141
Retained earnings 142,245   126,924
TOTAL SHAREHOLDERS' EQUITY 251,319   228,244
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 985,171   749,615
     

Segmented Reporting 

  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 2,004 10,712 322   13,038
Segment operating income (loss) 37,748 5,881 (10,744 ) 32,885
Finance costs       12,894
Income before income taxes       19,991
Income taxes       5,649
         
Net Income       14,342
         
Diluted earnings per share       0.97
         
         
  Three Months Ended September 30, 2017
($ in 000's except earnings per share)  easyfinancial easyhome Corporate Total
         
Revenue         
Interest income 44,796 198 -   44,994
Lease revenue - 30,892 -   30,892
Commissions earned 22,324 1,237 -   23,561
Charges and fees 1,591 1,655 -   3,246
  68,711 33,982 -   102,693
Total operating expenses before depreciation and amortization 38,799 17,712 9,542   66,053
Depreciation and amortization 1,772 10,706 238   12,716
Segment operating income (loss) 28,140 5,564 (9,780 ) 23,924
Finance costs       7,465
Income before income taxes       16,459
Income taxes       4,853
         
Net Income       11,606
         
Diluted earnings per share       0.81
         
         
  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 6,368 31,866 1,084   39,318
Segment operating income (loss) 100,565 16,393 (32,347 ) 84,611
Finance costs       32,989
Income before income taxes       51,622
Income taxes       14,385
         
Net Income       37,237
         
Diluted earnings per share       2.53
         
         
  Nine Months Ended September 30, 2017
($ in 000's except earnings per share)  easyfinancial easyhome Corporate Total
         
Revenue         
Interest income 123,662 247 -   123,909
Lease revenue - 94,327 -   94,327
Commissions earned 63,017 3,453 -   66,470
Charges and fees 4,558 5,220 -   9,778
  191,237 103,247 -   294,484
Total operating expenses before depreciation and amortization 112,010 54,376 26,399   192,785
Depreciation and amortization 5,187 32,853 716   38,756
Segment operating income (loss) 74,040 16,018 (27,115 ) 62,943
Finance costs       19,868
Income before income taxes       43,075
Income taxes       12,309
         
Net Income       30,766
         
Diluted earnings per share       2.17
         

 

($ in 000’s except earnings per share and percentages) Three Months Ended Variance Variance
September 30, 2018 September 30, 2017 $ / bps % change
Summary Financial Results        
Revenue 129,911   102,693   27,218   26.5 %
Operating expenses before depreciation and amortization 83,988   66,053   17,935   27.2 %
EBITDA 35,832   26,601   9,231   34.7 %
EBITDA margin 27.6 % 25.9 % 170 bps 6.6 %
Depreciation and amortization expense 13,038   12,716   322   2.5 %
Operating income 32,885   23,924   8,961   37.5 %
Operating margin 25.3 % 23.3 % 200 bps 8.6 %
Finance costs 12,894   7,465   5,429   72.7 %
PTPP income 52,858   34,188   18,670   54.6 %
Effective income tax rate 28.3 % 29.5 % (120 bps) (4.1 %)
Net income 14,342   11,606   2,736   23.6 %
Diluted earnings per share 0.97   0.81   0.16   19.8 %
Return on Equity 23.8 % 21.3 % 250 bps 11.7 %
         
Key Performance Indicators  
Same store revenue growth 26.2 % 21.3 % 490 bps 23.0 %
Same store revenue growth excluding easyfinancial 6.2 % 3.0 % 320 bps 106.7 %
         
Segment Financials        
easyfinancial revenue 95,658   68,711   26,947   39.2 %
easyfinancial operating margin 39.5 % 41.0 % (150 bps) (3.7 %)
easyhome revenue 34,253   33,982   271   0.8 %
easyhome operating margin 17.2 % 16.4 % 80 bps 4.9 %
         
Portfolio Indicators        
Gross consumer loans receivable 749,581   473,063   276,518   58.5 %
Growth in consumer loans receivable 63,008   47,739   15,269   32.0 %
Gross loan originations 221,340   157,589   63,751   40.5 %
Bad debt expense as a percentage of financial revenue 33.6 % 25.7 % 790 bps 30.7 %
Net charge offs as a percentage of average gross consumer loans receivable 12.9 % 13.1 % (20 bps) (1.5 %)
Potential monthly lease revenue 8,906   9,226   (320 ) (3.5 %)
Change in potential monthly lease revenue due to ongoing operations (68 ) (110 ) 42   38.2 %
                 

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