TORONTO, Aug. 14, 2020 (GLOBE NEWSWIRE) -- Dealnet Capital Corp. ("Dealnet" or the "Company") (TSX VENTURE: DLS), reported today its financial results for the quarter ended June 30, 2020. All results are reported under International Financial Reporting Standards ("IFRS") and in Canadian dollars, unless otherwise specified.
Net income of $279 thousand in the first half of 2020, an increase of $1.5 million over the results from the same period in 2019. This is a remarkable performance given the current economic climate. Dealnet’s business is strengthening, supported by a foundation that combines a solid, multi-year plan with talented leaders and managers who are demonstrating an ability to execute this plan in the face of a challenging operating environment. The Company continues to be in a strong position and well positioned to take further strategic actions as it executes on its growth strategy.
One Contact and EcoHome Financial Successfully Managing Through COVID-19
One Contact (“OCI”) delivered a profit of $432 thousand for the second quarter of 2020, an increase of 35% over the same period last year, despite significant volume declines at two of its customers and operational challenges related to COVID-19. Many of our call centre competitors have not been as successful in managing through the pandemic, and we would like to acknowledge the dedication and efforts of our OCI teams in Ontario and Nevada.
As COVID-19 hit in mid-March of 2020, we anticipated that there would be a sharp decline in loan originations for EcoHome Financial, due to the temporary closure of our dealers. We are pleased to report not only that originations did not decline as much as we had feared in second quarter 2020, but that they have started to rebound strongly as our dealers re-open.
During the second quarter, interest income stayed constant at $4.7 million and was not negatively affected by COVID-19, due to the high-quality portfolio of long-term loans and leases. In fact, delinquent accounts in the portfolio as of June 30, 2020 were down by 8% from levels seen at March 31, 2020, thanks to the efforts of our very effective collections group. Given that possible impacts from COVID-19 on the economy will take time to fully emerge, these indicators will continue to be monitored very closely as we go forward, but to see these trends at this stage is very encouraging. In the second quarter, Dealnet increased our balance sheet provision for credit losses:
|Q2 2020||Q1 2020||Q4 2019|
|Allowance for credit losses ($)||2.75M||2.28M||2.15M|
|Allowance for credit losses/gross finance receivables (%)||1.34%||1.09%||1.05%|
Further Reduction in Corporate Overheads
In second quarter overhead costs were further reduced to less than $1 million per month. This reduction was supported by a successful move to a new head office location that fully meets our needs with 25% less space.
“Throughout this unique time, the safety of our employees has continued to be a priority. I am proud of how the entire Dealnet team has continued to be highly productive and motivated despite the pandemic,” said Brent Houlden, CEO of Dealnet. “We have demonstrated that we can deliver solid and profitable results in the face of a wide range of challenges. Our financial position continues to be strong and we have the requisite funding and liquidity in place necessary to continue executing on our plans. For the balance of the year we will continue to position Dealnet to create sustainable value for shareholders by driving compounding profitable growth.”
Second Quarter and First Half 2020 Financial Highlights
Originations and Fee Revenue
Through the first half of 2020, organic originations were $20.5 million, a 19.3% decrease compared to $25.4 million in the first half of the prior year. COVID-19 significantly restricted the business activities of our dealer partners during the second quarter, which negatively impacted originations. Despite the decrease in originations in the second quarter, net fee and ancillary revenue increased 5% to $195 thousand in the second quarter from $185 thousand in the first quarter of 2020, due to strict discipline in managing direct costs and maximizing fee income on portfolio management activities.
Net Interest Margin
Net interest margin remained consistent at $2.2 million from the first quarter to second quarter of 2020, an increase of 22% compared to the second quarter of 2019.
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Overall delinquency rates as a percentage of the portfolio decreased to 5.1% as at June 30, 2020, from a rate of 5.5% in the prior quarter. To date, the impact of COVID-19 on portfolio performance has been limited, with less than 100 requests for payment deferrals on a total portfolio in excess of 39,000 accounts.
Provision for credit losses was $0.63 million in the second quarter of 2020 ($0.06 million in second quarter 2019). The increased credit loss provision was driven by the change in the aging profile of the portfolio, and adjustments to both the macro economic forecasts and probabilities used in our stress testing to reflect a more challenging near term future operating environment given the impact of COVID-19.
Call Centre Performance
Call Centre segment profitability increased 35% ($432 thousand in the second quarter of 2020, from $319 thousand in the same quarter of prior year). One Contact has received significant client accolades due to the high service levels it has continued to provide its clients throughout COVID-19. Receivables related to the business are current with no uncollectible accounts.
Second quarter 2020 expenses decreased further, reflecting the targeted cuts made at the end of first quarter 2020 due to uncertainty from COVID-19 and Canada Emergency Wage Subsidy amounts received during the quarter.
Key Performance Indicators
The following table summarizes some of the Key Performance Indicators that the Company uses to measure the achievement of its business plan objectives:
|Q2 2020||Q1 2020||Q2 2019|
|Average Yield on Earning Assets1||9.2||%||9.0||%||9.1||%|
|Weighted Average Interest Expense1||4.8||%||4.7||%||5.2||%|
|Net interest margin1||4.4||%||4.3||%||3.9||%|
|Call Centre Gross Margin||37||%||37||%||36||%|
|Tangible Net Worth1||$34.0M||$33.4M||$33.8M|
|Net Income (Loss) from Continuing Operations||$165K||$114K||$(593K)|
|Direct Operating Expense Ratio1||3.9||%||5.3||%||6.8||%|
1This is a non-GAAP measurement. Refer to Non-GAAP Measures on page 26 of the second quarter 2020 management’s discussion and analysis for the definition of this measurement.
The Company will rely on the relief granted by the Ontario Securities Commission under Ontario Instrument 51-504 – Temporary Exemptions from Certain Requirements to File or Send Securityholder Materials (and similar orders published by other provincial regulators) in respect of the filing of its executive compensation disclosure for fiscal 2019, which the Company intends to include in the information circular for its 2020 annual meeting. The relief provides an extension for executive compensation disclosure normally required to be filed within 180 days of a reporting issuer’s financial year-end.
The financial statements and management’s discussion and analysis for the second quarter of 2020 have been filed on SEDAR. The Company has also posted a slide deck with audio commentary summarizing the financial results. All materials are available on Dealnet's corporate website at www.dealnetcapital.com.
About Dealnet Capital Corp.
Dealnet is the parent company of subsidiaries operating in two market segments, consumer finance and call centre. The Company operates in the consumer finance segment in Canada through EcoHome Financial Inc. (“EcoHome”) and its call centre segment under the One Contact banner (“One Contact”).
EcoHome is a specialty finance company serving the $20 billion Canadian home improvement finance market. EcoHome develops and supports consumer sales financing programs for approved dealers and distributors under agreements with original equipment manufacturers (OEMs) that supply a wide range of home improvement products to the retail market. Through a dealer network, EcoHome underwrites, originates, funds and services the prime quality loans and leases that homeowners need to finance the acquisition and installation of capital assets that improve the quality, comfort and safety of their homes.
One Contact offers customer support services to both EcoHome and third-party institutions across Canada and the U.S.
For additional information please visit www.sedar.com.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This news release contains certain "forward-looking information" within the meaning of applicable securities law. Forward looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "would", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur. These statements are only predictions. Forward-looking information is based on the opinions and estimates of management at the date the information is provided, and is subject to a variety of risks, including the effects of Covid-19, and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. For a description of the risks and uncertainties facing the Company and its business and affairs, readers should refer to the Company’s Management’s Discussion and Analysis. The Company undertakes no obligation to update forward-looking information if circumstances or management's estimates or opinions should change, unless required by law. The reader is cautioned not to place undue reliance on forward-looking information.
|Brent Houlden||Michael Koshan|
|Chief Executive Officer||Chief Financial Officer and Treasurer|
|(905) 695-8557 ext.1145||(905) 695-8557 ext. 1113|