Loan Portfolio up 58%
Record Quarterly Earnings Per Share of $1.02
Credit Facility Interest Rate Reduced by 150 bps
Dividend Increase of 38% to $1.24 Per Share

MISSISSAUGA, Ontario, Feb. 13, 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 fourth quarter ended December 31, 2018. The Company also announced that on February 12, 2019 it completed an amendment to its pre-existing senior secured revolving credit facility (the “Credit Facility”) to increase the amount available to be borrowed thereunder, extend the maturity date and reduce the cost of borrowing. The Company has also declared a 38% increase in its annual dividend from $0.90 to $1.24 per share.

Fourth Quarter Results

Revenue for the fourth quarter of 2018 increased to $138 million, representing growth of 29% over the same period in 2017. The increase was driven by the growth of the easyfinancial consumer loan portfolio, which reached $834 million, up 58% from $527 million as at December 31, 2017.

During the quarter the Company generated a record $265 million of loan originations, up 50% from the $176 million in the fourth quarter of 2017. The increased originations led to growth in the loan portfolio of $84.2 million, up 57% from the $53.5 million in the same period of 2017. The net charge-off rate in the quarter was in line with expectations at 13.1%, up slightly from 12.8% in the fourth quarter of 2017 and at the midpoint of the Company’s guided range of 12% to 14% for 2018.

Operating income grew to $35.1 million, up 44% from $24.5 million in the fourth quarter of 2017, while operating margin expanded to a record 25.4%, up from 22.8%.

Net income for the quarter was $15.9 million, up 39.5% from an adjusted $11.4 million in 2017, which resulted in diluted earnings per share of $1.02, up 29% from an adjusted $0.79 in 2017. The 2017 results are adjusted to remove the impact of a one-time $8.2 million before tax refinancing charge occurring in the fourth quarter of 2017. Furthermore, in 2018 the Company adopted IFRS 9, which served to increase the size of the provision for future credit losses. The Company estimates that adjusted net income and adjusted diluted earnings per share for the fourth quarter of 2017 would have been $9.0 million and $0.64, respectively, if the allowance for credit losses was calculated on the same IFRS 9 basis as the current quarter (and excluding the impact of the refinancing charge). On this basis, adjusted net income for the fourth quarter of 2018 increased 76.2% and adjusted diluted earnings per share increased 59.4%.  

“We had a strong and productive fourth quarter, rounding out another record year for the Company,” said Jason Mullins, goeasy’s President and Chief Executive Officer. “Our brand awareness reached an all-time high of 84%, which leads the industry for non-prime lenders. Loan application volume and loan originations in the quarter elevated to record levels, with more than 62% of all advances funded to new customers. The combination of strong revenue growth, increased scale and stable credit performance resulted in the easyfinancial operating margin expanding to 40%, the highest level of the year and at the high-end of our guided range,” Mr. Mullins continued, “I am also proud that for the full year we achieved all our stated targets, while producing record revenue and earnings. Diluted earnings per share for the full year was $3.56, an increase of 45% versus the $2.46 in 2017, after adjusting for the one-time refinancing charge and the impact of IFRS 9. I want to thank the entire goeasy team for the passion they demonstrate daily to take great care of our customers and congratulate them on an outstanding year.”

Other Key Quarterly Highlights

easyfinancial

  • Total application volume increased 26%
  • Revenue grew to $103 million, up 41% from $73 million
  • Secured loan portfolio grew to $52.9 million, up from $8.5 million
  • 62.5% of net loan advances in the quarter were issued to new customers, up from 59%
  • Record aided brand awareness of 84%, up 10% and highest in the industry
  • Average loan book per branch improved to $2.9 million from $2.0 million, an increase of 45%
  • The delinquency rate on the final Saturday of the quarter was 5.2%, consistent with the 5.3% reported in the same period of 2017             

easyhome

  • Same store revenue increased 7.1%, compared to 0.1%
  • Consumer lending portfolio within easyhome leasing stores increased to $21.8 million from $5.3 million
  • Revenue of $2.9 million from consumer lending, versus $0.6 million
  • Operating margin of 14.8% for the quarter, an increase from the 14.3% reported in 2017
  • Operating income of $5.2 million in the quarter compared with $4.9 million

Overall

  • 35th consecutive quarter of same store sales growth
  • 70th consecutive quarter of positive net income
  • Total same store revenue growth of 28.5%, up from 20%
  • Compound annual revenue growth of 13% and net income growth of 29% since 2001
  • Return on equity of 23% in the quarter, up from an adjusted 20.1%
  • Net external debt to net capitalization of 66% as at December 31, 2018, below the Company’s target leverage ratio of 70%
  • Repurchased 398,452 shares in the quarter at a weighted average price of $37.61 under the Company’s Normal Course Issuer Bid             

Full Year Results

For the full year, the Company funded $923 million in loan originations, up 59% from the $579 million in 2017. The consumer loan portfolio grew $307 million, up 97% from $156 million in 2017. The growth in the consumer loan portfolio produced record revenues of $506.1 million, up 26% compared with $401.7 million in 2017. Operating income for 2018 was $119.7 million up 37% from $87.4 million in 2017.

Net income for the full year was $53.1 million, up 26% from an adjusted $42.2 million in 2017, which resulted in diluted earnings per share of $3.56, up 20% from an adjusted $2.97 in 2017. The 2017 results are adjusted to reflect removing a one-time $8.2 million before tax charge associated with the refinancing completed on November 1, 2017. Furthermore, in 2018 the Company adopted IFRS 9, which served to increase the size of the provision for future credit losses. The Company estimates that net income and diluted earnings per share for the full year of 2017 would have been $34.6 million and $2.46, respectively, if the allowance for credit losses was calculated on the same IFRS 9 basis as the current year. On this basis, net income for the full year of 2018 increased 53.4% and diluted earnings per share increased 44.7%.

Due to the strong growth experienced by the Company, it increased its loan book, revenue growth and return on equity targets mid-year.  The Company achieved all its original and revised targets for 2018 as follows:

 2018 Original Targets2018 Revised Targets2018 Actual
Gross Loan Receivable Portfolio at Year End$700M - $750M$825M - $875M$833.8M
easyfinancial Total Revenue Yield54% - 56%54% - 56%54.2%
New easyfinancial Locations20 - 3020 - 3023
Net Charge-offs as a Percentage of Average Gross Consumer Loans Receivable12% - 14%12% - 14%12.7%
easyfinancial Operating Margin38% - 40%38% - 40%38.5%
Total Revenue Growth16% - 18%26% - 28%26.0%
Return on Equity18%-20%21%+21.80%
    

Enhancements to Credit Facility

The Company is pleased to announce that on February 12, 2019 it completed an amendment to its pre-existing senior secured revolving credit facility provided by a syndicate of banks (the “Credit Facility”).

The amendment extended the maturity date to February 2022 (from October 2020) and increased the maximum principal amount available from C$174.5 million to C$189.5 million.

The interest rate on advances from the Credit Facility was also reduced from the previous rate of Canadian Bankers’ Acceptance rate (“BA”) plus 450 bps or the lender’s prime rate (“Prime”) plus 350 bps, to BA plus 325 bps (reduced 125 bps) or Prime plus 200 bps (reduced 150 bps). Based on the current BA rate of approximately 2.0% and Prime Rate of 3.95% as of February 12, 2019, the interest rate on the principal amount drawn would be 5.25% or 5.95%, at the option of the Company.

The Company intends to use borrowings under the Credit Facility to expand its consumer loan portfolio.

Balance Sheet and Liquidity

Total assets were $1.06 billion as at December 31, 2018, an increase of 41% from $749.6 million as at December 31, 2017, driven by the growth in the consumer loan portfolio and the additional cash on hand to fund future growth.

Cash provided by operating activities before the net issuance of consumer loans receivable and purchase of lease assets was $232 million in 2018, an increase of 30% from $179 million in 2017.

During the year, 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 year and the borrowing capacity under the Company’s amended revolving credit facility, the Company had approximately $290 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 and increasing rates of leverage.  However, the Company also estimates that once its existing and available sources of capital are fully utilized, the Company can continue to grow its loan portfolio by approximately $150 million per year solely from internal cash flows.

Future Outlook

The Company has provided updated 3-year targets for 2019 through 2021. The periods of 2019 and 2020 remain unchanged.

The Company continues to pursue a long-term strategy of expanding its product range and increasing the use of 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.

 2019 Targets2020 Targets2021 Targets
Gross Loan Receivable Portfolio at Year End$1.1B - $1.2B$1.3B - $1.4B$1.5B - $1.7B
easyfinancial Total Revenue Yield49% - 51%46% - 48%43% - 45%
New easyfinancial Locations10 - 2010 - 2010 – 20
Net Charge-offs as a Percentage of Average Gross Consumer Loans Receivable11.5% - 13.5%11% - 13%11% - 13%
easyfinancial Operating Margin42% - 44%44% - 46%45% - 47%
Total Revenue Growth20% - 22%14 - 16%10% - 12%
Return on Equity24%+26%+26%+
    

“As we turn the page to 2019, we are well positioned to benefit from the scale and investments that we have made in the business,” said Mr. Mullins. “While our corporate strategy remains unchanged, we will increase our focus on driving product and channel expansion and enhancing the customer experience. Key initiatives for 2019 will include reducing friction in the loan origination process, investing in our indirect lending and point-of-sale finance channel, and making transformative enhancements to our credit and analytics capabilities including testing new data sources and machine learning algorithms. The enhancements to our credit facility, which included an increase to the borrowing capacity, a term extension and a substantial rate reduction, demonstrates the confidence of our lenders in our executing on our business strategy. With this amendment our average interest rate reduces from 7.18% in the fourth quarter of 2018 to 6.76% upon fully utilizing the revolver and provides even greater certainty of future liquidity. We remain confident in achieving our targets for 2019 and in surpassing the $1 billion milestone, while we aim to capture an even greater share of the $186 billion non-prime credit market in Canada.”

Dividend

Based on its 2018 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 $0.90 per share to $1.24 per share, an increase of 38%.  2018 marks the 5th consecutive year of an increase in the dividend to shareholders. As such, the Board of Directors has approved a quarterly dividend of $0.31 per share payable on April 12, 2019 to the holders of common shares of record as at the close of business on March 29, 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:

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

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

    
goeasy Ltd.   
    
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION  
(expressed in thousands of Canadian dollars)   
    
    
  As AtAs At
  December 31,December 31,
  20182017
    
ASSETS    
Cash 100,188 109,370
Amounts receivable 15,450 14,422
Prepaid expenses 3,835 3,545
Consumer loans receivable 782,864 513,425
Lease assets 51,618 54,318
Property and equipment 21,283 15,941
Derivative financial asset 35,094 -
Deferred tax assets 9,445 2,121
Intangible assets 14,589 15,163
Goodwill 21,310 21,310
TOTAL ASSETS 1,055,676 749,615
    
LIABILITIES AND SHAREHOLDERS' EQUITY   
Liabilities   
Accounts payable and accrued liabilities 45,103 43,071
Income taxes payable 7,499 9,445
Dividends payable 3,247 2,426
Deferred lease inducements 1,234 1,294
Unearned revenue 6,002 4,819
Convertible debentures 40,581 47,985
Notes payable 650,481 401,193
Derivative financial liability - 11,138
TOTAL LIABILITIES 754,147 521,371
    
Shareholders' equity   
Share capital 138,090 85,874
Contributed surplus 16,105 15,305
Accumulated other comprehensive income 3,624 141
Retained earnings 143,710 126,924
TOTAL SHAREHOLDERS' EQUITY 301,529 228,244
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,055,676 749,615
    


goeasy Ltd.     
      
CONSOLIDATED STATEMENTS OF INCOME     
(expressed in thousands of Canadian dollars except earnings per share)    
      
      
  Three Months EndedYear Ended
  December 31,December 31,December 31,December 31,
  201820172018 2017
      
REVENUE     
Interest income   73,834 48,407  255,997  172,315
Lease revenue   29,437 30,784  119,745  125,111
Commissions earned   31,486 24,883  117,000  91,353
Charges and fees   3,403 3,170  13,449  12,949
    138,160 107,244  506,191  401,728
      
EXPENSES BEFORE DEPRECIATION AND AMORTIZATION    
Salaries and benefits   29,183 26,696  114,522  102,666
Stock-based compensation   1,755 1,527  6,836  5,623
Advertising and promotion   6,203 5,014  19,145  16,654
Bad debts   34,186 18,807  118,980  67,826
Occupancy   8,807 8,132  34,665  33,100
Technology costs   2,826 2,896  11,118  10,688
Other expenses   7,409 6,270  29,205  25,570
    90,369 69,342  334,471  262,127
      
DEPRECIATION AND AMORTIZATION     
Depreciation of lease assets   9,944 10,240  40,088  41,221
Depreciation of property and equipment   1,249 1,658  5,719  5,702
Amortization of intangible assets   1,492 1,554  6,196  5,285
    12,685 13,452  52,003  52,208
      
Total operating expenses   103,054 82,794  386,474  314,335
      
Operating income   35,106 24,450  119,717  87,393
      
Finance costs     
Interest expenses and amortisation of deferred financing charges  12,811 8,774  45,800  28,642
Refinancing cost   -  8,198  -   8,198
    12,811   16,972   45,800    36,840
      
      
Income before income taxes   22,295 7,478  73,917  50,553
      
Income tax expense (recovery)     
Current   3,753 1,779  24,354  10,854
Deferred   2,655 333  (3,561)3,567
    6,408 2,112  20,793  14,421
      
Net income   15,887 5,366  53,124  36,132
      
Basic earnings per share   1.07 0.39  3.78  2.67
Diluted earnings per share   1.02 0.38  3.56  2.56
      


Segmented Reporting     
       
   Three Months Ended December 31, 2018
       
Revenue     
 Interest 71,814 2,020 - 73,834
 Lease revenue -29,437 - 29,437
 Commissions earned 29,594 1,892 - 31,486
 Charges and fees 1,878 1,525 - 3,403
   103,286 34,874 - 138,160
Total operating expenses before    
depreciation and amortization60,032 19,482 10,855  90,369
Depreciation and amortization1,965 10,238 482  12,685
Operating income (loss) 41,289 5,154 (11,337)35,106
Finance costs     
 Interest expense and amortization of deferred financing charges   12,811
Income before income taxes    22,295
Income taxes    6,408
       
Net Income    15,887
       
Diluted earnings per share    1.02
       
       
   Three Months Ended December 31, 2017
($ in 000's except earnings per share) easyfinancialeasyhomeCorporateTotal
       
Revenue     
 Interest 48,005401- 48,406
 Lease revenue -30,784- 30,784
 Commissions earned 23,5811,302- 24,883
 Charges and fees 1,6451,526- 3,171
   73,23134,013- 107,244
Total operating expenses before    
depreciation and amortization42,54918,1948,599 69,342
Depreciation and amortization2,06810,955429 13,452
Operating income (loss) 28,6144,864(9,028)24,450
Finance costs     
 Interest expense and amortization of deferred financing charges   8,774
 Refinancing costs    8,198
      16,972
Income before income taxes    7,478
Income taxes    2,112
       
Net Income    5,366
       
Diluted earnings per share    0.38
       
       
   Year Ended December 31, 2018
($ in 000's except earnings per share) easyfinancialeasyhomeCorporateTotal
       
Revenue     
 Interest 250,622 5,375 - 255,997
 Lease revenue -119,745 - 119,745
 Commissions earned 110,423 6,577 - 117,000
 Charges and fees 7,280 6,169 - 13,449
   368,325 137,866 - 506,191
Total operating expenses before    
depreciation and amortization218,138 74,215 42,118  334,471
Depreciation and amortization8,333 42,104 1,566  52,003
Operating income (loss) 141,854 21,547 (43,684)119,717
Finance costs     
 Interest expense and amortization of deferred financing charges   45,800
Income before income taxes    73,917
Income taxes    20,793
       
Net Income    53,124
       
Diluted earnings per share    3.56
       
       
   Year Ended December 31, 2017
($ in 000's except earnings per share) easyfinancialeasyhomeCorporateTotal
       
Revenue     
 Interest 171,667648- 172,315
 Lease revenue -125,111- 125,111
 Commissions earned 86,5984,755- 91,353
 Charges and fees 6,2036,746- 12,949
   264,468137,260- 401,728
Total operating expenses before    
depreciation and amortization154,55972,57034,998 262,127
Depreciation and amortization7,25543,8081,145 52,208
Operating income (loss) 102,65420,882(36,143)87,393
Finance costs     
 Interest expense and amortization of deferred financing charges   28,642
 Refinancing costs    8,198
      36,840
Income before income taxes    50,553
Income taxes    14,421
       
Net Income    36,132
       
Diluted earnings per share    2.56


Summary of Financial Results and Key Performance Indicators    
     
($ in 000’s except earnings per share and percentages)Three Months EndedVarianceVariance
December 31, 2018December 31, 2017$ / bps% change
Summary Financial Results    
Revenue138,160  107,244 30,916 28.8%
Operating expenses before depreciation and amortization90,369  69,342 21,027 30.3%
EBITDA37,847  27,662 10,185 36.8%
EBITDA margin27.4%25.8%160 bps 6.2%
Depreciation and amortization expense12,685  13,452 (767)(5.7%)
Operating income35,106  24,450 10,656 43.6%
Operating margin25.4%22.8%260 bps 11.4%
Interest expense and amortization of deferred financing charges12,811  8,774 4,037 46.0%
Refinancing costs- 8,198 (8,198)(100.0%)
PTPP income56,481  26,285 30,196 114.9%
Effective income tax rate28.7%28.2%50 bps 1.8%
Net income15,887  5,366 10,521 196.1%
Diluted earnings per share1.02  0.38 0.64 168.4%
Return on Equity23.0%9.5%1,350 bps 142.1%
     
Adjusted (Normalized) Financial Results   
Adjusted net income15,887  11,392 4,495 39.5%
Adjusted earnings per share1.02  0.79 0.23 29.1%
Adjusted return on equity23.0%20.1%290 bps 14.4%
     
Key Performance Indicators 
Same store revenue growth (overall)28.5%20.0%850 bps 42.5%
Same store revenue growth (easyhome)7.1%0.1%700 bps 7000.0%
     
Segment Financials    
easyfinancial revenue103,286  73,231 30,055 41.0%
easyfinancial operating margin40.0%39.1%90 bps 2.3%
easyhome revenue34,874  34,013 861 2.5%
easyhome operating margin14.8%14.3%50 bps 3.5%
     
Portfolio Indicators    
Gross consumer loans receivable833,779  526,546 307,233 58.3%
Growth in consumer loans receivable84,198  53,483 30,715 57.4%
Gross loan originations264,996  176,383 88,613 50.2%
Total yield on consumer loans (including ancillary products)52.7%58.4%(570 bps) (9.8%)
Net charge offs as a percentage of average gross consumer loans receivable13.1%12.8%30 bps 2.3%
Potential monthly lease revenue9,141  9,481 (340)(3.6%)