Loan Portfolio Increase of 40%, driven by Record New Customers
Revenue Increased from $123 million to $148 million, up 20%
Net Income Increased from $11.8 million to $19.6 million, up 66%
Quarterly Earnings Per Share Increased from $0.82 to $1.26, up 54%

MISSISSAUGA, Ontario, Aug. 07, 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 second quarter ended June 30, 2019.

Second Quarter Results

During the quarter the Company generated $276 million of total loan originations, up 18% from the $234 million in the second quarter of 2018. The increased originations led to growth in the loan portfolio of $80.3 million, which reached $960 million at the end of the current quarter, up 40% from $687 million as at June 30, 2018.

Revenue for the second quarter increased to $148 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 13.5%, up from 12.4% in the second quarter of 2018, as previously expected and within the Company’s targeted range of 11.5% to 13.5% for 2019.

Growing revenues and continued improvement in operating leverage led to record margins, net income, earnings per share and return on equity. Operating income grew to $40.9 million, up 53% from $26.8 million in the second quarter of 2018, while the operating margin expanded to 28% up from 22%. Net income in the second quarter was $19.6 million, up 66% from $11.8 million in 2018, which resulted in diluted earnings per share of $1.26, up 54% from the $0.82 in 2018.

“During the second quarter we launched our spring media campaign, which helped produce a record level of new customers and an 18% increase in loan application volume, leading to loan growth that nearly doubled the first quarter of the year,” said Jason Mullins, goeasy’s President & Chief Executive Officer. “With a sequential increase in our risk-adjusted yield, the credit quality in the province of Quebec performing close to the portfolio average and secured lending representing 11% of our originations, we are striking the right balance between loan growth, yield and credit risk management.”

“In addition to strong business results, the last several months have been a rewarding time for our Company, as we have received recognition for our culture and the engagement of our team,” Mr. Mullins continued, “After being named one of Canada’s Most Admired Corporate Cultures in 2018, we have also been named one of North America’s Top 50 Most Engaged Workplaces for 2019 by Achievers and one of Canada’s Top 50 FinTech Companies for 2019 by the Digital Finance Institute. These awards are a testament to the passion and dedication that our entire team has for helping our customers improve their financial outcomes. With 1 out of 3 easyfinancial customers graduating to prime credit and 60% experiencing an increase in their credit score within 12 months of borrowing from us, we are proud and inspired to see our vision brought to life.”

Other Key Second Quarter Highlights

easyfinancial

  • Total application volume increased 18%
  • Revenue grew to $113 million, up 27%
  • Secured loan portfolio grew to $89 million, up from $32 million
  • 66% of net loan advances in the quarter were issued to new customers, the highest level since 2012
  • Aided brand awareness of 83%, up from 75%
  • Average loan book per branch improved to $3.3 million, an increase of 32%
  • The delinquency rate on the final Saturday of the quarter was 4.3%, consistent with the 4.2% reported in the same period of 2018
  • Operating income of $46.9 million, up 41%
  • Operating margin of 41.4%, an increase from the 37.5% reported in the second quarter of 2018

             
easyhome

  • Revenue grew to $34.5 million, up slightly from $34.3 million
  • Same store revenue increased 3.8%, compared to 6.9%
  • Consumer lending portfolio within easyhome stores increased to $29.5 million, up from $12.8 million
  • Revenue from consumer lending increased to $3.9 million, up from $1.6 million
  • Operating income of $5.6 million, up 10%
  • Operating margin of 16.1%, an increase from the 14.9% reported in the second quarter of 2018

Overall

  • 37th consecutive quarter of same store sales growth
  • 72nd consecutive quarter of positive net income
  • Total same store revenue growth of 19.9%
  • Record return on equity of 25.2% in the quarter, up from 20.9%
  • Net external debt to net capitalization of 67% as at June 30, 2019, below the Company’s target leverage ratio of 70%
  • Repurchased 95,500 shares in the quarter under the Company’s Normal Course Issuer Bid, bringing total repurchases since November 2018 to 777,452 shares at a weighted average price of $40.01
  • Named one of North America’s Top 50 Most Engaged Workplaces for 2019 by Achievers
  • Named one of Canada’s Top 50 FinTech Companies for 2019 by the Digital Finance Institute 

Six Months Results

For the first six months of 2019, goeasy achieved revenues of $288 million, up 21% compared with $238 million in the same period of 2018. Operating income for the period was $79.7 million compared with $51.7 million in the first six months of 2018, an increase of $28 million or 54%. Net income for the first six months of 2019 was $37.8 million and diluted earnings per share was $2.44 compared with $22.9 million or $1.58 per share, increases of 65% and 54%, respectively.

Balance Sheet and Liquidity

Total assets were $1.1 billion as at June 30, 2019, an increase of 39% from $805 million as at June 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 $67.3 million in the second quarter of 2019, an increase of 81% from $37.2 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 $200 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, 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 June 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 $1.9 billion.

Outlook

The Company has reaffirmed its 3-year commercial targets for 2019 through 2021. The periods of 2020 and 2021 remain unchanged, with the goal to achieve a consumer loan portfolio between $1.5 and $1.7 billion and return on equity that exceeds 26% by 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.

 Updated 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 Margin40% - 42%44% - 46%45% - 47%
Total Revenue Growth20% - 22%14 - 16%10% - 12%
Return on Equity24%+26%+26%+

“As we prepare to cross the $1 billion loan portfolio milestone in the next few weeks, the confidence in our strategy to provide everyday Canadians with a path to a better tomorrow, today, is stronger than ever, “said Mr. Mullins. “We continue to operate in a stable economic environment supported by wage growth that exceeds the level of inflation and unemployment at all-time lows. Furthermore, as we begin to utilize our lowest cost form of debt through the revolving credit facility, our average blended cost of interest has declined to 7.1% this quarter, from 7.6% a year ago, further reducing the borrowing costs for the business. Our balance sheet remains strong and well capitalized, with $200 million in available capital to fund the growth of our business through to the third quarter of 2020 and support our ambitious growth plan to become Canada’s top non-prime consumer lender.”

Dividend

The goeasy Board of Directors has approved a quarterly dividend of $0.31 per share payable on October 11, 2019 to the holders of common shares of record as at the close of business on September 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. 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:

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 AtAs At 
  June 30,December 31, 
  20192018 
     
ASSETS     
Cash 29,263 100,188 
Amounts receivable 17,417 15,450 
Prepaid expenses 4,717 3,835 
Consumer loans receivable, net 901,401 782,864 
Lease assets 46,701 51,618 
Property and equipment 21,924 21,283 
Deferred tax assets 9,704 9,445 
Derivative financial asset 10,390 35,094 
Intangible assets 15,636 14,589 
Right-of-use assets 41,592 - 
Goodwill 21,310 21,310 
TOTAL ASSETS 1,120,055 1,055,676 
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Liabilities    
Accounts payable and accrued liabilities 41,508 45,103 
Income taxes payable 13,264 7,499 
Dividends payable 4,468 3,247 
Deferred lease inducements - 1,234 
Unearned revenue 7,232 6,002 
Lease liabilities 48,180 - 
Revolving credit facility 20,000 - 
Convertible debentures 41,146 40,581 
Notes payable 624,935 650,481 
TOTAL LIABILITIES 800,733 754,147 
     
Shareholders' equity    
Share capital 142,224 138,090 
Contributed surplus 15,740 16,105 
Accumulated other comprehensive income 4,483 3,624 
Retained earnings 156,875 143,710 
TOTAL SHAREHOLDERS' EQUITY 319,322 301,529 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,120,055 1,055,676 
     

 

goeasy Ltd.     
      
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME   
(Unaudited)     
(expressed in thousands of Canadian dollars except earnings per share)   
      
      
  Three Months EndedSix Months Ended
  June 30,June 30,June 30,June 30,
  20192018 20192018 
      
REVENUE     
Interest income   82,560   60,775   159,290   114,566 
Lease revenue   28,352   30,133   57,834   60,802 
Commissions earned   33,352   29,188   63,432   56,127 
Charges and fees   3,590   3,247   7,158   6,625 
    147,854   123,343   287,714   238,120 
      
EXPENSES BEFORE DEPRECIATION AND AMORTIZATION     
Salaries and benefits   30,430   29,715   59,107   58,190 
Stock-based compensation   2,189   1,735   4,076   3,354 
Advertising and promotion   6,936   5,661   12,786   9,590 
Bad debts   35,765   27,549   70,159   51,927 
Occupancy   5,023   8,668   10,003   17,230 
Technology costs   3,019   2,666   5,757   5,632 
Other expenses   7,566   7,654   13,767   14,191 
    90,928   83,648   175,655   160,114 
      
DEPRECIATION AND AMORTIZATION     
Depreciation of lease assets   9,378   10,051   19,028   20,053 
Depreciation of property and equipment   1,549   1,391   3,050   3,009 
Depreciation of right-of-use assets   3,677   -    7,468   -  
Amortization of intangible assets   1,391   1,451   2,772   3,218 
    15,995   12,893   32,318   26,280 
      
Total operating expenses   106,923   96,541   207,973   186,394 
      
Operating income   40,931   26,802   79,741   51,726 
      
Finance costs     
Interest expenses and amortization of deferred financing charges  13,244   10,425   26,142   20,095 
Interest expense on lease liabilities   592   -    1,195   -  
    13,836   10,425   27,337   20,095 
      
Income before income taxes   27,095   16,377   52,404   31,631 
      
Income tax expense (recovery)     
Current   6,497   6,413   13,854   11,335 
Deferred   1,030   (1,857)  709   (2,599)
    7,527   4,556   14,563   8,736 
      
Net income   19,568   11,821   37,841   22,895 
      
Basic earnings per share   1.34   0.86   2.58   1.67 
Diluted earnings per share   1.26   0.82   2.44   1.58 
      

 

Segmented Reporting      
        
   Three Months Ended June 30, 2019 
($ in 000's except earnings per share)  easyfinancialeasyhomeCorporateTotal 
        
Revenue       
 Interest income   79,817   2,743   -     82,560  
 Lease revenue   -    28,352   -     28,352  
 Commissions earned   31,277   2,075   -     33,352  
 Charges and fees   2,242   1,348   -     3,590  
     113,336   34,518   -     147,854  
        
Total operating expenses before      
  depreciation and amortization   63,085   17,172   10,671    90,928  
        
Depreciation and amortization      
 Depreciation and amortization of lease assets,
  property and equipment and intangible assets
   1,777   9,829   712    12,318  
 Depreciation of right-of-use assets   1,539   1,945   193    3,677  
     3,316   11,774   905    15,995  
        
Segment operating income (loss)   46,935   5,572   (11,576)  40,931  
        
Finance costs      
 Interest expenses and amortization of
  deferred financing charges
      13,244  
 Interest expense on lease liabilities      592  
        13,836  
        
Income before income taxes      27,095  
        
Income taxes      7,527  
        
Net Income      19,568  
        
Diluted earnings per share      1.26  
        
   Three Months Ended June 30, 2018 
($ in 000's except earnings per share)  easyfinancialeasyhomeCorporateTotal 
        
Revenue       
 Interest income   59,669  1,106  -    60,775 
 Lease revenue   -   30,133  -    30,133 
 Commissions earned   27,601  1,587  -    29,188 
 Charges and fees   1,745  1,502  -    3,247 
     89,015  34,328  -    123,343 
Total operating expenses before      
  depreciation and amortization   53,663  18,642  11,343   83,648 
        
Depreciation and amortization      
 Depreciation and amortization of lease assets,
  property and equipment and intangible assets
   1,996  10,588  309   12,893 
Segment operating income (loss)   33,356  5,098  (11,652)  26,802 
        
Finance costs      
 Interest expense and amortization of
  deferred financing charges
      10,425 
Income before income taxes      16,377 
        
Income taxes      4,556 
        
Net Income      11,821 
        
Diluted earnings per share      0.82 
        
        
   Six Months Ended June 30, 2019 
($ in 000's except earnings per share)  easyfinancialeasyhomeCorporateTotal 
        
Revenue       
 Interest income   154,234   5,056   -     159,290  
 Lease revenue   -    57,834   -     57,834  
 Commissions earned   59,323   4,109   -     63,432  
 Charges and fees   4,390   2,768   -     7,158  
     217,947   69,767   -     287,714  
Total operating expenses before      
  depreciation and amortization   123,011   33,090   19,554    175,655  
        
Depreciation and amortization      
 Depreciation and amortization of lease assets,
  property and equipment and intangible assets
   3,595   19,930   1,325    24,850  
 Depreciation of right-of-use assets   3,056   4,027   385    7,468  
     6,651   23,957   1,710    32,318  
        
Segment operating income (loss)   88,285   12,720   (21,264)  79,741  
        
Finance costs      
 Interest expense and amortization of
  deferred financing charges
      26,142  
 Interest expense on lease liabilities      1,195  
        27,337  
        
Income before income taxes      52,404  
        
Income taxes      14,563  
        
Net Income      37,841  
        
Diluted earnings per share      2.44  
        
   Six Months Ended June 30, 2018 
($ in 000's except earnings per share)  easyfinancialeasyhomeCorporateTotal 
        
Revenue       
 Interest income   112,755  1,811  -    114,566 
 Lease revenue   -   60,802  -    60,802 
 Commissions earned   53,101  3,026  -    56,127 
 Charges and fees   3,525  3,100  -    6,625 
     169,381  68,739  -    238,120 
        
Total operating expenses before      
  depreciation and amortization   102,200  37,073  20,841   160,114 
        
Depreciation and amortization      
 Depreciation and amortization of lease assets,
  property and equipment and intangible assets
   4,364  21,154  762   26,280 
Segment operating income (loss)   62,817  10,512  (21,603)  51,726 
        
Finance costs      
 Interest expense and amortization of
  deferred financing charges
      20,095 
Income before income taxes      31,631 
        
Income taxes      8,736 
        
Net Income      22,895 
        
Diluted earnings per share      1.58 

 

Summary of Financial Results and Key Performance Indicators     
      
($ in 000’s except earnings per share and percentages)Three Months EndedVarianceVariance  
June 30, 2019 June 30, 2018 $ / bps% change  
Summary Financial Results     
Revenue  147,854    123,343   24,511 19.9%  
Operating expenses before depreciation and amortization  90,928    83,648   7,280 8.7%  
EBITDA  47,548    29,644   17,904 60.4%  
EBITDA margin32.2% 24.0%  820 bps 34.2%  
Depreciation and amortization expense  15,995    12,893   3,102 24.1%  
Operating income  40,931    26,802   14,129 52.7%  
Operating margin27.7% 21.7%  600 bps 27.6%  
Finance costs  13,836    10,425   3,411 32.7%  
Effective income tax rate27.8% 27.8%   -  -  
Net income  19,568    11,821   7,747 65.5%  
Diluted earnings per share  1.26    0.82   0.44 53.7%  
Return on equity25.2% 20.9%  430 bps 20.6%  
      
Key Performance Indicators   
Same store revenue growth (overall)19.9% 28.4%  (850 bps) (29.9%)  
Same store revenue growth (easyhome)3.8% 6.9%  (310 bps) (44.9%)  
      
Segment Financials     
easyfinancial revenue  113,336    89,015   24,321 27.3%  
easyfinancial operating margin41.4% 37.5%  390 bps 10.4%  
easyhome revenue  34,518    34,328   190 0.6%  
easyhome operating margin16.1% 14.9%  120 bps 8.1%  
      
Portfolio Indicators     
Gross consumer loans receivable  959,708    686,573   273,135 39.8%  
Growth in consumer loans receivable  80,338    84,849   (4,511) (5.3%)  
Gross loan originations  276,355    233,811   42,544 18.2%  
Total yield on consumer loans (including ancillary products)50.4% 55.2%  (480 bps) (8.7%)  
Net charge-offs as a percentage of average gross consumer
  loans receivable
13.5% 12.4%  110 bps 8.9%  
Potential monthly lease revenue  8,365    8,973   (608) (6.8%)  
      
      
      
($ in 000’s except earnings per share and percentages)Six Months EndedVarianceVariance  
June 30, 2019 June 30, 2018 $ / bps% change  
Summary Financial Results   
Revenue  287,714    238,120   49,594 20.8%  
Operating expenses before depreciation and amortization  175,655    160,114   15,541 9.7%  
EBITDA  93,031    57,953   35,078 60.5%  
EBITDA margin32.3% 24.3%  800 bps 32.9%  
Depreciation and amortization expense  32,318    26,280   6,038 23.0%  
Operating income  79,741    51,726   28,015 54.2%  
Operating margin27.7% 21.7%  600 bps 27.6%  
Finance costs  27,337    20,095   7,242 36.0%  
Effective income tax rate27.8% 27.6%  20 bps 0.7%  
Net income  37,841    22,895   14,946 65.3%  
Diluted earnings per share  2.44    1.58   0.86 54.4%  
Return on equity24.7% 20.6%  410 bps 19.9%  
      
Key Performance Indicators    
Same store revenue growth (overall)20.3% 26.0%  (570 bps) (21.9%)  
Same store revenue growth excluding easyfinancial (easyhome)4.2% 6.1%  (190 bps) (31.1%)  
      
Segment Financials     
easyfinancial revenue  217,947    169,381   48,566 28.7%  
easyfinancial operating margin40.5% 37.1%  340 bps 9.2%  
easyhome revenue  69,767    68,739   1,028 1.5%  
easyhome operating margin18.2% 15.3%  290 bps 19.0%  
      
Portfolio Indicators     
Gross consumer loans receivable  959,708    686,573   273,135 39.8%  
Growth in consumer loans receivable  125,929    160,027   (34,098) (21.3%)  
Gross loan originations  495,793    436,177   59,616 13.7%  
Total yield on consumer loans (including ancillary products)50.2% 55.6%  (540 bps) (9.7%)  
Net charge-offs as a percentage of average gross consumer
  loans receivable
13.4% 12.4%  100 bps 8.1%  
Potential monthly lease revenue  8,365    8,973   (608) (6.8%)