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goeasy Ltd. Reports Record Results for the Second Quarter Ended June 30, 2018 and Provides Updated Outlook

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Loan Book Growth up 121.7%
Revenue up 26.4%
Diluted EPS of $0.82 up 30.2%

MISSISSAUGA, Ontario, Aug. 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 with a chance for a better tomorrow, today, announced its results for the second quarter ended June 30, 2018, and provided updated targets for future periods.

Results for the Second Quarter Ended June 30, 2018

Revenue for the second quarter of 2018 increased to $123.3 million, up 26.4% from $97.5 million in the second quarter of 2017. The growth was driven by the expansion of the easyfinancial consumer loans receivable portfolio which grew a record $84.8 million in the quarter, compared to $38.3 million in the second quarter of 2017, an increase of 121.7%. The loan portfolio reached $686.6 million by quarter's end, up 61.4% from June 30, 2017.

"Our strategy of providing everyday Canadian consumers access to the funds they need, while helping put them on a path back to prime rates and better financial outcomes, continues to resonate." said David Ingram, goeasy's Chief Executive Officer. "During the quarter we generated record results across several key performance indicators including loan applications, net customer growth and loan originations. This performance was a direct result of a new multimedia marketing campaign, which drove a 30% increase in web traffic and a 54% increase in total loan applications compared to the prior year. The elevated consumer demand for our loan products was accompanied by a 23% increase in the size of the average unsecured loan, which collectively produced a record $233.8 million in loan originations, an increase of 67.7% compared with the second quarter of 2017. The evolving product mix combined with our ongoing investments in credit analytics and collections also produced an improvement in the credit performance of the portfolio, as the net charge off rate declined to 12.4% in the second quarter from 14.8% in the prior year."

Operating income for the three-month period ended June 30, 2018 was $26.8 million, an increase of $8.2 million or 44.1% compared to the second quarter of 2017.  During the first quarter of 2018, the Company adopted IFRS 9, Financial Instruments ["IFRS 9"] which increased the size of the provision for future credit losses that the Company maintained on its balance sheet.  This new accounting standard was adopted prospectively on January 1, 2018 without the restatement of the prior year's comparative results.  The increased size of the provision under IFRS 9 resulted in an additional $2.5 million in non-cash bad debt expense in the current quarter than would have resulted under the previous accounting standard.  The significant increase in loan book growth in the quarter resulted in an additional $2.7 million in bad debt expense compared to the second quarter of 2017.     

Net income for the quarter was a record $11.8 million, up $2.9 million or 33.0% from $8.9 million in the second quarter of 2017.  Diluted earnings per share for the quarter was a record $0.82, an increase of $0.19 or 30.2% from $0.63 in the second quarter of 2017.  The Company estimates that net income and diluted earnings per share for the second quarter of 2017 would have been $7.3 million and $0.52, respectively, if the allowance for credit losses was calculated on the same IFRS 9 basis as the current quarter. On this basis, net income increased 62.6% and diluted earnings per share increased 57.7%.

Secured Access to Growth Capital

The Company was also able to secure additional growth capital at a significantly reduced cost.  The size of the Company's senior secured revolving credit facility, which is provided by a syndicate of banks, was increased from $110 million to $174.5 million.  In addition, a number of related covenants were adjusted to make them less restrictive and to provide for greater operational flexibility including an increase in the maximum leverage ratio from 2.50 to 3.25.  The North American capital markets also showed their confidence in our business model and our strategy as the Company issued US$150 million in unsecured notes at a 105 premium to par resulting in a yield to maturity of 6.17%; a significant reduction in the Company's cost of borrowing.  Taken together, these activities provided the Company with an additional $268 million in capital which is expected to fuel the growth of its easyfinancial business through the second quarter of 2020.

"It is clear that investors are confident in our growth and business model as evidenced by our ability to raise capital at increasingly lower rates." said Mr. Ingram. "With the highest revenue and portfolio growth of our benchmarked companies in North America, we continue to be optimistic about the future."

Other highlights for the second quarter of 2018 include:

easyfinancial

  • Revenue increased by 41.4% to $89.0 million from $63.0 million in the second quarter of 2017.
  • Record net customer growth of 9,290, up from 8,116 in the second quarter of 2017, an increase of 14.5%.
  • Average loan book per branch of $2.5M, up from $1.7M in the second quarter of 2017, an increase of 47%.
  • Delinquency rates on the final Saturday of the quarter reduced to a record low of 4.2% from 4.8% on the final Saturday of the second quarter of 2017.
  • Operating margin for the second quarter of 2018 increased to 37.5% from 33.9% in the second quarter of 2017.

easyhome

  • Same store revenue increased 6.9%.
  • Consumer lending portfolio within easyhome leasing stores of $12.8M up from $1.1M in the second quarter of 2017.
  • Revenue of $1.6 million from consumer lending versus $0.1M in the second quarter of 2017.
  • Operating income of $5.1 million in the quarter compared with $5.3 million in the second quarter of 2017.

Overall

  • 33rd consecutive quarter of same store sales growth.
  • 68 consecutive quarters of positive net income.
  • Operating margin was 21.7% for the quarter, up from 19.1% in the second quarter of 2017.
  • The Company's return on equity was 20.9% in the current quarter, versus 17.1% in the second quarter of 2017.
  • Net external debt to total capitalization of 67% as at June 30, 2018, within the Company's optimal leverage ratio of 70%.
  • Employee retention year to date has improved by 14% over 2017.

Six Months Results

For the first six months of 2018, goeasy achieved revenues of $238.1 million, up 24.2% compared with $191.8 million in the same period of 2017. Operating income for the period was $51.7 million compared with $39.0 million in the first six months of 2017, an increase of $12.7 million or 32.6%. Net income for the first six months of 2018 was $22.9 million and diluted earnings per share was $1.58 compared with $19.2 million or $1.36 per share, increases of 19.5% and 16.2%, respectively.

Revised Outlook

"Given the record growth in the first half of 2018, the strengthening of our balance sheet and our plans for the future, we are providing an updated and more ambitious three-year outlook. We now expect the high end of our loan book in 2018 to be 17% higher than our original targets and the high end of our loan book in 2019 of $1.2 Billion to be 26% higher than the $950M target previously set out." said Mr. Ingram. "These growth targets will be achieved by continuing to build our brand awareness in Canada and executing on our strategic initiatives. We will continue to meet our customer's needs through risk adjusted pricing, expansion in the Quebec market and growth of our secured lending product. The growth will be further aided by several new initiatives that we are bringing to market in the second half of 2018 including investments in our online digital platforms and continued efforts to build out our laddered suite of products that help graduate our customers up the credit spectrum, all of which are contributing to our confidence in the future."  

  2018 2019 2020
       
Gross consumer loans receivable portfolio at year end $825 - $875
million
$1.1 - $1.2  
billion
$1.3 - $1.4
billion
       
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% +

Dividend

The Board of Directors has approved a quarterly dividend of $0.225 per share payable on October 12, 2018 to the holders of common shares of record as at the close of business on September 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. 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.

goeasy Ltd. is listed on the TSX under the symbol ‘GSY'. 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 FINANCIAL POSITION    
(Unaudited)        
(expressed in thousands of Canadian dollars)        
         
         
    As At As At  
    June 30, December 31,  
    2018  2017  
         
ASSETS         
Cash   19,243   109,370  
Amounts receivable   16,305   14,422  
Prepaid expenses   5,380   3,545  
Consumer loans receivable   646,298   513,425  
Lease assets   51,103   54,318  
Property and equipment   16,022   15,941  
Deferred tax assets   10,418   2,121  
Intangible assets   14,706   15,163  
Goodwill   21,310   21,310  
Derivative financial asset   4,316   -  
TOTAL ASSETS   805,101   749,615  
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Liabilities        
Accounts payable and accrued liabilities   42,738   43,071  
Income taxes payable   2,658   9,445  
Dividends payable   3,077   2,426  
Deferred lease inducements   1,003   1,294  
Unearned revenue   5,810   4,819  
Convertible debentures   48,095   47,985  
Loan from revolving credit facilty (Note 7)   49,738   -  
Notes payable   420,552   401,193  
Derivative financial liability   -   11,138  
TOTAL LIABILITIES   573,671   521,371  
         
Shareholders' equity        
Share capital   89,512   85,874  
Contributed surplus   12,623   15,305  
Accumulated other comprehensive (loss) income   (1,731 ) 141  
Retained earnings   131,026   126,924  
TOTAL SHAREHOLDERS' EQUITY   231,430   228,244  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   805,101   749,615  
         
         
         
         

 

goeasy Ltd.            
             
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME    
(Unaudited)            
(expressed in thousands of Canadian dollars except earnings per share)      
             
             
      Three Months Ended Six Months Ended
      June 30,  June 30,  June 30, June 30,
      2018  2017  2018  2017
             
REVENUE            
Interest income       60,775     40,781     114,566     78,915
Lease revenue       30,133     31,525     60,802     63,435
Commissions earned       29,188     21,936     56,127     42,909
Charges and fees       3,247     3,304     6,625     6,532
        123,343     97,546     238,120     191,791
             
EXPENSES BEFORE DEPRECIATION AND AMORTIZATION          
Salaries and benefits       29,715     25,793     58,190     49,615
Stock-based compensation       1,735     1,266     3,354     2,332
Advertising and promotion       5,661     5,295     9,590     8,727
Bad debts       27,549     17,173     51,927     31,290
Occupancy       8,668     8,304     17,230     16,616
Other expenses       10,320     8,317     19,823     18,152
        83,648     66,148     160,114     126,732
             
DEPRECIATION AND AMORTIZATION            
Depreciation of lease assets       10,051     10,220     20,053     20,942
Depreciation of property and equipment       1,391     1,330     3,009     2,654
Amortization of intangible assets       1,451     1,242     3,218     2,444
        12,893     12,792     26,280     26,040
             
Total operating expenses       96,541     78,940     186,394     152,772
             
Operating income       26,802     18,606     51,726     39,019
             
Finance costs       10,425     6,578     20,095     12,403
             
Income before income taxes       16,377     12,028     31,631     26,616
             
Income tax expense (recovery)            
Current       6,413     (1,310 )   11,335     4,137
Deferred       (1,857 )   4,448     (2,599 )   3,319
        4,556     3,138     8,736     7,456
             
Net income       11,821     8,890     22,895     19,160
             
Basic earnings per share       0.86     0.66     1.67     1.42
Diluted earnings per share       0.82     0.63     1.58     1.36
             

 

Segmented Reporting            
               
      Three Months Ended June 30, 2018  
($ in 000's except earnings per share)  easyfinancial easyhome Corporate Total  
               
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 1,996 10,588 309   12,893  
Segment operating income (loss) 33,356 5,098 (11,652 ) 26,802  
Finance costs         10,425  
Income before income taxes         16,377  
Income taxes         4,556  
               
Net Income         11,821  
               
Diluted earnings per share         0.82  
               
               
      Three Months Ended June 30, 2017  
($ in 000's except earnings per share)  easyfinancial easyhome Corporate Total  
               
Revenue             
  Interest income   40,732 49 -   40,781  
  Lease revenue   - 31,525 -   31,525  
  Commissions earned   20,753 1,183 -   21,936  
  Charges and fees   1,488 1,816 -   3,304  
      62,973 34,573 -   97,546  
Total operating expenses before          
  depreciation and amortization 39,889 18,465 7,794   66,148  
Depreciation and amortization 1,727 10,822 243   12,792  
Segment operating income (loss) 21,357 5,286 (8,037 ) 18,606  
Finance costs         6,578  
Income before income taxes         12,028  
Income taxes         3,138  
               
Net Income         8,890  
               
Diluted earnings per share         0.63  
               
               
      Six Months Ended June 30, 2018  
($ in 000's except earnings per share)  easyfinancial easyhome Corporate Total  
               
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 4,364 21,154 762   26,280  
Segment operating income (loss) 62,817 10,512 (21,603 ) 51,726  
Finance costs         20,095  
Income before income taxes         31,631  
Income taxes         8,736  
               
Net Income         22,895  
               
Diluted earnings per share         1.58  
               
               
      Six Months Ended June 30, 2017  
($ in 000's except earnings per share)  easyfinancial easyhome Corporate Total  
               
Revenue             
  Interest income   78,866 49 -   78,915  
  Lease revenue   - 63,435 -   63,435  
  Commissions earned   40,693 2,216 -   42,909  
  Charges and fees   2,967 3,565 -   6,532  
      122,526 69,265 -   191,791  
Total operating expenses before          
  depreciation and amortization 73,211 36,664 16,857   126,732  
Depreciation and amortization 3,415 22,147 478   26,040  
Segment operating income (loss) 45,900 10,454 (17,335 ) 39,019  
Finance costs         12,403  
Income before income taxes         26,616  
Income taxes         7,456  
               
Net Income         19,160  
               
Diluted earnings per share         1.36  
               
               


 

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