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 | % | |