goeasy Ltd. Reports Record Results for the First Quarter
Loan Portfolio of
Net Charge-Off Rate of 9.1%, down from 13.2%
Adjusted Quarterly Net Income of
Adjusted Quarterly Diluted Earnings per Share of
First Quarter Results
During the quarter, the Company continued to experience a gradually improving level of demand, complemented by stable credit performance, leading to record financial results.
The Company generated
During the quarter, the Company also continued to experience strong credit and payment performance. The net charge-off rate for the first quarter was 9.1%, compared to 13.2% in the first quarter of 2020. Although there remains uncertainty about the exact timing and pace of an economic recovery, the improvement in underlying credit performance and the general macroeconomic environment resulted in the Company decreasing its allowance for future credit losses to 9.88% from 10.08% in the prior quarter.
Improved operating leverage and lower credit losses, led to record operating income of
Net income in the first quarter was a record
“The first quarter continued to highlight the strength and resilience of our business. With improved originations, structurally lower credit losses and strong operating margins, we delivered record adjusted earnings per share of
Other Key First Quarter Highlights
easyfinancial
- Revenue of
$133 million , up 1% - Secured loan portfolio grew to
$162 million , up 33%, - 56% of net loan advances in the quarter were issued to new customers, down from 59%
- 51% of applications were acquired online, up from 46%
- Average loan book per branch improved to
$3.8 million , an increase of 2% - The delinquency rate on the final Saturday of the quarter was 4.4%, down from 5.4%
- Record operating income of
$71.7 million , up 39% - Operating margin of 54%, up from 39%
easyhome
- Record revenue of
$36.8 million , up 4% - Same store revenue growth of 4.9%
- Consumer loan portfolio within easyhome stores increased to
$53.1 million , up 30% - Revenue from consumer lending increased to
$6.6 million , up 20% - Record operating income of
$9.0 million , up 29% - Record operating margin of 24.5%, up from 19.8%
Overall
- 44th consecutive quarter of same store sales growth
- 79th consecutive quarter of positive net income
- 2021 marks the 17th consecutive year of paying dividends and the 7th consecutive year of dividend increases
- Total same store revenue growth of 1.7%
$6.9 million in loan protection claims payments, up 19% from$5.8 million in 2020- Adjusted return on equity of 29.5% in the quarter, up from 25.8%
- Fully drawn weighted average cost of borrowing reduced to 4.8%, down from 5.5%
- Net external debt to net capitalization of 58% on
March 31, 2021 , down from 72% in the prior year and below the Company’s target leverage ratio of 70%
Balance Sheet and Liquidity
Total assets were
In
Subsequent to the sale transaction, the Company entered into a 6-month total return swap agreement (the "TRS") to substantively hedge its market exposure related to its 655,416 common shares held in Affirm, which represents the non-contingent portion of the equity consideration received, pursuant to the sale of its investment in PayBright. The TRS effectively results in the economic value of the Company’s investment in Affirm shares being settled in cash at maturity for
During the quarter, the Company invested
In support of the acquisition of LendCare, The Company completed an equity offering of 1,404,265 subscription receipts of the Company (“Subscription Receipts”), at a price of
Cash provided by operating activities before net growth in gross consumer loans receivable in the quarter was
As of
Future Outlook
On
“Looking forward, we expect consumer demand to continue improving throughout the summer months as vaccination distribution accelerates. Our expansion through the acquisition of LendCare into point-of-sale financing verticals such as power sports and home improvement, will also aid in driving growth of the portfolio,”
Dividend
The Board of Directors has approved a quarterly dividend of $0.66 per share payable on July 9, 2021 to the holders of common shares of record as at the close of business on June 25, 2021.
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 to 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., a Canadian company, headquartered in Mississauga,
Accredited by the
goeasy Ltd.’s. common shares are listed on the TSX under the trading symbol “GSY”. goeasy is rated BB- with a stable trend from S&P and Ba3 with a stable trend from Moody’s. Visit www.goeasy.com.
For further information contact:
President & Chief Executive Officer
(905) 272-2788
Senior Vice President, Corporate Development & Investor Relations
(905) 272-2788
goeasy Ltd. | |||||
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | |||||
(Unaudited) | |||||
(expressed in thousands of Canadian dollars) | |||||
As At | As At | ||||
2021 | 2020 | ||||
ASSETS | |||||
Cash | 104,842 | 93,053 | |||
Amounts receivable | 14,846 | 9,779 | |||
Prepaid expenses | 7,293 | 13,005 | |||
Consumer loans receivable, net | 1,184,709 | 1,152,378 | |||
Investment | 96,896 | 56,040 | |||
Lease assets | 45,473 | 49,384 | |||
Property and equipment, net | 30,269 | 31,322 | |||
Deferred tax assets, net | - | 4,066 | |||
Derivative financial assets | 30,999 | - | |||
Intangible assets, net | 27,136 | 25,244 | |||
Right-of-use assets, net | 48,111 | 46,335 | |||
21,310 | 21,310 | ||||
TOTAL ASSETS | 1,611,884 | 1,501,916 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
Liabilities | |||||
Accounts payable and accrued liabilities | 38,197 | 46,065 | |||
Income taxes payable | 25,039 | 13,897 | |||
Dividends payable | 9,846 | 6,661 | |||
Unearned revenue | 10,342 | 10,622 | |||
Deferred tax liabilities, net | 4,281 | - | |||
Derivative financial liabilities | 44,985 | 36,910 | |||
Lease liabilities | 55,934 | 53,902 | |||
Accrued interest | 14,261 | 2,598 | |||
Revolving credit facility | (1,305 | ) | 198,339 | ||
Revolving securitization warehouse facility | 179,046 | - | |||
Notes payable | 680,992 | 689,410 | |||
TOTAL LIABILITIES | 1,061,618 | 1,058,404 | |||
Shareholders' equity | |||||
Share capital | 186,679 | 181,753 | |||
Contributed surplus | 18,621 | 19,732 | |||
Accumulated other comprehensive loss | (4,470 | ) | (5,280 | ) | |
Retained earnings | 349,436 | 247,307 | |||
TOTAL SHAREHOLDERS' EQUITY | 550,266 | 443,512 | |||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 1,611,884 | 1,501,916 | |||
goeasy Ltd. | |||
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||
(Unaudited) | |||
(expressed in thousands of Canadian dollars except earnings per share) | |||
Three Months Ended | |||
2021 | 2020 | ||
REVENUE | |||
Interest income | 105,494 | 100,100 | |
Lease revenue | 28,437 | 27,814 | |
Commissions earned | 33,337 | 35,278 | |
Charges and fees | 2,906 | 4,010 | |
170,174 | 167,202 | ||
EXPENSES BEFORE DEPRECIATION AND AMORTIZATION | |||
Salaries and benefits | 35,406 | 31,702 | |
Stock-based compensation | 2,086 | 2,098 | |
Advertising and promotion | 5,892 | 6,314 | |
Bad debts | 29,274 | 48,618 | |
Occupancy | 5,524 | 5,682 | |
Technology costs | 3,804 | 3,369 | |
Other expenses | 7,095 | 9,295 | |
89,081 | 107,078 | ||
DEPRECIATION AND AMORTIZATION | |||
Depreciation of lease assets | 9,243 | 9,024 | |
Depreciation of right-of-use assets | 4,344 | 3,997 | |
Depreciation of property and equipment | 1,828 | 1,612 | |
Amortization of intangible assets | 1,746 | 1,272 | |
17,161 | 15,905 | ||
TOTAL OPERATING EXPENSES | 106,242 | 122,983 | |
OPERATING INCOME | 63,932 | 44,219 | |
OTHER INCOME | 87,372 | - | |
FINANCE COSTS | |||
Interest expense and amortization of deferred financing charges | 13,495 | 13,676 | |
Interest expense on lease liabilities | 741 | 668 | |
14,236 | 14,344 | ||
INCOME BEFORE INCOME TAXES | 137,068 | 29,875 | |
INCOME TAX EXPENSES | |||
Current | 16,997 | 7,297 | |
Deferred | 8,096 | 599 | |
25,093 | 7,896 | ||
NET INCOME | 111,975 | 21,979 | |
BASIC EARNINGS PER SHARE | 7.41 | 1.50 | |
DILUTED EARNINGS PER SHARE | 7.14 | 1.41 | |
Segmented Reporting | ||||||||
Three Months Ended |
||||||||
($ in 000's except earnings per share) | easyfinancial | easyhome | Corporate | Total | ||||
Revenue | ||||||||
Interest income | 100,504 | 4,990 | - | 105,494 | ||||
Lease revenue | - | 28,437 | - | 28,437 | ||||
Commissions earned | 30,910 | 2,427 | - | 33,337 | ||||
Charges and fees | 1,915 | 991 | - | 2,906 | ||||
133,329 | 36,845 | - | 170,174 | |||||
Total operating expenses before | ||||||||
depreciation and amortization | 57,326 | 16,325 | 15,430 | 89,081 | ||||
Depreciation and amortization | ||||||||
Depreciation and amortization of lease assets, property and equipment and intangible assets | 2,085 | 9,575 | 1,157 | 12,817 | ||||
Depreciation of right-of-use assets | 2,221 | 1,908 | 215 | 4,344 | ||||
4,306 | 11,483 | 1,372 | 17,161 | |||||
Segment operating income (loss) | 71,697 | 9,037 | (16,802 | ) | 63,932 | |||
Other income | 87,372 | |||||||
Finance costs | ||||||||
Interest expense and amortization of deferred financing charges | 13,495 | |||||||
Interest expense on lease liabilities | 741 | |||||||
14,236 | ||||||||
Income before income taxes | 137,068 | |||||||
Income taxes | 25,093 | |||||||
Net Income | 111,975 | |||||||
Diluted earnings per share | 7.14 | |||||||
Three Months Ended |
||||||||
($ in 000's except earnings per share) | easyfinancial | easyhome | Corporate | Total | ||||
Revenue | ||||||||
Interest income | 96,094 | 4,006 | - | 100,100 | ||||
Lease revenue | - | 27,814 | - | 27,814 | ||||
Commissions earned | 32,965 | 2,313 | - | 35,278 | ||||
Charges and fees | 2,729 | 1,281 | - | 4,010 | ||||
131,788 | 35,414 | - | 167,202 | |||||
Total operating expenses before | ||||||||
depreciation and amortization | 76,756 | 17,039 | 13,283 | 107,078 | ||||
Depreciation and amortization | ||||||||
Depreciation and amortization of lease assets, property and equipment and intangible assets | 1,700 | 9,411 | 797 | 11,908 | ||||
Depreciation of right-of-use-assets | 1,849 | 1,944 | 204 | 3,997 | ||||
3,549 | 11,355 | 1,001 | 15,905 | |||||
Segment operating income (loss) | 51,483 | 7,020 | (14,284 | ) | 44,219 | |||
Finance costs | ||||||||
Interest expense and amortization of deferred financing charges | 13,676 | |||||||
Interest expense on lease liabilities | 668 | |||||||
14,344 | ||||||||
Income before income taxes | 29,875 | |||||||
Income taxes | 7,896 | |||||||
Net Income | 21,979 | |||||||
Diluted earnings per share | 1.41 | |||||||
Summary of Financial Results and Key Performance Indicators | |||||||||
($ in 000’s except earnings per share and percentages) | Three Months Ended | Variance | Variance | ||||||
$ / bps | % change | ||||||||
Summary Financial Results | |||||||||
Revenue | 170,174 | 167,202 | 2,972 | 1.8 | % | ||||
Operating expenses before depreciation and amortization2 | 89,081 | 107,078 | (17,997 | ) | (16.8 | %) | |||
EBITDA1 | 159,222 | 51,100 | 108,122 | 211.6 | % | ||||
EBITDA margin1 | 93.6 | % | 30.6 | % | 6,300 bps | 205.9 | % | ||
Depreciation and amortization expense | 17,161 | 15,905 | 1,256 | 7.9 | % | ||||
Operating income | 63,932 | 44,219 | 19,713 | 44.6 | % | ||||
Operating margin1 | 37.6 | % | 26.4 | % | 1,120 bps | 42.4 | % | ||
Other income3 | 87,372 | - | 87,372 | 100 | % | ||||
Finance costs | 14,236 | 14,344 | (108 | ) | (0.8 | %) | |||
Effective income tax rate | 18.3 | % | 26.4 | % | (810 bps) | (30.7 | %) | ||
Net income | 111,975 | 21,979 | 89,996 | 409.5 | % | ||||
Diluted earnings per share | 7.14 | 1.41 | 5.73 | 406.4 | % | ||||
Return on equity | 90.1 | % | 25.8 | % | 6,430 bps | 249.2 | % | ||
Adjusted (Normalized) Financial Results1,2,3 | |||||||||
Adjusted EBITDA | 72,530 | 51,100 | 21,430 | 41.9 | % | ||||
Adjusted EDITDA margin | 42.6 | % | 30.6 | % | 1,200 bps | 39.2 | % | ||
Adjusted net income | 36,679 | 21,979 | 14,700 | 66.9 | % | ||||
Adjusted diluted earnings per share | 2.34 | 1.41 | 0.93 | 66.0 | % | ||||
Adjusted return on equity | 29.5 | % | 25.8 | % | 370 bps | 14.3 | % | ||
Key Performance Indicators1 | |||||||||
Same store revenue growth (overall) | 1.7 | % | 19.6 | % | (1,790 bps) | (91.3 | %) | ||
Same store revenue growth (easyhome) | 4.9 | % | 4.5 | % | 40 bps | 8.9 | % | ||
Segment Financials | |||||||||
easyfinancial revenue | 133,329 | 131,788 | 1,541 | 1.2 | % | ||||
easyfinancial operating margin | 53.8 | % | 39.1 | % | 1,470 bps | 37.6 | % | ||
easyhome revenue | 36,845 | 35,414 | 1,431 | 4.0 | % | ||||
easyhome operating margin | 24.5 | % | 19.8 | % | 470 bps | 23.7 | % | ||
Portfolio Indicators | |||||||||
Gross consumer loans receivable | 1,277,291 | 1,166,055 | 111,236 | 9.5 | % | ||||
Growth in consumer loans receivable | 30,451 | 55,422 | (24,971 | ) | (45.1 | %) | |||
Gross loan originations | 272,351 | 241,603 | 30,748 | 12.7 | % | ||||
Total yield on consumer loans (including ancillary products) | 44.3 | % | 47.7 | % | (340 bps) | (7.1 | %) | ||
Net charge offs as a percentage of average gross consumer loans receivable | 9.1 | % | 13.2 | % | (410 bps) | (31.1 | %) | ||
Cash provided by operating activities before net growth in gross consumer loans receivable | 63,167 | 53,947 | 9,220 | 17.1 | % | ||||
Potential monthly lease revenue | 8,366 | 8,272 | 94 | 1.1 | % | ||||
1See description in sections “Portfolio Analysis” and “Key Performance Indicators and Non-IFRS Measures” in MD&A. | |||||||||
2During the first quarter of 2021, Operating expenses before depreciation and amortization includes |
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3During the first quarter of 2021, the Company recognized |