goeasy Ltd. Reports Record Results for the Second Quarter
Loan Portfolio Increase of 40%, driven by Record New Customers
Revenue Increased from
Net Income Increased from
Quarterly Earnings Per Share Increased from
Second Quarter Results
During the quarter the Company generated
Revenue for the second quarter increased to
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
“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
“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,”
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
Balance Sheet and Liquidity
Total assets were
Cash provided by operating activities before the net issuance of consumer loans receivable and purchase of lease assets was
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
The Company also estimates that as of
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
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 Targets | 2020 Targets | 2021 Targets | |
Gross Loan Receivable Portfolio at Year End | |||
easyfinancial Total Revenue Yield | 49% - 51% | 46% - 48% | 43% - 45% |
New easyfinancial Locations | 10 - 20 | 10 - 20 | 10 – 20 |
Net Charge-offs as a Percentage of Average Gross Consumer Loans Receivable | 11.5% - 13.5% | 11% - 13% | 11% - 13% |
easyfinancial Operating Margin | 40% - 42% | 44% - 46% | 45% - 47% |
Total Revenue Growth | 20% - 22% | 14 - 16% | 10% - 12% |
Return on Equity | 24%+ | 26%+ | 26%+ |
“As we prepare to cross the
Dividend
The goeasy Board of Directors has approved a quarterly dividend of
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
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:
President & Chief Executive Officer
(905) 272-2788
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 At | As At | |||
2019 | 2018 | |||
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 | - | ||
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 Ended | Six Months Ended | ||||||
2019 | 2018 | 2019 | 2018 | ||||
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 |
||||||||
($ in 000's except earnings per share) | easyfinancial | easyhome | Corporate | Total | ||||
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 |
||||||||
($ 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 | ||||||||
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 |
||||||||
($ in 000's except earnings per share) | easyfinancial | easyhome | Corporate | Total | ||||
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 |
||||||||
($ 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 | ||||||||
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 Ended | Variance | Variance | ||||||
$ / 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 margin | 32.2% | 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 margin | 27.7% | 21.7% | 600 bps | 27.6% | |||||
Finance costs | 13,836 | 10,425 | 3,411 | 32.7% | |||||
Effective income tax rate | 27.8% | 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 equity | 25.2% | 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 margin | 41.4% | 37.5% | 390 bps | 10.4% | |||||
easyhome revenue | 34,518 | 34,328 | 190 | 0.6% | |||||
easyhome operating margin | 16.1% | 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 Ended | Variance | Variance | ||||||
$ / 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 margin | 32.3% | 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 margin | 27.7% | 21.7% | 600 bps | 27.6% | |||||
Finance costs | 27,337 | 20,095 | 7,242 | 36.0% | |||||
Effective income tax rate | 27.8% | 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 equity | 24.7% | 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 margin | 40.5% | 37.1% | 340 bps | 9.2% | |||||
easyhome revenue | 69,767 | 68,739 | 1,028 | 1.5% | |||||
easyhome operating margin | 18.2% | 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%) | |||||