goeasy Ltd. Reports Record Results for the Third Quarter
Loan Portfolio Increased from
Revenue Increased from
Net Income Increased from
Quarterly Earnings Per Share Increased from
Third Quarter Results
During the quarter the Company generated a record
Revenue for the third quarter increased to
Growing revenues and continued improvements in operating leverage led to elevated margins, with record net income and earnings per share. Operating income grew to
“We saw positive momentum from our new branded media campaign, which drove a 25% increase in loan application volume and a second straight quarter of record new customers, resulting in a 20% increase in loan growth over the prior year,” said
“The last several months have also been highlighted by several major accomplishments on our journey to become Canada’s top non-prime consumer lender,”
Other Key Third Quarter Highlights
easyfinancial
- Total application volume increased 25%
- Revenue grew to
$122 million , up 28% - Secured loan portfolio grew to
$101 million , up from$41 million - 65% of net loan advances in the quarter were issued to new customers, up slightly from 63%
- 46% of applications acquired online, up from 37%
- Aided brand awareness of 84%, up from 80%
- Average loan book per branch improved to
$3.5 million , an increase of 35% - The delinquency rate on the final Saturday of the quarter was 4.6%, up slightly from 4.4%
- Operating income of
$47.5 million , up 26% - Operating margin of 39%, consistent with the third quarter of 2018
easyhome
- Revenue of
$33.9 million , down slightly from$34.2 million - Same store revenue growth of 2.4%
- Consumer lending portfolio within easyhome stores increased to
$33.5 million , up from$17.2 million - Revenue from consumer lending increased to
$4.6 million , up from$2.2 million - Operating income of
$5.6 million , down slightly from$5.9 million - Operating margin of 16.6%, down slightly from the 17.2% reported in the third quarter of 2018
- Acquired and merged 6 stores and the associated consumer leasing portfolios from Aarons Inc.
Overall
- 38th consecutive quarter of same store sales growth
- 73rd consecutive quarter of positive net income
- Total same store revenue growth of 20.4%
- Return on equity of 24.1% in the quarter, up from 23.8%
- Net external debt to net capitalization of 69% as at
September 30, 2019 , below the Company’s target leverage ratio of 70% - Cash provided by operating activities before the net issuance of consumer loans receivable and purchase of lease assets during the quarter was a record
$80.9 million - Repurchased 79,260 shares in the quarter under the Company’s Normal Course Issuer Bid, bringing total repurchases since
November 2018 to 856,712 shares at a weighted average price of$41.19 - Ranked in the inaugural TSX30 program as one of the 30 top-performing TSX stocks over a three-year period based on dividend-adjusted share price appreciation
- Listed on the inaugural Report on Business list of Canada’s Top Growing Companies for its three-year cumulative revenue growth
Nine Months Results
For the first nine 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
Future Outlook
The Company has provided 3-year commercial targets for 2019 through 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. These targets remain unchanged and are as follows:
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%+ |
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., a Canadian company, headquartered in
Throughout the company’s history, it has served over 1 million Canadians and originated over
goeasy is the proud recipient of several awards including Waterstone Canada’s Most Admired Corporate Cultures, Glassdoor Top CEO Award, Achievers Top 50 Most Engaged Workplaces in
goeasy Ltd.’s. common shares are listed 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. 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 | 29,723 | 100,188 | ||
Amounts receivable | 17,713 | 15,450 | ||
Prepaid expenses | 5,130 | 3,835 | ||
Consumer loans receivable, net | 971,467 | 782,864 | ||
Investment | 34,300 | - | ||
Lease assets | 45,987 | 51,618 | ||
Property and equipment | 22,300 | 21,283 | ||
Deferred tax assets | 8,132 | 9,445 | ||
Derivative financial asset | 23,905 | 35,094 | ||
Intangible assets | 17,031 | 14,589 | ||
Right-of-use assets | 43,648 | - | ||
21,310 | 21,310 | |||
TOTAL ASSETS | 1,240,646 | 1,055,676 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Liabilities | ||||
Revolving credit facility | 112,000 | - | ||
Accounts payable and accrued liabilities | 40,989 | 45,103 | ||
Income taxes payable | 4,078 | 7,499 | ||
Dividends payable | 4,447 | 3,247 | ||
Deferred lease inducements | - | 1,234 | ||
Unearned revenue | 7,323 | 6,002 | ||
Lease liabilities | 50,136 | - | ||
Convertible debentures | 40,797 | 40,581 | ||
Notes payable | 643,337 | 650,481 | ||
TOTAL LIABILITIES | 903,107 | 754,147 | ||
Shareholders' equity | ||||
Share capital | 141,927 | 138,090 | ||
Contributed surplus | 17,438 | 16,105 | ||
Accumulated other comprehensive income | 9,325 | 3,624 | ||
Retained earnings | 168,849 | 143,710 | ||
TOTAL SHAREHOLDERS' EQUITY | 337,539 | 301,529 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 1,240,646 | 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 | Nine Months Ended | ||||||||
2019 | 2018 | 2019 | 2018 | ||||||
REVENUE | |||||||||
Interest income | 90,304 | 67,597 | 249,594 | 182,163 | |||||
Lease revenue | 27,134 | 29,506 | 84,968 | 90,308 | |||||
Commissions earned | 34,909 | 29,387 | 98,341 | 85,514 | |||||
Charges and fees | 3,786 | 3,421 | 10,944 | 10,046 | |||||
156,133 | 129,911 | 443,847 | 368,031 | ||||||
EXPENSES BEFORE DEPRECIATION AND AMORTIZATION | |||||||||
Salaries and benefits | 30,141 | 27,149 | 89,248 | 85,339 | |||||
Stock-based compensation | 1,752 | 1,727 | 5,828 | 5,081 | |||||
Advertising and promotion | 6,425 | 3,352 | 19,211 | 12,942 | |||||
Bad debts | 43,326 | 32,867 | 113,485 | 84,794 | |||||
Occupancy | 5,086 | 8,628 | 15,089 | 25,858 | |||||
Technology costs | 3,314 | 2,660 | 9,071 | 8,292 | |||||
Other expenses | 7,737 | 7,605 | 21,504 | 21,796 | |||||
97,781 | 83,988 | 273,436 | 244,102 | ||||||
DEPRECIATION AND AMORTIZATION | |||||||||
Depreciation of lease assets | 9,023 | 10,091 | 28,051 | 30,144 | |||||
Depreciation of property and equipment | 1,607 | 1,461 | 4,657 | 4,470 | |||||
Depreciation of right-of-use assets | 3,798 | - | 11,266 | - | |||||
Amortization of intangible assets | 1,355 | 1,486 | 4,127 | 4,704 | |||||
15,783 | 13,038 | 48,101 | 39,318 | ||||||
Total operating expenses | 113,564 | 97,026 | 321,537 | 283,420 | |||||
Operating income | 42,569 | 32,885 | 122,310 | 84,611 | |||||
Finance costs | |||||||||
Interest expenses and amortization of deferred financing charges | 14,208 | 12,894 | 40,350 | 32,989 | |||||
Interest expense on lease liabilities | 613 | - | 1,808 | - | |||||
14,821 | 12,894 | 42,158 | 32,989 | ||||||
Income before income taxes | 27,748 | 19,991 | 80,152 | 51,622 | |||||
Income tax expense (recovery) | |||||||||
Current | 8,097 | 9,266 | 21,951 | 20,601 | |||||
Deferred | (174 | ) | (3,617 | ) | 535 | (6,216 | ) | ||
7,923 | 5,649 | 22,486 | 14,385 | ||||||
Net income | 19,825 | 14,342 | 57,666 | 37,237 | |||||
Basic earnings per share | 1.35 | 1.03 | 3.94 | 2.70 | |||||
Diluted earnings per share | 1.28 | 0.97 | 3.72 | 2.53 | |||||
Segmented Reporting | ||||||||
Three Months Ended |
||||||||
($ in 000's except earnings per share) | easyfinancial | easyhome | Corporate | Total | ||||
Revenue | ||||||||
Interest income | 87,087 | 3,217 | - | 90,304 | ||||
Lease revenue | - | 27,134 | - | 27,134 | ||||
Commissions earned | 32,706 | 2,203 | - | 34,909 | ||||
Charges and fees | 2,463 | 1,323 | - | 3,786 | ||||
122,256 | 33,877 | - | 156,133 | |||||
Total operating expenses before | ||||||||
depreciation and amortization | 71,283 | 16,854 | 9,644 | 97,781 | ||||
Depreciation and amortization | ||||||||
Depreciation and amortization of lease assets, property and equipment and intangible assets | 1,794 | 9,453 | 738 | 11,985 | ||||
Depreciation of right-of-use assets | 1,672 | 1,951 | 175 | 3,798 | ||||
3,466 | 11,404 | 913 | 15,783 | |||||
Segment operating income (loss) | 47,507 | 5,619 | (10,557 | ) | 42,569 | |||
Finance costs | ||||||||
Interest expenses and amortization of deferred financing charges | 14,208 | |||||||
Interest expense on lease liabilities | 613 | |||||||
14,821 | ||||||||
Income before income taxes | 27,748 | |||||||
Income taxes | 7,923 | |||||||
Net Income | 19,825 | |||||||
Diluted earnings per share | 1.28 | |||||||
Three Months Ended |
||||||||
($ 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 | ||||||||
Depreciation and amortization of lease assets, property and equipment and intangible assets | 2,004 | 10,712 | 322 | 13,038 | ||||
Segment operating income (loss) | 37,748 | 5,881 | (10,744 | ) | 32,885 | |||
Finance costs | ||||||||
Interest expense and amortization of deferred financing charges | 12,894 | |||||||
Income before income taxes | 19,991 | |||||||
Income taxes | 5,649 | |||||||
Net Income | 14,342 | |||||||
Diluted earnings per share | 0.97 | |||||||
Nine Months Ended |
||||||||
($ in 000's except earnings per share) | easyfinancial | easyhome | Corporate | Total | ||||
Revenue | ||||||||
Interest income | 241,321 | 8,273 | - | 249,594 | ||||
Lease revenue | - | 84,968 | - | 84,968 | ||||
Commissions earned | 92,029 | 6,312 | - | 98,341 | ||||
Charges and fees | 6,853 | 4,091 | - | 10,944 | ||||
340,203 | 103,644 | - | 443,847 | |||||
Total operating expenses before | ||||||||
depreciation and amortization | 194,294 | 49,944 | 29,198 | 273,436 | ||||
Depreciation and amortization | ||||||||
Depreciation and amortization of lease assets, property and equipment and intangible assets | 5,389 | 29,383 | 2,063 | 36,835 | ||||
Depreciation of right-of-use assets | 4,728 | 5,978 | 560 | 11,266 | ||||
10,117 | 35,361 | 2,623 | 48,101 | |||||
Segment operating income (loss) | 135,792 | 18,339 | (31,821 | ) | 122,310 | |||
Finance costs | ||||||||
Interest expense and amortization of deferred financing charges | 40,350 | |||||||
Interest expense on lease liabilities | 1,808 | |||||||
42,158 | ||||||||
Income before income taxes | 80,152 | |||||||
Income taxes | 22,486 | |||||||
Net Income | 57,666 | |||||||
Diluted earnings per share | 3.72 | |||||||
Nine Months Ended |
||||||||
($ 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 | ||||||||
Depreciation and amortization of lease assets, property and equipment and intangible assets | 6,368 | 31,866 | 1,084 | 39,318 | ||||
Segment operating income (loss) | 100,565 | 16,393 | (32,347 | ) | 84,611 | |||
Finance costs | ||||||||
Interest expense and amortization of deferred financing charges | 32,989 | |||||||
Income before income taxes | 51,622 | |||||||
Income taxes | 14,385 | |||||||
Net Income | 37,237 | |||||||
Diluted earnings per share | 2.53 |
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 | 156,133 | 129,911 | 26,222 | 20.2 | % | ||||
Operating expenses before depreciation and amortization | 97,781 | 83,988 | 13,793 | 16.4 | % | ||||
EBITDA | 49,329 | 35,832 | 13,497 | 37.7 | % | ||||
EBITDA margin | 31.6 | % | 27.6 | % | 400 bps | 14.5 | % | ||
Depreciation and amortization expense | 15,783 | 13,038 | 2,745 | 21.1 | % | ||||
Operating income | 42,569 | 32,885 | 9,684 | 29.4 | % | ||||
Operating margin | 27.3 | % | 25.3 | % | 200 bps | 7.9 | % | ||
Finance costs | 14,821 | 12,894 | 1,927 | 14.9 | % | ||||
Effective income tax rate | 28.6 | % | 28.3 | % | 30 bps | 1.1 | % | ||
Net income | 19,825 | 14,342 | 5,483 | 38.2 | % | ||||
Diluted earnings per share | 1.28 | 0.97 | 0.31 | 32.0 | % | ||||
Return on equity | 24.1 | % | 23.8 | % | 30 bps | 1.3 | % | ||
Key Performance Indicators | |||||||||
Same store revenue growth (overall) | 20.4 | % | 26.2 | % | (580 bps) | (22.1 | %) | ||
Same store revenue growth (easyhome) | 2.4 | % | 6.2 | % | (380 bps) | (61.3 | %) | ||
Segment Financials | |||||||||
easyfinancial revenue | 122,256 | 95,658 | 26,598 | 27.8 | % | ||||
easyfinancial operating margin | 38.9 | % | 39.5 | % | (60 bps) | (1.5 | %) | ||
easyhome revenue | 33,877 | 34,253 | (376 | ) | (1.1 | %) | |||
easyhome operating margin | 16.6 | % | 17.2 | % | (60 bps) | (3.5 | %) | ||
Portfolio Indicators | |||||||||
Gross consumer loans receivable | 1,035,596 | 749,581 | 286,015 | 38.2 | % | ||||
Growth in consumer loans receivable | 75,888 | 63,008 | 12,880 | 20.4 | % | ||||
Gross loan originations | 286,068 | 221,340 | 64,728 | 29.2 | % | ||||
Total yield on consumer loans (including ancillary products) | 50.1 | % | 53.5 | % | (340 bps) | (6.4 | %) | ||
Net charge-offs as a percentage of average gross consumer loans receivable | 13.2 | % | 12.9 | % | 30 bps | 2.3 | % | ||
Potential monthly lease revenue | 8,432 | 8,906 | (474 | ) | (5.3 | %) | |||
($ in 000’s except earnings per share and percentages) | Nine Months Ended | Variance | Variance | ||||||
$ / bps | % change | ||||||||
Summary Financial Results | |||||||||
Revenue | 443,847 | 368,031 | 75,816 | 20.6 | % | ||||
Operating expenses before depreciation and amortization | 273,436 | 244,102 | 29,334 | 12.0 | % | ||||
EBITDA | 142,360 | 93,785 | 48,575 | 51.8 | % | ||||
EBITDA margin | 32.1 | % | 25.5 | % | 660 bps | 25.9 | % | ||
Depreciation and amortization expense | 48,101 | 39,318 | 8,783 | 22.3 | % | ||||
Operating income | 122,310 | 84,611 | 37,699 | 44.6 | % | ||||
Operating margin | 27.6 | % | 23.0 | % | 460 bps | 20.0 | % | ||
Finance costs | 42,158 | 32,989 | 9,169 | 27.8 | % | ||||
Effective income tax rate | 28.1 | % | 27.9 | % | 20 bps | 0.7 | % | ||
Net income | 57,666 | 37,237 | 20,429 | 54.9 | % | ||||
Diluted earnings per share | 3.72 | 2.53 | 1.19 | 47.0 | % | ||||
Return on equity | 24.5 | % | 21.6 | % | 290 bps | 13.4 | % | ||
Key Performance Indicators | |||||||||
Same store revenue growth (overall) | 19.8 | % | 25.0 | % | (520 bps) | (20.8 | %) | ||
Same store revenue growth excluding easyfinancial (easyhome) | 3.4 | % | 6.1 | % | (270 bps) | (44.3 | %) | ||
Segment Financials | |||||||||
easyfinancial revenue | 340,203 | 265,039 | 75,164 | 28.4 | % | ||||
easyfinancial operating margin | 39.9 | % | 37.9 | % | 200 bps | 5.3 | % | ||
easyhome revenue | 103,644 | 102,992 | 652 | 0.6 | % | ||||
easyhome operating margin | 17.7 | % | 15.9 | % | 180 bps | 11.3 | % | ||
Portfolio Indicators | |||||||||
Gross consumer loans receivable | 1,035,596 | 749,581 | 286,015 | 38.2 | % | ||||
Growth in consumer loans receivable | 201,817 | 223,035 | (21,218 | ) | (9.5 | %) | |||
Gross loan originations | 781,861 | 657,517 | 124,344 | 18.9 | % | ||||
Total yield on consumer loans (including ancillary products) | 50.2 | % | 54.8 | % | (460 bps) | (8.4 | %) | ||
Net charge-offs as a percentage of average gross consumer loans receivable | 13.3 | % | 12.6 | % | 71 bps | 5.6 | % | ||
Potential monthly lease revenue | 8,432 | 8,906 | (474 | ) | (5.3 | %) | |||