Mr. David Ingram reports
GOEASY LTD. REPORTS RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2018
goeasy Ltd. has released its results for the first quarter ended March 31, 2018.
Revenue for the first quarter of 2018 was $114.8 million, an increase of 21.8% from $94.2 million in the first quarter of 2017. The increase was driven by the expansion of easyfinancial and the growth of its consumer loans receivable portfolio which reached $601.7 million by quarter's end, up 55.5% from March 31, 2017.
During the quarter, the Company generated a record level of loan originations and loan book growth. Loan originations in the quarter reached an all-time high of $202.4 million, an increase of 90.7% compared with the first quarter of 2017. The growth of the loan book in the quarter reached a record $75.2 million compared to $16.5 million in the first quarter of 2017, an increase of 354.6%. The strong growth was fueled by the increased penetration of risk adjusted rate loans to more credit worthy borrowers, the improved retention of the portfolio, the Company's expansion into Quebec and the introduction of the Company's new secured loan product. The record growth in the quarter was also complemented by strong credit and collections performance as the Company's net charge-off rate improved from 13.9% in the first quarter of 2017 to 12.4% in the current quarter.
Operating income for the three-month period ended March 31, 2018 was $24.9 million, an increase of $4.5 million or 22.1% when compared to the first quarter of 2017. Net income for the quarter was $11.1 million, up $0.8 million or 7.8% from $10.3 million in the first quarter of 2017. Diluted earnings per share for the quarter was $0.77, an increase of $0.04 or 5.5% from $0.73 in the first 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, although there has been no impact on credit performance or cash flows. This new accounting standard was adopted on January 1, 2018 without the restatement of the prior year's comparative results which reduces the ability to compare financial results between fiscal periods. The Company estimates that net income and diluted earnings per share for the first quarter of 2017 would have been $9.0 million and $0.64, 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 22.8% and diluted earnings per share increased 20.3%.
"We are delighted to see that the positive momentum from our performance in 2017 has accelerated in the first quarter of 2018", said David Ingram, goeasy's Chief Executive Officer. "With our highest loan book growth in a single quarter and our lowest net charge off rate since 2014, our confidence in the business and our ability to achieve our targets has never been stronger. The execution of our strategy, coupled with our focus on helping our customers rebuild their credit, are working well as we also saw net customer growth increase 70% over Q1 2017. As a result of the incremental growth in the quarter compared to last year, we were required to take a larger provision for future credit losses which impacted diluted earnings per share by an incremental $0.31. Mr. Ingram concluded, "Although we had forecasted our loan book to reach between $700 to $750 million by the end of 2018, we now believe that due to the customer demand we will achieve or exceed the high end of that range and will provide a fresh outlook on our 3-year growth targets when we report Q2 results."
Other highlights for the first quarter of 2018 include:
-
easyfinancial
- Revenue increased by 34.9% to $80.4 million from $59.6 million in the first quarter of 2017.
- Delinquency rates on the final Saturday of the quarter improved to 4.5% from 5.2% on the final Saturday of the first quarter of 2017.
-
Cash generated from easyfinancial customer payments was $131.8 million in the first quarter of 2018 compared to $99.5 million in the first quarter of 2017.
-
5 net new branches opened.
-
easyhome
- Same store revenue increased 3.6%.
-
Generated $1.0 million of revenue related to consumer lending.
- The operating margin for easyhome for the first quarter of 2018 was 15.7%, up from the 14.9% reported for the same period in 2017.
-
Overall
-
32nd consecutive quarter of same store sales growth.
-
67th consecutive quarter of positive net income.
- Pre-tax, pre-provision income, which is income before income taxes provisions for future credit losses, increased by 38.1% to $39.6 million from $28.7 million in the first quarter of 2017.
-
The Company's return on equity was 19.8% in the current quarter.
-
Balance Sheet and Liquidity
- Total assets were $755.4 million as at March 31, 2018, an increase of 43.5% from $526.5 million as at March 31, 2017 and driven by the $214.7 million growth in the gross consumer loans receivable portfolio.
- As at March 31, 2018, the Company had $57.3 million in cash and an additional $110.0 million from committed facilities available to support future growth.
Update on IFRS 9
As detailed in the Company's Management Discussion and Analysis for the three months ended March 31, 2018, effective January 1, 2018, the Company adopted IFRS 9. IFRS 9 introduces a new expected loss impairment model which replaces the existing incurred loss impairment model under IAS 39, Financial Instruments ["IAS 39"].
Under the previous accounting standard, IAS 39, a collective allowance for loan loss was recorded on those loans, or groups of loans, where a loss event has occurred but has not been reported, as at, or prior to, the balance sheet date. Under IFRS 9, the Company is required to apply an expected credit loss model, where credit losses that are expected to transpire in future years irrespective of whether a loss event has occurred or not as at the balance sheet date, are provided for.
It is important to note that the adoption of IFRS 9 does not impact the net charge-off rate of the Company's consumer loans receivable portfolio which is driven by borrowers' credit profile and behaviour. The Company will continue to write off unsecured customer balances that are delinquent greater than 90 days and secured customer balances that are delinquent greater than 180 days. Likewise, the cash flows used in and generated by the Company's consumer loans receivable portfolio are not impacted by the adoption of IFRS 9 as the periodic increase in the allowance for loan losses as a result of growth in the consumer loans receivable is a non-cash item.
The Company's allowance for loan losses, as determined under IAS 39, as at December 31, 2017, was $31.7 million which represented 6.0% of the gross consumer loans receivables. The Company determined that its allowance for loan losses, as determined under IFRS 9, as at January 1, 2018, was $49.1 million which represented 9.3% of the gross consumer loans receivable, resulting in an increase to its allowance for loan losses of $17.4 million. This increase in the allowance for loan losses was not indicative of a change in the expected recovery value of the underlying consumer loans receivable but rather a function of extending the allowance for loan losses to provide for expected future losses over a longer future time frame as required under IFRS 9.
In addition to the one-time reduction to retained earnings upon the adoption of IFRS 9 on January 1, 2018, the requirements of IFRS 9 will result in a reduction to IFRS reported net income in periods where the Company experiences growth in its consumer loans receivable portfolio. Due to the transition from an incurred loss model to a future expected credit loss model as required under IFRS 9, the Company's allowance for credit losses as a percentage of the gross consumer loans receivable outstanding will be higher. Operationally, this will require a larger provision to be taken when new consumer loans receivables are originated. This will result in greater bad debt expense and a corresponding decrease in reported net income when compared to net income reported under the prior standard, IAS 39.
Dividend
The Board of Directors has approved a quarterly dividend of $0.225 per share payable on July 13, 2018 to the holders of common shares of record as at the close of business on June 29, 2018.
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
.
goeasy Ltd.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOM E
(Unaudited)
(expressed in thousands of Canadian dollars except earnings per share)
Three Months Ended
March 31, March 31,
2018 2017
REVENUE
Interest income 53,791 38,134
Lease revenue 30,669 31,910
Commissions earned 26,939 20,973
Charges and fees 3,378 3,228
114,777 94,245
EXPENSES BEFORE DEPRECIATION AND AMORTIZATION
Salaries and benefits 28,475 23,822
Stock-based compensation 1,619 1,066
Advertising and promotion 3,929 3,432
Bad debts 24,378 14,117
Occupancy 8,562 8,312
Other expenses 9,503 9,835
76,466 60,584
DEPRECIATION AND AMORTIZATION
Depreciation of lease assets 10,002 10,722
Depreciation of property and equipment 1,618 1,324
Amortization of intangible assets 1,767 1,202
13,387 13,248
Total operating expenses 89,853 73,832
Operating income 24,924 20,413
Finance costs 9,670 5,825
Income before income taxes 15,254 14,588
Income tax expense (recovery)
Current 4,922 5,447
Deferred (742 ) (1,129)
4,180 4,318
Net income 11,074 10,270
Basic earnings per share 0.81 0.76
Diluted earnings per share 0.77 0.73
© 2024 Canjex Publishing Ltd. All rights reserved.