07:27:49 EDT Fri 29 Mar 2024
Enter Symbol
or Name
USA
CA



goeasy Ltd
Symbol GSY
Shares Issued 13,674,191
Close 2018-08-07 C$ 45.74
Market Cap C$ 625,457,496
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goeasy earns $11.82-million in Q2

2018-08-07 18:28 ET - News Release

Mr. David Ingram reports

GOEASY LTD. REPORTS RECORD RESULTS FOR THE SECOND QUARTER ENDED JUNE 30, 2018 AND PROVIDES UPDATED OUTLOOK

goeasy Ltd. has released its results for the second quarter ended June 30, 2018, and provided updated targets for future periods.

Results for the second quarter ended June 30, 2018

Revenue for the second quarter of 2018 increased to $123.3-million, up 26.4 per cent from $97.5-million in the second quarter of 2017. The growth was driven by the expansion of the easyfinancial consumer loans receivable portfolio, which grew a record $84.8-million in the quarter, compared with $38.3-million in the second quarter of 2017, an increase of 121.7 per cent. The loan portfolio reached $686.6-million by the quarter-end, up 61.4 per cent from June 30, 2017.

"Our strategy of providing everyday Canadian consumers access to the funds they need, while helping put them on a path back to prime rates and better financial outcomes, continues to resonate," said David Ingram, goeasy's chief executive officer. "During the quarter, we generated record results across several key performance indicators, including loan applications, net customer growth and loan originations. This performance was a direct result of a new multimedia marketing campaign, which drove a 30-per-cent increase in Web traffic and a 54-per-cent increase in total loan applications compared to the prior year. The elevated consumer demand for our loan products was accompanied by a 23-per-cent increase in the size of the average unsecured loan, which collectively produced a record $233.8-million in loan originations, an increase of 67.7 per cent compared with the second quarter of 2017. The evolving product mix, combined with our ongoing investments in credit analytics and collections, also produced an improvement in the credit performance of the portfolio, as the net charge-off rate declined to 12.4 per cent in the second quarter from 14.8 per cent in the prior year."

Operating income for the three-month period ended June 30, 2018, was $26.8-million, an increase of $8.2-million or 44.1 per cent compared with the second quarter of 2017. During the first quarter of 2018, the company adopted IFRS 9, Financial Instruments (international financial reporting standards), which increased the size of the provision for future credit losses that the company maintained on its balance sheet. This new accounting standard was adopted prospectively on Jan. 1, 2018, without the restatement of the prior-year comparative results. The increased size of the provision under IFRS 9 resulted in an additional $2.5-million in non-cash bad debt expense in the current quarter than would have resulted under the previous accounting standard. The significant increase in loan book growth in the quarter resulted in an additional $2.7-million in bad debt expense compared with the second quarter of 2017.

Net income for the quarter was a record $11.8-million, up $2.9-million or 33.0 per cent from $8.9-million in the second quarter of 2017. Diluted earnings per share for the quarter were a record 82 cents, an increase of 19 cents or 30.2 per cent from 63 cents in the second quarter of 2017. The company estimates that net income and diluted earnings per share for the second quarter of 2017 would have been $7.3-million and 52 cents, 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 62.6 per cent and diluted earnings per share increased 57.7 per cent.

Secured access to growth capital

The company was also able to secure additional growth capital at a significantly reduced cost. The size of the company's senior secured revolving credit facility, which is provided by a syndicate of banks, was increased from $110-million to $174.5-million. In addition, a number of related covenants were adjusted to make them less restrictive and to provide for greater operational flexibility including an increase in the maximum leverage ratio from 2.50 to 3.25. The North American capital markets also showed their confidence in the company's business model and its strategy as the company issued $150-million (U.S.) in unsecured notes at a 105 premium to par resulting in a yield to maturity of 6.17 per cent, a significant reduction in the company's cost of borrowing. Taken together, these activities provided the company with an additional $268-million in capital, which is expected to fuel the growth of its easyfinancial business through the second quarter of 2020.

"It is clear that investors are confident in our growth and business model as evidenced by our ability to raise capital at increasingly lower rates," said Mr. Ingram. "With the highest revenue and portfolio growth of our benchmarked companies in North America, we continue to be optimistic about the future."

Other highlights for the second quarter of 2018 include the following.

easyfinancial:

  • Revenue increased by 41.4 per cent to $89.0-million from $63.0-million in the second quarter of 2017;
  • Record net customer growth of 9,290, up from 8,116 in the second quarter of 2017, an increase of 14.5 per cent;
  • Average loan book per branch of $2.5-million, up from $1.7-million in the second quarter of 2017, an increase of 47 per cent;
  • Delinquency rates on the final Saturday of the quarter reduced to a record low of 4.2 per cent from 4.8 per cent on the final Saturday of the second quarter of 2017;
  • Operating margin for the second quarter of 2018 increased to 37.5 per cent from 33.9 per cent in the second quarter of 2017.

easyhome:

  • Same-store revenue increased 6.9 per cent;
  • Consumer lending portfolio within easyhome leasing stores of $12.8-million, up from $1.1-million in the second quarter of 2017;
  • Revenue of $1.6-million from consumer lending, versus $100,000 in the second quarter of 2017;
  • Operating income of $5.1-million in the quarter compared with $5.3-million in the second quarter of 2017.

Over all:

  • 33rd consecutive quarter of same-store sales growth;
  • 68 consecutive quarters of positive net income;
  • Operating margin was 21.7 per cent for the quarter, up from 19.1 per cent in the second quarter of 2017;
  • The company's return on equity was 20.9 per cent in the current quarter, versus 17.1 per cent in the second quarter of 2017;
  • Net external debt to total capitalization of 67 per cent as at June 30, 2018, within the company's optimal leverage ratio of 70 per cent;
  • Employee retention year to date has improved by 14 per cent over 2017.

Six-month results

For the first six months of 2018, goeasy achieved revenues of $238.1-million, up 24.2 per cent compared with $191.8-million in the same period of 2017. Operating income for the period was $51.7-million compared with $39.0-million in the first six months of 2017, an increase of $12.7-million or 32.6 per cent. Net income for the first six months of 2018 was $22.9-million, and diluted earnings per share were $1.58 compared with $19.2-million or $1.36 per share, increases of 19.5 per cent and 16.2 per cent, respectively.

Revised outlook

"Given the record growth in the first half of 2018, the strengthening of our balance sheet and our plans for the future, we are providing an updated and more ambitious three-year outlook. We now expect the high end of our loan book in 2018 to be 17 per cent higher than our original targets and the high end of our loan book in 2019 of $1.2-billion to be 26 per cent higher than the $950-million target previously set out," said Mr. Ingram. "These growth targets will be achieved by continuing to build our brand awareness in Canada and executing on our strategic initiatives. We will continue to meet our customers' needs through risk-adjusted pricing, expansion in the Quebec market and growth of our secured lending product. The growth will be further aided by several new initiatives that we are bringing to market in the second half of 2018, including investments in our on-line digital platforms and continued efforts to build out our laddered suite of products that help graduate our customers up the credit spectrum, all of which are contributing to our confidence in the future."

 
                                                       2018                           2019                           2020
                                                                                                              
Gross consumer loans 
receivable portfolio 
at year-end                     $825-million to $875-million  $1.1-billion to $1.2-billion  $1.3-billion to $1.4-billion
easyfinancial total revenue 
yield                                             54% to 56%                    49% to 51                     46% to 48%
New easyfinancial locations                         20 to 30                      10 to 20                      10 to 20
Net charge-offs as a 
percentage of average gross 
consumer loans receivable                         12% to 14%                11.5% to 13.5%                    11% to 13%
easyfinancial operating margin                    38% to 40%                    42% to 44%                    44% to 46%
Total revenue growth                              26% to 28%                    20% to 22%                    14% to 16%
Return on equity                                    21% plus                      24% plus                      26% plus

Dividend

The board of directors has approved a quarterly dividend of 22.5 cents per share, payable on Oct. 12, 2018, to the holders of common shares of record as at the close of business on Sept. 28, 2018.

About goeasy Ltd.

goeasy is a leading full-service provider of goods and alternative financial services, providing everyday Canadians with a chance for a better tomorrow, today. goeasy serves its customers through two key operating divisions, easyfinancial and easyhome.

easyfinancial is a non-prime consumer lender that bridges the gap between traditional financial institutions and costly payday lenders. 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.

                         INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME                                                 
                     (in thousands of Canadian dollars, except earnings per share) 
                                                                                                    
                                                            Three months ended          Six months ended
                                                         June 30,      June 30,    June 30,      June 30,
                                                            2018          2017        2018          2017     
Revenue                                                                                             
Interest income                                         $ 60,775      $ 40,781    $114,566      $ 78,915 
Lease revenue                                             30,133        31,525      60,802        63,435 
Commissions earned                                        29,188        21,936      56,127        42,909 
Charges and fees                                           3,247         3,304       6,625         6,532  
                                                         123,343        97,546     238,120       191,791
Expenses before depreciation and amortization                                                       
Salaries and benefits                                     29,715        25,793      58,190        49,615 
Stock-based compensation                                   1,735         1,266       3,354         2,332  
Advertising and promotion                                  5,661         5,295       9,590         8,727  
Bad debts                                                 27,549        17,173      51,927        31,290 
Occupancy                                                  8,668         8,304      17,230        16,616 
Other expenses                                            10,320         8,317      19,823        18,152 
                                                          83,648        66,148     160,114       126,732
Depreciation and amortization                                                         
Depreciation of lease assets                              10,051        10,220      20,053        20,942 
Depreciation of property and equipment                     1,391         1,330       3,009         2,654  
Amortization of intangible assets                          1,451         1,242       3,218         2,444  
                                                          12,893        12,792      26,280        26,040 
Total operating expenses                                  96,541        78,940     186,394       152,772
Operating income                                          26,802        18,606      51,726        39,019 
Finance costs                                             10,425         6,578      20,095        12,403 
Income before income taxes                                16,377        12,028      31,631        26,616 
Income tax expense (recovery)                                                                       
Current                                                    6,413        (1,310)     11,335         4,137  
Deferred                                                  (1,857)        4,448      (2,599)        3,319  
                                                           4,556         3,138       8,736         7,456  
Net income                                                11,821         8,890      22,895        19,160 
Basic earnings per share                                $   0.86      $   0.66    $   1.67      $   1.42   
Diluted earnings per share                              $   0.82      $   0.63    $   1.58      $   1.36   

We seek Safe Harbor.

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