Mr. David Ingram reports

GOEASY LTD. REPORTS RECORD RESULTS FOR THE THIRD QUARTER 2018

goeasy Ltd. has released its results for the third quarter ended Sept. 30, 2018.

Third quarter results

Revenue for the third quarter of 2018 increased to a record $130-million, an increase of 26.5 per cent over the same period in 2017. The increase was driven by the growth of the easyfinancial consumer loan portfolio, which reached $750-million by quarter-end, up 58.5 per cent from $473-million as at Sept. 30, 2017.

During the quarter, the company generated $221-million of loan originations, up 40.5 per cent from the $158-million in the third quarter of 2017. The growth in originations was primarily fuelled by consumer demand for the core unsecured loan product, further expansion of risk adjusted rate loans, the growth of secured lending and offering consumer loans through the easyhome leasing stores. The increased originations led to growth in the loan portfolio of $63.0-million in the quarter, up 32.0 per cent from the $47.7-million in the third quarter of 2017. The net charge-off rate in the quarter was 12.9 per cent, down from 13.1 per cent in the third quarter of 2017 and at the midpoint of the company's guided range of 12 per cent to 14 per cent for 2018.

The result of growing revenues and increasing scale produced record operating income, margins, net income, earnings per share and return on equity. Operating income grew to $32.9-million, up 37.5 per cent from $23.9-million in the third quarter of 2017, while operating margin expanded to 25.3 per cent up from 23.3 per cent. Net income in the third quarter was $14.3-million, up 23.6 per cent from $11.6-million in 2017, which resulted in diluted earnings per share of 97 cents, up 19.8 per cent from 81 cents in 2017. After adjusting for the effect of IFRS 9 (international financial reporting standards), which would have elevated the loan loss provision and bad debt expense in the prior year, diluted earnings per share were up 47.0 per cent compared with the estimated 66 cents per share in the third quarter of 2017.

"It was a solid quarter for the company, highlighted by record financial results," said David Ingram, goeasy's chief executive officer. "The strong revenue growth, combined with stable credit performance, led to improved margins, record earnings per share and a record return on equity of nearly 24 per cent. We remain on track to finish 2018 near the midpoint of our guided range for both the ending consumer loan portfolio and the net charge-offs. During the quarter, we also made several enhancements to our balance sheet. Securing lower-cost capital in advance of its use reduced earnings per share by approximately 14 cents in the quarter, while the equity raise completed in October served to lower our total leverage. Combined, we were able to obtain the capital we need to fund our growth until the third quarter of 2020."

Other key highlights

easyfinancial:

• Revenue increased to $95.7-million, up 39.2 per cent from $68.7-million in the third quarter of 2017; 61.9 per cent of net loan advances year to date have been issued to new customers, consistent with 2017.
• Average loan book per branch improved to $2.7-million from $1.9-million in the third quarter of 2017, an increase of 42.1 per cent.
• Average weekly delinquency rate throughout the quarter was 4.4 per cent, consistent with the same period of 2017.

easyhome:

• Same-store revenue increased 6.2 per cent, up from 3.0 per cent in the third quarter of 2017.
• Consumer lending portfolio within easyhome leasing stores was $17.2-million, up from $2.9-million in the third quarter of 2017.
• Revenue was $2.2-million from consumer lending, versus $300,000 in the third quarter of 2017.
• Operating margin was 17.2 per cent for the quarter, an increase from the 16.4 per cent reported in 2017.
• Operating income was $5.9-million in the quarter compared with $5.6-million in the third quarter of 2017.

Over all:

• 34th consecutive quarter of same-store sales growth;
• 69th consecutive quarters of positive net income;
• Total same-store revenue growth of 26.2 per cent, up from 21.3 per cent in the third quarter of 2017;
• Compound annual growth in diluted earnings per share of 37.0 per cent since 2001;
• Record return on equity of 23.8 per cent in the quarter, up from 21.3 per cent in the third quarter of 2017;
• Net external debt to net capitalization of 68 per cent as at Sept. 30, 2018, below the company's target leverage ratio of 70 per cent.

Future outlook

In the second quarter of 2018, the company provided revised three-year targets for 2018 through 2020. These targets remain unchanged.

                                        THREE-YEAR TARGETS

                                                         2018              2019             2020         

Gross loan receivable portfolio at year-end      $825-million      $1.1-billion     $1.3-billion
                                              to $875-million   to $1.2-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

"With the fourth quarter already off to a strong start, we remain excited by our future initiatives and our ability to execute against the targets set for the next three years," Mr. Ingram concluded. "We are still at the early stages of a significant period for growth that will continue to build our leadership position in the non-prime lending space. To this end, I am extremely proud to have guided the company for the last 18 years and have always been inspired by the meaningful relationships that our front line staff have worked tirelessly to build with the customers in their communities. In January, when I take on the role of executive chairman, I will pass the reigns over to Jason Mullins to assume the role of CEO, who has demonstrated during his eight years with our company the qualities and commitment to be an outstanding leader for the future of our organization."

Balance sheet and liquidity

Total assets were $985-million as at Sept. 30, 2018, an increase of 62.8 per cent from $605-million as at Sept. 30, 2017, primarily driven by the growth in the consumer loan portfolio and the additional cash on hand to finance future growth.

During the quarter, the company issued $150-million (U.S.) of notes payable due on Nov. 1, 2022, which generated net proceeds of $203-million (Canadian). The issuance of the notes payable was at a premium to par, resulting in an attractive interest rate (excluding the effect of financing charges) of 6.17 per cent. On Oct. 10, 2018, the company also closed its offering of 920,000 common shares, at a price of $50.50 per common share, for aggregate net proceeds of $44.3-million.

Based on the cash on hand at the end of the quarter, borrowing capacity under the company's revolving credit facility and the equity issuance subsequent to the end of the quarter, the company had approximately $340-million, which will allow the company to achieve its targets for the growth of its consumer loans portfolio through to the third quarter 2020.

Dividend

The board of directors has approved a quarterly dividend of 22.5 cents per share, payable on Jan. 11, 2019, to the holders of common shares of record as at the close of business on Dec. 28, 2018.

About goeasy Ltd.

goeasy offers leasing and lending services in the alternative financial services market and provides everyday Canadians a path to a better tomorrow, today. goeasy 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.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
   (in thousands of Canadian dollars, except earnings per share)
                                                  Three months ended           Nine months ended
                                              Sept. 30,     Sept. 30,       Sept. 30,   Sept. 30,
                                                  2018          2017            2018        2017
Revenue                                                                                        
Interest income                              $  67,597     $  44,994       $ 182,163   $ 123,909
Lease revenue                                   29,506        30,892          90,308      94,327
Commissions earned                              29,387        23,561          85,514      66,470
Charges and fees                                 3,421         3,246          10,046       9,778 
                                               129,911       102,693         368,031     294,484
Expenses before depreciation and amortization                                                   
Salaries and benefits                           27,149        26,355          85,339      75,970
Stock-based compensation                         1,727         1,764           5,081       4,096
Advertising and promotion                        3,352         2,913          12,942      11,640
Bad debts                                       32,867        17,729          84,794      49,019
Occupancy                                        8,628         8,352          25,858      24,968
Other expenses                                  10,265         8,940          30,088      27,092
                                                83,988        66,053         244,102     192,785
Depreciation and amortization                                                                   
Depreciation of lease assets                    10,091        10,039          30,144      30,981
Depreciation of property and equipment           1,461         1,389           4,470       4,044
Amortization of intangible assets                1,486         1,288           4,704       3,731
                                                13,038        12,716          39,318      38,756
Total operating expenses                        97,026        78,769         283,420     231,541
Operating income                                32,885        23,924          84,611      62,943
Finance costs                                   12,894         7,465          32,989      19,868
Income before income taxes                      19,991        16,459          51,622      43,075
Income tax expense (recovery)                                                                   
Current                                          9,266         4,938           20,601      9,075
Deferred                                        (3,617)          (85)          (6,216)     3,234
                                                 5,649         4,853           14,385     12,309
Net income                                      14,342        11,606           37,237     30,766
Basic earnings per share                     $    1.03     $    0.86        $    2.70  $    2.28 
Diluted earnings per share                   $    0.97     $    0.81        $    2.53   $    2.17 

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