Mr. Jason Mullins reports

GOEASY LTD. REPORTS RECORD RESULTS FOR THE FIRST QUARTER

goeasy Ltd. has released its results for the first quarter ended March 31, 2019.

First quarter results

During the quarter the company generated $219-million of total loan originations, up 8 per cent from the $202-million in the first quarter of 2018. The increased originations led to growth in the loan portfolio of $45.6-million, which reached $879-million, up 46 per cent from $602-million as at March 31, 2018.

Revenue for the first quarter of 2019 increased to $140-million, up 22 per cent over the same period in 2018, driven by the expansion of the consumer loan portfolio. The net charge-off rate remained consistent with the fourth quarter of 2018 at 13.1 per cent, up from 12.4 per cent in the first quarter of 2018 and within the company's guided range of 11.5 per cent to 13.5 per cent for 2019.

Growing revenues and improved operating leverage led to record margins, net income, earnings per share and return on equity. Operating income grew to $38.8-million, up 56 per cent from $24.9-million in the first quarter of 2018, while the operating margin expanded to 27.7 per cent, up from 21.7 per cent. Net income in the first quarter was $18.3-million, up 65 per cent from $11.1-million in 2018, which resulted in diluted earnings per share of $1.18, up 53 per cent from the 77 cents in 2018.

"It was a strong start to the year, highlighted by disciplined loan growth, stable credit performance and record financial results," said Jason Mullins, goeasy's president and chief executive officer. "While the pro-active credit adjustments made in the second half of 2018 served to moderate the growth of our loan originations in the quarter, we remain deliberately focused on improving the long-term credit quality and performance of our loan portfolio. Secured lending increased to 12 per cent of our loan originations, up from 4 per cent in 2018, demonstrating the growth potential for this product in the future. Furthermore, we have successfully introduced the second phase of our new custom credit strategy in Quebec, which will help deliver improved and sustainable performance in that market. We are well positioned to deliver improving levels of growth and achieve our targets in 2019."

Mr. Mullins continued: "We also continue to be driven by a goal to provide everyday Canadians with access to the credit they need, as we help them on a path to a better tomorrow. With an ever-broadening set of products, ancillary services and free education to help our customers improve their financial health, we are proud to see our vision brought to life with one in three easyfinancial customers graduating to prime credit and 60 per cent increasing their credit score within 12 months of borrowing from us."

Other key quarterly highlights

easyfinancial:

• Total application volume increased 11 per cent;
• Revenue grew to $105-million, up 30 per cent;
• Secured loan portfolio grew to $68.4-million, up from $19.7-million;
• 63 per cent of net loan advances in the quarter were issued to new customers, up from 58 per cent;
• Aided brand awareness of 82 per cent, up from 77 per cent;
• Average loan book per branch improved to $3.1-million, an increase of 41 per cent;
• The delinquency rate on the final Saturday of the quarter was 4.4 per cent, consistent with the 4.5 per cent reported in the same period of 2018;
• Operating income of $41.4-million, up 40 per cent;
• Operating margin of 39.5 per cent, an increase from the 36.7 per cent reported in the first quarter of 2018.

easyhome:

• Revenue grew to $35.2-million, up 2 per cent from $34.4-million;
• Same store revenue increased 4.7 per cent, compared with 3.6 per cent;
• Consumer lending portfolio within easyhome stores increased to $24.4-million, up from $8.5-million;
• Revenue from consumer lending increased to $3.4-million, up from $1.1-million;
• Operating income of $7.1-million in the quarter compared with $5.4-million in the same period of 2018, up 31 per cent;
• Operating margin of 20.3 per cent for the quarter, an increase from the 15.7 per cent reported in the first quarter of 2018.

Over all:

• 36th consecutive quarter of same store sales growth;
• 71st consecutive quarter of positive net income;
• Total same store revenue growth of 21.3 per cent;
• Return on equity of 24.4 per cent in the quarter, up from an adjusted 19.8 per cent;
• Net external debt to net capitalization of 67 per cent as at March 31, 2019, below the company's target leverage ratio of 70 per cent;
• Repurchased 283,500 shares in the quarter at a weighted average price of $41.75 under the company's normal course issuer bid.

Balance sheet and liquidity

Total assets were $1.1-billion as at March 31, 2019, an increase of 46 per cent from $755-million as at March 31, 2018, driven by the growth in the consumer loan portfolio.

Cash provided by operating activities before the net issuance of consumer loans receivable and purchase of lease assets was $76.9-million in the first quarter of 2019, an increase of 39 per cent from $55.5-million in the same period of 2018.

During the quarter, the company completed an amendment to its pre-existing senior secured revolving credit facility provided by a syndicate of banks. The amendment extended the maturity date to February, 2022 (from October, 2020) and increased the maximum principal amount available from $174.5-million to $189.5-million. The interest rate on advances from the credit facility was also reduced from the previous rate of Canadian Bankers' acceptance rate plus 450 basis points, or the lender's prime rate plus 350 bps, to BA plus 325 bps (reduced 125 bps), or prime plus 200 bps (reduced 150 bps). Based on the current BA rate of approximately 1.86 per cent and prime rate of 3.95 per cent as of May 1, 2019, the interest rate on the principal amount drawn would be 5.11 per cent or 5.95 per cent, at the option of the company.

Based on the cash on hand at the end of the quarter and the borrowing capacity under the company's amended revolving credit facility, the company has approximately $265-million in financing capacity, which will allow it to achieve its targets for the growth of its consumer loan portfolio through to the third quarter of 2020. The company has historically been able to obtain the additional financing required to finance the growth of its business at steadily lower costs of borrowing and increasing rates of leverage. However, the company also estimates that once its existing and available sources of capital are fully utilized, the company could continue to grow its loan portfolio by approximately $150-million per year solely from internal cash flows.

Dividend

The board of directors has approved a quarterly dividend of 31 cents per share payable on July 12, 2019, to the holders of common shares of record as at the close of business on June 28, 2019.

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 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.

             INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME                                  
     (expressed in thousands of Canadian dollars, except earnings per share)               
                                                                                    
                                                                   Three months ended  
                                                                  March 31,  March 31, 
                                                                      2019       2018   
                                                                                     
Revenue   
                                                                           
Interest income                                                     76,730     53,791 
Lease revenue                                                       29,482     30,669 
Commissions earned                                                  30,080     26,939 
Charges and fees                                                     3,568      3,378 
                                                                   139,860    114,777 
                                                                                     
Expenses before depreciation and amortization 
                                       
Salaries and benefits                                               28,677     28,475 
Stock-based compensation                                             1,887      1,619 
Advertising and promotion                                            5,850      3,929 
Bad debts                                                           34,394     24,378 
Occupancy                                                            4,980      8,562 
Technology costs                                                     2,738      2,966 
Other expenses                                                       6,201      6,537 
                                                                    84,727     76,466 
                                                                                     
Depreciation and amortization 
                                                       
Depreciation of lease assets                                         9,650     10,002 
Depreciation of property and equipment                               1,501      1,618 
Depreciation of right-of-use assets                                  3,791          -  
Amortization of intangible assets                                    1,381      1,767 
                                                                    16,323     13,387 
                                                                                      
Total operating expenses                                           101,050     89,853 
                                                                                      
Operating income                                                    38,810     24,924 
                                                                                     
Finance costs
                                                                        
Interest expenses and amortization of deferred financing charges    12,898      9,670 
Interest expense on lease liabilities                                  603          -  
                                                                    13,501      9,670 
                                                                                     
                                                                                     
Income before income taxes                                          25,309     15,254 
                                                                                     
Income tax expense (recovery) 
                                                       
Current                                                              7,357      4,922 
Deferred                                                              (321)      (742)
                                                                     7,036      4,180 
                                                                                     
Net income                                                          18,273     11,074 
                                                                                     
Basic earnings per share                                              1.25       0.81 
Diluted earnings per share                                            1.18       0.77 

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