Mr. Jason Mullins reports

GOEASY LTD. REPORTS RECORD RESULTS FOR THE FIRST QUARTER & PROVIDES UPDATED FORECAST

goeasy Ltd. has released results for the first quarter ended March 31, 2023.

First quarter results

During the quarter, the company produced loan originations of $616-million, up 29 per cent compared with $477-million originated in the first quarter of 2022. The increase in lending was driven by strong performance across the company's entire range of products and acquisition channels, including unsecured lending, home equity loans, point-of-sale lending and automotive financing.

The increased loan originations led to record first quarter growth in the loan portfolio of $196-million, which was up 58 per cent from $124-million of loan growth in the first quarter of 2022. At quarter-end, the gross consumer loan receivable portfolio was $2.99-billion, up 39 per cent from $2.15-billion in the first quarter of 2022. The growth in consumer loans led to an increase in revenue, which was a record $287-million in the quarter, up 24 per cent from the $232-million in the first quarter of last year.

During the quarter, the company continued to experience stable credit and payment performance. The net charge off rate in the first quarter was 8.9 per cent, in line with the company's updated reduced target range of between 8 per cent and 10 per cent on an annualized basis, and consistent with 8.8 per cent in the first quarter of 2022. The stable credit performance reflects the resilience of the non-prime consumer, coupled with the improved product mix of the loan portfolio and the pro-active credit and underwriting enhancements made since the fourth quarter of 2021. The company's allowance for future credit losses declined slightly to 7.48 per cent, compared with 7.62 per cent in the fourth quarter of 2022, due to improved portfolio mix and delinquency performance.

Operating income for the first quarter of 2023 was a record $102-million, up 28 per cent from $80-million in the first quarter of 2022. Operating margin for the first quarter was 35.5 per cent, up from 34.4 per cent in the same period last year.

After adjustments, including unusual items and non-recurring expenses, the company reported record adjusted operating income of $106-million, an increase of 24 per cent compared with $86-million in the first quarter of 2022. Adjusted operating margin for the first quarter was 37.1 per cent, flat compared with the same period in 2022, primarily due to a higher level of loan growth resulting in an increase in the loan loss provision expense compared with the prior period. The efficiency ratio for the first quarter of 2023 was 33.1 per cent, down 260 basis points from 35.7 per cent in the first quarter of 2022, reflecting improved operating leverage.

Net income in the first quarter was $51.4-million, up 97 per cent from $26.1-million in the same period of 2022, which resulted in diluted earnings per share of $3.01, up 94 per cent from the $1.55 reported in the first quarter of 2022. After adjusting for non-recurring and unusual items on an after-tax basis in both periods, adjusted net income was a record $52.9-million, up 16 per cent from $45.8-million in the first quarter of 2022. Adjusted diluted earnings per share were a record $3.10, up 14 per cent from $2.72 in the first quarter of 2022. Return on equity during the quarter was 23.2 per cent, compared with 13.5 per cent in the first quarter of 2022. Adjusted return on equity was 23.9 per cent in the quarter, up from 23.8 per cent in the same period of 2022.

"Two thousand twenty-three is off to a great start, driven by record first quarter loan growth, stable credit performance and record earnings," said Jason Mullins, goeasy's president and chief executive officer. "Despite ongoing concerns about the economic environment, our tactics to ensure highly stable and resilient credit performance, including credit model enhancements and improved product mix, continue to produce the desired results. Furthermore, the confidence in our business has been reaffirmed with over $250-million of additional funding being provided by a combination of our bank syndicate and a facility provided by SLC Management. With record results to start the year, we are confident we are on track to achieve our full-year guidance and produce record earnings," Mr. Mullins concluded. "We are also pleased to publish a new commercial forecast, which incorporates the impact of the pending change to legislation. While our yield will moderate slightly in the outer years, we also believe there will be an increase in lending volume and further improvements to credit performance. All together, we remain confident we can continue to produce a record level of annual earnings going forward."

Other key first quarter highlights

easyfinancial:

• Record revenue of $249-million, up 28 per cent;
• 41 per cent of the loan portfolio secured, up from 34 per cent;
• Record 67 per cent of net loan advances in the quarter were issued to new customers, up from 64 per cent;
• Record origination volumes in automotive financing;
• Net customer growth during the quarter of 8,955;
• Average loan book per branch improved to $5.1-million, an increase of 25.2 per cent;
• Weighted-average interest rate on consumer loans of 30.2 per cent, down from 32.7 per cent;
• Record operating income of $119-million, up 31 per cent;
• Operating margin of 47.7 per cent, up from 46.4 per cent.

easyhome:

• Revenue of $38.3-million, up 2 per cent;
• Consumer loan portfolio within easyhome stores increased to $92.0-million, up 27 per cent;
• Financial revenue from consumer lending increased to $11.2-million, up 24.6 per cent from $9.0-million;
• Operating income of $9.1-million, down 3 per cent;
• Operating margin of 23.8 per cent, down from 25.0 per cent.

Over all:

• 87th consecutive quarter of positive net income;
• 19th consecutive year of paying dividends and ninth consecutive year of a dividend increase;
• 52nd consecutive quarter of same-store revenue growth;
• Total customers served over 1.3 million;
• Adjusted return on equity of 23.9 per cent, up from 23.8 per cent;
• Adjusted return on tangible common equity of 33.8 per cent, down from 36.5 per cent;
• Fully drawn weighted-average cost of borrowing at 5.7 per cent, up from 4.3 per cent;
• Net debt to net capitalization of 72 per cent on March 31, 2023, in line with the company's target leverage profile.

Future outlook

On Feb. 15, 2023, the company provided a three-year forecast for the years 2023 through 2025. Subsequently, as previously disclosed, on March 28, 2023, the government of Canada announced through the federal budget its intent to reduce the maximum allowable rate of interest to an annual percentage rate (APR) of 35 per cent. The corresponding Budget Implementation Act indicates the effective date of the new maximum allowable rate will be determined at a later date, to be noted by a future order in council. It also references that the new maximum allowable rate will only be applicable to credit agreements entered into subsequent to the effective date, and that a regulatory process will consider and incorporate exemptions to the law. The date that the new regulation will be drafted and published remains unknown at this time, as does the effective date of the new legislation. The company intends to make enhancements to its products, pricing and cost structure, with the objective of mitigating the future impact of a lower maximum allowable rate on its commercial results. As a result of the above considerations, the company has assessed the anticipated impact of the reduced maximum allowable rate and has revised its forecasts, assuming that the new legislation, does not become effective prior to the end of 2023.

The attached tables outline the company's revised forecast for the years 2023 through 2025, and the prior forecast, which was issued in February, 2023. Despite the pending change in legislation, the company does not expect a significant impact to its business outlook and believes the change will benefit goeasy, and those with scale, in the long term. As such, the company remains confident it will continue to produce a record level of annual earnings going forward.

goeasy has been on a multiyear journey to reduce the weighted-average annual interest rate for its customers, which currently sits at approximately 30 per cent today. Furthermore, the company's existing strategy has already been to continuously reduce the weighted-average interest rate charged to its borrowers going forward. By widening its range of products and rates, the company has been able to attract more near-prime consumers and extend the life of its customer relationships, providing a path for consumers to receive a lower interest rate in reward for positive payment behaviour. This strategy has enabled the organization to scale to nearly $3-billion in consumer loans, while originating over $10.7-billion in loans and serving over 1.3 million Canadians.

Dividend

The board of directors has approved a quarterly dividend of 96 cents per share payable on July 14, 2023, to the holders of common shares of record as at the close of business on June 30, 2023.

About goeasy Ltd.

goeasy is a Canadian company, headquartered in Mississauga, Ont., that provides non-prime leasing and lending services through its easyhome, easyfinancial and LendCare brands. Supported by approximately 2,400 employees, the company offers a wide variety of financial products and services, including unsecured and secured instalment loans, merchant financing through a variety of verticals, and lease-to-own merchandise. Customers can transact seamlessly through an omnichannel model that includes on-line and mobile platforms, over 400 locations across Canada, and point-of-sale financing offered in the retail, power sports, automotive, home improvement and health care verticals, through over 7,500 merchant partners across Canada. Throughout the company's history, it has acquired and organically served over 1.3 million Canadians and originated over $10.7-billion in loans.

Accredited by the Better Business Bureau, goeasy is the proud recipient of several awards in recognition of its exceptional culture and continued business growth, including Waterstone Canada's most admired corporate cultures, ranking on the 2022 Report on Business women lead here executive gender diversity benchmark, placing on the Report on Business ranking of Canada's top-growing companies, ranking on the TSX30 and the Greater Toronto top employers award, and has been certified as a great place to work. The company is represented by a diverse group of team members from 78 nationalities who believe strongly in giving back to communities in which it operates. To date, goeasy has raised and donated over $4.8-million to support its long-standing partnerships with BGC Canada, Habitat for Humanity and many other local charities.

goeasy's common shares are listed on the Toronto Stock Exchange under the trading symbol GSY. goeasy is rated BB minus with a stable trend from S&P and Ba3 with a stable trend from Moody's.

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