Mr. Jason Mullins reports

GOEASY LTD. REPORTS RECORD RESULTS FOR THE SECOND QUARTER

goeasy Ltd. has released results for the second quarter ended June 30, 2023.

Second quarter results

During the quarter, the company produced record loan originations of $667-million, up 6 per cent compared with $628-million originated in the second quarter of 2022. The increase in lending was driven by strong demand, leading to a record volume of applications for credit, which were up 25 per cent over the prior year. The company experienced strong performance across its entire range of products and acquisition channels, including unsecured lending, point-of-sale lending and automotive financing.

The increased loan originations led to growth in the loan portfolio of $210-million, above the company's forecasted range of between $175-million and $200-million. At quarter-end, the consumer loan portfolio was a record $3.2-billion, up 35 per cent from $2.37-billion in the second quarter of 2022. The growth in consumer loans led to an increase in revenue, which was a record $303-million in the quarter, up 20 per cent from $252-million in the second quarter of last year.

During the quarter, the company continued to experience stable credit and payment performance. The net charge-off rate in the second quarter was 9.1 per cent, in line with the company's target range of between 8 per cent and 10 per cent on an annualized basis, and 20 basis points lower than 9.3 per cent in the second quarter of 2022. The stable credit performance reflects the improved product mix of the loan portfolio and the proactive credit and underwriting enhancements made throughout 2021 and 2022. The company's allowance for future credit losses reduced slightly to 7.42 per cent, compared with 7.48 per cent in the first quarter.

Operating income for the second quarter of 2023 was a record $111-million, up 30 per cent from $85-million in the second quarter of 2022. Operating margin for the second quarter was 36.5 per cent, up from 33.8 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 $114-million, an increase of 29 per cent compared with $89-million in the second quarter of 2022. Adjusted operating margin for the second quarter was 37.7 per cent, up from 35.3 per cent in the same period in 2022. The efficiency ratio for the second quarter of 2023 was 31.2 per cent, an improvement of 300 basis points from 34.2 per cent in the second quarter of 2022, reflecting an increase in operating leverage.

Net income in the second quarter was $55.6-million, up 45 per cent from $38.3-million in the same period of 2022, which resulted in diluted earnings per share of $3.26, up 41 per cent from the $2.32 reported in the second 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 $56-million, up 20 per cent from $46.8-million in the second quarter of 2022. Adjusted diluted earnings per share was a record $3.28, up 16 per cent from $2.83 in the second quarter of 2022. Return on equity during the quarter was 24.0 per cent, compared with 20.2 per cent in the second quarter of 2022. Adjusted return on equity was 24.2 per cent in the quarter, compared with 24.7 per cent in the same period of 2022.

"The second quarter continued to highlight the growth potential of our business model and the strength of our credit performance," said Jason Mullins, goeasy's president and chief executive officer. "As market conditions present a challenging environment for many companies within our industry, those with scale are experiencing a net benefit from that disruption. During the quarter, we experienced favourable competitive conditions and received a record number of applications for credit, at nearly half a million, which led to a record number of new customers, at nearly 42,000. We now expect to achieve the high end of our loan book forecast for 2023 of $3.6-billion. Furthermore, we continue to produce stable credit performance, with the net charge-off rate improving year over year by 20 basis points to 9.1 per cent, while our focus on operating leverage resulted in an improvement to our efficiency ratio by 300 basis points compared with last year. All combined, adjusted diluted earnings per share rose 16 per cent in the quarter to a record $3.28," Mr. Mullins concluded.

Other key second quarter highlights

easyfinancial:

• Record revenue of $265-million, up 24 per cent;
• 41 per cent of the loan portfolio secured, up from 36 per cent;
• Record volume of applications for credit, up 25 per cent;
• Record new customer volume at 41,928;
• Record 71 per cent of net loan advances in the quarter were issued to new customers, up from 65 per cent;
• Average loan book per branch improved to a record $5.2-million, an increase of 22 per cent;
• Weighted average interest rate on consumer loans of 30.1 per cent, down from 31.7 per cent;
• Record operating income of $125-million, up 31 per cent;
• Operating margin of 47.4 per cent, up from 44.6 per cent.

easyhome:

• Revenue of $38.2-million, up 2 per cent;
• Consumer loan portfolio within easyhome stores increased to $96.6-million, up 25 per cent;
• Financial revenue from consumer lending increased to $11.6-million, up 17 per cent from $9.9-million;
• Operating income of $9.2-million, up 5 per cent;
• Operating margin of 24.1 per cent, up from 23.3 per cent.

Over all:

• 88th consecutive quarter of positive net income;
• 2023 marks the 19th consecutive year of paying dividends and the ninth consecutive year of a dividend increase;
• 53rd consecutive quarter of same-store revenue growth;
• Total customers served over 1.3 million;
• Acquired and organically originated over $11.4-billion in loans;
• Adjusted return on equity of 24.2 per cent, down slightly from 24.7 per cent;
• Adjusted return on tangible common equity of 33.4 per cent, down from 38.0 per cent;
• Fully drawn weighted average cost of borrowing at 5.9 per cent, up from 4.9 per cent;
• Net debt to net capitalization of 72 per cent on June 30, 2023, in line with the company's target leverage profile.

Six-month results

For the first six months of 2023, the company funded $1.28 billion in loan originations, up 16 per cent from $1.10 billion in 2022. The consumer loan receivable portfolio finished at $3.20 billion, up 35 per cent from $2.37 billion as of June 30, 2022.

For the first six months of 2023, the company produced record revenues of $590-million, up 22 per cent compared with $484-million in the same period of 2022. Operating income for the period was a record $213-million compared with $165-million in the first six months of 2022, an increase of $47.6-million or 29 per cent. Adjusted operating income2 for the first six months of 2023 was a record $221-million, 26 per cent higher compared with $175-million in the same period of 2022. Efficiency ratio1 for the first six months of 2023 was 32.1 per cent, an improvement of 280 bps from 34.9 per cent in the same period of 2022.

Net income for the first six months of 2023 was $107-million and diluted earnings per share was $6.27, compared with $64.4-million or $3.86 per share. Adjusted net income2 for the first six months of 2023 was $109-million and adjusted diluted earnings per share1 was $6.39 compared with $92.6-million or $5.55 per share, increases of 18 per cent and 15 per cent, respectively. Reported return on equity was 23.6 per cent, while adjusted return on equity1 was 24.0 per cent, consistent with 24.1 per cent in the same period of 2022.

Balance Sheet and Liquidity

Total assets were $3.68 billion as of June 30, 2023, an increase of 27 per cent from $2.90 billion as of June 30, 2022, primarily driven by growth in the consumer loan portfolio.

During the quarter, the company extended the maturity of its existing revolving securitization warehouse facility ("Securitization Facility") from August 30, 2024 to October 31, 2025. The amendment to the $1.4 billion Securitization Facility incorporates key modifications including improved eligibility criteria for consumer loans, as well as pool concentration limits, resulting in increased funding capacity. The lending syndicate for the Securitization Facility continues to consist of Royal Bank of Canada, National Bank Financial Markets and Bank of Montreal, and the facility bears interest on advances payable at the rate of 1-month Canadian Dollar Offered Rate ("CDOR") plus 195 bps. Based on the current 1-month CDOR rate of 5.37 per cent as of August 4, 2023, the interest rate would be 7.32 per cent. The company continues utilizing an interest rate swap agreement to generate fixed rate payments on the amounts drawn to assist in mitigating the impact of increases in interest rates.

During the quarter, the company recognized net investment income of $2.3-million, due to fair value change in the company's strategic minority investment in Affirm Holdings Inc. ("Affirm").

Free cash flow from operations before net growth in gross consumer loans receivable2 in the quarter was $76.5-million, up 34 per cent from $56.9-million in the second quarter of 2022. Based on the cash on hand at the end of the quarter and the borrowing capacity under the company's existing revolving credit facilities, the company had approximately $895-million in total funding capacity as of June 30, 2023. The company remains confident that the capacity available under its existing funding facilities, and its ability to raise additional debt financing, is sufficient to fund its organic growth forecast.

At quarter-end, the company's weighted average cost of borrowing was 5.6 per cent, and the fully drawn weighted average cost of borrowing was 5.9 per cent. The company estimates that it could currently grow the consumer loan portfolio by approximately $250-million per year solely from internal cash flows, without utilizing external debt. The company also estimates that once its existing and available sources of debt are fully utilized, it could continue to grow the loan portfolio by approximately $400-million per year solely from internal cash flows. The company also estimates that if it were to run-off its consumer loan and leasing portfolios, the value of the total cash repayments paid to the company over the remaining life of its contracts would be approximately $4 billion. If, during such a run-off scenario with reasonable cost reductions, all excess cash flows were applied directly to debt, the company estimates it would extinguish all external debt within 15 months.

Dividend

The Board of Directors has approved a quarterly dividend of $0.96 per share payable on October 13, 2023 to the holders of common shares of record as at the close of business on September 29, 2023.

About goeasy

goeasy Ltd. is a Canadian company, headquartered in Mississauga, Ontario, 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 online and mobile platforms, over 400 locations across Canada, and point-of-sale financing offered in the retail, powersports, automotive, home improvement and healthcare verticals, through over 8,500 merchant partners across Canada. Throughout the company's history, it has acquired and organically served over 1.3-million Canadians and originated over $11.4 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, Greater Toronto Top Employers Award and has been certified as a Great Place to Work(TM). 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 $4.9-million to support its long-standing partnerships with BGC Canada, Habitat for Humanity and many other local charities.

goeasy Ltd.'s. common shares are listed on the TSX under the trading symbol "GSY". goeasy is rated BB- with a stable trend from S&P and Ba3 with a stable trend from Moody's.

We seek Safe Harbor.