Loan Book Growth up 121.7%
Revenue up 26.4%
Diluted EPS of $0.82 up 30.2%

MISSISSAUGA, Ontario, Aug. 07, 2018 (GLOBE NEWSWIRE) -- goeasy Ltd. (TSX: GSY), (“goeasy” or the “Company”), a leading full-service provider of goods and alternative financial services that provides everyday Canadians with a chance for a better tomorrow, today, announced 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% 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 to $38.3 million in the second quarter of 2017, an increase of 121.7%. The loan portfolio reached $686.6 million by quarter's end, up 61.4% 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% increase in web traffic and a 54% increase in total loan applications compared to the prior year. The elevated consumer demand for our loan products was accompanied by a 23% 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% 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% in the second quarter from 14.8% 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% compared to the second quarter of 2017.  During the first quarter of 2018, the Company adopted IFRS 9, Financial Instruments [“IFRS 9”] 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 January 1, 2018 without the restatement of the prior year’s 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 to the second quarter of 2017.     

Net income for the quarter was a record $11.8 million, up $2.9 million or 33.0% from $8.9 million in the second quarter of 2017.  Diluted earnings per share for the quarter was a record $0.82, an increase of $0.19 or 30.2% from $0.63 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 $0.52, 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% and diluted earnings per share increased 57.7%.

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 our business model and our strategy as the Company issued US$150 million in unsecured notes at a 105 premium to par resulting in a yield to maturity of 6.17%; 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:

easyfinancial

• Revenue increased by 41.4% 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%.
• Average loan book per branch of $2.5M, up from $1.7M in the second quarter of 2017, an increase of 47%.
• Delinquency rates on the final Saturday of the quarter reduced to a record low of 4.2% from 4.8% on the final Saturday of the second quarter of 2017.
• Operating margin for the second quarter of 2018 increased to 37.5% from 33.9% in the second quarter of 2017.

easyhome

• Same store revenue increased 6.9%.
• Consumer lending portfolio within easyhome leasing stores of $12.8M up from $1.1M in the second quarter of 2017.
• Revenue of $1.6 million from consumer lending versus $0.1M 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.

Overall

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

Six Months Results

For the first six months of 2018, goeasy achieved revenues of $238.1 million, up 24.2% 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%. Net income for the first six months of 2018 was $22.9 million and diluted earnings per share was $1.58 compared with $19.2 million or $1.36 per share, increases of 19.5% and 16.2%, 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% higher than our original targets and the high end of our loan book in 2019 of $1.2 Billion to be 26% higher than the $950M 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 customer’s 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 online 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 - $875 million	$1.1 - $1.2   billion	$1.3 - $1.4 billion
easyfinancial total revenue yield	54% - 56%	49% - 51%	46% - 48%
New easyfinancial locations	20 - 30	10 - 20	10 - 20
Net charge-offs as a percentage of average gross consumer loans receivable	12% - 14%	11.5% - 13.5%	11% - 13%
easyfinancial operating margin	38% - 40%	42% - 44%	44% - 46%
Total revenue growth	26% - 28%	20% - 22%	14% - 16%
Return on equity	21% +	24% +	26% +

Dividend

The Board of Directors has approved a quarterly dividend of $0.225 per share payable on October 12, 2018 to the holders of common shares of record as at the close of business on September 28, 2018.

Forward-Looking Statements

All figures reported above with respect to outlook are targets established by the Company and are subject to change as plans and business conditions vary. Accordingly, investors are cautioned not to place undue reliance on the foregoing guidance. Actual results may differ materially.

This press release includes forward-looking statements about goeasy, including, but not limited to, its business operations, strategy, expected financial performance and condition, the estimated number of new locations to be opened, targets for growth of the consumer loans receivable portfolio, annual revenue growth targets, strategic initiatives, new product offerings and new delivery channels, anticipated cost savings, planned capital expenditures, anticipated capital requirements, liquidity of the Company, plans and references to future operations and results and critical accounting estimates. In certain cases, forward-looking statements are statements that are predictive in nature, depend upon or refer to future events or conditions, and/or can be identified by the use of words such as ‘expects’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘budgeted’, ‘estimates’, ‘forecasts’, ‘targets’ or negative versions thereof and similar expressions, and/or state that certain actions, events or results ‘may’, ‘could’, ‘would’, ‘might’ or ‘will’ be taken, occur or be achieved.

Forward-looking statements are based on certain factors and assumptions, including expected growth, results of operations and business prospects and are inherently subject to, among other things, risks, uncertainties and assumptions about the Company’s operations, economic factors and the industry generally, as well as those factors referred to in the Company’s most recent Annual Information Form and Management Discussion and Analysis, as available on www.sedar.com, in the section entitled “Risk Factors”. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those expressed or implied by forward-looking statements made by the Company, due to, but not limited to, important factors such as the Company’s ability to enter into new lease and/or financing agreements, collect on existing lease and/or financing agreements, open new locations on favourable terms, purchase products which appeal to customers at a competitive rate, respond to changes in legislation, react to uncertainties related to regulatory action, raise capital under favourable terms, manage the impact of litigation (including shareholder litigation), control costs at all levels of the organization and maintain and enhance the system of internal controls. The Company cautions that the foregoing list is not exhaustive.

The reader is cautioned to consider these and other factors carefully and not place undue reliance on forward-looking statements, which may not be appropriate for other purposes. The Company is under no obligation (and expressly disclaims any such obligation) to update or alter the forward-looking statements whether as a result of new information, future events or otherwise, unless required by law.

About goeasy

goeasy Ltd. is a leading full-service provider of goods and alternative financial services that provides everyday Canadians with a chance for a better tomorrow, today. goeasy Ltd. 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. It is supported by a strong central credit adjudication process and industry leading risk analytics. easyfinancial also operates an indirect lending channel, offering loan products to consumers at the point-of-sale of third party merchants. 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. Both operating divisions of goeasy Ltd. offer the highest level of customer service and enable customers to transact through a national store and branch network and through its online and mobile eCommerce enabled platforms.

goeasy Ltd.’s. common shares are listed for trading on the TSX under the trading symbol “GSY” and goeasy’s convertible debentures are traded on the TSX under the trading symbol “GSY-DB”.  goeasy is rated BB- with a stable trend from S&P and Ba3 with a stable trend from Moody’s. For more information, visit www.goeasy.com.

goeasy Ltd. is listed on the TSX under the symbol ‘GSY’. For more information, visit www.goeasy.com.

For further information contact:

David Ingram
Chief Executive Officer
(905) 272-2788

goeasy Ltd.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(expressed in thousands of Canadian dollars)
		As At		As At
		June 30,		December 31,
		2018		2017
ASSETS
Cash		19,243		109,370
Amounts receivable		16,305		14,422
Prepaid expenses		5,380		3,545
Consumer loans receivable		646,298		513,425
Lease assets		51,103		54,318
Property and equipment		16,022		15,941
Deferred tax assets		10,418		2,121
Intangible assets		14,706		15,163
Goodwill		21,310		21,310
Derivative financial asset		4,316		-
TOTAL ASSETS		805,101		749,615
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities		42,738		43,071
Income taxes payable		2,658		9,445
Dividends payable		3,077		2,426
Deferred lease inducements		1,003		1,294
Unearned revenue		5,810		4,819
Convertible debentures		48,095		47,985
Loan from revolving credit facilty (Note 7)		49,738		-
Notes payable		420,552		401,193
Derivative financial liability		-		11,138
TOTAL LIABILITIES		573,671		521,371
Shareholders' equity
Share capital		89,512		85,874
Contributed surplus		12,623		15,305
Accumulated other comprehensive (loss) income		(1,731	)	141
Retained earnings		131,026		126,924
TOTAL SHAREHOLDERS' EQUITY		231,430		228,244
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		805,101		749,615

 

goeasy Ltd.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(expressed 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

 

Segmented Reporting
			Three Months Ended June 30, 2018
($ in 000's except earnings per share)			easyfinancial	easyhome	Corporate		Total
Revenue
	Interest income		59,669	1,106	-		60,775
	Lease revenue		-	30,133	-		30,133
	Commissions earned		27,601	1,587	-		29,188
	Charges and fees		1,745	1,502	-		3,247
			89,015	34,328	-		123,343
Total operating expenses before
depreciation and amortization			53,663	18,642	11,343		83,648
Depreciation and amortization			1,996	10,588	309		12,893
Segment operating income (loss)			33,356	5,098	(11,652	)	26,802
Finance costs							10,425
Income before income taxes							16,377
Income taxes							4,556
Net Income							11,821
Diluted earnings per share							0.82
			Three Months Ended June 30, 2017
($ in 000's except earnings per share)			easyfinancial	easyhome	Corporate		Total
Revenue
	Interest income		40,732	49	-		40,781
	Lease revenue		-	31,525	-		31,525
	Commissions earned		20,753	1,183	-		21,936
	Charges and fees		1,488	1,816	-		3,304
			62,973	34,573	-		97,546
Total operating expenses before
depreciation and amortization			39,889	18,465	7,794		66,148
Depreciation and amortization			1,727	10,822	243		12,792
Segment operating income (loss)			21,357	5,286	(8,037	)	18,606
Finance costs							6,578
Income before income taxes							12,028
Income taxes							3,138
Net Income							8,890
Diluted earnings per share							0.63
			Six Months Ended June 30, 2018
($ in 000's except earnings per share)			easyfinancial	easyhome	Corporate		Total
Revenue
	Interest income		112,755	1,811	-		114,566
	Lease revenue		-	60,802	-		60,802
	Commissions earned		53,101	3,026	-		56,127
	Charges and fees		3,525	3,100	-		6,625
			169,381	68,739	-		238,120
Total operating expenses before
depreciation and amortization			102,200	37,073	20,841		160,114
Depreciation and amortization			4,364	21,154	762		26,280
Segment operating income (loss)			62,817	10,512	(21,603	)	51,726
Finance costs							20,095
Income before income taxes							31,631
Income taxes							8,736
Net Income							22,895
Diluted earnings per share							1.58
			Six Months Ended June 30, 2017
($ in 000's except earnings per share)			easyfinancial	easyhome	Corporate		Total
Revenue
	Interest income		78,866	49	-		78,915
	Lease revenue		-	63,435	-		63,435
	Commissions earned		40,693	2,216	-		42,909
	Charges and fees		2,967	3,565	-		6,532
			122,526	69,265	-		191,791
Total operating expenses before
depreciation and amortization			73,211	36,664	16,857		126,732
Depreciation and amortization			3,415	22,147	478		26,040
Segment operating income (loss)			45,900	10,454	(17,335	)	39,019
Finance costs							12,403
Income before income taxes							26,616
Income taxes							7,456
Net Income							19,160
Diluted earnings per share							1.36