Second Quarter Results
During the quarter the Company generated $276 million of total loan originations, up 18% from the $234 million in the second quarter of 2018. The increased originations led to growth in the loan portfolio of $80.3 million, which reached $960 million at the end of the current quarter, up 40% from $687 million as at June 30, 2018.
Revenue for the second quarter increased to $148 million, up 20% over the same period in 2018, driven by the expansion of the consumer loan portfolio. The net charge-off rate for the quarter was 13.5%, up from 12.4% in the second quarter of 2018, as previously expected and within the Company’s targeted range of 11.5% to 13.5% for 2019.
Growing revenues and continued improvement in operating leverage led to record margins, net income, earnings per share and return on equity. Operating income grew to $40.9 million, up 53% from $26.8 million in the second quarter of 2018, while the operating margin expanded to 28% up from 22%. Net income in the second quarter was $19.6 million, up 66% from $11.8 million in 2018, which resulted in diluted earnings per share of $1.26, up 54% from the $0.82 in 2018.
“During the second quarter we launched our spring media campaign, which helped produce a record level of new customers and an 18% increase in loan application volume, leading to loan growth that nearly doubled the first quarter of the year,” said Jason Mullins, goeasy’s President & Chief Executive Officer. “With a sequential increase in our risk-adjusted yield, the credit quality in the province of Quebec performing close to the portfolio average and secured lending representing 11% of our originations, we are striking the right balance between loan growth, yield and credit risk management.”
“In addition to strong business results, the last several months have been a rewarding time for our Company, as we have received recognition for our culture and the engagement of our team,” Mr. Mullins continued, “After being named one of Canada’s Most Admired Corporate Cultures in 2018, we have also been named one of North America’s Top 50 Most Engaged Workplaces for 2019 by Achievers and one of Canada’s Top 50 FinTech Companies for 2019 by the Digital Finance Institute. These awards are a testament to the passion and dedication that our entire team has for helping our customers improve their financial outcomes. With 1 out of 3 easyfinancial customers graduating to prime credit and 60% experiencing an increase in their credit score within 12 months of borrowing from us, we are proud and inspired to see our vision brought to life.”
Other Key Second Quarter Highlights
easyfinancial
easyhome
Overall
Six Months Results
For the first six months of 2019, goeasy achieved revenues of $288 million, up 21% compared with $238 million in the same period of 2018. Operating income for the period was $79.7 million compared with $51.7 million in the first six months of 2018, an increase of $28 million or 54%. Net income for the first six months of 2019 was $37.8 million and diluted earnings per share was $2.44 compared with $22.9 million or $1.58 per share, increases of 65% and 54%, respectively.
Balance Sheet and Liquidity
Total assets were $1.1 billion as at June 30, 2019, an increase of 39% from $805 million as at June 30, 2018, driven by the growth in the
Cash provided by operating activities before the net issuance of consumer loans receivable and purchase of lease assets was $67.3 million in the second quarter of 2019, an increase of 81% from $37.2 million in the same period of 2018.
Based on the cash on hand at the end of the quarter and the borrowing capacity under the Company’s amended revolving credit facility, goeasy had approximately $200 million in funding 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 fund the growth of its business at steadily lower costs of borrowing, increasing rates of leverage and more favorable terms. The Company also estimates that once its existing and available sources of capital are fully utilized, it could continue to grow the loan portfolio by approximately $150 million per year solely from internal cash flows.
The Company also estimates that as of June 30, 2019 if it were to run-off its consumer loan and consumer leasing portfolios, the value of the total cash repayments paid to the Company over the remaining life of its contracts would be approximately $1.9 billion.
Outlook
The Company has reaffirmed its 3-year commercial targets for 2019 through 2021. The periods of 2020 and 2021 remain unchanged, with the goal to achieve a consumer loan portfolio between $1.5 and $1.7 billion and return on equity that exceeds 26% by 2021.
The Company continues to pursue a long-term strategy that includes expanding its product range, developing its channels of distribution and leveraging risk-based pricing offers, which increase the average loan size and extend the life of its customer relationships. As such, the total yield earned on its consumer loan portfolio will gradually decline, while net charge-off rates moderate and operating margins expand, resulting in an increase to return on equity.
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“As we prepare to cross the $1 billion loan portfolio milestone in the next few weeks, the confidence in our strategy to provide everyday Canadians with a path to a better tomorrow, today, is stronger than ever, “said Mr. Mullins. “We continue to operate in a stable economic environment supported by wage growth that exceeds the level of inflation and unemployment at all-time lows. Furthermore, as we begin to utilize our lowest cost form of debt through the revolving credit facility, our average blended cost of interest has declined to 7.1% this quarter, from 7.6% a year ago, further reducing the borrowing costs for the business. Our balance sheet remains strong and well capitalized, with $200 million in available capital to fund the growth of our business through to the third quarter of 2020 and support our ambitious growth plan to become Canada’s top non-prime consumer lender.”
Dividend
The goeasy Board of Directors has approved a quarterly dividend of $0.31 per share payable on October 11, 2019 to the holders of common shares of record as at the close of business on September 27, 2019.
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.
goeasy Ltd. 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 installment loans supported by a strong central credit adjudication process and industry leading risk analytics. 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 an omni channel model that includes over 400 stores and branches across Canada and digital 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.
Jason Mullins
President & Chief Executive Officer
(905) 272-2788
David Ingram
Executive Chairman of the Board
(905) 272-2788
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SOURCE goeasy
goeasy Ltd. is the leading full service provider of goods and alternative financial services that improve the lives of everyday Canadians.