Loan Portfolio Increased from $834 million to $1.11 billion, up 33%
Adjusted Quarterly Earnings Per Share Increased from $1.02 to $1.45, up 42%
Adjusted Annual Earnings Per Share Increased from $3.56 to $5.17, up 45%
Dividend Per Share Increased from $1.24 to $1.80, up 45%MISSISSAUGA, Ontario, Feb. 12, 2020 (GLOBE NEWSWIRE) — goeasy Ltd. (TSX: GSY), (“goeasy” or the “Company”), a leading full-service provider of goods and alternative financial services, announced its results for the fourth quarter ended December 31, 2019.
Fourth Quarter ResultsDuring the quarter the Company generated a record $314 million of total loan originations, up 18% from the $265 million in the fourth quarter of 2018. The increased originations led to growth in the loan portfolio of $75 million, which reached $1.11 billion at the end of the quarter, up 33% from $834 million as at December 31, 2018.Revenue for the fourth quarter increased to a record $166 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 13.3% compared to 13.1% in the fourth quarter of 2018, 13.2% in the third quarter of 2019 and within the Company’s targeted range of 11.5% to 13.5% for 2019.Operating income grew to a record $46.5 million, up 32% from $35.1 million in the fourth quarter of 2018, while the operating margin expanded to a record 28.1% up from 25.4% in the prior year. Net income in the fourth quarter, which included a $16.0 million after-tax charge associated with the refinancing of the Company’s notes payable completed on November 27, 2019, was $6.7 million, while diluted earnings per share was $0.46. Excluding the one-time refinancing charge, adjusted net income was $22.6 million, up $6.8 million or 43% from the net income of $15.9 million in the fourth quarter of 2018. Adjusted diluted earnings per share was $1.45 per share, an increase of $0.43 or 42% from diluted earnings per share of $1.02 in the fourth quarter of 2018.“The fourth quarter wrapped up another record year for the Company and was highlighted by strong loan growth, stable credit performance and further improvements to our balance sheet and liquidity,” said Jason Mullins, goeasy’s President and Chief Executive Officer. “With brand awareness at an all-time high of 85%, we experienced record levels of consumer demand, resulting in an 18% increase in loan originations and a loan portfolio that exceeded $1.11 billion. In parallel, we also made great strides to strengthen our balance sheet through the amendment to our revolving credit facility and refinancing of our notes payable, which collectively served to increase our liquidity and reduce our fully drawn weighted average cost of borrowing from 6.8% to 5.5%.” Mr. Mullins continued, “We are also pleased to have achieved all our stated targets for the year, while producing record revenue and earnings. After normalizing for the one-time charge related to our refinancing, adjusted diluted earnings per share for the full year was $5.17, an increase of 45% versus the $3.56 in 2018.”Other Key Fourth Quarter HighlightseasyfinancialTotal application volume increased 19%Revenue grew to $130 million, up 26%Secured loan portfolio grew to $116 million, up 118%62% of net loan advances in the quarter were issued to new customers, consistent with 201850% of applications acquired online, up from 42%Record aided brand awareness of 85%, up from 84%Average loan book per branch improved to $3.7 million, an increase of 28%The delinquency rate on the final Saturday of the quarter was 5.1%, down slightly from 5.2%Operating income of $53.3 million, up 29%Operating margin of 41%, up from 40% in the fourth quarter of 2018easyhomeRevenue of $35.5 million, up 2%Same store revenue growth of 6.2%Consumer lending portfolio within easyhome stores increased to $38.1 million, up 75%Revenue from consumer lending increased to $5.1 million, up 76%Operating income of $6.5 million, up 26%Operating margin of 18.3%, up from the 14.8% reported in the fourth quarter of 2018Overall
39th consecutive quarter of same store sales growth74th consecutive quarter of positive net incomeTotal same store revenue growth of 19.7%Adjusted return on equity of 27% in the quarter, up from 23%Net external debt to net capitalization of 71% as at December 31, 2019, in line with the Company’s target leverage ratio of 70%Cash provided by operating activities before the net issuance of consumer loans receivable and purchase of lease assets during the quarter was $71.1 millionNamed a Top Employer in the Greater Toronto AreaSubsequent to quarter-end, was added to the S&P/TSX Canadian Dividend Aristocrats Index with a 42% compound annual growth rate in the dividend over the prior 5 yearsFull Year ResultsFor the full year, the Company funded $1.1 billion in loan originations, up 19% from the $923 million in 2018. The consumer loan portfolio grew $1.11 billion, up 33% from $834 million in 2018. The growth in the consumer loan portfolio produced record revenues of $609 million, up 20% compared with $506 million in 2018. Operating income for 2019 was $169 million up 41% from $120 million in 2018.Net income for the full year, which included a $21.7 million one-time before tax charge associated with the refinancing of the Company’s notes payable completed on November 27, 2019, was $64.3 million, which resulted in diluted earnings per share of $4.17. Excluding the one-time refinancing charge, adjusted net income was $80.3 million, up $27.2 million or 51% from the net income of $53.1 million in 2018. Adjusted diluted earnings per share was $5.17 per share, an increase of $1.61 or 45% from diluted earnings per share of $3.56 in 2018.The Company achieved all its stated targets for 2019 as follows:*Adjusted for the one-time $16.0 million after-tax charge associated with the refinancing of the Company’s notes payable completed on November 27, 2019Balance Sheet and LiquidityTotal assets were $1.32 billion as at December 31, 2019, an increase of 25% from $1.06 billion as at December 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 $296 million in 2019, an increase of 28% from $232 million in 2018. During 2019, the Company made several enhancements to its balance sheet, including amendments to its revolving credit facility and refinancing of its unsecured notes payable. The amendments to the revolving credit facility increased the maximum principal amount available to be borrowed from $174.5 million in 2018 to $310.0 million and extended the maturity date from November 1, 2020 to February 12, 2022. As part of these amendments, the cost of borrowing under the revolving credit facility was also reduced. Subsequent to these amendments, interest on advances is payable at either the Canadian Bankers’ Acceptance rate (“BA”) plus 300 bps or lender’s prime rate (“Prime”) plus 200 bps, at the option of the Company. On November 27, 2019, the Company issued USD550.0 million of 5.375% senior unsecured notes payable which mature on December 1, 2024. The proceeds from the November 27, 2019 notes issuance were used to extinguish the Company’s previous USD475.0 million of 7.875% senior unsecured outstanding notes payable that would have matured on November 1, 2022, and unwind the related cross-currency swap. As a result of repaying these notes, the Company incurred an early repayment penalty, recognized the remaining unamortized net deferred financing costs associated with these notes, realized a derivative loss, and reclassified the net change in cash flow hedge from other comprehensive income (loss) to the consolidated statement of income resulting in a one-time after-tax charge of $16.0 million. Due to the improved cost of borrowing, the Company estimates it will prospectively save approximately C$0.42 in annual after-tax earnings per share, more than offsetting the cost of refinancing. 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 $240 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 2021. 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, at more favorable terms, and extending its liquidity runway. 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 December 31, 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 $2.2 billion. If during such a run-off scenario all excess cash flows were applied directly to debt, the Company estimates it would extinguish all external debt within 22 months.Future OutlookThe Company has provided a 3-year forecast for 2020 through 2022. The periods of 2020 and 2021 have been updated to reflect the most recent outlook. 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.“As we look forward to 2020 and beyond, we are excited about the many opportunities that lie ahead. We are in the early period of executing our strategy to expand the product range, develop our channels of distribution, increase our geographic footprint and deliver a best-in-class customer experience that helps over 60% of our customers improve their credit score and 1 in 3 graduate to prime credit. With a strong balance sheet and award-winning culture to help fuel our ambitions, we are positioned better than ever to capture a greater share of the $231 billion non-prime consumer credit market. Our updated three-year forecast reflects the consumer loan portfolio growing to between $1.8 billion and $2 billion by the end of 2022, while credit continues to gradually improve and the net debt to total capitalization steadily declines.” Mr. Mullins concluded, “I want to thank the entire goeasy team for the passion that they pour into taking care of our customers and for all of their accomplishments during another record year for our Company. We are truly just getting started.”
DividendBased on its 2019 adjusted earnings and the Company’s confidence in its continued growth and access to capital going forward, the Board of Directors has approved an increase to the annual dividend from $1.24 per share to $1.80 per share, an increase of 45%. 2019 marks the 6th consecutive year of an increase in the dividend to shareholders. As such, the Board of Directors has approved a quarterly dividend of $0.45 per share payable on April 10, 2020 to the holders of common shares of record as at the close of business on March 27, 2020.Forward-Looking StatementsAll 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 to 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 goeasygoeasy Ltd., a Canadian company, headquartered in Mississauga, Ontario, provides non-prime leasing and lending services through its easyhome and easyfinancial divisions. With a wide variety of financial products and services including unsecured and secured instalment loans, goeasy aspires to help put Canadians on a path to a better financial future, as they rebuild their credit and graduate to prime lending. Customers can transact seamlessly with easyhome and easyfinancial through an omni-channel model that includes online and mobile, as well as over 400 leasing and lending locations across Canada supported by more than 2,000 employees.Throughout the company’s history, it has served over 1 million Canadians and originated over $3.9 billion in loans, with one in three customers graduating to prime credit and 60% increasing their credit score within 12 months of borrowing.goeasy is the proud recipient of several awards including Waterstone Canada’s Most Admired Corporate Cultures, Glassdoor Top CEO Award, Achievers Top 50 Most Engaged Workplaces in North America, Greater Toronto Top Employers Award, the Digital Finance Institute’s Canada’s Top 50 FinTech Companies, ranking on the TSX30 and placing on the Report on Business ranking of Canada’s Top Growing Companies. The company and its employees believe strongly in giving back to the communities in which it operates and has raised over $2.9 million to support its long-standing partnerships with the Boys & Girls Clubs of Canada and Habitat for Humanity.goeasy Ltd.’s. common shares are listed 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. Visit www.goeasy.com.For further information contact:Jason Mullins
President & Chief Executive Officer
(905) 272-2788David Ingram
Executive Chairman of the Board
(905) 272-2788
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