goeasy Ltd. Reports Record Results for the Third Quarter

Loan Portfolio of $1.90 billion, up 60%
Revenue of $220 million, up 36%
Adjusted Operating Income of $85.8 million, up 51%
Adjusted Quarterly Net Income of $46.7 million, up 48%
Adjusted Quarterly Diluted Earnings per Share of $2.70, up 35%

MISSISSAUGA, Ontario, Nov. 03, 2021 (GLOBE NEWSWIRE) -- goeasy Ltd. (TSX: GSY), (“goeasy” or the “Company”), one of Canada’s leading non-prime consumer lenders, today reported results for the third quarter ended September 30, 2021.
        
Third Quarter Results

During the quarter, the Company generated a record $436 million in total loan originations, up 52% compared to the $287 million produced in the third quarter of 2020, and a sequential increase of 15% from the $379 million in loan originations in the second quarter of 2021. The increase in loan originations led to record organic growth in the loan portfolio of $101 million during the quarter, resulting in a total gross consumer loan receivable portfolio of $1.90 billion, up 60% from $1.18 billion in the third quarter of 2020. The growth in consumer loans led to an increase in revenue, which was a record $220 million in the quarter, up 36% over the third quarter in 2020.

During the quarter, the Company continued to experience stable credit and payment performance. The net charge off rate for the third quarter was 8.3%, compared to 7.8% in the third quarter of 2020 and 8.2% in the second quarter of 2021. The overall allowance for future credit losses reduced slightly from 7.90% in the prior quarter to 7.83%.

Operating income for the third quarter of 2021 was a record $81.4 million, up 43% from $56.9 million in the third quarter of 2020. Operating margin for the third quarter was 37.0%, up from 35.2% in the prior year. After adjusting for items related to the recent acquisition of LendCare Holdings Inc. (“LendCare”), the Company reported record adjusted operating income of $85.8 million, up $28.9 million or an increase of 51% compared to the third quarter of 2020. Adjusted operating margin for the third quarter was 39.1%, up from 35.2% in the prior year. During the quarter, the Company also recorded a $23.2 million before-tax fair value gain on investments.

Net income in the third quarter was $63.5 million, compared to $33.1 million in the same period of 2020, which resulted in diluted earnings per share of $3.66, compared to $2.09 in the third quarter of 2020. After adjusting for non-recurring and unusual items on an after-tax basis, including $1.0 million of transaction and integration costs related to the acquisition of LendCare, $2.4 million in amortization of acquired intangible assets, and a $20.1 million fair value gain on investments, adjusted net income was a record $46.7 million, up 48% from $31.6 million in 2020. Adjusted diluted earnings per share was a record $2.70, up 35% from $2.00 in the third quarter of 2020.

Return on equity during the quarter was 32.7%, compared to 34.7% in the third quarter of 2020. After adjusting for the non-recurring and unusual items previously noted, adjusted return on equity was 24.0% in the quarter, compared to 33.1% in the same period of 2020.

“During the quarter we made significant progress on the integration of LendCare, which is on track to produce the synergies and accretion forecast during our acquisition,” said Jason Mullins, goeasy’s President and Chief Executive Officer, “With consumer demand for credit improving, complemented by the expansion of our auto lending program and point-of-sale channel, we grew the consumer loan portfolio a record $101 million during the quarter, more than double the same quarter last year. Meanwhile, the stable credit performance and improved operating leverage, led to record adjusted diluted earnings per share of $2.70,” Mr. Mullins concluded, “With our fully drawn weighted average cost of borrowing declining to 4.3% and total liquidity now exceeding $900 million, our balance sheet is stronger than ever and we remain on track to achieving our forecast for 2021 and beyond.”

Other Key Third Quarter Highlights

easyfinancial

• Revenue of $182 million, up 45%
• 33% of the loan portfolio secured, up from 12%
• 66% of net loan advances in the quarter were issued to new customers, up from 50%
• 41% of applications acquired online, up from 38%
• 25% of new loans issued through point-of-sale financing, up from 18%
• 4% of new loans issued auto financing, a new product category in 2021
• Average loan book per branch improved to $4.0 million, an increase of 6%
• Weighted average interest yield of 33.6%, down from 38.3%
• Record operating income of $90.6 million, up 42%
• Operating margin of 49.7%, down from 50.7%

easyhome

• Record revenue of $37.6 million, up 5%
• Same store revenue growth of 5.6%
• Consumer loan portfolio within easyhome stores increased to $61.8 million, up 38%
• Revenue from consumer lending increased to $7.9 million, up 43%
• Record operating income of $10.1 million, up 28%
• Record operating margin of 26.7%, up from 21.9%

Overall

• 46^th consecutive quarter of same store sales growth
• 81^st consecutive quarter of positive net income
• 2021 marks the 17^th consecutive year of paying dividends and the 7^th consecutive year of a dividend increase
• Total same store revenue growth of 15.4%
• Adjusted return on equity of 24.0% in the quarter and adjusted return on tangible common equity of 42.9%
• Fully drawn weighted average cost of borrowing reduced to 4.3%, down from 5.0%
• Net external debt to net capitalization of 62% on September 30, 2021, down from 66% in the prior year and below the Company’s target leverage ratio of 70%
  

Nine Months Results

For the first nine months of 2021, the Company produced record revenues of $592 million, up 24% compared with $480 million in the same period of 2020. Operating income for the period was $201 million compared with $155 million in the first nine months of 2020, an increase of $46.2 million or 30%. Net income for the first nine months of 2021 was $195 million and diluted earnings per share was $11.75 compared with $87.6 million or $5.64 per share, increases of 123% and 108%, respectively. Excluding the effects of the adjusting items related to the acquisition of LendCare and fair value gains on investments, adjusted net income for the first nine months of 2021 was $127 million and adjusted diluted earnings per share was $7.66, increases of 54% and 44%, respectively, while adjusted return on equity was 26.6%.

Balance Sheet and Liquidity

Total assets were $2.47 billion as of September 30, 2021, an increase of 81% from $1.37 billion as of September 30, 2020, driven by growth in the consumer loan portfolio, including the $445 million gross consumer loan portfolio acquired through the acquisition of LendCare, the intangible assets and goodwill arising from the LendCare acquisition, and the return on the Company’s investment in Affirm Holdings Inc. (“Affirm”).

In September 2021, the Company entered into a 9-month total return swap agreement (the “TRS”) to partially hedge its market exposure related to 100,000 of the 468,000 contingent shares related to the equity held in Affirm. The TRS effectively results in the economic value of the hedged portion of the Company’s contingent equity in Affirm being settled in cash at maturity for US$110.35 per share, net of applicable fees. During the third quarter of 2021, the Company recognized a $20.1 million after-tax fair value gain on the investment in Affirm and the TRS. Year to date, the Company has recorded total fair value gains on investments of $92.4 million.

During the quarter, the Company increased its existing revolving securitization warehouse facility to $600 million. The warehouse facility continues to be structured and underwritten by National Bank Financial Markets under a new three-year agreement, which incorporates favorable key modifications, including improvements to eligibility criteria and advance rates. The interest on advances are payable at the rate of 1-month CDOR plus 185 bps, an improvement of 110 bps. Based on the current 1-month CDOR rate of 0.43% as of November 3, 2021, the interest rate would be 2.28%. The Company continues utilizing an interest rate swap agreement to generate fixed rate payments on the amounts drawn and mitigate the impact of interest rate volatility.

Cash provided by operating activities before the net growth in gross consumer loans receivable in the quarter was $89.2 million. Based on the cash on hand at the end of the quarter and the borrowing capacity under the Company’s revolving credit facilities, goeasy has approximately $908 million in total funding capacity, which it estimates is sufficient to fund its organic growth through the fourth quarter of 2023. At quarter-end, the Company’s fully drawn weighted average cost of borrowing reduced to 4.3%, down from 5.0% in the prior year, with incremental draws on its senior secured revolving credit facility bearing a rate of approximately 3.5% and incremental draws on its amended securitization facility bearing a rate of approximately 2.3%.

As of September 30, 2021, 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 $200 million per year solely from internal cash flows. The Company also estimates that 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 $3 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 16 months.

Future Outlook

The Company has provided 3-year forecasts for the years 2021 through 2023. 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, which increases the average loan size and extends 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. The forecasts outlined below contemplate the Company’s expected domestic organic growth plan and do not include the impact of any future mergers or acquisitions, or the associated gains or losses associated with its investments.

Dividend

The Board of Directors has approved a quarterly dividend of $0.66 per share payable on January 14, 2022 to the holders of common shares of record as at the close of business on December 31, 2021.

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 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 goeasy

goeasy Ltd., a Canadian company, headquartered in Mississauga, Ontario, provides non-prime leasing and lending services through its easyhome, easyfinancial and LendCare brands. Supported by more than 2,200 employees, the Company offers a wide variety of financial products and services including unsecured and secured instalment loans. Customers can transact seamlessly through an omni-channel model that includes an online and mobile platform, over 400 locations across Canada, and point-of-sale financing offered in the retail, power sports, automotive, home improvement and healthcare verticals, through more than 4,000 merchants across Canada. Throughout the Company’s history, it has acquired and organically served over 1 million Canadians and originated over $7.2 billion in loans, with one in three easyfinancial customers graduating to prime credit and 60% increasing their credit score within 12 months of borrowing.

Accredited by the Better Business Bureau, 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 and has been certified as a Great Place to Work®. The company is represented by a diverse group of team members from over 75 nationalities who believe strongly in giving back to the communities in which it operates. To date, goeasy has raised and donated over $3.8 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. Visit www.goeasy.com.

For further information contact:

Jason Mullins
President & Chief Executive Officer
(905) 272-2788

Farhan Ali Khan
Senior Vice President, Corporate Development & Investor Relations
(905) 272-2788