Loan Originations of $641 million, up 47% from $436 million
Loan Growth of $219 million, up 117% from $101 million
Loan Portfolio of $2.59 billion, up 37% from $1.90 billion
Diluted EPS of $2.86; Adjusted Diluted EPS1 of $2.95, up 9% from $2.70
MISSISSAUGA, Ontario, Nov. 10, 2022 (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, 2022 and announced the establishment of a new $200 million revolving securitization warehouse facility (the “New Securitization Facility”) collateralized by automotive consumer loans.
Third Quarter Results
During the quarter, the Company produced record loan originations of $641 million, up 47% compared to the $436 million originated in the third quarter of 2021. The increase in lending was driven by healthy demand across the company’s entire range of products and acquisition channels, including unsecured lending, home equity loans, powersports financing and automotive financing.
The increased loan originations led to record growth in the loan portfolio of $219 million, which was up 117% from $101 million of loan growth in the third quarter of 2021. At quarter end, the gross consumer loan receivable portfolio was $2.59 billion, up 37% from $1.90 billion in the third quarter of 2021. The growth in consumer loans led to an increase in revenue, which was a record $262 million in the quarter, up 19% over the same period last year.
During the quarter, the Company also continued to experience stable credit and payment performance. The net charge off rate in the third quarter was 9.3%, in line with the Company’s target range of between 8.5% and 10.5% on an annualized basis, and down from the pre-pandemic level of 13.2% in the third quarter of 2019. The Company’s allowance for future credit losses decreased slightly to 7.58% from 7.68% in the second quarter of 2022, primarily due to the improved product and credit mix of the loan portfolio.
Operating income for the third quarter of 2022 was a record $91.4 million, up 12% from $81.4 million in the third quarter of 2021. Operating margin for the third quarter was 34.8%, down from 37.0% in the prior year. After adjustments for items related to the acquisition of LendCare Capital Inc. (“LendCare”), the Company reported record adjusted operating income2 of $94.8 million, up $9.0 million or an increase of 11% compared to $85.8 million in the third quarter of 2021. Adjusted operating margin1 for the third quarter was 36.2%, down from 39.1% in the prior year, primarily due to a higher level of loan growth resulting in an increase in the loan loss provision expense compared to the prior year.
Net income in the third quarter was $47.2 million, down 26% from $63.5 million in the same period of 2021, which resulted in diluted earnings per share of $2.86, down 22% from the $3.66 reported in the third quarter of 2021. After adjusting for non-recurring and unusual items on an after-tax basis, including $2.4 million in amortization of acquired intangible assets and a $1.1 million fair value gain on investments, adjusted net income2 was a record $48.6 million, up 4% from $46.7 million in the third quarter of 2021. Adjusted diluted earnings per share1 was a record $2.95, up 9% from $2.70 in the third quarter of 2021. Return on equity during the quarter was 24.2%, compared to 32.7% in the third quarter of 2021. After adjusting for non-recurring and unusual items, adjusted return on equity1 was 24.9% in the quarter, up from 24.0% in the same period of 2021.
“The team delivered another strong quarter, producing record loan growth and stable credit performance. Amidst an uncertain economic backdrop, we continue to employ a disciplined approach to managing credit risk by focusing on the quality of our originations and underwriting standards, which further strengthen the resilience of our portfolio,” said Jason Mullins, goeasy’s President and Chief Executive Officer. “Similar to last quarter, the elevated loan growth over the prior year resulted in an incremental loan loss provision expense of approximately $0.40 on an after-tax per share basis in the quarter, yet the strong commercial performance and operating leverage served to produce record adjusted diluted earnings per share1of $2.95. The addition of a new securitization facility to support our automotive financing program also demonstrates the ongoing support of our banks and increases our undrawn debt capacity to over $1.1 billion. Looking forward, we continue to experience strong growth potential fueled by our business initiatives and favorable competitive dynamics. We are confident that the business is well positioned to grow responsibly and navigate through the current economic conditions. We are reaffirming the commitment to our 3-year forecast, which includes increasing our consumer loan portfolio by approximately 54% to nearly $4 billion by the end of 2025, and we remain dedicated to our journey to build Canada’s leading non-prime consumer lending platform,” Mr. Mullins concluded.
Other Key Third Quarter Highlights
easyfinancial
- Revenue of $225 million, up 24%
- 38% of the loan portfolio secured, up from 33%
- 64% of net loan advances1 in the quarter were issued to new customers, consistent with 66%
- Record net customer growth during the quarter of 12,472
- Record financing volumes in unsecured loans, automotive financing and healthcare financing
- Average loan book per branch3 improved to $4.6 million, an increase of 16%
- Weighted average interest rate3 on consumer loans of 31.0%, down from 33.6%
- Record operating income of $102 million, up 12%
- Operating margin of 45.3%, down from 49.7%
easyhome
- Revenue of $37.3 million, broadly flat year over year
- Same store revenue growth3 of 1.6%
- Consumer loan portfolio within easyhome stores increased to $83.0 million, up 34%
- Financial revenue2 from consumer lending increased to $10.2 million, up 30% from $7.9 million
- Operating income of $7.8 million, down 23%
- Operating margin of 20.9%, down from 26.7%
Overall
- 50th consecutive quarter of same store revenue growth3
- 85th consecutive quarter of positive net income
- 2022 marks the 18th consecutive year of paying dividends and the 8th consecutive year of a dividend increase
- Total same store revenue growth3 of 14.9%
- Total customers served over 1.2 million
- Adjusted return on equity1 of 24.9%, up from 24%
- Adjusted return on tangible common equity1 of 37.7%, up from 37.1%
- Fully drawn weighted average cost of borrowing at 5.2%
- Net debt to net capitalization4 of 72% on September 30, 2022, up from 62% in the prior year
Nine Months Results
For the first nine months of 2022, the Company produced record revenues of $746 million, up 26% compared with $592 million in the same period of 2021. Operating income for the period was a record $257 million compared with $201 million in the first nine months of 2021, an increase of $55.2 million or 27%. Net income for the first nine months of 2022 was $112 million and diluted earnings per share was $6.71, compared with $195 million or $11.75 per share. Excluding the effects of the adjusting items related to the acquisition of LendCare, corporate development costs and fair value mark-to-market impact on investments, adjusted net income2 for the first nine months of 2022 was a record $141 million and adjusted diluted earnings per share1 was a record $8.50 compared with $127 million or $7.66 per share, increases of 11% and 11%, respectively. Reported return on equity was 19.2%, while adjusted return on equity1 was 24.3%, down from 26.6% in 2021.
Balance Sheet and Liquidity
Total assets were $3.13 billion as of September 30, 2022, an increase of 27% from $2.47 billion as of September 30, 2021, primarily driven by growth in the consumer loan portfolio.
In June 2022, the Company entered into a strategic commercial partnership and agreed to make a minority equity investment of $40 million in Canada Drives, Canada’s largest 100% online car shopping and to-your-door delivery platform. In October 2022, the Company invested $15 million of its total commitment, in convertible notes, resulting in a total $30 million investment to date. The Company has committed to purchase an additional $10 million in convertible notes on or before January 1, 2023. The convertible notes mature on June 15, 2025, bear interest at 5% annually and are convertible into preferred shares on defined terms.
The Company announced today the establishment of a new $200 million revolving securitization warehouse facility, structured and underwritten by Bank of Montreal. The new facility will be securitized by automotive consumer loans originated by goeasy’s wholly owned subsidiaries, easyfinancial Services Inc. and LendCare, and will have an initial term of two years and interest on advances payable at the rate of 1-month Canadian Dollar Offered Rate (“CDOR”) plus 185 bps. Based on the current 1-month CDOR rate of 4.23% as of November 8, 2022, the interest rate would be 6.08%. The Company intends to establish 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. The New Securitization Facility complements the Company’s existing $1.4 billion revolving securitization warehouse facility, which also bears an interest on advances payable at the rate of 1-month CDOR plus 185 bps.
Free cash flow from operations before net growth in gross consumer loans receivable2 in the quarter was $95.6 million, up 7% from $89.2 million in the third quarter of 2021. Based on the cash on hand at the end of the quarter and the borrowing capacity under the Company’s revolving credit facilities, including the aforementioned New Securitization Facility, the Company has approximately $1.12 billion in total debt capacity. The Company estimates that its current debt capacity is sufficient to support organic growth, excluding any change in the value of its investments, through the second half of 2025. At quarter-end, the Company’s fully drawn weighted average cost of borrowing was at 5.2%. 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 in the second of half of 2025, 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 $3.4 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 $0.91 per share payable on January 13, 2023 to the holders of common shares of record as at the close of business on December 30, 2022.
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’s 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 2,300 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, powersports, automotive, home improvement and healthcare verticals, through approximately 6,000 merchants across Canada. Throughout the Company’s history, it has acquired and organically served over 1.2 million Canadians and originated over $9.5 billion in loans, with one in three easyfinancial customers graduating to prime credit and over 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, honoured by The Globe and Mail’s Women Lead Here executive gender diversity benchmark 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 $4.7 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, Chief Corporate Development Officer
(905) 272-2788
Notes:
1 These are non-IFRS ratios. Refer to “Non-IFRS Measures and Other Financial Measures” section in this press release.
2 These are non-IFRS measures. Refer to “Non-IFRS Measures and Other Financial Measures” section in this press release.
3 These are supplementary financial measures. Refer to “Non-IFRS Measures and Other Financial Measures” section in this press release.
4 These are capital management measures. Refer to “Non-IFRS Measures and Other Financial Measures” section in this press release.
5 Non-IFRS ratios, non-IFRS measures, supplementary financial measures and capital management measures are not determined in accordance with IFRS, do not have standardized meanings and may not be comparable to similar financial measures presented by other companies.
| goeasy Ltd. | |||||
| INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | |||||
| (Unaudited) | |||||
| (expressed in thousands of Canadian dollars) | |||||
| As At | As At | ||||
| September 30, | December 31, | ||||
| 2022 | 2021 | ||||
| ASSETS | |||||
| Cash | 74,009 | 102,479 | |||
| Accounts receivable | 25,566 | 20,769 | |||
| Prepaid expenses | 8,604 | 8,018 | |||
| Consumer loans receivable, net | 2,435,447 | 1,899,631 | |||
| Investments | 37,913 | 64,441 | |||
| Lease assets | 45,520 | 47,182 | |||
| Property and equipment, net | 35,223 | 35,285 | |||
| Derivative financial assets | 67,580 | 20,634 | |||
| Intangible assets, net | 157,812 | 159,651 | |||
| Right-of-use assets, net | 61,319 | 57,140 | |||
| Goodwill | 180,923 | 180,923 | |||
| TOTAL ASSETS | 3,129,916 | 2,596,153 | |||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
| Liabilities | |||||
| Revolving credit facility | 98,492 | - | |||
| Accounts payable and accrued liabilities | 50,401 | 57,134 | |||
| Income taxes payable | 2,088 | 27,859 | |||
| Dividends payable | 14,453 | 10,692 | |||
| Unearned revenue | 24,589 | 11,354 | |||
| Accrued interest | 24,511 | 8,135 | |||
| Deferred tax liabilities, net | 25,735 | 38,648 | |||
| Lease liabilities | 69,973 | 65,607 | |||
| Secured borrowings | 121,207 | 173,959 | |||
| Revolving securitization warehouse facility | 716,554 | 292,814 | |||
| Derivative financial liabilities | - | 34,132 | |||
| Notes payable | 1,189,961 | 1,085,906 | |||
| TOTAL LIABILITIES | 2,337,964 | 1,806,240 | |||
| Shareholders' equity | |||||
| Share capital | 359,920 | 363,514 | |||
| Contributed surplus | 19,691 | 22,583 | |||
| Accumulated other comprehensive (loss) income | (414 | ) | 8,567 | ||
| Retained earnings | 412,755 | 395,249 | |||
| TOTAL SHAREHOLDERS' EQUITY | 791,952 | 789,913 | |||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 3,129,916 | 2,596,153 | |||
| goeasy Ltd. | |||||||||||
| INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||
| (Unaudited) | |||||||||||
| (expressed in thousands of Canadian dollars, except earnings per share) | |||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||
| September 30, | September 30, | September 30, | September 30, | ||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||
| REVENUE | |||||||||||
| Interest income | 180,695 | 146,132 | 506,830 | 380,109 | |||||||
| Lease revenue | 25,369 | 27,923 | 78,195 | 84,708 | |||||||
| Commissions earned | 50,569 | 42,052 | 145,770 | 117,824 | |||||||
| Charges and fees | 5,583 | 3,655 | 15,215 | 9,651 | |||||||
| 262,216 | 219,762 | 746,010 | 592,292 | ||||||||
| EXPENSES BEFORE DEPRECIATION AND AMORTIZATION | |||||||||||
| Salaries and benefits | 44,838 | 41,776 | 130,710 | 120,986 | |||||||
| Stock-based compensation | 2,642 | 2,116 | 7,432 | 6,103 | |||||||
| Advertising and promotion | 7,234 | 7,751 | 26,127 | 20,815 | |||||||
| Bad debts | 72,551 | 45,297 | 194,636 | 123,444 | |||||||
| Occupancy | 6,265 | 5,995 | 18,828 | 17,272 | |||||||
| Technology costs | 5,274 | 4,900 | 15,974 | 12,721 | |||||||
| Other expenses | 11,054 | 9,852 | 33,716 | 32,356 | |||||||
| 149,858 | 117,687 | 427,423 | 333,697 | ||||||||
| DEPRECIATION AND AMORTIZATION | |||||||||||
| Depreciation of lease assets | 8,371 | 8,601 | 25,031 | 26,687 | |||||||
| Amortization of intangible assets | 5,249 | 5,405 | 15,377 | 11,285 | |||||||
| Depreciation of right-of-use assets | 5,071 | 4,650 | 14,911 | 13,416 | |||||||
| Depreciation of property and equipment | 2,289 | 2,067 | 6,742 | 5,833 | |||||||
| 20,980 | 20,723 | 62,061 | 57,221 | ||||||||
| TOTAL OPERATING EXPENSES | 170,838 | 138,410 | 489,484 | 390,918 | |||||||
| OPERATING INCOME | 91,378 | 81,352 | 256,526 | 201,374 | |||||||
| OTHER INCOME (LOSS) | 1,294 | 23,219 | (23,050 | ) | 106,505 | ||||||
| FINANCE COSTS | |||||||||||
| Interest expense and amortization of deferred financing charges | 27,602 | 20,889 | 73,835 | 54,450 | |||||||
| Interest expense on lease liabilities | 895 | 797 | 2,586 | 2,294 | |||||||
| 28,497 | 21,686 | 76,421 | 56,744 | ||||||||
| INCOME BEFORE INCOME TAXES | 64,175 | 82,885 | 157,055 | 251,135 | |||||||
| INCOME TAX EXPENSE (RECOVERY) | |||||||||||
| Current | 17,822 | 25,769 | 54,443 | 58,577 | |||||||
| Deferred | (836 | ) | (6,424 | ) | (8,973 | ) | (2,424 | ) | |||
| 16,986 | 19,345 | 45,470 | 56,153 | ||||||||
| NET INCOME | 47,189 | 63,540 | 111,585 | 194,982 | |||||||
| BASIC EARNINGS PER SHARE | 2.92 | 3.79 | 6.88 | 12.15 | |||||||
| DILUTED EARNINGS PER SHARE | 2.86 | 3.66 | 6.71 | 11.75 | |||||||
| Segmented Reporting | |||||||||
| Three Months Ended September 30, 2022 | |||||||||
| ($ in 000's except earnings per share) | easyfinancial | easyhome | Corporate | Total | |||||
| Revenue | |||||||||
| Interest income | 173,145 | 7,550 | - | 180,695 | |||||
| Lease revenue | - | 25,369 | - | 25,369 | |||||
| Commissions earned | 47,236 | 3,333 | - | 50,569 | |||||
| Charges and fees | 4,537 | 1,046 | - | 5,583 | |||||
| 224,918 | 37,298 | - | 262,216 | ||||||
| Total operating expenses before | |||||||||
| depreciation and amortization | 114,291 | 18,888 | 16,679 | 149,858 | |||||
| Depreciation and amortization | |||||||||
| Depreciation and amortization of lease assets, property and equipment and intangible assets | 6,006 | 8,663 | 1,240 | 15,909 | |||||
| Depreciation of right-of-use assets | 2,809 | 1,965 | 297 | 5,071 | |||||
| 8,815 | 10,628 | 1,537 | 20,980 | ||||||
| Segment operating income (loss) | 101,812 | 7,782 | (18,216 | ) | 91,378 | ||||
| Other income | 1,294 | ||||||||
| Finance costs | |||||||||
| Interest expense and amortization of deferred financing charges | 27,602 | ||||||||
| Interest expense on lease liabilities | 895 | ||||||||
| 28,497 | |||||||||
| Income before income taxes | 64,175 | ||||||||
| Income taxes | 16,986 | ||||||||
| Net Income | 47,189 | ||||||||
| Diluted earnings per share | 2.86 | ||||||||
| Three Months Ended September 30, 2021 | |||||||||
| ($ in 000's except earnings per share) | easyfinancial | easyhome | Corporate | Total | |||||
| Revenue | |||||||||
| Interest income | 140,266 | 5,866 | - | 146,132 | |||||
| Lease revenue | - | 27,923 | - | 27,923 | |||||
| Commissions earned | 39,234 | 2,818 | - | 42,052 | |||||
| Charges and fees | 2,619 | 1,036 | - | 3,655 | |||||
| 182,119 | 37,643 | - | 219,762 | ||||||
| Total operating expenses before | |||||||||
| depreciation and amortization | 83,167 | 16,752 | 17,768 | 117,687 | |||||
| Depreciation and amortization | |||||||||
| Depreciation and amortization of lease assets, property and equipment and intangible assets | 5,880 | 8,912 | 1,281 | 16,073 | |||||
| Depreciation of right-of-use-assets | 2,512 | 1,924 | 214 | 4,650 | |||||
| 8,392 | 10,836 | 1,495 | 20,723 | ||||||
| Segment operating income (loss) | 90,560 | 10,055 | (19,263 | ) | 81,352 | ||||
| Other income | 23,219 | ||||||||
| Finance costs | |||||||||
| Interest expense and amortization of deferred financing charges | 20,889 | ||||||||
| Interest expense on lease liabilities | 797 | ||||||||
| 21,686 | |||||||||
| Income before income taxes | 82,885 | ||||||||
| Income taxes | 19,345 | ||||||||
| Net Income | 63,540 | ||||||||
| Diluted earnings per share | 3.66 | ||||||||
| Nine Months Ended September 30, 2022 | |||||||||
| ($ in 000's except earnings per share) | easyfinancial | easyhome | Corporate | Total | |||||
| Revenue | |||||||||
| Interest income | 485,434 | 21,396 | - | 506,830 | |||||
| Lease revenue | - | 78,195 | - | 78,195 | |||||
| Commissions earned | 135,990 | 9,780 | - | 145,770 | |||||
| Charges and fees | 12,218 | 2,997 | - | 15,215 | |||||
| 633,642 | 112,368 | - | 746,010 | ||||||
| Total operating expenses before | |||||||||
| depreciation and amortization | 320,101 | 54,663 | 52,659 | 427,423 | |||||
| Depreciation and amortization | |||||||||
| Depreciation and amortization of lease assets, property and equipment and intangible assets | 17,542 | 25,918 | 3,690 | 47,150 | |||||
| Depreciation of right-of-use assets | 8,280 | 5,896 | 735 | 14,911 | |||||
| 25,822 | 31,814 | 4,425 | 62,061 | ||||||
| Segment operating income (loss) | 287,719 | 25,891 | (57,084 | ) | 256,526 | ||||
| Other loss | (23,050 | ) | |||||||
| Finance costs | |||||||||
| Interest expense and amortization of deferred financing charges | 73,835 | ||||||||
| Interest expense on lease liabilities | 2,586 | ||||||||
| 76,421 | |||||||||
| Income before income taxes | 157,055 | ||||||||
| Income taxes | 45,470 | ||||||||
| Net Income | 111,585 | ||||||||
| Diluted earnings per share | 6.71 | ||||||||
| Nine Months Ended September 30, 2021 | |||||||||
| ($ in 000's except earnings per share) | easyfinancial | easyhome | Corporate | Total | |||||
| Revenue | |||||||||
| Interest income | 363,806 | 16,303 | - | 380,109 | |||||
| Lease revenue | - | 84,708 | - | 84,708 | |||||
| Commissions earned | 109,809 | 8,015 | - | 117,824 | |||||
| Charges and fees | 6,721 | 2,930 | - | 9,651 | |||||
| 480,336 | 111,956 | - | 592,292 | ||||||
| Total operating expenses before | |||||||||
| depreciation and amortization | 223,784 | 50,143 | 59,770 | 333,697 | |||||
| Depreciation and amortization | |||||||||
| Depreciation and amortization of lease assets, property and equipment and intangible assets | 12,423 | 27,652 | 3,730 | 43,805 | |||||
| Depreciation of right-of-use-assets | 7,021 | 5,750 | 645 | 13,416 | |||||
| 19,444 | 33,402 | 4,375 | 57,221 | ||||||
| Segment operating income (loss) | 237,108 | 28,411 | (64,145 | ) | 201,374 | ||||
| Other income | 106,505 | ||||||||
| Finance costs | |||||||||
| Interest expense and amortization of deferred financing charges | 54,450 | ||||||||
| Interest expense on lease liabilities | 2,294 | ||||||||
| 56,744 | |||||||||
| Income before income taxes | 251,135 | ||||||||
| Income taxes | 56,153 | ||||||||
| Net Income | 194,982 | ||||||||
| Diluted earnings per share | 11.75 | ||||||||
| Summary of Financial Results and Key Performance Indicators | ||||||||||
| ($ in 000’s except earnings per share and percentages) | Three Months Ended | Variance | Variance | |||||||
| September 30, 2022 | September 30, 2021 | $ / bps | % change | |||||||
| Summary Financial Results | ||||||||||
| Revenue | 262,216 | 219,762 | 42,454 | 19.3 | % | |||||
| Operating expenses before depreciation and amortization2,3 | 149,858 | 117,687 | 32,171 | 27.3 | % | |||||
| EBITDA1 | 105,281 | 116,693 | (11,412 | ) | (9.8 | %) | ||||
| EBITDA margin1 | 40.2 | % | 53.1 | % | (1,290 bps) | (24.3 | %) | |||
| Depreciation and amortization expense2,3 | 20,980 | 20,723 | 257 | 1.2 | % | |||||
| Operating income | 91,378 | 81,352 | 10,026 | 12.3 | % | |||||
| Operating margin | 34.8 | % | 37.0 | % | (220 bps) | (5.9 | %) | |||
| Other income2,3 | 1,294 | 23,219 | (21,925 | ) | (94.4 | %) | ||||
| Finance costs | 28,497 | 21,686 | 6,811 | 31.4 | % | |||||
| Effective income tax rate | 26.5 | % | 23.3 | % | 320 bps | 13.7 | % | |||
| Net income | 47,189 | 63,540 | (16,351 | ) | (25.7 | %) | ||||
| Diluted earnings per share | 2.86 | 3.66 | (0.80 | ) | (21.9 | %) | ||||
| Return on assets | 6.3 | % | 10.3 | % | (400 bps) | (38.8 | %) | |||
| Return on equity | 24.2 | % | 32.7 | % | (850 bps) | (26.0 | %) | |||
| Return on tangible common equity1 | 38.5 | % | 52.3 | % | (1,380 bps) | (26.4 | %) | |||
| Adjusted Financial Results1,2,3 | ||||||||||
| Adjusted operating income | 94,823 | 85,818 | 9,005 | 10.5 | % | |||||
| Adjusted operating margin | 36.2 | % | 39.1 | % | (290 bps) | (7.4 | %) | |||
| Adjusted net income | 48,626 | 46,748 | 1,878 | 4.0 | % | |||||
| Adjusted diluted earnings per share | 2.95 | 2.70 | 0.25 | 9.3 | % | |||||
| Adjusted return on assets | 6.5 | % | 7.6 | % | (110 bps) | (14.5 | %) | |||
| Adjusted return on equity | 24.9 | % | 24.0 | % | 90 bps | 3.8 | % | |||
| Adjusted return on tangible common equity | 37.7 | % | 37.1 | % | 60 bps | 1.6 | % | |||
| Key Performance Indicators | ||||||||||
| Same store revenue growth (overall)1 | 14.9 | % | 15.4 | % | (50 bps) | (3.2 | %) | |||
| Same store revenue growth (easyhome)1 | 1.6 | % | 5.6 | % | (400 bps) | (71.4 | %) | |||
| Segment Financials | ||||||||||
| easyfinancial revenue | 224,918 | 182,119 | 42,799 | 23.5 | % | |||||
| easyfinancial operating margin | 45.3 | % | 49.7 | % | (440 bps) | (8.9 | %) | |||
| easyhome revenue | 37,298 | 37,643 | (345 | ) | (0.9 | %) | ||||
| easyhome operating margin | 20.9 | % | 26.7 | % | (580 bps) | (21.7 | %) | |||
| Portfolio Indicators | ||||||||||
| Gross consumer loans receivable | 2,588,656 | 1,896,716 | 691,940 | 36.5 | % | |||||
| Growth in consumer loans receivable | 218,813 | 100,872 | 117,941 | 116.9 | % | |||||
| Gross loan originations | 640,519 | 436,194 | 204,325 | 46.8 | % | |||||
| Total yield on consumer loans (including ancillary products)1 | 37.4 | % | 40.8 | % | (340 bps) | (8.3 | %) | |||
| Net charge offs as a percentage of average gross consumer loans receivable | 9.3 | % | 8.3 | % | 100 bps | 12.0 | % | |||
| Free cash flows from operation before net growth in gross consumer loans receivable1 | 95,588 | 89,240 | 6,348 | 7.1 | % | |||||
| Potential monthly lease revenue1 | 7,623 | 8,160 | (537 | ) | (6.6 | %) | ||||
| 1 EBITDA, adjusted operating income, adjusted net income and free cash flows from operations before net growth in gross consumer loans receivable are non-IFRS measures. EBITDA margin, adjusted operating margin, adjusted diluted earnings per share, adjusted return on equity, adjusted return on asset, reported and adjusted return on tangible common equity and total yield on consumer loans (including ancillary products) are non-IFRS ratios. Same store revenue growth (overall), same store revenue growth (easyhome) and potential monthly leasing revenue are supplementary financial measures. See description in “Key Performance Indicators and Non-IFRS Measures” section in this press release. 2 During the three-month period ended September 30, 2022, the Company had $2.2 million before-tax ($1.4 million after-tax) of adjusting items which include: Adjusting items related to the acquisition of LendCare • Integration costs related to consulting costs, employee incentives, representation and warranty insurance costs, and other integration costs related to the acquisition of LendCare. Integration costs amounting to $0.2 million before-tax ($0.1 million after-tax) were reported under Operating expenses before depreciation and amortization; • Amortization of $131 million intangible asset related to the acquisition of LendCare with an estimated useful life of ten years amounting to $3.3 million before-tax ($2.4 million after-tax); and Adjusting item related to other income • Investment income of $1.3 million before-tax ($1.1 million after-tax) mainly due to fair value gains on the investment in Affirm. 3 During the three-month period ended September 30, 2021, the Company had $18.8 million before-tax ($16.8 million after-tax) of adjusting items which include: Adjusting items related to the acquisition of LendCare • Transaction costs of $0.3 million (non-tax deductible) which include advisory and consulting costs, legal costs, and other direct transaction costs related to the acquisition of LendCare reported under Operating expenses before depreciation and amortization. • Integration costs related to advisory and consulting costs, employee incentives, representation and warranty insurance costs, and other integration costs related to the acquisition of LendCare reported under Operating expense before depreciation and amortization amounting to $1.0 million before-tax ($0.7 million after-tax); and • Amortization of the $131 million intangible asset related to the acquisition of LendCare with an estimated useful life of ten years amounting to $3.3 million before-tax ($2.4 million after-tax). Adjusting item related to other income • Investment income mainly due to fair value gains on investments in Affirm and its related TRS amounting to $23.2 million before-tax ($20.1 million after-tax). | ||||||||||
| ($ in 000’s except earnings per share and percentages) | Nine Months Ended | Variance | Variance | |||||||
| September 30, 2022 | September 30, 2021 | $ / bps | % change | |||||||
| Summary Financial Results | ||||||||||
| Revenue | 746,010 | 592,292 | 153,718 | 26.0 | % | |||||
| Operating expenses before depreciation and amortization2,3 | 427,423 | 333,697 | 93,726 | 28.1 | % | |||||
| EBITDA1 | 270,506 | 338,413 | (67,907 | ) | (20.1 | %) | ||||
| EBITDA margin1 | 36.3 | % | 57.1 | % | (2,080 bps) | -36.4 | % | |||
| Depreciation and amortization expense2,3 | 62,061 | 57,221 | 4,840 | 8.5 | % | |||||
| Operating income | 256,526 | 201,374 | 55,152 | 27.4 | % | |||||
| Operating margin | 34.4 | % | 34.0 | % | 40 bps | 1.2 | % | |||
| Other (loss) income2,3 | (23,050 | ) | 106,505 | (129,555 | ) | (121.6 | %) | |||
| Finance costs3 | 76,421 | 56,744 | 19,677 | 34.7 | % | |||||
| Effective income tax rate | 29.0 | % | 22.4 | % | 660 bps | 29.5 | % | |||
| Net income | 111,585 | 194,982 | (83,397 | ) | (42.8 | %) | ||||
| Diluted earnings per share | 6.71 | 11.75 | (5.04 | ) | (42.9 | %) | ||||
| Return on assets | 5.3 | % | 12.9 | % | (760 bps) | (58.9 | %) | |||
| Return on equity | 19.2 | % | 40.8 | % | (2,160 bps) | (52.9 | %) | |||
| Return on tangible common equity1 | 31.2 | % | 54.2 | % | (2,300 bps) | (42.4 | %) | |||
| Adjusted Financial Results1,2,3 | ||||||||||
| Adjusted operating income | 269,624 | 230,299 | 39,325 | 17.1 | % | |||||
| Adjusted operating margin | 36.1 | % | 38.9 | % | (280 bps) | (7.2 | %) | |||
| Adjusted net income | 141,235 | 127,114 | 14,121 | 11.1 | % | |||||
| Adjusted diluted earnings per share | 8.50 | 7.66 | 0.84 | 11.0 | % | |||||
| Adjusted return on assets | 6.7 | % | 8.4 | % | (170 bps) | (20.2 | %) | |||
| Adjusted return on equity | 24.3 | % | 26.6 | % | (230 bps) | (8.6 | %) | |||
| Adjusted return on tangible common equity | 37.1 | % | 34.6 | % | 250 bps | 7.2 | % | |||
| Key Performance Indicators | ||||||||||
| Same store revenue growth (overall)1 | 14.7 | % | 12.1 | % | 260 bps | 21.5 | % | |||
| Same store revenue growth (easyhome)1 | 2.4 | % | 6.1 | % | (370 bps) | (60.7 | %) | |||
| Segment Financials | ||||||||||
| easyfinancial revenue | 633,642 | 480,336 | 153,306 | 31.9 | % | |||||
| easyfinancial operating margin | 45.4 | % | 49.4 | % | (400 bps) | (8.1 | %) | |||
| easyhome revenue | 112,368 | 111,956 | 412 | 0.4 | % | |||||
| easyhome operating margin | 23.0 | % | 25.4 | % | (240 bps) | (9.4 | %) | |||
| Portfolio Indicators | ||||||||||
| Gross consumer loans receivable | 2,588,656 | 1,896,716 | 691,940 | 36.5 | % | |||||
| Growth in consumer loans receivable4 | 558,317 | 649,876 | (91,559 | ) | (14.1 | %) | ||||
| Gross loan originations | 1,745,251 | 1,087,627 | 657,624 | 60.5 | % | |||||
| Total yield on consumer loans (including ancillary products)1 | 38.3 | % | 42.4 | % | (410 bps) | (9.7 | %) | |||
| Net charge-offs as a percentage of average gross consumer loans receivable | 9.1 | % | 8.5 | % | 60 bps | 7.1 | % | |||
| Free cash flows from operation before net growth in gross consumer loans receivable1 | 192,434 | 200,652 | (8,218 | ) | (4.1 | %) | ||||
| Potential monthly lease revenue1 | 7,623 | 8,160 | (537 | ) | (6.6 | %) | ||||
| 1 EBITDA, adjusted operating income, adjusted net income and free cash flows from operations before net growth in gross consumer loans receivable are non-IFRS measures. EBITDA margin, adjusted operating margin, adjusted diluted earnings per share, adjusted return on equity, adjusted return on asset, reported and adjusted return on tangible common equity and total yield on consumer loans (including ancillary products) are non-IFRS ratios. Same store revenue growth (overall), same store revenue growth (easyhome) and potential monthly lease revenue are supplementary financial measures. Non-IFRS measures, non-IFRS ratios and supplemental financial measures are not determined in accordance with IFRS, do not have standardized meanings and may not be comparable to similar financial measures presented by other companies. See description in “Key Performance Indicators and Non-IFRS Measures” section in this press release. 2 During the nine months ended September 30, 2022, the Company had $36.1 million before-tax ($29.7 million after-tax) adjusting items which include: Adjusting items related to corporate development costs • Corporate development costs of $2.3 million ($1.7 million after-tax) are related to the exploration of a strategic acquisition opportunity, which the company elected not to undertake, including advisory, consulting and legal costs reported under Operating expenses before depreciation and amortization. Adjusting items relating to the acquisition of LendCare • Integration costs related to consulting costs, employee incentives, representation and warranty insurance costs, and other integration costs related to the acquisition of LendCare. Integration costs of $1.0 million before-tax ($0.7 million after-tax) were reported under Operating expenses before depreciation and amortization; • Amortization of the $131 million intangible asset related to the acquisition of LendCare with an estimated useful life of ten years amounting to $9.8 million before-tax ($7.2 million after-tax). Adjusting item related to other loss • Investment loss of $23.0 million before-tax ($20.0 million after-tax) mainly due to fair value loss on the investment in Affirm partially offset by the fair value gain on the related TRS. 3 During the nine months ended September 30, 2021, the Company had $75.9 million before-tax ($67.9 million after-tax) of adjusting items which include: • Transaction costs of $9.3 million before-tax ($8.9 million after-tax) which include advisory and consulting costs, legal costs, and other direct transaction costs related to the acquisition of LendCare reported under Operating expenses before depreciation and amortization amounting to $7.6 million which are non tax-deductible and loan commitment fees related to the Acquisition of LendCare reported under Finance costs amounting to $1.7 million before-tax ($1.3 million after-tax); • Integration costs related to advisory and consulting costs, employee incentives, representation and warranty insurance costs, and other integration costs related to the Acquisition of LendCare reported under Operating expenses before depreciation and amortization amounting to $1.6 million before-tax ($1.2 million after-tax); • Bad debt expense related to the day one loan loss provision on the acquired loan portfolio from LendCare amounting to $14.3 million before-tax ($10.5 million after-tax); and • Amortization of the $131 million intangible asset related to the Acquisition of LendCare with an estimated useful life of ten years amounting to $5.5 million before-tax ($4.0 million after-tax). Adjusting item related to other income • Investment income mainly due to fair value gains mainly on the investment in Affirm and its related TRS amounting to $106.5 million before-tax ($92.4 million after-tax). 4 Growth in consumer loans receivable for the nine-month period ended September 30, 2021 includes $444.5 million of gross loans purchased through the acquisition of LendCare. | ||||||||||
Non-IFRS Measures and Other Financial Measures
The Company uses a number of financial measures to assess its performance. Some of these measures are not calculated in accordance with International Financial Reporting Standards (IFRS) as issued by International Accounting Standards Board (IASB), are not identified by IFRS and do not have standardized meanings that would ensure consistency and comparability among companies using these measures. The Company believes that non-IFRS measures are useful in assessing ongoing business performance and provide readers with a better understanding of how management assesses performance. These non-IFRS measures are used throughout this press release and listed below. An explanation of the composition of non-IFRS measures and other financial measures can be found in the Company’s Management’s Discussion & Analysis (“MD&A”), available on www.sedar.com.
Adjusted Net Income and Adjusted Diluted Earnings Per Share
Adjusted net income is a non-IFRS measure, while adjusted diluted earnings per share is a non-IFRS ratio. Refer to “Key Performance Indicators and Non-IFRS Measures” section on page 38 of the Company’s MD&A for the three and nine-month periods ended September 30, 2022. Items used to calculate adjusted net income and adjusted earnings per share for the three and nine-month periods ended September 30, 2022 and 2021 include those indicated in the chart below:
| Three Months Ended | Nine Months Ended | |||||||
($in 000’s except earnings per share) | September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||
| Net income as stated | 47,189 | 63,540 | 111,585 | 194,982 | ||||
| Impact of adjusting items | ||||||||
| Operating expenses before depreciation and amortization | ||||||||
| Corporate development costs1 | - | - | 2,314 | - | ||||
| Integration costs3 | 170 | 952 | 959 | 1,600 | ||||
| Transaction costs2 | - | 256 | - | 7,615 | ||||
| Day one loan loss provision on the acquired loans 4 | - | - | - | 14,252 | ||||
| Amortization of intangible assets | ||||||||
| Amortization of acquired intangible assets 5 | 3,275 | 3,258 | 9,825 | 5,458 | ||||
| Other loss (income)6 | (1,294 | ) | (23,219 | ) | 23,050 | (106,505 | ) | |
| Finance costs | ||||||||
| Transaction costs2 | - | - | - | 1,726 | ||||
| Total pre-tax impact of adjusting items | 2,151 | (18,753 | ) | 36,148 | (75,854 | ) | ||
| Income tax impact of above adjusting items | (714 | ) | 1,961 | (6,498 | ) | 7,986 | ||
| After-tax impact of adjusting items | 1,437 | (16,792 | ) | 29,650 | (67,868 | ) | ||
| Adjusted net income | 48,626 | 46,748 | 141,235 | 127,114 | ||||
| Weighted average number of diluted shares outstanding | 16,510 | 17,340 | 16,619 | 16,600 | ||||
| Diluted earnings per share as stated | 2.86 | 3.66 | 6.71 | 11.75 | ||||
| Per share impact of adjusting items | 0.09 | (0.96 | ) | 1.79 | (4.09 | ) | ||
| Adjusted diluted earnings per share | 2.95 | 2.70 | 8.50 | 7.66 | ||||
Adjusting item related to corporate development costs
1 Corporate development costs are related to the exploration of a strategic acquisition opportunity, which the Company elected to not undertake, including advisory, consulting and legal costs reported under Operating expenses before depreciation and amortization.
Adjusting items related to the LendCare Acquisition
2 Transaction costs included advisory and consulting costs, legal costs, and other direct transaction costs related to the acquisition of LendCare reported under Operating expenses before depreciation and amortization and loan commitment fees related to the acquisition of LendCare reported under Finance costs.
3 Integration costs related to advisory and consulting costs, employee incentives, representation and warranty insurance costs, other integration costs related to the acquisition of LendCare. Integration costs were reported under Operating expenses before depreciation and amortization.
4 Bad debt expense related to the day one loan loss provision on the acquired loan portfolio from LendCare.
5 Amortization of the $131 million intangible asset related to the acquisition of LendCare with an estimated useful life of ten years.
Adjusting item related to other income (loss)
6 For the three and nine-month periods ended September 30, 2022 and 2021, investment income (loss) is mainly due to fair value gains (losses) on investments in Affirm and its related TRS.
Adjusted Operating Income and Adjusted Operating Margin
Adjusted operating income is a non-IFRS measure, while adjusted operating margin is a non-IFRS ratio. Refer to “Key Performance Indicators and Non-IFRS Measures” section on page 38 of the Company’s MD&A for the three and nine-month periods ended September 30, 2022. Items used to calculate adjusted operating income and adjusted operating margins for the three and nine-month periods ended September 30, 2022 and 2021 include those indicated in the chart below:
| Three Months Ended | ||||||||
($in 000’s except percentages) | September 30, 2022 | September 30, 2022 (adjusted) | September 30, 2021 | September 30, 2021 (adjusted) | ||||
| easyfinancial | ||||||||
| Operating income | 101,812 | 101,812 | 90,560 | 90,560 | ||||
| Divided by revenue | 224,918 | 224,918 | 182,119 | 182,119 | ||||
| easyfinancial operating margin | 45.3 | % | 45.3 | % | 49.7 | % | 49.7 | % |
| easyhome | ||||||||
| Operating income | 7,782 | 7,782 | 10,055 | 10,055 | ||||
| Divided by revenue | 37,298 | 37,298 | 37,643 | 37,643 | ||||
| easyhome operating margin | 20.9 | % | 20.9 | % | 26.7 | % | 26.7 | % |
| Total | ||||||||
| Operating income | 91,378 | 91,378 | 81,352 | 81,352 | ||||
| Operating expenses before depreciation and amortization1 | ||||||||
| Integration costs | - | 170 | - | 952 | ||||
| Transaction costs | - | - | - | 256 | ||||
| Amortization of intangible assets1 | ||||||||
| Amortization of acquired intangible assets | - | 3,275 | - | 3,258 | ||||
| Adjusted operating income | 91,378 | 94,823 | 81,352 | 85,818 | ||||
| Divided by revenue | 262,216 | 262,216 | 219,762 | 219,762 | ||||
| Total operating margin | 34.8 | % | 36.2 | % | 37.0 | % | 39.1 | % |
1 For explanation of adjusting items, refer to the “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section above.
| Nine Months Ended | ||||||||
($in 000’s except percentages) | September 30, 2022 | September 30, 2022 (adjusted) | September 30, 2021 | September 30, 2021 (adjusted) | ||||
| easyfinancial | ||||||||
| Operating income | 287,719 | 287,719 | 237,108 | 237,108 | ||||
| Divided by revenue | 633,642 | 633,642 | 480,336 | 480,336 | ||||
| easyfinancial operating margin | 45.4 | % | 45.4 | % | 49.4 | % | 49.4 | % |
| easyhome | ||||||||
| Operating income | 25,891 | 25,891 | 28,411 | 28,411 | ||||
| Divided by revenue | 112,368 | 112,368 | 111,956 | 111,956 | ||||
| easyhome operating margin | 23.0 | % | 23.0 | % | 25.4 | % | 25.4 | % |
| Total | ||||||||
| Operating income | 256,526 | 256,526 | 201,374 | 201,374 | ||||
| Operating expenses before depreciation and amortization1 | ||||||||
| Corporate development costs | - | 2,314 | - | - | ||||
| Integration costs | - | 959 | - | 1,600 | ||||
| Transaction costs | - | - | - | 7,615 | ||||
| Day one loan loss provision on the acquired loans | - | - | - | 14,252 | ||||
| Amortization of intangible assets1 | ||||||||
| Amortization of acquired intangible assets | - | 9,825 | - | 5,458 | ||||
| Adjusted operating income | 256,526 | 269,624 | 201,374 | 230,299 | ||||
| Divided by revenue | 746,010 | 746,010 | 592,292 | 592,292 | ||||
| Total operating margin | 34.4 | % | 36.1 | % | 34.0 | % | 38.9 | % |
1 For explanation of adjusting items, refer to the “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section above.
Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and EBITDA Margin
EBITDA is a non-IFRS measure, while EBITDA margin is a non-IFRS ratio. Refer to “Key Performance Indicators and Non-IFRS Measures” section on page 38 of the Company’s MD&A for the three and nine-month periods ended September 30, 2022. Items used to calculate EBITDA and EBITDA margin for the three and nine-month periods ended September 30, 2022 and 2021 include those indicated in the chart below:
| Three Months Ended | Nine Months Ended | |||||||
| ($in 000’s except percentages) | September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||
| Net income as stated | 47,189 | 63,540 | 111,585 | 194,982 | ||||
| Finance costs | 28,497 | 21,686 | 76,421 | 56,744 | ||||
| Income tax expense | 16,986 | 19,345 | 45,470 | 56,153 | ||||
| Depreciation and amortization | 20,980 | 20,723 | 62,061 | 57,221 | ||||
| Depreciation of lease assets | (8,371 | ) | (8,601 | ) | (25,031 | ) | (26,687 | ) |
| EBITDA | 105,281 | 116,693 | 270,506 | 338,413 | ||||
| Divided by revenue | 262,216 | 219,762 | 746,010 | 592,292 | ||||
| EBITDA margin | 40.2 | % | 53.1 | % | 36.3 | % | 57.1 | % |
Free Cash Flow from Operations before Net Growth in Gross Consumer Loans Receivable
Free cash flow from operations before net growth in gross consumer loans receivable is a non-IFRS measure. Refer to “Key Performance Indicators and Non-IFRS Measures” section on page 38 of the Company’s MD&A for the three and nine-month periods ended September 30, 2022. Items used to calculate free cash flow from operations before net growth in gross consumer loans receivable for the three and nine-month periods ended September 30, 2022 and 2021 include those indicated in the chart below:
| Three Months Ended | Nine Months Ended | |||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||
| Cash used in operating activities | (123,225 | ) | (11,632 | ) | (365,883 | ) | (4,704 | ) |
| Net growth in gross consumer loans receivable during the period1 | 218,813 | 100,872 | 558,317 | 205,356 | ||||
| Free cash flows from operations before net growth in gross consumer loans receivable | 95,588 | 89,240 | 192,434 | 200,652 | ||||
1 Excludes $444.5 million of gross loans purchased through the acquisition of LendCare in 2021.
Adjusted Return on Assets
Adjusted return on assets is a non-IFRS ratio. Refer to “Key Performance Indicators and Non-IFRS Measures” section on page 38 of the Company’s MD&A for the three and nine-month periods ended September 30, 2022. Items used to calculate adjusted return on assets for the three and nine-month periods ended September 30, 2022 and 2021 include those indicated in the chart below:
| Three Months Ended | ||||||||
| ($in 000’s except percentages) | September 30, 2022 | September 30, 2022 (adjusted) | September 30, 2021 | September 30, 2021 (adjusted) | ||||
| Net income as stated | 47,189 | 47,189 | 63,540 | 63,540 | ||||
| After-tax impact of adjusting items1 | - | 1,437 | - | (16,792 | ) | |||
| Adjusted net income | 47,189 | 48,626 | 63,450 | 46,748 | ||||
| Multiplied by number of periods in a year | X 4 | X 4 | X 4 | X 4 | ||||
| Divided by average total assets for the period | 3,012,832 | 3,012,832 | 2,461,509 | 2,461,509 | ||||
| Return on assets | 6.3 | % | 6.5 | % | 10.3 | % | 7.6 | % |
1 For explanation of adjusting items, refer to the “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section above.
| Nine Months Ended | ||||||||
| ($in 000’s except percentages) | September 30, 2022 | September 30, 2022 (adjusted) | September 30, 2021 | September 30, 2021 (adjusted) | ||||
| Net income as stated | 111,585 | 111,585 | 194,982 | 194,982 | ||||
| After-tax impact of adjusting items1 | - | 29,650 | - | (67,868 | ) | |||
| Adjusted net income | 111,585 | 141,235 | 194,982 | 127,114 | ||||
| Multiplied by number of periods in a year | X 4/3 | X 4/3 | X 4/3 | X 4/3 | ||||
| Divided by average total assets for the period | 2,827,534 | 2,827,534 | 2,009,205 | 2,009,205 | ||||
| Return on assets | 5.3 | % | 6.7 | % | 12.9 | % | 8.4 | % |
1 For explanation of adjusting items, refer to the “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section above.
Adjusted Return on Equity
Adjusted return on equity is a non-IFRS ratio. Refer to “Key Performance Indicators and Non-IFRS Measures” section on page 38 of the Company’s MD&A for the three and nine-month periods ended September 30, 2022. Items used to calculate adjusted return on equity for the three and nine-month periods ended September 30, 2022 and 2021 include those indicated in the chart below:
| Three Months Ended | ||||||||
| ($in 000’s except percentages) | September 30, 2022 | September 30, 2022 (adjusted) | September 30, 2021 | September 30, 2021 (adjusted) | ||||
| Net income as stated | 47,189 | 47,189 | 63,540 | 63,540 | ||||
| After-tax impact of adjusting items1 | - | 1,437 | - | (16,792 | ) | |||
| Adjusted net income | 47,189 | 48,626 | 63,540 | 46,748 | ||||
| Multiplied by number of periods in a year | X 4 | X 4 | X 4 | X 4 | ||||
| Divided by average shareholders’ equity for the period | 780,125 | 780,125 | 778,059 | 778,059 | ||||
| Return on equity | 24.2 | % | 24.9 | % | 32.7 | % | 24.0 | % |
1 For explanation of adjusting items, refer to the “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section above.
| Nine Months Ended | ||||||||
| ($in 000’s except percentages) | September 30, 2022 | September 30, 2022 (adjusted) | September 30, 2021 | September 30, 2021 (adjusted) | ||||
| Net income as stated | 111,585 | 111,585 | 194,982 | 194,982 | ||||
| After-tax impact of adjusting items1 | - | 29,650 | - | (67,868 | ) | |||
| Adjusted net income | 111,585 | 141,235 | 194,982 | 127,114 | ||||
| Multiplied by number of periods in a year | X 4/3 | X 4/3 | X 4/3 | X 4/3 | ||||
| Divided by average shareholders’ equity for the period | 775,414 | 775,414 | 637,474 | 637,474 | ||||
| Return on equity | 19.2 | % | 24.3 | % | 40.8 | % | 26.6 | % |
1 For explanation of adjusting items, refer to the “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section above.
Return on Tangible Common Equity
Reported and adjusted return on tangible common equity are non-IFRS ratios. Refer to “Key Performance Indicators and Non-IFRS Measures” section on page 38 of the Company’s MD&A for the three and nine-month periods ended September 30, 2022. Items used to calculate reported and adjusted return on tangible common equity for the three and nine-month periods ended September 30, 2022 and 2021 include those indicated in the chart below:
| Three Months Ended | ||||||||
| ($in 000’s except percentages) | September 30, 2022 | September 30, 2022 (adjusted) | September 30, 2021 | September 30, 2021 (adjusted) | ||||
| Net income as stated | 47,189 | 47,189 | 63,540 | 63,540 | ||||
| Amortization of acquired intangible assets | 3,275 | 3,275 | 3,258 | 3,258 | ||||
| Income tax impact of the above item | (868 | ) | (868 | ) | (863 | ) | (863 | ) |
| Net income before amortization of acquired intangible assets, net of income tax | 49,596 | 49,596 | 65,935 | 65,935 | ||||
| Impact of adjusting items1 | ||||||||
| Operating expenses before depreciation and amortization | ||||||||
| Integration costs | - | 170 | - | 952 | ||||
| Transaction costs | - | - | - | 256 | ||||
| Other income | - | (1,294 | ) | - | (23,219 | ) | ||
| Total pre-tax impact of adjusting items | - | (1,124 | ) | - | (22,011 | ) | ||
| Income tax impact of above adjusting items | - | 154 | - | 2,824 | ||||
| After-tax impact of adjusting items | - | (970 | ) | - | (19,187 | ) | ||
| Adjusted net income | 49,596 | 48,626 | 65,935 | 46,748 | ||||
| Multiplied by number of periods in a year | X 4 | X 4 | X 4 | X 4 | ||||
| Average shareholders’ equity | 780,215 | 780,215 | 778,059 | 778,059 | ||||
| Average goodwill | (180,923 | ) | (180,923 | ) | (180,379 | ) | (180,379 | ) |
| Average acquired intangible assets2 | (114,079 | ) | (114,079 | ) | (127,179 | ) | (127,179 | ) |
| Average related deferred tax liabilities | 30,231 | 30,231 | 33,702 | 33,702 | ||||
| Divided by average tangible common equity | 515,444 | 515,444 | 504,203 | 504,203 | ||||
| Return on tangible common equity | 38.5 | % | 37.7 | % | 52.3 | % | 37.1 | % |
1 For explanation of adjusting items, refer to the “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section above.
2 Excludes intangible assets relating to software.
| Nine Months Ended | ||||||||
| ($in 000’s except percentages) | September 30, 2022 | September 30, 2022 (adjusted) | September 30, 2021 | September 30, 2021 (adjusted) | ||||
| Net income as stated | 111,585 | 111,585 | 194,982 | 194,982 | ||||
| Amortization of acquired intangible assets | 9,825 | 9,825 | 5,458 | 5,458 | ||||
| Income tax impact of the above item | (2,604 | ) | (2,604 | ) | (1,446 | ) | (1,446 | ) |
| Net income before amortization of acquired intangible assets, net of income tax | 118,806 | 118,806 | 198,994 | 198,994 | ||||
| Impact of adjusting items1 | ||||||||
| Operating expenses before depreciation and amortization | ||||||||
| Corporate development costs | - | 2,314 | - | - | ||||
| Integration costs | - | 959 | - | 1,600 | ||||
| Transaction costs | - | - | - | 7,615 | ||||
| Day one loan loss provision on the acquired loans | - | - | - | 14,252 | ||||
| Other loss (income) | - | 23,050 | - | (106,505 | ) | |||
| Finance costs | ||||||||
| Transaction costs | - | - | - | 1,726 | ||||
| Total pre-tax impact of adjusting items | - | 26,323 | - | (81,312 | ) | |||
| Income tax impact of above adjusting items | - | (3,894 | ) | - | 9,432 | |||
| After-tax impact of adjusting items | - | 22,429 | - | (71,880 | ) | |||
| Adjusted net income | 118,806 | 141,235 | 198,994 | 127,114 | ||||
| Multiplied by number of periods in a year | X 4/3 | X 4/3 | X 4/3 | X 4/3 | ||||
| Average shareholders’ equity | 775,414 | 775,414 | 637,474 | 637,474 | ||||
| Average goodwill | (180,923 | ) | (180,923 | ) | (100,845 | ) | (100,845 | ) |
| Average acquired intangible assets2 | (117,354 | ) | (117,354 | ) | (63,590 | ) | (63,590 | ) |
| Average related deferred tax liabilities | 31,099 | 31,099 | 16,851 | 16,851 | ||||
| Divided by average tangible common equity | 508,236 | 508,236 | 489,890 | 489,890 | ||||
| Return on tangible common equity | 31.2 | % | 37.1 | % | 54.2 | % | 34.6 | % |
1 For explanation of adjusting items, refer to the “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section above.
2 Excludes intangible assets relating to software.
easyhome Financial Revenue
easyhome financial revenue is a non-IFRS measure. It’s calculated as total company revenue less easyfinancial revenue and leasing revenue. The Company believes that easyhome financial revenue is an important measure of the performance of the easyhome segment. Items used to calculate easyhome financial revenue for the three-month periods ended September 30, 2022 and 2021 include those indicated in the chart below:
| ($in 000’s) | Three Months Ended | |||
| September 30, 2022 | September 30, 2021 | |||
| Total company revenue | 262,216 | 219,762 | ||
| Less: easyfinancial revenue | (224,918 | ) | (182,119 | ) |
| Less: leasing revenue | (27,074 | ) | (29,762 | ) |
| easyhome financial revenue | 10,224 | 7,881 | ||
Total Yield on Consumer Loans as a Percentage of Average Gross Consumer Loans Receivable
Total yield on consumer loans as a percentage of average gross consumer loans receivable is a non-IFRS ratio. See description in section “Portfolio Analysis” on page 27 of the Company’s MD&A for the three and nine-month periods ended September 30, 2022. Items used to calculate total yield on consumer loans as a percentage of average gross consumer loans receivable for the three and nine-month periods ended September 30, 2022 and 2021 include those indicated in the chart below:
| Three Months Ended | Nine Months Ended | |||||||
| ($in 000’s except percentages) | September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||
| Total Company revenue | 262,216 | 219,762 | 746,010 | 592,292 | ||||
| Less: Leasing revenue | (27,074 | ) | (29,762 | ) | (83,281 | ) | (90,128 | ) |
| Financial revenue | 235,142 | 190,000 | 662,729 | 502,164 | ||||
| Multiplied by number of periods in a year | X 4 | X 4 | X 4/3 | X 4/3 | ||||
| Divided by average gross consumer loans receivable | 2,516,122 | 1,862,433 | 2,304,371 | 1,579,544 | ||||
| Total yield on consumer loans as a percentage of average gross consumer loans receivable (annualized) | 37.4 | % | 40.8 | % | 38.3 | % | 42.4 | % |
Net Principal Written and Percentage Net Principal Written to New Customers
Net principal written (Net loan advances) is a non-IFRS measure. See description in section “Portfolio Analysis” on page 27 of the Company’s MD&A for the three-month period ended September 30, 2022. Percentage of net loan advances issued to new customers is a non-IFRS ratio. It is calculated as loan originations to new customers divided by net principal written. The Company uses percentage of net loan advances issued to new customers, among other measures, to assess the operating performance of its lending business. Items used to calculate percentage of net loan advances issued to new customers for the three-month period ended September 30, 2022 and 2021 include those indicated in the chart below:
| Three Months Ended | ||||
| ($in 000’s except percentages) | September 30, 2022 | September 30, 2021 | ||
| Gross loan originations | 640,519 | 436,194 | ||
| Loan originations to new customers | 298,810 | 204,022 | ||
| Loan originations to existing customers | 341,709 | 232,172 | ||
| Less: Proceeds applied to repay existing loans | (174,746 | ) | (126,135 | ) |
| Net advance to existing customers | 166,964 | 106,037 | ||
| Net principal written | 465,773 | 310,059 | ||
| Percentage net advances to new customers | 64 | % | 66 | % |
Net Debt to Net Capitalization
Net debt to net capitalization is a capital management measure. Refer to “Financial Condition” section on page 48 of the Company’s MD&A for the three and nine-month periods ended September 30, 2022.
Average Loan Book Per Branch
Average loan book per branch is a supplementary financial measure. It is calculated as gross consumer loans receivable held by easyfinancial branch locations divided by number of total easyfinancial branch locations.
Weighted Average Interest Rate
Weighted average interest rate is a supplementary financial measure. It Is calculated as the sum of individual loan balance multiplied by interest rate divided by gross consumer loans receivable.
Same Store Revenue Growth
Same store revenue growth (easyhome) and same store revenue growth (overall) are supplementary financial measures. Refer to “Key Performance Indicators and Non-IFRS Measures” section on page 38 of the Company’s MD&A for the three and nine-month periods ended September 30, 2022.
Potential Monthly Leasing Revenue
Potential monthly leasing revenue is a supplementary financial measure. Refer to “Portfolio Analysis” section on page 27 of the Company’s MD&A for the three and nine-month periods ended September 30, 2022.
