goeasy Ltd. Reports Results for the Fourth Quarter and Full Year

Record Revenues and Operating Income
Record Originations and Loan Book Growth
Dividend Increase of 25% to $0.90 Per Share

MISSISSAUGA, Ontario, Feb. 20, 2018 (GLOBE NEWSWIRE) -- goeasy Ltd. (TSX:GSY), (“goeasy” or the “Company”), a leading full-service provider of goods and alternative financial services that provides everyday Canadians with a chance for a better tomorrow, today, announced its results for the fourth quarter and year ended December 31, 2017. The Company also announced a 25% increase in its annual dividend from $0.72 to $0.90 per share.

Results for the Fourth Quarter Ended December 31, 2017

Revenue for the fourth quarter of 2017 was $108.6 million, an increase of 18.9% from $91.3 million in the fourth quarter of 2016. The growth was driven by the expansion of easyfinancial and the related growth of its consumer loans receivable portfolio which reached $526.5 million by quarter's end, up 42.1% from December 31, 2016.

During the quarter, the Company generated record levels of loan originations and loan book growth on the back of its second largest quarter ever of net customer gain. Loan originations in the quarter reached a record $176.4 million, an increase of 50.1% compared with the fourth quarter of 2016. The record growth of the loan book in the quarter was $53.5 million compared to $26.8 million in the fourth quarter of 2016, an increase of 99.5%. The strong growth was fueled by the increased penetration of risk adjusted rate loans to more credit worthy borrowers, the Company’s expansion into Quebec and the introduction of the Company’s new secured loan product. Additionally, strong growth in the quarter was supported by improved performance of the company’s digital marketing efforts and an increased investment in advertising, which increased by $2.0 million or 48%.

Operating income for the three-month period ended December 31, 2017 was $24.5 million, an increase of $7.3 million or 42.4% when compared to operating income in the fourth quarter of 2016. Net income for the quarter, which included an $8.2 million before tax charge associated with the refinancing completed on November 1, 2017, was $5.4 million. Excluding this charge, adjusted net income was $11.4 million, up $3.1 million or 36.6% from the net income of $8.3 million in the fourth quarter of 2016. Diluted earnings per share for the quarter was $0.38. Adjusted diluted earnings per share was $0.79 per share, an increase of $0.19 or 31.7% from diluted earnings per share of $0.60 in the fourth quarter of 2016.

“The fourth quarter rounded out a record year for our Company which resulted in financial success and the accomplishment of many of our strategic goals,” said David Ingram, goeasy’s President and Chief Executive Officer. “Consumer demand remains elevated and our product suite is clearly matching the right size of loan with the right interest rate as our overall credit performance continues to improve. I am particularly pleased that during the quarter we saw an improvement in charge-off rates from 15.8% to 12.8%.”

Other highlights for the fourth quarter of 2017 include:

easyfinancial

  • Revenue increased by 33.2% to $74.6 million from $56.0 million in the fourth quarter of 2016.
  • Delinquency rates on the final Saturday of the quarter improved to 5.3% from 5.8% on the final Saturday of 2016.
  • Operating margin for the fourth quarter of 2017 increased to 38.4% from 34.9% in the comparable period of 2016.
  • Cash generated from easyfinancial customer payments was $127.1 million in the fourth quarter of 2017 compared to $94.0 million in the fourth quarter of 2016.
  • easyfinancial now has the highest consumer awareness in Canada for non-prime installment lending.

easyhome

  • Same store revenue increased 0.1%.
  • The operating margin for easyhome for the fourth quarter of 2017 was 14.3%, down from the 15.6% reported for the same period in 2016.

Overall

  • 31st consecutive quarter of same store sales growth.
  • 66th consecutive quarter of positive net income.
  • Operating margin was 22.5% for the quarter, up from 18.8% in the fourth quarter of 2016.
  • The Company’s normalized return on equity was 20.1% in the current quarter, up from 17.4% for the fourth quarter of 2016.

Full Year Results

For the full year, goeasy recorded revenues of $405.2 million, up 16.6% compared with $347.5 million in 2016.

Operating income for 2017 was $87.4 million, net income was $36.1 million and diluted earnings per share was $2.56. The 2017 results included an $8.2 million before tax charge associated with the refinancing completed on November 1, 2017. The 2016 results included a $3.0 million gain on the sale of an investment and $6.4 million in transaction advisory costs that were not routine and non-recurring. Excluding these items, adjusted net income for 2017 was $42.2 million compared with $33.2 million in 2016, an increase of $9.0 million or 27.2%; and adjusted diluted earnings per share for 2017 was $2.97 compared with $2.38 in 2016, an increase of $0.59 or 24.8%.

In addition to the strong financial performance during 2017, the Company also made significant progress on its strategic initiatives:

  • easyfinancial expanded into the province of Quebec. At year end, the Quebec loan portfolio exceeded $23 million, significantly ahead of initial expectations.
  • Beginning in the second quarter of 2017, the Company introduced its easyfinancial unsecured loan product into almost 100 of its easyhome leasing stores.
  • During the fourth quarter of 2017, easyfinancial launched a new secured lending product to qualifying borrowers who own and reside within their home and who are looking for lower cost forms of financing.
  • Also during the fourth quarter of 2017, the Company completed a recapitalization of the Company’s balance sheet. The new debt structure provided by the North American capital markets and a group of national and international banks provides goeasy with a capital structure to fund its growth for the foreseeable future.

Balance Sheet and Liquidity

Total assets were $749.6 million as at December 31, 2017, an increase of 49.0% from $503.1 million as at December 31, 2016 and driven by the $156.0 million growth in the gross consumer loans receivable portfolio.

As at December 31, 2017, the Company had $109.4 million in cash on hand and an additional $110.0 million from committed facilities available to support future growth.

The Company believes that its cash and committed facilities, coupled with the cash flows provided by operations, will be sufficient to fund the planned growth through to the end of 2018 and into 2019.

Outlook

goeasy’s strategic focus continues to be driven by the following strategic imperatives:

  • Enhance its product offering
  • Evolve its delivery channels
  • Execute with efficiency and effectiveness
  • Deliver a best-in-class customer experience


The Company has previously provided 3 year targets for 2018 through 2020 that is:

201820192020
New easyfinancial locations20 - 30
openings
10 - 20
openings
10 - 20
Openings
Gross consumer loans receivable portfolio at year end$700 - $750
million
$875 - $950
million
$1.0 - $1.1
billion
easyfinancial total revenue yield54% - 56%49% - 51%46% - 48%
Net charge-offs as a percentage of average gross consumer loans receivable12% - 14%11% - 13%10% - 12%
easyfinancial operating margin 38% - 40%40%+40%+
Total revenue growth16% - 18%14% - 16%10% - 12%
Return on Equity18% - 20%20%+20%+

The achievement of these targets by the Company, however, is predicated on a number of factors, including the pace of expansion of easyfinancial.

"The significant progress made by goeasy over the past few years has positioned the Company to be the leading non-prime lender for everyday Canadians. Since 2001 on a normalized basis we have achieved compound annual growth rates of 12% for revenue and 29% for earnings per share. We remain unwavering in our commitment to provide our customers with the opportunity to achieve better financial outcomes and the ability to graduate towards prime credit,” said Mr. Ingram. “We are better prepared than ever before to capture a greater share of the $165 billion non-prime consumer credit market. The previously announced debt financing provides us with both sufficient capital to fund our growth over the next several quarters and a long-term structure that will enable further access to debt capital as required”. Mr. Ingram concluded, “My thanks to our entire team who continue to work tirelessly to meet and exceed the needs of our customers who are underserved by traditional financial organizations. It is clear now more than ever, that goeasy is well organized for continued success.”

Dividend Increase

Based on its 2017 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 $0.72 per share to $0.90 per share, an increase of 25%. As such, the Board of Directors has approved a quarterly dividend of $0.225 per share payable on April 13, 2018 to the holders of common shares of record as at the close of business on March 29, 2018.

Forward-Looking Statements

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

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

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

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

About goeasy

goeasy Ltd. is a leading full-service provider of goods and alternative financial services that provides everyday Canadians with a chance for a better tomorrow, today. goeasy Ltd. serves its customers through two key operating divisions, easyfinancial and easyhome. easyfinancial is a non-prime consumer lender that bridges the gap between traditional financial institutions and costly payday lenders. It is supported by a strong central credit adjudication process and industry leading risk analytics. easyfinancial also operates an indirect lending channel, offering loan products to consumers at the point-of-sale of third party merchants. easyhome is Canada's largest lease-to-own company, offering brand-name household furniture, appliances and electronics to consumers under weekly or monthly leasing agreements through both corporate and franchise stores. Both operating divisions of goeasy Ltd. offer the highest level of customer service and enable customers to transact through a national store and branch network and through its online and mobile eCommerce enabled platforms.

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

For further information contact:

David Ingram
President and Chief Executive Officer
(905) 272-2788

-or-

Steve Goertz
Executive Vice President and Chief Financial Officer
(905) 272-2788

goeasy Ltd.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(expressed in thousands of Canadian dollars)
As AtAs At
December 31,December 31,
20172016
ASSETS
Cash 109,370 24,928
Amounts receivable 14,422 7,857
Prepaid expenses 3,545 1,909
Consumer loans receivable 513,425 354,499
Lease assets 54,318 55,288
Property and equipment 15,941 16,103
Deferred tax assets 2,121 6,856
Intangible assets 15,163 14,312
Goodwill 21,310 21,310
TOTAL ASSETS 749,615 503,062
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities 42,706 31,879
Income taxes payable 9,445 2,874
Dividends payable 2,426 1,666
Deferred lease inducements 1,294 1,506
Unearned revenue 4,819 5,204
Provisions 365 608
Term loan - 263,294
Convertible debentures 47,985 -
Notes payable 401,193 -
Derivative financial instruments 11,138 -
TOTAL LIABILITIES 521,371 307,031
Shareholders' equity
Share capital 85,874 82,598
Contributed surplus 15,305 9,943
Accumulated other comprehensive (loss) income 141 880
Retained earnings 126,924 102,610
TOTAL SHAREHOLDERS' EQUITY 228,244 196,031
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 749,615 503,062

goeasy Ltd.
CONSOLIDATED STATEMENTS OF INCOME
(expressed in thousands of Canadian dollars except earnings per share)
Three Months EndedYear Ended
December 31,December 31,December 31,December 31,
2017201620172016
REVENUE
Interest income 49,748 37,477 175,812 138,782
Lease revenue 31,918 33,832 130,527 137,849
Other 26,920 19,985 98,885 70,874
108,586 91,294 405,224 347,505
Other income - - - 3,000
EXPENSES BEFORE DEPRECIATION AND AMORTIZATION
Salaries and benefits 26,696 23,014 102,666 91,557
Stock-based compensation 1,527 1,190 5,623 4,323
Advertising and promotion 6,356 4,242 20,150 13,457
Bad debts 18,807 15,936 67,826 55,668
Occupancy 8,132 8,324 33,100 32,867
Other expenses 9,166 7,996 36,258 29,398
Transaction advisory costs - - - 6,382
70,684 60,702 265,623 233,652
DEPRECIATION AND AMORTIZATION
Depreciation of lease assets 10,240 10,789 41,221 44,230
Depreciation of property and equipment 1,658 1,501 5,702 5,902
Amortization of intangible assets 1,554 1,127 5,285 4,205
13,452 13,417 52,208 54,337
Total operating expenses 84,136 74,119 317,831 287,989
Operating income 24,450 17,175 87,393 62,516
FINANCE COSTS
Interest expense and amortisation of deferred financing charges 8,774 5,702 28,642 21,048
Refinancing cost 8,198 - 8,198 -
16,972 5,702 36,840 21,048
Income before income taxes 7,478 11,473 50,553 41,468
Income tax expense (recovery)
Current 1,779 2,045 10,854 11,362
Deferred 333 1,086 3,567 (943)
2,112 3,131 14,421 10,419
Net income 5,366 8,342 36,132 31,049
Basic earnings per share 0.39 0.62 2.67 2.29
Diluted earnings per share 0.38 0.60 2.56 2.23

Segmented Reporting
Three Months Ended December 31, 2017
($ in 000's except earnings per share) easyfinancialeasyhomeCorporate Total
Revenue 74,573 34,013 - 108,586
Total operating expenses before
depreciation and amortization 43,891 18,194 8,599 70,684
Depreciation and amortization 2,068 10,955 429 13,452
Operating income (loss) 28,614 4,864 (9,028)24,450
Finance costs
Interest expense and amortization of
deferred financing charges 8,774
Refinancing cost 8,198
16,972
Income before income taxes 7,478
Income taxes 2,112
Net Income 5,366
Diluted earnings per share 0.38
Three Months Ended December 31, 2016
($ in 000's except earnings per share) easyfinancialeasyhomeCorporate Total
Revenue 55,99935,295- 91,294
Total operating expenses before
depreciation and amortization 34,77218,2447,686 60,702
Depreciation and amortization 1,67511,558184 13,417
Operating income (loss) 19,5525,493(7,870)17,175
Finance costs
Interest expense and amortization of
deferred financing charges 5,702
5,702
Income before income taxes 11,473
Income taxes 3,131
Net Income 8,342
Diluted earnings per share 0.60
Year Ended December 31, 2017
($ in 000's except earnings per share) easyfinancialeasyhomeCorporate Total
Revenue 267,964 137,260 - 405,224
Other Income --- -
Total operating expenses before
depreciation and amortization 158,055 72,570 34,998 265,623
Depreciation and amortization 7,255 43,808 1,145 52,208
Operating income (loss) 102,654 20,882 (36,143)87,393
Finance costs
Interest expense and amortization of
deferred financing charges 28,642
Refinancing cost 8,198
36,840
Income before income taxes 50,553
Income taxes 14,421
Net Income 36,132
Diluted earnings per share 2.56
Year Ended December 31, 2016
($ in 000's except earnings per share) easyfinancialeasyhomeCorporate Total
Revenue 204,076143,429- 347,505
Other Income --3,000 3,000
Total operating expenses before
depreciation and amortization and
transaction advisory costs 122,84374,70829,719 227,270
Transaction advisory costs --6,382 6,382
Depreciation and amortization 6,47947,184674 54,337
Operating income (loss) 74,75421,537(33,775)62,516
Finance costs
Interest expense and amortization of
deferred financing charges 21,048
21,048
Income before income taxes 41,468
Income taxes 10,419
Net Income 31,049
Diluted earnings per share 2.23

Source: goeasy Ltd.