MISSISSAUGA, ONTARIO -- (Marketwired) -- 02/15/17 -- goeasy Ltd. (TSX: GSY) ("goeasy" or the "Company"), a leading full service provider of goods and alternative financial services that improve the lives of everyday Canadians, today announced its results for the fourth quarter and year ended December 31, 2016. The Company also announced a 44% increase in its annual dividend from $0.50 to $0.72 per share.
Q4 2016 Results
Revenue for the fourth quarter of 2016 increased to $91.3 million, an increase of 10.2% from $82.9 million in the fourth quarter of 2015. On a comparative basis, revenue and operating income for the fourth quarter of 2016 were reduced by $1.0 million due to the transition of the Company's creditor life insurance product to a new provider. Total same store sales growth in the quarter was 12.6%. The growth was driven primarily by the expansion of easyfinancial and the related growth of its consumer loans receivable portfolio which reached $370.5 million by quarter's end, up 28.0% from December 31, 2015. Loan book growth in the fourth quarter of 2016 was $26.8 million.
Operating income for the quarter was $17.2 million, up $2.2 million or 14.6% compared to operating income of $15.0 million in the fourth quarter of 2015. Net income for the quarter was $8.3 million, up $0.8 million or 10.8% from $7.5 million in the fourth quarter of 2015. Diluted earnings per share for the quarter was $0.60, up $0.06 or 11.1% from $0.54 in the fourth quarter of 2015.
"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. "We were particularly pleased with the record level of originations, reduction in delinquencies and our customer satisfaction ratings in excess of 95%. Customer demand remains strong as our new risk-adjusted pricing product and merchant financing programs reach an expanding audience between traditional banks and expensive payday lenders."
Other highlights for the fourth quarter of 2016 include:
easyfinancial
-- Revenue increased by 24.9% to $56.0 million from $44.8 million in the
fourth quarter of 2015.
-- Gross loan originations increased by 6.0% to $117.5 million from $110.9
million in the fourth quarter of 2015.
-- Delinquency rates at the end of the quarter reduced to 5.8% from 7.4% at
the end of 2015.
-- Net charge offs as a percentage of the average gross consumer loans
receivable on an annualized basis were 15.8%, within the targeted range
of 14% to 16%.
-- Operating margin for the fourth quarter of 2016 improved from 32.9% to
34.9%.
-- Cash generated from easyfinancial customer payments was $94.0 million in
the fourth quarter of 2016 compared to $76.6 million in the fourth
quarter of 2015.
easyhome
-- Same store revenue declined 1.9%.
-- The operating margin for easyhome for the fourth quarter of 2016 was
15.6% as it continued to improve sequentially from the third quarter of
2016.
Overall
-- 27th consecutive quarter of same store sales growth.
-- Operating margin was 18.8% for the quarter, up from the operating margin
of 18.1% in the fourth quarter of 2015.
-- Operating income for the quarter was negatively impacted by $1.0 million
and diluted earnings per share was reduced by $0.05 per share due to the
transition of the Company's creditor life insurance product to a new
provider.
-- The Company's return on equity was 17.4% in the current quarter.
Full Year Results
For the full year, goeasy recorded revenues of $347.5 million, up 14.2% compared with $304.3 million in 2015.
Operating income for 2016 was $62.5 million, while net income was $31.0 million and diluted earnings per share was $2.23. 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 operating income for the year was $65.9 million compared with $48.1 million in 2015, an increase of $17.8 million or 37.1%; adjusted net income was $33.2 million compared with $23.7 million in 2015, an increase of $9.4 million or 39.7%; and adjusted diluted earnings per share was $2.38 compared with $1.69 for 2015, an increase of $0.69 or 40.8%.
In addition to the strong financial performance during 2016, the Company also made significant progress on its strategic initiatives:
-- easyfinancial introduced risk adjusted pricing, offering lower rate
products to its customers and helping them along their journey back to
bank financing.
-- easyfinancial increased its maximum loan size from $10,000 to $15,000
for eligible customers.
-- The Company further enhanced its indirect lending channel by launching
the industry's first single source point-of-sale loan application system
to provide financing for customers across the entire credit spectrum.
"2016 was a productive and record setting year," said Mr. Ingram. "Over the past 15 years, on a normalized basis, we have achieved compound annual growth rates of 11.7% for revenue, 22.0% for operating income and 19.3% for earnings per share. 2016 continued the Company's trend of 62 consecutive quarters of positive net income and 27 quarters of positive same store sales growth. As importantly, we have seen improvements to employee engagement, customer satisfaction and brand awareness. My sincere thanks to our entire team who continue to work tirelessly to meet and exceed the needs of all our customers who are underserviced by traditional financial organizations."
Balance Sheet and Liquidity
Total assets were $503.1 million as at December 30, 2016, an increase of 20.2% from $418.5 million as at December 31, 2015 and driven by the $81.1 million growth in the gross consumer loans receivable portfolio. As at December 31, 2016, the Company had $57.4 million in cash and 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 until the end of the third quarter of 2017.
Outlook and Corporate Strategy
Throughout 2016, the Company completed an in-depth strategic review, gaining a greater understanding of available opportunities within the non-prime market for consumer lending in Canada. The resulting insights confirmed that the Company's corporate strategy continues to be appropriate and will guide the tactics employed by the Company to achieve its goals in the future.
goeasy's corporate strategy is unchanged from the prior years. Its strategic imperatives will be to i) evolve its delivery channels, ii) expand the easyfinancial footprint, iii) enhance its product offering and iv) execute with efficiency and effectiveness.
Over the past several years, the Company made significant investments in its processes, systems and infrastructure to support long-term sustainable growth. Although these investments will continue, the Company is now well placed to take advantage of positive market conditions and accelerate its rate of growth. Specific initiatives in 2017 to achieve this are as follows:
-- In addition to its easyfinancial branch network, the Company also
operates 176 easyhome stores. To provide greater access to a physical
location to its lending customers, the Company intends to begin offering
consumer lending products through its easyhome stores.
-- Since its launch in 2006 until 2016, the Company has focused on
developing its easyfinancial business across Canada except for the
province of Quebec. The Company believes that there is significant
demand for non-prime lending in Quebec and so it intends to expand the
easyfinancial footprint into Quebec.
-- The Company believes that a substantial opportunity exists to expand its
product range by introducing a secured loan product.
-- It is the Company's mission to help customers improve their credit risk
profile and "graduate" the customer back to lower cost prime lending.
The Company also believes that significant demand exists for non-prime
lending products that carry a lower interest rate on average than the
Company has historically charged. In response to these factors, the
Company intends to further expand its use of risk-adjusted pricing.
-- The Company will continue to evolve its indirect lending platform,
taking advantage of developments in technology to further streamline and
expedite the in-store application process.
The successful implementation of these specific initiatives is dependent upon additional financing being secured. Although the details of such additional financing have not yet been determined, the Company is confident that it will continue to have access to additional and appropriate capital to fund the growth of its business into the future. There is no certainty that these long-term sources of additional capital will be available or at terms favourable to the Company.
In conjunction with the specific initiatives the Company has established the following targets for 2017:
-- open 20 - 30 new easyfinancial locations
-- easyfinancial gross consumer loans receivable portfolio of $475 - $500
million by year end
-- easyfinancial total revenue yield (including revenue generated on the
sale of optional ancillary products) of 60 - 62%
-- easyfinancial operating margins of 35 - 37%
-- total revenue growth of 10 - 12%
The Company has also established a number of three-year targets that it is working to achieve by the end of 2019.
-- 260 easyfinancial locations operating
-- easyfinancial gross consumer loans receivable portfolio of $775 - $800
million
-- easyfinancial total revenue yield (including revenue generated on the
sale of optional ancillary products) of 49 - 51%
-- easyfinancial margins of 40%+
Normal Course Issuer Bid and Dividend Increase
On June 22, 2016, the Company renewed its Normal Course Issuer Bid (the "NCIB") allowing it to purchase for cancellation up to 986,105 Common Shares over the following 12 months which commenced on June 27, 2016. During the year ended December 31, 2016, the Company repurchased and cancelled 435,800 of its common shares at an average price of $18.21 per share. The Company intends to continue purchasing shares for cancellation under this NCIB.
Based on its 2016 earning 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 $0.50 per share to $0.72 per share, an increase of 44%. As such, the Board of Directors has approved a quarterly dividend of $0.18 per share payable on April 13, 2017 to the holders of common shares of record as at the close of business on March 31, 2017.
Forward-Looking Statements
This press release includes forward-looking statements about goeasy, including, but not limited to, its business operations, strategy and expected financial performance and condition. Forward-looking statements include, but are not limited to, those with respect to 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 December 31, 2016 Management Discussion and Analysis 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
As at December 31, 2016, the Company operated 208 easyfinancial locations (including 46 kiosks located within easyhome stores) and 176 easyhome stores (including 28 franchises and 2 consolidated franchise locations).
goeasy Ltd. is a leading full service provider of goods and alternative financial services that improve the lives of everyday Canadians. 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 of over 200 easyfinancial and 175 easyhome locations across Canada and through its online and mobile eCommerce enabled platforms.
goeasy Ltd. is listed on the TSX under the symbol 'GSY'. For more information, visit www.goeasy.com.
goeasy Ltd.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(expressed in thousands of Canadian dollars)
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As At As At
December 31, December 31,
2016 2015
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ASSETS
Cash 24,928 11,389
Amounts receivable 7,857 9,480
Prepaid expenses 1,909 2,446
Consumer loans receivable 354,499 274,481
Lease assets 55,288 60,753
Property and equipment 16,103 18,689
Deferred tax assets 6,856 5,913
Intangible assets 14,312 14,041
Goodwill 21,310 21,310
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TOTAL ASSETS 503,062 418,502
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities 31,879 22,196
Income taxes payable 2,874 700
Dividends payable 1,666 1,341
Deferred lease inducements 1,506 1,922
Unearned revenue 5,204 3,982
Provisions 608 582
Term loan 263,294 211,720
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TOTAL LIABILITIES 307,031 242,443
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Shareholders' equity
Share capital 82,598 81,725
Contributed surplus 9,943 9,852
Accumulated other comprehensive income 880 969
Retained earnings 102,610 83,513
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TOTAL SHAREHOLDERS' EQUITY 196,031 176,059
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 503,062 418,502
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goeasy Ltd.
CONSOLIDATED STATEMENTS OF INCOME
(expressed in thousands of Canadian dollars except earnings per share)
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Three Months Ended Year Ended
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December 31, December 31, December 31, December 31,
2016 2015 2016 2015
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REVENUE
Interest income 37,477 29,534 138,782 100,814
Lease revenue 33,832 36,563 137,849 146,692
Other 19,985 16,778 70,874 56,767
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91,294 82,875 347,505 304,273
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Other income - - 3,000 -
EXPENSES BEFORE
DEPRECIATION AND
AMORTIZATION
Salaries and benefits 23,014 22,097 91,557 85,658
Stock-based
compensation 1,190 1,149 4,323 4,753
Advertising and
promotion 4,242 2,620 13,457 10,689
Bad debts 15,936 13,473 55,668 41,933
Occupancy 8,324 7,961 32,867 31,545
Other expenses 7,996 6,513 29,398 25,547
Transaction advisory
costs - - 6,382 -
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60,702 53,813 233,652 200,125
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DEPRECIATION AND
AMORTIZATION
Depreciation of lease
assets 10,789 11,901 44,230 47,407
Depreciation of
property and
equipment 1,384 1,580 5,606 5,545
Amortization of
intangible assets 1,127 674 4,205 3,138
Impairment, net 117 (84) 296 6
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13,417 14,071 54,337 56,096
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Total operating
expenses 74,119 67,884 287,989 256,221
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Operating income 17,175 14,991 62,516 48,052
Finance costs 5,702 4,605 21,048 15,334
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Income before income
taxes 11,473 10,386 41,468 32,718
Income tax expense
(recovery)
Current 2,045 3,159 11,362 8,157
Deferred 1,086 (305) (943) 833
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3,131 2,854 10,419 8,990
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Net income 8,342 7,532 31,049 23,728
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Basic earnings per
share 0.62 0.56 2.29 1.75
Diluted earnings per
share 0.60 0.54 2.23 1.69
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Segmented Reporting
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Three Months Ended December 31, 2016
---------------------------------------------
($ in 000's except earnings per
share) easyfinancial easyhome Corporate Total
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Revenue 55,999 35,295 - 91,294
Total operating expenses before
depreciation and amortization 34,772 18,244 7,686 60,702
Depreciation and amortization 1,675 11,558 184 13,417
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Operating income (loss) 19,552 5,493 (7,870) 17,175
Finance costs 5,702
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Income before income taxes 11,473
Income taxes 3,131
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Net Income for the period 8,342
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Diluted earnings per share 0.60
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Three Months Ended December 31, 2015
---------------------------------------------
($ in 000's except earnings per
share) easyfinancial easyhome Corporate Total
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Revenue 44,826 38,049 - 82,875
Total operating expenses before
depreciation and amortization 28,616 18,520 6,677 53,813
Depreciation and amortization 1,449 12,489 133 14,071
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Operating income (loss) 14,761 7,040 (6,810) 14,991
Finance costs 4,605
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Income before income taxes 10,386
Income taxes 2,854
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Net Income for the period 7,532
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Diluted earnings per share 0.54
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Year Ended December 31, 2016
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($ in 000's except earnings per
share) easyfinancial easyhome Corporate Total
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Revenue 204,076 143,429 - 347,505
Other Income - - 3,000 3,000
Total operating expenses before
depreciation and amortization
and transaction advisory costs 122,843 74,708 29,719 227,270
Transaction advisory costs - - 6,382 6,382
Depreciation and amortization 6,479 47,184 674 54,337
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Operating income (loss) 74,754 21,537 (33,775) 62,516
Finance costs 21,048
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Income before income taxes 41,468
Income taxes 10,419
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Net Income for the period 31,049
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Diluted earnings per share 2.23
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Year Ended December 31, 2015
---------------------------------------------
($ in 000's except earnings per
share) easyfinancial easyhome Corporate Total
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Revenue 151,668 152,605 - 304,273
Total operating expenses before
depreciation and amortization 99,607 77,724 22,794 200,125
Depreciation and amortization 5,289 50,214 593 56,096
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Operating income (loss) 46,772 24,667 (23,387) 48,052
Finance costs 15,334
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Income before income taxes 32,718
Income taxes 8,990
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Net Income for the period 23,728
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Diluted earnings per share 1.69
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Contacts:
goeasy Ltd.
David Ingram
President and Chief Executive Officer
(905) 272-2788
goeasy Ltd.
Steve Goertz
Executive Vice President and Chief Financial Officer
(905) 272-2788
www.goeasy.com
