goeasy Ltd. (TSX: GSY), (“goeasy” or the “Company”), one of Canada’s leading non-prime consumer lenders, today reported results for the second quarter ended June 30, 2023.

Second Quarter Results

During the quarter, the Company produced record loan originations of $667 million, up 6% compared to $628 million originated in the second quarter of 2022. The increase in lending was driven by strong demand, leading to a record volume of applications for credit, which were up 25% over the prior year. The Company experienced strong performance across its entire range of products and acquisition channels, including unsecured lending, point-of-sale lending, and automotive financing.

The increased loan originations led to growth in the loan portfolio of $210 million, above the Company’s forecasted range of between $175 million and $200 million. At quarter end, the consumer loan portfolio was a record $3.20 billion, up 35% from $2.37 billion in the second quarter of 2022. The growth in consumer loans led to an increase in revenue, which was a record $303 million in the quarter, up 20% from $252 million in the second quarter of last year.

During the quarter, the Company continued to experience stable credit and payment performance. The net charge off rate in the second quarter was 9.1%, in line with the Company’s target range of between 8% and 10% on an annualized basis, and 20 bps lower than 9.3% in the second quarter of 2022. The stable credit performance reflects the improved product mix of the loan portfolio and the proactive credit and underwriting enhancements made throughout 2021 and 2022. The Company’s allowance for future credit losses reduced slightly to 7.42%, compared to 7.48% in the first quarter.

Operating income for the second quarter of 2023 was a record $111 million, up 30% from $85 million in the second quarter of 2022. Operating margin for the second quarter was 36.5%, up from 33.8% in the same period last year.

After adjustments, including unusual items and non-recurring expenses, the Company reported record adjusted operating income2 of $114 million, an increase of 29% compared to $89 million in the second quarter of 2022. Adjusted operating margin1 for the second quarter was 37.7%, up from 35.3% in the same period in 2022. The efficiency ratio1 for the second quarter of 2023 was 31.2%, an improvement of 300 bps from 34.2% in the second quarter of 2022, reflecting an increase in operating leverage.

Net income in the second quarter was $55.6 million, up 45% from $38.3 million in the same period of 2022, which resulted in diluted earnings per share of $3.26, up 41% from the $2.32 reported in the second quarter of 2022. After adjusting for non-recurring and unusual items on an after-tax basis in both periods, adjusted net income2 was a record $56.0 million, up 20% from $46.8 million in the second quarter of 2022. Adjusted diluted earnings per share1 was a record $3.28, up 16% from $2.83 in the second quarter of 2022. Return on equity during the quarter was 24.0%, compared to 20.2% in the second quarter of 2022. Adjusted return on equity1 was 24.2% in the quarter, compared to 24.7% in the same period of 2022.

“The second quarter continued to highlight the growth potential of our business model and the strength of our credit performance,” said Jason Mullins, goeasy’s President and Chief Executive Officer, “As market conditions present a challenging environment for many companies within our industry, those with scale are experiencing a net benefit from that disruption. During the quarter we experienced favorable competitive conditions and received a record number of applications for credit, at nearly half a million, which led to a record number of new customers, at nearly 42,000. We now expect to achieve the high end of our loan book forecast for 2023 of $3.6 billion. Furthermore, we continue to produce stable credit performance, with the net charge off rate improving year-over-year by 20 basis points to 9.1%, while our focus on operating leverage resulted in an improvement to our efficiency ratio by 300 basis points compared to last year. All combined, adjusted diluted earnings per share rose 16% in the quarter to a record $3.28,” Mr. Mullins concluded.

Other Key Second Quarter Highlights

easyfinancial

  • Record revenue of $265 million, up 24%
  • 41% of the loan portfolio secured, up from 36%
  • Record volume of applications for credit, up 25%
  • Record new customer volume at 41,928
  • Record 71% of net loan advances1 in the quarter were issued to new customers, up from 65%
  • Average loan book per branch3 improved to a record $5.2 million, an increase of 22%
  • Weighted average interest rate3 on consumer loans of 30.1%, down from 31.7%
  • Record operating income of $125 million, up 31%
  • Operating margin of 47.4%, up from 44.6%

easyhome

  • Revenue of $38.2 million, up 2%
  • Consumer loan portfolio within easyhome stores increased to $96.6 million, up 25%
  • Financial revenue2 from consumer lending increased to $11.6 million, up 17% from $9.9 million
  • Operating income of $9.2 million, up 5%
  • Operating margin of 24.1%, up from 23.3%

Overall

  • 88th consecutive quarter of positive net income
  • 2023 marks the 19th consecutive year of paying dividends and the 9th consecutive year of a dividend increase
  • 53rd consecutive quarter of same store revenue growth
  • Total customers served over 1.3 million
  • Acquired and organically originated over $11.4 billion in loans
  • Adjusted return on equity1 of 24.2%, down slightly from 24.7%
  • Adjusted return on tangible common equity1 of 33.4%, down from 38.0%
  • Fully drawn weighted average cost of borrowing at 5.9%, up from 4.9%
  • Net debt to net capitalization4 of 72% on June 30, 2023, in line with the Company’s target leverage profile

Six Months Results

For the first six months of 2023, the Company funded $1.28 billion in loan originations, up 16% from $1.10 billion in 2022. The consumer loan receivable portfolio finished at $3.20 billion, up 35% from $2.37 billion as of June 30, 2022.

For the first six months of 2023, the Company produced record revenues of $590 million, up 22% compared to $484 million in the same period of 2022. Operating income for the period was a record $213 million compared with $165 million in the first six months of 2022, an increase of $47.6 million or 29%. Adjusted operating income2 for the first six months of 2023 was a record $221 million, 26% higher compared to $175 million in the same period of 2022. Efficiency ratio1 for the first six months of 2023 was 32.1%, an improvement of 280 bps from 34.9% in the same period of 2022.

Net income for the first six months of 2023 was $107 million and diluted earnings per share was $6.27, compared with $64.4 million or $3.86 per share. Adjusted net income2 for the first six months of 2023 was $109 million and adjusted diluted earnings per share1 was $6.39 compared with $92.6 million or $5.55 per share, increases of 18% and 15%, respectively. Reported return on equity was 23.6%, while adjusted return on equity1 was 24.0%, consistent with 24.1% in the same period of 2022.

Balance Sheet and Liquidity

Total assets were $3.68 billion as of June 30, 2023, an increase of 27% from $2.90 billion as of June 30, 2022, primarily driven by growth in the consumer loan portfolio.

During the quarter, the Company extended the maturity of its existing revolving securitization warehouse facility (“Securitization Facility”) from August 30, 2024 to October 31, 2025. The amendment to the $1.4 billion Securitization Facility incorporates key modifications including improved eligibility criteria for consumer loans, as well as pool concentration limits, resulting in increased funding capacity. The lending syndicate for the Securitization Facility continues to consist of Royal Bank of Canada, National Bank Financial Markets and Bank of Montreal, and the facility bears interest on advances payable at the rate of 1-month Canadian Dollar Offered Rate (“CDOR”) plus 195 bps. Based on the current 1-month CDOR rate of 5.37% as of August 4, 2023, the interest rate would be 7.32%. The Company continues utilizing 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.

During the quarter, the Company recognized net investment income of $2.3 million, due to fair value change in the Company’s strategic minority investment in Affirm Holdings Inc. (“Affirm”).

Free cash flow from operations before net growth in gross consumer loans receivable2 in the quarter was $76.5 million, up 34% from $56.9 million in the second quarter of 2022. Based on the cash on hand at the end of the quarter and the borrowing capacity under the Company’s existing revolving credit facilities, the Company had approximately $895 million in total funding capacity as of June 30, 2023. The Company remains confident that the capacity available under its existing funding facilities, and its ability to raise additional debt financing, is sufficient to fund its organic growth forecast.

At quarter-end, the Company’s weighted average cost of borrowing was 5.6%, and the fully drawn weighted average cost of borrowing was 5.9%. 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, 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 $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 $0.96 per share payable on October 13, 2023 to the holders of common shares of record as at the close of business on September 29, 2023.

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 and expected financial performance and condition. Forward-looking statements include, but are not limited to, statements with respect to forecasts for growth of the consumer loans receivable, annual revenue growth forecasts, strategic initiatives, new product offerings and new delivery channels, anticipated cost savings, planned capital expenditures, anticipated capital requirements and the Company’s ability to secure sufficient capital, liquidity of the Company, plans and references to future operations and results, critical accounting estimates, expected future yields and net charge off rates on loans, the estimated number of new locations to be opened, the dealer relationships, the size and characteristics of the Canadian non-prime lending market and the continued development of the type and size of competitors in the market. In certain cases, forward-looking 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 “expect”, “continue”, “anticipate”, “intend”, “aim”, “plan”, “believe”, “budget”, “estimate”, “forecast”, “foresee”, “target” 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. 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. Some important factors that could cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to, goeasy’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, offer 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, compete, 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. These and other factors could cause actual results to differ materially from our expectations expressed in the forward-looking statements, and further details and descriptions of these and other factors are disclosed in the Company’s Management’s Discussion and Analysis (“MD&A”), including under the section entitled “Risk Factors”.

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. is a Canadian company, headquartered in Mississauga, Ontario, that provides non-prime leasing and lending services through its easyhome, easyfinancial and LendCare brands. Supported by approximately 2,400 employees, the Company offers a wide variety of financial products and services including unsecured and secured instalment loans, merchant financing through a variety of verticals and lease-to-own merchandise. Customers can transact seamlessly through an omnichannel model that includes online and mobile platforms, over 400 locations across Canada, and point-of-sale financing offered in the retail, powersports, automotive, home improvement and healthcare verticals, through over 8,500 merchant partners across Canada. Throughout the Company’s history, it has acquired and organically served over 1.3 million Canadians and originated over $11.4 billion in loans.

Accredited by the Better Business Bureau, goeasy is the proud recipient of several awards in recognition of its exceptional culture and continued business growth including Waterstone Canada’s Most Admired Corporate Cultures, ranking on the 2022 Report on Business Women Lead Here executive gender diversity benchmark, placing on the Report on Business ranking of Canada’s Top Growing Companies, ranking on the TSX30, Greater Toronto Top Employers Award and has been certified as a Great Place to Work®. The Company is represented by a diverse group of team members from 78 nationalities who believe strongly in giving back to communities in which it operates. To date, goeasy has raised and donated over $4.9 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.

For more information about goeasy and our business units, visit www.goeasy.com, www.easyfinancial.com, www.lendcare.ca,  www.easyhome.ca.

For further information contact:

Jason MullinsPresident & Chief Executive Officer(905) 272-2788

Farhan Ali KhanSenior Vice President, Chief Corporate Development Officer(905) 272-2788

Notes:

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
  June 30, December 31,
  2023 2022
     
ASSETS    
Cash 74,503 62,654
Accounts receivable 26,249 25,697
Prepaid expenses 11,692 8,334
Income taxes recoverable - 2,323
Consumer loans receivable, net 3,014,883 2,627,357
Investments 61,617 57,304
Lease assets 46,022 48,437
Property and equipment, net 31,936 35,856
Derivative financial assets 36,702 49,444
Intangible assets, net 131,835 138,802
Right-of-use assets, net 64,210 65,758
Goodwill 180,923 180,923
TOTAL ASSETS 3,680,572 3,302,889
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Liabilities    
Revolving credit facility 273,477 148,646
Accounts payable and accrued liabilities 58,422 51,136
Income taxes payable 66 -
Dividends payable 15,876 14,965
Unearned revenue 29,637 28,661
Accrued interest 6,396 10,159
Deferred tax liabilities, net 20,859 24,692
Lease liabilities 72,969 74,328
Secured borrowings 113,731 105,792
Revolving securitization warehouse facilities 984,279 805,825
Derivative financial liabilities 6,783 -
Notes payable 1,144,775 1,168,997
TOTAL LIABILITIES 2,727,270 2,433,201
     
Shareholders' equity    
Share capital 423,608 419,046
Contributed surplus 19,382 21,499
Accumulated other comprehensive income 8,706 2,776
Retained earnings 501,606 426,367
TOTAL SHAREHOLDERS' EQUITY 953,302 869,688
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 3,680,572 3,302,889
     
     

goeasy Ltd.        
         
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME        
(Unaudited)        
(Expressed in thousands of Canadian dollars, except earnings per share)        
         
         
  Three Months Ended Six Months Ended
  June 30, June 30, June 30, June 30,
  2023 2022 2023 2022
         
REVENUE        
Interest income 213,563 169,311 414,991 326,135
Lease revenue 25,052 25,948 50,617 52,826
Commissions earned 57,532 51,343 111,448 95,201
Charges and fees 6,781 5,050 13,169 9,632
  302,928 251,652 590,225 483,794
         
OPERATING EXPENSES        
         
BAD DEBTS 84,634 67,936 160,530 122,085
         
OTHER OPERATING EXPENSES        
Salaries and benefits 50,546 43,908 101,709 85,872
Stock-based compensation 2,974 2,490 5,998 4,790
Advertising and promotion 8,992 9,383 16,239 18,893
Occupancy 6,396 6,184 13,040 12,563
Technology costs 6,459 5,460 13,748 10,700
Underwriting and collections 4,093 3,531 8,078 6,622
Other expenses 6,715 7,268 15,140 16,040
  86,175 78,224 173,952 155,480
         
DEPRECIATION AND AMORTIZATION        
Depreciation of lease assets 8,406 8,195 16,913 16,660
Amortization of intangible assets 5,482 4,915 10,791 10,128
Depreciation of right-of-use assets 5,271 4,971 10,517 9,840
Depreciation of property and equipment 2,309 2,228 4,804 4,453
  21,468 20,309 43,025 41,081
         
TOTAL OPERATING EXPENSES 192,277 166,469 377,507 318,646
         
OPERATING INCOME 110,651 85,183 212,718 165,148
         
OTHER INCOME (LOSS) 2,330 (6,819) 4,313 (24,344)
         
FINANCE COSTS (37,653) (24,445) (71,879) (47,924)
         
INCOME BEFORE INCOME TAXES 75,328 53,919 145,152 92,880
         
INCOME TAX EXPENSE (RECOVERY)        
Current 23,436 20,325 42,996 36,621
Deferred (3,658) (4,706) (4,830) (8,137)
  19,778 15,619 38,166 28,484
         
NET INCOME 55,550 38,300 106,986 64,396
         
BASIC EARNINGS PER SHARE 3.29 2.37 6.36 3.96
DILUTED EARNINGS PER SHARE 3.26 2.32 6.27 3.86
         

SEGMENT REPORTING        
(Expressed in thousands of Canadian dollars, except earnings per share)        
         
  Three Months Ended June 30, 2023
  easyfinancial easyhome Corporate Total
         
Revenue        
Interest income 204,912 8,651 -   213,563  
Lease revenue - 25,052 -   25,052  
Commissions earned 53,973 3,559 -   57,532  
Charges and fees 5,868 913 -   6,781  
  264,753 38,175 -   302,928  
         
Operating expenses        
Bad debts 81,181 3,453 -   84,634  
Other operating expenses 48,846 14,978 22,351   86,175  
Depreciation and amortization 9,305 10,544 1,619   21,468  
  139,332 28,975 23,970   192,277  
         
Operating income (loss) 125,421 9,200 (23,970 ) 110,651  
         
Other income       2,330  
         
Finance costs       (37,653 )
         
Income before income taxes       75,328  
         
Income taxes       19,778  
         
Net income       55,550  
         
Diluted earnings per share       3.26  
         
  Three Months Ended June 30, 2022
  easyfinancial easyhome Corporate Total
         
Revenue        
Interest income 162,140 7,171 -   169,311  
Lease revenue - 25,948 -   25,948  
Commissions earned 47,897 3,446 -   51,343  
Charges and fees 4,077 973 -   5,050  
  214,114 37,538 -   251,652  
         
Operating expenses        
Bad debts 65,021 2,915 -   67,936  
Other operating expenses 45,137 15,412 17,675   78,224  
Depreciation and amortization 8,374 10,473 1,462   20,309  
  118,532 28,800 19,137   166,469  
         
Operating income (loss) 95,582 8,738 (19,137 ) 85,183  
         
Other loss       (6,819 )
         
Finance costs       (24,445 )
         
Income before income taxes       53,919  
         
Income taxes       15,619  
         
Net income       38,300  
         
Diluted earnings per share       2.32  
         
         
  Six Months Ended June 30, 2023
  easyfinancial easyhome Corporate Total
         
Revenue        
Interest income 398,091 16,900 -   414,991  
Lease revenue - 50,617 -   50,617  
Commissions earned 104,357 7,091 -   111,448  
Charges and fees 11,282 1,887 -   13,169  
  513,730 76,495 -   590,225  
         
Operating expenses        
Bad debts 154,446 6,084 -   160,530  
Other operating expenses 96,624 30,826 46,502   173,952  
Depreciation and amortization 18,511 21,278 3,236   43,025  
  269,581 58,188 49,738   377,507  
         
Operating income (loss) 244,149 18,307 (49,738 ) 212,718  
         
Other income       4,313  
         
Finance costs       (71,879 )
         
Income before income taxes       145,152  
         
Income taxes       38,166  
         
Net income       106,986  
         
Diluted earnings per share       6.27  
         
  Six Months Ended June 30, 2022
  easyfinancial easyhome Corporate Total
         
Revenue        
Interest income 312,289 13,846 -   326,135  
Lease revenue - 52,826 -   52,826  
Commissions earned 88,754 6,447 -   95,201  
Charges and fees 7,681 1,951 -   9,632  
  408,724 75,070 -   483,794  
         
Operating expenses        
Bad debts 117,140 4,945 -   122,085  
Other operating expenses 88,670 30,830 35,980   155,480  
Depreciation and amortization 17,007 21,186 2,888   41,081  
  222,817 56,961 38,868   318,646  
         
Operating income (loss) 185,907 18,109 (38,868 ) 165,148  
         
Other loss       (24,344 )
         
Finance costs       (47,924 )
         
Income before income taxes       92,880  
         
Income taxes       28,484  
         
Net income       64,396  
         
Diluted earnings per share       3.86  

SUMMARY OF FINANCIAL RESULTS AND KEY PERFORMANCE INDICATORS        
(Expressed in thousands of Canadian dollars, except earnings per share and percentages)        
         
  Three Months Ended    
  June 30, June 30, Variance Variance
2023 2022 $ / bps % change
         
Summary Financial Results        
Revenue 302,928 251,652 51,276 20.4%
Bad debts 84,634 67,936 16,698 24.6%
Other operating expenses 86,175 78,224 7,951 10.2%
EBITDA1 126,043 90,478 35,565 39.3%
EBITDA margin1 41.6% 36.0% 560 bps 15.6%
Depreciation and amortization 21,468 20,309 1,159 5.7%
Operating income 110,651 85,183 25,468 29.9%
Operating margin 36.5% 33.8% 270 bps 8.0%
Other income (loss) 2,330 (6,819) 9,149 134.2%
Finance costs 37,653 24,445 13,208 54.0%
Effective income tax rate 26.3% 29.0% (270 bps) (9.3%)
Net income 55,550 38,300 17,250 45.0%
Diluted earnings per share 3.26 2.32 0.94 40.5%
Return on assets 6.2% 5.5% 70 bps 12.7%
Return on equity 24.0% 20.2% 380 bps 18.8%
Return on tangible common equity1 34.6% 33.0% 160 bps 4.8%
         
Adjusted Financial Results1        
Other operating expenses 94,440 86,137 8,303 9.6%
Efficiency ratio 31.2% 34.2% (300 bps) (8.8%)
Operating income 114,067 88,740 25,327 28.5%
Operating margin 37.7% 35.3% 240 bps 6.8%
Net income 56,039 46,830 9,209 19.7%
Diluted earnings per share 3.28 2.83 0.45 15.9%
Return on assets 6.2% 6.7% (50 bps) (7.5%)
Return on equity 24.2% 24.7% (50 bps) (2.0%)
Return on tangible common equity 33.4% 38.0% (460 bps) (12.1%)
         
Key Performance Indicators        
         
Segment Financials        
easyfinancial revenue 264,753 214,114 50,639 23.7%
easyfinancial operating margin 47.4% 44.6% 280 bps 6.3%
easyhome revenue 38,175 37,538 637 1.7%
easyhome operating margin 24.1% 23.3% 80 bps 3.4%
         
Portfolio Indicators        
Gross consumer loans receivable 3,200,213 2,369,843 830,370 35.0%
Growth in consumer loans receivable 209,527 215,543 (6,016) (2.8%)
Gross loan originations 666,783 628,189 38,594 6.1%
Total yield on consumer loans (including ancillary products)1 35.4% 39.0% (360 bps) (9.2%)
Net charge offs as a percentage of average gross consumer loans receivable 9.1% 9.3% (20 bps) (2.2%)
Free cash flows from operations before net growth in gross consumer loans receivable1 76,473 56,918 19,555 34.4%
Potential monthly lease revenue1 7,558 7,634 (76) (1.0%)
1 EBITDA, adjusted other operating expenses, 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, efficiency ratio, adjusted operating margin, adjusted diluted earnings per share, adjusted return on equity, adjusted return on assets, reported and adjusted return on tangible common equity and total yield on consumer loans (including ancillary products) are non-IFRS ratios. Refer to “Non-IFRS Measures and Other Financial Measures” section in this press release.    
         
         
         
         
  Six Months Ended    
  June 30, June 30, Variance Variance
2023 2022 $ / bps % change
         
Summary Financial Results        
Revenue 590,225 483,794 106,431 22.0%
Bad debts 160,530 122,085 38,445 31.5%
Other operating expenses 173,952 155,480 18,472 11.9%
EBITDA1 243,143 165,225 77,918 47.2%
EBITDA margin1 41.2% 34.2% 700 bps 20.5%
Depreciation and amortization 43,025 41,081 1,944 4.7%
Operating income 212,718 165,148 47,570 28.8%
Operating margin 36.0% 34.1% 190 bps 5.6%
Other income (loss) 4,313 (24,344) 28,657 117.7%
Finance costs 71,879 47,924 23,955 50.0%
Effective income tax rate 26.3% 30.7% (440 bps) (14.3%)
Net income 106,986 64,396 42,590 66.1%
Diluted earnings per share 6.27 3.86 2.41 62.4%
Return on assets 6.1% 4.7% 140 bps 29.8%
Return on equity 23.6% 16.7% 690 bps 41.3%
Return on tangible common equity1 34.4% 27.6% 680 bps 24.6%
         
Adjusted Financial Results1        
Other operating expenses 189,622 169,038 20,584 12.2%
Efficiency ratio 32.1% 34.9% (280 bps) (8.0%)
Operating income 220,511 174,801 45,710 26.1%
Operating margin 37.4% 36.1% 130 bps 3.5%
Net income 108,972 92,609 16,363 17.7%
Diluted earnings per share 6.39 5.55 0.84 15.1%
Return on assets 6.2% 6.8% (60 bps) (8.8%)
Return on equity 24.0% 24.1% (10 bps) (0.4%)
Return on tangible common equity 33.6% 36.9% (330 bps) (8.9%)
         
Key Performance Indicators        
         
Segment Financials        
easyfinancial revenue 513,730 408,724 105,006 25.7%
easyfinancial operating margin 47.5% 45.5% 200 bps 4.4%
easyhome revenue 76,495 75,070 1,425 1.9%
easyhome operating margin 23.9% 24.1% (20 bps) (0.8%)
         
Portfolio Indicators        
Gross consumer loans receivable 3,200,213 2,369,843 830,370 35.0%
Growth in consumer loans receivable 405,519 339,504 66,015 19.4%
Gross loan originations 1,282,402 1,104,732 177,670 16.1%
Total yield on consumer loans (including ancillary products)1 35.5% 38.9% (340 bps) (8.7%)
Net charge offs as a percentage of average gross consumer loans receivable 9.0% 9.1% (10 bps) (0.9%)
Free cash flows from operations before net growth in gross consumer loans receivable1 158,574 96,846 61,728 63.7%
Potential monthly lease revenue1 7,558 7,634 (76) (1.0%)

 

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 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 32 of the Company’s MD&A for the three and six-month periods ended June 30, 2023. Items used to calculate adjusted net income and adjusted earnings per share for the three and six-month periods ended June 30, 2023 and 2022 include those indicated in the chart below:

  Three Months Ended Six Months Ended
($ in 000’s except earnings per share) June 30,2023 June 30,2022 June 30,2023 June 30,2022
         
Net income as stated 55,550   38,300   106,986   64,396  
Impact of adjusting items        
Other operating expenses        
Contract exit fee1 -   -   934   -  
Integration costs2 141   282   310   789  
Corporate development costs4 -   -   -   2,314  
Depreciation and amortization        
Amortization of acquired intangible assets3 3,275   3,275   6,550   6,550  
Other (income) loss5 (2,330 ) 6,819   (4,313 ) 24,344  
Total pre-tax impact of adjusting items 1,086   10,376   3,481   33,997  
Income tax impact of above adjusting items (597 ) (1,846 ) (1,494 ) (5,784 )
After-tax impact of adjusting items 489   8,530   1,987   28,213  
         
Adjusted net income 56,039   46,830   108,973   92,609  
         
Weighted average number of diluted shares outstanding 17,061   16,522   17,064   16,677  
         
Diluted earnings per share as stated 3.26   2.32   6.27   3.86  
Per share impact of adjusting items 0.02   0.51   0.12   1.69  
Adjusted diluted earnings per share 3.28   2.83   6.39   5.55  

Adjusting item related to a contract exit fee1 In the fourth quarter of 2022, the Company decided to terminate its agreement with a third-party technology provider that was contracted in 2020 to develop a new loan management system. After careful evaluation, the Company determined that the performance to date was unsatisfactory, and the additional investment necessary to complete the development was no longer economical, relative to the anticipated business value and other available options. In the first quarter of 2023, the Company settled its dispute with the third-party technology provider for $0.9 million, reported under Other operating expenses.Adjusting items related to the LendCare Acquisition2 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 as a result of the integration with LendCare. 3 Amortization of the $131 million intangible asset related to the acquisition of LendCare with an estimated useful life of ten years.Adjusting items related to the corporate development costs4 Corporate development costs in the first quarter of 2022 were related to the exploration of a strategic acquisition opportunity, which the Company elected to not pursue, including advisory, consulting and legal costs, reported under Other operating expenses.Adjusting item related to other income (loss)5 For the three and six-month periods ended June 30, 2023, net investment income was mainly due to fair value change on the Company’s investment in Affirm. For the three and six-month periods ended June 30, 2022, net investment losses were mainly due to fair value changes on the Company’s investments in Affirm and its related TRS. Adjusted Other Operating Expenses and Efficiency Ratio

Adjusted other operating expenses is a non-IFRS measure, while efficiency ratio is a non-IFRS ratio. Refer to “Key Performance Indicators and Non-IFRS Measures” section on page 32 of the Company’s MD&A for the three and six-month periods ended June 30, 2023. Items used to calculate adjusted other operating expenses and efficiency ratio for the three and six-month periods ended June 30, 2023 and 2022 include those indicated in the chart below:

  Three Months Ended Six Months Ended
($ in 000’s except earnings per share) June 30,2023 June 30,2022 June 30,2023 June 30,2022
         
Other operating expenses as stated 86,175 78,224 173,952 155,480
         
Impact of adjusting items1        
Other operating expenses        
Contract exit fee - - (934) -
Integration costs (141) (282) (310) (789)
Corporate development costs - - - (2,314)
Depreciation and amortization        
Depreciation of lease assets 8,406 8,195 16,913 16,660
Total impact of adjusting items 8,265 7,913 15,669 13,557
         
Adjusted other operating expenses 94,440 86,137 189,621 169,037
         
Total revenue 302,928 251,652 590,225 483,794
         
Efficiency ratio 31.2% 34.2% 32.1% 34.9%

1 For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.

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 32 of the Company’s MD&A for the three and six-month periods ended June 30, 2023. Items used to calculate adjusted operating income and adjusted operating margins for the three and six-month periods ended June 30, 2023 and 2022 include those indicated in the chart below:

  Three Months Ended
($ in 000’s except percentages) June 30,2023 June 30,2023 (adjusted) June 30,2022 June 30,2022 (adjusted)
         
easyfinancial        
Operating income 125,421 125,421 95,582 95,582
Divided by revenue 264,753 264,753 214,114 214,114
         
easyfinancial operating margin 47.4% 47.4% 44.6% 44.6%
         
easyhome        
Operating income 9,200 9,200 8,738 8,738
Divided by revenue 38,175 38,175 37,538 37,538
         
easyhome operating margin 24.1% 24.1% 23.3% 23.3%
         
Total        
Operating income 110,651 110,651 85,183 85,183
Other operating expenses1        
Integration costs - 141 - 282
Depreciation and amortization1        
Amortization of acquired intangible assets - 3,275 - 3,275
Adjusted operating income 110,651 114,067 85,183 88,740
         
Divided by revenue 302,928 302,928 251,652 251,652
         
Total operating margin 36.5% 37.7% 33.8% 35.3%

1 For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.

  Six Months Ended
($ in 000’s except percentages) June 30,2023 June 30,2023 (adjusted) June 30,2022 June 30,2022 (adjusted)
         
easyfinancial        
Operating income 244,149 244,149 185,907 185,907
Divided by revenue 513,730 513,730 408,724 408,724
         
easyfinancial operating margin 47.5% 47.5% 45.5% 45.5%
         
easyhome        
Operating income 18,307 18,307 18,109 18,109
Divided by revenue 76,495 76,495 75,070 75,070
         
easyhome operating margin 23.9% 23.9% 24.1% 24.1%
         
Total        
Operating income 212,718 212,718 165,148 165,148
Other operating expenses1        
Contract exit fee - 934 - -
Integration costs - 310 - 789
Corporate development costs - - - 2,314
Depreciation and amortization1        
Amortization of acquired intangible assets - 6,550 - 6,550
Adjusted operating income 212,718 220,512 165,148 174,801
         
Divided by revenue 590,225 590,225 483,794 483,794
         
Total operating margin 36.0% 37.4% 34.1% 36.1%

1 For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.

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 PerformanceIndicators and Non-IFRS Measures” section on page 32 of the Company’s MD&A for the three and six-month periods ended June 30, 2023. Items used to calculate EBITDA and EBITDA margin for the three and six-month periods ended June 30, 2023 and 2022 include those indicated in the chart below:

  Three Months Ended Six Months Ended
($in 000’s except percentages) June 30,2023 June 30,2022 June 30,2023 June 30,2022
         
Net income as stated 55,550   38,300   106,986   64,396  
         
Finance cost 37,653   24,445   71,879   47,924  
Income tax expense 19,778   15,619   38,166   28,484  
Depreciation and amortization 21,468   20,309   43,025   41,081  
Depreciation of lease assets (8,406 ) (8,195 ) (16,913 ) (16,660 )
EBITDA 126,043   90,478   243,143   165,225  
         
Divided by revenue 302,928   251,652   590,225   483,794  
         
EBITDA margin 41.6 % 36.0 % 41.2 % 34.2 %

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 32 of the Company’s MD&A for the three and six-month periods ended June 30, 2023. Items used to calculate free cash flow from operations before net growth in gross consumer loans receivable for the three and six-month periods ended June 30, 2023 and 2022 include those indicated in the chart below:

  Three Months Ended Six Months Ended
  June 30,2023 June 30,2022 June 30,2023 June 30,2022
         
Cash used in operating activities (133,054 ) (158,625 ) (246,945 ) (242,658 )
         
Net growth in gross consumer loans receivable during the period 209,527   215,543   405,519   339,504  
         
Free cash flows from operations before net growth in gross consumer loans receivable 76,473   56,918   158,574   96,846  

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 32 of the Company’s MD&A for the three and six-month periods ended June 30, 2023. Items used to calculate adjusted return on assets for the three and six-month periods ended June 30, 2023 and 2022 include those indicated in the chart below:

  Three Months Ended
($in 000’s except percentages) June 30,2023 June 30,2023 (adjusted) June 30,2022 June 30,2022 (adjusted)
         
Net income as stated 55,550 55,550 38,300 38,300
After-tax impact of adjusting items1 - 489 - 8,530
Adjusted net income 55,550 56,039 38,300 46,830
         
Multiplied by number of periods in a year X 4 X 4 X 4 X 4
         
Divided by average total assets for the period 3,587,282 3,587,282 2,792,034 2,792,034
         
Return on assets 6.2% 6.2% 5.5% 6.7%

1 For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.

  Six Months Ended
($in 000’s except percentages) June 30,2023 June 30,2023 (adjusted) June 30,2022 June 30,2022 (adjusted)
         
Net income as stated 106,986 106,986 64,396 64,396
After-tax impact of adjusting items1 - 1,987 - 28,213
Adjusted net income 106,986 108,973 64,396 92,609
         
Multiplied by number of periods in a year X 4/2 X 4/2 X 4/2 X 4/2
         
Divided by average total assets for the period 3,492,484 3,492,484 2,726,740 2,726,740
         
Return on assets 6.1% 6.2% 4.7% 6.8%

1 For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.

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 32 of the Company’s MD&A for the three and six-month periods ended June 30, 2023. Items used to calculate adjusted return on equity for the three and six-month periods ended June 30, 2023 and 2022 include those indicated in the chart below:

  Three Months Ended
($in 000’s except percentages) June 30,2023 June 30,2023 (adjusted) June 30,2022 June 30,2022(adjusted)
         
Net income as stated 55,550 55,550 38,300 38,300
After-tax impact of adjusting items1 - 489 - 8,530
Adjusted net income 55,550 56,039 38,300 46,830
         
Multiplied by number of periods in a year X 4 X 4 X 4 X 4
         
Divided by average shareholders’ equity for the period 927,703 927,703 759,896 759,896
         
Return on equity 24.0% 24.2% 20.2% 24.7%

1 For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.

  Six Months Ended
($in 000’s except percentages) June 30,2023 June 30,2023 (adjusted) June 30,2022 June 30,2022 (adjusted)
         
Net income as stated 106,986 106,986 64,396 64,396
After-tax impact of adjusting items1 - 1,987 - 28,213
Adjusted net income 106,986 108,973 64,396 92,609
         
Multiplied by number of periods in a year X 4/2 X 4/2 X 4/2 X 4/2
         
Divided by average shareholders’ equity for the period 908,364 908,364 769,902 769,902
         
Return on equity 23.6% 24.0% 16.7% 24.1%

1 For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.

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 32 of the Company’s MD&A for the three and six-month periods ended June 30, 2023. Items used to calculate reported and adjusted return on tangible common equity for the three and six-month periods ended June 30, 2023 and 2022 include those indicated in the chart below:

  Three Months Ended
($ in 000’s except percentages) June 30,2023 June 30,2023 (adjusted) June 30,2022 June 30,2022 (adjusted)
         
Net income as stated 55,550   55,550   38,300   38,300  
Amortization of acquired intangible assets 3,275   3,275   3,275   3,275  
Income tax impact of the above item (868 ) (868 ) (868 ) (868 )
Net income before amortization of acquired intangible assets, net of income tax 57,957   57,957   40,707   40,707  
         
Impact of adjusting items1        
Other operating expenses        
Integration costs -   141   -   282  
Other loss (income) -   (2,330 ) -   6,819  
Total pre-tax impact of adjusting items -   (2,189 ) -   7,101  
Income tax impact of above adjusting items -   271   -   (978 )
After-tax impact of adjusting items -   (1,918 ) -   6,123  
         
Adjusted net income 57,957   56,039   40,707   46,830  
         
Multiplied by number of periods in a year X 4 X 4 X 4 X 4
         
Average shareholders’ equity 927,703   927,703   759,896   759,896  
Average goodwill (180,923 ) (180,923 ) (180,923 ) (180,923 )
Average acquired intangible assets2 (104,254 ) (104,254 ) (117,354 ) (117,354 )
Average related deferred tax liabilities 27,627   27,627   31,099   31,099  
Divided by average tangible common equity 670,153   670,153   492,718   492,718  
         
Return on tangible common equity 34.6 % 33.4 % 33.0 % 38.0 %

1 For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.2 Excludes intangible assets relating to software.

  Six Months Ended
($ in 000’s except percentages) June 30,2023   June 30,2023 (adjusted)   June 30,2022   June 30,2022 (adjusted)  
                 
Net income as stated 106,986   106,986   64,396   64,396  
Amortization of acquired intangible assets 6,550   6,550   6,550   6,550  
Income tax impact of the above item (1,736 ) (1,736 ) (1,736 ) (1,736 )
Net income before amortization of acquired intangible assets, net of income tax 111,800   111,800   69,210   69,210  
                 
Impact of adjusting items1                
Other operating expenses                
Contract exit fee -   934   -   -  
Integration costs -   310   -   789  
Corporate development costs -   -   -   2,314  
Other (income) loss -   (4,313 ) -   24,344  
Total pre-tax impact of adjusting items -   (3,069 ) -   27,447  
Income tax impact of above adjusting items -   242   -   (4,048 )
After-tax impact of adjusting items -   (2,827 ) -   23,399  
                 
Adjusted net income 111,800   108,973   69,210   92,609  
                 
Multiplied by number of periods in a year X 4/2   X 4/2   X 4/2   X 4/2  
                 
Average shareholders’ equity 908,364   908,364   769,902   769,902  
Average goodwill (180,923 ) (180,923 ) (180,923 ) (180,923 )
Average acquired intangible assets2 (105,892)   (105,892 ) (118,992 ) (118,992 )
Average related deferred tax liabilities 28,061   28,061   31,533   31,533  
Divided by average tangible common equity 649,610   649,610   501,520   501,520  
                 
Return on tangible common equity 34.4 % 33.6 % 27.6 % 36.9 %

1 For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.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 June 30, 2023 and 2022 include those indicated in the chart below:

($in 000’s) Three Months Ended
June 30,2023 June 30,2022
Total company revenue 302,928 251,652
Less: easyfinancial revenue (264,753) (214,114)
Less: leasing revenue (26,616) (27,641)
easyhome financial revenue 11,559 9,897

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 21 of the Company’s MD&A for the three and six-month periods ended June 30, 2023. Items used to calculate total yield on consumer loans as a percentage of average gross consumer loans receivable for the three and six-month periods ended June 30, 2023 and 2022 include those indicated in the chart below:

  Three Months Ended Six Months Ended
($in 000’s except percentages) June 30,2023 June 30,2022 June 30,2023 June 30,2022
         
Total Company revenue 302,928 251,652 590,225 483,794
Less: Leasing revenue (26,616) (27,641) (53,764) (56,207)
Financial revenue 276,312 224,011 536,461 427,587
         
Multiplied by number of periods in a year X 4 X 4 X 4/2 X 4/2
         
Divided by average gross consumer loans receivable 3,125,896 2,295,232 3,025,402 2,198,495
         
Total yield on consumer loans as a percentage of average gross consumer loans receivable (annualized) 35.4% 39.0% 35.5% 38.9%

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 21 of the Company’s MD&A for the three and six-month periods ended June 30, 2023. The percentage of net loan advances to new customers is a non-IFRS ratio. It is calculated as loan originations to new customers divided by the net principal written. The Company uses percentage of net loan advances to new customers, among other measures, to assess the operating performance of its lending business. Items used to calculate the percentage of net loan advances to new customers for the three and six-month periods ended June 30, 2023 and 2022 include those indicated in the chart below:

  Three Months Ended Six Months Ended
($ in 000’s) June 30,2023 June 30,2022 June 30,2023 June 30,2022
         
Gross loan originations 666,783 628,189 1,282,402 1,104,732
         
Loan originations to new customers 348,695 301,184 651,238 518,878
         
Loan originations to existing customers 318,088 327,005 631,164 585,854
Less: Proceeds applied to repay existing loans (174,045) (162,880) (336,999) (296,917)
Net advance to existing customers 144,043 164,125 294,165 288,937
         
Net principal written 492,738 465,309 945,403 807,815
Percentage net advances to new customers 70.8% 64.7% 68.9% 64.2%

Net Debt to Net Capitalization

Net debt to net capitalization is a capital management measure. Refer to “Financial Condition” section on page 43 of the Company’s MD&A for the three and six-month periods ended June 30, 2023.

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 the 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.

 

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