GSY Goeasy Ltd

Loan Originations of $827 million, up 24% from $667 million
Loan Growth of $286 million, up 37% from $210 million
Loan Portfolio of $4.14 billion, up 29% from $3.20 billion
Revenue of $378 million, up 25% from $303 million
Diluted EPS of $3.76; Adjusted Diluted EPS¹ of $4.10, up 25% from $3.28

MISSISSAUGA, ON, Aug. 8, 2024 /CNW/ - goeasy Ltd. (TSX: GSY), ("goeasy" or the "Company"), one of Canada's leading consumer lenders focused on delivering a full suite of financial services to Canadians with non-prime credit, today reported results for the second quarter ended June 30, 2024.

Second Quarter Results

During the quarter, the Company generated a record $827 million in loan originations, up 24% compared to $667 million produced in the second quarter of 2023. The increase in lending was driven by a record volume of applications for credit, which were up 34% over the prior year. The Company experienced strong performance across several product and acquisition channels, including unsecured lending, home equity lending, point-of-sale and automotive financing.

The increase in loan originations led to record growth in the loan portfolio of $286 million, which was up 37% from $210 million of loan book growth in the second quarter of 2023. At quarter end, the consumer loan portfolio was $4.14 billion, up 29% from $3.20 billion in the second quarter of 2023. The growth in consumer loans led to an increase in revenue, which was a record $378 million in the quarter, up 25% from $303 million in the second quarter of last year. 

During the quarter, the Company continued to experience stable credit and payment performance. The annualized net charge off rate was 9.3%, in line with the Company's target range of between 8% and 10%. The Company's allowance for future credit losses decreased slightly to 7.31%, compared to 7.38% in the first quarter.

Operating income for the second quarter of 2024 was a record $147 million, up 33% from $111 million in the second quarter of 2023. Operating margin for the first quarter was 39.0%, up from 36.5% in the same period last year. After adjusting for unusual and non-recurring items, the Company reported record adjusted operating income² of $153 million, an increase of 34% compared to $114 million in the second quarter of 2023. Adjusted operating margin¹ for the second quarter was 40.5%, up from 37.7% in the same period in 2023. The efficiency ratio¹ for the second quarter of 2024 was a record 26.9%, an improvement of 430 bps from 31.2% in the second quarter of 2023, reflecting an increase in operating leverage.

Net income in the second quarter was $65.4 million, up 18% from $55.6 million in the same period of 2023, which resulted in diluted earnings per share of $3.76, up 15% from the $3.26 reported in the second quarter of 2023. After adjustments, adjusted net income² was a record $71.3 million, up 27% from $56.0 million in the second quarter of 2023. Adjusted diluted earnings per share¹ was a record $4.10, up 25% from $3.28 in the second quarter of 2023. Return on equity during the quarter was 23.3%, compared to 24.0% in the second quarter of 2023. Adjusted return on equity¹ was 25.4% in the quarter, an increase of 120 bps from 24.2% in the same period of 2023.

"During the quarter we were proud to serve a record number of new customers at over 48,000, while producing record loan growth of $286 million, highlighting the critical role we play in providing everyday Canadians with access to credit," said Jason Mullins, goeasy's President and Chief Executive Officer, "With the accelerated growth experienced in the first half of the year, we have revised our three year forecast, including increasing our loan growth, revenues and operating margins," Mr. Mullins continued, "We were also pleased to secure an additional $450 million of funding in the quarter, strengthening our balance sheet and lifting our funding capacity to over $1.6 billion."

Other Key Second Quarter Highlights

easyfinancial

• Record revenue of $340 million, up 28%
• 44% of the loan portfolio secured, up from 41%
• Record volume of applications for credit, up 34%
• Record new customer volume at 48,200, up 15%
• 71% of net loan advances¹ in the quarter were issued to new customers, consistent with 71%
• Record volume of originations in automotive financing, up 79%
• Average loan book per branch³ improved to a record $6.2 million, an increase of 19%
• Weighted average interest rate³ on consumer loans of 29.5%, down slightly from 30.1%
• Record operating income of $165 million, up 31%

easyhome

• Revenue of $38.3 million, consistent with $38.2 million
• Consumer loan portfolio within easyhome stores increased to $109.9 million, up 14%
• Financial revenue² from consumer lending increased to $12.9 million, up 11%
• Record operating income of $11.9 million, up 29%

Overall

• 92^nd consecutive quarter of positive net income
• 2024 marks the 20^th consecutive year of paying dividends and the 10^th consecutive year of a dividend increase
• 57^th consecutive quarter of same store revenue growth
• Total customers served over 1.4 million
• Acquired and organically originated over $14.3 billion in loans
• Adjusted return on equity¹ of 25.4%, up from 24.2%
• Fully drawn weighted average cost of borrowing at 6.8%, up from 5.9%
• Net debt to net capitalization⁴ of 73% on June 30, 2024, in line with the Company's target leverage profile

Six Months Results

For the first six months of 2024, the Company funded $1.51 billion in loan originations, up 18% from $1.28 billion in 2023. The consumer loan receivable portfolio finished at $4.14 billion, up 29% from $3.20 billion as of June 30, 2023.

For the first six months of 2024, the Company produced record revenues of $735 million, up 25% compared to $590 million in the same period of 2023. Operating income for the period was a record $285 million compared with $213 million in the first six months of 2023, an increase of $72 million or 34%. Adjusted operating income² for the first six months of 2024 was a record $297 million, 35% higher compared to $221 million in the same period of 2023. Efficiency ratio¹ for the first six months of 2024 was 27.1%, an improvement of 500 bps from 32.1% in the same period of 2023.

Net income for the first six months of 2024 was $124 million and diluted earnings per share was $7.17, compared with $107 million or $6.27 per share. Adjusted net income² for the first six months of 2024 was $138 million and adjusted diluted earnings per share¹ was $7.94 compared with $109 million or $6.39 per share, increases of 26% and 24%, respectively. Reported return on equity was 22.6%, while adjusted return on equity¹ was 25.0%, up from 24.0% in the same period of 2023.

Balance Sheet and Liquidity

Total assets were $4.63 billion as of June 30, 2024, an increase of 26% from $3.68 billion as of June 30, 2023, primarily driven by growth in the consumer loan portfolio.

Subsequent to quarter-end, the Company implemented several enhancements to its balance sheet, including increasing its existing senior secured revolving credit facility (the "Credit Facility") by $180 million to $550 million and issuing US$200 million aggregate principal amount of senior unsecured notes.

The amendment to the Credit Facility incorporates key modifications including improved effective advance rates and less restrictive covenants and extends the maturity to July 18, 2027. The amended Credit Facility is underwritten by Bank of Montreal, Royal Bank of Canada, Wells Fargo Bank, CIBC, National Bank of Canada, Toronto-Dominion Bank and three new lenders including Desjardins, Bank of Nova Scotia and Raymond James. The facility continues to bear interest on advances payable at either the lenders prime rate plus 75 bps or the rate of Adjusted 1-Month Term Canadian Overnight Repo Rate Average ("Adjusted CORRA") plus 225 bps. Based on the current Adjusted CORRA rate of 4.79% as of August 2, 2024, the interest rate on the principal amount drawn would be 7.04%. The Company can also utilize an accordion feature to increase the size of the facility by up to an additional $150 million.

In July 2024, the Company issued US$200 million aggregate principal amount of senior unsecured notes due 2029 (the "New Notes"). The New Notes were issued at a price of US$1,018.75 per US$1,000 principal amount, plus accrued interest from July 1, 2024. The New Notes have substantially identical terms (other than issuance price, date of issuance and the date from which interest initially accrues) as, and are treated as a single series with, the Company's 7.625% unsecured notes due 2029 issued on February 23, 2024 (together with the New Notes, the "Notes"). An aggregate of US$600 million principal amount of Notes is outstanding following closing of the offering. In connection with the offering, the Company entered into a currency swap agreement (the "Currency Swap") to reduce the Canadian dollar equivalent cost of borrowing on the New Notes to 6.38% per annum. The Company used the net proceeds from the sale of the New Notes for general corporate purposes, including the repayment of indebtedness.

During the quarter, the Company recognized an unrealized net investment loss of $2.7 million, mainly due to fair value changes in the Company's investments.

Free cash flow from operations before net growth in gross consumer loans receivable² in the quarter was $93 million compared to $76 million in the second quarter of 2023. Based on the cash on hand at the end of the quarter and the borrowing capacity under the Company's existing revolving credit facilities, including the aforementioned balance sheet enhancements implemented following the quarter, the Company has approximately $1.6 billion in total funding capacity as of August 2, 2024 and a net debt to total capitalization ratio of 73%, in line with the Company's desired level of financial leverage. 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 6.9%, and the fully drawn weighted average cost of borrowing was 6.8%. 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 $450 million per year solely from internal cash flows.

Revised & Increased Forecast

On February 13, 2024, the Company provided a 3-year forecast for the years 2024 through 2026. The Company has since experienced a more accelerated rate of growth in its consumer loans receivable portfolio and consequently, has revised its forecast for the years 2024 through 2026 to reflect the most recent outlook. Additionally, the revised forecast reflects an effective date of January 1, 2025, for the previously announced new legislation to reduce the maximum allowable rate of interest, which the Company had previously assumed would be implemented by the middle of 2024. Lastly, the Company continues to employ the use of probability weighted third party economic forecasts to establish its economic outlook and based on those forecasts, the Company continues to assume that Canada will experience a mild to moderate recession in 2024 and into 2025.

The Company continues to pursue a long-term strategy that includes expanding its product range, developing its channels of distribution, and leveraging risk-based pricing to reduce the cost of borrowing for its consumers and extend the life of its customer relationships. As such, the total yield earned on its consumer loan portfolio and net charge off rates will gradually decline, while operating margins expand. The forecast outlined below is based on the Company's expected domestic organic growth plan and does not include the impact of any future mergers or acquisitions, or the associated gains or losses related to its investments.

Dividend

The Board of Directors has approved a quarterly dividend of $1.17 per share payable on October 11, 2024 to the holders of common shares of record as at the close of business on September 27, 2024.

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 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 over 2,500 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 omni-channel 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 10,300 merchant partners across Canada. Throughout the Company's history, it has acquired and organically served over 1.4 million Canadians and originated over $14.3 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 2024 Best Workplaces™ in Financial Services & Insurance, 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 over 70 nationalities who believe strongly in giving back to communities in which it operates. To date, goeasy has raised and donated over $5.8 million to support its long-standing partnerships with BGC Canada and many other local charities. In 2023, the Company announced a 3-year, $1.4 million commitment to BGC Canada's Food Fund.

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

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

Notes:
¹ These are non-IFRS ratios. Refer to "Non-IFRS Measures and Other Financial Measures" section in this press release. 
² These are non-IFRS measures. Refer to "Non-IFRS Measures and Other Financial Measures" section in this press release. 
³ These are supplementary financial measures. Refer to "Non-IFRS Measures and Other Financial Measures" section in this press release.
⁴ These are capital management measures. Refer to "Non-IFRS Measures and Other Financial Measures" section in this press release.
⁵ Non-IFRS ratios, non-IFRS measures, supplementary financial measures and capital management measures are not determined in accordance with IFRS, do not have standardized meanings and may not be comparable to similar financial measures presented by other companies.

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.sedarplus.ca.

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 31 of the Company's MD&A for the three and six-month periods ended June 30, 2024. Items used to calculate adjusted net income and adjusted earnings per share for the three and six-month periods ended June 30, 2024 and 2023 include those indicated in the chart below:

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 31 of the Company's MD&A for the three and six-month periods ended June 30, 2024. Items used to calculate adjusted other operating expenses and efficiency ratio for the three and six-month periods ended June 30, 2024 and 2023 include those indicated in the chart below:

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 31 of the Company's MD&A for the three and six-month periods ended June 30, 2024. Items used to calculate adjusted operating income and adjusted operating margins for the three and six-month periods ended June 30, 2024 and 2023 include those indicated in the chart below:

Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") and EBITDA Margin

EBITDA is a non-IFRS measure, while EBITDA margin is a non-IFRS ratio. Refer to "Key Performance Indicators and Non-IFRS Measures" section on page 31 of the Company's MD&A for the three and six-month periods ended June 30, 2024. Items used to calculate EBITDA and EBITDA margin for the three and six-month periods ended June 30, 2024 and 2023 include those indicated in the chart below:

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 31 of the Company's MD&A for the three and six-month periods ended June 30, 2024. 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, 2024 and 2023 include those indicated in the chart below:

Adjusted Return on Receivables

Adjusted return on receivables is a non-IFRS ratio. Refer to "Key Performance Indicators and Non-IFRS Measures" section on page 31 of the Company's MD&A for the three and six-month periods ended June 30, 2024. Items used to calculate adjusted return on receivables for the three and six-month periods ended June 30, 2024 and 2023 include those indicated in the chart below:

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 31 of the Company's MD&A for the three and six-month periods ended June 30, 2024. Items used to calculate adjusted return on assets for the three and six-month periods ended June 30, 2024 and 2023 include those indicated in the chart below: