goeasy Ltd. Reports Record Results for the First Quarter

Loan Portfolio of $1.28 billion, up 10%
Net Charge-Off Rate of 9.1%, down from 13.2%
Adjusted Quarterly Net Income of $36.7 million, up 67%
Adjusted Quarterly Diluted Earnings per Share of $2.34, up 66%

MISSISSAUGA, Ontario, May 11, 2021 (GLOBE NEWSWIRE) -- goeasy Ltd. (TSX: GSY), (“goeasy” or the “Company”), a leading full-service provider of goods and alternative financial services, announced its results for the first quarter ended March 31, 2021.

First Quarter Results

During the quarter, the Company continued to experience a gradually improving level of demand, complemented by stable credit performance, leading to record financial results.

The Company generated $272 million in total loan originations in the first quarter, up 13% compared to the $242 million produced in the first quarter of 2020. The improved originations led to growth in the loan portfolio of $30.5 million during the quarter, which finished at $1.28 billion, up 10% from $1.17 billion as of March 31, 2020. The growth in the consumer loan portfolio, which was partially impacted by lower commissions related to higher levels of loan protection insurance claims, led to an increase in revenue to $170 million in the quarter, up 2% over the same period in 2020.

During the quarter, the Company also continued to experience strong credit and payment performance. The net charge-off rate for the first quarter was 9.1%, compared to 13.2% in the first quarter of 2020. Although there remains uncertainty about the exact timing and pace of an economic recovery, the improvement in underlying credit performance and the general macroeconomic environment resulted in the Company decreasing its allowance for future credit losses to 9.88% from 10.08% in the prior quarter.

Improved operating leverage and lower credit losses, led to record operating income of $63.9 million, up 45% from $44.2 million in the first quarter of 2020, while the operating margin expanded to a record 37.6%, up from 26.4% in the prior year. During the quarter, the Company also recorded an additional $87.3 million pre-tax unrealized fair value gain related to the investment in shares of Affirm Holdings Inc. (“Affirm”).

Net income in the first quarter was a record $112.0 million, up from $22.0 million in the same period of 2020, which resulted in diluted earnings per share of $7.14, up from $1.41 in the first quarter of 2020. Return on equity was 90.1%, up from 25.8% in the first quarter of 2020. After adjusting for $75.8 million after-tax unrealized fair value gains on investments recorded in the first quarter of 2021 and $0.5 million of after-tax transaction costs related to the acquisition of LendCare Holdings Inc. (“LendCare”) incurred in the quarter, adjusted net income was a record $36.7 million, up 67% from $22.0 million in 2020, resulting in adjusted diluted earnings per share of $2.34, up 66% from $1.41 in the first quarter of 2020. Adjusted return on equity was 29.5% in the quarter, up from adjusted return on equity of 25.8% in 2020.

“The first quarter continued to highlight the strength and resilience of our business. With improved originations, structurally lower credit losses and strong operating margins, we delivered record adjusted earnings per share of $2.34, an increase of 66%. We were also pleased to report an $87.3 million pre-tax gain related to the performance of our investment in Affirm and the associated benefits of our hedging strategy,” said Jason Mullins, goeasy’s President and Chief Executive Officer, “Most of all, I am incredibly proud of the work done by our team to prepare for the successful acquisition of LendCare, which we announced in April. The positive response from the capital markets led to both our equity and unsecured notes offering being oversubscribed by 2.5 times, enabling us to confidently execute the transaction with an improved balance sheet and reduced cost of borrowing.”

Other Key First Quarter Highlights

easyfinancial

• Revenue of $133 million, up 1%

• Secured loan portfolio grew to $162 million, up 33%,

• 56% of net loan advances in the quarter were issued to new customers, down from 59%

• 51% of applications were acquired online, up from 46%

• Average loan book per branch improved to $3.8 million, an increase of 2%

• The delinquency rate on the final Saturday of the quarter was 4.4%, down from 5.4%

• Record operating income of $71.7 million, up 39%

• Operating margin of 54%, up from 39%

easyhome

• Record revenue of $36.8 million, up 4%

• Same store revenue growth of 4.9%

• Consumer loan portfolio within easyhome stores increased to $53.1 million, up 30%

• Revenue from consumer lending increased to $6.6 million, up 20%

• Record operating income of $9.0 million, up 29%

• Record operating margin of 24.5%, up from 19.8%

Overall

• 44^th consecutive quarter of same store sales growth

• 79^th consecutive quarter of positive net income

• 2021 marks the 17^th consecutive year of paying dividends and the 7^th consecutive year of dividend increases

• Total same store revenue growth of 1.7%

• $6.9 million in loan protection claims payments, up 19% from $5.8 million in 2020

• Adjusted return on equity of 29.5% in the quarter, up from 25.8%

• Fully drawn weighted average cost of borrowing reduced to 4.8%, down from 5.5%

• Net external debt to net capitalization of 58% on March 31, 2021, down from 72% in the prior year and below the Company’s target leverage ratio of 70%

Balance Sheet and Liquidity

Total assets were $1.61 billion as of March 31, 2021, an increase of 15% from $1.41 billion as of March 31, 2020, driven by the growth in the consumer loan portfolio and return on the Company’s investment in Affirm.

In September 2019, the Company invested $34.3 million to acquire a minority equity interest in PayBright. On December 3, 2020, PayBright announced that the shareholders of PayBright had reached a definitive agreement to sell 100% of the PayBright shares to Affirm, including the Company’s minority equity interest in PayBright. The sale transaction closed on January 1, 2021. Under the terms of the sale transaction, the Company received consideration of C$23 million in cash, 655,416 common shares in Affirm and 468,154 common shares of Affirm held in escrow, subject to revenue performance achieved in 2021 and 2022. After considering the likelihood of achieving the contingent equity, a total consideration of $56 million was recognized. The fair value of investment in Affirm as at March 31, 2021 amounts to $89.4 million. During the first quarter, the Company recognized an unrealized fair value gain amounting to $56.4 million ($48.9 million after-tax) in the consolidated statement of income.

Subsequent to the sale transaction, the Company entered into a 6-month total return swap agreement (the "TRS") to substantively hedge its market exposure related to its 655,416 common shares held in Affirm, which represents the non-contingent portion of the equity consideration received, pursuant to the sale of its investment in PayBright. The TRS effectively results in the economic value of the Company’s investment in Affirm shares being settled in cash at maturity for US$108.87 per share, net of applicable fees. The change in fair value of the TRS during the first quarter amounts to $30.9 million. The pre-tax unrealized fair value gain on Affirm shares and the TRS combined is a total of $87.3 million ($75.7 million after tax). The total fair value of investment in Affirm, inclusive of the TRS, is $120.3 million as at March 31, 2021.

During the quarter, the Company invested $6.5 million to acquire a minority equity interest in Brim Financial Inc. (“Brim”). Brim, a Canadian fintech company and globally certified credit card issuer, offers a full product suite of consumer and business credit cards, consumer digital banking services, a globally open rewards and loyalty ecosystem, and financial products including buy now pay later capabilities seamlessly integrated in all business and consumer revolving credit card products. The investment in Brim aligns with the Company’s strategic vision of broadening its near-prime product range.

In support of the acquisition of LendCare, The Company completed an equity offering of 1,404,265 subscription receipts of the Company (“Subscription Receipts”), at a price of $122.85 per Subscription Receipt, for gross aggregate proceeds of $172.5 million. As a result of the completion of the acquisition on April 30, 2021, each of the 1,404,265 outstanding Subscription Receipts were automatically exchanged for one common share of the Company. In addition, subsequent to quarter-end, the Company also closed its offering of US$320 million 4.375% senior unsecured notes maturing on May 1, 2026. Concurrently with the offering, the Company entered into a cross currency swap agreement, effectively hedging the obligation at $400 million with a Canadian dollar interest rate of 4.818%.

Cash provided by operating activities before net growth in gross consumer loans receivable in the quarter was $63.2 million, an increase of 17% over 2020. Based on the cash on hand at the end of the quarter and the borrowing capacity under the Company’s revolving credit facilities, goeasy had approximately $435 million in total funding capacity. At quarter-end, the Company’s fully drawn weighted average cost of borrowing reduced to 4.8%, down from 5.5% in the prior year, with incremental draws on its senior secured revolving credit facility bearing a rate of approximately 3.5% and incremental draws on its revolving securitization warehouse facility bearing a rate of approximately 3.4%.

As of March 31, 2021, the Company also estimates that once its existing and available sources of capital are fully utilized, it could continue to grow the loan portfolio by approximately $150 million per year solely from internal cash flows. The Company also estimates that if it were to run-off its consumer loan and consumer leasing portfolios, the value of the total cash repayments paid to the Company over the remaining life of its contracts would be approximately $2.3 billion. If during such a run-off scenario all excess cash flows were applied directly to debt, the Company estimates it would extinguish all external debt within 17 months.

Future Outlook

On February 17, 2021, the Company provided a 3-year forecast for the years 2021 through 2023, which did not contemplate the acquisition of LendCare. As a result, the Company is withdrawing its 3-year forecast and intends to provide a new long-term forecast, incorporating the contribution from LendCare, as part of the Company’s release of second quarter financial results.

“Looking forward, we expect consumer demand to continue improving throughout the summer months as vaccination distribution accelerates. Our expansion through the acquisition of LendCare into point-of-sale financing verticals such as power sports and home improvement, will also aid in driving growth of the portfolio,” Mr. Mullins concluded, “On a consolidated basis, we expect to finish the second quarter with nearly $1.8 billion in consumer loan balances. With the economy on the road to recovery, the upcoming launch of our auto-loan product, and the addition of LendCare, we remain on track to our goal of becoming the largest and best performing lender in the $200 billion non-prime consumer credit market.”

Dividend

The Board of Directors has approved a quarterly dividend of $0.66 per share payable on July 9, 2021 to the holders of common shares of record as at the close of business on June 25, 2021.

Forward-Looking Statements

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

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

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

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

About goeasy

goeasy Ltd., a Canadian company, headquartered in Mississauga, Ontario, provides non-prime leasing and lending services through its easyhome, easyfinancial and LendCare brands. Supported by more than 2,200 employees, the Company offers a wide variety of financial products and services including unsecured and secured instalment loans. Customers can transact seamlessly through an omni-channel model that includes an online and mobile platform, over 400 locations across Canada, and point-of-sale financing offered in the retail, power sports, automotive, home improvement and healthcare verticals, through more than 3,000 merchants across Canada. Throughout the Company’s history, it has acquired and organically served over 1 million Canadians and originated over $6.4 billion in loans, with one in three easyfinancial customers graduating to prime credit and 60% increasing their credit score within 12 months of borrowing.

Accredited by the Better Business Bureau, goeasy is the proud recipient of several awards including Waterstone Canada’s Most Admired Corporate Cultures, Glassdoor Top CEO Award, Achievers Top 50 Most Engaged Workplaces in North America, Greater Toronto Top Employers Award, the Digital Finance Institute’s Canada’s Top 50 FinTech Companies, ranking on the TSX30 and placing on the Report on Business ranking of Canada’s Top Growing Companies. The company and its employees believe strongly in giving back to the communities in which it operates and has raised over $3.8 million to support its long-standing partnerships with BGC Canada, Habitat for Humanity and many other local charities.

goeasy Ltd.’s. common shares are listed on the TSX under the trading symbol “GSY”. goeasy is rated BB- with a stable trend from S&P and Ba3 with a stable trend from Moody’s. Visit www.goeasy.com.

For further information contact:

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

Farhan Ali Khan
Senior Vice President, Corporate Development & Investor Relations
(905) 272-2788

goeasy Ltd.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(expressed in thousands of Canadian dollars)
		As At		As At
		March 31,		December 31,
		2021		2020
ASSETS
Cash		104,842		93,053
Amounts receivable		14,846		9,779
Prepaid expenses		7,293		13,005
Consumer loans receivable, net		1,184,709		1,152,378
Investment		96,896		56,040
Lease assets		45,473		49,384
Property and equipment, net		30,269		31,322
Deferred tax assets, net		-		4,066
Derivative financial assets		30,999		-
Intangible assets, net		27,136		25,244
Right-of-use assets, net		48,111		46,335
Goodwill		21,310		21,310
TOTAL ASSETS		1,611,884		1,501,916
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities		38,197		46,065
Income taxes payable		25,039		13,897
Dividends payable		9,846		6,661
Unearned revenue		10,342		10,622
Deferred tax liabilities, net		4,281		-
Derivative financial liabilities		44,985		36,910
Lease liabilities		55,934		53,902
Accrued interest		14,261		2,598
Revolving credit facility		(1,305	)	198,339
Revolving securitization warehouse facility		179,046		-
Notes payable		680,992		689,410
TOTAL LIABILITIES		1,061,618		1,058,404
Shareholders' equity
Share capital		186,679		181,753
Contributed surplus		18,621		19,732
Accumulated other comprehensive loss		(4,470	)	(5,280	)
Retained earnings		349,436		247,307
TOTAL SHAREHOLDERS' EQUITY		550,266		443,512
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		1,611,884		1,501,916

goeasy Ltd.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(expressed in thousands of Canadian dollars except earnings per share)
		Three Months Ended
		March 31,	March 31,
		2021	2020
REVENUE
Interest income		105,494	100,100
Lease revenue		28,437	27,814
Commissions earned		33,337	35,278
Charges and fees		2,906	4,010
		170,174	167,202
EXPENSES BEFORE DEPRECIATION AND AMORTIZATION
Salaries and benefits		35,406	31,702
Stock-based compensation		2,086	2,098
Advertising and promotion		5,892	6,314
Bad debts		29,274	48,618
Occupancy		5,524	5,682
Technology costs		3,804	3,369
Other expenses		7,095	9,295
		89,081	107,078
DEPRECIATION AND AMORTIZATION
Depreciation of lease assets		9,243	9,024
Depreciation of right-of-use assets		4,344	3,997
Depreciation of property and equipment		1,828	1,612
Amortization of intangible assets		1,746	1,272
		17,161	15,905
TOTAL OPERATING EXPENSES		106,242	122,983
OPERATING INCOME		63,932	44,219
OTHER INCOME		87,372	-
FINANCE COSTS
Interest expense and amortization of deferred financing charges		13,495	13,676
Interest expense on lease liabilities		741	668
		14,236	14,344
INCOME BEFORE INCOME TAXES		137,068	29,875
INCOME TAX EXPENSES
Current		16,997	7,297
Deferred		8,096	599
		25,093	7,896
NET INCOME		111,975	21,979
BASIC EARNINGS PER SHARE		7.41	1.50
DILUTED EARNINGS PER SHARE		7.14	1.41

Segmented Reporting
			Three Months Ended March 31, 2021
($ in 000's except earnings per share)			easyfinancial	easyhome	Corporate		Total
Revenue
	Interest income		100,504	4,990	-		105,494
	Lease revenue		-	28,437	-		28,437
	Commissions earned		30,910	2,427	-		33,337
	Charges and fees		1,915	991	-		2,906
			133,329	36,845	-		170,174
Total operating expenses before
depreciation and amortization			57,326	16,325	15,430		89,081
Depreciation and amortization
	Depreciation and amortization of lease assets, property and equipment and intangible assets		2,085	9,575	1,157		12,817
	Depreciation of right-of-use assets		2,221	1,908	215		4,344
			4,306	11,483	1,372		17,161
Segment operating income (loss)			71,697	9,037	(16,802	)	63,932
Other income							87,372
Finance costs
	Interest expense and amortization of deferred financing charges						13,495
	Interest expense on lease liabilities						741
							14,236
Income before income taxes							137,068
Income taxes							25,093
Net Income							111,975
Diluted earnings per share							7.14
			Three Months Ended March 31, 2020
($ in 000's except earnings per share)			easyfinancial	easyhome	Corporate		Total
Revenue
	Interest income		96,094	4,006	-		100,100
	Lease revenue		-	27,814	-		27,814
	Commissions earned		32,965	2,313	-		35,278
	Charges and fees		2,729	1,281	-		4,010
			131,788	35,414	-		167,202
Total operating expenses before
depreciation and amortization			76,756	17,039	13,283		107,078
Depreciation and amortization
	Depreciation and amortization of lease assets, property and equipment and intangible assets		1,700	9,411	797		11,908
	Depreciation of right-of-use-assets		1,849	1,944	204		3,997
			3,549	11,355	1,001		15,905
Segment operating income (loss)			51,483	7,020	(14,284	)	44,219
Finance costs
	Interest expense and amortization of deferred financing charges						13,676
	Interest expense on lease liabilities						668
							14,344
Income before income taxes							29,875
Income taxes							7,896
Net Income							21,979
Diluted earnings per share							1.41

Summary of Financial Results and Key Performance Indicators
($ in 000’s except earnings per share and percentages)	Three Months Ended				Variance		Variance
	March 31, 2021		March 31, 2020		$ / bps		% change
Summary Financial Results
Revenue	170,174		167,202		2,972		1.8	%
Operating expenses before depreciation and amortization2	89,081		107,078		(17,997	)	(16.8	%)
EBITDA1	159,222		51,100		108,122		211.6	%
EBITDA margin1	93.6	%	30.6	%	6,300 bps		205.9	%
Depreciation and amortization expense	17,161		15,905		1,256		7.9	%
Operating income	63,932		44,219		19,713		44.6	%
Operating margin1	37.6	%	26.4	%	1,120 bps		42.4	%
Other income3	87,372		-		87,372		100	%
Finance costs	14,236		14,344		(108	)	(0.8	%)
Effective income tax rate	18.3	%	26.4	%	(810 bps)		(30.7	%)
Net income	111,975		21,979		89,996		409.5	%
Diluted earnings per share	7.14		1.41		5.73		406.4	%
Return on equity	90.1	%	25.8	%	6,430 bps		249.2	%
Adjusted (Normalized) Financial Results1,2,3
Adjusted EBITDA	72,530		51,100		21,430		41.9	%
Adjusted EDITDA margin	42.6	%	30.6	%	1,200 bps		39.2	%
Adjusted net income	36,679		21,979		14,700		66.9	%
Adjusted diluted earnings per share	2.34		1.41		0.93		66.0	%
Adjusted return on equity	29.5	%	25.8	%	370 bps		14.3	%
Key Performance Indicators1
Same store revenue growth (overall)	1.7	%	19.6	%	(1,790 bps)		(91.3	%)
Same store revenue growth (easyhome)	4.9	%	4.5	%	40 bps		8.9	%
Segment Financials
easyfinancial revenue	133,329		131,788		1,541		1.2	%
easyfinancial operating margin	53.8	%	39.1	%	1,470 bps		37.6	%
easyhome revenue	36,845		35,414		1,431		4.0	%
easyhome operating margin	24.5	%	19.8	%	470 bps		23.7	%
Portfolio Indicators
Gross consumer loans receivable	1,277,291		1,166,055		111,236		9.5	%
Growth in consumer loans receivable	30,451		55,422		(24,971	)	(45.1	%)
Gross loan originations	272,351		241,603		30,748		12.7	%
Total yield on consumer loans (including ancillary products)	44.3	%	47.7	%	(340 bps)		(7.1	%)
Net charge offs as a percentage of average gross consumer loans receivable	9.1	%	13.2	%	(410 bps)		(31.1	%)
Cash provided by operating activities before net growth in gross consumer loans receivable	63,167		53,947		9,220		17.1	%
Potential monthly lease revenue	8,366		8,272		94		1.1	%
1See description in sections “Portfolio Analysis” and “Key Performance Indicators and Non-IFRS Measures” in MD&A.
2During the first quarter of 2021, Operating expenses before depreciation and amortization includes $0.7 million before-tax ($0.5 million after-tax) transaction costs related to the acquisition of LendCare, including advisory and consulting costs, legal costs, and other direct transaction costs.
3During the first quarter of 2021, the Company recognized $87.4 million before-tax ($75.8 million after-tax) impact of the unrealized fair value gains mainly on investments in Affirm and TRS.