Dealnet Capital Corp.
TSX VENTURE : DLS

Dealnet Capital Corp.

May 25, 2017 07:30 ET

Dealnet Reports Higher Gross Profit on 23% Increase in Finance Receivables in Q1-2017

- Portfolio grows to $169 million after acquired and organic originations add $39 million during the period

- Achieved significant technology penetration within dealers during the quarter at nominal cost relative to overall SG&A expenses

- Average yield on the portfolio increased to 8.8% from 8.1% reported in the previous period

- Interest expense as a percent of finance assets remains flat at 4.2% compared to the previous period

- Net Book Value of past due accounts declined 30% to 5.4% of portfolio from 9.5% of portfolio at the end of the previous quarter

- Tangible net worth as at March 31, 2017 increased to $26.2 million from $18.8 million at the end of the previous period

- Gross profit increases 35% over the previous quarter while net loss declines to $0.01 per share

TORONTO, ONTARIO--(Marketwired - May 25, 2017) - Dealnet Capital Corp. ("Dealnet" or the "Company") (TSX VENTURE:DLS), reported today its financial results for the three-month period ending March 31, 2017. All results are reported under International Financial Reporting Standards ("IFRS") and in Canadian dollars, unless otherwise specified.

The Company's portfolio of finance assets increased to $169.1 million as at March 31, 2017 from $137.5 million reported at the end of the previous period. During the period the Company reported originations of new consumer finance receivables of approximately $38.8 million in the seasonally slow first quarter of 2017 including $27.6 million of new finance assets acquired in a portfolio purchase that closed on January 13, 2017.

"Dealnet made significant progress on key strategic objectives in the quarter beginning with a 23 percent increase in finance receivables during the three-month period in line with our Treasury Utilization Plan," said Michael Hilmer, Dealnet's Chief Executive Officer. "We see significant opportunity for organic and acquired finance receivable growth for the balance of the year given recent developments within the competitive landscape. Our team continues to work prescriptively to apply our expanding treasury towards the highest margin opportunities when accounting for all origination costs. Finance receivable bulk buys including high credit quality customers are exceptional opportunities to accelerate our earning asset growth," added Mr. Hilmer.

The average yield on the portfolio increased by 70 basis points to 8.8 percent during the three-month period ending March 31, 2017 from 8.1 percent during the previous three-month period ending December 31, 2016. The Company's weighted average interest expense remained flat at 4.2 percent during the three-month period ending March 31, 2017 compared to 4.2 percent during the previous three-month period. Net Book Value of past due accounts as at March 31, 2017 have declined 30% to $8.8 million or 5.4 percent of the portfolio from $12.6 million or 9.5 percent of the portfolio reported at the end of the previous period ended December 31, 2016. The Company's tangible net worth as at March 31, 2017 was $26.2 million versus $18.8 million as at December 31, 2016. The Company's tangible leverage ratio declined modestly to 6.1:1 at the end of Q1-2017 from 7.7:1 at the end of the previous three-month period.

During the period the Company received cash proceeds of approximately $24.9 million from the securitization of finance assets and redeployed excess cash to warehouse additional earning finance receivables. During regular securitizations this cash will be returned to working capital on the balance sheet to be used for warehousing of new consumer finance receivable assets. As a non-bank specialty finance company Dealnet utilizes private securitization facilities to provide funding for its origination activity. The Company does not rely on retail deposits and has sufficient liquidity through its established institutional funding platforms, internally generated cash and existing capital resources to fund the growth objectives in its current business plan.

For the three-month period ending March 31, 2017, the Company reported gross profit of $4.2 million, an increase of 38 percent from the $3.1 million reported in the previous quarter. The Company's Consumer Finance business contribution increased to 43 percent of the gross profit earned during the quarter while the Engagement business contributed 57 percent.

"These results confirm that our earning assets continue to generate significant long term margin through seasonally quiet periods," said Michael Hilmer, Dealnet's Chief Executive Officer.

The following table summarizes some of the Key Performance Indicators that the Company uses to measure the achievement of its business plan objectives:

Q1 2017 Q4 2016 Q1 2016
Finance Receivables $ 169M $ 138M $ 83M
Organic and Acquired Originations $ 39M $ 22M $ 12M
Average Yield on Earning Assets 8.7% 8.2% 9.7%
Weighted Average Interest Expense 4.2% 4.2% 4.8%
Consumer Finance Gross Margin as a % of Total Revenue 19% 2% 6%
Engagement Gross Margin as a % of Total Revenue 25% 34% 32%
Securitizations $ 24.9M $ 31.3M $ 7.9M
Tangible Leverage 6.1 7.7 16.1
Tangible Net Worth $ 26.2M $ 18.8M $ 5.8M

The financial statements for the three-month period ending March 31, 2017 together with management's discussion and analysis of these results have been filed on SEDAR and are available on the Company's website at www.dealnetcapital.com.

The Company will host a conference call on Thursday, May 25, 2017 commencing at 10:00 A.M. EST to discuss these results.

Conference Call Details
Dial in number: Local / International: 416-340-2216
North American Toll Free: 866-223-7781
Replay number: Local / International: 905-694-9451
North American Toll Free: 800-408-3053
Passcode: 1103297

To view the press release or any additional financial information, please visit the Investor Relations section of the Dealnet website at: http://www.dealnetcapital.com/investors/

About Dealnet Capital Corp.

Dealnet is a specialty finance company backed by its proprietary, scalable engagement platform to service the $20 billion home improvement finance market through both dealer-based and technology enabled originations of secured finance assets (leases and loans). The Company earns net finance income over the term of these assets, which have a term to maturity of up to ten years and from fee income derived from the transaction support services that it provides to its dealer network. The Company also uses its engagement platform to provide customer support services on a contract basis to third party institutions which provides significant scale to the engagement business. Together, these three revenue sources provide the Company with a combination of both annuity-like income that is earned over time from its growing portfolio of finance assets, and transaction-based income that generates fees for contracted services.

For additional information please visit www.sedar.com.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward Looking Statements

This news release contains certain "forward-looking information" within the meaning of applicable securities law including statements regarding the Company. Forward looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "would", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur. These statements are only predictions. Forward-looking information is based on the opinions and estimates of management at the date the information is provided, and is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. For a description of the risks and uncertainties facing the Company and its business and affairs, readers should refer to the Company's Management's Discussion and Analysis. The Company undertakes no obligation to update forward-looking information if circumstances or management's estimates or opinions should change, unless required by law. The reader is cautioned not to place undue reliance on forward-looking information.

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