easyhome Ltd.
TSX : EH

easyhome Ltd.

November 06, 2014 17:15 ET

easyhome Ltd. Reports Results for the Third Quarter Ended September 30, 2014

Continued Record Revenue and Successful Launch of goeasy Master Brand

MISSISSAUGA, ONTARIO--(Marketwired - Nov. 6, 2014) - easyhome Ltd. (TSX:EH) ("easyhome" or the "Company"), the Canadian leader in providing goods and financial services to the cash and credit constrained consumer, today announced its results for the third quarter ended September 30, 2014.

Revenue for the third quarter of 2014 increased to $65.5 million, an increase of 19.4% from $54.9 million in the third quarter of 2013. Total same store sales growth in the quarter was 20.7%. The growth was driven primarily by the expansion of easyfinancial and the related growth of its consumer loans receivable portfolio by $20.3 million during the third quarter of 2014 compared with $8.9 million in the third quarter of 2013. The gross consumer loans receivable as at September 30, 2014 was $165.7 million compared with $92.8 million as at September 30, 2013, an increase of 79%.

Operating income for the quarter was $7.4 million, up $0.5 million or 6.6% compared to the third quarter of 2013. Net income for the quarter was $3.5 million, a decrease of 9.1% compared with $3.8 million reported in the third quarter of 2013. During the third quarter of 2014, easyhome made a planned one-time investment in advertising expenditures to support the launch of the goeasy master brand that reduced net income by $1.1 million (net of tax) and earnings per share by $0.08. Diluted earnings per share for the quarter decreased by $0.06 to $0.25 compared to $0.31 for the third quarter of 2013.

"easyhome again delivered record revenues," said David Ingram, easyhome's President and Chief Executive Officer. "We are still in the early days of the goeasy master brand launch but since the launch on September 15, 2014, we have seen an increase in the number of visitors to our websites and have realized an improvement in the number of deliveries and new customers within our leasing business compared to the trend during 2014. These positive changes will help the Company to deliver strong revenue growth and improved earnings in the fourth quarter and onwards, while advertising expenditures will return to more normal run rates."

Other highlights for the third quarter of 2014 include:

easyfinancial Services

  • Revenue for easyfinancial increased by 75% for the third quarter of 2014 compared to the third quarter of 2013.
  • Net charge-offs as a percentage of the average gross consumer loans receivable balance declined from 15.2% in the third quarter of 2013 to 14.9% in the third quarter of 2014.
  • easyfinancial's strong loan book growth during the third quarter of 2014, coupled with the consistent application of its methodology for determining its allowance for loan losses, resulted in a greater provisions for future charge offs. As a result, easyfinancial's bad debt expense as a percentage of revenue increased from 26.0% to 27.0% in the third quarter of 2014.
  • Operating margin of 29.6% for the third quarter of 2014 was down from 32.5% reported for the same period in 2013. The increased advertising expenditures and the increased bad debt expenses reduced operating margin by 1.5% and 1.0%, respectively.
  • During the quarter, easyfinancial opened six new stand-alone locations.

easyhome Leasing

  • Revenue for easyhome Leasing declined by 2.2% for the third quarter of 2014 compared to the third quarter of 2013, primarily due to the impact of store closures over the preceding 15 months and partially offset by same store sales growth of 1.7%.
  • The operating margin of easyhome Leasing declined from 16.6% in the third quarter of 2013 to 11.2% in the third quarter of 2014. As with easyfinancial, the increased level of advertising expenditures, combined with the realignment of merchandising activities to optimize inventory for the launch of the goeasy master brand, caused the majority of the margin decline.

Nine Months Results

For the first nine months of the year, easyhome recorded revenues of $189.1 million, up 17.4% compared with $161.0 million in the first nine months of 2013. Operating income for the period was $23.1 million compared with $17.5 million in the first nine months of 2013, an increase of 32%, while net income increased by $2.8 million or 28%. Earnings per share increased from $0.81 to $0.91 cents, an increase of $0.10 or 12%.

2015 Targets

The Company has established the following targets for 2015:

  • Open 40 - 45 new easyfinancial locations with virtually all of these being stand-alone locations.
  • easyfinancial gross consumer loans receivable portfolio growing to $260 - $270 million.
  • easyfinancial margins of 30 - 32% will remain consistent with 2014 due to the continued investments in the development and implementation of new technologies, the earnings drag from newly opened locations and the initial cost for developing new distribution channels.
  • easyhome leasing expects to open three new franchise stores.

Based on these assumptions, the Company is targeting total revenue growth of 17 - 20%. The achievement of these targets by the Company, however, is predicated on a number of factors, including the pace of expansion of easyfinancial.

The Board of Directors has approved a quarterly dividend payment of $0.085 per share payable on January 9, 2015 to the holders of common shares of record as at the close of business on December 29, 2014.

About easyhome

As at September 30, 2014, easyhome Ltd. operated 235 easyhome leasing stores (including 9 consolidated franchise locations and 62 other franchise locations) and 143 easyfinancial locations.

easyhome Ltd. is the Canadian leader in providing goods and financial services to the cash and credit constrained consumer. easyhome Ltd. serves its customers under the master brand goeasy through its two key operating divisions, easyhome Leasing and easyfinancial. easyhome Leasing is Canada's largest merchandise leasing Company, offering top quality, brand-name household furnishings, appliances and home electronic products to consumers under weekly or monthly leasing agreements through both corporate and franchise stores. easyfinancial is a leading provider of consumer loans as an alternative to traditional banks and payday lenders. easyhome Ltd. is listed on the TSX under the symbol 'EH'. For more information, visit www.easyhome.ca.

The above analysis refers to certain financial measures, including same store revenue growth and gross consumer loans receivable which are not determined in accordance with International Financial Reporting Standards ("IFRS"). These measures do not have standardized meanings and may not be comparable to similar measures presented by other companies. These measures are defined in our Management's Discussion and Analysis for the period which is available on SEDAR or on the Company's website at www.easyhome.ca or can be determined by reference to our financial statements. We discuss these measures as we believe that they facilitate the understanding of the results of our operations and financial position.

Forward-Looking Statements

This news release includes forward-looking statements about easyhome Ltd., including its business operations, strategy and expected financial performance and condition. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as 'expects', 'anticipates', 'intends', 'plans', 'believes' or negative versions thereof and similar expressions. In addition, any statement that may be made concerning future financial performance (including revenue, earnings or growth rates), ongoing business strategies or prospects about future events is also a forward-looking statement. 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 our operations, economic factors and the industry generally. They are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied by forward-looking statements made by us, due to, but not limited to important factors such as our ability to enter into new lease and/or financing agreements, collect on existing lease and/or financing agreements, open new locations on favourable terms, secure new franchised locations, purchase products which appeal to our customers at a competitive rate, cope with changes in legislation, react to uncertainties related to regulatory actions, 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 our system of internal controls. We caution that the foregoing list is not exhaustive. The reader is cautioned to consider these and other factors carefully and not place undue reliance on forward-looking statements, which may not be appropriate for other purposes. We are under no obligation (and expressly disclaim any such obligation) to update or alter the forward-looking statements whether as a result of new information, future events or otherwise, unless otherwise required by law.

easyhome Ltd.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited)
(expressed in thousands of Canadian dollars)
As at As at
September 30, December 31,
2014 2013
ASSETS
Cash 6,056 2,329
Amounts receivable 9,213 7,206
Prepaid expenses 2,293 1,699
Consumer loans receivable 155,779 103,936
Lease assets 63,591 68,453
Property and equipment 17,103 15,793
Deferred tax assets 8,096 3,997
Intangible assets 11,962 9,524
Goodwill 19,963 19,963
TOTAL ASSETS 294,056 232,900
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Bank revolving credit facility - 23,496
Accounts payable and accrued liabilities 32,620 24,322
Income taxes payable 7,255 3,929
Dividends payable 1,133 1,130
Deferred lease inducements 2,469 2,749
Unearned revenue 3,724 3,763
Term loan 99,702 37,878
Total Liabilities 146,903 97,267
Shareholders' Equity
Share capital 80,349 79,923
Contributed surplus 5,650 4,169
Accumulated other comprehensive income 682 307
Retained earnings 60,472 51,234
Total Shareholders' Equity 147,153 135,633
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 294,056 232,900
easyhome Ltd.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(expressed in thousands of Canadian dollars except earnings per share)
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2014 2013 2014 2013
REVENUE
Lease revenue 37,041 37,913 113,623 115,559
Interest income 17,107 9,844 44,622 26,406
Other 11,380 7,109 30,863 19,053
65,528 54,866 189,108 161,018
EXPENSES BEFORE DEPRECIATION AND AMORTIZATION
Salaries and benefits 19,107 16,152 56,849 48,968
Stock based compensation 1,182 895 4,450 2,454
Advertising and promotion 3,174 1,655 6,510 5,538
Bad debts 7,252 3,974 17,507 10,351
Occupancy 6,994 6,495 20,903 19,558
Other 6,080 5,379 17,673 16,560
43,789 34,550 123,892 103,429
DEPRECIATION AND AMORTIZATION
Depreciation of lease assets 12,564 11,968 36,925 35,920
Depreciation of property and equipment 1,215 1,096 3,560 3,314
Amortization of intangible assets 526 318 1,512 925
Impairment, net 26 (14 ) 168 (26 )
14,331 13,368 42,165 40,133
Total operating expenses 58,120 47,918 166,057 143,562
Operating income 7,408 6,948 23,051 17,456
Finance costs 2,535 1,686 5,893 4,224
Income before income taxes 4,873 5,262 17,158 13,232
Income tax expense (recovery)
Current 1,708 1,217 8,621 3,619
Deferred (305 ) 228 (4,099 ) (233 )
1,403 1,445 4,522 3,386
Net income 3,470 3,817 12,636 9,846
Basic earnings per share 0.26 0.32 0.94 0.82
Diluted earnings per share 0.25 0.31 0.91 0.81

Contact Information

  • easyhome Ltd.
    David Ingram
    President & Chief Executive Officer
    (905) 272-2788

    easyhome Ltd.
    Steve Goertz
    Senior Vice President and Chief Financial Officer
    (905) 272-2788