TSX:GSY - Post Discussion
Post by
retiredcf on Aug 11, 2022 8:21am
TD
Currently have a $195.00 target. GLTA
goeasy Ltd.
(GSY-T) C$131.60
Q2/22 First Look Event
goeasy reported Q2/22 results. The company will host a conference call this morning at 11:00 am ET (dial-in link; webcast).
Impact: POSITIVE
goeasy reported Q2/22 adjusted EPS of $2.83 (up 9% y/y) versus our estimate of $2.73 and consensus of $2.74. The EPS beat was driven by very strong loan growth and a higher-than-expected revenue yield partially offset by higher-than- expected provisions/expenses associated with the strong loan growth. Credit losses were higher vs. prior periods but remain within expectations. The company bought back 170k shares (~1.1% of shares o/s) in the quarter.
Loans: Loan growth significantly outperformed our estimates and management guidance this quarter resulting in management raising its three-year outlook. Loans increased a record $216mm sequentially (organic; guidance $160-$180mm), over 60% higher than the previous largest increase, driven by a record volume of applications (up 51% y/y). Originations of $628mm were up 66% y/y (record auto finance and powersport originations). It is important to note, expenses and provisions associated with this higher-than-expected loan growth get booked upfront but should generate additional earnings in the future. Management now expects the loan portfolio to reach $3.8-$4.0bn by Q4/24E (previously $3.4-$3.6bn).
Yield: Revenue yield of 39.2% was up ~65bps q/q but down ~535bps y/y (higher than our estimate). The y/y decrease reflects organic growth of lower-yielding products (auto, home equity, POS of powersports, home improvement, health care, and retail) and increased penetration into the Quebec market (lower interest rates), among other factors. We expect the revenue yield to continue to trend lower as the mix of business shifts to a higher proportion of lower-risk secured products going forward.
Credit: Net charge-offs increased to 9.3% vs. 8.8% in Q1/22 and 8.2% in Q2/21 but remains within guidance ranges and was better-than-our-forecast (our estimate: 9.7%). The prior-year comparable reflects pandemic-related government support. The allowance ratio was down 10bps q/q to 7.68%. Management increased its 2023E net charge-off outlook range by 50bps (8.5%-10.5% from 8.0%-10.0%).
Expenses: Total operating expenses of $166mm were slightly above our estimate and up 14% y/y. Excluding charge-offs, provisions, depreciation, and amortization, expenses were flat y/y.
Adjusted ROE remains strong at 24.7%.
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