goeasy Ltd.
(GSY-T) C$156.01
Q4/21 First Look Event
goeasy reported Q4/21 results. The company will host a conference call on February 17 at 11:00 am ET (1-866-219-5269; passcode 6745839#; webcast).
Impact: POSITIVE
goeasy reported Q4/21 adjusted EPS of $2.76 (up 23% y/y) versus our estimate of $2.65 and consensus of $2.62. The company raised its 2022 and 2023 loan growth guidance ranges by $50mm and $100mm, respectively, and introduced 2024 guidance. Note that total company operating margin guidance is unchanged in 2022 and 2023, but appears lower because it is shown on a reported rather than adjusted basis (in accordance with IFRS standards). GSY announced a 38% dividend increase ($0.91/share vs. our estimate $0.95/share).
Loan Growth: Ending gross loans increased $134mm q/q to $2.03bn, higher than our forecast of $2.01bn and management's guidance range for an increase of $100- $110mm (upper end of 2021 guidance). Loans are forecast to grow over 70% over the next three years (domestic organic growth) based on the mid-point of management's 2024 guidance. Origination volumes were a record $507mm (up 16% q/q) with 61% going to new customers. Consumer demand for credit is improving and the newly launched auto loan program is providing another avenue for growth.
Yield: Revenue yield of 41.3% was up 50bps q/q but down 550bps y/y (slightly higher than our estimate). Lower yields reflect the LendCare acquisition (lower average interest rates), an increased proportion of risk-adjusted and secured loans, and increased penetration into the Quebec market (lower interest rates), among other factors. What is important to note is that the risk adjusted yield is only down modestly as the credit quality of the portfolio improves reflecting the company's ability to protect yields as the mix shifts.
Credit: The credit environment began to normalize (as expected) this quarter with net charge-offs coming in at 9.6% (lower than our forecast of 10.0%), up from 8.3% last quarter and 9.0% last year. The allowance ratio was relatively stable at 7.87%.
Expenses: Total operating expenses of $155mm were slightly higher than our estimate and up 12% q/q. Excluding charge-offs, provisions, depreciation, and amortization, expenses were up 3% q/q reflecting continued cost discipline.
Adjusted ROE remains strong at 23.9%.