goeasy Ltd.
(GSY-T) C$106.00
Q1/22 First Look Event
goeasy reported Q1/22 results. The company will host a conference call this morning at 9:30 am ET (1-866-219-5269; passcode 1938947#; webcast).
Impact: MIXED
goeasy reported Q1/22 adjusted EPS of $2.72 (up 16% y/y) versus our estimate of $2.88 and consensus of $2.85. The EPS miss was driven by a lower-than-expected revenue yield and higher-than-expected provisions/expenses associated with strong loan growth. Importantly, credit remains very stable. The company bought back 280k shares (~1.7% of shares O/S) in the quarter.
Loan Growth: Ending gross loans increased $124mm from Q4/21 to $2.15bn, higher than our forecast of $2.12bn and management's guidance range for an increase of $80-$100mm. It is important to note, part of the EPS miss relates to the expenses and provisions associated with this higher-than-expected loan growth that get booked upfront but should generate additional earnings in the future. Management is expecting a record quarter for organic growth in Q2/22E, with guidance for an additional $160-$180mm of loans over Q1/22 levels. Origination volumes were $477mm (64% to new customers), down slightly q/q in a seasonally slower quarter. Consumer demand for credit is improving and the newly launched auto loan program is providing another avenue for growth.
Yield: Revenue yield of 38.5% was down 280bps q/q and down 555bps y/y (slightly lower than our estimate and towards the lower end of management guidance). 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. 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: Credit performance remained stable with net charge-offs coming in at 8.8% vs. 9.6% in Q4/21 and 9.1% in Q1/21 (our forecast: 9.4%). We are not seeing any signs of deterioration. The allowance ratio was little changed at 7.78%.
Expenses: Total operating expenses of $152mm were relatively in line with our estimate and down 2% q/q. Excluding charge-offs, provisions, depreciation, and amortization, expenses were up 4% q/q.
Adjusted ROE remains strong at 23.8%.