GoEasy Earnings Q2 Earnings

Outstanding Results with Long Runway

Earnings Summary

Revenues: $303.87M

Loan Originations: $657M (+9%)

Net Charge Off: 8.8%

Return on Equity: 29.3%

Net Income: $62.88M

All Financial Figures in USD

Commentary

Balance Sheet

I would say I was blown away by GoEasy’s performance in Q2 but it is really what I have come to expect from this business. Even in a time where consumers around the world struggle, economies weaken, and US/Canada trade uncertainty persist, GoEasy continues to execute. The capital structure continues to maintain a healthy balance as the business grows loan originations and uses them as collateral to securitize its debt obligations in a thoughtful way. The capital structure today is a mix of equity, securitized loan facilities, and senior unsecured notes with an average cost of debt of just 6.7%. While the businesses earnings power is high quality and consistent, I cannot help but pound the table on the competitive advantages GoEasy possesses via the nature of its balance sheet. Given that installment lending is an inherently challenging business, banks are reluctant to fund a new entrant into the space to go write loans to subprime consumers. The banks will either laugh you out of their offices or charge you high teens percentage interest rates. GoEasy, because of the long-term track record the company has, enjoys a marginal cost of debt with relationships at every major bank in Canada. We would wrap this section up by saying the biggest red flag for any financial business is a fast growing one. We feel that given the matching of loans to the expansion of the capital structure, and the skin in the game from founders/executives, that this is not a material risk long term for GoEasy.

Criminal Rate of Interest & Net Charges