Goeasy Inc. (OTCPK: EHMEF, TSX:GSY: CA) is a prominent non-prime lender in Canada, offering secured and unsecured loans and point-of-sale financing. Established in 1990 as RTO Enterprises Inc., Goeasy went public in 1993 through a reverse merger with Aumo Explorations Inc.
The company has an omnichannel presence in over 400 locations across Canada. Over its history, Goeasy has originated over $12.8 billion in loans to more than 1.3 million Canadians.
Financial Performance
Goeasy’s revenue grew from $609 million in 2019 to $1.25 billion in 2023, achieving a compound annual growth rate (CAGR) of 20%. Its loan portfolio increased from $1.11 billion to $3.65 billion, a CAGR of 35%.
Over the past five years, Goeasy’s shares have surged by 244%, significantly outperforming the S&P 500 and the S&P/TSX Composite Index.
Business Segments
Goeasy operates through three main brands:
- easyfinancial focuses on direct-to-consumer lending, offering personal loans, home equity loans, and other financial products from 300 locations across Canada.
- easyhome specializes in lease-to-own financing for appliances, furniture, and electronics through 144 Canadian locations.
- LendCare provides point-of-sale funding for over 9,500 merchant partners in sectors such as powersports, automotive, retail, and healthcare.
For reporting purposes, the company has two operating segments: easyfinancial (which includes LendCare) and easyhome, accounting for 88% and 12% of revenue, respectively.
Market Position and Customer Base
Goeasy caters to non-prime borrowers, Canadians with credit scores below 720, a market segment comprising 29% of the 31.8 million Canadians with active credit files. The non-prime credit market in Canada is estimated to be $218 billion annually, and Goeasy holds a 2% market share in this underserved market.
The average Goeasy customer is 43 years old, earns $60,000 annually, has a median credit score of 579, and 72% have been denied credit by traditional banks or credit unions. Interestingly, non-prime customers carry lower levels of debt compared to prime customers, providing stability to Goeasy’s business.
Growth Strategy
Goeasy’s growth strategy combines organic growth with strategic acquisitions, such as the 2021 purchase of LendCare. The company offers a range of loan products, including unsecured personal, retail, and healthcare loans, and secured auto, powersports, and home equity loans.
Goeasy is expanding both within Canada and internationally, enhancing its product range and distribution channels.
Profitability and Cash Flow
Financially, Goeasy has shown impressive performance. Its revenue doubled from $609 million in 2019 to $1.25 billion in 2023, while adjusted net income rose by 202.9% to $243.2 million.
The company’s adjusted net income as a percentage of revenue increased from 13.2% in 2019 to 19.8% in 2023. Free cash flow grew from $121 million in 2019 to $377 million in 2023, a CAGR of 33%, supporting increased dividends. The annual dividend payment rose from $1.80 in 2020 to $4.68 in 2024.
Loan Quality and Debt Management
Goeasy’s loan portfolio quality improved in 2023, with a 20 basis point reduction in the annualized net charge-off rate to 8.8%. Despite higher finance costs due to a 6.4% average blended interest rate on debt, Goeasy maintained strong operating cash flow, allowing it to manage its debt effectively.
The company’s finance costs in 2023 were $149.3 million, 38.2% higher than a year earlier. However, its higher operating cash flow enabled it to repay some of its outstanding borrowings while increasing its loan book by 30%. Goeasy finished the year with a total debt of $2.93 billion, slightly less than its current market cap.
For those who understand and believe that Goeasy fills a demand much in need by those who have been denied credit, its business is an excellent long-term investment.
While non-prime lending may not appeal to every investor, Goeasy’s robust financial performance, growth strategy, and market position make it a compelling choice for aggressive investors.
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I’m Elizabeth Monroe, a writer who brings you stories from around the world. I’m passionate about sharing important global news and amplifying the voices of those often left unheard. Through my writing, I aim to make the world feel a bit closer and more accessible.
