14.08.2019 02:28:00

Dealnet Reports Second Quarter 2019 Financial Results

  • Q2 originations increased 35% over the same period in 2018 with continued strong credit quality and yield
  • Major Canadian LifeCo securitization facility now provides enhanced monthly cash flows, permanent funding for Quebec originations and funding for individual finance receivable contractsup to $100,000
  • Additional sales resources committed to drive originations in British Columbia

TORONTO, Aug. 13, 2019 /CNW/ - Dealnet Capital Corp. ("Dealnet" or the "Company") (TSX VENTURE: DLS), reported today its financial results for the three-month and six-month periods ending June 30, 2019. All results are reported under International Financial Reporting Standards ("IFRS") and in Canadian dollars, unless otherwise specified.

"For the second straight quarter, we have achieved a 35% increase in originations over the prior year," said Brent Houlden, Dealnet's Chief Executive Officer. "Our securitization facility with our major Canadian LifeCo funding partner has been expanded to include enhanced monthly cash flows for each pool funded as well as a significantly lower cost of funds for our Quebec originations. These developments are continuing evidence of our momentum on the path to profitability and scale" added Mr. Houlden.

The following are highlights from the quarterly results:

Originations and Portfolio Growth

The Company's Consumer Finance segment posted second quarter originations of $12.9 million, an increase of 35% over originations of $9.5 million reported in the second quarter of 2018. The average credit score and average yield for originations in the second quarter of 2019 was 735 and 9.4%, respectively, versus 728 and 9.2% for the same period last year. The Company's net portfolio of finance receivables has now increased to $188.7 million and 37,000 contracts from $174.3 million and 33,000 contracts as at June 30, 2018.

Net Interest Margin

Interest income increased to $4.2 million for the three-month period ended June 30, 2019 (9.1% yield) from $4.1 million (9.1% yield) for the previous three-month period and $3.8 million (8.7% yield) for the same period last year. Interest expense increased to 5.2% of average earning assets in the second quarter of 2019 from 4.9% in the previous quarter and 4.5% for the same period last year.  The increased interest expense is attributable to the higher funding costs of the interim funding facility that was put in place to fund Quebec originations. This interim Quebec facility was repaid in full in May 2019 upon the establishment of a permanent funding facility.

Management estimates that the additional incremental cost of the interim funding solution for Quebec, over and above what would have been paid if the permanent funding solution was in place in the second quarter was $195 thousand and $79 thousand in the first quarter.  With the permanent funding in place, these additional financing costs are not expected to recur in the future and the rate of growth of the Quebec portfolio can continue unimpeded.

Fee Revenue

Fee and ancillary revenue for the second quarter of 2019 was $623 thousand, as compared to $482 thousand in the first quarter and $587 thousand in the second quarter of 2018. In addition, management is also actively exploring various partnership opportunities as additional sources of revenue. 

Call Centre Performance

Starting in the fourth quarter of 2018, the Company's Call Centre segment has secured the renewal or re-awarding of all of its major accounts, and has become a leading omnichannel solutions provider.  Over the last three years, non-voice work (e.g., email, SMS, chat-based support) has grown from 4% of revenue to approximately 22%. In addition, the call centres have continued to increase their service offerings to the Company's Consumer Finance segment to include payment processing, generating new dealer leads and first-party collections support. 

Operating Expenses

Salaries, wages and benefits together with general and administrative expenses totaled $3.2 million, an improvement of 4% relative to the $3.3 million recorded in the same period last year. The current quarter was impacted by a higher level of professional fees and other non-recurring items.

Key Performance Indicators

The following table summarizes some of the Key Performance Indicators that the Company uses to measure the achievement of its business plan objectives:


Q2 2019

Q1 2019

Q2 2018

Finance Receivables

$188.7M

$185.9M

$174.3M

Organic Originations

$12.9M

$12.5M

$9.5M

Average Yield on Earning Assets

9.1%

9.1%

8.7%

Weighted Average Interest Expense *

5.2%

4.9%

4.5%

Net interest margin *

3.9%

4.2%

4.2%

Call Centre Gross Margin

36%

35%

36%

Tangible Leverage

5.5

5.3

11.8

Tangible Net Worth

$33.8M

$34.4M

$15.3M

Direct Operating Expense Ratio

6.8%

6.1%

7.7%





*

The 2019 metrics were impacted by the interim funding facility for Quebec portfolio

 

For the three-month period ending June 30, 2019, the Company reported a net loss of $593 thousand or $(0.00) per share versus a net loss of $614 thousand or $(0.00) per share in the previous three-month period and a net loss of $51 thousand or $(0.00) per share for the same period last year.

The financial statements for the three-month and six-month periods ending June 30, 2019 together with management's discussion and analysis of these results have been filed on SEDAR and are available on the Company's website at www.dealnetcapital.com.

The Company will host a conference call to discuss these results on August 14, 2019 commencing at 10:00 A.M. Eastern Time.

Conference Call Details:




Date:

Wednesday August 14, 2019

Time:

10:00 A.M. Eastern Time



Dial-in Number:

Local / International: 416-764-8688


North American Toll Free: 1-888-390-0546



Conference ID:

18711094



Replay Number:

Local / International: 416-764-8677


North American Toll Free: 1-888-390-0541


Replay Passcode: 711094#



Website:

http://www.dealnetcapital.com/investors/

 

About Dealnet Capital Corp.

Dealnet is the parent company of subsidiaries operating in two market segments, consumer finance and call centre. The Company operates in the consumer finance segment in Canada through EcoHome Financial Inc. ("EcoHome") and its call centre segment under the One Contact banner ("One Contact").

EcoHome is a specialty finance company serving the $20 billion Canadian home improvement finance market. EcoHome develops and supports consumer sales financing programs for approved dealers and distributors under agreements with original equipment manufacturers (OEMs) that supply a wide range of home improvement products to the retail market. Through a dealer network, EcoHome underwrites, originates, funds and services the prime quality loans and leases that homeowners need to finance the acquisition and installation of capital assets that improve the quality, comfort and safety of their homes.

One Contact offers customer support services to both EcoHome and third-party institutions across Canada and the U.S.

For additional information please visit www.sedar.com.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward-looking Statements

This news release contains certain "forward-looking information" within the meaning of applicable securities law. Forward looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "would", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur. These statements are only predictions. Forward-looking information is based on the opinions and estimates of management at the date the information is provided, and is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. For a description of the risks and uncertainties facing the Company and its business and affairs, readers should refer to the Company's Management's Discussion and Analysis. The Company undertakes no obligation to update forward-looking information if circumstances or management's estimates or opinions should change, unless required by law. The reader is cautioned not to place undue reliance on forward-looking information.

SOURCE Dealnet Capital Corp.

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