U.S. Markets open in 8 hrs 56 mins

Dealnet Reports Third Quarter 2019 Financial Results

  • Net loss of $386 thousand , an improvement of 35% over the second quarter and 89% over the same quarter in 2018
  • Originations increased 39% over the same period in 2018 with continued strong credit quality and yield
  • Renewal of two primary funding facilities, with enhancements to cash flow, eligibility criteria and support for pilot programs for non-prime lending
  • Record fee revenue of $842 thousand in the quarter, 35% and 41% above the second quarter of 2019 and the third quarter of 2018, respectively
  • Sufficient liquidity and capital to fund the current growth rate for the foreseeable future


TORONTO , Nov. 7, 2019 /CNW/ - Dealnet Capital Corp. ("Dealnet" or the "Company") (TSX VENTURE: DLS), reported today its financial results for the three-month and nine-month periods ending September 30, 2019 . All results are reported under International Financial Reporting Standards ("IFRS") and in Canadian dollars, unless otherwise specified.

For the three-month period ending September 30, 2019 , the Company reported a net loss from continuing operations of $386 thousand or $(0.00) per share versus a net loss of $593 thousand or $(0.00) per share in the previous three-month period and a net loss of $3.4 million or $(0.01) per share for the same period last year.  The current period loss represents an improvement of 35% and 89% over the second quarter of 2019 and third quarter of 2018, respectively.

On November 7, 2019 , the Board increased the portion of share-based compensation for Management's 2019 and 2020 performance bonuses.  Part of the 2019 bonuses will be taken via stock options while in 2020 a significant portion of management's bonuses will be paid in deferred share units ("DSUs").  By increasing the portion of share-based compensation and by decreasing the amount of cash paid, management and shareholder interests continue to be aligned.

"Over the last two years, management has demonstrated its ability to perform.  The turnaround was completed without dilution, growth was reignited and we have built a solid springboard to capitalize on game-changing opportunities," said Brent Houlden , Dealnet's Chief Executive Officer. "Upcoming cash inflows starting in 2022 provide Dealnet with value-enhancing options for shareholders," added Mr. Houlden.

The following are highlights from the quarterly results:

Liquidity

Cash and cash equivalents increased $528 thousand to $7.3 million at September 30, 2019 from $6.8 million as at June 30, 2019 .

Originations and Portfolio Growth

The Company's Consumer Finance segment posted third quarter originations of $16.1 million , an increase of 39% over originations of $11.5 million reported in the third quarter of 2018.  The average credit score and average yield for originations in the third quarter of 2019 was 732 and 9.3%, respectively, versus 706 and 9.4% for the same period last year.  The Company's net portfolio of finance receivables has now increased to $193.9 million and over 37,000 contracts from $177.6 million and 34,000 contracts as at September 30, 2018 .

Net Interest Margin

Net interest margin increased to $2.0 million (4.1% yield) for the quarter ended September 30, 2019 from $1.8 million (3.9% yield) for the quarter ended June 30, 2019 and $1.9 million (4.3% yield) from the same period in 2018.  Interest income increased to $4.3 million for the three-month period ended September 30, 2019 (9.0% yield) from $4.2 million (9.1% yield) for the previous three-month period and $3.9 million (8.8% yield) for the same period last year.  Interest expense decreased to 4.9% of average earning assets in the third quarter of 2019 from 5.2% in the previous quarter and 4.5% for the same period last year.  The increased interest expense as compared to the prior year is attributable to the change in mix of secured borrowings associated with the repayment of historical tranches funded at lower rates and the addition of newer tranches funded at higher rates.

Fee Revenue

Fee and ancillary revenue was a record $842 thousand for the third quarter of 2019 driven by higher origination volumes, as compared to $623 thousand in the second quarter and $598 thousand in the third quarter of 2018.

Portfolio Performance

The aging profile of the finance receivable portfolio improved meaningfully over comparative periods.  Overall delinquency rates dropped to 4.6% as at September 30, 2019 as compared to 5.8% in both the prior quarter and the same quarter in 2018.  The primary driver of this decline was in the less than 90 days bucket which fell to 1.0% as compared to 2.0% as at December 31, 2018 and 2.1% as at September 30, 2018 .

Call Centre Performance

Call Centre gross margin was $816 thousand (34%) for the current quarter, as compared to $861 thousand (36%) in the second quarter of 2019 and $762 thousand (37%) in the third quarter of 2018.

Operating Expenses

Salaries, wages and benefits together with general and administrative expenses totaled $3.1 million , an improvement of 5% relative to the $3.2 million recorded in the prior quarter and a 17% improvement over the $3.7 million recorded in same period last year.  The third quarter of 2018 was impacted by $565 thousand of severance costs. 

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:


Q3 2019

Q2 2019

Q3 2018





Finance Receivables

$193.9M

$188.7M

$177.6M

Organic Originations1

$16.1M

$12.9M

$11.5M

Average Yield on Earning Assets1

9.0%

9.1%

8.8%

Weighted Average Interest Expense1

4.9%

5.2%

4.5%

Net Interest Margin1

4.1%

3.9%

4.3%

Call Centre Gross Margin

34%

36%

37%

Corporate Tangible Leverage Ratio1

5.5

5.5

4.7

Tangible Net Worth1

$33.5M

$33.8M

$35.2M

Direct Operating Expense Ratio1

6.3%

6.8%

8.3%



(1)

Non-GAAP Measures   




The Company uses a number of financial measures to assess its performance.  Some of these measures are not calculated in accordance with GAAP, are not defined by GAAP, and do not have standardized meanings that would ensure consistency and comparability between companies using these measures.  Please refer to the Company's third quarter Management Discussion and Analysis for additional information concerning these measures.

 

The financial statements for the three-month and nine-month periods ending September 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.

Q3 Video Broadcast:

A video broadcast summarizing the third quarter financial results will be posted to the Dealnet corporate website at www.dealnetcapital.com.

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.


View original content: http://www.newswire.ca/en/releases/archive/November2019/07/c8738.html