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22.05.2019 01:51
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Dealnet Reports First Quarter 2019 Financial Results

DRUCKEN
  • Record Q1 originations increased 35% over the same period in 2018 with improved credit quality and yield
  • Almost 60% of last year's One Contact's revenue has been renewed in multi-year contracts, at increased rates
  • In May 2019, $5.5 million of Quebec originations were securitized at substantially lower cost of funds

TORONTO, May 21, 2019 /CNW/ - Dealnet Capital Corp. ("Dealnet" or the "Company") (TSX VENTURE: DLS), reported today its financial results for the three-month period ending March 31, 2019. All results are reported under International Financial Reporting Standards ("IFRS") and in Canadian dollars, unless otherwise specified.

"With a record level of first quarter originations, the financial results were as expected," said Brent Houlden, Dealnet's Chief Executive Officer. "A key strategic achievement subsequent to the end of the quarter was the securitization of $5.5 million of Quebec originations at a significantly lower cost of funds.  We're off to a great start for 2019 and the management team is very excited for the remainder of the year as we grow to scale," added Mr. Houlden.

The following are highlights from the quarterly results:

Originations

The Company's Consumer Finance segment posted first quarter originations of $12.5 million, an increase of 35% over originations of $9.3 million reported in the first quarter of 2018.  The Company typically experiences a seasonal decline in originations between the fourth quarter of one year and the first quarter of the next year.  The 11% decline in originations in the first quarter of 2019 from the $14.0 million originated in the fourth quarter of 2018 was significantly lower than the 21% seasonal decline experienced over the comparable period last year.   It is important to note that the year-over-year increase in origination volume in the first quarter of 2019 was not achieved at the expense of either credit quality or yield.  The average credit score and average yield for originations in the first quarter of 2019 was 734 and 9.6% respectively versus 726 and 8.9% for the same period last year.

Net Interest Margin

Interest income increased to $4.1 million for the three-month period ended March 31, 2019 (9.1% yield) from $3.9 million (8.7% yield) for the previous three-month period and $3.8 million (8.9% yield) for the same period last year. Interest expense increased to 4.7% of average earning assets in the first quarter of 2019 from 4.5% of average earning assets in the previous quarter and 4.5% of average earning assets 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 will be repaid in full when $5.5 million of receivables are securitized with our LifeCo. funding partner. Net interest margin for the first quarter was $1.9 million (4.2% yield), in line with the fourth quarter of 2018 (4.3% yield) and an increase from the $1.8 million (4.4% yield) in the first quarter of the prior year.

Call Centre Gross Margin

Gross margin for the Company's call centre operations was $0.7 million (35% margin), an improvement over the $0.6 million (27% margin) in the fourth quarter of 2018 and the $0.6 million (18% margin) in the first quarter of 2018, which included the results of Gemma. The Company's call centre business has secured the renewal or re-awarding of accounts that together represent almost 60% of last year's annual revenues of One Contact. All of these awards represent multi-year contracts and include increased billing rates and margin forecasts.

Operating Expenses

Salaries, wages and benefits together with general and administrative expenses were held constant at $2.8 million in the first quarter of 2019 relative to the previous three-month period but declined by 33% from the same period last year. Consolidated operating expenses were $3.2 million in the first quarter as compared to $3.0 million in the previous quarter and $6.3 million for the first quarter of 2018.  Both comparative quarters were impacted by the results of Gemma.  After adjusting for Gemma, operating expenses would have been $3.1 million for the previous three-month period and $4.6 million for the same period last year.

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:



Q1 2019

Q4 2018

Q1 2018

Finance Receivables


$185.9M

$182.8M

$172.9M

Organic Originations


$12.5M

$14.0M

$9.3M

Average Yield on Earning Assets


9.1%

8.7%

8.9%

Weighted Average Interest Expense


4.9%

4.4%

4.5%

Net interest margin


4.2%

4.3%

4.4%

Call Centre Gross Margin


35%

27%

18%

Tangible Leverage


5.3

4.9

11.9

Tangible Net Worth


$34.4M

$34.9M

$15.1M

Direct Operating Expense Ratio


6.1%

6.3%

9.7%

 

For the three-month period ending March 31, 2019, the Company reported a net loss of $614 thousand or $(0.00) per share versus a net loss of $382 thousand or $(0.00) per share in the previous three-month period and a net loss of $2.4 million or $(0.01) per share for the same period last year.

The financial statements for the three-month period ending March 31, 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 May 22, 2019 commencing at 10:00 A.M. Eastern Time.

Conference Call Details:

Date:                    

Wednesday May 22, 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:         

20462461



Replay Number:      

Local / International: 416-764-8677


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


Replay Passcode: 462461#



Website: 

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

 

About Dealnet Capital Corp.

Dealnet is a specialty finance company serving the $20 billion Canadian home improvement finance market. The Company 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. The Company runs its Consumer Finance segment through the operating business, EcoHome Financial Inc. Through a dealer network, the Company 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.

In addition, the Company operates its call center segment in the business communications industry in Canada and the U.S. under the One Contact banner, offering customer support services on a contract basis to the Company's Consumer Finance segment and to third party institutions.

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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