Solution Financial Reports Record Q3 2020 Financial Results, Conversion of Debentures into Equity and Increase to Bank Leasing Facility
Vancouver, British Columbia--(Newsfile Corp. - September 23, 2020) - Solution Financial Inc. (TSXV: SFI) (the "Company") a leading provider of luxury automotive and yacht leasing in western Canada, today announced its financial results for the third quarter ending July 31, 2020 along with conversion of $1,380,000 of convertible debentures into common shares and a $2,500,000 increase to its Bank Leasing Facility.
Earnings Highlights for the Third Quarter:
- Net income increased to a record $235,222 and Adjusted net income(1) increased to a record $301,084.
- Net revenue increased 58% over the prior year quarter to a record $3,936,630.
- Total lease and finance portfolio grew 2.9% to $25,361,020 over the prior quarter.
- Quarterly dividend on common shares of $0.001 per share or roughly 1% returns at the Company's current share trading price of $0.44 per share.
"Business remains very good despite the COVID-19 as we originated $4,565,205 of new in-house vehicle leases in the quarter compared to only $3,952,223 during the same quarter in the previous year which is a healthy 15% increase," began Bryan Pang, the Company's CEO.
"We attribute this increase to a strengthening of the real estate markets in western Canada, the weakening Canadian dollar and our expansion into Alberta. Most of our clientele are very wealthy and their spending is likely tied to the value of their underlying assets which include real estate and financial assets impacted by the US dollar. We saw an uptick in the real estate markets over the summer compared to significant drops in 2019 and with the drop in Canadian dollar from 2019 to 2020, luxury vehicles seem comparatively inexpensive. We also saw a lot of repeat customers who do not seem to be overly impacted by COVID-19," continued Bryan.
"This continued growth also resulted in record earnings for us in both top line revenue, bottom line earnings and adjusted net income or cash profits. Our in-house portfolio has grown over 167% since we went public in 2018 and our portfolio is generating average returns at over 14% with little to no increases in our operating costs. Vehicle sales on end-of-lease and wholesale brokered revenues also remained strong at $1.8 million during the quarter. We also concluded some tax planning initiatives that further improved our net earnings," added Bryan.
"Our next highest priority will be securing additional equity financing and looking at how best to leverage our strong portfolio position to continue expanding into other markets in Canada that are ideally suited to our unique leasing model. We are thrilled to have recently converted all of our 3.99% convertible debenture holders into equity which is a great start to this initiative. In addition, our banking partner added $2,500,000 of leasing capacity to our facility which bears interest at prime plus 1.2% to bring our total leasing bank facility to $12,500,000," concluded Bryan.
Solution is reporting a net income of $235,222, or $0.003, per share for the quarter ending July 31, 2020. This compares to a net income of $98,565 or $0.001 per share for the quarter ending July 31, 2019.
Adjusted net income for the quarter ending July 31, 2020 was $301,084 (1) or $0.004 per share compared to $228,261 or $0.003 per share for the quarter ending July 31, 2019. Adjusted Net Income excludes the non-cash accretion interest expense related to the convertible debentures of $50,649, share-based compensation expense of $4,720 for stock compensation and amortization expense of $10,493.
Our operating cash flow for the nine months ended July 31, 2020 increased to $4,667,047 compared to $4,266,065 for the nine months ended July 31, 2019.
At July 31, 2020, Solution had 337 vehicles in our In House lease portfolio, with 41 new vehicles added to the portfolio during the quarter less 36 end-of-lease or upgrade sales resulting in a net increase of $714,672 during the quarter to bring the total lease portfolio to $25.4 million.
At July 31, 2020, the average remaining lease term for the portfolio was 21.12 months, weighted by net book value for each vehicle. At July 31, 2020, Solutions' 337 leases were generating annualized rental revenue of approximately $15.7 million, a 43% increase during the quarter.
Solution Financial commenced operations in 2004 and specializes in sourcing and leasing luxury and exotic vehicles, yachts and other high value assets. Solution works with a select group of automotive and marine dealerships providing lending solutions to clients who cannot obtain leasing terms with traditional Canadian financial institutions or other lenders. Typical customers include new immigrants, business owners and international students. Solution Financial provides a unique leasing experience whereby it partners with its clients to help them navigate the challenges of acquiring, insuring, maintaining and upgrading vehicles and luxury assets in Canada.
Note 1- Non-IFRS Financial Metrics
Solution provides all financial information in accordance with International Financial Reporting Standards ("IFRS"). To supplement our consolidated financial statements presented in accordance with IFRS, we are also providing with this press release, certain non-IFRS financial measures, including Adjusted Net Income to help investors better quantify our cash earnings. In calculating these non-IFRS financial measures, we have excluded certain transactions that are not necessarily indicative of our ongoing operations or do not impact cash flows.
Cautionary Statement Regarding Forward- Looking Statements
This press release contains "forward-looking information" as defined under applicable Canadian securities laws. This information includes, but is not limited to, statements concerning our objectives, our strategies to achieve those objectives, as well as statements made with respect to management's beliefs, plans, estimates, projections and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking information generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "should", "plans" or "continue", or similar expressions suggesting future outcomes or events. Such forward-looking information reflects management's current beliefs and is based on information currently available to management. Although forward-looking information contained in this press release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with this forward-looking information. Certain statements included in this press release may be considered a "financial outlook" for purposes of applicable Canadian securities laws, and as such the financial outlook may not be appropriate for purposes other than this press release.
The forward-looking information contained in this press release is made as of the date of this press release and should not be relied upon as representing Solution's views as of any date subsequent to the date of this press release. Except as required by applicable law, management and Solution's Board of Directors undertake no obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.
For further information please contact Sean Hodgins at (778) 318-1514.
ON BEHALF OF THE BOARD
(signed) "Bryan Pang"
President, CEO and Director
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