CHESSWOOD ANNOUNCES FISCAL YEAR 2023 RESULTS
Year End Highlights
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Total originations of
$1.2 billion (2) for the year endedDecember 31, 2023 , a decrease of 31.4% (from$1.7 billion (2)) from the prior year due to tightened credit standards and higher loan pricing. -
During the year ended
December 31, 2023 , the Company continued entering into new agreements with investment managers and financial institutions for the non-recourse sale of leases and loans in exchange for fees. During the year endedDecember 31, 2023 ,$454.9 million ofU.S. and Canadian finance receivables were sold under such arrangements (year endedDecember 31, 2022 -$270.1 million ). -
Chesswood andWafra Inc. formed a joint venture company to invest in equipment leases and loans originated by theU.S. Equipment Financing Segment, targeting$1 billion in total acquisitions. -
Positive 2023 Free Cash Flow of
$3.8 million (1). Elevated general and administrative expenses occurred in the fourth quarter of 2023 due to the Wafra transaction closure.
"Like many other financial services companies, 2023 has been a challenging year for
"A closer look at
"As we enter 2024, we are excited to announce that we have begun selling receivables to our new joint venture company with Wafra. Wafra significantly impacted our off-balance sheet program and provides
On
Summary of
2023 Full Year
The Company reported a consolidated net loss of
Interest expense increased by
The
During the year ended
The Canadian Consumer Financing Segment generated revenue of
The Canadian Auto Financing Segment generated revenue of
Q4 2023
The Company reported consolidated net loss of
Despite a
The
During the three months ended
The Canadian Consumer Financing Segment generated revenue of
During the three months ended
Outlook
Following year end, we completed our first sale of receivables to the joint venture company which Wafra created with us. This new structure allows
As a result of our ongoing emphasis towards asset management, we expect a substantial portion of our originated assets to be held in off-balance sheet structures going forward, thereby enabling us to invest equity with partners or in new opportunities, all while our operating companies receive a steady fee stream.
While we remain cautious on general economic conditions, we have taken the necessary steps to position the company to capitalize on future business opportunities.
Consolidated Operating and Financial Results |
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Financial Highlights |
For the Three Months |
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For the Year |
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(in CDN |
Ended |
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Ended |
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2023 |
2022 |
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2023 |
2022 |
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Revenue |
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Interest expense |
(32,192) |
(26,875) |
|
(123,921) |
(73,379) |
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Net charge-offs |
(25,099) |
(8,514) |
|
(72,525) |
(17,553) |
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17,468 |
41,687 |
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119,926 |
185,433 |
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Expenses: |
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Personnel |
(15,603) |
(15,528) |
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(61,771) |
(63,005) |
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Other expenses |
(13,225) |
(13,033) |
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(53,827) |
(45,823) |
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Depreciation |
(370) |
(423) |
|
(1,760) |
(1,765) |
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Adjusted Operating Income (Loss)(1) |
(11,730) |
12,703 |
|
2,568 |
74,840 |
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Increase in allowance for expected credit losses |
(6,609) |
(1,834) |
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(14,633) |
(26,762) |
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|
(22,886) |
— |
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(22,886) |
— |
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Amortization – intangible assets |
(708) |
(591) |
|
(2,785) |
(2,435) |
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Operating income (loss) |
(41,933) |
10,278 |
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(37,736) |
45,643 |
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Other non-cash items |
1,219 |
(461) |
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659 |
(1,464) |
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Income (loss) before taxes |
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Net income (loss) |
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Earnings (loss) Per Share – Basic |
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Earnings (loss) Per Share – Diluted |
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Free Cash Flow (1) |
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Free Cash Flow Per Share – Diluted |
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(1) - See Note (1) below related to NON-GAAP Measures |
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(1) "Adjusted Operating Income (Loss)" and "Free Cash Flow" and other non-GAAP measures as defined below, are not recognized measures under International Financial Reporting Standards and do not have standardized meanings. Therefore, these measures may be different from similarly labelled measures presented by other companies. Furthermore, these measures are based primarily on the significant banking and lending agreements of the Company and its subsidiaries to determine compliance with financial covenants and calculate permitted dividends and cash available for purchases of shares under the Company's normal course issuer bid.
"EBITDA" is net income (loss) as presented in the audited consolidated statements of income (loss), adjusted to exclude interest expense, income taxes, depreciation and amortization and goodwill and intangible asset impairment. EBITDA is included in one of the Company's significant bank agreements where it is used for financial covenant purposes.
"Adjusted EBITDA" is EBITDA as further adjusted for inclusion of interest on debt facilities as a deduction from net income (loss), and the removal of other non-cash or non-recurring items such as (i) non-cash gain (loss) on financial instruments and investments, (ii) non-cash unrealized gain (loss) on foreign exchange, (iii) non-cash share-based compensation expense, (iv) non-cash change in finance receivable allowance for ECL, (v) restructuring and other transaction costs, and (vi) any unusual and material one-time gains or expenses. Adjusted EBITDA is a measure of performance defined in one of the Company's significant bank agreements and is the basis for the Company's Free Cash Flow calculation. Adjusted EBITDA is therefore included as a non-GAAP measure relevant for a wider audience of the Company's financial reporting users.
"Adjusted Operating Income (Loss)" is operating income (loss) as presented in the audited consolidated statements of income (loss), adjusted to exclude the amortization of intangible assets and the change in allowance for ECL. Adjusted Operating Income (Loss) is intended to reflect the recurring income from the Company's businesses. Amortization of intangible assets, which includes the expense related to broker relationships and software, is a function of acquisitions. Once these acquisition-related intangibles have been fully amortized they are not replenished, and the amortization expense will cease. The change in the allowance for ECL can be calculated from the continuity of the allowance for ECL in Note 6(c) - Finance Receivables in the audited consolidated financial statements as the difference between the provision for credit losses and the net charge-offs during a period. The change in allowance for ECL is a non-cash item. It reflects our creditor-approved formulas for Adjusted EBITDA and Free Cash Flow that drive our maximum permitted dividends, both relevant measures for the Company's financial reporting users.
"Free Cash Flow" or "FCF" is Adjusted EBITDA less maintenance capital expenditures, the tax effect of the non-cash change in the allowance for ECL and tax expense. Cash receives significant attention from primary users of financial reporting. Free Cash Flow provides an indication of the cash the Company generates that is available for servicing and repaying debt, investing for future growth and providing dividends to our shareholders. The FCF measure provides information relevant to assessing the Company's resilience to shocks and the ability to act on opportunities. Free Cash Flow is a calculation that reflects the agreement with one of the Company's significant lenders as a measure of the cash flow produced by the Company's businesses in a period. It is also management's view that the measure reduces the impact of significant non-cash charges and recoveries that do not reflect the actual cash flows of the businesses, and can vary considerably in amount from period to period.
"Free Cash Flow per share - Diluted" is FCF divided by the weighted average number of shares outstanding (including
(2) Origination volumes include contracts that were originated by the Company's segments and sold to investment managers and financial institutions.
ABOUT
For information on
www.ChesswoodGroup.com
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www.Rifco.net www.WaypointInvestmentPartners.com
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