Weaker than planned revenue performance in the quarter reduced earnings by approximately $0.2 million. This was caused by a 1.7% reduction in same-store revenues and higher than expected pick-ups and pay-offs from the Insta-rent acquisition.
David Ingram, President and CEO, easyhome

easyhome Ltd. (TSX:EH), Canada's leading rent-to-own company, today announced its revenue for the first quarter ended March 31, 2009 increased 10.2% to $43.9 million compared with $39.8 million in the first quarter of 2008. Operating income was $4.4 million, down from $5.7 million for the first three months of 2008. Net income for the first quarter fell to $2.4 million compared with $3.5 million for the same period last year.

easyhome said its net income "was adversely affected by a non-cash future income tax charge of $0.3 million as a result of timing changes in the expected utilization of our future tax assets. Net income adjusted for the future tax charge was $2.7 million. Diluted earnings per share were $0.23. Adjusted diluted earnings per share were $0.26 compared with $0.33 in 2008."

Commenting on the results, David Ingram, President and CEO, stated, "While I am pleased to report that our commitment to earnings growth has resulted in sequential improvement for the last two quarters, we remain absolute in our resolve to manage further reduction to our cost ratios. Overall, operating margin improved from 7.7% in the fourth quarter to 10.0% in the first quarter. These efficiency improvements were a result of targeted operations execution, minimal distraction of new initiatives, reduction in capital outlays, and improved staff retention. Cash flow from operating activity was $5 million, which allowed debt repayment of $3.4 million in the quarter, which positions the Company to meet its 2009 target of $10 million in debt repayment."

Ingram added, "Revenue performance was mixed across our major business units during the quarter, with Canadian stores positive 5.5%, while the US leasing business more than quadrupled, and easyfinancial more than doubled. Our communication objective in 2009 is to build awareness of the leasing alternative, emphasizing the benefits that this affords, particularly "No credit needed" and "No debt". Although this is a difficult operating environment for most retailers, we believe it is the right time to increase our marketing spend, to promote our access model, and continue to expand each business segment. To this end, we remain optimistic for continued improvement in revenue and earnings for the balance of the year."

Factors Affecting Performance

"Our 35.9% improvement in earnings over the fourth quarter of 2008 was driven primarily by a reduction in charge-offs and increased margins on our lease agreements.

Despite the earnings improvement over the fourth quarter, the Company's adjusted net income in the quarter was down $0.8 million or 26.4% from the first quarter of 2008, which was the Company's most profitable on record. The shortfall was attributable to two factors.

First, expense management was not as efficient as in the first quarter of 2008, which caused approximately $0.6 million of the shortfall. We believe the Company will realize cost efficiencies in the ensuing quarters due to the relatively low number of corporate store openings in the quarter (which will reduce the related short-term earnings drag), and continued operational focus in the areas of labour, store costs, and charge-offs.

Second, weaker than planned revenue performance in the quarter reduced earnings by approximately $0.2 million. This was caused by a 1.7% reduction in same-store revenues and higher than expected pick-ups and pay-offs from the Insta-rent acquisition. Subsequent to the end of the quarter, the Company made a series of operational adjustments, which have resulted in the Company growing its customer base faster in April 2009 than April 2008. The combination of these factors is expected to result in increased same-store sales of 0-3% in the second quarter.

During the first quarter easyfinancial earned just under $0.2 million, more than it earned during the entirety of fiscal 2008. The improved earnings was attributable to i) the increased size of the loan portfolio, which grew to $4.3 million and ii) a reduction in bad debts expense, as a percentage of revenues, due to stricter lending criteria. In addition, the Company's franchise operations continue to make progress. By quarter end we had entered into franchise agreements to develop 38 stores across five states. Shortly after quarter end, two of these stores were opened, one in Austin, Texas and the other in Geyer Springs, Arkansas.

Donald K. Johnson, Chairman of the Board, commented, "The management team is delivering on the commitments it made to the Board at the end of 2008. They have improved operating margins, minimized store openings to better focus on execution, and strengthened the balance sheet by reducing the company's debt. We are confident that the Company is on track to meet its targets in 2009, and to generate long-term value for shareholders."

The Board of Directors has approved a dividend payment of $0.085 per share payable on July 3, 2009 to the holders of common shares of record as at the close of business on June 16, 2009.

About easyhome

As of December 31, 2008, easyhome Ltd. had 229 stores, including 209 Canadian corporate stores, eleven U.S. corporate stores, three U.S. franchised stores, five Canadian franchised stores and one licensed Canadian store.