If economic conditions continue to be ideal and the company can deliver the same amount of loans in the future, growth investors will appreciate this name. The company reported revenue growth of 9.89% y/y in December 2017, amounting to $639 million. Source: Prospectus Profitable Company With 9.89% Revenue Growth y/y The image below provides the list of contractual obligations: Debt holders could own the company, and nothing could be left for shareholders. If certain loans are not paid, the company may need to acquire new debt, which should be even more worrying. As of today, the company does not have liquidity to pay these contractual obligations. In addition, Exeter Finance accepted to pay 8.75% senior notes due in June 2023, which may scare certain investors. In total, the company will have to pay a total amount of contractual obligations of $3.876 billion. The company will have to pay $1.375 billion in less than a year and $1.788 billion in one to three years. The most worrying are the company’s contractual obligations. Shareholders provided only $0.396 billion as shown in the image below: The company reported financial debt of $2.99 billion in notes payables and senior notes of $175 million. Source: Prospectus The Company Financed Its Activity With Notes PayablesĪs of September 28, 2018, the type of liabilities, the contractual obligations and the interest being paid may scare certain investors.
The image below provides further details on the total amount of assets: Investors should understand that if a few loans are not returned, the company may face solvency issues in the following years. 89% of the total amount of assets is represented by loans to be received. The company reported $2.76 billion in loan receivables in December 2016 and $3.54 billion in September 2018. The largest amount of loans to be received was given before 2016. The lines below provide further details on this matter:Īs of September 30, 2018, the company reports an asset/liability ratio of 1.34x. Keep in mind that it may have to negotiate a new lease agreement in less than a year. Investors may want to remember these date as the company may have to pay a bit more for leasing space from 2019. The agreements will expire in 2019, 2023, and 2024. The company’s head office is in Texas, where Exeter signed lease agreements for a 45,000 square foot, a 50,000 square foot and a 93,000 square foot facility. The image below provides further details about the company’s relationship with its employees: Keep in mind that the company commenced its business in 2005, so it has hired on average 83 employees per year. The number of employees is elevated, equal to 1,000 employees. With the technology owned, Exeter Finance seems to be able to grow its revenues to higher marks without compromising on credit performance. In addition, the business model seems to be quite scalable. The company notes in the prospectus that the extensive amount of data analyzed and the advanced analytics have permitted to obtain earnings growth. It should be quite convenient for consumers. With the use of these algorithms, the credit models permit dealers to obtain a credit decision within 30 seconds. The company seems to be making extensive use of technology-enabled processes that permit modeling risk-adjusted pricing and predictive loss forecasting. When the economy performs, these loans are very profitable, but when it does not, they become a major issue.
However, investors should understand very clearly that the delinquency ratio on these loans should be elevated. The rates and the net income generated should be ideal. The company seems to be providing loans to individuals with high risk. The lines below provide further details on how FICO Score ranks borrowers.
As of September 30, 2018, the company had a total amount of retail installment contracts with an average FICO Score at origination of 567 worth $4 billion. The amount of money managed is quite large. In addition, the company underwrites, purchases and securitizes retail installment contracts, among other services. These features don’t make Exeter Finance a buy.įounded in 2006, Exeter Finance is a data-driven specialty finance company offering automobile loans in the United States. Finally, the proceeds will be used to acquire shares from existing shareholders along with other purposes. Additionally, investors will not appreciate that Exeter Finance expects to be controlled after the IPO. Without a lot of cash in hand, if delinquency ratios increase, the company may need to raise further capital or increase its debt. Firstly, the company will have to pay contractual obligations of $1.375 billion in less than a year and $1.788 billion in one to three years. While revenue growth and net income growth have been quite impressive in the last three years, Exeter Finance ( XTF) seems a risky bet right now.
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