New Management Team Protecting Shareholder Value Following Small’s Destructive Tenure at Dealnet - Seite 2

Under Houlden’s leadership, Dealnet has now reached the 2016 origination highs but with a 37% higher risk adjusted margin – better credit quality, better yield, better dealers, better cost of funds and no subprime business. The cumulative default rate of originations under the new management team are tracking under 2%, versus the 2016 cumulative default rate of 15% under Small.

Under the prudent business skills of the new leadership team, EcoHome’s net asset value has grown by over 8X from acquisition date. In addition, EcoHome has contractual residual cashflows of $75M commencing in 2022 and the new management team has taken proactive enforcement actions to gain access to the rights to end of term payments on 16,000 leases.  

Call Centre Business Posted Significant Operating Losses Under Small, Now Profitable and Growing

On September 30, 2015, Small championed the purchase of Gemma Communications for $3.7M. Following its purchase, Gemma incurred operating losses of $9.5M. In order to stem the operating losses, the new leadership team was forced to put Gemma Communications into bankruptcy on March 9, 2018.

One Contact also had a history of significant operating losses, but was turned around by the new leadership team and has now achieved eight consecutive profitable quarters.  Today, One Contact is a well-managed business which has increased its gross profit to 36%, retained its customers, incurred no service level penalties in 2019 and is winning new profitable accounts while deploying its omnichannel capabilities and leading technology. 

Small’s Excessive Overhead Spending Brought Under Control

In Q4 2016, overheads were $6.8M as Small and management rewarded themselves for three quarters of EcoHome growth, just prior to delinquencies skyrocketing and originations cratering. Since the end of the turnaround in Q3 2018, management has lived up to its commitment to keep overheads at $3M per quarter.  As the business has grown, overheads as a percentage of the finance receivable book value have declined from over 5% to approximately 1%.   

Protecting Shareholder Value

While taking the necessary steps to turn Dealnet around, the new leadership team has protected shareholder equity by avoiding shareholder dilution. There have been six quiet quarters since the completion of the turnaround in the third quarter of 2018, and Dealnet continues its path to profitability.