the future is now
2015 ANNUAL REPORT
2 | goeasy Ltd.
A new name, a renewed focus
2015 was a significant year in the history of the Company,
marked with the adoption of a new name—goeasy.
The name change reflected both the evolution of our
business and a commitment to embody goeasy’s values
in all interactions with our customers.
At goeasy, our customer is at the heart of everything
we do. We give them a second chance, even if they have
been denied access by traditional retailers and financial
institutions. Our customers are hard-working, family-focused
individuals that often live paycheque to paycheque with
little financial flexibility to deal with unexpected bills and
expenses. It is our goal to help these customers get back
on track to a better financial future.
Over the past several years we have worked hard to build
a foundation for future growth and success. We have
established a strong track record of growth. The future is now.
2015 Annual Report | 3
4 | goeasy Ltd.
goeasy Ltd.
goeasy is the leading full service provider of goods and alternative
financial services that improve the lives of everyday Canadians.
We serve our customers through two key operating divisions: easyhome and easyfinancial. easyhome offers customers
brand-name household furniture, appliances and electronics under flexible weekly or monthly lease agreements.
easyfinancial offers customers unsecured installment loans from $500 to $15,000.
Our products and services are offered through a number of channels – stores, transactional websites and through
our merchant partners, offering customers choice in how they transact with us. We differentiate ourselves from our
competitors by giving our customers access, relief and most of all, respect.
We say yes more than anyone else
We give everyday people who may have limited financial options access
to the things they need in their lives, when they need them most.
We give our customers a decision in minutes
We provide a sense of relief and hope through our customers having something
that was previously out of reach become a reality.
We have happy customers
We treat our customers with the respect they deserve by understanding
their needs and providing a full service solution that is delivered with the
highest level of customer service and transparency.
2015 Annual Report | 5
Highlights
2015 was the fourteenth
consecutive year of growing
revenues and delivering profits
Achieved 17.4% total revenue
growth and 16.3% same store
sales growth
Grew easyfinancial’s gross
consumer loans receivable
portfolio by a record of
$97.2 million to finish the year
with a gross consumer loans
receivable portfolio
of $289.4 million
Achieved 27.6% growth
in adjusted earnings and
26.1% growth in adjusted
earnings per share
Increased the available credit
facilities from $200 million
to $300 million to support
the growth of easyfinancial
while increasing flexibility and
decreasing the interest rate
Opened 64 new
easyfinancial locations
Increased quarterly dividend
by 25% from $0.10 per share
to $0.125 per share
Expanded the indirect lending
channel by partnering with a
large, national furniture retailer
and using a new point-of-sale
financing alternative
6 | goeasy Ltd.
Annual Revenue ($000s)
350,000
300,000
250,000
200,000
150,000
100,000
50,000
$ –
$304,273
CAGR = 11.5%
$259,150
$218,814
$199,673
$188,325
$168,189
$174,184
$158,081
$139,704
$116,334
$100,337
$86,070
$75,989
$65,936 $70,488
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Note: All revenue restated to IFRS
easyhome
easyfinancial
Normalized Net Income ($000s)
25,000
22,500
20,000
17,500
15,000
12,500
10,000
7,500
5,000
2,500
$ –
23,728
18,600
14,182
10,445
8,983
8,956
8,844
10,481
9,612
7,671
6,476
6,773
4,027
2,618
465
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Note: 2001 to 2009 amounts reported on a Canadian GAAP basis. 2010 to 2015 amounts reported under IFRS
Financial summary
(in $000s except per share amounts, store and employee counts, percentages and ratios)
2015
2014
2013
2012
2011
Net issuance of consumer loans receivable
132,201
101,021
Income statement
Revenue
Operating income
Net income
Diluted earnings per share
Balance sheet
Gross consumer loans receivable
Lease assets
Total assets
External debt
Shareholders’ equity
Cash flow
Purchase of lease assets
Purchase of property and equipment, intangibles and goodwill
Dividend payments
Annual dividend per share
Key metrics
Revenue growth
Same store revenue growth
Normalized Net Income1
Adjusted earnings per share1
Operating margin (adjusted)1
Return on equity (adjusted)1
External debt to shareholders’ equity
External debt to adjusted EBITDA1
Operations
Total store count:
easyhome
easyfinancial
easyfinancial branch openings
Employees
304,273
259,150
218,814
199,673
188,325
48,052
23,728
1.69
34,593
19,748
1.42
24,965
14,182
1.15
17,709
11,057
0.92
15,267
9,612
0.81
289,426
192,225
110,704
60,753
64,526
68,453
70,658
68,075
47,565
66,996
418,502
319,472
232,900
189,927
159,123
210,299
121,597
61,374
39,611
176,059
153,968
135,633
105,013
33,123
97,542
29,398
48,614
5,584
3,913
0.34
8.1%
8.2%
9,612
0.81
8.1%
44,709
10,880
5,164
0.40
49,066
12,339
4,527
0.34
17.4%
16.3%
18.4%
19.6%
23,728
18,600
1.69
15.8%
14.4%
1.19
3.71
1.34
12.9%
12.9%
0.79
2.91
52,152
49,423
11,233
4,060
0.34
9.6%
17.7%
14,182
1.15
11.4%
12.4%
0.45
2.01
31,425
55,446
11,630
4,038
0.34
6.0%
8.9%
10,481
0.87
8.7%
10.4%
10.2%
0.38
1.82
0.34
1.72
184
202
64
192
154
39
237
119
36
253
100
20
261
88
20
1,566
1,496
1,254
1,241
1,259
1Certain financial statement amounts have been adjusted to exclude unusual and non-recurring items. Further details on such adjustments can be found in the Management’s Discussion and Analysis.
2015 Annual Report | 7
2014 Annual Report | 7
“easyhome is a great company who helped me to get my furniture
when I was starting a new chapter in my life. Everyone who works
there is great and very friendly.”
– Karen
8 | goeasy Ltd.
easyhome
easyhome is Canada’s largest lease-to-own company. We
offer brand-name household furniture, appliances and
electronics to consumers under weekly or monthly lease
agreements. The access to merchandise that we provide
appeals to a wide variety of consumers who are looking
for alternatives to traditional retailers. These consumers
are attracted to a leasing transaction that does not involve
a credit check or initial down payment, and includes
delivery and set-up with the flexibility to terminate the
agreement at any time.
easyhome provides a more inviting retail experience than
any direct competitors, guarantees the lowest weekly
payment rates and services
its customers through
engaged and well-trained retail associates.
easyhome operates through both corporately owned and
franchised stores located across Canada. Additionally,
since 2013, the Company allows customers to enter
into merchandise leasing transactions through
its
e-commerce platform.
$152.6M
60,000
$60.8M
Revenue
Customers
Lease assests
184
Stores
Why easyhome is the better choice for customers
No credit
needed
Flexible
terms
Free delivery,
set-up & repairs
Lowest payment
guarantee
We approve 97% of
customers for leases.
All they need is a source
of income and a place
of residence.
Customers can make
weekly, bi-weekly or
monthly payments and
have the option to pay off
or cancel their agreement
at any time.
Our optional total
protection plan includes
product delivery, set up
and a full warranty.
Customers do not need to
shop around. We will beat
any competitor’s advertised
price by 10%.
2015 Annual Report | 9
“I cannot thank easyfinancial enough for your help and support. What might
be “just a day at work” for them is a life changer for me. A complete life
changer. Today, you helped me to start to climb back from the bottom.
The service I received was enthusiastic and supportive – and that is
exactly what I needed. Thanks for treating me with respect and dignity and
not making me feel embarrassed for my financial situation. The big banks
have a lot to learn from you and the service you provide. It’s a new day
for me and for my family!”
10 | goeasy Ltd.
– Matthew
easyfinancial
is one of Canada’s
easyfinancial
largest non-bank
personal loan providers and offers customers unsecured
installment loans from $500 to $15,000 with repayment
terms from 9- to 60-months. Customers can choose to
repay the entire loan balance at any time during the term
without penalty. As a credit-reporting lender, easyfinancial
positions its loan products as a vehicle to help rebuild
credit and provide access to financing for the everyday
Canadian consumer.
easyfinancial’s loans occupy a critical space in the marketplace,
bridging the gap between traditional financial institutions
and costly payday lenders. Traditional financial institutions
generally will not offer credit solutions to customers with
challenging financial situations or less-than-perfect credit.
Approximately 60% of easyfinancial’s customers have
been denied credit by these same traditional financial
institutions. Our consumers prefer to avoid the high fees
and onerous repayment terms imposed on them by payday
lenders (which could have an interest rate in excess of
500%). easyfinancial’s products appeal to these consumers
who are looking for alternatives.
easyfinancial transacts with its customers in store, on-line
and through point of sale financing. On-line and indirect
lending complement easyfinancial’s retail footprint to
increase brand awareness and maximize loan applications.
The loan products offered by easyfinancial carry a higher
risk of default than the loan products offered by traditional
banks and therefore have a comparatively higher yield.
The Company utilizes its extensive data set to develop
proprietary underwriting and credit scoring models that
optimize the balance between growth and controlling loan
losses. Taking advantage of the underwriting experience
gained since 2006, and including over $1.0 billion in credit
originations, the Company regularly enhances its lending
models to make better lending decisions, with a goal of
maximizing total long-term returns.
$151.7M
78,000
$289.4M
$1B+
Revenue
Customers
Gross consumer
loans receivable
Total loan
originations to-date
202
Branches
Why easyfinancial is the better choice for customers
Access to financing
Cheaper than Payday loans
Rebuild customer credit
Get customers back on track
60% of our customers
have been turned down
by a bank.
We provide our customers
with an alternative to the
high cost of payday loans
that can charge over
500% interest.
We report to the credit
bureaus allowing our
customers to rebuild
their credit.
80% of customers say they
struggle when a financial
emergency occurs.
2015 Annual Report | 11
Our mission is to be the leading
full service provider of goods and
alternative financial services that
improve the lives of everyday Canadians
12 | goeasy Ltd.
Message to shareholders
David Ingram, President & CEO
A track record of accomplishment
2015 was a year of accomplishments for goeasy. It was
our fourteenth consecutive year of growing revenues
and delivering profits. Since 2001, our total revenue has
seen a compounded annual growth rate of 11.5% while
net income has grown from a loss of $1.9 million in 2001
to net income of $23.7 million in 2015. The Company
once again delivered record levels of loan book growth,
revenue and profit. Our strong financial performance
and our confidence for the future allowed our Board of
Directors to approve a 25% increase to our quarterly
dividend beginning in the first quarter of 2016.
Our corporate strategy remains unchanged and is built on
three imperatives: evolve the delivery channels, expand
the size and scope of easyfinancial and execute with
efficiency and effectiveness across the organization.
Evolve the delivery channels
Over the last several years, we have developed multiple
delivery channels in response to consumer demand,
technology advancements and market opportunities.
Up until 2013, all of our interactions with our customers
occurred at a physical retail location. Today, more than
50% of our loan applications originate on-line.
Our transactional websites were launched in 2013 and
significantly enhanced in 2015 to improve the customer
experience, better explain the value proposition and
streamline the application process. We will continue to
invest in this technology. The analysis of transactional
performance data and the enhanced transactional websites
will allows us to continue to optimize these channels.
In 2015, we launched our indirect lending platform with a
large, national furniture retailer to provide its customers
that do not qualify for traditional prime credit with a new
point-of-sale financing alternative. This is the first step
in our broader strategy of developing the indirect lending
channel where we will offer our loan products at the point
of sale in the home furnishing, health care and automotive
repair sectors.
We developed an industry leading and proprietary mobile
tablet solution to allow our merchant partners to process
credit applications right in their store and receive an instant
credit decision. By leveraging automated authentication
tools, custom credit models, personal
identification
scanning technology and digital documents, we are able
to process paperless loans in minutes.
Expand the size and scope of easyfinancial
We continue to expand the size and scope of easyfinancial.
We believe there is significant demand for the products
we offer in the Canadian marketplace and that a large
portion of this demand is currently not being satisfied.
In the first quarter of 2015, we acquired 45 retail locations
across Canada from a former payday loan operator,
effectively fast tracking our planned real estate build-out
for easyfinancial. Including these locations, we opened 64
easyfinancial branches in the year, achieving the Company’s
stated objective of opening 60 to 65 branches in 2015.
During the year, we increased our maximum loan size to
$10,000. This was rolled out after carefully testing it with
a select customer group and evaluating the performance
of those test loans. It is our goal to continue expanding our
product line, including offering larger loans for longer
payment durations, but only after we have performed the
required data analysis and completed a comprehensive pilot
so that the results are predictable. In early 2016, we began a
pilot of increasing our maximum loan size to $15,000.
2015 Annual Report | 13
As we have said before, our mission is to be the leading
full service provider of goods and alternative financial
services that improve the lives of everyday Canadians.
These services include tools that allow our customer
to take better charge of their own personal financial
situation. In 2015, we launched a credit monitoring service
to our customers, allowing them to review their credit
score and monitor their credit status on an ongoing basis.
In the third quarter of 2015, we acquired 14 Canadian
merchandise leasing stores from a U.S.-based rent-to-
own competitor. This transaction secured our place as
the market leader in Canada. During the year, we also
completed the wind-down of our US operations. Today
we are solely focused on the Canadian market and our
easyhome business operates a smaller, more profitable
store network.
Finally, we increased our total credit facility in 2015 by
$100 million (to $300 million) while reducing the interest
rate. The additional capital will allow easyfinancial to
continue its growth through to 2017 and build upon our
leadership position as an alternative provider of term
financing to consumers.
Execute with efficiency and effectiveness
We believe that the products and services presented to
our customers are clearly differentiated from those of
our competitors. easyhome has established itself as the
Canadian market leader by providing a more inviting
retail experience than its direct competitors, providing
consumers with the guaranteed lowest weekly payment
rates and by employing more engaged and better trained
retail associates. easyfinancial provides consumers with a
financing alternative that is less costly than payday loans
and quicker and more convenient than traditional banks,
all in an inviting retail or electronic environment.
To meet the demands of our customers and to maximize
the profitability of the overall business, we continue
to focus on improving execution across all areas of the
business; particularly the fundamentals of
lending,
leasing and collecting.
In 2015, we focused our marketing efforts on the
goeasy master brand. This allowed us to gain stronger
brand recognition and make our marketing spend
more efficient. Later in 2015, we formally changed
the company name to goeasy Ltd. The change reflects
the evolution and growth in the business as it moves
from a name that was aligned with our legacy leasing
business to a corporate name that encompasses all of
the Company’s business units and our ambition to add
new goeasy brands as we expand our offerings.
Navigating through outside
economic pressures
Outside economic issues can have an adverse impact
on the leasing and consumer loan sectors. Our market
research tells us that the main economic indicators that
affect our customers are the price of gas, inflation on food
and clothing and the rate of unemployment.
Overall, it was a challenging year for the Canadian
economy. The oil price shock and subsequent devaluation
of the Canadian dollar created uncertainty in the economic
landscape. On one hand, lower gas prices left more money
for people to spend or meet their debt obligations, while on
the other hand the oil price shock raised the unemployment
rate in regions dependent on the energy sector and the
devaluation of the Canadian dollar increased the cost of
living. Although markets such as Alberta experienced
negative impacts due to these difficulties, we benefited
from our larger exposure in Ontario and British Colombia
which showed positive indicators.
Our approach has been to have a geographically diverse
loan portfolio. Our loan book roughly reflects the
population distribution across the country. For 2015,
Ontario represented approximately 44% of our easyfinancial
loan portfolio, and Alberta only 14%. We believe this
geographical distribution, combined with our more than
a decade of credit underwriting experience, allowed us to
successfully navigate through these economic challenges.
Committed to our values
goeasy is a company that is committed to our employees,
our customers and the communities we serve. We believe
financial literacy is key to helping our customers get on a
path to good credit. In 2015, we introduced goeasy Academy,
a free on-line resource to help improve our customers’
14 | goeasy Ltd.
financial literacy. It contains tools, articles and videos
to help people make better financial decisions and take
control of their financial future.
As a company, we believe in investing in our communities.
For more than 10 years, goeasy has been a proud
supporter of Boys and Girls Clubs of Canada, raising
over $1 million in total. We are also in our second year of
the 10-year commitment we have made to renovate all
100 kitchens of Boys and Girls clubs across the country
through our “easybites” program.
In addition, our employees have volunteered time and
resources to the Habitat for Humanity Global Village
project building houses in Nicaragua for families in need.
Hundreds of our employees have taken advantage of
the company’s commitment to volunteering in company
sponsored community events.
Looking ahead
The successes we achieved in the past year have buoyed
our confidence for the future. We see a large, untapped
market serving a segment of the population whose needs
have not been adequately met by traditional retailers or
banks. Our presence and experience nationally, plus our
deep understanding of the needs of our customers, give
us a competitive advantage.
Looking ahead, we will continue on the same strategic
path. We will evolve our delivery channels to better meet
the needs of our customers. We will expand the size and
scope of easyfinancial. We will execute with efficiency and
effectiveness.
Second, we realize that we need to evolve our business to
reward and ultimately retain our best customers. As such
we will begin testing risk adjusted loan pricing in 2016
and offering reduced interest rates based on a customer’s
credit profile and repayment history. We feel that this is
the right thing for the customer and benefits the Company
by improving customer retention and opening up our
business to a larger segment of the lending market.
Third, we will continuously invest in our credit risk
management expertise and collection practices. Bad debts
represent one of our largest expenses and therefore small
improvements in reducing these costs, without impacting
loan origination volumes, can have a significant positive
impact on the bottom line. For 2016, we expect charge-off
rates to be within our optimal rage of 14% to 16% with an
expected reduction compared to the fourth quarter of 2015
beginning in the first quarter of 2016.
Finally, we will use the experience gained with our initial
indirect lending partners to further penetrate the large
untapped opportunity within this channel.
We are well positioned for our anticipated growth with a
seasoned management team in place with the right skills
and experience. In addition, our commitment to employee
training will ensure we deliver on our promise of excellent
service and respect for our customers.
On behalf of the management team, I want to thank all
of our employees for their dedication to our customers.
I also want to thank our Board of Directors for their
guidance and support and I look forward to another year
of achievement in 2016.
The progress made on all fronts during the last few years
has positioned the Company for significant earnings
expansion and unencumbered loan book growth. Our plans
for 2016 are focused on four key areas.
Sincerely,
First, we will continue to build and enhance our IT
infrastructure. Technology is rapidly changing and we must
stay abreast of these changes to continue meeting the
expectations of our customers. We must also ensure that all
of our core systems take advantage of emerging technologies
to maximize reliability and protect our electronic data.
David Ingram,
President & CEO
2015 Annual Report | 15
Proven performance, infinite possibilities. The future is now.
David Ingram
President and Chief Executive Officer
David has been the President and Chief Executive
Officer of goeasy Ltd. since 2001. Prior to goeasy
David was an executive with Kingfisher plc (a
retail conglomerate) in the United Kingdom. He
has also held progressively senior executive roles
with Thorn which included leading a 370 branch
network for Rent a Center. He is also Vice Chair
of the Boys & Girls Clubs of Canada foundation
committee and serves on the Board of Directors.
We are a high-performing team that
is accountable, dedicated to achieving
the goals of our organization, and
proud of how we work together to
serve our customers. Together we
make great things happen.
Steve Goertz
Executive Vice President and Chief Financial Officer
Steve is the Executive Vice-President and Chief Financial
Officer of goeasy Ltd. having joined goeasy in 2009. Prior
to goeasy, Steve was Vice President, Finance, for Sobeys
Ontario and also held the role of Vice President, Finance for
Maple Leaf Foods Inc. Steve is a Chartered Accountant and
holds an Honours Degree, Bachelor of Mathematics from
the University of Waterloo.
David Yeilding
Senior Vice President, Finance
David is the Senior Vice President, Finance of
goeasy Ltd. having joined goeasy in 2010. Prior to
joining goeasy, David was Vice President Finance
with Fidelity Investments and a Director for
PricewaterhouseCoopers Transaction Services.
David is a Chartered Accountant and holds a
Masters in Business Administration degree from
the DeGroote School of Business and a Bachelors
Degree from Queens University.
16 | goeasy Ltd.
Proven performance, infinite possibilities. The future is now.
Jason Mullins
Executive Vice President and Chief Operating Officer
Jason is the Executive Vice President and Chief
Operating Officer having joined goeasy Ltd. in 2010.
Prior to goeasy, Jason was the Vice President of Sales
and Operations at Mogo Finance Technology. He has
held previous operations management roles at CIBC
and Allied International Credit, and has a Masters
in Business Administration from the Ivey School of
Business at the University of Western Ontario.
Andrea Fiederer
Executive Vice President & Chief Marketing Officer
Andrea is the Executive Vice President and Chief
Marketing Officer of goeasy Ltd. having joined goeasy
in January of 2015. Prior to goeasy, Andrea held senior
roles in management consulting and marketing most
recently at Mobilicity and XM Satellite Radio. She has a
Master of Business Administration from the Schulich
School of Business and a Bachelor of Commerce
degree from McGill University
Jason Appel
Senior Vice President, Risk and Analytics
Jason is the Senior Vice President, Risk and Analytics
of goeasy Ltd. having joined goeasy in 2012. Jason was
previously Senior Vice President, Decision Management,
with Citigroup and prior to that held senior positions in
the mortgages and lending division of CIBC. Jason holds
a Master of Business Administration from the Schulich
School of Business and a Bachelor’s Degree from the
University of Toronto.
Shane Pennell
Senior Vice President, Operations
and Shared Service
Shane is the Senior Vice President,
Operations and Shared Services for
goeasy Ltd. having joined goeasy in 2013.
Shane was previously Vice President of
Consumer Lending and Marketing at HSBC
Financial and prior to that held senior
management roles at CitiFinancial.
2015 Annual Report | 17
18 | goeasy Ltd.
Table of contents
Management’s Discussion and Analysis of Financial Conditions and Results of Operations .....................................20
Caution Regarding Forward-Looking Statements ...............................................................................................................................20
Overview of the Business ............................................................................................................................................................................21
Corporate Strategy ........................................................................................................................................................................................24
Outlook ..............................................................................................................................................................................................................29
Analysis of Results for the Year Ended December 31, 2015 ............................................................................................................31
Selected Annual Information .....................................................................................................................................................................39
Analysis of Results for the Three Months Ended December 31, 2015 ..........................................................................................40
Selected Quarterly Information .................................................................................................................................................................47
Portfolio Analysis...........................................................................................................................................................................................47
Key Performance Indicators and Non-IFRS Measures ......................................................................................................................54
Financial Condition........................................................................................................................................................................................60
Liquidity and Capital Resources ................................................................................................................................................................61
Outstanding Shares and Dividends ..........................................................................................................................................................62
Commitments, Guarantees and Contingencies ....................................................................................................................................63
Risk Factors ....................................................................................................................................................................................................63
Critical Accounting Estimates ....................................................................................................................................................................69
Adoption of New Accounting Standards and Standards Issued But Not Yet Effective .............................................................69
Internal Controls ............................................................................................................................................................................................70
Managements Responsibility for Financial Reporting ....................................................................................................71
Audited Consolidated Financial Statements ....................................................................................................................73
Corporate Information ......................................................................................................................................................111
2015 Annual Report | 19
Management’s discussion and analysis
of financial condition and results of operations
Date: February 17, 2016
The following Management’s Discussion and Analysis [“MD&A”] presents an analysis of the financial condition of goeasy
Ltd. (formerly easyhome Ltd.) and its subsidiaries [collectively referred to as “goeasy” or the “Company”] as at December
31, 2015 compared to December 31, 2014, and the results of operations for the three-month period and year ended
December 31, 2015 compared with the corresponding periods of 2014. This MD&A should be read in conjunction with the
Company’s audited consolidated financial statements and the related notes for the year ended December 31, 2015. The
financial information presented herein has been prepared in accordance with International Financial Reporting Standards
[“IFRS”], unless otherwise noted. All dollar amounts are in thousands of Canadian dollars unless otherwise indicated.
This MD&A is the responsibility of management. The Board of Directors has approved this MD&A after receiving the
recommendations of the Company’s Audit Committee, which is comprised exclusively of independent directors, and the
Company’s Disclosure Committee.
This MD&A refers to certain financial measures that are not determined in accordance with IFRS. Although these
measures do not have standardized meanings and may not be comparable to similar measures presented by other
companies, these measures are defined herein or can be determined by reference to our financial statements. The
Company discusses these measures because it believes that they facilitate the understanding of the results of its
operations and financial position.
Additional information is contained in the Company’s filings with Canadian securities regulators, including the
Company’s Annual Information Form. These filings are available on SEDAR at www.sedar.com and on the Company’s
website at www.goeasy.com.
Caution Regarding Forward-Looking Statements
This MD&A includes forward-looking statements about goeasy, including, but not limited to, its business operations,
strategy and expected financial performance and condition. Forward-looking statements include, but are not limited
to, those with respect to the estimated number of new locations to be opened, targets for growth of the consumer
loans receivable portfolio, annual revenue growth targets, strategic initiatives, new product offerings and new delivery
channels, anticipated cost savings, planned capital expenditures, anticipated capital requirements, liquidity of the
Company, plans and references to future operations and results and critical accounting estimates. In certain cases,
forward-looking statements that are predictive in nature, depend upon or refer to future events or conditions, and/or
can be identified by the use of words such as ‘expects’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘budgeted’, ‘estimates’,
‘forecasts’, ‘targets’ or negative versions thereof and similar expressions, and/or state that certain actions, events or
results ‘may’, ‘could’, ‘would’, ‘might’ or ‘will’ be taken, occur or be achieved.
Forward-looking statements are based on certain factors and assumptions, including expected growth, results of
operations and business prospects and are inherently subject to, among other things, risks, uncertainties and assumptions
about the Company’s operations, economic factors and the industry generally, as well as those factors referred to in the
section entitled “Risk Factors”. There can be no assurance that forward-looking statements will prove to be accurate as
actual results and future events could differ materially from those expressed or implied by forward-looking statements
made by the Company, due to, but not limited to important factors such as the Company’s ability to enter into new lease
and/or financing agreements, collect on existing lease and/or financing agreements, open new locations on favourable
terms, secure new franchised locations, purchase products which appeal to customers at a competitive rate, respond to
changes in legislation, react to uncertainties related to regulatory action, raise capital under favourable terms, manage
20 | goeasy Ltd.
the impact of litigation (including shareholder litigation), control costs at all levels of the organization and maintain and
enhance the system of internal controls. The Company cautions that the foregoing list is not exhaustive.
The reader is cautioned to consider these and other factors carefully and not place undue reliance on forward-looking
statements, which may not be appropriate for other purposes. The Company is under no obligation (and expressly
disclaims any such obligation) to update or alter the forward-looking statements whether as a result of new information,
future events or otherwise, unless required by law.
Overview of the Business
goeasy Ltd. is the leading full service provider of goods and alternative financial services that improve the lives of everyday
Canadians. goeasy Ltd. serves its customers through two key operating divisions: easyhome Leasing and easyfinancial.
On September 14, 2015 easyhome Ltd. changed its name to goeasy Ltd.
The activities of both easyhome Leasing and easyfinancial are governed by federal laws which set a maximum rate of
interest and by the various consumer protection acts that exist in each province. As the Company does not offer payday
loans and does not accept customer deposits, it is not subject to payday loan legislation or the rules set out for banks
by the Office of the Superintendent of Financial Institutions.
Overview of easyhome Leasing
easyhome Leasing is Canada’s largest lease-to-own company, offering brand-name household furniture, appliances and
electronics to consumers under weekly or monthly leasing agreements through both corporate and franchise stores.
easyhome Leasing’s programs appeal to a wide variety of consumers who are looking for alternatives to traditional
retailers and who are attracted to a leasing transaction that does not involve a credit check, does not require an initial
down payment, includes delivery and set up and offers them the flexibility to terminate the arrangement at any time.
These consumers may not be able to purchase merchandise because of a lack of credit or insufficient cash resources,
may have a short-term or otherwise temporary need for the merchandise, or who simply want to use the merchandise,
with no long-term obligation, before making a purchase decision.
Customers who wish to lease merchandise with an option to purchase from easyhome Leasing are required to enter
into easyhome Leasing’s standard form merchandise leasing agreement (a “Merchandise Lease Agreement”). The
Merchandise Lease Agreement provides that the customer will lease merchandise for a set term and make payments on
a weekly or monthly basis. Generally, customers are required to make an initial up-front lease payment and thereafter
the periodic payments are collected in advance for each payment period. If the customer makes all of the periodic
payments throughout the lease term, he or she will obtain ownership of the merchandise. In addition, at specified
times during the term of a Merchandise Lease Agreement, customers can exercise an option to purchase the leased
merchandise at a predetermined price. easyhome Leasing maintains ownership of its merchandise until this purchase
option is exercised. Ultimately, easyhome Leasing customers have the flexibility to return the merchandise at any time
without any further obligations.
easyhome Leasing operates through both corporately owned stores located across Canada and through a network
of franchised locations. Additionally, since 2013, the Company allows customers to enter into merchandise leasing
transactions through its e-commerce platform.
2015 Annual Report | 21
Overview of easyfinancial
easyfinancial is the Company’s financial services arm, offering unsecured, installment loans in amounts from $500 to $10,000
for 9 to 48 month terms with bi-weekly, semi-monthly and monthly repayment options. Customers can choose to repay the
entire loan balance at any time during the term without penalty. As a credit reporting lender, easyfinancial positions its loan
products as a vehicle to help rebuild credit and provide access to alternative financing for the everyday Canadian consumer.
easyfinancial’s loans occupy a critical niche in the marketplace, bridging the gap between traditional financial institutions
and costly payday lenders. Traditional financial institutions are unable to effectively offer credit solutions to consumers
that are deemed to be a higher credit risk due to the consumer’s financial situation or less-than-perfect credit.
Historically, approximately 60% of easyfinancial’s customers have been denied credit by these same traditional financial
institutions. These same consumers prefer to avoid the high fees (which could have an interest rate in excess of 500%)
and onerous repayment terms imposed on them by payday lenders. easyfinancial’s products appeal to these consumers
who are looking for alternatives.
The Company believes that there is significant demand for the products offered by easyfinancial in the Canadian
marketplace. Historically, the consumer demand for these loans was satisfied by the consumer-lending arms of several
large, international financial institutions. Since 2009, many of the largest participants in this market have either closed
their operations or dramatically reduced their size due to changes in banking regulations related to risk adjusted capital
reserves, leaving easyfinancial as the only national participant with stated growth aspirations. The Company estimates
that the historic Canadian market for unsecured consumer installment loans, consistent with the products offered by
easyfinancial, was in excess of $2.0 billion and that this market was serviced by more than 600 retail locations.
The easyfinancial business model has continued to evolve in response to changing consumer expectations and technology
developments.
• The easyfinancial business was initially piloted using a kiosk that was physically located within an existing
easyhome Leasing location.
• In 2011, to better meet customer demand for its products, the Company determined that the easyfinancial business
would scale more successfully by operating out of stand-alone locations that were physically separated from the
easyhome Leasing stores. These larger and higher capacity stand-alone locations also exhibited a more rapid
growth trajectory. The first easyfinancial stand-alone location was opened in July 2011.
• Once the business model was finalized and prior to its large scale expansion, easyfinancial launched a centralized
loan decision platform and deployed a highly scalable core banking system in 2011.
• In 2013, a transactional website was launched by easyfinancial for securing consumer installment loans. This new
delivery channel allowed the Company to reach consumers who may not have had access to a physical location
or those who preferred to interact through the privacy and convenience of their home.
• In 2014, the Company launched an internally developed and proprietary loan application management system
that was fully integrated with its CRM and collections activities.
• In 2015, easyfinancial launched its indirect lending platform. Indirect lending involves creating partnerships with
merchants, both on-line and offline, to provide financing for their customers who do not qualify for the traditional
credit products offered by these merchants. Under such a delivery channel, these customers are given the
opportunity to apply for a loan through easyfinancial at the point of purchase, thereby allowing them to purchase
the desired products or services from the merchant partner.
22 | goeasy Ltd.
•
The Company is committed to helping its customers improve their financial literacy. In 2015, the Company
developed an on-line financial education platform through goeasy Academy that included articles, videos and
other educational content.
The Company recognizes that the loan products it offers to consumers carry a higher risk of default than the loan products
offered by traditional banks and, as such, the Company will incur a higher level of delinquencies and charge offs, but that
this will be offset by the higher yield generated on the consumer loans receivable. To assist with the management of this
risk, the Company has developed proprietary underwriting practices and credit scoring models that have been developed
using the historical performance of its portfolio. Additionally, the Company continuously explores and incorporates, where
appropriate, leading edge date sources when they become available. Taking advantage of its underwriting experience
gained since 2006 and including almost $1.0 billion in relevant credit originations, the Company regularly enhances these
practices and scoring models to make better lending decisions, with a goal of maximizing total returns.
Through its multiple delivery channels and utilizing an extensive analysis of the historic performance of its portfolio,
easyfinancial has created a business model that is somewhat unique within its industry.
• On-line advertising, coupled with the Company’s mobile responsive transactional website, create a cost-effective
way to attract new customers and optimize the application process.
• Indirect lending significantly expands the Company’s distribution points without significant incremental costs by
leveraging a mobile tablet solution.
• The Company’s national footprint of retail branch locations further promote the Company’s brand and allow
customers to apply in-person if that is their preferred means of application. Recent surveys indicated that over
36% of easyfinancial customers became aware of easyfinancial through the physical retail presence.
• By analyzing all of its loan transactions originated since 2006, the Company has developed underwriting practices
and credit scoring models that are able to predict the performance of its customers with far more accuracy than
the traditional generic scoring models utilized by other lenders.
• Subsequent to a successful loan application, the responsibility for loan closing and funding and for ongoing
customer relationship management, including collections, is assigned to a retail branch that is conveniently
located near the customer. In this way, the customer lifetime value is enhanced as the sale of ancillary products
is maximized, customer retention is improved and the Company experiences lower delinquency rates due to the
local relationship and engagement with the customer.
• Since ongoing customer relationship management is performed at the local branch level, the Company is able
to establish a stronger relationship with its customers that better allows it to work with these customers to
resolve any financial challenges. In this way, bad debts are significantly reduced, especially when compared to
a pure on-line lender.
2015 Annual Report | 23
Corporate Strategy
The Company is committed to being the leading full service provider of goods and alternative financial services that
improve the lives of everyday Canadians. To maintain this position, the Company must continuously evolve to meet the
needs of its chosen consumer segment. Additionally, the Company must focus on maintaining its competitive advantage
by capitalizing on the key aspects of each business unit, including brand awareness, superior customer service and its
cross-country retail network. Cost efficiencies through economies of scale and shared services will further contribute
to the Company’s ability to contend with competitive activities in the marketplace.
To achieve this long-term goal, the Company has three key business imperatives:
• Evolve the delivery channels
• Expand the size and scope of easyfinancial
• Execute with efficiency and effectiveness
Evolving the Delivery Channels
Over the last several years, the Company has developed multiple delivery channels in response to customer demands,
technology advancements and market opportunities. Up until 2013, all of goeasy’s interactions with its customers
occurred at a physical retail location.
In 2013, transactional websites were launched by easyhome Leasing for the leasing of new merchandise, and easyfinancial
for applying for a consumer installment loans. These new delivery channels allowed the Company to reach consumers
who may not have had access to a physical location or those who preferred to interact through the privacy and convenience
of their home. These transactional websites require continued evolution to stay abreast of changing technologies and to
offer improved levels of service. All of the Company’s websites were significantly enhanced in 2015 and these investments
in technology will be ongoing. The 2015 enhancement of the easyfinancial website resulted in the time required to complete
an application being reduced by 75% which contributed to improvements in the conversion rates. Further optimization of
these channels will be achieved through ongoing analysis of performance data and the enhancement of the transactional
websites. Ultimately, the transactional websites will be personalized to the unique needs of each user.
The continued enhancement of the easyfinancial transactional website and the shift from traditional advertising channels
towards digital media has resulted in a large portion of the easyfinancial loans originating from on-line applications.
This shift has resulted in an overall lower cost of acquisition due to more efficient advertising and reduced transaction
support costs (labour, real estate, etc.). This cost reduction, however, has been offset by a modest increase in the overall
charge-off rate. The Company’s experience has shown that on-line-originated consumers have a higher charge-off rate
than retail originated consumers. On a net basis, the achieved margins from each of these two origination channels are
similar and the Company benefits from an overall increase in volume.
In 2015, the Company launched its indirect lending platform to provide financing solution to the customers of merchant
partners who did not qualify for the traditional credit products offered by these merchants. Under such a delivery
channel, these customers are given the opportunity to apply for a loan through easyfinancial at the point of purchase,
thereby allowing them to purchase the desired products or services from the merchant partner.
24 | goeasy Ltd.
The initial launch of the indirect lending platform was the first step in a broader strategy of developing the indirect lending
channel, where the Company will offer its loan products at the point of sale in the home furnishing, health care and automotive
industries. The internally developed mobile tablet solution allows current partners to process credit applications right in
their store and receive an instant credit decision. By leveraging automated authentication tools, custom credit models,
personal identification scanning technology and digital documents, the Company is able to process loans fully paperless in
less than 15 minutes. As the indirect lending channel expands, the Company will need to deploy a desktop based solution
and continue to enhance the mobile tablet solution, taking advantage of developments in technology.
The easyhome Leasing business will complement the expansion into indirect lending. Consumer loans made by
easyfinancial to consumers for the purchase of product categories that are similar to those offered by easyhome Leasing
will be secured by the purchased merchandise. In the event that the loan goes into default, the goods can be repossessed
and the value of these recovered goods can be realized by leasing or selling the assets through the easyhome Leasing
store network. In this manner, the Company can better manage its risk and has a significant competitive advantage over
potential competitors that lack a viable outlet for realizing any value against the security.
Expanding the Size and Scope of easyfinancial
In addition to evolving its delivery channels, the Company will continue to focus on expanding the size and scope of
easyfinancial. The Company believes there is significant demand for the products offered by easyfinancial in the Canadian
marketplace and that a large portion of this demand is currently not being satisfied.
The Company has made significant investments in its processes and infrastructure to position its easyfinancial business
for long-term sustainable growth, including making the following key enhancements:
• Outside experts were engaged by the Company to evaluate all of the key easyfinancial control processes and make
recommendations on best practices in the industry. All of the opportunities identified by these experts have been
addressed.
• The Company has developed an internal competence in evaluating and managing credit risk. Using leading-edge,
data-driven modeling and analytical techniques, underwriting and credit adjudication rules were enhanced with
the goal of balancing throughput and charge offs to optimize returns.
• An industry-standard banking platform was implemented in 2011 to ensure that the loans receivable portfolio
could be appropriately managed and information could be securely maintained on a scalable infrastructure.
• In 2014, the Company implemented a proprietary loan application management system to process applications originated
in its retail and on-line channels. This system is supported by a new credit decision engine built in partnership with a
global leader in risk management technology solutions and is fully integrated with Company’s customer relationship
management platform enabling it to more efficiently meet the needs of its growing customer base.
• The easyfinancial management team was enhanced through the recruitment of senior managers with broad
experience in the financial services and mobile technology industries.
• Through a combination of equity offerings, debt offerings and renegotiation of existing lending relationships, the
Company secured the necessary capital to fund the expected growth for the near-term. The continued successful
growth of the easyfinancial portfolio and the strengthened balance sheet should provide for access to further
levels of capital in the future at reduced costs.
2015 Annual Report | 25
The Company estimates that its retail footprint for easyfinancial could expand to over 250 locations across Canada.
Significant progress was made towards this goal in 2015 with the acquisition of 45 retail locations from a payday lender
that exited the marketplace. Over the next few years, the Company will continue to add incremental locations in select
markets as it works towards its goal. In addition to providing more convenient access to the customers that wish to
transact in a physical retail environment, the critical mass of physical locations will strengthen the Company’s financial
services brand, establishing easyfinancial as the leader in providing financing solutions to consumers who are looking
for an alternative to traditional banks and payday lenders.
Over the long-term, the Company expects the operating margin of its easyfinancial business unit to exceed 35% (before
any allocation of indirect corporate costs and interest). This operating margin, however, will be muted in periods of
rapid expansion. Additional easyfinancial store openings will provide a drag on margins as the relatively fixed cost
base of a new location in the months after opening will be disproportionately large until the consumer loans receivable
portfolio for that location has grown to a sufficient size to generate larger revenues. The Company will continue to make
investments in technology as it develops the required platforms for the new delivery channels.
The expansion of easyfinancial will also be aided by the introduction of complementary financial products. The Company
has a stated goal of being the leading full service provider of goods and alternative financial services that improve
the lives of everyday Canadians and as such, the Company intends to build out a suite of products that can ladder a
customer from establishing credit to home ownership. In cases where the Company has the expertise and resources to
offer these products directly, it will do so. In other cases, it will look to partner with primary providers of these products
and offer such products to the Company’s customers under a commission or fee-type arrangement. As an example, in
2015 the Company began offering a credit monitoring service to its customers, allowing them to take better control of
their financial situation and credit score by monitoring their credit status on an ongoing basis.
Executing with Efficiency and Effectiveness
The Company believes that the products and services presented to its customers are clearly differentiated from its competitors.
easyhome Leasing has established itself as the Canadian market leader by providing a more inviting retail experience than
its direct competitors, providing consumers with the guaranteed lowest weekly payment rates, and by employing more
engaged and better trained retail associates. easyfinancial provides consumers with a financing alternative that is less costly
than payday loans and quicker and more convenient than traditional banks, all in an inviting retail or electronic environment.
To meet the demands of its customers and to maximize the profitability of the overall business, the Company will
continue to focus on improving its level of execution across all areas of the business.
Offer High Levels of Customer Service and Satisfaction
Customer retention is of paramount importance. Frequent and positive customer interactions encourage repeat
business and provide high levels of service and satisfaction. As part of its effort to provide superior customer service,
the Company offers quick delivery of its merchandise and rapid loan decisions and funding. The Company believes
that competent, knowledgeable and motivated personnel are necessary in order to achieve high levels of customer
service and satisfaction. Accordingly, the Company has developed intensive employee training programs, as well as
performance measurement programs, incentive-driven compensation plans and other tools to drive a positive customer
experience and ensure customer retention.
26 | goeasy Ltd.
Increase Store Level Efficiency
Although the Company will pursue the previously described methods to encourage customer retention and growth, it must
also aggressively manage all discretionary spending. Supplier relationships and economies of scale will be leveraged to
reduce overall cost ratios. Idle inventory levels within its stores will be maintained at optimum levels, balancing the need to
provide customers with the choice and selection they require with the capital committed and management effort required
to maintain this inventory. Other costs, especially labour, will be tightly controlled through centrally established thresholds,
allowing spending to occur only when it will result in improved revenues. In addition, the Company will remediate and, if
necessary, close underperforming stores, merging their portfolios with other nearby locations.
Utilize Data Analytics as a Competitive Advantage
The Company has a tremendous volume of customer data that it has gained from years of operating its merchandise
leasing and consumer lending businesses. The Company has made significant investments in information technology to
safeguard the privacy of this data and also to allow the business to analyze this data to make better business decisions.
The intelligent use of this data and analysis will allow easyfinancial to continually enhance its underwriting practices
and credit scoring models to make better lending decisions. It will allow easyhome Leasing to better understand the
retention patterns of its customers and develop marketing and customer relationship programs that are tailored to
each customer’s needs while maximizing profitability to the Company.
Leverage the Synergies of Both Business Units
The easyhome Leasing and easyfinancial businesses offer different products to a common customer segment and
share many operational practices such as customer relationship management, collections and contract administration.
Historically, and as is common with both industries, these practices have been performed by each business unit at the
local operating store level. While this approach results in more direct contact with customers, it makes it difficult to
foster best practices and achieve economies of scale.
In the fourth quarter of 2013, The Company opened a new Shared Service Centre to provide operational support for
both business units in areas such as collections, customer retention and customer care and to support the new delivery
channels that do not operate with a dedicated local presence. The Company believes that this hybrid structure will
allow local operators to continue to provide a strong level of service directly to their customers, and will enable many
administrative and support functions to be performed at a reduced cost, employing best practices. Going forward,
additional opportunities for providing coordinated operational support for all business units will be explored.
Continue to Invest in New Technologies
As indicated previously, the Company has made significant investments in technology over the past several years to
provide easyfinancial with a scalable platform on which to support significant future growth and to allow new delivery
channels to be accessed. As an example, in 2014 the Company implemented a proprietary loan application management
system on the Salesforce platform to process applications originated in its retail and on-line channels. This investment
in new technologies will continue in the future as the Company evolves its delivery channels and expands the size and
scope of easyfinancial. Investments in new technology will also be made to provide the operators and support staff with
additional tools so that they can better service their customers and obtain greater levels of efficiency.
2015 Annual Report | 27
Improve Brand Recognition Through goeasy
In the third quarter of 2014 the Company launched a new master brand, goeasy, and in the third quarter of 2015 the Company
further aligned to this master brand by changing its corporate name from easyhome Ltd. to goeasy Ltd. Going forward, the
Company’s new goeasy master brand will provide a corporate umbrella that unites and supports its sub-brands of easyhome
and easyfinancial, and allow it to more effectively reach its targeted demographic with all its lines of business.
The pillars of the goeasy master brand are Access, Relief and Respect. When a customer deals with any of the Company’s
business units, they will know they can obtain greater access to products and services than they can through more traditional
retailers or banks who have denied them in the past. They can also access the Company’s products through multiple
channels, including retail, on-line and indirect. Customers will be provided with relief from their financial challenges with
the promise of a decision within 30 minutes. Finally, customers will know that they will be respected by the Company and
its people throughout their entire customer experience. These are the core pillars that anchor the goeasy brand.
The launch of the master brand also involved a shift away from paper-based advertising channels towards a greater
investment in broadcast and digital media. Longer term, the master brand will facilitate the launch of new products and
services and reduce the cost of customer acquisition.
28 | goeasy Ltd.
Outlook
The discussion in this section is qualified in its entirety by the cautionary language regarding forward-looking statements
found in the “Caution Regarding Forward-Looking Statements” of this MD&A.
Update of 2015 Targets
The Company’s 2015 targets along with the underlying assumptions and risk factors were originally communicated in
its September 30, 2014 MD&A and most recently revised in its June 30, 2015 MD&A. The Company’s actual performance
against its targets for fiscal 2015 is as follows:
Actual
Results for
2015
Revised
Targets for
2015
Explanation for Variance to Targets
New easyfinancial locations opened in year
64
60 – 65
Target achieved
Gross consumer loans receivable portfolio at
year end
$289.4
million
$280 – $295
million
Target achieved
easyfinancial operating margin
30.8%
28 – 32%
Target achieved
Total revenue growth
17.4%
15 – 20%
Target achieved
Looking to 2016, goeasy’s strategic focus remains unchanged. The Company will focus on evolving its delivery channels,
expanding the size and scope of easyfinancial and executing with efficiency and effectiveness.
2015 Annual Report | 29
Update of 2016 and Three-Year (2018) Targets
The Company’s 2016 targets and assumptions were originally communicated in its December 31, 2013 MD&A and most
recently revised in its September 30, 2015 MD&A. The Company’s three-year (2018) targets and assumptions were
originally communicated in its September 30, 2015 MD&A.
The following table outlines the Company’s targets for 2016 and 2018 and provides the material assumptions used
to develop such forward-looking statements. These targets are inherently subject to risks which are identified in the
following tables, as well as those risks referred to in the section entitled “Risk Factors”.
Targets for
2016
Targets for
2018
Assumptions
Risk Factors1
• The Company continues to be
able to access growth capital for
its easyfinancial business at a
reasonable cost.
• Virtually all new locations will
operate as stand-alone branches.
• The new store opening plan and
the development of new delivery
channels occur as expected.
• The Company continues to be
able to access growth capital for
its easyfinancial business at a
reasonable cost.
• Increased expenditures on
marketing and advertising within
easyfinancial.
• The earnings drag from newly
opened locations is within
acceptable levels.
• The Company’s ability to secure
new real estate and experienced
personnel.
• Retail business conditions are
assumed to be within normal
parameters with respect to
consumer demand and margins.
• Retail business conditions are
assumed to be within normal
parameters with respect to
consumer demand and margins.
• The Company’s ability to secure
new real estate and experienced
personnel.
• Continued access to capital.
• Nominal growth for the easyhome
Leasing business unit.
• Continued accelerated growth of
the consumer loans receivable
portfolio, driven by new delivery
channels, additional store openings
and increased marketing spend.
• Retail business conditions are
assumed to be within normal
parameters with respect to
consumer demand and margins.
• Changes to regulations
governing the products offered
by the Company.
• Reduction in the yield on
easyfinancial’s products.
• Yield and cost rates at mature
• The Company’s ability to achieve
locations are indicative of future
performance.
operating efficiencies as its
locations mature.
• The earnings drag from newly
opened locations is within
acceptable levels.
New easyfinancial
locations
10 – 20
locations
opened
during the
year
220 – 240
locations
by the end
of 2018
Gross consumer
loans receivable
portfolio at year end
$360 – $390
million
$500 million
Total revenue growth
18% – 22%
n/a
easyfinancial
operating margin
32% – 35%
35%
1 Risk factors include those risks referred to in the section entitled “Risk Factors”.
30 | goeasy Ltd.
Analysis of Results for the Year Ended December 31, 2015
Financial Highlights and Accomplishments
• 2015 was the fourteenth consecutive year of growing revenues and delivering profits. Since 2001, total revenue
has seen a compounded annual growth rate of 11.5% while net income has grown from a loss of $1.9 million in
2001 to net income of $23.7 million in 2015. In 2015, the Company again delivered record levels of revenue, net
income and earnings per share.
• In consideration of the improved earnings achieved in 2014 compared to the prior year and the Company’s
confidence of its continued growth and access to capital going forward, the Board of Directors approved an
increase to the quarterly dividend from $0.085 per share to $0.10 per share in the first quarter of 2015.
• goeasy continued to grow revenue during 2015. Revenue for the year increased to $304.3 million from $259.2
million in 2014, an increase of $45.1 million or 17.4%. The growth was driven primarily by the expansion of
easyfinancial and its consumer loan receivable portfolio.
• The Company continued to secure the additional capital needed to fund the growth of its consumer loans receivable
at lower costs throughout the year. During the year, the Company increased its total credit facilities by $100
million from $200 million to $300 million, while reducing the current interest rate on the term loan from 8.22% to
7.99%. The amended facilities were comprised of a $280 million term loan and a $20 million revolving operating
facility. The increased capital will support the growth of easyfinancial into 2017. The amended facilities featured
financial covenants that were more flexible and drawings that closely corresponded with the estimated cash flow
requirements of the business. In addition, the expiry date was extended by 12 months to October 4, 2019.
• In the first quarter of 2015, the Company acquired the lease rights and obligations for 45 retail locations across
Canada from a former payday loan operator for total consideration of $2.8 million, effectively fast tracking the
Company’s planned real estate build-out for its easyfinancial business. Including these locations the Company opened
64 easyfinancial branches in the year, achieving the Company’s stated objective of opening 60 to 65 branches in 2015.
• In the third quarter of 2015, the Company acquired 14 Canadian merchandise leasing stores from a U.S.-based
rent-to-own company. As part of the transaction, the Company sold two of its remaining U.S. franchised locations
whose financial results were consolidated for financial statement purposes. The net purchase price for the
transaction was $3.4 million.
• Also in the third quarter of 2015, the Company partnered with a large, national furniture retailer to provide their
customers that do not qualify for traditional prime credit with a new point-of-sale financing alternative. This
launch was part of a broader strategy to expand into the indirect lending channel, where the Company can offer
its loan products at the point of sale in the home furnishing, health care and automotive industries.
• The gross consumer loans receivable portfolio experienced record growth, increasing by $97.2 million compared
with growth of $81.5 million in 2014. The gross consumer loans receivable portfolio as at December 31, 2015 was
$289.4 million compared with $192.2 million as at December 31, 2014, up 50.6%. Loan originations were also a
record in 2015 at $330.7 million, up 41.4% compared with total loan originations of $233.8 million in 2014.
2015 Annual Report | 31
• easyhome Leasing operating margin improved from 15.4% in 2014 to 16.2% in 2015. The Company is now
operating a smaller more profitable store network. easyfinancial operating margin for 2015 was 30.8%, achieving
the Company’s operating margin target of 28 to 32%.
• The operating income of both the easyhome leasing and easyfinancial businesses increased in 2015 driving overall
operating income to a record $48.1 million, up $14.7 million or 44.0%, from 2014 excluding restructuring and
other items in the prior comparative results. Overall, operating margin for the year was 15.8%, up from the 12.9%
reported in 2014 excluding the impact of restructuring and other items in the prior comparative results. Overall
operating margin benefitted from higher operating margins at the easyhome leasing business, strong margins
at easyfinancial and an increasing percentage of the Company’s operating income being generated by the higher
margin easyfinancial business.
• Net income for 2015 was $23.7 million or $1.69 per share on a diluted basis. Excluding the impact of restructuring
and other items which benefitted 2014, net income and diluted earnings per share in the prior year were $18.6
million and $1.34 respectively. On this normalized basis, net income and diluted earnings per share increased by
$5.1 million (27.6%) and $0.35 (26.1%) respectively.
32 | goeasy Ltd.
Summary Financial Results and Key Performance Indicators
(in $000’s except earnings per share and percentages)
Dec. 31, 2015
Dec. 31, 2014
$ / %
% Change
Year Ended
Variance
Variance
Summary Financial Results
Revenue
Operating expenses before depreciation and amortization
304,273
200,125
259,150
167,916
EBITDA1
EBITDA margin1
Depreciation and amortization expense
Operating income
Operating margin1
Finance costs
Effective income tax rate
Net income
Diluted earnings per share
Adjusted (Normalized) Financial Results1
Adjusted EBITDA margin
Adjusted operating earnings
Adjusted operating margin
Adjusted earnings
Adjusted earnings per share
Key Performance Indicators1
Same store revenue growth
Same store revenue growth excluding easyfinancial
easyhome Leasing
Potential monthly lease revenue
Change in potential monthly lease revenue
due to ongoing operations
easyhome Leasing revenue
easyhome Leasing operating margin
easyfinancial
Gross consumer loans receivable
Growth in gross consumer loans receivable
Gross loan originations
easyfinancial revenue
Bad debt expense as a percentage of easyfinancial revenue
Net charge offs as a percentage of average gross consumer
loans receivable
easyfinancial operating margin
1 See description in sections “Portfolio Analysis” and “Key Performance Indicators and Non-IFRS Measures”.
56,741
18.6%
56,096
48,052
15.8%
15,334
27.5%
23,728
1.69
18.6%
48,052
15.8%
23,728
1.69
16.3%
4.7%
41,809
16.1%
56,641
34,593
13.3%
8,800
23.4%
19,748
1.42
15.7%
33,368
12.9%
18,600
1.34
19.6%
2.6%
45,123
32,209
14,932
2.5%
(545)
13,459
2.5%
6,534
4.1%
3,980
0.27
2.9%
14,684
2.9%
5,128
0.35
(3.3%)
2.1%
17.4%
19.2%
35.7%
–
(1.0%)
38.9%
–
74.3%
–
20.2%
19.0%
–
44.0%
–
27.6%
26.1%
–
–
10,651
10,955
(304)
(2.8%)
(98)
143
(241)
168.5%
152,605
16.2%
158,322
15.4%
(5,717)
0.8%
289,426
97,201
330,689
151,668
27.6%
14.8%
30.8%
192,225
81,521
233,805
100,828
24.1%
13.0%
32.7%
97,201
15,680
96,884
50,840
3.5%
1.8%
(1.9%)
(3.6%)
–
50.6%
19.2%
41.4%
50.4%
–
–
–
2015 Annual Report | 33
Store Locations Summary
easyhome Leasing
Corporately owned stores
Consolidated franchise locations
Total consolidated stores
Total franchise stores
Total easyhome Leasing stores
easyfinancial
Kiosks (in store)
Stand-alone locations
National loan office
Total easyfinancial locations
Locations as at
Dec. 31, 2014
Locations opened
/ aquired during
period
Locations closed
/ sold during
period
Conversions
Locations as at
Dec. 31, 2015
163
6
169
23
192
64
89
1
154
5
–
5
–
5
2
50
–
52
(10)
(3)
(13)
–
(13)
(3)
(1)
–
(4)
(3)
–
(3)
3
–
(12)
12
–
–
155
3
158
26
184
51
150
1
202
34 | goeasy Ltd.
Summary of Financial Results by Operating Segment
($ in 000’s except earnings per share)
easyhome Leasing
easyfinancial
Corporate
Total
Revenue
152,605
151,668
–
304,273
Year Ended December 31, 2015
Total operating expenses before depreciation
and amortization
Depreciation and amortization
Operating income (loss)
Finance costs
Income before income taxes
Income taxes
Net income
Diluted earnings per share
77,724
50,214
24,667
99,607
5,289
46,772
22,794
200,125
593
(23,387)
56,096
48,052
15,334
32,718
8,990
23,728
1.69
($ in 000’s except earnings per share)
easyhome Leasing
easyfinancial
Corporate
Total
Revenue
158,322
100,828
–
259,150
Year Ended December 31, 2014
Total operating expenses before depreciation
and amortization and restructuring and other items
Restructuring and other items
Depreciation and amortization
Operating income (loss)
Finance costs
Income before income taxes
Income taxes
Net income
Diluted earnings per share
81,305
–
52,711
24,306
64,524
–
3,298
33,006
23,312
169,141
(1,225)
632
(22,719)
(1,225)
56,641
34,593
8,800
25,793
6,045
19,748
1.42
2015 Annual Report | 35
Revenue
Revenue for the year ended December 31, 2015 was $304.3 million compared to $259.2 million in 2014, an increase of
$45.1 million or 17.4%. The increase was driven by the growth of easyfinancial.
easyhome Leasing: Revenue for the year ended December 31, 2015 was $152.6 million, a decrease of $5.7 million from
2014. The year-over-year change in revenue can be attributed to:
• Revenue growth across the Canadian store network (excluding the impact of store transactions) was $2.0 million
in 2015 when compared with the prior year. The growth was driven by improved pricing to offset the higher cost
of acquiring inventory in U.S. dollars. Similarly, same store sales growth excluding the impact of easyfinancial was
4.7% in the year.
• The Company completed several transactions over the past two years to acquire merchandise lease portfolios
as well as closed or sold merchandise leasing stores that it owned. These transactions in aggregate reduced
revenue by $2.5 million in 2015 when compared to the prior year.
• Revenue in the year was also impacted by the sale of the Company’s royalty rights from its U.S. franchise network
that were sold in the fourth quarter of 2014 and the deconsolidation of franchise locations that were previously
consolidated for financial reporting purposes. These factors reduced revenue by $1.3 million and $3.9 million
respectively in the year compared to 2014.
easyfinancial: Revenue for the year ended December 31, 2015 was $151.7 million, an increase of $50.8 million or 50.4%
from 2014. The increase was due to the growth of the gross consumer loans receivable portfolio, which increased from
$192.2 million as at December 31, 2014 to $289.4 million as at December 31, 2015, an increase of $97.2 million or 50.6%.
During 2015, the company realized a reduction in the yield it achieved on its portfolio. The average loan size increased due
to strong demand for the Company’s larger dollar value loan products. Higher value loans have lower pricing on certain
ancillary products to account for the lower overall risk. As a result, the commission earned by the Company on the sale of
the ancillary products was lower. The overall portfolio yield in 2015 declined by 3.7% when compared to 2014.
The gross consumer loans receivable portfolio grew by $97.2 million during the year ended December 31, 2015 as
compared with growth of $81.5 million for 2014. Loan originations were also strong in the year at $330.7 million, up
41.4% compared with 2014.
Total Operating Expenses before Depreciation and Amortization (and Restructuring and Other Items)
Total operating expenses before depreciation and amortization and restructuring and other items were $200.1 million
for the year ended December 31, 2015, an increase of $31.0 million or 18.3% from the comparable period in 2014. The
increase was related to the higher operating expenses of the growing easyfinancial business and was somewhat offset
by lower operating expenses within the leasing business. Operating expenses before depreciation and amortization and
restructuring and other items represented 65.8% of revenue in 2015 as compared with 65.3% for 2014.
easyhome Leasing: Total operating expenses before depreciation and amortization for the year ended December 31, 2015
were $77.7 million, a decrease of $3.6 million or 4.4% from 2014. The decline was related to the reduced store count,
improved labour efficiencies, the impact of the wind-down of the U.S. operations and a $1.4 million reduction in advertising
costs. Consolidated leasing store count declined from 169 as at December 31, 2014 to 158 as at December 31, 2015.
36 | goeasy Ltd.
easyfinancial: Total operating expenses before depreciation and amortization were $99.6 million for the year ended
December 31, 2015, an increase of $35.1 million or 54.4% from 2014. Operating expenses excluding bad debt expense
increased by $17.4 million or 43.3% in the year driven by: i) the increased cost of 48 additional branches when compared
to December 31, 2014, including the additional operating expenses relating to the locations acquired in the first quarter
of 2015, ii) $3.0 million in additional advertising and marketing costs to support the strong growth in the consumer
loans receivable portfolio, iii) continued conversion of in-store kiosks towards higher capacity stand-alone branches,
iv) higher costs associated with easyfinancial’s Shared Service Centre to support the increase in loan originations, and
v) incremental expenditures to develop new distribution channels and manage the growing branch network. Overall,
branch count increased from 154 as at December 31, 2014 to 202 as at December 31, 2015.
Bad debt expense increased to $41.9 million for the year ended December 31, 2015 from $24.3 million in 2014, up $17.6
million or 72.8%. Net charge offs as a percentage of the average gross consumer loans receivable on an annualized
basis were 14.8% in 2015, up from 13.0% in 2014. The net charge-off rates for both 2015 and 2014 benefitted from the
gain realized on the sale of previously charged-off accounts. Excluding this gain, net charge offs as a percentage of the
average gross consumer loans receivable were 15.0% and 13.6% for 2015 and 2014, respectively.
The overall charge-off rate has increased as a larger proportion of loans have originated on-line. The Company’s
experience has shown that on-line-originated consumers have a higher charge-off rate than retail originated consumers.
This higher charge-off rate was offset by an overall lower cost of acquisition for loans originated on-line due to more
efficient advertising and reduced transaction support costs (labour, real estate, etc.), resulting in achieved margins
from each of these two origination channels that were similar while the Company benefited from an overall increase in
volume. The Company continues to expect that the net charge-off rate will be in the range of 14% to 16% for 2016.
Corporate: Total operating expenses before depreciation and amortization and restructuring and other items were $22.8
million in the year ended December 31, 2015 compared to $23.3 million in 2014, a decrease of $0.5 million. The decline
was related to lower incentive compensation costs in the year ended December 31, 2015. First, accruals for short term
incentive compensation were reduced by 38% (while earnings before tax increased by 27%) due to exceeding internal
financial targets in 2014 whereas the financial results in 2015 were more in line with internal targets in 2015. Second,
stock-based compensation expense was no longer impacted by changes in the Company’s share price as it was in 2014
due to the move from cash settled units to stock settled units. Corporate expenses before depreciation and amortization
and restructuring and other items represented 7.5% of revenue in 2015 compared to 9.0% of revenue in 2014.
Restructuring and other items: During the fourth quarter of 2014, the Company decided to wind down its operations
in the U.S. and focus on the Canadian marketplace. This involved the sale of the Company’s rights to future royalty
payments from its franchisees, the recognition of impairment provisions against certain intangible assets and property
and equipment located in the U.S. and the recording of other restructuring charges which consisted of provisions for
onerous leases, severance and other charges. For the year ended December 31, 2014, a net credit of $1.2 million was
recorded as restructuring and other charges within operating income.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 2015 was $56.1 million, a decrease of $0.5 million
from 2014. Increased depreciation of property and equipment and intangible assets within easyfinancial was more than
offset by the reduced depreciation within easyhome leasing. Overall depreciation and amortization represented 18.4% of
revenue in 2015, an improvement from 21.9% in 2014.
2015 Annual Report | 37
Leasing depreciation and amortization expense declined by $2.5 million in the year compared with 2014 due to reductions
in the lease portfolio (as described in the analysis of easyhome Leasing’s revenue), improved pricing and margins, lower
charge offs and a reduced impairment charge. Leasing depreciation and amortization expressed as a percentage of
leasing revenue for the year was 32.9%, an improvement from the 33.3% reported for 2014.
The $2.0 million increase in depreciation and amortization within easyfinancial was attributable to its growing branch
network and the amortization of new systems.
Operating Income (Income before Finance Costs and Income Taxes)
Operating income for the year ended December 31, 2015 was $48.1 million. Operating income in the prior year was
$34.6 million or $33.4 million excluding the impact of restructuring and other items. On this normalized basis, operating
income for the year ended December 31, 2015 increased by $14.7 million or 44.0%. Overall operating margin for the
year ended December 31, 2015 was 15.8%, up from the 12.9% reported in 2014 and excluding the impact of restructuring
and other items in the prior period. Overall operating margin benefitted from higher operating margins at the easyhome
leasing business, strong margins at easyfinancial and an increasing percentage of the Company’s operating income
being generated by the higher margin easyfinancial business.
easyhome Leasing: Operating income was $24.7 million for the year ended December 31, 2015, up $0.4 million from 2014. The
benefit of reduced advertising spend and improved store level performance was partially offset by the store transactions (sales,
closures and acquisitions) completed during 2014 and 2015 and the removal of the U.S. royalty income in the fourth quarter of
2014. With the various store transactions completed during the year, the Company now has a smaller, but more profitable, store
network. Operating margin for the year ended December 31, 2015 was 16.2%, up from the 15.4% reported in 2014.
easyfinancial: Operating income was $46.8 million for the year ended December 31, 2015 up from the $33.0 million
reported in 2014, an increase of $13.8 million or 41.7%. Operating margin for the year was 30.8% compared with 32.7%
reported in 2014. Operating margin was negatively impacted by the drag on earnings associated with the 45 locations
acquired and opened in the first quarter of 2015 and by the reduction in the portfolio yield.
Finance Costs
Finance costs for the year were $15.3 million, up $6.5 million from 2014. The increase in finance costs was driven by
higher average borrowing levels.
Income Tax Expense
The effective income tax rate for the year ended December 31, 2015 was 27.5%, up from the 23.4% reported in 2014.
During the fourth quarter of 2014, the Company decided to wind down its operations in the U.S., which involved the
sale of the Company’s rights to future royalty payments from its U.S. franchisees. This resulted in a gain on sale in the
Company’s U.S. subsidiary which had adequate tax loss carryforwards to eliminate any tax payable on the transaction,
thus resulting in a low effective income tax rate in the year. Excluding the impact of the Company’s U.S. operations, the
Company’s effective tax rate for its Canadian operations for 2014 was 26.5%.
Net Income and Earnings Per Share
Net income for the year ended December 31, 2015 was $23.7 million or $1.69 per share on a diluted basis. Excluding the
impact of restructuring and other items which benefitted the year ended December 31, 2014, net income and diluted
earnings per share in the prior year were $18.6 million and $1.34 respectively. On this normalized basis net income and
diluted earnings per share increased by $5.1 million (27.6%) and $0.35 (26.1%) respectively.
38 | goeasy Ltd.
Selected Annual Information
Operating Results
($ in 000’s except per share amounts)
Revenue
Net income
Dividends declared on common shares
Cash dividends declared per common share
Earnings Per Share
Basic
Diluted
Assets and Liabilities
($ in 000’s)
Total Assets
Liabilities
Bank debt
Term loan
Other
Total Liabilities
2015
304,273
23,728
5,372
0.40
2014
259,150
19,748
4,530
0.34
1.75
1.69
1.47
1.42
2013
218,814
14,182
4,178
0.34
1.16
1.15
2012
199,673
11,057
4,043
0.34
0.93
0.92
2011
188,325
9,612
4,029
0.34
0.81
0.81
As At
Dec. 31, 2015
As At
Dec. 31, 2014
As At
Dec. 31, 2013
As At
Dec. 31, 2012
As At
Dec. 31, 2011
418,502
319,472
232,900
189,927
159,123
–
210,299
32,144
242,443
1,756
119,841
43,907
165,504
23,496
37,878
35,893
97,267
21,281
18,330
45,303
84,914
33,123
–
28,458
61,581
2015 Annual Report | 39
Analysis of Results for the Three Months Ended December 31, 2015
Fourth Quarter Highlights
• goeasy continued to grow revenue during the fourth quarter of 2015. Revenue for the quarter reached a record high
of $82.9 million, up from the $70.0 million reported in the fourth quarter of 2014 and an increase of $12.8 million
or 18.3%. The growth was driven primarily by the expansion of easyfinancial and its consumer loans receivable
portfolio. Same-store revenue growth for the quarter, which includes revenue growth from easyfinancial, was
16.5%. Excluding the impact of easyfinancial, same-store revenue growth was 5.0%.
• The gross consumer loans receivable portfolio as at December 31, 2015 was $289.4 million compared with $192.2
million as at December 31, 2014, an increase of $97.2 million or 50.6%. The loan book grew by a record $35.8
million in the quarter compared with growth of $26.5 million in the fourth quarter of 2014. Loan originations
were also strong in the quarter at $110.9 million, up 49.5% compared with the fourth quarter of 2014. Similarly,
easyfinancial revenue increased by 46.1% in the quarter compared to the same period of 2014, driven by a larger
consumer loans receivable portfolio.
• easyfinancial generated a strong operating margin of 32.9%, continuing to improve sequentially after the acquisition
of 45 branches from a payday loan operator in the first quarter of 2015. easyfinancial’s operating income was
$14.8 million for the fourth quarter of 2015 compared with $10.7 million for the comparable period in 2014, an
increase of $4.1 million or 37.5% driven by the growth of the gross consumer loans receivable portfolio.
• The operating income of easyhome leasing increased 15.8% or $1.0 million for the fourth quarter of 2015, reaching
$7.0 million. The improvement was driven by lower advertising spending and improved store level profitability
driven by a smaller but more efficient store network. The operating margin for easyhome leasing reached 18.5%
for the fourth quarter of 2015, up from the 15.4% reported in the fourth quarter of 2014.
• Operating income for fourth quarter of 2015 reached $15.0 million. This represented an increase of $4.7 million
or 45.3% when compared to the normalized operating income (excluding restructuring and other charges) for
the fourth quarter of 2014. Overall, operating margin for the quarter was 18.1%, up from the 14.7% normalized
operating margin reported in the fourth quarter of 2014. Overall operating margin benefitted from higher operating
margins at the easyhome leasing business, strong margins at easyfinancial and an increasing percentage of the
Company’s operating income being generated by the higher margin easyfinancial business.
• Net income for the fourth quarter of 2015 was $7.5 million or $0.54 per share on a diluted basis. Excluding
the impact of restructuring and other items that benefitted the fourth quarter of 2014, net income and diluted
earnings per share for the comparable period in 2014 were $6.0 million and $0.43, respectively. When compared
to the normalized results for the fourth quarter of 2014, net income and earnings per share increased by $1.5
million (26.3%) and $0.11 (25.6%), respectively.
40 | goeasy Ltd.
Summary Financial Results and Key Performance Indicators
(in $000’s except earnings per share and percentages)
Dec. 31, 2015
Dec. 31, 2014
$ / %
% Change
Three Months Ended
Variance
Variance
Summary Financial Results
Revenue
Operating expenses before depreciation and amortization
EBITDA1
EBITDA margin1
Depreciation and amortization expense
Operating income
Operating margin1
Finance costs
Effective income tax rate
Net income
Diluted earnings per share
Adjusted (Normalized) Financial Results1
Adjusted EBITDA margin
Adjusted operating earnings
Adjusted operating margin
Adjusted earnings
Adjusted earnings per share
Key Performance Indicators1
Same store revenue growth
Same store revenue growth excluding easyfinancial
easyhome Leasing
Potential monthly lease revenue
Change in potential monthly lease revenue
due to ongoing operations
easyhome Leasing revenue
easyhome Leasing operating margin
easyfinancial
Gross consumer loans receivable
Growth in consumer loans receivable
Gross loan originations
easyfinancial revenue
Bad debt expense as a percentage of easyfinancial revenue
Net charge offs as a percentage of average gross
consumer loans receivable
easyfinancial operating margin
1 See description in sections “Portfolio Analysis” and “Key Performance Indicators and Non-IFRS Measures”.
82,875
53,813
17,161
20.7%
14,071
14,991
18.1%
4,605
27.5%
7,532
0.54
20.7%
14,991
18.1%
7,532
0.54
16.5%
5.0%
10,651
314
38,049
18.5%
289,426
35,819
110,895
44,826
30.1%
15.5%
32.9%
70,042
44,024
13,518
19.3%
14,476
11,542
16.5%
2,907
17.6%
7,112
0.51
17.6%
10,317
14.7%
5,964
0.43
20.8%
2.6%
12,833
9,789
3,643
1.4%
(405)
3,449
1.6%
1,698
9.9%
420
0.03
3.1%
4,674
3.4%
1,568
0.11
(4.3%)
2.4%
18.3%
22.2%
26.9%
–
(2.8%)
29.9%
–
58.4%
–
5.9%
5.9%
–
45.3%
–
26.3%
25.6%
–
–
10,955
(304)
(2.8%)
593
(279)
(47.0%)
39,370
15.4%
(1,321)
3.1%
192,225
26,505
74,198
30,672
22.0%
11.3%
35.0%
97,201
9,314
36,697
14,154
8.1%
4.2%
(2.1%)
(3.4%)
–
50.6%
35.1%
49.5%
46.1%
–
–
–
2015 Annual Report | 41
Store Locations Summary
easyhome Leasing
Corporately owned stores
Consolidated franchise locations
Total consolidated stores
Total franchise stores
Total easyhome Leasing stores
easyfinancial
Kiosks (in store)
Stand-alone locations1
National loan office
Total easyfinancial locations
Locations as at
Sept. 30, 2015
Locations opened
during quarter
Locations closed /
sold during quarter
Conversions
Locations as at
Dec. 31, 2015
157
4
161
25
186
52
148
1
201
–
–
–
–
–
–
1
–
1
(1)
(1)
(2)
–
(2)
–
–
–
–
(1)
–
(1)
1
–
(1)
1
–
–
155
3
158
26
184
51
150
1
202
42 | goeasy Ltd.
Summary Financial Results by Operating Segment
($ in 000’s except earnings per share)
easyhome Leasing
easyfinancial
Corporate
Three Months Ended December 31, 2015
Revenue
Total operating expenses before depreciation
and amortization
Depreciation and amortization
Operating income (loss)
Finance costs
Income before income taxes
Income taxes
Net income
Diluted earnings per share
38,049
18,520
12,489
7,040
44,826
28,616
1,449
14,761
($ in 000’s except earnings per share)
easyhome Leasing
easyfinancial
Corporate
Three Months Ended December 31, 2014
Revenue
Total operating expenses before depreciation and
amortization and restructuring and other items
Restructuring and other items
Depreciation and amortization
Operating income (loss)
Finance costs
Income before income taxes
Income taxes
Net income
Diluted earnings per share
39,370
19,944
–
13,344
6,082
30,672
18,972
–
968
10,732
6,677
53,813
133
(6,810)
Total
82,875
14,071
14,991
4,605
10,386
2,854
7,532
0.54
Total
70,042
–
–
6,333
45,249
(1,225)
164
(5,272)
(1,225)
14,476
11,542
2,907
8,635
1,523
7,112
0.51
2015 Annual Report | 43
Revenue
Revenue for the three-month period ended December 31, 2015 was $82.9 million compared to $70.0 million in the same
period in 2014, an increase of $12.8 million or 18.3%. Same-store sales growth for the quarter was 16.5%. Revenue
growth was driven primarily by the growth of easyfinancial.
easyhome Leasing: Revenue for the three-month period ended December 31, 2015 was $38.0 million, a decrease of $1.3
million when compared with the fourth quarter of 2014. Factors impacting revenue in the period included the following:
• Revenue growth across the Canadian store network (excluding the impact of store transactions) was $0.4 million
in the fourth quarter of 2015 compared with the fourth quarter of 2014, driven primarily by improved pricing to
offset the higher cost of acquiring inventory in U.S. dollars. Similarly, same store sales growth within easyhome
Leasing was 5.0% in the quarter.
• The Company completed several transactions over the past 15 months to acquire merchandise lease portfolios
(including the acquisition of the lease portfolio of 14 rent-to-own stores from a large U.S.-based rent-to-own company
completed in third quarter of 2015) and closed or sold merchandise leasing stores that it owned. These transactions in
aggregate reduced revenue by $0.1 million in the quarter when compared to the fourth quarter of 2014.
• Revenue in the quarter was also reduced by the sale of the Company’s royalty rights from its U.S. franchise
network that were sold in the fourth quarter of 2014 and the deconsolidation of franchise locations that were
previously consolidated for financial reporting purposes. These factors reduced revenue by $0.3 million and $1.3
million, respectively, in the quarter compared with the fourth quarter of 2014.
easyfinancial: Revenue for the three-month period ended December 31, 2015 was $44.8 million, an increase of $14.2
million or 46.1% from the comparable period in 2014. The increase was due to the growth of the gross consumer loans
receivable portfolio, which increased from $192.2 million as at December 31, 2014 to $289.4 million as at December 31,
2015, an increase of $97.2 million or 50.6%. While the gross consumer loans receivable portfolio grew 50.6% over the
past 12 months, easyfinancial’s revenue grew at a lower rate of 46.1% compared with the fourth quarter of 2014 due to
a reduction in the achieved yield as previously described. The annualized yield declined by 2.4% in the fourth quarter of
2015 compared to the fourth quarter of 2014.
The gross consumer loans receivable portfolio experienced record growth of $35.8 million in the quarter compared
with growth of $26.5 million for the fourth quarter of 2014. Loan originations in the quarter were $110.9 million, up 49.5%
compared to the fourth quarter of 2014.
Total Operating Expenses before Depreciation and Amortization (and Restructuring and Other Items)
Total operating expenses before depreciation and amortization and restructuring and other items were $53.8 million
for the three-month period ended December 31, 2015, an increase of $8.6 million or 18.9% from the comparable period
in 2014. The increase in operating expenses was driven primarily by the higher costs associated with the expanding
easyfinancial business and somewhat offset by lower costs within the easyhome leasing business. Total operating
expenses before depreciation and amortization and restructuring and other items represented 64.9% of revenue for the
fourth quarter of 2015, consistent with the 64.6% reported in the fourth quarter of 2014.
easyhome Leasing: Total operating expenses before depreciation and amortization for the three-month period ended
December 31, 2015 were $18.5 million, a decrease of $1.4 million from the $19.9 million reported in the fourth quarter
of 2014. The costs savings were driven by the reduced store count, improved labour efficiencies, the impact of the wind
44 | goeasy Ltd.
down of the U.S. operations and a $0.9 million reduction in advertising spend. Consolidated leasing store count declined
by 11 from 169 as at December 31, 2014 to 158 as at December 31, 2015.
easyfinancial: Total operating expenses before depreciation and amortization were $28.6 million for the fourth quarter
of 2015, an increase of $9.6 million or 50.8% from the fourth quarter of 2014. Operating expenses, excluding bad debt,
increased by $2.9 million or 24.0% in the quarter driven by: i) the increased cost of 48 additional branches when compared
to December 31, 2014, including the additional operating expenses relating to the locations acquired in the first quarter of
2015, ii) an additional $0.9 million in advertising and marketing investment to support the strong growth in the consumer
loans receivable portfolio, iii) the continued conversion of in-store kiosks towards higher capacity stand-alone branches,
iv) higher costs associated with easyfinancial’s Shared Service Centre to support the increase in loan originations and
collection activities and v) incremental expenditures to develop new distribution channels and manage the growing branch
network. Overall, branch count increased from 154 as at December 31, 2014 to 202 as at December 31, 2015.
Bad debt expense increased to $13.5 million for the fourth quarter of 2015 from $6.8 million during the comparable
period in 2014. Bad debt expense in the fourth quarter of 2014 benefitted from the sale of certain charged-off accounts
to a third-party collection firm. This sale reduced bad debt expense, which is net of recoveries, in the comparable period
by $0.9 million. Excluding the impact of this sale, bad debt expense in the quarter increased by $5.8 million or 75.3%.
Net charge offs as a percentage of the average gross consumer loans receivable on an annualized basis were 15.5% in the
quarter compared with 13.2% in the fourth quarter of 2014, excluding the impact of the aforementioned charged-off account
sale. The overall charge-off rate has increased as a larger proportion of loans have originated on-line. The Company’s
experience has shown that on-line-originated consumers have a higher charge-off rate than retail originated consumers.
This higher charge-off rate was offset by an overall lower cost of acquisition for loans originated on-line due to more efficient
advertising and reduced transaction support costs (labour, real estate, etc.) for such loan originations resulting in achieved
margins from each of these two origination channels that were similar while the Company benefited from an overall increase
in volume. The Company continues to expect that the net charge-off rate will be in the range of 14% to 16% for 2016.
Corporate: Total operating expenses before depreciation and amortization and restructuring and other items were $6.7
million for the fourth quarter of 2015 compared to $6.3 million in the fourth quarter of 2014, an increase of $0.4 million.
The increase was related to higher salary and administrative costs in the fourth quarter of 2015 and was somewhat
offset by lower incentive compensation costs in the year ended December 31, 2015 as previously described. Corporate
expenses before depreciation and amortization and restructuring and other items represented 8.1% of revenue in the
fourth quarter of 2015 compared to 9.0% of revenue in the fourth quarter of 2014.
Restructuring and other items: During the fourth quarter of 2014, the Company decided to wind down its operations
in the U.S. and focus on the Canadian marketplace. This involved the sale of the Company’s rights to future royalty
payments from its franchisees, the recognition of impairment provisions against certain intangible assets and property
and equipment located in the U.S. and the recording of other restructuring charges that consisted of provisions for
onerous leases, severance and other charges. For the year ended December 31, 2014, a net credit of $1.2 million was
recorded as restructuring and other charges within operating income.
Depreciation and Amortization
Depreciation and amortization for the three-month period ended December 31, 2015 was $14.1 million, a decrease of
$0.4 million from the comparable period in 2014. Overall, depreciation and amortization represented 17.0% of revenue
for the three months ended December 31, 2015, a decrease from 20.7% in the comparable period of 2014.
2015 Annual Report | 45
easyhome Leasing depreciation and amortization expense declined by $0.9 million in the fourth quarter of 2015 compared
to the fourth quarter of 2014 due to reductions in the lease portfolio (as described in the analysis of easyhome Leasing’s
revenue), improved pricing and margins, lower charge offs and an impairment recovery in the quarter compared with
an impairment charge in the fourth quarter of 2014. Leasing depreciation and amortization expressed as a percentage
of leasing revenue for the quarter was 32.8%, a decrease from the 33.9% reported in the fourth quarter of 2014.
The $0.5 million increase in depreciation and amortization within easyfinancial was attributable to its growing branch
network and the amortization of new systems.
Operating Income (Income before Finance Costs and Income Taxes)
Operating income for the three-month period ended December 31, 2015 was $15.0 million. Normalized operating income
in the comparable prior of 2014, excluding restructuring and other items, was $10.3 million. Normalizing the 2014
results, operating income in the current quarter increased by $4.7 million or 45.3%. Higher operating incomes within
the leasing business and easyfinancial were partially offset by higher corporate costs. Overall, operating margin for the
quarter was 18.1%, up from the 14.7% reported in the fourth quarter of 2014 excluding the impact of restructuring and
other items in the prior period. Overall operating margin benefitted from higher operating margins at the easyhome
leasing business, strong margins at easyfinancial and an increasing percentage of the Company’s operating income
being generated by the higher margin easyfinancial business.
easyhome Leasing: Operating income was $7.0 million for the fourth quarter of 2015, an increase of $1.0 million when compared
with the fourth quarter of 2014. While overall revenue declined in the quarter when compared with the fourth quarter of 2014
due to the smaller store network and the prior sale of the U.S royalty income, operating income was positively impacted by
lower advertising spend and improved store level profitability driven by a smaller but more efficient store network. Operating
margin for the fourth quarter of 2015 was 18.5%, an increase from 15.4% reported in the fourth quarter of 2014.
easyfinancial: Operating income was $14.8 million for the fourth quarter of 2015 compared with $10.7 million for the
comparable period in 2014, an increase of $4.1 million or 37.5%. The increase in operating income was driven primarily
by the growth of the consumer loans receivable portfolio and associated revenue. Operating margin was 32.9% in
the quarter compared with 35.0% reported in the fourth quarter of 2014. However, the operating margin in the fourth
quarter of 2014 benefited from the charge off sale and excluding the impact of this sale was 32.2%.
Finance Costs
Finance costs for the three-month period ended December 31, 2015 were $4.6 million, up $1.7 million from the same
period in 2014. This increase in finance costs was driven by higher average borrowing levels.
Income Tax Expense
The effective income tax rate for the fourth quarter of 2015 was 27.5% compared to 17.6% in the fourth quarter of 2014. The
Company recorded certain gains on the sale of its U.S. royalty rights in the fourth quarter of 2014 which had adequate tax loss
carryforwards to eliminate any tax payable on the transaction thus resulting in a lower effective tax rate in the prior period.
Net Income and EPS
Net income for the fourth quarter of 2015 was $7.5 million or $0.54 per share on a diluted basis. Excluding the impact
of restructuring and other items that benefitted the fourth quarter of 2014 net income and diluted earnings per share
were $6.0 million and $0.43 respectively, for the comparable period in 2014. Normalizing the 2014 results, net income
and diluted earnings per share increased by $1.5 million (26.3%) and $0.11 (25.6%) respectively.
46 | goeasy Ltd.
Selected Quarterly Information
($ in millions except percentages
and per share amounts)
Revenue
Net income for the period
Net income as a percentage
of revenue
Earnings per Share1
Basic
Diluted
Dec.
2015
82.9
7.5
Sept.
2015
78.0
6.3
Jun.
2015
72.9
5.0
Mar.
2015
70.5
4.9
Dec.
2014
70.0
7.1
Sept.
2014
65.5
3.5
Jun.
2014
63.2
4.5
Mar.
2014
60.3
4.6
Dec.
2013
57.8
4.3
9.1%
8.0%
6.9%
7.0%
10.2%
5.3%
7.2%
7.7%
7.5%
0.56
0.54
0.46
0.45
0.37
0.36
0.36
0.35
0.53
0.51
0.26
0.25
0.34
0.33
0.35
0.34
0.34
0.33
1Quarterly earnings per share are not additive and may not equal the annual earnings per share reported. This is due to the effect of stock issued during the year on the basic weighted average
number of common shares outstanding together with the effects of rounding.
Portfolio Analysis
The Company generates its revenue from a portfolio of lease agreements and consumer loans receivable that are
originated through the initial transaction with its customers. To a large extent, the business results for a period are
determined by the performance of these portfolios, and the make-up of the portfolios at the end of a period are an
important indicator of future business results.
The Company measures the performance of its portfolios during a period and their make-up at the end of a period using
a number of key performance indicators as described in more detail below. Several of these key performance indicators
are not measurements in accordance with IFRS and should not be considered as an alternative to net income or any
other measure of performance under IFRS.
The discussion in this section refers to certain financial measures that are not determined in accordance with IFRS.
Although these measures do not have standardized meanings and may not be comparable to similar measures
presented by other companies, these measures are defined herein or can be determined by reference to the Company’s
financial statements. The Company discusses these measures because it believes that they facilitate the understanding
of the results of its operations and financial position.
2015 Annual Report | 47
easyhome Leasing Portfolio Analysis
Potential Monthly Leasing Revenue
The Company measures its leasing portfolio through potential monthly lease revenue. Potential monthly lease revenue
reflects the revenue that the Company’s portfolio of leased merchandise would generate in a month providing it collected
all lease payments due in that period. Growth in potential monthly lease revenue is driven by several factors including
an increased number of customers, an increased number of leased assets per customer as well as an increase in the
average price of the leased items.
The change in the potential monthly lease revenue during the periods was as follows:
Three Months Ended
Year Ended
($ in 000’s)
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Opening potential monthly lease revenue
10,555
10,655
10,955
11,430
Change due to store openings or acquisitions during the period
Change due to store closures or sales during the period
Change due to ongoing operations
Net change
–
(218)
314
96
73
(366)
593
300
548
(754)
(98)
(304)
104
(722)
143
(475)
Ending potential monthly lease revenue
10,651
10,955
10,651
10,955
easyhome Leasing Portfolio by Product Category
At the end of the periods, the Company’s leasing portfolio as measured by potential monthly lease revenue was allocated
between the following product categories:
($ in 000’s)
Furniture
Appliances
Electronics
Computers
Potential monthly lease revenue
Dec. 31, 2015
Dec. 31, 2014
4,369
1,174
3,547
1,561
10,651
4,191
1,196
3,706
1,862
10,955
48 | goeasy Ltd.
easyhome Leasing Portfolio by Geography
At the end of the periods, the Company’s Leasing portfolio as measured by potential monthly lease revenue was allocated
between the following geographic regions:
($ in 000’s except percentages)
Newfoundland & Labrador
Nova Scotia
Prince Edward Island
New Brunswick
Quebec
Ontario
Manitoba
Saskatchewan
Alberta
British Columbia
USA
December 31, 2015
December 31, 2014
$
% of total
936
842
199
729
575
3,900
263
613
1,470
986
138
8.8%
7.9%
1.9%
6.8%
5.4%
36.5%
2.5%
5.8%
13.8%
9.3%
1.3%
$
944
864
202
734
571
3,956
265
728
1,430
953
308
% of total
8.6%
7.9%
1.8%
6.7%
5.2%
36.1%
2.4%
6.7%
13.1%
8.7%
2.8%
Potential monthly lease revenue
10,651
100.0%
10,955
100.0%
easyhome Leasing Charge-Offs
When easyhome Leasing enters into a leasing transaction with a customer, a sale is not recorded as the Company retains
ownership of the related asset under the lease. Instead, the Company recognizes its leasing revenue over the term of
the lease as payments are received from the customer. Periodically, the lease agreement is terminated by the customer
or by the Company prior to the anticipated end date of the lease and the assets are returned by the customer to the
Company. In some instances, the Company is unable to regain possession of the assets which are then charged off. Net
charge offs (charge offs less subsequent recoveries of previously charged-off assets) are included in the depreciation
of lease assets expense for financial reporting purposes.
($ in 000’s except percentages)
Net charge offs
Leasing revenue
Net charge offs as a percentage of easyhome Leasing revenue
Three Months Ended
Year Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
1,254
38,049
3.3%
1,352
39,370
3.4%
4,292
152,605
2.8%
5,029
158,322
3.2%
2015 Annual Report | 49
Consumer Loans Receivable Portfolio
Loan Originations and Net Principal Written
Gross loan originations is the value of all consumer loans receivable advanced to the Company’s customers during
the period where new credit underwritings have been performed. Included in gross loan originations are loans to new
customers and new loans to existing customers, a portion of which is applied to eliminate their prior borrowings.
When the Company extends additional credit to an existing customer, a full credit underwriting is performed using up-
to-date information. Additionally, the loan repayment history of that customer throughout their relationship with the
Company is considered in the credit decision. As a result, the quality of the credit decision is improved and is expected
to result in better performance.
Net principal written details the Company’s gross loan originations during a period, excluding that portion of the
originations that has been used to eliminate the prior borrowings.
The gross loans originations and net principal written during the period were as follows:
($ in 000’s)
Loan originations to new customers
Loan originations to existing customers
Less: Proceeds applied to repay existing loans
Net advance to existing customers
Net principal written
Gross Consumer Loans Receivable
Three Months Ended
Year Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
45,804
65,091
(31,565)
33,526
79,330
33,011
41,187
(21,091)
20,096
53,107
144,807
185,882
(88,830)
97,052
241,859
104,194
129,611
(63,243)
66,368
170,562
The measure that the Company uses to measure its easyfinancial portfolio is gross consumer loans receivable. Gross
consumer loans receivable reflects the period-end balance of the portfolio before provisioning for potential future
charge offs. Growth in gross consumer loans receivable is driven by several factors including an increased number of
customers and an increased loan value per customer. The changes in the gross consumer loans receivable portfolio
during the periods were as follows:
Three Months Ended
Year Ended
($ in 000’s)
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Opening gross consumer loans receivable
Gross loan originations
Gross principal payments and other adjustments
Gross charge offs before recoveries
Net growth in gross consumer loans receivable during the period
253,607
110,895
(63,289)
(11,787)
35,819
165,720
74,198
(41,047)
(6,646)
26,505
Ending gross consumer loans receivable
289,426
192,225
192,225
330,689
110,704
233,805
(194,527)
(130,682)
(38,961)
97,201
289,426
(21,602)
81,521
192,225
50 | goeasy Ltd.
Net Charge Offs
In addition to loan originations, the consumer loans receivable portfolio during a period is impacted by charge offs of delinquent
customers. The Company charges off delinquent customers when they are 90 days contractually in arrears. Subsequent
collections of previously charged-off accounts are netted with gross charge offs during a period to arrive at net charge offs.
Average gross consumer loans receivable has been calculated based on the average of the month-end loan balances for
the indicated period. This metric is a measure of the collection performance of the easyfinancial consumer loans receivable
portfolio. For interim periods, the rate is annualized.
($ in 000’s except percentages)
Net charge offs
Average gross consumer loans receivable
Net charge offs as a percentage of average gross
consumer loans receivable (annualized)
easyfinancial Bad Debt Expenses
Three Months Ended
Year Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
10,707
275,714
5,167
182,548
35,000
236,392
19,500
149,615
15.5%
11.3%
14.8%
13.0%
The Company’s bad debt expense for a period includes the net charge offs for that particular period plus any increases or
decreases to its allowance for loan losses. The details of the Company’s bad debt expense for the periods were as follows:
($ in 000’s except percentages)
Net charge offs
Net change in allowance for loan losses
Bad debt expense
easyfinancial revenue
Bad debt expense as a percentage of easyfinancial revenue
Three Months Ended
Year Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
10,707
2,766
13,473
44,826
30.1%
5,167
1,590
6,757
30,672
22.0%
35,000
6,933
41,933
151,668
27.6%
19,500
4,764
24,264
100,828
24.1%
2015 Annual Report | 51
easyfinancial Allowance for Loan Losses
The allowance for loan losses is a provision that is reported on the Company’s balance sheet that is netted against the
gross consumer loans receivable to arrive at the net consumer loans receivable. The allowance for loan losses provides
for a portion of the future charge offs that have not yet occurred within the portfolio of consumer loans receivable
that exist at the end of a period. It is determined by the Company using a standard calculation that is not subject to
management’s discretion or estimates that considers i) the relative maturity of the loans within the portfolio, ii) the
long-term expected charge off rates based on actual historical performance and iii) the long-term expected charge
off pattern (timing) for a vintage of loans over their life based on actual historical performance. The allowance for loan
losses essentially estimates the charge offs that are expect to occur over the subsequent five month period for loans
that existed as of the balance sheet date.
($ in 000’s except percentages)
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Three Months Ended
Year Ended
Allowance for loan losses, beginning of period
Net charge offs written off against the allowance
Change in allowance due to lending and collection activities
Allowance for loan losses, ending of period
Allowance for loan losses as a percentage of the
ending gross consumer loans receivable
Aging of the Consumer Loans Receivable Portfolio
15,700
(10,707)
13,472
18,465
6.38%
9,941
(5,166)
6,757
11,532
6.00%
11,532
(35,000)
41,933
18,465
6,768
(19,500)
24,264
11,532
6.38%
6.00%
An aging analysis of the consumer loans receivable portfolio at the end of the periods was as follows:
December 31, 2015
December 31, 2014
$
% of total
$
% of total
269,711
93.2%
178,590
92.9%
12,282
2,256
1,919
3,258
19,715
289,426
4.2%
0.8%
0.7%
1.1%
6.8%
100.0%
9,004
1,505
1,273
1,853
13,635
192,225
4.7%
0.8%
0.7%
0.9%
7.1%
100.0%
($ in 000’s except percentages)
Current
Days past due
1 - 30 days
31 - 44 days
45 - 60 days
61 - 90 days
Gross consumer loans receivable
52 | goeasy Ltd.
A large portion of the Company’s consumer loans receivable portfolio operates on a bi-weekly rather than monthly
repayment cycle. As such, the aging analysis between different fiscal periods may not be comparable depending upon
the day of the week on which the fiscal period ends. An alternate aging analysis prepared as of the last Saturday of the
fiscal periods often presents a more relevant comparison.
An aging analysis of the consumer loans receivable portfolio as of the last Saturday of the periods was as follows:
Current
Days past due
1 - 30 days
31 - 44 days
45 - 60 days
61 - 90 days
Gross consumer loans receivable
easyfinancial Consumer Loans Receivable Portfolio by Geography
Saturday,
Dec. 26, 2015
Saturday,
Dec. 27, 2014
% of total
% of total
92.6%
92.4%
4.8%
0.7%
0.8%
1.1%
7.4%
100%
5.2%
0.8%
0.7%
0.9%
7.6%
100%
At the end of the periods, the Company’s easyfinancial consumer loans receivable portfolio was allocated between the
following geographic regions:
($ in 000’s except percentages)
Newfoundland & Labrador
Nova Scotia
Prince Edward Island
New Brunswick
Quebec
Ontario
Manitoba
Saskatchewan
Alberta
British Columbia
Territories
December 31, 2015
December 31, 2014
$
% of total
$
% of total
15,753
23,501
3,849
16,227
–
126,832
11,412
15,560
41,097
32,491
2,704
5.4%
8.1%
1.3%
5.6%
–
44.0%
3.9%
5.4%
14.2%
11.2%
0.9%
11,773
18,715
2,757
12,115
–
84,393
6,826
9,567
24,872
19,600
1,607
6.1%
9.7%
1.4%
6.3%
–
43.9%
3.7%
5.0%
12.9%
10.2%
0.8%
Gross consumer loans receivable
289,426
100.0%
192,225
100.0%
2015 Annual Report | 53
Key Performance Indicators and Non-IFRS Measures
Fourth Quarter Highlights
In addition to the reported financial results under IFRS and the metrics described in the Portfolio Analysis section of
this MD&A, the Company also measures the success of its strategy using a number of key performance indicators as
described in more detail below. Several of these key performance indicators are not measurements in accordance with
IFRS and should not be considered as an alternative to net income or any other measure of performance under IFRS.
The discussion in this section refers to certain financial measures that are not determined in accordance with IFRS.
Although these measures do not have standardized meanings and may not be comparable to similar measures
presented by other companies, these measures are defined herein or can be determined by reference to the Company’s
financial statements. The Company discusses these measures because it believes that they facilitate the understanding
of the results of its operations and financial position.
Several non-IFRS measures that are used throughout this discussion are defined as follows:
Same-Store Revenue Growth
Same-store revenue growth measures the revenue growth for all stores that have been open for a minimum of 15
months. To calculate same-store revenue growth for a period, the revenue for that period is compared to the same
period in the prior year. Same-store revenue growth is influenced by both the Company’s product offerings as well as
the number of stores which have been open for a 12-36 month time frame, as these stores tend to be in the strongest
period of growth at this time.
Same-store revenue growth
Same-store revenue growth excluding easyfinancial
Three Months Ended
Year Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
16.5%
5.0%
20.8%
2.6%
16.3%
4.7%
19.6%
2.6%
Adjusted Operating Earnings, Adjusted Operating Margin, Adjusted Earnings, Adjusted Earnings Per Share
At various times, operating income, operating margin, net income and earnings per share may be affected by unusual
items that have occurred in the period and impact the comparability of these measures with other periods. The Company
defines operating margin as operating income divided by revenue. Items are considered unusual if they are outside of
normal business activities, significant in amount and scope and are not expected to occur on a recurring basis. The
Company defines i) adjusted operating earnings as operating income excluding such unusual and non-recurring items,
ii) adjusted earnings as net income excluding such items and iii) adjusted earnings per share as diluted earnings per
share excluding such items. The Company believes that adjusted operating earnings, adjusted earnings and adjusted
earnings per share are important measures of the profitability of operations adjusted for the effects of unusual items.
54 | goeasy Ltd.
Items used to adjust operating income, net income and earnings per share for the three months and years ended
December 31, 2015 and 2014 include those indicated in the chart below:
($ in 000’s except earnings per share and percentages)
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Three Months Ended
Year Ended
Operating income as stated
Divided by revenue
Operating margin
Operating income as stated
Restructuring and other items included in operating expenses1
Adjusted operating earnings
Divided by revenue
Adjusted operating margin
Net income as stated
Restructuring and other items included in operating expenses1
Tax impact of above items
After tax impact
Adjusted earnings
Weighted average number of shares outstanding
Diluted earnings per share as stated
Per share impact of restructuring and other items
Adjusted earnings per share
14,991
82,875
18.1%
14,991
–
14,991
82,875
18.1%
7,532
–
–
–
7,532
14,069
0.54
–
0.54
11,542
70,042
16.5%
11,542
(1,225)
10,317
70,042
14.7%
7,112
(1,225)
77
(1,148)
5,964
14,002
0.51
0.08
0.43
48,052
304,273
15.8%
48,052
–
48,052
304,273
15.8%
23,728
–
–
–
23,728
14,037
1.69
–
1.69
34,593
259,150
13.3%
34,593
(1,225)
33,368
259,150
12.9%
19,748
(1,225)
77
(1,148)
18,600
13,944
1.42
0.08
1.34
1During the fourth quarter of 2014, the Company decided to wind down its operations in the U.S. and focus on the Canadian marketplace. This wind-down involved the sale of the Company’s
rights to future royalty payments from its franchisees, the recognition of impairment provisions against certain intangible assets and property and equipment located in the U.S. and the recording
of other restructuring charges which consisted of provisions for onerous leases, severance and other charges. For the year ended December 31, 2014, a net credit of $1,225 was recorded as
restructuring and other charges within operating income. No further related charges are expected in future periods.
2015 Annual Report | 55
Operating Expenses Before Depreciation and Amortization
The Company defines operating expenses before depreciation and amortization as total operating expenses excluding
depreciation and amortization expenses for the period. The Company believes that operating expenses before
depreciation and amortization is an important measure of the cost of operations adjusted for the effects of purchasing
decisions that may have been made in prior periods.
($ in 000’s except percentages)
Operating expenses before depreciation and amortization as stated
Restructuring charges and other items included in operating expenses
Adjusted operating expenses before depreciation and amortization
Divided by revenue
Operating expenses before depreciation and amortization as % of revenue
($ in 000’s except percentages)
Three Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2014
(adjusted)
53,813
–
53,813
82,875
64.9%
44,024
–
44,024
70,042
62.9%
Year Ended
44,024
1,225
45,249
70,042
64.6%
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2014
(adjusted)
Operating expenses before depreciation and amortization as stated
200,125
167,916
Restructuring charges and other items included in operating expenses
Adjusted operating expenses before depreciation and amortization
Divided by revenue
Operating expenses before depreciation and amortization as % of revenue
–
200,125
304,273
65.8%
–
167,916
259,150
64.8%
167,916
1,225
169,141
259,150
65.3%
56 | goeasy Ltd.
Operating Margin
The Company defines operating margin as operating income divided by revenue for the Company as a whole and for
its operating segments: easyhome Leasing and easyfinancial. The Company believes operating margin is an important
measure of the profitability of its operations, which in turn assists it in assessing the Company’s ability to generate cash
to pay interest on its debt and to pay dividends.
($ in 000’s except percentages)
easyhome Leasing
Operating income
Divided by revenue
easyhome Leasing operating margin
easyfinancial
Operating income
Divided by revenue
easyfinancial operating margin
Total
Operating income
Divided by revenue
Total operating margin
Total (adjusted)
Operating income as stated
Restructuring and other items included in operating expenses
Adjusted operating earnings
Divided by revenue
Total (adjusted) operating margin
Three Months Ended
Year Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
7,040
38,049
18.5%
14,761
44,826
32.9%
14,991
82,875
18.1%
14,991
–
14,991
82,875
18.1%
6,082
39,370
15.4%
10,732
30,672
35.0%
11,542
70,042
16.5%
11,542
(1,225)
10,317
70,042
14.7%
24,667
152,605
16.2%
46,772
151,668
30.8%
48,052
304,273
15.8%
48,052
–
48,052
304,273
15.8%
24,306
158,322
15.4%
33,006
100,828
32.7%
34,593
259,150
13.3%
34,593
(1,225)
33,368
259,150
12.9%
2015 Annual Report | 57
Earnings before Interest, Taxes, Depreciation and Amortization [“EBITDA”] and EBITDA Margin
The Company defines EBITDA as earnings before interest, taxes, depreciation and amortization, excluding depreciation
of lease assets. The Company uses EBITDA, among other measures, to assess the operating performance of its ongoing
businesses. EBITDA margin is calculated as EBITDA divided by revenue.
($ in 000’s except percentages)
Net income as stated
Finance costs
Income Tax Expense
Depreciation and amortization, excluding dep. of lease assets
EBITDA
Restructuring and other items included in operating expenses
Adjusted EBITDA
Divided by revenue
EBITDA margin
($ in 000’s except percentages)
Net income as stated
Finance costs
Income Tax Expense
Depreciation and amortization, excluding dep. of lease assets
EBITDA
Restructuring and other items included in operating expenses
Adjusted EBITDA
Divided by revenue
EBITDA margin
Three Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2014
(adjusted)
7,532
4,605
2,854
2,170
7,112
2,907
1,523
1,976
17,161
13,518
–
17,161
82,875
20.7%
–
13,518
70,042
19.3%
Year Ended
7,112
2,907
1,523
1,976
13,518
(1,225)
12,293
70,042
17.6%
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2014
(adjusted)
23,728
15,334
8,990
8,689
56,741
–
56,741
304,273
18.6%
19,748
8,800
6,045
7,216
41,809
–
41,809
259,150
16.1%
19,748
8,800
6,045
7,216
41,809
(1,225)
40,584
259,150
15.7%
58 | goeasy Ltd.
Return on Equity
The Company defines return on equity as annualized net income in the period divided by average shareholders’ equity
for the period. The Company believes return on equity is an important measure of how shareholders’ invested capital
is utilized in the business.
($ in 000’s except percentages)
Net income as stated
Restructuring and other items included in operating expenses
Tax impact of above items
After tax impact
Adjusted earnings
Multiplied by number of periods in year
Divided by average shareholders' equity for the period
Return on equity
($ in 000’s except percentages)
Net income as stated
Restructuring and other items included in operating expenses
Tax impact of above items
After tax impact
Adjusted net income
Divided by average shareholders' equity for the period
Return on equity
Three Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2014
(adjusted)
7,532
7,112
–
–
–
7,532
X 4/1
172,446
17.5%
–
–
–
7,112
X 4/1
150,561
18.9%
Year Ended
7,112
(1,225)
77
(1,148)
5,964
X 4/1
150,561
15.8%
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2014
(adjusted)
23,728
19,748
–
–
–
23,728
164,480
14.4%
–
–
–
19,748
144,110
13.7%
19,748
(1,225)
77
(1,148)
18,600
144,110
12.9%
2015 Annual Report | 59
Financial Condition
The following table provides a summary of certain information with respect to the Company’s capitalization and financial
position as at December 31, 2015 and December 31, 2014.
($ in 000’s except for ratios)
Consumer loans receivable (net of allowance)
Dec. 31, 2015
Dec. 31, 2014
270,961
180,693
Lease assets
Cash
Property and equipment
Intangible assets
Amounts receivable
Other assets
Total assets
External debt (includes term loan)
Other liabilities
Total liabilities
Shareholders’ equity
Total capitalization (total debt plus total shareholders’ equity)
External debt to shareholders’ equity
External debt to total capitalization
External debt to EBITDA1
1 EBITDA excludes the impact of restructuring and other unusual items.
60,753
11,389
18,689
14,041
13,000
29,669
418,502
210,299
32,144
242,443
176,059
386,358
1.19
0.54
3.71
64,526
1,165
16,915
11,006
16,508
28,659
319,472
121,597
43,907
165,504
153,968
275,565
0.79
0.44
2.91
Total assets were $418.5 million as at December 31, 2015, an increase of $99.0 million or 31.0% over December 31, 2014.
The growth in total assets was driven primarily by: i) the increased size of the consumer loans receivable portfolio (net
of allowance) which increased by $90.3 million over the past 12 months, ii) the Company’s investment in property and
equipment and intangible assets which increased by $4.8 million on a net basis, and iii) a $10.2 million increase in cash
on hand related to the timing of advances on the Company’s credit facilities.
The $99.0 million growth in total assets was financed by an $88.7 million increase in external debt and a $22.1 million
increase in total shareholder’s equity. While the Company has continued to pay a dividend to its shareholders, a large
portion of the Company’s earnings over the prior 12 months have been retained to fund the growth of easyfinancial.
On July 31, 2015, the Company increased its total credit facilities by $100 million, from $200 million to $300 million, while
reducing the current interest rate on the term loan from 8.22% to 7.99%. The amended facilities were comprised of a $280
million term loan and a $20 million revolving operating facility. The increased capital will support the growth of easyfinancial into
2017. The amended facilities featured financial covenants that were more flexible and drawings that closely corresponded with
the estimated cash flow requirements of the business. In addition, the expiry date was extended by 12 months to October 4, 2019.
As at December 31, 2015, $217.5 million had been drawn under the term loan. Borrowings under the term loan bore
interest at the Canadian Bankers’ Acceptance rate plus 699 bps, while borrowings under the revolving operating facility
bore interest at the lender’s prime rate plus 175 to 275 bps depending on the Company’s debt to earnings before interest,
taxes, depreciation and amortization ratio. This credit facility expires on October 4, 2019 and was secured by a first charge
over substantially all assets of the Company. As at December 31, 2015, the Company’s interest rates under the term loan
and revolving operating facility were 7.99% and 5.45%, respectively.
60 | goeasy Ltd.
Liquidity and Capital Resources
Summary of Cash Flow Components
($ in 000’s)
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Three Months Ended
Year Ended
Cash provided by operating activities before
issuance of consumer loans receivable
Net issuance of consumer loans receivable
Cash (used in) provided by operating activities
Cash used in investing activities
Financing activities
Net (decrease) increase in cash for the period
37,633
17,385
114,081
94,077
(46,527)
(8,894)
(13,451)
11,473
(10,872)
(31,671)
(14,286)
(11,357)
20,752
(4,891)
(132,201)
(101,021)
(18,120)
(54,916)
83,260
10,224
(6,944)
(50,290)
56,070
(1,164)
Cash flows used in operating activities for the three-month period ended December 31, 2015 were $8.9 million. Included
in this amount was a net investment of $46.5 million to increase the easyfinancial consumer loans receivable portfolio.
If this net investment in the easyfinancial consumer loans receivable portfolio was treated as cash flows from investing
activities, the cash flows generated by operating activities would be $37.6 million in the fourth quarter of 2015, up
$20.2 million compared to the same period of 2014 driven primarily by i) higher net income; ii) an increase in non-cash
expenses such as bad debts; and iii) improvements in working capital.
Cash flows provided by operating activities in the fourth quarter of 2015 enabled the Company to: i) meet the growth
demands of easyfinancial as described above, ii) invest $13.0 million in new lease assets, iii) invest $1.9 million in
additional property and equipment and intangible assets, and iv) maintain its dividend payments.
During the quarter, the Company generated $11.5 million in cash flow from financing activities as the Company increased
its borrowings under the credit facility to finance the growth of easyfinancial.
Cash flows used in operating activities for the year ended December 31, 2015 were $18.1 million. Included in this amount was
a net investment of $132.2 million to increase the easyfinancial consumer loans receivable portfolio. If this net investment
in the easyfinancial consumer loans receivable portfolio was treated as cash flows from investing activities, the cash flows
generated by operating activities would be $114.1 million in the year, up $20.0 million or 21.3% compared to 2014.
Cash flows provided by operating activities for the year ended December 31, 2015 enabled the Company to: i) meet the
growth demands of easyfinancial as described above, ii) invest $44.7 million in new lease assets, iii) invest $10.9 million
in additional property and equipment and intangible assets, iv) invest $7.9 million in asset acquisitions and v) maintain
its dividend payments.
During the year ended December 31, 2015, the Company generated $83.3 million in cash flow from financing activities
related primarily to increased borrowings under the Company’s credit facility.
The Company believes that the cash flows provided by operations will be sufficient in the near-term to meet operational
requirements, purchase lease assets, meet capital spending requirements and pay dividends. Also, the additional
availability under the Company’s amended credit facilities will allow the Company to achieve its targets for the growth
of its consumer loans receivable portfolio into 2017. However, for easyfinancial to achieve its full long-term growth
potential, additional sources of financing over and above the currently available credit facility and term loan are required.
There is no certainty that these long-term sources of capital will be available or at terms favourable to the Company.
2015 Annual Report | 61
Outstanding Shares and Dividends
As at February 17, 2016 there were 13,253,597 shares, 167,113 DSUs, 479,834 options, 678,366 RSUs, and no warrants outstanding.
Normal Course Issuer Bid
On June 23, 2015, the Company announced the acceptance by the Toronto Stock Exchange (the “TSX”) of goeasy’s Notice of
Intention to Make a Normal Course Issuer Bid (the “NCIB”). Pursuant to the NCIB, goeasy proposes to purchase, from time
to time, if it is considered advisable, up to an aggregate of 670,000 Common Shares, being approximately 4.98% of goeasy’s
issued and outstanding Common Shares as of June 12, 2015. As at June 12, 2015, goeasy had 13,453,606 Common Shares
issued and outstanding and the average daily trading volume for the 6 months prior to May 31, 2015 was 38,566.
Under the NCIB, daily purchases will be limited to 9,641 Common Shares, other than block purchase exemptions. The
purchases may commence on June 25, 2015 and will terminate on June 24, 2016 or on such earlier date as goeasy may
complete its purchases pursuant to the Notice of Intention. The purchases made by goeasy will be effected through the
facilities of the TSX, as well as alternative trading systems, and in accordance with the rules of the TSX. The price that
goeasy will pay for any Common Shares will be the market price of such shares at the time of acquisition. goeasy will
make no purchases of Common Shares other than by open-market purchases.
As of December 31, 2015, the Company had repurchased and cancelled 111,041 of its common shares on the open
market at an average price of $17.73 per share pursuant to the NCIB for a total cost of $2.0 million.
Dividends
On February 18, 2015, the Company increased the dividend rate by 17.6% from $0.085 per share to $0.10 per share. For
the quarter ended December 31, 2015, the Company paid a $0.10 per share quarterly dividend on outstanding common
shares. The Company reviews its dividend distribution policy on a regular basis, evaluating its financial position,
profitability, cash flow and other factors the Board of Directors considers relevant. However, no dividends may be
declared in the event there is a default of the loan facility, or where such payment would lead to a default.
The following table sets forth the quarterly dividends paid by the Company in the fourth quarter of the years indicated:
Dividend per share
Percentage increase
2015
$ 0.100
17.6%
2014
$ 0.085
0.0%
2013
$ 0.085
0.0%
2012
$ 0.085
0.0%
2011
$ 0.085
0.0%
2010
$ 0.085
0.0%
2009
$ 0.085
0.0%
62 | goeasy Ltd.
Commitments, Guarantees and Contingencies
Commitments
The Company is committed to long-term service contracts and operating leases for premises, equipment, vehicles and
signage. The minimum annual lease payments plus estimated operating costs and other commitments required for the
next five years and thereafter are as follows:
($ in 000’s)
Premises
Other operating lease obligations
Other
Total contractual obligations
Contingencies
Within 1 year
After 1 year
but not more
than 5 years
More than
5 years
25,097
1,113
12,306
38,516
41,611
1,961
2,903
46,475
1,292
–
–
1,292
The Company is involved in various legal matters arising in the ordinary course of business. The resolution of these matters
is not expected to have a material adverse effect on the Company’s financial position, financial performance or cash flows.
The Company has agreed to indemnify its directors and officers and particular employees in accordance with the
Company’s policies. The Company maintains insurance policies that may provide coverage against certain claims.
Risk Factors
Overview
The Company’s activities are exposed to a variety of commercial, operational, financial and regulatory risks. The Company’s
overall risk management program focuses on the unpredictability of financial and economic markets and seeks to
minimize potential adverse effects on the Company’s financial performance. The Company’s Board of Directors has overall
responsibility for the establishment and oversight of the Company’s risk management framework. The Audit Committee of
the Board of Directors reviews the Company’s risk management policies on an annual basis.
Commercial Risks
Dependence on Key Personnel
One of the significant limiting factors in the Company’s performance and expansion plans will be the hiring and retention of the
best people for the job. Over the past few years, the Company has improved its hiring competencies and its training programs.
In particular, the Company is dependent on the abilities, experiences and efforts of its senior management team and
other key employees. The loss of these individuals without adequate replacement could materially adversely affect its
business and operations.
As a consequence of its growth strategy and relatively high employee turnover at the store and branch level, the
Company requires a growing number of qualified managers and other store or branch personnel to operate its expanding
branch and store network successfully. There is competition for such personnel and there can be no assurances that the
2015 Annual Report | 63
Company will be successful in attracting and retaining such personnel as it may require. If the Company is unable to attract
and retain qualified personnel or its costs to do so increase dramatically, its operations would be materially adversely affected.
Competition
easyhome Leasing: Competition from U.S.-based merchandise leasing companies and others in the Canadian market
will increase the competition for customers and employees. Although the Company believes that such competition will
stimulate rent-to-own industry growth, this increased competition could have a material adverse effect on the Company’s
operational results should the Company not be able to adequately respond to it. Other factors that may adversely affect
the performance of the Leasing business are further competition from merchandise rental businesses, the increased
sale of used furniture and electronics on-line and, to a lesser extent, rental stores that do not offer a purchase option.
The Company also competes with discount stores and other retail outlets that offer an installment sales program or
offer a financing transaction to facilitate the purchase of consumer merchandise. Furthermore, additional competitors,
both domestic and international, may emerge since barriers to entry are relatively low.
easyfinancial: The Company’s financial services business occupies a market niche between traditional financial
institutions and short-term payday lenders. As such, it competes with companies from each of these sectors. Competition
is based primarily on access, flexibility and cost (interest rate). Since the Company’s products are more affordable than
payday loans while being more accessible and flexible than banks, the Company offers alternatives to customers that
are not being adequately served by the incumbent participants in either of these market sectors. Although there may be
other, larger companies that offer products similar to those offered by the Company’s financial services business, the
Company believes that the potential marketplace is sufficiently large enough that such competition will not adversely
affect the Company’s operational results in the near term. Additionally, the large volume of data relating to its customers
and related loan performance which the Company has compiled and uses to create its loan underwriting models forms
an effective barrier to entry as a competitor would not have access to such data.
Macroeconomic Conditions
Certain changes in macroeconomic conditions can have a negative impact on the Company’s customers and its
performance. The Company’s chosen customer segment is the cash-and credit-constrained individual. These customers
are affected by adverse macroeconomic conditions such as higher unemployment rates or costs of living, which can
lower the Company’s collection rates and result in higher loss rates and adversely affect the Company’s performance,
financial condition and liquidity. The Company can neither predict the impact current economic conditions will have on
its future results, nor predict when the economic environment will change.
Litigation
From time to time the Company may be involved in material litigation. There can be no assurance that any litigation
in which the Company may become involved in the future will not have a material adverse effect on the Company’s
business, financial condition or results of operations.
Operational Risks
Operational risk, which is inherent in all business activities, is the potential for loss as a result of external events, human
behaviour (including error and fraud, non-compliance with mandated policies and procedures or other inappropriate
behaviour) or inadequacy, or the failure of processes, procedures or controls. The impact may include financial loss, loss
of reputation, loss of competitive position or regulatory and civil penalties. While operational risk cannot be eliminated,
64 | goeasy Ltd.
the Company takes reasonable steps to mitigate this risk by putting in place a system of oversight, policies, procedures
and internal controls.
Strategic Risk
The Company believes it has the correct strategy to address the current market opportunities. The Company’s growth
strategy is focused on easyfinancial. The Company’s ability to increase its customer and revenue base is contingent, in
part, on its ability to secure additional locations for easyfinancial, to grow its consumer loans receivable portfolio, to
access customers through new delivery channels and to execute with efficiency and effectiveness.
Strategic risk is the risk from changes in the business environment, fundamental changes in demand for the Company’s
products or services, improper implementation of decisions, execution of the Company’s strategy or inadequate
responsiveness to changes in the business environment, including changes in the competitive or regulatory landscape.
The impact of poor execution by management or an inadequate response to changes in the business environment could
have a material adverse effect on the Company’s financial condition, liquidity and results of operations.
Credit Risk
Credit risk is the risk of loss that arises when a customer or third party fails to pay an amount owing to the Company.
The maximum exposure to credit risk is represented by the carrying amount of the amounts receivable, consumer loans
receivable and lease assets with customers under merchandise lease agreements. The Company leases products and
makes consumer loans to thousands of customers pursuant to policies and procedures that are intended to ensure that
there is no concentration of credit risk with any particular individual, company or other entity, although the Company is
subject to a higher level of credit risk due to the credit constrained nature of many of the Company’s customers and in
circumstances where its policies and procedures are not complied with.
For easyhome Leasing, the credit risk related to assets on lease with customers results from the possibility of customer
default with respect to agreed-upon payments or in their not returning the leased asset. The Company has a standard
collection process in place in the event of payment default, which concludes with the recovery of the lease asset if
satisfactory payment terms cannot be worked out, as the Company maintains ownership of the lease assets until
payment options are exercised.
For amounts receivable from third parties the risk relates to the possibility of default on amounts owing to the Company.
The Company deals with credible companies, performs ongoing credit evaluations of debtors and creates an allowance
on its financial statements for uncollectible amounts, when determined to be appropriate.
The credit risk on the Company’s consumer loans receivable made in accordance with policies and procedures is impacted
by both the Company’s credit policies and the lending practices which are overseen by the Company’s senior management.
Credit quality of the customer is assessed based on a number of proprietary credit models and individual credit limits are
defined in accordance with this assessment and other factors including the ability of the customer to comfortably afford
the periodic loan payments. The consumer loans receivable are unsecured. The Company evaluates the concentration of
risk with respect to customer loans receivable as low, as its customers are located in several jurisdictions and operate
independently. The Company develops underwriting models based on the historical performance of groups of customer
loans which guide its lending decisions. To the extent that such historical data used to develop its underwriting models is
not representative or predictive of current loan book performance, the Company could suffer increased loan losses.
2015 Annual Report | 65
The Company maintains an allowance for loan losses (i.e. expected losses that will be incurred in relation to the Company’s
consumer loan’s portfolio). The process for establishing an allowance for loan losses is critical to the Company’s results
of operations and financial conditions. It is determined by the Company using a standard calculation that considers :i) the
relative maturity of the loans within the portfolio, ii) the long-term expected charge off rates based on actual historical
performance and iii) the long-term expected charge off pattern (timing) for a vintage of loans over their life based on
actual historical performance. To the extent that such historical data used to develop its allowance for loans losses is
not representative or predictive of current loan book performance, the Company could suffer increased loan losses
above and beyond those provided for on its financial statements.
The Company cannot guarantee that delinquency and loss levels will correspond with the historical levels experienced
and there is a risk that delinquency and loss rates could increase significantly.
Technology Risk
The Company is dependent upon the successful and uninterrupted functioning of its computer, internet and data
processing systems. The failure of these systems could interrupt operations or materially impact the Company’s ability
to enter into new lease or lending transactions and service customer accounts. Although the Company has extensive
information technology security plans and disaster recovery plans, if sustained, such a failure could have a material
adverse effect on the Company’s financial condition, liquidity and results of operations.
The Company’s operations rely heavily on the secure processing, storage and transmission of confidential customer
information. While the Company has taken reasonable steps to protect its data and that of its customers, the risk of the
Company’s inability to protect customer information, or breaches in the Company’s information systems, may adversely
affect the Company’s reputation and result in significant costs or regulatory penalties and remedial action.
Internal Controls over Financial Reporting
The effective design of internal controls over financial reporting is essential for the Company to prevent and detect
fraud or material errors that may have occurred. The Company is also obligated to comply with the Form 52-109F2
Certification of interim filings of the Ontario Securities Commission, which requires the Company’s CEO and CFO to
submit a quarterly certificate of compliance. The Company and its management have taken reasonable steps to ensure
that adequate internal controls over financial reporting are in place. However, there is a risk that a fraud or material
error may go undetected and that such material fraud or error could adversely affect the Company.
Risk Management Processes and Procedures
The Company has established a Risk Oversight Committee and created processes and procedures to identify, measure,
monitor and mitigate significant risks to the organization. However, to the extent that such risk go unidentified or are not
adequately or expeditiously addressed by management, the Company could be adversely affected.
Financial Risks
Inadequate Access to Financing
The Company has historically been funded through various sources such as private placement debt and public market
equity offerings. The availability of additional financing will depend on a variety of factors including the availability of
credit to the financial services industry and the Company’s financial performance and credit ratings.
66 | goeasy Ltd.
The Company believes that the cash flow expected to be provided by operations during 2016, coupled with the increased loan
facilities obtained in the third quarter of 2015 will be sufficient in the near term to meet operational requirements, purchase
leased assets, meet capital spending requirements, satisfy financial obligations and pay dividends. Additionally, the Company
is able to manage the growth of its consumer loans receivable portfolio based on the amount of available financing.
The Company has publicly stated that it intends to significantly expand its consumer lending business. To achieve this
goal, it will require additional funds that can be obtained through various sources, including debt or equity financing.
There can be no assurance, however, that additional funding will be available when needed or will be available on terms
favourable to the Company. The inability to access adequate sources of financing, or to do so on favourable terms, may
adversely affect the Company’s capital structure and the Company’s ability to fund operational requirements and satisfy
financial obligations. If additional funds are raised by issuing equity securities, shareholders may incur dilution.
Interest Rate Risk
Interest rate risk measures the Company’s risk of financial loss due to adverse movements in interest rates. The Company
is subject to interest rate risk as all credit facilities bear interest at variable rates. The Company does not hedge interest
rates and future changes in interest rates will affect the amount of interest expense payable by the Company.
Foreign Exchange
The Company sources some of its merchandise out of the U.S. and as such, the Company’s Canadian operations have U.S.
denominated cash and payable balances. While the Company sold off most of its U.S. franchise rights in 2014, it continues
to have some operations in the U.S. As a result, the Company has both foreign exchange transaction and translation risk.
Although easyhome has U.S. denominated purchases, the Company has historically been able to price its lease
transactions to compensate for the impact of foreign currency fluctuations on its purchases. However in periods of
rapid change in the Canadian to U.S. dollar exchange rate, the Company may not be able to pass on such changes in the
cost of purchased products to its customers which may negatively impact the Company’s financial performance. The
Company currently does not actively hedge foreign currency risk and transacts in foreign currencies on a spot basis.
Liquidity Risk
Liquidity risk is the risk that the Company’s financial condition is adversely affected by an inability to meet funding
obligations and support its business growth. The Company manages its capital to maintain its ability to continue as
a going concern and to provide adequate returns to shareholders by way of share appreciation and dividends. The
capital structure of the Company consists of external debt and shareholders’ equity, which comprises issued capital,
contributed surplus and retained earnings.
The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company,
upon approval from its Board of Directors, will balance its overall capital structure through new share issuances, share
repurchases, the payment of dividends, increasing or decreasing debt or by undertaking other activities as deemed
appropriate under the specific circumstances. The Company’s strategy, objectives, measures, definitions and targets
have not changed significantly from the prior period.
The Company’s revolving operating facility and term debt facility must be renewed on a periodic basis. These facilities
contain restrictions on the Company’s ability to, among other things, pay dividends, sell or transfer assets, incur
additional debt, repay other debt, make certain investments or acquisitions, repurchase or redeem shares and engage
in alternate business activities. The facilities also contain a number of covenants that require the Company to maintain
2015 Annual Report | 67
certain specified financial ratios. Failure to meet any of these covenants could result in an event of default under these
facilities which could, in turn, allow the lenders to declare all amounts outstanding to be immediately due and payable.
In such a case, the financial condition, liquidity and results of operations of the Company could materially suffer.
The Company has been successful in renewing and expanding the revolving credit and term debt facilities in the past.
If the Company were unable to renew these facilities on acceptable terms when they became due, there could be a
material adverse effect on the Company’s financial condition, liquidity and results of operations.
The Company has significant debt that is subject to certain financial and non-financial covenants. A violation of any or all
of the debt covenants may result in the lender requiring the Company to repay the outstanding debt, which would have
a material adverse effect on the Company’s financial position, liquidity and results of operation.
Possible Volatility of Stock Price
The market price of the Company’s Common Shares, similar to that of many other Canadian (and indeed worldwide)
companies, has been subject to significant fluctuation in response to numerous factors, including the recent credit crisis
and related recession, economic shock such as the recent decline in oil prices and the related impact on the Canadian
economy, as well as variations in the annual or quarterly financial results of the Company, timing of announcements of
acquisitions or material transactions by the Company or its competitors, other conditions in the economy in general or
in the industry in particular, changes in applicable laws and regulations and other factors. Moreover, from time to time,
the stock markets experience significant price and volume volatility that may affect the market price of the Common
Shares for reasons unrelated to the Company’s performance. No prediction can be made as to the effect, if any, that
future sales of Common Shares or the availability of shares for future sale (including shares issuable upon the exercise
of stock options) will have on the market price of the Common Shares prevailing from time to time. Sales of substantial
numbers of such shares or the perception that such sales could occur may adversely affect the prevailing price of the
Common Shares. Significant changes in the stock price could jeopardize the Company’s ability to raise growth capital
through an equity offering without significant dilution to existing shareholders.
Regulatory Risks
Government Regulation and Compliance
The Company takes reasonable measures to ensure compliance with governing statutes, regulations and regulatory policies.
A failure to comply with such statutes, regulations or regulatory policies could result in sanctions, fines or other settlements
that could adversely affect both its earnings and reputation. Changes to laws, statutes, regulations or regulatory policies
could also change the economics of the Company’s merchandise leasing and consumer lending businesses.
Numerous consumer protection laws and related regulations impose substantial requirements upon lenders involved
in consumer finance, including leasing and lending. Also, federal and provincial laws impose restrictions on consumer
transactions and require contract disclosures relating to the cost of borrowing and other matters. These requirements
impose specific statutory liabilities upon creditors who fail to comply with their provisions.
easyhome currently operates in an unregulated environment with regards to capital requirements. The Criminal Code
of Canada, however, imposes a restriction on the cost of borrowing in any lending transaction to 60% per year. The
application of capital requirements or a reduction in the maximum cost of borrowing could have a material adverse
effect on the Company’s financial condition, liquidity and results of operations.
68 | goeasy Ltd.
Privacy, Information Security, and Data Protection Regulations
The Company is subject to various privacy, information security and data protection laws and takes reasonable
measures to ensure compliance with all requirements. Legislators and regulators are increasingly adopting new
privacy information security and data protection laws which may increase the Company’s cost of compliance. While the
Company has taken reasonable steps to protect its data and that of its customers, a breach in the Company’s information
security may adversely affect the Company’s reputation and also result in fines or penalties from governmental bodies.
Critical Accounting Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenue and expenses during the year. Actual amounts
could differ from these estimates.
Significant changes in assumptions, including those with respect to future business plans and cash flows, could change
the recorded amounts by a material amount.
The Company’s critical accounting estimates are fully described in the Company’s December 31, 2015 Notes to the
Financial Statements.
Adoption of New Accounting Standards and Standards
Issued But Not Yet Effective
No new accounting standards were adopted by the Company during the reporting period.
The Company will be required to adopt IFRS 9, Financial Instruments, which is the IASB’s replacement of IAS 39. IFRS 9
will provide new requirements for the classification and measurement of financial assets and liabilities, impairment and
hedge accounting. IFRS 9 is required to be applied for years beginning on or after January 1, 2018 with early adoption
permitted. The Company is in the process of assessing the impact of this standard.
The Company will be required to adopt IFRS 15, Revenue from Contracts with Customers, which clarifies the principles
for recognizing revenue and cash flows arising from contracts with customers. IFRS 15 is required to be applied for
years beginning on or after January 1, 2018, with early adoption permitted, and is to be applied retrospectively. The
Company is in the process of assessing the impact of this standard.
The Company will be required to adopt IFRS 16, Leases, which is the IASB’s replacement of IAS 17. IFRS 16 will require
lessees to recognize a lease liability that reflects future lease payments and a ‘right-of-use-asset’ for most lease contracts.
IFRS 16 is required to be applied for years beginning on or after January 1, 2019 with early adoption permitted, but only in
conjunction with the adoption of IFRS 15. The Company has not yet assessed the impact of this standard.
2015 Annual Report | 69
Internal Controls
Disclosure Controls and Procedures [“DC&P”]
DC&P are designed to provide reasonable assurance that information required to be disclosed by the Company in reports
filed with or submitted to various securities regulators is recorded, processed, summarized and reported within the
time periods specified. This information is gathered and reported to the Company’s management, including the Chief
Executive Officer [“CEO”] and Chief Financial Officer [“CFO”], so that timely decisions can be made regarding disclosure.
The Company’s management, under supervision of, and with the participation of, the CEO and CFO, have designed and
evaluated the Company’s DC&P, as required in Canada by National Instrument 52-109, “Certification of Disclosure in
Issuers’ Annual and Interim Filings”. Based on this evaluation, the CEO and CFO have concluded that the design of the
system of disclosure controls and procedures were effective as at December 31, 2015.
Internal Controls over Financial Reporting [“ICFR”]
ICFR is a process designed by, or under the supervision of, senior management, and effected by the Board of Directors,
management and other personnel, to provide reasonable assurances regarding the reliability of financial reporting and
preparation of the Company’s consolidated financial statements in accordance with IFRS. Management is responsible
for establishing and maintaining ICFR and designs such controls to attempt to ensure that the required objectives of
these internal controls have been met. Management uses the Internal Control – Integrated Framework (2013) to evaluate
the effectiveness of internal control over financial reporting, which is a recognized and suitable framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission [“COSO”].
In designing and evaluating such controls, it should be recognized that due to inherent limitations, any controls, no
matter how well designed and operated, can provide only reasonable assurance and may not prevent or detect all
misstatements as a result of, among other things, error or fraud. Projections of any evaluations of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies and/or procedures may deteriorate.
Changes to ICFR During 2015
There were no material changes in the Company’s ICFR that occurred or were finalized during the year ended December 31, 2015.
Evaluation of ICFR at December 31, 2015
As at December 31, 2015, under the direction and supervision of the CEO and CFO, the Company has evaluated the
effectiveness of the Company’s ICFR. The evaluation included a review of key controls, testing and evaluation of such
test results. Based on this evaluation, the CEO and CFO have concluded that the design and operation of the Company’s
internal controls over financial reporting were effective as at December 31, 2015.
70 | goeasy Ltd.
Management’s responsibility for financial reporting
The accompanying consolidated financial statements and the information in this Annual Report are the responsibility
of management and have been approved by the Board of Directors.
The consolidated financial statements have been prepared by management in accordance with International Financial
Reporting Standards [“IFRS”] and include some amounts based on management’s best estimates and judgments. When
alternative accounting methods exist, management has chosen those it considers most appropriate in the circumstances.
Management has prepared the financial information presented elsewhere in the annual report and has ensured that it
is consistent with the financial statements.
goeasy Ltd. maintains a system of internal controls to provide reasonable assurance that transactions are properly
authorized, financial records are accurate and reliable, and the Company’s assets are properly accounted for and
adequately safeguarded.
The Board of Directors is responsible for ensuring that management fulfills its responsibility for financial reporting
and is ultimately responsible for reviewing and approving the financial statements. The Board of Directors carries out
its responsibility for the financial statements through its Audit Committee. This Committee meets periodically with
management and the external auditors to review the financial statements and the annual report and to discuss audit,
financial and internal control matters. The Company’s external auditors have full and free access to the Audit Committee.
The financial statements have been subject to an audit by the Company’s external auditors, Ernst & Young LLP,
in accordance with Canadian generally accepted auditing standards on behalf of the shareholders.
David Ingram
President and Chief Executive Officer
Steve Goertz
Executive Vice President & Chief Financial Officer
2015 Annual Report | 71
Independent auditor’s report
To the Shareholders of goeasy Ltd.
We have audited the accompanying consolidated financial statements of goeasy Ltd., which comprise the consolidated
statements of financial position as at December 31, 2015 and 2014, and the consolidated statements of income,
comprehensive income, changes in shareholders’ equity and cash flows for the years then ended, and a summary of
significant accounting policies and other explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, and for such internal control as management determines
is necessary to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that
we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks
of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
goeasy Ltd. as at December 31, 2015 and 2014, and its financial performance and its cash flows for the years then ended
in accordance with International Financial Reporting Standards.
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
February 17, 2016
72 | goeasy Ltd.
Consolidated statements of financial position
(expressed in thousands of Canadian dollars)
ASSETS
Cash
Amounts receivable (note 5)
Prepaid expenses
Consumer loans receivable (note 6)
Lease assets (note 7)
Property and equipment (note 8)
Deferred tax assets (note 16)
Intangible assets (note 9)
Goodwill (note 9)
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Revolving operating facility (note 11)
Accounts payable and accrued liabilities
Income taxes payable
Dividends payable (note 13)
Deferred lease inducements
Unearned revenue
Provisions (note 12)
Term loan (note 11)
TOTAL LIABILITIES
Shareholders' equity
Share capital (note 13)
Contributed surplus (note 14)
Accumulated other comprehensive income
Retained earnings
TOTAL SHAREHOLDERS' EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
See accompanying notes to the consolidated financial statements
On behalf of the Board:
As At
December 31, 2015
As At
December 31, 2014
11,389
13,000
2,446
270,961
60,753
18,689
5,913
14,041
21,310
1,165
16,508
1,971
180,693
64,526
16,915
6,725
11,006
19,963
418,502
319,472
–
23,617
700
1,341
1,922
3,982
582
210,299
242,443
81,725
9,852
969
83,513
176,059
418,502
1,756
32,837
3,042
1,133
2,603
3,978
314
119,841
165,504
80,364
6,458
694
66,452
153,968
319,472
David Ingram, Director
Donald K. Johnson, Director
2015 Annual Report | 73
Consolidated statements of income
(expressed in thousands of Canadian dollars except earnings per share)
December 31, 2015
December 31, 2014
Year Ended
REVENUE
Lease revenue
Interest income
Other
EXPENSES BEFORE DEPRECIATION AND AMORTIZATION
Salaries and benefits
Stock based compensation (note 14)
Advertising and promotion
Bad debts
Occupancy
Other
Restructuring and other items (note 15)
DEPRECIATION AND AMORTIZATION
Depreciation of lease assets
Depreciation of property and equipment
Amortization of intangible assets
Impairment, net (note 8)
Total operating expenses
Operating income
Finance costs (note 11)
Income before income taxes
Income tax expense (recovery) (note 16)
Current
Deferred
Net income
Basic earnings per share (note 17)
Diluted earnings per share (note 17)
See accompanying notes to the consolidated financial statements
74 | goeasy Ltd.
146,692
100,814
56,767
304,273
85,658
4,753
10,689
41,933
31,545
25,547
–
151,068
64,237
43,845
259,150
78,012
6,264
9,089
24,264
28,147
23,365
(1,225)
200,125
167,916
47,407
5,545
3,138
6
56,096
256,221
48,052
15,334
32,718
8,157
833
8,990
23,728
1.75
1.69
49,425
4,789
2,133
294
56,641
224,557
34,593
8,800
25,793
8,774
(2,729)
6,045
19,748
1.47
1.42
Consolidated statements of comprehensive income
(expressed in thousands of Canadian dollars)
Net income
Other comprehensive income (loss)
Change in foreign currency translation reserve
Transfer of realized translation gains
Comprehensive income
See accompanying notes to the consolidated financial statements
Year Ended
December 31, 2015
December 31, 2014
23,728
19,748
1,144
(869)
24,003
627
(240)
20,135
Consolidated statements of changes
in shareholder equity
Share
Capital
Contributed
Surplus
Total
Capital
Retained
Earnings
Accumulated Other
Comprehensive
Income
Total
Shareholders’
Equity
6,458
86,822
66,452
694
153,968
(expressed in thousands of Canadian dollars)
Balance, December 31, 2014
Common shares issued
Stock-based compensation (note 14)
Shares purchased for cancellation (note 13)
Comprehensive income
Dividends (note 14)
80,364
2,037
–
(676)
–
–
(342)
3,736
–
–
–
1,695
3,736
(676)
–
–
–
–
(1,295)
23,728
(5,372)
Balance, December 31, 2015
81,725
9,852
91,577
83,513
Balance, December 31, 2013
Common shares issued
Stock-based compensation (note 14)
Comprehensive income
Dividends (note 13)
441
–
–
–
(67)
2,356
–
–
374
2,356
–
–
–
–
19,748
(4,530)
Balance, December 31, 2014
80,364
6,458
86,822
66,452
See accompanying notes to the consolidated financial statements
79,923
4,169
84,092
51,234
307
135,633
–
–
–
275
–
969
1,695
3,736
(1,971)
24,003
(5,372)
176,059
–
–
387
–
694
374
2,356
20,135
(4,530)
153,968
2015 Annual Report | 75
Consolidated statements of cash flow
(expressed in thousands of Canadian dollars)
December 31, 2015
December 31, 2014
Year Ended
OPERATING ACTIVITIES
Net income
Add (deduct) items not affecting cash
Depreciation of lease assets
Depreciation of property and equipment
Impairment, net (note 8)
Amortization of intangible assets
Stock-based compensation (note 14)
Bad debt expense
Deferred tax expense (recovery) (note 16)
Gain on sale of property and equipment
Net change in other operating assets and liabilities (note 18)
Net issuance of consumer loans receivable
Cash (used in) provided by operating activities
INVESTING ACTIVITIES
Purchase of lease assets
Purchase of property and equipment
Purchase of intangible assets
Acquisitions (note 10)
Proceeds on sale of assets
Cash used in investing activities
FINANCING ACTIVITIES
Repayments of bank revolving credit facility
Advances of term loan
Payment of common share dividends (note 13)
Issuance of common shares (note 13)
Purchase of shares for cancellation (note 13)
Cash provided by financing activities
Net increase (decrease) in cash during the period
Cash, beginning of period
Cash, end of period
See accompanying notes to the consolidated financial statements
76 | goeasy Ltd.
23,728
19,748
47,407
5,545
6
3,138
3,736
41,933
833
(3,307)
123,019
(8,938)
(132,201)
(18,120)
(44,709)
(6,587)
(4,293)
(7,854)
8,527
(54,916)
(1,756)
90,458
(5,164)
1,695
(1,973)
83,260
10,224
1,165
11,389
49,425
4,789
294
2,133
2,356
24,264
(2,729)
(4,643)
95,637
(1,560)
(101,021)
(6,944)
(49,066)
(6,893)
(5,446)
–
11,115
(50,290)
(21,740)
81,963
(4,527)
374
–
56,070
(1,164)
2,329
1,165
Notes to consolidated financial statements
December 31, 2015 and 2014
(Expressed in thousands of Canadian dollars except where otherwise indicated)
1. Corporate information
goeasy Ltd. [“Parent Company”], formerly known as easyhome Ltd., was incorporated under the laws of Alberta, Canada
by Certificate and Articles of Incorporation dated December 14, 1990 and was continued as a corporation in Ontario
pursuant to Articles of Continuance dated July 22, 1993. The Parent Company changed its name from easyhome Ltd.
to goeasy Ltd. effective September 14, 2015. The Parent Company has common shares listed on the Toronto Stock
Exchange (TSX – GSY) and its head office is located in Mississauga, Ontario, Canada.
The principal operating activities of the Parent Company and all the companies that it controls [collectively referred to as
“goeasy” or the “Company”] include i) merchandise leasing of household furnishings, appliances and home electronic products
to consumers under weekly or monthly leasing agreements and ii) offering unsecured instalment loans to consumers.
The Company operates in two reportable segments: easyhome Leasing and easyfinancial. As at December 31, 2015,
the Company operated 184 easyhome Leasing stores (including 26 franchises and 3 consolidated franchises) and 202
easyfinancial locations (December 31, 2014 – 192 easyhome Leasing stores including 23 franchises and 6 consolidated
franchises, and 154 easyfinancial locations).
2. Basis of preparation
The consolidated financial statements were authorized for issue by the Board of Directors on February 17, 2016.
Statement of Compliance with IFRS
The consolidated financial statements of the Company have been prepared in accordance with International Financial
Reporting Standards [“IFRS”] as issued by the International Accounting Standards Board [“IASB”]. The policies applied in
these consolidated financial statements were based on IFRS issued and outstanding as at December 31, 2015.
3. Significant accounting policies
Basis of Consolidation
The consolidated financial statements include the financial statements of the Parent Company and all of the companies
that it controls. goeasy Ltd. controls an entity: i) when it has the power to direct the activities of the entity which have
the most significant impact on the entity’s risks and/or returns; ii) where it is exposed to significant risks and/or returns
arising from the entity; and iii) where it is able to use its power to affect the risks and/or returns to which it is exposed.
This includes all wholly owned subsidiaries and certain special purpose entities [“SPEs”] where goeasy Ltd. has control
but does not have ownership of a majority of voting rights.
As at December 31, 2015, the Parent Company’s principal subsidiaries were:
• RTO Asset Management Inc.
• easyfinancial Services Inc.
• easyhome U.S. Ltd.
• easyfinancial mortgages Inc.
2015 Annual Report | 77
The Company’s SPEs consisted of certain franchises for which the Company exerted effective control by the provision
of financing rather than through ownership of a majority of voting rights. An entity is controlled when the Company has
power over an entity, exposure, or rights to, variable returns from its involvement with the entity and is able to use its
power over the entity to affect its return from the entity. The Company’s SPEs are fully consolidated from the date at
which the Company obtains control, until the date that such control ceases. Control ceases when the SPE has the ability
to operate as a stand-alone entity without financial and operational support from the Company, which is generally
considered to be the date at which the SPE repays the amounts loaned to it by the Company.
The financial statements of the subsidiaries and SPEs were prepared for the same reporting period as the consolidated
financial statements of the Parent Company using consistent accounting policies as described in these consolidated
financial statements.
All intra-group transactions and balances were eliminated on consolidation.
Presentation Currency
The consolidated financial statements are presented in Canadian dollars [“CAD”], which is the Parent Company’s
functional currency. The functional currency is the currency of the primary economic environment in which a reporting
entity operates and is normally the currency in which the entity generates and expends cash. All financial information
presented in CAD has been rounded to the nearest thousand, unless noted otherwise.
Foreign Currency Translation
The Parent Company’s presentation and functional currency is the Canadian dollar. Each entity in the Company
determines its own functional currency and items included in the financial statements of each entity are measured
using that functional currency. The functional currency of the Company’s U.S. subsidiary, easyhome U.S. Ltd. and certain
of its SPEs, is the U.S. dollar. The functional currency of all other entities in the Company is the Canadian dollar.
Foreign currency transactions are initially recorded at the rate prevailing at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are retranslated into the functional currency at the spot rate on the
reporting date. All differences are recorded in comprehensive income. Non monetary items that are measured in terms of
historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.
The assets and liabilities of foreign operations are translated into CAD at the rate of exchange prevailing at the reporting
date and items in comprehensive income are translated at the average exchange rates prevailing for the year. The
exchange differences arising on the translation are recognized in other comprehensive income. On disposal or divestiture
of a foreign operation, the component of accumulated other comprehensive income relating to that particular foreign
operation is recognized in net income.
The Parent Company has monetary items that are receivable from foreign operations. A monetary item for which
settlement is neither planned nor likely to occur in the foreseeable future is, in substance, a part of the Parent Company’s
net investment in that foreign operation. Exchange differences arising on a monetary item that forms part of a reporting
entity’s net investment in a foreign operation are recognized in income in the separate financial statements of the
foreign operation. In the consolidated financial statements such exchange differences are recognized initially in other
comprehensive income and reclassified from accumulated other comprehensive income to net income on disposal of
the net investment in foreign operations.
78 | goeasy Ltd.
Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the
revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable,
excluding promotional discounts, rebates and sales taxes. The Company assesses its revenue arrangements against
specific criteria in order to determine if it is acting as principal or agent. The Company has concluded that it is acting as
principal in all of its revenue arrangements except for the sale of certain customer protection products where it acts as
agent and therefore recognizes such revenue on a net basis.
i) Lease Revenue
Merchandise is leased to customers pursuant to agreements that provide for periodic lease payments collected in
advance. The lease agreements can be terminated by the customer at the end of the periodic lease period without any
further obligation or cost to the customer.
Lease revenue consists of lease payments, product damage liability waivers and processing and other fees. Revenue
from lease agreements is recognized when earned. Lease revenue also consists of revenue from the ultimate sale of
goods to customers which represents the culmination of the lease asset life cycle and occurs when title passes to the
customer. Such revenue is measured at the fair value of the consideration received or receivable.
ii) Interest Revenue
Interest revenue from consumer loans receivable is recognized when earned using the effective interest rate method.
iii) Other Revenue
Other revenue consists primarily of the sale of customer protection products, revenue generated from franchising
including royalties, franchise fees and other fees, all of which are recognized when earned.
Vendor Rebates
The Company participates in various vendor rebate programs, including vendor volume rebates and vendor advertising
incentives. The Company records the benefit of vendor volume rebates on purchases made as a reduction of lease
assets based on the rebate amounts the Company believes are probable and reasonably estimable during the term of
each rebate program. Vendor advertising incentives that are related to specific advertising programs are accounted for
as a reduction of the related expenses.
Cash
Cash is comprised of bank balances, cash on hand and demand deposits, adjusted for in-transit items such as
outstanding cheques and deposits.
2015 Annual Report | 79
Financial Assets
Financial assets consist of amounts receivable and consumer loans receivable, which are stated net of an allowance for
loan losses. Financial assets are initially measured at fair value.
Amounts receivable are subsequently measured at amortized cost and are carried at the amount of cash expected to
be received.
The Company’s consumer loans receivable are subsequently measured at amortized cost. Amortized cost is determined
using the effective interest rate method. The effective interest rate is the rate that exactly discounts the estimated future
cash receipts through the expected life of the consumer loans receivable to the carrying amount. When calculating
the effective interest rate, the Company estimates future cash flows considering all contractual terms of the financial
instrument, but not future loan losses. There are no significant incremental costs incurred in writing consumer loans.
The Company does not have any financial assets that are subsequently measured at fair value.
Financial assets are derecognized when the rights to receive cash flows from the asset have expired or the Company
has transferred its rights to receive cash flows from an asset.
Impairment of Financial Assets
The Company assesses at each reporting date whether there is any objective evidence that a financial asset or a group
of financial assets is impaired. A financial asset or group of financial assets is deemed to be impaired if, and only if, there
is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the
asset [an incurred ‘loss event’], the event has a negative impact on the estimated cash flows of the financial asset and
the loss can be reliably estimated. The carrying amount of the financial asset is reduced through the use of an allowance
account and the amount of the loss is recognized as a bad debts expense.
The allowance for loan losses is a provision that is reported on the Company’s balance sheet that is netted against the
gross consumer loans receivable to arrive at the net consumer loans receivable. The allowance for loan losses provides
for a portion of the future charge offs that have not yet occurred within the portfolio of consumer loans receivable
that exist at the end of a period. It is determined by the Company using a standard calculation that considers i) the
relative maturity of the loans within the portfolio, ii) the long-term expected charge off rates based on actual historical
performance and iii) the long-term expected charge off pattern (timing) for a vintage of loans over their life based on
actual historical performance. The allowance for loan losses essentially estimates the charge offs that are expect to
occur over the subsequent five month period for loans that existed as of the balance sheet date. Customer loan balances
which are delinquent greater than 90 days are written off against the allowance for loan losses.
Financial assets, together with the associated allowances, are written off when there is no realistic prospect of further
recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an
event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced
by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to bad debts expense.
80 | goeasy Ltd.
Lease Assets
Lease assets are stated at cost net of accumulated depreciation and accumulated impairment losses, if any.
The cost of lease assets comprises their purchase price and any costs directly attributable to bringing the assets to the
location and condition necessary for them to be capable of operating in the manner intended by management. Vendor
volume rebates are recorded as a reduction of the cost of lease assets.
As the leases are effectively cancellable by the customer with a week’s notice, and there are no bargain purchase
options provided to the customer, the customer leases are considered operating in nature. Lease agreements entitle
customers to buy out a lease asset earlier in accordance with conditions stipulated in the lease agreements.
The residual value, useful life and depreciation method of the lease assets are reviewed at each financial year end, and
if expectations differ from previous estimates, they are adjusted and the changes are accounted for prospectively as
a change in accounting estimates. In the event management determines that the Company can no longer lease or sell
certain lease assets, they are written off. The residual value of lease assets is nominal.
Depreciation on lease assets is charged to net income as follows:
• Assets on lease, excluding game stations, computers and related equipment, are depreciated in proportion to the
lease payments received to the total expected lease amounts provided over the lease agreement term [the “units of
activity method”]. Lease assets that are subject to the units of activity method of depreciation that are not on lease for
less than 90 consecutive days are not depreciated during such period. After that they are depreciated on a straight-
line basis over 36 months. When an asset goes on lease, depreciation will revert to the units of activity method.
• Game stations are depreciated on a straight-line basis over 18 months. Computers and related equipment are
depreciated on a straight-line basis over 24 months. The depreciation for game stations, computers and related
equipment commences at the earlier of the date of the first lease or 90 days after arrival in the store and continues
uninterrupted thereafter on a straight-line basis over the periods indicated.
• Depreciation for all lease assets includes the remaining book values at the time of disposition of the lease assets
that have been sold and amounts which have been charged off as stolen, lost or no longer suitable for lease.
The Company’s lease assets are subject to theft, loss or other damage from its customers. The Company records
a provision against the carrying value of lease assets for estimated losses.
2015 Annual Report | 81
Property and Equipment
The cost of property and equipment comprises their purchase price and any costs directly attributable to bringing the
assets to the location and condition necessary for them to be capable of operating in the manner intended by management.
Property and equipment are stated at cost net of accumulated depreciation and accumulated impairment losses, if any.
Subsequent costs are included in an asset’s carrying amount or recognized as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can
be measured reliably. All other expenses are charged to net income as repairs and maintenance expense when incurred.
Depreciation on property and equipment is charged to net income.
Property and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets as follows:
Asset category
Furniture and fixtures
Computer and office equipment
Automotive
Signage
Leasehold improvements
Estimated useful lives
7 years
5 and 7 years
5 years
7 years
the lesser of 5 years or lease term
Property and equipment are derecognized upon disposal or when no future economic benefits are expected from their use
or disposal. Any gains or losses arising on derecognition of the assets (calculated as the difference between the net disposal
proceeds and the carrying amount of the assets) are included in net income in the period the assets are derecognized.
Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. The costs of intangible assets
acquired in a business combination are their estimated fair values at the date of acquisition. Following initial recognition,
intangible assets are carried at costs less any accumulated amortization and accumulated impairment losses, if any.
Internally generated intangible assets, excluding capitalized development costs, are not capitalized and the expenditure
is reflected in net income in the period in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever
there is an indication that the intangible asset may be impaired. The amortization period and the amortization method
for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period for potential
impairment indicators. Changes in the expected useful life or the expected pattern of consumption of future economic
benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and
are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is
recognized in net income.
Customer lists and software are amortized over their estimated useful lives of five years.
Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually. The assessment
of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the
change in useful life from indefinite to finite is made on a prospective basis.
82 | goeasy Ltd.
The Company’s trademarks have been assessed to have an indefinite life.
Gains or losses arising from the derecognition of intangible assets are measured as the difference between the net disposal
proceeds and the carrying amounts of the asset and are recognized in net income when the assets are derecognized.
Development Costs
Development costs, including those related to the development of software, are recognized as an intangible asset when
the Company can demonstrate:
• the technical feasibility of completing the intangible asset so that it will be available for use or sale;
• its intention to complete and its ability to use or sell the asset;
• how the asset will generate future economic benefits;
• the availability of resources to complete the asset; and
• the ability to measure reliably the expenditure during development.
Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset
to be carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset
begins when development is complete and the asset is available for use. It is amortized over the period of the expected
future benefit. During the period of development, the asset is tested for impairment annually.
Business Combinations and Goodwill
Business combinations are accounted for using the purchase method. The cost of an acquisition is measured at the fair
value of the assets given, equity instruments and liabilities incurred or assumed at the date of exchange. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at fair
value at the date of acquisition, irrespective of the extent of any non-controlling interest.
Goodwill is initially measured at cost being the excess of the cost of the business combination over the Company’s
share in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. If the fair values of
the assets, liabilities and contingent liabilities can only be calculated on a provisional basis, the business combination
is recognized initially using provisional values. Any adjustments resulting from the completion of the measurement
process are recognized within twelve months of the date of acquisition.
After initial recognition, goodwill is measured at cost less accumulated impairment losses, if any. Goodwill is not
amortized. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition
date, allocated to each of the Company’s operating segments that are expected to benefit from the synergies of the
combination, irrespective of whether other assets and liabilities of the acquiree are assigned to those segments.
Impairment of Non-financial Assets
The Company assesses, at each reporting date, whether there is an indication that an asset or a cash-generating unit
[“CGU”] may be impaired. A CGU is defined as the smallest identifiable group of assets that generates cash inflows that
are largely independent of the cash inflows from other assets or groups of assets. The Company has determined that
this is at the individual store level.
2015 Annual Report | 83
If an indication of impairment exists, or when annual testing for an asset is required, the Company estimates the asset’s
or CGU’s recoverable amount. The recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell
and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or groups of assets, in which case it is determined
for the CGU to which the asset belongs. Where the carrying amount of an asset or CGU exceeds its recoverable amount,
the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. In
determining fair value less costs to sell, an appropriate valuation model is used. In cases where fair value less costs to
sell cannot be estimated, value in use is utilized as the basis to determine the recoverable amount. Impairment losses
are recognized in net income.
The impairment test calculations are based on detailed budgets and forecasts which are prepared annually for each
CGU to which the assets are allocated. These budgets and forecasts generally cover a period of three years with a long-
term growth rate applied after the third year.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication
that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists,
the Company estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed
only if there has been a change in the assumptions used to determine the asset or CGU’s recoverable amount since the
last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset or CGU does not
exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of amortization,
had no impairment loss been recognized for the asset or CGU in prior years. Such reversal is recognized in net income.
Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each group of CGUs to which the
goodwill relates. Where the recoverable amount of the CGUs is less than their carrying amount, an impairment loss is
recognized. Impairment losses relating to goodwill cannot be reversed in future periods.
Intangible assets with indefinite useful lives are tested for impairment annually at the CGU level and when circumstances
indicate that the carrying value may be impaired.
Financial Liabilities
Financial liabilities are initially recognized at fair value and in the case of loans and borrowings, they are recognized
at the fair value of proceeds received, net of directly attributable transaction costs. The Company’s financial liabilities
include a revolving operating facility, term loans and accounts payable and accrued liabilities.
After initial recognition, the Company’s interest bearing debt is subsequently measured at amortized cost using the
effective interest rate method. Amortized cost is calculated by taking into account any fees or costs related to the
interest bearing debt. Interest expense is included in finance costs.
Non-interest bearing financial liabilities, such as accounts payable and accrued liabilities, are carried at the amount owing.
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired. Any gains
or losses are recognized in net income when liabilities are derecognized.
84 | goeasy Ltd.
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement
at inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the
arrangement conveys a right to use the asset.
i) Company as a Lessee
Finance leases which transfer substantially all the risks and rewards incidental to ownership of the leased item are
capitalized at the inception of the lease at the fair value of the leased asset, or, if lower, at the present value of the minimum
lease payments. Subsequent lease payments are apportioned between finance charges and a reduction of the lease
liability. Finance charges are recognized in net income. Capitalized leased assets are depreciated over the shorter of the
estimated useful life of the asset and the lease term. The Company has not entered into any finance leases.
Operating lease payments (net of any amortization of incentives) are expensed as incurred. Incentives received from the
lessor to enter into an operating lease are capitalized and depreciated over the term of the lease.
ii) Company as a Lessor
Leases where the Company does not transfer substantially all the risks and benefits of ownership of the asset are
classified as operating leases. The leasing income is recognized when earned over the lease term.
The Company is in the business of leasing assets. As the leases are effectively cancellable by the customer with a
week’s notice, and there are no bargain purchase option provided to the customer, the customer leases are considered
operating in nature.
Provisions
Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of a past
event, and the costs to settle the obligation are both probable and reliably measurable. Where there is expected to be a
reimbursement of some or all of a provision, for example under an insurance contract, the reimbursement is recognized
as a separate asset but only when the reimbursement is virtually certain. If the effect of the time value of money is
material, provisions are discounted. Where discounting is used, the increase in the provision as a result of the passage
of time is recognized as a finance cost.
Taxes
i) Current Income Tax
Current income tax assets are measured at the amount expected to be recovered from or paid to the taxation authorities.
The tax rates and tax laws used to compute the amount are those enacted or substantively enacted by the end of the
reporting period.
Current income tax assets and liabilities are only offset if a legally enforceable right exists to offset the amounts and the
Company intends to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Current income tax relating to items recognized directly in equity is recognized in equity and not in net income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulations are subject to interpretation and establishes provisions where appropriate.
2015 Annual Report | 85
ii) Deferred Income Tax
Deferred income tax is provided for using the liability method on temporary differences at the reporting date between
the tax basis of assets and liabilities and their carrying amount for financial reporting purposes. Deductible income
tax liabilities are recognized for all taxable temporary differences. Deferred income tax assets are recognized for all
deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it
is probable that taxable income will be available against which the deductible temporary differences and the carry
forward of unused tax credits and unused tax losses can be utilized.
The following temporary differences do not result in deferred income tax assets or liabilities:
• the initial recognition of assets or liabilities, not arising in a business combination, that does not affect accounting
or taxable profit;
• goodwill; and
• investment in subsidiaries, associates and jointly controlled entities where the timing of reversal of the temporary
differences can be controlled and reversal in the foreseeable future is not probable.
The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred
income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at the end of each reporting
period and are recognized to the extent that it has become probable that future taxable income will be available to allow
the deferred income tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the period when
the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted by the
end of the reporting period.
Deferred income tax assets and liabilities are offset if a legally enforceable right exists to set off current income tax
assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the
same taxation authority.
iii) Sales Tax
Revenues, expenses and assets are recognized net of the amount of sales tax except where the sales tax incurred on a
purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognized
as part of the cost of acquisition of the asset or as part of the expense item as applicable.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of amounts
receivable or accounts payable and accrued liabilities in the consolidated statements of financial position.
86 | goeasy Ltd.
Stock-based Payment Transactions
The Company has stock-based compensation plans as described in note 14.
i) Equity-Settled Transactions
The Company has stock options, Restricted Share Units [“RSU”] and Deferred Share Units [“DSU”] which are currently
accounted for as equity-settled awards. The cost of such equity-settled transactions is measured by reference to the fair
value determined using the market value on the grant date or the Black-Scholes option valuation model, as appropriate.
The inputs into this model are based on management’s judgments and estimates.
The cost of equity-settled transactions is charged to net income, with a corresponding increase in contributed surplus
over the service and vesting period. The cumulative expense recognized for equity-settled transactions at each reporting
date reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of equity
instruments that will ultimately vest. The income or expense for a period represents the movement in cumulative
expense recognized at the beginning and end of that period and is recognized in stock based compensation expense.
No expense is recognized for awards that do not ultimately vest, except for equity-settled transactions where vesting
is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the
market or non-vesting condition is satisfied, provided that all other performance and or service conditions are satisfied.
ii) Cash-Settled Transactions
The Company has Performance Share Units [“PSU”] which mirror the value of the Company’s publicly-traded common
shares and can only be settled in cash [“cash-settled transactions”]. The cost of cash-settled transactions is measured
initially at fair value at the grant date. The liability is remeasured to fair value, at each reporting date up to and including
the settlement date, based on the value of the Company’s publicly-traded common shares and the Company’s best
estimate of the number of cash-settled instruments that will ultimately vest. Changes in fair value are recognized in
stock based compensation expense.
The cost of cash-settled transactions is charged to net income, with a corresponding increase in liabilities, over
the period in which the performance and or service conditions are fulfilled. The cumulative expense recognized for
cash-settled transactions at each reporting date reflected the extent to which the vesting period had expired and the
Company’s best estimate of the number of cash-settled instruments that will ultimately vest. The income or expense
for a period represents the movement in cumulative expense recognized during the period and is recognized in stock
based compensation expense.
No expense is recognized for awards that do not ultimately vest.
2015 Annual Report | 87
Earnings Per Share
Basic earnings per share is computed by dividing the net income by the weighted average number of common shares
outstanding during the year.
Diluted earnings per share is calculated using the treasury stock method, which assumes that the cash that would be
received on the exercise of options and warrants is applied to purchase shares at the average price during the period
and that the difference between the shares issued upon exercise of the options and the number of shares obtainable
under this computation, on a weighted average basis, is added to the number of shares outstanding.
Significant Accounting Judgments, Estimates and Assumptions
The preparation of the consolidated financial statements in conformity with IFRS requires management to make
accounting judgements, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent
assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting periods.
These accounting judgments, estimates and assumptions are continuously evaluated and are based on management’s
historical experience, best knowledge of current events and conditions and other factors that are believed to be
reasonable under the circumstances. As future events and their effects cannot be determined with precision, actual
results could differ significantly from these estimates, which could materially impact these consolidated financial
statements. Changes in estimates will be reflected in the consolidated financial statements in future periods.
Key areas of estimation where management has made difficult, complex or subjective judgments often in respect of
matters that are inherently uncertain are as follows:
i) Consumer Loan Losses
The allowance for loan losses consists of both specific allowances on identified impaired loans and an estimate of incurred
losses in the loan portfolio that have not yet been identified based on an assessment of historical loss rates and patterns.
ii) Cost of Lease Assets
Lease assets are recorded at cost, including freight. Vendor volume rebates are recorded as a reduction of the cost
of lease assets and are determined based on the rebate amounts the Company believes are probable and reasonably
estimable during the term of each rebate program.
iii) Depreciation of Lease Assets
Certain assets on lease, (excluding game stations, computers and related equipment) are depreciated in the proportion
of lease payments received to total expected lease amounts provided over the lease agreement term, which are
estimated by management for each product category. Lease payments received in period compared with total expected
lease payments to be received over the expected term of the lease is believed to be an effective proxy for the usage of
the asset on lease. Other assets on lease such as game stations, computers and related equipment are depreciated on
a straight line basis over their estimated useful lives.
88 | goeasy Ltd.
iv) Depreciation of Property and Equipment
Property and equipment are recorded at cost, including freight, and are depreciated on a straight-line basis over their
estimated useful lives, which are estimated by management for each class of asset.
v) Impairment on Non-Financial Assets
The indicators of impairment are based on management’s judgment. If an indication of impairment exists, or when annual
testing for an asset is required, the Company estimates the asset’s or CGU’s recoverable amount. Where the carrying
amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing the recoverable amount, management estimates the asset’s or CGU’s value in use. Value
in use is based on the estimated future cash flows of the asset or CGU discounted to their present value using a discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset.
The impairment test calculations are based on detailed budgets and forecasts which are prepared for each CGU to
which the assets are allocated. These budgets and forecasts generally cover a period of three years with a long-term
growth rate applied after the third year. Key areas of management judgment involve the cash flow forecast, the growth
rate applied to cash flows subsequent to the third year and the discount rate.
vi) Impairment of Goodwill and Indefinite Life Intangibles
In assessing the recoverable amount, management estimated the group of CGU’s value in use. Value in use is based
on the estimated future cash flows of the asset or CGU discounted to their present value using a discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. The impairment
test calculations are based on detailed budgets and forecasts which are prepared for each CGU to which the assets are
allocated. These budgets and forecasts generally cover a period of three years with a long-term growth rate applied
after the third year. Key areas of management judgment involve the cash flow forecast, the growth rate applied to cash
flows subsequent to the third year and the discount rate.
vii) Fair Value of Stock-Based Compensation
The fair value of stock-based compensation plan grants are measured at the grant date using either the related
market value or the Black-Scholes option valuation model, as appropriate. The Black-Scholes option valuation model
was developed for use in estimating the fair value of traded options that are fully transferable and have no vesting
restrictions. In addition, option valuation models require the input of highly subjective assumptions, including expected
share price volatility. The Company’s share options have characteristics significantly different from those of freely
traded options and because changes in subjective input assumptions can materially affect the fair value estimate, the
existing models do not necessarily provide a single reliable measure of the fair value of the unit options granted.
The vesting of the Company’s stock-based compensation plans is based on the expected achievement of long-term
targets and management retention rates, the assessment of which are subject to management’s judgment.
2015 Annual Report | 89
viii) Provisions
Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of a past event,
and the costs to settle the obligation are both probable and reliably measurable. The estimation of the costs to settle
such obligations are subject to management’s judgment.
ix) Taxation Amounts
Income tax provisions, including current and deferred income tax assets and liabilities, may require estimates and
interpretations of federal and provincial income tax rules and regulations and judgments as to their interpretation and
application to the Company’s specific situation. Therefore, it is possible that the ultimate value of the tax assets and
liabilities could change in the future and that changes to these amounts could have a material effect on the Company’s
consolidated financial statements.
x) Unearned Revenue
Unearned revenue includes lease fees that have not yet been earned and processing fees that are received at the
inception of a consumer lease. The processing fees are recognized into income over the expected life of the lease
agreement, as estimated by management.
xi) Consolidated SPE Franchises
The Company consolidates certain SPE franchises to which it provided financing but did not have ownership of a
majority of voting shares, based on whether the Company effectively exerts control over the entity as determined
by management. An entity is controlled when the Company has power over an entity, exposure, or rights, to variable
returns from its involvement with the entity, and is able to use its power over the entity to affect its return from the
entity. The financing provided to SPE franchises is secured by the assets of the franchise, bears interest at market rates
and on standard terms and conditions.
90 | goeasy Ltd.
4. Standards issued but not yet effective
IFRS 9 Financial Instruments
The Company will be required to adopt IFRS 9, Financial Instruments, which is the IASB’s replacement of IAS 39. IFRS 9
will provide new requirements for the classification and measurement of financial assets and liabilities, impairment and
hedge accounting. IFRS 9 is required to be applied for years beginning on or after January 1, 2018 with early adoption
permitted. The Company is in the process of assessing the impact of this standard.
IFRS 15 Revenue from Contracts with Customers
The Company will be required to adopt IFRS 15, Revenue from Contracts with Customers, which clarifies the principles
for recognizing revenue and cash flows arising from contracts with customers. IFRS 15 is required to be applied for
years beginning on or after January 1, 2018, with early adoption permitted, and is to be applied retrospectively. The
Company is in the process of assessing the impact of this standard.
IFRS 16 Leases
The Company will be required to adopt IFRS 16, Leases, which is the IASB’s replacement of IAS 17. IFRS 16 will require
lessees to recognize a lease liability that reflects future lease payments and a ‘right-of-use-asset’ for most lease
contracts. IFRS 16 is required to be applied for years beginning on or after January 1, 2019 with early adoption permitted,
but only in conjunction with the adoption of IFRS 15. The Company has not yet assessed the impact of this standard.
5. Amounts receivable
Vendor rebate receivable
Due from franchisees
Interest receivable from consumer loans
Other
Current
Non-current
December 31, 2015
December 31, 2014
703
5,102
3,520
3,675
13,000
12,490
510
13,000
921
5,233
2,916
7,438
16,508
15,789
719
16,508
Other amounts receivable consisted of amounts due from customers, indirect taxes, insurance and other items.
2015 Annual Report | 91
6. Consumer loans receivable
Consumer loans receivable represented amounts advanced to customers of easyfinancial. Loan terms generally ranged
from 9 to 48 months
Gross consumer loans receivable
Allowance for loan losses
Current
Non-current
December 31, 2015
December 31, 2014
289,426
(18,465)
270,961
118,850
152,111
270,961
192,225
(11,532)
180,693
87,473
93,220
180,693
An aging analysis of consumer loans receivable past due is as follows:
1 – 30 days
31 – 44 days
45 – 60 days
61 – 90 days
December 31, 2015
December 31, 2014
$
% of total loans
12,282
2,256
1,919
3,258
19,715
4.2%
0.8%
0.7%
1.1%
6.8%
$
9,004
1,505
1,273
1,853
13,635
% of total loans
4.7%
0.8%
0.7%
0.9%
7.1%
The changes in the allowance for loan losses are summarized below:
Balance, beginning of the period
Net amounts written off against allowance
Increase due to lending and collection activities
Balance, end of the period
Year Ended
December 31, 2015
December 31, 2014
11,532
(35,000)
41,933
18,465
6,768
(19,500)
24,264
11,532
92 | goeasy Ltd.
7. Lease assets
Cost
As at December 31, 2013
Additions
Disposals
Foreign exchange differences
As at December 31, 2014
Additions
Disposals
Foreign exchange differences
As at December 31, 2015
Accumulated Depreciation
As at December 31, 2013
Depreciation for the year
Disposals
Foreign exchange differences
As at December 31, 2014
Depreciation for the year
Disposals
Foreign exchange differences
As at December 31, 2015
Net Book Value
As at December 31, 2014
As at December 31, 2015
Total
100,097
49,066
(57,487)
258
91,934
48,111
(57,184)
390
83,251
(31,644)
(49,425)
53,756
(95)
(27,408)
(47,407)
52,460
(143)
(22,498)
64,526
60,753
During the year ended December 31, 2015, the net book value of the lease assets sold by the Company was $4,146
(2014 – $3,731).
2015 Annual Report | 93
8. Property and equipment
Furniture and
Fixtures
Computer and
Office Equipment
Automotive
Signage
Leasehold
Improvements
Cost
As at December 31, 2013
Additions
Disposals
Foreign exchange differences
As at December 31, 2014
Additions
Disposals
Foreign exchange differences
As at December 31, 2015
12,406
1,528
(465)
43
13,512
1,151
(1,001)
148
13,810
Accumulated Depreciation and Provision for Impairment
As at December 31, 2013
(7,274)
Depreciation
Provision for impairment
Recovery of impairment
Impairment related to
restructuring and other items
Disposals
Foreign exchange differences
As at December 31, 2014
Depreciation
Provision for impairment
Recovery of impairment
Disposals
Foreign exchange differences
(1,200)
(219)
91
(79)
343
(11)
(8,349)
(1,256)
(112)
130
778
(29)
7,800
1,314
(552)
20
8,582
1,063
(911)
80
8,814
(4,375)
(1,003)
(59)
54
(42)
355
(5)
(5,075)
(981)
(47)
53
616
(14)
276
–
(46)
–
230
15
(38)
–
207
(234)
(31)
–
–
–
35
–
(230)
(12)
–
–
38
–
5,077
634
(248)
13
5,476
557
(527)
21
5,527
(3,656)
(375)
(50)
38
(18)
198
(4)
(3,867)
(423)
(26)
23
404
(8)
17,655
3,417
(1,098)
82
20,056
5,187
(1,660)
135
23,718
(11,882)
(2,180)
(199)
50
(88)
910
(31)
(13,420)
(2,873)
(58)
31
1,395
(75)
Total
43,214
6,893
(2,409)
158
47,856
7,973
(4,137)
384
52,076
(27,421)
(4,789)
(527)
233
(227)
1,841
(51)
(30,941)
(5,545)
(243)
237
3,231
(126)
As at December 31, 2015
(8,838)
(5,448)
(204)
(3,897)
(15,000)
(33,387)
Net Book Value
As at December 31, 2014
As at December 31, 2015
5,163
4,972
3,507
3,366
–
3
1,609
1,630
6,636
8,718
16,915
18,689
94 | goeasy Ltd.
As at December 31, 2015, the amount of property and equipment classified as under construction or development and
not being amortized was $0.3 million (2014 – $0.2 million).
During the year ended December 31, 2015, the net book value of the property and equipment sold by the Company
was $521 (2014 – $568).
Various impairment indicators were used to determine the need to test a CGU for impairment. Examples of impairment
indicators include a significant decline in revenue, performance significantly below budget and expectations and
negative CGU operating income. Where these impairment indicators existed, the carrying value of the assets within a
CGU was compared with its estimated recoverable value which was generally considered to be the CGU’s value in use.
When determining the value in use of a CGU, the Company developed a discounted cash flow model for the individual
CGU. Sales and cost forecasts were based on actual operating results, three-year operating budgets consistent with
strategic plans presented to the Company’s Board of Directors and a 1% long-term growth rate consistent with industry
practice. The pre-tax discount rate used on the forecasted cash flows was 17%. Where the carrying value of the CGU’s
assets exceeded the recoverable amounts, as represented by the CGU’s value in use, the store’s property and equipment
assets were written down. It was concluded that, due to the portability of lease assets held within the CGU and the cash
flows generated by individual lease assets, no impairment write-down of the lease assets was required. As such, the
CGU impairment charge was limited to the property and equipment held by the impaired CGU.
For the year ended December 31, 2015, the Company recorded an impairment charge of $243 (2014 – $527) offset by
impairment recovery of $237 (2014 – $233). The net impairment expense for 2015 was $6 (2014 – $294). All impairment
charges and recoveries relate solely to the easyhome Leasing segment.
2015 Annual Report | 95
9. Intangible assets and goodwill
Intangible Assets
Trademarks
Customer Lists
Software
Total
Cost
As at December 31, 2013
Additions
Disposals
Foreign exchange differences
As at December 31, 2014
Additions
Disposals
1,827
81
–
165
2,073
1
–
327
355
–
–
682
463
(51)
As at December 31, 2015
2,074
1,094
Accumulated amortization and provision for impairment
As at December 31, 2013
Amortization for the year
Impairment related to restructuring and other items
Disposals
As at December 31, 2014
Amortization for the year
Disposals
As at December 31, 2015
Net book value
As at December 31, 2014
As at December 31, 2015
–
–
(1,992)
–
(1,992)
–
–
(1,992)
81
82
(60)
(79)
–
–
(139)
(227)
–
(366)
543
728
9,711
5,010
(17)
–
14,704
5,761
(19)
20,446
(2,281)
(2,054)
–
13
(4,322)
(2,911)
18
(7,215)
10,382
13,231
11,865
5,446
(17)
165
17,459
6,225
(70)
23,614
(2,341)
(2,133)
(1,992)
13
(6,453)
(3,138)
18
(9,573)
11,006
14,041
Trademarks are considered indefinite life intangible assets as there is no foreseeable limit to the period over which the
assets are expected to generate net cash flows.
Included in software additions for the year ended December 31, 2015 were $5.6 million (2014 – $4.8 million) of internally
developed software application and website costs.
Goodwill was $21.3 million as at December 31, 2015 (2014 – $20.0 million). $1.3 million in goodwill was added in relation
to acquisitions completed during 2015. There were no disposals or impairments applied to goodwill during the years
ended December 31, 2015 and 2014.
Goodwill and indefinite life intangible assets were allocated to the group of CGUs to which they relate. The carrying
value of goodwill was fully allocated to the Canadian leasing CGUs. Impairment testing is performed annually and
was performed as at December 31, 2015 and December 31, 2014. The impairment test consisted of comparing the
carrying value of assets within the CGU to the recoverable amount of that CGU as measured by discounting the expected
future cash flows using a value in use approach. The discounted cash flow model was based on historical operating
results, detailed sales and cost forecasts over a three-year period, a 1% long-term growth rate consistent with industry
96 | goeasy Ltd.
averages and a pre-tax discount rate used on the forecasted cash flows of 17%, all of which were consistent with the
strategic plans presented to the Company’s Board of Directors.
Based on the analysis performed by management, no impairment charge was required on goodwill.
10. Acquisitions
On July 13, 2015, the Company acquired 14 Canadian merchandise leasing stores from a U.S. based rent-to-own company
for cash consideration of $4.2 million. The Company continued to operate these stores or merged the related business
into its store network. As part of the transaction, the Company also sold two of its remaining U.S. franchised locations
whose results were consolidated for financial statement purposes for cash consideration of $0.8 million, resulting in
a combined net purchase price of $3.4 million and a reported loss on disposal of $0.3 million. The acquisition of the 14
merchandise leasing stores in Canada met the definition of a business combination as defined in IFRS 3.
On February 10, 2015, the Company acquired the lease rights and obligations as well as certain related assets for 45
retail locations across Canada for total cash consideration of $2,777, which included certain transaction costs. This
transaction was accounted for as an asset acquisition. During the first quarter of 2015, these acquired locations were
opened as easyfinancial branches.
In addition, the Company acquired the assets and operations of two leasing stores during the first quarter of 2015.
The acquisition of the two leasing stores met the definition of a business combination as defined by IFRS 3. The total
consideration of $894 was paid in cash.
The fair value of the identifiable assets and liabilities recognized as acquisitions were as follows:
Assets
Amounts receivable
Property and equipment
Lease assets, net
Intangible assets
Liabilities
Unearned revenue
Total identifiable assets at fair value
Goodwill arising on acquisition
Cash consideration
Acquisitions
completed in the first
quarter of 2015
Acquisition
on July 13, 2015
Year ended
December 31, 2015
–
2,827
433
–
–
3,260
411
3,671
28
78
2,969
413
240
3,248
935
4,183
28
2,905
3,402
413
240
6,508
1,346
7,854
Goodwill arising on the acquisitions of $1,346 related to the Company’s future ability to generate incremental revenues
from the acquired customers and expected future growth. The goodwill arising on acquisitions was allocated entirely
to the Canadian leasing segment.
2015 Annual Report | 97
11. Revolving operating facility and term loan
On July 31, 2015, the Company amended its existing credit facilities and increased its total credit available by $100
million from $200 million to $300 million. The Company’s amended credit facilities consisted of a $280 million term
loan and a $20 million revolving operating facility. $217.5 million of the term loan was drawn at December 31, 2015 with
the balance available in periodic advances until March 31, 2017. Borrowings under the term loan bore interest at the
Canadian Bankers’ Acceptance rate plus 699 bps with a 799 bps floor, while borrowings under the revolving operating
facility bore interest at the lender’s prime rate plus 175 to 275 bps depending on the Company’s debt to earnings before
interest, taxes, depreciation and amortization [“EBITDA”] ratio. The amended credit facilities expire on October 4, 2019
and are secured by a first charge over substantially all assets of the Company.
The drawings under the Company’s credit facilities were as follows:
Revolving operating facility
Amounts borrowed under term loan
Unamortized deferred financing costs
Term loan
December 31, 2015
December 31, 2014
–
217,500
(7,201)
210,299
1,756
125,000
(5,159)
119,841
As at December 31, 2015, the Company’s interest rates under the term loan and revolving operating facility were 7.99%
and 5.45%, respectively.
The financial covenants of the credit facility were as follows:
Financial Covenant
Total debt to EBITDA ratio
Total debt to tangible net worth ratio
Adjusted EBITDA for preceding 12 months (consolidated)
Requirements
December 31, 2015
< 4.40
< 1.70
> 48,600
3.80
1.52
57,260
The financial covenant requirements described above vary each quarter as per the lending agreement and were based
on the Company’s financial forecast over these periods. As at December 31, 2015, the Company was in compliance with
all of its financial covenants under its lending agreements.
Finance Costs
Included in finance costs in the consolidated statements of income was interest expense on the credit facilities and
amortization of deferred financing costs as follows:
Interest expense
Amortization of deferred financing costs
Finance costs
98 | goeasy Ltd.
Year Ended
December 31, 2015
December 31, 2014
13,837
1,497
15,334
7,621
1,179
8,800
12. Provisions
As at December 31, 2013
Incurred during the year
Utilized during the year
As at December 31, 2014
Incurred during the year
Utilized during the year
As at December 31, 2015
Current
Non-current
13. Share capital
Authorized Capital
Provisions Due to
Onerous Leases
21
314
(21)
314
495
(227)
582
December 31, 2015
December 31, 2014
420
162
582
96
218
314
The authorized capital of the Company consisted of an unlimited number of common shares with no par value and an
unlimited number of preference shares.
Each common share represents a shareholder’s proportionate undivided interest in the Company. Each common share
confers to its holder the right to one vote at any meeting of shareholders and to participate equally and rateably in any
dividends of the Company. The common shares are listed for trading on the TSX.
Common Shares Issued and Outstanding
The changes in common shares are summarized as follows:
Year Ended
December 31, 2015
Year Ended
December 31, 2014
# of shares (in 000’s)
$
# of shares (in 000’s)
Balance, beginning of the period
Exercise of stock options
Shares purchased for cancellation
Dividend reinvestment plan
Balance, end of the period
13,330
189
(111)
3
13,411
80,364
1,975
(676)
62
81,725
13,289
39
–
2
$
79,923
403
–
38
13,330
80,364
2015 Annual Report | 99
Dividends on Common Shares
For the year ended December 31, 2015, the Company paid dividends of $5.2 million (2014 – $4.5 million) or $0.385 per share
(2014 – $0.34 per share). On February 18, 2015, the Company increased the dividend rate from $0.085 per share to $0.10
per share on a quarterly basis. The Company declared a dividend of $0.10 per share on November 3, 2015 to shareholders
of record on December 24, 2015, payable on January 8, 2016. The dividend paid on January 8, 2016 was $1.3 million.
Shares Purchased for Cancellation
During the year ended December 31, 2015, the Company repurchased and cancelled 111,041 (2014 – nil) of its common
shares on the open market at an average price of $17.75 per share pursuant to a normal course issuer bid for a total cost
of $2.0 million. The normal course issuer bid in effect at December 31, 2015 allows for a total purchase of up to 670,000
common shares and expires on June 24, 2016.
14. Stock-based compensation
Share Option Plan
Under the Company’s stock option plan, options to purchase common shares may be granted by the Board of Directors
to directors, officers and employees. Options are generally granted at exercise prices equal to the fair market value at
the grant date, vest at the end of a three-year period based on earnings per share targets and have exercise lives of five
years. The aggregate number of common shares reserved for issuance and which may be purchased upon the exercise
of options granted pursuant to the plan shall not exceed 2.0 million common shares.
Outstanding balance, beginning of year
Options granted
Options exercised
Options forfeited or expired
Outstanding balance, end of year
Exercisable balance, end of year
Year Ended
December 31, 2015
Year Ended
December 31, 2014
Options
# (in 000’s)
Weighted Average
Exercise Price
$
Options
# (in 000’s)
Weighted Average
Exercise Price
$
601
80
(188)
(13)
480
10
11.81
18.81
8.67
11.50
14.22
9.42
538
190
(39)
(88)
601
203
9.81
17.52
8.54
13.39
11.81
8.73
Outstanding options to directors, officers and employees as at December 31, 2015 were as follows:
Outstanding
Weighted Average
Remaining
Contractual
Life in Years
2.12
3.47
3.67
2.88
Options
# (in 000’s)
213
257
10
480
Exercisable
Weighted Average
Exercise Price
$
Options
# (in 000’s)
Weighted Average
Exercise Price
$
9.60
17.65
24.45
14.22
10
–
–
10
9.42
–
–
9.42
Range of Exercise
Prices
$
8.00 – 10.99
15.00 – 19.99
20.00 – 24.99
8.00 – 24.99
100 | goeasy Ltd.
The Company used the fair value method of accounting for stock options granted to employees and directors. During the
year ended December 31, 2015, the Company granted 79,806 options (2014 – 190,332 options), and recorded an expense
of $532 (2014 – expense of $402), in stock-based compensation expense in the consolidated statements of income, with
a corresponding adjustment to contributed surplus.
Options granted during 2015 were determined using the Black-Scholes option pricing model with the following
assumptions, resulting in a weighted average fair value of $5.16 per option. Volatility assumptions were best estimates
of the market implied volatility matching the exercise price and expected life of the options.
Risk-free interest rate (% per annum)
Expected hold period to exercise (years)
Volatility in the price of the Company’s shares (%)
Dividend yield (%)
Restricted Share Unit [“RSU”] Plan
2015
0.57
5.00
38.16
2.13
2014
1.34
5.00
37.14
2.00
Under the Company’s RSU plan, RSUs may be granted by the Board of Directors to employees of the Company. RSUs are
granted at fair market value at the grant date and generally vest at the end of a three-year period based on long-term targets.
On May 4, 2015 the Company’s shareholders approved a resolution to amend the RSU plan, increasing the maximum number
of common shares reserved for issuance from treasury under the RSU Plan by 150,000 shares, from 765,000 to 915,000.
Outstanding balance, beginning of year
RSUs granted
RSU dividend reinvestments
RSUs forfeited
Outstanding balance, end of year
Year Ended
December 31, 2015
Year Ended
December 31, 2014
Weighted Average
Fair Value at
Grant Date
$
RSU’s
# (in 000’s)
Weighted Average
Fair Value at
Grant Date
$
RSU’s
# (in 000’s)
559
194
11
(89)
675
14.00
21.69
18.38
17.46
15.82
434
171
6
(52)
559
9.97
22.69
19.97
9.66
14.00
For the year ended December 31, 2015, $2,685 (2014 – $1,764) was recorded as an expense in stock-based compensation
expense in the consolidated statements of income, with a corresponding adjustment to contributed surplus.
Performance Share Unit [“PSU”] Plan
During the year ended December 31, 2015, the Company granted 199,330 PSUs (2014 – 171,134 PSUs) to senior executives
of the Company under its PSU Plan. On May 5, 2015, the PSUs granted in 2015 were cancelled and an equivalent number
of RSUs were granted to senior executives of the Company (see RSU Plan described above).
PSUs are granted at fair market value at the grant date and vest at the end of a three-year period based on long-term
targets. For the year ended December 31, 2015, $1,018 (2014 – $3,908) was recorded as an expense in stock-based
compensation expense in the consolidated statements of income. Additionally, for the year ended December 31, 2015,
an additional 2,832 PSUs (2014 – 11,270 PSUs) were granted as a result of dividends payable.
The PSU liability as at December 31, 2015 was nil (2014 – $6,872).
2015 Annual Report | 101
Deferred Share Unit [“DSU”] Plan
During the year ended December 31, 2015, the Company granted 24,805 DSUs (2014 – 7,250 DSUs) to directors under
its DSU Plan. DSUs are granted at fair market value at the grant date and vest immediately upon grant. For the year
ended December 31, 2015, $519 (2014 – $190) was recorded as stock-based compensation expense under the DSU
Plan in the consolidated statements of income. Additionally, for the year ended December 31, 2015, an additional
2,792 DSUs (2014 – 2,232 DSUs) were granted as a result of dividends payable.
Stock Based Compensation Expense
Equity-settled stock-based compensation
Cash-settled stock-based compensation
Stock-based compensation
Contributed Surplus
The following is a continuity of the activity in the contributed surplus account:
Contributed surplus, beginning of year
Equity settled stock-based compensation expense
Stock options
Restricted share units
Deferred share units
Reduction due to exercise of stock options
Contributed surplus, end of year
15. Restructuring and other items
Proceeds on sale of U.S. royalty rights
Impairment of trademark
Impairment of fixed assets
Other restructuring charges
Year Ended
December 31, 2015
December 31, 2014
3,736
1,017
4,753
2,356
3,908
6,264
Year Ended
December 31, 2015
December 31, 2014
6,458
532
2,684
519
10,193
(341)
9,852
4,169
402
1,764
190
6,525
(67)
6,458
Year Ended
December 31, 2015
December 31, 2014
–
–
–
–
–
4,742
(1,992)
(227)
(1,298)
1,225
During the fourth quarter of 2014, the Company decided to wind down its operations in the U.S. and focus on the
Canadian marketplace. This wind down involved the sale of the Company’s rights to future royalty payments from its
102 | goeasy Ltd.
franchisees, the recognition of impairment provisions against certain intangible assets and property and equipment
located in the U.S. and the recording of other restructuring charges which consisted of provisions for onerous leases,
severance and other charges. For the year ended December 31, 2014, a net credit of $1.2 million was recorded as
restructuring and other charges within operating income.
16. Income taxes
The Company’s income tax provision was determined as follows:
Combined basic federal and provincial income tax rates
Expected income tax expense
Non-deductible expenses
U.S. and SPE results not tax effected
Other
The significant components of the Company’s income tax expense were as follows:
Current income tax
Current income tax charge
Adjustments related to intercompany management fees and other
Deferred income tax
Relating to origination and reversal of temporary differences
The significant components of the Company’s deferred tax assets are as follows:
Tax cost of lease assets and property and equipment in excess of net book value
Amounts receivable and provisions
Deferred salary arrangements
Unearned revenue
Financing fees
Other
Year Ended
December 31, 2015
December 31, 2014
27.3%
8,942
333
(370)
85
8,990
27.2%
7,005
263
(764)
(459)
6,045
Year Ended
December 31, 2015
December 31, 2014
8,187
(30)
833
8,990
7,990
784
(2,729)
6,045
December 31, 2015
December 31, 2014
(1,177)
5,575
1,382
500
(100)
(267)
5,913
544
3,342
2,546
239
213
(159)
6,725
During 2015, all changes to the deferred tax assets were recorded as an expense in deferred tax expense in the consolidated
statements of income.
2015 Annual Report | 103
At December 31, 2015, there was no recognized deferred tax liabilities (2014 – nil) for taxes that would be payable on the
undistributed earnings of the Company’s subsidiaries. The Company has determined that undistributed earnings of its
subsidiaries would not be distributed in the foreseeable future.
17. Earnings per share
Basic Earnings Per Share
Basic earnings per share amounts were calculated by dividing the net income for the year by the weighted average number
of ordinary shares and DSUs outstanding. DSUs were included in the calculation of the weighted average number of ordinary
shares outstanding as these units vest upon grant.
Net income
Weighted average number of ordinary shares outstanding (in 000’s)
Basic earnings per ordinary share
Year Ended
December 31, 2015
December 31, 2014
23,728
13,561
1.75
19,748
13,449
1.47
For the year ended December 31, 2015, 148,065 DSUs (2014 – 130,285 DSUs) were included in the weighted average
number of ordinary shares outstanding.
Diluted Earnings Per Share
Diluted earnings per share reflect the potential dilution that could occur if additional common shares are assumed to
be issued under securities that entitle their holders to obtain common shares in the future. The number of additional
shares for inclusion in diluted earnings per share was determined using the treasury stock method, whereby stock
options and warrants, whose exercise price is less than the average market price of the Company’s common shares,
were assumed to be exercised and the proceeds are used to purchase common shares at the average market price for
the period. The incremental number of common shares issued under stock options and warrants was included in the
calculation of diluted earnings per share.
Net income
Weighted average number of ordinary shares outstanding (in 000’s)
Dilutive effect of stock-based compensation (in 000’s)
Weighted average number of diluted shares outstanding
Dilutive earnings per ordinary share
Year Ended
December 31, 2015
December 31, 2014
23,728
13,561
476
14,037
1.69
19,748
13,449
495
13,944
1.42
For the year ended December 31, 2015, 261,138 stock options to acquire common shares (2014 – 182,332 options),
were considered anti-dilutive using the treasury stock method and therefore excluded in the calculation of diluted
earnings per share.
104 | goeasy Ltd.
18. Net change in other operations assets and liabilities
The net change in other operating assets and liabilities was as follows:
Amounts receivable
Prepaid expenses
Accounts payable and accrued liabilities
Income taxes payable
Deferred lease inducements
Unearned revenue
Provisions
Year Ended
December 31, 2015
December 31, 2014
3,508
(475)
(9,220)
(2,342)
(681)
4
268
(8,938)
(9,302)
(272)
8,539
(887)
(146)
215
293
(1,560)
Supplemental disclosures in respect of the consolidated statements of cash flows comprised the following:
Income taxes paid
Income taxes refunded
Interest paid
Interest received
Year Ended
December 31, 2015
December 31, 2014
12,021
1,522
13,873
100,246
9,694
61
7,637
62,568
19. Commitments and guarantees
The Company is committed to software maintenance, development and licensing service agreements, and operating leases
for premises and vehicles. The minimum annual lease payments plus estimated operating costs required for the next five
years and thereafter are as follows:
Premises
Other operating lease obligations
Other
Total contractual obligations
Within 1 year
After 1 year but not
more than 5 years
More than 5 years
25,097
1,113
12,306
38,516
41,611
1,961
2,903
46,475
1,292
–
–
1,292
During the year ended December 31, 2015, $27.3 million (2014 – $24.0 million) was recognized as an expense in the consolidated
statements of income in respect of operating leases.
2015 Annual Report | 105
20. Contingencies
The Company was involved in various legal matters arising in the ordinary course of business. The resolution of these matters
is not expected to have a material adverse effect on the Company’s financial position, financial performance or cash flows.
The Company has agreed to indemnify its directors and officers and particular employees in accordance with the
Company’s policies. The Company maintains insurance policies that may provide coverage against certain claims.
21. Capital risk management
The Company manages its capital to maintain its ability to continue as a going concern and to provide adequate returns
to shareholders by way of share appreciation and dividends. The capital structure of the Company consists of bank debt
(revolving operating facility), term debt and shareholders’ equity, which includes share capital, contributed surplus,
accumulated other comprehensive income and retained earnings.
The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company,
upon approval from its Board of Directors, will balance its overall capital structure through new share issues, share
repurchases, the payment of dividends, increasing or decreasing bank debt and term debt or by undertaking other
activities as deemed appropriate under specific circumstances. The Company’s strategy, objectives, measures,
definitions and targets have not changed significantly in the past year.
The Company has externally imposed capital requirements as governed through its financing facilities. These requirements
are to ensure the Company continues to operate in the normal course of business and to ensure the Company manages its
debt relative to net worth. The capital requirements are congruent with the Company’s management of capital.
The Company monitors capital on the basis of the financial covenants of its credit facility as described in Note 11.
For the years ended December 31, 2015 and 2014, the Company was in compliance with all of its externally imposed
financial covenants.
22. Financial risk management
Overview
The Company’s activities are exposed to a variety of financial risks: credit risk, liquidity risk, interest rate risk and currency
risk. The Company’s overall risk management program focuses on the unpredictability of financial and economic markets
and seeks to minimize potential adverse effects on the Company’s financial performance.
Credit Risk
The maximum exposure to credit risk is represented by the carrying amount of the amounts receivable, consumer loans
receivable and lease assets with customers under merchandise lease agreements. The Company leases products and makes
consumer loans to thousands of customers pursuant to policies and procedures that are intended to ensure that there is no
concentration of credit risk with any particular individual, company or other entity, although the Company is subject to a higher
level of credit risk due to the credit constrained nature of many of the Company’s customers and in circumstances where its
policies and procedures are not complied with.
106 | goeasy Ltd.
The credit risk related to lease assets with customer’s results from the possibility of customer default with respect to agreed
upon payments or in not returning the lease assets. The Company has a standard collection process in place in the event of
payment default, which includes the recovery of the lease asset if satisfactory payment terms cannot be worked out with the
customer, as the Company maintains ownership of the lease assets until payment options are exercised. Lease asset losses
for the year ended December 31, 2015 represented 2.8% (2014 – 3.2%) of total revenue for the easyhome Leasing segment.
The credit risk on the Company’s consumer loans receivable made in accordance with policies and procedures is impacted
by both the Company’s credit policies and the lending practices which are overseen by the Company’s senior management.
Credit quality of the customer is assessed based on a credit rating scorecard and individual credit limits are defined in
accordance with this assessment. The consumer loans receivable are unsecured. The Company evaluates the concentration
of risk with respect to customer loans receivable as low, as its customers are located in several jurisdictions and operate
independently. As at December 31, 2015, the Company’s gross loan portfolio was $289.4 million (2014 – $192.2 million).
The credit risk related to other amounts receivable are managed in accordance with policies and procedures resulting
from the possibility of default on rebate payments, amounts due from licensee and franchisees and other amounts
receivable. The Company deals with credible companies, performs ongoing credit evaluations of creditors and
consumers and allows for uncollectible amounts when determined to be appropriate.
Liquidity Risk
The Company addresses liquidity risk management by maintaining sufficient availability of funding through its committed
credit facility. The Company manages its cash resources based on financial forecasts and anticipated cash flows, which
are periodically reviewed with the Company’s Board of Directors.
The Company believes that the cash flow provided by operations and funds available from the credit facility will be sufficient
in the near term to meet operational requirements, purchase lease assets, meet capital spending requirements and pay
dividends. In addition, the incremental financing obtained through the credit facility will allow the Company to continue
growing its consumer loans receivable portfolio into 2017. In order for the Company to achieve the full growth opportunities
available, however, additional sources of financing over and above the currently available credit facility will be required. There
is no certainty that these long-term sources of capital will be available or at terms favourable to the Company.
Substantially all liabilities are due within 12 months with the exception of the revolving operating facility and term loan, which
are due as disclosed in Note 11.
Interest Rate Risk
Interest rate risk measures the Company’s risk of financial loss due to adverse movements in interest rates. The Company is
subject to interest rate risk as the revolving operating facility bears interest at the lead lenders prime rate plus 175 to 275 bps,
depending on the Company’s total debt to EBITDA ratio and the term loan bears interest at 699 bps over the Canadian Bankers’
Acceptance rate with a 799 bps floor. As at December 31, 2015, the interest rate on the revolving operating facility was 5.45%
per annum (2014 – 5.0% per annum) and the interest rate on the term loan was 7.99% per annum (2014 – 8.5% per annum).
The Company does not hedge interest rates. Accordingly, future changes in interest rates will affect the amount of interest
expense payable by the Company.
As at December 31, 2015, all of the Company’s borrowings were subject to movements in floating interest rates. A 1% increase
in the prime interest rate and bankers’ acceptance rate would have decreased net income for the year by approximately
$1,739, while a 1% decrease in the prime interest rate and bankers’ acceptance rate would have increased net income for the
year by approximately $12 due to the interest rate floor on the Company’s term loan.
2015 Annual Report | 107
Currency Risk
Currency risk measures the Company’s risk of financial loss due to adverse movements in currency exchange rates.
The Company sources a portion of the assets it leases in Canada from U.S. suppliers. As a result, the Company had foreign
exchange transaction exposure. These purchases were funded using the spot rate prevailing at the date of purchase. Pricing
to customers can be adjusted to reflect changes in the Canadian dollar landed cost of imported goods and, as such, there is
not a material foreign currency transaction exposure.
The Company additionally had foreign currency transaction exposure through its SPEs and franchise locations in the United
States with the Parent Company as these entities had a U.S. functional currency.
The earnings of the Company’s U.S. subsidiaries and SPEs were translated into Canadian dollars each period. A 5%
movement in the Canadian and U.S. dollar exchange rate would have increased or decreased net income for the year
by approximately $31.
23. Financial instruments
Recognition and Measurement of Financial Instruments
The Company classified its financial instruments as follows:
Financial Instruments
Cash
Amounts receivable
Consumer loans receivable
Accounts payable and accrued liabilities
Revolving operating facility
Term loan
Fair Value Measurement
Measurement
December 31, 2015
December 31, 2014
Fair value
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
11,389
13,000
270,961
23,617
–
210,299
1,165
16,508
180,693
32,837
1,756
119,841
All assets and liabilities for which fair value was measured or disclosed in the consolidated financial statements were
categorized within the fair value hierarchy, described as follows, based on the lowest level input that was significant to the
fair value measurement as a whole:
Level 1:
Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2:
Level 3:
Valuation techniques for which the lowest level input that is significant to the fair value measurement is
directly or indirectly observable
Valuation techniques for which the lowest level input that is significant to the fair value measurement is
unobservable
108 | goeasy Ltd.
The hierarchy required the use of observable market data when available. The following table provides the fair value
measurement hierarchy of the Company’s financial assets and liabilities measured at amortized cost as at December 31, 2015:
Amounts receivable
Consumer loans receivable
Accounts payable and accrued liabilities
Term loan
Total
13,000
270,961
23,617
210,299
Level 1
Level 2
–
–
–
–
–
–
–
–
Level 3
13,000
270,961
23,617
210,299
There were no transfers between Level 1, Level 2, or Level 3 during the period.
24. Related party transactions
Key management personnel includes all corporate officers with the position of president, executive vice president or senior
vice president. The following summarizes the expense related to key management personnel during the reporting periods.
Short-term employee benefits including salaries
Share-based payment transactions
25. Segmented reporting
Year Ended
December 31, 2015
December 31, 2014
3,623
3,121
6,744
3,631
4,281
7,912
For management purposes, the Company had two reportable segments: easyhome Leasing and easyfinancial.
General and administrative expenses directly related to the Company’s business segments were included as operating
expenses for those segments. All other general and administrative expenses were reported separately as part of Corporate.
Management assessed the performance based on segment operating income (loss). The following tables summarize the
relevant information for the years ended December 31, 2015 and 2014:
Year Ended
December 31, 2015
Revenue
Total operating expenses before depreciation
and amortization
Depreciation and amortization
Segment operating income (loss)
Finance costs
Income (loss) before income taxes
easyhome Leasing
easyfinancial
Corporate
152,605
151,668
77,724
50,214
24,667
–
24,667
99,607
5,289
46,772
–
46,772
–
22,794
593
(23,387)
15,334
(38,721)
Total
304,273
200,125
56,096
48,052
15,334
32,718
2015 Annual Report | 109
Year Ended
December 31, 2014
Revenue
Total operating expenses before depreciation and
amortization and restructuring and other items
Restructuring and other items
Depreciation and amortization
Segment operating income (loss)
Finance costs
Income (loss) before income taxes
easyhome Leasing
easyfinancial
Corporate
158,322
100,828
81,305
–
52,711
24,306
–
24,306
64,524
–
3,298
33,006
–
33,006
–
23,312
(1,225)
632
(22,719)
8,800
(31,519)
Total
259,150
169,141
(1,225)
56,641
34,593
8,800
25,793
The Company operated across Canada and in certain U.S. states. During the year ended December 31, 2015, 99% or $300.6
million of revenue was generated in Canada and 1% or $3.7 million of revenue was generated in the U.S. (2014 – 97% or $251.3
million of revenue was generated in Canada and 3% or $7.9 million of revenue was generated in the U.S.). Additionally, as at
December 31, 2015, $414.9 million of the Company’s assets were located in Canada and $3.6 million were located in the U.S.
(2014 – $309.0 million in Canada and $10.5 million in the U.S.).
As at December 31, 2015, the Company’s goodwill of $21.3 million (2014 – $20.0 million) related entirely to its easyhome
Leasing segment.
The Company’s easyhome Leasing business consisted of four major product categories: furniture, electronics, computers and
appliances. Lease revenue generated by these product categories as a percentage of total lease revenue for the years ended
December 31, 2015 and 2014 were as follows:
Year Ended
December 31, 2015
(%)
December 31, 2014
(%)
40
34
14
12
100
38
34
16
12
100
Furniture
Electronics
Computers
Appliances
110 | goeasy Ltd.
Head Office
33 City Centre Drive
Suite 510
Mississauga, Ontario
L5B 2N5
Tel:
(905) 272-2788
Fax: (905) 272-9886
Investor Relations
David Ingram
President & Chief Executive Officer
Tel:
(905) 272-2788
Steve Goertz
Executive Vice President
& Chief Financial Officer
Tel:
(905) 272-2788
Banker
Canadian Imperial Bank
of Commerce
Toronto, Ontario
Transfer Agent
TMX Equity Transfer Services
Toronto, Ontario
Listed
Toronto Stock Exchange
Trading Symbol: GSY
Auditor
Ernst & Young LLP
Toronto, Ontario
Solicitor
Torys LLP
Toronto, Ontario
Website
www.goeasy.com
Board of Directors
Corporate Officers
Donald K. Johnson
Chairman of the Board
David Ingram
President & Chief Executive Officer
David Ingram
President & Chief Executive Officer, goeasy Ltd.
Steve Goertz
Executive Vice President & Chief Financial Officer
David A. Lewis
Corporate Director
David Appel
Corporate Director
Jason Mullins
Executive Vice President & Chief Operating Officer
Andrea Fiederer
Executive Vice President & Chief Marketing Officer
Sean Morrison
Managing Director, Maxam Capital Corp.
Jason Appel
Senior Vice President, Risk and Analytics
David J. Thomson
Corporate Director
Karen Basian
Chief Executive Officer, Beehive5
Shane Pennell
Senior Vice President, Operations and Shared Services
David Yeilding
Senior Vice President, Finance
33 City Centre Drive, Suite 510,
Mississauga, Ontario L5B 2N5
Tel: (905) 272-2788 Fax: (905) 272-9886
www.goeasy.com