Provide
everyday
Canadians
a path to a
better
tomorrow,
today.
2022 A N N U A L R E P O R T
2022 was a year of
record growth, strong
credit performance and
successful execution
of our strategy, as we
continued to further
solidify our position
as a leader in the non-
prime consumer credit
market in Canada.
2
2
Our commitment
to our vision of
helping everyday
Canadians on the
path to a better
tomorrow, today is
stronger than ever.
As we moved beyond the impacts of the
COVID-19 pandemic, goeasy experienced
exceptionally strong commercial performance,
enabling us to make great progress against our
goal of building Canada’s leading non-prime
consumer finance business. Growth from our
wide suite of personal lending products was
experienced across every delivery channel,
including our retail branch network, online
digital platforms, and through our network
of merchant partners, demonstrating the
benefits of a diverse business model. We
also remained committed to driving down the
cost of borrowing for our customers, with the
weighted average cost of interest declining to
approximately 30%, as we strive to pass along
the benefits of scale.
With a focus on providing credit in a responsible
and transparent manner for the over 8.5 million
Canadians that are often denied credit from
traditional financial institutions, our customers
turn to us as a trusted source for products
that meet their current financial needs, while
helping build credit for the future. Supported by
a business model that delivers an unparalleled
customer experience across all our channels,
we are proud to see 1 in 3 of our easyfinancial
customers graduate to prime credit and 60%
increase their credit score within 12 months of
borrowing from us.
About
goeasy
goeasy is one of Canada’s leading non-
prime consumer lenders offering a full
suite of leasing and lending products to
the non-prime consumer. Founded in
1990, the Company operates under its
easyfinancial, easyhome and LendCare
brands through its retail footprint of
over 400 stores and branches, its digital
lending platform and approximately 6,500
merchant partners across Canada. With
over 2,400 employees coast-to-coast,
goeasy has spent the past 32 years
providing approximately 1.3 Million
Canadians with access to $10.1 Billion in
consumer credit.
33
Our
Strategy
goeasy’s vision of providing everyday Canadians a
path to a better tomorrow, today is supported by
four strategic pillars established in 2017 to fuel
our latest stage of growth and expansion. These
strategic pillars include expanding the range of
credit products we offer, growing our channels of
distribution, diversifying geographically and helping
Canadians improve their overall financial wellness
by gradually reducing their cost of borrowing
and helping them improve their credit score and
graduate back to prime rates.
and financing for everyday purchases in the
Lending
111
Product
Range
We are proud to be a single source of credit for
non-prime Canadians by offering one of the
widest ranges of consumer credit products
in the market, including leasing for everyday
household items, unsecured personal loans,
home equity loans, automotive financing,
powersports, healthcare, home improvement
and general retail categories.
Leasing
easyhome, Canada’s largest lease-to-own
retailer, has been in operation since 1990 and
offers customers brand name household
furniture, appliances, and electronics through
flexible
lease-to-own agreements. The
brand is supported by 154 retail locations,
which includes 34 franchise stores and an
eCommerce platform. Canadians turn to
444
easyhome as an alternative to purchasing or
easyhome as an alternative to purchasing or
2 kiosks, coast -to-coast and a digital lending
2 kiosks, coast -to-coast and a digital lending
financing their goods, or when they simply
financing their goods, or when they simply
platform, allowing consumers to transact in
platform, allowing consumers to transact in
want the flexibility to return or upgrade
want the flexibility to return or upgrade
the most convenient manner possible.
the most convenient manner possible.
items in their home with ease. With no
items in their home with ease. With no
down payment or credit check required,
Point-of-Sale Financing
easyhome offers a flexible solution that
LendCare is goeasy’s point-of-sale purchase
helps consumers get access to the goods
financing brand. Through a network of
they need, with the flexibility to terminate
approximately 6,500 merchants, we offer
their lease at any time without penalty.
financing for the purchase of vehicles,
powersports products, everyday retail
purchases, healthcare procedures and
Through a suite of both unsecured personal
equipment, and home
improvements.
loans and home equity loans, easyfinancial
Our goal is to provide our partners with
offers customers up to $100,000 with rates
competitive approval
rates, attractive
starting at 9.9%. Loans are fully amortizing
financing offers to their consumers, and a
fixed payment installment products and all
best-in-class overall financing experience,
payments made by borrowers are reported
to help drive and increase their sales
to credit reporting agencies, which in turn
volume. Powered by our
leading-edge
helps our customers rebuild their credit and
technology platform, the merchant can
graduate to lower rates on a subsequent
obtain an instant credit decision and fully
loan. This direct-to-consumer offering is
automated
loan solution, enabling
the
supported by an omnichannel model, including
customer to buy what they want today and
a branch network of 299 locations, including
pay over time.
222
Channel
Expansion
In 2022, we made meaningful progress in
expanding our channels of distribution as
we undertook the development of goeasy
Connect, a self-serve mobile app that
enables access to goeasy’s entire range of
products and services, while dynamically
presenting customers with
loan offers
tailored to their credit profile. We also
continued to expand our core channels
of distribution so our customers can get
access to the credit they need in the most
convenient manner possible, whenever and
wherever they are. We further enhanced
our digital capabilities, opened 10 branches
across Canada and added 1,617 new
merchant partners
including 664 new
automotive dealerships to our network. Key
relationships were established with exciting
brands including Hisun Motors Canada,
Segway Inc. and Massimo Motor Canada,
Segway Inc. and Massimo Motor Canada,
building on the already impressive set of
building on the already impressive set of
merchants offering non-prime Canadians
merchants offering non-prime Canadians
our financing program.
our financing program.
333
Geographic
Diversification
Canada continues to provide goeasy a
substantial runway for growth, with over
8.5 million non-prime Canadians needing
alternative options for credit. We finished
2022 with 299 easyfinancial locations,
strategically placed throughout Canada to
provide more than 85% of the population
easy and convenient access to one of our
branches. Further retail expansion will be
targeted within the province of Quebec
and key urban markets such as Toronto
and Vancouver, where the population per
branch is the largest. We also remain
focused on adding new dealers and
merchants to our point-of-sale network,
to increase the points of distribution for
our products.
Furthermore, we also believe that there is a
credit reporting agencies. As our customers
future opportunity to consider international
demonstrate consistent on-time payment
expansion where our consumer finance
behaviour, we are able to gradually reduce
business model can be replicated. The two
their cost of borrowing over time by qualifying
markets that we believe present future
them for other lending products at a lower
potential include the United States and
interest rate. Between 2017 and 2022, we have
the United Kingdom, where consumers
reduced the weighted average interest rate
generally use credit products very similar
charged to customers from 46% to 30% today.
to those offered by goeasy in Canada today.
444
Financial
Wellness
goeasy is committed to improving the financial
wellness of our customers, by providing
responsible and transparent financial products
and services that are tailored to the individual
needs of our customers and gradually help
them lower their cost of borrowing. With 72%
of easyfinancial customers disclosing that
they have been denied credit by banks or other
traditional lenders, our focus is not only to
provide them with the credit they need today,
but the tools to improve their financial health
for tomorrow.
For many non-prime borrowers, we serve as
an important steppingstone to help rebuild
At goeasy we have always set ourselves
apart from the competition by looking beyond
the initial transaction with the customer and
focusing on building long term personalized
relationships based on trust and respect.
During discussions with customers, we aim
to help them understand their credit profile,
how credit works, and what steps they can
take to ensure they protect and build their
credit rating. In addition, goeasy provides free
financial literacy resources for all Canadians
through goeasy Academy, a dedicated portal
that includes hundreds of articles and tools to
help Canadians better understand and manage
their personal finances. Over time, we will
continue to invest in building unique tools and
programs that will help drive meaningful
progress for our customers on their path
to a better tomorrow and an improved
credit by reporting each loan payment to the
financial future.
555
Our
Customers
With a history of serving approximately
1.3 Million non-prime Canadians over
three decades, we have developed a deep
understanding of our customers and their
financial needs, goals, and priorities.
goeasy customers are everyday hard-working
large ticket discretionary purchases. 80% of
Canadians
in a variety of
industry sectors
easyfinancial customers state that they rely on
including manufacturing, retail, financial services,
access to credit when a financial emergency
healthcare, technology, and public sector jobs.
arises, turning to goeasy as a trusted and reliable
The typical customer is 43 years old, supporting
alternative to a traditional bank, to help them deal
an average of 1.9 dependents, with an individual
with basic everyday financial needs. While some
income of $57,000 per year, residing at their
borrowers rely on goeasy for credit to address
current place of residence for almost 4 years
household expenses and general bill payments,
and working with their current employer for 3.6
many others turn to goeasy to finance a wide range
years. Non-prime Canadians, however, carry 55%
of large ticket purchases. From financing a vehicle
less total consumer debt than the typical prime
or buying a powersports product for their family's
consumer, due primarily to a lower level of home
enjoyment, to financing a healthcare expense such
ownership, at approximately 20% versus the
as uninsured dental work or a veterinary bill, or
Canadian home ownership rate of ~67%.
purchasing household items such as furniture or
goeasy serves a wide range of consumers,
providing credit for basic financial needs, through
appliances, we help non-prime Canadians finance
all their life needs.
6
6
43
Average
customer age
1.9
Average number
of dependents
3.9
Average years at
current residence
$57K
Average
individual income
3.6
Average years at
current employer
585
Median
credit score1
1 Based on credit scores obtained by TransUnion
Source: goeasy direct-to-consumer loan data (December 2022) and goeasy non-prime benchmark survey (2021)
7
7
Provide
everyday
Canadians
a path to
a better
tomorrow,
today.
8
8
32
Years of leasing &
Years of leasing &
lending experience
lending experience
1.3M
Canadians
Canadians
served
served
$10.1B $2.8B
Total loan
originations
Consumer
loan portfolio
Within 12 months of borrowing from us
1 Prime credit is defined as opening a trade with a prime bank lender within 12 months of borrowing from us.
2 As measured by an increase in TransUnion Risk Score within 12 months of borrowing from us.
9
9
A history
in the
making
2001
• David Ingram
appointed CEO and
company returns
to profitability
2006
• easyfinancial launches
2015
• Corporate name
changed to
goeasy ltd.
2017
• Expanded into
Quebec
• Home Equity
product launched
• Recapitalized the
business with
C$530 Million in
financing
• RTO Enterprises
Founded
1990
• easyhome is born,
consolidated from 6 brands
2003
• Risk adjusted
interest
rate loans
launched
2016
• 1st easyfinancial
stand alone
branch opens
• Centralized credit
adjudication
introduced
2011
10
"For over 30 years we have consistently found ways to grow, evolve and adapt. Fueled
by our passion for creating better tomorrows for our customers, we have persistently
found ways to develop new products and services that meet the needs of the 8.5
million non-prime Canadians. While every milestone on our journey signifies an
important step in our history that informs and guides us, we are more excited than
ever about the future potential of our organization. We are truly just getting started."
Jason Mullins
President & CEO
2019
• David Ingram transitions to
Executive Chairman, Jason Mullins
Assumes role of President & CEO
• $1 Billion loan portfolio milestone
• Strategic partnership &
investment in PayBright
• Recapitalized the business with
C$728 Million in financing
• Reached $1 Billion
market capitalization
2021
• Completed strategic
acquisition of LendCare
• $2 Billion loan portfolio milestone
• Completed $173 Million equity
offering & US$320 Million senior
unsecured notes issuance
• Strategic investment &
partnership with Brim
• Launched automotive financing
• Next generation
proprietary online
loan application
launched
2018
• goeasy and
PayBright launched
e-commerce platform
• Launch of soft credit inquiry
• Launch of banking models
for credit adjudication
• Established $200 Million
revolving securitization
warehouse facility
2020
• Increased its Securitization Facility
from $900 Million to $1.4 Billion
• C$57.9 Million Bought Deal
Offering of Common Shares
• Launch of new corporate intranet
– The Hub
• New goeasy.com Corporate Website
• Placed on the 2022 Report on
Business Women Lead Here list
2022
11
Annual
Revenue
(In dollar millions)
17.7%
CAGR SINCE 2012
6
0
5
$
2
0
4
$
8
4
3
$
4
0
3
$
9
5
2
$
9
1
2
$
0
0
2
$
$1,019
7
2
8
$
3
5
6
$
9
0
6
$
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
12
1212
Annual
Net Income
(In dollar millions)
Reported Net Income
28.9%
CAGR SINCE 2012
1
1
$
2
1
0
2
4
1
$
3
1
0
2
0
2
$
4
1
0
2
4
2
$
5
1
0
2
Adjusted Net Income1
33.8%
CAGR SINCE 2012
$140
5
4
2
$
7
3
1
$
4
6
$
3
5
$
1
3
$
6
3
$
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
$192
5
7
1
$
8
1
1
$
0
8
$
2
4
$
3
3
$
3
5
$
4
2
$
1
1
$
2
1
0
2
4
1
$
3
1
0
2
9
1
$
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
1
2
0
2
1 Adjusted net income is a non-IFRS measure. It is not determined in accordance with IFRS, does not have standardized meanings and may not be comparable to similar financial measures presented
by other companies. Refer to 1) “Key Performance Indicators and Non-IFRS Measures” section on page 43 of the Company’s Management's Discussion and Analysis (MD&A, available on www.sedar.
com) year ended December 31, 2022 for FY 22 and FY21 metrics, 2) “Key Performance Indicators and Non-IFRS Measures” section on page 42 of the Company’s MD&A year ended December 31, 2020
for FY 20 and FY 19 metrics, 3) “Key Performance Indicators and Non-IFRS Measures” section on page 51 of the Company’s MD&A year ended December 31, 2018 for FY 18 and FY 17 metrics, 4) “Key
Performance Indicators and Non-IFRS Measures” section on page 35 of the Company’s MD&A year ended December 31, 2016 for FY 16 and FY 15 metrics, 5) “Key Performance Indicators and Non-IFRS
Measures” section on page 29 of the Company’s MD&A year ended December 31, 2014 for FY 14 and FY 13 metrics, and 6) “Key Performance Indicators and Non-IFRS Measures” section on page 20 of
the Company’s MD&A year ended December 31, 2012 for FY 12 metric
131313
Annual
EPS
Reported Diluted EPS
24.8%
CAGR SINCE 2012
$8.42
.
2
6
4
1
$
.
6
7
8
$
.
2
9
0
$
2
1
0
2
.
5
1
1
$
3
1
0
2
2
4
1
$
.
4
1
0
2
9
6
1
$
.
5
1
0
2
.
3
2
2
$
6
1
0
2
Adjusted Diluted EPS1
29.5%
CAGR SINCE 2012
.
6
5
3
$
.
7
1
4
$
.
6
5
2
$
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
$11.55
.
3
4
0
1
7 $
5
7.
7 $
1
5
$
.
.
7
8
0
$
.
5
1
1
$
4
3
1
$
.
9
6
1
$
.
.
6
5
3
$
8
3
2
$
.
.
7
9
2
$
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
1 Adjusted diluted EPS is a non-IFRS measure. It is not determined in accordance with IFRS, does not have standardized meanings and may not be comparable to similar financial measures presented
by other companies. Refer to 1) “Key Performance Indicators and Non-IFRS Measures” section on page 43 of the Company’s Management's Discussion and Analysis (MD&A, available on www.sedar.
com) year ended December 31, 2022 for FY 22 and FY21 metrics, 2) “Key Performance Indicators and Non-IFRS Measures” section on page 42 of the Company’s MD&A year ended December 31, 2020
for FY 20 and FY 19 metrics, 3) “Key Performance Indicators and Non-IFRS Measures” section on page 51 of the Company’s MD&A year ended December 31, 2018 for FY 18 and FY 17 metrics, 4) “Key
Performance Indicators and Non-IFRS Measures” section on page 35 of the Company’s MD&A year ended December 31, 2016 for FY 16 and FY 15 metrics, 5) “Key Performance Indicators and Non-IFRS
Measures” section on page 29 of the Company’s MD&A year ended December 31, 2014 for FY 14 and FY 13 metrics, and 6) “Key Performance Indicators and Non-IFRS Measures” section on page 20 of
the Company’s MD&A year ended December 31, 2012 for FY 12 metric
1414
Financial Summary
(in $000s except per share amounts, store counts, employee counts,
percentages and ratios)
2022
2021
2020
2019
2018
INCOME STATEMENT
Revenue
Operating income
Net income
Diluted earnings per share
BALANCE SHEET
Cash
1,019,336
332,407
140,161
8.42
826,722
281,003
244,943
14.62
652,922
216,436
136,505
8.76
609,383
168,793
64,349
4.17
506,191
119,717
53,124
3.56
62,654
102,479
93,053
46,341
100,188
Gross consumer loans receivable
2,794,694
2,030,339
1,246,840
1,110,633
Lease assets
Total assets
External debt3
Shareholders’ equity
FINANCIAL METRICS
Revenue growth
Operating margin
Adjusted operating margin1
Efficiency ratio1,4
Adjusted net income2
Adjusted diluted earnings per share1
Return on equity
Adjusted return on equity1
Return on tangible common equity1,4
Adjusted return on tangible common equity1,4
Net debt to net capitalization3
Annual dividend per share
OPERATING METRICS
Gross loan originations
47,182
49,384
48,696
2,596,153
1,501,916
1,318,622
1,055,676
1,552,679
789,913
887,749
443,512
854,768
332,421
691,062
301,529
48,437
3,302,889
2,229,260
869,688
23.3%
32.6%
36.2%
33.6%
26.6%
34.0%
38.3%
37.2%
7.1%
33.1%
33.1%
-
192,261
174,759
117,646
11.55
17.6%
24.2%
28.4%
36.4%
0.71
3.64
10.43
36.7%
26.2%
50.7%
35.3%
0.65
2.64
7.57
36.1%
31.1%
38.3%
33.0%
0.64
1.80
20.4%
27.7%
27.7%
-
80,315
5.17
20.2%
25.3%
-
-
0.71
1.24
2,377,606
1,594,480
1,033,130
1,095,375
833,779
51,618
26.0%
23.7%
23.7%
-
53,124
3.56
21.8%
21.8%
-
-
0.66
0.90
922,550
307,233
Growth in gross consumer loans receivable
764,355
783,499
136,207
276,854
Net charge-offs as a percentage of
average gross consumer loans receivable
Free cash flows from operations before net growth in gross
consumer loans receivable2
9.1%
8.8%
10.0%
13.3%
12.7%
258,474
260,104
210,619
120,985
95,689
OPERATIONS
Total store count:
easyfinancial
easyhome
Employees
302
154
2,492
294
158
2,394
266
161
2,024
256
163
2,024
241
165
1,821
Notes:
1 These are non-IFRS ratios. Refer to 1) “Key Performance Indicators and Non-IFRS Measures” section on page 43 of the Company’s MD&A year ended December 31, 2022 for FY 22 metric, 2) “Key Performance
Indicators and Non-IFRS Measures” section on page 50 of the Company’s MD&A year ended December 31, 2021 for FY 21 and FY 20 metrics, 3) “Key Performance Indicators and Non-IFRS Measures” section
on page 39 of the Company’s MD&A year ended December 31, 2019 for FY 19 and FY 18 metrics
2 These are non-IFRS measures. Refer to 1) “Key Performance Indicators and Non-IFRS Measures” section on page 43 of the Company’s MD&A year ended December 31, 2022 for FY 22 metric, 2) “Key
Performance Indicators and Non-IFRS Measures” section on page 50 of the Company’s MD&A year ended December 31, 2021 for FY 21 and FY 20 metrics, 3) “Key Performance Indicators and Non-IFRS
Measures” section on page 39 of the Company’s MD&A year ended December 31, 2019 for FY 19 and FY 18 metrics
3 This is a capital management measure. Refer to 1) “Financial Condition” section on page 54 of the Company’s MD&A year ended December 31, 2022 for FY 22 metric, 2) “Financial Condition” section on page 61 of
the Company’s MD&A year ended December 31, 2021 for FY 21 and FY 20 metrics, 2) “Financial Condition” section on page 45 of the Company’s MD&A year ended December 31, 2019 for FY 19 and FY18 metrics
4 Comparable efficiency ratio measure for the years 2018 to 2020 were not published; comparable reported and adjusted return on tangible common equity measures for the years 2018 and 2019 were not
published
Note: Non-IFRS ratios, non-IRFS measures and capital management measures are not determined in accordance with IFRS, do not have standardized meanings and may not be comparable to similar financial
measures presented by other companies
15
15
2022
Highlights
$2.4B
Annual loan
originations
$4.9M
Average loan book
per branch1
37.6%
Total loan
book growth
9.1%
Net charge
off rate
16
16
1 Average loan book per branch is a suppementary financial measure. It is not determined in accordance with IFRS, does not have standardized meanings and may not be comparable to similar
financial measures presented by other companies. It is calculated as gross consumer loans receivable held by easyfinancial branch locations divided by number of total easyfinancial branch locations.
23.3%
Total revenue
growth
10.0%
Adjusted net
income growth2
10.7%
Adjusted diluted
eps growth2
24.2%
Adjusted return
on equity2
2 Adjusted net income is a non-IFRS measure, and adjusted diluted EPS and adjusted return on equity are non-IFRS ratios.
17
17
Environment,
Social &
Governance
Strategy and
Approach
181818
Environment
Committed to
making a positive
difference for our
customers, our
community, and
our world.
As a proudly Canadian company, our purpose
extends beyond profit as we strive to create a
positive impact for our customers, employees,
communities, and shareholders. We aim to
be a socially responsible organization that
is committed to putting our customers
first and improving the lives of those around
us. Providing better tomorrows is not just
something we say. It guides how our teams
operate, the decisions we make and how we
establish the values and policies that govern
our organization’s behaviours and create
long-term value for all stakeholders.
CERTIFIED REFORESTED
429
Reforested
trees in
2022
10.7M
Letter pages
of paper
consumption offset
1280
Trees
reforested since
2021
We are committed to managing our environmental
impacts and minimize our use of natural resources.
We continue to enhance our understanding of
the risks and opportunities that climate change
presents to our business, the global economy,
and the world. We have put several environmental
initiatives into practice over recent years and are
making progress in a few key areas.
Sustainable Paper Policies
In an effort to significantly reduce our paper
consumption, we have
invested heavily
in
multiple digital platforms including an Enterprise
Resource Platform (2020), a Human Resources
Information System (2020) and new intranet
portal (2022).
For the paper that we do use, including printed
posters and brochures across our retail network,
we have partnered with PrintReleaf, a global
platform that uses technology to measure our
paper footprint based on our cumulative printing
volume. PrintReleaf in turn then calculates how
many trees have been harvested to produce the
paper used and automatically reforests them at
sustainable reforestation sites around the world.
In 2022, we reforested over 429 trees and since
joining PrintReleaf in January 2021, we are proud to
have offset the equivalent of 10.7 Million letter pages
of paper consumption by reforesting 1,280 trees.
Energy & Emission Reduction
We continue to take steps to reduce our carbon
footprint and energy consumption through initiatives
that include using LED lighting across our 400+ retail
locations. Over the past year, we have installed only
energy-efficient LED lighting in 25 new stores and
branches. Additionally, we are engaging suppliers
to minimize shipping distance and waste associated
with packaging materials. Based on available data for
92% of our retail footprint, total energy consumption
in 2022 was 12,953,804.77 kWh.
191919
Social
People & Culture
Our people are at the centre of our award-
our employees declare that goeasy is a great
winning culture and our long-term growth
place to work. In 2022, for the second year in
and success. We’ve built a world-class culture
a row, employee engagement remained at an
where our employees can learn, innovate, and
all-time high of 84%, we were named as one
grow their careers in an environment that
of Waterstone Human Capital Canada’s Most
promotes inclusivity and fosters belonging.
Admired Corporate Cultures for the second
We aim to support our team with the tools
time, recertified as a Great Place to Work, as
and resources needed to excel at their jobs,
well as recognized as one of Globe and Mail’s
while providing them with challenging and
Report on Business Canada’s Top Growing
meaningful work that will translate to a career.
Companies. We are also proud to be added
As we continue to build our high-performance
culture and focus on providing our employees
with an unparalleled employee experience, we
are proud to have received several awards for
culture and performance, as well as having
to the Globe and Mail’s annual Report on
Business Women Lead Here list, highlighting
the strength of our diversity and impressive
roster of female leaders, who represent more
than 50% of our organization and more than
20% of the senior executive team.
A Focus on Development, Growth,
and Engagement
Guided by our Leadership Principles, our
obsession with talent development and
career management is supported by a variety
of development programs and platforms
including job-specific training, career coaching,
leadership excellence, sponsorships, LinkedIn
Learning, tuition assistance and support for
external courses. These investments are
supported with semi-annual performance
reviews and comprehensive succession
planning to ensure our talent is ready for
the future.
Our Values
We play
as a team
We operate
with respect
& integrity
We are
relentless in
finding a way
We are
invested in our
communities
We embrace
technology
& innovation
20
Some of the unique programs we have
and support their career advancement.
earn a monetary award for each candidate
designed to support our employees include:
75% of available management positions
who is hired into a Permanent Full-Time or
• “goforum” a proprietary developmental
program to provide career and
life
experiences to top talent. This past year,
we had 17 participants enroll in the
were filled by
internal promotions
in
Part-Time position. In 2022, our employees
2022, highlighting the work that is done to
were successful in referring 327 new
prepare the next generation of leadership
employees and the Company paid out over
from the most frontline positions.
$95K in referral rewards.
program to collaborate with people in
• Free LinkedIn Learning that offers unlimited
• Annual employee engagement survey which
other departments to solve real business
access to industry leading learning and
includes sharing results with employees,
issues, participate in external courses,
development programs with rich content
so they understand what specific feedback
receive personal
career
coaching,
that we are able to assign, push, and track
was collected and how the leadership
psychometric and 360 assessments,
to completion.
intend to use the information to improve the
and learn from senior executives who
participate in the program as sponsors.
• Employee Referral Program for employees
to recommend colleagues who share their
• Manager-in-training programs are designed
commitment to achieving high standards of
to grow employees within our organization
delivering top-quality work. Employees can
goeasy workplace culture.
82%
Of employees agree
that they are doing
meaningful work
83%
Of employees are
proud to tell others
they work for goeasy
85%
Of employees agree
that they can be
themselves at work
84%
Overall
engagement
score
82%
Of employees
agree that they feel
like they belong at
goeasy
84%
Of employees
would recommend
their manager
to others
91%
Of employees agree that
goeasy values diversity
of cultural backgrounds,
personal styles, and lifestyles
among its employees.
21
Putting our
employee’s health
and well-being first
In keeping with our mission to create better tomorrows for
our employees, each year goeasy commits to enhancing
its total rewards offering. This means modifying and
enhancing our incentives, benefits, or perks to align to what
is most important to our employees, and in turn with current
economic and social conditions. In 2022, we were very
pleased to put forward several enhancements including
new family benefits, a one-time financial support bonus to
combat inflation and an employee share purchase program
that encourages and rewards saving while investing and
taking an ownership position in the company
At goeasy, our vision is to provide our customers with a
path towards a better tomorrow, today. Our view towards
our employees is no different, and we continue to invest in
our overall employee benefits and recognition programs
which includes competitive base pay, monthly bonus plans,
quarterly and annual performance and leadership awards,
maternity and parental top up benefits, a RRSP matching
program, virtual medical access, a mental health support
system that is unparalleled, employee assistance program
(EAP), company matched charitable donations, spring
break and summer camp programs for kids of employees,
a sabbatical program, service awards, tuition assistance
programs and access to free financial literacy webinars.
2022 Investments
• One time $250 cost of living bonus to frontline team
members
• The launch of a new Employee Share Purchase Plan,
allowing team members to invest in their company
and receive up to $1,000 in goeasy share matching
annually
• Introduction of a new educational benefit for working
parents’ families through a partnership with Hoot
Reading, the leader in online literacy tutoring, to
give children access to online reading tutoring with
experienced teachers
• Providing discounted access to funds through our
employee loan program
• The launch of Headversity, a wellness app designed
to pre-empt mental illness
• Introducing bereavement leave for miscarriage
• Paid time off for IVF treatment
22
54%
of internal promotions
in 2022 were filled with
employees who identify
as women
52%
of all management
positions are held by
women-identifying
employees
38%
of non-executive
board positions held
by women-identifying
leaders
5%
of our employees
identify as
First Nations, Inuit
or Métis
2,500+
Women have
participated in
goeasy’s Women
in Leadership
Program
27%
Female
representation
in the C-suite
6%
of our
employees
identify as Black
Creating
an inclusive
workplace
through
diversity,
equity, &
inclusion.
At goeasy, we prioritize cultivating and
2022 was a year of expansion for ADE with
maintaining
a work culture where we
two new chapters in Quebec and within the
celebrate who we are, where everyone feels
LendCare business with a focus on equity
seen and heard, and where every employee
of Black Talent.
Here's what we learned:
• ~65% of our employees in Quebec identify
as Black
• ~33% of our employees at LendCare identify
as Black
In 2022, ADE held four events for Black History
Month that covered Career, Black Mental
Health, Black Culture and How Black Culture
influences the world today in terms of Food,
Music, Fashion, and Business with between
200-300 people in attendance at each event.
At the annual goeasy conference they hosted
an event called ‘ADE Network Mixer’ with 100
employees from diverse backgrounds to give
them more info about ADE as well as answer
any questions and suggestions on how they
can increase awareness on topics in relation
to the Black community.
can be the best version of their selves. Since
forming our Diversity, Equity and Inclusion
(DE&I) council in 2021, we continue to listen
to employees and conduct an "I am goeasy"
Personal Demographic Survey annually.
The survey is used to measure our progress
toward being an inclusive organization, by
helping us understand representation, develop
action plans, and report on progress related
to our DE&I commitments to employees. This
information will be used to inform strategies
to improve the work experience of and climate
for everyone.
We have employees from over 78 different
countries of origin, and above average
Canadian representation of members of the
LGBTQ2+ community, members of racialized
groups (visible minorities) and Indigenous
people. We established diversity training for
all leaders and employees to create a culture
of respect and understanding.
We have four Employee Resource Groups,
formed by employees for employees including:
support within goeasy. To move forward,
they acknowledge and honour their history to
engage the goeasy community.
Women in Leadership
Established in 2015, the Women in Leadership
(WIL) employee resource group, supports the
growth of our female colleagues through
learning and development, mentorship, social
and community engagement, and giving
programs to uplift women’s causes. The
mandate of the program is to provide female
leaders at goeasy the opportunity to advance
their careers through growth and learning
opportunities, networking, and exposure to
senior female leaders.
In 2022, goeasy hosted our third annual WIL
Summit attracting over 250 senior leaders
from across Canada for a day of learning
and development supported by a variety of
thought leaders, helping to further extend the
reach and impact of the program. With 52% of
manager positions being held by women and
38% of our non-executive board members
being female, we are extremely proud of the
work we have done to support gender equality
in the workplace. In 2022, our efforts were
recognized as we were awarded placement
on the “2022 Report on Business “Women
Lead Here” list, an annual editorial benchmark
to identify best-in-class executive gender
diversity in corporate Canada.
Pride
According to our internal 2021 demographic
survey, we learned that goeasy has above
average Canadian representation of members
Throughout 2022, ADE hosted Meet &
of the LGBTQ2+ community. The newly formed
Greet sessions on career growth, Black
PRIDE employee resource group is in its
representation, and other topics. These
early stages of development but has already
sessions had an average attendance of
had a positive impact in 2022, by providing
Afro-Canadian Development
and Empowerment (ADE) Committee
CIRCLE
200-300 people.
a safe space for LGBTQ2+ employees to be
themselves. Creating a culture of respect
and understanding has been supported by
Strives to develop and empower all Black
employees and Black allies through the
promotion of racial equity within our
organization.
In 2022, we partnered with Onyx Initiative to
help address the systemic gap in the recruiting
and selecting of Black University and College
students for corporate roles in Canada.
5% of goeasy’s employees identify as First
sharing resources and information around the
Nations, Inuit or Métis, which aligns with
use of pronouns, as well as planned activities
the representation in the overall Canadian
during Pride Month and Diversity Month. To
population and represents a significant
underscore goeasy’s culture of inclusivity
number of our employees. The CIRLCE
and fostering belonging, the Pride committee
employee resource group was developed to
produced a video with the Senior Executive
uplift our Indigenous team in building a safe
Team, sharing personal perspectives on what
space with opportunities for growth and
Pride and allyship means to them.
23
23
Customer
Responsibility
Our mission is to help the more than 8.5 million
Canadians, considered non-prime based on their
credit profile, who have been denied credit by the
banks and other traditional financial institutions
get access to the credit they need to build a better
tomorrow. We are committed to an unwavering
belief
in providing our customers with the
financial tools and education they need to make
sound financial decisions, helping them to reduce
debt, increase their credit score, reduce their
interest rates over time, and graduate to prime
lending rates.
The goeasy customer truly reflects the average
Canadian. While our customers may have a non-
prime credit score, making getting approved
by a traditional bank more difficult, they truly
resemble the typical hard-working consumer that
relies on credit for everyday household needs and
to finance large ticket purchases such as cars,
recreational vehicles, healthcare expenses or
home improvements.
Having served approximately 1.3 million customers,
we have come to know that behind every loan
there is a powerful story. It is the stories of these
everyday Canadians that motivate us to serve our
customers with respect, to make accessing credit
simple and convenient, as well as continuing to
build on our suite of resources and tools to help our
customers take control of their financial future for
today and tomorrow.
24
1IN3
Of our
customers graduate
to prime credit1
60%
Of our customers
increase their
credit score2
1 Prime credit is defined as opening a trade with a prime bank lender within 12 months of borrowing from us.
2 As measured by an increase in TransUnion Risk Score within 12 months of borrowing from us.
"All I knew about my
credit history is that
I need to fix it. On my
first visit, Jennifer
from easyfinancial,
spent over two hours
with me reviewing my
credit report. In just
12 months, my credit
score doubled and I
was able to graduate
to prime rates and
clear up debt.
I wouldn't be where I
am today if it weren't
for Jennifer."
Moncton, NB
goeasy Academy
We offer a complete knowledge centre, available
to all Canadians, with tools and financial literacy
articles covering a wide range of topics to help
develop better money habits through a deeper
understanding of the whole personal finance
ecosystem. Content focuses on best practices
around budgeting, saving, understanding,
maintaining a good credit score and of course,
getting out of debt. goeasy Academy also offers
meaningful tools to aid in the education of
personal financial literacy.
• 30-Day Financial Wellness Challenge
• Credit Score Quiz
Lending Products to Support
our Customers' Journey to
Financial Health
Our mission is to help our customers who
have been denied credit get access to the
credit they need, while also helping them
improve their credit score, and gradually
reduce their cost of borrowing.
• Employee training to help customers
understand their credit report and the
steps to improve their credit score
• Lower rates of interest are offered after a
consistent period of on-time payments
• Debt Consolidation Calculator
• Customers can access financial literacy
• Savings Calculator
• Budget Calculator
Credit Optimizer
We offer customers a unique data-driven
tool that helps them take control of their
finances with a customized plan that can
tools
through goeasy Academy and
manage and improve their credit score
with Credit Optimizer
• We offer a 14-day cooling off period on all
unsecured direct-to-consumer loans
• An optional loan protection plan is offered
to protect customer's loan payments in
the case of unforeseen events such as
unemployment or critical illness
help them improve credit scores and move
• A suite of collections tools designed to
to lower rates. With features that go well
help customers through difficult financial
beyond a basic credit monitoring solution,
periods such as payment deferrals and
Credit Optimizer lets customers set a target
term extensions
credit score and provides them with the
steps they can take to help get there.
In 2022, both easyfinancial and easyhome
won the Feefo Platinum Trusted Service
• Personalized credit improvement plan
Award, an independent seal of excellence,
Data-driven technology that analyses
which recognizes businesses that consistently
individual credit profiles and identifies the
deliver a world-class customer experience.
actions to take to improve credit scores.
Feefo established
the Trusted Service
• Real-time recommendations
Set target credit scores and get real-time
recommendations and personalized debt
analysis to help stay in control of credit.
• Credit monitoring and fraud alerts
Unlimited credit checks that won’t affect
credit scores and real-time email alerts
to help protect from potential threats.
Awards in 2014 to recognise brands that
use the platform to collect verified reviews
and receive exceptional feedback from their
customers. The awards are unique because
they truly reflect an organization's dedication
to providing outstanding customer service by
analyzing feedback from real customers.
In addition, goeasy is accredited by the Better
Business Bureau, goeasy is proud of our A+
BBB Rating.
25
Community
• David Lewis Scholarship Award grants
confidence, and a sense of community. When
$10,000 per year for a child of a goeasy
we met with BGC, we understood how central
With a retail footprint that serves over
employee, totaling $80,000 since 2016
their clubs are to so many young Canadians
85% of Canadians, our connection to the
communities in which we operate is defined
by more than our physical locations. We strive
to be dedicated members of our communities,
which means committing ourselves to make
• DK Johnson community Award grants
$10,000 per year, totaling $40,000 since 2019
• Donations to date of $4.83 million, including
$455.5K in 2022
and their families, and how important it is to be
able to provide regular access to healthy meals
to those who come in. Over the last 10 years,
we have almost built 100 functional kitchens in
all BGC clubs across the country through our
the places we live and work healthier and
• BGC Payroll Deduction and Company
$2.5 million easybites program. Throughout
match donations over $90K in 2022
2023, we will be completing our easybites
more equitable. By donating our time, talents,
and resources, we’re working to make a
difference at home and abroad through our
long-standing charitable partnerships.
• In-kind donations of $35.6K for Toy
Drives, Holiday Hamper and Pounds for
Pumpkins
Along with in-kind donations, we encourage
• Red Cross Donations supporting Ukraine
employees to lend their support in bettering
and Hurricane Fiona relief efforts of $35K
their community, in whatever way they
can. This includes our corporate donation
matching program, as well as offering
employees dedicated volunteer paid time
off so they can contribute their time to many
worthy causes.
• Employee Resource Group fundraising
initiatives of almost $10,000
BGC Partnership
Since our partnership began in 2004, we have
donated over $4 million to BGC Canada in
• 3 dedicated volunteer paid time off days
support of their efforts to provide children and
for employees
youth with safe spaces to develop life skills,
initiative and our commitment to renovating
all 100 hundred kitchens across the clubs. In
2022, our employees and head office continued
our ongoing support of their community-based
activities like food and toy drives as well as
scholarship fund contributions.
Mariam Society
Founding
Sponsor
As an organization, one of our core values
is investing in our communities. For us that
means locally as well as being a good global
“goeasy has been a trusted
partner over the years,
offering support through
the easybites kitchen
renovation program at
Clubs across the country
– thank you for the
generosity when we truly
need it the most.”
Owen Charters
CEO- BGC Canada
26
$4M+ 100%
Donated to date
Overlap with
branch and store
communities
$2.5M
10-year initiative
enhancing a safe and
supportive place for
young Canadians
100
easybites
kitchens
citizen. We exist to serve the underserved and
to offer a dignified pathway to a better future.
In 2022, one of goeasy’s employees shared
her plans to launch a charity with the mandate
of providing funding to send girls in India to
school. We immediately saw the alignment of
our mission and Mariam Society’s endeavour
to empower girls living in poverty, through
education and financial literacy.
Habitat for
Humanity
Beyond our
local communities, goeasy
is always looking outward with a global
vision of making a difference around the
world. Our people are extremely proud
to dedicate their time and effort through
build projects with Habitat for Humanity.
Since that time, we are incredibly proud to have
Since 2015, over 125 goeasy employees
supported the education of over 100 girls as a
have travelled to five countries to help
significant contributor to their path to a better
build homes and infrastructure through
life. We don’t just help with their education; we
our partnership with Habitat for Humanity
also help broaden the financial literacy they
Global Village. While the Global Village
need to help support their families, just like we
program has been on hold due to COVID-19,
do with our customers in Canada.
we continue to support the organization and
What is really special about supporting the
Mariam Society is that we can see first-hand
how transformative our efforts are for these
girls. It becomes personal when we know
their names, see their faces, and hear their
stories. It is even more rewarding to have
supported one of our employee’s in helping to
bring their vision for giving back to life.
look forward to the program's return. We
believe that opportunities like these remind
our employees of how fortunate we are in
Canada and how their contributions can
make significant impact to those in under
developed countries.
125
Employees
27
Homes
5
Countries - Nicaragua,
India, Guatemala,
Cambodia, and Bolivia
18
Smokeless
stoves
27
45
Housing solutions
for families in
extreme poverty
Governance
Governance
Developing and implementing strong governance practices
Developing and implementing strong governance practices
across goeasy is essential to the safe, sustainable, and
across goeasy is essential to the safe, sustainable, and
effective operation of the organization.
goeasy strives to develop and maintain a comprehensive
set of policies, controls and procedures designed to keep
set of policies, controls and procedures designed to keep
the organization secure, while enhancing disclosure and
alignment with shareholders.
Ethical Business Conduct
Board of Director Committees
The Board has adopted a written code
The Board has established three committees
of business conduct (the “Code”) for the
to assist with its responsibilities: the Audit
Corporation’s directors, officers, and employees
Committee, the Human Resources Committee,
that sets out the Board’s expectations for the
and the Corporate Governance, Nominating
conduct of such persons in their dealings
and Risk Committee.
on behalf of the Corporation. The Board has
also established an independent confidential
Audit Committee
hotline to encourage employees, directors,
The Audit Committee oversees the accounting
and officers to raise concerns regarding
and financial reporting practices of the Company
matters addressed by the Code on a
and the audits of the Company’s financial
confidential basis, free from discrimination,
statements and exercises the responsibilities
retaliation, or harassment.
and duties set out in its mandate.
The Audit Committee is currently comprised
of five directors of the Corporation, Karen
Basian (Chair), David Appel, Sean Morrison,
Hon. James Moore, and Jonathan Tétrault,
all of whom are independent. Each member
of the Audit Committee is considered by the
Board of Directors to be financially literate
within the meaning of applicable securities
laws by way of their business experience and
educational background.
Board Composition
& Diversity
goeasy believes in the benefits of diversity,
both on the Board and at the executive level.
The Company has committed to a board
that is diverse in experience, perspective,
education, race, gender, and national origin.
Through the Company’s policy of supporting
and promoting diversity, it looks to identify
and select board members based not only
on the qualifications, personal qualities,
business background and experience of the
candidates, but also the composition of the
group of nominees to bring together a board
that will support goeasy in achieving the
highest level of compliance and performance
for its shareholders.
28
includes but is not limited to salary, bonuses,
includes but is not limited to salary, bonuses,
benefits, equity-based
incentives, share
purchases and other compensation, as
appropriate. Additionally, the Committee
reviews and makes recommendations to the
full Board on all matters pertaining to bonus
plans, salary policy, equity-based incentives
and share purchase plans for all other
employees. The Committee annually reviews
its compensation practices by comparing them
to surveys of relevant competitors and sets
objective compensation based on this review.
Also, as part of its mandate, the Human
Resources Committee
is responsible for
developing and monitoring executive talent
management plans, ensuring that succession
plans are in place for key executive roles.
The Committee will advise to ensure that
management has effective processes in place
to retain key employees, identify and reward
high-potential talent, and adequately address
the organization’s diversity and inclusion
needs in efforts to align the capabilities of
talent with the current and forward-facing
Human Resources Committee
business goals and strategy.
The Human Resources Committee
is
responsible for, among other things, reviewing
and recommending the form and adequacy of
compensation arrangements for directors and
executive officers, having regard to associated
risks and responsibilities. Compensation
The Human Resources Committee
is
currently comprised of four directors of
the Corporation, Tara Deakin (Chair), Karen
Basian, Sean Morrison, and Susan Doniz, all
of whom are independent.
Corporate Governance, Nominating
Corporate Governance, Nominating
and Risk Committee
and Risk Committee
The Corporate Governance, Nominating
The Corporate Governance, Nominating
and Risk Committee is responsible for,
and Risk Committee is responsible for,
among other things, assisting the Board
among other things, assisting the Board
in establishing and maintaining a sound
in establishing and maintaining a sound
system of corporate governance through
system of corporate governance through
a process of continuing assessment and
a process of continuing assessment and
enhancement, as well as enterprise risk
enhancement, as well as enterprise risk
management, which
management, which
includes matters
includes matters
such as: Environmental Social and
such as: Environmental Social and
Governance (ESG) and information security.
Governance (ESG) and information security.
The Committee is also responsible for
The Committee is also responsible for
reviewing any related-party transactions
and implementing yearly Material Interest
Attestations for all Board Members.
The Corporate Governance, Nominating
and Risk Committee is currently comprised
of five directors of the Corporation, Hon.
James Moore (Chair), David Appel, Susan
Doniz, Tara Deakin, and Jonathan Tétrault,
all of whom are independent.
Executive Compensation
Governance and Philosophy
The Human Resources Committee of
the Board has the mandate to establish
and implement the Company’s executive
compensation policies and monitor
its
compensation practices, with the objective
that executive compensation be aligned
to shareholders, market competitive and
fair. The Human Resources Committee is
responsible for reviewing and approving all
responsible for reviewing and approving all
officers’ compensation and equity-based
officers’ compensation and equity-based
compensation plans.
compensation plans.
The Company’s executive compensation
Executive Officer. Performance targets are
policy is designed to incorporate a pay-for-
based on financial measurements agreed
performance philosophy. The philosophy
to by the Board. Each of these elements fits
has been established to encourage and
into the Company’s overall compensation
reward executive officers on the basis
strategy by aligning individual and corporate
of individual and business performance.
performance to business strategies.
Elements of executive officer compensation
includes competitive base wages, short-
term incentives such as bonus plans, and
Enterprise Risk Management
Framework
long-term equity-based incentives such as
The Company has adopted an Enterprise
share options, restricted share units, and
Risk Management Framework to identify
executive deferred share units.
risks across its business operations, rank
The Company’s objective with respect to
its compensation program is to attract,
retain and motivate employees at all
levels to achieve corporate and individual
performance
goals.
The
Company’s
compensation programs are designed to
risks against a 25-point scale (impact and
likelihood) and formulate mitigation plans
for risk that are deemed to be outside the
Company’s accepted risk tolerance. The
formal process occurs quarterly and is
reported to the Board on a frequent basis.
reward individual performance based on
predetermined individual goals as well as
Information Technology and
Cybersecurity
the Company’s financial targets, such as
profitability, and adherence to corporate
values. The Company’s strategy is to align
compensation with corporate objectives
including appropriate risk management and
strategic execution.
The Company chooses to pay each element
of its compensation program in order to
attract, retain and motivate employees
as well as to remain competitive within
the Canadian and U.S. financial services
and retail industries, and to encourage
long-term employment. Equity awards, as
determined by the Board, are based on the
determined by the Board, are based on the
recommendations of the President and Chief
recommendations of the President and Chief
The Company’s business model
is
dependent upon
the successful and
uninterrupted functioning of its computer,
internet, and data processing systems
and,
thus,
it
allocates
appropriate
resources to support its ongoing function
and enhancement. It also relies heavily
on the secure processing, storage and
transmission of confidential and sensitive
customer and other information through
its information technology network. The
Chief Information Officer of the Company
oversees information security, and the Chief
Privacy Officer oversees privacy matters.
Privacy Officer oversees privacy matters.
29
Message from
the Executive
Chairman of
the Board
2022 was another year of
2022 was another year of
significant progress towards our
significant progress towards our
strategy to be the leading provider
strategy to be the leading provider
of credit for over 8.5 million
of credit for over 8.5 million
non-prime Canadians.
non-prime Canadians.
With a loan portfolio that grew to $2.8 billion at
year-end, the team produced a record year of
organic loan book growth, record revenue and
record adjusted earnings.
We continued our multi-year journey to diversify our
business through the addition of new products and
channels, that will combine to accelerate growth
and continue to drive future record earnings. The
record organic loan growth in 2022 of $764 million
provided record revenues of over $1 billion, up
23%. The increased revenues, combined with
increasing scale and operating leverage, also led
to record adjusted earnings. Adjusted operating
income increased 17% to a record $369 million,
adjusted net income increased 10% to a record
$192 million, and adjusted diluted earnings per
share improved 11% to a record $11.55
David Ingram
Executive Chairman of the Board
30
Message from
the Executive
Chairman of
the Board
Change &
Innovation
Over the last 22 years we have built a culture
that embraces change and evolution. From
our first wave of growth with rebranding the
entire company to easyhome in 2003, to the
conception and launch of easyfinancial in 2006
that fueled the second wave of growth and to
the highly accretive acquisition of LendCare,
we have solidified our strategy to be a one-stop
source of credit for non-prime Canadians. Our
long track record of success is rooted in looking
to capture opportunities in the market and
finding ways to diversify, while aggressively
executing a test and learn approach to find
scalable products. Since 2017 we have been
executing on our third wave of growth, moving
from a single priced loan product to a wide
range of risk adjusted interest rates and 7
lending products that provide credit to meet
all the needs of the non-prime consumer. We
have also expanded our distribution channels,
growing from our first branch in 2006, then
developing a market leading digital platform
that produces nearly 40% of our application
volume, and with the benefits of LendCare, we
now have 6,500 merchants where we offer
automotive and point-of-sale financing giving
us nearly 7,000 points of contact. Our journey
has been one of a relentless drive to hire the
best talent, develop and test new ideas, and then
execute them with efficiency and effectiveness.
Tenure, credentials, and experience don't
substitute for results, our team understands
they are not rewarded to pace themselves or
budget their effort. In a rapidly changing world
with economic uncertainty and regulatory
changes, we are very well positioned to thrive
and adapt. Executing this strategy has resulted
in the weighted average interest rate charged
to consumers declining from 47% to 30%, as
we have passed on the benefits of scale to
our customers. As a result of these efforts, we
remain committed to produce record earnings
for many years into the future.
Growth-Focused
Since 2001 we have compounded revenue
growth at 14% and adjusted net income growth
at over 30%. The track record of our Company
is a direct result of a growth mind-set, and a
drive to be the leader in our industry. In 2022
the management team embarked on an
accelerated growth plan, with organic growth
rising to a level that was double our prior
highest year. Management's discipline to “test
and learn” as we build and develop products
gives the Board great confidence in the team’s
ability to continue its industry leading growth
trajectory. The strong level of organic growth
in 2022 led to an equity financing late in the
year, which was necessary to ensure we had
the appropriate capital and leverage profile to
continue our momentum. Despite raising equity
at a share price multiple below the long-term
historical average, it proved to be the best capital
management decision, as organic growth
remains our priority use of capital and very
accretive to the future earnings of the company.
Management continued to seek strategic
investments that will produce
long term
commercial benefits and potentially serve as
future growth engines. Over the last 22 years we
have invested over $400 million in M&A related
transactions, collectively producing in excess
of a 50% return to date, with future benefits
still to accrue. Whether we are designing new
products or developing the financial model for a
new investment concept, we consistently build
our thesis around delivering a 20%+ return on
equity for all investments.
In Closing
team
On behalf of the board, I want to thank the
management
for another year of
executing a plan to achieve record loan book
growth and record adjusted earnings. Under
Jason's leadership and intelligent direction and
the executive leadership team, we are proud to
have assembled a team of over 2,400 ambitious
colleagues, who are passionate about serving
our customers and delivering on the mission of
our organization in making "Better tomorrow's,
Today" Their drive to consistently produce
record results, while making a difference in
the lives of our customers as they embark on
their journey to rebuild their credit inspires
us. My time with the company, which now
spans more than 22 years, has seen our
organization
through multiple phases of
growth and evolution. We’ve been through
ups and downs, managed through five major
market corrections and made a few mistakes.
However, through it all we have always tried to
lead by personal example rather than personal
convenience, and we have always worked to
succeed rather than work to survive. We are
relentless in finding a way. It is the strength,
creativity, determination, and resilience of our
team that has helped produce total shareholder
return of over 15,000% making us the top
performing financial Company on the TSX for
the last 22 years. But despite any success its
humbling to recognize that we still only occupy
less than 2% of a large and underserved $200
billion market. As Jason has said, we are truly
just getting started and have so much more
work to do!
David Ingram
Executive
Chairman of
the Board
31
2022 Annual
Letter to
Shareholders
Shareholders
2022 truly highlighted
2022 truly highlighted
the growth potential of
the growth potential of
our business and the
our business and the
resilience of our team.
resilience of our team.
Despite the challenging environment, including
Despite the challenging environment, including
high inflation, rising interest rates and turbulent
high inflation, rising interest rates and turbulent
capital markets, goeasy produced record results.
capital markets, goeasy produced record results.
Once again, the ability of our Company to adapt and
Once again, the ability of our Company to adapt and
respond to the rapidly changing world around us,
respond to the rapidly changing world around us,
enabled the organization to thrive, grow market
enabled the organization to thrive, grow market
share and achieve all our commercial targets
share and achieve all our commercial targets
during the year. In addition to producing record
during the year. In addition to producing record
growth, stable credit performance and record
growth, stable credit performance and record
normalized earnings, the ongoing evolution of our
normalized earnings, the ongoing evolution of our
business has made the organization stronger and
business has made the organization stronger and
better prepared for the future.
better prepared for the future.
Jason Mullins
Jason Mullins
President & Chief Executive Officer
President & Chief Executive Officer
32
32
Record Results
As a result of business initiatives developed over the
preceding years, origination levels in 2022 accelerated
to nearly $2.4 billion. The 50% increase in origination
volume resulted in nearly doubling the previous year’s
level of organic loan growth, with a net increase in
the loan portfolio of $764 million. Our core unsecured
loan product, home equity lending, powersports and
automotive financing, produced most of the growth. The
year closed with a portfolio just shy of $2.8 billion, up
38% over the prior year. Revenue in 2022 crossed $1
billion for the first time in our Company’s history.
We also delivered another year of stable credit
performance with a net annualized charge off rate of
9.1%, directly in line with our target range. As we continue
to invest in AI, machine learning, and data analytics,
our capability to monitor, measure and design credit
strategies that accurately predict and produce the desired
credit outcomes, continues to strengthen every year.
We also focussed on operational efficiencies that produced
operating leverage during the year. With a rising interest
rate environment, and a strategy to lower the cost of
borrowing for our customers, it is imperative that we
sweat our cost structure. In 2022, our efficiency ratio –
operating expenses as a percentage of revenue – declined
from 37.2% to 33.6%, improving nearly 400 basis points.
After normalizing for unrealized losses associated to our
investments and non-recurring expenses, adjusted net
income was a record $192 million, up 10%, while adjusted
diluted earnings per share increased to $11.55, up 11%.
As mentioned, we experienced a significant increase in
the organic loan growth of the portfolio, which requires
an accounting provision for future credit losses to be
incurred. With a year over year increase in organic loan
growth of $425 million, we incurred an incremental
pre-tax loan loss provision of $29 million compared to
the prior year, impacting net income by approximately
$21 million and diluted earnings by over $1 per share.
This organic growth is highly accretive and will help fuel
earnings growth into the future.
Adjusted return on assets for the year was 6.6%,
leading to adjusted return on equity of 24.2%, above our
targeted level of return. The strong earnings growth
also enabled us to lift the dividend to $3.84 per share,
our 9th consecutive annual increase.
3333
Strategic
Initiatives
We also made significant progress against
our strategic initiatives, highlighted by the
expansion of automotive financing, increasing
efficiency in our branch network, and the
development of our new consumer facing
retail and call centre operations. This included
market, provide accesses to new customers,
a digital communications platform, digital
and extend the life of our existing customer
employee training software, a new call centre
relationships. By offering a suite of lending
telephony solution, and business intelligence
solutions that serve a wider set of needs
dashboards for frontline staff. Combined,
for the 8.5 million Canadian non-prime
these tools lifted the loan origination volume
consumers, we can build a bigger business
per employee in our branch and call centre
and serve a greater portion of the demand
network by 20% in 2022.
for consumer credit.
mobile app, which will launch this year.
goeasy Connect
Automotive Financing
At nearly $60 billion, automotive financing
is the single largest product category in the
non-prime consumer credit market. In this
category we compete on five key elements:
our approval rates, loan offers (size and rate),
dealer commissions, speed of decisioning
and merchant support. In 2022, an additional
660 used car dealerships began offering our
financing solution, which expanded our network
to over 2,400 dealers by year-end, while our
automotive financing portfolio grew 2.5x during
the year, finishing at over $250 million. With over
8,000 used car dealerships across Canada, we
are making great progress toward our goal of
becoming the number one non-prime, non-bank
automotive financing business in the country.
Productivity & Efficiency
We also executed several projects designed to
improve productivity and efficiency within our
By year-end, we also neared the completion
of our new consumer mobile app, “goeasy
Connect”. Through this new digital platform,
customers and prospects will be empowered
to browse our entire suite of lending products,
receive personalized loan offers, access their
credit score, and connect directly to an agent for
support. We believe goeasy Connect will truly
empower non-prime Canadians, by enabling
them to carry credit in their pocket - removing
the barriers, stress, and inconvenience of the
typical borrowing experience.
Evolution of
the Business
Since 2017 our strategy has been guided by
expanding our product range and channels
of distribution. As new products and point-
of-sale financing verticals are developed
and mature, they increase our addressable
Moreover, in addition to fueling an increase
in earnings, the growth and evolution of
the business has significantly improved
the capacity of our Company to withstand
changes
in macro conditions, such as
deterioration in the economy and the recently
announced regulatory changes. In building
a company that can thrive for generations,
improvements that increase sustainability
and defend against extraneous factors are
incredibly valuable.
Prepared for
Economic Challenges
In our investor materials, we lay out the
many reasons why non-prime consumers
are significantly more resilient through
economic cycles than most expect. These
characteristics include carrying lower levels
of debt than prime borrowers (~55% less
debt) and lower levels of home ownership
(<20% own homes), thereby reducing their
34
exposure to interest rates and real estate.
affordability, resembling the same approach
After years of futureproofing the business,
In addition, over the past several years the
we take to unsecured lending. However,
we are well prepared to adapt. A key element
business has evolved in a manner that even
when the loans are secured by real estate,
of our strategy has been to reduce the overall
further prepares us to withstand economic
automobiles
or
recreational
vehicles,
weighted average interest rate charged to
stress, increasing confidence that we can
the existence of a hard asset that can be
our customers over time. Whether a result
continue our long track record of stable credit
surrendered in the event of default, results in
of gradually lowering the price of credit as
performance. Over the course of 2021 and
meaningfully lower credit losses – at almost
reward for on-time payments or qualifying
2022, we made a number of proactive credit
half the rate of an unsecured loan issued to
a customer for a lower priced loan product,
and underwriting enhancements. These
the equivalent borrower.
adjustments were designed to “tighten” credit
the weighted average interest rate charged to
our borrowers has reduced from ~45% five
and improve the quality of future originations
Adapting to Regulatory Changes
years ago, to ~30% today. At the core of our
by raising our minimum credit tolerance
or adjusting the required loan affordability
ratios, specifically the debt-to-income and
payment-to-income required to be granted a
loan. With a loan portfolio that has an average
life of approximately 24 months (much
shorter than the actual term of the loans), our
credit and underwriting modifications can
affect as much as 50% of the business within
as little as 12 months. The quick turnover
rate of the portfolio presents a material
advantage for managing credit, especially if
we can spot signals in the data, or broader
marketplace, and then act quickly enough.
Furthermore, we have continued to increase
the proportion of secured lending volume,
which increased from 12.5% of our loan
portfolio entering 2021, to over 40% today.
Secured loans to non-prime borrowers are
always written on the basis of credit and
In the recent 2023 budget, the federal
government announced
its
intention to
reduce the maximum allowable rate of
interest that can be charged from 47% to
35%. While the change will reduce access
to credit for an estimated 4.7 million
Canadians, we believe it will benefit goeasy
and those with scale in the long term.
Organizations with less scale and higher
funding costs, will inevitably find it very
difficult to compete within a lower rate
environment. Moreover, it will prove to be
incredibly challenging for new entrants,
raising the barrier to entry. The net result
will lead to a greater share of market for
goeasy, reduce the future regulatory risk,
and produce a portfolio with lower APR’s
and credit losses – characteristics that have
proven to be appealing for investors and
creditors alike.
strategy has been the long-term benefits of
reducing pricing for consumers, which in turn
provides them access to larger loans, longer
terms, lowers credit risk and extends the life
of our customer relationships. As a result,
only 36% of our loan portfolio is currently
priced above the future allowable rate.
In response, we are deploying a suite of
business initiatives designed to mitigate the
impact from the reduced maximum allowable
rate, so that we can continue to serve as
many non-prime Canadians as possible and
deliver comparable results to our previous
plan. These include adjusting pricing, seeking
ways to accelerate growth, and productivity
initiatives to increase operating efficiency, all
of which are possible in a less competitive
environment. Together, we are confident we
will continue to grow annual earnings to
record levels and be better off in the future.
35
Capital
Allocation
Capital is always limited - by either the
amount of available liquidity or the amount
that can be reasonably deployed due to
the impact on financial leverage. First, the
amount of available liquidity (cash on hand
and undrawn available debt) at a given time,
will naturally influence how we allocate
capital, as it forces a prioritization of where
dollars are deployed. Secondly, to ensure
sufficient access to debt at the most cost-
effective level possible, we must ensure the
business is appropriately levered, as this
is a key consideration for debt holders and
the rating agencies that assess the financial
risk of the Company. Therefore, even if we
have the liquidity to invest, the growth in our
book equity often sets the pace.
As we have outlined before, we first prioritize
capital toward organic loan growth, as it
generates the highest return on investment,
often with the greatest degree of certainty
and lowest level of risk. Next, we invest in
business initiatives, including developing
new systems, building new products and
developing channels that will fuel the future
intrinsic value. As we entered the second
organic growth of the organization. These
quarter of 2022 however, circumstances
initiatives are often constrained by the
changed. Increasing consumer demand,
operational capacity of the organization,
reduced levels of competition and the
more than the willingness or capacity to
performance of internal business initiatives,
invest. Alongside investing in the business
culminated to produce a meaningful lift
to develop new revenue sources, we will
in originations and loan growth. As such,
also consider investing in other businesses,
the organic growth began to consume all
including outright acquisitions, provided
available capital. When growth accelerates,
these investments are accretive to our per
it also creates an immediate and material
share earnings and add strategic value.
impact on financial leverage. Not only do
In the event the business has sufficient
we incur the associated debt immediately,
access to capital to fund its organic growth
but the cash inflows also take time to
outlook, more specifically the free cash
materialize, and we incur an upfront loan
flow from operations covers produces the
loss provision expense. When combined
necessary equity component of our organic
with the cost of marketing and origination
loan growth, then we will return capital
expenses, a loan is not accretive for more
to shareholders. Capital is returned to
than 9 months.
investors in the form of a regular dividend,
at a payout ratio of approximately one third
of our prior years’ earnings.
The growth in 2022 was elevated such that
by year-end, we were bumping up against
a level of financial leverage (on a debt-to-
In late 2021 and first quarter of 2022, our
equity basis), requiring us to either issue a
business was performing well, and we were
small amount of new equity, or slow down
producing excess capital beyond the level
our loan growth. As we carefully examined
needed to fund organic growth, business
and modelled the choices, it was clear that
initiatives and our existing dividend. As such,
issuing equity was going to be the best
we were actively repurchasing our shares,
financial decision, due to the accretive
as we felt they were trading below their
nature of the organic growth.
36
36
credit needs of our customers over the
Preserving Capital
Measuring
Profitability
It is important for investors to understand
which specific financial metrics we use when
designing our loan products. While we look at
financial performance from many different
vantage points, two of the most important
for optimizing economic objectives, are i)
the annualized returns of a given portfolio of
loans, and ii) the lifetime value of a customer.
Annualized Portfolio Returns
long term. We measure LTV as Lifetime
Revenue (average number of loans over the
customer’s life x average life of each loan x
average balance outstanding x average total
yield) minus Lifetime Expenses (average cost
to acquire + average cost to originate each
loan + average cost to service/collect each
loan + average net credit losses + required
cost of capital). In executing our business
strategy, we have clearly observed that as
we expand the number of products available
(meeting a wider set of financing needs)
and gradually reward customers with lower
We first start with the requirement that each
rates of interest, our customers repay more
product or channel needs to deliver at least
consistently and turn to us as a trusted source
a 20%+ annual return on equity. Producing
of credit more often, ultimately increasing
As noted earlier, in 2022 we both repurchased
shares and then later issued equity. Clearly
this is not an optimal management of our
capital. As was explained, we made decisions
that based on the information available at the
time, were in the best interest of the business.
However, we also subsequently proved that
if our strategic initiatives performed well,
general market demand could support a level
of organic growth beyond our expectations,
putting temporary pressure on our leverage
profile. As such, it may be prudent in the
future to generate and hold excess capital in
reserve, rather than returning as much as we
did to shareholders.
a strong return on equity is essential to
the LTV. Since beginning to execute our risk
No Endless Rescue Missions
competing for
investment against other
based pricing and multi-product strategy, our
high performing financial stocks including
customer LTV has lifted by over 30%.
the bank sector. With approximately 30% of
the business funded by equity, this means
our consumer loan portfolio must produce
after tax returns of a minimum of 6%, or
approximately 8.5% on a pre-tax basis. From
the target 8.5% pre-tax return, we need to
cover the cost of capital, operating expenses
and credit losses from the gross yield earned
on the loans. While each product and lending
vertical needs to deliver the same minimum
target net return, they all produce that result
in a different manner. An unsecured loan
in a different manner. An unsecured loan
portfolio produces higher annual gross yields,
portfolio produces higher annual gross yields,
but also produces higher loan losses and a
but also produces higher loan losses and a
If we can produce attractive and portfolio
returns, while increasing the lifetime value of
each customer we acquire, we maximize the
long-term earnings of the Company.
Lessons
Learned
With every year that passes we learn more
about our business. By acknowledging that
we can always be better, we can reflect on
we can always be better, we can reflect on
our experiences and improve our decision
our experiences and improve our decision
making in the future. During the year we
making in the future. During the year we
greater level of operating expenses, such as
greater level of operating expenses, such as
evolved our thinking in two key areas:
evolved our thinking in two key areas:
Late in 2022 we decided to terminate our
agreement with a technology vendor that
had been developing a new lending platform
for our easyfinancial business. This was the
first major technology project that we failed
to deliver in over 23 years. While the decision
was the right one for all stakeholders, it
could have been made sooner. When you
run a high-performance culture, fueled by
execution oriented and results driven people,
you are susceptible to falling into endless
rescue missions. If a business initiative isn’t
working, we need to pull the plug as soon the
working, we need to pull the plug as soon the
hard truth presents itself.
hard truth presents itself.
marketing, origination, and servicing costs.
marketing, origination, and servicing costs.
By comparison, a secured loan portfolio
By comparison, a secured loan portfolio
produces a lower level of annual gross
produces a lower level of annual gross
yields, but with much lower credit losses and
yields, but with much lower credit losses and
operating expenses. While there are certain
operating expenses. While there are certain
products that produce higher returns than
products that produce higher returns than
others, which inherently encourages us to
others, which inherently encourages us to
prioritize how we allocate capital between
prioritize how we allocate capital between
them, all products are designed to meet the
them, all products are designed to meet the
minimum desired hurdle rate.
Customer Lifetime Value
Another key measure of profitability is the
Another key measure of profitability is the
lifetime value of a customer (LTV). This lens
lifetime value of a customer (LTV). This lens
is critical, as it looks past the economics
is critical, as it looks past the economics
of a single loan or annual period of time,
of a single loan or annual period of time,
and rather at how well we are fulfilling the
and rather at how well we are fulfilling the
37
37
The
Future
With only 1.5% share of the large and underserved $200
billion non-prime consumer credit market today, we are
incredibly excited about the future. The macro economic
conditions and regulatory changes will in fact only serve
to create more opportunity for goeasy – leading to a larger
and more profitable business. In just the first few months
of 2023, the proportion of credit we advanced to new
customers was higher than any other quarter in the last
five years, a strong signal that our strategy is resonating,
and that we still have millions more borrowers to serve.
As we have said many times before, we still feel like a small
company in the early stages of our growth journey. Many of
our product lines, such as automotive financing and point
of sale lending, are in the early stages of development. We
believe our new consumer facing mobile app, which will
provide access to all our products in one simple digital
interface, will transform the way non-prime consumers
obtain credit. Lastly, we have still yet to fully monetize
our platform by exposing all the pre-approved credit
offers available to our customers. As we continue to scale
our business and multiply the loan portfolio, we remain
committed to continuing our multi-decade track record of
generating industry leading returns for our shareholders.
In closing, I want to thank the entire team for their
unwavering commitment to our vision. The 2,400 team
members across goeasy are smart, hungry, and humble.
They care deeply about providing an exceptional experience
for our customers and improving their financial health.
They work tirelessly to make our organization successful
and to ensure the 8.5 million non-prime Canadians have
access to a trusted and reliable source of credit to finance
their life. Together, we are on a mission to be the largest and
best performing non-prime consumer lender in Canada.
We are truly just getting started.
Jason Mullins
38
Table of
Contents
Management’s Discussion and Analysis of Financial Condition and Results of Operations ....................................... 40
Caution Regarding Forward-Looking Statements.......................................................................................................... 41
Overview of the Business ...................................................................................................................................................... 42
Corporate Strategy .................................................................................................................................................................. 44
Outlook........................................................................................................................................................................................ 46
Analysis of Results for the Year Ended December 31, 2022 ....................................................................................... 48
Selected Annual Information................................................................................................................................................ 56
Analysis of Results for the Three Months Ended December 31, 2022...................................................................... 57
Selected Quarterly Information ........................................................................................................................................... 64
Portfolio Analysis..................................................................................................................................................................... 65
Key Performance Indicators and Non-IFRS Measures.................................................................................................. 72
Financial Condition .................................................................................................................................................................. 81
Liquidity and Capital Resources .......................................................................................................................................... 82
Outstanding Shares and Dividends..................................................................................................................................... 84
Commitments, Guarantees and Contingencies ............................................................................................................... 85
Risk Factors............................................................................................................................................................................... 86
Financial Instruments............................................................................................................................................................. 94
Critical Accounting Estimates .............................................................................................................................................. 94
Changes in Accounting Policy and Disclosures............................................................................................................... 94
Internal Controls ...................................................................................................................................................................... 94
Management’s Responsibility for Financial Reporting .................................................................................................. 96
Independent Auditor’s Report .......................................................................................................................................... 97
Audited Consolidated Financial Statements ................................................................................................................. 100
Corporate Information..................................................................................................................................................... 146
39
Management’s
discussion
and analysis
of financial
condition
and results
of operations
For the year ended
December 31, 2022
40
Management’s discussion and analysis of financial
condition and results of operations
Date: February 15, 2023
The following Management’s Discussion and Analysis (“MD&A”) presents an analysis of the consolidated financial condition of goeasy
Ltd. and its subsidiaries (collectively referred to as “goeasy” or the “Company”) as at December 31, 2022 compared to December
31, 2021, and the consolidated results of operations for the three-month period and year ended December 31, 2022, compared with
the corresponding periods of 2021. 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, 2022. 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 consolidated 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, statements with respect
to forecasts for growth of the consumer loans receivable, annual revenue growth forecasts, strategic initiatives, new product
offerings and new delivery channels, anticipated cost savings, planned capital expenditures, anticipated capital requirements and the
Company’s ability to secure sufficient capital, liquidity of the Company, plans and references to future operations and results, critical
accounting estimates, expected future yields and net charge off rates on loans, the estimated number of new locations to be opened,
the dealer relationships, the size and characteristics of the Canadian non-prime lending market and the continued development of the
type and size of competitors in the market. 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 “expect”, “continue”, “anticipate”, “intend”,
“aim”, “plan”, “believe”, “budget”, “estimate”, “forecast”, “foresee”, “target” 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. 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. Some important factors that could cause actual results to differ materially from those
expressed in the forward-looking statements include, but are not limited to, goeasy’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, offer 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, compete, manage 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. These and other factors could cause actual results to differ
materially from our expectations expressed in the forward-looking statements, and further details and descriptions of these and
other factors are disclosed in this MD&A, including under the section entitled “Risk Factors”.
The reader is cautioned to consider these, and other factors carefully and not to 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.
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Overview of the Business
goeasy Ltd. is a Canadian company headquartered in Mississauga, Ontario, that provides non-prime leasing and lending services
through its easyhome, easyfinancial and LendCare brands. Supported by more than 2,400 employees, the Company offers a wide
variety of financial products and services including unsecured and secured instalment loans, merchant financing through a variety
of verticals and lease-to-own merchandise. Customers can transact seamlessly through an omnichannel model that includes online
and mobile platforms, over 400 locations across Canada, and point-of-sale financing offered in the retail, powersports, automotive,
home improvement and healthcare verticals, through approximately 6,500 merchant partners across Canada. Throughout the
Company’s history, it has acquired and organically served approximately 1.3 million Canadians and originated approximately $10.1
billion in loans.
With 32 years of leasing and lending experience, goeasy has developed a deep understanding of the non-prime Canadian consumer.
Of the 30.4 million Canadians with an active credit file as at December 31, 2022, 8.5 million had credit scores less than 720 and
are deemed to be non-prime, up from 8.2 million in 2021 due to the normalization of consumer credit scores following the end of
government-supported stimulus and a recovery in consumer spending. Collectively, these Canadians carry $193.6 billion in non-
mortgage credit balances, up from $186.6 billion in 2021, and represent the Company’s target market. These consumers, many of
which are unable to access credit from banks and traditional financial institutions, turn to goeasy as a reliable source of consumer
credit for everyday financial needs. goeasy aspires to help non-prime customers rebuild their credit and put them on a path to a
better financial future. By graduating customers to progressively lower rates of interest in response to on-time payment behaviour,
and eventually helping them graduate back to prime lending, goeasy is uniquely positioned to deliver on its vision of providing
everyday Canadians a path to a better tomorrow, today.
goeasy funds its business through a combination of equity and a variety of debt instruments, including a US$550 million senior
unsecured note, a US$320 million senior unsecured note, and a $270 million revolving credit facility. In addition, the Company has
a revolving securitization warehouse facility of $1.4 billion, underwritten by a broad syndicate including five of the major Canadian
banks. In December 2022, the Company also entered into a new $200 million revolving securitization warehouse facility, underwritten
by one of its large bank partners. The Company remains confident that capacity available under its existing funding facilities, and its
ability to raise additional debt financing, is sufficient to fund its organic growth forecast. goeasy’s senior unsecured notes payable
are rated BB- and Ba3, with a stable trend, by the Standard and Poors and Moody’s rating agencies, respectively. goeasy’s common
shares (“Common Shares”) are listed for trading on the Toronto Stock Exchange (“TSX”) under the trading symbol “GSY”.
Accredited by the Better Business Bureau, goeasy is the proud recipient of several awards in recognition of its exceptional culture
and continued business growth including Waterstone Canada’s Most Admired Corporate Cultures, ranking on the 2022 Report
on Business Women Lead Here executive gender diversity benchmark, placing on the Report on Business ranking of Canada’s
Top Growing Companies, ranking on the TSX30, Greater Toronto Top Employers Award and has been certified as a Great Place
to Work®. The Company is represented by a diverse group of team members from 78 nationalities who believe strongly in giving
back to communities in which it operates. To date, goeasy has raised and donated over $4.8 million to support its long-standing
partnerships with BGC Canada, Habitat for Humanity and many other local charities.
Reportable segments
For management reporting purposes, the Company has two reportable segments: easyfinancial and easyhome. The Company
aggregates the operations of its easyfinancial and LendCare brands into one reportable segment called easyfinancial, on the basis
of their similar economic characteristics, customer profile, nature of products, and regulatory environment. Refer to the Company’s
audited consolidated financial statements and the related notes for the year ended December 31, 2022, for further details.
Overview of easyfinancial
In 2006, easyfinancial, the Company’s non-prime consumer lending segment began operating with the goal of bridging the gap
between traditional financial institutions and costly payday lenders. In 2021, the Company acquired LendCare Capital Inc., a Canadian
point-of-sale consumer finance and technology company. The Company’s consumer lending segment is a leading provider of non-
prime credit in Canada and operates through both the easyfinancial and LendCare brands.
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Historically, consumer demand for non-prime loans in Canada was satisfied by the consumer-lending arms of several large, international
financial institutions. Today, traditional financial institutions are generally unwilling or unable to 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 history. For this reason,
demand in this market is met by a variety of industry participants who offer diverse products including auto lending, credit cards,
instalment loans, retail finance programs, small business lending and real estate secured lending. Generally, industry participants have
tended to focus on a single product rather than providing consumers with a broad integrated suite of financial products and services. As
a result, easyfinancial is one of a small number of national companies focused on serving the entire non-prime credit spectrum.
The business model of easyfinancial is based on lending out capital in the form of unsecured and secured consumer credit
primarily to non-prime borrowers who are generally unable to access credit from traditional sources such as major banks. The
Company originates loans up to $100,000 with rates between 9.9% and 46.9%, which are fixed payment instalment products. When
a loan is secured, the collateral provided by the borrower may include residential property, an automobile, a recreational vehicle
or personal property. All payments made by borrowers are reported to credit reporting agencies to help customers rebuild their
credit. easyfinancial also offers a number of optional ancillary products including a customer protection program that provides
creditor insurance, a home and auto benefits product which provides roadside assistance, a gap insurance product which covers
buyer and lender from any shortfall in cases of total loss insurance claims, warranty coverage on select financial products, and a
credit monitoring and optimization tool that helps customers understand the steps to take to rebuild their credit.
The Company charges its customers interest on the money it lends and may also receive a commission for the sale of optional
ancillary products offered through third party providers. The interest, additional commissions and various fees, collectively
produce the total portfolio yield the Company generates on its loan book. The Company’s total portfolio yield, relative to its cost of
capital and loan losses, is a key driver of profitability.
As a lender, the Company expects to incur credit losses related to those customers who are unable to repay their loans. Given
the higher credit risk of non-prime borrowers, credit losses are reflective of the higher rates of interest charged. The Company’s
custom credit and underwriting models allow it to set the level of risk it is willing to accept. The Company could take less credit
risk and reduce its loan losses, but it would come at the expense of profitable volume. Likewise, the Company could accept more
risk to drive greater growth and profitability, but it would come with higher credit losses and have potential impacts on the cost
and availability of access to capital. Ultimately, the Company’s objective is to optimize investment returns and operating margins
by striking the right balance between origination velocity (the applicants it approves) and the loss rate of the portfolio.
The Company offers its products and services through an omnichannel business model, including a retail branch network, digital
platform, merchant partners and indirect lending partnerships. The Company had 302 easyfinancial locations (including 2 kiosks
within easyhome stores and 3 operations centres) in 10 Canadian provinces as at December 31, 2022. In addition to its retail branch
network, customers can also transact online, which remains a critical source of new customer acquisition. The Company also
originates loans through its point-of-sale channel, which includes approximately 6,500 merchant partners across Canada.
Although the Company leverages multiple acquisition channels to attract new customers, of the majority of its loans are managed
through its local branches. Through many years of experience in non-prime lending, the Company believes that an omnichannel model
optimizes customer acquisition, loan performance and profitability, while providing a high-touch and personalized customer experience.
The customer loyalty developed through these direct personal relationships with higher risk borrowers, extends the length of the
customer relationship and improves the repayment of loans, which ultimately leads to lower charge offs and higher lifetime value.
In addition to its unique omnichannel model, the Company also differentiates itself through its customer experience and specifically the
journey of providing customers a path to improving their credit and graduating back to prime borrowing. This is done through the Company’s
broad product range, which provides customers with progressively lower interest rates, ] free financial literacy literature and tools and
services that help them better understand and manage their credit score. Whether a customer is looking to establish, repair, build or
strengthen their credit profile by borrowing funds, purchase an automobile or recreational vehicle or using the equity in their home to
secure a larger loan for a home renovation or repair, easyfinancial can provide a lending solution that best serves their individual needs.
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Through its many years of experience and a disciplined approach to growth and managing risk, easyfinancial has demonstrated a history
of stable and consistent credit performance. Since implementing centralized credit adjudication in 2011 in easyfinancial, the Company
has successfully managed annualized net charge off rates within its stated target range consistently during each year of its operations.
Lending decisions are made using custom credit and underwriting models that are constructed using the latest statistical and machine
learning techniques and data sources to optimize the balance between loan volumes and credit losses. These models have been
developed and refined over time by leveraging the accumulation of extensive customer application, demographic, borrowing, repayment
and consumer banking data that determines a customer’s creditworthiness, lending limit and interest rate. These models improve the
accuracy of predicting default risk for the non-prime customer and are 200% more predictive when compared to a traditional credit score.
Credit risk is further enhanced by industry-leading underwriting practices that include pre-qualification, credit adjudication, affordability
calculations, centralized loan and document verification, and repayment by the customer via electronic pre-authorized debit directly
from the customer’s bank account on the day they receive their regularly scheduled income. The Company also requires supporting
documentation for all of its successful applicants who take out a direct-to-consumer loan. Through the Company’s proprietary custom
scoring models, coupled with the personal relationships its employees develop with customers at its branch locations, the Company
believes it has found an optimal balance between growth and prudent risk management and underwriting.
Overview of easyhome
easyhome, is Canada’s largest lease-to-own brand and has been in operation since 1990 offering customers brand-name household
furniture, appliances and electronics through flexible lease agreements. In 2022, easyhome accounted for 15% of consolidated
revenue (2021 – 18%) and leasing revenue accounted for 73% of easyhome revenue (2021 – 80%).
Through its 154 locations, which includes 34 franchise stores or through its eCommerce platform, Canadians turn to easyhome as an
alternative to purchasing or financing their goods. With no down payment or credit check required, easyhome offers a flexible solution
that helps consumers get access to the goods they need, with the flexibility to terminate their lease at any time without penalty.
In 2017, easyhome began offering unsecured lending products. As at December 31, 2022, there are 117 easyhome locations
offering unsecured loans to its customers. This expansion allowed the Company to further increase its distribution footprint for its
financial services products by leveraging its existing real estate and employee base. This transition has enabled easyhome stores
to diversify its product offering and meet the broader financial needs of its customers.
In 2019, easyhome began reporting customer’s lease payments to the credit reporting agencies as a way to further enhance its
vision of providing its customers with a path to a better tomorrow, today. With every on-time lease payment, easyhome customers
can now build their credit and ultimately use the easyhome transaction as a steppingstone into other financial products and
services offered by easyfinancial.
Corporate Strategy
The Company has developed a strategy based on four key strategic pillars. These priorities have remained consistent since 2017
and align to the Company’s strategic initiatives, as it furthers its vision of becoming the single source of credit for non-prime
consumers. In addition to providing access to responsible financial products, the Company aims to help their customers improve
their credit and gradually lower their borrowing costs.
The Company’s four strategic pillars include focusing on developing a wide range of credit products, expanding its channels and
points of distribution, diversifying its geographic footprint and lastly, focusing on improving the customer’s financial wellness
through its products, pricing, ancillary tools and services and customer relationships.
Product Range
The Company’s objective is to build a full suite of non-prime consumer credit products, which currently includes unsecured and secured
lending products at various risk-adjusted interest rates, along with a broad suite of value-add ancillary services. As of December 31, 2022,
the Company offers traditional unsecured instalment loans, home equity secured instalment loans, automotive vehicle financing, and loans
to finance the purchase of retail goods, powersports and recreational vehicles, home improvement projects and healthcare related products
and services. The Company will continue to expand and grow the products it offers with the goal of providing non-prime consumers with
the same type of choices and options available to prime consumers through a traditional bank. As the Company brings new products to
market, it will explore existing conventional products as well as develop new forms of credit that meet the unique needs of its customers.
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Channel Expansion
The Company operates 3 distinct and complementary distribution and acquisition channels including 416 retail lending outlets (299
easyfinancial branches and 117 easyhome stores where loans are offered as of December 31, 2022), its online platform (web and mobile)
and point-of-sale financing available through approximately 6,500 dealerships and merchant partners. Based on the unit volume of
applications and originations in the most recent quarter, the retail branch channel represented 18% of application volume and 48% of
loan originations, online represented 56% of application volume and 27% of originations and point-of-sale financing represented 26%
applications and 25% of originations. 59% of loan originations were funded and/or serviced in a branch location, 30% were funded and/or
serviced through a point-of-sale channel, with the remaining 11% serviced in the Company’s national shared services centre. Expanding
its channels of distribution is a key strategic priority, as the Company seeks new ways to make credit accessible in a convenient manner
for its customers. The Company will continue to pursue new opportunities that include expanding its retail network, developing a more
dynamic and personalized digital experience supported by mobile, adding new automotive and powersports dealerships, adding new
merchant partnerships and seeking new third-party lending and referral partnerships. The point-of-sale market continues to be an
attractive opportunity as consumers gravitate to spreading payments over time through a buy now, pay later model.
Geographic Diversification
Canada continues to provide a substantial runway for growth for many years to come for goeasy with over 8.5 million non-prime Canadians
facing limited options for credit. The market is largely underserved, providing adequate room for expansion. While the Company finished
2022 with 302 easyfinancial locations, it estimates its retail footprint for easyfinancial will gradually expand to around 325 locations across
Canada in the coming years. The Company will continue to incrementally add locations in select markets as it works toward expanding its
footprint. In particular, retail branch expansion will be focused on the province of Quebec, which represents a large market opportunity, and
completing the footprint in key urban markets such as Toronto and Vancouver. The Company also remains focused on adding new dealer
and merchant partners across Canada to increase the distribution of its products and make them more accessible to all Canadians.
The Company also believes there is a future opportunity to consider international markets where the easyfinancial business model can be
replicated. The two markets the Company believes are attractive include the United States and the United Kingdom. In the United States it
is estimated that there are over 100 million non-prime consumers and in the United Kingdom it is estimated that there are over 12 million
non-prime consumers. The consumers in these markets utilize credit products similar to those offered by the Company in Canada. The
Company remains active in exploring potential acquisition opportunities within the domestic Canadian financial services industry, as well
as in these international markets.
Financial Wellness
The Company competes on a unique point of differentiation, which is a focus on its customers’ financial wellness and more specifically, the journey
of providing customers a path to gradually reduce their rate of interest, improve their credit and graduate back to prime. With 8.5 million non-
prime Canadians, of which 72% have been denied credit by banks and other financial institutions, goeasy plays an extremely important role in
the financial system. By providing access to credit and a second chance for its customers, the Company serves as a key steppingstone in helping
them rebuild their credit through products that report each payment to the credit reporting agencies. The Company is also focused on providing
its consumers a path to reducing their cost of borrowing, by progressively offering its customers with on-time payments access to products with
lower rates of interest. Between 2017 and 2022, the company has reduced the weighted average interest charged on its loans from 46% to 30.5%.
The Company has always set itself apart from the competition by seeing beyond the initial transaction with the customer and instead, focusing
on building one-to-one personalized relationships that are based on trust and respect for every customer’s unique situation. The Company is
proud to provide free financial literacy resources for all Canadians, which includes hundreds of articles and tools to help its customers better
understand and manage their personal finances.
As the Company continues to evolve, ensuring its suite of products and services are designed to meet its customer’s needs across the entire
credit spectrum is critically important. goeasy views its business as a lending ecosystem for non-prime Canadians, a one-stop shop where they
can get access to all their borrowing needs from a single trusted provider. In 2022, the Company developed a self-serve digital portal through
a mobile app that enables customers access to goeasy’s entire range of product and services and dynamically present customers loan offers
tailored to their credit profile and borrowing needs. The digital portal will extract additional value from the Company’s full-suite product offering
and improve the customer experience. Whether a customer is establishing credit as a new Canadian or repairing damaged credit as a result of
a life event, goeasy’s laddered suite of products ensures every customer has access to honest and responsible lending options.
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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 on 2022 Forecasts
As the effects of the COVID 19 pandemic subsided throughout 2022, the Company experienced strong commercial performance,
including stable credit performance, improved operating leverage, and record adjusted operating income, adjusted net income
and adjusted earnings per share. The Company ended the year in a strong financial position, driven by record organic growth
and improvements in the credit quality of the Company’s consumer loan portfolio. Furthermore, the Company remained well
capitalized throughout the year, with approximately $928 million in total liquidity and funding capacity, along with an appropriate
level of financial leverage. The business also continued to prove its strength and resilience amidst economic volatility.
The Company’s 2022 forecasts, assumptions and risk factors were disclosed in its December 31, 2021 MD&A. The Company has since
experienced an elevated level of consumer demand and operating performance across many of its products and customer acquisition
channels, which has driven accelerated growth in its consumer loan receivable portfolio. Consequently, the Company revised its
forecasts in its June 30, 2022, MD&A. The Company’s actual performance against its revised forecast for fiscal 2022 is as follows:
ACTUAL RESULTS
FOR 2022
UPDATED FORECASTS
FOR 2022
OUTCOME
Gross consumer loans receivable at year-end
$2.79 billion
$2.60 - $2.80 billion
Consistent with forecast
New easyfinancial locations opened during the year
10
10 – 15
Consistent with forecast
Total Company revenue
$1.02 billion
$1.00 - $1.04 billion
Consistent with forecast
Total yield on consumer loans (including ancillary
products) 1
Net charge offs as a percentage of average gross
consumer loans receivable
37.7%
9.1%
36.5% - 38.5%
Consistent with forecast
8.5% - 10.5%
Consistent with forecast
Total Company operating margin (reported/adjusted1,2)
32.6%/36.2%
Return on equity (reported/adjusted1,2)
17.6%/24.2%
35% +
22% +
Consistent with forecast
Consistent with forecast
1 Total yield on consumer loans (including ancillary products), adjusted total Company operating margin and adjusted return on equity are non-IFRS ratios. Non-IFRS ratios are not determined in
accordance with IFRS, do not have standardized meanings and may not be comparable to similar financial measures presented by other companies. See description in sections “Portfolio Analysis”
and “Key Performance Indicators and Non-IFRS Measures”.
2 During the year, the Company incurred adjusting items that were outside of its normal business activities and are significant in amount and scope, which management believes are not reflective
of underlying business performance. These adjusting items include LendCare integration costs, amortization of intangible assets acquired through the acquisition, one-time write off of an
intangible asset, corporate development costs and investment losses. These adjusting items are discussed in the “Key Performance Indicators and Non-IFRS Measures” section.
Three Year Forecasts
The Company continues to pursue a long-term strategy that includes expanding its product range, developing its channels of distribution
and leveraging risk-based pricing to reduce the cost of borrowing for its consumers and extend the life of its customer relationships. As
such, the total yield earned on its consumer loan portfolio will gradually decline, while net charge off rates remain stable and operating
margins expand.
The Company’s strong financial profile positions it well to continue on its long-track record of achieving its corporate growth objectives.
The Company has provided a new 3-year forecast for the years 2023 through 2025. The periods of 2023 and 2024 have been updated to
reflect the most recent outlook.
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The forecasts outlined below contemplate the Company’s expected domestic organic growth plan and do not include the impact of any
future mergers or acquisitions, or gains or losses on its investments.
FORECASTS FOR 2023
FORECASTS FOR 2024
FORECASTS FOR 2025
Gross consumer loans receivable at year end
$3.40 - $3.60 billion
$4.10 - $4.30 billion
$4.70 - $5.00 billion
Total Company revenue
$1.15 - $1.25 billion
$1.38 - $1.48 billion
$1.56 - $1.70 billion
Total yield on consumer loans (including ancillary
products)1
Net charge offs as a percentage of average gross
consumer loans receivable
34.5% - 36.5%
33.5% - 35.5%
33.0% - 35.0%
8.5% - 10.5%
8.0% - 10.0%
8.0% - 10.0%
Total Company operating margin
Return on equity
36% +
22% +
37% +
22% +
38% +
22% +
1 Total yield on consumer loans (including ancillary products) is a non-IFRS ratio. Non-IFRS ratios are not determined in accordance with IFRS, do not have standardized meanings and may not be
comparable to similar financial measures presented by other companies. See description in section “Portfolio Analysis”.
These forecasts are inherently subject to material assumptions used to develop such forward-looking statements and risk factors as identified below.
KEY ASSUMPTIONS
In formulating the guidance provided above, the Company makes a series of assumptions, which include, but are not limited to:
Environment Conditions
• Stability in the economic environment.
• Continued demand for non-prime credit.
Portfolio Growth
• The Company executes on growth initiatives outlined in its strategic plan, including expansion of loan products, geographic
expansion across Canada, and increased penetration of its indirect point of-sale and secured lending products.
• Stable revenue generated by the Company’s easyhome business, coupled with growth of consumer lending at easyhome.
Liquidity & Funding
• The Company continues to be able to access growth capital at reasonable rates.
Revenue Yield
• The Company expects the total portfolio yield to moderate over the outlook period, due to a shift in product mix, growth in indirect
point-of-sale financing and secured lending products.
• The effective yield earned on the sale of ancillary products gradually reduces as the average loan size increases.
• Total portfolio yield and net loss rates of its lending products are as estimated in the Company’s budget and strategic plan.
Credit Performance
• Net charge offs perform in line with the Company’ budget and the forecasts generated through the use of its proprietary custom
credit and scoring models.
• The mixture of customers acquired through each of the Company’s acquisition channels and the mixture of new and existing
borrowers are as estimated in the Company’s forecast.
Investment Performance
• The fair value of investments are assumed to remain static, as no forecast is made on changes in carrying value or timing of realization
of the investment portfolio.
Mergers and Acquisitions
• No mergers and acquisitions were contemplated in the forecasts.
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KEY RISK FACTORS
These forecasts are inherently subject to risks as identified in the following, as well as those risks, which are referred to in the section
entitled “Risk Factors” as described in this MD&A.
Environmental & Market Conditions
• Uncertainty around overall consumer demand during times of business disruption.
• Increased levels of unemployment or economic instability.
• Business conditions are within acceptable parameters with respect to consumer demand, competition and margins.
Real Estate
• The Company’s ability to renew existing leases and secure new locations.
Access to Capital & Funding
• Continued access to required capital and funding.
Regulatory Environment
• Changes to regulations governing the products offered by the Company.
Credit Performance
• Material increase of net charge off rates.
Merchant Partnerships and Point-of-Sale Channel
• The Company’s ability to continue to secure and maintain merchant partnerships in its automotive financing and point-of-sale channel.
Analysis of Results for the Year Ended December 31, 2022
Financial Highlights and Accomplishments
• In January 2022, the Company increased its revolving securitization warehouse facility under its goeasy Securitization Trust
(“Revolving Securitization Warehouse Facility I”) from $600 million to $900 million and was further increased to $1.4 billion
in June 2022. The facility continues to be underwritten by National Bank Financial Markets (“NBFM”), with the addition of new
lenders to the syndicate. The facility matures on August 30, 2024 and continues to bear interest on advances payable at the
rate equal to 1-month Canadian Dollar Offered Rate (“CDOR”) plus 185 basis points (“bps”).
• In addition, in January 2022, the Company amended its revolving credit facility agreement to reduce the maximum principal
amount available from $310 million to $270 million, with the maturity extended to January 27, 2025, and increased the
accordion feature from $75 million to $100 million. The amendments also include key modifications including improved
advance rates, less restrictive covenants, and a broader syndicate of banks. On lenders’ prime rate (“Prime”) advances, the
interest rate payable was reduced by 125 bps, from the previous rate of Prime plus 200 bps to Prime plus 75bps. On draws
elected to be taken utilizing the Canadian Bankers’ Acceptance (“BA”) rate, the interest rate payable was reduced by 75 bps
from the previous rate of BA plus 300 bps to BA plus 225 bps.
• In 2022, the Company entered into a strategic commercial partnership and invested a total of $40 million in a convertible
notes receivable of 1195407 B.C. Ltd. (“Canada Drives”). Canada Drives is Canada’s largest 100% online car shopping and
to-your-door delivery platform. The convertible notes receivable mature on June 15, 2025, bear interest at 5% per annum
and are convertible into preferred shares on defined terms. Through the strategic commercial partnership, goeasy provides
automotive financing to a committed portion of the non-prime borrowers who purchase and finance a vehicle through Canada
Drives platform.
• On November 21, 2022, the Company issued 488,750 common shares including 63,750 common shares issued pursuant to the
exercise in full by the syndicate of underwriters of the over-allotment option granted by the Company, at a price of $118.50
per common share, for gross aggregate proceeds of $57.9 million. goeasy used the net proceeds to support the growth of the
Company’s consumer loan portfolio and for general corporate purposes.
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• On December 16, 2022, the Company entered into a new $200 million revolving securitization warehouse facility under goeasy
Securitization Trust II, structured and underwritten by Bank of Montreal (the “Revolving Securitization Warehouse Facility II”).
The Revolving Securitization Warehouse Facility II will be collateralized by automotive consumer loans originated by goeasy’s
wholly owned subsidiaries, easyfinancial Services Inc. and LendCare. The Revolving Securitization Warehouse Facility II
matures on December 16, 2024, and bears interest equal to the 1-month CDOR plus 185 bps.
• As at December 31, 2022, the Company had a cash position of $62.7 million which includes $39.7 million in restricted cash
related to its revolving securitization warehouse facility and secured borrowings reserve. As at December 31, 2022, the
Company has borrowing capacities of $590 million under its Revolving Securitization Warehouse Facility I, $200 million
under its Revolving Securitization Warehouse Facility II and $120 million under its revolving credit facility. Excluding the $100
million accordion feature under its revolving credit facility, the Company’s total liquidity as at December 31, 2022 was $972.7
million. The current total liquidity, excluding future enhancements or diversification of funding sources, provide adequate
growth capital for the Company to execute its organic growth forecast.
• The Company reported record revenue for the year ended December 31, 2022 of $1.02 billion, an increase of $192.6 million, or
23.3% compared to 2021. The increase was primarily driven by record organic growth of the Company’s consumer loan portfolio.
• Gross consumer loans receivable increased from $2.03 billion as at December 31, 2021 to $2.79 billion as at December 31,
2022, an increase of $764.4 million, or 37.6%. The increase in consumer loans receivable was driven by healthy demand
across the Company’s entire range of products and acquisition channels, including unsecured lending, home equity loans and
powersports and automotive financing.
• Net charge offs for the year as a percentage of average gross consumer loans receivable were 9.1%, 30 bps higher compared
to 2021 of 8.8%. The increase in the net charge off rate reflects the benefits of pandemic related government support
and consumer expense reductions experienced in 2021. The Company’s net charge off rate was otherwise in line with the
Company’s targeted range for 2022 of 8.5% to 10.5%.
• During the year, the net change in allowance for future credit losses increased by $53.3 million due to a higher level of loan
book growth compared to 2021. The provision rate for the year decreased to 7.62% from 7.87% in 2021, primarily due to the
continued improvement in the product and credit mix of the loan portfolio.
• The easyfinancial reportable segment reported record operating income of $394.0 million in 2022, compared to $324.8
million in 2021, an increase of $69.2 million, or 21.3%. The improved operating income was driven by continued organic
growth in the Company’s loan portfolio. As a result, easyfinancial revenue increased by $193.2 million, partially offset by an
increase of $87.1 million in bad debt expense and $36.9 million of incremental expenditures to support the growing customer
base and enhance product offerings. easyfinancial’s operating margin for the year was 45.3%, compared to 48.0% in 2021.
The decline in operating margin was mainly due to a higher level of allowance for credit losses related to the record loan
growth experienced during the year and the increase in net charge offs relative to the prior year, which experienced the
benefit of pandemic related government support and consumer expense reductions.
• The easyhome reportable segment operating income was $34.6 million in 2022, compared with $36.9 million in 2021, a
decrease of $2.3 million, or 6.2%. The decrease was mainly driven by lower lease revenues from a smaller leasing portfolio
and incremental volume related costs to operate and manage the growing loan portfolio in easyhome, partially offset by
higher lending revenues from a larger consumer loan portfolio. easyhome’s operating margin for the year was 23.1%, a slight
decrease from 24.5% in 2021.
49
• Total Company operating income in 2022 was $332.4 million, up $51.4 million, or 18.3% compared to 2021. The Company also reported
an operating margin for the year of 32.6%, down from the 34.0% in 2021. During the year, the Company incurred adjusting items that
are outside of its normal business activities and are significant in amount and scope, which management believes are not reflective
of the Company’s underlying business performance. These adjusting items include integration costs related to the acquisition of
LendCare, amortization of intangible assets acquired from LendCare, non-recurring corporate development costs and a one-time
write off of an intangible asset. These adjusting items are discussed in the “Key Performance Indicators and Non-IFRS Measures”
section. Excluding the effects of these adjusting items, the Company reported record adjusted operating income1 for the year of $369.4
million, up $52.7 million, or 16.6%, compared to 2021. The Company also reported an adjusted operating margin1 of 36.2% for the year,
down from the 38.3% in 2021. The decline in operating margin was mainly due to a higher level of allowance for credit losses related
to the record loan growth experienced during the year and the increase in net charge offs relative to the prior year, which experienced
the benefit of pandemic related government support and consumer expense reductions.
• The fair value of the Company’s investment in Affirm Holdings Inc. (“Affirm”) as at December 31, 2022 was $6.1 million, which
resulted in an unrealized fair value loss for the year ended December 31, 2022 of $47.4 million.
Since the initial investment in Affirm, made on January 1, 2021, the Company has recognized realized gains on the non-contingent
portion of the investment and its related total return swaps (“TRS”) of $66.3 million, a realized gain on the TRS related to the
contingent portion of the investment in Affirm of $25.4 million and an unrealized fair value loss on the contingent portion of the
investment in Affirm of $9.2 million.
Including the cash received on the initial sale of PayBright Inc. (“PayBright”) to Affirm, the total net realized and unrealized gains
amount to $104.2 million, relative to the initial investment of $34 million made in 2019.
• The Company’s net income for 2022 was $140.2 million, or $8.42 per share on a diluted basis, down 42.8% and 42.4%, respectively,
compared to $244.9 million, or $14.62 per share on a diluted basis in 2021. The decrease in net income was mainly driven by non-
recurring corporate development costs, a one-time write off of an intangible asset and fair value losses on investments, compared to
significant fair value gains on investments in 2021. Excluding the effects of the adjusting items discussed in “Key Performance Indicators
and Non-IFRS Measures” section, the Company achieved record adjusted net income1 and record adjusted diluted earnings per share1
in 2022 of $192.3 million and $11.55, respectively. On this basis, adjusted net income and adjusted diluted earnings per share increased
by 10.0% and 10.7%, respectively. The increase in adjusted net income was primarily driven by the record revenue, partially offset by the
corresponding incremental loan volume related costs and finance costs required to support the growing loan portfolio.
• Return on equity was 17.6% in 2022, compared to 36.7% in 2021. The lower return on equity was primarily due to the lower net
income discussed above. Adjusted return on equity1 was 24.2%, down from 26.2% in 2021. The decline in adjusted return on equity
was primarily related to the higher level of average shareholders’ equity resulting from the higher average goodwill and average
acquired intangible assets, compared to 2021. Excluding goodwill and acquired intangible assets, the adjusted return on tangible
common equity1 was 36.4%, up from 35.3% in 2021. The increase in adjusted return on tangible common equity was primarily
related to the increased adjusted net income produced by the larger consumer loan portfolio.
• In consideration of the improved earnings achieved in 2022 and the Company's confidence in its continued growth and access to capital
going forward, the Board of Directors approved a 5.5% increase to the annual dividend from $3.64 per share to $3.84 per share in 2023.
1 Adjusted operating income and adjusted net income are non-IFRS measures. Adjusted operating margin, adjusted diluted earnings per share, adjusted return on equity and adjusted tangible
common equity are non-IFRS ratios. Non-IFRS measures and non-IFRS ratios are not determined in accordance with IFRS, do not have standardized meanings and may not be comparable to similar
financial measures presented by other companies. See descriptions in section “Key Performance Indicators and Non-IFRS Measures”.
50
Summary of Financial Results and Key Performance Indicators
($ in 000’s except earnings per share and percentages)
Summary Financial Results
YEAR ENDED
December 31,
2022
December 31,
2021
VARIANCE
$ / BPS
VARIANCE
% CHANGE
Revenue
Bad debts
Other operating expenses
EBITDA1
EBITDA margin1
Depreciation and amortization
Operating income
Operating margin
Other (loss) income
Finance costs
Effective income tax rate
Net income
Diluted earnings per share
Return on assets
Return on equity
Return on tangible common equity1
Adjusted Financial Results1,2
Other operating expenses
Efficiency ratio
Operating income
Operating margin
Net income
Diluted earnings per share
Return on assets
Return on equity
Return on tangible common equity
Key Performance Indicators
Segment Financials
easyfinancial revenue
easyfinancial operating margin
easyhome revenue
easyhome operating margin
Portfolio Indicators
Gross consumer loans receivable
Growth in consumer loans receivable3
Gross loan originations
1,019,336
272,893
332,730
351,507
34.5%
81,306
332,407
32.6%
(28,659)
107,972
28.4%
140,161
8.42
4.8%
17.6%
28.4%
342,422
33.6%
369,362
36.2%
192,261
11.55
6.6%
24.2%
36.4%
869,528
45.3%
149,808
23.1%
826,722
182,084
284,749
438,921
53.1%
78,886
281,003
34.0%
114,876
79,025
22.7%
192,614
90,809
47,981
(87,414)
(1,860 bps)
2,420
51,404
(140 bps)
(143,535)
28,947
570 bps
244,943
(104,782)
14.62
11.5%
36.7%
50.7%
307,931
37.2%
316,652
38.3%
174,759
10.43
8.2%
26.2%
35.3%
676,351
48.0%
150,371
24.5%
(6.20)
(670 bps)
(1,910 bps)
(2,230 bps)
34,491
(360 bps)
52,710
(210 bps)
17,502
1.12
(160 bps)
(200 bps)
110 bps
193,177
(270 bps)
(563)
(140 bps)
764,355
(19,144)
783,126
23.3%
49.9%
16.9%
(19.9%)
(35.0%)
3.1%
18.3%
(4.1%)
(124.9%)
36.6%
25.1%
(42.8%)
(42.4%)
(58.3%)
(52.0%)
(44.0%)
11.2%
(9.7%)
16.6%
(5.5%)
10.0%
10.7%
(19.5%)
(7.6%)
3.1%
28.6%
(5.6%)
(0.4%)
(5.7%)
37.6%
(2.4%)
49.1%
2,794,694
2,030,339
764,355
783,499
2,377,606
1,594,480
Total yield on consumer loans (including ancillary products)1
Net charge offs as a percentage of average gross
consumer loans receivable
Free cash flows from operations before net growth in
gross consumer loans receivable1
Potential monthly lease revenue1
37.7%
9.1%
258,474
7,868
42.1%
(440 bps)
(10.5%)
8.8%
30 bps
260,104
8,193
(1,630)
(325)
3.4%
(0.6%)
(4.0%)
1 EBITDA, adjusted other operating expenses, adjusted operating income, adjusted net income and free cash flows from operations before net growth in gross consumer loans receivable are non-
IFRS measures. EBITDA margin, efficiency ratio, adjusted operating margin, adjusted diluted earnings per share, adjusted return on equity, adjusted return on assets, reported and adjusted return
on tangible common equity and total yield on consumer loans (including ancillary products) are non-IFRS ratios. See description in sections “Portfolio Analysis”, “Key Performance Indicators and
Non-IFRS Measures” and “Financial Condition”.
2 Adjusting items are discussed in the “Key Performance Indicators and Non-IFRS Measures” section.
3 Growth in consumer loans receivable for the year ended December 31, 2021 includes $444.5 million of gross loans purchased through the acquisition of LendCare.
51
Locations Summary
easyfinancial
Kiosks (in store)
Stand-alone locations
Operations Centers
Total easyfinancial locations
easyhome
Corporately owned stores
Franchise stores
Total easyhome stores
Corporate
Corporate office
Total corporate office
LOCATIONS AS AT
DECEMBER 31, 2021
LOCATIONS OPENED
IN THE YEAR
LOCATIONS CLOSED
IN THE YEAR
CONVERSIONS
LOCATIONS AS AT
DECEMBER 31, 2022
5
286
3
294
124
34
158
1
1
-
10
-
10
-
-
-
-
-
-
(2)
-
(2)
(4)
-
(4)
-
-
(3)
3
-
-
-
-
-
-
-
2
297
3
302
120
34
154
1
1
Summary of Financial Results by Reporting Segment
($ IN 000'S EXCEPT EARNINGS PER SHARE)
EASYFINANCIAL
EASYHOME
CORPORATE
TOTAL
YEAR ENDED DECEMBER 31, 2022
668,779
-
184,013
16,736
869,528
261,997
180,867
32,668
475,532
393,996
29,371
103,414
13,146
3,877
149,808
10,896
61,748
42,586
115,230
34,578
-
-
-
-
-
-
90,115
6,052
96,167
(96,167)
698,150
103,414
197,159
20,613
1,019,336
272,893
332,730
81,306
686,929
332,407
(28,659)
(107,972)
195,776
55,615
140,161
8.42
Revenue
Interest income
Lease revenue
Commissions earned
Charges and fees
Operating expenses
Bad debts
Other operating expenses
Depreciation and amortization
Operating income (loss)
Other loss
Finance costs
Income before income taxes
Income taxes
Net income
Diluted earnings per share
52
($ IN 000'S EXCEPT EARNINGS PER SHARE)
EASYFINANCIAL
EASYHOME
CORPORATE
TOTAL
YEAR ENDED DECEMBER 31, 2021
Revenue
Interest income
Lease revenue
Commissions earned
Charges and fees
Operating expenses
Bad debts
Other operating expenses
Depreciation and amortization
Operating income (loss)
Other income
Finance costs
Income before income taxes
Income taxes
Net income
Diluted earnings per share
Portfolio Performance
Consumer Loans Receivable
512,810
-
152,485
11,056
676,351
174,936
148,445
28,219
351,600
324,751
22,828
112,371
11,249
3,923
150,371
7,148
61,558
44,804
113,510
36,861
-
-
-
-
-
-
74,746
5,863
80,609
(80,609)
535,638
112,371
163,734
14,979
826,722
182,084
284,749
78,886
545,719
281,003
114,876
(79,025)
316,854
71,911
244,943
14.62
The gross consumer loans receivable portfolio increased from $2.03 billion as at December 31, 2021 to $2.79 billion as at December 31,
2022, an increase of $764.4 million, or 37.6%. Loan originations for the year were $2.38 billion, up 49.1% from 2021. The increase in consumer
loans receivable was driven by healthy demand across the company’s range of products and acquisition channels, including unsecured
lending, home equity loans, powersports and automotive financing, and cross-selling activity across its consumer base.
The total annualized yield, including loan interest, fees and ancillary products, realized by the Company on its average consumer loans receivable
was 37.7% in the current year, down 440 bps from 2021. Total annualized yield decreased due to i) organic growth of certain products which carry
lower rates of interest such as home equity loans, automotive financing, point-of-sale financing in powersports, home improvement, and healthcare
and retail categories; ii) increased lending activity in the province of Quebec, where loans have lower rates of interest; iii) a higher proportion of larger
dollar value loans which have reduced pricing on certain ancillary products; iv) a modest reduction in penetration rates on ancillary products; and v)
the Company’s strategy to reward borrowers for on-time payment behaviour, by gradually reducing the rate of interest charged.
Bad debts increased to $272.9 million for the year ended December 31, 2022 from $182.1 million in 2021, an increase of $90.8 million, or
49.9%. The following table details the components of bad debts:
($ IN 000’S)
Provision required due to net charge offs
Impact of loan book growth
Day one loan loss provision on the acquired LendCare loans
Impact of change in provision rate in the year
Net change in allowance for credit losses
Bad debt
Bad debts increased by $90.8 million due to the following factors:
YEAR ENDED
DECEMBER 31, 2022
DECEMBER 31, 2021
219,614
53,617
-
(338)
53,279
272,893
147,998
24,739
14,252
(4,905)
34,086
182,084
(i) Net charge offs increased from $148.0 million in the year ended December 31, 2021 to $219.6 million in the current year, an increase of
$71.6 million. Net charge offs in the year as a percentage of average gross consumer loans receivable were 9.1%, up from 8.8% in 2021.
The increase in the net charge off rate reflects the benefits of pandemic related government support and consumer expense reductions
experienced in 2021. The Company’s net charge off rate was in line with the Company’s targeted range for 2022 of 8.5% to 10.5%.
53
(ii) The acquisition of LendCare on April 30, 2021 increased the bad debt provision by $14.3 million related to the acquired loan book of
$444.5 million. Excluding the acquired loan book, the Company’s loan portfolio in 2021 increased by $339.0 million, which included
loan originations in LendCare for eight months. The loan book growth in 2021 resulted in a provision expense of $24.7 million. In
2022, loan book growth of $764.4 million resulted in additional provision expense of $53.6 million.
(iii) The impact of provision rate changes in the year resulted in a reduction of bad debts by $0.3 million, as compared to a reduction
of $4.9 million in 2021. During the year, the provision rate decreased from 7.87% to 7.62%, primarily due to continued improvement
in the product and credit mix of the loan portfolio.
easyhome Leasing Portfolio
The leasing portfolio as measured by potential monthly leasing revenue as at December 31, 2022 was $7.9 million, down from $8.2
million reported as at December 31, 2021. The easyhome leasing business is a mature business that has experienced a long-term
gradual decline in sales volume, as consumer demand has shifted into alternate forms of financing purchases of everyday household
items.
Revenue
Revenue for the year was $1.02 billion, an increase of $192.6 million, or 23.3%, when compared to 2021. Revenue growth was primarily
driven by record organic growth of the Company’s consumer loan portfolio.
easyfinancial – Revenue in 2022 was $869.5 million, an increase of $193.2 million, or 28.6%, compared to 2021. Components of the
increased revenue include:
(i) Interest income increased by $156.0 million, or 30.4% driven by 37.6% growth in the loan portfolio, which includes growth of
unsecured loans, home equity loans, powersports and automotive financing, point-of-sale financing and cross-selling activity
across its consumer base, partially offset by lower average interest yields;
(ii) Commissions earned from sales of ancillary products and services increased by $31.5 million, or 20.7%, due to the larger
consumer loan portfolio and lower claims costs associated with the Company’s loan protection program; and
(iii) Charges and fees increased by $5.7 million.
easyhome – Revenue for 2022 was $149.8 million, a decrease of $0.6 million, or 0.4%, compared to 2021. Lending revenue within the
easyhome stores increased by $9.0 million, compared to 2021. Traditional leasing revenue decreased by $9.6 million, compared to 2021.
Components of the increased revenue include:
(i) Interest revenue increased by $6.5 million due to growth of the consumer loans receivable portfolio related to the easyhome
business;
(ii) Lease revenue was lower by $9.0 million due to a smaller lease portfolio;
(iii) Commissions earned on the sale of ancillary products increased by $1.9 million, mainly due to higher revenues associated with
the Company’s loan protection program; and
(iv) Charges and fees were relatively flat from 2021.
Other Operating Expenses
Other operating expenses for the year were $332.7 million, an increase of $48.0 million, or 16.9%, compared to 2021. The increase in
other operating expenses was mainly driven by the write off of an intangible asset, partially offset by the non-recurring transaction and
integration costs incurred in 2021 related to the acquisition of LendCare.
easyfinancial – Other operating expenses were $180.9 million in the year, an increase of $32.4 million, or 21.8%, compared to 2021. The
increase in other operating expenses was driven by incremental volume related costs to operate and manage the growing loan portfolio
and increased advertising and marketing spending to expand brand awareness and support growth in loan originations. easyfinancial
locations increased from 294 as at December 31, 2021 to 302 as at December 31, 2022.
easyhome – Other operating expenses were $61.7 million for the year, relatively flat from 2021.
54
Corporate – Total operating expenses before depreciation and amortization for the year ended December 31, 2022 were $90.1 million, an increase
of $15.4 million, or 20.6%, from 2021. The increase was primarily due to a one-time write off of an intangible asset, non-recurring corporate
development costs incurred in the first quarter of 2022, and higher technology costs, partially offset by non-recurring LendCare acquisition
transaction and integration costs in 2021. Excluding the effects of the adjusting items discussed in “Key Performance Indicators and Non-IFRS
Measures”, corporate expenses before depreciation and amortization represented 6.5% of revenues in 2022, compared to 7.5% of revenues in 2021.
Depreciation and Amortization
Depreciation and amortization for the year was $81.3 million, an increase of $2.4 million, or 3.1%, compared to 2021, driven mainly by higher
amortization of intangible assets acquired through the acquisition of LendCare. Overall, depreciation and amortization represented 8.0% of
revenue in 2022, a decline from 9.5% in 2021.
easyfinancial – Depreciation and amortization was $32.7 million for the year, an increase of $4.4 million, or 15.8% from 2021. The increase
was primarily due to higher depreciation of right-of-use assets, primarily due to new retail premises lease agreements in the year, and higher
amortization of intangible assets from the acquisition of LendCare.
easyhome – Depreciation and amortization was $42.6 million for the year, a decrease of $2.2 million, or 5.0% from 2021, mainly due to a smaller
lease asset portfolio.
Corporate – Depreciation and amortization was $6.1 million for 2022, relatively flat from 2021.
Operating Income (Income before Finance Costs and Income Taxes)
Operating income for the year was $332.4 million, up $51.4 million, or 18.3%, compared to 2021. The Company’s operating margin for the year was
32.6%, down from 34.0% in 2021. Excluding the effects of the adjusting items discussed in “Key Performance Indicators and Non-IFRS Measures”,
the Company reported a record adjusted operating income of $369.4 million, up $52.7 million, or 16.6%, compared to 2021. The Company also
reported an adjusted operating margin of 36.2% for the year, down from 38.3% in 2021. The decline in operating margin was mainly due to a higher
level of allowance for credit losses related to record loan growth experienced during the year and the increase in net charge offs relative to the
prior year, which experienced the benefit of pandemic related government support and consumer expense reductions.
easyfinancial – Operating income was $394.0 million for the year, an increase of $69.2 million, or 21.3%, compared to 2021. The improved operating
income was driven by continued organic growth in the Company’s loan portfolio. As a result, easyfinancial revenue increased by $193.2 million,
partially offset by an increase of $87.1 million in bad debt expense and $36.9 million of incremental expenditures to support the growing customer
base and enhance product offerings. easyfinancial’s operating margin for the year was 45.3%, compared to 48.0% in 2021. The decline in operating
margin was mainly due to a higher level of allowance for credit losses related to the record loan growth experienced during the year and increased
net charge offs relative to the prior year, which experienced the benefit of pandemic related government support and consumer expense reductions.
easyhome – Operating income was $34.6 million for the year, a decrease of $2.3 million, or 6.2%, compared to 2021. The decrease was mainly
driven by lower lease revenues from a smaller leasing portfolio and incremental volume related costs to operate and manage the growing loan
portfolio in easyhome, partially offset by higher lending revenues from a larger consumer loan portfolio. easyhome’s operating margin for the year
was 23.1%, a slight decrease from 24.5% in 2021.
Other Income
During the year, the Company recognized investment losses of $28.7 million mainly due to a net fair value loss on the Company’s investment in
Affirm and its related TRS, compared to a $114.9 million fair value gain in 2021.
Finance Costs
Finance costs for the year were $108.0 million, an increase of $28.9 million from 2021. The increase was mainly driven by higher borrowing levels
to fund growth of the Company’s lending business and higher costs of borrowing. The average blended interest rate on drawn balances for the
Company’s debt as at December 31, 2022, was 5.2%, up from 4.9% as at December 31, 2021.
Income Tax Expense
The effective income tax rate for the year was 28.4%, higher than the 22.7% in 2021. The increase was mainly due to the fair value losses on
investments, compared to the significant fair value gains on investments in 2021, which are being taxed at a lower capital gains effective tax rate.
55
Net Income & Diluted Earnings Per Share
The Company’s net income for the year was $140.2 million, or $8.42 per share on a diluted basis, down 42.8% and 42.4%, respectively,
compared to $244.9 million, or $14.62 per share on a diluted basis in 2021. The decrease in net income was mainly driven by non-
recurring corporate development costs, a one-time write off of an intangible asset and fair value losses on investments, compared
to significant fair value gains on investments in 2021. Excluding the effects of the adjusting items discussed in the “Key Performance
Indicators and Non-IFRS Measures” section, the Company achieved record adjusted net income and record adjusted diluted earnings per
share in 2022 of $192.3 million and $11.55, respectively, an increase of 10.0% and 10.7%, respectively, compared to 2021. The increase in
adjusted net income was primarily driven by the record revenue, partially offset by the corresponding incremental loan volume related
costs and finance costs required to support the growing loan portfolio.
Selected Annual Information
($ IN 000’S EXCEPT PERCENTAGES AND PER SHARE AMOUNTS)
20223
20213
2020
2019
2018
Gross Consumer Loans Receivable
2,794,694
2,030,339
1,246,840
1,110,633
833,779
Revenue
Net income
Adjusted net income1
Return on assets
Adjusted return on assets1
Return on equity
Adjusted return on equity1
Return on tangible common equity1,2
Adjusted return on tangible common equity1,2
Net income as a percentage of revenue
Adjusted net income as a percentage of revenue1
Dividends declared on Common Shares
Cash dividends declared per Common Share
Earnings per share
Basic
Diluted
Adjusted diluted1
1,019,336
140,161
192,261
826,722
244,943
174,759
652,922
136,505
117,646
4.8%
6.6%
17.6%
24.2%
28.4%
36.4%
13.8%
18.9%
58.3
3.64
8.61
8.42
11.55
11.5%
8.2%
36.7%
26.2%
50.7%
35.3%
29.6%
21.1%
42.3
2.64
15.12
14.62
10.43
9.8%
8.5%
36.1%
31.1%
38.3%
33.0%
20.9%
18.0%
26.1
1.80
9.21
8.76
7.57
609,383
506,191
64,349
80,315
5.5%
6.8%
20.2%
25.3%
-
-
10.6%
13.2%
17.9
1.24
4.40
4.17
5.17
53,124
53,124
6.1%
6.1%
21.8%
21.8%
-
-
10.5%
10.5%
12.5
0.90
3.78
3.56
3.56
1 Adjusted net income is a non-IFRS measure. Adjusted diluted earnings per share, adjusted return on equity, adjusted return on assets and reported and adjusted return on tangible common
equity are non-IFRS ratios. See description in section “Key Performance Indicators and Non-IFRS Measures”. Please refer to page 50 of the December 31, 2021 MD&A, page 42 of the December
31, 2020 MD&A, page 39 of the December 31, 2019 MD&A, and page 51 of the December 31, 2018 MD&A, for the respective “Key Performance Indicators and Non-IFRS Measures” section for those
years. These MD&As are available on www.sedar.com.
2 Comparable reported and adjusted return on tangible common equity financial measures for the years 2018 and 2019 were not published.
3 Selected annual information above for years ended December 31, 2022 and 2021 include financial information related to LendCare.
Key financial measures for each of the last five years are summarized in the table above and include gross consumer loans receivable,
revenue, net income, earnings per share, return on assets, return on equity, return on tangible common equity and net income as a
percentage of revenue over this timeframe. Revenue growth over this time frame was primarily related to growth of gross consumer
loans receivable. The larger revenue base, which is partially offset by increased bad debts and finance costs, resulted in an increase in
the Company’s adjusted net income and adjusted diluted earnings per share. The increased scale of the business resulted in adjusted
net income as a percentage of revenue also increasing in prior years, declining in the current year mainly due to the shift in product mix
towards a higher proportion of secured loans, which carry lower rates of interest. Lastly, adjusted return on assets, adjusted return on
equity and adjusted return on tangible common equity have generally been rising in prior years due to the increasing earnings generated
by the business. Adjusted return on assets and adjusted return on equity have declined in the past two years due to the aforementioned
shift in product mix and due to the higher level of assets and shareholders’ equity related to the acquisition of LendCare in 2021.
56
Assets and Liabilities
($ IN 000’S)
Total assets
Consumer loans receivable, net
Cash
Total liabilities
Revolving credit facility
Secured borrowings
Revolving securitization warehouse facility
Notes payable
Convertible debentures
AS AT
DECEMBER 31,
2022
AS AT
DECEMBER 31,
2021
AS AT
DECEMBER 31,
2020
AS AT
DECEMBER 31,
2019
AS AT
DECEMBER 31,
2018
3,302,889
2,627,357
62,654
2,596,153
1,899,631
102,479
1,501,916
1,152,378
93,053
2,433,201
1,806,240
1,058,404
148,646
105,792
805,825
-
198,339
173,959
292,814
-
-
1,168,997
1,085,906
689,410
-
-
-
1,318,622
1,040,552
46,341
986,201
112,563
-
701,549
40,656
1,055,676
782,864
100,188
754,147
-
-
650,481
40,581
Total assets have been increasing due primarily to the organic growth of the Company’s consumer loans receivable portfolio and the
acquisition of LendCare in 2021.
The Company finances the growth of its consumer loans receivable through a combination of debt, common shares and retained earnings. In
2018, the Company issued a tranche of the 7.875% senior unsecured notes with a maturity date of November 1, 2022 (“2022 Notes”) amounting to
US$150 million and increased the borrowing limit under its revolving line of credit to $174.5 million. In 2019, the Company issued US$550 million
of 5.375% senior unsecured notes with a maturity date of December 1, 2024 (“2024 Notes”), repaid the 2022 Notes and increased the borrowing
limit under its revolving line of credit to $310 million. In 2020, the Company redeemed all unconverted Debentures as at July 31, 2020 and
established $200 million Revolving Securitization Warehouse Facility I. In 2021, the Company increased the Revolving Securitization Warehouse
Facility I to $600 million, acquired secured borrowing facilities from the acquisition of LendCare and issued US$320 million of 4.375% senior
unsecured notes maturing on May 1, 2026 (“2026 Notes”). In 2022, the company further increased its Revolving Securitization Warehouse Facility
I to $1.40 billion and the Company amended its revolving credit facility agreement to reduce the maximum principal amount available from $310
million to $270 million with the maturity date extended to January 27, 2025. The Company established a $200 million Revolving Securitization
Warehouse Facility II on December 16, 2022. All of the Company’s credit facilities are as described in the notes to the Company’s consolidated
financial statements for the year ended December 31, 2022.
At the end of 2022, the Company’s ratio of net debt (net of surplus cash on hand) to net capitalization was 71%; a level that is conservative against
several of the Company’s peers and consistent with the Company’s desired position of approximately 70%.
Analysis of Results for the Three Months Ended December 31, 2022
Fourth Quarter Highlights
• The Company reported record revenue during the three-month period ended December 31, 2022 of $273.3 million, an increase
of $38.9 million, or 16.6%, when compared to the same period of 2021. The increase was primarily driven by record organic
growth of the Company’s consumer loan portfolio.
• Gross consumer loans receivable increased from $2.03 billion as at December 31, 2021 to $2.79 billion as at December 31, 2022, an increase
of $764.4 million, or 37.6%. The increase in consumer loans receivable was driven by healthy demand across the Company’s entire range of
products and acquisition channels, including unsecured lending, home equity loans and powersports and automotive financing.
• Net charge offs for the three-month period ended December 31, 2022 as an annualized percentage of average gross consumer loans
receivable were 9.0%, 60 bps lower compared to 9.6% for the same period of 2021. The decrease in the net charge off rate reflects the
improved product and credit mix of the loan portfolio and the credit model enhancements and underwriting adjustments in recent periods
to improve the long-term credit quality of the loan portfolio. The Company’s net charge off rate was in line with the Company’s targeted range
for 2022 of 8.5% to 10.5%.
• For the three-month period ended December 31, 2022, the net change in allowance for credit losses increased by $16.7 million due primarily to
loan book growth, compared to the same period of 2021. The provision rate for the three-month period ended December 31, 2022 decreased
to 7.62% from 7.87% in the same period of 2021, primarily due to continued improvement in the product and credit mix of the loan portfolio.
57
• The easyfinancial reportable segment reported record operating income for the three-month period ended December 31, 2022 of
$106.3 million, an increase of $18.6 million, or 21.3%, compared to the same period of 2021. The improved operating income was
driven by continued organic growth in the Company’s loan portfolio. easyfinancial revenue increased by $39.9 million, partially
offset by an increase of $19.2 million in bad debt expense and an increase of $2.1 million in other operating expenses to support
the growing customer base and enhance product offerings. easyfinancial’s operating margin in the quarter was 45.1%, compared
to 44.7% in the same period of 2021. The improvement in operating margin was mainly due to increased revenue and lower bad
debts due to continued improvement in the product and credit mix of the loan portfolio.
• The easyhome reportable segment reported operating income for the three-month period ended December 31, 2022 of $8.7
million, relatively flat from the same period in 2021, an increase of $0.2 million, or 2.8%. The increase was mainly driven by higher
lending revenues, partially offset by decreased leasing revenues due to smaller leasing portfolio. Operating margin for the three-
month period ended December 31, 2022 was 23.2%, an increase from 22.0% reported in the comparable period of 2021.
• The Company reported total operating income for the three-month period ended December 31, 2022 of $75.9 million, down $3.7
million, or 4.7%, compared to the same period of 2021. The Company reported an operating margin of 27.8% in the quarter,
down from 34.0% reported in the comparable period of 2021. During the three-month period ended December 31, 2022, the
Company incurred adjusting items that are outside of its normal business activities and are significant in amount and scope,
which management believes are not reflective of the Company’s underlying business performance. These adjusting items include
integration costs related to the acquisition of LendCare, amortization of intangible assets acquired from LendCare and a one-time
write off of an intangible asset. These adjusting items are discussed in the “Key Performance Indicators and Non-IFRS Measures”
section. Excluding the effects of the adjusting items, the Company reported record adjusted operating income1 for the three-month
period ended December 31, 2022 of $99.7 million, up $13.4 million, or 15.5%, from the comparable period of 2021. The increase
in adjusted operating income was mainly driven by higher revenue during the period associated with the larger consumer loan
portfolio, partially offset by higher operating expenses. The Company reported an adjusted operating margin1 of 36.5% in the
quarter, down from 36.8% reported in the comparable period of 2021. The decline in operating margin was mainly due to higher
net charge offs and a higher level of allowance for credit losses related to the record loan growth experienced during the quarter
relative to the comparable period of 2021.
• The fair value of the Company’s investment in Affirm as at December 31, 2022 was $6.1 million, which resulted in an unrealized fair
value loss for the three-month period ended December 31, 2022 of $6.0 million.
• The three-month period ended December 31, 2022 was the 86th consecutive quarter of positive net income and diluted earnings
per share. The Company’s net income for the three-month period ended December 31, 2022 was $28.6 million, or $1.71 per share
on a diluted basis, down 42.8% and 41.0%, respectively, compared to $50.0 million, or $2.90 per share on a diluted basis reported
in the same period of 2021. The decrease in net income was mainly driven by a one-time write off of an intangible asset and
fair value losses on investments, compared to fair value gains on investments in the three-month period ended December 31,
2021. Excluding the effects of adjusting items discussed in the “Key Performance Indicators and Non-IFRS Measures” section,
goeasy achieved record adjusted net income1 and record adjusted diluted earnings per share1 during the three-month period ended
December 31, 2022 of $51.0 million and $3.05 per share on a diluted basis, respectively. Adjusted net income and adjusted diluted
earnings per share increased by 7.1% and 10.5%, respectively, compared to the same period of 2021. The increase in adjusted net
income was primarily driven by the record revenue, partially offset by the corresponding incremental loan volume related costs
and finance costs required to support the growing loan portfolio.
• Return on equity was 13.8% for the three-month period ended December 31, 2022, down from 25.0% reported in the comparable
period of 2021. The lower return on equity was primarily due to the lower net income discussed above. Adjusted return on equity1
for the three-month period ended December 31, 2022 was 24.6%, up from 23.9% in the comparable period of 2021. The increase
in adjusted return on equity was primarily related to higher adjusted net income produced by the larger consumer loan portfolio.
• Return on tangible common equity1 was 21.8% in the three-month period ended December 31, 2022, down from 39.8% in the
comparable period of 2021. Adjusted return on tangible common equity1 for the three-month period ended December 31, 2022
was 35.9%, down from 36.2% in the comparable period of 2021. The slight decline in adjusted return on tangible common equity
was driven by a higher level of tangible equity resulting from the $57.9 million bought deal equity offering, partially offset by the
increased adjusted net income produced by the larger consumer loan portfolio.
1 Adjusted operating income and adjusted net income are non-IFRS measures. Adjusted operating margin, adjusted diluted earnings per share, adjusted return on equity and reported and adjusted
tangible common equity are non-IFRS ratios. Non-IFRS measures and non-IFRS ratios are not determined in accordance with IFRS, do not have standardized meanings and may not be comparable
to similar financial measures presented by other companies. See descriptions in section “Key Performance Indicators and Non-IFRS Measures”.
58
Summary of Financial Results and Key Performance Indicators
($ IN 000’S EXCEPT EARNINGS PER SHARE AND PERCENTAGES)
Summary Financial Results
THREE MONTHS ENDED
December 31,
2022
December 31,
2021
VARIANCE
$ / BPS
VARIANCE
% CHANGE
Revenue
Bad debts
Other operating expenses
EBITDA1
EBITDA margin1
Depreciation and amortization
Operating income
Operating margin
Other (loss) income
Finance costs
Effective income tax rate
Net income
Diluted earnings per share
Return on assets
Return on equity
Return on tangible common equity1
Adjusted Financial Results1,2
Other operating expenses
Efficiency ratio
Operating income
Operating margin
Net income
Diluted earnings per share
Return on assets
Return on equity
Return on tangible common equity
Key Performance Indicators
Segment Financials
easyfinancial revenue
easyfinancial operating margin
easyhome revenue
easyhome operating margin
Portfolio Indicators
Gross consumer loans receivable
Growth in consumer loans receivable
Gross loan originations
Total yield on consumer loans (including ancillary products)1
Net charge offs as a percentage of average gross
consumer loans receivable
Free cash flows from operations before net growth in
gross consumer loans receivable1
Potential monthly lease revenue1
273,326
78,257
99,943
81,001
29.6%
19,245
75,881
27.8%
(5,609)
31,551
26.2%
28,576
1.71
3.6%
13.8%
21.8%
87,877
32.2%
99,738
36.5%
51,026
3.05
6.3%
24.6%
35.9%
234,430
58,640
74,496
38,896
19,617
25,447
100,508
(19,507)
42.9%
21,665
79,629
34.0%
8,371
22,281
24.0%
49,961
2.90
7.9%
25.0%
39.8%
80,206
34.2%
86,353
36.8%
47,644
2.76
7.5%
23.9%
36.2%
(1,330 bps)
(2,420)
(3,748)
(620 bps)
(13,980)
9,270
220 bps
(21,385)
(1.19)
(430 bps)
(1,120 bps)
(1,800 bps)
7,671
(200 bps)
13,385
(30 bps)
3,382
0.29
(120 bps)
70 bps
(30 bps)
39,871
40 bps
(975)
120 bps
764,355
72,415
125,502
16.6%
33.5%
34.2%
(19.4%)
(31.0%)
(11.2%)
(4.7%)
(18.2%)
(167.0%)
41.6%
9.2%
(42.8%)
(41.0%)
(54.4%)
(44.8%)
(45.2%)
9.6%
(5.8%)
15.5%
(0.8%)
7.1%
10.5%
(16.0%)
2.9%
(0.8%)
20.3%
0.9%
(2.5%)
5.5%
37.6%
54.2%
24.8%
235,886
196,015
45.1%
37,440
23.2%
44.7%
38,415
22.0%
2,794,694
2,030,339
206,038
632,355
36.2%
133,623
506,853
41.4%
(520 bps)
(12.6%)
9.0%
9.6%
(60 bps)
66,040
7,868
59,452
8,193
6,588
(325)
(6.3%)
11.1%
(4.0%)
1 EBITDA, adjusted other operating expenses, adjusted operating income, adjusted net income and free cash flows from operations before net growth in gross consumer loans receivable are non-IFRS measures.
EBITDA margin, efficiency ratio, adjusted operating margin, adjusted diluted earnings per share, adjusted return on equity, adjusted return on assets, reported and adjusted return on tangible common equity and
total yield on consumer loans (including ancillary products) are non-IFRS ratios. See description in sections “Portfolio Analysis”, “Key Performance Indicators and Non-IFRS Measures” and “Financial Condition”.
2 Adjusting items are discussed in the “Key Performance Indicators and Non-IFRS Measures” section.
59
Locations Summary
easyfinancial
Kiosks (in store)
Stand-alone locations
Operations Centers
Total easyfinancial locations
easyhome
Corporately owned stores
Franchise stores
Total easyhome stores
Corporate
Corporate office
Total corporate office
LOCATIONS AS AT
SEPTEMBER 30,
2022
LOCATIONS OPENED
IN THE PERIOD
LOCATIONS
CLOSED IN THE
PERIOD
CONVERSIONS
LOCATIONS AS AT
DECEMBER 31, 2022
3
295
3
301
120
34
154
1
1
-
2
-
2
-
-
-
-
-
-
(1)
-
(1)
-
-
-
-
-
(1)
1
-
-
-
-
-
-
-
2
297
3
302
120
34
154
1
1
Summary of Financial Results by Reporting Segment
($ IN 000'S EXCEPT EARNINGS PER SHARE)
EASYFINANCIAL
EASYHOME
CORPORATE
TOTAL
THREE MONTHS ENDED DECEMBER 31, 2022
183,345
-
48,023
4,518
235,886
75,224
47,539
6,846
129,609
106,277
7,975
25,219
3,366
880
37,440
3,033
14,948
10,772
28,753
8,687
-
-
-
-
-
-
37,456
1,627
39,083
(39,083)
191,320
25,219
51,389
5,398
273,326
78,257
99,943
19,245
197,445
75,881
(5,609)
(31,551)
38,721
10,145
28,576
1.71
Revenue
Interest income
Lease revenue
Commissions earned
Charges and fees
Operating expenses
Bad debts
Other operating expenses
Depreciation and amortization
Operating income (loss)
Other loss
Finance costs
Income before income taxes
Income taxes
Net income
Diluted earnings per share
60
($ IN 000'S EXCEPT EARNINGS PER SHARE)
EASYFINANCIAL
EASYHOME
CORPORATE
TOTAL
THREE MONTHS ENDED DECEMBER 31, 2021
Revenue
Interest income
Lease revenue
Commissions earned
Charges and fees
Operating expenses
Bad debts
Other operating expenses
Depreciation and amortization
Operating income (loss)
Other income
Finance costs
Income before income taxes
Income taxes
Net income
Diluted earnings per share
Portfolio Performance
Consumer Loans Receivable
149,004
-
42,676
4,335
196,015
56,058
43,539
8,775
108,372
87,643
6,525
27,663
3,234
993
38,415
2,582
15,981
11,402
29,965
8,450
-
-
-
-
-
-
14,976
1,488
16,464
(16,464)
155,529
27,663
45,910
5,328
234,430
58,640
74,496
21,665
154,801
79,629
8,371
(22,281)
65,719
15,758
49,961
2.90
Loan originations in the three-month period ended December 31, 2022 were $632.4 million, up 24.8% compared to the same period of 2021. The
consumer loan portfolio grew by $206.0 million during the quarter, compared to $133.6 million in the same period of 2021. Gross consumer loans
receivable increased from $2.03 billion as at December 31, 2021 to $2.79 billion as at December 31, 2022, an increase of $764.4 million, or 37.6%.
The increase in consumer loans receivable was driven by record originations across several of the Company’s products and acquisition channels.
The Company experienced better than anticipated performance from home equity loans, automotive financing, and cross-selling activity across
its consumer base.
Total annualized yield, including loan interest, fees and ancillary products, realized by the Company on its average consumer loans receivable was
36.2% in the three-month period ended December 31, 2022, down approximately 520 bps from the comparable period of 2021. Total annualized
yield decreased due to i) organic growth of certain products which carry lower rates of interest such as home equity loans, automotive financing,
point-of-sale financing in powersports, home improvement, and healthcare and retail categories; ii) increased lending activity in the province
of Quebec, where loans have lower rates of interest; iii) a higher proportion of larger dollar value loans which have reduced pricing on certain
ancillary products; iv) a modest reduction in penetration rates on ancillary products; and v) the Company’s strategy to reward borrowers for on-
time payment behaviour, by gradually reducing the rate of interest charged.
Bad debts increased to $78.3 million for the three-month period ended December 31, 2022, from $58.6 million during the same period of 2021, an
increase of $19.6 million, or 33.5%. The following table details the components of bad debt expense.
($ IN 000’S)
Provision required due to net charge offs
Impact of loan book growth
Impact of change in provision rate during the period
Net change in allowance for credit losses
Bad debt
THREE MONTHS ENDED
DECEMBER 31, 2022
DECEMBER 31, 2021
61,511
14,346
2,400
16,746
78,257
47,399
10,301
940
11,241
58,640
61
Bad debts increased by $19.6 million due to the following factors:
(i) Net charge offs increased from $47.4 million in the fourth quarter of 2021, to $61.5 million in the current quarter, an increase of
$14.1 million. Net charge offs in the quarter, as a percentage of average gross consumer loans receivable on an annualized basis,
were 9.0%, down by 60 bps, compared to 9.6% reported in the same quarter of 2021. The decrease in the net charge off rate
reflects the improved product and credit mix of the loan portfolio and credit model enhancements and underwriting adjustments
in recent periods to improve long-term credit quality of the loan portfolio. The Company’s net charge off rate was in line with the
Company’s targeted range for 2022 of 8.5% to 10.5%.
ii) The Company’s loan portfolio for the three-month period ended December 31, 2021 increased by $133.6 million, resulting in a
provision expense of $10.3 million, compared to loan book growth of $206.0 million for the three-month period ended December
31, 2022, which resulted in a provision expense of $14.3 million.
iii) The impact of provision rate changes during the quarter resulted in bad debts of $2.4 million, compared to $0.9 million in the
same period of 2021. The provision rate for the fourth quarter of 2022 decreased to 7.62% from 7.87% in the same period of 2021,
primarily due to continued improvement in the product and credit mix of the loan portfolio.
easyhome Leasing Portfolio
The leasing portfolio as measured by potential monthly leasing revenue as at December 31, 2022 was $7.9 million, down from $8.2 million
reported as at December 31, 2021. The easyhome leasing business is a mature business that has experienced a long-term gradual decline
in sales volume, as consumer demand has shifted into alternate forms of financing purchases of everyday household items.
Revenue
Revenue for the three-month period ended December 31, 2022 was $273.3 million, an increase of $38.9 million, or 16.6%, compared to
the same period of 2021. Revenue growth was driven mainly by the organic growth of the Company’s consumer loan portfolio.
easyfinancial – Revenue for the three-month period ended December 31, 2022 was $235.9 million, an increase of $39.9 million, compared
to the same period of 2021. Components of the increased revenue include:
(i) Interest income increased by $34.3 million, or 23.0%, driven by growth in the loan portfolio, which includes growth of home equity
loans, automotive financing and cross-selling activity across its consumer base, partially offset by lower interest yields;
(ii) Commissions earned on the sale of ancillary products and services increased by $5.3 million, or 12.5%, due to the larger consumer
loan portfolio and lower claims costs associated with the Company’s loan protection program; and
(iii) Charges and fees was relatively flat to the same quarter of 2021.
easyhome – Revenue for the three-month period ended December 31, 2022 was $37.4 million, a decrease of $1.0 million, compared to the
same period of 2021. Lending revenue within the easyhome stores increased by $1.7 million, compared to the same quarter of 2021. Traditional
leasing revenue, including fees, was $2.7 million lower compared to the same quarter of 2021. Components of the decreased revenue include:
(i) Interest income increased by $1.5 million due to the growth of the consumer loans receivable portfolio related to the easyhome
business;
(ii) Lease revenue decreased by $2.4 million due to a smaller lease portfolio;
(iii) Commissions earned on the sale of ancillary products was relatively flat to the same quarter of 2021.
Other Operating Expenses
Other operating expenses were $99.9 million for the three-month period ended December 31, 2022, an increase of $25.4 million, or
34.2%, from the comparable period in 2021. The increase in other operating expenses was mainly driven by the one-time write off of
an intangible asset and higher operating costs to support the growing loan portfolio, partially offset by non-recurring integration costs
incurred in the same period of 2021 related to the acquisition of LendCare.
easyfinancial – Other operating expenses were $47.5 million for the three-month period ended December 31, 2022, an increase of $4.0
million, or 9.2%, from the comparable period of 2021. The increase in other operating expenses was driven by incremental volume
related costs to operate and manage the growing loan portfolio. easyfinancial locations increased from 294 as at December 31, 2021 to
302 as at December 31, 2022.
62
easyhome – Other operating expenses were $14.9 million for the three-month period ended December 31, 2022, a decrease of $1.0
million, or 6.5%, from the comparable period of 2021. The increase in other operating expenses was driven by higher advertising and
marketing spending to expand brand awareness and increased other store costs to support the growth in loan originations.
Corporate – Other operating expenses were $37.5 million for the three-month period ended December 31, 2022, an increase of $22.5
million, or 150.1%, from the comparable period of 2021. The increase was primarily due to the one-time write off of an intangible asset
and higher technology costs, partially offset by lower non-recurring LendCare integration costs in 2021. Excluding the integration costs
and the one-time write off of an intangible asset, corporate expenses before depreciation and amortization represented 6.2% of revenues
in the fourth quarter of 2022, compared to 4.9% for the same quarter of 2021.
Depreciation and Amortization
Depreciation and amortization for the three-month period ended December 31, 2022 was $19.2 million, a decrease of $2.4 million,
or 11.2%, from the comparable period of 2021, driven primarily by lower depreciation of lease assets and amortization of intangible
assets, partially offset by higher depreciation of right-of-use assets due to new retail premises lease agreements in the period. Overall,
depreciation and amortization represented 7.0% of revenues for the three-month period ended December 31, 2022, compared to 9.2%
for the same period of 2021.
easyfinancial – Depreciation and amortization was $6.8 million for the three-month period ended December 31, 2022, a decrease of
$1.9 million, or 22.0%, from the comparable period of 2021. The decrease was primarily due to the reversal of an impairment reserve
recognized on the existing core loan management software recognized in prior periods.
easyhome – Depreciation and amortization was $10.8 million for the three-month period ended December 31, 2022, $0.6 million or 5.5%
lower than the comparable period of 2021, mainly due to a smaller lease asset portfolio.
Corporate – Depreciation and amortization was $1.6 million in the three-month period ended December 31, 2022, relatively flat from the
comparable period of 2021.
Operating Income (Income before Finance Costs and Income Taxes)
Operating income for the three-month period ended December 31, 2022 was $75.9 million, down $3.7 million, or 4.7%, compared to the
same period of 2021. The Company reported an operating margin of 27.8% for the quarter, down from 34.0% reported in the comparable
period of 2021. Excluding the effects of the adjusting items discussed in the “Key Performance Indicators and Non-IFRS Measures”
section, the Company reported record adjusted operating income for the three-month period ended December 31, 2022 of $99.7 million,
up $13.4 million, or 15.5%, from the comparable period of 2021. The increase in adjusted operating income was mainly driven by higher
revenue during the period associated with the larger consumer loan portfolio, partially offset by higher operating expenses. The Company
reported an adjusted operating margin1 of 36.5% for the quarter, down from 36.8% reported in the same period of 2021. The decline in
operating margin was mainly due to higher net charge offs and a higher level of allowance for credit losses related to the record loan
growth experienced during the quarter.
easyfinancial – Operating income for the three-month period ended December 31, 2022 was $106.3 million, an increase of $18.6 million, or
21.3%, compared to the same period of 2021. The improved operating income was driven by continued organic growth in the Company’s
loan portfolio. easyfinancial revenue increased by $39.9 million, partially offset by an increase of $19.2 million in bad debt expense
and an increase of $2.1 million in other operating expenses to support the growing customer base and enhance product offerings.
easyfinancial’s operating margin in the quarter was 45.1%, compared to 44.7% in the same period of 2021. The improvement in operating
margin was mainly due to increased revenue and lower bad debts due to the continued improvement in the product and credit mix of the
loan portfolio.
easyhome – Operating income for the three-month period ended December 31, 2022 was $8.7 million compared to $8.5 million for the
same period of 2021, an increase of $0.2 million, or 2.8%. The increase was mainly driven by higher lending revenues, partially offset by
decreased leasing revenues due to smaller leasing portfolio. Operating margin for the three-month period ended December 31, 2022
was 23.2%, an increase from 22.0% for the same period of 2021.
Other Income
During the three-month period ended December 31, 2022, the Company recognized investment losses of $5.6 million mainly due to a fair
value loss on the Company’s investment in Affirm, compared to $8.4 million of investment income in the same period of 2021 mainly due
to fair value gains on the investment in Affirm and its related TRS.
63
Finance Costs
Finance costs for the three-month period ended December 31, 2022 were $31.6 million, an increase of $9.3 million, or 41.6%, from the same
period of 2021. The increase was mainly driven by higher borrowing levels to fund growth of the Company’s lending business and a higher cost
of borrowing. The average blended interest rate on drawn balances for the Company’s debt as at December 31, 2022, was 5.2%, up from 4.9%
as at December 31, 2021.
Income Tax Expense
The effective income tax rate for the three-month period ended December 31, 2022 was 26.2%, higher than the 24.0% reported in the comparable
period of 2021. The increase was mainly due to the fair value losses on investments, compared to the fair value gains on investments in the
three-month period ended December 31, 2021, which are being taxed at a lower capital gains effective tax rate.
Net Income and Diluted Earnings Per Share
The Company’s net income for the three-month period ended December 31, 2022 was $28.6 million, or $1.71 per share on a diluted basis, down
42.8% and 41.0%, respectively, compared to $50.0 million, or $2.90 per share on a diluted basis for the same period of 2021. Excluding the
effects of adjusting items discussed in the “Key Performance Indicators and Non-IFRS Measures” section, goeasy achieved record adjusted net
income and record adjusted diluted earnings per share during the three-month period ended December 31, 2022 of $51.0 million and $3.05 per
share on a diluted basis, respectively. Adjusted net income and adjusted diluted earnings per share increased by 7.1% and 10.5%, respectively,
compared to the same period of 2021. The increase in adjusted net income was primarily driven by the record revenue, partially offset by the
corresponding incremental loan volume related costs and finance costs required to support the growing loan portfolio.
Selected Quarterly Information
($ IN MILLIONS EXCEPT PERCENTAGES
AND PER SHARE AMOUNTS)
DECEMBER
20223
SEPTEMBER
20223
JUNE
20223
MARCH
20223
DECEMBER
20213
SEPTEMBER
20213
JUNE
20213
MARCH
2021
DECEMBER
2020
Gross consumer loans
receivable
Revenue
Net income
Adjusted net income2
Return on assets
Adjusted return on assets2
Return on equity
Adjusted return on equity2
Return on tangible
common equity2
Adjusted return on
tangible common equity2
Net income as a percentage of
revenue
Adjusted net income as a
percentage of revenue2
Earnings per share1
Basic
Diluted
Adjusted diluted2
2,794.7
2,588.7
2,369.8
2,154.3
2,030.3
1,896.7
1,795.8
1,277.3
1,246.8
273.3
262.2
251.7
232.1
234.4
219.8
202.4
170.2
173.2
28.6
51.0
3.6%
6.3%
13.8%
24.6%
47.2
48.6
6.3%
6.5%
38.3
46.8
5.5%
6.7%
26.1
45.8
4.0%
6.9%
50.0
47.6
7.9%
7.5%
63.5
46.7
10.3%
7.6%
19.5
43.7
3.8%
8.6%
112.0
36.7
28.8%
9.4%
24.2%
24.9%
20.2%
24.7%
13.5%
23.8%
25.0%
23.9%
32.7%
12.0%
90.1%
24.0%
26.9%
29.5%
48.9
35.0
13.6%
9.8%
45.8%
32.8%
21.8%
38.5%
33.0%
22.8%
39.8%
52.3%
16.8%
94.2%
48.2%
35.9%
37.7%
38.0%
36.5%
36.2%
37.1%
34.8%
30.8%
34.5%
10.5%
18.0%
15.2%
11.2%
21.3%
28.9%
9.6%
65.8%
28.2%
18.7%
18.5%
18.6%
19.7%
20.3%
21.2%
21.6%
21.6%
20.2%
1.74
1.71
3.05
2.92
2.86
2.95
2.37
2.32
2.83
1.59
1.55
2.72
3.00
2.90
2.76
3.79
3.66
2.70
1.20
1.16
2.61
7.41
7.14
2.34
3.24
3.14
2.24
1 Quarterly earnings per share are not additive and may not equal the annual earnings per share reported. This is due to the effect of shares issued or repurchased during the period on the basic
weighted average number of Common Shares (as defined herein) outstanding together with the effects of rounding.
2 Adjusted net income is a non-IFRS measure. Adjusted diluted earnings per share, adjusted return on equity, adjusted return on assets and reported and adjusted return on tangible common equity
are non-IFRS ratios. See descriptions in “Key Performance Indicators and Non-IFRS Measures” section. Please refer to page 38 of the September 30, 2022 MD&A, page 37 of the June 30, 2022 MD&A,
page 27 of the March 31, 2022 MD&A, page 50 of the December 31, 2021 MD&A, page 37 of the September 30, 2021 MD&A, page 39 of the June 30, 2021 MD&A, page 25 of the March 31, 2021 MD&A,
and page 42 of the December 31, 2020 MD&A for the respective “Key Performance Indicators and Non-IFRS Measures” section for those periods. These MD&As are available on www.sedar.com.
3 During the second quarter of 2021, the Company acquired LendCare. The selected quarterly information for the periods beginning June 30, 2021 include financial information related to LendCare.
64
Key financial measures for each of the last nine quarters are summarized in the table above and include the gross consumer loans
receivable, revenue, net income, earnings per share, return on assets, return on equity, return on tangible common equity, and net
income as a percentage of revenue over this timeframe. Revenue growth over this timeframe was primarily related to the growth of
gross consumer loans receivable. The larger revenue base together with operating expense management, increased the Company’s
adjusted net income and adjusted earnings per share. Adjusted return on assets, adjusted return on equity and adjusted return on
tangible common equity have increased in prior quarters due to increasing earnings generated by the business, declining in the most
recent quarter due to the higher level of assets and shareholders’ equity from the $57.9 million bought deal equity offering in support
of future growth.
Portfolio Analysis
The Company generates its revenue from portfolios of consumer loans receivable and lease agreements. To a large extent, the Company’s
financial results are determined by the performance of these portfolios. The composition of these portfolios at the end of a period are a
significant indicator of future financial 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 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 consolidated financial statements. The Company discusses these measures
because it believes they facilitate the understanding of the results of its operations and financial position.
Consumer Loans Receivable
Loan Originations and Net Principal Written
Gross loan originations is the value of all consumer loans receivable advanced to the Company’s customers during a 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 may be applied to eliminate a prior borrowing. When the Company extends additional credit to an existing customer, a
centralized credit analysis or full credit underwriting is performed using up-to-date information. Additionally, the loan repayment history of
that customer throughout their relationship with the Company, along with their other borrowing and repayment activities, are considered
in the credit decision. As a result, the quality of the credit decision made when evaluating an existing or prior customer is improved and has
historically resulted in better performance. No additional credit is extended to a customer whose loan is delinquent.
Net principal written is a non-IFRS measure capturing the Company’s gross loan originations during a period, excluding the portion of the
originations used to repay prior borrowings. The Company uses net principal written, among other measures, to assess the operating
performance of its lending business. Non-IFRS measures are not determined in accordance with IFRS, do not have standardized meanings
and may not be comparable to similar financial measures presented by other companies.
Gross loan originations and net principal written during the period were as follows:
($ IN 000’S)
Gross loan originations
Loan originations to new customers
Loan originations to existing customers
Less: Proceeds applied to repay existing loans
Net advance to existing customers
THREE MONTHS ENDED
YEAR ENDED
DECEMBER 31, 2022 DECEMBER 31, 2021 DECEMBER 31, 2022 DECEMBER 31, 2021
632,355
299,458
332,897
(177,848)
155,049
506,853
2,377,606
1,594,480
215,939
1,117,146
693,774
290,914
(152,153)
138,761
1,260,460
(649,509)
610,951
900,706
(486,627)
414,079
Net principal written
454,507
354,700
1,728,097
1,107,853
65
Gross Consumer Loans Receivable
The Company measures the size of its lending portfolio in terms of 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 the number of customers and average loan value per customer. Changes in gross
consumer loans receivable during the periods were as follows:
($ IN 000’S)
DECEMBER 31, 2022 DECEMBER 31, 2021 DECEMBER 31, 2022 DECEMBER 31, 2021
THREE MONTHS ENDED
YEAR ENDED
Opening gross consumer loans receivable
2,588,656
1,896,716
2,030,339
1,246,840
Gross loan originations
Gross loan purchased
Gross principal payments and other adjustments
Gross charge offs before recoveries
Net growth in gross consumer loans receivable
during the period
632,355
-
(355,334)
(70,983)
506,853
2,377,606
-
(321,412)
(51,818)
-
(1,359,667)
(253,584)
1,594,480
444,520
(1,093,566)
(161,935)
206,038
133,623
764,355
783,499
Ending gross consumer loans receivable
2,794,694
2,030,339
2,794,694
2,030,339
The scheduled principal repayment aging analyses of the gross consumer loans receivable portfolio as at December 31, 2022 and 2021
are as follows:
($ IN 000’S EXCEPT PERCENTAGES)
$
% OF TOTAL
$
% OF TOTAL
DECEMBER 31, 2022
DECEMBER 31, 2021
0 – 6 months
6 – 12 months
12 – 24 months
24 – 36 months
36 – 48 months
48 – 60 months
60 months+
236,026
161,441
363,437
433,895
480,990
346,560
772,345
8.4%
5.8%
13.0%
15.5%
17.2%
12.4%
27.7%
220,383
160,914
351,028
408,762
332,049
229,782
327,421
10.9%
7.9%
17.3%
20.1%
16.4%
11.3%
16.1%
Gross consumer loans receivable
2,794,694
100.0%
2,030,339
100.0%
Gross consumer loans receivable with principal repayments beyond 60 months as at December 31, 2022 increased by 1,160 bps,
compared to December 31, 2021, primarily due to the shift in product mix towards a higher proportion of secured loans, which have
longer payment terms.
Gross consumer loans receivable portfolio categorized by the contractual time to maturity as at December 31, 2022 and 2021 are
summarized as follows:
($ IN 000’S EXCEPT PERCENTAGES)
$
% OF TOTAL
$
% OF TOTAL
DECEMBER 31, 2022
DECEMBER 31, 2021
0 – 1 year
1 – 2 years
2 – 3 years
3 – 4 years
4 – 5 years
5 years +
Gross consumer loans receivable
65,485
139,143
312,612
573,567
493,336
1,210,551
2,794,694
2.3%
5.0%
11.2%
20.5%
17.7%
43.3%
60,319
155,957
347,331
501,830
473,096
491,806
100.0%
2,030,339
3.0%
7.7%
17.1%
24.7%
23.3%
24.2%
100.0%
Gross consumer loans receivable with contractual times to maturity beyond 5 years as at December 31, 2022 increased by 1,910 bps,
compared to December 31, 2021, primarily due to the shift in product mix towards a higher proportion of secured loans, which have
longer payment terms.
66
Loans are originated and serviced by both the easyfinancial and easyhome reportable segments. A breakdown of gross consumer loans
receivable between these segments is as follows:
($ IN 000’S EXCEPT PERCENTAGES)
$
% OF TOTAL
$
% OF TOTAL
DECEMBER 31, 2022
DECEMBER 31, 2021
Gross consumer loans receivable, easyfinancial
Gross consumer loans receivable, easyhome
Gross consumer loans receivable
2,705,943
88,751
2,794,694
96.8%
3.2%
100.0%
1,960,517
69,822
2,030,339
96.6%
3.4%
100.0%
Financial Revenue and Net Financial Income
Financial revenue, a non-IFRS measure, is generated by both the easyfinancial and easyhome reportable segments. Financial revenue
includes interest and various other ancillary fees generated by the Company’s gross consumer loans receivable. Financial revenue is
calculated as total Company revenue less leasing revenue from the easyhome reportable segment.
Net financial income is a non-IFRS measure that details the profitability of the Company’s gross consumer loans receivable before costs to originate
or administer. Net financial income is calculated by deducting interest expense, amortization of deferred financing charges and bad debt expense
from financial revenue. Net financial income is impacted by the size of gross consumer loans receivable, portfolio yield, amount and cost of the
Company’s debt, the Company’s leverage ratio and bad debt expense incurred in the period. The Company uses net financial income, among other
measures, to assess the operating performance of its loan portfolio. Non-IFRS measures are not determined in accordance with IFRS, do not have
standardized meanings and may not be comparable to similar financial measures presented by other companies.
($ IN 000’S)
DECEMBER 31, 2022 DECEMBER 31, 2021 DECEMBER 31, 2022 DECEMBER 31, 2021
THREE MONTHS ENDED
YEAR ENDED
Total Company revenue
Less: Leasing revenue
Financial revenue
Less: Financial costs
Add: Interest expense on lease liabilities
Less: Bad debt expense
Net financial income
273,326
(26,772)
246,554
(31,551)
991
(78,257)
137,737
234,430
(29,456)
204,974
(22,281)
821
(58,640)
1,019,336
(110,053)
909,283
(107,972)
3,577
(272,893)
826,722
(119,585)
707,137
(79,025)
3,115
(182,084)
124,874
531,995
449,143
Total Yield on Consumer Loans as a Percentage of Average Gross Consumer Loans Receivable
Total yield on consumer loans as a percentage of average gross consumer loans receivable is a non-IFRS ratio and is calculated as the
financial revenue generated, including revenue generated on the sale of ancillary products, on the Company’s gross consumer loans
receivable, divided by the average of the month-end loan balances for the indicated period. For interim periods, the rate is annualized. The
Company uses total yield on gross consumer loans as a percentage of average gross consumer loans receivable, among other measures,
to assess the operating performance of its loan portfolio.
($ IN 000’S EXCEPT PERCENTAGES)
DECEMBER 31, 2022 DECEMBER 31, 2021 DECEMBER 31, 2022 DECEMBER 31, 2021
THREE MONTHS ENDED
YEAR ENDED
Total Company revenue
Less: Leasing revenue
Financial revenue
Multiplied by number of periods in year
Divided by average gross consumer loans
receivable
Total yield on consumer loans as a percentage
of average gross consumer loans receivable
(annualized)
273,326
(26,772)
246,554
X 4
234,430
(29,456)
204,974
X 4
1,019,336
(110,053)
909,283
X 4/4
826,722
(119,585)
707,137
X 4/4
2,726,446
1,982,680
2,409,890
1,680,328
36.2%
41.4%
37.7%
42.1%
67
Net Charge Offs
In addition to loan originations, gross consumer loans receivable are impacted by charge offs. Unsecured customer loan balances that are
delinquent greater than 90 days and secured customer loan balances that are delinquent greater than 180 days are charged off. In addition,
customer loan balances are charged off upon notification that the customer is bankrupt, following a detailed review of the filing. Subsequent
collections of previously charged off accounts are netted against 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 gross consumer loans receivable. For interim periods, the rate is annualized.
($ IN 000’S EXCEPT PERCENTAGES)
DECEMBER 31, 2022 DECEMBER 31, 2021 DECEMBER 31, 2022 DECEMBER 31, 2021
THREE MONTHS ENDED
YEAR ENDED
Net charge offs against allowance
Multiplied by number of periods in year
Divided by average gross consumer loans
receivable
Net charge offs as a percentage of average gross
consumer loans receivable (annualized)
Allowance for Credit Losses
61,511
X 4
47,399
X 4
219,614
X 4/4
147,998
X 4/4
2,726,446
1,982,680
2,409,890
1,680,328
9.0%
9.6%
9.1%
8.8%
The allowance for expected credit losses is a provision that is reported on the Company’s statement of financial position that is netted
against gross consumer loans receivable to arrive at net consumer loans receivable. The allowance for expected credit losses provides
for credit losses that are expected to transpire in future periods. Customer loans for which we have received a notification of bankruptcy,
unsecured customer loan balances that are delinquent greater than 90 days and secured customer loan balances that are delinquent
greater than 180 days are charged off against the allowance for loan losses.
THREE MONTHS ENDED
YEAR ENDED
($ IN 000’S EXCEPT PERCENTAGES)
DECEMBER 31, 2022 DECEMBER 31, 2021 DECEMBER 31, 2022 DECEMBER 31, 2021
Allowance for credit losses, beginning of period
Net charge offs against allowance
Bad debt expense
Allowance for credit losses, end of period
Allowance for credit losses as a percentage of
the ending gross consumer loans receivable
196,295
(61,511)
78,257
213,041
7.62%
148,521
(47,399)
58,640
159,762
7.87%
159,762
(219,614)
272,893
213,041
125,676
(147,998)
182,084
159,762
7.62%
7.87%
IFRS 9 requires that Forward Looking Indicators (“FLIs”) be considered when determining the allowance for credit losses. Historically, the
four key macroeconomic variables contributing to credit risk and losses within the Company’s loan portfolio have been: unemployment
rates, inflation rates, gross domestic product (“GDP”) growth and the price of oil. Analysis performed by the Company determined that
a forecasted increase in the rates of unemployment and inflation, a decrease in the expected future price of oil from current rates or
a decrease in the rate of GDP growth has historically tended to increase charge offs. Conversely, a forecasted decrease in the rate of
unemployment, rate of inflation, an increase in the expected future price of oil from the rates or an increase in the GDP growth rate has
historically tended to decrease charge offs.
In calculating the allowance for credit losses, internally developed models were used, which factor in credit risk related parameters
including probability of default, exposure at default, loss given default and other relevant risk factors. As part of the process, the Company
employed five distinct forecast scenarios, derived from FLI forecasts produced by Moody’s Analytics, which include neutral, moderately
optimistic, extremely optimistic, moderately pessimistic and extremely pessimistic scenarios. These scenarios use a combination of four
inter-related macroeconomic variables, being unemployment rates, GDP, inflation rates and oil prices, to determine a probability weighted
allowance. Management judgment is then applied to the recommended probability weightings to these scenarios to determine a probability
weighted allowance for credit losses.
68
The following table shows the key macroeconomic variables used in the determination of the probability weighted allowance during the
forecast periods as at December 31, 2022 and 2021, respectively.
12-MONTH FORWARD-LOOKING
MACROECONOMIC VARIABLES
(AVERAGE ANNUAL)
NEUTRAL
MODERATELY
OPTIMISTIC
EXTREMELY
OPTIMISTIC
MODERATELY
PESSIMISTIC
EXTREMELY
PESSIMISTIC
December 31, 2022
Unemployment rate1
GDP growth rate2
Inflation growth rate3
Oil prices4
December 31, 2021
Unemployment rate1
GDP growth rate2
Inflation growth rate3
Oil prices4
6.07%
0.15%
4.08%
$86.85
5.81%
3.78%
3.07%
$67.34
5.28%
1.20%
3.78%
$89.40
5.02%
6.36%
3.64%
$69.02
4.59%
2.08%
3.46%
$91.49
4.33%
9.03%
4.14%
$72.75
8.30%
(1.88%)
4.95%
$71.65
8.04%
(2.18%)
2.38%
$42.25
9.72%
(3.08%)
5.31%
$60.58
9.45%
(6.91%)
1.79%
$38.69
1 An average of the projected monthly unemployment rates over the next 12-month forecast period.
2 A projected year-over-year GDP growth rate.
3 A projected year-over-year inflation growth rate.
4 An average of the projected monthly oil prices over the next 12-month forecast period.
The assignment of the probability weighting for the various scenarios using these variables involves management judgment through a robust
internal review and analysis to arrive at a collective view on the likelihood of each scenario taking into account current economic conditions
and the implications for near-term macroeconomic performance. If management were to assign 100% probability to the extremely pessimistic
scenario forecast, the allowance for credit losses would have been $31.4 million (December 31, 2021 - $24.7 million) higher than the reported
allowance for credit losses as at December 31, 2022. This sensitivity above does not consider the migration of exposure and/or changes in
credit risk that would have occurred in the loan portfolio due to risk mitigation actions or other factors.
Aging of the Gross Consumer Loans receivable
An aging analysis of gross consumer loans receivable at the end of the periods was as follows:
($ IN 000’S EXCEPT PERCENTAGES)
$
% OF TOTAL
$
% OF TOTAL
DECEMBER 31, 2022
DECEMBER 31, 2021
Current
Days past due
1 - 30 days
31 - 44 days
45 - 60 days
61 - 90 days
91 - 120 days
121 - 150 days
151 - 180 days
Gross consumer loans receivable
2,628,884
94.1%
1,909,110
94.1%
86,687
22,027
18,245
25,285
6,157
5,020
2,389
165,810
2,794,694
3.1%
0.8%
0.6%
0.9%
0.2%
0.2%
0.1%
5.9%
100.0%
71,505
14,417
12,358
14,966
3,350
2,792
1,841
121,229
2,030,339
3.5%
0.7%
0.6%
0.7%
0.2%
0.1%
0.1%
5.9%
100.0%
A large portion of the Company’s gross consumer loans receivable 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 fiscalperiod ends. An alternate aging analysis prepared as of the last Saturday of the fiscal periods may present a more
relevant comparison.
69
Aging analysis of the gross consumer loans receivable 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
91 - 120 days
121 - 150 days
151 - 180 days
SATURDAY,
DECEMBER 31, 2022
SATURDAY,
DECEMBER 25, 2021
% OF TOTAL
% OF TOTAL
94.1%
93.8%
3.1%
0.8%
0.6%
0.9%
0.2%
0.2%
0.1%
5.9%
3.7%
0.7%
0.7%
0.7%
0.2%
0.1%
0.1%
6.2%
Gross consumer loans receivable
100.0%
100.0%
Consumer Loans receivable by Geography
At the end of the years, the Company’s gross consumer loans receivable were allocated among 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, 2022
DECEMBER 31, 2021
$
% OF TOTAL
$
% OF TOTAL
82,931
137,746
18,027
123,635
349,936
1,059,314
113,146
129,596
465,297
290,711
24,355
3.0%
4.9%
0.6%
4.4%
12.5%
37.9%
4.0%
4.6%
16.7%
10.4%
1.0%
65,514
104,654
13,395
93,522
243,865
762,981
86,681
99,365
329,465
210,611
20,286
3.2%
5.2%
0.7%
4.6%
12.0%
37.6%
4.3%
4.9%
16.2%
10.4%
0.9%
Gross consumer loans receivable
2,794,694
100.0%
2,030,339
100.0%
Consumer Loans receivable by Loan Type
At the end of the periods, the allocation of the Company’s gross consumer loans receivable based on loan type is as follows:
($ IN 000’S EXCEPT PERCENTAGES)
Unsecured Instalment Loans
Secured Instalment Loans1
Gross consumer loans receivable
DECEMBER 31, 2022
DECEMBER 31, 2021
$
% OF TOTAL
$
% OF TOTAL
1,703,593
1,091,101
2,794,694
61.0%
39.0%
100.0%
1,364,696
665,643
2,030,339
67.2%
32.8%
100.0%
1 Secured instalment loans include loans secured by real estate, personal property or a Notice of Security Interest.
Leasing Portfolio Analysis
Potential Monthly Leasing Revenue
Potential monthly leasing revenue is a supplementary financial measure. The Company measures its leasing portfolio and the performance of its
easyhome business through potential monthly leasing revenue. Potential monthly leasing revenue reflects the lease revenue that the Company’s
portfolio of leased merchandise would generate in a month providing it collected all lease payments contractually due in that period, but excludes
revenue generated by certain ancillary products. Potential monthly leasing revenue is an important indicator of the future revenue generating
potential of the Company’s lease portfolio. Potential monthly leasing revenue is calculated as the number of lease agreements outstanding,
multiplied by the average required monthly lease payment per agreement.
70
Potential monthly lease revenue is calculated as follows:
Total number of lease agreements
Multiplied by the average required monthly lease
payment per agreement
Potential monthly leasing revenue ($ in 000’s)
DECEMBER 31,2022
DECEMBER 31, 2021
73,895
106.47
7,868
79,776
102.70
8,193
The change in the potential monthly lease revenue during the periods was as follows:
THREE MONTHS ENDED
YEAR ENDED
($ IN 000’S)
DECEMBER 31, 2022 DECEMBER 31, 2021 DECEMBER 31, 2022 DECEMBER 31, 2021
Opening potential monthly lease revenue
Decrease due to store closures or sales during the period
Increase (decrease) due to ongoing operations
Net change
Ending potential monthly leasing revenue
7,623
(24)
269
245
7,868
8,160
(27)
60
33
8,193
8,193
(111)
(214)
(325)
7,868
8,461
(49)
(219)
(268)
8,193
Potential Monthly Leasing Revenue by Product Category
At the end of the periods, the Company’s leasing portfolio, as measured by potential monthly leasing revenue was allocated among the
following product categories:
($ IN 000’S EXCEPT PERCENTAGES)
$
% OF TOTAL
$
% OF TOTAL
DECEMBER 31, 2022
DECEMBER 31, 2021
Furniture
Electronics
Appliances
Computers
Potential monthly leasing revenue
Potential Monthly Leasing Revenue by Geography
3,238
2,626
1,119
885
7,868
41.2%
33.4%
14.2%
11.2%
100.0%
3,380
2,656
1,140
1,017
8,193
41.3%
32.4%
13.9%
12.4%
100.0%
At the end of the periods, the Company’s leasing portfolio as measured by potential monthly leasing revenue, was allocated among 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
Potential monthly leasing revenue
DECEMBER 31, 2022
DECEMBER 31, 2021
$
% OF TOTAL
$
% OF TOTAL
688
753
136
642
552
2,442
233
356
1,217
849
7,868
8.7%
9.6%
1.7%
8.2%
7.0%
31.0%
3.0%
4.5%
15.5%
10.8%
100.0%
699
810
140
648
586
2,571
234
383
1,244
878
8,193
8.4%
9.9%
1.7%
7.9%
7.2%
31.4%
2.9%
4.7%
15.2%
10.7%
100.0%
71
Leasing Charge offs as a Percentage of Leasing Revenue
The Company’s leasing charge offs as a percentage of leasing revenue is a non-IFRS ratio. When easyhome 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. easyhome leasing revenue is a non-IFRS measure and is calculated as total Company revenue
less financial revenue. The Company uses leasing charge offs as a percentage of leasing revenue, among other measures, to assess the
operating performance of its leasing portfolio. Non-IFRS ratios are not determined in accordance with IFRS, do not have standardized
meanings and may not be comparable to similar financial measures presented by other companies.
($ IN 000’S EXCEPT PERCENTAGES)
DECEMBER 31, 2022 DECEMBER 31, 2021 DECEMBER 31, 2022 DECEMBER 31, 2021
THREE MONTHS ENDED
YEAR ENDED
Depreciation of lease assets
Less: Lease asset amortization excluding net
charge offs
Net charge offs
Total Company revenue
Less: Financial revenue
Leasing revenue
Net charge offs as a percentage
of leasing revenue
8,516
(7,678)
838
273,326
(246,554)
26,772
9,157
33,547
35,844
(8,291)
866
234,430
(204,974)
29,456
(29,992)
3,555
1,019,336
(909,283)
110,053
(32,831)
3,013
826,722
(707,137)
119,585
3.1%
2.9%
3.2%
2.5%
Key Performance Indicators and Non-IFRS Measures
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 consolidated 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:
Adjusted Net Income and Adjusted Diluted Earnings Per Share
At various times, net income and diluted earnings per share may be affected by adjusting items that have occurred in the period and
impact the comparability of these measures with other periods. Adjusting items include items that are outside of normal business
activities and are significant in amount and scope, which management believes are not reflective of underlying business performance.
Adjusted net income and adjusted diluted earnings per share are non-IFRS measures. The Company defines: i) adjusted net income as
net income excluding such adjusting items; and ii) adjusted diluted earnings per share as diluted earnings per share excluding such
adjusting items. The Company believes that adjusted net income and adjusted diluted earnings per share are important measures of the
profitability of operations.
72
Items used to calculate adjusted net income and adjusted diluted earnings per share for the three-month periods and years ended
December 31, 2022 and 2021 include those indicated in the chart below:
($ IN 000'S EXCEPT EARNINGS PER SHARE)
DECEMBER 31, 2022 DECEMBER 31, 2021 DECEMBER 31, 2022 DECEMBER 31, 2021
THREE MONTHS ENDED
YEAR ENDED
Net income as stated
Impact of adjusting items
Bad debts
Day one loan loss provision on the acquired loans1
Other operating expenses
Write off of an intangible asset5
Corporate development costs6
Integration costs3
Transaction costs2
Depreciation and amortization
Amortization of acquired intangible assets4
Other loss (income)7
Finance costs
Transaction costs2
Total pre-tax impact of adjusting items
Income tax impact of above adjusting items
After-tax impact of adjusting items
Adjusted net income
Weighted average number of
diluted shares outstanding
Diluted earnings per share as stated
Per share impact of adjusting items
Adjusted diluted earnings per share
28,576
49,961
140,161
244,943
-
20,460
-
122
-
3,275
5,609
-
29,466
(7,016)
22,450
51,026
16,753
1.71
1.34
3.05
-
-
-
3,447
-
3,277
(8,371)
-
(1,647)
(670)
(2,317)
47,644
17,233
2.90
(0.14)
2.76
-
14,252
20,460
2,314
1,081
-
13,100
28,659
-
65,614
(13,514)
52,100
192,261
16,650
8.42
3.13
11.55
-
-
5,047
7,615
8,735
(114,876)
1,726
(77,501)
7,317
(70,184)
174,759
16,757
14.62
(4.19)
10.43
Adjusting items related to the LendCare Acquisition
1 Bad debt expense related to the day one loan loss provision on the acquired loan portfolio from LendCare.
2 Transaction costs included advisory and consulting costs, legal costs, and other direct transaction costs related to the acquisition of LendCare reported under Other operating expenses and loan
commitment fees related to the acquisition of LendCare reported under Finance costs.
3 Integration costs related to advisory and consulting costs, employee incentives, representation and warranty insurance costs, other integration costs related to the acquisition of LendCare and the
write off of certain software as a result of the integration with LendCare. Integration costs were reported under Other operating expenses.
4 Amortization of the $131 million intangible asset related to the acquisition of LendCare with an estimated useful life of ten years.
Adjusting item related to the write off of an intangible asset
5 During the fourth quarter of 2022, the Company decided to terminate its agreement with a third-party technology provider that was contracted in 2020 to develop a new loan management system.
After careful evaluation, the Company determined that the performance to date was unsatisfactory, and the additional investment necessary to complete the development was no longer economical,
relative to the anticipated business value and other available options. As such, the Company elected to write off capitalized software costs in 2022 in the amount of $20.5 million, associated with this
loan management system being developed by the third-party.
Adjusting item related to corporate development costs
6 Corporate development costs are related to the exploration of a strategic acquisition opportunity, which the Company elected to not pursue, including advisory, consulting and legal costs reported
under Other operating expenses.
Adjusting item related to other income (loss)
7 For the three-month periods and years ended December 31, 2022 and 2021, investment income (loss) is mainly due to fair value gains (losses) on the Company’s investment in Affirm and its related TRS.
73
Adjusted Net Income as a Percentage of Revenue
Adjusted net income as a percentage of revenue is a non-IFRS ratio. The Company believes that adjusted net income as a percentage of
revenue is an important measure of the profitability of the Company’s operations.
($ IN 000’S EXCEPT PERCENTAGES)
Net income as stated
After-tax impact of adjusting items1
Adjusted net income
Divided by revenue
Net income as a percentage of revenue
THREE MONTHS ENDED
DECEMBER 31,
2022
DECEMBER 31,
2022
(ADJUSTED)
DECEMBER 31,
2021
DECEMBER 31,
2021
(ADJUSTED)
28,576
-
28,576
273,326
10.5%
28,576
22,450
51,026
273,326
18.7%
49,961
-
49,961
234,430
21.3%
49,961
(2,317)
47,644
234,430
20.3%
1 For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.
($ IN 000’S EXCEPT PERCENTAGES)
Net income as stated
After-tax impact of adjusting items1
Adjusted net income
Divided by revenue
Net income as a percentage of revenue
YEAR ENDED
DECEMBER 31,
2022
DECEMBER 31,
2022
(ADJUSTED)
DECEMBER 31,
2021
DECEMBER 31,
2021
(ADJUSTED)
140,161
-
140,161
1,019,336
13.8%
140,161
52,100
192,261
1,019,336
18.9%
244,943
-
244,943
826,722
29.6%
244,943
(70,184)
174,759
826,722
21.1%
1 For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.
Adjusted Other Operating Expenses and Efficiency Ratio
Adjusted other operating expenses is a non-IFRS measure. The Company defines adjusted other operating expenses as other operating expenses
including depreciation of lease assets but excluding other operating expenses that are outside of normal business activities and are significant in
amount and scope. Efficiency ratio is a non-IFRS ratio. The Company defines efficiency ratio as adjusted other operating expenses divided by total
revenue. The Company believes efficiency ratio is an important measure of the profitability of the Company’s operations.
($ IN 000’S EXCEPT EARNINGS PER SHARE)
DECEMBER 31, 2022
DECEMBER 31, 2021
DECEMBER 31, 2022 DECEMBER 31, 2021
Other operating expenses as stated
99,943
74,496
332,730
284,749
THREE MONTHS ENDED
YEAR ENDED
Impact of adjusting items1
Other operating expenses
Write off of an intangible asset
Corporate development costs
Integration costs
Transaction costs
Depreciation and amortization
Depreciation of lease assets
Total impact of adjusting items
Adjusted other operating expenses
Total revenue
Efficiency ratio
(20,460)
-
(122)
-
8,516
(12,066)
87,877
273,326
32.2%
-
-
(3,447)
-
9,157
5,710
(20,460)
(2,314)
(1,081)
-
33,547
9,692
80,206
342,422
234,430
1,019,336
34.2%
33.6%
-
-
(5,047)
(7,615)
35,844
23,182
307,931
826,722
37.2%
1 For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.
74
Adjusted Operating Margin
Adjusted operating margin is a non-IFRS ratio. The Company defines adjusted operating margin as adjusted operating income divided
by revenue for the Company as a whole and for its reporting segments: easyfinancial and easyhome. The Company defines adjusted
operating income as operating income excluding adjusting items. The Company believes adjusted 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)
easyfinancial
Operating income
Divided by revenue
easyfinancial operating margin
easyhome
Operating income
Divided by revenue
easyhome operating margin
Total
Operating income
Other operating expenses1
Write off of an intangible asset
Integration costs
Depreciation and amortization1
Amortization of acquired intangible assets
Adjusted operating income
Divided by revenue
Total operating margin
THREE MONTHS ENDED
DECEMBER 31,
2022
DECEMBER 31,
2022
(ADJUSTED)
DECEMBER 31,
2021
DECEMBER 31,
2021
(ADJUSTED)
106,277
235,886
45.1%
8,687
37,440
23.2%
106,277
235,886
45.1%
8,687
37,440
23.2%
87,643
196,015
44.7%
8,450
38,415
22.0%
87,643
196,015
44.7%
8,450
38,415
22.0%
75,881
75,881
79,629
79,629
-
-
-
75,881
273,326
27.8%
20,460
122
3,275
99,738
273,326
36.5%
-
-
-
79,629
234,430
34.0%
-
3,447
3,277
86,353
234,430
36.8%
1 For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.
75
($ IN 000’S EXCEPT PERCENTAGES)
easyfinancial
Operating income
Divided by revenue
easyfinancial operating margin
easyhome
Operating income
Divided by revenue
easyhome operating margin
Total
Operating income
Bad debts1
YEAR ENDED
DECEMBER 31,
2022
DECEMBER 31,
2022
(ADJUSTED)
DECEMBER 31,
2021
DECEMBER 31,
2021
(ADJUSTED)
393,996
869,528
45.3%
34,578
149,808
23.1%
393,996
869,528
45.3%
34,578
149,808
23.1%
324,751
676,351
48.0%
36,861
150,371
24.5%
324,751
676,351
48.0%
36,861
150,371
24.5%
332,407
332,407
281,003
281,003
Day one loan loss provision on acquired loans
Other operating expenses1
Write off of an intangible asset
Corporate development costs
Integration costs
Transaction costs
Amortization of intangible assets1
Amortization of acquired intangible assets
Adjusted operating income
Divided by revenue
Total operating margin
-
-
-
-
-
-
332,407
1,019,336
-
20,460
2,314
1,081
-
13,100
369,362
1,019,336
32.6%
36.2%
1 For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.
-
-
-
-
-
-
281,003
826,722
34.0%
14,252
-
-
5,047
7,615
8,735
316,652
826,722
38.3%
Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and EBITDA Margin
EBITDA is a non-IFRS measure and EBITDA margin is a non-IFRS ratio. The Company defines EBITDA as earnings before interest, taxes,
depreciation and amortization, excluding depreciation of lease assets. EBITDA margin is calculated as EBITDA divided by revenue. The
Company uses EBITDA and EBITDA margin, among other measures, to assess the operating performance of its ongoing businesses.
($ IN 000’S EXCEPT PERCENTAGES)
DECEMBER 31, 2022
DECEMBER 31, 2021
DECEMBER 31, 2022 DECEMBER 31, 2021
THREE MONTHS ENDED
YEAR ENDED
Net income as stated
Finance costs
Income tax expense
Depreciation and amortization
Depreciation of lease assets
EBITDA
Divided by revenue
EBITDA margin
28,576
31,551
10,145
19,245
(8,516)
81,001
273,326
29.6%
49,961
22,281
15,758
21,665
(9,157)
100,508
234,430
42.9%
140,161
107,972
55,615
81,306
(33,547)
351,507
1,019,336
34.5%
244,943
79,025
71,911
78,886
(35,844)
438,921
826,722
53.1%
76
Free Cash Flows from Operations before Net Growth in Gross Consumer Loans Receivable
Free cash flows from operations before net growth in gross consumer loans receivable is a non-IFRS measure. The Company
defines free cash flows from operations before net growth in gross consumer loans receivable as cash provided by (used in)
operating activities, adjusted for the costs of investments made to grow gross consumer loans receivable. The Company believes
free cash flows from operations before net growth in gross consumer loans receivable is an important performance indicator to
assess the cash generating ability of its existing loan portfolio.
($ IN 000’S EXCEPT PERCENTAGES)
DECEMBER 31, 2022
DECEMBER 31, 2021
DECEMBER 31, 2022 DECEMBER 31, 2021
Cash used in operating activities
(139,998)
(74,171)
(505,881)
(78,875)
THREE MONTHS ENDED
YEAR ENDED
Net growth in gross consumer loans
receivable during the period
Less: Gross loans purchased1
206,038
-
206,038
133,623
-
133,623
764,355
-
764,355
783,499
(444,520)
338,979
Free cash flows from operations before net
growth in gross consumer loans receivable
66,040
59,452
258,474
260,104
1 Gross loans purchased during the second quarter of 2021 through the acquisition of LendCare.
Return on Assets
Adjusted return on assets is a non-IFRS ratio. The Company defines adjusted return on assets as annualized adjusted net income
divided by average total assets for the period. The Company believes adjusted return on assets is an important measure of how
total assets are utilized in the business.
($ IN 000’S EXCEPT PERCENTAGES)
Net income as stated
After-tax impact of adjusting items1
Adjusted net income
Multiplied by number of periods in a year
Divided by average total assets for the period
Return on assets
THREE MONTHS ENDED
DECEMBER 31,
2022
DECEMBER 31,
2022
(ADJUSTED)
DECEMBER 31,
2021
DECEMBER 31,
2021
(ADJUSTED)
28,576
-
28,576
X 4
3,216,403
3.6%
28,576
22,450
51,026
X 4
3,216,403
6.3%
49,961
-
49,961
X 4
2,533,945
7.9%
49,961
(2,317)
47,644
X 4
2,533,945
7.5%
1For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.
($ IN 000’S EXCEPT PERCENTAGES)
Net income as stated
After-tax impact of adjusting items1
Adjusted net income
Divided by average total assets for the period
Return on assets
YEAR ENDED
DECEMBER 31,
2022
DECEMBER 31,
2022
(ADJUSTED)
DECEMBER 31,
2021
DECEMBER 31,
2021
(ADJUSTED)
140,161
-
140,161
2,922,605
4.8%
140,161
52,100
192,261
2,922,605
6.6%
244,943
-
244,943
2,126,594
11.5%
244,943
(70,184)
174,759
2,126,594
8.2%
1For explanation of adjusting items, refer to the corresponding “Adjusting Net Income and Adjusting Diluted Earnings Per Share” section.
77
Return on Equity
Adjusted return on equity is a non-IFRS ratio. The Company defines adjusted return on equity as annualized adjusted net income in
the period, divided by average shareholders’ equity for the period. The Company believes adjusted 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
After-tax impact of adjusting items1
Adjusted net income
Multiplied by number of periods in a year
Divided by average shareholders’ equity for the period
Return on equity
THREE MONTHS ENDED
DECEMBER 31,
2022
DECEMBER 31,
2022
(ADJUSTED)
DECEMBER 31,
2021
DECEMBER 31,
2021
(ADJUSTED)
28,576
-
28,576
X 4
830,820
13.8%
28,576
22,450
51,026
X 4
830,820
24.6%
49,961
-
49,961
X 4
798,620
25.0%
49,961
(2,371)
47,644
X 4
798,620
23.9%
1 For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.
($ IN 000’S EXCEPT PERCENTAGES)
Net income as stated
After-tax impact of adjusting items1
Adjusted net income
Divided by average shareholders’ equity for the period
Return on equity
YEAR ENDED
DECEMBER 31,
2022
DECEMBER 31,
2022
(ADJUSTED)
DECEMBER 31,
2021
DECEMBER 31,
2021
(ADJUSTED)
140,161
-
140,161
794,269
17.6%
140,161
52,100
192,261
794,269
24.2%
244,943
-
244,943
667,962
36.7%
244,943
(70,184)
174,759
667,962
26.2%
1For explanation of adjusting items, refer to the corresponding “Adjusted Net Income and Adjusted Diluted Earnings Per Share” section.
78
Return on Tangible Common Equity
Reported and adjusted return on tangible common equity are non-IFRS ratios. The Company defines return on tangible common
equity as net income, adjusted for the after-tax amortization of acquisition-related intangible assets, which are treated as adjusting
items, as a percentage of average tangible common equity. Tangible common equity is calculated as shareholders’ equity for the
period, less goodwill and acquisition-related intangible assets, net of related deferred tax liabilities. Adjusted net income before
after-tax amortization of intangible assets excludes the impact of adjusting items. The Company believes adjusted return on
tangible common equity is an important measure of how shareholders’ invested tangible capital is utilized in the business.shareholders’
invested tangible capital is utilized in the business.
THREE MONTHS ENDED
DECEMBER 31,
2022
DECEMBER 31,
2022
(ADJUSTED)
DECEMBER 31,
2021
DECEMBER 31,
2021
(ADJUSTED)
($ IN 000’S EXCEPT PERCENTAGES)
Net income as stated
Amortization of acquired intangible assets
Income tax impact of the above item
Net income before amortization of acquired
intangible assets, net of income tax
Impact of adjusting items1
Other operating expenses
Write off of an intangible asset
Integration costs
Other loss (income)
Total pre-tax impact of adjusting items
Income tax impact of above adjusting items
After-tax impact of adjusting items
28,576
3,275
(868)
30,983
-
-
-
-
-
-
28,576
3,275
(868)
30,983
20,460
122
5,609
26,191
(6,148)
20,043
49,961
3,277
(868)
52,370
-
-
-
-
-
-
Adjusted net income
30,983
51,026
52,370
Multiplied by number of periods in year
X 4
X 4
X 4
Average shareholders’ equity
Average goodwill
Average acquired intangible assets2
Average related deferred tax liabilities
Divided by average tangible common equity
Return on tangible common equity
830,820
(180,923)
(110,804)
29,363
568,456
21.8%
830,820
(180,923)
(110,804)
29,363
568,456
35.9%
798,620
(180,923)
(123,904)
32,835
526,628
39.8%
1 For explanation of adjusting items, refer to the corresponding “Adjusting Net Income and Adjusting Diluted Earnings Per Share” section.
2 Excludes intangible assets relating to software.
49,961
3,277
(868)
52,370
-
3,447
(8,371)
(4,924)
198
(4,726)
47,644
X 4
798,620
(180,923)
(123,904)
32,835
526,628
36.2%
79
($ IN 000’S EXCEPT PERCENTAGES)
Net income as stated
Amortization of acquired intangible assets
Income tax impact of the above item
Net income before amortization of acquired
intangible assets, net of income tax
Impact of adjusting items1
Bad debts
Day one loan loss provision on acquired loans
Other operating expenses
Write -off of intangible assets
Corporate development costs
Integration costs
Transaction costs
Other loss (income)
Finance costs
Transaction costs
Total pre-tax impact of adjusting items
Income tax impact of above adjusting items
After-tax impact of adjusting items
Adjusted net income
Average shareholders’ equity
Average goodwill
Average acquired intangible assets2
Average related deferred tax liabilities
Divided by average tangible common equity
Return on tangible common equity
YEAR ENDED
DECEMBER 31,
2022
DECEMBER 31,
2022
(ADJUSTED)
DECEMBER 31,
2021
DECEMBER 31,
2021
(ADJUSTED)
140,161
13,100
(3,471)
140,161
13,100
(3,471)
149,790
149,790
244,943
8,735
(2,314)
251,364
-
-
-
-
-
-
-
-
-
-
149,790
794,269
(180,923)
(115,717)
30,665
528,294
28.4%
-
20,460
2,314
1,081
-
28,659
-
52,514
(10,043)
42,471
192,261
794,269
(180,923)
(115,717)
30,665
528,294
36.4%
-
-
-
-
-
-
-
-
-
-
251,364
667,962
(116,860)
(75,325)
19,961
495,738
50.7%
244,943
8,735
(2,314)
251,364
14,252
-
-
5,047
7,615
(114,876)
1,726
(86,236)
9,631
(76,605)
174,759
667,962
(116,860)
(75,325)
19,961
495,738
35.3%
1 For explanation of adjusting items, refer to the corresponding “Adjusting Net Income and Adjusting Diluted Earnings Per Share” section.
2 Excludes intangible assets relating to software.
80
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, 2022 and 2021.
($ IN 000’S, EXCEPT FOR RATIOS)
Consumer loans receivable, net
Cash
Accounts receivable
Prepaid expenses
Income taxes recoverable
Investments
Lease assets
Property and equipment, net
Derivative financial assets
Intangible assets, net
Right-of-use assets, net
Goodwill
Total assets
Revolving credit facility
Secured borrowings
Revolving securitization warehouse facilities
Notes payable
External debt
Accounts payable and accrued liabilities
Income taxes payable
Dividends payable
Unearned revenue
Accrued interest
Deferred tax liabilities, net
Lease liabilities
Derivative financial liabilities
Total liabilities
Shareholders’ equity
Total capitalization (external debt plus total
shareholders’ equity)
Capital management measures
External debt to shareholders’ equity1
Net debt to net capitalization2
DECEMBER 31, 2022
DECEMBER 31, 2021
2,627,357
62,654
25,697
8,334
2,323
57,304
48,437
35,856
49,444
138,802
65,758
180,923
3,302,889
148,646
105,792
805,825
1,168,997
2,229,260
51,136
-
14,965
28,661
10,159
24,692
74,328
-
2,433,201
869,688
3,098,948
2.56
0.71
1,899,631
102,479
20,769
8,018
-
64,441
47,182
35,285
20,634
159,651
57,140
180,923
2,596,153
-
173,959
292,814
1,085,906
1,552,679
57,134
27,859
10,692
11,354
8,135
38,648
65,607
34,132
1,806,240
789,913
2,342,592
1.97
0.65
1 External debt to shareholders’ equity is a capital management measure that the Company uses to assess the ability of its net assets to cover outstanding debts. It is calculated as external debt
divided by shareholders’ equity.
2 Net debt to net capitalization is a leverage metric the Company uses to ensure it is operating within its target leverage range. Net debt is calculated as external debt less cash. Net debt to net
capitalization is net debt divided by the sum of net debt and shareholders’ equity.
Total assets were $3.30 billion as at December 31, 2022, an increase of $706.7 million or 27.2%, compared to December 31, 2021. The increase
was related primarily to a $727.7 million increase in net consumer loans receivable and a $28.8 million increase in derivative financial assets,
partially offset by the decrease in cash of $39.8 million, decrease in intangible assets of $20.8 million mainly due to write off of internally
developed software and a decrease in investments of $7.1 million due to fair value loss on the Company’s investment in Affirm partially offset
by the Company’s investment in convertible notes receivable of Canada Drives.
81
The $706.7 million of growth in total assets was primarily financed by i) a $676.6 million increase in external debt mainly from
the revolving securitization warehouse facilities and ii) a $79.8 million increase in total shareholder’s equity, which was driven by
the $57.9 million bought deal equity offering and earnings generated by the Company, partially offset by share buybacks under
the Company’s Normal Course Issuer Bid (“NCIB”) and dividends paid. While the Company has continued to pay a dividend to its
shareholders, a large portion of the Company’s earnings have been retained to fund growth of its consumer lending business.
Liquidity and Capital Resources
Cash Flow Review
The table below provides a summary of cash flow components for the three-month periods and years ended December 31, 2022 and 2021.
($ IN 000’S)
DECEMBER 31, 2022 DECEMBER 31, 2021 DECEMBER 31, 2022 DECEMBER 31, 2021
THREE MONTHS ENDED
YEAR ENDED
Cash provided by operating activities before
net issuance of consumer loans receivable and
purchase of lease assets
Net issuance of consumer loans receivable
Purchase of lease assets
Cash used in operating activities
Cash used in investing activities
Cash generated by financing activities
Net (decrease) increase in cash for the period
141,600
(270,167)
(11,431)
(139,998)
(32,653)
161,296
(11,355)
115,882
(178,198)
(11,855)
(74,171)
(8,475)
60,440
(22,206)
529,528
(1,000,619)
(34,790)
(505,881)
(42,491)
508,547
(39,825)
439,573
(484,817)
(33,631)
(78,875)
(210,635)
298,936
9,426
The Company provides loans to non-prime borrowers. The Company obtains capital and funding which is treated as cash flows from
financing activities and then advances funds to borrowers as loans which are treated as cash used in operating activities. When a
borrower makes a loan payment, it generates cash flow from operating activities and income. As such when the Company is growing its
portfolio of consumer loans it will tend to use cash in operating activities.
Cash Flow Analysis for the Three Months Ended December 31, 2022
Cash used in operating activities for the three-month period ended December 31, 2022 was $140.0 million, compared with $74.2
million of cash used in operating activities in the same period of 2021. Included in cash used in operating activities for the three-
month period ended December 31, 2022 were: i) a net issuance of consumer loans receivable of $270.2 million; and ii) the purchase
of lease assets of $11.4 million. If the net issuance of consumer loans receivable and the purchase of lease assets were treated as
cash flows from investing activities, the cash flows generated by operating activities would have been $141.6 million for the three-
month period ended December 31, 2022, up from $115.9 million in the same period of 2021. The increase of $25.7 million was driven
by higher non-cash expenses such as bad debts, a one-time write off of an intangible asset and fair value losses on investments,
partially offset by the lower earnings in the period.
During the three-month period ended December 31, 2022, cash used in investing activities was $32.7 million, mainly due to a $25
million increase in the Company’s investment in Canada Drives. During the three-month period ended December 31, 2021, cash
used in investing activities was $8.5 million, mainly due to purchases of property plant and equipment and intangible assets.
During the three-month period ended December 31, 2022, the Company generated $161.3 million in cash flow from financing activities,
compared to $60.4 million in same period of 2021, mainly from net drawings on the Company’s credit facilities to fund consumer loan
growth and the $57.9 million bought deal equity offering. In addition, the Company repurchased shares under the Company’s NCIB
during the three-month period ended December 31, 2021 amounting to $62.3 million, compared to nil in the same period of 2022.
82
Cash Flow Analysis for the Year Ended December 31, 2022
Cash used in operating activities during the year was $505.9 million, compared with $78.9 million of cash used for operating
activities in 2021. Included in cash provided by operating activities for the year ended December 31, 2022 was: i) net issuance of
consumer loans receivable of $1.00 billion, and ii) the purchase of $34.8 million of lease assets. If the net issuance of consumer
loans receivable and the purchase of lease assets were treated as cash flows from investing activities, the cash flows generated
by operating activities would have been $529.5 million for the year, up from $439.6 million in 2021. The increase of $90.0 million
was driven by higher non-cash expenses such as bad debts, a one-time write off of an intangible asset and fair value losses on
investments, partially offset by the lower earnings in the year.
During the year, the Company used $42.5 million in investing activities, mainly due to the $40 million investment in Canada Drives
and $27.9 million of purchases of property and equipment and intangible assets, partially offset by $25.4 million of proceeds from
the settlement of the TRS related to the contingent portion of the investment in Affirm. During the year ended December 31, 2021,
the Company used $210.6 million for investing activities mainly due to $281.0 million of cash used for the acquisition of LendCare,
purchases of equity investments, mainly in Brim of $11.3 million, partially offset by proceeds from the sale of equity investments
in PayBright and Affirm of $109.2 million.
During the year, the Company generated $508.5 million of cash flow from financing activities, mainly from net drawings on the
Company’s credit facilities to fund consumer loan growth and the $57.9 million bought deal equity offering, partially offset by
cash used for repurchases of common shares through the Company’s NCIB and payments of dividends, lease liabilities and cash-
settled restricted share units. In 2021, the Company generated $298.9 million of cash flow from financing activities mainly due to
the offering of US$320 million of 2026 Notes and $172.5 million bought deal equity offering to fund the acquisition of LendCare.
These cash inflows were partially offset by the net repayments of advances from the Company’s credit facilities, repayments of
acquired notes payable and the payments of dividends and lease liabilities.
Capital and Funding Resources
goeasy funds its business through a combination of equity and debt instruments. goeasy’s Common Shares are listed for trading on
the TSX under the trading symbol “GSY”. goeasy is rated BB- with a stable trend from S&P and Ba3 with a stable trend from Moody’s.
On March 22, 2021, goeasy’s Common Shares were added by Dow Jones to the S&P/TSX Composite Index. The Company’s inclusion
in the benchmark Canadian index reflects the value that has been created for the Company’s shareholders over the years.
As at December 31, 2022, the Company’s external debt consisted of US$550 million of 2024 Notes with a net carrying value of
$739.7 million, US$320 million of 2026 Notes with a net carrying value of $429.3 million, $105.8 million of secured borrowings, $810
million drawn against the Company’s Revolving Securitization Warehouse Facility I and $150 million drawn against the Company’s
revolving credit facility.
Borrowings under the 2024 Notes bore a US$ coupon rate of 5.375%. Through a cross-currency swap agreement arranged
concurrently with the US$550 million offering of the 2024 Notes in November 2019, the Company hedged the risk of changes in the
foreign exchange rate for all required payments of principal and interest, effectively hedging the obligation at $728.3 million with
a Canadian dollar interest rate of 5.65%. These 2024 Notes mature on December 1, 2024.
Borrowings under the 2026 Notes bore a US$ coupon rate of 4.375%. Through a cross-currency swap agreement arranged
concurrently with the US$320 million offering of the 2026 Notes in April 2021, the Company hedged the risk of changes in the
foreign exchange rate for all required payments of principal and interest, effectively hedging the obligation at $400 million with a
Canadian dollar interest rate of 4.818%. These 2026 Notes mature on May 1, 2026.
Borrowings under the Company’s Revolving Securitization Warehouse Facility I bear interest at the rate of 1-month CDOR plus 185
bps, maturing August 30, 2024. Concurrent with the establishment of the revolving securitization warehouse facility, the Company
entered into an interest rate swap as a cash flow hedge to protect against the risk of changes in the variability of future interest
rates by paying a fixed rate and receiving the variable rate equivalent to 1-month CDOR.
Borrowings under the Company’s revolving credit facility bear interest at either the BA rate plus 225 bps or Prime plus 75 bps at
the option of the Company.
83
As described in the preceding section: Analysis of Results for the Year Ended December 31, 2022, the Company established a new
$200 million Revolving Securitization Warehouse Facility II which bears an interest at the rate of 1-month CDOR plus 185 bps. As
at December 31, 2022, no amount was drawn against Revolving Securitization Warehouse Facility II.
The average blended coupon interest rate for the Company’s debt as at December 31, 2022 was 5.2%, up from 4.9% as at December 31, 2021.
The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:
($ IN 000’S)
December 31, 2022
Accounts payable and accrued liabilities
Accrued interest
Revolving credit facility
Revolving securitization warehouse facilities
Secured borrowings
Notes payable
December 31, 2021
Less than
1 Year
1 to 3
Years
4 to 5
Years
5 Years +
Total
51,136
10,159
-
-
-
-
150,000
810,000
-
-
-
-
-
-
-
-
30,901
53,996
16,205
4,690
-
745,195
433,568
Accounts payable and accrued liabilities
Accrued interest
57,134
8,135
-
-
-
-
Revolving securitization warehouse facilities
-
295,000
Secured borrowings
Derivative financial liabilities
Notes payable
38,727
-
-
77,905
34,132
-
695,035
404,384
47,810
4,936
51,136
10,159
150,000
810,000
105,792
1,178,763
57,134
8,135
295,000
169,378
34,132
1,099,419
-
-
-
-
-
-
As at December 31, 2022, the Company had a cash position of $62.7 million which includes $39.7 million in restricted cash related
to its revolving securitization warehouse facility and secured borrowings reserve. As at December 31, 2022, the Company has
borrowing capacities of $590 million under its Revolving Securitization Warehouse Facility I, $200 million under its Revolving
Securitization Warehouse Facility II and $120 million under its revolving credit facility. Excluding the $100 million accordion feature
under its revolving credit facility, the Company’s total liquidity as at December 31, 2022 was $972.7 million. The current total
liquidity, excluding future enhancements or diversification of funding sources, provide adequate growth capital for the Company to
execute its organic growth forecast.
Outstanding Shares and Dividends
As at February 15, 2023, there were 16,449,964 Common Shares, 317,296 Board deferred share units, 341,200 share options, 318,941
restricted share units, 63,906 Executive deferred share units and no warrants outstanding.
Normal Course Issuer Bid
On December 16, 2022, the Company announced the acceptance by the TSX of the Company’s Notice of Intention to make an NCIB (the
“2022 NCIB”). Pursuant to the 2022 NCIB, the Company proposed to purchase, from time to time, up to an aggregate of 1,252,730 common
shares being approximately 10% of goeasy’s public float as of December 9, 2022. As at December 9, 2022, goeasy had 16,438,926 common
shares issued and outstanding, and the average daily trading volume for the six months prior to November 30, 2022, was 49,253. Under
2022 NCIB, daily purchases will be limited to 12,313 common shares, representing 25% of the average daily trading volume, other than
block purchase exemptions. The purchases were permitted to commence on December 21, 2022, and will terminate on December 20,
2023, or on such earlier date as the Company may complete its purchases pursuant to the 2022 NCIB. The 2022 NCIB will be conducted
through facilities of the TSX or alternative trading systems, if eligible and will conform to their regulations. Purchases under the 2022
NCIB will be made by means of open market transaction or other such means as a security regulatory authority may permit, including
pre-arranged crosses, exempt offers and private agreements under an issuer bid exemption order issued by a securities regulatory
authority. The price that goeasy will pay for any Common Shares will be the market price of such shares at the time of acquisition, unless
otherwise permitted under applicable rules.
84
On December 14, 2021, the Company announced the acceptance by the TSX of the Company’s Notice of Intention to Make an NCIB (the
“2021 NCIB”). Pursuant to the 2021 NCIB, the Company proposed to purchase, from time to time, if considered advisable, up to an
aggregate of 1,243,781 Common Shares being approximately 10% of goeasy’s public float as of December 7, 2021. As at December 7,
2021, goeasy had 16,254,135 Common Shares issued and outstanding, and the average daily trading volume for the six months prior to
November 30, 2021, was 62,825. Under the 2021 NCIB, daily purchases were limited to 15,706 Common Shares, representing 25% of the
average daily trading volume, other than block purchase exemptions. Purchases were permitted to commence on December 21, 2021,
and terminated on December 20, 2022. The purchases made by goeasy pursuant to the 2021 NCIB were effected through facilities of the
TSX, as well as alternative trading systems and in accordance with the rules of the TSX. The price the Company paid for repurchased
Common Shares was the market price of such shares at the time of acquisition. The Company did not purchase any Common Shares
other than by open-market purchases. Under the 2021 NCIB, the Company completed the purchase for cancellation through the facilities
of the TSX of 450,058 Common Shares at a weighted average price of $135.52 per Common Share for a total cost of $61.0 million.
On December 16, 2020, the Company announced the acceptance by the TSX of the Company’s Notice of Intention to Make an NCIB (the “2020
NCIB”). Pursuant to the 2020 NCIB, the Company proposed to purchase, from time to time, if considered advisable, up to an aggregate of
1,079,703 Common Shares being approximately 10% of goeasy’s public float as of December 9, 2020. As at December 9, 2020, goeasy had
14,801,169 Common Shares issued and outstanding, and the average daily trading volume for the six months prior to November 30, 2020,
was 83,554. Under the 2020 NCIB, daily purchases were limited to 20,888 Common Shares, representing 25% of the average daily trading
volume, other than block purchase exemptions. The 2020 NCIB was permitted to commence on December 21, 2020 and the 2020 NCIB
terminated on December 20, 2021. The purchases made by goeasy pursuant to the 2020 NCIB were effected through the facilities of the TSX,
as well as alternative trading systems, and in accordance with the rules of the TSX. The price the Company paid for repurchased Common
Shares was the market price of such shares at the time of acquisition. The Company did not purchase any Common Shares other than by
open-market purchases. Under the 2020 NCIB, the Company completed the purchase for cancellation through the facilities of the TSX of
333,315 Common Shares at a weighted average price of $186.86 per Common Share for a total cost of $62.3 million.
Dividends
During the quarter ended December 31, 2022, the Company declared a $0.91 per share quarterly dividend on outstanding Common
Shares. This dividend was paid on January 13, 2023.
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 can be declared in the event there is a default of a loan facility,
or where such payment would lead to a default.
On February 16, 2022, the Company increased the quarterly dividend rate by 37.9% from $0.66 to $0.91 per share. 2022 marks the 18th
consecutive year of paying a dividend to shareholders and the 8th consecutive year of an increase in the dividend rate per share to shareholders.
In February 2020, the Company was added to the S&P/TSX Canadian Dividend Aristocrats Index with a 42% compound annual growth
rate in the dividend over the prior 5 years.
The following table sets forth the quarterly dividends paid by the Company in the fourth quarter of the years indicated:
2022
2021
2020
2019
2018
2017
2016
Quarterly dividend per share
Percentage increase
$0.910
37.9%
$0.660
46.7%
$0.450
45.2%
$0.310
37.8%
$0.225
25.0%
$0.180
44.0%
$0.125
25.0%
Commitments, Guarantees and Contingencies
Commitments
The Company is committed to software maintenance, development and licensing service agreements, and operating leases for premises
and vehicles. Some of the Company’s lease contracts for premises include extension options. Management exercises significant judgement
in determining whether these extension options are reasonably certain to be exercised. As at December 31, 2022, no extension option for
lease contracts for premises is expected to be exercised.
85
The undiscounted potential future lease payments for operating leases for premises and vehicles and the estimated operating costs
related to technology commitments required for the next five years and thereafter are as follows:
($ IN 000’S)
Premises
Vehicles
Technology commitments
Total contractual obligations
Contingencies
WITHIN 1 YEAR
AFTER 1 YEAR, BUT NOT
MORE THAN 5 YEARS
MORE THAN 5 YEARS
22,508
696
14,604
37,808
50,812
1,540
13,370
65,722
8,649
31
-
8,680
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.
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 Board has overall responsibility for the establishment and oversight of the Company’s
risk management framework. The Corporate Governance, Nominating and Risk Committee of the Board reviews the Company’s risk
management program and policies on an annual basis.
Strategic Risk
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 and regulatory landscapes.
The Company’s growth strategy is focused on consumer lending through its easyfinancial and LendCare brands. 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, to secure and maintain merchant partnerships for LendCare, to
successfully develop and launch new products to meet evolving customer demands, to secure growth financing at a reasonable cost, to maintain
profitability levels within the mature easyhome business and to execute with efficiency and effectiveness.
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.
Market Risk
Macroeconomic Conditions
Certain changes in macroeconomic conditions, many of which are beyond the Company’s control, can have a negative impact on its customers
and its performance. The Company’s primary customer segment is the non-prime consumer. These cash and credit constrained customers are
affected by adverse macroeconomic conditions such as higher unemployment rates and/or costs of living, which can lower collection rates and
result in higher charge off rates and adversely affect the Company’s performance, financial condition and liquidity. The Company can neither
predict the impact of the current economic conditions will have on its future results, nor predict when the economic environment will change.
There can be no assurance that economic conditions will remain favorable for the Company’s business or that demand for loans or
default rates by customers will remain at current levels. Reduced demand for loans would negatively impact the Company’s growth and
revenues, while increased default rates by customers may inhibit the Company’s access to capital, hinder the growth of its loan portfolio
and negatively impact its profitability. Either such result could have a material adverse effect on the Company’s business, prospects,
results of operations, financial condition and/or cash flows.
86
Interest Rate Risk
Interest rate risk measures the Company’s risk of financial loss due to adverse movements in interest rates. The Company maintains diversified
funding sources and utilizes derivative financial instruments as cash flow hedges to assist in the management of interest rate volatility.
The 2024 Notes and 2026 Notes maturing on December 1, 2024 and May 1, 2026, respectively, have fixed rates of interest.
As at December 31, 2022, the revolving credit facility has a variable interest rate at either the BA rate plus 225 bps or the Prime rate
plus 75 bps, at the option of the Company. The Company does not hedge interest rates on the revolving credit facility. Accordingly, future
changes in interest rates will affect the amount of interest expense payable by the Company to the extent that draws are made on the
variable rate revolving credit facility. As at December 31, 2022, the Company has drawn $150 million against its $270 million revolving
credit facility.
The Revolving Securitization Warehouse Facility I has a variable interest rate at 1-month CDOR plus 185 bps. The Company entered into
an interest rate swap agreement as a cash flow hedge to protect itself against the variability of future interest payments by paying a fixed
rate based on the weighted average life of the securitized loans and receiving variable rate equivalent to 1-month CDOR. As such, each
incremental swap that is taken on has a hedge implemented that results in interest rates becoming fixed for the duration of that swap.
As at December 31, 2022, 93% of the Company’s drawn debt balances effectively bear fixed rates due to the type of debt and the
aforementioned interest rate swap agreement on the Revolving Securitization Warehouse Facility I.
The Company cannot predict the impact of the changing economic conditions will have on its future results, nor predict when interest
rates will change.
Foreign Currency Risk
The 2024 Notes and 2026 Notes are United States dollar denominated. In connection with the offering of these notes, the Company
entered into cross-currency swap agreements to hedge the risk of changes in the foreign exchange rate for the proceeds from the
offerings and for all required payments of principal and interest under these notes, effectively hedging the obligation. The hedge
is designed to match the cash flow obligations of the Company under the notes payable.
The Company sources some of its merchandise and services out of the United States and, as such, its Canadian operations have
some United States dollar denominated cash and payable balances. As a result, the Company has both foreign exchange transaction
and translation risk. Although the Company has United States dollar denominated purchases, it 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 United States 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 its financial performance.
Competition
The Company estimates the size of the Canadian market for non-prime consumer lending, excluding mortgages, is approximately $193.6
billion. This demand is currently being met by a wide variety of industry participants that offer diverse products, including auto lending, credit
cards, installment loans, retail finance programs, small business lending and real estate secured lending. Generally, industry participants
have tended to focus on a single product offering rather than providing consumers with multiple alternatives. As a result, the suppliers to
the marketplace are quite diverse.
Competition in the non-prime consumer lending market is based primarily on access, flexibility and cost (interest rates). Consumers are
generally able to transition between different types of lending products that are available in the marketplace to satisfy their need for these
different characteristics. The Company expects the competition for non-prime consumer lending in Canada will remain relatively stable for
the foreseeable future. While traditional financial institutions are likely to decrease their risk tolerance and move farther away from non-
prime lending, regional financial institutions such as credit unions, payday lenders, marketplace lenders and online lenders may consider
expansion into the non-prime market.
The Company also faces direct competition in the Canadian market from other merchandise leasing companies. Other factors that may
adversely affect the performance of the leasing business are increased sales of used furniture and electronics online and at retail stores
that offer a non-prime point-of-sale purchase financing option. Additional competitors, both domestic and international, may emerge since
barriers to entry are relatively low.
The Company may be unable to compete effectively with new and existing competitors, which could adversely affect its revenues and
results of operations. In addition, investments required to adjust to changing market conditions may adversely affect the Company’s
business and financial performance.
87
Credit Risk
Credit risk is the risk of loss that arises when a customer or counterparty fails to pay an amount owing to the Company.
The maximum exposure to credit risk is represented by the carrying amount of the accounts receivable, consumer loans receivable and lease
assets with customers under merchandise lease agreements. The Company provides consumer loans and leases products 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. 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.
Credit risk related to the Company’s consumer loans receivable is impacted by both the Company’s credit policies and the lending practices
which are overseen by the Company’s Credit Committee, comprised of members of senior management. Credit quality of the customer is
assessed using proprietary credit models and individual credit limits are defined in accordance with this assessment. 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 continuously updates its underwriting models based on the historical performance of groups of customer loans,
which guide its lending decisions. To the extent 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.
The Company maintains an allowance for credit losses as prescribed by IFRS 9 and as described fully in the notes to the Company’s consolidated
financial statements for the year ended December 31, 2022. The process for establishing an allowance for loan losses is critical to the Company’s
results of operations and financial conditions and is based on historical data, the underlying health and quality of the consumer loan portfolio at a
point in time, and forward-looking indicators. To the extent that such inputs used to develop its allowance for credit losses are not representative
or predictive of current loan book performance, the Company could suffer increased loan losses above and beyond those provided for on its
consolidated financial statements.
The Company cannot guarantee that delinquency and loss levels will correspond with historical levels experienced, and there is a risk that
delinquency and loss rates could increase significantly and have a material adverse effect on the financial results of the Company.
Credit risk related to lease assets with customers 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.
For accounts receivable from third parties, credit risk relates to the possibility of default on amounts owing to the Company. The Company deals
with credible companies, performs ongoing credit evaluations of counterparties and consumers and creates an allowance for uncollectible
amounts when determined to be appropriate.
The Company has established a Credit Committee and created processes and procedures to identify, measure, monitor and mitigate significant
credit risks. However, to the extent that such risks go unidentified or are not adequately or expeditiously addressed by senior management, the
Company and its financial performance could be adversely affected.
Liquidity and Funding Risk
Liquidity Risk
The Company has been funded through various sources, including the revolving credit facility, the revolving securitization warehouse
facilities, the 2024 Notes and 2026 Notes, 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.
The Company has publicly stated that it intends to significantly expand its consumer lending business. To achieve this goal, the Company may
require additional funds which 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 favorable to the Company. The inability to access adequate
sources of financing, or to do so on favorable terms, may adversely affect the Company’s capital structure and ability to fund operational
requirements and satisfy financial obligations. If additional funds are raised by issuing equity securities, shareholders may incur dilution.
Liquidity risk is the risk that the Company’s financial condition is adversely affected by an inability to meet funding obligations and
support the Company’s 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 Company’s capital structure consists of
external debt and shareholders’ equity, which comprises issued capital, contributed surplus and retained earnings.
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All of the Company’s debt facilities 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 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 lenders to declare all amounts outstanding to be immediately due and payable.
In such a case, the financial condition, liquidity and results of the Company’s operations could materially suffer.
The Company has strengthened its banking relationships and diversified its funding sources over the past years. In 2022, the Company
added new major Canadian banks to its Revolving Securitization Warehouse Facility I and launched the Revolving Securitization
Warehouse II with one of its large bank partners. The Company also expanded the syndicate of banks under its Revolving Credit Facility.
If the Company is unable to renew these facilities on acceptable terms when they become due, there could be a material adverse effect
on the Company’s financial condition, liquidity and results of operations.
Debt Service
The Company’s ability to make scheduled payments on, or refinance its debt obligations, depends on its financial condition and operating
performance, which are subject to a number of factors beyond its control. The Company may be unable to maintain a level of cash flows
from operating activities sufficient to permit it to repay the principal and interest on its indebtedness.
If the Company’s cash flows and capital resources are insufficient to fund its debt service obligations, it could face substantial liquidity
problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations,
reduce its growth plans, seek additional debt or equity capital or restructure or refinance its indebtedness. The Company may not be
able to obtain such alternative measures on commercially reasonable terms, or at all and, even if successful, those alternative actions
may not allow it to meet its scheduled debt service obligations. The Company’s credit agreements restrict its ability to dispose of assets
and use the proceeds from those dispositions and may also restrict its ability to raise debt or equity capital to be used to repay other
indebtedness when it becomes due. The Company may not be able to consummate any such dispositions or to obtain proceeds in an
amount sufficient to meet any debt service obligations when due.
The Company’s inability to generate sufficient cash flows to satisfy its debt obligations, or to refinance its indebtedness on commercially
reasonable terms or at all would materially and adversely affect its business, results of operations and financial condition. Failure to meet
its debt obligations could result in default under its lending agreements. In the event of such default, the holders of such indebtedness
could elect to declare all of the funds borrowed thereunder to be immediately due and payable, together with accrued and unpaid
interest, and the Company could, among other remedies that may be available, be forced into bankruptcy, insolvency or liquidation. If
the Company’s operating performance declines, it may need to seek waivers from the holders of such indebtedness to avoid being in
default under the instruments governing such indebtedness. If the Company breaches its covenants under its indebtedness, it may not be
able to obtain a waiver from the holders of such indebtedness on terms acceptable to the Company or at all. If this occurs, the Company
would be in default under such indebtedness, and the holders of such indebtedness could exercise their rights as described above and
the Company could, among other remedies that may be available, be forced into bankruptcy, insolvency or liquidation. A default under
the agreements governing certain of the Company’s existing or future indebtedness and the remedies sought by the holders of such
indebtedness could make the Company unable to pay principal or interest on the debt.
Debt Covenants
The agreements governing the Company’s credit facilities contain restrictive covenants that may limit its discretion with respect to
certain business matters. These covenants may place significant restrictions on, among other things, the Company’s ability to create
liens or other encumbrances, to pay distributions or make certain other payments, investments, loans and guarantees, and to sell or
otherwise dispose of assets. In addition, the agreements governing the Company’s credit facilities may contain financial covenants
that require it to meet certain financial ratios and financial condition tests.
If the Company fails to maintain the requisite financial ratios under the agreement governing its credit facilities, it will be unable to draw
any amounts under the credit facilities until such default is waived or cured as required. In addition, such a failure could constitute an
event of default under the Company’s lending agreements entitling the lenders to accelerate the outstanding indebtedness thereunder
unless such event of default is cured as required by the agreement. The Company’s ability to comply with these covenants in future
periods will depend on its ongoing financial and operating performance, which in turn will be subject to economic conditions and to
financial, market and competitive factors, many of which are beyond its control.
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The restrictions in the agreements governing the Company’s credit facilities may prevent the Company from taking actions that it
believes would be in the best interest of its business and may make it difficult for it to execute its business strategy successfully or
effectively compete with companies that are not similarly restricted. The Company may also incur future debt obligations that might
subject it to additional restrictive covenants that could affect its financial and operational flexibility.
The Company’s ability to comply with the covenants and restrictions contained in the agreement governing the Company’s credit
facilities may be affected by economic, financial and industry conditions beyond its control. The breach of any of these covenants or
restrictions could result in a default under the agreements that would permit the applicable lenders to declare all amounts outstanding
thereunder to be due and payable (including terminating any outstanding hedging arrangements), together with accrued and unpaid
interest, or cause cross-defaults under the Company’s other debts. If the Company is unable to repay its secured debt, lenders could
proceed against the collateral securing the debt. This could have serious consequences to the Company’s financial condition and
results of operations and could cause it to become bankrupt or insolvent.
Credit Ratings
The Company received credit ratings in connection with the issuance of its 2024 Notes and 2026 Notes. Any credit ratings applied to
the 2024 Notes and 2026 Notes are an assessment of the Company’s ability to pay its obligations. The Company is under no obligation
to maintain any credit rating with credit rating agencies and there is no assurance that any credit rating assigned to the 2024 Notes
and 2026 Notes will remain in effect for any given period of time or that any rating will not be lowered or withdrawn entirely by the
relevant rating agency. A lowering, withdrawal or failure to maintain any credit ratings applied to the 2024 Notes and 2026 Notes may
have an adverse effect on the market price or value and the liquidity of the 2024 Notes and 2026 Notes and, in addition, any such action
could make it more difficult or more expensive for the Company to obtain additional debt financing in the future.
Volatility of Stock Price
The market price of the Common Shares, similar to that of other public companies, has been subject to significant fluctuation in
response to numerous factors, including significant shifts in the availability of global credit, changes in macro-economic performance
due to volatile shifts in oil prices and unexpected natural disasters, concerns about the global economy and potential recession,
economic shocks, 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.
Operational Risk
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, the Company takes reasonable steps to mitigate this risk by
putting in place a system of oversight, policies, procedures and internal controls.
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 strengthened its hiring competencies and training programs.
In particular, the Company is dependent upon the abilities, experiences and efforts of its senior management team and other key employees.
The loss of these individuals without adequate replacement could have a material adverse impact on 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 successfully operate its expanding branch and store network.
There is competition for such personnel, and there can be no assurances that the Company will be successful in attracting and retaining
the personnel 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.
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Outsource Risk
The Company outsources certain business functions to third-party service providers, which increases its operational complexity and
decreases its control. The Company relies on these service providers to provide a high level of service and support, which subjects
it to risks associated with inadequate or untimely service. In addition, if these outsourcing arrangements were not renewed or were
terminated or the services provided to the Company were otherwise disrupted, the Company would have to obtain these services from
an alternative provider. The Company may be unable to replace, or be delayed in replacing, these sources and there is a risk that it would
be unable to enter into a similar agreement with an alternate provider on terms that it considers favorable or in a timely manner. In the
future, the Company may outsource additional business functions. If any of these or other risks relating to outsourcing were realized, the
Company’s financial position, liquidity and results of operations could be adversely affected.
Fraud Risk
Employee and customer misconduct could subject the Company to financial losses or regulatory sanctions and seriously harm the
Company’s reputation. Misconduct by its employees could include hiding unauthorized activities, improper or unauthorized activities on
behalf of customers or improper use of confidential information. It is not always possible to prevent employee error and misconduct, and
the precautions the Company takes to prevent and detect this activity may not be effective in all cases. Employee error could also subject
the Company to financial claims for negligence.
If the Company’s internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured, exceeds applicable
insurance limits or if insurance coverage is denied or not available, it could have a material adverse effect on the Company’s business,
financial condition and results of operations.
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 or collect customer accounts. Although the Company has extensive information technology security and
disaster recovery plans, such a failure, if sustained, could have a material adverse effect on the Company’s financial condition, liquidity
and results of operations.
Breach of Information Security
The Company’s operations rely heavily on the secure processing, storage and transmission of confidential and sensitive customer
and other information through its information technology network. Other risks include the Company’s use of third-party vendors
with access to its network that may increase the risk of a cyber security breach. Third-party breaches or inadequate levels of cyber
security expertise and safeguards may expose the Company, directly or indirectly, to security breaches.
A breach, unauthorized access, computer virus, or other form of malicious attack on the Company’s information security may result
in the compromise of confidential and/or sensitive customer or employee information, destruction or corruption of data, reputational
harm affecting customer and investor confidence, and a disruption in the management of customer relationships or the inability
to originate, process and service the Company’s leasing or lending portfolios which could have a material adverse effect on the
Company’s financial condition, liquidity and results of operations.
To mitigate the risk of an information security breach, the Company regularly assesses such risks, has a disaster recovery plan in
place and has implemented reasonable controls over unauthorized access. The store network and corporate administrative offices,
including centralized operations, takes reasonable measures to protect the security of its information systems (including against
cyber-attacks). The Chief Information Officer of the Company oversees information security. However, such a cyber-attack or data
breach could have a material adverse effect on the Company and its financial condition, liquidity and results of operations.
Privacy, Information Security, and Data Protection Regulations
The Company is subject to various privacy and information security laws and takes reasonable measures to ensure compliance with
all requirements. Legislators and regulators are increasingly adopting new privacy and information security 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 or regulators.
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Risk Management Processes and Procedures
The Company has established a Risk Oversight Committee and created regular and ongoing processes and procedures to identify,
measure, monitor and mitigate significant risks to the organization. However, to the extent such risks go unidentified or are not
adequately or expeditiously addressed by management, the Company could be adversely affected.
Compliance Risk
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
and 52-109F1 Certification of annual filings of the Ontario Securities Commission, which requires the Company’s CEO and CFO to
submit a quarterly and annual 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.
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 including the salability or pricing of certain
ancillary products which could have a material adverse effect on the Company.
Section 347 of the Criminal Code prohibits the charging of an effective annual rate of interest that exceeds sixty percent for an
agreement or arrangement for credit advanced. The Company believes that easyfinancial is subject to section 347 of the Criminal
Code and closely monitors any legislative activity in this area. The application of additional 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. At present, additional provincial regulation in certain geographic areas focusing on high-cost credit loans have been
adopted, but do not materially impact the Company’s business operations.
While management of the Company is of the view that its merchandise leasing business does not involve the provision of credit, it
could be determined that aspects of easyhome’s merchandise leasing business are subject to the Criminal Code. The Company has
implemented measures to ensure that the aggregate of all charges and expenses under its merchandise lease agreement do not
exceed the maximum interest rate allowed by law. Where aspects of easyhome’s business are subject to the Criminal Code, and
the Company has not complied with the requirements thereof, the Company could be subject to either or both (1) civil actions for
nullification of contracts, rebate of some or all payments made by customers, and damages; and (2) criminal prosecution for violation
of the Criminal Code, any of which outcomes could have a material adverse effect on the Company.
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.
easyfinancial is subject to minimal regulatory capital requirements in connection with its operations in Saskatchewan. Otherwise, the
Company operates in an unregulated environment with regard to capital requirements.
Accounting Standards
From time to time the Company may be subject to changes in accounting standards issued by accounting standard-setting bodies, which
may affect the Company’s consolidated financial statements, reduce its reported profitability and change the calculation of its financial
covenant measures.
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Legal and Reputational Risk
Reputation
The Company’s reputation is very important to attracting new customers to its platform, securing repeat lending to existing customers,
hiring the best employees and obtaining financing to facilitate the growth of its business. While the Company believes that it has a
good reputation and that it provides customers with a superior experience, there can be no assurance that the Company will continue
to maintain a good relationship with customers or avoid negative publicity.
In recent years, consumer advocacy groups and some media reports have advocated governmental action to prohibit or place severe
restrictions on non-bank consumer loans, not making the proper distinction between payday loans and non-prime loans. Such
consumer advocacy groups and media reports generally focus on the annual percentage rate for this type of consumer loan, which
is compared unfavorably to the interest typically charged by banks to consumers with top-tier credit histories. The finance charges
the Company assesses can attract media publicity about the industry and be perceived as controversial. Customer’s acceptance of
the interest rates the Company charges on its consumer loans receivable could impact the future rate of the growth. Additionally, if
the negative characterization of these types of loans is accepted by legislators and regulators, the Company could become subject
to more restrictive laws and regulations applicable to consumer loan products that could have a material adverse effect on the
Company’s business, prospects, results of operations, financial condition or cash flows.
The Company’s ability to attract and retain customers is highly dependent upon the external perceptions of its level of service,
trustworthiness, business practices, financial condition and other subjective qualities. Negative perceptions or publicity regarding
these matters — even if related to seemingly isolated incidents, or even if related to practices not specific to short-term loans,
such as debt collection — could erode trust and confidence and damage the Company’s reputation among existing and potential
customers, which would make it difficult to attract new customers and retain existing customers, significantly decrease the demand
for the Company’s products, result in increased regulatory scrutiny, and have a material adverse effect on the Company’s business,
prospects, results of operations, financial condition, ability to raise growth capital or cash flows.
Litigation
From time to time and in the normal course of business, the Company may be involved in material litigation or may be subject to
regulatory actions. There can be no assurance that any litigation or regulatory action 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.
Lawsuits or regulatory actions could cause the Company to incur substantial expenditures, generate adverse publicity and could
significantly impair the Company’s business, force it to cease doing business in one or more jurisdictions or cause it to cease
offering one or more products.
The Company is also likely to be subject to further litigation and communications with regulators in the future. An adverse ruling or a
settlement of any current or future litigation or regulatory actions against the Company or another lender could cause the Company
to have to refund fees and/or interest collected, forego collections of the principal amount of loans, pay multiple damages, pay
monetary penalties and/or modify or terminate its operations in particular jurisdictions. Defense of any lawsuit or regulatory action,
even if successful, could require substantial time and attention of the Company’s management and could require the expenditure of
significant amounts for legal fees and other related costs.
Insurance Risk
The Company’s insurance policies may not comprehensively cover all risks and liabilities because appropriate coverage may not be
available (or may not adequately cover all losses) or the Company may elect not to insure against certain risks. It may elect not to do
so, for example, where it considers the applicable premiums to be excessive in relation to the perceived risks and benefits that may
accrue. As a result, the Company may be held liable for material claims beyond its insurance coverage limits that could materially and
adversely impact financial performance and reputation. In addition, any significant claim against such policies may lead to increased
premiums on renewal and/or additional exclusions to the terms of future policies. If insurance (including cyber insurance) is not
available to cover a claim or the quantum of a claim exceeds policy limits, the Company will be exposed to the financial impact of the
event which could have an adverse impact on the Company’s business, financial performance and operations.
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Financial Instruments
The Company’s assets and liabilities include financial instruments.
The Company’s financial assets consist of accounts receivable, consumer loans receivable, derivative financial instruments and
investments, which are initially measured at fair value plus transaction costs. Accounts receivable and consumer loans receivable
are subsequently measured at amortized cost. Investments are subsequently measured at fair value.
The Company’s financing activities expose it to the financial risks of changes in foreign exchange and interest rate volatility. The
Company utilizes derivative financial instruments as cash flow hedges to assist in the management of these risks. Derivative financial
instruments are initially measured at fair value on the trade date and subsequently remeasured at fair value at each reporting date
using observable market inputs.
The Company’s financial liabilities include a revolving credit facility, notes payable, revolving securitization warehouse facilities,
secured borrowings, derivative financial instruments and accounts payable and accrued liabilities. Financial liabilities are initially
recognized at fair value. After initial recognition, the Company’s interest-bearing debt is subsequently measured at amortized cost
using the effective interest rate method. Non-interest-bearing financial liabilities, such as accounts payable and accrued liabilities,
are subsequently carried at the amount owing.
Critical Accounting Estimates
The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the
reported amounts of 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 as described in the December 31, 2022 notes to the consolidated financial statements.
Changes in Accounting Policy and Disclosures
(a) New standards, interpretations and amendments adopted by the Company
There were no new standards, interpretations or amendments that had a material impact to the Company’s consolidated financial
statements. The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
b) Standards issued but not yet effective
There are no new standards issued but not yet effective as at January 1, 2022 that have a material impact on the Company’s consolidated
financial statements.
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 are recorded, processed, summarized and reported within the time periods specified
in applicable Canadian securities laws and include controls and procedures designed to ensure that information required to be
disclosed in the Company’s filings or other reports is accumulated and communicated to the Company’s management, including the
Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), so that timely decisions can be made regarding required 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 the Company’s disclosure controls
and procedures were effective as at December 31, 2022.
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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.
The Company’s internal controls over the financial reporting framework include those policies and procedures that:
(i) Pertain to the maintenance of records that, in reasonable details, accurately and fairly reflect the transactions and dispositions of
the assets of the Company;
(ii) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial
statements in accordance with IFRS, and that receipts and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and
(iii) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the Company’s consolidated financial statements.
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 2022
No changes were made in the Company’s internal controls over financial reporting during the year ended December 31, 2022 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Evaluation of ICFR at December 31, 2022
As at December 31, 2022, 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, 2022.
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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. These controls
include quality standards in the hiring and training of employees, written policies and procedures related to employee conduct, risk
management, external communication and disclosure of material information, and review and oversight of the Company’s policies,
procedures and practices. Management has assessed the effectiveness of this system of internal controls and determined that, as at
December 31, 2022, the Company’s internal control over financial reporting is effective.
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. The Audit Committee is composed entirely of independent directors. The Audit Committee is
responsible for the quality and integrity of the Company’s financial information, the effectiveness of the Company’s risk management,
internal controls and regulatory compliance practices, reviewing and approving applicable financial information and documents prior
to public disclosure and for selecting the Company’s external auditors. The Audit 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.
Jason Mullins
President & Chief Executive Officer
Hal Khouri
Executive Vice-President & Chief Financial Officer
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INDEPENDENT AUDITOR’S REPORT
To the shareholders of goeasy Ltd.
Opinion
We have audited the consolidated financial statements of goeasy Ltd. and its subsidiaries (the Company), which comprise the consolidated
statements of financial position as at December 31, 2022 and 2021, and the consolidated statements of income, consolidated statements
of comprehensive income, consolidated statements of changes in shareholders’ equity and consolidated statements of cash flows for the
years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial
position of the Company as at December 31, 2022 and 2021, and its consolidated financial performance and its consolidated cash flows
for the years then ended in accordance with International Financial Reporting Standards (IFRSs).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We are
independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the consolidated financial
statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as a
whole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion on these matters. For each matter below,
our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of
our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our
assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.
Allowance for loan losses
Key audit
matter
As more fully described in Notes 2 and 7 of the consolidated financial statements, goeasy has used expected credit loss
(ECL) models to recognize $213.0 million in allowances for credit losses on its consolidated balance sheet. The ECL is
an unbiased and probability-weighted estimate of credit losses expected to occur in the future, which is determined by
evaluating a range of possible outcomes incorporating the time value of money and reasonable and supportable infor-
mation about past events, current conditions and future economic forecasts.
The allowance for credit losses is a significant estimate for which variations in model methodology, assumptions and
judgements can have a material effect on the measurement of expected credit losses.
Auditing the allowance for credit losses was complex, involved auditor judgement and required the involvement of Credit
Risk Specialists due to the inherent com-plexity of the models, assumptions, judgements and the interrelationship of these
variables in measuring the ECL. Significant assumptions and judgments with re-spect to the estimation of the allowance
for credit losses included the calculation of both 12-month and lifetime expected credit losses, the determination of when
a loan has experienced a significant increase in credit risk and the determination of relevant forward looking multiple
economic scenarios and the probability weighting of those scenarios.
How our
audit
addressed
the key audit
matter
To test the allowance for credit losses, among other procedures, we assessed, with the assistance of our Credit Risk
Specialists, whether the methodology and assumptions used in the ECL models are consistent with IFRS. We independently
recalculated the ECL using source data. With the assistance of our Credit Risk Specialists, we evaluated the accuracy
and related application of the programming code which records loans in each of the appropriate stages. We evaluated
the reasonability of macroeconomic inputs used by comparing the information to third party sources and recalculated
the effect of the inputs on the ECL models. We tested the completeness and accuracy of a sample of data used in the
measurement of ECL by agreeing back to appropriate source systems or loan origination documents.
97
Goodwill impairment
Key audit
matter
As more fully described in Notes 2 and 12 of the consolidated financial statements, goeasy has recognized $180.9 million
in goodwill as a result of past business combinations. Goodwill is tested, at least annually, for impairment. Goodwill
is also required to be tested for impairment whenever there are indicators that it may be impaired. Goodwill is tested
by comparing the recoverable amount of the cash- generating unit (CGU) to which they have been allocated, with the
carrying amount of the total CGU. The recoverable amount of a CGU is defined as the higher of its estimated fair value
less costs to sell and its value in use.
Auditing goeasy’s goodwill impairment tests was complex, required the application of auditor judgement and involved
the use of our Valuation Specialists due to the significant estimation required to determine the recoverable amounts
of the CGUs. In particular, the estimates of recoverable amounts are sensitive to significant assumptions, such as
forecasted growth rates, discount rates, and terminal growth rates, which are affected by expectations about future
market or economic conditions.
How our
audit
addressed
the key audit
matter
With the assistance of our Valuation Specialists, we tested management’s estimate of the recoverable amounts of the
CGUs. We performed a sensitivity analysis over the significant assumptions to evaluate the changes in the recoverable
amount of the CGU that would result from changes in the assumptions. We performed audit procedures that included,
among others, assessing the methodologies applied, and testing the significant assumptions discussed above and the
underlying data used by goeasy in its assessments. With the assistance of our Valuation Specialists, we evaluated the
discount rate by considering the cost of capital of comparable businesses and other industry factors. We evaluated the
reasonability of the forecasted earnings and terminal growth rates by comparing to historical results and our current
understanding of the business as well as current economic trends. We assessed the historical accuracy of management’s
prior year estimates by performing a comparison of management’s prior year projections to actual results.
Other Information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion & Analysis
• The information, other than the consolidated financial statements and our auditor’s report thereon, in the Annual Report.
Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form
of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information, identified above
and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion & Analysis prior to the date of this auditor’s report. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If based on the work we will perform on
this other information, we conclude there is a material misstatement of other information, we are required to report that fact to those
charged with governance.
Responsibilities of management and those charged with governance for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs,
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.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
98
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events
or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether
the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the
audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is David Tedesco.
Toronto, Canada
February 15, 2023
99
Audited
Consolidated
Financial
Statements
For the years ended
December 31, 2022 & 2021
100
Consolidated Statements of Financial Position
(Expressed in thousands of Canadian dollars)
ASSETS
Cash (note 5)
Accounts receivable (note 6)
Prepaid expenses
Income taxes recoverable
Consumer loans receivable, net (note 7)
Investments (note 8)
Lease assets (note 9)
Property and equipment, net (note 10)
Derivative financial assets (notes 8, 13 and 16)
Intangible assets, net (note 12)
Right-of-use assets, net (note 11)
Goodwill (note 12)
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Revolving credit facility (note 15)
Accounts payable and accrued liabilities
Income taxes payable
Dividends payable (note 17)
Unearned revenue
Accrued interest
Deferred tax liabilities, net (note 21)
Lease liabilities (note 11)
Secured borrowings (note 14)
Revolving securitization warehouse facilities (note 13)
Derivative financial liabilities (note 16)
Notes payable (note 16)
TOTAL LIABILITIES
SHAREHOLDERS' EQUITY
Share capital (note 17)
Contributed surplus (note 18)
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, 2022
AS AT
DECEMBER 31, 2021
62,654
25,697
8,334
2,323
2,627,357
57,304
48,437
35,856
49,444
138,802
65,758
180,923
3,302,889
148,646
51,136
-
14,965
28,661
10,159
24,692
74,328
105,792
805,825
-
1,168,997
2,433,201
419,046
21,499
2,776
426,367
869,688
3,302,889
102,479
20,769
8,018
-
1,899,631
64,441
47,182
35,285
20,634
159,651
57,140
180,923
2,596,153
-
57,134
27,859
10,692
11,354
8,135
38,648
65,607
173,959
292,814
34,132
1,085,906
1,806,240
363,514
22,583
8,567
395,249
789,913
2,596,153
David Ingram
Director
Karen Basian
Director
101
Consolidated Statements of Income
(Expressed in thousands of Canadian dollars, except earnings per share)
REVENUE
Interest income
Lease revenue
Commissions earned
Charges and fees
OPERATING EXPENSES
BAD DEBTS (NOTE 7)
OTHER OPERATING EXPENSES
Salaries and benefits
Stock-based compensation (note 18)
Advertising and promotion
Occupancy
Technology costs
Loss on sale or write off of assets (note 12)
Underwriting and collections
Other expenses (note 19)
DEPRECIATION AND AMORTIZATION
Depreciation of lease assets (note 9)
Depreciation of right-of-use assets (note 11)
Amortization of intangible assets (note 12)
Depreciation of property and equipment (note 10)
TOTAL OPERATING EXPENSES
OPERATING INCOME
OTHER INCOME (LOSS) (NOTE 8)
FINANCE COSTS (NOTE 20)
INCOME BEFORE INCOME TAXES
INCOME TAX EXPENSE (RECOVERY) (NOTE 21)
Current
Deferred
NET INCOME
BASIC EARNINGS PER SHARE (NOTE 22)
DILUTED EARNINGS PER SHARE (NOTE 22)
See accompanying notes to the consolidated financial statements.
YEAR ENDED
DECEMBER 31, 2022
DECEMBER 31, 2021
698,150
103,414
197,159
20,613
1,019,336
535,638
112,371
163,734
14,979
826,722
272,893
182,084
174,236
10,053
34,069
25,234
23,463
20,549
13,930
31,196
332,730
33,547
20,160
18,406
9,193
81,306
686,929
332,407
(28,659)
(107,972)
195,776
65,659
(10,044)
55,615
140,161
8.61
8.42
157,157
8,875
30,393
23,614
18,033
2,580
9,596
34,501
284,749
35,844
18,207
16,831
8,004
78,886
545,719
281,003
114,876
(79,025)
316,854
73,744
(1,833)
71,911
244,943
15.12
14.62
102
Consolidated Statements of Comprehensive Income
(Expressed in thousands of Canadian dollars)
Net income
Other comprehensive income (loss) to be reclassified to the consolidated statement of
income in subsequent periods
Change in fair value of cash flow hedge, net of taxes
Change in costs of hedging, net of taxes
Change in foreign currency translation reserve
YEAR ENDED
DECEMBER 31, 2022
DECEMBER 31, 2021
140,161
244,943
(7,842)
2,055
(4)
(5,791)
20,271
(6,424)
-
13,847
Comprehensive income
134,370
258,790
See accompanying notes to the consolidated financial statements.
Consolidated Statements of Changes in Shareholders' Equity
(Expressed in thousands of Canadian dollars)
SHARE
CAPITAL
CONTRIBUTED
SURPLUS
TOTAL
CAPITAL
RETAINED
EARNINGS
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
TOTAL
SHAREHOLDERS'
EQUITY
22,583
386,097
395,249
8,567
Balance, December 31, 2021
Common shares issued
Stock-based compensation (note 18)
Repurchase of equity interest related to
restricted share units, net of tax
363,514
65,828
-
-
Shares purchased for cancellation (note 17)
(10,296)
Comprehensive income (loss)
Dividends
-
-
(2,532)
63,296
10,053
10,053
(8,605)
(8,605)
-
-
-
-
-
-
(10,296)
(50,703)
-
-
140,161
(58,340)
Balance, December 31, 2022
419,046
21,499
440,545
426,367
Balance, December 31, 2020
Common shares issued
181,753
189,362
(6,024)
183,338
19,732
201,485
247,307
(5,280)
Stock-based compensation (note 18)
-
8,875
8,875
Shares purchased for cancellation (note 17)
(7,601)
Comprehensive income
Dividends
-
-
-
-
-
(7,601)
(54,689)
-
-
244,943
(42,312)
Balance, December 31, 2021
363,514
22,583
386,097
395,249
See accompanying notes to the consolidated financial statements.
-
-
-
-
-
-
(5,791)
-
2,776
-
-
-
13,847
-
8,567
789,913
63,296
10,053
(8,605)
(60,999)
134,370
(58,340)
869,688
443,512
183,338
8,875
(62,290)
258,790
(42,312)
789,913
103
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)
OPERATING ACTIVITIES
Net income
Add (deduct) items not affecting cash
Bad debts (note 7)
Depreciation of lease assets (note 9)
Other loss (income) (note 8)
Loss on sale or write off of assets (note 12)
Depreciation of right-of-use assets (note 11)
Amortization of intangible assets (note 12)
Stock-based compensation (note 18)
Depreciation of property and equipment (note 10)
Amortization of deferred financing charges
Deferred income tax recovery (note 21)
Net change in other operating assets and liabilities (note 23)
Net issuance of consumer loans receivable
Purchase of lease assets
Cash used in operating activities
INVESTING ACTIVITIES
Proceeds on sale of investment
Purchase of property and equipment
Investments in intangible assets
Purchase of investments
Cash used in business acquisitions, net of cash acquired (note 4)
Cash used in investing activities
FINANCING ACTIVITIES
Advances from revolving securitization warehouse facilities, net of financing charges
Advances from revolving credit facilities, net of financing charges
Issuance of common shares, net of issuance costs (note 17)
Lease incentive received (note 11)
Payment of restricted share units
Payment of lease liability (note 11)
Payment of common share dividends
Payment of loan from secured borrowings
Purchase of common shares for cancellation (note 17)
Payment of advances from revolving credit facilities
Issuance of notes payable, net of finance charges (note 16)
Advances from secured borrowings
Payment of advances from revolving securitization warehouse facilities
Payment of notes payable
Cash provided by financing activities
Net (decrease) increase in cash during the year
Cash, beginning of year
Cash, end of year
See accompanying notes to the consolidated financial statements.
104
YEAR ENDED
DECEMBER 31, 2022
DECEMBER 31, 2021
140,161
244,943
272,893
33,547
28,659
20,549
20,160
18,406
10,053
9,193
6,202
(10,044)
549,779
(20,251)
(1,000,619)
(34,790)
(505,881)
25,395
(9,871)
(18,015)
(40,000)
-
(42,491)
511,468
514,840
60,564
888
(10,692)
(20,945)
(51,610)
(68,167)
(60,999)
(366,800)
-
-
-
-
508,547
(39,825)
102,479
62,654
182,084
35,844
(114,876)
2,580
18,207
16,831
8,875
8,004
5,688
(1,833)
406,347
33,226
(484,817)
(33,631)
(78,875)
109,198
(7,815)
(19,634)
(11,343)
(281,041)
(210,635)
372,557
154,803
170,177
1,573
(1,159)
(18,880)
(37,474)
(60,433)
(62,290)
(355,000)
391,516
67,113
(80,000)
(243,567)
298,936
9,426
93,053
102,479
Notes To
Consolidated
Financial
Statements
(Expressed in thousands of Canadian dollars, except where otherwise indicated)
December 31, 2022 and 2021
105
1. Corporate Information
goeasy Ltd. (the “Parent Company”) was incorporated under the laws of the Province of Alberta, Canada by Certificate and Articles of
Incorporation dated December 14, 1990, and was continued as a corporation in the Province of Ontario pursuant to Articles of Continuance
dated July 22, 1993. The Parent Company has common shares listed on the Toronto Stock Exchange (the “TSX”) under the symbol “GSY”
and its head office is in Mississauga, Ontario, Canada.
The Parent Company and all of the companies that it controls (collectively referred to as “goeasy” or the “Company”) are a leading full-
service provider of goods and alternative financial services that provide everyday Canadians with a path for a better tomorrow, today. The
principal operating activities of the Company include: i) providing loans and other financial services to consumers; and ii) leasing household
products to consumers. Customers can transact seamlessly through an omnichannel model that includes online and mobile platforms,
over 400 locations across Canada, and point-of-sale financing offered in the retail, powersports, automotive, home improvement and
healthcare verticals, through approximately 6,500 merchant partners across Canada.
The Company operates in two reportable segments: easyfinancial and easyhome. As at December 31, 2022, the Company operated 302
easyfinancial locations (including 2 kiosks within easyhome stores and 3 operation centres) and 154 easyhome stores (including 34
franchises). As at December 31, 2021, the Company operated 294 easyfinancial locations (including 5 kiosks within easyhome stores and
3 operation centres) and 158 easyhome stores (including 34 franchises).
The consolidated financial statements were authorized for issue by the Board of Directors on February 15, 2023.
2. Significant Accounting Policies
Basis of Preparation
The consolidated financial statements of the Company for the year ended December 31, 2022 have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The policies applied in
these consolidated financial statements were based on IFRS issued and outstanding as at December 31, 2022.
Certain comparative amounts have been restated to conform with the presentation adopted in the current year.
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 when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee. This includes all wholly owned subsidiaries and structured entities (note 13)
where goeasy Ltd. has control but does not have ownership of a majority of the voting rights.
As at December 31, 2022, the Parent Company’s principal subsidiaries were:
• RTO Asset Management Inc.
• easyfinancial Services Inc.
• LendCare Capital Inc. (“LendCare”) (note 4)
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.
Foreign Currency Translation
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.
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 translated into the functional currency at the spot rate on the reporting date. 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.
106
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 ancillary products where it acts as an agent and therefore recognizes such revenue on a net basis.
i) Interest Income
Interest income from consumer loans receivable is recognized when earned using the effective interest rate method.
ii) 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.
iii) Commissions Earned and Charges and Fees
Commissions earned are recognized when, or as, a performance obligation is satisfied by providing a service to a customer, in the
amount of the consideration to which the Company expects to receive. Charges and fees are recognized as revenue at a point in time
upon when the transaction is completed.
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 consists of bank balances and cash on hand, adjusted for in-transit items such as outstanding cheques and deposits.
Financial Assets
Initial Recognition and Measurement
Financial assets are classified at initial recognition at: i) fair value through profit or loss (“FVTPL”); ii) amortized cost; iii) debt financial
instruments measured at fair value through other comprehensive income (“FVOCI”); iv) equity financial instruments designated at
FVOCI; or v) financial instruments designated at FVTPL, based on the contractual cash flow characteristics of the financial assets and
the business model under which the financial assets are managed. All financial assets are measured at fair value with the exception of
financial assets measured at amortized cost. Financial assets are reclassified when and only when the business model under which
they are managed has changed. All reclassifications are to be applied prospectively from the reclassification date.
All debt instrument financial assets that do not meet a “solely payment of principal and interest” (“SPPI”) test, including those that contain
embedded derivatives are classified at initial recognition as FVTPL. For debt instrument financial assets that meet the SPPI test, classification
at initial recognition is determined based on the business model under which these instruments are managed. Debt instruments that are
managed on a “held for trading” or “fair value” basis are classified as FVTPL. Debt instruments that are managed on a “hold to collect and for
sale” basis are classified as FVOCI for debt. Debt instruments that are managed on a “hold to collect” basis are classified as amortized cost.
Financial assets consist of accounts receivable, consumer loans receivable, derivative financial instruments and investments, and are
initially measured at fair value plus transaction costs.
Accounts receivable and consumer loans receivable are subsequently measured at amortized cost. Amortized cost is determined using the
effective interest rate method, factoring in acquisition costs paid to third parties, and allowances for loan losses. The effective interest rate is
the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to the carrying amount. When
calculating the effective interest rate, the Company estimates future cash flows considering all contractual terms of the financial instrument.
The Company does not have any financial assets that are subsequently measured at fair value except for investments and the derivative
financial instruments which may be in an asset or liability position (see section “Derivative Financial Instruments and Hedge Accounting”).
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.
107
Impairment of Financial Assets
The Company applies an expected credit loss (“ECL”) model, where credit losses that are expected to transpire in future years irrespective
of whether or not a loss event has occurred as at the statement of financial position date, are provided for. The Company assesses and
segments its loan portfolio into performing (Stage 1), under-performing (Stage 2) and non-performing (Stage 3) categories as at each
statement of financial position date. Loans are categorized as under-performing if there has been a significant increase in credit risk.
The Company utilizes an internal risk rating methodology that incorporates changes in delinquency and other identifiable risk factors
based on data obtained from monthly refreshes of a customer’s credit profile, and any substantive adjustments to a loan’s terms.
Under-performing loans are recategorized to performing only if there is deemed to be a substantial decrease in credit risk. Loans are
categorized as non-performing if there is objective evidence that such loans will likely charge off in the future, which the Company
has determined to be when loans are delinquent for greater than 30 days. For performing loans, the Company is required to record an
allowance for loan losses equal to the expected losses on that group of loans over the ensuing twelve months. For under-performing and
non-performing loans, the Company is required to record an allowance for loan losses equal to the expected losses on those groups of
loans over their remaining life.
The Company does not provide additional credit to borrowers who are delinquent. In order for additional credit to be advanced to a
borrower, they must be current on their pre-existing loan and meet the Company’s credit and underwriting requirements. In limited
situations, the Company may amend the terms of a loan, typically through deferring payments and extending the loan amortization
period, for customers that are current or are in arrears as a means to ensure the customer remains able to repay the loan.
The key inputs in the measurement of ECL allowances are as follows:
• The probability of default is an estimate of the likelihood of default over a given time horizon;
• The exposure at default is an estimate of the exposure at a future default date;
• The loss given default is an estimate of the loss arising in the case where a default occurs at a given time; and
• Forward-looking indicators (“FLIs”).
Ultimately, the ECL is calculated based on the probability weighted expected cash collected shortfall against the carrying value of
the loan and considers reasonable and supportable information about past events, current conditions and forecasts of future events
and economic conditions that may impact the credit profile of the loans. Forward-looking information is considered when determining
significant increases in credit risk and measuring expected credit losses. Forward-looking macroeconomic factors are incorporated
in the risk parameters as relevant. From an analysis of historical data, management has identified and reflected in the Company’s ECL
allowance those relevant FLI variables that contribute to credit risk and losses within the Company’s loan portfolio. Within the Company’s
loan portfolio, the most highly correlated variables are unemployment rates, inflation, oil prices, and gross domestic product (“GDP”).
Unsecured customer loan balances that are delinquent greater than 90 days and secured customer loan balances that are delinquent
greater than 180 days are written off against the allowance for loan losses.
Consumer loan balances, 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 decreases because of an event occurring after the impairment was
recognized, the previously recognized impairment loss is reduced by adjusting the allowance account. If a write off is later recovered,
the recovery is credited to bad debt expense.
For accounts receivable, the Company applies a simplified approach in calculating ECLs recognizing a loss allowance based on lifetime
ECLs at each reporting date.
Modified Loans
In cases where a borrower experiences financial difficulty, the Company may grant certain concessionary modifications to the terms
and conditions of a loan. Modifications may include payment deferrals, extension of amortization periods, rate reductions and other
modifications intended to minimize the economic loss. The Company has policies in place to determine the appropriate remediation
strategy based on the individual borrower.
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If the Company determines that a modification results in the expiry of cash flows, the original asset is derecognized while a new asset
is recognized based on the new contractual terms. Significant increase in credit risk is assessed relative to the risk of default on the
new financial instrument at the date of derecognition. A gain or loss is assessed at the date of modification or derecognition equal to the
difference between the fair value of the cash flows under the original and modified terms.
If the Company determines that a modification does not result in derecognition, significant increase in credit risk is assessed based on the
risk of default at initial recognition of the original asset. Expected cash flows arising from the modified contractual terms are considered
when calculating the ECL for the modified asset. For loans that were modified while having lifetime ECLs, the loans can revert to having
twelve-month ECLs after a period of performance and improvement in the borrower’s financial condition.
Purchased or Originated Credit-Impaired Financial Assets
Purchased or originated credit-impaired ("POCI") financial assets are assets that are credit-impaired at the time of initial recognition. A
lifetime ECL is incorporated into the calculation of the effective interest rate of these assets. Consequently, POCI assets do not carry an
impairment allowance at the time of initial recognition. The amount recognized as a loss allowance subsequent to initial recognition is
equal to changes in the lifetime ECL.
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 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. 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:
• Lease assets, excluding game stations, computers and related equipment, are depreciated using the units of activity method over
the expected lease agreement term.
• 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.
• 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 that have been charged off as stolen, lost or no longer suitable for lease.
The Company records a provision against the carrying value of lease assets for estimated losses from theft and/or damage.
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.
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Property and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets as follows:
Asset Category
Estimated Useful Lives
Furniture and fixtures
Computer
Office equipment
Signage
Leasehold improvements
7 years
5 years
7 years
7 years
5 to 10 years depending on the 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 cost 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 their estimated useful lives 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 is 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 for intangible assets with finite lives is recognized in net income.
Intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets as follows:
Asset Category
Estimated Useful Lives
Customer lists
Websites and digital properties
Software (excluding websites and digital properties)
Merchant networks
5 years
3 years
5 to 10 years
10 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.
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.
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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, if any. 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.
Leases
The Company assesses contracts at inception, whether a contract is or contains a lease. A lease contract conveys the right to control the
use of an identified asset for a period of time in exchange for consideration.
A. Company as a Lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-
value assets. The Company recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the
underlying assets.
i) Right-of-use Assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for
use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses and adjustments for any
remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized at the inception of
the lease, initial direct costs incurred, and lease payments made at or before the lease commencement date less any lease incentives
received. Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognized
right-of-use assets are depreciated on a straight-line basis over the shorter of their estimated useful life and the lease term. Right-of-use
assets are subject to impairment.
ii) Lease Liabilities
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to
be made over the lease term. Lease payments include fixed payments (including in-substance fixed payments) less any lease incentives
receivable, plus variable lease payments that depend on an index or a rate and amounts expected to be paid under residual value
guarantees. Lease payments also include the exercise price of purchase options reasonably certain to be exercised by the Company and
payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate. Variable lease
payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers
the payment occurs.
In determining a lease component, the Company does not separate the non-lease components from the lease component and instead
accounts for each lease component and any associated non-lease components as a single lease component.
In calculating the present value of lease payments, the Company uses the incremental borrowing rate on leases at the lease commencement
date, if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced for lease payments made. In addition, the carrying amount of lease liabilities is
remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the
assessment to purchase the underlying asset.
iii) Short-term Leases and Leases of Low-Value Assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of
12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets
recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases
of low-value assets are recognized as expense on a straight-line basis over the lease term.
B. Company as a Lessor
Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified
as operating leases. Lease revenue recognition is discussed above.
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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.
The Company regularly reviews lease assets that are idle for more than 90 days for indicators of impairment. Such assets deemed
not leasable or saleable are discarded and their net carrying value reduced to nil.
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.
For the easyhome business unit, a CGU was determined to be at the individual store level, as the cash inflows of an individual store are
largely independent of the cash inflows of other assets in the Company. For the easyfinancial and LendCare business units, a CGU was
determined to be at the business unit level, as the cash inflows are largely dependent on their centralized loan and collection centres.
If an indication of impairment exists, or when annual testing for an asset is required, the Company estimates the asset or CGU’s recoverable
amount. The recoverable amount is the higher of the asset 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. 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’s
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 reversals are recognized in net income.
Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. Impairment is determined
by assessing the recoverable amount of each group of CGUs to which the goodwill relates. Where the recoverable amount of a CGU is less
than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in subsequent periods.
Intangible assets with indefinite useful lives are tested for impairment annually at the CGU level and when circumstances indicate the carrying
value may be impaired.
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Financial Liabilities
Financial liabilities are initially recognized at fair value. In the case of certain loans and borrowings, the fair value at initial recognition
includes the value of proceeds received net of directly attributable transaction costs. The Company’s financial liabilities include
a revolving credit facility, United States dollar (“USD”) denominated notes payable, revolving securitization warehouse facilities,
secured borrowings, derivative financial instruments 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 fees or costs related to the interest-bearing debt. Interest
expense and the amortization of deferred financing charges are 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 settled, discharged, cancelled or expired. Any gains or
losses are recognized in net income when liabilities are derecognized.
Derivative Financial Instruments and Hedge Accounting
The Company’s financing activities expose it to the financial risks of changes in foreign exchange and interest rate volatility. The
Company utilizes derivative financial instruments as cash flow hedges to assist in the management of these risks.
Derivative financial instruments are initially measured at fair value on the trade date and subsequently remeasured at fair value
at each reporting date using observable market inputs.
The Company designates derivative financial instruments as cash flow hedges to hedge the change due to foreign exchange risk or interest
rate risk when the derivative financial instruments meet the criteria for hedge accounting in accordance with IFRS 9, Financial Instruments.
In order to qualify for hedge accounting, formal documentation must include identification of the hedging instrument, the hedged
item, the nature of the risk being hedged and how the Company will assess whether the hedging relationship meets the hedge
effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A
hedging relationship qualifies for hedge accounting if it meets all the following effectiveness requirements:
• There is an economic relationship between the hedged item and the hedging instrument.
• The effect of credit risk does not dominate the change in values that result from that economic relationship.
• The hedge ratio of the hedging relationship is consistent with management's risk strategy.
Where an effective hedge exists, the change in the fair value of the derivative instrument is recognized in other comprehensive
income (loss) (“OCI”) and reclassified to profit or loss as a reclassification adjustment in the same period or periods during which
the hedged cash flows affect profit or loss. As such there is no net impact on net income.
Hedge effectiveness is assessed at the inception of the hedge and on an ongoing basis. Should a hedge cease to be effective any
changes in fair value related to movements in foreign currency or interest rates would be recognized in net income at that time.
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 Taxes
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to taxation authorities. Income
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 taxes relating to items recognized directly in equity are also recognized in equity and not in net income.
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ii) Deferred Income Taxes
Deferred income taxes are 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;
• The initial recognition of 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 realized. 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
Revenue, 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, taxation authorities is included as part of amounts receivable or
accounts payable and accrued liabilities in the consolidated statements of financial position.
Stock-based Payment Transactions
The Company has stock-based compensation plans, such as, stock options, Executive Share Units (“ESUs”) in the form of
restricted share units (“RSUs”) or executive deferred share units (“Executive DSUs”), and Board deferred share units (“Board
DSUs”), which are accounted for as equity-settled transactions. 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 pricing 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
vesting period. The cumulative expense recognized for equity-settled transactions at each reporting date reflects the extent to
which the vesting period has elapsed and the Company’s best estimate of the number of equity instruments that will ultimately
vest. The expense for a period is recognized in stock-based compensation expense in the consolidated statements of income.
No expense is recognized for awards that do not ultimately vest.
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Earnings Per Share
Basic earnings per share is calculated by dividing 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 cash received from 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 Judgements, 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 revenue and expenses during the reporting periods.
These accounting judgements, 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 the 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) Business combinations
Business combinations require management to exercise judgment in measuring the fair value of the assets acquired, equity instruments
issued, and liabilities incurred or assumed.
ii) Allowance for Credit Losses and Allowance for Loan Losses
The ECL method is applied in determining the allowance for credit losses on gross consumer loans receivable. The key inputs in
the measurement of ECL allowances, all of which are subject to accounting judgments, estimates and assumptions are discussed
in note 2, “Financial Assets”.
In addition, consumer loans receivable includes accrued interest earned from consumer loans that is expected to be received
in future periods. Interest receivable from consumer loans is determined based on the amounts the Company believes will be
collected in future periods.
iii) Depreciation of Lease Assets
Certain assets on lease (excluding game stations, computers and related equipment) are depreciated based on the time on lease against
the lease agreement term, which is estimated by management for each product category. Other assets on lease such as game stations,
computers and related equipment, are depreciated on a straight-line basis over their estimated useful lives.
iv) Impairment Assessment of Non-Financial Assets
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.
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 include the cash flow forecast, the growth rate applied to cash flows subsequent to the third year and the discount rate.
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v) Impairment Assessment of Goodwill and Indefinite-Life Intangible Assets
In assessing the recoverable amount, management estimates the group of CGU’s value in use. Value in use is based on 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) Fair Value of Stock-Based Compensation
The fair value of equity-settled stock-based compensation plan grants are measured at the grant date using either the related market
value or the Black-Scholes option pricing model, as appropriate. The Black-Scholes option pricing model was developed for estimating the
fair value of traded options that are fully transferable and have no vesting restrictions. In addition, option pricing 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.
vii) Taxation Amounts
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.
viii) Fair Value Measurement of Investments
When the fair values of investments recorded in the consolidated statement of financial position cannot be measured based on quoted
prices in active markets, their fair value is measured using alternative valuation techniques, including financial models. The inputs to
these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required
in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in
assumptions relating to these factors could affect the reported fair value of financial instruments.
3. Changes In Accounting Policy And Disclosures
(a) New standards, interpretations and amendments adopted by the Company
There were no new standards, interpretations or amendments that had a material impact to the Company’s consolidated
financial statements. The Company has not early adopted any standard, interpretation or amendment that has been issued but
is not yet effective.
(b) Standards issued but not yet effective
There are no new standards issued but not yet effective as at January 1, 2022 that have a material impact on the Company’s
consolidated financial statements.
4. Significant Acquisition in 2021
On April 30, 2021 (“Acquisition Date”), the Company acquired 100% of the outstanding equity of LendCare, a Canadian point-of-sale
(“POS”) consumer finance and technology company, from LendCare’s founders and CIVC Partners for consideration of $324.8 million,
of which $313.0 million was paid in cash and $11.8 million was paid in the Company’s common shares (the “Acquisition”). The $11.8
million fair value of the 81,400 common shares issued as consideration was calculated with reference to the closing price of the
Company’s common shares on the Acquisition Date.
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The Company determined the fair value of the identifiable net assets and liabilities, goodwill and intangible assets acquired at the
date of acquisition as follows:
Total identifiable net assets acquired
Intangible assets
Goodwill
Deferred tax liabilities
Total purchase consideration transferred
Purchase consideration
Cash
Common shares
Total consideration
Analysis of cash flows on Acquisition
Transaction costs of the Acquisition (included in cash flows from operating activities)
Cash used in Acquisition, net of cash acquired (included in cash flows from investing activities)
Issuance of Notes Payable, net of financing charges (note 16) (included in cash flows from financing
activities)
Issuance of common shares, net of issuance costs (note 17) (included in cash flows from financing
activities)
Payment of Notes Payable (included in cash flows from financing activities)
Net cash flow on Acquisition
AMOUNT
71,212
134,186
159,613
(40,229)
324,782
312,945
11,837
324,782
(9,341)
(281,041)
391,516
164,812
(243,567)
22,379
The goodwill of $159.6 million largely reflects the synergies of combining and streamlining the Company’s existing business at the
Acquisition Date with LendCare’s operations. Goodwill is not deductible for income tax purposes.
The results of the Acquisition have been consolidated from the Acquisition Date and are included in the easyfinancial reporting
segment (note 30).
Identifiable assets acquired and liabilities assumed
The following table summarizes the identifiable assets acquired and liabilities assumed at the Acquisition Date:
Cash
Accounts receivable
Prepaid expenses
Consumer loans receivable
Property and equipment
Right-of-use assets
Income taxes recoverable
Accounts payable and accrued liabilities
Accrued interest
Deferred tax liabilities, net
Notes payable
Secured borrowings
Lease liabilities
Total identifiable net assets acquired
AMOUNT
29,507
9,337
798
444,520
4,159
1,160
6,120
(9,034)
(564)
(2,859)
(243,567)
(167,205)
(1,160)
71,212
On the Acquisition Date, the total gross consumer loan contractual amounts due were $457.3 million, of which $16 million was expected
to be uncollectible.
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5.Cash
Certain cash on deposit at banks earns interest at floating rates based on daily bank deposit rates.
The Company has pledged a portion of its cash to fulfill collateral requirements under its cross-currency swap contracts. As at December
31, 2022, the fair value of the cash pledged by the counterparties as cash collateral in respect of its cross-currency swap contracts was
$30.2 million (2021 - $19.6 million cash pledged by the Company).
Related to its Revolving Securitization Warehouse Facilities and Secured Borrowings, the Company holds back an amount from the
proceeds of loan transfers as a reserve against future customer defaults. As at December 31, 2022, the cash held back as a reserve for
the Revolving Securitization Warehouse Facilities and Secured Borrowings were $26.2 million and $13.5 million, respectively (2021 –
$6.8 million and $20.8 million, respectively).
6.Accounts Receivable
Commissions receivable
Vendor rebates receivable
Due from franchisees
Amounts due from customers and others
DECEMBER 31, 2022
DECEMBER 31, 2021
18,266
613
282
6,536
25,697
15,223
601
337
4,608
20,769
All accounts receivable for the years ended December 31, 2022 and 2021 are due with in 12 months.
7. Consumer Loans Receivable
Consumer loans receivable represents amounts advanced to customers and includes both unsecured and secured loans. Unsecured
loan terms generally range from 9 to 84 months while secured loan terms generally range from 5 to 20 years.
DECEMBER 31, 2022
DECEMBER 31, 2021
Gross consumer loans receivable
Interest receivable from consumer loans
Unamortized deferred acquisition costs
Unamortized deferred revenue
Allowance for credit losses
2,794,694
32,457
33,026
(19,779)
(213,041)
2,627,357
2,030,339
18,881
16,320
(6,147)
(159,762)
1,899,631
All accounts receivable for the years ended December 31, 2022 and 2021 are due with in 12 months.
The allocation of the Company’s gross consumer loans receivable based on loan type is as follows:
Unsecured instalment loans
Secured instalment loans
DECEMBER 31, 2022
DECEMBER 31, 2021
$
% OF TOTAL LOANS
$
% OF TOTAL LOANS
1,703,593
1,091,101
2,794,694
61.0%
39.0%
100.0%
1,364,696
665,643
2,030,339
67.2%
32.8%
100.0%
118
The scheduled principal repayment aging analyses of the gross consumer loans receivable portfolio as at December 31, 2022 and 2021
are as follows:
0 - 6 months
6 - 12 months
12 - 24 months
24 - 36 months
36 - 48 months
48 - 60 months
60 months +
DECEMBER 31, 2022
DECEMBER 31, 2021
$
% OF TOTAL LOANS
$
% OF TOTAL LOANS
236,026
161,441
363,437
433,895
480,990
346,560
772,345
8.4%
5.8%
13.0%
15.5%
17.2%
12.4%
27.7%
220,383
160,914
351,028
408,762
332,049
229,782
327,421
10.9%
7.9%
17.3%
20.1%
16.4%
11.3%
16.1%
2,794,694
100.0%
2,030,339
100.0%
The gross consumer loans receivable portfolio categorized by the contractual time to maturity as at December 31, 2022 and 2021 are
summarized as follows:
0 - 1 year
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
5 years +
DECEMBER 31, 2022
DECEMBER 31, 2021
$
% OF TOTAL LOANS
$
% OF TOTAL LOANS
65,485
139,143
312,612
573,567
493,336
1,210,551
2,794,694
2.3%
5.0%
11.2%
20.5%
17.7%
43.3%
60,319
155,957
347,331
501,830
473,096
491,806
3.0%
7.7%
17.1%
24.7%
23.3%
24.2%
100.0%
2,030,339
100.0%
An aging analysis of gross consumer loans receivable past due is as follows:
1 - 30 days
31 - 44 days
45 - 60 days
61 - 90 days
91 - 120 days
121 - 150 days
151 - 180 days
DECEMBER 31, 2022
DECEMBER 31, 2021
$
% OF TOTAL LOANS
$
% OF TOTAL LOANS
86,687
22,027
18,245
25,285
6,157
5,020
2,389
165,810
3.1%
0.8%
0.6%
0.9%
0.2%
0.2%
0.1%
5.9%
71,505
14,417
12,358
14,966
3,350
2,792
1,841
121,229
3.5%
0.7%
0.6%
0.7%
0.2%
0.1%
0.1%
5.9%
119
The following tables provide the gross consumer loans receivable segregated by the Company’s risk ratings and staging classification. The
classification of loans into low, normal and high risk categories is based on the Company’s custom behaviour credit scoring model and/or third-
party credit scores. The Company’s scoring model has been built and refined using analytical techniques and statistical modelling tools for
predicting future losses among certain customer segments rather than traditional credit scores available from credit reporting agencies. Loans
categorized as low risk have expected future losses that are lower than the average expected loss rate of the overall portfolio. Loans categorized
as normal risk have expected future losses that are approximately equal to the average expected loss rate of the overall loan portfolio. Loans
categorized as high risk have expected future losses that are higher than the average expected loss rate of the overall loan portfolio. The median
TransUnion Risk Score for those borrowers categorized as low, normal and high risk is presented as a reference.
MEDIAN TRANSUNION
RISK SCORE
STAGE 1
(PERFORMING)
STAGE 2
(UNDER-PERFORMING)
STAGE 3
(NON-PERFORMING)
TOTAL
AS AT DECEMBER 31, 2022
634
551
498
579
1,531,982
814,108
217,305
2,563,395
1,471
8,032
145,032
154,535
239
679
75,846
76,764
1,533,692
822,819
438,183
2,794,694
MEDIAN TRANSUNION
RISK SCORE
STAGE 1
(PERFORMING)
STAGE 2
(UNDER-PERFORMING)
STAGE 3
(NON-PERFORMING)
TOTAL
AS AT DECEMBER 31, 2021
635
557
504
583
1,090,814
610,484
167,008
1,868,306
1,586
6,122
105,102
112,810
122
270
48,831
49,223
1,092,522
616,876
320,941
2,030,339
Low Risk
Normal Risk
High Risk
Total
Low Risk
Normal Risk
High Risk
Total
An analysis of the changes in the classification of gross consumer loans receivable is as follows:
Balance as at January 1, 2022
Gross loans originated
Principal payments and other adjustments
Transfers to (from)
Stage 1 (Performing)
Stage 2 (Under-Performing)
Stage 3 (Non-Performing)
Gross charge offs
Net growth in gross consumer loans receivable during the year
STAGE 1
(PERFORMING)
1,868,306
2,377,606
(1,350,018)
391,106
(478,115)
(197,577)
(47,913)
695,089
YEAR ENDED DECEMBER 31, 2022
STAGE 2
(UNDER-
PERFORMING)
STAGE 3
(NON-
PERFORMING)
TOTAL
112,810
49,223
2,030,339
-
-
2,377,606
24,141
(33,790)
(1,359,667)
(314,537)
501,668
(147,010)
(22,537)
41,725
(76,569)
(23,553)
344,587
(183,134)
27,541
-
-
-
(253,584)
764,355
Balance as at December 31, 2022
2,563,395
154,535
76,764
2,794,694
120
STAGE 1
(PERFORMING)
YEAR ENDED DECEMBER 31, 2021
STAGE 2
(UNDER-
PERFORMING)
STAGE 3
(NON-
PERFORMING)*
Balance as at January 1, 2021
Gross loans originated
Gross loans purchased (note 4)
Principal payments and other adjustments
Transfers to (from)4
Stage 1 (Performing)
Stage 2 (Under-Performing)
Stage 3 (Non-Performing)
Gross charge-offs
Net growth in gross consumer loans receivable during the year
1,141,801
1,594,480
435,311
(1,091,069)
265,508
(356,082)
(88,832)
(32,811)
726,505
84,835
-
-
20,204
-
9,209
TOTAL
1,246,840
1,594,480
444,520
11,778
(14,275)
(1,093,566)
(226,178)
369,644
(112,779)
(14,490)
27,975
(39,330)
(13,562)
201,611
(114,634)
29,019
-
-
-
(161,935)
783,499
Balance as at December 31, 2021
1,868,306
112,810
49,223
2,030,339
* Included purchased credit-impaired loans from the Acquisition of LendCare (note 4).
The changes in the allowance for credit losses are summarized below:
Balance, beginning of year
Net charge offs against allowance
Increase due to lending and collection activities
Balance, end of year
DECEMBER 31, 2022
DECEMBER 31, 2021
159,762
(219,614)
272,893
213,041
125,676
(147,998)
182,084
159,762
An analysis of the changes in the classification of the allowance for credit losses is as follows:
YEAR ENDED DECEMBER 31, 2022
STAGE 1
(PERFORMING)
STAGE 2
(UNDER-
PERFORMING)*
STAGE 3
(NON-
PERFORMING)
TOTAL
Balance as at January 1, 2022
89,665
40,680
29,417
159,762
Gross loans originated
Principal payments and other adjustments
Transfers to (from) including remeasurement
Stage 1 (Performing)
Stage 2 (Under-Performing)
Stage 3 (Non-Performing)
Net charge offs against allowance
Balance as at December 31, 2022
93,821
(44,689)
92,536
(47,003)
(22,817)
(44,544)
116,969
-
2,922
(68,338)
141,948
(42,875)
(20,956)
53,381
-
(44,134)
(46,353)
(16,672)
274,547
(154,114)
42,691
93,821
(85,901)
(22,155)
78,273
208,855
(219,614)
213,041
121
YEAR ENDED DECEMBER 31, 2021
STAGE 1
(PERFORMING)
STAGE 2
(UNDER-
PERFORMING)
STAGE 3
(NON-
PERFORMING)*
TOTAL
Balance as at January 1, 2021
Gross loans originated
Gross loans purchased
Principal payments and other adjustments
Transfers to (from) including remeasurement
Stage 1 (Performing)
Stage 2 (Under-Performing)
Stage 3 (Non-Performing)
Net charge offs against allowance
Balance as at December 31, 2021
* Includes purchased credit-impaired loans from the Acquisition of LendCare (note 4).
77,759
57,648
14,252
(28,520)
35,662
(25,851)
(10,635)
(30,650)
89,665
32,608
15,309
125,676
-
-
800
(45,015)
97,907
(32,030)
(13,590)
40,680
-
-
57,648
14,252
(17,032)
(44,752)
(26,283)
(9,018)
170,199
(103,758)
29,417
(35,636)
63,038
127,534
(147,998)
159,762
In calculating the allowance for credit losses, internally developed models were used which factor in credit risk related parameters
including probability of default, exposure at default, loss given default and other relevant risk factors. As part of the process, the
Company employed five distinct forecast scenarios, derived from FLI forecasts produced by Moody’s Analytics, which include
neutral, moderately optimistic, extremely optimistic, moderately pessimistic and extremely pessimistic scenarios. These scenarios
use a combination of four inter-related macroeconomic variables, being unemployment rates, GDP, inflation rates and oil prices, to
determine a probability weighted allowance. Management judgment is then applied to the recommended probability weightings to
these scenarios to determine a probability weighted allowance for credit losses.
The following table shows the key macroeconomic variables used in the determination of the probability weighted allowance during the
forecast periods as at December 31, 2022 and 2021, respectively:
12-MONTH FORWARD-LOOKING
MACROECONOMIC VARIABLES
(AVERAGE ANNUAL)
FORECAST SCENARIOS
NEUTRAL
MODERATELY
OPTIMISTIC
EXTREMELY
OPTIMISTIC
MODERATELY
PESSIMISTIC
EXTREMELY
PESSIMISTIC
December 31, 2022
Unemployment rate1
GDP growth rate2
Inflation growth rate3
Oil prices4
December 31, 2021
Unemployment rate1
GDP growth rate2
Inflation growth rate3
Oil prices4
6.07%
0.15%
4.08%
$86.85
5.81%
3.78%
3.07%
$67.34
5.28%
1.20%
3.78%
$89.40
5.02%
6.36%
3.64%
$69.02
4.59%
2.08%
3.46%
$91.49
4.33%
9.03%
4.14%
$72.75
8.30%
(1.88%)
4.95%
$71.65
8.04%
(2.18%)
2.38%
$42.25
9.72%
(3.08%)
5.31%
$60.58
9.45%
(6.91%)
1.79%
$38.69
1 An average of the projected monthly unemployment rates over the next 12-month forecast period.
2 A projected year-over-year GDP growth rate.
3 A projected year-over-year inflation growth rate.
4 An average of the projected monthly oil prices over the next 12-month forecast period.
122
Historically, the rates of inflation and unemployment are positively correlated with the Company’s loss rates while oil prices and the rate of
GDP growth are negatively correlated. The assignment of the probability weighting for the various scenarios using these variables involves
management judgment to arrive at a collective view of the likelihood of each scenario taking into account current economic conditions and
implications for near-term macroeconomic performance. If management were to assign 100% probability to the extremely pessimistic
scenario forecast, the allowance for credit losses would have been $31.4 million (2021 – $24.7 million) higher than the reported allowance
for credit losses as at December 31, 2022. This sensitivity does not consider the migration of exposure and/or changes in credit risk that
would have occurred in the loan portfolio due to risk mitigation actions or other factors.
8.Investments
Investments include the following:
Listed and actively traded companies
Affirm Holdings Inc.
Others
Unlisted equities
1195407 B.C. Ltd. (“Canada Drives”)
Brim Financial Inc.
DECEMBER 31, 2022
DECEMBER 31, 2021
6,134
92
40,578
10,500
57,304
53,543
398
-
10,500
64,441
Changes in the holdings, fair values of investments and the related total return swaps, and investment income (loss) recorded in other income
(loss) (including interest income and realized and unrealized gains and losses) in the consolidated statements of income are summarized below:
FAIR VALUE,
BEGINNING OF YEAR
ADDITIONS
SALES/
SETTLEMENTS
INVESTMENT
INCOME (LOSS)
FAIR VALUE,
END OF YEAR
For the year ended December 31, 2022
Investments
Listed and actively traded companies
Affirm Holdings Inc.1
Others
Unlisted companies
Canada Drives
Brim Financial Inc.
Investments
Total return swap related to Affirm
Holdings Inc.2
Investments including total return swaps
For the year ended December 31, 2021
Investments
Listed and actively traded companies
Affirm Holdings Inc.1
Others
Unlisted companies
Brim Financial Inc.
PayBright1
Investments
Total return swaps related to Affirm
Holdings Inc.2
Investments including total return swaps
53,543
398
-
-
-
40,000
10,500
64,441
6,979
71,420
-
-
-
56,040
56,040
-
56,040
-
40,000
-
40,000
33,065
843
10,500
-
44,408
-
44,408
-
-
-
-
-
(25,395)
(25,395)
(54,577)
-
-
(56,040)
(110,617)
(33,287)
(143,904)
(47,409)
(306)
578
-
(47,137)
18,416
(28,721)
75,055
(445)
-
-
74,610
40,266
114,876
6,134
92
40,578
10,500
57,304
-
57,304
53,543
398
10,500
-
64,441
6,979
71,420
1 On January 1, 2021, the Company sold its equity investment in PayBright for consideration of cash and equity in Affirm Holdings Inc.
2 In August 2021, the Company settled the total return swap related to the non-contingent portion of the equity in Affirm Holdings Inc. and in September 2021 and November 2021, the Company
entered into new total return swaps to partially hedge the contingent portion of the equity consideration received. In June 2022, the Company settled the total return swaps related to the
contingent portion of the equity in Affirm Holdings Inc.
123
Affirm Holdings Inc. and PayBright
In September 2019, the Company purchased a minority equity interest in PayBright for an aggregate cost of $34.3 million. PayBright is a
non-listed Canadian lending company and payments platform focused on providing consumers with buy now pay later solutions at their
favourite retailers, both online and in-store.
On January 1, 2021, PayBright sold 100% of its shares to Affirm Holdings Inc. (“Affirm”), including the Company’s minority equity interest
in PayBright. Subsequent to the closing of the sale transaction, Affirm completed an initial public offering on the Nasdaq Global Select
Market under the symbol “AFRM”. The equity consideration received by the Company was subject to customary lock-up agreements,
which expired in August 2021, in connection with Affirm’s initial public offering.
Under the terms of the sale to Affirm, the Company received total consideration, which was valued at that time, as follows:
•
•
•
Cash of $23.0 million, excluding one-time expenses and closing adjustments and including $2.1 million held in escrow;
Equity in Affirm with a value of $21.5 million; and
Contingent equity in Affirm with a value of $15.4 million, subject to revenue performance achieved in 2021 and 2022.
On January 1, 2021, the Company derecognized its investment in PayBright and recognized its $33.1 million investment in Affirm in the
consolidated statements of financial position.
The Company’s investment in Affirm was classified at initial recognition at FVTPL on January 1, 2021.
In August 2021, the Company sold all non-contingent Affirm shares with a total consideration of $54.6 million and realized a fair value
gain of $33.0 million included in other income (loss) in the consolidated statements of income.
For the year ended December 31, 2022, the Company recognized an unrealized fair value loss of $47.4 million (2021 – unrealized fair
value gain of $42.0 million) included in other income (loss) in the consolidated statements of income.
Total Return Swap
Subsequent to Affirm’s initial public offering, the Company entered into a 6-month total return swap (“TRS”) agreement to substantively
hedge its market exposure related to its equity in Affirm which represented the non-contingent portion of the equity consideration
received, pursuant to the sale of its investment in PayBright. This TRS effectively resulted in the economic value of the Company’s non-
contingent shares in Affirm being settled in cash at maturity for US$108.87 per share, net of applicable fees. This TRS did not meet the
criteria for hedge accounting.
The TRS related to the non-contingent portion of the equity in Affirm was settled in August 2021 for $33.3 million, which was recognized
as a realized fair value gain included in other income (loss) in the consolidated statements of income.
In September 2021, the Company entered into a 9-month TRS agreement to partially hedge its market exposure related to 100,000 contingent
shares of Affirm. This TRS effectively resulted in the economic value of the hedged portion of the Company’s contingent equity in Affirm
being settled in cash at maturity for US$110.35 per share, net of applicable fees. This TRS did not meet the criteria for hedge accounting.
In November 2021, the Company entered into a 7-month TRS agreement to partially hedge its market exposure related to an additional 75,000
contingent shares of Affirm. This TRS effectively resulted in the economic value of the hedged portion of the Company’s contingent equity in
Affirm being settled in cash at maturity for US$163.00 per share, net of applicable fees. This TRS did not meet the criteria for hedge accounting.
Included in Derivative financial assets as at December 31, 2021 is the change in fair value of the above 9-month and 7-month TRS, in the
amount of $7.0 million, which was recorded as an unrealized fair value gain in Other income in the consolidated statements of income.
The fair value of the cash posted by the counter parties as at December 31, 2021 in respect of the 9-month and 7-month TRS related to
the contingent portion of the equity in Affirm was $6.3 million.
The TRS related to the contingent portion of the equity in Affirm were settled in June 2022 for $25.4 million, which was recognized as a
realized fair value gain included in other income (loss) in the consolidated statements of income.
124
Canada Drives
During the year, the Company invested $40 million in convertible notes receivable of Canada Drives, Canada’s largest 100% online car
shopping and delivery-to-door platform. The convertible notes receivable mature on June 15, 2025, bear interest at 5% per annum and
are convertible into preferred shares on defined terms.
The Company’s investment in Canada Drives was classified at initial recognition at FVTPL. The option to convert the notes receivable into
preferred shares is a financial derivative instrument, the fair value of which is included in the cost of the convertible notes receivable.
For the year ended December 31, 2022, the Company recognized interest income of $0.6 million included in other income (loss) in the
consolidated statements of income.
Brim Financial Inc.
In 2021, the Company invested $10.5 million to acquire a minority equity interest in Brim Financial Inc., a Canadian fintech company and
globally certified credit card issuer.
9. Lease Assets
Cost
Balance, beginning of year
Additions
Disposals
Balance, end of year
Accumulated Depreciation
Balance, beginning of year
Depreciation
Disposals
Balance, end of year
Net book value
DECEMBER 31, 2022
DECEMBER 31, 2021
47,712
34,802
(24,006)
58,508
(530)
(33,547)
24,006
(10,071)
48,437
52,539
33,642
(38,469)
47,712
(3,155)
(35,844)
38,469
(530)
47,182
During the years ended December 31, 2022 and 2021, the net book value of the lease assets sold or disposed of were nil.
125
10. Property And Equipment
Cost
December 31, 2020
Additions through business acquisition
(note 4)
Additions
Disposals
December 31, 2021
Additions
Disposals
December 31, 2022
Accumulated Depreciation
December 31, 2020
Depreciation
Disposals
December 31, 2021
Depreciation
Disposals
December 31, 2022
Net Book Value
December 31, 2021
December 31, 2022
FURNITURE AND
FIXTURES
COMPUTER AND
OFFICE EQUIPMENT
SIGNAGE
LEASEHOLD
IMPROVEMENTS
TOTAL
10,726
11,775
3,852
31,501
57,854
216
893
(10)
11,825
521
(95)
12,251
(5,985)
(1,100)
8
(7,077)
(1,084)
88
(8,073)
4,748
4,178
806
1,306
(9)
13,878
1,844
(59)
15,663
(4,835)
(1,911)
9
(6,737)
(2,246)
50
(8,933)
7,141
6,730
-
751
(14)
4,589
475
(38)
5,026
(2,405)
(439)
12
(2,832)
(442)
36
(3,238)
1,757
1,788
3,137
4,865
(5)
39,498
7,031
(200)
46,329
(13,307)
(4,554)
2
(17,859)
(5,421)
111
4,159
7,815
(38)
69,790
9,871
(392)
79,269
(26,532)
(8,004)
31
(34,505)
(9,193)
285
(23,169)
(43,413)
21,639
23,160
35,285
35,856
As at December 31, 2022, the amount of property and equipment classified as under construction or development and not being depreciated
was $3.8 million (2021 – $1.1 million).
Regarding the easyhome CGU, various impairment indicators were used to determine the need to test the CGU for impairment.
Examples of impairment indicators include a significant decline in revenue, performance significantly below budget and expectations
of negative CGU operating income. Where these impairment indicators exist, 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. Revenue 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% (2021 – 3%) long-term growth rate. The pre-tax discount rate used on the forecasted cash flows
was 15.3% (2021 – 14.7%). 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. As at December 31, 2022 and 2021, no
impairment on property and equipment was recognized.
For the easyfinancial and LendCare CGUs, it was determined that no indicators of impairment existed that would require an
impairment test on property and equipment.
For the years ended December 31, 2022 and 2021, no net impairment of property and equipment was recognized by the Company.
126
11. Right-Of-Use Assets And Lease Liabilities
December 31, 2020
Additions through business acquisition (note 4)
Additions
Depreciation
Interest
Interest payment
Lease inducement received
Principal payment
December 31, 2021
Additions
Depreciation
Interest
Interest payment
Lease inducement received
Principal payment
December 31, 2022
RIGHT-OF-USE ASSETS
PREMISES
VEHICLES
TOTAL
LEASE LIABILITIES
44,025
1,160
27,554
(17,435)
-
-
-
-
55,304
27,935
(19,450)
-
-
-
-
2,310
-
298
(772)
-
-
-
-
1,836
843
(710)
-
-
-
-
46,335
1,160
27,852
(18,207)
-
-
-
-
57,140
28,778
(20,160)
-
-
-
-
63,789
1,969
65,758
53,902
1,160
27,852
-
3,115
(3,115)
1,573
(18,880)
65,607
28,778
-
3,577
(3,577)
888
(20,945)
74,328
For the year ended December 31, 2022, the Company recognized rent expense from short-term leases of $2,485 (2021 – $1,759) and
variable lease payments of $13,694 (2021 – $12,598).
12. Intangible Assets And Goodwill
Intangible Assets
MERCHANT NETWORK
SOFTWARE
OTHER
TOTAL
Cost
December 31, 2020
Additions through business
acquisition (note 4)
Additions
Disposals or write off
December 31, 2021
Additions
Disposals or write-off
December 31, 2022
Accumulated Amortization
December 31, 2020
Amortization
Disposals or write off
December 31, 2021
Amortization
December 31, 2022
Net Book Value
December 31, 2021
December 31, 2022
-
131,000
-
-
131,000
-
-
131,000
-
(8,733)
-
(8,733)
(13,089)
(21,822)
122,267
109,178
49,161
3,186
19,634
(3,689)
68,292
18,015
(20,458)
65,849
(24,250)
(7,982)
1,107
(31,125)
(5,206)
(36,331)
37,167
29,518
3,342
-
-
-
3,342
-
-
3,342
(3,009)
(116)
-
(3,125)
(111)
(3,236)
217
106
52,503
134,186
19,634
(3,689)
202,634
18,015
(20,458)
200,191
(27,259)
(16,831)
1,107
(42,983)
(18,406)
(61,389)
159,651
138,802
127
Other intangible assets includes trademarks and customer lists. 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 additions for the year ended December 31, 2022 were $18.0 million (2021 – $19.6 million) of internally developed software
application and website development costs.
During the fourth quarter of 2022, the Company decided to terminate its agreement with a third-party technology provider that was
contracted in 2020 to develop a new loan management system. After careful evaluation, the Company determined that the performance
to date was unsatisfactory, and the additional investment necessary to complete the development was no longer economical, relative to
the anticipated business value and other available options. As such, the Company elected to write off capitalized software costs in 2022
in the amount of $20.5 million, associated with this loan management system being developed by the third-party. For the year ended
December 31, 2021, the Company wrote off a software in the amount of $2.3 million in conjunction with the integration of LendCare. Write
offs of intangible assets were recognized under loss on disposal or write off of assets in the consolidated statements of income.
Goodwill
Goodwill was $180.9 million as at December 31, 2022 and 2021. The Acquisition of LendCare in April 2021 resulted in the recognition of
$159.6 million of goodwill (note 4). There were no disposals of goodwill during the years ended December 31, 2022 and 2021.
Goodwill and indefinite-life intangible assets are attributed to the group of CGUs to which they relate. As at December 31, 2022 and 2021, the
carrying value of goodwill attributed to the easyhome CGU was $21.3 million and $159.6 million was attributed to the LendCare CGU. Impairment
testing was performed as at December 31, 2022 and 2021. 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. When
determining the value in use of a CGU, the Company developed a discounted cash flow model for the individual CGU. Revenue 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 long-term growth rate for of 1.0% for easyhome (2021 – 3.0%) and 3.0% for LendCare (2021 – 3.0%). The pre-tax discount rate
used on the forecasted cash flows was 15.3% (2021 – 14.7%) for easyhome and 24.0% (2021 – 21.0%) for LendCare.
No impairment charges of goodwill or indefinite-life intangible assets were recorded in the years ended December 31, 2022 and 2021.
13. Revolving Securitization Warehouse Facilities
goeasy Securitization Trust
goeasy Securitization Trust (“Trust I”) is a securitization vehicle controlled and consolidated by the Company. The Company’s activities
include transactions with Trust I, a structured entity, which has been designed to achieve a specific business objective. A structured entity
is one that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when
any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.
The primary purpose of Trust I is to provide the Company with funding for its operational needs. Trust I entered into a $600 million
revolving securitization warehouse facility (“Revolving Securitization Warehouse Facility I”) with National Bank Financial Markets
(“NBFM”), and as collateral for the drawn amount, consumer loans are sold from easyfinancial Services Inc. and LendCare into
Trust I. As the economic exposure associated with the rights related to these consumer loans are controlled by easyfinancial
Services Inc. and LendCare, these consumer loans do not qualify for derecognition in the Company’s consolidated statements of
financial position. The Revolving Securitization Warehouse Facility I matures on August 30, 2024 and bears interest equal to the
1-month Canadian Dollar Offered Rate (“CDOR”) plus 185 basis points (“bps”).
On January 28, 2022, the Company increased its Revolving Securitization Warehouse Facility I to $900 million. The Revolving
Securitization Warehouse Facility I continued to be underwritten by NBFM, with the addition of new lenders to the syndicate.
On June 30, 2022, the Company further increased its Revolving Securitization Warehouse Facility I to $1.4 billion.
The following table summarizes the details of the Revolving Securitization Warehouse Facility I:
Drawn amount
Unamortized deferred financing costs
128
DECEMBER 31, 2022
DECEMBER 31, 2021
810,000
(3,040)
806,960
295,000
(2,186)
292,814
For the year ended December 31, 2022, $1.34 billion (2021 – $457.7 million) of consumer loans receivable were pledged by the
Company as collateral against its Revolving Securitization Warehouse Facility I.
Concurrent with the establishment of the Revolving Securitization Warehouse Facility I, the Company entered into a derivative
financial instrument (the “interest rate swap”) as a cash flow hedge to protect against the variability of future interest payments
by paying a fixed rate based on the weighted average life of the securitized loans and receiving a variable rate equivalent to
1-month CDOR.
The Company has elected to use hedge accounting for the Revolving Securitization Warehouse Facility I and related interest
rate swap (i.e., the same notional amount, maturity date, and interest payment dates). The Company has established a hedge
ratio of 1:1 for the hedging relationships. To test the hedge effectiveness, the Company uses the hypothetical derivative method
and compares the changes in the fair value of the hedging instruments against the changes in fair value of the hedged items
attributable to the hedged risks. There are no significant sources of hedge ineffectiveness between the Revolving Securitization
Warehouse Facility I and interest rate swap. There was no hedge ineffectiveness recognized in net income for the years ended
December 31, 2022 and 2021.
As the Revolving Securitization Warehouse Facility I and the interest rate swap are in an effective hedging relationship, changes in
the fair value of the interest rate swap are recorded in OCI and subsequently reclassified into net income upon settlement.
The interest rate swap has an aggregated notional amount equal to the aggregated principal outstanding of the hedged Revolving
Securitization Warehouse Facility I. The fair value of the interest rate swap is determined from swap curves adjusted for credit
risks. Swap curves are obtained directly from market sources. The fair value of the interest rate swap is as follows:
Derivative financial asset
Interest rate swap
DECEMBER 31, 2022
DECEMBER 31, 2021
10,894
10,894
1,035
1,035
The financial covenant of the Revolving Securitization Warehouse Facility I is as follows:
FINANCIAL COVENANT
REQUIREMENTS
DECEMBER 31, 2022
DECEMBER 31, 2021
Minimum consolidated fixed charge coverage ratio
> 2.0
4.11
4.83
As at December 31, 2022 and 2021, the Company was in compliance with its financial covenant under the Revolving Credit Warehouse Facility I.
goeasy Securitization Trust II
On October 24, 2022, the Company established goeasy Securitization Trust II (“Trust II”), a securitization vehicle controlled and consolidated
by the Company. The Company’s activities include transactions with Trust II, a structured entity, which has been designed to achieve a
specific business objective.
The primary purpose of Trust II is to provide the Company with funding for automotive consumer loans. On December 16, 2022, the
Company entered into a $200 million revolving securitization warehouse facility, structured and underwritten by Bank of Montreal (the
“Revolving Securitization Warehouse Facility II”). The Revolving Securitization Warehouse Facility II will be collateralized by automotive
consumer loans originated by goeasy’s wholly owned subsidiaries, easyfinancial Services Inc. and LendCare. As the economic exposure
associated with the rights related to these automotive consumer loans are controlled by easyfinancial Services Inc. and LendCare,
these consumer loans do not qualify for derecognition in the Company’s consolidated statements of financial position. The Revolving
Securitization Warehouse Facility II matures on December 16, 2024 and bears interest equal to the 1-month CDOR plus 185 bps. The
Company intends to establish an interest rate swap agreement to generate fixed rate payments on the amounts drawn to assist in
mitigating the risk of increases in interest rates. As at December 31, 2022, no amount was drawn against the Revolving Securitization
Warehouse Facility II and the unamortized deferred financing costs amount to $1.1 million.
129
14. Secured Borrowings
The Company also securitizes consumer loans through non-structured third parties. The economic exposure associated with the rights
related to these consumer loans are retained by the Company. As a result, these consumer loans do not qualify for derecognition in the
Company’s consolidated statements of financial position and Secured Borrowings are recognized for the cash proceeds received.
The Company has the following securitization facilities with non-structured third parties:
• A $105 million securitization facility (“$105 million Securitization Facility”), which bears interest at the Government of Canada
Bonds (“GOCB”) rate (with a floor rate of 0.95%) plus 395 bps. The loan sale agreement to sell loans into the facility expired on July
31, 2021. The balance of the loans that were sold into the facility will amortize down based on their contractual time to maturity.
• An $85 million securitization facility (“$85 million Securitization Facility”), which bears interest at the GOCB rate (with a floor
rate of 0.25%) plus 325 bps. In addition to the securitization loan facility, there is a $6 million accumulation loan agreement
which advances 85% of the face value of consumer loans for up to a 90-day period, bearing interest at the Canadian Bankers’
Acceptance rate (“BA”) plus 400 bps. The loan sale agreement to sell loans into the facility expired on November 30, 2021. The
balance of the loans that were sold into the facility will amortize down based on their contractual time to maturity.
As at December 31, 2022, the drawn amount against the Secured Borrowings was $105.8 million (2021 – $174.0 million).
As at December 31, 2022, $126.5 million (2021 – $171.3 million) of consumer loans receivable were pledged by the Company as collateral
for these Secured Borrowings.
The financial covenant on the Secured Borrowings of the $105 million Securitization Facility are as follows:
FINANCIAL COVENANT
REQUIREMENTS
DECEMBER 31, 2022
DECEMBER 31, 2021
Minimum LendCare tangible net worth
> 20,000
130,545
70,027
The financial covenants on the Secured Borrowings of the $85 million Securitization Facility are as follows:
FINANCIAL COVENANT
REQUIREMENTS
DECEMBER 31, 2022
DECEMBER 31, 2021
Minimum LendCare tangible net worth
Maximum LendCare leverage ratio
>30,000
< 9.00
130,816
6.16
75,919
6.79
As at December 31, 2022 and 2021, the Company was in compliance with its financial covenants for all Secured Borrowings.
15. Revolving Credit Facility
The Company’s Revolving Credit Facility consisted of a $310 million senior secured revolving credit facility that matures on February
12, 2022. The Revolving Credit Facility was provided by a syndicate of banks. The Company also had the ability to exercise the accordion
feature under its Revolving Credit Facility to add an additional $75 million in borrowing capacity. Interest on advances is payable at either
the BA plus 300 bps or the lender’s prime rate (“Prime”) plus 200 bps, at the option of the Company.
In January 2022, the Company amended its Revolving Credit Facility agreement to reduce the maximum principal amount available from $310 million
to $270 million, with the maturity extended to January 27, 2025 and increased the accordion feature from $75 million to $100 million. The amendments
also include key modifications including improved advance rates, less restrictive financial covenants and a broader syndicate of banks. On lenders’
Prime advances, the interest rate payable was reduced by 125 bps, from the previous rate of Prime plus 200 bps to Prime plus 75 bps. On draws
elected to be taken utilizing the BA rate, the interest rate payable was reduced by 75 bps from the previous rate of BA plus 300 bps to BA plus 225 bps.
The following table summarizes the details of the Revolving Credit Facility:
Drawn amount
Unamortized deferred financing costs
DECEMBER 31, 2022
DECEMBER 31, 2021
150,000
(1,354)
148,646
-
-
-
130
The financial covenants of the Revolving Credit Facility were as follows:
FINANCIAL COVENANT
Maximum consolidated leverage ratio
Minimum consolidated fixed charge coverage ratio
Minimum consolidated asset coverage ratio
Maximum net charge off ratio
Minimum consolidated tangible net worth
Minimum collateral performance index
REQUIREMENTS AS AT
DECEMBER 31,
2022
DECEMBER 31,
2022
REQUIREMENTS AS AT
DECEMBER 31,
2021
DECEMBER 31,
2021
< 4.50
> 1.25
>1.75
< 15.0%
-
-
3.87
2.08
4.68
9.2%
-
-
< 4.25
> 1.75
-
< 15.0%
3.23
2.41
-
9.0%
>$132,000, plus 50% of
consolidated net income
> 90.0%
$472,917
99.2%
As at December 31, 2022 and 2021, the Company was in compliance with all of its financial covenants under its Revolving Credit Facility agreement.
16. Notes Payable
On November 27, 2019, the Company issued US$550.0 million of 5.375% senior unsecured notes payable (the “2024 Notes”) with interest
payable semi-annually on June 1 and December 1 of each year. The 2024 Notes mature on December 1, 2024 and include certain
prepayment features.
Concurrent with the issuance of the 2024 Notes, the Company entered into derivative financial instruments (the “2024 cross-currency swaps”)
as cash flow hedges to hedge the risk of changes in the foreign currency exchange rate for the proceeds from the offering and for all required
payments of principal and interest under the 2024 Notes at a fixed exchange rate of US$1.000 = CAD1.3242, thereby fully hedging the US$550.0
million 2024 Notes at a CAD interest rate of 5.65%. The 2024 cross-currency swaps fully hedge the obligation under the 2024 Notes.
The following table summarizes the details of the 2024 Notes:
2024 Notes in CAD at issuance
Change in fair value of 2024 Notes since issuance date due to
changes in foreign exchange rate
Unamortized deferred financing costs
DECEMBER 31, 2022
DECEMBER 31, 2021
728,310
16,885
745,195
(5,454)
739,741
728,310
(33,275)
695,035
(8,063)
686,972
On April 29, 2021, the Company issued US$320.0 million of 4.375% senior unsecured notes payable (“2026 Notes”) (the 2024 Notes and
2026 Notes are collectively referred to as “Notes Payable”) with interest payable semi-annually on May 1 and November 1 of each year,
commencing November 1, 2021. The 2026 Notes mature on May 1, 2026 and include certain prepayment features.
Concurrent with the issuance of the 2026 Notes, the Company entered into derivative financial instruments (the “2026 cross-currency swaps”)
(the 2024 cross-currency swaps and 2026 cross-currency swaps are collectively referred to as the “cross-currency swaps”) as cash flow
hedges to hedge the risk of changes in the foreign currency exchange rate for the proceeds from the offering and for all required payments
of principal and interest under the 2026 Notes at a fixed exchange rate of US$1.000 = CAD1.2501, thereby fully hedging the US$320.0 million
2026 Notes at a CAD interest rate of 4.818%. The 2026 cross-currency swaps fully hedge the obligation under the 2026 Notes.
The following table summarizes the details of the 2026 Notes:
2026 Notes in CAD at issuance
Change in fair value of 2026 Notes since issuance date due to
changes in foreign exchange rate
Unamortized deferred financing costs
DECEMBER 31, 2022
DECEMBER 31, 2021
400,032
33,536
433,568
(4,312)
429,256
400,032
4,352
404,384
(5,450)
398,934
131
The following table summarizes the total carrying value of Notes Payable:
2024 Notes
2026 Notes
DECEMBER 31, 2022
DECEMBER 31, 2021
739,741
429,256
1,168,997
686,972
398,934
1,085,906
The Company has elected to use hedge accounting for the Notes Payable and the cross-currency swaps (i.e., the same notional
amount, maturity date, interest rate, and interest payment dates). The Company has elected to designate foreign currency basis
as a cost of hedging, thereby excluding foreign currency basis spreads from the designation of the hedging relationship, and has
established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the foreign exchange contracts is identical to
the hedged risk components. To test the hedge effectiveness, the Company uses the hypothetical derivative method and compares
the changes in the fair value of the hedging instruments against the changes in fair value of the hedged items attributable to the
hedged risks. There are no significant sources of hedge ineffectiveness between the Notes Payable and cross-currency swaps.
There was no hedge ineffectiveness recognized in net income for the year ended December 31, 2022 and 2021.
As the Notes Payable and the cross-currency swaps are in an effective hedging relationship, changes in the fair value of the cross-
currency swaps is recorded in OCI and subsequently reclassified into net income to offset the effect of foreign currency exchange
rates related to the Notes Payable recognized in net income. The amount of the foreign currency basis spread at inception,
designated as a cost of hedging, is amortized in net income on a straight-line basis over the life of the Notes Payable.
The cross-currency swaps have an aggregated notional amount equal to the aggregated principal outstanding of the hedged Notes
Payable. The fair value of cross-currency swaps is determined using swap curves adjusted for credit risks. Swap curves are
obtained directly from market sources. The fair value of the cross-currency swaps are as follows:
Derivative financial assets (liabilities)
2024 Cross-currency swaps
2026 Cross-currency swaps
17. Share Capital
Authorized Capital
DECEMBER 31, 2022
DECEMBER 31, 2021
7,872
30,678
38,550
(34,132)
12,620
(21,512)
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 shareholders’ 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.
132
Common Shares Issued and Outstanding
The changes in common shares issued and outstanding are summarized as follows:
Balance, beginning of year
Exercise of share options
Dividend reinvestment plan
Exercise of RSUs
Shares purchased for cancellation
Share issuance
Share issuance costs, net of tax
Others
Balance, end of year
DECEMBER 31, 2022
DECEMBER 31, 2021
# OF SHARES
(IN 000S)
$
# OF SHARES
(IN 000S)
$
16,199
363,514
14,801
181,753
161
21
25
(450)
489
-
-
16,445
6,821
2,457
1,096
(10,296)
57,917
(2,014)
(449)
419,046
164
6
75
(333)
1,486
-
-
16,199
7,326
807
2,904
(7,600)
184,358
(6,034)
-
363,514
$57.9 Million Bought Deal Equity Offering
On November 21, 2022, the Company issued 488,750 common shares including 63,750 common shares issued pursuant to the exercise
in full by the syndicate of underwriters of the over-allotment option granted by the Company, at a price of $118.50 per common share,
for gross aggregate proceeds of $57.9 million. goeasy used the net proceeds to support the growth of the Company’s consumer loan
portfolio and for general corporate purposes.
$172.5 Million Bought Deal Equity Offering
In connection with the Acquisition of LendCare (note 4), on April 16, 2021, the Company issued 1,404,265 subscription receipts for
common shares (“Subscription Receipts”) at a price of $122.85 per Subscription Receipt, for gross aggregate proceeds of $172.5
million. At closing of the LendCare acquisition on the Acquisition Date, each of the 1,404,265 outstanding Subscription Receipts were
exchanged for one common share of the Company.
Share Consideration for the Acquisition of LendCare
As share consideration for the Acquisition of LendCare (note 4), the Company issued 81,400 common shares to LendCare’s founders
valued at $11.8 million, calculated with reference to the closing price of the Company’s common shares on the Acquisition Date.
Dividends on Common Shares
For the year ended December 31, 2022, the Company paid dividends of $54.1 million (2021 – $38.3 million) or $3.39 per share (2021 –
$2.43 per share). On November 10, 2022, the Company declared a dividend of $0.91 per share to shareholders of record on December
30, 2022, payable on January 13, 2023. The dividend paid on January 13, 2023 was $15.0 million.
Shares Purchased for Cancellation
On December 16, 2020, the Company announced the acceptance by the TSX of the Company’s Notice of Intention to Make a normal
course issuer bid (“NCIB”), which commenced on December 21, 2020 (the “2020 NCIB”). During the year ended December 31, 2021, the
Company purchased and cancelled 333,315 of its common shares on the open market at an average price of $186.86 per share for a
total cost of $62.3 million pursuant to the 2020 NCIB. This normal course issuer bid expired on December 20, 2021.
On December 14, 2021, the Company renewed its NCIB, which allows for a total purchase of up to 1,243,781 common shares (the “2021
NCIB”) and expired on December 20, 2022. During the year ended December 31, 2022, the Company purchased and cancelled 450,058 of its
common shares on the open market at an average price of $135.52 per share, for a total cost of $61.0 million, pursuant to the 2021 NCIB.
On December 16, 2022, the Company renewed its NCIB, which allows for a total purchase of up to 1,252,730 common shares and
expires on December 20, 2023.
133
18. Stock-Based Compensation
Share Option Plan
Under the Company’s share option plan, options to purchase common shares may be granted by the Board of Directors to 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.
Outstanding balance, beginning of year
Options granted
Options exercised
Outstanding balance, end of year
Exercisable balance, end of year
DECEMBER 31, 2022
DECEMBER 31, 2021
# OF OPTIONS
(IN 000S)
WEIGHTED AVERAGE
EXERCISE PRICE
$
# OF OPTIONS
(IN 000S)
WEIGHTED AVERAGE
EXERCISE PRICE
$
477
29
(161)
345
70
47.20
163.13
33.42
63.35
40.55
577
65
(165)
477
144
36.07
119.39
34.85
47.20
32.44
Outstanding options to officers and employees as at December 31, 2022 were as follows:
OUTSTANDING
EXERCISABLE
RANGE OF
EXERCISE
PRICES
$
33.56 – 49.99
50.00 – 99.99
100.00 – 149.99
150.00 – 163.13
33.56 – 163.13
# OF OPTIONS
(IN 000S)
WEIGHTED AVERAGE
REMAINING
CONTRACTUAL LIFE IN
YEARS
WEIGHTED AVERAGE
EXERCISE PRICE
$
# OF OPTIONS
(IN 000S)
WEIGHTED AVERAGE
EXERCISE PRICE
$
251
5
50
39
345
1.83
2.12
3.13
3.97
2.26
38.58
64.07
111.83
161.44
63.35
70
-
-
-
70
40.55
-
-
-
40.55
The Company uses the fair value method of accounting for stock options granted to employees. During the year ended December 31,
2022, the Company recorded an expense of $1.6 million (2021 – $2.0 million) in stock-based compensation expense related to its stock
option plan in the consolidated statements of income, with a corresponding adjustment to contributed surplus.
Options granted in 2022 and 2021 were determined using the Black-Scholes option pricing model with the following assumptions:
Risk-free interest rate (% per annum)
Expected hold period to exercise (years)
Volatility in the price of the Company’s shares (%)
Dividend yield (%)
2022
2021
1.59
4.55
51.62
2.00
0.33
4.75
49.95
2.00
134
Executive Share Unit Plan
Under the terms of the ESU Plan, the Company’s Board of Directors may grant RSUs and Executive DSUs to officers and employees.
Restricted Share Units
RSUs are granted at fair market value at the grant date and generally vest at the end of a three-year period based on achieving long-term
financial targets. RSUs are paid to officers and employees upon vesting.
Outstanding balance, beginning of year
RSUs granted
RSU dividend reinvestments
RSUs exercised
RSUs forfeited
Outstanding balance, end of year
DECEMBER 31, 2022
DECEMBER 31, 2021
# OF RSUs
(IN 000S)
WEIGHTED AVERAGE
FAIR VALUE AT
GRANT DATE
$
# OF RSUs
(IN 000S)
WEIGHTED AVERAGE
FAIR VALUE AT
GRANT DATE
$
263
150
5
(92)
(10)
316
76.33
123.32
119.02
42.59
82.23
108.94
270
86
4
(87)
(10)
263
46.11
127.63
112.33
38.07
48.74
76.33
For the year ended December 31, 2022, the Company repurchased the equity interest related to a portion of fully vested RSUs amounting to
$10.7 million or $8.6 million, net of tax.
For the year ended December 31, 2022, the Company recorded an expense of $4.8 million (2021 – $4.5 million) in stock-based compensation
expense related to the Company’s RSUs in the consolidated statements of income with a corresponding adjustment to contributed surplus.
Executive Deferred Share Units
Executive DSUs are granted at fair market value at the grant date and generally vest at the end of a three-year period based on achieving
long-term financial targets. Executive DSUs are paid to officers and employees upon termination of their employment with the Company.
Outstanding balance, beginning of year
Executive DSUs granted
Executive DSU dividend reinvestments
Outstanding balance, end of year
DECEMBER 31, 2022
# OF
EXECUTIVE DSUS
(IN 000S)
WEIGHTED AVERAGE FAIR VALUE
AT GRANT DATE
$
-
59
1
60
-
124.74
110.00
124.73
For the year ended December 31, 2022, the Company recorded an expense of $0.4 million (2021 – nil) in stock-based compensation expense
related to the Company’s Executive DSUs in the consolidated statements of income with a corresponding adjustment to contributed surplus.
Board of Directors Deferred Share Unit Plan
Under the terms of the Board DSU Plan, the Company may grant DSUs to Board Directors. DSUs are granted at fair market value at the
grant date and vest immediately upon grant. During the year ended December 31, 2022, the Company granted 16,274 Board DSUs (2021
– 14,352 Board DSUs) to Board Directors under its DSU Plan. For the year ended December 31, 2022, $3.3 million (2021 – $2.3 million)
were recorded as stock-based compensation expense under the Board DSU Plan in the consolidated statements of income. Additionally,
for the year ended December 31, 2022, an additional 8,395 Board DSUs (2021 – 4,667 Board DSUs) were granted as a result of dividends
payable. During the years ended December 31, 2022 and 2021, no Board DSUs were settled.
135
Contributed Surplus
The following is a continuity of the activity in the contributed surplus account:
DECEMBER 31, 2022
DECEMBER 31, 2021
Contributed surplus, beginning of year
Equity-settled stock-based compensation expense
Restricted share units
Board deferred share unit
Stock options
Executive deferred share unit
Reductions due to exercise in shares of stock-based compensation
Restricted share units
Stock options
Repurchase of equity interest related to restricted share units, net of tax
Contributed surplus, end of year
19. Other Expenses
22,583
4,771
3,291
1,619
372
(1,097)
(1,435)
(8,605)
21,499
19,732
4,544
2,339
1,992
-
(4,431)
(1,593)
-
22,583
In 2022, the Company incurred corporate development costs of $2.3 million, including advisory, consulting and legal costs, in connection
with the exploration of a strategic acquisition opportunity, which the Company elected to not pursue. In 2021, the Company incurred costs
related to the Acquisition of LendCare, including advisory and consulting costs, legal costs and other direct transaction costs amounting
to $7.6 million. Corporate development costs and LendCare acquisition costs were reported under other expenses in the consolidated
statements of income.
20. Finance Costs
Finance costs include the following:
Interest expense
Notes payable
Revolving securitization warehouse facilities
Secured borrowings
Revolving credit facility
Amortization of deferred financing costs and accretion expense
Interest expense on lease liabilities (note 11)
Loan commitment fees
Interest income on cash in bank, net
DECEMBER 31, 2022
DECEMBER 31, 2021
60,423
27,194
6,144
5,955
6,234
3,577
-
(1,555)
107,972
54,106
6,441
5,674
2,897
5,655
3,115
1,726
(589)
79,025
136
21. Income Taxes
The Company’s income tax expense was determined as follows:
Combined basic federal and provincial income tax rates
Expected income tax expense
Effect of capital losses (gains) on sale of assets and investments
Non-deductible expenses
Non-deductible acquisition transaction costs
True up of prior year tax expense
Other
DECEMBER 31, 2022
DECEMBER 31, 2021
26.5%
51,881
3,874
1,607
-
(1,202)
(545)
55,615
The significant components of the Company’s income tax expense are as follows:
DECEMBER 31, 2022
DECEMBER 31, 2021
Current income tax:
Current income tax charge
Adjustments in respect of prior years and other
Deferred income tax:
Relating to origination and reversal of temporary differences
Adjustments in respect of prior years and other
68,609
(2,950)
65,659
(11,792)
1,748
(10,044)
55,615
Deferred tax related to items recognized in OCI during the year are summarized below:
DECEMBER 31, 2022
DECEMBER 31, 2021
Change in fair value of cash flow hedge
Change in costs of hedging
Deferred tax (recovery) expense charged to OCI
The changes in deferred tax assets (liabilities) are as follows:
(4,168)
533
(3,635)
DECEMBER 31, 2022
DECEMBER 31, 2021
Balance, beginning of year
Tax recovery during the year recognized in profit or loss
Tax recovery (expense) during the year recognized in OCI
Tax on share issuance costs
Deferred taxes related to business acquisition (note 4)
Balance, end of year
(38,648)
10,044
3,635
277
-
(24,692)
26.6%
84,283
(15,221)
1,293
1,998
-
(442)
71,911
74,017
(273)
73,744
(1,833)
-
(1,833)
71,911
3,704
(575)
3,129
4,066
1,833
(3,129)
1,670
(43,088)
(38,648)
137
The significant components of the Company’s deferred tax liabilities are as follows:
DECEMBER 31, 2022
DECEMBER 31, 2021
Accounts receivable and allowance for credit losses
Revaluation of notes payable and derivative financial instruments
Stock-based compensation
Financing fees
Right-of-use assets, net of lease liabilities
Unrealized fair value gains on investments
Tax cost of lease assets and property and equipment in excess of
net book value
Intangible asset arising from business acquisition
Loss carry forwards
Others
7,660
2,767
2,107
1,640
1,303
233
(11,974)
(28,929)
-
501
(24,692)
3,312
(868)
1,874
3,578
1,230
(7,015)
(10,165)
(32,401)
1,467
340
(38,648)
As at December 31, 2022 and 2021, there were no recognized deferred tax liabilities for taxes that would be payable on the undistributed
earnings of the Company’s subsidiaries.
22. 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 outstanding
common shares and Board DSUs. Board DSUs granted to the Board Directors are included in the calculation of the weighted average
number of common shares outstanding as they vest upon grant.
Net income
Weighted average number of common shares outstanding (in 000s)
Basic earnings per common share
140,161
16,275
8.61
244,943
16,200
15.12
For the year ended December 31, 2022, 294,025 Board DSUs (2021 – 274,735 Board DSUs) were included in the weighted average
number of common shares outstanding.
DECEMBER 31, 2022
DECEMBER 31, 2021
Diluted Earnings Per Share
Diluted earnings per share reflect the potential dilutive effect that could occur if additional common shares were assumed to be issued
under securities or instruments that may entitle their holders to obtain common shares in the future. Dilution could occur through the
exercise of share options, the exercise of RSUs, or the exercise of unvested Executive DSUs. The number of additional shares for inclusion
in the diluted earnings per share calculation was determined using the treasury stock method.
Net income
Weighted average number of common shares outstanding (in 000s)
Dilutive effect of stock-based compensation (in 000s)
Weighted average number of diluted shares outstanding (in 000s)
Dilutive earnings per common share
DECEMBER 31, 2022
DECEMBER 31, 2021
140,161
16,275
375
16,650
8.42
244,943
16,200
557
16,757
14.62
138
The following stock-based compensation grants were considered anti-dilutive using the treasury stock method and therefore were
excluded in the calculation of diluted earnings per share:
DECEMBER 31, 2022
DECEMBER 31, 2021
Restricted share units (in 000s)
Share options (in 000s)
Executive deferred share units (in 000s)
150
88
60
298
23. Net Change In Other Operating Assets And Liabilities
The net change in other operating assets and liabilities is as follows:
DECEMBER 31, 2022
DECEMBER 31, 2021
Accounts receivable
Prepaid expenses
Accounts payable and accrued liabilities
Income taxes payable
Unearned revenue
Accrued interest
(4,866)
(316)
(6,304)
(28,096)
17,307
2,024
(20,251)
-
10
-
10
(1,834)
5,785
4,064
19,506
732
4,973
33,226
Supplemental disclosures in respect of the consolidated statements of cash flows comprised the following:
Income taxes paid
Income taxes refunded
Interest paid
Interest received
DECEMBER 31, 2022
DECEMBER 31, 2021
95,592
1,837
97,697
690,779
54,846
1,184
64,094
535,601
24. Commitments And Guarantees
The Company has technology commitments and operating leases for premises and vehicles. Some of the Company’s lease contracts for
premises include extension options. Management exercises significant judgement in determining whether these extension options are
reasonably certain to be exercised. As at December 31, 2022, no extension option for lease contracts for premises is expected to be exercised.
The undiscounted potential future lease payments for operating leases for premises and vehicles and the estimated operating costs related
to technology commitments required for the next five years and thereafter are as follows:
Premises
Vehicles
Technology commitments
25. Contingencies
WITHIN 1 YEAR
AFTER 1 YEAR, BUT NOT
MORE THAN 5 YEARS
MORE THAN 5 YEARS
22,508
696
14,604
37,808
50,812
1,540
13,370
65,722
8,649
31
-
8,680
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.
139
26. 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 debt facilities (Revolving Credit Facility,
Revolving Securitization Warehouse Facilities and Secured Borrowings), Notes Payable and Shareholders’ equity, which includes
share capital, contributed surplus, accumulated OCI and retained earnings.
The Company manages its capital structure and adjusts it in response to changing 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 drawn amounts against the Company’s debt facilities, issuance or payment of Notes Payable 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 financing facilities.
For the years ended December 31, 2022 and 2021, the Company was in compliance with all of its externally imposed financial covenants.
27. 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
Credit risk is the risk of loss that arises when a customer or counterparty fails to pay an amount owing to the Company.
The maximum exposure to credit risk is represented by the carrying amount of the accounts receivable, consumer loans receivable and
lease assets with customers under merchandise lease agreements. The Company makes consumer loans and leases products 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.
The credit risk on the Company’s consumer loans receivable made in accordance with policies and procedures is impacted by FLIs. The analysis
performed by the Company determined that the rate of inflation and rate of unemployment were positively correlated with the Company’s historic
loss rates while oil prices and the rate of GDP were negatively correlated with the Company’s historic loss rates. In calculating the allowance for
credit losses, internally developed models were used, which factor in credit risk related parameters including the probability of default, the exposure
at default, the loss given default, and other relevant risk factors. As part of the process, for the years ended December 31, 2022 and 2021, five
forward-looking scenarios were generated – 1) neutral, 2) moderately optimistic, 3) extremely optimistic, 4) moderately pessimistic, and 5) extremely
pessimistic – based on forecasting degrees of change in the macroeconomic variables (GDP, unemployment rates, inflation rates, and oil prices) within
a 12-month period. Judgment is then applied by management to assign probabilistic weightings to these scenarios to determine a probability weighted
allowance for credit losses as at the reporting date. The proposed macroeconomic forecasts and probability weightings are then subject to robust
internal review and analysis by management to arrive at a collective view on the likelihood for each scenario. Refer to note 7 for additional details on
the allowance for credit losses. As at December 31, 2022, the Company’s gross consumer loans receivable portfolio was $2.79 billion (2021 – $2.03
billion). Net charge offs expressed as a percentage of the average loan book were 9.1% for the year ended December 31, 2022 (2021 – 8.8%).
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. As at December 31, 2022, the Company’s lease
assets were $48.4 million (2021 – $47.2 million). Lease asset losses for the year ended December 31, 2022 represented 3.2% (2021 –
2.5%) of total leasing revenue for the easyhome reportable segment.
140
For accounts 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 counterparties and consumers and creates an
allowance for uncollectible amounts when determined to be appropriate.
Liquidity Risk
The Company addresses liquidity risk management by maintaining sufficient availability of funding through its financing facilities.
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 flows provided by operations and funds available from the credit facilities 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 issuance of further equity and the borrowing capacities under the Revolving
Securitization Warehouse Facilities and Revolving Credit Facility will allow the Company to continue growing its consumer loans
receivable portfolio into the second quarter of 2025 based on the Company’s organic growth assumptions.
The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:
LESS THAN 1
YEAR
1 TO 3
YEARS
4 TO 5
YEARS
5 YEARS +
TOTAL
DECEMBER 31, 2022
Accounts payable and accrued liabilities
Accrued interest
Revolving credit facility
Revolving securitization warehouse facilities
Secured borrowings
Notes payable
DECEMBER 31, 2021
Accounts payable and accrued liabilities
Accrued interest
Revolving securitization warehouse facilities
Secured borrowings
Derivative financial liabilities
Notes payable
Interest Rate Risk
51,136
10,159
-
-
30,901
-
-
-
150,000
810,000
53,996
745,195
-
-
-
-
16,205
433,568
LESS THAN 1
YEAR
1 TO 3
YEARS
4 TO 5
YEARS
5 YEARS +
57,134
8,135
-
38,727
-
-
-
-
295,000
77,905
34,132
695,035
-
-
-
47,810
4,936
-
404,384
-
-
-
-
-
-
4,690
-
-
-
-
51,136
10,159
150,000
810,000
105,792
1,178,763
TOTAL
57,134
8,135
295,000
169,378
34,132
1,099,419
Interest rate risk measures the Company’s risk of financial loss due to adverse movements in interest rates. The Company maintains diversified
funding sources and utilizes derivative financial instruments as cash flow hedges to assist in the management of interest rate volatility.
The 2024 Notes and 2026 Notes maturing on December 1, 2024 and May 1, 2026, respectively, have fixed rates of interest.
The Revolving Credit Facility has variable interest rates at either the BA rate plus 225 bps or the Prime rate plus 75 bps, at the option of the
Company. The Company does not hedge interest rates on the Revolving Credit Facility. Accordingly, future changes in interest rates will affect
the amount of interest expense payable by the Company to the extent draws are made on the variable rate Revolving Credit Facility. As at
December 31, 2022, the Company’s has drawn $150 million against its $270 million Revolving Credit Facility.
The Revolving Securitization Warehouse Facility I has a variable interest rate at 1-month CDOR plus 185 bps. The Company entered into an
interest rate swap agreement as a cash flow hedge to protect itself against the variability of future interest payments by paying a fixed rate
based on the weighted average life of the securitized loans and receiving variable rate equivalent to 1-month CDOR. As such, each incremental
swap that is taken on has a hedge implemented that results in interest rates becoming fixed for the duration of that swap.
141
The $105 million Securitization Facility bears interest at the GOCB rate (with a floor rate of 0.95%) plus 395 bps and the $85 million Securitization
Facility bears interest at the GOCB (with a floor rate of 0.25%) plus 325 bps. The loan sale agreements to sell loans into these facilities expired
in 2021. The balance of the loans that were sold into the facility will amortize down based on their contractual time to maturity.
As at December 31, 2022, 93% (2021 – 100%) of the Company’s drawn debt balances effectively bear fixed rates due to the type of debt and the
aforementioned interest rate swap agreement on the Revolving Securitization Warehouse Facility I.
The Company cannot predict the impact of the changing economic conditions will have on its future results, nor predict when interest rates will change.
Currency Risk
Currency risk measures the Company’s risk of financial loss due to adverse movements in currency exchange rates.
On November 27, 2019, the Company issued the 2024 Notes with a USD coupon rate of 5.375% and on April 29, 2021, the Company
issued the 2026 Notes with a USD coupon rate of 4.375%. Concurrent with these offerings, the Company entered into cross-
currency swap agreements to hedge the risk of changes in the foreign exchange rate for the proceeds from the offerings and for all
required payments of principal and interest under these notes effectively hedging the obligation. The hedge is designed to match
the cash flow obligations of the Company under the Notes Payable.
The Company sources a portion of the assets it leases in Canada from U.S. suppliers. As a result, the Company has foreign exchange transaction
exposure. These purchases are funded using the spot rate prevailing at the date of purchase. Pricing to customers can be adjusted to reflect
changes in the CAD landed cost of imported goods and, as such, the Company does not have a material foreign currency transaction exposure.
28. Financial Instruments
Recognition and Measurement of Financial Instruments
The Company classified its financial instruments as follows:
FINANCIAL INSTRUMENTS
Cash
Accounts receivable
Consumer loans receivable, net
Investments
Derivative financial assets
Revolving credit facility
Accounts payable and accrued liabilities
Accrued interest
Secured borrowings
Revolving securitization warehouse facilities
Derivative financial liabilities
Notes payable
Fair Value Measurement
MEASUREMENT
Fair value
Amortized cost
Amortized cost
Fair value
Fair value
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Fair value
Amortized cost
DECEMBER 31, 2022
DECEMBER 31, 2021
62,654
25,697
2,627,357
57,304
49,444
148,646
51,136
10,159
105,792
805,825
-
102,479
20,769
1,899,631
64,441
20,634
-
57,134
8,135
173,959
292,814
34,132
1,168,997
1,085,906
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 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or
indirectly observable.
Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
142
The hierarchy required the use of observable market data when available. The following tables provide the fair value measurement
hierarchy of the Company’s financial assets and liabilities measured as at December 31, 2022 and 2021:
TOTAL
LEVEL 1
LEVEL 2
LEVEL 3
DECEMBER 31, 2022
Cash
Accounts receivable
Consumer loans receivable, net
Investments
Derivative financial assets
Revolving credit facility
Accounts payable and accrued liabilities
Accrued interest
Secured borrowings
Revolving securitization warehouse facilities
Notes payable
DECEMBER 31, 2021
Cash
Accounts receivable
Consumer loans receivable, net
Investments
Derivative financial assets
Accounts payable and accrued liabilities
Accrued interest
Secured borrowings
Revolving securitization warehouse facilities
Derivative financial liabilities
Notes payable
62,654
25,697
2,627,357
57,304
49,444
148,646
51,136
10,159
105,792
805,825
1,168,997
62,654
-
-
6,226
-
-
-
-
-
-
-
102,479
20,769
1,899,631
64,441
20,634
57,134
8,135
173,959
292,814
34,132
1,085,906
102,479
-
-
53,941
-
-
-
-
-
-
-
-
-
-
-
49,444
-
-
-
-
-
-
-
-
-
-
20,634
-
-
-
-
34,132
-
-
25,697
2,627,357
51,078
-
148,646
51,136
10,159
105,792
805,825
1,168,997
LEVEL 3
-
20,769
1,899,631
10,500
-
57,134
8,135
173,959
292,814
-
1,085,906
TOTAL
LEVEL 1
LEVEL 2
There were no transfers between Level 1, Level 2, or Level 3 for the years ended December 31, 2022 and 2021.
29. Related Party Transactions
Key management personnel includes all directors of the board and corporate officers. The following summarizes the expenses related
to key management personnel during the year.
Short-term employee benefits including salaries
Share-based payment transactions
DECEMBER 31, 2022
DECEMBER 31, 2021
6,642
6,880
13,522
6,462
5,847
12,309
143
30. Segmented Reporting
For management reporting purposes, the Company has two reportable segments:
• The easyfinancial reportable segment lends out capital in the form of unsecured and secured consumer loans to non-prime borrowers.
easyfinancial’s product offering consists of unsecured and real estate secured instalment loans. The LendCare operating segment specializes
in financing consumer purchases in the powersports, automotive, retail, healthcare, and home improvement categories. The majority of
LendCare loans are secured by personal property or a Notice of Security Interest. The Company aggregates operations of easyfinancial and
LendCare into one reportable segment called easyfinancial, on the basis of their similar economic characteristics, customer profile, nature of
products, and regulatory environment. This aggregation most accurately reflects the nature and financial results of the business activities in
which the Company engages, and the broader economic and regulatory environment in which it operates.
The Company’s chief operating decision maker (“CODM”), which has been determined by the Company to be the Chief Executive Officer,
utilizes the same key performance indicators to allocate resources and assess the performance of the operating segments. The CODM
uses several metrics to evaluate the performance of the operating segments, including but not limited to, the volume of consumer
loan originations and the risk-adjusted margin of the businesses (comprising the yield on the consumer loan portfolios net of the
annualized loss rates). These key financial and performance indicators, which are used to assess results, manage trends and allocate
resources to each of the operating segments, have been, and are expected to remain, similar. In addition, the Company is in the process
of centralizing some of the common functions such as finance, human resources and information technology.
Customers served by the easyfinancial and LendCare operating segments are Canadian consumers, the majority of whom are
classified as non-prime borrowers and seeking alternative financial solutions to those of a traditional bank. These consumers
actively use a wide range of financial products and will migrate across the products offered in each segment. Furthermore, the
nature of products sold by each of the operating segments and the distribution methods of those products are similar. Both the
easyfinancial and LendCare operating segments offer unsecured and secured instalment loans, which are offered through a
retail network of branches or merchant partnerships, and complemented by an online digital platform. In addition, both operating
segments are subject to the same federal and provincial legislations and regulations applicable to the consumer lending industry.
• The easyhome reportable segment provides leasing services for household furniture, appliances and electronics and unsecured
lending products to retail consumers.
The Company’s business units generate revenue in four main categories: i) interest generated on the Company’s gross consumer loans
receivable portfolio; ii) lease payments generated by easyhome lease agreements; iii) commissions and other revenues generated by the
sale of various ancillary products; and iv) charges and fees.
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 the Corporate segment.
Management assesses performance based on segment operating income (loss).
The following tables summarize the relevant information for the years ended December 31, 2022 and 2021:
YEAR ENDED DECEMBER 31, 2022
EASYFINANCIAL
EASYHOME
CORPORATE
TOTAL
Revenue
Interest income
Lease revenue
Commissions earned
Charges and fees
Operating expenses
Bad debt
Other operating expenses
Depreciation and amortization
Segment operating income (loss)
Other loss
Finance costs
Income before income taxes
144
668,779
-
184,013
16,736
869,528
261,997
180,867
32,668
475,532
393,996
29,371
103,414
13,146
3,877
149,808
10,896
61,748
42,586
115,230
34,578
-
-
-
-
-
-
90,115
6,052
96,167
(96,167)
698,150
103,414
197,159
20,613
1,019,336
272,893
332,730
81,306
686,929
332,407
(28,659)
(107,972)
195,776
YEAR ENDED DECEMBER 31, 2021
EASYFINANCIAL
EASYHOME
CORPORATE
TOTAL
Revenue
Interest income
Lease revenue
Commissions earned
Charges and fees
Operating expenses
Bad debt
Other operating expenses
Depreciation and amortization
Segment operating income (loss)
Other loss
Finance costs
Income before income taxes
512,810
-
152,485
11,056
676,351
174,936
148,445
28,219
351,600
324,751
22,828
112,371
11,249
3,923
150,371
7,148
61,558
44,804
113,510
-
-
-
-
-
-
74,746
5,863
80,609
36,861
(80,609)
535,638
112,371
163,734
14,979
826,722
182,084
284,749
78,886
545,719
281,003
114,876
(79,025)
316,854
As at December 31, 2022 and 2021, the Company's goodwill was comprised of $21.3 million related to its easyhome reportable
segment and $159.6 million related to the LendCare operating segment within the easyfinancial reportable segment.
In scope under IFRS 15, Revenue from Contracts with Customers (“IFRS 15”) are revenues relating to commissions earned and charges
and fees. Lease revenue is covered under IFRS 16, Leases. Included in lease revenue is certain additional services provided by the
Company related to the lease, but which fall under the scope of IFRS 15. These revenues totalled $11.8 million for the year ended
December 31, 2022 (2021 – $13.2 million).
The Company's easyhome business consisted of four major product categories: furniture, electronics, appliances and computers.
Lease revenue generated by these product categories as a percentage of total lease revenue for the years ended December 31, 2022
and 2021 were as follows:
Furniture
Electronics
Appliances
Computers
DECEMBER 31, 2022
(%)
DECEMBER 31, 2021
(%)
40
34
15
11
100
40
32
15
13
100
Corporate Information
Head Office
33 City Centre Drive
5th Floor
Mississauga, Ontario
L5B 2N5
Tel:
(905) 272-2788
Investor Relations
Jason Mullins
President & Chief Executive Officer
Tel:
(905) 272-2788
David Ingram
Executive Chairman of the Board
Tel:
(905) 272-2788
Hal Khouri
Executive Vice-President
& Chief Financial Officer
Tel:
(905) 272-2788
Farhan Ali Khan
Senior Vice President and Chief
Corporate Development Officer
Tel:
(905) 272-2788
Bankers
Bank of Montreal
Toronto, Ontario
Wells Fargo Canada
Toronto, Ontario
Canadian Imperial Bank
of Commerce
Toronto, Ontario
Royal Bank of Canada
Toronto, Ontario
The Toronto-Dominion Bank
Toronto, Ontario
National Bank of Canada
Toronto, Ontario
Transfer Agent
TSX Trust Company
Toronto, Ontario
Listed
Toronto Stock Exchange
Trading Symbol: GSY
Solicitors
Blake, Cassels & Graydon LLP
Toronto, Ontario
Auditors
Ernst & Young LLP
Toronto, Ontario
Website
www.goeasy.com
Board of Directors
David Ingram
Executive Chairman of the Board
Corporate Officers
Jason Mullins
President & Chief Executive Officer
Donald K. Johnson
Chairman Emeritus
David Appel
Corporate Director
Karen Basian
Corporate Director
Susan Doniz
Corporate Director
Sean Morrison
Corporate Director
Honourable James Moore
Corporate Director
Tara Deakin
Corporate Director
Jason Mullins
Corporate Director
Jonathan Tétrault
Corporate Director
146
Hal Khouri
Executive Vice-President & Chief Financial Officer
Jason Appel
Executive Vice-President & Chief Risk Officer
Andrea Fiederer
Executive Vice-President & Chief Marketing Officer
Jackie Foo
Executive Vice President & Chief Operating Officer
Ali Metel
President, LendCare
Mark Schell
Chief Operating Officer, LendCare
David Cooper
Senior Vice-President & Chief Talent Officer
Sabrina Anzini
Senior Vice President & Chief Legal Officer
Michael Eubanks
Senior Vice-President & Chief Information Officer
Farhan Ali Khan
Senior Vice President & Chief Corporate Development Officer
Steven Poole
Senior Vice-President, Operations & Merchandising