Executives: David Yielding - SVP, Finance David Ingram - President & CEO Steve Goertz - CFO Jason Mullins - COO Jason Appel - Chief Risk

Officer
Analysts: Stephen MacLeod - BMO Capital Markets Jeff Fenwick - Cormark Securities Michael Overvelde - Raymond James Doug Cooper - Beacon

Securities
Operator: Good morning, ladies and gentlemen. Welcome to the 2016 Fourth Quarter and Yearend Financial Results Call. I would now like to turn the meeting over to Mr. David Yielding, Senior Vice President, Finance of goeasy limited. Please go ahead, Mr.

Yeilding.

David Yielding: Thank you, operator and good morning, everyone. Thank you for joining us to discuss goeasy’s results for the fourth quarter and year ended December 31, 2016. The news release, which was issued yesterday after the close of market, is available on Marketwired and on our website. Today, David Ingram, goeasy’s President and CEO, will talk about the highlights of the fourth quarter.

Following his remarks, Steve Goertz, the company’s CFO, will discuss goeasy’s financial results in greater detail. David Ingram will then provide some insights into our strategic initiatives and outlook before we open the line for questions from investors. Jason Mullins, the company’s Chief Operating Officer and Jason Appel, the company’s Chief Risk Officer are also on the call. Before we begin, I remind you this conference call is open to all investors and is being webcast through the company’s investor website. All shareholders, analysts and portfolio managers are welcomed to ask questions over the phone after management is finished.

The operator will pull for questions and will provide instructions at the appropriate time. Business media are welcomed to listen to this call and use management’s comments in responses to see questions and coverage. However, we would ask that they do not hold callers unless that individual has granted their consent. Today's discussion may contain forward-looking statements. I am not going to read the full statement, but I will direct you to the caution regarding forward-looking statements included in our MD&A.

Now, I will turn the call over to David Ingram.

David Ingram: Thank you. Good morning, everyone and thank you for the participation on our call today. The fourth quarter of 2016 and all of 2016 for that matter, were strong for our company. We reported record revenue and earnings and met all our stated targets.

This solid performance, coupled with our optimizing for the future gave our Board the confidence to reward shareholders by raising our dividend. Before Steve reviews the detailed financial performance for the quarter, I want to touch on some of the highlights from the quarter. Overall revenue increased by 10% reaching a record of $91 million for the quarter. The company's record revenue growth was again driven by easyfinancial as it grew its loan book to $371 million by the end of the quarter, a year-over-year increase of $0.28. The growth in revenue contributed to increased earnings, diluted earnings per share for the quarter increased by 11% to $0.60 from $0.54 in the fourth quarter of 2015.

During the quarter, we launched a point of sale financing platform within Sears Canada. This launch was an important milestone as it was the first time a retail customer could apply for and receive point of sale financing across the credit spectrum using a single streamlined electronic application process. Depending on the company's credit profile, either Sears Canada or easyfinancial extends credit to complete the purchase of point-of-sale. Our tablet-based proprietary application system provides the backend support system and loan servicing needed to make an install process smooth and straightforward for the customer. Throughout 2016, our focus was on growth and leveraging the scale of easyfinancial.

In addition to delivering strong financial results, we met all our stated targets. We target to closing loan book at $370 million to $380 million and ended the year at $371 million. We target total revenue growth of 14% to 16% and delivered revenue growth of 14%. We targeted easyfinancial operating margins of 35% to 38% and delivered 37% and finally we opened 17 new branches against our stated goal of 10 to 20. We also made significant progress on our strategic initiatives.

In particular, I want to focus on two achievements. After having conducted market testing throughout 2015, we introduced risk adjusted pricing early in 2016, offering lower rate products to new and existing qualified customers. We also increased our maximum loan size from 10,000 to 15,000. Both of these product enhancements benefited our customers by providing them access to needed financial resources, that were not available from traditional providers and assisting them in their journey back to bank financing. So overall 2016 was a very productive and a record setting year and continued a strong track record of sustainable growth.

Over the past 15 years, we have delivered compound annual growth rate of 11.7% in revenue, 22% for operating income and 19.3% for earnings per share. 2016 also continued the company's trend of 62 consecutive quarters of positive net income and 27 quarters of positive same-store sales growth. As importantly, we saw improvements to employee engagement, customer satisfaction and brand awareness. Our strong financial performance and our outlook for the future, combined with our strong balance sheet has given our Board the confidence to increase our quarterly dividend by 44% to $0.18 per share. Now I'll turn the call over to Steve to review our financial results for the quarter in greater detail.

Steve Goertz: Thank you, David. The gross consumer loans receivable portfolio grew by $27 million in the quarter, driven by our strong originations, which increased to $118 million from $111 million in the fourth quarter of 2015. The growth of easyfinancial contributed to improved financial results for the quarter. Total revenue was $91.3 million, an increase of $8.4 million or 10.2% compared with $82.9 million in the fourth quarter of 2015. Same-store sales growth, which includes easyfinancial was 12.6%.

Both revenue and operating income for the quarter were reduced by $1 million due to the transition of our creditor life insurance product to a new provider. Ultimately this one-time impact reduced earnings per share for the quarter by $0.05 but the company will benefit from improved commissions and better levels of customer service in future periods. Easyfinancial's bad debt expense increased to $15.9 million for the fourth quarter of 2016 up $2.4 million or 18.3%. This rate of increase was below the 28% rate of growth of the loan book. Net charge-offs as a percentage of the average gross consumer loans receivable on an annualized basis, were 15.8% in the quarter, up slightly from 15.5% reported in the fourth quarter of 2015, but within our targeted range of 14% to 16%.

Operating margin was 18.8% for the fourth quarter of 2016, up from 18.1% reported in the fourth quarter of 2015. The improvement in operating margin was driven by the higher operating margin in easyfinancial business and a larger percentage of earnings generated by easyfinancial. The improved operating income translated into higher net income and earnings per share for the quarter. Net income for the quarter was $8.3 million and diluted earnings per share increased to $0.60 in the quarter. As previously slated, results for the fourth quarter of 2016 were reduced by the transition of our creditor life insurance product to a new provider.

Excluding this impact, earnings per share would've been $0.65 compared with $0.54 reported in the fourth quarter of 2015, an increase of 20%. Our overall financial position remains strong at year-end. Our debt to total capitalization was 0.57, less than many of our industry peers. $267.5 million was drawn against our $300 million committed credit facilities, with the remaining borrowing capacity in cash on hand plus cash flows generated by operations, we possess sufficient capacity to fund the expected loan book growth through the end of the third quarter of 2017. Now I'll turn the call back to David.

David Ingram: Thanks Steve. Throughout 2016, we completed an in depth strategic review gaining a greater understanding of available opportunities within the nonprime market for consumer lending in Canada. This review confirmed that our corporate strategy continues to be appropriate and identified several key insights. Firstly, the market for nonprime lending in Canada excluding mortgages, is approximately $165 billion. The supply however is fragmented by both products and credits segments and is satisfied by large number of diverse lenders, which each focusing on relatively narrow range of products.

Opportunity for growth exists for those lenders who are able to effectively offer multiple products, spanning the nonprime consumer credit spectrum across various distribution channels. Second, competition within the nonprime consumer lending market is in a state of transition. While many large participants have exited the market in recent years, new competition from nontraditional sources such as payday lenders, online lenders and marketplace lenders has emerged. Third, with the nonprime market, the company has traditionally focused on relatively high risk consumers and offered a product with higher interest rates that was commensurate with that risk. Greater opportunities exist for a lower rate products where a reduced yield can be offset by lower credit losses and servicing cost.

Fourth, the opportunity for secured lending product is large with significant unsatisfied demand. This demand is likely to increase in the future as the regulations impacting mortgage applications in Canada continue to change. The reduced yield for this type of product is offset by lower credit losses and lower cost to administer. And finally, a significant opportunity exist to provide point-of-sale financing alternatives to customers of traditional retail organizations, many of which do not have financing options for customers in the nonprime credit segment. While the opportunity in nonprime retail financing is large, with few supplies of scale, even more significant prospects exist for companies that can provide retail financing across the entire credit spectrum that minimizes or eliminates the level of credit friction in the customer application process.

Taken together, these insights have validated that our corporate strategy continues to be appropriate with an opportunity to accelerate and refine our tactical plans in order to achieve our goals. Over the past several years, we've made significant investments in our processes, systems and infrastructure to support long-term sustainable growth. Although these investments will continue, we're now well placed to take advantage of positive market conditions and accelerate at rates of growth. To achieve this, we have identified several specific initiatives that we intend to pursue in 2017. First, we continue to believe that direct personal relationships with our customers are essential to achieving optimal results.

Such relationships are best achieved through a physical location where our customers live and work. Beginning in 2017 and to provide greater access to physical location to our customers, we will significantly expand our easyfinancial footprint by offering consumer lending products through our easyhome stores. These easyhome stores are in areas of service easyfinancial's target market, having existing relationships with customers that are likely consumers of the products offered by easyfinancial and are staffed with dedicated employees that have significant experience in managing the relationships, including selections with nonprime consumers. This rollout will begin in the second quarter and will be completed by the end of the year. Second, since its launch in 2006 and through 2016, we have focused on developing our easyfinancial business across Canada with the exception of the province of Québec.

Although we have a long and successful history of operating in Québec through our easyhome stores, the Québec market for nonprime lending created additional complexity for us due to a different legal and regulatory environment. We always believe that Québec represented a large opportunity for nonprime lending and now that easyfinancial has been firmly established across the rest of the country, we will expand our easyfinancial footprint into Québec. Although our products offering will differ somewhat from the product offering across the rest of Canada, as focusing Québec will be consistent with our overall goal of being a leading full service provider for alternative goods and financial services that improve the lives of everyday Canadians. We have received Québec lending permit and will begin the rollout in the second quarter. Third, our mission continues to be helping our customers improve their credit risk profile and graduate them back to lower cost prime lending.

Our launch of risk-adjusted pricing in 2016 provided our best customers with access to larger dollar and lower rate products. In 2017, we intend to further expand these offerings, which reduce our relative acquisition, origination and servicing costs and tend to be of longer duration with lower charge-off rates. In addition to helping us retain our best performing customers, these lower rate products have also attracted new customers from within the broader, nonprime credit spectrum. And finally, we believe that a substantial opportunity exists to complement our current, unsecured installment lending product with secured loan products that are secured by hot asset. For these new products, the interest rate charged to customers will be reduced due to the expected lower charge-off rate stemming from the collateral security pledged by the customers, thereby generating attractive returns on equity.

Initially, we will explore an installment loan products, which is secured by real estate while future products may include loans secured by other hard assets, such as automobiles. We expect to offering our secured loan products in the third quarter. As a result of these new initiatives, we're targeting an accelerated rate of growth. We forecast our loan book reaching $475 million to $500 million by the end of 2017, achieving a $0.5 billion consumer loan receivable portfolio one year earlier than originally communicated. We further expect our loan book to grow into $775 million to $800 million by the end of 2019.

Although revenue growth in 2017 and beyond will be positively impacted by the growing loan book, the yield that we'll realize in our loan portfolio will decline as we introduce more loans with risk-adjusted pricing and launch our secured loan product that also offers a lower rate of interest. We anticipate that our easyfinancial revenue yield, including revenue generation on the sale of optional auxiliary products will decline to 60% to 62% for 2017 and to approximate 49% to 51% in 2019. The impact of the growing loan portfolio is somewhat offset by a lower total yield will continue to drive strong revenue growth. Based on the factors noted above and the successful execution of the initiatives, we anticipate revenue growth of 10% to 12% for 2017, accelerating further in the years thereafter as we have the full annual benefit from these initiatives. The continued growth of easyfinancial will allow us to achieve further economies of scale, including lower rates of loan losses that will help offset the reduction in total yields.

As such, we expect easyfinancial to continue generating strong operating margin. We expect easyfinancial to achieve operating margins of 35% to 37% for 2017, increasing to about 40% by 2019. The growth in income associated with the targets and initiatives identified above will enable us to continue improving our overall financial performance. For 2017 we anticipate improving our return on equity to 18% to 19% and increasing this further to more than 21% by 2019. The successful implementation of these specific initiatives and the achievement of our growth forecast is is dependent upon additional financing being secured.

Although these financing plans have not yet been completed, we are confident that we will continue to have access to additional debt capital to fund that growth into the future. We continue to retain a large portion of the net income that we generate, building up a sufficient equity balance to support our assets. We also believe that the company's leverage ratio has room for expansion. As a result, we do not believe that additional equity will be required to fund our growth strategy through 2019. Additionally, over the past several years we have established relationships with many alternative providers of debt capital and continue to explore funding alternatives that represent an optimal balance between interest rates, term, flexibility and security.

So, in closing, I want to thank our entire team for their dedication and tireless efforts that allowed us to meet our goals. 2016 was a record year for goeasy and was one that included many other strategic achievements that position us for long-term success. We have a history of setting ambitious goals, but we also have a history of delivering on our promises so that delivered a total shareholder return of over 3,000% during the past 15 years. Going forward, our history of success, coupled with us in depth strategic review tells us that we are on the right path with the right plan and the right people to deliver strong, sustainable growth in 2017 and beyond. So, with that formal comments complete, we're now happy to open the call up for questions.

Operator: Thank you. We'll now take questions from the telephone lines. [Operator instructions] The first question is from Stephen MacLeod of BMO Capital Markets. Please go ahead.

Stephen MacLeod: Thank you.

Good morning.

David Ingram: Good morning. Stephen.

Stephen MacLeod: Good morning. I just wanted to just get a sense of the cadence or pace of expansion through 2017.

So, I guess just in terms of loan book growth, it sounds like maybe it's tilted towards the back half of the year but I just wanted to get a sense of loan book growth, the new stores that you're putting in and also how you expect bad debt expense and margins to move through the year as you get to your 2017 target of 35% to 37%.

Jason Mullins: So yeah, you're right in that because of the way we've staggered some of the growth initiatives. The growth will be more heavily weighted in the back half of the year. You're looking at roughly call it 35% to 40% of the growth in the first half and 60% to 65% of the growth in the back half from a total receivables growth point of view. Store expansion will be a little bit similar.

We'll have probably more of the openings tied in Q3, Q4 timeframe. So, the total 20 to 30 we gave guidance on probably looking at say five or so in the first half and the balance in the second half. And then because we're sort of staggering the rate of expansion through store opening and book growth, the loss rate and the operating margins will be fairly steady throughout the year. We don't expect any major fixed valleys in those two major metrics.

Stephen MacLeod: Okay.

Okay. Great. And then I guess in terms of specific initiatives that you outlined David in terms of Quebec, the risk adjusted lending, the opportunity for secured loan products and then also adding loans through the easyhome footprint, which of those do you expect to generate the highest penetration in terms of loan book growth.

Steve Goertz: So yes, you're asking it by value in terms of volume size of receivable from each of the initiatives.

Stephen MacLeod: Yeah just of thinking of -- just trying to get a sense of which you view as the biggest opportunities?

David Ingram: Yes so, I think you got to look into two time horizons.

So, in the initial launch of 2017 secured will be quite small in the mix of what we actually achieved in 2017 because of timing of launch, but when you look at over the three-year horizon come 2019, you start to see it make one of the biggest contribution in the total mix of new initiatives. So, if you think of secured as being a bigger allocation of this mix, risk-adjusted pricing will continue to grow and we have good experience. So, that will be fairly decent large and then Québec it's an interesting province for us because while it has a slightly different product, the opportunity with the population in Québec has very low supply side and quite good demand side. So, Québec will be quite good for us over the next three years. The one that's trickier for us to try and give you any kind of guidance on is the conversion of easyfinancial inside easyhome.

So, one we're going to stop quite quickly in terms of rolling in, but we have a lower expectation of high growth in year one as the staff get familiar with the product and they try to work through the management of the leasing side as well as the easyfinancial side. So, if you look now over the next two three years, I would say secured lending will take a big allocation, then you'll have the risk-adjusted lending, then you'll have Québec and then you'll have the easyhome contribution for easyfinancial if that helps.

Stephen MacLeod: Yes, that's very helpful and do you expect that secured could potentially be bigger at some point than the unsecured business?

David Ingram: Difficult to say because as we said in the text, we're starting with using the homes as the hot asset to secure the lending and we're still not quite sure about the other asset classes to get into. So, depending on which direction we go the other asset classes, that combined value could be something that gets close to the unsecured or could exceed it, but it depends if we go beyond the first asset class that we begin with. So, I don't think I can give you more clarity on that until we get through at least the next at 12-18 months and then we can give you a bit more of a clear picture at that point.

Stephen MacLeod: Okay. That's helpful. Thank you. And then do you expect to have to invest in ad spend in order to pursue these new growth channels and is that built into your guidance for margins?

David Ingram: Yes, so there is really two areas to think about where most of the investment will be made. You've got the CapEx investment because there is a whole bunch of IT investment that needs to be done to allow these things to be accelerated.

So, whether it's your CRM platform, whether it is the ability to be a better digital provider for the different products and consumers and a lot of it is to engineer the ability to make these products work quite frankly. So, there is a CapEx spend increase that is going to be call it $4 million or so year on year that is the investment to get these initiatives all to work. So, that's kind of part one. Part two, is then the market advertising investment, which we're going to increase in 2017 to get the new products, the ability to grow and penetrate further. So, for example, digital spend in the mix for 2017, so our online spend in particular will be 50% roughly about until we spend the marketing dollars, so that will see quite a big increase and we know that -- we know that the market wants a faster delivery of getting access to loans.

They want a better experience online and all of that costs more dollars to get more customers through the door. So between online and a new TV production, a new TV media spend, all of those things will help launch these products in 2017 and then finally there will be additional resource or headcount to support these new initiatives to make sure that they're well-planned, well through and then executed for a delivery.

Stephen MacLeod: Okay. And sorry just to clarify, did you say $4 million incremental in 2017 on CapEx?

Steve Goertz: Yeah, I think if you look at it as a comparison to 2016, I haven’t got the number in front of me, but from top of my head it's roughly in the order, the magnitude of $4 to $5 million on a four year spend year-over-year.

Stephen MacLeod: Okay.

Okay.

Steve Goertz: On a CapEx basis.

Stephen MacLeod: On CapEx. Right. Okay.

And in terms of increased headcount, do you expect to see an increase to your corporate cost.

Steve Goertz: There will be an ongoing increase to corporate cost just because of the pace of growth. So, it will scale up quite well. So, the leverage ratio will be okay, but if you're looking at total headcount to the office to support all these new initiatives, we'll be adding probably somewhere in the order of 15 to 20 heads over the next 12 months. So not all at once, but phased in over the 12 months to support the area's like risk, like IT, like marketing and digital.

So, it's going to be lower than the rate of growth for the business, but it will be an investment to keep the new initiatives being built.

Stephen MacLeod: Okay. That's great. Thank you. I'll go back in line.

Steve Goertz: You're welcome.

Operator: Thank you. The following question is from Jeff Fenwick of Cormark Securities. Please go ahead.

Jeff Fenwick: Hi.

Good morning, everybody. I just wanted to follow up on the aspects of the growth plan, it's going back into the easyhome stores. I think you just talked about the decision to do that I mean the focus had been on removing a lot of locations and putting them into standalone is the offer going to be substantially the same or the structure of that and within the store that was in the past and what was the thinking behind that.

Jason Mullins: Yes, so Jeff, it's Jason, yes so obviously, our kiosk model has proven to be successful as you know. So, we clearly know that in the location there is traffic coming in those stores that is attractive to this product and has interested in the product and so we look at the leasing business and recognize that in that particular industry there is a tremendous amount of growth opportunity from the product categories we offer today.

This is really an opportunity to give that staff the ability to offer a product that we do know there is growth in consumer demand for us that they can grow their business and grow their portfolio. Again, as David mentioned earlier, the staff are all very well trained in the exact same skills and competencies that are necessary to offer an easy financial product form sales to collections. So really the ideal as we've just tried to simplify some of the operational procedures, centralized some of those procedures. So, it takes less burden on that staff complement, but otherwise given them yes, the identical same unsecured products that we would have used to secure easyfinancial.

David Ingram: Just one thing I would add Jeff in the context of success or failure, the chaos never really -- the chaos never failed for us being an easy home store.

We choose the majority of them into standalone stores, just because the economics were factored two times when we moved outside of the chaos. So, chaos was always profitable but they would reach a peak of $1 million loan book portfolio and we knew that moving them into a monoline standalone would reach an average of $2 million plus. So, that was the strategy and it continues to be the strategy. That still leaves a smaller book that can be built inside easyhome with easyhome team. Won't be the same size as chaos because it won't be a dedicated transaction, but it still gives us an opportunity to further increase our reach and our ability to give loans.

Jeff Fenwick: Okay. And I am not really familiar with the geographic distribution of the stores. Is there any risk there in terms of cannibalizing the standalone stores that you've launched in the past?

David Ingram: I think there is always going to be the risk of cannibalization but the amount is quite small and like all things when you got to commoditize product, it will come down to local execution and the skill of the employee to build that relationship. So, we haven’t built a scenario that worries too much because we don't see a large scale cannibalization of the transaction and when I look at the cannibalization potential of the leasing business and easyfinancial, we still think the customers would choose to have two separate transactions as opposed to use the money that they borrow to pay out the lease that will be some but it will be quite minor. So, the cannibalization there we think will be quite small.

Jeff Fenwick: And I guess as I look at that and look at the easyhome business itself as sort of slowly contracting over time, is there opportunities here for eventually just replacing those stores and have the easyfinancial banner pump out in the front of the store and it's just the way of I guess of efficiently transitioning that business.

David Ingram: Well there is always possibilities and if you look at the industry on a macro basis, there is a structural decline and the public companies that report have had a bad go of it in the last 12, 18 months. So, by comparison we've actually done very well against the industry norms. Our same-store sales on an annualized basis were down just over 1%, just under 2% rather for the full year. So, there is a small decline is taking place.

We saw a very good fourth quarter in terms of portfolio growth. It was better than the prior year. So, those were good signals, but ultimately if we do nothing, it will be a slow drip where the portfolio declines and the profitability declines. By introducing and widening the product choice to having cash as an available product, we believe we can reverse that trend within the four walls and we can start to see it go back to growing profitability as opposed to either holding or decline it. Whether it ends up three years, four years from now, showing that we should dramatically change the business to one that's primarily lending rather than leasing, then I can't tell you that until we see how we perform with the new product.

My sense is it won't because we are the primary lender of doing rents and leasing in Canada and there is little competitive pressure on us from other companies.

Jeff Fenwick: Okay. That's great. And maybe just a comment back on competition and I recognize the comments you gave early around it being still very fragmented but you did have Citi Financial always considered as your company or a competitor in the market there at least and you had a change in ownership and backing behind that business and do you have any sense of their intentions in the marketplace and have seen anything at this point recognizing it's still pretty early?

David Ingram: The short answer is no. We have not heard of the transaction being closed.

We've not heard anything about what it may or may not look like going forward. So, what we are planning is what we can control and what we can influence and we believe that we can be quite disruptive in introducing new products, new ways to do business that will allow us to path our own journey and do well while they go through their change. But I can't tell you what that change looks like so I can only tell you what the change looks like for us.

Jeff Fenwick: Okay. And maybe just chat a bit about the finance plan here, you gave some time to that in your comments earlier.

Given the state of flux businesses and the plans to launch new products with different credit profiles, does that make it easier or harder or just more complex I guess for determining what the right solution is going to be for you? And I guess the follow-on to that is there going to be maybe some opportunity here of the overall risk profile that book looks like it's going to be less for you to perhaps get a lower cost of funding as you go forward.

David Ingram: Yes, I think it's both going to be more complex, but easier. If I take you through a bit of history, we put in place financing for easyfinancial a number of years ago. Every time we needed additional capital, we've accessed the markets increase the size of our borrowings, reduce the rate, increase the flexibility. We expect that trend to continue over the last 12 months through the acquisition process that we participated in.

We were able to raise significant capital to fund an acquisition that was much larger than we were, but through the process, we were always also introduced a whole host of providers of capital and we've maintained those relationships. So, as we've gone through the strategic planning process, we've been in contact and been in discussions with a host of different lenders to understand what might be possible. We haven't been able to firm anything up yet because we needed the strategic plan in place as well as the forecast in place to understand what the needs were, what the products were and what the end goal was going to look like. Now that we've completed that, we're completing the engagement with those providers to come up with a capital plan that meets the needs of the business over the upcoming several years. As we move into lower risk products that has the opportunity to help us improve our rate, help us improve our access and most importantly helps us improve our leverage ratios.

Right now, relative to most of the participants in our industry, we're under-levered, we're heavily equity financed and relatively light debt financed. So, we see an opportunity to improve upon that and in finance all of the growth through additional debt capacity.

Jeff Fenwick: Okay. Thanks for your comments. Appreciate it.

Operator: Thank you. [Operator instructions] The following question is from Michael Overvelde of Raymond James. Please go ahead.

Michael Overvelde: Okay. Thank you.

And hello everyone. Just maybe a follow-up on Jeff's question on the rates, to the extent that you may have additional sources of funding out there that you identified, now that you've got the strategy in place, is it possible that you might be able to arrange called a lower rate, interest rate and financing ahead of the portfolio mix changing, considering that the portfolio mix won't really be changing all that materially through 2017?

David Ingram: We'll be going to be looking to go out and source that capital. Obviously, we're always looking to decrease the rate, but at the same time, we're looking to increase the leverage ratio because that's probably a bigger driver of creating shareholder value. So, it'll continue to be a balance between those two elements.

Michael Overvelde: And maybe just I guess a follow-on considering all the ways that this might change some of your financial trends going forward, one of the targets I guess that you haven't updated necessarily and I don't blame you I guess because there is a lot of uncertainty as the net charge-off loan loss type targets as you look forward, clearly those should come down as the mix changes, just want to get a sense for order of magnitude.

By 2019 your revenue yield call it easyfinancial is going to be 10% to 11% lower as a percentage of revenues. How much lower would you anticipate your credit cost to be over the same timeframe?

David Ingram: We've intentionally not communicated that. We're working out with the product mix because it will shift. We know that the yield decline will be offset by reductions in charge offs as well as significant reductions in per unit cost to administer our loans. It cost us the same amount to administer a lower dollar loan as a larger dollar loan.

So, as we're increasing the size of our loans, we get efficiencies there. That helps us to maintain the margin that we forecasted, but we haven't got into providing details on what the charge off rates are going to be in the future.

Michael Overvelde: All right. Maybe just two other quick clarification questions on a couple things that have been discussed, one was on the ad spend. I know in the past you've had targets, I don't know if it was 3.84% of revenues and you've indicated maybe higher level of spend.

Are you able to quantify as a percentage of revenues you what you might be targeting for 2017?

Steve Goertz: Yes 4.9%.

Michael Overvelde: 4.9%, okay. And just a clarification on the comment you made with respect to corporate cost because clearly those are going to be rising, you mentioned it would be rising less than revenue growth, would we be talking plus minus 5% a year growth from the $30 million level in 2016?

Steve Goertz: Given the investments we've got to make in systems in people, in advertising, as well to support the growth as well as the new products, the corporate cost rate is going to be greater than that. It will be lower than the rate of growth over probably somewhere in the area of 6% to 8%.

Michael Overvelde: 6% to 8%.

All right. Thanks guys. Appreciate it.

Operator: Thank you. The following question is from Doug Cooper of Beacon Securities.

Please go ahead.

Doug Cooper: Hi. Good morning, guys. I just wanted to circle back on the secured product you said initially on the real estate, any ideal how would this work in terms of loan-to-value? What do you anticipate yield will be on that kind of product?

Jason Mullins: Yes, it's Jason. So generally speaking for that type of product for the consumer segment that we're in, you're looking at a yield somewhere on the low-end kind of mid to high teens, going into the mid-20s that's generally the range that you find that type of product for the consumer who has equity in the home, but doesn't necessarily have the credit to go out and get traditional prime secured financing or the prime lender just isn’t willing to go out on the certain loan-to-value ratio.

So, we're really dealing with those two types of consumers and that's kind of the rate range you would expect.

Doug Cooper: All right. So, you think of this like second and third mortgages, kind of thing on the property?

Jason Mullins: Yes, ultimately the lean itself is the collateral mortgage. So, it functions like a mortgage in terms of its lean characteristics, but it's treated more like an installment loan. So, a fixed payment over a longer amortization.

It's really for someone to use as a second or maybe in rare cases, a third and its really just to go in and be able to get quick and easy access to a small amount of capital that they would access against their equity for personal purchases or renovations into the home are probably the most common.

Doug Cooper: Right. And I guess how often would you review the value of that asset considering that BMO just came out the other day and said that we're in a housing bubble?

Jason Mullins: Yes, every time someone is going to attempt to access credit, you would redo an evaluation of the value of the property, reassess all of their income and liabilities and therefore reestablish both their credit rating, their affordability and the value of the asset that you're securing again.

Doug Cooper: Okay. And finally, just typically the term on these would be how long?

Jason Mullins: Amortization on these are generally longer.

So, you're probably looking around 10 years. Longer terms it will be kind of six to eight, but your typical customer will take a term closer to 10 years with the size of the loan.

Doug Cooper: Okay. And the size of the loan is 10,000 to 15,000 where you're out now on the unsecured product, where do you think this, what do you imagine this will be?

Jason Mullins: This will be up to -- initially start with up to 25,000. So, your average is probably around the 20 range.

So, it's again really for that customer who the $10,000 unsecured loans not enough proceeds to do what they need to and so because they own a home, they can access a larger loan.

Doug Cooper: Okay. Just shifting gears to Quebec for a second, what are the actual differences from a regulatory legal perspective, is it rates, is that the biggest difference?

Jason Mullins: Yes, so ultimately there isn’t a regulated rate different in Quebec. The criminal code regulation still applies federally inclusively within Quebec, but they do have a financial services regulatory regime that requires that you apply for to obtain a landing permit and through that lending permit application process, there's a bit more scrutiny placed on your total cost of credit, in this case including your optional product. So, in the province of Quebec, when we disclosed the credit rate or the cost of borrowing rate on the contract with the borrower, it has to include those optional products and so as a result in order to both be competitive and to be regulatory compliant, we'll end up with a reduced yield from a reduction in the interest rate and a reduction in the premiums charged on those optional products.

Doug Cooper: All right. So, if your give or take let's call it 60% of the yield on your unsecured product today, what do you envision Québec would be just as for instance.

Jason Mullins: It's going to be probably somewhere in the 40% to 45% range.

Doug Cooper: Okay. And is it primarily the payday loan guys who are there, is City there? Like who's there in terms of you talked about lower competition.

Jason Mullins: Yes, so Citi is there today. They have 40 to 50 locations there. So, it represents a fairly sizable share of their footprint, but they're really the primary dominant player. There isn’t payday loan regulation that's been allowed for in the province. So outside of them for non-bank, non-prime lending, you're only the major option.

There is going to be credit card options like your non-traditional credit card let's say Capital One etcetera. So, it's clearly going to be we think a fair amount of demand that today there is a supply for.

Doug Cooper: Right and you're targeting 260 stores by 2019, you're at 208 today. How many of those 52 stores would be earmarked to Québec?

David Ingram: So, we're planning to do of the 20 to 30 we gave guidance on this year. We'll do 10 this year and we'll probably do 10 each year and we think the capacity for stores in Québec is not that far off what Citi has today.

So, call it 40 locations or so.

Doug Cooper: Okay. And finally, just looking at the operating margin in the easyfinancial just reported, I think it was 34.9% and then you talked about a $1 million I guess I don't know if you'd call it a cost or from the insurance changeover. Is that captured in the lower margin, I was just trying to say excluding that, you talk about excluding those $0.05 would that change your operating margin by my math up to 36.7% excluding that $1 million is that fair?

Steve Goertz: Yes, the impact of the shift in insurance provider is basically reflected in lower revenue, which manifests itself in a lower operating margin in the quarter as well.

David Ingram: The margin number we stated has not adjusted for that reaction.

Doug Cooper: And can you just elaborate on why you changed to providers and what that $1 million actually is?

David Ingram: We change providers really to provide us with a lower rated commission opportunity when our portfolio gets bigger as well as there is new provider we believe offers a greater level of customer service. So, a better experience for our customers. As part of the transition process, the old contract that was winding down, called for a lower commission rate at the tail of that contract. So, that's why the reduction in Q4.

Doug Cooper: Okay.

Great guys. Thanks very much.

Operator: Thank you. The following question in from Stephen MacLeod of BMO Capital Markets. Please go ahead.

Stephen MacLeod: Thank you. I just had one follow-up question. As you go out from 2017, 2018, 2019 and yields come down, but they're lower cost loans, fewer charge-offs, how does that debt expense move if you go out through over the next call it three years 2017, 2018, 2019?

David Ingram: Yes, it is going to reduce. We haven't disclosed what our expectations are for charge-off rates in those later years.

Stephen MacLeod: Okay.

That's great. Thank you.

Operator: Thank you. There are no further questions registered at this time. I would like to turn the meeting back over to Mr.

Ingram.

David Ingram: Once again, I want to thank everyone for their participation in this call. We look forward to further updates and enjoying what we think will be a very challenging in terms of workload but a very productive and strong year for 2017 and again thanks for your participation in our organization. Thank you.

Operator: Thank you.

The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.