Q1 2025 goeasy Ltd Earnings Call

Yeah.

Operator: Good morning, my name is Dion, and I will be your conference operator today.

Dion: Good morning, My name is Dion and I will be your conference operator today at this time I would like to welcome everyone to the go easy limited first quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question.

Operator: At this time, I would like to welcome everyone to the GOESY Limited first quarter 2025 earnings conference. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone. If you would like to withdraw your question, please press the pounds key.

Dion: <unk> and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press the pound key.

Farhan Ali Khan: Now, I will be turning over the time to Farhan Ali Khan. You may begin your conference.

Ali Kahn: Now I will be turning over at the time too far on Ali Kahn, you May begin your conference.

Farhan Ali Khan: Thank you, operator.

Ali Kahn: Thank you operator, and good morning, everyone.

Farhan Ali Khan: Good morning, everyone.

Farhan Ali Khan: My name is Farhan Ali Khan, the company's Chief Strategy and Corporate Development Officer, and thank you for joining us to discuss GOESY Limited's results for the first quarter ended March 31st, 2025. The news release, which was issued yesterday after the close of market, is available on Cision and on the GOESY website.

Speaker Change: My name is Farhan Ali Kahn, the company's chief strategy, and corporate development officer, and thank you for joining us to discuss what we see limited results first quarter ended March 31st 2025.

Speaker Change: News release, which was issued yesterday after the close of market. It is available on decision and on the go with your website.

David Ingram: Today, David Ingram, GOESY's Executive Chairman, will review the results for the first quarter and provide an outlook for the business.

Speaker Change: Today, David Ingram Executive Chairman, who will review the results for the first quarter and provide an outlook for the business.

Hal Khouri: Hal Khouri, the company's Chief Financial Officer, will provide an overview of our capital and liquidity position. Dan Rees, the company's Chief Executive Officer, and Jason Appel, the company's Chief Risk Officer, are also on the call.

Corey: Corey the company's Chief Financial Officer will provide an overview of our capital and liquidity position can reach the company's chief Executive Officer, and Jason Appel, The company's Chief risk Officer are also on the call.

Farhan Ali Khan: After our prepared remarks, we will then open the line for questions.

Speaker Change: Our prepared remarks, we will then open the line for questions.

Farhan Ali Khan: Before we begin, I remind you that this conference call is open to all investors and is being webcast to the company's investor website and supplemented by a quarterly earnings presentation. For those dialing in by phone, the presentation can also be found directly on our investor site. Analysts are welcome to ask questions over the phone after management has finished their prepared remarks. The operator will pull for questions and will provide instructions at the appropriate time. Business media are welcome to listen to this call and to use management's comments and responses to questions in any coverage.

Speaker Change: Before we begin I remind you that this conference call is helping to all investors and is being webcast at the company's investor website and supplemented by our quarterly earnings presentation.

Speaker Change: For those dialing in by phone presentation can also be found directly on our investors analysts.

Speaker Change: Analysts are welcome to ask questions over the phone. After management has finished their prepared remarks, the operator will pull for questions and we will provide instructions at the appropriate time.

Speaker Change: It's just media are welcome to listen to this call and use management's comments and responses to questions that any coverage. However, we would ask that they do not quote callers unless that individual has granted their consent.

Farhan Ali Khan: However, we would ask that they do not quote the callers unless that individual has granted their consent.

Farhan Ali Khan: Today's discussion may contain forward-looking statements. I'm not going to read the full statement, but will direct you to the caution regarding forward-looking statements included in the MD&A.

Speaker Change: Today's discussion may contain forward looking statements I'm not going to read the full statement, but I'll direct you to the caution regarding forward looking statements included in the MD&A.

David Ingram: I will now turn the call over to David Ingram. Thanks, Farhan. Good morning, everyone, and thank you for joining the call today. We produced strong loan growth, stable credit performance and improved operating leverage, while also raising over $550 million of additional capital and earning a spot once again in the top 50 workplaces to work in Canada. All of this is a testament to our team and their passion for helping Canadians with non-prime credit get access to the financial products that support their lives. A continued increase in market share and favorable competitive dynamics led to a record first quarter of applications for credit at 672,000, up 10% from quarter one last year, generating 43,500 new customers, an increase of 8%, which is a record for a Q1 period.

David Ingram: I will now turn the call over to David Ingram.

Speaker Change: And good morning, everyone and thank you for joining the call today.

Speaker Change: We produced strong loan growth stable credit performance and improved operating leverage while also raising over $550 million of additional capital and adding a spot once again in the top 50, what places to work in Canada. All of this is a testament to our team and their passion for helping Canadians adult prime credit get access.

Speaker Change: So the financial products that support that lives.

Speaker Change: A continued increase in market share and favorable competitive dynamics led to a record first quarter with applications for credit at 672000 up 10% to closer to what last year generating 43500, new customers, an increase of 8%, which is a record for a Q1 period.

David Ingram: The robust volume of applications led to originations in the quarter of $677 million. Organic loan growth for the first quarter was $190 million above the company's forecasted range of between $160 million and $185 million. At quarter end, our loan portfolio finished at $4.79 billion, up 24% from the prior year. Unsecured lending continues to be the largest product category at 62% of loan originations and within our direct-to-consumer channel. The average loan portfolio across our branch network rose to a new high of $7.2 million per branch, up 20%. We continue to make progress in scaling our automotive financing products with record first quarter originations of $150 million, up 30% year-over-year.

Speaker Change: The robust volume of applications led to originations in the quarter of 677 million.

Speaker Change: Organic loan growth for the first quarter was 119 billion above the company's forecast range of between 160 million 185 million.

Speaker Change: At quarter end, our loan portfolio finished at $4 79 billion up 24% from the prior year.

Speaker Change: Unsecured lending continues to be the largest part of category at 62% upload originations and within our direct to consumer channel. The average loan portfolio across our broad network rose to a new high 7.2 billion Pep Raj switched to <unk>.

Speaker Change: We continue to make progress in scaling our automotive financing products with record first quarter originations of 150 million up 30% year over year.

David Ingram: This quarter, we grew our dealer network to over 4,000 dealers and continue to experience an increase in funding volume from multi-location dealer groups. During the quarter, home equity lending volumes were also up 29% year-over-year, with consistent and conservative LTV ratios at approximately 65% inclusive of our low. This second mortgage product, secured by Residential Real Estate, is primarily used for debt consolidation and major home repairs, and is one of our best before we products with the lowest credit rate. The overall weighted average interest rate charged to our customers during the first quarter was 28.4%, down from 30% at the end of the first quarter last year.

Speaker Change: This quarter, we grew our dealer networks with a 4000 dealers and continue to experience an increase in funded volume for multi location dealer groups.

Speaker Change: During the quarter home equity lending volumes are also up 29% year over year with consistent and conservative LTV ratios at approximately 65% inclusive inclusive about load.

Speaker Change: The second mortgage product secured by residential real estate.

Speaker Change: I'm married to use for debt consolidation of major home repairs and it's one of our best before with products with the lowest credit risk.

Speaker Change: The overall weighted average interest rate charged to customers. During the first quarter was 28, 4% down from 30% at the end of the first quarter last year.

David Ingram: Combined with ancillary revenue sources, the total portfolio yield finished at 31.3%. The portfolio yield decline year-over-year was due to growth of secured low products which carry lower rates of interest, targeted credit, and underwriting enhancements to reduce risk and implementation of the new interest rate cap. While the total yield in the quarter is at the lower end of our forecasted range, we're addressing this through the opportunity in product pricing and collections optimization efforts. When we estimated total yield in the new interest rate cap environment, it was based on a combination of pricing on originations, how much we could increase pricing below the rate cap, and the runoff of our Lexi portfolio above 35 percent.

Speaker Change: Bind with ancillary revenue sources, the total portfolio yield finished at 31, 3%.

Speaker Change: The portfolio yield declined year over year was due to growth of secured LOE products, which carried lower rates of interest toxic credit underwrites and enhancements to reduce risk and implementation of the new interest rate cap.

Speaker Change: While the total yield in the quarter was at the low rated about forecast at range. We are addressing this through the opportunity and product pricing and collections optimization efforts.

Speaker Change: We estimate the total yield and the interest new interest rate cap at bar, but it was based on a combination of pricing on originations how much we can increase pricing below the rate cap and the run off of that legacy portfolio about 35%.

David Ingram: We are fine-tuning those assumptions and do not expect any long-term structural difference in what we have guided, but rather some movement during the quarters. Total revenue in the quarter was $392 million, up 10% over the same period in 2024. We continue to be pleased with the quality of our loan originations and credit performance of the overall portfolio. The dollar-weighted average credit score of our first quarter loan originations was 632, the highest in the company's history, highlighting the benefits of our credit adjustments and improving product quality. First quarter was also the 13th consecutive quarter where the dollar weighted average credit score of our rich nations was greater than 600.

Speaker Change: We are fine tuning those assumptions do not expect any long term structural difference, what we had guided but rather some movement during the quarters.

Speaker Change: Total revenue in the quarter was 392 billion up 10% over the same periods in 'twenty 'twenty four.

Speaker Change: We continue to be pleased with the quality of our loan originations and credit performance of the overall portfolio.

Speaker Change: The dollar weighted average credit score of that first quarter loan originations were 632, the highest in the company's history, highlighting the benefits about credit adjustments and improving product mix.

Speaker Change: First quarter was also the 13th consecutive quarter with a dollar weighted average credit score of our originations was great. So there's 600 secured loans now also represent a record 46% of our loan portfolio.

David Ingram: Secured loans now also represent a record 46% of our loan portfolio. Despite the weakening economic environment and higher delinquency in the portfolio relative to last year, our credit losses have remained broadly stable as a result of proactive credit tightening and the higher proportion of our portfolio secured by hard collateral. As our customers adapt to managing their finances within this new reality of economic uncertainty and stress, we remain focused on supporting them while balancing the need to manage risk and ensure timely repayment of our loan principal. The annualised net charge-off range in the first quarter was 8.9%, within our forecasted range of between 8.75% and 9.75% for the quarter.

Speaker Change: Despite the weakening economic environment higher delinquency in the portfolio relative to last year, our credit losses have remained broadly stable as a result of proactive credit tightening and the high proportion about portfolio secured by hard collateral.

Speaker Change: As our customers adapt to managing their finances within this new reality of the economic uncertainty and stress. We remained focus on supports the while balancing the need to manage risk in a short time, he repayment of our loan principal.

Speaker Change: The annualized net charge off rate in the first quarter was eight 9%, but they'd have forecasted range of between $8 75, and 97, 5% for the quarter.

David Ingram: To account for weaker economic performance, higher year-on-year delinquency and unfavorable movement in the modeling of forward-looking macroeconomic data obtained from Moody's analytics, our loan loss provision rate increased from 7.61% in the prior quarter to 7.86%, which had the impact of reducing earnings by approximately $0.52 per share in the quarter. We continue to remain vigilant in our monitoring of the level of credit risk in the portfolio against the backdrop of a weakening economy and its impact on collection and recovery efforts. We continue to experience the benefits of scale through operating leverage and productivity improvement. During the first quarter, our efficiency ratio, specifically operating expenses as a percentage of revenue, improved to 26.1%, a reduction of 130 basis points from 27.4% in the first quarter of the prior year.

Speaker Change: To account for weaker it cannot economic performance high year on year delinquency and unfavorable movements in the bottle in the forward looking macroeconomic data obtained from Moody's analytics.

Speaker Change: Alone loss provision rate increased from 7.61% in the prior quarter to 7.86%, which had the impact of produce and earnings by approximately 52 cents per share in the quarter.

Speaker Change: We continue to remain vigilant and are monitoring the level of credit risk of the portfolio against the backdrop of a weakened weakening of the economy and its impact till collection and recovery efforts.

Speaker Change: We continued to experience the benefits of scale through operating leverage and productivity improvements.

Speaker Change: The first quarter, our efficiency ratio, specifically operating expenses as a percentage of revenue improved to 26, 1% a reduction of 130 basis points from 27, 4% in the first quarter of the prior year.

David Ingram: As a function of receivables, operating expenses were 8.7% versus 10.4% during the prior year, reducing margin to absorb reduced APRs. We believe that we can concurrently continue to invest in critical components of our business platform and culture while also driving operating efficiencies to the future. After adjusting for unusual items and non-recurring expenses, we reported the adjusted operating income of $148 million, an increase of 3% compared to $144 million in the first quarter of 2024. Adjusted operating margin for the first quarter was 37.9%, down from 40.2% in the same period in 2024. Adjusted net income for the quarter was $60 million, down 9% from $66.3 million in the same period of 2024, primarily due to the decline in total yield on the consumer loans, as well as the increase in allowance for future credit losses as a result of weaker macroeconomic performance and unfavorable changes in forward-looking macroeconomic indicators.

Speaker Change: As a function of receivables operating expenses were eight 7% versus 10, 4% during the prior year, but juicy margin to absorb reduced apr's.

Speaker Change: We believe the weekend concurrently continue to invest in critical components of our business platform and culture, while also driving operating efficiencies to the future.

Speaker Change: After adjusting for unusual items and nonrecurring expenses, we reported adjusted operating income was 148 billion, an increase of 3% compared to 144 minutes in the first quarter of 'twenty 'twenty four.

Speaker Change: Adjusted operating margin for the first quarter with 37, 9% down from 42% in the same period towards 'twenty pool.

Speaker Change: Adjusted net income for the quarter was $60 million down 9% from $66 3 million in the same period up towards 24, primarily due to the declining total yield on the consumer loans as well as the increase in the allowance for future credit losses, as a result of weak macroeconomic performance and favorable changes the forward look.

Speaker Change: In macroeconomic indicators.

David Ingram: Adjusted diluted earnings per share was $3.53, down 8% from $3.83 in the first quarter of 2024, while adjusted return on equity in the quarter was 20.4%.

Speaker Change: Adjusted diluted earnings per share was $3 53 down eight seven for $3.83 in the first quarter twice you towards your ball, while adjusted with total equity in the quarter was 24%.

Hal Khouri: With that, I'll now pass over to Hal to discuss our balance sheet and capital position before providing some comments on our outlook. Thanks, David. During the first quarter, we continue to build on our long track record of obtaining capital to support our growth plan. Subsequent to the quarter, we took advantage of favorable capital market conditions and issued 400 million U.S. dollars seniors unsecured notes due in 2030. In connection with the offering, we concurrently entered into a cross-currency swap agreement which served to reduce the Canadian dollar equivalent cost of borrowing on the notes to 6.03% per annum.

Speaker Change: With that I'll now pass over to Howard to discuss our balance sheet and capital position before providing some comments on our outlook. Thanks, David during the first quarter. We continued to build on our long track record of obtaining capital to support our growth plans.

Howard: Subsequent to the quarter, we took advantage of favorable capital market conditions and issued $400 million seniors unsecured notes due in 2030.

Howard: In connection with the offering we concurrently entered into a cross currency swap agreement, which served to reduce the Canadian dollar equivalent cost of borrowing on the notes to 6.0% to 3% per annum.

Hal Khouri: Based on the cash on hand at the end of the quarter and the borrowing capacity under our existing revolving credit facilities, we have approximately $2 billion in total funding capacity. At quarter end, our weighted average cost of borrowing was 6.8% and the fully drawn weighted average cost of borrowing was 6.3%. We also continue to remain confident that the capacity available under our existing funding facilities and our ability to raise additional debt financing is sufficient to fund our organic growth forecast. The business also continues to produce a growing level of free cash flow. Pre-cash flow from operations before the net growth in the consumer loan portfolio for the trailing 12 months was $436 million.

Howard: Based on the cash on hand at the end of the quarter and the borrowing capacity under our existing revolving credit facilities, we have approximately $2 billion in total funding capacity.

Howard: At quarter end, our weighted average cost of borrowing of six 8% and fully drawn weighted average cost of borrowing was six 3% we.

Howard: We also continue to remain confident but the capacity available under our existing funding facilities and our ability to raise additional debt financing is sufficient to fund our organic growth forecast.

Howard: The business also continues to produce a growing level of free cash flow pre.

Howard: Free cash flow from operations before the net growth in the consumer loan portfolio for the trailing 12 months was $436 million.

Hal Khouri: As a result, we estimate we could currently grow the consumer loan book by approximately $300 million per year solely from internal cash flows without utilizing external debt, while also maintaining a healthy level of annual investment in the business and maintaining the dividends. Once our existing and available sources of debt are fully utilized, we could also continue to grow the loan portfolio by approximately $500 million per year solely from internal cash flow. During the quarter, we also leveraged our current liquidity position to take advantage of opportunistic share repurchases and purchased for cancellation approximately $71 million worth of our shares.

Howard: As a result, we estimate we can currently grow the consumer loan book by approximately $300 million career solely from internal cash flows without utilizing external debt, while also maintaining a healthy level of annual investment in the business and maintaining the dividend.

Howard: Once our existing and available sources of debt our fully utilized we could also continue to grow the loan portfolio by approximately $500 million per year solely from internal cash flows.

Howard: During the quarter, we also leveraged our current liquidity position to take advantage of opportunistic share repurchases at purchase for cancellation approximately $71 million worth of our shares subsequent to the quarter. We have continued to be opportunistic in repurchasing an additional $25 million worth of our shares.

Hal Khouri: Subsequent to the quarter, we have continued to be opportunistic and repurchased an additional $25 million worth of our shares.

Hal Khouri: Based on the current earnings and cash flows and the confidence in our continued growth and access to capital going forward, the Board of Directors has approved a quarterly dividend of $1.46 per share, payable on July 11, 2025, to the holders of common shares of record as of the close of business on June 27, 2025.

Howard: Based on the current earnings in cash flows and the confidence in our continued growth and access to capital going forward. The board of directors has approved a quarterly dividend of $1 46 per share payable on July 11, 2025 to holders of common shares of record as of the close of business on June 27th 2025.

David Ingram: I'll now pass it back over to David.

David Ingram: I'll now pass it back over to David.

David Ingram: Thank you, Hal.

David Ingram: Thank you Hal are turning to the upcoming quarter, we continue to take a conservative and prudent approach to manage credit yet.

David Ingram: Turning to the upcoming quarter, we continue to take a conservative and prudent approach to manage credit. Yet we also continue to experience healthy demand and limited competitive tension, allowing us to grow at an attractive rate while being selective about the loans we underwrite. Despite the macroeconomic conditions, we remain confident in our ability to thrive during this period.

David Ingram: We also continued to experience healthy demand.

David Ingram: Witted competitive tension allowed us to grow at attractive rates, while being selective about the loans we underwrite.

David Ingram: Despite the macroeconomic conditions, we remain confident in our ability to thrive during this period.

David Ingram: As we have proven during cycles before, our business model and our customers are highly resilient and we have a team that's very experienced of navigating through adverse In the second quarter, we expect the loan portfolio to grow between $275 and $300 million. while the total yield generated on the Consumer Loan Portfolio to be between 31% and 32%. We expect credit losses to travel within the range of 8.75% and 9.75% in the quarter and acknowledge that the speed with which the tariff and broader economic situation is evolving could lead to a higher degree of oscillation within the range as compared to the previous quarter.

David Ingram: We have proven during cycles before our business model and that coupled with a highly resilient and we have a team that's very experienced navigating through adversity.

David Ingram: In the second quarter, we expect the loan portfolio to grow between 275 $300 million.

David Ingram: While the total youll generate so the consumer loan portfolio to be between 31% 32%.

David Ingram: We expect credit losses to travel within the range of 875%, 975% in the quarter and I acknowledge that the speed with which the tariff of broader economic situation is evolving could lead to a higher degree of oscillation within the range as compared to the previous quarter.

David Ingram: During the quarter, we announced the appointment of Dan Rees as the company's new chief executive officer. Dan is the first external CEO to lead our organization in 25 years, and his appointment is an exciting milestone and signal of goeasy's ambition. He brings a depth of experience in financial services that was unmatched by any other candidate, and he is exceptionally positioned to lead our business through its next stage of growth. His entrepreneurial approach aligns well with our culture, and his addition strengthens the executive team with their journey to expand our existing products and channels of distribution to become the largest and best performing non-prime lender in Canada and beyond.

Speaker Change: During the quarter, we announced the appointment of Dan Rees as the company's new Chief Executive Officer that is the best external CEO to lead our organization in 25 years and his appointment is an exciting milestone as signal will go easy ambition.

Speaker Change: He brings a depth of experience in financial services that was unmatched by any other candidate and he is exceptionally positioned to lead our business through its next stage of growth.

Speaker Change: His entrepreneurial approach aligns well with our culture and his addition strengthens the executive table that journey to expand our existing products and channels of distribution to become the largest.

Speaker Change: First before we know probably late day in Canada and beyond.

Dan Rees: I'll now pass over to Dan to provide some remarks. Thank you, David. And good morning, everyone.

Dan Rees: I'll pass over to Dan to provide some remarks.

Dan Rees: Thank you David and good morning, everyone I'm very excited and honored to join and lead the go easy team.

Dan Rees: I'm very excited and honored to join and lead the GO-EASY It has been excellent to see the business model up close, and I'm very pleased with what I have seen and learned. The board and David have crafted a comprehensive onboarding program and the CEO transition is very much on track. We have an impressive senior leadership team and culture more broadly, one I would describe as welcoming and positive, growth oriented and yet balanced, and above all else, very experienced and successful. Turning to the business, the organic growth plan is well on track. and in my opinion continues to offer attractive yields to shareholders.

Dan Rees: It has been excellent to see the business model up close and I'm very pleased with what I've seen and learned.

Dan Rees: The board and David have crafted a comprehensive onboarding program and the CEO transition is very much on track.

Dan Rees: We have an impressive senior leadership team and culture more broadly what I would describe as welcoming and positive growth oriented and yet balanced and above all else very experienced and successful.

Dan Rees: Turning to the business the organic growth plan is well on track.

Dan Rees: And in my opinion continues to offer attractive yields to shareholders.

Dan Rees: We are expanding the product range, engaging the broader set of distribution channels, and moving well at advancing the digital assets alongside the stores. The plan to launch a credit card later this year is progressing very well, and broadly, the ongoing investments in collections will, as you can imagine, continue to be critical in this business model. Strategically, I see the direction where we are heading as very well placed. As David and me transition the role, I will now start the process of engaging the teams over the coming months to review opportunities. Do not expect any major pronouncements.

Dan Rees: We are expanding the product range engaging the broader set of distribution channels, and moving well and advancing the digital assets alongside the stores and branches.

Plan to launch a credit card later this year is progressing very well and broadly the ongoing investments in collections will as you can imagine continued to be critical in this business model.

Speaker Change: Strategically I see the direction, where we are heading is very well placed as David and me transition the role I will now start the process of engaging the teams over the coming months.

Dan Rees: View opportunities do.

Dan Rees: Do not expect any major pronouncements, what has been working well.

Dan Rees: What has been working well has been working well for a reason. That said, I do look forward to elevating the conversation about the customers. our target market, priority segments, full lifetime value, and so forth, as well as the competition. Who exactly are we competing against? Why might they be winning? And why might they be losing? As you would expect, we are constantly evaluating our risk posture and allocation of capital. Overall, I'm excited about working with David, the team more broadly, and the very supportive board. We will be unified in our focus on fueling the robust growth and attractive returns that has rewarded shareholders over the long term.

Dan Rees: It's been working well for a reason and.

Dan Rees: That said I do look forward to elevating the conversation about the customer our target market priority segments full lifetime value and so forth.

Dan Rees: As well as the competition.

Speaker Change: Exactly are we competing against what might they be winning and why might they be losing as.

Dan Rees: As you would expect we are constantly evaluating our risk posture and allocation of capital.

Dan Rees: Overall, I'm excited about working with David and the team more broadly and a very supportive board, we will be unified in our focus on fueling the robust growth and attractive returns that has rewarded shareholders over the long term.

David Ingram: With that, I will now pass it back to David. Great. Thank you, Dan.

Dan Rees: With that I will now pass it back to David Great. Thank you Dan.

David Ingram: So, in closing, I want to thank the entire team for their unwavering commitment to our vision. In April, we were thrilled to hold our company national conference, providing us the opportunity to celebrate, recognize all of the incredible talent across our organization. The more than 2,600 team members across goeasy are smart, they're hungry, and they're humble. They care deeply about providing an exceptional experience for our customers. They play an essential role in the financial system by serving the millions of hardworking Canadians that rely on us for the credit that fuels their lives. I'm very proud of this entire team.

Dan Rees: As you know, what's the type of the entire team for their unwavering commitment to our vision.

Dan Rees: April we were thrilled to hold our company Nashville conference, providing us the opportunity to celebrate recognize all of the incredible talent across our organization.

Dan Rees: The more than 2600 team members across go easy on small hungry and humble they care deeply about providing an exceptional experience for our customers. They play an essential role in the financial system by Saturday the millions of pod working Canadians that rely on us with a credit appears that lives I'm very.

Dan Rees: Proud of this entire team.

Farhan Ali Khan: Now with those comments complete, we'll now open the call for questions. Thank you.

Speaker Change: Now with those comments complete we'll now open the call for questions.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your Touchtone phone you will hear a problem that your hand hasn't been raised should you wish to decline from the polling process. Please press star.

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two.

Speaker Change: Number two.

Operator: If you are using a speakerphone, please lift the handset before pressing any.

Speaker Change: Using a speaker phone please lift the handset before pressing any keys.

Etienne Ricard: Your first question comes from Etienne Ricard of BMO Capital Markets.

Speaker Change: Your first question comes from eating in regard of BMO capital markets. Please go ahead.

Jason Appel: Please go ahead. Thank you and good morning team. So to start on impaired loans, it's good to see the improvements sequentially down to 6.9%. What explains this improvement in your view? Is it the result of tighter collection policies that you've implemented over the past year? Or is it also the result of your borrower base holding up quite well in this environment?

Speaker Change: Thank you and good morning team so to start on the impaired loans, it's good to see the improvements are sequentially.

Speaker Change: Down to 269%.

Speaker Change: What what explains this improvement in your view is it the result of tighter collection policies that you've implemented over the past year.

Speaker Change: Or is it also the result of your borrower base holding up quite well in this environment.

Jason Appel: Good morning, Etienne. It's Jason Appel here. I'll take that. It's really both factors. We've highlighted, and David highlighted in the script, if you look at our early stage delinquency, we continue to see moderating improvement, and that's largely a function of the fact that we are writing a better quality customer, going principally to the fact that the product mix of secured lending has now reached an all-time high. You'll recall that's sitting at about 46% of the book and represents a fairly significant portion of new originations that we're writing, and on top of that, I think the organization continues to optimize its ability to collect from the accounts that do sit in the delinquency ranges, so you could chalk that up to better experience in understanding the nuances of this customer base, particularly those that hold secured collateral.

Speaker Change: What are you trying to stay as an IPO here I'll take that it's really both factors, we've highlighted and David highlighted in the script.

Speaker Change: If you look at our early stage delinquency, we continued to see a moderating improvement and that's largely a function of the fact that we are writing a better quality customer owing principally the fact that the product mix of secured lending has that reached an all time high.

Speaker Change: You'll recall that sitting at about 46% of the book and I represent a fairly significant portion of new originations that were writing.

Speaker Change: And on top of that I think the organization continues to optimize its ability to collect from the accounts that do sit in the delinquency ranges. So you can do you can chalk that up to a better experience and understanding the nuances of this customer base, particularly those that hold secured collateral where we're mindful of the opportunity to work with them before we have to have the need to secure a R sees that collateral.

Jason Appel: We're mindful of the opportunity to work with them before we have to have the need to secure or seize that collateral, but it's a combination of both efforts.

Speaker Change:

Speaker Change: But it's a combination of both efforts it is better overall underwriting performance at the front end of our business and continued optimization of collections at the backend.

Jason Appel: It is better overall underwriting performance at the front end of our business and continued optimization of collections at the back. Okay, it's interesting to see that 73% The Net Loan advances this quarter. or to new customers despite, to your point, Jason, that you've been tightening the underwriting policy. So how would you describe the competitive environment relative to? maybe 6 or 12 months ago, and have you seen any evidence that prime lenders have been tightening?

Speaker Change: Okay.

Speaker Change: Okay, It's it's interesting to see that 73%.

Speaker Change: The net loan advances this quarter.

Speaker Change: Where can your customers despite to your point, Jason that you've been tightening the underwriting policies.

Speaker Change: So how how would you describe the competitive environment relative to.

Speaker Change: Maybe six or 12 months ago and have you seen any evidence that prime lenders have been tightening.

Jason Appel: Let me answer that in two ways. I would say, certainly based on the incoming volume of applications we're seeing, and we've seen this before in prior events, as an example, in Alberta in 2015 when the oil crash happened. We generally see a tightening that does take place in the major financial institutions, including the banks, and as you would expect, we would be a net beneficiary of that impact. But if you look at the quality of the originations that were written in the quarter that you commented upon, keep in mind that, as I think we had indicated in the prior quarter, in anticipation of the introduction of the APR rate cap, we had made adjustments to focus on the ability through which we can improve the qualified loan amounts that we give to our better quality customers.

Speaker Change: Let me answer that in two ways I would say certainly based on the incoming volume of applications, we're saying and we've seen this before in prior events as an example in Alberta and 2015, when the oil cross shopping we generally see a tightening that does take place in the major financial institutions, including the banks.

Speaker Change: As you would expect we would be a net beneficiary of that impact, but if you looked at the quality of the the originations that were written in the quarter that you've commented upon I mean keep in mind that as we I think we had indicated in the prior quarter in anticipation of the introduction of the APR rate cap, we had made adjustments to focus on the.

Speaker Change: I believe that through which we can approve the qualified loan amounts that we give to our better quality customers.

Jason Appel: And what we saw in the quarter in Q1 was that our conversion of those customers actually increased, meaning that by offering those customers slightly more funds at a lower interest rate, that being the 35% interest rate cap that was introduced, we saw a tick up in the number of new customers that were now interested in taking advantage of the product offer, in particular on the unsecured side of it. So those those factors are what contributed to the numbers that. But I would I would point out again that the influx of individuals from better credit quality segments is something that is pretty typical of these types of events.

Speaker Change: And what we saw in the quarter in Q1 was that our conversion of those customers actually increased meaning that by offering those customers slightly more funds at a lower interest rate that being the 35% interest rate cap that was introduced we saw a tick up in the number of new customers that we're not interested in taking advantage of the product offer in particular on the unsecured.

Speaker Change: Side of our business. So those those factors are what contributed to the numbers that you see.

Speaker Change: I would point out again that the influx of individuals' from better credit quality segments is something that is pretty typical of these types of events.

Jason Appel: But that is not the only reason it's also because of the adjustments we made to the offers we had out in the market, which simply translated into more better quality customers converting on the offers we had.

Speaker Change: That is not the only reason it's also because of the adjustments. We've made to the offers we have out in the market, which simply translated into more better quality customers converting on the offers we had them.

Jason Appel: One more piece I would add in the quarter is we should all keep in mind that this new rate cap environment is still new to us as well, as it is to everyone else. So one of the highlights in the quarter that will lead to some moderation during the next few quarters is we only funded 12.3% of applications versus a run rate or a normalized rate from last year of 15.4%. So when you see the credit quality go up, it really speaks to Jason's point that there may be a prime that's coming down and being rejected by the banks.

Speaker Change: One more one more piece I would add in the quarter as we should all keep in mind that this new rate cap environment is still new to us as well as it is to everyone else or one of the highlights of the quota that will lead to some moderation during the next few quarters as we only fund at 12, 3% of applications versus a run.

Speaker Change: Rate or a normalized rate from last year, a 54%. So when you see the credit quality go up it really speaks to Jason's point that there may be a prime that's coming down and being rejected by the banks, we've seen a high credit type of customer coming through but we're also being much more discrete with.

David Ingram: We're seeing a high credit type of customer coming through. We're also being much more discreet with who comes into the system because of this new rate cap environment. So as it's taken us many, many years to get the portfolio close to $5 billion, it's likely going to take us a few more quarters to just really optimize what a new rate cap environment looks like at 35% or below. So these are good indicators of the health. It just means that we may be missing some opportunity for more originations because we have been more discreet as we try to carefully navigate this change.

Speaker Change: Who comes into the system because of this new brake cap environment. So as it's taken us many many years to get the portfolio close to 5 billion is likely going to take us a few more quarters to just really optimize what a new rate captain Bartlett looks like a 35% of the load. So these are good indicators of the hedge.

Speaker Change: It just means that we may be missing some opportunity, but more originations because we have been more discreet as we try to carefully navigate this change.

Etienne Ricard: Great, thank you very much.

Speaker Change: Great. Thank you very much.

Speaker Change: Yeah.

Jeff Fenwick: Your next question comes from Jeff Fenwick of Kormark Securities. Please go ahead. Hi, good morning everyone.

Speaker Change: Your next question comes from Jeff Fan week of Corn Mark Securities. Please go ahead.

Jeff Fan: Hi, Good morning, everyone I wanted to start my questions off with respect to the securitization facilities and as you articulated you have a lot of capacity now after your last notes issue, but on on those facilities in particular did.

Hal Khouri: I'm going to start my questions off. with respect to the securitization facilities. lot of capacity now after your last But on those facilities in particular, could you maybe just... Is there the potential for some variability in terms of what would be acceptable? shift in the credit profile, or the mix somehow, does that...

Speaker Change: Could you maybe just speak to.

Speaker Change: Some of the terms around around them with respect to lenders and is there the potential for some variability in terms of what would be acceptable to put into those facilities.

Speaker Change: If there's a shift in the credit profile or the mix somehow does that.

Speaker Change: Change what you can put into them or is there anything there that's the variable that we should be keeping in mind.

Hal Khouri: Yeah, hey, Jeff, it's Hal here. So, as you know, we currently have two securitization warehouse facilities, one that houses our auto portfolio and another one for our general loans that are under management. As you can imagine, there are covenants and requirements associated with those securitization portfolios as per the normal course. That would include eligibility, reinvestment criteria, and advanced rates and certain requirements in terms of portfolio based requirements, whether that's average term, concentration, et cetera. We certainly examine our securitization facilities regularly to determine if there are opportunities or constraints vis-a-vis the subset of credit performance and quality, excess spread, and the like.

Speaker Change: Yeah, Hey, Jeff It's Hal here. So as you know we are we currently have two securitization warehouse facilities.

Speaker Change: One that houses our auto portfolio and another one for our general.

Speaker Change: General loans that are under management.

Speaker Change: You can imagine.

Speaker Change: There are.

Speaker Change: Covenants and requirements associated with the securitization portfolios is as per the normal course.

Speaker Change: That would include eligibility reinvestment criteria.

Speaker Change: And advance rates.

Speaker Change: And certain requirements in terms of a.

Speaker Change: Portfolio portfolio base requirements, whether or not the average time, a concentration et cetera.

Speaker Change: We certainly examine.

Speaker Change: You know our securitization facilities are regularly.

Speaker Change: To determine if there are opportunities or constraints. These avi.

Speaker Change: Uh huh.

Speaker Change: Okay.

Speaker Change: Subset of credit performance and quality XL.

Speaker Change: Excess spread.

Hal Khouri: We feel that we've actually had quite a successful run at continuing to improve conditions surrounding those facilities and would expect that to continue going forward as well. In addition, I'd also say we counterbalance that, as you know, with the ability to enter into the unsecured notes market as we have. We took advantage of that subsequent to quarter end and we're opportunistic around raising roughly another 550 million Canadian at about 6%, and we feel that we have ample access, capacity, liquidity runway, great syndicate of bank lenders, and we think we're in fantastic shape as it relates to the balance sheet overall.

Speaker Change: And the like we feel that we've we've actually had quite a successful run and continue to improve.

Speaker Change: Conditions surrounding those facilities and would expect that to continue going forward as well.

Speaker Change: In addition, I'd also say, we counterbalance that as you know.

Speaker Change: With the with the ability to enter into the unsecured notes market as we have now.

Speaker Change: We took advantage of that subsequent to quarter end.

Speaker Change: We are opportunistic around raising roughly another 550 million Canadian.

Speaker Change: At about 6%.

Speaker Change: We feel that we have ample access capacity liquidity runway, great syndicate of bank lenders and.

Speaker Change: And we think we're in fantastic shape as it relates to the balance sheet overall.

Hal Khouri: and with respect to facility one. that a bit early, obviously you'd probably want to get that settled. Yeah, absolutely. And we're already in the throes of of negotiating with our bank partners don't see any issues and getting that renewed. And we'll be looking to do our best at enhancing some of the terms associated with that as well as as And then on Facility 2, I know it's targeted more at the auto loans, the balance... will obviously be very active. That's correct. Yeah. So, as we naturally do, we pool that set of receivables and loans and move them into the warehouse.

Speaker Change: And what's effective facility one I think it matures in October of this year. So just any any thoughts about can you do that it's a bit early obviously you'd probably want to get that settled ahead of that time, but any expectations there.

Speaker Change: Yeah, absolutely and we're already in the throes of.

Speaker Change: Of negotiating with our bank partners don't see any issues in getting that renewed.

Speaker Change: And we will be looking to do our best that enhancing some of the terms associated with that as well as all of us.

Speaker Change: Okay, and then on facility to I know, it's targeted more at the auto loans are the balance there didn't.

Speaker Change: It didn't move quarter over quarter are.

Speaker Change: Still obviously, a very active source of originations for you is this is this just a timing issue that you were carrying them on the revolver before you put them into that facility.

Speaker Change: That's correct yeah. So as we naturally do we pool that set of receivables and loans.

Speaker Change: Move them into the warehouse.

Hal Khouri: We naturally would have as part of our overall growth, we are continuing to grow our auto vertical quite aggressively. And because of the raising of the high yield notes, subsequent to quarter end, we would likely be paying down some of our facilities as well. So, you'll see that little bit of a timing blip in terms of paying down some of our securitization facilities as we raised the high yield, the high yield. for that color.

Speaker Change: We are we naturally it would have it as part of our overall growth.

Speaker Change: We are continuing to grow our auto vertical quite quite aggressively.

Speaker Change: And because of the raising of the high yield notes subsequent to quarter end.

Speaker Change: We would likely be paying down some of our facilities as well so you'll see that a little bit of a timing blip in terms of paying down some of our securitization facilities as we raised the high yield the high yield funds.

Speaker Change: Okay, great. Thanks for that color I'll requeue.

John Aiken: Your next question comes from John Aiken of Jefferies, please go ahead. Good morning, wanted to focus on the yield from the quarter. David, in your prepared comments, you talked about, obviously, some movement that might come back and forth in terms of the quarters. And I know that you're still guiding for yield of at least 31% in the quarter. But I guess my first question is, what is the risk with the changing movements that we've seen within the portfolio that we could actually dip below 31%? And then can you give us some specific instances or examples in terms of what may actually cause the yield to increase through risk?

Speaker Change: Your next question comes from John I can of Jefferies. Please go ahead.

John: Good morning wanted to focus.

John: Focus on the yield for the quarter David in your prepared comments you talked about obviously some movement that might come back and forth in terms of the quarters and I know that you are still guiding for yield or at least a 31% in the quarter.

I guess my first question is what is the risk with the changing of movements that we see within the portfolio that we could actually drift below 31% and then can you give us. Some specific instances are examples in terms of what actually caused the yield to increase through the rest of the year.

John: Okay.

David Ingram: Sorry, I'm going to give Jason the pen on this one, because I think he'll give you a more tangible response in terms of the breakdown. So in terms of some, I'll give you some quick color, and then Jason can be more specific than I can. From our perspective, the risk, I think you asked what the risk could be that it could dip below 31. I think the risk is less likely, and if we break the yield into two parts, which is the coupon, the price at which we write the yield, and then the actual yield, which is what we actually collect from the yield.

Speaker Change: Sorry, I'm going to I'm going to give a J. So the pedal. This one because I think he'll give you a more tangible response in terms of the breakdown. So in terms of some I'll give you. Some quick color and then Jason can be more specific but I can.

Speaker Change: From our perspective, the the risk I think you asked what the risk could be that it could dip below 31, I think the risk is less likely as if we break it into two parts, which is the coupons the price at which we write field and then the actual yield which is what we actually collect from the yields on the coupon side.

David Ingram: So on the coupon side, I think the risk is very much less there, because we obviously control what that would be. And from our first kind of quarter view of life, we can see some opportunity to actually lift in certain categories, small amounts in the yield in the coupon.

Speaker Change: I think that the risk is very.

Speaker Change: Very much less than that because we obviously control what that would be and from our first quarter view of life. We can see some opportunity to actually lift in certain categories small amounts in the yields in the coupons. So.

David Ingram: So. That from our lens based on the competitive set that we're in based on the application demand Which has been very strong and it's continued to lift into into April and May So we don't see any resistance or reasons why we can't put some of the coupon up in some of the different verticals And so we'll be doing that over the next few months in a measured way on the actual collected side Obviously the collective side is has got all kinds of different Pieces that could give headwinds So some of it could be the economic environment where customers are finding it more challenging to to make timings payments on a timely basis and That's probably more pronounced in certain verticals than others.

Speaker Change: That from Atlanta based on the competitive set that we're in based on the application demand, which is being very strong as it has continued to lift into a into April and may. So we don't see any resistance or reasons why we cant put some of the coupon up in some of the different verticals and so we'll be doing that over.

Speaker Change: The next few months in a measured way well natural collected side, obviously the collector side is it's got all kinds of different.

Speaker Change: Pieces that could give headwinds so somebody could be the economic environment, where customers are finding it more challenging to to make time is payments on a timely basis.

Speaker Change: And that's probably more pronounced in sudden third schools than others. So we are susceptible to that.

Jason Appel: So we are susceptible to that At this point, we don't see that being a huge risk But it does carry some risk and obviously the tariffs do play some part in in how that works its way through So that's a general picture and I think we're comfortable at the 31% range long term We are looking for ways to try to edge that up But I'll pass it over to Jason.

Speaker Change: At this point, we don't see that being a huge risk, but it does carry some risk I don't see the terrorists student placement part and how that works its way through so that's a general picture and I'd say, we're comfortable with the 31% range long term. We we are looking for ways to try to edge that up.

Speaker Change: But I'll pass it over to Jason who will give you a bit more descriptive in the actuals, yeah, maybe just to bolt that into sort of three broad categories or ways in which we could approach.

Jason Appel: He'll give you a bit more descriptive than the actuals Yeah, maybe just to bolt that into sort of three broad categories or ways in which we approach Improving the yield gradually over time David already spoke to the first one which is just selectively taking pricing on new Originations where we believe the competitive environment would support it We do see some opportunities to do that And as I think I pointed out on previous calls that is part of our part and parcel of how we optimize the yield on the portfolio the second area would be Continued evolution and how we use both our tool set and offer set to optimize the collection of cash from both secured and unsecured accounts we've been evolving our capability in that area over the last several quarters by building much more robust models to target and identify the right customer who has a higher likelihood of repayment under the right Circumstances we continue to refine that capability and testing and learning against that and then the third broader area would be just continued work around modifying how we go to market on our products and In particularly the mix of the types of types of products we write if you take just a simple example of our unsecured loan We continue to Test and move up our coupon rates on that program By focusing as we had pointed out the outset of the call the proportion of new customers with whom we are originating The substantial majority of whom are priced at 35 at the cap So as a result of just those types of product mix modifications, we can influence the yield to move upward It obviously as you can appreciate just takes a few quarters to work through it its way through the portfolio Given the size of the installed book now approaches 5 billion so those would broadly be the three tool sets pricing on originations improve collectability of cash through collection tools and segmentation and modification of our product great color guys, thank you.

Jason: Proving the yield gradually over time, David already spoke to the first time, which is just selectively taking pricing on new originations, where we believe the competitive environment would support it we do see some opportunities to do that and as I think I pointed out on previous calls that as part of our part and parcel of how we optimize the yield on the portfolio of <unk>.

Jason: Second area would be continued evolution in how we use both our toolset and offer set to optimize the collection of cash from both secured and unsecured accounts.

Jason: We've been evolving our capability in that area over the last several quarters by building much more robust models to target and identify the right customer who has a higher likelihood of repayment under the right circumstances, we continue to refine that capability and testing and learning against that.

Jason: Then the third broader area would be just continued work around modifying how we go to market on our products and in particularly the mix of the types of types of products we write.

Jason: You take just the simple example of our unsecured loan we continue to test and move up our coupon rates on a program by focusing as we have pointed out the outside of the call. The proportion of new customers with whom we are originating the substantial majority of them are priced at 35 at the cap.

Jason: So as a result of just those types of product mix modifications, we can influence that yield to move upward. It obviously as you can appreciate it just takes a few quarters to work through it its way through the portfolio given the size of the installed book now approaching $5 billion. So those would probably be the three tool sets pricing on originations improved collectability of cash through collection tools.

Jason: Segmentation and modification of our product mix.

Speaker Change: Great color guys. Thank you.

Gary Ho: Your next question comes from Gary Ho of Desjardins Capital Markets. Please go ahead. Okay, great. Jason, maybe a couple of questions on the credit and the provision side. So, I asked this last quarter, just on the FLI weight on each of the scenarios, and I think last quarter, there was no material change made last quarter. So, with the 5 scenario worsening again from the Moody's analytics, just curious to hear whether the, yeah, the 25 base points increase in the provision came from the FLI forecast deteriorating, or were there shifts in the probability as well? Yeah, well, as you would appreciate, the ACL strengthening was primarily model driven and it basically reflects its deterioration in the third-party forward-looking indicators that we incorporate into the allowance alongside what I would call a slight weakening in the underlying credit of the portfolio, largely due to the persistency of late-stage delinquent accounts, which are mostly being impacted by a longer time frame for us to cover and collect our asset.

Your next question comes from Gary Ho of leisure team's capstone markets. Please go ahead.

Speaker Change: Okay, Great, Jason maybe a couple of questions on.

Speaker Change: The credit on the provision side. So I asked this last quarter I was just on the F. L. I wait on each of the scenarios.

Speaker Change: And I think last quarter. There was no material change made last quarter. So with the five scenario worsening again from the Moody's analytics.

Speaker Change: You'll see here whether that be on the 25 basis points increase in the provision came from the F. L I forecast deteriorating or where there are shifts in the probability of success as well.

Speaker Change: Yeah, well as you would appreciate the ACL strengthening was primarily model driven and it basically reflects the deterioration in the third party forward looking indicators are that we incorporate into the allowance.

Speaker Change: Long side, what I would call it a slight weakening in the underlying credit of the portfolio largely due to the persistency of late stage delinquent accounts, which are mostly being impacted by a longer timeframe for us to cover our recover and collect our asset.

Jason Appel: But as you would also know, against that backdrop, we continue to maintain a very conservative posture with a substantial majority of our model scenario weightings allocated to what we call the neutral and pessimistic scenarios, which are updated every month by Moody's Analytics. Now, within those scenarios themselves, quarter-on-quarter, and you can see this in the NDNA and financial statements disclosures this quarter, virtually every single FLI that we track to worsen quarter-over-quarter in response, as you would appreciate, to the impact and uncertainty that we see with U.S. imposed tariffs on select Canadian goods. Plus, you'll also note that in the quarter, we saw evidence of further weakening in the Canadian economy, with GDP having turned negative in February and core inflation having ticked up with the elimination of the GST holiday around the middle of the month.

Speaker Change: But as you would also know against that backdrop, we continue to maintain a very conservative posture with a substantial majority of our modeled scenario weightings allocated to what we call the neutral and pessimistic scenarios, which are updated every month by Moodys analytics now within those scenarios themselves quarter on quarter and you can see this in the MD&A and financial statements.

Speaker Change: Disclosures this corner virtually every single <unk> that we track to worsen quarter over quarter.

Speaker Change: In response as you would appreciate to the impact of uncertainty that we see with U S imposed tariffs on southern Canadian goods plus.

Speaker Change: Plus you'll also note that in the corner, we saw evidence of further weakening in the Canadian economy with GDP, having turned negative in February and core inflation, having ticked up with the elimination of the GSE holiday around the middle of the month.

Jason Appel: Now, we would continue to expect the volatility and the high degree of negativity associated with those forecasts to continue, but we do see them moderating over time, and I think what will ultimately drive that moderation is the degree to which we get clarity on the types of impacts the tariff situation will meter out, and whether or not we can enter into what I would call an enhanced bilateral trade agreement with the United States, though, as you would appreciate, the timing of this does remain a little fluid. We would, though, also expect the provision to gradually moderate in response to a reduction in the volume of late-stage delinquent accounts and, as well, the strong quality of the new originations that we've already spoken about what we are writing, which is leading to an overall reduction in our early-stage delinquent accounts.

Speaker Change: Yeah, we would continue to expect the volatility in the high degree of negativity associated with those forecast.

Speaker Change: To continue but we do see them moderating over time and I think what will ultimately drive that moderation is the degree to which we get clarity on the types of impacts of tariffs situational would meter out and whether or not we can enter into and what I would call. It enhanced bilateral trade agreement with the United States. So as you would appreciate the timing of this does remain a little fluid we went though.

Speaker Change: Also we expect our provision to gradually moderate.

Speaker Change: In response to a reduction in the volume of late stage delinquent accounts and as well on the strong quality of the new originations have you've already spoken about what we are writing which is leading to an overall reduction in our early stage delinquent accounts.

Jason Appel: In the interim, as you would expect, we continue to remain focused on our secured mix, being selected with the credit that we're underwriting, and continuing to optimize our collection efforts. So, quarter on quarter, I would say we do not see a material adjustment on our side in the weightings. They are still very much favored toward neutral and pessimistic, and we will likely continue to remain in that posture until we see evidence of the situation. Okay, great. Maybe just hold on, sorry, it's out here. Maybe just hold on. Of course.

Speaker Change: In the interim as you would expect we continue to remain focused on our secured mix.

Speaker Change: Being selective with the credit that we're underwriting and continuing to optimize our collection efforts so quarter on quarter I would say, we did not see a material adjustment on our side and the weightings. They are still very much favor towards neutral and pessimistic and will likely continue to remain in that posture until until we see evidence of a situation.

Speaker Change: Okay, Great and maybe just a bolt ons sorry, it's all here, maybe just to bolt on of course.

Gary Ho: As those macroeconomic indicators, if they were to shift in a positive direction, relative relative to the the FLIs that are currently in place, we would naturally look to reduce our overall Yeah, okay. Copy that.

Speaker Change: As those macroeconomic indicators, if they were to shift in a positive direction.

Speaker Change: Relative relative to the <unk> that are currently in place.

Speaker Change: We would.

Speaker Change: Naturally look to reduce our overall.

Speaker Change: But.

Speaker Change: Yeah, Okay copy that and then as it related question just on the provision rate to 786% are you able to segregate that between your secured versus unsecured loan provisions.

Gary Ho: And then as a related question, just on the provision rate, the 7.86%, are you able to segregate that between your secured versus unsecured loan provisions? Yeah, it's tough on our side to kind of gauge the appropriateness of that. So when I look back, I think when your loan book was more unsecured, tilted, right at the onset of COVID, the provisions kind of touched 9% to 10% range, but that's mostly unsecured. Like any color, if you can kind of help us think about if you were to kind of break that into the two bigger buckets, what would that look like?

Speaker Change: Tough on our side to kind of gauge the appropriateness of that so when I look back.

Speaker Change: When your loan book was more unsecured tilted.

Speaker Change: Right the onset of Covid provisions kind of touch 90% to 10% range, but that's mostly unsecured like any color. If you can kind of help us think about if you were to kind of break that into the two big buckets, what would that look like.

Hal Khouri: Maybe I'll start off and then Jason can certainly add on, but as you know, Gary, we don't specifically disclose the breakdown of our provision rate between secured and unsecured. What I will say, though, is as our portfolio begins to triangulate around 50% of the book being secured and relative to the unsecured book, naturally you can kind of gravitate yourself towards that pro rata distribution in a certain sense of the receivables and the associated provision around that. Secured book will be gravitating towards a better risk profile as well that would create some nuance in that overall provision in unsecured to secured ratio.

Speaker Change: And then maybe it's all here, maybe I'll start off and then Jason can certainly add on but as you know Gary we don't specifically disclose the breakdown.

Speaker Change: <unk> of our provision rates between secured and unsecured but I will say, though is as our portfolio.

Speaker Change: Begins to triangulate around 50%.

Speaker Change: <unk> of the book being secured and relative to the unsecured book.

Speaker Change: Naturally you can kind of gravitate yourself towards.

Speaker Change: You know that pro rata distribution in a certain sense of the receivables and the associated provision around that.

Speaker Change: Secured book will.

Speaker Change: The gravitating towards a a a.

Speaker Change: Better risk profile as well.

Speaker Change: That would create some nuance in that overall.

Speaker Change: Our provision in unsecured.

Speaker Change: Two secured ratio.

Hal Khouri: And as we've disclosed previously, just under 30% of our book currently is our legacy book that would have been above the rate cap as well. So you can factor that through in terms of your modeling exercise as you look at that not only from a provision standpoint, but from a net charge-off perspective as well. Anything further on that? The only thing I would say, Gary, is obviously if you just look at where the provision is traveling in the quarter, it's 786. As you can appreciate, we're students of history here at GO-EASY, so we have a pretty good view as to how that's oscillated over the last several years under which we've been following IFRS 9.

Speaker Change: And as we've disclosed previously.

Speaker Change: Just under 30% of our book currently.

Speaker Change: <unk> is our legacy book.

Speaker Change: That would've been above the rate cap as well.

Speaker Change: So you can factor that through in terms of your.

Speaker Change: Your modeling exercise.

Speaker Change: If you look at that from a not only from a provision standpoint, but from a net charge off perspective as well.

Speaker Change: Further on that.

Speaker Change: Only thing I would say Gary is obviously, if you just look at where the provision is travelling in the quarter at 786.

Speaker Change: As you can appreciate we're students of history here and go easy. So we have a pretty good view as to how that's awesome. They did over the last several years under which we've been following my first nine that.

Hal Khouri: That provision rate has traveled in and around the mid to high sevens for about the last three to three and a half years. And that's despite the fact that we significantly continue to improve the product mix. That said, the underlying reason why the provision rate continues to move up is because the economic situation over that period has meaningfully deteriorated, even if you go back to 22 and 23. And as you can appreciate under IFRS 9, we ought to and should be incorporating that in terms of the expectation of future loss. But as with most things, the expectation of future loss doesn't necessarily translate into actual loss, as you see with the fact that credit losses this quarter were pretty stable.

Speaker Change: That provision rate has traveled in and around that.

Speaker Change: Mid to high Sevens for about the last three to three and a half years and that's despite the fact that we have significantly continued to improve the product mix.

Speaker Change: That said you know the obviously the underlying reason why the provision rate continues to move up is because the economic situation over that period has meaningfully deteriorate. You mean, if you go back to 22 and 'twenty three and as you can appreciate that dry first nine we ought to and should be incorporating that in terms of the expectation of future loss, but as with most things the <unk>.

Speaker Change: Spectation of future loss doesn't necessarily translate into actual losses as you've seen with the fact that credit losses this quarter were pretty stable.

Hal Khouri: So, while we have to reserve and ought to reserve against our allowance for future credit losses, we're very much mindful of how we practically mitigate that risk on a regular basis. So, and one of the ways in which we do that, obviously, is to focus on growing our mix of secured loans. So, I wouldn't look at it as how it would impact the provision, because while our mix of secured loans has been growing, the provision rate, again, if I go back two to three years, it's basically been flat. What's been preventing that provision rate from being higher is that mix of secured loans, because the underlying macroeconomic indicators have worsened materially over that period.

Speaker Change: So while we have the reserve and an entre reserve against our allowance for future credit.

Speaker Change: Credit losses were.

Speaker Change: Very much mindful of how we practically mitigate that risk on a regular basis. So.

Speaker Change: And one of the ways in which we do that obviously is to focus on growing our mix of secured loans. So I wouldn't look at it is how it would impact our provision because while it makes it kind of allowance has been growing the provision rate again, if I go back two to three years, it's basically been flat, we'd spend that preventing that provision rate for being higher is that mix of secured loans because the underlying.

Speaker Change: Lying macroeconomic indicators have worsened materially over that period. So I wouldn't think about it so much in terms of security as I would benefit that we get from our secured program product, giving us a nice buffer to mitigate the risk of broader economic weakness in our portfolio.

Hal Khouri: So, I wouldn't think about it so much in terms of security as I would the benefit that we get from the secured product, giving us a nice buffer to mitigate the risk of broader economic weakness in the portfolio. Okay, that's helpful.

Speaker Change: Okay.

Gary Ho: If I can just sneak one more in, maybe a numbers question. When I look at the sequential change in your loan book from Q4 to Q1, the principal payment and adjustment was quite a bit lower than the last couple of quarters. Just wondering if there's a reason why or what would cause that to be lower this quarter?

Speaker Change: That's helpful. If I can just sneak one more in maybe a numbers question.

Speaker Change: When I look at the sequential change in your loan book from Q4 to Q1, the principal payment and adjust and adjustment was quite a bit lower than the last couple of quarters.

Speaker Change: I'm just wondering if there's a reason why or what would cause that to be lower this quarter.

Gary Ho: Are you talking specifically, Gary, about the loan originations change quarter on quarter? Now just the loan book reconciliation, there's a couple pieces, there's your loan originations, there's the principal payment adjustments, and then there's the gross charge off. So specifically for the principal payment adjustment segment, it's much lower than the last couple of quarters as a percentage of the beginning balance. Just wondering what's causing that. So what I can certainly speak to is the amount of pay down that you would see in the MD&A quarter on quarter.

Speaker Change: Are you talking specifically, Gary about the loan originations change quarter on quarter.

Speaker Change: Just the just on the loan book reconciliation, there's a couple of pieces such as loan originations Theres a principal payment adjustments and then there's the gross charge off so specifically for the principal payment adjustment segment, it's much lower than the last couple of quarters as a percentage of the beginning balance just wondering what what's what's causing that.

Speaker Change: So I can what I can certainly speak to is the.

Speaker Change: The amount of pay down that you would see in the MD&A quarter on quarter.

Hal Khouri: So let me try and unpack that. Originations to new customers, we're up 76 million quarter on quarter. And as we pointed out before, that was largely due to higher conversion rates as a result of the introduction of the rate cap at 35%, on top of which we obviously made very positive adjustments to our qualified loan amount strategy, even to more credit ready customers. Originations to existing customers, however, were down 86 million quarter-on-quarter, and this was due to the change that we introduced with the introduction of the APR rate cap to gradually moderate the decline of portfolio of loans held above 35%.

Speaker Change: So let me, let me try and unpack that originations to new customers.

Speaker Change: We're up 76 million quarter on quarter and as we've pointed out before that was largely due to higher conversion rates as a result of the introduction of a rate cap of 35%.

Speaker Change: On top of which we obviously made very positive adjustments to our qualified one of our strategy even to more credit worthy customers originations.

Speaker Change: Originations to existing customers, however were down 86 million quarter on quarter and this was due to the change that we introduced with the introduction of the can rate cap to gradually moderate the decline of portfolio of loans held about 35%.

Hal Khouri: And where these customers approached us, the customers who had existing loans with rates above 35%, where they approached us for an increase in lending, we did not require that their existing loan balance be paid down. Instead, these customers were adjudicated based on their existing loan balance remaining and the repayment of that loan remaining continuing, which meant that the total amount of additional borrowing we could give to that customer inclusive of their existing loan was smaller, again, because we were not paying down their existing loan. So despite the drop in originations year over year, this didn't translate into a reduction in the amount of net credit or net principal advanced to these existing customers.

Speaker Change: Adam where are these customers approached us the customers, who had existing laws with rates about 35%, where they approached us for an increase in lending.

Speaker Change: We did not require that their existing loan balanced butane down instead. These customers were adjudicated based on their existing loan balance remaining and the repayment of a vulgar, meaning continuing which meant that the total amount of additional borrowing we could get to that customer inclusive about their existing smaller again, because we were not paying down their existing loan so.

Despite the drop in originations year over year. This didn't translate into a reduction in the amount of net credit our net principal it fast to these existing customers and you can see that on page 14 of the MTA, which shows that the amount of that credit advance to existing customers was actually flat year on year. Despite the fact that we had a meaningful drop in origination volumes and when.

Gary Ho: And see that on page 14 of the MD&A, which shows that the amount of net credit advance to existing customers was actually flat year on year, despite the fact that we had a meaningful drop in origination volumes. And when you combine that with the fact that we actually wrote more business to new customers, that is how we actually wound up writing new or an additional amount of net principal in the quarter as compared to the prior quarter. Okay, that's that's great. No, thanks for thanks for the color there.

Speaker Change: You combine that with the fact that we actually wrote more business to new customers that that's how we actually wound up writing you knew or an additional amount of principal during the quarter as compared to the prior quarter.

Speaker Change: Okay, that's great and thanks for thanks for the color there that's it for me.

Gary Ho: That's it for me.

Speaker Change: Yeah.

Graham Riding: Your next question comes from Graham Riding of TD Securities. Please go ahead. Hi, good morning. You called out in your presentation, you approved and funded 10% of loans. Is that new loans or both new and renewals?

Speaker Change: Your next question comes from Graham Ryding of TD Securities. Please go ahead.

Graham Ryding: Hi, Good morning, you called out in your presentation.

Graham Ryding: You approved and funded to 10% of loans is that new loans are both new and renewals and then how would that compare to maybe a year ago and perhaps your sort of longer term approval rate.

Graham Riding: And then how would that compare to maybe a year ago and perhaps your sort of longer term approval rate? Yeah, so that number that we're quoting, Graham, is new loans, only because obviously they represent the vast majority of our loan originations, as I referenced in a prior comment, and that obviously would be down from the prior year, where we would hover more around the 15-ish percent range. And again, the number one reason why that conversion is down is really twofold. One, we obviously saw a significant uptick in the number of applications for credit, given the macroeconomic environment, the high level of demand.

Graham Ryding: Yeah. So that number that we're quoting are Graham as new loans are only because obviously they represent the vast majority of our loan originations as I referenced on the prior comment.

Graham Ryding: And that obviously would be down from the prior year.

Graham Ryding: We would have or more around the 15 ish percent range and again the number one reason why that the conversion is down on it is really two fold. One we obviously saw a significant uptick in the number of applications for credit given the macroeconomic environment the high level of demand and as we pointed out on repeated calls we have tightened our underwriting in particular as it really.

Jason Appel: And as we pointed out on repeated calls, we have tightened our underwriting, in particular as it relates to the unsecured customers we are writing. So that just gives us an ability to be a little bit more mindful and thoughtful about how we cherry-pick out of that basket of customers, the net impact of which is that our conversion rate as a percentage of the total applications that we see coming through the door is down. We would expect that ratio to travel in and around that range, but as in most cases, we are continually optimizing our loan offerings and our credit risk tolerance.

Graham Ryding: So the unsecured customers. We are writing so that just gives us an ability to be a little bit more mindful and thoughtful about how we cherry pick out of that basket of customers. The net impact of which is that our conversion rate as a percentage of the total applications that we see coming through the door is down.

Graham Ryding: We would expect that ratio to travel in and around that range, but as in most cases, we are continually optimizing our loan offerings and our credit risk tolerance. So we could see that number quite frankly continue to travel down depending on the amount of inbound applications that we see because that will show a denominator or we could see that number potentially tick up.

Jason Appel: So we could see that number, quite frankly, continue to travel down, depending on the amount of inbound applications that we see, because that would fuel the denominator. Or we could see that number potentially tick up as we begin to get more comfortable and see the results of the changes we've made post the rate cap, which as you can appreciate are only three or four months old.

Graham Ryding: As we begin to get more comfortable and see the results of the changes we've made post the rate cap, which as you can appreciate there are only three or four months old. So it's still it's still a little bit of learning to be done, but I would say at the moment that the 10% ish level around new loans is likely where we're gonna travel for the next little while.

Graham Riding: So still a little bit of learning to be done, but I would say at the moment that 10%-ish level around new loans is likely where we're going to travel for the next little while. Okay, that's helpful.

Graham Ryding: Yeah.

Graham Ryding: Okay.

Graham Riding: And then... You flagged that your average blended coupon rate was 6.8% in the quarter. That's flat year over year. What's your what's your outlook for this sort of rate through the rest of 2025? Should we expect to be fairly stable? Yeah, so the overall coupon on cost of borrowing is what you're referring to, I think, Graham there. Yeah, look, I think as we continue to go out to market, as you might be familiar, we have a proactive hedging strategy that we employ to ensure that our debt facilities are at fixed rates and any subsequent draw on our facilities would be at the prevailing rate at the time.

Graham Ryding: That's helpful and then.

Speaker Change: You flagged that your average blended coupon rate was six 8% in the quarter, that's flat year over year, what's your what's your outlook.

Graham Ryding: For this sort of rate through the rest of 2025 should we expect it to be fairly stable.

Graham Ryding: Yeah. So the the overall coupon on our cost of borrowing is what youre, referring to I think Graham there.

Graham Ryding: Look I think as we continue to go out to market as.

Graham Ryding: As you might be familiar.

Graham Ryding: We have a proactive hedging strategy that we employ.

Graham Ryding: To ensure that our.

Our debt facilities are at fixed rates and any any subsequent draw on our facilities would be at the prevailing rate at the time. So there's not much of a movement on the existing portfolio in terms of variable rate movement, but it would be on subsequent draws were based on the <unk>.

Graham Riding: So, there's not much of a movement on the existing portfolio in terms of variable rate movement, but it'd be on subsequent draws where, based on the rate curve and the outlook, we should see some nominal reductions in the overall cost of borrowing there. Okay.

Graham Ryding: Rate curve and the outlook, we should we should see some nominal.

Graham Ryding: Reductions in the overall cost of borrowing.

Graham Ryding: Okay.

Graham Riding: That's it for me, thank you.

Graham Ryding: That's it for me thank you.

Nik Priebe: Your next question comes from Nik Priebe of CIBC Capital Markets. Please go ahead. Okay, thanks.

Speaker Change: Your next question comes from Nick <unk> of CIBC capital markets. Please go ahead.

Nick: Okay. Thanks, I just wanted to drill a little further into the portfolio yield.

Hal Khouri: I just wanted to drill a little further into the portfolio yield. There was a comment in the MD&A just suggesting that commissions earned on the sale of ancillary products was partly impacted by reduced pricing. Can you just elaborate on what that relates to and when those pricing changes would have been implemented? Yeah, I can, it's out here. So I think, I think the comments around that, around our ancillary products, as, as Jason had alluded to, in terms of the tightening up of overall credit, that would typically have perhaps a higher penetration rate of ancillary products.

Nick: There was a comment in the MD&A, just suggesting that commissions earned on the sale of ancillary products was partly impacted by reduced pricing.

Nick: Can you just elaborate on what that relates to and when those pricing changes would have been implemented.

Nick: Yeah I can it's all here so I think I think the comments around that.

Nick: Our ancillary products.

Speaker Change: As as Jason had alluded to in terms of the tightening up of overall credit.

Jason: That would typically have perhaps a higher penetration rate of ancillary products. So you think about insurance or warranties.

Hal Khouri: So you think about insurance or warranties, those types of products that would be complementary to the loan. So that that would be an initial impact on on those numbers. I'd say as well, the increasing shift to secured and the secured mix overall. Typically, the secured products, whether you're looking at home equity, auto, would traditionally garner a slightly lower penetration rate relative to our unsecured product. So there's a little bit of a dynamics going on in terms of of those rates.

Nick: These types of products that would be complementary to the loan.

Jason: So that that would be an initial.

Jason: <unk> on on those numbers I'd say as well the increasing shift to secured and the secured mix overall.

Jason: Typically the secured products, whether youre looking at home equity auto.

Jason: With traditionally garner a slightly lower penetration rate relative to our unsecured product. So there's a little bit of a dynamics.

Jason: Going on in terms of of those rates.

Hal Khouri: Silver lining around that we continue to invest in our infrastructure to try to continue to move the needle and the dial on on our pen rates on a perspective. Got it. Okay.

Jason: Silver lining around that we continue to invest in our infrastructure.

Jason: To try to continue to move the needle on the dial on our pen rates on a prospective basis.

Jason: Got it got it okay and just two follow ups on that one.

Hal Khouri: And just two follow-ups on that. Just one, I'm curious what kind of prompted the change in pricing on those ancillary products. Like, I would think that demand for the loan protection product, as an example, be relatively price inelastic. I guess what I'm trying to say is I wouldn't have thought of the attachment rate being enormously sensitive to the commission. So what was, I guess, the kind of incentive to adjust pricing there? So, I would say, in terms of pricing more broadly, and if I were to look at our loan protection program, specifically, that would have tiered pricing based on loan amount.

Speaker Change: I'm curious what could have prompted.

Speaker Change: The change in pricing on those ancillary products like I would think that demand for the wound protection product as an example would be relatively price inelastic and I guess, what I'm trying to say is I would've thought if the attachment rate being enormously sensitive to the commission. So what was the I guess, the kind of incentive to adjust pricing there.

Speaker Change: So I would say in terms of pricing more broadly and if I were to look at our.

Speaker Change: Loan protection program, specifically that would have tiered pricing based on our loan amount.

Hal Khouri: And so, as as the loan amount gravitates upwards, the rate for that loan protection product would actually come down, even though you're still garnering more overall. if that's helpful. Okay, yeah, that makes sense. And then I guess the way the account would work is when you originate an unsecured loan and there is take up for the third party loan protection product, the commissioner on the sale, that product would be recognized in the same quarter that the loan is originated, right? So I think what you're trying to suggest is that in a period where the mix of loans sold skews more towards secured lending, which has a lower attachment rate to those products, the economics of those loans are less front end loaded, all things equal, so that could put some pressure on the yield in that period, right?

Speaker Change: And so as as the loan amount gravitate upwards.

Speaker Change: The rates are.

Speaker Change: For that loan protection product would actually come down, even though you're still garnering more overall.

Speaker Change: Revenue contribution.

Speaker Change: If that's helpful.

Speaker Change: Okay, Yeah that makes sense and then I guess the way the accounting works when you originate an unsecured loan and there is taken up with the third party loan protection product. The commission around the sale of that product would be recognized.

Speaker Change: Quarter that the loan is originated rates I think what you're trying to suggest is that.

Speaker Change: In a period, where the mix of loans sold skews more towards secured lending, which has a lower attachment rates to those products.

Speaker Change: <unk> of those loans are much front end loaded all things equal so that could put some pressure on the yield in that period right and then over the full course or duration of the loan the overall ROE might actually look comparable between secured and unsecured.

Hal Khouri: And then over the full course or duration of the loan, the overall ROE might actually look comparable between secured and unsecured.

Hal Khouri: I guess one question I would have is if you were to order rank the product suite by ROE, how would the various products compare? Yeah, I mean, I think to get back to your earlier narrative around that, I think you're correct, right? Like, depending on the product that's being sold, either there's an upfront recognition in totality as we're a distributor of those products, for example, a warranty on auto where we would be able to recognize our net commission upfront in period. Whereas if you take a loan protection product where there may be a monthly fee, where we take an upfront service charge or service fee, and then we have back-end return economics, that would be a bit trailing in that regard.

Speaker Change: I guess one question I would have is if you were to order rank the product suite by Roy how would the various products compare.

Speaker Change: Yeah, I mean, I think to get back to your.

Speaker Change: Earlier narrative around that I think I think you're correct right like depending on depending on the product that's being sold either there is an upfront recognition in totality as we.

Speaker Change: We're a distributor of those products for example, a warranty.

Speaker Change: On auto where we would be able to recognize our net commission upfront in period, whereas if you take a loan protection product, where there may be a monthly monthly fee.

Speaker Change: Where are we taken upfront service charge or service fee.

Speaker Change: And then we have back end return economics that would be a bit trailing.

Hal Khouri: So, you know, there's a little bit of a dynamic in that respect. If we think about the contribution of the overall products, all are significant contributors to the overall bottom line. I don't think we've specifically rank ordered them in terms of contribution overall to the economics, but certainly all of them would be significant contributors to our yield and overall economics as we look at underwriting the product. Okay. All right. That's very helpful. That's it for me. Thank you.

Speaker Change: That regard so there's there's a little bit of a dynamic in that respect if.

Speaker Change: If we think about the contribution of the overall products all.

Speaker Change: All are significant contributors to the overall bottom line I don't think we've specifically rank order them.

Speaker Change: In terms of contribution overall.

Speaker Change: To the to the economics.

Speaker Change: But certainly all of them would be significantly confidently errors to our yield and overall economics as we look at underwriting the products.

Speaker Change: Okay. That's very helpful. That's it for me thank you.

Jaeme Gloyn: Your next question comes from Jaeme Gloyn of National Bank Financial. Please go ahead. I love it. Yeah, I just wanted to ask a question on the OPEX.

Jaime: Your next question comes from Jaime and growing of National Bank Financial. Please go ahead.

Jaime: Oh all of it.

Speaker Change: Yeah, just wanted to.

Jaime: Ask the question on the Opex.

Jaeme Gloyn: So maybe first off on the underwriting and collections line a little bit higher this quarter, obviously, you're trying to beef up your collections teams, maybe just a little bit more color on where those costs are going. And then is this something that you expect that will kind of run a little bit higher here over the next several quarters as you continue to work through the what you've called the optimization of collection? Yeah, hey, Jaeme. Yeah, great question. So as we look at OPEX overall, yes, we did see a quarter on quarter year over year movement in the overall OPEX line.

Jaime: So maybe first off on the on the underwriting and collections line a little bit higher this quarter, obviously, you're trying to beef up your collections teams, maybe just a little bit more color on where those costs are going and then is this something that you expect that will kind of run a little bit higher here over the next several quarters as you continue to work through the.

Jaime: What you've called the optimization of collections.

Jaime: Yeah, Hey, Jim Yeah, Great question. So as we look at Opex overall, yes, we did see a quarter on quarter year over year movement in the overall Opex line.

Jason Appel: Partially that would be volume related as our overall loan book has grown by almost 25% year over year. Collections and the focus in on collections certainly would be an area where we've had increased OPEX. That would be based on what Jason was describing earlier in our drive to invest in infrastructure around those collections and collections activities, whether that's people resources, whether that's third parties. We also, as we continue to engage in repossession of secured assets of vehicles, power sports, power sports loans as well, that would contribute to a heightened level of overall costs that are being borne into the P&L.

Jaime: Partially that would be volume related as our overall loan book has grown by almost 25% year over year.

Jaime: Collections and the focus in on collections certainly.

Jaime: It would be an area, where we've had increased opex are that would be based on what Jason was describing earlier.

Jaime: In our drive to invest in infrastructure around those collections and collections activities.

Jaime: That's people resources, whether that's third parties.

Jaime: We also as we continue to engage and repossession of secured assets.

Jaime: Vehicles power sports.

Jaime: Power sports model as well.

Jaime: That would contribute to a heightened level of overall cost that are being born into the P&L. Yeah, maybe just to bolt on to that it's also you have to look at it from a timing and sequencing perspective, we're going to incur those costs before we see the benefit of those changes whether it's.

Jason Appel: Yeah, maybe just to bulk onto that. It's also, you have to look at it from a timing and sequencing perspective. We're going to incur those costs before we see the benefit of those changes, whether it's the bailiffs we have to contract with or other types of third party servicers or beefing up our own internal service capability. Those costs are going to hit us first before the benefit of better collections and better recovery. We would expect obviously to see those numbers start to improve as we look to the overall backend of our business, but certainly on the front end when it comes to OPEX, we'll feel it before we get the benefit.

Jaime: The bailiffs, we have to contract with or other types of third party servicers or the beefing up our own internal service capability. Those costs are going to hit his first before the benefit of better collections and better recovery.

Jaime: We would expect obviously to see those numbers start to improve as we look to the overall backend of our business, but certainly on the front end when it comes to Opex, we will feel that before we get the benefit but we would have obviously taken out any consideration as we model. This.

Jason Appel: We would have obviously taken that into consideration as we model these types of investments as we do anytime we upgrade our quality.

Jaime: These types of investments as we do any time, we upgrade our quality and capability.

Jason Appel: And just tying that theme into the delinquency rate disclosure, so the greater than 150 days, it sounds like there's some loans that are greater than 180 that you have some visibility on collections. Can you maybe just dig into that figure that's, I think it's $110 million, $110 million, I can't remember the number off the top of my head, that's in that 150 plus, like how much of that would be greater than 180 and, you know, your confidence in recovering those assets and then eliminating those delinquencies. Yeah, so what I would say is we don't typically disclose, you know, a finer breakdown of the one, what I'll call the 151 plus day bucket, but as you can appreciate, as a result of the backlog that we've been challenged by over the last, this would be now the second quarter, it's obviously taking us about another, on average, 90 days to get recovery of these types of assets, where normally they would be pursued for a 90 day period, and by the time they get to the 180 marker, we've generally received principal or a decent portion of our principal.

Jaime: And and just tying that theme into the delinquency rate.

Jaime: Disclosure, so the greater than 150 days it sounds like theirs.

Jaime: Some loans that are greater than a 180 that.

Jaime: But you have some visibility on collections can you can you maybe just dig into that figure that's the.

Jaime: I think it's 104 hundred 10 million I can't remember off top my head.

Jaime: That's in that 150, plus like how much of that would be greater than 180, and and you know your your confidence in Rick.

Jaime: Covering those assets and then.

Jaime: And then eliminating those delinquencies.

Jaime: Yeah. So what I would say is we don't typically disclose or find a breakdown of the one what I'll call a 151 plus day bucket, but as you can appreciate as a result of the backlog that we have been challenged by over the last this will be now the second quarter. It's obviously, taking us about another on average 90 days to get recovery of these.

Jaime: Types of assets, where normally they would be pursued for a 90 day period and by the time they get to the 180 marker. We generally received principle or a decent portion of our principle.

Jason Appel: So, as a result, we're not seeing that simply because of the challenges, not just faced by us as a lender, but by many lenders in the space, given the rising delinquency against the macroeconomic backdrop, but I would say we would anticipate over time that this number would gradually begin to move down as we become more adept and expert at reducing the timeframe within which we can recover and collect on these secured assets. The challenge will be, and not the challenge, the benefit will be, is we've already started to see a moderation in the number of accounts that are taking the amount of time beyond this typical 90 day window in order to get recovery, it's obviously just going to take us a couple of more quarters to work through that population of loans.

Jaime: As a result, we're not seeing that simply because of the challenges not just face by us as a as a lender, but by many lenders in the space given the rising delinquency against the macroeconomic backdrop, but I would say we would anticipate over time that this number would gradually begin to move down.

Jaime: As we become more adept and expert at reducing the timeframe within which we can recover and collect on these secured assets.

Jaime: The challenge will be and we've already heard about the challenge that benefit won't be as we've already started to see a moderation in the number of accounts that are taking the amount of time that beyond this typical 90 day window in order to get recovery.

Jaime: Obviously, you're just going to take US a couple of more quarters to work through that population of loans.

Jaime: Not because we see the credit of the portfolio to be at risk just simply because we're facing a limited number of processors AOS and third parties that can help us work through the volume of these accounts, knowing full well that we intend to recover and applied roughly the same degree of recoveries that we've seen in keeping with previous periods. So it's a decent number of them.

Jason Appel: So, it's a decent number of that 100 plus million number, but again, it's a number that we feel pretty good about being able to move down over time. And like I said, even if you look quarter on quarter, that number is beginning to gradually move down.

Jaime: That 100 plus million number, but again, it's a number that we feel pretty good about being able to move down over time and like I said, even if you look quarter on quarter that number is beginning to gradually move down we would expect that number to continue to improve as we move through the next few quarters.

Jason Appel: We would expect that number to continue to improve as we move through the next few quarters.

Jaeme Gloyn: Great.

Okay, Great and then maybe coming back to the Opex and ER and how youre thinking through.

Jaeme Gloyn: And then maybe coming back to the OPEX and how you're thinking through investments, it looks like technology had a little bump this quarter, but what's the strategy or your near-term view on managing the expense line, just given that there's obviously a little bit higher sensitivity to macro conditions feeding through to protect your margins here over the next few quarters? Yeah, Jaeme, I mean, what I would say is our first philosophy is always being prudent and mindful around around costs and expenses. And certainly that's that's for at the forefront of our thoughts, regardless of the environment that we're in.

Speaker Change: Investments it looks like technology had a little bump. This this quarter, but is there what's like what's the strategy or your or your near term view on <unk>.

Jaime: Managing the expense line.

Jaime: You know just given that there's obviously a little bit higher a.

Jaime: Sensitivity to macro conditions feeding through to protect your two particular margins here over the next few quarters.

Speaker Change: Yeah, James I mean, so what I would say is our first philosophy is always being prudent and mindful around around costs and expenses.

Speaker Change: And certainly that's that's for us at the forefront of our thoughts regardless of the environment that we're in.

Jaeme Gloyn: You pointed out the tech piece. Yes, we we absolutely continue to invest in our business, in our platform, specifically projects that are underway right now with credit card launch, auto title refi that we've already spoken to the market quite actively around, ensuring that our customer facing platforms that we use to service our customers, we continue to upgrade and make sure those are top of line. So I think those are critical components regardless of the environment that we're in. But having said that, as we think about areas of opportunity, we've already, if you might have noticed within the salary lines, that has tightened up relative to the volume and the growth of the overall book.

Speaker Change: You pointed out the tech piece, yes, we are we absolutely continue to invest.

Speaker Change: In our business and our platform specifically projects that are underway right now with the credit card launch.

Speaker Change: Auto title refi that we've already spoken to the market quite actively around ensuring that our customer facing.

Speaker Change: Platforms that we use to service our customers, we continue to upgrade and make sure. Those are our top of line. So I think those are critical components, regardless of the environment that we're in but having said that as we think about areas of opportunity. We've already if you might've noticed within the salary.

Speaker Change: Lines that that has tightened up relative to the volume and the growth of the overall book will be continue to be mindful around our hiring practices third party servicing costs as we think about sourcing and procurement.

Jaeme Gloyn: We'll continue to be mindful around our hiring practices, third party servicing costs, as we think about sourcing and procurement, and continue to sharpen our pencils, so to speak, as we think about cost outlays. So I'd say as we think about the next few quarters, notwithstanding the Q1 component around the tech and the collections components, you should see that slightly moderate and there's some timing in there based on our investments, but continue to be well within line of our overall operating margin and continued improvement in our operating leverage.

Speaker Change: And continue to sharpen our pencils so to speak as we think about cost outlays.

Speaker Change: So let's.

Speaker Change: I'd say as we think about the next few quarters, notwithstanding the Q1 component.

Speaker Change: Around the tech and the.

Speaker Change: <unk> components, you should see that slightly moderate and theres some timing in there based on our investments but.

Speaker Change: Continue to be well within line of our overall operating operating margin and continued improvement in our operating leverage.

Speaker Change: Okay. Thank you guys.

Jaeme Gloyn: Thank you, guys.

Speaker Change: Okay.

Stephen Boland: Your last question comes from Stephen Boland of Raymond James. Please go ahead. Thanks, I won't be, I'll be quick here. Just in terms of, you know, the numbers this quarter and your 2025 dial. hit those numbers. But if you annualize your revenue, you're below the low end, your ROE, if we use the 20.7, is below what you're guided to. And then for Q2, you know your revenue yield is going to be in this range.

Speaker Change: Your last question comes from Stephen Boland of Raymond James. Please go ahead.

Stephen Boland: Well I think so it won't be a I'll be quick here just in terms of the numbers. This quarter in your 2025 guidance I think you said you can still.

Stephen Boland: Hit those numbers, but if you annualize your revenue youre below the low end your Roe.

Stephen Boland: If if we use the 27 it was below what you had guided to.

Stephen Boland: And then for Q2, you know your revenue yield is going to be in this range.

David Ingram: I'm just... what gives you confidence that you can hit, you know, the guidance? Like is this going to be more towards the the second half where you catch up on some of these metrics? Yeah, so in terms of our confidence level with our overall annualized position, I would say that at this time, we would reaffirm the guidance that we've put out across all of our key metrics. As you've noted, in terms of the yield contribution, we would see that through the course of the year while still maintaining to be within range, likely at the lower end of our overall guidance in that respect.

Stephen Boland: What gives you confidence that you can hit.

Stephen Boland: The guidance like is this going to be more.

Stephen Boland: Towards the second half, where you catch up on some of these metrics.

Stephen Boland: Yeah.

Stephen Boland: Yeah. So in terms of our confidence level with our overall annualized position I would say that at this time.

Stephen Boland: Would reaffirm.

Stephen Boland: The guidance that we've put out across all of our key metrics.

Stephen Boland: As you've noted in terms of the yield contribution we would see that.

Stephen Boland: Through the course of the year, while still maintaining a to be within range likely at the lower end of our overall guidance in that respect.

David Ingram: And as we traditionally do, we'll come back in the August timeframe as we've got another quarter under our belts, we'll re-examine the outlook not only for 2025, but get a sense on the read with the macroeconomic backdrop and environment in that respect. But at this point, we won't be shifting off of the guidance.

Stephen Boland: And as we traditionally do we'll come back in the August timeframe as we've got another quarter under our belts, we will reexamine the outlook not only for 2025.

Stephen Boland: But get a sense on the read with the macroeconomic backdrop and environment and non respect but at this point, we won't be we won't be shifting off of the guidance at this time.

Jason Appel: And just the last question for me is when you talk about tightening, you know, obviously, Jan one was a was a new era for you. But like during the quarter after, you know, tariff, some economic uncertainty, Was the tightening continually, like, did that continue throughout the quarter? So by March, you know, metrics were much different than January or February. I'm just trying to gauge how much, um, you know, you looked at the environment and said, you know, this is getting worse. We really got to be careful. So Jason, I think it's fair to say we're always tightening or oscillating with the underwriting platform.

Speaker Change: And just the last question for me is when you talk about tightening you know obviously Gen. One was it was a new era for you, but like during the quarter. After you know tariff some economic uncertainty.

Stephen Boland: It was the tightening continually you'd like.

Stephen Boland: That continue throughout the quarter. So by March metrics were much different than January or February I'm, just trying to gauge how much.

Stephen Boland:

Stephen Boland: You looked at the environment and said you know this is getting worse, we've really got to be careful here.

Stephen Boland: So Jason here I think it's fair to say, we're always tightening or oscillating underwriting platform I mean, we've talked about this prior to COVID-19.

Jason Appel: talked about this prior in COVID, where the situation obviously was far more dire and very much uncertain. We were tightening or releasing or adjusting almost on a weekly basis in response to at that time were fairly sizable shifts in the macroeconomic environment, amongst other things. I'd say over the course of the quarter, A, we continue to monitor the overall health of the portfolio. And there isn't a week that goes by that some element of the credit risk posturing of the book isn't either being tweaked or modified. And I would have you think about that in a couple of different ways.

Where the situational I was it was far more dire and very much uncertain.

Stephen Boland: We were tightening our releasing or adjusting almost on a weekly basis in response to at that time, but we're a fairly sizable shifts in the macroeconomic environment amongst other things I'd say over the course of the quarter and we continue to monitor the overall health of the portfolio and there isn't a week that goes by that some element of the credit risk posturing of the book isn't either being.

Stephen Boland: Tweaked or modified and I would have you think about that a couple of different ways one might be certainly the most obvious would you be on the front end of the book, whereas I pointed out in previous calls we can modify cutoff scores.

Jason Appel: One would be certainly the most obvious, which would be on the front end of the book, where, as I pointed out in previous calls, we can modify cutoff scores, debt-to-income criteria, and underwriting protocols pretty much within a 24-hours timeframe notice. The other area that we can also have a fairly significant impact is in the back end or the back book, the business that's already out the door and basically in a process of by choosing, again, the types of offers and constructs we give to those customers when they encounter a period of difficult repayment. And as you can appreciate, that's often in response to changes in the macroeconomic environment as well.

Stephen Boland: Debt to income criteria of underwriting protocols pretty much within 24 hours timeframe notice. The other area that we can also have a fairly significant impact is in the back end or the back book of business, that's already out the door and basically in the process of repayment and again, we cannot be can work that book much more effectively by choosing again the types of offers and.

Stephen Boland: Constructs, we get to those customers when they encounter a period of difficult repayment and as you can appreciate that's often in response to changes in the macroeconomic environment as well. So those types of activities are reviewed and updated generally every week within both businesses. The only difference is we may not necessarily make those changes every week, we will review the need for those.

Jason Appel: So those types of activities are reviewed and updated generally every week within both businesses. The only difference is we may not necessarily make those changes every week, but we will review the need for those changes every week because that's just how we go to business-as-usual activity. And we were doing that throughout the first quarter. And I'll point out we'll continue to do that throughout every quarter. Just the scale with which we choose to make changes will only vary in response to the substantiveness of the degree of change in the broader environment.

Stephen Boland: <unk> every week because that's just how we go to market on managing our non prime portfolio. So that's just part of our go to market business as usual activity and we were doing that throughout the first quarter and I'll point out we will continue to do that throughout every quarter.

Stephen Boland: Just the scale with which we choose to make changes will only very in response to the substantive tests of the degree of change in the broader environment.

Operator: Okay, thanks very much, guys. Thank you, ladies and gentlemen. That concludes our session.

Stephen Boland: Okay. Thanks, very much guys.

Stephen Boland: Okay.

Stephen Boland: Thanks.

Stephen Boland: Hmm.

Stephen Boland: Yeah.

Stephen Boland: Okay.

Stephen Boland: That's instead of on global Shoeless Joe session.

Farhan Ali Khan: I will now turn the conference over to goeasy Limits. Okay, thank you, operator. Since there are no more questions, we want to thank everyone that participated on the call, and we appreciate your interest in the company. And we'll continue to update you and look forward to giving you the next quarterly call in August. So have a great day, everyone. Thank you. This concludes today's conference. Thank you for attending. You may now disconnect your lines.

Stephen Boland: Now I'll turn the conference over to go easy limited.

Speaker Change: Okay. Thank you operator.

Speaker Change: Since there are no more questions, we want to thank everyone that.

Speaker Change: Participating on the call and we appreciate your interest in the company and we will continue to update you and.

Speaker Change: I look forward to giving you the next quarterly call in August so have a great day everyone.

Speaker Change: Thank you.

Speaker Change: This concludes today's conference. Thank you for attending you may now disconnect your lines.

Speaker Change: [noise].