Q2 2025 goeasy Ltd Earnings Call
Good morning. My name is Aubrey and I will be your conference operator today.
At this time I would like to welcome everyone. To the go is a limited second quarter to 2025 earnings conference call.
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After the speakers remarks, there will be a question and answer session.
If you would like to ask a question during this time, simply press the star, then the number 1 on your telephone keypad.
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Thank you, awkward.
And good morning everyone. I'm James. O'bright vice, president of investor relations and capital markets. Thank you for joining us to discuss. Go easy limited's results for the second quarter ended, June 30th 2025, the news release, which was issued yesterday after market. Close is available on decision and on the go easy website.
On today's call Dan Reese, go easys, chief executive officer will review key highlights for the second quarter and provide an outlook for the business 3. Our chief financial financial officer will provide an overview of our financial results as well as our capital and liquidity position.
Jason Appel. The company's Chief risk officer will then provide an update on our credit and underwriting after the prepared remarks. We will open the lines for questions from analysts the operator will pull for questions and will provide instructions at the appropriate time.
Before we begin, I remind you that this conference call is open to all investors and is being webcast through the company's investor website and supplemented by quarterly earnings presentation which will be referred to by our speakers today.
For those dialing in by phone, the presentation can be found on our investor website. As a reminder, the slide presentation and our mdna contain the disclaimer on forward-looking statements which also applies to our discussion on this conference call.
To listen to this call and to use Management's comments and responses to questions in any coverage. However, we would ask that they do not quote callers unless that individual has granted their consent. I'll now turn the call over to Dan ree. Great, thank you, James. Given this is the first earnings call. I'm leaving since joining go easy. I would like to begin by extending a personal. Welcome to all of those listening, including our employees investors and the research analysts that follow the company.
I would like to start by echoing. Some of the initial comments I made during our q1 call.
My first few months in this.
Confirmed my confidence in go easy with my direct engagement with our employees across Canada as well as many of our external stakeholders. I continue to believe this business is already operating at a high level and that we continue to have substantial potential for more.
My initial Focus across the business has surfaced many positive insights. And as you can see now in our Q2 results, we have begun to deliver on a few operational refinements.
As we press ahead, I would like to reiterate a comment I made on a prior call.
Expect broad continuity in terms of strategic Direction.
What has been working well at go? Easy has been working well for a reason.
My aim is to ensure go. Easy has the talent systems and capital to build on the legacy of growth and strong returns that David Ingram and Jason Mullins, have both established.
that said,
Opportunity and responsibility. So as we continue to level up, we will scale up
In keeping with the Heritage and Norms of go easy, over the years, we will continue to be growth-minded.
Deliberate thoughtful and forward leading as we enter this exciting new chapter and go easy history.
With that. Let's now get into the quarter. I'll ask you to turn to slide 4 of the Q2 2025 earnings presentation available on our website.
I am pleased to report that our loan book, increased a record 313 million in Q2 driven by a record origination level of 904 million. This exceeded our previously stated quarterly Outlook,
This strong performance, lifted our receivables to 5.1 billion in the quarter on June 12th, you will have noticed that we proudly press release that we moved through the 5 billion dollar level.
And as you can imagine, this was a major milestone for us internally and was rightly celebrated throughout the organization.
I was reminded the other day that when Hal joined go easy. Just over 6 years ago, our loan portfolio was actually slightly below 1 billion.
For Reference last year. At this point, it was 4.1 billion. So even as we get bigger, our rate of loan growth has been very impressive and very well-managed
Our record growth together with improved cash collections helped to generate record quarterly. Revenue of 408 million up 11% from Q2 of last year Tailwind in the quarter which we will dive into shortly included. An important 50 basis point uptick in our total yield relative to q1 now at a very encouraging 31.8% yield benefit of specifically from improved product, mix stronger pricing and better performance in ancillary sales.
We also saw the continuation of recent Trends in credit performance. This quarter in Q2, we reported another decline in our net charge offs down 50 basis points from the prior year. Now at 8.8%
Net charge offs benefited from an increased contribution from secured Lending.
As well as underwriting enhancements.
As we continue to expand our business. And as we drive increased volumes through our Merchant Partners, we are seeing a benefit in our efficiency ratio which now at 25.6% came in 130 basis points lower or better than last year. Our adjusted EPS at 4.11 was the same level for the same period in 2024. Despite as you know, the impact of the rate cap, these results in combination underscore the resilience of our business model coming off. Just a slightly, lower yield in q1.
To the fall.
In keeping with past practice, we will affirm our priorities and 3 year growth Outlook early in 2026 in conjunction, with the release of our full year results, we continue to expect to deliver against the 2025 forecast. We share shared earlier this year and now based on these Q2 numbers expect our loan book to finish at the top end of our original, expectations of 5.4 to 5.7 billion,
Turning to slide 5, I would note that our strong Q2 performance was made possible by the focus and dedication of all of our 2,600 employees.
Personally, as part of a group of 30 go easily leaders. I recently had the opportunity to participate in our annual leadership tour.
Collectively the group of us visited over 225 of our locations across
Canada.
I met with many go, easy leaders at our annual National Conference recently, which was attended by 600 Managers from across the organization.
Throughout all of this engagement with the go easy team at all levels. I've been struck by how consistent and how powerful our passion is for our customers and our culture.
I've been spending a lot of time with our land care business, including our Merchant Partners these Partners, which now, number more than 11,000 remain, a critical component of our growth particularly in the auto sector in the quarter Automotive, as well as unsecured lending, home equity loans, and point of sale. All delivered, strong, sequential, loan growth.
Surrounding out. My opening comments, I'm very proud to highlight, what the go easy team delivered. This quarter turning the slide 6. You can see that our performance in Q2 met or exceeded. The Outlook we shared recently with you just in may all of this despite a complex macro backdrop. This is a testament to the strength and adaptability of our business model and it underpins it underpins pardon me our confidence in the future.
With that, I will pass the call to our Chief Financial Officer. How Corey to provide an update on our financial performance and balance sheet. Thanks Dan. Good morning everyone, I'm picking up on slide 8, we experienced very strong originations in Q2 at over 900 million up 9% year-over-year.
Growth was driven by record applications for credit across all products, and acquisition channels, including unsecured lending home equity loans automotive and point of sale Lending.
Dan called out the consistent growth. We've been driving in our gross Consumer loans receivable, but I wanted to pause on the increased percentage of our portfolio, which is secure.
We've grown this 3 and a half percentage points since this time. Last year, it's almost 48% supported by strong, originations and auto and home, equity Lending.
On slide 9, total revenue in the quarter was a record. 418 million up, 11% over the 378 million in the same period in 2024 total yield on Consumer loans declined. Year-over-year at 31.8% due to growth of secured loan products, which carry lower rates of Interest, a higher proportion of larger value loans, with reduced pricing on certain ancillary products and implementation of the new interest rate cap.
Notwithstanding the decline year-over-year management actions and produce a product pricing and collections of optimization efforts. It led to a 50 basis points Improvement in yield quarter or recorded.
Turning the slide 10, strong loan, growth, stable credit performance and continued gains and operating efficiency for all reported adjusted, operating income of 164 million. An increase of 7% compared to 153 million in the second quarter of 2024,
That operating income translated to adjusted diluted earnings per share of 4.11, the difference between our 5.19 reported and our 4.11 adjusted EPS relates primarily to fair value changes on prepayment options embedded in our notes table.
Turning to slide 11. We continue to experience the benefits of scale, including greater operating efficiency and productivity improvement. During the second quarter, our efficiency ratio, specifically operating expenses as a percentage of revenue, improved to 25.6%, a reduction of 130 basis points from 26.9% in the second quarter of 2024.
As well as the increase in allowance. For credit losses, primarily driven by unfavorable movement and macroeconomic forward-looking indicators.
This was partially offset by the continued Improvement and operating efficiency and net charge off rate as outlined on slide 12 in the second quarter. We added to our long track record of obtaining Capital support. Our growth plans in April, we took advantage of favorable market conditions and issued US dollar 400 million senior unsecured notes due in 2030.
We also concur currently entered into a cross-current cross-currency swap agreement, which served to reduce the Canadian dollar equivalent cost of borrowing on the notes to 6.03% per UNAM.
based on the cash on hand at the end of the quarter and the borrowing capacity under our existing revolving credit facilities,
approximately 1.74 billion in total funding capacity.
At quarter end, our weighted average cost of borrowing was 6.7%. And the fully drawn weighted average cost of borrowing was 6.1% in both cases and Improvement year-over-year and quarter over quarter.
we remain confident that the capacity available under an existing funding facilities and our ability to raise additional debt, financing is sufficient to fund our organic growth forecast,
Bolstering, our strong funding position. And as described in the bottom left of slide 13, the business continues to produce impressive levels of free, cash flow, free cash flow from operations. For the trailing 12 months before, the net growth in the consumer loan. Portfolio was 377 million.
As a result we estimate. We currently grow the consumer loan book by approximately 350 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 dividend
reflecting confidence in our continued growth and access to Capital going forward. The board of directors approved. A quarterly dividend of 1.46 cents per share table on October 10th, 2025 to the holders of common shares of record, as of the close of business on September 26th 2025.
During the quarter, we took advantage of Market weakness, to purchase the approximately 25 million worth of our shares. Bringing the total number of shares bought back in 2025 to approximately 590,000.
With many attractive growth opportunities available in the business. Expect us to be a disciplined buyer of our stock. As we carefully, allocate Capital going forward,
On slides, 14 and 15, adjusted return on Equity, landed at 23.2% for Q2 down 20220 basis, points year-over-year, the main driver was lower adjusted, net earnings, due to lower yield from secured, makes shift rate, cap impact and increased credit Provisions, which Jason will cover off in further, detail in his credit and underwriting commentary.
Jason over to you. Thanks very much Alan. Good morning everyone. I'm pleased to be able to provide some additional comments on our approach to managing credit and underwriting for the non-prime consumer and how it impacted our business. In the second quarter, the key takeaways which I will leave for your reference are summarized on slide 17.
Training to slide 18. Our net charge offer rate of 8.8%, which came in at the lower end of our guided outlook for the quarter, representative 50 basis, point improvement over the prior year and a 10 basis, point improvement over the prior quarter, we continue to benefit from a shift towards secured lending. Now, setting it just shy of 48% of the total portfolio along with the Tailwind with the proactive credit adjustments. We made late in 2023.
And throughout 2024 in anticipation of weakening macroeconomic conditions.
We talked for a while now about the increasing percentage of our book that is secured. And that's how noted we expect the pace of the shift to moderate in the coming quarters. As we look to take advantage of opportunities, we are seeing in the unsecured installment loan Market. Caught in part by the migration of certain segments of customers into the non-prime segment.
Model delinquent, balances at 6.7% of the portfolio decline. 100 basis points from the prior year and 20 basis points from the prior quarter late stage delinquencies Define as loans, more than 90 days past due at 2, at 2.8 percent, or 130 bits higher when compared to the prior year,
However, we continue to make steady progress in optimizing, our late stage Collections, and as the volume of our delinquent balance is more than 90 days. Outstanding decline, 50, dips quarter of a quarter from 3.3 percent to 2.8%.
We expect to see continued progress in reducing these balances by further streamlining the processes to recover the assets, collateralized by our secure loans.
As we work toward making further, improvements, our recovery rates continue to remain stable and consistent with prior periods.
Posture in our underwriting of new loans, funding just 13% of applications at a dollar weighted average credit, score of 622, and a quarter.
Q2 was our 14th consecutive quarter with average scores above 600.
We also made some further enhancements to the risk management of our portfolio by implementing our first phase of Next Generation. Detective controls these trigger based mechanisms will enhance our ability to identify opportunities for potential credit expansion as well as areas of potential credit risk across a variety of segments within our portfolio.
Including by product Channel, rest group and income, stratification to name. But a few
Turning to slide 19. Our allowance for credit losses. Saw a modest quarter of a quarter of an increase of 6 basis points to 7.92% from 7.86%.
The increase was due to unfavorable movement in the forward-looking macroeconomic indicators or fliss produced by Moody's Analytics. This was partially offset by the improved credit and product mix up on portfolio as well as credit and underwriting enhancements made in a quarter.
These SLI have continued to worsen over the last few years and now sit at an all-time high.
Is coupled with a higher mix of late stage delinquent accounts. Lifted, both the rate and size of the allowance over the last year.
As we continue to remain focused on managing our net charge offs and reducing our late stage delinquencies, we would expect our allowance to gradually decline with the potential for future relief. Should we begin to see meaningful Improvement in underlying macroeconomic performance?
Finally on slide 20 we have highlighted some of the ways in which we continue to take a balanced approach in our management of risk to build further resilience in our loan portfolio.
Early in the quarter, we introduced underwriting changes for customers working in Industries, impacted by high sustained tariffs, I think steel aluminum as examples.
this follows the approach, we took during the co impacted period, where modifications to our underwriting were adjusted that the industry level in response to changing conditions,
We continue to keep a watchful eye on potential, chair of changes. And what highlights on our low portfolio remains highly Diversified with no industry sector accounting for more than 9% of the loan book.
Also, in the quarter, we introduced a new credit model, for our home equity loan product, an increase our maximum loan size to 150,000, for qualifying properties, with loan-to-value ratios below 50%,
We continue to hold a very favorable view of our home equity product, given its low, net charge, offer rate and the ability to attract more cost sources of funding.
Critical to our ongoing success in the coming quarters will be maintaining an appropriate balance between managing a level of growth and risk in a way that fully accounts for the best interests of both. Our customers and go easy
As such, you can continue to expect us to remain disciplined, Underwriters of non non-prime credit, as we continue to navigate against the backdrop of a stagnant economy and a constantly evolving tariff picture.
With that, I'll turn the call back to Dan for our Outlook and some closing remarks.
Great. Thank you. Jason. Uh looking to slide 22 where we introduce our Q3 255 outlook here. You can see where Amy to continue the growth momentum, we have in our consumer loan portfolio. While as Jason mentioned, balancing it with prudent underwriting practices.
Maintaining this balance quarter after quarter has been a Hallmark of go easy approach and a critical pillar of our historical success. And I want to ensure investors that we will not lose sight of that as we continue to scale the business.
For our Q3 Outlook, we are targeting growth in our loan book of between 325 and 350 million. Our expectations for total yield and net charge off. Remain the same as in Q2.
Moving to slide 23. We reiterate our forecasts that we expect gross consumer loan receivables to come in at the top end.
Of the 5.5 5.4 to 5.7 billion range. As you know, these 3 year plans are closely connected to our annual strategic planning process.
Place this fall.
as I spend more time in this role and engage further, with all the
Part. As part of our planning, you can expect us to update you further, when we publish our annual results in February of next year,
I want to thank the entire team for their unwavering commitment to our vision. We have incredible Talent across our organization at all levels. Over the past few months, I've had the opportunity to build deeper relationships with the excellent senior leadership team here at go, easy and I'm remain very pleased with the bench that I'm getting to know better on the topic of talent. Since we last spoke, with you, our former Chief strategy and corporate development officer Farhan. Ali, Khan has assumed a new role that we created as the chief Revenue officer at lent care. I would like to take this opportunity to thank Farhan for his many contributions and wish him the very best in his new role.
Some new executive talent. And for 1 we've brought James on board as the senior vice president of investor relations in capital markets. So a formal warm, welcome to you. James and in addition we've added leadership in areas such as strategy Collections and a few others these hires bring many years of external experience that we believe is highly complimentary to that of our tenure go easy executive team.
My colleagues and I have high Ambitions to continue to build on the market leadership that we have enjoyed and have multiple levers to continue to do. So in addition, to advancing our products services and channels, we are investing in and embedding an AI and automation mindset in all of our technology enabling activities.
To ensure that we achieve scale and efficiency. Concurrently for example, we are deploying a substantial upgrade to Salesforce making several ongoing enhancements, to our customer website, a range of improvements to our collection processes and technology. And all of which will demonstrate important benefits to our employees and our customers.
In closing, goeasy plays an essential role, as you know, in the financial system broadly by serving the many millions of hardworking Canadians that rely on us to pursue their goals and live full lives. I am very proud of this entire team and very excited about our future together. And so now, with the formal comments complete, we'll open the call for questions. Back to you, operator.
Thank you, ladies and gentlemen. We will now begin the question-and-answer session.
Should you have a question, please? Press the star, followed by the number 1 on your touchtone phone. You will hear a prompt that your hand has been raised.
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If you are using a speaker phone, please, lift the handset. Before pressing any Keys 1 moment, please for our first question.
Our first question comes from Jen. Icahn of Jeffrey. Please go ahead.
Hi John. Your line is unmuted. You can now ask your question.
My apologies about that. Thank you. Um, how in in your, uh, prepare commentary. You talked about collection optimization, uh, for the uninitiated like myself. Can you give us a couple of examples of what that might entail? And then talk about, um, you know, the benefits that we saw in terms of the margins and the 90-day, uh, delinquents 90-day plus delinquencies, how sustainable are those levels? And and can we actually see some acceleration moving forward,
Maybe, I'll take that 1 over a quarter movement in our collections, late stage, moving down, 50 basis points from 33 to 28, um, to those people who may not be as familiar with how we managed to achieve that I would say. Broadly speaking, it's all about Focus.
And really understanding the kpis that can help move the needle. So if you think about some of the ways in which we we're working through, that inventory of late stage accounts, it's about uh Expediting the time frame with which we can get at those accounts. Uh bringing those accounts sooner and forward in the delinquency cycle, so that we can if necessary repossess them and sell them and sell them in such a way, where we can maximize the recovery value of those assets, it continued to do that. Obviously, in q1, we saw a meaningful Improvement in Q2, uh, judging that, uh, obviously, we we still have some room to go. We would, we would be optimistic in seeing how that number would move down in the coming quarters. So, we're, we're optimistic. That number should move below the 2.8 level. The exact number. We, we don't have that to share at this point in time, but we would be broadly optimistic in that in that number coming down, just simply because the amount of effort and focus and some of the kpis that we use to manage that business are all trending in the right direction.
Thank you. Our next question comes from Eden. Ricardo, BMO Capital Markets, please go ahead.
So um, loan growth appears to be accelerating heading into the second half.
And the press release notes that there's um strong demands across um all the products and the channels. So I'm wondering relative to last quarter. Um, why are you seeing improving demand? That is giving you the confidence that uh, you'll be able to achieve
This year.
Yeah, good morning ETI, it's Holly here. So, um, further Ado, our discussion yesterday, uh, you know, we're seeing we're seeing heightened, level demand across all of our primary channels. Uh, for sure, uh, be that on our secured End Auto home equity, uh, and in particular because of the seasonality around our Powersports vertical, particularly as the warmer weather hits. Uh, that 1 has a seasonal impact, uh, attached to it. Uh, in addition, uh, notwithstanding, uh, the maximum allowable rate of interest. We've seen some, some great Demand on our unsecured lending, uh, vertical. And, uh, we continue to optimize from a overall, uh, risk risk standpoint on that particular product, but, uh, that that's been a very strong vertical for us. And so we feel fairly confident, that that momentum will continue to not only into the third quarter, but into the fourth quarter as well.
And as per the guidance that we've offered up, uh, we would expect that to be within the 325 to 350 million dollar range.
Okay. Uh, thank you. Hal. And and Dan, um, last quarter you raised at a focus.
For you as around better leveraging.
The customer relationship.
So what are some of the opportunities you see in terms of integrating
the land care and the easy financial uh platforms uh together going forward.
Yeah, morning. Thank you for the question. And I would just tag on to how to answer and just reinforce the, the demand from customers to cross. The product Suite has been substantial this quarter and I, I, I would just re-emphasize our confidence in that continuing on the subject of the customer relationship. I think what you would have seen in terms of yield Improvement, sequentially is in part based on our emphasis on, uh, ancillary sales the way in which we go to market with our existing customers to introduce additional add-on products, has been very successful for us, historically. And we made some very important progress in that of that in the quarter on the subject of Len care and cross-selling, and multi-logo leveraging. Our digital channels such as our Connect app, uh, we do know from a credit perspective.
Factor that multi loan products perform better because the customer feels like whether it's through the digital channel or in store that they have a connection with the people at go easy, they work within the brand in general and then they trust us, and therefore, are more accessible and more collectible and therefore, the end to end lifetime value of those customers with multiple products, is more attractive. So I would say we're, we're aware of the opportunity. We've made some progress with the status that we have at the moment and know that, that will be important as we step into 26 and we'll share more plans as those become more advanced.
Great. Thank you, team.
Our next question comes from Gary hope desertines Capital markets. Please go ahead.
Thanks. Good morning. Thanks for taking my question. Um, maybe just the first 1 for for Jason. Just in slide. 20. Uh, looks like some underwriting changes were implemented for customers working in Industries, impacted by by tariffs. Can you elaborate, what changes those were specifically. And then second uh, there's also a new credit model for home, equity loans, and increasing the loan, size to 150,000 any color on on. That would be helpful.
Yeah, sure Jerry. Thanks and good morning. Uh, the way I would have you think about the underwriting thing is we put in is just adding an additional series of layers of validation where by no means excluding, people working in those industries from having access to credit. That's not our intent. It's about making sure they have stability of income. And as such we we increase our our tightening, if you will or or checking of that income through a variety of ways. So those kinds of changes are are the kinds of things that we would typically do to to bolster our underwriting. That's not all together. Different from the approach we took in the co period nor was a substantially different from the approach we took in 2015, where you may recall, we had a recession in the province of Alberta. So think of it as a another fine-tuning layer and how we just go to market to make sure that the business we are writing Has the strength of repayment over the Long Haul as opposed to over the next couple of quarters. As it relates to the home equity business. Uh as you know, we've constantly employed a test and learn approach when it comes to introducing new credit.
Rolled out model out. Uh, and as I noted in my in my uh, introductory remarks, we have been very careful to, to do that in combination with an increase in the maximum loan size.
And are doing such with only a portion of the eligible property types that we underwrite and only for situations with a loan to evaluate value. Ratios are significantly below our minimum tolerance level, so that should give you a bit of a feel that we are being pretty prudent. That even though we're using a new model and are increasing our maximum exposure, we're doing it on only a portion of the portfolio. Uh, think of it as more of a broad testing, a learning approach that we're rolling out. So think of those as just different examples of how we try and seek opportunistically ways in which to grow the portfolio with products that have historically very low charge operates in solid returns, uh, with the need to be very prudent and tight around those unsecured products, which can always be impacted to changes when economic conditions change. So, that's how I have. You think about
Perfect, thank you, thanks. Thanks for that. My next question is from the revenue yield, um, rebound. It nicely 31.8%. That was good to see, um, sounds like, outside of the ancillary, um, products, stand. You just mentioned. There's maybe some pricing, uh, adjustments on several products.
Maybe, can you walk me through several of the bigger moving pieces? And um, are there more to do? And I take a demand hasn't suffered, uh, post these pricing changes.
Yeah, hey Gary, it's Hal here. So you know, as as you've noted, we've seen a nice uptick in the uh, overall yield quarter over quarter. As you initially referenced uh ancillary being 1 of the Prime contributors there, uh, with the heightened level of of growth that we've experienced, uh, predominantly in the security category which has higher levels of attachment on ancillary products, such as warranties tire and rim gap insurance, those types of things
Uh, so that that's been a nice uptick for us. In addition, uh, the better cash collections overall, uh, attributed to, uh, our our our, uh, net charge offs. So while in addition to, as you might have noted and seen here around our principal charge offs improving quarter of a quarter. Uh we also see on our interest and fees as well. Uh the uh the charge offs on those improving slightly into the second quarter as well as our waived uh waived interest and reversals there um on the pricing front as as you've noted. Um you know, we've seen some competitive dislocation in the marketplace uh big Banks tightening up some of the smaller players going. The Wayside uh and
We feel that uh, prominently on our secured, uh, secured uh, loans that there was some room, there on the pricing front again optimizing around, uh, our credit optimization so balancing risk as well as the APR and the total revenue yield. Um, so, you know, in terms of the outlook for the third quarter, we've provided guidance of 31 to 32% in terms of total yield contribution and again generally in line with our full year guidance. So I would expect that uh, you know, to be within that range going forward.
Okay great thanks Al and then just last 1. Um Dan you just spoke about the multi loan um kind of customers and and working on that, I think in the past. Um, the companies talked about launching a revolving card product. Um, this year as a strategic initiative, uh, any update that you can provide on this, uh, potential cross-selling opportunities and path to growth over the coming years.
Yeah, thank you. I, I think, um, I would just reiterate our our interest in ensuring that our product shelf, our products Suite, reflects the interests of customers. And we know that the credit card product is a substantial. Um,
Offer substantial Market, the size opportunity and yield and we continue to make progress of advancing. The infrastructure necessarily necessary for us to add that product to our Shelf. It is a meaningful change for the company because it would be our first revolving credit launch. Um, and I think that um, you know, as we would have indicated for quite a number of quarters. Now we're taking a measured planful approach, given the importance of it as a source of new customers, the source of balances and making sure that it fits within the product Suite with the infrastructure as needed. So um, no new updates that are other than uh were advancing as expected.
Okay, great. That's my question. Thank you.
our next question comes from Graham riding of TD Securities, please go ahead
Your approach to managing credit prudently—can you just talk about what you do, or your approach on the auto loan side in particular? Given that it's been such an important growth area for you, but it also...
Is a pretty competitive space. Can you talk about how you sort of approach managing credit there and don't grow?
Too fast, or you don't take on the wrong risk.
Yeah, and I I appreciate the fact that you've highlighted, the fact that it is a balance.
Uh there are there's some different approaches that we take to manage all of our portfolios which Auto obviously is a is a key part. So if I think about the kind
we've done over the last couple of quarters as that particular product, set continues to grow at a, at a fairly progressed rate, obviously, uh, we continue to use a couple of different approaches, uh,
If we if we just start with credit the 1 is to make sure that we're confident and happy with the level of underwriting. Uh obviously we employ a fairly sophisticated approach when it comes to approving. Those loans based on credit score and a variety of uh interweaving business rules and we constantly modify those rules. As we see opportunities or concerns in the performance of the portfolio, the other area that I think we also do is we use pricing and have used pricing.
I think we did remind that we did make some pricing adjustments in the quarter. So in instances where we we may be seeing changes in the underwriting performance of the loan book. We certainly have the ability to take actions to mitigate the exposure of the impact on the trends by using pricing as an opportunity.
The other thing is turning back to, uh, to credit is, we obviously keep a watchful eye on the loan devalue ratios that we use and value. In the assets that we underwrite, those are reviewed on a regular basis and we're appropriate, we will tweak them, either way, raising either raising them, if we think we need to be competitive with the market or tightening them. If we feel that historical performance is deviating from our expectations. So it's really a combination of of of walking a very, a very careful rope in looking at both ways in which we can manage the risk but also price for it in such a way as we begin uh, to see those numbers move in a way that we wouldn't expect. So uh again I would point out that that's the approach we take on most of the products and not just
But those are just some of the ways we handle at the bottom.
Okay, that's helpful. And then uh, Dan if I could just um, follow up on your comments around, um, some Investments towards technology. Um, can you elaborate on maybe, how material the spend your uh your considering on that front either uh on the Opex and or on the capex side?
I think my my reference is really where, um,
Uh, a call out to the decisions made before I arrived, to be honest with you and I think the, the Opex capex, uh, mix is unchanged. And our commitments are getting the, uh, kind of the operating performance metrics, margin and efficiency, and otherwise remain intact for the crystal 25 period. So these are kind of multi-view Investments, but we're advancing, uh, very well and, and they're in response to both things that our customers have said they wanted as well as well, will help our employees be more and more productive. So, uh, no new ads. There are are, are in incremental investment with regards to technology AI Auto
And so forth.
All will be folded into our updated, uh, 2026 and Beyond 3-year forecast, which we will bring back to you in around February.
Okay.
That's it for me. Thank you.
Thank you.
Our next question is coming from Stephen Boland. The fremen jeans, please go ahead.
Hi, just 1 question. I apologize about my I'm uh, if this has been talked about, um, just for the the past due loans, the ones that are like 150 to 180 or even more. I know they're kept current because you're confident in the recovery of the asset. I'm just wondering, has there been any situation where you've recovered the asset sold it at auction?
And you've even recorded a partial loss so that the the depreciated asset is less than the loan or is there such a a comfortable.
I guess Gap or margin between the loan to value and the sale.
I I think, I think broadly speaking when we when we, when we repossess those assets
Some instances, we are going to sell them for.
Risk, if you will, just to put it in general terms, is something that we face every day in our business, and the allowance, generally speaking, takes that in.
Consideration.
As you rightly pointed out.
An aggregate. When it comes to putting the provision together, uh, we believe we have medically reserved for that amount based
Progress. And as I think I've said before, we've typically not seen
Material shift in our recovery rate or performance over the last quarters, despite the uptick in the late stage buckets, and the other point I would highlight is that year over year. We have seen a lift in the allowance from around the 7.3% range up to around the 7.9%. We've taken that adjustment into consideration as we think about how to for a provision for future credit loss.
Maybe Jason. I'll just follow on that quickly. And that would be 1 of my observations with regards to the provisioning stance here as well as the collectibility and collection efficiency and effectiveness at the back end in secured the slide, 19. I think clearly points out the rising line of provision for that Jason mentioned. Maybe a scripted remarks, he did refer to having added in excess of a hundred million dollars in ACL over the period. So as we continue to work through what we would have described for some time as an industry, Dynamic at the back end you mentioned auction and and wholesaling, you know we'll continue to refine our improvements at the recovering and ensure that those recovery rates make their way back into the provisioning that we're
Building and anticipation of uh, of that inventory.
Okay. And just a just a follow on that uh demo. We talked last and maybe serp apologies. If you mentioned this on again, um like you talked about Staffing up the collections that that whole back you know, back part of a, you know, doing a loan is is that still in progress or is that still uh, a work in progress.
Oh oh I would say. I think you know the the emphasis on collections certainly was there before I started, obviously I I think the the kind of quarter on quarter performance in terms of the ability to absorb higher provisions and still hit tremendous earnings growth. I I'm talking about adding a bit more technology, a few more people that more leadership tightening up on some of the data flows exercising. Some third-party relationships that have been underway and ensuring that both our bailiff Network as well as those third parties are kind of fully on board with the projections that we have, because obviously we're growing in a fast rate and so we need them to be right there. Alongside Us in terms of scaling and in terms of providing accurate reporting. So uh work in progress for sure and progressing as expected. I think we're where I was uh, when we last spoke and even last quarter, it being important is that it resonates or the organization and we're using technology to um, to make that happen.
Okay, thanks very much.
Our next question is coming from Jack Cohen of National Bank Financial. Please go ahead.
Hi. Good morning. Um so you reported a sequential increase in the 1 to 30 day delinquency bucket. I was just wondering if you could provide a little bit more color on what drove the increase there in the quarter.
That it's Jason here. Um, I think it's important just to point out that the the 1 to 30 bucket does oscillate from quarter to quarter. In fact, if you look over the last 4 quarters, it's it's moved around uh at 2.5% which is where we landed in Q2, we are still down from the 3.0% year-on-year, um, and it would, it would I would point out that what we've also seen about the movement in the, in the 1 to 30 bucket is, we aren't necessarily seeing the roll rates in the later stages. If anything in more recent quarters, those are all rates that improved. So the fact that that 1 to 30 bucket, may move up from time, to time from quarter to quarter, um, isn't necessarily something that we would be concerned with, you would only be a concern if we actually see that translate into that movement in the later, stage buckets. And if you look at the later stage buckets, those buckets are absolutely coming down as as both an absolute number and as a percentage of the total and just to just to add on top of that. If you if you consider the fact that you know from an underwriting perspective, we're originating, uh you know, larger amounts of loans, a higher percentage of those are secured
You weighted average credit score of those loans remains quite robust. It's about 14. Consecutive quarters of weighted. Average score is above 600. I would say that it's not unusual to expect modest. Oscillations from quarter to quarter in the 1 to 30. The thing, you do want to be mindful of and obviously, as Dan mentioned, we're a laser focused on is to make sure that doesn't show up in your later stage buckets, and to date certainly since the year has begun, we've been quite pleased with how that's been performing.
To keep that in mind and also bear in mind that the way in which a quarter can end from what we often refer to as a day waiting perspective. So the the last day of the month of a quarter can also influence that 1 to 30 bucket, uh, you know, depending on, whether that, that quarter ends on a day where you're pulling a lot of payments for customers or you're getting a lot of payment returns from customers, can most quickly and be most manifestly felt in the 1 to 30 range. So again, you will see oscillation from quarter to quarter but we're pretty we're pretty confident that, uh, 30, that 1 to 30 bucks, it isn't contributing to any issues down the road and therefore, we would say no concerns at this point.
Okay, thank you for that. That's uh, that's helpful. So also the uh, the funding rate of new applications increased to 13% in the quarter. Well, it still seems Seems low, does this suggest um an increased appetite for growth? Maybe
Yeah, you know, it's how here uh so you know obviously we always look at optimizing uh optimizing from a credit credit posture and credit standpoint. I think as we've seen, you know, those applications flow through particularly, you know, as some of the large players have actually tightened up the large Banks, bringing a really good throughput of customers. Uh, our way, uh, we'll continue to look at optimization. Uh, we think that there's opportunity there for some marginal uplift.
In our overall approval and funding rates. And we are still dealing with the overall, Dynamic of the maximum allowable interest rate. And as that continues to flow through, that will have some impact. But generally speaking, you know, we've been managing that, uh, in line with expectations, or in fact, slightly better than, than what we expected coming through. So,
we're very pleased with the throughput, very pleased with the growth, as I've mentioned, you know, record levels of originations record levels of growth, uh, and uh, very, very pleased from a competitive posture. And, uh, we'll continue to try to optimize, uh, our risk risk appetite reward.
I would just as we're as, I think we're wrapping the call here, shortly. Just say the, the market size, the competitive Dynamics,
and the high customer demand in this environment leads us to believe that there's opportunity in the funding rate. And I think what you're seeing it, uh, is that Json? As I hope has been convincing, has been reassuring. You that the we want to take a long-term View and we want to balance that growth upside with returns that take into account the full end-to-end cost, including credit. So, uh, I I really appreciate you pointing that out. You know, it's 87% of the ones we we don't fund them, right? So the opportunity is within our control to determine how we, um, how we toggle the intake on on new customer demand. So I would just end by saying
It's it's been a, a really really positive, uh, last several months, obviously, uh, the results, uh, speak for themselves and we just really appreciate all of your questions and interest in the company, and I'll pass it back to James.
Operator: Uh, should we do a poll for any last questions?
As a reminder.
Should you have a question? Please? Press star 1.
There are no further questions at this time. I would now like to turn the call back over to Mr. James Wright, for his closing remarks, please go ahead.
Thank you. Operator. We'd like to thank everyone for participating in this conference call. We look forward to updating you on our next quarterly, call in November have a great rest of your day. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.