Q1 2026 goeasy Ltd Earnings Call

May 13, 2026

Operator: Good morning, ladies and gentlemen, and welcome to GoEasy Q1 2026 earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. Also note that this call is being recorded on Wednesday, 13 May 2026. I would now like to turn the conference over to James Obright, Senior Vice President of Investor Relations & Capital Markets. Please go ahead.

Operator: Good morning, ladies and gentlemen, and welcome to goeasy Q1 2026 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on Wednesday, 13 May 2026. I would now like to turn the conference over to James Obright, Senior Vice President of Investor Relations and Capital Markets. Please go ahead.

Speaker #2: Following the presentation, we will conduct a question-and-answer session. And if at any time during this call you require me to assistance, please press star 0 for the operator.

Speaker #2: Also note that this call is being recorded on Wednesday, May 13, 2026. I would now like to turn the conference over to James Albright, Senior Vice President of Investor Relations and Capital Markets.

Speaker #2: Please go ahead. Thank you, Operator, and good morning, everyone. Thank you for joining us to discuss goeasy Limited's results for the first quarter ended March 31st, 2026.

James Obright: Thank you, operator. Good morning, everyone. Thank you for joining us to discuss goeasy Ltd.'s results for Q1 ended 31 March 2026. Our Q1 news release, which was issued yesterday, is available on Cedar Plus and on the goeasy website. On today's call, Patrick Ens, goeasy's Chief Executive Officer, will provide an update on our Q1 performance and recent developments, an outlook for the business. Felix Wu, our Chief Financial Officer, will provide an overview of our Q1 2026 financial results as well as our liquidity position. Also joining us on the call today is Jason Appel, goeasy's Chief Risk Officer. After the prepared remarks, we will open the lines for questions from our research analysts. The operator will poll for questions and provide instructions at the appropriate time.

James Obright: Thank you, Operator. Good morning, everyone. Thank you for joining us to discuss goeasy Ltd.'s results for Q1 ended 31 March 2026. Our Q1 news release, which was issued yesterday, is available on Cedar Plus and on the goeasy website. On today's call, Patrick Ens, goeasy's Chief Executive Officer, will provide an update on our Q1 performance and recent developments, an outlook for the business. Felix Wu, our Chief Financial Officer, will provide an overview of our Q1 2026 financial results as well as our liquidity position. Also joining us on the call today is Jason Appel, goeasy's Chief Risk Officer. After the prepared remarks, we will open the lines for questions from our research analysts. The operator will poll for questions and provide instructions at the appropriate time.

Speaker #2: Our Q1 news release, which was issued yesterday, is available on Cedar Plus and on the goeasy website. On today's call, Patrick Enns, goeasy's Chief Executive Officer, will provide an update on our first quarter performance and recent developments, and an outlook for the business.

Speaker #2: Felix Wu, our Chief Financial Officer, will provide an overview of our Q1 2026 financial results, as well as our liquidity position. Also joining us on the call today is Jason Appell, goeasy's Chief Risk Officer.

Speaker #2: After the prepared remarks, we will open the lines for questions from our research analysts. The operator will poll for questions and provide instructions at the appropriate time.

Speaker #2: Before we begin, I remind you that this conference call is open to all investors, and is being webcast through the company website and supplemented by a quarterly earnings presentation, which will be referred to by our speakers today.

James Obright: Before we begin, I remind you that this conference call is open to all investors and is being webcast through the company website and supplemented by a quarterly earnings presentation, which will be referred to by our speakers today. For those dialing in by phone, the presentation can be found in the investor relations section of the company's website. As noted on slides 2 and 3, forward-looking statements will be made on this call, which involve assumptions that have inherent risks and uncertainties. Actual results could differ materially. I would also remind listeners that goeasy uses non-IFRS financial measures and metrics to arrive at adjusted results. Management evaluates performance on both a reported and an adjusted basis and considers both useful for assessing underlying business performance. These are more fully described in the appendix. With that, I'll now turn the call over to Patrick Ens.

James Obright: Before we begin, I remind you that this conference call is open to all investors and is being webcast through the company website and supplemented by a quarterly earnings presentation, which will be referred to by our speakers today. For those dialing in by phone, the presentation can be found in the investor relations section of the company's website. As noted on slides two and three, forward-looking statements will be made on this call, which involve assumptions that have inherent risks and uncertainties. Actual results could differ materially. I would also remind listeners that goeasy uses non-IFRS financial measures and metrics to arrive at adjusted results. Management evaluates performance on both a reported and an adjusted basis and considers both useful for assessing underlying business performance. These are more fully described in the appendix. With that, I'll now turn the call over to Patrick Ens.

Speaker #2: For those dialing in by phone, the presentation can be found in the Investor Relations section of the company's website. As noted on slides 2 and 3, forward-looking statements will be made on this call, which involve assumptions that have inherent risks and uncertainties.

Speaker #2: Actual results could differ materially. I would also remind listeners that goeasy uses non-IFRS financial measures and metrics to arrive at adjusted results. Management evaluates performance on both a reported and an adjusted basis and considers both useful for assessing underlying business performance.

Speaker #2: These are more fully described in the appendix. With that, I'll now turn the call over to Patrick Enns.

Speaker #3: Thank you, James. And welcome to everyone listening in on the call today. Before we discuss our Q1 results, I wanted to take a minute to reiterate the essential role we play in the financial system: empowering the 9.5 million hardworking, everyday Canadians with non-prime credit scores.

Patrick Ens: Thank you, James, and welcome to everyone listening in on the call today. Before we discuss our Q1 results, I wanted to take a minute to reiterate the essential role we play in the financial system, empowering the 9.5 million hardworking everyday Canadians with non-prime credit scores. We have built a market-leading direct-to-consumer brand through our easyfinancial platform, which operates nearly 300 branches nationwide. The direct-to-consumer easyfinancial model has a long track record of strong performance. The combination of credit models and lending practices informed by decades of experience and a focus on building deep customer relationships continues to lead to strong repayment behavior and greater lifetime customer value. Expanding our market-leading direct-to-consumer easyfinancial franchise in Canada's large and relatively untapped market is the core of our strategy. In the near term, our priorities are clear.

Speaker #3: We have built a market-leading, direct-to-consumer brand through our easy financial platform, which operates nearly 300 branches nationwide. The direct-to-consumer easy financial model has a long track record of strong performance.

Speaker #3: The combination of credit models, lending practices, informed by decades of experience, and a focus on building deep customer relationships continues to lead to strong repayment behavior and greater lifetime customer value.

Speaker #3: Expanding our market-leading, direct-to-consumer easy financial franchise in Canada's large, relatively untapped market is the core of our strategy. In the near term, our priorities are clear.

Speaker #3: We are delivering on our plan to reduce exposure to underperforming, merchant-originated loans, concentrating growth in our direct-to-consumer easy financial brand, and managing our liquidity and balance sheet carefully.

Patrick Ens: We are delivering on our plan to reduce exposure to underperforming merchant-originated loans, concentrating growth in our direct-to-consumer easyfinancial brand, and managing our liquidity and balance sheet carefully. It has been 6 weeks since we last updated you on the performance of our business. I am pleased to report that we are on track with our stated plan. In the short time since we last spoke with you, we have continued to execute our 6-point action plan. We have an energized team, supportive stakeholders, and a clear focus. Let's turn to an update on the business. Starting with an update on the key financial developments of the quarter, we pulled back on originations late in Q1. Our ability to carefully calibrate origination volumes, the largest use of cash in our business, is an invaluable tool as we manage our liquidity.

Speaker #3: It has been six weeks since we last updated you on the performance of our business. I am pleased to report that we are on track with our stated plan.

Speaker #3: In the short time since we last spoke with you, we have continued to execute our six-point action plan. We have an energized team supportive of stakeholders and a clear focus.

Speaker #3: Let's turn to an update on the business. Starting with an update on the key financial developments of the quarter, we pulled back on originations late in Q1.

Speaker #3: Our ability to carefully calibrate origination volumes, the largest use of cash in our business, is an invaluable tool as we manage our liquidity. Together with elevated levels of net charge-offs, lower originations resulted in a contraction of our gross consumer loans receivable by 150 million dollars or 2.7% on a quarter-over-quarter basis.

Patrick Ens: Together with elevated levels of net charge-offs, lower originations resulted in a contraction of our gross consumer loans receivable by CAD 150 million or 2.7% on a quarter-over-quarter basis. As we'll get into in more detail later in this presentation, the elevated charge-offs in our merchant-originated business through LendCare weighed on earnings. Our adjusted diluted EPS came in at -CAD 1.90 for Q1. The overall business nonetheless continued to generate strong cash provided by operations before net principal written of CAD 560 million. The total net charge-off rate came in as anticipated at 17.8%, up year over year, but lower relative to Q4 2025.

Speaker #3: As we'll get into in more detail later in this presentation, the elevated charge-offs in our merchant-originated business through LendCare weighed on earnings. Our adjusted diluted EPS came in at negative $1.90 for Q1.

Speaker #3: The overall business, nonetheless, continued to generate strong cash provided by operations before net principal written of $560 million. The total net charge-off rate came in as anticipated at 17.8%, up year over year but lower relative to Q4 2025.

Speaker #3: Delinquencies were up 30 basis points year over year to 12.3%, with significant improvements in 30 days plus past-due loan balances, offset by an increase in 1 to 30 days past-due loan balances.

Patrick Ens: Delinquencies were up 30 basis points year-over-year to 12.3%, with significant improvements in 30 days plus past due loan balances offset by an increase in 1 to 30 days past due loan balances. On a sequential quarter-on-quarter basis, loan balances greater than 30 days past due declined 70 basis points from 6.6% to 5.9%. The rate of allowance for expected credit losses increased to 10.09% in Q1 as we continue to add to our total allowance for credit losses against a backdrop of a persistent weak macroeconomic environment. Total ACL on gross consumer loans increased to CAD 541.2 million from CAD 382.8 million at this time last year. On our Q4 call, I shared details on our 6-point action plan.

Speaker #3: On a sequential quarter-on-quarter basis, loan balances greater than 30 days past-due declined 70 basis points from 6.6% to 5.9%. The rate of allowance for expected credit losses increased to 10.09% in Q1 as we continue to add to our total allowance for credit losses, against a backdrop of a persistent weak macroeconomic environment.

Speaker #3: Total ACL on gross consumer loans increased to $541.2 million from $382.8 million at this time last year. On our Q4 call, I shared details on our six-point action plan.

Speaker #3: I noted the most significant steps we took in quarter, including the workforce reduction, that impacted approximately 9% of our employee base, and is expected to contribute $30 million in annualized savings.

Patrick Ens: I noted the most significant steps we took in Q1, including the workforce reduction that impacted approximately 9% of our employee base and is expected to contribute CAD 30 million in annualized savings. That reduction coincided with our move to significantly tighten merchant originations through LendCare. LendCare gross loans receivable declined 7.4% in Q1. As I noted on our previous call, we are maintaining a reduced presence in segments and merchants where we see better performance and opportunities for future optimization. We will continue to evaluate our strategy for lending opportunities in merchant channels over the coming quarters. Finally, we continue to manage liquidity carefully. We progressed against the two deliverables required to make further draws against Securitization Warehouse Facility One and repaid our US$65 million May 2026 senior unsecured note maturity using existing cash resources.

Speaker #3: That reduction coincided with our move to significantly tighten merchant originations through LendCare. LendCare gross loans receivable declined 7.4% in the quarter. As I noted on our previous call, we are maintaining a reduced presence in segments and merchants where we see better performance, and opportunities for future optimization.

Speaker #3: We will continue to evaluate our strategy for lending opportunities in merchant channels over the coming quarters. Finally, we continue to manage liquidity carefully. We progressed against the two deliverables required to make further draws against securitization warehouse facility one and repaid our US $65 million May 2026 senior unsecured note maturity using existing cash resources.

Speaker #3: On slide seven, I wanted to revisit the Q1 2026 outlook that we shared with you when we provided our Q4 annual financial results. I am pleased to report that our actual Q1 performance was consistent with our outlook across all three measures.

Patrick Ens: On slide 7, I wanted to revisit the Q1 2026 outlook that we shared with you when we provided our Q4 annual financial results. I am pleased to report that our actual Q1 performance was consistent with our outlook across all three measures. Ending gross consumer loans receivable of CAD 5.36 billion was in the middle of our CAD 5.3 billion to CAD 5.4 billion outlook range. Total yield on consumer loans came in at 27.9%, near the top end of our 27% to 28% range. Net charge-offs at 17.8% came in just below the midpoint of our 17.5% to 18.5% outlook. Now turning to slide 8. As a reminder, we have two reporting segments. easyfinancial, our consumer lending arm that provides installment loans, and easyhome, Canada's largest lease-to-own company.

Speaker #3: Ending gross consumer loans receivable of 5.36 billion was in the middle of our 5.3 to 5.4 billion outlook range, total yield on consumer loans came in at 27.9%, near the top end of our 27 to 28 percent range, and net charge-offs at 17.8% came in just below the midpoint of our 17.5 to 18.5 percent outlook.

Speaker #3: Now turning to slide eight. As a reminder, we have two reporting segments. Easy financial, our consumer lending arm that provides installment loans, and EasyHome, Canada's largest leased-to-own company.

Speaker #3: Under the consumer lending umbrella, our two operating segments. The easy financial operating segment is our direct-to-consumer lending business, the longtime core of goeasy. The second consumer lending operating segment, LendCare, is our merchant-originated financing business, which we acquired in 2021.

Patrick Ens: Under the consumer lending umbrella are two operating segments. The easyfinancial operating segment is our direct-to-consumer lending business, the longtime core of goeasy. The second consumer lending operating segment, LendCare, is our merchant-originated financing business which we acquired in 2021. It operates through merchant partnerships as an indirect channel. LendCare represented 41.3% of our portfolio at the end of Q1, down from 43.4% in Q4 2025 and 45% in Q1 last year. Our strong core of direct-to-consumer unsecured personal loans, secured home equity loans, and easyhome lending now comprises 58.7% of our total portfolio. Given their strong performance, we expect that the direct-to-consumer unsecured and secured portfolios will be our focus for loan book growth in H2 of the year.

Speaker #3: It operates through merchant partnerships as an indirect channel. LendCare represented 41.3% of our portfolio at the end of Q1, down from 43.4% in Q4 2025 and 45% in Q1 last year.

Speaker #3: Our strong core of direct-to-consumer unsecured personal loans secured home equity loans and easy home lending now comprises 58.7% of our total portfolio. Given their strong performance, we expect that the direct-to-consumer unsecured and secured portfolios will be our focus for loan book growth in the second half of the year.

Speaker #3: On the next slide, we provide an update on the performance of the components of our consumer lending reporting segment. We saw stable quarter-over-quarter weighted average interest rates of originations in our easy financial unsecured personal loans, and a modest increase in our easy financial secured personal loans.

Patrick Ens: On the next slide, we provide an update on the performance of the components of our consumer lending reporting segment. We saw stable quarter-over-quarter weighted average interest rates of originations in our easyfinancial unsecured personal loans and a modest increase in our easyfinancial secured personal loans. Weighted average interest rates dropped in merchant-originated loans through LendCare primarily due to pullbacks in credit that were focused on preserving higher quality and thus lower rate borrowers. On a dollar-weighted basis at quarter end, 86.6% of total gross consumer loans receivable carried an interest rate less than or equal to the 35% APR maximum allowable interest rate for new loans written after 1 January 2025. In Q1, we continued to see credit performance in line with expectations in both our direct-to-consumer secured and unsecured products.

Speaker #3: Weighted average interest rates dropped in merchant-originated loans through LendCare, primarily due to pullbacks in credit that were focused on preserving higher quality and thus lower rate borrowers.

Speaker #3: On a dollar-weighted basis at quarter end, 86.6% of total gross consumer loans receivable carried an interest rate less than or equal to the 35% APR maximum allowable interest rate for new loans written after January 1, 2025.

Speaker #3: In Q1, we continue to see credit performance in line with expectations in both our direct-to-consumer secured and unsecured products. Annualized net charge-offs for direct-to-consumer unsecured loans were 13.8%.

Patrick Ens: Annualized net charge-offs for direct-to-consumer unsecured loans were 13.8%, up from 12.7% in Q1 2025. In the merchant-originated LendCare loan portfolio, net charge-offs fell to 26.4% in the quarter from 40.6% in Q4. Our direct-to-consumer business continues to perform as expected, and that's where we expect to focus our growth in H2 2026. While Q1 net charge-offs at LendCare are still significantly elevated, they were in line with our expectations for the quarter. I will now turn the call over to our CFO, Felix Wu, for a discussion of our financial performance for Q1. Felix.

Speaker #3: Up from 12.7% in Q1 2025. In the merchant-originated LendCare loan portfolio, net charge-offs fell to 26.4% in the quarter from 40.6% in Q4. Our direct-to-consumer business continues to perform as expected, and that's where we expect to focus our growth in the second half of 2026.

Speaker #3: While Q1 net charge-offs at LendCare are still significantly elevated, they were in line with our expectations for the quarter. I will now turn the call over to our CFO, Felix Wu, for a discussion of our financial performance for the first quarter.

Speaker #3: Felix, thank you, Patrick. And good morning, everyone. Before I recap the key financial developments in our business in the first quarter, I wanted to provide an update on the LendCare-specific control deficiency related to the application of IFRS 9 in our financial statements that was identified during our year-end assessment.

Felix Wu: Thank you, Patrick, good morning, everyone. Before I recap the key financial developments in our business in Q1, I wanted to provide an update on the LendCare-specific control deficiency related to the application of IFRS 9 in our financial statements that was identified during our year-end assessment. Since reporting Q4, we continue to make progress in our cross-functional remediation efforts that include credit risk, collections, finance, and internal audit. We have added to our operational controls, our governance and oversight mechanisms, and further documented our processes. We've also engaged a Big Four consulting firm to further strengthen our financial reporting processes going forward. Turning to the summary of our Q1 results, the nearly 12% year-over-year growth in our consumer loan portfolio supported modest growth in revenue.

Speaker #3: Since reporting Q4, we continue to make progress in our cross-functional remediation efforts that include credit risk collections, finance, and internal audit. We have added to our operational controls our governance and oversight mechanisms and further documented our processes.

Speaker #3: We've also engaged a Big Four consulting firm to further strengthen our financial reporting processes going forward. Turning to the summary of our first quarter results, the nearly 12% year-over-year growth in our consumer loan portfolio supported modest growth in revenue.

Speaker #3: However, our net income and return on equity were negatively impacted by elevated net charge-offs related to our merchant-originated auto and power sports portfolios. We significantly narrowed the deficit relative to Q4 with adjusted net loss of 31.3 million and adjusted diluted loss per share of $1.90.

Felix Wu: However, our net income and return on equity were negatively impacted by elevated net charge-offs related to our merchant-originated auto and powersports portfolios. We significantly narrowed the deficit relative to Q4 with adjusted net loss of CAD 31.3 million and adjusted diluted loss per share of CAD 1.90. Gross consumer loans receivable increased to CAD 5.36 billion as at 31 March 2026 from CAD 4.8 billion this time last year, an increase of CAD 568 million or approximately 12%. The increase in consumer loans receivable was driven by loan growth across several product and acquisition channels, including unsecured lending and home equity loans. This growth was partially offset by charge-offs recognized in Q4 2025 and Q1 2026 related to certain underperforming merchant-originated auto and powersports loans.

Speaker #3: Gross consumer loans receivable increased to $5.36 billion as at March 31, 2026, from $4.8 billion this time last year, an increase of $568 million, or approximately 12%.

Speaker #3: The increase in consumer loans receivable was driven by loan growth across several product and acquisition channels, including unsecured lending and home equity loans. This growth was partially offset by charge-offs recognizing the fourth quarter of 2025 and the first quarter of 2026 related to certain underperforming merchant-originated auto and power sports loans.

Speaker #3: This was in addition to the impact of lower loan originations in the current quarter, driven by credit-tightening measures applied to the merchant-originated loan portfolios and by a moderation in direct-to-consumer loan originations implemented to bolster our liquidity.

Felix Wu: This was in addition to the impact of lower loan originations in the current quarter, driven by credit tightening measures applied to the merchant-originated loan portfolios and by a moderation in direct-to-consumer loan originations implemented to bolster our liquidity. Due to the merchant-originated auto and powersports charge-offs and reduced originations, combined with continued unsecured personal loan growth, 44.4% of the total loan portfolio was secured as at quarter end, down from 45.6% in the prior quarter. Organic portfolio growth, partially offset by lower total yield, drove a year-over-year increase in quarterly revenue of 2% to CAD 413 million, also slightly ahead of Q4 2025. On the right of the page, the total yield on our consumer loan portfolio was down 330 basis points relative to Q1 2025, but up 130 basis points relative to Q4.

Speaker #3: Due to the merchant-originated auto and power sports charge-offs and reduced originations, combined with continued unsecured personal loan growth, 44.4% of the total loan portfolio was secured as at quarter end.

Speaker #3: Down from 45.6% in the prior quarter. Organic portfolio growth, partially offset by lower total yield, drove a year-over-year increase in quarterly revenue of 2% to $413 million.

Speaker #3: Also slightly ahead of Q4 2025. On the right of the page, the total yield in our consumer loan portfolio was down 330 basis points relative to Q1 2025, but up 130 basis points relative to Q4.

Speaker #3: Year-over-year, yields faced downward pressure on three fronts. The impact of the higher allowance for credit losses on interest receivable. The continued impact of the lowered maximum allowable rate of interest on our unsecured lending products and a higher proportion of larger dollar-value loans, which have lower yields in certain ancillary products.

Felix Wu: Year-over-year, yields faced downward pressure on three fronts. The impact of the higher allowance for credit losses on interest receivable. The continued impact of the lowered maximum allowable rate of interest on our unsecured lending products. A higher proportion of larger dollar value loans which have lower yields than certain ancillary products. Switching over to costs. Other operating expenses in Q1 were CAD 96.8 million, up 1.5% compared to last year. The increase was mainly driven by non-recurring restructuring charges of CAD 4.8 million in the period, higher legal and professional services costs, and higher collections costs. These were largely offset by lower marketing investments and lower compensation costs, some of which were one-time.

Speaker #3: Switching over to costs, other operating expenses in Q1 were 96.8 million, up 1.5% compared to last year. The increase was mainly driven by non-recurring restructuring charges of 4.8 million in the period, higher legal and professional services costs, and higher collections costs.

Speaker #3: These were largely offset by lower marketing investments and lower compensation costs, some of which were one-time. The efficiency ratio for the period, which normalizes for restructuring charges, was 24.5%, an improvement of 160 basis points from 26.1% in the same period of 2025.

Felix Wu: The efficiency ratio for the period, which normalizes for restructuring charges, was 24.5%, an improvement of 160 basis points from 26.1% in the same period of 2025. Looking ahead, we expect operational efficiency will face pressures as a result of collection costs and increased marketing investments as we look to resume growth in H2 of the year. We continue to evaluate and identify opportunities to improve effectiveness and operational efficiency across all areas, with a particular focus on credit, underwriting, and collection practices. On both a reported and an adjusted basis, Q1 operating income was down year-over-year. The decrease in adjusted operating income was primarily driven by elevated credit losses and lower total yield in consumer loans, including ancillary products. We generated an adjusted loss per diluted share of CAD 1.90 in the quarter.

Speaker #3: Looking ahead, we expect operational efficiency will face pressures as a result of collection costs and increased marketing investments as we look to resume growth in the second half of the year.

Speaker #3: We continue to evaluate and identify opportunities to improve effectiveness and operational efficiency across all areas with a particular focus on credit underwriting and collection practices.

Speaker #3: On both the reported and an adjusted basis, Q1 operating income was down year-over-year. The decrease in adjusted operating income was primarily driven by elevated credit losses and lower total yield in consumer loans, including ancillary products.

Speaker #3: We generated an adjusted loss per diluted share of $1.90 in the quarter. That figure backs out the impact of restructuring charges and fair value changes on both our investments and prepayment options related to our notes payable.

Felix Wu: That figure backs out the impact of restructuring charges and fair value changes on both our investments and prepayment options related to our notes payable. Starting on the next slide, we move into a discussion of our credit and underwriting performance in the quarter. The year-over-year increase in net charge-offs was primarily driven by higher charge-offs in our merchant-originated auto and powersports loan portfolio. Recall that beginning in Q4 2025, we determined that in the case of unsecured loans that are delinquent for greater than 90 days and secured loans that are delinquent for greater than 180 days, we would not deem further collection efforts to be practicable unless collateral has been seized where proceeds from the sale have not yet been received, or the company and the borrower have entered into an agreement to modify the loan pending process completion.

Speaker #3: Starting on the next slide, we move into a discussion of our credit and underwriting performance in the quarter. The year-over-year increase in net charge-offs was primarily driven by higher charge-offs in our merchant-originated auto and power sports loan portfolio.

Speaker #3: Recall that beginning in Q4 2025, we determined that in the case of unsecured loans that are delinquent for greater than 90 days, and secured loans that are delinquent for greater than 180 days, we would not deem further collection efforts to be practicable unless collateral has been seized or proceeds from the sale have not yet been received.

Speaker #3: Or the company and the borrower have entered into an agreement to modify the loan pending process completion. Referencing the operating segment disclosure, Patrick covered on slide 9, which showed net charge-offs in greater detail, for Q1 2025, net charge-offs in LendCare were 26.4% as compared with 40.6% in Q4.

Felix Wu: Referencing the operating segment disclosure Patrick covered on slide 9, which showed net charge-offs in greater detail, for Q1 2025, net charge-offs in LendCare were 26.4% as compared with 40.6% in Q4. Net charge-offs were only slightly higher quarter-over-quarter in the easyfinancial direct-to-consumer portfolio, underscoring the relative health of that business and the continued impact that our merchant-originated business is having. The chart on this page illustrates a meaningful shift in the composition of our delinquencies. Total delinquent loans at the end of Q1 represented 12.3% of the total, an increase of 30 basis points compared to Q1 2025.

Speaker #3: Net charge-offs were only slightly higher quarter over quarter in the easy financial direct-to-consumer portfolio underscoring the relative health of that business and the continued impact that our merchant-originated business is having.

Speaker #3: The chart on this page illustrates a meaningful shift in the composition of our delinquencies. Total delinquent loans at the end of the first quarter represented 12.3% of the total, an increase of 30 basis points compared to Q1 2025.

Speaker #3: Gross consumer loans receivable that were 1 to 30 days past due as at the end of first quarter increased by 240 basis points compared to Q1 last year.

Felix Wu: Gross consumer loans receivable that were 1 to 30 days past due as at the end of Q1 increased by 240 basis points compared to Q1 last year, driven by elevated credit risk performance in merchant-originated auto and powersports loans, an increased focus on cash collections in the unsecured loan portfolio, and persistent weak macroeconomic conditions. Gross consumer loans receivable that were over 30 days past due at the end of Q1 decreased by 210 basis points compared to Q1 last year, primarily driven by charge-offs recognized in Q4 of 2025 and Q1 of 2026 related to certain delinquent merchant-originated auto and powersports loans. We place the most focus internally on loans 30 days past due or more and are pleased with the improvement and emerging stability we're seeing in that category.

Speaker #3: Driven by elevated credit risk performance in merchant-originated auto and power sports loans, an increased focus on cash collections in the unsecured loan portfolio, and persistent weak macroeconomic conditions.

Speaker #3: Gross consumer loans receivable that were over 30 days past due at the end of Q1 decreased by 210 basis points compared to Q1 last year, primarily driven by charge-offs recognized in the fourth quarter of 2025 and first quarter of 2026 related to certain delinquent merchant-originated auto and power sports loans.

Speaker #3: We placed the most focus internally on loans 30 days past due or more, and are pleased with the improvement in emerging stability we're seeing in that category.

Speaker #3: Looking at our allowances for credit losses, we continue to build in the quarter with total ACL now $541.2 million. Up from $382.8 million this quarter last year.

Felix Wu: Looking at our allowances for credit losses, we continued to build in the quarter with total ACL now CAD 541.2 million, up from CAD 382.8 million this quarter last year. The increase was mainly due to management's current view of collectability and an increase in the credit loss outlook for merchant-originated auto and powersports loans. The rate of allowance for expected credit losses increased from 7% as at Q4 2025 to 10.09% for Q1 2026. Driven primarily by unfavorable changes in the macroeconomic outlook data used in our IFRS 9 allowance model. Slide 19 provides an update on the new non-IFRS measure that we introduced in connection with our Q4 results.

Speaker #3: The increase was mainly due to management's current view of collectibility and an increase in the credit loss outlook for merchant-originated auto and power sports loans.

Speaker #3: The rate of allowance for expected credit losses increased from 9.57% as at Q4 2025 to 10.09% for Q1 2026, driven primarily by unfavorable changes in the macroeconomic outlook data used in our IFRS 9 allowance model.

Speaker #3: Slide 19 provides an update on the new non-IFRS measure that we introduced in connection with our Q4 results. Cash provided by operating activities before net principal written is essentially the principal repayments we received together with interest paid by our borrowers before originations.

Felix Wu: Cash provided by operating activities before net pre-principal written is essentially the principal repayments we received together with interest paid by our borrowers before originations. We have a great deal of control over the pace and volume of originations, which are the biggest use of cash in our business. This is an invaluable tool in liquidity management. Historically, we directed much of that cash flow to meet customer demand for new loans and to support the growth in our gross loans receivable. As you've heard, in Q1, we moderated originations to fortify our liquidity. Cash provided by operations before net principal written in Q1 2026 was CAD 560.1 million, up from CAD 410.7 million in Q1 2025. The strong cash generation I just described is a good lead-in to an update on our balance sheet.

Speaker #3: We have a great deal of control over the pays and volume of originations, which are the biggest use of cash in our business, and this is an invaluable tool in liquidity management.

Speaker #3: Historically, we directed much of that cash flow to meet customer demand for new loans and to support the growth in our gross loans receivable.

Speaker #3: As you've heard, in Q1, we moderated originations to fortify our liquidity. Cash provided by operations before net principal written in Q1 2026 was $560.1 million, up from $410.7 million in Q1 2025.

Speaker #3: The strong cash generation I just described is a good lead-in to an update on our balance sheet. Since our last update, we used existing cash resources to repay the $64.6 million unsecured note that matured at the beginning of this month.

Felix Wu: Since our last update, we used existing cash resources to repay the $64.6 million USD unsecured note that matured at the beginning of this month. Our quarter-end liquidity represented by cash on hand, plus unused contractual borrowing capacity was CAD 1.1 billion, of which CAD 743 million is not currently available. On 1 July, we regained incremental capacity under our revolving credit facility. For our Securitization Warehouse Facility One, there are two conditions to regain incremental capacity. Both are in process. First, we have to complete a facility-level audit to the satisfaction of our lenders. To be clear, this is not a company-wide audit, but rather one focused on the assets sold to the Securitization Trust I, its cash flows, and the trust reporting. The external auditors have already completed their fieldwork. Second, we need to replace our backup servicer.

Speaker #3: Our quarter-end liquidity, represented by cash on hand plus unused contractual borrowing capacity, was $1.1 billion, of which $743 million is not currently available. On July 1st, we regained incremental capacity under our revolving credit facility.

Speaker #3: For our warehouse facility one, there are two conditions to regain incremental capacity, and both are in process. First, we have to complete a facility-level audit to the satisfaction of our lenders.

Speaker #3: To be clear, this is not a company-wide audit, but rather one focused on the assets sold to the securitization warehouse trust, its cash flows, and the trust reporting.

Speaker #3: The external auditors have already completed their fieldwork. Second, we need to replace our backup servicer. For those not familiar, a backup servicer is a designated third-party agent that steps in to take over the administration, collection, and reporting of loan assets if something happens to the primary servicer.

Felix Wu: For those not familiar, a backup servicer is a designated third-party agent that steps in to take over the administration, collection, and reporting of the loan assets if something happens to the primary servicer, which is us. While fulfilling both these Securitization Warehouse Facility One conditions are not entirely in our control as we are relying on third parties, we continue to make good progress and continue to work closely with our lenders, the auditors, and the new backup servicer to complete these processes. With the main note's maturity repaid, we have no other near-term note maturities to manage. We'll continue to benefit from the low and mostly fixed or hedged interest costs we have with an average coupon of 6.6% at the end of Q1. Our capital allocation priorities remain consistent with Q4.

Speaker #3: Which is us. While fulfilling both these securitization warehouse trust one conditions are not entirely in our control as we are relying on third parties, we continue to make good progress and continue to work closely with our lenders, the auditors, and the new backup servicer to complete these processes.

Speaker #3: With the main notes maturity repaid, we have no other near-term note maturities to manage. We'll continue to benefit from the low and mostly fixed or hedged interest costs we have with an average coupon of 6.6% at the end of Q1.

Speaker #3: Our capital allocation priorities remain consistent with Q4. We've suspended our dividend and share repurchases indefinitely and were prudently managing cash while we navigate this period.

Felix Wu: We've suspended our dividend and share repurchases indefinitely, and we're prudently managing cash while we navigate this period. With that, I will turn the call back to Patrick for our outlook and concluding comments.

Speaker #3: With that, I will turn the call back to Patrick for our outlook and concluding comments.

Speaker #2: Thank you, Felix. With our earnings, we are introducing a Q2 outlook. Following the same framework, we used last quarter. For Q2 2026, we expect ending loans receivables to be between $4.9 and $5.1 billion.

Patrick Ens: Thank you, Felix. With our earnings, we are introducing a Q2 outlook following the same framework we used last quarter. For Q2 2026, we expect ending loans receivables to be between 4.9 and 5.1 billion. Yield on consumer loans is expected to land between 27% and 28.5% and net charge-offs are expected to be between 16% and 17.5%. Regarding the full year 2026, our expectations remain consistent with those we provided last quarter. We continue to expect gross loans receivable to decline before resuming growth in the H2. Yield on consumer loans is expected to improve over the course of the year as interest charge-offs decline. Finally, we expect net charge-offs to average in the mid-teens for the year, with improvement expected as the year progresses.

Speaker #2: Yield on consumer loans is expected to land between 27% and 28.5%, and net charge-offs are expected to be between 16% and 17.5%. Regarding the full year 2026, our expectations remain consistent with those we provided last quarter.

Speaker #2: We continue to expect gross loans receivable to decline before resuming growth in the second half. Yield on consumer loans is expected to improve over the course of the year as interest charge-offs decline.

Speaker #2: And finally, we expect net charge-offs to average in the mid-teens for the year with improvement expected as the year progresses. In the coming quarters, we are continuing to focus our efforts on execution.

Patrick Ens: In the coming quarters, we are continuing to focus our efforts on execution, delivering on our six-point plan, prudent management of liquidity, and strengthening credit performance. With that, I would like to turn the call back to the operator and open the lines to questions from our analysts.

Speaker #2: Delivering on our six-point plan, prudent management of liquidity, and strengthening credit performance. With that, I would like to turn the call back to the operator and open the lines to questions from our analysts.

Speaker #3: Thank you, sir. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touchdown phone.

Operator: First, we will hear from Stephen Boland at Raymond James. Please go ahead.

Speaker #3: You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two.

Speaker #3: And if you're using your speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you do have any questions.

Speaker #3: First, we will hear from Stephen Boland at Raymond James. Please go ahead.

Operator: First, we will hear from Stephen Boland at Raymond James. Please go ahead.

Speaker #4: Okay, that's a bit of a surprise. Maybe you could just talk about what you're doing with the secured book. The operations to get the delinquencies in check.

Stephen Boland: Okay, that's a bit of a surprise. Maybe you could just talk about what you're doing with the secured book, the operations to get the delinquencies in check. Have you stepped up collections, the pace of calls, things of that sort? You know, not just letting the book run down, but how are you preventing further charge-offs and delinquencies? You know, what steps have you taken there?

Speaker #4: Have you stepped up collections—the pace of calls, things of that sort? Not just letting the book run down, but how are you preventing further charge-offs and delinquencies?

Speaker #4: What steps have you taken there?

Speaker #2: Good morning. Thank you, Stephen. This is Patrick speaking. Yeah, with respect to our secured loan portfolio, it's been a top priority for the organization to effectively manage credit on that portfolio.

Patrick Ens: Good morning. Thank you, Stephen. This is Patrick speaking. With respect to our secured loan portfolio, it's been a top priority for the organization to effectively manage credit on that portfolio. Certainly long term, the biggest gains we're going to see are going to come from redoing and re-optimizing our underwriting. In the interim, we are very focused on managing down the back book and managing down the losses on that back book. In the last, you know, 12 months or so on the longer arc here, we've added multiple third parties to the network to support in both the asset recovery, as well as the locating of our customers where necessary.

Speaker #2: And certainly, long-term, the biggest gains we're going to see are going to come from redoing and reoptimizing our underwriting. But in the interim, we are very focused on managing down the backbook and managing down the losses on that backbook.

Speaker #2: In the last 12 months or so, on the longer arc here, we've added multiple third parties to the network to support in both the asset recovery as well as the locating of our customers where necessary.

Speaker #2: We've staffed up our internal team with additional collection staff, but we've also added significant capacity at the leadership level. And in some cases, we've also leveraged our retail footprint to support some of the early-stage collections efforts.

Patrick Ens: We've staffed up our internal team with additional collection staff, but we've also added a significant capacity at the leadership level. In some cases, we've also leveraged our retail footprint to support some of the early-stage collections efforts. There's really been an all-hands-on-deck approach and frankly, we think we're seeing the results come in exactly as we expected. We're pleased to see the downward movement in the LendCare loss portfolio, and that's also what's really feeding into our expectations for Q2 and our reiteration in the confidence of our full-year outlook of mid-teens loss rates for the full portfolio.

Speaker #2: So there's really been an all-hands-on-deck approach. And frankly, we think we're seeing the results come in exactly as we expected. And we're pleased to see the downward movement in the LendCare loss portfolio.

Speaker #2: And that's also what's really feeding into our expectations for Q2 and our reiteration in the confidence of our full-year outlook of mid-teens loss rates for the full portfolio.

Speaker #4: Okay. And just in terms of the allowance, or actually, no, just my second question. I'll go to the unsecured book. I guess now it's called direct-to-consumer seems to be the focus.

Stephen Boland: Okay. Just in terms of the allowance. Actually, no, I'll Just my second question. I'll go to the unsecured book. I guess now it's called the, you know, direct to consumer seems to be the focus. You're managing the growth. We, we get that. Your acceptance rate has always been fairly low even in that book. I just trying to get an idea now is, you know, are you seeing better credit coming in or, you know, you're just cherry-picking the best, you know, 100 applications, you're underwriting 1 or 2, where it might have been 4 or 5 before? I'm trying to get an idea, you know, is the credit getting better in that book as well as you're being more selective?

Speaker #4: So you're managing the growth. We get that. You're acceptance rate has always been fairly low even in that book. So I'm just trying to get an idea now is are you seeing better credit coming in or you just cherry-picking the best 100 applications at your underwriting one or two where it might have been four or five before?

Speaker #4: I'm trying to get an idea of, is the credit getting better in that book, as well as if you're being more selective?

Speaker #2: Stephen, on the direct-to-consumer, easyfinancial unsecured personal loans business, which is really the core of our business, we've seen strong and stable credit performance on that front.

Patrick Ens: Stephen, on the direct to consumer easyfinancial unsecured personal loans business, which is really the core of our business, we've seen, you know, strong and stable credit performance on that front. The reduction in originations in Q1 and what will flow through into Q2, of course, is selective. Where we're choosing to underwrite fewer loans, we are pulling back on what would normally be profitable business, but might be higher than the average risk of what we would normally acquire. We are being selective in that front. Ultimately, we think there's lots of great business in there, and that's what we're going to be leaning further into in Q3 and beyond.

Speaker #2: The reduction in originations in Q1 and what will flow through into Q2, of course, is selective. So where we're choosing to underwrite fewer loans, we are pulling back on what would normally be profitable business but might be higher than the average risk of what we would normally acquire.

Speaker #2: So we are being selective in that front. But ultimately, we think there's lots of great business in there, and that's what we're going to be leaning further into in Q3 and beyond.

Patrick Ens: For the entire back book, of course, we're seeing relatively stable performance, even in the face of a relatively challenged macroeconomic environment. We're quite pleased with the performance on our direct to consumer business.

Speaker #2: For the entire backbook, of course, we're seeing relatively stable performance even in the face of a relatively challenged macroeconomic environment. So we're quite pleased with the performance on our direct-to-consumer business.

Speaker #4: Okay. And I'll sneak one more in, and I won't read to you, but just on the backup servicer, can you name the third party?

Stephen Boland: Okay. I'll sneak one more in then I won't argue. Just on the backup servicer, can you name the third party? I'm just trying to, you know. Like I presume they have to do, like, you know, satisfy your lenders. What specific conditions do they have to meet to be approved? Or has that already happened?

Speaker #4: I'm just trying to presume they have to satisfy your lenders. What specific conditions do they have to meet to be approved? Or has that already happened?

Speaker #2: That's already happened. We can't name the hi Stephen, sorry, this is Felix. Apologies. We can't name the backup service provider. We've already selected it.

Felix Wu: That's already happened. Hi, Stephen Boland. Sorry, this is Felix Wu. We can't name the backup service provider. We've already selected it. I do want to iterate that this is a pretty standard process and procedure, especially for warehouse trust. Frankly, in terms of the two deliverables, this is probably the easier one and more sort of business as usual thing to process. That being said, there are lots of parties and technical details that need to be implemented on it. We're making great progress in working with our banks and the backup servicer to implement it. It's a normal BAU process. We have one already, and it's just switching it. That's proceeding well.

Speaker #2: I do want to iterate that this is a pretty standard process and procedure, especially for warehouse trusts. So frankly, in terms of the two deliverables, this is probably the easier one and more sort of business-as-usual thing to process.

Speaker #2: We've that being said, there are lots of parties and technical details that need to be implemented on it. And so but we're making great progress, and working with our banks and the backup servicer to implement it.

Speaker #2: So it's a normal BAU process. We have one already, and it's just switching it. And that's proceeding well.

Speaker #4: Okay. Thanks.

Stephen Boland: Okay, thanks.

Speaker #3: Thank you. Next question will be from Gary Ho at Desjardins Capital Markets. Please go ahead.

Operator: Thank you. Next question will be from Gary Ho at Desjardins Capital Markets. Please go ahead.

Speaker #5: Thanks, good morning, gentlemen. Maybe just start off with the net charge-off side. Maybe put a finer point in your discussion with Stephen's question. Just on the LendCare 26.4% in the quarter, now, just curious, the glide path we should expect towards the end of the year, you sounded pretty confident in hitting that mid-teens consolidated target.

Gary Ho: Thanks. Good morning, gentlemen. Maybe just start off with the net charge-off side. Maybe put a finer point in your discussion with Stephen Boland's question. Just on the LendCare 26.4% in the quarter. Now just curious, the glide path we should expect towards the end of the year. You sounded pretty confident in hitting that mid-teens consolidated target. Q1 will be more front-end loaded, and we should see that kind of going down. The other one, just on the easyfinancial side, the net charge-off did see that deteriorate sequentially. Wondering what's driving that. Do you see anything that we should call out?

Speaker #5: So Q1 would be more front-end loaded and we should see that kind of going down. And then the other one, just on the easy financial side, the net charge-off, did see that deteriorate sequentially.

Speaker #5: Wondering what's driving that. Do you see anything that we should call out? And what do you expect that to look for the balance of the year?

Gary Ho: What do you expect that to look for the balance of the year?

Speaker #2: Great. Thank you, Gary. So two questions just to make sure I'm keeping track here. We've got going to a bit more detail on how you see the LendCare trajectory playing out and where you get the confidence on your LendCare losses.

Patrick Ens: Great. Thank you, Gary. 2 questions just to make sure I'm keeping track here. We've got go into a bit more detail on how you see the LendCare trajectory playing out and where you get the confidence on your LendCare losses. What's driving our easyfinancial direct to consumer unsecured loss rates. Why don't I start with the first. You know, I think as we had projected heading into this quarter, that we would start relatively high on the LendCare portfolio and see continued improvement over the quarters. That's really based on how we expect the seasoning of the LendCare originations from 2024 and 2025 to play out throughout the year. Quite a bit of sophistication goes into that.

Speaker #2: And then what's driving our easy financial direct-to-consumer unsecured loss rates? So why don't I start with the first and I think as we head projected heading into this quarter that we would start relatively high on the LendCare portfolio and see continued improvement over the quarters.

Speaker #2: That's really based on how we expect the seasoning of the LendCare originations from '24 and '25 to play out throughout the year. So, quite a bit of sophistication goes into that.

Speaker #2: What I would point to in terms of the strongest leading indicator of moving in the right direction there is really in the 91-day-plus past-due receivables.

Patrick Ens: What I would point to in terms of the strongest leading indicator of moving in the right direction there is really in the 91-day-plus past due receivables. Those are concentrated, of course, in our LendCare portfolio, and you can see a significant contraction in those quarter-over-quarter. As the dollars in that LendCare portfolio shrink and the dollars in the 91-plus category shrink, that would be your strongest leading indicator. I think very clearly shows from Q4 to Q1 that we're on the right path, which is really driving our confidence in the full year estimations.

Speaker #2: Those are concentrated, of course, in our LendCare portfolio. And you can see a significant contraction in those quarter over quarter. So, as the dollars in that LendCare portfolio shrink, and the dollars in the 91-plus category shrink, that would be your strongest leading indicator.

Speaker #2: And I think it very clearly shows from Q4 to Q1 that we're on the right path, which is really driving our confidence in the full-year estimations.

Speaker #2: On the easy financial unsecured side, where we see slightly elevated performance, but what we would describe as within our expectations there's one additional factor at play here, which is that in all the previous quarters you're seeing substantial growth in the denominator as we're underwriting new loans.

Patrick Ens: On the easyfinancial unsecured side, where we see a slightly elevated performance, but what we would describe as within our expectations, there's one additional factor at play here, which is that in all the previous quarters, you're seeing substantial growth in the denominator as we're underwriting new loans. That's not taking effect in Q1. It's not perfect math, but you might have to back out somewhere between 30 and 50 basis points and call that the growth math effect on our unsecured losses. While we're on that topic, just so that there's expectations properly set heading into Q2, our Q2 outlook on losses incorporates a reduction in the loan book growth, so an actual contraction in the loan book growth, which relative to normal course elevates the loss rate.

Speaker #2: And that's not taking effect in Q1. So it's not perfect math, but you might have to back out somewhere between 30 and 50 basis points and call that the growth math effect on our unsecured losses.

Speaker #2: And while we're on that topic, just so that there's expectations properly set heading into Q2, our Q2 outlook on losses incorporates a reduction in the loan book growth.

Speaker #2: So an actual contraction in the loan book growth, which relative to normal course, elevates the loss rate and even in spite of that, we're seeing our loss rate come down quite substantially in Q2.

Patrick Ens: Even in spite of that, we're seeing our loss rate come down quite substantially in Q2.

Speaker #5: Okay. No, thanks. Thanks for that. And then my follow-up would be just on your ACL hit to kind of 10% this quarter. How do you feel about that provisioning?

Gary Ho: Okay. No, thanks for that. My follow-up would be just on your ACL, hit kind of 10%, this quarter. How do you feel about that provisioning? Do you think that's a peak, or should this climb higher before it levels off?

Speaker #5: Do you think that's a peak or should this grind higher before it levels off?

Speaker #2: Yes, Gary. On the ACL, the primary driver that drove it up this quarter was our economic forward-looking indicators, right? So ultimately, those swung unfavorably in the quarter.

Patrick Ens: Yes, Gary, on the ACL, you know, the primary driver that drove it up this quarter was our economic forward-looking indicators, right? Ultimately, those swung unfavorably in the quarter. That is the factor that is not within the control of the business. We are operating and managing our credit in the context of the environment that we operate in, our allowance takes into consideration changes in the forward-looking outlook there. We actually we will steer clear of making further commentary on how we expect those forward-looking indicators to play out, we're just gonna focus on managing credit exceptionally well, which in the long run leads to better performance within our ACL.

Speaker #2: And that is the factor that is not within the control of the business. We are operating and managing our credit in the context of the environment that we operate in.

Speaker #2: And then our allowance takes into consideration changes in the forward-looking outlook there. So we actually we will steer clear of making further commentary on how we expect those forward-looking indicators to play out.

Speaker #2: And we're just going to focus on managing credit exceptionally well. Which in the long run, leads to better performance within our ACL.

Speaker #5: And Gary, I feel this is—if I may add—Patrick's highlighted sort of the rate impact in the forward-looking indicators. And how we manage credit is the biggest driver on the rate.

Gary Ho: Yeah. Okay.

Felix Wu: Gary, hi, this is Felix.

Gary Ho: Hi.

Felix Wu: If I may add, Patrick Ens's highlighted sort of the rate impact in the forward-looking indicators and how we manage credit as the biggest driver on the rate. There is also a volume in the loan receivable book size that drives the allowance for the total allowance for credit losses. Given sort of our outlook on the loan receivable size, that will have an impact on the total allowance as well.

Speaker #5: There is also a volume in the loan receivable book size that drives the allowance for the total allowance for credit losses. And given sort of our outlook on the loan receivable size, that will have an impact on the total allowance as well.

Speaker #5: Okay. No, thanks for that clarification. And I'm not sure if I can sneak in one really quick one for you. Felix, just on that, I think there's a $743 million release.

Gary Ho: Okay. No, thanks for that clarification. I'm not sure if I can sneak in one really quick one for you, Felix. Just on that, I think there's a CAD 743 million release, I think last quarter in Q4. You said it was 1 July 2026. I didn't see that date with the MD&A and deck. Has that been pushed out, or what's your expectation in terms of timing?

Speaker #5: I think last quarter in Q4, you said it was July 1st, 2026. I didn't see that date with the SEMDNA and DEC. Has that been pushed out or what's your expectation in terms of timing?

Speaker #2: Sorry, Gary. The $700 could you restate the question? I'm not sure I totally understood.

Felix Wu: Sorry, Gary, could you restate the question? I'm not sure I totally understood that.

Gary Ho: Yeah, sorry. The securitization warehouse, that gets released, in terms of liquidity.

Speaker #5: Yeah, sorry. The securitization warehouse, that gets released in terms of liquidity. I think last quarter was you mentioned in your presentation a July 1st, 2026 is when you get that liquidity.

Felix Wu: Yeah

Gary Ho: I think last quarter was, you mentioned in your presentation that 1 July 2026 is when you get that liquidity.

Speaker #5: I don't see that date.

Felix Wu: Okay

Gary Ho: I don't see that date.

Speaker #2: Yeah, I know. Great. Thanks, Gary. So we have two facilities with our bank partners. One is the revolving credit facility and the second one is a securitization warehouse trust one.

Felix Wu: Yeah, no. Great. Thanks, Gary. We have 2 facilities with our bank partners. One is the revolving credit facility, and the second one is the Securitization Warehouse Facility One. For the revolving credit facility, it is date-based. We get access to that incremental funding on 1 July. That is the date that we disclosed in our last earnings call. For the Securitization Warehouse Facility, it is not date-based, but there are 2 conditions that we need to meet: the audit of the Securitization Warehouse Facility and the changing of our from our present backup service provider to another one. That is not date-based. There are 2 deliverables on the Securitization Warehouse Facility that we're making good progress on. The other one, the revolver, is 1 July date-based.

Speaker #2: For the revolving credit facility, it is date-based. So, we get access to that incremental funding on July 1st. And so, that is the date that we disclosed in our last earnings call.

Speaker #2: And then for the securitization warehouse trust, it is not date-based, but they're two conditions that we need to meet. The audit of the securitization warehouse trust and the changing of our from our present backup service provider to another one.

Speaker #2: So that's not date-based. And so there are two deliverables on the securitization warehouse progress on. And then the other one, the revolver is July 1st date-based.

Speaker #5: Got it. Okay. Thank you very much.

Gary Ho: Got it. Okay. Thanks. Thank you very much.

Speaker #4: Next question will be from John Aiken at Jefferies. Please go ahead.

Operator: Next question will be from John Aiken at Jefferies. Please go ahead.

Speaker #6: Good morning, Felix. Just to follow up on that point then. If and when July 1st is the date where you get access to all the liquidity, is at that point that we can expect to see originations start to run ahead of free cash flow?

John Aiken: Good morning, Felix. Just to follow up on that point then, if and when 1 July is the date where you get access to all the liquidity, is it that point that we can expect to see originations start to run ahead of free cash flow?

Speaker #2: Yeah. That's that would be right. We would be enable us to grow, and that's our expectations in terms of the outlook where our loan receivable book will resume growth in the second half of the year.

Felix Wu: Yeah. Like, that's, that would be right. We would be

Felix Wu: Yeah. Like, that's, that would be right. We would be Enable us to grow, and that's our expectations in terms of the outlook where our loan receivable book will resume growth in H2 of the year.

Jason Appel: Enable us to grow, and that's our expectations in terms of the outlook where our loan receivable book will resume growth in H2 of the year.

John Aiken: Thank you. Just a finer point on the ACL. As a percentage of the loan portfolio, as the LendCare portfolio runs down through the rest of the year and into 2027, can we actually expect to see releases out of the ACL, all else being equal, macro, et cetera?

Speaker #6: Thank you. And just a finer point on the ACL, as a percentage of the loan portfolio, as the LendCare portfolio runs down through the rest of the year in 2027, can we actually expect to see releases out of the ACL almost being equal macro, etc.?

Jason Appel: Yeah, that would be correct in terms of the overall The basic math, right, is the rate and the volume base. Patrick delineated sort of the drivers of the rate. Primarily, it's credit and the performance of our portfolio, which we're actively and most focused on that we can action. There is a secondary lesser impact in terms of the macroeconomic environment, and the other one is overall volume and the size of the loan receivable book. Those are your two drivers behind the ACL.

Speaker #2: Yeah, that would be correct. In terms of the overall, the basic math, right, is a rate and a volume-based. And so Patrick delineated sort of the drivers of the rate primarily.

Felix Wu: Yeah, that would be correct in terms of the overall The basic math, right, is the rate and the volume base. Patrick delineated sort of the drivers of the rate. Primarily, it's credit and the performance of our portfolio, which we're actively and most focused on that we can action. There is a secondary lesser impact in terms of the macroeconomic environment, and the other one is overall volume and the size of the loan receivable book. Those are your two drivers behind the ACL.

Speaker #2: It's credit and the performance of our portfolio, which we're actively and most focused on, that we can action. There is a secondary, lesser impact in terms of the macroeconomic environment.

Speaker #2: And the other one is overall volume and the size of the loan receivable book. And so, those are your two drivers behind the ACL.

Speaker #6: Thanks, Gary.

John Aiken: Thanks.

Patrick Ens: John, this is Patrick.

Speaker #5: John, this is Patrick.

Speaker #6: Yeah, go ahead, please.

John Aiken: Yeah, go ahead, please.

Patrick Ens: John, I would just add to that, of course, if we're declining our LendCare book as expected, there's naturally release of the allowance attached to the LendCare book. We are planning on growing the direct-to-consumer side of the business, there would be volumes related release, bills attached to that.

Speaker #5: John, I was just adding that, of course, if we're declining our LendCare book as expected, there's naturally release of the allowance attached to the LendCare book.

Speaker #5: We are planning on growing the direct-to-consumer side of the business. So there would be volumes related bills attached to that.

Speaker #6: Yep, understood. And then Patrick, as we're looking at the LendCare portfolio, you stated in your prepared commentary that you're assessing the merchants in terms of who's been performing well.

John Aiken: Yeah, understood. Patrick, as we're looking at the LendCare portfolio, you stated in your prepared commentary that you're assessing the merchants in terms of, you know, who's been performing well. Can you give us an order of magnitude in terms of when the dust settles, what percentage of the merchants you actually think you're gonna be carrying on business with?

Speaker #6: Can you give us an order of magnitude in terms of when the dust settles, what percentage of the merchants you actually think you're going to be carrying on business with?

Speaker #2: John, on the current state, we have pulled back north of 80% on originations within the LendCare business. And we focused on our longest-standing merchant partners, where we see the strongest performance.

Patrick Ens: John, on the current state, we have pulled back north of 80% on originations within the LendCare business. We focused on our longest-standing merchant partners where we see the strongest performance. That's formulated the base of the LendCare strategy. We have lots of opportunity, of course, to reevaluate and revisit all the performance from our past business and develop a strategy. We're thinking of that as mostly option value in addition to the very healthy and strong direct-to-consumer opportunity ahead of us.

Speaker #2: So that's formulated the base of the LendCare strategy. And then we have lots of opportunity. Of course, to reevaluate and revisit all the performance from our past business and develop a strategy.

Speaker #2: So, we're thinking of that as mostly option value, in addition to the very healthy and strong direct-to-consumer opportunity ahead of us.

John Aiken: Understood, Patrick. Thanks for the color.

Speaker #6: Understood, Patrick. Thanks for the comment.

Speaker #4: Question will be from Jeff Fenwick at ATB. Please go ahead.

Operator: Question will be from Jeff Fenwick at ATB. Please go ahead.

Speaker #5: Hi, good morning, everyone. Maybe as a follow-up on that last question there, and maybe a bit bigger picture, as you make the shift towards greater focus on the direct-to-consumer and less from LendCare, and we're trying to think about longer-term aggregate growth overall, is the TAM big enough in the direct-to-consumer to offset that decline from LendCare?

Jeff Fenwick: Hi. Good morning, everyone. Maybe as a, as a follow-up on that last question there and maybe a bit bigger picture, as you make the shift towards a greater focus on the direct to consumer and less from LendCare, we're trying to think about longer term, you know, aggregate growth overall, is the TAM big enough in the direct to consumer to offset that decline from LendCare? I mean, I guess when I step back and look at the store count, it hasn't really changed over the last number of years. It's actually maybe a little smaller now. I would imagine a lot of those locations are pretty mature in terms of the relative size. How should we think about that sort of transition happening? Is there enough growth there to allow it to happen?

Speaker #5: I mean, I guess when I step back and look at the store count, it hasn't really changed over the last number of years. It's actually maybe a little smaller now.

Speaker #5: So I would imagine a lot of those locations are pretty mature. In terms of the relative size. So how should we think about that sort of transition happening?

Speaker #5: Is there enough growth there to allow it to happen?

Speaker #2: Yes, thank you for the question, Jeff. And in terms of what I'd point you back to, if you actually refer to slide 8 in the investor presentation, you can see, even within the data points we've provided here and the short last one year, we've seen strong growth in our direct-to-consumer business.

Patrick Ens: Yes. Thank you for the question, Jeff. You know, in terms of what I'd point you back to, if you actually refer to slide 8 in the investor presentation, you can see even within the data points we've provided here in the short last 1 year, we've seen strong growth in our direct to consumer business. I'm of the strong belief that the market opportunity in the direct to consumer lending side of the business for Canadians with non-prime credit scores, as I said, is large and relatively untapped, and the offering that easyfinancial provides is unique.

Speaker #2: So I'm of the strong belief that the market opportunity in the direct-to-consumer lending side of the business, or Canadians with non-prime credit scores, as I said, is large and relatively untapped.

Speaker #2: And the offering that Easy Financial provides is unique. And even if we're focused on the direct-to-consumer side, there will likely still be good opportunity for additional merchant-originated volumes to complement the focus we have on the direct-to-consumer relationship aspect of the business.

Patrick Ens: Even if we're focused on the direct to consumer side, there will likely still be good opportunity for additional merchant-originated volumes to complement the focus we have on the direct to consumer relationship aspect of the business. There are still products and channels in the direct to consumer space that we haven't even tapped into yet, and we're certainly not seeing the growth within our existing channels hit a ceiling. I mean, secondly, I would point even to our secured home equity personal loan business, which you can see ended Q1 at CAD 590 million. I think that could easily be 3, 4x the size of what it is today.

Speaker #2: There are still products and channels in the direct-to-consumer space that we haven't even tapped into yet. And we're certainly not seeing the growth within our existing channels hit a ceiling.

Speaker #2: I mean, secondly, I would point even to our secured home equity personal loan business, which you can see ended Q1 at $590 million. And I think that could easily be three, four times the size of what it is today.

Speaker #5: Jeff, it's Jason Appell here. Just as a reminder that the total size of the non-prime credit market in Canada X mortgages sits at about 240 billion as at year-end.

Jason Appel: Jeff, it's Jason Appel here. Just as a reminder that the total size of the non-prime credit market in Canada ex-mortgages sits at about CAD 240 billion as at year-end, and it's been growing at roughly 1% to 2% a year organically, which generates about two and a half to five billion dollars of just net incremental growth. As you'll recall, we are currently only active in a couple of the sub-segments that make up that market. To Patrick's point, there's quite a large runway when you consider that organic growth and the fact that the largest holders of that business, which are the large Canadian banks, continue to move down in terms of their overall share of market.

Speaker #5: And it's been growing at roughly 1 to 2 percent a year organically, which generates about $2.5 to $5 billion of just net incremental growth.

Speaker #5: And as you recall, we are currently only active in a couple of the subsegments that make up that market. So to Patrick's point, there's quite a large runway when you consider that organic growth and the fact that the largest holders of that business, which are the large CD banks, continue to move down in terms of their overall share of market.

Speaker #5: So there would be an argument to me that there's some pretty decent runway looking forward in terms of our ability to capture growth.

Jason Appel: There would be an argument to be made that there is some pretty decent runway looking forward in terms of our ability to capture growth.

Speaker #6: Okay, I appreciate that commentary. I guess it also then speaks to new product development, which obviously is just not front and center right now.

Jeff Fenwick: Okay, I appreciate that commentary. I guess it also then speaks to new product development, which obviously is just not front and center right now. I'm just kind of trying to get a handicap of, you know, in the interim period, how much the LendCare falls away, and we can sort of lean on the core easyfinancial business and maybe stabilize the balance in the loan book.

Speaker #6: So I'm just kind of trying to get a handicap of in the interim period, how much the LendCare falls away, and we can sort of lean on the core Easy Financial business and maybe stabilize the balance in the loan book.

Speaker #2: Yes, Jeff, that's when we provided our outlook for the year of returning to growth in the second half, that is net of runoff in the LendCare portfolio.

Patrick Ens: Yes, Jeff, that's, you know, when we provided our outlook for the year of returning to growth in H2, you know, that is net of runoff in the LendCare portfolio. Implied in that is our confidence in the level of attractive growth within the direct-to-consumer business.

Speaker #2: So it implied in that is our confidence in the level of attractive growth within the direct-to-consumer business.

Speaker #6: Okay. And then maybe just one follow-up on LendCare. Subprime auto can be a very good segment, and it sounds like a lot of the problems that came here were just a lack of controls and audit of how the business was being run.

Jeff Fenwick: Okay. Then maybe just one follow-up on, you know, on LendCare. You know, subprime auto can be a very good segment, and it sounds like a lot of the problems that came here were just a lack of controls and audit of how the business was being run. You know, if you as you get that process under control, you're not gonna exit necessarily from a category like that, I assume. Like, I guess I'm trying to understand what remains of LendCare once you've kind of stabilized the platform and unified onto your the rest of the lending operation?

Speaker #6: And if you get that process under control, you're not going to exit necessarily from a category like that, I assume. I guess I'm trying to understand what remains of LendCare once you've kind of stabilized the platform and unified onto your the rest of the lending operation.

Speaker #2: Yes, Jeff. As you've pointed out, and as I've mentioned, our strategy to date has really been to reduce exposure where we've seen the most problematic loan performance.

Patrick Ens: Yes, Jeff. As, as you pointed out and as I've mentioned, our strategy to date has really been to reduce exposure where we've seen the most problematic loan performance while maintaining the core of the business that we think produces the most option value going forward to build off of. We're thinking about it the same way you're thinking about it, Jeff, in terms of there is going to be good lending here, and our focus in the near term is just setting ourselves up for success so that we can capitalize that when the time is right.

Speaker #2: While maintaining the core of the business that we think produces the most option value going forward to build off of. So we're thinking about it the same way you're thinking about it, Jeff, in terms of there is going to be good lending here.

Speaker #2: And our focus in the near term is just setting ourselves up for success so that we can capitalize that when the time is right.

Speaker #6: Okay, thank you, Albrecht.

Jeff Fenwick: Okay. Thank you. Over to you.

Speaker #4: Next question comes from Ryan Shelley at Bank of America. Please go ahead.

Operator: Next question comes from Ryan Shelley at Bank of America. Please go ahead.

Speaker #7: Hey guys, thanks for the question. My first question is on early-stage delinquencies. Would you be able to help size how much of the three factors you list in the presentation make up that increase and what investors should be thinking about going forward here as drivers of those early-stage delinquencies?

Ryan Shelley: Hey, guys. Thanks for the question. My first question is on early stage delinquencies. Would you be able to help size how much of the 3 factors you list in the presentation make up, you know, that increase? What investors should be thinking about going forward here as drivers of those early stage delinquencies? You've done a great job, you know, kind of fleshing out the later stage. As we move into 2026, obviously there's a lot of noise out there. If you could size the impact of, you know, some of the factors you mentioned, that'd be great. Thank you.

Speaker #7: You've done a great job kind of fleshing out the later stage, but as we move into '26, obviously, there's a lot of noise out there.

Speaker #7: So if you could size the impact of some of the factors you mentioned, that'd be great. Thank you.

Speaker #2: Great, thank you, Ryan, and welcome to the call. I'll let Felix provide more detail on his commentary.

Patrick Ens: Great. Thank you, Ryan, and welcome to the call. I'll let Felix provide more detail on his commentary.

Speaker #8: Yeah. Thanks. Thanks for the question, Ryan. When we look at the 1 to 30 buckets about half of that is driven by LendCare or our merchant-originated auto and power sports loan book.

Felix Wu: Thanks for the question, Ryan. When we look at the 1 to 30 buckets, about half of that is driven by LendCare or our merchant-originated auto and powersports loan book. Again, this is expected and included in our loss outlook as we expected sort of the losses in the portfolio to perform and included in our overall loss forecast. The other half, I would say the other half is coming from our unsecured loan book. It is a little bit difficult to always parse out and separate how much is the macroeconomic factor versus our collections practices or just normal volatility. We are focusing more on cash collection and using less of the borrowing tools on the 1 to 30. I think that is proving to be effective on that side.

Speaker #8: Again, this is expected and included in our loss outlook as we expected sort of the losses and the portfolio to perform and included in our overall loss forecast.

Speaker #8: The other half, I would say, the other half is coming from our unsecured loan book. It is a little bit difficult to always parse out and separate how much is the macroeconomic factor versus our collections practices, or just normal volatility.

Speaker #8: We are focusing more on cash collection and using less of the borrowing tools on the 1 to the 30. I think that is proving to be effective on that side.

Speaker #8: The area that we are most focused on is the 30-plus, and we've seen great progress and stability from that side. And that will continue to be the area because it's the best leading indicator in terms of overall charge-offs.

Felix Wu: The area that we are most focused on is the 30 plus, and we've seen great progress and stability from that side. That will continue to be the area because it's the best leading indicator in terms of overall charge-offs.

Speaker #7: Got it. Thank you. And then just one more quickly, if I could. So I know the focus right now on the securitization warehouse, regaining access, but the maturity is coming up here in October, I believe.

Ryan Shelley: Got it. Thank you. Just one more quickly if I could. I know the focus right now on the securitization warehouse is regaining access, but the maturity's coming up here in October, I believe. My question is, are you starting to have those conversations with your lending partners, you know, post regaining access of, you know, what an extension would look like? And any color you could give on that as well as, you know, the revolver is, you know, coming up on being current in July as well. Just any color you can give investors that you're on conversations you're having with your lending partners, would be very helpful. Thank you.

Speaker #7: So my question is, are you starting to have those conversations with your lending partners post-regaining access of what an extension would look like? And any color you could give on that as well as the revolver is coming up on being current in July, as well.

Speaker #7: So just any color you can give investors that you're on conversations you're having with your lending partners would be very helpful. Thank you.

Speaker #2: Yeah, no, thanks, Ryan. I would say first, on the securitization warehouse trust, there are two deliverables that we're focused on. The first one, two conditions.

Felix Wu: Yeah, no. Thanks, Ryan. I would say first on the securitization warehouse trust, you know, there are 2 deliverables that we're focused on. The first 1, 2 conditions. 1 was the completion of an audit of the assets in the trust, the other 1 was the backup service provider. The bankers just want the completion of the audit to see that report. You know, once that's done and to their satisfaction, I think that will be a very natural segue into the renewal of the facility. Again, from an audit perspective, they have done their field work. We have undergone audits of the trust before, are not expecting any issues on that. It's much more sort of a, it's a business as usual.

Speaker #2: One was the completion of an audit of the assets in the trust, and then the other one was the backup service provider. The bankers just want the completion of the audit to see that report.

Speaker #2: And once that's done and to their satisfaction, I think that that will be a very natural segue into the renewal of the facility. Again, from an audit perspective, they have done their fieldwork.

Speaker #2: We have undergone audits of the trust before, and so are not expecting any issues on that. It's much more sort of as a business as usual.

Speaker #2: And so we expect that to be sort of fully completed and reported on soon. And I think that that will be a good start to the negotiations around renewal.

Felix Wu: We expect that to be sort of fully completed and reported on soon. I think that will be a good start to the negotiations around renewal on that side. On the revolver, I would say that, you know, the timing in Q3 is probably the right time to engage in terms of those conversations. We'll be having active conversations with all of our banking partners over the next few months. In terms of the mood or the tone of the conversation, they've always been sort of very collaborative and very open. If I can say, you know, how we got to an amendment in 2 weeks after sharing the news that we had to share in March, was an indication of the level of collaboration and support that they have demonstrated.

Speaker #2: On that side, on the revolver, I would say that the timing in Q3 is probably the right time to engage in terms of those conversations.

Speaker #2: And so we'll be having active conversations with all of our banking partners over the next few months. In terms of the mood or the tone of the conversations, they've always been sort of very collaborative and very open.

Speaker #2: If I can say, how we got to an amendment in two weeks after sharing those news that we had to share in March, was an indication of the level of collaboration.

Speaker #2: And support that they have demonstrated, I think that that's a good indicator for how I feel that the conversations about renewal will go over the next few months.

Felix Wu: I think that that's a good, indicator for how I feel that the conversations about renewal will go over the next few months.

Speaker #7: Perfect. Well, thanks for the questions, guys.

Ryan Shelley: Perfect. Well, thanks for the questions, guys.

Speaker #2: Thank you, Ryan.

Patrick Ens: Thank you, Ryan.

Operator: Next question will be from Graham Ryding at TD Securities. Please go ahead.

Speaker #4: Next question. Next question will be from Graham Riley at TD Securities. Please go ahead.

Operator: Next question will be from Graham Ryding at TD Securities. Please go ahead.

Speaker #5: Yeah, I just want to focus on the consumer field a little bit, but maybe looking a little bit further out. As LendCare becomes less of a focus and a lower portion of the portfolio mix, that should be supportive of that consumer yield migrating higher.

Graham Ryding: I just wanna focus on the consumer yield a little bit, but maybe looking a little bit further out, you know, as LendCare becomes less of a focus and a lower portion of the portfolio mix that should be supportive of that consumer yield migrating higher. You also have some of these legacy loans, I think. I think was it 13% of the portfolio might be still above that 35% hurdle, so there's sort of an offset there. Can you give us some indication of sort of what you're expecting, looking a little bit, you know, further out in terms of how the overall consumer yield is gonna migrate?

Speaker #5: But you also have some of these legacy loans, I think, was it 13% of the portfolio might be still above that 35% hurdle. So there's sort of an offset there.

Speaker #5: Can you give us some indication of sort of what you're expecting looking a little bit further out in terms of how the overall consumer yield is going to migrate?

Speaker #2: Yes. Thank you, Graham. Maybe Jason can weigh in on that one.

Patrick Ens: Yes. Thank you, Graham. Maybe Jason can weigh in on that one.

Speaker #9: Yeah, good morning, Graham. Just to answer your question, we obviously with the direct-to-consumer easy financial business, a fairly significant portion of the unsecured business, which represents the vast majority of the portfolio in totality, is priced at or near the revised maximum rate of interest.

Jason Appel: Yeah. Morning, Graham. Just to answer your question, we obviously with the direct to consumer easyfinancial business, a fairly significant portion of the unsecured business, which represents the vast majority of the portfolio in totality, is priced at or near the revised maximum rate of interest. As you correctly pointed out, the proportion of the loan book that's sitting over 35% continues to deplete and decline over time. We've got about 13% left of the loan book that sits at that level, which is declining at an orderly pace. As we mentioned also on the call, there are a couple of offsetting factors that do influence the direction of the yield.

Speaker #9: And, as you correctly pointed out, the proportion of the loan book that's sitting over 35 continues to deplete and decline over time. We've got about 13% left of the loan book that sits at that level.

Speaker #9: Which is declining at an orderly pace. But as we mentioned also on the call, there are a couple of offsetting factors that do influence the direction of the yield.

Speaker #9: One is obviously the charge-offs because when we charge off a loan, it has charge-off interest associated with it. And that has to be taken into consideration.

Jason Appel: One is obviously the charge-offs, because when we charge off a loan, it has charge-off interest associated with it, and that has to be taken into consideration and factors into the overall yield. As the charge-offs begin to normalize and gradually decline, we would expect that to be a net positive. Another factor that you have to take into consideration is the average size of the loan. As our average loan size has crept up by virtue of the fact that we are being selected and the credit we underwrite, the ancillary revenue that we derive from those loans as a percentage of the total revenue we generate declines modestly because obviously the premium rate factors that we apply on those loans reduces as the loan sizes get bigger.

Speaker #9: And factors into the overall yield. So as the charge-offs begin to normalize and gradually decline, we would expect that to be a net positive.

Speaker #9: Another factor that you have to take into consideration is the average size of the loan. As our average loan size has crept up, by virtue of the fact that we are being selective in the credit we underwrite, the ancillary revenue that we derive from those loans as a percentage of the total revenue we generate declines modestly because obviously the premium rate factors that we apply on those loans reduces as the loan sizes get bigger.

Speaker #9: So overall, we are pretty confident that the yield and the direct-to-consumer portfolio will stabilize, but it's still going to be subject to some downward oscillations, primarily until such time as the full impact of that 13% of the loan book is completely run off, which we don't expect to happen until probably toward the end of 2027.

Jason Appel: Overall, we are pretty confident that the yield on the direct to consumer portfolio will stabilize, but it's still going to be subject to some downward oscillations, primarily until such time as the full impact of that 13% of the loan book is completely run off, which we don't expect to happen until probably toward the end of 2027. It does and it is moving down in the direction we expect, which is why when we give the yield guidance that we did in Q1, and as we just updated our yield guidance in Q2, we have a fairly high degree of confidence that we should be able to navigate within those, within those guardrails.

Speaker #9: But it does and is moving down in the direction we expect. Which is why when we give the yield guidance that we did in Q1, and as we just updated our yield guidance in Q2, we have a fairly high degree of confidence that we should be able to navigate within those guardrails.

Speaker #5: Okay, that's helpful. On the expense front, I think you had just under 5 million of restructuring costs this quarter. Anything more? Any visibility on more restructuring costs in Q2, perhaps?

Graham Ryding: Okay. That's helpful. On the expense front, I think you had just under CAD 5 million of restructuring costs this quarter. Anything more, any visibility on more restructuring costs in Q2 perhaps? I think more importantly, just the sort of expectation for the expenses. It sounds like there's some puts and takes where you're gonna increase marketing in Q3, but you're also looking for cost efficiencies. Can you sort of help give us some indication of how the expenses are expected to develop throughout the rest of the year?

Speaker #5: And then I think more importantly, just the sort of expectation for the expenses. It sounds like there's some puts and takes where you're going to increase marketing in Q3, but you're also looking for cost efficiencies.

Speaker #5: Can you sort of help give us some indication of how the expenses are expected to develop throughout the rest of the year?

Speaker #2: Yes. Thank you, Graham. Felix, why don't you weigh in on expense management?

Patrick Ens: Yes. Thank you, Graham. Felix, why don't you weigh in on expense management?

Speaker #8: Yeah, no, thanks. Look, I would say that we don't have anything to disclose in addition in terms of the restructuring costs or any future restructuring costs at this point in time.

Felix Wu: Yeah. No, thanks. Look, I would say that we don't have anything to disclose in addition in terms of the restructuring costs or any future restructuring costs at this point in time. In terms of overall operational efficiency, Graham, I would say that, you know, there will be upward pressure on our operational efficiency metric, A, as we continue to invest in collections, as we manage the higher delinquencies that we're seeing from our merchant-originated auto and powersports loan book. The second one, I would say the bigger one, is reinvestment again into marketing to grow in H2 and resume our growth trajectory, specifically in our direct-to-consumer loan portfolio. I would say that there's upward pressure on that operational efficiency for H2.

Speaker #8: In terms of overall operational efficiency, Graham, I would say that there will be upward pressure on our operational efficiency metric. A, as we continue to invest in collections, to as we manage the higher delinquencies that we're seeing from our merchant-originated auto and power sports loan book.

Speaker #8: And the second one, and I would say the bigger one is reinvestment, again, into marketing. To grow in the second half of the year and resume our growth trajectory.

Speaker #8: Specifically, in our direct-to-consumer loan portfolio. So I would say that there's upward pressure on that operational efficiency for the second half of the year.

Speaker #8: We will always be looking for different opportunities to help mitigate on that, but I would say that there's upward pressure.

Felix Wu: We will always be looking for different opportunities to help mitigate on that, but, I would say that there's upward pressure.

Patrick Ens: Graham, if I could. This is Kash. Maybe just tying your two questions together where I think you're really trying to get to what are the longer term returns look like on the easyfinancial business. You know, as we mentioned in our guidance, we're expecting some improvements in yield as the year progresses. Thinking about those long-term yields, they're likely not too far off of roughly where we're at today. Then there was some commentary earlier on how much growth is available in this market, the retail network hasn't expanded. You know, that's intentional. We still see quite a bit of growth and quite a bit of opportunity to scale on our existing infrastructure, right?

Speaker #2: Graham, if I could, this is Patrick. Maybe just tying your two questions together where I think you're really trying to get to what are the longer-term returns look like on the easy financial business.

Speaker #2: As we mentioned in our guidance, we're expecting some improvement in yield as the year progresses. Thinking about those long-term yields, they're likely not too far off of roughly where we're at today.

Speaker #2: And then there was some commentary earlier on how much growth is available in this market. The retail network hasn't expanded—that's intentional. We still see quite a bit of growth.

Speaker #2: And quite a bit of opportunity to scale on our existing infrastructure, right? So, over the long term, we would expect to be able to drive significant efficiency through leveraging an existing fixed cost base, while we really work to invest in the automation and technology improvements that are available to drive a lot of the variable costs down.

Patrick Ens: Over the long term, we would expect to be able to drive significant efficiency through leveraging an existing fixed cost base while we really work to invest in the automation and technology improvements that are available to drive a lot of the variable costs down. That's how we're thinking about it on a much longer term trajectory. As Felix pointed out, and as you mentioned, quarter to quarter at this point, of course, there's some puts and takes in each direction.

Speaker #2: So that's how we're thinking about it on a much longer-term trajectory. And as Felix pointed out, and as you mentioned, quarter to quarter at this point, of course, there's some puts and takes in each direction.

Speaker #5: Yeah, that's helpful. Thank you. And then just my last question, if I could—just the delinquencies from LendCare and the sort of charge-offs that you're seeing currently.

Graham Ryding: Yeah, that's helpful. Thank you. Just my last question, if I could, just the delinquencies from LendCare and the sort of charge-offs that you're seeing currently, do you have visibility? Are these largely loans that were originated in 2024 and 2025? Or are they more mature than that?

Speaker #5: Do you have visibility? Are these largely loans that were originated in 2024 and 2025? Or are they more mature than that?

Speaker #2: Thank you, Graham. Why don't Jason and Paul weigh back in on that one?

Patrick Ens: Thank you, Graham. Why, why doesn't Jason Appel all the way back in on that one?

Speaker #8: Yeah, hey, the answer to that would be yes. They would be predominantly coming, for the most part, from the 2024 cohorts, along with some early 2025 populations.

Jason Appel: The answer to that would be yes. They would be predominantly coming from the most part from the 2024 cohorts, along with some early 2025 populations. Typically, we do see the delinquency and performance of these portfolios start to turn in and around the 9 to 15-month mark. You would have some of those delinquencies being made up by more recent vintages, just given the age of them. The actual impact of the charge-off generally starts and starts to materialize more significantly into the end of the first year, but more towards the beginning of the second year following origination. It would be made up mostly from 24 and 25.

Speaker #8: Typically, we do see the delinquency and performance of these portfolios start to turn in and around the 9 to 15-month mark. So you would have some of those delinquency being made up by more recent vintages, just given the age of them.

Speaker #8: But the actual impact of the charge-off generally starts and starts to materialize more significantly into the end of the first year, but more toward the beginning of the second year following origination.

Speaker #8: So it would be made up mostly from '24 and '25.

Speaker #5: Okay, that's helpful. So that gives you some indication, then, that given you've pulled back in 2026, you'll start to see some benefit from that in 2027.

Graham Ryding: Okay, that's helpful. That gives you some indication then that, given you've pulled back in 2026, that you'll start to see some benefit from that in 2027.

Speaker #2: Yes.

Patrick Ens: Yes.

Speaker #5: Okay, that's it for me. Thank you very much.

Graham Ryding: Okay. That's it for me. Thank you very much.

Speaker #1: Next question will be from Bart Bazarski at RBC Capital Markets. Please go ahead.

Operator: Next question will be from Bart Dziarski at RBC Capital Markets. Please go ahead.

Speaker #9: Great, thanks. And good morning, everyone. I wanted to ask about the LendCare control deficiency. So, Felix, you had mentioned you're hiring a Big Four consulting firm to help out.

Bart Dziarski: Great. Thanks, good morning, everyone. I wanted to ask around the LendCare control deficiency. Felix, you had mentioned you're hiring a Big Four consulting firm to help out, and we still haven't seen a resolution. Could you maybe unpack, like, what's driving the delay in terms of why the deficiency is still out there? Could you give us a sense of the range of outcomes that we should expect as you get to resolution by the end of the year?

Speaker #9: And we still haven't seen a resolution. So could you maybe unpack what's driving the delay in terms of why the deficiency is still out there?

Speaker #9: And could you give us a sense of the range of outcomes that we should expect as you get through resolution by the end of the year?

Speaker #8: Yeah, no, good morning, Bart, and thanks for the question. Yeah, maybe first off, I'd just like to set expectations on sort of remediation of a material weakness.

Felix Wu: Good morning, Bart Dziarski, and thanks for the question. Maybe, first off, I'd just like to set expectations on sort of remediation of a material weakness. You know, obviously we take this very, very seriously, but there are different phases of it. There's quick and immediate actions by the first and second lines of defenses to actually, you know, put in the right controls, documentation and process on that. Once that's done, internal audit then has to go in and do a significant control testing to validate all of those changes. Then there's a third phase on that our financial auditors would then review all of the work done by the first, second, and third lines of defenses.

Speaker #8: Obviously, we take this very, very seriously. But there are different phases of it. There's quick and immediate actions by the first and second lines of defenses to actually put in the right controls documentation and processes on that.

Speaker #8: Once that's done, internal audit then has to go in and do a significant control testing to validate all of those changes. And then there's a third phase on that that our financial auditors would then review all of the work done by the first, second, and third lines of defenses.

Speaker #8: And so material weaknesses are not sort of closed within sort of weeks, or a month or two. These are sort of very sort of purposely longer sort of time horizons in a very thorough fashion.

Felix Wu: Material weaknesses are not closed within weeks or a month or two. These are very purposely longer time horizons in a very thorough fashion. Bart, that being said, I would say that there's been a lot of focus and a lot of action on that. I would say that we're 75% done in terms of the first and second line defenses. Again, this is implementing new controls, new operational procedures, the documentation. We've implemented increased governance and oversight in terms of our IFRS 9 approval and calculations on an interest receivable perspective. We've made a lot of significant progress on that side. There's still a little bit more work to do.

Speaker #8: But Bart, I would, that being said, I would say that there's been a lot of focus and a lot of action on that. I would say that we're 75% done in terms of the first and second line defenses.

Speaker #8: And again, this is implementing new controls. New operational procedures, the documentation, we've implemented increased governance and oversight in terms of our IFRS 9 approval and calculations on an interest receivable perspective.

Speaker #8: And so we've made a lot of significant progress on that side. There's still a little bit more work to do. And then, again, as I mentioned, the third line of defense in terms of internal audit will do the control testing, then followed by Ernst & Young auditors.

Felix Wu: As I mentioned, the third line of defense in terms of internal audit will do the control testing, then followed by our some young auditors. We've done and have committed to an additional layer on top of all of that. We're just bringing in a Big Four consulting firm to do a holistic review of our internal controls over financial reporting, and we expect, you know, that work to be done over the next couple of months.

Speaker #8: We've done and have committed to an additional layer on top of all of that, which is bringing in a Big Four consulting firm to do a holistic review of our internal controls over financial reporting.

Speaker #8: And we expect that work to be done over the next couple of months.

Speaker #9: Okay, great. Thanks, Felix. That's great color. And then I just wanted to square something up on the liquidity. So on the slides, you're highlighting strong liquidity, positioning, and then but then Patrick, you did mention in the prepared remarks that you're managing liquidity in the balance sheet very carefully.

Bart Dziarski: Okay, great. Thanks, Felix. That's, that's great color. I just wanted to square something up on the liquidity. you know, on the slides you're highlighting strong liquidity positioning, Patrick, you did mention in the prepared remarks that you're managing liquidity and the balance sheet very carefully. Can you maybe just square those up and what is it about the liquidity that you're focused on, and when should we expect that to improve? Thanks.

Speaker #9: So can you maybe just square those up? And what is it about the liquidity that you're focused on? And when should we expect that to improve?

Speaker #9: Thanks.

Speaker #4: Hey, Bart. This is Felix. I can take that. We do expect to get access to our two banking facilities as we outlined over the next sort of couple of months, roughly, July 1st for the revolver and those two completing those two conditions for the securitization warehouse.

Felix Wu: Hey, Bart Dziarski. This is Felix. I can take that. You know, we do expect to get access to our two banking facilities as we outlined over the next sort of couple of months, roughly 1 July for the revolver and those two, completing those two conditions for the securitization warehouse. Until then, we're just bolstering and fortifying our liquidity, and we've done it very, very well. Our cash generation of the business was CAD 560 million for the quarter. We just toggle the loan originations, again, which is a huge lever and strength of this portfolio to manage our overall liquidity. We've bolstered and fortified our liquidity in Q2. That is that why in terms of our guidance and loan receivable that we are shrinking.

Speaker #4: Until then, we're just bolstering and fortifying our liquidity. And we've done it very, very well. Our cash generation of the business was $560 million for the quarter.

Speaker #4: And so we just toggle the loan originations. Again, which is a huge lever and strength of this portfolio to manage our overall liquidity. And we've bolstered and fortified our liquidity in Q2.

Speaker #4: That is that why in terms of our guidance and loan receivable, that we are shrinking. We did expect to shrink the loan receivable for the first half of the year before resuming growth in the second half of the year.

Felix Wu: We expect to shrink the loan receivable for H1 of the year before resuming growth in H2 of the year from that side. We're in a position of strength given those actions and the six-point action plan that we outlined in our last quarter, and we continue to execute, and things fall in line with our expectations.

Speaker #4: From that side, but we're in a position of strength given those actions and the six-point action plan that we outlined in our last quarter.

Speaker #4: And we continue to execute. And things fall in line with our expectations.

Speaker #9: Great. Thanks for taking my questions.

Bart Dziarski: Great. Thanks for taking my questions.

Speaker #1: Question will be from James Lloyd at National Bank Capital Markets. Please go ahead.

Operator: Question will be from Jaeme Gloyn at National Bank Capital Markets. Please go ahead.

Speaker #8: Yeah, thanks. Good morning. I want to just dig into the commentary that the easy financial credit performance is strong and stable. When I see metrics that are pointing to, I guess, the opposite insofar as charge-offs and dollar terms, charge-off rates, increased significantly, the delinquency rates, and that 1 to 90-day bucket, which would be secured portfolio, increased.

Jaeme Gloyn: Yeah, thanks. Good morning. I wanna just dig into the commentary that the easyfinancial credit performance is strong and stable, when I see metrics that are pointing to, I guess the opposite insofar as charge-off, charge-offs in dollar terms, charge-off rates increased significantly, the delinquency rates in that 1 to 90 day bucket, which would be, you know, secured portfolio increase. And you called out lower collections and direct-to-consumer channels as a driver of a higher interest receivable allowance for credit losses. Just trying to square that commentary and looking at this quarter and, you know, obviously thinking through, is this a peak quarter, or could we see ongoing stress flowing through the easyfinancial unsecured portfolio given those data points?

Speaker #8: And you call, though, lower collections and direct-to-consumer channels as a driver of a higher interest receivable allowance for credit losses. So just trying to square that commentary and looking at this quarter and obviously thinking through is this a peak quarter, or could we see ongoing stress flowing through the easy financial unsecured portfolio given those data points?

Speaker #2: Thank you, James, and good morning. Thank you for your patience as well. So, I think you've narrowed in on a very important point, which is the performance and strength of the easyfinancial business.

Patrick Ens: Thank you, James Obright, and good morning. Thank you for your patience as well. I think you've narrowed in on a very important point, which is the performance and strength of the easyfinancial business. We did show, and you can see that there is an uptick in the net charge-off rate in the quarter relative to the previous quarter, as well as year over year. As you pointed out, we did show as well that at a goeasy level, the early stage 1 to 30 days past due volume is up, quarter over quarter and year over year as well. There are a number of factors at play, which we discussed.

Speaker #2: We did show, and you can see, that there is an uptick in the net charge-off rate in the quarter relative to the previous quarter.

Speaker #2: As well as year-over-year. As you pointed out, we did show as well that at a go-easy level, the early stage 1 to 30 days past due volume is up quarter over quarter.

Speaker #2: And year-over-year as well. And so there are a number of factors at play. Which we discussed. Those factors were within our easy financial portfolio on the delinquency side, our increased focus on cash collections, and a desire to manage delinquencies 31 plus down with the acceptance of slightly higher rates in the early stage if it means we can gain more cash, which we think we are having some success with.

Patrick Ens: Those factors were within our easyfinancial portfolio on the delinquency side, our increased focus on cash collections and a desire to manage delinquencies 31 plus down with the acceptance of slightly higher rates in the early stage, if it means we can gain more cash, which we think we are having some success with. The interest receivable provision that you're referring to is on a longer time horizon, so incorporates a longer window of data into that input. Those time horizons won't be directly matched. Eventually, the stronger performance we're seeing now should flow through in future quarters as you evaluate your interest provision. A second factor is the growth impact.

Speaker #2: The interest receivable provision that you're referring to is on a longer time horizon. So incorporates a longer window of data into that input. So those time horizons won't be directly matched.

Speaker #2: Eventually, the stronger performance we're seeing now should flow through in future quarters as you evaluate your interest provision. A second factor is the growth impact.

Speaker #2: So I attempted to explain this and maybe didn't explain it very well. But every quarter, loss rates vertically, so for your end period, are impacted by the volume of originations.

Patrick Ens: I attempted to explain this and maybe didn't explain it very well, but every quarter, loss rates vertically, so per your end period, are impacted by the volume of originations. Because we did lower originations in quarter, we effectively saw higher, all else being equal, net charge-off rates, and I had articulated that as in the, call it, 30 to 50 basis point range. We should expect that to flow through to Q2, right? Because in Q2, we're further moderating originations and therefore loan book growth. We should expect that, and we as a management team do expect that. The third factor, of course, is how the Canadian consumer is faring within the macroeconomic environment. We suspect there is some modest impacts that are flowing through to both delinquencies and loss rates from that as well.

Speaker #2: And because we did lower originations in quarter, we effectively saw higher all else being equal net charge-off rates. And I had articulated that is in the, call it, 30 to 50 basis point range.

Speaker #2: We should expect that to flow through to Q2, right? Because in Q2, we're further moderating originations. And therefore, loan book growth. So we should expect that.

Speaker #2: And we as a management team do expect that. And then the third factor, of course, is how the Canadian consumer is faring within the macroeconomic environment.

Speaker #2: And we suspect there is some modest impacts that are flowing through to both delinquencies and loss rates from that as well. But we incorporate all of that information into our decisions about who to underwrite, how to collect, and what loss guidance to give, which is what nets back to the performance was in line with our expectations for the quarter.

Patrick Ens: We incorporate all of that information into our decisions about who to underwrite, how to collect, and what loss guidance to give, which is what nets back to the performance was in line with our expectations for the quarter.

Jaeme Gloyn: Okay. Yeah, it's just, it's tough to see with the disclosures. I don't know if there's something that maybe, you know, can be helpful in future quarters to see through that. You know, I understand the growth side of it, but, you know, that dollar increase in charge-off was greater than, you know, the growth rate of the overall portfolio as well. Maybe if I can shift to a, you know, a bigger picture question and just thinking through the longer term or maybe even, you know, medium-term profitability of the business.

Speaker #8: Okay. Yeah, it's just tough to see. With the disclosures, I don't know if there's something that maybe can help be helpful in future quarters to see through that.

Speaker #8: I understand the growth side of it. But that dollar increase in charge-off was greater than the growth rate of the overall portfolio as well.

Speaker #8: So maybe if I can shift to a bigger-picture question and just think through the longer-term, or maybe even medium-term, profitability of the business—if we kind of take the revenue yields today, a charge-off rate of 14%, if that's going to be the level of the overall portfolio, higher funding costs, efficiency ratios at 25%—is the business generating enough profitability on a go-forward basis?

Jaeme Gloyn: If we kind of take, you know, the revenue yields today, a charge-off rate of, you know, 14%, if that's gonna be the level of the overall portfolio, higher funding costs, efficiency ratios at 25%, is, you know, is the business generating enough profitability, on a go-forward basis to drive growth?

Speaker #8: To drive growth?

Speaker #2: Got it. Yes, thank you, James. Maybe a couple of pieces I would point to as well. And so appreciate the way that you're looking at it.

Patrick Ens: Got it. Yes. Thank you, Jay. Maybe a couple pieces I would point to as well. Appreciate the way that you're looking at it. On the loss rate side, you know, our aim is to bring losses lower over time than what you would’ve referenced there. Our mid-teens guidance for the full year would mean that in the H2 of the year, there is substantially better loss performance than what we’ve observed in the H1 of the year as well. If you go into the appendix of our investor presentation and maybe revisit some of the updated debt covenants and leverage, you can see that in our revolver covenants there’s a step-down in leverage implied in the plan.

Speaker #2: On the loss rate side, our aim is to bring losses lower over time than what you would have referenced there. And so our mid-teens guidance for the full year would mean that in the second half of the year, there is substantially better loss performance than what we've observed in the first half of the year as well.

Speaker #2: If you go into the appendix of our investor presentation and maybe revisit some of the updated debt covenants and leverage, you can see that in our revolver covenants, there's a step down in leverage implied in the plan.

Speaker #2: And so that is commensurate with an expectation that we are both growing the loan book but driving down leverage, which would imply that we're doing so by expanding retained earnings.

Patrick Ens: That is commensurate with an expectation that we are both growing the loan book, but driving down leverage, which would imply that we're doing so by expanding retained earnings. Even though we're not providing earnings guidance, I think you can effectively imply what that might look like through looking at slide 26. Longer term, you know, getting back to healthy ROAs would require and necessitate achieving better loss rates, than what you have stated, Jay, and that's what we'll be focused on driving.

Speaker #2: So even though we're not providing earnings guidance, I think you can effectively imply what that might look like through looking at slide 26. And then, longer term, getting back to healthy ROAs would require and necessitate achieving better loss rates than what you have stated, James.

Speaker #2: And that's what we'll be focused on driving.

Speaker #8: Okay. Understood on that side. Just on the leverage, my assumption would be that leverage is ticking down more on the reduced growth than it is on generating positive retained earnings expansion.

Jaeme Gloyn: Okay. Understood on that side. Just on the leverage, my assumption would be that leverage is ticking down on the reduced growth more on the reduced growth than it is on generating positive retained earnings expansion. I don't know, correct me if I'm wrong on that.

Speaker #8: But I don't know. Correct me if I'm wrong on that.

Speaker #2: James, there could be multiple ways to get there. But what we've shared with you as our plan is to grow the portfolio in the second half of the year.

Patrick Ens: Jay, there could be multiple ways to get there, but what we've shared with you as our plan is to grow the portfolio in H2 of the year.

Speaker #8: Okay. Okay. Thank you. Appreciate the extra time.

Jaeme Gloyn: Okay. Thank you. Appreciate the extra time.

Operator: At this time, it concludes our question and answer session for today. I would like to turn the call back over to Patrick Ens.

Speaker #9: At this time, it concludes our question-and-answer session for today. I would like to turn the call back over to Patrick Enns.

Speaker #2: Thank you, operator. To summarize, execution against our stated plan is on track. We have taken decisive action to significantly reduce our exposure to new merchant-originated loans and implemented cost-efficiency measures.

Patrick Ens: Thank you, operator. To summarize, execution against our stated plan is on track. We have taken decisive action to significantly reduce our exposure to new merchant-originated loans and implemented cost efficiency measures. We continue to expect improvements in net charge-offs over the remainder of the year. Our liquidity position remains strong as we prudently manage capital outflows through this transitionary period. Thank you for joining us today.

Speaker #2: We continue to expect improvement in net charge-offs over the remainder of the year. Our liquidity position remains strong as we prudently manage capital outflows through this transitionary period.

Speaker #2: Thank you for joining us today.

Speaker #9: Thank you, sir. Ladies and gentlemen, this is indeed concludes your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending, and at this time, we do ask that you please disconnect your lines.