goeasy Aktie

Good morning, ladies and gentlemen, and welcome to the goeasy Limited Q2 2026 Earnings Call. [Operator Instructions] Following the presentation, we will conduct a question and answer session. [Operator Instructions] This call is being recorded on Friday, August 7, 2026.

I would now like to turn the conference over to James Obright. Please go ahead.

Thank you, operator, and good morning, everyone. I'm James Obright, Senior Vice President of Investor Relations and Capital Markets. Thank you for joining us to discuss goeasy Limited's results for the second quarter ended June 30, 2026. Our Q2 news release, which was issued yesterday, is available on SEDAR+ and on the goeasy website.

On today's call, Patrick Ens, goeasy's Chief Executive Officer, will provide an update on our second quarter performance and recent developments and an outlook for the business. Felix Wu, our Chief Financial Officer, will provide an overview of our Q2 '26 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 will provide instructions at the appropriate time.

Before we begin, I remind you that this conference call is open to all investors and is being webcast through the company 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 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. Please refer to our Q2 MD&A for further details on the risks, assumptions and non-IFRS measures. 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 will now turn the call over to Patrick Ens.

Thank you, James, and welcome to everyone listening today. goeasy exists to create financial opportunity for Canadians who are underserved by traditional financial institutions. Serving those customers well with discipline, care and innovation is how we create lasting value for our shareholders, employees and the communities in which we operate. That purpose is at the center of everything we do. I saw it reflected firsthand in the considerable time I spent with frontline leaders and employees across the country during the past several weeks. These conversations provided valuable insight into the evolving needs of our customers and the opportunities we have to continue improving execution.

What stood out most was the strength of our people, their commitment to serving our customers and supporting each other and coming to work with enthusiasm and resilience every day. We have long believed that culture is a competitive advantage and what I saw confirms that belief.

Our strategic priorities for the near term are clear and consistent with those I outlined in Q1. We are reducing our exposure to underperforming merchant originated loans, concentrating new originations in our direct-to-consumer easyfinancial brand and managing our liquidity and balance sheet carefully. We are doing this with a close eye on the macroeconomic backdrop, where the Canadian nonprime consumer continues to feel pressure from a prolonged period of economic uncertainty. Our objective remains to reduce credit losses, strengthen our balance sheet and return to generating healthy returns for shareholders. We have continued to execute against our six-point plan, and I look forward to discussing that in more detail shortly.

Let's turn to an update on the business. Starting with the key financial developments for the quarter, we delivered adjusted diluted earnings per share of $1.02. This is down compared to the second quarter of 2025, but up sequentially from an adjusted diluted loss per share of $1.90 in Q1 2026. Consistent with our plans, we pulled back significantly on originations in Q2. Originations are the largest use of cash in our business, reducing them combined with continued strength in cash provided by operations before net principal written, meaningfully strengthened our balance sheet this quarter.

Together with elevated but improving levels of net charge-offs, lower Q2 originations resulted in a contraction in our gross consumer loans receivable by $363 million or 6.8% on a quarter-over-quarter basis and a quarter end balance of $5 billion. Elevated charge-offs in our merchant originated LendCare business continued to weigh on profitability. The overall net charge-off rate came in as anticipated at 16.7%, higher year-over-year but improving by 110 basis points relative to the first quarter.

Delinquencies trended better, down 100 basis points year-over-year to 11.9%. An improvement in 30 days plus past due loan balances was partially offset by an increase in the 1- to 30-day category. Relative to Q1, loan balances greater than 30 days past due declined from 5.9% to 5.8%. Total allowance for credit losses on gross consumer loans increased to $499.5 million from $406.7 million at this time last year. The net change in ACL was negative $41.6 million compared to positive $21 million in the second quarter of 2025. This provision release contributed to improved earnings relative to the prior quarter.

As a core focus of our six-point plan, we continue to prudently manage our liquidity. We tightened credit, particularly in the merchant originated loan portfolio, while also pulling back originations in our direct-to-consumer segment. We built up our cash position and repaid the full balance on our revolving credit facility by quarter end, meaningfully improving our debt to adjusted tangible equity ratio to 4.95x, down from 5.3x in Q1.

As of July 1, we regained the ability to make incremental draws on our revolving credit facility. We also received confirmation from the lenders under our revolving securitization facility that the audit report requirement has been satisfied. As a reminder, this audit report was one of two conditions required to restore access to incremental draws on that facility. We have meaningfully advanced steps to replace the backup servicer, which will satisfy the second condition.

Turning to our financial performance. Compared to the first quarter of 2026, we improved our total yield, reduced our net charge-off rate, managed our costs and delivered positive earnings. We also strengthened our leverage position. As expected, our results were impacted by our decision to reduce originations alongside elevated net charge-offs, though the charge-off rate itself continued to improve relative to Q1.

Turning to Slide 8. I want to highlight our progress on the six-point plan we introduced on March 10. First, despite pulling back significantly on originations in the second quarter to prioritize liquidity, we have increased the direct-to-consumer share of our total gross loans receivable by 300 basis points since Q4. We will continue to focus second half originations on easyfinancial direct-to-consumer lending. Second, we made a very significant reduction to second quarter LendCare originations year-over-year. We are maintaining a selective presence in segments and merchants where performance meets our standards, and we see opportunities for future optimization. Third, we strengthened our leadership team with key appointments that bring additional outside expertise. In mid-June, we welcomed Lynne Oddie to goeasy's executive team as SVP and Chief Operations Officer. Lynne brings deep consumer lending expertise across operations, risk, collections, customer experience and transformation built through 15-plus years in non-prime consumer lending. At goeasy, will consolidate and oversee loan processing, customer service, collections and administration. Fourth, we continued our focus on operational and cost efficiencies. In the quarter, we closed one of our four main office locations, generating greater operating leverage on our real estate spend. Fifth, our efforts to strengthen LendCare progressed as expected, including improvements to net charge-off rates. We continue to evaluate our long-term strategy for the merchant originated business. And sixth, we delivered on our aim to strengthen our balance sheet and liquidity position. With the retained cash flow from reduced originations, we repaid our revolving credit facility in full. Effective July 1, we restored access to incremental draws on that facility. The progress made on our balance sheet gives us a stronger starting point for origination activity going forward.

Our six-point action plan has two objectives: to stabilize the business in the near term and to strengthen the foundation for sustainable, profitable growth over the long term. We have made meaningful progress on both and are well advanced in building a stronger, more resilient company.

Slide 9 revisits the Q2 2026 outlook that we shared with our Q1 financial results. Actual Q2 performance was consistent with our outlook across all three measures. Ending gross consumer loans receivable of $5 billion came in at the midpoint of our $4.9 billion to $5.1 billion outlook range. Total yield on consumer loans came in at 28.3%, near the top end of our 27% to 28.5% range and net charge-offs at 16.7% came in at the midpoint of our 16% to 17.5% outlook.

Slide 10 presents an update on the composition of our gross loans receivable, focusing on the direct-to-consumer and merchant originated split. As noted in the six-point plan update, LendCare merchant originated loans represented 39.7% of our portfolio at the end of Q2, down from 41.3% in Q1 and from 46.2% in Q2 last year. The core of direct-to-consumer unsecured personal loans, secured home equity loans and easyhome lending now make up 60.3% of our total portfolio from 53.8% in Q2 2025. That 650 basis point shift in one year reflects the deliberate repositioning of the portfolio toward our core franchise. We expect this shift to continue. Direct-to-consumer unsecured and secured originations will be our primary focus in the second half of 2026.

Slide 11 provides an update on the performance of the components of our easyfinancial reporting segment. Quarter-over-quarter weighted average interest rates of originations remained largely stable across our easyfinancial unsecured, easyfinancial secured and LendCare merchant-originated secured loans. At quarter end, 87.9% of total gross consumer loans receivable carried an interest rate at or below the 35% APR maximum allowable interest rate for loans written after January 1, 2025. This was up 130 basis points from 86.6% as of March 31. In Q2, credit performance in our direct-to-consumer secured products continued in line with expectations. Annualized net charge-offs for direct-to-consumer unsecured loans were 17%, up from 13% in Q2 2025. This increase was driven by three factors: a declining loan book or the denominator effect, a significant increase in nonprime consumer insolvency rates and an increase in aged losses. In our merchants originated loan portfolios, net charge-offs fell 580 basis points to 20.6% in the quarter from 26.4% in Q1, in line with our expectations.

I will now turn the call over to our CFO, Felix Wu, for a discussion of our second quarter financial performance. Felix?

Thank you, Patrick, and good morning, everyone. Before recapping our second quarter financial performance, I want to provide an update on the LendCare-specific material weakness related to IFRS 9 that we identified at year-end. Since our first quarter update, we have continued to make meaningful progress on our remediation plan. We are strengthening governance and operational controls as well as enhancing our policies, documentation and training. During the quarter, we engaged a big 4 consulting firm to conduct an independent advisory assessment of our broader internal controls over financial reporting or ICFR program. Most importantly, the targeted assessment did not identify additional critical gaps in our program. It highlighted the strong commitment to ICFR by our internal audit team as well as additional opportunities for improvement.

Our focus remains on implementing, monitoring and testing these enhanced controls. Our internal audit function is now actively performing control testing. As we have previously stated, a material weakness is not remediated until the controls have operated for a sufficient period and have been validated through testing. We remain committed to maintaining a strong control environment and high standards of financial reporting discipline.

Turning to our year-to-date results. The 2% year-over-year decline in our consumer loan portfolio led to a modest decrease in revenue. Our net income and return on equity were negatively impacted by elevated net charge-offs in our merchant-originated auto and powersports portfolios. On an adjusted basis, we reported a net loss of $14.5 million and adjusted diluted loss per share of $0.88, both of which were down year-over-year.

On Slide 14, we tightened credit measures in the merchant originated loan portfolio and curtailed loan originations in Q2. We managed originations down 70% year-over-year to $272 million from $904 million in the second quarter of 2025. This helped to bolster our liquidity position. The reduced loan originations directly impacted gross consumer loans receivable, which ended the quarter at $5 billion, a decrease of $107 million or approximately 2% from $5.11 billion at Q2 2025 quarter end. Quarter end, 55.4% of the total loan portfolio was unsecured, up from 52.4% in Q2 2025 and essentially flat to Q1 this year.

The planned reduction in gross loans receivable, coupled with a lower total yield compared to the prior year led to a 9.6% year-over-year decline in quarterly revenue to $390 million. The total yield on our consumer loan portfolio was down 340 basis points relative to Q2 2025, but up 40 basis points relative to Q1. Year-over-year, yields faced downward pressure on four fronts: the impact of the higher allowance for credit losses on interest receivable, credit tightening in merchant originated loan originations and a moderate reduction in direct-to-consumer originations, the continued impact of the lower maximum allowable rate of interest on unsecured lending products and a higher proportion of larger dollar value loans, which carry lower yields on certain ancillary products.

Turning to costs on Slide 16. Other operating expenses in Q2 were $91 million, down 9.3% compared to last year. The decrease was mainly driven by lower marketing expense in line with lower origination activity and the decline in total compensation expense. The efficiency ratio for Q2 was 25.5%, relatively flat from 25.6% in the same period of 2025 despite the decline in revenue. The efficiency ratio for the quarter benefited from reduced marketing costs due to the 70% reduction in year-over-year originations. 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 the reported and an adjusted basis, Q2 operating income was down year-over-year. The decrease in adjusted operating income was primarily driven by elevated credit losses and lower total yield on consumer loans, including ancillary products and higher cost of borrowing. Operating income improved quarter-over-quarter as credit losses continue to decline. Earnings benefited from the release of provision for credit losses resulting from the decline in gross consumer loans receivable. We generated adjusted diluted earnings per share of $1.02 in the quarter. That figure backs out the impact of the amortization of intangibles and fair value changes on 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. Patrick covered net charge-offs for easyfinancial secured, unsecured and LendCare on Slide 11. For the whole business, we delivered 110 basis point quarter-over-quarter improvement to 16.7% despite the denominator effect resulting from a decrease in average gross loans receivable.

The chart on Slide 19 illustrates a meaningful shift in the composition of our gross consumer loans receivable past due or delinquencies. Total delinquent loans at the end of the second quarter represented 11.9% of the total, a decrease of 100 basis points compared to Q2 2025. Gross consumer loans receivable that were 1 to 30 days past due as of the end of the second quarter increased by 130 basis points compared to Q2 last year. This was driven by elevated credit risk performance in merchant originated auto and powersports loans and 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 as of the end of Q2 decreased by 230 basis points compared to Q2 last year, primarily driven by charge-offs recognized in the fourth quarter of 2025 to the second quarter of 2026 related to certain delinquent merchant-originated auto and powersports loans. We placed the most focus internally on loans 30 days past due or more and are pleased with the continued improvement, both year-over-year and quarter-over-quarter that we are seeing in that category.

Looking at our allowance for credit losses on Slide 20. We ended the quarter with total ACL at $499.5 million, up from $406.7 million in Q2 2025. Net change in allowance for credit losses on gross consumer loans was negative $41.6 million compared to $21 million in Q2 2025, primarily due to the release of provision for credit losses resulting from the decline in gross consumer loans receivable during Q2. The rate of allowance for expected credit losses decreased from 10.09% as of Q1 2026 to 9.99% for Q2 2026, driven primarily by changes in the macroeconomic outlook data used in our IFRS 9 allowance model, coupled with improved product mix, specifically a higher proportion of easyfinancial secured in the portfolio.

On Slide 21, cash provided by operating activities before net principal written in Q2 2026 was $585 million, up from $489 million in Q2 2025. As our Q2 results demonstrate, we have significant control over the pace and volume of originations, the biggest use of cash in our business. This control proved a valuable lever in liquidity management as we deliberately moderated originations to bolster our liquidity.

The continued strong cash generation from the business drove positive momentum toward restoring our balance sheet health. As we previously disclosed, we used existing cash resources to repay the USD 64.6 million unsecured note that matured in May. On June 30, 2026, we repaid the full outstanding balance of $314 million under our revolving credit facility. As of June 30, liquidity represented by unrestricted cash on hand plus unused contractual borrowing capacity was $1.37 billion, of which $1.06 billion was not available. On July 1, we regained the ability to make incremental draws on our revolving credit facility as expected.

With the amendments to our securitization warehouse facility secured earlier this year, we had to satisfy two conditions to regain the ability to make incremental draws. First, we had to complete a facility level audit to the satisfaction of our lenders. We received confirmation from the applicable lenders that the audit report requirement has been accepted and that condition had been fulfilled. Second, we needed to replace our backup servicer. We are well advanced in meeting the second condition and are working with a new provider on implementation plans. Our securitization lenders have also initiated preliminary discussions with us to extend the facility. We continue to appreciate the constructive approach and look forward to finalizing an extension. With the main maturity repaid, we have no other near-term unsecured note maturities. We continue to benefit from low and mostly fixed or hedged interest costs in the near term. The average blended coupon interest rate on our debt was 6.8% at the end of Q2. Our capital allocation priorities remain consistent with the prior two quarters. Dividends and share repurchases are suspended indefinitely as we continue to prudently manage our liquidity.

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

Thank you, Felix. With our Q2 results, we are introducing a Q3 2026 outlook. For the quarter, we expect ending loans receivable of between $4.8 billion and $5 billion. Yield on consumer loans is expected to land between 26.5% and 28% and net charge-offs are expected to be between 14.5% and 16%. We are also refreshing two components of our full year 2026 commentary.

On gross consumer loans receivable, we have updated our full year outlook to reflect current and expected near-term macroeconomic conditions and continued moderation of direct-to-consumer loan originations. Accordingly, we expect gross consumer loans receivable at year-end to be broadly consistent with Q2 ending levels. For total yield on consumer loans, including ancillary products, we expect to see continued benefit from lower charge-offs over the course of 2026. However, continued moderation of direct-to-consumer originations and portfolio mix changes are now expected to offset much of this benefit. Accordingly, we expect full year total yields on consumer loans to be broadly consistent with first half results. We continue to expect net charge-offs to average in the mid-teens for the year with improvement continuing as the year progresses.

Before we conclude our prepared remarks, I want to recognize Jason Appel, our Chief Risk Officer, who we announced yesterday, will be leaving goeasy at the end of August to pursue an external opportunity. Over the past 13 years, Jason has made significant contributions to goeasy and played an important role in helping to build and strengthen our risk and analytics capabilities through a period of substantial growth. On behalf of the entire team, I would like to thank him for his leadership and wish him every success in the future. We have identified a successor to Jason and expect to announce that appointment separately before Jason wraps up his time with us.

In closing, our focus for the second half is clear: grow originations responsibly in our direct-to-consumer easyfinancial business, continue to improve credit performance and build on the progress we have made on our balance sheet.

With that, I would like to turn the call back to the operator and open the lines to questions from our analysts.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. [Operator Instructions] Your first question comes from John with Jefferies.

Felix, thanks for the update in terms of the warehouse facility. Do you have any sense in terms of when the second requirement will be completed?

Yes. In terms of the backup service provider, the requirement is for them to be live or able to step in whenever needed. When we signed the contract with the replacement, they outlined a 60- to 90-day implementation plan. We're well on our way from that. They are all -- between 60 and 90 days would probably lead us into around the September -- early or mid-September time frame.

That's great. And then with presumably access to those facilities as well as -- sorry, the standby that you refreshed. Given the fact that you got a little bit more access to liquidity, can we make the assumption that originations may accelerate from where they were in the second quarter? I understand the guidance for year-end gross loans, but is that something that might be a reasonable expectation?

John, this is Patrick. Let me jump in on that one, if I could. So two things, maybe two things to think about there. One, our forecasted originations for Q3 over Q2, they will increase, and that's embedded in our guidance on where we expect the loan book to end Q3. Really, the binding constraint for us at this point is more about where we see profitable returns. So we've moderated our expectations in Q3 relative to where we would have been when we met in May based on some of the increases observed in our easyfinancial unsecured loss rates. So we're really focused on managing credit well to ensure that all the originations we put on our books will generate the proper risk-adjusted returns. And at this juncture, we're not constrained from a capital or funding perspective in achieving our target origination levels.

Your next question comes from Gary with Desjardins.

I want to start off the question with the easyfinancial unsecured net charge-offs of 17%. Last quarter, Patrick, I think you flagged the denominator effect that could be larger in the quarter. So just wondering if you can just quantify the shrinking book so the denominator and then the portion that's related to perhaps underlying deterioration and any collections strategy shift? And where do you see the easyfinancial net charge-off in Q3 and also exiting this year?

Thank you, Gary, and good morning. So overall portfolio loss rates for goeasy stepping down from 17.8% to 16.7% directly hit the midpoint of the guidance. And so we're very pleased with the trajectory that we see there. We've obviously made tremendous progress on the LendCare portfolio. You can see those rates stepping down quite substantially and the investments that we've made on the leadership front and the collections front are starting to pay dividends, and we see momentum building.

We did expect coming into the quarter that our easyfinancial unsecured rates would present as higher and that this would be at least partially driven by the denominator effect. In typical quarters, we've been growing the loan book between, call it, 4% and 5% recently. And in this quarter, easyfinancial shrunk by a little bit more than 4%. So it's a pretty significant swing. It is challenging to get precise in exactly how big the denominator effect is because to some degree, you need to estimate what the losses would have been on the loans you did not book and we did not book them.

So assuming there's a significant contribution from the denominator effect, but also knowing that there is a significant contribution from the increase in our insolvency losses, in particular on that portfolio is notable.

One thing that we did validate through external data sources is that the rise in consumer insolvencies we observed here is a significant step-up from the prior quarter and year, but also in line with industry trends. And that's what's really leading to us taking a more cautious outlook on growth in Q3 and into the end of the year, given that trend.

Okay. Great. And then maybe just more broadly on your net charge-off outlook for the full year. So, first half, I think you did 17.3%. And then if I take your midpoint guidance for Q3, 15.3% and I reverse engineer that versus your mid-teens. So the math implies Q4 to be in the low double digits range. So is that the right way to think about it exiting this year? And is that number a reasonable starting point for '27? Just any help in the trajectory would be helpful.

Certainly. Certainly appreciate the desire to kind of map out the longer-term credit trends. Our focus, Gary, for sure, is bringing on bringing down credit losses quite substantially over the back half of the year and into future years as well. The trend that we've observed, in particular, on our LendCare portfolio in combination with the success we're having in really shifting the composition of the portfolio towards our easyfinancial business is really driving down the significant step, step down in losses into Q3 and what's implied in Q4 as we confirm our guidance of mid-teens loss rates.

So we're very much focused on completing the year with a strong end on credit losses and riding that momentum into 2027. Too early at this point for us to just to comment and provide guidance on where we expect '27 to land. But our focus is clear, which is to continue to bring down credit losses over time.

And lastly, Jason, I appreciate all your help over the years, and congrats on your next chapter.

Thank you, Gary. Much appreciated.

Your next question comes from Stephen with Raymond James.

I want to revisit the provision release, if we could, because obviously, that's the main driver of the headline profit. So, I guess, at this point, it was driven because of the lower loan book, but there was nothing forcing you to do that release. You could have kept the allowance elevated. So I'm trying to understand the rationale to do that because at some point, you're going to be regrowing this company, and that's going to require an allowance increase, which means you're dampening earnings on the other side. So can you explain the rationale of why you would want to release at this point where credit is still elevated in both your books?

Stephen, yes, I'll pass it over to Felix.

Yes. Thanks, Stephen, for the question. And so in terms of the provision, it is fairly prescriptive, and we are following IFRS 9 accounting standards on that, Stephen. So there are very formulaic assumptions driven based on the performance of our portfolio, probability of default, exposure default, loss given default as well as a macroeconomic indicators that we use from Moody's from external benchmarks. And so when you think about the calculation of the allowance for credit losses, it's going to be based on the size of our book as well as the rate. The rate is driven by the overall credit outlook and credit performance that I was mentioning in terms of those factors. But then you do have the volume impact, which is ending receivables. And so following IFRS 9 accounting standards, as we shrink the book, as the rate is -- all else being equal, if the rate is the same, it will result in a release.

There are sometimes adjustments that can be done from a management perspective related to the macroeconomic outlook, but it is based on -- it is very prescriptive. And I would say that the loan loss allowance is also based on the existing book. It doesn't include -- it's based on the balance sheet ending loan receivables and does not include any future losses from that perspective, too.

Okay. Maybe I'll follow up. I don't want to spend 10 minutes on this. But the second question is, when I look at the 90 to 180 bucket, that fell $25 million quarter-over-quarter, which was positive. I'm just wondering how much of that decline or that $25 million is contributing to the charge-off rate? Like what's the success rate of that decline? And what ended up being in charge-off? I probably don't want to give specifics, but is it like that $25 million all become charge-offs and because you have $90 million left. So I'm trying to figure out the success rate of that 90 to 180 bucket.

I'll take that one, Stephen. So it's a good observation. We've seen a significant step down in our 90 to 180 past due receivables. As a reminder, the majority of that -- the vast majority of that is going to come from our purchase originated loans through LendCare. And a good chunk of the loans in that space will be secured against collateral as well, where we'll attempt to recover on the balances for those that ultimately aren't able to get back to current status. But certainly, a meaningful proportion of what ends up in 90-plus is going to flow through to charge-off. As we continue to shrink the LendCare portfolio, we will also just naturally see that volume continue to decline. And as the risk profile of what's remaining improves, the rate may end up declining as well.

Okay. And I'll sneak one more in here. And maybe for you, Patrick. When I look at the elevated charge-offs for the remainder of the year, and obviously, that's going to change into 2027. The yield is well under the rate cap now and your unsecured book, which tends to be the highest yielding product and will dominate, but I don't know if it's ever going to get back into the 30s. Like what are you looking at in terms of longer-term ROE potential for this business? I think next quarter, if you're not -- if the book is stable, you won't get that provision release. So I'm trying to understand what is your goal or what is the longer-term ROE potential in your mind?

Yes. Great question, Stephen, and spot on as well. I mean we're very excited about the long-term potential of our business, and we continue to be focused on becoming Canada's leading non-prime lender.

The strength that we have in our easyfinancial and easyhome lending business enables us to generate very strong risk-adjusted returns. Those are, of course, dampened at the moment because of the performance of our merchant originated business and some of the elevation we're seeing in loss rates there. But over the long term, that's a business that has generated very strong returns, and we'll continue to be able to serve that customer base very well because what we see in the market is continued strong demand and relatively limited options for these consumers from competitors.

And you're right to point out that we're 1.5 years past the rate cap implementation now. You can see that the quarter-on-quarter effect of running off the previous above 35% book is going to continue to shrink. Our unsecured business and our secured business combined generates closer to the 30-ish percent yield with in the 12%, 13%-ish loss rates. And with the right operating leverage and scale, that's going to produce very attractive returns for our shareholders. To get there, we really need to continue executing on our plan, which is why we're so focused in the here and now on improving credit performance, particularly in LendCare, but across the portfolio and shifting our mix quite strongly towards our easyfinancial direct-to-consumer base.

Your next question comes from Bart with RBC Capital Markets.

Felix, I appreciate the update on the internal control remediation. Can you just maybe give us a bit more detail around sort of the path and next steps that you guys are looking for to get that remediation done by the end of this year, which I think is your expected time frame?

Bart, I think you're looking for Felix there. Go ahead, Felix.

Yes. Thank you. Yes, I would say to approach the remediation of the material weakness is sort of three steps or three parties involved here. We have -- in the first phase, we have finance and credit risk team working actively as well as operations to improve our controls, documentation on policies and the training from that side. That would be the first phase. The second group that then comes in is internal audit to do substantive testing and verify the actual success of the controls. And then the third phase would be active collaboration with our financial auditors in terms of satisfaction as well from that side.

We're near the end of the first phase and starting the second phase or the second group with internal audit, having started doing active control testing on that side. And so once we complete that group, we're going to be actively working and we'll be working going forward with our auditors to close that. And so that's where we stand in terms of the overall process. There is time that is required in terms of the number of results of satisfactory control testing that we need to see.

That's helpful, Felix. And then maybe, Patrick, just on the guidance, I mean, we did see a guide down this quarter on the top line, and that's on the back of guidance that was just released last quarter. So maybe can you help us understand like when you provide guidance to us, like what the kind of bottoms-up process is? And what's giving you the comfort that the current guidance out there is, let's call it, stable from here?

Yes. Thank you, Bart. Maybe just from a philosophical perspective here, the business drives the guidance and the guidance doesn't drive the business. So as we had communicated last quarter, we will provide an outlook to the best of our ability on how we're seeing the year unfold. But in the day-to-day, as things evolve, we have a very dynamic business.

So managing our easyfinancial business, as an example, we've invested quite a bit in the credit infrastructure that supports that business, which means we're right on top of credit trends, and we have technology and processes in place that allow us to be very nimble with making updates from a credit perspective. And the same is true of how we deploy our marketing spend.

So really, this is a sign of strength that as we saw some loss rates that were elevated compared to what we might have originally expected, we're fine-tuning our approach heading into Q3 and Q4 based on that. And then, of course, that had a natural implication for where we planned at the end of the year, and we wanted to provide that update and give clarity. But it's a very dynamic market that we live in.

So as we work through Q3, there will, of course, be new things that come up, and we're going to respond accordingly in optimizing our business and then providing transparency on the implications of that with each of our calls. So that's just kind of how we look at it internally. We don't ever want to let kind of the guidance drive the business decisions as the data changes. And so we wake up and answer the case every day.

That's helpful. Thanks, Patrick. Appreciate the candid response.

Your next question comes from Jeff with ATB Cormark.

One high-level question I wanted to ask is, could you give us some color on the LendCare portfolio and what the expected runoff rate would be on the loans in that bucket? I know you speak generally to 30% to 40% of the overall book would run off in a typical year. But I'm assuming it's a bit longer than that in the LendCare book. I'm just trying to use that to help me think about the amount of originations you'll have to pick up within easyfinancial.

Thank you, Jeff. Yes, for the LendCare book, you'll be able to see that quarter-over-quarter, we had a 10% decline in the loan book, and I think about a 15% decline year-on-year. So it's quite a substantial kind of tick down just in the last 90 days. That overall kind of paydown rate is elevated as charge-offs are part of that decline, and we see charge-offs continuing to abate as we move into the second half of the year. So 10% is probably on the higher end, and you'll see some decline in that over time.

That said, we haven't planned for any material increase in our LendCare originations through the back half of the year. So when we provide our guidance on where we expect the loan book to end, that is entirely on the strength of growing the easyfinancial direct-to-consumer business and the originations that would correspond with that.

Okay. That's helpful. And then just on the liquidity front, I appreciate the color that you offered us. And then just looking at the amount of cash that comes into the business as the existing portfolio pays down. I'm just wondering when you would even expect to utilize either the RCF or the securitization facility sort of based on the guidance you're giving us, it seems like you could just live within your existing liquidity. But would there be a reason that you would need to tap one or the other of those facilities within the next six months based on the guidance you're giving us?

Jeff, why don't I let Felix weigh in on that one?

Yes. Thanks. And I think in terms of your observation, you're absolutely right in terms of our guidance on the ending loan book for the remainder of the year. It is to be roughly consistent with Q2. And so the loan book is the reason for that -- the funding requirement. And so if it is going to be relatively consistent given our funding capacity, you wouldn't expect any material changes in terms of draws from that perspective, all else being equal.

Okay. That's what I just want to be clear on that. I know people are sort of focused on this, but it doesn't seem like you're going to need it for at least 6 months. And then just one other one here on E Financial. You mentioned the heightened charge-off activity and gave us some of those dynamics there. In the past, you've spoken to the level of borrower assistance that's part of just the typical operations in the business. Where does that sit now versus what you had disclosed in the past? Have you really, I assume, curtailed the level of borrower assistance pretty significantly at this point?

Yes. Thank you, Jeff. Why don't let Jason Appel discuss that?

Jeff, I think the last disclosure we had given around the borrower assistance to usage hovered around 10%. As we've continued to optimize collections and focus on the opportunity to collect where we can, that ratio has declined. We'd be hovering more in the 8% to 9% range, which would be closer to the historical norms, but still sitting above sort of the low point we would have hit in a benign economic environment. So it would be down, and that's because we're being a little bit more mindful as we optimize the portfolio.

Your next question comes from Jaeme with National Bank Capital Markets.

I wanted to dig in a little bit on the easyfinancial net charge-offs and just get a little bit more granular perhaps from your perspective, if you can share some commentary on vintage performance that is driving the higher charge-off ratio in this quarter. Is it related to new loans, 25%? What can you tell us on that basis for vintage? And then if you could offer some color around the delinquency performance and collections activity within that easyfinancial unsecured loan portfolio as well, please?

Jaeme, good to hear from you again. Thank you for the question. In terms of your ask on the easyfinancial unsecured vintage level performance, we haven't seen any deterioration actually in vintage level performance. So as we're observing our newer originations from, say, '25 come in, everything thus far is in line with our expectations.

Given that the rise in losses has come largely through increased insolvencies or consumer proposals, those tend to impact some of our longer-standing vintages. And so that's where we've seen more of the increase there, to be frank. So less pressure coming from new vintages, although we've ingested the information and reoptimized our credit box accordingly. Overall, delinquency rates within the within the easyfinancial portfolio are relatively stable. The overall delinquency rates at the company level are relatively stable, modestly better. And specifically within easyfinancial, they're very stable.

Okay. And just in terms of your commentary on the rise in insolvencies, just kind of looking at some of the broader data for Canada seems to have plateaued recently in terms of the number of insolvencies. Is that a trend that you're seeing as well in your portfolio? Or has that rising trend lagged a little bit what we're seeing in the broader data? So what I mean is, are you seeing continued rise in that insolvency for your clients, and that's why you're sort of pulling back on growth a little bit?

So, two things, just overall insolvencies within Canada have been rising. However, they've been rising more within the nonprime population. We secure that data through commercial agreements with various providers, and we've seen our rise to be in line with what the broader non-prime market is facing.

So our view on that is that this is a natural consequence of the prolonged period of rising unemployment and CPI or inflation pressure that's concentrated in really day-to-day goods. Certainly pleased to see the step down in unemployment in June. We haven't necessarily baked into any of our forecasts any sort of macroeconomic tailwinds at this point, but do see some green shoots appearing on that front.

I appreciate that, that actually a little bit of color on nonprime. Similar question then on the LendCare portfolio, if I could, just on the vintage. Obviously, some originations were coming through up until sort of mid-Q1 of this year. Can you talk about the performance of the vintages? Has anything shifted in the LendCare portfolio as you're continuing to wind it down?

By and large, we're seeing vintage level performance in line with the expectations that we leveraged to come up with our full year guide on performance in the mid-teens. What we are now seeing is some of the momentum building internally around our efforts on the collections front.

We have invested quite a bit in the leadership in that space, in the oversight of that space. just really, really happy with the work of the team on that front. And so we've kind of -- we baked in the performance benefits that we've assumed that we will continue to achieve performance benefits, but we're really pleased to see the trajectory that the LendCare losses are on.

Your next question comes from Graham with TD Securities.

Could you just give us some color on what's baked in or behind the guide for a lower consumer loan yield in Q3 versus sort of where you've been in the first half of the year? What's driving that?

Graham, thank you for the question. So we're projecting our full year yield results to be broadly in line with what we saw in the first quarter. Admittedly, we had -- or in the first half -- sorry, admittedly, we had previously communicated a gradual improvement over time that would be driven by the mix shift towards our direct-to-consumer business and the charge-offs reducing primarily on the LendCare portfolio.

A couple of factors at play here. One is that we are growing our easyfinancial business less than originally anticipated. So the mix shift impact is slightly smaller. And although we expect to consider to have some benefits from reduced charge-offs, the actual mix of what's remaining in the LendCare portfolio over time is going to put some pressure on LendCare's yield specifically. Said differently, we've obviously stratified the pricing within that portfolio by risk. And as we're experiencing charge-offs, those disproportionately are coming from the higher risk, therefore, higher-priced loans on the book.

Okay. That makes a lot of sense. On the expense front, I thought you did a good job this quarter on managing those down. I presume there's sort of less marketing spend going on. That's one of the drivers. Is this a reasonable level for your business through the, I guess, the second half of the year?

Graham, yes, I think you've called out an important facet there. So we had reduced advertising spend in Q2. And we will be increasing that advertising spend in Q3 as we ramp back up on our easyfinancial direct-to-consumer business. So I think Felix touched on this a bit with his comments around some of the upward pressure on operating efficiency into the second half of the year. And it's really about those levels of advertising are not representative of the run rate levels we'll experience.

Your next question comes from Ryan with Bank of America.

Most of might have been answered. One quick one here. So congrats on getting access to the revolver. It sounds like securitization facility conversations are going well. My conversation centers around the potential for repurchasing bonds in the open market. So some of the long-end bonds in your cash back are still relatively sizable discount. So my question is that now that liquidity is more solidified here, is that an option you'd consider, especially as at least in your revolver, you start to see some of those leverage covenants step down in coming quarters. So just any thoughts there? And again, congrats on the quarter.

Thank you, Ryan, and thank you for your patience. Felix, why don't you jump in on this one?

Thanks, Ryan, for the question. And you're right, given certain of the discounts and the later maturities of our high-yield bonds. It is something when we do look at investments of our cash, we will be evaluating the impact on all of our balance sheet key metrics for originations versus debt repurchases.

There are also covenants that we have to consider and sort of restrictions in terms of our indentures or amendments from that side. Those are probably -- the latter ones are probably more restrictive from that in terms of right now, given the most recent amendments in terms of some of the buybacks in terms of the high-yield bonds.

All right. Ladies and gentlemen, there's no further questions at this time. I'll turn the call back over to Patrick Ens.

Thank you, operator. To summarize, execution against our plan is on track. Our balance sheet is stronger, credit performance is improving, and our direct-to-consumer franchise is growing as a proportion of the total portfolio. We have more work to do, and I am confident that we have the team to do it. Thank you for joining us today.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Welcome to the Annual General and Special Meeting of Shareholders of goeasy Limited. Please note, the meeting is being recorded.

I would like to introduce Mr. David Ingram, Executive Chairman of the Board. Mr. Ingram, the floor is yours.

Good morning, everyone, and thank you for joining us for the Annual General and Special Meeting of Shareholders of goeasy. I would like to call the meeting to order.

My name is David Ingram. I am the Executive Chairman of the Board, and I will also be acting as Chair of today's meeting.

Now we have 4 formal matters of business to conduct at today's meeting, namely the presentation of financial statements, the election of directors, the appointment of the corporation's auditors for the coming year; and finally, the confirmation of the corporate's advanced notice bylaw.

Given that this is a virtual meeting, the voting at today's meeting will be conducted by online ballots for all matters. If as a registered shareholder or a duly appointed proxy holder, you are using your control number to log into the meeting and you accept the terms and conditions, you will be provided with the opportunity to vote by online ballot.

If you have already voted by proxy and you vote again by online ballot during today's meeting, your online vote during the meeting will revoke your previously submitted proxy.

If you have already voted by proxy and do not wish to revoke your previously submitted proxy, do not vote again today during the meeting. The poll will be open for all resolutions at the same time. This will allow you to choose to vote on each resolution immediately or wait until conclusion of discussion on each resolution prior to casting your votes.

Registered shareholders and duly appointed proxy holders who have signed in using their control number and have specific questions relating to a formal item of business may submit their questions now by clicking the Ask a Question button.

Please clearly identify the applicable item of formal business and include your name and contact information with your submission. Kindly note that the questions that do not relate to the formal items of business of the meeting would not be addressed during the meeting. Therefore, any such questions should be directed to Investor Relations at [email protected].

Once discussion on all items of business has concluded, I will give you time to enter your votes and then declare voting closed on all resolutions. A report disclosing the voting results of today's meeting will be filed on SEDAR+ and disclosed in a press release in due course following the meeting.

I now declare the polls open on all resolutions. I will begin by asking Sabrina Anzini, Executive Vice President and Chief Legal Officer of goeasy to act as Secretary of the meeting. With the consent of this meeting, I appoint Christopher de Lima of TSX Trust Company to act as scrutineer for the meeting.

The Secretary has advised me that the notice of meeting, together with a form of proxy, the management information circular and the financial statements of goeasy for the financial year ended December 31, 2025, and auditor's report thereon have been sent to shareholders of record as of March 25, 2026.

Additional copies of these materials are available on the corporation's website and on SEDAR. Accordingly, I will dispense with the reading of the notice of the meeting.

Pursuant to goeasy's bylaws, business may only be transacted at this meeting if 2 persons, each being a shareholder entitled to vote there at or a duly appointed proxy holder or representative for a shareholder so entitled, irrespective of the number of shares held by such persons are present or represented by proxy.

The scrutineer has provided me with a preliminary report regarding shareholder attendance at this meeting. The scrutineer reports that there are present at this meeting or represented by proxy 180 shareholders holding 6,805,246 common shares, representing an aggregate of approximately 42.4% of the shares issued and outstanding.

Accordingly, I declare that the requisite quorum of shareholders is present, and I declare that the meeting is duly called and properly constituted for the transaction of business. I direct that the confirmation of mailing of the notice of meeting received from the TSX Trust Company and the scrutineers' complete report on attendance be annexed to the meeting minutes.

The last general meeting of goeasy was held on May 8, 2025. The Secretary has the minutes of the last meeting of shareholders of the corporation, which can be made available upon request. I will dispense with the reading of the minutes of such meeting.

We will now proceed with the first item of business, namely the presentation of the corporation's consolidated financial statements for the year ended December 31, 2025, and the auditor's report thereon. These have been made available to shareholders prior to the meeting and are available on the corporation's website and on SEDAR. We will dispense with the reading of the auditor's report to the meeting.

We will now proceed with the election of directors. The management information circular contains a list of biographical profile of the 10 nominees recommended for election to serve as directors of the corporation to hold office until the next Annual General Meeting or until their successors are duly elected or appointed in accordance with the articles and bylaws of the corporation.

These nominees are as follows: Donald K. Johnson, Karen Basian, Sean Morrison, Honorable James Moore, Tara Deakin, Jonathan Tétrault, Radhika Kakkar, Patrick Ens, Jacqueline Moss; and myself, David Ingram.

Pursuant to a resolution adopted by the Board of Directors, the number of directors has been set at 10 and 10 eligible candidates have been nominated. Furthermore, pursuant to the advanced notice bylaw approved by the Board of Directors on March 31, 2026, advanced notice is required to be given to the corporation regarding any proposed director nominees not included in the management information circular.

No such notice was received by the corporation, and therefore, no additional nominees will be considered at this meeting. May I have a motion that the 10 persons nominated as directors of the corporation be so elected.

I so move.

Thank you, Patrick. May I have a motion seconded?

I second the motion.

Thank you, Felix. I will now call for a vote on the motion. The online ballot will allow for voting for each individual director nominee. We will now proceed with the appointment of Ernst & Young LLP as auditors of the corporation. May I have a motion that Ernst & Young LLP be appointed as auditors of the corporation until the next Annual General Meeting of Shareholders or until a successor is appointed and that the Board of Directors are authorized to fix the auditor's remuneration.

I so move.

Thank you, Felix. May I have the motion seconded?

I second the motion.

Thank you, Patrick. I will now call for a vote on the motion. The last item of business is to confirm the adoption of the bylaw providing advanced notice requirements for the nomination of directors as further described in Schedule B of the management information circular and as adopted by the Board of Directors on March 31, 2026. May I have a motion that a resolution in the form of the resolution attached as Schedule A to the management information circular confirming the adoption of the advanced notice bylaw be passed as a resolution of the corporation.

I so move.

Thank you Farhan. May I have the motion seconded?

I second the motion.

Thank you, Jason. I will now call for a vote on the motion. It is now 10 minutes after 10, and the polls for all items of business at this meeting will close in 15 seconds. Those of you who have not yet voted and wish to do so, please do so now.

[Voting]

I now declare the polls closed and the voting terminated for this meeting. I am pleased to confirm that the scrutineers have reported to me that all matters put to a ballot have been passed with the shareholder approval.

A report disclosing the voting results will be filed on SEDAR and disclosed in a press release in due course. This now concludes the formal business brought before the meeting. Thank you all for attending, and I now declare this meeting to be terminated.

Thank you, everyone, for joining. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to goeasy Q1 2026 Earnings Conference Call. [Operator Instructions]. Also note that this call is being recorded on Wednesday, May 13, 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.

Thank you, operator, and good morning, everyone. Thank you for joining us to discuss goeasy Limited's results for the first quarter ended March 31, 2026. Our Q1 news release, which was issued yesterday is available on SEDAR+ and on the goeasy website.

On today's call, Patrick Ens, goeasy's Chief Executive Officer, will provide an update on our first quarter performance and recent developments and 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. 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.

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 hard-working everyday Canadians with nonprime 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 continue 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. We are delivering on our plan to reduce exposure to underperforming merchant originated loans, concentrating growth in our direct-to-consumer easyfinancial brands 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, support of 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. Together with elevated levels of net charge-offs, lower originations resulted in a contraction of our gross consumer loans receivable by $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 merchants-originated business through LendCare weighed on earnings. Our adjusted diluted EPS came in at negative $1.90 for Q1. 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. Delinquencies were up 30 basis points year-over-year to 12.3% with significant improvement 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 $541.2 million from $382.8 million at this time last year. On our Q4 call, I shared details on our 6-point action plan. I noted the most significant steps we took in the quarter including the workforce reduction that impacted approximately 9% of our employee base and is expected to contribute $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 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. 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 2 deliverables required to make further draws against Securitization Warehouse Facility I and repaid our USD 65 million May 2026 senior unsecured note maturity using existing cash resources.

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 3 measures. Ending gross consumer loans receivable of $5.36 billion was in the middle of our $5.3 billion 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% range and net charge-offs at 17.8% and 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. Under the consumer lending umbrella are two operating segments. The easyfinancial operating segment is our direct-to-consumer lending business, the long-time 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 the second half of the year.

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 January 1, 2025. 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%, 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. 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. Felix?

Thank you, Patrick, and good morning, everyone. Before I recap the key financial developments and 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. 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 4 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. 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 $31.3 million and adjusted diluted loss per share of $1.90. 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%. 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 the fourth quarter of 2025 and the first quarter of 2026, related to certain underperforming merchant-originated auto and power sports loans. 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 $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. Year-over-year, yields faced downward pressure on 3 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.

Switching over to costs. Other operating expenses in Q1 were $96.8 million, up 1.5% compared to last year. The increase is mainly driven by nonrecurring restructuring charges of $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 onetime. 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 the second half 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 $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.

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. Referencing the operating segment disclosure Patrick covered on Slide 9, which showed net charge-offs in greater detail.

For Q1 2025 (sic) [ 2026 ], 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 the first quarter represented 12.3% of the total, an increase of 30 basis points compared to Q1 2025.

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, driven by elevated credit risk performance in merchant-originated auto and powersports loans and 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 the fourth quarter of 2025 and first quarter of 2026 related to certain delinquent merchant-originated auto and powersports loans.

We placed the most focused internally on loans 30 days past due or more and are pleased with the improvement in emerging stability we're seeing in that category. Looking at our allowances for credit losses, we continued to build in the quarter with total ACL now $541.2 million, up from $382.8 million this quarter last year. 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 powersports loans.

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. 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.

We have a great deal of control over the pace and volume of originations, which has the biggest use of cash in our business, and 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 $560.1 million, up from $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. In our last update, we used existing cash resources to pay -- repay the USD 64.6 million unsecured notes that matured at the beginning of this month. 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 1, we regained incremental capacity under our revolving credit facility. For our Warehouse Facility I, 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. 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. The external auditors have already completed their field work. 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 the loan assets if something happens to the primary servicer, which is us. While fulfilling both these Securitization Warehouse Trust I 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 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. Our capital allocation priorities remain consistent with Q4. 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.

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 billion 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 in the quarter. We continue to expect gross loans receivables 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. 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, delivering on our 6-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.

[Operator Instructions]. First, we will hear from Stephen Boland at Raymond James.

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, not just letting the book run down, but how are you preventing further charge-offs and delinquencies. What steps have you taken there?

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. 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 back book and managing down the losses on that back book.

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. We've staffed up our internal team with additional collection staff. But we've also added a 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. 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 movements 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.

Okay. And just in terms of the allowance, and actually just my second question, I'll go to the unsecured book as I guess now it's called direct-to-consumer seems to be the focus. So you're managing the growth. We get that. Your 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're just cherry picking the best 100 applications that you're underwriting 1 or 2, where it might have been 4 or 5 before. I'm trying to get an idea is the credit getting better in that book as well as you're being more selective?

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. 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 a profitable business, but might be higher than the average risk of what we would normally acquire.

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. For the entire back book, 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.

Okay. I'll sneak one more in and I won't requeue. But just on the backup servicer, can you name the third party? I'm just trying to -- like I presume they have to do like satisfy your lenders. What specific conditions do they have to meet to be approved or has that already happened?

That's already happened. We can't name the -- sorry, this is Felix. 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. So frankly, in terms of the 2 deliverables, this is probably the easier one and more sort of business as usual thing to process. 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 in working with our banks and the backup servicer to implement it. So it's a normal BAU process. We have one already, and it's just switching it and that's proceeding well.

Next question will be from Gary Ho at Desjardins Capital Markets.

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. So Q1 will be more front-end loaded, and we should see that kind of going down.

And then 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? And what do you expect that to look for the balance of the year?

Great. Thank you, Gary. So two questions just to make sure I'm keeping track here. We've got -- going into a bit more detail on how you see the LendCare trajectory playing out and where you get the confidence on your LendCare losses and then what's driving our easyfinancial direct-to-consumer unsecured loss rates. So why don't I start with the first?

And 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 '24 and '25 to play out throughout the year. So quite a bit of sophistication goes into that. 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. 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. And I think very clearly shows from Q4 to Q1 that we are on the right path, which is really driving our confidence in the full year estimations.

On the easyfinancial 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, 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.

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. 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.

Okay. And then 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 grind higher before it levels off?

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. And that is the factor that is not within the control of the business. We are operating and managing our credits in the context of the environment that we operate in, 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. And we're just going to focus on managing credit exceptionally well, which in the long run leads to better performance within our ACL.

Gary, this is Felix Wu. 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. 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.

Okay. 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. I think last quarter in Q4, you said it was July 1, 2026. I didn't see that date with this MD&A and deck, has that been pushed out? Or what's your expectation in terms of timing?

Sorry, Gary, the $700 million -- could you restate the question? I'm not sure I totally...

Yes. Sorry, the Securitization Warehouse that gets released in terms of liquidity. I think last quarter was -- you mentioned in your presentation that July 1, 2026, is when you get that liquidity. I don't see that date.

Yes. No, great. Thanks, Gary. So we have two facilities with our bank partners. One is the revolving credit facility and the second one is the Securitization Warehouse Trust I. For the revolving credit facility, it is date-based so we get access to that incremental funding on July 1. And so that is the date that we disclosed in our last earnings call, and then for the Securitization Warehouse Trust, it is not date based, but there are 2 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. So that's not date-based. And so there are 2 deliverables on the Securitization Warehouse Trust that we're making good progress on and then the other one, the revolver is July 1 date-based.

Next question will be from John Aiken at Jefferies.

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

Yes. 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 the second half of the year.

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 into 2027. Can we actually expect to see releases out of the ACL, almost being equal, macro, et cetera?

I think, yes, that would be correct in terms of the overall -- the basic math, right, is the rate and the volume base. And so 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. And so those are your 2 drivers behind the ACL.

John, this is Patrick. I was just adding 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. So there would be volumes related reserve builds attached to that.

Yes. 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. 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?

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. So that's formulated the base of the LandCare strategy. And then we have lots of opportunity, of course, to reevaluate and revisit all the performance from our past business and develop the strategy. 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.

Next question will be from Jeff Fenwick at ATB.

Maybe 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, 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? I mean the 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. 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? Is there enough growth there to allow it to happen?

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 provided here in the short last 1 year, we've seen strong growth in our direct-to-consumer business. So I'm of the strong belief that the market opportunity in the direct-to-consumer lending side of the business for Canadians with nonprime credit scores as I said, is large and relatively untapped and the offering that easyfinancial 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. 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. It 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 $590 million. And I think that could easily be 3x, 4x the size of what it is today.

Yes. It's Jason Appel here. Just as a reminder, the total size of the nonprime credit market in Canada ex mortgages sits at about $240 billion as at year-end. And it's been growing at roughly 1% to 2% a year organically, which generates about $2.5 billion to $5 billion of just net incremental growth. 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 community banks, continue to move down in terms of their overall share of market. So there -- it would be an argument to be made that there's some pretty decent runway looking forward in terms of our ability to capture growth.

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

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. So implied in that is our confidence in the level of attractive growth within the direct-to-consumer business.

Okay. And then maybe just 1 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. And as you get that process under control, you're not going to 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.

Yes, Jeff. 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. 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 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.

Next question comes from Ryan Shelley at Bank of America.

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 that increase? And what investors should be thinking about going forward here, as drivers of those early-stage delinquencies. 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. So if you could size the impact of some of the factors you mentioned, that'd be great.

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

Yes. Thanks for the question, Ryan. When we look at the 1 to 30 bucket, 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 and 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. The area that we are most focused on is the 30 plus, and we have seen great progress and stability from that side. And that will continue to be the area because it's still best leading indicator in terms of overall charge-offs.

Got it. And then just one more quickly, if I could. So I know the focus right now on the Securitization Warehouse is regaining access but the maturities coming up here in October, I believe. 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. So just any color you can give investors that -- on conversations you're having with your lending partners would be very helpful.

Yes. No, thanks, Ryan. I would say, first, on the securitization warehouse trust, there are two deliverables that we're focused on. The first one, 2 conditions. 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. 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 field work. 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. 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 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.

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 conversation, they've always been sort of very collaborative and very open. If I can say how we got to an amendment in 2 weeks after sharing those news -- the news that we had to share in March was an indication of the level of collaboration 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.

Next question will be from Graham Ryding at TD Securities.

I just want to focus on the consumer yield 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, but you also have some of these legacy loans, I think it's 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 further out in terms of how the overall consumer yield is going to migrate?

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

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. 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, 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. 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.

So 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 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.

So 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 towards the end of 2027. 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.

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

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

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

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

Yes, that's helpful. 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, do you have visibility? Are these largely loans that were originated in 2024 and 2025? Or are they more mature than that?

Why don't Jason Appel weigh back in on that one?

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. So you would have some of those delinquency being made up by more recent vintages just given the age of them. 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 towards the beginning of the second year following origination. So it would be made up mostly from '24 and '25.

Okay. That's helpful. So 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?

Yes.

Next question will be from Bart Dziarski at RBC Capital Markets.

I wanted to ask around the LendCare control deficiency. So Felix, you had mentioned you're hiring a Big 4 consulting firm to help out, and we still haven't seen resolution. So could you maybe unpack like what's driving the delay in terms of why the deficiency is still out there? 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?

Yes, thanks for the question. Maybe first off, I'd just like to set expectations on sort of remediation of a material weakness. 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 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. 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.

And so material weaknesses are not sort of closed within sort of weeks or a month or 2. These are sort of very -- sort of purposely longer sort of time horizons in a very thorough fashion. 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 of defenses. 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. 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, we'll do the control testing then followed by Ernst & 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 4 consulting firm to do a holistic review of our internal controls over financial reporting, and we expect that work to be done over the next couple of months.

Okay. Great. That's great color. And then I just wanted to square something up on the liquidity. So on the slide, you're highlighting strong liquidity positioning. And then -- but then, Patrick, you did mention in the prepared remarks that you're managing liquidity and the balance sheet very carefully. 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?

Bart, this is Felix. I can take that. We do expect to get access to our 2 banking facilities as we outlined over the next sort of couple of months, roughly, July 1 for the revolver and those 2 -- completing those 2 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 $560 million for the quarter. 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're -- we've bolstered and fortified our liquidity in Q2. That is 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 from that side. But we're in a position of strength given those actions and the 6-point action plan that we outlined in our last quarter, and we continue to execute and things fall in line with our expectations.

Question will be from Jaeme Gloyn at National Bank Capital Markets.

I want to 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 in so far as charge-offs in dollar terms, charge-off rates increased significantly. The delinquency rates in that 1- to 90-day bucket, which would be the unsecured portfolio increased. And you called out lower collections in 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 easyfinancial unsecured portfolio given those data points?

Thank you, Jaeme. 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. 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. And so there are a number of factors at play, which we discussed.

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

Okay. Yes. It's just -- it's tough to see with the disclosures. I don't know if there's something that may be can be helpful in future quarters to see through that. 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. So maybe if I can shift to a bigger picture question and just thinking 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 to drive growth?

Got it. Yes. Thank you, Jaeme. Maybe a couple of pieces I'd point to as well. And so I appreciate the way that you're looking at it. 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. 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.

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. 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, Jaeme, and that's what we'll be focused on driving.

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. But I don't know, correct me if I'm wrong on that.

Jaeme, 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.

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

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.

Good morning, ladies and gentlemen, and welcome to the goeasy Q4 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, March 26 -- on Wednesday, April 1, 2026.

I would now like to turn the conference over to James Obright, Senior Vice President. Please go ahead.

Thank you, operator, and good morning, everyone. I'm James Obright, Senior Vice President of Investor Relations and Capital Markets. Thank you for joining us to discuss goeasy Limited's results for the fourth quarter and full year ended December 31, 2025. Our Q4 news release, which was issued yesterday is available on SEDAR+ and the goeasy website.

On today's call, Patrick Ens, goeasy's Chief Executive Officer, will provide an update on our fourth quarter performance and recent developments and an outlook for the business; Felix Wu, our Chief Financial Officer, will provide an overview of our Q4 and full year 2025 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. [Operator Instructions] The operator will poll for questions and will provide instructions at the appropriate time.

Before we begin, I remind you that this conference call is open to all investors and is being webcast through the company 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 Investors section of the company website.

As noted on Slide 2, forward-looking statements will be made on this call, which may 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 will turn the call over to Patrick Ens.

Thank you, James, and thank you, everyone, for listening today. I want to begin by acknowledging the impact on our shareholders, our lenders, our employees and our other stakeholders from the charge-offs at LendCare and the impact from the mitigating actions we have taken since disclosing those charge-offs to you on March 10. Since 2021, our strategy has been to grow the secured loan book through merchant channels at LendCare with certain expectations of returns and credit performance. Based on what we are observing now, those expectations are not being met. We are taking decisive action to pull back where we see the weakest performance and reoptimizing our strategy to focus on where we have the greatest confidence, our direct-to-consumer, unsecured and home equity personal loans.

My top priority as CEO is to ensure we manage credit well and return to delivering the strong performance we expect of ourselves. Although we are significantly pulling back on our originations at LendCare, we see potential in these product verticals to be unlocked down the road by applying the best practices established in the strong easyfinancial business to our merchant-originated loans.

Since this is my first call as CEO, let me provide a brief introduction. I've spent my entire professional career in credit, including serving as a Senior Credit Officer at a financial institution and working in the subprime lending sector for nearly 20 years. I came to goeasy in 2024 to lead easyfinancial, our direct-to-consumer lending business. It's a business I'm very proud of, one with strong fundamentals and it represents the majority of our loan book today.

The challenges we're currently navigating pertain to LendCare, our indirect, merchant-originated point-of-sale financing business. On our call today, we're going to discuss the matters we disclosed on March 10 in more detail and have addressed in our current financial reporting, not only to help you better understand them, but critically, to highlight what we've already been doing to address them through our six-point action plan. We've taken decisive steps in recent weeks, initiated structural changes to our business and defined a road map to get goeasy back on track. We have work to do, but we have a clear plan, we're executing with urgency and we're committed to building back stronger than ever.

Now let me walk you through where we are and where we are headed. Let's start with an update on the key financial developments of the quarter. As we'll get into in more detail later in this presentation, we saw higher levels of losses in LendCare, including an incremental charge-off of loans receivable and a related charge-off of loan interest and fees. We recognized a goodwill impairment charge, also related to LendCare, and saw an increase in our allowance for credit losses. Beyond identifying and promptly disclosing these matters, we've set out a six-point action plan and have already taken swift and decisive steps.

While one part of our business is facing some significant challenges, the fundamental market opportunity remains strong and intact. We perform best where we have built direct relationships with our customers. That's where our credit performance has been strongest. easyfinancial, the direct business I led as President before becoming CEO, continues to perform as expected. That's why our strategy is focused on growing easyfinancial while we stabilize and rightsize LendCare by leveraging the best practices around credit discipline and collections in support of a unified operating model.

Turning to a summary of our Q4 financial performance. You can see the impact of the challenges at LendCare across key metrics. Profitability in the quarter was significantly impacted by the $72 million net change in allowance for credit losses, the incremental $178 million of charge-offs and the $160 million goodwill impairment charge. However, as a reflection of continued strong customer demand for credit, Q4 originations drove continued growth in our consumer loan portfolio which ended the year at $5.5 billion, up almost 20% year-over-year.

The origination levels in the quarter are a reminder of the opportunity we have to provide a valued service to an underserved customer base. This opportunity will remain available to us as we work through this period and beyond. But we are determined to approach this opportunity right. Let's look at exactly what we are doing to address the factors that impacted this quarter's results.

As announced on March 10, we have a six-point action plan. Let me walk you through what we've already delivered over the last 3 weeks. First, we're focusing growth on easyfinancial channels. We've reoptimized our unsecured personal loan credit criteria and continue to underwrite loans where we have expertise and a strong track record.

Second, we've reduced LendCare originations. We've significantly tightened credit standards and reduced exposure in auto lending, powersports and other merchant channels. We are maintaining a smaller presence in segments and merchants where we see better performance and opportunities for future optimization. We are fundamentally reassessing our approach in this area.

Third, we're integrating functions across our business units as we adopt one unified operating model. We've already unified our easyfinancial and LendCare loan processing teams under shared leadership, eliminating duplication and ensuring consistent standards.

Fourth, we're delivering operational and cost efficiencies. We implemented a workforce reduction in March, impacting approximately 9% of our employees that is expected to yield $30 million in annualized run rate savings that will flow through our P&L in coming quarters. The impact of these reductions was deepest in our LendCare business unit, consistent with the reduction in activity at LendCare, while we work on strengthening the business model. Going forward, we will be investing as appropriate to strengthen and develop our operations in areas where additional resources are necessary to deliver strong results.

Fifth, as previously disclosed, we've brought in new leadership at LendCare with the appointment of Farhan Ali Khan as Head. And sixth, we've taken the first steps to strengthen our balance sheet and liquidity. Dividends and share buybacks are suspended to retain cash, and we've successfully negotiated covenant amendments with our secured lenders. This is a plan already in motion, and we will continue to pursue ongoing initiatives around adjusting our business mix, integrating LendCare, looking for further opportunities to drive efficiencies and enhancing our funding position and liquidity.

Our six-point action plan does two things: it stabilizes the business in the near term and it sets out some of the core elements of the strategy to establish a stronger foundation for future profitable growth. So let me outline our road map for the next 3 years. This isn't just about fixing what's not working, it's about building a stronger, more resilient company that can deliver sustainable, profitable growth.

In 2026, our focus is on decisive action and stabilization through our six-point action plan. This includes rebuilding our access to attractively priced capital, and we are pressing ahead with that work. As this year unfolds and into next, we will be investing in our platform for scalable disciplined growth. We will be strengthening our enterprise risk management with enhanced risk models, credit discipline and collections resources for our indirect merchant channel. We will prudently invest in technology to automate manual processes and drive efficiency and scalability. We will leverage our unique multichannel model to pursue growth opportunities and develop dynamic and personal digital customer experiences.

Into 2028 and beyond, we're expecting to deliver disciplined high performance. Our strategy, which you'll be hearing more about in coming quarters as we refine our plans, is designed to deliver a return to sustainable profitability through balanced portfolio expansion, a scalable operating model and normalized credit metrics. goeasy will be oriented to sustainable and profitable growth throughout the credit cycle. By transferring best practices from areas where we are already performing well to the entire business, we will approach the future with a significantly strengthened enterprise.

So I've told you about where we are taking goeasy, but wanted to spend some time on the company as it stands today. On Slide 9, we offer some new insights around our portfolio composition to underscore where we continue to see strong performance. We have two reporting segments: easyfinancial, our consumer lending arm that provides installment loans; and easyhome, Canada's largest lease-to-own company.

Under the consumer lending umbrella are two operating segments. The easyfinancial operating segment is our direct-to-consumer lending business. This is the long-time core of goeasy and the business I was leading as President prior to taking the CEO role. We offer unsecured personal loans and home equity loans directly to customers through our nearly 300 locations across Canada and our digital channels. With easyfinancial, we have deep credit expertise, proven underwriting models and strong customer relationships that have yielded a track record of success through credit cycles.

We acquired the second consumer lending operating segment, LendCare, in 2021. LendCare is our point-of-sale financing business. It operates through thousands of merchant partnerships, auto dealerships, powersports dealers and retail partners. It's an indirect channel, which means we're one step removed from the customer relationship. LendCare represents about 43% of our portfolio.

Our direct channels, the healthy core of easyfinancial unsecured personal loans, secured home equity loans and easyhome lending comprised 57% of our portfolio.

And on Slide 9, we look specifically at the performance of the components of our consumer lending reporting segment. We're providing the weighted average interest rate of these three business lines to highlight the relative returns before ancillaries and interest charge-offs. The decline in unsecured loans from Q4 2024 to Q1 2025 reflects the impact of the new maximum allowable rate of interest cap at 35%. Its impact has been moderating over time.

Now here's what's critical. We saw stable credit performance in Q4 in both our easyfinancial secured and unsecured products. The elevated credit losses we experienced were not in our direct channels. The higher charge-offs in Q4, including the incremental $178 million were attributed to the LendCare loan portfolio. Our direct business continues to perform as expected, and that's where we're focusing our growth going forward while we invest in integrating and reoptimizing the LendCare business under Farhan's leadership.

As I wrap up my initial remarks, I want to talk a little bit more about our easyfinancial direct business. Our platform addresses a large target market, 9.5 million Canadians with non-prime credit scores who collectively represent almost $238 billion in non-mortgage credit balances. That group is underserved by the mainstream financial institutions. With no dominant player, the market opportunity is attractive for participants that can execute with discipline.

As the prior slide demonstrated, this part of our business is healthy and strong. Our customers know our top-ranked brand. We've earned a great Trustpilot rating, an overall measurement of reviewer satisfaction. And our customers have access to close to 300 locations nationwide and a whole suite of digital channels to engage with us and build relationships.

As we have seen, the returns are attractive and the credit performance is consistent. In my time leading easyfinancial, I have been impressed with the team members I work with, the business processes, credit discipline and overall performance. By pursuing a unified operating model going forward, we will bring that culture of success to the whole goeasy organization. Our ability to execute this rebuild is grounded in our success with easyfinancial and our unique value proposition in the Canadian market. There is more work ahead but Felix and I and the rest of the executive leadership team here are determined to see it through.

Before I turn things over to Felix to go into more detail on our financial performance, I wanted to take a moment to formally introduce him in his new role. This is Felix's first call since being appointed as our permanent Chief Financial Officer last month. Felix brings more than 20 years of senior leadership experience in finance, operations, risk and compliance at financial services companies. He served as CFO 3 times before, most recently at KOHO and previously at President's Choice Financial and Capital One Canada. At a time when we're focused on strengthening our foundation, rebuilding our balance sheet and enhancing our risk management practices, Felix is exactly the leader we need in this seat. I have full confidence in his ability to strategically lead our financial function going forward.

Now I will turn it over to Felix for a discussion of our performance for the year and for the quarter. Felix, over to you.

Thank you, Patrick, and good morning. Before I recap the key financial developments in our business in 2025, I wanted to highlight three important points in our financials. The first is a difference in the presentation of certain financial information that takes effect with our Q4 2025 financial reporting. In the preparation of these results, we identified a presentation change around consumer loan interest receivable write-offs, which were previously shown as an offset to interest income, lowering the net revenue line. To align with IFRS 9, interest receivable write-offs are now being shown as a bad debt expense. This was purely a reclassification. It had no impact on net income, earnings per share, cash flow or our balance sheet. For consistency with prior presentation of certain non-IFRS measures and ratios such as total yield and annualized net charge-offs, we maintained our prior approach to the calculations.

The second important point is the restatement of prior period information that corrects an error in the accounting treatment of certain customer payments. This had an impact on the gross loans receivable, interest and fees receivable, the allowance for credit losses as well as our delinquency and loan staging disclosures. I will describe this more fully in the coming slides.

This was also an error in the over-accrual of -- there was also an error in the over-accrual of interest income on Stage 3 loans. As required by IFRS 9, interest income is recognized on the net carrying amount of the loan, whereas we were recognizing interest income on the gross loan amount for Stage 3 loans. The company has corrected this error in our previously provided financial reports. More details of our restatements can be found in Note 2 of our financial statements and in the sections of our MD&A headed Restatement of Prior Period Financial Information and Restatement Impact on Interim Financial Information.

Finally, during our year-end assessment, we identified a LendCare-specific control deficiency related to the application of IFRS 9 in our financial statements. While this LendCare deficiency did not prevent us from accurately restating our financial statements and properly accounting for credit losses, we have determined that our internal control over financial reporting at LendCare requires enhancement. We are implementing additional controls and oversight mechanisms to strengthen our financial reporting processes going forward.

Turning to the summary of our full year results. For the year, our top line was strong. We grew our consumer loan portfolio by nearly 20% and saw double-digit year-over-year growth in revenue as a result. However, our net income and return on equity were negatively impacted by the measures taken in the fourth quarter related to LendCare, namely a significant charge-off of late-stage receivables based on an assessment of collectibility, a meaningful increase in the allowance for credit losses on the expectation of higher charge-offs and the impairment of goodwill associated with our LendCare business. I will expand on these further in the coming slides.

We had a positive year in originations and asset growth. Originations grew by nearly 10% for the year, driven by strong customer demand and volume of applications for credit. Gross consumer loans receivable grew by nearly 20% to $5.5 billion, with 45.6% of that number secured, down from the prior quarter due to the LendCare charge-offs and continued strong easyfinancial growth.

Originations growth drove revenue growth of more than 10% for the full year. The chart on the right side shows total yield on our consumer loan portfolio, which declined to 26.6% and in the fourth quarter from 32.6% in the prior year. Yields faced downward pressure on three fronts. The most significant impact came from higher interest and fee receivable charge-offs relating to the LendCare portfolio. The ongoing impact of the new maximum allowable rate of interest on the company's unsecured lending product introduced at the beginning of 2025 was the second largest impact. And lastly, a higher proportion of larger dollar value loans, which have reduced pricing on certain ancillary products also weighed down yield.

Let's get into expenses and cost management for the business. The company defines efficiency ratio as adjusted other operating expenses divided by total revenue, less bad debt on interest income. As we've seen in recent quarters, adjusted operating margin can move around for reasons beyond how we're managing costs, such as provisioning or credit performance. We also recognize that the efficiency ratio aligns more closely with how other lenders think about operating efficiency, which enhances comparability as revenue normalizes.

Over the course of 2025, we continue to evaluate and implement measures designed to improve effectiveness and operational efficiency across all areas with a particular focus on credit underwriting and collection practices, which resulted in a Q4 efficiency ratio of 25% or 24.9% for the full fiscal year.

As was noted by Patrick, the fourth point in our action plan is a focus on operational and cost efficiencies, which we expect will yield approximately $30 million in run rate savings. Our future focus is on enhancing our whole firm practices by building off of the rigor of the easyfinancial operating model.

On both a reported and on an adjusted basis, which excludes the goodwill impairment, Q4 operating income was a significant negative, reflecting large items recorded in the quarter, pertaining entirely to our LendCare segment.

The next three slides focus on our credit and underwriting performance in the quarter. Charge-offs are an important indicator of the health of our operations. Excluding the incremental $178 million, the net charge-off rate was 11% due to weakness in the LendCare portfolio that emerged in Q4 2025. In addition, in Q4 2025, we incorporated more recent data in the assessment of the collectibility of unsecured and secured loans that are greater than 90 and 180 days past due, respectively.

There are now two scenarios where an unsecured loan can age beyond 90 days and a secured loan can age beyond 180 days, namely, the collateral has been seized, but we're still waiting on proceeds from sale, or we've entered into an agreement with the borrower to modify the loan, but the process has not yet been completed. With our current view of collectibility informed by additional data, we expect to see higher loss rates in our LendCare business.

I want to reference the new disclosure Patrick covered on Slide 9, which showed net charge-offs in greater detail than we had previously shared. For Q4 2025, net charge-offs in LendCare were 40.6% as compared with 12.1% in easyfinancial unsecured and 1% in easyfinancial's home equity secured business.

Regarding our delinquency disclosures, you will see some of the impact of the restatements I mentioned here. After the year ended December 31, 2025, we identified an error related to the financial reporting of certain customer payments initiated close to period end dates in Q4 2024 and the first 3 quarters of 2025. These payments were credited to our bank account by our banking partner, but had not yet settled with customers as of the relevant period end. We had reported them as customer payments. Although the cash was accessible to us at period end, under our banking agreement, we remain liable for payment reversals and retained credit risk until settlement. Ultimately, there was a meaningful number of payment returns. We reinstated the related loan, interest and fee receivables and recognized additional allowance for credit losses on the increased balances along with related tax impacts. We also corrected the disclosures for loan aging, staging classification.

You will also note that this quarter, we amended the aging buckets to align with how we are now monitoring delinquent loans and managing the collection strategy. These updated loan aging data are shown in this delinquency table. The percentage in the 91 to 180-day bucket rose slightly quarter-over-quarter into Q4. This is a source of potential future charge-offs. Following the application of the updated assessment of collectibility I covered on the prior slide, only 0.5% of the loan portfolio was more than 180 days past due at the end of 2025 compared with 2.9% at the end of 2024.

Turning to our allowance for credit losses. The net change was $72 million in the quarter and $168 million in the full year. Increases in allowance are driven by portfolio growth and by changes in expected credit losses. Our rate of allowance for expected credit losses, which we refer to as provision rate in prior quarters, increased to 9.6% in Q4 from 8.4% in Q3, and reflects our expectation for higher credit losses in our LendCare portfolio.

I want to point out something about our business that may not be fully understood. So this chart should help to clarify. Our lending business generates strong cash flows. The significant principal repayments we receive together with interest paid by our borrowers, generates about $0.5 billion in cash flow per quarter or roughly $2 billion per year before originations. In the past, we directed much of that cash flow to meet customer demand for new loans and to support the growth in our gross receivables. To be clear, we are still making new loans, but we have a lot of flexibility to carefully manage the biggest use of cash in our business, originations, as we work to manage our liquidity in the near term and continue to strengthen our balance sheet. That flexibility also extends to our ability to control both the size and the mix of credit we underwrite and its associated risk and profitability.

I want to wrap up my remarks with an update on our balance sheet. We announced on March 24, we entered into definitive agreements with the lenders under our revolving credit facility, securitization facility and loan purchase and sale agreements. These agreements provided that our revolving credit facility and securitization warehouse 1 would remain available to provide future funding as well as waiving compliance with certain covenants with respect to Q4 2025 and giving effect to other amendments. As a result of executing the definitive agreements, we are in compliance with all of the financial and other covenants under the facilities. We've provided detailed disclosures on these amendments in the appendix to this presentation and in our MD&A. Under current assumptions, new equity was not required in order to comply with the revised covenants.

From a liquidity perspective, as I noted on the prior slide, we benefit from considerable cash flow coming in and our ability to control the volume of loans we originate. We'll be repaying our May notes maturity out of existing cash resources and have no other near-term maturities to manage. We'll continue to benefit from the low and mostly fixed hedge interest costs we have with an average coupon of 6.6% at the end of 2025.

As Patrick outlined in our six-point action plan, by focusing our growth on easyfinancial channels, where we have a strong track record of originating highly profitable loans while reducing underperforming LendCare originations, we have outlined a strategy to deliver on covenant compliance and strengthening our balance sheet. Lastly, by suspending our dividend and share repurchases indefinitely, we're showing prudent retention of cash flow while we navigate this period.

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

Thank you, Felix. Let me talk about what you should expect from us in the near term and how we're thinking about our path back to strong performance. In terms of our outlook for the business, when we report Q1 next month, we expect ending loans receivable to be between $5.3 billion to $5.4 billion relative to $5.5 billion at year-end 2025. Yield on consumer loans is expected to land between 27% and 28%, and net charge-offs between 17.5% and 18.5%.

We know that many of you had hoped we would share 3-year financial forecast today, as has been goeasy's historic practice in prior fourth quarters. While we're not providing that detailed financial guidance today, we did want to share some outlook for the year ahead, 2026. We 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. And finally, we expect net charge-offs to average in the mid-teens for the year, with improvements expected as the year progresses.

Our focus for 2026 is execution, delivering on our six-point plan, prudent management of liquidity and strengthening credit performance. We aim to come back to you with well-thought-out commercial targets later this year, while we continue to deliver against the path forward we have outlined today.

As we wrap up, I want to reinforce why goeasy remains an attractive opportunity even as we navigate these near-term challenges. First, we are serving the relatively fragmented $238 billion non-prime consumer credit market in Canada. There is significant room for a disciplined, experienced player to gain share, and we already have a leadership position.

Second, we have a proven track record of meeting customer needs. easyfinancial is a well-known brand in the direct channel with more than 20 years of history of serving that market. Our top-tier ratings of customer awareness and trust, our expansive merchant channel and our 400-plus locations means a presence that is hard to replicate.

Third, our core direct-to-consumer business is healthy and profitable, and we are building on that foundation going forward. And critically, we generate significant free cash flow before net principal written, $2.1 billion last year, that we can use to rebuild liquidity and balance sheet strength.

This combination, a large market proven model, healthy core business and strong cash generation gives us confidence in our ability to execute on our six-point plan and emerge stronger. This is the foundation we're building on as we navigate this transition and position ourselves for success in writing the next chapter in goeasy's story.

Thank you for your time today and for your ongoing support of our company. With the conclusion of our prepared remarks, I will turn the call back to our operator for questions from our research analysts. [Operator Instructions] Operator?

[Operator Instructions] Your first question comes from Gary Ho with Desjardins Capital Markets.

I want to start off with the loan book and the cash generated. So you did mention a decline in loan book to $5.3 billion to $5.4 billion in Q1 and a recovery in the back half. So directionally, it sounds like Q2 could be the trough. Maybe just give us a sense of the size of the loan book as we progress throughout the year.

And more importantly, under those assumptions, Felix, Patrick, I think you highlighted $2 billion of cash flow generated last year. But looking out, can you elaborate under those assumptions with additional loans, like what's your net cash flow look like first half and second half? And I think you also mentioned you don't need equity at this point. Maybe just talk us through what scenarios you perhaps might need some equity help, if at all?

Thank you, Gary. Thank you for the question. Just to make sure that I was tracking there. I heard a request for a bit more color commentary on how our growth is expected to play out over the course of the year and how that pertains to our plans for funding that growth. So maybe just to pull it up a level, what we outlined in our action plan here is that we feel really strongly about the performance of our easyfinancial direct-to-consumer business. So that's where we're focusing our growth and attention while we're pulling back on the LendCare merchant-originated loans so that we can recalibrate and rebuild our formula on that side of the house.

So we've shared for the full year that we expect our year-end gross loans receivable to be relatively flat by the end of the year. And so yes, declining in the first half of the year and then returning to some growth in the second half of the year to hit our year-end target of being roughly flat.

We also shared that we've successfully partnered with our secured lenders to reestablish our covenants and funding facilities there. And so that plan really all works together to achieve and fund those stated growth goals and successfully done that without any requirements for equity.

Okay. And then -- sorry, I know it's limited to one question, but like under those scenarios, you probably ran under -- other assumptions, like what are maybe some of the KPIs we should look at from the outside? Is it your debt to tangible equity going to a certain range before there might be an equity raise, or no?

Yes. Thank you, Gary. I think if you look as well in the appendix materials, you can see that we do have higher debt to tangible equity than we would have had in the past. What's important to note is that that's part of the plan that's been worked upon and agreed with our banking partners that doesn't require any additional equity. So we're going to start a little bit higher and then continue to bring that down as the year progresses.

Your next question comes from Jeff Fenwick with ATB Cormark.

Can you hear me okay?

We can. Thank you, Jeff.

Okay. Great. I just wanted just to get some clarification about the ability to access the funding under your amended credit agreements here. It looks like, obviously, there's an audit that needs to be completed on some aspects of the loan book through the end of Q1, some restrictions around advances and things like that. Like what -- just trying to understand realistically how accessible that base of funding is? Are you really going to -- it sounds like at least not until midyear, but just being able to draw on either the securitization facility or the revolver, how should we think about that?

I mean, it looks like you're going to have to navigate largely with your own cash flows for the time being. And then it's just not quite clear to me that those dollars are there, but are they really desirable to be able to draw on? Are they available for you to draw on without a lot of incremental challenge there?

Got it. Thank you, Jeff. I'm going to let Felix take that one.

Yes. Great question, Jeff. We have a lot of clarity in terms of the ability to draw on those amended facilities, both the securitization warehouse and the revolver. And so very clearly, on the revolver, we have access to it as of July 1. And so it's [ date ] driven from that perspective. On the securitization warehouse facility, there are two things that we need to accomplish, and we have a good line of sight to being able to deliver on that over the next few months -- the next 2, 3 months. The first one is the completion of an audit, and that continues to go well. And the second one is the changing of a backup servicer from that respect. And so we have no sort of -- there's no complications or obstacles in terms of executing on that. And so we foresee having unfettered access to both of those facilities at the end of Q2, beginning of Q3 from that perspective.

Lastly, as we highlighted, we generate -- one of the big strengths of this portfolio is we generate a lot of cash. And so there is absolutely no issue in terms of liquidity. We can manage our originations to manage any short-term liquidity or liquidity needs that we do have. We do have a very small bond maturity on May 1 that we stated that we're going to pay down with our existing cash flows. And then our next big maturity from a high-yield bond perspective is not until December of 2028. And we can, again, as we highlighted, moderate our origination to manage any liquidity needs.

Okay. And I guess just a nuance there is that external -- or sorry, third-party servicer you mentioned, it's a little unusual. I guess goeasy had been -- you had been servicing the loan book yourselves directly. So is this just to provide extra reassurance to the lending partners that they're more directly engaged in the process of the collections and remittance?

No, Jeff, let me be clear on this. This is a backup. And so we continue to service all of the loans on that side. But in the event sort of that there is an issue that they have the right to switch to a backup service provider from that side. So we are servicing our loans.

Your next question comes from Stephen Boland with Raymond James.

One question. I'll get to the main question, I guess. Patrick, I think there's some concerns about the culture, this big write-off comes at a point of where the media was reporting predatory practices, aggressive lending. So I guess, Patrick, I'm going to put you a little bit on the spot here. What is to blame here? Like -- or who is to blame? Is there a problem with the culture in the company? Some people have pointed to the 3-year guidance that it maybe has driven employees to be more aggressive than necessary. So how do you feel about the culture of this company? And does it need an adjustment or a change?

Stephen, thank you for the question. Let me just maybe start by saying that obviously, the leadership team here is certainly spending some time reflecting on how we got to this point. These aren't results that we want to attain. So we've been reflecting quite a bit on that. And just looking back on the strategy of the organization, there was a strong kind of belief that leaning into growth through our merchant-originated secured business was going to generate a certain set of performance and credit results that would be net beneficial to the organization. And we're now learning that those expectations aren't being met based on the most recent data that we have. So it is an excellent learning opportunity for the organization and certainly one that we're institutionalizing.

And it also just provides us an opportunity to recalibrate our strategy. So really, what we were sharing through our action plan as well is that focusing our growth on where we've seen the best performance and where we have the strongest track record is the formula for success at this company, and that's why we're leaning so far into easyfinancial and pulling back on LendCare.

But we also think there's a lot of good things that we're doing in that easyfinancial business that could be applied to our merchant-originated business as well, and that's what's behind that point in our action plan around delivering a unified operating model because fundamentally, we have this really successful business, and we had one business where the performance expectations are not being met. So we want to take the great ingredients of that successful business and bring it to the whole organization.

Your next question comes from John Aiken with Jefferies.

Patrick, I wanted to explore the -- what I'm calling the runoff of the LendCare portfolio. Can you give us a little more details in terms of what you plan on underwriting going forward? Is it by product, merchant, geography? And then from the originations in the LendCare in the fourth quarter, how much of those originations represent things that are not going to be going moving forward?

And then Felix, one sub-question for you. When you reassess the collectability within LendCare, was -- did any of those write-offs pertain to autos? Or was that all the pleasure craft vehicles?

Thank you for the questions. Just to make sure I can track the two there. There's just one around where do we see opportunity in the LendCare business? What sort of business might we be underwriting going forward? And then the second one was just around the details of that kind of LendCare write-down. I might ask Jason Appel to answer the second one here. I can start with the first.

So we have a broad range of products and merchant types in the LendCare business today. The two biggest verticals being automotive and powersports. We have seen some performance challenges in both of those verticals. We are taking the opportunity to fully reassess exactly that question. So we're going to deeply understand where we see stronger performance, maybe less strong performance, whether that be by customer segments or merchant types or kind of product verticals. And part of the reason we're not sharing the longer-term financial forecast today is just so that we can spend the time to do the rigor to answer exactly that question and come back to you with a more robust response. So I understand that might be a little bit unsatisfying, and just appreciate your patience on that.

Maybe I can ask Jason here to lean in on your second question.

Just on the reassessment of collectibility, that would have extended to a very broad brush that we took across the entire organization, but specifically in the quarter, in Q4, it pertained principally to the auto and powersports businesses of LendCare. So hopefully, that answers your second question.

And if I can just revert with a follow-on. Given the fact that you're still reassessing the LendCare business, can we assume that in -- going forward in the second quarter, there may not be any originations in LendCare as you're going [indiscernible] and that's one of the factors in terms of the decline in the portfolio?

Yes. Maybe just coming back to the prepared remarks off the top. We have maintained a small presence in certain pockets of the merchant-originated channels there, particularly where we see better performance and where we have long-standing strong merchant relationships that we think there is long-term opportunity here. I would say that there's still more to be evaluated there and there could be more opportunity in other merchants as well. But we still have a presence that we're maintaining in Q2.

Your next question comes from Jaeme Gloyn with National Bank.

Yes. I guess maybe a bit of a two-parter. First part would be how much of a deep dive into the loan portfolio did you complete to come to the charge-off guidance for 2026? Did that include the unsecured easyfinancial portfolio?

And then related to that, if I think about the allowance rate at 9.6% compared to that mid-teens guidance. What's the risk? Like the risk I'm concerned about is that allowance rate continues to rise through 2026. Why would it not rise?

Thank you, Jaeme. Jason, can you take that one?

Yes. Jaeme, just to answer the first part of your question, we did a pretty thorough deep dive across the entire portfolio so that would be both the LendCare channel as well as the easyfinancial channel. And I think as I mentioned in past quarters, we tend to break out the performance of the loan books in two ways. We look at both the back book, which is all the loans that are effectively out as well as the anticipated performance of the front book, which is the originations we are going to use moving forward. And both of those were modeled quite extensively using various scenario analysis to arrive at how we expected the charge-offs to run through. And as both Patrick and Felix mentioned on the call, we do expect those charge-offs to progressively move or ease as the quarters move along with an average coming in and around the mid-teens, which suggests that we should be -- we should be below that level by the end of the year.

And as far as the allowance is concerned, I would say that it's just important to remember that, that allowance contains multiple moving parts. Obviously, it looks at the underlying performance of the portfolio and also takes into consideration mostly future-oriented performance. So you're right, we have indicated that charge-offs will remain elevated in our LendCare business, and that's partly why we saw an increase in the allowance in the quarter. But also keep in mind that as we write off certain portions of the LendCare book, that amount is netted against the allowance, which results in an allowance release.

So you have to look at this as a series of puts and takes. I wouldn't go so far as to say that one would expect the allowance to rise. I'd say the other factor you have to keep in mind is there are also forward-looking indicators that weigh into the allowance that we have no direct control over. So all three of those component inputs can push the allowance up or down, and you'd be right in that the allowance has been moving up over the last number of quarters. But with the action plan, as we have outlined and as the charge-offs starting to move down quarter-over-quarter, we would naturally expect that allowance to start to reflect that trend over time as we move forward.

Your next question comes from Bart Dziarski with RBC Capital Markets.

Great. I wanted to have you guys maybe confirm for us the unit economics embedded within your 2026 outlook numbers? And I'm thinking yield, losses, OpEx, cost of capital, et cetera. And I'm just trying to confirm whether you expect to be profitable based on that outlook and those embedded unit economics?

Thank you, Bart. I appreciate the question. And yes, as you've noted, the economics of the loans we're originating are very important to our strategy. And so in providing the guidance that we did provide, which -- acknowledging it's relatively limited and directional on a couple of key elements, we expect the year to see net charge-offs starting higher than the average for the year and ending progressively lower throughout the year. That obviously impacts our yield. So our yield as well starts lower and then will rise over the course of the year.

As you noted, we're pursuing fairly aggressively cost efficiency opportunities. And so we took a very meaningful step in the organization with the reduction in force that was implemented in March and certainly not one -- or not an action we take lightly. So there's a variety of moving pieces there that are all intended to strengthen and improve the profitability of the company as we move forward. We haven't directly provided -- or we haven't provided more precise guidance than that. We intend on doing that later on in the year. Once we've seen some of the actions that we've already got underway start to filter their way through the P&L, and we'll have more clarity and specificity for you.

Your next question comes from Graham Ryding with TD Securities.

Maybe we could talk about the securitization facility 1. It matures on October 30 of this year. What's your confidence that you can renew that important lending facility? And when would you actually look to engage in discussions with that? Would you look to do it before October 30?

Why don't I have Felix take that one.

Thanks, Patrick, and thanks for the question. We have a lot of confidence in renewing that facility. That's based on the fact that, unfortunately, we had some tough news to share with our banking partners 2, 3 weeks ago, but we were able to quickly come to amendments after 2 weeks of effort. And so I think that, that just speaks to their support of the action plan that we have in place as well as the deepness of the relationship, and we acknowledge that support that we -- and collaboration that we received from our banking partners. And so for that quick resolution, I think, is a testament to our confidence in being able to renew the facility on that. And so -- and to your point, we would be looking to do that well before the October time frame in terms of discussions.

There's obviously a couple of things that we outlined in terms of being able to access that facility over the next 2, 3 months, which is switching the backup service provider as well as completing this audit. And so we're taking it step by step. But if you look at the sort of what we've been able to accomplish in a couple of weeks in terms of this amendment, we are very confident on that side.

Okay. That's helpful. And just with the higher spreads on the amended facilities, what's your sort of expectation for that blended cost of debt going forward relative to what we saw in Q4?

Look, I think that, that will be part of the overall discussion with our bank partners at the time. It's obviously -- one component is pricing, but it's also the borrowing base that is allowed and the collateralization levels and the different triggers. And so I think if we look at it at a portfolio level, it was up by 100 basis points. But when you take a look at sort of that overall funding mix compared to our total debt, this is 10% to 15% of our overall funding costs and so very manageable in terms of -- from a cost of funds impact.

[Operator Instructions] Your next question comes from Jaeme Gloyn with National Bank.

Yes. So maybe two separate follow-ups. First, I think I understand this. The -- there's no expectation of repaying or paying down the warehouse facility or the revolver facility. Those balances outstanding today will remain outstanding for the next couple of quarters. Just want to make sure I'm clear on that.

And then the second is just on the charge-off guidance. If the unsecured portfolio is running at 12% charge-off right now, and the auto, powersports portfolio, if you ex out the sort of onetime $178 million, it's running at about 12%, like why is it jumping to 18% in Q1? But what else do you see coming down the pipe? Why is it not -- like what did you miss in Q4, what did you not factor in, in Q4 that you need to take into account in Q1 and Q2, I guess?

Thanks, Jaeme. We got two distinct questions there. So maybe Felix, you can start with the first question, and then maybe I'll pass it back to Jason to talk about the credit risk expectations there.

Yes. In terms of the first one, that is correct, Jaeme, there's no expectation to pay it down. In fact, because of this amendment and the support from the banks, we are able to access additional funding from that side so you would expect over time for that funding amount to increase from that perspective. And then I'll pass it over to Jason in terms of your second question.

Yes, Jaeme, if you look at the charge-off performance in Q4, you'd be right, the unsecured business of easyfinancial is throwing off about a 12% net charge-off rate. And then the LendCare business, in totality, I think we indicated, threw off a 40% net charge-off rate. And of that, roughly about 30% out of that 40% number is accounted for by the onetime charge-off of $177.9 million that we took in the quarter. So you'd be right in saying that the delta would be around 11% on that business.

And if we look at how we're guiding the remainder of the year, it's taking into a combination of a couple of factors. One is obviously the reduction in the size of the LendCare portfolio that's taking place principally as a result of two things, the reduction in originations that's been mentioned as well as the continued high expectation of charge-off numbers. Felix commented on that when he walked you through -- or walked everyone through the delinquency numbers sitting as at Q4, where we still have a pretty appreciable size of loans in the late-stage buckets that we intend or expect a significant portion of that, which will charge off. So I would say that, that 11% number is informed by a combination of both the numerator and denominator.

And as far as whether or not we've missed anything in the quarter, as I said before, we've modeled out both the back book historical performance as well as the level of originations we anticipate going forward. And that gives us a fairly high degree of confidence that, that overall charge-off number will reduce through time, recognizing that, again, movements in the denominator might change that percentage a little bit. But the important point to note is those charge-off numbers are moving down. They are moving down consistently. And until such time as we've got that judicious review and comfort as to how the overall LendCare portfolio will perform, we'll continue to be mindful of how much we originate moving forward.

Okay. So I guess it's just a seasoning and timing factor for some of these loans that are currently delinquent and what you expect will become delinquent?

Correct.

There are no further questions at this time. I will now turn the call over to Patrick Ens for closing remarks.

Thank you, operator. In closing, we are committed to taking decisive action through a focused six-point plan to deliver strong financial performance, anchored in the strength of our direct-to-consumer business. Thank you again for joining us.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Good morning, ladies and gentlemen, and welcome to the goeasy Limited Q3 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 6, 2025.

I would now like to turn the conference over to James Obright. Please go ahead.

Thank you, operator, and good morning, everyone. I'm James Obright, Senior Vice President of Investor Relations and Capital Markets. Thank you for joining us to discuss goeasy Limited's results for the third quarter ended September 30, 2025. The news release, which was released yesterday after market close, is available on SEDAR and on the goeasy website.

On today's call, Dan Rees, goeasy's Chief Executive Officer, will review key highlights for the third quarter and provide an outlook for the business. Hal Khouri, the Chief Financial Officer will provide an overview of our financial results as well as our capital and liquidity position. Jason Appel, the company's Chief Risk Officer will then provide an update on our credit and underwriting. Also joining us on the call today is Felix Wu, Interim Chief Financial Officer; and Patrick Ens, President, easyfinancial and easyhome.

After the prepared remarks, we will open the lines for questions from analysts. The operator will pause for questions and will provide instructions at the appropriate time.

Before we begin, I remind you that this conference call is open to all investors and is being webcast through the company's investor website and supplemented by a quarterly earnings presentation, which will be referred to by our speakers today. Those dialing in by phone, the presentation can be found on the investor website.

As a reminder, the slide presentation and our MD&A contain a disclaimer on forward-looking statements, which also applies to our discussion on this conference call. Business media are welcome to listen to this call and to use management's comments and responses to questions in any quarter-related coverage. However, we would ask that they do not quote callers unless that individual has granted their consent.

I'll now turn the call over to Dan Rees.

All right. Thank you, James. I'd like to begin by extending a personal welcome to all of those listening, including our employees, investors and the research analysts that follow our company. I would like to begin by first reflecting on how we began Q3. One week after we reported Q2, we launched a highly successful senior unsecured notes offering, which was upsized and which netted us CAD 796 million in gross proceeds with a 6.1% low coupon. By late August, early September, our shares were close to all-time highs.

Less than a week later, our share price came under pressure following the publication of a misleading short seller report. We continue to be pleased with the confidence that so many have expressed in goeasy, our management team, our business model and our track record. We did hear from some stakeholders that they would benefit from a review of a few areas of our business and some of our financial reporting. And so today, we will be providing you with an analysis of our performance for the third quarter and our outlook, but we will also spend some time highlighting these topics, notably interest receivable and borrower assistance programs.

As I've said on many occasions, I continue to be impressed by the longstanding track record of growth and profitability of goeasy as well as its commitment to invest and its ability to adjust. While the business is clearly performing well in many respects, we also recognize that being long-term minded is key to capturing our future potential. Given the persistently challenging macroeconomic backdrop and areas of uncertainty, it is especially important now to take a prudent approach.

As stated previously, with increasing size comes both opportunity and responsibility. We will continue to bolster our operations to reflect the size and scale of our business and continue to look for better and more efficient ways to deliver products, service customers and manage the loan portfolio end-to-end. As you've seen this quarter, we will continue to be growth-minded and we'll do so in a deliberate and thoughtful way that both honors our mission and reflects the challenges of today's operating environment.

With that, let's now get into the quarter. I'll ask you first to turn to Slide 4 of the Q3 2025 earnings presentation available, as James mentioned, on our website. I am pleased to report organic loan book growth of $336 million in the quarter, driven by originations of $946 million. This strong performance lifted our receivables to $5.44 billion at quarter end. Our growth helped to generate record quarterly revenue of $440 million, up an impressive 15% from Q3 of last year. Our portfolio yield of 31.4% reflects the expected ongoing transition from the rate cap as well as the impact from a higher composition of secured loans.

In Q3, we reported a 30-basis point year-over-year decline in our net charge-off rate to 8.9% and our allowance for credit losses increased from 7.9% to 8.1%. This is in response to higher early-stage delinquencies attributable to persistent weak macroeconomic conditions. Our efficiency ratio at 23.4% was 30 basis points higher than last year and remains an area of continued focus for management.

Our EPS at $4.12 was down [ $4.6 ] from the same period in '24. This is due to the impact of lower yields, an increase in allowance for credit losses and incremental financing costs associated with our successful high-yield notes offering in August, which provided important liquidity to fund our growth ambition. The 21-basis point increase in provisions equaled approximately a $0.50 impact to our adjusted EPS for the quarter.

Turning to Slide 5, I would highlight the continuation in Q3 of many of the trends that have made goeasy such a successful company for so long. Applications continue to be high and are up 22% and loan originations up 13%. We delivered balanced growth in both secured and unsecured loans and delivered another milestone financing in the high-yield markets.

Our continued strong performance in Q3 was made possible by the focus and dedication of our 2,600 employees. In recent months, my goeasy colleagues and I were proud to be recognized again as one of the best places to work in Ontario as well as one of Canada's top growing companies by The Globe and Mail's report on business.

Q3 was another quarter of giving back to our communities. We hosted our 17th Annual Golf Tournament this September and raised well in excess of $400,000 in support of our Feed Their Future campaign at BGC Canada, which is Canada's largest and dedicated child and youth serving organization. I remain deeply impressed by how consistent and powerful our passion is for our customers and our culture, and also our communities.

Rounding out my opening comments, I'm pleased to highlight how the goeasy team delivered against our objectives this quarter. We were fully on track. And as you can see on Slide 6, our performance in Q3 was in line with the outlook we shared with you in August despite the ongoing challenges posed by the weaker macro backdrop. Our continued loan book growth, resilient yield and stable net charge-offs underscore the resilience, strength and adaptability of our business model.

With that, I will pass the call to our CFO, Hal Khouri to provide an update on our financial performance and balance sheet.

Thanks, Dan, and good morning, everyone. I'm picking up on Slide 8. We experienced strong organic loan originations in Q3 at over $940 million, up 13% year-over-year. Growth was driven by record applications for credit across all product and acquisition channels, including unsecured lending, home equity loans, automotive and point-of-sale lending. We've been driving consistent growth in our gross consumer loans receivable for much of the year now, and there has been a focus on the increasing percentage of our portfolio which is secured.

This quarter, while we continue to see strong originations in auto and home equity lending, we also delivered strong growth from the unsecured part of our business. As such, we grew our lending loan receivables by 24% year-over-year to $5.4 billion, and the percentage of our portfolio represented by secured loans remained at 48% over Q2, though it was up nearly 3 percentage points year-over-year.

Turning to Slide 9. Total revenue in the quarter was a record $440 million, up 15% over the $383 million in the same period in 2024. At 31.4% for Q3, total yield on consumer loans declined year-over-year due to growth of our secured loan products, which carry lower rates of interest and implementation of the federal maximum allowable rate of interest of 35% at the beginning of this year.

On Slide 10, our strong organic loan growth drove increased revenue generation and led to record reported adjusted operating income of $170 million, an increase of 4% compared to $163 million in the third quarter of 2024. That operating income translated into adjusted diluted earnings per share of $4.12, which was essentially flat quarter-over-quarter, but down 5% from the third quarter of 2024. As Dan noted in his opening remarks, the 21-basis points quarter-over-quarter increase in provisions had a negative $11 million impact on operating income and a negative $0.50 impact on adjusted EPS.

Turning to Slide 11. We continue to experience the benefits of scale, including through greater operating efficiency and productivity improvement. During the third quarter, our efficiency ratio, specifically operating expenses as a percentage of revenue, improved over Q2 and remained relatively stable to the third quarter of 2024. In Q3, we reported an adjusted operating margin of 38.6%, down from 42.6% in the same period of 2024, primarily driven by the decline in total yield due to the new interest rate cap and the increase in allowance for credit losses. Provision impact had a 2.5% impact on our adjusted operating margin.

Other operating expenses were up $15.1 million or 18.6% year-over-year. As we mentioned on our Q3 '24 call, this quarter last year benefited from below trend salaries and benefits as well as the accounting policy change to capitalize employee commissions and bonuses that are directly attributable to loan originations, making Q3 2025 a tougher year-over-year comparison.

Before I get into the balance sheet, I wanted to spend a little bit of time addressing a topic a number of our investors have asked about recently.

Slide 12 provides some information on our interest receivable line item. The interest receivable we carry on our balance sheet reflects interest accrued on all loans through the charge-off, including current and delinquent. In accordance with IFRS, it is stated net of allowance for losses. The net interest receivable balance was $142 million in Q3, up $11 million over Q2.

The rise in the interest receivable balance can be attributed to a few key factors. The main driver is the record growth of loan portfolio requiring incremental accrued interest levels. Second is the mix shift to more secured loans, which can remain on books for longer and continue to accrue interest. Third factor is utilization of focused collections efforts and certain borrower assistance tools to support loan repayments. Lastly, optimization of certain collection efforts, including focusing on cash receipts, contribute to changes. We continue to monitor interest receivable as a percentage of our overall loan book. It was 2.6% in Q3 and flat relative to the prior quarter. As late stage delinquent balances decline and we continue to optimize borrower assistance tool design and usage, interest receivable will gradually decline relative to our overall gross loans receivable.

Turning to our funding position, as outlined on Slide 13, we finished the quarter with a strong and fortified balance sheet with over $400 million in unrestricted cash. In the quarter, we added to our long track record of obtaining capital on attractive terms to support our growth plans. In August, we capitalized on favorable market conditions and issued USD 450 million in senior unsecured notes due in 2031 as well as reopened our existing Canadian senior unsecured notes due 2030 for $175 million. These offerings which raised approximately $796 million in gross proceeds for goeasy, upsized from the initial amounts targeted, reflecting a strong investor response.

We also concurrently entered into a cross-currency swap agreement, which served to reduce the Canadian dollar equivalent cost of borrowing on the new U.S. dollar notes to 6.1% per annum. Last week, we also announced the 1-year renewal of our $1.4 billion securitization warehouse facility on substantially similar commercial terms. Based on existing facilities, we have approximately $2.3 billion in total funding capacity.

At quarter end, our weighted average cost of borrowing was 6.6% and the fully drawn weighted average cost of borrowing was 6.1%, largely consistent quarter-over-quarter. Our debt to tangible equity ratio for the quarter was 3.96%, at the high end of our targeted range, primarily due to higher cash and liquidity on the balance sheet following our recent unsecured notes offering. We remain confident that the capacity available under our existing funding facilities will be sufficient to fund our organic growth ambitions.

That being said, the recent negative events that have been observed in the broader consumer finance credit markets, a reminder that we benefit from remaining highly proactive in pursuing opportunities to raise additional debt on attractive terms.

Bolstering our strong funding position and as described in the bottom left of Slide 14, the business continues to produce impressive levels of free cash flow. Free cash flow from operations for the trailing 12 months before the net growth in consumer loan portfolio was $393 million. As a result, we estimate we can currently grow the consumer loan book by approximately $350 million per year solely from internal cash flows without utilizing external debt, while also maintaining a healthy level of annual investment in the business and maintaining the dividend.

Reflecting confidence in our continued growth and access to capital going forward, the Board of Directors approved a quarterly dividend of $1.46 per share payable on January 9, 2026, to the holders of common shares of record as of the close of business on December 26, 2025.

On Slides 15 and 16, adjusted return on equity landed at 22.6% for Q3, down 310 basis points year-over-year. The main driver was lower adjusted net earnings, as covered previously, as well as a higher level of shareholders' equity. That covers our financial performance.

I'll now turn it over to Jason for further details on credit and underwriting in Q3.

Thanks very much, Hal, and good morning, everyone. I'm pleased to be able to provide some additional comments on our approach to managing credit and underwriting for the non-prime consumer and how it impacted our business in the third quarter.

Key takeaways which I will leave for your reference can be found on Slide 18. I'll cover much of this in more detail on the subsequent pages. But before I move off the slide, I did want to call out that while the demand for credit has remained strong, we continue to maintain a conservative posture in our underwriting of new loans. In Q3, we funded 11% of the credit applications we received at a dollar weighted average credit score of 624 in the quarter. Q3 marks our 15th consecutive quarter with average scores above 600.

Turning to Slide 19. Our net charge-off rate, as previously described at 8.9%, came in at the lower end of our guided outlook for the quarter. It represented a 30-basis point improvement over the prior year and a 10-basis point increase over the prior quarter. We continue to benefit from a shift towards secured lending now at just under 48% of the total portfolio and ongoing optimization of credit, underwriting and our collections practices.

Total delinquent balance is at 7.3% of the portfolio declined 10 bps from the prior year, but increased 60 bps from the prior quarter. Late stage delinquencies, defined as loans more than 90 days past due at 2.8%, were in line with the prior quarter, reflecting our ongoing focus on collection and recovery efforts from these accounts. Early stage delinquencies, defined as those that are 1 to 90 days past due at 4.5%, were lower by 50 bps -- or sorry, 80 bps from the prior year and were up 60 bps from the prior quarter.

As we have mentioned previously, the Canadian economy continues to operate under a degree of economic pressure not seen since the COVID pandemic. Unemployment at 7.1% is at its highest level since May 2016, excluding the volatile years of 2020 and 2021. GDP growth is absent, Q2's number coming in at negative 1.6% annualized. With over 70% of small and medium businesses impacted by tariffs and 18% of Canada's gross domestic product coming from exports to the United States, there remains a high degree of uncertainty about the future.

And while the Bank of Canada has continued to inject stimulus into the economy with its second consecutive 25-basis point reduction in its overnight lending rate, these actions will take some time to work their way through the economy. As such, we can continue to expect to see elevated delinquency levels while we work to assist our customers during these periods of uncertainty, more about which I will speak in a moment.

Turning to Slide 20. Our allowance for credit losses increased by 21-basis points from 7.92% to 8.13% in the quarter in response to higher early stage delinquencies attributable to persistent weak macroeconomic conditions. Reflecting the environment and our prudent approach to provisioning for credit risk, in 2025 year-to-date, $92 million was added to our allowance for credit losses, of which $61.5 million was due to our loan book growth. Our total allowance stood at $442 million as of the end of Q3.

With our focus on the non-prime credit segment, we are often asked about our day-to-day approach to managing our customers when they encounter periods of economic stress brought on by adverse economic conditions or an unexpected life event that puts the repayment of our debt at risk. One of the ways we address these concerns is through the use of our borrower assistance tools.

Slide 21 provides an overview of these tools and the circumstances under which they may be utilized by our customers. In a given month, approximately one in 10 of our borrowers will make use of one of these tools. These are designed to prioritize repayment of our loan while offering the customer the opportunity to maintain their credit profile. These tools are commonly used across the industry, both prime and non-prime, and our borrower assistance tools help customers stay on track with their payment obligations, reducing the need for immediate and often costly legal action for asset repossession and are governed by a range of policies, operational and system controls.

We regularly analyze the payment performance of these tools, which has allowed us to further refine our targeting and optimizing of their use. They represent a key ingredient in how we are able to assist over 1/3 of our borrowers to successfully graduate back to prime within 1 year of starting a lending relationship with us.

While the use of these tools can be an effective strategy in helping our customers overcome financial adversity while maintaining our focus on cash collections, by their very nature, they are intended for a riskier customer population. As such, the use of these tools can impact the customer's risk classification and often results in our having to increase the amount of provision for future credit loss. It is for these reasons that we continue to place a heavy emphasis on refining and optimizing these tools in response to changes in the macroeconomic environment and our evolving risk appetite.

Our success in the coming quarters will continue to be dependent on striking the appropriate balance between growth and risk in a way that fully accounts for the best interest of both our customers and goeasy. You can expect us to remain disciplined underwriters of non-prime credit as we continue to navigate against the backdrop of a protracted period of macroeconomic weakness and its corresponding impact on the non-prime consumer.

With those remarks complete, I'll turn the call back to Dan for our outlook.

Great. Thank you, Jason. On Slide 23, we introduce our Q4 outlook. As you can see, we are signaling a continuation of the solid growth we've been delivering in our consumer loan portfolio, while consistently remaining focused on high-quality prudent underwriting.

For Q4, we are targeting growth in our loan book of between $250 million and $275 million. You'll note some seasonality in our business, whereby gross loan adds in Q4 are often lower than Q3. This outlook reflects our current credit posture given the economic environment.

Looking at yield and in keeping with our conservative approach, we are fine tuning our outlook for Q4 to be in between 30.5% and 31.5%. This adjustment largely reflects the rate cap changes moving through the portfolio. Our outlook range for net charge-offs remains the same as in Q3.

Turning to Slide 24. In keeping with past practice, we will update our 3-year forecasts in February in connection with the release of our full year results. In terms of 2025, the ongoing strong customer demand provides confidence in our growth and revenue outlook and both yield and charge-offs continue to perform as expected throughout the first 9 months of the year. The slightly elevated provisions in Q3 did put some downward pressure on operating margin and ROE, so those 2 metrics remain in focus as we move through Q4.

I want to thank the entire team for their unwavering commitment. We have terrific players across all levels of our organization. We are saying goodbye to one of those terrific players today. This is the last goeasy earnings call for Hal, who will be wrapping up his tenure with goeasy this week. On behalf of our entire organization and the Board, Hal, I'd like to thank you for your many contributions to the growth and success of the company.

Shortly after Hal joined goeasy as CFO in July of 2019, we had announced at that time proudly that our loan portfolio topped $1 billion. Today, it is more than 5 times that size. Hal played a big part in our acquisition of LendCare in 2021 and in multiple unsecured notes offerings, raising billions of dollars in proceeds and the creation and growth of our 2 revolving securitization facilities. We wish you all the best, Hal, as you pursue your new role down south in the U.S.

I would like to more formally welcome now Felix Wu as our Interim CFO. With CFO experience at KOHO, PC Financial and Capital One Canada, Felix brings a deep understanding of our industry, a depth of technical and operational knowledge and familiarity with our funding model. In the time since Felix joined our team, his impact has already been felt, and he and Hal now have had a full and complete transition. We are really pleased with Felix' arrival and Felix already in your substantial contributions. So thank you. We are very successful in attracting Felix, which I think provides us with a lot of confidence that the caliber of his profile is a positive reflection of the organization that we've built here at goeasy. And so thank you to Felix for joining.

Throughout this period of change, I would also like to thank our Board for their ongoing support and commitment. Our governance model is strong, and the entire management team has benefited from the guidance and direction of David Ingram and all of our directors during the quarter.

Looking ahead, my colleagues and I will continue to build on our market leadership and capitalize on the many levers at our disposal to do so. As we manage through the economic conditions here in Canada, we do so with a proven suite of products, services and a multichannel delivery model to serve the significant customer demand and opportunity in front of us. Through past business cycles, we have delivered profitable growth alongside prudent risk management, and we at goeasy will continue to do so.

In closing, goeasy plays an essential role in the broader financial system and the overall Canadian economy by actively serving the millions of hardworking Canadians that rely on us to pursue their goals and live full lives. I'm very proud of the goeasy team.

And so now, James, with our formal comments complete, we'll turn it over to the analysts for their questions.

Thank you, Dan. And with that, operator, we're ready for questions from the analysts.

[Operator Instructions] Your first question comes from John Aiken from Jefferies.

In the prepared commentary, you talked about the impact that the rate cap is flowing through in terms of the portfolio. Are you able to provide us with a little bit of metrics in terms of what the size of the portfolio are that are currently generating above the rate cap and what the average duration is remaining on those loans?

John, it's Hal here. Yes. So the current portfolio in terms of loans receivable that's above the federal rate cap would be approximately 18%. Where we started off the year when the rates came into effect, we were approximately 1/3 of our portfolio at that time, was above the overall federal rate cap. So naturally, you're going to see that flowing through into our -- and as expected as part of our guidance into our overall interest and revenue yield contribution.

And one other one for you. The buybacks that occurred in the quarter, obviously opportunistic. I'm assuming that you believe the share price is below what you feel intrinsic value is. What -- going forward, how should we be looking at the willingness to continue to do buybacks? Is this -- should we be looking at loan growth? And what type of guardrails do we have in place in terms of the leverage ratio that is currently as you mentioned, near the top end of your accepted range?

Yes. Thanks for that, John. So we're fairly consistent in terms of our approach around looking at share repurchase activity. We have an overall capital allocation strategy that, as you've referenced, would be first and foremost targeted towards maintaining liquidity and cash needs to fuel the organic growth of the portfolio and required expenditures and capital expenditures as well. So that will be first and foremost.

We have been fairly active year-to-date in terms of overall share repurchases, approximately $100 million year-to-date in terms of share repurchase activity. We'll continue to monitor the market conditions prospectively, managing that in conjunction with managing our overall covenants and overall leverage position and ensuring we have enough forward-looking liquidity to maintain and manage the overall business requirements.

So steady state and we'll continue to be opportunistic, as you've referenced, but I want to ensure that from a capital standpoint, we have enough to continue to fuel the business.

Your next question comes from Stephen Boland from Raymond James.

First question, Dan, when you came in, you really talked about building up the collections group. I'm just wondering what actions have been taken since then in terms of processes, new employees, things of that sort?

Yes. Thanks, Stephen. Yes, I think as I mentioned on prior calls, that's a big area of focus. Obviously, when you're granting credit, the money is made when there are repayments happening on schedule and also actively managing early stage delinquencies as we're seeing here with a priority balance between cash collection and curing so that those consumers don't roll through to late stage. And we're pleased to see the late stage kind of ratio stabilizing.

And as an example of some of the investments in our LendCare business, we have a new leader in place. In the last little while we've added additional collectors there. We've made adjustments to employee incentives to prioritize those 2 dimensions I mentioned as well as frankly, just more active involvement from those of us here in the head office. So we've been pleased with the progress we've seen over the last number of months. And obviously, the -- we're working through the later stage delinquencies as a matter of priority. Collections is a complicated part of any business, and I'm pleased that we've set it as a priority here and with the progress we've made in the last number of months.

Okay. And then second question, maybe a little bit little general. But during COVID, when there was economic volatility, the company slowed originations to kind of protect the balance sheet and prevent delinquencies. That doesn't seem to be happening this time, like your guidance has not changed and even Q4 looks to be very solid year-over-year growth. I'm just wondering if there's a thought of shifting that strategy to slow growth a little bit here while this volatility gets sorted out?

Sure, Stephen. I'll start and then pass it to Jason, if you don't mind. I think you are seeing slower growth in Q4 than Q3. That's both, as I mentioned in my prepared remarks, a function of the seasonality as well as our credit posture, which I think I also referenced. We've obviously seen a lot of growth in our auto portfolio, which we've been fine tuning some of the originations appetite over the last number of months. And so on a relative basis, that has slowed somewhat. And at the other end of the spectrum, we're actively growing our home equity loan portfolio. So between the products, we're constantly making adjustments. And I know Jason wants to make some comments here as well.

Yes. I think it's a good question to ask, Stephen. The only comment I would add is obviously during COVID, we did some fairly noticeable tightening, mostly in the underwriting side of our business given that for a very short period of time, about one in every 3 Canadians have deferred loans from their job. So the overall slowing of demand was also precipitated by pretty weak economic conditions in addition to our tightening.

In this particular instance, obviously, you still have weak economic conditions, but we are still being quite prudent. I think I mentioned on the call, we're only funding about 11% of the applications that are coming through the door, and that continues to move down, and that's deliberate as we tighten around the edges, which we continue to do in Q3, and we would expect to do going forward as economic conditions persist.

Your next question comes from Gary Ho from Desjardins Capital Markets.

Maybe first question for Jason. Just on the ACL build this quarter, that's primarily driven by the higher early stage delinquencies. I'm wondering if you can share what are you seeing in October or post quarter so far? Has that 1 to 30 bucket delinquencies stabilize or moderate? Any quantitative or qualitative comments you can provide?

Gary, the other way I would take your question is just to think about how the ACL, the allowance for credit loss generally works. As you would know, Gary, it's a reflection of the overall health of the portfolio at a given point in time, and it moves in response to changes in customers' risk profile. And that's basically how they borrow and how they repay their debt over time. The allowance incorporates those changes in those movements and then forecast the level of expected loss that also includes the impact of the forward-looking indicators, or FLIs into the future.

As our customers' profiles change, so too does the level of allowance that we provide against their loans. At the moment, at $442 million, we think the level of allowance is appropriate, as that's what's indicated by the model. And so far, as we think about what's occurred in the last 30 days, I would say, as I mentioned in the remarks, our delinquency levels remain elevated, but we haven't seen any significant shifts since the quarter end.

Okay. That's great. And then maybe just staying with the early delinquency bucket, are you seeing any concentration in terms of affected customer employment sectors, whether that's kind of tilted towards the trade and tariffs affected industries? Or is it fairly broad-based?

I would say it is fairly broad-based. As we've commented in past conference calls, no one industry sector represents over 10% of the concentration of the loan book. So -- and as I mentioned on the call remarks, a majority of Canadian businesses are feeling the impacts of tariffs. So when we look at where we're seeing delinquency increases, it's pretty much spread across the board because, again, we don't have an over concentration in any one given area. So broadly speaking, it isn't concentrated in any one specific industry in our book, and that's because we have that diversification that's built in.

Okay. And then maybe I can sneak one more in for Hal. The debt to tangible equity, fairly high this quarter at 3.97x. I know that includes an upsized cash balance. But if I assume that even normalizes, your debt to tangible equity probably is still up sequentially, correct me if I'm wrong. Just wondering if you can just remind me the upper end of your comfort level and if you've kind of stress test how much higher the ACL builds can be while staying within kind of onside your comfort level?

Yes. Thanks for the question, Gary. Yes, as you've referenced, our overall leverage position is higher than what we would typically have it in large part due to the incremental proceeds that we took in as part of our successful high yield offering that was well oversubscribed. And -- so today, we're maintaining approximately $400 million on balance sheet of unrestricted cash. We will use that cash and have been using that cash to actually pay down our securitization facilities as we are able to. I would expect that, and our forecast is to have that leverage ratio come down significantly over the next quarter and 2. We do maintain a threshold of a 4x ratio. As you've noted, we are getting close to that, but our expectation and outlook for the fourth quarter would certainly be to be comfortably well within that targeted range and continue to improve as quarters unfold.

Your next question comes from Graham Ryding from TD Securities.

You mentioned that you would expect that interest receivable piece to trend lower as late stage arrears start to move lower. I presume if those late stage arrears cure or there's a successful collection, and that's a best-case scenario. If those late stage arrears are fully written off or partially written off, does that translate into writing off some of that interest receivable in future periods? And if so, is that baked in at all into your consumer yield outlook for 2026?

Yes. Thanks, Graham. Yes, so it is contemplated as part of our yield outlook, certainly. And as you've noted, interest does continue to accrue on accounts right up until overall charge-off. We do maintain a robust allowance against expected credit losses for the interest receivables as required under IFRS 9. And we would expect to continue to work those receivables. And certainly, as they are cured, that would look to take in payments against the interest receivable. We've contemplated a percentage of those accounts charging off. And as you've noted, in the event that there is a charge-off net of provision, that would go against the overall interest income and revenue, but that's contemplated as part of our outlook and guidance that we've provided.

Okay. Understood. And then just, Jason, on the ACL, your arrears are -- have ticked up somewhat. Your ACL currently 8.1%. That's been ticking higher since about mid-2024. Can you just talk about your outlook for the ACL ratio? Like is it reasonable to expect that this continues to grind higher? Or are you feeling like it should stabilize around this level given your outlook for macro conditions?

I mean, as I said before, not to dodge the question, the allowance is the allowance, and it will respond and how customers ultimately deal with the situation they're in, in terms of the backdrop of the macro economy. So I would say, as of right now, we feel that allowance is appropriately balanced and set forward. And depending on where those major indicators, unemployment, inflation and GDP move, whether they're positive or negative, the provision will take those factors into consideration and so will our borrowers in so far as prioritizing our loans for repayment.

So, as much as I'd love to be able to provide you a crystal ball on what the future would look like, I can't do that. What I can tell you is that we're still confident that the methodology that underpins the allowance will pick it up and be an appropriate level of reserving that we think is prudent given the level of risk that may be in the portfolio in the future.

Okay. Understood. And my last one, just the early stage arrears, would that be a combination of secured and unsecured? Or is it more biased in one of those areas?

Graham, it would be in both portfolios. But as you can appreciate, it would be more felt on the unsecured side of our business where we don't have the benefit of collateral.

Your next question comes from Jaeme Gloyn from National Bank Capital Markets.

First question, just on the borrower assistance programs and commentary that it is elevated today. Can you give us a sense of how elevated borrower assistance programs, or utilization of borrower assistance programs are today compared to perhaps last quarter, last year, other stress periods?

Yes. Jaeme, it's Jason here. I think we've commented on this prior, and I mentioned on the call, our customer utilization rate, if I can use that term, today is about 1 in 10. We've seen that trend at that level now for the last number of quarters. That obviously is below the peak that we experienced during the COVID period where economic uncertainty was at an all-time high. That would have seen that percentage about 12% or roughly 13%.

And what I would say is in more benign economic times, where there's less uncertainty, we would expect to see that assistance level travel in and around the 7% to 8% range. So think of those as being the goalposts that we would have experienced over the last, let's say, half decade, that we think are still applicable depending on what the circumstances are on the macro side.

Okay. Great. And would you be able to share how much the interest receivable balance today is attributable to loans that are on a borrower assistance program? I understand growth in volume and just regular payments that are on accrual. I understand delinquent accounts that are accruing. Yes, just the piece that's tied to borrower assistance tools would be interesting to hear? And how that has moved over the last several quarters?

Yes, Jaeme, it's Hal here. Just in terms of the overall interest receivable, while we don't necessarily have specifics on that particular number, what I'd say is that the majority, we're kind of looking at about 2/3 of that overall interest receivable, is just natural interest receivable on where customers and loans are and aging within their respective buckets and whether they're a monthly or biweekly payer, et cetera.

The balance is really attributed to a couple of key factors there. One, where they're sitting in the delinquency cycle. We did make that change, the accounting policy change in Q4 of last year that allowed accounts to continue to accrue interest beyond 180 days where we still expect it to have cash flows and realize all value from those assets. So that's definitely a piece of that.

And I'd say the other component, if you look at 2/3 of the balance being just the natural accrual. And then if you were to bifurcate between the delinquency and the borrower assistance tools, I mean, generally speaking, it's about a 50-50 split on balance there. That's how I would have you think about it.

And how would that have trended maybe, let's say, versus like 1 year ago or a couple of years ago?

Yes. So, Jaeme --

It would have been like -- yes, sorry, go ahead.

Yes. No, it's a great question. I mean, certainly, it would have trended upwards and the overall interest receivable has been trending upwards year-over-year as we've noted. I don't have a specific number for you. I think what Jason referenced in terms of utilization and those percentages that he's quoted where we would have normally been somewhere in the 7% or 8% range, I think, in terms of borrower assistance tools, that's gone up by about 20% to 25%. So if you extrapolate that, I mean, generally speaking, that's how I would kind of look at it in terms of the numbers there. Good news is the overall interest receivable number has plateaued as we continue to collect cash and work through and tighten up our borrower assistance programs and collections tools, we expect that number to gradually decline over time.

Okay. I appreciate that. And I suppose just based on the commentary around -- I think it was Gary's question, the first month here of Q4 looks fairly similar to what we saw at the end of Q3. So we shouldn't see much deviation here from one quarter-to-quarter, assuming that the rest of the year goes the same. Is that fair? Do I understand that correctly?

I mean I don't think it's necessarily fair to say it's going to stay or is the same. I mean, as I said before, as we update the allowance quarterly, I would pay more attention to how things move through the quarter rather than just rely on any one given month. So I would just -- I would caution you to assume that just because we're seeing things maybe be stable, that necessarily means they're going to be stable going forward. That isn't necessarily to say that they couldn't improve or couldn't worsen. It's just we look at the allowance and true up the allowance at quarter end, and that's where we have a more informed picture of any changes in the customers' borrowing patterns because you can get volatility in any one given month.

And I think -- it's Dan here. I would just turn you to Slide 23, which is we stand by the outlook that's in there, including the net charge-off range, which is clearly going to have an impact as we move through the next 2 months and the full quarter with regards to how we build ACL and how the models [ go ].

Yes, of course. And if I could just sneak one last one in around the commentary on the slide around the additional underwriting requirements for auto and powersport verticals for new merchants. Can you describe what you were seeing there? What drove those changes? What are the changes? And is it a reflection of those portfolios perhaps underperforming the rest of the portfolio?

Yes. I would describe these as changes we would do on a periodic basis. We just haven't made mention of them in the past only because we've become a little bit more comprehensive in the way we think about the way in which we would tighten our approach to underwriting, specifically as we onboard new merchants and expand into other categories. So it's in the earnings presentation as part of our overall comprehensive approach to risk management and governance, in laying it out. It certainly wasn't indicated that this was the only time we've done it. It is a regular part of our underlying process. We just happen to have set a new bar, if you will, in how we think about it and the data that we use to inform those levels of changes that we introduced in the quarter.

[Operator Instructions] Your next question comes from Bart Dziarski from RBC Capital Markets.

I wanted to ask around the late stage delinquency. So I think you characterized the 3.3% in Q1 '25 as a peak. I'm just wondering what's giving you the confidence to label that a peak? And I know we're at 2.8% now, but I wanted to see what's driving that?

I can start, and Dan, if you want to add any additional comments. I think picking up on Dan's comments, that confidence level in the percentage is really a function of the ongoing investments we've made in collections and our ability to just notch up the operations and be more effective in how we approach and work through those assets, particularly those assets where we have collateral.

And I think as we've mentioned in the past, we do that through 2 primary means. We do it through a vast network of individuals within the company that are responsible for things like asset remarketing and recovery. And we also do it through outsourcing work that we do with national providers who supplement that work. And as we've continued to strengthen our relationships with those providers, we've just been able to benefit from processes improvements, not only within the internal side of our business, but also with our partners as well. Dan, I don't know if you want to add.

I think Jason covered that well.

Okay. Great. And then just a follow-up on the commentary around -- so you're taking a more conservative posture. That's great. How does that impact, if at all? There's management overlays within reserves and when setting sort of the base downside, upside case probabilities. And I think you guys generally are more conservative towards the base and downside case. So given the more conservative posture now, are those probabilities, have they changed to become even more conservative? Or are you keeping them kind of stable?

That's a good question. We've left those overlays stable now. I think this is either the second or the third quarter. Don't quote me, but it's at least 1, if not 2 quarters that we haven't changed them. They are significantly weighted toward neutral and pessimistic scenarios. The vast majority of that weighting sits in those categories.

And I would point out that, you can certainly see this in the financial statements in the quarter, if you compare where those FLIs were sitting in December of last year to where they're now sitting as of September, most of them in all 3 of those types of scenarios, neutral, pessimistic that it's moderate, pessimistic -- that's quite pessimistic. Most of those metrics have become worse. So while our weightings have remained stable, the implications of those FLIs has actually increased if you reference back to Q4 of last year. So the management obviously believes that we continue to maintain that conservative posture. And as a result, we're picking up the impact of those FLIs moving slightly worse into the future into the provision model itself.

Your next question comes from Jaeme Gloyn from National Bank Capital Markets.

I just wanted to just follow-up on the ACL and the trajectory for ACL. And just thinking about where borrower assistance programs are today at 10%. It's been 10% for a few quarters based on your commentary. That in theory should continue to flow through to, I guess, early stage delinquencies and increase in provisions given that those borrowers remain higher risk and the growth of the portfolio, right? So we should continue to see that ACL rate rise in future quarters, unless we see utilization of borrower assistance programs begin to decline. So I guess is that -- am I characterizing this fairly? And what gives you some confidence that borrower assistance utilization will decline in upcoming quarters?

Well, I'd make 2 comments. One is the confidence in that use declining would be obviously in relation to whether or not macroeconomic changes improve. That would be the first comment. The second comment I would say is, I wouldn't necessarily assume that all of the movement in the provision is being driven by borrower assistance tools. Certainly, that is a tool that we use to assist a select group of borrowers who encounter financial distress. But there are other borrowers who encounter other types of financial distress that we have no direct control over. The way in which the provision model works is it takes into consideration the overall customer profile.

So if you take the most basic example of a customer who's paying us on time, but who may not be paying their other creditors, we'll still pick that up in their overall score because we score those customers monthly based on their bureau activity. That's an example of where we can have a very good customer on our books, but still have a higher level of risk, knowing that we're being paid, but they may not necessarily be paying other borrowers. But we have to take the total picture of the customer into consideration because that's how you have to think about it under a provisioning model.

So it's not just simply a movement of whether the provisioning or -- sorry, the use of the tools are moving up and down. It's also the underlying state of the borrower themselves and what else they're going through with their other borrowings in addition to what they have with goeasy.

There are no further questions at this time. You may proceed.

Thank you. Since there are no more questions, we'd like to thank everyone for participating in the conference call. We look forward to updating you at our next call in February.

Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.