goeasy Reports Q2 Adjusted EPS of $1.02, Outlines Credit Strategy

goeasy (TSX: GSY ) held its second-quarter earnings conference call on Friday. Below is the complete transcript from the call. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary goeasy Ltd. 90 in Q1 2026. The company reduced loan originations by 70% year-over-year to strengthen its balance sheet, resulting in a contraction of gross consumer loans receivable by $363 million. 7%, with delinquency rates also showing positive trends.

Strategic focus remains on direct-to-consumer lending, reducing exposure to underperforming merchant-originated loans, and improving liquidity. The company successfully repaid its revolving credit facility and regained the ability to make incremental draws. Management highlighted the progress on a six-point plan aimed at stabilizing the business and strengthening the foundation for long-term growth. 5% and 16%.

Full Transcript OPERATOR Good morning, ladies and gentlemen, and welcome to the goeasy Ltd. Q2 2026 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session.

If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Friday, August 7, 2026. I would now like to turn the conference over to James O'Bright. Please go ahead.

James O'Bright, Senior Vice President, Investor Relations and Capital Markets Thank you, operator, and good morning, everyone. I'm James O'Bright, Senior Vice President of Investor Relations and Capital Markets. '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 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 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 two and three, forward-looking statements will be made on this call which involve assumptions that have inherent risks and uncertainties.

Actual results could differ materially. I would also remind listeners that goeasy uses non-IFRS financial measures and metrics to arrive at adjusted results. 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. Patrick Ens, Chief Executive Officer 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 confirmed 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 non-prime 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 of the quarter.

02. 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. 8% on a quarter-over-quarter basis to a quarter-end balance of $5 billion. Elevated charge-offs in our merchant-originated Lendcare business continue to weigh on profitability. 7%, higher year over year but improving by 110 basis points relative to the first quarter.

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. 8%. 7 million at this time last year.

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.

3 times in Q1. As of July 1st, we regained the ability to make incremental draws on our revolving credit facility. We also received confirmation from the lenders under a revolving securitization facility that the audit report requirement had 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 yields, 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 10th. 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 Lynn Ottie to goeasy's executive team as SVP and Chief Operations Officer. Lynn 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, Lynn 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 1st. 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.

1 billion outlook range. 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. 2% in Q2 last year.

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. 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. 6% as of March 31.

In Q2, credit performance in our direct-to-consumer secured product 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: a declining loan book, or the denominator effect, a significant increase in non-prime consumer insolvency rates, and an increase in aged losses in our merchant-originated loan portfolios. 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 Wu, Chief Financial Officer 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 in 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 Four 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. 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. 11 billion at Q2 2025 quarter-end. 4% in Q2 2025 and essentially flat to Q1 this year.

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 lowered 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.

3% compared to last year. The decrease is mainly driven by lower marketing expense in line with lower origination activity and the decline in total compensation expense. 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 a 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 continued to decline.

Earnings benefited from the release of provision for credit losses resulting from the decline in gross consumer loans receivable. 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.