Okay, everybody, thank you for joining us. I'm Graham Ryding. I cover Canadian diversified financials for TD Cowen. Joining me for this fireside is Jason Mullins, President and CEO of goeasy since 2019. Jason, I think you've been with goeasy since 2010, so thank you very much for joining us today. Yeah, thanks for having me. We do have some U.S. investors attending today, so I just thought maybe a good place to start was you could give us an overview of the business from how you see it in terms of product mix, target market, maybe how the business has evolved over the last, you know, three to five years, and some of the key financial metrics that you target. Yeah, very happy to. Well, thanks, everyone, for taking the time to join today. So goeasy is one of Canada's leading providers of consumer credit to the non-prime Canadians. By way of a bit of background, there are about 32 million Canadians with an active credit file, of which approximately 9 million are deemed by the credit reporting agencies to have a non-prime credit score. And so those 9 million Canadians, generally speaking, cannot get credit from a traditional bank. They would carry, at any given time, excluding any residential mortgage, about CAD 200 billion of total consumer credit balances, so that would be across a wide range of products. And so we consider our market to be those 9 million Canadians and that CAD 200 billion of consumer credit. Today, we have about CAD 4 billion of consumer loan balances, so circa about 2% or just a hair under 2% of the total market share, within which we operate and compete. The basic economics of the business are that we charge a range of APRs that vary depending on someone's credit profile, and then we price the loan according to the risk of the consumer. And when you then factor in operating costs, losses, and our cost of funding, we generate a return on assets that, based on our current composition of the balance sheet, deliver a 20%+ return on equity. So the 20%+ return on equity is sort of our financial hurdle rate in terms of return for investors. If you look back over the last 20+ years, we've compounded revenue over that period consistently at about 13%, and that's translated into compound net income growth of about 30% for that 20-year period. Basic product mix is six different consumer loan products, from a personal loan, which is just a regular cash-based installment loan, a home equity loan for someone that might own a home and qualify for a bigger loan, and then we finance a variety of goods and services, from vehicles with automotive financing, powersports, recreational vehicles, retail purchases, healthcare financing, and a variety of other goods and services that a consumer may be purchasing. Okay, great. That was a thorough overview, and I forgot to remind the audience here that there is a chat box or a question box, I think, at the top right of your screen. So feel free to throw in a question, and I'll keep monitoring on my left here to see if I could get those in as well. So, Jason, maybe we'll just start with sort of the market and the growth opportunity here. So your portfolio, I think, just recently moved over CAD 4 billion in size Canadian, so I think that's about a 2%, roughly, market share of that CAD 200 billion-dollar market that you've described. Is that a sort of true addressable market for you, or is there a subprime component of that CAD 200 billion that is really your target market? How should we think about that? Yeah. So over the last six or seven years, we have been effectively expanding the proportion of that total market that, for us, would be addressable. And the way we've done that is through sort of two streams of work. One is progressively offering a wider range of APRs so that the low entry point of the APR we offer would be right really where the bank's high-end rates would be. So essentially, any customer that falls just below qualifying for credit from a prime lender or a bank, we would kick in and offer APRs at that level, and then all the way up to rates that would correspond with a higher level of credit risk. As we've widened the range of APRs, we've essentially increased the proportion of the consumers that could and be willing to to borrow from us. We've also done it by expanding the product mix. Every time we add one additional product to the suite, we make more and more of that total market addressable. Today, if you took that CAD 200 billion, it would effectively break down into four key product categories: installment loans, which is about CAD 40 billion. Automotive financing, which is about CAD 60 billion. Credit card, which is about CAD 50 billion. And line of credit, which is about CAD 50 billion. Today, we have a range of installment loans and automotive financing, so we are, in theory, can address about half of that CAD 200 billion marketplace, or about CAD 100 billion. And in our product roadmap is to build and develop a regular, general-purpose, non-prime credit card, which will then again, similar to, as I referenced earlier, as you add a product, then, kick up the size of the market that we can truly address. Okay, great. Yeah, and I did wanna get into that, that credit card launch. Before we talk about that, maybe just can you talk about your, your distribution strategy? Like, how do you see that evolving over the medium term? I think you've sort of got online, mobile presence, point of sale, and then also branch and in-store. So how should we think about how those different- Yeah strategies should evolve? Yes. So our one of our four key strategic pillars is to offer the widest possible distribution platform and the widest range of channels of distribution. So we're effectively a omni or multi-channel lender that is trying to give access to our consumer credit products to our consumers in the widest form possible. So today, the way that that looks is we really have what we call three distinct channels. One is the retail branch network. So we have 400 points of distribution, 300 dedicated lending branches, and 100 lending kiosks that occupy the footprint coast to coast. Effectively, between 85%-90% of the Canadian population is within a 20-minute drive of one of those branches or kiosks. So really a very wide footprint that gives people retail access for those that wanna visit us face-to-face. We have our digital channel, so that's essentially our direct website and a mobile app, so customers can get access to us digitally, apply for loans, check their balances, get pre-approved, those kinds of things. And then for the indirect lending channel, where we are distributing products and services to consumers through some third-party merchant or retailer or dealer, we would have today about 10,000 merchant partners coast to coast. That would be, again, things like automotive dealers that provide financing for the purchase of vehicles. That would be dental clinics that provide financing for cosmetic dentistry procedures, retailers, power sports, et cetera. Think of it as 400 points of distribution coast to coast that we operate, a digital and mobile app, and then 10,000 merchant partners offering our products and services to their customers when they're looking to buy goods or services. Are you seeing the online or the point-of-sale, is that sort of increasingly becoming, you know, sort of higher volume source of clients for you? Yeah, I'd say definitely the higher growth channels are the growth of our digital channel and our merchant network and point-of-sale network. Part of that is that digital is younger and an earlier stage in development relative to the retail network, and more and more consumers are gravitating to online as a source of applying for credit. And then on the point-of-sale side, that's largely because we've just been building out many of those point-of-sale products and adding merchants every year. We're adding 1,000-2,000 new merchants every year to that network. So digital and point of sale are definitely faster-growing from a source of acquisition, but I wouldn't underestimate the value of the branch network. In our business, in dealing with non-prime borrowers, there is a very large segment of the population that by being able to service and fulfil the loan, even if the customer applied online in a branch, makes a very big difference in our ability to qualify a borrower, underwrite a loan, and improves the quality of the loan if we can service them in their local community. So digital and POS are definitely the faster-growing sources of acquisition, but that branch network still plays a really big role, even in the context of servicing and collections. Okay, that's an interesting point. So maybe we could go back to the portfolio of products that you have. And you are, as you mentioned, you're in every product except credit cards, which you're rolling out a credit card product this year. So why have you not been in that product up to now, and what's... you know, why are you deciding to move into it? Yeah. So I think our approach was, you know, the genesis of the business was to build a smaller dollar installment loan that was meant to help customers that were finding themselves trapped in the payday loan cycle. So the very, very beginning of the business, back in 2006, when we started consumer lending, was built on the basis that we could offer an installment loan product at a much more affordable rate, and in a manner that would help people build credit, and be a better alternative to payday loans. We then began to expand the size of the personal loan, widen the range of rates of the personal loan, and then our product roadmap has really been to try to just add products that are the most incremental and most adjacent. Those are the best products to add because the work effort, and the cost and the investment are the least. Your confidence and certainty in predicting how they'll perform, your ability to cross-sell your existing customer, all of those things are better when it's sort of a very adjacent product. So we went from a personal loan to saying, "Okay, we've got this portion of homeowners that could get access to a bigger loan at a lower rate, by using a home equity product." So then we added that product, and then we said we saw customers buying everyday retail goods and services. Could we finance those goods and services when they're at our retail partners? And we added that product, and sorta so on and so forth. Today, we really have such a wide range of installment products that we mostly occupy that kinda product category, in a fulsome manner, that the next idea and the next concept was: Could we now move to a more, utilitarian product that would give us access to maintaining an ongoing customer relationship, and allow them to make everyday smaller dollar purchases, like gas and groceries? So if you think about our installment products today, they're very episodic. They're, designed to borrow money for a particular large dollar purchase or larger dollar need. They pay down as an installment product, and then the customer might no longer be a customer or might have a gap between the products that they then use thereafter. The general purpose revolving credit card gives us the ability to maintain an ongoing, continuous relationship with the customer, be able to monitor their credit, monitor their bank history, maintain a conversation and a dialogue. So it just gives us an ability to really stitch together the relationship and maximize the share of wallet and the lifetime value of the customer. Okay, interesting. That was one of my questions, but you answered, so that's perfect. What about the weighted average interest rate and, you know, the charge-off rate that you would expect from a credit card similar to your existing business, or any material change there once this sort of builds out? No, very fairly similar. Today, our average interest rate is about 29%. We then have a basket of other, products and services that provide additional revenue that gives us a total yield on the portfolio, of in the low- to mid-30%s. We're about 34% today. I suspect the credit card product, based on the work we've done so far, will probably be priced sort of between 20% and the low 30%s as well, so probably an average rate of interest somewhere in the mid- to high 20%s, given the slightly more, high-risk nature of the borrower we're targeting and servicing. And then generate a total yield that will be not that far off, our current portfolio yield. All of our products are built and designed, again, reverse engineered on the basis that we have a 20% return on equity hurdle rate. We can then determine, based on how we fund the balance sheet between debt and equity, what return on those receivables or assets we need in order to produce that ROE, and then from there, we can build up all of our funding costs, operating costs, and loss ratio assumptions to get to the right risk and reward ratio that's gonna make economic sense, for us. Because the competitive landscape for servicing this consumer is fairly limited, it's a rather underserved population, you know, you can, you can build your products to achieve a certain target return and expect that there's always going to be a decent portion of that market, that you can get access to, just because there are so few companies that are trying to service that particular borrower. Then how do you work out or forecast the sort of expected credit loss, losses or charge-offs if you haven't had a credit card product before? Like, were you able to get access to credit card data, third-party perhaps, and sort of bring that into your modeling and forecasting? Yeah, so a couple thoughts on that. So, first of all, yes, we buy and consume a substantial amount of data from the credit reporting agencies themselves. So we can get data that's, of course, anonymized, but we can get data on how our target consumer performs in general with those other products. So that's one. Two, about 70% of our existing customers have a credit card. They just happen to be the very low-end, entry-level cards of many of the prime lenders in the banks, where they get sort of the least benefit and the least reward for using the products, something we think we can beat and exceed in terms of value proposition. So we got the data on our own customers and how they perform, so that's helpful. In reality, when we build any product, we always apply a very methodical test-and-learn philosophy, where we gradually wade our way in and accumulate the data set needed to get more confidence. In the case of a credit card, for example, we're gonna go to the existing customers we know and we trust, and begin to gradually issue them some cards with small limits, and slowly build up that history. The last thing I would just say is, we did share that we had hired a new business unit leader just in the last few weeks, and the gentleman we've brought on does have credit card experience in his background and has spent most of his professional career in the credit card space. So we then further augment that strategy with trying to bring in talent and expertise that has a deep understanding of the products we're intending to build as well. So that, in collective, gives us, you know, a lot of confidence that we can do this carefully, gradually, methodically, and have success in the long term. Okay. Sounds like you have a plan in place. Yes. One topic I wanted to get to was just, you noted, I think, in your last quarterly update that your receivings are up 40% year-over-year. Do you have a feel for... Or can you assess, like, is that the market coming to you because the banks and the other financial institutions are tightening up, or perhaps creditors in the non-prime space are struggling? Or is it your marketing efforts and things that you're doing on your own that are increasing the volume of applications? Yeah, it's definitely a combination of three things. One, the prime lenders, as you've suggested, and banks, for that matter, have all tightened credit, and as have we, and as have every lender effectively in this macroeconomic backdrop. So when the prime lender's sitting above us and the credit threshold tighten, there's definitely an incremental portion of borrowers that get pushed into our space. So that's an aspect, and that's a dynamic at play. Two, the general macroeconomic environment definitely puts a lot of pressure on small-scale companies. Smaller-scale companies, earlier-stage companies, definitely find it more difficult to navigate this environment, and so we've seen less competitive tension. Some of those small-scale companies have had to retrench or have exited the market, and then therefore, less competition means more business gets driven to those with scale that are continuing to pursue growth. And then lastly, there's just the execution of our business initiatives. Many of our channels and products are still fairly early in their development and their growth relative to the size of market. So you're pursuing capturing share and capturing more of the growth of the total market in areas and products and APR ranges that we hadn't historically, we were not historically in. So all of those three things are conspiring to increase the top-of-funnel level of demand to us, and then, of course, we're just taking that elevated level of demand at the top of the funnel and just being more selective- about who we're willing to lend to and give a loan to, given this current backdrop. Okay. So I did wanna talk about just credit risk, given that's the business that you are in. So it looks to me like your charge-off rates have been pretty steady through this recent period, but we have been seeing some pressure build in consumer credit broadly, in Canada, particularly in that unsecured, part of the market. So perhaps you can just share with us, you know, like, is the subprime consumer, are they not seeing the same pressure as maybe the broader consumer credit market? Or, you know, what's behind your steady charge-off rates? Is it an evolving product mix, tighter underwriting? Maybe you can square that for us. Yeah, I mean, the simplest way to think about it is, yes, the broader consumer set, the broader market, is feeling a level of stress, and that means that the loss ratios and the delinquencies of the entire market are going to have crept up, as they have. They've crept up over the last couple years. We as a lender are not invisible to that dynamic, that reality. The goal of every lender, though, is to try to make sure that you're selecting a subset, a targeted subset, where the portfolio performance of the lender will over-index the performance of the broader market. And so it's not that we're not also exposed to extra pressures from credit risk, we've just tried to be very proactive with tightening credit and raising our tolerance level over the last several years. We've been focused on gradually shifting our product mix to more secured loans. So if we do that well, then although we might experience some level of pressure from the macro environment, we might see losses tick up, the degree to which we can contain that extra credit risk will be dramatically more manageable, and overall, will deliver fairly stable credit performance and credit losses. So we've been fortunate that all of that portfolio enhancement that's been made over the last several years to upgrade the quality of the borrower and shift to more secured loans, has been able to provide the buffer and the shelter against that macro stress, such that, we've been able to travel in that kind of 8%-10% loss rate range now for the last several years, and we expect to be able to stay in that range even over the next year or two as, as we face this extra pressure. Okay, that makes sense. Last quarter, I think you flagged that you received 610,000 applications, if I've got that number right. How many of those did you accept, or what's, what's that acceptance ratio, and how would that compare to two to three years ago? Yeah, so, think about it as if you bifurcate those applicants into brand-new customers we've never seen before, and- customers that we've got some existing or prior relationship with. On the brand-new customer side, today we're funding about 10%-12% of the applications from a brand-new customer. That number would be down from between 15%-20%, if you were to go back two or three years ago. That differential is a function of just, again, tightening credit. On the existing customer side, we would've historically funded between 40%-50% of the credit applicants coming in from existing customers, simply because our models and our familiarity with the borrower is substantially better. Today, that number would be down to around 35%-40%, so we've also tightened there. If you put that all together, today, we're funding about 30% less of the applicants that we receive on a blended basis than what we would have if you were to go back a few years. And that's why you can see that although applications are up about 30%, the actual amount of loans we're writing are only up about 10%-15%. The reason the funding rate under indexes the application growth is, again, that process of being more selective with who we're willing to give a loan to. Okay. Perfect. I got one more question on credit, and then I'd like to just talk about capital and maybe M&A before we, before we wrap up. But just, I think you indicated in your stress testing in your financials that if the unemployment rate were to go up, you know, almost 4%, I think it's 365 basis points higher than your base case forecast, that the implication for your allowance for credit losses, by my math, suggests maybe a 10%, like, your EPS would be lower by about 10%, if that's sort of reasonable. So why is your model suggest that, you know, it's not such a dramatic hit to your earnings if we were to see such a material increase in unemployment? Yeah. So I think there's two reasons for that. One, the subprime borrower in general is just more stable and resilient than people expect. That's for a variety of reasons. They have half as much debt to household income as a prime borrower does, 'cause they can't get access to as much credit. Only 20% own a house, compared to the Canadian population at almost 70%, so they don't have the same exposure to real estate, fluctuations and rising interest rates, which most affect people's mortgage payments. So that's a benefit. The majority of the customers, particularly in the higher-risk categories and the personal loan, unsecured personal loan categories, the majority of them actually purchase extra unemployment insurance so that they can be sure that if they did lose their income, their loan payments would be made, and they would protect their credit. So there's a lot of the reasons why that customer by themselves does experience stress, and losses do go up during periods of duress. But the degree of increase is much more contained than a lot of people expect. If you look at the credit data and just look at the whole population, those lower credit tiers, historically, at various moments in time, global financial crisis, dot-com bubble, no matter how far back you go, those lower credit tiers losses might go up by 10% or 15% or 20%. And so if losses are already at 10% or 12%, that means they might go up 100 or 200 or 300 basis points, which if you have a large risk-adjusted margin, means that the business can very comfortably sustain a little bit of an increase in losses and still generate excellent returns and extra profits. It's actually prime lenders where the margin is much thinner between the cost of funding and the rates that they actually charge the borrower there. If the loss rates on a prime customer go from one to two or one to three, that's a much more meaningful impact on the risk-adjusted margin that the prime lender or the bank in that, in that example has to work with. So one is just the borrower themselves, generally speaking, is more stable and resilient than people expect. And then the second reason is because we're always doing things to try to countereffect the impact from the macro environment. We're always doing things to try to improve the credit quality, improve our model accuracy, improve our portfolio mix. And the portfolio turns over fairly quickly. It liquidates down at about 50% a year, with an average total runoff rate of about 2-2.5 years. So if we're good enough at foreseeing potential economic concerns, and we start to make some changes, they can work their way through and have a positive effect fairly quickly. So our base model today is that at 8%-10% range, unemployment could rise all the way up through the 6s and as high as 7%, and we could still stay within that 8%-10% range. If unemployment was to look like it's tracking above 7%, then we would probably have to notch our range up slightly, b ut within that, up to unemployment at 7% level, we can stay below the 10% net charge-off rate that's part of our forecast. Okay. Okay, great. We have four minutes left. I'd love to talk about just capital and how you're funding the business and maybe some M&A. So you put these loan growth targets out to 2026. Can you achieve those targets with your sort of existing debt capacity, what you're forecasting to generate through free cash flow and sort of stay within your targeted leverage ratio, or does equity at some point come into play? Yeah. So, today, we have about CAD 1 billion-CAD 1.2 billion of total funding capacity. That's, that's liquidity that's available on existing funding facilities. When we pair that with the business free cash flow, which is about CAD 250-CAD 300 million after dividends and capital expenditures, of net free cash, we can effectively fund the business at its current growth trajectory for between 12-24 months. So we wouldn't have the capital to fund the full three-year projection. However, the component that's being funded by free cash flow is more than enough to fund the proportion that would be required of equity capital from a balance sheet perspective. So although we will require additional debt to be taken on over the next few years to fund that growth outlook, we don't require any equity to fund that growth outlook, because the balance sheet can continue to grow and scale, funded by a combination of existing or future debt and the free cash flow from the business. And if you looked at our current growth outlook, you would see that the business is actually still slightly delevering every year, because even though we're generating about CAD 1 billion of net receivable growth on a run rate annualized basis, that free cash flow component is more than enough to compensate for the proportion that needs to be put on the balance sheet from the equity perspective. We can basically achieve those organic growth forecasts through a combination of existing debt, new debt that we think we can obtain in the market, and the combination of the free cash flow without having to issue equity. Okay. Perfect. We probably have time for one more, and I'll make it a U.S.-themed question. So you've previously mentioned that you do have interest in expanding into the U.S., but obviously you haven't done so to date. So I guess, what are the most common obstacles or barriers that have prevented you from pushing into that U.S. market to date? Yeah, I mean, it, it-- I would sum it up with just saying that when you have a very high-performing organic growth business, the hurdle rate and the bar for something to make sense is just high, right? And so whether that means that the financial performance of something you might invest in, the returns of something you might invest in, the strategic fit of something you might invest in, just all has to really stack up to be highly attractive and make a lot of sense to be willing to make that investment and take that risk. So, we have all the enthusiasm to want to opportunistically explore acquisitions, but we're also very grounded and disciplined in the fact that with a very good business here in Canada, with still a fairly small market share and a lot of growth runway, we're in no rush and no hurry to go do anything. This is purely about keeping our eyes and ears open for things that could be a good fit, where for a few years we can nurture and develop a new investment, that then five-plus years down the road, could be a meaningful driver of growth. You wanna be looking for those opportunities when things are going well, because that's the best time where you can be the most disciplined, and you can be the most thoughtful about those investments. And so we're just taking advantage of the good growth we're experiencing to be opportunistic and look for things that could be a good fit. And, you know, that will come along at some point. It's hard to say if it's months or years. Eventually, we'll find something that makes, I think, sense. But we're in no rush and no hurry, and we've got great growth even here in Canada, without any M&A. Great. Our time is up, so, I think that's a good place to wrap up. Jason, thank you very much for giving us, your time and the insight today, and thank you, the attendees for joining this, this chat. Great. Appreciate it. Thanks so much.