Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- goeasy Ltd (EHMEF, Financial) reported its strongest quarter in history with record originations and earnings.
- Loan originations reached a record $839 million, a 16% increase from the previous year.
- The company issued approximately CAD700 million in senior unsecured notes to enhance debt funding capacity.
- The dollar-weighted average credit score of loan originations was the highest in company history at 624.
- The efficiency ratio improved significantly to a record 23.1%, indicating better operating leverage and productivity.
Negative Points
- The overall portfolio yield was slightly lower than forecasted due to increased growth in lower APR secured loan products.
- There was a modest elevation in delinquencies, with total portfolio delinquency slightly higher than the previous year.
- The loan loss provision rate rose slightly, indicating potential future credit risk.
- The company is experiencing a challenging macroeconomic environment, impacting credit performance.
- The transition of the CEO role may introduce uncertainty as the company searches for a seasoned executive.
Q & A Highlights
Q: Can you explain the decline in salary expenses this quarter and what we should expect going forward? Also, will the focus on collections impact this line item?
A: The decline in salary expenses was due to a reduction in variable compensation and a one-time adjustment moving certain labor costs to the deferred acquisition expense line. The run rate should be around $50 million going forward. The focus on collections will not significantly impact this line item as our current infrastructure can handle a larger network of accounts. - Jason Mullins, President, CEO
Q: What is the expectation for delinquency rates and loss rates in the coming quarters?
A: Delinquency rates are expected to remain stable in the low to mid-7% range, with loss rates in the low to mid-9% range for the next few quarters. The secured loan portfolio, which constitutes half of our business, helps mitigate loss rates due to the recovery of hard assets. We anticipate these rates to trend down in 2025 as economic conditions improve. - Jason Mullins, President, CEO
Q: Can you provide an update on the search for your successor and the qualities you are looking for?
A: The search committee is progressing well, with a smaller group of candidates undergoing deeper interviews. We are looking for a seasoned executive with the right fit for the company. David Ingram will serve as interim CEO if needed, ensuring a smooth transition. - Jason Mullins, President, CEO
Q: How do you expect competition to evolve with the upcoming 35% rate cap and declining interest rates?
A: The competitive landscape remains stable, with no significant changes expected before the rate cap implementation. While declining rates may stimulate competition, the rate cap presents a high barrier to entry for new competitors, limiting significant changes in the competitive environment. - Jason Mullins, President, CEO
Q: What is driving the moderation in Q4 loan growth, and which segments are you cautious about?
A: The moderation is due to both seasonal factors and ongoing credit tightening, particularly affecting higher APR unsecured loans. We are being cautious and selective, focusing on maintaining a healthy level of growth while managing risk. - Jason Mullins, President, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
