goeasy Ltd.

Ladies and gentlemen, thank you for standing by, and welcome to the Go Easy Second Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star 1 on your telephone. If you require any further assistance, please press star then 0. I would now like to turn the call over to your hosts, Farhan Ali Khan. You may begin.

Thank you, Operator, and good morning, everyone. My name is Farhan Ali Khan, the company's Senior Vice President of Corporate Development and Investor Relations, and thank you for joining us to discuss GoEasy Limited's results for the second quarter ended June 30, 2021. The news release, which was issued yesterday after the close of market, is available on Globe Newswire and on the GoEasy website. Today, Jason Mullins, GoEasy's President and Chief Executive Officer, will review the results for the second quarter and provide an outlook for the business. Hal Khoury, the company's chief financial officer, will also provide an overview of our capital and liquidity position. Jason Appel, the company's chief risk officer, is also on the call. After the prepared remarks, we will then open the line for questions from investors. Before we begin, I remind you that this conference call is open to all investors and is being webcast to the company's investor website and supplemented by a quarterly earnings presentation. For those dialing in directly by phone, the presentation can also be found directly on our investor site. All shareholders, analysts, and portfolio managers are welcome to ask questions over the phone after management has finished the prepared remarks. The operator will poll for questions and will provide instructions at the appropriate time. Business media are welcome to listen to this call and to use management's comments and responses to questions and any coverage. However, we would ask that they do not quote callers unless that individual has granted their consent. Today's discussion may contain forward-looking statements. I'm not going to read the full statement, but I will direct you to the caution regarding forward-looking statements, including the MD&A. I will now turn the call over to Jason Mullins.

Thanks, Farhan, and welcome to today's call, everyone. The second quarter was highlighted by a significant increase in loan originations, continued strength in the credit performance of our portfolio, and the expansion of our point-of-sale lending channel through the acquisition of LendCare. First, I'll provide a brief update on the overall integration of LendCare before delving into the commercial and financial performance of the second quarter. The acquisition closed successfully on April 30th, resulting in a partial consolidation period this quarter. LendCare's founders, Ali and Mark, have joined our senior leadership team and continue to oversee the day-to-day operations of the business. Furthermore, various functional and project teams across Go Easy have already begun collaborating with their new colleagues, and efforts to unlock several revenue and cost synergies are underway, remaining on track to delivering the benefits we envisioned when we contemplated this partnership. Although we continue to maintain the LendCare brand, within our financial disclosures, we will operate the business as an origination channel within the existing Easy Financial Consumer Lending operating segment. Given the homogenous nature of the product range and the migration and cross-selling of customers, this allows us to seamlessly allocate resources, leverage technology, and make decisions that are best for the growth of that overall consumer lending business unit. Turning now to second quarter results. While the third wave of COVID-19 continued to weigh on demand for direct-to-consumer credit early in the quarter, things began to improve as stay-at-home orders were lifted in early June. Furthermore, our point-of-sale financing channel, which is now the fastest-growing part of our business, continued to produce a steady increase in volume, aided by our partnership with Affirm and the contributions from LendCare. Despite supply chain challenges, demand for online buying activity, and several core point-of-sale categories, such as power sports, continue to benefit from robust financing volume. During the quarter, we formed new partnerships with Massimo Motors and Segway Power Sports, in addition to a handful of smaller partners. Between our partnership with Affirm and all other direct merchant relationships, our point-of-sale channel produced a record level of new customer contribution at 34% of all new customers acquired during the quarter. We were also pleased to soft launch two new products in the quarter. First in June, we began the pilot of our direct-to-consumer auto loan product under the Easy Financial brand, which we will begin marketing to new customers through our digital channels in the coming weeks. This product will be gradually and carefully scaled, consistent with our test and learn philosophy, while we also complete building out the ecosystem of dealerships and the online car buying journey. Secondly, within our point of sale channel at LendCare, we launched an automotive repair financing product designed to allow non-prime consumers to use their vehicle as security when applying for financing for an automotive repair. This product, which is now available nationally, will be gradually offered to auto repair shops across Canada. All combined, total loan originations during the quarter were a record 379 million, up 122% over the 171 million produced in the second quarter of 2020, and a sequential increase of nearly 40% from the 272 million in loan originations in the first quarter of this year. The combination of the acquired $445 million consumer loan portfolio and $74 million of organic growth in the quarter resulted in the consumer loan book finishing at $1.8 billion, up 58% from $1.13 billion as of June 30, 2020. When we combine the predominantly secured and near prime nature of the acquired LendCare portfolio with our direct-to-consumer strategy to progressively reduce the cost of borrowing for our customers, We experienced an evolution in the key portfolio metrics of our business, including the yield, loss rate, and the balance sheet provision for future credit losses. For the second quarter, the weighted average interest rate in our portfolio declined to 33.7%, with the total portfolio yield, including all ancillary product revenue, finishing at 42.8%. The acquired and organic growth in the loan book, coupled with strong customer retention in our leasing business, led to an increase in revenue, which was a record $202 million in the quarter, up 34% over the same period in 2020. We also continued to experience structurally strong credit performance within the portfolio, aided by the high proportion of secured loans within the LendCare book. At quarter end, nearly 33% of our loan book was secured by real estate, automotive equipment, or personal property. Upon amalgamating the acquired loan book, The annualized net charge-off rate for the quarter was 8.2%, down from 10% in the second quarter of 2020. Given the more near-prime nature of the acquired portfolio, the overall credit profile of our book has structurally lower level of allowance for future credit losses. During the quarter, we increased our loan loss provision to build the necessary reserves related to the acquired loan portfolio by $14.3 million, and $4.6 million due to organic growth, which was then partially offset by a reduction to our existing portfolio provision of $3.1 million due to improvements in the underlying credit quality of our existing portfolio. After updating the probability-weighted economic scenarios in contemplation of a gradually improving economy, our new allowance for future credit losses reduced from 9.88% to 7.9%. Using historical probabilities of default, our credit analytics suggest this is a provision rate that fairly reserves for the future losses of our portfolio, while providing sufficient coverage for the remaining uncertainty in the economic environment. After adjusting for the non-recurring and unusual items related to the acquisition of LendCare and the fair value adjustments related to our investments in the quarter, adjusted operating income was a record $79.9 million, up $25.9 million or 48% over the second quarter of 2020. Adjusted operating margin for the second quarter was 39.5%, up from 35.8% in the prior year. Adjusted net income was a record $43.7 million, up 50% from $29.1 million in 2020, resulted in adjusted diluted earnings per share of $2.61, up 38% from $1.89 in the second quarter of 2020. Return on our assets was 8.6% on an adjusted basis, producing an adjusted return on equity of 26.9%, and an adjusted return on tangible compound equity of 38.5%. I'll now pass it over to Hal to discuss our balance sheet and capital position before providing some comments on our outlook. Thanks, Jason.