goeasy Ltd.

Good morning, my name is Jenny, and I will be your conference operator today. At this time, I would like to welcome everyone to Go Easy Limited third quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, Please press star, then the number two. Thank you. Mr. Farhan Ali Khan, you may begin your conference.

Thank you, operator, and good morning, everyone. My name is Farhan Ali Khan, the company's chief strategy and corporate development officer, and thank you for joining us to discuss GoEasy Limited's results for the third quarter ended September 30th, 2024.

The news release, which was issued yesterday after the close of market, is available on CISN and on the GoEasy website. Today, Chicken Mullis, GoEasy's president and CEO, will review the results for the third quarter and provide an outlook for the business.

Alec Corey, the company's chief financial officer, will provide an overview of our capital and liquidity position.

Jason Appel, the company's chief risk officer, is also on the call for questions. After the third remarks, we will then open the line for questions.

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. For those dialing in directly by phone, the presentation can also be found directly on our investor site. Analysts are welcome to ask questions over the phone after management has finished their prepared remarks. The operator will pull up her 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 of any coverage.

However, we ask that they do not quote callers unless that individual has granted their consent. Today's discussion may contain forward-looking statements. I am not going to read the full statement, but will direct you to the caution regarding forward-looking statements included in the MD&A. I will now turn the call over to Jason Mullins. Thanks, Farhan. Good morning, everyone, and thank you for joining the call today. The third quarter was the strongest in our history, characterized by record originations, strong loan book growth, stable credit, and record earnings, and a very healthy return on equity. Additionally, subsequent to the quarter, we issued approximately 700 million Canadian equivalent of senior unsecured notes to bolster our debt funding capacity for our ambitious growth plans. A continued increase in market share and favorable competitive dynamics led to a robust volume of applications for credit at 645,000, up 22% from Q3 last year, generating 48,600 new customers, an increase of 14%.

Loan originations during the quarter were a record 839 million, up 16%, compared to 722 million produced in the third quarter of 2023.

Organic loan growth was a record third quarter of $255 million, while our loan portfolio finished the quarter at $4.39 billion, up 28%. Unsecured lending continues to be the largest product category at 55% of loan originations, and within our direct-to-consumer channel, the average loan portfolio across our branch network rose to a new high of $6.6 million, up 18%. We also continue to make progress in scaling our automotive financing product, with volume exceeding $150 million of quarterly originations for the first time in company history. This quarter, we grew our dealer network to over 3,700 dealers and continue to experience an increase in funding volume from multi-dealer location groups. During the quarter, home equity lending volumes were also up 57% year-over-year, with consistent and conservative LTV ratios at approximately 65% inclusive of our loans. This second mortgage product, secured by residential real estate, is primarily used for debt consolidation and major home repairs as one of our best-performing products with the lowest credit risk. During the quarter, the overall weighted average interest rate charged to our customers was 29.3%, down from 30.1% at the end of the third quarter last year. Combined with ancillary revenue sources, the total portfolio yield ended the quarter at 33.2%. The portfolio yield finished slightly lower than our original forecasted range as a result of increased growth in lower APR secured loan products, left interest collected on past due accounts, and an accounting adjustment that moves the sales and marketing labor expenses into the deferred customer acquisition expense line. With these items now embedded in the business, we expect to maintain the yield going forward in the coming quarter. With that, total revenue in the quarter was a record $383 million, up 19% over the same period in 2023. We also continue to be pleased with the quality of our loan originations and credit performance of the overall portfolio. The dollar-weighted average credit score of our third quarter loan originations was 624, the highest in company history for the second consecutive quarter, highlighting the benefits of our credit adjustments and improving product mix. Secured loans now also represent a record 45% of our loan portfolio. Despite the weakening economic environment and a modest elevation in delinquency relative to last year, our credit losses have remained stable as a result of proactive credit tightening and the higher proportion of our portfolio secured by hard collateral. The annualized net charge-off rate during the third quarter was 9.2%, in line with our forecasted range of between 8.75% and 9.75% for the quarter, and a slight quarter-over-quarter improvement from 9.3%. While total portfolio delinquency continues to be slightly higher than the prior year related to both macro conditions and the recent tightening of our certain collection practices, we experienced a sequential quarterly reduction at 7.4% down from 7.7% in the second quarter. Our loan loss provision rate rose slightly to 7.38% from 7.31% in the prior quarter. We are continuing to experience the benefits of scale through operating leverage and productivity improvements. During the third quarter, our efficiency ratio, specifically operating expenses as a percentage of revenue, improved to a record 23.1%, a reduction of 550 basis points from 28.6% in the third quarter of the prior year. After adjusting for unusual items and non-recurring expenses, we reported record adjusted operating income of $163 million, an increase of 25% compared to $130 million in the third quarter of 2023. Adjusted operating margin for the third quarter was a record 42.6%, up from 40.4% in the same period of 2023. Adjusted net income was a record $75.1 million, up 15% in the third quarter of 2023, while adjusted diluted earnings per share was a record $4.32, up 13% from $3.81 in the third quarter of 2023. Adjusted return on equity was also above our target level of return at 25.7% in the quarter. With that, 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. We continue to build our long track record of obtaining capital to support our growth. Subsequent to the quarter, we took advantage of the gradual improvements to the interest rate environment and issued $400 million U.S. and we also issued $150 million Canadian. of 6% senior unsecured notes due in 2030. This transaction marked OE's inaugural unsecured notes issuance in the Canadian capital markets. It presents a new avenue of raising debt capital in the future to fund our growth plans. In connection with the offering, we can currently enter into a cross-currency swap agreement, which serves to reduce the Canadian dollar equivalent cost of borrowing on the notes to 5.98% per annum. full 40 basis points better than the notes we issued in July. Based on the cash on hand at the end of the quarter and the borrowing capacity under our existing revolving credit facilities, as well as the aforementioned balance sheet enhancements implemented following the quarter, we have approximately $1.8 billion in total funding capacity. At quarter end, our weighted average cost of borrowing was 6.7%, and the fully drawn weighted average cost of borrowing was 6.6%. We also continue to remain confident that the capacity available under our existing funding facilities and our ability to raise additional debt financing is sufficient to fund our organic growth forecast. Business also continues to produce a growing level of free cash flow. Free cash flow from operations before the net growth in the consumer loan portfolio was $126 million and a quarter, while the trailing 12 months of free cash flow exceeded $381 million. As a result, we estimate we could currently grow the consumer loan book by approximately $300 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 current dividend. Once our existing and available sources of debt are fully utilized, we could also continue to grow the loan portfolio by approximately $500 million per year solely from internal cash flows. Subsequent to the quarter, we also leveraged our current liquidity position to take advantage of opportunities like share repurchases and purchase for cancellation approximately $9 million worth of shares. Based on the current earnings and cash flows and a confidence in our continued growth and access to capital going forward, the Board of Directors has approved a quarterly dividend of $1.17 per share, tabled on January 10, 2025, to the holders of common shares of record as at the close of business on December 27th, 2024. I'll now pass it back over to Jason. Thanks, Al. As communicated in July, I will be transitioning out of the role as president and chief executive officer at year end while remaining as a director on the board. We continue to make progress with our global search for a seasoned and experienced executive and are currently assessing candidates. In the interim, the Board announced today the appointment of David Ingram as Interim Chief Executive Officer, effective January 1st, 2025. David assumed the role of Executive Chairman of the Board on January 1st, 2019, prior to which he was GOESY's Chief Executive Officer from the year 2000 to 2018. Between David and myself, there is 38 years of combined GOESY management experience on the Board. The company is in an excellent position with a very strong executive team to continue its 23-year-plus track record of delivering industry-leading performance. As we head into the last quarter of the year, we expect to grow the loan portfolio between $205 and $230 million. We also expect to maintain the current total annualized yield on the loan portfolio, which should finish between 33% and 34%. Based on current payment and collection trends, we expect the annualized net charge-off rate to remain within the same range as previously guided at 8.75% and 9.75% in the quarter. I want to once again thank the entire GoEasy team, as we owe the outstanding results and performance year-to-date entirely to them. I am more convinced than ever that we have a winning team who are deeply passionate about our vision. They truly play an essential role in the financial system by serving the millions of hardworking Canadians that rely on us for access to credit to fuel their everyday lives and help them graduate back to prime. Lastly, as this will be my final quarterly earnings call as the CEO for GoEasy, I'd like to publicly thank all the many research analysts that have spent considerable time getting to know our business and providing coverage over the years. and the countless shareholders that have thoughtfully invested in our company and shown the management team and I incredible support and confidence. After nearly 15 years with the company and six years as CEO, I will now transition out of a management role while remaining as a director on the board, where I hope to provide value to the company for many years into the future. From the small $15 million loan portfolio when I joined in 2010 to the nearly 4.4 billion consumer loan portfolio we have today, it's been a truly rewarding journey working with the most incredible people, and I could not be more proud of the business we've built together. And as I have always said, I still feel like we are truly just getting started.

With those comments complete, we'll now open the call for questions.

Thank you.

Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch-down phone. Questions will be taken in the order received. Should you wish to cancel your request, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question is from John Aiken from Jefferies. Your line is now open.

Good morning. I don't want to take anything away from the impressive performance you guys had on your efficiency, but I was hoping to dive into the details a little bit more on expenses. Can you speak to the decline that we saw in the salaries expense of the quarter and what we may anticipate going forward in that line item? And then secondarily, I'm assuming that given the higher focus that you're having on collections, we may start to see a higher pace of growth in that line of moving forward. Any commentary would be greatly appreciated. Thank you.

Yeah, sure. Happy to. Thanks for the question.

So, yes, you did see in the quarter a decline in the salary and benefits line. I believe the second quarter was around $54 million. That declined to around $44 million this most recent quarter. You should think of the run rate of that being around $50 million, and that's what you should expect going forward. That step down in the third quarter was really related to two items. split roughly between a reduction in variable compensation. Notwithstanding the strong performance, as you've noted, we're a bit behind what our internal plan was and some of our internal goals. So that means as we adjust our year-to-date accruals for variable comp, both stock-based and annual bonuses, we have to make an adjustment there. And then the other item, which was mentioned in the prepared remarks, was that there was a one-time adjustment where we moved certain labor and sales costs to the deferred acquisition expense line. So no net impact effectively over the long term, really just moving what was some cost that would normally show up in the labor line related to sales and marketing that's now going to be a deferred acquisition expense. And that was, as noted earlier, what also put a little bit of downward pressure on the yield. So those are the two kind of things that you can use to bridge the gap, but you should expect that around that $50 million level is the right kind of run rate of expenses coming out of Q4 and beyond.

And then I guess the pace of growth on collections, is that going to impact the line moving forward?

No, we don't think so. I mean, our collections infrastructure today, both internally and third parties that we use, is capable of managing, frankly, a meaningfully larger network of accounts. So you should not expect to see any real change in the collections expense line.

We're in more than good enough shape to manage it. Great. Thank you. I appreciate the call. No problem.

Thank you. Your next question is from .

Your line is now open.

Thanks. I just wanted to touch on credit in the quarter. It looks pretty stable sequentially. Because the primary driver of higher delinquencies in Q2 was deliberate action to tighten collection practices with an emphasis on secured loans, is the expectation that as those delinquent loans age, they will roll through the delinquency buckets and eventually roll off in such a way that you should start to see a declining delinquency ratio over the next few quarters without a corresponding uptick in the loss rate? Like, absent any sort of shock scenario, is that kind of the baseline expectation? Yeah, that's directionally correct. I think that given – if you think about the increase in the delinquency gradually from kind of five and change to around seven and change over the last year, that's been a gradual increase over time, driven in combination by, obviously, the more challenging macroeconomic environments. And then, as you noted, in the second quarter in particular, we started to tighten collection practices, and that pushed up the delinquency a little further as well. I suspect that it's going to take a few quarters before that delinquency begins to gradually decline. And part of that, of course, will also be dependent on macroeconomic conditions as well. But, yes, to your point, because the bulk of the increase comes from a secured loan portfolio, which is now half our business, where those accounts don't roll through the delinquency cycle at the same rate as unsecured loans. And when they do roll, you've also then got a hard asset to be able to recover, which generally gives you back about 40% of the balance at the time you recover and succeed to liquidate the asset. That's why even though you'll see the delinquency is up 230 basis points year on year, The losses are only 40 basis points year-on-year from 8.8 to 9.2. That's simply because, again, you get less secured loans rolling through the buckets, and when they do, you get the benefit of a large recovery from the asset. So we suspect that the delinquency levels that we're experiencing right now, kind of in the low to mid-7s, losses that are in the low to mid-9s, That's probably where we'll be for another couple quarters. And then we suspect that the credit adjustments we've made and hopefully the rate reductions affecting the macroeconomic conditions favorably will start to allow for that delinquency rate and that loss rate to trend down in 2025. Okay. That's great. And then are you able to elaborate on the search process for your successor and just your experience so far and, you know, I guess what sort of qualities, attributes, experience the board is looking for? Yeah, sure. So as mentioned the previous quarter, the board's put together a search committee. It exists of several members of the board, our head of talent here internally within the management team, myself, our board chair, and then the search partner. We've combed the globe for talent and have spoken to and screened a pretty large number of candidates. We're at the stage now where we have a smaller handful of people that we're progressing through a sequential series of more deeper interviews and discussions and assessing fit. So don't, of course, have someone that's gone all the way through the process and we're ready to commit to and announce yet, but we are making good progress. Nonetheless, as we kind of said previously, this is an important role. We need to get it right. We need to take our time. And given we've got such a strong management team, a strong board, as noted, David Ingram, our board chair and former CEO, is in a position to be able to step back on an interim basis to be able to bridge the gap. That gives us a lot of confidence that even if we don't have someone fully selected and appointed by the end of the year and it does fill in the next year, we're in excellent shape to manage that. So we'll keep everybody posted, and, of course, soon as we have a candidate, make that announcement. But we're making good progress in the search, and as I say, we've got a good team, so we don't want to rush this either.

Okay, thanks. I'll turn it over.

Thank you.

Your next question is from Etienne Ricard from BMO Capital Market. Your line is now open.

Thank you, and good morning. Two questions from me on the competitive landscape. First, have you seen changes in behavior as we approach the implementation date of the 35% rate cap? And second, rising financing costs were a headwind for many of your competitors over the past couple years.

How do you expect competition to evolve in the declining rate cycle? So in terms of competition right now, nothing has really changed.

It continues to be similar to what it has for the last year or two, which is somewhat softer than we would have previously experienced. As we've said over the last couple of years, there were a number of smaller companies that we've seen exit the market, and there's really been no new entrants. So the market and competitive dynamics are pretty similar today as they have been for the last year, which is quite constructive. We haven't really seen anyone materially change, as has been the case with ourselves, their behavior leading up to the rate cap date. There is no reason to proactively start declining customers in advance of that date that we can give credit to today. So we continue to still offer loans between 35 and 47 for those customers that are in that credit bracket. I suspect a lot of companies like ourselves that have done credit tightening over the last few years, that has largely affected many of the customers that would otherwise lose access to credit at 35. So some of those people are already now being rejected, unfortunately. So no real change in behavior. I think that, like ourselves, the industry is, you know, getting prepared to adapt and implement accordingly in January and And as we said before, unfortunately, there'll be some customers on the outskirts that will lose that access. So otherwise, it's steady as she goes, and it's a pretty good competitive environment for us. As it relates to rates, yeah, generally speaking, as rates come down and the economy improves, that is always going to stimulate some increase to level of competition. Rates are the raw material for this balance sheet-heavy lending business, so as those costs come down, that makes it easier for companies to obtain capital to lend. However, we still maintain the view that with that rate cap in place, it makes for an immensely higher barrier to entry. As we've educated investors many times, when you first enter non-prime lending and do not have the data to develop sophisticated credit models, losses can easily be in the high teens or even 20%. And at the beginning, it's often that you're paying double-digit cost of capital in the low to mid-teens, again, just as we did when we first began. So If you've got 20% losses and, say, 12% cost of capital and you're at 32 points, you know, that rate cap makes it very difficult for businesses to enter non-prime lending and give it a real go. So while rates declining will stimulate more competition, I think the combined effect of the rate cap will still make the barrier to entry pretty high, and we wouldn't expect to see a ton of new competition in the years ahead.

Okay, interesting.

And switching topics, Q4 sequential loan growth appears to be moderating a little bit from recent quarters. Is this on the back of the tightening credit standards? And if so, for what loan products or borrower segments are you a bit more cautious on?

Yes, so it's a little bit of credit tightening and a little bit of also just seasonality. I think if you look at Q4 last year, loan growth was not far off where we're projecting to be. And so that kind of range of between 200 on the low end and 260 on the high end, we've pretty much been consistently within that range every quarter now for about two years. But, of course, it does ebb and flow somewhat due to various seasonal factors of demand. Generally speaking, yes, the ongoing tightening we've done to credit does – reduce the amount of lending that we're doing, and we continue to do that just to be extra cautious and conservative. Most of the time when we tighten credit, it has the most pronounced effect on the higher APR unsecured loan customers because that's generally where we have the highest marginal credit risk. That's also why over the last several quarters we've talked about that mix shift being more pronounced towards secured. Not only is that driven by growth in secured, it's driven by as you tighten credit, you're often tightening the unsecured product with the highest losses first and foremost because that's where you get the biggest bang for your buck when trying to reduce risk in the portfolio. So that is part of what is driving the current loan growth trends. But even at the range we've provided, we feel very good that it's a very healthy level of growth and that we're being responsible and selective in the loans that we're writing.

Great. Thank you. And best wishes for your next step, Jason. Thank you.

Thank you.

Once again, please press star 1 should you wish to ask a question. And your next question is from Stephen Bowen from Raymond James. Your line is now open.

Yeah, if you don't mind revisiting the delinquency, when we look at the schedule, you know, from 90 days to 180 days, I mean, I guess the language there says that that might be, you know, primarily secured lending, secured loans, meaning, you know, I'm just trying to get an idea, like the collections, you know, it's definitely harder to collect or, you know, recover. Nobody wants to use the word repossess, but Certainly, these are movable assets, if they're power sports, if they're autos, if they're things of that sort. I'm just wondering, you know, like that bucket of, you know, 0.7, 0.7, 0.7 from the 90 to 180, that represents the 2%, you know, higher rate. I'm just wondering, you know, after 180 days, you know, there's a good portion here that might be, you know, I guess written off that you're just not gonna be able to recover the asset. I'm just trying to get an idea of what enhancement you've done for collections and how recoverable some of these assets are.

Yeah. So first of all, all of the loans between 90 and 180 are secured.

We write off all the unsecured stuff at 90. So anything within that stage or range of delinquency, all of it would have a secured asset, a hard collateral attached to it. If it's secured by residential real estate, we have a very high success and a very high recovery rate, essentially almost 100%, which is why on that product the losses are very low. So even though an account could move through the delinquency cycle, there's a very good chance that if we go to recover the piece of real estate, we get back the majority, if not all, of our proceeds, either before it charges off or immediately after as a recovery rate. If it's a vehicle or a piece of power sports or recreational vehicle equipment, generally speaking, we find that we're able to recover about 80% of those assets. And when we liquidate those assets, we generally get 40 to 50 cents on the dollar in the value of those assets relative to the amount of principal balance that's owed. The reason you don't see the same roll-through to charge-offs from the delinquency of those secured products is, first of all, a lesser proportion rolls from one bucket to the next than, say, the unsecured. And, of course, we have a very high success rate. And if we need to recover the asset, a lot of customers, frankly, voluntarily provide it back, getting the asset and being able to liquidate it, sometimes before it charges off, sometimes after it charges off, in which case we get a recovery.

Okay. So, you're pretty confident that that delinquency, although it's going to stay elevated, that it's not going to turn into that, you know, into more charge-offs on a higher level?

That's right. We expect these levels to be rough.

Yeah, that's right. We expect this is the level. If you think about the When the delinquency was, say, a year ago in the fives, losses were in the high eights, 8.8, I believe it was, same quarter last year. Now it's seven and change. Losses are at, like, 9.2, 9.3 the last few quarters. The 40 to 50 basis points have increased in the loss rate. corresponds to the 220 basis points of increase in delinquency. So think about it as it's about a quarter or so of the delinquency that we'll roll through, and that's why you've got the losses today in the low nines. The other proportion of that increase in delinquency, the other two-thirds, that is either customers that successfully repay or they might just stay delinquent. Keep in mind, a lot of customers might go two or three or four months past due, and then they start paying again on time. But if they do that, we will often keep them in the delinquency bucket, and they may sit there for a while. And then you, of course, also have the customers where we recover the asset and post the recovery as well.

The second question is just – I presume this is more for LendCare. I know in the past we did HVAC. upgrades, installations, things like that. I'm just wondering with the Ontario ban on the NOSI, does that have an impact on LendCare? Has it had any impact on the types of business you're doing? And was NOSI, was that something that was frequently used by your company at all?

Very minor.

We have a very small home improvement portfolio, but that's a product category that we've never really meaningfully put a ton of effort behind. Two reasons. One, we have the secured home equity products. which is a second mortgage that is a full security lien, which is different than the NOSI. And that product has been phenomenal for us. So that kind of serves a lot of those major home repairs. And then secondly, home improvement is a category where we found there are some competitors that have very different sort of economic hurdle rates than we do in that particular product category. And so it's not one that we put a ton of emphasis behind because we don't believe today generates the kind of returns in that category that we would expect. And so the business there is very small. So the nosy impact has been basically negligible for us.

Okay, that's great. Anyway, I just want to say, Jason, congratulations on the new role down south, and we'll try to keep in touch with us up here in the north.

Appreciate it. Thanks.

Thank you. Your next question is from James Goyne from National Bank Financial.

Your line is now open.

Yeah, thanks. Just want to dig into the delinquencies as well, but this time in the one to 90-day bucket, which was down almost 100 basis points quarter over quarter. Maybe You know, maybe some of the timing of the quarter end might have had an impact there, but can you talk about what you might attribute that improvement to?

Yeah, so if you think about the tightening collection practices that we referenced a quarter ago,

Those practices, when you tighten, are going to affect a very specific subset of customers that are more reliant on us being more helpful and more flexible. And so once that pool of customers, we tighten collection practices, starts to come through the delinquency cycle, We still, as we saw in the 1 to 90 bucket, expect delinquency to run at historical levels and over time improve based on all the previous credit tightening adjustments and product mix adjustments that we've done. So we're quite happy that we've seen that even though we've got a bit more accounts, particularly secured accounts in the later stage, to your point, we've got a reduction in the delinquency in the earlier stage buckets, which bodes well for how we think about losses in 2025. Hence why we said, as noted earlier, that we're still feeling very comfortable about stable losses and or improving losses in 25.

Okay, great.

And in terms of the tightening cycle that you've been on, some tightening of underwriting standards in Q2 and Q3, Is the view right now that you're in a comfortable position and tightening cycle in Q4, there likely won't be any other sort of minor tweaks, or are you still in a tweaking phase at this point? And perhaps as we look into 2025, stable unemployment today, but let's see what the outlook has in store for maybe loosening of those underwriting standards. Where are you in sort of that timeline?

Hey Jamie, it's Chase McDowell here. I'll take that one. I would say we continue to maintain an overall conservative credit posture just given that the economic performance continues to be a tad uneven in light of today's unemployment rate just holding its own. We continue to be I'd say opportunistic when it comes to both loosening and tightening credit. We do anticipate tweaking around the edges, to use your comment, in the fourth quarter, just to make sure that the 2025 runway looks clear. Most of the tightening we anticipate doing is probably more to address the continued growth and insolvency that we see across Canada, as opposed to the underlying performance of the credit that we already have booked. But as we look into 2025, I would say, you know, depending on how far the bank goes through its rate process, release cycle, we would tend to probably maintain ourselves within a neutral to slightly conservative posture. But like anything else, be opportunistic as macroeconomics conditions change. So right now, I look at it as being slightly conservative with the goal to moving toward more neutral and possibly even opening up as we look to the back half of 2025.

I think, Jane, one of the longer-term sort of upside tailwinds that's not factored into our outlook is the potential that when economic conditions do improve, and they would have to improve, you know, by a healthy level, so not just unemployment ticking down slightly, but if we saw like a nice, healthy, consistent marked improvement in unemployment, say down into the fives again as an example, we would have the opportunity to slightly loosen credit criteria again. All lenders go through a sort of cycle of tightening and loosening depending on macroeconomic conditions. And again, just as a reminder and perspective as to sort of how much tighter credit criteria is today, as we mentioned earlier that applications for credit were up 22% same quarter year on year. The number of loans funded year on year is only up about 5%. So that difference is effectively almost all related to credit and underwriting, which means that if and when that opportunity to arise, That's going to be a nice tailwind of incremental growth in the future that's currently not in our kind of 25, 26, 27 forecast.

Okay, great.

And lastly, just around the revenue yield, and it sounds like, you know, the change in geography of some of those marketing expenses moving up into the revenue yield. line. Was this something that, just to refresh memory, was all this baked into the 25-26 guidance on both revenue yields and the operating margin?

Yes.

Yes, that's right. If you think about what the yield is as we go forward, and we've got a pretty decent step down in the yield guidance already embedded into next year due to the rate cap, The kind of 20 basis points of impact that this change had rolling forward doesn't alter our view on our guidance. It's a relevant but otherwise fairly insignificant geography change, so no real change on the outlook from a yield perspective. Obviously, we'll update our guidance in February as we always do, but as we sit here today, forecast for the next three years up to date, and nothing at this point is giving us any positive concern on the need to change those ranges.

Yeah, perfect. Thank you.

Thank you. There are no further questions at this time. Please proceed.

Great. Well, again, thank you, everyone, for taking the time to

Join and participate in today's call, and we look forward to updating everyone on our next quarterly call in February.

Thanks very much. Have a great day.

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.