This article first appeared on GuruFocus .
Release Date: August 07, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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goeasy Ltd ( EHMEF ) delivered positive adjusted diluted earnings per share of $1.02 in Q2 2026, a significant improvement from the adjusted diluted loss per share of $1.90 in Q1 2026.
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The company strengthened its balance sheet by repaying the full balance on its revolving credit facility and improving its debt to adjusted tangible equity ratio to 4.95 times from 5.3 times in Q1.
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Net charge-off rates improved by 110 basis points quarter-over-quarter to 16.7%, and delinquencies (30+ days past due) declined by 100 basis points year-over-year to 11.9%.
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The direct-to-consumer share of the loan portfolio increased by 300 basis points to 54%, reflecting a strategic shift toward the core easy financial franchise.
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goeasy Ltd ( EHMEF ) restored access to incremental draws on its revolving credit facility effective July 1, 2026, and is well advanced in meeting the second condition to restore access to its securitization facility.
Negative Points
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Originations were reduced by 70% year-over-year to $272 million, leading to a contraction in gross consumer loans receivable by $363 million (6.8%) quarter-over-quarter.
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Elevated net charge-offs in the merchant-originated loan portfolio (LendCare) continued to weigh on profitability, with overall net charge-off rate at 16.7%, higher year-over-year.
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The company suspended dividends and share repurchases indefinitely to manage liquidity, which may disappoint income-focused investors.
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Total yield on consumer loans declined by 340 basis points year-over-year due to the impact of the rate cap, higher allowance for credit losses, and portfolio mix changes.
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The company faces ongoing challenges from rising non-prime consumer insolvencies and a prolonged period of economic uncertainty, leading to a cautious outlook for growth in the second half of 2026.
Q & A Highlights
Q: Can you provide an update on the timeline for completing the second condition required to restore access to incremental draws on the securitization facility, and should we expect originations to accelerate given the improved liquidity position? A: Felix Wu (CFO) confirmed the backup servicer replacement is well advanced, with a 60-90 day implementation plan that should be completed around early or mid-September. Patrick Ens (CEO) added that while Q3 originations will increase from Q2 levels, the binding constraint is now focused on profitable returns rather than funding capacity. The company has moderated Q3 expectations due to observed increases in easy financial unsecured loss rates, prioritizing credit quality and risk-adjusted returns over growth.
Q: Can you quantify the impact of the denominator effect on the easy financial unsecured net charge-off rate of 17%, and what is the expected trajectory for Q3 and year-end? A: Patrick Ens (CEO) explained that the easy financial unsecured book shrank by over 4% in the quarter, a significant swing from typical 4-5% growth, which contributed to the elevated charge-off rate. While it's challenging to precisely quantify the denominator effect, there was also a notable increase in insolvency losses, validated by external data showing a significant step-up in non-prime consumer insolvencies in line with industry trends. This cautious outlook has led to more conservative growth expectations for Q3 and the remainder of the year.
Q: What is the rationale behind releasing the provision for credit losses given elevated credit levels, and how should we think about the impact on future earnings as the company regrows? A: Felix Wu (CFO) clarified that the provision release is prescriptive under IFRS 9 accounting standards, driven by the declining loan book size and formulaic assumptions based on portfolio performance and macroeconomic indicators. The allowance is based on the existing ending loan receivables and does not include future losses. As the book shrinks with a stable rate, a release naturally occurs. The company is following accounting standards rather than making discretionary management adjustments.
Q: What is the longer-term ROE potential for the business, given the yield is now well under the rate cap and the unsecured book will dominate? A: Patrick Ens (CEO) expressed confidence in the long-term potential, noting that the easy financial and easy home lending businesses generate very strong risk-adjusted returns, currently dampened by the merchant originated business performance. The combined unsecured and secured business generates yields closer to 30% with loss rates in the 12-13% range. With the right operating leverage and scale, this should produce very attractive shareholder returns, but the immediate focus remains on improving credit performance and shifting the portfolio mix toward the direct-to-consumer base.
Q: Can you provide more detail on the internal control remediation plan and the timeline for completing it by year-end? A: Felix Wu (CFO) outlined a three-phase process: first, finance and credit risk teams improving controls, documentation, and training; second, internal audit conducting substantive testing; and third, collaboration with financial auditors for satisfaction. The company is near the end of the first phase and has started the second phase with internal audit actively performing control testing. The material weakness will not be considered remediated until controls have operated for a sufficient period and been validated through testing.
Q: What is the expected runoff rate for the Lendcare portfolio, and how much origination growth will be needed in the Easy Financial segment to offset this decline? A: Patrick Ens (CEO) noted the Lendcare book declined 10% quarter-over-quarter, which is on the higher end due to elevated charge-offs that should abate in the second half. The company has not planned for any material increase in Lendcare originations through the back half of the year. The guidance for ending loan balances relies entirely on the strength of growing the easy financial direct-to-consumer business and corresponding originations.
Q: Given the improved liquidity position, do you expect to need to utilize the revolving credit facility or securitization facility within the next six months? A: Felix Wu (CFO) confirmed that based on the guidance for ending loan balances to remain roughly consistent with Q2 levels, there would be no material funding requirements and therefore no expected material draws on either facility. The company's existing liquidity and cash generation should be sufficient to support operations without needing to tap these facilities in the near term.
Q: Can you provide more granularity on the vintage performance driving the higher easy financial net charge-offs, and what is the current level of borrower assistance usage? A: Jason Appel (Chief Risk Officer) stated that vintage-level performance has not deteriorated, with newer originations from 2025 performing in line with expectations. The rise in losses is largely driven by increased insolvencies and consumer proposals impacting longer-standing vintages. Delinquency rates within the easy financial portfolio remain very stable. Regarding borrower assistance, usage has declined from around 10% to the 8-9% range, closer to historical norms, as collections optimization efforts continue.
Q: What is driving the lower consumer loan yield guidance for Q3, and is the current expense level a reasonable run rate for the second half? A: Felix Wu (CFO) explained that the full-year yield is projected to be broadly in line with the first half, with factors including lower-than-anticipated growth in the easy financial business reducing the mix shift benefit, and the remaining Lendcare portfolio experiencing yield pressure as higher-risk, higher-priced loans are charged off. Patrick Ens (CEO) added that Q2 advertising spend was reduced, but will increase in Q3 as the company ramps back up on easy financial direct-to-consumer originations, meaning Q2 expense levels are not representative of the run rate.
Q: Would the company consider repurchasing bonds in the open market given the discounts on longer-dated maturities and improved liquidity? A: Felix Wu (CFO) acknowledged that bond repurchases are being evaluated as an investment of cash, but the company must consider the impact on all balance sheet metrics and covenants. The restrictions in indentures and recent amendments are noted as potentially more restrictive, particularly regarding buybacks of IO bonds. The decision would weigh originations against debt repurchases while maintaining compliance with existing agreements.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
