goeasy (TSE:GSY) reported second-quarter adjusted diluted earnings per share of C$1.02, improving from an adjusted diluted loss per share of C$1.90 in the first quarter, as the non-prime lender reduced originations, released credit-loss provisions tied to a smaller loan book and strengthened its liquidity position.
Chief Executive Officer Patrick Ens said the company is continuing to execute a six-point plan centered on reducing exposure to underperforming merchant-originated loans, emphasizing direct-to-consumer easyfinancial lending and managing its balance sheet carefully amid pressure on Canadian non-prime consumers.
Originations Cut as Portfolio Contracts
goeasy reduced second-quarter originations by 70% from a year earlier to C$272 million, compared with C$904 million in the second quarter of 2025. The company said the pullback was intended to preserve liquidity and reflected tighter credit measures, particularly in its merchant-originated LendCare portfolio.
Gross consumer loans receivable ended the quarter at C$5 billion, down C$363 million, or 6.8%, from the first quarter. The balance was down approximately 2% from C$5.11 billion a year earlier. Revenue declined 9.6% year over year to C$390 million, reflecting the smaller portfolio and lower total yield.
The consumer loan yield was 28.3% during the quarter, down 340 basis points from the prior-year period but up 40 basis points sequentially. Chief Financial Officer Felix Wu said yields faced year-over-year pressure from higher allowances for credit losses on interest receivable, tighter underwriting, lower originations, the reduced maximum allowable interest rate on unsecured products and a greater mix of larger-dollar loans with lower ancillary-product yields.
Other operating expenses fell 9.3% year over year to C$91 million, largely due to lower marketing spending and compensation costs. The company’s efficiency ratio was 25.5%, compared with 25.6% in the prior-year quarter.
Credit Losses Improve Sequentially
goeasy’s net charge-off rate was 16.7% in the quarter, improving 110 basis points from the first quarter but remaining above the prior-year level. Merchant-originated loan portfolio charge-offs declined to 20.6% from 26.4% in the first quarter, while annualized net charge-offs on direct-to-consumer unsecured loans rose to 17% from 13% a year earlier.
Ens attributed the increase in unsecured loan charge-offs to a declining loan book, increased non-prime consumer insolvencies and higher aged losses. He told analysts that newer easyfinancial loan vintages have performed in line with expectations, while the rise in losses has been more pronounced among longer-standing vintages affected by insolvencies.
Total delinquencies represented 11.9% of the portfolio at quarter-end, down 100 basis points from a year earlier. Loans more than 30 days past due declined to 5.8% from 5.9% in the first quarter. Wu said the company places particular emphasis on loans that are at least 30 days past due and was encouraged by improvement in that category.
Total allowance for credit losses was C$499.5 million at the end of June, compared with C$406.7 million a year earlier. The company recorded a C$41.6 million net release of allowance for credit losses during the quarter, compared with a C$21 million provision in the prior-year period. Wu said the release followed IFRS 9 requirements because the loan portfolio declined, while the allowance calculation is based on the ending portfolio and related credit assumptions.
Portfolio Mix Shifts Toward Direct Lending
The company continued to shift its portfolio away from LendCare merchant-originated lending and toward its core direct-to-consumer products. Merchant-originated loans represented 39.7% of gross loans receivable at quarter-end, down from 41.3% in the first quarter and 46.2% a year earlier.
Direct-to-consumer unsecured personal loans, secured home equity loans and easyhome Lending accounted for 60.3% of the portfolio, up from 53.8% a year earlier. Ens said direct-to-consumer unsecured and secured lending will be the company’s primary origination focus during the second half.
goeasy also said it has not planned a material increase in LendCare originations for the remainder of 2026. Ens told analysts that the company’s guidance for its loan book assumes growth will come from easyfinancial direct-to-consumer originations.
Liquidity Improves, Facility Access Progresses
Cash provided by operating activities before net principal written rose to C$585 million from C$489 million a year earlier. The company used cash resources to repay a C$64.6 million unsecured note that matured in May and repaid the full C$314 million outstanding on its revolving credit facility by June 30.
Its debt-to-adjusted tangible equity ratio improved to 4.95 times from 5.3 times in the first quarter. Liquidity, measured as unrestricted cash plus unused contractual borrowing capacity, was C$1.37 billion at quarter-end, though C$1.06 billion was not available.
Effective July 1, goeasy regained the ability to make incremental draws under its revolving credit facility. The company also satisfied one of two conditions needed to restore incremental draws under its revolving securitization facility after lenders accepted its facility-level audit report. Wu said implementation of a replacement backup servicer, the remaining condition, is expected to take roughly 60 to 90 days and could be completed in September.
Dividends and share repurchases remain suspended indefinitely. Wu said management may evaluate debt repurchases against other uses of cash, though covenants and restrictions under recent amendments currently limit the company’s flexibility.
Updated Outlook and Leadership Changes
For the third quarter, goeasy expects gross consumer loans receivable of C$4.8 billion to C$5 billion, consumer loan yield of 26.5% to 28%, and net charge-offs of 14.5% to 16%.
For full-year 2026, the company expects year-end gross consumer loans receivable to be broadly consistent with its C$5 billion second-quarter ending balance. It expects total loan yields to be broadly in line with first-half results and continues to anticipate net charge-offs in the mid-teens, with improvement over the remainder of the year.
The company also appointed Lynne Oddie as senior vice president and chief operations officer in mid-June. Oddie will oversee loan processing, customer service, collections and administration. Chief Risk Officer Jason Appel will leave at the end of August for an external opportunity, and goeasy said it has identified a successor and expects to announce the appointment before Appel’s departure.
About goeasy (TSE:GSY)
goeasy Ltd provides financial services to own furniture, electronics, computers, and appliances. It offers merchandise leasing of household furnishings, appliances, and home electronic products to consumers under weekly or monthly leasing agreements. The company also offers unsecured installment loans to consumers. Its reportable business segments include easyhome and easyfinancial, of which it derives maximum revenue from easyfinancial segment.
