Operator: Good day, and thank you for standing by. Welcome to goeasy’s Third Quarter 2023 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. [Operator Instructions].

Please be advised, that today’s conference is being recorded. I would now like to hand the conference over to your host today, Farhan Ali Khan. Please go ahead. Farhan

Ali Khan: Thank you, operator and good morning, everyone. My name is Farhan Ali Khan, the Company’s Senior Vice President and Chief Corporate Development Officer, and thank you for joining us to discuss goeasy Ltd.

results for the third quarter ended September 30, 2023. 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 third quarter and provide an outlook for the business. Hal Khouri, the company’s Chief Financial Officer, will also provide an overview of our capital and liquidity position and Jason Appel, the Company’s Chief Risk Officer is also on the call. After the prepared remarks, we will then open the lines 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 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 their prepared remarks. The operator will call for questions that will provide instructions at the appropriate time.

Business media are welcome to listen to the call and to use management's comments and responses to questions in the 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 However, we would ask that they do not quote callers unless that individual has granted their consent.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, I will direct you to the caution regarding forward-looking statements, including the MD&A. I will now turn the call over Jason Mullins.

Jason Mullins: Thanks, Farhan. Good morning, everyone. And thank you for joining the call today. The third quarter was the strongest in the history of our company. We produced record originations record loan growth, and reduced credit losses to generate record earnings and a very healthy return on equity.

As we discussed over the last several quarters, a challenging macro environment puts immense pressure on smaller scale companies, driving more demand toward those with scale such as goeasy. Similar to last quarter, the number of companies bidding directly against us within Google paid search was down nearly 40% year-over-year. Furthermore, we continue to see evidence that the banks and other prime lenders have tightened credit, resulting in high quality borrowers turning to lenders like goeasy when they are seeking credit. For example, in our automotive financing program, the portion of our originations in our top two risk tiers has increased from 50% to 80% over the last 24 months. As a lender increased demand enables us to be more selective about where we allocate capital and which loans we underwrite.

As such, the proportion of applications we funded during the quarter was less than 15%, down from 17% last year and 22% the year prior, due to our highly disciplined approach to managing credit in times of economic uncertainty. As a result, the credit quality of the loans we're writing continues to strengthen. The third quarter was the eighth consecutive quarter of an increase in the weighted average credit score of our loan originations, with this quarter being the single highest ever at 617. This is a very clear way to measure the combined impact of our proactive credit tightening shifting product mix and the higher credit score of the consumers who are using our products. We also continue to benefit from our highly diversified distribution and acquisition platform.

With approximately 300 easy financial branches, 100 easy home lending kiosks and over 9,100 merchants across our automotive and point of sale financing programs. We are highly accessible to the 8.5 million non-prime consumers that use our wide range of lending products. During the quarter, we also officially launched the first version of our new goeasy Connect Mobile app and web platform after several months of in market testing. At the end of October, we had almost 66,000 app downloads across both Android and iOS devices with an 85% signup rate. Since launch, the mobile app has also generated over 6500 applications for credit across our entire product suite.

The combination of healthy demand less competitive tension, and the performance of our strategic business initiatives produced another record level of applications for credit at 528,000, up 30% year-over-year. This also led to another consecutive quarter of record new customers at over 42,700, an increase of 16% over last year. Originations in the quarter were a record $722 million up 13% over the third quarter of 2022. Organic loan growth was a record $230 million at the high end of our quarterly forecast. At quarter end, our loan portfolio finished at $3.43 billion up 33% from the prior year.

As we continue to optimize pricing amidst the higher cost borrowing environment, the average interest rate we charge our borrowers has now stabilized. During the quarter, the overall weighted average interest rate charged to our customers was flat at 30.1%, but still down from 31% at the end of the third quarter last year. Combined with ancillary revenue sources, the total portfolio yield finished within our forecasted range at 35.3%. Total revenue in the quarter was a record $322 million up 23% over the same period in 2022. As expected, our disciplined approach to risk management and favorable product mix shifts have continued to produce stable credit performance despite the challenging macroeconomic backdrop.

During the quarter, the annualized net charge off rate decreased to 8.8%, down 50 basis points from 9.3% in the second quarter of last year. Our loan loss provision rate also reduced to 7.37% compared to 7.42% in the previous quarter. I will also remind everyone that both our long term net charge off rate guidance and our existing loan loss provision are based on a base assumption of a mild to moderate recession, which incorporates unemployment rising close to 7% in 2024. As such, we are confident we can continue to sustain stable credit performance even in a more stressed environment. With a keen focus on managing expenses, and the corresponding economies of scale, the business is also benefiting from significant operating leverage.

During the quarter our efficiency ratio, specifically operating expenses as a percentage of revenue reduced to 28.6%, an improvement of 400 basis points from 32.6% in the third quarter of last year. After adjusting for unusual items and non-recurring expenses, we reported record adjusted operating income of $130 million, an increase of 37% compared to $95 million in the third quarter of 2022. Adjusted operating margin for the third quarter was a record 40.4% up from 36.2% in the same period in 2022. Adjusted net income was a record $65.2 million, up 34% from $48.6 million in the third quarter of 2022. While adjusted diluted earnings per share was a record $3.81, up 29% from $2.95 in the third quarter of 2022.

Adjusted return on equity was 26.6% in the quarter, an increase of 170 basis points from 24.9% last year. With that, I'll now pass it over Hal to discuss our balance sheet and capital position.

Hal Khouri: Thanks Jason. The third quarter highlighted both the significant cash generating capability of the business and the continued confidence in our lenders in our business model. Looking first at the cash flows.

Cash flow from operations before net growth in the loan portfolio was $134 million in the quarter of 40% from $96 million in the third quarter of 2022. After deducting cash outflows such as dividends and capital expenditures, we funded over 40% of our net phonebook growth or approximately $100 million from internal cash flow. Based on the portfolio today, we estimate we could grow the consumer loan portfolio by approximately $250 million annually solely from internal cash flows without utilizing any external debt. Furthermore, once our existing and available sources of debt are fully utilized, we continue to grow the loan portfolio by approximately $400 million per year solely from internal cash flows. Lastly, if we were to run off the consumer loan and leasing portfolios, the value of the total cash repayments paid to the company over the remaining life of its contracts be approximately $4.2 billion.

If during such a runoff scenario with reasonable cost reductions, all excess cash flows were applied directly to debt. We estimate we could extinguish all external debt within 16 months. Turning to our balance sheet, during the quarter we increase the size of a revolving automotive financing securitization warehouse from $200 million to $375 million with the addition of Wells Fargo Bank as a new lender to the Syndicate, which is led by Bank of Montreal. Obtaining the commitment of another major bank to put their balance sheet behind her automotive financing program that meets the current macro conditions is a significant testament to the underwriting and credit quality of this product category. The facility continues to bear interest on advances payable at the rate of one-month Canadian dollar offered rate plus 185 basis points.

Based on the current one-month federal rate of 5.43%, as of November 1, 2023, the interest rate would be 7.28%. We also continue to utilize interest rate swap agreements, to generate fixed rate payments and mitigate the impact of increases interest rates on each bar draws. While the company is experiencing the impact of higher rates on incremental debt financing, thanks to the swap agreements and the fact that over 93% of our drawn debt is currently now fixed. The marginal impact higher borrowing costs has had a slow and gradual effect on our business, one that has been more than offset by a relative reduction in operating expenses. At quarter end, our weighted average cost of borrowing was 5.9%.

And the fully drawn weighted average cost of borrowing was 6.2%. Based on the cash on hand and borrowing capacity under our existing revolving credit facilities, we had approximately $930 million in total funding capacity at the end of the third quarter. In the fourth quarter. We also intend to complete the refinancing of our 2019 unsecured debentures as these notes mature late next year. While the replacement notes will bear a higher rate of interest.

Once refinanced, we are highly confident that we can execute the refinancing and have already embedded the impact of this refinancing into the three year forecast we published earlier this year. As such, we are confident that the capacity of our existing funding facilities and our ability to raise additional debt financing will enable us to achieve our growth plans. I'll now pass it back over to Jason to talk about our outlook.

Jason Mullins: Thanks, Hal. We're very proud of the recent performance.

As our strategy, business model and highly talented team are working to produce industry leading results and making a significant impact in the lives of our customers. We now expect to exceed the high end of our loan book growth forecast for this year, while achieving all the targets we set out through 2025. In the upcoming quarter, we expect the loan portfolio to grow between $195 million and $215 million. As we continue to optimize our pricing, we also expect to maintain the current total annualized portfolio yield, which had finished the quarter between 34.75% and 35.75% again. We also continue to expect resilient and stable credit performance, with the annualized net charge off rate expected to remain between 8.5% and 9.5% during the fourth quarter.

In closing, it is clear that millions of Canadians continue to rely on trustworthy, transparent and responsible lenders such as goeasy. Our customers are everyday hardworking Canadian families that rely on our financial products for a wide range of reasons, including paying bills, consolidating debt, and buying or fixing a vehicle to get to work. It is clear from the continued increase in demand for our products that non private lenders fill a much needed and important role in the consumer credit market. Beyond the financial products we offer, it is also our team members that play a critical role in building relationships with our customers to ensure they have access to the right credit products that can meet their needs today, while helping them rebuild their credit score over time so they can graduate to prime lending rates. We are proud of the work we do and we believe we are truly just getting started.

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

Operator: [Operator Instructions] And our first question comes from line with Nik Priebe, With CIBC Capital Markets. Your line is now open. Nik Priebe : Okay, thanks for the question. Jason, as you pointed out, you're tracking to exceed the high end of the guidance range for year-end loan growth.

If I extrapolate the recent growth trajectory into 2024, the target they're starting look pretty conservative as well. So I guess the question is why not look to revise that guidance higher this quarter. Is that forecasting exercise just something you you'd be more inclined to revisit around year end. Jason Mullins : Yes, so I mean, we have followed a fairly consistent process for quite some time, which has been to put out fresh three-year guidance every February at year end, where we roll off the current prior year and roll on the New Year. And then generally mid-year, we will do either a minor revision, or at least guide people to where we expect to finish within those ranges.

But other than in unusual circumstances, like COVID, et cetera, where they require immediate, more meaningful revision, we're trying to stay fairly consistent with that process. So as you've noted, given the robust loan growth and the fact that we'll be beyond the high end of the range for this year, it is safe to assume that as we go into publishing those new forecasts next year, you should expect some upward revisions to those ranges. But we would likely stay the course and put out full three year forecasts in February and be consistent with our process.

Nik Priebe: Yes, fair enough. Okay, that makes sense.

And then if I compare the quarterly growth rate of the secured and unsecured lending portfolios, the trend line appears to be converging a little bit to some degree. So wondering if you could just help us understand the dynamics there?
Jason Mullins : Yes, so the secure folks stepped up marginally, as you've noted, from 40% to 41% roughly. I think, as we've talked about, in the past, when we've got into the longer term portfolio mix, we've said that we thought it would gradually rise to around 50-50. I think as we're now over 40 you're going see that that increase is a little bit more gradual. So I wouldn't, you shouldn't expect to see material spikes in the proportion of secured I think you can expect that it'll continue to slowly rise.

But if you look at the mix of our business, the traditional just pure unsecured personal loan is still a very meaningful and important product in our suite. If you were to bifurcate, the $230 million of loan growth in the quarter, the largest contribution to that loan growth is still our core and largest product, the unsecured personal loan. So that's why you're going to see all products now grow in somewhat lockstep in a meaningful way. And probably see that secured mix, just kind of slowly continue to inch up gradually towards what I think in a few years out will be around 50-50, give or take.

Nik Priebe: Yes, okay.

That's good. That's helpful. I will pass the line for now. Thank you.

Operator: One moment for the next question.

Your next question comes from the line of Etienne Ricard with BMO capital markets, your line is now open. Etienne Ricard : Thank you. And good morning. A highlight for me this quarter is the magnitude of the operating margin expansion. I mean, the 400 basis points increase year-over-year is well in excess of the 100 basis points plus, that you're guiding for in the forecast.

So how should we think about incremental margins at this point, given the investments you've made in the retail branches, and the online channel?

Hal Khouri: Yes, thanks. So, two things I would say. We're clearly at the point in our businesses lifecycle, and growth cycle where we're experiencing the peak benefits of operating leverage, i.e., a good portion of our infrastructure is built and developed. Our branch network is now fully developed. And so we're really now and for the next little while getting the benefit of a much higher rate of growth in revenue than we are in costs, particularly things like back office, corporate costs.

Two, we've also pushed harder on expense management, given the macroeconomic conditions and uncertainty and been more purposeful and diligent about managing costs. So I would say, part of the reason you're seeing more operating leverage than we originally guided to, is because of the additional steps we're taking, to try to make sure that we really better prepare the business for any of the uncertainties that could be could be in the future. So if you think about our operating margins today at around 40%, I think we feel good that that will continue to expand. There'll of course be some quarter-to-quarter volatility. But over the next several years, that number will still grow over time by I think at least several 100 more basis points of margin expansion.

If you think about our OpEx as a function of receivables, we're running with our OpEx kind of between 10% to 12% as a function of receivables. If you take a look at a business like a one main in the U.S., that would be obviously, much more further along the curve of scale, their OpEx as a function of receivables would be like 7%. So that just gives you a sense of how much more room there is an operating leverage from expense reductions as the business growth scales. So we're very happy with where we're at. It's obviously a key strategy we've employed to offset the impact of yield reductions and higher funding costs.

And at the moment, and for the foreseeable future, we think our operating leverage can continue to outstrip the margin compression from those other factors, and protect margins overall.

Etienne Ricard: Okay. And as part of the press release, last week, you announced the potential for partnership with Nova as it relates to providing credit to new Canadians. So two-part question. What percentage of your book is currently extended to new Canadians, which I interpret as individuals with a credit history of two to three years in Canada? And number two, what potential benefits would you anticipate from this partnership?

Hal Khouri: So I'll make a couple of comments.

And then Jason can jump in here if he wants to get out anything. So look, obviously the Canadian population has and will continue to experience meaningful immigration, and the number of new Canadians every year will continue to grow. So like all financial institutions, we're looking for ways to better improve the services and products we offer those folks. Nova Credit is a business that we've started collaborating with, hopefully, we'll end up doing a formal agreement with at some point, that is essentially offering access to the credit data for other foreign countries, particularly those where we are experiencing the highest levels of immigration from and converting that data into one standard format that a lender like goeasy can use. And then one of the major banks is already using their services as well, to help better assess a new Canadian.

To-date, because we haven't necessarily had a dedicated strategy for that population, I think that our proportion is probably not all that dissimilar to the population. Maybe we over index a little bit because we're generally taking more credit risks than the banks would. But it would still be in terms of the true definition of new Canadian i.e., in the country less than 24 months, probably under 10%. At the size of the opportunity is reflective of the size of the pool of new Canadians, which as you know, this past 12 months was a record at a million people. I think the outlook for the Canadian government is to continue to sustain 500,000 plus new Canadians every year, which means that over the next 5 to 10 years, if you think about it in the long game that could be a really important part of the way we build our business.

So not overly significant portion today, still early days in terms of how we develop the right skills to serve that population, but certainly a new growth avenue for the future.

Etienne Ricard: Great, thank you very much.

Operator: One moment for the next question. And your next question comes from the line of Gary Ho with Desjardins. Your line is now open.

Gary Ho : Thanks, good morning. You get that your three-year commercial outlook, but feels like the rate cap could be pushed out versus your Jan first implementation date. Can you just remind us now obviously, you have a slightly different mix than when they first came out? Kind of what the step down could look like once that is implemented on a quarterly basis?

Jason Mullins: Yes. So, just to reiterate and clarify on that point. We are expecting to get more visibility to when the rate cap takes effect, hopefully by year end.

I think your point is correct. It's safe to assume now that our Gen-1 implementation is would seem unlikely and it's more likely to be in the back half of next year. An additional say six months of originations at the previous allowable rate probably doesn't move the yield on the whole, what will be close to $3.5 billion to $4 billion loan book by the end of the year in a meaningful way. So, we may make some small revisions to the yield guidance, but I would not expect anything material just purely on up and only from a partial year delay on the implementation date. So I think the yield range that we've published for next year, which is 33% to 35%, is still a very comfortable range to use.

Perhaps that'll push us into the upper end of the range, if everything goes according to plan, but I don't think you should assume much change in the range from a guidance perspective at this point.

Gary Ho: And then, is it true that you're thinking around the ancillary products not being captured? In the rate cap. That still stands?
Jason Mullins : Correct. Yes. I mean, the government already published back when they announced the 35%, a pretty clear definition of what APR is, and what's included and what isn't.

And, much like the definition in almost all developed countries that have maximum allowable interest rate rules, optional ancillary products and services that customer uses their discretion to purchase are outside of that of that calculation, it's really meant to just capture anything that's a true mandatory charge to the borrower.

Gary Ho: Okay, and then, Jason, just on those comments on ancillary products, are there ways for you to grow that line outside of the creditor insurance product? Can that it is not kept by the government over time?
Jason Mullins : Yes, for sure. I mean, every year we spent time thinking about our product roadmap, and we have a very robust list of additional products and services that we think our customers would be interested in. And for us, it starts with what can we offer that brings value to the customer, we're not looking to build and launch products, just to chase revenue. That's a too short thinking type approach, we're thinking about what are the additional products and services our customers would benefit from.

And we've got a really comprehensive list, our customers, of course, use a wide range of different benefits, a wide range of different insurances, a wide range of other financial services. So I think as we build this business, the platform scale, a big customer base, that's just going to be more and more opportunity to offer them other products and services. So, our forecast today doesn't contemplate that, it's based purely on our core lending business. But as you think about the possibilities for goeasy, what might be other drivers of growth or other ways for us to capture and build new revenue streams in the wake of the lower APR threshold. Certainly, we've got other types of products on our roadmap, and we're thinking about.

Gary Ho: Okay, perfect. And then just maybe just last question, just on the revenue yield. At the onset of the rate cap news, you raised your rates on portion of your book, just wondering if there were any other rate increases in Q3, or ones that you might be contemplating over the near term. Jason Mullins : We've done some pricing optimization, pretty much every couple of months, all year long. So we continue to do that, you'll see that our, our credit quality is improving, which typically means lower average yield, or APRs.

And you'll see our product mix continues to shift, which typically means lower interest rates than APRs. But yet, our actual weighted average interest rate has stayed very stable. So think of that as underneath, we've made various pricing changes to compensate for the other pressures on the business. I don't think we're intending to do material increases beyond this level. I think our positioning in the market today is a very good one, we're able to use the benefits of our scale to capture a disproportionate share of the market.

And in part, part of that is because we still are attractively priced to the borrower and able to underprice relative to some of our competitors that have less scale. So it is very much still a journey of bringing down the weighted average interest rate for our customers over time. But I think at this point in our journey, where we've got other macro headwinds that have to be considered the plan is to cut a hold the average rate steady and then of course, it'll then drift down as the as the rate cap takes effect at some point next year.

Gary Ho: Okay, perfect. Those are my questions.

Operator: One moment for the next question. And your next question comes from the line of Marcel McLean with TD Securities. Your line is now open.

Marcel McLean: Okay, thanks for taking my question. First question is on the auto side, two-part question.

Have you ever sized what the auto book is of the secured overall secured loans or of the overall portfolio? I know it's one of the fastest growing years, wondering where that sort of gone to today? And secondly, if you're seeing any signs of weakness in the Canadian subprime auto market, I know there's been reports of the U.S. market, seeing multi decade highs, in terms of delinquencies. If this is a small portion of overall book, it might be sort of hidden in there. So just curious on the law side, and if you can size sort of the relevance of the book overall. Jason Mullins : With regards to your first question, so as you noted, we don't break out the detail related to every product.

Obviously, with the secured portion being 40% of our total book, then that's around 1.4 billion, or there about of total secured volume. Today, the proportion between our three largest secured products, home equity lending, power sports financing, and automotive financing, is reasonably proportionate, like they're all several 100 million each. So it's not a perfect third split each way. But it's not wildly off that, like they're all, they're all very meaningful products in our suite. Clearly, as we talked about auto is the largest single product category.

So inherently over time, you would expect that will overtake some of the other products. But we're also managing credit risk in a very conservative manner now. So we are probably the ones moderating the rate of growth of that product most so versus the amount of demand that's available. I think, if we were to find ourselves at some point in a better economic environment with less uncertainty, that product could probably grow even more quickly. As I said in the prepared remarks, it's one of the products that we’re experiencing some of the strongest performance in with the best overall average credit quality and the most improvements in the average credit quality.

So it's performing very well. This past quarter was actually our lowest repossession rate that we've had since the launch of that product over two years ago. So it's just a good signal that the health of our business and the laws we've written, remains in good stead. As it relates to the second question, regarding just the general consumer, there's definitely stress on the general consumer, I think inflation over time has compounded to create pressures. We've seen unemployment tick up, it was as low as five at one point, and then five, two three, five, and now it's 5.7.

So it's, it's under some pressure, GDP growth is obviously slowed down pretty meaningfully. Quietly we're in a technical recession, now or very soon. And that's what we've modelled into our forecast. So there's definitely some pressure on the consumer in general. I think the consumer has held up better than people expected, there was anticipation, they'd be under much more pressure by now.

So they've held up better than expected. Our customer segments, as we've talked about in the past, generally is more resilient than people perceive, again, with only one out of five owning a home. They're not feeling in general, the kind of stress and pressure that the average prime borrower is. If you think about where this this particular cycle is hitting people and where they're expecting to be hit the hardest. It's really the homeowner that's got a mortgage renewal.

And so for more than 80% of our customers, that's not a major pain point or a major stressor. So I think the consumer overall starting to feel some pressure but less than people think, I think our segment of borrowers feeling even less just because of the circumstances there and then our business as a whole, given all the work we've done on credit risk is obviously in very good shape. And we've sort of modeled out what level of credit tolerance do we need to make sure, as the environment worsens, we can continue to produce stable credit results, so we're trying to manage the overall environment.

Hal Khouri: The only other comment, Marcel, I'd add to that, Jason’s comments. When comparing to the U.S.

cops, when it comes to auto you have to keep in mind that, a significant proportion of that market that is subject to regular refi risk. Virtually all the loans that we do it goeasy, and in fact most of those that are done in the Canadian market are straight purchase, whether that's new or used, where the United States you have a quite a large number of lenders that are engaged in first and second liens on autos, whereas we are only in first position on our entire book, as is most of the auto lending that goes on in Canada. So it's not a surprise that you're going to see some more degradation in the United States when economic weakness comes about, but it is likely that you won't see an exact replica of that in the Canadian market, because the structure of that market and how credit is underwritten is somewhat different.

Marcel McLean: Okay, thanks for that. Yes, that's very helpful.

That's a good point. My second question is on the, in terms of your visibility, for like demand for loans, it looks like it's been as strong as it ever has this quarter. If you're only funding the 50% of applications, even if we do see, maybe some drop off in demand at some point, how do you expect that to impact the business?
Jason Mullins : So I think, generally speaking, if you look at past periods of economic stress and cycles, the data does show that at some point during a cycle, demand for credit does soften somewhat. There's usually a point in a cycle when the consumer becomes a bit more conservative and cautious with the use of credit. But it's not a material softening most of the data points in terms of the public companies that have done consumer lending through many cycles, the TransUnion credit data will show you might experience a softening of up to but no more than 10% of softening in demand.

We don't for see that likely being the case for us, given that we're operating in a market today where because of all the other macroeconomic challenges, we're experiencing much less competitive tension. I think as the rate cap comes in, we've also talked about how there will be a select few companies with scale that'll become net beneficiaries of that. Whereas smaller companies struggle or fall away. We experienced less new entrants, that'll push more demand to the select few companies that do have scale. So yes, I think it's safe to assume that at some point, credit demand may soften somewhat.

But in our particular case, where we've got so many products, and channels that are in their earlier stage of development, where we're still a small company in a very large market and where we're feeling less competitive tension, we're feeling very optimistic about the growth outlook. And you say you can see that in our numbers and in the trends today. So, as I said earlier, more likely that we would revise guidance from a growth perspective up versus down. That's for sure.

Marcel McLean: Okay, thanks.

If I could just take one point of clarification on your prepared remarks. And I hear that the credit guidance incorporates 7% plus unemployment rate at the high end is that I get that right?
Jason Mullins : Yes, so just to clarify, when we develop a forecast, and have to set our credit tolerance levels that we're comfortable with across our range of products, and when we calculate our loan loss provision under IFRS 9, we have to factor in the macro economic outlook. And the way that that mechanically works is we figure out the correlation between various macroeconomic variables, which for us are inflation, unemployment, oil, and GDP. And then we purchase a set of economic forecasts, in our case from Moody's, and you can buy these forecasts from many of the big firms. We then work to weight the different economic scenarios, so that they're probability weighted.

And then that computes theoretical economic outlook. We then use the correlations to determine what that would mean for the level of performance and stress on the book. And then reverse engineer what kind of tolerance adjustments we need to make to ensure that we can maintain stable credit through that period of economic stress. Our base case, and of course, we've got downside cases, we've got upside cases. And we've stress tested a variety of circumstances.

But the base case we're using, that we're assuming is the sort of down the fairway scenario is a mild to moderate recession, as that's the most common economic outlook. What that statistically means is unemployment rising close to 7%. Meaning that our base case, the midpoint of all of our ranges is contemplating unemployment going close to 7%. If it stays in the low sixes that will be upside to our plan. If it goes into the 7% or 8%, then we'll probably be in the higher end of our last forecast range.

So our range kind of contemplates for more stress and less stress, but the base case at the very bare minimum, we're expecting a mild to moderate recession with unemployment rising to about 7%. Yes.

Marcel McLean: Okay, I appreciate that. Thank you very much for taking my questions.

Operator: One moment for the next question.

And your next question comes from the line of Stephen Boland with RJ. Your line is now open.
Stephen Boland : Well, thanks, guys. Just one question for me, obviously, the organic growth has been pretty robust now for several quarters maybe for several years. Can you just talk about the possible rate change here in Canada, the cap, have you seen M&A opportunities that have presented itself? And you know, what, if you have seen that, is it valuation, is it the type of book.

Maybe just talk about the M&A pipeline right now?
Jason Mullins : Yes, so there was a period there where it was a little bit soft, and it felt like everybody was taking a wait and see approach. I'd say in the recent months, we've seen a little bit more activity, more opportunities come across our desk, we're engaging in more conversations. So -- and I don't think it's so much about regulation, so much as it is just the environment as the environment gets tougher. That tends to sometimes be a catalyst for businesses to do strategic things. And so we're seeing some of that activity.

As we've talked about for many years now, we are always open and willing to explore acquisition and strategic investments, we look at them regularly. We just have a very high standard and a very high hurdle rate, so that the number of opportunities we pursue end up being quite a few, given our robust organic growth. So we're hopeful that we will find another great opportunity at some point. There's nothing imminently in the pipeline that is going to happen in the next few weeks. But we do have irons in the fire, and we are looking at opportunities.

And we need to assess them and find one and try to find one that makes strategic sense for us.

Stephen Boland: And is your focus on more, is it about the book like an unsecured loan book came available. Do you look at the book or the distribution? Is it both? Or is your focus really on secured products going forward?
Jason Mullins : We're open to both. I think that in Canada, where we have the platform already, we would be more looking for opportunities to find maybe a loan portfolio and maybe take another company out of the competitive market. Unlikely we're trying to buy going concern business with a new platform, when we already kind of have the platform we need.

Maybe there's a scenario where we would buy a business or invest in a business because it gives us some new capability or some new products. But those are going to be far and few between given how our platform is here. If we were to consider another market, which we've talked about in the past, we're always open minded too. There we would probably be more focused on like a traditional branch based loan business. As we're building experience in point of sale and auto, we might be more open minded to those categories, because we've got much more experience now in them.

But the core branch model is probably still are more favored and desirable expansion method. So those are the kinds of things we're looking at those the kinds of lines of business that we're evaluating. Again, nothing, this exact moment, but very hopeful that we'll find something that will really progress the company and launch it forward strategically at some point.

Stephen Boland: Okay, appreciate that. That's all for me.

Thanks.

Operator: [Operator Instructions] And your next question comes from the line of Doug Cooper with Beacon Securities. Your line is now open.

Doug Cooper: Hi, good morning everybody. And congratulations on an excellent quarter.

Just one quick one for me on the debt refinancing. You said you're highly confident of doing that before the end of the year. I think it's $550 million U.S., currently at $565 million. Just in terms of this quarter, so this quarter, I'm assuming your underwriters would want to see that out of the way and want to be able to review that. So it was a great time, obviously to have the quarter like this.

So what are your thoughts in terms of what kind of yield you have to issue debt at? And when can you, you got both five, five more weeks before year end? So maybe…

Jason Mullins: Yes, so great question. It would be our expectation to execute on a refinancing transaction prior to it becoming current. So I say imminent, is what I would say. And naturally your reference the current rate on that on that debt facility running in the mid-single digit range, we would expect that based on where rates are at today to be in the high single digit range, but certainly looking to execute on a transaction imminently.

Doug Cooper: Okay, that's it for me.

Thanks.

Operator: And we have no further questions at this time. I will now turn the call back over to Jason Mullins. Jason Mullins : Great. And thank you everyone for taking the time to join our call today.

We appreciate it and we look forward to updating you next when we close out the fourth quarter results early next year. So thank you very much and have a fantastic day.

Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.