Earnings Call: Q1 2021

May 12, 2021

Good day, ladies and gentlemen, and welcome to the GoEZ First Quarter 2021 Financial Results. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Farhan Alekhan. Your line is you may begin. Thank you, operator, and good morning, everyone. My name is Farhan Ali Khan, the company's Senior Vice President of Corporate Development and Investor Relations, And thank you for joining us to discuss GoEZ Limited results for the Q1 ended March 31, 2021. The news release, which was issued yesterday after the close of market, is available on GlobeNewswire and on the Goeasy website. Today, Jason Mullins, Goeasy's President and Chief Executive Officer, will review the results for the Q1 and provide an outlook for the business. Hello Khoury, the company's Chief Financial Officer, will also provide an overview of our capital and liquidity position. Chikta Nappel, the company's Chief Risk Officer, is also on the call. After the prepared remarks, we will then open the line for questions from investors. Before we begin, I remind you that this conference call is open For those dialing in directly by phone, the presentation can also be found directly on our Investors site. All shareholders, analysts and portfolio managers are welcome to ask questions over the After management has finished the prepared remarks, the operator will pull for questions and provide instructions at the appropriate time. Business media are welcome to listen on this call and to use management's comments and responses to questions and any coverage. However, we would ask that you do not quote callers unless that individual has granted their consent. Today's discussion may contain forward looking statements. I'm not going to read the full statement, but I will direct you to the caution regarding forward looking statements included in the MD and A. I will now turn the call over to Jason Mullins. Thanks, Farhan, and welcome to today's call, everyone. I want to first extend our sympathies to the families and Communities both here in Canada and around the world that continue to deal with the ongoing effects of COVID-nineteen. As an incredibly diverse organization Represented by over 70 nationalities, many of our team members have friends or family in other countries and call those places home. In addition to prioritizing the health and safety of our team, we will continue to assist others through various charitable causes, and we hope that the support helps make an impact. Turning to Q1 results. It was a strong start to the year in which our business continued to perform well and we produced record reported and adjusted earnings. Furthermore, subsequent to the quarter, we were pleased to announce our successful acquisition of LendCare, one of Canada's leading point of sale financing platforms. In the Q1, we experienced a gradually improving level of demand for consumer credit, though seasonal trends and provincial stay at home orders Continue to keep borrowing at more modest levels. After our 2nd strongest quarter for web traffic, loan originations during the quarter were 272,000,000 up nearly 13% compared to the Q1 of 2020 and our strongest ever first quarter origination volume. Loan growth was $30,500,000 bringing our portfolio at quarter end to $1,280,000,000 in consumer loans. With the 2nd and third waves of COVID continuing to impact our communities and moderate demand for our traditional direct to consumer lending channels, Our point of sale financing channel has continued to perform well. As we highlighted last quarter, we had experienced continued growth in the proportion of new customers being acquired through our frictionless full credit spectrum offering with the firm or directly through our merchant platform. The portion of new customers we acquired in the Q1 from this channel lifted to We also continue to execute on our strategy of focusing on lifetime value by offering an expanded range of lower priced products while graduating customers to progressively better rates, collectively bringing down their overall cost of borrowing. The weighted average interest rate on our portfolio at 44.3%. Combined with another stable performance from our leasing portfolio, revenue for the Q1 was 170,000,000 an increase of 2% over 2020. As closures and restrictions continue to come and grow across various regions At Industry Sectors, we continue to dynamically adjust our credit tolerance and underwriting practices. The improving credit quality of our portfolio and the continued reduction in the overall discretionary expenses for the average Canadian contributed to another quarter of strong credit performance. The net charge off rate for the Q1 was 9.1%, down from 13.2% in the Q1 of 2020. We are also proud that our loan protection product continues to provide a reliable source of insurance for those remaining customers who have been displaced from their employment due to the recent pandemic related business closures. During the Q1, the product paid out approximately $7,000,000 in claim payments on behalf of our customers. With over $50,000,000 in payments made in 2020, the product continues to provide customers with meaningful value during a period of economic disruption. While we expect the credit performance of our existing Easy Financial portfolio to trend back toward our optimal range in the coming quarters, The underlying credit trends of the portfolio remain healthy and we are confident in long term performance and stability of our loan book. As the broader economic environment has begun to show signs of recovery and as the timing of a return to more normal conditions is gradually becoming more clear, We have updated the probability weighted economic scenarios used to determine the appropriate loan loss allowance that would barely account for the future expected credit losses. As a result, our allowance for future credit losses reduced slightly from 10.08% to 9.88%, a reduction of 20 basis points from the previous quarter, while still providing ample coverage to account for unforeseen changes in the current economic environment. Improved operating leverage and lower credit losses led to record operating income of $63,900,000 up 45% from $44,200,000 in the Q1 of 2020, while the operating margin expanded to a record 37.6%, up from 26.4% in the prior year. During the quarter, our retail point of sale financing partner, Affirm, formerly Paybreak, Completed an initial public offering with shares beginning to trade on the NASDAQ Global Select Market. Through the sale of PayBright to Affirm, which closed in early January, We received consideration of $23,000,000 in cash, 655,000 common shares in Affirm, subject to a customary lockup agreement at 468,000 common shares held in escrow subject to revenue performance at T2 'twenty one and 2022. Shortly after the public listing, We entered into a 6 month total return swap agreement to substantively hedge our market exposure related to the noncontingent 655,000 common shares. The total return swap effectively results in the economic value of our non contingent shares in Affirm being settled in cash at maturity for a price of US108.87 dollars per share, net of applicable fees. After considering the impact of the hedging arrangement and the likelihood of achieving the contingent equity, during the quarter, we recorded a pretax unrealized fair value A gain of $87,300,000 bringing the total value derived from our original $34,000,000 investment to an excess of 140,000,000 Through our ongoing partnership with Affirm, we continue to offer a market leading full spectrum point of sale financing solution to major retail brands such as Wayfair, Samsung and Casper, I look forward to working together for many years to come. During the quarter, we also invested $6,500,000 to acquire a strategic minority equity interest in Brim Financial, an early stage private Canadian fintech platform. Brim offers a turnkey suite of consumer and business card products, a white label digital banking platform and a globally open rewards and loyalty ecosystem. With a future roadmap to launch new products, enhance our mobile and digital platform for consumers and eventually increase the rewards for our customers, Brim can help augment and accelerate our product, digital and loyalty and rewards roadmap. We also believe that Brim offers 1 of the best Cards mobile banking and loyalty reward solution on the market presenting a unique investment opportunity. In connection with our investment, We are also entitled to preferential commercial terms for use of the Brim platform in the future. Including the gain associated with our investment in Affirm, Net income in the Q1 was a record $112,000,000 up from $22,000,000 in the same period of 2020, which resulted in diluted earnings per share of 7.14 cents, up from $1.41 in the Q1 of 2020. After adjusting for the 78,500,000 After tax fair value gain related to depreciation of our investment in Affirm, adjusted net income was a record 36,700,000 up 67% from the Q1 of 2020 and adjusted diluted earnings per share was $2.34 up 66%. Adjusted return on equity was 29.5 percent in the quarter, up from 25.8% in the Q1 of 2020. I'll now pass the call over to Hal to discuss our balance sheet and capital position before providing some comments on our outlook. Thanks, Jason. During the Q1, we continued to invest in our business, while also improving our liquidity position and deleveraging our balance sheet in preparation for our Lentier acquisition. To help simplify and highlight the free cash generating capability of our portfolio, last quarter, we began to publish A new non IFRS measure in our disclosures, which is the cash provided by operating activities before the net growth of the consumer loan portfolio. This figure represents the amount of free cash we produce each period if we were to hold loan portfolio flat. From this figure, we can then invest that free cash Cash provided by operating activities before net gross consumer loans receivable in the quarter was $63,200,000 an increase of 17% over 2020. Based on the cash at hand at the end of the quarter and the borrowing capacity under the company's revolving credit GoEZ had approximately $435,000,000 in total funding capacity. At quarter end, company's fully drawn weighted average cost of borrowing reduced to 4.8%, down from 5.5% in the prior year With incremental draws on its senior secured revolving credit facility bearing a rate of approximately 3.5% And incremental draws on its revolving securitization warehouse facility bearing a rate of approximately 3.4%. As of March 31, 2021, the company also estimates that once its existing and available sources of capital are fully utilized, It could continue to grow the loan portfolio by approximately $150,000,000 per year solely from internal cash flows. When factoring in the gains recorded in the quarter and the cash produced by the business, we have continued to reduce our leverage position. As at quarter end, our net debt to net capitalization declined to 58%, well below our target of 70% And the equity on our balance sheet improved over $550,000,000 Subsequent to quarter end, we also completed 2 successful capital raises Support the acquisition of LendCare, which closed on April 30, 2021. First, we completed an equity offering of 1,400,000 subscription receipts at a price of $122.85 for gross aggregate proceeds of $172,500,000 As a result of the completion of the acquisition, each of the 1,400,000 outstanding subscription receipts were automatically exchanged for one common share of the company. In addition, subsequent to quarter end, the company also closed its offering of US320 million dollars 4.375 percent senior unsecured notes maturing on May 1, 2026. Concurrently with the offering, the company entered into a cross currency swap agreement, effectively hedging the obligation at CAD400 1,000,000 with a Canadian dollar interest rate of 4.818 percent. At the close of our 2nd quarter financial results, which will now include a partial consolidation period with LendCare and the inheritance of new funding facilities, we estimate that our total funding capacity will be in curitization warehouse facility, which we recently launched in January with National Bank Financial Markets. With the continued strength of our business model, the stability in credit performance and the positive growth outlook of the company, we have received expressions of interest from several large and reputable financial institutions to participate in the syndication and related increase in the facility capacity. We look forward to updating everyone on our progress in the quarters ahead. During the Q1, our common shares were also added by Dow Jones The S and PTSX Composite Index effective March 22, 2021. The index is considered Principal benchmark measure for the Canadian equity markets and consists of the 231 largest Canadian companies as measured by market capitalization and liquidity. GoEZ is also included in the S and PTSX Canadian Dividend Aristocrats Index as a result of consistently increasing dividends for more than 5 consecutive years. Lastly, we continue to use a portion of our free cash to return capital to shareholders through our regular dividend program. The Board has approved a quarterly dividend of $0.66 per share payable on July 9, 2021 to the holders of common shares of record as at the close of business on June 25, 2021. I'll now pass the call back over to Jason for some comments on our outlook. Thanks, Hal. While 2021 is Presenting a new round of challenges as we navigate through the 3rd wave of the pandemic, our business continues to perform well and we see a renewed sense of optimism beginning As vaccination distribution accelerates and the economy builds momentum toward a recovery. To help further accelerate our growth, we were pleased to announce Closing of the acquisition of LendCare within the last few weeks. LendCare is one of Canada's leading point of sale financing platforms and the powersports, retail, healthcare and home improvement verticals. Through approximately 3,000 merchants, LendCare offers a Consumer focused loan origination platform that enables their merchant partners to process installment loans quickly and easily for their customers with rates between 9.9% and 34.9%. The company has deep and long standing relationships with retailers, dealers and major name brand OEMs, such as Bombardier Recreational Products and CF MOTO. Lend care consumers range across the entire credit spectrum with 2 thirds in the nonprime segment, where they have especially deep expertise in credit and underwriting in their respective verticals. The transaction is a highly complementary and meaningful end market acquisition, which increases our scale, extends the product line for customers and diversifies our channels of distribution through expansion to new verticals. We have already begun to work with the LendCare team and collaborate on new opportunities together. We also remain on track to launch the pilot of our direct Our first phase will involve enabling customers to purchase from their dealer of choice or through a private sale, followed by the introduction of an approved dealer network and then an online car buying experience over the course of 2021. Further, we will also begin testing offering customers With existing vehicles that are declined for unsecured credit, the opportunity to provide their vehicle as security as a way to borrow and build credit. We also continue to work on our new cloud based court lending platform called Fusion. This platform will not only enable us to The enterprise under a multi product, multi channel model, but will unlock features and functionality that can drive a greater experience and new sources of revenue. We expect to complete the configuration of the new platform over the coming quarters and carefully stage our migration amongst our other major initiatives. As we noted in our earnings release yesterday evening, we plan to provide a new 3 year forecast, including the impact of LendCare when we report our Q2 results. With the transaction closing on April 30, the second quarter will include a partial consolidation period, which will influence some of the typical portfolio metrics we report, such as yield and net charge off rates, which are calculated on the average consumer loan book during the As such, we will temporarily move to providing an outlook on the upcoming quarter in the form of the total revenue and net charge offs we expect provided in dollars. After accounting for the loan growth during the quarter and the adjustments associated to the merge of the Lend Care business, We expect to finish the 2nd quarter with a consumer loan portfolio of between $1,790,000,000 $1,800,000,000 While the calculation of the total yield generated on the loan portfolio will be skewed by the partial consolidation period, We expect total company revenue of between $195,000,000 $205,000,000 during the quarter. Lastly, while the credit trends on our existing Easy Financial portfolio are expected to gradually return to more normal levels, The amalgamation of the higher credit quality Lend Care business will serve to improve the overall credit performance. During the Q2, we expect to record net charge offs of between $36,000,000 $40,000,000 excluding the change in the allowance for credit losses associated with the growth in the consumer loan book. As we move into the Q3 and beyond, we will return to providing both the short and longer term forecast using traditional portfolio metrics such as portfolio yield and net charge off rate as we have done in the past. So with a highly strategic acquisition now complete, The pending launch of a new auto loan product and the economy set to experience meaningful recovery in the quarters ahead, there is much excitement in our business. We continue to be in the early stages of our journey to becoming the largest and best performing lender in the large and underserved $200,000,000,000 non prime consumer credit market. Even more important, with a wider range of rates and products now available, our mission to help the 9,000,000 non prime Canadians get access to credit while improving their financial health, lowering their cost of borrowing and graduating to prime is stronger than ever. I I want to once again welcome LendCare to the Goeasy organization and thank our now over 2,200 team members for continuing Thank you. At this time, I would like to remind everyone Thank you and good morning. Good morning, Adam. So with the closing of GlenCare Now behind us, could you share how the integration is progressing, Your near term priorities as well as growth achieved by the business in 2021 year to date? Yes. So I guess on your first question, integration goes well. We've obviously spent the last couple of weeks now working together with the LendCare team, getting to know everybody, figuring out what each business' individual Priorities and focus areas are, we continue to have a heavy list of key strategic priorities that we're focused on, The launch of the auto product, the new core platform, LendCare continues to be focused on adding new merchants to their existing verticals, Making improvements to their customer experience through their technology, and we've already started to now collaborate on ways that we can work together in The future of which we highlighted some of them during our announcement of the transaction, which primarily revolve around Being able to offer more of their customers loan products through our EZ Financial scoring models and then also being able to Across all customers across the two businesses. We'll obviously start to explore when and how we implement those particular new initiatives over the next couple of But both businesses, of course, have quite a robust organic growth plan as it is now under one umbrella. We don't we haven't broken out in our Q2 projections the exact split of the growth coming from Each of those two portfolios as our plan and our intent as we highlighted when we made the announcement is that these are really going to become one Consumer loan portfolio and we'll just be providing the growth on a consolidated basis. As you can imagine, Part of the strategy, which is to be able to move customers back and forth across products means that cross pollination It's going to murky the waters as to what exactly belongs to each individual channel of distribution. So it's really only going to make sense for that part of 1 consolidated loan portfolio. Okay, great. And I mean part of the strategic rationale for the deal is that It expands your point of sale presence. Could you share how you think About customer acquisition economics for this channel and how that would compare to Your branch and online channels. Yes, sure. So generally speaking, in our direct to consumer, we think of the branch and the online as direct to consumer and point of sale as Indirect, in that we're in point of sale using more of a B2B2C model where you're working through a merchant relationship and partnership. In the direct to consumer business, our marketing and advertising dollars, Which as you know, GoEZ historically has invested approximately 4% to 5% of our annual revenues into, is where we acquire our customers. And through that channel, we would generally speaking, obviously ebbs and flows with the impacts of COVID as of late, but we would generally acquire a customer for around $300 When you take our marketing and advertising investment over the number of new customers we acquire. In the point of sale channel, Because you're leveraging the traffic of that existing merchant base, you really have a cost of acquisition that's only a couple of dollars. It's really just the operational transaction costs, if you will, of actually processing it as that merchant partner really does the heavy lifting and promoting and advertising their products that drive the customer traffic. That difference in the cost structure, which includes both the cost of acquisition And the operating cost of the business because you don't have a big platform of retail branches, for example, is what enables that channel to be able to still generate comparable returns, comparable return on assets, even though it has a lower overall Yield from the portfolio coming through point of sale. Once a customer comes in through a point of sale acquisition, whether that be our existing Business or Lend Care, we will then over time be able to, of course, to offer those customers' other products. We've seen from our Prior point of sale experience that over a quarter of our customers we acquire through point of sale eventually migrate within that 1st year into one of our other traditional Lending products. We don't know, of course, what that exact experience will look like as we start to work with LendCare, but we do think there will be an interest on those consumers' All right, awesome. And last one for me. On the investment at Brim Financial, could you provide a bit more details as to the background of this investment? And how should we think about the potential for GoEZ to introduce maybe at some point, revolving loan products? Yes, sure. So the background thesis is we've known about Brim for a little while, Started to connect and talk to them about some of the things that they had on the go and some of their new business initiatives and really get To look at their platform and their technology carefully over the last 6 months, what really became clear to us is that their platform, The first one is they have a card platform that enables you to issue a variety of different types of card products, Cards connected to bank accounts, revolving credit cards and prepaid cards. So they offer these variety of card products. We think from a product expansion perspective in the future, some of those card products might make sense In our suite, for example, for the consumer that's declined for unsecured credit, There might be an opportunity to offer a secured credit card similar to the one that Capital One would offer to its non prime customers Where the customer puts forth some full or partial amount of security in order to get access to a card product that can build credit. On the upper end of our credit spectrum and particularly now that we're moving more toward near prime through our business and the acquisition of Lincare, We think there might be opportunity down the road for a traditional non prime credit card product. In fact, if you look at kind of the largest North American Peer group member, OneMain, in the U. S, that's a product they've actually been working on and announced over the last year. And I believe they're going to market later this year as well. So it has this card platform that we think can be useful to us in the future. Secondly, they also offer a Kind of white label digital mobile customer platform. And what we've done a phenomenal job at building a mobile first Web experience for both the main core websites and our application, we have not yet invested in the creation of a mobile app That creates another point of engagement with our customers. As we think about expanding that product strategy and customers over time having multiple products, Giving them access to a mobile app that allows them to interact and engage with us more frequently, we think is going to deepen the relationship with the customer. So they have to have that and we think that's interesting. And then lastly, they also have a loyalty platform that uses the credit card rails to allow the participation in both issuing and redeeming points across different retailers that are part of the network. And of course, again, our view is over time, we want to be able to Strengthen the reward system for our customers. So because they have these capabilities in this platform that really has a number of pieces that We need and want and are interesting to us, similar to what we've done in the past with those types of relationships, became this really great unique opportunity to take a small minority equity interest as we work together with the business and that also helped enable us get some preferential commercial terms for the use of that platform in the future. All right, great. Thank you for your comments. Our next question comes from the line of Gary Ho with Desjardins Capital. Your line is open. Thanks and good afternoon. I just want to dig into one element of your Q2 guidance, which is the net charge off $36,000,000 to 40,000,000 Can you help me segment kind of what would be on a percentage basis roughly on the Easy Financial versus the LendCare side? Just want to gauge kind of your expectations On a sequential basis relative to 9.1% in Q1 and whether you're looking for, I guess, it sounds like Some gradual increase as the portfolio normalizes as you've mentioned in the past? Yes, I can start And then, Jason, if I can add if there's any additional comments. So again, similar to my comment earlier, we are Reporting the portfolio as one consolidated portfolio for the reasons highlighted earlier, as that's just inevitably how the Portfolio mix is going to change and evolve through the cross sell products that I highlighted. What I can tell you just for some The color there is, as you know, we had anticipated that our core Easy Financial portfolio We'll gradually migrate back to the range we originally provided for this year, which is between 10.5% and 12.5%. That was what we believe is the steady state and optimal range for our book. Of course, down from where it used to be Pre pandemic, as a result of the credit enhancements we've made and the evolution of the mix of our business. We expected that it would be around the Q2. We would start to see The returns of those more normal levels begin to occur. And so we are beginning to see a little bit of that trend back toward those more normal levels. So we're not all the way back there yet, but some of that correction is occurring and I would expect that provided that over the next several months, They begin to reverse some of the lockdowns and some of the things that are going to drive growth occur, we will we are right on track To that exact range that we targeted. What you also know, of course, is that the LendCare portfolio that we are inheriting has a, as we quoted before, mid single digit Loss rate performance. So the amalgam of those, of course, produces a charge off rate that, as we quoted before, would be around 10%. And we will, of course, provide more clarity on what that consolidated portfolio looks like now and in the future When we put out the new forecast projections in the next quarter. Okay, perfect. And then my next question, maybe just on the liquidity. Hal, you mentioned almost greater than the $600,000,000 financial Wondering relative to the Q3 2023 run rate for growth that you published last quarter, Where do you stand today factoring in the potential growth of the LendCare book over the coming years? Hey, Gary. So I think we'll be producing as part of our Q2 financial outlook, we'll be Providing that guidance in terms of the liquidity runway as we integrate the LendCare portfolio. What I would say though is that the balance sheet has been in the best position that it's been in quite a long time. As we look at securitization, In particular, we've received quite a bit of expression of interest from our syndicated banks that we deal with. And we would be looking to upsize our securitization facility Over the coming quarters, and that will unlock additional liquidity. And of course, we have a multiyear runway that would be available to us. And so we would expect, notwithstanding the accelerated Growth from both the GoEasy business and the new LendCare business Being integrated that we'd have ample runway over the next 12 to 24 months. Okay. Thanks for the color for that. And then my last question, Maybe just a numbers question is related to LendCare. On the corporate segment, will any of LendCare's corporate costs All under there or will it all go through in the Easy Financial side? And then any early read as to kind of That day 1 credit provision might look like. I think you'll back that out in the adjusted EPS, but any color would be helpful. Yes. Hey, Gary. So just in terms of the bifurcation of overall costs, we would expect that A portion of the LendCare costs would actually be attributed to the corporate segment. Typical things like back office, technology, admin, typical to what we currently do with our existing EFS And business on that front. In terms of the day 1 provision, we are still examining that And we'll be looking to provide an update as part of our Q2 earnings. Just to add to that, I think in terms of trying to model what does the provision rate look like for the business. You obviously have a good grounding as to where the provision rate of our existing business lies today. I think you can safely say that the provision rate on the portfolio we're acquiring from LendCare, similar to our business, It's going to be approximately the annualized charge off rate. So if you're using, again, a mid single digit provision rate On the growth associated with the portfolio we're acquiring, that will give you on a weighted average basis, some sense and direction as to what that combined provision rate is likely to be. But as Hal said, we do have some work ahead Still complete our analysis and merge all the financials and then be in a position to provide a new consolidated provision rate at the end of Yes. And Gary, maybe just to bolt on to that, as you might know already that LendCare was on ASPE reporting and will be required to Invertible rye for resto, there's some additional work to be done on that front as well. Okay. Great. Those are my questions. Thanks very much. Thanks. We have our next question coming from the line of Steven Bollin With Raymond James, your line is open. Thanks. I just want to follow-up to that last question because I guess when I go back to your previous 3 year guidance and that 10.5% to 12.5%, to average even to 10.5%, you have to assume Pretty, I won't say steep, but you're getting into the 10%, 11% to 12% to get to that 10.5% average for the year. What's the real driver of that? Is that is it government subsidies kind of falling off? Is it Growth in the portfolio as you mentioned or what would be the real cause if you think that of that rate coming up pretty quickly over the next several quarters? Yes. So really the same factors that we've seen caused the lower level of losses Over the last period of pandemic that are having the inverse correlation on growth. So as consumers get more comfortable living in a state Of the pandemic or as they come out of lockdowns and return to more normal spending behavior, cars go back on the road and They begin to break down again. Summer camps look like they're now opening back up and families have to put kids in camp. All of those normal spending matters are what drive both the demand for credit and contribute to a more normal spending pattern That results in a standard probability of default for any given segment of customers. We've modeled our credit tolerance To be such that the velocity of customers we approve and the credit profile of those customers we approve Would have a normal run rate of losses in that 10.5% to 12.5% range. So therefore, if the environment is More normal, regular normal behaviors in terms of spending and financial household liability, that should be the range that our portfolio operates at. And we intentionally try to manage the credit risk and optimize for that range because we think that's the way in which we maximize a combination of velocity and ultimately returns for the business. We could of course tighten credit criteria further and slow the rate of the change in the rate or even bring down further The standard go forward rate on that portion of the portfolio, but that wouldn't be in the best long term interest of the business. So it's ultimately the reality of that Over the next several quarters, we should see, in fact we hope, a correction because that would be the correction that it's going to lift and drive overall loan growth. Okay. That makes sense. And maybe just a second, Another piece of your guidance was the opening of locations. It was 20 to 25 for 2021. I think you did 3 in this quarter. Obviously, COVID may be still impacting that. Is that prior guidance still Achievable, about 20% to 25%, like should we expect an acceleration for the remainder of the year? Yes. I think we'll still be in good shape to get to that range. As you noted, COVID, particularly in the first A little bit of the year here has slowed down some of that expansion effort. We will be heavily back end weighted in the year In terms of new locations, the vast majority of the locations that we have planned for this year, we've already got leases signed up. We've got contractors assigned. So our real estate expansion plan is only being Held up in the short term, just as it relates to the complexities of dealing with health and safety protocols and lockdowns related to COVID. So As soon as those lockdowns start to subside in the next, it should be hopefully a few months, depending on the course of the province, that will allow us to get in and quickly Complete the real estate build out. So there might be a small bit of delay, but I would say, generally speaking, we're still on track in the back half of the year To get to or very, very close to our real estate expansion plans. Okay. Thanks guys. We have our next question coming from the line of Patrick Laudeier with Sierra Capital. Your line is open. Good afternoon. I think that was a mistake. I don't have a question. Thank you. There are no further questions on the queue. I will now turn the call Over to Jason Mullins for additional comments. Well, thanks everyone for joining our Q1 earnings Our release call, we appreciate your ongoing support, and we look forward to updating everyone when we release our Q2 results in August, where we'll have the opportunity to Showcase the combined consolidation of the business and as noted provide new long term forecast for the organization. I hope everyone has a fantastic day. Thanks very much. Bye now. This concludes today's conference call. Thank you for participating. You may now disconnect.