Good day, ladies and gentlemen, and welcome to the goeasy second quarter 2017 financial results call. At this time, all participants are in a listen-only mode, so if anyone should require assistance during the call, please press star then zero on your touchtone telephone to reach an operator. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, today's conference is being recorded. I'd now like to introduce your host for today's conference, Mr. David Yeilding, Senior Vice President of Finance. Sir, please go ahead.
Thank you, operator, and good morning, everyone. Thank you for joining us to discuss goeasy's results for the second quarter ended June 30th, 2017 . News release, which was issued yesterday after the close of market, is available on Marketwired and on our website. Today, David Ingram, goeasy's President and CEO, will talk about the highlights of the second quarter. Following his remarks, Steve Goertz, the company's CFO, will discuss goeasy's financial results in greater detail. David Ingram will then provide some insights into our strategic initiatives and outlook before we open the line for questions from investors. Jason Mullins, the company's Chief Operating Officer, and Jason Appel, the company's Chief Risk Officer, are also on the call. Before we begin, I remind you that this conference call is open to all investors and is being webcast through the company's investor website.
While shareholders, analysts, and portfolio managers are welcome to ask questions over the phone after management is finished, the operator will poll for questions and will provide instructions at the appropriate time. Business media are welcome to listen to this call and use management's comments in responses to questions in your 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 However, we would ask that you do not quote callers unless that individual has granted their consent.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 that statement included in our MD&A. Now I'll turn the call over to David Ingram.
Hi, good morning, and thank you for the participation in our call today. We're very pleased to once again report a strong second quarter with record growth for our easyfinancial business. We delivered record growth in the quarter in terms of originations, loan book growth, and customer growth. Originations reached an all-time record of CAD 139 million, an increase of 42% compared to the second quarter of 2016. These strong originations resulted in record loan book growth of CAD 38 million during the quarter, an improvement of 74% compared to the second quarter of 2016. The growth in the quarter further allowed easyfinancial to achieve two major milestones, reaching a CAD 400 million loan book and 100,000 active customers.
Additionally, during the quarter, we added more new customers than ever before at over 8,000 against our next best quarter of 6,800. Total revenue increased by 14%, reaching CAD 98.2 million for the quarter. The company's revenue growth was again driven by easyfinancial, as it grew its loan book to CAD 425 million by the end of the quarter, a year-over-year increase of 30% and on track to reach our stated goal of CAD 475-500 million by the end of the year. The growth in revenue contributed to increased earnings. Diluted earnings per share for the quarter increased to CAD 0.63 compared to CAD 0.60 on a normalized basis in the second quarter of 2016.
Before Steve reviews the detailed financial performance for the quarter, I want to touch on some of the strategic achievements that were completed. First, we launched easyfinancial in Quebec. We always knew that Quebec represented a large opportunity for us, as it represents 22% of the Canadian population, but is largely underserved by non-prime lenders. We opened our first branch in Laval and launched online lending in April. The results today have exceeded all of our expectations. The Laval branch growth was the fastest we have ever seen for any easyfinancial branch anywhere. Since that first Quebec opening in Laval in April, we have opened two additional branches in Gatineau and Quebec City. The growth trajectories of these two branches have also significantly outpaced the typical growth trajectory of prior new branches.
We will have 11 branches operating in Quebec by year's end, growing to a total of between 20 to 30 over the next few years to meet the demand from this largely underserved consumer. Second, during the quarter, we began offering our consumer lending products to our customers through a select number of easyhome retail stores. The existing easyhome stores created an opportunity for the company to further expand the easyfinancial footprint since the credit and risk decisions were already being made centrally.
The easyfinancial systems were developed and had capacity, and the easyfinancial lending practices were documented and well established. Third, we continued to see strong performance from our risk-adjusted interest rate loans. We launched risk-adjusted pricing in 2016 , where we provided our best and most creditworthy customers with access to larger dollar loans with reduced interest rates.
This product extension was consistent with our mission of helping our customers improve their credit profile and graduate back to lower-cost prime lending. The customer benefits from the reduced rate of interest, and we benefit through lower charge-off rates and greater lifetime value. While we continue to require a stronger credit profile for those customers obtaining a lower interest rate loan, the availability of these loans was increased from 10% of total originations in 2016 to 20% for the current year. And lastly, we completed an offering of convertible debentures due July 31st, 2022, for aggregate gross proceeds of CAD 53 million. These funds will be utilized to continue the strong growth of easyfinancial. To support our growth initiatives, we continue to assess alternatives to our current funding structure.
This offering is a positive first step towards achieving our objective of diversifying our funding sources and optimizing our capital structure at attractive levels. Our second quarter advertising activities included a targeted TV campaign, coupled with an expanded use of digital and radio. This integrated media fueled the origination loan book growth and increased the profile of the easyfinancial brand. This resulted in unaided awareness improvement of 55% versus the second quarter of 2016 , and 18% improvement in aided awareness, which is now at 80% in Canada. While growth is important, we also continue to be focused on credit risk management. Our continued investments in risk management, underwriting, and collection processes are having the desired effect of mitigating losses in the portfolio while we diligently pursue new growth opportunities.
We have seen charge-offs continue to decline year-over-year, achieving 14.7% in the quarter, compared to 15.2% in the second quarter of 2016. Based on these efforts, we are confident that the charge-off rate for the remainder of the year will be in the lower end of the range of our previously guided target of 14%-16%. In addition to the achievements of easyfinancial during the second quarter of 2017, we also achieved a significant improvement for the performance of our mature easyhome business. Same-store sales growth at easyhome was 1.4%. As we have stated previously, our goal for this mature business is to maximize profitability. We implemented tight cost controls over labor and store-level costs and reduced charge-offs.
We have also closed a number of underperforming stores over the past year, merging their portfolios to other nearby easyhome stores and thereby retaining much of the revenue without the store operating expense. Ultimately, easyhome's operating income increased by CAD 700,000 in the current quarter. So overall, we're very pleased with the results for the quarter. We made solid progress on our strategic imperatives, and our revenue portfolio growth was strong. Although our financial results for the quarter were somewhat moderated by the investments made to drive growth through our strategic imperatives and additional marketing expense, they were improved from the normalized earnings reported in the prior year, and the business is well positioned for future success. Now I'll turn the call over to Steve to review our financial results for the quarter in greater detail.
Thank you, David. As David indicated, the gross consumer loans receivable portfolio grew by CAD 38.3 million in the quarter, driven by our strong originations, which increased to CAD 139 million from CAD 98 million in the second quarter of 2016 . The growth of easyfinancial contributed to improved financial results for the quarter. Total revenue was CAD 98.2 million, an increase of CAD 12.1 million or 14.1%, compared with CAD 86.1 million in the second quarter of 2016 . Same-store sales growth was 16.6%. Revenue generated by easyfinancial was CAD 63.6 million, up 26% against the second quarter of 2016 . The revenue increase was driven by the growth of the loan book for the reasons that David just detailed and was offset by a 130 basis point decline in yield.
As we had indicated previously, the increased penetration of our risk-adjusted rate loans to more creditworthy customers and the higher proportion of larger dollar loans, which have lower pricing on certain ancillary products, will continue to reduce the yield we achieve on our portfolio. We are confident that this decreased yield will be offset by lower charge-off rates and lower relative costs to originate and manage the portfolio. easyfinancial's operating expenses before depreciation and amortization were CAD 40.6 million for the second quarter of 2017, an increase of CAD 10.3 million or 33.9% from the second quarter of 2016.
The increase was driven primarily by the additional CAD 1.6 million in advertising and marketing spend to support the growth in originations, higher operating costs of the maturing and growing branch network, incremental costs to expand the product offering, such as secured lending, which will launch later this year, and increased bad debt expense. Bad debt expense increased by CAD 3.8 million when compared to the second quarter of 2016. Although net charge-offs as a percentage of the average gross consumer loans receivable on an annualized basis were down to 14.7% in the quarter from 15.2% reported in the second quarter of 2016, the absolute value of charge-offs in the quarter increased by CAD 3 million due to the larger loan book.
Additionally, the record loan book growth in the quarter required an incremental CAD 1 million dollar provision for future charge-offs when compared to the second quarter of 2016. As a result of the drag associated with the development and launch and strategic initiatives during the quarter, additional advertising expenditures to drive growth, and the increased bad debt provisioning required due to the record growth during the quarter, the operating margin of easyfinancial was somewhat moderated. The operating margin for easyfinancial in the quarter was 33.6%, compared with 36.7% in the second quarter of 2016. Looking to easyhome for a moment. Total revenue declined by 3.1% to CAD 34.6 million, primarily due to store closures over the past year.
As David described, our goal for this mature business is to maximize operating income, which increased by CAD 700,000 in the current quarter compared to the second quarter of 2016. Total operating income was CAD 18.6 million in the second quarter of 2017. Operating income in the comparable period of 2016 benefited from other income of CAD 3 million related to the sale of an investment, and was negatively impacted by CAD 600,000 in non-recurring transaction advisory costs. Normalizing for these items, operating income in the second quarter of 2016 was CAD 15.7 million. On this normalized basis, operating income increased by CAD 2.9 million or 18.2% in the current quarter compared to the second quarter of 2016.
Operating margin was 18.9% for the second quarter of 2017, up from 18.3% normalized operating margin reported in the second quarter of 2016. The improvement in operating margin was driven by the higher operating margin in both businesses and a larger percentage of earnings generated by easyfinancial. As previously indicated, operating margin was moderated by the drag associated with the development or launch of strategic initiatives during the quarter, additional advertising expenditures to drive growth, and the increased bad debt provisioning required due to the record growth during the quarter. The improved operating income translated into higher net income and earnings per share for the quarter. Net income for the quarter was CAD 8.9 million, or CAD 0.63 per share on a diluted basis.
This compares with normalized net income of CAD 8.4 million, or CAD 0.60 per share in the second quarter of 2016. On this normalized basis, net income and earnings per share increased by 6.4% and 5%, respectively. During the quarter, we completed an offering of convertible unsecured subordinated debentures for gross proceeds of CAD 53 million. These debentures bear interest at a fixed rate of 5.75% and are convertible at the holder's option into common shares of the company at a conversion price of CAD 44 per share. The debentures mature on July 31, 2022. This offering is a positive first step towards achieving our objective of diversifying our funding sources and optimizing our capital structure at attractive levels.
We continue to believe that the company's leverage ratio is low compared to most industry players and has room for expansion. As such, we do not intend to raise additional equity to fund our growth strategy. The completion of the convertible debt offering has provided us with additional time to assess various funding alternatives that represent an optimal balance between interest rates, term, flexibility, and security. Our discussions and analysis in this regard are in the advanced stages, and we are confident that we will have access to the necessary capital to continue executing our plan prior to it being required. Finally, as many of you are aware, we are required to implement the new IFRS 9 accounting standard in the first quarter of 2018 . IFRS 9 introduces a new loan loss provisioning model based on expected credit losses, which will replace the existing incurred loss model.
Under the current accounting standard, a provision for loan loss is recorded on those loans or groups of loans where a triggering event has occurred as at or prior to the balance sheet date, which provides objective evidence that the loan will likely charge off in the future. The company's current provision for loan losses essentially estimates the charge-offs that are expected to occur over the subsequent five-month period for loans that existed as at the balance sheet date.
Under IFRS 9, the company will be required to assess and categorize its loans into performing, underperforming, and non-performing categories as at each balance sheet date. Loans will be categorized as underperforming if there has been a deterioration in credit quality since their origination date. Loans will be categorized as non-performing if there is objective evidence that such loans are impaired and will likely charge off in the future.
For performing loans, the company will record a provision for loan losses equal to the expected losses on that group of loans over the ensuing twelve months. For underperforming loans and non-performing loans, the company will record an allowance for loan losses equal to the expected losses on those group of loans over their remaining life. The calculation of these loss rates will be based on historical loss patterns and will be subject to adjustment due to the projected impacts of future economic conditions that may impact the credit profile of these loans. Ultimately, IFRS 9 will result in the earlier recognition of credit losses compared to the current standard.
Similarly, as the provision for loan losses will provide for either expected twelve-month or lifetime losses, the amount of the allowance for loan losses under IFRS 9 will increase when compared to the current methodology, as will the volatility of this provision from one balance sheet date to the next. The implementation of IFRS 9 requires extensive analysis involving both our risk and finance teams, and we are on track to complete this implementation within the required timeframe. We intend to provide additional disclosure on our progress, as well as some guidance on the impact IFRS 9 will have on our financial statements as part of our third quarter disclosures. Now I'll turn the call back to David.
Thanks, Steve. So we're very pleased with the strategic achievements, strong growth, and financial results that we reported for the second quarter of 2017 . I'm happy to report that this growth has continued into July, which was a record month for loan growth for the company. Additionally, the loan book growth we achieved in the second quarter will be a driver of earnings in the third and fourth quarters. We are committed to improving the lives of everyday Canadians and helping them return to prime financing. We believe strongly in creating a laddered suite of products, which allow our customers to reduce their overall cost of borrowing and improve their credit profile. Our unsecured lending product, which features interest rates from 29.9%, is a key component of this commitment.
In the third quarter of this year, we will launch our secured lending product, which represents a natural and progressive extension of our customer offering. This upcoming product extension will allow qualifying customers to gain access to greater amounts of financing while reducing their cost of borrowing, ultimately propelling them on a path to a better financial future. This strategy is the right thing for the consumer, but it is also the right thing for our company. Our secured lending product will be offered to qualifying borrowers who own and reside within their own home and are looking for a lower-cost form of financing. Loan sizes will range from CAD 15,000-CAD 25,000, with rates from 19.9% and terms up to 10 years. All loans will require periodic installment payments of both principal and interest.
Eligibility for the secured lending product will be consistent with our existing methodology that incorporates a custom credit score using our proprietary scoring algorithms, as well as an assessment of the customer's ability to afford and repay the loan. Lending decisions will therefore be made based on the creditworthiness of the borrower, while the secured nature of the product will result in lower loss rates, helping us to reduce the interest rate charged to the consumer. The secondary consideration will involve a prudent assessment of the borrower's level of equity in their residence, essentially establishing a ceiling on the amount the customer is able to borrow. Both of these factors will be considered, ensuring our prudent management of the customer's ability to repay at a time of rising interest rates and moderating growth in property values.
We will be launching this product across Canada in a staged rollout beginning in September. As with all of our previous expansions into new markets and products, our intention is to manage this latest extension of lending activity by monitoring and evaluating the impacts on customer behavior in advance of supporting this product with a robust marketing investment in the new year. We believe that this product will attract a much larger pool of potential borrowers, and our marketing message and media buy will be adapted in 2018 to reach this expanded customer segment. The initiatives that we have launched today have exceeded our expectations, delivering record levels of growth in the second quarter. We remain confident in our ability to achieve our stated 2017 targets.
Given the growth of our loan book to date, as well as the strength of our launch in Quebec, we are confident that we will reach the upper end of our guided range for the closing loan book of CAD 475 million-CAD 500 million by year's end. So in conclusion, we're pleased with our financial results and the achievements we have made on all the strategic initiatives during the quarter. We expanded our distribution into Quebec, and we broadened our suite of products with lower-rate loans, which aligns to our values and commitment to help our customers take control of their financial future and get back to prime financing.
Our continued investments in risk management and collections is delivering lower delinquencies and charge-off rates. Our business is performing well, and we are successfully executing against the strategic plan. We have set ambitious but achievable goals, and we're delivering on those goals. 2017 will be another record year for goeasy, and I look forward to updating you further on our progress in the coming months. With our formal comments complete, we'll now open it up for questions.
Ladies and gentlemen, if you'd like to ask a question at this time, please press the star, then the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, you may do so by pressing the pound key. Again, if you'd like to ask a question at this time, that's star, then one. Our first question comes from the line of Jeff Fenwick with Cormark Securities.
Hi, good morning, everybody. I just wanted to start my questions with the rollout in Quebec. I guess the thing that caught me by surprise in the quarter was the size of the portfolio there by the end at CAD 7 million. So maybe you could just give us a little bit of color around where the flows came in through. Obviously, you really only opened the one location, so I'm assuming there's a big contribution from online volumes and any color you could offer there.
Sure. Jeff, it's Jason Mullins. So, yeah, to your point, when we launched there, because we also launched online, that allowed us to still offer the product to the entire Quebec market, even though we only had one retail location at the time. Now we have the three. And then similar with our strategy for distribution in the rest of the country, when we can't service an individual consumer with a branch in their local community, we're able to service those loans from our call center here. And then as we open new locations, more of that business will route away from the call center and into the local branch in the consumer's community. So, we've been really happy with what we've seen there.
As we've mentioned in the past, we know there is a supply shortage of credit for this particular target consumer, and consumers have been very responsive to the digital advertising we've put in market, so it's performed very well, and looks like in the long run, it should perform at or over index its population contribution in the long term.
I guess I understand there's a bit of a balancing act there, too. You typically, as you mentioned, try to drive customers for at least the final sign-off into one of your physical locations, and the ones that don't maybe have a slightly higher loss experience for you. So you're kind of happy with that dynamic for now to balance that larger proportion that are coming, I presume, entirely online?
... Yeah, in this particular instance, I think we may have mentioned in the past, because we're also generating a slightly lower yield with the lower interest rate offered in Quebec, we intentionally raised our credit floor for the loans we issue there by a fairly meaningful degree. And that was really intended to just give us comfort around as we build the book there so quickly that the loss rate there will perform at or below the portfolio average, and therefore help contribute to loss rate and performance as opposed to become a strain.
Okay. And then moving on to the launch of the secured lending product. David, you gave us a little color there in your comments. Just around the rollout here. So the idea to test this product out of certain stores or certain regions before you begin to push more meaningfully across the country, is that how it's gonna work?
Yeah. We've basically got a couple levers we'll use to stage the rollout appropriately. So the first one is there'll be a provincial level rollout strategy. So we'll start in September with three provinces. We'll then add some additional provinces in the following months, and then probably have all of the provinces rolled out nationally by early 2018. So that'll be one way of managing it. The second way will be no different than when we went into risk-adjusted rates. We'll use our credit tolerance levels to manage the flow-through and the risk, starting slightly more conservative, and then as we get more comfortable with seeing the consumer response, to be able to manage it from there forward.
Okay, that's great. And then I guess in the context of all of that, I mean, this quarter had some higher ad spending as you began to push on the marketing side of things. What should we be thinking in terms of that going forward? I would imagine with the new product launch like that, you're gonna follow it up or accompany it with some higher spending there again.
Yeah. So Jeff, we as we said, for the whole year, marketing would increase from approximately 4% in 2016 to just over 5% on average in 2017. Q2, the spend was around 6% of revenue. Q3, we're forecasting 4%, and Q4, we're forecasting 5.5%. So Q4, you'll see some of that extra spend to support these initiatives at that time. So overall, year- on- year, you've got about a 1% increase in total spend for the full year.
Okay, that's all I had for now. Thank you.
Thanks, Jeff.
Our next question comes from Stephen MacLeod with BMO Capital Markets.
Thank you. Good morning.
Hi, Stephen.
Morning. I just wanted to follow up on the ad spend, just specifically. That's the incremental ad spend is built into your margin expectations for 2017, is that, is that correct?
That's correct.
Yeah, that's right.
Okay, great. And then can you talk a little bit about where you're seeing the biggest return on the incremental ad spend and sort of how you expect that to move through the year and I guess, and then heading into calendar 2018 ?
So, like all TV media, it's always hard to attribute the exact return on investment. But if you look at one area that we focused on this year, which was digital and putting more paid search online, if you look at what the application flow has done for funded loans in Q2, it's up around 53% year- on- year. So with that one area, which has had an increase in spend, we can clearly align that growth to the spend increase that we put in the quarter. So, that would be one example. And then TV, you have seen us use more TV product in the quarter. There'll be a bit of a break from that in Q3, but you'll see more of it back in Q4 again.
Okay. Okay, that's great. And then can you talk a little bit about your loan book growth expectations for the back half of the year? I mean, I know you talked about being at the high end of the range for the full year, but do you expect to see it mostly coming from existing products, or do you sort of see it accelerating into Q4 when you have more traction around your secured loan product?
Yeah. So, we plan for a fairly conservative level of growth of the secured loan in the 2017 period, particularly because we're getting it off the ground in a staged rollout so late in the year. Also, as I mentioned, we'll be somewhat managing the throughput. So the majority of the growth in the back half of the year will still be from our existing unsecured product. We will continue to see, as always mentioned in the past, a slow migration towards the lower risk-adjusted products. That trend should continue in the back half of the year, but the majority of the growth comes from the core unsecured product.
Okay, great. And, is it pretty evenly split between Q3 and Q4? Do you see a higher proportion in Q4, I guess, historically?
Higher proportion in Q4. If you were to look at the kind of Q3, Q4, loan growth, trends seasonally in the past, we would expect this period to be similar in terms of the mix between the two.
Yeah. Okay. Okay, and then just putting it all together, when you think about, you know, incremental ad spend and, yeah, I guess that's really the key incremental OpEx number. Do you kind of expect that you'll be closer to the low end of your 2017 range in terms of easyfinancial margins?
No, the back half of the year is probably in the 35%-40% range. I think we had given a full- year guidance of 35%-37%, if I recall, so we're gonna be probably in the mid to high end of that range for the full year.
Okay. Okay, that's great. And then just one more for Steve. I was wondering if you could provide a little bit of color around what you expect for the tax rate in 2017 and 2018 ?
Yeah, it's... You know, we had some noise earlier on, given the provision we made for the U.S. receivables that increased the tax rate Q1. But, you know, removing that-
... There's not a lot of variable in the tax rate, it's about 27.5%.
Okay. That's great. Thank you very much.
As a reminder, ladies and gentlemen, if you'd like to ask a question at this time, that's star, then one. Our next question comes from the line of Brenna Phelan with Raymond James.
Good morning, guys.
Morning.
So I had a quick question on there was a consultation paper published by the government a few weeks ago regarding alternative financial services, so consumer installment loans are under the matters for further consideration, but two things of potential impact. They're suggesting prohibition of making contact to solicit refinancing, so I was just wondering if you could talk about the proportion of customers that refinance and extend their easyfinancial loans. Do you guys generally reach out to them, or are they reaching out to you? And are you in contact with the government agencies that are proposing these? Do you have any color on sort of what the next steps are with this regulation?
Sure, I can comment on that. So, just to answer your first question, this past period is similar to the last number of years. About 50% of our originations are to brand-new customers, and 50% are to existing customers that are reapplying for credit. The majority of those come from those customers reaching out to us. They actively apply either by walking into a location to apply or applying online. In respect to your second part of your question, so we're engaged in the process now. What's been said is that there is a consultation paper that we're working on responding to today.
There is a further consultation that they expect to do in the fall of this year, and then they've indicated that if they were to implement some regulation around installment lending, it would come into effect in 2019 . So at this point, it's very early, and they really are just looking for feedback and information. There's really no real outlook on if or how it'll impact the business.
But we're definitely actively engaged in the process. We have done so in the past. In 2014 , as an example, there was some regulation changes in the payday loan space that we worked with the Ontario government to help craft. So we'll continue to play an active role in that capacity, but there's no real indication of what the impact would be, if any, yet.
Okay, so is this something you would work with, CitiFinancial, or the former CitiFinancial? Are you in discussions with them to come to sort of an industry response on what you think is appropriate?
No, I mean, so we are a part of the Canadian Lenders Association, so we will prudently associate with the other lenders in the space to understand how they view it and how they intend to respond, and where appropriate, align our responses for continuity, but generally speaking, we've been able to, you know, directly provide those consultation papers back to the ministry, and in the past, they've been very responsive to working with us and responding to questions and collaborating, so you know, we intend that we'll be able to do that in this instance, going forward as well.
Okay, great. Thank you. And then just back to the secured lending product. So, lower rate, can you give sort of an estimate of what you would think charge-offs would trend at in the secured portfolio?
Yeah, we're still evaluating the product. We know that charge-off rates will be significantly lower than we have today, given the higher creditworthiness of the customers and the inherent security in the real estate. We haven't come up with what we believe to be the charge-off rates yet. We've got to get some experience with the product. We have modeled those. We've got our own expectations-
Yeah.
but it's not something we've shared publicly yet.
Okay, and potentially a positive, though, for IFRS 9, if you're a longer duration loan, only providing for the first year of projected charge-offs. Do you see that being a favorable, a favorable impact overall?
Yeah, we've come up... You know, we've said that IFRS 9 is going to increase the provision we have to maintain for future charge-offs. Offsetting some of the negative for that is, as we introduced lower rate, lower risk products, that's inherently gonna bring our charge-offs down, which will result in a reduction of the required provision under IFRS 9. So there will be an offset of that, both because of the secured lending and also our risk-adjusted rate loans.
Okay, very helpful. And then last one. Salaries and benefits increased by CAD 1.5 million in the quarter? No, almost CAD 2 million. Is that? Should we expect that to continue or trend higher? Are you bringing on more staff for these new product rollouts?
It's a combination of two things. It's bringing on new staff to support the role, development and roll out of the new products, but it's also a function of opening new stores and increasing the loan book at the stores we do have. You know, as we increase the portfolios in the stores, we add staff. So, it goes in lockstep with the growth of the loan book.
So we should expect that to-
Not, not all of it. Some of it was higher bonus payments at the store level. So with nearly 400 points of distribution between easyfinancial and easyhome-
Okay.
- you, we had a better performance in the quarter. The loan book was better than budget, and some of that meant slightly higher payouts to the staff. As we calibrate those targets in the third and fourth quarter, I think you'll see the level of that come down, and you'll see some of that normalize slightly in the later periods.
Sorry, you said higher benefits to some of the staff in the store?
No, as the bonus pay has been higher-
Oh, the bonus.
- in Q2 because of performance against target, as we recalibrate those targets, that will have the impact of decreasing the value of some of the bonus payouts in Q3 and Q4.
Okay, so fair to say it would still increase on an absolute basis, but maybe moderate?
Yeah, it's gonna continue on an absolute basis just because of the size of the business and the additional-
Yeah.
hiring as the business continues to grow, but not at the same rate you saw in Q2.
Okay. Wonderful. Thanks very much.
Thank you.
I'm not showing any further questions in queue at this time. I'd like to turn the call back to Mr. Ingram for any closing remarks.
Thank you, operators. There's no further questions. Once again, we wish to thank everyone and their participation for the call and their interest in the company, and we look forward to updating you in Q3 in November. Thank you.
Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program, and you may now disconnect. Everyone, have a good night.