Propel Holdings Inc. Reports Record Quarterly Results and Announces Dividend Increase

TORONTO, Aug. 7, 2024 /CNW/ - Propel Holdings Inc. ("Propel" or the "Company") (TSX: PRL), the fintech facilitating access to credit for underserved consumers, today reported record financial results for the three months ended June 30, 2024 ("Q2 2024"). Propel also announced that its Board of Directors has approved a further increase to its dividend from C$0.52 to C$0.56 per share on an annualized basis, effective Q3 2024. This represents an increase of 8% and the Company's third dividend increase in 2024 and fifth dividend increase since the beginning of 2023. All amounts are expressed in U.S. dollars unless otherwise stated.

Financial and Operational Highlights for Q2 2024 (Shown in U.S. Dollars)

Comparable metrics relative to Q2 2023, respectively

• Revenue: increased by 49% to $106.8 million in Q2 2024, and increased by 48% to $203.3 million for year-to-date 2024, representing record performance for both periods
• Adjusted EBITDA¹: increased by 67% to $30.4 million in Q2 2024, and increased by 70% to $59.9 million for year-to-date 2024, representing record performance for both periods
• Net Income: increased by 95% to $11.1 million in Q2 2024, and increased by 85% to $24.2 million for year-to-date 2024, representing record performance for a six-month period ending Q2
• Adjusted Net Income¹: increased by 82% to $15.6 million in Q2 2024, and increased by 83% to $31.0 million for year-to-date 2024, representing record performance for both periods
• Diluted EPS²: increased by 93% to $0.30 (C$0.41) in Q2 2024, and increased by 83% to $0.65 (C$0.89) for year-to-date 2024, representing record performance for a six-month period ending Q2
• Adjusted Diluted EPS^1,2: increased by 80% to $0.42 (C$0.57) in Q2 2024, and increased by 81% to $0.83 (C$1.13) for year-to-date 2024, representing record performance for both periods
• Return on Equity³: increased on an annualized basis to 38% in Q2 2024 compared to 26% in Q2 2023, and increased to 44% for year-to-date 2024 compared to 30% for fiscal 2023
• Adjusted Return on Equity¹: increased on an annualized basis to 54% in Q2 2024 compared to 39% in Q2 2023, and increased to 56% for year-to-date 2024 compared to 39% for fiscal 2023
• Loans and Advances Receivable: increased by 41% in Q2 2024 to $305.2 million, a record ending balance
• Ending Combined Loan and Advance Balances¹: increased by 44% in Q2 2024 to $392.2 million, a record ending balance
• Dividend: paid a Q2 2024 dividend of C$0.13 per common share on June 5, 2024, representing an 8% increase to our Q1 2024 dividend

Management Commentary

"Building on an incredibly strong Q1, we are proud to deliver another quarter of record results including record Total Originations Funded¹, Revenue, Adjusted EBITDA¹, Adjusted Net Income¹ and ending CLAB¹. We also achieved a major milestone in exceeding $100 million in quarterly revenue for the first time.

This quarter we continued to observe record consumer demand that led to record Total Originations Funded¹, up 40% over Q2 of 2023. Furthermore, we and our Bank Partners originated a record number of new customers, even while maintaining a prudent approach to underwriting. The demand reflects the heightened need for credit from a growing segment of consumers who are underserved by traditional financial institutions. Backed by our AI-powered platform, we are able to serve this strong consumer demand and extend credit to more consumers, while delivering strong results.

At the halfway point in the year, we have never been stronger. Having recently upsized our CreditFresh facility by $80 million to $330 million, we are well capitalized to continue scaling our business, support our robust business development pipeline and fund the significant opportunities in front of us. There is still much more to come as we set out to become a global leader in building financial opportunity for underserved consumers," said Clive Kinross, Chief Executive Officer.

Discussion of Financial Results and Business Strategy

• Strong consumer demand led to record quarterly Total Originations Funded¹, Ending CLAB¹ and revenue
  • Propel achieved another record quarter and the first quarter with revenue in excess of $100 million in its history. While continuing to maintain a prudent underwriting posture, we and our Bank Partners facilitated record originations, driven by higher consumer demand than anticipated across the whole loan portfolio
  • Total Originations Funded¹ increased by 40% to a quarterly record of $144 million in Q2 2024 vs. Q2 2023, resulting in Ending CLAB¹ growing year-over-year by 44% to a record of $392 million
  • In addition, Annualized Revenue Yield¹ increased to 115% in Q2 2024 from 110% in Q2 2023. The increase was driven by a variety of factors, including a higher number of new customer originations compared to Q2 2023, as well as a greater proportion of new originations from higher yielding segments of the loan portfolio
  • The record Ending CLAB¹ and increased Annualized Revenue Yield¹ contributed to the 49% growth and record revenue in Q2 2024
• Propel's AI-powered technology continued to deliver strong credit performance, while expanding credit access to underserved consumers
  • Propel's AI-powered technology platform continues to be a significant differentiator in this economic environment allowing Propel to better evaluate consumers than traditional credit scores. As a result, Propel and our Bank Partners were able to capitalize on strong consumer demand and extend credit to more consumers, while continuing to drive strong credit performance across the loan portfolio
  • Provision for loan losses and other liabilities as a percentage of revenue decreased to 50% in Q2 2024 from 51% in Q2 2023 despite the record level of new customer originations
    • The provision for loan losses and other liabilities as a percentage of revenue in Q2 2024 represented the lowest percentage in a Q2 period since 2021, a period impacted by government support related to COVID-19
• Net income and Adjusted Net Income¹ increased due to overall growth, lower relative provisions, operating leverage and effective operating expense management
  • Net income increased to $11.1 million in Q2 2024, a 95% increase over Q2 2023, and Adjusted Net Income¹ increased to a quarterly record of $15.6 million in Q2 2024, an 82% increase over Q2 2023
  • Net income margin increased to 10% in Q2 2024 from 8% in Q2 2023 and Adjusted Net Income Margin¹ increased to 15% in Q2 2024 from 12% in Q2 2023. The margin expansion was driven by strong credit performance, operating leverage and effective cost management
• Lending-as-a-Service ("LaaS") growth continued, extending Propel's reach to more consumers
  • In Q2, we continued to optimize marketing channels and onboard new purchasers to support both the Pathward and CreditFresh LaaS programs
  • During the quarter we achieved record originations and revenue for LaaS. We are pleased by the performance and expect the LaaS program to continue to scale into a more significant business in 2025
• Fora achieved record quarterly originations and revenue and optimized underwriting in the lead up to 2025 regulatory change
  • Fora experienced strong growth and demand in Q2 2024 which led to record originations and revenue, with Fora's Ending CLAB¹ growing by 43% from Q1 2024
  • The Company continued to expand marketing and acquisition strategies while optimizing and refining its AI models for the sub 35% APR market as well. Propel is also working on securing new partnerships and opportunities to further accelerate our growth. We remain incredibly confident in our ability to grow Fora into a leading online lender to the underserved consumer in Canada
• Upsized CreditFresh credit facility from $250 million to $330 million in July with additional lenders
  • The upsized credit facility will continue to enable the expansion of the Company's largest portfolio and support continued overall growth
  • The Company's Debt-to-Equity³ ratio was 2.0x at the end of Q2 2024, the same level as Q4 2023, despite the 44% growth in Ending CLAB¹ for the three month period ending June 30, 2024
• Propel's ongoing strong operating results and financial position supported the decision to increase the quarterly dividend by 8% to C$0.14 per common share in Q3 2024
  • Quarterly dividend represents a payout ratio of 22% on Q2 2024 Adjusted Net Income¹

Notes:
(1)	See "Non-IFRS Financial Measures and Industry Metrics" and "Reconciliation of Non-IFRS Financial Measures" below. See also "Key Components of Results of Operations" in the accompanying Q2 2024 MD&A for further details concerning the non-IFRS financial measures and industry metrics used in this press release including definitions and reconciliations to the relevant reported IFRS measure.
(2)	Results converted from USD to CAD assuming an exchange rate of USD/CAD $1.3683 and USD/CAD $1.3586 for the three-month and six-month periods ending June 30, 2024, respectively.
(3)	See "Supplemental Financial Measures" in the accompanying Q2 2024 MD&A for further details concerning certain financial metrics used in this press release including definitions.

Dividend Increase

Propel also announced today that its board of directors has approved an increase to its dividend that represents an increase from C$0.52 per common share to C$0.56 per common share on an annualized basis. This 8% increase is the Company's third dividend increase in 2024 and the fifth dividend increase since the beginning of 2023. The board declared a dividend of C$0.14 per common share, payable on September 5, 2024 to shareholders of record as of the close of business on August 16, 2024. The Company has designated this dividend as an eligible dividend within the meaning of the Income Tax Act (Canada).

Conference Call Details

The Company will be hosting a conference call and webcast tomorrow morning with a presentation by Clive Kinross, Chief Executive Officer, and Sheldon Saidakovsky, Chief Financial Officer.

Conference call details are as follows:

Date:	Thursday, August 8, 2024
Time:	8:30 a.m. EDT
Toll-free North America:	1-800-836-8184
Local Toronto:	1-289-819-1350
Webcast:	Click here
Replay:	1-888-660-6345 or 1-646-517-4150 (PIN: 29122#)

About Propel

Propel Holdings (TSX: PRL) is the fintech company building a new world of financial opportunity for consumers, partners, and investors. Propel's operating brands - Fora Credit, CreditFresh and MoneyKey - and our Lending-as-a-Service product line facilitate access to credit for consumers underserved by traditional financial institutions. Through its groundbreaking AI-driven platform, Propel evaluates customers in a more comprehensive way than traditional credit scores can. The result is better products and an expanded credit market for consumers while creating sustainable, profitable growth for Propel. Our revolutionary fintech platform has already helped consumers access over one million loans and lines of credit and over one billion dollars in credit. At Propel, we are here to change the way customers, partners and investors succeed together. Learn more at propelholdings.com

Non-IFRS Financial Measures and Industry Metrics

This press release makes reference to certain non-IFRS financial measures and industry metrics. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. Such measures include "Adjusted Diluted EPS", "Adjusted EBITDA", "Adjusted Net Income", "Adjusted Net Income Margin", "Adjusted Return on Equity", "EBITDA", "Ending CLAB", and "Total Originations Funded". This press release also includes references to industry metrics such as "Annualized Revenue Yield", "Return on Equity" and "Total Originations Funded" which are supplementary measures under applicable securities laws.

These non-IFRS financial measures and industry metrics are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We believe that securities analysts, investors and other interested parties frequently use non-IFRS financial measures and industry metrics in the evaluation of issuers. The Company's management also uses non-IFRS financial measures and industry metrics in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts, and to determine components of management and executive compensation. The key performance indicators used by the Company may be calculated in a manner different than similar key performance indicators used by other similar companies.

Definitions and reconciliations of non-IFRS financial measures to the relevant reported measures can be found in our accompanying MD&A available on SEDAR+. Such reconciliations can also be found in this press release under the heading "Reconciliation of Non-IFRS Financial Measures" below.

Forward-Looking Information

Certain statements made in this press release may constitute forward-looking information under applicable securities laws. These statements may relate to our dividend scheduled for September 5, 2024, the factors fueling our growth throughout 2024, our business development pipeline, our ability to serve underserved consumers in North America and globally. As the context requires, this may include certain targets as disclosed in the prospectus for our initial public offering, which are based on the factors and assumptions, and subject to the risks, as set out therein and herein. Often but not always, forward-looking statements can be identified by the use of forward-looking terminology such as "may", "will", "expect", "believe", "estimate", "plan", "could", "should", "would", "outlook", "forecast", "anticipate", "foresee", "continue" or the negative of these terms or variations of them or similar terminology.

Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the factors discussed in the "Risk Factors" section of the Company's annual information form dated March 12, 2024 for the year ended December 31, 2023 (the "AIF"). A copy of the AIF and the Company's other publicly filed documents can be accessed under the Company's profile on SEDAR+ at www.sedarplus.ca.

The Company cautions that the list of risk factors and uncertainties described in the AIF is not exhaustive and other factors could also adversely affect its results. Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such information. The forward-looking information contained in this press release represents our expectations as of the date of this press release (or as the date they are otherwise stated to be made), and are subject to change after such date. However, we disclaim any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

Selected Financial Information

	Three months ended June 30,		Six months ended June 30,
	2024	2023	2024	2023
(US$ other than percentages)
Revenue	106,750,700	71,688,456	203,254,306	137,305,788
Provision for loan losses and other liabilities	53,267,856	36,206,543	95,629,483	67,343,216
Operating expenses
Acquisition and data	13,108,205	9,387,011	24,605,094	16,283,848
Salaries, wages and benefits	9,103,189	7,489,202	18,499,911	14,653,417
General and administrative	2,829,590	1,787,901	5,305,007	4,113,577
Processing and technology	3,990,353	2,567,635	7,624,321	4,796,616
Total operating expenses	29,031,337	21,231,749	56,034,333	39,847,458
Operating income	24,451,507	14,250,164	51,590,490	30,115,114
Other (income) expenses
Interest and fees on credit facilities	7,563,988	5,210,245	14,668,815	10,066,778
Interest expense on lease liabilities	66,153	80,758	138,674	166,225
Amortization of internally developed software	1,009,277	814,771	1,959,060	1,600,660
Depreciation of property and equipment.	49,986	47,736	101,618	95,514
Amortization of right-of-use assets	190,756	162,451	379,440	324,163
Foreign exchange (gain) loss	153,514	(11,714)	227,725	10,918
Unrealized (gain) loss on derivative financial Instruments	84,031	(89,374)	620,340	(63,342)
Total other (income) expenses	9,117,705	6,214,873	18,095,672	12,200,916
Income before income tax	15,333,802	8,035,291	33,494,818	17,914,198
Income tax expense (recovery)
Current	7,508,225	3,861,377	13,757,700	5,746,751
Deferred	(3,298,002)	(1,531,184)	(4,508,314)	(952,829)
Net income for the period	11,123,579	5,705,098	24,245,432	13,120,276
Earnings per share ($USD):
Basic	0.32	0.17	0.71	0.38
Diluted	0.30	0.15	0.65	0.36
Earnings per share ($CAD)(1):
Basic	0.44	0.22	0.96	0.52
Diluted	0.41	0.21	0.89	0.48
Return on equity(2)	38 %	26 %	44 %	30 %
Dividends:
Dividends	3,269,355	2,553,447	6,300,162	4,955,800
Dividend per share	0.095	0.074	0.183	0.144

Notes:
(1)	Results converted from USD to CAD assuming an exchange rate of USD/CAD $1.3683 and USD/CAD $1.3586 for the three-month and six-month periods ending June 30, 2024, respectively, and assuming an exchange rate of USD/CAD $1.3428 and USD/CAD $1.3477 for the three-month and six-month periods ending June 30, 2023, respectively.
(2)	See "Supplemental Financial Measures" in the accompanying Q2 2024 MD&A for further details concerning certain financial metrics used in this press release including definitions.

Reconciliation of Non-IFRS Financial Measures

The following table provides a reconciliation of Propel's net income to EBITDA¹ and Adjusted EBITDA¹:

	Three months ended June 30,		Six months ended June 30,
	2024	2023	2024	2023
(US$ other than percentages)
Net Income	11,123,579	5,705,098	24,245,432	13,120,276
Interest and fees on credit facilities	7,563,988	5,210,245	14,668,815	10,066,778
Interest expense on lease liabilities	66,153	80,758	138,674	166,225
Amortization of internally developed software	1,009,277	814,771	1,959,060	1,600,660
Depreciation of property and equipment	49,986	47,736	101,618	95,514
Amortization of right-of-use assets	190,756	162,451	379,440	324,163
Income Tax Expense (Recovery)	4,210,223	2,330,193	9,249,386	4,793,923
EBITDA(1)	24,213,962	14,351,252	50,742,425	30,167,539
EBITDA(1) Margin	23 %	20 %	25 %	22 %
Provision for credit losses on current status accounts(2)	4,946,261	2,098,009	6,488,940	2,692,187
Provisions for CSO Guarantee liabilities and Bank Service Program liabilities	1,204,440	1,757,978	2,659,264	2,392,964
Adjusted EBITDA (1)	30,364,663	18,207,239	59,890,629	35,252,690
Adjusted EBITDA(1) Margin	28 %	25 %	29 %	26 %

Notes:
(1)	See "Non-IFRS Financial Measures and Industry Metrics".
(2)	Provision included for (i) loan losses on good standing current principal (Stage 1 - Performing) balances (see "Material Accounting Policies and Estimates - Loans and advances receivable" in the accompanying Q2 2024 MD&A).

The following table provides a reconciliation of Propel's Net Income to Adjusted Net Income¹, Adjusted Return on Equity¹ and Adjusted Net Income margin¹:

	Three months ended June 30,		Six months ended June 30,
	2024	2023	2024	2023
(US$ other than percentages)
Net Income	11,123,579	5,705,098	24,245,432	13,120,276
Provision for credit losses on current status accounts net of taxes(2)	3,635,502	1,573,506	4,769,371	2,019,141
Provisions for CSO Guarantee liabilities and Bank Service Program liabilities net of taxes(2)	885,263	1,318,484	1,954,559	1,794,723
Adjusted Net Income(1)	15,644,344	8,597,088	30,969,362	16,934,140
Multiplied by number of periods in year	x4	x4	x2	x2
Divided by average shareholders' equity for the period	116,095,875	88,965,442	111,379,419	86,670,016
Adjusted Return on Equity(1)	54 %	39 %	56 %	39 %
Adjusted Net Income Margin(1)	15 %	12 %	15 %	12 %

Notes:
(1)	See "Non-IFRS Financial Measures and Industry Metrics".
(2)	Each item is adjusted for after-tax impact, at an effective tax rate of 26.5% for the three and six months ended June 30, 2024 and comparative 2023 periods.

The following table provides a reconciliation of Propel's Ending CLAB¹ to loans and advances receivable:

	As at June 30,		As at Dec 31,
(US$ other than percentages)	2024	2023	2023
Ending Combined Loan and Advance balances1	392,151,276	273,195,030	337,282,804
Less: Loan and Advance balances owned by third party lenders pursuant to CSO program	(4,448,928)	(3,096,208)	(3,779,004)
Less: Loan and Advance balances owned by a NBFI pursuant to the MoneyKey Bank Service program	(46,127,970)	(27,997,288)	(36,736,938)
Loan and Advance owned by the Company	341,574,378	242,101,534	296,766,862
Less: Allowance for Credit Losses	(89,578,324)	(50,520,769)	(79,093,294)
Add: Fees and interest receivable	43,501,224	20,633,383	36,063,899
Add: Acquisition transaction costs	9,673,916	3,471,441	5,575,769
Loans and advances receivable	305,171,194	215,685,589	259,313,236

Note:

(1) See "Non-IFRS Financial Measures and Industry Metrics".

SOURCE Propel Holdings Inc.

For further information, please contact: Lindsay Finneran-Gingras, Vice President, Communications, [email protected], Devon Ghelani, Senior Director, Capital Markets and Investor Relations, [email protected]