PRL Propel Holdings Inc

TORONTO, May 8, 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 March 31, 2024 ("Q1 2024"). Propel also announced that its Board of Directors has approved a further increase to its dividend from C$0.48 to C$0.52 per share on an annualized basis, effective Q2 2024. This represents an increase of 8% and the Company's fourth dividend increase since the beginning of 2023. All amounts are expressed in U.S. dollars unless otherwise stated.

Financial and Operational Highlights for Q1 2024 (Shown in U.S. Dollars)

Comparable metrics relative to Q1 2023, respectively

• Revenue: increased by 47% to $96.5 million in Q1 2024, representing record quarterly performance
• Adjusted EBITDA¹: increased by 73% to $29.5 million in Q1 2024, representing record quarterly performance
• Net Income: increased by 77% to $13.1 million in Q1 2024, representing record quarterly performance
• Adjusted Net Income¹: increased by 84% to $15.3 million in Q1 2024, representing record quarterly performance
• Diluted EPS²: increased by 74% to $0.35 (C$0.48) in Q1 2024, representing record quarterly performance
• Adjusted Diluted EPS^{1, 2}: increased by 81% to $0.41 (C$0.56) in Q1 2024, representing record quarterly performance
• Return on Equity¹: increased on an annualized basis to 49% in Q1 2024 compared to 35% in Q1 2023
• Adjusted Return on Equity^1,2: increased on an annualized basis to 57% in Q1 2024 compared to 40% in Q1 2023
• Loans and Advances Receivable: increased by 39% in Q1 2024 to $271.2 million, a record ending balance
• Ending Combined Loan and Advance Balances¹: increased by 41% in Q1 2024 to $349.2 million, a record ending balance
• Dividend: paid a Q1 2024 dividend of C$0.12 per common share on March 5, 2024, representing a 14% increase to our Q4 2023 dividend

Management Commentary

"We have had an exceptionally strong start to the year and are proud to deliver another quarter of record results including record Revenue, Adjusted EBITDA¹, Net Income, Adjusted Net Income¹ and Ending CLAB¹.

This quarter was marked by strong credit performance across the loan portfolio. At the same time, we and our Bank Partners observed very strong demand and originated record Q1 volume, in what is also typically our slowest demand quarter. The strong start to the year reflects both the economic health and resilience of the underserved consumer, particularly in the United States, and our industry-leading AI technology platform that continues to bring more consumers – overlooked by traditional financial institutions – into the credit market, while driving strong credit performance. We expect these factors will continue to fuel our growth throughout 2024.

Looking ahead, we remain confident for the remainder of the year. We have a robust business development pipeline, a passionate and focused team, industry-leading technology and we are well capitalized. There are 70 million underserved consumers in North America and hundreds of millions more globally and Propel is exceptionally well positioned to serve them. There is much more to come," said Clive Kinross, Chief Executive Officer.

Discussion of Financial Results and Business Strategy

• Strong consumer demand led to record Q1 Total Originations Funded¹, and quarterly record ending CLAB¹ and revenue

• • Propel achieved its strongest first quarter in history. While Q1 typically experiences softer demand due to the tax season, this year benefited from strong demand carrying over from the holiday season in Q4 and from the continued tightening across the credit spectrum
  • Total Originations Funded¹ increased by 48% to a Q1 record of $116.8 million in Q1 2024 vs. Q1 2023, resulting in Ending CLAB¹ growing year-over-year by 41% to a record of $349.2 million
  • In addition, Annualized Revenue Yield¹ increased to 112% in Q1 2024 from 106% in Q1 2023. The increase was driven by a variety of factors, including a higher proportion of new customer originations compared to Q1 2023, as well as a greater proportion of the new originations targeted towards higher yielding segments of the loan portfolio
  • The record Ending CLAB¹ and increased Annualized Revenue Yield¹ contributed to the 47% growth and record revenue in Q1 2024

• Propel's industry-leading AI technology and continued consumer resilience drove strong credit performance while enabling Propel to expand credit access

• • Our AI-powered technology platform supported the record performance achieved in Q1. As a result of our technology, we and our Bank Partners were able to capitalize on strong consumer demand and extend credit to more consumers during the quarter, while still driving strong credit performance across the loan portfolio
    • Provision for loan losses and other liabilities as a percentage of revenue decreased to 44% in Q1 2024 from 47% in Q1 2023 despite the higher proportion of new customer originations
  • The provision for loan losses and other liabilities as a percentage of revenue in Q1 2024 represented the lowest quarter since Q2 2021, a period positively impacted by government support related to COVID-19
  • As a testament to the industry-leading AI, Propel Co-founder and Chief Risk Officer Dr. Jonathan Goler was recently recognized by the Globe and Mail's Report on Business as one of Canada's Best Executives in 2024 for his development of Propel's proprietary AI-powered technology platform

• Technology enhancements, operating leverage and increased automation help drive record net income and Adjusted Net Income¹

• • Net income increased to $13.1 million in Q1 2024, a 77% increase over Q1 2023, and Adjusted Net Income¹ increased to $15.3 million in Q1 2024, an 84% increase over Q1 2023, both representing records
  • Net income margin increased to 14% in Q1 2024 from 11% in Q1 2023 and Adjusted Net Income Margin¹ increased to 16% in Q1 2024 from 13% in Q1 2023. The margin expansion was driven by the inherent operating leverage in our business model and ongoing effective cost management
    
    
• Fora continued to gain market share and launched new insurance product offer

• • Fora experienced strong growth and demand in Q1 which led to record originations and revenues. To drive ongoing growth and performance, we are continuing to expand our marketing and acquisition strategies as well as optimizing and refining our AI models
  • Announced on April 9, 2024, Propel launched its first insurance product offer. Fora's Payment Protection Plan is a digital credit insurance product offered in partnership with Walnut Insurance and underwritten by Trans Global Insurance and Trans Global Life Insurance Company ("TGI"). The product also provides incremental fee revenue and some loss protection for Propel

• Lending-as-a-Service continues to gain momentum with additional program launched in Q1

• • To build a foundation for future growth of our business, Propel launched its first Lending-as-a-Service ("LaaS") partnership with Pathward in June 2023. This quarter we continued our momentum by originating more consumers, optimizing key marketing channels and onboarding new purchasers. We are proud of the progress we have made in this new part of our business
  • In Q1 2024 we also launched a LaaS partnership under our CreditFresh brand. This new LaaS partnership will allow us to provide access to credit to even more underserved consumers across the United States, while contributing to expanding revenues and margins
  • Propel continues to actively explore additional LaaS opportunities on both sides of the border

• Solid financial position and continued earnings growth, supports the continued expansion of existing programs and an increased dividend

• • The Company ended Q1 2024 with approximately $76 million of undrawn credit capacity on its various credit facilities with a Debt-to-Equity³ ratio of 1.9x
    • The Debt-to-Equity³ ratio decreased from 2.0x at the end of Q4 2023 despite the 41% growth in ending CLAB¹ for the three month period ending March 31, 2024
  • Propel's ongoing strong operating results and financial position supported the decision to increase the quarterly dividend by 8% to C$0.13 per common share in Q2 2024

Dividend Increase

Propel also announced today that its board of directors has approved an increase to its dividend that represents an increase from C$0.48 per common share to C$0.52 per common share on an annualized basis. This 8% increase is the Company's fourth dividend increase since the beginning of 2023. The board declared a dividend of C$0.13 per common share, payable on June 5, 2024 to shareholders of record as of the close of business on May 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:

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" and "Ending CLAB".  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 June 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

Reconciliation of Non-IFRS Financial Measures

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

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

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

SOURCE Propel Holdings Inc.