Propel Reports Record First Quarter Results and Announces Dividend Increase

Propel Holdings Inc. (“Propel” or the “Company”) (TSX: PRL), an innovative fintech company dedicated to credit inclusion, today reported record financial results for the three months ended March 31, 2023 (“Q1 2023”), a testament to the Company’s commitment to profitable growth. Propel also announced that its Board of Directors has approved an increase to the annual dividend from C$0.38 per share to C$0.40 per share effective Q2 2023. This represents an increase of 5.3% and the Company’s first dividend increase as a publicly traded company. All amounts are expressed in U.S. dollars unless otherwise stated.

Financial and Operational Highlights for Q1 2023

Comparable metrics relative to Q1 2022

• Loans and Advances Receivable: increased by 57% in Q1 2023 to $195.8 million, a record ending balance

• Ending Combined Loan and Advance Balances (“CLAB”)¹: increased by 57% in Q1 2023 to $248.1 million, a record ending balance

• Total Originations Funded¹: decreased by 12% to $79.0 million in Q1 2023

• Revenue: increased by 30% to $65.6 million in Q1 2023, representing record quarterly performance

• Adjusted EBITDA¹: increased by 75% to $17.0 million in Q1 2023, representing record quarterly performance

• Net Income: increased by 91% to $7.4 million in Q1 2023, representing record quarterly performance

• Adjusted Net Income¹: increased by 48% to $8.3 million in Q1 2023, representing record quarterly performance

• Cost of Debt Capital: average effective interest rate increased to 12.9% in Q1 2023 from 8.9% in the comparative period in 2022

• Dividend: Paid a Q1 2023 dividend of C$0.095 per share on March 7, 2023, representing a 5.8% dividend yield against Propel’s closing share price on May 9, 2023

Management Commentary

“We are proud to announce another quarter of record results. Propel delivered record quarterly revenue with 30% growth over last year, and record net income and Adjusted Net Income¹ with 91% and 48% year-over-year growth, respectively. This growth was achieved amidst a dynamic economic environment. Our expanding profitability is a result of disciplined cost control, our growing portfolio and prudent underwriting with our Bank Partners. Given our strong results, the confidence we have in our business, our track record of profitable growth and solid financial position, we have made the decision to increase our dividend.

We also continue to make excellent progress in executing our strategic growth plan and diversifying our business. We are continuing to grow across Canada; we are very close to launching our lending as a service (LaaS) partnership with Pathward®, N.A.; and we are broadening our presence across the underserved consumer market while improving the credit quality of originations. Underpinning our progress and strong results are our AI and machine learning capabilities, best-in-class technology platform and our commitment to superior customer service.

Our management team is excited about our prospects for the remainder of the year and beyond. Consumers in our segment of the market continue to be resilient and continued real wage growth and low unemployment are driving strong credit performance. We have never, in the history of our company, been stronger or better positioned for growth and there is so much more to come,” said Clive Kinross, Chief Executive Officer.

Discussion of Financial Results and Business Strategy

• Macroeconomic environment remains dynamic, but key economic indicators for our consumers remain robust
  • Consumer resiliency supported by continued real wage growth and a robust labour market remaining at a 50 year low for unemployment, drove strong credit performance across the loan portfolio

  • Propel and its Bank Partners experienced a more normalized tax season for the first time since the onset of the Covid-19 pandemic, contributing to lower loan originations as compared to last year

• Loans and advances receivable grew by 57% driven by industry trends and expansion of our product offerings
  • Loans and advances receivable increased by 57% to a record $195.8 million as at March 31, 2023, compared to $124.8 million as at March 31, 2022

  • The growth in the balance was driven by: 1) the expansion of variable pricing and graduation capabilities; 2) the growth of the Bank Programs; 3) the expansion of originations through growth into Canada and with key marketing channels; and 4) at a macro level, strong consumer demand for credit driven by several factors including the continuing industry-wide transition from brick-and-mortar to online lending, and tightening across the credit supply chain, which has increased the quality and volume of applications on Propel’s platform

• Revenue increased by 30% to reach new Q1 record
  • Revenue increased by 30% to a record of $65.6 million in Q1 2023, compared to $50.5 million in Q1 2022. This growth was the result of the 57% growth in CLAB¹, offset by a decrease in Annualized Revenue Yield¹ to 106% in Q1 2023 from 138% in Q1 2022

  • The decrease in Annualized Revenue Yield¹ is a result of a reduction in the cost of credit across the portfolio as we and our Bank Partners continued expanding the product offerings to a stronger credit profile consumer segment

• Net income and Adjusted Net Income¹ increased due to growth and effective cost management
  • Net income increased by 91% to $7.4 million in Q1 2023, compared to $3.9 million in Q1 2022 and Adjusted Net Income¹ increased by 48% to $8.3 million in Q1 2023, compared to $5.6 million in Q1 2022

  • The growth in net income and Adjusted Net Income¹ is primarily a result of the overall growth of the business and ongoing effective and prudent cost management and operating leverage. The disciplined expense management and inherent operating leverage in the business resulted in the net income margin increasing from 8% in Q1 2022 to 11% in Q1 2023, and the Adjusted Net Income¹ margin increasing from 11% in Q1 2022 to 13% in Q1 2023.

• Delivering on our growth strategy through diversification
  • We continue to grow Fora across Ontario, Alberta and British Columbia and are excited to announce the launch in Saskatchewan on May 10, 2023. The Canadian market continues to perform in line with our expectations and we are seeing strong demand and stable credit performance. Despite recently proposed regulatory changes, we remain confident in our ability to adapt and for our Canadian brand to develop into a significant business over the long term.

  • Our partnership with Pathward, through which we will be providing white labelled lending-as-a-service functionality for their sub-36% APR consumer lending product, is expected to launch imminently. In addition, we continue to evaluate other new partnerships to leverage our expertise, platform capabilities and track record in online consumer lending.

Increase to Annual Dividend and Declaration of Q2 2023 Dividend

Propel also announced today that its board of directors has approved an increase to the annual dividend from C$0.38 per common share to C$0.40 per common share, representing an increase of 5.3% and the Company’s first dividend increase as a publicly traded company. The board declared a dividend of C$0.10 per common share, payable on June 7, 2023 to shareholders of record as of the close of business on May 17, 2023. 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 (TSX: PRL) is an innovative financial technology (“fintech”) company, committed to credit inclusion by facilitating fair, fast and transparent access to credit through its proprietary, industry-leading online lending platform. Understanding the challenge faced by millions of people without adequate access to credit, Propel, through its operating brands, is dedicated to bringing best-in-class credit solutions to consumers in Canada and the United States. For more than a decade, Propel has leveraged its expertise in consumer lending, its robust capabilities in artificial intelligence and underwriting, and its steadfast dedication to a superior customer experience to facilitate over one million loans and lines of credit to consumers in need. For more information, please visit propelholdings.com.

About Pathward®

Pathward®, N.A., a national bank, is a subsidiary of Pathward Financial, Inc. (Nasdaq: CASH). Pathward is a U.S.-based financial empowerment company driven by its purpose to power financial inclusion. Pathward strives to increase financial availability, choice and opportunity across our Banking as a Service and Commercial Finance business lines. The strategic business lines provide end-to-end support to individuals and businesses. Learn more at Pathward.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 EBITDA”, “Adjusted Net Income”, “EBITDA” and “Ending CLAB”. This press release also includes references to industry metrics such as “Annualized Revenue Yield” 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 ability to profitably grow our business and facilitate access to credit to more and more underserved consumers, the Company’s dividend policy, our ability to achieve our strategic growth plans and diversify our business, the growth of Fora and its launch in Saskatchewan and the launch of our LaaS partnership with Pathward. 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 22, 2023 for the year ended December 31, 2022 (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.sedar.com.

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:

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 “Critical Account Policies and Estimates — Loans and advances receivable” in the accompanying Q1 2023 MD&A).

The following table provides a reconciliation of Propel’s Net Income to Adjusted Net Income¹ and Adjusted Net Income margin¹:

1. See “Non-IFRS Financial Measures and Industry Metrics”.

2. Each item is adjusted for after-tax impact, at an effective tax rate of 25.0% for the three months ended March 31, 2023 and at an effective tax rate of 26.5% for the three months ended March 31, 2022.

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

1. See “Non-IFRS Financial Measures and Industry Metrics”.

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