Propel Reports Record Quarterly Results and Announces Dividend Increase

TORONTO, Nov. 6, 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 September 30, 2024 ("Q3 2024"). Propel also announced that its Board of Directors has approved a further increase to its dividend from C$0.56 to C$0.60 per share on an annualized basis, effective Q4 2024. This represents an increase of 7% and the Company's fourth dividend increase in 2024 and sixth dividend increase since the beginning of 2023. All amounts are expressed in U.S. dollars unless otherwise stated.

Financial and Operational Highlights for Q3 2024 (Shown in U.S. Dollars)
Comparable metrics relative to Q3 2023 and year-to-date Q3 2023, respectively

• Revenue: increased by 41% to $117.2 million in Q3 2024, and increased by 45% to $320.4 million for year-to-date 2024, representing record performance for both periods
• Adjusted EBITDA¹: increased by 56% to $29.0 million in Q3 2024, and increased by 65% to $88.9 million for year-to-date 2024, representing record performance for a nine-month period ending Q3
• Net Income²: increased by 70% to $10.5 million (or $12.4 million when excluding one-time transaction costs related to the Acquisition of QuidMarket) in Q3 2024, and increased by 80% to $34.8 million (or $36.6 million when excluding one-time transaction costs related to the Acquisition of QuidMarket) for year-to-date 2024, representing record performance for a nine-month period ending Q3
• Adjusted Net Income¹: increased by 66% to $14.1 million in Q3 2024, and increased by 77% to $45.0 million for year-to-date 2024, representing record performance for a nine-month period ending Q3
• Diluted EPS^2,3: increased by 68% to $0.28 (C$0.39) (or $0.33 (C$0.45) when excluding one-time transaction costs related to the Acquisition of QuidMarket) in Q3 2024, and increased by 78% to $0.93 (C$1.27) (or $0.98 (C$1.34) when excluding one-time transaction costs related to the Acquisition of QuidMarket) for year-to-date 2024, representing record performance for a nine-month period ending Q3
• Adjusted Diluted EPS^1,3: increased by 64% to $0.38 (C$0.51) in Q3 2024, and increased by 75% to $1.21 (C$1.65) for year-to-date 2024, representing record performance for a nine-month period ending Q3
• Return on Equity^2,4: increased on an annualized basis to 34% (or 40% when excluding one-time transaction costs related to the Acquisition of QuidMarket) in Q3 2024 compared to 27% in Q3 2023, and increased to 40% (or 42% when excluding one-time transaction costs related to the Acquisition of QuidMarket) for year-to-date 2024 compared to 29% for fiscal 2023
• Adjusted Return on Equity¹: increased on an annualized basis to 45% in Q3 2024 compared to 37% in Q3 2023, and increased to 52% for year-to-date 2024 compared to 38% for fiscal 2023
• Loans and Advances Receivable: increased by 41% in Q3 2024 to $333.0 million, a record ending balance
• Ending Combined Loan and Advance Balances¹: increased by 44% in Q3 2024 to $432.3 million, a record ending balance
• Dividend: paid a Q3 2024 dividend of C$0.14 per common share on September 5, 2024, representing an 8% increase to our Q2 2024 dividend

Management Commentary

"Building on a record first half of fiscal year 2024, we are proud to deliver another quarter of record results in Q3 including record Total Originations Funded¹, Revenue and ending CLAB¹.

In our existing business, we experienced strong consumer demand, particularly from existing and return customers, that led to record Total Originations Funded¹, up 36% over Q3 2023. Supported by our AI-powered technology platform, we and our Bank Partners delivered strong credit performance in line with seasonal expectations, while significantly growing our overall loan portfolio.

On our path to become a global leader, we made an important step forward with our pending acquisition of QuidMarket, a leading fintech lender in the UK, for $71 million to be financed with a concurrent C$115 million bought deal equity offering. With more than 20 million underserved consumers, the UK market presents a significant growth opportunity. We also announced a new embedded lending partnership model with KOHO, to further our Canadian growth.

Propel is at an exciting inflection point. When we went public just over three years ago, we outlined three growth objectives: geographic expansion, serving more consumers across the credit spectrum and strategic acquisitions. We have delivered on all three while also growing our last twelve month revenues organically at a 55% CAGR for the past three years. There is still much more to come as we aim to become a global leader," said Clive Kinross, Chief Executive Officer.

Discussion of Financial Results and Business Strategy

• Ongoing strong consumer demand led to record quarterly Total Originations Funded¹, Ending CLAB¹ and Revenue
  • While continuing to maintain a prudent underwriting posture, we and our Bank Partners facilitated record originations driven by higher consumer demand particularly from existing and returning consumers, which represented a record for the quarter
  • Total Originations Funded¹ increased by 36% to a quarterly record of $150 million in Q3 2024 vs. Q3 2023, resulting in Ending CLAB¹ growing year-over-year by 44% to a record of $432 million
  • Annualized Revenue Yield¹ decreased to 114% in Q3 2024 from 116% in Q3 2023. The decrease was driven by a variety of factors including: i) the record originations from existing and returning customers; ii) the continued aging of the loan portfolio; and iii) the ongoing expansion of Fora
  • The record Ending CLAB¹ drove the 41% growth and record revenue in Q3 2024 of $117 million
• Propel's AI-powered technology continued to deliver strong credit performance in Q3
  • We 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, in line with seasonal expectations
  • Given the strong demand during Q3, we and our Bank Partners proactively originated relatively more volume from returning and existing customers with established repayment histories
  • Provision for loan losses and other liabilities as a percentage of revenue remained the same at 52% in Q3 2024 from 52% in Q3 2023
    • Net Charge-Offs as a Percentage of CLAB¹, on the other hand, decreased to 11% in Q3 2024 from 12% in Q3 2023 driven by the ongoing strong credit performance across the loan portfolio over the past year
• Overall growth, operating leverage and effective cost management contributed to the year-over-year increase in Net income and Adjusted Net Income¹  
  • Net income was $10.5 million in Q3 2024, a 70% increase over Q3 2023, and Adjusted Net Income¹ was  $14.1 million in Q3 2024, a 66% increase over Q3 2023
  • Net income margin increased to 9% in Q3 2024 from 7% in Q3 2023 and Adjusted Net Income Margin¹ increased to 12% in Q3 2024 from 10% in Q3 2023. The margin expansion was driven by operating leverage and effective cost management
    • Net income in Q3 2024 was adversely impacted by one-time transaction expenses of $2.5 million (pre-tax) associated with the acquisition of QuidMarket. By excluding these one-time transaction expenses, Propel's net income and net income margin for Q3 2024 would have been $12.4 million and 11%, respectively
• Propel accelerated its global growth strategy with the acquisition of QuidMarket for $71 million
  • The UK market has an estimated 20 million underserved consumers and provides a foothold in the large underserved European market for Propel
  • Transaction to be financed through C$115 million bought deal equity offering which included exercise of 15% over-allotment option by syndicate of underwriters
  • The acquisition is expected to be immediately accretive to Propel's 2024 and 2025 Adjusted Diluted EPS¹, on a pro forma basis, and excluding transaction costs and prior to any potential synergies
  • Moving forward, we expect the growth at QuidMarket to be further enhanced by leveraging Propel's AI-powered technology, financial and operational expertise and capital resources
  • The acquisition is expected to close in either Q4 2024 or in Q1 2025, subject to the satisfaction of customary closing conditions, including the receipt of applicable regulatory approvals, including the approval of the Financial Conduct Authority
• Fora launched an embedded lending partnership with KOHO, furthering growth in the Canadian market and pioneering a new partnership model
  • On September 20, Propel and KOHO announced an exclusive embedded lending partnership, with Fora to provide the technology, underwriting, servicing and funding of KOHO loans, directly through the KOHO app. The partnership officially launched to select KOHO customers on October 30
  • Embedded lending is a new partnership model for Propel and the Company is working to secure additional partners across its markets
• Lending-as-a-Service ("LaaS") growth continued with increased commitments from purchasers
  • The Company is pleased by the performance and expects the LaaS program to continue to be a significant driver of growth going forward
• Propel's record growth earned the Company recognition on the 2024 Deloitte Technology Fast 50 ranking in Canada
  • Propel also ranked on Globe and Mail's Top Growing Companies in September, placing 128 out of 417 companies, with a three year revenue growth rate of 331%
  • Propel's CEO Clive Kinross was also named EY Entrepreneur of the Year for Ontario. Mr. Kinross will participate in the national Canadian competition with the winner announced November 26
• Solid financial position and continued earnings growth supports the continued expansion of existing programs and increased dividend
  • The Company ended Q3 2024 with approximately $117 million of undrawn credit capacity on its various credit facilities with a Debt-to-Equity⁴ ratio of 2.0x, the same level as Q4 2023, even with the 44% growth in Ending CLAB¹ for the three month period ending September 30, 2024
    • Propel expects its Debt-to-Equity⁴ ratio to decline upon the closing of the QuidMarket acquisition which was financed by the recent C$115 million bought deal equity offering
• In addition, the Company upsized its CreditFresh credit facility from $250 million to $330 million in July with additional lenders to support future growth
• Propel's ongoing strong operating results and financial position supported the decision to increase the quarterly dividend by 7% to C$0.15 per common share in Q4 2024
  • Quarterly dividend represents a payout ratio of 30% on Q3 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 Q3 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)	See "Business combinations" in the Company's Q3 2024 Financial Statements for further information on the Acquisition of QuidMarket and associated one-time transaction costs.
(3)	Results converted from USD to CAD assuming an exchange rate of USD/CAD $1.3641 and USD/CAD $1.3604 for the three-month and nine-month periods ending September 30, 2024, respectively.
(4)	See "Supplemental Financial Measures" in the accompanying Q3 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$0.56 per common share to C$0.60 per common share on an annualized basis. This 7% increase is the Company's fourth dividend increase in 2024 and the sixth dividend increase since the beginning of 2023. The board declared a dividend of C$0.15 per common share, payable on December 4, 2024 to shareholders of record as of the close of business on November 15, 2024. The Company has designated this dividend as an eligible dividend within the meaning of the Income Tax Act (Canada). Upon the closing of the QuidMarket acquisition, subscription receipt holders of record as of the close of business on November 15, 2024 will receive C$0.15 per subscription receipt pursuant to the terms of the subscription receipts.

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, November 7, 2024
Time:	8:30 a.m. EST
Toll-free North America:	1-888-510-2154
Local Toronto:	1-437-900-0527
Rapid Connect:	Click here
Webcast:	Click here
Replay:	1-888-660-6345 or 1-646-517-4150 (PIN: 44697#)

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 December 4, 2024, the factors fueling our growth throughout 2024, the impact of the pending acquisition of QuidMarket and the expected growth at QuidMarket post-closing, 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 September 30,		Nine months ended September 30,
	2024	2023	2024	2023
(US$ other than percentages)
Revenue	117,169,442	83,171,747	320,423,748	220,477,535
Provision for loan losses and other liabilities	61,283,816	43,187,285	156,913,299	110,530,501
Operating expenses
Acquisition and data	13,690,825	10,638,072	38,295,919	26,921,920
Salaries, wages and benefits	9,453,082	7,994,000	27,952,993	22,647,417
General and administrative	4,615,304	2,135,332	9,920,311	6,248,909
Processing and technology	4,081,750	3,101,982	11,706,071	7,898,598
Total operating expenses	31,840,961	23,869,386	87,875,294	63,716,844
Operating income	24,044,665	16,115,076	75,635,155	46,230,190
Other (income) expenses
Interest and fees on credit facilities	8,401,947	5,943,899	23,070,762	16,010,677
Interest expense on lease liabilities	60,980	86,260	199,654	252,485
Amortization of internally developed software	1,080,039	835,343	3,039,099	2,436,003
Depreciation of property and equipment	45,296	50,186	146,914	145,700
Amortization of right-of-use assets	182,249	191,001	561,689	515,164
Foreign exchange (gain) loss	(45,238)	274,579	182,487	285,496
Unrealized (gain) loss on derivative financial instruments	(112,925)	280,156	507,415	216,814
Total other (income) expenses	9,612,348	7,661,424	27,708,020	19,862,339
Income before income tax	14,432,317	8,453,652	47,927,135	26,367,851
Income tax expense (recovery)
Current	6,391,842	4,672,134	20,149,542	10,418,885
Deferred	(2,480,782)	(2,390,443)	(6,989,096)	(3,343,271)
Net income for the period	10,521,257	6,171,961	34,766,689	19,292,237
Earnings per share ($USD):
Basic	0.31	0.18	1.01	0.56
Diluted	0.28	0.17	0.93	0.53
Earnings per share ($CAD)^(1):
Basic.	0.42	0.24	1.38	0.76
Diluted	0.39	0.22	1.27	0.71
Return on equity^(2^)	34 %	27 %	40 %	29 %
Dividends:
Dividends	3,552,647	2,514,003	9,852,809	7,469,803
Dividend per share	0.103	0.073	0.287	0.218

Notes:
(1)	Results converted from USD to CAD assuming an exchange rate of USD/CAD $1.3641 and USD/CAD $1.3604 for the three-month and nine-month periods ending September 30, 2024, respectively, and assuming an exchange rate of USD/CAD $1.3414 and USD/CAD $1.3456 for the three-month and nine-month periods ending September 30, 2023, respectively.
(2)	See "Supplemental Financial Measures" in the accompanying Q3 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 September 30,		Nine months ended September 30,
	2024	2023	2024	2023
(US$ other than percentages)
Net Income	10,521,257	6,171,961	34,766,689	19,292,237
Interest and fees on credit facilities	8,401,947	5,943,899	23,070,762	16,010,677
Interest expense on lease liabilities	60,980	86,260	199,654	252,485
Amortization of internally developed software	1,080,039	835,343	3,039,099	2,436,003
Depreciation of property and equipment	45,296	50,186	146,914	145,700
Amortization of right-of-use assets	182,249	191,001	561,689	515,164
Income Tax Expense (Recovery)	3,911,060	2,281,691	13,160,446	7,075,613
EBITDA^(1)	24,202,828	15,560,341	74,945,253	45,727,879
EBITDA^(1) Margin	21 %	19 %	23 %	21 %
Transaction costs	2,519,841	—	2,519,841	—
Provision for credit losses on current status accounts^(2)	1,023,630	2,769,749	7,512,570	5,461,937
Provisions for CSO Guarantee liabilities and Bank Service Program liabilities	1,272,531	326,633	3,931,795	2,719,596
Adjusted EBITDA^(1)	29,018,830	18,656,723	88,909,459	53,909,412
Adjusted EBITDA^(1) Margin	25 %	22 %	28 %	24 %

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 Q3 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 September 30,		Nine months ended September 30,
	2024	2023	2024	2023
(US$ other than percentages)
Net Income	10,521,257	6,171,961	34,766,689	19,292,237
Transaction costs net of taxes^(2)	1,852,083	—	1,852,083	—
Provision for credit losses on current status accounts net of taxes^(2)	752,368	2,077,312	5,521,739	4,096,453
Provisions for CSO Guarantee liabilities and Bank Service Program liabilities net of taxes^(2)	935,310	244,974	2,889,869	2,039,696
Adjusted Net Income^(1)	14,061,018	8,494,247	45,030,380	25,428,386
Multiplied by number of periods in year	x4	x4	x1	x1
Divided by average shareholders' equity for the period	124,245,048	92,912,934	115,667,962	88,750,988
Adjusted Return on Equity^(^1)	45 %	37 %	52 %	38 %
Adjusted Net Income Margin^(1)	12 %	10 %	14 %	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 nine-months ended September 30, 2024 and comparative 2023 periods.

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

	As at September 30,		As at Dec 31,
(US$ other than percentages)	2024	2023	2023
Ending Combined Loan and Advance balances^1	432,273,487	299,374,790	337,282,804
Less: Loan and Advance balances owned by third party lenders pursuant to CSO program	(4,645,331)	(3,288,230)	(3,779,004)
Less: Loan and Advance balances owned by a NBFI pursuant to the MoneyKey Bank Service program	(51,673,179)	(31,132,413)	(36,736,938)
Loan and Advance owned by the Company	375,954,977	264,954,147	296,766,862
Less: Allowance for Credit Losses	(104,602,128)	(58,812,754)	(79,093,294)
Add: Fees and interest receivable	49,225,554	25,170,297	36,063,899
Add: Acquisition transaction costs	12,421,019	4,695,208	5,575,769
Loans and advances receivable	332,999,422	236,006,898	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]