Propel Reports Record Results for Q4 and Fiscal Year 2023

TORONTO, March 12, 2024 /CNW/ - Propel Holdings Inc. ("Propel" or the "Company") (TSX: PRL), the fintech facilitating access to credit for underserved consumers, today reported another set of record financial results for the three months ("Q4 2023") and fiscal year ended December 31, 2023. All amounts are expressed in U.S. dollars unless otherwise stated.

Financial and Operational Highlights for Q4 and Fiscal Year 2023 (Shown in U.S. Dollars)
Comparable metrics relative to Q4 2022 and Fiscal Year 2022, respectively

• Revenue: increased by 54% to $96.0 million in Q4 2023, and increased by 40% to $316.5 million for fiscal 2023, representing record performance for both periods
• Adjusted EBITDA¹: increased by 62% to $22.4 million in Q4 2023, and increased by 87% to $76.3 million for fiscal 2023, representing record performance for both periods
• Net Income: increased by 68% to $8.5 million in Q4 2023, and increased by 84% to $27.8 million for fiscal 2023, representing record performance for both periods
• Adjusted Net Income¹: increased by 62% to $10.8 million in Q4 2023, and increased by 77% to $36.1 million for fiscal 2023, representing record performance for both periods
• Diluted EPS²: increased by 65% to $0.23 (C$0.31) in Q4 2023, and increased by 78% to $0.76 (C$1.02) for fiscal 2023, representing record performance for both periods
• Adjusted Diluted EPS^1,2: increased by 59% to $0.29 (C$0.40) in Q4 2023, and increased by 72% to $0.98 (C$1.32) for fiscal 2023, representing record performance for both periods
• Return on Equity³: increased on an annualized basis to 35% in Q4 2023 compared to 25% in Q4 2022, and increased to 30% for fiscal 2023 compared to 19% for fiscal 2022
• Adjusted Return on Equity¹: increased on an annualized basis to 44% in Q4 2023 compared to 33% in Q4 2022, and increased to 40% for fiscal 2023 compared to 26% for fiscal 2022
• Loans and Advances Receivable: increased by 33% in Q4 2023 to $259.3 million, a record ending balance
• Ending Combined Loan and Advance Balances¹: increased by 36% in Q4 2023 to $337.3 million, a record ending balance
• Dividend: paid a Q4 2023 dividend of C$0.105 per common share on December 5, 2023, representing an 11% increase to our Q4 2022 dividend and a 2.5% dividend yield against Propel's closing share price on March 12, 2024

Management Commentary

"We are proud to end 2023 with another year of significant growth in both revenue and profitability and another quarter and year of record results including Revenue, Net Income, Adjusted Net Income¹, Adjusted EBITDA¹, Total Originations Funded¹ and Ending CLAB¹.

Importantly, in 2023 we were able to facilitate credit access and build financial opportunity for a record number of underserved consumers, who otherwise would have been excluded from the credit market. Through our AI-powered underwriting platform, we facilitated over 164,000 loans and lines of credit in 2023, representing a record number. This was accomplished while Propel and our partners maintained a prudent underwriting posture driving strong credit performance and record profitability.

As we look ahead to 2024, we see tremendous opportunity to continue growing our core business in serving the more than 70 million Americans and Canadians who are underserved by traditional financial institutions. We will continue to add additional opportunities, including expanding our Lending-as-a-Service offering, broadening our product suite, and expanding into new geographies. We have the people, technology, infrastructure, experience and are well capitalized to continue to realize our vision of becoming the global leader in financial services for underserved consumers." said Clive Kinross, Chief Executive Officer.

Discussion of Financial Results and Business Strategy

• Growth of the core business including Bank Programs led to record Total Originations Funded¹, ending CLAB¹ and revenue
  • Total Originations Funded¹ increased by 19% to a record of $120.7 million in Q4 2023 vs. Q4 2022 and increased by 7% to a record of $412.6 million for fiscal year 2023 vs. fiscal year 2022, resulting in Ending CLAB¹ growing year-over-year by 36% to a record of $337.3 million
  • In addition, Annualized Revenue Yield¹ increased to 121% in Q4 2023 from 110% in Q4 2022. The increase was driven by a variety of factors, including a higher proportion of new customer originations compared to Q4 2022, as well as a greater proportion of the new originations targeted towards higher yielding segments of the loan portfolio
  • The record Ending CLAB¹ and Annualized Revenue Yield¹ contributed to the 54% and 40% growth and record revenue for the Q4 2023 and fiscal year 2023 periods, respectively
• Propel's proprietary AI-powered technology continued to drive strong credit performance
  • Utilizing our proprietary AI-powered underwriting technology, Propel⁴ deployed upgraded models throughout the year and into Q4 that resulted in the origination of additional volume from higher yielding segments of the loan portfolio on a profitable basis
  • Provision for loan losses and other liabilities as a percentage of revenue increased modestly to 54% in Q4 2023 from 53% in Q4 2022, which is expected in a period where substantially more new customer volume was originated
• Net income increased to $8.5 million in Q4, a 68% increase over Q4 2022, and Adjusted Net Income¹ increased to $10.8 million, a 62% increase over Q4 2022, both representing records
  • Growth in net income and Adjusted Net Income¹ was primarily a result of i) the overall growth of the business; ii) the inherent operating leverage in our business model from the infrastructure we have built out over the years and effective cost management; and iii) the increased automation and efficiency in originations and customer service that the Company has been able to drive through the continuous enhancement of its proprietary technology infrastructure
• Fora completed its first full year with operations across seven provinces
  • Our measured rollout of Fora has allowed us to accumulate proprietary loan performance data that is continuously feeding and refining our AI-powered underwriting. As a result, we have a strong foundation to continue to grow into the Canadian market
  • While Fora currently represents a small percentage of the Company's overall revenue, and even with the backdrop of regulatory changes, we remain excited about the Canadian market and are focused on building a leading digital fintech business in Canada
• Lending-as-a-Service program successfully launched and growing
  • We launched our first Lending-as-a-Service program with Pathward in June 2023 and are proud of the performance to date. Since launching, we have grown the number of marketing channels, expanded into new states and onboarded more purchaser relationships
  • Propel is actively exploring additional Lending-as-a-Service opportunities on both sides of the border. We expect our Lending-as-a-Service offering, including Pathward, to be a powerful driver of future growth and will have a more meaningful impact to the Company's financial results in 2024 and beyond
• Solid financial position supports continued expansion of existing programs, growth initiatives and increased dividend
  • The Company ended Q4 2023 with approximately $89 million of undrawn credit capacity on its various credit facilities with a Debt-to-Equity³ ratio of 2.0x
  • With ample debt capacity, continued growth in earnings and significant operating cash flow, the Company is well positioned to continue growing the business, funding our various existing and new initiatives and supporting the dividend
  • Strong operating results and financial position supported the decision to increase our quarterly dividend by 14% to C$0.12 per common share in Q1 2024

2024 Operating and Financial Targets

Propel finished fiscal year 2023 with record results across multiple operating and financial metrics and with a strong financial position to support its growth. The 2024 targets below are supported by our strategy which includes: i) scaling of our core business in the US and Canada; ii) expansion of our Lending-as-a-Service offering; and iii) investment in our proprietary technology to maintain our market leadership in AI-powered lending.

Furthermore, the Company expects to achieve continued margin expansion in fiscal year 2024 driven by: i) the operating leverage inherent in the business and further driven by our sophisticated technology infrastructure; ii) the overall growth and increasing scale of the loan portfolio; and iii) the increased contribution from Propel's Lending-as-a-Service offering which is expected to generate higher margins than the Company's existing product portfolio given the fee income nature of the program.

There are a number of new business and corporate development initiatives, including the broadening of our addressable market through new products, programs and geographies, that form part of the Company's growth strategy and are not included in the operating and financial targets below.

Operating and Financial Targets (US$)	2023A Results	2024 Target
Ending Combined Loan and Advance Balances^1 year over year growth	36 %	25% - 35%
Revenue	$316 million	$410 - $450 million
Adjusted EBITDA Margin^1	24 %	24% - 29%
Net Income Margin	9 %	9.5% - 12.5%
Adjusted Net Income Margin^1	11 %	11.75% - 14.75%
Return on Equity^3	30 %	30%+
Adjusted Return on Equity^1	40 %	40%+

The operating and financial 2024 targets are based on management's current strategies and expectations and may be considered forward-looking information under applicable securities laws. Such targets are based on estimates and assumptions made by management regarding, among other things, the following:

• the macroeconomic environment in fiscal 2024 and its impact on the Company;
• the continued expansion of the Company's Bank Program and Lending-as-a-Service relationships;
• the maintenance and expansion of the Company's marketing partnerships;
• the availability and cost of debt capital for the Company; and
• the regulatory landscape applicable to the Company's operations.

For a more detailed discussion on the operating and financial 2024 targets and the assumptions underpinning such targets, please refer to the Company's accompanying December 31, 2023 MD&A, which is available under the Company's profile on SEDAR+ at www.sedarplus.ca. The above operating and financial targets are based on growth in the Company's existing business lines, existing Bank Programs and the recently  launched Lending-as-a-Service offering, including Pathward. While the recent opportunities have the potential of driving significant incremental growth for the business, their impact on the Company's operating and financial targets, particularly in the short-term, are unknown.

Management currently believes that the achievement of the 2024 operating and financial targets described above can be reasonably estimated and are based on underlying assumptions that management believes are reasonable in the circumstances, given the time period for such targets. However, there can be no assurance that Propel will be able to meet such operating and financial targets.

Note:
(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 Q4 2023 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 $1.362 and USD/CAD $1.350 for the three-month and twelve-month periods ending December 31, 2023, respectively.
(3)	See "Supplemental Financial Measures" in the accompanying Q4 2023 MD&A for further details concerning certain financial metrics used in this press release including definitions.
(4)	Where applicable, underwriting models are approved by and/or provided by Propel's Bank Partners.

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:	Wednesday, March 13, 2024
Time:	8:30 a.m. ET
Toll-free North America:	1-888-664-6383
Local Toronto:	1-416-764-8650
Webcast:	Click here
Replay:	1-888-390-0541 or 1-416-764-8677 (PIN: 290043 #)

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 EBITDA", "Adjusted Net Income", "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 2024 Operating and Financial Targets, our profitable growth prospects, our dividend, our AI-powered technology and compliance first approach continuing to be the differentiator and driver of our growth, expanding our Lending-as-a-service offering, our ability to profitably grow our business and facilitate access to credit to more and more underserved consumers, our ability to scale our core business in the US and Canada, our future investment in our proprietary technology to maintain our market leadership in AI-powered lending and our ability to achieve continue margin expansion in fiscal year 2024.  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 Dec 31,		Year Ended Dec 31,
(US$)			2023	2022	2023	2022
Revenue			96,010,640	62,514,925	316,488,175	226,850,634
Provision for loan losses and other liabilities			51,377,131	32,887,310	161,907,632	120,152,745
Operating expenses
Acquisition and data			11,634,932	5,329,721	38,556,852	27,230,127
Salaries, wages and benefits			8,865,125	7,371,727	31,512,542	26,709,694
General and administrative			2,403,984	2,789,060	8,652,893	8,844,587
Processing and technology			3,150,278	2,577,942	11,048,876	10,029,943
Total operating expenses			26,054,319	18,068,450	89,771,163	72,814,351
Operating income			18,579,190	11,559,165	64,809,379	33,883,538
Other income (expenses)
Interest and fees on credit facilities			(6,462,539)	(4,047,068)	(22,473,216)	(9,784,859)
Interest expense on lease liabilities			(78,247)	(86,635)	(330,732)	(379,480)
Amortization of internally developed software			(894,459)	(792,304)	(3,330,462)	(2,596,779)
Depreciation of property and equipment			(51,559)	(46,558)	(197,259)	(158,215)
Amortization of right-of-use assets			(188,333)	(158,241)	(703,497)	(621,890)
Foreign exchange gain (loss)			(98,143)	(214,746)	(383,639)	(58,093)
Unrealized gain (loss) on derivative financial instruments			809,761	345,946	592,947	(61,866)
Total other income (expenses)			(6,963,519)	(4,999,606)	(26,825,858)	(13,661,182)
Income before transaction costs and income tax			11,615,671	6,559,559	37,983,521	20,222,356
Income tax expense (recovery)
Current			7,709,771	1,301,734	18,128,656	7,003,736
Deferred			(4,577,996)	213,640	(7,921,268)	(1,908,827)
Net Income for the period			8,483,896	5,044,185	27,776,133	15,127,447
Earnings per share ($USD):
Basic			0.25	0.15	0.81	0.44
Diluted			0.23	0.14	0.76	0.42
Earnings per share ($CAD):^1
Basic			0.34	0.20	1.09	0.57
Diluted			0.31	0.19	1.02	0.55
Return on Equity^2			35 %	25 %	30 %	19 %
Dividends:
Dividends			2,664,212	2,428,196	10,134,015	10,055,003
Dividends per share			0.078	0.071	0.295	0.293

^{(1)    Results converted from USD to CAD assuming an exchange rate of USD/CAD $1.362 and USD/CAD $1.350 for the three-month and twelve months periods ending December 31, 2023, respectively and assuming an exchange rate of USD/CAD $1.358 and USD/CAD $1.302 for the three-month and twelve month periods ending December 31, 2022, respectively.
(2)    See "Supplemental Financial Measures" in the accompanying Q4 2023 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 Dec 31,		Year Ended Dec 31,
(US$ other than percentages)			2023	2022	2023	2022
Net Income			8,483,896	5,044,185	27,776,133	15,127,447
Interest and fees on credit facilities			6,462,539	4,047,068	22,473,216	9,784,859
Interest expense on lease liabilities			78,247	86,635	330,732	379,480
Amortization of internally developed software			894,459	792,304	3,330,462	2,596,779
Depreciation of property and equipment			51,559	46,558	197,259	158,215
Amortization of right-of-use assets			188,333	158,241	703,497	621,890
Income Tax Expense (Recovery)			3,131,775	1,515,374	10,207,388	5,094,909
EBITDA^1			19,290,808	11,690,365	65,018,687	33,763,579
EBITDA margin^1 as a % of revenue			20 %	19 %	21 %	15 %
Provision for credit losses on current status accounts^2			4,395,134	2,185,938	9,857,071	7,389,684
Provisions for CSO Guarantee liabilities and Bank Service Program liabilities			(1,289,553)	(41,198)	1,430,044	(320,340)
Adjusted EBITDA^1			22,396,389	13,835,105	76,305,802	40,832,923
Adjusted EBITDA margin^1 as a % of revenue			23 %	22 %	24 %	18 %

^{(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 Q4 2023 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 Dec 31,		Year Ended Dec 31,
(US$ other than percentages)			2023	2022	2023	2022
Net Income			8,483,896	5,044,185	27,776,133	15,127,447
Provision for credit losses on current status accounts net of taxes^2			3,230,423	1,639,453	7,244,947	5,542,263
Provisions for CSO Guarantee liabilities and Bank Service Program liabilities net of taxes^2			(947,821)	(30,898)	1,051,082	(240,255)
Adjusted Net Income^1 for the period			10,766,498	6,652,740	36,072,162	20,429,455
Multiplied by number of periods in year			x4	x4
Divided by average shareholders' equity for the period			98,261,336	80,083,985	91,128,575	77,624,315
Adjusted Return on Equity^1			44 %	33 %	40 %	26 %
Adjusted Net Income Margin^1			11 %	11 %	11 %	9 %

^{(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 months and twelve month periods ending December 31, 2023 and at an effective tax rate of 25.0% for the comparative 2022 periods.}

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

			As at Dec 31,
(US$)			2023	2022
Ending Combined Loan and Advance balances^1			337,282,804	247,488,344
Less: Loan and Advance balances owned by third party lenders pursuant to CSO program			(3,779,004)	(2,988,636)
Less: Loan and Advance balances owned by a NBFI pursuant to the MoneyKey Bank Service program			(36,736,938)	(21,088,522)
Loan and Advance owned by the Company			296,766,862	223,411,186
Less: Allowance for Credit Losses			(79,093,294)	(49,844,370)
Add: Fees and interest receivable			36,063,899	19,265,893
Add: Acquisition transaction costs			5,575,769	2,795,722
Loans and advances receivable			259,313,236	195,628,431

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

SOURCE Propel Holdings Inc.

Lindsay Finneran-Gingras, Vice President, Communications, [email protected]; Devon Ghelani, Senior Director, Capital Markets and Investor Relations, [email protected]