Mr. Clive Kinross reports

PROPEL REPORTS RECORD RESULTS FOR Q3 2023 AND ANNOUNCES DIVIDEND INCREASE

Propel Holdings Inc. had another set of record financial results for the three months ended Sept. 30, 2023 (Q3 2023). Propel's board of directors has approved an increase to its dividend from 40 Canadian cents to 42 Canadian cents per share on an annualized basis, effective Q4 2023. This represents an increase of 5 per cent and the company's second dividend increase in 2023. All amounts are expressed in U.S. dollars unless otherwise stated.

Financial and operational highlights for Q3 2023

Comparable metrics relative to Q3 2022 and year-to-date Q3 2022, respectively:

• Revenue: Increased by 39 per cent to $83.2-million in Q3 2023, and increased by 34 per cent to $220.5-million for year to date through Q3 2023, representing record performance for both periods;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization): Increased by 113 per cent to $18.7-million in Q3 2023, and increased by 100 per cent to $53.9-million for year to date through Q3 2023, representing record performance for both periods;
• Net income: Increased by 47 per cent to $6.2-million in Q3 2023, and increased by 91 per cent to $19.3-million for year to date through Q3 2023, representing record performance for a nine-month period ending Q3;
• Adjusted net income: Increased by 123 per cent to $8.5-million in Q3 2023, and increased by 86 per cent to $25.4-million for year to date through Q3 2023, representing record performance for a nine-month period ending Q3;
• Diluted earnings per share (EPS): Increased by 42 per cent to 17 cents (22 Canadian cents) in Q3 2023, and increased by 86 per cent to 53 cents (71 Canadian cents) for year to date through Q3 2023, representing record performance for a nine-month period ending Q3;
• Adjusted diluted EPS: Increased by 115 per cent to 23 cents (31 Canadian cents) in Q3 2023, and increased by 77 per cent to 69 cents (93 cents) for year to date through Q3 2023, representing record performance for a nine-month period ending Q3;
• Loans and advances receivable: Increased by 42 per cent in Q3 2023 to $236-million, a record ending balance;
• Ending combined loan and advance balances (CLAB): Increased by 44 per cent in Q3 2023 to $299.4-million, a record ending balance;
• Dividend: Paid a Q3 2023 dividend of 10 Canadian cents per share on Sept. 8, 2023, representing a 4.9-per-cent dividend yield against Propel's closing share price on Nov. 7, 2023

Management commentary

"We are proud to announce another strong quarter of record results in Q3, including record revenue, adjusted EBITDA, total originations funded and ending CLAB. Consistent with the second quarter, our growth in Q3 was driven by an increase in new customer originations which represented 51 per cent of total originations funded. Based on our ongoing strong operational results and credit performance, confidence in our profitable growth prospects and cash flow generation, as well as our solid financial position, we have made the decision to increase our dividend for the second time this year.

"Propel was built on the belief that we can expand credit access to underserved consumers, while appropriately managing risk and driving sustainable and profitable growth through our AI-powered technology. Propel's AI-powered technology has allowed us to grow our ending CLAB by 44 per cent over last year while maintaining strong credit performance as shown by a decline in our provision for loan losses and other liabilities as a percentage of revenue to 52 per cent in Q3 2023 from 54 per cent in Q3 2022 and a decrease in net charge-offs as a percentage of average CLAB to 12 per cent in Q3 2023 from 14 per cent in Q3 2022. The strong growth and credit performance was accomplished while we and our bank partners maintained a prudent approach to underwriting.

"Looking ahead, we believe that our AI-powered technology and compliance first approach will continue to be the differentiator and driver of growth. Since going public two years ago, the macroeconomic environment has shifted and continues to be dynamic. Over the past two years, we've grown our revenues organically by 149 per cent from $88-million for the nine-months ended Sept. 30, 2021, to $220-million for the most recent nine-month period. We have demonstrated our ability to continue to maintain strong credit performance, while funding more underserved consumers. We are building a new world of financial opportunity for our consumers, partners and shareholders, and we're just getting started," said Clive Kinross, chief executive officer.

Discussion of financial results and business strategy

• Strong consumer demand and tightening of credit markets drives new customer growth in Q3:
  • Consumer demand supported by several factors including the continued industry-wide transition from brick-and-mortar to on-line lending and the tightening across the credit spectrum, which increased the quality and volume of applications on Propel's platform;
    • Recent data from the federal reserve indicates that U.S. banks continue to maintain tight lending standards on consumer loans and remain at the tightest levels since Q3 2020;
  • Macroeconomic environment remained dynamic and consequently Propel and its bank partners remained vigilant with a prudent risk posture.
• CLAB grew by 44 per cent and revenue increased by 39 per cent to reach new quarterly record:
  • Revenue increased by 39 per cent to a record of $83.2-million in Q3 2023, compared with $59.7-million in Q3 2022. This growth was the result of the 44-per-cent growth in CLAB, offset by a decrease in annualized revenue yield1 to 116 per cent in Q3 2023 from 123 per cent in Q3 2022;
  • CLAB grew to $299.4-million, a record ending balance, and was supported by record total originations funded of $110.3-million in Q3 2023, an increase of 13 per cent from $97.7-million in Q3 2022;
  • Decrease in annualized revenue yield1 was in line with expectations and a result of a reduction in the cost of credit across the portfolio as Propel and its bank partners continued expanding product offerings to a stronger credit profile consumer segment. This includes consumers who have graduated to lower-cost products over time. Propel does note that annualized revenue yield increased relative to Q1 and Q2 2023 which was reflective of the continued emphasis on new customer volume
• Artificial-intelligence-powered technology continues to manage risk and drive profitability:
  • Propel's AI-powered underwriting technology can evaluate thousands of data points on each applicant to provide it a more comprehensive and current picture of their financial health. This is why Propel can facilitate loans to consumers where traditional lenders may have passed them over while maintaining prudent risk level;
  • Provision for loan losses and other liabilities as a percentage of revenue decreased to 52 per cent in Q3 2023 from 54 per cent in Q3 2022. This was partly driven by a decrease in year-over-year net charge-offs as a percentage of CLAB to 12 per cent in Q3 2023 from 14 per cent in Q3 2022. This improvement was driven by strong credit performance facilitated by prudent underwriting and application of AI capabilities.
• Net income and adjusted net income increased due to overall growth, lower relative provisions, operating leverage and effective operating expense management:
  • Net income increased by 47 per cent to $6.2-million in Q3 2023, compared with $4.2-million in Q3 2022, and adjusted net income increased by 123 per cent to $8.5-million in Q3 2023, compared with $3.8-million in Q3 2022;
    • Year-to-date net income increased by 91 per cent to $19.3-million and adjusted net income increased by 86 per cent to $25.4-million, both representing record performance for a nine-month period ending Q3;
  • Growth in net income and adjusted net income was primarily a result of i) the overall growth of the business; ii) lower provision for loan losses and other liabilities as a percentage of revenue; iii) the inherent operating leverage in the company's business model from the infrastructure it has built out over the years; and iv) continued technology enhancements driving increased automation and efficiency in originations and loan servicing.
• Propel recognized as one of Canada's fastest0growing companies by The Globe and Mail:
  • The company placed in the top 10 within its revenue category of those companies with revenue over $250-million (Canadian), and was No. 199 overall on the 2023 Report on Business ranking of Canada's top-growing companies;
  • Propel earned this achievement by generating a three-year (2019 to 2022) revenue growth rate of 234 per cent, which was accomplished all organically.
• Fora, Propel's Canadian business, continues to expand as a result of strong consumer demand:
  • Propel continues to observe strong demand from Canadian consumers as traditional financial institutions continue to tighten underwriting, competition exits the market while demand from underserved consumers continues to increase;
    • Recent data from TransUnion showed that credit demand from prime and below consumers in Canada grew by 15 per cent in Q2 2023 from Q2 2022;
  • On Sept. 6, 2023, Propel launched Fora in Nova Scotia representing its seventh operational province;
  • Propel expects an update on the government's regulations regarding the lowering of the criminal rate of interest, including implementation timeline and potential exemptions, before the end of the year. As previously disclosed, Propel does not expect the change to have any impact on its guidance;
  • While Fora currently represents a small percentage of the overall company's revenue, Propel is confident that it will establish a significant business in the Canadian market over time.
• Rollout of Pathward partnership in line with plan, with additional partners and channels expected to be onboarded by the end of the year:
  • Rollout has proceeded as expected, with the completion of the onboarding of the first group of Pathward customers in Q3;
  • Similar to Fora, the Pathward program is expected to have a more meaningful impact to the company's results in 2024 as the program expands;
  • Propel is increasingly enthusiastic about the potential of the lending-as-a-service (LaaS) model and is actively exploring additional opportunities on both sides of the border.
• Solid financial position supports continued expansion of existing programs, growth initiatives and increased dividend:
  • The company ended Q3 2023 with approximately $116-million of undrawn credit capacity on its various credit facilities;
  • Total debt/equity ratio of 1.8 times at the end of Q3 2023, the same level at the end of 2022 despite the 21-per-cent growth in the company's ending CLAB during the nine months ended Sept. 30, 2023.

Dividend increase

Propel also announced today that its board of directors has approved an increase to its dividend that represents an increase from 40 Canadian cents per common share to 42 Canadian cents per common share on an annualized basis. This 5-per-cent increase is the company's second dividend increase in 2023 and represents a 5.2-per-cent dividend yield against Propel's closing share price on Nov. 7, 2023. The board declared a dividend of 10.5 Canadian cents per common share, payable on Dec. 5, 2023, to shareholders of record as of the close of business on Nov. 21, 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 Mr. Kinross, chief executive officer, and Sheldon Saidakovsky, chief financial officer.

Conference call details are as follows:

Date: Wednesday, Nov. 8, 2023

Time: 8:30 a.m. ET

Toll-free North America: 1-888-886-7786

Local Toronto: 1-416-764-8658

Conference ID: 86263795

Replay: 1-877-674-7070 or 1-416-764-8692 (PIN: 263795 followed by pound key)

About Propel Holdings Inc.

Propel Holdings 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 its 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. The company's revolutionary fintech platform has already helped consumers access over one million loans and lines of credit and over one billion dollars in credit. Propel is here to change the way customers, partners and investors succeed together.

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