Great quarter and dividend increase
Propel Reports Record First Quarter Results and Announces Dividend Increase
2023-05-09 17:09 ET - News Release
Company Website: https://propelholdings.com
TORONTO -- (Business Wire)
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.
| 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 Q1 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. |
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).