Propel Reports Record Second Quarter Results and Declares Quarterly Dividend

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 June 30, 2023 (“Q2 2023”) and declared a dividend for the third quarter of 2023. All amounts are expressed in U.S. dollars unless otherwise stated.

Financial and Operational Highlights for Q2 2023
Comparable metrics relative to Q2 2022 and year-to-date Q2 2022, respectively

• Revenue: increased by 33% to $71.7 million in Q2 2023, and increased by 31% to $137.3 million for year-to-date through Q2 2023, representing record performance for both periods
• Adjusted EBITDA1: increased by 114% to $18.2 million in Q2 2023, and increased by 93% to $35.3 million for year-to-date through Q2 2023, representing record performance for both periods
• Net Income: increased by 183% to $5.7 million in Q2 2023, and increased by 123% to $13.1 million for year-to-date through Q2 2023, representing record performance for a six-month period ending Q2
• Adjusted Net Income1: increased by 102% to $8.6 million in Q2 2023, and increased by 71% to $16.9 million for year-to-date through Q2 2023, representing record performance for both periods
• Diluted EPS: increased by 174% to $0.15 in Q2 2023, and increased by 116% to $0.36 for year-to-date through Q2 2023, representing record performance for a six-month period ending Q2
• Adjusted Diluted EPS1: increased by 96% to $0.23 in Q2 2023, and increased by 66% to $0.46 for year-to-date through Q2 2023, representing record performance for a six-month period ending Q2
• Loans and Advances Receivable:increased by 53% in Q2 2023 to $215.7 million, a record ending balance
• Ending Combined Loan and Advance Balances (“CLAB”)1: increased by 53% in Q2 2023 to $273.2 million, a record ending balance
• Dividend: Paid a Q2 2023 dividend of C$0.10 per share on June 7, 2023, representing a 4.3% dividend yield against Propel’s closing share price on August 10, 2023

Management Commentary

“Propel delivered another outstanding quarter of record results in Q2 including record revenue, Adjusted EBITDA1, Adjusted Net Income1 and Ending CLAB balance1. After experiencing a more typically seasonal first quarter, our business returned to a period of robust originations driven mainly by new customer volume.

Growth of new customer volume was driven by strong consumer demand, which coupled with a resilient macro-economic environment and continued strong credit performance, led to record originations. Critically, Propel achieved these results while we and our Bank Partners maintained a prudent approach to underwriting. We can facilitate access to credit to more consumers, while driving profitably for shareholders because our AI builds a more accurate prediction of credit performance than credit scores used by traditional lenders. This translated into improved provision for loan losses and other liabilities as a percentage of revenue, which decreased to 51% during the second quarter from a high point of 58% in Q2 2022.

As we move into the second half of 2023, we expect growth to accelerate as a result of: (1) expanding our established programs by continuing to originate new, high credit quality customers for us and our Bank Partners; (2) scaling Pathward®, N.A. and Fora; and (3) realizing additional market opportunities including new products, partners and geographies. At Propel, we’re building a new world of financial opportunity and we are just getting started,” said Clive Kinross, Chief Executive Officer.

Discussion of Financial Results and Business Strategy

• Resilient macro-economic environment and strong consumer demand, drove new customer growth in Q2
  • Macro-economy remained resilient, supported by moderating inflation, continued economic growth, 50-year low unemployment and continued real wage growth
  • Consumer demand supported by several factors including: the continued industry-wide transition from brick-and-mortar to online lending and the tightening across the credit spectrum, which increased the quality and volume of applications on Propel’s platform
  • Macro-economic environment remained dynamic and consequently we and our Bank Partners remained vigilant with a prudent risk posture
• Revenue increased by 33% to reach new quarterly record
  • Revenue increased by 33% to a record of $71.7 million in Q2 2023, compared to $54.1 million in Q2 2022. This growth was the result of the 53% growth in CLAB1, offset by a decrease in Annualized Revenue Yield1 to 110% in Q2 2023 from 128% in Q2 2022
  • Decrease in Annualized Revenue Yield1 was 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. We do note that Annualized Revenue Yield1 increased relative to Q1 2023 which was reflective of the higher new customer volume
• CLAB1 grew by 53% driven by robust consumer demand and the expansion of our portfolio towards those consumers higher on the credit spectrum
  • CLAB1 increased by 53% to a record $273.2 million as at June 30, 2023, compared to $179.0 million at June 30, 2022. The increase was supported by record Total Originations Funded1 of $102.6 million in Q2 2023, an increase of 5% from $97.5 million in Q2 2022
  • Growth in the CLAB1 was driven by those macro-economic factors and Total Originations Funded1 discussed above in addition to: 1) the growth in new customer originations; 2) the expansion of variable pricing and graduation capabilities; 3) the growth of the Bank Programs; 4) rollout across Canada and 5) the expansion of key marketing channels
• Net income and Adjusted Net Income1 increased due to overall growth, lower relative provisions, operating leverage and effective operating expense management
  • Net income increased by 183% to $5.7 million in Q2 2023, compared to $2.0 million in Q2 2022 and Adjusted Net Income1 increased by 102% to $8.6 million in Q2 2023, compared to $4.3 million in Q2 2022
  • Growth in net income and Adjusted Net Income1 was primarily a result of the overall growth of the business, lower provision for loan losses and other liabilities as a percentage of revenue, operating leverage and continued technology enhancements driving increased automation in originations and loan servicing, lowering our operating costs
    • These factors resulted in the net income margin increasing from 4% in Q2 2022 to 8% in Q2 2023, and the Adjusted Net Income1 margin increasing from 8% in Q2 2022 to 12% in Q2 2023
• AI as meaningful differentiator in evaluating risk and driving profitability
  • Key to our profitable growth is our proprietary underwriting technology. We have been successfully using our AI for several years and, based on our experience, Propel’s AI-powered underwriting technology can better evaluate risk for us and on behalf of our partners, than traditional credit scores. With over 12 years of proprietary data and years of experience developing and improving our models, we believe that we have one of the industry’s leading AI models
  • Provision for loan losses and other liabilities as a percentage of revenue significantly decreased to 51% in Q2 2023 from a high point of 58% in Q2 2022. This was partly driven by a decrease in year-over-year Net Charge-Offs as a Percentage of CLAB1 from 15% in Q2 2022 to 12% in Q2 2023. This improvement was driven by our prudent underwriting and application of AI capabilities
  • Technology platform enabled us to originate additional volume without incurring significant additional cost demonstrating the operating leverage and scalability of our business model
• Continued growth in Canada under our Fora brand, with expansion to new provinces
  • In Canada, under our Fora brand, we continue to grow originations through new and existing provinces
  • On July 26, 2023, we launched Fora in New Brunswick and Newfoundland and Labrador expanding our Canadian operations to six provinces
  • As previously disclosed, the proposed legislation by the Canadian government continues to have no impact on our guidance for 2023
• Launching LaaS program with Pathward to expand access to lower-risk market
  • Our program with Pathward launched on June 20, 2023, in line with expectations. The program marked the official launch of our LaaS product offering
  • Notably, this represents fee revenue to Propel, expansion into sub-36% APR consumer lending products and the diversification of our business. Similar to Fora, this program will not have a material impact to our 2023 guidance

Declaration of Q3 2023 Dividend
Propel also announced today that its board of directors has declared a dividend of C$0.10 per common share, payable on September 8, 2023 to shareholders of record as of the close of business on August 18, 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.

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 accelerate our growth in the second half of 2023, the expansion our established programs by continuing to originate new, high credit quality customers for us and our Bank Partners, scaling Pathward®, N.A. and Fora and evaluating additional market opportunities including new products, partners and geographies, and our ability to profitably grow our business and facilitate access to credit to more and more underserved consumers. 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.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

Reconciliation of Non-IFRS Financial Measures

The following table provides a reconciliation of Propel’s net income to EBITDA1 and Adjusted EBITDA1:

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

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

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