Loans and Advances Receivable increased by 138%,
Originations increased by 120%, Ending Combined Loan and Advance
Balances increased by 150% and Revenue increased by
99%, all reaching record levels
TORONTO, Nov. 15, 2021 /CNW/ - Propel Holdings Inc.
("Propel" or the "Company") (TSX: PRL) today reported
its financial results for the three and nine month periods ending
September 30, 2021 ("Q3 2021"). All
amounts are expressed in U.S. dollars unless otherwise
indicated.
Management Commentary
"By delivering record originations, revenue and loan and advance
balances in Q3 2021, we are well on our way to meeting our short
term targets. With the recent implementation of variable pricing
and graduation capabilities through our platform, as well as
expansion of certain programs into new states over the course of
the year, we have significantly increased the market that is able
to be served by our platform. This places Propel in an excellent
position to drive growth in Q4, historically our strongest quarter
of the year, and over the short term, and importantly allows us to
continue to fulfill on our mission of credit inclusion," said
Clive Kinross, Chief Executive
Officer.
Mr. Kinross continued, "We have now been in operation for 10
years, and I have never been more confident about our future growth
prospects. We have established bank partnerships, diversified
funding sources, reliable credit decisioning from our proprietary
underwriting model, new product and service offerings and
greenfield markets to penetrate. I believe that we have laid the
groundwork for continued long-term growth."
Q3 2021 Financial and Operational Highlights
Comparable
metrics relative to Q3 2020
|
- Loans and Advances Receivable: increased by 138%
to $77.2 million, a record ending
balance
- Total Originations Funded: increased by 120% to
$55.8 million in Q3 2021, a record
performance for quarterly originations, and increased by 144% to
$136.7 million for year-to-date Q3
2021
- Ending Combined Loan and Advance Balances:
increased by 150% to $96.8 million in
Q3 2021, a record ending balance
- Revenue: increased by 99% to $32.7 million in Q3 2021, and increased by 73% to
$88.5 million for year-to-date Q3
2021, representing record performance for both periods
- Net Income: decreased by 76% to $0.6 million in Q3 2021, and increased by 4% to
$8.8 million for year-to-date Q3
2021
- Adjusted EBITDA: decreased 26% to $5.0 million in Q3 2021, and increased 42% to
$22.7 million for year-to-date Q3
2021
- Cost of Debt Capital: decreased average interest
rate to 9.2%, from 11.6%, in part through retirement of higher cost
term loan at the end of Q2 2021
- Product structure additions: rolled out variable
pricing and graduation capabilities through our platform,
consistent with strategy of providing more competitive products and
lower cost of credit to new and existing customers
- Geographic expansion: from Q1 to Q3 2021,
facilitated expansion of bank programs into 4 and 3 new states
through the MoneyKey and CreditFresh brands, respectively
Highlights Subsequent to Q3 2021
- Successful IPO: raised gross proceeds of
approximately C$70 million (including
the full exercise of the underwriters' over-allotment option)
- Trading on TSX: began trading on the Toronto
Stock Exchange under the symbol "PRL"
- Geographic expansion: facilitated expansion of
bank programs into 5 and 7 new states through the MoneyKey and
CreditFresh brands, respectively
- Dividend: Declared its first dividend as a public
company of CAD $0.095 per share, to
be paid on December 8, 2021
Short Term Targets
The Company is maintaining the Short Term operational and
financial targets for the 12 to 18 month period following
June 30, 2021, disclosed in its IPO
prospectus dated October 13,
2021.
Operating and
Financial Targets
|
Short Term
Targets
|
Ending Combined Loan
and Advance Balances CAGR(1)
|
100%
|
Revenue
Yield(1)
|
140% –
150%
|
Adjusted EBITDA
Margin(1)
|
22% – 26%
|
Net Income
Margin
|
8% – 10%
|
(1)
See "Non-IFRS Financial Measures and Industry Metrics" in the
Company's Management Discussion and Analysis
|
Conference Call Details
The Company will be hosting a conference call and webcast later
this morning with a presentation by Clive
Kinross, Chief Executive Officer, and Sheldon Saidakovsky,
Chief Financial Officer.
Q3 2021 conference call details are as follows:
Date:
|
November 15,
2021
|
Time:
|
8:30AM ET
|
Conference
ID:
|
6015799
|
Toll free
dial-in:
|
(833)
989-2995
|
International
dial-in:
|
(236)
714-4063
|
Webcast:
|
https://onlinexperiences.com/Launch/QReg/ShowUUID=EA2692C5-9ED3-493E-A5B9-7D6B03450111
|
Replay:
|
(800) 585-8367 or
(416) 621-4642
|
Discussion of Financial Results
|
Three Months Ended
Sept 30,
|
%
|
Nine Months Ended
Sept 30,
|
%
|
|
2021
|
2020
|
Change
|
2021
|
2020
|
Change
|
Loans and Advances
Receivable
|
77,216,368
|
33,282,125
|
132%
|
77,216,368
|
33,282,125
|
132%
|
Ending Combined Loan
and
Advance Balances (1)
|
96,841,777
|
38,735,070
|
150%
|
96,841,777
|
38,735,070
|
150%
|
Total Originations
Funded (1)
|
55,786,711
|
25,340,129
|
120%
|
136,723,506
|
55,994,974
|
144%
|
(1)
See "Non-IFRS Financial Measures and Industry Metrics" in the
Company's Management Discussion and Analysis
|
Loans and Advances Receivable grew to $77.2 million and Ending Combined Loan and
Advance Balances reached $96.8
million as at September 30,
2021 and the Company facilitated record Total Funded
Originations for Q3 2021 and year-to-date Q3 2021. The growth was
driven predominantly by the growth in the Bank Programs under the
Company's CreditFresh brand which included the ramp up of our new
bank partnership launched in Q2 2021, the ramp up of the MoneyKey
Bank Service program launched last year, the roll-out of several
new states through both the CreditFresh and MoneyKey brands, the
general economic recovery as a result of easing of COVID-19 related
restrictions, and the increased penetration of our more recent
marketing partners and channels.
|
Three Months Ended
Sept 30,
|
%
|
Nine Months Ended
Sept 30,
|
%
|
|
2021
|
2020
|
Change
|
2021
|
2020
|
Change
|
Revenue
|
32,742,895
|
16,468,013
|
99%
|
88,471,249
|
51,022,187
|
73%
|
Annualized Revenue
Yield (1)
|
143%
|
191%
|
-25%
|
152%
|
202%
|
-25%
|
(1)
See "Non-IFRS Financial Measures and Industry Metrics" in the
Company's Management Discussion and Analysis
|
Revenue increased by 99% to $32.7
million for Q3 2021 and increased 73% to $88.5 million for year-to-date Q3 2021. Revenue
generated over both the periods represent historical records for
the Company. The growth in revenue is attributable to the growth in
Ending Combined Loan and Advance Balances discussed above.
Annualized Revenue Yield for Q3 2021 decreased to 143% and to
152% for year-to-date Q3 2021. This reflects the growth of
CreditFresh and the Bank Programs relative to Propel's legacy
MoneyKey direct lending and CSO products and the general reduction
of rates across products facilitated over Propel's platform.
Products offered by our Bank Partners through the Bank Programs
generally serve lower risk consumers when compared to Propel's
legacy direct lending and CSO products offered under the MoneyKey
brand.
|
Three Months Ended
Sept 30,
|
%
|
Nine Months Ended
Sept 30,
|
%
|
|
2021
|
2020
|
Change
|
2021
|
2020
|
Change
|
Provision for loan
losses and other
liabilities
|
15,420,843
|
4,668,724
|
230%
|
33,175,000
|
13,618,114
|
144%
|
Provision for loan
losses and other
liabilities as a % of revenue
|
47%
|
28%
|
66%
|
37%
|
27%
|
40%
|
Net Charge-Offs as a
% of Total
Funded (1)
|
19%
|
8%
|
138%
|
18%
|
30%
|
-38%
|
(1)
See "Non-IFRS Financial Measures and Industry Metrics" in the
Company's Management Discussion and Analysis
|
Provision for loan losses and other liabilities increased by
230% to $15.4 million for Q3 2021 and
increased 144% to $33.2 million for
year-to-date Q3 2021. The increases are primarily due to the growth
in 2021 and atypically low demand and provisioning in Q2 2020 and
Q3 2020 as a result of the early stages of the COVID-19
pandemic. This is further reflected in the increases in
provision for loan losses and other liabilities as a % of revenue
for both the Q3 and year-to-date periods in 2021.
Demand was especially muted in Q2 2020 and Q3 2020 because of a
temporary reduction in consumer spending coupled with an increase
in government stimulus. Also, out of prudence, underwriting was
proactively tightened due to the market uncertainty which further
reduced origination volumes. This led to exceptionally low
provisioning as percentage of revenue in Q2 2020 and Q3 2020.
In periods of high growth, Propel experiences a higher provision
for loan losses as new customers tend to have higher default rates
relative to existing customers in the portfolio that have been
consistently making payments. Also, under IFRS, the Company records
loan loss provisions based on expected future credit losses as soon
as a new loan is originated without matching revenue that is earned
over the life of a loan. Demand is highest in the second half of
the year beginning with the back-to-school period in Q3 and demand
is particularly strong in Q4 during the holiday season, where
origination volume is at its highest. In contrast, Q1 tends
to be the lowest demand period driven in large part by the tax
refund season. As such, provision for loan losses and other
liabilities as a percentage of revenue is highest in Q3 and Q4 and
lowest in Q1 in a normalized environment. As a result of
COVID-19, Q2 and Q3 2020 were uncharacteristically low growth
periods that, coupled with very strong credit performance, drove
atypically low provision for loan losses and other liabilities as a
% of revenue. 2021 has seen a gradual return in demand as the
economy reopens and government stimulus packages are being wound
down. As such, provision for loan losses and other
liabilities as a % of revenue are more normalized for the 2021
periods considering the accelerated growth realized.
|
Three Months
Ended Sept 30,
|
%
|
Nine Months Ended
Sept 30,
|
%
|
|
2021
|
2020
|
Change
|
2021
|
2020
|
Change
|
Net Income
|
626,044
|
2,566,736
|
-76%
|
8,775,498
|
8,463,160
|
4%
|
Net Income as % of
Revenue
|
2%
|
16%
|
|
10%
|
17%
|
|
EBITDA
(1)
|
2,849,359
|
5,168,345
|
-45%
|
18,517,389
|
16,659,605
|
11%
|
EBITDA as % of
Revenue
|
9%
|
31%
|
|
21%
|
33%
|
|
Adjusted EBITDA
(1)
|
5,008,050
|
6,753,265
|
-26%
|
22,748,623
|
15,992,244
|
42%
|
Adjusted EBITDA as %
of
Revenue
|
15%
|
41%
|
|
26%
|
31%
|
|
(1)
See "Non-IFRS Financial Measures and Industry Metrics" in the
Company's Management Discussion and Analysis
|
Net Income decreased by 76% to $0.6
million for Q3 2021 and Adjusted EBITDA decreased by 26% to
$5.0 million. The increase in Revenue
in Q3 2021 was offset primarily by higher provisioning in the
higher growth period of the calendar third quarter as described
above, the acquisition and data costs incurred through delivering
record originations without a full period of revenue recognition,
the increases in operating expenses to support the high growth, the
uncharacteristic nature of Q3 2020 which resulted in much lower
relative provisioning due to the factors described above as well as
low acquisition and data and other operating expenses given the
atypically low demand and origination volume.
Net Income increased by 4% to $8.8
million for year-to-date Q3 2021 and Adjusted EBITDA
increased by 42% to $22.7 million.
The growth in both profitability metrics is a function of overall
business growth and a return of demand for the products offered
over the Company's platform due to a more normalized operating
environment, resulting in higher Ending Combined Loan and Advance
Balances and Revenues. This growth has been offset in part by the
higher provisioning discussed above and higher acquisition costs in
periods of high growth.
Net Income for both the Q3 2021 and year-to-date Q3 2021 periods
was more impacted by IFRS provisioning on new originations and
accounts in good standing whereas an adjustment for this is made in
the calculation of Adjusted EBTIDA. Net Income was also impacted by
non-recurring transaction expenses of $0.3
million related to the Company's financings.
About Propel
Propel is an innovative, online fintech company, committed to
credit inclusion by providing fair, fast and transparent access to
credit with exceptional service using its proprietary online
lending platform. Through its operating brands, MoneyKey and
CreditFresh, Propel is focused on providing access to credit to the
over 60 million underserved U.S. consumers who struggle to access
credit from mainstream credit providers. Propel's revenue growth
and profitability have accelerated significantly over the past two
years as Propel has been able to facilitate access to credit for an
increasing number of consumers, helping them move forward in their
credit journeys.
Forward-Looking Information
Certain statements made in this news release may constitute
forward-looking information under applicable securities laws. These
statements may relate to our future financial outlook and
anticipated events or results and include the reaffirmation of our
short-term operating and financial targets, our ability to drive
growth in Q4 and over the long-term. Such statements are based on
management's reasonable assumptions and beliefs in light of the
information currently available to us and is made as of the date of
this news release. However, we do not undertake to update any such
forward-looking information whether as a result of new information,
future events or otherwise, except as required under applicable
securities laws in Canada. Actual
results and the timing of events may differ materially from those
anticipated in the forward-looking information as a result of
various factors, including those described in "Risk Factors".
Additional risks and uncertainties are discussed in the Company's
materials filed with the Canadian securities regulatory authorities
from time to time, including the Company's final initial public
offering prospectus dated October 13,
2021 (the "Prospectus"). These factors are not intended to
represent a complete list of the factors that could affect us;
however, these factors should be considered carefully. A copy
of the Prospectus and the Company's other publicly filed documents
can be accessed under the Company's profile on the System for
Electronic Document Analysis and Retrieval ("SEDAR") at
www.sedar.com.
Implicit in forward-looking statements in respect of the
Company's expectations for: (i) Ending Combined Loan and Advance
Balances CAGR; (ii) Revenue Yield; (iii) Adjusted EBITDA Margin;
and (iv) Net Income Margin for the 12 to 18 month period following
the date of the prospectus, are certain assumptions relating to the
COVID-19 pandemic and related government subsidies, the regulatory
landscape, our continued expansion of our Bank Partner
relationships, the availability and cost of debt capital, the
maintenance and expansion of our marketing partnerships and the
overall macroeconomic environment, each as further set out in the
Prospectus.
We caution that the list of risk factors and uncertainties is
not exhaustive and other factors could also adversely affect our
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.
See "Risk Factors" in the Prospectus for a discussion of the
uncertainties, risks and assumptions associated with these
statements.
Non-IFRS Financial Measures and Industry Metrics
This news 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", "EBITDA", "Ending Combined Loan
and Advance Balances", "Net Charge-Offs", "Net Charge-Offs as a
Percentage of Total Funded" and "Total Originations Funded". See
"Key Components of Results of Operations" in the accompanying
MD&A available on SEDAR.
For a reconciliation of the non-IFRS financial measures refenced
herein, please see "Reconciliation of Non-IFRS Financial Measures"
in this news release.
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.
Reconciliation of Non-IFRS Financial Measures
The following table provides a reconciliation of our net income
to EBITDA and to Adjusted EBITDA for the three- and
nine-month periods ending September 30, 2021
and September 30, 2020:
|
Three
Months Ended Sept 30,
|
Nine Months Ended
Sept 30,
|
(US$)
|
2021
|
2020
|
2021
|
2020
|
Net Income. . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
|
626,044
|
2,566,736
|
8,775,498
|
8,463,160
|
Interest on Debt. . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
.
|
1,212,845
|
902,706
|
4,124,761
|
2,888,953
|
Interest on lease
liabilities. . . . . . . . . . . . . . . . . . . . . .
|
106,564
|
114,941
|
334,008
|
356,929
|
Amortization of
intangible assets . . . . . . . . . . . . . . . . . .
|
493,375
|
441,239
|
1,529,846
|
1,236,002
|
Depreciation of
property and equipment . .. . . . . . . . . . .
|
25,186
|
38,211
|
87,191
|
127,064
|
Amortization of
right-of-use assets. . . . . . . . . . . . . . . . .
|
159,629
|
179,090
|
502,129
|
536,154
|
Income Tax Expense
(Recovery) . . . . . . . . . . . . . . . . . .
|
225,716
|
925,422
|
3,163,956
|
3,051,343
|
EBITDA. . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
|
2,849,359
|
5,168,345
|
18,517,389
|
16,659,605
|
Transaction Costs and
Financing Costs. . .. . . . . . . . . .
|
323,216
|
-
|
364,821
|
22,149
|
Provision for credit
losses on current
status
accounts(1) . . . . . . . . . . . . . . . .
.. . . . . . . . . . . . .
|
1,194,979
|
1,419,197
|
2,627,786
|
(274,066)
|
Provisions for CSO
Guarantee liabilities and
Bank Service Program
liabilities. . . . . . . . . . . . . . . . . . .
|
640,496
|
165,724
|
1,238,627
|
(415,444)
|
Adjusted EBITDA. .
. . . . . . . . . . . . . . . . . . . . . . . . . .
|
5,008,050
|
6,753,265
|
22,748,623
|
15,992,244
|
|
|
|
|
|
|
|
|
|
|
_____________
|
Note: (1)
Provision included for (i) loan losses on good standing current principal (Stage 1 — Performing) balances (see "Critical Accounting
Estimates and Judgements — Loans and advances receivable" in
the Company's Management Discussion and Analysis).
|
The following table provides a reconciliation of our Ending
Combined Loan and Advance Balances to
loans and advances receivable for periods
ending September 30, 2021,
September 30, 2020, and December 31, 2020
|
As at Sept
30,
|
As at Dec
31,
|
(US$)
|
2021
|
2020
|
2020
|
Ending Combined
Loan and Advance balances. . . . . . . . . . . . .
|
96,841,775
|
38,735,070
|
62,643,735
|
Less: Loan and
Advance balances owned by third
party lenders
pursuant to CSO program. . . . . . . . . . . . . . . . . .
.
|
(3,204,174)
|
(2,560,981)
|
(2,487,802)
|
Less: Loan and
Advance balances owned by a NBFI
pursuant to the
MoneyKey Bank Service program. . . . . . . . . . .
|
(9,519,178)
|
(280,498)
|
(3,316,385)
|
Loan and Advance
owned by the Company . . . . . . . . . . . . . . .
|
84,118,425
|
35,893,590
|
56,839,548
|
Less: Allowance for
Credit Losses. . . . . . . . . . . . . . . . . . . . . .
.
|
(19,809,595)
|
(8,304,746)
|
(13,406,118)
|
Add: Fees and
interest receivable. . . . . . . . . . . . . . . . . . . . . . .
.
|
9,076,161
|
4,177,246
|
5,262,181
|
Add: Deferred
acquisition and data costs . . . . . . . . . . . . . . . .
.
|
3,831,377
|
1,516,036
|
2,881,948
|
Loans and Advance
Receivables. . . . . . . . . . . . . . . . . . . . . . .
.
|
77,216,368
|
33,282,125
|
51,577,558
|
SOURCE Propel Holdings Inc.