Propel Holdings Inc.

Good morning, everyone. Welcome to the Propel Holdings Second Quarter 2022 Financial Results Conference Call. As a reminder, this conference call is being recorded on August 9th, 2022. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for research and analysts to queue up for questions. I will now turn the call over to Sarika Alawalia. Please go ahead, Sarika.

Thank you, Operator. Good morning, everyone, and thank you for joining us today. Propel's second quarter financial results were released this morning. The press release, financial statements, and MD&A are available on CDAR, as well as the company's website, propelholdings.com. Before we begin, I'd like to remind all participants that our statements and comments today may include forward-looking statements within the meaning of applicable security laws. Forward-looking statements may include but are not necessarily limited to financial projections or other statements of the company's plans, objectives, expectations or intentions and management's plans for future operations or similar matters which are subject to certain risks and uncertainties. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. The company's actual results could differ materially from those projected or suggested in the forward-looking statements due to several important factors or assumptions and many of which are beyond the company's control, including those risks and uncertainties described in our annual information form for the year ended December 31, 2021, filed on CDAR. Any forward-looking statements we make today are only as of today's date. Except as required by applicable securities laws, we undertake no obligation to publicly update or review any forward-looking statements. Additionally, during the call, we may refer to non-IFRS measures. Participants are advised to review the section entitled Non-IFRS Financial Measures and Industry Metrics in the company's management discussion and analysis for the quarter ended June 30th, 2022, for definitions of our non-IFRS measures and the reconciliation of these measures to the most comparable IFRS measure. I'm joined on the call today by Clive Kinross, founder and chief executive officer, and Sheldon Sadakoski, founder and chief financial officer. I will now pass the call over to Clive.

Thank you, Sokka, and welcome everyone to our Q2 2022 conference call. I will start off today's call with an overview of market conditions and how Propel has navigated through the last few months. I will then provide highlights of our second quarter performance. Sheldon will provide a detailed analysis of our financial results. And before we open up the call for questions, I will review our strategy, growth drivers, and our financial targets for 2022 and 2023. Throughout the second quarter, we continue to experience a resurgence in consumer demand for credit post-COVID. Despite some uncertainty in the macroeconomic environment, including inflationary pressures and the threat of a recession, we continue to produce profitable growth. Subprime consumers have been adapting to a turbulent economic environment and continue to demonstrate resilience as the global economy is navigating through post-COVID normalization inflation and geopolitical tensions, all of which have had various impacts on consumers, including through supply chain interruptions and rising food and gas prices. Today, we are seeing strong wage growth, a strong job market, and a low unemployment rate. Our data also tells us that consumers seeking credit products through our platform have strong incomes despite the inflationary pressures with incomes increasing at a faster rate than inflation between Q4 2021 and today. This means that while they may need credits to bridge gaps, that on balance, we expect these consumers to maintain their ability to repay. While this is the picture we are seeing today, our data at the start of the quarter, particularly our delinquency and default rates, showed us that consumers were still in the process of adjusting to the new economic reality. As you may recall, in light of the economic backdrop and ensuing uncertainty, Propel and its bank partners proactively began tightening credit criteria in Q1 of 2022. In addition, at the beginning of the quarter, our team put a lot of energy into automating and refining a number of our processes to help our consumers and our team navigate through the evolving economic landscape. In hindsight, we know that our thesis was correct and that these measures were the right thing to do. While delinquency rates began to increase, we saw them peak approximately in the middle of the quarter when the effects of the credit tightening and process improvements began to come through and consumers had the opportunity to adjust. Towards the end of Q2, we saw stronger repayment behavior and improving default performance across our portfolios. Today, these metrics continue to improve throughout the existing portfolio. Default performance for new customers is better than expected, and our AI-based machine learning underwriting engine is more robust than ever. At a high level, we have also observed a tightening of credit criteria across the financial services sector. This has resulted in a material increase of new and high-quality applications characterized by higher incomes and credit scores across our platform. This dynamic has also contributed positively to our improving portfolio metrics in the back part of Q2 and into Q3. Propel delivered record originations, revenue, and ending combined loan and advance balances in Q2 2022. This growth was driven by the advancement of our strategy through the following factors. The addition of a new bank partner in Q2 2021. The rollout into 10 new states by our bank partners in 2021, expanding our geographic presence. The general economic recovery and return of demand as a result of easing of COVID-19 restrictions. the addition of marketing partners and expansion of existing marketing channels, the continuing successful performance of our graduation and variable pricing capabilities, and on an industry level, the continuing transition from brick and mortar to online lending. And, as I just mentioned, the tightening of credit criteria across the financial system, which has resulted in a broader, higher credit quality consumer base seeking credit over our platform. In light of the significant growth, we delivered strong profitability on both an IFRS and an adjusted basis, which is a testament to our operating discipline, our variable cost structure, and the diligent execution of our strategy. You will recall that in periods of high growth, we recognized significant upfront cash costs, and we also booked significant non-cash expenses relating to provisioning on new originations under IFRS with very little attributable revenue in the period of origination. I would also like to highlight a significant reduction in our acquisition cost per dollar funded, which is the result of our improving acquisition strategies, marketing partnerships, and continuously refined underwriting and acceptance criteria in addition to originations in the quarter being more heavily concentrated. toward existing customers. Our discipline in managing costs and our established infrastructure is expected to provide a solid base for operating leverage as revenue and profitability are expected to accelerate in the second half of 2022 and into 2023. With that, I will now pass the call over to Shelf.