Propel Holdings Inc.

Good morning, everyone. Welcome to PrepareHall Link's first quarter 2023 financial results conference call. As a reminder, this conference call is being recorded on May 10th, 2023. At this time, all participants are in listening mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for research analysts to queue up for questions. I will now turn the call over to Devin Kalani. Please go ahead, Devin.

Thank you, operator. Good morning, everyone, and thank you for joining us today. Propel's first quarter 2023 financial results were released yesterday after market close. 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 would like to remind all participants that our statements and comments today may include forward-looking statements within the meaning of applicable securities laws. The risks and considerations regarding forward-looking statements can be found in our Q1 2023 MD&A, an annual information form for the year ended December 31st, 2022, both of which are available on CNR. 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 Q1 2023 NDNA for definitions of our non-IFRS measures and the reconciliation of these measures to the most comparable IFRS measure. I am joined on the call today by Clive Kinross, Founder and Chief Executive Officer, and Sheldon Sinikowski, Founder and Chief Financial Officer. Clive will provide an update on our operations in the U.S. and Canada, including observations on the overall consumer market. It will also discuss how AI and machine learning continue to play an integral role in our operations and growth strategy. Clive will then provide an overview of our record Q1 results before Sheldon covers our financials in more detail. Before we open the call up to questions, Clive will provide an update on Propel's strategy and growth drivers for 2023. With that, I will now pass the call over to Clive.

Thank you, Devon, and welcome everybody to our Q1 2023 conference call. We are very proud of another record-setting quarterly performance. Amidst a dynamic economic environment and what is historically our slowest quarter of the year for originations, Propel delivered another record quarter on both the top and bottom line. Starting with our U.S. operations, we continue to see a resilient consumer which is driving strong credit performance. The unemployment rate remains at a 50-year low, and the job market continues to be strong, as shown by another robust job report with over a quarter of a million jobs added last month. We also continue to observe positive real wage growth. In fact, when looking specifically at the underserved consumer markets, the data demonstrates that real wage growth has been the strongest for this particular group during the four-year period ended in 2022, strengthening the financial position of this consumer base. This is all to say that we remain steadfast in our mission of providing access to credits for underserved consumers and are encouraged to see how resilient this segment of the consumer market continues to be. From a credit demand perspective, as we briefly mentioned on our last earnings call, our core business observed a more normalized seasonal pattern in Q1 insofar as we experienced a more standard tax season for the first time since the onset of COVID in early 2020. This resulted in consumers receiving higher lump sum tax refunds, repaying their debt balances at a faster pace, and borrowing less. which is typical for what we experienced in the Q1 period before COVID. The credit scores and income levels we are seeing coming through our platform are higher than they've ever been, driven in part by the tight and underlining and conservative credit posture implemented by us and our bank partners about a year ago. We also continue to benefit from the ongoing tightening of credit throughout the credit supply chain, which has pushed more higher credit quality consumers to our platform. We expect this trend to continue and even possibly increase in light of the regional banking turmoil in the U.S. Given this instability, it is very likely that financial lenders in our U.S. markets will tighten their standards even further. not too dissimilar to what transpired during the 2008-2009 global financial crisis. And ultimately, as was the case coming out of that crisis, we expect that more consumers will be locked out of traditional credit options and will continue to move to our segment of the market. Turning to Canada, we launched four accredited in British Columbia during the quarter, our third province after Ontario and Alberta. And just this morning, we entered Saskatchewan, our fourth province, ahead of schedule. While still in the early days, we are seeing strong demand and stable credit performance in Canada. Not unlike the U.S., Canada is also experiencing a strong labor market with 50-year low unemployment and with mainstream banks and other traditional credit providers appearing to tighten underwriting standards as well. This is shutting more and more Canadian consumers out of the credit market in an environment of rising interest rates and elevated inflation. Data shows that in excess of 50% of Canadian consumers are living paycheck to paycheck. Despite this backdrop, the Canadian federal government announced in late March the intention to introduce legislation that would reduce the maximum allowable interest rates to 35% APR. We are disappointed with this decision, and we will believe this will put into peril the very Canadians the government is trying to protect. At a time when more Canadians than ever are living paycheck to paycheck, the need for access to credit in Canada is as important as ever. Yet under the proposed changes, the Canadian Lenders Association Risk Roundtable Subcommittee estimates that roughly 4.7 million Canadians will lose access to fair and transparent credit, forcing many Canadians to turn to payday lenders or other high-cost alternatives that are approximately 10 times more expensive. The fact is, as a result of our industry-leading AI and machine learning capabilities, we are able to provide products to Canadian consumers that cannot access mainstream credit products. And the products we provide are up to 90% less expensive on an APR basis than what would otherwise be available to them. The demand for credit will not change as a result of this proposed legislation. People still need to pay bills and all this will do is cut off a critical and legitimate supply of credit. At Propel, we believe everybody deserves access to fair credit. As they work through this process, we urge the governments to work with the industry to ensure that these risks can be somewhat mitigated. While the implementation timing is currently uncertain, we do not anticipate the change will have any impact on our 2023 guidance. Looking beyond this recent announcement, there remains a tremendous market opportunity for online access to credits for underserved consumers across Canada. We remain confident in our ability to adapt and for our Canadian brands to develop into a market leader over the longer term, contributing to both revenue and profitability. Before turning to our Q1 performance, I wanted to spend a few minutes speaking about our industry-leading AI and machine learning platform and how it sets Propel apart. With AI so prevalent in the news lately, more and more people are starting to understand the power of the technology. But AI and machine learning is not new to us at Propel. We're one of the few fintechs in North America that can say we've been on the cutting edge of AI shortly after our inception and that it has been driving our growth and profitability ever since. What sets our use of AI and machine learning apart is that it's not bolted onto existing systems and processes as many businesses are doing today. Rather, our AI and machine learning is fully integrated into every aspect of our operation. Unlike prime credit consumers, our addressable market has uneven or thin credit histories, and consequently, accessing data from mainstream credit bureaus is inadequate in underwriting these consumers. Our AI allows us to look beyond traditional credit scores and processes and triangulate millions of pieces of data to determine the credit worthiness of an applicant and also detect potential fraud. Our platform provides immediate and reliable feedback, which allows us to process applications in real time, creating efficiencies for us, our partners, and ultimately the more than one million consumers we've been able to facilitate access to credit. Without the sophisticated technology we have been able to develop, this consumer segment would continue to be locked out of credit options or would be accessing credit at a materially higher cost than what we're able to provide. Our AI and machine learning has been built entirely in-house allowing us to make smarter, faster, and more predictive decisions to continue to help more consumers, and importantly, to drive our profitability. Lastly, while we internally recognize how powerful our platform and technology are, it has also been widely recognized in the industry and has become a key differentiator for us in generating the active new business development pipeline we currently have. I'm incredibly passionate about this technology and the talent behind it, and I'm confident it will continue to drive Propel's growth. Now onto some highlights for the callback. Propel has once again delivered record results in Q1 2023. Our ending combined loan and advanced balances, or CLAB, increased by 57% to more than $248 million U.S. dollars. and revenue increased by 30% to a record of $66 million. This quarter, Propel also delivered record adjusted EBITDA of more than $17 million, record net income of almost $7.5 million, and record adjusted net income of more than $8.3 million. All of these metrics represent significant increases from Q1 2022. The growth we experienced in Q1 2023 was driven by, first of all, the continued successful expansion and performance of graduation and variable pricing capabilities. Secondly, the growth of our bank programs. Thirdly, the expansion of originations through growth in Canada and with key marketing initiatives. And fourth of all, at a macro level, strong consumer demand for credit driven in part by the continued focus on online lending as well as a tightening of credit criteria across the financial sector which has resulted in a broader higher credit quality consumer base seeking credit across our platform our record performance in q1 2023 is a testament to our relentless focus on profitable growth and the scalability and operating leverage in our business model lastly Given our strong results, track record of profitable growth, and solid financial position, I am pleased to announce that our board of directors has approved an increase to our annual dividend from $0.38 per share to $0.40 per share. This represents an increase of 5.3% and our first dividend increase as a publicly traded company. With that, I will now pass the call over to Shelton.