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spk04: Good morning and welcome to Propel Holdings' second quarter 2023 financial results conference call. As a reminder, this conference call is being recorded on August 11th, 2023. At this time, all participants are in listen-only 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 Devon Galani. Please go ahead, Devon.
spk07: Thank you, operator. Good morning, everyone, and thank you for joining us today. Propel's second quarter 2023 financial results were released yesterday after market close. The press release, financial statements, and MD&A are available on CDR Plus, 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 Q2 2023 MDNA and annual information form for the year ended December 31st, 2022, both of which are available on CDER+. 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 and accompanies Q2 2023 MD&A 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 Clyde Kinross, Founder and Chief Executive Officer, and Sheldon Sidakovsky, Founder and Chief Financial Officer. Clive will provide an update on our operations, including observations on the overall consumer market, and will then provide an overview of our record Q2 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 growth strategy and outlook for the remainder of 2023. With that, I will pass the call over to Clive.
spk00: Thank you, Devin, and welcome everybody to our Q2 2023 conference call. We are proud to deliver another outstanding quarter of record results in Q2 on both the top and bottom line, including record revenue, adjusted EBITDA, adjusted net income, total originations funded, and ending combined loan and advance balances, or CBAT. Following a more typically seasonal first quarter characterized by lower consumer demand, we returned to a period of robust originations, driven by additional new customer volume representing 48% of total originations funded, which is the highest percentage of new customers originated since 2021. Looking at the broader economy on both sides of the border, we're encouraged by the macroeconomic data we are observing. Inflation appears to be moderating, the job market remains strong with the unemployment rate remaining at a 50-year low, and we haven't observed any material slowdown in economic activity, including consumer spending. We're also encouraged by the ongoing positive real wage growth supporting our and our bank partners' target consumers. This is all to say that we continue to observe resilience and strong demand coupled with strong credit performance among the underserved consumer segments. Turning to our U.S. business, we experienced a significant increase in consumer demand and strong credit performance during Q2, following a more typical seasonal Q1. This demand was supported by several factors, including the expansion of products and services offered through our platform, the continuing industry-wide transition from brick and mortar to online lending, and the continuing tightening of credit throughout the credit spectrum, which has pushed more higher-quality credit consumers to our platform. As noted last month by the Federal Reserve Bank of New York, The tightening across the credit spectrum, amongst other factors, has pushed the rejection rates for loan applications to 22%, the highest level since June 2018, leaving many borrowers looking to alternative lenders. The quality of consumer demand, strong credit performance, and the encouraging macroeconomic data previously discussed led to record originations. we did this while we and our bank partners maintained a prudent approach to underwriting the strong credit performance is demonstrated by provision for loan losses and other liabilities which has a percentage of revenue decreased to 51 during the quarter from a high point of 58 in q2 2022 Our ability to continue to grow while decreasing the provision as a percentage of revenue is driven by our proprietary and industry-leading AI capabilities. We believe that our AI calculated credit risk scores are a more accurate measure of a consumer's ability to repay than traditional credit scores, and our industry-leading underwriting platform provides us with the confidence to facilitate loans to consumers that are otherwise locked out of the credit market by traditional lenders. Our AI is able to bring more people into the credit market while driving profitability in our business. While we're optimistic about the opportunity to continue facilitating access to credits to even more new consumers, we also recognize that the macroeconomic environment remains dynamic, and as such, we and our bank partners remain vigilant and will continue to operate prudently. Also in the U.S., we're excited about the official launch of our lending as a service program with PathWord. We announced this program on June 20th, which was in line with expectations. The program will broaden access to credit for underserved consumers, a shared vision for both companies. While in its early days, Pathwood is pleased with the performance to date, including credit performance, which is strong in line with expectations. Importantly, the loans originated by Pathwood will generate fee revenue for Propel, expand our presence into the sub 36% APR consumer lending products, diversifies our business, and is the start of our lending as a service product offering. As we have previously communicated, it will take additional time before this program will have a meaningful impact to our financial performance, and we're not expecting it to have a material impact to our 2023 results. Turning to Canada, our rollout plan remains on track with the launch of FORA in Saskatchewan during the quarter. We are also delighted to announce a recent expansion into the Atlantic provinces with the launch of New Brunswick and Newfoundland and Labrador on July 26. While still nascent, the fuller credit loan portfolio has grown to approximately 6 million Canadian dollars at the end of Q2. Furthermore, Canadian credit performance is continuing to perform in line with expectations, and we have also observed that our cost per customer acquisition in Canada has performed better than we had originally projected. This is a testament to our prudent underwriting and the application of our AI capabilities to optimize our marketing efforts and determine the creditworthiness of applicants. Our cost per acquisition is one of the largest operating expenses on the income statement, and while it is still early days, this performance should ultimately help in generating higher margins than our business plan had initially anticipated. This is another way our AI drives profitability throughout our entire business. We're incredibly excited about our growth prospects in Canada. Having just added two new provinces in the portfolio, we are now live in six provinces across the country, with more expected to follow. Regarding the Canadian federal government's announcements in the 2023 budget to reduce the maximum allowable rate of interest to a 35% APR, We continue to engage in productive discussions with the Canadian government, both directly and through the Canadian Lenders Association. We continue to believe that without the appropriate exemptions to this change, a blanket reduction in the maximum liable rate of interest will put into peril the very Canadians the government is trying to protect. Propel has dedicated itself to building a new world of financial opportunity for our consumers and partners, and we will continue to proudly advocate for our consumers. While the implementation timing and specifics remain uncertain, the change is not expected to have any impact on our current 2023 guidance. Now onto some highlights for the quarter. Propel delivered another quarter of record results in Q2 2023. In comparison to Q2 of last year, revenue increased by 33% to a record of $72 million, and our C-Lab increased by 53% to a record of more than $273 million. This quarter, Propel also delivered record adjusted EBITDA of more than $18 million, net income of 5.7 million dollars and record adjusted net income 8.6 million dollars all of these metrics represent significant increases from the prior year the top line growth we experienced in q20 q2 2023 was driven by first of all updates to our ai model to originate additional volume from new customers Secondly, the continued successful expansion and performance of graduation and variable pricing capabilities. Third of all, the growth of our bank programs. Fourth, expansion of originations through growth into Canada and with new marketing partners. And fifth, At a macro level, strong consumer demand for credits, driven in part by the continued focus on online lending, as well as the tightening of credit criteria across the financial sector, which has resulted in a broader, higher credit quality consumer base seeking credits across our platform. Our strong profitability on both an IFRS and on an adjusted basis is a testament to our operating discipline and the scalability and operating leverage in our business model. And as discussed, our industry-leading AI, which is constantly optimizing our platform for efficiencies. With that, I will now pass the call over to Shel.
spk06: Thank you, Clyde, and good morning, everyone. We are proud of our record results this quarter and of our ability to continue growing the business significantly on the top and bottom line. As Clive discussed, we experienced the return to a more robust quarter of originations following a more typical seasonal Q1 characterized by higher tax refunds and softer consumer demand. In line with our expectations and given the strong credit performance, continued resilience of the macroeconomic environment, and the quality of the consumer demand, we and our bank partners originated a higher proportion of new customers through both the CreditFresh and MoneyKey brands as compared to prior quarters. New customer originations for the quarter represented 48% of our total originations funding and was the highest percentage of new customer originations since Q4 2021, right before we and our bank partners started tightening our underwriting posture in early 2022. The increase in new customer originations helped drive our record loan and advance receivables balance to $215.7 million, as well as our record ending C-Lab to over $273 million for the quarter. These balances were also driven by the factors that Clive outlined earlier, which include the continued expansion of our bank programs and broadening our presence across the underserved consumer market amongst other factors. I would also note that our Canadian operation, FORA, contributed to the company's overall Q2 revenue and loan balance growth, albeit modestly, given the short time period since the launch in late 2022. Ultimately, the record loan and advance receivables balance and ending C-Lab resulted in our record revenues of $71.7 million for Q2, representing 33% growth over Q2 2022. Furthermore, our year-to-date revenues of $137.3 million was a record for a six-month period. The annualized revenue yield was 110% in Q2, a decline from 128% in the prior year. This change in yield is consistent with the strategy of moving up the credit spectrum to facilitate access to credit for more underserved consumers. As previously noted, this is accomplished primarily through our variable pricing and graduation initiatives. I would, however, note that the annualized revenue yield has actually increased slightly from 106% in Q1 2023, which is reflective of the higher new customer volume previously discussed. As a reminder, new customers typically start at a higher cost of credit before qualifying for reduced rates and higher loan amounts pursuant to our graduation program. Turning to provisioning and charge-offs, the provision for loan losses and other liabilities as a percentage of revenue was 51% in Q2, representing a significant decline from 58% in Q2 of last year. As a reminder, the 58% in Q2 2022 represented a high point for the company in recent years and occurred during a period in which central banks were just starting to increase interest rates and consumers were starting to experience the effects of rising inflation. Consequently, we experienced an uptick in default rates during that period, as we have discussed previously. The decrease in the provision for loan losses as a percentage of revenue reflects the improving credit performance in the portfolio from Q2 2022 through today and is a testament to our prudent underwriting and application of AI capabilities driving higher credit quality. Our AI platform is dynamic, constantly integrating new pertinent external and internal data points. which in conjunction with our world-class risk team adjusts how we evaluate consumer risk and ultimately enables us and our bank partners to facilitate more loans to consumers across the credit spectrum while keeping strong default performance in line with targets. With respect to net charge-offs, consistent with the decrease in provisions, our net charge-offs as a percentage of C-Lab also declined, decreasing to 12% in Q2 2023 as compared to 15% in Q2 2022. This decrease is a result of the same factors that drove down the provision and ultimately because of the higher credit quality portfolio composition, including higher average credit scores and average incomes. I would also note that the 12% experience in Q2 2023 is lower than pre-pandemic levels and as such reflects the continued shift in the overall portfolio towards consumers higher on the credit spectrum. In Q2 2023, our net income increased to $5.7 million from $2 million in Q2 2022, while adjusted net income increased to a record of $8.6 million in Q2 2023 from $4.3 million in Q2 last year. Our net income year-to-date grew to $13.1 million and adjusted net income increased to $16.9 million, both representing records for a six-month period. You will recall that in periods of high growth, we recognize significant upfront cash costs, and we also book significant non-cash expenses relating to provisioning on new originations under IFRS with very little attributable revenue in the period of origination. As such, we make an adjustment to our net income to remove a part of the provision relating to the good standing loans that have no indication of underperformance. We believe that the adjusted net income is a truer reflection of the company's earnings performance. The growth in net income and adjusted net income is primarily a result of the overall growth of the business, lower provision for loan losses as a percentage of revenue, operating leverage, and ongoing effective and prudent cost management. These cost management initiatives include continued technology enhancements that are driving increased automation in originations and loan servicing across the product portfolio, ultimately leading to higher productivity and lowering our operating costs. Furthermore, technology advancements are enhancing the overall customer experience, which is core to our mission. The disciplined expense management, technological enhancements, and inherent operating leverage is evident in our decreasing operating expenses as a percentage of revenue. These cost efficiencies, along with the lower relative provision expense, contributed to the net income margin increasing from 4% in Q2 2022 to 8% in Q2 2023, and the adjusted net income margin increasing from 8% in Q2 2022 to 12% in Q2 2023. We do note that we expect that the margin would have been even higher but was counteracted by the following factors. higher upfront costs including acquisition and provisions for loan losses related to a higher level of new customer origination. Secondly, costs incurred related to the build out of PathWord that launched in late June and costs related to growing our new Canadian product which launched late last year. And three, higher interest costs on our credit facilities due to the increasing interest rates over the past year. The increase in interest rates since the start of 2022 drove our overall cost of debt to 13.5% in Q2 from 9.1% in the prior year. Before I pass the call back to Clive, I'll provide an overview of Propel's financial position. At the end of Q2, we remain well capitalized to continue executing on our growth plan. As of June 30th, we had approximately $132 million of undrawn capacity under our various credit facilities. Our debt to equity ratio of approximately 1.7 times remained the same as the end of Q2 from Q1 and dropped slightly from 1.8 times at the end of last year. This comes as a result of strong earnings and operating cash flow generated over the quarter, offsetting the increase in debt utilization. Furthermore, this result is noteworthy given the significant growth in originations in Q2 over Q1. Given the structuring of our credit facilities, which provides us the capacity for four times leverage, we continue to have ample debt capacity and liquidity to execute on our strategy. We are confident that our strong financial position and significant cash flow generating capability will be able to support the continued growth of our existing programs, ongoing rollout of fora and PathWord, and to support our dividend. I will now pass the call back over to Claude.
spk00: Thank you, Sheldon. Having just passed the halfway mark, we are thrilled with what we have achieved so far in 2023. But there remains a lot of work to be accomplished in the back half of the year, and we are focused on accelerating our growth through three key areas. First, with our core U.S. business, we will respond to consumer demand and expand and optimize our existing programs, including Money Key and Credit Fresh. We are also laying the groundwork to offer products and services in additional states. while we expect that we and our bank partners will remain prudent with our underwriting given the ongoing high credit quality consumer demand and credit performance we expect that we will continue to experience an increasing number of new customers during q3 and q4 which are typically the highest demand quarters for our business second we will continue to accelerate growth for path with amphora With PATHWIT, as previously mentioned, we officially launched our five-year lending as a service program, which is off to a stellar start. With respect to FORA, we expect to continue to build our presence in existing provinces, as well as continue our rollout across additional provinces on a disciplined basis. We remain extremely optimistic about the market opportunity in Canada and our ability to develop into an industry leader. And third, we continue to realize additional market opportunities, including new products and partnerships. Additionally, while the need for credit access remains high in the U.S. and Canada, we know there is significant demand in other markets, and as a result, we are evaluating exciting opportunities in additional geographies. There is a lot to accomplish, but we have a track record of results and the discipline to execute. In the last 12 months, we have bought fora and password to market and schedule while continuing to grow profitability. I have incredible confidence in our team and I know we will deliver. Lastly, halfway through the year, we as a group have spent time reviewing where we are as a company and what more there is to accomplish as an organization. We've had several conversations about where we have come from and what inspired us to start Propel. Being entrepreneurs, we are very involved in the day-to-day, so it's important to step back and reflect. Twelve years ago, we believed there was a real need to build a different financial system for consumers who were locked out of traditional credit institutions. To build a company that combined the best of technology and AI, the best talent, and the best of consumer finance. We've done that, and we have built a world that works for consumers, partners, and shareholders alike. That being said, while we are one of North America's fastest growing and profitable fintechs, there remains a vast market opportunity to serve those consumers in need of access to credit. And our path to becoming a global industry leader is just getting started. That concludes our prepared remarks. Operator, you may now open the line for questions.
spk04: Thank you, sir. As stated, ladies and gentlemen, we will take questions from research analysts. If you would like to ask a question, please press star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. And if you would like to withdraw from the question queue, you will need to press star followed by two. And if you are using a speakerphone, you will have to press Lift the handset before pressing any of the keys. Please go ahead and press star 1 now if you have a question. And your first question will be from Andrew Scott at RothMKM. Please go ahead, Andrew.
spk02: Good morning. Thanks for taking my questions and congratulations on the strong results.
spk03: So I know you guys touched on this in the prepared remarks, but could you kind of elaborate on what you saw kind of in the economy and marketplace that allowed you to feel more comfortable pursuing new customers? And secondly, kind of how are those loans performing to date?
spk00: Yeah. First of all, Andrew, good morning. Thanks for joining the call. And thank you also for your kind comments. Much appreciated. Certainly, you know, we're all looking at the same macroeconomic data, and we're all seeing that there's real wage growth across the broader economy. If you were to really hone into our segment of the market, the wage growth has been even more significant, and we're seeing that wage growth. or real wage growth at a time when inflation is coming under control. In addition to that, Mirela, all-time high in terms of employment. All of those are very strong fundamentals and, in many respects, a Goldilocks scenario for us. At the same time, there continues to be certainly the perception of risk in the markets, from an economic standpoint. And as a result of that, there's been significant tightening across the entire credit spectrum. Because of where we fall in the waterfall, so to speak, lots of the customers who would otherwise get funded prior to Propel, if you will, in terms of, again, in terms of the credit waterfall, are dropping down to us. So we are seeing higher quality consumers than we've ever seen before. And I know I've been saying that for the last quarter or two, but it continues to be the case today. And when I say better quality consumers, I'm saying higher incomes, better credit scores than we've ever experienced in the past. So notwithstanding our tighter underwriting posture, that we and our bank partners have and we're still doing record numbers of originations because of the large volume of consumers that aren't being funded prior to us. in answer to the second part of the question and maybe the most important aspect is how are these consumers performing as you could see from the results credit performance has been exceptionally strong contrast q2 of this year to q2 of last year you could see what a dramatic improvement there is and the provision for loan losses went from 58 percent last year to 51% this year, which is a dramatic improvement. And we're continuing to see that same strong credit performance as well as that same strong consumer demand up to this point of Q3. So we're really feeling good about the state of the consumer.
spk03: Awesome. Thank you for the additional details. And then a second question from me. Very exciting to see the launch of Pathword. I think it'd be a really transformational product. I was just kind of curious what you guys are looking for over the next couple months, maybe, I guess, through year end, what you're targeting to kind of see through the partnership and what you guys want to accomplish there.
spk00: Yeah, and we're almost two months into that launch. It's been a really strong start. Credit performance has been outstanding, and I think one of the things about our AR platform that we've tried to educate the market on since coming to market is first and foremost that when you underwrite, underbank, and underserve consumers, you can't do it using traditional credit scores. And one of the reasons we developed our AI underwriting platform several years ago was specifically it's the only way to ultimately score these underserved consumers. But we said all along that we could use the same methodology in moving upstream from a credit standpoint. And the fact that we've gone into the sub-36% market with PathWord are originating loans, and these loans are performing in line with, if not better than expectations. And I want to caveat that by saying it's still early days, but we're seeing stellar credit performance is really a testament to our AI underwriting engine and excellent proof points that we could go way broader and certainly a much broader market given our overall methodology. As you can also appreciate, Andrea, being at the very early phases over here, we're coming off an exceptionally low base, so the growth really is exponential, and we expect it to continue to be exponential for the remainder of Q3 and into Q4 as well. With that said, with the business that this year we've guided to, I think the midpoint of the guidance is around $330 million, as I'm sure you can appreciate, a program that's as new as Pathways. While it will contribute positively to 2023, it's not going to have a material impact to revenues nor the bottom line. It will start to have a bigger impact in 2024 and beyond.
spk02: Awesome. Well, thanks again for the color, and I'm excited to see the continued progress. Thank you, and thanks for the encouragement and kind words.
spk04: Your next question will be from Adia Kelvey at 8 Capital. Please go ahead.
spk05: Hey, good morning, guys, and let me add my congratulations as well. Just on the PCL performance, really strong performance there. So that's good to see. But given through the back half of the year, you said you're going to be increasing those originations to new customers. How do you see PCLs kind of trending throughout the end of the year? Would you still continue to expect this strong performance or a slight pullback? Just any color around that would be excellent.
spk06: Yeah, hey, dear, thank you for the kind words as well. So, you know, typically when we grow originations and particularly new customer originations, they carry with them a higher provision for loan losses. Then our mature portfolio, so that's notwithstanding the excellent performance that we saw in Q2, you still saw an uptake in the provision relative to Q1 from 47 to 51%. But if you look under the covers in terms of how the actual delinquency rates for the business are performing, they were pretty much in line with Q1. And that's reflected also through our net charge-off rate, which was 12% in Q2 versus actually 13% in Q1. So it's really kind of the... The distribution or composition of the portfolio between new and existing consumers, all things being equal, the more originations we put on the books, the higher the PCL as a percentage of revenue will be, and that's okay. So I think to answer your question, we expect because of the accelerated growth that we're anticipating in Q3 and Q4, I would expect that PCL to tick up. probably between the 51% that we're at today to, let's say, 54-ish, between 51 and 54 for the remainder of the year. And that's, again, you know, as we've always said, in a period of growth somewhere between 50 and 55, that's a very profitable place for us to be from a provision standpoint.
spk00: I want to just add to what Sheldon said over there. Obviously, there's accelerating growth in Q3 and Q4 for the remainder of the year. And I guess you could calculate that based on the guidance. So even though these provisions will tick up a little bit, the growth is ticking up materially, and we expect, certainly on the revenue side, and we expect, obviously, there to be growth in absolute terms in the bottom line as well. The good news about growing the book, that materially between now and the end of the year, it means we're building in a very strong position to begin the 2024 financial year. So with that said, if you just kind of connect all the dots over here, you could see that we will start 24 at a revenue run rate. you know, certainly start the year somewhere in the $400 million range and build it up from there. So not only is it going to have very, very strong implications for the back end for this year, but will position us very well for the start of next year as well.
spk05: Understood. Thanks for that. And then maybe just from a customer acquisition point, of course, I understand that that ticked up a little bit commensurate with the increase in origination. Would you expect that to go up? slightly as well?
spk06: Yeah, so I think, you know, the metric that we report is cost per funded origination. And obviously, the increase is reflected in that metric. But if you actually look at our cost per acquisition per new customer dollar funded, it remained unchanged from last year. It's about 19 cents per dollar funded. So, from that perspective, again, the acquisition costs increased in terms of the cost for funded origination because of the higher proportion of new customer originations that we did. So, the blended costs, we do expect to continue to increase as the new customer acquisitions represent the higher proportion of total originations funded. But in terms of as a percentage of revenue, we expect it to decrease. And certainly as a, you know, from a cost per acquisition on a new customer basis, we expect it to be in line with what we've done over the quarters coming in. Well, over the past several quarters.
spk05: Excellent. Congratulations again on the results, guys. I'll pass the line.
spk00: Thank you. Thanks for the curiosity and also the current words.
spk02: Much appreciated.
spk04: Next question will be from David Pierce at Raymond James. Please go ahead.
spk02: Good morning. Morning, David.
spk01: Hoping you can talk a bit about acceptance rates. You're obviously seeing larger application volumes. That's allowing you to be more selective with who you lend to. My question is, How has the acceptance rate been trending over the last 12 months? Maybe going back to 2Q22 last year when credit performance was a little weaker, you decided to tighten your underwriting after that. Is it fair to say that with the higher origination volumes this quarter, the acceptance rate was a little higher compared to recent quarters?
spk00: Yeah, it's a great question. And let me start off by contrasting the acceptance rate of Q2 of this year relative to Q2 of last year. Q2 of last year, certainly the acceptance rate was higher than it was this year. And just looking in the rearview mirror, I think that we're probably – We and our bank partners were not prudent enough, given some of the macroeconomic trends that existed at the time. If you recall correctly, we then took a much tighter underwriting posture. And for the most part today, we're operating with the same or very similar underwriting posture to what we've been working with ever since. So, by and large, we haven't changed our perspective on the risk in the border markets in terms of how we operate, meaning we continue to operate very prudently. With that said, we are noticing an uptick in the acceptance rates, certainly not where we were in Q2 of 2022. but we're higher than say we were in Q3 and Q4 of last year. And the reason for that, again, is because the number of consumers that aren't accessing credit prior to falling into our segment of the market has increased. If you look at what the Federal Reserve New York put out recently, the number of consumers that are being declined from traditional credit sources is at its highest level since 2018. And it's because those high consumers how quality consumers are now hitting our segment of the market that our acceptance rate has ticked up. So all of that is to say that's the direct answer to your question. To flesh that out a little bit further, that certainly doesn't mean we're taking on incremental risk, as evidenced by our underwriting posture, which hasn't changed.
spk01: Thank you. And just on the competitive environments, The results we're seeing across your peer group have been relatively mixed over the last couple of quarters. Your results have clearly been very strong. When you think about trends like higher financing costs, a more uncertain economic environment, how has your competitive positioning in the marketplace changed over the last 18 months or so?
spk00: I think a couple of things. First of all, I think we're delivering consistent, profitable growth. And if anything, as the business grows, so too does the bottom line grow at an even faster clip. And I think that's a testament to almost our 12 years of operating history, not only in terms of the proprietary data that we've been able to collect and establish over that period and therefore refine the underlying and marketing and techniques that we use amongst other things. But in addition to that, we're a very, very well-tenured company in terms of our executive team. And I believe that that is what enables us to execute flawlessly and bring these new programs to market like Pathwood, which I think certainly differentiates us, including the profit profile that you spoke about. With that said, we've grown a lot in the last couple of years. Our credit facility that we have today was put in place with the same partners that we've been working with for the last eight or nine years. They've been phenomenal in how they've supported the business. And this is a facility that was put in place, again, when we were a smaller company. And if you look at some of our competitors, their cost of capital is, in some instances, closer to 6% or 7% or 8%, whereas today we're at 13.5%. So from a competitive standpoint, that incremental call at 5.5% on our cost of debt is certainly a headwind relative to our competitors. But as we're getting larger, as we're getting closer to being able to attract different types of institutional capital, we certainly expect to be able to grow into that lower cost of capital over the foreseeable future. So what today may be viewed as a headwind, we believe is going to present tremendous opportunity on a go-forward basis largely because of the different types of debt capital we'll be able to attract on the one hand. And on the other hand, it's our view that if we're not at the top of the tightening cycle, we're close to the top of the tightening cycle. So we expect our costs of capital to start to come down irrespective.
spk02: Appreciate the insight. Thank you.
spk04: Thank you. At this time, I would like to turn it back over to Clive for closing remarks.
spk00: Great. Thanks for all the questions, and thanks for those of you that have joined our call today. We really appreciate the attendance. I would like to thank all of our investors for your continued support and belief in Propel and our vision of building a new world of financial opportunity. The world we're building is one that can provide relief to a consumer and create opportunity for our investors and partners. And as always, I would like to extend a big thank you to the Propel team for pushing themselves and helping us transform an industry. Have an excellent day. Operator, on that note, you may end the call.
spk04: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Have a good weekend.
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