Propel Holdings Inc.

Good morning, everyone. Welcome to Propel Holdings Third Quarter 2025 Financial Results Conference Call. As a reminder, this conference call is being recorded on November 5th, 2025. 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, Propel's Vice President of Capital Markets and Investor Relations. Please go ahead, Devin.

Thank you, Officer Rader. Good morning, everyone, and thank you for joining us today. Propel's third quarter 2025 financial results were released yesterday after market close. The press release, financial statements, and MD&A are available on Sierra Plus as well as on the company's website, propelholders.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 Q3 2025 MDMA and Annual Information Form for the year ended December 31st, 2024, both of which are available on CDR Plus. Additionally, in terms of all, we enable for a non-IFRS measure. Participants are advised to review the section entitled Non-IFRS Financial Measures and Industry Metrics in the Company Q3 2025 MDMA for Definitions of our Non-IFRS Measures and the Reconciliation of these Measures to the Most Comparable IFRS Measure. Lastly, all dollar amounts referenced during the call are in U.S. dollars unless otherwise noted. I am joined on the call today by Clive Kinlow, Founder and Chief Executive Officer, and Shelma Sinikovsky, Founder and Chief Financial Officer. Clive will provide an overview of our Q3 2025 results and observations on the overall economic environment before showing the coverage of financials in more detail. Before we open the call up to questions, Clive will provide an update on Propel's strategy and growth initiatives for the remainder of 2025 and into 2026. For that, I'll pass the call over to Clive. Thank you, Devin, and welcome everyone to our Q3 conference call. Holding on a strong first half, we are proud to deliver another quarter of record results. And in a dynamic macroeconomic environment, our AI-powered platform and disciplined risk management drove stable credit performance while delivering profitable growth. Before speaking about what we're observing in the broader economy and our consumer segment, I'd like to highlight our record third quarter results. We delivered another quarter of strong growth with record quarterly revenue, total originations funded, and ending CLAB. Carrying forward momentum from the first half of the year, we experienced healthy consumer demand and stable credit performance through Q3. At the same time, given evolving macroeconomic conditions and a modest uptick in delinquencies during the quarter, we and our bank partners maintained a tight underlying posture, particularly in the U.S., making targeted adjustments to preserve credit quality in line with seasonal expectations. Even with these prudent measures, we achieved record total originations funded of $205 million, up 37% year-over-year, and record revenue of $152.1 million, an increase of 30% from Q3 2024. On the bottom line, net income rose by 43% to $15 million, and adjusted net income increased by 16% to $16.2 million compared to the prior year. turning to what we observed in the macro environments and with our consumer segments. In the U.S., growth remains steady. Either inflation in essential spending categories such as food, shelter, and health care remains elevated with each increasing more than 3% euro per year, weighing more heavily on the consumers we serve who spend a greater proportion of their income on these essentials. Furthermore, according to the Federal Reserve Bank of Atlanta, median nominal wage growth for lower-income workers was 3.6% in August 2025. As a result, real wage growth for our consumers, while still moderately positive, was moderated in 2025. In addition, the resumption of student loan collection due to has put additional pressure on some of our consumers. Observing these pressures on our U.S. consumers during the quarter, we and our bank partners made proactive underwriting adjustments to ensure our credit performance was aligned with seasonal expectations. This is the benefit of our AI-powered platform and the resiliency of our business model. We benefit from the quick feedback loop where slight changes to the macro environment of consumer behavior are detected immediately and we are able to adjust our underwriting instantly. Notwithstanding some of the pressures we're observing in the U.S., employment remains healthy and continued job growth across key sectors where many of our customers are employed. The resiliency of our consumers cannot be understated. They are employed in jobs that are in demand and often interchangeable that consequently are able to replace lost income quickly. Overall, the U.S. consumer remains resilient. We are taking a deliberately cautious stance in the U.S. market to prioritize strong credit performance and profitable growth. In Canada, revenue grew by 41% year-over-year to a record level in Q3, though the market still represents approximately 2% of total revenue as we continue to scale forward. Credit performance was particularly strong and is reflective of previous refinements to our risk model, further demonstrating our ability to adjust to macroeconomic conditions quickly and the resiliency of our operating model. This performance is even more encouraging considering the backdrop of the border Canadian economy, which has softened due to U.S. trade tariffs and with relatively higher unemployment of 7.1%. Encouragingly, the Bank of Canada has cut rates by a cumulative 275 BIPs since mid-2024 to a policy rate of 2.25%. We continue to monitor the impact of recent trade measures and are encouraged by the federal budget's stronger focus on driving investments in Canada, including much-needed reforms to Shred. I had the opportunity to meet recently with Minister Solomon, Canada's Minister of AI. I was encouraged by the government's commitment to be a global AI leader and hope the AI strategy he set to table later this year will include specific support for public companies like Propel who choose to build innovative businesses here in Canada. Turning to lending as a service, we achieved record revenue, which exceeded $5 million in Q3, representing growth of more than four times from last year and suppression growth of approximately 13%. Late in Q3, we launched in two additional states, further broadening our geographic footprint. This expansion, in addition to strong partner returns, has led to increased commitment from our partners, which will fuel further growth. In the UK, we delivered record originations and revenue in Q3, while maintaining strong credit performance. Prior to Propel's acquisition of quick markets, the UK's record monthly loan originations was approximately 7,600. And in less than a year, it has grown consistently month over month by 78%, totaling roughly 13,500 originations in September, demonstrating a market opportunity and ability to successfully scale in new geographies. Our performance in the UK was supported by a resilient economy, The UK has seen inflation trending towards the Bank of England's target. Unemployment remains low at 4.7%, and wage growth is outpacing inflation, supporting spending and credit demands. Lastly, reflecting our continued strong results and solid financial position, our Board of Directors has approved another increase to our dividend from $0.78 to $0.84 per share annually in Canadian dollars. The 8% increase represents our ninth consecutive dividend rates, underscoring our strong financial performance and ongoing commitment to delivering shareholder returns. I will speak more about our outlook and business development pipeline for the remainder of 2025 and into 2026. But first, I'll turn it all over to Shel.

Thank you, Clyde, and good morning, everyone. We're proud to deliver another quarter of record results and of achieving strong, profitable growth while maintaining our disciplined approach to credit. Given the uncertain economic environment and the uptick in delinquencies observed during the quarter, we and our bank partners operated with a more measured underwriting posture in Q3, particularly in North America. Outstanding this dynamic, consumer demand across our operating brands remained healthy, and together with our bank partners, we achieved record originations from both new and existing customers during the quarter. This resulted in record originations funded of $205 million, an increase of 37% from Q3 of last year. This growth drove ending C-Lab to a record $558 million, up 29% year-over-year. Consistent with our disciplined underwriting posture, we and our bank partners prioritize the higher proportion of volume from return and existing customers to strengthen credit quality in North America. In addition, within our U.S. portfolios, we and our bank partners focus originations more on higher credit quality consumer segments that carry a lower cost of credit. In contrast, in the U.K., where credit performance remains very strong, we emphasize new customer originations. Overall for Propel, new customers represented 44% of total originations in Q3, consistent with prior quarters and reflecting our balanced and deliberate approach to growth across all markets. Our record loans and advances receivable balance amending C-Lab drove record revenues of $152.1 million in Q3, representing a 30% increase over Q3 last year. Our annualized revenue yield in Q3 was 113%, a modest decrease from 114% last year. This decline primarily reflects the shift toward returning and existing customers, the emphasis on higher credit quality new customer originations at lower fee tiers, the continued aging of the portfolio including graduation, and the ongoing expansion of fora. These factors were partially offset by the higher-yielding quid market portfolio and our last revenue. Turning to provisioning and charge-offs, our provision for loan losses and other liabilities as a percentage of revenue was 52% in Q3 2025, consistent with Q3 of last year and within our targeted range. As noted earlier, we experienced a modest uptick in delinquencies within the U.S. portfolios. reflecting normal seasonal trends and the broader macro pressures on our consumer segment discussed earlier. In response, we and our bank partners implemented underwriting adjustments and moderated new customer originations to maintain credit quality and deliver strong results within our established loss rate targets. In the UK, while delivering record originations, Quid Market continued to deliver strong credit performance. Furthermore, in Canada, where we've been operating with optimized underwriting and a tighter posture for several quarters, we experienced our strongest ever quarterly credit performance in Q3. Taken together, credit performance for Propel as a whole remained well within our targeted range, reflecting the diversification benefits of our multi-market platform and the strength of our disciplined underwriting capabilities. Credit performance also continues to be supported by, firstly, the effectiveness of our AI-powered platform and disciplined underwriting by Propel and our bank partners, and secondly, the continued scale and maturation of the loan portfolio with a higher proportion of originations from return and existing customers who historically demonstrate lower default rates than new customers. Net charge-offs as a percentage of C-Lab was 12% in Q3, also within our target range and consistent with seasonal trends. Overall, both the 52% provision and 12% net charge-off ratios remain firmly within expectations and continue to support strong unit economics and sustainable, profitable growth. Turning to profitability, adjusted net income increased to $16.2 million in Q3 2025, up 16% from last year. On an EPS basis, diluted adjusted EPS grew to $0.38 for the quarter. For the nine-month period, adjusted net income increased to $58.7 million and diluted adjusted EPS grew to $1.39, both representing nine-month period records. As a reminder, all figures are expressed in U.S. dollars. The year-over-year increase in earnings reflects the company's strong top-line growth, stable credit performance, and disciplined expense management. I would note that our IFRS net income increased by 43% year-over-year, which is a larger increase relative to the adjusted measure. This is a result of two main factors. Firstly, a lower quarter-over-quarter C-Lab increase in Q3 2025 relative to last year resulted in a relatively lower Stage 1 ad back this quarter. And secondly, transaction costs relating to the quid market acquisition were expensed in Q3 last year, thereby reducing our Q3 2024 IFRS net income. On a return on equity basis, our annualized adjusted ROE for Q3 declined to 25% from 45% last year. For the year-to-date period, annualized adjusted ROE was 33% versus 52% last year. The declines were driven primarily by the $115 million Canadian equity offering completed in Q4 2024 to finance the quick market acquisition. We believe these metrics demonstrate strong returns to our investors, as well as our ability to efficiently utilize shareholders' capital. Acquisition and data expenses increased by 41% to $18.3 million in Q3 2025, driven primarily by strong total originations funded growth and an increase in the cost per funded origination. Cost per funder origination increased to 8.9 cents per dollar in Q3 from 8.7 cents per dollar last year, while costs per new customer funded increased to 20.4 cents per dollar from 19.3 cents per dollar funded last year. Overall, these costs remain well within our acceptable range to achieve targeted profitability during a period of significant growth. Other operating expenses represented 15% of revenue in Q3 compared with 16% in Q3 last year. This reduction left several factors, investments in AI, driving operating efficiencies, and the inherent operating leverage in our model. At the same time, these have been somewhat offset by the increased operating expenses this year due to our investments in our infrastructure to support forthcoming business development initiatives. These initiatives, several of which are nearing launch, are expected to meaningfully contribute to growth and profitability as they scale. Lastly, operating expenses were impacted last year by one-time transaction costs relating to the quick market acquisition. Our profitability also benefited from a lower overall cost of debt. Driven by recent interest rate reductions and improved credit facility terms, Combined, these factors decreased our cost of debt to 11% in Q3 from 13.4% in the prior year. Any further reductions in interest rates as we experienced in the US and Canada last week will further benefit profitability. Overall, our adjusted net income margin was 11% in Q3 compared to 12% last year. The modest year-over-year decline The margin percentage primarily reflects a lower Stage 1 provision add-back and the strategic investments being made to support our growth initiatives. These initiatives are expected to drive growth and margin expansion over the long term. Turning a propelled capitalization. At the end of Q3, we had approximately $125 million of undrawn capacity across our various credit facilities, and our debt-to-equity ratio was approximately 1.2 times, reflecting a well-capitalized balance sheet and continued financial flexibility. We believe that our strong balance sheet, debt capacity, and cash flow generation position us well to support the continued expansion of our existing programs new growth initiatives, and a recently increased dividend. Lastly, I want to provide an update on the integration of our UK business, which, as Clive mentioned, has achieved significant growth ahead of expectations. We successfully completed the integration of financial, corporate, and IT systems ahead of schedule, including the identifying of enhanced acquisition risk and analytics capabilities. We're now focused on accelerating growth through ongoing product enhancements, opening new customer acquisition channels, product expansion, and the continued refinement of our underwriting and analytic strategies, all of which are helping us capture a greater share of the addressable market. Recently, Noah Buckman, a President and Chief Revenue Officer, joined me in the UK to meet with senior UK leadership and discuss new business development initiatives. These included potential strategic partnerships, marketing channels, and innovative opportunities to further expand our UK footprint. The market remains full of potential, and we're confident the UK will continue to be a meaningful and growing contributor to propel success in 2026 and beyond. I'll now turn the call over to Clive. Thanks, Sheldon.