Propel Holdings Inc.

Good morning, everyone. Welcome to the Propel Holdings fourth quarter and year-end 2025 Financial Results Conference Call. As a reminder, this conference call has been recorded on March 3rd, 2026. 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 Devan Gilani, Propel's Vice President, capital markets, and investor relations. Please go ahead, Devin.

Thank you, operator. Good morning, everyone, and thank you for joining us today. Propel's fourth quarter year-end 2025 financial results were released yesterday after market close. The press release, financial statements, and MD&A are available on CDR Plus, as well as on the company's website, propelholdings.com. Before we begin, I would like to remind all participants that our statements and comments today may include short-looking statements within the meaning of a placeholder's previous lines. The risks and considerations regarding forward-looking statements can be found in our Q4 2025 MD&A and Annual Information Form for the year ended December 31st, 2025, both of which are available on CR+. 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 Q4 2025 MD&A for definitions of our non-IFRS measures and the reconciliation of these measures to the most favorable IFRS measure. Lastly, all dollar amounts after this call are in U.S. dollars unless otherwise noted. I am joined on the call today by Clyde Kinrod, current Chief Executive Officer, Sheldon Sidakoski, Founder and Chief Financial Officer, and Noah Buckman, Founder, President, and Chief Revenue Officer. Clyde will provide an overview of our Q4 fiscal year 2025 results and observations on the overall economic environment before Sheldon covers our financials in more detail. Before we open the call up to questions, Clyde will provide an overview of Propel's strategy and growth initiatives for the year, which we'll discuss during 2026, operating financial targets. With that, I'll pass the call over to Clyde.

Thank you, Devin, and welcome everybody to our Q4 and year-end conference calls. 2025 was another year of strong discipline growth for Propel as we continue to expand access to credit for underserved consumers while continuing to enhance our AI-powered platform. Turning specifically to the fourth quarter, we entered Q4 with a tightened underwriting posture following the credit pressure experienced in Q3. That discipline allowed us to navigate through external volatility, including the longest U.S. shutdown government shutdown in history. As performance trends strengthened during the quarter, we accelerated originations in December, driving approximately $30 million of C-Lab growth in that month alone, representing nearly all of the $32 million of sequential growth in Q4, and our strongest month of C-Lab growth to date. However, that growth required upfront provisioning and incremental acquisition spend, while the associated revenue will be recognized over subsequent periods. As a result, profitability was pressured, but these investments positioned the portfolio for strong growth in 2026. Credit metrics have turned, and we exited the year with record-ending C-Lab and strengthened credit performance, and we are seeing that improvement carry forward into 2026. Even with the challenging macroeconomic conditions, our business showed significant resilience as we continue to maintain profitable growth. Turning to our full 2025 results. In 2025, we achieved record total originations funded of $774 million, up 32% year-over-year, record revenue of $590 million, 31%, and record ending C-Lab of $590 million, an increase of 23%. from 2024. For the full year, net income increased by 28% to $59.5 million. In 2025, an adjusted net income increased by 7% to $66.7 million, both representing record performance. Turning to the macroeconomic backdrop and the performance of our regional business units. In the U.S., 2025 was characterized by a dynamic economic environment. While overall inflation has declined, inflation for essential spending remains elevated and real wage growth for many lower income households has moderated. These dynamics contributed to credit softness that emerged in Q3 and extended into early Q4. However, as the quarter progressed, we observed improving credit performance. The government shutdown ended, employment remained stable across sectors where many of our customers are employed, and access to credit remains constrained. These factors supported the improvements we observed exiting the quarter, and we continue to experience the same trends two-thirds into Q1, and we expect that trajectory to continue throughout 2026. Turning to lending as a service, the program achieved record revenue of $5.8 million in Q4, representing 97% growth year-over-year, and was approximately $18 million for fiscal 2025, up 191% from 2024. Towards the end of Q4, Propel received increased commitments from existing purchases, supporting higher origination capacity and continued growth heading into 2026. In Canada, macroeconomic conditions remain softer relative to the U.S. with slower GDP growth and higher unemployment levels. Despite this backdrop, the Canadian business grew by 49% in 2025 from 2024, though the market still represents approximately 2% of total revenue. Credit performance was strong and reflects previous refinements to our risk mark. Lastly, in the UK, inflation remains somewhat elevated, but unemployment levels remain historically low with wage growth slightly outpacing inflation, supporting strong credit demand and stable credit performance. Against this backdrop, our UK business continued to exceed expectations, delivering record revenue and strong annual growth for 2025 that exceeded 50%. The strength of our UK results reflects the scalability of our platform, disciplined underwriting, and the successful integration of quid market into Propel's platform. Since the acquisition, we have incorporated our underwriting, marketing, technological, and operational best practices. Importantly, performance in the UK remains strong in 2025, throughout the more dynamic economic conditions in North America, providing geographic diversification across the business. I will speak more about our recently announced business development initiatives, growth plans, and our guidance for 2026. But first, I will pass it all over to Sheldon.

Thank you, Clive, and good morning, everyone. We exited 2025 with strong growth momentum following a period of tighter underwriting in Q3 and through mid-Q4. As credit performance stabilized, originations accelerated meaningfully in the back half of the quarter, especially in December. Consumer demand across our operating brands remained strong, and together with our bank partners, we achieved record originations from both new and existing customers during the quarter. This resulted in record total originations funded of $221 million, an increase of 26% from Q4 of last year. This growth drove NEC Lab to a record 590 million, up 23% year-over-year. Consistent with our disciplined approach, we and our bank partners prioritized a higher proportion of volume from return and existing customers in the U.S. to reinforce portfolio quality. In the UK, where credit performance remains strong, we emphasize new customer originations. Overall for Propel, new customers represented 43% of total originations funded in Q4, consistent with prior quarters and reflecting our balanced and deliberate approach to growth across all of our markets. Our record-ending C-Lab drove record revenues of $155.8 million in Q4, representing a 21% increase over Q4 last year. The annualized revenue yield of 109% in Q4 compared to 113% last year primarily reflects the timing impact of stronger originations late in the quarter, particularly in December, which increased ending CLAB with a modest contribution of revenue during the quarter. The majority of revenue from those originations will be earned in subsequent periods. Turning to provisioning and charge-offs. Provision for loan losses and other liabilities was 56% of revenue, and net charge-offs was 14% of average CLAB in Q4. These levels reflect the credit dynamics that emerged in Q3 and extended into the early part of the fourth quarter. During the quarter, we observed softness within certain segments of the U.S. portfolio, including lower cure rates and variability in collections performance, partially influenced by macroeconomic factors, including the government shutdown, which affected specific customer cohorts. These factors also had an effect on Q3 vintages, particularly those originated prior to the tightened underwriting adjustments. All of this contributed to the higher provisioning and charge-offs in Q4. These trends started to reverse later into the quarter, enabling us to drive higher originations. To further clarify, the charge-offs are primarily related to earlier vintages, particularly from Q3, as they are a lagging indicator of credit performance. As those earlier vintage cohorts have largely worked through the portfolio, and with underwriting adjustments implemented in late Q3 and early Q4, credit performance strengthened meaningfully into the back half of Q4. Based on current trends, we believe Q4 is likely to represent the peak in provisioning. Early 2026 indicators continue to be strong, and we're observing credit metrics in line with our expectations. It is also important to highlight the impact of origination timing. Under IFRS accounting, the significant originations funded in December required upfront provisioning. while the associated revenue will be earned over future periods. This timing dynamic further increased the provision rate in Q4 when measured as a percentage of revenue, as those originations contributed only modestly to quarterly revenue. Over our 15-year history, we have successfully navigated similar credit cycles before. In Q2 2022, provision expense reached approximately 58% of revenues. during a period of macroeconomic disruption driven by accelerating inflation and interest rates. Following underwriting adjustments taken by us and our bank partners, portfolio performance improved and provision rates declined meaningfully in the subsequent quarters. The recovery occurred quickly due to the resiliency of our customer segment and our ability to recalibrate underwriting in real time through our AI-driven feedback loop. Geographic diversification continues to support overall performance. The UK delivered strong credit results alongside record originations, and Canada's credit performance remained strong following underwriting optimization earlier in the year. With credit performance aligned with expectations at year end, we're very well positioned to continue accelerating growth in 2026. Turning to profitability, adjusted net income was $8 million in Q4, or 19 cents for diluted share. For fiscal year 2025, adjusted net income increased to $66.7 million, and diluted adjusted EPS was $1.58. Fourth quarter profitability was impacted by several dynamics related to origination timing and upfront spend and expenses. As mentioned, the late quarter origination growth, particularly in December, required upfront provisioning under IFRS accounting, while the associated revenue will be recognized over future periods. In addition, acquisition and marketing spend increased in the back half of the quarter to support the higher origination volumes, with expenses recognized immediately while revenue will be earned over the life of the loan. We also incurred incremental startup and infrastructure costs related to the build and launch of Propel Bank and the Column Partnership, positioning the company for additional expansion in 2026 and beyond. On a return on equity basis, annualized adjusted ROE was 12% in Q4 and 27% for the full year. While quarterly returns were impacted by the timing and upfront costs discussed, full-year results continue to demonstrate strong returns. Given the stabilized credit trends, the record-ending balances at year-end, and the investments made in 2025, we expect our adjusted ROE to expand on a go-forward basis. Acquisition and data expenses increased by 48% to $23.2 million in Q4. reflecting the record total originations funded and an increase in cost for funded origination. Cost for funded origination increased to 10.5 cents per dollar funded in Q4 2025, while cost for new customer funded origination increased to 24.5 cents per dollar funded. Although higher year over year, these levels remain aligned within our targeted profitability parameters. and reflect deliberate strategic decisions made during the quarter. First, we allocated a higher proportion of marketing dollars to organic and direct marketing investment, particularly in December as credit performance stabilized. These channels require more upfront spend, but historically deliver stronger credit performance and higher lifetime value. Second, We diversified our marketing partnerships and channels, adding new strategic partners and expanding across key digital and direct channels. These investments enhance acquisition resiliency and long-term scalability. Third, we incurred higher underwriting and data costs per dollar for funded loan as a result of our tighter underwriting. These incremental costs support portfolio quality and long-term loss performance. And fourth, we continue to experience strong growth from the UK, which carries higher acquisition costs per loan, but is offset by higher yields and strong credit performance. Overall, the increase reflects intentional investment to support credit quality and scalable profitable growth. Other operating expenses represented 16% of revenue in Q4, consistent with approximately 16% in Q4 last year when excluding one-time transaction costs related to the quit market acquisition. Operating leverage gains were largely offset by infrastructure investments to support Propel Bank and our partnership with Column, which we expect to contribute meaningfully as they scale. In addition, we've made several investments in AI that will lead to increased productivity and additional operating leverage in the long term, but contributed to additional overhead in the short term. Our profitability benefited from a lower overall cost of debt, which declined to 10.6% in Q4 from 12.7% in the prior year, supported by increased credit facility terms and lower interest rates. On a go-forward basis, we expect our margins on an IFRS and adjusted basis to expand given the meaningful investments we've outlined, the stabilized credit performance, and the operating leverage of the business model. Turning to Propel's capitalization. At the end of Q4, we had approximately $103 million of undrawn capacity across our various credit facilities. And our debt to equity ratio was approximately 1.3 times, reflecting a well-capitalized balance sheet and continued financial flexibility. In Q4, we increased our quarterly dividend by 8% to 21 cents per share, and subsequently increased it an additional 7% to 22.5 cents per share for the current quarter. This marks our 10th consecutive dividend increase underscoring the durability of our cash flows and our confidence in the long-term outlook of the business. We believe our strong balance sheet, disciplined capital management, and recurring earnings profile position us well to continue investing for growth while delivering increasing returns to shareholders. I'll now turn the call back over to Clark.

Thank you, Sheldon. 2025 was a year of disciplined execution, of the intentionally moderating growth and taking a tightened underlying posture to stabilize credit performance. Through much of Q3 and Q4, credit performance has turned and we look forward to robust, profitable growth in 2026. Well into Q1, we continue to observe strong credit performance and healthy demand. As we look ahead, two key initiatives announced in Q4 will help us drive growth through the remainder of 2026 and for years to come. These initiatives are spearheaded by my colleague, co-founder, President and Chief Revenue Officer Noah Buckman, who has joined us on this call to speak to these initiatives during our Q&A. First, our partnership with Collin, which supports the launch of FreshLine in the U.S. and expands our addressable market by serving a new consumer segment and entering additional states. We expect FreshLine to become a driver of growth going forward. To support this partnership, we recently announced a forward flow commitment of $60 million for the FreshLine product from Mesura, one of North America's leading private credit investors. The success of our Lady as a Service program has demonstrated our ability to launch, operationalize, and scale these types of programs profitably. That execution capability gives us the confidence as we introduce FreshLine and continue expanding our U.S. footprint. We expect to have additional commitments in the months ahead. Second, the launch of Propel Bank, an ambitious initiative several years in the making. While we remain a fintech holding company, a banking license gives us immense optionality for the medium and long term as the world embraces digital-first banking. The bank is now officially operational and we expect it to provide new avenues for growth and expansion in the years to come. Propel Bank enhances our platform by providing potential products and service diversification and optionality. and expanding access to both new and existing markets. We have built a fantastic and growing team in Puerto Rico, and together we are building new opportunities for Propel and for consumers. Supported by these initiatives, our 2026 growth strategy is anchored on four pillars. First, scaling and expanding our core North American business. With approximately 70 million underserved consumers in the US and Canada, we have only served a small fraction of the addressable markets. In 2026, we're expanding to additional states, increasing penetration in existing markets, and building new marketing distribution channels to broaden our reach across the credit spectrum. Second, accelerating growth in the UK. We finished 2025 with over 50% revenue growth in the UK, reflecting strong demand, disciplined underwriting, and successful integration. We expect the UK to continue to delivering accelerated growth in 2026, supported by new product introductions, expanded distribution channels, and further automation across the platform. There is a tremendous opportunity in the UK that we have only just begun to realize. Third, expanding and optimizing our lending as a service program. Following the strong momentum from our existing lending as a service program, where we grew by 191% year over year. Towards the end of Q4, we saw increased commitment from existing capital partners and demand from new capital partners to participate, including Mesoram. With the launch of Propel Bank and Freshline, as well as additional capital commitments to our existing lending as a service programs, we expect robust growth for this program in 2026. These initiatives allow us to enter new geographies, serve additional customer segments in the underserved markets, and generate high margin fee-based revenue. Fourth, deepening AI integration across the organization. Our focus is on driving productivity, improving decision accuracy, and enhancing the customer experience. We are already observing measurable gains in customer operations, where in December, we supported 42% more loan originations than the previous year with the same number of agents. We have had our highest three consecutive orders of auto approval applications supported by AI. And in the year ahead, we expect to see these efficiencies expand across the company, including in technology and engineering. As an AI-first company with over a decade of proprietary data that has trained our models, best-in-class team, and experience in running an AI platform, we believe Propel is uniquely positioned to lead, not follow, in this next phase of AI-driven financial services innovation. Against this backdrop, we're introducing our 2026 operational and financial targets. We are targeting ending CLAB growth of 18 to 24%. Furthermore, we are targeting revenue of $725 to $775 million, and adjusted EBITDA of $152.5 to $177.5 million. The net income target range of $70 to $90 million and the adjusted net income target range of $80 to $100 million represent growth rates of 34% and 35% respectively over 2025, based on the midpoints. We are also targeting a return on equity of 24% plus and adjusted return on equity of 28% plus, representing strong returns on shareholders' equity. Lastly, we continue to actively pursue exciting organic and inorganic growth initiatives. These are not included in the operating and financial targets, but form part of our long-term growth strategy. As part of our strategy, I want to spend a moment on capital allocation. Our capital allocation framework remains very consistent with what we've communicated since going public. we expect the dividend to continue growing annually, supported by earnings growth. Importantly, when we went public, we indicated an intention to distribute roughly 50% of adjusted earnings over time. In practice, we've operated well below that level, approximately 32% in 2025, which provides meaningful flexibility. This allows us to simultaneously, first, we invest significant capital into organic growth. Second, maintain balance sheet strength and strategic flexibility so that we can invest through cycles, pursue acquisitions where appropriate, and operate from a position of resilience rather than reliance on external capital. And third, deliver a predictable and growing return to shareholders. And fourth, retain excess capital that can be deployed opportunistically, including share repurchases. We believe that combination, disciplined reinvestment, a growing dividend, and opportunistic barbacks is the most effective way to compound long-term shareholder value. Our capital allocation framework remains very consistent with what we've communicated since going public. As we move through 2026, our focus remains clear, serving the more than 90 million underserved consumers across our markets who continue to need responsible access to credit. We do that through disciplined growth, credit performance, and long-term value creation. Since 2020, we have grown revenue and adjusted net income, both by a CAGR of approximately 50%, That consistency reflects the durability of our platform and the discipline of our execution. Into 2026, the team is aligned and as focused as ever to deliver a strong year of profitable growth. We have made investments in AI that will ensure we continue to drive efficiencies and optimizations across the business. We have large and growing commitments from linear service purchases and strong computing consumer demand to power the program's growth in 2026. We are now operational in Puerto Rico, where we are building a banking arm of our business to create more options for the future. We are close to launching FreshLine to serve even more U.S. consumers. With 15 years of experience operating through cycles, we believe our AI-powered platform is well-positioned for its next phase of profitable growth. As always, we remain committed to building opportunities for our team, consumers, our partners, and our shareholders. With that operator, you may now open the line for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Matthew Lee with Canaccord Genuity. Your line is now open.

Hi. Morning, guys. Thanks for taking my question here. Maybe we can start on credit. Obviously, a tough quarter with the government shutdown. Just maybe, what gives you confidence that you get back to the 50% level that your guidance sort of suggests? And, you know, what sort of credit indicators are you seeing that suggests that credit is improving?

Yeah, so good morning, Matt, and thanks for joining us this morning. You know, we've certainly seen a significant rebound in credit performance. You know, as you know, our products tend to be short-term in nature. And when there is a spike in credit performance, we're able to adjust very quickly. We adjust our underwriting and invariably we're experiencing challenges. It means all of the lenders ahead of us in the credit supply chain, if you will, are doing the same thing. So there was more and more tightening ahead of us that was absolutely evident in Q4 2024. I think the tightest since 2019, which meant there was more high quality volume dropping into our segment of the market, even while we tightened our underwriting standards and also tightened other terms around the loans that we provided. That's the kind of stuff that we're able to do in the short term, given our AI underwriting platform. And as a result of that, the other thing that happens in our market is we have competition that's not as well capitalized as us. And when there is increases in delinquencies, invariably there's less competition as well. So we see more volume into our segment of the market. Competition tends to get eroded. And because of the short-term nature of our products, the customers that are going to go delinquent, go delinquent pretty rapidly. And we're able to turn it around with net new vintages. Obviously in Q4, the first half of Q4 in particular, there was a prolonged level of delinquency, about as long as we've seen. for roughly over a four month period driven largely because of the longest U.S. shutdown in history. But not long after that ending, given the underwriting changes that we saw, we saw significant increases in credit performance. Those increases have obviously driven further momentum into 2026. We're now two thirds of the way through the quarter. We're seeing very strong credit performance. very much in line with our expectations, also very much in line with the largest tax refunds that consumers have received in many, many years. And the nice cherry on top over and above the strong credit performance is demand has been very robust given some of these developments. That's partially because of the tightening ahead of us. And what's discreet to propel is we really did use that opportunity in Q4 to expand our marketing and distribution relationships. And those are certainly yielding lots of fruits, particularly on the demand side, now that we're two-thirds of the way through Q1.

Yeah, I just wanted to just add a couple additional data points to what Clive's saying. And we mentioned this in the remarks. You know, we've seen this before many times. You know, we referenced Q2 2022, where the provision was 58%, so higher than it was over here in Q4. The very next quarter, it dropped to 54 and then dropped towards 50% where we target it. So, as Clive said, it happens relatively quickly. We tightened underwriting appropriately. And just to reemphasize, a lot of the, you know, a lot of the higher provision was related to charge-offs coming from the prior vintages that were originated prior to us tightening. So, we're very confident that that's in the past. Those have flushed through. And as Clive says, early this year, we've had very strong credit performance.

Right. So maybe just on early indicators, I mean, like your customer base, your employment rates, the payment rates, you know, the credit scores, are those all kind of trending upwards as you look into Q1?

Yeah, the simple answer to that, Matt, is absolutely. Now, bear in mind, from a seasonal perspective, we expect there to be stronger credit performance in Q1. So let me start off by saying that. So to really provide context and answer your question, I need to speak about what that credit performance looks like relative to what we expect will be improving credit performance in any event. And we are really, really pleased with what we're seeing. Not only our first payment default rates and weighted average default rates lower than our expectations, but we're actually seeing excellent collections data as well. Obviously, when some customers do miss payments, We need to rehabilitate them and cure them so that they can continue to draw down on their facilities. And we're seeing very strong performance from our payment solutions team as well. So, you know, again, two-thirds of the way through the first quarter of the year, we're very pleased with credit performance. We're very pleased with collections. And the other thing that we're very pleased with, obviously, is strong demand, which doesn't always go hand-in-hand with those dynamics. We're also now, now that we've entered March, we're entering really the biggest month of the year in terms of customer refunds. So if anything, we expect the trajectory that we're seeing on the credit side to continue through the remainder of the quarter.

Okay, that's super helpful. And then maybe just to add one, sneak one in here. Can you quantify, you know, column member power bank? I think you guys talked about an expanding product suite. But we shouldn't be accepting you guys to be taking deposits or, like, offering GICs or anything, right? Like, what kind of products are you envisioning from Propel Bank? And when might we start seeing them?

Yeah, I've asked Noah to join us on the call over here, so I'm going to hand the call over to him. He's just done, him and his team have just done the most stellar job on these initiatives. So with that, Noah, it's over to you. Good morning.

Thank you, Matt, for that question. A few things. We have to look at this in stages, kind of call it short, medium, and long-term. So, out of the gate, as we operationalize Propel Bank, and as you heard in the opening remarks, we're thrilled that it's live now, it will continue to provide the services that we've listed in the press release to our existing bank partners, and then to column as that program launches on a go-forward basis. We will then expand our current line of business in existing and new geographies throughout the United States. It gives us the optionality globally, which is why it's called Propel Global Bank. And then to your nuance part of the question, we will move into the business of banking. And as we move further into the business of banking, we will have additional revenue streams over and above those core services that we provide to other banks. With regulatory approval from our regulator, it gives us those options. So in the future, in longer term, you will see us be able to expand into more traditional banking products over and above the core FinTech-related services we will be providing in the short and medium term.

Let me also add a couple of things over there, Matt, if you don't mind. I mean, really, really delighted to have Mesereau come on last week and commit $60 million. Mesero are the fund that acquired Bastion, and I think you guys know that we've been with Bastion since 2013. These are folks who are very, very familiar with Propel. They've worked with us for many different credit cycles, and we were delighted to have them as the first forward flow purchaser to commit $60 million. I will tell you that the opportunity, the market opportunity with FreshLine, And that segment of the market that we're serving is probably larger than any other opportunity that we serve today. On the back of that, you could absolutely expect to see more commitments and more announcements from top tier institutions, which are going to accelerate the growth of our lending as a service program for many, many years to come. We delighted with how testing is going in that environment, the folks at Column, have also been absolutely exceptional and an absolute joy to work with. And we expect to stand that program up this month, launching obviously with Mesereau purchasing the initial loans over there with additional announcements to come in the not-too-distant future that, again, will continue to accelerate the growth of that program for years to come.

All right. Sounds good, guys. Thanks.

Your next question comes from Steven Bolin with Raymond James. Your line is now open.

Morning, everybody. Sheldon, I don't know if you can quantify this or maybe have quantified it. The 56% PCL rate, obviously, you mentioned credit issues and the growth. I'm wondering if it's possible to break that down roughly, you know what I mean? Like you've always kind of reported a low 50 PCL rate. Like, is it really the growth that drove that up a few basis points or a few percent in the quarter?

Hey, Steve, thanks for that. So, it's a mix. It's a mix of things. You know, I think, first of all, as we talked about, you know, we had Last quarter, we had an increase in delinquencies that, you know, over the course of Q3. Subsequent to that, we started tightening our underwriting. But, however, a lot of those Q3 vintages then ended up flushing through in Q4 through charge-offs. And the reason for that, obviously, those were worse vintages sort of in the rear view. But in addition to that, you know, the government shutdown exacerbated some of the macroeconomic dynamics we were dealing with in Q4. So I would say that there was certainly several million dollars in the PCL that was relating to kind of the Q3 vintages that ended up flushing through in Q4. In addition to that, obviously, as we've mentioned over here, $30 million of our $32 million growth in CLAP all came in December. As you know, we have to provision upfront as soon as we originate. So, a lot of that was related to the growth in December. To put it into perspective, you probably also saw that the revenue yield was 109%. That's not really reflective of what the yield is in the portfolio. In reality, it's between the 110 and 115% that we've been reporting on regularly. When you have the back-ended growth in your book, you don't have time to earn the revenues. So just to put it into perspective, if we were to proportionally originate the same amount per month in Q4 rather than originate the vast majority in December, that would have led to probably close to about $3 million in additional revenue for the quarter alone. That would boost the yield. That would reduce the PCL percentage just because you're increasing the denominator. So there's a lot of dynamics certainly relating to the growth as well as the, you know, credit performance primarily from the Q3 vintages before we tightened all exacerbated by the government shutdown as well in Q4.

And, Steve, maybe let me just jump in as well and just respond to what I'm hearing is the question behind the question. Obviously, you know, you're reacting to an increase in the provisions. You're reacting to, you know, compression of earnings last quarter and, you know, just the delinquency headlines. And there's a question about, you know, how long is this going to go on for? I think that's the underlying question over there. We've been doing this for a long time, and here's the irony of the whole thing. The weakest borrowers, when you go through something like this, exit the system very, very rapidly. You know, that's the nature of short-term unsecured lending. Pricing improves quickly, largely because of the changes we've made. I've already mentioned competitors pull back in that environment, and those ahead of us tighten their underlining, and future vintages strengthen almost immediately. So you're not going to see a protracted period of higher delinquencies over here. That's in the rearview mirror. And as I've stated a couple times on this call already, expect us to return to normalcy with very profitable growth from the get-go in 2026.

And, Steve, one other thing I would add also, just to put it into context as well, you know, obviously, you know, you're asking about a 56%. PCL, a lot of that relating to the kind of back-ended growth in the quarter. You know, this is not completely uncharacteristic of a Q4. Obviously, Q4 and 24 was very strong. If you look at Q4s in prior years, going all the way from 2021 to 2023, we probably have a PCL in Q4 close to about 54%. So, it's not completely uncharacteristic that in Q4 you do have higher PCL just because it's such a high growth quarter. But again, I would think about it as two-thirds of that relative increase in the PCL rate is relating to prior vintages prior to tightening.

Okay. Okay, great. Second question is on quick market. So, when I look at the stages, You know, the book was $29 million at the end, $10 million roughly, I guess, of underperforming, and then just under $2 million of non-performing. So it seems like a very good – I'm trying to understand the borrower profile or is it the collections that are really not allowing those loans to go into non-performing? Again, is it the borrower or it's the – You know, if people over there just forget for five days or 10 days and you make the phone call and they pay the loan off. I'm trying to understand how that stage two to stage three improves so much.

Yeah, you know, and this is something we've been saying for a while since the get-go, that the credit performance that's being delivered by the team in the UK is just outstanding. I think it's a combination of factors, Steve. You know, first of all, we've got excellent operators, very experienced operations team over there that's doing an exceptional job once consumers miss payments and delinquency. So not stopping them from going to stage three and then ultimately to charge off. The other thing is just the, you know, the market dynamics in the UK. There's so much, such a big market over there that's so vastly underserved. That quid market, you know, historically is able to cherry-pick the very best consumers on the one hand, and secondly, grow in excess of our forecast. You know, we just grew in excess of 50% year over year, even though we told the market after acquisition we'd grow by 40%. So we exceeded those growth expectations, all while maintaining an exceptional default rate. So it's a combination of just our superior market or excellent operations, as well as just there being a vast market and our ability to cherry pick the best volume. So what this is going to lead to is there's huge runway from a growth perspective. So expect even faster growth in 2026 for quid market. We're very well positioned to do that. And we'll continue growing at probably similar credit metrics that you've seen. Now, we do have the opportunity to take on a little bit of a higher PCL in quid market as we grow and still be very profitable. The other side of it is because of the construct of the pnl the pcl is lower in quid market just um you know what for comparison purposes we're able to spend more on the acquisition side and that's also uh one of the factors that um you know increased our acquisition costs year over year um so the quid market quid market is uh driving exceptional credit performance, but we're able to increase acquisition costs, acquire more customers over there as a result.

Okay. I'll get back to you. Thanks.

Thanks, Steve. Thank you.

Your next question comes from Rob Joff with Bentham. Your line is now open. Good morning, and thank you for taking my questions.

My first question would be, My first question would be on the guidance. Is that something that we should look at as back half-weighted, or is it relatively balanced across the quarters?

Yeah, so, Rob, it's a great question, and I think you know that our business is cyclical in nature. Q1 tends to be slower growth. And then, you know, as you move through the rest of the year, the growth tends to accelerate with Q4 being the high point of the year. And our model absolutely reflects that. I think when we look back at 2025, particularly at Q3 and Q4, where we saw heightened delinquencies, we slowed our growth down in reaction to that. And consequently, the growth at Q3 and Q4 in particular was lower than we otherwise would have liked it to have been. We obviously ended Q4 with significant growth in our C-Lab that wasn't reflected in our revenues because lots of that growth happened in December. But in essence, all of that revenue will now be earned over the course of 2026, all of which is to say you will see a growing revenue from quarter to quarter, number one. And number two, the biggest deltas relative to 2025. you'll see in Q3 and Q4 respectively because of a couple of reasons. First of all, comparing to what happened in 2025. And second of all, that's when we expect some of the new initiatives like Lending as a Service to really start contributing in a more meaningful way. And by the way, I say that about Lending as a Service, which is already starting to move the needle following almost 200% year-over-year growth in 2025. But just wait until you see what 2026 has in store, particularly the back half of the year.

Thanks. In terms of the visibility, clearly the provisions is a key point. Am I crazy if I look at your provisions in Q1 being down order of magnitude 8 to 10 points, Q on Q, given you have visibility into the quarter?

Yeah, hey, Rob, thanks for that. We absolutely have visibility into the quarter. You know, we're two months in. As Clive mentioned, credit performance is right in line with expectations. You know, if you look traditionally just the way the seasonality of our business works, you should probably expect a PCL percentage somewhere in the, you know, in the mid-40% range. That is what we target, and that's certainly what we would – expect in a Q1 period. And we've just kind of, you know, said that things are running in line with expectations. So if you, you know, if you're doing the math on that, I think that's a reasonable expectation level.

Thank you. And can I ask you for a bit more color and perspective with respect to your views on capital allocation and the NCIB, given where your current share price is?

I try to get ahead of that in the prepared remarks for whatever reason. This discussion between share buybacks and dividends and reinvestments and other parts of the portfolio seems to be something of increased discussion and people have very strong views on it and different views on it. There's lots of people, lots of folks that like the the steady growing discipline of the increasing dividends and the guardrails that that provides as well. And there's lots of other folks that think at attractive levels we should be considering barbacks more. And I will tell you, we've got a very open mind to these things. First and foremost, we're going to support the organic growth of the business. I've spoken about it a few times on this call between Column Bank, and between Propel International Bank, these are new initiatives that have a very high return on equity. So first things first, we need to make sure that there's capital that's allocated to those programs and other initiatives where the ROE, we expect to be quite well north of the guidance that we provided even on this call. We also obviously like to keep contingencies. First of all, for a rainy day, but second of all, to be opportunistic. And in this context, I'm talking about acquisitions and other organic opportunities where we constantly are looking for new opportunities and seeing some really interesting ones at the moment as well. Third of all, as I said, we will be increasing the dividends, and that obviously is a function of growing earnings, which we have a tremendous amount of confidence in, so I'm quite comfortable setting that expectation and then obviously we will look at share buybacks opportunistically okay thank you good luck thanks so much rob thank you your next question comes from jeff tenwick with atd coremark your line is now open hi good morning everyone um wanted to start my questions off with respect to acquisition costs it looks like

um those climbed up pretty meaningfully in the quarter obviously you were very active on originations just wondering if you could speak to some of the dynamics there what are the expectations is there um inflation and things like seo costs and and uh i think the mix of your origination um you know changing around like how should we think about that going forward hey jeff yeah thanks for that um you know maybe maybe the first of all just to kind of

step back for a second. I mean, we've done some incredible things on the business development side and the new initiative side for the business. We've put in a number of programs that will grow the business in the U.S. dramatically for many years to come. That includes Propel Bank, Column, All of the other stuff that we're doing, for example, you haven't seen it yet, but on the MoneyKey program in particular, we've done some work over there that will drive significant growth on a go-forward basis. So in order to support that growth, we need to make investments on the marketing side. And we've deliberately stepped into that. And what that includes is expanding our spend on various organic channels. And we've talked about increasing our spend on organic for several quarters coming into this one. But that's a deliberate step, and I think that that's kind of what we'll continue doing, certainly over the course of 2026, and that includes branded digital marketing, direct mail, et cetera, all these things that are building Propel and its operating subsidiaries brands. So that requires upfront spend, but that also drives exceptional credit quality and opens up additional volume right at the top of the funnel. Secondly, in order, again, to support all of what we want to do is expanding marketing partnerships and additional channels. So we started investing into, you know, for example, online videos and social media ads and that sort of stuff that we hadn't done before. and standing up additional partnerships, as I mentioned. And all of that, again, requires upfront spend. You don't see the originations flowing from it directly just yet, and you have a higher cost for acquisition on those sources to start with. But certainly, that builds our foundation to enable scalable growth to support all of these new initiatives across the U.S. And then thirdly, you know, as I mentioned in a comment before, is quid market. Again, that, you know, the cost per acquisition over there, just relatively speaking, is higher than what we incur in the U.S., but that's offset by a lower provision. There's no cost of debt in the U.K., as an example, just yet. So, we're comfortable. increasing the acquisition costs over there to grow at the rates that we're growing. So all of this is deliberate. It's intentional. It's building us for the long term. We're not just managing for, you know, a quarter to quarter over here. We're building Propel and its operating brands for many years into the future. So what does that mean in 2026? I think the best way to think about it is, you know, our cost per acquisition will probably remain in line with where you're seeing it recently and in Q4. And then you'll certainly see a lot of the leverage coming from these investments, probably towards the back part of 2026 and certainly into 2027 and beyond.

That's helpful. And yes, you're sort of speaking to the overall operating leverage in the business. I know you're carrying a lot of investments in new businesses. So I guess just to clarify, though, like some of the spend is already flowing through as I guess you're standing up these new things in that specific acquisition bucket of expense as well.

Yeah, Jeff, that's right. And maybe if I can, I wouldn't mind just taking a step back to say a few things. And I'll tie some of it back to your question and some of it maybe we'll touch on some of the other questions that we've gone on on the call. I could tell you not me nor any of the team are pleased with Q3 and Q4. Obviously, that was driven largely by external variables, but it shouldn't be lost on anybody. that the five-year K lower revenue and profitability of this business is in excess of 50%. And when I look at 2025 compared to 2023, we're more than double revenues of profits over a two-year period. And if you said to me, what's the driving force behind that growth at the end of the day, first and foremost, it's our people. And I don't say that lightly. You know, when I look at some of the data around that, the four co-founders 15 years later, and we're still together at the business, more motivated, more ambitious than we've ever been. We have a 21-person executive team here at Propel that's got an average tenure of about nine years, which is pretty outrageous for a company that's 15 years old and have not lost a single executive. In addition to that, if you look at some of the insider selling, there's very, very little. You know, everybody over here is in it for the long term and that's certainly not me suggesting to anybody nor to the executives that if they want to sell or for whatever reason want some liquidity, they shouldn't do it. They're absolutely free to do that, but they're not doing that. And one of the reasons they're not doing that is because they're getting access to a steady growing dividend and they've got lots of incentive amongst other things to continue to grow that dividend. I don't think that that element should be lost and the impact that it has on developing and building a world-class team that's executing on this business. In 2025, notwithstanding some of those challenges, we stood up probably the two biggest organic initiatives since we've been around from 2011. Between Propel Bank and the Column Partnership, I don't exaggerate when I say they're probably the two biggest organic initiatives, notwithstanding some of the headwinds last year, and you will see the impact that those have on the business on a go-forward basis. The other thing, and that was during, you know, some headwinds, some macro headwinds that we continued to land and build those relationships. And at the same time, what was incredibly inspiring when we had some of the challenges in 2025 was to see that team rally, to see that team go out and establish new marketing partnerships new distribution channels that not only drove the growth in 2026, in particular from the back half of November and into December, and certainly have been following through into 2026. But those initiatives are driving profitable growth. And even though you may be seeing a little bit of an uptick in cost per acquisition, I can assure you that the delinquencies that we're seeing from these channels, more than all set, any increases that we're seeing on a cost-per-funded basis. I don't think it's prudent to assume that the cost-per-funded is going to come down in these channels, but I can tell you that myself and the team will be working really, really hard to drive those efficiencies at the same time.

Thanks. I appreciate that, Collar. And maybe just on a different topic here, a lot of the investments are revolving around the service area of the business. I'm just trying to get a sense of how that plays out from here. It was a little under $6 million in revenue in the quarter. Clearly, you're gearing towards being much bigger than that. But what's a realistic expectation for how that plays out this year? Is that a line that can see revenue double or be bigger this year? How should we be thinking about that realistically from just sort of the ramp up of these things that you've been speaking to here?

Yeah. Yeah, it's really starting to get going now, and obviously I mentioned on the call that several lending as a service purchases increased their commitments towards the end of 2025. We've just announced the commitment from Mesereau for $60 million, and I think I said a few times on the call that there's more to come. So you can see there's lots of capital coming into this program, and the reason that's happening is because we're absolutely delivering for the purchasers. As it relates to Propel, we're absolutely comfortable saying that there will be triple-digit growth in our lending as a service in 2026, and we expect the trajectory as we get closer towards the end of the year, Q4 of 2026, we expect the lending as a service component to start moving towards 10% of Propel's overall revenue. And bear in mind, that's moving towards 10% of a revenue number that's growing over the course of 2026. And then we'll obviously be well positioned for exponential growth in 2027 and beyond as well.

That's very helpful. And then maybe just one last one that's related here. I mean, there's certainly a lot of commentary about you know, concerns about private credit investors and what's happening in that market. You obviously had success with Mesoro, which is great to see. What's your read on what's happening in the space there and the demand for the type of loan assets that you're generating for partners like that?

I think it's really important, Rob, to look at where these credit funds are investing. You know, I think that Blue Owl, which is, you know, obviously a top tier fund, but a lot of their investments that are leading to some of this perceived challenges are not because of their investments in consumer credit. They have funded a lot of LBOs, a lot of management buyouts of big software companies that are under pressure right now. Rightly or wrongly, they are under pressure right now, and obviously that puts into question the underlying debt that's used to fund those deals. We're absolutely not seeing that in our segment on the market. I don't think there have been any funds that have come out so far and supported that consumer credit and suggested they're under any pressure. So I would encourage anybody who is seeing any pressure from these private credit funds to really take a look at where they're invested and where the credit's coming from, if anything. And I'm not exaggerating. We have more and more of these funds contacting us regularly to speak to us about two opportunities. First of all, they'd love to get access to our main credit facilities. And second of all, what we're doing on the forward flow side is certainly starting to have positive impacts in the broader environment. And lots of these funds, not dissimilar to MesoRail, or reaching out to us with a view to buying those receivables as well.

Okay, great. Thank you for that. That's all I had.

Your next question comes from . Your line is now open.

Good morning, guys, and thank you for squeezing me in here. I'll leave with one question here, just on Propel Bank. What does this mean from a go-to-market perspective for you guys in the near term, in terms of, you know, where are you guys able to put fuel on the fire? Is this more of a U.S. expansion lever here, or could we see more entry into new global markets?

Yeah, good morning.

It's Noah here, and I appreciate the question. The best way to look at that, at least short-term, is this is about growth and new additional revenue streams and opportunity. The initial focus is significant expansion within the U.S. market. We heard Clive on the previous question comment on a lot of growth initiatives within the mass expansion within the U.S. This is one of the future areas that will underpin that. It provides us a lot of opportunities for additional states, new geographies, customer segments, especially as we onboard current bank lending partners and new bank lending partners. And it will fuel customer expansion and geographic expansion in both the short and medium term. To tie it back to the earlier question that I was asked around more traditional business of banking, the third piece will then be layering on top additional revenue streams over and above what we're able to provide today with our services. So this will be good, solid, high margin revenue business for us, both short, medium, and long term.

Great. Thanks. Take my questions. Thank you.

Ladies and gentlemen, as a reminder, should you have a question, please press star 1. Your next question comes from Andrew Scott with Roth Capital. Your line is now open.

Hey, guys. Thanks for sneaking me in here. And I'll keep it short with one quick question. But, you know, in Q1 and Q2, you guys usually see a benefit from tax refund season. We're still in early days here. But can you guys kind of talk about what you're seeing so far?

Yeah, I think that there's what we're seeing, and then there's the information that we have access to in terms of what's going on in the broader marketplace. So certainly what we're seeing is we're seeing, you know, strong repayment behavior. We're seeing strong delinquency performance. And that's largely a function of being in the middle of tax season. And the offset to that or in addition to that, and this is the good part, we're seeing robust demand as well. Those two things don't normally go hand in hand. With that said, we believe that the biggest tax refund days and consequently the days that we expect delinquency performance to be the strongest probably lie in next week. So, sorry, this week, the first and the second week of March is where we expect the refunds to really start coming back. So if anything, the incredibly strong results we've seen so far hopefully will get even stronger as the quarter continues. From what we know, the refund amounts this year are about 10% higher than they've been in years past. In addition to that, the childcare tax refund is only going to start going up in the middle of March. So overall refunds by volumes are actually down a little bit from prior years. The amount of refunds is up a little bit from prior years. That's quarter to date. But any shortfalls on the volumes will be made up in Q3. So overall, that's driving, obviously, very strong delinquency performance. And as I've said a few times, coupled with robust demand, and if you say to me, where's the robust demand coming from in that environment? I think it's coming from two different areas. Number one, there has been continued tightening across the credit spectrum. So we have high-quality volumes that are moving to our segment of the market. And I think some of the challenges, credit challenges in Q3 and Q4, really did cleanse the markets of some of the competitors that were in this space. So there's been a little bit of a cleansing over there, albeit with the smaller, less well-capitalized lenders, and that volume is also now being absorbed by bigger players like ourselves.

Great. Appreciate the call. Thanks so much for the question.

I don't know for the questions at this time. I will now turn the call over to management for closing remarks.

Thank you. And thank you, everybody, again, for taking the call this morning. I'd also like to thank our investors and partners for their continued support and our vision of building a new world of financial opportunity. And as always, I would like to extend a really big thank you to the Propel team in Canada, the UK, and now Puerto Rico for delivering these outstanding record results and achievements. On that note, have an excellent day, and operator, you may end the call.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.