Loans and Advances Receivable increased by 138%, Originations increased by 120%, Ending Combined Loan and Advance Balances increased by 150% and Revenue increased by 99%, all reaching record levels
Management Commentary
"By delivering record originations, revenue and loan and advance balances in Q3 2021, we are well on our way to meeting our short term targets. With the recent implementation of variable pricing and graduation capabilities through our platform, as well as expansion of certain programs into new states over the course of the year, we have significantly increased the market that is able to be served by our platform. This places Propel in an excellent position to drive growth in Q4, historically our strongest quarter of the year, and over the short term, and importantly allows us to continue to fulfill on our mission of credit inclusion," said
Q3 2021 Financial and Operational Highlights
Comparable metrics relative to Q3 2020 |
- Loans and Advances Receivable: increased by 138% to
$77.2 million , a record ending balance - Total Originations Funded: increased by 120% to
$55.8 million in Q3 2021, a record performance for quarterly originations, and increased by 144% to$136.7 million for year-to-date Q3 2021 - Ending Combined Loan and Advance Balances: increased by 150% to
$96.8 million in Q3 2021, a record ending balance - Revenue: increased by 99% to
$32.7 million in Q3 2021, and increased by 73% to$88.5 million for year-to-date Q3 2021, representing record performance for both periods - Net Income: decreased by 76% to
$0.6 million in Q3 2021, and increased by 4% to$8.8 million for year-to-date Q3 2021 - Adjusted EBITDA: decreased 26% to
$5.0 million in Q3 2021, and increased 42% to$22.7 million for year-to-date Q3 2021 - Cost of
Debt Capital : decreased average interest rate to 9.2%, from 11.6%, in part through retirement of higher cost term loan at the end of Q2 2021 - Product structure additions: rolled out variable pricing and graduation capabilities through our platform, consistent with strategy of providing more competitive products and lower cost of credit to new and existing customers
- Geographic expansion: from Q1 to Q3 2021, facilitated expansion of bank programs into 4 and 3 new states through the MoneyKey and CreditFresh brands, respectively
Highlights Subsequent to Q3 2021
- Successful IPO: raised gross proceeds of approximately
C$70 million (including the full exercise of the underwriters' over-allotment option) - Trading on TSX: began trading on the
Toronto Stock Exchange under the symbol "PRL" - Geographic expansion: facilitated expansion of bank programs into 5 and 7 new states through the MoneyKey and CreditFresh brands, respectively
- Dividend: Declared its first dividend as a public company of CAD
$0.095 per share, to be paid onDecember 8, 2021
Short Term Targets
The Company is maintaining the Short Term operational and financial targets for the 12 to 18 month period following
Operating and Financial Targets | Short Term Targets | |
Ending Combined Loan and Advance Balances CAGR(1) | 100% | |
Revenue Yield(1) | 140% – 150% | |
Adjusted EBITDA Margin(1) | 22% – 26% | |
Net Income Margin | 8% – 10% |
(1) See "Non-IFRS Financial Measures and Industry Metrics" in the Company's Management Discussion and Analysis |
Conference Call Details
The Company will be hosting a conference call and webcast later this morning with a presentation by
Q3 2021 conference call details are as follows:
Date: | |
Time: | |
Conference ID: | 6015799 |
Toll free dial-in: | (833) 989-2995 |
International dial-in: | (236) 714-4063 |
Webcast: | https://onlinexperiences.com/Launch/QReg/ShowUUID=EA2692C5-9ED3-493E-A5B9-7D6B03450111 |
Replay: | (800) 585-8367 or (416) 621-4642 |
Discussion of Financial Results
Three Months Ended | % | Nine Months Ended | % | |||
2021 | 2020 | Change | 2021 | 2020 | Change | |
Loans and Advances Receivable | 77,216,368 | 33,282,125 | 132% | 77,216,368 | 33,282,125 | 132% |
Ending Combined Loan and | 96,841,777 | 38,735,070 | 150% | 96,841,777 | 38,735,070 | 150% |
Total Originations Funded (1) | 55,786,711 | 25,340,129 | 120% | 136,723,506 | 55,994,974 | 144% |
(1) See "Non-IFRS Financial Measures and Industry Metrics" in the Company's Management Discussion and Analysis |
Loans and Advances Receivable grew to
Three Months Ended | % | Nine Months Ended | % | |||
2021 | 2020 | Change | 2021 | 2020 | Change | |
Revenue | 32,742,895 | 16,468,013 | 99% | 88,471,249 | 51,022,187 | 73% |
Annualized Revenue Yield (1) | 143% | 191% | -25% | 152% | 202% | -25% |
(1) See "Non-IFRS Financial Measures and Industry Metrics" in the Company's Management Discussion and Analysis |
Revenue increased by 99% to
Annualized Revenue Yield for Q3 2021 decreased to 143% and to 152% for year-to-date Q3 2021. This reflects the growth of CreditFresh and the Bank Programs relative to Propel's legacy MoneyKey direct lending and CSO products and the general reduction of rates across products facilitated over Propel's platform. Products offered by our
Three Months Ended | % | Nine Months Ended | % | |||
2021 | 2020 | Change | 2021 | 2020 | Change | |
Provision for loan losses and other | 15,420,843 | 4,668,724 | 230% | 33,175,000 | 13,618,114 | 144% |
Provision for loan losses and other | 47% | 28% | 66% | 37% | 27% | 40% |
Net Charge-Offs as a % of Total | 19% | 8% | 138% | 18% | 30% | -38% |
(1) See "Non-IFRS Financial Measures and Industry Metrics" in the Company's Management Discussion and Analysis |
Provision for loan losses and other liabilities increased by 230% to
Demand was especially muted in Q2 2020 and Q3 2020 because of a temporary reduction in consumer spending coupled with an increase in government stimulus. Also, out of prudence, underwriting was proactively tightened due to the market uncertainty which further reduced origination volumes. This led to exceptionally low provisioning as percentage of revenue in Q2 2020 and Q3 2020.
In periods of high growth, Propel experiences a higher provision for loan losses as new customers tend to have higher default rates relative to existing customers in the portfolio that have been consistently making payments. Also, under IFRS, the Company records loan loss provisions based on expected future credit losses as soon as a new loan is originated without matching revenue that is earned over the life of a loan. Demand is highest in the second half of the year beginning with the back-to-school period in Q3 and demand is particularly strong in Q4 during the holiday season, where origination volume is at its highest. In contrast, Q1 tends to be the lowest demand period driven in large part by the tax refund season. As such, provision for loan losses and other liabilities as a percentage of revenue is highest in Q3 and Q4 and lowest in Q1 in a normalized environment. As a result of COVID-19, Q2 and Q3 2020 were uncharacteristically low growth periods that, coupled with very strong credit performance, drove atypically low provision for loan losses and other liabilities as a % of revenue. 2021 has seen a gradual return in demand as the economy reopens and government stimulus packages are being wound down. As such, provision for loan losses and other liabilities as a % of revenue are more normalized for the 2021 periods considering the accelerated growth realized.
Three Months Ended | % | Nine Months Ended | % | |||
2021 | 2020 | Change | 2021 | 2020 | Change | |
Net Income | 626,044 | 2,566,736 | -76% | 8,775,498 | 8,463,160 | 4% |
Net Income as % of Revenue | 2% | 16% | 10% | 17% | ||
EBITDA (1) | 2,849,359 | 5,168,345 | -45% | 18,517,389 | 16,659,605 | 11% |
EBITDA as % of Revenue | 9% | 31% | 21% | 33% | ||
Adjusted EBITDA (1) | 5,008,050 | 6,753,265 | -26% | 22,748,623 | 15,992,244 | 42% |
Adjusted EBITDA as % of | 15% | 41% | 26% | 31% |
(1) See "Non-IFRS Financial Measures and Industry Metrics" in the Company's Management Discussion and Analysis |
Net Income decreased by 76% to
Net Income increased by 4% to
Net Income for both the Q3 2021 and year-to-date Q3 2021 periods was more impacted by IFRS provisioning on new originations and accounts in good standing whereas an adjustment for this is made in the calculation of Adjusted EBTIDA. Net Income was also impacted by non-recurring transaction expenses of
About Propel
Propel is an innovative, online fintech company, committed to credit inclusion by providing fair, fast and transparent access to credit with exceptional service using its proprietary online lending platform. Through its operating brands, MoneyKey and CreditFresh, Propel is focused on providing access to credit to the over 60 million underserved
Forward-Looking Information
Certain statements made in this news release may constitute forward-looking information under applicable securities laws. These statements may relate to our future financial outlook and anticipated events or results and include the reaffirmation of our short-term operating and financial targets, our ability to drive growth in Q4 and over the long-term. Such statements are based on management's reasonable assumptions and beliefs in light of the information currently available to us and is made as of the date of this news release. However, we do not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws in
Implicit in forward-looking statements in respect of the Company's expectations for: (i) Ending Combined Loan and Advance Balances CAGR; (ii) Revenue Yield; (iii) Adjusted EBITDA Margin; and (iv) Net Income Margin for the 12 to 18 month period following the date of the prospectus, are certain assumptions relating to the COVID-19 pandemic and related government subsidies, the regulatory landscape, our continued expansion of our Bank Partner relationships, the availability and cost of debt capital, the maintenance and expansion of our marketing partnerships and the overall macroeconomic environment, each as further set out in the Prospectus.
We caution that the list of risk factors and uncertainties is not exhaustive and other factors could also adversely affect our results. Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such information. See "Risk Factors" in the Prospectus for a discussion of the uncertainties, risks and assumptions associated with these statements.
Non-IFRS Financial Measures and Industry Metrics
This news release makes reference to certain non-IFRS financial measures and industry metrics. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. Such measures include "Adjusted EBITDA", "EBITDA", "Ending Combined Loan and Advance Balances", "Net Charge-Offs", "Net Charge-Offs as a Percentage of Total Funded" and "Total Originations Funded". See "
For a reconciliation of the non-IFRS financial measures refenced herein, please see "Reconciliation of Non-IFRS Financial Measures" in this news release.
These non-IFRS financial measures and industry metrics are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We believe that securities analysts, investors and other interested parties frequently use non-IFRS financial measures and industry metrics in the evaluation of issuers. The Company's management also uses non-IFRS financial measures and industry metrics in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts, and to determine components of management and executive compensation. The key performance indicators used by the Company may be calculated in a manner different than similar key performance indicators used by other similar companies.
Reconciliation of Non-IFRS Financial Measures
The following table provides a reconciliation of our net income to EBITDA and to Adjusted EBITDA for the three- and nine-month periods ending September 30, 2021 and
Three Months Ended
| Nine Months Ended
| |||
(US$) | 2021 | 2020 | 2021 | 2020 |
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 626,044 | 2,566,736 | 8,775,498 | 8,463,160 |
Interest on Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1,212,845 | 902,706 | 4,124,761 | 2,888,953 |
Interest on lease liabilities. . . . . . . . . . . . . . . . . . . . . . | 106,564 | 114,941 | 334,008 | 356,929 |
Amortization of intangible assets . . . . . . . . . . . . . . . . . . | 493,375 | 441,239 | 1,529,846 | 1,236,002 |
Depreciation of property and equipment . .. . . . . . . . . . . | 25,186 | 38,211 | 87,191 | 127,064 |
Amortization of right-of-use assets. . . . . . . . . . . . . . . . . | 159,629 | 179,090 | 502,129 | 536,154 |
Income Tax Expense (Recovery) . . . . . . . . . . . . . . . . . . | 225,716 | 925,422 | 3,163,956 | 3,051,343 |
EBITDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,849,359 | 5,168,345 | 18,517,389 | 16,659,605 |
Transaction Costs and Financing Costs. . .. . . . . . . . . . | 323,216 | - | 364,821 | 22,149 |
Provision for credit losses on current status accounts(1) . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . | 1,194,979 | 1,419,197 | 2,627,786 | (274,066) |
Provisions for CSO Guarantee liabilities and Bank Service Program liabilities. . . . . . . . . . . . . . . . . . . | 640,496 | 165,724 | 1,238,627 | (415,444) |
Adjusted EBITDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,008,050 | 6,753,265 | 22,748,623 | 15,992,244 |
_____________ |
Note: (1) Provision included for (i) loan losses on good standing current principal (Stage 1 — Performing) balances (see "Critical Accounting Estimates and Judgements — Loans and advances receivable" in the Company's Management Discussion and Analysis). |
The following table provides a reconciliation of our Ending Combined Loan and Advance Balances to loans and advances receivable for periods ending
As at | As at | ||
(US$) | 2021 | 2020 | 2020 |
Ending Combined Loan and Advance balances. . . . . . . . . . . . . | 96,841,775 | 38,735,070 | 62,643,735 |
Less: Loan and Advance balances owned by third party lenders pursuant to CSO program. . . . . . . . . . . . . . . . . . . | (3,204,174) | (2,560,981) | (2,487,802) |
Less: Loan and Advance balances owned by a NBFI pursuant to the MoneyKey Bank Service program. . . . . . . . . . . | (9,519,178) | (280,498) | (3,316,385) |
Loan and Advance owned by the Company . . . . . . . . . . . . . . . | 84,118,425 | 35,893,590 | 56,839,548 |
Less: Allowance for Credit Losses. . . . . . . . . . . . . . . . . . . . . . . | (19,809,595) | (8,304,746) | (13,406,118) |
Add: Fees and interest receivable. . . . . . . . . . . . . . . . . . . . . . . . | 9,076,161 | 4,177,246 | 5,262,181 |
Add: Deferred acquisition and data costs . . . . . . . . . . . . . . . . . | 3,831,377 | 1,516,036 | 2,881,948 |
Loans and Advance Receivables. . . . . . . . . . . . . . . . . . . . . . . . | 77,216,368 | 33,282,125 | 51,577,558 |
SOURCE
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