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Management Commentary

"Building on a record first half of fiscal year 2024, we are proud to deliver another quarter of record results in Q3 including record Total Originations Funded¹, Revenue and ending CLAB¹.

In our existing business, we experienced strong consumer demand, particularly from existing and return customers, that led to record Total Originations Funded¹, up 36% over Q3 2023. Supported by our AI-powered technology platform, we and our Bank Partners delivered strong credit performance in line with seasonal expectations, while significantly growing our overall loan portfolio.

On our path to become a global leader, we made an important step forward with our pending acquisition of QuidMarket, a leading fintech lender in the UK, for $71 million to be financed with a concurrent C$115 million bought deal equity offering. With more than 20 million underserved consumers, the UK market presents a significant growth opportunity. We also announced a new embedded lending partnership model with KOHO, to further our Canadian growth.

Propel is at an exciting inflection point. When we went public just over three years ago, we outlined three growth objectives: geographic expansion, serving more consumers across the credit spectrum and strategic acquisitions. We have delivered on all three while also growing our last twelve month revenues organically at a 55% CAGR for the past three years. There is still much more to come as we aim to become a global leader," said Clive Kinross, Chief Executive Officer.

Discussion of Financial Results and Business Strategy

• Ongoing strong consumer demand led to record quarterly Total Originations Funded¹, Ending CLAB¹ and Revenue

  • While continuing to maintain a prudent underwriting posture, we and our Bank Partners facilitated record originations driven by higher consumer demand particularly from existing and returning consumers, which represented a record for the quarter

  • Total Originations Funded¹ increased by 36% to a quarterly record of $150 million in Q3 2024 vs. Q3 2023, resulting in Ending CLAB¹ growing year-over-year by 44% to a record of $432 million

  • Annualized Revenue Yield¹ decreased to 114% in Q3 2024 from 116% in Q3 2023. The decrease was driven by a variety of factors including: i) the record originations from existing and returning customers; ii) the continued aging of the loan portfolio; and iii) the ongoing expansion of Fora

  • The record Ending CLAB¹ drove the 41% growth and record revenue in Q3 2024 of $117 million

• Propel's AI-powered technology continued to deliver strong credit performance in Q3

  • We and our Bank Partners were able to capitalize on strong consumer demand and extend credit to more consumers, while continuing to drive strong credit performance, in line with seasonal expectations

  • Given the strong demand during Q3, we and our Bank Partners proactively originated relatively more volume from returning and existing customers with established repayment histories

  • Provision for loan losses and other liabilities as a percentage of revenue remained the same at 52% in Q3 2024 from 52% in Q3 2023

    • Net Charge-Offs as a Percentage of CLAB¹, on the other hand, decreased to 11% in Q3 2024 from 12% in Q3 2023 driven by the ongoing strong credit performance across the loan portfolio over the past year

• Overall growth, operating leverage and effective cost management contributed to the year-over-year increase in Net income and Adjusted Net Income¹

  • Net income was $10.5 million in Q3 2024, a 70% increase over Q3 2023, and Adjusted Net Income¹ was  $14.1 million in Q3 2024, a 66% increase over Q3 2023

  • Net income margin increased to 9% in Q3 2024 from 7% in Q3 2023 and Adjusted Net Income Margin¹ increased to 12% in Q3 2024 from 10% in Q3 2023. The margin expansion was driven by operating leverage and effective cost management

    • Net income in Q3 2024 was adversely impacted by one-time transaction expenses of $2.5 million (pre-tax) associated with the acquisition of QuidMarket. By excluding these one-time transaction expenses, Propel's net income and net income margin for Q3 2024 would have been $12.4 million and 11%, respectively

• Propel accelerated its global growth strategy with the acquisition of QuidMarket for $71 million

  • The UK market has an estimated 20 million underserved consumers and provides a foothold in the large underserved European market for Propel

  • Transaction to be financed through C$115 million bought deal equity offering which included exercise of 15% over-allotment option by syndicate of underwriters

  • The acquisition is expected to be immediately accretive to Propel's 2024 and 2025 Adjusted Diluted EPS¹, on a pro forma basis, and excluding transaction costs and prior to any potential synergies

  • Moving forward, we expect the growth at QuidMarket to be further enhanced by leveraging Propel's AI-powered technology, financial and operational expertise and capital resources

  • The acquisition is expected to close in either Q4 2024 or in Q1 2025, subject to the satisfaction of customary closing conditions, including the receipt of applicable regulatory approvals, including the approval of the Financial Conduct Authority

• Fora launched an embedded lending partnership with KOHO, furthering growth in the Canadian market and pioneering a new partnership model

  • On September 20, Propel and KOHO announced an exclusive embedded lending partnership, with Fora to provide the technology, underwriting, servicing and funding of KOHO loans, directly through the KOHO app. The partnership officially launched to select KOHO customers on October 30

  • Embedded lending is a new partnership model for Propel and the Company is working to secure additional partners across its markets

• Lending-as-a-Service ("LaaS") growth continued with increased commitments from purchasers

  • The Company is pleased by the performance and expects the LaaS program to continue to be a significant driver of growth going forward

• Propel's record growth earned the Company recognition on the 2024 Deloitte Technology Fast 50 ranking in Canada

  • Propel also ranked on Globe and Mail's Top Growing Companies in September, placing 128 out of 417 companies, with a three year revenue growth rate of 331%

  • Propel's CEO Clive Kinross was also named EY Entrepreneur of the Year for Ontario. Mr. Kinross will participate in the national Canadian competition with the winner announced November 26

• Solid financial position and continued earnings growth supports the continued expansion of existing programs and increased dividend

  • The Company ended Q3 2024 with approximately $117 million of undrawn credit capacity on its various credit facilities with a Debt-to-Equity⁴ ratio of 2.0x, the same level as Q4 2023, even with the 44% growth in Ending CLAB¹ for the three month period ending September 30, 2024

    • Propel expects its Debt-to-Equity⁴ ratio to decline upon the closing of the QuidMarket acquisition which was financed by the recent C$115 million bought deal equity offering

• In addition, the Company upsized its CreditFresh credit facility from $250 million to $330 million in July with additional lenders to support future growth

• Propel's ongoing strong operating results and financial position supported the decision to increase the quarterly dividend by 7% to C$0.15 per common share in Q4 2024

  • Quarterly dividend represents a payout ratio of 30% on Q3 2024 Adjusted Net Income¹

Dividend Increase

Propel also announced today that its board of directors has approved an increase to its dividend that represents an increase from C$0.56 per common share to C$0.60 per common share on an annualized basis. This 7% increase is the Company's fourth dividend increase in 2024 and the sixth dividend increase since the beginning of 2023. The board declared a dividend of C$0.15 per common share, payable on December 4, 2024 to shareholders of record as of the close of business on November 15, 2024. The Company has designated this dividend as an eligible dividend within the meaning of the Income Tax Act (Canada). Upon the closing of the QuidMarket acquisition, subscription receipt holders of record as of the close of business on November 15, 2024 will receive C$0.15 per subscription receipt pursuant to the terms of the subscription receipts.

Conference Call Details

The Company will be hosting a conference call and webcast tomorrow morning with a presentation by Clive Kinross, Chief Executive Officer, and Sheldon Saidakovsky, Chief Financial Officer.

Conference call details are as follows:

About Propel

Propel Holdings (TSX: PRL) is the fintech company building a new world of financial opportunity for consumers, partners, and investors. Propel's operating brands — Fora Credit, CreditFresh and MoneyKey — and our Lending-as-a-Service product line facilitate access to credit for consumers underserved by traditional financial institutions. Through its groundbreaking AI-driven platform, Propel evaluates customers in a more comprehensive way than traditional credit scores can. The result is better products and an expanded credit market for consumers while creating sustainable, profitable growth for Propel.  Our revolutionary fintech platform has already helped consumers access over one million loans and lines of credit and over one billion dollars in credit. At Propel, we are here to change the way customers, partners and investors succeed together. Learn more at propelholdings.com

Non-IFRS Financial Measures and Industry Metrics

This press 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 Diluted EPS", "Adjusted EBITDA", "Adjusted Net Income", "Adjusted Net Income Margin", "Adjusted Return on Equity", "EBITDA", "Ending CLAB", and "Total Originations Funded".  This press release also includes references to industry metrics such as "Annualized Revenue Yield", "Return on Equity" and "Total Originations Funded" which are supplementary measures under applicable securities laws.

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.

Definitions and reconciliations of non-IFRS financial measures to the relevant reported measures can be found in our accompanying MD&A available on SEDAR+. Such reconciliations can also be found in this press release under the heading "Reconciliation of Non-IFRS Financial Measures" below.

Forward-Looking Information

Certain statements made in this press release may constitute forward-looking information under applicable securities laws. These statements may relate to our dividend scheduled for December 4, 2024, the factors fueling our growth throughout 2024, the impact of the pending acquisition of QuidMarket and the expected growth at QuidMarket post-closing, our business development pipeline, our ability to serve underserved consumers in North America and globally.  As the context requires, this may include certain targets as disclosed in the prospectus for our initial public offering, which are based on the factors and assumptions, and subject to the risks, as set out therein and herein. Often but not always, forward-looking statements can be identified by the use of forward-looking terminology such as "may", "will", "expect", "believe", "estimate", "plan", "could", "should", "would", "outlook", "forecast", "anticipate", "foresee", "continue" or the negative of these terms or variations of them or similar terminology.

Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the factors discussed in the "Risk Factors" section of the Company's annual information form dated March 12, 2024 for the year ended December 31, 2023 (the "AIF"). A copy of the AIF and the Company's other publicly filed documents can be accessed under the Company's profile on SEDAR+ at www.sedarplus.ca.

The Company cautions that the list of risk factors and uncertainties described in the AIF is not exhaustive and other factors could also adversely affect its 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. The forward-looking information contained in this press release represents our expectations as of the date of this press release (or as the date they are otherwise stated to be made), and are subject to change after such date. However, we disclaim any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

Selected Financial Information

Reconciliation of Non-IFRS Financial Measures

The following table provides a reconciliation of Propel's net income to EBITDA¹ and Adjusted EBITDA¹:

The following table provides a reconciliation of Propel's Net Income to Adjusted Net Income¹, Adjusted Return on Equity¹ and Adjusted Net Income margin¹:

The following table provides a reconciliation of Propel's Ending CLAB¹ to loans and advances receivable:

SOURCE Propel Holdings Inc.

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