Earnings call transcript: Propel Holdings Q2 2025 sees revenue surge

Propel Holdings Inc. reported a strong financial performance for the second quarter of 2025, with a record revenue of $143 million, marking a 34% year-over-year increase. The company also achieved a milestone by surpassing $50 million in monthly revenue in June. Despite the absence of specific earnings forecasts, the company’s stock experienced a modest increase, with a 0.87% rise to close at $35.71. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.2/5, with liquid assets exceeding short-term obligations. Propel Holdings continues to show robust growth, driven by its AI-powered platform and strategic market expansion.

Key Takeaways

• Propel Holdings reported a 34% increase in revenue year-over-year, reaching $143 million for Q2 2025.
• The company achieved over $50 million in monthly revenue for the first time in June.
• Propel Holdings’ stock price increased by 0.87% following the earnings announcement.
• The company is leveraging AI technology to enhance credit performance and expand its customer base.
• Propel Holdings is maintaining its full-year revenue guidance and expects significant growth in the UK market.

Company Performance

Propel Holdings demonstrated strong performance in Q2 2025, driven by its innovative use of AI technology and strategic expansion efforts. The company’s revenue increased by 34% compared to the same period last year, highlighting its ability to capture market share and enhance operational efficiency. The integration of AI across various operations, including customer service, is expected to further boost the company’s performance by enabling it to serve an additional 10,000 customers monthly by the end of the year.

Financial Highlights

• Revenue: $143 million, up 34% year-over-year
• Adjusted net income: $19.2 million, a 22% increase
• Diluted adjusted EPS: $0.45
• Provision for loan losses: 49.8% of revenue, slightly down from 49.9% last year

Outlook & Guidance

Propel Holdings is optimistic about the second half of the year, maintaining its full-year revenue guidance and anticipating strong growth, particularly in the UK market, with potential growth rates of 50-60%. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its Fair Value, suggesting investors should carefully consider entry points. The company is also exploring new partnerships and product expansions. Additionally, potential Federal Reserve rate cuts are seen as a favorable factor for future growth. InvestingPro subscribers can access comprehensive valuation metrics and detailed growth forecasts in the Pro Research Report, part of the platform’s coverage of over 1,400 US stocks.

Executive Commentary

CEO Clyde Buchanross emphasized the company’s commitment to leveraging AI, stating, "We have built an AI-powered technology platform that is flexible, scalable, and adaptable." He also noted that there is "even greater opportunity to deepen our use of AI across the business." CFO Sheldon Sedikovsky highlighted the company’s strategic direction, saying, "Our intent is to continue expanding up and across the credit spectrum."

Risks and Challenges

• High credit application rejection rates: The U.S. credit application rejection rate is at 23%, which could impact customer acquisition.
• Economic pressures: Unemployment rates and inflation trends in key markets like the U.S., UK, and Canada could affect consumer spending and credit demand.
• Competitive landscape: As Propel Holdings targets higher credit quality consumers, competition from other financial service providers may intensify.

Q&A

During the earnings call, analysts inquired about Propel Holdings’ organic marketing strategy and the growth potential of its lending-as-a-service program. Executives clarified their approach to underwriting and customer acquisition, highlighting the role of AI in enhancing operational efficiency and driving future growth.

Full transcript - Propel Holdings Inc (PRL) Q2 2025:

Conference Call Operator: Good morning, everyone. Welcome to Propel Holdings Second Quarter twenty twenty five Financial Results Conference Call. As a reminder, this conference call is being recorded on 08/07/2025. At this time, all participants are in a 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 Jelani, Propel’s Vice President, Capital Markets and Investor Relations. Please go ahead, Devon.

Devon Jelani, Vice President, Capital Markets and Investor Relations, Propel Holdings: Thank you, operator. Good morning, everyone, and thank you for joining us today. Propel’s second quarter twenty twenty five financial results were released yesterday after market close. The press release, financial statements and MD and A are available on SEDAR plus as well as on the company’s website, propellholdings.com. Before we begin, I would like to remind all participants that our statements and comments today may include forward looking statements within the meaning of applicable securities laws.

The risks and considerations regarding forward looking statements can be found in our Q2 twenty twenty five MD and A and annual information form for the year ended 12/31/2024, both of which are available on SEDAR plus Additionally, during the call, 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 Q2 twenty twenty five MD and A for definitions of our non IFRS measures and a 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 Clyde Buchanross, Founder and Chief Executive Officer and Sheldon Sedikovsky, Founder and Chief Financial Officer. Clyde will provide an overview of our record Q2 twenty twenty five results and our 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 update on PROPEL strategy and growth initiatives for the remainder of 2025. With that, I will now pass the call over to Clyde.

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: Thank you, Devin, and welcome everybody to our Q2 conference call. Building on our strong start to the year, we are proud to have delivered another quarter of record results. While macroeconomic conditions remain dynamic, our AI powered platform, disciplined risk management and diversified global footprint continued to drive our record performance. We’ll

Devon Jelani, Vice President, Capital Markets and Investor Relations, Propel Holdings: cover

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: what we’re observing from our consumer segment in the macroeconomic environment shortly, but first I want to speak about our record Q2 results. We delivered another quarter of strong growth with record quarterly revenue, total originations funded and ending CLAB. Carrying over from our strong Q1, we and our bank partners continued to experience robust demand, leading to record total originations funded of $194,000,000 an increase of 35% over Q2 of the previous year. We accomplished this while delivering our strongest credit performance for a Q2 period since becoming a public company, a result of a disciplined approach to underwriting and our AI powered technology. Strong consumer demand from both new and existing customers led to a record revenue of $143,000,000 an increase of 34% from Q2 of last year.

We also achieved in excess of $50,000,000 in monthly revenue for the first time in June. On the bottom line, adjusted net income increased by 22% to $19,200,000 from Q2 twenty twenty four. Turning to the macroeconomic environment, which remains dynamic, we are confident in our business and the resiliency of our consumer segments. As we have previously discussed, to propel some level of macroeconomic uncertainty is an opportunity with a tightening lending environment leading to more consumers with higher credit quality applying for credit from Propel and its bank partners. As we discussed last quarter, credit for U.

S. Consumers in particular has become increasingly challenging to access. According to the New York Fed, 23% of credit applications were rejected in June, up 2% from February and the highest reported level since 2014. This trend is especially acute for consumers with credit scores below six eighty, with nearly 57% of applications rejected, up from 48% in February. Concurrently, the Wall Street Journal recently reported that the major credit card companies have been shifting their marketing to target consumers with higher credit scores.

This is coupled with many major US banks shifting their focus to high income households. And yet consumers remain resilient. While The US unemployment rate increased modestly to 4.2% in July, it remains near historical lows and wage growth continues to outpace inflation. Within our target markets, employment remains healthy with job gains concentrated in sectors such as health care and education, industries that disproportionately employ many of our consumers. Meanwhile, in Canada, revenue grew by 55% year over year to a record in Q2, though Canada still represents only 2% of our overall revenue as we continue to scale forward.

We also continue to observe differences in the broader macro environment compared to The US. Canada’s unemployment rate remains higher at 6.9% as of June and GDP growth was essentially flat in Q2, driven in part by the effects of US tariffs. That said, there are encouraging signals. Inflation remains near the Bank of Canada’s target rates, and in July, the bank held rates steady, noting that the economy has withstood US tariffs better than expected. We are closely monitoring the status of ongoing trade discussions, though it is clear that some level of tariffs will remain in place going forward.

Turning to The UK, market continues to exceed our expectations. Total originations funded grew by 68 in Q2 compared to last year, representing a record. In addition, Good Market delivered record revenue and continued to deliver strong credit performance in Q2. Looking at the macro environment in The UK, while economic growth has moderated, the unemployment rate of 4.7% remains below the long term historical average. Inflation continues on a downward path, and while not yet at pre COVID levels, is steadily approaching the Bank of England’s targets.

Encouragingly, wage growth remains strong and continues to outpace inflation supporting consumer resilience. Lastly, reflecting on our strong results and solid financial position, our Board of Directors has approved another increase to our dividend from $0.72 to $0.78 per share annually in Canadian dollars. That 8% increase represents our eighth consecutive dividend rate. Since early twenty twenty three, our dividend has more than doubled underscoring our strong financial performance and our commitment to delivering shareholder returns. I will speak more about our outlook and business development pipeline for the remainder of 2025.

But first, I will pass the call over to Shaul.

Sheldon Sedikovsky, Founder and Chief Financial Officer, Propel Holdings: Thank you, Clive, and good morning, everyone. We are proud to deliver another quarter of record results, while continuing to grow the business significantly on a profitable basis. Similar to Q1, we and our bank partners continued to observe strong consumer demand and credit performance across our operating brands. We achieved record originations from both new and existing customers in Q2, which resulted in record total originations funded of $194,000,000 an increase of 35% versus Q2 of last year. The record quarterly originations helped drive the 33% year over year growth in ending CLAB, which ended Q2 at a record $520,000,000 Given the macroeconomic environment, we and our bank partners prioritized originating a higher proportion of volume from return and existing customers versus new customers.

Similar to Q1, new customers represented 43% of total originations in Q2. Lending as a service generated record revenues in Q2 with over 60% sequential revenue growth from Q1. The program continues to deliver strong margins and returns to forward flow purchasers, consistent with our expectations. In Canada, notwithstanding the macroeconomic backdrop, Fora experienced strong growth and generated record revenue in Q2 twenty twenty five. And in The UK, as Clive mentioned, Quid Market experienced record revenues and originations in Q2.

PROPEL’s overall record loans and advances receivable balance and ending C Lab drove the record revenues of $143,000,000 for Q2, representing 34% growth over Q2 twenty twenty four. The annualized revenue yield in Q2 was 114%, a modest decrease from 115% in Q2 of last year. The decrease was driven by several factors, including firstly, the larger proportion of originations from return in existing customers. Secondly, the continued aging of the loan portfolio, including the graduation of customers to lower cost of credit, and thirdly, the ongoing expansion of FORA. These factors offset those items driving the yield higher, including quid market and our lending as a service revenue.

Turning to provisioning and charge offs, the provision for loan losses and other liabilities as a percentage of revenue decreased slightly to 49.8% in Q2 from 49.9% in Q2 last year. We continue to experience strong credit performance across the loan portfolio, driven by one, the effectiveness of our AI powered platform and our bank partners disciplined underwriting approach. Two, the continued customer resiliency in our segment of the market. And three, the continued scale and maturation of the loan portfolio, with an increased proportion of originations from return and existing customers. As a reminder, existing and returning customers generally have lower default rates than new customers.

As Clive mentioned, the provision for loan losses and other liabilities as a percentage of revenue in the quarter was our strongest Q2 performance since going public. With respect to net charge offs, our net charge offs as a percentage of C Lab was 12% in Q2 twenty twenty five and reflects strong credit performance for the quarter. The provision as a percentage of revenue and net charge offs were also impacted by a one time accounting estimate change relating to Quinn Market. Without this one time adjustment, the provision percentage would have been lower. The 50% in provision as a percentage of revenue and the 12% net charge offs as a percentage of CLAB are both well within our target range for the loan portfolio, and we believe will continue generating strong unit economics and driving expanding growth and profitability going forward.

In Q2 twenty twenty five, adjusted net income increased to $19,200,000 from $15,700,000 in Q2 last year, representing 22% growth. On an EPS basis, our diluted adjusted EPS grew to $0.45 in Q2. For the year to date period, our adjusted net income increased to $42,600,000 and our diluted adjusted EPS grew to $1.1 Both of these figures represent six month period records. As a reminder, all of these figures are expressed in U. S.

Dollars. The growth in our earnings is primarily a result of the overall revenue growth of the business, strong credit performance and ongoing effective cost management. On a return on equity basis, our annualized adjusted ROE for Q2 declined to 32% from 54% last year. For the year to date period, our annualized adjusted ROE was 37% compared to 56% last year. The primary reason for the declines was the $115,000,000 Canadian equity offering to finance the quit market transaction that we completed in Q4 last year.

We believe these metrics demonstrate strong returns to our investors, as well as our ability to efficiently utilize shareholders’ capital. Turning to acquisition and data costs. Starting in Q2, we removed the marketing and underwriting costs relating to our lending as a service program and included them along with the other lending as a service program costs in processing technology and program servicing. This enables users to better understand and compute our cost per funded origination, considering our total originations funded exclude lending as a service. Acquisition and data expenses as a percentage of revenue increased to 13% in Q2 from 11.4% in Q2 last year.

This increase was driven primarily by the strong total originations funded for the quarter and an increase in the cost per funded origination. Our cost per funded origination increased to $0.96 in Q2 from $0.85 in Q2 last year, and our cost per new customer funded origination increased to $0.02 $24 from $0.01 $81 in the prior year. These increases were driven primarily by three factors. Firstly, fluid market, which has a higher cost per funded origination than our other programs, had an even more meaningful impact this quarter given the acceleration in its growth. Although it has a higher relative cost per funded origination, the provision for loan losses in this program is notably lower than our North American programs.

Secondly, an increased spend in organic marketing, which has a higher cost per funded origination, but historically also drives relatively higher credit quality originations to our platform. This supported the strong credit performance in Q2, and is expected to continue delivering high quality originations in future quarters. And thirdly, given our prudent risk posture, we incurred a higher relative spend on underwriting and data, which in turn further contributed to our strong credit performance. As a reminder, underwriting and data costs are a meaningful part of our cost per funded origination. We continue to pursue broad application volume while maintaining a disciplined and conservative acceptance rate.

While this increases our data and underwriting costs, we’re comfortable with this approach considering the strong credit performance. Overall, this level of spend remains well within the acceptable range to achieve targeted profitability during a period of significant growth. With respect to other operating expenses, these increased as a percentage of revenue to 17% in Q2 from 16% in Q2 last year. Although we continue to benefit from the operating leverage inherent in the business, we are also continuing to invest in our infrastructure to support the launch of near term business development initiatives. We expect to announce these initiatives over the coming months and for them to significantly contribute to our growth and profitability as they scale over time.

Our profitability benefited from a reduction in our overall cost of debt, which includes interest and other credit facility associated fees. The combination of lower interest rates and a recent reduction to our credit facility costs decreased the cost of debt to 11.4% in Q2 from 13.4% in the prior year. Overall, our adjusted net income margin decreased to 13% in Q2 from 15% in Q2 of last year. Prior The positive impact from the strong credit performance and lower interest costs was offset by a lower stage one provision add back and an unrealized foreign exchange gain in the quarter, which is removed from our adjusted figures. Turning to PROPEL’s capitalization.

As of June 30, we had approximately $151,000,000 of undrawn capacity under our various credit facilities. During Q2, we completed a $70,000,000 upsize to our Credit Fresh facility, bringing the total capacity up to $400,000,000 Furthermore, we completed the refinancing of our Money Pit credit facility to $15,000,000 In addition, we were able to reduce the cost of both facilities meaningfully by approximately 150 basis points per annum on a combined basis. As a reminder, our credit facilities are based on a floating rate. So any additional reduction in interest rates in Canada and The U. S.

Will provide a tailwind to our profitability. Our debt to equity ratio was approximately 1.1 times at the end of Q2, providing us with an exceptionally well capitalized balance sheet. We believe that our strong financial position and additional debt capacity, as well as our significant cash flow generating capability will be able to support the continued expansion of our existing programs, additional growth initiatives, and to support the increased TAR dividend. Lastly, I want to provide an update on the integration of QuickMarket. We have nearly completed the integration of our financial, general corporate and IT infrastructure systems and are ahead of schedule.

We have also placed a greater focus on the integration of our two cultures. Last month, I was in The UK with our Head of People and Culture, Cindy Upsbridge, where we had a discussion with the UK team about our common values and the mission that unites and drives us. The team was bursting with input and energy. Next, we are focusing on customer acquisition, product and underwriting strategies that will unlock significant synergies and opportunities to further accelerate our growth in The UK. As always, I came away from the visit even more excited about what we are building.

We are increasingly focused on how we can further expand into The UK’s large addressable market. Congrats to our exceptional team in Nottingham on helping deliver a quarter of significant and record growth.

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: I’ll pass the call back over to Vlad. Thanks, Sheldon. More than a month into our third quarter, we are confident in our ability to deliver strong record results in the 2025. As a reminder, our business is seasonal with more of the growth typically in the back half of the year. While we remain vigilant on a seasonally adjusted basis, we continue to observe strong credit performance and customer demand across our operating regions.

Now operational in three markets and with a full business development pipeline, there is significant opportunity in front of us and we are focused on seizing it. Looking at our growth in The U. S, The U. S. Remains a critical market for us and we are actively exploring ways to expand our presence through new partnerships, products and investments.

In this regard, we will have more to announce in the months to come. With Lending as a Service, we have always stated that the market demands within the states we operate in outweighs the capital we have had access to. With the addition of new purchases and additional commitments secured from existing purchases during the quarter, we are well positioned to meet more of the demand in front of us in the months and quarters to come. Overall, this remains a relatively young and well performing program and one we expect to continue to grow significantly. In Canada, the effects of The U.

S. Tariffs appear to be largely confined to a limited number of sectors. While we continue to take a cautious approach to our home market, we are working on several new fintech partnerships, not too dissimilar to Coho, which we expect to announce in the coming months. We remain confident in our ability to grow into the leading fintech lender for underserved consumers in Canada. Lastly, in The UK, given strong originations and credit performance, we now expect top line growth to exceed 50% in our first full year of owning Quid Market.

There is tremendous opportunity in The UK and millions of consumers underserved by today’s market. We have the right team on the ground in The UK to ensure we deliver and accelerate growth even more in the future. As we continue to grow, scaling effectively remains a top priority. AI underpins that effort. When we went public in 2021, we had a team of roughly three thirty and generate a trailing twelve month revenue of approximately $110,000,000 Today, four years later, we have a team of roughly six thirty and at the midpoint of our guidance suggest we will achieve $620,000,000 in revenues this year.

That represents a nearly six times revenue growth with less than double the headcounts, a result of disciplined technology investments, automation and AI powered underwriting platform that continues to deliver strong credit performance and operating leverage. And we’re just getting started. We see even greater opportunity to deepen our use of AI across the business. That’s why we are investing further in our AI capabilities, not just in our underwriting and lending platform, but increasingly across our operations. One area we’re especially excited about is our customer operations center.

We’re working with a leading AI customer service company to implement solutions that drive both automation and effectiveness. This includes AI agents, as well as real time tools that assist our representatives with real time guidance, assistance, and workflow integration, allowing them to serve more customers quicker, more accurately, and effectively. Our AI investments are working. In Q2 twenty twenty five, we achieved a record in order decision originations. Looking ahead, we expect the AI agents alone will enable us to serve an additional 10,000 customers each month by the end of the year without additional headcounts.

Going forward AI will continue to drive margin expansion, elevate customer satisfaction and help us become a true global leader. While we continue to invest in AI and technology, there’s our people and culture that remain at the center of our business. That is why we are proud to be named one of the Best Places to Work by HRD Canada for the third year in a row this award is recognition of the meritocratic culture we have built and championed here and of course the strength of our people and propel culture is set at the top That’s why I was especially proud to see my friend and co founder Sheldon Sadikovsky recognized as Executive of the Year by the Canadian Lenders Association. While this award highlights Sheldon’s leadership in the acquisition and integration of quick markets, his impact on PROPEL runs far deeper. Sheldon has one of the sharpest financial minds I’ve ever worked with, and more importantly, is one of the most principled, hardworking, and honorable individuals I know.

Over fourteen years, we’ve worked side by side, and I’ve seen Sheldon grow into a powerhouse CFO and a world class leader and executive. Congratulations, Sheldon. As we head into the second half of the year, when demand for our and our bank partners’ product is highest, our business development pipeline is strong. With credit demand at record highs, we are well positioned to expand our products, enter new markets, and enhance our partnerships. There’s a lot of exciting work underway that we’re investing in, and we look forward to sharing some of these initiatives in the months to come.

Let me close by sharing a few thoughts on the uncertainty we continue to see around the world and how PROPEL is built for this month. For a while now, uncertainty has become the norm. Many businesses are pulling back, reassessing, or waiting for clarity. But at Propel, this is the environment we were built for. We have built an AI powered technology platform that is flexible, scalable, and adaptable.

It allows us to move quickly and operate confidently across any economic condition. We serve a resilient consumer base with people who know how to manage their tight budgets, adapt to uncertainty, and do more with less, often better than those with higher income and credit scores. We’re increasingly global. Geographic diversification allows us to manage risk and drive sustainable growth across our portfolio. We are disciplined.

Our approach to risk management isn’t reactive. Discipline is in our DNA and guides every decision we make. We have an exceptionally well capitalized balance sheet and sufficient debt capacity to fund our existing growth existing business growth initiatives and support our dividends. We have developed partnerships and business models that give us virtually unlimited paths to scale, with more opportunities post to launching. And most importantly, we have a team that has worked together for over fourteen years, weathering every storm, seizing every opportunity, and always moving forward.

Looking ahead, we see lots of opportunity. Now more than ever, we are committed to building a new world of financial opportunity for the more than 90,000,000 consumers in The U. S, Canada, and The U. K, underserved by traditional financial institutions. That concludes our prepared remarks.

Operator, you may now open the line for questions.

Conference Call Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer Your first question comes from the line of Matthew Lee from Canaccord Genuity. Your line is now open.

Matthew Lee, Analyst, Canaccord Genuity: Hey. Good morning, guys. Congrats, Sheldon, on the award, and thanks for taking my questions. I want to maybe ask about the guidance ranges. I know you’ve maintained the range over March, but at the time that you guys kind of set that guidance, things are much more opaque and frankly none of us had a good idea of how things would go.

It feels like we have much better clarity now and just given how your first half has gone, the natural seasonality, it seems like you’re end up on the high end of loan growth range. And then maybe in my model, that translates to earnings growth kind of in the 50% range. Can you just any tightening of the guidance would be helpful here?

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: Good morning, Matt, and nice to hear from you over there. We mentioned that June we exceeded $50,000,000 in revenue for the first time. We also made mention of the fact that our growth in the back half of the year dramatically exceeds the growth in the front half of the year, which means that the June revenue numbers are kind of the low point from a monthly perspective from this point onwards. So, you could kind of extrapolate what that means in terms of revenue for the back half of the year. And you could triangulate that into guidance.

All of which is to say, we certainly can increase the bottom end of our guidance range with a lot of confidence, but we elected not to simply because we’re big believers in under promising and over delivering. You know very well that we’ll be pushing hard to get to as close to the top end of that guidance as possible. We certainly see market conditions that support strong demand. We’re seeing good credit performance on a seasonally adjusted basis. And at the same time, we’ve never been better capitalized 1.1 debt to equity ratio, the amount of dry liquidity we have on the sidelines, all supports our ability to lean into that demand.

But as we’ve always done, we will only do so on a very, very disciplined basis, ensuring not only growth, but very profitable growth at the same time.

Matthew Lee, Analyst, Canaccord Genuity: Okay, that’s helpful. And maybe when I think about yield so far this year, if you take away the impact of the existing customer mix and the targeting of better customers, would you say yields have been fairly stable? Mean, maybe thought of another way, Is there any competitive pressure impacting pricing? Or is it really all related to your internal risk management preferences?

Sheldon Sedikovsky, Founder and Chief Financial Officer, Propel Holdings: Hey, Matt. First of all, thanks for the congrats and good to speak to you. Yeah, so it’s primarily related to the composition of the portfolio. It’s not related to anything in external market, it’s just the composition of our products. Quit market obviously has a higher yield on balance, so that’s driving some of that yield up, whereas the maturation of the portfolio is sort of you know, going to other way and driving it down.

I would say, what I’ve said consistently is that we expect our revenue yields this year to be between 110 and 115. We’re at the top end of that range, and that’s a good thing for the portfolio, just given the composition also within the products themselves, within the risk tiers that we’re originating in. So there’s quite a lot that goes into it. But I would say that if anything, our revenue yield is probably ahead of our estimates, and we’ll probably end up closer to the higher end of the range for the remainder of the year.

Matthew Lee, Analyst, Canaccord Genuity: Okay, that’s helpful. Then maybe just to sneak one last one in on lending as a service. I listen to a lot of The US big banks and it sounded like they’re getting a lot of interest from them, having wanted to exposure to consumer credit and they’re all getting to this buy now pay later business. I would argue Propel’s business model is better than some of those other models. Is that an opportunity to maybe add a bigger partner to the LAAS roster?

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: Yes. So Matt, first of all, I think our lending as a service revenue, our sequential growth was about 60% plus from quarter to quarter. And if anything, expect that Q2 to be the low point. So we’re to continue to drive lending as a service growth into Q3 and Q4. Right now we expect the annualized numbers for 2025 to more than double into 2026.

I’m really giving you a kind of a sneak peek as to where we’re the lending as a service going. Let me maybe take a step back and tell you what we’re seeing or what our what our what our purchasers are seeing over there, and I’ll try also answer your question about a larger institution. First of all, very, very important, the foundation to our lending as a service program is all the purchasers seeing the returns that we represent that they would be seeing. And not only are they getting those returns, but they’re doing even better than we told them they would do. Our philosophy of under promising and over delivering doesn’t stop at the investor community, it goes with all of our partners, and they are over the moon by what they’re seeing to the point that every single purchaser, is going out and raising raising fresh capital so that they could put more funds to work, with with Propel.

We saw new purchases as well as increased commitments from purchases during the quarter, and they’re racing fast to fill up that capacity before we bring on any new purchases. So you’ve certainly got that dynamic taking place in the marketplace, and we are much more balanced today in terms of having capital to absorb lots of the loan application volume from our lending as a service portfolio. That notwithstanding, there’s obviously tremendous growth. We’re now I think we’re originating approximately 3,000 loans, new loans a month in our lending as a service portfolio, and that will also represent kind of a low point that’s going to grow and there’s way more capacity than that. So the question that I think you’re alluding to is where’s the capital gonna come to to fund that growth, first and foremost, from our existing guys.

I can’t overstate that. Again, they’re raising capital and putting it to work. At the same time, it’s a huge market that we operate in, and there’s more than enough capital to go around if and when we do bring on a big institution. But that said, and I’m going to be absolutely candid about it, the opportunity for those bigger and bigger institutions to participate frankly is becoming less and less, because more and more of the capital that needs to be put to work is being taken up by the smaller guys, and a lot of these big institutions want huge commitments on an annualized basis, and the opportunity for that is being squeezed, they’re being squeezed a little bit out of the markets, because the other guys are taking up their capacity. All of which is to say, Matt, expect the growth to continue for the remainder of the year.

There’s tons of capital coming off of this market as we’re maturing and again expect that to more than double as we move into 2026. And that’s just the lending as a service with our infrastructure. All I’m alluding to is that there’s lots of other good stuff coming down the pike and we’ll be announcing that in the months to come, which will accelerate the lending as a service and other parts of the business even more than what I’ve already alluded to.

Conference Call Operator: Your next question comes from the line of Andrew Scott from ROTH Capital Partners.

Andrew Scott, Analyst, ROTH Capital Partners: Hey, guys. Just want to echo the congratulations for Sheldon. I want to say congrats on another solid quarter and thank you for taking my questions. So first one from me, you guys often talk about how customers are falling down the credit curve. You gave the Federal Reserve statistic of credit card applications.

But you guys are also kind of about a year and a half, two years into

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: a

Andrew Scott, Analyst, ROTH Capital Partners: marketing initiative to also attract higher credit quality customers. So can you kind of talk about how that’s translated into the improved customer base you’re working with today?

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: So do you want to take that? Do want me to take it? Yeah. Sure. You take it.

Why don’t you take it? And if there’s anything you need, I’ll jump on. Yeah.

Sheldon Sedikovsky, Founder and Chief Financial Officer, Propel Holdings: No, absolutely. So, hey, Andrew, thanks a lot. So, yeah, we’re continuing to move up the credit spectrum, as you’re saying. And as we’ve been telling folks for a while now, we’ve got a number of programs that enable us to continue to expand our total addressable market and move upstream as banks and traditional credit institutions tighten their underwriting more and more and shift away from the non prime consumer. We’re doing more and more risk based pricing.

We’re graduating consumers at, I would say on balance at faster pace. So that’s enabling us to keep consumers with Propel and offering them products all along their credit journey. So they stay with us for an extended period of time and access better products than they would access anywhere else in the market. So that’s certainly continuing to happen across our platform, and you’re seeing it in the credit results. We’re operating in an incredibly dynamic market with some macroeconomic numbers that are coming out that are impacting consumers, obviously, but we continue to hit our growth targets and continue to improve our credit quality all along the way.

We are operating with a tightened underwriting approach on new customers. That’s part of the way that we’re managing it. But our intent is to continue expanding up and across the credit spectrum all along the way.

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: And maybe let me add, because Andrew, you’re right, you spoke about the tightening that we’re seeing. In citing the New York Federal Reserve, that’s where the rejection rate grew from 21% last quarter to 23% this quarter to 10% growth in the rejection rate, the highest it’s been since 2014. And if you were to bifurcate that between strong credit consumers and consumers with a FICO score sub six eighty, the rejection rate grew from 49% to 57%. That’s your rejection rate from your credit card companies and your mainstream banks. And if you then look delinquencies from credit card companies and mainstream banks, it’s increased by about 20% over the last two years, particularly for consumers who are earning north of $150,000 And you’ve kind of scratch your head and you say, what’s going on over there?

I think a lot of that is AI starting to take hold. We’ve all heard about a lot of the terminations and reductions in force at some of the big tech companies, and I think that’s where you’re seeing some weakening in the credit cycle, leading to the tightening, okay, which ultimately translates to way more high quality volumes moving into our segments of the market. The obvious question then is, does that mean that there’s more risk in our segments of the market? And the answer to that question is no. We just had a record quarter from a provisioning perspective in Q2 since being a public company, so that’s the data point that proves my point.

But more than that, what you’re seeing is a very low unemployment rate for our consumers. You’re seeing more and more open jobs or very high number of open jobs for our consumers. That’s the second important data point. And if you look at where the job growth is coming from, a lot of it is coming from industries like transportation, like education, which have a disproportionate number of our consumers in that segment of the market. All of which is to say, this needs to be analyzed not at a 30,000 foot level, but at a more granular level to understand how some of this dislocation is impacting our business.

And for the most part, what’s going on in the broader market is a net positive for PROPEL, translating to more originations, more demand for our products because of these dynamics, with very strong seasonally adjusted credit performance.

Andrew Scott, Analyst, ROTH Capital Partners: Great. Really, really appreciate the color there from you guys. My second question here is on kind of operating leverage. Clive, you really broke down the AI initiatives you guys are investing in right now, noted this was the highest percentage of auto decision originations. I think another area which margins can grow is when lending as a service really scales.

So can you guys just talk about your ability to drive operating leverage and maybe what you can pull over to Quid Market?

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: Yes. Maybe let me touch on one or two points over there, Sheldon. And you’re absolutely right about the operating leverage. And the other thing that we mentioned that there’s a full business development pipeline, and I want to reiterate that. We live as a public company in a market where we can’t put out announcements until they crystallize.

But rest assured, there’s some big things coming down the pipe that are going to move the needle at scale, with relative to where we are today. And one of the things that’s going on, if you look in the bottom half of our income statement is there’s a lot of investments in these items. We write off all of the early stage costs associated with these initiatives that we haven’t announced yet, but expect them to be hitting certainly in the back half of this year and early into next year, you will start to see some very, very exciting announcements. So all of which is to say, our OpEx is a little bit elevated because we’re taking on some of those big infrastructure build out costs at the moment, but expected to generate big outsized returns on a go forward basis. And so that’s the first thing that I wanna say.

The next thing that I wanna say, just in terms of the operating leverage, is we are seeing AI playing a big role. You know, I mentioned some of those data points in terms of what we’re seeing. I think that, from an efficiency perspective, I think by the end of this year, if you were to ask me to measure the impact of AI, probably 10% efficiency, particularly in our operations center, meaning that those costs would probably have been 10% higher than they otherwise might be because of the introduction of AI, which mind you, has its own incremental costs. So for 2025, I would say overall, it would be a net neutral. But moving into 2026, I expect the efficiencies from AI in our operations center to move closer to 20%, and you’ll really start to see the operating leverage coming out of that as we move into 2026.

The other big tailwinds, for the first time, we have our own economists here at Propel, and for the first time we’re starting to predict Fed rate cuts. You all may have your own perspective on that, but that’s a little bit of a tailwind, particularly as our as our debt in certainly dollar terms starts to grow 25 bp, 50 bp cut cut in rates is a is a nice tailwind, heading into 2026 and also, also will lead to some margin acceleration. The final thing I want to say, and I’d be remiss if I didn’t speak to it, the costs in The UK, the operating expenses in The UK as a percentage of revenues are also blended into those numbers. Sheldon explained in quite a lot of detail the impact it’s having on our cost of acquisition, but by the same token, the expense line items in The UK tend to be a little bit higher than here at Propel even though the overall margins are higher. Credit performance is better.

They don’t have any credit, so the overall margins are better. But looking at those line items, they are a little bit little bit higher on a percentage basis. They will also decrease as the growth in The UK continues to accelerate. You know, Sheldon mentioned, I mean, we mentioned last year that we expect growth in The UK of about 40% top and bottom line. Sheldon is conservatively already saying 50% growth in his prepared remarks.

I actually think that we could achieve 60% top line growth in our first year of that business. We did almost 12,000 originations in our most recent month of July, contrast that to around 7,000 monthly originations a year ago, and if anything, that’s just accelerating. What that’s going to translate to, just from an operating leverage standpoint, is not only faster top line growth than we’ve suggested, but you will also start to see the operating leverage in The UK, which will also lead to more margin expansion on a go forward basis.

Sheldon Sedikovsky, Founder and Chief Financial Officer, Propel Holdings: And sorry, maybe Andrew, I’ll just add one thing, just as we look at this from how the numbers come together. And as Clive said, we’re investing quite a lot in a number of future initiatives that are moving along incredibly well, and we expect to have some announcements in the coming months. So we are investing a lot in operations and infrastructure. With that said, I do want to make sure that, in terms of the numbers, if you look at our IFRS net income, the net income actually grew 36% year over year, while the revenues grew 34%. So the margins on an IFRS basis actually improved slightly, even with all of this additional investment in our operating infrastructure.

Certainly benefiting from some operating leverage over there, even with a lot of the additional investment. The reason the adjusted net income margin was a little bit lower was because there was a lower stage one adjustment relative to last because we were tighter on the new customer side. And most of that adjustment to stage one comes from higher growth on the new customer acquisitions. And secondly, there was just a large Forex gain that we back out of our adjusted net income as well. So, I did wanna clarify that, that we’re still seeing operating leverage, even in an environment where we’re investing quite a lot into our infrastructure.

Andrew Scott, Analyst, ROTH Capital Partners: Great. Really appreciate the detail. Congrats again on the strong quarter.

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: Thanks, Andrew. Thank you, Andrew.

Conference Call Operator: Thank you. Your next question comes from the line of Rob Goff from Ventum. Your line is now open.

Rob Goff, Analyst, Ventum: Good morning and congrats to Sheldon as well and congratulations on a solid quarter. I’m very pleased.

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: Thank you. Thanks, Rob. Thank you.

Rob Goff, Analyst, Ventum: Most welcome. I have two questions around the sales pipeline. Could you talk to your thoughts with respect to the funnel screening where, you know, the parameters are sometimes between, I believe, 815%? And secondly on this, could you talk to your stated shift towards organic in the use of SEO?

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: Sure thing. Sure thing. I’m I’m happy to take it, Chopin, jump just jump in. You know, we’ve had we’ve had we’ve continued to have a tight underwriting posture, you know, and and we’re seeing such strong demand that notwithstanding a ton underwriting posture, we’re hitting, you know, record volumes. You you heard it was a record quarter.

And I could tell you that the month of July has just come and gone, and that was another record month from an originations perspective. Not only was it a record month, but I would tell you that it exceeded our expectations in terms of demand and credit performance on a seasonal basis very much in line with expectations, notwithstanding a tight underwriting posture. Why are we keeping that tight underwriting posture? We’re keeping it because the growth we’re hitting all of our growth metrics. If anything, we’re now at a time of year where we’re exceeding them, and credit performance credit performance has been very strong.

The drawback, if you were to kind of look at the whole thing fulsomely, as Sheldon mentioned in his prepared remarks, is our CPA was a little bit higher. As your accept rate is a little bit lower, your data and underwriting costs are same cost. So if you’re amortizing those costs over fewer accepted relative loans, your CPFL is going to be a little bit higher. And the opposite would be true if we were to open up a little bit, which we’re not inclined to do right now, given given the stellar performance that we demonstrated. So that’s what’s going that’s what’s going on on that front.

Now, as it relates to as it relates to your and by the way, Rob, we certainly can. You know, our marginal safety from our lost marginal loan is significant, and if we really wanted to drive more of that growth and lean into more of the demand and take a little bit more risk, we could certainly do that. But on balance, we’d rather grow a little bit slower, And we think that roughly 40% year over year growth considering that slow growth is still quite impressive. And regarding your comments about organic marketing, that’s an area where we really do control the spend. You know, we’re probably spending there a fraction of what we could spend, so we could maybe spend at least double what we’re spending and achieve the same type of KPIs that we are achieving on the organic growth side.

With that said, we’ve already accelerated our growth on the organic side. It’s a greater proportion of new loan originations are coming from those channels. As Sheldon mentioned as well, they do tend to have higher upfront marketing costs associated with them, but by the same token, they tend to have better credit performance. It’s one of the things that’s driving the better credit performance is a higher proportion of that organic traffic. We can accelerate that a lot faster as well if we wanted to, but we feel quite comfortable with where it’s cadenced at the moment.

And even as I say that, Rob, I would say to you that there was maybe even a little bit stronger organic originations heading into Q3 than the strong performance we already saw in Q2. Yeah, and

Sheldon Sedikovsky, Founder and Chief Financial Officer, Propel Holdings: maybe just to add to that really quickly and to give kind of a real example of how these dynamics work in our P and L. As we said in our prepared remarks, and Clive just reiterated, our acquisition costs have gone up a little bit, mainly because of organic spend, as well as just being tighter from an acceptance rate perspective and incurring higher data and underwriting costs. And you mentioned the acceptance rate of between 815%, we’re closer to that lower end, just given our tighter underwriting posture. But when we’re happy to be spending more on the organic side and driving lower default rates, just on balance. We are to sort of pick between those two drivers or levers.

Traditionally in our North American business, we run with a provision for loan losses of about 50% of revenue and our acquisition and data costs of about 12% of revenue. To contrast that to what The UK is doing, in The UK, the provision for loan losses is probably closer to about 30%, so much lower relatively speaking, but their acquisition costs are about 24% of revenue. So double of what ours are on a relative basis. In both cases, you’re generating very strong margins. It’s just a different approach.

You have to spend more in order to drive better credit performance. Again, there’s other factors that factor in, but I did want to contrast kind of the North American business and The UK business, because now you’re starting to see how The UK business is impacting some of the numbers as you look across the P and L.

Rob Goff, Analyst, Ventum: That’s great. Thank you. And if I may have a follow-up. You’ve talked a fair bit about new services that could potentially move the needle on scale. The new services were also discussed within MD and A.

Can you talk to how they might be introduced? I know there’s privacy issues here, but these new services, would they be piloted and learned from before going more broadly? Or would they be the type of services where you could do more of a blanket launch?

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: That’s a great that’s a great question. And, you know, you know, we’re we’re delighted that we could turn around and say we know how to do acquisitions. You know, we’ve done one, and we’ve already, I think, gonna dramatically exceed the expectations that we set in the market. But more growth through acquisition is organic growth, and I think that that’s what we’ve demonstrated since our inception, And we have now the team and the infrastructure and the capital and the technology, if anything, to even accelerate that. So wait till you see what we’ve got coming, Rob.

I will tell you that these are initiatives that we have a high degree of confidence in. We’ll be able to launch some of these initiatives at scale rather than kind of that slow build that you’re referring to. So if I were to contrast what’s coming relative, say, to new initiatives like Canada or lending as a service, which at the time of launching them, they were net new, and we had a cadence of growth and learn a lot as we go. The nature of these initiatives is they’re going to move the needle quite materially on day one, the day that we launch them, and we’ll continue to grow and expand from there. So if you were ready to connect the dots as to what they translate to, ultimately what they translate to is operating in additional geographies within the same countries that we operate in, and expanding our product sets in both instances in areas that we’re very, very familiar with.

Rob Goff, Analyst, Ventum: That’s great. Thank you very much. Good luck.

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: Great. Thank you. Thanks,

Conference Call Operator: Your next question comes from the line of Jeff Fenwick from Cormark Securities. Your line is now open.

Jeff Fenwick, Analyst, Cormark Securities: Hi, good morning everyone. Wanted to follow-up on some of the commentary on the lending as a service. I appreciated the added disclosure there on the expenses matched up against the fees that you’re generating. Can you maybe give us a sense of how quickly that relative margin begins to build? We don’t have obviously a balance from you in terms of loans under management, but it sounds like as those loans stack up that you’re managing on behalf of your third parties, you should start to see the economics improve there with respect to margins.

Any sort of color you can offer there to help us understand how that will begin to build?

Sheldon Sedikovsky, Founder and Chief Financial Officer, Propel Holdings: Yeah, for sure. Thanks a lot, Jeff. So, glad you liked the additional disclosure. Think it’s now that lending as a service is becoming quite meaningful, we’re having 60% revenue growth, quarterly sequential quarter over quarter, and that’s gonna continue. We’ve got at

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: the end of Q2 about

Sheldon Sedikovsky, Founder and Chief Financial Officer, Propel Holdings: just over $50,000,000 that are being managed across our purchasers and that’s gonna scale, I would say at least the 50% growth between now and the end of the year. So you’re gonna see that the revenues ramp up quite significantly as Clive commented on earlier in the call. In terms of the margins, as you could see, they increased quite significantly over last year, Right now they’re at about 24. The goal for this program is to get kind of well into the 30s and probably touch 40, once it gets really up to scale. Obviously, the way the works is we do receive an upfront fee when loans do get originated.

However, a lot of the economics are earned over the life of the loan through our various servicing technology and other fees that we charge as the loan goes through its duration across our platform. So those economics grow significantly because the costs for us are quite a bit lower as the loan portfolio matures. A lot of our costs are really upfront on the origination side.

Jeff Fenwick, Analyst, Cormark Securities: And I guess the duration of those loans under management, I believe those are some lower APRs that you wouldn’t typically target for your own balance sheet, but maybe a longer duration so that I assume makes it easier to begin to stack those assets, they’re not rolling off as quickly, right? So the revenue build should be strong, the margin’s better and relatively sustainable or less variability, I guess, in that balance?

Sheldon Sedikovsky, Founder and Chief Financial Officer, Propel Holdings: Yeah, I mean, the answer to that is yes, they are kind of longer duration. I mean, are open ended lines of credit as we have on our balance sheet as well, very similar. So, our goal is obviously to continue graduating consumers and offering them better and better products as they perform well. So the intent is for us to be the ones and our bank partners to be offering the consumers the best in market products. In terms of what the product looks like, there’s quite a range on the APR side.

And I would look at it in a very similar way as we look at our credit fresh program and its range on our balance sheet today.

Jeff Fenwick, Analyst, Cormark Securities: Thank you. And maybe one on The UK, obviously going well for you. You don’t have a debt facility in place there. At what point does that start to become a priority to support the continued growth of that business?

Sheldon Sedikovsky, Founder and Chief Financial Officer, Propel Holdings: Well, it’s a very good question, because The UK is generating incredible profitability and cash flow. So we’re certainly able to continue funding that business with retained earnings for the time being. Clive mentioned earlier, I have been conservative in my estimates. To put it into perspective this year, I believe we’re on pace to be close to $50,000,000 in revenue that’s compared to what the business is last year, which was 32,000,000. So that’s well in excess of 50% growth.

What we’re doing, the intent was always sort of to look in the back half of this year to size up the growth and figure out what type of facility we should place into The UK. Right now, the focus on The UK after all of our infrastructure integration has been done is now to refine products to incorporate some of our sophisticated underwriting capabilities and platform and to expand their marketing and distribution initiatives and channels. So once we start sizing that up and that work is going underway, we’ll size up the capital required and I expect us to have a facility in place over there. Certainly next year, the timing of that probably in the first half of next year. In the meantime, to achieve the numbers for this year, excess of $50,000,000 of growth, it doesn’t require any debt facility.

Jeff Fenwick, Analyst, Cormark Securities: Helpful, thank And then maybe one more just on the aggregate of your funding. Great to see the continued reduction in the cost for PROPEL overall. Remind us, there was some step down in funding costs through the quarter. How much of that was fully in effect for the quarter versus maybe just continuing to see the rates continue to decline through Q3, obviously not withstanding the fact the rates overall may be cut by the Fed or the Bank of Canada?

Sheldon Sedikovsky, Founder and Chief Financial Officer, Propel Holdings: Sorry, Jeff, I might have missed a piece your question. Are you asking the cost of debt being lower this quarter relative to last year, if that’s a result of the decrease? Yeah, it’s mostly. The decline is mostly from our refinance and renegotiated debt facility where we brought down the cost by about 150 basis points. Now, there were relative to last year, some reductions in the Fed relatively speaking, but most of it is because of the cost of debt reduction.

Now, I think, once it’s fully baked in, we should be kind of close to that 11% cost of debt on a go forward basis. Now, if there are further rate reductions by the Fed or the Canadian Fed, rates will come down further.

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: And I think I would just add, I mean, Jeff, first of all, great to have you on the call over here and you certainly got your own perspective in terms of what will happen to rates over there. My sense is The US is at a point now where they’re really getting ready to lower rates, and that will be a nice little tailwind to us. But that’s outside of our control, obviously. What’s inside of our control from a rate reduction perspective, Currently, where our focus is, is renegotiating our Canadian debt facility. And to that end, you should certainly expect I would expect a fairly material rate reduction on the Canadian side.

Jeff Fenwick, Analyst, Cormark Securities: Thank you very much for that color. That’s all I had.

Sheldon Sedikovsky, Founder and Chief Financial Officer, Propel Holdings: Thanks, Jeff.

Conference Call Operator: Thank you. There are no further questions at this time. Turning over back to Clive for closing remarks.

Clyde Buchanross, Founder and Chief Executive Officer, Propel Holdings: Yes. Thanks so much, everybody, for attending our call this morning. And as always, I would like to thank our investors and our 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 very big thank you to the PROPEL teams in Canada and The UK for delivering these outstanding record results and achievements. On that note, have an excellent day, and operator, you may end the call.

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

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