Propel Holdings Q2 2026 Earnings Call: Complete Transcript

Propel Holdings (TSX: PRL ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This content is powered APIs. 6 million, and a 23% increase in ending Sealab to $639 million.

Strategic investments in expanding platforms and product offerings, such as Lending as a Service, which saw a 150% revenue increase, and geographical expansion contributed to this growth. The company maintained stable credit performance with a provision for loan losses at 50% of revenue, supported by its AI-powered underwriting platform. 2 times. Management highlighted strong consumer demand, particularly in the underserved segment, and plans for further expansion into new states and product offerings, with an optimistic outlook for continued growth in the latter half of 2026.

Full Transcript OPERATOR Good morning, everyone. Welcome to Propel Holdings' Second Quarter 2026 Financial Results Conference Call. As a reminder, this conference call is being recorded on August 6, 2026. At this time, all participants are in listen-only mode.

Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for research analysts to queue up for questions. And now I will turn the call over to Devin Galani, Propel's Vice President, Capital Markets and Investor Relations. Please go ahead, Devin.

Devin Galani, Vice President, Capital Markets and Investor Relations Thank you, operator. Good morning, everyone, and thank you for joining us today. Propel's second quarter 2026 financial results were released yesterday after market close. 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 2026 MD&A and Annual Information Form for the year ended December 31, 2025, both of which are available on SEDAR+. Additionally, during the call we may refer to non-IFRS measures.

Participants are advised to review the section entitled Non-IFRS Financial Measures and Industry Metrics in the company's Q2 2026 MD&A for definitions of our non-IFRS measures and the reconciliation of these measures to the most comparable IFRS measure. Lastly, all dollar amounts referenced during the call are in US dollars unless otherwise noted. I am joined on the call today by Clive Kinross, Founder and Chief Executive Officer, and Sheldon Saidakovsky, Co-Founder and Chief Financial Officer. Clive will provide an overview of our Q2 results and observations on our consumer segment and overall economic environment before Sheldon covers our financials in more detail.

Before we open the call to questions, Clive will provide an update on Propel's growth strategy and outlook for the remainder of 2026. With that, I'll pass the call over to Clive. Clive Kinross, Chief Executive Officer and Founder Thank you, Devin, and welcome, everyone, to our second quarter conference call. We delivered another record quarter, building on the strong momentum we established at the beginning of the year.

Importantly, this quarter demonstrated that the strategic investments we've made over the past several quarters to expand our platform and serve more consumers across the credit spectrum are translating into measurable results. We expanded into new states, launched new products, and broadened our distribution channels, enabling us to reach more consumers than ever before. Supported by strong consumer demand, new customer originations increased by 34% year over year, and if including Lending as a Service, new customer originations increased by 43%. 6 million, an increase of 26%.

8 million. Importantly, we achieved this growth while maintaining another quarter of stable credit performance. Provision for loan losses and other liabilities represented 50% of revenue, reflecting both the strength of our AI-powered underwriting platform and the resiliency of the consumers we serve. Before turning the call over to Sheldon, I'd like to spend a few minutes discussing those consumers and what we're seeing across the broader economy.

We often use the term underserved consumer, but today that group represents a much larger segment of the population than it did just a few years ago. As we've discussed on previous calls, we continue to see a K-shaped economy emerge across our markets with the middle of the credit spectrum shrinking. While many consumers have benefited from rising asset prices and migrated into the super prime category, others, despite remaining employed and maintaining reasonable repayment histories, are finding it increasingly difficult to access traditional sources of credit. 8% of the population.

The lending market has changed for them. Many large financial institutions have tightened underwriting standards, leaving a growing number of consumers without access to the credit products they have historically relied upon. At the same time, demand for credit remains elevated as households continue to manage the impact of higher everyday living costs. In fact, the Federal Reserve recently reported that credit rejection rates reached 33% in 2025, the highest level in a decade.

Furthermore, in Q2 2026, the Federal Reserve Bank of New York found that consumer demand for credit reached its highest level since October 2021, and we see this dynamic in our own business with strong demand and stable credit performance. This is why our mission remains so relevant today. We believe our technology and AI-powered underwriting platform can responsibly expand access to credit by helping us better understand consumers who have been overlooked by traditional underwriting models. At the core of our business is a simple belief: these consumers are often misunderstood.

They are resilient, they're employed, they're actively managing their finances, and they're taking practical steps to navigate the macroeconomic environment. Our own data reinforces this. In a recent survey of Propel and our bank partners' customers, the majority of respondents told us they expect to spend more on essentials like gas and groceries this summer. Rather than falling behind, the majority said they plan to reduce spending elsewhere.

Looking more broadly across our markets, we continue to see an economic backdrop that is resilient. 2%, with employment remaining strong across many of the industries where our customers work. Furthermore, our customers continue to benefit from steady wage gains, and consumer spending remains strong. In the United Kingdom, inflation has moderated towards the Bank of England's targets, while unemployment has remained relatively stable.

Canada, which represents approximately 2% of our business, continues to experience a softer labor market than the United States. However, inflation remains relatively low, and despite ongoing trade uncertainty, the Canadian economy has remained more durable than many had anticipated. Overall, across the markets in which we operate, we continue to see healthy employment, moderating inflation, and resilient consumer demand. This is an environment we know well and one in which our AI-powered underwriting platform has consistently performed well.

To serve the increasing number of underserved consumers and strengthen our business, we spent the past several quarters investing in initiatives that expand both our addressable markets and our competitive advantages. These investments are increasingly contributing to our results. 1 million, an increase of 150% year over year. S.

while enhancing long-term strategic flexibility. Overall, we are proud of both our second quarter performance and the momentum we've built through the first half of the year. 02 per share, Canadian, on an annualized basis, representing a 6% increase and our 12th consecutive quarterly increase. I will speak more about our growth plans and the outlook for the rest of 2026, but first I will pass it over to Sheldon.

Sheldon Saidakovsky, Co-Founder and Chief Financial Officer Thank you, Clive, and good morning, everyone. We continue to build on the strong momentum established earlier this year. Strong consumer demand, together with the continued expansion of our platform, supported another quarter of record results. 4 million, representing another quarterly record.

New customer origination growth was strong, increasing by approximately 34% year over year to a record $111 million, and if including Lending as a Service, new customer originations increased by 43% year over year. The MoneyKey Bank Service Program in particular continued to experience significant growth during the quarter, with ending Sealab increasing by approximately 79% year over year and by 29% sequentially over Q1. New customer originations within this program increased by approximately 56% sequentially from Q1, driven by continued geographic expansion, the ongoing transition from legacy products, and the addition of new marketing partners and channels. 1 million.

In the UK, QuidMarket continued to grow significantly, delivering another quarter of record originations and revenue, with revenue increasing in excess of 50% year over year as the business further expanded its market presence. 6 million, an increase of 26% year over year. The annualized revenue yield increased to 117% in Q2 from 114% in the prior-year period. The increase primarily reflects the strong growth from new customer originations, the expansion of Lending as a Service, and the higher contribution from higher-yielding programs including QuidMarket and the Bank Service Program.

Overall, we are pleased with the continued execution of our growth strategy during the quarter and the expansion of our platform across products, geographies, and customer segments. Turning to provisioning and charge-offs, credit performance remained stable during the second quarter and was consistent with our expectations. Provision for loan losses and other liabilities represented 50% of revenue in Q2 2026, while net charge-offs as a percentage of average CWAB was 12%, both consistent with the prior-year period, reflecting the strength of our AI-powered underwriting platform, disciplined approach, consumer resiliency, and continued strong portfolio performance.

Notably, we achieved this performance while delivering overall record originations and growing ending Sealab by 23% year over year, demonstrating our ability to successfully balance significant growth with prudent risk management. Overall credit performance was in line with our expectations and remains in line as we move forward through Q3. 8 million. 58 per diluted share.

Adjusted return on equity improved to 35% on an annualized basis compared to 32% in the prior year period, reflecting another quarter of strong earnings growth and efficient capital deployment. As discussed earlier, the significant growth of the MoneyKey bank service program over Q1 resulted in a larger non-cash adjustment to net income during the quarter. This adjustment was driven by the increase in the bank service program liability relating to the increase in the off-balance sheet receivables associated with this program.

In addition, the growth in the other programs and the corresponding increase in the Stage 1 expected credit loss allowance also contributed to the higher adjustment to net income during the quarter. As a reminder, we believe that these adjustments, and consequently our non-IFRS metrics, provide a better representation of the portfolio's performance, particularly in a period of higher growth.

Turning to operating expenses, we continue to invest in a number of strategic initiatives designed to support the company's long-term growth, including the ongoing buildout and expanded operations of Propel Bank, further scaling of our Lending as a Service platform, and ongoing investment in AI-powered capabilities, technology infrastructure, and customer acquisition initiatives. At the same time, we realized operating leverage across several areas of the business. 5%, reflecting the scalability of our platform as we continue to grow. 5% of revenue during the quarter from 13% in the prior year period.

Cost per funded origination increased to 11 cents from 10 cents, while cost per new customer funded origination increased to 24 cents from 22 cents. As we've noted in prior quarters, the year-over-year increases reflect the continued investment in expanding and diversifying our customer acquisition platform through approximately 20 new marketing partners, together with broader investment across diversified marketing channels. In addition, the ongoing growth of QuidMarkets contributed to the increase as we continue investing to expand its customer base and market position.

Underwriting and data costs per funded loan also contributed to this increase as application volumes grew even more significantly than originations, reflecting the disciplined approach maintained with our bank partners. Effectively, we and our bank partners are evaluating more applications relative to each funded origination. Importantly, both cost per funded origination and cost per new customer funded origination improved sequentially for the first quarter of 2026, reflecting early benefits from our expanding marketing platform and continued optimization of our acquisition strategy.

We believe these investments support long-term growth while maintaining disciplined underwriting and stable credit performance. Processing, technology, and program servicing expense increased primarily due to the ongoing scaling of our Lending as a Service platform, which, as we mentioned, grew by 150% year over year. As a reminder, these expenses include customer acquisition and servicing costs associated with our Lending as a Service programs. Notably, Lending as a Service costs declined to 62% of Lending as a Service revenue from 76% in the prior year, demonstrating improving unit economics and operating leverage as the program scales.

4% in the prior year period, reflecting enhanced credit facility pricing together with lower benchmark interest rates. Lower funding costs further enhance the earnings power of the business while providing additional flexibility to support future growth in the shares. Overall, we delivered record adjusted net income and adjusted diluted EPS while continuing to invest in strategic initiatives across the business. Strong profitability was supported by record revenue, stable credit performance, and disciplined execution.

Our investments are delivering results and will continue delivering attractive long-term revenue and earnings growth and returns on equity. Turning to Propel's capitalization, we continue to maintain a strong financial position supporting the ongoing growth of our lending programs and strategic initiatives. 2 times, providing significant liquidity and financial flexibility. Even though ending CLAB grew by approximately $50 million since year end, our outstanding debt balance remained essentially unchanged at $332 million.

This reflects the strong earnings and cash flow profile of the business, which enabled us to fund meaningful portfolio growth, an increasing quarterly dividend, and continued investment in our strategic initiatives without increasing our outstanding debt.