All right. Again, welcome back. It is certainly my pleasure to welcome our next guest at the conference here, Clive Kinross, Co-Founder and CEO of Propel Holdings. Clive, thank you for coming.
Thanks for having me. It's great to be here.
Yeah. I think advancements in AI, I think, could be the major theme in the technology and financial services sector. Maybe we can start off by maybe talking about ways Propel has really harnessed the power of AI and alternative data to really create new borrowing opportunities for underserved customers.
Yeah, that's very, very true. Diving right in at the deep end over there, appreciate that. For those of you that don't know what we do, we provide access to credit to underbanked and underserved consumers. We're operational today in the U.S. That's probably 90% plus of our revenue stream, in the U.K., and in Canada. We do it all on our proprietary technology platform, which has got a big AI and machine learning underwriting component that underpins the business. The consumers that we lend to tend to have bruised credit profiles. That's why we call them underbanked or underserved. As a consequence of that, traditional credit bureaus don't work at scoring our customers. If you're scoring prime, super prime consumer, get access to the credit report, look at their FICO score. They've got a high FICO score.
You look at what their income is and you right-size the loan based on their income. Doesn't work for our customers because all of them have bruised credit reports and FICO scores that are really suboptimal. At the end of the day, what we do is instead of using the scores, we use the underlying data from those reports. We're also integrated with several other alternative bureaus and other data sources. When a consumer applies for it to us, we have up to 5,000 data points per consumer. That goes through our proprietary AI and machine learning algorithms. In the space of about six seconds, we could render a decision for the consumer. We look at about 70,000 applications every day. You need best-in-class technology and best-in-class underwriting platform to be able to do that.
The machine learning capabilities and the AI is ultimately what allows us to do that. We've been talking about this, by the way, and doing this for many, many years now, long before AI became the subject that it is today. On the back of this AI, Scotiabank, as well as Canaccord Genuity and other banks, took us public in 2021. That year, we did about $130 million in revenue with about $12 million in adjusted profits. We've grown that. The guidance range for 2024, we're going to report next week, by the way, has us doing revenue somewhere in the $430-$450 million with roughly, again, I'm speaking to the guidance, roughly $60 million in profits. That is all organic growth. What has allowed us to do that organic growth, obviously, is the ability to do this AI machine learning type underwriting. We've done it all.
We've grown the revenues of the top line by about 350%, grown the bottom line by about 500%. The growth in the bottom line is really a testament to the operating leverage in the business model, which is what the AI and the machine learning and the technology ultimately enables us to do.
Excellent. We can talk a little bit about maybe Propel's growth strategy and your outlook for the company.
Yeah. I could talk a little bit. I could talk a lot. I could talk however much you want. Fortunately, there's a lot to talk about. The company not only has grown exceptionally well, and I've just spoken to that. Historically, I've mentioned from 2021. When you go back to 2019, I think our growth has been roughly 47% top line CAGR, earnings growth of 75% over that period, adjusted earnings growth of 87% over that period, which again speaks to the operating leverage in the business model. That's all in the past. Your questions about the future. If you look at our most recent quarter that we reported, which was Q3 of last year, you would have seen a 40% increase in year-over-year originations, which really speaks to the ongoing growth in the business model. That growth is coming from several different variables.
What I'm going to do, Phil, is just touch on a few of them. If you want to do a deep dive on any of them, that's entirely up to you. Our core business is in the U.S., important for me to mention that 90% of our business is in the U.S. Notwithstanding the Trump tariffs that we saw yesterday, there's no direct impact to our business from the Trump tariffs. I'm digressing a little bit. I'll get back on track. The other thing is, obviously, with the weak Canadian dollar, that's actually good for our business. Half of our costs are in Canadian dollars. As the Canadian dollar gets weaker in U.S. dollar terms, our expenses are going down. In addition to that, our earnings in Canadian dollars, because of the depreciating Canadian dollar, all other things being equal, go up.
Our core business is growing exceptionally well. As I mentioned, 40% growth in originations last quarter. We expect the growth to continue on a go-forward basis. We've funded collectively about one million consumers in the US in an overall addressable market between Canada, the US, and the UK that comprises roughly 100 million consumers. You could see we're just getting started. There's a huge pathway ahead of us. If anything, in many, many respects, we're accelerating the growth. That's our core business in the US. We launched in Canada a couple of years ago. The Canadian market is a market that, from a fintech perspective, is wide open. I think Say's law says that supply begets demand. We're the first player to come into this market in a sophisticated fashion, with a big balance sheet, with a world-class management team.
We believe that the Canadian market is wide open for us to take market share in what I would say is a relatively challenging time in Canada right now from a macroeconomic standpoint. I am happy to dive into that a little bit more. When we went to market in 2021, we said there are a few things that we are going to be doing, one of which is looking for opportunistic acquisitions that fit our strategic plan. We also said that we are going to get into lower-risk markets. We have done both of those. I want to just speak to our growth plan as it relates to those items now. We did an acquisition of QuidMarket in October of last year. It was a $115 million board deal to finance that acquisition.
At the time, we said we're only going to do acquisitions that fit three criteria, being the jurisdiction that we like, the U.K. is what we were focused on, be accretive. That acquisition is wildly accretive. And be it with a team that fits our corporate culture. We believe we've done all of those. At the time, we said that the top line growth and bottom line growth will continue at their trajectory of roughly 40% a year, if not accelerate from that. Obviously, we feel really good about how that's trending. Finally, the other thing we said is we'd get into lower APR markets, which broadens our addressable markets through lending as a service.
Another initiative that is coming off of a low base, obviously, because it's still a new initiative, but doing exceptionally well and growing at a clip, obviously, well north of what I would call more mature, albeit still high-growing businesses. Lots of growth levers of the business. Those are businesses that the market knows about and that investors know about. Suffice to say, there's lots of stuff going on at the business that investors do not know about that will no doubt continue to fuel the growth of the business.
Excellent. I think you mentioned 90% of the business is in the U.S. I guess my next question here is, what do you see as the implications, I guess if any, stemming from the new Trump administration?
If any, wow. What's happened in the last five minutes? You're asking now, five minutes ago, yesterday. It's a wild riot. Wow, it's a wild riot. For all of us, for all of us, for a host of reasons. Maybe let me break down the answer into two categories: regulation and tariffs. A Republican in the White House likes smaller government. Smaller government ultimately translates to less regulation. The big regulatory body overseeing our industry is the Consumer Financial Protection Bureau. The Trump administration, to the extent you've been following that, has been largely defanging the Consumer Financial Protection Bureau. All other things being equal, those are positive developments for our industry. With that said, I was asked the same question four years ago about the Biden administration. I answered the question in the exact opposite way, except I concluded with the following: we don't take regulatory risk.
We do everything top-notch at our company. We're in the process of building a global industry leader right here from Canada. We don't take regulatory risk. What I said at the time with the Biden administration, despite the fact that they'll tighten regulations, we don't perceive it to be a risk. I can't now contradict what I said four years ago. Despite the fact that they're going to loosen risk, we don't take loosen regulatory requirements. We don't take regulatory risk. What is otherwise perceived to be a net positive, we would view as a net neutral. That's just being candid and authentic about that answer. The tariffs is a different discussion. I think tariffs is going to impact both Canada and the U.S. a little bit differently. The Canadian economy is already struggling. Canadian consumers are already stretched. There's unemployment in Canada higher than the U.S.
GDP per capita is certainly on the decline in this country. This was before there was 25% tariffs. To say that I'm a little bit concerned about the Canadian market and creditworthiness of consumers in this market would be an understatement. I do think, though, that the Canadian banking system is an oligopoly controlled by six banks. They're risk-off right now. When banks are risk-off it means they tighten their underwriting beyond what they would normally do. We're seeing that actually on both sides of the border, where approvals in the month of January were at all-time lows, or certainly all-time lows since COVID from an approval standpoint. Underwriting's exceptionally tight. Why is that good for us? Because consumers who might otherwise go to the banks here in Canada and get a loan don't get that loan.
Because where we fall in the credit spectrum, they drop to our business. We could fund consumers that we otherwise would not see. We could go in and cherry-pick the best consumers, make sure that their risk profile is working out the way it is supposed to work out. In the context of that, I believe that in Canada, we could operate very successfully and grow very rapidly in Canada, notwithstanding this, what I would call, cautious economic backdrop. That growth, as excellent as it is, is lower than it might otherwise be if it was an environment that we were more confident in. That is how it impacts us in Canada. In the U.S., it is a little bit different. The U.S. economy and the U.S. consumer is exceptionally strong right now, arguably for a business like ours, a little bit too strong. We like a strong economy.
We like an economy where there's near full employment, where inflation is moving in the right direction. Those are all good scenarios for us. The Goldilocks scenario for us, though, is when the economy's showing signs of a little bit of weakness, not too much weakness, a little bit of weakness, where unemployment creeps up a little bit, and where the stance of the banks who lend to consumers ahead of us starts to tighten up. We believe that's what's going to happen in the U.S. We believe unemployment's going to go up a little bit. Banks are going to tighten a lot. Provided it remains under control, that's kind of a Goldilocks scenario for us in many, many respects in the market that is largely the biggest market for us today.
It is conceivable that it gets overdone, that unemployment in the U.S. goes higher than what I'm predicting over here. You're certainly hearing from some economists cautioning about a recession in the U.S. as a result of some of these moves. I'm not sure that's what our posture is. Our job isn't to be economists. It's to plan for every eventuality. Should the economy be worse than what I've just outlined over here, that's not the end of the world for a business like ours and for an industry like ours. I say that being based on many, many years of data. We've been doing this for about 14 years. Our industry's been around for 40 or 50 years. The underbanked, underserved market performs just fine during a recession. Our loans have margin.
Our consumers are used to operating in what I would call a recessionary type environment. To the extent that they lose a job, they find another job fairly quickly after that. You could look at tons and tons of external data, and they would suggest, even in that scenario, our business performs very well, albeit not as well as it would perform in the other scenario. Our growth would be a little bit slower. We would tighten underwriting in that scenario, and that would probably cut variable costs out of the business as our volumes go down. We are exceptionally well covered in all scenarios. I think overall, just going back to your earlier question, the growth question, I think that we are very, very well poised to growth, even with these tariffs.
As unconventional as it is, these tariffs, particularly in the U.S., may actually lead to an ideal scenario for our business.
I'm going to circle back and kind of stay with the growth theme. You touched on it, I think, in your introductory remarks. You recently made your first acquisition of QuidMarket. It certainly gives you a toehold into a whole new geography. Maybe we can start out with a bit of an introduction to kind of QuidMarket and then kind of back into ultimately what your plan is for the U.K. business going forward.
Yeah. Thank you. Thanks a lot. Again, when we went to market, we told investors we're going to be looking very, very cautiously at acquisitions. I think by the time we did the QuidMarket deal, we had probably looked at somewhere between 30 and 40 potential acquisitions, a handful of them very seriously. We really started honing in on the U.K. market. We thought from a strategic perspective that made all the sense in the world to us. There are about 20 million underserved consumers in the U.K. It's a market that had been through some fairly meaningful regulatory changes around 10 years ago, say around 2015. Candidly, doing a look back, I think the regulator in the U.K. probably overdid the regulations back then.
It pushed a lot of lenders out of the market to the point that there were illegal entrants to the market in the U.K. that came in and filled that void. Regulators realized that. Their posture's now changed. They're working very closely with the industry to see how they could encourage more lending. It's probably the most, what I would call, regulatory-friendly of all the jurisdictions that we operate in. We liked that fundamental aspect of it. We liked the U.K. We liked that they speak English. We liked that it's one of the developed countries in the world, notwithstanding the fact that this is a global opportunity that we had. We thought that that made sense in terms of our next acquisition. We then went about looking for potential acquisitions. QuidMarket is a company that was founded by a gentleman that I know quite well.
We had spent the best part of two years looking at the business and monitoring their progress. They did exactly what they said they were going to do, which hopefully for those of you that have invested in Propel since the get-go know that we do exactly what we say we're going to do, maybe even a little bit better. They were demonstrating the same characteristics. We then got into negotiations with them. It was a challenging negotiation because we told investors we're only going to do deals that are accretive. To do that became a challenging negotiation. We held firm. We got done what we needed to get done. It is accretive. We checked that box. Finally, the culture of this team is best in class. This is a second business that I've built from the ground up.
I've done several acquisitions over the course of my career. It's easy to figure out what's going to be accretive and what's not going to be accretive. The bankers can help with that if you need that. The more difficult part of acquisitions is the culture and making sure socially one plus one is a greater number than that. Ultimately, that's where these acquisitions fail or succeed. We took a lot of time getting to know these folks, making sure they were our kinds of people. It's an excellent cultural fit. We're four months into it. This is a business that when we took it to market and raised money in October, we said it's growing the top and bottom line by around 40% a year. And we could accelerate that.
We're putting out earnings a week from now where maybe I could provide a little bit more color in this transaction. It's early days. We're four months into it. I will tell you, we were enthusiastic at the time we did the transaction. We're even more enthusiastic today. The opportunities are not going to be from cost cutting or those types of synergies. It's going to be from taking our best practices, leveraging our best practices and our technology to accelerate the growth of that business quite materially. I think over the medium term, the growth of that business, both top and bottom line, will be one of the fastest growers, which is kind of cool that a business that we didn't actually start ourselves, we could acquire, we could add value. Ultimately, it could provide significant shareholder value over the medium to long term and short term.
Excellent. Another interesting avenue that Propel's looking at is obviously lending as a service. You've already got partnerships. You've arranged and starting to produce some revenue and earnings from that. Maybe you can give us a bit of an update on that initiative.
Yeah. I shouldn't say lots of lending-as-a-service may be a buzzword that folks in the room aren't familiar with. Let me try to contextualize it a little bit and maybe start off by the opening question, which was speak about our AI and machine learning. If you're lending to prime and near prime consumers, you don't need machine learning and AI. It helps, but you don't need it. The most challenging kind of underwriting to do is underbanked and underserved consumers because none of them look like they have particularly good credit profiles. That's where we started. That's where our systems were developed. That's what we understand. It is materially easier to go from lending to those consumers to lending to less risky consumers than doing it the other way around. That's what we could do. We know how to underwrite.
We have a proprietary technology platform that's best in class that allows us to lend right across the credit spectrum. Our consumers tend to be riskier with lending as a service. We won an RFQ against the likes of Upstart, Fiserv, and others to be their partner at providing access to credit to consumers in the U.S. at rates below 36%. Bear in mind, these are unsecured loans. That's lower than our typical rate. By virtue of that, the loan amounts tend to be higher. In order to do that, you need a really, really large balance sheet. What most fintechs do who are targeting that market is they don't use their own balance sheet. They get other institutional purchasers to come along and purchase those loans. That's what we call lending as a service, where we're doing all the servicing.
Somebody else comes along and purchases those loans. We do the same thing with what I would call our more legacy products targeted to more risky consumers. We do that in states or jurisdictions where we cannot both do the servicing and earn the economic interest on those loans. There are some regulations in some states that mandate the service and the purchase. It needs to be two separate people. That is what we mean by lending as a service. By necessity, as a result of the business model, we cannot use our own balance sheet. We have now got a new, call it a new core competency, which is bringing on new purchasers, onboarding them onto our platform, managing them, and making sure that we generate the returns that we have told them that we will generate. I will tell you that the market opportunity is very, very significant.
There's a huge market out there, way bigger than our purchasers can absorb at the moment. Our performance from a KPI perspective in terms of the returns that we told investors they would get has, if anything, exceeded their expectations. There's a host of reasons for that. We probably won't have time today. What is a little bit of a short-term challenge, if I could call it that, is onboarding all of these purchasers. You kind of onboard a purchaser. You have this stair-step type growth. Your new purchaser comes on board. Your growth tends to be relatively nominal because the purchaser's got limitations in what they could acquire. You then onboard your next purchaser, same thing, your next purchaser, and so on. Those are what I would call shorter-term type challenges until the business gets a little bit more mature.
We have all the capital that we need to address the very, very large market that we're going after. We're speaking to bigger and bigger financial institutions all the time, many of whom are not capital constrained. We had one of them actually in the office last week. We spent the best part of two or three days doing diligence with them. They've looked at hundreds of companies in our space or adjacent space who do something similar on the lending-as-a-service side. I kid you not, on multiple occasions, I said this is the best presentation, best management team that they have seen in all of their travels. These types of things and building the business the way we have do not happen by accident. You need the people. You need the team. You need the sophistication.
That's what goes into building the technology and the AI and the machine learning and developing the relationships that we have. It was an excellent testament. I'm entirely confident that that business will continue to grow at the kind of rate that it has been growing. The other thing that's excellent about it is we don't use our balance sheet. The margins for that business are actually higher than our existing business. We feel really good about that too.
Excellent. Maybe as a follow-on, and I guess at the risk of overstepping, can you give us any hints of maybe kind of what other initiatives or partnerships you're working on?
Don't worry about overstepping. Just overstep all you want. I encourage it. Look, we're a lending business. We've got a big balance sheet. We've got a big debt facility. The debt facility was in place pre-RPO. We were a smaller company back then. We've told the market for a long time that in the first quarter of 2025, we're able to refile that facility at better rates and better terms without incurring a penalty. We are now in the first quarter of 2025. We are certainly working on, A, upsizing our facility and, B, doing it on better rates and terms than we are currently. We've kind of telegraphed that to the market for a few years now. 2025 has finally rolled around.
I expect investors to hold us accountable to that and also expect that we'll be able to do exactly what we said we would do sometime in Q2. First of all, that's on the cards. The other thing, and I mentioned this is my second business, my first business, OPENLANE is a Fortune 500 company today. Trades under the ticker CAR on the New York Stock Exchange. I'm digressing a little bit. We raised venture capital for that business. I remember one of the folks we raised venture capital from was ` . They funded Salesforce, NetSuite, Facebook, amongst many others. Paul Madeira, their managing partner who sat on our board, always used to tell me about Facebook in particular, said when they got started, there were companies in the space who had better technology than them.
What they had that was better than anybody else was they had the best sales force and they had the best sales team out there. That often kind of does not get discussed enough in the context of technology companies. I could tell you we have the best business development team out there. Propel was started by four founders almost 14 years ago. We are all together today. We are all incredibly incentivized, as is the rest of the executive team. Business development is headed up by one of my co-founders, Noah Buchman. He and his team are just absolutely outstanding. They do not sit still. The growth that I spoke about, Phil, at the beginning of our discussion today is all stuff that to a large degree is baked and in the mix and happening on an ongoing basis.
Noah and his team onboarded Coho in exclusive relationship a few months ago. He is responsible for onboarding the Pathward program as an example. All you need to know is there are lots of other initiatives like that. The scale is getting larger and larger that Noah and his team are working on. I cannot speak about the specifics. Certainly over the course of the coming months, we are really excited to announce some of the new developments and things we have been working on.
Excellent. Maybe kind of turning back to Canada. I think you launched your Fora Credit brand in Canada, I think the end of 2022. Can you provide an update on that initiative? I guess in particular, the recent partnership with Coho.
Yeah. Yeah. Look, the Canadian market, I've said, is kind of a really, really wide open market. We're in one of the most sophisticated countries in the world over here. We've got an oligopoly in the banking system, which means underbanked and underserved market tends to be even larger as a result of that dynamic. Our cell phone adoption, technology adoption in Canada is one of the highest in the world. If you look at fintech adoption, it's like 13%. The U.S. and the U.K. are somewhere north of 40% respectively. Canada's got a long way to go. If you ask me why that is, Say's law says supply begets demand. There's no sophisticated fintech lender in Canada who's well capitalized and come and taken over that market. We believe that we have all the sophistication already for this market.
On the back of that, we entered the Canadian market. There have been a couple of headwinds in Canada. One is the economy. We touched on that a few minutes ago. There was also a regulatory change in Canada after we came in where the Liberal government lowered the rate cap. Candidly, I do not think they are doing anybody any favors. The very people that they purport to protect are the people that they are putting in danger of being able to not access credit on reasonable terms. They are going to push them into payday loans and the like. I digress. Back to Canada and back to our business idea. It is going really well. Our KPIs are getting better all the time. They are getting better all the time, not because of the macro trends. They are getting better all the time because we are understanding the business better.
We're making discrete changes to drive a better business in Canada. As you mentioned, one of the largest and leading neobanks in Canada, Coho. We partnered with them towards the end of last year. In essence, Coho are a neobank that do not have an unsecured lending product for their million-plus consumers in Canada. They partnered with us to be their back end and the capital around providing loans to their consumers. It is, in essence, from our perspective, an excellent distribution channel. It has been going really well. Not dissimilar to the acquisition that we are now seeing, more and more acquisitions, that investors know that we are in that business. Similarly, we are seeing more and more partners approach us on both sides of the border, but certainly several in Canada in the hopes of us doing the same thing.
We think that we're going to take more and more market share over here. Again, it's in a backdrop in Canada in particular that we're proceeding cautiously. Fortunately, it's a small little percentage of our business. If I was one of the lenders where it was a large percentage of my business, this is the time to be cautious in Canada.
Excellent. Listen, maybe to close out the conversation, from your own conversations you've had with investors, what do you find as the biggest misconception related to Propel? What do you see as the most compelling reason to own the stock today?
Yeah. Look, we're growing at the rates we are. I'm not going to overstate the points that we've already made over here. We were one of the best-performing companies on the tier six. Certainly the best out of 2020 and after RPOs, Propel is the best-performing stock by none. I think that in 2024, we were one of the top-performing stocks just in that year alone. We've come off a little bit in the last few weeks. I've been scratching my head and wondering why. Let me state, first of all, 90% plus of our revenues are from the U.S. We are not directly impacted by tariffs. It's not our industry. I somehow think that somehow we've been swept up in a lot of that noise. By and large, that's the first variable.
The second variable that I think that investors don't necessarily understand about the business is the team and the insider ownership. Businesses are built by people. At the end of the day, I would never invest in a team that I didn't like and trust notwithstanding what their numbers look like. We've been doing this for a few years now. My founding team's intact as it was a few years ago. We have aspirations of building the global industry leader right here from Canada. We have the team. We have the people. We have the processes. I'm not sure people fully appreciate what goes into building a business like ours. Rest assured, we have the team and we have the people to be able to do that. The final element of it is we really are in a huge underserved market.
We funded about a million consumers historically over our last 14 years of an addressable market of 100 million plus. That is just in the markets that we are in. We have proven that we could do acquisitions. We have proven we could do greenfield operations in two jurisdictions. As I like to say, we are just getting started.
Excellent. Listen, on behalf of Scotiabank Global Banking and Markets, I'd like to thank you personally, Clive, for taking the time to participate today, as well as the entire Propel organization for your continued support. Clive, it's always a great chat.
Likewise. Thank you so much. I enjoyed that. Thank you.