Propel Holdings Inc

TSX:PRL

Earnings Call Transcript

[Operator]

Good morning, and welcome to Propel Holdings Second Quarter 2023 Financial Results Conference Call. As a reminder, this conference call is being recorded on August 11, 2023. 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 Ghelani. Please go ahead, Devon.

[Devon Ghelani, executive]

Thank you, operator. Good morning, everyone, and thank you for joining us today. Propel's second quarter 2023 financial results were released yesterday after market close. The press release, financial statements, and MD&A are available on CR+ as well as the company's website, propelholdings.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 2023 MD&A and annual information form for the year ended December 31, 2022, both of which are available on CR+. Additionally, during the call, we may refer to non-IFRS measures. Participants would like to review the section entitled Non-IFRS Financial Measures and industry metrics in the company's Q2 2023 MD&A for definitions are non-IFRS measures and the reconciliation of these matters to the most comparable IFRS measure. I'm joined on the call today by Clive Kinross, Founder and Chief Executive Officer; and Sheldon Saidakovsky, Founder and Chief Financial Officer. Clive will provide an update on our operations, including observations on the overall consumer market, and will then provide an overview of our record Q2 results before Sheldon covers our financials in more detail. Before we open the call up to questions, Clive will provide an update on Propel's growth strategy and outlook for the remainder of 2023. With that, I will pass the call over to Clive.

[Clive Kinross, executive]

Thank you, Devon, and welcome, everybody, to our Q2 2023 Conference Call. We are proud to deliver another outstanding quarter of record results in Q2 on both the top and bottom line, including record revenue, adjusted EBITDA, adjusted net income, total origination standards, and ending combined loans and advanced tenancies or CLAT. Following a more typically seasonal first quarter characterized by lower consumer demand, we returned to a period of robust originations driven by additional new customer volume, representing 48% of total originations funded, which is the highest percentage of new customers originated since 2021. Looking at the broader economy on both sides of the border, we're encouraged by the macroeconomic data we observed. Inflation appears to be moderating. The job market remains strong, with the unemployment rate remaining at a 50-year low, and we haven't observed any material slowdown in economic activity, including consumer spending. We were also encouraged by the ongoing positive real wage growth porting our, and our bank partners' target consumers. This is all to say that we continue to observe resilience and strong demand, coupled with strong credit performance among the underserved consumer segments. Turning to our U.S. business. We experienced a significant increase in consumer demand and strong trade performance during Q2, following a more difficult seasonal Q1. This demand was supported by several factors, including expansion of products and services offered through our platform, the continuing industry-wide transition from brick-and-mortar to online lending, and the continuing tightening of things throughout the credit pension, which has pushed more higher quality bringing consumers to our platform. As mounted last month by the Federal Reserve Bank of New York, the tightening of our credit spectrum, amongst other factors, has pushed the rejection rates for loan applications to 22%, the highest level since June 2018, leaving many borrowers looking to alternative lenders. The quality of consumer demand, strong credit alone, and the encouraging macroeconomic data previously discussed led to record originations. We did this while we and our bank partners maintained a prudent approach to underwriting. The strong credit performance is demonstrated by our provision for loan losses and other liabilities, which as a percentage of revenue decreased to 51% during the quarter from a high point of 58% in Q2 2022. Our ability to continue to grow while decreasing the provision as a percentage of revenue is driven by our proprietary and industry-leading AI capabilities. We believe that our AI-calculated credit risk files are a more accurate meter of the consumer's ability to repay their traditional credit scores, and our industry-leading underlining platform provides us with the confidence to facilitate lost consumers that are otherwise locked in of the quiet market by traditional lenders. Our AI is able to bring more people into the credit markets while driving profitability in our business. While we're optimistic about the opportunity to continue facilitating access to credits to even more new consumers, we also recognize that the macroeconomic environment remains dynamic, and as such, when our partners remain vigilant, and we'll continue to operate prudently. Also in the U.S., we're excited about the official launch of our Lending as a Service program with Pathward. We announced this program in 20, which was in line with expectations. The program will broaden access to credit for underserved consumers to share a vision for both companies. While in its early days, Propel is pleased with the performance to date, including credit performance, which is strong higher than expectations. Importantly, the loans originated by Propel will generate fee revenue for Propel, expand our presence into the sub-36% APR consumer lending products, diversifies our business, and it's the start of our lending as a Service product offering. As we have previously communicated, it will take additional time before this program will have a meaningful impact to our financial performance, and we're not expecting it to have a material impact to our 2023 results. Turning to Canada. Our rollout plan remains on track with the launch of Fora in Saskatchewan during the quarter. We were also delighted to announce the recent expansion into the Atlantic provinces with the launch of New Brunswick and Newfoundland and Nevada on July 26. While still nascent, the Fora-credit loan portfolio has grown to approximately CAD 6 million at the end of Q2. Furthermore, Canadian credit performance is continuing to perform in line with expectations, and we have also observed our cost per consumer acquisition in Canada has performed better than we had eligible projected. This is a testament to our prudent underwriting and the application of our AI cable business to optimize our marketing efforts and determine the good worthiness of Africans. Our cost per acquisition is one of the largest operating expenses in the income statement. And while it is still early days, this performance should ultimately help in generating higher margins than our business plan initially anticipated. This is another way our AI drives profitability throughout our entire business. We're incredibly excited about our growth prospects in Canada, having just added provinces in the portfolio. We are now live in 6 provinces across the country, with more expected to follow. Regarding the Canadian federal government's announcements in the 2023 budget to reduce the maximum reliable rate of interest to 35% APR, we continue to engage in productive discussions with the Canadian government, both directly and through the Canadian Lenders Association. We continue to believe that about the appropriate exemptions to this change, a blanket reduction in the maximum liable rate of interest will put into peril the very Canadians the government is trying to protect. Propel has dedicated itself to building a new world of financial opportunity for our consumers and partners, and we will continue to proudly advocate for our consumers. While the implementation timing and specifics remain uncertain, the change is not expected to have any impact on our current 2023 guidance. Now on to some highlights for the quarter. Propel delivered another quarter of record results in Q2 2023. In comparison to Q2 last year, revenue increased by 33% to a record of $72 million, and our CLAT increased by 53% for the quarter of more than $273 million. This quarter, Propel also delivered a record adjusted EBITDA of more than $18 million, net income of $5.7 million, and a record adjusted net income of $8.6 million. All these metrics represent significant increases from the prior year. The top-line growth we experienced in Q2 2023 was driven by, first of all, updates to our AI model to originate additional volume from new customers; secondly, the continued successful expansion and performance of graduation and variable pricing capabilities; third of all, the growth of our bank programs; fourth, expansion of originations through Growing Canada and with new marketing partners; and fifth, at a macro level, strong consumer demand for credits driven in part by the continued focus on online lending as well as timing of bigger criteria across the financial sector, which has resulted in a broader, higher credibility consumer base, seeking credit across our platform. Our strong profitability on both an IFRS and on an adjusted basis is a testament to our operating discipline and the scalability and operating leverage in our business model. And as discussed, our industry-leading AI, which is constantly optimizing our platform for efficiencies. With that, I will now pass the call over to Shell.

[Sheldon Saidakovsky, executive]

Thank you, Clive, and good morning, everyone. We are proud of our results this quarter and of our ability to continue growing the business significantly on the top and bottom line. As Clive discussed, we experienced a return to a more robust quarter of originations following a more typical seasonal Q1 characterized by higher tax refunds and softer consumer demand. In line with our expectations and given the strong credit performance, continued resilience of the macroeconomic environment, and the quality of the consumer demand, we and our bank partners originated a higher proportion of new customers through both the Credit Fresh and Money heap rents as compared to prior quarters. New customer originations for the quarter represented 48% of our total origination funding and was the highest percentage of new customer originations. Q4 2021, right before we and our bank partners started tightening our underwriting posture in early 2022. The increase in new customer originations helped drive our record Wellman advance receivables balance to $215.7 million as well as our record-ending CLEP to over $273 million for the quarter. These balances were also driven by the factors that Clive outlined earlier would include the continued expansion of our bank programs and broadening our presence across the understood consumer market, amongst other factors. I would also note that our Canadian operation for us contributed to the company's overall Q2 revenue and loan balance, albeit modestly, given the short time period in the launch in wet 2023. Ultimately, the record loan and the receivables balance and ending Slab resulted in our record revenues of $71.7 million for Q2, representing 33% growth over Q2 2022. Furthermore, our year-to-date revenues of $137.3 million was a record for a 6-month period. The annualized revenue yield was 110% in Q2, a decent from 1.28% in the prior year. This Tintin yield is consistent with the strategy of moving price spectrum to facilitate credit for more under-consumers. As previously noted, this is accomplished primarily through our variable pricing and graduation initiatives. I would, however, note that the annualized revenue has actually increased slightly from 106% in Q1 2023, which is reflective of the higher new customer volume previously discussed. As a reminder, new customers typically start at a higher cost of credit for qualifying for reduced rates at created loan amounts, assuming for our elaboration program. Turning to provisioning and charge-offs. Teton for loan losses and other liabilities as a percentage of revenue was 51% in Q2, representing a significant decline from 58% in Q2 of last year. As I remember, the 58% in Q2 2020 represented a high point for the company in recent years and occurred during the period in which central banks were just starting to increase rates and consumers were starting to see the effect closing inflation. We experienced an uptick in default rates during that period, as we have discussed previously. The decrease in the provision for loan losses as a percentage of revenue reflects the improving credit performance in the portfolio from Q2 2022 today and is a testament to our prudent underwriting and application of AI capabilities driving higher credit quality. Our AI platform is dynamic, constantly integrating new pertinent external and internal data points, which in conjunction with our world-class risk team, adjust how you evaluate consumer risk and ultimately enable us and our bank partners to facilitate more loans to consumers across the credit spectrum while keeping strong default performance in line with targets. With respect to net charge-offs, consistent with the increase in pens, our net charge-offs as a percentage of CLAT also declined, decreasing to 12% in Q2 2023 as compared to 15% in Q2 2022. This decrease is a result of the same factors that drove down the provision and ultimately because of the higher drag quality portfolio composition, including higher average credit scores and African costs. I would also note that the 12% experienced in Q2 2023 is lower than pre-pandemic levels and as such, reflects the continued shift in the overall portfolio towards consumers higher on the credit spectrum. In Q2 2023, our net income increased by $5.7 million from $2 million in Q2 2022, while adjusted net income increased to a comfort of $8.6 million in Q2 2023 from $4.3 million in Q2 last year. Our net income year-to-date grew to $13.1 million, and adjusted net income increased to $16.9 million, both representing records for a 6-month period. You will recall that in periods by growth, we recognized significant upfront cash costs, and we also booked significant noncash expenses relating to provisioning on new originations under IFRS with very little attributable revenue in the period of origination. As such, we make an adjustment to our net income to remove a part of the provision relating to the good-standing loans that have no indication of underperformance. We believe that the adjusted net income is a truer reflection of the company's earnings performance. The growth in net income and adjusted net income is primarily a result of the overall growth of the business, lower provision for loan losses as a percentage of revenue, operating leverage, and ongoing effective and prudent cost management. These cost management initiatives include continued technology enhancements that are driving increased automation and originations, and loan servicing across the product portfolio, ultimately leading to higher productivity and lowering our operating costs. Furthermore, technology enhancements are enhancing the overall customer experience, which is core to our mission. The disciplined expense management, technological enhancements, and inherent operating leverage is evident in our decreasing operating expenses as a percentage of revenue. These cost efficiencies, along with lower relative provision expense contributed to the net income margin increasing from 4% in Q2 2022 to 8% in Q2 2023 and the adjusted net income margin increasing from 8% in Q2 2022 to 12% in Q2 2023. Do note that we expected that the margin would be even higher but was counteracted by the following factors: the higher front cost, including acquisition and provisions for loan losses related to a higher level of new customer origination. Secondly, cost is incurred related to the build-out of Pathword that launched in late June and costs related to growing our new Canadian product, which launched late last year; and three, higher interest costs on our credit facilities due to the increasing interest rates over the past. The increase in interest rates since SR22 drove our overall cost of debt to 13.5% in Q2 0.1% in the prior year. Before I turn the call back to Clive to provide an overview of Propel's financial position. At the end of Q2, we remain well capitalized to continue executing on its growth plan. As of June 30, we had approximately $132 million of uncrowned capacity on our various credit facilities. Our debt-to-equity ratio of approximately 1.7x remain the same at the end of Q2 from Q1 and dropped slightly from 1.8x at the end of last year. This comes as a result of strong earnings and operating cash flow generated over the quarter, offsetting the increase in debt utilization. Further, this result is noteworthy given the significant growth in originations in Q2 over Q1. Given the structuring of our credit facilities, which provides us the capacity for 4x less, we continue to have ample capacity and liquidity to execute on that strategy. We are confident in our strong financial position and significant cash-related capability. We'll be able to support the continued growth of our existing programs, ongoing the rollout of Fora and Pathward to support our dividend. I will now pass the call back over to Clive.

[Clive Kinross, executive]

Thank you, Sheldon. Having just passed the airplay mark, we are thrilled with what we have achieved so far in 2023. But there remains a lot to be accomplished in the back half of the year, and we focused on accelerating our growth through 3 key areas. First, with our core U.S. business, we will respond to consumer demand and expand and optimize our existing programs, including Money Key and Creditresh. We are also laying the groundwork to offer products and services in additional states. While we expect that we and our bank partners will remain prudent with our underwriting given the ongoing high-quality consumer demand and credit performance, we expect that we will continue to experience an increasing number of new customers during Q3 and Q4, which are typically the highest demand orders for our business. Second, we will continue to accelerate growth for Pathward and Fora. With Pathward, as previously mentioned, we officially launched our 5-year Lending as a Service program, which is off to a stellar start. With respect to Fora, we expect to continue to build our presence in existing provinces as well as continue our rollout across additional provinces on a disciplined basis. We remain extremely optimistic about the market opportunity in Canada and our ability to develop into an industry leader. And third, we continue to realize additional market opportunities, including new products and partnerships. Additionally, while the need for credit access remains high in the U.S. and Canada, we know there is significant demand in other markets. And as a result, we are evaluating exciting opportunities in additional geographies. There is a lot to accomplish, but we have a track record of results and the discipline to execute. In the last 12 months, we have bought for and powerful to-market schedule while continuing to grow profitability. I have incredible confidence in our team, and I know we will deliver. Lastly, halfway through the year, we, as a group, have spent time doing where we are as a company and what more there is to accomplish as an organization. We've had several conversations about where we have come from, and what inspired us to start Propel. Being entrepreneurs, we are very involved in the day-to-day. So it's important to step back and reflect. 12 years ago, we believed there was a real need to build a different financial consumers who were locked out of traditional credit institutions to build a company that combines the best of technology and AI, the best talent, and the best of consumer finance. We've done that, and we have built a world that works for consumers, partners, and shareholders alike. That being said, while we are one of North America's fastest-growing and profitable fintech, there remains the best market opportunity to serve those consumers in zero access to credit and our path to becoming a global industry leader is just getting started. That concludes our prepared remarks. Operator, you may now open the line for questions.

[Operator]

Thank you, sir. As stated, ladies and gentlemen, we will take questions from research analysts. [Operator Instructions] And your first question will be from Andrew Scott, ROTH MKM.

[Andrew Scutt, analyst]

Congratulations on the strong results. So I know you guys touched on this in the prepared remarks, but could you kind of elaborate on what you saw kind of in the economy and marketplace that allowed you to feel more comfortable pursuing new customers? And secondly, kind of how are those loans performing to date?

[Clive Kinross, executive]

Yes. First of all, Andrew, good morning. Thanks for joining the call, and thank you also for your kind comments. Much appreciated. Certainly, we're all looking at the same macroeconomic data, and we're all seeing that there's real wage growth across a broad economy. If you were to really hone into our segments of the market, the wage growth is even has been even more significant, and we're seeing that wage growth and we're real ways both at a time when inflation is coming under control. And in addition to that, [indiscernible] high in terms of employment. One of those are very strong fundamentals and in many respects, a gowelock scenario for us. At the same time, there continues to be certainly the perception of risk in the market from an economic standpoint. And as a result of that, there's been significant tightening across the entire credit spectrum. Because of where we fall in the waterfall, so to speak, lots of the customers who would otherwise get funded prior to Propel, if you will, again, in terms of the credit waterfall, are dropping down to us. So we are seeing higher quality consumers than we've ever seen before. And I know I've been saying that for the last quarter or 2, but it continues to be the case today. And when I say better quality consumers, I'm saying higher incomes, we quite tools than we have experienced in other. So notwithstanding our time underwriting posture that we and our bank partners have and we're still doing record numbers of originations because of the less bad volume of consumers that aren't being funded prior to us. In answer to the second part of the question and maybe the most important aspect is how are these consumers performing. As you can see from the results, quicker performance has been exceptionally strong at as Q2 this year to Q2 of last year. You could see what a dramatic improvement there is, and the provision for loan losses went from 58% last year to 51% this year, which is a dramatic improvement, and we're continuing to see that same strong credit performance as well as that same strong consumer demand after the part of Q3. So we're really being good about the state of the corner.

[Andrew Scutt, analyst]

And then just a question for me. Very excited to see the launch of Pathward be really transformational product. I was just kind of curious what you guys are looking for over the next couple of months, maybe, I guess, through year-end, what you're targeting to kind of see through the partnership and what you guys want to accomplish there.

[Clive Kinross, executive]

Yes. And we're almost 2 months into that launch. It's been a really strong start. Credit performance has been outstanding. And I think one of the things about our platform is that we've tried to educate the more [indiscernible] coming to market. And first and foremost, when you underwrite underbanked and underserved consumers, you can't do it using traditional credit scores. And one of the reasons we developed our AI underwriting platform several years ago was specifically the only way to ultimately score these underserved consumers. But we said all along that we could use the same methodology in moving upstream from a credit standpoint. And the fact that we've gone into the sub-36% market with Pathward, or originating loans, and the lines are performing environment, if not better than expectations. And I want to caveat that by saying it's still early days, but we're seeing stellar credit performance is really a testament to our AI underwriting engine and excellent proof points that we could go way broader seeing a much broader market given our overall methodology. As you can so appreciate, Andrew, being at the very early phases over here, we are coming off an exactly low base [indiscernible] really is exponential, and we expect it to continue to be exponential for the remainder of Q3 and into Q4 as well. But that said, with the business that this year, we've guided to -- I think the midpoint of the guidance is around USD 330 million. As I'm sure you can appreciate a program that is as new as Pathward while it will contribute positively to 2023, it's not going to have a material impact to revenues or the bottom, but we'll start to have a big impact in 2024 and beyond.

[Operator]

The next question will be from Ralph Profiti, Eight Capital.

[Ralph Profiti, analyst]

Let me have my congratulations as well. Just on the PCL performance, really strong performance there. So that's good to see. But given through the back half of the year, you said you're going to be increasing those originations to new customers. How do you see PCLs kind of trending throughout the end of the year? Would you still continue to expect this strong performance or a slight pullback? Just color around that would be excellent.

[Sheldon Saidakovsky, executive]

Thank you for the kind words as well. So typically, when we grow originations and particularly new customer originations, they carry with them a higher provision for loan losses than our mature portfolio. So that's notwithstanding the excellent performance that we saw in Q2, you still saw an uptick in provision relative to Q1 from 47% to 51%. But if you look under the covers in terms of how the actual delinquency rates for the business are performing, they were pretty much in line with Q1, and that's reflected also through our net charge-off rate, which was 12% in Q2 versus actually 13% in Q1. So it's really kind of the distribution or composition of the portfolio between new and existing consumers, all things being equal, the more originations we put on the books, the higher the PCL as a percentage of revenue will be, and that's okay. So I think to answer your question, we expect because of the accelerated growth that we're anticipating in Q3 and Q4, I would expect that PCL to tick up probably between the 51% that we're at today to, let's say, 54-ish between 51 and 53 for the remainder of the year. And that's, again, as we've always said, in a period of growth that we're somewhere between 50% and 55%. That's a very profitable place for us to be from a provision standpoint.

[Clive Kinross, executive]

I want to just add to what Sheldon said over there. Obviously, there's accelerating growth in Q4 for the remainder of the year. And you could -- I guess you could calculate that based on the guidance, so even though now these provisions will tick up a little bit, the growth is ticking up materially, and we expect certainly on the revenue side, and we expect obviously it to be growth in absolute terms in the bottom line as well. The good news about growing the book is that materially between month and the end of the year. It means we're building in a very strong position to begin the 2024 financial year. So with that said, if you just kind of connect all the dots over, you could see that we will start '24 at a revenue run rate, certainly start the year somewhere in the $400 million range, and build it up from there. So not only is it going to have a very, very strong implication for the back half of this year, but it will position us very well for the start of next year as well.

[Ralph Profiti, analyst]

Understood. And then maybe just from a customer acquisition point. Of course, I understand that that ticked up a little bit commensurate with the increase in origination. Would you expect that to go up slightly as well?

[Sheldon Saidakovsky, executive]

Yes. So I think the metric that we report is cost per funded origination. And obviously, the increase is reflected in that metric. But if you actually look at our cost per acquisition from new customer dollar funded, it remained unchanged from last year. It's about $0.19 per dollar funded. So from that perspective, again, the acquisition costs increased in terms of the cost per funded origination because of a higher proportion of new customer originations that we did. So blended costs, we do expect to continue to increase as the new customer acquisitions represent a higher proportion of total originations funded in terms of as a percentage of revenue, we expect it to decrease. And certainly, as a -- from a cost per acquisition on a new customer basis, we expect it to be in line with what we've done over the quarters coming in -- well, over the past several quarters.

[Ralph Profiti, analyst]

Excellent. Congratulations again on the results going. I'll pass away.

[Sheldon Saidakovsky, executive]

Thanks for the curiosity and also the kind words. Much appreciated.

[Operator]

The next question will be from David Pierce at Raymond James.

[David Pierce, analyst]

Hoping you can talk a bit about acceptance rates. You're obviously seeing larger application volumes that's allowing you to be more selective with who you lend to. My question is, how has the acceptance rate been trending over the last 12 months? Maybe going back to 2Q '22 last year, when credit performance was a little weaker, you decided to tighten your underwriting after that. Is it fair to say that with the higher origination volumes this quarter, the acceptance rate was a little higher compared to recent quarters?

[Sheldon Saidakovsky, executive]

Yes, it's a great question. And let me start off by contrasting the acceptance rate of Q2 of this year relative to Q2 of last year. Q2 of last year, certainly, the acceptance rate was higher than it was this year. And just looking in the rearview mirror, I think that we probably -- we and our bank partners were more prudent in us given some of the macroeconomic trends that existed at the time. If you recall correctly, we then took a much tighter underwriting posture. And for the most part, today, we're operating with the same or very similar underwriting posture to what we've been working with ever since. So by and large, we haven't changed our perspective on the risk in the broader markets in terms of how we operate, meaning we continue to operate very prudently. With that said, we are noticing an uptick in the acceptance rates. We're certainly not where we were in Q2 of 2022, but we were higher than, say, we were in Q3 and Q4 of last year. And the reason for that, again, is because of the number of consumers that aren't accessing credit prior to falling into our segment of the market has increased. If you look at what the Federal Reserve, New York put out recently, the number of consumers that are being the client from traditional ceded sources is at its highest level since 2018. And it's because of those high consumers -- high-quality consumers are now hitting our segment of the market that accept rate has ticked up. So all of that is to say that's the direct answer to your question to flex tail, but further, that certainly doesn't mean we're taking on incremental risk, as evidenced by our underwriting posture, which hasn't changed.

[David Pierce, analyst]

And just on the competitive environment, the results we're seeing across your peer group have been relatively mixed over the last couple of quarters. Your results have clearly been very strong. When you think about trends like higher financing costs, and a more uncertain economic environment, how is your competitive positioning in the marketplace changed over the last 18 months or so?

[Clive Kinross, executive]

I think a couple of things. First of all, I think we're delivering consistent, profitable growth. And if anything, as the business grows, so too does the bottom line grow at an even faster clip. And I think that's a testament to almost our 12 years of operating history, not only in terms of the proprietary data that we've been able to collect and establish over that period and therefore refine the underwriting and marketing techniques that we used, amongst other things. But in addition to that, we're a very, very well-tenured company in terms of our executive team. And I believe that that is what enables us to execute flawlessly and bring these new programs to market like LightPath, which I think certainly differentiates us, including the profit profile that you spoke about. With that said, we've grown a lot in the last couple of years. Our credit facility that we have today was put in place with the same partners that we've been working with for the last 8 or 9 years. They've been phenomenal in how they've supported the business. And this is a facility that was put in place again when we were a smaller company. And if you look at some of our competitors, their cost of capital is, in some instances, closer to 6% or 7% or 8%, whereas today, we're at 13.5%. So from a competitive standpoint, that incremental, call it, 5.5% on our cost of debt is certainly a headwind relative to our competence. But as we're getting larger, as we're getting closer to being able to attract different types of institutional capital, we certainly expect to be able to grow into that lower cost of capital over the foreseeable future. So what today may be viewed as a headwind, we believe, is going to present a tremendous opportunity on a go-forward basis, largely because of the different types of debt capital we'll be able to attract on the one hand. And on the other hand, it's our view that if we're not at the top of the timing cycle, we're close to the top of the piping cycle. So we expect our cost of capital to start to come down irrespective.

[Operator]

Thank you. At this time, I would like to turn it back over to Clive for closing remarks.

[Clive Kinross, executive]

Great. Thanks for all the questions, and thanks for those of you that have joined our call today. We really appreciate the attendance. I would like to thank all of our investors for your continued support and belief in Propel and our vision of building a new world of financial opportunity. The world we're building is one that can provide relief to a consumer and create opportunities for our investors and partners. And as always, I would like to extend a big thank you to the Propel team for pushing themselves and helping us transform an industry. Have an excellent day. Operator on that note, you may end the call.

[Operator]

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Have a good weekend.