Financial Results for the Three and Nine Month Period Ended September 30, 2016

Montreal, Quebec–(Newsfile Corp. – November 29, 2016) – IOU FINANCIAL INC. (TSXV: IOU) (“IOU” or “the Company”), a leading online lender to small businesses (IOUFinancial.com), announced today its results for the three and nine month period ended September 30, 2016.

“IOU remains committed to achieving profitable growth by emphasizing credit quality over loan volume and seeking to continuously improve operational efficiencies. To that end, we recently deployed our next generation proprietary IOU Risk Logic Score, part of our continued investment in innovation and technology and at the end of the quarter adopted a plan to reduce operating costs. The close of our $50 million credit facility with Midcap Financial in the second quarter, lowered our funding costs and enhanced our competitive position,” said Mr. Marleau.

“In addition, during the quarter we also announced our entrance into Canada. Since 2009, we have originated roughly US$ 400 million of loans in the USA. We are looking forward to fueling the growth of small businesses across Canada,” added Mr. Marleau.

FINANCIAL HIGHLIGHTS

  • Loan applications rose significantly year over year. As a result of a continuing disciplined strategy aimed at emphasizing the quality of IOU’s loans over gross loan origination, loan volumes decreased during the quarter. Loan originations in the third quarter ended September 30, 2016 were US$30.2 million versus originations of US$45.0 million for the same period last year. For the nine-month period ended September 30, 2016, IOU Financial originated US$87.5 million in loans compared to loan originations of US$110.1 million for the same period last year.
  • As of September 30, 2016, IOU’s total loans under management decreased to $78.6 million as compared to $89.6 million at the end of the third quarter 2015. On September 30, 2016, the principal balance of the loan portfolio grew to $40.9 million compared to $21.1 million at the end of the third quarter of 2015 consistent with the Company’s strategy to retain more loans on its balance sheet. The principal balance of IOU’s servicing portfolio (loans being serviced on behalf of a third-parties) was $37.7 million compared to $68.5 million in 2015.
  • Gross revenue for the quarter ended September 30, 2016 was $5.7 million versus $2.6 million for the quarter ended September 30, 2015, representing a 114% increase as a result of the increase in the loan portfolio. For the nine-month period ended September 30, 2015, gross revenues improved to $12.5 million, in comparison to $8.1 million for the same period in 2015.
  • IOU recorded net revenue for the quarter ended September 30, 2016 of $2.6 million versus $1.5 million for the quarter ended September 30, 2015. The increase in net revenue for the quarter was due to an increase in the loan portfolio. For the nine-month period ended September 30, 2016 IOU Financial recorded net revenue of $6.1 million versus $5.3 million for the same period in 2015, an increase of 14.9%.
  • Interest expense during the quarter ended September 30, 2016 increased to $0.9 million, up from $0.4 million over the previous year. The increase is attributable to an increase in borrowings under the credit facility. Interest expense for the nine-month period increased to $2.2 million, up from $1.2 million for the same period in 2015.
  • Provision for loan losses (net of recoveries) increased to $2.2 million, up from $0.7 million, for the quarter ended September 30, 2016. This increase is attributable to an increase in the size of the loan portfolio and a build in the allowance for loan losses for loans originated in prior periods. IOU Financial has since adjusted its originating levels and shifted its loan originations towards higher quality loans. This shift is expected to contribute to improved credit performance. In addition, the Company has implemented certain process changes to improve its servicing and collections. For the nine-month period, provision for loan losses (net of recoveries) increased to $4.2 million, up from $1.7 million, over the previous year.
  • Operating expenses (excluding non-recurring costs) were $2.8 million during the third quarter of 2016 versus $2.6 million for the quarter ended September 30, 2015. During the quarter, the Company adopted a plan to reduce operating expenses. These cost-reduction efforts, once fully implemented are expected to lower operating expenses to $2.0 million to $2.2 million during the fourth quarter on a normalized basis. For the nine-month period ended September 30, 2016 IOU Financial recorded operating expenses (excluding non-recurring costs) of $8.8 million versus $7.2 million for the same period in 2015.
  • IOU closed on the third quarter 2016 with a net loss of $350,033, or $0.01 per common share, compared to a net loss of $2,118,655 or $0.03 per common share during the same period of 2015. For the nine-month period ended September 30, 2016, IOU Financial had a net loss of $3,138,259 or $0.05 per common share (2015: $3,029,949 or $0.05 per common share).
  • IOU closed its third quarter 2016 with an adjusted net loss of $131,364, which excludes certain non-cash and non-recurring items, compared to an adjusted loss of $344,340 in the third quarter of 2015. For the nine-month period ended September 30, 2016, IOU Financial had an adjusted loss of $1,740,979 compared to an adjusted loss of $1,209,489 for the same period in 2015.

IOU’s financial statements and management discussion & analysis for the quarter ended September 30, 2016 have been filed on SEDAR and are available at www.sedar.com.

About IOU Financial
IOU Financial provides small businesses throughout the U.S. and Canada access to the capital they need to seize growth opportunities quickly. Typical customers include medical and dental practices, grocery and retail stores, restaurant and hotel franchisees and e-commerce companies. In a unique approach to lending, the IOU Financial advanced, automated application and approval system accurately assesses applicants’ financial realities, with an emphasis on day-to-day cash flow trends. It makes loans of up to US$150,000 to qualified U.S. applicants ($100,000 in Canada) within a few business days, with affordable charges favorable to cash-flow management. It’s speed and transparency make IOU Financial a trusted alternative to banks. To learn more visit: IOUFinancial.com.

Forward Looking Statements
Certain information set forth in this news release may contain forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the control of IOU including, but not limited to, the impact of general economic conditions, industry conditions, dependence upon regulatory and shareholder approvals, the execution of definitive documentation and the uncertainty of obtaining additional financing. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. IOU does not assume any obligation to update or revise its forward-looking statements, whether as a result of new information, future events, or otherwise.

The TSX-V has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

For more information, please contact:

Philippe Marleau
Chief Executive Officer
(514) 789-0694 ext. 225
David Kennedy
Chief Financial Officer
(514) 789-0694 ext. 278
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