Company more than doubles loan originations
vs. Q1 2021, generates over $1
million in net earnings and provides update on
Post-Pandemic Growth Plan.
- Loan originations reached an all-time quarterly record
US$59.6 million in Q1 2022,
representing an increase of 20.2% over Q4 2021 (and an increase of
135.5% vs. Q1 2021).
- Loans under management of $140.6
million in Q1 2022, representing an increase of 17.7% over
Q4 2021 (and driven by an increase of 18.8% in the servicing
portfolio).
- Servicing and fee revenue of $3.9
million in Q1 2022, representing an increase of 22.6% over
Q4 2021 (and an increase of 133.0% over Q1 2021).
- Adjusted operating expenses of $3.5
million in Q1 2022, representing an increase of 19.2% over
Q4 2021 (and an increase of 43.1% over Q1 2021).
- Net earnings of $1.1 million in
Q1 2022, representing an increase of 61.8% over Q4 2021 (and vs. a
net loss of $0.1 million in Q1 2021),
on an IFRS basis.
MONTREAL, May 18, 2022
/CNW Telbec/ - IOU FINANCIAL INC. ("IOU" or "the Company")
(TSXV: IOU), a leading online lender to small businesses
(IOUFinancial.com), announced today its results for the three-month
period ended March 31, 2022.
"IOU Financial continues to deliver on its promise to
stakeholders by growing loan originations and increasing
profitability while continuing to invest the scalability of its
operations and technology," said Robert
Gloer, President and CEO. "IOU's record Q1 loan originations
made it possible to continue investing in strategic growth
initiatives while reducing corporate debt through the repurchase of
an additional $1.2 million in
convertible debentures."
IOU Financial originated a record US$59.6
million in loans in the first quarter ending 2022,
representing an increase of 135.5% over Q1 2021 as well as
representing an increase of 20.2% over Q4 2021. The Company
attributes a significant portion of its strong growth in loan
originations to its successful transition from a balance sheet
strategy (under which the Company traditionally funded loans to its
balance sheet) to a marketplace strategy under which new loan
originations are primarily being sold to institutional
purchasers.
Loans under management increased, on average, 83.5% (Q1 2022 vs.
Q1 2021), outpacing a 43.1% growth in operating expenses (on an
adjusted basis) and helping to reduce the Company's Adjusted
Operating Expense Ratio to 10.7% in Q1 2022 (vs. 13.7% in Q1
2021).
The Company continued to advance on its Post-Pandemic Growth
Plan, first announced as part of its Q1 2021 Financial Results,
based on three strategic pillars designed to support scalability
and growth:
- Technology innovation: The Company continues to invest
in developing its proprietary IOU360 platform to better support
Brokers, Merchants, Investors and internal stakeholders, all
designed to support greater efficiencies and the long-term
scalability of the business.
- Product expansion: The Company is committed to continue
introducing innovative loan products to meet the needs of more
small business owners as well as to achieve further differentiation
in the market. The Company launched its first new lending product,
the IOU Financial Cash-Back Loan, in August
2021 and the IOU Financial 24-Month Loan in November 2021. Additional product innovations are
planned and will be enabled by further development of the IOU360
platform in 2022.
- Product distribution: The Company continues to expand
its wholesale (IOU Financial) and retail (ZING Funding)
distribution strategies to maximize its exposure to the economic
recovery through both channels.
IOU Financial's strong Q1 2022 loan originations and progress
towards its strategic goals demonstrate the Company's continuing
ability to leverage its marketplace strategy and make strategic
investments to support scalable growth and create value for all
stakeholders.
OUTLOOK
For all of 2022, the Company is targeting loan originations
in the range of US$220M to
US$260M while continuing to invest in
growth and scalability.
FINANCIAL
HIGHLIGHTS
The Company continues to focus on its marketplace strategy
allowing it to accelerate loan origination growth. This strategy
has the impact of placing more emphasis on servicing and fee
revenue over interest revenue and cost of revenue associated with
holding loans as part of a loan portfolio. Interest revenue
decreased as the principal loan portfolio balance continues to wind
down while servicing and fee revenue increased consistent with the
increase in loan origination volume as well as the increase in the
servicing portfolio.
Due to the wind down of the loan portfolio, there is no interest
expense associated with the financing credit facilities in Q1 2022
as IOU's two financing credit facilities were terminated in
December 2020 and October 2021, respectively. Interest expense has
also decreased in the quarter as the Company was able to use its
financial resources to repurchase $1.2
million of its convertible debentures in the quarter as well
as to repurchase an additional $0.2
million of convertible debentures subsequent to quarter
end.
In addition, the marketplace strategy will render the provision
for loan losses less significant as it relates to loans held on the
balance sheet. IOU will continue to focus on cash collections
on the remaining loan portfolio, which may give rise to reversals
in the provision for loan losses and recoveries of loans previously
written off.
Please refer to the table below for adjustments made to IFRS
gross revenue and operating expenses. These adjustments serve as
another measure of actual operating performance of the
business.
Loan Originations: In Q1 2022, the Company funded
US$59.6 million in loans (Q1 2021: US
$25.3 million), representing an
increase of 135.5% over the same period last year and representing
an increase of 20.2% over Q4 2021
Servicing and fee revenue: Servicing and fee
revenue increased 133.0% to $3.9
million in Q1 2022 from $1.7
million in Q1 2021. On a sequential basis, servicing and fee
revenue increased $0.7 million or
22.6% over Q4 2021. More specifically, servicing and fee revenue
growth is attributable to the following:
- Servicing fees earned on the servicing portfolio increased
$1.3 million or 125.6% over Q1 2021
(and increased 31.4% over Q4 2021). The average servicing portfolio
increased by 113.7% quarter over quarter (and increased 18.1% over
Q4 2021).
- Referral fee revenue earned by IOU's retail distribution
operation (ZING Funding) increased to $0.5
million in Q1 2022 from $0.1
million in Q1 2021 as it facilitated approximately
US$6.0 million in loan origination
volume in Q1 2022, representing an increase of 220.4% over Q1 2021
(US$2.8 million). On a sequential
basis, referral fee revenue increased 25.8% over Q4 2021.
- Administrative and other fees earned on the servicing portfolio
increased $0.1 million to
$0.2 million in Q1 2022 over Q1
2021.
- Accelerated recognition of transaction costs on loans sold.
This represents income earned on loans after taking into
consideration loan origination sales costs. This income category
increased by $0.5 million or 140.7%
quarter over quarter as loan origination volume increased 135.5% in
the same period. On a sequential basis, this income category
increased 29.8% over Q4 2021 as loan origination volume increased
20.2% in Q1 2022 vs Q4 2021.
Adjusted Gross Revenue: Adjusted gross revenue increased
to $3.9 million (2021: $2.3 million), representing an increase of 73.7%
for the three-month period ended March 31,
2022 compared to the same period in 2021 or 21.9% over
Q4 2021.
Adjusted Net Revenue: Increased 99.6% to
$3.9 million in Q1 2022 compared to
$2.0 million in Q1 2021 due mainly to
an increase in servicing and fee revenue of 133.0%. On a sequential
basis, adjusted net revenue increased 33.8% over Q4 2021.
Adjusted Operating Expenses: Adjusted operating
expenses increased 43.1% to $3.5
million for the first quarter of 2022 compared to
$2.4 million for the same period in
2021 (and increased 19.2% over Q4 2021) mainly due to an increase
in wages and salaries and data and IT costs as the Company
continues to support the future growth in loan originations by
investing in innovation and resources as part of its 2021
Post-Pandemic Growth Plan. The Adjusted Operating Expense Ratio,
which is a measure of the Company's operating efficiency, decreased
from 13.7% in Q1 2021 to 10.7% in Q1 2022. The ratio decreased as
average loans under management for the period increased by 83.5%
over the same period in 2021, outpacing the 43.1% growth in
adjusted operating expenses,
Adjusted Net Earnings (Loss): IOU closed on its
year first quarter ended March 31,
2022 with an adjusted net earnings of $0.5 million compared to adjusted net loss of
$(0.4) million for the same period in
2021.
IFRS Net Earnings (Loss): IOU closed on its first
quarter ended March 31, 2022 with
IFRS net earnings of $1.1 million, or
$0.01 per share, compared to IFRS net
loss of $(0.1) million or
$(0.00) per share for the same period
in 2021.
Adjusted
and IFRS net earnings (loss)
|
For the three-month
period ended March 31
|
2022
$
|
2021
$
|
Interest revenue
|
35,777
|
591,612
|
Servicing fees
|
2,419,477
|
1,072,420
|
Referral fee revenue
|
460,531
|
143,716
|
Administrative and other fees
|
237,965
|
133,059
|
Accelerated recognition of transaction costs on loans
sold
|
782,808
|
325,185
|
Adjusted Gross
Revenue
|
3,936,558
|
2,265,992
|
|
|
|
Interest expense
|
238,834
|
324,432
|
Net
recovery of loan losses
|
(261,404)
|
(42,200)
|
Cost of
Revenue
|
(22,570)
|
282,232
|
|
|
|
Adjusted Net
Revenue
|
3,959,128
|
1,983,760
|
Adjusted operating
expense
|
3,466,133
|
2,421,476
|
Adjusted Net
Earnings (Loss)
|
492,995
|
(437,716)
|
Adjusted Net
Earnings (Loss) per Share
|
0.00
|
(0.00)
|
|
|
|
Adjusted Net
Earnings (Loss)
|
492,995
|
(437,716)
|
Non-cash gain on sales
of loans
|
2,403,838
|
1,102,681
|
Non-cash amortization
of servicing asset
|
(1,695,792)
|
(723,998)
|
Non-cash stock-based
compensation
|
(24,597)
|
(20,431)
|
Non-recurring
cost-net
|
(59,040)
|
-
|
Net Earnings (Loss)
per IFRS
|
1,117,404
|
(79,464)
|
Net Earnings (Loss)
per Share
|
0.01
|
(0.00)
|
IOU's financial statements and management discussion &
analysis for the three-month period ended March 31, 2022 have been filed on SEDAR and are
available at www.sedar.com.
About IOU Financial Inc.
IOU Financial Inc. is a wholesale lender that provides quick
and easy access to growth capital to small businesses through a
network of preferred brokers across the US and Canada. Built on its proprietary IOU360
technology platform that connects underwriters, merchants and
brokers in real time, IOU Financial has become a trusted
alternative to banks by originating in excess of US$1 billion in loans to fund small business
growth since 2009. IOU trades on the TSX Venture Exchange
under the symbol IOU (TSXV: IOU), and on the US OTC markets as
IOUFF. To learn more about IOU Financial's corporate history,
financial products, or to join our broker network please visit
www.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.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
Non-IFRS Financial Measures
The Company uses certain non-IFRS financial measures as an
alternative method to evaluate performance. These measures include
adjusted gross revenue, adjusted net revenue, adjusted operating
expenses, adjusted operating expense ratio, non- recurring gains
and losses, adjusted net earnings (loss), adjusted net earnings
(loss) per share. These financial measures may not be comparable to
similar measures used by other issuers. The definitions for
certain non-IFRS financial measures are provided below
Definitions
- Adjusted gross revenue is defined as gross revenue prepared
in accordance with IFRS for the period, plus amortization of
servicing assets less gain on sale of loans. The Company uses
adjusted gross revenue as another measure of financial performance.
Specifically, it eliminates the non-cash gain on sale of loans and
the non-cash amortization of servicing assets which influence
operating results depending on the timing and amount of the loan
sales.
- Adjusted net revenue is defined as adjusted gross revenue
less cost of revenue.
- Adjusted operating expenses is calculated as follows: total
operating expenses prepared in accordance with IFRS for the period
less: stock-based compensation and non-recurring costs, plus
non-recurring gains. The Company uses adjusted operating expenses
as another measure of financial performance. Specifically, it
eliminates non-cash stock-based compensation which is given at
different times and prices and non-recurring costs and gains which
affects operating results only periodically.
- Adjusted Operating Expense Ratio is a non-IFRS measure and
is calculated as follows: adjusted operating expenses divided by
the average loans under management for the period, presented on an
annualized basis. The ratios are calculated on a two-point basis,
using December and period end balances, presented on an annualized
basis
- Non-Recurring Cost-net refers to adjustments to remove the
impacts on operating expenses which are not incurred in the normal
course of business and can fluctuate at different times and at
various amounts.
- The calculation of adjusted net (loss) earnings is defined
as net (loss) earnings for the period prepared in accordance with
IFRS less: non-cash gain on sale of loans and non-recurring gains,
plus: non-cash amortization of servicing assets, stock-based
compensation and non-recurring costs.
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SOURCE IOU Financial Inc.