IOU Financial Inc. Releases Financial Results for the Year Ended December 31, 2017

• Reached profitability during the year with positive adjusted net earnings of $0.1 million in Q4.
• Surpassed the half-billion loan origination mark with loan originations of $91.3 million (US) for the year.
• Increased interest revenue of 8.1% to $14.4 million for the year ended December 31, 2017 vs 2016.
• Reduced operating costs (excluding non-recurring costs) by 20.3% to $9.0 million for the year ended 2017.
• Raised $3.5 million via a private placement.

MONTREAL, April 26, 2018 /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 year ended December 31, 2017.

"Our action plan in 2017 which consisted of rightsizing the organization, managing defaults and improved pricing has resulted in positive adjusted earnings in the fourth quarter and represents a significant milestone for the organization. We expect to grow adjusted earnings throughout 2018," said Phil Marleau, CEO.

FINANCIAL HIGHLIGHTS

• Loan originations for the year ended December 31, 2017 were US$91.3 million versus originations of US$107.6 million for the year ended December 31, 2016. Loan originations decreased due to changes made to the Company's lending policies in response to increased delinquency levels. However, loan origination growth resumed in Q4 and increased 17.5% to $23.5 million compared to the same period last year.
• As of December 31, 2017, IOU's total loans under management amounted to approximately $61.7 million as compared to $70.3 million at the end of year 2016. On December 31, 2017, the principal balance of the loan portfolio amounted to $33.0 million compared to $42.1 million in 2016. The principal balance of IOU's servicing portfolio (loans being serviced on behalf of third-parties) amounted to approximately $28.6 million compared to $28.2 million in 2016.
• IOU recorded gross revenue during the for the year ended December 31, 2017 of $17.4 million versus $17.4 million for the same period last year. Interest revenue increased 8.1% to 14.4 million for the year ended 2017 compared to the same period last year. The increase is attributable to an increase in the average commercial loan receivable balance and the Company's pricing structure.
• Interest expense for the year ended December 31, 2017 increased to $3.7 million, up from $3.2 million over the previous year. The increase is attributable to an increase in borrowings under the credit facility partially offset by a reduction in the cost of funds borrowed versus the previous year.
• Allowance for loan losses (net of recoveries) increased to $8.2 million for the year ended December 31, 2017, up from $7.3 million for the previous year. The increase is primarily attributable to an increase in defaults by borrowers and, as a result, IOU Financial made changes to its lending policies. In addition, the Company implemented certain process changes to improve its servicing and collections which includes an aggressive litigation process against businesses who intentionally default on their loan obligations. As a result of these changes, the allowance for loan losses decreased 53% to $1.5 million in the fourth quarter 2017 compared to the same period in 2016.
• Excluding non-recurring costs, operating expenses decreased 20.3% to $9.0 million for the year ended December 31, 2017 as compared to $11.3 million for the previous year. During the quarter ended September 30, 2016, the Company adopted a plan to reduce operating expenses. The Company achieved its target of quarterly operating costs of $2.0 million to $2.2 million on a normalized basis in the third quarter. Operating costs, excluding non-recurring costs, were further reduced to $1.8 million in the fourth quarter of 2017, representing a decrease of 28.2% compared to the same period in 2016. The Company anticipates average quarterly operating expenses of approximately $1.6 million on a normalized basis in 2018.
• IOU closed on the year ended December 31, 2017 with a net loss of $4.5 million, or $0.05 per share, compared to a net loss of $4.8 million, or $0.08 per share, for the year ended December 31, 2016.
• IOU closed on the year ended December 31, 2017 with an adjusted net loss of $3.1 million, which excludes certain non-cash and non-recurring items, compared to an adjusted net loss of $3.2 million during the same period in 2016. In the fourth quarter 2017, IOU attained $0.1 million of adjusted earnings compared to an adjusted net loss of $1.4 million during the same period in 2016.

OUTLOOK

IOU remains well placed at the forefront of the fintech revolution that is democratizing access to capital for small businesses. IOU expects to grow adjusted earnings throughout 2018.

• The Company will continue to enhance its proprietary, next-generation technology and algorithms that evaluate and price credit risk. IOU will also continue to closely monitor the performance of its loan portfolio and capture operational efficiencies. The Company anticipates average quarterly operating expenses of approximately $1.6 million on a normalized basis in 2018.
• The Company intends to grow loan originations by:
• Continuing to identify, recruit and partner with business loan brokers;
• Forming new strategic partnerships with entities such as banks and small business suppliers and leveraging their relationships with small businesses to add new customers;
• Expanding its product offering to allow it to serve small businesses whose needs are not met by its current products;
• Investing in direct marketing and sales; and
• Continuing its expansion into Canada.

IOU's financial statements and management discussion & analysis for the year ended December 31, 2017 have been filed on SEDAR and are available at www.sedar.com.

CONFERENCE CALL

The Company will hold a conference call at 4:30 p.m. (EDT) on May 1, 2018, to discuss its financial results. The dial-in number to access the conference call from Canada and the United States is 1 (888) 231-8191 (toll-free), conference ID: 6167767.

About IOU Financial Inc.
IOU Financial Inc. 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, salons, gas stations, auto repair shops, and restaurants. In a unique approach to lending, IOU Financial's advanced, automated application and approval system accurately assesses applicants' financial realities, with an emphasis on day-to-day cash flow trends. IOU Financial allows these businesses to apply for six, nine, twelve, fifteen and eighteen-month term loans of up to US$300,000 to qualified U.S. applicants ($100,000 in Canada) within a few business days, with affordable charges favorable to cash-flow management. Its 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.

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.

SOURCE IOU Financial Inc.