IOU Financial Inc. Releases Financial Results for the Year Ended December 31, 2018

• IOU posts annual IFRS net earnings and adjusted net earnings of $2.7 million in 2018.
• Loan originations increased 36.8% to US$125.0 million during the year ended December 31, 2018.
• Total loans under management increased 55.5% to $95.9 million in 2018.
• Provision for loan losses (net of recoveries) decreased 43.1% to $4.7 million in 2018.
• Reduced operating costs (excluding non-recurring costs) by 5.5% to $8.5 million for the year ended December 31, 2018.

MONTRÉAL, April 25, 2019 /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, 2018.

"IOU delivered strong loan origination growth and earnings performance in 2018, representing an important milestone for the Company. We are proud to have achieved this success and remain committed to our strategy for profitable growth," said Phil Marleau, CEO.

FINANCIAL HIGHLIGHTS

• In the third quarter of 2016, the Company adopted a plan to i) target long-term origination growth of 25% to 30%; ii) reduce operating expenses; and iii) achieve profitability. In 2018, the Company achieved annual loan origination growth of 36.8%; reduced operating expenses (excluding non-recurring costs) by approximately 5.5% and achieved profitability.
• In 2018, the Company funded approximately US$125 million in loans (2017: US $91.3 million), representing an increase of 36.8% over the same period last year. This was significantly above the Company's long-term outlook for annual loan origination growth of 25% to 30%.
• As of December 31, 2018, IOU's total loans under management amounted to $95.9 million as compared to $61.7 million in 2017. The principal balance of the loan portfolio amounted to $34.5 million compared to $33.0 million in 2017. The principal balance of IOU's servicing portfolio (loans being serviced on behalf of third-parties) amounted to $61.4 million compared to $28.6 million in 2017.
• IOU recorded gross revenue during the year ended December 31, 2018 of $19.2 million versus $17.4 million for the same period last year, representing an increase of 10.1%. The increase is principally due to an increase in net gains recognized on the sale of loans which amounted to $3.9 million (2017: $2.1 million) following the increase in loans sold to third parties. Other fees and servicing income also increased to $1.8 million (2017: $0.9 million). Interest income amounted to $13.5 million for the year ended December 31, 2018 (2017: $14.4 million), representing a decrease of 6.4% over the previous year as a result of a decrease in the average size of the loan portfolio balance in 2018 compared to 2017.
• Interest expense during the year ended December 31, 2018 amounted to $3.4 million, compared to $3.7 million the previous year, representing a decrease of 8.8%. The decrease is primarily attributable to a decrease in borrowings under the credit facility.
• Provision for loan losses (net of recoveries) amounted to $4.7 million for the year ended December 31, 2018 (2017: $8.2 million), representing a decrease of 43.1%. The decrease is primarily attributable to a decrease in defaults by borrowers as well as a lower average loan portfolio in 2018 compared to 2017. The improvement in the provision for loan losses (net of recoveries) is a result of changes made in 2017 to the Company's lending policies including an aggressive litigation strategy against businesses who default on their loan obligations.
• Excluding non-recurring costs, operating expenses decreased 5.5% to $8.5 million for the year ended December 31, 2018 as compared to $9.0 million for the previous year due principally to lower professional fees and data services expenses as a result of vendor contract re-negotiations and cancellations following the Company's plan to reduce operating expenses initially adopted in the third quarter of 2016. Operating expenses in the three-month period ended December 31, 2018 amounted to approximately $2.4 million and was above the Company's anticipated average quarterly operating expense figure of $2.0 million previously stated due primarily to higher amortization of transaction costs related to the credit facility and higher legal and accounting expenses. However, the adjusted operating expense ratio (measured as total operating expenses less stock-based compensation relative to average loans under management) decreased from 11.8% in the fourth quarter of 2017 to 10.5% in the fourth quarter of 2018.
• IOU closed on the year ended December 31, 2018 with IFRS net earnings of $2.7 million, or $0.03 per share, compared to a net loss of $4.5 million or $0.05 per share for the year ended December 31, 2017.
• IOU closed the year ended December 31, 2018 with adjusted net earnings of $2.7 million, compared to an adjusted net loss of $3.1 million during the same period in 2017. The $5.8 million improvement in adjusted earnings is principally due to better loan quality, as demonstrated by the $3.5 million decrease in the provision for loan losses, as well as to the increase in gross revenue compared to the same period last year.

OUTLOOK

IOU remains well placed at the forefront of the fintech revolution that is democratizing access to capital for small businesses. IOU is committed to its strategy of profitable growth.

The Company is enhancing its proprietary, next-generation technology and algorithms that evaluate and price credit risk. IOU continues to closely monitor the performance of its loan portfolio, capture operational efficiencies and keep costs under control.

The Company intends to grow loan originations by:

• Identifying, recruiting and partnering 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.

These efforts are key to achieving the Company's long-term outlook for loan origination growth of 25% to 30% annually.

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

NORMAL COURSE ISSUER BID

IOU Financial has received conditional approval from the TSX Venture Exchange (the "Exchange") to make a Normal Course Issuer Bid ("NCIB"). Pursuant to the NCIB, IOU may purchase for cancellation, from time to time, as it considers advisable, up to 2,000,000 of its common shares ("Shares") over a 12-month period, representing approximately 2.3% of the 87,825,309 Shares outstanding as of April 24, 2019.

The NCIB will commence on May 1, 2019 and will terminate on April 30, 2020, or on such earlier date on which purchases under the NCIB have been completed or at the option of IOU. Purchases of Shares under the NCIB will be made through the facilities of the Exchange at the market price of the Shares at the time of acquisition. Leede Jones Gable Inc. will conduct the NCIB on behalf of IOU and Shares will be purchased at the discretion of senior management of IOU. Shareholders may obtain a copy of the Notice to Make a Normal Course Issuer Bid, without charge, by contacting the Company.

The Board of Directors of IOU believes that the current and recent market prices of IOU's Shares do not give full effect to their underlying value and that, accordingly, the purchase of Shares will increase the proportionate Share interest of, and be potentially advantageous to, all remaining shareholders. The NCIB purchases will also provide easier access to liquidity to IOU shareholders who would like to dispose of their Shares.

CONFERENCE CALL

The Company will hold a conference call at 4:30 (EDT) on April 29, 2019, 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: 3498494.

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, restaurants, trade contractors and manufacturing companies. 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$500,000 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.