IOU Financial Inc. Releases Financial Results for the Three-Month Period Ended March 31, 2018

• Net earnings on an IFRS basis and adjusted net earnings amounted to $0.8 million in Q1 2018, the second consecutive quarter with positive earnings for the Company.
• Loan originations increased 11.2% to $24.5 million compared to the same period in 2017.
• Provision for loan losses decreased 50.6% to $0.9 million in Q1 2018 driven by measures taken to reduce defaults.
• Opex decreased 23.1% to $1.9 million for the first quarter of 2018.

MONTREAL, May 24, 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 three-month period ended March 31, 2018.

"Following the positive results in the fourth quarter of 2017, IOU has delivered even stronger results in the first quarter of 2018. This is a testament to the measures taken to bring down loan defaults and control costs. IOU expects to continue to grow loan originations and generate profits over the coming quarters," said Phil Marleau, CEO.

FINANCIAL HIGHLIGHTS

• Loan originations for the first quarter ended March 31, 2018 increased 11.2% to US$24.5 million versus originations of US$22.1 million for the same period last year.
• As of March 31, 2018, IOU's total loans under management amounted to approximately $64.2 million as compared to $66.8 million in 2017. The principal balance of the loan portfolio amounted to $32.2 million compared to $43.8 million in 2017. The principal balance of IOU's servicing portfolio (loans being serviced on behalf of third-parties) amounted to approximately $32.0 million compared to $23.0 million in 2017.
• IOU recorded gross revenue during the first quarter of $4.4 million versus $4.3 million for the same period last year.
• Interest expense during the three-month period ended March 31, 2018 decreased by 11.6% to $812,535, compared to $918,658 the previous year. The decrease is attributable to a decrease in borrowings under the credit facility.
• Provision for loan losses (net of recoveries) decreased by 50.6% to $954,329 for the three-month period ended March 31, 2018. This decrease is primarily attributable to lower defaults by borrowers as well as by the smaller size of the loan portfolio. The improvement in the provision for loan losses (net of recoveries) is a result of changes made in 2017 in the Company's lending policies and in the loan servicing and collection process, which includes an aggressive litigation strategy against businesses who default on their loan obligations.
• Operating expenses decreased 23.1% to $1.87 million for the three-month period ended March 31, 2018 as compared to $2.44 million for the previous year. The decrease is attributable to the Company's plan to reduce operating expenses initially introduced in the third quarter of 2016. The plan resulted in reduced headcount thereby lowering employee compensation costs, a decrease in marketing costs and reduced professional fee expenses due to vendor contract re-negotiations.
• IOU closed its first quarter 2018 with positive net earnings of $797,198, or $0.01 per share, compared to a net loss of $1.0 million or $(0.01) per share during the same period of 2017.
• IOU closed its first quarter 2018 with positive adjusted earnings of $804,088, which excludes certain non-cash and non-recurring items, compared to an adjusted net loss of $0.7 million in the first quarter of 2017. The $1.5 million improvement in adjusted net earnings is principally due to the $1 million decrease in the provision for loan losses as well as to the $0.6 million in reduced operating expenses in the quarter compared to the same period last year and to the $0.1 million increase in gross revenue.

OUTLOOK

IOU remains well placed at the forefront of the fintech revolution that is democratizing access to capital for small businesses. IOU expects to continue to grow loan originations and generate profits 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, capture operational efficiencies and keep costs under control.
• 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 quarter ended March 31, 2018 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 Tuesday, May 29, 2018, to discuss its financial results. The dial-in number to access the conference call from Canada and the United States is 1 [phone] (toll-free), conference ID: 8878074.

CORPORATE UPDATE

IOU has formalized its employment arrangements with each of its CEO, CFO and COO (each, an "Executive") by entering into written agreements that formalize their current employment terms. Such employment agreements contain restrictive covenants such as non-competition and non-solicitation clauses. The employment agreements also set forth additional provisions with respect to termination, constructive dismissal, severance and change of control of the Executives, including the payment of between 6 and 18 months of salary, bonus and benefits in the event of a termination within 12 months after a change in control.

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.

Philippe Marleau, Chief Executive Officer, [phone] ext. 225; David Kennedy, Chief Financial Officer, [phone] ext. 278

Related Links

https://ioufinancial.com/en-ca/