NPF.U NextPoint Financial Inc

HURST, Texas, Dec. 15, 2021 /CNW/ - NextPoint Financial Inc. (TSX: NPF.U) (OTC Pink: NACQF) ("NextPoint" or the "Company"), a one-stop financial services destination providing tax services and loans for underserved consumers and small businesses, announced today the filing of its financial results for the three months and nine months ended September 30, 2021.  NextPoint closed its initial public offering on August 4, 2020 and completed its qualifying acquisition comprised of Liberty Tax, a leading provider of tax preparation services, and LoanMe, an online lender and loan marketer, on July 2, 2021.

Selected Financial Information ($US)

• $36.1 million of Consolidated Revenue for the Three Months Ended September 30, 2021
• Total Assets of $684.6 million as of September 30, 2021
• Total Shareholders' Equity of $240.5 million as of September 30, 2021
• Net cash used in operating activities of $18.5 million for the Nine Months Ended September 30, 2021
• Consolidated Net Loss of ($59.6) million for the Three Months Ended September 30, 2021
• Adjusted EBITDA* of ($59.6) million for the Three Months Ended September 30, 2021

Management Commentary
Brent Turner, CEO of NextPoint said, "Despite some near-term growth and operational challenges experienced in our LoanMe business, we remain confident in the strength, reach, and growth potential of the financial services platform we are building at NextPoint. Liberty Tax tax return volumes per U.S. office are up 7% for the first nine months of 2021 compared to last year, demonstrating the strength of the Liberty brand and business model. We believe we have identified and addressed the issues behind LoanMe's recent underperformance and are confident in our ability to deliver meaningful growth and operating improvements in 2022 and beyond."

"We continue to see a broad range of synergies and growth potential in leveraging the strengths of our brands, footprint, team and technology platform, as well as from expanding the breadth of our solutions to better attract, serve and retain customers. In addition to internal growth initiatives, we are investing significant time and resources in a disciplined, opportunistic M&A program to build on our capabilities and customer reach. We are focusing on opportunities with complementary products and services that should be accretive to cash flow and our bottom line."

"Additionally, 375 storefront offices of the newly combined NextPoint organization have elected to offer a newly developed bookkeeping service, exceeding management expectations for the period. Also, 230 Liberty offices now offer a consumer loan product branded Liberty Tax and Loan, with an additional 25 offices slated to begin offering this loan product by January 2022."

"Another compelling development is our introduction of a 'banking as a service' platform we call DeepBlue, this product went live on Dec 10^th and is available to all 1.6 million of our Liberty customers. DeepBlue is a subscription-based service delivered through a proprietary, customizable mobile app. DeepBlue includes range of services such as a MasterCard branded debit card, mobile check deposit, peer-to-peer payments, high-yield savings accounts, spending control tools, investing as a service, a complimentary tax filing solution and other value-added features. We are very excited about this opportunity to build our base of services and strengthen our customer relationships and expect DeepBlue to be an important growth driver in 2022 and beyond."

"NextPoint's vision is to bring an expanding base of financial services solutions to the vast market of consumers and small and medium business enterprises (SMEs), that fall outside of the focus of traditional financial institutions. This market segment is very large, with over 30 million SME businesses in the U.S. and Canada, along with roughly 85 million lower-income tax filers in the U.S. We have found these market segments are either ignored by larger financial institutions or are addressed by limited solutions that do not serve the full needs of each customer. Our goal is to build a growing base of interrelated financial services solutions, delivered at a competitive price, to help these customers get to the 'NextPoint' in their financial futures."

Liberty Tax:
At the end of the third quarter, Liberty Tax operations and financial performance are ahead of management's expectations for 2021 including:

• Reported a loss in the third quarter due to the seasonality of the U.S. and Canadian tax filing periods, consistent with historic performance.
• Tax returns processed per U.S. office increased 7% year-over-year.
• Operating expenses as a percentage of revenue are expected to be lower in 2021 than anticipated, primarily due to better expense control and higher revenue.

LoanMe:
The following factors have impacted the Company's LoanMe operations for Q3 2021:

• LoanMe transferred sub-servicing of the majority of its loan portfolio during the first quarter of 2021 in order to secure expected financial and operational efficiencies however, transition challenges negatively impacted loan performance and loan servicing costs. NextPoint management has taken corrective actions, including establishing enhanced oversight and control functions at the loan sub-servicer.
• Additional operating efficiencies are expected to benefit results in future periods.
• Brokered mortgage volume is expected to be materially less than the amount estimated for 2021, given the unfavorable dynamics and pricing in this loan production channel. As a result, the Company has made the decision to close its brokered mortgage division effective December 31, 2021.
• Loan originations are expected to be materially lower than anticipated for 2021 due to a competitive lending environment, the impact of management focus being diverted from loan production to servicing challenges, and lower than anticipated cross selling of LoanMe products within the Liberty customer base.
• NextPoint also announced today that Jonathan Williams has resigned as its President of Lending and as a member of its Board of Directors effective immediately. The Company has appointed Eric Norona (currently Chief Operating Officer of NextPoint) to also serve as President of Lending.

NextPoint:
Overall, the following factors contributed to the Company's results for Q3 2021:

• Previously anticipated cost savings across Liberty Tax and LoanMe operations are no longer expected primarily due to fewer Liberty Tax locations cross-selling LoanMe products and fewer LoanMe products sold per store overall.
• Additionally, NextPoint's third quarter results were negatively affected by fewer loan originations, higher provision for loan losses, and higher selling, general, and administrative expenses.

Outlook
NextPoint has made substantial progress on its integration efforts and based on the continued strength of its operations, the Company believes it remains well positioned for sustained, long-term growth. On an ongoing basis, the Company reviews its financial forecasts and operating metrics to assess the reasonableness of specific developments and market and operating factors.

In connection with this ongoing review, the Company announced today that despite a stronger than anticipated performance in its Liberty Tax business, challenges within its LoanMe consumer loan business have adversely affected NextPoint's ability to achieve its previously published forward-looking guidance for each of 2021, 2022 and 2023. The transfer of LoanMe's sub-servicing of the majority of its loan portfolio during the first quarter of 2021, a changing competitive lending environment, the impact of management focus being diverted from loan production to sub-servicing challenges, lower than anticipated demand for its products, and NextPoint determining to close its brokered mortgage origination division are the primary factors that adversely affected the forward looking results.

The following assumptions underlying the previously published guidance with respect to LoanMe, Liberty Tax and NextPoint are no longer valid:

• Anticipated number of loan originations;
• Anticipated brokered mortgage volumes;
• Value of expected average unpaid principal loan balances;
• Amount of total operating expenses;
• Value of pre-tax total cost saving synergies; and
• Number of Liberty Tax locations cross-selling LoanMe products and number of LoanMe products sold per store overall.

Accordingly, NextPoint has determined to withdraw all previously published forward looking financial guidance for the years 2021, 2022 and 2023 including that which was contained in its Investor Presentation dated February 22, 2021, its Analyst Day Presentation dated April 27, 2021, and its Prospectus dated June 3, 2021 and currently does not expect to provide such guidance going forward.

NextPoint's interim financial statements for the three months and nine months ended September 30, 2021 and earlier periods, along with other regulatory documents are filed on the System for Electronic Document Analysis and Retrieval ("SEDAR") www.sedar.com where they may be viewed by shareholders and other interested parties.

About NextPoint Financial Inc. (www.nextpointfinancial.com)
NextPoint Financial Inc. is an all-inclusive marketplace for financial services empowering hardworking and underserved consumers and small businesses. NextPoint Financial Inc. operates through Liberty Tax and LoanMe.

Forward Looking Statements
This news release may contain "forward-looking statements" (as defined under applicable securities laws). These forward-looking statements relate to future events or future performance including with respect to the Company's objectives and priorities for fiscal year 2021 and beyond, and strategies or further actions with respect to the Company, the Company's business operations, financial performance and condition.

Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", "target", "intend", "could" or the negative of these terms or other comparable terminology. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and many factors could cause actual events or results to differ materially from the results discussed in the forward-looking statements. In evaluating forward-looking statements, readers should specifically consider various factors that may cause actual results to differ materially from any forward-looking statement. These factors include, but are not limited to, market and general economic conditions and the risks and uncertainties discussed in the section entitled "Risk Factors" in the Company's final prospectus dated June 3, 2021.

The forward-looking statements contained in this news release are presented for the purpose of assisting investors in understanding business and strategic priorities and objectives of the Company as at the periods indicated and may not be appropriate for other purposes. Forward-looking statements contained in this news release are not guarantees of future performance and, while forward-looking statements are based on certain assumptions that the Company considers reasonable, actual events and results could differ materially from those expressed or implied by forward-looking statements made by the Company. Prospective investors are cautioned to consider these and other factors carefully when making decisions with respect to the Company and not place undue reliance on forward looking statements. Circumstances affecting the Company may change rapidly. Except as may be expressly required by applicable law, the Company does not undertake any obligation to update publicly or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.

SOURCE NextPoint Financial Inc.