Company highlights record loan originations,
strong revenue growth and improved operating expense ratio
- Third quarter loan originations totalled US$74.2 million, representing an increase of
25.8% over Q2 2022 and 42.1% over Q3 2021. Year to date loan
originations of US$192.7 million
position the Company to deliver at the high end of our 2022
origination guidance range of US$220
million – US$260 million.
- Loans under management of $186.1
million in Q3 2022, representing an increase of 26.1% over
Q2 2022.
- Servicing and fee revenue of $4.8
million in Q3 2022, representing an increase of 7.4% over Q2
2022 (and an increase of 54.8% over Q3 2021).
- Adjusted operating expense ratio decreased to 11.2% in Q3 2022
compared to 13.0% for Q3 2021, reflecting the impact of increased
scale of the business on a year over year basis.
- Net earnings of $0.7 million in
Q3 2022 highlighting 6 consecutive quarters of positive
earnings.
MONTREAL, Nov. 18,
2022 /CNW/ - IOU FINANCIAL INC. ("We", "IOU"
or "the Company") (TSXV: IOU), a leading online lender to small
businesses (IOUFinancial.com), announced today its results for the
three- and nine-month period ended September
30, 2022.
"IOU Financial continues to grow revenues and invest in
scalability while reducing its adjusted operating expense ratio"
said Robert Gloer, President and
CEO. "We remain laser focused on scalability and growth while
maintaining consistent underwriting standards, and we expect to
build on this trend in the months and quarters to come."
IOU Financial originated a record US$192.7 million in loans in the nine months
ended September 30, 2022,
representing an increase of 72.2% over the same period in
2021. Originations were driven by healthy demand from
borrowers resulting in increased loan applications and continued
demand from investors seeking high quality loans.
Loans under management increased 79.1% (nine months 2022 vs.
nine months 2021), outpacing a 43.7% growth in operating expenses
(on an adjusted basis) and helping to reduce the Company's Adjusted
Operating Expense Ratio to 10.6% for the nine months ended
September 30, 2022 (vs. 13.5% for the
nine months ended September 30,
2021).
The Company continued to advance on its strategic growth
initiatives first announced in its Q1 2021 Financial Results:
- 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. The Company continued to advance on
the development of its next generation Broker Portal while
automating several new features to ensure compliance and increase
efficiency for loan processing.
- 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. On August 1, 2022 the
Company announced its largest term loan product to date, the IOU
Financial Premier PLUS term loan for loan amounts of up to
US$1.5 million and with terms up to
36 months. Previous product innovations include the IOU Financial
Cash-Back Loan (August 2021) and the
IOU Financial 24-Month Loan (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 growth
opportunities through both channels.
"IOU Financial's strong year to date loan originations and
progress towards our 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," added Gloer.
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
Record origination volume for the third quarter of 2022 has
resulted in higher loans under management. Collections have been in
line with expectations, and we have not seen significant increases
in delinquencies, defaults or loan modifications. The
combination of higher originations, higher loans under management
and collections in line with expectations has driven a 54.8%
increase in servicing and fee revenue for the third quarter of 2022
compared to the third quarter of 2021 and a 90.9% increase for the
nine-month period ended September 30,
2022 compared to the same period in 2021.
Higher origination volume and loans under management also
contributed to higher adjusted operating expenses in the third
quarter of 2022 compared to the third quarter of 2021, and we
continue to invest in growth and scalability. For example, we
have added to our sales and underwriting teams to accommodate
growth, we continue to invest in our IOU360 platform to better
support brokers, merchants, investors, and internal stakeholders,
and we have increased our marketing and advertising spending. As a
result, adjusted operating expenses have increased by 50.2% for the
third quarter of 2022 compared to the third quarter of 2021 and
43.7% for the nine-month period ended September 30, 2022 compared to the same period in
2021. However, we are also beginning to see the benefits of
increased scale resulting in a lower adjusted operating expense
ratio (11.2% for the third quarter of 2022 compared to 13.0% for
the third quarter of 2021).
Interest expense decreased $0.4
million or 37.3% in the nine- month period ended
September 30, 2022 compared to the
same period in 2021 due to the continuing reduction in convertible
debenture balance. For example, as of November 18, 2022, IOU has redeemed approximately
$6.1 million of its debentures since
Q2 2021 leaving an outstanding principal balance of approximately
$5.6 million.
IFRS earnings for the third quarter of 2022 were $0.7 million ($0.01
per share), compared to $3.1 million
($0.03 per share) for the third
quarter of 2021 (which included a non-recurring gain of
$1.6 million). Adjusted
earnings for the third quarter of 2022 were $0.1 million ($0.00
per share) compared to $0.4 million
($0.00 per share) for the third
quarter of 2021.
Adjusted and IFRS
net earnings
|
|
September
30,
|
|
|
For the three months
ended
|
2022
|
2021
|
Difference
|
Difference
|
|
$
|
$
|
$
|
%
|
Interest revenue
|
8,424
|
113,106
|
(104,682)
|
(92.6 %)
|
Servicing & fee revenue
|
4,809,724
|
3,106,442
|
1,703,282
|
54.8 %
|
Adjusted Gross
Revenue
|
4,818,148
|
3,219,548
|
1,598,600
|
49.7 %
|
Interest expense
|
188,527
|
331,750
|
(143,223)
|
(43.2 %)
|
Net
recovery of loan losses
|
(67,137)
|
(496,972)
|
429,835
|
(86.5 %)
|
Cost of
Revenue
|
121,390
|
(165,222)
|
286,612
|
(173.5 %)
|
|
|
|
|
|
Adjusted Net
Revenue
|
4,696,758
|
3,384,770
|
1,311,988
|
38.8 %
|
Adjusted operating
expense
|
4,549,047
|
3,027,744
|
1,521,303
|
50.2 %
|
Income tax
expense
|
80,967
|
-
|
80,967
|
100.0 %
|
Adjusted Net
Earnings
|
66,744
|
357,026
|
(290,282)
|
(81.3 %)
|
Adjusted Net
Earnings per Share
|
0.00
|
0.00
|
0.00
|
0.0 %
|
|
|
|
|
|
Adjusted Net
Earnings
|
66,744
|
357,026
|
(290,282)
|
(81.3 %)
|
Non-cash gain on sales
of loans
|
3,035,342
|
2,411,638
|
623,704
|
25.9 %
|
Non-cash amortization
of servicing asset
|
(2,369,530)
|
(1,210,107)
|
(1,159,423)
|
95.8 %
|
Non-cash stock-based
compensation
|
(90,479)
|
(24,597)
|
(65,882)
|
267.8 %
|
Non-recurring gain,
net
|
10,049
|
1,566,311
|
(1,556,262)
|
(99.4 %)
|
Net Earnings per
IFRS
|
652,126
|
3,100,271
|
(2,448,145)
|
(79.0 %)
|
Net Earnings per
Share
|
0.01
|
0.03
|
(0.02)
|
(66.7 %)
|
Adjusted and IFRS
net earnings (loss)
|
|
September
30,
|
|
|
For the nine months
ended
|
2022
|
2021
|
Difference
|
Difference
|
|
$
|
$
|
$
|
%
|
Interest revenue
|
68,367
|
937,316
|
(868,949)
|
(92.7 %)
|
Servicing & fee revenue
|
13,189,243
|
6,910,210
|
6,279,033
|
90.9 %
|
Adjusted Gross
Revenue
|
13,257,610
|
7,847,526
|
5,410,084
|
68.9 %
|
Interest expense
|
632,014
|
1,008,750
|
(376,736)
|
(37.3 %)
|
Net
recovery of loan losses
|
(441,914)
|
(927,193)
|
485,279
|
(52.3 %)
|
Cost of
Revenue
|
190,100
|
81,557
|
108,543
|
133.1 %
|
|
|
|
|
|
Adjusted Net
Revenue
|
13,067,510
|
7,765,969
|
5,301,541
|
68.3 %
|
Adjusted operating
expense
|
11,671,345
|
8,124,826
|
3,546,519
|
43.7 %
|
Income tax
expense
|
80,967
|
-
|
80,967
|
100.0 %
|
Adjusted Net
Earnings (Loss)
|
1,315,198
|
(358,857)
|
1,674,055
|
(466.5 %)
|
Adjusted Net
Earnings (Loss) per Share
|
0.01
|
(0.00)
|
0.01
|
100.0 %
|
|
|
|
|
|
Adjusted Net
Earnings
|
1,315,198
|
(358,857)
|
1,674,055
|
(466.5 %)
|
Non-cash gain on sales
of loans
|
7,749,292
|
5,100,449
|
2,648,843
|
51.9 %
|
Non-cash amortization
of servicing asset
|
(6,141,559)
|
(3,128,086)
|
(3,013,473)
|
96.3 %
|
Non-cash stock-based
compensation
|
(139,673)
|
(125,616)
|
(14,057)
|
11.2 %
|
Non-recurring
gain/(loss), net
|
(90,284)
|
1,543,671
|
(1,633,955)
|
(105.8 %)
|
Net Earnings per
IFRS
|
2,692,974
|
3,031,561
|
(338,587)
|
(11.2 %)
|
Net Earnings per
Share
|
0.02
|
0.03
|
(0.01)
|
(33.3 %)
|
IOU's financial statements and management discussion &
analysis for the three- and nine-month period ended September 30, 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. 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.
- Servicing and fee 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 and less interest
revenue. The Company uses servicing and fee revenue as another
measure of financial performance. Specifically, it comprises those
elements of revenue that most closely reflect the Company's shift
to a marketplace strategy, which emphasizes the Company's servicing
activities.
- 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 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 ratio is using the average of month end
balances over the period presented.
- Non-Recurring Gain/(Loss), 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.