Company highlights strong year over year growth in loan
originations, return to profitability on an annual basis, and
provides update on Post-Pandemic Growth Plan.
- Total loan originations reached US$161.5
million in 2021, representing an increase of more than 90.3%
over 2020 and surpassing all previous annual loan origination
figures in the history of the Company.
- Total loans under management increased 72.5% in 2021 to
$119.5 million over 2020
($69.3 million) driven primarily by
an increase of 109.4% in the servicing portfolio over 2020.
- Servicing and fee revenue increased 89.8% to $10.1 million in 2021 from $5.3 million in 2020.
- Continued to support the future growth in loan originations as
evidenced by an increase in adjusted operating expenses of 15.9% to
$11.0 million in 2021 compared to
$9.5 million in 2020.
- Achieved net earnings of $3.7
million on an IFRS basis in the year.
MONTREAL, April 27,
2022 /CNW/ - 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, 2021.
"IOU Financial delivered on its 3 main goals for 2021: growing
loan origination volumes to pre-pandemic levels, achieving a return
to profitability on an annual basis, and laying the groundwork for
scalable growth for years to come," said Robert Gloer, President and CEO. "We are
proud of the team's performance in 2021 and even more excited about
the opportunities ahead."
IOU Financial originated a total of US$161.5 million in loans in 2021, representing
an increase of 90.3% over the previous year, surpassing
pre-pandemic levels and establishing a new high-water mark in its
12-year history. The Company attributes a significant portion
of its strong growth in loan originations to its successful
transition from a balance sheet strategy (under which the Company
traditionally funded loans to its balance sheet) to a marketplace
strategy under which new loan originations are primarily being sold
to institutional purchasers.
"IOU's marketplace strategy allowed the Company to originate
significantly more volume in 2021 than would have previously been
possible under the financial limitations of a balance sheet
strategy," added Gloer. "This has proven to be a win-win that
has in turn given us the financial latitude to repurchase
approximately $3.7 million in
convertible debentures in 2021 and invest in strategic growth
initiatives as part of our Post-Pandemic Growth Plan."
Operating expenses, on an adjusted basis, increased 15.9% to
$11.0 million in 2021 vs. 2020 by
investing in innovation and resources as part of its Post-Pandemic
Growth Plan.
"Our investments in strategic growth areas were designed to lay
the groundwork for future growth and scalability, and we already
started to see the initial benefits of these investments in 2021.",
added Gloer.
The Company's Post-Pandemic Growth Plan, first announced as part
of its Q1 2021 Financial Results, is based on 3 strategic pillars
that lay the groundwork for future scalability and growth:
- Technology innovation: The company announced major
developments for its proprietary IOU360 platform including the
introduction of new service portals for internal reporting and
legal services in 2021 as well as the upcoming development of new
service portals for Brokers, Product Development, Merchants and
Investors, all designed to support greater efficiencies and the
long-term scalability of the business.
- Product expansion: The Company launched its first new
lending product, the IOU Financial Cash-Back Loan, in August 2021 – an industry first resulting in
increased brand awareness and demand; the IOU Financial 24-Month
Loan – launched in November 2021 –
further supports these goals. 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 the economic
recovery through both channels. ZING Funding was launched in June
of 2020 and contributed $1.1 million
in referral fee revenue in 2021.
IOU Financial's strong 2021 loan originations and progress
towards its strategic goals demonstrate the Company's ability to
continue capitalizing on the economic recovery and create value for
investors by capitalizing on its marketplace strategy and investing
in areas that support scalable growth.
OUTLOOK
In the first quarter ending March 31,
2022, IOU originated US$59.6
million in loans and set a new quarterly loan origination
record in its history. 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
The Company continues to focus on its marketplace strategy
allowing it to accelerate loan origination growth. This strategy
has the impact of placing more emphasis on servicing and fee
revenue over interest revenue and cost of revenue associated with
holding loans as part of a loan portfolio. Interest revenue
decreased as the principal loan portfolio balance continues to wind
down while servicing and fee revenue increased consistent with the
increase in loan origination volume as well as the increase in the
servicing portfolio.
Due to the wind down of the loan portfolio, there is nominal
interest expense associated with the financing credit facilities in
2021 as IOU's two financing credit facilities were terminated in
December 2020 and October 2021, respectively. Interest expense has
decreased in 2021 as the Company was able to use its financial
resources to repurchase approximately $3.7
million its convertible debentures in 2021.
In addition, the marketplace strategy will render the provision
for loan losses irrelevant and IOU will continue to focus on cash
collections on the remaining portfolio which may give rise to
reversals in the provision for loan losses and recoveries of loans
previously written off.
Please refer to the table below for adjustments made to IFRS
gross revenue and operating expenses in order to better reflect the
actual operating performance of the business.
Loan Originations: In 2021, the Company funded
US$161.5 million in loans (2020: US
$84.9 million), representing an
increase of 90.3% over the same period last year.
Interest Revenue: Interest revenue decreased 91.7% to
$1.0 million in 2021 from
$11.8 million in 2020. The principal
balance of the loan portfolio decreased 82.2% to $2.6 million in 2021 from $13.5 million in 2020 consistent with the
transition to the marketplace strategy.
Servicing and fee revenue: Servicing and fee
revenue increased 89.8% to $10.1
million in 2021 from $5.3
million in 2020. More specifically, servicing and fee
revenue growth in 2021 over 2020 is attributable to the
following:
- Service fees earned on the servicing portfolio increased
$2.3 million or 61.4% over 2020 as
the average servicing portfolio increased by 47.3% over 2020.
- Referral fee revenue earned by IOU's retail distribution
operation (ZING Funding) increased to $1.1
million in 2021 from $0.5
million in 2020 as it facilitated approximately US$15.3 million in loan origination volume in
2021, representing an increase of 34.2% over 2020 (US$11.4 million).
- Administrative and other fees earned on the servicing portfolio
increased $0.5 million to
$0.9 million in 2021 over 2020.
- Accelerated recognition of transaction costs on loans sold.
This represents income earned on loans after taking into
consideration loan origination sales costs. This income category
increased by $1.4 million or 202.5%
over 2020 as loan origination volume increased to US$161.5 million in 2021 from US$84.9 million in 2020.
Adjusted gross revenue: Adjusted gross revenue decreased
to $11.1 million (2020: $17.1 million), representing a decrease of 35.3%
for the year ended December 31, 2021
compared to the same period in 2020.
Adjusted Net Revenue: Increased 68.9% to
$10.7 million in 2021 compared to
$6.3 million in 2020 due mainly to an
increase in servicing and fee revenue of 89.8% and to decreases in
interest expense of 54.3% to $1.3
million (2020: $2.8 million)
and net recovery for loan losses of $0.9
million in 2021 compared to a net provision for loan losses
in 2020 of $8.0 million. These
decreases are attributable to the transition to a marketplace
strategy which led to the discontinued use of financing credit
facilities and a reduction of convertible debentures.
Adjusted Operating Expenses: Increased 15.9% to
$11.0 million in 2021 compared to
$9.5 million in 2020 mainly due to an
increase in wages and salaries and data and IT costs as the Company
continues to support the future growth in loan originations by
investing in innovation and resources as part of its 2021
Post-Pandemic Growth Plan .
Adjusted Net Loss: IOU closed on its year ended
December 31, 2021 with an adjusted
net loss of $0.3 million compared to
adjusted net loss of $3.2 million for
the year ended December 31, 2020.
IFRS Net Earnings (Loss): IOU closed on its year
ended December 31, 2021 with IFRS net
earnings of $3.7 million, or
$0.04 per share, compared to IFRS net
loss of $(2.8) million or
$(0.03) per share for the same period
in 2020.
Adjusted and IFRS net earnings (loss)
|
|
For the year ended
December 31
|
2021
$
|
2020
$
|
Interest revenue
|
986,092
|
11,815,590
|
Servicing fees
|
6,048,422
|
3,746,601
|
Referral fee revenue
|
1,069,145
|
520,432
|
Administrative and other fees
|
895,769
|
362,772
|
Accelerated recognition of transaction costs on loans
sold
|
2,078,030
|
686,937
|
Adjusted Gross
Revenue
|
11,077,458
|
17,132,332
|
|
|
|
Interest expense
|
1,278,677
|
2,800,963
|
Net
provision (Recovery of) for loan losses
|
(925,548)
|
7,983,173
|
Cost of
Revenue
|
353,129
|
10,784,136
|
|
|
|
Adjusted Net
Revenue
|
10,724,329
|
6,348,196
|
Adjusted operating
expense
|
11,033,325
|
9,523,257
|
Income tax
expense
|
17,912
|
-
|
Adjusted Net
Loss
|
(326,908)
|
(3,175,061)
|
Adjusted Net Loss
per Share
|
(0.00)
|
(0.03)
|
|
|
|
Adjusted Net
Loss
|
(326,908)
|
(3,175,061)
|
Non-cash gain on sales
of loans
|
7,018,006
|
2,857,268
|
Non-cash amortization
of servicing asset
|
(5,177,397)
|
(3,004,811)
|
Non-cash stock-based
compensation
|
(150,213)
|
(137,345)
|
Non-recurring gain
-net
|
2,358,580
|
640,474
|
Net Earnings (Loss)
per IFRS
|
3,722,068
|
(2,819,475)
|
Net Earnings (Loss)
per Share
|
0.04
|
(0.03)
|
IOU's financial statements and management discussion &
analysis for the year ended December 31,
2021 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 and Canada. 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, 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.
- 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 which is given at
different times and prices and non-recurring costs and gains which
affects operating results only periodically.
- Non-Recurring Gain-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.