IOU REPORTS Q1 2022 FINANCIAL RESULTS
IOU Financial reported a strong Q1 2022, achieving a record loan origination of $59.6 million, up 135.5% compared to Q1 2021. This aligns with their strategic shift to a marketplace model, enhancing profitability with net earnings exceeding $1.1 million, a 61.8% increase from Q4 2021. Servicing and fee revenue surged by 133.0% to $3.9 million. The company aims for loan originations between $220 million and $260 million for 2022, reflecting a robust post-pandemic growth strategy.
- Record loan origination of $59.6 million in Q1 2022, up 135.5% YoY.
- Net earnings increased to $1.1 million from a loss of $0.1 million in Q1 2021.
- Servicing and fee revenue rose to $3.9 million, a 133.0% increase YoY.
- Adjusted operating expense ratio improved to 10.7% from 13.7% in Q1 2021.
- Adjusted operating expenses increased by 43.1% YoY, which could pressure margins if growth slows.
Company more than doubles loan originations vs. Q1 2021, generates over
- Loan originations reached an all-time quarterly record US
$59.6 million in Q1 2022, representing an increase of20.2% over Q4 2021 (and an increase of135.5% vs. Q1 2021). - Loans under management of
$140.6 million in Q1 2022, representing an increase of17.7% over Q4 2021 (and driven by an increase of18.8% in the servicing portfolio). - Servicing and fee revenue of
$3.9 million in Q1 2022, representing an increase of22.6% over Q4 2021 (and an increase of133.0% over Q1 2021). - Adjusted operating expenses of
$3.5 million in Q1 2022, representing an increase of19.2% over Q4 2021 (and an increase of43.1% over Q1 2021). - Net earnings of
$1.1 million in Q1 2022, representing an increase of61.8% over Q4 2021 (and vs. a net loss of$0.1 million in Q1 2021), on an IFRS basis.
MONTREAL, May 18, 2022 /PRNewswire/ - 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, 2022.
"IOU Financial continues to deliver on its promise to stakeholders by growing loan originations and increasing profitability while continuing to invest the scalability of its operations and technology," said Robert Gloer, President and CEO. "IOU's record Q1 loan originations made it possible to continue investing in strategic growth initiatives while reducing corporate debt through the repurchase of an additional
IOU Financial originated a record US
Loans under management increased, on average,
The Company continued to advance on its Post-Pandemic Growth Plan, first announced as part of its Q1 2021 Financial Results, based on three strategic pillars designed to support scalability and growth:
- 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.
- 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. The Company launched its first new lending product, the IOU Financial Cash-Back Loan, in August 2021 and the IOU Financial 24-Month Loan in 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 the economic recovery through both channels.
IOU Financial's strong Q1 2022 loan originations and progress towards its 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.
OUTLOOK
For all of 2022, the Company is targeting loan originations in the range of US
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 no interest expense associated with the financing credit facilities in Q1 2022 as IOU's two financing credit facilities were terminated in December 2020 and October 2021, respectively. Interest expense has also decreased in the quarter as the Company was able to use its financial resources to repurchase
In addition, the marketplace strategy will render the provision for loan losses less significant as it relates to loans held on the balance sheet. IOU will continue to focus on cash collections on the remaining loan 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. These adjustments serve as another measure of actual operating performance of the business.
Loan Originations: In Q1 2022, the Company funded US
Servicing and fee revenue: Servicing and fee revenue increased
- Servicing fees earned on the servicing portfolio increased
$1.3 million or125.6% over Q1 2021 (and increased31.4% over Q4 2021). The average servicing portfolio increased by113.7% quarter over quarter (and increased18.1% over Q4 2021). - Referral fee revenue earned by IOU's retail distribution operation (ZING Funding) increased to
$0.5 million in Q1 2022 from$0.1 million in Q1 2021 as it facilitated approximately US$6.0 million in loan origination volume in Q1 2022, representing an increase of220.4% over Q1 2021 (US$2.8 million ). On a sequential basis, referral fee revenue increased25.8% over Q4 2021. - Administrative and other fees earned on the servicing portfolio increased
$0.1 million to$0.2 million in Q1 2022 over Q1 2021. - 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
$0.5 million or140.7% quarter over quarter as loan origination volume increased135.5% in the same period. On a sequential basis, this income category increased29.8% over Q4 2021 as loan origination volume increased20.2% in Q1 2022 vs Q4 2021.
Adjusted Gross Revenue: Adjusted gross revenue increased to
Adjusted Net Revenue: Increased
Adjusted Operating Expenses: Adjusted operating expenses increased
Adjusted Net Earnings (Loss): IOU closed on its year first quarter ended March 31, 2022 with an adjusted net earnings of
IFRS Net Earnings (Loss): IOU closed on its first quarter ended March 31, 2022 with IFRS net earnings of
Adjusted and IFRS net earnings (loss) | ||
For the three-month period ended March 31 | 2022 $ | 2021 $ |
Interest revenue | 35,777 | 591,612 |
Servicing fees | 2,419,477 | 1,072,420 |
Referral fee revenue | 460,531 | 143,716 |
Administrative and other fees | 237,965 | 133,059 |
Accelerated recognition of transaction costs on loans sold | 782,808 | 325,185 |
Adjusted Gross Revenue | 3,936,558 | 2,265,992 |
Interest expense | 238,834 | 324,432 |
Net recovery of loan losses | (261,404) | (42,200) |
Cost of Revenue | (22,570) | 282,232 |
Adjusted Net Revenue | 3,959,128 | 1,983,760 |
Adjusted operating expense | 3,466,133 | 2,421,476 |
Adjusted Net Earnings (Loss) | 492,995 | (437,716) |
Adjusted Net Earnings (Loss) per Share | 0.00 | (0.00) |
Adjusted Net Earnings (Loss) | 492,995 | (437,716) |
Non-cash gain on sales of loans | 2,403,838 | 1,102,681 |
Non-cash amortization of servicing asset | (1,695,792) | (723,998) |
Non-cash stock-based compensation | (24,597) | (20,431) |
Non-recurring cost-net | (59,040) | - |
Net Earnings (Loss) per IFRS | 1,117,404 | (79,464) |
Net Earnings (Loss) per Share | 0.01 | (0.00) |
IOU's financial statements and management discussion & analysis for the three-month period ended March 31, 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 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
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.
- 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.
- 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 ratios are calculated on a two-point basis, using December and period end balances, presented on an annualized basis
- Non-Recurring Cost-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.
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