IOU REPORTS Q2 2022 FINANCIAL RESULTS
IOU Financial Inc. reported strong financial results for Q2 2022, with net earnings of $0.9 million, marking five consecutive quarters of positive earnings. Year-to-date loan originations soared by 98.5% to $118.6 million, while Q2 originations reached $59 million, a 71.3% increase year-over-year. The company also improved its adjusted operating expense ratio to 10.2%. Revenue from servicing and fees surged 110.3% to $4.5 million, showcasing robust growth and scalability.
- Net earnings of $0.9 million in Q2 2022, marking five consecutive quarters of profitability.
- Loan originations in the first half of 2022 increased by 98.5% year-over-year, totaling $118.6 million.
- Servicing and fee revenue increased 110.3% to $4.5 million in Q2 2022.
- Adjusted operating expense ratio improved to 10.2%, down from 14.0% in Q2 2021.
- Interest revenue decreased as the principal loan portfolio continues to wind down.
Company highlights strong net earnings and
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- Second quarter loan originations totalled US
$59.0 million , representing an increase of71.3% over Q2 2021. - Loans under management of
$147.5 million in Q2 2022, representing an increase of4.9% over Q1 2022 (and driven by an increase of5.2% in the servicing portfolio). - Servicing and fee revenue of
$4.5 million in Q2 2022, representing an increase of14.8% over Q1 2022 (and an increase of110.3% over Q2 2021). - Adjusted operating expense ratio decreased to
10.2% in Q2 2022 compared to14.0% for Q2 2021, reflecting the impact of increased scale of the business on a year over year basis. - Net earnings of
$0.9 million in Q2 2022 highlighting 5 consecutive quarters of positive earnings.
MONTREAL, Aug. 26, 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- and six-month periods ended June 30, 2022.
"IOU Financial continues to deliver on its promise to stakeholders by significantly increasing net earnings while continuing to invest the scalability of its operations and technology," said Robert Gloer, President and CEO. "Q2 originations were partially affected by normal seasonality but also included a new all-time company record of US
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. In Q2 the Company started beta testing its new Broker Portal, including the industry leading QuickSubmit tool that will allow preferred brokers to drag and drop their loan applications directly into the IOU360 platform and reduce transaction time by over
95% . - 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 launched in August 2021, and the IOU Financial 24-Month Loan launched 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 first half 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 the first half of 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 Q2 2022, the Company funded US
Servicing and Fee revenue: Servicing and fee revenue increased
Adjusted Gross Revenue: Adjusted gross revenue increased to
Adjusted Net Revenue: Increased
Adjusted Operating Expenses: Adjusted operating expenses increased
The Adjusted Operating Expense Ratio, which is a measure of the Company's operating efficiency, decreased from
Adjusted Net Earnings (Loss): IOU closed on its second quarter ended June 30, 2022 with an adjusted net earnings of
IFRS Net Earnings (Loss): IOU closed on its second quarter ended June 30, 2022 with IFRS net earnings of
Adjusted and IFRS net earnings (loss) | ||||
Three-month | Six-Month | |||
For the period ended June 30 | 2022 | 2021 | 2022 | 2021 |
$ | $ | $ | $ | |
Interest revenue | 24,166 | 232,598 | 59,943 | 824,210 |
Servicing & fee revenue | 4,478,737 | 2,129,388 | 8,379,518 | 3,803,768 |
Adjusted Gross Revenue | 4,502,903 | 2,361,986 | 8,439,461 | 4,627,978 |
Interest expense | 204,653 | 352,568 | 443,487 | 677,000 |
Net recovery of loan losses | (113,373) | (388,020) | (374,777) | (430,221) |
Cost of Revenue | 91,280 | (35,453) | 68,710 | 246,779 |
Adjusted Net Revenue | 4,411,623 | 2,397,439 | 8,370,751 | 4,381,199 |
Adjusted operating expense | 3,656,165 | 2,675,605 | 7,122,298 | 5,097,082 |
Adjusted Net Earnings (Loss) | 755,458 | (278,167) | 1,248,453 | (715,883) |
Adjusted Net Earnings (Loss) per Share | 0.01 | (0.00) | 0.01 | (0.00) |
Adjusted Net Earnings (Loss) | 755,458 | (278,167) | 1,248,453 | (715,883) |
Non-cash gain on sales of loans | 2,310,113 | 1,586,130 | 4,713,951 | 2,688,811 |
Non-cash amortization of servicing asset | (2,076,237) | (1,193,981) | (3,772,029) | (1,917,979) |
Non-cash stock-based compensation | (24,597) | (80,588) | (49,194) | (101,019) |
Non-recurring cost-net | (41,293) | (22,640) | (100,333) | (22,640) |
Net Earnings (Loss) per IFRS | 923,444 | 10,754 | 2,040,848 | (68,710) |
Net Earnings (Loss) per Share | 0.01 | 0.00 | 0.02 | (0.00) |
IOU's financial statements and management discussion & analysis for the three- and six-month periods ended June 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
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 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 six-month ratios are calculated on a three-point basis, using December, March 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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