IOU Financial Inc. Reports Financial Results for the Three-Month Period Ended March 31, 2021

Company highlights quarter-to-quarter growth in originations and strong cash position, announces Post-Pandemic Growth Plan.

• Loan origination volume grew to US$25.3 million in Q1 2021, representing an increase of 32.2% over Q4 2020.
• IOU continued to sell primarily all of its loan originations to institutional buyers.
• Increased corporate cash position to $11.5 million at March 31, 2021 from $9.9 million at December 31, 2020 .

MONTREAL , May 21, 2021 /CNW Telbec/ - 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, 2021 .

"IOU continues to emerge from the COVID-19 pandemic in a position of strength as evidenced by the sequential growth in loan originations in Q1 2021 over Q4 2020 and strong cash position at quarter end" said Phil Marleau , CEO. "We look forward to focussing on scalable quality growth supported by a forward-looking Post-Pandemic Growth Plan (PPGP)."

Funding Small Business Growth: IOU is well positioned for loan origination growth thanks in large part to the successful implementation of its Pandemic Resilience Plan. In the first quarter ended March 31, 2021 , the Company's loan originations amounted to US$25.3 million , representing an increase of 32.2%, on a sequential basis, over Q4 2020 loan originations as IOU gradually resumed lending to more businesses and geographical areas in the US. For the month of March 2021 , IOU originated in excess of US$12 million of loans, representing the highest monthly loan origination volume since the beginning of the COVID-19 pandemic.

Emerging from Q1 2021 in a Position of Strength: Despite the adjusted net loss for the quarter ended March 31, 2021 of $0.4 million , IOU's corporate cash position increased from $9.9 million at December 31, 2020 to $11.5 million at March 31 , 2021. This was achieved as IOU preserved cash collected from its loan portfolio and sold primarily all of its loan origination volume to institutional buyers in Q1 2021.

Investing for the Future: IOU will support the future growth in loan originations by investing in innovation and resources as part of its 2021 Post-Pandemic Growth Plan (PPGP), which is based on 3 pillars:

• Product expansion: The Company intends to expand its ability to support the post-pandemic growth of small businesses with innovative new funding products designed to meet a wider range of business needs.
• Product distribution: IOU is focussed on launching initiatives to expand its network of quality brokers, adding to its sales team, and investing in marketing and communications programs to generate new levels of awareness, differentiation and growth.
• Technology innovation: The Company is investing in its IOU360 technology platform to better support its network of brokers, merchants and employees with a frictionless user experience for all stakeholders.

FINANCIAL HIGHLIGHTS

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: For the three-month period ended March 31, 2021 , the Company funded US$25.3 million in loans (2020: US$38.1 million ), representing a decrease of 33.5% over the same period last year. The decrease in loan originations was a result of the COVID-19 pandemic whereby IOU modified its underwriting standards to cease lending to industries and geographical areas which were strongly impacted by COVID-19. On a sequential basis, loan originations increased 32.2% over Q4 2020 loan originations of US $19.1 million .

Adjusted Gross Revenue: Decreased to $2.3 million representing a decrease of 64.6% for the three-month period ended March 31, 2021 compared to the same period in 2020. The decrease in adjusted gross revenue is due primarily to the decrease in interest revenue of 88.1% year over year as a result of a decrease in the average commercial loan receivable balance of 81.3% in Q1 2021 as compared to Q1 2020.

Servicing and Other Income: Servicing and other income increased 16.7% to $1.7 million in Q1 2021 from Q1 2020 mainly due to an increase in fees earned as the Company increased its loan sales by 29.5% over Q1 2020.

Cost of Revenue: Decreased to $0.3M , down from $5.9M in Q1 2020, mainly due to a decrease in interest expense and provision for loan losses as the Company primarily sold all of its loan originations to institutional buyers.

Adjusted Operating Expenses: Decreased 7.1% to $2.4M in Q1 2021 compared to Q1 2020 due mainly to lower wages and salaries year over year.

Adjusted Net Loss: IOU closed on its three-month period ended March 31, 2021 with an adjusted net loss of $0.4 million compared to adjusted net loss of $2.1 million for the three-month period ended March 31, 2020 . On a per-share basis this represents an Adjusted Net Loss of $(0.00) per share, compared to an Adjusted Net Loss of ($0.02) per share for the same period in 2020.

IFRS Net Loss: IOU closed on its three-month period ended March 31, 2021 with an IFRS net loss of $0.1 million compared to an IFRS net loss of $2.1 million for the three-month period ended March 31 , 2020. On a per-share basis this represents an IFRS Net Loss of $(0.00) per share, compared to IFRS Net Loss of ($0.02) per share for the same period in 2020.

OUTLOOK

Despite the setback caused by the COVID-19 pandemic, the Company continues to work on bringing its loan origination volumes back to pre-pandemic levels and a return to profitability on an annual basis. For all of 2021, the Company is targeting loan originations in the range of US$165M to US$200M as compared to US$84.9M in 2020 and US$154.2M in 2019.

IOU's financial statements and management discussion & analysis for the quarter ended March 31, 2021 have been filed on SEDAR and are available at www.sedar.com .

CONFERENCE CALL

The Company will hold a conference call at 4:30 (EST) on May 26, 2021 , to discuss its financial results. The dial-in number to access the conference call from Canada and the United States is 1 (888) 231-8191 (toll-free), conference ID:1157639.

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 a proprietary technology platform that connects underwriters, merchants and brokers in real time, IOU Financial has become a trusted alternative to banks by underwriting US$898 million in loans to fund small business growth since 2009. 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.

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 it eliminates items that do not necessarily reflect how the Company is performing. 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 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 period-to-date ratios are calculated on a two-point basis, using December, and March period end balances, presented on an annualized basis. The Company uses adjusted operating expenses as it eliminates items that do not necessarily reflect how the Company is performing. 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.
• The calculation of adjusted net (loss) earnings is defined as net (loss) earnings for the period prepared in accordance with IFRS less: gain on sale of loans and non-recurring gains, plus: amortization of servicing assets, stock-based compensation and non-recurring costs.

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SOURCE IOU Financial Inc.

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