IOU FINANCIAL INC. REPORTS FINANCIAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2021 AND BREAKS ALL-TIME RECORD IN ANNUAL LOAN ORIGINATIONS

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 /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 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)

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.

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.

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.