In case anyone missed the CEO Letter to Investors!
They really made things happen in Q3! See below.
November 24, 2021
Dear shareholders:
2021 is a pivotal year for IOU Financial Inc. (“IOU” or “the Company”) in its 12-year history of funding small businesses. I am pleased to address our Q3 2021 financial results released on November 18th and highlight our progress.
Throughout 2021, IOU Financial has been focused on maximizing its exposure to the economic recovery with 2 clear goals:
bringing loan origination volumes back to pre-pandemic levels and
returning to profitability on an annual basis.
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Earlier this year, the Company outlined plans to achieve scale by migrating to a marketplace strategy to facilitate growth in loan originations, as well as a Post-Pandemic Growth Plan to invest in product innovation, distribution channels and its proprietary IOU360 technology platform.
In Q3, IOU delivered on its first goal and achieved a total of US$52.2 million in loan originations. This represents a year-over-year increase of 183.1% and establishes a new high-water mark in the history of the Company. New all-time loan origination records were established during this quarter in both the month of July (US$18.5 million) and September (US$19.6 million) and is a testament to the Company’s ability to grow along with the economic recovery.
This growth has been enabled in large part by IOU’s migration to a marketplace strategy under which new loan originations are primarily being sold to institutional investors instead of being carried on the Company’s balance sheet. This has provided IOU with the ability to maximize its exposure to the economic recovery by reaching loan origination volumes that would have been beyond the limitations previously imposed by a balance sheet strategy.
The marketplace strategy has also liberated resources allowing IOU to further reduce its corporate debt through the repurchase of $3.2 million in convertible debentures as at November 4, 2021. In addition, IOU Financial has continued to invest in its Post-Pandemic Growth Plan announced as part of its Q1 Financial Results.
With regards to the second goal of returning to profitability on an annual basis, I am pleased to report that the Company delivered adjusted net earnings of $0.4 million in Q3 as well as $3.1 million on an IFRS basis.
Under its Post-Pandemic Growth Plan, the Company continues to advance in 3 areas of strategic focus designed to drive its operational scale:
Technology innovation: Through our established network of thousands of brokers in North America, the IOU360 platform has processed over 170,000 applications from small businesses and has funded over US$1B in loan originations to date. Major efforts are currently underway to enhance the efficiency and flexibility of the IOU360 platform over the near term which will provide the necessary scale to IOU’s loan origination volume.
Product expansion: The Company launched the IOU Financial Cash-Back Loan in August - an industry first, and the first in a series of new lending products intended to increase brand awareness and attract and expand our network of quality broker partners. Further product innovations will be enabled by future investments in the Company’s IOU360 platform.
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.
IOU’s migration to a marketplace strategy requires us to focus on specific key performance indicators in order to provide meaningful insight to our activities in Q3:
Loan Origination Volume reached US$52.2 million in Q3 2021, representing a sequential increase of 51.5% (over Q2 2021) and a year-over-year increase of 183.1% (over Q3 2020). The increase is due to a combination of market demand and IOU Financial’s transition to a marketplace strategy.
Loans Under Management amounted to $103.9 million, representing a year-over-year increase of 33.7% vs. Q3 2020.
Adjusted Operating Expense Ratio stood at 13.3%, an increase of 2.7 percentage points over Q3 2020. The increase is 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 .
Servicing Portfolio Yield in Q3 stood at 8.4%, an increase of 1.6 percentage points over Q3 2020 (6.8%).
IOU ’s strong third quarter growth in loan originations and return to profitability reinforces our commitment to the Post-Pandemic Growth Strategy. That being said, we must remain aware of the risks of supply chain disruptions, labor shortages and uncertainty around the Delta variant of COVID-19 as described by the Federal Reserve’s comments as found in the The Beige Book – October 2021. We remain cautiously optimistic that the economic recovery will continue to fuel the demand for quick and easy access to small business funding.
Finally, in early November 2021, IOU achieved a significant milestone in its history and surpassed US$1 billion in total loan originations since the Company’s inception. This important achievement demonstrates the value of providing trusted alternatives to banks in providing access to capital to small businesses across America.
IOU Financial is committed to build on its track record by investing in technology, products and distribution strategies in order to provide funding solutions to small business owners. We look forward to sharing our updates to our strategic plan in early 2022 with you!
Robert Gloer
President and CEO
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