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IOU Financial Inc. Releases Financial Results for the Three and Nine-Month Period Ended September 30, 2019 and Provides Corporate Update

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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 nine-month period ended September 30, 2019.

“We continue to execute on our strategy of profitable growth given strong loan origination and revenue performance in the third quarter of 2019. This represents the Company’s seventh consecutive quarter of positive earnings” said Phil Marleau, CEO.

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.
  • In the third quarter of 2019, the Company funded US$41.4 million in loans (2018: US $36.1 million), representing an increase of 14.5% over Q3 2018. During the nine-month period ended September 30, 2019, the Company funded $112.7 million in loans (2018: US $89.9 million), representing an increase of 25.4% over the same period last year. This was driven by the introduction of new loan products, geographic expansion into Canada as well as the addition of several new strategic partnerships in line with the Company’s growth strategy. This was in line with the Company’s long-term outlook for annual loan origination growth of 25% to 30%.
  • As at­ September 30, 2019, total loans under management amounted to $108.0 million (2018: $84.7 million), representing an increase of 27.4% year over year and is attributable to the growth in loan originations of 25.4% in the first nine months of 2019 compared to the same period in 2018. The principal balance of the loan portfolio amounted to $54.5 million (2018: $30.2 million), representing an increase of 80.5% and consistent with the Company’s strategy to retain more loans on its balance sheet. The principal balance of IOU Financial’s servicing portfolio (loans being serviced on behalf of third parties) amounted to $53.4 million (2018: $54.5 million), representing a decrease of 2.0%.
  • Adjusted gross revenue increased 46.8% to $6.8 million for the three-month period ended September 30, 2019 compared to Q3 2018 ($4.6 million) due to an increase in interest revenue and servicing income.
  • Interest revenue increased 58.7% to $5.2 million in Q3 2019 compared to the same period in 2018 as a result of the increase in the average commercial loans receivable balance of 67.5% in Q3 2019 compared to Q3 2018. The increase in the interest revenue will lag behind the increase in the average commercial loans receivable balance as loans originated in the latter part of the quarter do not contribute interest revenue for the full quarter. In addition to the timing of the loan origination, other factors can impact the calculation of the portfolio yield such as the number of business days in the period and currency translation.
  • Servicing income increased 21.4% to $1.2 million in Q3 2019 compared to Q3 2018 as a result of the increase in the average servicing portfolio of 9.5% in Q3 2019 compared to Q3 2018 as well as a 0.9 percentage point increase in the servicing portfolio yield from 8.1% in Q3 2018 to 9.0% in Q3 2019. Quicker payoffs and other factors have had a positive effect on the servicing portfolio yield.
  • Adjusted gross revenue increased to $17.4 million (2018: $13.3 million), representing an increase of 30.5% for the nine-month period ended September 30, 2019 compared to the same period in 2018.
  • Interest expense during the three-month period ended September 30, 2019 increased 24.3% to $1.1 million (2018: $0.9 million). The increase is attributable to an increase in average borrowings of 40.7% in Q3 2019 compared to Q3 2018 and offset by a 1.3 percentage point decrease in the Cost of Borrowing Rate to 10.4%. In an effort to lower its Cost of Borrowing Rate, the Company closed a new credit facility in the first quarter of 2019 at a rate which is substantially lower than the current Cost of Borrowing Rate. Specifically, the rate on the new credit facility was 6.64% at September 30, 2019 or approximately 3.8 percentage points less than the current Cost of Borrowing Rate. As the company continues to increase borrowings from the new credit facility, the overall Cost of Borrowing Rate is expected to drop in the future. Interest expense during the nine-month period ended September 30, 2019 increased to $2.9 million (2018: $2.5 million), an increase of 16.4% compared to the same period last year.
  • Provision for loan losses during the three-month period ended September 30, 2019 increased to $2.4 million (2018: $1.3 million). The increase is attributable to an increase in the average commercial loans receivable balance in the third quarter of 2019 of 67.5% compared to the same period last year and an increase in the Provisional Credit Loss Rate to 18.2% in Q3 2019 compared to 17.1% in Q3 2018 due to a slight increase in delinquencies related to loans originated in Q2 2019. The Company expects the Provisional Credit Loss Rate to vary from quarter to quarter. The Provisional Credit Loss Rate during the nine-month period ended September 30, 2019 was 17.0%. The Company expects the Provisional Credit Loss Rate to average approximately 16.5%. The Provisional Credit Loss Rate is a representation of the expected credit loss within the lifetime of the loan and includes a provision to all current loans (Stage 1 provision). The growth in the principal balance of the loan portfolio contributed approximately 1.0% to 2.0% to the Provisional Credit Loss Rate compared to the Net Credit Loss Rate. Provision for loan losses increased to $5.7 million for the nine-month period ended September 30, 2019 (2018: $3.3 million).
  • The Net Credit Loss Rate increased from 11.1% in the third quarter of 2018 to 12.6% in the third quarter of 2019. The Company expects the Net Credit Loss Rate to vary from quarter to quarter. The Net Credit Loss Rate during the nine-month period ended September 30, 2019 was 13.2%. The Company expects the Net Credit Loss Rate to average approximately 15%. The Company uses the Net Credit Loss Rate as an alternative measure to the Provisional Credit Loss Rate as it excludes the effect of provisions (reductions) in the allowance for expected credit losses during the period which may not coincide with the actual timing of charge-offs and recoveries.
  • Adjusted operating expenses increased 26.8% or $0.5 million to $2.6 million in Q3 2019 (2018: $2.1 million) due primarily to reinvestments in staff and technology, however the Adjusted Operating Expense Ratio, which is a measure of the Company’s operating efficiency, decreased to 10.1% in the third quarter of 2019 (2018: 10.5%) as the Company increased its loans under management at a greater rate than operating expenses. For the nine-month period ended September 30, 2019, adjusted operating expenses increased 23.8% to $7.4 million (2018: $6.0 million) and the Adjusted Operating Expense Ratio decreased to 9.9% in the first nine months of 2019 from 11.2% in the first nine months of 2018. Operating expenses remained relatively flat at $2.2 million for the three-month period ended September 30, 2019 compared to $2.1 million in the same period in 2018. The reinvestments in staff and technology were offset by the non-recurring gain relating to the revaluation of convertible debentures of $0.5 million in Q3 2019 following the extension of the convertible debentures from December 31, 2020 to December 31, 2023.
  • IOU closed on its third quarter ended September 30, 2019 with adjusted net earnings of $769,906 compared to adjusted net earnings of $468,659 for the third quarter ended September 30, 2018. IOU closed on the nine-month period ended September 30, 2019 with adjusted net earnings of $1,544,843, compared to adjusted net earnings of $1,791,184 for the same period last year.
  • IOU closed on its third quarter ended September 30, 2019 with IFRS net earnings of $1,000,614, or $0.01 per share, compared to IFRS net earnings of $600,593 or $0.01 per share for the same period in 2018. IOU closed on the nine-month period ended September 30, 2019 with IFRS net earnings of $1,305,740, or $0.01 per share, compared to IFRS net earnings of $2,250,580 or $0.03 per share for the same period last year.
  • Since the establishment of the NCIB on May 1, 2019, IOU repurchased for cancellation 1,222,000 common shares in the market for a total cost of $253,421.

Adjusted and IFRS net earnings

Three-Month

Nine-Month

For the period ended September 30

2019

$

2018

$

2019

$

2018

$

Interest revenue

5,165,303

3,254,520

12,663,112

9,926,771

Servicing & other income

1,634,082

1,378,742

4,752,084

3,421,113

Adjusted Gross Revenue

6,799,385

4,633,262

17,415,196

13,347,884

Interest expense

1,062,039

854,095

2,899,799

2,491,162

Provision for loan losses

2,367,101

1,327,017

5,712,484

3,323,455

Recoveries

(41,640)

(129,058)

(169,913)

(256,840)

Cost of Revenue

3,387,500

2,052,057

8,442,370

5,557,777

Adjusted Net Revenue

Adjusted operating expense

2,641,979

2,083,059

7,427,983

5,998,923

Income tax expense/(recovery)

29,487

Adjusted Net Earnings

769,906

468,659

1,544,843

1,791,184

Adjusted Net Earnings per Share

0.01

0.01

0.02

0.02

Adjusted Net Earnings

769,906

468,659

1,544,843

1,791,184

 Non-cash gain on sales of loans

734,264

1,088,475

2,356,397

2,490,685

 Non-cash amortization of servicing asset

(938,051)

(850,415)

(2,844,177)

(1,890,664)

 Non-cash stock-based compensation

(51,084)

(106,126)

(236,902)

(140,625)

 Non-recurring costs

485,579

485,579

Net Earnings per IFRS

1,000,614

600,593

1,305,740

2,250,580

Net Earnings per Share

0.01

0.01

0.01

0.03

OUTLOOK

IOU is committed to its strategy of profitable growth. IOU continues to closely monitor the performance of its loan portfolio, capture operational efficiencies and keep costs under control.  IOU is also committed to its strategy of building a resilient funding model. In line with this objective, IOU continues to maintain diversified sources of institutional capital.

The Company intends to grow loan originations by:

    • Identifying, recruiting and partnering with business loan brokers;
    • Forming new strategic partnerships with entities such as banks and small business suppliers and leveraging their relationships with small businesses to add new customers;
    • Expanding its product offering to allow it to serve small businesses whose needs are not met by its current products;
    • Investing in direct marketing and sales; and
    • Continuing its expansion into Canada.

These efforts are key to achieving the Company’s long-term outlook for loan origination growth of 25% to 30% annually.

IOU’s financial statements and management discussion & analysis for the quarter ended September 30, 2019 have been filed on SEDAR and are available at www.sedar.com.

CONFERENCE CALL

The Company will hold a conference call at 4:30 (EDT) on November 18, 2019, 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: 1559245

CORPORATE UPDATE

The Company also announced today changes to its board of directors (the “Board”). Serguei Kozmine tendered his resignation as a director of the Company and the Board has appointed Lucas Timberlake to fill this Board vacancy.

Lucas Timberlake has been a Partner with Fintech Ventures Fund, LLLP, a financial technology-focused investment firm, since 2015. Since assuming his current role, Mr. Timberlake has held several board director positions with technology-enabled lending companies in the small business and real estate lending sectors, and currently serves on the board of directors for GROUNDFLOOR Finance. Previously, Mr. Timberlake was part of the investment team with Antarctica Capital, an international private equity firm focusing on real assets and insurance opportunities. Mr. Timberlake began his career as an investment banking analyst with Bank of America Merrill Lynch. Mr. Timberlake holds a Bachelor of Arts in Economics and Political Science from Columbia College of Columbia University.

“We thank Mr. Kouzmine for his services to the Board over these past years, and welcome Mr. Timberlake to IOU’s Board”, said Philippe Marleau, CEO.

 

SOURCE IOU Financial Inc.

Fintech

InfraRisk Expands Auto Financing Cooperation with Toyota Finance, Taurus Motor Finance

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InfraRisk Pty Ltd. (InfraRisk), a leading supplier of credit management solutions in Australia, today announced it has expanded cooperation in auto financing with Toyota Financial Services to Germany and Austria to facilitate its credit process when lending to dealerships and large fleet customers.

Toyota Financial Services is a wholly owned subsidiary of the world’s largest carmaker Toyota Motor Corp, specializing in offering a comprehensive financial services lineup that caters to customers’ diverse needs while strengthening the core auto sales finance operation.

Nicholas Davies, founder and CEO of InfraRisk, said, “These two new European deployments complement existing ones in Europe and Australia demonstrating our platform’s ability to operate across multiple geographies catering to a range of country specific factors including policies and languages, with modularity being the key architectural design.”

InfraRisk has been in partnership with the car loan provider since 2016, offering them a fully featured credit management platform – Credit Value Maximiser, or CVX, to Toyota’s broad base of customers.

The modularized tool is built around key origination functionalities, from profile to pricing, with each module connecting via defined APIs. By harnessing the power of big data analytics, cloud computing and artificial intelligence, InfraRisk’s auto financing solution will enable a more efficient and effective, as well as regulatory compliant credit process.

Meanwhile, InfraRisk announced today a new partnership with Taurus Motor Finance, a start-up car loans provider based in Australia with a digital, automated and real-time credit assessment and approval process. The lender is implementing InfraRisk’s cloud-based and intelligent CVX platform to facilitate its commercial lending business as it looks to scale up operations.

“InfraRisk’s deep experience in the auto finance sector along with the system readiness to manage the capture of industry specific data fields has grown us into a leading provider of auto finance SaaS solutions,” said Victor Li, head of Pintec International Business. “We will continue to invest in the ongoing research and development with committed efforts and build the platform into a smarter and more advanced tool catering to particular ecosystems.”

InfraRisk is a wholly owned subsidiary of Pintec Technology Holdings Limited (“Pintec”, Nasdaq: PT), a leading fintech solutions provider that specializes in intelligent retail finance covering point-of-sale installment loans, personal loans, SME loans, corporate and commercial segments, wealth management and insurance services.

 

SOURCE InfraRisk

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Montreal Fintech FlexPay Raises $6M from Impression Ventures and BMO Capital Partners

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FlexPay—which uses AI and machine-learning to help merchants recover lost revenues from declined transactions—is proud to announce they raised $6 million dollars, led by Impression Ventures, with participation from BMO Capital Partners, Anges Québec and strategic partners.

Credit card issuers report that 24% of recurring credit card transactions are falsely declined, costing online and telephone merchants $300 billion in lost sales and customers in the US alone. A false decline is a transaction that should have been approved, but wasn’t, for reasons out of the customers and merchants control. As the economy continues to shift to online and subscription-based revenue, this problem for customers and merchants is only getting bigger.

Using AI and machine-learning, FlexPay analyzes billions of transaction records to reverse-engineer exactly why risk-mitigation systems are falsely declining transactions. FlexPay then uses this real-time data to optimize credit card recovery and get valid transactions approved.

“Before learning about FlexPay, we didn’t know decline-salvage firms existed, to be honest. When we learned FlexPay’s fees are only charged on additional recovered customers, it was an easy decision for us at Masivo,” explains President Noam Egosi of Masivo Media. Following FlexPay’s integration, Masivo’s salvage rate rose from 10.0% to a staggering 42.4% average since March 2019, representing a 324% performance improvement. As a subscription business, this notable spike in recovery has also produced a 12% jump in precious LTV (Lifetime Value), and increased Masivo’s bottom-line profitability by 50%. “I tell everybody that will listen to us, to use FlexPay,” Egosi enthusiastically beams. “We’re big fans.”

“2019 was a year of significant in-roads,” reflects Darryl Hicks, CEO of FlexPay. “We surpassed the 2 million declines-processed mark and multiplied our integration points 8-fold, giving us access to a pool of 4 billion dollars in annual declines, 40,000 merchants and 80 million end-customers. The next logical step was to invite venture partners to join us and add their capital and expertise to accelerate us to help billions of end-customers get their transactions approved.”

Impression Ventures, based in Toronto and Montreal, led the round, marking their first investment in Montreal. “We believe FlexPay to be the best-in-class solution in a massively underserved market,” reflects Maor Amar, Managing Partner, “The company’s AI powered systems provide a solution to the large and rapidly growing problem of false credit card declines. FlexPay’s management team has an impressive entrepreneurial track record, in depth knowledge of this market and the passion and energy required to succeed. We are thrilled to join them on this journey.”

BMO Capital Partners added: “we are happy to support a talented team, committed to solving a real problem in the e-commerce space with state-of-the-art technology.”

“We thank our advisors, investors and board members for their ongoing help with FlexPay’s vision and traction,” adds CFO Laurent Binda. “Securing this specialized group of institutional investors gives us the capital, experience and network we need to accelerate our progress in solving falsely declined credit card transactions.”

 

SOURCE FlexPay

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35 Innovative Products, Services and Organizations Honoured International Innovation Awards 2019 in Singapore

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Photo source: globalbrandsmagazine.com

 

Enterprise Asia announced the winners of the International Innovation Awards 2019 in Singapore. Thirty five products, services and organizations are named as award winners from over 160 submissions.

Among the notable recipients of the InnoCube are AIA Malaysia, Taiwan’s HIWIN Technologies Corp., Singapore’s Olam International Ltd., Philippines’ Unilever, Indonesia’s PT MRT Jakarta, and United Arab Emirates’ Roads and Transport Authority.

“There are not conventional ‘innovations’. When we set out to identify winners of the IIA, our goal is to present a broad spectrum of innovations that could spur greater innovation in the recipients’ respective countries and industries. Just as innovation itself is continuously self-redefining, the awards are meant to promote continuity in innovation,” said Dato’ William Ng, president of Enterprise Asia.

“Innovation is moving faster than at any other point in history. Organizations cannot afford to rely on current practices and hope that they will work in the future. Organizations that fail to innovate are setting themselves up for failure,” Ng added.

“The award recipients also receive the InnoMark, the global certification for innovation. The InnoMark, like the International Innovation Awards, adopts our proprietary 8-Dimension of Innovation – which includes areas such as defendability and enforceability, impact and measurability as well as ideation and creativity. This will not only help define the best practice in innovation but provide a platform through which companies could showcase the results of their innovation,” shared Ng.

Organized annually by Enterprise Asia, the International Innovation Awards is among the most coveted global awards for innovation, and aims to recognize best innovations in the categories of Product, Service & Solution, and Organization & Culture. This year’s judging panel include Martin Daffner, founder of Innobrix, Professor Nadia Thalmann of Nanyang Technological University, Professor Natcha Thawesaengskulthai of Chulalongkorn UniversityMakoto Shibata of FINOLAB, The FinTech Center of Tokyo and Anna Simpson of Flux Compass.

In conjunction with International Innovation Awards 2019, Enterprise Asia also organized the International Innovation Summit 2019, themed “Innovation Trailblazers: Creating for Disruption”, the summit convened over 400 innovation experts, industry leaders and policy makers over three days. Following two successful editions in Shanghai and Macau, the Summit is held in Singapore and supported by the Singapore government this year.

At the opening of the Summit, organizing chairman and former minister of human resources of Malaysia, Dr. Fong Chan Onn said that the Asian economy need to reduce its reliance on foreign technology and develop its own in order to insulate its economies against global events such as the on-going US-China trade spat.

According to Dr. Fong, “Companies wedded to the old business model lose ground, and some are pushed out of business. Challengers that embrace innovation gain advantage and will take a dominant position in the market. The goal of this year’s International Innovation Summit is not only to discuss what to expect from the future of disruption in innovation, but also in defining the innovation culture that we must adopt for our organizations to compete in this revolution.”

“More importantly, governments must urgently work with the private sector to define the innovation agenda for their respective economy, and to work with other countries for a regional framework to advance the culture of innovation in each country,” Dr. Fong said.

This year’s keynote speakers include Koert Breebaart, vice president of SAP Asia; Ken Ding, head of product innovation of Samsung Electronics; Yat Siu, founder and CEO of Outblaze and Animoca Brands; Ajay Mohan of Intel Corporation and Jing Jang of Haier Group Corporation.

The International Innovation Awards 2019 is supported by Singapore Tourism Board through Singapore Exhibition & Convention Bureau, Eastern European Chamber of Commerce (Singapore), The Coordinating Secretariat for Science, Technology and Innovation (COSTI) under the Ministry of Science, Technology and Research, Sri Lanka, Malaysian Investment Development Authority (MIDA), Ministry of Energy, Science, Technology, Environment & Climate Change (MESTECC), Malaysia, Malaysian Global Innovation & Creativity Centre (MaGIC), National Institute of Entrepreneurship and Innovation (NIEI), Royal of Cambodia, Singapore Malay Chamber of Commerce & Industry (SMCCI) and Singapore-Thai Chamber of Commerce; Singapore Airlines as official airlines; Resorts World Sentosa as official venue partner; PR Newswire as news release distribution partner; and BusinessWorld, Commercial Times, Kumparan, SME Magazine, Techsauce, The Nation and Tuoi Tre News as the official media partners.

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