CORPORATE PRESENTATION SEPTEMBER 2016 TSX-V LISTED ISSUER (IOU) FU FUELING THE GROW OWTH OF OF SM SMALL BUSI SINESS SS
FORWARD LOOKING STATEMENTS Certain information set forth in this presentation may contain forward-looking statements. Forward-looking statements are statements, other than statements of historical fact, that address or discuss activities, events or developments that IOU Financial expects or anticipates may occur in the future. These forward-looking statements can be identified by the use of words such as "anticipates", "believes", "estimates", "expects", "may", "plans", "projects", "should", "will", or the negative thereof or other variations thereon. These forward-looking statements reflect management's current views and are based on certain assumptions including assumptions as to future economic conditions and courses of action, as well as other factors management believes are appropriate in the circumstances. Such forward-looking statements are subject to risks and uncertainties and no assurance can be given that any of the events anticipated by such statements will occur or, if they do occur, what benefit IOU Financial will derive from them. A number of factors could cause actual results, performance or developments to differ materially from those expressed or implied by such forward looking statements, including, but not limited to risks inherent in growing a new business, dependence on third-party service providers, competition, regulatory risk, dependence on key personnel, risks related to rapid growth of IOU Financial, security and confidentiality risk, risk related to inability to attract borrowers and lenders, technological development risk, IT disruptions, maintenance of client relationships, litigation risk, volatility of stock price, and other factors that are beyond its control. Additional information concerning these and other factors can be found beginning on page 16 under the heading "Risks and Uncertainties" in IOU Financial's management's discussion and analysis dated August 25, 2016, which is available under IOU Financial's profile on SEDAR at www.sedar.com. IOU Financial does not undertake any obligation to update publicly or to revise any such forward-looking statements, unless required by applicable legislation or regulation. 2
CORPORATE OVERVIEW $ 366.5 65 3
TRACK RECORD OF EXCEPTIONAL GROWTH CUMULATIVE LOAN ORIGINATIONS Q2 2016: $366,498,684 $350 $300 Originations (US$mm) $250 $200 $150 $100 $50 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 2012 2013 2014 2015 2016 4
SMALL BUSINESS LENDING MARKET INDUSTRY TRENDS $1,800 19% $1,600 18% $1,400 17% $1,200 16% $1,000 15% $800 14% $600 13% $400 12% $200 11% $0 10% All Domestic C&I Loans to U.S. Addressees ($ Billions) SMB Share (%) 8
MASSIVE MARKET OPPORTUNITY TOTAL US SMB CURRENT MARKET MARKET SHARE IOU Loans CAD Unmet Demand Oustanding as of $ 80.8M for SMB Lines of Q2 2016 Credit (1) US $80B - US $120B US $186 B Commercial and Industrial Loan Balances at Notes: FDIC – Insured Institutions under $250,000 (2) (1) Oliver Wyman, 2013 (2) FDIC, Q2 2015 6
TARGET CUSTOMER Type of Customer Restaurant, Retail Shop, Grocery Shop… Geographic Distribution Across all US States and Canada. Time in Business >1 Year in Business 7
LOAN PRODUCT * Loan size in Canada: $5,000 - $100,000 8
MULTI-CHANNEL DISTRIBUTION STRATEGY $137.6 M WHOLESALE* LOAN ORIGINATION $96.3 M $62.1 M $52.5 M $49. M $10.9 M (US$mm) 2012 2013 2014 2015 6M 2015 6M 2016 $8.8 M RETAIL/REFERRAL** LOAN ORIGINATION $4.7 M $3.1 M $3.0 M $.7 M $.5 M (US$mm) 2012 2013 2014 2015 6M 2015 6M 2016 *Wholesale: Borrowers are sourced via relationships with third-party business loan brokers. ** Retail/Referral: Borrowers are sourced directly via strategic partnerships and other methods. 9
CHANNEL MIX Channel Mix | 2014 Channel Mix | 2015 Channel Mix | 6M 2016 3.2% 8.1% 6.0% 96.8% 94.0% 91.9% 10
GROWTH STRATEGY Form New Strategic Partnerships Expand Product Offering Increase Relationship With Existing Customers 11
TM IOU RISKLOGIC SCORE IOU RiskLogic INPUT VARIABLES Score™ A B C D PROPRIETARY ANALYTICS PLATFORM E F Monitoring and reporting performed on IOU RiskLogic Score™ with best in class business intelligence tools. 12
IOU RISKLOGIC SCORE ™ VS. OTHER SCORES Cumulative Lift Chart (Lorenz Curve) Commentary 100% Considerable lift (predictive 90% power) versus Personal or 80% Business Generic Credit Cumulative of Bad Captured (%) Scores. 70% 60% For the same reject rate, the company can eliminate 50% significantly more bad 40% loans. 30% For the same level of risk, 20% the company can fund 10% significantly more loans. 0% 0% 20% 40% 60% 80% 100% Reject Rate (%) Business Credit Score Personal Credit Score IOU RiskLogic Score 2.0 Baseline 13
STRONG UNDERWRITING PERFORMANCE OVER TIME Net Charge-Off Rate* 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2014 2015 6M 2016 *Net Charge-Off Rate: Represents net charge-offs as a percentage of average outstanding loans on balance sheet, annualized. 14
FULLY INTEGRATED TECHNOLOGY PLATFORM 15
SHIFTING TO A PRIMARILY BALANCE-SHEET FUNDED MODEL Loans Outstanding Loans Outstanding Loans Outstanding 2014 2015 Q2 2016 25% 30% 46% 54% 70% 75% 16
NEW SOURCE OF FUNDING CREDIT FACILITY SUMMARY LENDER INTEREST RATE MidCap Financial (an entity that is The interest rate on the facility is LIBOR managed by Apollo Capital plus 8.50%. If the facility is increased to Management, L.P., a subsidiary of $37.5 million, the interest rate will be Apollo Global Management, LLC) LIBOR plus 8.20%, and if the facility is increased to $50 million, the interest rate will be LIBOR plus 7.75%. MATURITY ACCORDION INITIAL COMMITMENT April 22 nd , 2019 Expandable to US $50 US$25 million. million at IOU’s request and lender’s acceptance. • LIBOR – 1 Month Rate at 0.44%. 17
LOAN ORIGINATION & LOANS UNDER MANAGEMENT Loan Originations | Annual Loan Originations | Quarter $80 $160 Millions Millions $60 $120 (US$) (US$) $40 $80 $20 $40 $0 $0 2012 2013 2014 2015 6M 2015 6M 2016 Loans Under Management | Annual Loans Under Management | Quarter $84 $120 Millions Millions $80 $90 $76 $60 $30 $72 $0 $68 2012 2013 2014 2015 Q2 2015 Q2 2016 18
ADJUSTED GROSS REVENUES & ADJUSTED EBITDA Adjusted Gross Revenues | Annual Adjusted Gross Revenues | Quarter $16 $8 Millions Millions $12 $6 $4 $8 $2 $4 $0 $0 6M 2015 6M 2016 2012 2013 2014 2015 Adjusted EBITDA | Annual Adjusted EBITDA | Quarter $500 $0 Thousands Thousands $0 ($100) ($500) ($200) ($1,000) ($300) ($1,500) 6M 2015 6M 2016 2012 2013 2014 2015 *Adjusted Gross Revenues: Represents revenues excluding certain non-cash items such as the gain on servicing asset and amortization of the servicing asset. **Adjusted EBITDA: Represents net loss before taxes excluding interest expense and certain non-cash items such as amortization and depreciation, stock based compensation, gains on servicing asset, amortization of servicing asset as well as certain non-recurring expenses. 19
PROVEN MANAGEMENT TEAM PH PHIL MARLEAU RO ROBERT RT GLOER R DAVID DA D KENNEDY DY PAUL HAMILTON PA MA MAYCO QUIROZ CEO & Director COO CFO CTO Treasurer LU LUIS ROCHA MA MADELINE WADE JE JEFF TURNER BRIAN STUPP BR MARK SCHREWS MA VP Analytics VP Operations VP Credit & Compliance VP Marketing & Retail VP Wholesale 20
INVESTMENT HIGHLIGHTS MASSIVE SMALL MULTIPLE PROPRIETARY CREDIT BUSINESS LENDING DISTRIBUTION SCORING MODEL MARKET CHANNELS FUNDING MODEL – PROVEN MANAGEMENT FULLY-INTEGRATED VALUE CREATION TEAM TECH PLATFORM OPPORTUNITY 21
CAPITALIZATION SUMMARY VALUATION $24.7M 1.82X MARKET CAP (CAD) $0.40 SHARE PRICE (C$) P/SALES TRADING DATA $0.75 $0.40 52 WEEK HIGH $0.33 52 WEEK LOW 20 DAY VWAP as of: 6/10/2016 22
Thank You For more information, please reach out today. Phil Marleau| CEO pmarleau@ioufinancial.com 514-789-0694 x225
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