FU FUELING THE GROW OWTH OF OF SM SMALL BUSI SINESS SS AGENDA - - PowerPoint PPT Presentation

FU FUELING THE GROW OWTH OF OF SM SMALL BUSI SINESS SS

CORPORATE PRESENTATION JUNE 2016

TSX-V LISTED ISSUER (IOU)

AGENDA 1.Formal Business of Meeting 2.CEO’s Presentation to the Shareholders 3.Question and Answer Session

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FORMAL BUSINESS OF MEETING

• Chairman and Secretary
• Scrutineer
• Notice Of Meeting
• Voting Procedures
• Scrutineer’s Report
• Quorum
• Minutes Of Last Annual Meeting
• Reports Of Auditor And Annual Report
• Election Of Directors
• Appointment of the Auditor and Authorization to Fix their

Remuneration

• Approval of the Company’s Rolling Stock Option Plan
• Further Business and Termination of Meeting

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CEO’S PRESENTATION TO SHAREHOLDERS

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

• ther 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 May 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.

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CORPORATE OVERVIEW

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76

$334.7

TOTAL SMB LOANS FUNDED TO DATE

$0 $50 $100 $150 $200 $250 $300 $350 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

TRACK RECORD OF EXCEPTIONAL GROWTH

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Originations (US$mm)

CUMULATIVE LOAN ORIGINATIONS

2011 2012 2013 2014 2015 2016 Q1 2016: $334,721,263

INDUSTRY TRENDS

SMALL BUSINESS LENDING MARKET

10% 11% 12% 13% 14% 15% 16% 17% 18% 19% $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800

All Domestic C&I Loans to U.S. Addressees ($ Billions) SMB Share (%)

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MASSIVE MARKET OPPORTUNITY

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Unmet Demand for SMB Lines of Credit(1) Commercial and Industrial Loan Balances at FDIC – Insured Institutions under $250,000(2) IOU Loans Oustanding as of Q1 2016

TOTAL US SMB MARKET CURRENT MARKET SHARE

CAD $79.9M

US$186 B

US$80B -

US$120B

Notes: (1) Oliver Wyman, 2013 (2) FDIC, Q2 2015

CUSTOMER PROFILE

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*Based on incorporationdate

Type of Customer Geographic Distribution

Restaurant, Retail Shop, Grocery Shop… Across all US States. Average 11.3 years old*

Time in Business

LOAN PROFILE

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$.7 M $.5 M $3.1 M $8.8 M $1.5 M $2.3 M 2012 2013 2014 2015 3M 2015 3M 2016 $10.9 M $49. M $96.3 M $137.6 M $29.8 M $23.1 M 2012 2013 2014 2015 3M 2015 3M 2016

MULTI-CHANNEL DISTRIBUTION STRATEGY

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(US$mm) (US$mm)

RETAIL**

LOAN ORIGINATION

WHOLESALE*

LOAN ORIGINATION

*Wholesale: Borrowers are sourced via relationships with third-party business loan brokers. ** Retail: Borrowers are sourced directly.

90.9% 9.1% 94.0% 6.0% 96.8% 3.2%

CHANNEL MIX

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Channel Mix | 2014 Channel Mix | 2015 Channel Mix | Q1 2016

Strategic Partnerships Reach New Customers Expand Product Offering GROWTH STRATEGY

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IOU RISKLOGIC SCORE

TM

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IOU RiskLogic Score™

Monitoring and reporting performed on IOU RiskLogic Score™ with best in class business intelligence tools.

D E F C B A

PROPRIETARY ANALYTICS PLATFORM INPUT VARIABLES

IOU RISKLOGIC SCORE™ VS. OTHER SCORES

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Cumulative Lift Chart (Lorenz Curve) Commentary

Considerable lift (predictive power) versus Personal or Business Generic Credit Scores. For the same reject rate, the company can eliminate significantly more bad loans. For the same level of risk, the company can fund significantly more loans.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 20% 40% 60% 80% 100% Business Credit Score Personal Credit Score IOU RiskLogic Score 2.0 Baseline Cumulative of Bad Captured (%) Reject Rate (%)

STRONG UNDERWRITING PERFORMANCE OVER TIME

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7.50% 8.00% 8.50% 9.00% 9.50% 10.00% 2014 2015 Q1 2016

Net Charge-Off Rate*

*Net Charge-Off Rate: Represents net charge-offs as a percentage of average outstanding loans on balance sheet, annualized.

SHIFTING TO A PRIMARILY BALANCE-SHEET FUNDED MODEL

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75% 25% 70% 30% 68% 32%

Loans Outstanding 2014 Loans Outstanding 2015 Loans Outstanding Q1 2016

The interest rate on the facility is LIBOR plus 8.50%. If the facility is increased to $37.5 million, the interest rate will be LIBOR plus 8.20%, and if the facility is increased to $50 million, the interest rate will be LIBOR plus 7.75%.

NEW SOURCE OF FUNDING

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• LIBOR – 1 Month Rate at 0.44%.

CREDIT FACILITY SUMMARY

LENDER

MidCap Financial (an entity that is managed by Apollo Capital Management, L.P., a subsidiary of Apollo Global Management, LLC)

INITIAL COMMITMENT

US$25 million.

ACCORDION

Expandable to US $50 million at IOU’s request and lender’s acceptance.

INTEREST RATE MATURITY

April 22nd, 2019

ILLUSTRATIVE P&L FOR 100% BALANCE SHEET FUNDED MODEL

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Annualized P&L 100% Balance Sheet Revenues * $25.8M Net Charge-Offs ** $(6.7)M $60M Facility @7.75% + LIBOR $(4.9)M $11.5M Convertible Debenture @ 10% $(1.2)M Net Revenues $13.0M Adjusted OPEX*** $11.2M Net Income $1.8M ROE 21.2%

Assumes all Loan Under Management as of Q1 2016 ($80M) were funded on balance sheet.

* 100% Balance Sheet Revenues: Assumes that all loans were funded on balance sheet (no loans sold to third parties) and yielded 32.3% annualized interest, based on Q1 2016 revenue and average outstanding loans on balance sheet. ** Net Charge-Offs: Assumes provision for loan losses equals net charge-offs and assumes an annualized net charge-off rate of 8.41% based on Q1 2016 net charge offs and average outstanding loans on balance sheet. ***Adjusted OPEX: Represents OPEX excluding certain non-cash items such as amortization and depreciation and stock based compensation.

LOAN ORIGINATION & LOANS UNDER MANAGEMENT

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Loan Originations | Annual Loan Originations | Quarter Loans Under Management | Annual Loans Under Management | Quarter

$0 $30 $60 $90 $120 2012 2013 2014 2015 Millions $65 $70 $75 $80 $85 Q1 2015 Q1 2016

Millions

$0 $40 $80 $120 $160 2012 2013 2014 2015

Millions

$0 $10 $20 $30 $40 Q1 2015 Q1 2016

Millions

ADJUSTED GROSS REVENUES & ADJUSTED EBITDA

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($1,500) ($1,000) ($500) $0 $500 2012 2013 2014 2015 Thousands $0 $50 $100 $150 $200 Q1 2015 Q1 2016 Thousands

Adjusted EBITDA | Annual Adjusted EBITDA | Quarter

$0 $4 $8 $12 $16 2012 2013 2014 2015 Millions

Adjusted Gross Revenues | Annual Adjusted Gross Revenues | Quarter

$0 $1 $2 $3 $4 Q1 2015 Q1 2016 Millions

*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.

PROVEN MANAGEMENT TEAM

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MA MARK SCHREWS

VP Wholesale

BR BRIAN STUPP

VP Marketing & Retail

PH PHIL MARLEAU

CEO & Director

MA MAYCO QUIROZ

Treasurer

RO ROBERT RT GLOER R

COO

PA PAUL HAMILTON

CTO

JE JEFF TURNER

VP Credit & Compliance

MA MADELINE WADE

VP Operations

LU LUIS ROCHA

VP Analytics

DA DAVID D KENNEDY DY

CFO

INVESTMENT HIGHLIGHTS

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FUNDING MODEL – VALUE CREATION OPPORTUNITY MASSIVE SMALL BUSINESS LENDING MARKET PROPRIETARY CREDIT SCORIGN MODEL MULTIPLE DISTRIBUTION CHANNELS STRONG UNDERWRITING PERFORMANCE PROVEN MANAGEMENT TEAM

CAPITALIZATION SUMMARY

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VALUATION TRADING DATA

as of: 6/10/2016

SHARE PRICE (C$) P/SALES MARKET CAP (CAD)

1.82X $0.40 $24.7M

52 WEEK LOW 20 DAY VWAP 52 WEEK HIGH

$0.40 $0.33 $0.75

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QUESTIONS & ANSWERS