IOU Financial Inc. Corporate Presentation February 2018 Forward - PowerPoint PPT Presentation

IOU Financial Inc. Corporate Presentation February 2018

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 22 under the heading "Risks and Uncertainties" in IOU Financial's management's discussion and analysis dated November 29, 2017, 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

A leading online lender to small businesses US$500+ million – over half a billion of total loans originated since inception. • 8,000+ loans made to merchants and small businesses across the US and Canada. • 4 th on the 2016 PROFIT 500 List of Canada’s fastest growing companies. • Proprietary, fully integrated technology platform. • 3-5 minute application process with approved loans funded in as little as 24 hours. • Scalable operating and financial model. • Cumulative loans originated Shareholder summary 87.8M total shares outstanding $600 $509 $500 25.0M insider ownership $400 in millions (US$) 28% $300 $200 72% $100 62.8M public ownership $- 2009 2010 2011 2012 2013 2014 2015 2016 2017 3

Investment highlights Large market with growing demand • Online lenders expect to originate US$47 billion in 2020 from just US$4.6 billion in 2014 – a 47% CAGR.* – Significant growth potential in loan originations • IOU expects to ramp up its growth rate to 25%-30% per annum, over the long-term. – Improving operating leverage • Increasing portfolio yield. – Decreasing cost of debt capital over time. – Implemented credit improvement strategies. – Decreasing operating expenses as a percentage of revenues. – Unique, proprietary technology platform • Allows for industry-leading operating efficiency. – Alignment of interests • Management, directors, insiders and employees own approximately 30% of Company’s stock. – Significant inflection point reached • Reached break-even in the course of Q4 2017 on an adjusted earnings basis – a significant inflection – point in Company’s trajectory. Source: * Morgan Stanley Research, “Global Marketplace Lending: Disruptive Innovation in Financials,” Blue Paper, May 19, 2015 . Market size figures in USD. 4

The online lending industry Online lenders will continue to Larry Summers, former U.S. Treasury Secretary, increase their share of the small sees online lenders capturing a 70% market share in small business lending. business lending market. Size of SMB online lending industry 2% of the 16% of the $47.0 billion total market total market $4.6 billion 2014 2020 Source : Morgan Stanley Research, “Global Marketplace Lending: Disruptive Innovation in Financials,” Blue Paper, May 19, 2015 . Market size figures in USD. 5

Industry growth drivers Several key factors are driving the growth in online lending to SMBs. Banks have largely exited the small business loan market • With a focus on larger loans, banks’ presence in the SMB loan market has been in decline for over a decade. – Readily available institutional debt capital • Institutional capital has been attracted by relatively high rate of returns available by lending in this market. – Tremendous innovation and use of technology • Ease and simplicity of the application process and the speed at which capital is delivered to merchants. – SMB lending in the USA since 2000 $1,800 Small Business Loans (<$250K) $1,500 in billions (US$) All Business Loans $1,200 Unmet demand $900 $600 $300 $0 Source: FDIC, Q3 2016 - Commercial and Industrial Loan Balances at FDIC – Insured Institutions under $250,000. All figures in USD. 6

Business model IOU generates interest income from originated loans held on its own balance sheet and servicing income from IOU’s business model is simple, originated loans sold to institutional investors. scalable and has significant embedded operating leverage. The Company’s profitability is dependent on its cost of capital, the credit performance of its loan portfolio, and its operating efficiency. IOU’s business model Interest & servicing Credit losses Interest expense Opex Operating income revenues 7

Loan originations & Loans under management Total loans under management $100 $92.7 The past eighteen months was a period of Servicing portfolio transition for IOU. By increasing pricing, $80 Principal portfolio $70.3 lowering its cost of capital, tightening $60.9 in millions (C$) $56.9 $60 $65.2 credit and cutting costs, IOU has emerged $28.2 $25.8 $40 stronger and better-positioned to $42.7 $26.5 profitably grow into 2018 and beyond. $20 $42.1 $14.7 $35.0 $5.6 $27.5 $1.9 $14.3 $11.8 $0 2011 2012 2013 2014 2015 2016 Q3 17 Loans originated $146.4 $150 IOU will grow loan originations by: $125 $107.6 Increasing the number of loan brokers and capital • $99.5 $91.3 in millions (US$) $100 markets participants working with IOU. $75 Continuing to add new strategic partners such as • $49.5 banks and payment processors. $50 Adding new products to complement IOU’s short - • $25 $11.5 term working capital loan product. $2.4 $0.4 $- Further geographic expansion into Canada. • 2010 2011 2012 2013 2014 2015 2016 2017 8

Revenues Increasing portfolio yield reflects increased loan pricing IOU utilizes a hybrid revenue 45% 39.2% 40% strategy to fully optimize it’s 37.4% 35% 31.8% origination platform. 30% 25% 20% 15% 2015 2016 TTM Revenue breakdown $18 The yield on IOU’s principal portfolio has increased as Servicing & other $2.8 $4.7 $15 IOU raised pricing and introduced certain new fees and Interest measures to protect credit margins. $12 in millions (C$) $5.6 $9 Servicing revenues declined as the Company shifted to $15.3 $13.3 $6 more of a balance sheet model in 2016. $2.5 $6.8 $3 $2.9 $0 2014 2015 2016 TTM Note: TTM refers to “Trailing Twelve Months” as of Q3 2017. Note: “Servicing & other” revenues represent actual cash revenues and exclude certain non-cash items such as gains on servicing asset and amortization of servicing asset. “Portfolio yield” is calculated by dividing TTM interest revenues earned over the period by the average of the 9 beginning and end of period commercial loans receivable balance outstanding over such period.