Online Small Business Lender Corporate Presentation April 2015 TSX-V Listed Issuer (IOU)
Forward-Looking Statements Statements made in this presentation that describe the IOU Financial s or management s budgets, estimates, expectations, forecasts, objectives, predictions or projections of the future may be forward-looking statements, which can be identified by the use of the conditional or forward-looking terminology such as anticipates, believes, estimates, expects, may, plans, projects, should, will, or the negative thereof or other variations thereon. IOU Financial cautions that, by their nature, forward-looking statements involve risks and uncertainties, and that its actual actions and/or results could differ materially from those expressed or implied in such forward-looking statements, or could affect the extent to which a particular projection materializes. Many factors and assumptions could have an impact on the materialization of the company s projections, including, but not limited to, liquidity risks, risks inherent in growing a new business, dependence on third-party service providers, credit risks, competition, regulatory risk, and other factors that are beyond its control. IOU Financial cautions that the foregoing list of factors is not exhaustive. For more information on risks and uncertainties, and assumptions that would cause the company s actual results to differ from current expectations, please refer to the section Risks and Uncertainties of IOU Financial s most recent Management s Discussion and Analysis, which may be consulted at www.sedar.com ( MD&A). The forwardlooking statements presented in the MD&A reflect IOU Financial s expectations as at the date of the MD&A. 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
Who We Are Company Description: Market Capitalization (Dec-31-2014): $21.50 M Based in Montreal with sales and operations in Atlanta, IOU Financial (TSX-V: IOU) operates an Internet-based lending platform aimed at store-front businesses across the U.S. Strategic Partnership: Quick Facts: Shares (as of Sept-30-2014): Shares Outstanding Warrants Options Total Shares Fully Diluted Shareholders: Insider Ownership: Public Ownership: 53.7 Million 1.0 Million 4.7 Million 59.4 Million 9.1 Million 44.6 Million 53 full-time employees as of Sept-30-2014; Institutional shareholders you may recognize: $66.2M in loan origination in the nine months of 2014; Year over year origination growth rate of 92%; No. 32 On The 2014 PROFIT 500 List Of Canada's Fastest Growing Companies. 3
What We Do IOU makes working capital loans of up to $100k to small businesses across the U.S. Customers you may recognize: Loans are repaid daily and have 6, 9 or 12 month terms Customers can go through a 10 minute online application, receive a credit qualification decision within seconds, and funding in less than one day 4
How We Do It Data Collection Data Transformation D D D D D D D Models Answer IOU SCORES 5
Multi-Channel Loan Origination Retail Referral Wholesale Borrowers are sourced through direct marketing campaigns. Borrowers are sourced via various partnerships with third parties that refer customers to IOU. Borrowers are sourced via relationships with third-party business loan brokers. 6
Funding Model US Small Business Borrowers Promissory Notes $ IOU Central (Loan Portfolio) $ Interest Credit Facility Assignment of Loans (Non-recourse) Assignment of Loans $ (Non-recourse) $ $ Assignment of Loans (Non-recourse) Fund 1 Fund 2 Fund 3 Returns $ Returns $ Returns $ Investors Investors (Servicing Portfolio) Investors 7
Strong Growth in Loan Originations 8
Leads to Growing Assets Under Management 9
Leads to Growing Net Financial Income (before opex) 10
Provisional Credit Loss Rate 11
Massively Under-Served Market Segment Quote from Karen Gordon Mills, Senior Fellow at Harvard Business School and at Harvard Kennedy School, September 2014: ALTERNATIVE PLAYERS HAVE THE POTENTIAL TO FUNDAMENTALLY CHANGE THE WAY IN WHICH SMALL BUSINESSES ACCESS CAPITAL Statistic from the FDIC, January 2015: THERE WERE $177.4 BILLION IN COMMERCIAL AND INDUSTRIAL LOAN BALANCES AT FDIC-INSURED INSTITUIONS UNDER $250,000 IN THE UNITED STATES AS OF THE THIRD QUARTER 2014 ACROSS 21.8 MILLION LOANS. Estimate from Oliver Wyman, a management consulting firm and business unit of Marsh & McLennan, 2013: OLIVER WYMAN ESTIMATES THAT THERE IS A POTENTIAL $80 TO $120 BILLION IN UNMET DEMAND IN THE U.S. FOR SMALL BUSINESS LINES OF CREDIT. Statistic from Federal Reserve Bank of New York, Small Business Credit Survey, May 2013: NEARLY 70% OF SMALL BUSINESSES ARE IN NEED OF LESS THAN $250,000. Statement from The Small Business Administration, November 2012: DESPITE BEING THE BEDROCK OF THE AMERICAN ECONOMY, THE SMALL BUSINESS COMMUNITY IS UNDERSERVED AND REPRESENTS A VALUE OPPORTUNITY FOR INVESTORS. 12
Volume ($USD) Loan Origination Growth: IOU vs On Deck $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 IOU 2010 2011 2012 2013 2014 On Deck 2007 2008 2009 2010 2011 IOU OnDeck Year of Operation Note: On Deck is a publicly listed U.S. based online small business lender. On Deck s loan origination volume for the nine month period ending Sept-30-2014 was USD$788M. Source: On Deck s origination volume for 2007, 2008, 2009, and 2010 are IOU estimates based on On Deck s press releases and articles. On Deck s origination volume for 2011 is based on On Deck s company reports. 13
Comparables Analysis Company Market Data (Dec-31-2014) Loans Outstanding (Millions) (1) EPS (basic and diluted) Book Value per Share (BVPS) Ticker Price Shares Out. (Million) Market Cap As of Sept-30-2014 9 Month Period Sept-30-2014 As of Sept-30-2014 P/B IOU IOU $0.42 53.7 $21.5M $44.6 ($0.02) $0.21 2.0X On Deck ONDK US$22.43 71.9 (2) US$1,613.7M US$422.1 (US$0.11) (2) US$4.32 (2) (3) 5.2X Notes: (1) Principal balance of loans outstanding. (2) Pro-forma number for On Deck. (3) On Deck s BVPS is an IOU estimate based on company reports. Source: Company reports. 14
Leadership Managed by an experienced team that spans all facets of the business Phil Marleau, CEO and Director over 20 years of experience in the securities industry (Merrill Lynch and Scotia Capital). Mayco Quiroz, CFO over 15 years of experience in accounting (Harris Corporation and L Oreal). Robert Gloer, COO over 20 years of experience in lending (First Franklin, a subsidiary of Merrill Lynch). Paul Hamilton, CTO over 30 years of experience in technology (Maplesoft, McAfee, Disney Interactive, GuestDriven). Governed by an experienced Board of Directors Evan Price, Chairman over 20 years of experience leading hightech companies, both private and public. David Cynn, Director over 20 years of experience in investment banking and private equity focused on focused financial services (Morgan Stanley and Lightyear Capital). Guy Charette, Director over 25 years experience in securities law. Guy is currently a director of Carpathian Gold (TSX-V listed company). 15
Summary IOU is revolutionizing lending through technology. IOU operates in a massively under-served market. IOU is positioned for extreme growth within this market. Contacts: Phil Marleau, CEO IOU Financial Inc. (514) 789-0694 ext. 225 pmarleau@ioucentral.com Mayco Quiroz, CFO IOU Financial Inc. (514) 789-0694 ext. 298 mquiroz@ioucentral.com 16