Flow Capital Corp. (TSXV:FW) (“Flow Capital” and “Company”), a
leading provider of flexible growth capital and alternative debt
solutions, announces its unaudited financial and operating results
for the quarter ending September 30, 2022 (“Q3 2022”). Financial
references are in Canadian dollars unless otherwise specified.
Q3
2022 Highlights
- Recurring Revenue of $1.67 million
in Q3.
- Adjusted Recurring Free Cash Flow1
of approx. $400,000 in Q3; over $2 million YTD and $2.3 million
over the past four-quarters.
- Total assets of approximately $53
million compared to $44 million at YE 2021.
- Cash of approx. $9.5 million
compared to $4.1 million at YE 2021.
- Book Value ~$0.95 per share; up
27.3% YTD.
“In spite of the volatile capital markets
backdrop and recessionary and inflationary economic environment we
all find ourselves in, we are pleased with our Q3 performance” said
Alex Baluta, CEO of Flow Capital. “Our performance represents the
resiliency of the recurring revenue business model we have adopted
over the past several years, as well as the cash flow generation
and book value upside that can be generated from our portfolio of
loans to “growth” companies”, he continued.
Flow Capital continues to focus its efforts on
originating and investing in high growth companies looking to fuel
expansion without the excessive and expensive dilution of equity,
or restrictive covenants of conventional debt. With over thirty
million small and medium sized business in the United States and
Canada, and tens of millions of others in Flow Capital’s
addressable geographies and sectors, there is a large market of
potential investment opportunities.
“Q3 saw a material improvement in the size and
quality of our pipeline driven by realizations that the broader
equity markets are more challenging for businesses. The equity
market volatility is generating a marked increased demand for the
type of creative and flexible capital provided by Flow”, said Alex
Baluta, CEO of Flow Capital.
“While broader economic volatility and inflation
led to us to adjust some discount rates, which in turn led to a
slight increase in our loan loss allowances, such adjustments have
no impact on our current cash flow generation. We also believe that
our carefully selected portfolio of investments will continue to
grow and secure capital to repay us when due. Our $2.3M in adjusted
recurring cash flow generated over the past 4 quarters is a record
level of performance going back more than 4 years”, said Mr.
Baluta.
RESULTS OF OPERATIONS
|
Three-months ended September
30, 2022 |
Three-months ended September
30, 2021 |
Nine-months ended September 30,
2022 |
Nine-months ended September 30,
2021 |
Recurring royalty and loan revenue |
$ |
1,676,567 |
$ |
1,182,866 |
|
$ |
5,531,510 |
$ |
4,485,123 |
Total revenues per IFRS |
$ |
670,337 |
$ |
(323,997 |
) |
$ |
7,930,414 |
$ |
7,302,202 |
Net income |
|
502,663 |
|
(1,040,381 |
) |
|
5,421,388 |
|
3,333,468 |
Basic Earnings per share |
|
0.0160 |
|
(0.0333 |
) |
|
0.1734 |
|
0.1059 |
Diluted Earnings per share |
|
0.0158 |
|
(0.0333 |
) |
|
0.1694 |
|
0.1032 |
Book Value per outstanding share(1) |
|
0.9517 |
|
0.6740 |
|
|
0.9517 |
|
0.6740 |
Weighted basic average number of shares outstanding |
|
31,333,994 |
|
31,240,077 |
|
|
31,271,727 |
|
31,464,474 |
Weighted diluted average number of shares outstanding |
|
31,914,613 |
|
32,632,966 |
|
|
32,011,959 |
|
32,293,547 |
(1) Calculated by taking
Total Shareholders’ Equity as reported on the Statements of
Financial Position over the number of outstanding shares.Detailed
Financial results are available on our website at www.flowcap.com
or on www.sedar.com.
Revenues
Revenue reclassification: Effective January 1,
2022, the Company has revised the presentation of its income
statement to exclude foreign exchange gain and losses from revenue
and reclassified them as a non-operating expense item. The
previously reported comparative figures have been updated
accordingly. For the nine-month period ended September 30, 2021,
after reclassifying the foreign exchange loss of $218,223, total
revenue for the period is restated as $7,302,202 compared to
$7,083,979, reported previously. There is no change to the net
income.
Total revenue for the three-month period ended
September 30, 2022, was $670,337 compared to $(323,997) in the
three-month period ended September 30, 2021. Loan interest and
royalty payment income for the three-month period ended September
30, 2022, was $1,676,567 representing a 41.7% increase from the
$1,182,866, earned in the three-month period ended September 30,
2021.
Of the $1,676,567 loan interest and royalty
payment income earned during the three-month period ended September
30, 2022, $358,546 was contributed by interest earned from new
investments acquired in the last twelve months, $1,233,230 from
loan interest and royalty payment income from the existing
portfolio and $104,790 on account of loan amortization
adjustments.
Income from changes in value of financial assets
for the three-month period ended September 30, 2022 was
$(1,006,139) compared to $(1,444,690) for the three-month period
ended September 30, 2021.
Total revenue for the nine-month period ended
September 30, 2022, was $7,930,414, a 8.6% increase from $7,302,202
in the nine- month period ended September 30, 2021. Loan interest
and royalty payment income for the nine-month period ended
September 30, 2022, was $5,531,510 representing a 23.3% increase
from the $4,485,123, earned in the nine-month period ended
September 30, 2021.
Of the $5,531,510 loan interest and royalty
payment income earned during the nine-month period ended September
30, 2022, $1,229,432 was contributed by interest earned from new
investments acquired in the last twelve months, $4,015,892 from
loan interest and royalty payment income from the existing
portfolio and $306,186 on account of loan amortization
adjustments.
Operating Expense
Total operating expenses for the three and
nine-month periods ended September 30, 2022 were $881,638 (2021 -
$669,453) and $ 2,363,882 (2021 - $2,151,752), respectively. The
increase is primarily due to higher professional fees compared to
the previous corresponding periods.
Profit (Loss) After Taxes
Profit (loss) after taxes for the three and
nine-month periods ended September 30, 2022 were $502,663 (2021 -
$(1,040,381) and $5,421,388 (2021 - $3,333,468), respectively. The
movements in the profit (loss) after taxes was on account of higher
loan interest and royalty payment income and favourable foreign
exchange impacts, offset by fewer buyouts, fair value movements,
and higher operating costs, compared to the corresponding periods
in the previous year.
Assets
|
As at September
30,
2022 |
As at December
31,
2021 |
Cash and Cash Equivalents |
$ |
9,468,760 |
$ |
4,144,671 |
Investments |
$ |
43,038,555 |
$ |
39,442,728 |
Total assets |
$ |
52,971,149 |
$ |
44,018,033 |
|
|
|
Portfolio Update
|
Three-months ended Sept 30,
2022 |
Three-months ended Sep 30,
2021 |
Nine-months ended Sep 30,
2022 |
Nine-months ended Sep 30,
2021 |
Number of active company investments |
|
13 |
|
14 |
|
13 |
|
14 |
Number of new company investments in period |
|
- |
|
1 |
* |
|
1 |
Total capital deployed during the period |
$ |
- |
$ |
8,247,300 |
$ |
4,545,368 |
$ |
17,432,700 |
Carrying value of investments, at the end of period |
$ |
43,038,555 |
$ |
32,198,454 |
$ |
43,038,555 |
$ |
32,198,454 |
**Follow-on investments in two investees and a
royalty investment was bought out on the acquisition of an investee
and Flow received preferred shares in the acquirer as
consideration
Conference Call Details
Flow Capital will host a conference call to
discuss these results at 9:00 a.m. Eastern Time, on Monday,
November 21, 2022. Participants should call +1 (888) 396-8049 or +1
(416) 764-8646 and ask an operator for the Flow Capital earnings
call, Conference ID 65839061. Please dial in 10 minutes prior to
the call to secure a line. A replay will be available shortly after
the call. To access the replay, please dial +1 (416) 764-8692 or +1
(877) 674-7070 and enter passcode 471759#. The replay recording
will be available until 11:59 p.m. Eastern Time, December 4,
2022.
An audio recording of the conference call will
be also available on the investors’ page of Flow Capital’s website
at www.flowcap.com/financials.
About
Flow Capital
Flow Capital Corp. is a diversified alternative
asset investor and advisor, specializing in providing minimally
dilutive capital to emerging growth businesses. To apply for
financing, visit www.flowcap.com.
For further information, please contact:
Flow Capital Corp.Alex
BalutaChief Executive Officeralex@flowcap.com
1 Adelaide Street East, Suite 3002,PO Box 171,Toronto, Ontario
M5C 2V9
Forward-Looking Information and
Statements
This press release contains certain
“forward-looking information” within the meaning of applicable
Canadian securities legislation and may also contain statements
that may constitute “forward-looking statements” within the meaning
of the safe harbor provisions of the U.S. Private Securities
Litigation Reform Act of 1995. Such forward-looking information and
forward-looking statements are not representative of historical
facts or information or current condition, but instead represent
only the Company’s beliefs regarding future events, plans or
objectives, many of which, by their nature, are inherently
uncertain and outside of the Company’s control. Generally, such
forward-looking information or forward-looking statements can be
identified by the use of forward-looking terminology such as
“plans”, “expects” or “does not expect”, “is expected”, “budget”,
“scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or
“does not anticipate”, or “believes”, or variations of such words
and phrases or may contain statements that certain actions, events
or results “may”, “could”, “would”, “might” or “will be taken”,
“will continue”, “will occur” or “will be achieved”. The
forward-looking information contained herein may include, but is
not limited to, information with respect to: prospective financial
performance; including the Company’s opinion regarding the current
and future performance of its portfolio, expenses and operations;
anticipated cash needs and need for additional financing;
anticipated funding sources; future growth plans; royalty
acquisition targets and proposed or completed royalty transactions;
estimated operating costs; estimated market drivers and demand;
business prospects and strategy; anticipated trends and challenges
in the Company’s business and the markets in which it operates; the
amount and timing of the payment of dividends by the Company; and
the Company’s financial position. By identifying such information
and statements in this manner, the Company is alerting the reader
that such information and statements are subject to known and
unknown risks, uncertainties and other factors that may cause the
actual results, level of activity, performance or achievements of
the Company to be materially different from those expressed or
implied by such information and statements.
An investment in securities of the Company is
speculative and subject to a number of risks including, without
limitation, risks relating to: the need for additional financing;
the relative speculative and illiquid nature of an investment in
the Company; the volatility of the Company’s share price; the
Company’s limited operating history; the Company’s ability to
generate sufficient revenues; the Company’s ability to manage
future growth; the limited diversification in the Company’s
existing investments; the Company’s ability to negotiate additional
royalty purchases from new investee companies; the Company’s
dependence on the operations, assets and financial health of its
investee companies; the Company’s limited ability to exercise
control or direction over investee companies; potential defaults by
investee companies and the unsecured nature of the Company’s
investments; the Company’s ability to enforce on any default by an
investee company; competition with other investment entities; tax
matters, including the potential impact of the Foreign Account Tax
Compliance Act on the Company; the potential impact of the Company
being classified as a Passive Foreign Investment Company (“PFIC”);
the Company’s ability to pay dividends in the future and the timing
and amount of those dividends; reliance on key personnel,
particularly the Company’s founders; dilution of shareholders’
interest through future financings; and general economic and
political conditions; as well as the risks discuss ed in the joint
management information circular of the Company dated May 2, 2018
and the risks discussed herein. Although the Company has attempted
to identify important factors that could cause actual results to
differ materially from those contained in the forward- looking
information and forward-looking statements, there may be other
factors that cause results not to be as anticipated, estimated or
intended.
In connection with the forward-looking
information and forward-looking statements contained in this press
release, the Company has made certain assumptions. Assumptions
about the performance of the Canadian and U.S. economies over the
next 24 months and how that will affect the Company’s business and
its ability to identify and close new opportunities with new
investees are material factors that the Company considered when
setting its strategic priorities and objectives, and its outlook
for its business.
Key assumptions include, but are not limited to:
assumptions that the Canadian and U.S. economies relevant to the
Company’s investment focus will remain relatively stable over the
next 12 to 24 months; that interest rates will not increase
dramatically over the next 12 to 24 months; that the Company’s
existing investees will continue to make royalty payments to the
Company as and when required; that the businesses of the Company’s
investees will not experience material negative results; that the
Company will continue to grow its portfolio in a manner similar to
what has already been established; that tax rates and tax laws will
not change significantly in Canada and the U.S.; that more small to
medium private and public companies will continue to require access
to alternative sources of capital; that the Company will have the
ability to raise required equity and/or debt financing on
acceptable terms; and that the Company will have sufficient free
cash flow to pay dividends. The Company has also assumed that
access to the capital markets will remain relatively stable, that
the capital markets will perform with normal levels of volatility
and that the Canadian dollar will not have a high amount of
volatility relative to the U.S. dollar. In determining expectations
for economic growth, the Company primarily considers historical
economic data provided by the Canadian and U.S. governments and
their agencies. Although the Company believes that the assumptions
and factors used in preparing, and the expectations contained in,
the forward- looking information and statements are reasonable,
undue reliance should not be placed on such information and
statements, and no assurance or guarantee can be given that such
forward-looking information and statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such information and
statements.
The forward-looking information and
forward-looking statements contained in this PRESS RELEASE are made
as of the date of this PRESS RELEASE, and the Company does not
undertake to update any forward-looking information and/or
forward-looking statements that are contained or referenced herein,
except in accordance with applicable securities laws. All
subsequent written and oral forward- looking information and
statements attributable to the Company or persons acting on its
behalf is expressly qualified in its entirety by this notice.
Neither TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
1 Adjusted recurring free cash flow is an internally defined
number represented by revenues from interest and royalties, less
recurring operating expenses less interest expenses.
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