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, 2023 (“Q3 2023”). Financial
references are in Canadian dollars unless otherwise specified.
Q3 2023 Highlights
- Book Value of $1.20 per share; up
26% over the past four-quarters.
- Recurring Royalty and Loan Interest
Income1 of $1.50 million in Q3, up 3.9% from the prior
quarter.
- Recurring Free Cash Flow2 of
approx. $237,000 in Q3; and $710,000 over the past
four-quarters.
- Total assets of approximately $62.5
million compared to $53.0 million at Q3 2022.
- Cash of over $9.3 million compared
to $9.5 million at Q3 2022.
- $12.5M in new investments made
since May of 2023.
“Q3 was in line with our expectations and
reflects recent loan maturities and modest capital deployments in
the past year ” said Alex Baluta, CEO of Flow Capital. “ Our
balance sheet remains very strong and we continue to generate
positive cash flow from recurring operations”.
“Since May of this year, we have deployed over
$12M into 4 new investments, and our pipeline remains very strong
with currently 5 potential investments currently in due diligence.
We are starting to see the results of both the positive market
opportunity for Growth Debt solutions, as well as our ongoing
effort to increase deal flow quantity and quality. Given the number
of deals we have in due diligence at the current time, we expect we
will be deploying new capital in the coming weeks and months”, said
Mr. Baluta.
To raise additional capital to support our
ongoing deployment growth, in July we launched our
redeemable/retractable floating rate debenture. “We are excited
about the introduction of the new debenture structure. By providing
investors with a floating rate of interest (currently at 10.5%),
redeemability, and seniority to almost $40M in equity, we expect we
can use it to raise additional capital over time”, said Mr. Baluta.
“We expect this structure will help us grow our asset base for the
foreseeable future”.
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.
RESULTS OF OPERATIONS
|
|
|
Three-months ended September 30, 2023 |
Three-months ended September 30, 2022 |
Recurring Royalty and Loan Interest Income (1) |
|
|
$ |
1,502,093 |
$ |
1,530,022 |
Royalty and Loan Interest Income |
|
|
$ |
1,697,147 |
$ |
1,676,567 |
Total Revenues per IFRS |
|
|
$ |
1,003,477 |
$ |
670,337 |
Net income |
|
|
$ |
20,229 |
$ |
502,663 |
Adjusted Recurring Free Cash Flow (2) |
|
|
$ |
236,941 |
$ |
253,422 |
Basic Earnings per share |
|
|
|
0.0006 |
|
0.0160 |
Diluted Earnings per share |
|
|
|
0.0006 |
|
0.0158 |
Book Value per outstanding share(3) |
|
|
$ |
1.1984 |
$ |
0.9517 |
Weighted basic average number of shares outstanding |
|
|
|
32,462,803 |
|
31,333,994 |
Weighted diluted average number of shares outstanding |
|
|
|
32,608,230 |
|
31,914,613 |
(1) Recurring Royalty and Loan Interest Income
is an internally defined, non-IFRS measure calculated as Royalty
and Loan Interest Income less Loan Amortization Income and one-time
payments (e.g. prepayment fees). Reconciliations of non-IFRS
measures to the nearest IFRS measure can be found in this press
release under “Reconciliation of Non-IFRS
Measures”.(2) Recurring Free Cash Flow is an
internally defined, non-IFRS measure calculated as Recurring
Royalty and Loan Interest Income less Salaries, Professional fees,
Office and general administrative and Financing expenses.
Reconciliations of non-IFRS measures to the nearest IFRS measure
can be found in this press release under “Reconciliation of
Non-IFRS Measures”.(3) 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
Total revenue for the three-month period ended
September 30, 2023, was $1,003,477 compared to $670,337 in the
three-month period ended September 30, 2022. Loan interest and
royalty payment income for the three-month period ended September
30, 2023, was $1,697,147 representing a 1.23% increase from the
$1,676,567, earned in the three-month period ended September 30,
2022.
Of the $1,697,147 loan interest and royalty
payment income earned during the three-month period ended September
30, 2023, $321,276 was contributed by interest earned from new
investments acquired in the last twelve months, $1,197,583 from
loan interest and royalty payment income from the existing
portfolio and $178,289 on account of loan amortization
adjustments.
Income from changes in value of financial assets
for the three-month period ended September 30, 2023 was $(722,558)
compared to $(1,006,139) for the three-month period ended September
30, 2022.
Operating Expense
Total operating expenses for the three and
nine-month periods ended September 30, 2023 were $872,554 (2022 -
$881,638) and $ 2,615,664 (2022 - $2,363,882), respectively. The
increase is primarily due to higher salaries and professional fees
compared to the previous corresponding periods.
The decline in operating expenses for three
months ended September 30, 2023 compared to the three months ended
September 30, 2022 was primarily driven by lower professional fees,
offset by higher salaries and share-based compensation. The
increase in operating expenses for nine months ended September 30,
2023 compared to the nine months ended September 30, 2022 was
primarily driven by higher salaries, professional fees and
share-based compensation.
Profit After Taxes
Profit (loss) after taxes for the three and
nine-month periods ended September 30, 2023 were $20,229 (2022 -
$502,663) and $453,789 (2022 - $5,421,388), respectively. The
decline in profit after taxes for three months ended September 30,
2023 compared to the three months ended September 30, 2022 was
primarily driven by lower foreign exchange gains, offset by higher
revenues and lower operating expenses. The decline in profit
after taxes for nine months ended September 30, 2023 compared to
the nine months ended September 30, 2022 was primarily driven by
lower income from changes in values of financial assets, higher
total operating expenses and lower foreign exchange
gains.
Assets
|
As at September 30, 2023 |
As at September 30,2022 |
Cash and Cash Equivalents |
$ |
9,341,082 |
$ |
9,468,760 |
Investments |
$ |
44,975,071 |
$ |
43,038,555 |
Total assets |
$ |
62,528,800 |
$ |
52,971,149 |
|
|
|
Portfolio Update
|
Three-months ended September 30, 2023 |
Three-months ended September 30, 2022 |
Number of active company investments |
|
16 |
|
13 |
Number of new company investments in period |
|
1 |
|
- |
Total capital deployed during the period |
$ |
1,691,500 |
$ |
0 |
Carrying value of investments, at the end of period |
$ |
44,975,071 |
$ |
43,038,555 |
Non-IFRS Financial Measures
This press release includes references to
certain non-IFRS financial measures such as recurring royalty and
loan interest income and recurring free cash flow. These financial
measures are employed by the Company to measure its operating and
economic performance and to assist in business decision-making, as
well as providing key performance information to senior management.
The Company believes that, in addition to conventional measures
prepared in accordance with IFRS, certain investors and analysts
use this information to evaluate the Company’s operating and
financial performance. These financial measures are not defined
under IFRS nor do they replace or supersede any standardized
measure under IFRS. Other companies in our industry may calculate
these measures differently than we do, limiting their usefulness as
comparative measures. Reconciliations of non-IFRS measures to the
nearest IFRS measure can be found in this press release under
“Reconciliation of Non-IFRS Measures”.
Reconciliation of Non-IFRS
Measures
The tables below reconcile royalty and loan
interest Income to recurring royalty and loan interest income and
recurring free cash flow for the periods indicated.
Recurring Royalty and Loan Interest Income is an
internally defined, non-IFRS measure calculated as Royalty and Loan
Interest Income less Loan Amortization Income and one-time payments
(e.g. prepayment fees).
|
Three-months ended September 30, 2023 |
Three-months ended June 30, 2023 |
Three-months ended March 31, 2023 |
Three-months ended December 31, 2022 |
Three-months ended September 30, 2022 |
Royalty and Loan Interest Income |
$ |
1,697,147 |
|
$ |
1,843,406 |
|
$ |
1,691,481 |
|
$ |
2,263,790 |
|
$ |
1,676,567 |
|
Less: Loan Amortization Income |
$ |
(195,054 |
) |
$ |
(235,357 |
) |
$ |
(182,044 |
) |
$ |
(373,304 |
) |
$ |
(146,545 |
) |
Less: One-time payments |
$ |
0 |
|
$ |
(161,844 |
) |
$ |
0 |
|
$ |
(461,624 |
) |
$ |
0 |
|
Total Adjustments |
$ |
(195,054 |
) |
$ |
(397,201 |
) |
$ |
(182,044 |
) |
$ |
(834,928 |
) |
$ |
(146,545 |
) |
Recurring Royalty and Loan Interest Income |
$ |
1,502,093 |
|
$ |
1,446,205 |
|
$ |
1,509,437 |
|
$ |
1,428,862 |
|
$ |
1,530,022 |
|
Recurring Free Cash Flow is an internally
defined, non-IFRS measure calculated as Recurring Royalty and Loan
Interest Income less Salaries, Professional fees, Office and
general administrative and Financing expense.
|
Three-months ended September 30, 2023 |
Three-months ended June 30, 2023 |
Three-months ended March 31, 2023 |
Three-months ended December 31, 2022 |
Three-months ended September 30, 2022 |
Recurring Royalty and Loan Interest Income |
$ |
1,502,093 |
|
$ |
1,446,205 |
|
$ |
1,509,437 |
|
$ |
1,428,862 |
|
$ |
1,530,022 |
|
Less: Salaries |
$ |
(426,714 |
) |
$ |
(411,828 |
) |
$ |
(376,606 |
) |
$ |
(393,929 |
) |
$ |
(360,812 |
) |
Less: Professional fees |
$ |
(132,767 |
) |
$ |
(276,601 |
) |
$ |
(213,652 |
) |
$ |
(184,996 |
) |
$ |
(253,091 |
) |
Less: Office and general administrative |
$ |
(180,284 |
) |
$ |
(187,408 |
) |
$ |
(175,211 |
) |
$ |
(334,869 |
) |
$ |
(196,216 |
) |
Less: Financing Expense |
$ |
(525,387 |
) |
$ |
(443,472 |
) |
$ |
(445,212 |
) |
$ |
(467,610 |
) |
$ |
(466,481 |
) |
Total Adjustments |
$ |
(1,265,152 |
) |
$ |
(1,319,309 |
) |
$ |
(1,210,681 |
) |
$ |
(1,381,404 |
) |
$ |
(1,276,600 |
) |
Recurring Free Cash Flow |
$ |
236,941 |
|
$ |
126,896 |
|
$ |
298,756 |
|
$ |
47,458 |
|
$ |
253,422 |
|
Conference Call Details
Flow Capital will host a conference call to
discuss these results at 9:00 a.m. Eastern Time, on Wednesday,
November 22, 2023. Participants should call +1 (888) 886-7786 or +1
(416) 764-8658 and ask an operator for the Flow Capital earnings
call, Conference ID 47648691. 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 648691#. The replay recording
will be available until 11:59 p.m. Eastern Time, December 22,
2023.
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.
(4) Recurring Royalty and Loan Interest Income
is an internally defined, non-IFRS measure calculated as Royalty
and Loan Interest Income less Loan Amortization Income and one-time
payments (e.g. prepayment fees). Reconciliations of non-IFRS
measures to the nearest IFRS measure can be found in this press
release under “Reconciliation of Non-IFRS
Measures”.(5) Recurring Free Cash Flow is an
internally defined, non-IFRS measure calculated as Recurring
Royalty and Loan Interest Income less Salaries, Professional fees,
Office and general administrative and Financing expenses.
Reconciliations of non-IFRS measures to the nearest IFRS measure
can be found in this press release under “Reconciliation of
Non-IFRS Measures”.
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