TORONTO, ON, Nov. 18, 2022 (GLOBE NEWSWIRE) -- 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 Baluta
Chief Executive Officer
alex@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.
