TORONTO — November 14, 2019 — Flow Capital Corp. (TSXV: FW) (“Flow Capital”) today announced its financial and operating results for the three-month and nine-month periods ended September 30, 2019. Financial references are in Canadian dollars unless otherwise specified.
Q3 2019 Highlights
“The performance in the quarter was encouraging with Free Cash Flow(1) and Adjusted EBITDA(1) performing strongly,” said Alex Baluta, Chief Executive Officer of Flow Capital. “The benefits of our structure, particularly the buyout premium, was evidenced in our strong cash flow this quarter. In addition, for the growth company entrepreneur, the flexibility of our revenue-based financing offers the compelling value proposition of repayment on their timeline.”
Recurring revenues from royalties and interest
Recurring royalties and interest earned were $1,340,000 and $4,343,000 for the three-month (Q3 2019) and nine-month (YTD 2019) period ended September 30, 2019, respectively, compared to $1,214,000 and $3,388,000 for the corresponding periods in 2018. Recurring royalties and interest earned for Q3 2019 and YTD 2019 are up 10% and 28%, respectively, from the same period in 2018, due to royalties earned on new investments closed in the last twelve months and higher royalties due to growth from the existing investments.
Non-recurring revenues from buyouts and equity returns
In Q3 2019, there was one buyout that earned $993,000 of a realized gain compared to two buyouts that earned realized gains of $525,000 in the corresponding period in 2018. Cash of $24,000 and $385,000 was generated during Q3 2019 and YTD 2019, respectively, from the sale of shares of equity investments held in our portfolio compared to $114,000 for the corresponding periods in 2018.
Revenues
Revenues as reported under IFRS were $473,000 and $2,017,000 for Q3 2019 and YTD 2019, respectively, compared to $420,000 and $4,652,000 for the corresponding periods in 2018. With the adoption of IFRS 9, certain non-cash items are recognized in revenue.
Revenues in the quarterly period were impacted by IFRS 9 net non-cash items of $(2,426,000) compared to $(650,000) for the same period in 2018. The non-cash amount of $(2,426,000) was made up of $(2,412,000) for adjustments to fair value, $(194,000) realized loss on investments written-off that were previously written-down to zero and $180,000 for foreign exchange differences. Included in the adjustments to fair value was $182,000 for relating to equity instruments held and $(2,594,000) for fair value adjustments on various investments in the portfolio.
Operating Expense
Total operating expenses, excluding discontinued operations, were $890,000 and $2,881,000 for Q3 2019 and YTD 2019, respectively, compared to $742,000 and $3,261,000 for the corresponding periods in 2018. Operating expenses for Q3 2019 were $148,000 higher than the 2018 corresponding period due to higher staffing costs and professional fees of $90,000 and $93,000, respectively, offset by $50,000 lower restructuring costs. Operating expenses for YTD 2019 were $380,000 lower than for the same period in 2018 due to $706,000 of restructuring costs incurred in 2018, offset by an increase of $252,000 and $162,000 in professional fees and staffing costs for YTD 2019.
Adjusted EBITDA(1)
Adjusted EBITDA(1) was $1,717,000 and $4,323,000 for Q3 2019 and YTD 2019, respectively, compared to $844,000 and $1,462,000 for the corresponding periods in 2018. The increase in Adjusted EBITDA(1) for Q3 2019 compared to the corresponding period in 2018 was due to the $993,000 gain on the Factor75 buyout. The increase in Adjusted EBITDA(1) for YTD 2019 compared to the corresponding period in 2018 was due to the previously referenced $993,225 gain on the Factor75 buyout, $954,727 higher royalty and loan payment income and $706,250 in lower restructuring costs.
Free Cash Flow(1)
Free Cash Flow(1) was $1,477,000 and $2,138,000 for Q3 2019 and YTD 2019, respectively, compared to $24,000 and $(268,000) for the corresponding periods in 2018. Free Cash Flow(1) for Q3 2019 was higher due to the $993,000 gain on the Factor75 buyout. For YTD 2019, Free Cash Flow(1) was higher compared to the corresponding period in 2018 due to the realized gain of $993,000 on the Factor75 buyout and $932,000 of Free Cash Flow(1) generated from the LOGiQ Global Partners business during YTD 2019.
Profit (Loss) After Taxes
Profit (loss) after taxes was $(883,000) and $(1,670,000) for Q3 2019 and YTD 2019, respectively, compared to $(499,000) and $5,489,000 for the corresponding periods in 2018. The decrease of $384,000 and $7,159,000 in profit (loss) after taxes for Q3 2019 and YTD 2019, respectively, was due to a combination of non-cash items, the most significant being the bargain purchase gain of $5,459,147 recognized in the corresponding periods in 2018.
Conference Call Details
Flow Capital will host a conference call to discuss these results at 8:00 a.m. Eastern Time, Friday, November 15, 2019. Participants should call (647) 427-2311 or (866) 521-4909 and ask an operator for the Flow Capital earnings call. 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 (416) 621-4642 or (800) 585-8367 and enter access code 1777556. The replay recording will be available until 11:59 p.m. Eastern Time, November 22, 2019.
An audio recording of the conference call will be also available on the investors’ page of Flow Capital’s website at www.flowcap.com/investor-relations/2019.
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
Certain statements herein may be “forward-looking” statements that involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Flow or the industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether such results will be achieved. A number of factors could cause actual results to vary significantly from the results discussed in the forward-looking statements. These forward-looking statements reflect current assumptions and expectations regarding future events and operating performance and are made as of the date hereof and Flow assumes no obligation, except as required by law, to update any forward-looking statements to reflect new events or circumstances.
