TORONTO — August 28, 2023 — 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 June 30, 2023 (“Q2 2023”). Financial references are in Canadian dollars unless otherwise specified.
Q2 2023 Highlights
“While our revenues were down slightly year over year, they were in line with our expectations. Slower than expected capital deployment combined with several early repayments has led to flat revenue growth in the quarter” said Alex Baluta, CEO of Flow Capital. “ Our balance sheet remains very strong with almost $8M in cash, and we continue to generate positive cash flow from recurring operations”.
In spite of the flat revenue from slow capital deployment, we are starting to make significant new investments driven by a very strong pipeline in terms of quality of opportunities. We closed an investment right at the end of the quarter, into Wrisk Limited (“Wrisk”), a B2B2C SaaS insurtech provider with a current focus on the automobile insurance space. In addition, in mid-August we closed an investment in a woman led B2C company in the sleep wellness space. 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 record number of deals we have in due diligence at the current time, we expect we will be deploying significant amounts of 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 floating rate debenture. The debenture pays a floating rate of interest, currently set at 10.5% – 11% for Canadian denominated units (depending on investment size), and is redeemable by the investor on 90 days notice. Full details on the debenture can be found on the Sedar website. “The redeemable debenture marks the third evolution of what was called our Priority Return Fund. It is an investor friendly structure that pays an excellent yield and is senior to the almost $40M of equity we have on our balance sheet”, 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.
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”.
Results of Operations
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 June 30, 2023, was $2,280,530 compared to $3,391,791 in the three-month period ended June 30, 2022. Loan interest and royalty payment income for the three-month period ended June 30, 2023, was $1,843,406 representing a 11.8 % decrease from the $2,089,569, earned in the three-month period ended June 30, 2022, due to the repayment of loans over the 12-month period.
Of the $1,843,406 loan interest and royalty payment income earned during the three-month period ended June 30, 2023, $123,482 was contributed by interest earned from new investments acquired in the last twelve months, $1,501,357 from loan interest and royalty payment income from the existing portfolio, and $218,567 on account of loan amortization adjustments.
Income from changes in value of financial assets for the three-month period ended June 30, 2023, was $427,668 compared to $1,197,569 for the three-month period ended June 30, 2022.
Operating Expense
Total operating expenses for the three and six-month periods ended June 30, 2023, were $936,037 (2022 – $721,955) and $1,743,110 (2022 – $1,482,244). The increase is primarily due to higher professional fees compared to the previous corresponding periods.
Profit After Taxes
Profit after taxes for the three and six-month periods ended June 30, 2023 were $ 88,110 (2022 – $2,349,942) and $ 433,560 (2022 -$4,918,725), respectively. The movements in the profit after taxes was primarily on account of relatively lower loan interest and royalty payment income on account of exits, foreign exchange impacts, fair value movements, and marginally higher operating costs, compared to the corresponding periods in the previous year.
Assets
Portfolio Update
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).
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.
CFO Transition
We are also pleased to announce the appointment of Michael Denney as Chief Financial Officer of the Company, effective September 22, 2023. Michael succeeds Gaurav Singh who has held the role since April 2020 and will be leaving the Company at the end of September to pursue other opportunities.
Michael Denny has over 25 years of experience as a senior investment banker to growth companies, advising them on equity and debt placements and strategic acquisitions and divestitures. Prior to joining Flow he was a Managing Director with private equity manager Lynx Equity Limited, where he managed the Lynx Equity Income Trust.
“We are excited to have Michael joining our team. He brings a mix of investment, financial, and capital raising skills that will help continue to scale our business,” said Alex Baluta, CEO of Flow Capital. “Gaurav has made significant contributions to our business as evidenced by our book value growth of over 150% during his tenure. I would like to thank him for his hard work and dedication and wish him every success in the future.”
Conference Call Details
Flow Capital will host a conference call to discuss these results at 9:00 a.m. Eastern Time, on Tuesday, August 29, 2023. Participants should call +1 (888) 396-8049 or +1 (416) 764-8646 and ask an operator for the Flow Capital earnings call, Conference ID 62734095. 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 734095#. The replay recording will be available until 11:59 p.m. Eastern Time, September 12, 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/investor-relations/2023
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
47 Colborne Street, Suite 303,
Toronto, Ontario M5E 1P8
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.
