TORONTO — November 21, 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 September 30, 2023 (“Q3 2023”). Financial references are in Canadian dollars unless otherwise specified.
Q3 2023 Highlights
“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
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
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.
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/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.
