Quarter: Q3 2025
Speaker: Alex Baluta, CEO of Flow Capital
Related resources and filings are available at 2025 Investor Relations.
Operator
Good morning, and welcome to Flow Capital’s Q3 2025 Earnings Call.
Today’s discussion is being recorded on Friday, November 14, 2025, and may contain forward-looking statements that reflect current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.
I will now turn the call over to Alex Baluta, Chief Executive Officer of Flow Capital.
Alex Baluta
Thank you, and good morning, everyone. I’m joined today by our CFO, Michael Denny. Last night we released our Q3 financial results, which are available on SEDAR, on our website under the Investor section, and through our press release on the wires.
Before reviewing the quarter, I’d like to welcome PricewaterhouseCoopers (PwC) as our new auditor. We’re pleased to have them on board. You will also notice that we have updated the format and presentation of our financial statements, providing, in our view, a clearer and more accurate representation of the company’s operating performance. In particular, revenue presentation under IFRS had previously been less intuitive; the new format is much more transparent, and we expect to maintain it going forward.
Q3 Highlights
Q3 was another strong quarter for Flow Capital:
Portfolio Performance
The portfolio continues to perform well.
Several events this year were positive, though not all were expected:
In most transactions, we retain small equity or warrant positions, offering long-term optionality. For that one, I'm particularly optimistic: They're a real rocket ship, a fantastic client, and I wish management well. I'm glad to have been part of their journey.
As a senior secured lender, we do everything we can to work with our companies when they stumble, and we worked with this company for a long time. In the end, the customers found a home, the new buyer is optimistic about the future, and we retain a position in the acquiring entity, preserving potential future upside, as well as an obligation on their behalf to continue to pay us. To date, our cash-on-cash return was 90 cents on the dollar. So, even in transactions where it doesn't work out, and sometimes that happens, the type of investing we do provide us with good security.
Our long-term, seven-year portfolio IRR remains in the mid-20% range, a number we are very proud of and a function of strong deal selection, disciplined underwriting, and a highly effective team.
AI Adoption
Across the company, we have implemented multiple new AI-driven initiatives in:
These tools have already generated substantial productivity gains and new forms of actionable insight.
Marketing Performance
Marketing continues to perform strongly:
Market Environment
We’ve noticed evolving dynamics in the market:
The slowdown appears to be driven by:
We have a lot of spare capital due to a post-quarter increase in our line of credit with our U.S. banking syndicate to $25 million, but we are not in a rush to deploy. In some models where there's captive capital and you have eight years to deploy it, if you're not deploying it, you could be hurting your economics.
As an evergreen lender, we are not forced to deploy capital. We can be patient and remain selective, which is a core strategic advantage.
Pipeline
The pipeline remains healthy. While increased competition has modestly slowed the close rate, we continue to work on a large number of opportunities. With leads up 26% and growing, we feel confident entering 2026.
I’ll pause here and hand the call back to the operator for questions.
Q&A Session
Guest: Good quarter, Alex. Regarding the deal referenced for October, that’s not included in the Q3 financials, correct?
Alex Baluta: Correct. The revenue from that deal is included in Q3, but the transaction formally closed in Q4, so any buyout-related impact will appear in the Q4 results.
Guest: Understood. Could that be positive?
AB: It’s possible, but we don’t expect a material financial impact in Q4. The real value is in the long-term equity position. As always, these equity/warrant components are small and minimally dilutive but provide attractive optionality.
Guest: So, you're going to hang on to the equity even as they exit the loan?
AB: In that particular case, yes. We have a couple of different structures that we can deploy for, let's call it bonus, equity-like exposure. Sometimes it's warrants on common equity, sometimes it's exit fees, but in that case, it's a long-term warrant.
Guest: And regarding taxes, you’re now showing tax expense. Should we expect ongoing cash taxes?
AB: No. While we are profitable and recording tax expense, it is fully offset by our $7.5 million deferred tax asset from historical operating losses. So, we are not paying cash taxes at this time, aside from small U.S. amounts. Our deferred tax asset continues to shelter cash taxes for the foreseeable future.
Guest: Great, thanks for the clarification.
Operator: There are no further questions. I will return the call to Alex for closing remarks.
Alex Baluta:
Thank you and thank you to everyone who joined us live or via recording. As always, Michael and I are available for follow-up questions at any time. We look forward to reconnecting early in the new year when we report Q4 and full-year results.
