Flow Capital Announces 2020 Third Quarter Results

November 17, 2020
– Reports Recurring Revenue from Royalties and Interest of $1,661,000 in Q3 2020 – 

 

TORONTO, Ontario, November 17, 2020 – 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, 2020. Financial results are in Canadian dollars unless otherwise specified. 

2020 Third Quarter Highlights

  • Estimated book value at the end of Q3 of approximately $0.55 per share; year-to-date (YTD) growth of more than 21% from the book value at the year-end December 31, 2019
  • Q3 total revenue under IFRS $3,839,000; YTD $6,767,000
  • Q3 net income from continuing operations of $1,846,000; YTD $1,504,000
  • Q3 adjusted EBITDA(1) of $1,520,000; YTD $2,356,000
  • Q3 cash generated from operations of $1,567,000; YTD $2,230,000

“In the third quarter, we achieved a steady growth in revenue as well as high levels of operating efficiency and resource allocation. The strong performance of our investment portfolio, throughout the COVID-19 uncertainty has helped us grow book value per share by over 21% year to date.” said Alex Baluta, Chief Executive Officer of Flow Capital.

“We were also focused on fundraising and closed $17,000,000 post quarter-end in early October, as the first tranche towards Priority Return Fund II. The capital raised adds to our capacity to make more investments and freed up capital to repay our outstanding B debenture. To that end we recently announced that we will be redeeming the B debenture 7 months early, and in the past two weeks we have closed two investments, deploying $6,500,000. Looking ahead we remain focused on deal origination and continued growth in book value.”

Flow Capital Financial Highlights Q3 2020

Revenues

Total revenues were $3,839,000 and $6,767,000 for the three-month (Q3 2020) and nine-month (YTD 2020) periods ended September 30, 2020 compared to $473,000 and $2,017,000 for the corresponding periods in 2019. Recurring royalties and interest earned were $1,611,000 for Q3 2020 and $3,837,000 for YTD 2020, an increase of 20% and a decline of 12% compared to $1,340,000 and $4,343,000 in the corresponding periods in 2019. The decline in recurring revenue was due to royalty buyouts in the last twelve months and continued non-accrual of royalty income from old distressed investments.

Non-cash items included in revenue under IFRS, had a net impact of $1,893,000 in the quarterly period ended Q3 2020, compared to $(2,426,000) in the corresponding period in 2019. This represents $2,108,000 for adjustments to fair value and $(215,000) for foreign exchange loss. Included in the adjustments to fair value was $(804,000) relating to equity instruments held and $2,912,000 for fair value adjustments on various investments in the portfolio.

Operating Expense

Total operating expenses were $520,000 and $2,827,000 for Q3 2020 and YTD 2020 compared to $890,000 and $2,881,000 for the corresponding periods in 2019. The operating expenses in Q3 2020 are lower, primarily due to lower professional fees and general administrative expenses offset by an increase in salaries due to additions to the team.

Profit (Loss) After Taxes

Profit (loss) after taxes from continuing operations was $1,846,000 and $1,504,000 for Q3 2020 and YTD 2020 compared to $(896,000) and $(2,034,000) for the corresponding periods in 2019. The improving profitability reflects the continued emphasis on cost efficiencies, growth in the fair value of the investment portfolio and no additional investments becoming distressed in the current year.

Adjusted EBITDA(1)

Adjusted EBITDA(1) was $1,520,000 and $2,356,000 for Q3 2020 and YTD 2020 compared to $1,717,000 and $3,723,000 for the corresponding periods in 2019. The decrease in Adjusted EBITDA(1) for Q3 2020 and YTD 2020 compared to the corresponding periods in 2019 was mainly attributed to higher earnings in the current period offset by greater realized losses from investments written off and sale of equity investments, and unrealized foreign exchange movements, in the previous periods.

Free Cash Flow(1)

Free Cash Flow(1) was $1,047,000 and $1,012,000 for Q3 2020 and YTD 2020 compared to $1,477,000 and $2,138,000 for the corresponding periods in 2019, with the decline primarily due to $931,000 of cash flow in YTD 2019 contributed by the LOGiQ Global Partners business which was subsequently sold in Q2 2019.

Flow Capital Assets Q3 2020

Conference Call Details

Flow Capital will host a conference call to discuss these results at 8:30 a.m. Eastern Time, Wednesday, November 18, 2020. Participants should call +1 (778) 560-2703 or +1 (833) 968- 1926 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 +1 (416) 621-4642 or +1 (800) 585-8367 and enter access code 4878065. The replay recording will be available until 11:59 p.m. Eastern Time, November 25, 2020.

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
Tel: (416) 777-0383 

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 discussed 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.