Flow Capital Announces the Buyout of Its Investment in Interiormark, LLC., and Q1 2021 Financial Results

May 25, 2021
– Records Recurring Revenues from Royalties and Interest of $1,610,000; Year-Over-Year Growth of 73.1% – 

 

TORONTO, Ontario, May 25, 2021 – Flow Capital Corp. (TSXV: FW) (“Flow Capital”) announces that Interiormark LLC., has agreed to a buyout Flow Capital’s royalty investment for US$1,925,000 in cash proceeds. Including the monthly royalty payments received by Flow, this represents a cash-on-cash return of approximately 2.67 times the amount invested over 6 years.

“Our relationship with Flow Capital and their team has always been more than just a financial one. They are a trusted and valuable business partner and resource with impeccable character.” said Bruce Tucker, Vice President of Interiormark LLC.

The Company also announces its unaudited financial and operating results for the quarter ended March 31, 2021 (“Q1 2021”). Financial references are in Canadian dollars unless otherwise specified.

Q1 2021 Financial Highlights

  • Free Cash Flow of $405,191 in Q1 2021 compared to $(76,750) in Q1 2020.

  • Total revenue under IFRS of $2,340,570 in Q1 2021; a YoY growth of 114.2%.

  • Net income of $1,308,000 in Q1 2021, compared to a net loss of $(370,000) in Q1 2020.

  • EBITDA of $1,692,000 in Q1 2021; a nearly 11X growth over $156,000 in Q1 2020.

  • Book value of approximately $0.60 per share; year-over-year (YoY) growth of 30.5%.

Q1 2021 Financial Snapshot

“Our Q1 2021 performance demonstrates the strength of our business model with steady growth in core recurring revenues complemented by equity upside. Profitability improved significantly, through a combination of sustained efforts to drive operating efficiency and an increase in the value of our long-term equity positions. The $131 million transaction combining Sundial and Inner Spirit, of which we own nearly 12.6 million shares, announced recently, already represents an additional $0.05 in book value, over Q1 2020,” said Alex Baluta, Chief Executive Officer of Flow Capital.

“The majority of our investment portfolio has remained resilient to impacts of COVID-19, and we expect that to continue as economic activity reopens gradually. We have a strong pipeline of new investment opportunities and remain focused on deal origination to expand our active investment portfolio, to drive growth in recurring revenue and free cash flow.”

Revenues
Total revenue for the three-month period ended March 31, 2021 was $2,340,570, a 114.2% increase from $1,092,937 for the three-month period ended March 31, 2020. Royalty and loan interest income for the three-month period ended March 31, 2021 was $1,610,068 representing a 73.1% increase from the $930,333, earned in the three-month period ended March 31, 2020.

Of the $1,610,068 royalty payment and loan interest income earned during the three-month period ended March 31, 2021, $342,165 was contributed by new investments acquired or topped-up over the past year, $946,360 was from investees that increased their royalty payments due to growth in their revenues and investees resuming to pay a royalty and $22,602 was due to the amortization of the promissory notes.

Non-cash items included in revenue under IFRS, had a net impact of $381,826 in the three-month period ended March 31, 2021, compared to $(124,591) for the three-month period ended March 31, 2020. This includes $525,750 from adjustments to fair value and $(143,924) of foreign exchange impact. Adjustments to fair value comprise an increase of $(675,688) from fair value adjustments to various royalty and promissory notes investments in the portfolio, and an increase of $1,201,438 in the fair value of equity and warrant positions held in investee companies.

Operating Expense
Total operating expenses were $657,321 for the three-month and year ended March 31, 2021 compared to $979,102 for the three-month period ended March 31, 2020. The operating expenses in Q1 2021 are lower, primarily due to savings on consulting fees paid to a former US-based executive in the previous year.

Profit (Loss) After Taxes
Profit (loss) after taxes was $1,307,956 for the three-month period ended March 31, 2021 compared to $(369,536) for the three-month period ended March 31, 2020. The growth in profits is attributed to the stronger operating performance reflected in the growth in royalty and loan income and lower operating expenses.

Q1 2021 Assets

Adjusted EBITDA(1)
Adjusted EBITDA(1) was $1,337,613 for the three-month period ended March 31, 2021 compared to $592,220 for the three-month period ended March 31, 2020. The year-over-year increase of $745,393 flows from the improved operating results, adjusted by movements in foreign exchange and fair value of the investment portfolio.

Free Cash Flow(1)
Free Cash Flow(1) for the three-month period ended March 31, 2021 was $405,191 compared to $(76,750) for the three-month period March 31, 2020. The increase is attributed to higher royalty and loan interest income and lower operating costs.

(1) Adjusted EBITDA, and Free Cash Flow are non-IFRS measures. Refer to section Definition of Non-IFRS Measures in the MD&A for further explanation and definitions.

Shares Outstanding
During Q1 2021 Flow Capital repurchased 543,500 common shares under the ongoing NCIB, at an average price of $0.4138 per share. As at March 31, 2021, Flow Capital had 31,611,577 share outstanding.

Conference Call Details
Flow Capital will host a conference call to discuss these results at 9:00 a.m. Eastern Time, Wednesday, May 26, 2021. 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 9883288. The replay recording will be available until 11:59 p.m. Eastern Time, April 5, 2021.

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.