TORONTO, ONTARIO–(Marketwired – May 13, 2015) – Grenville Strategic Royalty Corporation (TSX VENTURE:GRC) (“Grenville” or the “Company”) today announced its financial and operating results for the three-month period ended March 31, 2015. Financial references are in Canadian dollars unless otherwise specified.
First Quarter 2015 Highlights
- Revenues of $1,610,690 for the three-month ended March 31, 2015 (Q1 2015)
- Adjusted EBITDA(1) of $1,125,132
- Free Cash Flow(1) of $165,534
- Income after taxes was $1,398,981
- Royalty agreements acquired were $5.2 million for Q1 2015, bringing the aggregate value of acquired royalties since inception to the end of Q1 2015 to $29.9 million
- Average royalty payment per million invested(1) was $262,724 for the month of March, 2015
- Raised gross proceeds of $25.3 million comprised of $11.5 million closed on February 26, 2015 and $13.8 million, subsequent to end of the period
“Our growing portfolio performed well in the quarter, generating record quarterly revenue and Adjusted EBITDA and material improvements in other key operating metrics such as royalty agreements acquired and average royalty payment per million invested,” said William (Bill) R. Tharp, President and Chief Executive Officer of Grenville. “The portfolio is delivering on its objectives and our unique capital offering continues to fill an important niche in the North American, small-to-medium enterprise, growth-capital marketplace. Our pipeline of prospective investments remains robust, positioning us well for continued growth and diversification in 2015.”
Financial Highlights for the First Quarter 2015
Revenues were $1,610,690 for Q1 2015, compared with $147,071 for Q1 2014. The substantial increase in revenues was due to total aggregate investments increasing by 552% between Q1 2014 and Q1 2015, as the Company continues to scale its portfolio. The most significant component of revenues is royalty payment income, which represented 97.4% of total revenue in Q1 2015.
Total operating expenses were $(714,616) for Q1 2015 and included a net foreign exchange gain of $1,261,292, of which $1,235,347 related to an unrealized foreign exchange gain following the translation of royalty agreements acquired denominated in U.S. dollars and a share-based payment expense of $27,959. Total operating expenses for Q1 2014 were $3,828,317 and included expenses of $3,636,197 directly attributable to the Company’s reverse takeover completed in Q1 2014 (RTO). Operating expenses for Q1 2015, excluding foreign exchange gains, were approximately $185,000 per month.
Income (loss) After Taxes
Income (loss) after taxes was $1,398,981 for Q1 2015, compared to a (loss) after taxes of $(3,681,246) for Q1 2014. The increase over the comparable period was due to higher revenues, as well as the foreign exchange gain of $1,261,292 in Q1 2015 and the total RTO related costs of $3,636,197 that were incurred in Q1 2014.
Adjusted EBITDA (loss) (1)
Adjusted EBITDA(1) was $1,125,132 for Q1 2015, compared to an Adjusted EBITDA loss of $(7,217) for Q1 2014. The increase in Adjusted EBITDA(1) since 2014 was primarily due to higher revenues driven by new royalty agreements acquired since the end of March 2014.
Free Cash Flow(1)
Free cash flow(1) was $165,534 for Q1 2015, compared to $664,948 for the three-month period ended March 31, 2014. The primary decrease is due to timing differences in tax recoveries and receivables during the period.
Starting on March 15, 2015 the Company commenced the payment of a monthly dividend of $0.00416 per share. The amounts paid in March and April 2015 were $332,877 and $334,114, respectively. The expected dividend to be paid on May 15, 2015 is $334,673. All dividend payments were made from the Company’s available free cash flow(1).
Average Royalty Payment per Million Invested(1)
The average royalty payment per million(1) invested for the month of March 2015 was $262,724, which exceeded the Company’s target of $250,000 per month.
To view the bar graph accompanying this press release, please visit the following link:
Rolling Three-Month Average Investment per Month(1)
As of March 31, 2015, the rolling three-month average investment per month(1) was $2,659,800.
To view the bar graph accompanying this press release, please visit the following link: http://media3.marketwire.com/docs/grc0513graph2.jpg.
Rolling Three-Month Average Investment per Transaction(1)
As of March 31, 2015, the rolling three-month average investment per transaction(1) was $1,045,489.
To view the bar graph accompanying this press release, please visit the following link: http://media3.marketwire.com/docs/grc0513graph3.jpg.
Declaration of May Dividend
The board of directors of the Company has declared a dividend of $0.00416 per common share for the month of May 2015, representing $0.05 per share on an annualized basis. The dividend is payable on June 15, 2015 to shareholders of record on May 29, 2015. The ex-dividend date is May 27, 2015.
This dividend is designated by the Company to be an eligible dividend for the purpose of the Income Tax Act (Canada) and any similar provincial or territorial legislation. An enhanced dividend tax credit applies to eligible dividends paid to Canadian residents.
The declaration and payment of dividends is at the discretion of the board of directors of the Company and any future declaration of dividends will depend on the Company’s financial results, cash requirements, future prospects and other factors deemed relevant by the board of directors of the Company.
As the Company continues to scale its business, it is building a diversified portfolio consisting of cyclical, neutral and defensive asset classes. The strength and diversity of this portfolio has also been designed to mitigate a level of portfolio impairment that would be expected in small to medium enterprise (SME) investments. The Company has invested more than $29 million of capital across 24 investments in 19 portfolio companies. Management’s target in building a balanced portfolio is based on the pricing of risk in the SME market a rate of $250,000 average royalty payment per million(1) invested. The portfolio has reached a scale at which, as designed, it is generating stable income and Adjusted EBITDA(1), allowing the Company to declare dividends.
Grenville’s royalty agreements with its portfolio companies provided revenue to the Company of approximately $1.6 million for the three-month period ended March 31, 2015. As at the date of this release, management estimates April 2015 revenues will be approximately $0.6 million, reflecting the existing portfolio and new investments added to date. Operating expenses for Q1 2015, excluding any foreign exchange effects, were approximately $0.2 million per month, and are estimated to run in the range of $1.9 million and $2.4 million on an annualized basis in Q2 2015.
Grenville’s unique capital offering continues to fill an expansive niche in North American small to medium enterprise, growth-capital markets. With continued access to funding accretive to shareholder value, we are confident we will be able to add new portfolio companies to the Company’s existing portfolio holdings. Each new portfolio company added will further diversify and strengthen Grenville’s existing portfolio balance. Management also believes that the revenue contribution per portfolio-company added will be priced at roughly the same rate as existing companies within the portfolio.
Grenville’s financial statements and management’s discussion and analysis for the three months ended March 31, 2015 will be filed on SEDAR at www.sedar.com and will be available on Grenville’s website at www.flowcap.com.
(1) Please refer to the Company’s management’s discussion and analysis for definitions and reconciliations of these non-IFRS measures to measures prescribed by IFRS.
Conference Call Details
Grenville will host a conference call to discuss these results at 8:00 a.m. Eastern Time today, Wednesday, May 13, 2015. William Tharp, CEO, Donnacha Rahill, CFO and Steven Parry, Executive Chairman, will co-chair the call. Participants should call (647) 788-4922 or (877) 291-4570 and ask an operator for the Grenville 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 (416) 621-4642 or (800) 585-8367 and enter access code 37098416. The replay recording will be available until 11:59 p.m. Eastern Time, May 20, 2015.
Grenville is a Toronto-based company that was formed to provide royalty-based finance solutions by acquiring revenue streams generated by growing industrial and technology businesses. Grenville has identified a large and underserviced finance market for companies generating up to $50 million in revenue, many of which are well managed and generating improving cash flow, but face difficult financing hurdles from traditional debt and equity markets. The non-dilutive royalty financing structure offered by Grenville can bridge the financing needs of these companies until traditional debt or equity is available to them on more attractive commercial terms. The application of Grenville’s royalty financing structure into sectors not traditionally serviced by royalty companies represents a new and innovative financing model – Capital Simplified – that has already attracted a considerable number of opportunities with attractive potential returns.
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 statements are not representative of historical facts or information or current condition, but instead represent only Grenville’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of Grenville’s control. Generally, such forward-looking information or 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; 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 Grenville’s business and the markets in which it operates; the amount and timing of the payment of dividends by Grenville; and Grenville’s financial position. By identifying such information and statements in this manner, Grenville 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 Grenville to be materially different from those expressed or implied by such information and statements. An investment in securities of Grenville 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 Grenville; the volatility of Grenville’s share price; Grenville’s lack of operating history; Grenville’s ability to generate sufficient revenues; Grenville’s ability to manage future growth; the limited diversification in Grenville’s existing investments; ability to negotiate additional royalty purchases from new investee companies; dependence on the operations, assets and financial health of investee companies; limited ability to exercise control or direction over investee companies; potential defaults by investee companies and the unsecured nature of Grenville’s investments; Grenville’s ability to enforce on any default by an investee company; competition with other investment entities; tax matters; Grenville’s ability to pay dividends in the future and the timing and amount of those dividends; reliance on key personnel, particularly Grenville’s founders; dilution of shareholders’ interest through future financings; and general economic and political conditions. Although Grenville has attempted to identify important factors that could cause actual results to differ materially from those contained in the forward-looking information and 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 document, Grenville 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 Grenville’s business and its ability to identify and close new opportunities with new investees are material factors that Grenville 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 will continue to grow moderately over the next 12 to 24 months; that interest rates will not increase dramatically over the next 12 to 24 months; that Grenville’s existing investees will continue to make royalty payments to Grenville as and when required; that the businesses of Grenville’s investees will not experience material negative results; that Grenville 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 Grenville will have the ability to raise required equity and/or debt financing on acceptable terms; and that Grenville will have sufficient free cash flow to pay dividends. Grenville 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, Grenville primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies.
Although Grenville 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.
For additional information with respect to these risks, uncertainties and assumptions, please refer to the “Risk Factors” section of Grenville’s annual information form dated February 11, 2015 and the other public filings of Grenville available on SEDAR at www.sedar.com. The forward-looking information and statements contained in this press release is made as of the date hereof, and Grenville does not undertake to update any forward-looking information and/or statement that is contained or referenced herein, except in accordance with applicable securities laws. All subsequent written and oral forward looking information and statements attributable to Grenville or persons acting on its behalf is expressly qualified in its entirety by this notice.
Caution Regarding Non-IFRS Financial Measures – Grenville uses certain measures in this press release which do not have a standardized meaning as prescribed by International Financial Reporting Standards (“IFRS”) and are unlikely to be comparable to similar measures presented by other issuers. These non-IFRS measures, including adjusted EBITDA, average royalty payment per million investment, rolling three month average investment per transaction and rolling three month average investment per month have been presented in this press release in order to provide shareholders and potential investors with additional information regarding Grenville, but should not be considered in isolation or as a substitute for, or more meaningful than, measures prepared in accordance with IFRS, such as net income (loss) or cash flow from operating activities. Please refer to the Company’s Management’s Discussion and Analysis as at and for the three months ended March 31, 2015 for definitions and reconciliations of these non-IFRS measures to measures prescribed by IFRS.
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.