TORONTO, Ontario, April 1, 2022 – Flow Capital Corp. (TSXV: FW) (“Flow Capital”) announces its unaudited financial and operating results for the three-months (“Q4 2021) and year ended December 31, 2021 (“YE 2021”).
The release dated March 31, 2022 contained the following clerical errors. The comparative numbers reported for net income (loss) in Q4 2020 and the realized gains in YE 2021 inadvertently referenced the Q3 2021 figures. The corrected release reads as follows:
2021 Performance Highlights
In YE2021, Flow Capital deployed $23.1 million in seven investments, completed $5.5 million in equity sales and $12.3 million in five royalty repayments, some partial redemptions and recoveries from previously distressed investments.
“The significant increase in transaction throughput in 2021 has accelerated the transition in Flow Capital’s investment portfolio, from the legacy royalty-oriented portfolio to a predominantly loan- centric portfolio. This demonstrates our focus on moving down the risk-curveinto later stage and typically larger and secured investments, layered with additional upside potential through warrants and/or exit-fees in all our recent deals.
We are witnessing increasing momentum in capital deployment into more deals with equity upside. We have invested in building the team and on technology that has made our platform more scalable. 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 profitability” said Alex Baluta, Chief Executive Officer of Flow Capital.
Further details below. Financial references are in Canadian dollars unless otherwise specified.
Financial Snapshot
Revenues
Total revenue for the three-month period ended December 31, 2021 was $3,342,968, a 7.5% decrease from $3,612,107 in the three-month period ended December 31, 2020. Royalty and loan payment income for the three-month period ended December 31, 2021 was $1,605,980 representing a 4.5% increase from the $1,536,576, earned in the three-month period ended December 31, 2020.
Of the $1,605,980 royalty and loan payment income earned during the three-month period ended December 31, 2021, $754,871 was contributed by interest earned from new investments acquired in the last twelve months, $786,624 from royalty payment income from the existing portfolio and $64,241 on account of loan amortization adjustments. The increase in royalty and loan income was offset by a reduction due to royalty buyouts and one investment not accruing any income due to non-payment, over the twelve-month period ended December 31, 2021.
Realized gain (loss) from sale of investments was $(489,944) for the three-month period ended December 31, 2021 compared to $442,409 for the three-month period ended December 31, 2020, on account of an old investment being restructured.
Non-cash items included in revenue under IFRS, had a net impact of $2,066,113 in the three- month period ended December 31, 2021 compared to $1,570,992 for the three-month period ended December 31, 2020. The non-cash amount of $2,066,113 comprised $5,140,136 in adjustments to fair value, $(3,106,800) in realized losses due to investments written off and $32,777 of foreign exchange movements.
Total revenue for the year ended December 31, 2021, was $10,426,947, a 0.5% increase from $10,379,187 for the year ended December 31, 2020. Royalty and loan payment income for the year ended December 31, 2021, was $6,091,103 representing a 13.4% increase from the $5,373,630 earned in the year ended December 31, 2020.
Of the $6,091,103 royalty and loan payment income earned during the year ended December 31, 2021, $1,299,249 was contributed by interest from new loan investments acquired in the last twelve months. $2,945,471 was from royalty payment and loan income from the continuing portfolio, carried forward from last year and into the next year, $1,635,034 from investments that were exited during the year, and $138,701 from income from loan amortization adjustments. These increases were offset by seven royalty buyouts and two investments not accruing any income due to non-payment, over this period.
Realized gain from sale of investments was $8,704,123 for the year ended December 31, 2021 compared to a realized gain of $918,379 for the year ended December 31, 2020.
Non-cash items included in revenue under IFRS, had a net impact of $(4,568,455) in the year ended December 31, 2021, compared to compared to $3,661,264 for the year ended December 31, 2020. The non-cash amount of $(4,568,455) was made up of $(1,276,209) in adjustments to fair value, $(3,106,800) in realized losses due to investments written off and $(185,446) of foreign exchange movements.
Operating Expense
Total operating expenses were $932,786 and $3,083,113 for the three-month period and year ended December 31, 2021, compared to $1,059,017 and $3,886,089 for the three-month period and year ended December 31, 2020. The reduction in the YTD operating expenses is on account of changes in staffing, and lower restructuring costs and professional fees, compared to the corresponding period in the previous year. This was partly offset by an increase in insurance related expenses, on account of a general increase in Directors and Officers insurance premiums.
Profit (Loss) After Taxes
Profit (loss) after taxes was $2,263,808 and $5,597,275 for the three-month period and year ended December 31, 2021, compared to $617,851 and $2,121,739 for the three-month period and year ended December 31, 2020. The increase in the profit (loss) after taxes was on account of higher royalty and loan payment income, favourable fair value movements, gains on royalty buyouts and sale of investments, and lower operating costs, compared to the corresponding periods in the previous year.
Assets
Shares Outstanding
As at December 31, 2021, Flow Capital had 31,240,077 share outstanding. Between January 1, 2021 and December 31, 2021, 915,000 common shares were repurchased at a weighted-average price per share of $0.4280.
Conference Call Details
Flow Capital will host a conference call to discuss these results at 9:00 a.m. Eastern Time, on Friday, April 1, 2022. 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 1143478. The replay recording will be available until 11:59 p.m. Eastern Time, April 8, 2022.
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
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 discuss ed in the joint management information circular of the Company dated May 2, 2018 and the risks discussed herein. Although the Company has attempted toidentifyimportantfactorsthatcouldcauseactualresultstodiffermateriallyfromthosecontainedintheforward- 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.
