Flow Capital Corp., a leading provider of flexible growth capital and alternative debt solutions, announces its unaudited financial and operating results for the quarter ending March 31, 2022 (“Q1 2022”). Financial references are in Canadian dollars unless otherwise specified.
Q1 2022 Highlights
• Recorded Quarterly Recurring Revenue of $1.77 million, the highest recurring revenue from investments since Flow Capital transitioned its focus and strategy to venture-debt.
• Book Value increased to ~$0.82 per share; up 10% from December 2021, and up 38% over Q1 last year.
• Earnings per Share increased by 83% to $0.075 per share up from $0.041 in the prior year period.
• Net Income increased 80% to $2.3 million from $1.3 million in the prior year period
• Generated strong Adjusted Recurring Free Cash Flow1 of over $630,000 in the quarter
• Investment portfolio increased by 41% to $41.9 million in the first quarter as compared to $29.8 million as of March 31, 2021.
• Closed another US$500,000 tranche of a follow-on investment in Jorsek Inc; bringing the total investment up to US$3,500,000.
Flow Capital continues to focus its efforts on originating and investing in high growth companies looking to fuel expansion without the excessive and expensive dilution of equity, or restrictive covenants of conventional debt. With over thirty million small and medium sized business in the United States and Canada, and tens of millions of others in Flow Capital’s addressable geographies and sectors, there is a large market of potential investment opportunities.
“We continue to see strong demand and a solid pipeline of opportunities. We expect this will continue as the current equity market volatility and lower company valuations is expected to generate a marked increased demand for the type of creative and flexible capital provided by Flow”, said Alex Baluta, CEO of Flow Capital.
During the quarter, Flow Capital also booked most of the gains associated with an early repayment of an investment made in 2021. “Gains such as this highlight how our flexible capital can provide companies the funding they need to help them achieve exponential growth, without resorting to a dilutive equity raise.” said Alex Baluta, CEO of Flow Capital. “These types of investments also highlight the exceptional shareholder value creation our business model can generate, both for Flow, and for our investee company partners.”
“Flow Capital continues to focus on making senior secured loans to high growth companies. The security of these loans, combined with the additional upside through warrants and/or exit fees, has generated stellar returns for our shareholders over the past 10 quarters. Our Q1 book value per share of $0.82 is up 10% from December 2021, up 38% over Q1 last year, and up over 83% from a low in Q3 2019. Our equity attributable to common shareholders is now well over $25M. We are satisfied with our performance to date and we continue to be laser focused on investing in the best high growth companies we can find”, said Mr. Baluta.
RESULTS OF OPERATIONS
Revenues
Revenue reclassification: Effective January 1, 2022, the Company has revised the presentation of its income statement to exclude foreign exchange gain and losses from revenue and reclassified them as a non-operating expense item. The previously reported comparative figures have been updated accordingly. For the three-month period ended March 31, 2021, after reclassifying the foreign exchange loss of $143,924, total revenue for the period is restated as $2,484,494 compared to $2,340,570, reported previously. There is no change to the net income.
Total IFRS revenue for the three-month period ended March 31, 2022, was $3,868,286, a 55.7% increase from $2,484,494 in the three-month period ended March 31, 2021. Royalty and loan payment income for the three-month period ended March 31, 2022, was $1,765,374 representing a 9.6% increase from the $1,610,068, earned in the three-month period ended March 31, 2021.
Of the $1,765,374 recurring revenue from royalty and loan payments earned during the three-month period ended March 31, 2022, $895,635 was contributed by interest earned from new investments acquired in the last twelve months, $790,308 from royalty payment income from the existing portfolio and $79,606 on account of loan amortization adjustments.
In accordance with IFRS 9 Financial Instruments, all components, some of which are non-cash items, that impact the value of the financial asset must be included in revenue. Income from changes in value of financial assets was $2,100,805 for the three-month period ended March 31, 2022, compared to $870,112 for the three-month period ended March 31, 2021.
The non-cash amount of $2,100,805 comprised $2,367,875 in adjustments to fair value and $(264,957) in realized losses on sale of investments. Adjustments to fair value comprised $(2,113) in an allowance for expected losses on loans receivable, $429,729 from movements in the carried value of royalty investments and $1,938,146 from the change in the carried value of equity and warrant positions.
Operating Expense
Total operating expenses for the three-month period ended March 31, 2022 were $760,289 (2021 - $657,321). The increase is on account of changes in share-based compensation, higher legal and accounting related expenses and increases Directors and Officers insurance premiums compared to the corresponding period in the previous year.
Profit (Loss) After Taxes
Profit (loss) after taxes for the three-month period ended March 31, 2022 was $2,349,942 (2021 - $1,307,956). The increase in the profit (loss) after taxes was on account of higher royalty and loan payment income, favourable fair value movements, and lower operating costs, compared to the corresponding periods in the previous year.
