Flow Capital Corp., a leading provider of flexible growth capital and alternative debt solutions, announces its audited financial and operating results for the three-months (“Q4 2022”) and year ended December 31, 2022 (“YE 2022”). Financial references are in Canadian dollars unless otherwise specified.
2022 Performance Highlights
• Revenue from Royalties and Interest of $2.26M in Q4 2022; Fiscal 2022 Royalty and Interest revenue of $7.8M; YoY growth of 28%
• Book value of approximately $1.22 per share; YoY growth of 63%. This includes the re-recognition of a deferred tax asset of $7.9M. Excluding the tax asset, Book Value was up 29% over the year to ~$0.97/share.
• IFRS Net income of $9.1M in Q4 2022, compared to $2.26M in Q4 2021. YTD net income of $14.5M; YoY growth of 159%.
• Adjusted Recurring Free Cash Flow1 of approx. $882K in Q4 2022, compared to $313K in Q4 2021; Adjusted Recurring Free Cash Flow1 of over $2.9 million YTD; YoY growth of 76%.
• Cash collections of approximately $3.20M from various types of upside/bonus payments including pre-payments of interest on early exit, warrant exercise and sale, other bonus payments on investment exit, and equity sales.
• Total assets of $58.6 million compared to $44 million at YE 2021.
• Cash of over $9.5 million compared to $4.1 million at YE 2021.
“Q4 2022 capped what has been a remarkable 3 years for the Company. Excluding the re-recognition of the deferred tax asset, book value was up 29% in the last year, 73% over the last 2 years, and 113% over the last 3 years. Over the three-year time period we have also become consistently profitable and we have regularly generated positive cash flow from operations, which allowed us to re-recognize the deferred tax asset of almost $8M, adding an additional $0.25/share to our book value”, said Alex Baluta, CEO of Flow Capital.
“Over the past 3 years you have seen us transition our business model from riskier permanent royalties to a portfolio of predominantly senior secured loans made to high growth tech companies. We have consciously focused on moving down the risk curve into later stage and larger secure loans, layered with additional upside potential through warrants and/or other equity like bonus features. The net result has been the performance mentioned above – a remarkable 113% growth in the book value attributable to our shareholders.”
“As mentioned above, in almost all of our investments, we take some form of equity or equity equivalent upside, most often in the form of warrants. In addition to our cash flow based on recurring interest and royalty revenue, part of our shareholder value creation comes from the realization of cash gains on these equity positions, as well as from other types of bonus payments we earn. Given that we invest in primarily high growth tech companies, we expect these gains will be a material part of our growth, and in 2022 we earned over $3.2M in cash from such payments", continued Mr. Baluta
“While our multi-year financial performance has been strong, we were disappointed with the relatively slow pace of new investments in the year, closing on approximately $7.3M of new loans. However, we have continued to spend responsibly on our team, our marketing initiatives, and our platform capabilities, to ensure that we can continue to grow profitably. Looking forward, we have the capacity and the vision to significantly increase the scale of our business. Given the significant improvement in the pace of pipeline activity in the past several months we are targeting a material increase in new investments in 2023, to drive continued growth in recurring revenue and profitability”, said Mr. Baluta.
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 year ended December 31, 2021, after reclassifying the foreign exchange loss of $185,446, total revenue for the period is restated as $10,612,393 compared to $10,426,947, reported previously. There is no change to the net income.
Total revenue for the three-month period ended December 31, 2022, was $2,365,702 compared to $3,310,191 in the three-month period ended December 31, 2021. Loan interest and royalty payment income for the three-month period ended December 31, 2022, was $2,263,790 representing a 41% increase from the $1,605,980, earned in the three-month period ended December 31, 2021.
Of the $2,263,790 loan interest and royalty payment income earned during the three-month period ended December 31, 2022, $179,733 was contributed by interest earned from new investments acquired in the last twelve months $1,427,272 from loan interest and royalty payment income from the existing portfolio, $311,520 from fees on early repayment of loans, and $ 345,266 on account of loan amortization adjustments.
Income from changes in value of financial assets for the three-month period ended December 31, 2022, was $ 75,689 compared to $1,543,392 for the three-month period ended December 31, 2021.
Total IFRS revenue for the year ended December 31, 2022, was $10,296,116, a 3% decrease from $10,612,393 in the year ended December 31, 2021. Loan interest and royalty payment income for the year ended December 31, 2022, was $7,795,300 representing a 28% increase from the $6,091,103, earned in the year ended December 31, 2021.
Of the $7,795,300 loan interest and royalty payment income earned during the year ended December 31, 2022, $1,409,165 was contributed by interest earned from new investments acquired in the last twelve months, $5,384,788 from loan interest and royalty payment income from the existing portfolio, $349,896 from fees on early repayment of loans, and $651,452 on account of loan amortization adjustments.
Operating Expense
Total operating expenses were $953,378 and $3,317,260 for the three-month period and year ended December 31, 2022, compared to $932,786 and $3,084,538 for the three-month period and year ended December 31, 2021. The increase in the YTD operating expenses was driven primarily by higher Office and general administrative expenses, on account of a general increase in Director and Officers insurance premiums and customer acquisition costs.
Profit (Loss) After Taxes
Profit (loss) after taxes was $9,089,332 and $14,510,720 for the three-month period and year ended December 31, 2022, compared to $2,263,807 and $5,597,275 for the three-month period and year ended December 31, 2021. The movements in the profit (loss) after taxes was primarily on account of the recognition of the deferred tax asset, higher loan interest and royalty payment income and favourable foreign exchange impacts, offset by fewer buyouts, fair value movements, and higher operating costs, compared to the corresponding periods in the previous year.
Assets
Shares Outstanding
As at December 31, 2022, Flow Capital had 31,290,610 shares outstanding. Between January 1, 2022 and December 31, 2022, 184,500 common shares were repurchased at a weighted-average price per share of $0.5031.
