TORONTO, ONTARIO--(Marketwired - Feb. 6, 2015) - Grenville Strategic Royalty Corp. (TSX VENTURE:GRC) ("Grenville" or the "Company") today announced its financial and operating results for the three-month and twelve-month periods ended December 31, 2014. Financial references are in Canadian dollars unless otherwise specified.
Fourth Quarter 2014 Highlights
- Revenues of $1,535,246 and $2,944,791 for the three-months ended December 31, 2014 (Q4 2014) and twelve-month period ended December 31, 2014 (FY 2014), respectively
- Income (loss) after taxes was $(80,461) in Q4 2014 and $(3,457,760) in FY 2014, including non-recurring costs of $3,636,197 directly attributable to the Company's going public transaction
- Adjusted EBITDA1 (loss) of $(61,451) in Q4 2014 and $490,357 in FY 2014
- Excluding the writedown of $1,000,000, Adjusted EBITDA was $938,549 in Q4 2014 and $1,490,537 in FY 2014
- Free Cash Flow1 of $1,217,417 in Q4 2014 and $936,690 in FY 2014
- Royalty agreements acquired were $4.5 million for Q4 2014, bringing the aggregate value of acquired royalties since inception to the end of Q4 2014 to $24.6 million
- Average royalty payment per million invested1 was $247,118 for the month of December
Financial Highlights for the Fourth Quarter and Fiscal Year 2014
| Canadian dollars |
Three-month period ended December 31, 2014 |
|
Twelve-month period ended December 31, 2014 |
|
| Revenues |
1,535,246 |
|
2,944,791 |
|
| Loss after income taxes |
(80,461 |
) |
(3,457,760 |
) |
| Basic and diluted earnings (loss) per share |
(0.0014 |
) |
(0.0700 |
) |
| Adjusted EBITDA1 (loss) |
(61,451 |
) |
490,357 |
|
| Adjusted EBITDA1, excluding writedown |
938,549 |
|
1,490,537 |
|
| Free Cash Flow1 |
1,217,407 |
|
936,690 |
|
| Royalty agreements acquired in the period |
4,511,400 |
|
22,722,168 |
|
"The strength of our diversified and growing portfolio of royalty investments generated strong results with increased revenue and free cash flow", said William (Bill) R. Tharp, President and Chief Executive Officer of Grenville. "The stability and sustainability of the portfolio now enables us to return capital to shareholders with the declaration of our first dividend. Our underlying fundamentals remain strong as evidenced by our average royalty payment per million invested1 and a robust pipeline of prospective investments. As we continue to scale the business, we are committed to providing shareholders access to a growing, diversified portfolio of SME opportunities providing regular, predictable and growing returns".
Revenues
Revenues were $1,535,246 and $2,944,791 for Q4 2014 and FY 2014, respectively, compared to $51,952 for the period from July 29 to December 31, 2013 (2013). The most significant component of revenues is royalty payment income, which represents 89.4% and 90.2% of total revenue Q4 2014 and FY 2014, respectively. The increase in revenues was due to $22,722,168 in new royalty agreements acquired during FY 2014 as the Company scaled its portfolio, as well as the impact of a full year of revenues from investments made in FY 2013.
Operating Expense
Total operating expenses were $218,916 and $4,660,620 for Q4 2014 and FY 2014, respectively, compared to $160,808 in 2013. Total operating expenses in Q4 2014 included a net foreign exchange gain of $445,963, $444,643 of which related to an unrealized foreign exchange gain following the translation of royalty agreements denominated in US dollars; a share-based payment expense of $27,959; and $156,799 for withholding tax paid that was expensed rather than treated as recoverable. Net of these expenses, operating expenses for Q4 2014 were $480,121. Total operating expenses during FY 2014 included $3,636,197 directly attributable to the Company's going public transaction; $693,789 of unrealized foreign exchange gains; $214,046 in share-based payment expense and $156,799 for withholding tax paid that was expensed rather than treated as recoverable. Net of these expenses, operating expenses for FY 2014 were $1,347,367, or approximately $112,000 per month, which is in line with management's expectations.
Income (loss) After Taxes
Income (loss) after taxes was $(80,461) and $(3,457,760) for Q4 2014 and FY 2014, respectively, compared to $(108,856) for 2013. The Company recorded a $1,000,000 impairment provision during Q4 2014, previously announced on November 10, 2014, in relation to a single investment. While management believes a portion of the investment may be recovered, the Company has made a full impairment provision in the period against the book value of the investment. The Company is currently pursuing enforcement actions against the investee company. The impairment was partially offset by the foreign exchange gain of $445,963 referenced above.
Adjusted EBITDA
Adjusted EBITDA1 (loss) was $(61,451) and $490,357 for Q4 2014 and FY 2014, respectively, compared to $(23,844) for 2013. Adjusted EBITDA1 margin was (5.244)% for Q4 2014, reflecting the impairment provision referenced above. Excluding the writedown of $1,000,000, Adjusted EBITDA was $938,549 in Q4 2014 and $1,490,537 in FY 2014.
Free Cash Flow
Free cash flow1 was $1,217,417 and $936,690 for Q4 2014 and FY 2014, respectively, compared to negative free cash flow1 of $548,988 in 2013. The Company received a HST refund in the amount of $1,038,124 in November 2014.
Assets
| |
As at December 31, 2014 |
As at December 31, 2013 |
| Cash and cash equivalents |
$9,748,841 |
$ 593,417 |
| Royalty agreements acquired and loan portfolio |
24,283,758 |
1,890,169 |
| Total assets |
35,194,085 |
3,176,891 |
Average Royalty Payment per Million Invested1
The average royalty payment per million invested1 for the month of December 2014 was $247,118, compared to the Company's target of $250,000 for the month. Management is focused on building a portfolio with expanding diversification, underlying revenue growth greater than portfolio write-downs combined with a healthy percentage of minimum monthly payments, currently at 85% of the portfolio.
To view the graph associated with this release, please visit the following link: http://media3.marketwire.com/docs/991138_graph1.jpg
Rolling Three Month Average Investment per Month1
As of December 31, 2014, the rolling three month average investment per month1 was $1,504,000.
To view the graph associated with this release, please visit the following link: http://media3.marketwire.com/docs/991138_graph2.jpg
Rolling Three Month Average Investment per Transaction1
As of December 31, 2014, the rolling three month average investment per transaction1 was $920,000.
To view the graph associated with this release, please visit the following link: http://media3.marketwire.com/docs/991138_graph3.jpg
Declaration of Dividend
The Company is also pleased to announce that its board of directors has approved a cash dividend of $0.00416 per share for the period of February 1, 2015 to February 28, 2015, which is equal to $0.05 per share on an annualized basis. The dividend will be paid on March 16, 2015 to shareholders of record at the close of business on February 27, 2015.
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.
Outlook
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 $24 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 of annual revenue per million of invested capital1. The portfolio has reached a scale at which, as designed, it is generating stable income and Adjusted EBITDA1, which has enabled the Company to declare its first dividend.
Grenville continues to possess a strong pipeline of investment prospects. During 2014, management reviewed approximately 465 prospective transactions, proceeded to the due diligence stage on approximately 260 transactions, issued 68 term sheets and closed 16 new investments and 4 follow-on investments. With the volatility of the broader markets experienced during the fourth quarter, management deliberately slowed its rate of investment, as evidenced by the decrease in the rolling three month average investment per month. Management believes this volatility in the markets has the potential to provide the Company with enhanced deal flow, as small and medium sized enterprises often face difficulty in accessing growth capital in challenging equity markets.
Grenville's financial statements and management's discussion and analysis for the twelve-months ended December 31, 2014 will be filed on SEDAR at www.sedar.com and will be available on Grenville's website at www.grenvillesrc.com.
1 Please refer to the Non-IFRS Measures section below.
Non-IFRS Measures
For the definitions of Non-IFRS measures, please refer to the Company's management's discussion and analysis.
The following tables reconcile Adjusted EBITDA1 and Free Cash Flow1 to IFRS measures reported in the audited consolidated financial statements;
| |
Three months ended December 31, 2014 |
|
Year ended December 31, 2014 |
|
| Loss before income taxes |
$ (111,568 |
) |
$ (3,513,887 |
) |
| Depreciation |
2,384 |
|
3,721 |
|
| Financing expense |
427,898 |
|
798,058 |
|
| EBITDA/EBITDA (Loss) |
318,714 |
|
(2,712,108 |
) |
| Adjustments: |
|
|
|
|
| Unrealized foreign exchange gain on carrying amount of Royalty Agreements Acquired |
(444,643 |
) |
(684,297 |
) |
| Unrealized adjustment to carrying amount of royalty agreements as a result of revising estimated cash flows |
(120,280 |
) |
(120,280 |
) |
| Share-based payment expense |
27,959 |
|
214,046 |
|
| Going public transaction expense |
- |
|
2,651,316 |
|
| Severance payment |
- |
|
400,000 |
|
| Legal and professional expenses directly related to the going public transaction |
- |
|
584,881 |
|
| Withholding tax expensed |
156,799 |
|
156,799 |
|
| Adjusted EBITDA/EBITDA (Loss) |
$ (61,451 |
) |
$ 490,357 |
|
| |
|
|
|
|
| |
Three months ended December 31, 2014 |
|
Year ended December 31, 2014 |
|
| Net cash used in operating activities |
$ (2,914,423 |
) |
$ (22,028,331 |
) |
| Royalty agreements acquired |
4,511,400 |
|
22,722,168 |
|
| Interest expense |
(351,144 |
) |
(661,644 |
) |
| Income tax payable- movement in period |
(28,426 |
) |
(80,384 |
) |
| Going public transaction expenses not paid from Free cash flow - see above |
- |
|
984,881 |
|
| Free Cash Flow |
$ 1,217,407 |
|
$ 936,690 |
|
The calculation of the average royalty payment per million invested, the rolling three month average investment per month and the rolling three month average transaction per transaction are:
To view the tables associated with this release, please visit the following link:
http://media3.marketwire.com/docs/991138_table.pdf
Conference Call Details
Grenville will host a conference call to discuss these results at 4:30 p.m. Eastern Time today, Friday, February 6, 2015. William Tharp, CEO, Donnacha Rahill, CFO and Steven Parry, Executive Chairman, will co-chair the call. Participants should call (647) 788-4919 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 75102239. The replay recording will be available until 11:59 p.m. Eastern Time, February 13, 2015.
An audio recording of the conference call will be also available on the "investors" page of Grenville's website at grenvillesrc.com.
About Grenville
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 be complementary to other financing alternatives or be simple stand-alone capital. Capital can be used in a variety of ways: from working capital needs, to funding acquisitions, buying out minority partners, or just adding a financing alternative to the range of existing capital solutions. 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 purchasers 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 April 21, 2014 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 statements 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 September 30, 2014 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.