Flow Capital Announces Q1 2022 Financial Results

Recurring Revenues from Royalties and Interest of over $1.7M – YoY growth of 9.6%

TORONTO, May 30, 2022 (GLOBE NEWSWIRE) -- Flow Capital Corp. (TSXV:FW) (“Flow Capital” and “Company”), 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

(1) Calculated by taking Total Shareholders’ Equity as reported on the Statements of Financial Position over the number of outstanding shares.


Detailed Financial results are available on our website at www.flowcap.com or on Sedar.com.

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.

Assets

Portfolio Update

*Follow-on investment in one investee and a royalty investment was bought out on the acquisition of an investee and Flow received preferred shares in the acquirer as consideration.

Conference Call Details

Flow Capital will host a conference call to discuss these results at 9:00 a.m. Eastern Time, on Tuesday, May 31, 2022. Participants should call +1 (888) 396-8049 or +1 (416) 764-8646 and ask an operator for the Flow Capital earnings call, Conference ID 72683794. 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) 764-8692 or +1 (877) 674-707 and enter passcode 683794 #. The replay recording will be available until 11:59 p.m. Eastern Time, June 14, 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 FlowCapital

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
alex@flowcap.com

1 Adelaide Street East, Suite 3002,
PO Box 171,
Toronto, Ontario M5C 2V9

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 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 attemptedtoidentifyimportantfactorsthatcouldcauseactualresultstodiffermateriallyfromthosecontainedintheforward- 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.

1 Adjusted recurring free cash flow is an internally defined number represented by revenues from interest and royalties, less recurring operating expenses less interest expenses.