flow capital (tsxv:fw) annual general meeting · 2019. 7. 5. · humble abode dionymed...

FLOW CAPITAL (TSXV:FW)

Annual General MeetingFriday, July 5, 2019

Forward Looking Information

THIS CORPORATE PRESENTATION 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 PROVIS IONS OF THE U.S. PRIVATE SECURITIES L ITIGATION 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 COMPANY’S ABIL ITY TO PAY DIVIDENDS IN THE FUTURE AND THE AMOUNT AND TIMING OF THOSE DIVIDENDS; THE COMPANY’S ABIL ITY TO SUCCESSFULLY MANAGE ITS JOINT VENTURE RELATIONSHIPS; AND THE COMPANY’S F INANCIAL 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 COMPANY'S ABIL ITY TO PAY DIVIDENDS IN THE FUTURE AND THE TIMING AND AMOUNT OF THOSE DIVIDENDS; THE RELATIVE SPECULATIVE AND ILLIQUID NATURE OF AN INVESTMENT IN THE COMPANY; THE VOLATIL ITY OF THE COMPANY’S SHARE PRICE; THE COMPANY’S L IMITED OPERATING HISTORY; THE COMPANY'S ABIL ITY TO GENERATE SUFFICIENT REVENUES; THE COMPANY'S ABIL ITY TO MANAGE FUTURE GROWTH; THE LIMITED DIVERSIF ICATION IN THE COMPANY'S EXISTING INVESTMENTS AND THE CONCENTRATION OF A S IGNIFICANT AMOUNT OF THE COMPANY'S INVESTED CAPITAL IN A SMALL NUMBER OF INVESTMENTS; THE COMPANY'S ABIL ITY 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 L IMITED ABIL ITY 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 ABIL ITY 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 CLASSIF IED AS A PASSIVE FOREIGN INVESTMENT COMPANY ( "PFIC"); RELIANCE ON KEY PERSONNEL, PARTICULARLY THE COMPANY'S FOUNDERS; DILUTION OF SHAREHOLDERS’ INTEREST THROUGH FUTURE FINANCINGS; CHANGES TO THE COMPANY'S ACCOUNTING POLICIES AND METHODS; AND GENERAL ECONOMIC AND POLITICAL CONDITIONS; AS WELL AS THE RISKS DISCUSSED UNDER THE HEADING "RISK FACTORS" ON PAGES 23 TO 25 OF THE ANNUAL INFORMATION FORM OF THE COMPANY DATED FEBRUARY 15, 2015 AND THE RISKS DISCUSSED HEREIN. ALTHOUGH THE COMPANY HAS ATTEMPTED TO IDENTIFY IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING INFORMATION AND FORWARD-LOOKING STATEMENTS, THERE MAY BE OTHER FACTORS THAT CAUSE RESULTS NOT TO BE AS ANTICIPATED, ESTIMATED OR INTENDED.

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 S IMILAR TO WHAT HAS ALREADY BEEN ESTABLISHED; THAT TAX RATES AND TAX LAWS WILL NOT CHANGE S IGNIFICANTLY 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; AND THAT THE COMPANY WILL HAVE THE ABIL ITY TO RAISE REQUIRED EQUITY AND/OR DEBT FINANCING ON ACCEPTABLE TERMS. 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 CORPORATE PRESENTATION ARE MADE AS OF THE DATE OF THIS CORPORATE PRESENTATION, 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.

NON-IFRS MEASURES THIS CORPORATE PRESENTATION REFERS TO CERTAIN KEY PERFORMANCE INDICATORS, INCLUDING EBITDA, ADJUSTED EBITDA, FREE CASH FLOW, WEIGHTED AVERAGE ROYALTY RATE AND CASH RETURNED FROM ROYALTY PAYMENTS AND ROYALTY BUYOUTS TO ASSIST IN ASSESSING THE COMPANY’S F INANCIAL PERFORMANCE. EBITDA, ADJUSTED EBITDA, WEIGHTED AVERAGE ROYALTY RATE AND CASH RETURNED FROM ROYALTY PAYMENTS AND ROYALTY BUYOUTS (THE “NON-IFRS MEASURES”) ARE FINANCIAL MEASURES USED IN THIS PRESENTATION THAT ARE NOT STANDARD MEASURES UNDER IFRS. THE COMPANY’S METHOD OF CALCULATING THE NON-IFRS MEASURES MAY DIFFER FROM THE METHODS USED BY OTHER ISSUERS. THEREFORE, THE COMPANY’S NON-IFRS MEASURES MAY NOT BE COMPARABLE TO SIMILAR MEASURES PRESENTED BY OTHER ISSUERS. SEE SECTION “DEFINITION OF NON-IFRS MEASURES” FOR AN EXPLANATION ON HOW THEY ARE CALCULATED. THESE NON-IFRS MEASURES SHOULD ONLY BE INTERPRETED IN CONJUNCTION WITH THE MOST RECENTLY AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018, AND THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2019, WHICH ARE AVAILABLE ON SEDAR AT WWW.SEDAR.COM.

AGM Meeting | July 5, 2019

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AGM Meeting | July 5, 2019 3

Flow Capital provides growth capital for emerging companies in high-growth, tech-enabled industries.

Flow offers a superior alternative to conventional debt and equity for emerging-growth companies with $1M to $20M in revenue.

Flow Capital

ESTABLISHED PUBLICLY TRADED INVESTMENT COMPANY (TSXV:FW)

$80MHAS INVESTED $80M IN 44

INVESTMENTS SINCE INCEPTION IN

2014

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Who Do We Invest In?

Annual revenues or ARR of greater than $1 million; operating in high-growth markets; 75% of portfolio is tech-based companies

Small to medium-sized businesses in North America or the UK

Emerging & High Growth

Small to mid-size

Operating history greater than 2 years2+ years

Revenue-Based Financing and Venture Debt

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REVENUE-BASED FINANCING VENTURE DEBT

Term Perpetual 12 to 36 months

Yield 20-25% 15-17%

Buyout Premium 2X N/A

Target Investment IRR Mid-to-high 20’s High Teens

Portfolio Target IRR High Teens High Teens

Warrant Coverage Light, 5-20% Light, 5-15%

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Why Do Companies Take a Royalty Investment?

An excellent fit for high-growth companies in industries such as technology, SaaS, regulated cannabis, etc.

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DEFER COST MINIMAL DILUTION BUY OUT OPTION

To defer dilutive equity issuance using the royalty investment as a bridge or

as growth capital.

Businesses are typically growing equity at a

faster rate than cost of the Royalty.

Royalty investments typically have modest

warrant coverage.

Companies have the option to buy out the investment

on their schedule.

AquamWmode

FixtPliteq

Above Security4Tell

DS HandlingBoardwalktech, Inc.

FrequentzBlue Drop

INOVxMera

TruGolfInterior Mark

ManifestMedical Imaging

Expert HomesFactor75

Agnity/mCloudWestlake

One UpHumble Abode

DionymedConnectAndSell, Inc.

CherubimSwitch Video

Hybrid FinancialAPO Group

eScribeMedallion

KareMedworxs

PFOClear Blue

Inner Spirit/WatchitLattice

Insight downholeDove Cleaners

StabilityBG Furniture

SPCS Spiridon

Solar BrokersCompression General

0% 100% 200% 300% 400%

2%

3%

8%4%

14%

41%

49%

22%

8%

105%

125%152%

139%132%169%

200%278%

250%

5%5%7%9%8%14%13%

23%16%21%

28%20%

34%38%39%40%

43%46%47%50%50%50%57%

8%63%64%66%

46%70%

99%108%

123%22%

135%28%

9%26%

37%20%

200%21%

36%126%

Contract Buyout

How Have We Done?


TSXV:FWPortfolio Payback by Company, May 2019

70%

Aggregate Portfolio Company Revenues

Mill

ions

$0

$6

$12

$18

$24

Apr-20 Jun-20 Aug-20 Oct-20 Dec-20Feb-21 Apr-21 Jun-21 Aug-21 Oct-21 Dec-21Feb-22 Apr-22 Jun-22 Aug-22 Oct-22 Dec-22Feb-23 Apr-23 Jun-23

Portfolio Revenues3 Month Rolling Avg

How Do We Grow? TSXV:FW


Recurring revenues will continue to grow: • Making investments in new portfolio companies • Increasing the average initial investment size • Making follow-on investments in existing portfolio companies • Increasing revenue growth of portfolio companies • Minimizing distressed situations

CAD $240M annualized aggregate portfolio revenue

CA

D $

('00

0s)

'-

1,750

3,500

5,250

7,000

Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019

114.271498.53761.6

800.4250505000

194.06

1284.07581106.431182.9224993.8631033.9181298.2171318.7611400.6661152.863

Periodic Royalty Buyouts & Equity Realizations

Ongoing Royalty or Venture Debt Deals

What Drives Our Returns on Investment? TSXV:FW


Ongoing Royalty or Venture Debt Deals

Periodic Royalty Buyouts Equity Realizations

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Simplified Income Statement

Q1 2019 Annualized

$000 %

Core Royalty/Interest Revenue $6,108 100.00%

Ninepoint Interest $1,100

Op Ex ($3,345) -46.4%

EBITDA $3,863 53.6%

Simplified View:

• Hard to track performance under IFRS

• Based on Q1 2019 run rates

• Including the legacy LOGiQ costs that

Flow would retain post the LOGiQ

divestiture

• EBITDA margin over 53%

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Simplified Balance Sheet

Simplified Balance Sheet

$000

Current Assets $11,500

Current Liabilities ($20,700)

Net Current ($9,200)

Proceeds of LOGiQ Sale $12,400

Net of LOGiQ $3,200

Portfolio Including Equity $25,000

Long Term Debt (“B” Debenture) ($5,000)

Net Realizable Longer Term Assets $23,200

Simplified View:

• Company is in a strong financial position • “Real assets”/Share approximately $0.275/

share

• Sale of LOGiQ removed balance sheet

uncertainty • While volatile, positive contribution of equity

positions via warrants highlights the importance

of earning equity in all future investments

*Excludes tax losses of approximately $20M that

will shelter substantial future income.

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Strongly Supporting Our Own Stock (Normal Course Issuer Bid)

FW Common Share FW.DB.A FW.DB.B

Limit 4,666,666 1,720,100 521,000

Purchased (units) 3,341,000 279,000 91,000

Available to Buy (units) 1,325,666 1,441,100 430,000

% Complete 71.6% (51.1% in Q4)

16.2% (10.6% in Q4) 17.5%

Purchased ($) $418,445 $257,880 $68,250

Average Price $0.1252 $92.43 $75.00

As of the end of Q1 2019:

• $101,000 spent in the quarter • Total of $744,575 spent to date

• Expires August 1, 2019

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Sale of Global Partners Business (LOGiQ)

Objective of the sale was to strengthen our balance sheet and provide capital to invest in emerging

growth companies.

• Consideration made up of cash of $1.375M and two 10% interest bearing notes totaling $11M. • The notes generate $1.1M income. • Repayment of first $9.5M note can be exercised any time after August 1, 2019. • Purchase price is subject to an adjustment of +/- $1.5M if the 2019 increase or decrease by more than 5%.

Sale closed in April 2019 for total consideration of $12.375M

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OUTLOOK

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↑ Increase Scale

↑ Increase Efficiency

↑ Increase Quality

! INCREASE BOOK VALUE

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Recent Deals

USD $1,000,000 term loan closed beginning of July. • Social media platform for publishers that builds artificial intelligence to distribute content

efficiently.

CAD $800K closed yesterday. • Uses artificial intelligence to better match candidates to jobs through a mobile, chat, and

video-based employment marketplace.

Spiridon Technologies

USD $250K closed in May, $250K follow-on option through August 1. • A privately-held consolidator of IoT and related technology providers.

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TO BE ANNOUNCED

*Pipeline opportunities continue to improve.

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Key Objective: Improve Pipeline Size, Throughput, and Quality

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Initiatives Include: • Hiring a new origination principal • Separation of origination and due

diligence functions • Aggressive marketing initiatives

• Digitization and operational

improvements

Objectives: • Focus on increasing number of

deals in the top of the pipeline

funnel • Increase quality of deals that make

it to the bottom of the pipeline • Deploy more capital into high

quality deals

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Website Optimization

Website Redesign • Redesigned website was launched in the

beginning of June to boost branding, credibility, and optimize for SEO.

• Adding a knowledge center and blog to enhance content creation and SEO efforts.

• Will be using A/B testing and Google Analytics to enhance aspects of the new website that can help generate digital leads.

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Marketing Initiatives

Marketing • Hired a Marketing Specialist in the beginning of June who has previous experience in

the industry and is a digital native. • Initiatives

o Ads - Will be launching video ads on LinkedIn and Facebook in July to generate leads.

o Content - Currently working on long-form and short-form content to build industry

and “tech” credibility. o Events – Reaching out to events across North America for sponsorship and

speaker opportunities. • Goals

o Brand Development o Increase lead flow & social channel exposure o Create high-quality, targeted content o Increase exposure at conferences

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Digitize Internal Systems and Processes

Focusing on improving systems to keep pace with competitive trends in the marketplace.

Improving operational throughput and efficiencies.

Proactive instead of reactive management.

Monitoring• Automated risk assessment • Automate dashboard • Early warning of potential

problems

• Portfolio performance monitoring

Scale• Digital onboarding • Digital marketing • Digital closing process • Future: New product

opportunities

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Speed of Due Diligence• Improve financial modeling • Improve standardization and

cross-company comparisons

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Focus on Quality

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Quality

1

2

3

Cleaning up distressed deal backlog

Focusing on maximization of return from distress

Improving decision making and support processes • Improving risk assessment • Reacting more quickly to signs of trouble • Focusing on avoiding challenging situations vs. fixing them

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Shareholder Value Creation

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Flow Capital creates shareholder value in five distinct ways:

1. Stable, recurring revenues from a diverse portfolio of royalty and venture debt

investments in North American, emerging-growth companies.

2. Royalty buyouts or buy downs.

3. Returns from realizations of equity and warrant positions in portfolio companies.

4. Supporting and buying our own stock when it represents particularly high return.

5. Opportunistically grow the business through acquisitions.

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Contact Us For more information, please contact: ALEX BALUTAChief Executive Officer

Phone: (416) 477-2431 Cell: (416) 574-6611

Email: [email protected]

ROBB MCLARTYChief Investment Officer

Phone: (647)-477-4896 Cell: (805) 453-3699


DONNACHA RAH ILL

Chief Financial Officer Phone: (416)-477-2601


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flow capital (tsxv:fw) annual general meeting · 2019. 7. 5. · humble abode dionymed...

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