Grenville Strategic Royalty Corp. (TSXV:GRC) (“Grenville” or the
“Company”) today announced its financial and operating results for
the three-month period ended March 31, 2018. Financial references
are in Canadian dollars unless otherwise specified.
2018 First Quarter Financial Highlights
- Royalty Payment and Interest Income of $1,039,000
- Realized gain on Contract Buyout of $125,000
- Revenue of $1,844,000
- Adjusted EBITDA(1) of $115,000
- Free Cash Flow(1) of $(133,000)
Operational Highlights
- Announced Robb McLarty as the new Chief Investment Officer and
Acting Chief Executive of Grenville and the resignation of Steve
Parry from the Board of Directors
- Entered into an arrangement agreement with LOGiQ Asset
Management Inc. (“LOGiQ”) for a reverse takeover of LOGiQ.
Pending the requisite shareholder approvals, court approvals and
closing conditions, Grenville shareholders would hold approximately
67% of the combined company and LOGiQ shareholders 33%
- Closed three new investments since January 1, 2018, consisting
of $950,000 in Solar Brokers Canada Corp. (“Solar Brokers”),
$800,000 in Dionymed Holdings Inc.(“DionyMed”), and US$875,000 in
Stability Healthcare Inc. (“Stability”)
- Received a Contract Buyout of $250,000, plus royalties earned,
on the $125,000 investment in Fixt, bringing the total return to
$277,000 for a cash-on-cash return of 2.21 within ten months
- Converted a $1 million royalty agreement in WatchIt! to 10
million shares in Inner Spirit at a price of $0.10 per share
- Received 80,000 warrants in DionyMed and granted the right to
earn up to 399,424 common share purchase warrants in Boardwalktech
in relation to consulting services, both of which were subsequent
to the end of the period
“The transaction with LOGiQ provides us with
immediate financial scale that allows us to leverage our existing
deal sourcing platform to continue the growth of our portfolio”
said Robb McLarty, Acting Chief Executive Officer of Grenville.
“The three investments made since the beginning of the year reflect
what we seek when sourcing investments. Each company has a strong
customer value proposition, is capital efficient, and is led by a
proven management team with a significant ownership stake. They are
companies of scale and growth, cumulatively representing more than
$69 million in run-rate revenue. Looking forward, we will
continue to source and close investments in companies like Solar
Brokers, DionyMed and Stability.”
Financial Highlights
Canadian dollars |
Three months ended March 31, 2018 |
Three months ended March 31, 2017 |
Revenues |
$ |
1,844,420 |
|
$ |
(3,442,258 |
) |
Royalty Payment Income Interest and Fee Income Earned |
|
1,038,506 |
|
|
1,333,641 |
|
Adjusted EBITDA(1) |
|
115,796 |
|
|
157,101 |
|
Free Cash Flow(1) |
|
(132,874 |
) |
|
52,232 |
|
(Loss)/Profit for the period |
|
195,934 |
|
|
(3,792,281 |
) |
EBITDA/EBITDA (Loss)(1) |
|
664,615 |
|
|
(4,638,865 |
) |
Basic Earnings/(Loss) per share |
|
0.0012 |
|
|
(0.0357 |
) |
Diluted Earnings/(Loss) per share |
|
0.0012 |
|
|
(0.0357 |
) |
Weighted basic average number of shares outstanding |
|
106,317,656 |
|
|
106,297,830 |
|
Royalty agreements acquired and promissory notes receivable in
period |
|
950,000 |
|
|
98,130 |
|
- EBITDA, Adjusted EBITDA and Free Cash Flow are non-IFRS
measures. Refer to section Definition of Non-IFRS Measures for
further explanation and definitions.
RevenuesRevenues were
$1,844,000 for the three-month period (Q1 2018) ended March 31,
2018, compared to $(3,442,000) for the corresponding period in
2017. Like previous reporting periods, certain non-cash items are
recognized in revenue in accordance with IFRS 9.
Revenues were positively impacted by the
$125,000 realized gain from the buyout of the Fixt investment.
Revenues were also positively impacted by net non-cash items of
$639,000 in Q1 2018 compared to a negative impact of $4,793,000 for
the corresponding period in 2017. The non-cash amount relates to
$410,000 of an unrealized gain in writing-up the fair value of
royalty agreements acquired and promissory notes receivable and
$94,000 of an unrealized foreign exchange gain. These improvements
were partially offset by $182,000 for the unrealized loss in the
change in the fair value of the shares held in Lattice Biologics
Ltd.
Royalty Payment Income and Interest and
Fee Income EarnedRoyalty payment income plus interest and
fee income earned were $1,039,000 for Q1 2018, compared to
$1,334,000 for the corresponding period in 2017. The change was
primarily due to $269,000 of income recognized on the Aquam
investment during the three-month period ended March 31, 2017 that
was bought-out in April 2017.
Management believes that the portfolio will
continue to contribute Free Cash Flow(1) on a regular basis as it
matures.
Operating ExpenseTotal
operating expenses were $1,205,000 in Q1 2018, compared to
$1,251,000 for the corresponding period in 2017. The improvement
was due to lower salary costs of approximately $72,500 due to two
fewer employees, lower rent of $18,500 as a result of moving
offices, lower staff training costs of $17,000 and an expense
incurred in Q1 2017 of $400,000 related to overclaimed HST input
credits. These improvements were partially offset by a $312,500
restructuring cost for the termination of the employment agreement
for a managing director of the Company and $136,500 of professional
fees incurred for the transaction to combine with LOGiQ.
Adjusted EBITDA(1) Adjusted
EBITDA(1) was $116,000 for Q1 2018, compared to $157,000 for the
corresponding period in 2017. The variance was due to a number of
factors but the insignificant change demonstrates the
sustainability of the company’s performance even though royalty
payment income, the core revenue item fell by $295,000.
Free Cash Flow(1)Free Cash
Flow(1) was $(133,000) for Q1 2018, compared to $52,000 for the
corresponding period in 2017. The change was due to $103,000
year-end related audit and professional fees paid and the expenses
paid for professional fees relating to the transaction to combine
with LOGiQ.
Profit (Loss) After TaxesProfit
after taxes was $196,000 for Q1 2018, compared to $(3,792,000) for
the corresponding periods in 2017. The improvement was primarily
due to $4,154,000 improvement in non-cash items (unrealized foreign
exchange gains and losses, unrealized gains and losses from the
changes in the fair value of royalty and equity investments and
realized loss from investments written-off) between the
periods.
OutlookThe Company has invested approximately
$72 million of capital in 43 portfolio companies, generated
Adjusted EBITDA(1) of $20.3 million since inception and generated
free cash flow(1) of $12.3 million since July 2014. The core of the
portfolio has reached a scale at which it is generating positive
Adjusted EBITDA(1) and Free Cash Flow(1). The Company has over time
developed and expanded the royalty model to include equity
investments as part of its offering. The Company will in select
cases where management believes the balance of risk and return
warrant it, blend royalties with an equity kicker where management
believe it may lead to better returns for the Company and
ultimately our shareholders.
Grenville’s royalty agreements with its
portfolio companies generated Adjusted EBITDA(1) to the Company of
approximately $0.1 million for Q1 2017. As of May 3, 2018, the
Company estimates that the royalty payment income and interest
earned for April 2018 will be $0.37 million. Operating expenses
(excluding share-based compensation, restructuring cost,
transactions costs for the LOGiQ transaction and depreciation) for
Q1 2018 were approximately $0.225 million per month. Operating
expenses, excluding a restructuring cost in relation to Steve
Parry’s move to an advisory role, are estimated to be in the range
of $0.2 million to $0.25 million per month for the three months
ending June 30, 2018. The Company’s cash position at May 3, 2018 is
approximately $5.1 million.
Grenville’s financial statements and
management’s discussion and analysis for the three-month period
ended March 31, 2018, will be filed today on SEDAR at www.sedar.com
and also available on Grenville’s website at
www.grenvillesrc.com.
(1) Please refer to the Company’s management’s discussion
and analysis for definitions and reconciliations of these non-IFRS
measures to measures prescribed by IFRS.
Conference Call
DetailsGrenville will host a conference call to discuss
these results at 8:00 a.m. Eastern Time, Friday, May 4, 2018.
Participants should call (647) 427-2311 or (866) 521-4909 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 7288573. The
replay recording will be available until 11:59 p.m. Eastern Time,
May 17, 2018.
An audio recording of the conference call will
be also available on the investors’ page of Grenville’s website at
www.grenvillesrc.com.
About GrenvilleBased in
Toronto, Grenville Strategic Royalty Corp. makes growth-oriented
investments in established businesses with revenues of up to $50
million. Grenville generates revenues from royalty payments,
buyouts from contracts and equity returns. The royalty financing
structure offered by Grenville competes directly with traditional
equity to meet the long-term financing needs of companies on more
attractive commercial terms.
Forward-Looking Information and
StatementsThis 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 discussed under the
heading "Risk Factors" on pages 17 to 28 of the Annual Information
Form of the Company dated April 27, 2018 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.
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.
For further information, please
contact:
Grenville Strategic Royalty Corp.:Donnacha
RahillChief Financial OfficerTel: (416) 477-2601
Grenville Strategic Royalty (TSXV:GRC)
Historical Stock Chart
From Sep 2024 to Oct 2024
Grenville Strategic Royalty (TSXV:GRC)
Historical Stock Chart
From Oct 2023 to Oct 2024