Input Capital Corp. Announces FY2019 Q3 Results
REGINA, Aug. 13, 2019 /CNW/ - Input Capital Corp. ("Input", "Company", "we", "our") (TSX Venture: INP) (US: INPCF) has released its third quarter results for the 2019 fiscal year. All figures are presented in Canadian dollars.
"This last quarter has been one of significant activity at Input," said Doug Emsley, President & CEO. "In the first half of the quarter, we completed our strategic alternatives review, and in the second half we set about implementing changes as a result of our Board's decision, announced May 14th, to postpone capital deployment."
"In keeping with that decision, and with an eye on profitability, we have eliminated all sales & marketing expenses and reduced staffing to a level appropriate to our new level of activity. We have also reduced G&A expenses in a number of other areas, including executive compensation, which will result in a significant overall reduction in operating expenses going forward. And with our Substantial Issuer Bid, completed subsequent to the end of the quarter, we have been able to buy back almost 20% of our outstanding shares at about a 30% discount to our Book Value, boosting Book Value per share. This represents a prudent strategy especially in light of ongoing trade issues with China," said Emsley.
FY2019 Q3 HIGHLIGHTS
- Adjusted crop revenue1 of $3.879 million on the delivery of 8,540 canola equivalent metric tonnes1 ("MT" or "tonnes") at an average price of $454.22 per MT;
- Adjusted net income1 of $1.064 million, or $0.01 per share. This is up from $0.249 million, or $0.00 per share, over the same three month period last year;
- In December 2018, we announced the renewal of our Normal Course Issuer Bid, allowing the company to buy back up to 6,500,856 of its Class A common shares. During the three months ended June 30, 2019, we bought back a total of 132,500 shares at an average price of $0.77 per share;
- On May 14, 2019, the Board announced that in conjunction with management and financial advisors, it had completed a thorough and comprehensive review that took into account current market opportunities and trade disruptions. The Board concluded that options for cost effective scalable funding of the company's mortgage stream business are not competitively available in the marketplace at this time, particularly in light of the trade issues with China. As a result, the Board decided to postpone further capital deployment operations in favour of maximizing shareholder value from our existing book of business and to concentrate efforts on operating profitably, maximizing book value per share and continuing to return capital to shareholder via dividends and share buybacks.
- On May 14, 2019, the Company announced the eleventh consecutive quarterly dividend of $0.01 per share, or $0.04 annualized;
- On June 3, 2019, we announced a Substantial Issuer Bid ("SIB") to purchase for cancellation up to $15,000,000 of our common shares at a price of between $0.72 and $0.82 per share, to be determined by way of a modified Dutch auction process;
- Finished the quarter with:
- Cash and cash equivalents of $25.833 million;
- Total crop interests and other financial assets of $29.741 million;
- Loans and mortgages receivable of $57.816 million;
- Multi-year active streaming contracts with 406 farm operators;
- Total shareholders' equity of $95.373 million;
- $5.404 million drawn on its long-standing revolving credit facility; and
- Long-term debt of $18.910 million.
1 Non-IFRS financial measures with no standardized meaning under IFRS. For further information and a detailed reconciliation, refer to the "Non-IFRS Measures" section of the MD&A.
KEY PERFORMANCE INDICATORS FOR THE COMPARABLE PERIODS ARE SUMMARIZED BELOW:
Twelve months ended
CAD millions, unless otherwise noted
Adjusted crop revenue
Adjusted total revenue
Corporate admin expense
Adjusted net income
Adjusted net income per share (basic)
Adjusted EBITDA per share (basic)
Ending canola reserves (MT)
Total capital deployed in period
Active streaming clients
For the quarter ended June 30, 2019, we generated adjusted crop revenue of $3.879 million on adjusted crop volume of 8,540 MT.
Adjusted crop revenue for the quarter represents a 123% increase in quarterly volume over the comparable quarter one year ago, when we sold 3,837 MT of canola equivalent for adjusted crop revenue of $1.897 million. Crop margin for the quarter was $0.620 million, compared to $0.542 million in the same quarter last year. The large increase in adjusted crop revenue is a result of weather-related delivery delays in September and resulting crop quality issues which pushed more of the expected 2018 crop sales into the second and third quarters compared to the previous year, when there were no significant weather-related delays.
During the period, the Company generated interest margin of $0.842 million compared to $0.785 million in the comparable quarter one year ago. This increase is a result of growth in the mortgage stream portfolio during the period.
CAPITAL DEPLOYMENT AND STREAMING CONTRACT PORTFOLIO
Quarter Ended June 30, 2019
Capital deployment has been constrained in recent quarters by our need to source a scalable source of mortgage financing. As a result of our strategic alternatives review, we do not plan to deploy any more capital into streams until we have a scalable source of capital in place to fund them.
As of June 30, 2019, Input's active streaming portfolio consisted of 406 geographically diversified producers. The Company has streams with 290 producers in Saskatchewan, 104 in Alberta, and 12 in Manitoba.
The change in active streaming contracts by region on a quarterly and annual basis is demonstrated in the table below:
Jun 30, 2019
Mar 31, 2019
Jun 30, 2018
Year Over Year
KEY BALANCE SHEET ITEMS ARE SUMMARIZED BELOW:
Statements of Financial Position
CAD millions, unless otherwise noted
Jun 30, 2019
Jun 30, 2018
Crop interests and other financial assets
Loans and mortgages receivable
Total shareholders' equity
Common shares outstanding
Book value per share
Revolving credit facility
Canola prices have been soft due in large part to trade disruptions with China, Canada's traditionally largest canola customer, as well as general softness in the price of US soybeans, to which canola prices have a strong correlation.
It is impossible to know when or to what degree canola prices will rise, or if these trade tensions will be resolved. However, shareholders should bear in mind that while lower canola prices do have an impact on the profitability of our business, the effect is moderate, and we have a significant margin of safety. Every one of our contracts remains profitable at today's prevailing canola prices. In fact, the price of canola could fall below the marginal cost of production of our farm clients, and our canola margins would remain positive.
Our operational focus is on profitably managing the contracts that we currently have with existing clients. We will continue to distribute capital to shareholders via the dividend and through NCIB activity at appropriate price levels.
On July 2, 2019, John P.A. Budreski resigned as a director of the Company in order to focus on his many business interests. We thank John for his service and wish him all the best.
On July 15, 2019, we announced the completion of the SIB, in which we bought back 16,088,083 shares at a price of $0.82 per share, for a total expenditure of $13.192 million. Upon completion of the SIB, we had 65,933,877 shares outstanding, representing a reduction in our shares outstanding of 19.6%, with our share capital reduced by the $13.192 million spent to buy back the shares.
Since the completion of the SIB, our previously announced Normal Course Issuer Bid ("NCIB") program has been actively buying back additional shares for cancellation.
On July 31, 2019, Deloitte LLP resigned as our auditors at our request. KPMG LLP have been appointed as our replacement auditors. We expect to realize significant cost savings as a result of this change.
NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
Input is an agriculture commodity streaming company with a focus on canola, the largest and most profitable crop in Canadian agriculture. The Company has developed several flexible and competitive forms of financing which help western Canadian canola farmers solve working capital, mortgage finance and canola marketing challenges and improve the financial position of their farms. Under a streaming contract, Input has provided capital in exchange for a stream of canola via multi-year fixed-volume canola purchase contracts. To a farmer, Input is like a virtual grain company, buying canola and providing financial solutions. To canola buyers, Input is like a large virtual farm which produces and sells canola over a large geographically diverse footprint, but does not own the land, or equipment or operate the farm. As of May 14, 2019, Input has postponed capital deployment operations in light of canola trade uncertainties with China and the effect of this uncertainty on capital availability.
Forward Looking Statements
This release includes forward-looking statements regarding Input and its business. Such statements are based on the current expectations and views of future events of Input's management. In some cases the forward-looking statements can be identified by words or phrases such as "may", "will", "expect", "plan", "anticipate", "intend", "potential", "estimate", "believe" or the negative of these terms, or other similar expressions intended to identify forward-looking statements. The forward-looking events and circumstances discussed in this release may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting Input, including risks regarding the agricultural industry, economic factors and the equity markets generally and many other factors beyond the control of Input. No forward-looking statement can be guaranteed. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statement or information. Accordingly, readers should not place undue reliance on any forward-looking statements or information. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Input undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Input measures key performance metrics established by management as being key indicators of the Company's strength, using certain non-IFRS performance measures, including:
- Adjusted Crop Revenue, Adjusted Crop Volume and Adjusted Crop Margin;
- Adjusted Total Revenue;
- Adjusted Net Income, Adjusted Net Income per share, Adjusted EBITDA, Adjusted EBITDA per share, and;
- Book Value per share.
The Company uses these non-IFRS measures for its own internal purposes. These non-IFRS measures do not have any standardized meaning prescribed by IFRS, and these measures may be calculated differently by other companies. The presentation of these non-IFRS measures is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The Company provides these non-IFRS measures to enable investors and analysts to understand the underlying operating and financial performance of the Company in the same way as it is frequently evaluated by Management. Management will periodically assess these non-IFRS measures and the components thereof to ensure their continued use is beneficial to the evaluation of the underlying operating and financial performance of the Company, and to confirm that these measures remain useful for comparison purposes to other royalty/streaming companies. For more detailed information, please refer to Input's Management Discussion and Analysis available on the Company's website at investor.inputcapital.com and on SEDAR at www.sedar.com.
SOURCE Input Capital Corp.