Input Capital Corp. Announces FY2020 Q2 Results
REGINA, May 15, 2020 /CNW/ - Input Capital Corp. ("Input", "Company", "we", "our") (TSX Venture: INP) (US: INPCF) has released its results for the second quarter of the 2020 fiscal year. All figures are presented in Canadian dollars.
"Our strategy remains focussed on the maximization of Book Value on a per share basis. In light of having suspended new capital deployment last year, this means we continue to reduce our operating expenses while we serve our ongoing clients, and continue to buy back shares when we have the opportunity to do so at a significant discount to Book Value," said Doug Emsley, President & CEO. "It is repetitive, because I have said it before, but everything we do is oriented by our focus on increasing Book Value per Share.
"As we do these things, we continue to strengthen our balance sheet and maximize our flexibility so that as many options as possible can be on the table going forward," said Emsley.
FY2020 Q2 HIGHLIGHTS
- Adjusted crop revenue* of $11.172 million on the delivery of 25,086 canola equivalent metric tonnes ("MT" or "tonnes") at an average price of $445.35 per MT;
- Adjusted net income* of $0.568 million, or $0.01 per share. This is virtually the same as the adjusted net income of $0.595 million, or $0.01 per share, during the same three-month period last year;
- During the quarter, we paid a quarterly dividend of $0.01 per share, or $0.04 per share annualized;
- During the quarter, we bought back 384,100 shares at an average price of $0.69 per share and we launched a Substantial Issuer Bid ("SIB") to purchase up to $7.5 million of our shares via a modified Dutch auction process in a price range per share between $0.60 and $0.70. The SIB was completed mid-April, and the final outcome is presented below;
- Subsequent to the end of the quarter, we repaid our entire debt outstanding with HSBC Bank Canada and closed our credit facility with them. This will save us over $400,000 per year in interest, standby fees and other fees; and
- Finished the quarter with:
- Cash and cash equivalents of $34.248 million;
- Total crop interests and other financial assets of $16.664 million;
- Loans and mortgages receivable of $33.180 million;
- Multi-year active streaming contracts with 107 farm operators;
- Total shareholders' equity of $77.051 million;
- $nil drawn on our long-standing revolving credit facility; and
- oong-term debt of $18.093 million.
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 (loss)
Adjusted net income per share (basic)
Adjusted EBITDA per share (basic)
Ending canola reserves (MT)
Total capital deployed in period
Active streaming clients
REVENUE & NET INCOME
For the quarter ended March 31, 2020, we generated adjusted crop revenue of $11.172 million on adjusted crop volume of 25,086 MT.
Adjusted crop revenue for the quarter represents a 9.7% decrease in quarterly volume over the comparable quarter one year ago, when we sold 27,775 MT of canola equivalent for adjusted crop revenue of $13.534 million. However, crop margin for the quarter increased to $0.622 million from $0.551 million in the same quarter last year. The decline in crop revenue in the quarter compared to last year is a result of two factors: lower realized prices for canola and a reduction in the total number of tonnes sold this year. This is in line with our previously described expectation that total revenue and adjusted crop revenue would decline significantly as a result of our portfolio optimization efforts.
For the twelve months ended March 31, 2020, we generated adjusted crop revenue of $27.972 million on adjusted crop volume of 63,268 MT.
Adjusted crop revenue for the twelve-month period ending March 31, 2020, represents a 30.6% decline in volume compared to the previous twelve-month period, when we sold 91,134 MT of canola equivalent for adjusted crop revenue of $44.646 million. This translates into a crop margin of $2.062 million for the most recent year compared to $3.520 million for the previous year. The decrease in volume is due to the change in the mix of our business in favour of mortgage streams, and a significant reduction in the number of marketing streams which remain in place as a result of an offer made by us to our clients to exit early from their marketing stream contracts. Mortgage streams require fewer canola tonnes to service them than do capital streams, and marketing streams represented a lot of tonnes and revenue, but very small margins for the amount of work required to manage them.
CAPITAL DEPLOYMENT AND STREAMING CONTRACT PORTFOLIO
Quarter Ended March 31, 2020
We have not deployed new capital for several quarters and do not plan to do so unless we acquire a scalable source of mortgage financing.
Last year, we offered existing clients who have a marketing stream with us the opportunity to end their marketing stream contracts early due to market instability and uncertainty. As a result of this offer, most of our outstanding marketing stream contracts were cancelled or bought back, significantly reducing our client count, as well as the number of tonnes in our canola reserves and our annual canola revenue. However, marketing streams have always generated very small margins for us, and this has not resulted in a material impact on our gross margin or our bottom-line earnings. We also gained some operational efficiencies by reducing the number of loads of canola to organize for marketing and payment processing during a short period of time.
As of March 31, 2020, our active streaming portfolio consisted of 107 geographically diversified streams, distributed as follows:
Mar 31, 2020
Dec 31, 2019
Mar 31, 2019
Year Over Year
KEY BALANCE SHEET ITEMS ARE SUMMARIZED BELOW:
Statements of Financial Position
CAD millions, unless otherwise noted
Mar 31, 2020
Mar 31, 2019
Crop interests and other financial assets (liabilities)
Loans and mortgages receivable
Total shareholders' equity
Common shares outstanding
Book value per share
Revolving credit facility
SUBSTANTIAL ISSUER BID LAUNCHED
On March 6, 2020, we announced a Substantial Issuer Bid ("SIB") for the purchase via a modified Dutch auction of $7.5 million of our shares in a price range between $0.60 and $0.70 per share. Subsequent to the end of the quarter, on April 16, 2020, we announced the results of the SIB. We purchased 7,418,686 shares at a purchase price of $0.70 per Share, for an aggregate purchase price of approximately $5,193,080.20, excluding fees and expenses relating to the Offer. Subsequent to the purchase of these shares, the shares were cancelled, reducing the number of shares outstanding in the Company to 54,116,971 as of April 21, 2020.
UPDATE ON NORMAL COURSE ISSUER BID
During the quarter, we bought back 384,100 shares at an average price of $0.69 per share as part of our ongoing share buyback activity under our active Normal Course Issuer Bid.
Canola prices have been soft over the last year 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. Net elevator prices are down about 10% from one year ago, but have been supported in-part by a decline in the Canadian dollar relative to the US dollar.
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, generating positive gross margins, 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.
The ongoing effects of the COVID-19 pandemic and uncertainty within international markets could impact the Company's financial performance for the year ended September 30, 2020 and, possibly, beyond. The financial impact will be dependent on the spread and duration of the pandemic and on related restrictions and government advisories. While we have not seen any material impact on our business to date, given the balance of uncertainties, the financial impact on the Company, if any, cannot be determined at this time.
Our operational focus is on profitably managing the contracts that we currently have with existing clients. We plan to continue to distribute capital to shareholders via the dividend and through NCIB activity at appropriate price levels, reduce our debt while maintaining solid liquidity, and focus on maximizing Book Value per Share.
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. As of May 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 (Loss), Adjusted Net Income (Loss) 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. 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.