Input Capital Corp. Announces FY2021 Q1 Results
REGINA, SK, Feb. 16, 2021 /CNW/ - Input Capital Corp. ("Input", "Company", "we", "our") (TSXV: INP) (OTC: INPCF) has released its results for the first quarter, ended December 31, 2020, of the 2021 fiscal year. All figures are presented in Canadian dollars.
"We will look back on Q1 of our 2021 fiscal year as a pivot quarter for Input Capital," said President & CEO Doug Emsley. "The acquisition of SRG has set in motion a gradual shift from the agriculture business into the physical and cyber security business. This will take some time to fully implement because we have a significant number of agriculture clients whose contracts have a few years left on them, but it is our intention to use SRG as a platform for growth in the security business and back that growth with our very strong balance sheet.
"This means that you will see a change in the format of our reporting to you starting with the next quarter, which we will report mid-May 2021. Book value per share will remain an important measure, but profitable growth both organically and via acquisition are going to take on a new level of emphasis and importance. We are very excited about this new direction and believe it is the best path to create value for our shareholders."
FY2021 Q1 HIGHLIGHTS
- Adjusted crop revenue* of $4.979 million on the delivery of 10,574 canola equivalent metric tonnes ("MT" or "tonnes") at an average price of $471 per MT;
- Adjusted net income* of $0.377 million, or $0.01 per share. This is a significant increase from the net loss of $3.180 million, or $(0.05) per share, during the same quarter last year and is a result of a realized loss on a mortgage reported in the comparable period last year, and a non-cash decrease in DSU expenses in the reporting period that resulted from a decline in the share price during the quarter;
- During the quarter, we bought back 1,328,109 shares at an average price of $0.87 per share and received approval from the TSX Venture Exchange for the renewal of our NCIB program starting on January 4, 2021;
- On October 29, 2020, we announced that the previously announced Plan of Arrangement with Bridgeway National had been terminated;
- On November 19, 2020, we paid a quarterly dividend of $0.01 per share, or $0.04 per share annualized;
- On November 30, 2020, we announced that we had entered into a non-binding term sheet to acquire 100% of the shares of privately-held SRG Security Resource Group Inc. On December 14, 2020, we announced that we had finalized a binding share purchase agreement with SRG and all of its shareholders, and subsequent to the end of the quarter, we closed the transaction on February 1, 2021. For more details on the transaction and the role of the Independent Committee of the Board, please see the relevant sections of the MD&A as well as documents filed on SEDAR.
- We finished the fiscal year with:
- Cash and cash equivalents of $29.466 million;
- Total crop interests and other financial assets of $13.215 million;
- Loans and mortgages receivable of $26.516 million;
- Multi-year active streaming contracts with 75 farm operators;
- Total shareholders' equity of $69.587 million; and
- Long-term debt of $7.734 million.
KEY PERFORMANCE INDICATORS FOR THE COMPARABLE PERIODS ARE SUMMARIZED BELOW:
CAD millions, unless otherwise noted
Revenue less Expenses before other income
Adjusted crop revenue
Adjusted total revenue
Corporate admin expense
Adjusted net income (loss)
Adjusted net income per share (basic)
Adjusted EBITDA per share (basic)
Active streaming clients
As an agriculture company, our business is highly seasonal and not well-suited to the traditional quarter-to-quarter reporting requirements of public companies, and we remind you to keep this in mind when reading the information in this discussion and analysis of Input's quarter ended December 31, 2020.
REVENUE & NET INCOME
For the quarter ended December 31, 2020, we generated adjusted crop revenue of $4.979 million on adjusted crop volume of 10,574 MT.
Adjusted crop revenue for the quarter represents a 61% decrease in quarterly volume over the comparable quarter one year ago, when we sold 27,092 MT of canola equivalent for adjusted crop revenue of $11.845 million. Revenue per MT was higher this year due to higher canola prices, but volumes were much lower as our book of canola streaming contracts shrinks. Our book is shrinking because we have not deployed new capital into streaming contracts since May 2019, and because existing contracts are either completed or occasionally bought back early by the farmer.
During the period, the Company generated interest margin of $0.525 million compared to $0.950 million in the comparable quarter one year ago, due to a combination of mortgage buyouts reducing the size of our book, as well as a reduction in our own financing costs as a result of paying down a significant portion of our long-term debt.
STREAMING CONTRACT PORTFOLIO
As of December 31, 2020, our active streaming portfolio consisted of 75 geographically diversified streams, distributed as follows:
Dec 31, 2020
Sept 30, 2020
Dec 31, 2019
Year Over Year
We expect our book of streaming contracts to shrink as they mature or are bought back by our farm clients. The current low interest rate and high canola price environment offers farmers excellent refinancing opportunities.
KEY BALANCE SHEET ITEMS ARE SUMMARIZED BELOW:
Statements of Financial Position
CAD millions, unless otherwise noted
Dec 31, 2020
Dec 31, 2019
Crop interests and other financial assets
Loans and mortgages receivable
Total shareholders' equity
Common shares outstanding
Book value per share
Revolving credit facility
APPOINTMENT OF BLAIR ROSS AS CHIEF OPERATING OFFICER
We are pleased to announce the appointment on February 16, 2021 of Blair W. Ross, C.Dir., as Chief Operating Officer of the Company. Blair is a co-founder of SRG and its predecessor companies, giving him over 33 years of corporate leadership experience in the security industry. He joins the leadership team of the Company as we prepare to grow SRG's business with our balance sheet.
Blair has three decades of experience in the private security industry, during which he has built and managed numerous large security operations from the ground up. Blair launched his career in 1989 when he co-founded Vision Security and Investigations Inc. In the 12 years that followed, he served as Vice President, building that company into a major central and western Canadian regional service provider with over 1,100 employees.
During this time, he developed a special high-level security consulting subsidiary company called SRG Security Resource Group Inc., which has grown into a significant employer in western Canada. Blair will continue to lead the growth of SRG as a subsidiary of Input Capital.
Blair is active in his local community as Past Chair of the Hospitals of Regina Foundation and previously as the Co-Chair of the Sandra Schmirler Charity Golf Classic fundraising event. He is also a Regina Big Brothers Honorary Life-time Big Brother award recipient and a recipient of a Diamond Jubilee Medal for his business and community involvement.
Blair received the Chartered Director (C.Dir) designation from the Directors College (a joint venture of McMaster University and The Conference Board of Canada) in 2013 and currently sits on the board of the Saskatchewan Gaming Corporation (Chair). Previously he sat on the boards of the Hospitals of Regina Foundation (Past Chair) and the Regina Airport Authority.
UPDATE ON NORMAL COURSE ISSUER BID
During the quarter, we bought back 1,328,109 shares at an average price of $0.87 per share as part of our ongoing share buyback activity under our active Normal Course Issuer Bid. Our Book Value is now $1.33 per share, up from $1.24 per share a year ago. During that time, we also paid out $0.04 per share in dividends. We also renewed our NCIB for the upcoming year, with a start date effective January 4, 2021.
When combined with all previous NCIB activity, plus the two Substantial Issuer Bids completed in 2019 and 2020, our total historical share buyback program has bought back 32,702,002 shares at an average price of $0.80. This represents approximately 39% of the shares that were outstanding when we began to buy back shares in 2017.
We continue to believe that our shares have been trading in a price range which does not adequately reflect their value and that the purchase of shares under the NCIB will enhance shareholder value in general.
We expect our book of streaming contracts to rapidly shrink as they mature or are bought out over the next 2-3 years. We intend to redeploy that capital in the physical and cyber security business of SRG because we believe this will lead to better results for shareholders than attempting to grow the canola streaming business with limited capital.
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. The addition of SRG to the corporate structure will also mean a greater focus on EBITDA growth as a measure of our progress.
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, 2021 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 with any certainty. To date, it is possible that COVID-19 may have indirectly had a positive impact on canola prices and our bottom-line results.
On February 1, 2021, we closed the previously announced $19.9 million purchase of SRG Security Resource Group Inc., a company owned 23.1% by Input's Chief Executive Officer. Consideration was paid 50% in cash and 50% in shares of the Company at a deemed value of $1.12 per share, with any standard working capital adjustments paid in cash. We plan to use our balance sheet to back the expansion of SRG's physical and cyber security business. For more information on the transaction, see the section of the accompanying MD&A entitled Purchase of SRG Security Resource Group Inc. and our filings on SEDAR.
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 was founded as an agriculture commodity streaming company providing several flexible and competitive forms of financing which help western Canadian farmers solve working capital, mortgage finance and canola marketing challenges and improve the financial position of their farms. On February 1, 2021, Input acquired SRG Security Resource Group Inc. as a platform for growth in the cyber and physical security business in Canada. For more information, please visit www.inputcapital.com.
SRG is a market-leading Canadian provider of world-class Cyber Security and physical Protective Security Services. Founded in 1996, most of SRG's employees are located in Western Canada, but solutions and services are provided to organizations across the country. SRG clients include federal and provincial governments, Crown corporations, and many high profile corporate and public sector clients such as hospitals, airports, utility companies and police forces. SRG now operates as a wholly-owned subsidiary of Input. More information is available on SRG's website at https://securityresourcegroup.com.
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.