Flow Capital Corp. ($FW)

Good morning, ladies and gentlemen, and welcome to Flow Capital's Q1 2026 Earnings Call. [Operator Instructions] I would like to remind everyone that today's discussions may contain forward-looking statements that reflect current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. For more information on Flow Capital's risks and uncertainties related to these forward-looking statements, please refer to the YE 2025 Company's management discussion and analysis, which is available on SEDAR. Today's call is being recorded on Tuesday, May 12, 2026. And I would now like to turn the meeting over to Alex Baluta, Chief Executive Officer of Flow Capital. Please go ahead.

Thank you, operator. One clarification. This is our Q1 2026. Although as the operator said, you can find our results for all prior quarters filed on SEDAR or on our website. Thank you, everybody, for joining. I expect this will be a very short call. Happy to announce a continued growth in Q1 2026. Highlights include a 21% revenue increase to $3.5 million, up from $2.9 million, a 4% increase in recurring free cash flow to just under $900,000, up from $850,000 a year ago, an 8% increase in recurring free cash flow per share to $0.03 a share, a 27% increase in total assets -- I should say, total investment assets to $80.3 million, that's up from $63.4 million a year ago and up from $73.5 million in December, and a 6% increase in book value from a year ago, now at $1.29 versus $1.22 a year ago and also up from $1.275 in December. Additionally, during the quarter, we made $6.5 million of new investments, which compares to $3.2 million a year ago. All in all, it was another strong quarter. We're well into our sixth year of profitability every quarter, free cash flow hitting almost $900,000 in the quarter, and things continue to be on track for us. I do want to make a couple of comments on the environment. I made some of these comments in our Q4 call about a month ago, and I encourage everybody to listen to that call as well. We have seen over the past couple of years, increasing competition, which has led to tighter competition on deal flow, but also decreases in pricing, in particular around headline interest rates. That was driven -- if you go back into the early 2020s, there was -- there were high valuations in the '21, '22, '23 time frame. And then you also saw a lot of capital flow into private credit in the '23, '24 and '25 time frame. And that, in particular, you saw that at the very large end of the market. We've seen some announcements in that time frame of almost a doubling of capital access available for private credit. And broadly speaking, we're very much in the growth segment of smaller companies, but in the growth segment of private credit, non-asset-backed high-growth companies, that's what we do. And we did see a trickle-down effect in terms of pricing pressures that came down from the bigger players slowly down into our space. Now it's been a challenge, in particular, on keeping our discipline, but I'll talk about that in a minute. But the good news is, I think we're starting to see a reversal of that trend. In particular, a lot of the larger players, there's lots and lots of news stories out there about redemptions, about concerns at investor levels, about gating of funds, and to be very clear, that has nothing to do with us. We're not in that scenario, although we know several people are. But with the gating of those funds, that trickle down effect of excess capital is starting, in my opinion, to reverse. And so we're seeing pricing stabilize, if not increase a little bit. Broadly speaking, we're seeing SaaS valuations stabilize, if not recover. Even in our own portfolio, we're seeing the businesses stabilize in terms of their own growth rates. And I think I mentioned this on the prior call, but I'll say it again. I feel that our portfolio is probably in the best condition it's been for a long, long time. It's in very strong health. And that's not to say it was bad before, it's just in terms of sort of both objective and -- let me just say, perception, the portfolio is in very good shape. So we have a unique business model that, again, I've highlighted before, and then we're essentially an evergreen model. We're not a fund that has -- when money is often paid back to a fund, sometimes they can pay that back to their limited partners, but often they have to redeploy it. We're in a unique model where we can pay back our lenders at both levels of our cap stack and then redraw in particular on our senior line of credit to redeploy capital. That means in practice is that we are not pressured to make decisions or investments that might not meet our very high economic thresholds of risk return. And so we've been cautious and judicious deployers of capital over the last couple of quarters, and that served us well. We've also started to see some of our portfolio companies, as they continue to improve, either get refinanced, new equity rounds or, in some cases, M&A transactions. And in fact, we announced one such M&A transaction in Q2, not in Q1. That was the TVision. It was a good exit for the company. It was an excellent exit for us. That investment had a 25% IRR for us, and there was over a $1 million gain to book value for us that will hit in Q2. But it does show the strength and resilience of our model. And we wish them well in their future endeavors for the acquirer, and that was an excellent outcome and that's what we hope to see in all of our deals. So while there's been pricing pressures, we've been very cautious and very conservative. Our portfolio health is good. And the one maybe unfortunate aspect is that we've deployed less capital than I had hoped, although we continue to deploy capital. In fact, as I mentioned in my preliminary comments, our investable assets -- our investment assets on our balance sheet is actually up to $80.3 million, up from $73.5 million at the end of Q4. So the impacts, though, have been slower deployments, and that will have some impact on our growth here in the short term. We continue to grow, but you'll notice that our growth in the quarter was down below the growth that we had last year. But we do continue to grow our book value per share. And our alignment as management to own a significant stake in the equity of the company is aligned with shareholders and shareholders' return. So all that to say is it's a good quarter. We remain very selective. We're seeing an easing of pricing pressures. We're actually seeing an increase in good deals in our pipeline. We're seeing some of our more direct competitors feeling challenged. And we will continue to invest in our business, and we'll continue to seek out excellent investment opportunities on a risk-adjusted basis. So with that, I'm going to pause and see if there's any questions.

[Operator Instructions] And it looks like there are no questions currently in the queue. I will turn the call back over to you, Alex Baluta.

Thank you very much, Marissa. Thank you, everybody, for listening to the recording of this call, and I look forward to speaking to you after Q2. Thank you very much.

This concludes today's conference call. We thank you so much for your participation. You may now disconnect.