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Input Capital Corp. Announces FY2019 Year End Results

REGINA, Dec. 4, 2019 /CNW/ - Input Capital Corp. ("Input", "Company", "we", "our") (TSX Venture: INP) (INPCF) has released its year end results for the 2019 fiscal year. All figures are presented in Canadian dollars.

"Our focus since we announced the results of our strategic alternatives review in May 2019 has been the implementation of our current strategic plan: we have stopped deploying capital into new streams, we have significantly reduced our operating expenses, are focussing our efforts on serving our existing clients well, and we have bought back over 20% of our outstanding shares at a significant discount to Book Value," said Doug Emsley , President & CEO. "Everything we do is oriented by our focus on accretively increasing Book Value per Share.

"It continues to be unclear whether trade issues with China will be resolved soon, or ever, and we believe that resolution of that issue is a minimum requirement in our search for scalable capital sources for our mortgage stream program. Until such time, we will continue to strengthen our balance sheet and exercise extreme prudence so that as many options as possible can be on the table going forward," said Emsley.

FY2019 FULL YEAR HIGHLIGHTS

  • Adjusted crop revenue1 of $42.879 million on the delivery of 88,487 canola equivalent metric tonnes1 ("MT" or "tonnes") at an average price of $484.58 per MT;

  • Adjusted net income1 of $3.679 million , or $0.05 per share. This is down from $4.079 million , or $0.05 per share, during the previous fiscal year, due to higher financing costs and lower canola prices;

  • In December 2018 , we announced the renewal of our Normal Course Issuer Bid ("NCIB"), allowing the company to buy back up to 6,500,856 of its Class A common shares. Over the course of the 2019 fiscal year, we bought back a total of 3,411,120 shares at an average price of $0.80 per share. Our board has approved the renewal of the NCIB program for another year, and we will be making application to the TSX Venture Exchange for approval of the renewal;

  • Over the course of the year, we paid a quarterly dividend of $0.01 per share, or $0.04 per share annualized;

  • On February 27, 2019 , our Board of Directors initiated a comprehensive review of strategic alternatives with the objective of enhancing shareholder value. The review process, which was conducted with the assistance of financial and legal advisors, considered a full range of potential strategic alternatives, which included, but was not limited to business combinations, scalable mortgage debt financing, acquisitions, joint ventures, moving into emerging crops such as cannabis and/or hemp, a go-private transaction, and the potential sale of the company.

  • 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 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 a Substantial Issuer Bid ("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. When combined with our NCIB, we bought back 23.4% of our outstanding shares during the fiscal year at a weighted average price of $0.82 per share.

  • On July 31, 2019 , Deloitte LLP resigned as our auditors at our request. KPMG LLP have been appointed as our replacement auditors. We have also reviewed our other professional services contracts and have been able to realize significant savings.

  • Finished the fiscal year with:


KEY PERFORMANCE INDICATORS FOR THE COMPARABLE PERIODS ARE SUMMARIZED BELOW: 


Quarter ended

Sept 30

Fiscal year ended

Sept 30

CAD millions, unless otherwise noted

2019

2018

2019

2018

Revenue





Crop

0.384

4.513

39.401

36.763

Interest

1.208

1.038

4.572

2.392

Rental

0.007

0.013

0.045

0.293

Total revenue

1.599

5.564

44.018

39.448






Adjusted crop revenue

1.077

4.825

42.879

41.336

Adjusted total revenue

2.291

5.875

47.496

44.021






Corporate admin expense

0.422

1.341

5.360

6.640






Adjusted net income

0.571

1.698

3.679

4.079

Adjusted net income per share (basic)

$0.01

$0.02

$0.05

$0.05

Adjusted EBITDA

1.337

1.038

10.938

14.579

Adjusted EBITDA per share (basic)

$0.02

$0.01

$0.14

$0.17






Ending canola reserves (MT)

125,000

366,000

125,000

366,000

Total capital deployed in period

-

16.819

13.002

33.791

Active streaming clients

126

371

126

371

 

FY2019 Q4 HIGHLIGHTS

  • Adjusted crop revenue1 of $1.077 million on the delivery of 2,551 canola equivalent metric tonnes1 ("MT" or "tonnes") at an average price of 422.02 per MT;

  • Adjusted net income1 of $0.571 million , or $0.01 per share. This is down from $1.698 million , or $0.02 per share, over the same three-month period last year. The decline is primarily due to a slow harvest pushing crop deliveries past the year-end cut-off.


REVENUE & NET INCOME

For the fiscal year ended September 30, 2019 , we generated adjusted crop revenue of $42.879 million on adjusted crop volume of 88,487 MT.

Adjusted crop revenue for the fiscal year ending September 30, 2019 , represents a 3% increase in volume compared to the previous twelve-month period, when we sold 85,672 MT of canola equivalent for adjusted crop revenue of $41.336 million . This translates into a crop margin of $3.026 million for the most recent year compared to $5.323 million for the previous year. The decrease in crop margin is due to the change in the mix of our business in favour of mortgage streams. Mortgage streams require fewer canola tonnes to service them than do capital streams.

During the twelve-month period, we also generated interest margin of $3.745 million compared to $2.331 million in the previous year. This is a result of the growth of our mortgage stream portfolio over the last year. Interest income on mortgages is accrued monthly.

For the fiscal year ended September 30, 2019 , we generated a net loss before taxes of $2.884 million (a net loss of $2.235 million after tax) compared to net loss before taxes of $1.821 million (net loss of $1.383 million after tax) during the previous year. The loss in the period ended September 30, 2019 is a result of an unrealized market value loss of $4.323 million during the period. We generated a profit of $1.980 million before the unrealized market value loss and income taxes. During the previous comparable period, we experienced an unrealized market value loss of $2.878 million and had profit before the unrealized market value loss and income taxes of $1.057 million .

CAPITAL DEPLOYMENT AND STREAMING CONTRACT PORTFOLIO

Fiscal Year Ended September 30, 2019

Capital deployment was constrained in the first part of the year 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. We do not believe that a scalable source of capital will be found so long as Canada has outstanding trade issues with China .

During the fourth quarter, 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, 304 marketing streams 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 September 30, 2019 , our active streaming portfolio consisted of 126 geographically diversified streams, distributed as follows:

Active Streams

Sept 30, 2019

Jun 30, 2019

Quarterly Net
Change

Sept 30, 2018

Year Over Year
Net Change

Manitoba

5

12

(7)

8

(3)

Saskatchewan

96

290

(194)

269

(173)

Alberta

25

104

(79)

94

(69)

Total

126

406

(280)

371

(245)

 

BALANCE SHEET

KEY BALANCE SHEET ITEMS ARE SUMMARIZED BELOW:

Statements of Financial Position 

CAD millions, unless otherwise noted

As at

Sept 30, 2019

As at

Sept 30, 2018

Cash

11.439

14.877

Crop interests and other financial assets

27.974

40.355

Loans and mortgages receivable

59.277

55.290

Total assets

107.718

119.065

Total liabilities

27.117

17.694

Total shareholders' equity

80.600

101.371

Common shares outstanding

63.752

83.251

Book value per share

$1.26

$1.22

Working capital

18.343

25.226

Revolving credit facility

5.404

3.687

Long-term debt

19.217

9.967

 

RENEWAL OF NORMAL COURSE ISSUER BID

Input's board of directors has approved the renewal of our Normal Course Issuer Bid ("NCIB" or "the Bid") when the current approval expires later this month because we believe that the Shares have been trading in a price range which does not adequately reflect their value and that the purchase of the Shares under the Bid will enhance shareholder value in general.

Subject to, and only upon receipt of approval by TSX Venture Exchange, the Bid will commence on December 18, 2019 and continue until the earlier of December 17, 2020 and the date by which Input has acquired the maximum Shares which may be purchased under the Bid.  The Bid will be made through the facilities of the TSX Venture Exchange, or such other "designated exchange" as that term is defined by applicable Canadian securities laws, and the purchase and payment for the Shares will be made in accordance with TSX Venture Exchange requirements, or such other designated exchange, at the market price of the Shares at the time of acquisition.  All Shares purchased by Input under the Bid will be cancelled.

OUTLOOK

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. Canola futures prices are down about 10% from one year ago.

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 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.

ABOUT INPUT

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 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.

Non-IFRS Measures

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.

__________________________
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.

SOURCE Input Capital Corp.


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