Earnings call transcript: Flow Capital’s Q2 2025 revenue jumps 54% YoY

Flow Capital reported a robust second quarter for 2025, with revenue surging 54% year-over-year and marking the eighth consecutive quarter of growth. According to InvestingPro data, the company’s stock has delivered a strong 30.77% return over the past year, despite showing high price volatility. The company’s financial performance showcased strong investment activity and cash flow, reinforcing its competitive position in the venture debt market.

Key Takeaways

• Revenue increased by 54% year-over-year in Q2 2025.
• Recurring free cash flow rose by 212% compared to the previous year.
• Record $16.3 million in new investments were made during the quarter.
• The company experienced its eighth consecutive quarter of revenue growth.

Company Performance

Flow Capital has continued its upward trajectory with significant revenue growth in the second quarter of 2025. The company’s unique investment model, which focuses on providing low-cost capital to high-growth companies, has driven its success. With a market capitalization of $18.74 million and an impressive current ratio of 7.35, InvestingPro analysis suggests the company is currently trading below its Fair Value, presenting a potential opportunity for investors. Flow Capital’s ability to maintain equity positions post-investment and its strategic deployment of capital have been key differentiators in a competitive market.

Financial Highlights

• Revenue: $3.2 million (up 54% YoY)
• Recurring free cash flow: $884,000 (up 212% YoY)
• Total investments: $72.2 million (up from $62 million in December)
• New investments in Q2: $16.3 million (record quarter)

Outlook & Guidance

Flow Capital remains focused on scaling its business and leveraging its operational strengths. Despite potential competitive pressure from banks re-entering the venture debt market, the company anticipates continued growth by targeting high-growth companies. With the next earnings report due on August 20, 2025, investors can gain deeper insights through InvestingPro’s comprehensive analysis, which includes additional ProTips and detailed financial metrics. The guidance for future revenues and earnings remains consistent, with projections for 2025 and 2026 holding steady.

Executive Commentary

CEO Alex Beluda highlighted the company’s consistent growth and strategic advantage, stating, "Q2 2025 marks the eighth sequential quarter in a row where our revenue was up quarter to quarter." Beluda also emphasized the cost-effectiveness of Flow Capital’s investment approach, noting, "The value proposition that we provide them is that the cost all in cost of our investment is dramatically lower than cost of equity."

Risks and Challenges

• Increased competition from banks re-entering the venture debt market.
• Potential economic downturns affecting high-growth companies.
• Managing the valuation of warrant positions conservatively.
• Dependence on maintaining high growth rates in portfolio companies.
• Navigating the bankruptcy of portfolio companies.

Flow Capital’s strong performance in Q2 2025 underscores its resilient business model and strategic focus on high-growth investments. As the company looks forward, it remains committed to its conservative investment approach and operational leverage to drive future success.

Full transcript - Flow Capital Corp (FW) Q2 2025:

Joel, Operator/Conference Moderator, Flow Capital: Good morning, ladies and gentlemen. Welcome to Flow Capital’s earnings call for Q2 twenty twenty five. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions.

Star zero for operator assistance at any time. 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 Full Capital’s risks and uncertainties related to these forward looking statements, please refer to the Q2 twenty twenty five company’s management discussion and analyst analysis, which is available on SEDAR. Today’s call is being recorded on Thursday, 08/14/2025.

I would now like to turn the meeting over to Alex Beluda, chief executive officer of Flow Capital.

Alex Beluda, Chief Executive Officer, Flow Capital: Thank you very much, operator, and thank you everybody who’s joining this call live or listening to this call on the recording from our website. We will file, as we always do, our numbers. You can find our numbers, the transcript, the recording on our website or filed on SEDAR. Very happy to announce another strong quarter for q two twenty twenty five. Q two twenty twenty five marks the eighth sequential quarter in a row where our revenue was up quarter to quarter, meaning up from the immediately prior quarter.

For the three months ended June 30 compared to the prior three months a year earlier, revenue was up 54% to a record $3,200,000 up from $2,100,000 a year ago. It was up sequentially almost 7% from q one this year. On a six month basis, revenue was up 49%. Free cash flow, which is a recurring free cash flow metric that we talked about, which is a non IFRS metric, but important for us in the way we manage our business. You’ll see a reconciliation from recurring free cash flow into IFRS in our statements.

Our recurring free cash flow was up 212% quarter I should say year over year to 884,000 up from 283. And for the six months, recurring free cash flow was at 1.7, up a 148%. I’ll come back to the growth in free cash flow in a moment, but it’s worth pointing out that the free cash flow in our first half of the year at 1,700,000.0 almost matches the recurring free cash flow that we did all of last year. And that’s a representation of the operating leverage in our business. Per free cash flow per share for the first six months is just under 6¢ per share of a 152% over the same period last year.

Total investments are up to 72,200,000.0, up from 62,000,000 at the December. And for the quarter, we had an excellent quarter in terms of deployment of new into new investments, up gross $16,300,000 in new investments. That’s a record for us in a single quarter, up from 9,300,000.0 a year ago. We did have a buyout in the quarter. A company called Valor Ready, one of our companies from a couple of years ago.

They were acquired. You know, the total IRR on that investment for us was over 30%. It was an early repayment. There were some early repayment fees associated with that. But in in addition, we maintain an equity position in the acquire the the the acquiring company.

It’s kinda worth pointing out here, if I pause for a second, how most of our deals are structured in the form of cash interest and tiny sliver of equity either in the form usually in the form of warrants. The value proposition for the borrower is that the cost of capital all in of our capital is dramatically lower than the cost of doing an equity round even with our small sliver of warrants. On average, we have sort of a one to 2% equity position in our borrowers. So not only do we get cash pay on our on our on our investments, on our loans, the companies get a lower cost of capital, and then we get a tiny sliver that in many instances, those warrants will expire. But it’s probably one of the least understood parts of our business model from an investor perspective is that we have a, what we call internally, a treasure chest of over 20 equity and warrant positions that we’ve established over the last seven years in high growth companies.

Remember, we target real and money to high growth companies generally with growth rates over 20%. And as I said earlier, the value proposition that we provide them is that the cost all in cost of our investment is dramatically lower than cost of equity. And so BallotReady is a great example of it works for them. It brings them to a transaction. It works for us from a IRR perspective on a cash on cash basis, and we continue to have a legacy equity position.

Overall, the portfolio IRR over a seven year period, going back to our pivot seven years ago now, is still over 22%. So overall, it’s an excellent quarter. There was I will say the book value is down 3¢ a share from the December 2024 number, and it was driven by a couple of things. One, we had a FX hit of over a million and a half. Two, we did have some big credit loss increase in one of our deals, and I’ll get to that in a moment.

And three, we took a we are taking a much more conservative approach, meaning lower in the valuation of our warrant portfolio, the portfolio I just talked about. Only because the warrant portfolio, it has to be mark to market on every quarter, and it creates volatility in our numbers when you when, you know, warrants go up a little bit, warrants go down a bit. If if the company is a public company, we obviously do a mark to market. But in our internal view, we’re trying to be as conservative as possible, meaning valuing our loan the warrants as low as possible. We still have over $7,000,000 in equity in total values in our warrant equity portfolio, but we did take warrants down on a same for same basis, I mean, excluding new warrants issued during the quarter, down about $1,300,000.

So we had warrant write down, DCL and credit loss and FX decline. Net net net net income profits that meant that book value came down about 3¢. I did wanna go back to that operating leverage commentary that I made. The business model that we as I mentioned on prior two calls have tremendous operating leverage, we see that continuing into the future as we scale our business. It should only get better.

On a competition basis and the pipeline, some client is always lumpy for us. One of the interesting things we are seeing is that banks are coming back into the market. I think that after the Silicon Valley bank episode a couple of years ago, banks paused their their their approach to the venture debt market. We’re seeing a bit more of that a bit more of them now, but so so we’re we’re seeing competitive term sheets from banks. Sometimes, you know, we can’t compete with banks, but I I wouldn’t say it’s dramatically changed the economics in the market for us.

It’s just a matter of the it’s a little unusual. Last point I wanna make is on the portfolio. You know, we had an unusual situation this quarter. It actually was post quarter, and that was actually in the bankruptcy of one of our investees. The net point is that on a cash on cash basis, we made a 1,700,000.0 $1,750,000 investment, and we should recover roughly and that’s in US dollars.

Roughly $1,600,000 in the end in terms of cash on cash. But it was it was an unusual situation in in how quickly it it unraveled. It had to do with the company being on a platform. The platform provider released a competing product. Customers got a bit nervous.

The customers actually stayed on board. You know, there was churn in the business. It went from about 3 and a half million down to 2,700,000.0, but it was also departure of a lot of employees, including senior executives. And in the end, we didn’t have the ability to stabilize in time, and the best path forward for all stakeholders, including us, was to see the bank the company going to bankruptcy. And as I said, a cash on cash basis, our losses were weren’t too were were de minimis.

We look you know, we we pride ourselves on working with our companies on doing our best efforts to try and keep them going. But sometimes this is gonna happen. We’ve got plenty of examples where we work in fact, almost all other examples, we worked with our company for extended periods of time to see them turn around their businesses. But sometimes this is an unfortunate outcome. From our perspective, it was about $700,000 in additional ECL charges that get on our balance sheet.

That’s Canadian. But, you know, as as I as I as I’m alluding to, if the worst outcome for us in a company that unravel quickly is a six to 10% cash on cash loss, it’s not so bad. But, again, we do our best to minimize that, and we also do our best to work with our partners for as long as possible to try and help them recover. And and, you know, you know, we’re not just thinking about ourselves, but we’re thinking about employees and customers and other stakeholders. So an unfortunate outcome, but and one that we hope doesn’t happen again and one that we work to avoid, but unfortunately, that did happen this actually in July.

And with that, I’ll pause Again, it was another record quarter for us on almost all metrics, year to date cash flow, revenue on a year over year basis, etcetera. And, Joel, I’ll pass it back to you for questions.

Joel, Operator/Conference Moderator, Flow Capital: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two.

If you are using a speakerphone, please lift a handset before pressing any key. One moment please for your first question. There are no further questions at this time. I will now turn the call over to Alex for closing remarks.

Alex Beluda, Chief Executive Officer, Flow Capital: Thank you, Joel. Thank you, everybody, for tuning in or listening on the recording. Look forward to speaking to you in q three, and thank you for your support.

Joel, Operator/Conference Moderator, Flow Capital: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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