VANCOUVER, BC – November 28, 2023 – Montfort Capital Corporation (“Montfort” or the “Company”) (TSX-V:MONT/OTCQB:MONTF), today announced financial results for the third quarter ended September 30, 2023. All figures are reported in Canadian dollars unless otherwise noted.
Third Quarter 2023 Highlights
For the three months ended September 30, 2023, the Company had the following highlights:
- Total revenue of $13.0 million, an increase of $5.1 million or 64% from $7.9 million in the three months ended September 30, 2022 (the “Prior Year Period”);
- Interest income was $9.2 million, an increase of $3.5 million or 60% from $5.7 million in the Prior Year Period;
- Income from transaction and other fees was $3.4 million, an increase of 63% from $2.1 million in the Prior Year Period;
- A net loss of $3.9 million or five cents per common share compared to net income of $0.5 million or two cents per common share in the Prior Year Period, reflecting a $3.4 million non-cash impairment charge;
- Total assets of $374.4 million as at September 30, 2023 compared to $455.5 million at December 31, 2022. The reduction was the result of management’s strategic decision to eliminate a low-margin portion of the loan portfolio. Cash balance, as part of assets, was $6.7 million compared to $7.0 million as at December 31, 2022;
- Montfort’s loan investment portfolio (loans receivable) decreased to $292.2 million in the third quarter 2023 compared to $380.7 million as of December 31, 2022; and
- Adjusted net loss (a non-GAAP measure) attributable to shareholders and adjusted net loss per common share attributable to shareholders (a non-GAAP measure) were $3.1 million and four cents per share in the three months ending September 30, 2023 compared to adjusted net income attributable to shareholders of $0.8 million and zero per share in the Prior Year Period.
On a comprehensive basis:
- Reported net comprehensive loss of $3.9 million for the three months ended September 30, 2023, compared to net comprehensive income of $2.6 million for the three months ending September 30, 2022.
“While our private credit business model continues to deliver as the Company generated $13 million of revenue in the third quarter, our bottom line was impacted by a non-cash impairment charge,” said Andrew Abouchar, Interim CEO of Montfort Capital Corporation. “We made the decision to take an impairment to one of our loans given the facts that we were presented with at the end of the quarter. We feel strongly that this was a prudent course of action given the current economic environment, however Management is actively pursuing recovery. We may see all or part of the impairment reversed in the coming quarters. Montfort rigorously reviews our portfolio on a monthly basis. We believe the remainder of our portfolio is performing well. We are excited about our business prospects as the uncertain economic environment has driven both corporate and consumer borrowers to look for alternatives outside of the traditional bank lending channels.”
Financial Review
The Company utilizes focused management teams and proprietary systems to originate, underwrite and service private-market, high-yield loan opportunities through its operating divisions:
- TIMIA Capital, a technology lending platform that offers revenue-based investment to fast growing, business-to-business Software-as-a-Service (or SaaS) businesses in North America,
- Pivot Financial which specializes in asset-backed private credit targeting mid-market borrowers in Canada,
- Brightpath Capital, one of Canada’s leading private providers of residential mortgages, and
- Langhaus Financial, provides insurance policy-backed lending solutions to high-net-worth individuals and entrepreneurs in Canada.
Montfort’s overall Assets Under Management and Administration (“AUMA”) includes assets under management plus loans managed on behalf of third parties. Montfort’s overall AUMA, as at September 30, 2023, was $388 million compared to $490 million in overall AUMA as at December 31, 2022. Total Assets were $374.4 million as at September 30, 2023 compared to $455.5 million as at December 31, 2022. The decrease in Total Assets was due to a decision by management to terminate a low margin administration partnership on a portfolio of loans.
The Company divides its private credit business into two distinct segments: consumer lending made up of Brightpath and Langhaus, and corporate lending which includes TIMIA Capital and Pivot Financial.
Consumer Lending
Brightpath’s consumer lending loan portfolio includes a portfolio of over 600 mortgages. Mortgages are secured by residential property, located mainly in Ontario, and have a maturity of one year or less.
Langhaus is primarily involved in providing loans to entrepreneurs that are ensuring their personal and corporate affairs are optimally structured to allow for planning opportunities that generate more after-tax liquidity.
The consumer lending segment reported over $269 million AUMA as at September 30, 2023.
Corporate Lending
TIMIA targets companies seeking capital primarily in the following three subsectors: Software-as-a-Service (SaaS), software-enabled service companies and hardware-enabled service companies. The Company is able to efficiently originate transactions, automate aspects of the underwriting process as well as manage the loan portfolio and investors on an ongoing basis.
Pivot addresses the borrowing needs of small to mid-sized enterprises in Canada with bespoke term debt structures, bridge loans, asset-based revolving loan facilities, and accounts receivable factoring facilities. Pivot portfolio companies typically have 1-100 employees and $1-$100 million in revenue.
Corporate lending segment reported $119 million AUMA as at September 30, 2023.
This news release is qualified in its entirety by the Company’s financial statements for the three months ended September 30, 2023, and 2022, and the associated Management’s Discussion & Analysis respecting the same periods, which can be downloaded from the Company’s profile on SEDAR at http://www.sedarplus.ca.
About Montfort Capital Corporation
Montfort manages a diversified family of specialized private credit brands that utilize focused strategies and experienced management teams combined with advanced technology to improve fee related performance. Montfort facilitates transparency for all of its investors through public company reporting. For further information, please visit www.montfortcapital.com.
For more information, please contact:
Tim McNulty / Darren Seed
Incite Capital Markets
Andrew Abouchar, Interim CEO
Montfort Capital Corporation
(604) 398-8839
IR@MONTFORTCAPITAL.COM
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
Cautionary Note on Non-GAAP Financial Measures
This release contains some non-Generally Accepted Accounting Principles (GAAP) financial measures as defined in National Instrument 52-112 “Non-GAAP and Other Financial Measures Disclosure”. Terms by which non-GAAP financial measures are identified include, but are not limited to, “adjusted net income”, “adjusted net income attributable to shareholders”, “adjusted net income per common share”, and “assets under management and administration”. Non-GAAP financial measures are used to provide management and investors with additional measures of performance to help assess results where no comparable GAAP (IFRS) measure exists. However, non-GAAP financial measures do not have standard meanings prescribed by GAAP (IFRS) and are not directly comparable to similar measures used by other companies. Investors may find these financial measures useful in understanding how management views the underlying business performance of the Company.
Adjusted net income attributable to shareholders and Adjusted net income per common share
Adjusted net income attributable to shareholders presents shareholders’ net income before stock-based compensation, business acquisition expenses, restructuring and amortization of intangible assets. Adjusted net income per common share is calculated as adjusted net income attributable to shareholders less dividends paid divided by the weighted average number of common shares outstanding. Management feels this metric is useful to understand the operating income of the Company’s lending business before non-cash and expenses that are non-recurring or not directly related to lending activities.
| Reconciliation of adjusted net income: | Three months ended September 30, 2023 | Three months ended September 30, 2022 | Nine months ended September 30, 2023 | Nine months ended September 30, 2022 | ||||
| IFRS reported net income | $ | (3,892,151) | $ | 514,175 | $ | (6,919,549) | $ | 2,768,550 |
| Add: | ||||||||
| Acquisition costs | 17,482 | 347,478 | 60,057 | 582,371 | ||||
| Share-based payments | 292,100 | 179,579 | 789,977 | 380,485 | ||||
| Amortization | 519,796 | 651,747 | 1,586,020 | 923,444 | ||||
| Restructuring | – | – | 650,000 | – | ||||
| Adjusted net income | $ | (3,062,773) | $ | 1,692,979 | $ | (3,833,495) | $ | 4,654,850 |
| Reconciliation of adjusted net income attributable to shareholders: | Three months ended September 30, 2023 | Three months ended September 30, 2022 | Nine months ended September 30, 2023 | Nine months ended September 30, 2022 | ||||
| IFRS reported net income attributable to shareholders | $ | (3,912,981) | $ | (337,577) | $ | (6,892,703) | $ | 389,908 |
| Add: | ||||||||
| Acquisition costs | 17,482 | 347,478 | 60,057 | 582,371 | ||||
| Share-based payments | 292,100 | 179,579 | 789,977 | 380,485 | ||||
| Amortization | 519,796 | 651,747 | 1,586,020 | 923,444 | ||||
| Restructuring | – | – | 650,000 | – | ||||
| Adjusted net income attributable to shareholders | $ | (3,083,603) | $ | 841,227 | $ | (3,806,649) | $ | 2,276,208 |
| Adjusted net income per common share | $ | (0.04) | $ | 0.00 | $ | (0.06) | $ | 0.02 |
Assets under Management and Administration (AUMA)
Assets under management and administration is a non-GAAP financial measure that provides an indicator of the size and volumes of the Company’s overall business. Management and administrative services are an important aspect of the overall business of the Company and should be considered when comparing volumes, size and trends. “Total assets” is the most directly comparable financial measure to AUMA that is disclosed in the Company’s financial statements. AUMA includes assets under management plus loans managed on behalf of third parties. Assets under management include the current portion of loans receivable and loans receivable on the statement of financial position within Total Assets.
Forward-Looking Information
Certain information and statements in this news release contain and constitute forward-looking information or forward-looking statements as defined under applicable securities laws (collectively, “forward-looking statements”). Forward-looking statements normally contain words like ‘believe’, ‘expect’, ‘anticipate’, ‘plan’, ‘intend’, ‘continue’, ‘estimate’, ‘may’, ‘will’, ‘should’, ‘ongoing’ and similar expressions, and within this news release include any statements (express or implied) respecting the future growth of the Company and the Company’s future financial performance.
Forward-looking statements are not guarantees of future performance, actions, or developments and are based on expectations, assumptions and other factors that management currently believes are relevant, reasonable and appropriate in the circumstances, including, without limitation, the assumption that the Company and its investee companies are able to meet their respective future objectives and priorities and assumptions concerning general economic growth and the absence of unforeseen changes in the legislative and regulatory framework for the Company.
Although management believes that the forward-looking statements are reasonable, actual results could be substantially different due to the risks and uncertainties associated with and inherent to Montfort’s business. Material risks and uncertainties applicable to the forward-looking statements set out herein include but are not limited to: intense competition in all aspects of business; reliance on limited management resources; continued availability of equity and debt financing; ability to recover on impaired loans; general economic risks; new laws and regulations and risk of litigation. Although Montfort has attempted to identify factors that may cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, predicted, estimated or intended. Also, many of the factors are beyond the control of Montfort. Accordingly, readers should not place undue reliance on forward-looking statements. Montfort undertakes no obligation to reissue or update any forward-looking statements as a result of new information or events after the date hereof except as may be required by law. All forward-looking statements contained in this news release are qualified by this cautionary statement.
- “Adjusted net income” is a non-GAAP financial measure. Refer to “Cautionary Note on Non-GAAP Financial Measures” and “Adjusted net income attributable to shareholder and Adjusted net income per common share” sections of this release for additional details.
- “Adjusted net income per common share” is a non-GAAP financial measure. Refer to “Cautionary Note on Non-GAAP Financial Measures” and “Adjusted net income attributable to shareholder and Adjusted net income per common share” sections of this release for additional details.
- “Assets under management and administration” and “assets under management” are non-GAAP financial measures. Refer to “Cautionary Note on Non-GAAP Financial Measures” section of this release for additional details.