Good morning, ladies and gentlemen, Welcome to Flow Capital's Q1 2023 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded today, Monday, May the 29th, 2023, and it is now my pleasure to turn the conference over to Alex Baluta, Chief Executive Officer. Please go ahead, sir. Thank you very much, Michelle. Thank you, everybody, for joining the call or listening in on the recording. Today we're going to talk about our Q1 2023 conference call or numbers. To be honest, a very in line, quite nondescript quarter, which is good news and bad news. It was. Our numbers, we, as you know, we publish our numbers in our financial statements, on our website and on SEDAR, so I'm not going to go through them in detail. Recurring royalty revenue, which is an internal metric, not an IFRS metric, was down slightly year-over-year. That's primarily because we had several major buyouts last year and not as many deployments as we had hoped. We had performed the only Jurecki buyout, and then at the end of the year, we only invested in Prolific. We just haven't been able to deploy our capital as much. You're going to start seeing a slight declining revenue trend, although we do expect that should turn around. Nevertheless, IFRS revenues, which can be distorted, we don't use that as a metric, but last year we had several buyouts in a three-month period, and any changes in balance sheet have to flow through the income statement. You had CAD 3.8 million or CAD 3.9 million in revenue last year, versus CAD 1.7 million. That's honestly not a relevant figure. The more important one is looking at royalty revenue and loan revenue, which was basically down 4.4%. Book value was essentially flat quarter-to-quarter, and we continued to buy back shares on our NCIB. I think the big news for us isn't this quarter, which was frankly slightly better than our internal expectation and as expected, down because of buyouts last year, with the opportunity that we're seeing in our pipeline. We've seen improving volume of deals and, more importantly, improving quality of deals. One of the metrics, we have a fairly robust pipeline approach to managing our pipeline. One of the metrics that we look at is what we call the preliminary investment committee meeting, where it's an all hands meeting after we've qualified the deal, qualified that they understand our structure, our rates, and that they qualify from our perspective in terms of the revenue and capabilities and growth. Last year, we, in the entire year, we did 31 preliminary IC meetings. Year to date, this year already, we've done 25. We're over 100% up on preliminary IC meetings. We have, at the current time, 5, soon to be 6 signed term sheets. We expect a deal that's going to close in the next week or two, followed by several others after that. There is instances that actually, I think last year we declined on closing on five deals post signing the term sheet because of the quality of the deal. We just weren't comfortable in due diligence, which is a testament to our real focus on quality, but nevertheless, very high-quality deals this year. A lot of term sheets signed. A really deep pipeline in the orders, on the order of hundreds of millions of CAD in our pipeline. I think you'll see us deploying capital fairly aggressively in the coming months. You'll start seeing a resumption in growth in our revenue. The good news is we continue to be profitable. We continue to generate adjusted free cash flow. We continue to generate positive EBITDA. Really, our business, after the last 5 years of adjustments to get here, is performing very well. Want to point out over the next couple of weeks, it's been 5 years since the merger of LOGiQ and Grenville. Grenville was a predecessor company of Flow Capital. We've decided to use that as a non-arbitrary time point to determine and to evaluate our progress. We'll publish a little bit of a preview, a press release coming out in a couple of days, showing our IRRs, and they're really quite good. In our business model, which is focusing on high growth companies, we really take debt-like risk and, to the best of our abilities, shoot for equity-like returns. We do that through 2 components, really. It's the cash yield, also bonuses related to those cash yields on early repayment or sometimes a bonus on exit. The second part comes from our equity exposure. In every one of our deals, we take equity exposure, unlike many of our competitors. It could be as small as a half a percent of equity in the company. It could be as large as 2% or 2.5% of equity. If you think about it, most of the companies we invest in, or almost all of them, are high growth companies, primarily technology. 80%+ of our portfolio is tech, 80%+ is U.S. These are the kind of companies that not just the owners and the entrepreneurs, but also the equity investors, are looking for an exit over time. Our relatively small portfolio of positions, but a relatively large portfolio of these positions. It's starting to generate very strong returns. You'll see our IRR is well above 20%. Again, pay attention to that in the next coming weeks when we, when we publish our sort of performance over the last five years. If you think of a net loss ratio in terms of, you know, losses in capital because of failed deals, we really haven't had any in the past year, five years, I should say. More importantly, the gains in our warrant portfolio more than make up for any write-downs or losses we might have in our portfolio. On a net basis, our IRR is a function of both our cash return, plus our gains minus our losses, and it's our IRR is dramatically higher than the cash returns that we generate. All in all, I'm gonna stop there. A relatively benign quarter, slight revenue decline as expected, as we've had several buyouts and less deployments. The pipeline has never been stronger. The number of deals in signed term sheets and due diligence now is at a record concurrent level. We've never had this many. We'll see how many get through the full due diligence process. You know, we've built the company, the infrastructure, the team, to really scale this company from the CAD 60 million in assets we have now, to CAD 100 million, then to CAD 200 million, then to CAD 500 million. We think the future is bright. Our performance has been phenomenal over the past five years, and for that, I'll pause, turn it back to the operator and see if there's any questions. Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If your question has been answered and you would like to withdraw from the queue, please press star followed by two. If you are using a speakerphone, please lift your handset before pressing any keys. One moment, please, for your first question. Your first question will come from Ed Sollbach at Spartan Fund Management. Please go ahead, sir. Good morning. Congrats on the steady quarter, Alex. Thanks, Ed. Thanks for talking about your pipeline. If you think about future loans, would you basically do it the same as historically, or would they be bigger or smaller in terms of deal size? Yeah, good question, Ed. Thanks again for supporting us and calling in and being with us for this whole journey. Yeah, I think over time, like right now, our largest deal is $6 million U.S. We have several in the pipeline, and they're close to that. Probably our average is gonna be in the $3 million-$3.5 million U.S. range. I do think that as we scale, you know, the scaling above $100 million-$200 million+, you'll see us go slightly higher in terms of deal size, maybe to $5 million on average. You know, our sweet spot will be in the $3 million-$10 million, let's say $5 million-$6 million on average. You know, what's interesting is, I meant to say this on the call, thanks for asking the question. Let me get back to this. If you think about what's going on in venture capital right now, I think the reason we have such a strong pipeline is two things: One, you had the equity markets, potential recession, and everybody knows venture capital dried up or venture capital deployment dried up in spite of a lot of apparent dry powder on the sidelines. What you've had is the explosion of AI, and real AI, not just people putting an AI spin on what it is they're doing. For most venture capitalists, when they invest, you know, it's 20% or 30% of their portfolio that makes up 100% of their returns. We're seeing that the VCs are not interested in funding B rounds and C rounds and reasonable growth companies doing 30% growth. What they're really interested in is the companies that are growing at 100% or 200% and on the new thing, which is AI. I don't want to say that there's no investment going on. It's very. I think it's sparse, but I think the companies that we focus on have, you know, they batten down the hatches, they've reduced their burn, they continue to grow, but they're finding that more equity isn't there for them to continue their growth. They're turning to alternatives like us. It's honestly, it's quite phenomenal, the number of deals that we're seeing that are companies with CAD 5 million, CAD 6 million, CAD 7 million, CAD 10 million in revenue, maybe have had CAD 30 million, CAD 40 million of equity invested, and just don't seem to have any interest in the equity markets or for that matter, the private equity markets, primarily because there's still those investors are still nervous, but also because there's a new shiny object out there called AI that they're focused on investing in. For us, it's a confluence of the, of events that I think is creating a really good opportunity, where companies with CAD 5 million and CAD 10 million in revenue, who've got their costs under control but want capital, they're already breakeven or close to it, and they want money to continue to grow, which is not unreasonable, they're coming to players like us. I'm quite excited about the future. Yes, back to your question, I do think the deal size will increase over time, but it'll be modest, and it won't be for maybe at this time next year, we'll be talking about an average deal size that's CAD 1 million or CAD 1.5 million more than what we're doing now. It'll probably take us some time to get there. I don't see us, I mean, till we get to be much, much larger, getting into the CAD 20 million and CAD 30 million dollars in terms of average deal size. That'll take some time. From a risk management point of view, do you have a, like, a hard limit in terms of how big you'll go? Yeah, right now it's no greater than $7 million. We've never hit that limit. Right now we're at $6 million. For sure, we're trying to manage, concentration risk and exposure, responsibly when we look at the overall portfolio. As we grow our total asset base, you know, you can see that it'll grow. It's about 10% of your assets, I guess. Correct. Maximum deal. Yeah. Okay, yeah, thanks for talking about AI. I was just wondering, given it's the trendy topic, if any of your portfolio companies are kind of, would be considered AI, you know, beneficiaries or AI companies? Give me a second. I don't think anybody. You know, there's no pure play AI, you know, so that we have. Do some of them have machine learning as part of their efforts in, you know, analysis? Yeah, for sure. I don't, we don't have a pure play, and I don't, I don't think we will. One of our companies, a smaller company, I'll give him a bit of a shout-out. A company called AskVet had did conversations between veterinarians and pet owners, and they were live vet. They were chats, and they were live vets and live pet owners, and they accumulated almost, I don't know, almost CAD 2 million in actual live chats. One of the things about AI, because I'm spending a lot of time trying to learn it, not from a technical perspective, but sort of implementation perspective, is the uniqueness of the data set. Well, if you've got 2 million conversations with pet owners and live vets, you have a really interesting, it's not huge, but you have a really interesting data set on which to train, sort of an automated assistant on. They're continuing. They're in that pet space, in, they do some various online things when it comes to veterinarian access. They're, they've used that data set to train some of the AI platforms, and now they're building automated assistants. I think it's, I think it's a brilliant pivot, and I'm excited about their future. That's one that's really, that makes the most sense from a unique data set perspective. If I look at the rest of the portfolio, nobody really has that level of AI exposure. And we'll see where it goes. I'm more thinking about the companies that had great runs, whether they were any kind of platform that was non-AI, but they've got CAD 10 million or CAD 15 million in revenue, or try to get to 10 or 15, and the equity markets have just turned absolutely cold on them, and that's the opportunity for us. I'd be surprised if we had a pure play AI play in our portfolio other than like AskVet pivoting into that because they had some unique data. Yeah, I mean, I think the second-order opportunities are more interesting right down the road where people can become more efficient or... Yeah. kind of the processes, but that's, that takes time to develop. Well, thanks for that, Alex. Thanks, Ed. Really appreciate your time and support. Again, call anytime if you have any questions. Will do. For sure. Take care. Ladies and gentlemen, once again, if you would like to ask a question, please press star one now. Mr. Baluta, there are no further questions from the phone line, sir. Please proceed. Thank you very much, Michelle. Again, a very nondescript inline quarter. Lots of really good things happening in the industry and in our pipeline. I'm very excited for the future. Really appreciate everybody's time, and we'll talk to you again in three months. Thank you very much. Ladies and gentlemen, this does conclude your conference call for this morning. We would like to thank you all for participating and ask you to please disconnect your lines.