~Delivering on record revenue in 2023; increasing focus on the bottom line in 2024~
TORONTO, April 25, 2024 /CNW/ - Montfort Capital Corp. ("Montfort" or the "Company") (TSXV: MONT) (OTCQB: MONTF), today announced financial results for the fourth quarter and year ended December 31, 2023. All figures are reported in Canadian dollars unless otherwise noted.
Fiscal Year 2023 Highlights
For the year ended December 31, 2023, compared to the year ended December 31, 2022, the Company generated the following financial results:
Record total revenue of $51.5 million, an increase of $20.2 million or 64.4% compared to the year ended December 31, 2022.
Interest income from investments of $37.5 million, up $14.0 million or 59.8% compared to the year ended December 31, 2022.
Income from transaction and other fees of $12.5 million, an increase of 90.1% or $5.9 million from $6.6 million during the year ended December 31, 2022.
Income from settlements of loans of $0.06 million, a decrease of $0.7 million or 92% from $0.8 million in the year ended December 31, 2022.
Performance fee income of to $1.4 million, an increase of $0.9 million or 205.2% from $0.4 million.
Net loss of $12.5 million compared to net income of $3.9 million in the year ended December 31, 2022. The change in year-over-year performance is largely driven by the change in accounting for TIMIA LP's; an impairment loss of $3.6 million and increase in expected credit loss expense (loans receivable) of $1.6 million and expected credit loss (accounts receivable) expense of $4.7 million. In addition, contributing to the net loss in the current period are increases in expenses, including interest and financing fee costs and foreign exchange unrealized losses, and restructuring costs.
Adjusted net loss (a non-GAAP measure)1 attributable to shareholders and adjusted net loss per common share (a non-GAAP measure)2 was $8.5 million, or $0.12 per share, in the year ended December 31, 2023 compared to adjusted net income of $3.1 million in the year ended December 31, 2022, or $0.02 per share.
Total assets of $402.5 million as at December 31, 2023 compared to $455.5 million at December 31, 2022. The main driver for the decrease was the maturity of a purchased loan portfolio returned to the lenders in accordance with the agreement of $74,533,460. Adjusting for this one time return of loans, total assets increased $21,572,331.
Total Assets Under Management and Administration (a non-GAAP measure)3 was $411 million as at December 31, 2023 compared to $490 million as at December 31, 2022.
Fourth Quarter 2023 Highlights
For the three months ended December 31, 2023, the Company generated the following financial results:
Total revenue of $12.1 million, a decrease of $1.7 million or 12.4% compared to the three months ended December 31, 2022.
Interest income from investments of $9.0 million, down $1.5 million or 14.3% compared to $10.5 million for the three month period ended December 31, 2022.
Income from transaction and other fees of $2.9 million, a decrease of 12.3% or $0.4 million from $3.3 million for the three months ended December 31, 2022.
Performance fee income of $0.3 million, an increase of $0.2 million or 146.1% from $0.1 million for the three months ended December 31, 2022.
Net loss of $5.6 million compared to net income of $1.2 million in the prior three month period ended December 31, 2022.
"While there are certainly recent accomplishments that we should celebrate, such as record annual revenue, the launch of a new line of business, and securing significant new funding capacity in Brightpath, Langhaus and Nuvo, we are not at all pleased with our financial results in 2023," said Ken Thomson, Chief Executive Officer of Montfort Capital Corp. "We were not immune to challenging conditions in the credit markets, which is reflected in our credit loss provision, and the legal and professional fees that we incurred to put in place our increased funding capacity were significant. We are confident that our credit loss provision represents a peak and not a trend, and that the investment we have made in new funding capacity will benefit our shareholders in the future. The Management team and the Board of Directors, who are also large shareholders of Montfort, are laser-focused on profitability and making the appropriate tactical and strategic decisions that will allow us to achieve it as quickly as possible."
______________________________
1 "Adjusted net income" is a non-GAAP financial measure. Refer to "Cautionary Note on Non-GAAP Financial Measures" section of this release for additional details.
2 "Adjusted net income per common share" is a non-GAAP financial measure. Refer to "Cautionary Note on Non-GAAP Financial Measures" section of this release for additional details.
3 "Assets under Management and Administration" is a non-GAAP financial measure. Refer to "Cautionary Note on Non-GAAP Financial Measures" section of this release for additional details.
Financial Review
The Company originates, underwrites and manages secured loans through the following operating divisions:
Brightpath Capital, one of Canada's leading providers of alternative residential mortgages.
Langhaus Financial, provides insurance policy-backed lending solutions to high-net-worth individuals and entrepreneurs in Canada.
Nuvo Financial, is focused on providing net asset value (NAV) loans to small and mid-sized investment funds in Canada.
Pivot Financial which specializes in asset-backed private credit targeting mid-market borrowers in Canada.
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.
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 December 31, 2023, was $411 million compared to $490 million in overall AUMA as at December 31, 2022. Total Assets were $403 million as at December 31, 2023 compared to $456 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 Capital and Langhaus Financial, and corporate lending which includes TIMIA Capital, Nuvo Financial, and Pivot Financial.
Consumer Lending
Brightpath's consumer lending loan portfolio includes a portfolio of approximately 600 mortgages. Mortgages are secured by residential property, located primarily in Ontario, and have a maturity of one year or less.
Langhaus is the leading non-bank provider of insurance policy-backed lending solutions to high-net-worth individuals and entrepreneurs throughout Canada.
The consumer lending segment reported over $298 million AUMA as at December 31, 2023.
Corporate Lending
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.
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.
Nuvo launched late 2023 and successfully funded its first investment in Q1 2024. Nuvo is focused on providing net asset value (NAV) loans to small and mid-sized investment funds in Canada.
The corporate lending segment reported $113 million AUMA as at December 31, 2023.
This news release is qualified in its entirety by the Company's financial statements for the three and twelve months ended December 31, 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 Corp.
Montfort is a trusted provider of focused private credit strategies for institutional investors, family offices, and wealth managers. We employ focused strategies, experienced management teams and advanced technology to drive superior risk-adjusted investment returns. For further information, please visit www.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.
Non-GAAP Measures
Adjusted net income and Adjusted net income per common share
Reconciliation of adjusted net income:
December 31, 2023
December 31, 2022
IFRS reported net income
$
(12,502,724)
$
3,931,690
Add:
Acquisition costs
73,026
557,607
Share-based payments
1,093,967
606,611
Amortization
2,073,465
1,323,080
Restructuring
650,000
-
Adjusted net income
$
(8,612,266)
$
6,418,988
Reconciliation of adjusted net income attributable to shareholders:
December 31, 2023
December 31, 2022
IFRS reported net income attributable to shareholders
$
(12,360,764)
$
591,077
Add:
Acquisition costs
73,026
557,607
Share-based payments
1,093,967
606,611
Amortization
2,073,465
1,323,080
Restructuring
650,000
-
Adjusted net income attributable to shareholders
$
(8,470,306)
$
3,078,375
Adjusted net income per common share
$
(0.12)
$
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.
