TIMIA Capital Corporation (“TIMIA” or the “Company”) (TSX-V:TCA) (OTC: TIMCF) today announced financial results for the second quarter ended May 31, 2020.
Second Quarter 2020 Highlights include:
- Reported consolidated net income of $478,611, compared with a consolidated net loss of $490,358 for the same period last year.
- Revenue of $891,186, up 7% over the same period last year.
- Posted interest income from investments of $869,793, included in total revenue, an increase of 28% year over year.
- Total assets increased 18% to $31.9 million as at May 31, 2020 compared to the same time period last year. Cash balance, as part of assets, was $5.2 million compared to $4.7 million as at November 30, 2019.
- TIMIA’s loan investment portfolio (loans receivable) increased by 56% to $25,541,689 in comparison to the same period last year.
“The Company posted a solid quarter during a time of unprecedented uncertainty with the emergence of the COVID-19 pandemic,” said Mike Walkinshaw, CEO of TIMIA Capital Corporation. “While much of the economy of North America was shut down during our second quarter, our experience was SaaS companies continued to operate near full capacity. Based on our experience, we believe that SaaS companies are a more secure asset class than most consider and offer a superior risk adjusted return. We will remain vigilant with our operations and continue to leverage our fintech platform to locate and engage leading recurring revenue software companies.”
Detailed Financial Review
During the quarter ended May 31, 2020, the Company continued to grow its revenue-financing (“RF”) business by completing two new investments, distributing growth capital of US$750,000 to US-based Measured and $1,250,000 to a Canadian-based Cova.
The Company’s revenue is primarily interest income generated under the Company’s RF model. As the Company makes new investments, the amount of monthly payments derived from the portfolio grows. Interest income in the three months ended May 31, 2020 was $869,793 compared to $680,260 in the same period last year, a 28% increase. Income from transaction and other fees was $21,393 in the three months ended May 31, 2020 compared to $154,778 in the same period last year. The change in transaction and other fees reflects the reduction in total number of new transactions as the Company paused its pace of investment during the initial phases of COVID-19. Reflecting the reduction in transaction fee revenue, total revenue for the three months ended May 31, 2020 increased 7% to $891,186 compared to $835,038 for the three months ended May 31, 2019.
TIMIA continues to build the value and size of its portfolio by making new investments and follow-on investments in existing portfolio companies, and actively assisting portfolio companies with their growth plans. At the same time, the Company is investing to support its future growth and the continued development of its fintech platform. Total expenses, including interest expense, for the quarter ended May 31, 2020 were $813,794 compared with $1,076,785 for the same period last year. The change reflects a decrease in interest expense, administrative, management, and director fees, and investor relations and communications costs, offset by small increases in the expected credit loss provision, share-based payments, and office, travel, systems, and miscellaneous expenses, year over year.
During the quarter ended May 31, 2020, the Company posted net income of $478,611 compared with a net loss of $490,358 in the same period last year. The year-over-year improvement of $968,969 is primarily due to the continued growth in size of the portfolio and the resulting interest income increase, lower operating expenses and $292,717 fund restructuring and financing costs recognized in 2019.
As at May 31, 2020, the Company’s cash balance was approximately $5.2 million and working capital was approximately negative $2.3 million, compared with approximately $4.7 million and $4.6 million, respectively, as of November 30, 2019. The working capital deficit at quarter end is attributed to the nearing maturity of certain of the debentures and convertible debentures. Management is currently considering alternatives to address these maturities through a combination of refinancing or extension of the debentures, and conversion of a portion of the convertible debentures to equity.
This news release is qualified in its entirety by the Company’s condensed interim financial statements for the three months ended May 31, 2020 and May 31, 2019 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.sedar.com.
TIMIA is providing an update with respect to the impact from the COVID-19 virus outbreak on its current operations. To date, there have been no known cases of COVID-19 at any of TIMIA’s offices.
Management believes that recurring revenue software companies offer security and stability. The Company utilizes a proprietary credit scoring process that focuses on high customer retention rates as well as a well-diversified customer base. These two factors, along with other key attributes such as size and cash runway, are structured to provide downward protection in an uncertain economic environment. Many of our portfolio companies have been agile in this environment, including in many instances transitioning employees to work remotely. At this time, none of the Company’s investments are in arrears. However, it may be several months before the full effect of the economic slowdown is felt in the portfolio. Management is in the process of reviewing revised and updated forecasts for each of the portfolio companies and are working with them to determine the best way to support them through the crisis. Management has decided to increase the size of our capital reserves thereby reducing our allocation to new deals
Fortunately, TIMIA employees are able to work from home and maintain close contact and relationships with current portfolio companies and new and exciting SaaS investment opportunities.