Flow Capital Corp.

Good morning, ladies and gentlemen, and welcome to Flow Capital's Q1 2026 earnings call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. If anyone has difficulty hearing the conference, you may press star zero for an operator assistance at any time. Thank you so much for joining us. Today's call is being recorded on Tuesday, May 12, 2026, and I would now like to turn the meeting over to Alex Baluta, Chief Executive Officer of Flow Capital. Please go ahead.

Thank you, Operator. One clarification, this is our Q1 2026, although, as the Operator said, you can find our results for all prior quarters filed on CDAR or on our website. Thank you, everybody, for joining. I expect this will be a very short call. Happy to announce Continued growth in Q1 2026. Highlights include a 21% revenue increase to $3.5 million, up from $2.9. A 4% increase in recurring free cash flow to just under $900,000, up from $850,000 a year ago. An 8% increase in recurring free cash flow per share to $0.03 a share. 27% increase in total investment assets to $80.3 million. That's up from $63.4 a year ago and up from $73.5 in December. And a 6% increase in book value from a year ago, now at $1.29 versus $1.22 a year ago, and also up from $1.275 in December. Additionally, during the quarter, we made $6.5 million of new investments, which compares to $3.2 million a year ago. All in all, it was another strong quarter. We're well into our sixth year of profitability of every quarter. Free cash flow is hitting almost $900,000 in a quarter. and things continue to be on track for us. I do want to make a couple of comments on the environment. I made some of these comments in our Q4 call about a month ago. I encourage everybody to listen to that call as well. We have seen over the past couple of years increasing competition, which has led to tighter competition on deal flow, but also decreases in pricing, in particular around headline interest rates. That was driven, you know, if you go back into the early 2020s, you know, there were high valuations in the 21, 22, 23 timeframe. And then you also saw a lot of capital flow into private credit in the 23, 24, and 25 timeframe. And in particular, you saw that at the very large end of the market. You know, we've seen some announcements in that time frame of almost a doubling of capital access available for private credit. And broadly speaking, we're very much in the growth segment of smaller companies, but in the growth segment of private credit, non-asset-backed, high-growth companies. That's what we do. And we did see a trickle-down effect, you know, in terms of pricing pressures that came down from the bigger players Slowly down into our space. Now, it's been a challenge in particular on keeping our discipline, but I'll talk about that in a minute. But the good news is I think we're starting to see a reversal of that trend. In particular, you know, a lot of the larger players, there's lots and lots of news stories out there about redemptions, about concerns at investor levels, about gating of funds. and to be very clear, that has nothing to do with us. We're not in that scenario, although we know several people are. But with the gating of those funds, that trickle-down effect of excess capital is starting, in my opinion, to reverse. And so we're seeing pricing stabilize, if not increase a little bit. Broadly speaking, we're seeing staff valuations stabilize, if not recover. you know even in our own portfolio we're seeing the businesses stabilize in terms of their own growth rates and I think I mentioned this on a prior call but I'll say it again I feel that our portfolio is probably in the best condition it's been for a long long time it's in very strong health and that's not to say it was bad before it's just in terms of sort of both objective and, let me just say, perception. The portfolio is in very good shape. So we have a unique business model that, again, I've highlighted before, and we're essentially an evergreen model. We're not a fund that has, when money is often paid back to a fund, sometimes they can pay that back to their limited partners, but often they have to redeploy it. We're a unique model where we can pay back our lenders at both levels of our cap stack and then redraw, particularly on our senior line of credit, to redeploy capital. What that means in practice is that we are not pressured to make decisions or investments that might not meet our very high economic thresholds of risk returns. and so we've been cautious and judicious employers of capital over the last couple of quarters and that's served us well. We've also started to see some of our portfolio companies as they continue to improve either get refinanced, new equity rounds or in some cases M&A transactions and in fact we announced one such M&A transaction in Q2, not in Q1. That was of T-Vision. It was a good exit for the company. It was an excellent exit for us. That investment had a 25% IRR for us, and there was over a $1 million gain to book value for us that will hit in Q2. But it does show the strength and resilience of our model, and we wish them well in their future endeavors for the acquirer, and that was an excellent outcome. That's what we hope to see in all of our deals. So while there's been pricing pressures, we've been very cautious and very conservative. Our portfolio health is good. And the one maybe unfortunate aspect is that we've deployed less capital than I'd hoped, although we continue to deploy capital. In fact, as I mentioned in my preliminary comments, our investable assets, our investment assets on our balance sheets is actually up to $80.3 million from $73.5 million at the end of Q4. So the impacts, though, have been slower deployments. And that will have some impact on our growth here in the short term. We continue to grow, but you'll notice that our growth in the quarter was down below the growth that we had last year. But we do continue to grow our book value per share. And, you know, our alignment has management doing a significant stake in the equity of the company. is the alignment of shareholders and shareholders' returns. So all I have to say is it's a good quarter. We remain very selective. We're seeing an easing of pricing questions. We're actually seeing an increase in good deals in our pipeline. We're seeing some of our more direct competitors feeling challenged. And we will continue to invest in our business, and we'll continue to seek out excellent investment opportunities on a risk-adjusted basis. So with that, I'm going to pause and see if there's any questions.

Thank you, Alex, ladies and gentlemen. Should you have a question, please press star followed by one on your touchtone phone. You will hear a prompt that your hand has been raised. And should you wish to remove your hand from the queue, please press star followed by two. And if you're using a speakerphone, please lift the handset before pressing any keys. Just a moment, please, while we tabulate the Q&A. and it looks like there are no questions currently in the queue. I have turned the call back over to you, Alex Baluta.

Thank you very much, Marissa. Thank you everybody for listening to the recording of this call and I look forward to speaking to you after Q2. Thank you very much.

This concludes today's conference call. We thank you so much for your participation. You may now disconnect.