FCF Founders Advantage Capital Corp

Founders Advantage Capital Corp. (TSX-V: FCF) (“FAC” or the “Corporation”) is pleased to report its financial results for the three months ended March 31, 2019 (“Q1-2019”).  For complete information, readers should refer to the consolidated financial statements and management discussion and analysis which are available on SEDAR at www.sedar.com and on the Corporation’s website at www.advantagecapital.ca.  All amounts are presented in Canadian dollars unless otherwise stated.  Further, the Corporation is pleased to announce that Ms. Robin Burpee (previously serving as Controller of the Corporation) has been appointed Chief Financial Officer of the Corporation.  A brief biography on Ms. Burpee is included below.

Our subsidiaries are referred to herein as Dominion Lending Centres Limited Partnership (“DLC”), Club16 Limited Partnership operating as Club16 Trevor Linden Fitness (“Club16”), Cape Communications International Inc. operating as Impact Radio Accessories (“Impact”), and Astley Gilbert Limited (“AG”). DLC’s subsidiary Newton Connectivity Systems Inc. is referred to herein as “NCS”.

Highlights

• Revenues of $33.0 million for Q1-2019, representing a 9.5% increase compared to Q1-2018;
• Adjusted EBITDA of $7.8 million for Q1-2019, representing a 24.2% increase compared to Q1-2018;
• Proportionate share of adjusted EBITDA of $4.8 million for Q1-2019, increasing by 21.5% compared to Q1-2018;
• Income from operations of $1.4 million for Q1-2019, consistent with Q1-2018;
• The Corporation recognized a $0.9 million loss for the period ended Q1-2019 compared to a loss of $2.0 million during Q1-2018;
• Adjusted net losses attributable to shareholders increased to $1.9 million for Q1-2019, compared to losses of $0.8 million in Q1-2018; and
• The Corporation recognized $0.8 million of restructuring costs for the period ended Q1-2019, with respect to severance, legal costs, and other related costs in connection with the strategic alternative review process commenced in 2018 and the corporate restructuring resulting therefrom.

James Bell, President and CEO, commented, “We are pleased to report our Q1-2019 financial and operating results.  In particular, we note that DLC was able to maintain consistent revenues with last year’s Q1 which is a significant accomplishment as Q1-2018 had increased funded mortgage volumes due to Canadians initiating home purchases prior to the implementation of the B20 regulations.  With a reduction in funded mortgage volumes compared to the unique prior year quarter, DLC was able to maintain consistent revenues by maximizing and adding to their supplier (lender) contracts.  We are also proud to announce that Club16 exceeded the 90,000-member milestone as well as opened a new club in the quarter and has an additional club scheduled to open later in 2019.  Our Business Products Segment, comprised of AG and Impact, performed in line with our expectations with AG continuing to navigate challenging market conditions in Ontario and Impact continuing to grow and benefit from a meaningful new customer contract.”

Selected Consolidated Financial Highlights:
	Three months ended
(in thousands except per share amounts)	Mar. 31, 2019			Mar. 31, 2018
Revenues		32,995			30,141
Income from operations		1,376			1,442
Adjusted EBITDA (1)		7,755			6,243
Adjusted EBITDA attributable to: (1)
Shareholders		4,126			3,086
Non-controlling interests		3,629			3,157
Adjusted EBITDA margin (1)		24	%		21	%
Proportionate share of investee adjusted EBITDA (1)		4,779			3,934
Free cash flow (1)		(373	)		(1,088	)
Net loss for the period		(895	)		(2,039	)
Net (loss) income attributable to:
Shareholders		(1,472	)		(2,291	)
Non-controlling interests		577			252
Adjusted net (loss) income (1)		(1,235	)		70
Adjusted net (loss) income attributable to: (1)
Shareholders		(1,867	)		(779	)
Non-controlling interests		632			849
Diluted loss per share		(0.04	)		(0.06	)
Adjusted loss per share (1)		(0.05	)		(0.02	)
Dividend declared per share		-			0.0125

(1) Please see the Non-IFRS Financial Performance Measures section of the MD&A for additional information.

Q1-2019 ResultsThe Corporation’s 2019 financial results include the impact of IFRS 16-Leases, effective January 1, 2019. The Corporation was required to adopt IFRS 16 and used the modified retrospective approach. Financial results prior to 2019 were not prepared on this basis. As a result, the comparability of the Corporation’s 2019 general and administrative expenses, depreciation and amortization, finance expense, net income and Adjusted EBITDA prior to 2019 is impacted. The Corporation provided further details on the impact of IFRS 16 adoption the Accounting Policies of its Q1-2019 MD&A. In addition, the opening balance sheet as of January 1, 2019 includes right-of-use assets of $52.4 million and a right-of-use lease liability of $53.2 million as a result of the adoption.

Adjusted EBITDA increased $1.5 million compared to the three months ended March 31, 2018. Adjusted EBITDA increased primarily on the adoption of IFRS 16. Pursuant to the new accounting standard, $1.6 million of lease payments previously recognized as rent expense are now reflected as $1.5 million of depreciation expense and $0.4 million of interest expense in the three months ended March 31, 2019. In addition, the Business Products and Services segment’s adjusted EBITDA increased $0.6 million due to higher Impact revenue, Consumer Products and Services segment increased $0.2 million from recent club openings and expansions, and Corporate adjusted EBITDA increased $0.2 million from lower expenses.   Franchise segment adjusted EBITDA decreased $1.0 million compared to the three months ended March 31, 2018 primarily due to a $0.5 million loss on the settlement of a contract dispute with a third party and higher advertising expenses due to the timing of events.

Adjusted net income for the three months ended March 31, 2019 decreased $1.3 million compared to the same period in the previous year with increased income from operations offset by higher deferred tax expense and finance expense.  

Selected Segmented Financial Highlights:We currently operate a corporate head office and three business segments being – Business Products and Services, Consumer Products and Services and Franchise.  Please see the Corporation’s MD&A for a comprehensive discussion relating to the financial results for the segments.

	Three months ended
(in thousands)	Mar. 31, 2019			Mar. 31, 2018
Adjusted EBITDA (1)
Franchise (2)	$	2,566		$	3,534
Consumer Products and Services		2,072			766
Business Products and Services		3,770			2,791
Corporate and consolidated		(653	)		(848	)
Total adjusted EBITDA (1)		7,755			6,243
Proportionate share of investee adjusted EBITDA (1)
Franchise		1,603			2,115
Consumer Products and Services		1,243			460
Business Products and Services		1,933			1,359
Total Proportionate share of investee adjusted EBITDA (1)		4,779			3,934

(1) Please see the Non-IFRS Financial Performance Measures section of this document for additional information.(2) Includes a $0.5 million loss on settlement of a contract dispute with a third-party provider.         Appointment of Chief Financial OfficerThe Corporation is pleased to announce that Robin Burpee has been appointed Chief Financial Officer of the Corporation.  Robin is a Chartered Professional Accountant and has served as Controller of the Corporation since September, 2017.  Prior to joining FAC, she worked at a major international accounting firm as a team member in the assurance group and spent several years preparing financial reporting for an international TSX listed company.  Robin holds a Bachelor of Commerce Degree from the University of Calgary (2010).

James Bell, President and CEO commented: “We are delighted that Robin has accepted the promotion to the CFO role.  Since joining us almost two years ago, Robin has been instrumental in facilitating our financial reporting and implementing processes for efficiencies.  Robin’s professional accounting expertise, coupled with her extensive knowledge of FAC and our investees, made Robin our top choice for the CFO role.  As Robin replaces Ron Gratton as Interim CFO, we’d like to thank Ron for his contributions and support during our transition period.”

About Founders Advantage Capital Corp.The Corporation is listed on the TSX Venture Exchange as an Investment Issuer (Tier 1) and employs a permanent investment approach.

The Corporation’s common shares are listed on the TSX Venture Exchange under the symbol “FCF”.

For further information, please refer to the Corporation’s website at www.advantagecapital.ca.

Contact information for the Corporation is as follows:

James Bell President and Chief Executive Officer 403-455-2218 jbell@advantagecapital.ca		Amar Leekha Sr. Vice-President, Capital Markets 403-455-6671 aleekha@advantagecapital.ca

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 RELEASE.

Non-IFRS Financial Performance Measures

Management presents certain non-IFRS financial performance measures which we use as supplemental indicators of our operating performance. Non-IFRS financial performance measures include EBITDA and adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA attributed to shareholders and NCI, proportionate share of investee EBITDA, adjusted net income, adjusted earnings per share, and free cash flow. Readers are cautioned that these non-IFRS measures should not be construed as a substitute or an alternative to applicable generally accepted accounting principle measures as determined in accordance with IFRS. Please see the Corporation’s MD&A for a description these measures and a reconciliation of these measures to their nearest IFRS measure.