Good morning, ladies and gentlemen, and welcome to the Crown Capital Q3 2022 Results Conference Call. Please note that today's call contains forward-looking statements within the meaning of the applicable Canadian securities legislation. Forward-looking statements involve known and unknown risks and uncertainties, as well as other factors that may cause actual financial results, performance, or achievements to be materially different from the estimated future results, performance, or achievements expressed, implied by those forward-looking statements. For a description of the risks associated with Crown's business, please refer to the company's most recently filed annual information form and its filings for Q3 fiscal 2022 at SEDAR or on the company's IR website. For your information, today's conference is being recorded. At this time, I'll turn the call over to your host today, Mr. Chris Johnson. Please go ahead, sir.
Great. Thank you very much, and good morning. Welcome to today's call. I'm joined, as usual, by Michael Overvelde, our Chief Financial Officer. Third quarter was another successful period in the transformation of Crown to a capital-light company with growing operating earnings from a diversified group of businesses. We continue to make good progress in our network services group and in the newly acquired fulfillment and distribution company, Go Direct Global. Both network services and distribution services, which together represent 95% of our total revenue in the third quarter, are benefiting from long-term tailwinds and are well-positioned for growth. Our network services group is at an exciting juncture. We are currently experiencing modest year-over-year increase in revenue profitability. However, Galaxy established itself as a world leader in deployment of low Earth orbit satellite technologies in remote areas, now with over 70 deployments in Canada.
Our current customers are predominantly large commercial users and government entities. However, as this technology becomes more widely available, we anticipate servicing entire remote communities as well. We also make important progress in our Community Network Partners division. We have a very large backlog of work, and our focus has shifted from filling the sales pipeline to executing the projects we have in hand. We reached an important milestone in September with the connection of this group's first customer, which took place in Dubreuilville, Ontario in September. The majority of our focus in 2023 will be building the network in the northern Ontario. We're being awarded a subsidy of approximately CAD 150 million from the government of Ontario. The surveying, design, engineering is currently underway, and we anticipate construction will start in Q2 2023.
Unfortunately, some of the growth in the satellite business community network is being offset by the accelerated runoff of the WireIE business, where our relatively expensive microwave circuits are being replaced by fiber connection as fiber becomes ubiquitous across Canada. We expect a continued runoff in 2023, followed by stability as the remaining circuits at that time will be servicing very remote locations. The second major growth initiative is our third-party logistics distribution platform. While the business is currently operating at breakeven, we're at the front end of a very significant growth phase. In 2022, GoDirect has opened three new warehouses in Columbus, Ohio, Calgary, Alberta, and most recently in Reno, Nevada. We have a very good sales pipeline, and these warehouses, as they're filled in 2023, will see a meaningful increase in profitability.
Our distributed power platform continues to make slow progress, with six projects operating in the quarter and an additional seven projects under development at various stages. Our focus continues to be on getting all projects operational and delivering the targeted results. We decided to discontinue one of the larger projects in Ontario as the economics have not held up and the project falls outside of our strategic focus. We intend to sell the project as an operating asset. Failing such, we will repurpose the inventory within our strategic focus. As Mike will describe in his remarks, we've taken a provision in the third quarter in relation to this project. While this group's performance has been well below our expectation, there are positive indicators for our Alberta-based merchant projects, which we anticipate capitalizing on in 2023.
We expect that this, combined with the completion of projects in development, will lead to favorable conditions to explore strategic options for this platform. We're already in the process of considering several options, including narrowing the focus to certain growth segments, as well as the sale of some or all of the assets. There are seven loans remaining in the Crown Partners Fund, which together with the GP carried interest, represents approximately CAD 37 million in capital we expect to recover in the next 12 to 18 months. Consistent with our past approach, we intend to use the proceeds to pursue strategic growth opportunities and to rationalize our capital structure. In terms of our other assets, our plans with Pinnacle and its two residential projects are moving along well. We're making great progress on the Barrie project, where rezoning for up to 500 residential units is well underway.
We're expecting positive results in 2023. At such time, we'll review liquidity options for this project. Stoney Creek projects also made great progress towards a 150-unit residential development and is about six months further back than the Barrie project. Our arms business recently introduced an upgraded version of its core application and has several interesting projects in its pipeline. We expect both businesses to contribute to profitability to Crown this year and more next year. With that, I'll turn the call to Mike, who will review the financials.
All right. Thanks, Chris. Good morning to everyone on the line. Q3 results and financial statements were filed last night. It's a fairly straightforward quarter, and Chris has done a pretty comprehensive review to update on our operations. I'm gonna keep this very brief.
I'll start with revenues. Total revenue essentially doubled over the prior year to CAD 15.3 million this quarter. That is mainly from the addition of a full quarter of results from our distribution services business, Go Direct, which you'll recall was just acquired and added to the mix very late in Q2. This is the first full quarter that we're including that business in our results. The largest contributor of consolidated revenue at this point remains our network services segment. Revenues from that segment increased slightly year-over-year from CAD 7.4 million last year to CAD 7.5 million this quarter, you know, for the reasons that, you know, Chris cited, with growth from Galaxy offsetting year-over-year declines at the WireIE business.
In Q3, the Network Services segment contributed net income before income taxes of CAD 1.1 million, and that includes depreciation and amortization expense of CAD 1.2 million. That compares to the same period last year when we had net income before income taxes of CAD 1.1 million, inclusive of depreciation and amortization of CAD 0.9 million. For the year-to-date period, Network Services segment generated pre-tax income of CAD 3.4 million and earnings before taxes, depreciation and amortization of CAD 6.4 million on revenues of CAD 20.6 million. Based on the multiple growth catalysts that Chris touched on, you know, this business should see meaningful expansion in both top and bottom line results, you know, over time. Distribution Services now represents our second-largest revenue segment.
It generated revenue of $7 million in the third quarter and a modest net loss before income taxes of $0.7 million. That included depreciation and amortization of $0.9 million, so close to breakeven on EBITDA. Note that this business features three new facilities, including a new Calgary warehouse that just opened in Q3 and is expected to reach and exceed breakeven capacity as soon as Q4 of this year. A large facility in Columbus, Ohio, it's ramping up nicely and where profitability will improve as capacity utilization continues to increase. A brand-new facility that opened just last week in Reno, Nevada, that's already onboarded customer shipments and is poised to fill up quickly based on our sales pipeline.
Collectively, we expect these three new facilities, which are all at various stages of startup, to provide solid and growing profitability for Go Direct Global throughout 2023. We're excited about the profitability and growth potential for this vertical, particularly given strong market demand for the service and the relatively low capital intensity to expand it. As for other revenue categories, you know, interest revenue, which now solely includes revenues from Crown Capital Power Fund, was just over CAD 400 thousand. That's up from CAD 278 thousand last year. Fees and other income, which is comprised primarily of credit reporting services income of Lumbermen's, was roughly CAD 420 thousand versus CAD 150 thousand last year.
For Q3 2022, Crown's share of earnings of Crown Partners Fund, which is based on IFRS-based earnings reported by the funds, totaled just CAD 0.1 million. I'd note that income distributions of Crown Partners Fund received by Crown for that period were CAD 0.6 million, which is in line with our expectation. You'll also see that we reported the non-cash impairment charges in the quarter, as Chris alluded to, which negatively impacted our net income. Specifically, Crown Capital Power Fund incurred CAD 3.6 million in non-cash impairment charges, of which CAD 1.6 million were sort of attributable to Crown shareholders. The charge had two components.
The largest component was a CAD 3.3 million write-down to the carrying value of distributed power equipment under development, and related deposits in order to reflect revised estimates of the recoverable value of a single distributed power project under development, as Chris mentioned earlier. While there might be opportunity to sell that project, we have taken the stance at this point of that we would mark the values of the related equipment down to recoverable value, which we felt was a conservative approach at this point, and did result in the CAD 3.3 million write-down. We also recorded a write-down of CAD 0.3 million related to certain distributed power equipment that we hold in inventory, you know, based on current estimates of the recoverable fair value of that equipment.
The non-cash charges drove a net loss in the period of CAD 2.1 million, or CAD 0.38 per basic share. That compares with net income of CAD 0.8 million, or CAD 0.10 per share in the same period last year. Total equity at quarter end decreased to CAD 53.9 million from CAD 69.1 million at the end of Q4 2021, mainly because of share repurchases totaling CAD 11 million, but also due to the net loss to shareholders of CAD 4.2 million in the year to date period. Total equity per share decreased to CAD 9.56 as at Q3 from CAD 9.74 at year-end, but it has increased year over year. It was CAD 9.37 a year ago.
At quarter end on a consolidated basis, we had cash of CAD 7.8 million and a little more than CAD 14 million drawn on the corporate credit facility, much of which related to the execution of the substantial issuer bid earlier in the year.
As Chris mentioned, we continue to have visibility on additional capital coming back from Crown Partners Fund through 2023, and we continue to have the necessary resources to execute on near-term organic growth plans for the operating businesses. In closing, we appreciate your continued interest in Crown. We look forward to updating you on developments in the coming months and with our Q4 earnings. As you heard from us today, well, we do have many exciting developments within the two largest segments that we believe have set Crown up well, I should say, for profitable growth in 2023. With that, we will turn it over to questions. Operator, over to you.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll take our first question from the line of Nick Corcoran with Acumen Capital.
Good morning, thanks. Take my questions. My first question just has to do with the project you took an impairment charge on. Can you maybe give a little bit more detail on what the project was and what drove the decision to write it down?
Yeah, sure. I'll take that. Hey, Nick. This was one of the first projects the Power Fund did. It went totally sideways on us, and we tried restructuring it, and it ultimately got restructured as what's known as a Global Adjustment or GA busting project, where you run a portion of the year to avoid Global Adjustment charges, and then you effectively split that with the customer host site. I compare that to our other models where we have long-term PPAs of fixed price that last for 20, 25 years or the ones where we are more of a merchant producer ourselves and we're selling to the grid when we determine we can make a profit.
We can, over the course of a year, get a pretty good estimate of how much we'll run and what our costs will be. We really don't like the revenue model of GA busting projects. It was a workout scenario that got us into that in the first place. When the project is falling below economics due to just a lower GA pool, for one, and second, just higher natural gas prices, and third, just we're not getting the production we thought we were gonna get out of it just in this kind of decision, it's not the best use to keep that project operating, not under our, you know, model. We have other places we can take that machinery and put it to work.
That's good color. Do you have any other similar projects or are they more of the fixed price type projects?
The only one. Everything else is either the sort of fixed PPA model or the merchant model.
Is there any indication or can you give an indication what the timeline on a potential sale might be?
Well, it's for what it is. It's, I think, a pretty valuable asset to the host site. I think it not only is capable of operating as a GA buster, it's capable of operating as a full facility backup, if they need it. We think that it's a large multinational company we're partnered with on that one. Like, either we think they will want it or they have other groups such as us who've been providing similar type of assets on other facilities. We're in discussions with them as well. I don't think it'll take a long time.
Yeah. Maybe switching gears to Distribution Services, how should we think about the revenue generating potential of each of the three new facilities?
Yeah, it's a good question. It does vary by size. They're not all the same size. So it's, some of them have a slightly different mix. We're actually more focused on the net cash flow than we are necessarily about the revenue out of them. Just maybe ballpark-wise, for every, say 50,000 sq ft, we're looking at something in the range of maybe CAD 1 million EBITDA that would come off of that. In total, we have Columbus about 250,000 sq ft, Calgary is 50,000, Reno's is 100,000. So that's the issue. The state we're at right now is we know we've got the capacity there. It's just getting the right mix of customers into that facility.
What's the timeline to get the right mix of customers into the facilities?
Well, it's underway. Like, every single facility has customers that are being onboarded as we speak. So it's, you know, Mike mentioned, it's the sort of milestones that are important to us, which is, you know, reaching the sort of minimum capacity that you're sort of operating at breakeven, and then you operate. To get to the target I mentioned is probably about 85 to 90%, limit, 'cause, you know, it doesn't make sense to really, in our model, to fill 100% up. You know, by our plans, we're full at all these facilities by the end of next year. In fact, we'll be looking for additional facilities.
That's helpful. Maybe just moving on to Ontario Connects, is that project progressing at the pace you previously expected to?
Yeah, it's a huge project, so I don't think we had a really good handle on what pace was when we won, and we have three years to build it. So it's we weren't expecting a ton of action in the first six months as we're taking you know something that's around 3,000 kilometers of network that need to be built and determining you know the construction methodology and the contractor you know group. Or you know we'll be using likely several contracting groups to build it for us so we can build things simultaneously. So that's underway. We have engaged an engineering firm to do initial design on a number of these things. There's a lot of steps in the process but not much happens over winter anyways.
It's just the goal here is to get as much done as we can, that we can open up as many lots as we can, as soon as the snow clears in the spring.
Did you mention in your prepared remarks that you expect construction to begin in the second quarter of 2023?
Yeah. April is the kickoff date. This is pretty similar. Last year, we built Dubreuilville, which is, you know, a town north of Lake Superior, and so similar conditions to that. Yeah, it thaws quick. It's quite a bit of Canadian Shield up in that area. Most of this work is gonna be going on poles, which is more of a getting the ditches clear of snow, that equipment can get down into the ditches and get guys up on poles.
Thanks a lot for that.
You're welcome.
It appears there are no further questions at this time. Mr. Johnson, I'd like to turn the conference back to you for any additional or closing remarks.
Okay. Well, thank you very much, everybody, for participating in today's call, and, as always, we're available to be offline as well. Please reach out and talk to you next time.