Diamond Estates Wines & Spirits Reports Q2 2025 Financial Results

Rhea-AI Summary

Diamond Estates Wines & Spirits reported Q2 2025 financial results with revenue of $7.7 million, slightly down from $7.8 million in Q2 2024. The Winery division saw a $2.4 million increase while the Agency division decreased by the same amount. Gross margin improved to 53.9% from 39.6% year-over-year. The company achieved positive EBITDA of $1.0 million, up from negative $1.0 million in Q2 2024, and reported net income of $0.2 million compared to a $2.3 million loss last year. Key developments include securing $841,000 in Winery Sector Support, acquiring Perigon Beverage Group assets for $1.8 million, and refinancing debentures with new maturity in November 2025.

Positive

• Gross margin percentage increased significantly from 39.6% to 53.9%
• EBITDA improved by $2.0 million to positive $1.0 million
• Net income turned positive at $0.2 million from -$2.3 million loss
• Winery division sales increased by $2.4 million
• Secured $841,000 in Winery Sector Support program funding

Negative

• Overall revenue decreased by $0.1 million to $7.7 million
• Agency division sales declined by $2.4 million
• Loss of key supplier impacting Agency division revenue by $2.1 million
• New debentures issued with maturity in November 2025 indicating ongoing debt obligations

Niagara-on-the-Lake, Ontario--(Newsfile Corp. - November 28, 2024) - Diamond Estates Wines & Spirits Inc. (TSXV: DWS) ("Diamond Estates" or "the Company") today announced its financial results of position for the three and six months ended September 30, 2024 ("Q2 2025 and "YTD 2025" respectively).

Q2 2025 Summary:

• Revenue for Q2 2025 was $7.7 million, a decrease of $0.1 million from $7.8 million in Q2 2024. The Winery division experienced an increase in sales of $2.4 million while the Agency division experienced a decrease of $2.4 million. The increase in sales in the Winery division is largely attributable to $0.9 from DPTB, $0.5 million increase of all other brands and the remainder is from the VQA wine support program. The increase in sales is a direct result of the Ontario's government announcement to expand the marketplace to convenience, grocery and big-box stores. The decrease in the Agency division was primarily driven by the loss of a key supplier in the prior year in the amount of $2.1 million and the sale of Western Canada operations to Renaissance in August, 2024;

• Gross margin¹ as a percentage of revenue grew to 53.9% for Q2 2025 compared to 39.6% in Q2 2024 and gross margin increased $1.1 million, from $3.1 million in Q2 2024 to $4.2 million for Q2 2025. The Winery division experienced an increase of $1.5 million while the Agency declined by $0.4 million. The gross margin in the Winery division increased from 43.7% in Q2 2024 to 51.0% in Q2 2025 as a result of the VQA Wine support program and general margin increases across various skus. The gross margin at the Agency increased from 33.9% in Q2 2024 to 76.4% in Q2 2025 with the sale of Western Canada operations to Renaissance in August, 2024 and the increase in commissions sales compared to third party wines and spirits;

• EBITDA1 increased by $2.0 million to positive $1.0 million in Q2 2025 from a negative $1.0 million in Q2 2024. Adjusted EBITDA1 increased by $1.3 million to positive $0.5 million in Q2 2025 from a negative $0.8 million in Q2 2024. Both EBITDA and Adjusted EBITDA increases are attributed to improving gross margins in the Winery division and an overall decrease in SG&A expenses of $0.2 million compared to the prior year; and

• Net income was $0.2 million, compared to a net loss of $2.3 million in Q2 2024.

Subsequent Events:

• In October, 2024, the Company signed an agreement to receive the $841,000 under the Winery Sector Support program, none of which has been accrued as of September 30, 2024;

• In October, 2024, the Company closed on the acquisition of certain assets from the Perigon Beverage Group ("Perigon"). More specifically, Diamond has purchased the agency and supplier contracts, the intellectual property, and other intangible assets of Perigon and its agency business, such as its website, customer lists, business names and inventory. The purchase price is $1.8 million based on Perigon's latest financial results and will be satisfied by the issuance of common shares of Diamond over the next eighteen months;

• On November 11, 2024, the Company replaced the $4.759 million of 2023 Replacement Debentures with new debentures (the "2024 Replacement Debentures"). The material terms of the 2024 Replacement Debentures are the same as the 2023 Replacement Debentures, other than (i) the conversion price, which is now $0.24, and (ii) the maturity date, which is now November 9, 2025; and

• In November, 2024, the Company entered into a further amendment to its Second Amended and Restated Credit Agreement (the "SARCA") with Bank of Montreal ("BMO"), the notable terms of which were (i) the establishment of a non-revolving credit facility in the amount of $2,500,000 ("Demand NRT Facility") (ii) The non-revolving term credit facility previously available in the amount of $8.7 million has been reduced to $3.0 million, and (iii) a limited recourse guarantee granted by Lassonde Industries Inc. in favour of BMO on the Demand NRT Facility.

President's Message

"The enhanced VQA Wine Support Program, the D'Ont Poke the Bear partnership and the changes to the Ontario alcohol landscape has had a dramatic impact on our Winery Results this quarter. It is an exciting time to be in this industry as we will expect to see a continuation of these positive changes in the months to come. With dramatic and quick changes in the Retail landscape in Ontario; our company has moved nimbly to respond to the opportunities and to speed our improving results. " said Andrew Howard, President and CEO

"We are also excited to see the financial impact of the significant changes made at the Company as they come to fruition. We expect to see further improvements in our Agency Business as the purchase of Perigon, new business wins and growth of our current businesses impacts our Q3 and beyond business results."

2RL Agreement

The Company has engaged 2RL Capital Inc. to provide financial advisory and investment banking services. Services under this agreement, in the anticipated amount of $150,000, will be paid in common shares of the Company, in three installments occurring every six months, based on detailed invoices provided by 2RL Capital. The number of shares to be issued per installment will be calculated at the time they are issued based on a share price that is the greater of: (i) the minimum price permissible under the rules of the TSX Venture Exchange, and; (ii) the average trading price over the thirty (30) days prior to the respective payment dates.

About Diamond Estates Wines and Spirits Inc.

Diamond Estates Wines and Spirits Inc. is a producer of high-quality wines and ciders as well as a sales agent for over 120 beverage alcohol brands across Canada. The Company operates four production facilities, three in Ontario and one in British Columbia, that produce predominantly VQA wines under such well-known brand names as 20 Bees, Creekside, D'Ont Poke the Bear, EastDell, Lakeview Cellars, Mindful, Shiny Apple Cider, Fresh Wines, Red Tractor, Seasons, Serenity and Backyard Vineyards.

Through its commercial division, Trajectory Beverage Partners, the Company is the sales agent for many leading international brands in all regions of the country as well as being a distributor in the western provinces. These recognizable brands include Fat Bastard, Meffre, Pierre Chavin and Andre Lurton wines from France, Brimincourt Champagne from France, Merlet and Larsen Cognacs from France, Kaiken wines from Argentina, Blue Nun and Erben wines from Germany, Calabria Family Estate Wines and McWilliams Wines from Australia, Saint Clair Family Estate Wines and Yealands Family Wines from New Zealand, Storywood and Cofradia Tequilas from Mexico, Maverick Distillery spirits (including Tag Vodka and Barnburner Whisky) from Ontario, Talamonti and Cielo wines from Italy, Catedral and Cabeca de Toiro wines from Portugal, Edinburgh Gin, Tamdhu, Glengoyne and Smokehead single-malt Scotch whiskies from Scotland, Islay Mist, Grand MacNish and Waterproof whiskies from Scotland, C. Mondavi & Family wines including C.K Mondavi & Charles Krug from Napa and Hounds Vodka from Canada, Bols Vodka from Amsterdam, Koyle Family Wines from Chile, Pearse Lyons whiskies and gins from Ireland and McCormick Distilling International including Tequila Rose Strawberry Cream, Five Farms Irish Cream Liqueur, Broker's Gin, Hussong's Tequila, Tarantula Tequila, 360 Vodka and Holliday Bourbon.

Forward Looking Statements

This press release contains forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Diamond Estates Wines and Spirits Inc. to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this press release. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to: the economy generally; consumer interest in the services and products of the Company; financing; competition; and anticipated and unanticipated costs. While the Company acknowledges that subsequent events and developments may cause its views to change, the Company specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing the views of the Company as of any date subsequent to the date of this press release. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

Non IFRS Financial Measure

Management uses net income (loss) and comprehensive income (loss) as presented in the unaudited interim condensed consolidated statements of net income (loss) and comprehensive income (loss) as well as "gross margin", "EBITDA" and "Adjusted EBITDA" as a measure to assess performance of the Company. The Company defines "gross margin" as gross profit excluding depreciation. EBITDA and "Adjusted EBITDA" are other financial measures and are reconciled to net income (loss) and comprehensive income (loss) below under "Results of Operations".

EBITDA and Adjusted EBITDA are supplemental financial measures to further assist readers in assessing the Company's ability to generate income from operations before considering the Company's financing decisions, depreciation of property, plant and equipment and amortization of intangible assets. EBITDA comprises gross margin less operating costs before financial expenses, depreciation and amortization, non-cash expenses such as share-based compensation, one-time and other unusual items, and income tax. Adjusted EBITDA comprises EBITDA before non- recurring expenses including cost of sales adjustments related to inventory acquired in business combinations, EWG transaction costs expensed, government funding under CEWS and CERS programs, and other non-recurring adjustments included in the calculation of EBITDA. Gross margin is defined as gross profit excluding depreciation on property, plant and equipment used in production. Operating expenses exclude interest, depreciation on property, plant and equipment used in selling and administration, and amortization of intangible assets.

For more information, please contact:

Andrew Howard
President & CEO, Diamond Estates Wines & Spirits Inc.
ahoward@diamondwines.com

Ryan Conte, CPA, CA, CBV
CFO, Diamond Estates Wines & Spirits Inc.
rconte@diamondwines.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 release.

_________________________
¹ See definition of selected terms under the heading "Non-IFRS Financial Measures"

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/231854

FAQ

What was Diamond Estates Wines & Spirits (DWS) revenue in Q2 2025?

Diamond Estates Wines & Spirits reported revenue of $7.7 million in Q2 2025, a slight decrease of $0.1 million from $7.8 million in Q2 2024.

How much did Diamond Estates' gross margin improve in Q2 2025?

The gross margin increased to 53.9% in Q2 2025 from 39.6% in Q2 2024, representing a significant improvement in profitability.

What was the net income for Diamond Estates in Q2 2025?

Diamond Estates reported a net income of $0.2 million in Q2 2025, compared to a net loss of $2.3 million in Q2 2024.

How much did Diamond Estates pay for the Perigon Beverage Group acquisition?

Diamond Estates agreed to purchase Perigon Beverage Group's assets for $1.8 million, to be satisfied through the issuance of common shares over eighteen months.