Flow Beverage Corp. Reports 32% Net Revenue Growth and EBITDA Improvement in Q1 2022

Rhea-AI Summary

Flow Beverage Corp. (OTCQX: FLWBF) reported a 32% increase in net revenue to $11.9 million for Q1 2022, driven by a 40% growth in Flow brand revenue. The gross margin fell to 26% compared to 28% a year ago, influenced by elevated shipping costs. The EBITDA Loss improved by 20% year-over-year, reaching $7.9 million, aided by cost reduction strategies. The company maintains its FY 2022 net revenue growth target of 45% - 55% and EBITDA loss reduction of 45% - 50%. Flow continues expanding distribution channels and innovating product offerings.

Positive

• Net revenue increased by 32% to $11.9 million in Q1 2022.
• Flow brand net revenue grew by 40%, supported by increased distribution points.
• EBITDA Loss improved by 20% compared to Q1 2021.
• Targeting 45% - 55% net revenue growth for FY 2022.

Negative

• Gross margin decreased to 26% from 28% in Q1 2021 due to higher shipping costs.

• Net revenue in Q1 2022 increased 32% to $11.9 million
• Flow brand net revenue growth of 40% in Q1 2022
• Gross margin¹ in Q1 2022 was 26%
• EBITDA Loss² improvement of 20% versus Q1 2021 and 28% versus Q4 2021

TORONTO--(BUSINESS WIRE)-- Flow Beverage Corp. (TSX:FLOW; OTCQX:FLWBF) (the “Company” or “Flow”), today announced its financial results for the three-month period ending January 31, 2022 (“Q1 2022”).

Maurizio Patarnello, Chief Executive Officer of Flow, stated: “Flow brand net revenue increased 40% in Q1 2022, driven by increased velocity and points of distribution. Furthermore, we have delivered a significant EBITDA improvement versus the prior year and the previous quarter, driven by increased gross profit and strong cost discipline. We are making solid progress improving net trade working capital and decreasing capital expenditures by focusing on our key strategic priorities. With new retail authorizations in both the U.S. and Canada scheduled in upcoming months, and by maintaining a disciplined approach to expenses, we remain confident that we are on the right trajectory to deliver on our strategic framework.”

Company Outlook and Strategic Framework for FY 2022

• Maintaining FY 2022 targets: Flow brand net revenue growth of 45% - 55% and overall reduction in EBITDA Losses² by 45% - 50%

The Company’s strategy is focused on the long-term profitable growth of the Flow brand.

We continue to be positioned to benefit from favourable industry trends for premium, sustainable and enhanced water. Additionally, consumer awareness for Flow brand products is steadily growing as the Company recruits new customers through targeted marketing programs.

Flow has added over 800 points of distribution through its DSD strategy in 2022, bringing its total to over 25,800, and has secured several authorizations from large retailers that will begin selling Flow water for the summer season. The Company’s focus on innovation has resulted in new SKUs contributing to increased velocity in both the U.S. and Canada. Flow will continue to utilize co-packing opportunistically to optimize capacity and absorb fixed costs.

The Company remains committed to achieving its financial targets through growth of the Flow brand, disciplined cost management and capital deployment.

Financial Results for Q1 2022

Consolidated net revenue increased 32% to $11.9 million in Q1 2022 as compared to Q1 2021, and 15% from $10.4 million in Q4 2021.

Flow brand net revenue increased 48% in retail channels and 27% in e-commerce, for combined Flow brand net revenue growth of 40% as compared to Q1 2021.

Net revenue from co-packing operations increased 27% as compared to Q1 2021.

Gross margin was 26% in Q1 2022, as compared to 28% in Q1 2021 and 21% in Q4 2021. Flow continues to benefit from improved efficiency and consistent costs of raw materials and packaging. However, in Q1 2022 these improvements were offset by higher relative shipping costs to service COVID-related re-openings of certain customers.¹

Flow reported an EBITDA Loss of $7.9 million in Q1 2022, as compared to a loss of $9.9 million in Q1 2021 and a loss of $11.0 million in Q4 2021. The improvement in EBITDA Loss is attributable to higher gross profit and a significant reduction in stock-based compensation, partially offset by increased sales and marketing to support the growth of the Flow brand, and general and administration expenses attributable to professional services. As compared to Q4 2021, EBITDA Loss improved due to increased gross profit and significant decreases in all operating expense categories.²

Flow reported an Adjusted EBITDA Loss of $5.7 million in Q1 2022, as compared to a loss of $4.2 million in Q1 2021 and a loss of $7.9 million in Q4 2021. The variance in Adjusted EBITDA Loss is attributable to the same factors that impact EBITDA Loss, removing stock-based compensation.²

With respect to capital management, net trade receivables decreased by $0.6 million or 12%, to $4.2 million compared to $4.8 million as at the end of Q4 2021. Capital expenditures have declined to $0.6 million in Q1 2022, from $2.2 million in Q1 2021.

Flow Beverage Corp.
Consolidated statements of loss and comprehensive loss
[Expressed in Canadian dollars, except share amounts]
In Canadian Dollars		Three-month periods ended
		January 31, 2022							January 31, 2021
		$				% of			$				% of
						Revenue							Revenue
Net revenue			11,887,935			100	%			9,021,014			100	%
Cost of revenue			8,804,646			74	%			6,466,471			72	%
Gross profit			3,083,289			26	%			2,554,543			28	%
Gross margin(1)			26	%						28	%
Operating expenses
Sales and marketing			1,463,595			12	%			964,544			11	%
General and administrative			4,108,991			35	%			2,830,751			31	%
Salaries and benefits			3,664,813			31	%			3,449,564			38	%
Amortization and depreciation			504,154			4	%			499,405			6	%
Share-based compensation			2,178,981			18	%			5,683,105			63	%
			11,920,534			100	%			13,427,369			149	%
Loss before the following			(8,837,245	)		-74	%			(10,872,826	)		-121	%
Other expense (income)			8,683			0	%			(55,857	)		-1	%
Finance expense, net			1,128,180			9	%			1,785,568			20	%
Foreign exchange gain			(84,932	)		-1	%			(24,058	)		0	%
Restructuring and other costs			23,785			0	%			—			0	%
Loss before income taxes			(9,912,961	)		-83	%			(12,578,479	)		-139	%
Income tax expense			—			0	%			—			0	%
Net loss			(9,912,961	)		-83	%			(12,578,479	)		-139	%
EBITDA Loss(2)			(7,892,485	)		-66	%			(9,889,842	)		-110	%
Adjusted EBITDA Loss(2)			(5,689,719	)		-48	%			(4,206,737	)		-47	%
Adjusted Net Loss(2)			(7,710,195	)		-65	%			(6,467,874	)		-72	%
Loss per share - basic and diluted		$	(0.18	)					$	(0.32	)
Weighted average number of common shares outstanding - basic and diluted			53,754,040							39,365,399
Total Assets			121,971,596
Non-Current Liabilities			25,578,553

(1)			This is a supplementary financial measure and is used throughout this press release. See "Non-IFRS and Other Financial Measures" for more information on the supplementary financial measure.
(2)			This is a non-IFRS financial measure and is used throughout this press release. See "Non-IFRS and Other Financial Measures" for more information on each non-IFRS financial measure.

		Three-month periods ended
In Canadian dollars		January 31, 2022			January 31, 2021
Consolidated net loss:		(9,912,961	)		(12,578,479	)
Finance expense, net		1,128,180			1,785,568
Amortization and depreciation		892,296			903,069
EBITDA Loss		(7,892,485	)		(9,889,842	)
Restructuring and other costs		23,785			—
Share-based compensation		2,178,981			5,683,105
Adjusted EBITDA Loss		(5,689,719	)		(4,206,737	)
		Three-month periods ended
In Canadian dollars		January 31, 2022			January 31, 2021
Consolidated net loss:		(9,912,961	)		(12,578,479	)
Restructuring and other costs		23,785			—
One-time debt settlement costs		—			427,500
Share-based compensation		2,178,981			5,683,105
Adjusted Net Loss		(7,710,195	)		(6,467,874	)

Conference Call Information

Date:					March 15, 2022
Time:					9:00 a.m. EST
Conference ID:					8283657
Dial-in:					(866) 941-1098 or (873) 415-0295
Webcast:					Link
Replay:					(800) 585-8367 or (416) 621-4642; available until April 15, 2022

About Flow

Flow is one of the fastest-growing premium water companies in North America. Founded in 2014, Flow’s mission since day one has been to reduce environmental impacts by providing sustainably sourced naturally alkaline spring water in a sustainable, 100% recyclable and up to 75% renewable, plant-based pack. Today, the brand is B-Corp Certified with a best-in-class score of 126.5, offering a diversified line of health and wellness-oriented beverage products: original naturally alkaline spring water, award-winning organic flavours, and collagen-infused flavours in sizes ranging from 330-ml to 1-litre. All products contain naturally occurring electrolytes and essential minerals and support Flow’s overarching purpose to “bring wellness to the world through the positive power of water.” Flow beverage products are available online at flowhydration.com and are sold at over 25,800 stores across North America.

For more information on Flow, please visit Flow’s investor relations site at: investors.flowhydration.com.

Cautionary Statement

This press release may contain “forward-looking statements” within the meaning of applicable Canadian securities legislation. Such forward-looking statements include, but are not limited to, information with respect to our objectives and the strategies for achieving those objectives, as well as information with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. Forward-looking statements are typically identified by the use of words such as “may”, “would”, “should”, “could”, “expect”, “intend”, “estimate”, “anticipate”, “plan”, “foresee”, “believe”, or “continue”, although not all forward-looking statements contain these words. Forward-looking statements are provided for the purposes of assisting the reader in understanding Flow and its business, operations, prospects, and risks at a point in time in the context of historical and possible future developments, and the reader is therefore cautioned that such information may not be appropriate for other purposes. Forward-looking statements are based on assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking statements. Those risks and uncertainties include the following: impact and spread of COVID-19; ability to achieve and manage growth; failure to expand sales capabilities; changes in consumer preferences; criticism of packaged water; maintain brand image and product quality; constrained or unavailable spring water sources; inability to package products; increased competition; accurately estimating demand; maintaining relationships with distributors and vendors; changing retail landscape; incorrect product design or development; product information misrepresentation; revenues derived entirely from packaged beverages; increases in costs or shortages of materials; fluctuation of quarterly operating results; no assurance of profitability; fluctuations in foreign currency; changes in government regulation; contamination or recalls of ingredients or end products; loss of intellectual property rights; litigation; future tax rates; catastrophic events; climate change; seasonal business; dependence on key information systems and third-party service providers; ability to securely maintain confidential information; maintaining and upgrading information technology systems; conflict of interest; dual class share structure; potential volatility of share price; no assurance of active market for shares; lack of dividends; global financial condition; publication of inaccurate or unfavourable research and reports; operating history; and management and conflict of interests. Consequently, all of the forward-looking statements contained herein are qualified by the foregoing cautionary statements, and there can be no guarantee that the results or developments that we anticipate will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business, financial condition or results of operation. Unless otherwise noted or the context otherwise indicates, the forward looking. statements contained herein are provided as of the date hereof, and we do not undertake to update or amend such forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by applicable law.

Non-IFRS and Other Financial Measures

This press release makes reference to certain non-IFRS measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS, and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS measures including “Adjusted EBITDA Loss”, “Adjusted Net Loss”, and “EBITDA Loss”.

The Company uses a supplementary financial measure to disclose a financial measure that is not (a) presented in the financial statements and (b) is, or is intended to be, disclosed periodically to depict the historical or expected future financial performance, financial position or cash flow, that is not a non-IFRS financial measure as detailed above. We use the supplementary financial measure “gross margin”.

These non-IFRS and supplementary financial measures are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS and supplementary financial measures in the evaluation of issuers. Our management also uses non-IFRS and supplementary financial measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and to determine components of management compensation. For definitions and reconciliations of these non-IFRS measures to the relevant reported measures, please see “How We Assess the Performance of Our Business” and “Selected Consolidated Financial Information” sections of the Company’s Management Discussion & Analysis available on sedar.ca and investors.flowhydration.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220315005600/en/

Devan Pennell, Chief Financial Officer

1-844-356-9426

investors@flowhydration.com

US investors:

Lynne Collier

Lynne.collier@icrinc.com

Canadian investors:

Marc Charbin

investors@flowhydration.com

Media:

Natasha Koifman

nk@nkpr.net

Source: Flow Beverage Corp.

FAQ

What were Flow Beverage Corp.'s Q1 2022 net revenue figures?

Flow Beverage Corp. reported a net revenue of $11.9 million for Q1 2022, marking a 32% increase.

How much did Flow's EBITDA Loss improve in Q1 2022?

The EBITDA Loss improved by 20%, totaling $7.9 million in Q1 2022 compared to $9.9 million in Q1 2021.

What is Flow Beverage Corp.'s outlook for FY 2022?

Flow maintains a target of 45% - 55% net revenue growth and a 45% - 50% reduction in EBITDA losses for FY 2022.

What drove the growth in Flow brand net revenue?

The 40% growth in Flow brand net revenue was driven by increased velocity and expanding distribution points.

What was the gross margin for Flow Beverage Corp. in Q1 2022?

The gross margin for Q1 2022 was 26%, a decrease from 28% in the prior year.