Flow Beverage Corp. Reports Q1 2023 Financial Results

Rhea-AI Summary

Flow Beverage Corp. reported a 40% increase in net revenue to $9.9 million for Q1 2023, driven by strong demand for its vitamin-infused water. Gross margins improved to 30%, up from 26% in Q1 2022, due to strategic operational improvements, including the sale of the Verona production facility. Cash reserves were $25.8 million, bolstered by recent initiatives. Although net co-packing revenue declined 61% to $2.6 million, the company secured distribution partnerships with Foodbuy and Starbucks, expanding market presence significantly. Flow aims for continued growth through new partnerships and operational enhancements throughout fiscal 2023.

Positive

• Net revenue increased 40% to $9.9 million in Q1 2023.
• Gross margins improved to 30%, up from 26% in Q1 2022.
• Cash reserves reached $25.8 million as of January 31, 2023.
• Expanded retail partnerships, including over 46,600 stores carrying Flow products.
• Signed distribution agreements with Foodbuy and Starbucks for broader market access.

Negative

• Net co-packing revenue decreased 61% to $2.6 million.
• Reported an EBITDA loss of $7 million, although improved from $7.9 million in Q1 2022.
• Adjusted EBITDA loss increased to $6.2 million compared to $5.7 million in Q1 2022.

• Flow brand net revenue increased 40% in Q1 2023
• Gross margins improved to 30% in Q1 2023
• $26 million in cash as of January 31, 2023
• Cash flows used in operations of $4.8 million in Q1 2023, an improvement of $7.1 million or 60%
• Delivering expected results from strategic initiatives and operational improvements

TORONTO--(BUSINESS WIRE)-- Flow Beverage Corp. (TSX:FLOW; OTCQX:FLWBF) (the “Company” or “Flow”), today announced its financial results for the fiscal quarter ended January 31, 2023 (“Q1 2023”). All currency amounts are stated in Canadian dollars unless otherwise noted.

Nicholas Reichenbach, Chairman and Chief Executive Officer of Flow, stated: “Fiscal 2023 is off to a strong start. We have successfully expanded our product portfolio, and have added retail and foodservice partners, resulting in Flow brand net revenue growth of 40%. We expect the Flow brand to gain further traction through new partnerships in the food service sector, increasing orders from partners signed in the past year, and more retailers adding Flow Vitamin-Infused water to their shelves.”

“We are making substantial progress on the transformation plan we previously communicated, with significant improvement in key indicators, such as gross margin of 30%, and ongoing progress in streamlining our operating model and related expense reductions. We expect the benefits of the Verona production facility sale will become even more pronounced in the second half of the fiscal year as we complete the restructuring of functional areas including logistics, warehousing, distribution and shipping. All told, we believe fiscal 2023 will be a transformational year on the path toward our goal of achieving sustainable profitable growth of the Flow brand.”

Operational Highlights During and Subsequent to Q1 2023

• Increased number of North American stores carrying Flow products to over 46,600, from 24,690 in January 2022, an 89% increase
• Maintained market share leadership in carton format and shelf stable water in the United States at 45% in Q1 2023
• Concluded a distribution agreement with Foodbuy, the largest food procurement organization in North America, with over 11,000 points of distribution
• Launched Flow Vitamin-Infused Water line of products in three new organic flavors in the United States through flowhydration.com and over 100 Fred Meyer locations and, in Canada, with 22 retail partners, representing over 800 locations
• Signed a distribution agreement with Starbucks for Flow water to become available in over 1,000 locations across Canada
• Closed the sale of the Verona production facility to BioSteel for US$19.5 million
• Secured up to $20 million from Senior Secured Debt Facility

Financial Results for Q1 2023

Consolidated net revenue was $9.9 million in Q1 2023, as compared to $11.9 million for the fiscal quarter ended January 31, 2022 (“Q1 2022”). Consolidated net revenue includes 40% growth in Flow brand revenue to $7.9 million. The increase in Flow brand revenue was due primarily to new partners in the club channel and recent innovations performing ahead of expectations. Net co-packing revenue decreased 61% to $2.6 million, reflecting the expected impact of the sale of the Verona production facility at the beginning of Q1 2023.

Gross margin¹ was 30% in Q1 2023, up from 26% in Q1 2022. The improvement in gross margin¹ reflects the sale of the Verona production facility, which was under utilized in Q1 2022.

Flow reported an EBITDA² Loss of $7.0 million in Q1 2023, as compared to an EBITDA² Loss of $7.9 million in Q1 2022, resulting primarily from decreased stock-based compensation and salaries and benefits expenses. EBITDA² Loss also includes $0.6 million in restructuring expenses realized as part of its operational transformation.

Flow reported an Adjusted EBITDA² Loss of $6.2 million in Q1 2023, as compared to and Adjusted EBITDA² Loss of $5.7 million in Q1 2022. The Adjusted EBITDA² Loss is attributable to the same factors that impact EBITDA² Loss, removing stock-based compensation and restructuring charges.

Flow reported $25.8 million of cash as of January 31, 2023. In addition to the $31 million in contribution from recent strategic initiatives, cash also includes approximately $7.5 million in working capital improvements realized in Q1 2023. The working capital improvement is primarily related to the sale of the Verona production facility and other recently implemented operational improvements.

In Canadian Dollars	Three-month periods ended
	January 31, 2023				January 31, 2022
	$		% of		$		% of
			Revenue				Revenue
Net revenue	9,851,465		100	%	11,887,935		100	%
Cost of revenue	6,931,906		70	%	8,804,646		74	%
Gross profit	2,919,559		30	%	3,083,289		26	%
	30	%			26	%
Operating expenses
Sales and marketing	1,411,391		14	%	1,463,595		12	%
General and administrative	4,080,215		41	%	4,108,991		35	%
Salaries and benefits	3,364,240		34	%	3,664,813		31	%
Amortization and depreciation	298,434		3	%	504,154		4	%
Share-based compensation	256,049		3	%	2,178,981		18	%
	9,410,329		96	%	11,920,534		100	%
Loss before the following	(6,490,770	)	(66	%)	(8,837,245	)	(74	%)
Other income	27,890		0	%	8,683		0	%
Finance expense, net	390,112		4	%	1,128,180		9	%
Foreign exchange loss (gain)	238,349		2	%	(84,932	)	(1	%)
Reverse take-over costs	—		0	%	23,785		0	%
Restructuring	551,227		6	%			0	%
Loss before income taxes	(7,698,348	)	(78	%)	(9,912,961	)	(83	%)
Income tax expense	—		0	%	—		0	%
Net loss for the period	(7,698,348	)	(78	%)	(9,912,961	)	(83	%)
Other comprehensive gain (loss)
Item that may be reclassified subsequently loss:
Exchange gain (loss) on translation of foreign operations	(264,626	)	(3	%)	673,412		6	%
Net other comprehensive gain (loss) for the year	(264,626	)	(3	%)	673,412		6	%
Comprehensive loss	(7,962,974	)	(81	%)	(9,239,549	)	(78	%)
EBITDA loss(2)	(7,006,240	)	(71	%)	(7,892,485	)	(66	%)
Adjusted EBITDA loss(2)	(6,198,964	)	(63	%)	(5,689,719	)	(48	%)
Adjusted net loss(2)	(6,891,072	)	(70	%)	(7,710,195	)	(65	%)

(1)		Gross margin is a supplementary financial measure and is used throughout this MD&A. See “Non-IFRS and Other Financial Measures” for more information on the supplementary of financial measure. See “How We Assess the Performance of Our Business” for an explanation of the composition of such measure.
(2)		This is a non-IFRS financial measure and is used throughout this MD&A. See “Non-IFRS and Other Financial Measures” for more information on each non-IFRS financial measure. See “How We Assess the Performance of Our Business” for an explanation of the composition of such measure.

	Three-month periods ended
In Canadian dollars	January 31, 2023			January 31, 2022
Consolidated net loss:	(7,698,348	)		(9,912,961	)
Income tax expense	—			—
Finance expense, net	390,112			1,128,180
Amortization and depreciation	301,996			892,296
EBITDA loss	(7,006,240	)		(7,892,485	)
Share-based compensation	256,049			2,178,981
Reverse take-over costs	—			23,785
Restructuring	551,227
Adjusted EBITDA loss	(6,198,964	)		(5,689,719	)
	Three-month periods ended
In Canadian dollars	January 31, 2023			January 31, 2022
Consolidated net loss:	(7,698,348	)		(9,912,961	)
One-time debt settlement costs	—			—
Share-based compensation	256,049			2,178,981
Reverse take-over costs	—			23,785
Restructuring	551,227
Adjusted net loss	(6,891,072	)		(7,710,195	)

Conference Call Information
Date:					March 17, 2023
Time:					8:30 a.m. ET
Conference ID:					20886485
Dial-in:					(416) 764-8646 or (888) 396-8049
Webcast:					Link
Replay:					(416) 764-8692 or (877) 674-7070
					Passcode: 886485
					Available until April 17, 2023

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 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, collagen-infused and vitamin-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 46,000 stores across North America.

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

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.

Forward-Looking Statements

This press release contains forward-looking information and forward-looking statements within the meaning of applicable securities laws (“Forward-Looking Statements”). The Forward-Looking Statements contained in this press release relate to future events or Flow’s future plans, operations, strategy, performance or financial position and are based on Flow’s current expectations, estimates, projections, beliefs and assumptions. Such Forward-Looking Statements have been made by Flow in light of the information available to it at the time the statements were made and reflect its experience and perception of historical trends. All statements and information other than historical fact may be forward‐looking statements. Such Forward‐Looking Statements are often, but not always, identified by the use of words such as “may”, “would”, “should”, “could”, “expect”, “intend”, “estimate”, “anticipate”, “plan”, “foresee”, “believe”, “continue”, “expect”, “believe”, “anticipate”, “estimate”, “will”, “potential”, “proposed” and other similar words and expressions.

Specific Forward-Looking Statements contained in this news release include, but are not limited to, statements regarding Flow’s business strategy or outlook and future growth plans, expectations regarding the elevated pace of revenue growth, potential operational efficiencies to be realized and anticipation of profitability.

Forward-Looking Statements are based on certain expectations and assumptions and are subject to known and unknown risks and uncertainties and other factors, many of which are beyond Flow’s control, that could cause actual events, results, performance and achievements to differ materially from those anticipated in these Forward-Looking Statements. 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 should not be read as guarantees of future performance or results. Readers are cautioned not to place undue reliance on these Forward-Looking Statements, which speak only as of the date of this press release. Unless otherwise noted or the context otherwise indicates, the Forward-Looking Statements contained herein are provided as of the date hereof, and the Company disclaims any intention or obligation, except to the extent required by law, to update or revise any Forward-Looking Statements as a result of new information or future events, or for any other reason.

The following press release should be read in conjunction with the management’s discussion and analysis (“MD&A”) and consolidated financial statements and notes thereto as at and for the three months ended January 31, 2023. Additional information about Flow is available on the Company’s profile on SEDAR at www.sedar.com, including the Company’s Annual Information Form for the year ended October 31, 2022 dated January 29, 2023.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230317005062/en/

Trent MacDonald, Chief Financial Officer

1-844-356-9426

investors@flowhydration.com

Investors:

Marc Charbin

investors@flowhydration.com

Media:

Natasha Koifman

nk@nkpr.net

Source: Flow Beverage Corp.

FAQ

What were Flow Beverage Corp's Q1 2023 net revenue results?

Flow Beverage Corp reported Q1 2023 net revenue of $9.9 million, a 40% increase compared to the previous year.

How did Flow Beverage perform in terms of gross margins for Q1 2023?

Flow's gross margins improved to 30% in Q1 2023, up from 26% in Q1 2022.

What strategic partnerships did Flow Beverage announce?

Flow announced distribution agreements with Foodbuy and Starbucks, expanding its market reach.

What was the cash position of Flow Beverage as of January 31, 2023?

Flow Beverage had cash reserves of $25.8 million as of January 31, 2023.

What is the outlook for Flow Beverage in fiscal 2023?

Flow expects continued revenue growth in fiscal 2023 through new partnerships and operational improvements.