Flow Beverage Corp. Reports Q1 2024 Financial Results

Rhea-AI Summary

Flow Beverage Corp. reported a decrease in net revenue for Q1 2024, with a focus on profitability and operational optimization. The company aims to achieve Adjusted EBITDA profitability and positive cash flow by Q4 2024.

Positive

• Flow brand net revenue was $6.6 million in Q1 2024, a 9% decrease from Q1 2023.
• Consolidated net revenue was $8.3 million in Q1 2024, a 16% decrease from Q1 2023.
• Adjusted EBITDA Loss1 was $9.2 million in Q1 2024, compared to $6.2 million in Q1 2023.
• Flow secured agreements with BeatBox and BioSteel, expecting over $148 million in co-pack revenue over the next five years.
• The company aims to reach Adjusted EBITDA profitability and positive cash flow by Q4 2024.

Negative

• Gross margin was (15)% in Q1 2024, a significant decrease from 30% in Q1 2023.
• EBITDA1 Loss was $10.9 million in Q1 2024, compared to $7.0 million in Q1 2023.
• Consolidated net revenue did not include the full run-rate of co-manufacturing agreements.
• Flow reported an Adjusted EBITDA1 Loss of $9.2 million in Q1 2024, compared to $6.2 million in Q1 2023.

• Flow brand net revenue was $6.6 million in Q1 2024, a 9% decrease from Q1 2023
• Consolidated net revenue was $8.3 million in Q1 2024, a 16% decrease from Q1 2023
• Adjusted EBITDA Loss¹ was $9.2 million in Q1 2024, compared to an Adjusted EBITDA Loss¹ of $6.2 million in Q1 2023
• Flow continues to expect to reach Adjusted EBITDA¹ profitability and positive cash flow from operations by the fourth quarter of fiscal 2024

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, 2024 ( “Q1 2024”). All currency amounts are stated in Canadian dollars unless otherwise noted.

Nicholas Reichenbach, Chairman and Chief Executive Officer of Flow, stated: “In Q1 2024, we exited unprofitable commercial relationships and channels that impacted current period Flow brand net revenue. While these were difficult decisions to make, they were taken to improve profitability and are consistent with our transformation plan. On the revenue side, we secured agreements with BeatBox and BioSteel that are expected to help bring Flow over $148 million in co-pack revenue over the next five years. This represents a significant acceleration of co-pack revenue now that our fourth production line has been commissioned, with production having already started for both JoyBurst and BioSteel. Additionally, we entered into a private placement to help bridge our working capital requirements in the near term, and the Company will continue to discuss alternative funding solutions with some of its key commercial partners as required. Each of these are significant milestones that should propel Flow through the coming quarters, when we expect to see a return to Flow brand growth. Ultimately, these new co-pack contracts and our operational optimization should pave the way for reaching Adjusted EBITDA profitability and positive cash flow from operations by Q4 2024.”

Trent MacDonald, Chief Financial Officer and EVP Operations of Flow, added: “A key part of our transformation is to focus on our core and most profitable offerings: our original Flow water and our streamlined four-flavour water assortment. As a result, we have chosen to de-list our vitamin-infused products and cancel related investments. This led to a one-time $1.0 million write-down of vitamin-infused product inventory, which is included in cost of goods sold. Cost of goods sold was also impacted by our capacity utilization in Q1 2024, which led to lower absorption. Third-party logistics had not yet been fully optimized through this period as well. As a result, we expect gross margins to materially improve over the balance of the year. More broadly — as a leaner and much more focused operation — we continue to see evidence that our transformation is delivering results on our accelerating journey to profitability.”

Financial Results for Q1 2024

Flow brand net revenue was $6.6 million in Q1 2024, a 9% decrease from $7.2 million in Q1 2023. We had strong growth in Flow brand net revenue in Canada within our e-commerce channel and within traditional grocery, both of which we see profitable growth continuing over the balance of the year. Net revenue in the U.S. continues to be impacted by competitor reselling over e-commerce channels. Our efforts to mitigate the competitor reselling in the U.S. are expected to take effect in the second half of fiscal 2024. Also impacting Flow brand net revenue during the quarter were the exiting of commercial partnerships with U.S. retail and food service partners to meet the Company’s profitability targets.

Consolidated net revenue was $8.3 million in Q1 2024, a 16% decrease from $9.9 million in Q1 2023. In addition to the factors impacting Flow brand revenue, consolidated net revenue did not include the full run-rate of co-manufacturing agreements the Company has recently announced.

Gross margin² was (15)% in Q1 2024, as compared to 30% in Q1 2024. The variance in gross margin² reflects the factors impacting net revenue described above, below capacity utilization at the Aurora production facility, $(0.5) million of gross margin² relating to certain commercial partnerships that we chose to exit going forward and a $1.0 million non-cash write-off of raw materials.

Flow reported an EBITDA¹ Loss of $10.9 million in Q1 2024, as compared to an EBITDA¹ Loss of $7.0 million in Q1 2023. EBITDA¹ Loss includes the factors impacting gross margin², a $1.1 million decrease to salaries and benefits which is attributable to our recent restructuring and a $1.3 million increase in share-based compensation. We expect general and administrative expenses to further reduce in the coming quarters.

Flow reported an Adjusted EBITDA¹ Loss of $9.2 million in Q1 2024, as compared to $6.2 million in Q1 2023. The Adjusted EBITDA¹ Loss is attributable to the same factors that impact EBITDA² Loss, removing stock-based compensation and restructuring charges.

	Three-month period ended January 31,
In thousands of Canadian dollars, except percentage amounts	2024		2023
	$		$
Net revenue	8,268		9,851
Gross profit	(1,258	)	2,920
Operating expenses	11,840		9,410
Finance expense, net	2,675		390
Restructuring and other costs	97		551
Net loss for the period	(15,365	)	(7,698	)
EBITDA1 loss	(10,896	)	(7,006	)
Adjusted EBITDA1 loss	(9,232	)	(6,199	)
Adjusted net loss	(13,701	)	(6,891	)
Gross margin2	(15	%)	30	%

	Three-month period ended January 31,
		2024			2023
Consolidated net loss:	$	(15,365	)	$	(7,698	)
Finance expense, net		2,675			390
Amortization and depreciation		1,794			302
EBITDA1 loss		(10,896	)		(7,006	)
Share-based compensation		1,542			256
Impairment of assets and restructuring		97			551
Loss on stock option revaluation		25			—
Adjusted EBITDA1 loss	$	(9,232	)	$	(6,199	)

(1)	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.
(2)	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.

Conference Call Information
Date:	March 18, 2024
Time:	8:30 a.m. ET
Conference ID:	89961878
Dial-in:	(416) 764-8658 or (888) 886-7786
Webcast:	Link
Replay:	(416) 764-8692 or (877) 674-7070 Passcode: 961878 Available until April 18, 2024

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 and award-winning organic 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 at retailers in Canada and the United States, and online at flowhydration.com.

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 year ended October 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 January 31, 2024 dated January 29, 2024.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240318966922/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 was Flow brand net revenue in Q1 2024?

Flow brand net revenue was $6.6 million in Q1 2024, a 9% decrease from Q1 2023.

What is the ticker symbol for Flow Beverage Corp.?

The ticker symbol for Flow Beverage Corp. is FLWBF.

What agreements did Flow secure in Q1 2024?

Flow secured agreements with BeatBox and BioSteel, expecting over $148 million in co-pack revenue over the next five years.

When does Flow expect to achieve Adjusted EBITDA profitability?

Flow expects to achieve Adjusted EBITDA profitability and positive cash flow by the fourth quarter of fiscal 2024.

What was the gross margin in Q1 2024?

Gross margin was (15)% in Q1 2024, a significant decrease from 30% in Q1 2023.