Flow Beverage Corp. Reports Q2 2024 Financial Results, Best Adjusted EBITDA¹ Result Since Go-Public in July 2021

Rhea-AI Summary

Flow Beverage Corp. (FLWBF) reported its Q2 2024 financial results, revealing a net revenue of $12.1 million, down 14% from Q2 2023. Flow brand net revenue declined by 26% to $7 million due to the exit of unprofitable partnerships. However, co-packing revenue grew by 12%. The company achieved a gross margin of 28%, improved from 18% in Q2 2023. Adjusted EBITDA loss was reduced to $3.5 million from $6.6 million in Q2 2023. CEO Nicholas Reichenbach credits restructuring efforts and a focused operating model for these improvements. Flow aims to achieve positive Adjusted EBITDA and cash flow by Q4 2024.

Positive

• Gross margin improved to 28% in Q2 2024 from 18% in Q2 2023.
• Adjusted EBITDA loss reduced to $3.5 million from $6.6 million in Q2 2023.
• Co-packing revenue increased by 12%.
• Operational restructuring led to reduced salaries and benefits by $1.9 million.
• General and administrative expenses decreased by $1.0 million.
• Flow brand is launching a summer hydration campaign to boost sales.

Negative

• Flow brand net revenue decreased by 26% to $7 million.
• Consolidated net revenue fell by 14% to $12.1 million.
• Net loss for the period was $7 million, though an improvement from $10.1 million in Q2 2023.
• Finance expenses increased to $2.1 million from $1.9 million.
• Restructuring and other costs were $299,000.

• Flow brand net revenue was $7.0 million in Q2 2024, a 26% decrease from Q2 2023
• Consolidated net revenue was $12.1 million in Q2 2024, a 14% decrease from Q2 2023
• Gross margin² was 28% in Q2 2024, as compared to 18% in Q2 2023 and (15)% in Q1 2024
• Adjusted EBITDA Loss¹ was $3.5 million in Q2 2024, compared to an Adjusted EBITDA Loss¹ of $6.6 million in Q2 2023 and $9.2 million in Q1 2024
• Restructuring and operational optimization beginning to be reflected in financial results
• Flow continues to expect to reach positive Adjusted EBITDA¹ and 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 April 30, 2024 (“Q2 2024”). All currency amounts are stated in Canadian dollars unless otherwise noted.

Nicholas Reichenbach, Chairman and Chief Executive Officer of Flow, stated: “In Q2 2024, we delivered the best Adjusted EBITDA result since becoming a public company in July 2021, which demonstrates that our restructuring and focused operating model are translating to improved financial performance. While Flow brand net revenue has declined due to the exit of unprofitable commercial partnerships, we have significantly improved both gross margin and operating expenses. With our summer hydration campaign and refreshed Flow brand launching across North America next month and continued growth in our co-pack operation, we look forward to building on our momentum in profitable channels.”

Trent MacDonald, Chief Financial Officer and EVP Operations of Flow, added: “With significant year-over-year and sequential improvements in our profitability metrics, our Q2 2024 financial results help support our goal of reaching positive Adjusted EBITDA and cash flow from operations in Q4 2024. We expect gross margin will continue to improve as production at Aurora scales and as we focus exclusively on distribution channels that are profitable for the Flow brand. Today, our operational transformation is 90% complete, which means we believe we can achieve significant operating leverage as Flow brand product grows in focused channels and co-pack revenue continues to expand. This quarter is the beginning of what we expect to be sequential improvements in profitability as we look to unlock significant shareholder value.”

Financial Results for Q2 2024

Flow brand net revenue was $7.0 million in Q2 2024, a 26% decrease from $9.5 million in Q2 2023. Flow brand net revenue declined due to material impact of exiting commercial partnerships with U.S. retail and food service partners to meet the Company’s profitability targets. This was partially offset by strong growth in certain profitable channels and Canadian e-commerce, which has benefited from food service contracts such as Starbucks and Live Nation.

Consolidated net revenue was $12.1 million in Q2 2024, a 14% decrease from $14.0 million in Q2 2023. Offsetting in part the decrease in Flow brand net revenue, co-packing revenue increased 12% in Q2 2024, which is attributable to recently signed contracts. The Company expects continued sequential growth in co-packing revenue over the next several quarters.

Gross margin² was 28% in Q2 2024, as compared to 18% in Q2 2023 and (15)% in Q1 2024. The year-over-year and sequential improvement in gross margin² reflect consolidation of production to the Aurora production facility, improved utilization at the Aurora production facility, and a focus on higher margin channels for the Flow brand.

Flow reported an EBITDA¹ Loss of $4.2 million in Q2 2024, as compared to an EBITDA¹ Loss of $7.1 million in Q2 2023 and $10.9 million Q1 2024. EBITDA¹ Loss relative to Q2 2023 reflects the factors impacting gross margin² improvement, a $1.9 million decrease to salaries and benefits which is attributable to Flow’s recent restructuring and a $1.0 million decrease to general and administrative expenses as the Company reached substantial completion of its operational transformation.

Flow reported an Adjusted EBITDA¹ Loss of $3.5 million in Q2 2024, as compared to $6.6 million in Q2 2023 and $9.2 million in Q1 2024. The Adjusted EBITDA¹ Loss is attributable to the same factors that impact EBITDA¹ Loss, removing stock-based compensation and restructuring charges.

In thousands of Canadian dollars, except percentage amounts		Three months ended April 30
		2024			2023
		$			$
Net revenue		12,055			13,975
Cost of revenue		8,713			11,502
Gross profit		3,342			2,473
Operating expenses		8,030			10,408
Finance expense, net		2,127			1,873
Restructuring and other costs		299			331
Net loss for the period		(7,028	)		(10,130	)
EBITDA1 loss		(4,226	)		(7,117	)
Adjusted EBITDA1 loss		(3,499	)		(6,642	)
Adjusted net loss		(6,301	)		(9,656	)
Gross margin2		28	%		18	%

		Three months ended April 30
		2024				2023
Consolidated net loss:		$	(7,028	)		$	(10,130	)
Finance expense, net			2,127				1,873
Amortization and depreciation			675				1,141
EBITDA1 loss			(4,226	)			(7,116	)
Share-based compensation			511				144
Impairment of assets and restructuring			299				331
Loss on option revaluation			(83	)			—
Adjusted EBITDA1 loss		$	(3,499	)		$	(6,641	)

(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:		June 17, 2024
Time:		8:30 a.m. ET
Conference ID:		01170
Dial-in:		(289) 514-5100 or (800) 717-1738
Webcast:		Link
Replay:		(289) 819-1325 or (888) 660-6264
		Passcode: 01170
		Available until July 17, 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 three and six months ended ended April 30, 2024. 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, 2023 dated January 29, 2024.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240617376385/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 Q2 2024 net revenues?

Flow Beverage Corp.'s Q2 2024 net revenues were $12.1 million, a 14% decrease from Q2 2023.

How much did Flow Beverage Corp.'s Flow brand net revenue decrease in Q2 2024?

Flow brand net revenue declined by 26% to $7 million in Q2 2024.

What was Flow Beverage Corp.'s gross margin in Q2 2024?

Flow Beverage Corp.'s gross margin was 28% in Q2 2024.

What was Flow Beverage Corp.'s adjusted EBITDA loss in Q2 2024?

Flow Beverage Corp.'s adjusted EBITDA loss was $3.5 million in Q2 2024.

How did Flow Beverage Corp.'s co-packing revenue perform in Q2 2024?

Flow Beverage Corp.'s co-packing revenue increased by 12% in Q2 2024.

What is Flow Beverage Corp.'s target for positive adjusted EBITDA and cash flow?

Flow Beverage Corp. aims to achieve positive adjusted EBITDA and cash flow by Q4 2024.