Flow Beverage Corp. Reports Q4 and Fiscal 2023 Financial Results, Provides Strategic Update and FY 2024 Outlook

Rhea-AI Summary

Flow Beverage Corp. (TSX:FLOW; OTCQX:FLWBF) reported a 27% increase in net revenue in fiscal 2023 but a 1% decrease in consolidated net revenue. The company also announced several co-pack contracts and restructuring efforts, aiming to achieve positive cash flow and EBITDA by Q4 2024.

Positive

• 27% increase in Flow brand net revenue in fiscal 2023
• Several take-or-pay co-pack contracts signed, expected to generate over $148 million in revenue
• Restructuring efforts and transition to third-party logistics for cost savings
• Additional production line to be operational in February 2024
• Improved financial outlook and no longer considering divesture of the Aurora Production Facility a necessity

Negative

• 1% decrease in consolidated net revenue in fiscal 2023
• 29% decrease in Q4 2023 net revenue compared to Q4 2022
• EBITDA loss of $11.3 million in Q4 2023 and $38.1 million in fiscal 2023
• Non-recurring costs of $4.7 million and $9.9 million included in Q4 2023 and fiscal 2023 EBITDA loss, respectively
• Gross margin of 9% in Q4 2023, down from 10% in Q4 2022

Financial Results

• Flow brand net revenue was $33.7 million in fiscal 2023, an increase of 27% as compared fiscal 2022
• Flow brand net revenue was $7.2 million in Q4 2023, a decrease of 9% as compared to Q4 2022
• Consolidated net revenue was $46.7 million in fiscal 2023, a 1% decrease as compared to fiscal 2022
• Consolidated net revenue was $9.7 million in Q4 2023, a 29% decrease as compared to Q4 2022
• EBITDA Loss¹ was $11.3 million in Q4 2023 and $38.1 million in fiscal 2023, and includes $4.7 million and $9.9 million in non-recurring costs, respectively

Strategic Update and Outlook for Fiscal 2024

• Flow has recently signed several take-or-pay co-pack contracts with committed minimum volumes which, if met, are expected to provide more than $148 million of revenue over the term of the respective agreements
• Restructuring of all functional areas is complete and transition to third-party logistics is materially complete
• Additional fourth production line in the Company’s Aurora Production Facility will be operational in February
• Flow now expects to reach Adjusted EBITDA¹ and operational cash flow positive by the fourth quarter of fiscal 2024
• Flow is still exploring potential opportunities for a divesture of the Aurora Production Facility, however, given the improved path to profitability, the Company no longer considers the divesture a requirement to meet its strategic goals and objectives

TORONTO--(BUSINESS WIRE)-- Flow Beverage Corp. (TSX:FLOW; OTCQX:FLWBF) (the “Company” or “Flow”), today announced its financial results for the fiscal quarter and year ended October 31, 2023 ( “Q4 2023” and “FY 2023,” respectively). All currency amounts are stated in Canadian dollars unless otherwise noted.

Nicholas Reichenbach, Chairman and Chief Executive Officer of Flow, stated: “Our recent momentum in co-pack contract wins has improved our outlook towards Flow’s profitability, having achieved over $148 million in minimum contracted revenue from BeatBox, Joyburst and BIOSTEEL. Consumers, retailers and our food service partners are all showing continued demand for premium, functional and sustainable beverages, and those factors helped the Flow brand achieve 27% net revenue growth in fiscal 2023. Our Q4 2023 and fiscal 2023 results reflect a year of complete operational transformation and we believe we have sufficiently restructured the organization on the road to profitability, with Flow now expecting Adjusted EBITDA profitability and positive cash flow from operations in Q4 2024. The entire Flow team is focused on meeting the expectations we’ve set for ourselves under our new operational model and look forward to delivering much improved results throughout fiscal 2024.”

Trent MacDonald, Chief Financial Officer and EVP Operations of Flow, added: “In fiscal 2023, we executed on our operational transformation plan which, while difficult and expensive, has provided the Company with a foundation on which to grow efficiently and profitably. Fiscal 2023 results, and especially those of Q4 fiscal 2023, contained several non-recurring costs that will begin to dissipate into fiscal 2024. Our expectation is that we can achieve up to $23 to $27 million in cost savings throughout fiscal 2024, which will help drive Adjusted EBITDA profitability and positive cash flow from operations in Q4 2024. Our team has come a long way over the past year and our confidence in achieving our goals is bolstered by the outlook for demand for the Flow brand, significant contract wins for our co-pack business and our much leaner operating cost base. With my recent additional appointment to EVP Operations, I will be focused on operational execution and effectiveness to help achieve our goals and objectives.”

Financial Results for Q4 2023 and FY 2023

Consolidated net revenue was $46.7 million in fiscal 2023, as compared to $47.1 million for the fiscal year ended October 31, 2022 (“FY 2022”), and includes Flow brand net revenue of $33.7 million. Flow brand net revenue increased 27%, driven by growth in retail sales. Co-pack revenue decreased to $13.0 million due to the divestiture of the Verona production facility in November 2022.

Consolidated net revenue was $9.7 million in Q4 2023, as compared to $13.6 million for the fiscal quarter ended October 31, 2022 (“Q4 2022”), and includes Flow brand net revenue of $7.2 million. Flow brand net revenue decreased 9%, principally due to contractual fees owed under a distribution agreement that Flow anticipates will no longer have a material impact after Q1 2024. Flow brand net revenue was also impacted by competing resellers of Flow brand products through e-commerce channels. Flow has partially mitigated some of this impact in Q1 2024 and believes it will be fully mitigated by Q2 2024. Flow brand gross revenue increased 15% in Q4 2023, driven by growth in Canadian retail. Co-pack revenue decreased to $2.5 million, from $5.7 million in Q4 2022, due to the divestiture of the Verona production facility.

Gross margin² was 14% in fiscal 2023, as compared to 19% in fiscal 2022. Gross margin² was 9% in Q4 2023, as compared to 10% in Q4 2022. The variance in gross margin² in both periods reflects the impact of the contractual fees and competitor reselling described above, as well as other non-recurring charges. The Company does not believe that FY 2023 gross margin is reflective of what can be achieved in FY 2024.

Flow reported an EBITDA¹ Loss of $38.1 million in fiscal 2023, as compared to an EBITDA¹ Loss of $36.1 million in fiscal 2022. Sales and marketing expenses decreased 15% and salaries and benefits decreased 13% as compared to FY 2022, due to the Company’s restructuring and operational improvements. General and administration expenses include $7.9 million in non-recurring costs. The non-recurring costs are comprised of consulting expenses attributable to the Company’s transformation and the ongoing process to divest of our Aurora facility, temporary logistics costs as Flow transitions to third-party logistics, a one-time write-off of an accounts receivable and increase to the allowance for doubtful accounts, true-up costs related to the sale of the Verona Facility and legal costs associated with financing arrangements.

Flow reported an EBITDA¹ Loss of $11.3 million in Q4 2023, as compared to an EBITDA¹ Loss of $12.0 million in Q4 2022. Sales and marketing expenses decreased 33% and salaries and benefits decreased 48% as compared to Q4 2022. General and administration expenses includes $3.9 million in non-recurring costs. The non-recurring costs are comprised of consulting expenses attributable to the Company’s transformation and the ongoing process to divest of our Aurora facility, a one-time write-off of an accounts receivable and increase to the allowance for doubtful accounts, true-up costs related to the sale of the Verona facility and legal costs associated with financing arrangements.

Flow reported an Adjusted EBITDA¹ Loss of $34.1 million in FY 2023, as compared to an Adjusted EBITDA¹ Loss of $28.3 million in FY 2022. Adjusted EBITDA¹ Loss was $10.5 million in Q4 2023, as compared to $10.6 million in FQ4 2022. The Adjusted EBITDA¹ Loss is attributable to the same factors that impact EBITDA² Loss, removing stock-based compensation and restructuring charges.

	Three months ended October 31									Twelve months ended October 31
In thousands of Canadian dollars, except percentage amounts	2023 $		2022 $		Increase (Decrease)		%			2023 $		2022 $		Increase (Decrease)		% Variance
Net revenue	9,692		13,556		(3,864	)	(29	%)		46,675		47,120		(445	)	(1	%)
Gross profit	864		1,361		(497	)	(37	%)		6,673		9,171		(2,498	)	(27	%)
Operating expenses	12,399		13,829		(1,430	)	(10	%)		45,023		49,758		(4,735	)	(10	%)
Finance expense, net	(511	)	1,015		(1,526	)	(150	%)		3,322		5,680		(2,358	)	(42	%)
Impairment of assets and restructuring costs	327		1,426		(1,099	)	(77	%)		1,563		2,047		(484	)	(24	%)
Net loss for the period	(10,882	)	(14,615	)	3,733		(26	%)		(42,974	)	(47,707	)	4,733		(10	%)
EBITDA loss1	(11,296	)	(12,047	)	751		(6	%)		(38,145	)	(36,098	)	(2,047	)	6	%
Adjusted EBITDA loss1	(10,515	)	(10,610	)	95		(1	%)		(34,073	)	(28,328	)	(5,745	)	20	%
Adjusted net loss1	(12,241	)	(13,178	)	937		(7	%)		(40,955	)	(39,937	)	(1,018	)	3	%
Gross margin2	9	%	10	%						14	%	19	%

(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.

	Three months ended October 31						Twelve months ended October 31
		2023			2022			2023			2022
Consolidated net loss:	$	(10,882	)	$	(14,615	)	$	(42,974	)	$	(47,707	)
Finance expense, net		(511	)		1,015			3,322			5,680
Amortization and depreciation		96			1,553			1,507			5,929
EBITDA loss1		(11,296	)		(12,047	)		(38,145	)		(36,098	)
Impairment of assets and restructuring costs		327			1,426			1,564			2,047
Share-based compensation		368			11			2,422			5,723
Loss on options cancellations		86			—			86			—
Adjusted EBITDA loss1	$	(10,515	)	$	(10,610	)	$	(34,073	)	$	(28,328	)
	Three months ended October 31						Twelve months ended October 31
		2023			2022			2023			2022
Consolidated net loss:	$	(10,882	)	$	(14,615	)	$	(42,974	)	$	(47,707	)
Impairment of assets and restructuring costs		327			1426			1,563			2,047
Gain on debt extinguishment		(2,141	)					(2,141	)
Gain on derecognition of derivative liability								88
Share-based compensation		368			11			2,422			5,722
Loss on options cancellations		86						86			—
Adjusted net loss1	$	(12,242	)	$	(13,178	)	$	(40,956	)	$	(39,937	)

Strategic Update

On June 15, 2023, the Company announced it had entered into a non-brokered process to sell the Aurora production facility. Since that announcement, Flow has announced co-manufacturing agreements with BeatBox, JoyBurst and, most recently, BIOSTEEL. Together, these contracts are expected to provide a combined minimum total revenue of $148 million over the term of the respective agreements. These contracts have materially changed the outlook for Flow’s path to profitability relative to when the sale of the Aurora production facility was announced. In FY 2024, Flow expects cost improvement between $23 to $27 million, and to be Adjusted EBITDA¹ and operational cash flow positive in fiscal Q4 2024.

While Flow is still considering the possible divesture of the Aurora production facility, the Company’s improved financial outlook means the divestiture is no longer considered a necessity to deliver on the Company’s strategic goals.

Conference Call Information

Date:	January 30, 2024
Time:	8:30 a.m. ET
Conference ID:	05942003
Dial-in:	(416) 764-8658 or (888) 886-7786
Webcast:	Link
Replay:	(416) 764-8692 or (877) 674-7070
	Passcode: 942003
	Available until February 29, 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, 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 59,500 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 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 October 31, 2023 dated January 29, 2024.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240129780146/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 Beverage Corp.'s net revenue in fiscal 2023?

Flow Beverage Corp.'s net revenue in fiscal 2023 was $46.7 million.

What was the percentage increase in Flow brand net revenue in fiscal 2023?

Flow brand net revenue increased by 27% in fiscal 2023.

What is the ticker symbol for Flow Beverage Corp.?

The ticker symbol for Flow Beverage Corp. is FLWBF.

What are the expected minimum revenues from the recently signed co-pack contracts?

The expected minimum revenue from the co-pack contracts is over $148 million.

When does Flow expect to reach Adjusted EBITDA and operational cash flow positive?

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