Flow Beverage Corp. Reports Q3 2024 Financial Results with Substantial Adjusted EBITDA¹ Improvements, Driven by Enhanced Profitability

• Consolidated net revenue was $13.8 million in Q3 2024, a 5% increase from Q3 2023
• Flow brand net revenue was $8.4 million in Q3 2024, a 15% decrease from Q3 2023
• Gross margin² was 34% in Q3 2024, as compared to 3% in Q3 2023 and 28% in Q2 2024
• Adjusted EBITDA Loss¹ was $1.9 million in Q3 2024, compared to an Adjusted EBITDA Loss¹ of $10.7 million in Q3 2023 and $3.5 million in Q2 2024
• Restructuring and operational optimization driving improved profitability
• Flow continues to expect to reach positive Adjusted EBITDA¹ 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 July 31, 2024 (“Q3 2024”). All currency amounts are stated in Canadian dollars unless otherwise noted.

Nicholas Reichenbach, Chairman and Chief Executive Officer of Flow, stated: “Flow’s operational transformation is delivering significant financial improvements and, for the second consecutive quarter, we have achieved the best results in profitability since becoming a public company. Our co-pack business is scaling rapidly, gross margin² is improving and our operating expenses are at much more sustainable levels. We are approaching the end of the financial impact to Flow brand from the exit of unprofitable commercial partnerships and, looking forward, we expect continued growth from Flow’s core accounts as well as a return to Flow brand growth in Q1 2025 as we make inroads into more traditional grocery aisles, signing listing agreements for Flow Sparkling Mineral Spring Water, and reaping the benefits from our leaner operating structure. Additionally, with the signing of over $246 million in co-pack contracts and expanding the Aurora production facility, we are on a path for growth, prosperity and profitability over the long-term.”

Trent MacDonald, Chief Financial Officer and EVP Operations of Flow, added: “We continue to see the positive impact of our complete restructuring on our financial results with gross margin² increasing to 34% from 3% in the same quarter last year, while general and administration expenses decreased 51% and we achieved a 21% decrease in salaries and benefits. In the near term, we plan to improve our production utilization through growth in Flow brand revenue and significant additional co-pack volume, and expect absorption to drive even greater margins. We are still very focused on operational improvements and refining our processes. We believe this will inevitably result in positive Adjusted EBITDA¹ in Q4 2024 while providing a strong foundation for profitable growth going forward.”

Financial Results for Q3 2024

Flow brand net revenue was $8.4 million in Q3 2024, a 15% decrease from $9.9 million in Q3 2023. Flow brand net revenue decreased due to: 1) the exit of unprofitable commercial partnerships with retail and food service partners to meet the Company’s profitability targets, as part of the restructuring discussed in prior periods, 2) temporary disruptions to Flow brand production as we scale our operations in Aurora, and 3) a change to a wholesale model on certain e-commerce channels to eliminate the impact of competitor re-selling while driving greatly improved gross margin². The above-noted factors were offset by increases in Flow brand sales within profitable channels, such as e-comm, conventional grocery and natural foods. A consolidated return to Flow brand growth is expected by the first quarter of fiscal year 2025.

Consolidated net revenue was $13.8 million in Q3 2024, a 5% increase from $13.2 million in Q3 2023. Offsetting the decrease in Flow brand net revenue, co-pack revenue increased 62% in Q3 2024, which is attributable to recently signed contracts. The Company expects continued growth in co-packing revenue over the next several quarters.

Gross margin² was 34% in Q3 2024, as compared to 3% in Q3 2023 and 28% in Q2 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, contribution from co-pack revenue, a focus on higher margin channels for the Flow brand and a change to a wholesale model on certain e-commerce channels to eliminate the impact of competitor re-selling.

Flow reported an EBITDA¹ Loss of $3.5 million in Q3 2024, as compared to an EBITDA¹ Loss of $12.7 million in Q3 2023 and a loss of $4.2 million in Q2 2024. EBITDA¹ Loss relative to Q3 2023 reflects the factors impacting gross margin² improvement, a 51% decrease in general and administrative expenses with the substantive completion of the Company’s operational transformation and a 21% decrease in salaries and benefits due to Flow’s recent restructuring.

Flow reported an Adjusted EBITDA¹ Loss of $1.9 million in Q3 2024, as compared to a loss of $10.7 million in Q3 2023 and a loss of $3.5 million in Q2 2024. The Adjusted EBITDA¹ Loss is attributable to the same factors that impact EBITDA¹ Loss, removing stock-based compensation and restructuring charges.

		Three months ended July 31
In thousands of Canadian dollars, except percentage amounts		2024			2023 (Restated)
		$			$
Net revenue		13,760			13,157
Cost of revenue		9,131			12,739
Gross profit		4,629			417
Operating expenses		8,268			12,807
Finance expense, net		2,652			1,570
Restructuring and other costs		948			355
Net loss for the period		(7,179	)		(14,264	)
EBITDA loss1		(3,481	)		(12,726	)
Adjusted EBITDA loss1		(1,909	)		(10,717	)
Adjusted net loss		(5,607	)		(12,255	)
Gross margin2		34	%		3	%

		Three months ended July 31
		2024				2023 (Restated)
Consolidated net loss:		$	(7,179	)		$	(14,264	)
Tax expense			36				—
Finance expense, net			2,652				1,570
Amortization and depreciation			1,010				(32	)
EBITDA loss1			(3,481	)			(12,726	)
Share-based compensation			630				1,654
Impairment of assets and restructuring			948				355
Gain on option revaluation			(6	)			—
Adjusted EBITDA loss1		$	(1,909	)		$	(10,717	)

(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:									September 17, 2024
Time:									8:30 a.m. ET
Conference ID:									63472
Dial-in:									(289) 514-5100 or (800) 717-1738
Webcast:									Link
Replay:									(289) 819-1325 or (888) 660-6264
									Passcode: 63472
									Available until October 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 natural mineral spring water in the most sustainable product formats. 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 mineral spring water, award-winning organic flavours and sparkling mineral spring water in sizes ranging from 300-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 nine months ended July 31, 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/20240917829808/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.