TORONTO--(BUSINESS WIRE)--Flow Beverage Corp. (TSX:FLOW; OTCQX:FLWBF) (the “Company” or “Flow”), today announced its financial results for the three-month period and fiscal year ending October 31, 2021 (“Q4 2021” and “FY 2021”, respectively).
Maurizio Patarnello, Chief Executive Officer of Flow, stated: “We are very encouraged with our efforts at increasing velocity in target distribution channels and maintaining industry-leading growth. We remain fully committed to accelerating the profitable growth of Flow branded products and aligning with the needs and aspirations of our consumers. Combined with a continued focus in our disciplined approach to cost management, we are confident that we can drive higher net revenue while significantly improving our EBITDA.”
Company Outlook and Strategic Framework for FY 2022
- Increasing net revenue target for Flow branded product growth to 45% - 55%
- Reiterating target to reduce overall EBITDA losses by 45% - 50%
The Company’s strategy is focused on the profitable growth of the Flow brand, which remains one of the fastest growing brands in the premium water category.1
We will continue to utilize co-packing opportunistically to optimize capacity and absorb fixed costs.
The Flow brand continues to benefit from favourable industry trends for premium, sustainable and enhanced water. In FY 2021, the velocity of sales performed particularly well.1 This acceleration was due to increased brand awareness, successful activation programs and the distribution of multi-serve SKUs. Flow also benefited from increasing its points of distribution to over 24,600 locations. As a result, the Company is increasing its net revenue target for Flow branded products in FY 2022 to 45% - 55%, from 35% - 45% previously.
Concurrently, EBITDA losses are expected to decrease by 45% - 50% in FY 2022 as compared to FY 2021 as the Company generates increased gross profit from higher net revenue, and maintains its disciplined approach to cost management.
The Company is also prioritizing asset optimization. This includes both improving its working capital position and significantly reducing capital expenditures.
Financial Results for FY 2021
Consolidated net revenue increased by 86% for FY 2021 to $42.7 million, compared to $23.0 million for FY 2020. Net revenue for Flow branded products increasing 47% in Retail and in E-commerce channels. The Company also benefited from significant co-packing revenue, particularly in Q2 2021.
Gross margin increased to 26% of revenue for FY 2021, compared to 6% for FY 2020. The improvement in gross margin is the result of increased utilization of the installed lines, efficiency on production runs, and consistent costs of raw materials and packaging on a per unit basis.
Flow reported an adjusted EBITDA loss of $27.0 million for FY 2021, as compared to a loss of $27.3 million in the prior year. The variance in adjusted EBITDA is attributable to higher gross profit, offset by increased sales and marketing to support the growth of the Flow brand, general and administration expenses attributable to professional services, and an increased headcount.
Financial Results for Q4 2021
Consolidated net revenue increased by 74% in Q4 2021 to $10.4 million, compared to $6.0 million in Q4 2020. Net revenue for Flow branded products increasing 69% in Retail and E-commerce. The Company also benefited from higher co-packing net revenue as compared to the prior year, though at a lower rate of growth than prior quarters due to certain customers reducing demand.
Gross margin increased to 21% of net revenue in Q4 2021, compared to 4% in Q4 2020. The improvement in gross margin is the result of increased utilization of the installed lines, on production runs, and consistent costs of raw materials and packaging on a per unit basis. Q4 2021 gross margin was also impacted by higher relative shipping costs to service COVID-related re-openings of certain customers.
Flow reported an adjusted EBITDA loss of $7.9 million in Q4 2021, as compared to a loss of $5.5 million in Q4 2020. The variance in adjusted EBITDA is attributable to higher gross profit, offset by increased sales and marketing to support the growth of the Flow brand, general and administration expenses attributable to professional services, increased insurance costs and expenses related to operating as a public company and salaries and benefits due to the increased headcounts.
| In Canadian Dollars | Three-month periods ended | Twelve-month periods ended | |||||||||||||||
| October 31, 2021 | October 31, 2020 | October 31, 2021 | October 31, 2020 | ||||||||||||||
| $ | % of | $ | % of | $ | % of | $ | % of | ||||||||||
| Revenue | Revenue | Revenue | Revenue | ||||||||||||||
| Net revenue | 10,371,339 |
|
100 |
% |
5,955,474 |
|
100 |
% |
42,697,547 |
|
100 |
% |
22,962,308 |
|
100 |
% |
|
| Cost of revenue | 8,225,593 |
|
79 |
% |
5,709,575 |
|
96 |
% |
31,390,486 |
|
74 |
% |
21,671,279 |
|
94 |
% |
|
| Gross profit | 2,145,746 |
|
21 |
% |
245,899 |
|
4 |
% |
11,307,061 |
|
26 |
% |
1,291,029 |
|
6 |
% |
|
| Operating expenses | |||||||||||||||||
| Sales and marketing | 2,678,693 |
|
26 |
% |
1,568,309 |
|
26 |
% |
9,910,992 |
|
23 |
% |
5,306,210 |
|
23 |
% |
|
| General and administrative | 4,639,547 |
|
45 |
% |
2,920,571 |
|
49 |
% |
15,700,421 |
|
37 |
% |
16,128,324 |
|
70 |
% |
|
| Salaries and benefits | 3,984,031 |
|
38 |
% |
2,171,359 |
|
36 |
% |
15,624,183 |
|
37 |
% |
9,728,546 |
|
42 |
% |
|
| Amortization and depreciation | 478,743 |
|
5 |
% |
519,451 |
|
9 |
% |
1,962,881 |
|
5 |
% |
2,077,905 |
|
9 |
% |
|
| Share-based compensation | 2,575,035 |
|
25 |
% |
3,116,279 |
|
52 |
% |
18,290,947 |
|
43 |
% |
7,570,596 |
|
33 |
% |
|
14,356,049 |
|
138 |
% |
10,295,969 |
|
173 |
% |
61,489,424 |
|
144 |
% |
40,811,581 |
|
178 |
% |
||
| Loss before the following | (12,210,303 |
) |
-118 |
% |
(10,050,070 |
) |
-169 |
% |
(50,182,363 |
) |
-118 |
% |
(39,520,552 |
) |
-172 |
% |
|
| Other income | (7,031 |
) |
0 |
% |
(455,704 |
) |
-8 |
% |
(87,829 |
) |
0 |
% |
(685,750 |
) |
-3 |
% |
|
| Finance expense, net | 2,195,475 |
|
21 |
% |
1,925,550 |
|
32 |
% |
6,267,941 |
|
15 |
% |
6,738,718 |
|
29 |
% |
|
| Foreign exchange loss (gain) | (89,488 |
) |
-1 |
% |
93,335 |
|
2 |
% |
508,411 |
|
1 |
% |
(16,698 |
) |
0 |
% |
|
| Reverse take-over costs | 190,000 |
|
2 |
% |
— |
|
0 |
% |
2,588,786 |
|
6 |
% |
— |
|
0 |
% |
|
| Restructuring and other costs | 278,500 |
|
3 |
% |
969,262 |
|
16 |
% |
2,793,793 |
|
7 |
% |
2,592,525 |
|
11 |
% |
|
| Loss before income taxes | (14,777,759 |
) |
-142 |
% |
(12,582,513 |
) |
-211 |
% |
(62,253,465 |
) |
-146 |
% |
(48,149,347 |
) |
-210 |
% |
|
| Income tax expense | — |
|
0 |
% |
— |
|
0 |
% |
— |
|
0 |
% |
— |
|
0 |
% |
|
| Net loss for the period | (14,777,759 |
) |
-142 |
% |
(12,582,513 |
) |
-211 |
% |
(62,253,465 |
) |
-146 |
% |
(48,149,347 |
) |
-210 |
% |
|
| EBITDA loss(1) | (10,988,586 |
) |
-106 |
% |
(9,570,661 |
) |
-161 |
% |
(50,711,485 |
) |
-119 |
% |
(37,483,623 |
) |
-163 |
% |
|
| Adjusted EBITDA loss(1) | (7,945,051 |
) |
-77 |
% |
(5,485,120 |
) |
-92 |
% |
(27,037,959 |
) |
-63 |
% |
(27,320,502 |
) |
-119 |
% |
|
| Adjusted net loss(1) | (10,699,882 |
) |
-103 |
% |
(8,496,972 |
) |
-143 |
% |
(37,118,097 |
) |
-87 |
% |
(37,986,226 |
) |
-165 |
% |
|
(1) Non-IFRS measures as defined in MD&A
| In Canadian dollars | October 31, 2021 | October 31, 2020 | October 31, 2021 | October 31, 2020 | |||||||||
| Consolidated net loss: | (14,777,759 |
) |
(12,582,513 |
) |
(62,253,465 |
) |
(48,149,347 |
) |
|||||
| Income tax expense | — |
|
— |
|
— |
|
— |
|
|||||
| Finance expense, net | 2,195,475 |
|
1,925,550 |
|
6,267,941 |
|
6,738,718 |
|
|||||
| Amortization and depreciation | 1,593,698 |
|
1,086,302 |
|
5,274,039 |
|
3,927,006 |
|
|||||
| EBITDA loss | (10,988,586 |
) |
(9,570,661 |
) |
(50,711,485 |
) |
(37,483,623 |
) |
|||||
| Restructuring and other costs | 278,500 |
|
969,262 |
|
2,793,793 |
|
2,592,525 |
|
|||||
| Share-based compensation | 2,575,035 |
|
3,116,279 |
|
18,290,947 |
|
7,570,596 |
|
|||||
| Reverse take-over costs | 190,000 |
|
— |
|
2,588,786 |
|
— |
|
|||||
| Adjusted EBITDA loss | (7,945,051 |
) |
(5,485,120 |
) |
(27,037,959 |
) |
(27,320,502 |
) |
|||||
| Three-month periods ended | Twelve-month periods ended | ||||||||||||
| In Canadian dollars | October 31, 2021 | October 31, 2020 | October 31, 2021 | October 31, 2020 | |||||||||
| Consolidated net loss: | (14,777,759 |
) |
(12,582,513 |
) |
(62,253,465 |
) |
(48,149,347 |
) |
|||||
| Restructuring and other costs | 278,500 |
|
969,262 |
|
2,793,793 |
|
2,592,525 |
|
|||||
| One-time debt settlement costs | 1,034,342 |
|
— |
|
1,461,842 |
|
— |
|
|||||
| Share-based compensation | 2,575,035 |
|
3,116,279 |
|
18,290,947 |
|
7,570,596 |
|
|||||
| Reverse take-over costs | 190,000 |
|
— |
|
2,588,786 |
|
— |
|
|||||
| Adjusted net loss | (10,699,882 |
) |
(8,496,972 |
) |
(37,118,097 |
) |
(37,986,226 |
) |
|||||
Conference Call Information |
||
Date: |
January 31, 2022 |
|
Time: |
10:00 a.m. EST |
|
Conference ID: |
8486741 |
|
Dial-in: |
(866) 941-1098 or (873) 415-0295 |
|
Webcast: |
https://onlinexperiences.com/Launch/QReg/ShowUUID=C9259786-4B20-443B-A5FF-FFE450A21CC6 |
|
Replay: |
(800) 585-8367 or (416) 621-4642; available until March 3, 2022 |
|
Proposed Amendment to Outstanding Debentures
Flow has $9,476,000 of unsecured debentures maturing on February 28, 2022 (the "Debentures"). Flow has received the consent of holders representing over 75% of the outstanding principal amount and unpaid interest payments of the Debentures to, among other things, amend the maturity date to February 29, 2024. The amendment of the Debentures is subject to the approval of The Toronto Stock Exchange and the Corporation has applied to The Toronto Stock Exchange seeking such approval. If approved, Flow intends to extend the maturity date of all of the Debentures to 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 sustainable, 100% 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, and collagen-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 24,650 stores across North America.
For more information on Flow, please visit Flow’s investor relations site at: investors.flowhydration.com.
Cautionary Statement
This press release may contain “forward-looking statements” within the meaning of applicable Canadian securities legislation. Such forward-looking statements include, but are not limited to, information with respect to our objectives and the strategies for achieving those objectives, as well as information with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. Forward-looking statements are typically identified by the use of words such as “may”, “would”, “should”, “could”, “expect”, “intend”, “estimate”, “anticipate”, “plan”, “foresee”, “believe”, or “continue”, although not all forward-looking statements contain these words. 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 are based on assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking statements. Those risks and uncertainties include the following: impact and spread of COVID-19; ability to achieve and manage growth; failure to expand sales capabilities; changes in consumer preferences; criticism of packaged water; maintain brand image and product quality; constrained or unavailable spring water sources; inability to package products; increased competition; accurately estimating demand; maintaining relationships with distributors and vendors; changing retail landscape; incorrect product design or development; product information misrepresentation; revenues derived entirely from packaged beverages; increases in costs or shortages of materials; fluctuation of quarterly operating results; no assurance of profitability; fluctuations in foreign currency; changes in government regulation; contamination or recalls of ingredients or end products; loss of intellectual property rights; litigation; future tax rates; catastrophic events; climate change; seasonal business; dependence on key information systems and third-party service providers; ability to securely maintain confidential information; maintaining and upgrading information technology systems; conflict of interest; dual class share structure; potential volatility of share price; no assurance of active market for shares; lack of dividends; global financial condition; publication of inaccurate or unfavourable research and reports; operating history; and management and conflict of interests. Consequently, all of the forward-looking statements contained herein are qualified by the foregoing cautionary statements, and there can be no guarantee that the results or developments that we anticipate will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business, financial condition or results of operation. Unless otherwise noted or the context otherwise indicates, the forward looking. statements contained herein are provided as of the date hereof, and we do not undertake to update or amend such forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by applicable law.
Non-IFRS 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”, “Adjusted Net Loss”, and “EBITDA”. These non-IFRS 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 measures in the evaluation of issuers. Our management also uses non-IFRS 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.
1 US SPINS MULO, Natural Channel Shelf-stable Non-Carbonated Water. Nielsen CA, Food Drug Mass, and Convenience & Gas Channel, Brand and Item Report. 52 Weeks Ending December 2021 (US MULO + Natural); 52 Weeks Ending December 2021 (CA FDM + C&G).
