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Flow Beverage Corp. Reports 79% Net Revenue Growth in Q3 2021 and Introduces Strategic Framework for Fiscal 2022

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  • Flow remains the highest growth brand in the premium natural water category with 94% growth in the US multi-outlet and natural channels, and 76% growth in Canadian channels

  • Net revenue increased by 79% to $12.0 million in Q3 2021, with gross margin increasing to 22%; net revenue increased by 90% for YTD Q3 2021 with gross margin increasing to 28%

  • Fiscal 2022 outlook introduced for 35% to 45% net revenue growth in Flow branded products, and EBITDA losses expected to decrease by 45% to 50%

TORONTO, September 13, 2021--(BUSINESS WIRE)--Flow Beverage Corp. (TSX:FLOW) (the "Company" or "Flow"), today announced its financial results for the three and nine month period ending July 31, 2021 ("Q3 2021" and "YTD Q3 2021").

Maurizio Patarnello, Chief Executive Officer of Flow, stated: "Flow has experienced tremendous success at establishing category leading growth as a premium and functional water brand in North America. To take this company through the next phase of its evolution, we have implemented a focused strategic framework. We believe we can maintain a high growth net revenue trajectory while taking a disciplined approach to cost and capital management. With a brand that customers adore and industry trends providing strong tailwinds, we are very confident our elevated levels of growth can continue."

Company Fiscal Year 2022 Outlook

Flow remains the highest growth brand in the premium natural water category1. Through a focused sales and marketing strategy and the recent addition of large distribution partners, elevated growth rates are expected to continue. By increasing all commodity volume, sales velocity, e-commerce subscriptions and new product SKUs, the Company believes it can increase net revenue for Flow branded products by 35% to 45% in fiscal 2022. Flow plans to direct its marketing and distribution investments towards omni-channel activations, strategic sport partnerships and innovation in a disciplined manner. As the Company earns increased gross profit and benefits from declining relative expenses, EBITDA losses are expected to decrease by 45% to 50% in fiscal 2022 as compared to fiscal 2021.

Discussion of Q3 2021 Financial Results

Net revenue increased by 79% in Q3 2021, or $5.3 million, to $12.0 million, compared to $6.7 million in Q3 2020. Net revenue increased by 90% for YTD Q3 2021, or $15.3 million, to $32.3 million, compared to $17.0 million for YTD Q3 2020. The increase in net revenue for both periods is primarily related to the Flow brand’s increased retail and e-commerce sales, as well as increased co-packing services.

Gross margin increased to 22% of net revenue in Q3 2021, compared to 2% in Q3 2020. Gross margin increased to 28% of net revenue for YTD Q3 2021, compared to 6% for YTD Q3 2020. The improvements in gross margin were driven by increased utilization of the installed lines and increased efficiency on production run by production run basis. In addition, the input costs of raw materials and packaging have been consistent period over period on a per unit basis.

Adjusted EBITDA loss increased by 2% in Q3 2021, or $0.2 million, to $8.3 million, compared to $8.1 million in Q3 2020. Adjusted EBITDA loss decreased by 12%, or $2.7 million, to $19.1 million for YTD Q3 2021, compared to $21.8 million for YTD Q3 2020. The variance to Adjusted EBITDA is attributable to higher gross profit in each period, offset by higher sales and marketing expenses to support distribution and e-commerce growth in the U.S., and a higher employee headcount.

Consolidated statements of loss and comprehensive loss

[Expressed in Canadian dollars, except share amounts]

In Canadian Dollars

Three-month periods ended

Nine-month periods ended

July 31, 2021

July 31, 2020

July 31, 2021

July 31, 2020

$

% of

$

% of

$

% of

$

% of

Revenue

Revenue

Revenue

Revenue

Net revenue

12,015,514

100%

6,706,141

100%

32,326,208

100%

17,006,834

100%

Cost of revenue

9,379,303

78%

6,565,627

98%

23,164,893

72%

15,961,704

94%

Gross profit

2,636,211

22%

140,514

2%

9,161,315

28%

1,045,130

6%

Operating expenses

Sales and marketing

3,427,287

29%

714,311

11%

7,232,299

22%

3,737,901

22%

General and administrative

3,948,278

33%

7,553,605

113%

13,593,841

42%

14,831,016

87%

Salaries and benefits

4,047,400

34%

2,195,633

33%

11,640,152

36%

7,557,187

44%

Amortization and depreciation

498,310

4%

539,576

8%

1,484,138

5%

1,558,454

9%

Share-based compensation

2,995,931

25%

2,329,733

35%

15,715,912

49%

4,454,317

26%

14,917,206

124%

13,332,858

199%

49,666,342

154%

32,138,875

189%

Loss before the following

(12,280,995)

-102%

(13,192,344)

-197%

(40,505,027)

-125%

(31,093,745)

-183%

Other expense

(6,976)

0%

(76,464)

-1%

(80,798)

0%

(230,046)

-1%

Finance expense, net

1,156,133

10%

1,842,226

27%

4,072,466

13%

4,813,168

28%

Foreign exchange loss (gain)

382,903

3%

(58,966)

-1%

597,899

2%

(110,033)

-1%

Reverse take-over costs

1,791,703

2,381,112

Loss before income taxes

(15,604,758)

-130%

(14,899,140)

-222%

(47,475,706)

-147%

(35,566,834)

-209%

Income tax expense

0%

0%

0%

0%

Net loss for the period

(15,604,758)

-130%

(14,899,140)

-222%

(47,475,706)

-147%

(35,566,834)

-209%

EBITDA loss(1)

(13,039,668)

-109%

(12,038,642)

-180%

(39,722,899)

-123%

(27,912,962)

-164%

Adjusted EBITDA loss(1)

(8,252,034)

-69%

(8,085,646)

-121%

(19,110,784)

-59%

(21,835,382)

-128%

Adjusted net loss(1)

(10,817,124)

-90%

(10,946,144)

-163%

(26,436,091)

-82%

(29,489,254)

-173%

Loss per share - basic and diluted

$

(0.35)

$

(0.44)

$

(1.14)

$

(1.13)

Weighted average number of

45,129,726

33,904,277

41,534,664

31,346,445

common shares outstanding - basic and diluted

Total Assets

152,970,394

Non-Current Liabilities

30,729,077

(1) Non-IFRS measures as defined in MD&A

Conference Call Information

Date:

September 13, 2021

Time:

10:00 a.m. EST

Conference ID:

8046289

Dial-in:

(800) 585-8367 or (416) 621-4642

Webcast:

https://onlinexperiences.com/Launch/QReg/ShowUUID=8F8CA832-E2F8-4570-BE10-A36582F07EFC

About Flow

Flow is a premium alkaline spring water company with a diversified line of health and wellness-oriented beverage products sold online and at retailers throughout North America. Flow's premium alkaline spring water is offered in original unflavored and a range of award-winning organic flavors, in sizes ranging from 330-ml to 1-liter.

Due to its unique artesian spring sources, Flow products contain naturally occurring electrolytes and essential minerals, and its original and flavored water products have an alkaline pH. As part of its ongoing innovation into functional "better-for-you" beverages, Flow recently introduced a new line of collagen-infused waters with natural flavors.

Founded in 2014 by serial, mission-driven entrepreneur Nicholas Reichenbach, Flow is highly dedicated to sustainability and is a B-Corp Certified company with a purpose to "bring wellness to the world through the positive power of water." Flow set out to be a sustainable brand, packaging its products in up to 75% renewable-resource-based Tetra Pak™ cartons utilizing sustainable operations.

Flow beverage products are available online at flowhydration.com, and are sold at over 20,000 stores across the United States and Canada, including Target, Walmart, Costco, Whole Foods Market, Loblaws, Sobeys, Metro, Shoppers Drug Mart, CVS Pharmacy, Farm Boy, Sprouts Farmers Market, Safeway, Wegmans, Harris Teeter, Sam's Club, Giant Eagle, Bristol Farms, Raley's, Vitamin Shoppe, and Duane Reade, among others.

Follow Flow on social media: Instagram (https://www.instagram.com/flow/); Twitter (https://twitter.com/FlowHydration); and Facebook (facebook.com/FlowHydration).

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.

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 Aug 8, 2021. (US MULO + Natural); 52 Weeks Ending Jul 17, 2021 (CA FDM + C&G)

View source version on businesswire.com: https://www.businesswire.com/news/home/20210913005320/en/

Contacts

Devan Pennell, Chief Financial Officer
1-844-356-9426
investors@flowhydration.com

US Investors:
Ashley DeSimone
Ashley.DeSimone@icrinc.com

Canadian investors:
Marc Charbin
investors@flowhydration.com

Media:
Natasha Koifman
nk@nkpr.net

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