- Revising Flow brand net revenue growth target to 25% - 30% for
FY 2022
- Maintaining Flow brand net revenue growth target of 45% - 55%
for second half of fiscal 2022, relative to the same period prior
year
- Maintaining target for overall reduction in EBITDA Loss1 by 45%
- 50% in FY 2022
- Flow Alkaline Spring Water became the number one carton format
brand shelf stable water in the United States, increasing its Q2
market share to 45% in 2022 from 38% in 2021
- Signed food service sector contracts to become the official
water partner of Norwegian Cruise Line and Accor hospitality group
in North America and the Caribbean
- Added over 10,000 points of distribution in calendar 2022
Flow Beverage Corp. (TSX:FLOW; OTCQX:FLWBF) (the “Company” or
“Flow”), today announced its financial results for the three and
six month periods ending April 30, 2022 (“Q2 2022” and “YTD Q2
2022,” respectively).
Nicholas Reichenbach, founder and Chief Executive Officer of
Flow, stated: “During the second quarter, Flow brand growth
remained strong through our e-commerce platform and in the gas and
convenience channel in the Canadian market. During this period,
Flow also made investments in trade spend in the U.S. retail market
ahead of the revenue growth curve that have added points of
distribution. Although the Company has revised its growth targets,
we expect velocity at these new stores to improve as our
relationships with new partners mature and summer activation
programs take effect. Furthermore, the operational efficiencies and
cost reductions we have implemented have set us on a path of
continued improvement towards profitability.”
“Consumer demand for sustainable products is growing at a rapid
trajectory and Flow is fortunate to have been sustainable since day
one. Our investments into distribution and continued effort to
maintain leading ESG credentials have resulted in adding thousands
of points of distribution this year and securing meaningful
contracts in the food service sector with reputable partners,
leading hotel group Accor and Norwegian Cruise Line. Heading into
the seasonally strong summer hydration period, we are excited for
new formats of popular flavours and the launch of Vitamin
Water.”
Operational Highlights During and Subsequent to Q2
2022
- Flow Alkaline Spring Water became the number one carton format
brand shelf stable water in the United States, increasing its
market share in the Multi-Outlet (MULO) and Natural retail sectors
to 45% in 2022 from 38% in April 2021
- Signed an agreement with Norwegian Cruise Line (“NCL”) for Flow
Alkaline Spring Water to become NCL’s official water, NCL is a
leading global cruise line operating a fleet of 28 ships under the
Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas
Cruises brands
- Flow became the official water partner of Accor in North
America and the Caribbean, Accor is the second largest luxury hotel
operator in North America
- Began the launch of Flow to more than 70 luxury hotels operated
by Accor
- Flow published its first Sustainability Accounting Standards
Board (“SASB”) Report covering the 2021 fiscal year, SASB is one of
the most widely accepted voluntary public disclosure frameworks
that provides transparent and relevant corporate responsibility
information to investors and other key stakeholders
- Launched EcoCart on the Company’s e-commerce platform at
www.flowhydration.com, EcoCart makes it possible for Flow to offset
carbon emissions on each customer order placed on its website by
donating to carbon emission reduction projects and making every
order on its site carbon neutral
- Joined The Climate Pledge, a community of more than 300
like-minded companies committed to achieving net-zero carbon by
2040 or sooner
- Activated the Company’s partnership with the New York Road
Runners at the United Airlines NYC Half Marathon
Company Outlook and Strategic Framework for FY 2022
The Company’s strategy is focused on the long-term profitable
growth of the Flow brand. Industry trends for premium, sustainable
and enhanced water remain favourable. Flow has added over 10,000
points of distribution through its DSD strategy in 2022, bringing
its total to over 35,600, and has secured several authorizations
from large retailers. Elevated demand for sustainable product
formats, investments made into trade spend, and recent contract
wins, particularly in the food service sector, are expected to help
accelerate growth of Flow brand net revenue during the seasonally
strong summer hydration season.
The Company remains committed to achieving its net revenue
growth target for the Flow brand of 45% to 55% in the second half
of fiscal 2022, relative to the same period in the prior year. As a
result of investments into trade spend in the U.S. market that
increased store count, the Company does not expect to achieve its
financial target of net revenue growth for the Flow brand of 45% to
55% for fiscal 2022. Flow now expects net revenue growth for the
Flow brand of 25% to 30% for fiscal 2022.
Flow plans to maintain the significant improvements and
efficiencies it has implemented across its cost structure. As net
revenue increases in the second half of fiscal 2022 and comparable
periods reflect the cost structure of a public company, Flow
expects to generate continued EBITDA improvements. The Company is
maintaining its target of 45% to 50% EBITDA improvement and
improved capital efficiency for FY 2022.
Flow will continue to utilize co-packing opportunistically to
optimize capacity and absorb fixed costs.
Financial Results for Q2 2022
Consolidated net revenue was $9.0 million in Q2 2022 as compared
to $11.3 million in Q2 2021. Consolidated net revenue was $20.8
million for YTD Q2 2022 as compared to $20.3 million for YTD Q2
2021. Increased Flow brand net revenue through e-commerce and new
stores in Canada was offset by trade spend costs in the U.S. in
advance of in-store activations. Net revenue from co-packing
reflected lower demand from co-packing partners.
Gross margin was 12% in Q2 2022, as compared to 35% in Q2 2021,
and gross margin was 20% for YTD Q2 2022 as compared to 32% for YTD
Q2 2021. Flow continues to benefit from improved efficiency and
consistent costs of raw materials and packaging. These factors were
offset by lower demand for co-packing services which resulted in
the under-utilization of new production lines added in Q4 2021,
higher relative shipping costs to service COVID-related re-openings
of certain customers in Q1 2021 and factors related to trade spend
that impacted net revenue in Q2 2022.
Flow reported an EBITDA Loss of $8.5 million in Q2 2022, a 49%
improvement from Q2 2021, and a loss of $16.4 million for YTD Q2
2022, a 38% improvement from YTD Q2 2021. The improvement in EBITDA
Loss is attributable to a significant reduction in stock-based
compensation, as well as decreases to sales and marketing and
salaries and benefits expenses.
Flow reported an Adjusted EBITDA Loss of $6.9 million in Q2
2022, a 2% increase from Q2 2021, and a loss of $12.6 million for
YTD Q2 2022, a 16% increase over YTD Q2 2021. The variance in
Adjusted EBITDA Loss is attributable to the same factors that
impact EBITDA Loss, removing stock-based compensation.
With respect to capital management, capital expenditures have
declined by $4.2 million, or 86%, in YTD Q2 2022, compared to YTD
Q2 2021.
Three-month periods
ended
Six-month periods
ended
In Canadian Dollars
April 30, 2022
April 30, 2021
April 30, 2022
April 30, 2021
$
% of
$
% of
$
% of
$
% of
Revenue
Revenue
Revenue
Revenue
Net revenue
8,958,241
100
%
11,289,680
100
%
20,846,176
100
%
20,310,694
100
%
Cost of revenue
7,839,878
88
%
7,319,119
65
%
16,644,524
80
%
13,785,590
68
%
Gross profit(1)
1,118,363
12
%
3,970,561
35
%
4,201,652
20
%
6,525,104
32
%
Operating expenses Sales and marketing
1,357,227
15
%
2,840,468
25
%
2,820,822
14
%
3,805,012
19
%
General and administrative
4,011,680
45
%
4,431,507
39
%
8,120,671
39
%
7,112,596
35
%
Salaries and benefits
3,830,089
43
%
4,143,188
37
%
7,494,902
36
%
7,592,752
37
%
Amortization and depreciation
491,611
5
%
486,423
4
%
995,765
5
%
985,828
5
%
Share-based compensation
1,605,502
18
%
7,036,876
62
%
3,784,483
18
%
12,719,981
63
%
11,296,109
126
%
18,938,462
168
%
23,216,643
111
%
32,216,169
159
%
Loss before the following
(10,177,746
)
-114
%
(14,967,901
)
-133
%
(19,014,991
)
-91
%
(25,691,065
)
-126
%
Other income
(24,249
)
0
%
(17,965
)
0
%
(15,566
)
0
%
(73,822
)
0
%
Finance expense, net
1,514,720
17
%
1,130,765
10
%
2,642,900
13
%
2,916,333
14
%
Foreign exchange loss (gain)
29,598
0
%
239,054
2
%
(55,334
)
0
%
214,996
1
%
Reverse take-over costs
—
0
%
457,421
4
%
—
0
%
607,083
3
%
Restructuring and other costs
—
0
%
2,515,293
22
%
23,785
0
%
2,515,293
12
%
Loss before income taxes
(11,697,815
)
-131
%
(19,292,469
)
-171
%
(21,610,776
)
-104
%
(31,870,948
)
-157
%
Income tax expense
—
0
%
—
0
%
—
0
%
—
0
%
Net loss for the period
(11,697,815
)
-131
%
(19,292,469
)
-171
%
(21,610,776
)
-104
%
(31,870,948
)
-157
%
EBITDA Loss(2)
(8,532,904
)
-95
%
(16,793,389
)
-149
%
(16,425,389
)
-79
%
(26,683,231
)
-131
%
Adjusted EBITDA Loss(2)
(6,927,402
)
-77
%
(6,783,799
)
-60
%
(12,617,121
)
-61
%
(10,840,874
)
-53
%
Adjusted Net Loss(2)
(10,092,313
)
-113
%
(9,282,879
)
-82
%
(17,802,508
)
-85
%
(15,601,091
)
-77
%
Loss per share - basic and diluted
$
(0.22
)
(0.48
)
$
(0.40
)
$
(0.80
)
Weighted average number of
53,976,325
40,037,268
53,863,341
39,695,674
common shares outstanding - basic and diluted Total Assets
111,170,256
Non-Current Liabilities
33,534,732
(1)
Gross margin is a supplementary financial measure and is used
throughout this press release. See "Non-lFRS and Other Financial
Measures" for more information on the supplementary financial
measure.
(2)
This is a non-IFRS financial measure and is used throughout this
press release. See "Non-lFRS and Other Financial Measures" for more
information on each supplementary financial measure.
Three-month periods ended Six-month periods ended In
Canadian dollars
April 30, 2022 April 30, 2021
April 30, 2022 April 30, 2021 Consolidated net
loss:
(11,697,815
)
(19,292,469
)
(21,610,776
)
(31,870,948
)
Income tax expense
—
—
—
—
Finance expense, net
1,514,720
1,130,765
2,642,900
2,916,333
Amortization and depreciation
1,650,191
1,368,315
2,542,487
2,271,384
EBITDA Loss
(8,532,904
)
(16,793,389
)
(16,425,389
)
(26,683,231
)
Restructuring and other costs
—
2,515,293
23,785
2,515,293
Share-based compensation
1,605,502
7,036,876
3,784,483
12,719,981
Reverse take-over costs
—
457,421
—
607,083
Adjusted EBITDA Loss
(6,927,402
)
(6,783,799
)
(12,617,121
)
(10,840,874
)
Three-month periods ended Six-month periods ended In
Canadian dollars
April 30, 2022 April 30, 2021
April 30, 2022 April 30, 2021 Consolidated net
loss:
(11,697,815
)
(19,292,469
)
(21,610,776
)
(31,870,948
)
Restructuring and other costs
—
2,515,293
23,785
2,515,293
One-time debt settlement costs
—
—
—
427,500
Share-based compensation
1,605,502
7,036,876
3,784,483
12,719,981
Reverse take-over costs
—
457,421
—
607,083
Adjusted Net Loss
(10,092,313
)
(9,282,879
)
(17,802,508
)
(15,601,091
)
Conference Call Information
Date:
June 14, 2022
Time:
9:00 a.m. ET
Conference ID:
34018934
Dial-in:
(416) 764-8646 or (888) 396-8049
Webcast:
Link
Replay:
(416) 764-8692 or (877) 674-7070
Passcode 018934
Available until July 14, 2022
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 35,600 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 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.
1
This is a non-IFRS financial measure and
is used throughout this press release. See "Non-IFRS and Other
Financial Measures" for more information on each non-IFRS financial
measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220615005044/en/
Devan Pennell, Chief Financial Officer 1-844-356-9426
investors@flowhydration.com
US investors: Lynne Collier Lynne.collier@icrinc.com
Canadian investors: Marc Charbin investors@flowhydration.com
Media: Natasha Koifman nk@nkpr.net
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