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Financial Review
Revenue of $105.4 million for the three months ended December 31, 2024, increased 5.2% over the prior year period. The increase was primarily attributable to sales to big box stores, a new sales channel, partially offset by a decrease in the Company’s retail stores as a result of the Province of Ontario’s new rules on beverage alcohol retail distribution. Several of the Company’s other well-established trade channels also performed well, particularly restaurants and hospitality locations. This was partially offset by softness in sales from the Company’s personal winemaking business. In the third quarter of fiscal 2025, the Company recognized $3.2 million relating to the revised Ontario VQA Support Program announced in December 2023.

For the nine months ended December 31, 2024, revenue was $314.1 million, up 4.4% from the prior year. The increase was attributable to higher sales in the Company’s retail stores due to the July strike at the LCBO and sales to big box stores as described above. The Company’s other well-established trade channels have performed well on a year-to-date basis, particularly restaurants and hospitality locations. This strong performance was offset by softness in sales from the estate wineries and wine clubs due to lower guest traffic and reduced consumer discretionary spending due to tightening economic conditions. In the nine months ending December 31, 2024, the Company recognized $9.2 million relating to the revised Ontario VQA Support Program.

Gross margin as a percentage of revenue increased to 40.2% and 40.4% for the three and nine months ended December 31, 2024 respectively from 34.7% and 38.2% in the prior year. Gross margin has benefited from the inclusion of the Ontario VQA Support program, as described above, as well as lower costs for glass bottles and inbound freight due to the cost savings programs implemented by the Company. Gross margin is also continuing to be impacted by channel mix and inflationary cost pressures in concentrate, packaging and other raw materials. In response to these margin pressures, the Company is continuing to execute cost savings programs and formulation changes relating to these inputs.

As a percentage of revenue, selling and administrative expenses increased to 22.6% and 24.7% for the three and nine months ended December 31, 2024, respectively, compared to 21.5% and 24.6% in the prior year. Selling and administrative expenses increased due to higher compensation and higher selling costs as a result of the strong performance in the third quarter of fiscal 2025.

Earnings before interest, amortization, loss on debt extinguishment and financing fees, net unrealized gains and losses on derivative financial instruments, other (income) expenses, and income taxes (“EBITA”) (see “Non-IFRS Measures” section of this MD&A) was $18.5 million in the third quarter of fiscal 2025 compared to $13.2 million in the same prior year period, an increase of 40%. EBITA increased to $49.4 million for the nine months ended December 31, 2024 from $41.1 million in the prior year, an increase of 20.3%.

Interest expense for the three months ended December 31, 2024 decreased from the prior year due to a lower average debt balance and lower interest rates compared to prior year. Interest expense for the nine months ended December 31,2024 increased due to a higher average debt balance compared to the same period in the prior year and higher interest expense on the Company’s leases.

The Company recorded a net unrealized non-cash gain of $0.6 million in the third quarter of fiscal 2025 related to mark-to-market adjustments on interest rate swaps and foreign exchange contracts compared to a loss of $2.8 million in the same quarter in the prior year. The Company recorded a loss in the first nine months of fiscal 2025 of $1.2 million compared to a loss of $1.6 million in the prior year. The Company has elected not to apply hedge accounting and accordingly the change in fair value of these financial instruments is reflected in the Company’s consolidated statement of earnings (loss) each reporting period. These instruments are considered to be effective economic hedges and are expected to mitigate the short-term volatility of changing foreign exchange and interest rates.

Other expenses were $1.6 million and $2.8 million for the three and nine months ended December 31, 2024. The expense in fiscal 2025 related primarily to a restructuring initiative completed in the fiscal year to align the Company’s business structure with the changing retail landscape in Ontario.

In the nine months ended December 31, 2024, the Company undertook certain tax planning initiatives as it relates to capital gains with respect to the Port Moody lands. This included transferring the beneficial interest in the land to a newly registered limited partnership. All parties associated with the limited partner are within the consolidated APL group and there has been no legal ownership change. This transaction resulted in an additional current tax expense of $4.0 million, with an offsetting deferred tax recovery.

The Company generated net income of $7.7 million ($0.18 per Class A share) for the third quarter of fiscal 2025 compared to a net loss of $0.4 million (loss of $0.01 per Class A share) in the prior year and net income of $11.9 million ($0.28 per Class A share) for the nine months ended December 31, 2024 compared to $4.1 million ($0.10 per Class A Share) in the prior year.

Long-term debt decreased to $183.3 million at December 31, 2024 compared to $208.3 million at March 31, 2024 due to higher levels of cash from operations and stronger working capital management. For the nine months ended December 31, 2024, the Company generated cash from operating activities, after changes in non-cash working capital items, of $59.6 million compared to $39.9 million in the prior year, primarily due to a decrease in inventory due to increased sales and cost savings initiatives.

On July 15, 2024, the Company announced its normal course issuer bid (“NCIB”) had been approved by the Toronto Stock Exchange. Under the issuer bid the Company can purchase for cancellation up to 1,000,000 of its outstanding Class A non-voting shares, representing 2.8% of the Class A shares outstanding at the time, over the ensuing 12 months. The total number of common shares repurchased for cancellation under the NCIB for the nine month period ended December 31, 2024 amounted to 127,300 common shares, at a weighted average price of $4.04 per common share, for a total cash consideration of $0.5 million.

Investor Conference Call
The Company will hold a conference call to discuss the results on Thursday, February 6, 2025 at 10:00 a.m. ET. Paul Dubkowski, CEO, Renee Cauchi, Interim CFO and Patrick O’Brien, President and CCO, will host the call, with a question and answer period following management’s presentation.

About Andrew Peller Limited
Andrew Peller Limited is one of Canada’s leading producers and marketers of quality wines and craft beverage alcohol products. The Company’s award-winning premium and ultra-premium Vintners’ Quality Alliance brands include Peller Estates, Trius, Thirty Bench, Wayne Gretzky, Sandhill, Red Rooster, Black Hills Estate Winery, Tinhorn Creek Vineyards, Gray Monk Estate Winery, Raven Conspiracy, and Conviction. Complementing these premium brands are a number of popularly priced varietal offerings, wine-based liqueurs, craft ciders, and craft spirits. The Company owns and operates 101 well-positioned independent retail locations in Ontario under The Wine Shop, Wine Country Vintners, and Wine Country Merchants store names. The Company also operates Andrew Peller Import Agency and The Small Winemaker’s Collection Inc., importers and marketing agents of premium wines from around the world. With a focus on serving the needs of all wine consumers, the Company produces and markets premium personal winemaking products through its wholly owned subsidiary, Global Vintners Inc., the recognized leader in personal winemaking products. More information about the Company can be found at ir.andrewpeller.com.

The Company utilizes EBITA (defined as earnings before interest, amortization, loss on debt extinguishment and financing fees, net unrealized gains and losses on derivative financial instruments, other (income) expenses, and income taxes) to measure its financial performance. EBITA is not a recognized measure under IFRS. Management believes that EBITA is a useful supplemental measure to net earnings, as it provides readers with an indication of earnings available for investment prior to debt service, capital expenditures, and income taxes, as well as provides an indication of recurring earnings compared to prior periods. Readers are cautioned that EBITA should not be construed as an alternative to net earnings determined in accordance with IFRS as indicators of the Company’s performance or to cash flows from operating, investing, and financing activities as a measure of liquidity and cash flows. The Company also utilizes gross margin (defined as sales less cost of goods sold, excluding amortization). The Company’s method of calculating EBITA and gross margin may differ from the methods used by other companies and, accordingly, may not be comparable to measures used by other companies.

Andrew Peller Limited common shares trade on the Toronto Stock Exchange (symbols ADW.A and ADW.B).

FORWARD-LOOKING INFORMATION
Certain statements in this news release may contain “forward-looking statements” within the meaning of applicable securities laws including the “safe harbour provisions” of the Securities Act (Ontario) with respect to APL and its subsidiaries. Such statements include, but are not limited to, statements about the growth of the business; its launch of new premium wines and craft beverage alcohol products; sales trends in foreign markets; its supply of domestically grown grapes; and current economic conditions. These statements are subject to certain risks, assumptions, and uncertainties that could cause actual results to differ materially from those included in the forward-looking statements. The words “believe”, “plan”, “intend”, “estimate”, “expect”, or “anticipate”, and similar expressions, as well as future or conditional verbs such as “will”, “should”, “would”, “could”, and similar verbs often identify forward-looking statements. We have based these forward-looking statements on our current views with respect to future events and financial performance. With respect to forward-looking statements contained in this news release, the Company has made assumptions and applied certain factors regarding, among other things: future grape, glass bottle, and wine and spirit prices; its ability to obtain grapes, imported wine, glass, and other raw materials; fluctuations in foreign currency exchange rates; its ability to market products successfully to its anticipated customers; the trade balance within the domestic Canadian and international wine markets; market trends; reliance on key personnel; protection of its intellectual property rights; the economic environment; the regulatory requirements regarding producing, marketing, advertising, and labelling of its products; the regulation of liquor distribution and retailing in Ontario; the application of federal and provincial environmental laws; and the impact of increasing competition.

These forward-looking statements are also subject to the risks and uncertainties discussed in this news release, in the “Risks and Uncertainties” section and elsewhere in the Company’s MD&A and other risks detailed from time to time in the publicly filed disclosure documents of Andrew Peller Limited which are available at www.sedar.com. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties, and assumptions which could cause actual results to differ materially from those conclusions, forecasts, or projections anticipated in these forward-looking statements. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. The Company’s forward-looking statements are made only as of the date of this news release, and except as required by applicable law, the Company undertakes no obligation to update or revise these forward-looking statements to reflect new information, future events or circumstances or otherwise.

For more information, please contact:        
Craig Armitage and Jennifer Smith
ir@andrewpeller.com

Source: Andrew Peller Limited