"Fiscal 2024 was a pivotal year during which we completed our operational transformation and restructuring. In the last three quarters, we have seen significant improvement in financial performance, starting with higher gross margin1 and dramatically lower operating expenses. Our co-packing revenue increased significantly off the back of our $267 million of manufacturing services agreements, while our Flow brand net revenue decreased principally due to our decision to exit unprofitable channels and partnerships. Looking forward to fiscal 2025, we have a freshly innovated Flow brand and the near-term launch of Flow Sparkling Mineral Spring Water for which we have already secured listings across the hospitality, natural food and grocery channels. At our Aurora production facility, we have four production lines running with two additional production lines just months away from commissioning. Lastly, with recent capital injections from new investors we have a clear sight to profitability and positive operating cash flow," said Nicholas Reichenbach, Founder and Chief Executive Officer of Flow.
Trent MacDonald, Chief Financial Officer and EVP of Operations, added, "We are very proud of the strides we’ve made decreasing our operating expenses, however, there is still work to be done on cost of goods sold and, specifically, improving production efficiency at our Aurora production facility. In order to meet the demand from co-pack partners and maintain inventory levels to adequately fulfill orders for Flow brand products, Flow added a fourth line and had to transition to a 100% capacity utilization production environment. In doing so, we encountered several challenges throughout Q3 and well into Q4 leading to significant downtime and an inability to achieve our production attainment goals. Starting in Q4, we’ve been tremendously focused on production improvement, bringing in several subject matter experts, hiring leaders rooted in lean manufacturing practices and redesigning and implementing standard operating procedures that align with our new production reality. As a result of the production challenges, Flow reported an Adjusted EBITDA2 loss of $2.6 million in Q4 2024, as compared to its previous financial target of Adjusted EBITDA2 profitability. Given the momentum in our Flow brand sales and continued growing demand for our co-packing services, the reduction in overhead expenses and the early results from our production improvements, we now expect fiscal 2025 net revenue between $72 million and $82 million, gross margin1 between 38% and 48%, and Adjusted EBITDA2 between $6 million to $11 million. We acknowledge that we have to demonstrate financial improvement one quarter at a time, and are confident that we have positioned ourselves to meet our financial goals."
Update on Operational Transformation
In fiscal 2022, Flow reported a gross margin1 of 19% or $9.2 million, yet operating expenses were $42.1 million. It was an unsustainable business model. With a goal of achieving profitability and positive cash flow from operations, Flow embarked on an operational transformation and restructuring that took five quarters, beginning in Q1 2023.
During this period, Flow made a series of strategic decisions and implemented processes to position the Company for the long-term. Highlights of strategic changes include: the divestiture of the Verona production facility; a recapitalization of its balance sheet; the implementation of a new IT ecosystem; the exit of unprofitable retail and food service partnerships; consolidation of production to and an increase in capacity at the Aurora production facility; securing new co-pack partners; restructuring of corporate and financial reporting functions; and the implementation of third-party logistics.
Beginning in fiscal Q2 2024, progress towards profitability and positive cash flow became evident. Even while net revenue was impacted by the exit of unprofitable partnerships, gross margin1 improved 10.0%, 30.4% and 12.0% in Q2, Q3 and Q4 of fiscal 2024, respectively. Additionally, due to significant reductions in general and administrative costs and salaries and benefits, Adjusted EBITDA2 improved $3.1 million, $8.8 million and $7.9 million, respectively, for the same three quarters.
Financial Targets for FY 2025
Flow is introducing its financial targets for FY 2025 (the "2025 Financial Targets"). The Company expects to earn net revenue between $72 million and $82 million, gross margin1 between 38% and 48%, and Adjusted EBITDA2 between $6 million to $11 million.
The material assumptions underlying the 2025 Financial Targets include but are not limited to: 1) Flow brand growth, both for existing SKUs in Tetra format and through the Company’s launch of sparkling water in aluminum format; 2) scaling of the Company’s co-pack operation with a full year of running four production lines and installation and commissioning of two additional production lines beginning in the second half of FY 2025; 3) higher capacity utilization and gaining production efficiencies at the Aurora production facility; 4) gross margin1 reflective of profitable channels for Flow brand net revenue, accretive co-pack contracts and improved production performance; and 5) Flow’s ability to implement its growth strategy with continued discipline in operating expenses.
Should the underlying assumptions on which the 2025 Financial Targets are based not materialize, it could have a material impact on the Company’s reported results. Specific risk factors that could cause financial results to differ materially from the 2025 Financial Targets include, but are not limited to, access to working capital, achieving production efficiency targets, delays in obtaining the necessary capacity at the Aurora production facility, and counter-party risk in relation to co-pack partners.
Financial Results for Q4 2024
Flow brand net revenue was $6.4 million in Q4 2024, an 11% decrease from $7.1 million in Q4 2023. Flow brand net revenue decreased due to the exit of commercial partnerships with retail and food service partners to meet the Company’s profitability targets and temporary disruptions to Flow brand production as we scale.
Consolidated net revenue was $11.8 million in Q4 2024, a 22% increase from $9.7 million in Q4 2023. Offsetting the decrease in Flow brand net revenue, co-pack revenue increased 115% in Q4 2024, which is attributable to recently signed contracts.
Gross margin1 was 21% in Q4 2024, as compared to 9% in Q4 2023. The improvement in gross margin1 reflects the 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 EBITDA2 loss of $4.6 million in Q4 2024, as compared to an EBITDA1 loss of $11.3 million in Q4 2023. EBITDA2 loss relative to Q4 2023 reflects the factors impacting gross margin1 improvement, a 59% decrease in sales, marketing and general and administrative expenses with the substantive completion of the Company’s operational transformation and a 17% decrease in salaries and benefits due to Flow’s recent restructuring.
Flow reported an Adjusted EBITDA2 loss of $2.6 million in Q4 2024, as compared to a loss of $10.5 million in Q4 2023. The Adjusted EBITDA2 loss is attributable to the same factors that impact EBITDA2 loss, removing stock-based compensation and restructuring charges.
| | | Three months ended October 31 |
| | | 2024 | | 2023 |
| In thousands of Canadian dollars, except percentage amounts | | | | |
| | | $ | | $ |
| Net revenue | | 11,848 | | | 9,692 | |
| Cost of revenue | | 9,377 | | | 8,828 | |
| Gross profit | | 2,471 | | | 864 | |
| Operating expenses | | 6,641 | | | 12,399 | |
| Finance expense, net | | 2,957 | | | (511 | ) |
| Restructuring and other costs | | 1,522 | | | 328 | |
| Net loss for the period | | (8,679 | ) | | (10,882 | ) |
| EBITDA loss2 | | (4,564 | ) | | (11,296 | ) |
| Adjusted EBITDA loss2 | | (2,626 | ) | | (10,515 | ) |
| Adjusted net loss | | (6,741 | ) | | (12,242 | ) |
| | | | | |
| Gross margin1 | | 21 | % | | 9 | % |
| | | Three months ended October 31 |
| | | 2024 | | 2023 |
| Consolidated net loss: | | $ | (8,679 | ) | | $ | (10,882 | ) |
| Tax expense | | | 34 | | | | — | |
| Finance expense, net | | | 2,957 | | | | (511 | ) |
| Amortization and depreciation | | | 1,124 | | | | 96 | |
| EBITDA loss2 | | | (4,564 | ) | | | (11,297 | ) |
| Share-based compensation | | | 422 | | | | 368 | |
| Impairment of assets and restructuring | | | 1,522 | | | | 327 | |
| Loss on option revaluation | | | (6 | ) | | | 86 | |
| Adjusted EBITDA loss2 | | $ | (2,626 | ) | | $ | (10,516 | ) |
| (1) | | 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. |
| (2) | | 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. |
Conference Call and Webcast Details
Nicholas Reichenbach, Founder and Chief Executive Officer, and Trent MacDonald, Chief Financial Officer and EVP Operations, will host a conference call and webcast featuring a presentation, followed by a Q&A session where webcast participants will have the chance to submit questions directly to management.
| Date: | | | | January 30, 2025 |
| Time: | | | | 8:30 a.m. ET |
| Conference ID: | | | | 11856 |
| Dial-in: | | | | (289) 514-5100 or (800) 717-1738 |
| Webcast: | | | | Link |
| Replay: | | | | (289) 819-1325 or (888) 660-6264 |
| | | | | Passcode: 11856 |
| | | | | Available until February 22, 2025 |
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.
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, including in relation to the 2025 Outlook, and are based on Flow’s current expectations, estimates, projections, beliefs and assumptions, including, among other things, growth of Flow brand both for existing SKUs in Tetra format and through the Company’s launch of sparkling water in aluminum format, the scaling of the Company’s co-pack operation with a full year of running four production lines and installation and commissioning of two additional production from lines beginning in the second half of fiscal FY 2025, a higher capacity utilization and gaining production efficiencies at the Aurora production facility, gross margins reflective of profitable channels for Flow brand net revenue, accretive co-pack contracts and improved production performance and Flow’s ability to implement its growth strategy with continued discipline in operating expenses.
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.
Although Flow believes that the assumptions underlying Forward-Looking Statements are reasonable, they may prove to be incorrect. 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. As it pertains to the 2025 Outlook, those risks include but are not limited to access to working capital, achieving production efficiency targets, delays in obtaining the necessary capacity at the Aurora production facility, and counter-party risk in relation to co-pack partners. Forward-Looking Statements are provided for the purpose 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 and consolidated financial statements and notes thereto as at and for the year ended October 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, 2024 dated January 29, 2025.
View source version on businesswire.com: https://www.businesswire.com/news/home/20250130265903/en/
Contacts
Trent MacDonald, Chief Financial Officer
1-844-356-9426
investors@flowhydration.com
Investors:
Marc Charbin
investors@flowhydration.com
Media:
Natasha Koifman
nk@nkpr.net
