Waterloo Brewing : Second Quarter EBITDA grows +38.4% to $8.0M

KITCHENER, ON, Sept. 2, 2021 /CNW/ -

Second Quarter Highlights:

• Net revenue increased 39.2% to $34.2 million, up from $24.6 million the year prior.
• Gross margin improved to 32.6%, compared to 30.9% the prior year; this is a result of increased co-manufacturing, as well as cost reductions.
• Selling, Marketing and Administration expenses were $4.9 million, up from $3.4 million in the year prior.
• EBITDA* increased 38.4% to $8.0 million, compared to $5.8 million in the year prior.
• The Board of Directors approved a quarterly dividend, $0.0276/share, payable October 29, 2021, to shareholders of record as of October 15, 2021. The dividend is classified as an eligible dividend.

First Half Highlights:

• Net revenue increased 43.8% to $56.7 million up from $39.4 million in the year prior.
• Gross Margin was flat at 28.5% compared to the year prior.
• Selling, Marketing, and Administration expenses were $8.5 million up from $6.3 million prior year.
• EBITDA* increased 42.2% to $11.2 million, compared to $7.9 million in the prior year.

Waterloo Brewing Ltd. ("Waterloo Brewing" or the "Company") (TSX: WBR), Ontario's first craft brewery, announced financial results for the second quarter of fiscal 2022 which ended on August 1, 2021. Waterloo Brewing reported EBITDA* of $8.0 million, an increase of $2.2 million or 38.4% over the prior year, on net revenue of $34.2 million. Net revenue increased by $9.6 million or 39.2% from the second quarter of fiscal 2021.

"The results of our second quarter are a testament to our team's hard work," said George Croft, President and Chief Executive Officer of Waterloo Brewing. "With the commissioning of our second canning line now complete, we have begun to fill our capacity. Revenue from our co-manufacturing business increased by 128%, to $17.1 million, during the second quarter compared to the same quarter in fiscal 2021."

The total volume of the Company's products decreased 3.3% during the quarter, slightly ahead of the industry's decline of 4.9%. LandShark® performed strong with growth of 38% during the second quarter due to the continued success of the 24-pack in-case promotions, as well as growth of the LandShark® seltzers, which were introduced last quarter.

The industry sales through The Beer Store were down 9.1% during the quarter compared to the second quarter of fiscal 2021. Owner brand beer sales were also negatively impacted by transition issues with ramp-up of TBS's new Caledon warehouse.

Seagram Island Time Coconut Lime, and Seagram White Peach cider, launched at the end of the first quarter, and are proving to be quite popular, contributing to a 4% growth of the Seagram portfolio during the quarter.

Gross margin improved to 32.6% in the quarter with the new canning line operational and no longer being required to outsource production, as well as margin improvements from the increase in co-manufacturing. While the shortage of aluminum cans within the beverage industry continues to put pressure on the Company's cost of materials, due to sourcing some cans from international partners, the Company expects to continue to show margin improvements during the balance of the year.

Waterloo Brewing's board of directors has approved a quarterly dividend at $0.0276/share. The dividend is payable on October 29, 2021, to shareholders of record as of October 15, 2021.

The following financial information should be read in conjunction with the audited annual financial statements of the Company prepared under IFRS for the year ended January 31, 2021.

Reconciliation of Net Earnings to EBITDA*
	Quarter ended				Fiscal year-to-date ended
(in thousands of dollars)	August 1, 2021		July 26, 2020		August 1, 2021		July 26, 2020
Net income	$	4,155	$	2,221	$	4,054	$	1,926
Add (deduct):
Income tax expense	1,450		953		1,414		827
Gain on misappropriated funds	(900)		-		(900)		-
Depreciation and amortization	2,634		1,889		4,984		3,626
Loss (gain) on disposal of property, plant & equipment and right-of-use assets	(5)		(4)		(22)		214
Share-based payments	270		196		409		365
Finance costs	397		526		1,308		954
Subtotal	3,846		3,560		7,193		5,986
EBITDA *	8,001		5,781		11,247		7,912

STATEMENTS OF FINANCIAL POSITION
As at August 1, 2021 and January 31, 2021
(Not audited or reviewed by the Company's external auditor)

	August 1, 2021		January 31, 2021
ASSETS
Current assets
Accounts receivable	$	15,527,018	$	9,871,061
Inventories	21,562,020		14,344,496
Prepaid expenses	1,039,287		729,260
	38,128,325		24,944,817
Non-current assets
Property, plant and equipment	53,091,757		46,630,107
Right-of-use assets	27,682,901		26,936,861
Intangible assets	14,943,460		15,002,826
Construction deposits	231,236		1,949,074
	95,949,354		90,518,868
TOTAL ASSETS	134,077,679		115,463,685
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness	8,887,380		3,366,489
Accounts payable and accrued liabilities	28,213,374		21,341,335
Current portion of lease liabilities	3,519,491		3,282,080
Non-revolving demand loans	-		25,896,379
Current portion of long-term debt	5,240,681		510,275
	45,860,926		54,396,558
Non-current liabilities
Provisions	1,050,935		1,019,962
Lease liabilities	21,550,937		21,522,379
Long-term debt	24,436,327		1,367,930
Deferred income tax liability	4,875,952		3,462,495
	51,914,151		27,372,766
TOTAL LIABILITIES	97,775,077		81,769,324
Equity
Share capital	40,231,228		39,546,216
Share-based payments reserves	2,084,224		2,245,415
Deficit	(6,012,850)		(8,097,270)
TOTAL EQUITY	36,302,602		33,694,361
TOTAL LIABILITIES AND EQUITY	$	134,077,679	$	115,463,685

STATEMENTS OF COMPREHENSIVE INCOME
For the quarters and fiscal year-to date periods ended August 1, 2021 and July 26, 2020
(Not audited or reviewed by the Company's external auditor)

	Quarter ended				Fiscal year-to-date ended
	August 1, 2021		July 26, 2020		August 1, 2021		July 26, 2020
Revenue	$	34,201,669	$	24,573,498	$	56,685,854	$	39,415,977
Cost of sales	23,042,956		16,988,040		40,530,338		28,133,486
Gross profit	11,158,713		7,585,458		16,155,516		11,282,491
Selling, marketing and administration expenses	4,938,097		3,422,457		8,534,167		6,261,706
Other expenses	1,124,135		466,877		1,767,923		1,099,697
Finance costs	396,635		525,975		1,307,884		954,420
Gain on misappropriated funds, net	(899,647)		-		(899,647)		-
Loss (gain) on disposal of property, plant and equipment,
and right-of-use assets	(5,277)		(3,658)		(22,487)		214,405
Income before tax	5,604,770		3,173,807		5,467,676		2,752,263
Income tax expense	1,449,850		952,949		1,413,456		826,485
Net income and comprehensive income	$	4,154,920	$	2,220,858	$	4,054,220	$	1,925,778
Basic earnings per share	$	0.11	$	0.06	$	0.11	$	0.05
Diluted earnings per share	$	0.11	$	0.06	$	0.11	$	0.05

STATEMENTS OF CASH FLOWS
For the quarters and fiscal year-to-date periods ended August 1, 2021 and July 26,2020
(Not audited or reviewed by the Company's external auditor)

	Quarter ended				Fiscal year-to-date ended
	August 1, 2021		July 26, 2020		August 1, 2021		July 26, 2020
Operating activities
Net income	$	4,154,920	$	2,220,858	$	4,054,220	$	1,925,778
Adjustments for:
Income tax expense	1,449,850		952,949		1,413,456		826,485
Finance costs	396,635		525,975		1,307,884		954,420
Depreciation and amortization of property, plant and
equipment, right-of-use assets and intangibles	2,634,216		1,888,290		4,984,194		3,623,969
Loss (gain) on disposal of property, plant and equipment and
right-of-use assets	(5,277)		(3,658)		(22,486)		214,405
Share-based payments	270,222		195,712		409,388		365,184
Change in non-cash working capital related to operations	(3,764,764)		11,600,805		(6,264,846)		13,335,325
Less:
Interest paid	(637,018)		(464,854)		(1,319,696)		(878,808)
Cash provided by operating activities	4,498,784		16,916,077		4,562,114		20,366,758
Investing activities
Purchase of property, plant and equipment	(2,304,316)		(2,947,759)		(7,887,396)		(7,055,464)
Construction deposit paid	(70,586)		(1,296,460)		(231,236)		(1,296,460)
Proceeds from sale of right-of-use assets, net	5,983		2,538		23,899		2,538
Purchase of intangible assets	(3,167)		(1,287)		(45,464)		(23,100)
Cash used in investing activities	(2,372,086)		(4,242,968)		(8,140,197)		(8,372,486)
Financing activities
Increase (decrease) in bank indebtedness	858,990		(1,036,758)		5,520,891		(783,077)
Issuance of long-term debt, net of fees	1,173,691		-		4,536,234		2,041,549
Repayment of long-term debt	(1,321,431)		(559,814)		(2,637,649)		(1,107,521)
Repayment of obligation under finance lease	(887,269)		(552,207)		(1,986,026)		(1,433,267)
Dividends paid	(1,969,800)		(1,846,271)		(1,969,800)		(1,846,271)
Issuance of shares, net of fees	29,930		-		115,943		-
Shares repurchased and cancelled, including fees	-		(152,767)		-		(340,393)
Stock option costs	(10,809)		-		(10,809)		-
Proceeds from stock option exercise	-		77,940		9,299		77,940
Cash generated from (used in) financing activities	(2,126,698)		(4,069,877)		3,578,083		(3,391,040)
Net increase in cash	-		8,603,232		-		8,603,232
Cash, beginning of period	-		-		-		-
Cash, end of period	$	-	$	8,603,232	$	-	$	8,603,232
Non-cash investing and financing activities:
Acquisition of assets under lease	$	745,025	$	233,343	$	2,277,440	$	233,343

About Waterloo Brewing

Waterloo Brewing is Ontario's largest Canadian-owned brewery. The Company is a regional brewer of award-winning premium quality and value beers and is officially certified under the Global Food Safety Standard, one of the highest and most internationally recognized standards for safe food production. Founded in 1984, Waterloo Brewing Ltd. was the first craft brewery to start up in Ontario and is credited with pioneering the present-day craft brewing renaissance in Canada. Waterloo Brewing has complemented its Waterloo premium craft beers with the popular Laker brand. In 2011, Waterloo Brewing purchased the Canadian rights to Seagram Coolers and in 2015, secured the exclusive Canadian rights to both LandShark® and Margaritaville®. In addition, Waterloo Brewing utilizes its leading-edge brewing, blending, and packaging capabilities to provide an extensive array of contract manufacturing services in beer, coolers, and ciders. Waterloo Brewing trades on the TSX under the symbol WBR. Visit us at www.WaterlooBrewing.com.

Forward-Looking Statements

All statements in this press release that do not directly and exclusively relate to historical facts, including but not limited to the anticipated quarterly dividend payment date of October 29, 2021, constitute forward-looking statements as of the date of this press release. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "anticipate", "seek", "plan", "believe" or "continue" or the negatives of these terms or variations of them or similar terminology. Although the Company believes that the expectations and assumptions reflected in these forward-looking statements are reasonable, undue reliance should not be placed on these forward-looking statements, which are not guarantees and are subject to certain risks, uncertainties, and assumptions, which may cause actual performance and financial results to differ materially from such forward-looking statements. The forward-looking statements included in this press release are made only at the date of this press release and, except as required by applicable securities laws, the Company does not undertake to publicly update such forward-looking statements to reflect new information, future events or otherwise.

* EBITDA is a non-IFRS earnings measure, therefore it does not have any standardized meaning prescribed by International Financial Reporting Standards and may not be similar to measures presented by other companies. EBITDA represents earnings before interest, income taxes, depreciation, and amortization, gain (loss) on disposal of property, plant, and equipment and right-of-use assets, gain on misappropriated funds, and share-based payments. Management uses this measurement to evaluate the operating results of the Company. This measure is also important to management since it is used by the Company's lenders to evaluate the ongoing cash-generating capability of the Company and therefore the amounts those lenders are willing to lend to the Company. Investors find EBITDA to be useful information because it provides a measure of the Company's operating performance.

SOURCE Waterloo Brewing Ltd.

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