Waterloo Brewing announces second quarter results.

Second Quarter Highlights:

• Net revenue of $29.5 million, decreased from $34.2 million in the prior year.
• Gross profit of $6.8M, decrease from $11.2 million in the prior year.
• Selling, marketing and administration expenses of $4.0 million, reduced from $4.9 million in the prior year.
• EBITDA* of $5.1 million, decreased from $8.0 million in the prior year.

First Half Year Highlights:

• Net revenue of $50.7 million, decreased from $56.7 million in the prior year.
• Gross profit of $10.8 million, decreased from $16.2 million in the prior year.
• Selling, marketing and administration expenses of $7.6 million, reduced from $8.5 million the prior year.
• EBITDA* of $7.7 million, decreased from $11.2 million in the prior year.

KITCHENER, ON, Sept. 8, 2022 /CNW/ – Waterloo Brewing Ltd. ("Waterloo Brewing" or the "Company") (TSX: WBR), Ontario's first craft brewery, announced financial results for the second quarter of fiscal 2023 which ended on July 31, 2022. Waterloo Brewing reported EBITDA* for the second quarter of fiscal 2023 of $5.1 million, on net revenue of $29.5 million.

Owner brand sales volume in the quarter grew by 1.4%, while the industry, as a whole, was down by 0.9%. Volumes of the domestic mainstream Laker brand increased by 9.3% versus the prior year, signalling trade-down behaviours within the category as a result of inflationary pressures. The Company expects consumers to continue to trade-down, which will benefit the Laker brand, as they continue to feel inflationary pressures.  LandShark® also grew by 7.2% which maintained the performance trend in the first quarter and significantly out paced the domestic premium category.  Owner brands continued to gain market share at The Beer Store and grocery stores in Ontario.

A few large co-manufacturing customers that supply their own raw materials were impacted by ongoing supply chain delays in the quarter, which resulted in contract volumes either partially lost or shifted to upcoming months.  Service revenue decreased by $4.4 million in the quarter versus the prior representing 93.6% of the overall decline in net revenue.

Gross profit performance declined in the quarter due to lower co-manufacturing volumes, inflationary cost pressures, supply chain challenges and increased operational fixed costs. Waterloo Brewing will continue to evaluate and implement selective product price increases that are expected to partially offset some of the inflationary pressures. Further, Waterloo Brewing expects to gain improved operating efficiencies and labour cost efficiencies as the co-manufacturing volumes increase during the balance of the fiscal year.

"We know our customers are facing significant financial pressures right now. We feel it too, as we continue to experience inflationary cost escalation of our own, and encounter supply chain delays which affects both our co-manufacturing and owner brand manufacturing," said George Croft, President and Chief Executive Officer of Waterloo Brewing. "We want to ensure our customers feel heard and supported, which is why we continue to offer great tasting beer at great prices, continuing to produce the beer of choice for so many Ontarians."

Moving forward, Waterloo Brewing has secured partnerships with Bingemans Oktoberfest, Oktoberfest at Concordia Club and Wilfrid Laurier University Athletics and Recreation. These partnerships will help increase local visibility and align with Waterloo Brewing's commitment to growing its business in its home market.  Additionally, the Company is preparing for the release of the newest installment of the Waterloo Signature Series Premium Collection, featuring three new fall-inspired beers that will be hitting the LCBO, The Beer Store and select grocery stores this September.

"We have a strong and experienced team that is focused on reaching our goals. I am confident that we will finish this fiscal year strong despite the ongoing challenges," Croft said.

The Board of Directors approved a quarterly dividend of $0.0304/share, payable November 2, 2022, to shareholders of record as of October 19, 2022. The dividend is classified as an eligible dividend.

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, 2022.

Reconciliation of Net Earnings (loss) to EBITDA*
	Quarter ended (unaudited)		Fiscal year-to-date ended (unaudited)
(in thousands of dollars)	July 31, 2022	August 1, 2021	July 31, 2022	August 1, 2021
Net income (loss)	$                     730	$                  4,155	$                    (254)	$                  4,054
Add (deduct):
Income tax recovery (provision)	254	1,450	(111)	1,414
Gain on misappropriated funds	-	(900)	-	(900)
Depreciation and amortization	2,963	2,634	5,968	4,984
Gain on disposal of property, plant and equipment, and right-of-use assets	(3)	(5)	(3)	(22)
Share-based payments	302	270	508	409
Finance costs	746	662	1,451	1,334
Unrealized gain (loss) on foreign exchange contracts	86	(265)	135	(26)
Subtotal	4,348	3,846	7,948	7,193
EBITDA *	5,078	8,001	7,694	11,247

STATEMENTS OF FINANCIAL POSITION

As at July 31, 2022 and January 31, 2022
(Not audited or reviewed by the Company's external auditor)

		July 31, 2022	January 31, 2022
ASSETS
Current assets
Accounts receivable and contract assets		$         15,652,911	$           15,526,799
Inventories		18,684,118	15,841,135
Prepaid expenses		1,209,878	754,088
		35,546,907	32,122,022
Non-current assets
Property, plant and equipment		51,077,825	51,930,553
Right-of-use assets		31,264,860	32,067,772
Intangible assets		15,214,583	14,846,687
Construction deposits		62,939	466,818
		97,620,207	99,311,830
TOTAL ASSETS		133,167,114	131,433,852
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness		14,674,424	16,861,218
Accounts payable and accrued liabilities		17,930,970	14,062,415
Dividends payable		1,091,709	-
Current portion of lease liabilities		3,605,614	4,134,584
Current portion of long-term debt		6,445,013	5,327,821
		43,747,730	40,386,038
Non-current liabilities
Provisions		1,248,978	1,211,324
Lease liabilities		24,583,353	25,535,180
Long-term debt		23,042,931	21,751,775
Deferred income tax liability		5,714,559	5,825,398
		54,589,821	54,323,677
TOTAL LIABILITIES		98,337,551	94,709,715
Equity
Share capital		40,706,416	40,618,496
Share-based payments reserves		2,901,972	2,447,275
Deficit		(8,778,825)	(6,341,634)
TOTAL EQUITY		34,829,563	36,724,137
TOTAL LIABILITIES AND EQUITY		$       133,167,114	$         131,433,852

STATEMENTS OF COMPREHENSIVE INCOME

For the quarters ended July 31, 2022 and August 1, 2021
(Not audited or reviewed by the Company's external auditor)

		Quarter ended		Fiscal year-to-date ended
		July 31, 2022	August 1, 2021	July 31, 2022	August 1, 2021
Revenue		$           29,497,602	$           34,201,669	$           50,742,251	$           56,685,854
Cost of sales		22,663,144	23,042,956	39,947,871	40,530,338
Gross profit		6,834,458	11,158,713	10,794,380	16,155,516
Selling, marketing and administration expenses		4,039,900	4,938,097	7,555,532	8,534,167
Other expenses		1,068,077	859,221	2,155,973	1,741,600
Finance costs		745,903	661,549	1,451,637	1,334,207
Gain on misappropriated funds, net		-	(899,647)	-	(899,647)
Gain on disposal of property, plant and equipment,      and right-of-use assets		(2,977)	(5,277)	(3,467)	(22,487)
Income (loss) before tax		983,555	5,604,770	(365,295)	5,467,676
Income tax expense (recovery)		253,908	1,449,850	(110,837)	1,413,456
Net income (loss) and comprehensive   income (loss)		$                729,647	$             4,154,920	$               (254,458)	$             4,054,220
Basic earnings (loss) per share		$                      0.02	$                      0.11	$                     (0.01)	$                      0.11
Diluted earnings (loss) per share		$                      0.02	$                      0.11	$                     (0.01)	$                      0.11

STATEMENTS OF CASH FLOWS

For the quarters ended July 31, 2022 and August 1, 2021
(Not audited or reviewed by the Company's external auditor)

		Quarter ended		Fiscal year-to-date ended
		July 31, 2022	August 1, 2021	July 31, 2022	August 1, 2021
Operating activities
Net income (loss)		$                       729,647	$                 4,154,920	$                      (254,458)	$                 4,054,220
Adjustments for:
Income tax expense (recovery)		253,908	1,449,850	(110,837)	1,413,456
Finance costs		745,903	661,549	1,451,637	1,334,207
Depreciation and amortization of property, plant and      equipment, right-of-use assets and intangibles		2,963,293	2,634,216	5,967,671	4,984,194
Gain on disposal of property, plant and equipment and      right-of-use assets		(2,977)	(5,277)	(3,467)	(22,487)
Share-based payments		302,150	270,222	507,685	409,388
Change in non-cash working capital		(7,282,387)	(4,029,678)	(44,416)	(6,291,168)
Less:
Interest paid		(686,627)	(637,018)	(1,358,130)	(1,319,696)
Cash provided by (used in) operating activities		(2,977,090)	4,498,784	6,155,685	4,562,114
Investing activities
Purchase of property, plant and equipment		(588,493)	(2,304,316)	(1,989,720)	(7,887,396)
Construction deposit paid		-	(70,586)	-	(231,236)
Proceeds from sale of property, plant and equipment, and      right-of-use assets, net		3,551	5,983	4,584	23,899
Purchase of intangible assets		(2,919)	(3,167)	(482,940)	(45,464)
Cash used in investing activities		(587,861)	(2,372,086)	(2,468,076)	(8,140,197)
Financing activities
Increase (decrease) in bank indebtedness		2,062,644	858,990	(2,186,794)	5,520,891
Issuance of long-term debt		5,000,000	1,173,691	5,000,000	4,536,234
Repayment of long-term debt		(1,339,502)	(1,321,431)	(2,591,652)	(2,637,649)
Repayment of lease liabilities		(1,091,951)	(887,269)	(2,853,071)	(1,986,026)
Dividends paid		(1,091,024)	(1,969,800)	(1,091,024)	(1,969,800)
Issuance of shares, net of fees		24,783	29,930	34,932	115,943
Stock option costs		-	(10,809)	-	(10,809)
Proceeds from stock option exercise, net of costs		-	-	-	9,299
Cash generated (used in) from financing activities		3,564,951	(2,126,698)	(3,687,609)	3,578,083
Net increase in cash		-	-	-	-
Cash, beginning of period		-	-	-	-
Cash, end of period		$                                -	$                                -	$                                -	$                                -
Non-cash investing and financing activities:
Acquisition of assets under lease		$                 1,170,016	$                    745,025	$                 1,375,726	$                 2,277,440

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 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.

Enida Zaimi, Chief Financial Officer, [phone], E-mail: [email protected]