Waterloo Brewing delivers Third Quarter EBITDA of $4.0M up +19% from prior year

Third Quarter Highlights:

• Net revenue for the third quarter increased +40.2% to $22.8 million compared to $16.3 million in the prior year.
• Gross profit margin for the third quarter declined to 21.9% versus 31.5% in the prior year.
• Selling, Marketing, and Administration expenses were $2.6 million, down from $3.4 million prior year.
• EBITDA* for the third quarter increased +18.7% to $4.0 million compared to $3.4 million in the prior year, excluding one-time costs.
• The Board of Directors approved a 5% increase to the quarterly dividend to $0.0276/share, payable January 29, 2021, to shareholders of record as of January 15, 2021. The dividend is classified as an eligible dividend.

Year-to-Date Highlights:

• Net revenue increased +36.2% to $62.2 million, from $45.7 million in the prior year.
• Gross profit margin declined to 26.1% vs 29.7% in the prior year.
• Selling, Marketing, and Administration expenses were $8.9 million, down from $9.3 million prior year.
• EBITDA* for the nine months improved by 38.4% to $11.9 million, up from $8.6 million in the prior year, excluding one-time costs.

KITCHENER, ON, Dec. 10, 2020 /CNW/ - Waterloo Brewing Ltd. ("Waterloo Brewing" or the "Company") (TSX: WBR), Ontario's first craft brewery, announced financial results for the third quarter ending October 25, 2020.

Net revenue grew +40.2% to $22.8 million, and EBITDA grew +18.7% to $4.0 million for the third quarter of fiscal 2020. Gross profit margin declined in the third quarter to 21.9%.

"We are pleased with our performance in the third quarter, posting revenue growth of +40.2% and EBITDA growth of +18.7% compared to the previous year," stated George Croft, President, and CEO, Waterloo Brewing. "The strength of our brands is particularly evident in all retail channels where growth on our Laker family is +5%, Landshark +16%, and Waterloo Craft +16%.  The grocery channel continues to expand during the COVID pandemic and pushed our third quarter growth to +51% in this channel."

"The challenges of last nine months presented a number of new obstacles for us, as it did for many other businesses. This included the increased cost and availability of aluminum cans, the associated cost of COVID related to keeping our employees safe, and the need to outsource some owner brand production to meet demand in advance of new operating capital being commissioned. We met each challenge head-on and we never lost sight of our goals or the path we set out on early in the year. We continue to execute our strategy that allows us to drive growth now and into the future,". added Croft.

"To support this rate of growth we invested $13.4 million of capital in capacity and capabilities, which are not yet fully installed," continued Croft. "Most importantly, the installation of our new can line is on track for completion in Spring 2021 and will add 750 thousand hectoliters per year of incremental capacity.  Over the last few months, demand for our brands and co-manufacturing outstripped our can line capacity.  Prior to the completion of the new can line in Spring 2021, we are using outsourced production solutions in the interim to allow us to continue to grow both our owner brand and co-manufacturing businesses".

As a result of the strength in operating and financial performance, Waterloo Brewing is announcing a 5% increase in the quarterly dividend, to $0.02756 share, up from $0.02625/share. The dividend is payable January 29, 2021, to shareholders of record as of January 15, 2021. "The increase in the dividend is simply our commitment to deliver value to shareholders. We believe in our ability to deliver sustainable results and increasing shareholder return supports our long-term goals," said David Birch, Chief Financial Officer.

"Our business has solid momentum, and that momentum continues to build," added Croft. "Strong brands, clear choices, and a group of the most resilient people have us set up to deliver another record-setting year for Waterloo Brewing."

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, 2020.

Reconciliation of Net Earnings to Earnings Before Interest Taxes Depreciation and Amortization, and Share Based Payments (EBITDA)*
	Quarter ended				Fiscal year-to-date ended
(in thousands of dollars)	October 25, 2020		October 27, 2019		October 25, 2020		October 27, 2019
Net income	$	965	$	588	$	2,891	$	1,433
Add (deduct):
Income tax expense	432		341		1,258		688
Depreciation and amortization	1,963		1,577		5,587		4,399
Loss (gain) on disposal of property, plant & equipment and right-of-use assets	6		(14)		221		(28)
Share-based payments	203		276		568		626
Finance costs	466		452		1,420		1,132
Subtotal	3,070		2,632		9,054		6,817
EBITDA *	4,035		3,220		11,945		8,250

STATEMENTS OF COMPREHENSIVE INCOME

	Quarter ended				Fiscal year-to-date ended
	October 25, 2020		October 27, 2019		October 25, 2020		October 27, 2019
Revenue	$	22,824,769	$	16,283,899	$	62,240,746	$	45,683,062
Cost of sales	17,836,211		11,151,543		45,969,697		32,095,705
Gross profit	4,988,558		5,132,356		16,271,049		13,587,357
Selling, marketing and administration expenses	2,609,776		3,384,260		8,871,482		9,283,721
Other expenses	510,195		380,446		1,609,892		1,078,167
Finance costs	465,720		452,288		1,420,140		1,132,549
Loss (gain) on disposal of property, plant and equipment,
and right-of-use assets	6,128		(14,035)		220,533		(28,248)
Income before tax	1,396,739		929,397		4,149,002		2,121,168
Income tax expense	431,634		340,988		1,258,119		687,834
Net income and comprehensive
income	$	965,105	$	588,409	$	2,890,883	$	1,433,334
Basic earnings per share	$	0.03	$	0.02	$	0.08	$	0.04
Diluted earnings per share	$	0.03	$	0.02	$	0.08	$	0.04

STATEMENTS OF FINANCIAL POSITION

	Quarter ended
	October 25, 2020		January 31, 2020
ASSETS
Current assets
Accounts receivable	10,207,927		$	4,976,226
Inventories	13,734,922		10,482,912
Prepaid expenses	688,924		787,448
	24,631,773		16,246,586
Non-current assets
Property, plant and equipment	40,616,118		32,808,678
Right-of-use assets	26,572,923		27,840,996
Intangible assets	15,057,026		15,184,333
Construction deposits	2,452,930		1,050,425
	84,698,997		76,884,432
TOTAL ASSETS	109,330,770		93,131,018
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness	2,113,211		783,077
Accounts payable and accrued liabilities	21,673,864		12,909,771
Dividends payable	926,124		-
Current portion of lease liabilities	2,632,742		2,869,733
Current portion of long-term debt	3,809,735		2,946,038
	31,155,676		2,946,038
Non-current liabilities
Provisions	1,004,478		958,025
Lease liabilities	21,788,368		23,226,137
Long-term debt	17,641,332		13,342,788
Deferred income tax liability	3,467,066		2,208,947
	43,901,244		39,735,897
TOTAL LIABILITIES	75,056,920		59,244,516
Equity
Share capital	39,260,522		39,126,283
Share-based payments reserves	2,243,291		2,108,671
Deficit	(7,229,963)		(7,348,452)
TOTAL EQUITY	34,273,850		33,886,502
COMMITMENTS
TOTAL LIABILITIES AND EQUITY	$	109,330,770	$	93,131,018

STATEMENTS OF CASH FLOWS

	Quarter ended				Fiscal year-to-date ended
	October 25, 2020		October 27, 2019		October 25, 2020		October 27, 2019
Operating activities
Net income	$	965,105	$	588,409	$	2,890,883	$	1,433,334
Adjustments for:
Income tax expense	431,634		340,988		1,258,119		687,834
Finance costs	465,720		452,288		1,420,140		1,132,549
Depreciation and amortization of property, plant and
equipment, right-of-use assets and intangibles	1,963,432		1,576,833		5,587,401		4,398,808
Loss (gain) on disposal of right-of-use assets	6,128		(14,035)		220,533		(28,248)
Share-based payments	202,792		275,334		567,976		625,963
Change in non-cash working capital related to operations	(13,003,152)		655,636		332,173		5,338,618
Less:
Interest paid	(440,933)		(357,234)		(1,319,741)		(945,703)
Cash provided by operating activities	(9,409,274)		3,518,219		10,957,484		12,643,155
Investing activities
Purchase of property, plant and equipment, net of reimbursements	(3,765,744)		(2,170,156)		(10,836,188)		(4,980,311)
Construction deposit paid	(1,171,450)		(221,223)		(2,452,930)		(270,704)
Proceeds from sale of right-of-use assets	-		17,692		2,538		31,736
Purchase of intangible assets	(2,045)		(10,744)		(25,145)		(134,565)
Cash generated from (used in) investing activities	(4,939,239)		(2,384,431)		(13,311,725)		(5,353,844)
Financing activities
Increase (decrease) in bank indebtedness	2,113,211		-		1,330,134		(1,887,253)
Issuance of long-term debt, net of fees	5,000,000		-		7,041,549		-
Repayment of long-term debt	(778,999)		(469,117)		(1,886,520)		(1,369,445)
Repayment of obligation under finance lease	(552,267)		(357,295)		(1,985,534)		(981,525)
Dividends paid	-		(884,727)		(1,846,271)		(1,769,256)
Issuance of shares, net of fees	-		4,440		-		5,920
Shares repurchased and cancelled, including fees	(36,664)		(290,523)		(377,057)		(770,591)
Proceeds from stock option exercise	-		-		77,940		59,779
Cash used in financing activities	5,745,281		(1,997,222)		2,354,241		(6,729,540)
Net increase (decrease) in cash	(8,603,232)		(863,434)		-		559,770
Cash, beginning of period	8,603,232		1,423,204		-		-
Cash, end of period	$	-	$	559,770	$	-	$	559,770
Non-cash investing and financing activities:
Acquisition of assets under lease	$	88,557	$	12,600,547	$	321,900	$	12,600,547

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. (formerly Brick Brewing Co. Limited) 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 or loss on disposal of property, plant, and equipment and right-of-use assets, 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.

David J Birch, Chief Financial Officer, [phone] Ext. 106, E-mail: [email protected]

Related Links

www.waterloobrewing.com