Waterloo Brewing Ltd. Reports Third Quarter EBITDA of $3.4M, excluding one-time costs

Third Quarter Highlights:

• Net revenue increased 14.9% to $16.3 million up from $14.2 million in the prior year.
• Gross margin improved to 32.6%, compared to 28.1% in the prior year, excluding one-time costs.
• Selling, Marketing, and Administration ("SM&A") expenses were $3.4 million up from $2.2 million prior year.
• EBITDA* increased 21.2% to $3.4 million, compared to $2.8 million prior year, excluding one-time costs.
• The Board of Directors approved an increase to the quarterly dividend to $0.02625/share, payable January 29, 2020, to shareholders of record as of January 15, 2020. The dividend is classified as an eligible dividend.

Year-to-date Highlights:

• Net revenue increased 10.5% to $45.7 million up from $41.3 million in the prior year, excluding one-time costs.
• Gross Margin improved to 30.6%, compared to 27.8% in the prior year, excluding one-time costs.
• Selling, Marketing, and Administration ("SM&A") expenses were $9.3 million up from $7.2 million prior year.
• EBITDA* increased 19.2% to $8.6 million, compared to $7.2 million in the prior year, excluding one-time costs.

KITCHENER, ON, Dec. 4, 2019 /CNW/ - Waterloo Brewing Ltd. ("Waterloo" or the "Company") (TSX: WBR), Ontario's largest Canadian-owned brewery, today released results for the third quarter ended October 27, 2019.

Net revenues for the third quarter of fiscal 2020 grew to $16.3 million, up from $14.2 million in the third quarter of fiscal 2019. Gross margin for the quarter increased to 32.6% versus 28.1% in Q3 of the prior year. Margin expansion was supported by pricing, enhanced co-pack volume as well as overall cost reductions in operations. EBITDA for the third quarter improved to $3.4 million, reflecting an acceleration of strong results in fiscal 2020.

"We are extremely pleased with our third-quarter results. We have outstanding momentum in all of our key sales categories and are reporting 15% growth in revenue and 21% growth in EBITDA" noted George Croft, President, and CEO. "Our Laker brand posted 27% volume growth and our LandShark brand continued to find new consumers and grew volume 28% in the quarter. Our Waterloo brand volume improved 7% in the face of craft beer proliferation and strong competitive category pressure.  Overall, our Owner Brand volumes grew 27% in the quarter, exceptional performance considering that the overall beer industry saw a decline of 3.5% versus the prior year".

As a result of the strength in operating and financial performance, Waterloo Brewing is announcing a 5% increase in the quarterly dividend, to $0.02625/share, up from $0.025/share. The dividend is payable January 29, 2020, to shareholders of record as of January 15, 2020. "The increase in the dividend is consistent with our commitment to deliver value to shareholders.  While we have made a significant capital investment in the last 12 months, we strongly believe in our ability to deliver long term sustainable results through these investments in support of our long-term goals and objectives" said David Birch, Chief Financial Officer.

Croft added, "Our goal is to finish the fiscal year strong and continue the momentum into next year.  All indicators are giving us reasons to be very optimistic about the bright future ahead."

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, 2019.

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 27, 2019^1		October 28, 2018		October 27, 2019^1		October 28, 2018^2
Net income	$	588	$	1,025	$	1,433	$	604
Add (deduct):
Income tax provision	341		395		688		233
Depreciation and amortization	1,577		1,101		4,399		3,178
Gain (loss) on disposal of property, plant & equipment and
right-of-use assets	(14)		-		(28)		251
Share-based payments	276		132		626		334
Finance costs	452		151		1,133		348
Subtotal	2,632		1,779		6,818		4,344
EBITDA *	3,220		2,804		8,251		4,948

1.	As a result of the adoption of IFRS 16 effective February 1, 2019, for the quarter and fiscal year-to-date periods ended October 28, 2019, respectively, EBITDA* increased by approximately $0.2 million and $0.7 million, depreciation and amortization increased by $0.2 million and $0.5 million, and finance costs increased by $0.2 million and $0.4 million.
2.	As a result of a one-time adjustment during the quarter ended April 29, 2018, associated with TBS' change to a consignment basis, net income decreased by $1.6 million and EBITDA* decreased by $2.2 million.

STATEMENTS OF COMPREHENSIVE INCOME

Quarters ended October 27, 2019 and October 28, 2018

		Quarter ended				Fiscal year-to-date ended
		October 27, 2019		October 28, 2018		October 27, 2019		October 28, 2018
Revenue		$	16,283,899	$	14,169,490	$	45,683,062	$	37,745,557
Cost of sales		11,151,543		10,185,405		32,095,705		28,538,993
Gross profit		5,132,356		3,984,085		13,587,357		9,206,564
Selling, marketing and administration expenses		3,384,260		2,224,770		9,283,721		7,153,180
Other expenses		380,446		187,763		1,078,167		616,205
Finance costs		452,288		151,411		1,132,549		348,484
Loss (gain) on disposal of property, plant and
equipment and right-of-use assets		(14,035)		-		(28,248)		251,405
Income before tax		929,397		1,420,141		2,121,168		837,290
Income tax expense		340,988		395,281		687,834		233,320
Net income and comprehensive
income		$	588,409	$	1,024,860	$	1,433,334	$	603,970
Basic earnings per share		$	0.02	$	0.03	$	0.04	$	0.02
Diluted earnings per share		$	0.02	$	0.03	$	0.04	$	-

STATEMENTS OF FINANCIAL POSITION

Quarters ended October 27, 2019 and January 31, 2019

		October 27, 2019		January 31, 2019
ASSETS
Current assets
Cash		$	559,770	$	-
Accounts receivable		5,204,701		4,851,774
Inventories		10,004,804		10,316,767
Prepaid expenses		766,724		562,756
		16,535,999		15,731,297
Non-current assets
Property, plant and equipment		27,980,457		24,645,925
Right-of-use assets		27,584,808		4,747,572
Intangible assets		15,237,503		15,253,736
Construction deposits		270,704		1,386,464
		71,073,472		46,033,697
TOTAL ASSETS		87,609,471		61,764,994
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness		-		1,887,253
Accounts payable and accrued liabilities		13,031,683		7,303,233
Dividends payable		882,512		-
Current portion of lease liabilities		2,011,735		799,736
Current portion of long-term debt		1,907,145		1,859,922
		17,833,075		11,850,144
Non-current liabilities
Provisions		709,610		553,535
Lease liabilities		23,953,133		2,212,157
Long-term debt		7,012,529		8,420,927
Deferred income tax liability		2,359,003		1,671,576
		34,034,275		12,858,195
TOTAL LIABILITIES		51,867,350		24,708,339
Equity
Share capital		39,373,547		40,001,097
Share-based payments reserves		1,856,602		1,325,150
Deficit		(5,488,028)		(4,269,592)
TOTAL EQUITY		35,742,121		37,056,655
COMMITMENTS
SUBSEQUENT EVENT
TOTAL LIABILITIES AND EQUITY		$	87,609,471	$	61,764,994

STATEMENTS OF CASH FLOWS

Quarters ended October 27, 2019 and October 28, 2018

		Quarter ended				Fiscal year-to-date ended
		October 27, 2019		October 28, 2018		October 27, 2019		October 28, 2018
Operating activities
Net income		$	588,409	$	1,024,860	$	1,433,334	$	603,970
Adjustments for:
Income tax expense		340,988		395,281		687,834		233,320
Finance costs		452,288		151,411		1,132,549		348,484
Depreciation and amortization of property, plant and
equipment, right-of-use assets and intangibles		1,576,833		1,100,576		4,398,808		3,178,450
Loss (gain) on disposal of property, plant and equipment and
right-of-use assets		(14,035)		-		(28,248)		251,405
Share-based payments		275,334		132,083		625,963		334,475
Change in non-cash working capital related to operations		655,636		(1,875,576)		5,338,618		3,499,070
Less:
Interest paid		(357,234)		(145,927)		(945,703)		(386,780)
Cash provided by operating activities		3,518,219		782,708		12,643,155		8,062,394
Investing activities
Purchase of property, plant and equipment, net of reimbursements		(2,170,156)		(886,648)		(4,980,311)		(4,968,523)
Construction deposit paid		(221,223)		(151,069)		(270,704)		(409,025)
Proceeds from sale of property, plant and equipment, net		-		-		-		280,000
Proceeds from sale of right-of-use assets		17,692		-		31,736		-
Purchase of intangible assets		(10,744)		(23,501)		(134,565)		(65,200)
Cash used in investing activities		(2,384,431)		(1,061,218)		(5,353,844)		(5,162,748)
Financing activities
Decrease in bank indebtedness		-		-		(1,887,253)		(787,843)
Issuance of long-term debt, net of fees		-		-		-		2,600,000
Repayment of long-term debt		(469,117)		(419,008)		(1,369,445)		(1,115,763)
Repayment of obligation under finance lease		(357,295)		(193,395)		(981,525)		(574,724)
Dividends paid		(884,727)		(709,363)		(1,769,256)		(2,123,972)
Issuance of shares, net of fees		4,440		-		5,920		-
Shares repurchased and cancelled, including fees		(290,523)		-		(770,591)		-
Stock option costs		-		-		(17,169)		(18,510)
Proceeds from stock option exercise		-		1,077		59,779		195,319
Cash used in financing activities		(1,997,222)		(1,320,689)		(6,729,540)		(1,825,493)
Net increase/(decrease) in cash		(863,434)		(1,599,200)		559,770		1,074,152
Cash, beginning of period		1,423,204		2,673,352		-		-
Cash, end of period		$	559,770	$	1,074,152	$	559,770	$	1,074,152
Non-cash investing and financing activities:
Acquisition of assets under lease		$	12,600,547	$	-	$	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 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