Waterloo Brewing Quarterly EBITDA surges 61.5% versus prior year

Second Quarter Highlights:

• Net revenue increased 44.4% to $24.6 million, up from $17.0 million in the prior year.
• Gross margin declined slightly to 30.9%, compared to 34.1% the prior year.
• Selling, Marketing, and Administration expenses were $3.4 million, down from $3.8 million prior year.
• EBITDA* increased 61.5% to $5.8 million, compared to $3.6 million prior year.
• Core owned brands (+28% versus prior year) are becoming formidable competitors in the highly profitable beer and beverage alcohol categories.
• The Board of Directors approved the quarterly dividend, $0.02625/share, payable October 30, 2020, to shareholders of record as of October 16, 2020. The dividend is classified as an eligible dividend.

First Half Highlights:

• Net revenue increased 34.3% to $39.4 million up from $29.4 million in the prior year.
• Gross Margin was flat at 28.6% compared to the prior year.
• Selling, Marketing, and Administration expenses were $6.3 million up slightly from $5.9 million prior year.
• EBITDA* increased 51.1% to $7.9 million, compared to $5.2 million in the prior year.

KITCHENER, ON, Sept. 3, 2020 /CNW/ - Waterloo Brewing Ltd. ("Waterloo Brewing" or the "Company") (TSX: WBR), Ontario's first craft brewery, announced financial results for the second quarter ending July 26, 2020. Waterloo Brewing reported EBITDA growth of +61.5% to $5.8 million on net revenue of $24.6 million.

"The strength of our business strategy has been put to the test in these past few months, and it has been reassuringly successful," said George Croft, President, and CEO, Waterloo Brewing. "Our choice to embrace our Ontario roots reflects growing consumer interest in buying local. Our choice to provide reliably good value reflects the challenges of hardworking people's budgets. Our choice for a diverse portfolio of value, premium and craft beers, complemented by our Seagram family of ciders, coolers and future beverage alcohol innovation, is growing at +28% versus prior year. This is an exciting chapter of intensive growth and expansion for our Company."

"This past quarter is a watershed moment for our business," continued Croft. "firmly establishing the foundation of healthy brands, superior quality standards, relentlessly efficient operations and the solid financials needed to become a formidable player in the national beverage alcohol market."

"These past few months have also reinforced just how important our hometown of Kitchener-Waterloo is to our business, and we are to the community," continued Croft. "The outstanding growth we're experiencing is the result of a commitment from everyone here at Waterloo Brewing to help each other through this time, and help our Company and our community emerge stronger for the experience."

Waterloo Brewing's board of directors has approved the quarterly dividend at $0.02625/share.  The dividend is payable on October 30, 2020, to shareholders of record as of October 16, 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)	July 26, 2020		July 28, 2019		July 26, 2020		July 28, 2019
Net income	$	2,221	$	952	$	1,926	$	845
Add (deduct):
Income tax expense	953		347		827		347
Depreciation and amortization	1,889		1,387		3,626		2,822
Gain (loss) on disposal of property, plant & equipment and right-of-use assets	(4)		(1)		214		(14)
Share-based payments	196		274		365		350
Finance costs	526		416		954		680
Subtotal	3,560		2,423		5,986		4,185
EBITDA *	5,781		3,376		7,912		5,030

STATEMENTS OF COMPREHENSIVE INCOME

	Quarter ended				Fiscal year-to-date ended
	July 26, 2020		July 28, 2019		July 26, 2020		July 28, 2019
Revenue	$	24,573,498	$	17,014,274	$	39,415,977	$	29,357,153
Cost of sales	16,988,040		11,208,470		28,133,486		20,944,163
Gross profit	7,585,458		5,805,804		11,282,491		8,412,990
Selling, marketing and administration expenses	3,422,457		3,784,237		6,261,706		5,857,451
Other expenses	466,877		307,532		1,099,697		697,720
Finance costs	525,975		416,469		954,420		680,262
Loss (gain) on disposal of property, plant and equipment, and right-of-use assets	(3,658)		(1,133)		214,405		(14,213)
Income before tax	3,173,807		1,298,699		2,752,263		1,191,770
Income tax expense	952,949		346,846		826,485		346,846
Net income and comprehensive	$	2,220,858	$	951,853	$	1,925,778	$	844,924
income
Basic earnings per share	$	0.06	$	0.02	$	0.05	$	0.02
Diluted earnings per share	$	0.06	$	0.02	$	0.05	$	0.02

STATEMENTS OF FINANCIAL POSITION

	Quarter ended
	July 26, 2020		January 31, 2020
ASSETS
Current assets
Cash	$	8,603,232	-
Accounts receivable	8,818,191		$	4,976,226
Inventories	11,359,975		10,482,912
Prepaid expenses	765,560		787,448
	29,546,958		16,246,586
Non-current assets
Property, plant and equipment	38,220,164		32,808,678
Right-of-use assets	27,017,924		27,840,996
Intangible assets	15,106,213		15,184,333
Construction deposits	1,296,460		1,050,425
	81,640,761		76,884,432
TOTAL ASSETS	111,187,719		93,131,018
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness	-		783,077
Accounts payable and accrued liabilities	30,981,970		12,909,771
Current portion of lease liabilities	2,599,943		2,869,733
Current portion of long-term debt	3,227,603		2,946,038
	36,809,516		19,508,619
Non-current liabilities
Provisions	988,994		958,025
Lease liabilities	22,284,877		23,226,137
Long-term debt	14,000,160		13,342,788
Deferred income tax liability	3,035,432		2,208,947
	40,309,463		39,735,897
TOTAL LIABILITIES	77,118,979		59,244,516
Equity
Share capital	38,884,048		39,126,283
Share-based payments reserves	2,453,637		2,108,671
Deficit	(7,268,945)		(7,348,452)
TOTAL EQUITY	34,068,740		33,886,502
COMMITMENTS
TOTAL LIABILITIES AND EQUITY	$	111,187,719	$	93,131,018

STATEMENTS OF CASH FLOWS

Cash Flow Statements
	Quarter ended				Fiscal year-to-date ended
	July 26, 2020		July 28,2019		July 26, 2020		July 28, 2019
Operating activities
Net income	$	2,220,858	$	951,853	$	1,925,778	$	844,924
Adjustments for:
Income tax expense	952,949		346,846		826,485		346,846
Finance costs	525,975		416,469		954,420		680,262
Depreciation and amortization of property, plant and	1,888,290		1,388,160		3,623,969		2,821,975
equipment, right-of-use assets and intangibles
Loss (gain) on disposal of right-of-use assets	(3,658)		(1,133)		214,405		(14,213)
Share-based payments	195,712		274,105		365,184		350,629
Change in non-cash working capital related to operations	11,600,805		1,060,176		13,335,325		4,682,982
Less:
Interest paid	(464,854)		(298,290)		(878,808)		(588,469)
Cash provided by operating activities	16,916,077		4,138,186		20,366,758		9,124,936
Investing activities
Purchase of property, plant and equipment, net of reimbursements	(2,947,759)		105,556		(7,055,464)		(2,810,155)
Construction deposit paid	(1,296,460)		(49,481)		(1,296,460)		(49,481)
Proceeds from sale of right-of-use assets	2,538		964		2,538		14,044
Purchase of intangible assets	(1,287)		(9,980)		(23,100)		(123,821)
Cash generated from (used in) investing activities	(4,242,968)		47,059		(8,372,486)		(2,969,413)
Financing activities
Decrease in bank indebtedness	(1,036,758)		(945,896)		(783,077)		(1,887,253)
Issuance of long-term debt, net of fees	-		-		2,041,549		-
Repayment of long-term debt	(559,814)		(465,533)		(1,107,521)		(900,328)
Repayment of obligation under finance lease	(552,207)		(315,720)		(1,433,267)		(624,230)
Dividends paid	(1,846,271)		(884,530)		(1,846,271)		(884,530)
Issuance of shares, net of fees	-		-		-		1,480
Shares repurchased and cancelled, including fees	(152,767)		(190,392)		(340,393)		(480,068)
Proceeds from stock option exercise	77,940		57,199		77,940		59,779
Cash used in financing activities	(4,069,877)		(2,762,041)		(3,391,040)		(4,732,319)
Net increase in cash	8,603,232		1,423,204		8,603,232		1,423,204
Cash, beginning of period	-		-		-		-
Cash, end of period	$	8,603,232	$	1,423,204	$	8,603,232	$	1,423,204
Non-cash investing and financing activities:
Acquisition of assets under lease	$	233,343	$	-	$	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. (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], E-mail: [email protected]

Related Links

www.waterloobrewing.com