Waterloo Brewing Third Quarter EBITDA grows +7.4% to $4.3M

KITCHENER, ON, Dec. 9, 2021 /CNW/ -

Third Quarter Highlights:

• Net revenue increased 17.8% to $26.9 million, up from $22.8 million in the prior year.
• Gross margin of 22.2% was slightly better than the prior year; incremental co-manufacturing in the period helped to improve performance.
• Selling, Marketing and Administration expenses were $3.4 million, up from $2.6 million in the prior year.
• EBITDA* increased 7.4% to $4.3 million, compared to $4.0 million in the prior year.
• The Board of Directors approved a quarterly dividend, $0.0304/share, an increase of 10%, payable January 28, 2022, to shareholders of record as of January 14, 2022. The dividend is classified as an eligible dividend.

Year-to-Date Highlights:

• Net revenue increased 34.3% to $83.6 million, up from $62.2 million in the prior year.
• Gross Margin of 26.5 % was slightly improved versus 26.1% in the prior year.
• Selling, Marketing, and Administration expenses were $11.9 million, up from $8.9 million in the prior year.
• EBITDA* increased 30.4% to $15.6 million, compared to $11.9 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 third quarter of fiscal 2022 which ended on October 31, 2021. Waterloo Brewing reported EBITDA* of $4.3 million, an increase of $0.3 million or 7.4% over the prior year, on net revenue of $26.9 million. Net revenue increased by $4.1 million or 17.8% from the third quarter of fiscal 2021.

"I am encouraged with our third quarter results. Despite industry-wide beer category softness, supply chain challenges and inflationary cost pressures, we continue to deliver top line growth to the business. Our co-manufacturing business continues to exhibit healthy growth and we are expecting to close the year off on a strong note," said George Croft, President and Chief Executive Officer of Waterloo Brewing.

The total volume of the Company's owner brand products was flat versus the year prior compared to an industry volume decline of 4.2% in the third quarter of fiscal 2022. LandShark® continues to perform exceedingly well with growth of 49% during the third quarter. In-case promotions are attracting new consumers to the premium brand and fueling the growth of the new LandShark® Seltzer brands, which were introduced in the first quarter of fiscal 2022

The Company faced inflationary cost pressures on key input materials and supply chain challenges related to the COVID-19 pandemic but was still able to maintain a 22% gross margin in the third quarter and grow overall production volume.

"In order to minimize our supply chain risk, our team has been proactively securing supply of critical materials as well as locking in pricing on key contracts in anticipation of rising input costs in the coming year," said Russell Tabata, Chief Operating Officer at Waterloo Brewing.

Waterloo Brewing's board of directors has approved a quarterly dividend at $0.0304/share; an increase of 10% from last quarter. The dividend is payable on January 28, 2022, to shareholders of record as of January 14, 2022.

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)	October 31, 2021		October 25, 2020		October 31, 2021		October 25, 2020
Net income	$	738	$	965	$	4,792	$	2,891
Add (deduct):
Income tax expense	268		432		1,681		1,258
Gain on misappropriated funds					(900)		-
Depreciation and amortization	2,491		1,963		7,475		5,587
Loss (gain) on disposal of property, plant & equipment and right-of-use assets	(15)		6		(37)		221
Share-based payments	275		203		685		568
Finance costs	577		466		1,885		1,420
Subtotal	3,596		3,070		10,789		9,054
EBITDA ^*	4,334		4,035		15,581		11,945

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

	October 31, 2021		January 31, 2021
ASSETS
Current assets
Accounts receivable	$	8,461,797	$	9,871,061
Inventories	20,752,375		14,344,496
Prepaid expenses	974,847		729,260
	30,189,019		24,944,817
Non-current assets
Property, plant and equipment	51,057,843		46,630,107
Right-of-use assets	30,643,401		26,936,861
Intangible assets	14,892,935		15,002,826
Construction deposits	679,973		1,949,074
	97,274,152		90,518,868
TOTAL ASSETS	127,463,171		115,463,685
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness	9,768,417		3,366,489
Accounts payable and accrued liabilities	18,503,458		21,341,335
Current portion of lease liabilities	7,260,426		3,282,080
Non-revolving demand loans	-		25,896,379
Current portion of long-term debt	5,282,206		510,275
	40,814,507		54,396,558
Non-current liabilities
Provisions	1,066,421		1,019,962
Lease liabilities	20,946,616		21,522,379
Long-term debt	23,163,237		1,367,930
Deferred income tax liability	5,143,600		3,462,495
	50,319,874		27,372,766
TOTAL LIABILITIES	91,134,381		81,769,324
Equity
Share capital	40,300,067		39,546,216
Share-based payments reserves	2,290,613		2,245,415
Deficit	(6,261,890)		(8,097,270)
TOTAL EQUITY	36,328,790		33,694,361
TOTAL LIABILITIES AND EQUITY	$	127,463,171	$	115,463,685

STATEMENTS OF COMPREHENSIVE INCOME
For the quarters and fiscal year-to date periods ended October 31, 2021 and October 25, 2020
(Not audited or reviewed by the Company's external auditor)

	Quarter ended				Fiscal year-to-date ended
	October 31, 2021		October 25, 2020		October 31, 2021		October 25, 2020
Revenue	$	26,878,165	$	22,824,769	$	83,564,020	$	62,240,746
Cost of sales	20,918,137		17,836,211		61,448,475		45,969,697
Gross profit	5,960,028		4,988,558		22,115,545		16,271,049
Selling, marketing and administration expenses	3,363,501		2,609,776		11,897,668		8,871,482
Other expenses	1,028,806		510,195		2,796,730		1,609,892
Finance costs	576,828		465,720		1,884,712		1,420,140
Gain on misappropriated funds, net	-		-		(899,647)		-
Loss (gain) on disposal of property, plant and equipment,
and right-of-use assets	(14,902)		6,128		(37,389)		220,533
Income before tax	1,005,795		1,396,739		6,473,471		4,149,002
Income tax expense	267,649		431,634		1,681,105		1,258,119
Net income and comprehensive
income	$	738,146	$	965,105	$	4,792,366	$	2,890,883
Basic earnings per share	$	0.02	$	0.03	$	0.13	$	0.08
Diluted earnings per share	$	0.02	$	0.03	$	0.13	$	0.08

STATEMENTS OF CASH FLOWS
For the quarters and fiscal year-to-date periods ended October 31, 2021 and October 25, 2020
(Not audited or reviewed by the Company's external auditor)

	Quarter ended				Fiscal year-to-date ended
	October 31, 2021		October 25, 2020		October 31, 2021		October 25, 2020
Operating activities
Net income	$	738,146	$	965,105	$	4,792,366	$	2,890,883
Adjustments for:
Income tax expense	267,649		431,634		1,681,105		1,258,119
Finance costs	576,828		465,720		1,884,712		1,420,140
Depreciation and amortization of property, plant and
equipment, right-of-use assets and intangibles	2,490,806		1,963,432		7,475,000		5,587,401
Loss (gain) on disposal of property, plant and equipment and
right-of-use assets	(14,902)		6,128		(37,389)		220,533
Share-based payments	275,228		202,792		684,616		567,976
Change in non-cash working capital related to operations	(1,754,639)		(13,003,152)		(8,019,483)		332,173
Less:
Interest paid	(577,315)		(440,933)		(1,897,011)		(1,319,741)
Cash provided by (used in) operating activities	2,001,801		(9,409,274)		6,563,916		10,957,484
Investing activities
Purchase of property, plant and equipment	(2,056,111)		(3,765,744)		(9,943,507)		(10,836,188)
Construction deposit paid	(448,737)		(1,171,450)		(679,973)		(2,452,930)
Proceeds from sale of right-of-use assets, net	15,090		-		38,989		2,538
Purchase of intangible assets	(1,313)		(2,045)		(46,777)		(25,145)
Cash used in investing activities	(2,491,071)		(4,939,239)		(10,631,268)		(13,311,725)
Financing activities
Increase in bank indebtedness	881,037		2,113,211		6,401,928		1,330,134
Issuance of long-term debt, net of fees	-		5,000,000		4,536,234		7,041,549
Increase to obligation under finance lease	2,656,846		-		2,656,846		-
Repayment of long-term debt	(1,231,564)		(778,999)		(3,869,213)		(1,886,520)
Repayment of obligation under finance lease	(829,864)		(552,267)		(2,815,891)		(1,985,534)
Dividends paid	(987,186)		-		(2,956,986)		(1,846,271)
Issuance of shares, net of fees	-		-		115,943		-
Shares repurchased and cancelled, including fees	-		(36,664)		-		(377,057)
Stock option costs	-		-		(10,809)		-
Proceeds from stock option exercise	-		-		9,299		77,940
Cash generated from financing activities	489,270		5,745,281		4,067,352		2,354,241
Net increase in cash	-		(8,603,232)		-		-
Cash, beginning of period	-		8,603,232		-		-
Cash, end of period	$	-	$	-	$	-	$	-
Non-cash investing and financing activities:
Acquisition of assets under lease	$	3,991,554	$	88,557	$	6,268,994	$	321,900

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 January 28, 2022, 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] x106, E-mail: [email protected]

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