Flow Beverage (FLOW) Q2 2024 earnings summary

Executive summary

• Achieved the most profitable quarter since going public, with the lowest adjusted EBITDA loss in three years and gross margin improvement to 28% from 18% year-over-year and -15% sequentially, driven by operational restructuring and optimization.

• Completed major operational transformation, with 90% of initiatives finished, and exited unprofitable U.S. partnerships to focus on profitable channels.

• Entered major manufacturing agreements, securing $148 million in minimum contracted revenue, including a 5-year, $115 million deal with BeatBox and a 3-year agreement with BioSteel.

• Aurora facility expansion completed, enabling commercial production for BeatBox Party Punch and alcoholic beverages for the first time.

• Completed private placement to support path to profitability.

Financial highlights

• Q2 2024 consolidated net revenue was $12.1 million, down 14% year-over-year; Flow brand net revenue was $7.0 million, down 26% due to exit from U.S. commercial partnerships; co-packing net revenue increased 12–13% year-over-year.

• Adjusted EBITDA loss reduced to $3.5 million from $6.6 million year-over-year and $9.2 million sequentially.

• Gross margin improved to 28% in Q2 2024 from 18% in Q2 2023 and -15% in Q1 2024.

• Operating expenses decreased, with G&A and salaries down significantly due to restructuring.

• Net loss for the period was $7.0 million, down from $10.1 million in Q2 2023.

Outlook and guidance

• Expects to reach positive adjusted EBITDA and cash flow from operations by Q4 2024, with co-packing revenue ramping up and gross margin targeted to reach 40%+ as capacity utilization increases.

• Anticipates resumption of Flow brand net revenue growth as impact from exited contracts and competitor reselling abates.

• Operational transformation is 90% complete, positioning for operating leverage and profitability improvements.