Diamond Estates Wines & Spirits Reports Financial Results Q2 2023

Promising improvements for future results

NIAGARA-ON-THE-LAKE, Ontario, Nov. 25, 2022–(BUSINESS WIRE)–Diamond Estates Wines & Spirits Inc. (“Diamond Estates” or “the Company”) (DWS-TSX Venture) today announced its position financial results for the three and six months ended September 30, 2022 (“Q2 2023 and “YTD 2023”, respectively).

Summary Q2 2022:

  • Revenue for Q2 2023 of $9.2 million, an increase of $2.1 million from Q2 2022 revenue of $7.1 million. The winery division saw an increase of $1.8 million; due to the acquisition of Equity Wine Group, the continued resurgence of on-site sales, the expansion of distribution across the LCBO and Grocery channels, and organic growth at Lakeview Winery. In addition, export sales have recovered from $0.1 million in Q1 2023 to $0.6 million in Q2 2023. The Agency experienced moderate growth from $0.3 million to $3.8 million in Q2 2023.

  • Gross margin for Q2 2023 was $3.6 million, up $0.9 million from $2.7 million in Q2 2022, while gross margin as a percentage of revenue was 38.7% for Q2 2023 compared to 38.1% in Q2 2022. However, when accounting for cost of goods sales adjustments for the fair value of EWG inventory sold, gross margin for Q2 2023 was $3.8 million and 41.1% of sales. The gross margin increase was the result of increases in most channels as a result of the Equity Wine Group acquisition and price increases on most products;

  • EBITDA was negative $0.4 million in Q2 2023, down $0.1 million from negative $0.3 million in Q2 2022, the decline is primarily attributable to an increase in sales, general and administrative costs of the EWG acquisition, brand redesigns on many of the core brands, increased spending requirements with the easing of covid (promotions, events and travel) and the opening of our new Shiny store in July 2022. When adjusted for incremental fair value of sold EWG inventories, adjusted EBITDA was negative $0.2 million in Q2 2023 compared to negative $0.1 million in Q2 2022; and

  • Net loss was $1.4 million compared to a net loss of $1.0 million in Q2 2022.

Later events:

  • On October 24, 2022, the Company entered into an amendment to its Second Amended and Amended Credit Agreement (the “SARCA”) with Bank of Montreal (“BMO”); and

  • On November 9, 2022, the Company closed an unbrokered private placement of 10.0% unsecured convertible bonds of the Company for gross proceeds of $4.884 million.

“I am very excited to see strong sales growth in the company,” said Andrew Howard, President and CEO. “Over the past six months, we have seen a resurgence in onsite sales, significant early success of our new low alcohol, low sugar wine in the first quarter, and a number of exciting new products for our Agency.

We are pleased with the solid year-over-year gross margin growth driven by the acquisition of Equity Wine Group as well as our Lakeview winery, but our growth is below our projections for the quarter. We continue to experience gross margin headwinds in BC and Alberta in our agency and consumer traffic has not yet returned to our wineries as covid eases where we are earning our highest gross margin. We are confident that our team will overcome these problems.

The domestic marketing team has also been hard at work refreshing our core brands with graphic redesigns of Twenty Bees, Fresh Wines and Lakeview Wine Co, in addition to introducing a premium line of Twenty Bees for the winery and e-commerce channels.

It’s typically hard to drive up the price in this industry, but we’ve successfully added a dollar or more to virtually all of our products in every channel. We achieved this with both new product launches and enhancements to our current products. We will continue to evaluate pricing opportunities given inflationary pressures on cost of goods sold.

We have experienced and driven many changes in our business that have caused our expenses to grow faster than our revenues, including: significant brand redesigns, the opening of our new Shiny Apple Cidery store, and support for new brand launches. With the easing of covid, spending has increased to participate in promotional events and compete across all channels. This will need to be closely managed in the future to improve profitability.

Given the revenue growth in the business, gross margin improvement, successful price increases, the launch of new products including Mindful, well-received graphic redesigns, and several new business wins at our agency, I am confident that we are paving the way for future improved business results,” says Howard.

The company also announced that starting today it has issued Deferred Share Units (“DSUs”) to its directors. Under the company’s DSU plan, the company issued a total of 71,301 DSUs to non-executive directors to settle $34,937.50 in deferred director compensation. The DSUs must be settled in common stock of the Company when the director resigns all functions to the Company.

About Diamond Estates Wines and Spirits Inc.

Diamond Estates Wines and Spirits Inc. is a producer of premium wines and ciders as well as a sales agent for more than 120 liquor brands across Canada. The company operates five production facilities, four in Ontario and one in British Columbia, primarily producing VQA wines under well-known brand names such as 20 Bees, Creekside, EastDell, Lakeview Cellars, Mindful, Queenston Mile, Shiny Apple Cider, Fresh, Proud Pour, Red Tractor, Seasons, Serenity, Persona and Backyard Vineyards.

Through its commercial division, Trajectory Beverage Partners, the company is the sales agent for many leading international brands in all regions of the country as well as a distributor in the western provinces. These recognizable brands include Josh wines from California, Fat Bastard, Meffre, Pierre Chavin and Andre Lurton wines from France, Brimincourt Champagne from France, Merlet and Larsen Cognacs from France, Kaiken wines from Argentina, Blue Nun and Erben wines from Germany, Felix Solis Wines from Spain, Calabria Family Estate Wines from Australia, Saint Clair Family Estate Wines from New Zealand, Redemption Bourbon and Rye Whiskeys from the US, Gray Whale Gin from California, Storywood and Cofradia Tequilas from Mexico, Magnum Cream Liqueur from Scotland, Talamonti and Cielo wines from Italy, Catedral and Cabeca de Toiro wines from Portugal, Waterloo Beer & Radlers from Canada, Landshark Lager from the US, Edinburgh Gin, Tamdhu, Glengoyne and Smokehead single malt Scotch whiskeys from Scotland, Islay Mist, Grand MacNish and Waterproof whiskeys from Scotland, C. Mondavi & Family wines including CK Mondavi & Charles Krug from Napa, Wize Spirits and Hounds Vodka from Canada, Bols Vodka from Amster dam, Koyle Family Wines from Chile and Pearse Lyons whiskeys and gins from Ireland.

Forward-Looking Statements

This press release contains forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “expects”, “estimates”, “intends”, “anticipates” or ” does not anticipate”, or “believe”, or variations of such words and expressions or states that certain actions, events or results “could”, “could”, “could”, “could” or “will” be taken, occur or are being reached. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may affect the actual results, performance or achievements of Diamond Estates Wines and Spirits Inc. differ materially from any future results, performance or achievements expressed or implied by the forward statements. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this press release. Such forward-looking statements are based on a number of assumptions that may prove incorrect, including, but not limited to: the economy in general; consumer interest in the company’s services and products; financing; contest; and expected and unexpected costs. While the Company acknowledges that subsequent events and developments may cause its views to change, the Company expressly disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon to represent the views of the Company as of any date after the date of this press release. While the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that could cause actions, events or results not to be as expected, estimated or intended. There can be no assurance that forward-looking statements will prove to be correct, as actual results and future events may differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

Non-IFRS Financial Measure

Management uses net income (loss) and comprehensive income (loss) as presented in its unaudited interim condensed consolidated statements of net income (loss) and comprehensive income (loss), as well as “EBITDA” as a measure of the company’s performance. to judge. EBITDA is another financial measure and is aligned with net income (loss) and total income (loss) under “Results of Operations” in the company’s MD&A.

EBITDA is a supplemental financial measure to further assist readers in assessing the company’s ability to generate revenue from operations before accounting for the company’s financing decisions, depreciation of property, plant and equipment, and amortization of intangible assets. EBITDA includes gross margin less operating expenses before finance charges, depreciation and amortization, non-cash expenses such as share-based compensation, one-off and other unusual items, and income tax. Gross margin is defined as the gross profit excluding depreciation on tangible fixed assets used in production. Operating expenses exclude interest, depreciation of property, plant and equipment used in sales and administration, and amortization of intangible assets.

EBITDA does not represent the actual cash provided by the operating activities, nor is it a recognized measure of financial performance under IFRS. Readers are cautioned that this measure should not be viewed as a substitute for that of the unaudited interim condensed consolidated financial statements prepared under IFRS. The Company’s definitions of this non-IFRS financial measure may differ from those used by other companies.

Neither the TSX Venture Exchange nor its regulatory service provider (as that term is defined in the TSX Venture Exchange’s policies) assumes responsibility for the adequacy or accuracy of this release.

View the source version on businesswire.com: https://www.businesswire.com/news/home/20221124005335/en/

Contacts

Andrew Howard
President & CEO, Diamond Estates Wines & Spirits Inc.
[email protected]

Ryan Conte, CPA, CA, CBV
CFO, Diamond Estates Wines & Spirits Inc.
[email protected]

Diamond Estates Wines & Spirits Reports Financial Results Q2 2023

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