Mr. Nicholas Reichenbach reports

FLOW BEVERAGE CORP. REPORTS Q1 2024 FINANCIAL RESULTS

Flow Beverage Corp. has released its financial results for the fiscal quarter ended Jan. 31, 2024.

Nicholas Reichenbach, chairman and chief executive officer of Flow, stated: "In Q1 2024, we exited unprofitable commercial relationships and channels that impacted current-period Flow brand net revenue. While these were difficult decisions to make, they were taken to improve profitability and are consistent with our transformation plan. On the revenue side, we secured agreements with BeatBox and BioSteel that are expected to help bring Flow over $148-million in co-pack revenue over the next five years. This represents a significant acceleration of co-pack revenue now that our fourth production line has been commissioned, with production having already started for both JoyBurst and BioSteel. Additionally, we entered into a private placement to help bridge our working capital requirements in the near term, and the company will continue to discuss alternative funding solutions with some of its key commercial partners as required. Each of these are significant milestones that should propel Flow through the coming quarters, when we expect to see a return to Flow brand growth. Ultimately, these new co-pack contracts and our operational optimization should pave the way for reaching adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] profitability and positive cash flow from operations by Q4 2024."

Trent MacDonald, chief financial officer and executive vice-president, operations, of Flow, added: "A key part of our transformation is to focus on our core and most profitable offerings: our original Flow water and our streamlined four-flavour water assortment. As a result, we have chosen to delist our vitamin-infused products and cancel related investments. This led to a one-time $1-million writedown of vitamin-infused product inventory, which is included in cost of goods sold. Cost of goods sold was also impacted by our capacity utilization in Q1 2024, which led to lower absorption. Third party logistics had not yet been fully optimized through this period as well. As a result, we expect gross margins to materially improve over the balance of the year. More broadly -- as a leaner and much more focused operation -- we continue to see evidence that our transformation is delivering results on our accelerating journey to profitability."

Financial results for Q1 2024

Flow brand net revenue was $6.6-million in Q1 2024, a 9-per-cent decrease from $7.2-million in Q1 2023. The company had strong growth in Flow brand net revenue in Canada within its e-commerce channel and within traditional grocery, both of which the company sees profitable growth continuing over the balance of the year. Net revenue in the United States continues to be impacted by competitor reselling over e-commerce channels. The company's efforts to mitigate competitor reselling in the United States are expected to take effect in the second half of fiscal 2024. Also impacting Flow brand net revenue during the quarter were the exiting of commercial partnerships with U.S. retail and food service partners to meet the company's profitability targets.

Consolidated net revenue was $8.3-million in Q1 2024, a 16-per-cent decrease from $9.9-million in Q1 2023. In addition to the factors impacting Flow brand revenue, consolidated net revenue did not include the full run rate of co-manufacturing agreements the company has recently announced.

Gross margin was negative 15 per cent in Q1 2024, as compared with 30 per cent in Q1 2024. The variance in gross margin reflects the factors impacting net revenue described herein, below-capacity utilization at the Aurora production facility, negative $500,000 of gross margin relating to certain commercial partnerships that Flow chose to exit going forward and a $1-million non-cash write-off of raw materials.

Flow reported an EBITDA loss of $10.9-million in Q1 2024, as compared with an EBITDA loss of $7-million in Q1 2023. EBITDA loss includes the factors impacting gross margin, a $1.1-million decrease to salaries and benefits, which is attributable to Flow's recent restructuring, and a $1.3-million increase in share-based compensation. Flow expects general and administrative expenses to further reduce in the coming quarters.

Flow reported an adjusted EBITDA loss of $9.2-million in Q1 2024, as compared with $6.2-million in Q1 2023. The adjusted EBITDA loss is attributable to the same factors that impact EBITDA loss, removing stock-based compensation and restructuring charges.

Conference call information

Date:  March 18, 2024

Time:  8:30 a.m. ET

Conference ID:  89961878

Dial-in numbers:  416-764-8658 or 888-886-7786

Replay numbers:  416-764-8692 or 877-674-7070

Passcode:   961878

The replay is available until April 18, 2024.

About Flow Beverage Corp.

Flow is one of the fastest-growing premium water companies in North America. Founded in 2014, Flow's mission since day one has been to reduce environmental impacts by providing sustainably sourced naturally alkaline spring water in a recyclable and up-to-75-per-cent-renewable, plant-based pack. Today, the brand is B Corp. certified with a best-in-class score of 126.5, offering a diversified line of health-and-wellness-oriented beverage products: original naturally alkaline spring water and award-winning organic flavours in sizes ranging from 330 millilitres to one litre. All products contain naturally occurring electrolytes and essential minerals and support Flow's overarching purpose to bring wellness to the world through the positive power of water. Flow beverage products are available at retailers in Canada and the United States and on-line.

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