Niagara-on-the-Lake, Ontario--(Newsfile Corp. - August 22, 2024) - Diamond Estates Wines & Spirits Inc. (TSXV: DWS) ("Diamond Estates" or "the Company") today announced its financial results for the three-month period ending June 30, 2024 ("Q1 2025").
Q1 2025 Summary:
- Revenue for Q1 2025 was $6.2 million, a decrease of $1.7 million, from $7.9 million in Q1 2024. The Winery division experienced an increase in sales of $0.4 million while the Agency division experienced a decrease of $2.1 million. The increase in sales in the Winery division is largely attributable to the VQA wine support program of $0.7 million and sales of D'Ont Poke the Bear of $0.4 million offset by bulk sales of $0.6 million and the sales from Queenston Mile Vineyard in the prior year. The decrease in the Agency division was primarily driven by the loss of two suppliers in the prior year in the amount of $2.1 million;
- Gross margin1 as a percentage of revenue increased to 44.8% for Q1 2025 compared to 36.8% in Q1 2024; however, gross margin for Q1 2025 was $2.8 million, a decrease of $0.1 million, from $2.9 million in Q1 2024. The gross margin at the Wineries increased from 36.3% in Q1 2024 to 47.7% in Q1 2025 as a result, of the VQA Wine support program and general margin increases across various skus in the wholesale channel as a result improving cost of goods sold and strategic price increases. The gross margin at the Agency decreased from 37.4% in Q1 2024 to 33.6% in Q1 2025 from the loss of a key supplier and its related revenue in the commission markets;
- Adjusted EBITDA1 increased by $0.6 million to negative $0.3 million in Q1 2025 from a negative $0.9 million in Q1 2024. The increase is mostly the result of improving gross margin as a percent of sales and an overall decrease in SG&A expenses of $0.6 million compared to the prior year; and
- Net loss of $2.0 million, compared to a net loss of $2.5 million in Q1 2024, includes $0.6 million of charges resulting from the debt reduction program and the rationalization of the Company's footprint.
Subsequent Event(s)
Private placement
On July 17, 2024, the Company closed a fully subscribed non-brokered private placement through the issuance of 11,466,065 common shares at an issue price of $0.20 per common share. The aggregate gross proceeds of $2.3 million were used for general working capital purposes. Lassonde and a company related to it subscribed for 9,000,000 of the total common shares issued.
Deferred share units ("DSUs)
In August, 2024, the Company issued an aggregate of 163,888 DSUs in settlement of $44,250 of previously accrued deferred directors compensation.
VQA proceeds
In July, 2024, the Company received the $2.1 million of VQA Wine Support Program accrued as at March 31, 2024.
Agreement with Renaissance Wine Merchants
On June 6, 2024, in accordance with the terms of the agreement, TBP gave written notice to exercise a put-option. As of the reporting date, the Company has received $1.5 million and expects to receive an additional $0.8 million. The Company continues to work collaboratively with Renaissance and continues with its discussions around a potential merger.
BMO non-revolving loan repayment
Under the terms of its amended BMO credit agreement, the Company was required to have repaid all of its non- revolving term loan by May 31, 2024. As of the date of release of these unaudited interim condensed consolidated financial statements, the balance of $6.8 million outstanding as of June 30, 2024 has been reduced by the scheduled monthly principal payments of $0.1 million, the VQA Wine Support Program of $2.1 million, $1.5 million from the exercise of the put option agreement with Renaissance and $0.1 million from the sale of bulk wine leading to an outstanding balance of $3.0 million. The Company expects to apply the proceeds of the assets currently held for sale, and the remainder of the expected proceeds from the exercise of the TBP put option with Renaissance against this indebtedness. While management expects the target to be achieved, there is uncertainty relating to the amount and timing of the actual funds that will ultimately be received.
President's Message
"We continue to experience an unprecedented time in the beverage alcohol industry here in Canada, and around the world. With dramatic changes in the Retail landscape in our core market of Ontario, significant changes in consumer behaviour, weather related events impacting vineyards and changing government perspectives on the benefit of the wine industry to economic health - this is an exciting time to be in this industry," said Andrew Howard, President and CEO.
"We are also in the midst of significant change as a company and I am pleased to see those changes beginning to impact our financial results in a positive manner. We have initiated an aggressive series of projects to reduce debt, drive growth and improve profitability. We are well on our way to having all of the key projects come to fruition and I am excited to be part of the very capable team that is guiding these projects.
The enhanced VQA Wine Support Program, key agency and winery partnerships including with D'Ont Poke the Bear (effective in mid-May), the sale of non- strategic assets and the nimble response taken to address the expansion of beverage alcohol retailing in all Grocery and Convenience in Ontario are key projects driving the turnaround."
About Diamond Estates Wines and Spirits Inc.
Diamond Estates Wines and Spirits Inc. is a producer of high-quality wines and ciders as well as a sales agent for over 120 beverage alcohol brands across Canada. The Company operates four production facilities, three in Ontario and one in British Columbia, that produce predominantly VQA wines under such well-known brand names as 20 Bees, Creekside, EastDell, Lakeview Cellars, Mindful, Shiny Apple Cider, Fresh, Red Tractor, Seasons, Serenity, Backyard Vineyards, and most recently, D'Ont Poke the Bear ("DPTB") wines and ciders.
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 being a distributor in the western provinces. These recognizable brands include Fat Bastard, Gabriel Meffre, and Andre Lurton wines from France, Merlet and Larsen Cognacs from France, Kaiken wines from Argentina, Blue Nun and Erben wines from Germany, Calabria Family Estate Wines, McWilliams Wines and Joiy Wines from Australia, Saint Clair Family Estate Wines and Yealands Family Wines from New Zealand, Cofradia Tequila from Mexico, Maverick Distillery spirits (including Tag Vodka and Barnburner Whisky) from Ontario, Talamonti, Cavit and Cielo wines from Italy, Catedral and Cabeca de Toiro wines from Portugal, Edinburgh Gin, Tamdhu, Glengoyne and Smokehead single-malt Scotch whiskies from Ian McLeod Distillers in Scotland, Islay Mist, Ryelaw, and Waterproof whiskies from MacDuff International in Scotland, C. Mondavi & Family wines including C.K Mondavi, Charles Krug, and Flat Top Hills from Napa Valley, Wize Spirits, Hounds Vodka, Walter Caesars, Glen Breton Whisky from Canada, Bols Vodka from Amsterdam, Warsteiner Beers from Germany, Koyle Family Wines from Chile, Rossi D'Asiago Limoncello from Italy and Becherovka from Czechia.
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", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-Looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Diamond Estates Wines and Spirits Inc. to be materially different from any future results, performance or achievements expressed or implied by the forward-looking 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 which may prove to be incorrect, including, but not limited to: the economy generally; consumer interest in the services and products of the Company; financing; competition; and anticipated and unanticipated costs. While the Company acknowledges that subsequent events and developments may cause its views to change, the Company specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing the views of the Company as of any date subsequent to the date of this press release. Although 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 cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could 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 the unaudited interim condensed consolidated statements of net income (loss) and comprehensive income (loss) as well as "gross margin", "EBITDA" and "Adjusted EBITDA" as a measure to assess performance of the Company. The Company defines "gross margin" as gross profit excluding depreciation. EBITDA and "Adjusted EBITDA" are other financial measures and are reconciled to net income (loss) and comprehensive income (loss) below under "Results of Operations".
EBITDA and Adjusted EBITDA are supplemental financial measures to further assist readers in assessing the Company's ability to generate income from operations before considering the Company's financing decisions, depreciation of property, plant and equipment and amortization of intangible assets. EBITDA comprises gross margin less operating costs before financial expenses, depreciation and amortization, non-cash expenses such as share-based compensation, one-time and other unusual items, and income tax. Adjusted EBITDA comprises EBITDA before non- recurring expenses including cost of sales adjustments related to inventory acquired in business combinations, EWG transaction costs expensed, government funding under CEWS and CERS programs, and other non-recurring adjustments included in the calculation of EBITDA. Gross margin is defined as gross profit excluding depreciation on property, plant and equipment used in production. Operating expenses exclude interest, depreciation on property, plant and equipment used in selling and administration, and amortization of intangible assets.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
1See definition of selected terms under the heading "Non-IFRS Financial Measures"
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