Flow Beverage Corp.

Good morning, everyone. Welcome to Flow Beverage Corp's Fiscal Q4 2024 and Operational Update Conference Call. As a reminder, this conference call is being recorded on January 30, 2025. At this time, all participants are in the listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for research analysts to queue up for questions. For those participating by webcast, You may enter your questions you have for management anytime. Before we begin, we would like to remind you that today's presentation and discussion contains forward-looking statements that involve known and unknown risks and uncertainties and other factors that could cause actual events to differ materially from current expectations and may cause actual results, performance, or achievements to be materially different from those implied by such statements. The forward-looking statements are based upon and include the company's current internal estimates, plans, expectations, opinions, forecasts, projections, targets, guidance, or other statements that are not statements of fact. Any statements contained herein or discussed during today's session that are not statements of historical facts may be deemed to be forward-looking statements. A number of factors could cause actual events, performance, or results to differ materially, from what is projected in the forward-looking statements. A more complete discussion of the risks and uncertainties facing the company appear in the company's Annual Information Form, dated January 29, 2025, and the company's management discussion and analysis for the year ended October 31, 2024, which are available under the company's profile on CEDAR+. You are cautioned not to place any reliance on these forward-looking statements. which only speak to the date of this presentation. The company disclaims any intention or obligation except to the extent required by law to update or revise any forward-looking statements as a result of new information or future events or for any reason. Any forward-looking statements contained herein or discussed during today's session is expressly qualified in its entirety by the above cautionary statement. I will now turn the call over to Nicholas Reichenbach, Founder and Chief Executive Officer of Flow, Please go ahead, Nicholas.

Thank you, operator. Good morning, everyone. I'm joined today by Trent McDonald, Flow's Chief Financial Officer and EVP of Operations. On today's call, we're going to start with an operational update, review Flow's transformation over the last two years. I will then spend some time reviewing our freshly innovative Flow brand and our strategic priorities. Then I'll pass the call over to Trent. who will take you through a detailed review of Q4 results and then share an update on our path to profitability and financial targets. After transfer marks, we'll open the call to questions from our analysts, and then we'll be taking questions from our investors that have joined our webcast. Just type your questions in, and we'll do our best to answer them all. Flo's transformation truly began in November 2022. At the time, we had $2.3 million in cash and operating expenses that greatly exceeded our gross profit. Six months prior, I came back as Chief Executive Officer at Flo. Trent came in as well as Chief Financial Officer, and we developed a plan to radically transform Flo in order to achieve long-term and sustainable profits. Our most significant steps have included selling our Virginia facility, recapitalizing our balance sheet, restructuring our corporate, IT, and financial reporting functions. We exited unprofitable retail partnerships. We outsourced logistics, distribution, and marketing functions. We consolidated production of flow and our co-packing partners to our Aurora production facility. We significantly increased the capacity of Aurora's facility and added the ability to produce alcoholic beverages. And finally, we signed over $267 million worth of co-packing contracts It took about five quarters to begin seeing our financial benefits from our operational transformation and restructuring. Beginning in Q2 2024, we started to show significant improvements in our gross margin, which has consistently been between 20 and up to 33%. We still think that there's much more we can achieve with higher margins as we continue to scale. Our adjusted EBITDA has also improved by a total of $19 million over the last three quarters compared to fiscal 2023. Again, there is still significant opportunity for us to improve here, of which we'll describe in more detail in a couple of minutes. As part of our transformation, we focused our product lineup to include our four best-selling flavors, and we exited vitamin-infused water. Including our newly launched Flow sparkling mineral water, we now have 11 SKUs. For those joining us today by webcast, our SKU assortment is on the screen. You can see our newly branded new packaging has a clean, refreshed look and feel. Our brand innovation was designed in the premium water consumer in mind. specifically those with active lifestyles. If you look closely at our SKU assortment, you may notice a new product, FLOW sparkling mineral water in a 750 ml glass bottle. We are launching this new premium bottle in the second half of 2025, focused first on our strategic food service partners and premium grocery stores across North America. An important strategic shift we have made recently is highlighting our mineral and electrolytes in flow branded water. We have a unique competitive advantage with our water in both Canada and the United States as it's sourced from a naturally occurring mineral spring. The slides on the screen highlight our functional value proposition to our consumer. What we haven't included on this slide, but we do include in our presentations to our new partners, is FLOW's superior mineral count and hydration levels compared to the other premium waters sold in North America. For example, our mineral count is 319 milligrams per liter, exceeds Fiji, Avion, Liquidex, and Smartwater, and our electrolyte content is up to three times those of the premium water category. These attributes make up the vast majority of why consumers buy premium water. Additionally, our pH at 8.1 is also higher than the four same brands. pH is important to our consumer because of its alkalinity that provides superior hydration compared to purified water. Flo has maintained leadership in our ESG, which is a very important value proposition to our organization and our consumers. In 2024, we renewed our B Corp certification, publishing one of the highest ESG rating of all beverages companies in the world. B Corp is a rigorous test for all aspects of ESG, and the results are independently audited. Some more recent milestones of FLOW include adding purchase orders and listings in agreement with our hospitality, grocery, and national food channels partners for FLOW's new sparkling mineral water. We are very pleased to report that Whole Foods Global will be listing our latest innovation, and they have been a phenomenal partner for the last 10 years. The Flo brand is also making good progress in getting listings in conventional food aisles in some of Canada's leading grocery chains like Loblaws. Moving to conventional aisle is a pretty important move for us as we have a significant improvement in our velocity of sales where consumers can now choose Flo against the mainstream water brands. In the last few months, We've expanded two co-packing agreements and we signed a new co-packing agreement as well. Today, our take or pay manufacturing agreements total 267 million. And the best part of these agreements are, the best part is these agreements are as profitable as the flow branded margin.

Sequentially to year end, we have,