BIG ROCK BREWERY INC. ANNOUNCES ITS MOST PROFITABLE QUARTER IN SEVEN YEARS AN Q3 RESULTS

For Immediate Release

Reports Profitable Third Quarter with EBITDA of $2.5 Million, Up 290% from Third Quarter 2019

November 3, 2020 — Calgary, Alberta — Big Rock Brewery Inc. (TSX: BR) (“Big Rock” or the “Corporation“) today announced its financial results for the three and nine months ended September 30, 2020.

“We are pleased to report continued strong financial and operational results, with third quarter EBITDA (defined herein) of $2.5 million, an increase of 22% compared to the second quarter of 2020 and 290% compared to the same period in 2019. We continue to successfully navigate the challenges related to the COVID-19 pandemic despite the closure of bars, restaurants and events which has resulted in significant losses in our retail revenue which persisted in the summer months,” said President & CEO Wayne Arsenault. “the health and safety of our employees, customers and consumers remains our top priority. Through our commitment to these principles, we reported an excellent third quarter and have spent a significant amount of time realigning our long-term strategic plan to ensure success in the years to come.”
At September 30, 2020, the Corporation had a cash balance of $1.3 million, was undrawn on its operating credit facility of $5 million and $3.0 million drawn on its $6 million term facility with its sole lender, affording Big Rock significant financial flexibility.
“Despite the significant financial hurdles experienced in prior years, we are very pleased with the strong financial position of the Corporation at the end of the third quarter and are well positioned to be opportunistic going forward,” said Chief Financial Officer Don Sewell.
Financial Highlights
For the three months ended September 30, 2020, compared to the three months ended September 30, 2019, the Corporation reported:
• operating income of $1.5 million, compared to an operating loss of $0.8 million;
• earnings before interest, taxes, depreciation and amortization (“EBITDA”) increase of $1.9 million, from $0.6 million to $2.5 million;
• cash provided by operating activities of $1.6 million, compared to cash used in operating activities of $0.9 million;
• sales volumes remained flat from 50,327 hl to 50,367 hl;
• net revenue increased by 14.6%, from $11.2 million to $12.8 million; and
• net income of $1.0 million from a net loss of $0.2 million.
For the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, the Corporation reported:
• operating income of $1.6 million compared to an operating loss of $3.5 million;
• positive EBITDA of $4.6 million compared to negative EBITDA of $0.4 million;
• cash provided by operating activities of $4.6 million, compared to cash used in operating activities of $2.5 million;
• sales volumes decreased 652 hl, from 134,202 hl to 133,550 hl;
• net revenue increased 1.7%, from $33.1 million to $33.7 million;
• net income increased to $0.7 million from a net loss of $1.6 million, an improvement of $2.3 million;
• a reduction in bank indebtedness and long-term debt of $2.0 million and an increase in cash of $0.9 million, as the Corporation continued to focus on using its cash flow to pay down debt; and
• receipt of $0.9 million in government assistance under the Canada Emergency Wage Subsidy Program.
Operating Highlights
In the third quarter of 2020, the Corporation achieved a $1.9 million increase in EBITDA to $2.5 million, as compared to the same period in 2019. Several trends from the second quarter of 2020 continued during the third quarter, with the strongest contributions to the improvement in the Corporation’s EBITDA in the quarter being attributed to the following:
• contract manufacturing volumes and sales of the Corporation’s licensed brands more than doubled in comparison to the same period in 2019;
• continued growth in value offerings including Alberta Genuine Draft;
• significant reductions in selling expenses and general and administrative costs as a result of cost cutting initiatives implemented by the Corporation during the second quarter of 2019; and
• the resurgence in the Corporation’s gross profit primarily driven by the Alberta Gaming, Liquor and Cannabis Commission’s (“AGLC”) amendment of the beer mark-up policy in September 2019.
The loss of keg sales related to COVID-19 continued to put the performance of Big Rock’s Signature series of beers under significant pressure, along with a continued decline in beer consumption trend in Canada.
The Corporation experienced several manufacturing issues during the second quarter, some related to COVID-19 and others not. Although some of these issues were remediated in the third quarter, some manufacturing issues persisted, resulting in the Corporation realizing a $0.4 million charge due to increased waste and damaged inventories. The Corporation has several projects underway to remediate such manufacturing issues going forward as this has not only impacted the cost of sales, but also impacted revenue in the form of ‘stock-outs’ which is consistent with other brewers’ experiences during the COVID-19 pandemic.
Despite manufacturing and inventory challenges experienced in the third quarter of 2020, Big Rock reported net income of $1.0 million or $0.15 per common share, compared to a net loss of $0.2 million or $0.03 per common share in the same period of 2019.
Summary of Results
Three months ended September 30
Nine months ended September 30
$000, except hl and per share amounts
2020
2019
2020
2019
Sales volumes (hl) (1)
50,367
50,327
133,550
134,202
Gross revenue
$ 17,830
$ 18,081
$ 47,273
$ 52,224
Net revenue
12,822
11,189
33,676
33,114
EBITDA (2)
2,492
639
4,614
(417)
Operating income (loss)
1,512
(761)
1,645
(3,485)
Net income (loss)
1,028
(201)
706
(1,625)
Income (loss) per share (basic)
$ 0.15
$ (0.03)
$ 0.10
$ (0.23)
Income (loss) per share (diluted)
$ 0.14
$ (0.03)
$ 0.10
$ (0.23)
$ per hl
Net revenue
$254.57
$222.33
$252.16
$246.75
Cost of sales
$150.00
$143.34
$153.55
$169.94
(1) Excludes contract manufacturing volumes due to the nature of the agreements.
(2) Non-GAAP measure. See “Non-GAPP Measures”.
Additional Information
The unaudited consolidated financial statements and Management’s Discussion and Analysis for the three and nine months ended September 30, 2020 dated November 3, 2020, can be viewed on Big Rock’s website at www.bigrockbeer.com and on SEDAR at www.sedar.com under Big Rock Brewery Inc.
NON-GAAP MEASURES
The Corporation uses certain financial measures referred to in this press release to quantify its results that are not prescribed by Generally Accepted Accounting Principles. This press release contains the term “EBITDA”. This financial measure does not have a standardized meaning under the Corporation’s Generally Accepted Accounting Principles and therefore may not be comparable to similar measures presented by other issuers. EBITDA is calculated by adding back to net income, interest, income taxes, depreciation and amortization. For more information, please see Management’s Discussion and Analysis for the three months and nine months ended September 30, 2020.
Forward-Looking Information
Certain statements contained in this news release constitute forward-looking statements. These statements relate to future events or Big Rock’s future performance. All statements, other than statements of historical fact, may be forward-looking statements. Forward-looking information are not facts, but only predictions and generally can be identified by the use of statements that include words or phrases such as, “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “likely” “may”, “project”, “predict”, “propose”, “potential”, “might”, “plan”, “seek”, “should”, “targeting”, “will”, and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Big Rock believes that the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon by readers, as actual results may vary materially from such forward-looking statements. These statements speak only as of the date of this news release and are expressly qualified, in their entirety, by this cautionary statement.
In particular, this news release contains forward-looking statements pertaining to the following:
• supply and demand of Big Rock’s products;
• the impact of recent amendments to the AGLC beer mark-up rates in Alberta and any further changes in the future;
• Big Rock’s expectations with respect to its ability to be successful in the years to come;
• Big Rock’s ability to remediate manufacturing issues going forward; and
• Big Rock’s expectations with respect to its future financial position and its ability to take advantage of future opportunities.
With respect to the forward-looking statements listed above and contained in this news release, management has made assumptions regarding, among other things:
• volumes in the current fiscal year will remain constant or will increase;
• input costs for brewing and packaging materials will not materially increase or decrease;
• there will be no material change to the regulatory environment in which Big Rock operates;
• there will be no material supply issues with Big Rock’s vendors;
• Big Rock’s ongoing projects to remediate its manufacturing issues will be successful; and
• that the duration and extent of the COVID-19 pandemic will not be long-term.
Some of the risks which could affect future results and could cause results to differ materially from those expressed in the forward-looking information and statements contained herein include the risk factors set out in the Corporation’s annual information form and also include, but are not limited to:
• the inability to maintain the current AGLC beer mark-up policy in Alberta;
• the inability to maintain the current AGLC mark-up rates applicable to RTD beverages in Alberta;
• the inability to grow demand for Big Rock’s products;
• Big Rock’s inability to remediate its manufacturing issues;
• the worldwide economic and social impact of the COVID-19 pandemic; and
• the duration and extent of the COVID-19 pandemic.
Readers are cautioned that the foregoing list of assumptions and risk factors is not exhaustive. The forward-looking information and statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking information and statements included in this news release are made as of the date hereof and Big Rock does not undertake any obligation to publicly update such forward-looking information and statements to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.
About Big Rock Brewery Inc.
In 1985, Ed McNally founded Big Rock to contest the time’s beer trends. Three bold, European-inspired offerings – Bitter, Porter and Traditional Ale – forged an industry at a time heavy on easy drinking lagers and light on flavour. Today, our extensive portfolio of signature beers, ongoing seasonal offerings, six ciders (Rock Creek Cider® series), custom-crafted private label products and other notable, licensed alcoholic beverages keeps us at the forefront of the craft beer revolution and still proudly contesting the beer and alcoholic beverage trends of today. Big Rock has brewing operations in Calgary, Alberta, Vancouver, British Columbia, and Toronto, Ontario. Big Rock trades on the TSX under the symbol “BR”. For more information on Big Rock visit www.bigrockbeer.com
For further information, please contact:
Wayne Arsenault, President & Chief Executive Officer, or Don Sewell, Chief Financial Officer:
Phone: (403) 720-3239
Fax: (403) 720-3641
Email: investors@bigrockbeer.com