E-Malt.com News article: Canada, AB: Big Rock Brewery Inc. reports financial results to December 30, 2024

Big Rock Brewery Inc. on March 21 announced its financial results for the three months and year ended December 30, 2024.

For the three months ended December 30, 2024, compared to the three months ended December 30, 2023, the company reported:

• wholesale sales volumes down 4.3% to 33,808 hectolitres ("hl") compared to 35,314 hl;
• contract sales volumes up 189.2% to 28,779 hl compared to 9,952 hl;
• total sales volumes up 38.3% to 62,587 hl compared to 45,266 hl;
• net revenue increased by 7.7% to C$9.7 million from C$9.0 million;
• operating loss increased by 87.7% to C$2.8 million compared to $1.5 million;
• net loss increased by C$7.6 million to C$9.7 million due to an increase in one-time costs of C$7.2 million compared to 2023 largely attributed to non cash charges incurred when non core assets were rationalized; and
• Adjusted EBITDA decreased by C$0.3 million to C$(1.0) million. Adjusted EBITDA is a non-GAAP (as defined herein) financial measure, see "Non-GAAP Measures".
For the year ended December 30, 2024, compared to the year ended December 30, 2023, the company reported:

• wholesale sales volumes down 5.6% to 148,384 hl from 157,203 hl;
• contract sales volumes increased 11.9% to 82,598 hl compared to 73,810 hl;
• total sales volumes flat at 230,982 hl compared to 231,013 hl;
• net revenue is relatively steady at C$43.4 million compared to C$43.7 million;
• operating loss increased to C$6.1 million from C$1.6 million;
• net loss increased to C$13.5 million from C$2.9 million due to an increase in one-time costs of C$6.0 million compared to 2023 largely attributed to non cash charges incurred when non core assets were rationalized;
• Adjusted EBITDA decreased by C$4.4 million to C$(2.2) million; and
• C$0.7 million of term debt was repaid and C$3.4 million drawn in the year ended December 30, 2024 on the operating facility for total debt of C$18.7 million, representing an increase of C$2.1 million from the C$16.6 million outstanding at December 31, 2023.

Fiscal 2024 represents a significant transition period for the company. This started with the appointment of David Kinder as President and CEO on January 8th, 2024 and the addition of Linda Thomas and George Croft to the board on May 14, 2024.

Strategically, the focus of the company will be to expand it's ready to drink and co-packing business while still supporting its core brands and wholesale business.

The loss of a key co-pack partner in the last half of 2023 has had a negative effect on the financial results throughout most of 2024. However, Big Rock was able to secure two multi-year co-packing agreements on August 12, 2024 and November 26, 2024 which we anticipate will increase production and contract co-pack volumes by more than 100,000 hl annually. These volume increases were evident in the last quarter of 2024, as Big Rock had one of its most productive periods in company history. Sales volumes for the fourth quarter of 2024 were up 38.3% compared to the same period in 2023.

Operating efficiencies were gained throughout 2024 as Big Rock continues to focus on its core businesses and streamlining its operations. The company made the decision to permanently close its operations in Vancouver and Toronto at the conclusion of their leases. The Vancouver Brewery and Eatery was closed in 2024 and resulted in a one-time charge of C$2.8 million for the year. The Toronto Brewpub lease expires on April 30, 2025 and resulted in the recognition of a non recurring one time impairment of fixed assets of C$1.6 million and a contingent loss of C$0.2 million. The rationalization of these operations will improve cash flow in 2025 and allow for a renewed focus in our core sales area. That said, Big Rock will continue to maintain a presence and its manufacturing license in both British Columbia and Ontario. Operational efficiencies were gained when Big Rock's warehouse facility located in Edmonton was closed and sold on June 17, 2024 and a partnership developed with a local Edmonton based trucking company who will provide cross docking functionality to serve Big Rocks existing network of customers.

Furthermore, in December 2024, Big Rock entered into 5 year lease on 88,156 square feet of warehouse space which commences on June 1, 2025. Both initiatives will improve cash flow by reducing third party logistics costs in 2025 and more importantly allow Big Rock to leverage its distribution license.

Lastly, in January of 2025, concurrent with a C$9.0 million debt settlement agreement with VN Capital Fund I, LP the company a closed a C$8.4 million private placement which resulted in a total of 17.4 million common shares being issued. Approximately C$3.2 million of the cash proceeds will be used to fund strategic capital investments aimed at increasing the capacity and improving the efficiency in the ready-to-drink production platform, with the residual being used to deleverage the balance sheet. More specifically, C$11.3 million or all indebtedness and liabilities owing to VN Capital have been settled (inclusive of the aforementioned C$9.0 million) and C$0.7 million was used to repay existing term loans. The recapitalization of the balance sheet was critical as it as it gives the company to ability to act on opportunities to improve operating efficiencies while providing the liquidity to weather the current macro economic uncertainties. The recapitalization also marks the end of what we believe the transition period is as we move into a period of positive EBITDA and cash flow.

On December 30, 2024, the company was not compliant with its fixed charge coverage ratio. In January 2025, the ATB provided a commitment letter which provided a waiver for this covenant for the fiscal 2024 year end. Had this been obtained on or before December 30, 2024$9.0 million in ATB debt would have been classified as non current as opposed to current on the balance sheet. As this issue was resolved in January 2025, the classification of ATB debt will revert to being classified as non current in the first quarter of 2025.

"We are proud of the progress Big Rock has made during this period of transition," noted President and Chief Executive Officer David Kinder. "In the fourth quarter of 2024, we began production under our new multi-year co-packing agreements, driving a 38% increase in sales volumes compared to the same period in 2023. We are excited to continue investing in our own brands to align with consumer demand, focus on product innovation, and expand our Ready-to-Drink ("RTD") production capabilities alongside our co-packing partners and Big Rock labels. Despite increased sales volumes, Q4 remained part of our transition period, as we had yet to fully realize the benefits of our recently implemented efficiencies and accordingly we continued to incur expenditures with our third-party providers of these services. Looking ahead into 2025, these costs are anticipated to be wholly avoided as we fully leverage our new logistics and production capabilities which will help to contribute to a return to positive EBITDA in 2025. I am incredibly proud of our team's dedication, which has set the stage for continued growth and success.

While we remain optimistic about our path forward, we recognize ongoing economic uncertainty, including the threat of tariffs on aluminum and other materials, as well as recent changes to the Alberta mark-up rate on alcohol sales. We are actively monitoring these risks and working to mitigate their impact, including engaging with policymakers and carefully reviewing our procurement strategies."


26 March, 2025