Earnings call transcript: Flow Beverage reports Q2 2025 loss, stock drops 12.5%

Flow Beverage Corp (FLOW), with a market capitalization of $11.22 million, reported disappointing earnings for Q2 2025, with a larger-than-expected loss per share and revenue falling short of forecasts. The company’s stock fell 12.5% following the announcement. According to InvestingPro analysis, Flow operates with a significant debt burden and has been quickly burning through cash, raising concerns about its financial stability.

Key Takeaways

• Flow Beverage reported an adjusted EPS of -$0.0821, missing the forecast of -$0.045.
• Revenue for the quarter was $10 million, below the expected $14.91 million.
• The company’s stock price dropped to $0.08, a 12.5% decrease after the earnings release.
• Flow Beverage plans to launch a new sparkling water line in Q3 2025.
• The company is focused on achieving adjusted EBITDA profitability and positive cash flows.

Company Performance

Flow Beverage Corp’s performance in Q2 2025 showed challenges as the company reported a net revenue of $10 million, which aligns with its trailing 12-month revenue of $47 million, returning to fiscal 2022 levels. The gross margin was 23%, which decreased due to lower production volumes. The company also faced inventory write-offs and marketing rebates totaling $500,000. Despite these setbacks, Flow Beverage is working to optimize manufacturing processes and expand partnerships, such as the increased collaboration with Starbucks Canada.

Financial Highlights

• Revenue: $10 million, a decrease from forecasted $14.91 million.
• Earnings per share: -$0.0821, missing the forecast of -$0.045.
• Gross margin: 23%, impacted by lower production volumes.
• Adjusted EBITDA loss: $11.6 million.

Earnings vs. Forecast

Flow Beverage’s Q2 2025 earnings per share (EPS) of -$0.0821 fell short of the forecasted -$0.045, resulting in an EPS surprise of 82.44%. Revenue also missed expectations, coming in at $10 million compared to the anticipated $14.91 million, marking a revenue surprise of -32.66%.

Market Reaction

Following the earnings release, Flow Beverage’s stock price dropped 12.5%, closing at $0.08. This decline reflects investor disappointment in the company’s performance, particularly given the significant miss on both EPS and revenue. The stock’s current price is closer to its 52-week low of $0.05, indicating a challenging market environment for the company.

Outlook & Guidance

Looking ahead, Flow Beverage is focused on returning to branded revenue growth and achieving adjusted EBITDA profitability. The company is expanding its foodservice and retail presence and plans to launch Flow Sparkling Mineral Water in fiscal Q3 2025. Additionally, Flow Beverage raised $14.3 million through private placements and business loans to support its strategic initiatives. InvestingPro analysis shows the company’s Financial Health Score at 3.54, labeled as ’GREAT’, despite current challenges. Discover detailed insights and access the comprehensive Pro Research Report, available for Flow and 1,400+ other US stocks.

Executive Commentary

Paul Dualdol, CFO, emphasized the importance of optimizing manufacturing processes, stating, "Manufacturing to me is about counting every penny and optimizing processes until you find the formula that works." CEO Nicolas Reichenbach highlighted the demand for Flow’s products, saying, "We have plenty of demand for our co-packing partners, and we are experiencing unfulfilled demand with the Flow branded products."

Risks and Challenges

• Production underutilization impacting gross margins.
• Inventory write-offs and marketing rebates affecting financial performance.
• Competitive pressures in the premium beverage market.
• The need to scale manufacturing efficiently to meet demand.
• Achieving profitability amidst current financial losses.

Q&A

During the earnings call, analysts inquired about Flow Beverage’s working capital constraints and the impact of UNFI logistics disruptions, which the company confirmed were not affecting operations. The management also addressed gross margin pressures due to production underutilization and reassured investors about maintaining current retail partnerships.

Full transcript - Flow Beverage Corp (FLOW) Q2 2025:

Conference Call Operator: Good morning, everyone. Welcome to Flow Beverage Corp’s Fiscal Q2 twenty twenty five Conference Call. As a reminder, this conference call is being recorded on 06/17/2025. At this time, all participants are in a 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. 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 company’s current The company’s are ’20 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 are 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 01/29/2025, and the company’s management’s discussion and analysis for the three months ended 04/30/2025, which are available under the company’s profile on SEDAR plus.

You are cautioned not to place undue 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 statement 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 Nicolas Reichenbach, Founder and Chief Executive Officer of Pho. Please go ahead, Nicolas.

Nicolas Reichenbach, Founder and Chief Executive Officer, Flow Beverage Corp: Thank you, operator. Good morning, everyone. I’m joined today by Paul Dualdol, Flow’s newly appointed Chief Financial Officer. On today’s call, I will start by providing an update on our quarter and our recent milestones, and then I’ll pass the call over to Paul to introduce himself to review our results. After Paul’s remarks, we’ll open the questions up for analysts.

SLO continues to make steady financial progress since undertaking its operational transformation. Looking at the trailing twelve months, we have earned $47,000,000 in revenue, which back to fiscal twenty twenty two levels. We have exited a number of unprofitable contracts since fiscal twenty twenty two, and we were able to replace those contracts with more profitable co packing contracts as well as more profitable retail partners for the Flow brand. You can see the results of gross margin, which has reached $11,800,000 for the trailing twelve month period. Adjusted EBITDA also continues to trend in the right direction.

We have incurred an adjusted EBITDA loss of $11,600,000 in the trailing twelve months, which is due to the progress in gross profit and a significant reduction in overhead expenses. We have a very active summer hydration season in front of us. We have a number of programs in conventional and natural grocery.

Sean MacKowen, Analyst, ROTH Capital Partners: We have

Nicolas Reichenbach, Founder and Chief Executive Officer, Flow Beverage Corp: promotions with Costco warehouses in Ontario and Quebec as well as national programs in the Costco business center. In The U. S, we have also national programs with Whole Foods, our longest standing partner in market. The programs all reflect a strategic approach to trade spend that should allow Flow to maintain the improvements as we make it to profitability. We’ll also be returning to TIFF this fall as an exclusive hydration partner.

When you hit the red carpet this year, you have a look at Flow OG and Sparkling at TIFF’s theaters and venues. We have said a couple of times that we are experiencing increased demand of the Flow branded water. If you have joined the web by webcast, you’ll see the slide on your screen that shows the results of our most recent consumer survey in 2023. There is a significant gap between our target customer that are aware of the brand and those that have tried. This is the opportunity.

And now that we have working capital infusion to run production and fulfill to full capacity, we think that we can get Flow into the hands of our target consumers that are aware of the brand and that want to be long term customers. We expect our first production run of Flow Sparkly Mineral Water this month and a launch in Foodservice and Natural Food Partners in fiscal Q3. Flow Sparkly is going to be available in our OG and three flavors. It will contain our natural alkaline mineral water, but the aluminum bottles are going to be produced and fulfilled on a contract manufacturer. The aluminum bottles will also reflect our premium brand and maintain our commitment to the environment as the bottles are made from 70% recycled material and use 60% less energy to produce.

Planet Aid co packing is the brand that we created for our co manufacturing business, and our goal is to provide the highest sustainable packaging to all of our customers. As most of you know, we have become licensed for alcohol production to service our beatbox contract and have added an additional fourth line, and we are also making progress in building our fifth line as well. Our fifth line is now currently delivered and being installed with a targeted commissioning in Q4 twenty twenty five. So far this year, Flow has raised $14,300,000 in private placement on a convertible debenture and secured business loans. These funding rounds were required to solidify our working capital position and scale production.

We have plenty of demand for our co packing partners, and we are experiencing unfulfilled demand with the Flow branded products. But we still haven’t had a consistent working capital level to fund materials, people and infrastructure. These financing rounds will go a long way to scale our manufacturing in the quarters to come. We are very excited to welcome Paul as our Chief Financial Officer. Paul officially joined Flow’s team today with twenty five years’ experience as a hands on operator finance executive.

Paul’s experience includes three years at Ice River Springs, an Ontario based vertically integrated bottled water manufacturer serving Canada and The United States and has experience in the alcohol sector as well with Ontario based Diamond States wines. Paul brings an experience in high growth founder led businesses and has exposed to and it has exposure to public companies. I think Paul is a great fit for Flow, and we are keen to get to work and to achieve our financial goals. With that, I’ll turn the call over to Paul.

Paul Dualdol, Chief Financial Officer, Flow Beverage Corp: Thank you, Nicholas.

Sean MacKowen, Analyst, ROTH Capital Partners: I’m very excited to

Paul Dualdol, Chief Financial Officer, Flow Beverage Corp: be joining the Flow team. Having spent some time in the water business and having frequented many retailers where the Flow brand is prominently displayed, I was well aware of the Flow brand before joining the company. My tenure in the water business was predominantly in recycled PET plastics, and I think there’s a big opportunity in the Tetra Pak format given the movements towards sustainable consumer packaged goods. Having had a chance to learn a bit more about Flow, I saw an opportunity to roll up my sleeves and to help fine tune our processes so that this business can scale profitably. Manufacturing to me is about counting every penny and optimizing processes until you find the formula that works.

Has made a lot of progress in the last couple of years, but it’s clear to me that the best is yet to come. Now turning to our financial results for Q2 twenty twenty five. Consolidated net revenue was 10,000,000 Flow branded net revenue was down to prior year because of the exit of unprofitable contracts and the temporary disruptions to production and fulfillment due to the working capital constraints we recently experienced. As Nicholas mentioned, our recent funding round should make a material impact, returning the Flow brand to growth. Planet Aid co pack revenue was up 28% to last year, and we continue to see high demand from our co pack partners.

Gross margin of 23% was down due to the decrease in consolidated net revenue. Lower production volumes have resulted in increased overhead absorption in the quarter, thus increasing our cost of revenue. Once we return to higher production levels and net revenue growth, we expect to see the benefits of operating leverage. Included in the gross margin numbers is $200,000 of inventory write offs for the quarter. Looking at overhead expenses, sales and marketing is down due to lower promotional activity tied to the temporary disruption in flow brand production fulfillment.

There were also marketing rebates in the quarter totaling $300,000 General and administrative expenses were consistent with last year. And similar to last quarter, salaries and benefits are up given the recent investments in The U. S. Sales staff. All in all, adjusted EBITDA improved by $05,000,000 relative to Q2 twenty twenty four.

Adjusted EBITDA profitability and positive cash flows remain the long term financial goals for Flow. To accomplish this, we need to return Flow to growth in branded revenue. Now that we have our working capital infusion, we can push in conventional and natural grocery and move ahead with our launch of Flow Sparkling in Canada. To that end, foodservice remains a key pillar of our growth, and we have Starbucks Canada expanding its SKU set by listing the seven fifty milliliter OG in the coming months. Second, our plan a day co pack business remains a profitable source of revenue with ongoing demand from our partners.

And lastly, we continue to hold the line on operating expenses in order to drive our adjusted EBITDA towards profitability. And with that, operator, please open the line for questions.

Conference Call Operator: Thank you. And your first question comes from the line of Sean MacKowen with ROTH Capital Partners. Please go ahead.

Sean MacKowen, Analyst, ROTH Capital Partners: Good morning, Nick, and pleasure to meet you by phone, Paul. Question I have to start is, could you give a little bit more color on the temporary disruptions? Was it all about working capital? Or were there some other factors in there?

Nicolas Reichenbach, Founder and Chief Executive Officer, Flow Beverage Corp: Yes. The main issue was working capital with the Flow branded product. We started to run out of stock in Q2, specifically February, March, April, and started to correct it with the financing that we received to meet all of the Flow branded product demand throughout the summer and fall.

Sean MacKowen, Analyst, ROTH Capital Partners: And do you feel like you were able to hold on to the placements that you have at retail, Nick?

Nicolas Reichenbach, Founder and Chief Executive Officer, Flow Beverage Corp: Sean, this is the best part of flow, which is the brand strength, both in Canada and The U. S, and the consumer demand has never been stronger. So throughout this period, the unfortunate period of running out stock in certain retailers, only created more demand for the product when we reentered it back in. So to date, we have not lost a single listing or phasing in any of our retail partnerships, both in Canada and The U. S.

So we expect a very busy summer as we refill all of those stocks and launch our summer promotions.

Sean MacKowen, Analyst, ROTH Capital Partners: That’s good to hear. And then could you provide a little bit more color on the gross margin pressure? How much of that was absorption? Or were there some other factors in there?

Nicolas Reichenbach, Founder and Chief Executive Officer, Flow Beverage Corp: It was a lot to do with absorption. As you know, Sean, our largest selling SKU for flow is our one liter, and we have a dedicated line for our one liter production here in Aurora, Ontario. And without running that line to its full capacity, which is of the norm, that made the underutilization go up and our gross margins go down. So I envision this to be very temporary because the Flow brand is coming back online, and that machine will be running 20 fourseven throughout the summer to restock all of our shelves and then come back to the normalized Flow branded production, which brings a utilization of above 80% on that line.

Sean MacKowen, Analyst, ROTH Capital Partners: Great. Thank you. And my last question for now is, I know this is not related to the second quarter, but can you talk a little bit about any potential impact from the UNFI disruptions that we’ve seen?

Nicolas Reichenbach, Founder and Chief Executive Officer, Flow Beverage Corp: We haven’t had any experiences with the disruption in UNFI. And from our communication with them, we don’t see any perceived issues with logistics. In fact, we’re moving towards more volume shipments with them, which means full truckloads, lower cost to serve and faster route to market.

Sean MacKowen, Analyst, ROTH Capital Partners: That’s good to hear. Okay. Thank you very much.

Nicolas Reichenbach, Founder and Chief Executive Officer, Flow Beverage Corp: Thanks, Sean. Have a great week.

Sean MacKowen, Analyst, ROTH Capital Partners: And

Conference Call Operator: we have no further questions at this time. Ladies and gentlemen, this now concludes today’s conference call. Thank you all for joining. You may now disconnect.

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