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Q3 2021 Financial Results

Diamond Estates Wines & Spirits Reports Q3 2021 Financial Results

Growth in revenue and EBITDA despite continuing negative impact of COVID-19 pandemic

February 24, 2021, Niagara-on-the-Lake, Ontario – Diamond Estates Wines & Spirits Inc. (“Diamond Estates” or “the Company”) (DWS-TSX Venture) today announced its financial results for the three and nine-month periods ended December 31, 2020 (“Q3 2021” and “YTD 2021” respectively).

Q3 2021 Summary:
  • Revenue increased slightly to $7.0 million, from $6.9 million in the three months ended December 31, 2019 (“Q3 2020”). Revenue in the agency division increased by 24.5%. This more than offset lower revenue in the winery division attributable to the negative impact of COVID-19, which resulted in reduced operations for most private retail and on-premise accounts nationally;
  • Gross margin was $2.9 million, or 41.8% of revenue, compared to $3.0 million, or 43.5% of revenue, in Q3 2020. Lower gross margin primarily reflects a revenue decline in high-margin trade channels and a shift in consumer preference to lower-margin brands during the pandemic;
  • EBITDA increased to $0.3 million, from negative $0.3 million in Q3 2020, primarily reflecting a $0.7 million reduction in selling, general and administrative (“SG&A”) expenses, partially offset by the small reduction in gross margin;
  • Net loss was $0.5 million, compared to a net loss of $1.3 million in Q3 2020;
  • Cash flow from operating activities for YTD 2021, before changes in non-cash working capital items, was ($0.1) million, compared to ($0.9) million in Q3 2020, reflecting a reduced net loss in YTD 2021;
  • The Company maintained its strong #2 position in the emerging Ontario grocery channel amongst VQA wines, with 20 Bees representing three of the top 20 selling stock keeping units. Josh Cellars Cabernet Sauvignon continues to be the top selling imported red wine over $15, with sales volumes growing more than four-fold year-over-year;
  • As a result of COVID-19, the Company continued to see a shift in wine volume sales, particularly in Ontario, from traditional retail channels to the grocery, on-line, direct delivery and curbside retail channels; and
  • On October 26, 2020, the Company closed on a $2.75 million term loan through its primary lender facilitated under the federal government’s Business Credit Availability Program (the “BCAP Loan”). The BCAP Loan has an interest rate of 1.25% above prime, extends to July 1, 2022 to align with the Company’s credit agreement, has an annual guarantee fee of 1.8% of the amount of the original loan, and is 80% guaranteed by Export Development Canada.

“We were very pleased to generate year-over-year growth in revenue and EBITDA in the
seasonally strong December quarter, despite the difficult market conditions. This performance demonstrates that we continue to adapt effectively to the challenges created by COVID-19,” said Murray Souter, President and CEO of Diamond Estates. “While the pandemic negatively impacted revenue and margins in our winery division during the quarter, we had strong revenue growth in our agency division and reduced SG&A costs by 21.5%. This combination resulted in much stronger EBITDA.”

“With our solid balance sheet, strong operating platform and strategic partnership with Lassonde Industries, we are well positioned to seek out further growth opportunities and gain market share as the pandemic subsides. We believe the future for Diamond Estates is very exciting.”

About Diamond Estates Wines and Spirits Inc.

Diamond Estates Wines and Spirits Inc. is a producer of high-quality wines and a sales agent for over 120 beverage alcohol brands across Canada. The Company operates two wineries, one in Ontario and one in British Columbia, that produce predominantly VQA wines under such wellknown brand names as 20 Bees, EastDell, Lakeview Cellars, Dan Aykroyd, Fresh, McMichael Collection, Seasons, Serenity, and Backyard Vineyards. 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 Josh wines from California, Fat Bastard and Andre Lurton wines from France, Kaiken wines from Argentina, Blue Nun wines from Germany, Francois Lurton wines from France and Argentina, Felix Solis wines from Spain, Waterloo Brewing from Canada, Landshark Lager from the USA, Marston's beers from England, Edinburgh Gin from Scotland, Tamdhu, Glengoyne and Smokehead single-malt Scotch whiskies, Barcelo Rum from the Dominican Republic, C.K. Mondavi & Family wines including Charles Krug from Napa, Bols Vodka from Amsterdam, Koyle Family Wines from Chile, Pearse Lyons whiskies and gins from Ireland, Niagara Craft Distillers’ beverages from Ontario, Fontana di Papa wines from Italy, and certain Heineken International beer brands, including Tiger from Singapore, Red Stripe and Dragon Stout from Jamaica and Gosser and Kaiser from Austria.

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 "EBITDA" as a measure to assess performance of the Company. EBITDA is another financial measure and is reconciled to net income (loss) and comprehensive income (loss) under "Results of Operations" in the Company’s MD&A.
EBITDA is a supplemental financial measure to further assist readers in assessing the Company’s ability to generate income from operations before taking into account 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. Gross margin is defined as gross profit excluding depreciation on property, plant and equipment used in production. Operating expenses excludes interest, depreciation on property, plant and equipment used in selling and administration, and amortization of intangible assets.

EBITDA does not represent the actual cash provided by the operating activities nor is it a recognized measure of financial performance under IFRS. Readers are cautioned that this measure should not be considered as a replacement for those as per the unaudited interim condensed consolidated financial statements prepared under IFRS. The Company's definitions of this non IFRS financial measure may differ from those used by other companies.

For more information, please contact:

J. Murray Souter                                                      
President & CEO                                                      
Diamond Estates Wines & Spirits Inc.                                     
905.641.1042 Ext 234 
Geoff Kritzinger, CPA, CA
Interim CFO
Diamond Estates Wines & Spirits Inc.

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.

Diamond Estates Wines & Spirits LTD

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