ADW.B Andrew Peller Ltd

Andrew Peller Limited (TSX: ADW.A / ADW.B) (“APL” or the “Company”) announced today results for the three months ended June 30, 2024. All amounts are expressed in Canadian dollars unless otherwise stated.

FIRST QUARTER 2025 HIGHLIGHTS

• Revenue was $99.5 million, compared with $100.5 million in the prior year;
• Gross margin of 38.4%, consistent with the prior year;
• EBITA increased to $12.9 million, from $12.7 million in Q1 2024; and
• Net loss of $0.4 million ($0.01 per Class A Share), compared to $0.9 million ($0.02 per Class A Share) in Q1 2024.

“Our operating results were largely consistent year over year, as our significant work on cost savings initiatives and operational efficiencies has enabled us to generate solid EBITA performance through a period of softer market conditions across the industry,” said Paul Dubkowski, Chief Executive Officer. “The breadth of our brand portfolio and sales channels allowed us to mitigate the impact of these conditions and continue to meet the evolving tastes and preferences of our consumers. Heading into our typically busier second and third quarters, including at our award-winning estates, we remain focused on growing sales in our key brands while also introducing new products both in our core wine segment and other growth categories, building on our company’s history of innovation. These initiatives support our objective to deliver above-category sales performance, combined with further margin expansion and EBITA growth.”

Financial Highlights(Financial Statements and the Company’s Management Discussion and Analysis for the period can be obtained on the Company’s web site at ir.andrewpeller.com)

For the three months ended June 30, (in $000, except per share amounts)		2024			2023
Revenue		$ 99,465			$ 100,481
Gross margin (1)		38,179			39,028
Gross margin (% of revenue)		38.4%			38.8%
Selling and administrative expenses		25,320			26,328
EBITA (1)		12,859			12,700
Interest		4,580			4,284
Net unrealized loss on derivative financial instruments		218			631
Loss on debt extinguishment and financing fees		-			2,172
Other expenses		296			1,217
Net loss		(375)			(931)
Loss per share – basic and diluted - Class A		$(0.01)			$(0.02)
Loss per share – basic and diluted - Class B		$(0.01)			$(0.02)
Dividend per share – Class A		$0.0615			$0.0615
Dividend per share – Class B		$0.0535			$0.0535

(1) Please refer to the Company’s MD&A concerning “Non-IFRS Measures”

Financial Review

Revenue for the three months ended June 30, 2024 decreased 1.0% over the prior year period. Several of the Company’s well-established trade channels performed well with solid growth of sales to provincial liquor stores, restaurants and hospitality locations, as well as sales from the Company’s personal wine making business. This was offset by softness in sales from the estates and wine clubs due to lower guest traffic as well as reduced consumer discretionary spending due to tightening economic conditions. In the first quarter of fiscal 2025, the Company recognized $3.2 million relating to the revised Ontario VQA Support Program announced in December 2023.

Gross margin as a percentage of revenue was 38.4% for the three months ended June 30, 2024, compared to 38.8% in the year prior. This is due to softness in sales from high-margin channels, such as the estates and wine clubs, as well as continuing cost pressures impacting the cost of imported wine, glass, and international freight and shipping charges. In response to these margin pressures, the Company has executed numerous production efficiency and cost savings programs aimed at enhancing operating margins including the renegotiation of inbound and outbound freight rates and alternate sourcing for glass bottles, which will improve margin going forward.

As a percentage of revenue, selling and administrative expenses was 25.5% in the first quarter of fiscal 2025, down from from 26.2% in the prior year due primarily to compensation optimization at the Company’s retail stores and estate wineries, and rationalization of marketing spend in line with current market conditions.

Earnings before interest, amortization, loss on debt extinguishment and financing fees, net unrealized gains and losses on derivative financial instruments, other (income) expenses, and income taxes (“EBITA”) (see “Non-IFRS Measures” section of this MD&A) increased to $12.9 million for the three months ended June 30, 2024, compared to $12.7 million in the prior year.

Interest expense for the three months ended June 30, 2024 increased $0.3 million compared to prior year due to a higher average debt balance through the first quarter of fiscal 2025.

As a result of these factors, the Company incurred a net loss of $0.4 million ($0.01 per Class A share) for the three months ended June 30, 2024 compared to $0.9 million ($0.02 per Class A Share) in the prior year.

Investor Conference CallThe Company will hold conference call to discuss the results on Thursday, August 8, 2024 at 10:00 a.m. ET. Paul Dubkowski, CEO and Patrick O’Brien, President and CCO, will host the call, with a question and answer period following management’s presentation.

Conference Call Dial In Details:
Date:	Thursday, August 8, 2024
Time:	10:00 a.m. (ET)
Dial-in numbers:	Local Toronto / International: (289) 819-1350North American Toll Free: (800) 836-8184
Webcast:	A live webcast will be available at ir.andrewpeller.com
Replay:	Following the live call, a recording will be available on the Company’s investor relations website at ir.andrewpeller.com

About Andrew Peller LimitedAndrew Peller Limited is one of Canada’s leading producers and marketers of quality wines and craft beverage alcohol products. The Company’s award-winning premium and ultra-premium Vintners’ Quality Alliance brands include Peller Estates, Trius, Thirty Bench, Wayne Gretzky, Sandhill, Red Rooster, Black Hills Estate Winery, Tinhorn Creek Vineyards, Gray Monk Estate Winery, Raven Conspiracy, and Conviction. Complementing these premium brands are a number of popularly priced varietal offerings, wine-based liqueurs, craft ciders, and craft spirits. The Company owns and operates 101 well-positioned independent retail locations in Ontario under The Wine Shop, Wine Country Vintners, and Wine Country Merchants store names. The Company also operates Andrew Peller Import Agency and The Small Winemaker’s Collection Inc., importers and marketing agents of premium wines from around the world. With a focus on serving the needs of all wine consumers, the Company produces and markets premium personal winemaking products through its wholly owned subsidiary, Global Vintners Inc., the recognized leader in personal winemaking products. More information about the Company can be found at ir.andrewpeller.com.

The Company utilizes EBITA (defined as earnings before interest, amortization, loss on debt extinguishment and financing fees, net unrealized gains and losses on derivative financial instruments, other (income) expenses, and income taxes) to measure its financial performance. EBITA is not a recognized measure under IFRS. Management believes that EBITA is a useful supplemental measure to net earnings, as it provides readers with an indication of earnings available for investment prior to debt service, capital expenditures, and income taxes, as well as provides an indication of recurring earnings compared to prior periods. Readers are cautioned that EBITA should not be construed as an alternative to net earnings (loss) determined in accordance with IFRS as indicators of the Company’s performance or to cash flows from operating, investing, and financing activities as a measure of liquidity and cash flows. The Company also utilizes gross margin (defined as revenue less cost of goods sold, excluding amortization). The Company’s method of calculating EBITA and gross margin may differ from the methods used by other companies and, accordingly, may not be comparable to measures used by other companies.

Andrew Peller Limited common shares trade on the Toronto Stock Exchange (symbols ADW.A and ADW.B).

FORWARD-LOOKING INFORMATIONCertain statements in this news release may contain “forward-looking statements” within the meaning of applicable securities laws including the “safe harbour provisions” of the Securities Act (Ontario) with respect to APL and its subsidiaries. Such statements include, but are not limited to, statements about the growth of the business; its launch of new premium wines and craft beverage alcohol products; sales trends in foreign markets; its supply of domestically grown grapes; and current economic conditions. These statements are subject to certain risks, assumptions, and uncertainties that could cause actual results to differ materially from those included in the forward-looking statements. The words “believe”, “plan”, “intend”, “estimate”, “expect”, or “anticipate”, and similar expressions, as well as future or conditional verbs such as “will”, “should”, “would”, “could”, and similar verbs often identify forward-looking statements. We have based these forward-looking statements on our current views with respect to future events and financial performance. With respect to forward-looking statements contained in this news release, the Company has made assumptions and applied certain factors regarding, among other things: future grape, glass bottle, and wine and spirit prices; its ability to obtain grapes, imported wine, glass, and other raw materials; fluctuations in foreign currency exchange rates; its ability to market products successfully to its anticipated customers; the trade balance within the domestic Canadian and international wine markets; market trends; reliance on key personnel; protection of its intellectual property rights; the economic environment; the regulatory requirements regarding producing, marketing, advertising, and labelling of its products; the regulation of liquor distribution and retailing in Ontario; the application of federal and provincial environmental laws; and the impact of increasing competition.

These forward-looking statements are also subject to the risks and uncertainties discussed in this news release, in the “Risks and Uncertainties” section and elsewhere in the Company’s MD&A and other risks detailed from time to time in the publicly filed disclosure documents of Andrew Peller Limited which are available at www.sedarplus.ca. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties, and assumptions which could cause actual results to differ materially from the conclusions, forecasts, or projections anticipated in these forward-looking statements. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. The Company’s forward-looking statements are made only as of the date of this news release, and except as required by applicable law, the Company undertakes no obligation to update or revise these forward-looking statements to reflect new information, future events or circumstances.

For more information, please contact:Craig Armitage and Jennifer Smithir@andrewpeller.com

Source: Andrew Peller Limited