Mr. Andrew Howard reports

DIAMOND ESTATES WINES & SPIRITS REPORTS FISCAL Q1 2024 FINANCIAL RESULTS

Diamond Estates Wines & Spirits Inc. has released its financial results for the three-month period ended June 30, 2023.

First quarter 2024 summary:

• Revenue for Q1 2024 was $7.9-million, an increase of $400,000 from $7.5-million in Q1 2023. The largest contribution to the increase in sales year over year came from the winery division, contributing $300,000, and the agency division contributed $100,000. The increase experienced at the winery division came from $800,000 in bulk wine sales at Backyard Vineyards, and the moderate increase from the agency came from several brands.
• Gross margin for Q1 2024 was $2.9-million, a decrease of $100,000 from $3.0-million in Q1 2023, while gross margin as a percentage of revenue was 36.8 per cent for Q1 2024 compared with 40.3 per cent in Q1 2023. The decline is attributed to the winery division, which experienced a decrease in gross margins because of a significant one-time sale in bulk wine, and a general increase in cost of goods across all channels. When accounting for the depletion of the EWG inventory, gross margins decreased by 10.2 per cent from 46.6 per cent in Q1 2023 to 36.4 per cent in Q1 2024, and when removing the bulk wine sale, gross margin decreases to 42.3 per cent Q1 2024.
• EBITDA (earnings before interest, taxes, depreciation and amortization) remained flat at negative $900,000 in Q1 2024 relative to Q1 2023; however, when adjusting for the fair value of EWG inventories sold, adjusted EBITDA decreased from negative $700,000 in Q1 2023 to negative $900,000 in Q1 2024.
• Net loss was $1.6-million, compared with a net loss of $400,000 in Q1 2023.

Subsequent event

On Aug. 22, 2023, the company received notification from its largest supplier of import wines that the contract that was set to expire on Oct. 1, 2023, is not being renewed. Further disclosure is outlined in management's discussion and analysis. The company is still assessing any mitigating actions that may be undertaken and looks to replace that business with a dedicated focus on its current and prospective supplier partners going forward.

President's quote

"We are experiencing an unprecedented time in the beverage alcohol industry here in Canada and around the world. It is extremely rare to see consumers restricting dining out and alcohol consumption more broadly in order to afford the essentials of life," said Andrew Howard, president and chief executive officer.

"This has resulted in softer-than-anticipated top-line results. Combined with continued expense pressure, our bottom line results have not improved versus last year, with EBITDA essentially flat. While we are not satisfied with this result, we are pleased to see revenue growth of 7.5 per cent and offtake results showing our business holding our own or outperforming industry in every major category over the past 12 months. I also believe the soft industry results will be short-lived and that we are well positioned for growth with innovative ideas and products ready to capitalize as the industry rebounds, along with the beverage alcohol retail expansion and modernization that is expected in Ontario."

About Diamond Estates Wines & Spirits Inc.

Diamond Estates is a producer of high-quality wines and ciders, as well as a sales agent for over 120 beverage alcohol brands across Canada. The company operates five production facilities -- four in Ontario and one in British Columbia -- that produce predominantly VQA wines under brand names such as 20 Bees, Creekside, EastDell, Lakeview Cellars, Mindful, Queenston Mile, Shiny Apple Cider, Fresh, Proud Pour, Red Tractor, Seasons, Serenity, Persona 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, Meffre, Pierre Chavin and Andre Lurton wines from France, Brimincourt champagne from France, Merlet and Larsen cognacs from France, Kaiken wines from Argentina, Blue Nun and Erben wines from Germany, Calabria Family Estate wines and McWilliams wines from Australia, Saint Clair Family Estate wines and Yealands Family wines from New Zealand, Redemption bourbon and rye whiskies from the United States, Gray Whale gin from California, Storywood and Cofradia tequilas from Mexico, Magnum cream liqueur from Scotland, Talamonti and Cielo wines from Italy, Catedral and Cabeca de Toiro wines from Portugal, Waterloo beer and radlers from Canada, Landshark lager from the United States, Edinburgh gin, Tamdhu, Glengoyne and Smokehead single-malt Scotch whiskies from Scotland, Islay Mist, Grand MacNish and Waterproof whiskies from Scotland, C. Mondavi & Family wines, including C.K. Mondavi and Charles Krug from Napa, Wize spirits, Hounds vodka and Valley of Mother of God gins from Canada, Bols vodka from Amsterdam, Koyle Family wines from Chile, and Pearse Lyons whiskies and gins from Ireland.

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