Mr. Andrew Howard reports

DIAMOND ESTATES WINES & SPIRITS REPORTS Q2 2024 FINANCIAL RESULTS

Diamond Estates Wines & Spirits Inc. has released its financial results of position for the three and six months ended Sept. 30, 2023 (Q2 2024 and YTD (year to date) 2024, respectively).

Q2 2024 summary:

• Revenue for Q2 2024 was $7.8-million, a decrease of $1.4-million from $9.2-million in Q2 2023. The decrease in sales year over year resulted from the winery experiencing a decrease in sales of $900,000 and the agency division by $500,000. The declines in the winery division were driven by excise taxes of $200,000 and a decrease in sales across several channels, including exports, liquor boards, grocery and on-site retail. The decline in the agency division was primarily driven by softness experienced in Western Canada;
• Gross margin (1) for Q2 2024 was $3.1-million, a decrease of $500,000 from $3.6-million in Q2 2023, while gross margin as a percentage of revenue was 39.6 per cent for Q2 2024, compared with 38.7 per cent in Q2 2023. However, when factoring the adjustments to cost of goods sold for the fair value of EWG inventories sold, gross margin for Q2 2024 remained unchanged, while Q2 2023 was $3.8-million and 41.1 per cent of revenue. The decrease in gross margins for the period was from the winery experiencing a decrease of $400,000 and the agency division by $100,000. When considering the non-recurring impacts of the inventory provision and net impact of the excise tax and winery support program gross margin as a percentage of sales increases from 39.6 per cent to 44.1 per cent in Q2 2024.
• EBITDA (earnings before interest, taxes, depreciation and amortization) (1) decreased by $300,000 to negative $800,000 in Q2 2024 from a negative $500,000 in Q2 2023. However, when adjusting for the fair value of EWG inventories sold, adjusted EBITDA declined by $500,000 when comparing Q2 2024 with Q2 2023. After considering the non-recurring impacts of the inventory provision and net impact of the excise tax and winery support program, EBITDA increased from negative $800,000 to negative $500,000.
• Net loss was $2.3-million, compared with a net loss of $1.4-million in Q2 2023.

Subsequent events:

• On Nov. 1, 2023, the company has entered into a business collaboration agreement between its commercial division, Trajectory Beverage Partners, and Renaissance Wine Merchants Ltd. to augment each party's capabilities in Western Canada.
• On Nov. 14, 2023, the company closed a previously announced non-brokered private placement through the issuance of 20 million common shares to Lassonde Industries Inc. at an issue price of 45 cents per common share for an aggregate purchase price of $9-million.
• On Nov. 14, 2023, the company entered into a second amendment to its second amended and restated credit agreement with Bank of Montreal;
• The company received an additional $933,802 in Q3 2024 under the wine sector support program.

"After improving results in the first quarter, the second quarter has seen the broad impact of continued consumer confidence issues, global economic challenges and restrained spending on beverage alcohol at both retail and on premise," said Andrew Howard, president and chief executive officer.

"The new investment by our largest shareholder (Lassonde Inc.) is a critical element in our debt reduction strategy and demonstrates their confidence in the future of our business. The clear mandate is to drive top-line growth, reduce costs and continue to improve our balance sheet," says Mr. Howard.

"I am very pleased with the collaboration we have formed with Renaissance Wine Merchants in Western Canada, which has resulted in 60 per cent more sales representatives on the road. This bodes well for the work we are doing to form a national merged entity together. We see tremendous growth opportunities with our combined agency portfolio and several new business wins that will help offset the recent loss of a large supplier."

About Diamond Estates Wines and Spirits Inc.

Diamond Estates Wines 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 such brand names 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 Canadian provinces. These recognizable brands include 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, Storywood and Cofradia Tequilas from Mexico, Maverick Distillery spirits (including Tag Vodka and Barnburner Whisky) from Ontario, Magnum Cream Liqueur from Scotland, Talamonti and Cielo wines from Italy, Catedral and Cabeca de Toiro wines from Portugal, Waterloo Beer & 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 & Charles Krug, from Napa, Wize Spirits, Hounds Vodka and Valley of Mother of God Gins from Canada, Bols Vodka from Amsterdam, Collective Arts beers, spirits and RTDs from Ontario, Koyle Family Wines from Chile, and Pearse Lyons whiskies and gins from Ireland.

(1) A non-IFRS (international financial reporting standards) financial measure.

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