Welcome to the annual meeting of shareholders of Flow Beverage Corp. Please note that the meeting is being recorded. I would like to introduce Mr. Nicholas Reichenbach, Executive Chairman and Chief Executive Officer of the corporation. Mr. Reichenbach, the floor is yours.
Thank you. Good afternoon. It is now 1:00 P.M. The meeting will now come to order. I'm Nicholas Reichenbach, Executive Chairman and Chief Executive Officer of the corporation. I will act as chairman of this meeting. On behalf of the board of directors, all of whom are in attendance today virtually, I welcome you to the annual meeting of the shareholders of Flow Beverage Corp. Once again, this year, we are conducting the meeting virtually.
Please bear with us if we encounter technical difficulties with the platform during the meeting. We'll move quick, as quickly as possible in order to resolve them. I've asked Mathieu Socque, the company's General Counsel and Corporate Secretary, to act as the secretary during the meeting. I ask Lori Winchester of the TSX Trust to act as the scrutineer.
If anything should happen to my internet connection during the meeting, the secretary will continue to conduct all formal meeting business until my connection is reestablished. As you will note from our manager information circular and notice calling the meeting, we have three items of business to conduct today. Votes will be conducted electronically through the meeting. Please pay attention to your screen to participate. All polls will remain open until polls are instructed to close.
To make the best use of our time, certain people have been asked to move the resolution as we will be considering. As this meeting is being held online via live webcast, it is appropriate to set out a few rules of online participants for orderly conduct of this meeting. For the purpose of the meeting, voting of all matters will be conducted by electronic ballot.
Voting will be open upon commencing of the formal portion of the meeting and will remain open for you to vote at all times during the poll until they're closed. We may choose to vote on each resolution immediately or wait until the conclusion of the discussion on all resolutions prior to the casting your vote. When you are asked to vote, once voting is declared open, shareholders can click the Voting button on the left menu to start voting.
You will only have a certain amount of time to do so while the polls are open. If you are a registered shareholder and have already voted by proxy prior to the proxy cutoff time and do not wish to change or revoke your previous vote, please do not vote again when the ballots appear on your screen. By voting again, you will revoke your previous vote.
Notice of this meeting was sent to all shareholders of record as of the close of business March 29th, 2023. I direct that the copy of the notice with the proof of mailing be kept as a record of this meeting. I now direct the secretary to read the notice calling the meeting, unless I have a motion to dispense of this reading.
I move that the reading of the notice calling this meeting be dispensed with. May I have a second motion?
I second the motion.
Thank you. I am advised that the requisite number of shareholders for a quorum is present. The notice calling the annual meeting of the shareholders and the accompanied management information circular, form of proxy, financial statements of the corporation, and auditor's report were mailed to all security holders of the corporation entitled to receive the notice and were filed on SEDAR on 30th January 2023, as it pertains to the financial statements of the auditor's report on and on 29th March 2023 for the proxy materials. As notice of the meeting has been given in accordance to the articles of incorporation and bylaws of the corporation, and we have quorum, I now declare that this meeting has been properly called and is regularly constituted for the transaction of business.
We have received the preliminary scrutineer's report, which indicates that the requisite number of shareholders have voted by proxy in favor of each of the resolutions to be brought before this meeting. The resolution requires majority of the voting cast. The final scrutineer's report will be annexed to the minutes of this meeting. I direct that the scrutineer's report of the attendance be attached to the meeting also. Before starting the meeting, I have the following comments on voting procedure. Each shareholder is entitled to 10 votes for each multiple voting share and one vote for each subordinate voting share held by the shareholder in respect to all matters to come before the meeting. To be effective, all resolutions require the affirmative vote of a majority of the votes casted.
We will conduct the votes in the matter before us by a poll. The poll will be open to all resolutions at the same time. This will allow you to choose to vote on each of the resolutions immediately or wait until the conclusion of the discussion on all resolutions prior to casting your vote. Once the discussion of all items of business has concluded, I will give time to enter your votes and then declare the voting closed on all resolutions.
As a result, for the meeting will be publicly released and available on our website after the meeting is concluded. I now instruct the scrutineer to open the polls for all resolutions. I now place before the meeting the financial statements of the corporation as at and for the year ending 31st October 2022, together with the auditor's report to the shareholders.
Copies of these documents are also available for review on SEDAR. As the financial statements have been delivered to all shareholders with the notice of this meeting, I would ask someone to move that the reading of the financial statements and the auditor's report be dispensed with.
I so move. I second the motion. Sorry, Neil. No worries.
Thank you. The next item of business to be considered and to be resolved is the election of the directors of the corporation. The directors will hold office until the close of business of the next annual meeting of the corporation's shareholders. The articles of the corporation provide for a minimum of 1 and a maximum of 10 directors.
There are presently five, and the number of directors to be elected at this meeting will be fixed at five. In accordance to the corporation's advanced notice provisions and as described in the management information circular, the following individuals have been nominated and are present to be elected as directors. Nicholas Reichenbach, Patrick Bousquet-Chavanne, Stephen A. Smith, Michael Lines, and Joe Jackman.
In accordance with the board of directors majority voting policy, if any of the nominees receives four vote, fewer than the majority of the voting cast in respect to his election, he will be immediately tender his resignation to the board of directors. May I have a motion that nominates be presented for election of the board of directors?
I so move. I second the motion.
Please cast your votes for or against each of the nominees in the poll. I now instruct the polls to be closed.
Mr. Chair, the polls are now closed.
Thank you. The scrutineer has closed the polls and will compile the votes. On the second item of business pertaining to the election of the directors of the corporation, I declare the motion carried, and it is resolved that the nominees have been duly elected as directors of the corporation. On the third item of business pertaining to the appointment of Ernst & Young LLP as our auditors of the corporation, I declare the motion carried, and it is resolved that Ernst & Young LLP have been appointed as the auditors.
I so move.
Thank you.
Second.
As there is no further business brought to the meeting, that concludes the formal part of the meeting, and I thank you for taking the time to attend. The secretary will move for final resolution.
I move that the meeting be terminated. May I have a motion? The motion seconded. I second the motion.
Excellent. That concludes the meeting. Now on to the fun stuff. Our Chief Financial Officer, Trent MacDonald, and I will take you through the presentation, highlighting the corporation's achievement up to the end of and including the first fiscal quarter ending 31st January 2023, and provide you an update on our recent strategic milestones. Excellent. Thank you.
trust for concluding the first part of the meeting, we'll proceed.
Good afternoon, everybody. Thank you for joining us. We are delighted to provide you with an update on our business with recent milestones and our go-forward strategy. Flow is an invigorated company. We are transforming. We have a strong suite of products. We have the highest growth rates the company's ever had, and we're maintaining our world-class ESG standards. We are leaner and meaner, and we have cash in the .
My positive outlook is due to the strategic changes Flow has made in the past year. As most of you know, sold Virginia facility, production facility in November 2022. This provided us with a cash injection, a reduction in certain liabilities, and provided us more certainties with our margins and cost of goods sold.
We took the step away from production and warehousing operations to dedicate more resources to what we are really good at, building the Flow brand. To bolster our balance sheet, earlier in the calendar year 2023, we also secured a CAD 20 million credit facility and drew CAD 15 million against it. Due to these recent strategic changes, our financial position has improved considerably. We have cash of CAD 26 million as of 31st January 2023.
Our gross margins increased to 30%, which is a 4% increase year-over-year. We have demonstrated an improvement in most of our operating expense lines, particularly salaries and benefits. Most importantly, the Flow brand net revenue grew 40% in Q1, 2023. This growth was driven from the increased revenue of our club channels and our advancement in food service, both in Canada and the United States.
Vitamin Infused Water has outperformed our expectations. All these signs are positive for the year ahead. Flow is sold in 51,000 stores. This is a 67% increase from last year. Our biggest additions to the store count have been our club channels and mass channels with household names like Dollar General, Family Dollar, and Costco.
We have also added an additional 2,000 Albertsons Safeway Vons stores in the US market, which is the second largest grocery chain. This growth in store count, as well as product innovation and growth in our food service business, has led Flow's branded growth over 35% in four of the last five quarters. In Q2 2022, many CPG companies experienced lower sales rate as retail work through excessive inventory. That had nothing to do with Flow and our value proposition.
What we are seeing in today's market with retailers, food service companies, and consumer, is that the demand for environmentally friendlier products has never been higher. Flow hits that on the head. As I mentioned earlier, our Vitamin-Infused product launch is going fantastic. If you have not tried the Vitamin-Infused line, go to flowhydration.com to see our full suites of product. That's my sales pitch. Our Canadian launch includes 22 retailers in over 800 locations.
Today, our Vitamin-Infused Water is carried in over 1,900 locations in Canada. Most recently, we have received purchase orders from MacEwen and Quickie gas and convenience stores to the Vitamin-Infused brand to over 180 locations across Ontario and Quebec. This will bring our Canadian store carrying Flow Infused product to well over 2,000.
In the US, we have activated all of our pipeline, and we expect to hit over 200 stations in . We have only begun the roll out of our Vitamin Infused Water product line. We expect to add more retail partners throughout the year, and we also expect to announce new production innovations in the near fiscal 2023. Now, I'll pass it off to Trent.
Thank you, Nicholas. I wanna go through our 2022 results. I'll, you know, at the time, which was 31st October 2022, our fiscal year ended, and we are now about to end our second quarter, so it's a bit historical. That being the case, I wanna talk through what that year-end looked like and then jump into Q1 and some of the things that we've done to deliver on the promises and expectations we made to ourselves at the end of the year. Our 2022 results reflected a company in the midst of an operational transformation. One of our priorities was to strengthen the balance sheet, dramatically and dramatically improve our financial position.
While this is going to continue to be an ongoing focus, one of the themes of our Q4 and year-end results was one-time non-recurring items and reserves. We felt it was very important for us to de-risk the entire balance sheet at year-end. Set the organization up for a much cleaner and more profitable 2023. Flow brand net revenue throughout 2022 increased 26%. The primary driver were the successes we had in unlocking new retail stores across North America, while continuing to build momentum within our e-commerce channel.
Our growth rate on a consolidated basis was slightly lower, as our co-packing revenue was impacted by both our focus on the Flow brand, which is most important to us, and by the amendment of a co-pack manufacturing agreement, which became effective 1st May , 2022, partway through the fiscal year, and formed part of the Verona divestiture announced subsequent to the year-end.
This amendment impacted co-pack revenue and gross profit by approximately CAD 2.2 million on a run rate basis in Q4 of 2022. Our gross margin was 19% for fiscal 2022, and our normalized gross margin was 25% when considering the impacts of both that co-pack agreement I just mentioned, and a lot of one-time, one-time adjustments, including a CAD 300,000 inventory reserve associated with the exit of Flow Collagen-Infused Water.
Even normalized n-margin was impacted by the higher relative production volume coming out of the Verona facility. The cost per unit of Flow water and co-packaging was much higher at our at Verona, given it was not running at full capacity, and this increased the overhead costs applied to each and every unit of production. Our EBITDA loss improved, however, 29% for the fiscal year through having lower stock-based compensation and all the cost disciplines that we had initiated.
Coming through to having that, again, that clean balance sheet, or I shouldn't say clean bal but strengthened balance sheet, cleaner P&L, you go through to what Q1 looked like. We made even greater progress de-risking our balance sheet and dramatically improving our financial results at the end of Q1.
As we articulated in our operational update on January 9th, the divestiture of Verona would greatly improve our gross margins, improve operating cash flows, and free up working capital to continue to invest in the Flow brand. As you see in Q1 2023, our gross margins did improve to 30% from 20%, 6% last year, and our operating cash outflows improved $7.2 million or 60% improvement year-over-year as we freed up over $7.5 million in working capital in Q1 2023.
Flow brand revenue growth was 40% in Q1 2023, as we continued to expand across retail, e-commerce, and food service channels. As Nicholas mentioned, the launch of Vitamin Infused Water is also performing better than expected.
Consolidated revenue was down 17%. Again, this decrease in consolidated net revenue was expected because we lost our co-packing revenue out of the Verona production facility. The buyers of that facility were our top co-pack customer in the U.S. we no longer have that revenue stream. Furthermore, while we plan to bring some of the U.S. co-packing business to Canada, this did not take place in Q1 2023. We expect the transition actually to take place in the second half of 2023. Lastly, sorry, last of Q1 2022 results, yeah, also included revenue recognition under take or pay agreements, which did not reoccur in the Q1 of 2023.
Gross margins did improve to 30%, as I mentioned. Our gross margins now reflect a combination of lower predictable cost of goods sold coming out of Verona, in addition to higher capacity utilization in Aurora. While we expect there will be a short-term volatility in margins, given some of our product mix and ongoing cost savings initiatives that we're in the midst of executing against, we anticipate there will be further upside on gross margins over time. EBITDA loss improved to CAD 7 million from CAD 7.99 million the prior year. The big driver in the profitability improvement was stock-based compensation. We also realized year-over-year improvements in salaries and benefits. Included in this CAD 7 million of EBITDA loss is over CAD 500,000 we incurred in restructuring charges.
The point is, look, we feel very encouraged by the fact that we have many levers to pull towards achieving even further profitability growth of the Flow brand. As we move to an asset-light model, we expect to increase gross margin further and attain more certainty and control in all of our expense lines, we think we can do this by delivering continued growth in the Flow brand.
Our most immediate priorities are implementing process changes to logistics, shipping, and warehousing. We have completed a very rigorous evaluation of our current path to market and feel strongly that we can decomplexify this aspect of our business, significantly removing costs. We are now moving into the execution stage and expect to see the results of our efforts before the end of this current fiscal year.
We have also completed a very thorough review of all the other areas of our business and are now moving into the execution stage of a broad-based functional restructuring, again, meant to both simplify our business and remove costs. The result of all this very recent work is that we are now estimating annualized cost improvements of between CAD 20 million and CAD 23 million, up from our previous estimate of CAD 17 million, which again will allow us to invest and focus on the Flow brand driving value for our customers. All of that said, we know we also have to drive value for our shareholders.
Given the dramatically improved financial position and operational progress reflected in our Q1 results, as well as what we've detailed as yet to be accomplished, we feel it's reasonable to compare ourselves to our peer group in terms of relative valuation. Currently, Flow is trading at a 0.3x revenue multiple as compared to our publicly traded beverage peers who are trading at a simple average over 3x revenue and over 5x revenue on a weighted average basis. While we know there were fair, very fair, and tangible reasons for Flow to have this valuation, we do believe with the progress we've made against our strategic initiatives, there remains a great deal of shareholder value left to unlock.
As we continue to strengthen our financial position and hasten the path to both cash flow and EBITDA positivity, it should be pointed out that we are a growth company and have been regularly outpacing the industry average revenue growth rates by a wide margin. Having grown the Flow brand by 40% in Q1 2023, which was the third straight quarter of over 35% growth in Flow-branded net revenue. Given the net revenue to enterprise value associated with our peer group, we believe we can achieve a greater valuation for our shareholders.
To achieve this re-rating in our valuation and to unlock further shareholder value, we are going to continue to articulate and follow a very clear path to profitability. The first step is to continue what we are good at, sales and marketing of the Flow brand, driving Flow brand net revenue growth.
Our brand is very strong and resonates well with consumers as a premium, functional, and environmentally responsible beverage. We still have ample opportunities to grow in North America in the retail and food service sectors, as well as through innovation. As I mentioned earlier, we have many financial levers to pull as well, starting with logistics and shipping, as I spoke to earlier.
We're also going to continue to assess every aspect of our operation to ensure we are allocating resources in the correct places. Third, we are going to continue pursuing an asset-light model. The Verona transaction was an excellent example of unlocking shareholder value. We think there is much more to do to improve our cash position and ultimately reinvest in the Flow brand. With that, I would like to turn it over to Nicholas for some closing remarks.
Mr. Chair, if I may, interrupt the meeting. We need to reconvene the formal portion of the meeting to approve the auditor and the remuneration for the upcoming year. The polls will now be open once again, for the appointment of the auditor.
Excellent. My apologies for missing the poll aspect of the auditors. We'll reopen the formal part of voting on our AGM meeting now. The last item of business to be considered, and if deemed advisable to be resolved, is the reappointment of Ernst & Young LLP as the auditors of the corporation. If reappointed, Ernst & Young LLP will hold office until the close of the next business of the next annual meeting of the shareholders. May I have a motion that Ernst & Young LLP be appointed as the auditor of the corporation until the next annual meeting of the shareholders, and that the directors of the corporation be authorized to fix the remuneration.
I so move. I second.
Excellent. Thank you. Again, apologies. We'll open the poll and let everyone vote. Now I'll instruct the polls to be closed. Excellent. Thank you very much. That concludes our AGM and presentation. Before we log off, we can open it to a Q&A as well to registered shareholders. Trent and I can answer on behalf of the management team and the board of directors.
Mr. Chair, no, we have not received any questions from registered shareholders.
Excellent. That concludes our meeting today. Thank you very much. Have a great Friday and weekend, and we'll see each other for our conversation on Q2 in June. Looking forward to it. Thank you.