Flow Beverage Corp

TSX:FLOW

Earnings Call Transcript 2023-Q1

[Operator]

Good morning, everyone. Welcome to Flow Beverage Corp.'s Fiscal Q1 2023 Conference Call. As a reminder, this conference call is being recorded on March 17, 2023.

[Operator Instructions]

Before we begin, we would like to remind you that today's presentation and discussion contains forward-looking statements that involve known and unknown risks and uncertainties and other factors that could cause actual events to differ materially from current expectations and may cause actual results, performance or achievements to be materially different from those implied by such statements.

The forward-looking statements are based upon and include the company's current internal assets, plans, expectations, opinions, forecasts, projections, targets, guidance or other statements that are not statements of fact. Any statements contained herein or discussed during today's session that are not statements of historical facts may be seen to be forward-looking statements. A number of factors could cause actual events, performance or results to differ materially from what is projected in the forward-looking statements. A more complete discussion of the risks and uncertainties facing the company appear in the company's annual information form dated January 29, 2023, and the company's management's discussion and analysis for 3 months ended January 31, 2023, which are available under the company's profile on SEDAR.

You are cautioned not to place undue reliance on these forward-looking statements, which only speak to the date of this presentation. The company disclaims any intention or obligation, except to the extent required by law. To update or revise any forward-looking statements as a result of new information or future events or any reason. Any forward-looking statement contained herein or discussed during today's session is expressly qualified in its entirety by the above cautionary statement.

I will now turn the call over to Nicholas Reichenbach, Chairman and Chief Executive Officer of Flow. Please go ahead, Nicholas.

[Nicholas Reichenbach, executive]

Thank you, operator. Good morning, everyone, and thank you for joining us today. I'm joined today by Trent MacDonald, Flow's Chief Financial Officer. I'll begin today's call with a summary of our recent strategic and operational milestones, and I'll pass it over to Trent to review our financial performance and valuation. We'll then open the call for questions from our analysts.

2023 is off to a great start. We are delivering expected results from our strategic initiatives and operational improvements. We're starting to see proof that the sale of our Virginia facility and our internal restructuring are significantly improving our financial performance. First, we have cash of $26 million at the end of the quarter. Our gross margins are up by 30% or to 30%. This is a 4% improvement over -- year-over-year, and we are demonstrating improvements in our operational expenses, particularly salary and benefits expense.

Secondly, our cash flow improvement has an over 60% improvement from the year-over-year. Most importantly, the Flow branded net revenue increased 40% in Q1 2023. This growth is driven by the increased revenue in the club channel, growth in our food service channel and the launch of our Vitamin-Infused Water, which is outperforming our expectations. These are the signs for the year ahead.

As we mentioned in our operational update call in January 2023, we believe that most of our cost savings are going to come through the second half of this fiscal period as we implement changes to our logistic shipping and warehouse, not to mention were expected strong sales from our seasonal summer hydration period.

Turning to our operational highlights. As you are aware, our big news in Q1 was the sale of our Virginia, Verona production facility for USD 19.5 million. The sale of the production facility is expected to continue to improve our financial performance as we transition to a more asset-light model. We also secured up to $20 million from a senior debt facility, which we have drawn $15 million, which leaves us the option to draw another $5 million.

Our strong momentum in the U.S. retail channel has allowed Flow to maintain its 45% market share in the carton water format and resulting in an 89% increase in store count compared to last year. Flow is now sold in over 46,000 stores.

Turning to our food service. Our most recent contract win has been with Foodsby, which represents a potential 11,000 locations across North America and Starbucks Canada, which added an additional 1,000 locations carrying Flow. We completed the rollout of our Starbucks locations in Canada, our hospitality partners such as Accor and Norwegian Cruise Line are experiencing high sell-through of Flow contributing to the increase in net revenue. We expect to continue traction in the food service as we move forward, primarily due to our positioning as a premium sustainable water choice.

As mentioned earlier, our Vitamin Water launch is going fantastic. We have -- if you have not tried our Vitamin Water, please visit flowhydration.com to see our full suite of products. Our Canadian launch includes 22 retailers in over 800 locations. Most recently, we have gained authorization in over 2,200 locations across Albertsons, Vons, Safeway, the second largest grocer in the U.S. We have only begun our rollout in Vitamin-Infused Water. We expect to add more retail partners throughout the year and are also expecting to launch -- to announce new production innovation in the near term in fiscal '24.

Now I'll pass it over to Trent.

[Trent MacDonald, executive]

Thank you, Nicholas. Now I'd like to start by restating that through the strategic initiatives Nicholas described earlier, we have substantially derisked our balance sheet and have dramatically improved our financial position. As a result, we are now in a position to invest in the Flow brand while also putting ourselves on a path to profitability. As we articulated in our operational update on January 9 as well as on our Q4 earnings call, we expect that the divestiture of Verona would greatly improve our gross margins, improve operational cash flows and free up working capital. From our results released this morning, you will see that we are delivering on these expectations.

As you see in Q1 2023, our gross margins have improved to 30%, up from 26% last year, and operating cash flows improved by 7.2 -- operating cash outflows improved by $7.2 million or a 60% improvement from last year as we freed up over $7.5 million in working capital in Q1 of 2023. The Flow brand revenue growth was 40% in Q1 2023 as we continue to expand across retail, e-commerce and food service channels. As Nicholas mentioned, the launch of Vitamin-Infused Water is also performing much better than expectation.

Consolidated revenue was, however, down 17%. This was due to the expected loss of U.S.-based co-packing revenue with the sale of the Verona production facility. Given the purchasers of that facility, we're our top co-pack customer in the United States, we no longer have that revenue stream as part of our net revenue. Furthermore, while we plan to bring some of the U.S. co-packing business up to Canada, this did not take place in Q1 2023 as we expected it would not. And this instead will be transitioning specifically over the second half of 2023.

Lastly, Q1 2022 results also include revenue recognized under take-or-pay agreements, which did not occur this year. Gross margins improved to 30% in Q1 2023. Our gross margins now reflect a combination of lower predictable cost of goods sold in Verona in addition to higher capacity utilization in our Aurora, Ontario production facility. We are still aggressively working on internal initiatives that we anticipate will provide even further upside to gross margins in the back half of this fiscal year.

EBIT loss improved to $7 million from $7.9 million last year. The big driver in the profitability improvement was the differential in stock-based compensation. But we also realized a lot of year-over-year improvements in salaries and benefits included -- which were all part of our expected cost-saving initiatives in Q1 and further will happen in the following quarters to come. Included in the $7 million EBITDA loss is over $500,000 incurred in restructuring charges, which is part of that plan as we articulated before.

Turning to a more detailed review of our financial results. You can see on Slide 8 that Flow brand net revenue contributed $2 million in growth, while co-packing was down over $4 million. Again, this was expected -- we expect impact from the sale of the Verona, Virginia production facility. Sales and marketing expenses were slightly lower than the prior year as we realized decreases -- decreased costs from trade marketing campaigns.

Looking forward, however, we do anticipate further investments in marketing initiatives as we invest in the Flow brand. We do not want to take our foot off the gas pedal of the Flow brand. General and admin expenses were flat as compared to Q1 2022. As we detailed in our operational update in January, we have gone through an extensive process of identifying cost-saving opportunities throughout all functional areas of the organization, specifically in logistics and distribution.

As we mentioned during that update, we did not anticipate these would be executed upon in Q1 of 2023, but rather our expectation is that we will begin to see the results of these initiatives in the second half of 2023. Salaries and benefits expenses decreased $0.3 million over the last year. Again, we expect further improvements in the second half of 2023. All told, EBITDA loss improved to $7 million from $7.9 million in the prior year. Again, this includes approximately $0.5 million in restructuring charges as we continue to deliver on our restructuring plan internally.

So to reiterate, we have dramatically improved our financial position. We have improved our margins and has significantly decreased our operating cash outflows while putting ourselves in a position to finally speak about our relative valuation against our peer group. Flow was trading at 0.6x our revenue as compared to our publicly traded beverage peers, creating a simple average of between 3 and 5x revenue on a weighted average. We feel -- sorry, 3x revenue, 5x on a weighted average basis. We feel this valuation for Flow does not reflect the progress we have made against our strategic initiatives.

Furthermore, industry average revenue growth rates are in the mid-teens, while Flow brand grew 40% in Q1 2023, which is the third quarter in a row of over 35% growth in the Flow brand net revenue. But look, to achieve every rating in our evaluation, we are going to have to focus on driving growth in the Flow brand, implementing even further efficiencies to improve gross margins and being vigilant in operating expenses. We have begun making selective investments into our IR program to get more investor interest across North America as well. But we know we have to deliver on the expectation that we have set forth to provide a path towards profitability keep a strong financial position. We continue to do that. We believe we will continue to build shareholder value, which is ultimately what we are trying to achieve.

With that, operator, I will open the line for questions.

[Operator]

[Operator Instructions]

Your first question comes from the line of Martin Landry from Stifel GB.

[Martin Landry, analyst]

Nick, my first question, just wanting to touch a little bit on the planogram resets that usually happened this spring. You have visibility now on where you're going to be listed or additional listings and where you're going to be delisted. So I was wondering if you can talk to us a little bit about some of your shelf space gains and some of the places where you're losing some placements or being delisted. Just to get a bit of an idea of what's coming up this spring and the summer in terms of planogram resets for you guys?

[Nicholas Reichenbach, executive]

Yes. Thank you, Martin. As we mentioned on the call, the Vitamin-Infused innovation line that we launched in January and then in the latter half of last year is definitely moving better than expected from a planogram and listing perspective. As we mentioned, our most recent win is our first and largest national listing in grocery with Albertsons, Safeway, Vons carrying all 3 SKUs across all locations, coast to coast in the United States. This is a very large win on a planogram basis because our current OG, which is the non-flavored Flow 500 million 1 liter is not carried across Albertsons, Vons, Safeway.

So this is our first national listing and our innovation penetrated through on a national level due to its previous success with certain Kroger listings in the U.S. and obviously, its amazing profile and functional benefits. So that is going to obviously affect our ACV, all commodity volume trading and the amount of doors that we are in the U.S. in 2023, and we'll continue to sell our original and flavored line through all of the -- all of those channels and hopefully get additional listings within food, drug and mass.

Another major movement that we've seen is within the club channel and last channel with our listings in Dollar General and Dollar Stores, and as I mentioned on our last call, those stores are really picking up a lot of well, lack of a better way of saying steam as they are competing against the club channel in the United States specifically. We are listed in over 10,000 locations in the Mass category in Dollar Stores, and we are not selling at $1 or a value proposition that's less than any of our other mass channels.

So for us, this one leader SKU, which is our largest selling SKU has picked up a substantial amount of distribution in 2023. And we are seeing higher velocities than the category average across all of those channels. So with those 2 listings amounting to 12,000 doors, we're going to see a significant change in the positive to the Flow branded products across food, drug and mass. That's the main category in the United States.

In Canada, we're going to continue -- we have a large and strong ACV, I think north of 60 in Canada, and we're continuing to see the SKU count per door being rolled out across all our food, drug and mass. Vitamin Water is definitely adding to the SKU count, but we're also seeing an increase in multipack sales across the Canadian market as we stand out across all of our conventional grocery stores. To name a few expansions within that, we've seen the West Coast of Canada, expand rapidly into conventional this year with adding on Save-on-Foods, which is a large retailer in grocery in Canada and the West Coast, adding not only our Vitamin Water, but our original and flavored lines as an example of this expansion.

So those are knowing listings that are coming online. We're seeing a decline in listings in certain stores in Target and Walmart in the United States. But we are still going through category review with both of those retailers on our innovation product, which actually may make up or exceed the expectations in both of those retailers. Outside of that, Martin, we've not been delisted or have changed in SKUs and most of our retail listings across natural and food, drug and mass, which is a very positive sign when you look at our core business, as increased velocities are going with increased SKU count across all of our some plus 20,000 locations that are driving the adoption and continued repeat purchases of our products.

[Martin Landry, analyst]

Yes. That's actually a good segue into my next question. Your number of doors has increased significantly in the last 6 months. And I'm trying to get a bit of an understanding of how much of your sales or channel fill versus how much of your sales are going to be -- are repeat? And that's going to help us out a little bit modeling and set expectations as well, right? So I mean you have like great growth rates this quarter, one of your fastest growth rate for your Flow branded products, but how much of that is channel fill versus repeat orders?

[Nicholas Reichenbach, executive]

Our repeat purchases across all of our food, drug and mass channels have maintained their rates this past quarter, Q1. And we don't expect any changes to the core velocity of our products within our core retailers. The increased doors and increased revenue growth from Flow are mainly contributed to, as I mentioned, the expansion into the club channel with the Dollar Stores, which is a significant amount of doors. These doors have typically lower velocities but we are expected -- we are experiencing higher growth in velocity within those doors, which is a very positive sign. Meaning that, that consumer in this new channel are beating the category expectations on our velocity. So we don't see any slowdown within those new channels.

The other growth area, which we've mentioned on numerous occasions is the food service category. And our core customers, Starbucks, a core hotel chain and NCL are experiencing higher velocity than expected from our expectations. I'm sure that they're very pleased with their core consumers. And this is a very positive sign moving forward as we roll out distribution like Foodsby that has a total accessible doors of 11,000, and we're just beginning to unlock all of the smaller chain food service accounts and national corporate accounts in the cafeteria as we see a move back into the corporate offices.

And so when I look at the whole market of our velocity in our core channels, I would say that we're going to experience higher-than-expected growth in the food service as we roll out and continue to roll out our food service channels. And that the club channel, driven by Dollar Stores are going to experience growth from our base in both -- sorry, in the U.S. And then to speak a little bit about Canada, we are experiencing growth in the club channel with our main retailer Costco, as we rolled out national programs to launch Vitamin Water, which I believe we press released in January as well as our regional expression of our Flow core branded products are now rolled out nationally across both the Eastern division and Western division. So you're going to start to see a lot of momentum pick up in the club channel in Canada and then the club channel driven by Dollar Stores in the U.S., which is not new-founded business, and we've expected this, but it's growing faster than expected with the velocities in the core products.

[Martin Landry, analyst]

Okay. That's helpful. And maybe my last question. I don't know if you have that number, but I'd love to see where you're at with your ACV penetration in both U.S. and Canada? And where do you expect this to be maybe by end of calendar year?

[Nicholas Reichenbach, executive]

So we're not giving any guidance on the expectations of growing our ACV. Our ACV has maintained its position in the U.S. and maintained its position in Canada and growing slightly with the launch of Costco in the West Coast. As you know about -- tell to all the listeners, food service has not tracked on ACV so our recent wins with the core and NCL and even Starbucks are not tracked our ACV, only food, drug and mass, gas and convenience as a separate ACV as well. So we're expected to obviously maintain our ACV in the U.S. grow slightly in Canada, but we're not giving any particular guidance with our growth on ACV or growth on revenue this year.

[Operator]

And your next question comes from the line of Pulkit Sabharwal from Canaccord Genuity.

[Pulkit Sabharwal, analyst]

Just a couple of questions on my end. So I was just wondering, in terms of the restructuring and cost savings, would you be able to contextualize what the low-hanging fruit might be in terms of driving further cost savings?

[Trent MacDonald, executive]

Yes. I mean, look, the big one for us is distribution, logistics, warehousing, shipping. I mean that is a very large part of our cost base, as you can imagine, as a water CPG organization where we have consumers -- the actual consumers of our product from California to know it's goes to Vancouver to Florida. So it's a big bucket. And that's where we've been focusing a lot internally over the last, call it, several months. We are now getting to -- getting closer and closer to an execution stage on what that might look like as a model for ourselves going forward. But that is the biggest area of cost savings.

But look, beyond that, we've gone through every functional area. And we've done it in a very granular way to ensure that we're not kidding ourselves in terms of what we think we can say, but we're talking like finance department to IT and HR and marketing and sales and so on and so forth. So no rock has remained unturned, and we believe we're going to be able to execute on pretty much all of that and by the -- on an annualized basis by the time we get through our second half.

[Pulkit Sabharwal, analyst]

Okay. That's very helpful. And then just in terms of the early days of the partnership with Costco, and I know you guys have tested upon this a little bit. But in terms of the early days of partnership with Costco, could you just talk about how they're trending and how they're being received? And what are you expecting going forward in the near-to-medium term?

[Nicholas Reichenbach, executive]

Great question. And so our Costco club channel in Canada specifically is growing better than we expected. Velocities and door counts are continuously increasing as we roll the partnership out this past quarter and the previous quarter. We've seen increases in distribution, as I mentioned, on the West Coast in the Western division of Costco, but we've also seen additional programs to launch specifically our Vitamin Water that have gone across nationwide, which you'll have seen the impact of that in our Q1 financials and our revenue growth and continue to see that as we roll out additional programs during the summer months with our core hydration products which will be rolled out and actualized over the course of the summer.

So the club channel is definitely a big channel for us now in Canada with national listing exposure into Costco. And we're seeing our core products as well as our innovation being adopted by the Costco divisions, both East and West Coast. And unfortunately, we don't pull our velocity because Costco has got their own system to pull velocity. But from what we can see, this is definitely a good match to the Costco member, and we have great product market fit with both our innovation as well as our core products.

And as I mentioned, in the U.S., our club channel is growing rapidly due to Dollar and Dollar General in that channel as they start to compete more rapidly with the core club retailers.

[Operator]

And your next question comes from the line of Chip Moore from EF Hutton.

[Chip Moore, analyst]

Great to see that very healthy growth continuing for the Flow brand. Wondering maybe if you could update us on that co-packing transition over to Canada, how that's going and how to think about that and impact on utilization there?

[Nicholas Reichenbach, executive]

I can start off and then Trent can kind of finish it off if I missed anything. But as expected, when we divested our Virginia facility, we expected that the revenue associated with co-packing from that plant would either be taken back by the new owners, which is Canopy Growth's BioSteel, which had a significant amount of production within the Virginia facility. So we expected that revenue loss, as Trent mentioned in the call. But we also have a full transition of that facility, which has now ended, but it was a 90-day transition of that facility, of which we were still manufacturing our co-packing contracts through that facility.

And now as of February, we are successfully moving those production contracts back up to our Canadian facility. And we're going to see that continue throughout Q2, Q3 and Q4. And as Trent mentioned on the call, you'll start to see that in Q3, Q4 of this year on a fully transitioned basis.

And sorry to talk about your asset utilization. The strategic transformational plan that we're executing against is well in motion where we have now increased our production facility in Canada, which are 3 Tetra lines to 24/7 production, which means that all 3 lines and full capacity is being utilized from what was 5 days a week to now 7 days a week, 24 hours a day with obviously downtime for cleaning and different product substitutions and additions.

[Chip Moore, analyst]

That's helpful. And then maybe on Vitamin Water, off to a very strong start. Any more detail you can provide us there? And then how would you think about a potential U.S. launch in terms of timing, do you want to see how it goes in Canada first or how you're approaching that?

[Nicholas Reichenbach, executive]

So we did launch our Vitamin Water infusion in the U.S. first. Although we launched it last September on our e-comm channel, and we went through category review in the fall and the first part of Q1. And then we launched secondly, in Canada in January. And so to speak about the U.S. specifically, we achieved a very large listing that is going live now with Albertsons, Safeway, Vons. As I mentioned, they're the second largest grocery chain outside of Kroger. And we expect that this channel will do very well with our Vitamin-Infused line.

And we're also launching in our core broadline distribution with UNFI and KeHE, which distribute to all of the natural grocery stores across the United States. So we'll start to see pickup across all of our natural, which we have a high ACV plus 60 points in the U.S. as we roll out the Vitamin Water, which is an organic certified product, which really hits a great product market fit within the natural grocery channel, where Flow is -- has the strongest velocity as well as the largest ACV. With those 2 channels alone, we will be building out a national platform for Vitamin, Vitamin infusion and our future product lines and start to expand regionally within our core grocery channels with listings that we currently already have, and there's a long list of retailers that will be going live regionally, depending on their planogram resets during the summer.

In Canada, the reception on the Vitamin Water was stronger than expected. Vitamin Water, historically, this category, Canadians over-indexed in the consumption of Vitamin-Infused products and Vitamin-Infused beverages specifically. And so we actually had a lot of our main core conventional retailers in grocery, like Metro, Loblaws, as examples of large national retailers, Save-on-Foods, which I mentioned, Sobeys, accept the product, and they're being rolled out currently, if not already live in our core retailers.

In natural, like the United States, Canada has a very high ACV, north 70. And we have rolled out successfully across all of our major Canadian National and regional natural retailers like Whole Foods as an example, and all of our other independent natural grocery stores. In Canada, specifically, we do have gas and convenience and we have got listings with Vitamin Water within the core gas and convenience channels that have actually very good ACV, namely Circle K, which is a national conventional -- sorry, gas and convenience chain, and we're going to start to see that channel slowly penetrate as well in Canada, specifically during the course of this year.

So all in all, for a product launch and innovation, this product launch is going better than expected as we mentioned. As our retailers are accepting the innovation due to its product attributes of delivering a full daily dose of vitamin C and zinc, which is almost double, if not more, than our competitors, but also having 0 figure as well as an organic certification has been well received across all of our channels, conventionally in national and natural and national in Canada. And then with the launch of Albertsons, Safeway, Vons safely in the U.S., we are now national with our platform on innovation in both countries.

[Chip Moore, analyst]

I appreciate all that color. And maybe just a segue there, I think you mentioned new product innovations potentially in the pipeline. Maybe expand on that, how you think about investment. Obviously, you're much better positioned now versus that focus on profitability.

[Nicholas Reichenbach, executive]

Yes. No, that's great. Well, the Vitamin Water infusion moves into a category that's called Functional Beverages or Functional Enhanced Water. This category is in double-digit growth. As you see other companies infusing their products with functional benefits. We really view the Vitamin infusion as a platform. And the platform of innovation can go across all of our need states and our core consumer, which we have 18 million plus core consumers that are into health, wellness and -- health and wellness and also fitness.

So when we look at Vitamin infusion, we look at it as a product line and a platform to be able to hit our need states of our core consumers and our growing consumers that will go into functional benefits across all of their need states as they build out their wellness regime through eating, drinking and exercise. So we will be launching additional SKUs within the Vitamin infusion lines as we roll out this product in the years to come. So we're investing against Vitamin infusion as a platform against our core products, which is high alkaline, not really occurring mineral water that we naturally infuse with organic flavors, which is our first product line that we have 6 organic flavors, and then you'll start to see more SKUs rollout across our Vitamin Infuse product line.

[Operator]

[Operator Instructions]

Your next question comes from the line of Sean McGowan from ROTH MKM.

[Sean McGowan, analyst]

Is there a meaningful difference in gross margin on the Vitamin Water versus the regular water?

[Nicholas Reichenbach, executive]

All of our innovation products are margin-accretive. So yes, there is. It has a higher price point so more dollars stock to the retailers as well as Flow, but it is a margin-accretive exercise when we do all innovation. We expect to not only maintain our margin but increase it. And you'll start to see, as Trent mentioned, our gross margins improved quarter-over-quarter as expected as we roll out innovation but also a lot of fine-tuning against our assets and our production.

[Sean McGowan, analyst]

Okay. That's helpful on a product sense. And then in terms of channels, is there any of the new channels that you're in to have a different gross margin profile compared to kind of core?

[Nicholas Reichenbach, executive]

I'll let Trent answer that because he look at the numbers in more detail than I do.

[Trent MacDonald, executive]

I mean, yes. Obviously, it's going to come down to -- I mean there's a lot of things comes into gross margin. But when it comes down to channels, e-comm is one of our more accretive margin channels because, as you can imagine, the dynamic of that when it comes to brokerage sales, distribution. It's a very different model. And so we can actually afford to give deeper discount to ultimately the consumer who's ordering our e-comm channels still yet maintain higher margin.

But when it comes to each and every individual retailer, whether it be Dollar Tree versus Whole Foods, Whole Foods versus Sprouts and so on and so forth, it really depends on the negotiated agreement with the retailers themselves. And so Costco being another one. So these are all very different. So each one is a little different in terms of the margin profile.

[Sean McGowan, analyst]

And regarding Starbucks, Nicholas, I imagine that you're pushing hard to try to get something going in the U.S. Any sense on what the timing of that decision one way or the other could be? Like when should we expect to know whether or not you're going to be in Starbucks in the U.S.?

[Nicholas Reichenbach, executive]

That's a great question. Obviously, the management team and Flow in general, would be honored to have an opportunity to sell and continue to sell in Starbucks. And we view this as a very strategic retailer for obvious reasons. The sustainability values and dimension are very aligned with us and in Canada, we'll be rolling out joint programs together and be announcing some very ESG-focused efforts that are a combination of Starbucks and Flow as we move the partnership forward in Canada.

All I can say about our partnership in the U.S. is that the opportunity to present to the entire Starbucks stock on our ESG partnership and our initiative and introduced the brand to them and the entire U.S. leadership team and sustainability team joined the call, which was not expected, but very pleased with the replies and responses we got from the U.S. team. And I would say that due to our success in Canada and our continued success in Canada, I'm sure that they will be reviewing their category and looking at our performance, and one could only hope that we'll have the opportunity to expand our listing within the U.S., but it is to be performed instead of to be expected.

[Sean McGowan, analyst]

Well put. Okay. My last question, I think, for Trent, talk a little bit about the conditions on your borrowings relative to cash. I mean, it's a pretty high cash position. Do you have to have the borrowings in place? Is there any flexibility there? I would have thought that maybe lower cash and lower borrowings might make some sense there. So could you just kind of update us on how that works?

[Trent MacDonald, executive]

Sure. So we were -- yes, we -- there were some covenants around what we had to draw at the beginning versus what we would have liked to have drawn. We did take $15 million, we still have $5 million available under the facility that we have not yet drawn. So that will be coming at some point down the road. As you recall, we did say that we'd be repaying the unsecured creditors at some point, that is actually part of the post-closing conditions of the secured credit facility. And so that will be coming at some point. So we are just working through the final mechanics of that as we speak. So you'll see that coming out of the cash. So if you think about that, that's going to be a reduction of probably $9 million-ish give or take, depending -- so that would be the big thing.

[Sean McGowan, analyst]

So that explains it. So the borrowings have not yet been repaid at the end of the quarter?

[Trent MacDonald, executive]

No, it had not.

[Operator]

Thank you. And that does conclude our conference for today. Thank you all for participating. You may now disconnect.