Flow Beverage Corp

TSX:FLOW

Earnings Call Transcript 2023-Q4

[Operator]

Good morning, everyone, and welcome to Flow Beverage Corp.'s Fiscal Q4 and Year Ended 2023 Conference Call. As a reminder, this conference call is being recorded on January 30, 2024. [Operator Instructions]

Before we begin, we would like to remind you that today's presentation and discussion contain 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 events being materially different from those implied by such statements. The forward-looking statements are based upon and include the company's current internal estimates, 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 deemed 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, 2024, and the company's management discussions and analysis for 12 months ended October 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 for any reason. Any forward-looking statements contained herein or discussed during today's session is expressly qualified in its entirety by the above cautionary statements.

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

[Nicholas Reichenbach, executive]

Thank you, operator. Good morning, everyone. I'm joined by Trent MacDonald, Flow's Chief Financial Officer and EVP of Operations. I'll begin today's call with an overview of Flow's milestones in fiscal 2023, then I'll provide a review of the fiscal 2024 strategic growth priorities. We have a lot to go to drive shareholder value. Trent will then take you through a detailed review of the 2023 financial results, update on our strategic priorities, and provide a financial outlook of fiscal 2024. After Trent's remarks, we'll open up the call to questions from our analysts.

The Flow brand achieved significant milestones in fiscal 2023. Retail locations carrying Flow increased 28% over the year. This was driven by thousands of new locations with household names like Family Dollar, Dollar Tree, Albertsons/Safeway, Save-On-Foods and Circle K. Our foodservice channel benefited from over 1,100 Starbucks Canada locations adding Flow to their shelves as well as rollouts from Foodbuy and most recently Live Nation. And we launched Vitamin infused water, which made a solid contribution to our growth.

Our store count additions and innovation launches in the United States helped Flow achieve 50% market share in the U.S. carton format water, which was up from 44% this past year. Our market share continues to indicate that consumers are gravitating towards our value proposition for a premium and functional beverage with the highest level of environmental standards.

All told, Flow's brand net revenue increased 27% in fiscal 2023 and our gross revenues of branded products increased 32%.

We also announced 2 major contract wins with BeatBox and Joyburst on our co-packing business in fiscal 2023. And just last week, we announced a new partnership with a very familiar brand, BioSteel. Partnering with these high-growth brands to deliver their beverages in Tetra Prisma format is expected to earn Flow $148 million with minimum contracted revenues over the terms of these agreements. That's a boom.

We are entering fiscal 2024 with a leaner and more focused operational model. We have clear priorities of delivering revenue growth and move towards profitability. As always, the Flow brand is the core. We expect to continue our growth at both retail and foodservice. After a tough second half of 2023, we expect profitability of our e-com segment to improve significantly. Furthermore, with the investments we made with promoting trial and the expansion of our foodservice business, we expect e-com to resume as a key growth driver in our revenue.

Expanding capacity in our Aurora facility is going to be a major priority for the Flow team. Given the volume growth of our new co-packing agreements and the ongoing growth of the Flow brand, we can easily justify the additional fourth line in Aurora. Once this line is commissioned in this month, February, next month, we expect Aurora production to increase by 25%.

We are very optimistic about improving financial fundamentals. The last 3 co-packing agreements have come to -- with a benefit of contractually secured revenue. Additionally, we are focused on stabilizing our working capital position, and our operational transformation has led to a foundation for a solid road towards adjusted EBITDA profitability and cash flow positive in Q4 2024.

This concludes my remarks, and now I'll pass it over to Trent.

[Trent MacDonald, executive]

Thank you very much, Nicholas. I'd like to start by discussing growth in the Flow brand. While we usually only disclose net revenue, it should be noted that Flow branded gross revenue increased 32% for fiscal '23 and 14% in Q4. That said, Flow brand net revenue growth was 27% in fiscal 2023 and actually declined 9% in Q4 2023 compared to Q4 of 2022.

As Nicholas has highlighted, the Flow brand benefited from new stores, new foodservice partners and innovation, yet this was not reflected in Q4 2023, for a couple of reasons. First, we incurred annual amounts related to contractual fees under certain distribution agreements, which totaled close to $2.2 million in the quarter, the fees of which were recorded in trade spend in Q4, which had an impact between gross down to net revenue.

Second, in Q4 2023, we also identified issues with competing resellers of Flow branded products on e-com channels, which hurt our Flow branded sales, specifically in the U.S. Together, these 2 items swung our Flow brand net revenue growth down 17%.

Of the commercial fees I just noted, we incurred a specific charge for the entire year of close to $1.6 million in relation to one commercial account, which we do not anticipate will continue past Q1 of fiscal year '24.

When it comes to e-commerce, Flow branded net revenue in the U.S. was actually up 42% in the first half of the year, while we are only up 7% in Canada e-commerce. We put a lot of marketing and effort into the second half, both in the U.S. and Canada, which resulted in Canada increasing 62% in the second half of fiscal '23, but U.S. e-commerce sales actually decreased 10% compared to the second half of fiscal 2022 as a result of these resellers.

As we discussed in our last call, in Q3 2023, we uncovered issues in our fulfillment methodology and incurred a service interruption to U.S. subscribers, which we subsequently fixed prior to Q4. However, we then faced certain competitors, again, reselling Flow branded products through Q4 both in the U.S. and Canada, with the U.S. being much more impacted. We have been able to stop one such reseller completely and are working to dramatically mitigate the impact of all other resellers, which we feel will become fully effective by the end of Q2 of fiscal 2024.

Consolidated revenue decreased 28% in Q4 2023 due to all the factors I just discussed with regards to the Flow brand, while co-pack revenue decreased by $3 million due to the impact of selling the Verona facility and the impact of one of our key co-pack customers going into CCAA within our fourth quarter.

All of that said, we expect the new co-packing partners, that we announced over the past several months, to ramp up throughout 2024 and contribute to significantly higher co-pack revenue from fiscal 2024 compared to that of 2023. Our gross margin was 9% for Q4 2023 at 14% for fiscal 2023. In addition to the factors I just described, which all impacted gross margin, we continued to incur nonrecurring expenses which have lowered gross margin. These nonrecurring expenses are linked to our transition to third-party logistics, which was still in process in Q4. We have a high degree of confidence that we can significantly improve gross margin from fiscal 2023 performance. The factors impacting trade spend in e-commerce are not permanent and continued increases in Flow brand growth, along with our new co-pack contracts, will significantly improve fixed cost absorption rates at our Aurora production facility.

Furthermore, we do not plan to incur any tolling costs for the manufacturing of Flow branded product as long as we own the Aurora production facility, which is contrary to the current year FY '23 when we incurred tolling fees for all U.S. production out of Verona.

Turning to EBITDA. While sales and marketing expenses and salaries and benefits are trending down, our efforts to reduce general and administrative expenses are not yet visible due to the $3.9 million in nonrecurring costs to that expense line. Excluding these nonrecurring expenses, G&A would have been down almost 50% in Q4 2023 compared to the same quarter in 2022.

Looking at Q4 2023 in greater detail, we reported gross profit of $0.9 million. Again, this included $2.2 million in contractual fees under our distribution agreement. Normalizing for these expenses alone would have improved gross profit from last year dramatically. Recall too, we added a number of significant foodservice partners in fiscal 2023, and these Flow branded sales are the lower gross margin and revenue earned through retail or e-commerce channels.

Foodservice remains a very part -- a very important part of our revenue as it continues -- contributes to gross profit and promotes consumer trial, which should help drive revenue growth in retail and e-commerce given the thousands of new consumers trying Flow each and every day.

As we move down the income statement, you can see 33% decrease in sales and marketing costs in Q4. Once we get closer to profitability, we plan to be investing even more in sales and marketing on a strategic basis to drive Flow branded growth.

General and administrative expenses include nonrecurring costs of $3.9 million. The costs include consulting and legal expenses attributable to our transformation and the Aurora facility divestiture, temporary logistics costs as Flow transitions to third-party logistics, a onetime write-off of an accounts receivable, an increase to our allowance for [ doubtful ] accounts corresponding to that, and true-up costs related to the sales of Verona production facility as we finalize the close well after the year-end -- or well after the transaction, which was in November of 2022. As we continue the final stages of our transformation, we expect meaningful declines in both nonrecurring expenses and G&A.

Q4 salaries and benefits were 48% lower than the prior year. While Q4 reflects a significant portion of our restructuring efforts, our transition to third-party logistics was still in progress in Q4 2023.

Looking forward, we believe our investments in our transformation are about to pay off. We have restructured our organization, reducing our functional area corporate headcount by 45%. We have also simplified many of our processes, and our transition to a third-party logistics platform is materially complete. As we said before, moving to third-party logistics is the biggest cost saving lever we had identified.

I would now like to update -- I would like to provide an update on the previously announced strategy of divesting our Aurora production facility. While the process is still ongoing, our recent co-packing contract wins have significantly improved the pro forma profitability of the Aurora production facility. And when combined with the cost savings coming from our transformation efforts, things look very different than they did at the time we made the decision to go forth to divest of the Aurora production facility.

We have said all along that the Aurora production facility is a profit center that reduces our cost of goods sold and thus improves our gross margin. It is without doubt that we had always have preferred to keep it if we did not believe the divestiture was a financial necessity to allow us to execute on our strategic plans for the Flow brand. With the material change in recent circumstances, we would still consider divesting the facility at the right price and with the right partner. However, we no longer believe it is -- it to be an absolute necessity as it relates to meeting our strategic goals and objectives.

Some of you may have seen, I recently took on the role of EVP of Operations, in addition to my role as CFO. This new responsibility has tasked me with leading capacity utilization as we add the fourth production line and strive to run the plant as efficiently as possible to lower our cost of production pertaining to each unit. We are also now running on a new operating model. All of our manufacturing has been consolidated into Canada. We have outsourced our logistics, and we have a series of operational improvements that are currently being implemented.

Between continued growth of Flow brands and co-pack operations, and execution of our drivers of profitability, we believe 2024 will see Flow move from operational transformation to financial transformation. More specifically, we now expect improvements between $23 million to $27 million in 2024 when compared to 2023 levels. And more importantly, we believe we can, in fact, reach EBITDA and cash flow positivity by Q4 of 2024.

Currently, Flow is trading at 1x revenue on a trailing basis and 0.7x revenue based on our financial outlook for fiscal 2024. This is compared to our publicly traded beverage peer trading at a simple average of about 3x revenue and over 5x revenue on a weighted average basis. Our 27% net revenue growth for the Flow brand at fiscal 2023, while not as high as we would have liked, still compares very favorably to the growth of most of our peers. And we think that we can do even better in Flow brand growth in fiscal 2024. Factoring co-packing revenue, we believe our path and profitability has also been substantially derisked. Given the revenue to enterprise value multiples associated with our peer group, we see a significant opportunity to unlock shareholder value.

Now all of that said, the best way to unlock this value is to execute on our plans, which the entire team at Flow, myself included and Nicholas included, will be focused on throughout the foreseeable future.

We appreciate all of your continued support. And with that, operator, please open up the line for questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Martin Landry at Stifel.

[Martin Landry, analyst]

I was wondering if you could talk a little bit about the outlook for the Flow branded products. There's lots of discussion about your co-packing initiatives. But how does the outlook is for the Flow banded products? I mean, you're almost done Q1 now. Could we see you achieve a similar growth rate in '24? And you've achieved in '23, I think in '23 your net Flow branded revenues were up 27%. Is this achievable? Or do you think the growth is going to slow down? Any color would be super helpful.

[Trent MacDonald, executive]

Yes, Martin, that's a great question. Look, we're holistically focused on the Flow brand. That is who we are, that's who we're going to continue to be. A 27% growth in net revenue for the full year was a little bit disappointing. There was a couple of things that happened to us, as I alluded to in my remarks. We were hit by resellers on our e-com channels. And I can't emphasize that enough. We were up, again, 42% in e-com in the U.S. through 6 months. And in the back half, it fell off a cliff. At first, some of the things that happened were on our own, which we described last time. I think we had some questions, that you'd provided, and we answered those as well in relation to that. But as we corrected all of those logistical issues, that's when we get hit by some serious resellers, specifically on one of our biggest sites.

And now we have some strategies that we're working through right now, one of which has already been implemented, and it looks like it's going to provide not only higher sales but more margin accretive sales. And we're about to try to do that same thing in the U.S. And so that's going to help dramatically.

Had it not been for that, if we'd just been able to maintain the setting run rate because, as I said, we put a lot of money into e-com both in the U.S. and Canada in the second half, and you saw it in Canada go from 9% growth in the first half to 64% growth in the second, and we anticipated that's what was going to happen in the U.S. Had it even just maintained its run rate our net revenue would have been increased from 27% for the year to 34% for the year. That's just that one channel.

The second thing that happened was we were hit by a commercial -- we had a very, let's say, punitive commercial relationship as it pertains to one of our major foodservice clients. And we've now rectified that situation. And that in itself really hurt our net revenue.

So if you think about just those 2 things, okay, not imagining anything else, just those 2 things that puts Flow branded net revenue well over 35% and -- for the year. And we don't anticipate that we're going to be taking our foot off the pedal in that regard. So if you start thinking about the numbers I just said, you're getting your head around exactly what we believe FY '24 will be.

[Martin Landry, analyst]

Okay. That's a pretty sizable growth expectation. Like where is this going to come from? Is this going to come from additional doors that you expect to win? Is this going to come from velocity? Are you introducing new products? Just a bit of color as to where that growth is going to come from.

[Nicholas Reichenbach, executive]

Yes. So as we saw 2023 unfold, we also saw continued growth in our core channels of natural grocery -- grocery, both in Canada and the United States. And the velocities within those channels maintained a very high level of growth, and they have been for the last 6 years.

Next year, or this year, 2024, we'll be moving to profitable growth channels and anchoring in on our core channels to be able to produce the growth that we want, so we can invest our marketing dollars, trade and consumer against those profitable channels, while maintaining our strategic partnerships in foodservice like Starbucks and Live Nation as 2 examples, to be able to increase trial to produce larger results in e-commerce, but also larger brand awareness. And putting our marketing dollars into those channels will more solidify our growth expectations next year, but also, most importantly, they will improve our margins and improve our trade spend as a result of anchoring in on those channels. We've had a significant amount of brand awareness and trial through our successful partnerships in foodservice. So by maintaining that strategy will actually get us to exactly where we want to be with the core Flow brand both here in Canada and the United States.

[Martin Landry, analyst]

Okay. So if I understand correctly, it's more of a shift in channel mix rather than an increase in your portfolio product rather than an increase in doors. You're expecting that your channel mix is going to be translating into pure trade spend that's going to boost your growth. Is that fair?

[Nicholas Reichenbach, executive]

Yes, that's exactly right. While maintaining our strategic foodservice channels may not make exactly the same margin profile, but they have a significant amount of brand equity and brand awareness attached to them in trial that has proven in 2023 to be a growth driver. So we're going to anchor in to those channels as well to get brand awareness and profitable growth in our core channels.

So you're not -- you may not expect we're going to add the same amount of doors as we had last year. But what we want to do is maintain our core channels and growth to ensure that Flow exceeds our growth from last year and also make it more profitable by higher gross margins through more strategic trade spending against those channels that Flow has proven for the last 6 years to generate both product market fit as well as great consumer margin and great consumer experience.

[Martin Landry, analyst]

Okay. And then just maybe switching gears to your balance sheet. You finished October with $6.5 million of cash. You're talking about CapEx spending to introduce a new line. Your operations are still generating significant losses. Your cost savings are -- seems to be happening throughout the year, and you're going to only hit profitability in Q4, as you alluded to. So how are you going to bridge now to then in terms of in terms of cash?

[Trent MacDonald, executive]

Yes, another good penetrative question, Martin. So look, the reality is that our cash burn has been declining outside of all these onetime costs, and transformation is expensive. We said this before, restructuring is not cheap. But through Q1, and we're 1 day away from it closing through Q1, without giving much guidance, it looks a lot better than Q4 and Q3. And I can say as of today, where we sit in front of this audience, we have, in fact, completed most of the restructuring that was set forth to complete when Nicholas and I came back into the organization -- or came into the organization. And so our path forward looks very different from a cash burn perspective.

But we have done some things internally, too, which have not yet been announced. There will be some things will be announced over the next little bit. But from a cash perspective, we've been able to bridge, both for our Board and for other parties who obviously have a vested interest in what our next 12 months look like, we've been able to bridge it. And a lot of that co-pack, which we, under a divestiture model, would not have owned comes and starts production literally now. We've already started Joyburst, and we're about to start BioSteel, which we announced publicly. And so all of that is cash flow accretive and obviously helps the absorption rates when it comes to the Flow brand because it's taking some of the cost away from what would have been on the Flow brand.

And so there's a lot of -- there's a lot of cash flow implications in relationship to those large, large co-packing agreements. And as we said, there are about 145, 149, in that range, million dollars, over the 5-year span, a couple of which are 3 years. So that's a lot of cash that we would not have anticipated having for us had we divested of the Aurora facility.

So we're -- look, again, I don't want to say we're not divesting completely, but clearly, it's going to come down to we need to have the right partner and the exact right price that we're looking for because we now have a very well-thought-out detailed granular path forward that we believe is going to get us to profitability and cash flow positive in a pretty good timeframe. I mean, fourth quarter is -- I mean, we're about to start our second quarter in 2 days, and so fourth quarter isn't that far way, it's only 6 months. So we think there's -- we think we could -- we bridged it from a cash perspective and things are looking up.

[Operator]

Our next question comes from the line of Najib Islam of Canaccord Genuity.

[Najib Islam, analyst]

I was wondering if you could give me some more color as to the cadence of the $148 million in revenue that you're hoping to realize as well as some information about the margin profile that these agreements have.

[Trent MacDonald, executive]

Yes. Sure. So let's start with the cadence. So we have a -- and these are all public, in the public domain. We have a 5-year agreement with BeatBox. It's a wonderful co-pack line and they're in hyper-growth, they're alcohol beast, malt, wine beast, drink in a tetra pack that people are really enjoying out there in the marketplace. So we're glad to have them as a partner. That, as we said, is 50 million units in the first year and 70 million units each year thereafter at a minimum.

So that's what they are comfortable signing up for as a minimum as a take-or-pay. So they don't produce, they still pay, and there's parameters around that. But it's a pretty stable source of income and cash flow.

Now we believe and they believe, clearly, that they're going to exceed those volumes, and that's why they signed up for those minimums.

BioSteel, as we announced, is a 24 million pack for the final 2 years and I think it's like 20 million or 21 million in the first calendar year ending this December 31. And so again, the new owner who we've met with, Nicholas has had -- spent some time with, a very, very intelligent person who's had a lot of success in other businesses, really brings a different frame of mind to the business as well of BioSteel. And he and we feel very confident that brand is going to continue to be healthy and grow. And so again, the minimum is the minimum, but we believe, especially in the second and third year, that volume will well exceed those minimums.

And then we have Joyburst, again, a beautiful product within a very good organization doing extremely well at Costco, and it's 15 million packs per year, again, at a minimum. All of these are take-or-pay. So all of that's what it looks like.

Now from a merger perspective, there's only a certain level of cost that goes against the co-packing client. And when you look at the co-packing fees, the things that we have to supply the company is literally that I don't mind telling is the cap that goes on top of the tetra pack and then the supplies when it relates to shipping, so cornerboard, slip sheet, pallet wrap. But other than that, it's actually just the underlying cost of production, which is all about absorption. So running the actual plan, your allocation of rent, utilities, repairs and maintenance, casual labor and so on and so forth. And so when you have that extra volume going through the plant, it really does lower the cost of goods per unit and allow everything to have higher margin.

So that's really where we are. And so it's very margin accretive. Very, very margin accretive.

[Najib Islam, analyst]

Sure. And just one more question. Could you give me an idea of how much incremental revenue the fourth production line in Aurora can support? And how much CapEx was required for this?

[Trent MacDonald, executive]

Sure. each line typically can do 3 million units per month, so 36 million units a year, give or take. If you're running it more efficiently because you're doing longer batch runs, you can get efficiency up to 95% and you can actually exceed the 3 million. And if you're doing multiple co-pack clients in 1 month on 1 line, it could be a little less. But 3 million is a pretty good bar to use.

And from our perspective -- or sorry, and the total cost of that is about $11.5 million, 70% of which was financed through -- I'll give them a shout-out, a tremendous partner of ours from a financing perspective, NFS Leasing, who have been friendly and very supportive lender and friend to the company. So that being the case, we are -- I can tell you right now the line is actually installed. It will be operational within another week to 2 weeks top, and the revenue stream that goes along with it will turn itself on at that time.

[Nicholas Reichenbach, executive]

And it's fully booked.

[Trent MacDonald, executive]

Yes, and it's fully booked.

[Nicholas Reichenbach, executive]

Yes. So the fourth line capacity has been sold for, well, the better half of 5 years.

[Trent MacDonald, executive]

Yes.

[Operator]

We currently have one further question in the queue. [Operator Instructions] The next person is Sean McGowan at ROTH MKM.

[Sean McGowan, analyst]

A couple of questions. One, Trent, could you give us a sense of where in the P&L the $23 million to $27 million cost improvements are likely to show up? I imagine it's kind of spread out. But if you could just sort of bracket the ballpark areas. How much of that would be in gross margin, how much in marketing, how much in G&A, et cetera?

[Trent MacDonald, executive]

Yes. And a lot of that is run rate and what we look like this year. But yes, G&A for sure. For sure, for sure, G&A. We're going to have, I'd say, both the, for the sake of argument, $8 million, give or take, coming right out of G&A on a run rate basis. Salaries will be reduced by a couple of million on a run rate basis over the course of the entire year.

And then the rest is all in COGS, where you look at the logistics savings, which are -- a lot of which are in COGS, and some of the operational efficiencies we're putting into the Aurora production facility. It's a different day. And so those are the 3 areas that you'd see.

[Sean McGowan, analyst]

Okay. And then assuming that the plant is retained and production with these co-pack partners has rolled out as expected, what would you -- how would you characterize the range of potential co-pack gross margins? I imagine, because it's so sensitive to utilization and some of these ramp-up, what's sort of the range of gross margins we should expect from a co-pack revenue?

[Trent MacDonald, executive]

Yes. So with co-pack there, it's really what it does to the consolidated number of units that are being -- including Flow brand that are being put through the facility itself. Right? Because it's really that overhead absorption that you benefit from, in addition, obviously, to the revenue stream and the cash flow. But from that perspective, once you're at capacity and you're running over 100 million units over the next 12 months, you get down to a gross margin on co-pack of no less than 40%. And so it's very margin accretive and does, in fact, lower -- again, because it's going to be more than half of the volume. And when you do that and it's absorbing more than half of the cost, you can understand what it does to the Flow brand when it comes to margins as well.

[Sean McGowan, analyst]

That's helpful. So I mean that would be kind of purely incremental gross margin at full run rate?

[Trent MacDonald, executive]

Yes.

[Sean McGowan, analyst]

Okay. my last question is, could you talk a little bit more with color on the trade spend hit that you took? I didn't quite follow what that was about.

[Trent MacDonald, executive]

Yes. I mean I can't get into names and details, but here's the premise. We have a commercial...

[Sean McGowan, analyst]

That's what I wanted.

[Trent MacDonald, executive]

I know you do. I know you do. We have a direct store delivery commercial relationship in the United States in a very populous area that we signed into with a great partner. But one of our big foodservice clients happens to take a lot of their product in through that specific geographic region. And as a result of that specific thing happening, we were paying some fairly large sort of margin protection fees.

And now I want to start off by saying that's going away. I can tell you that. That's going away. But it was very punitive for the year. By the time -- because this was -- when we went into the year with that particular foodservice client, it wasn't well known or understood at all, in fact, that would be happening. And I don't know that people understood the implications with regards to the direct sort of leverage [ via fee ] partner we had.

And as you work through that throughout the course of the year and late into the year, it became fairly determined that this was going to be a hit. And so we ended up taking it. Unfortunately, all in 1 quarter, for the most part, although we did restate Q3 in relation to this as well, so you don't see all of it in Q4. And you can see the restatement in our MD&A. But by and large, that goes away, and it was significant. It was a significant amount.

And it had to do a new service line that we obviously don't make money with because it's foodservice. So it doubled up. It was very punitive.

[Operator]

Thank you. And currently, there are no further questions on the phones at this time. So thank you all very much for attending. You may now disconnect your lines.