14:14:09 EDT Thu 28 Mar 2024
Enter Symbol
or Name
USA
CA



Goodfood Market Corp
Symbol FOOD
Shares Issued 75,474,954
Close 2023-01-17 C$ 0.55
Market Cap C$ 41,511,225
Recent Sedar Documents

Goodfood Market losses fall to $11.7-million in Q1 2023

2023-01-17 13:11 ET - News Release

Mr. Jonathan Roiter reports

GOODFOOD REPORTS FIRST QUARTER GROSS MARGIN OF 35.6% AND REAFFIRMS EXPECTATION OF POSITIVE ADJUSTED EBITDA1 NEXT QUARTER FOLLOWING AN 85% YEAR-OVER-YEAR IMPROVEMENT THIS QUARTER

Goodfood Market Corp. has released its financial results for the first quarter of fiscal 2023, which ended on Dec. 3, 2022.

"We are encouraged to begin our new fiscal year with a strong gross margin, highlighting the diligent operational execution of Project Blue Ocean. Our gross margin surpassed the 35-per-cent mark for the first time in Goodfood's history with lower net sales of $47-million being driven by our focus on attracting and retaining higher value customers that require lower incentives, leading to better profitability metrics. Combined with continued discipline in our selling, general and administrative costs, our adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] loss came in at $2-million this quarter compared to a loss of $15-million in the same quarter last year. In addition, our cash used in operating activities came in at $4-million compared to $17-million in the same quarter as last year, when adjusted for reorganization and related costs, a significant improvement over last year, charting our path forward towards profitable growth and positive cash flows," said Jonathan Ferrari, chief executive officer of Goodfood.

"As we now enter the second quarter with what we intend to be the final steps of project Blue Ocean under way, we expect to have the operating and SG&A [selling, general and administrative] cost structure in place to expect achieving positive adjusted EBITDA in the second quarter of 2023, which will serve as the foundation for long-term profitable growth and positive cash flows," added Mr. Ferrari. "Looking further out into the year, as our target cost structure is realized, we will shift our focus towards growth, beginning with taking our customer experiences to the next level and by extension enhance our customer lifetime values. With initiatives such as a new VIP [very important person] customer program, restaurant collaborations and the launch of an exciting new marketing campaign in the coming month with an important Canadian athlete, we believe we are well under way towards implementing the building blocks that will drive long-term, consistent profitable growth," concluded Mr. Ferrari.

Financial highlights

Results of operations -- first quarter of fiscal 2023 and 2022

The associated table sets forth the components of the company's consolidated statement of loss and comprehensive loss.

Variance analysis for the first quarter of 2023 compared with the first quarter of 2022

  • Net sales decreased compared with the same period in the previous year, driven by the company's focus on attracting and retaining customers that provide higher gross margins and by changing customer behaviours, partially offset by an increase in average order values.
  • The decrease in gross profit primarily resulted from a decrease in net sales, partially offset by lower food costs and production costs as a percentage of net sales costs driven by improved efficiencies as well as lower credit and incentives as a percentage of sales.
  • The decrease in selling, general and administrative expenses is primarily due to lower wages and salaries, as well as marketing spend, driven primarily by lower net sales and the company's Blue Ocean initiatives. Selling, general and administrative expenses as a percentage of net sales increased from 44.4 per cent to 46.7 per cent.
  • Reorganization and other related costs incurred in the first quarter of fiscal 2023 mainly comprise the loss on disposal of non-financial assets and headcount reduction costs partially offset by gains on termination of leases.
  • The increase in depreciation and amortization expense is mainly due to the capitalization of the depreciation on right-of-use assets during the construction phase of the new leases in the first quarter of fiscal 2022.
  • The increase in net finance costs is mainly due to the company's $30-million convertible debenture issued in February, 2022.
  • The decrease in net loss in the first quarter of 2023 compared with the same quarter in the previous year is mainly due to lower wages and salaries in cost of good sold and in selling, general and administrative expenses, as well as lower marketing spend in selling in general and administrative expenses partially offset by lower gross profit mainly driven by lower sales.

EBITDA, adjusted EBITDA and adjusted EBITDA margin

For the first quarter of 2023, adjusted EBITDA margin improved by 13.8 percentage points compared with the corresponding period in 2022, mainly driven by stronger adjusted gross margin, lower selling, general and administrative expenses due to lower marketing expense, a lower salary base resulting from lower net sales, and project Blue Ocean initiatives. The improved adjusted EBITDA margin was partly offset by a lower net sales base.

Financial outlook

Goodfood's core purpose is to create experiences that spark joy and help our community live longer on a healthier planet. As a food brand with a strong following from Canadians coast to coast, the company is focused on growing the Goodfood brand through the company's meal solutions, including meal kits and prepared meals, with a range of exciting Goodfood branded add-ons to be explored and complete a unique food experience for customers.

Meal kits are estimated to have reached over $1-billion in size in Canada as part of the $144-billion Canadian grocery industry, with roughly 8.4 per cent of households subscribed to a meal kit service (see annual information form for additional details). The company believes that consumers' willingness to simplify their weekly meal planning combined with their desire for joyful, exciting and nourishing food experiences at home while reducing food waste provides for significant room to increase on-line food delivery penetration. With a future household penetration of 20 per cent, the market for weekly meal plans in Canada, including meal kits, prepared meals and add-ons, could reach approximately $3-billion in the coming years; Goodfood is ideally positioned to capture a significant share of that market.

Investing in efficient and highly targeted marketing strategies to capture new customers, increase order frequency and grow basket sizes through effective cross selling remains at the forefront of Goodfood's near-and-long-term goals. The company's current focus, however, remains centred around growing adjusted EBITDA and cash flows in the coming quarters while continuing to invest in a customer value proposition that will provide years of profitable growth. Last year, the company established project Blue Ocean to drive profitability and have fully implemented the majority of the identified initiatives:

  • Ingredients simplification with ingredients sourced declining from over 400 to below 200;
  • Alignment of work force with scale leading to significant headcount reductions;
  • Footprint rationalization leading to consolidation of production in two facilities in Montreal and Calgary;
  • Reduction of capital investments (capex);
  • Meal kit and add on products price increases.

These initiatives and the discontinuation of on-demand have had and are expected to continue to have a positive impact on the financial performance of the business. The company's meal kit demand driven by the company's weekly subscriptions has stabilized and the company's gross margins have continued to improve, reaching a record 36.9 per cent when adjusting for inventory write-offs, increasing from 24 per cent for the same quarter in the previous year, a 1,290-basis-point increase.

Moreover, toward the end of the first quarter of fiscal 2023, the company initiated further selling general and administrative expenses reduction through headcount streamlining and contract renegotiations to align the company's cost structure to the company's go-forward operating model. Combined with stable net sales and strong gross margin, the company is reconfirming its expected path to return to positive quarterly adjusted EBITDA in the second quarter of fiscal 2023.

Despite recent challenges (see the discussions at "Basis of presentation" and "Capital management" in the MD&A (management's discussion and analysis) filed today, including uncertainty regarding the company's ability to continue as a going concern), the company's focus on profitability and cash flows continues to bear fruit, underpinned by consistent improvement in adjusted EBITDA; when coupled with the company's unrelenting focus on nurturing its customer relationships, it remains the company's top priority. The Goodfood team is fully focused on building and growing Canada's most loved millennial food brand.

Trends and seasonality

The company's net sales and expenses are impacted by seasonality. During the holiday season and the summer season, the company anticipates net sales to be lower as a higher proportion of customers elect to skip their delivery. The company generally anticipates the number of active customers to be lower during these periods. During periods with warmer weather, the company anticipates packaging costs to be higher due to the additional packaging required to maintain food freshness and quality. The company also anticipates food costs to be positively affected due to improved availability during periods with warmer weather.

Conference call

Goodfood will hold a conference call to discuss these results on Jan. 17, 2023, at 8 a.m. Eastern Time. Interested parties can join the call by dialling 416-764-8646 (Toronto or overseas) or 888-396-8049 (elsewhere in North America).

Parties unable to call in at this time may access a recording by calling 877-674-7070 and entering the playback passcode 024494, followed by the number symbol. This recording will be available on Jan. 17, 2023, as of 11 a.m. Eastern Time until 8 a.m. Eastern Time on Jan. 24, 2023.

A full version of the company's management's discussion and analysis and consolidated financial statements for the first quarters ended Dec. 3, 2022, and Dec. 4, 2021, will be posted on SEDAR later today.

About Goodfood Market Corp.

Goodfood is a leading digitally native meal solutions brand in Canada, delivering fresh meals and add-ons that make it easy for customers from across Canada to enjoy delicious meals at home every day. The Goodfood team is building Canada's most loved millennial food brand, with the mission to create experiences that spark joy and help our community live longer on a healthier planet. Goodfood customers have access to uniquely fresh and delicious products, as well as exclusive pricing, made possible by its world-class culinary team and direct-to-consumer infrastructures and technology. The company is passionate about connecting its partner farms and suppliers to its customers' kitchens while eliminating food waste and costly retail overhead. The company's administrative offices are based in Montreal, Que., with production facilities located in the provinces of Quebec and Alberta.

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