Mr. Jonathan Ferrari reports

GOODFOOD REPORTS THIRD QUARTER RESULTS WITH $42 MILLION OF NET SALES, $3 MILLION OF ADJUSTED EBITDA AND RECORD $4 MILLION OF ADJUSTED FREE CASH FLOW

Goodfood Market Corp. has released financial results for the third quarter of fiscal 2023 ended June 3, 2023.

Highlights:

• Net sales were $42-million in the third quarter, a 37-per-cent reduction compared with the same quarter last year and an increase of $100,000 compared with the second quarter of fiscal 2023. Net sales results were driven by the company's deliberate focus on higher-value customers, leading to better unit economics.
• Record quarterly unadjusted gross margin was 41.0 per cent, an improvement of 14.8 per cent compared with the same quarter last year, with gross profit at $17.3-million, compared with $17.6-million in the same quarter last year, a slight decrease despite net sales declining 37 per cent.
• Net loss for the quarter was $1-million, a $20-million improvement compared with the same quarter last year.
• Record quarterly adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin was 7.8 per cent for an adjusted EBITDA of $3-million this quarter, a $14-million improvement compared with the same quarter last year.
• Cash flows from operations were $3-million for the quarter, an improvement of $17-million compared with the same quarter last year.
• Adjusted free cash flows were $4-million for the third quarter, a $23-million improvement compared with the same quarter last year.
• The company is upgrading its forecast to positive adjusted EBITDA for the fiscal year 2023 underpinned by a lean cost structure, with expectations to build on third quarter growth for fiscal 2024.

"We are pleased to have delivered positive cash flows for the third quarter, with adjusted free cash flow reaching $4 million, highlighting our improved financial position and underscoring our commitment to delivering long-term shareholder value. Furthermore, the positive cash flows came on the back of sequentially stable net sales, which grew for the first time since the third quarter of Fiscal 2021," said Jonathan Ferrari, Chief Executive Officer of Goodfood. "Fueled by our leaner cost structure, we also delivered positive adjusted EBITDA1 of $3 million dollars for a second consecutive quarter, and an adjusted EBITDA margin1 of nearly 8%," added Mr. Ferrari.

"As we enter the fourth quarter, we are energized by the strengthening of our financial health and our positive business outlook. The $23 million annual improvement in adjusted free cash flow is a testament to what our teams accomplished in the third quarter and to their dedication, hard work and consistent discipline in making sound business and financial decisions. With the structural financial strength established this quarter, the fourth quarter, which is typically marked by a seasonal slowdown in business activity as customers spend more time outside of their homes, provides the opportunity to build additional momentum on the implementation of our growth plan. Our teams are now focused on generating incremental customer acquisition efficiencies, as well as driving higher order frequency and basket size. We are concentrating our efforts on scaling our long-term growth platform through a set of initiatives that will seek to augment our 360-degree view of the customer, drive increased conversion and re-order rates, broaden our meal solutions assortment, and capture a larger share of Canadians' food wallet - please read our Financial Outlook section for additional information," concluded Jonathan Ferrari.

RESULTS OF OPERATIONS - THIRD QUARTER OF FISCAL 2023 AND 2022

The following table sets forth the components of the Company's consolidated statement of loss and comprehensive loss:

VARIANCE ANALYSIS FOR THE THIRD QUARTER OF 2023 COMPARED TO THIRD QUARTER OF 2022

The decrease in net sales is mainly driven by lower active customers and the Company's decision to discontinue its on-demand offering partially offset by an increase in average order value. The decrease in active customers is mainly driven by the Company's focus on attracting and retaining customers that provide higher gross margins and by changing customer behaviours.

The decrease in gross profit primarily resulted from a decrease in net sales mostly offset by improved production, food and shipping costs as a percentage of net sales costs driven by improved efficiencies.

The decrease in selling, general and administrative expenses is primarily due to lower wages and salaries and marketing spend driven primarily by the Company's Blue Ocean initiatives. Selling, general and administrative expenses as a percentage of net sales decreased from 43.8% to 34.5%.

The decrease in depreciation and amortization expense is mainly due to the reduction in fixed assets and right-of-use assets in relation to Blue Ocean initiatives.

The decrease in reorganization and other related costs mainly consist of lower external advisor fees and lower headcount reduction costs as the Company completes its Blue Ocean initiatives.

The decrease in net finance costs is mainly due to lower interest expense on debt and lease obligations due to a lower debt balance and lower lease obligations in relation to Blue Ocean initiatives partially offset by higher interest on the Debentures as the Company issued convertible debenture in February 2023.

Despite the decrease in net sales compared with same quarter last year, net loss has improved significantly. This improvement is mainly due to lower wages and salaries in cost of good sold and in selling, general and administrative expenses as well as lower food costs and lower marketing spend.

RESULTS OF OPERATIONS - YEAR-TO-DATE FISCAL 2023 AND 2022

The following table sets forth the components of the Company's consolidated statement of loss and comprehensive loss:

VARIANCE ANALYSIS FOR THE YEAR-TO-DATE 2023 COMPARED TO SAME PERIOD OF 2022

The decrease in net sales is primarily driven by lower active customers, the Company's decision to discontinue its on-demand offering partially offset by an increase in average order value. The decrease in active customers is mainly driven by the Company's focus on attracting and retaining customers that provide higher gross margins also by changing customer behaviours.

The decrease in gross profit primarily resulted from a decrease in net sales mainly offset by lower production costs and food costs as a percentage of net sales costs driven by improved efficiencies.

The decrease in selling, general and administrative expenses is primarily due to lower wages and salaries and marketing spend driven primarily by the Company's Blue Ocean initiatives. Selling, general and administrative expenses as a percentage of net sales decreased from 44.5% to 39.7%.

The decrease in depreciation and amortization expense is mainly due to the reduction in fixed assets and right-of-use assets in relation to Blue Ocean initiatives.

Reorganization and other related gains mainly consist of gains on termination of leases partially offset by loss on disposal of non-financial assets and headcount reduction costs.

The increase in net finance costs is mainly due to the Company's $30 million convertible debentures issued in February 2022 partially offset by lower interest expense on lease obligations in relation to Blue Ocean initiatives.

Although net sales have decreased compared with same period last year, net loss has improved significantly. This improvement is mainly due to the reduction in selling, general and administrative expenses driving by Project Blue Ocean initiatives as well as improved gross margin driven by improved operational efficiencies.

ADJUSTED GROSS PROFIT 1 AND ADJUSTED GROSS MARGIN

For the 13 weeks ended June 3, 2023, the adjusted gross profit decreased slightly by $0.3 million primarily due to lower net sales partially offset by operational efficiencies driving lower food and production costs. The increase in adjusted gross margin of 14.8 percentage points can be explained mainly by improved food, production, packaging and shipping costs as a percentage of net sales driven by efficiencies gained as part of Project Blue Ocean as well as lower credit and incentives as a percentage of sales. Lower credits and incentives can be explained in part by the Company's focus on attracting and retaining customers that require lower incentives. The improved adjusted gross margin was partly offset by a lower net sales base.

For the 39 weeks ended June 3, 2023, the adjusted gross profit decreased by $1.4 million primarily due to lower net sales partially offset by lower costs of goods sold mainly in food, production and packaging costs. The increase in adjusted gross margin of 15.2 percentage points can be explained by lower food, production, packaging and shipping costs as a percentage of net sales costs driven by efficiencies gained as part of Project Blue Ocean.

EBITDA 1 , ADJUSTED EBITDA 1 AND ADJUSTED EBITDA MARGIN 1

For the 13 weeks ended June 3, 2023, adjusted EBITDA margin improved by 23.7 percentage points compared with the corresponding period in 2022 mainly driven by stronger adjusted gross margin and lower selling, general and administrative expenses due to a lower salary base and other Project Blue Ocean initiatives. The improved adjusted EBITDA margin was partly offset by a lower net sales base.

For the 39 weeks ended June 3, 2023, adjusted EBITDA margin improved by 20.8 percentage points compared with the corresponding period in 2022 mainly driven by stronger adjusted gross margin and lower selling, general and administrative expenses mainly due to a lower salary base and other Project Blue Ocean initiatives. The improved adjusted EBITDA margin was partly offset by a lower net sales base.

FREE CASH FLOW 1 AND ADJUSTED FREE CASH FLOW 1

For the 13 weeks ended June 3, 2023, adjusted free cash flow improved by $22.8 million compared with the corresponding period in 2022 mainly driven by lower net loss in the third quarter of 2023 compared with same corresponding 2022 period resulting primarily from lower salary base and other Project Blue Ocean initiatives and lower additions to fixed assets as new facility roll-outs were concluded in Fiscal 2022.

For the 39 weeks ended June 3, 2023, adjusted free cash flow improved by $72.2 million compared with the corresponding period in 2022 mainly driven by lower net loss resulting primarily from lower salary base and other Project Blue Ocean initiatives, lower additions to fixed assets as new facility roll-outs were concluded in Fiscal 2022 as well as proceeds on disposal of non-financial assets received mainly in the first quarter of 2023.

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, we are focused on growing the Goodfood brand through our 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

. The online meal solutions market continues to grow rapidly and meal kits are now estimated to have reached approximately $1 billion dollar in size in Canada as part of the $144 billion Canadian Grocery industry. Globally, the meal kit market is estimated by Vantage Research to reach US$51.2 billion by 2030, growing at an 18.2% CAGR (Vantage Research, July 2023). With roughly only 8.4% of households subscribed to a meal kit service (see Annual Information Form for details), we believe there is substantial runway for additional penetration of meal kits into Canadian households. We believe 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 online food delivery penetration. With a future household penetration of 20%, the market for weekly meal plans including meal kits, prepared meals and add-ons in Canada could reach approximately $3 billion in the coming years and Goodfood is well positioned to capture a significant share of that market.

Before scaling our efforts to capture an outsized share of the meal solutions market, our focus has been and continues to be on further improving and growing cash flows. We are pleased to have now reported two consecutive quarters of positive adjusted EBITDA1 and have driven adjusted free cash flows1 in positive territory to the tune of $4 million in the third quarter alone. Having improved adjusted EBITDA1 and adjusted free cash flows1 by $14 million and $23 million, respectively, on the back of lower net sales highlights the cost discipline we have shown in improving our operational efficiency and selling, general and administrative reduction. This turnaround, enabled in large part by our team's execution of Project Blue Ocean, positions Goodfood ideally to turn its focus to growth and fund its growth with internally generated cash flows. The stable net sales this quarter - increasing by $0.1 million compared with the second quarter of this year - provide a template and launchpad to return Goodfood to consistent growth during Fiscal 2024.

During Fiscal 2024, Goodfood will focus on three key growth drivers: 1) customer growth, 2) order frequency increase, and 3) basket size enhancement.

To grow our customer base, the first step is building customer acquisition cost efficiencies to enable adding more customers to the Goodfood platform every week with the same investment. In recent months, we have completed a thorough review of our acquisition channels and tested various data-driven strategies that have driven initial improvements to acquisition costs in the third quarter. Moreover, we have made and continue to make investments in our digital product to elevate the customer experience by reducing friction and enhancing ease of signups. Combined with reactivations of previous Goodfood members, these customer growth initiatives will look to broaden our base of customers, with our focus continuing to be on the profitability of new customers.

To enhance our order frequency, we have further built our loyalty VIP program, which rewards our best customers with exclusive discounts, live events and a dedicated customer service experience. In addition to enticing our most loyal customers, we are increasing the diversity of our recipe and ingredient offering to provide additional choices to enhance order rate. With a focus on Better-for-You products like organic chicken breasts and paleo and keto meals, combined with a growing selection of ready-to-eat meals and exciting upcoming partnerships with first-rate restaurants, we plan on offering an exciting and mouth-watering selection to customers to drive consistently increasing order frequency.

The dollar-value of the baskets our customers are building is also increasing and we are building a differentiated set of meal kits, ready-to-eat meals and add-ons to provide Canadians with an exciting online meal solutions option and increasingly capture a larger share of their food wallet. With the recent launch of our discovery bundles including our Block Party BBQ and Italian Discovery we aim to bring customers through a culinary journey that will aim to drive larger baskets purchased on Goodfood. In addition, we will soon be providing more choice of proteins to our customers, with the upcoming launch of customization and upsells within our meal-kit recipes allowing customers to swap or double the proteins included in their chosen recipes. With these initiatives, we aim to provide customers with an array of options to easily make their baskets bigger.

In addition to focusing on these three key drivers of top-line growth, we will continue to explore the potential for multi-channel partnerships that can broaden Goodfood's customer reach and resilience.

To maximize the reach of our growth initiatives, we first improved the economics of our customer acquisition cost and customer metrics and, beginning in the first quarter of next fiscal year, will invest in efficient, data-driven, and highly targeted marketing strategies to capture new customers with solid profitability metrics. Now that we have delivered on our goal to return to Adjusted EBITDA1 profitability and that cash flows are positive in the third quarter, growing these two metrics in the coming quarters and years is likely to be driven by top-line growth and that is where our focus is, building a frictionless platform, product diversity, customer retention and efficient marketing initiatives.

With the steps we have taken and progress made in overcoming recent challenges, our strategic execution to drive profitability and cash flows continues to bear fruit, underpinned by consistent improvement in Adjusted EBITDA1 and cash flows. Coupled with our unrelenting focus on nurturing our customer relationships, profitable growth remains our 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 winter 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 Customers1 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 July 18, 2023, at 8:00AM Eastern Time. Interested parties can join the call by dialing 1-416-764-8646 (Toronto or overseas) or 1-888-396-8049 (elsewhere in North America). To access the webcast and view the presentation, click on this link: https://www.makegoodfood.ca/en/investisseurs/evenements

Parties unable to call in at this time may access a recording by calling 1-877-674-7070 and entering the playback passcode 698192#. This recording will be available until July 25, 2023.

A full version of the Company's Management's Discussion and Analysis (MD&A) and Consolidated Financial Statements for the third quarters ended June 3, 2023, and June 4, 2022, will be posted on http://www.sedar.com later today.

ABOUT GOODFOOD

Goodfood (TSX: FOOD) 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. We are passionate about connecting our partner farms and suppliers to our customers' kitchens while eliminating food waste and costly retail overhead. The Company's administrative offices are based in Montreal, Quebec, with production facilities located in the provinces of Quebec and Alberta.

We seek Safe Harbor.