Goodfood Market Corp. (FOOD) Earnings Call Transcript & Summary

My name is Neil Cuggy, and I move that the special resolution approving and authorizing an amendment to the company's articles with respect to stakeholder interests in relation to the company's application for B Corp Certification, the whole is set forth in Annex D of the management proxy circular be hereby approved.

My name is Roslane Aouameur, and I second the motion.

I now invite you to vote on the resolution. [Voting]

Since we have covered all the topics on the meeting agenda, we will now pause for 1 minute in order to allow registered shareholders and proxy holders to vote if they have not already done so. I remind you that if you have already voted by proxy, it is not necessary to vote again. [Voting]

The voting period is now closed for all the topics on meeting agenda. [Foreign Language] Neil Cuggy, Jonathan Ferrari, Donald Olds, Terry Yanofsky, John Khabbaz. [Foreign Language] As we have completed the business of the meeting, I will ask for a motion to close the formal portion of the meeting before proceeding to a question period and the management presentation.

My name is Neil Cuggy, and I move that the meeting be closed.

My name is Roslane Aouameur, and I second the motion.

I now declare the meeting terminated. We are now opening the question period. I would like to remind you that only shareholders or proxy holders are entitled to ask questions, and that the instructions for asking a question appear on your screen. We will take a short break to allow you to ask your questions, if any, by following the instructions that appear on your screen. As there are no further questions, we will now proceed to the management presentation. Over the past year, we have spent time thinking back to our purpose and the value proposition, Goodfood is looking to provide Canadians. Our mission is to spark joy, by making cooking and eating a fun, exciting and enjoyable experience to help Canadians live longer by achieving a balanced and healthy diet and to enable our community to enjoy a healthier planet by offering planet conscious products that are sourced packaged and delivered sustainably. As we embark on the year of Goodfood's 10th anniversary, we are very motivated to continue to execute towards that ambitious purpose. We will look forward to a laser focus on our meal-kit experience and align our teams towards building Canada's most loved digital first food brand. We will now move to Slide 10 to review recent strategic developments. We're pleased to have built on our profitability momentum by delivering consecutive quarters of positive EBITDA and record EBITDA for the full fiscal year. This performance demonstrates our commitment to build on our improved financial performance, to generate growing profitability and cash flows. Operational efficiencies, our teams have hard worked to gain in addition to continuous pricing optimizations, drove robust gross margin, with gross profit stable year-over-year on a lower net sales basis. Combined with unwavering SG&A discipline, the improved gross margin has led to strong EBITDA performance. The efficiencies, our team has been laser-focused on achieving our key to Goodfood's profitable growth. Both in recent months and into the future, we continue to build on the momentum we've created by consistently strengthening our customer value proposition to increase the stickiness of our customer base and unlock new total addressable market. We have increased and continue to increase our assortment of delicious recipes. We are investing in the user experience on our digital platforms while doubling down on sustainability and building inspiring partnerships with good food ambassadors and brand partners. Overall, we are lean, mean and disciplined which puts us in a strong position to continue delivering EBITDA growth and look forward to accelerating that growth and profitability. I will now move to Slide 11 to review our outlook. In recent quarters, we shared with you the customer feedback that is informing our road map and execution to enhance our customer value proposition every day. This feedback has been instrumental in creating a stickier and more engaged fan base as well as helping to carefully grow our addressable markets, both within our direct-to-consumer meal-kit market and within adjacent categories to increasingly serve the needs of new customer segments. Overall, home cooking remains the most popular way Canadians eat dinner. In the current challenging economic climate with the potential for a recession and discretionary income spending correction, home cooking is becoming even stickier. Our customers, families and busy professionals are increasingly focused on preparing and eating healthy, nutritious and tasty meals at home with high-quality ingredients that can be prepared quickly. Armed with that feedback, we continue to broaden our assortment of healthy recipes that provide low-carb options. And with the expanded customization options we launched, we have given our customers the option to choose different proteins for various recipes or even customize the size of protein they can order. We also continue to partner with key brand ambassadors to align our customers' wants and values with our meals and brands. After a successful partnership with Montreal Canadiens' Captain, Nick Suzuki, we have also partnered with Sarah Nurse, Pro Hockey Olympic Medalist with more exciting partnerships to come. In addition to answering our members call for more health-focused options, we have also taken and stride customers' desire for experiences that spark joy while offering an alternative to pricey restaurants and takeout options. For example, we have introduced a rotation of delicious value meals starting at $10.99 per serving. That combine our leading culinary creativity with our Farm Fresh ingredients and unique sourcing abilities to provide a delicious meal experience at an attractive price. We also started selling 4-serving Family style recipes on our 2 serving plans, which can be used for entertaining or weekly meal planning and provide great value to our customers. These family style recipes are a great way for us to continue increasing our average basket size. As Canadians increasingly eat at home, we're continuing to find new ways to spark joy cooking at home, building on the momentum of our curated unique partnerships with some of the best restaurants in Canada, bringing local flavors from Arlo in Toronto and St. Lawrence in Vancouver with more exciting collaborations in the pipeline that are sure to delight our fans. Finally, Canadians are prioritizing planet-friendly options whenever possible. Our members have long enjoyed the perfectly portioned ingredients that nearly eliminate food waste, and our farm-to-table supply chain that removes intermediaries and additional costs from meal planning. After building on that, offsetting carbon emissions on Goodfood deliveries, and by introducing packaging innovations that have helped us remove the equivalent of 2.4 million plastic bags annually from our deliveries, we are taking it up a notch by entering the process of applying for B Corp Certification, a rigorous and credible certification that will further highlight our sustainability efforts across many areas of Goodfood. We have already started seeing results from the initiatives we have mentioned today and in previous quarters. For example, our customers are ordering bigger baskets containing more portions of our delicious recipes with basket sizes increasing double-digit percentage points year-over-year, further supported by our customers' order rate, also displaying a significant increase compared to the same period last year. Overall, we are lean, mean and consistently growing our profitability. We are also remaining focused on consistently growing our customer value proposition and with continued SG&A and operational discipline, we are in a strong position to continue growing our free cash flow at an attractive pace in fiscal 2024 and beyond. On that note, I will pass it on to Ros to go over Slide 12 and briefly review our financial performance for this past fiscal year, and most recent quarter.

Thank you, Jon. For fiscal 2023, we are pleased to report our largest ever adjusted EBITDA performance of $5 million or a margin of 3%, compared to an EBITDA loss of $41 million or negative margin of 15% last year. This successful turnaround and record performance stem from the operational efficiency gains as well as our focus on consistently improving unit economics over time through enhancements to customer value proposition. This strong performance is underpinned by a structurally strong gross margin, which also hit an annual record of 39%. On the SG&A side, we have reduced annual non-marketing SG&A by $34 million this year, enabling a cost structure that can consistently drive growth in our profitability metrics. Our marketing efficiency initiatives have also begun bearing fruit as our customer acquisition cost has decreased by double-digit percentage points compared to the same period last year and to the early quarters of last fiscal year. These levels of profitability have translated into an $87 million improvement in adjusted free cash flows, well on our way to consistently generating and growing positive free cash flows. Fiscal 2023's financial performance provided the ideal launchpad for our plan to generate profitable growth for years to come and generate significant shareholder value. As such, we use 2023's momentum to generate positive adjusted EBITDA for a fourth quarter in a row in Q1 of 2024, driving LTM adjusted EBITDA to $8.5 million. We also generated strong positive cash flows from operations in the first quarter of fiscal 2024, leading to adjusted free cash flow of $4 million in the first quarter. Overall, we are energized with consistently strong results that have driven record profitability and cash flow metrics continuously improving quarter after quarter. This note, I will pass it back to Jon.

[Foreign Language]

Thank you for attending today's meeting. You may now disconnect.