Q4 2023 Goodfood Market Corp Earnings Call
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Great and can I, just take your name and company.
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Net sales per active customer grew roughly in line year over year and declined sequentially driven by lower order rate typical for this amendment.
We will now turn to slide five which look better profitability level.
We are pleased to now have delivered three consecutive quarters of positive adjusted EBITDA.
On the back of continuous improvement in gross margin, which reached 38% in the fourth quarter and 990 basis point improvement compared to the same quarter last year, we achieved 1 million of adjusted EBITDA. This quarter for a margin of nearly 2% or 6% improvement year over year.
This level of profitability in our fourth quarter underscore the efforts made by our teams to simplify and enhance the efficiency of our operations.
And with pricing optimization, and a focus on our most profitable products and customers.
These improvements have now shown to be structural in nature and provide a solid platform to sustain growing profitability as evidenced by the gross profit in dollars remaining again stable year over year on the Barnett shale.
The increased gross margin combined with the implemented G&A people provide the lean cost structure, enabling to maintain consistent EBITDA profitability, even in seasonal quarters like this one or two quarters with increased marketing activity as indicated in the current first quarter.
I will now move to slide six for a review of cash flow and capital expenditures.
Cash flows used by operating activities were $2 million and $11 million improvement compared to the same quarter last year.
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To review, our cash flows and capital expenditures.
The reversal from positive CFO in the third quarter of this year two negatives.
Cash flows used by operating activities were $2 million in it.
CFO this quarter is driven by the nature of our working capital as we pay invoices stemming from the higher volume third quarter and the lower volume fourth quarter.
$11 million improvement compared to the same quarter last year.
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Still the substantial improvement compared to last year, mainly the result of improved profitability.
CFO this quarter is driven by the nature of our working capital as we pay invoices stemming from the higher volume third quarter and the lower volume fourth quarter.
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Capital expenditure came in again at less than a quarter million dollars.
Relating mainly to capitalized labor of tech investments and payments of minor maintenance work.
Still a substantial improvement compared to last year, mainly the result of improved profitability.
Capital expenditure came in again at less than a quarter million dollars.
This continues our consistent reduction of capital intensity, when compared to last year's fourth fourth quarter Capex of $5 million.
Relating mainly to capitalized labor of tech investments and payments of minor maintenance works.
As a measure of our cash generation ability. We introduced this year a metric that combines our cash flow from operations and capital expenditure at.
This continues our consistent reduction of capital intensity, when compared to last year's fourth fourth quarter Capex of $5 million.
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That metric is free cash flow.
As a measure of our cash generation ability, we introduced this year a metric that combined with our cash flow from operations and capital expenditures that.
As you can see here when adjusting for restructuring related outflows, we used $1 million of free cash flow in the seasonal fourth quarter and $11 million improvement compared to last year.
Speaker 3: Hello, good morning. I would like to join to a good food conference, please. Great. Can I just take your name and company? A-U-R-A-I-E-T-R-A.
That metric is free cash flow.
As you can see here when adjusting for restructuring related outflows, we used $1 million of free cash flow in the seasonal fourth quarter and $11 million improvement compared to last year.
This performance has been the result of growing profitability as well as lower capital investment and underscores our disciplined approach to cost management and capital allocation and our commitment to delivering delivering long term shareholder value through substantial free cash flow generation.
This performance has been the result of growing profitability as well as lower capital investments and underscores our disciplined approach to cost management and capital allocation and our commitment to delivering delivering long term shareholder value through substantial free cash flow generation.
Turning to slide seven you will find a summary of our performance this quarter and fiscal year.
Speaker 4: The conference is now being recorded.
Overall as John mentioned, we're energized with the results of our team's hard work, which has driven record gross margin and adjusted EBITDA. This year.
Turning to slide seven you will find a summary of our performance this quarter and fiscal year.
Both of them are annual and quarterly basis profitability indicators have displayed the material improvement and consistent strength year over year, demonstrating our unwavering commitment to profitability and cash flow.
Speaker 4: Net sales per active customer will roughly align year over year and decline sequentially driven by the lower order rate typical for the summer months. We will now turn to slide...
Overall as John mentioned, we're energized with the results of our team's hard work, which has driven record gross margin and adjusted EBITDA. This year.
Both of them are annual and quarterly basis profitability indicators have displayed the material improvements and consistent strength year over year, demonstrating our unwavering commitment to profitability and cash flow.
Focusing on this fiscal year, we are very pleased to report our largest ever annual adjusted EBITDA nearly $5 million at a margin of 3%.
Speaker 4: We are pleased to now have delivered three consecutive quarters of positive adjusted EBITDA. On the back of continuous improvement in gross margin, which reached 38% in the fourth quarter, and 990 basis points improvement compared to the same quarter last year, we achieved $1 million of adjusted EBITDA this quarter for a margin of nearly 2%, a 6% improvement year over year.
Strong performance is underpinned by a structurally strong gross margin, which also hit an annual record at 39%.
Focusing on this fiscal year.
We're very pleased to report our largest ever annual adjusted EBITDA, sending up nearly $5 million at a margin of 3%.
Levels of profitability have translated into an $87 million improvement in adjusted free cash flow as well on our way to consistently generating and growing positive free cash flow.
Strong performance is underpinned by a structurally strong gross margins, which also hit an annual record of 39%.
Speaker 4: This level of profitability in the fourth quarter underscores the efforts made by our teams to simplify and enhance the efficiency of our operations.
These levels of profitability would have translated into an $87 million improvement in adjusted free cash flow as well on our way to consistently generating and growing positive free cash flow.
This year's financial performance provide the ideal launch pad for our plan to generate profitable growth for years to come and generate significant shareholder value.
Speaker 4: combined with pricing optimization and a focus on our most profitable products and customers. These improvements have now shown to be structural in nature and provide a solid platform to sustain growing profitability, as evidenced by the gross profit in dollars remaining again stable year over year on the lower net field.
On this note I will turn it back to John to review our outlook.
This year's financial performance provide an ideal launch pad for our plan to generate profitable growth for years to come and generate significant shareholder value.
Thank you Ross.
Which is the slide eight last quarter, we shared key customer insights that inform our long term roadmap to consistently grow our customer value proposition, thereby creating an increasingly sticky customer base as well as carefully growing our tam to serve the needs of new customer segments.
On this note I will turn it back to John to review our outlook.
Speaker 4: The increased gross margin combined with the implemented G&A savings provide the lean call structure enabling to maintain consistent even-dub profitability, even in seasonal quarters like this one, or in quarters with increased marketing activity, as is the case in the current first quarter.
Thank you Ross.
With me to slide eight last quarter, we shared key customer insights that inform our long term roadmap to consistently grow our customer value proposition and thereby creating an increasingly sticky customer base as well as carefully growing our time to serve the needs of new customer segments.
Yeah.
Speaker 4: I will now move to slide six for review of cash flows and capital extended.
First busy.
D C professionals and families are increasingly craving delicious and nutritious meal.
Speaker 4: Cash flows used by operating activities were $2 million and an $11 million improvement in the same quarter last year. The reversal from positive cash flow in the third quarter of this year to negative cash flow in this quarter is driven by the nature of our working capital as we pay invoices stemming from the higher volume in the third quarter and the lower volume in the fourth quarter.
Can be prepared in minutes.
Yeah.
With this in mind.
First busy professionals and families are increasingly craving delicious and nutritious meals that can be prepared in minutes.
We have broadened our assortment of carb wise calories, smart keto, Paleo and high protein recipes by over 50%.
With this in mind.
Many of which can be prepared within 10 or 15 minutes.
We have broadened our assortment of carb wise calories, smart keto, Paleo and high protein recipes by over 50%.
We partnered with key brand ambassadors to amplify the initiative.
Speaker 4: Still, this is essentially proven compared to last year's main nature of our work in capital, as we pay in voices stemming from higher volumes of capital expenditures gaming again at less than a quarter million dollars.
Including Montreal Canadiens Captain <unk>.
Any of which can be prepared within 10 or 15 minutes.
And per some of the new meals with the introduction of our better for you proteins, including organic beef grass fed advising and steelhead trout.
Yes.
We partnered with key brand ambassadors to amplify the initiative.
Speaker 4: relating maintenance to capitalizing labor, technical security, and payments is minor maintenance.
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Second we are seeing strong demand from customers, who are looking for experiences that spark joy, while providing an alternative to price your restaurant options.
And per some of the new meals with the introduction of our better for you proteins, including organic beef grass fed bison and steel head trapped.
Speaker 4: This continued our commitment to reduction of capital identity when poor engines last year's fourth quarter, namely, capitalized by the And payments as a measure of our cash generation continues and introduced Recently a metric that combines our cash flow from our latest and capital expenditure capex that metric is free cash
To achieve that we have curated select partnerships for our customers, including exclusive meals co created with Michelin starred.
Second we are seeing strong demand from customers, who are looking for experiences that's broke joy, while providing an alternative to pricey restaurant options.
Speaker 4: As you can see here, we're adjusting for the structuring-related value flows. This year, we used $1 million for cash flow and operation for importance, and $11 million of that treatment is for cash flow. As you can see here, we're adjusting for the cost of building as well as the lower capital investment. An underscore, our discipline approach to cost management and capital allocation and our commitment to delivering long-term shareholder value as well as lower capital generation. An underscore.
Saint Lawrence restaurant in Vancouver to bring dishes like lemon chicken piccata with fresh fettuccine, and garlic roasted broccolini to our customers' homes.
To achieve that we have curated select partnerships for our customers, including exclusive meals co created with Michelin starred Saint Lawrence restaurant in Vancouver to bring dishes like lemon chicken piccata with fresh fettuccine, and garlic roasted broccolini to our customers' homes.
Another exciting product innovation, we introduced to our customers. This fall is our new line of Air Fryer recipes and partnership with Ninja Canada's number one selling air Fryer brands.
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Another exciting product innovation, we introduced to our customers this fall.
Our air Fryer recipes take minutes to prepare costs half the price of restaurant delivery and provide unbeatable crispy flavors like our air Fryer fried chicken sandwiches with Spice Honey and crisp Apple Kale salad.
Our new line of Air Fryer recipes and partnership with Ninja.
Speaker 4: Turning to slide 7, you will find a summary of our performance and interoperability over the year. Overall, we are energized with the results of our team's hard work. We're turning to slide 7 and you will find a summary of our performance, both on an annual and quarterly basis. Profitability indicators have displayed superior improvement and consistent strength for year over year, demonstrating our unwavering commitment to profitability. Both on an annual and quarterly basis, focusing on this indicator, we are very pleased to report our largest ever annual adjusted EBITDA percentage at nearly $5 million and a margin of 3% in cash flow. This strong performance is underpinned by a structurally strong core zone, which also hits an annual record at 39% and gets nearly $5 million. These levels of profitability have translated into an $87 million underpaid adjusted free cash flow, which also is generating and growing
And it is number one selling air Fryer brands.
Our air Fryer recipes take minutes to prepare costs half the price of restaurant delivery and provide unbeatable crisp flavors like our air Fryer fried chicken sandwiches with Spice Honey and crisp Apple Kale salad.
It's been a hit with our customers.
Third.
Canadians are prioritizing planet friendly options whenever possible.
Our customers have long appreciated are perfectly portion of ingredients.
It's been a hit with our customers.
Third.
That's save them from food waste and keep more cash in their pockets.
Canadians are prioritizing planet friendly options whenever possible.
As well as the way in which we built our supply chain to remove middle men from farm to kitchen table.
Our customers have long appreciated are perfectly portion of ingredients.
That save them from food waste and keep more cash in their pockets.
This year, we've taken it up another notch by offsetting carbon emissions on good food deliveries and by introducing packaging innovations.
As well as the way in which we've built our supply chain to remove middlemen from farm to kitchen table.
Helped us to remove the equivalent of $2 4 million plastic bags annually from our deliveries.
This year, we've taken it up another notch by offsetting carbon emissions on good food deliveries and by introducing packaging innovations that have helped us to remove the equivalent of $2 4 million plastic bags annually from our deliveries.
We have already started seeing results from the initiatives we've covered together today.
Speaker 4: If your financial performance provides the ideal launchpad for a plan to generate profitable growth for years to come, well and are willing to generate significant shareholdership, you have a growing positive free cash flow. On this note, I will turn it back to John to review the ideal launchpad for a plan to generate profitable growth for years to come and generate significant shareholdership.
Which will compound into free cash flow growth going forward.
For example, in the fourth quarter, our customer's basket size increased by 3% compared to the third quarter without a price increase.
We have already started seeing results from the initiatives we've covered together today.
Which will compound into free cash flow growth going forward.
Throughout the quarter, we were also able to improve customer acquisition costs by double digit percentage points.
For example, in the fourth quarter, our customer's basket size increased by 3% compared to the third quarter without a price increase.
Speaker 5: Switching to slide 8, last quarter we shared key customer insights that inform our long-term roadmap to consistently grow our customer value proposition, thereby creating an increasingly sticky customer base, as well as carefully growing our task to serve the needs that inform our long-term roadmap to consistently grow our customer value proposition.
As a larger share of our sign ups come from referrals from passionate customers and reactivation from older customers, who want to discover the new good food.
Throughout the quarter, we were also able to improve customer acquisition costs by double digit percentage points.
As a larger share of our sign ups come from referrals from passionate customers and reactivation from older customers, who want to discover the new good food.
Overall, our lean and mean teams are happy to have achieved record profitability. This year.
Speaker 5: First, busy professionals and families are increasingly craving this delicious and nutritious meal that can be prepared in minutes.
Going forward, we are convinced that by remaining focused on consistently growing our customer value proposition with sustained discipline on our SG&A costs.
Overall, our lean and mean teams are happy to have achieved record profitability. This year.
Speaker 5: With this in mind, we have broadened our assortment of carb-wise, calorie-smart, keto, paleo, and high-protein recipes by over 50%.
We are in a strong position to continue growing our free cash flow at an attractive pace in fiscal 2024 and beyond.
Going forward, we are convinced that by remaining focused on consistently growing our customer value proposition with sustained discipline on our SG&A costs.
Speaker 5: Many of which can be prepared in 10 or 15 minutes. Calorie smart. We partnered with key brand ambassadors to amplify the initiative, including Montreal Canadiens Captain Nick Suzuki, and paired some of the new meals with the introduction of our Better For You proteins, including organic beef, grass-fed bison, and steelhead trout.
On that note I will turn it over to the operator for the Q&A portion of this call.
We are in a strong position to continue growing our free cash flow at an attractive pace in fiscal 2024 and beyond.
Thank you, Sir ladies and gentlemen, you will now begin the question answer session should you have a question. Please press star followed by the number one on your touch stone fun again that's.
On that note I will turn it over to the operator for the Q&A portion of this call.
Thank you, Sir ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the number one on your thoughts John Zang.
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Speaker 5: Second, we are seeing strong demand from customers who are looking for experiences that spark joy while providing an alternative to pricey restaurant options.
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<unk> followed by the number one.
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Speaker 5: To achieve that, we have curated select partnerships for our customers, including exclusive meals co-created with Michelin-starred St. Lawrence restaurant in Vancouver to bring dishes like lemony chicken toccata with fresh fettuccine and garlic-roasted broccolini to our customers' homes.
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Hi, good morning, guys.
Good morning, most of my my first.
Our first question comes from the line of Martin Landry from Stifel. Please go ahead.
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We're almost there on your Q1 quarter.
Speaker 5: Another exciting product innovation that we introduced to our customers this fall is our new line of air fryer recipes in partnership with Nunchuk, Canada's number one selling air fryer product innovation.
Hi, good morning, guys.
Quarter.
So.
Good morning.
I was wondering if you can give us some color on how the quarter as as gone you know, perhaps some color on revenues customer account profitability.
My first question.
We're almost done.
Your Q1.
Quarter.
Speaker 5: Our air fryer recipes take minutes to prepare, cost half the price of restaurant delivery, and provide unbeatable crispy flavors like our air fryer fried chicken sandwiches, our air fryer recipes take minutes to prepare, and cost half the price of restaurant delivery.
I was wondering if you can give us some color on how the quarter as as gone you know, perhaps some color on revenues customer account profitability.
And you know, especially given that.
The macro outlook in Canada is difficult so just.
Any color would be super helpful.
Yeah.
Especially given that.
Good morning, and thanks for the question.
The macro outlook in Canada is difficult so just.
Speaker 5: Third, Canadians are prioritizing climate-friendly options whenever possible. Our customers have long appreciated our perfectly portioned ingredients.
So we have we.
We have continued to see certainly a deterioration in the macro environment that's impacting.
Any color would be super helpful.
Yeah.
Good morning, and thanks for the question.
Everyone from from customers too.
So we have we.
The suppliers that are experiencing stress as well.
Speaker 5: that save them from food waste and keep more cash in their pockets as well as the way in which we've built our supply chain to remove middlemen from farm-to-kitchen tables. This year, we've taken it up another notch by offsetting carbon emissions on good food deliveries and by introducing packaging innovations that have helped us to remove the equivalent we've taken it up another notch by offsetting carbon emissions on good food deliveries.
We have continued to see certainly deter.
Deterioration in the macro environment that's impacting.
So it is a difficult environment.
Everyone from from customers to suppliers that are experiencing stress as well.
I think the work that we've done over the past 12 months has put us in a really good place to continue growing.
So it is a.
Our profitability and.
A difficult environment.
We've also made a lot of the investments upfront as we were talking about to improve and grow.
I think the work that we've done over the past 12 months has put us in a really good place to continue growing our.
Our customer value proposition consistently.
Our profitability and.
So we continue to see.
We've also made a lot of the investments upfront as we were talking about to improve.
Year over year improvements on our customer acquisition cost.
Speaker 5: We have already started seeing results from the initiatives we've covered together today, which will compound into free cash flow growth going forward from our deliveries. For example, in the fourth quarter, our customer basket size increased by 3% compared to the third quarter without a price increase.
And grow.
Customer lifetime values are also increasing based on.
Our customer value proposition consistently so.
So we continue to see.
Better order rates.
Year over year improvements on our customer acquisition costs.
As well as.
Some success that we've seen in growing the basket size through some of the.
Customer lifetime values are also increasing based on.
Partnerships that we talked about with the with the brands that we're working with.
Speaker 5: Throughout the quarter, for example, we were also able to improve customer acquisition costs by double digit percentage points compared to the third quarter, as a larger share of our sign-ups come from referrals from passionate customers, and reactivations from older customers who want to discover the new good in us.
Better order rates.
I think the.
As well as.
The outlook continues to be difficult on the macro side, but.
Some success that we've seen in growing the basket size through some of the.
But I think good food discovery.
Partnerships that we talked about with the with the brands that we're working with.
Relatively well.
Through it.
I think the.
And from.
The outlook continues to be difficult on the macro side, but.
From a quarterly active customer count we have seen growth from Q4 to Q1.
Speaker 5: a larger share of our signups come from referrals. Overall, our lean and mean teams are happy to have achieved record profitability this year.
But I think good food discovery.
Relatively well.
Which is a very good sign and a good base for us to to be starting fiscal 'twenty four.
Through it.
From a quarterly active customer count we have seen growth from Q4 to Q1.
Speaker 5: We are convinced that by remaining focused on consistently growing our customer value proposition, our lean and mean VCs are happy to have a consistent profitability this year. We are in a strong position to continue growing our free cash flow at an attractive pace in fiscal 2024, and with sustained discipline on our SG&A call. On that note, I will turn it over to the operator for the Q&A portion of this call.
Okay. Thank you that's helpful. So so youre able to grow your customer count in this difficult environment that's great.
Which is a very good sign and a good base for us to to be starting fiscal 'twenty four.
I've noticed your credits and incentives for Q4 gone up a little bit I think there were around 16%.
Okay. Thank you that's helpful. So so youre able to grow your customer count.
You know.
In this difficult environment that's great.
How do you balance.
I've noticed your credits and incentives for Q4 gone up a little bit I think there were around 16%.
You know credits and incentives to.
Speaker 6: Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the number one on your touchstone phone. Again, that's star followed by the number one. You will hear a three-tone prompt acknowledging your request. Should you have a question, please press star followed by the number one on your touchstone phone. Again, that's star followed by the number one. You will hear a three-tone prompt acknowledging your request.
To attract customers versus.
You know.
Profitability. Its just I don't know if you can just walk us through a little bit you know at what point at what point the Delta and it makes you look at profitability versus customer count.
How do you balance.
Credits and incentives too.
To attract customers versus them.
Profitability.
Its just I don't know if you can just walk us through a little bit you know.
Yes, it's a good question and you alluded strike compared to Q4 of last year and this year I think a few things to talk about the first one being the Reengagement campaigns, you mentioned that it was where a first for us in and they were and initial test in the fourth quarter, it's not a perfect quarter to do that but I think it would be.
What point at what point, the Delta and it makes you look at profitability versus customer count.
Speaker 6: Our first question comes from the line of Martin Landry from Stevell. He's got it. We are using a speakerphone. Please lift your hands. Hi.
Yes, it's a good question and you've noted strike two compared to Q4 last year and this year I think a few things to talk about the first one being the Reengagement campaigns you mentioned that these were.
That's a really good result.
Speaker 7: Morning, my first question, you know, we're almost done your your Q1 quarter guys. So,
That drove incentives a little higher.
First for us and there were.
I think the other piece of it if you think of C&I lots here with with on demand being quick delivery.
An initial test in the fourth quarter, it's not a perfect quarter to do that but I think it would be really really good results.
Speaker 7: I was wondering if you can give us some color on how the quarter has gone, perhaps get some color on revenues, customer count, profitability.
You'd see usually less less credits and more direct deliveries that they can in the Hudson around the weekly.
I drove incentives a little higher.
I think the other piece of it.
If you think of C&I lights here with with on demand dealer quick delivery.
We are planning a longer delivery, if that goes up a little bit.
Speaker 7: I was wondering if you can give us a color on how the quarter has gone, and you have a color on revenues, margin of return, profitability.
You'd see usually less less credits and more direct delivery that they can in the HUD somewhere on a weekly.
I think from a an overview of where we think things are tight.
Tight balance between making sure our.
Our gross sales, Florida like tailwind to our gross profit.
We are planning an early deliveries that goes up a little bit.
Speaker 5: you know, especially given that the macro outlook in Canada is difficult or just any colour would be super helpful.
And we still are able to make sure that the customer experience is good enough and because I had folks to either be we engage with the platform or to join the platform.
I think from a overview of where we think things are tight.
Tight balance between making sure.
Our gross sales, Florida led sales into our gross profit.
So I think if we can keep gross margin at a level, where we thought in the fourth quarter.
And we still are able to make sure that the customer experience is good and because I had folks to either be we engage with the platform.
Speaker 5: Everyone from customers to suppliers is experiencing the stress as well, so it is a difficult environment. I think the work that we've done over the past 12 months has put us in a really good place to continue growing our profitability.
While being able to be incentivizing people to order and join the platform I think those two combined to provide a pretty good balance and then drive profitability on an EBITDA basis and improved cash flows.
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I think if we can keep gross margin at a level, where we thought in the fourth quarter.
Being able to be incentivizing people to order and join the platform I think those two combined to provide.
So I.
I'm not going to say Q4 was the perfect balance of that but it is an indication of what we can where we can go up to it where we can go on C&I.
Speaker 5: We've also made a lot of investments up front, as we were talking about, to improve and grow our customer value proposition consistently, so we continue to see.
Pretty good balance and then drive profitability on an EBITDA basis and improved cash flows.
Maintaining good gross margin and EBITDA profitability.
So.
Allow me to say Q4 was the perfect value for that but it's an indication of what we can where we can go up to it where we can go on C&I.
Speaker 5: We've also made year-over-year improvements on our customer acquisition costs.
Okay. That's helpful and maybe if I can please.
But my point on that.
Speaker 5: Customer lifetime values are also increasing based on the better order rates as well as the success that we've seen in growing the basket size through some of the partnership that we talked about with the brand.
I'm, sorry, just jumping in on.
While maintaining good gross margin and EBITDA profitability.
Excuse me on my question just on the.
Theres, a strong interplay as well from a customer.
Okay. That's helpful and maybe if I can.
Customer acquisition costs to our C&I percentage, so the higher the C&I.
With my play on that.
I'm, sorry, just jumping in on.
Excuse me all my question just on the there is a strong interplay as well from a customer.
Up to a certain point, we see in our in our modeling that customer acquisition costs will actually come down and the inverse is true as well so we're constantly playing with.
Speaker 5: So I think the outlook continues to be difficult on the macro side, but I think good food is scouring relatively well with the brand through it. So I think from an orderly active customer count, we have seen growth from Q4 to Q1, which is a very good sign and a good base for us to be starting fiscal 2021.
Customer acquisition costs to our C&I percentage, so the higher the C&I.
Obviously maximizing lifetime value, but is there a.
Up to a certain point, we see in our in our modeling that.
12%, CNI target or 16% CNI target and what does that mean for our cost of acquisition and the efficiency of our media spend as well so if.
Customer acquisition costs will actually come down and the inverse is true as well so we're constantly playing with.
Obviously maximizing lifetime value, but is there a.
If you reduce one it doesn't necessarily mean, it's going to all go to profitability right away, but what you're trying to do over the long term is get the most lifetime value and shortest payback on your marketing investments.
12%, CNI target or 16% C&I targets and what does that mean for our cost of acquisition and the efficiency of our media spend as well so if.
Speaker 7: Okay, thank you. That's helpful. So, so you're able to grow your customer account in this difficult environment. That's great.
If you reduce one it doesn't necessarily mean, it's going to all go to profitability right away, but what you are trying to do over the long term is get the most lifetime value and shortest payback on your marketing investments.
Yeah.
Okay. That's helpful. And then maybe just last one for me if I can squeeze in.
You've done an impressive job, but reducing your SG&A expenses I think you said $34 million in one year.
Speaker 4: I've noticed your credits and incentives for Q4 have gone up a little bit. I think they were around 16%. How do you balance credits and incentives to attract customers versus profitability? I don't know if you can just walk us through a little bit. It's a good question, and you've really tried to correct it to Q4 last year and this year. I think the three things you talked about, the first one being the re-engagement campaigns you mentioned that say these were first for us, and they were the initial test in the fourth quarter. I think the three things you talked about, the first one being it's not a really good result, and that drove incentives a little higher. I think the other piece is if you think of CNI last year with on-demand being a quick delivery, you'd see usually less credits and more direct delivery in the hot cover and the weekly. If you think of CNI real-planning and longer delivery on-demand, you'd see usually less credits and more direct delivery in the hot cover and the weekly. If you think of CNI real-planning and longer delivery on-demand, that goes up a little bit.
Okay.
Okay. That's helpful. And then maybe just last one for me if I can squeeze in.
Can you just remind us a little bit when do we lap most of the cost reduction for modeling purposes, that'd be that'd be helpful.
You've done a.
The impressive job at reducing your SG&A expenses, I think you said $34 million in one year.
Can you just remind us a little bit when do we lap most of the cost reduction for modeling purposes that would be that'd be helpful.
That's where they they they spend a couple of quarters last year I think by the end of Q2.
Q3 is where most of it will have been lapped I think if you try to compare G&A structure and 34 million in SG&A, including yet it's really G&A I.
Yes.
They spend.
Couple of quarters last year, I think by the end of Q2 and into Q3 is where most of it will has been lapped.
I think by Q U you'll have.
The more comparable year over year cost structure.
I think if you try to compare G&A structure and $34 million.
That said, where we were.
SG&A, including yet it's really G&A.
We're pleased and energized and and the team did a lot of work to get to that number. It doesn't mean, we're not going to look for further improvement and obviously won't have the same kit.
I think by Q3 you have the.
More comparable year over year cost structure.
With that said.
Okay. Okay.
We're pleased and energized and the teams did a lot of work to get to that number that doesn't mean, we're not going to look for further improvement and obviously won't have the same kit.
Congratulations thank you.
It's not that.
Ladies and gentlemen, just a reminder, so do you have a question. Please press star followed by the number one and you touched down fine. We have our next question comes from the line of Frederic Tremblay from that does you Kim. Please go ahead.
Yeah.
Okay. Okay.
Congratulations thank you.
Thanks, Matt.
Ladies and gentlemen, just a reminder, so do you have a question. Please press star followed by the number one on your Touchstone Fine. We have our next question comes from the line of Frederic Tremblay from Deutsche Bank. Please go ahead.
Thanks, Good morning.
Most of my questions have been answered, but I have a couple more one of the things I found interesting was with the upcoming launch of customization in terms of the.
Thanks, Good morning.
Being able to swap or double the proteins and the recipes and can you maybe share a bit more color on that where you're at with that.
One of my questions have been answered, but I have a couple more one of the things I found interesting was.
With the upcoming launch of our customization.
Coming to initiatives that you started testing it in.
If so what would be your initial takeaways from that and just your thoughts as well on the timing of when that.
Being able to swap or double the proteins and the recipes.
Can you maybe share a bit more color on that where you are after that.
Fully rolled out to the B.
Coming to initiatives that we started testing it in.
The entire customer base.
If so what would be your initial take away from that and just your thoughts as well on the timing of when that may be fully rolled out to the.
Got it great. Thanks for the question I think.
As we laid out in the past couple of quarters, we want to continue investing in and selection and the protein customization I think it's a in a way to to add selection without adding a ton of complexity. So we'll continue to explore different ways to use that to give customers.
The entire customer base.
Got it great. Thanks for the question I think.
As we laid out in the past couple of quarters, we want to continue investing in and selection and.
More selection more perception of selection and and hopefully grow.
The protein customization.
As a as a way to to add selection without adding a ton of complexity. So we'll continue to explore different ways to use that to give customers.
Speaker 7: There's a strong interplay as well from a customer acquisition cost to our...
Basket size and order rates consistently overtime as well.
It also gives us an opportunity to introduce different variety of proteins that we wouldn't necessarily be able to include it at base pricing in People's plans. We mentioned some of the organics Timna free range some of the grass fed beef. So you'll see some of those types of things continue to kind of come in and out of the menu and we test it.
Speaker 7: So, the higher the CNI up to a certain point, we see in our modeling that customer acquisition costs will actually come down, and the inverse is true as well. So, we're constantly playing with, obviously, maximizing lifetime value, but is there a 12% CNI target or a 16% CNI target, and what does that mean for our cost of acquisition and the efficiency of our media spend as well? So, if you reduce one, it doesn't necessarily mean it's going to all go to profitability right away, but what you're trying to do over the long-term is gain the most lifetime values and shortest payback on your marketing inventory.
More selection more perception of selection and and hopefully grow.
Speaker 8: In our modeling, customer acquisition costs will actually come down, and the inverse is true as well. So we're constantly playing with, obviously, maximizing lifetime value, but is there, you know, a 12% CNI target or a 16% CNI target, and what does that mean for our cost of acquisition and the efficiency of our media spend as well? So if you reduce one, it doesn't necessarily mean it can all go to profit immediately, but what you're trying to do over the long term is get the most lifetime value and shortest payback on your marketing as well, so, you know, if you reduce one, it doesn't necessarily mean that... Okay, that's helpful. And then maybe just last one for me, if I can squeeze in, you know, you've done an impressive job at reducing your SG&E expenses. I think you said $34 million in one year. Can you just remind us a little bit, when do we lap most of the cost reduction for modeling purposes? That'd be helpful. One year. And then I think you said, you know, you've done a pretty good job at reducing your cost reduction for modeling purposes. That'd be helpful. And then maybe just last one for me, if I can squeeze in, you know, you've done an impressive job at reducing your cost reduction for modeling purposes. I think you said $34 million in one year. Can you just remind us a little bit, when do we lap most of the cost reduction for modeling purposes?
Besides in order rates consistently over time as well.
It also gives us an opportunity to introduce different variety of proteins that we wouldn't necessarily be able to include it at based pricing in People's plans. We mentioned some of the organics some of the free range.
To price points and protein.
Some of the grass fed beef so you'll see some of those types of things continue to kind of come in and out of the menu as we test different price points and protein.
Okay.
And then on.
Expanding into other channels and your multi titled partnerships do you have any.
Data on.
Where you're at with that.
Okay.
With those potential partnerships.
Speaker 7: You know, if you reduce one, it doesn't necessarily mean. Okay, that's awful. And then maybe just last one for me, if I can squeeze in. You know, you've done an impressive job at reducing your SG&E expenses. I think you said $34 million in one year. Can you just remind us a little bit, when do we lap most of the cost reduction for remodeling purposes that'd be helpful in one year?
And then on.
You're sort of.
You will be expanding to other channels and your multi titled partnership do you have any.
Thinking about a bathroom.
Yes, we've been running a pilot with them with skip the dishes out in Western Canada or.
Data on <unk>.
You're right.
Potential partnership for <unk>.
What's your sort of.
I must say two quarters now it's been going well still small scale. So it's only a couple a couple of stores and and a limited number of Skus. So it's.
Thinking about in the bathroom.
Yes, we've been running a pilot with with skip the dishes out in Western Canada or.
It's been going well, we're continuing to iterate on that we're we're chatting about if we scale up or stay at the same pace.
I want to say two quarters now it's been going well still small scale. So it's only a couple a couple of stores and and a limited number of Skus. So.
Speaker 8: Can you just remind us a little bit, when do we last most of the cost production for modeling purposes? That'd be helpful. Yeah, most of it will have been last.
Pace, they're we're at today.
It's been going well, we're continuing to iterate on that where are we're talking about if.
That's been something that's a that's in the back of our mind, obviously and.
Speaker 4: I think if you try to compare DNA structures in the 34 milliliter, I think by Q3, you'll have the most comparable year-over-year off-stripe DNA structures, and with that said, will DNA repeat and energize? And there's a lot of work to get to that number. That doesn't mean we're not going to look for further improvements. It obviously won't have off-stripe care.
The vast vast majority of our sales and profitability come from.
If we scale up or stay at the same.
The rates Cook business. So we want to continue to focus the teams efforts on that especially with the macro environment that we're seeing.
Pace.
They were at today.
That's been something that's a that's in the back of our mind, obviously I'm.
The vast vast majority of our sales and profitability come from.
Everyone is looking for different ways to reach customers. So we get.
The rates Cook business. So we want to continue to focus the teams efforts on that especially with the macro environment that we're seeing.
Lots of inbounds from different retail partners or other ecommerce players on how to expand both of our regions, which will continue to entertain.
Everyone is looking for different ways to reach customers. So we get.
Speaker 6: With that said, we're pleased and energized and our team did a lot of work to get to that number. That doesn't mean we're not going to look for further improvements. Ladies and gentlemen, just a reminder, should you have a question, please press star followed by the number one on your text tone phone.
Okay, Great and maybe one last one for me on free cash or outdoor or just general thoughts on cash flow obviously capex.
Lots of inbounds from different retail partners or other ecommerce players on how to expand both of our regions, which will continue to entertain.
That's been reduced tremendously here so in terms of growing cash flow in the future is it like are you envisioning it mainly be coming from.
Great and maybe one last one for me on free.
Free cash or outdoor or just general thoughts or from cash flow.
Speaker 4: We have our next question. It comes from the line of Frederick Tremblay from DigiGen. Please go ahead. Good morning. Most of my questions have been answered, but I have a couple more. One of the things I found interesting with the upcoming launch of customization in terms of the...
Obviously capex is going.
It's top line or is there more to do on B S.
Reduced tremendously here so in terms of growing cash flow in the future is it.
Jeremy a car for example, just trying to figure out.
What are the key levers would be for future cash flow improvements.
Like are you envisioning it mainly be coming from increased topline or is there more to do on <unk>.
Yeah, Great question and I think the answer is is that about it but we definitely want to continue to be disappointing on yesterday and that's been the highest rois pieces of the SG&A part of the P&L.
Jeremy So for example, just trying to figure out.
Speaker 8: and being able to swap or double the proteins and the rest of these. Can you share a bit more color on that, where you're at with that, with the upcoming initiative that you started testing it? And if so, what will be your initial takeaways from that? And just your thoughts as well on the timing of where you're at with that fully rolled out initiative that you started testing it?
What are the key levers would be for future cash flow improvements.
Yeah, Great question.
And I think the answer is it's about it but.
From a profitability perspective, given the cost structure, we have in and our iterations and balancing that C&I and net sales I think we can be in a place where our additional sales will will.
We definitely want to continue to be disappointing on yesterday side and that's been the highest rois pieces of the SG&A part of the P&L.
Speaker 7: If so, what would be your initial takeaways from that? And you're talking as well on the time you're aware of it. Yeah, as we laid out in the past couple of quarters, we want to continue investing in selection. And the protein customization, I think, is a way to add selection without adding a clinic. Yeah, as we laid out in the past couple of quarters, we want to continue investing in selection and more selection, more perception of selection, and hope to grow fast in order to raise.
I think from a profitability perspective, given the cost structure, we have in our iterations and balancing the C&I and net sales I think we can be in a place where our additional sales.
We will flow through at a pretty high quick.
So that'll definitely be sort of the operating leverage.
Free cash flow generation that we're looking to generate I think on the G&A side, there's definitely room for further improvement and when you look at it on a weekly daily basis to make sure that we're not.
Will will.
We will flow through at a pretty high quick.
So that will definitely be sort of the operating leverage.
Free cash flow generation that we're looking to generate I think on the G&A side, there's definitely room for further improvement and when you look at it on a weekly daily basis to make sure that we're not.
Any opportunity I think it's probably more magical than what could come from what could come from the top line with that said our goal always needs to be balanced in and I think from a.
Speaker 7: to use that as well. It also gives us an opportunity to introduce a different variety of proteins that we wouldn't necessarily be able to include at base pricing in people's plans. We mentioned some of the organics, some of the free range, some of the grass-fed beef. So you'll see some of those types of things included to kind of come in and out of the menu as we test it. We mentioned the price point of the organics, some of the free range.
Any opportunity I think it's probably more magical than what could come from what could come from the top line with that.
Perspective, the macro outlook.
Given that we're making I think the focus even more on the G&A side and looking at how we can take advantage of opportunities on the on the top line.
Ted.
Overall, it needs to be balanced and I think from us.
Perspective, the macro outlook is.
Yeah.
Great. Thanks for taking the questions.
Given that we're making I think the focus even more on the G&A side and looking at how we can take advantage of opportunities on the topline.
Yeah.
There are no further questions at this time I'd now like to turn the call back over to Mr. Ferrari for final closing comments.
Speaker 9: Okay, and then on potentially expanding into other channels, you know, multi-channel partnerships, do you have an update on...
Great. Thanks for taking the questions.
Yeah.
Thank you for joining us on this call this morning.
There are no further questions at this time I'd now like to turn the call back over to Mr. Ferrari for final closing comments.
We look forward to speaking with you again at our call in January.
Speaker 7: where you're at with them, and on what you're eventually expanding into multithandle partnerships? Yes, we've been running a pilot with Skip, the dishes out in Western Canada for
Thank you ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines have a lovely day.
Thank you for joining us on this call this morning.
We look forward to speaking with you again at our call in January.
Speaker 7: I want to say two orders now, it's been going well, it's still small scale, a couple stores and a limited number of SKUs, so it's been going well, we're continuing to iterate on that. We're chatting about if we scale up or stay at the same pace as SKUs that we're at today. This is something that's in the back of our mind, obviously, the vast, vast majority of our customers. If we scale up or stay at the same pace as SKUs that we're at today, this is something that's in the back of our mind, obviously, and the vast, vast minority of our customers are looking for different ways to reach customers, so we get a lot of inbounds from different retail partners or other e-commerce players on how to expand both of our reaches, which will...
Thank you ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask could you. Please disconnect your lines have a lovely day.
[music].
Speaker 9: Everyone is looking for different ways to reach customers, so we get... Great. And maybe one last one for me on, maybe on free cash flow outflows, or just general thoughts on cash flow. Obviously, CapEx has been reduced.
Speaker 9: tremendously here. So in terms of growing cash flow in the future, are you envisioning it mainly be coming from increased top line or is there more to do on the SGM? So in terms of growing cash flow in the future, are you envisioning it mainly be coming from
Speaker 4: increase top-line or is there a more quick view on the SGA or something like that? I think the answer is a balance, but we definitely want to continue to just be trading on the SG&A side and invest in the highest ROI of the SG&A part of the P&L. I think from a profitability perspective, given the policy structure we have on the SG&A side and our iterations and balancing of C&I and sales, I think we can be in a place where additional sales will flow through at a pretty high quid, so that will definitely be convenient operating leverage, pre-cash flow generation that we're looking to generate. I think on the G&A side, there's definitely room for further improvements and we'll look at a weekly-daily balance to make sure that we're not looking at a low generation, but I think it's probably more marginal in what could come from the top line. With that said, our goal will be daily balance and I think from a growth perspective, the macro outlook is what could come from, given that we're making an effort to focus even more on the G&A side and looking at how we can take advantage of opportunities on the top line.
Speaker 6: There are no further questions at this time. I'd now like to turn the call back over to Mr. Ferrari for final closing comments.
Speaker 6: There are no further questions at this time. I have now left to turn the call back over to Mr. Ferrari for final closing.
Speaker 6: Thank you sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.
Speaker 2: Ple that that.