Q3 2024 Goodfood Market Corp Earnings Call
Operator: Following the presentation, we will conduct a question-and-answer session. As a courtesy to others, we ask that each participant limit themselves to one question and one follow-up. Instructions will be provided at the time for you to queue up for questions.
Following the presentation, we will conduct a question and answer session is of course, if he to others. We ask each participant to limit themselves to one question and one follow up.
Speaker Change: Instructions will be provided at the time for you to queue up for questions. Please note that questions will be taken from financial analyst told me. If anyone has any difficulties hearing the conference. Please press star zero for operator assistance at any time I would like to remind everyone that this conference call is being recorded today July six.
Operator: Please note that questions will be taken from financial analysts only. If anyone has any difficulties hearing the conference, please press star followed by zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded today, July 16th, at 8 a.m. Eastern Time. Furthermore, I would like to remind you that today's presentation may contain forward-looking statements about Goodfood's current and future plans, expectations, and intentions, results, level of activity, performance, goals, or achievements, or other future events or developments.
Speaker Change: At eight o'clock am eastern time.
Speaker Change: Furthermore, I would like to remind that today's presentation may contain forward looking statements about gets its current and future plans expectations and intentions results levels of activity performance goals or achievements or other future events or developments as such please take a moment to read the disclaimer.
Operator: As such, please take a moment to read the disclaimer on forward-looking statements on slide 2 of the presentation. Please be aware that during the call, presenters will refer to certain metrics and non-IFRS measures. Where possible, these measures are identified and reconciled to the most comparable IFRS measures in our MD&A.
Speaker Change: All forward looking statements on slide two of the presentation.
Speaker Change: Be aware that during the call presenters will reference to certain metrics and then I F. R. S measures where possible. These measures are identified and reconciled to the most comparable I F. R. S measures in our M. D. N. A finally, let me remind you that all figures expressed on today's call are <unk>.
Operator: Finally, let me remind you that all figures expressed on today's call are in Canadian dollars unless otherwise stated. I would now like to turn the meeting over to your host for today's call, Jonathan Ferrari, Goodfood Chief Executive Officer. Mr. Ferrari, you may proceed.
Jonathan Ferrari: Agent dollars unless otherwise stated I would now like to turn the meeting over to your host for today's call Jonathan Perry Good food Chief Executive Officer. Mr. Ferry you May proceed.
Jonathan Ferrari: Thank you.
Speaker Change: So that's pretty good food well pairs I'll tell you, though because we see the quasi empty methane egress system in Venkat Cola Israel.
Jonathan Ferrari: Good morning everyone, and welcome to this call for Goodfood Market Corp. to present our financial results for the third quarter of fiscal 2024 ended June 1 I'm joined on the call today by Neil, Goodfood's President and Chief Operating Officer, and Ross, Chief Financial Officer. Our press release reporting this quarter's results was published earlier this morning, and it can be found on our website and on SIDAR.
Speaker Change: Good morning, everyone and welcome to this call for good food market Corp to present, our financial results for the third quarter of fiscal 2024 ended June 1st.
Speaker Change: I'm joined on the call today by Neil Good Foods', President and Chief operating Officer, and Ross Chief Financial Officer.
Speaker Change: Our press release reporting this quarters results was published earlier. This morning. It can be found on our website and on SEDAR.
Speaker Change: I will now turn to slide three to review the highlights of this quarter.
Jonathan Ferrari: I will now turn to slide three to review the highlights of this quarter. Our team is pleased with the consistent growth and profitability that was again on display this quarter, which marked our sixth consecutive quarter of positive adjusted EBITDA. The sustained discipline our teams have implemented and maintained enabled Adjusted EBITDA to reach a margin of 9.2% this quarter for $3.6 million. In the last 12 months, Adjusted EBITDA margin has reached 6% for $9.3 million, which is 4.5 times the $2.1 million LTM Adjusted EBITDA generated for the same period last year.
Speaker Change: Our team is pleased with the consistent growth and profitability that was again on display this quarter, which marked our sixth consecutive quarter of positive adjusted EBITDA.
Speaker Change: The sustained discipline, our teams have implemented and maintained enabled adjusted EBITDA to reach a margin of nine 2% this quarter for $3 $6 million.
Speaker Change: In the last 12 months adjusted EBITDA margin has reached 6% for $9 $3 million, which is 4.5 times the $2 $1 million LTM adjusted EBITDA generated at the same period last year.
Speaker Change: We are energized by the progress we have made and remain unwavering in our focus on profitability.
Jonathan Ferrari: We are energized by the progress we have made and remain unwavering in our focus on profitability. This level of profitability has, in turn, driven consistency in our business's cash flow generation, with adjusted free cash flow generated in four of the past five quarters and standing at $4.4 million this quarter, or $8.7 million year to date. This represents a $12 million improvement compared to the first three quarters of fiscal 2023 and cements our commitment to growing the cash generation ability of our business.
Speaker Change: This level of profitability has in turn driven consistency in our business is cash flow generation.
Speaker Change: With adjusted free cash flow generated in four of the past five quarters and standing at $4 $4 million this quarter or $8.7 million year to date.
Speaker Change: This represents a $12 million improvement compared to the first three quarters of fiscal 2023, and cements our commitment to growing the cash generation ability of our business.
Speaker Change: Supported by operating and business efficiencies that have driven gross margin consistently around the 40% Mark at SG&A expense reductions that reached $10 million compared to the first three quarters of fiscal 'twenty three.
Jonathan Ferrari: Supported by operating and business efficiencies that have driven gross margin consistently around the 40% mark and SG&A expense reductions that reach $10 million compared to the first three quarters of fiscal 23, our cash flow generation is poised to continue to grow and help provide further capital allocation flexibility. With this established and growing cash flow generation, we have reduced net leverage, measured as net debt divided by LTM adjusted EBITDA, from 8.2 turns last year to 2.1 turns today.
Speaker Change: Our cash flow generation is poised to continue to grow and help provide further capital allocation flexibility.
Speaker Change: With this established and growing cash flow generation.
Speaker Change: We have reduced net leverage measured as net debt divided by LTM adjusted EBITDA.
Speaker Change: From eight two turns last year to 2.1 turns today.
Speaker Change: Okay.
Jonathan Ferrari: Both by repaying bank debt and increasing profitability, we have meaningfully reduced the risk of our capital structure. With this improvement in leverage, we are giving ourselves the flexibility to invest in Goodfood's next phase of growth as we continue to enhance the economics of our meal kit offering and explore various avenues for growth. We are pleased with our financial performance, profitability, and cash flow generation in the first three quarters of this year, and we're excited to see the momentum created by the customer-centric initiatives our teams have developed and the rave reviews we are receiving from our members.
Speaker Change: Both by repaying bank debt and increasing profitability, we have meaningfully reduced the risk of our capital structure.
Speaker Change: Okay.
Speaker Change: With this improvement in leverage.
Speaker Change: We are giving ourselves the flexibility to invest in good through its next phase of growth as we continue to enhance the economics of our meal kit offering and explore various avenues for growth.
Speaker Change: We are pleased with our financial performance profitability and cash flow generation in the first three quarters of this year and we're excited to see the momentum created by the customer centric initiatives. Our teams have developed and the rave reviews, we are receiving from our members.
Jonathan Ferrari: Our teams have rolled out new recipes and partnerships that have created sparks of joy in kitchens coast to coast. More on that later. On that note, Russ will now go over our financial performance in greater detail. Thank you, Jon, and good morning.
Speaker Change: Our teams have rolled out new recipes and partnerships that have created sparks of joy in kitchens coast to coast.
Speaker Change: More on that later.
Speaker Change: On that note Russ will now go over our financial performance in greater detail.
Russ: Thank you John and good morning, everyone.
Ross: Thank you, John. And good morning, everyone.
Ross: Turning to slide 4, you will see that net sales were $38.6 million for the quarter, a $3.6 million or 8% year-over-year decline and a $1.2 million or 3% sequential decline compared to the second quarter. This was the result of a lower customer count as active customers were 105,000, driven by customer acquisition cost discipline and consumer spending softness. In addition to lower customer activity as early seasonality draws lower orders, especially during the month of May.
Russ: Turning to slide four you will see that net sales were $38 $6 million for the quarter of $3 6 million or 8% year over year decline at <unk>.
Speaker Change: One 2, million% to 3% sequential decline sequential decline compared to the second quarter.
Speaker Change: This was the result of lower customer count that gives customers a 105000 driven by customer acquisition cost discipline.
Sending stuff to it.
Speaker Change: In addition to lower customer activity is there any seasonality drove lower orders, especially during the month of May.
Speaker Change: Offsetting customer activity were larger basket sizes from ordering customers as our net sales per active customer hit a high of 367 on the back of record average order value and growing number of courses purchased for baskets.
Ross: Offsetting customer activity were larger basket sizes from ordering customers, as our net sales per active customer hit a high of $367 on the back of record average order value and growing number of portions purchased per basket. This was driven in part by our new protein customization, which led our members to customize their meals with premium proteins such as fresh salmon or organic chicken, as well as the addition of off-plan recipes like our Value. As mentioned last quarter, current demand circumstances are challenging, and we expect to return to year-over-year organic growth when the consumer and macro headwinds abate.
Speaker Change: Driven in part by our new protein customization, which led our members to customize their meals with being in proteins, such as fresh seven organic chicken as well as the addition of off plan recipes like our value.
Speaker Change: As mentioned last quarter current demand circumstances are challenging and we expect to return to year over year organic growth when the consumer and macro headwinds debate.
Ross: In the meantime, our focus remains on growing cash flow generation and disciplined unit economics investments to ensure meaningful operating leverage as we continue working on building growth momentum. We will now turn to slide five to review our profitability. As Jon mentioned, we are pleased to have brought consistency and growth to our profitability and have now delivered six consecutive quarters of positive adjusted EBITDA. Building on our operating improvements, gross margin reached a record 44% in the third quarter, a 300 basis points improvement compared to the same quarter last year.
Speaker Change: In the meantime, our focus remains on growing cash flow generation and disciplined unit economics investments to ensure meaningful operating leverage as we continue working on building growth momentum.
Speaker Change: We will now turn to slide five two of your profitability levels.
Speaker Change: As John mentioned, we are pleased to have brought consistency of growth profitability and have now delivered six consecutive quarters of positive adjusted EBITDA.
Building on our operating improvements gross margin reached a record 44% in the third quarter is 300 basis points improvement compared to the same quarter last year.
Ross: On the back of the record gross margin and consistently improving SG&A efficiency, we achieved three point six million dollars of adjusted EBITDA this quarter for a margin of nine point two percent, a one point four percent improvement year over year. This growing level of margin is the result of our internal initiatives aiming to drive the efficiency of our operations and our cost recovery. As part of a regular review of processes and the marginal gains we can make.
Speaker Change: On the back of the record gross margin.
Speaker Change: Improving SG&A efficiency, we achieved $3 6 million of adjusted EBITDA. This quarter for a margin of nine 2%, a 1.4% improvement year over year.
Speaker Change: It's growing level of margin is a result of our internal initiatives aiming to drive the efficiency of our operation and our cost structure.
Speaker Change: As part of our regular review of processes at the marginal gains we can make we have improved key operational and production metrics, such as labor proportion and last mile shipping cost per order.
Ross: We have improved key operational and production metrics such as labor proportion and last mile shipping cost per order. Both metrics have shown an improvement upwards of 10% year over year, as we continue to drive a culture of continuous improvement. We also continue to focus on customers with strong unit economics, which also drives cross-marketing. Highlighting our focus on profitability is the fact that our gross profit remained relatively flat year over year at around $17 million while net sales declined 8% in that same period. We have also further increased our use of technology tools and built outsourcing efficiency initiatives that have enabled further growth and profitability through both leveraging software and external resources.
Speaker Change: Both metrics have shown an improvement upwards of 10% year over year as we continued to drive a culture of continuous improvement.
Speaker Change: We also continue to focus on customers with strong unit economics, which also drives gross margin.
Speaker Change: Our focus on profitable customers is the fact that our gross profit remained relatively flat year over year at around $17 million well net sales declined 8% in that same period.
Speaker Change: We have also further increased our use of technology tools and outsourcing efficiency initiatives that have enabled further growth and profitability through both leveraging software and external resources.
Speaker Change: Combined with our with our focus on most profitable products and customers. These structural improvements have driven an LTM adjusted EBITDA of over $9 million.
Ross: Combined with our focus on the most profitable products and customers, these structural improvements have driven an LPM adjusted EBITDA of over $9 million. I will now move to slide 6 for a review of cash flows, capital expenditures, and leverage. Cash flows generated by operating activities were $4.5 million this quarter, a $1.3 million improvement compared to the same quarter last year.
Speaker Change: I will now move to slide six for a review of cash flows capital expenditures and leverage.
Speaker Change: Cash flows generated by operating activities were $4 $5 million this quarter, a $1 $3 million improvement compared to the same quarter last year.
Speaker Change: As profitability continues to grow and capital expenditures remained low given the relative newness and well maintained assets.
Ross: Profitability continues to grow, and capital expenditures remain low given the relative newness of well-maintained assets. Our adjusted free cash flows continue to grow, and have now reached $4.5 million this quarter and $8.7 million year to date. As we outlined on our previous call, this free cash flow generation is enabling a reduction in debt, which, combined with growing profitability, has broadened our leverage from 8.2 turns in the third quarter last year to 2.1 turns this quarter.
Speaker Change: Our adjusted free cash flows continue to grow and has now reached $4 $7 million this quarter and $8 $7 million year over year year to date.
Speaker Change: As we outlined on our previous call. This free cash flow generation is enabling a reduction in debt, which combined with growing profitability have brought down our leverage from eight two turns in the third quarter last year to $2 1 million this quarter.
Ross: The deleveraging and cash flows generated highlight our disciplined approach to cost management and capital allocation and our commitment to long-term shareholder value. Turning to slide seven, we will find a summary of our performance this quarter. On balance, our Q3 results came in line with what we expected and described during our last Ratings Call. We are pleased with the sustained strength of our financial performance and satisfied with the growing profitability on display again this quarter. Satisfied does not mean complete.
Speaker Change: The deleveraging and cash flow cash flows generated highlight our disciplined approach to cost management and capital allocation and our commitment to long term shareholder value.
Speaker Change: Turning to slide seven you will find the summary of our performance this quarter.
Speaker Change: On balance our Q3 results came in line with what we expected and described during our last earnings call. We are.
Speaker Change: Pleased with the sustained strength of our financial performance and satisfied with growing profitability on display again this quarter.
Speaker Change: That is why however, it does not mean completions, while the majority of our financial Kpis unit economic and customer feedback metrics continue to show some data improvement we continue to strive for growth in both the topline and bottom line.
Ross: While the majority of our financial KPIs, unit economics, and customer feedback metrics continue to show some improvement, we continue to strive for growth in both the top line and the bottom line. The positive free cash flow we have generated for the past five quarters and positive adjusted cash flow in the last six consecutive quarters demonstrate our commitments and focus on growing profitability and cash. As we look to continue to build on the positive momentum our stable net sales displayed and generate growth, we are energized by the flexibility which opens up multiple avenues for growth.
Speaker Change: The positive free cash flow, we have generated for the past five quarters and positive adjusted Ebitdas six consecutive quarters demonstrate our commitment and focus on growing profitability and cash.
As we look to continue to build on the positive momentum our stable net sales displayed and generate growth. We are energized by the flexibility, which opens up multiple avenues for growth.
Ross: During the fourth quarter, we plan on pushing forward on the execution of the customer-centric initiatives John will describe in further detail shortly, and for those initiatives to be in place for our first quarter of fiscal 24, beginning in early September. As a reminder, our fourth quarter consists, in large part, of the months of June, July, and August, which are seasonal in nature as customers travel and spend more time outside of their homes.
Speaker Change: During the fourth quarter, we plan on pushing forward on the execution of the customer centric initiatives as John will describe in further detail shortly.
John: Thanks for those initiatives to be in place for our first quarter of fiscal 'twenty four beginning in early September.
John: As a reminder, our fourth quarter can kick in large part of the months of June July and August which are seasonal in nature as customers travel and spend more time outside of their homes.
Ross: Overall, we remain disciplined and keep our focus on profitable growth, which puts us in a strong position to enhance our customers' value proposition every day and to continue delivering growing cash flows. Jon will now provide an update on a recent customer-centric initiative.
John: Overall, we remain disciplined and keep our focus on profitable growth, which puts us in a strong position to enhance our customer value proposition every day and to continue delivering growing cash flows and look forward to accelerating that growth and profitability.
John: John will now provide an update on our recent customer centric initiatives.
Ross: Thank you Ross.
Jonathan Ferrari: Moving to slide eight, it is important to highlight that as we came out of the pandemic and experienced challenges, we re-centered our value proposition around our core expertise in meal solutions. Since that focus was established, creating meal experiences that spark joy in Canadians' households has been a clear and key element of Goodfood's mission. In recent months, we have upped the ante on sparking joy by fostering a customer-centric culture driven by customer insights
John: Moving to slide eight.
John: It is important to highlight that as we came out of the pandemic and experienced challenges, we recenter at our value proposition around our core expertise in meal solutions.
John: Since that focus was established creating meal experiences that spark joy and Canadian households has been a clear and key element of good food mission.
John: In recent months, we upped the ante on sparking joy by fostering a customer centric culture driven by customer insights.
John: In the current challenging macro climate, our members increasingly want to prepare and eat healthy and delicious meals at home.
Jonathan Ferrari: In the current challenging macro climate, our members increasingly want to prepare and eat healthy and delicious meals at home, discover new and varied ingredients and flavors, and do so at a great value. As a result, we have worked over the past few months to double our lineup of recipes on our value menu. Goodfood customers can enjoy exciting recipes like our Japanese orange ginger pork stir-fry with fresh ramen noodles or Beef Picadillo Cubano with Spanish Olives and Raisins for under $10 a serving.
John: Discover new and buried ingredients and flavors.
John: And do so at a great value.
John: As a result.
John: We have worked over the past few months.
John: Our lineup of recipes on our value menu.
John: Good food customers can enjoy exciting recipes like our Japanese orange, Ginger pork stir fry with fresh ramen noodles or.
John: Or beef pick a deal.
John: Though with Spanish olives, and reasons for under $10 a survey.
Jonathan Ferrari: Our simple yet satisfying value menu not only provides additional tasty options but also allows for a broader range of households and budgets to engage with our platform. Speaking of engagement, another key initiative this summer is the launch of Camp Goodfood to spark joy for the whole family. Camp Goodfood is a set of six family favorites recipes available throughout the summer, with each recipe being paired with a companion video episode featuring Chef Jordana and our anti-hero mascot, Richard the raccoon. Kids receive hands-on cooking experiences and lessons centered around engaging all their senses in the kitchen. Touch, Sight, Smell, Sound, and, of course, taste.
Speaker Change: Our simple yet satisfying value menu not only provides additional TC options, but also allows for a broader range of household and budgets to engage with our platform.
John: Speaking of engagement. Another key initiative. This summer is the launch of camp good food to spark joy for the whole family.
John: Can't get food is a set of six family favorite recipes available throughout this summer with each recipe being paired with the companion video episode.
Giordano: During chef Giordano.
John: And our antihero mascot, Richard the raccoon.
John: Kids receive hands on cooking experiences and lessons centered around engaging all of our centers in the kitchen touch.
John: <unk> site smell sound and of course taste.
Jonathan Ferrari: The recipes also come with some fun Goodfood branded swag, including matching aprons, a kid's chef hat, and a mini whisk. So far, we have received strong feedback from our members and plenty of pictures capturing this great family memory. In addition, we have continued enhancing our digital product to create a cleaner, more intuitive experience for our customers. Our app and web platform now allow members to more easily browse and select from our wider variety of delicious recipes and customize them, where available.
John: The recipe has also come with some fun good food branded swag, including matching aprons, our kids Shanghai and many wisc.
John: So far we have received strong feedback from our members and plenty of pictures, capturing the great family memories.
John: In addition.
Speaker Change: We have continued enhancing our digital product to create a cleaner more intuitive experience for our customers.
Speaker Change: Our app and web platform now allow members to more easily browse and select from a wider variety of delicious recipes and customize them where available.
Jonathan Ferrari: As you may have recently seen, we have doubled down on our differentiating Canadian flavor through mouth-watering recipes and partnerships, including our most recent collaboration with Chef Laurent Dagenais. Chef Laurent and our very own Chef Jordana collaborated together to create meals and content that our loyal fans absolutely love.
Speaker Change: As you may have recently seen.
Speaker Change: We have doubled down on our differentiating Canadian flavor through Mouthwatering recipes and partnerships, including our most recent collaboration with chef Law Foundation it.
Dana: Chef level, and our very own shift toward danna collaborated together to create meals and content.
Dana: That our loyal fans absolutely loved it.
Jonathan Ferrari: The partnership was promoted to Laurent's 2 million social followers and culminated in Goodfood's first ever in-person live event for our VIP members in Montreal that further deepened the great bond we have with our raving fans. This focus on our customers' needs is continuing to yield results. Well, seasonality and macro challenges did reduce our active customer count this quarter. However, Goodfood members are ordering the biggest baskets we have ever sold, containing more portions of our recipes than ever and more customization driving the bigger basket.
Dana: The partnership was promoted to levels 2 million social followers and culminated in good foods' first ever in person live event for our VIP members in Montreal that further deepens the great bond, we have with our raving fans.
Dana: This focus on our customers' needs is continuing to yield results.
Dana: Seasonality and macro challenges did reduce our active customer count this quarter.
Food members are ordering the biggest baskets, we have ever sold.
Dana: Gaining more portions of our recipes than ever.
Dana: And more customization driving the bigger baskets.
Jonathan Ferrari: The strong net sales per active customer have demonstrated that our prioritization of profitable customers combined with relentless customer centricity is bringing us closer to closing the gap to year over year growth. Overall, we are pleased to continue consistently growing our profitability and cash generation. We have enhanced, and we'll continue to enhance, our customer value proposition, and with consistent 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 turn it over to the operator for the Q&A portion of this call.
Dana: The strong net sales per active customer.
Dana: Demonstrated that our prioritization of profitable customers combined with our relentless customer centricity is bringing us closer to closing the gap to year over year growth.
Dana: Overall, we are pleased to continue consistently growing our profitability and cash generation.
Dana: We have enhanced and.
Dana: And we will continue to enhance our customer value proposition and.
Speaker Change: And with consistent 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.
Speaker Change: On that note I will turn it over to the operator for the Q&A portion of this call.
Speaker Change: Okay.
Operator: Thank you, Mr. Ferrari. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star zero followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please leave the handset before pressing any. One moment, please, for your first question. You have here Mr. Martin Landry.
Speaker Change: Thank you Mr. Ferrari, ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star zero followed by the one on your Touchtone phone you will hear from that your hand has been raised should you wish to decline from the falling process. Please press the star of elevated Q.
Speaker Change: If you are using a speakerphone, please pick up the handset before questions.
Speaker Change: One moment. Please for your first question.
Speaker Change: You have here Mr. Martin Landry.
Speaker Change: Yes.
Martin Landry: Hi, good morning, guys. Morning, Marte.
Martin Landry: Hi, good morning, guys.
Good morning Rusty.
Unknown Speaker: Unknown Speaker ___________________________________________________ My first question is on your profitability improvements. You know, your gross margin is at the highest level, it's been a long time since 44%. Your SG&A expenses are also the lowest they've been in a while, which is pretty impressive, indeed, in terms of a turnaround. So I'm trying to understand on a go forward basis, how much more improvement is there from a gross margin expansion and from an SG&E reduction?
Unknown Speaker: Or are we there in terms of the most improvement you can drive from your business? Just a little bit of color and discussion around the evolution of gross margin from here and evolution of SG&E levels from here would be great.
Speaker Change: My first question is on your your profitability improvements.
Martin Landry: <unk>.
Speaker Change: Your gross margin is that.
Speaker Change: The highest level, it's been in a long time, it's 44%.
Speaker Change: And your SG&A expenses.
Speaker Change: Our.
Speaker Change: The lowest they've been also in a while.
Speaker Change: Which is pretty impressive indeed.
Speaker Change: In terms of a turnaround so I'm trying to understand on a go forward basis.
Speaker Change: How much more improvement is there.
From a gross margin expansion in combat in the SG&A reduction or are we there in terms of.
Speaker Change: Sure.
The most improvement you can drive from that from your from your from your business, just a little bit of a color and discussion around ever.
Speaker Change: Evolution of gross margin from here and any evolution of SG&A levels from here would be great.
Ross: Yeah, thanks for the question, Martin. And it's a good one.
Speaker Change: Yeah. Thanks for the question Mark then and it is a good one I.
Speaker Change: I think we've shown an ability to grow gross margin.
Speaker Change: Some need to deficiencies.
Speaker Change: And it hit a record level this quarter.
Speaker Change: If we think of the components of the gross margin be it on the labor side food and packaging side.
Speaker Change: The shipping time try the big component.
Speaker Change: There's things that we can always improve and have some marginal gains on.
Speaker Change: As you can see on the labor side.
Ross: I think we've shown an ability to grow gross margin through some really good efficiencies. And it hit a record level this quarter. I think if we think of the components of the gross margin, be it on the labor side, the food and packaging side, or the shipping side, which are the big components, there are things we can always improve and make some marginal gains on the efficiency on the labor side. And on the shipping side, I think increasingly as we look at this level of gross margin, it gives us the flexibility to think of how we can use that level of gross margin to enhance the customer value proposition and look to operate within close levels to where we are while giving more to the customer.
Speaker Change: And on the shipping side I think increasingly as we look at this level of gross margin. It gives us the flexibility to think of how do we use that level of gross margin to enhance the customer value proposition and look to.
Speaker Change: Operate within close level to where we are well, giving more to the customer.
Speaker Change: So I don't want to say that stay tuned here to the gross margin I think definitely in the near term in the fourth quarter gross margin declined because we had write backs had more packaging to keep refreshing. It. So it moves in the other direction, but I think it would be linked to fiscal 'twenty five.
Ross: So, you know, I don't want to say that, say, gross margin. I think, definitely, in the near term, in the fourth quarter, gross margin declines because we, at the right facts, have more packaging to keep the freshness, so it moves in the other direction. But I think as we look to fiscal 25, I could see us using a few percentage points of this gross margin and giving more food and a better experience to the customer overall.
Speaker Change: I could see us using a few percentage points of this gross margin and giving.
Speaker Change: More food and a better experience for the customer overall.
Speaker Change: So I think that's one thing to keep in mind.
Ross: So I think that's one thing to keep in mind. On the SG&A side, there's kind of the S part, which is the marketing side, and then the G&A, which is, you know, our people, our technology, our tools. I think on the marketing side, it's all about discipline, unit economics, and if we're seeing cats that are attractive and continue to be attractive, we have some flexibility in how we invest in these attractive economics.
Speaker Change: On the SG&A side.
Speaker Change: There's kind of the state and the S part, which is the marketing side and indeed, the G&A, which is.
Speaker Change: Our people or technology or tool.
I think on the marketing side, it's all about discipline and unit economics, if we're seeing catch their attractive and continue to be attractive we have some flexibility in how we invest into the attractive economics.
Speaker Change: I think the other side it is true as well as we mentioned this quarter I think.
Ross: I think the other side is true as well, as we've mentioned this quarter. I think the rest of the SG&A, so the G&A portion, is where we have, it's been three, four quarters, where we've looked for quite a few efficiencies on the technology side, trying to see how we can leverage software and various productivity tools to continue to enhance the SG&A side. I think there's a few more gains to be made. I think it's continuous improvement. I definitely would caution against expecting something, a similar improvement in the G&A, but we're always looking for a better cost structure.
Speaker Change: The rest of the the SG&A to the G&A portion is where we we it's been three or four quarters when it looks for quite a few efficiencies on the technology side trying to see how we can leverage software and various.
Speaker Change: Productivity tools.
Speaker Change: To continue to enhance the G&A side.
Speaker Change: There's a few more gains to be made I think it's continuous improvement.
Speaker Change: We would caution against <unk>.
Speaker Change: Expecting something similar improvement in the G&A, but we're always looking for for a better cost structure.
Ross: Okay, that's helpful. And maybe just a follow up on the revenue side. You've talked about the challenging economic backdrop as one of the reasons that your revenues are declining. You're also trimming your customer base. But I'd like to understand are you Are your revenues declining in line with the industry, or are you losing market share? I know industry numbers are not readily available, but if you could talk to us a little bit about how you see your market share evolving, it would give us a bit more color as to how the industry is performing.
Speaker Change: Okay. That's helpful.
Speaker Change: And maybe just a follow up.
Speaker Change: On the revenue side.
Speaker Change: You've talked about the challenged economy backdrop as one of the reason.
Speaker Change: That your revenues are declining.
Speaker Change: You are also pruning your customer base.
Speaker Change: But I'd like to understand.
Speaker Change: Our U R.
Speaker Change: Are your revenues declining in line with the industry or are you, losing market share I know industry numbers are not readily available.
If you can talk to us a little bit about how you see your market share evolving I can.
Speaker Change: It would give us a bit more color as to how the industry is performing.
Ross: Yes, I think if you look at it on a year-over-year basis in the Canadian landscape, you can get perfect numbers, but you can back them out a little bit or have estimates based on what's publicly available. I think our sales decline is probably not as steep as we've seen from the overall industry. I think it's challenging to get the perfect figures, but based on the data we have, both just on pure sales, active customers, but also some of the sort of secondary data you can get from various market participants.
Speaker Change: Yeah, I think if you actually look at it on a year over year basis.
Speaker Change: In the Canadian landscape.
Speaker Change: You can get perfect numbers, but you can back them out a little bit or have estimates based on what's publicly available.
Speaker Change: I think our R. R.
Speaker Change: Our sales decline is probably not as steep.
Speaker Change: As we've seen from some of the overall industry.
Speaker Change: I think it's.
Speaker Change: Challenging to get the perfect.
Speaker Change: Figures, but based on the data we have both just on.
Speaker Change: On pure sales active customers, but also some of the just sort of secondary data you can get from.
Speaker Change: Various market participants I would say that we've seen probably.
Ross: I'd say that we've probably seen a less decline than the industry. This is based on estimates, so I don't think it's so much of a market share situation. I think it's a consumer spending situation, for the large part.
Speaker Change: Less decline than the industry do you think this is based on estimates that I don't think it's so much more.
Speaker Change: I can share situation I think it's a.
Speaker Change: Consumer spending situation.
Finally, the lifespan.
Speaker Change: Okay.
Speaker Change: Okay.
Neil Cuggy: Okay, and then last question on your value meals. I was wondering if you could give us just some, I may have missed this, my apologies if I did, but when were your value meals introduced? What's the traction you're getting with that offer? What are the margins looking like? And what's the price differential versus your regular price meals?
Speaker Change: And last question on on.
Speaker Change: On your value meals.
Speaker Change: I was wondering if you could give us.
Speaker Change: Just some some I may have missed this my apologies if I did but.
Speaker Change: When when where you value meals introduced what's the traction you're getting with that.
Speaker Change: Offer what are the margins looking like and.
Speaker Change: And what's the price differential versus your regular priced meals.
Speaker Change: Okay.
Neil Cuggy: My name is Neil. Thanks for the question. So the value meals have been something we launched in a small way for at least six months now and have said recently to scale it up a little bit. So now we're offering a value plan for some customers that we're testing out. We have six options available on the website, starting at $8.99 a month, which is, you know, somewhere between 30 and 40% off our classic and most popular plan. So quite attractive.
Neil: I'm not saying, it's Neil thanks for the question. So the value meals have been something we launched in our <unk>.
Neil: Small way for at least six months now and have the fed recently to scale it up a little bit so now were offering.
Speaker Change: About your plan for some customers that were testing out were we.
Speaker Change: We have six options available on the web site, starting at 899, a portion which is somewhere between 30 and 40% discount to our classic and most popular plan. So.
Speaker Change: Attractive and we're still offering great portion size, great quality of ingredients.
Neil Cuggy: And we're still offering great portion size, great quality of ingredients, you know, obviously manufacturing the same facility, the same supply chain. So really top-quality stuff going to customers. The feedback is very, very good.
Speaker Change: Obviously manufacturing the same facility same supply chain, so really topped out top quality stuff going to customers.
Neil Cuggy: It allows people to shop at as low as $8.99 and up to our artisan plans, which some top $30 a portion, and we see a lot of the same customers buying across that price spectrum. Where we go from here, depending on customer feedback, we'll continue to iterate and gather as much data as possible. We see an opportunity to continue to grow the value selection on the site and the number of customers that are coming through.
Mr. <unk>: Mr. <unk> is very very good it allows people to shop at.
Mr. <unk>: As long as 899 and up to our artisan plans, which are some top $30 a portion.
Mr. <unk>: And we see a lot of the same customers buying.
Mr. <unk>: Across that that price spectrum.
Mr. <unk>: Where we go from here.
Mr. <unk>: For feedback, we'll continue to iterate and gather as much data as possible, we see an opportunity to continue to grow.
Mr. <unk>: The the value selection on the site and the number of customers that are coming through.
Neil Cuggy: And then to your point on margin, given that we're amortizing our same cost base, we start off at a pretty attractive margin and overall shouldn't have a major effect in the short term. They are slightly lower margin than the average Goodfood box, but not material right now.
Speaker Change: And then to your point on margin given that we're amortizing our same cost base, we start off at a pretty attractive attractive margin and an overall shouldnt have a major effect on the on the short term they are slightly lower margin than the average.
Speaker Change: Good food box, but not material right now.
Martin Landry: Okay, that's helpful. Thank you very much and best of luck.
Speaker Change: Okay. That's helpful. Thank you very much and best of luck.
Speaker Change: Thank you.
Okay.
Operator: Thank you, Martin. Now your next question comes from the line of Mr. Frederick Tremblay from Bay Jardins. Please hold it for a moment. You may now proceed.
Speaker Change: Thank you Marty and now your next question comes from the line of Mr. Frederic Tremblay from.
Speaker Change: Jordan.
Speaker Change: Please call them for a moment.
Speaker Change: You May now proceed.
Speaker Change: Thank you good morning.
Okay.
Good morning, Craig.
Frederic A. Tremblay: Good morning Ross. So we're hearing some comments from restaurant operators highlighting pressures on consumer discretionary spending, and you alluded to that as well. So I'm just wondering if at some point there's an opportunity for good food to benefit from lower traffic in restaurants. For example, what are your thoughts on a potential shift in spending from restaurants to food at home and how good food could potentially benefit from that?
Ross: Good morning Ross.
Ross: We're hearing some comments on.
Speaker Change: From restaurant operators, highlighting pressures on consumer discretionary spending and you did allude to that as well.
Speaker Change: So I'm just wondering if at some point there is there's an.
Speaker Change: And up to you for good food could benefit from lower traffic in restaurants like did but what's your thoughts on.
Speaker Change: Okay. Thank so shifting spending from restaurants to food at home and how good who could potentially benefit.
Speaker Change: How come that.
Jonathan Ferrari: Good morning, Fred. Thanks for the question. I think, you know, a few of the trends that we're trying to capitalize on, certainly one of them is creating alternatives for Canadians who are looking for more value versus going to a restaurant or ordering takeout. I think that's 1 of the key things that we've been working on, and we've been doing it by partnering with restaurants and working together to create recipes together and delivering them to our customers.
Fred: Good morning, Fred.
Fred: For the question.
Speaker Change: I think.
Speaker Change: A few of the trends that we're trying to capitalize on certainly one of them is.
Creating alternatives for Canadians, who are looking for more value versus going to the restaurant or ordering takeout I think that's one of the key things that we've been working on them.
Speaker Change: We've been doing it by partnering with with restaurants.
Speaker Change: And working together to collaborate recipes together and delivering it to our customers at a fraction of the cost of what it would cost our customers too.
Jonathan Ferrari: A fraction of the cost of what it would cost our customers to dine out. I think, you know, the other trend that we're trying to capitalize on as well as any Canadians who were staying home this summer trying to save money versus traveling abroad. We've been focusing on helping them travel through food with good food and having a really international good food menu that could help our customers travel through food, and creating that experience with Kemp Goodfood, which is our virtual kids camp, and having a way in which we can use content to bring our recipes to life.
Speaker Change: To dine out.
I think the other trend that we are.
Speaker Change: Trying to capitalize on as well as any Canadians who were staying home this summer trying to save money versus traveling abroad.
Speaker Change: We've been focusing on helping them travel through food with good food and having a really like it and international good food menu that could help our customers travel through food.
Speaker Change: And creating that experience with camp good food, which is our our virtual.
Speaker Change: Kid's camp.
Speaker Change: And having a way in which we can.
Speaker Change: Use content to bring our recipes to life.
Jonathan Ferrari: So one of the cool things about Camp Goodfood is that each of the meals comes with its own video content. And so the marginal cost to us of distributing that content is quite low, but the value added from having the lessons and recipe content around it is really engaging for our customers and creates an activity at home above and beyond just the food that we're delivering. So we're trying to play around with all of these different tactics around helping our customers perceive more value and creating fun ways to have delightful experiences at home.
Speaker Change: So one of the cool things with camp. Good food is each of the meals comes with its own video content.
Speaker Change: And so the the marginal cost to us of distributing that content is quite low, but the value added from having the lessons in.
Speaker Change: Recipe content around it.
Speaker Change: Is really engaging for our customers and creates an activity at home.
Speaker Change: And beyond just the food that we're delivering so we're trying to play around with all of these.
Speaker Change: Different tactics around helping our customers.
Speaker Change: Perceived more value.
Speaker Change: And and creating fun ways to tap the bipolar experiences at home.
Speaker Change: That's helpful. Thanks.
Frederic A. Tremblay: Thanks. Perhaps switching to active customers for Q3. You did point out that some of the decline was caused by early summer seasonality. I think you mentioned the month of May for that. What's your sort of interpretation on that based on what you're seeing so far in Q4 with that? That's largely a shift in the typical active customer decline that we would normally see in Q4. It's shifted into Q3, or there's sort of more of that to come in Q4 as well.
Speaker Change: Maybe switching to.
Customers for the Q3, you did point out that some of the decline was Scott.
Scott My early summer seasonality I think you mentioned the Mugger me for.
Doug: Hi, Doug.
Doug: What's your sort of interpretation on that based on what Youre seeing so far in Q4 was that.
Doug: Largely a shift in the typical active customer decline that would normally see in Q4.
Speaker Change: This shifted into Q3 or.
Speaker Change: Is there a sort of more of that to come in Q4 as well.
Ross: That's a good question. Fred, I think it's probably a little bit in between the two.
Speaker Change: That's a good it's a good question.
Speaker Change: I think it's probably.
Speaker Change: A little bit in between the two I think there's definitely.
Speaker Change: A shift that we would see sometime later in June usually after school or right around the end of the school.
Ross: I think there's definitely a shift that we would see sometime later in June, usually after school or right around the end of school. But that happened a little earlier, given the weather. I think there are obviously areas of our customer base where school-like events are less relevant, and we saw that happen in May. I still think from a seasonality perspective, a lot of the families that are members as well will still have relatively typical seasonality shifts and patterns in the summer. But I think for a portion of our customer base, that was brought a little bit forward to the month of May.
Speaker Change: That happened a little earlier, given the weather I think it.
Speaker Change: Theres, obviously areas of our customer base, where we're at.
Speaker Change: The school like events are less relevant and we've seen that happened in may I still think from a seasonality perspective, a lot of the family is that that our members.
Speaker Change: As well, we will we'll still have a relatively typical seasonality shifts and patterns in the summer I think.
Speaker Change: For for a portion of our of our customer base that was broad deliberate forward to the motorway.
Frederic A. Tremblay: Okay, and then my last question is on capital allocation, more specifically M&A. Last quarter, you did point out M&A as an area of potential avenues of growth. Can you just maybe provide an update on what you're seeing out there in terms of your M&A pipeline? And maybe just remind us what type of companies you'd be looking for in an M&A transaction.
Speaker Change: Okay and then my last question is on capital allocation specifically M&A.
Speaker Change: Last quarter, you did point out that many of urban areas.
Speaker Change: The potential avenue of growth.
Speaker Change: Can you just maybe provide an update on what youre seeing out there in terms of in terms of your M&A pipeline.
Speaker Change: Maybe just remind us what type of company.
Speaker Change: Companies, if youre looking for on the M&A front.
Ross: Yeah, that makes sense. I think from a pipeline perspective, I think we've seen some good activity. We've seen some interesting businesses and brands respond to our inquiries or, to an extent, come to market. I think it's quite a few steps between seeing, creating a connection or connecting with a potential target all the way to a transaction, but definitely, the pipeline is robust. I think from the type of business we're looking for.
Speaker Change: Yeah that makes sense.
Speaker Change: I think from from a pipeline perspective, I think we've seen some some good activity we've seen some.
Speaker Change: Interesting businesses and brands.
Speaker Change: Respond to inquiries or to an extent come to market.
Speaker Change: I think it is.
Speaker Change: It's quite a few steps between king.
Speaker Change: Creating a connection or connecting with with a potential target.
The way to a transaction, but definitely the pipeline is robust.
Speaker Change: I think from a <unk>.
Type of business, we're looking for them.
Ross: There's quite a wide array. I think there are definitely some similarities with direct-to-consumer businesses, similarities with some good brands that we could see there, even if they're niche brands that are well-positioned. I think even some of the base of different vendors we interact with and different partners we work with could have some interesting things there. So it's quite a wide array, and frankly, both in Canada and in the U.S., we've seen a pipeline that has responded well to our strategy and our inquiries. Thanks very much.
Speaker Change: There's quite a wide array of pickup there.
Speaker Change: There is some definitely some.
Speaker Change: Hum.
Speaker Change: Some similarities with direct to consumer businesses Similarly with them.
Speaker Change: Some good brands that we could see there even if they're niche brands.
Speaker Change: And that are well positioned.
Speaker Change: I think from some.
Speaker Change: Even in some of our of our debates of different vendors, we interact with and different partners, we work with there.
Speaker Change: There could be some some interesting things there so it's quite a wide array.
Speaker Change: And frankly, both in Canada, and the U S. We've seen a pipeline that has responded well to tour to our strategy and our inquiries.
Speaker Change: Great. Thanks very much.
Jonathan Ferrari: Thank you, Mr. Frederick. There are no further questions at this time. I'd now like to turn the call back over to Mr. Ferrari for his final closing comments.
Fredrik: Thank you Fredrik.
Speaker Change: Wow.
Speaker Change: There are no further questions at this time I'd now like to turn the call back over to Mr. Ferrari.
Chris: Chris final closing comments.
Chris: Okay.
Jonathan Ferrari: Thanks for joining us on this call. We look forward to speaking with you again at our next quarterly call.
Thanks for joining us on this call we look forward to speaking with you again at our next.
Quarterly call.
Operator: Thank you, Mr. Ferrari. Well, ladies and gentlemen, this concludes the conference call for today. Thank you for participating and I ask that you please disconnect your lines. I hope you all have a great day ahead. Good morning.
Speaker Change #100: Thank you Mr. Ferrari, ladies and gentlemen. This concludes your conference call for today. Thank you for participating and ask you. Please disconnect. Your lines I Hope you all have a great day.
Speaker Change: Good morning.
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Yeah.
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Speaker Change: Yes.
Okay.