Q4 2024 Goodfood Market Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to the good food Q4, and fiscal 2024 earnings call and webcast.
At this time all participants are in a listen only mode.
Following depressed inthe shouldn't be will conduct a question and answer session and instructions will be provided at that time for you to queue up for questions.
Note that questions will be taken from China financial analysts will be if any.
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I would like to remind everyone that this conference call is being recorded today does that vary 27 at eight a M eastern time.
Furthermore, I would like to remind you that today's presentation may contain forward looking statements about good should screen and future plans.
But the chance and intentions results levels of activity performance goals or achievements or other future events are the belt them as.
As such please take a moment to read the disclaimer on forward looking statements on slide two of the presentation.
Please be aware that during the call presenters will refer to certain metrics and no Niobrara smashers very possible. It is measures are identified and reconciled to the most comparable I affirm its not sure as you know.
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Finally, let me remind you that all figures expressed on today's call are in Canadian dollars unless otherwise stated.
Speaker Change: I would now like to turn the meeting over to your host for today's call Jonathan Ferrari Beechwood, Chief Executive Officer, Mr. Ferrari you may begin.
Speaker Change: Thank you Joseph.
Honestly I'm not sure good food book years, I'll tell you, who it is or definitely all shades of kits PMT missed that exists is stupid when cats Cumulus sets itself.
Speaker Change: Good morning, everyone and welcome to this call for good food market Corp to present, our financial results for the fourth quarter of fiscal 2024 ended September 7th.
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: This morning, we announced our Q4 and fiscal 'twenty four results you can find our press release and presentation on our website and SEDAR.
Speaker Change: All figures in today's call are expressed in Canadian dollars unless otherwise noted.
Let's start with with slide three.
Fiscal 'twenty 'twenty, four mark and get to its 10 year anniversary has been transformative for our company with significant advancements in profitability and cash flow generation, starting with adjusted EBITDA, which nearly doubled year over year.
Speaker Change: For fiscal 2024, adjusted EBITDA reached $9 $1 million, representing a margin of 6%.
Speaker Change: Compared to $4 7 million or 3% margin in fiscal 2023.
Speaker Change: This 93% growth in adjusted EBITDA reflects the structural efficiencies, we've implemented strong cost discipline and optimize pricing strategies that are now firmly embedded in our operations.
Speaker Change: Free cash flow generation has been equally strong.
For fiscal 2024, we achieved $7.6 million and adjusted free cash flow, marking a pivotal moment for good food as this is our first full year of free cash flow generation.
This has allowed us to reduce leverage by nearly two full turns bringing our net leverage ratio down from four four turns in fiscal 2023 to just two five turns today.
Speaker Change: This is this not only strengthens our financial flexibility, but also positions us to invest confidently in future growth opportunities.
On top of the financial accomplishments, we've continued to enrich our customer value proposition.
Speaker Change: Over the past year, we've added a record number of new recipes to our offering giving more variety and choices than ever before.
Speaker Change: We've also expanded our value plan, which delivers delicious recipes are just 999 per serving.
Making high quality home cooking accessible to more Canadians.
Speaker Change: This focus on affordability has been key in addressing evolving consumer preferences.
Speaker Change: And broadening the customer base, we have access to.
Speaker Change: Finally, I'm excited to highlight that we began executing on our acquisition strategy, which was discussed in previous quarters.
Speaker Change: Our acquisition of genuine T a leading Canadian third wave Crafty company marks the first step in building a platform of next generation brands.
Speaker Change: This acquisition is accretive to adjusted EBITDA.
Speaker Change: Aligns perfectly with our vision of building a portfolio of founder led.
Speaker Change: Gross and profitable businesses.
Speaker Change: With a strong foundation of financial discipline innovative customer offerings and our roadmap for growth, we're entering fiscal 2025 with momentum.
Ross: On that note Ross will now go over our financial performance in greater detail.
Ross: Thank you John and good morning, everyone.
Ross: Move to slide four to discuss net sales of active customer base.
Ross: On slide four you will see that net sales for the quarter were $34 $1 million compared to $37 $2 million in Q4 of 'twenty three.
Ross: Representing a 9% decline.
The unusual seasonality, we see in the summer months as customers travel and spend time eating out rather than at home. This also reflects a challenging consumer spending environment as well as our focus on more profitable customers.
Ross: As such active customers ended the quarter at 100.
Ross: 1000, compared to 116000 in Q4 of last year.
Relatively stable compared to the Q3 number one factoring seasonality.
Ross: As mentioned, we continue to focus on engaging with our most loyal existing and most profitable new customers we.
Ross: We have seen as a result, our highest net sales per active customer for our fourth quarter standing at 337 days practice customer this year up 5% from last year.
Ross: Our focus on enhancing basket size and order frequency, yet because we haven't had increase even in a difficult macroeconomic times.
Ross: Turning to slide five to review our profitability levels. We are pleased to have brought consistency to our profitability and have now delivered seven consecutive quarters of positive adjusted EBITDA.
Ross: Gross profit for the quarter was $13 million, representing a gross margin of 38% consistent with last year's gross margin.
This level reflects stable profitability supported by operational efficiencies and by pricing optimizations.
Ross: On the back of the consistent gross margin, we continue to work to take cost out of the system and reduce SG&A and have delivered adjusted EBITDA. This quarter of just over half a million dollars for a margin of one 5%.
Ross: Seventh consecutive quarters of positive adjusted EBITDA as required strong cost discipline to every employee gutsy.
Ross: Everyone has and continues to drive efficiencies in our operations and optimization of our cost structure.
Ross: Please persistently worked to build and implement a culture of continuous improvement and lean operations, which has enabled this consistent level of EBIT generation.
Ross: Moving to slide six cash flow generation remains a key highlight for fiscal 2024.
Ross: Cash flows used by operating activities were $9 million this quarter.
Ross: $1 $1 million improvement compared to the same quarter last year.
Ross: This profitability gain consistency our CFO has improved.
Ross: Compared to last year and with capital expenditure remaining low given the good condition of our relatively new and well maintained assets, our adjusted free cash flow and you remain stable for the quarter.
Ross: How does that line throughout the year as free cash flow improvement is enabling a reduction in debt, which combined with growing profitability Havent brought our net leverage from four four turns in the fourth quarter last year to two and a half during this quarter.
Ross: Turning to slide seven which summarizes our key financial metrics this year.
Ross: We are proud of the profitability metrics, we delivered this year.
Ross: Gross margin improved by two four percentage points and adjusted EBITDA margin in Q3, one percentage points on route to delivering record adjusted EBITDA of $9 $1 million.
Ross: This improved profitability is also a record record adjusted free cash flow, which reached full year positive territory for the first time and good with 10 year history.
Ross: Seven $6 million for the year.
Ross: This level of cash flow and cash balance provides meaningful financial flexibility to continue enhancing our financial position and the ability to invest in various strategic initiatives such as the recently announced acquisition of N T.
Ross: Overall the results. This year highlight our continued focus on providing more to customers with strong unit economics and building operating efficiencies.
Ross: Our active customer base has thrown some stability and lower confections. It has also shown its highest net sales per active customer every quarter. This year, which had been turned driven increased profitability.
Ross: Combined with further use of technology tools outsourcing initiatives disciplined cost management and improvements in operational metrics, such as labor cost proportion.
Our shipping cost quarter, which both showed double digit percentage improvement year over year.
Ross: Profitability has reached levels never seen before.
Ross: On balance our profitability metrics for the year came ahead of our expectations and we are pleased with the sustained strength of our financial performance and satisfied with growing profitability.
Ross: While the majority of our financial Kpis of the unit economics and customer feedback metrics continued to show improvement we continue to strive for growth in both the top line and the bottom line.
Ross: As we look to generate growth in a difficult environment, they're energized by this performance energized and hungry for more.
Ross: John will now provide an update on our recent customer centric initiatives and the acquisition of genuine team.
John: Thank you Ross turning to slide eight.
Speaker Change: Our outlook for fiscal 2025 centers on delighting, our customers and explore expanding our platform.
Speaker Change: We recently introduced the value plan built on the value recipes made available to members earlier this year.
Speaker Change: It's a cornerstone of our strategy.
Speaker Change: This plan offers though that's just classic recipes for under $10 per survey, making high quality affordable meals accessible to more Canadian households.
Speaker Change: It is not just an add on but a growing segment of our ready to cook portfolio and its uptake has doubled since launch in the summer.
Speaker Change: Members are increasingly signing up to the plan and still have access to the rest of our recipes upsells and grocery items.
Speaker Change: We are also excited about our chefs partnerships, which include collaborations with industry legend like Chuck Hughes versus certainly up and coming stars like chefs Love home doesn't there and Michelin starred chefs like Lee Cooper Blackbird two out in Vancouver.
Speaker Change: These partnerships bring unique culinary experiences directly to our customers' homes, creating a sense of joy and discovery that such good food apart.
Speaker Change: Moving to slide nine we are thrilled to welcome genuine T into the good food family.
Genuine T a leading Canadian third wave crafts tea company.
Speaker Change: Bodies the values, we look for in an acquisition.
Speaker Change: <unk> founders are strong growth history meaningful profitability.
Speaker Change: It meant to quality.
Speaker Change: In addition, genuine T has been recognized as one of Canada's fastest growing companies by the Globe and mail and has won best T in Toronto multiple years in a row.
Speaker Change: We are excited to be working with Sarah David the founders of genuine T who will continue to lead the business for years to come maintaining the brand's unique identity known for product innovations in high quality organic and transparently source keys.
Speaker Change: We believe genuine T is well positioned to continue to grow through its successful omni channel strategy.
Speaker Change: Selling into Canada, as most discerning cafes specialty grocery stores and their E Commerce website.
Speaker Change: This acquisition is a critical first steps in our long term strategy to build a global portfolio of next generation consumer brands.
Speaker Change: We enter partner with founder led businesses that share our values have demonstrated consistent growth and profitability.
Speaker Change: Couldn't operate within a decentralized model.
We will also support the acquired businesses and drive value creation through for example, combining logistics networks offering fulfillment as a service and cross selling initiatives among many value creating options.
Speaker Change: Our investment approach is designed for the long term, we plan to invest in businesses that align with our ethical and sustainability values and provide autonomy to foundries, while leveraging our platform for growth.
Speaker Change: This approach will be central to achieving our ambitious goal of becoming a leading portfolio of next generation brands globally.
Speaker Change: On the 10 year anniversary of good food, we are pleased with our financial performance and excited by the future of the company.
Speaker Change: This year has demonstrated the consistent cash flow generation ability.
Speaker Change: Good food.
Speaker Change: As well as its ability to attract and invest in next generation businesses and build a platform that is lean and well positioned to generate meaningful shareholder value.
Speaker Change: On that note I will turn it over to the operator for the Q&A portion of this call.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session to ask a question you May press star followed by the number one on your telephone keypad.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing any keys.
Speaker Change: So we do like a question. Please press star followed by the number Q. Once again, please press star one on your telephone keypad to ask a question.
Speaker Change: Your first question comes from the line of Mark and laundry with Stifel. Please go ahead.
Hi, good morning, guys.
Okay.
Speaker Change: The my first question is on <unk>.
Speaker Change: Oh, okay.
Speaker Change: On the on the trends that youre seeing them in Q1.
Speaker Change: Q1 is almost done so I was wondering if you could talk a little bit about how your customer count as evolved.
Speaker Change: Your.
Speaker Change: Average revenue per user has evolved in your customer acquisition costs.
In Q1, just to give us a little bit of a sense on how things are going post the year end.
Thanks for the question, let's say I think you know what are the things we mentioned in the script as Q4 was.
Speaker Change: Continuing to continuing to see consumer challenges and softness across Canada.
Speaker Change: So within Q1, we're seeing some of the same trends in terms of consumer softness.
Speaker Change: I think one of the things that.
We're looking at is the subscriber.
Speaker Change: Calix stability.
I would say since Q3.
Speaker Change: Three of 2024, we've seen relative stability in our customer accounts, which I think is a good leading indicator.
Being able to maintain that over several quarters is what leads to year over year.
Speaker Change: Revenue growth ultimately.
So we're.
Speaker Change: Encouraged by the stability in net customer.
Speaker Change: Customer count.
It's been driven I would say through.
Speaker Change: Really focusing in on the ROI of our marketing spend as we've talked about in the past I think we saw.
About 15%.
Speaker Change: The improvement in customer acquisition costs throughout the summer and we're continuing to maintain that.
Speaker Change: That trend in Q1.
Speaker Change: And.
Speaker Change: What else can I add I think the.
Speaker Change: The value plan is is helping us both to attract customers who are signing up to the value plans for the the 10 dollar meals, but we're also seeing existing customers interact with the with the value menu.
Speaker Change: So they can stay on their existing plans and AD Val.
Speaker Change: Value menu recipes within their selection and so it's creating a lot of options and ways in which customers can see.
Speaker Change: Save money, while continuing to shop at good food. So we're seeing we're seeing some positive things across those trends.
Speaker Change: But I'm sure you're seeing across all consumer businesses in Canada, we're working really hard to to meet customers' needs and.
Speaker Change: <unk> remains challenging.
Speaker Change: Yeah. So so so if you if your customer count is stable and youre seeing that youre seeing consumer softness does that imply that.
Speaker Change: <unk> is a is a down a little bit.
Speaker Change: I think I think you.
Speaker Change: As you know revenue is based on the basket size and the frequency of the orders I think we're seeing subscribers subscribers being relatively stable I think from an activity level.
Speaker Change: Probably not as much activity in or it's driven there is subsidising any activity from the customers I think in the basket size has held quite nicely though.
Speaker Change: Okay and you know.
Speaker Change: One thing we're seeing is our is our Canadian dollar.
Speaker Change: Losing ground versus the U S dollar and I, if I recall right.
Speaker Change: So you got some purchases in U S dollars can you talk a little bit about how the weakening Canadian dollar is impacting your business right now.
Speaker Change: Yes, there is some some impact, especially as we start sourcing more with the winter season from the U S.
Speaker Change: There is some some impact on our food cost.
I wouldn't say it's it's.
Speaker Change: It's very very significantly these pressuring gross margin a little bit. So at this point, we still try to have as many of our purchases as possible and N C. A D.
Speaker Change: Of course, some of the products mix in the U S. You guys liquidity and say did it extremely rate has it impacted and there are suddenly see purchases. It is still a minority of our cost structure.
Okay.
Speaker Change: Okay. That's it for me Thank you and good luck.
Speaker Change: And your next question.
Speaker Change: Your next question comes from the line of Frederickson Lee with <unk>. Please go ahead.
Speaker Change: Yeah.
Thank you and good morning, and congrats on the first the acquisition and just tell them that they wanted to.
Speaker Change: Can you dig a bit deeper on the acquisition strategy here, specifically, if you view it as being more brand related or category related and.
Yes, I mean, my God are you screening.
Speaker Change: Alright, good bye bye brands that are resonating with customers first or are there specific.
Speaker Change: Product categories that you are looking at just wanted to better understand what the sort of the filters are initially on the acquisition strategy.
Speaker Change: Yeah, Hey, good morning, Thanks for the question I think.
Speaker Change: What we're looking for is really the concept of next generation brand. So we're looking for.
Speaker Change: Brands that are aligned.
Speaker Change: Aligned with good foods values right. So.
Speaker Change: <unk> core purpose of go live there delivering joyful nourishment and helping our community to live longer on a healthier planet that's kind of one of the overarching themes that we're thinking about and talking about with the with the businesses that we're interacting with them.
Speaker Change: I think having a similar.
Speaker Change: And consumer is something that we're favoring so having the ability to say.
Speaker Change: The brand has a potentially.
Speaker Change: Potentially a similar customer base that we can cross sell.
Speaker Change: Their brand and take good foods customer base and vice versa. I think that's a that's a real plus.
Speaker Change:
Next generation for US also means a significant amount of of e-commerce sales.
Speaker Change: And that creates some interesting opportunities for us to offer.
Speaker Change: Fulfillment as a service to some of these smaller brands that are.
Speaker Change: Fulfilling their products.
Speaker Change: Internally themselves.
Speaker Change: We can do so on a larger scale with with many efficiencies.
Speaker Change: Probably at a cost basis, that's 15% to 20% below.
Speaker Change: What a smaller brands would be doing on their own.
Speaker Change: And then I think for us as well what we what we really like about a genuine T is if they've carved out a unique niche for their brand and their business. That's that's fast growing.
Speaker Change: And is gaining adoption in Canada, but they are one of the leaders in the third wave a T movement and if you've heard about the third wave movement on the coffee bean side, it's all about promoting quality.
Freshness and transparency of.
Speaker Change: Some of the product, Virginia went to your sourcing directly from <unk>.
Speaker Change: International farms getting high quality products and getting it really fresh for.
Speaker Change: For their customers.
And it also creates.
Speaker Change: Our real focus around innovation, which I think is another core piece of of next generation brands. So genuine T was the first tea brand to offer traditional much in Toronto. For example, they are also a leader in Adaptogenic tea blends.
Working with nutrition nutritionists to build out those those tea blends and so those are a few of the characteristics that we see in the next generation brands that were that were interested in working with and.
Speaker Change: What we love about the genuine T situation as well as the.
Speaker Change: The founder Sarah and David have this.
Speaker Change: Combination of a really deep understanding of their consumer base and their products they're both.
T symbol yeas.
Speaker Change: They also.
Speaker Change: Have business backgrounds and have M B A's, which gives them a really interesting combination of them.
Speaker Change: Business acuity in and entrepreneurial abilities, and deep knowledge of their consumers and their space and so I think the.
Speaker Change: For us.
Speaker Change: Well, what we're trying to do is make sure that in addition to targeting good foods organic growth, we can build out this.
This platform of brands that give us many ways to win and in many ways to grow within the portfolio.
Speaker Change: And genuine T has been really unimpressive fast growing brand over the past few years in and we're excited to.
Speaker Change: To work with the founders.
Speaker Change: That's great. Thanks for that and maybe just a last clarification. There I think in your script you mentioned global brands a few times was that was that.
Speaker Change: I meant to say that you are looking outside of Canada, as well and if so like how would you think about some of those synergies because of logistics.
Speaker Change: And the other I guess Canadian centric and synergies that we could see from that from some of the acquisitions made in Canada.
Speaker Change: How you would.
Speaker Change: I've said that if you were to acquire outside of that.
So we focus.
Speaker Change: We focused our our core efforts within Canada.
Speaker Change: Of course since we've made a genuine T announcement, we've had some.
Speaker Change: Some interest from businesses I would say across North America, and so we're keeping an open mind within the U S market.
We're trying to find businesses that we have an edge in and we understand them better than any other buyer out there.
Speaker Change: So I think that's a core piece of it and we're also exploring opportunities to.
Speaker Change: To bring U S brands into Canada, and leverage our platform for that so that could be one of the ways in which.
Speaker Change: Value could be created working with the U S brands.
Speaker Change: Okay, Great that's interesting.
Speaker Change: Maybe switching topics here I'm on the margin side, obviously, great progress in the fiscal 'twenty four.
Speaker Change: And without giving any sort of guidance for fiscal 'twenty five are you seeing any sort of.
Speaker Change: Levers that would potentially continue to move the margin out here in the next year or are we sort of have it.
Speaker Change: At a plateau and maybe we're just relying more on.
Margin accretive acquisitions, just how are you thinking about the growth in adjusted EBITDA margin going forward.
Speaker Change: It's a good question.
Speaker Change: I think from a gross margin perspective, you'd mentioned in recent quarters and highlighting the value plan is what we're looking to find ways to get more to the customer.
Speaker Change: So I think there are some investments that are being made and in terms of the amount of.
Speaker Change: The diversity and some ingredients and an up and down the pricing options.
So that's on the gross margin I think on an EBITDA margin definitely margin accretive acquisitions will play a role in that.
Speaker Change: I think overall, we're still always going to look for it.
Speaker Change: Medical cost improvements on the <unk>.
Speaker Change: Opex side.
Speaker Change: See what we can do better whether it's it's focusing on on improving.
Speaker Change: Some of our technology tools and how they can help.
Speaker Change: Uh huh.
Speaker Change: Increased productivity within the business.
Speaker Change: We look at some of the longer term contracts that we had that begin worked through.
Speaker Change: Those gains are probably going to be more on the mitral side. So I think the if.
Speaker Change: If you look at the mix of.
Speaker Change: Adding busch margin accretive acquisitions and doing some small improvements on.
Speaker Change: On the SG&A side and theirs.
Speaker Change: The path to get to a margin improvement on the EBITDA side.
Speaker Change: Alright, Thanks for taking my questions that's all that.
Speaker Change: Yeah.
Speaker Change: Thanks, so much.
Speaker Change: Thank you and I'm showing no further questions at this time I would like to turn it back to Mr. Jonathan Ferrari for closing remarks.
Speaker Change: Thank you for joining us on this call and we look forward to speaking with you again in the new year.
Thank you presenters, ladies and gentlemen. This concludes today's conference call. Thank you all for participating you may now disconnect.
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