Q3 2025 DAVIDsTEA Inc Earnings Call
Good morning, ladies and gentlemen, welcome to David's team's third quarter results webcast for fiscal 2024.
Today's webcast is being recorded.
A listen only mode.
Before we get started I would like to remind you of the company's safe Harbor language.
This presentation includes forward looking statements about expectations for the performance of the business in the coming quarter and year.
Each forward looking statements contained in this presentation is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements.
Additional information regarding these factors appears under the heading risk factors and uncertainties in the management's discussion and analysis of financial condition and results of operations.
M D N a.
Which was filed with Canadian regulatory authorities and is available on www Dot speed Arb question thoughts yet.
Forward looking statements in this discussion speak only as of today's date and the company undertakes no obligation to update or revise any of these statements.
If any non <unk> financial measures used during this webcast a reconciliation to the most directly comparable <unk>.
Financial measure.
Will be detailed in the M D N. It.
As a reminder, all dollar amounts referred to are in Canadian dollars unless otherwise indicated.
Speaker Change: Now I would like to turn the call over to Sarah Siegel, Chief Executive Officer, and Chief brand Officer.
Speaker Change: David's team.
Sarah Siegel: Thank you operator, good morning, everyone and thank you for joining us today.
Sarah Siegel: I am thrilled to share some exciting updates about David ongoing transformation and our remarkable progress this year.
Sarah Siegel: As we enter the final fiscal 'twenty 'twenty four our business momentum continues to build.
Sarah Siegel: Our financial results reflect the strength of our strategy our brand and our people.
Sarah Siegel: We are highly encouraged by the ongoing sales momentum in the third quarter of 'twenty 'twenty four with consolidated sales, increasing 15, 6% year over year to $14 million.
Sarah Siegel: This growth was driven by double digit increases across all distribution channels.
<unk> sales were up 19, 2% online sales growth.
Sarah Siegel: 11, 4% and wholesale channel sales grew 19, 3%.
Sarah Siegel: These results affirm our value proposition the appeal of our premium <unk> products and accessories.
Quality that resonate with key lovely.
Sarah Siegel: Equally important our multifaceted Omnichannel world strategy continues to gain traction.
Sarah Siegel: Reported by early signs of an improving economic environment, lower interest rates and easing and playful by.
By being present everywhere, whether in store online or through wholesale David's team continues to win over tea lovers, and those new to the category.
Sarah Siegel: We put he lovers are discovering and rediscovering the world that they've been.
Sarah Siegel: I am, particularly optimistic about the performance of our new retail locations.
Sarah Siegel: Our newest location in the Montreal, Eton Center, which opened just over a month ago. It perfectly situated at a significant hub of downtown theater topic and is already on track to become a top tier location in our twenties store network.
Sarah Siegel: Meanwhile, our September opening in Canada's newest luxury mall, Montreal, well known small is also delivering impressive financial results a tenant occupancy include leading to greater heights and multiple.
Sarah Siegel: These successes.
Sarah Siegel: Highlight the importance of choosing the right location for our stores and reflect the readiness of consumers to indulge in affordable luxuries like our premium seats.
Sarah Siegel: Our ability to deliver a heightened in store experience, which offers along with the passing of our skin guide's enables us to connect with customers in person to listen to their requests and provide guidance.
Sarah Siegel: Looking ahead, we are reiterating our intent to significantly increase our store footprint over the next three years to drive sustained profitable growth.
That said delay.
Sarah Siegel: Delivering sustainable profitability remains our primary goal.
Sarah Siegel: Despite recent revenue expansion, including two consecutive quarters of double digit year over year growth, we continue to focus on profitability.
Sarah Siegel: David <unk> reported a net loss of $1 6 million in the third quarter of 2024, and $5 7 million after nine months of the fiscal year.
Sarah Siegel: While these results represented an improvement over last year. It is not sufficient to secure a long clinical stuff.
To address this profitability issue in September we terminated our head office lease and relocated our headquarters until one of our warehouses and in early November converted all of our I T system to a more agile and cost effective platform.
Sarah Siegel: Moves are expected to generate annual savings of a little over $4 million bolstering our efforts to achieve sustained profitability in 2025.
Speaker Change: Thanks to tailor, our president Chief financial and operating Officer will provide more details about these initiatives in his prepared comments.
Speaker Change: I want to emphasize that the main objective of our leadership team remains to reach profitability, while delivering long term value to our stakeholders.
Speaker Change: Our company relies on innovative people creative ideation, and a desire to push the envelope in the categories other than exciting space to be in.
Speaker Change: Our customers love piece of it.
Speaker Change: Health benefits.
Speaker Change: The way it makes you feel in the constant discoveries.
Speaker Change: We invest in our people and rely on constant feedback from our customers, we listen and react in a way that leads us into adjacent categories like ready to drink functional T powders and the use of functional ingredients booths are loosely key benefits with healing organic and high quality wellness plans that have been embraced by.
Speaker Change: Customers looking to expand their tea journey.
Speaker Change: We continue to drive innovation by relying on our team's connection with our customers as well as global inspiration to bring new seasonal drops limited edition blends and exclusive partnership team with a constant strategy to always class and confirm our innovation with customer appreciation and data insights.
Speaker Change: Our product development cycle and latest collections mean, there is always a new reason to drop it to David.
Speaker Change: Lastly, I'd like to touch on the impact of the recent Canada post strike on our operation while order volumes. According to plan until mid November the site caused a decline in online orders and delays in holiday season deliveries.
Speaker Change: I want to reassure you that these delays are unrelated the fulfillment challenges experienced a few years ago those have been fully resolved by bringing order fulfillment in house.
Speaker Change: This season, our distribution team has been able to keep up with all order volumes and deliver excellent service.
Speaker Change: Any delays are due to carrier capacity and we are actively working with alternative carriers to resolve any lingering backlog and expect to mitigate much of the impact by increased volumes in our stores and wholesale channels.
Speaker Change: The disruption in delivering capabilities has led us to innovate and diversify our delivery partners, resulting in faster options being added and even next day delivery and major Canadian Metropolitan cities.
Speaker Change: We continue to innovate on delivery capacity to make our products even more accessible faster.
Speaker Change: In summary, David's team delivered a strong third quarter performance.
Speaker Change: Sales increased 15, 6% year over year, driven by a resonating value proposition and an improving economic environment.
Speaker Change: Our new Eaton Center store is off to a phenomenal start complementing the earlier success of our Royal Mountain ball locations.
Speaker Change: We implemented a key cost saving initiative with the IP system transition.
Speaker Change: Second to generate $4 million 90 real savings.
Speaker Change: And we remain committed to achieving sustained profitability by 2025.
Speaker Change: I will now turn the web cast over to Frank.
Speaker Change: Uh huh.
Frank: Thank you Sarah and good morning, everyone.
Speaker Change: I'm pleased to join you today to share the results of our third quarter performance.
Speaker Change: As well as the progress, we're making in positioning JBT for long term success.
Speaker Change: As we reflect on this quarter. One thing is clear we are a company in motion from operational enhancements to financial performance improvements David C is taking bold steps towards becoming a stronger more resilient business.
Speaker Change: Delivers value for both our consumers and our shareholders.
Speaker Change: Let's begin with the highlights of our financial performance.
Speaker Change: For the first time in recent memory, David P generated positive cash flow from operations, representing a significant milestone in our journey.
Speaker Change: And as a result.
Speaker Change: Strengthened our cash position.
Speaker Change: On a sequential basis of $7 9 million at the end of the quarter.
Speaker Change: It reflects our.
Speaker Change: Disciplined financial management and relentless commitment to operational excellence.
Speaker Change: Excellent.
Providing a strong foundation for continued growth and success.
Speaker Change: Consolidated sales grew by 15, 6% year over year.
Speaker Change: With $14 million in the third quarter.
Speaker Change: This growth reflects the effectiveness of our value proposition.
Speaker Change: A unique combination of premium products unmatched product quality and a memorable customer experience both online and in stores.
Speaker Change: Sorry.
Speaker Change: Book growth in all channels brick and mortar sales increased 19, 2% to $4 7 million.
Speaker Change: Representing the fourth consecutive quarter of growth in the sup.
Speaker Change: This drove highlights the value of a physical presence, allowing <unk> to connect with our brand in a more personal and immersive way.
Online sales rose 11, 4% to $6 3 million Schulke.
Showcasing the continuous strength of our digital capabilities in a world, where convenience and accessibility matter more than ever.
Speaker Change: Wholesale channel sales grew by 19, 3% to $3 million driver.
Speaker Change: Driving a strong driven by strong partnerships and replenishment orders from existing customers.
Speaker Change: Customers.
Speaker Change: Notably gross profit margin improved significantly to 51, 5%.
Up from 37, 9% in the prior year.
Speaker Change: This improvement was driven by higher sales better product margin and a reduction in freight shipping.
Speaker Change: Shipping and fulfillment costs.
Speaker Change: This is not just the financial metrics.
Speaker Change: Testament to the effectiveness of our operational efficiency initiatives.
Speaker Change: Let me be clear.
Speaker Change: While we made meaningful progress.
Speaker Change: Still work to be done.
Speaker Change: Despite two consecutive quarters of double digit revenue growth.
Speaker Change: Difficult improvement in sequential gross profit margin.
Speaker Change: We are not yet profitable.
Speaker Change: In the third quarter, we reported a net loss of $1 6 million. This represents however, a significant improvement compared to a net loss of $3 7 million in the same quarter last year.
Speaker Change: To ensure we achieve sustained profitability by 2020, we've taken decisive action.
Speaker Change: In early November we transitioned all of our IP system to a more agile and cost effective set of applications.
These systems enable us to better engage with new customers.
Speaker Change: Relationships with existing ones.
Speaker Change: Wireless <unk> required a $3 $1 million write offs in the quarter.
Forward looking investment that is expected to generate annual cost savings of approximately $4 million.
Speaker Change: These cost savings will improve our SG&A expense run rates and the additional capabilities will allow us to drive growth and deliver value to our consumers.
Speaker Change: Additionally, this transition triggered a reassessment of previously appear to property and equipment.
Speaker Change: Resulting in a reversal of $2 1 million.
It's worth noting that this reversal was not just an accounting adjustment. It reflects the tangible progress, we're making on improving our financial health and operational efficiency.
Speaker Change: In September we terminated our head office lease and relocated our headquarters into one of our warehouses.
Speaker Change: Following one time relocation costs. This move is expected to generate annual cost savings of approximately $200000.
Speaker Change: Selling general and administrative expenses increased by quarter four.
Speaker Change: Four 5% to $8 7 million.
Speaker Change: However, when adjusted for one time expenses to affect financial change.
Speaker Change: SG&A expenses actually decreased by $1 million or 12, 6% compared to the prior year.
Speaker Change: This reduction is a testament to our commitment to operational efficiencies and reduce our ability to do more with less.
Speaker Change: Turning to the bottom line adjusted EBITDA for the third quarter was 800000 compared to a negative $2 5 million in the same period last year.
Speaker Change: This $3 $3 million improvement reflect higher sales better margins and a disciplined cost management approach.
And as we look forward to the future our priorities are clear.
Speaker Change: First the <unk> profitability.
Speaker Change: We remain focused on achieving positive earnings in 2025.
Speaker Change: And to get there we're laser focused on revenue growth from all of our distribution channels and improving margins and maintaining a disciplined cost management process.
Speaker Change: Second store experiences.
Over the next three years, we plan to significantly grow our store footprint.
Speaker Change: Allowing us to meet the increasing demand for premium products and bring our brands even more communities.
Speaker Change: And finally operational excellence.
Speaker Change: From our new IQ platform to refining our Omnichannel strategy.
Speaker Change: And relentlessly driving cost efficiencies in our supply chain.
Speaker Change: We're laying the groundwork for longer term success.
Speaker Change: With these priorities guarding us David C is making steady progress delivering improving financial results streamlining operations.
Speaker Change: And staying true to our mission of making seed fund and accessible to all.
Speaker Change: We are confident in our ability to achieve sustainable growth and create lasting value for our cost for our consumers partners and shareholders.
Speaker Change: We want to thank all of our passionate employees, our loyal customers and patient shareholders for their continued support.
Speaker Change: This concludes the review of our third quarter results, we encourage investors wishing to obtain additional color without David C to contact Investor Relations.
Speaker Change: Who will help coordinate access to management. Thank.
Speaker Change: You for joining us today.
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