Q2 2025 Goodfood Market Corp Earnings Call

Operator: Good morning, ladies and gentlemen, and welcome to the Goodfood Q2 of Fiscal 2025 Earnings Call on Webcast. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. Please note that the 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, April 22nd at 8 a.m.

Good morning, ladies and gentlemen, and welcome to the good food Q2 of fiscal 'twenty 25 earnings call and webcast.

At this time all participants are in a listen only mode.

Following the presentation, we will conduct a question and answer session and instructions will be provided at that time for you to queue up for questions.

Note that the questions will be taken from financial analyst only.

Anyone has any particular skewing because bench, especially star followed by zero for operator assistance at any time.

I'd like to remind everyone that this conference call is being recorded today April 22nd at eight a M eastern time.

Operator: Eastern Time.

Operator: 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. As such, please take a moment to read their disclaimer and 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 mDNA.

Furthermore, I would like to remind you that today's presentation may contain forward looking statements about its current and future plans expectations and intentions results levels of T V. T performance goals, stretchy mens or other future events or developments as such please take a moment to read that.

Disclaimer on forward looking statements on slide two of depression patients.

Please be aware that during the call for sellers willing to break its Jordan, that's fixed and then I first measures.

Possible I'm, just not sure sure identified and reconciled to the most comparable I have for the rest of that church in our MD&A.

Operator: Finally, let me remind you that all figures expressed on today's call are in Canadian dollars, unless otherwise stated.

Finally, let me remind it.

Mind, you that I'll be curious express on today's call are in Canadian dollars unless otherwise stated.

Jonathan Ferrari: I would now like to turn the meeting over to your host for today's call, Jonathan Ferrari, Goodfood's Chief Executive Officer. Mr. Ferrari, you may proceed. Thank you.

Jonathan Sure: I would now like to turn the meeting over to your host for today's call Jonathan Sure I get your Chief Executive Officer. Mr. Ferrari You May proceed.

Yeah.

Speaker Change: Thank you both of you about Joseph do you have that.

Jonathan Ferrari: Bonjour à tous et bienvenue à l'appel conférence de Marché Goodfood pour présenter nos résultats financiers du second trimestre de l'exercice 2025, clos le 8 mars. Good morning, everyone, and welcome to this call for Good Food Market Corp to present our financial results for the second quarter of fiscal 2025 ended March 8. I'm joined on the call today by Neil, Goodfood's President and Chief Operating Officer, and Ross, Chief Financial Officer.

Speaker Change: What I'll say about sugared food because I'll tell you what is it that you don't need to say go ski mask, an exhaust system at a bad thank Claudia richness.

Speaker Change: Good morning, everyone and welcome to this call for good food market Corp to present, our financial results for the second quarter of fiscal 2025 ended March eight.

Speaker Change: I'm joined on the call today by Neal, It's good Foods', President and Chief operating Officer, and Ross Chief Financial Officer.

Jonathan Ferrari: This morning, we announced our Q2 results. You can find our press release and presentation on our website and CDAR+. All figures in today's call are in Canadian dollars, unless otherwise noted.

Speaker Change: This morning, we announced our Q2 results you can find our press release and presentation on our website and SEDAR plus.

Speaker Change: All figures on today's call are in Canadian dollars unless otherwise noted.

Jonathan Ferrari: Let's start with slide three. In Q2, we're encouraged to have delivered positive adjusted EBITDA for the ninth consecutive quarter, showcasing the durability of our business and financial model, despite significant economic headwinds. Adjusted EBITDA for the quarter was $1 million, representing a 4.5% margin. Within a softer top line and consumer spending environment, this continued margin performance reflects the adaptability of our operations, the soundness of our strategic priorities, and the nimbleness of our cost structure. Our gross margin also remains strong at 43%, even with macro pressures impacting volume. This was supported by cost efficiencies and process optimization, which helped mitigate seasonal declines in customer orders.

Speaker Change: Let's start with slide three in Q2, we're encouraged to have delivered positive adjusted EBITDA for the ninth consecutive quarter showcasing the durability of our business and financial model despite significant economic headwinds.

Speaker Change: Adjusted EBITDA for the quarter was $1 million, representing a four 5% margin.

Speaker Change: Within a softer topline and consumer spending environment. This continued margin performance reflects the adaptability of our operations the soundness of our strategic priorities and the nimbleness of our cost structure.

Speaker Change: Our gross margin also remained strong at 43%, even with the macro pressures impacting volumes.

Speaker Change: This was supported by cost efficiencies and process optimization, which helped mitigate seasonal declines in customer orders.

Jonathan Ferrari: In Q2, our customers' baskets reached an all-time high, driven in large part by enhanced digital experience features like protein customization and more intuitive add-on flows, which made it easy for customers to build larger baskets. Goodfood members can more easily browse our full selection of delicious meals, sides, desserts, appetizers, and more, driving more portions and products being added in each basket.

Speaker Change: In Q2, our customers' baskets.

Speaker Change: Reached an all time high driven in large part by enhanced digital experience features like protein customization and more intuitive flows which made it easy for customers to build larger baskets.

Speaker Change: Good food members can more easily browse our full selection of delicious meals sides desserts, appetizers and more driving more portions had products being added in each basket.

Jonathan Ferrari: In recent weeks, we launched our new Heat & Eat line, a ready-to-eat offering available in select geographies. Early reviews have been strong and the heat and eat meals that can be ready in two minutes are helping meet the growing demand for high quality, healthy and ultra-convenient meals.

Speaker Change: In recent weeks, we launched our new heat and eat line of ready to eat offering available in select geographies.

Speaker Change: Early reviews have been strong and the heat and eat meals that can be ready in two minutes are helping meet the growing demand for high quality healthy an ultra convenient meals.

Jonathan Ferrari: We're also proud to share that we officially achieved B Corp certification, a powerful recognition of our ongoing commitment to ethical business practices and environmental stewardship. The certification, a culmination of years of our team's hard work, is a customer facing testament to our commitment to continuously enhance our social and environmental performance, accountability, and transparency, all of which are important for our customers, our employees, and the communities we service. With all of this in play, we believe the business is firmly positioned to continue executing on both our core organic and inorganic growth pillars.

Speaker Change: We're also proud to share that we officially achieved B Corp certification.

Speaker Change: A powerful recognition of our ongoing commitment to ethical business practices and environmental stewardship.

Speaker Change: Certification.

Speaker Change: Elimination of years of our team's hard work is a customer facing testament to our commitment to continuously enhance our social and environmental performance.

Speaker Change: Ability and transparency all of which are important for our customers our employees and the communities we service.

Speaker Change: With all of this in play we believe the business is firmly positioned to continue executing on both our core organic and inorganic growth pillars.

Roslane Aouameur: Ros, we'll now walk you through our financial performance. Thank you, Jon. Let's begin on slide four with our sales and customer metrics.

Speaker Change: I'll now walk you through our financial performance.

John: Thank you John.

Speaker Change: On slide four with our sales and customer metrics.

Roslane Aouameur: Net sales for the quarter totaled $30.5 million, a 23% decline year-over-year. This drop primarily reflects a lower active customer count, resulting from a more pronounced holiday seasonality, cautious post-holiday consumer spending, and general macro headwinds. While the headwinds were strong, we continued our focus on higher value customers requiring less incentives and displaying stronger unit economics, which helped us achieve record net sales per active customers of $363, a substantial increase from the $327 in Q1. Active customers ended the quarter at 84,000, down from Q1, driven by the aforementioned lower consumer spending and aligned with our focus on customers with better unit economics.

Speaker Change: Net sales for the quarter totaled $35 million and 23% decline year over year.

Speaker Change: This drop primarily reflects a lower active customer count, resulting from a more pronounced holiday seasonality cautious post holiday consumer spending and general macro headwinds.

Speaker Change: While the headwinds were songs, we continued our focus on higher value customers, requiring less incentives and displaying stronger unit economics, which helped us achieve record net sales per active customers of $363 a substantial increase from the $3 27 in Q1.

Speaker Change: It takes customers ended the quarter at 84000 down from Q1, driven by the aforementioned lower consumer spending and align with our focus on customers with better unit economics.

Roslane Aouameur: Overall, these figures underscore the challenging holiday seasonality we experienced, and the muted post-holiday spending environment, and very low consumer confidence. While we recognize the challenges brought about by a lower net sales basis, the results also underscore our ability to drive more value per user with fewer promotional incentives leading to healthy margins, as we will see on the next slide.

Speaker Change: Overall these figures underscore the challenging holiday seasonality, we experienced and the muted post holiday spending environment and very low consumer confidence.

Speaker Change: We recognize the challenges brought about by the lower net sales basis. The results also underscore our ability to drive more value per user with fewer promotional incentives eating healthy margins as we will see on the next slide.

Roslane Aouameur: I will now turn to slide five to review our profitability level. This quarter, gross profit reached $13 million with a 42.6% gross margin, relatively flat compared to last year, despite the fixed costs being amortized on lower order and sales-based This was achieved through lean operations and supply chain diversification, lowering food costs in an inflationary environment. Strategic Efficiencies in our Fulfillment Process also drills lower labor unit costs and reductions in packaging unit costs, which contributed meaningfully to this result. Adjusted EBITDA came in at $1.4 million, reflecting the enduring strength of our cost management framework. While this is lower than the figure posted in Q2 last year, we are encouraged by the operational agility and financial discipline built, which helped us effectively navigate the substantial seasonal and macroeconomic challenges that occurred this quarter.

Speaker Change: I will now turn to slide five to review our profitability levels.

Speaker Change: This quarter gross profit reached $13 million with a 42, 6% gross margin.

Speaker Change: Relatively flat compared to last year, despite the fixed cost being amortized on lower order and sales basis.

Speaker Change: This was achieved through lean operations and supply chain diversification lower food costs and in an inflationary environment.

Speaker Change: T J efficiencies in our fulfillment process also drove lower labor unit costs and reductions in packaging unit costs, which contributed meaningfully to this result.

Speaker Change: Adjusted EBITDA came in at $1 $4 million, reflecting the enduring strength of our cost management framework.

Speaker Change: Well this is lower than the figure posted in Q2 last year. We are encouraged by the operational agility and financial discipline, built which helped us effectively navigate the substantial seasonal and macro economy challenges to that Craig.

Speaker Change: Got it.

Roslane Aouameur: Our teams relentlessly embed continuous improvement principles across the business, driving sustainable efficiency gains and providing an increasingly resilient level of profitability, ready to face a wide array of economic scenarios.

Speaker Change: Our team's relentless embed continuous improvement principles across the business driving sustainable efficiency gains and providing an increasingly resilient to a level of profitability ready to face a wide array of economic scenarios.

Roslane Aouameur: Now moving to slide 6 to review cash flow. The cash flow used in operations was $1.2 million, primarily driven by lower net income and timing differences in SG&A payables. Capital expenditures remained modest at $0.4 million, with spend concentrated on compliance upgrades at our Montreal facility, which are now more than half-complete. Adjusted free cash flow was negative $1.5 million compared to positive $0.3 million in the prior period. Despite the quarter's challenges, our liquidity remains solid, with $19 million in cash and marketable security. Also noteworthy from a balance sheet perspective was the repayment in shares for 2025 convertible debentures shortly after the quarter end.

Speaker Change: Now moving to slide six to review cash flows.

Speaker Change: Cash flow used in operations was $1 $2 million, primarily driven by lower net income and timing differences in SG&A payables.

Speaker Change: Capital expenditures remained modest at zero point $4 million with spend concentrated on complaints and shelf facility, which are now more that have some kid.

Speaker Change: Adjusted free cash flow was negative $1 $5 million.

The positive is anywhere from $3 million in the prior period.

Speaker Change: Despite the quarter's challenges our liquidity remains solid with $19 million in cash and marketable securities.

Speaker Change: Also noteworthy from a balance sheet perspective, whereas the repayment insurance for 2025 convertible debentures shortly after the quarter ended.

Roslane Aouameur: This further deleverages our balance sheet and reduces risk while supporting strategic capital flexibility moving forward.

Speaker Change: This further deleverages, our balance sheet and reduces risk, while supporting strategic capital flexibility moving forward.

Roslane Aouameur: Turning to slide 7, which summarizes our key financial highlights for the quarter. Overall, we maintained a gross margin of nearly 43% and delivered our ninth consecutive quarter of positive adjusted EBITDA, reinforcing the strength of our cost structure and unit economics and underscoring the efficiency of our operating model. while our adjusted EBITDA margin declined re-over a year to 4.5% as net sales declined. It remains stable relative to Q1. We attribute this resilience to a balanced approach, investing in physical and digital product enhancements and customer experiences that deliver solid returns while remaining very disciplined on cost. Our total net debt to adjusted EBITDA ratio is now at a manageable 3 turns after the repayment in shares of our 2020 flared debentures.

Speaker Change: Turning to slide seven which summarizes our key financial highlights for the quarter.

Speaker Change: Overall, we maintain a gross margin of nearly 43% and delivered our ninth consecutive quarter of positive adjusted EBITDA.

Speaker Change: Reinforcing the strength of our cost structure and unit economics, and underscoring the efficiency of our operating model.

Speaker Change: While our adjusted EBITDA margin declined year over year to four 5% as net sales declined it remains stable relative to Q1.

Speaker Change: We attribute this resilience to a balanced approach investing in physical and digital product enhancements and customer experiences that deliver solid returns.

Speaker Change: <unk> very disciplined on cost.

Speaker Change: Our total net debt to adjusted EBITDA ratio is now at a manageable three turns after the repayment in shares of our 2020 sorry of debentures.

Roslane Aouameur: Our capital structure is healthier and we retain the flexibility to support growth when the current headwinds subside.

Speaker Change: Our capital structure is healthier and we retain the flexibility to support growth and the current headwinds subside.

Jonathan Ferrari: With that, I'll turn it back to Jon for outlook. Thanks, Ross. Let's now look ahead on slide eight. As we chart our path forward, our organic value drivers are squarely focused on enhancing the customer experience and growing responsibly. A standout initiative in recent weeks has been the launch of our Heat & Eat Meals, a major expansion in our product mix, an addressable market that caters to time-sensitive consumers without compromising quality. These delicious meals have seen strong early adoption as we are selling nearly 1,000 meals a week only in Quebec and without any advertising. The quality and convenience of the meals has also translated to a strong satisfaction rate.

Speaker Change: With that I'll turn it back to John for outlook.

Speaker Change: Thanks, Ross So let's not look ahead on slide eight.

Speaker Change: As we chart our path forward.

Our organic value drivers are squarely focused on enhancing the customer experience and growing responsibly.

Speaker Change: Standout initiative in recent weeks has been the launch of our heat and eat meals, a major expansion in our product mix and addressable market that caters to time sensitive consumers without compromising quality.

Speaker Change: These delicious meals have seen strong early adoption as we are selling nearly 1000 meals a week only in Quebec and without any advertising that.

Speaker Change: Quality and convenience of the meals has also translated into strong satisfaction rates.

Jonathan Ferrari: Members have shared glowing feedback, with ratings averaging 4.6 out of 5, an early validation of our decision to invest in this segment. We are actively working to expand the line-up of recipes and delivery zones, making these nutritious and convenient options available to more households across Canada. Turning to the ready-to-cook side, Goodfood's head chef Jordana and her team have traveled the world to bring back authentic global flavors, ingredients, and cuisines to our customers' homes. This has led to the creation of the limited edition Goodfood Travels kits, allowing home chefs to experience firsthand the cuisine of Oaxaca in Mexico or Thailand, Vietnam, and Southeast Asia.

Speaker Change: Members have shared going feedback with ratings, averaging four six out of five and early validation of our decision to invest in this segment.

Speaker Change: We are actively working to expand our lineup of recipes and delivery zones, making these nutritious and convenient options available to more households across Canada.

Speaker Change: Turning to the ready to Cook side, Good foods head chef Giordano and her team have traveled the world to bring back authentic global flavors ingredients and cuisines to our customers' homes. This.

Speaker Change: This has led to the creation of the limited edition good food travels kits allow.

Speaker Change: Allowing home shafts two experienced firsthand the cuisine of Oaxaca, Mexico, or Thailand, Vietnam, and South East Asia.

Jonathan Ferrari: As we continue to explore the world and bring it back to Canadians coast-to-coast, we look forward to continuing to bring flair and global discovery to our menu.

Speaker Change: As we continue to explore the world that bring it back to Canadians coast to coast, we look forward to continuing to bring flare and global discovery to our menu.

Jonathan Ferrari: in parallel. We also continue to grow our value plan, which remains an attractive point of entry for new customers and a useful tool to drive upsell into our broader recipe portfolio. On the Genuine Tea Front, the organic craft tea brand that we acquired in November. We continue to be impressed with the performance of the business as it exceeds our expectations. Since its acquisition, the brand has achieved top-line growth nearing 30-40% year-over-year, while sustaining EBITDA margins in the teens. Danube Tea has had important wins this quarter, onboarding multi-location cafe brands like Pure Bread Bakery in British Columbia, and growing matcha sales 100% year over year at Whole Foods.

Speaker Change: In parallel.

Speaker Change: We also continue to grow our value plan, which remains an attractive point of entry for new customers and a useful tool to drive upsell into our broader recipe portfolio.

Speaker Change: On the genuine T front, the organic crafts tea brand that we acquired in November.

Speaker Change: We continue to be impressed with the performance of the business as it exceeds our expectations.

Speaker Change: Since its acquisition the brand has achieved top line growth nearing 30% to 40% year over year.

Speaker Change: Sustaining EBITDA margins in the teens.

Speaker Change: Benjamin T has had important wins this quarter Onboarding Multilocation cafe brands like pure bred bakery in British Columbia, and growing <unk> sales of 100% year over year at whole foods.

Jonathan Ferrari: Genuine Tea also reported benefiting from the bi-Canadian movement. as it is increasingly serving as an alternative to U.S.-based tea brands. We are enthusiastic about the overall performance of our first acquisition and now have the blueprint for our acquisition strategy. Growing founder-led profitable and value-aligned businesses with omni-channel potential. As we think of the future of our company, we envision a structure in which Goodfood, Genuine Tea and future acquisitions operate under the umbrella of a parent company, benefiting from the networks and expertise we have developed over the past 10 years. In fact, this model is already unlocking strategic synergies from shared logistics to fulfillment capabilities.

Speaker Change: Genuine T also reported benefiting from the buy Canadian movement.

Speaker Change: As it is increasingly serving as an alternative to U S based tea brands.

Speaker Change: We are enthusiastic about the overall performance of our first acquisition and now have the blueprint for our acquisition strategy.

Speaker Change: Growing founder led profitable and valued aligned businesses with Omnichannel potential.

As we think of the future of our company, we envision a structure and with good food genuine tea and future acquisitions operate under the umbrella of a parent company.

Speaker Change: Fitting from the networks and expertise we have developed over the past 10 years.

Speaker Change: In fact, this model is already unlocking strategic synergies from shared logistics fulfillment capabilities. We're excited by the runway genuine T presents and our deepening integration to maximize its impact.

Jonathan Ferrari: We're excited by the runway Genuine Tea presents and our deepening integration to maximize its impact. This acquisition is not just about a great product. It represents our first step towards building a curated portfolio of next generation brands that deliver delight and profitability. We will continue to be disciplined in this effort, seeking scalable and sustainable assets that enhance our ecosystem.

Speaker Change: This acquisition is not just about a great product.

It represents our first step towards building a curated portfolio of next generation brands that deliver delight and profitability.

Speaker Change: We will continue to be disciplined in this effort.

Speaker Change: <unk> scalable and sustainable assets that enhance our ecosystem.

Jonathan Ferrari: As part of our ongoing mission to create value responsibly, we are incredibly proud to have achieved B Corp certification, a recognition that places Goodfood among a global community of businesses committed to high standards of social and environmental performance. This milestone reinforces our dedication to sourcing locally. One hundred percent of our ingredients come from Canadian suppliers with 70 percent directly from local farms and to reducing our environmental footprint through initiatives like carbon reduced supply chains and resource efficient operations. B Corp status validates the steps we have taken across all aspects of our business from governance to sustainability and serves as a public commitment to improving the future of our planet while delivering fresh, high quality meals Canadians can feel good about.

Speaker Change: As part of our ongoing mission to create value responsibly.

Speaker Change: We are incredibly proud of the AR to have achieved B Corp certification a recognition that places good food among our global community of business is committed to high standards of social and environmental performance.

Speaker Change: This milestone reinforces our dedication to sourcing locally.

Speaker Change: 100% of our ingredients come from Canadian suppliers, with 70% directly from local farms and to reducing our environmental footprint.

Speaker Change: Through initiatives like carbon reduced supply chains and resource efficient operations.

Speaker Change: B Corp status validates the steps, we have taken across all aspects of our business from governance to sustainability.

Speaker Change: And serves as a public commitment to improving the future of our planet, while delivering fresh high quality meals Canadians can feel good about.

Jonathan Ferrari: On the Treasury side, we now hold the equivalent of 22.3 Bitcoin through the ETF as part of our Bitcoin Treasury Reserve Strategy. This strategy aims to preserve long-term value, hedge against inflation, and diversify capital deployment. While the majority of our liquidity remains in conventional instruments, we believe this is a prudent and value-creating strategy given the current macro environment. In closing, as we enter our 11th year in business, we are energized by the quality of our offerings, the passion of our team, and the clarity of our strategy. Whether it's through meal kits, heat and eat meals, or strategic acquisitions, Goodfood is laying the groundwork for long-term, differentiated success.

Speaker Change: On the Treasury side, we now hold the equivalent of $22 three bitcoin through the Etfs as part of our Bitcoin Treasury reserves strategy.

Speaker Change: This strategy aims to preserve long term value hedge against inflation and diversified capital deployment, while the majority of our liquidity remains in conventional instruments. We believe this is a prudent and value creating strategy given the current macro environment.

Speaker Change: In closing as we enter our 11th year in business, we are energized by the quality of our offerings the passion of our team and the clarity of our strategy.

Speaker Change: Whether it's through meal kits heat and eat meals for strategic acquisitions. Good food is laying the groundwork for long term differentiated success. Thank.

Jonathan Ferrari: Thank you for joining us.

Speaker Change: Thank you for joining us I'll now pass it to the operator for questions.

Operator: I'll now pass it to the operator for questions. Thank you.

Speaker Change: Thank you we will now begin the question and answer session to ask a question you May press star followed by the number one I guess telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing any keys did you get all your question you May Press Star followed by then I'd like to once again, Please press star one to join the queue one moment. Please.

Operator: We will now begin the question and answer session. To ask a question, you may press star followed by the number 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, you may press star followed by the number 2. Once again, please press star 1 to join the queue.

Operator: One moment please for your first question.

Speaker Change: For your first question.

Martin Landry: And your first question comes from the line of Martin Landry, Red Steeple. Please go ahead. Hi, good morning, guys. I would like to get more details on your customer count. The decline of 22,000 active customers during the quarter is a bit concerning. I'm sure that you're conducting exit surveys with your customer and I wondered, you know, what are the reasons that are cited by your customers when leaving? Are they going to competitors? Are they disconnecting because they don't see the value in your offering? You know, can you just elaborate a little bit as to why there's so much customer erosion.

Speaker Change: And your first question comes from the line of Martin Landry with Stifel. Please go ahead.

Martin Landry: Hi, good morning, guys.

Martin Landry: I would like to get more details on your customer count.

Speaker Change: The decline of 22000 customers active customers during the quarter is a bit concerning.

Martin Landry: I'm sure that you are conducting exit surveys with your customer and I wondered you know well.

Speaker Change: What are the reasons and that are in.

Speaker Change: Cited by your customers and when leaving are they are they going to competitors or a D and disconnecting.

Speaker Change: Disconnecting, because you don't see the value in your offering.

Speaker Change: Can you just.

Speaker Change: Elaborate a little bit as to.

Speaker Change: Why there's so much customary erosion right now.

Jonathan Ferrari: Good morning, Marte. So the main factor behind the decline in the active customer count is actually order rate related. So, we've actually seen an improvement in customer churn rate, like cancellations or cancelled customers, that has improved like year over year, and we've continued to see the improvement into Q3, but the lower seasonal order rates in December, and then lower order rates that continued in January, was the driver of the reduced active customer count in the past 90 days. So it's less about the cancellations and more about less activity within the customer base or reduced order rates.

Good morning, Matt.

Speaker Change: But the main factor behind.

Speaker Change: The decline in the active customer count is actually order rates are related.

Speaker Change: So we.

Speaker Change: We've actually seen an improvement.

Speaker Change: And customer churn rates like cancellations or canceled customers that has improved.

Speaker Change: Like year over year, and we've continued to see the improvement into Q3.

Speaker Change: The lower seasonal order rates in December and then lower order rates that continued in January.

Speaker Change: What's the driver of the reduced active customer count in the past 90 days.

Speaker Change: So it's less about the cancellations and more about more less activity within the customer base or reduced order rates.

Jonathan Ferrari: Okay, and then have you been able to onboard some customers during the quarter? So yes, we've continued to acquire new customers, and then from a churn perspective, we've made some improvements, both quarter over quarter and year over year. From a customer acquisition cost perspective, we've seen like a small reduction year-over-year in customer acquisition costs. So it's, you know, if we look at the full matrix of our unit economics, I would say CAC is relatively stable, a little bit down. Churn is improved fairly significantly through the initiatives we were talking about of like the product portfolio improvement, digital experience improvement, reducing friction from the customer experience, and ease of subscription management.

Speaker Change: Okay, and sorry, what what is the.

Speaker Change: Okay.

Speaker Change: And then have you been able to onboard some customers during the during the quarter.

Speaker Change: So yes, we've continued to.

Speaker Change: Like acquire new customers and then from a churn perspective.

Speaker Change: We have we've made some improvements both quarter over quarter and year over year.

Speaker Change: From a customer acquisition cost perspective.

Speaker Change: We've seen like a small reduction year over year, and our customer acquisition cost.

Speaker Change: It's kind.

Speaker Change: If we look at the <unk>.

Speaker Change: Full matrix of our unit economics I.

Speaker Change: I would say CAC is relatively stable a little bit down.

Speaker Change: Churn has improved.

Speaker Change: Fairly significantly through the initiatives that we're talking about of.

Speaker Change: Like the product portfolio improvement digital experience improvement, reducing friction from the customer experience and ease of subscription management.

Jonathan Ferrari: But the order rate is really what's been driving both the decline in sales year over year, as well as the reduction in the active customer counts. That's the key driver right now.

Speaker Change: But the order rate is really what's what's been driving both the decline in <unk>.

Speaker Change: Sales year over year as.

Speaker Change: As well as the reduction in the active customer accounts, that's the key driver right now.

Jonathan Ferrari: Okay, and maybe to dig a little bit more. So, so why is it that customers are not ordering as much as they used So... I would say, as we were seeing the numbers come in in December, we were assuming more pronounced seasonality in December. The way in which the holiday period fell this year, it impacted more Monday deliveries than it did last year, which has a more pronounced impact on the reduction in order rates seasonally because kind of Sundays and Mondays are the best delivery days for good food. And then in January and February, we saw continued customer acquisition and the impacts on CAC that I mentioned.

Speaker Change: And maybe to dig a little bit more.

Speaker Change: So so why is it that customers are not ordering as much as they used to.

Speaker Change: So.

Speaker Change: I would say as we were seeing that numbers come in in December we were assuming more pronounced seasonality in December the way in which the holiday period fell this year it impacted more Monday deliveries than it did last year, which has a more pronounced impact.

Speaker Change: On the on the reduction in order rates seasonally because kind of Sundays and Mondays are the biggest delivery days for.

Speaker Change: For good food.

Speaker Change: And then in in January and February.

Speaker Change: We saw.

Speaker Change: Continued customer acquisition and and.

Speaker Change: The impacts on CAC that that I mentioned.

Jonathan Ferrari: But the order rates didn't pick up as much as they have in prior years seasonally. And we're attributing that partially to the consumer spending environment and the tariff situation that was, I guess, started to pick up in February. Our supply chain is not directly impacted by the tariffs, really, given the fact that most of what we're sourcing at Goodfood is Canadian, and our sales are primarily in Canada. Genuine Tea has maybe 10% of sales into the US, so it's quite small. But the general uncertainty in the market that was building up from a macro perspective in late in 2024, and then exacerbated by the tariff situation in early calendar Q1.

Speaker Change: But the order rates didn't pick up as much as.

Speaker Change: As they have in prior years seasonally.

Speaker Change: We're attributing that to the.

Speaker Change: Partially to the consumer spending environment and the tariff situation that was a I guess started to pick up in February.

Speaker Change:

Speaker Change: We our supply chain is not <unk>.

Speaker Change: Correctly impacted by the by the tariffs really given the fact that most of what we're sourcing good food is.

Speaker Change: Is is Canadian.

Speaker Change: And our sales are primarily in Canada genuine T has maybe 10% of sales into the U S. So it's quite small.

Speaker Change: But the general uncertainty.

Speaker Change: In the market that was built.

Speaker Change: Building up from.

Speaker Change: Macro perspective in late in 2024, and then exacerbated by the tariff.

Speaker Change: The situation in.

Speaker Change: Early calendar Q Q1.

Jonathan Ferrari: The combination of those items really have created a lot of uncertainty within consumer spending and our customer base, and that's where we've seen backing off on the order rates. The flip side is, we talked a little bit about basket sizes, we've been working to grow the basket size of the average customer order and making it easier for customers to add, whether it's heat and eat meals or other add-ons to their baskets. Partially, it's been offset by some better basket sizes that improves both profitability and AOV, but certainly it's been a challenging environment.

Speaker Change: The combination of those items really have created a lot of uncertainty within consumer spending in our customer base and that's where we've seen backing off on on the order rates.

Speaker Change: The flip side is.

Speaker Change: We talked a little bit about basket sizes, we've been working to grow the basket size.

Speaker Change: Of.

Speaker Change: The average customer order and making it easier for customers to them.

Speaker Change: To add whether it's heat and eat meals or other add ons to their to their baskets.

Speaker Change: Partially it's been offset by some some better basket sizes that improves both profitability and.

Speaker Change: A L P.

But certainly a challenging it's been a challenging environment as.

Jonathan Ferrari: As we look into our fiscal Q3, we are seeing some stability in the customer count, which is good. The order rates remain lower than this time last year, but we are seeing some stability, I guess, both in the order rate quarter over quarter, but also in the customer count.

Speaker Change: As we look into.

Speaker Change: Our fiscal Q3.

Speaker Change: We are seeing substitutability in the customer count which is good.

Speaker Change: The order rates remained lower than this time last year, but we are seeing some some stability.

Speaker Change: I guess, both both of the order rate quarter over quarter, but.

Speaker Change: Also in the customer count.

Martin Landry: Okay, well, that was my next question. It was about Q3. So, it sounds like things are stabilizing a little bit because, I mean, at some point, with your sales declining like we're seeing today, your fixed-cost absorption erodes a little bit, it worsens, and we're seeing it on your margin on a year-over-year basis on your EBITDA margin. So, by the sound of it, you know, When you're seeing stability in your customer account, does that mean that we could expect your customer account to be stable sequentially in Q3?

Speaker Change: Okay, well that was my that was my next question was about Q3, so it sounds like.

Speaker Change: Things are stabilizing a little bit because I mean at some point.

Speaker Change: With your sales declining like we're seeing today.

Speaker Change: Your fixed costs absorption erodes, bill, but I guess, it worsens and we're seeing it on your on your on your margin on a year over year basis on your EBITDA margin. So so by the side of it.

Speaker Change: No.

Speaker Change: It is when youre seeing stability in your customer count does that mean that we could expect your customer count to be stable sequentially in Q3.

Roslane Aouameur: Yeah, hey, Martin, it's Ross here. I think in Q3, at least what we've seen so far is that from an order rate perspective, there is stability, which means that if on the subscriber side, there's stability, this should translate into active customers. So customers have placed an order within the quarter to be stable. Of course, we're halfway through, so there's quite a bit to go. But I think we can expect some stability on that front if order rates continue to be stable for the remaining weeks in the quarter. And maybe to go on, you know, make a comment on your on your margin comment, I think we We've worked very hard and we're able to variabilize, if you allow me the expression, a good chunk of our cogs so that we're still able to keep gross margin at a healthy level.

Speaker Change: Yeah, Hey, Matt Thanks, Ross here.

Speaker Change: I think in Q3 at least what we've seen so far is that from an order rate perspective, there is stability, which means that if I'm describing to send their stability. This should translate into active customers. So customers, who have placed an order within the quarter to be stable.

Speaker Change: Of course, where we're halfway through so there's quite a bit to go.

Speaker Change: As I said halfway through so quite a bit to go in the quarter, but I think we can expect some stability on on on that front if it's.

Speaker Change: If order rates continue to be stable for the remaining weeks in the quarter.

Speaker Change: And maybe you did it to go on and make a comment on your on your.

Speaker Change: Margin comment I think we.

Speaker Change: We've worked very very hard and we're able to very obliged if you allow me the expression.

Speaker Change: A good chunk of our Cogs.

Speaker Change: So that we're still able to keep gross margins at a healthy level I think on the SG&A side. It is.

Roslane Aouameur: I think on the SG&A side is when there's a net sales basis that evolves and declines is where there's opportunities that we want to make sure we're investing in the right areas and and see if there's areas where there's room for improvement. So that's something we'll continuously look into. So I think from a gross margin perspective, there should also be stability and then on SG&A we'll look for improvements throughout every day, every week, every month.

Speaker Change: Is where there is when there's a net sales basis that evolves and declines is where there's opportunities that we wanted to make sure we're investing in the right areas.

Speaker Change: And see if there is areas, where there's room for improvement. So that's something we will continuously look into them.

Speaker Change: So I think from a gross margin perspective, there should also be stability and then.

Speaker Change: SG&A will look for further improvements.

Speaker Change: Through throughout every day every week every month.

Martin Landry: Okay, super. Thank you and best of luck. Thank you.

Speaker Change: Okay Super Thank you and best of luck.

Speaker Change: Thank you.

Operator: And once again, if you would like to ask a question, simply press the star 1 on your telephone keypad.

Speaker Change: And once again, if you would like to ask a question keep your vessels star one on your telephone keypad.

Frederic Tremblay: Your next question comes from the line of Frederic Tremblay with Dejardin, please go ahead. Thank you. I just wanted to ask on the ready to eat offering. This is a category that you've been involved in in the past, and there's been a few iterations of it. I'm just wondering if there's anything different this time around that, you know, gives you the confidence that this will be successful and sort of how much of a focus that is versus ready to cook. I know a while ago in the industry, there seemed to be a bit of a shift towards are ready to eat.

Speaker Change: Your next question comes from the line of Patrick from Lately seizure again. Please go ahead.

Patrick: Thank you I just wanted to ask on the ready to eat offering them. This is a category that you've been involved in in the past and I know there's been a few iterations of it I'm just wondering if theres anything.

Speaker Change: Different this time around that.

Speaker Change: It gives you the confidence that.

Speaker Change: This will be successful and sort of how much of a focus that is versus ready to Kurt.

Speaker Change: I know a while ago in the industry there seemed to be there seem to be a bit of a shift towards.

Speaker Change: Ready to eat.

Frederic Tremblay: Is that something that you're trying to pivot to in a meaningful way or is it more of a complementary offering overall?

Speaker Change: It's something that you're trying to pivot here and in a meaningful way or is it more of a.

Speaker Change: Component every offering overall.

Jonathan Ferrari: Good morning, Fred. So, yes, the ready to eat segment is something that we've played around with in the past. We have some pretty significant learnings from those previous initiatives that we're able to apply to our current heat and eat offering. One is we've made the decision to prepare and cook the meals in-house within our facilities versus working with suppliers. In the past, what we saw is both the quality and the margin profile of the products that were prepared by third-party suppliers had trouble reaching consistency and traction within our customer base. We believe bringing that production in-house is better both economically and from a customer experience perspective.

Fred: Hey, good morning, Fred.

Speaker Change: So yes.

Speaker Change: Ready to eat segment is something that we've.

Speaker Change: Played around with in the past.

Speaker Change: We we have some pretty significant learnings from those previous initiatives that we are able to apply.

Speaker Change: Two our current heat and eat offering.

Speaker Change: One is we've made the decision to prepare and cook the meals in house within our facilities versus working with suppliers.

Speaker Change: In the past, what we saw as both the quality and the margin profile of the products.

Speaker Change: And that were prepared by third party suppliers.

Speaker Change: I had trouble reaching consistency.

Speaker Change: And traction within our customer base.

Speaker Change: We believe bringing it bringing that production in house is.

Speaker Change: Is better both economically and from a customer experience perspective.

Jonathan Ferrari: So, effectively, what we've done in the Montreal facility is convert a portion of our space into heat and eat production space. We are seeing strong demand in the market for these types of meal solutions. It's a product that's very convenient, easy to prepare, and it's really differentiated from what you would find on Uber Eats or DoorDash because of the health profile of the product. So, it's healthy, it's delicious, and it's significantly cheaper than any type of restaurant delivery. So, those are some of the things we're seeing in the market. It does look like it's a growing segment, which is the reason why we feel it's important for Goodfood to grab a piece of that growing segment.

Speaker Change: Typically what we've done.

Speaker Change: The Montreal facility is convert a portion of our of our space into.

Speaker Change: He'd any production space.

Speaker Change: We are seeing.

Speaker Change: Strong demand in the market for these types of of meal solutions.

Speaker Change: A product that's.

Speaker Change: Very convenient.

Speaker Change: Easy to prepare.

Speaker Change: And it's really differentiated from what you would find on a on a uber eats or door dash because of the health profile of the product. So it's healthy delicious and it's significantly cheaper.

Speaker Change: And then any type of restaurant delivery.

Speaker Change: So those are some of the things we're seeing in the market. It does look like it's a it is a growing segment, which is the reason why.

Speaker Change: We feel it's important for a good food to grab a piece of that growing segment.

Jonathan Ferrari: And then the other piece I would add is we're building it within the Goodfood customer experience. Our intent is to make it easy and seamless for customers to mix and match ready-to-cook and heat-and-eat products. And some of the behavior that we're seeing is for customers to be ordering the heat-and-eat products in addition to their ready-to-cook products. which is helping grow the basket sizes. At this point, it's still a small selection, and it's a very regional focus within certain parts of Quebec. So we're early days, but we're quite pleased with the traction so far. We're delivering more than 1,000 meals per week, and the customer ratings and reorder rates are encouraging.

Speaker Change: And then the other piece I would add is where we're building it within the good food customer experience. So our intent is to make it easy and seamless for customers to mix and match ready to cook and heat and eat products.

Speaker Change: And some of the behavior that we're seeing is.

Speaker Change: For customers to be ordering the heat and eat products. In addition to their ready to cook products, which.

Speaker Change: Which is helping grow the basket sizes.

Speaker Change: At this point, it's still a small.

Speaker Change: Selection and it's a very regional focus within certain parts of Quebec.

Speaker Change: So we're we're early days, but we are quite pleased with the traction so far we're.

Speaker Change: We're delivering more than 1000 meals per week.

Speaker Change: And.

Speaker Change: And the customer ratings and reorder rates are encouraging.

Neil Cuggy: Ross and Neil, I'll pass it to you if there's anything else you'd like to add about the heat and eat segment. Yeah, maybe just one thing, Fred. Obviously, one of the learnings that we've had is how to amortize the DNA of the facilities and of the team. So we've been much more integrated from a supply chain perspective and an operations perspective in this recent launch, which has helped on getting the gross margin up a lot faster while maintaining that quality experience that that Jon just mentioned and so far customers are really happy and the team is extremely motivated.

Speaker Change: Ross said, Neil I'll pass it to you if there's anything else you'd like to add about the heat in each segment.

Neil: Maybe just one thing Fred obviously, one of the learnings that we've had is oh to amortize the G&A of the facilities and the team. So we've been much more integrated from a supply chain perspective, and an operations perspective, and and this recent launch which has helped on them.

Neil: Getting that gross margin up a lot faster.

Neil: While maintaining that.

Neil: Quality experience that.

Speaker Change: That John just mentioned and so far customers are really happy and the team is extremely fixed.

Neil: Extremely motivated.

Neil: Okay.

Frederic Tremblay: Thanks for that, appreciate the call here.

Neil: Thanks for that appreciate the color.

Frederic Tremblay: Maybe a question of supply, with everything going on in the US trade policies.

Speaker Change: Maybe a question, we'll supply them with everything going on in the U S. Trade policies I know you guys are very local.

Jonathan Ferrari: I know you guys are very local focused as it relates to your sourcing, but has there been any impact whether on, you know, availability of supply or perhaps inflation from even locally from the current macro environment, or is it... The business as usual, tough to say in the current microenvironment, but has there been any sort of... Notable impacts on your supply approach or just the overall supply chain? Yeah, I'll start on that one. I would say on the ready to cook side, it's been fairly stable. I think there are suppliers that have seen cost increases in their supply chain and we work with them to try to not pass those along to customers in whatever way we can over long periods of time.

Speaker Change: Local focus as it as it relates to your sourcing but has there been any impact whether on availability of supply or perhaps inflation from even locally from the current macro environment or is it.

Speaker Change: Is it business as usual just to say in the current macro environment, but has there been any sort of.

Speaker Change: Notable impact on your supply approach or just the overall supply chain.

Speaker Change: Yes.

Speaker Change: Yeah, Hey, Fred I'll I'll start on that one.

Speaker Change: I'd say on the ready to Cook side, it's been a it's been fairly stable like a I think there are suppliers that have seen cost increases.

Speaker Change: And their supply chain, and we work with them to us.

Speaker Change: Try to not pass those along to customers and whenever we can over long periods of time, obviously inflation kind of catches up if it all ends up being sticky.

Jonathan Ferrari: Obviously, the inflation kind of catches up if it all ends up being sticky. But so far, it hasn't affected any kind of menu or other significant value proposition drivers that we focus on. And same for the heat and eat segment as well.

Speaker Change: But so far it hasn't it hasn't affected any kind of menu or or other significant value proposition drivers that we focus on.

Speaker Change: And same for the heating segment as well and then I think the biggest the biggest piece right now that are from a supply chain perspective that we're focused on is.

Jonathan Ferrari: And then I think the biggest piece right now from a supply chain perspective that we're focused on is helping Genuine T-Scale, as John and Ross mentioned in the prepared comments. A couple of their products are really, really doing well. Matcha is up 100% in Whole Foods and performing well across the other channels they sell into. So working with them to secure more supply globally for a market that's growing really quickly. I don't know, Ross, if you have anything else to add. I think that covers most of it.

Speaker Change: Helping genuine T scale is as John and Ross mentioned in the prepared comments.

Speaker Change: Couple of other products are really really doing well matched.

Speaker Change: Much of it was up a 100% at whole foods and performing well across the other channels that they sell into so working with with them to secure more supply globally for a market that's growing really quickly.

Speaker Change: On our roster of anything else that.

Speaker Change: Yes, it does.

Speaker Change: That covers most of it I think we.

Roslane Aouameur: I think when obviously this flip-flopping on tariffs came about, we looked at our supply chain and made sure that we had a secure supply, be some clarity on price. I think being mostly local, working with Canadian suppliers, even if they sourced some of the products in the US, they had alternatives. And then when the latest announcements were made that goods covered under USMCA were exempt, that covers a decent chunk, not all, but a decent chunk of produce and food-related items. So I think so far we've been able to see some good results. And even as mentioned in the remarks, the food cost proportion actually went down during the quarter as we worked to source this kind of sourcing to go and explore and make sure that we get the best prices on everything.

Speaker Change: When obviously this flip flopping on tariffs came about we looked at our supply chain and make sure that we had a secure supply be some clarity on price I think being mostly local working with Canadian suppliers, even if the source of it some of the products in the U S. They had alternatives.

Speaker Change: And then you know when.

Speaker Change: The latest announcements were made that good stuff and then I know you guys said, we're exempt that covers a decent chunk of that at all but a decent chunk of produce and food related items. So I think so far we've been able to see some good results that have been.

Speaker Change: And in the remarks that the food costs proportionate actually went down.

Speaker Change: During the quarter as we work to source.

Speaker Change: Just kind of pushed our sourcing kits to go and explore and make sure that we get the best prices and everything so it's it's been good so far.

Roslane Aouameur: So it's been good so far. I think the markets are relatively tight, but still manageable. Thanks.

Speaker Change: I think the markets are relatively tight but still manageable.

Speaker Change: Thanks last question for me on capital allocation, especially with the debenture repayment in shares or just curious to see what.

Frederic Tremblay: Last question for me on capital allocation, especially with the, you know, the Dependra repayment and shares. I'm just curious to see what. your current and mid-term capital allocation priorities are. You mentioned M&A.

Speaker Change: Your current and mid term capital allocation priorities are you mentioned M&A and there's obviously, another debenture and nurturing metering and in 2027 I'm.

Roslane Aouameur: There's obviously another debenture maturing in 2027, so just wanting a bit more clarity on What you're expecting there in terms of your capital uses moving forward, especially in the current environment where sales and potentially cash flow, there's a bit of a weight there on that. So just your thoughts on that would be helpful. Thank you.

Speaker Change: So just wondering a bit more clarity on.

Speaker Change: What you're expecting there in terms of your capital usage moving forward, especially in the current environment where.

Phil: Yeah Phil.

Speaker Change: Potentially casually, there's a bit of a wait their own.

Phil: So just your thoughts on that would be helpful. Thank you.

Roslane Aouameur: Yeah, I appreciate the question, Fred, and a good one. I think we've always been focused on prioritizing capital allocation based on return profiles, be it the internal P&L or some external opportunities. I think we'll definitely continue to do that. I think, obviously, it is prudent to be extra prudent on cash deployment and capital allocation over the next few months and potentially a couple of quarters to make sure that we have more clarity on the landscape in North America. So, I think we'll continue to manage our cash as prudently as possible. With that said, when there's good ROI or great ROI opportunities that come about, I think definitely we maintain the flexibility to be able to act on that.

Phil: Yeah I appreciate the question and a good one and I think we've always been focused on prioritizing prioritizing capital allocation based on on return profile did the internal P&L or or some external opportunities I think will definitely continue to do that.

Phil: I think obviously it is prudent to them to be extra prudent.

Phil: On on cash deployment and capital allocation over.

Phil: The next few months and potentially a couple of quarters to make sure that we have more clarity on underlying escaped in North America.

Phil: So I think we'll continue to manage our cash as as prudently as possible with that said.

Phil: You wouldn't windows, good ROI or a great ROI opportunities that come about I think they definitely need to maintain the flexibility to be able to act on them.

Frederic Tremblay: Thanks for taking the questions. Thank you.

Phil: Thanks for taking the questions.

Phil: Yeah.

Phil: Thank you.

Operator: And I'm showing no further questions at this time.

Speaker Change: And I'm showing no further questions at this time I would like to turn it back to Mr. Jonathan Ferrari for closing remarks.

Jonathan Ferrari: I would like to turn it back to Mr. Jonathan Ferrari for closing remarks. Thank you for joining us on the call and we look forward to speaking with you again at our next call. Thank you.

Jonathan Ferrari: Thank you for joining us on the call and we look forward to speaking with you again at our next call.

Speaker Change: Thank you ladies and gentlemen. This concludes today's conference call. Thank you all for joining you may now disconnect.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you all for joining.

Operator: You may now disconnect.

Oh.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Okay.