Goodfood Market Corp. (“Goodfood” or “the Company”) (TSX:FOOD), a
leading online grocery company in Canada, today announced strong
financial results for the first quarter of Fiscal 2020 ended
November 30, 2019.
“Fiscal 2020 has started with strong momentum
resulting in the addition of 30,000 net new subscribers1 and gross
merchandise sales run-rate1 of $276 million, a new record for
Goodfood. Demand for our private label grocery essentials and most
recent meal solutions continues to grow as the Goodfood basket of
our members expands. We are thrilled to see the accelerating
adoption of e-commerce for grocery and meal-prep as we are ideally
positioned to capitalize on this positive secular trend,” said
Jonathan Ferrari, Chief Executive Officer of Goodfood.
“We are pleased with our solid first quarter
results. Goodfood continues to increase its penetration across the
country and we continue to deliver a unique member experience with
an expanded product offering. In addition to the strong top-line
growth, we have also delivered year-over-year gross margin and
adjusted EBITDA1 margin improvements of, respectively, 6.9
percentage points and 6.7 percentage points, mostly from continuous
investments in automation and growing scale. This improvement has
driven our consistent ability to generate positive cash flow from
operating activities, which has in turn helped us grow our business
and maintain a solid and stable cash position,” said Neil Cuggy,
President and Chief Operating Officer of Goodfood.
FINANCIAL HIGHLIGHTS
Financial highlights for the three-month periods ended November 30,
2019 and 2018: |
|
|
|
|
|
|
(Amounts are in thousands ofCanadian dollars – Unaudited) |
Q1 2020 |
|
Q1 2019 |
|
Variance |
|
Revenue |
$ |
56,291 |
|
$ |
29,617 |
|
$ |
26,674 |
|
Growth % |
|
|
|
|
90% |
|
Gross profit |
16,219 |
|
6,494 |
|
9,725 |
|
Gross margin % |
28.8% |
|
21.9% |
|
6.9 pp |
|
Gross merchandise sales1 |
68,036 |
|
37,105 |
|
30,931 |
|
Growth % |
|
|
|
|
83% |
|
Adjusted gross profit1 |
27,964 |
|
13,982 |
|
13,982 |
|
Adjusted gross margin %1 |
41.1% |
|
37.7% |
|
3.4 pp |
|
Net loss |
(5,152) |
|
(4,851) |
|
(301) |
|
|
|
|
|
|
|
|
Cash
provided by operating activities |
1,461 |
|
1,750 |
|
(289) |
|
REVENUE AND GROSS MERCHANDISE
SALES1
Revenue for the first quarter of Fiscal 2020
increased by 90% to $56.3 million, compared to $29.6 million in the
corresponding period of Fiscal 2019. Gross merchandise sales1
(“GMS”), rose 83% for the first quarter of Fiscal 2020 to reach
$68.0 million, compared to $37.1 million for the corresponding
period of the previous fiscal year. The increase in revenue and
GMS1 was primarily driven by the continued growth in the number of
active subscribers1, an increase in average order value and the
expansion of our product offering to include private label grocery
products, new meal solutions and expanded ready-to-cook plans. The
increase in revenue has also been driven by a reduction of
incentives and credits as a percentage of GMS1.
The GMS run-rate1 was $276 million at the end of
the first quarter of Fiscal 2020, compared to $226 million at the
end of the fourth quarter of 2019, surpassing its previous high of
$257 million achieved in the third quarter of Fiscal 2019. This
variance is explained by the continued growth of the business and
by the first quarter being seasonally stronger than the fourth
quarter of the year.
The reconciliation of revenue to GMS1 for the
three-month periods ended November 30, 2019 and 2018, is as
follows:
(Amounts are in thousands of Canadian dollars – Unaudited) |
Q1 2020 |
|
Q1 2019 |
|
Revenue |
$ |
56,291 |
$ |
29,617 |
|
Credits removed from cancelled accounts |
|
- |
|
- |
|
Incentives and credits |
|
11,745 |
|
7,488 |
|
Gross
merchandise sales1 |
$ |
68,036 |
$ |
37,105 |
|
GROSS MARGIN AND ADJUSTED GROSS MARGIN1
The gross margin for the first quarter of 2020
increased substantially to 28.8%, compared to 21.9% for the
corresponding period of Fiscal 2019. Adjusted gross margin1 was
41.1% for the first quarter of Fiscal 2020, compared to 37.7% for
the corresponding period last year, an improvement of 3.4
percentage points. The increase in gross margin and adjusted gross
margin1 resulted from lower production costs as a percentage of
revenue and lower unit costs for food, packaging and shipping due
to increased operational efficiencies, additional automation
investments, increased density among the delivery zones and
purchasing power with key suppliers, but also due to lower
incentive and credits as a percentage of revenue. This was
partially offset by the increase in our product offering, with our
ready-to-cook meal solution presenting a higher gross margin at
this stage than the new meal solutions and private label grocery
products. The Company expects that fixed costs as a percentage of
revenues will continue to decrease with Goodfood’s continued growth
which should further increase gross margin and adjusted gross
margin1 in the future.
The reconciliation of adjusted gross profit1 and
adjusted gross margin1 for the three-month periods ended November
30, 2019 and 2018, is as follows:
(Amounts are in thousands of Canadian dollars – Unaudited) |
Q1 2020 |
|
Q1 2019 |
|
Gross
merchandise sales1 |
$ |
68,036 |
$ |
37,105 |
|
Cost of goods
sold |
|
40,072 |
|
23,123 |
|
Adjusted gross profit1 |
$ |
27,964 |
$ |
13,982 |
|
Adjusted gross
margin1 |
|
41.1% |
|
37.7% |
|
ADJUSTED EBITDA1, NET
LOSS AND NET LOSS PER SHARE
Adjusted EBITDA margin1 improved by 6.7
percentage points in the first quarter of Fiscal 2020. The increase
is primarily the result of higher revenues and operating leverage,
lower production labour costs as a percentage of revenue, and lower
unit costs with regards to food, packaging and shipping which
generated a higher gross profit, offset by an increase in selling,
general and administrative expenses driven in large part by new
salaried hires and the launch of new product offerings. Net loss
for the first quarter of Fiscal 2020 was $5.2 million, or $0.09 per
share (basic and diluted), compared to a net loss of $4.9 million,
or $0.09 per share (basic and diluted) for the corresponding period
of Fiscal 2019. The increase in net loss was mainly attributable to
factors explained above.
The reconciliation of net loss to EBITDA, Adjusted EBITDA1 and
Adjusted EBITDA margin1 for the three-month periods ended November
30, 2019 and 2018, is as follows:
(Amounts are in thousands of Canadian dollars – Unaudited) |
Q1 2020 |
|
Q1 2019 |
|
Net loss |
$ |
(5,152) |
$ |
(4,851) |
|
Net finance expenses |
|
97 |
|
87 |
|
Depreciation and amortization expense |
|
993 |
|
487 |
|
EBITDA1 |
$ |
(4,062) |
$ |
(4,277) |
|
Share-based payments |
|
411 |
|
375 |
|
Adjusted EBITDA1 |
$ |
(3,651) |
$ |
(3,902) |
|
Revenue |
$ |
56,291 |
$ |
29,617 |
|
Adjusted EBITDA margin1 (%) |
|
(6.5%) |
|
(13.2%) |
|
LIQUIDITY AND CAPITAL
RESOURCES
Cash provided by operating activities in the
first quarter of Fiscal 2020 amounted to $1.5 million compared to
cash provided by operating activities of $1.8 million for the same
period last year, with the difference primarily due to a change in
net working capital.
In the first quarter of Fiscal 2020, the Company
used its cash mainly for capital expenditures of $1.7 million for
continued investments in automation. The Company still expects to
spend between $10 million and $12 million in capital expenditures
in Fiscal 2020.
As at November 30, 2019, the Company had total
debt of $14.5 million and $47.0 million in cash, cash equivalents
and restricted cash.
OUTLOOK
The online grocery industry is one of the
fastest growing industries in the world. As a result, Goodfood
believes that there are significant opportunities and advantages to
rapidly grow its subscriber1 base by continuing to invest in
increased household penetration through highly targeted marketing
campaigns, in capacity expansion through additional facilities and
investments in automation, and in increasing its product offering
and in continuing to expand its national platform.
Goodfood's strategy is in part to delay
short-term profitability in order to invest in long-term
shareholder value creation. Goodfood's strategy continues to focus
on growing its subscriber1 base while investing in improving its
cost structure to achieve its long-term margin goals. Growing
Goodfood's subscriber1 base, market share, scale and product
offerings will allow the Company to deliver greater value to its
customers while attaining high returns on invested capital. As the
Company grows its subscriber1 base, we are confident that Goodfood
will achieve economies of scale and additional efficiencies which
will lead to improvements in profitability while maintaining an
unrivalled experience for subscribers1.
CONFERENCE CALL
Goodfood will hold a conference call to discuss
these results on January 8, 2020, at 8:00AM Eastern Time.
Interested parties can join the call by dialing 1-647-788-4922
(Toronto or overseas) or 1-877-223-4471 (elsewhere in North
America). To access the webcast and view the presentation, click on
this link:
https://www.makegoodfood.ca/en/investisseurs/evenements
Parties unable to call in at this time may
access a recording by calling 1-800-585-8367 and entering the
passcode 9475358. This recording will be available on Wednesday,
January 8, 2020 as of 11:00 AM Eastern Time until 11:59 PM Eastern
Time on Wednesday, January 15, 2020.
A full version of the Company’s Management’s
Discussion and Analysis (MD&A) and audited Financial Statements
for the quarter ended November 30, 2019 will be posted on
http://www.sedar.com later today.
NON-IFRS
FINANCIAL MEASURES
Certain financial and non-financial measures
included in this news release do not have a standardized meaning
under IFRS and therefore may not be comparable to similar measures
presented by other companies. The Company includes these measures
because it believes they provide to certain investors a meaningful
way of assessing financial performance. For a more complete
description of these measures and a reconciliation of Goodfood's
non-IFRS financial measures to financial results, please see
Goodfood's Management's Discussion and Analysis for the three-month
period ended November 30, 2019.
Goodfood's definition of the non-IFRS terms are
as follows:
- Gross merchandise sales measure the total retail value of all
goods sold by the Company before taking into account all incentives
and credits.
- Gross merchandise sales run-rate is defined as gross
merchandise sales for the four-week period ended as at the date
indicated multiplied by thirteen. Management believes that gross
merchandise sales run-rate is a useful measure of financial
performance because it is indicative of gross merchandise sales on
an annual basis for the Company's current level of active
subscribers.
- Adjusted gross profit is calculated as gross merchandise sales
less cost of goods sold.
- Adjusted gross margin is calculated as adjusted gross profit
divided by gross merchandise sales.
- EBITDA is defined as net income or loss before net finance
expenses (income), depreciation and amortization expense and income
tax expense.
- Adjusted EBITDA is defined as EBITDA excluding share-based
payments as they are an equity compensation item.
- Adjusted EBITDA margin is defined as adjusted EBITDA divided by
revenue.
ACTIVE
SUBSCRIBERS
An active subscriber is defined as an account
that is scheduled to receive a delivery or has elected to skip
delivery in the subsequent weekly delivery cycle. Active
subscribers exclude cancelled accounts. For greater certainty, an
active subscriber is only accounted for once, although different
products might have been ordered in a given weekly delivery cycle.
While active subscribers is not an IFRS or Non-IFRS Financial
Measure, and therefore, does not appear in and cannot be reconciled
to a specific line item in our financial statements, we believe
that active subscribers is a useful metric for investors because it
is indicative of future revenues. The Company reports the number of
active subscribers at the beginning and end of the period, rounded
to the nearest thousand.
ABOUT
GOODFOOD
Goodfood (TSX:FOOD) is a leading online grocery
company in Canada, delivering fresh meal solutions and grocery
items that make it easy for members from coast to coast to enjoy
delicious meals at home every week. Goodfood’s mission is to make
the impossible come true, from farm to kitchen, by enabling members
to do their weekly meal planning and grocery shopping in less than
1 minute. Goodfood members get access to a unique selection of
products online as well as exclusive pricing made possible by its
world class direct to consumer fulfilment ecosystem that cuts out
food waste and expensive retail overhead. The Company has its main
production facility and administrative offices based in Montreal,
Quebec, a second production facility in Calgary, Alberta, a
breakfast facility in Montreal, Quebec and is currently building
out its new production facility in Vancouver. Goodfood had 230,000
active subscribers1 as at November 30, 2019.
www.makegoodfood.ca
Except where otherwise indicated, all amounts in
this press release are expressed in Canadian dollars.
For further information:
Investors |
Media |
|
|
Philippe Adam Chief Financial
Officer(855) 515-5191IR@makegoodfood.ca |
Pierre Boucher President,
MaisonBrison (514) 731-0000pierre@maisonbrison.com |
|
|
Roslane Aouameur Head of Investor
Relations(855) 515-5191IR@makegoodfood.ca |
Jennifer McCaughey
Vice-President, Investor Relations MaisonBrison (514)
731-0000jennifer@maisonbrison.com |
FORWARD-LOOKING INFORMATION
This release contains forward-looking
information” within the meaning of applicable Canadian securities
legislation. Such forward-looking information includes, but is not
limited to, information with respect to our objectives and the
strategies to achieve these objectives, as well as information with
respect to our beliefs, plans, expectations, anticipations,
estimates and intentions. This forward-looking information is
identified by the use of terms and phrases such as “may”, “would”,
“should”, “could”, “expect”, “intend”, “estimate”, “anticipate”,
“plan”, “foresee”, “believe”, or “continue”, the negative of these
terms and similar terminology, including references to assumptions,
although not all forward-looking information contains these terms
and phrases. Forward-looking information is provided for the
purposes of assisting the reader in understanding the Company and
its business, operations, prospects and risks at a point in time in
the context of historical and possible future developments and
therefore the reader is cautioned that such information may not be
appropriate for other purposes. Forward-looking information is
based upon a number of assumptions and is subject to a number of
risks and uncertainties, many of which are beyond our control,
which could cause actual results to differ materially from those
that are disclosed in or implied by such forward-looking
information. These risks and uncertainties include, but are not
limited to, the following risk factors which are discussed in
greater detail under “Risk Factors” in the Company’s Annual
Information Form for the year ended August 31, 2019 available on
SEDAR at www.sedar.com: limited operating history, negative
operating cash flow, food industry, quality control and health
concerns, regulatory compliance, regulation of the industry, public
safety issues, product recalls, damage to Goodfood’s reputation,
transportation disruptions, product liability, ownership and
protection of intellectual property, evolving industry,
unionization activities, reliance on management, factors which may
prevent realization of growth targets, competition, availability
and quality of raw materials, limited number of products,
environmental and employee health and safety regulations, online
security breaches and disruption, reliance on data centers, open
source license compliance, future capital requirements, operating
risk and insurance coverage, management of growth, conflicts of
interest, litigation, and catastrophic events. Although the
forward-looking information contained herein is based upon what we
believe are reasonable assumptions, readers are cautioned against
placing undue reliance on this information since actual results may
vary from the forward-looking information. Certain assumptions were
made in preparing the forward-looking information concerning
availability of capital resources, business performance, market
conditions, and customer demand. Consequently, all of the
forward-looking information contained herein is qualified by the
foregoing cautionary statements, and there can be no guarantee that
the results or developments that we anticipate will be realized or,
even if substantially realized, that they will have the expected
consequences or effects on our business, financial condition or
results of operation. Unless otherwise noted or the context
otherwise indicates, the forward-looking information contained
herein is provided as of the date hereof, and we do not undertake
to update or amend such forward-looking information whether as a
result of new information, future events or otherwise, except as
may be required by applicable law.
1 See the non-IFRS financial measures and active
subscribers sections at the end of this press release.
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