Goodfood Market Corp. (“Goodfood” or “the Company”) (TSX: FOOD), a
leading online grocery company in Canada, today announced record
financial results for the third quarter ended May 31, 2021.
“Our impressive third quarter results reflected
the benefits of our leading and differentiated ready-to-cook
offering, growing grocery selection, and same-day fulfillment
capabilities in key markets, driving larger basket sizes and higher
order frequency from our increasingly loyal and engaged members,”
said Goodfood Chief Executive Officer, Jonathan Ferrari. “Our
record third quarter revenues of $108 million and record gross
profit of $38 million represent year-over-year growth or 24% and
51%, respectively, excellent results in the context of last year’s
COVID-19 positively impacted quarter. As previously communicated,
our Adjusted EBITDA continues to be impacted by our on-going
investments in people, processes and technology as we build out
Canada’s leading on-demand grocery delivery network. I am pleased
with the progress we continue to make as evidenced by the expansion
to 970 grocery products, the launch of the new Goodfood mobile
application, and the recent announcement of our first local
fulfillment center in Ottawa, which will allow us to offer same-day
delivery in a third major Canadian market,” added Mr. Ferrari.
“Our continued last-mile delivery optimization
and improved operational effectiveness leading to lower credits and
incentives, coupled with our growing scale and additional
investments in automation led to a record gross margin of 35%,”
said Goodfood President and Chief Operating Officer, Neil Cuggy.
“Our strong operational performance is providing the Company an
opportunity to reinvest operational efficiencies into additional
initiatives to attract and retain customers through continued
enhancement to our customer value proposition. With the growth of
the online grocery market continuing to accelerate, we will deploy
capital at an accelerating pace to enhance our operations across
the country, and remain focused on building the optimal footprint
of centralized production facilities and local fulfilment centres
to enable faster delivery times and greater product choice to
Canadian households from coast to coast,'' concluded Mr. Cuggy.
FINANCIAL
HIGHLIGHTS
THREE-MONTH PERIODS ENDED MAY 31, 2021,
AND 2020
(In thousands of Canadian dollars, except per
share and percentage information)
For the three-month periods ended |
May 31, 2021 |
|
May 31, 2020 |
|
($) |
(%) |
Revenues |
$ |
107,795 |
|
$ |
86,600 |
|
$ |
21,195 |
|
24% |
|
Cost of goods sold |
70,063 |
|
61,690 |
|
8,373 |
|
14% |
|
Gross profit |
$ |
37,732 |
|
$ |
24,910 |
|
$ |
12,822 |
|
51% |
|
Gross margin |
35.0% |
|
28.8% |
|
|
N/A |
|
6.2 pp |
|
Selling, general and administrative expenses |
$ |
36,875 |
|
$ |
19,486 |
|
$ |
17,389 |
|
89% |
|
Depreciation and amortization |
|
2,379 |
|
|
1,484 |
|
|
895 |
|
60% |
|
Net finance costs |
431 |
|
1,154 |
|
(723 |
) |
(63%) |
|
Net (loss) income before income taxes |
(1,953 |
) |
|
2,786 |
|
|
(4,739 |
) |
N/A |
|
Deferred income tax expense (recovery) |
61 |
|
|
– |
|
|
61 |
|
N/A |
|
Net (loss) income, being comprehensive (loss)
income |
$ |
(2,014 |
) |
$ |
2,786 |
|
$ |
(4,800 |
) |
N/A |
|
Basic and diluted net (loss) earnings per
share |
$ |
(0.03 |
) |
$ |
0.05 |
|
$ |
(0.08 |
) |
N/A |
|
- Revenues continued to be favourably impacted by our strategy to
expand product offering and same-day delivery which in turn drive
higher average basket sizes and order frequency. The decrease in
incentives and credits as a percentage of revenues from 15.3% to
9.6% also contributed to the increase in revenues.
- Gross profit and gross margin increased compared to the same
period last year due primarily to an increase in average order
value driving fixed cost leverage in a quarter marked by lower
packaging costs, a decrease in current incentives and credits
levels as a percentage of revenues, as well as lower unit costs for
shipping and other production costs driven by the ramp up of our
internal last-mile delivery capabilities and grocery
operations.
- The increase in selling, general and administrative expenses is
primarily due to higher marketing spend, higher wages, salaries and
technology spend as the Company continues to grow and expand its
operations and product offering across Canada, as well as the
non-recurrence of the temporary decline in marketing activities as
a result of the uncertainty created by the onset of the COVID-19
pandemic in the third quarter of 2020.
- The increase in depreciation and amortization expense is mainly
due to the recognition of right-of-use assets from new or amended
facility lease agreements and related additions of leasehold
improvements.
- The decrease in net finance costs is mainly due to a lower
balance of convertible debentures as a result of conversion of
convertible debentures since they were issued in the second quarter
of Fiscal 2020, as well as an increase in the interest income due
to a higher balance of cash and cash equivalents.
NINE-MONTH PERIODS ENDED MAY 31, 2021,
AND 2020
(In thousands of Canadian dollars, except per
share and percentage information)
For the nine-month periods ended |
May 31, 2021 |
|
May 31, 2020 |
|
($) |
(%) |
Revenues |
$ |
299,876 |
|
$ |
201,681 |
|
$ |
98,195 |
|
49% |
|
Cost of goods sold |
201,935 |
|
142,736 |
|
59,199 |
|
41% |
|
Gross profit |
$ |
97,941 |
|
$ |
58,945 |
|
$ |
38,996 |
|
66% |
|
Gross margin |
32.7% |
|
29.2% |
|
N/A |
|
3.5 pp |
|
Selling, general and administrative expenses |
$ |
97,735 |
|
$ |
60,989 |
|
$ |
36,746 |
|
60% |
|
Depreciation and amortization |
|
6,826 |
|
3,543 |
|
3,283 |
|
93% |
|
Net finance costs |
1,646 |
|
1,469 |
|
177 |
|
12% |
|
Net loss before income taxes |
|
(8,266 |
) |
|
(7,056 |
) |
|
(1,210 |
) |
17% |
|
Deferred income tax expense (recovery) |
|
403 |
|
|
(1,330 |
) |
|
1,733 |
|
N/A |
|
Net loss, being comprehensive loss |
$ |
(8,669 |
) |
$ |
(5,726 |
) |
$ |
(2,943 |
) |
51% |
|
Basic and diluted loss per share |
$ |
(0.12 |
) |
$ |
(0.10 |
) |
$ |
(0.02 |
) |
20% |
|
- The Company’s continued focus on
its strategy to become Canada’s leading online grocer by increasing
its product offering and flexibility for members through same day
delivery impacted positively the average basket size and order
frequency which, combined with a larger subscriber base, resulted
in increased revenues. The decrease in incentives and credits as a
percentage of revenues from 17.4% to 11.4%, due to an efficient
marketing strategy and improved operational effectiveness also
substantially contributed to the increase in revenues.
- The increase in gross profit and
gross margin primarily resulted from a decrease in incentives and
credits as a percentage of revenues as well as larger basket sizes
and lower production and fulfillment unit costs. The decrease in
the unit shipping costs is the result of an increased density among
the delivery zones as well as the expansion of our internal
last-mile delivery capabilities.
- The increase in selling, general
and administrative expenses is primarily due to higher wages and
salaries resulting from the expansion of the management team and
related administrative functions needed to support the Company’s
on-going growth and the increase of its product offering.
- The increase in depreciation and
amortization expense is mainly due to the recognition of
right-of-use assets from new facility lease agreements and lease
modification agreements as well as related additions of leasehold
improvements.
- The increase in net finance costs
primarily related to interest expense resulting from higher lease
obligations from the recognition of new and amended facility lease
agreements, as well as a higher balance of the credit facility in
Fiscal 2021 compared to the corresponding period in Fiscal
2020.
EBITDA (1), ADJUSTED EBITDA (1) AND
ADJUSTED EBITDA MARGIN (1)
The reconciliation of net loss to EBITDA (1),
adjusted EBITDA (1) and adjusted EBITDA margin (1) is as
follows:
(In thousands of Canadian dollars, except
percentage information)
|
Three-Month |
Nine-Month |
For the periods ended |
May 31, 2021 |
|
May 31, 2020 |
|
May 31, 2021 |
|
May 31, 2020 |
|
Net (loss) income |
$ |
(2,014 |
) |
$ |
2,786 |
|
$ |
(8,669 |
) |
$ |
(5,726 |
) |
Net finance costs |
|
431 |
|
|
1,154 |
|
|
1,646 |
|
|
1,469 |
|
Depreciation and amortization |
|
2,379 |
|
|
1,484 |
|
|
6,826 |
|
|
3,543 |
|
Deferred income tax expense (recovery) |
|
61 |
|
|
– |
|
|
403 |
|
|
(1,330 |
) |
EBITDA (1) |
$ |
857 |
|
$ |
5,424 |
|
$ |
206 |
|
$ |
(2,044 |
) |
Share-based payments |
|
869 |
|
|
560 |
|
|
3,270 |
|
|
1,456 |
|
Restructuring costs |
|
- |
|
|
– |
|
|
139 |
|
|
– |
|
Adjusted EBITDA (1) |
$ |
1,726 |
|
$ |
5,984 |
|
$ |
3,615 |
|
$ |
(588 |
) |
Revenues |
$ |
107,795 |
|
$ |
86,600 |
|
$ |
299,876 |
|
$ |
201,681 |
|
Adjusted EBITDA margin (%) (1) |
|
1.6% |
|
|
6.9% |
|
|
1.2% |
|
|
(0.3% |
) |
For the three-month period ended May 31, 2021,
adjusted EBITDA margin (1) decreased 5.3 percentage points compared
to the corresponding period in 2020. The decrease in the adjusted
EBITDA margin (1) resulted primarily from higher selling, general
and administrative expenses due to an increase in the marketing
spend as well as in wages and salaries as the Company continues to
grow and expand its operations and product offering across Canada.
In the third quarter of Fiscal 2020, at the onset of the pandemic,
the marketing spend was reduced to match the production and
fulfilment capacity of the Company at that time of sudden high
demand.
For the nine-month period ended May 31, 2021,
the increase in adjusted EBITDA margin (1) resulted in part from an
improvement in gross margin, driven by a larger revenue base, a
decrease in incentives and credits as a percentage of revenues. The
improvement in adjusted EBITDA margin (1) in the nine-month period
ended May 31, 2021, was partially offset by higher wages and
salaries as the Company continues to grow its national footprint as
well as additional costs incurred due to COVID-19.
LIQUIDITY AND CAPITAL
RESOURCES
The Company’s objective in managing its capital
structure is to ensure sufficient liquidity to finance its
operations and growth and to deliver competitive returns on
invested capital. To fund its activities, the Company has relied on
public and private placements of equity securities, convertible
debentures, cash flows provided by operating activities and
short-term or long-term debt, which are included in the Company’s
definition of capital. The Company manages its excess cash to
ensure that it has sufficient reserves to fund its operations and
capital structure. The Company is currently in a net cash position
of $128 million.
COVID-19
IMPACT AND MEASURES
The World Health Organization declared COVID-19
a global pandemic on March 11, 2020, and the outbreak has had an
impact on Goodfood’s overall business and operations. As the
Company is deemed an essential service in Canada, Goodfood has
continued to operate without interruption.
Starting in the second half of Fiscal 2020,
Goodfood experienced several positive impacts on its financial
results related to the COVID-19 pandemic such as increased
subscriber growth, number of orders and average order values, which
positively impacted revenue and continued in the first three
quarters of Fiscal 2021, with the second wave of the COVID-19
pandemic across Canada. The Company incurred direct COVID-19
incremental costs of approximately $0.2 million and $1.8 million
for the three and nine-month periods ended May 31, 2021,
respectively, consisting of additional production costs and
temporary agency premiums.
At the onset of the pandemic, precautionary
measures were implemented at all of the Company’s facilities across
Canada in addition to its already rigorous food safety standards.
These measures include, but are not limited to:
- Enhanced hygiene procedures, including additional cleaning at
all of its facilities, mandatory hand washing prior to entry (for
both visitors and employees), and accessibility to hand sanitizer
stations;
- Social distancing measures put in place for the health and
safety of employees, mandatory non-contact temperature checks
before entering the facility, installation of physical safety
barriers, requirement for all frontline employees to wear personal
protection equipment, such as face masks and face shields, and the
hiring of a team to ensure the health screening for employees and
reinforce social distancing measures inside and outside of all
facilities; and
- Temporary suspension of its Box Pick-up and Reusable Box
Program to eliminate the risk of cross-contamination in its
facilities.
The Company continues to follow precautionary
measures at its facilities in addition to its already rigorous food
safety standards to safeguard the health and safety of its
employees as well as ensuring the quality of its products to its
customers.
FINANCIAL
OUTLOOK
The online grocery industry is among the fastest
growing industries in the world. As a result, Goodfood believes
there are significant opportunities to rapidly grow its subscriber
base and basket sizes by investing in highly targeted marketing
campaigns, capacity expansion through additional facilities and
investments in automation, increasing its product offering and in
continuing to expand its national platform.
Goodfood's strategy in part involves delaying
short-term profitability through the investment of capital, in
people, processes and technology with the goal of generating
long-term shareholder value creation through ultimately leveraging
its cost structure to achieve long-term margin and profitability
goals. Growing Goodfood's market share, scale and product offering
will allow the Company to deliver greater value to its customers
while attaining attractive returns on invested capital. As the
Company continues to grow, it is confident that it will achieve
economies of scale and additional efficiencies which will lead to
improvements in profitability while maintaining an unrivalled
customer experience.
The COVID-19 pandemic has had an impact on
Goodfood’s overall business and operations and has resulted in
different levels of restrictions by government authorities. As an
essential service in Canada, Goodfood has been operating throughout
the pandemic and implemented increased safety protocols at its
facilities to ensure the safety of its employees. The Company
experienced an acceleration of growth in demand. Pressure on supply
chains, inventory levels and increased operational costs or
disruptions and labour shortages could increase depending on the
duration and severity of the pandemic as well as any changes to
Goodfood’s industry regulatory framework. The magnitude, duration,
and severity of the
COVID-19 pandemic as well as the impact of the
vaccine rollout are difficult to predict and could affect the
significant estimates and judgements used in the preparation of the
Company’s interim condensed consolidated financial statements.
As a result of the COVID-19 pandemic, the number
of employees working remotely has increased significantly, which
has also increased demands on information technology resources and
systems and increased the risk of phishing and other cybersecurity
attacks.
Objectives are based
upon assumptions and are subject to risks and uncertainties, many
of which are beyond our control. These risks and uncertainties
could cause actual results to differ materially from objectives.
See the "Forward-Looking Statements" and "Business Risk" sections
of the MD&A.
TRENDS AND
SEASONALITY
Revenues and expenses are impacted by
seasonality. During the holiday and summer seasons, the Company
anticipates revenues to be lower as a higher proportion of active
subscribers (1) elect to reduce their delivery frequencies. The
Company anticipates the growth rate of active subscribers (1) to be
lower during these periods. While this is typically the case, the
COVID-19 pandemic as well as the impact of the vaccine rollout and
changing government restrictions have had, and may continue to
have, an impact on this trend. While seasonality in the fourth
quarter of Fiscal 2020 was smaller than usual due to the pandemic,
in light of the COVID-19 vaccine rollout, normalized seasonality
trends are expected to return. During periods with warmer weather,
the Company anticipates packaging costs to be higher due to the
additional packaging required to maintain food freshness and
quality. The Company also anticipates food costs to be positively
affected due to improved availability during periods with warmer
weather.
CONFERENCE
CALL
Goodfood will hold a conference call to discuss
these results on July 7, 2021, 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 9946327. This recording will be available on July 7, 2021
as of 11:00 AM Eastern Time until 11:59 PM Eastern Time on July 14,
2021.
A full version of the Company’s Management’s
Discussion and Analysis (MD&A) and Consolidated Financial
Statements for the third quarters ended May 31, 2021 and May 31,
2020 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 third
quarter ended May 31, 2021.
Goodfood's definition of the non-IFRS measures
are as follows:
- EBITDA is defined as net income (loss) before net finance
costs, depreciation and amortization and income taxes.
- Adjusted EBITDA is defined as EBITDA excluding share-based
payments and restructuring costs.
- Adjusted EBITDA margin is defined as the percentage of adjusted
EBITDA to revenues.
ACTIVE
SUBSCRIBERS
An account that is scheduled to receive a
delivery, has elected to skip delivery in the subsequent weekly
delivery cycle or that is registered to Goodfood WOW. 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 the Company’s consolidated
financial statements, we believe that active subscribers is a
useful metric for investors because it is indicative of potential
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 customers from across Canada to enjoy
delicious meals at home every day. Goodfood’s vision is to be in
every kitchen every day by enabling users to complete their grocery
shopping and meal planning in minutes. Goodfood clients have access
to a unique selection of online products as well as exclusive
pricing made possible by its direct-to-consumer infrastructure and
technology that eliminate food waste and costly retail overhead.
The Company’s main production facility and administrative offices
are based in Montreal, Québec, with five additional production
facilities located in the provinces of Québec, Ontario, Alberta,
and British Columbia. A seventh production facility located in the
province of Ontario is currently under construction. As at May 31,
2021, Goodfood had 317,000 active subscribers (1).
www.makegoodfood.ca
Except where otherwise indicated, all amounts in
this press release are expressed in Canadian dollars.
For further
information: Investors and Media |
|
|
|
Jonathan Roiter Chief Financial
Officer(855) 515-5191IR@makegoodfood.ca |
Roslane Aouameur
Senior Director, FP&A and Investor Relations(855)
515-5191IR@makegoodfood.ca |
FORWARD-LOOKING INFORMATION
This press 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", and "continue", as well as 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 on 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, 2020 available on SEDAR: limited operating
history, negative operating cash flow, food industry ,
COVID-19 pandemic as well as the impact of the vaccine rollout,
quality control and health concerns, regulatory compliance,
regulation of the industry, public safety issues, product recalls,
damage to Goodfood’s reputation, transportation disruptions,
storage and delivery of perishable foods, product liability,
unionization activities, consolidation trends, ownership and
protection of intellectual property, evolving industry, reliance on
management, factors which may prevent realization of growth
targets, competition, availability and quality of raw materials,
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, limited number
of products , conflicts of interest , litigation,
catastrophic events, risks associated with payments from customers
and third parties, being accused of infringing intellectual
property rights of others and, climate change and environmental
risks. 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 the
availability of capital resources, business performance, market
conditions, and customer demand. In addition, information and
expectations set forth herein are subject to and could change
materially in relation to developments regarding the duration and
severity of the COVID-19 pandemic as well as the impact of the
vaccine rollout and its impact on product demand, labour mobility,
supply chain continuity and other elements beyond our control.
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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