PEAS Global Food And Ingredients Ltd

Company continues to grow higher margin categories resulting in higher gross profit

SUMMARY

• Record revenue recorded in the three months ended December 31, 2022 of $39.6 million, including incremental sales in the quarter from higher margin product categories such as plant-based pet food ingredients ($4.8 million), split peas ($1.9 million) and consumer product packaged goods ($0.2 million).
• During the three and nine months ended December 31, 2022, these higher margin product categories represented 17.5% and 23.6% of revenue, respectively (three and nine months ended December 31, 2021 of 3.7% and 1.5%, respectively).
• Continued improvement in gross profit, backed by the Company's shift to higher margin product categories. Gross profit increased by 532.7% to $2.4 million and adjusted gross profit increased by 482.5% to $2.5 million compared to the three months ended December 31, 2021. Adjusted gross profit as a percentage of revenue increased from 1.8% to 6.3% in the period.
• Despite the increased operating costs in the current period related to public company expenses, the pet food facility, commissioning of the pea splitter and brand development and other expenses of the CPG division, the Company's loss for the period improved by $3.1 million or 90.7% to $0.3 million.
• Cash of $3.2 million at December 31, 2022, an increase of $1.4 million from March 31, 2022, combined with a decrease in bank indebtedness of $3.1 million, during the same period.

TORONTO, Feb. 23, 2023 /CNW/ - Global Food and Ingredients Ltd. (TSXV: PEAS) (OTCQX: PEASF) ("GFI" or the "Company"), is pleased to announce the third quarter results for the three and nine months ended December 31, 2022.

"GFI is pleased to report a record quarter of revenues on top of our continued improvement in gross profit margin driven by our shift in focus to higher margin products," commented David Hanna, GFI's CEO. "This is affirmation of the hard work of everyone at GFI and we are starting to see the successes from our strategic focus to more downstream, value-added product categories, specifically with the pet food operation and now the commissioning of the pea splitting facility; which is still at the infancy stages of its potential."

Mr. Hanna added, "When we look at our underlying ingredients business (Plant-based Ingredients and Corporate Services segments), the Company is presenting a positive EBITDA for the nine months ended December 31, 2022 even after considering corporate segment costs, the additional costs associated with being a public entity and higher overhead costs as a result of the business growth. Overall, the path forward is exciting and we believe that we are positioned to start realizing on our investments in the future of the business. The pet food operation has proven to be a successful addition to the GFI ecosystem; we believe that our state-of-the art pea splitting facility can compete with any manufacturer in the industry in providing the highest quality outputs with the lowest carbon footprint; and our US distribution center will expand our geographical reach and in-house capabilities."

Mr. Hanna continued, "GFI is trending in the right direction as our business strategy continues to unfold which will allow us to respond to and capitalize on growth opportunities in the global plant-based food and ingredients markets."

Third Quarter Results

Financial Highlights – Three Months ended December 31, 2022

• The Company achieved record level of sales in the three months ended December 31, 2022 of $39.6 million, an increase of 65.0% from $24.0 million in the three months ended December 31, 2021, predominantly attributable to the good harvest in the current year which resulted in larger quantity of quality crop and the Company's shift to more premium, value-added ingredients.
• Gross profit increased by 532.7% to $2.4 million in the three months ended December 31, 2022, in comparison to negative $0.5 million in the prior comparable period.
• Adjusted gross profit¹ totalled $2.5 million or 6.3% of revenue in the three months ended December 31, 2022, compared to $0.4 million or 1.8% of revenue in the prior comparable period. The $2.1 million increase is predominantly attributable to the Company's shift to higher margin, value-added products, a higher quality harvest and stabilized industry conditions.
• Loss for the period improved by $3.1 million to a loss of $0.3 million in the third quarter of 2023, compared to a loss of $3.4 million in the three months ended December 30, 2022, predominately attributable to:
• • Improved margin profile of the Company in the current year, offset by increase operating, finance and depreciation costs to support the growth of the Company,
  • $1.3 million loss associated with the revaluation of the convertible debentures in the prior comparable period, which converted on the completion of the reverse takeover transaction ("RTO"), resulted in no revaluation in the current quarter, and
  • Offset by increased operating, finance and depreciation costs to support the growth of the company.

Financial Highlights – Nine Months ended December 31, 2022

• Revenue increased by 4.9%, to $94.0 million in the nine months ended December 31, 2022 compared to $89.6 million in the nine months ended December 31, 2021. The $4.4 million increase is attributable to the good harvest in the current year which drove strong sales in Q3 2023, the introduction of plant-based consumer packaged goods and the commissioning of the pea splitter.
• Gross profit totaled $6.2 million, compared to $3.3 million in the nine months ended December 31, 2022, an increase of 90.6%.
• Adjusted gross profit¹ totalled $7.8 million or 8.3% of revenue in the nine months ended December 31, 2022, compared to $6.1 million or 6.8% of revenue in the prior comparable period. The $1.7 million increase is attributable the Company's shift to higher margin product categories and a full nine months of the pet food operations, despite the increased overhead costs and $2.3 million negative movement in realized foreign exchange gains/losses on contracts.
• Loss for the period of $7.5 million, compared to loss of $4.0 million in the nine months ended December 31, 2021, predominately attributable to the additional costs associated with closing the RTO and other one-time transaction-related expenses, including:
• • non-cash, $2.1 million listing expense related to the accounting for the RTO;
  • $1.9 million attributable to non-recurring professional, legal and transaction fees for YoFiit and Bentilia acquisitions, rebranding and product development and go public related costs;
  • $4.0 million of increased operating, finance and depreciation costs to support the growth of the business; offset by,
  • improved margins, a non-cash $1.0 million reduction in the loss on the revaluation of the convertible debenture that converted on the completion of the RTO and a $1.8 million movement taxes recovered.

Highlights – Subsequent to the period ended December 31, 2022

• Completed financing of a subordinated loan with a related party in the principal amount of $3.0 million, payable along with accrued interest one year following the issuance. As additional consideration, the Company issued 2.5 million warrants to purchase an aggregate of 2.5 million common shares of the Company.
• Launched the Yofiit branded plant-based milk nationwide in Sprouts Farmers Market, bolstering roughly 380 stores across 23 states.
• GFI's Bentilia branded red lentil-based pasta partnered with Rainforest Distribution and Goldmine Distribution to expand their access to several thousand new points of distribution in the Northeast, Mid-Atlantic, Chicagoland and Illinois regions.

Income Statement Summary

Non-IFRS Measures Summary¹

The unaudited condensed consolidated interim financial statements for the three and nine months ended December 31, 2022 ("Financial Statements") and related Management's Discussion & Analysis ("MD&A") for the three and nine months ended December 31, 2022, are available under the Company's profile at www.sedar.com.

About GFI

GFI is a fast-growing Canadian plant-based food and ingredients company, connecting the local farm to the global supply chain for peas, beans, lentils, chickpeas and other high protein specialty crops. GFI is organized into four primary business lines: Pea Protein Inputs, Plant-Based Ingredients, Plant-Based Pet Food Ingredients and Plant-Based Consumer Packaged Goods. Headquartered in Toronto, GFI buys directly from its extensive network of farmers, processes its products locally at its four wholly-owned processing facilities in Western Canada and ships to 37 countries across the world.

GFI's vision is to become a vertically integrated farm-to-fork plant-based company providing traceable, locally sourced, healthy and sustainable food and ingredients. Through recent acquisition and development activities, GFI now offers a full suite of Plant-Based Consumer Packaged goods with over 20 SKUs under the Yofiit, Bentilia and Five Peas in Love brands.

Disclaimer

Neither the TSXV nor its Regulation Service Provider (as defined policies of the TSXV) accepts responsibility for the adequacy or accuracy of this press release.

Cautionary Statements

Non-IFRS Measures

This news release contains the financial performance metric of gross profit margin, adjusted gross profit, adjusted gross profit margin, EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin, all of which are measures that are not recognized or defined under IFRS (collectively the "Non-IFRS Measures"). As a result, this data may not be comparable to data presented by other food and ingredients companies. The Company believes that the Non-IFRS Measures are useful indicators of operational performance and are specifically used by management to assess the financial and operational performance of the Company.

Changes to Prior Period Presentation

In the current reporting period, management undertook a review of the historical adjusting items as part of an effort to reduce the number of non-IFRS items it adjusts for in its financial reporting. Management concluded that in order to present adjusting items in a manner more consistent with current and future fiscal year operating results, the Company will no longer adjust for net insurance proceeds associated with the take-or-pay toll processing agreement ("TPA") cancelled in Q4 of the year ended March 31, 2021.

Starting in the first quarter of the current reporting period, net insurance proceeds will not be considered as an adjusting item. The rationale for the adjustment to the allocation of net insurance proceeds in the quarters and year ended March 31, 2022 presentation is that in comparing the period over period performance, quarters and year ended March 31, 2022 to quarters and year fiscal year ended March 31, 2021, the net insurance proceeds were relevant given the nature of the operation at that time. The same is not the case in comparing the quarters and year ended March 31, 2023 to quarters and year fiscal year ended March 31, 2022. Toll processing services totalled $3.7 million or approximately 6% of the revenue in the fiscal year ended March 31, 2021 in comparison to $0.2 million or less than 1% of revenue in the fiscal year ended March 31, 2022. Therefore, in order to accurately compare the relevant performance of the periods, management allocated a portion of the proceeds recorded in fiscal year ended March 31, 2021 to the relevant quarters in the fiscal year ended March 31, 2022 to show a quantitative comparison as if the toll processing services continued in that year. Given the toll processing related services were cancelled prior to the fiscal year ended March 31, 2022 (with minor residual contracts being executed in the period) and are not part of the operating business in the current reporting period, management has assessed that it is more relevant to compare the current fiscal year ended March 31, 2023 operating results without the inclusion or allocation of any insurance proceeds in the comparable period, fiscal year ended March 31, 2022.

Non-IFRS Measures Definitions
Gross profit margin is defined as gross profit divided by revenue.

Adjusted gross profit is calculated by adding or deducting, as applicable from gross profit, certain costs, charges or benefits incurred in such period which in management's view are either not indicative or are directly correlated to the Company's process to sell its products, including: (a) realized foreign exchange loss (gain) and (b) overhead costs attributable to brining inventory to a saleable condition that have been recorded as cost of sales under IFRS. Adjusted gross profit margin represents adjusted gross profit divided by revenue.

EBITDA calculates, for the applicable period, earnings before interest, taxes and depreciation and amortization. Interest includes all finance costs net of interest income and depreciation and amortization includes the depreciation of property, plant and equipment, amortization of right-of-use assets, amortization of intangible assets and amortization of deferred financing fees. Management does not use EBITDA as a financial performance metric. EBITDA margin represents EBITDA divided by revenue.

Adjusted EBITDA is calculated by adding and deducting, as applicable from EBITDA, certain expenses, costs, charges or benefits incurred in such period which in management's view are either not indicative of underlying business performance, impact the ability to assess the operating performance of our business or are deemed non-cash, non-recurring or one-time in nature. Adjusted EBITDA margin represents adjusted EBITDA divided by revenue.

The following tables provide a reconciliation of the Non-IFRS Measures to the most directly comparable financial measures disclosed in the Financial Statements.

The following table provides a reconciliation of segment and consolidated gross profit to adjusted gross profit for the periods presented:

The following table provides a reconciliation of consolidated loss for the period to EBITDA and adjusted EBITDA for the periods presented:

Non-IFRS Measures should be considered together with other financial information prepared in accordance with IFRS to enable investors to evaluate the GFI's operating results, underlying performance and prospects in a manner similar to GFI's management.

Accordingly, these Non-IFRS Measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Forward-Looking Statements

This press release may contain certain forward-looking information and statements ("forward-looking information") within the meaning of applicable Canadian securities legislation, that are not based on historical fact, including without limitation statements containing the words "believes", "anticipates", "plans", "intends", "will", "should", "expects", "continue", "estimate", "forecasts" and other similar expressions. Forward looking statements in this press release include without limitation statements relating to GFI continuing to add further downstream processing and the effects thereof and GFI's business objectives. Readers are cautioned to not place undue reliance on forward-looking information. Actual results and developments may differ materially from those contemplated by these statements. GFI undertakes no obligation to comment analyses, expectations or statements made by third-parties in respect of GFI, its securities, or financial or operating results (as applicable). Although GFI believes that the expectations reflected in forward-looking information in this press release are reasonable, such forward-looking information has been based on expectations, factors and assumptions concerning future events which may prove to be inaccurate and are subject to numerous risks and uncertainties, certain of which are beyond GFI's control, including the risk factors discussed in GFI's annual information form for the year ended March 31, 2022, which are incorporated herein by reference and are available through SEDAR at www.sedar.com. The forward-looking information contained in this press release are expressly qualified by this cautionary statement and are made as of the date hereof. GFI disclaims any intention and has no obligation or responsibility, except as required by law, to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

SOURCE Global Food and Ingredients