Good morning, ladies and gentlemen, and welcome to the Goodfood Q3 FY 2024 Earnings and Webcast Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, July 16 at 8 o'clock a.m. Eastern Time. 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 the disclaimer on 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 MD&A. Finally, let me remind you that all figures expressed on today's call are in Canadian dollars unless otherwise stated. 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. [Foreign Language]. Good morning everyone and welcome to this call for Goodfood Market Corp. to present our financial results for the third quarter of fiscal 2024, ended June 1st. I'm joined on the call today by Neil, Goodfood’s President and Chief Operating Officer, and Ross, Chief Financial Officer. Our press release reporting this quarter's results was published earlier this morning. It can be found on our website and on SEDAR. I will now turn to Slide 3 to review the highlights of this quarter. Our team is pleased with the consistent growth and profitability that was again on display this quarter, which marked our sixth consecutive quarter of positive adjusted EBITDA. The sustained discipline our teams have implemented and maintained enabled adjusted EBITDA to reach a margin of 9.2% this quarter for $3.6 million. In the last 12 months, adjusted EBITDA margin has reached 6% for $9.3 million, which is 4.5 times the $2.1 million LTM adjusted EBITDA generated the same period last year. We are energized by the progress we have made and remain unwavering in our focus on profitability. This level of profitability has in turn driven consistency in our business's cash flow generation with adjusted free cash flow generated in four of the past five quarters and standing at $4.4 million this quarter or $8.7 million year-to-date. This represents a $12 million improvement compared to the first three quarters of fiscal 2023 and cements our commitment to growing the cash generation ability of our business. Supported by operating and business efficiencies that have driven gross margin consistently around the 40% mark and SG&A expense reductions that reached $10 million compared to the first three quarters of fiscal '23, our cash flow generation is poised to continue to grow and help provide further capital allocation flexibility. With this established and growing cash flow generation, we have reduced net leverage measured as net debt divided by LTM adjusted EBITDA from 8.2 turns last year to 2.1 turns today. Both by repaying bank debt and increasing profitability, we have meaningfully reduced the risk of our capital structure. With this improvement in leverage, we are giving ourselves the flexibility to invest in Goodfood's next phase of growth as we continue to enhance the economics of our Meal Kit offering and explore various avenues for growth. We are pleased with our financial performance, profitability and cash flow generation in the first three quarters of this year. And we're excited to see the momentum created by the customer centric initiatives our teams have developed and the rave reviews we are receiving from our members. Our teams have rolled out new recipes and partnerships that have created sparks of joy in kitchens coast-to- coast. More on that later. On that note, Ross will now go over our financial performance in greater detail.

Thank you, Jon, and good morning, everyone. Turning to Slide 4, you will see that net sales were $38.6 million for the quarter, a $3.6 million or 8% year-over-year decline and a $1.2 million or 3% sequential decline compared to the second quarter. This was the result of lower customer count as active customers were 105,000 driven by customer acquisition cost discipline, consumer spending softness, in addition to lower customer activity as early seasonality drove lower orders, especially during the month of May. Offsetting customer activity were larger basket sizes from ordering customers, as our net sales per active customer hit a high of $367 on the back of record average order value and growing number of portions purchased per basket. This was driven in part by our new protein customization, which led our members to customize their meals with premium protein, such as fresh salmon or organic chicken, as well as the addition of off plan recipes, like our value meals. As mentioned last quarter, current demand circumstances are challenging and we expect to return to year-over-year organic growth when the consumer and macro headwinds abate. In the meantime, our focus remains on growing cash flow generation and discipline unit economics investment to ensure meaningful operating leverage as we continue working on building growth momentum. We will now turn to Slide 5 to review our profitability levels. As Jon mentioned, we are pleased to have brought consistency and growth to our profitability and have now delivered six consecutive quarters of positive adjusted EBITDA. Building on our operating improvements, gross margin reached a record 44% in the third quarter, a 300 basis points improvement compared to the same quarter last year. On the back of the record gross margin and consistently improving SG&A efficiency, we achieved $3.6 million of adjusted EBITDA this quarter for a margin of 9.2%, a 1.4% improvement year-over-year. This growing level of margin is the result of our internal initiatives aiming to drive the efficiency of our operation and our cost structure. As part of a regular review of processes and the marginal gains we can make, we have improved key operational and production metrics, which has labor proportion and last mile shipping cost per order. Both metrics have shown an improvement upwards of 10% year-over-year, as we continue to drive a culture of continuous improvement. We also continue to focus on customers with strong unit economics, which also drives gross margin. Highlighting our focus on profitable customers is the fact that our gross profit remained relatively flat year-over-year at around $17 million, while net sales declined 8% in that same period. We have also further increased our use of technology tools and built outsourcing efficiency initiatives that have enabled further growth and profitability through both leveraging software and external resources. Combined with our focus on most profitable products and customers, these structural improvements have driven an LTM adjusted EBITDA of over $9 million. I will now move to Slide 6 for a review of cash flows, capital expenditures, and leverage. Cash flows generated by operating activities were $4.5 million this quarter, a $1.3 million improvement compared to the same quarter last year. As profitability continues to grow and capital expenditures remain low, given the relative newness and well-maintained assets, our adjusted free cash flows continue to grow and have now reached $4.5 million this quarter and $8.7 million year-to-date. As we outlined on our previous call, this free cash flow generation is enabling a reduction in debt, which combined with growing profitability have broadened our leverage from 8.2 turns in the third quarter last year to 2.1 turns this quarter. The deleveraging in cash flows generated highlight our disciplined approach to cost management and capital allocation and our commitment to long-term shareholder value. Turning to Slide 7, we will find a summary of our performance this quarter. On balance, our Q3 results came in line with what we expected and described during our last earnings call. We are pleased with the sustained strength of our financial performance and satisfied with growing profitability on display again this quarter. Satisfied, however, does not mean complacent. While the majority of our financial KPIs, unit economics and customer feedback metrics continue to show sustained improvement, we continue to strive for growth in both the top line and the bottom line. The positive free cash flow we have generated in four of the past five quarters and positive adjusted EBITDA in the last six consecutive quarters demonstrate our commitments and focus on growing profitability and cash. As we look to continue to build on the positive momentum our stable net sales displayed and generate growth, we are energized by the flexibility which opens up multiple avenues for growth. During the fourth quarter, we plan on pushing forward on the execution of the customer-centric initiatives as Jon will describe in further detail shortly, and for those initiatives to be in place for our first quarter of fiscal '24, beginning in early September. As a reminder, our fourth quarter consists in large part of the months of June, July and August, which are seasonal in nature as customers travel and spend more time outside of their homes. Overall, we remain disciplined and keep our focus on profitable growth, which puts us in a strong position to enhance our customers value proposition every day and to continue delivering growing cash flows and look forward to accelerating that growth in profitability. Jon will now provide an update on a recent customer centric initiative.

Thank you, Ross. Moving to Slide 8, it is important to highlight that as we came out of the pandemic and experienced challenges, we re-centered our value proposition around our core expertise in meal solutions. Since that focus was established, creating meal experiences that spark joy in Canadians' households has been a clear and key element of Goodfood's mission. In recent months, we upped the ante on sparking joy by fostering a customer centric culture driven by customer insights. In the current challenging macro climate, our members increasingly want to prepare and eat healthy and delicious meals at home, discover new and varied ingredients and flavors and do so at a great value. As a result, we have worked over the past few months to double our lineup of recipes on our value menu. Goodfood customers can enjoy exciting recipes like our Japanese orange-ginger pork stir-fry with fresh ramen noodles or beef picadillo cubano with Spanish olives and raisins for under $10 a serving. Our simple yet satisfying value menu not only provides additional tasty options, but also allows for a broader range of households and budgets to engage with our platform. Speaking of engagement, another key initiative this summer is the launch of Camp Goodfood to spark joy for the whole family. Camp Goodfood is a set of six family favorite recipes available throughout the summer with each recipe being paired with a companion video episode featuring Chef Jordana and our antihero mascot, Richard the Raccoon. Kids receive hands-on cooking experiences and lessons centered around engaging all our senses in the kitchen. Touch, sight, smell, sound, and of course, taste. The recipes also come with some fun Goodfood branded swag, including matching aprons, a kid's chef hat, and mini whisk. So far, we have received strong feedback from our members and plenty of pictures capturing the great family memories. In addition, we have continued enhancing our digital product to create a cleaner, more intuitive experience for our customers. Our app and web platform now allow members to more easily browse and select from our wider variety of delicious recipes and customize them where available. As you may have recently seen, we have doubled down on our differentiating Canadian flavor through mouthwatering recipes and partnerships, including our most recent collaboration with Chef Laurent Dagenais. Chef Laurent and our very own Chef Jordana collaborated together to create meals and content that our loyal fans absolutely loved. The partnership was promoted to Laurent's two million social followers and culminated in Goodfood's first ever in-person live event for our VIP members in Montreal that further deepened the great bond we have with our raving fans. This focus on our customers' needs is continuing to yield results. While seasonality and macro challenges did reduce our active customer count this quarter, Goodfood members are ordering the biggest baskets we have ever sold, containing more portions of our recipes than ever, and more customization driving the bigger baskets. The strong net sales per active customer have demonstrated that our prioritization of profitable customers combined with the relentless customer centricity is bringing us closer to closing the gap to year-over-year growth. Overall, we are pleased to continue consistently growing our profitability and cash generation. We have enhanced and will continue to enhance our customer value proposition. And with consistent SG&A and operational discipline, we are in a strong position to continue growing our free cash flow at an attractive pace in fiscal 2024 and beyond. On that note, I will turn it over to the operator for the Q&A portion of this call.

[Operator Instructions] You have here Mr. Martin Landry.

Hi, good morning, guys.

Good morning, Martin.

My first question is on your profitability improvements. Your gross margin is at the highest level. It's been in a long time. It's 44%. And your SG&A expenses are the lowest they've been also in a while, which is pretty impressive indeed in terms of a turnaround. So I'm trying to understand on a go-forward basis how much more improvement is there from a gross margin expansion and from an SG&A reduction. Are we there in terms of the most improvement you can drive from your business? Just a little bit of a color and discussion around evolution of gross margin from here and evolution of SG&A levels from here would be great?

Yes, thanks for the question, Martin, and it's a good one. I think we've shown an ability to grow gross margin through some really good efficiencies and it hit a record level this quarter. I think if we think of the components of the gross margin, be it on the labor side, the food and packaging side, or the shipping side, we try to have the big components, there's things we can always improve and have some marginal gains on the efficiency on the labor side and on the shipping side. I think increasingly as we look at this level of gross margin, it gives us the flexibility to think of how do we use that level of gross margin to enhance the customer value proposition and look to operate within close levels to where we are while giving more to the customer. So I don't want to say that, say, to the gross margin. I think, definitely in the near term, in the fourth quarter, gross margin declines because we add more ice packs, add more packaging to keep the freshness, so it moves in the other direction. But I think as we look to fiscal '25, I could see us using a few percentage points of this gross margin in giving more food and a better experience to the customer overall. So I think that's one thing to keep in mind. On the SG&A side, there's kind of the S part, which is the marketing side, and then the G&A, which is people or technology or tools. I think on the marketing side, it's all about discipline, unit, and economics. If we're seeing cats that are attractive and continue to be attractive, we have some flexibility in how we invest into the attractive economics. I think the other side is true as well, as we mentioned in this quarter. I think on the rest of the SG&A to the G&A portion, is where we spend three, four quarters, where we look for quite a few efficiencies on the technology side, trying to see how we can leverage software and various productivity tools to continue to enhance the G&A side. I think there's a few more gains to the G&A. I think it's continuous improvement. I definitely would caution against expecting something similar improvement in the G&A, but we're always looking for a better cost structure.

Okay. That's helpful. And maybe just a follow-up on the revenue side. You've talked about the challenged economic backdrop as one of the reasons that your revenues are declining. You're also pruning your customer base, but I'd like to understand are your revenues declining in line with the industry or are you losing market share? I know industry numbers are not readily available, but if you can talk to us a little bit about how you see your market share evolving, it would give us a bit more color as to how the industry is performing?

Yes. I think if you look at it on a year-over-year basis in the Canadian landscape, you can get perfect numbers, but you can back them out a little bit or have estimates based on what's publicly available. I think our sales decline is probably not as deep as we've seen from the overall industry. I think it's challenging to get the perfect figures, but based on the data we have, both just on per sales, active customers, but also some of the sort of secondary data you can get from various market participants, I'd say that we've seen probably less decline than the industry. This is based on estimates, so I don't think its so much market share situation. I think it's a consumer spending situation for the large part.

Okay. And then last question on your value meals. I was wondering if you could give us just some -- I may have missed this, my apologies if I did, but when were your value meals introduced, what's the traction you're getting with that offer? What are the margins looking like? And what's the price differential versus your regular price meals?

Martin, its Neil, thanks for the question. So the value meals have been something we've launched in a small way for at least six months now and have said recently to scale it up a little bit. So now we're offering a value plan for some customers that we're testing out. We have six options available on the website, starting at 899 a portion, which is somewhere between 30% and 40% discount to our classic and most popular plan, so quite attractive. And we're still offering great portion size, great quality ingredients, obviously manufacturing the same facility, the same supply chain. So, really top quality stuff going to customers. The feedback is very, very good. It allows people to shop at as well as 899 up to our artisan plans, which some top $30 a portion. And we see a lot of the same customers buying across that price spectrum. Where we go from here? I don't know the cost for feedback. We'll continue to iterate and gather as much data as possible. We see an opportunity to continue to grow the value selection on the site and the number of customers that are coming through. And then to your point on margin, given that we're amortizing our same cost base, we start off at a pretty attractive margin and overall shouldn't have a major effect on the short term. They are slightly lower margin than the average good food box, but not material right now.

Okay. That's helpful. Thank you very much and best of luck.

Thank you.

Thank you, Martin. Now your next question comes from the line of Mr. Frederic Tremblay from Desjardins. Please hold it for a moment. You may now proceed.

Thank you. Good morning.

Good morning, Fred.

Good morning, Ross. So we're hearing some comments on from restaurant operators highlighting pressures on consumer discretionary spending and you did allude to that as well. So I'm just wondering if at some point there's an opportunity for good food to benefit from lower traffic in restaurants, like what's your thoughts on a potential shift in spending from restaurants to food at home and how good food could potentially benefit from that?

Good morning, Fred. Thanks for the question. I think a few of the trends that we're trying to capitalize on, certainly one of them is creating alternatives for Canadians who are looking for more value versus going to the restaurant or ordering takeout. I think that's one of the key things that we've been working on and we've been doing it by partnering with restaurants and working together to collaborate recipes together and delivering it to our customers at a fraction of the cost of what it would cost our customers to dine out. I think the other trend that we're trying to capitalize on as well as any Canadians who are staying home this summer trying to save money versus traveling abroad, we've been focusing on helping them travel through food with good food and having really like an international good food menu that could help our customers travel through food and creating that experience with camp, Goodfood, which is our virtual kids camp and having a way in which we can use content to bring our recipes to life. So one of the cool things with camp Goodfood is each of the meals comes with its own video content and so the marginal cost to us of distributing that content is quite low, but the value added from having the lessons and recipe content around it is really engaging for our customers and creates an activity at home above and beyond just the food that we're delivering. So we're trying to play around with all of these different tactics around helping our customers proceed more value and creating fun ways to have the light full experiences at home.

That's helpful, thanks. Maybe switching to active customers for the Q3 did point out that some of the decline was scored by early summer seasonality, I think you mentioned the month of May for that. What's your sort of interpretation on that based on what you're seeing so far in Q4? Was that, that's largely a shift in the typical active customer decline that we would normally see in Q4, that's just shifted into Q3 or there's sort of more of that to come in Q4 as well?

That's a good question Fred. I think it's probably a little bit in between the two. I think there's definitely a shift that we would see sometime later in June usually after school or right around the end of school that happened a little earlier given the weather. I think it's there's obviously areas of our customer base where the school like events are less relevant and we've seen that happen in May. I still think from a seasonality perspective a lot of the families that are members as well will still have relatively typical seasonality shift in pattern in the summer. I think for a portion of our customer base that was brought a little bit forward to the month of May.

Okay. And then my last question is on capital allocation, more specifically M&A, last quarter you did point out M&A as an area of the potential avenue of growth. Can you just maybe provide an update on what you're seeing out there in terms of your M&A pipeline and maybe just remind us what type of company you're looking for on the M&A front?

That makes sense. I think from a pipeline perspective I think we've seen some good activity. We've seen some interesting businesses and brands respond to our inquiries or to an extent come to market. I think it's quite a few steps between creating a connection or connecting with a potential target all the way to a transaction but definitely the pipeline is robust. I think from a type of business we're looking for there's quite a wide array. I think there's definitely some similarities with direct-to-consumer businesses, similarities with some good brands that we can see there even if they're niche brands that are well-positioned. I think even in some of our, the base of different vendors we interact with and different partners we work with, there could be some interesting things there. It's quite a wide array and frankly both in Canada and the U.S. we've seen a pipeline that has responded well to our strategy and our inquiries.

Okay. Thanks very much.

Thank you, Mr. Frederic. Now there are no further questions at this time. I'd now like to turn the call back over to Mr. Ferrari for his final closing comment.

Thanks for joining us on this call. We look forward to speaking with you again at our next quarterly call.

Thank you, Mr. Ferrari. Well ladies and gentlemen this concludes your conference call for today. We thank you for participating and asking if you please disconnect your lines. I hope you all have a great day ahead.