Goodfood Market (TSX:FOOD) held its second-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.

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The full earnings call is available at https://www2.makegoodfood.ca/en/investisseurs/evenements

Summary

Goodfood Market reported a decline in net sales and active customers in Q2 2026, with net sales at $22.5 million and active customers at 59,000, primarily due to a temporary license disruption and reduced marketing efforts.

The company is focused on a strategic reset, emphasizing cost discipline, margin protection, and cash generation, while simplifying operations and improving product offerings to enhance customer retention and lifetime value.

Despite temporary cost pressures leading to a negative adjusted EBITDA of $1 million, management remains optimistic about future performance, highlighting actions taken to stabilize margins and improve cash flow through operational efficiencies and tighter cost controls.

Full Transcript

OPERATOR

Good morning ladies and gentlemen and welcome to The Good Food Q2 2026 earnings conference call and webcast. At this time, all participants are enlisted only. 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 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 21st at 8:00am Eastern Time. Furthermore, I would like to remind you that today's presentation may contain forward looking statements, statements about good foods, 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. I would like to turn the meeting over to your host for today's call, Selim Basu, Good Food Chief Executive Officer. Mr. Basu, you may proceed.

Selim Basu (Chief Executive Officer)

Thank you. Bonjour tout le monde, Bienvenue conférence de marche Good Food for presente non resultier du de seintrimas de l' exe sis DeMille Vincis Good morning everyone. Welcome to our Good Food earnings call in which we will present our results for the second quarter of fiscal 2026. You can find our press release and other filings on our website and SEDAR Plus and all figures on this call are in Canadian dollars unless otherwise noted. With me today are Najib Malouf, our newly appointed President and Chief Operating Officer Vanessa Harida, our Vice President of Finance and Ross Aomur, our outgoing Chief Financial Officer. Before we begin, I wanted to highlight two things. First, Najeeb and I joined goodfood with a clear stabilize the business, protect cash and rebuild discipline. That work is underway and albeit today's result will show the impact of a license suspension, we have made significant strides in advancing our mandate. Also for fiscal 2026, both Najib and I have made the deliberate decision to forego our base salary. This is a voluntary choice. Our employment agreements remain unchanged, but we believe that in this phase of the company's transformation, accountability needs to start at the top. This is not a signal that we expect others to do the same. Our priority is to build a stronger, more resilient company, one that creates long term opportunities for our teams, delivers for our customers and earns the trust of our shareholders. The second thing I wanted to highlight is that today is the last earnings call of our Chief Financial Officer, I want to recognize Ross for his strong leadership and disciplined financial stewardship over the years. He has been instrumental in the transition and we wish him continued success in his upcoming next chapter. I will now turn it over to Najeeb to begin our review of the quarter with Slide three.

Najib Malouf

Thank you Selim. First, I wish to say that it is a privilege to be serving alongside you one more time. Slide number three captures the reality of the quarter. We are executing a necessary reset while absorbing short term disruption. During Q2, operational factors, including a temporary regulatory related disruption, impacted order volumes and created cost inefficiencies, particularly in logistics. These pressures were real, but they were also temporary. More importantly, they accelerated our execution. We responded quickly with disciplined cost actions, namely reducing marketing intensity, optimizing headcount, and tightening our focus on profitable demand. As a result, we continue to see strength in average order value and customer quality. At the same time, the reset is well underway. We are simplifying the operating model, removing complexity, aligning the cost structure to current volumes and focusing the business on core profitability. In parallel, we are sharpening the product, offering improvements in ingredient quality, meaningful increase in portion sizes and faster recipe cook time to 20 minutes or less are designed to delight customers and into better retention and increased wallet share from our most engaged customers. So while Q2 reflects pressure, it also reflects progress. The actions we're taking are deliberate, structural and focused on improving the earnings profile of the business. I now turn it to Vanessa to walk through the financials.

Vanessa Harida (Vice President of Finance)

Thank you Najeeb. As shown on slide 4, net sales and active customers declined year over year reaching $22.5 million and $59,000 respectively. These figures reflect three primary factors: the temporary license disruption during the quarter, lower order frequency, and our intentional pullback in marketing and incentives. The reduction in marketing and coupon intensity is a conscious trade off. We are prioritizing revenue quality over volume and that is reflected in the continued increase in net sales for active customers year over year reaching $382. Higher basket sizes and lower discounting are driving the improved unit economics. This is an important point. While the top line is lower, the underlying revenue base is becoming more efficient and more profitable on a per customer basis. I will now turn to slide 5 to discuss margins and profitability. Profitability in the quarter was impacted by a combination of higher shipping and labor costs and lower fixed cost absorption due to the reduced volume as a result of a temporary license suspension. As such, gross profit was $7 million for a gross margin of 30.6%. These pressures resulted in margin compression and negative adjusted EBITDA for the quarter to the tune of negative $1 million. That said, we view a significant portion of these results as transitional in nature rather than a structural change. Indeed, when the license suspension occurred, we shipped Ontario orders from our Calgary facility, which is significantly more costly than shipping from our Montreal facility, which we have now resumed. Of course, the current operating environment with heightened fuel costs and food inflation remains a meaningful headwind. We also have already taken action to address these cost drivers, both through operational simplification, tighter cost control and pricing, which we expect to support margin stabilization going forward. Moving now to slide 6 cash flow in the quarter reflects the impact of profitability as well as working capital timing with certain payments shifting into Q2. Importantly, capital expenditures remain tightly controlled and we continue to operate with a disciplined approach to cash management. Our focus is clear, improving cash generation through better margins, controlled investment and continued working capital discipline. I will now turn to slide 7. The key takeaway from this slide is that Q2 reflects a combination of lower scale and temporary cost pressure. At the same time, the results reinforce why our current priorities cost discipline, margin protection and cash generation are the right one. We are actively addressing the drivers of performance and the actions underway are designed to improve both profitability and liquidity over time. With that, I will now pass it back to Najeeb to walk through our outlook.

Najib Malouf

Thank you Vanessa. Let's now turn to Slide 8. Our path forward is focused and disciplined. First on the operating model, we're simplifying the business and aligning the cost structure to current demand levels. We're not relying on a market recovery to improve performance. We are designing the model to perform under today's conditions. Second, on the product, we are repositioning the offering around value, quality and convenience. We have introduced a simpler menu that is designed to fit our customers busy lives. We also increase portion sizes and have sourced better ingredients to ensure the consistent quality of our subscribers experience. This is already contributing to a stronger basket size and is expected to support retention and lifetime value. Third, on capital and the balance sheet, our priority is consistent cash generation and liquidity preservation. Every dollar of capital is being allocated with discipline with a clear objective of maintaining flexibility. And fourth, on growth, we will remain selective. We see opportunities in adjacent categories such as E-commerce and Edibles but we will pursue them in a measured way with a strict focus on returns and cash flow. The common thread across all of these priorities is discipline. We're simplifying the business, improving execution and positioning goodfood to generate more consistent and sustainable financial performance. I will now turn it back to Salee for closing remarks.

Selim Basu (Chief Executive Officer)

Thank you, Najib. This quarter was not about optics. It was about action. We addressed operational issues, reduce complexity and reinforce discipline across the organization. We are running the business with a clear set of priorities. Protect margins, generate cash and maintain balance sheet flexibility. We have $44 million of convertible debt on the balance sheet with large interest payments. That is hindering our transformation and ability to invest in the business. We are focused on strengthening the business while evaluating a range of financial alternatives to address our debt situation and enhance long term value. We are not depending on external improvements to deliver results. We are focused on what we control, which are execution, cost, structure and product relevance. This is how we will rebuild performance and create long term shareholder value. With that, I will now turn it over to the operator for Q and A.

OPERATOR

Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press Star followed by the 1. On your Touchstone phone, you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press Star followed by the two. If you are using a speakerphone, please lift the handset before pressing any key. One moment please, for your first question. There are no questions at this time. I will now turn the call over to management for closing remarks.

Selim Basu (Chief Executive Officer)

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

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.