Ladies and gentlemen, welcome to today's meeting, annual meeting of shareholders of Goodfood Market Corp. Please note this meeting is being recorded. I would like to introduce Mr. Jonathan Ferrari, President of Goodfood Market Corp. Mr. Ferrari, the floor is yours.
Thank you. Mesdames et Messieurs, bonjour et bienvenue à cette assemblée des actionnaires de Goodfood. Je suis Jonathan Ferrari, Président du Conseil et Chef de la Direction de Goodfood, et je suis heureux d'être avec vous aujourd'hui. Hello everyone, welcome to this shareholder meeting. I'm Jonathan Ferrari, Chairman and Chief Executive Officer of Goodfood. Let's now move to slide three. To provide an opportunity for our shareholders to attend without having to travel or displace themselves, the meeting will be held in a virtual format. Shareholders will have an equal opportunity to participate in the meeting online regardless of their geographic location. By now, you may all be familiar with the procedure for a virtual meeting. However, please note that the instructions on how to exercise your voting rights or ask questions during the meeting are on your screen for ease of reference.
We would like to remind you that registered shareholders and registered proxy holders are the only persons entitled to vote or to ask questions during the meeting. We will conduct the votes on all the matters before us by poll using the online platform. The poll will be open for all motions and resolutions at the same time. This will allow you to choose to vote on each motion and resolution immediately, or to wait until the conclusion of discussion prior to casting your vote. Once the discussion on all items of business has concluded, I will give you a minute to enter your votes and then declare voting closed on all resolutions. If you have already voted by proxy, it is not necessary to vote again.
Please note that if you choose to vote again, only your vote cast during the meeting will be counted and the vote that you submitted by proxy will be revoked. Registered shareholders and duly appointed proxy holders have the opportunity to ask questions by selecting the Ask a Question button on the online platform. Generally, we would ask you to keep your questions for the specific period identified for such purpose at the end of the formal meeting. If questions are asked, we will read the questions aloud so that they may be heard by all of the shareholders, proxy holders, and guests present at the meeting. I now declare the polls open on all resolutions. Moving to the next slide four. Laissez-moi vous présenter les personnes qui pourront répondre à vos questions concernant le déroulement de l'assemblée.
Neil Cuggy, président et chef des opérations, Jonathan Roiter, chef de la direction financière, Caitlin Rose, associée chez Fasken et secrétaire de Goodfood, ainsi que moi-même. Shifting to slide five. Before we continue, I want to mention that we have received satisfactory proof that the notice calling this meeting was duly publicized and sent to the shareholders of the corporation. In accordance with our bylaws, I will be acting as Chairman, and Ms. Rose will be acting as Secretary for the meeting. The meeting will be held in English and in French. To ensure the proper proceeding of the meeting, we have designated in advance Mr. Neil Cuggy to act as Proposer and Mr. Jonathan Roiter to act as Seconder. Please note that both Mr. Cuggy and Mr. Roiter are shareholders and proxy holders of the corporation.
Cette année, l'assemblée est considérée comme étant une assemblée extraordinaire, car en outre l'élection des administrateurs et la nomination des auditeurs, les actionnaires sont appelés à se prononcer sur certaines questions liées au regroupement d'actions et à la création d'une nouvelle catégorie d'actions privilégiées. Conformément aux pouvoirs qui me sont conférés par les règlements administratifs généraux de la société, je nomme Madame Rebecca Prentice et Monsieur Julien Lavallière de Fiducie TSX comme scrutateurs de l'assemblée. Les scrutateurs nous ont informés que nous avons obtenu le quorum étant donné qu'au moins deux actionnaires qui détiennent au moins 25% des droits de vote rattachés aux actions donnant le droit de vote sont présents ou représentés par procuration. En conséquence, je déclare la présente assemblée régulièrement constituée aux fins de délibérer sur les points à l'ordre du jour.
Nous avons l'intention de traiter en premier lieu des aspects juridiques et techniques de l'ordre du jour. Ensuite, nous vous présenterons les activités et les résultats financiers de la société pour l'exercice terminé le 3 septembre 2022 et le premier trimestre de l'exercice 2023 terminé le 3 décembre 2022. Once the formal part of the meeting is completed, we will proceed to the presentation of Goodfood's business and financial results. A question and answer period with management will follow. Any person wishing to ask a question should, at the appropriate time during the question and answer period, submit their questions through the online platform. La réception des états financiers audités de la société pour l'exercice terminé le 3 septembre 2022 est le prochain point à l'ordre du jour.
Les états financiers, y compris le rapport des auditeurs ainsi que le rapport annuel, ont déjà été transmis aux actionnaires de la société dans le délai prescrit. Je demanderais à la secrétaire de noter le dépôt des états financiers pour les fins du procès-verbal. L'élection des administrateurs est le prochain point à l'ordre du jour. The election of the directors is the next point on the agenda. Moving to slide 6 to present the candidates. Comme il est indiqué dans la circulaire de sollicitation des procurations par la direction, la direction a proposé 5 candidats à titre d'administrateurs de la société. Le mandat de tous les administrateurs se terminera à la fin de la prochaine assemblée annuelle des actionnaires de Goodfood ou lors de l'élection, la nomination de leur successeur.
My name is Neil Cuggy, and I move that the following five persons be nominated as directors of the company. Neil Cuggy, Jonathan Ferrari, Donald Olds, Terry Yanofsky, John Khabbaz.
My name is Jonathan Roiter. I second the motion.
Ms. Rose has confirmed that to her knowledge, the company has not received any written notice from a shareholder nominating another individual for election to the board of directors within the period prescribed by the bylaws. Comme il n'y a pas d'autres candidats en nomination, les actionnaires voteront sur la motion visant à élire les candidats proposés par la direction à titre d'administrateur de la société. Je vous invite maintenant à voter sur l'élection des administrateurs. Vous devez exercer votre droit de vote pour chacun des cinq candidats. Nous vous rappelons qu'il est possible de voter pour toutes les propositions à l'ordre du jour, et ce, jusqu'à la clôture du vote après le dernier item à l'ordre du jour. Now, moving to slide seven.
The next item on the agenda is the appointment of the auditors for the financial year ending September 2nd, 2023, and the fixing of their remuneration. I would ask a motion for the appointment of the auditors.
My name is Neil Cuggy, and I move that KPMG LLP be appointed auditors of the corporation for the financial year ending September 2nd, 2023, and that their remuneration be determined by the board of directors.
My name is Jonathan Roiter, and I second that motion.
I now invite you to vote on the appointment of the auditors. The next item on the agenda is a special resolution authorizing an amendment to the company's certificate of incorporation to affect a share consolidation of all of the issued and outstanding common shares of the company on the basis of one post-consolidation common share for every 10 pre-consolidation common shares, and to grant authorization to the board of directors to determine, in its sole discretion, the timing of the share consolidation, the whole as set forth in Annex C of the management proxy circular. The background and purpose of the share consolidation are set forth in the circular sent to shareholders in connection with the meeting. The text of the resolution appears in Annex C of the management proxy circular of this meeting.
To be adopted, the resolution must be approved by not less than two-thirds of the votes cast by proxy or virtually at the meeting by holders of common shares voting together. I would ask for a proposer and a seconder.
My name is Neil Cuggy, and I move that the special resolution approving and authorizing an amendment to the company's certificate of incorporation to affect the share consolidation of all of the issued and outstanding common shares of the company on the basis of one post-consolidation common share for every 10 pre-consolidation common shares, and to grant authorization to the board of directors to determine, in its sole discretion, the timing of the share consolidation. The whole is set forth in Annex C of the management proxy circular, be hereby approved.
My name is Jonathan Roiter, and I second the motion.
I now invite you to vote on the resolution. The next item on the agenda relates to a special resolution authorizing an amendment to the company's certificate of incorporation. In order to create an authorized class of an unlimited number of preferred shares, issuable in series with the rights and restrictions of each series to be determined by the board of directors, the whole as set forth in Annex D of the management proxy circular. The purpose of the addition of a class of preferred shares to the company's share capital is set forth in the circular sent to shareholders in connection with the meeting. The text of the special resolution appears in Annex D of the management proxy circular of this meeting.
To be adopted, the resolution must be approved by not less than 2/3 of the votes cast by proxy or virtually at the meeting by holders of common shares voting together. I would ask for a proposer and a seconder.
My name is Neil Cuggy, and I move that the special resolution authorizing an amendment to the company's certificate of incorporation in order to create an authorized class of an unlimited number of preferred shares, issuable in series with the rights and restrictions of each series to be determined by the directors of the company. The whole is set forth in Annex D of the Management Proxy Circular be hereby approved.
My name is Jonathan Roiter. I second the motion.
I now invite you to vote on the resolution. Since we have covered all of the topics on the meeting agenda, we will now pause for one minute in order to allow registered shareholders and proxy holders to vote if they have not already done so. I remind you that if you have already voted by proxy, it is not necessary to vote again. The voting period is now closed for all of the topics on the meeting agenda.
Les scrutateurs nous ont remis leur rapport préliminaire, et je déclare donc qu'une majorité des votes exprimés par les actionnaires est en faveur de l'élection au poste d'administrateur de chacun de Neil Cuggy, Jonathan Ferrari, Donald Olds, Terry Yanofsky et John Khabbaz. Une majorité des votes exprimés par les actionnaires est en faveur de la nomination de KPMG à titre d'auditeur de la société. Une majorité aux deux tiers au moins des votes exprimés par les actionnaires est en faveur de la résolution spéciale autorisant la modification du certificat de constitution de la société de manière à effectuer un regroupement de toutes les actions ordinaires émises et en circulation de la société.
Une majorité aux deux tiers au moins des votes exprimés par les actionnaires est en faveur de la résolution spéciale autorisant la modification du certificat de constitution de la société de manière à créer une catégorie autorisée composée d'un nombre illimité d'actions privilégiées. Le résultat final des votes pour chacune de ces propositions sera déposé sur SEDAR dès que disponible. As we have completed the business of the meeting, I will now ask for a motion to close the formal portion of the meeting before proceeding to the management presentation and then question and answer period.
My name is Neil Cuggy, and I move that the meeting be closed.
My name is Jonathan Roiter, and I second the motion.
I now declare the meeting terminated. We will now move to slide nine for our management presentation. In recent months, we have spent significant time thinking of the essence of Goodfood, our reason of being. Thinking back to our purpose and the problem Goodfood is looking to solve, we recentered ourselves around Goodfood's core purpose. Our mission is to spark joy by making, cooking, and eating a fun, exciting, and enjoyable experience to help Canadians live longer by achieving a balanced and healthy diet, and to enable our community to enjoy a healthier planet by offering planet-conscious products that are sourced, packaged, and delivered sustainably.
As we continue to execute towards that ambitious purpose, we will look forward to a laser focus on our meal kit experience and align our teams towards building Canada's most loved digital-first food brand. We will now move to slide 10 to review our recent strategic developments. During fiscal 2022 and the first quarter of fiscal 2023, we have taken multiple key steps in our march towards profitability and growing positive cash flows. We are very pleased with the progress made on our two key pillars of cost structure improvement, which are, one, consistent gross margin enhancement, and two, SG&A and footprint streamlining. Together, they have combined a substantial gross margin and Adjusted EBITDA improvement over the year and this quarter. Zooming in on the two pillars. First, we have reached record gross margin in the first quarter.
Standing at 36.9% when adjusted for inventory write-offs related to the discontinuation of on-demand. Gross margin has benefited from the substantial simplification of our operations and our price adjustments to match recent inflationary pressures. The second pillar is our continued SG&A and asset streamlining. This year and quarter, we have rigorously cut costs to improve profitability and cash flows. With additional headcount streamlining and contract renegotiations, combined with lease exits this quarter and in recent weeks, we reduced our SG&A from CAD 35 million in the first quarter of fiscal 2022 to CAD 22 million in the first quarter of fiscal 2023.
While our teams continue to work tremendously hard to reduce our SG&A further and consistently implement efficiencies, we are nearing the cost structure that provides the springboard for Adjusted EBITDA profitability, as demonstrated by our 14% Adjusted EBITDA margin improvement year-over-year in the first quarter of fiscal 2023. Looking forward to the remaining quarters of this year, having now completed the consolidation of all of our operations into two facilities located in Montreal and Calgary, we expect strength in our gross margin as well as reduced labor and other SG&A expenses and improved cash conversion to materialize throughout 2023. The improvement in profitability can be further amplified by new marketing initiatives we are implementing to spur growth.
We have recently launched a series of delicious meals in collaboration with Aloette, a Toronto-based restaurant that was one of the first restaurants in Canada to receive a Michelin star last fall. In the coming weeks, we will also be launching a new VIP customer program, cementing our focus on acquiring and retaining customers with strong order profiles, as well as a partnership with a Montreal-based Canadian athlete as a brand ambassador. We will now move to slide 11 to review our outlook for the year. Our near-term outlook continues to be dictated by four key drivers. First, the turbulence we experienced last year has led us to recenter ourselves around Goodfood's core purpose, as previously described. We have recentered our purpose around our joy-sparking meal kits and have elevated our customer experience with recent initiatives.
We are bringing our customer experience to the next level and look forward to generating growth with the aforementioned initiatives. Moreover, with our cost structure and gross margin now significantly improved, we believe we have achieved and will continue to achieve the improvement in unit economics, enabling us to scale up our growth initiatives further. Second, the cost structure initiatives we have completed and continue to execute on are expected to generate EBITDA profitability in the near term and drive positive cash flows. As we discussed, we have already seen great improvements in gross margin, reaching record levels, and have improved our Adjusted EBITDA margin by nearly 14 points year-over-year. We continue to face operating and market challenges, but our progress in reaching profitability, positive cash flows continues. Third, our balance sheet has been our key focus this past quarter.
Following the previously announced tolerance entered into with our lenders, we are thrilled to have reached an updated credit facility that is adapted to our current needs. We appreciate the support of our banking partners, as we continue to right-size our cost structure to our current business model and scale. Beyond our credit facilities, we announced last quarter that our plan is to operate our business out of two main facilities in Montreal and Calgary. As such, we have exited the majority of our leased facilities and are actively looking to exit remaining leases and renegotiate commitments that would help simplify our balance sheet and further improve cash flows. We expect all our team's hard work and these initiatives to lead to continued improvement in financial performance in the upcoming quarters of fiscal 2023.
We are pleased to confirm our expectation of positive Adjusted EBITDA in the second quarter, and with these results, we are confident that we can expect to generate profitable growth and positive cash flows in the very near term. I will now turn it over to Jonathan Roiter, and we will move to slide 13 to review our financial performance.
Thank you, Jonathan. Overall, Goodfood has seen its fair share of challenges this year. From consumer behaviors moving away from e-commerce purchases, a behavior that we believe is temporary in nature, to challenging operating capital market conditions on the back of macroeconomic forces not seen in over 40 years. We have faced headwinds that made fiscal 2022 Goodfood's most difficult year since its inception. In the face of these challenges, we have not stood still. We have embarked on Project Blue Ocean to improve our cost structure and footprint, and have made the difficult decisions required to achieve our number one goal, establishing profitable growth. The tough conditions faced this year led our team to step up and make significant progress to consistently improve the operating and financial performance of the company quarter after quarter.
Through the series of operational and strategic initiatives implemented for the most part this year, our gross margin improved from 23% in the fourth quarter of last year to over 30% on an adjusted basis in the fourth quarter of this year, and over 35% in the first quarter of fiscal 2023. While our Adjusted EBITDA loss was improved from CAD 18 million in the Q4 of fiscal 2021 to CAD 2 million this Q4 and Q1 of fiscal 2023. We will now shift to slide 14 to review our Adjusted EBITDA margin goals. The road to positive and growing Adjusted EBITDA is well underway. With further cost structures enhancements and operating leverage through top line growth, our goal of reaching 10%-15% Adjusted EBITDA margin remains intact.
By focusing our meal kit offering with add-ons to spur bigger baskets, gain the economies of scale that growth can provide, we plan on maintaining our current gross margin levels. Combined with the right sizing of our SG&A, the current level gross margin provides a clear path to Adjusted EBITDA margin in the double digits in the medium to long term. This concludes management's presentation. We can now move to slide 17 for Q&A.