Earnings Call: Q1 2021

Jan 13, 2021

Welcome to the Good Food First Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. As a courtesy to others, we ask that each participant limit themselves to one question and if necessary, one follow-up question. Instructions will be provided at that time for you to queue up for questions. Please note that the questions will be taken from financial analysts only. I'd like to remind everyone that this conference call is being recorded today, January 13, 2021 at 8 am Eastern Time. Furthermore, I would like to remind you that today's Presentation may contain forward looking statements about Good Food'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 the forward looking statements On Slide 2 of the presentation, I'd now like to turn the meeting over to your host for today's call, Jonathan Ferrari, Good Food's Chief Executive Officer. Mr. Ferrari, you may proceed. Thank you. Good morning, everyone, and welcome to this call for Good Food Market Corp, in which we'll present our financial results for the Q1 of fiscal 2021 Ended on November 30, 2020. I'm pleased to be joined on the call today by Neil Caillou, Cifu's President and Chief Operating Officer And Philip Adam, Chief Financial Officer. Our press release recording our Q1 results was published earlier this morning. It can be found on our website at nakedfood. Ca and on SEDAR. Please be aware that we'll refer to certain metrics Finally, let me remind you that all figures expressed on today's call are in Canadian dollars unless otherwise stated. Now turning to Slide 3, which outlines our key financial highlights for the Q1. Our exceptional results this quarter demonstrate the crystallization A strong secular trends, accelerating the adoption of online meal solutions and grocery shopping, as well as Good Food's long term business strategy and leading position in these markets. During this quarter, we continued to experience outstanding growth and accomplishments, while also managing significant Business and Human Challenges. Our employees have consistently worked tremendously hard to respond to the essential grocery and meal planning needs of Canadians, all the while operating under enhanced safety protocols to keep our workforce and customers safe. To all Good Food employees, I want to say thank you again for believing in our vision, but most of all for your hard work and dedication to our members and our company. This important quarter was marked by continued strong growth and key metrics, highlighting the strength of our operational execution and success of our business strategy. We are pleased to report strong subscriber growth And even stronger revenue growth, while achieving positive earnings before interest, taxes, depreciation and amortization, In addition to record levels on several key metrics. First, our active subscriber count passed the 300,000 Milestone standing at 306,000 active subscribers. The convenience of our service, unique customer experience And quality of our products continue to drive good food penetration from coast to coast and across demographics. Our year over year growth in revenue outpaced our growth in subscribers by a factor of 2 as our strategy to expand our product offering and provide a larger share of our customers' grocery basket translated again into larger basket sizes and more frequent orders. As such, our revenues for the quarter reached a record $91,400,000 a 62% year over year increase. 2nd, our strong operational execution has further expanded our gross margin, which stood at 32.3% this quarter, A 3.5 percentage point year over year improvement. A decrease in incentives and credits, improvement in delivery costs Driven by good quarter initiative and increased density, improved packaging unit costs And automation investments contributed to the gross margin increase. 3rd, we are pleased to report a 3rd consecutive quarter Positive EBITDA. This reflects not only growth in revenue and gross margin improvements, but also an efficient operating leverage driven by a higher revenue base. Adjusted EBITDA reached $1,400,000 for the quarter or a margin of 1.5%, representing an improvement of 8 percentage points compared to the same period last year. Overall, our financial performance this quarter has been exceptional, driven by the accelerated penetration of online grocery shopping. I'll now turn to Slide 4 to share some key business highlights. First, we continue to deliver strong growth, the keystone of our overall business and record financial performance. By building and positioning Good Food to respond to Canadians' strong and sustained demand for online grocery and meal solutions shopping, We have been able to not only increase active subscribers by 33% year over year, but also provide customers With an offering that allowed them to purchase bigger baskets as evidenced by the revenue growth being nearly double the subscriber growth this quarter. Our trailing 12 months revenue have now surpassed the $300,000,000 milestone, ending at $321,000,000 Moreover, our gross profit growth came in 2.5 times higher than our subscriber growth, demonstrating our ability to continuously execute strongly on operational initiatives, providing better profitability. 2nd, the strong performance has been and continues to be enabled by our obsession with member happiness. This quarter, we continue to execute on our strategy to consistently enhance our members' experience by launching and increasing the availability Our unlimited same day delivery service in the Greater Montreal area. Our members are absolutely loving our same day delivery and are excited and we are excited to launch it soon in the Greater Toronto Area. By the end of this calendar year, it will be available to many more Canadians coast to coast. We've also continued to bolster our product offering, which now count nearly 550 products, Up 37% quarter over quarter. We are well on our way to reaching the 4000s Q goal set as part of our long term strategy. Our members are showing their appreciation for the quality and value of our new products through consistently high ratings, reorder rates and what we like to call a cult like following. 3rd, our team continues to execute at a very high level on all fronts to drive operational excellence from product sourcing all the way to customers' doors. We have increased the penetration of the Good Courier fleet, which now delivers well over half of our volume. This has been made possible by the use of last mile hubs And our customers love the new refrigerated band used by Good Courier, which help reduce packaging in our deliveries, thereby creating cost savings and reducing our environmental footprint. Combined with lower packaging costs and investments in technology and automation, which continue to drive more efficient operations. Our gross margin now stands at 32.3% for the quarter, The grocery industry leading level in Canada. 4th, our strong growth, continuously improving value proposition to customers and world class operational execution have all led to impressive product offering uptake, margin and loyalty momentum. This quarter alone, we have delivered almost a 500,000 Good Food branded grocery products to our customers, 13 times more than the same period last year and 65% more than in Q4 of fiscal 2020. Thus, the progress we have made in growing selection, delivery speed and use of automation and technology Has enabled us to reach a record gross profit per subscriber of over $100 highlighting the success of our investments to date with considerably more room to grow. Finally, 94% of our revenues have come from loyal subscribers who have ordered 3 or more times, further establishing that our strategic flywheel has robust momentum and strong unit economics. Finally, This exceptional performance on all fronts has driven strong shareholder returns as our share price is currently approximately 4x its level At the beginning of calendar 2020 with our market cap now surpassing the $800,000,000 mark. On that note, I will now turn the call to Philippe to go over our financial performance. Thank you, Jonathan. Good morning, everyone. Turning to Slide 5, which provides details on subscribers and revenues. The acceleration of online grocery and meal solutions adoption, Combined with good food and increase in product offering and customer loyalty has allowed us to achieve record results this quarter. Subscriber grew 33% year over year to surpass the 300,000 milestone and revenue showed significantly higher year over year growth of 62% to hit the record level of $91,400,000 up $35,100,000 compared to the same period last year. The increase in revenues was primarily driven by sustained order rates and bigger basket sizes from our current subscribers, driven by an increased product offering as well as strong additions of new subscribers. In summary, our customers are ordering more frequently and are buying more products online. The stronger revenue growth compared to subscriber growth underscores the success of our strategy to broaden our grocery product offering to fill a larger portion of customers' basket. Also, as we pointed out, the vast majority of our revenues came from customers who have placed 3 orders or more, A trend that was mostly sustained this quarter and that is highlighting our subscriber base loyalty, stickiness of our customers and our decreasing churn rate. Please now turn to Slide 6, which looks at our profitability levels. Our gross profit increased to $29,600,000 record over a margin of 32.3 percent, an increase of 3.5 percentage points year over year. The increase in gross margin resulted mainly from lower credit than incentive as a percentage of revenues due to an efficient marketing strategy and record no level of quality issues, but also to improve unit economics or packaging driven by scale and the use of less expensive packaging for certain deliveries as well as lower shipping costs explained by a favorable cost structure of Good Tierrier and by higher density among the delivery cells. Benefits from investments in automation have also driven operational efficiencies, but have enhanced our cost structure. This was partially offset by $900,000 of COVID-nineteen related costs such as personal protection equipment and agency premiums for additional production We're also pleased to report another quarter of positive adjusted EBITDA at $1,400,000 or a margin of 1.5%. The strong performance resulted primarily from higher revenues and gross profit, the efficiency of our marketing strategy as well as operating leverage as SG and A expenses as a percentage of revenues continue to decrease year over year despite significant investment in our people, We will continue to invest in technology and hiring key personnel over the coming quarters as we look to further develop Our net run this quarter decreased by 48 percent $2,700,000 or $0.04 per share. Turning to Slide 7 for cash flow and capital expenditures. We generated cash flow from operating activities of $2,100,000 for the Q1 of this fiscal year. This was enabled by our attractive negative working capital structure combined with a growing scale and a reduced net loss. Capital expenditures for Q1 were $2,900,000 or only 3% of our Q1 revenue. They were mainly related to the build out of the flagship facility in the GTA, the continued investment in automation equipment and technology as well as investments in infrastructure in various facilities across the country. Note that while our CapEx plans may be slightly delayed by the COVID-nineteen pandemic, We are still confident we'll be able to complete our investments and achieve our plan with minimal delays. For fiscal 2021, we're now planning on paying at least $30,000,000 in capital expenditures to build out our flagship facility in Toronto and to land the infrastructure for same day delivery across the country and further increase our operation and technology. We ended the quarter in a solid financial position with cash And cash equivalents of $104,000,000 We have great flexibility to grow from current levels, withstand headwinds and execute on our strategy. Finally, we'd like to turn to Slide 8 to provide some color on our outlook. E commerce grocery and meal solution shopping are already 2 of the Fastest growing industries in the world before the current pandemic hit nearly 10 months ago. Since March of 2020, the strong growth has significantly accelerated and we have seen a bigger movement to grocery shopping computed online. We have seen this shift be sustained over 10 months now We expect it to continue accelerating over the coming years as consumers adapt the convenience of receiving grocery items purchased online delivered directly to their home. We expect trips to physical grocery stores to continue to decline over the coming years. Our online platform and delivered to own fulfillment model has This trend and the strong growth in demand, and we are now more than ever investing in operational capabilities, people and technology to continue supporting this shift. The pandemic has brought about significant challenges and opportunities and precisely evaluating the full range of medium and long term impacts remains difficult. We anticipate that a significant portion of grocery and food consumption traditionally done in stores All restaurants have shifted and will continue to shift online. The trends we began to see in March April this year have now crystallized over time as we've been in quite a strong demand Investing in our strategy to build the number one direct to consumer grocery technology continues to be our main priority. With good food footprint of purpose built fulfillment centers, investments in increased selection, customer flexibility, scale, density, automation and technology, We are in a great position to capitalize on the cemented year over year shift. We are thrilled that this strategy has had the intended effects of an enhancing of profit per subscriber, which has in turn allowed us to continue focusing on growth. As we continue to invest, We recognize that we are still in the early days of digitizing 1 of Canada's largest industries. We are making great progress each quarter in building the economic note This concludes our financial highlights for the Martin Landry with Stifel, your line is open. Hi, good morning, everyone, and congratulations on your good results. Thank you, Michael. My first question is on your same day delivery Fortunately, in the Greater Toronto Area, I was wondering if you could talk to us a little bit about What's left to prepare or what's left to build out before you're able to offer Hey, Nathan, it's Neil. Thanks for the question. In terms of left, we have the one facility up and running. So it's a matter of in the facility, so that's been ramping up well, and then making clients aware that the service is available. So We're starting to market in Q2 and Q3 for same day, and we'll continue to kind of build awareness in that market in the next quarters years. So in terms of what's left, there's not a tremendous amount of work left as in transferring SKUs and making people aware that it's available. Is it is the service available on a pilot mode before an official launch right now? Are you seeing this GTA specifically or Yes, yes. Right now, it's not available, same day service, but it will be available in the coming months. Okay. And we'll do a progressive we'll definitely do a progressive roller, like we've done with many other things. We don't want to do a big bang launch and have any Operational issues kind of hit us in the face. So we'll turn it on and ramp it up progressively. Okay. The other thing I would add to that is Other than the operational considerations of going into Got a second more important lockdown in Montreal and in the GTA. We wanted to ensure the stability of the overall operations, right, to make sure that we could fulfill on the customer Experience and promise before accelerating delivery times in the GTA. So that's progressing well. And then the other thing is we were looking at ensuring that we were happy with All of the metrics and the economics of Wow and same day delivery in the Greater Montreal area. So the NPS scores are really exciting to see on Lao and Montreal. The basket sizes are similar to our weekly subscription, but the order frequency is higher. And then just overall, the qualitative feedback from our members is it's a magic moment for them when they've Been used to receiving their deliveries in 5 days after placing the order of the cutoff. It's just a magic moment to receive it on a same day basis. So we were gathering all of this information, making sure that we were happy with the gross Margins as well. And so that's all coming together really nicely, and we'll be ready to scale up progressively, as Neil mentioned, Perfect. Thank you very much. Luke Cannon with Canaccord Genuity. Your line is open. Thanks. Good morning, guys. I wanted to dig in a little bit more on the incentives and credits. There's a very significant year over year decrease as a percentage of revenues. And I believe in the press release, you call out And efficient marketing strategy and low level of quality issues. So I just wanted to learn a little bit more About that marketing strategy and what exactly that entails and if that's something that you guys can sort of repeat for the balance of the fiscal year. Yes. Thanks very much for the question. On the marketing side, we've been successful in both marketing our ready to click offering So that entails some brand new creatives and Market positioning around ensuring the customer is aware of good food and understands that good food is what we're calling Eating a dog, right? It's the most interesting, newest way in which customers can do their grocery shopping. We are planning For the week, in just a matter of minutes, conveniently receive the products at home. And our customers are really understanding that every other way to do grocery shopping and meal planning is really becoming outdated compared to the offering that Good Food is proposing to them. So I would say it's partly the efficiency About positioning and new creatives. I would say when we think about Some of the other aspects of the marketing efficiency, we're also including Increases in customer retention and customer lifetime value That are coming through bigger basket sizes and higher order rates or more order frequency. We believe that we still have a lot of growth available both in basket size and order frequency compared to Broader, let's say, global online grocery KPIs So we still think that we have room to grow, but we're including that in our marketing efficiency. And so Because we're growing selection, because we're growing delivery speed, we're making a payback on our marketing spend more quickly than in the past. And so our intent is to continue growing that selection, rolling out progressively Our same day delivery service across the country, and we expect that, that should continue to enable us to generate And then Neil, I wanted to go back To something you said, I think you had mentioned that marketing spend for Good Food Wow! And the GTA when you guys eventually roll it out, you expect that marketing spend to increase In Q2 and Q3, I did notice that was something else that was mentioned in that marketing spend as a whole for Q1, I think, was Decrease. It was a controlled decrease. So should we expect Q2, Q3 and maybe the balance of the year? Should that be more of a normal marketing spend? Should we expect it to ramp back up to what you guys would have done historically? Or how should we think about that? Yes. I'm happy to take it. December so maybe to clarify, Q1 marketing spend was Certainly increased quarter over quarter versus Q4, which is a slower seasonal period for us. December is also typically a slower seasonal period for us. We were happy with some of the results that we saw with our new product offerings. So for example, Our holiday dinners, we had some turkey dinner, kind of an aluminized turkey dinner for 6 people With all of the sides, the trimming, the turkey, and so our holiday meals did really well, I would say, in the last couple of weeks of December, It's still a seasonally slower period for us. And so as we look to the kind of the remaining months in our Fiscal year January February are typically months where we continue to see Strong uptick in our service and market to customers. And then the summer months will typically be when We'll pull back on our marketing spend. It's just a slower seasonal period for us, and then we'll gear up for back to school. And just to add to that, Luc, it decreased as a percentage of sales, not necessarily in dollar. And also like to your credit and incentive question, just to add to that as well, like they were basically cut in half and yes, due to the marketing, but also to the Record low level of quality issues due to the quality of our products, almost no stock out and the high efficiency of our shipping and logistics. Got it. Great. Last one for me and then I'll pass it on the COVID costs that you guys called out almost $1,000,000 Is that should we just I guess a clarification, is that all in the cost of sales line or is that Is it most of that in cost of sales and some of that in SG and A? It's mostly in cost of sales. And yes, I mean, with the current curfew that we're seeing in Montreal and Toronto and The rest of Canada, I think we still expect to see these costs in the short term, but it should gradually reduce over time to G0. Okay, great. Thank you very much. And Luke, Just on that, I mean, this is the cost that we are accounting in our COGS, but this will include all the time that the management spend on it and all The time that is indirect, so the VAT conservative representation of the investment that this group is making. Michael Glenn with Raymond James, your line is open. Hey, good morning. Jonathan, during your opening comments, you talked About 500,000 SKUs and 65% growth in that figure from 4Q 'twenty. Can you just clarify exactly What you were referring to there? Yes. Good morning. So I was referring to our private label grocery SKUs. So excluding our ready to cook meals and our other meal solutions, We delivered almost 500,000 individual grocery, like, good food branded grocery items. So the intent was to give a little bit of a sense of traction on the number of units that we were that we're currently delivering Just on the private label grocery side. So we're quite impressed with the traction. We're happy with the Uptake rates and increased penetration of grocery products within our base, but there continues to be huge wins to grow both in terms of uptake rate and launching additional grocery SKUs as well. So we'll give you some periodic And as you add SKUs, you see that as leading to benefit in terms of the growth in that overall figure as well. That's correct. As we add SKUs, we're seeing both increase in order frequency, so there's more reason to come shop with good food in any given week, but also continued growth in basket fives. And we're certainly seeing, let's say, over the past quarter, we've seen some record basket sizes as well. I think both in terms of order rates and in terms of basket sizes, there's certainly part of the increase that's Related to COVID and stay at home orders and part of the increase that's related to our strategy of So it's hard to distinguish between the 2, but what we do know is More established online grocery companies will typically have a basket size of around $120 So we're still pretty far from that. And then the average shopper in a brick and mortar retail store is visiting grocery store about 2.5 times per week. So we're still very far from those penetration levels, and those are kind of our long term targets or long term objectives to close that gap. Okay. That's really interesting. And then just to come into the meal kit market. So your Primary competitor in the market has been publicly stating that they're gaining market share in Canada. I'm just wondering if you can comment on that dynamic and how you see the competitive dynamic in the Canadian market right now. Yes. We're seeing the entire market, both in terms of the FX and Solutions and Groceries growing nicely across Canada. I think depending on the sources of data that you look at, I'm I'm not sure what sources of data they're looking at, and we don't have access to any of their actual financials. So It's hard to comment on their specific market share claims. I would say longer term, we're really building out a differentiated strategy. We're interested in following these different competitors, but we think long term, we're in a really good position to have More of a one stop shop. So having our differentiated meal solutions and meal kits, which our customers love, But being able to offer more of a complete grocery shop, we think is going to significantly differentiate us from And I think if you also look at the website visits, we had about 1,600,000 And we had about 1,600,000 website visits in December, which is the largest banana website visit of any The expert business in Canada and compares very favorably to website visits of I think we're above So it's not a direct proxy, but we do look at website visits to think about our market share as well. Okay. Thanks for taking the questions. Thanks very much. Frederick Twamley with Desjardins Capital Markets, your line is open. Good morning and congrats on the continued strong performance. Thank you so much. First question is, is on your comment on 94% of revenue coming from subscribers with 3 or more orders. I was wondering if that's consistent across the courts, meaning those that joined During COVID and those that were here before COVID, if you can maybe comment on order frequencies for those 2 quarters? Thanks, Ed. I mean, what we've seen in 2020 is that an increase of the loyalty of our customers. So the GAP, I think we're showing a number of like 91% of our customer with 2 orders or more in 2019 and then 2020, that number jumped to 94% or 3 orders or more, which is a significant jump. And it's, I mean, COVID-nineteen impacted our fiscal 2020, but the acceleration was done much before COVID-nineteen hit. And what we're seeing broadly is just an acceleration of the loyalty of our customers and a reduction of our churn. So People are staying longer with us and are ordering more frequently with bigger basket sizes. So overall, Maybe the U. S. Economy was a bit accelerated by COVID-nineteen, but acceleration was done way before. Thank you. And a question on cost inflation. Are you seeing any meaningful inflation for ingredients or order costs and what sort of initiatives could you take to offset that? Yes. Hi, Fred. It's Neil. Thanks for the question. I think we had similar Questions about that in past quarters and the answer remains kind of consistent like we're seeing the same inflation on the food side that all the groceries you're seeing and customers are seeing or We're able to mitigate part of that by intelligent any design or working with different suppliers, but always face that same headwind. And then on the labor side, I still mentioned like there's about $1,000,000 of costs this quarter, mostly related to PP and E. But what you don't see in that The COVID related cost is the additional wages or the unemployment rate coming down In the warehouse labor market, making it more challenging to find people. So it's not stuff that we haven't faced in the past. We added about 2,000 employees over the last 12 months, so we're still able to bring high quality talent on board. But I would say, similar to all the groceries and Amazon and other companies in the e commerce space, We see those 2 as headwinds that we're dealing with. Great. Thanks very much. Ryan Lee with National Bank Financial, your line is open. Thanks for taking my call my questions. Congrats on another good quarter. I just wanted to talk about early Q2 trends, particularly as some lockdowns, more restricted Measures took place across several provinces in the country. First of all, is there any impact on your scheduling, on your shifts that You're able to do with some of the curfews in Quebec. And secondly, like I think the general view in the grocery space is that any potential Likes won't be as big as what was experienced in the spring. Is that kind of your expectation as well as we go into the current lockdowns? Yes. Good morning, and thanks very much for the question. So our I would say the biggest difference With this lockdown versus the last one, certainly in Montreal is the addition of the curfew between 8 p. M. And 5 a. M. Our main concern there was ensuring that our night shift employees, so we do have we do operate Our fulfillment center is 24 hours a day. And so the main concern was for the night shift employees to be able to get to work safely and attend their shift. If you recall back in the spring, We did have high levels of absenteeism during the lockdown on our shifts because employees were still to leave their homes and come to work. So we proactively Did a lot of work this time around to make sure that communication to our employees were clear, that they had access to essential worker letters in case they were stopped on the street for any reason, particularly coming to their night shift. And so this has been in place only since Saturday. So it's still early days, but we're happy to see that our employees are comfortable Coming to work. There are some added costs, of course, right, of Management time and dealing with this lockdown and the curfew, but we are able to focus More on our operations this time around. So the first time around, we were still trying to figure out how to social distance, How to separate employees in the cafeteria? How to set up barriers and flexi glass and that kind of So this time around, there's certainly a lot of the groundwork that was already set up and in place, which is Really helpful. And then in terms of trends, I think we're continuing to see strong uptake of New subscribers, solid order rates, continued growth in our basket sizes. So we're happy with all of the economics that we're seeing right now. George Doumet with Scotiabank, your line is open. Good morning, guys. Congratulations on a strong quarter. And maybe I'm going to ask this question in a different way. But can you talk a little bit about how the first half of the quarter evolved versus the second half of the quarter? Obviously, there's more COVID related restriction, maybe in terms of the metrics you guys provided, can you maybe help us delineate the start versus maybe the exit? Yes, happy to do so. Thank you and good morning. So I would say the start of the quarter, so certainly in September, We were gearing up for a back to school season that was going to be a little bit different than previous back to school seasons. We did see a high level of activity in the market. So certainly, competitors were Marketing as usual again in September. In October November, I would say we had a very or particularly in November, we had a great Black Friday season and And promotion, which led to, I would say, a good part of the customer adds for the quarter Happened in kind of the back half of Q1. I think that's pretty much the commentary that I can add. I would say we are we were marketing, I would say in an efficient manner across the country, focusing primarily on ready to cook solutions in Western Canada And Eastern Canada, both ready to cook, but growing the awareness of our expanded product offering. And so that's partly what led to the increase in basket sizes in November. Okay. I would add to that, George, that the extension of our product offering throughout the quarter made a difference in the second half and defeat the impact of our basket size and order intake. Okay. Thanks for that. And maybe on that topic, guys, as we ramp up The 550 SKU count to 4,000, are there any specific categories within grocery that you feel that you may be Underrepresented today? Or is it going to be just the same categories but more products? I would say the one of the most underrepresented categories right now is Kind of on the stand alone crude investable side. So we focused certainly the first 500 SKUs on Items that are high margin and with extended shelf lives. We do have the capabilities internally right to deal with fresh and perishable products because of our Experience in the base meal kit business, and we'll be launching, Let's say, a small or restricted or curated assortment of fruits and vegetables in the coming quarters. And the intent is, it's really the fresh part of our business And when customers are thinking about Doing their online grocery shopping for the very first time, there's 3 components that are really interesting. So they think about, of Pricing, they think about the assortment and they're also thinking about is the quality of the fresh product Going to be the same or better than what I would have picked out in the store on my own. And we think we have A real opportunity to differentiate from the personal shopper model like And we believe certainly it's a cart walking into a grocery store and shopping for your grocery basket because we're able to manage our supply chain in a more vertically integrated way than they are. So we expect that we will be able to offer better quality, better pricing and really differentiate on the fresh side, and that's coming in calendar 2021. Okay. Thanks And so let me one last one, if I may. Obviously, our business model has benefited quite a bit from the negative working capital with the meal kits. But as we ramp up those SKUs, as we invest in the GTA, just to what extent do you think our free cash flow conversion It may not be as strong given the need for more and more inventory in that part of the business. I can take this one. So far, like if you look at our Q1 and even in Q4, we've opened new facilities. We've launched hundreds of SKUs and we're able to mitigate the inventory impact. Like as John was mentioning, We've seen experts at dealing with Perishable Products and high inventory turnover. So Basically, it's a challenge to continue to excel and maintain a low inventory turnover. But as we invest in our technology and as we get more efficient, Operationally speaking, we are looking to be able to manage slightly our inventory. We saw a very small impact in Q1 and no impact in If you look at our Q1, like our cash flow generation was above $2,000,000 in terms of cash flow from ops, and we were able to do 3 years in a row of free cash flow. So We hope to continue to do so. And sorry, John, you were going to say something on yield? Yes. No, sorry, George, I was just going to add that The large grocers are also negative working capital business model. So it's not like a business model that's going into a different type of working capital structure. So we Okay. Our final question is a follow-up from Martin Landry with Stifel. Your line is open. Yes. Thank you for taking my question. I wanted to just have some color on the geographic, Try to find try to see how customer new customer counts are coming in terms of If there's any variation in any of your geographies in terms of new additions for your subscribers. Hi, Martin. So yes, and this year, we saw some great things in the couple of last quarters. I mean, our customers evolved in many ways, And we're happy to report that we had as many customers in their 20s and in their 60s now. So we're seeing like the early adopters were Young professional, but it was like 5 years ago. So now we have older customers that are ordering Frequently with large basket size and we love to see that. And I think with the current pandemic, like we even have like customers that are And they're at 80 6, 87, 88 years old. So, exciting people are seeing our business model as a way to keep We have time to be safe and receive their food at their door without going to brick and mortar stores. So, DTE benefits Our business model and we're happy to see our customers evolving on that sense as well. Okay. Are you seeing more customers coming in from Quebec versus Western Canada? I'm just I would say it continues to be representative of the population across the country. So we are trying to balance demand within our fulfillment center network. So for that reason, we try and make sure that we're building out capacity and density Evenly and representative of the population across the country. And certainly, the GTA has been Huge growth area for us. Over the past 12 months, we've been we were always More penetrated in Quebec, given that it was our first market and our head office was based in Quebec. And so yes, I would say Ontario is leading the growth in terms of numbers. And BC is leading in terms of percentage growth, I would say, as of Q1. Okay. Perfect. Thank you. Thanks, Martha. There are no further questions at this time. I would now like to turn it back over to Mr. Fry for final remarks. Thanks again for joining us on this call. We look forward to speaking with you on our next quarterly call. Have a great day. This concludes the Good Food Call. We thank you for your participation. You may now disconnect.