Welcome to the Goodfood 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. If anyone has any difficulties hearing the conference, please press star followed by zero for operator assistance at any time. I'd like to remind everyone that this conference call is being recorded today, January 13, 2021, at 8:00 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 the forward-looking statements on slide two of the presentation. I'd now like to turn the meeting over to your host for today's call, Jonathan Ferrari, Goodfood Chief Executive Officer. Mr. Ferrari, you may proceed.
Thank you. [Non-English content]. Good morning, everyone, welcome to this call for Goodfood Market Corp, in which we'll present our financial results for the first quarter of fiscal 2021, ended on November 30, 2020. I'm pleased to be joined on the call today by Neil Cuggy, Goodfood's President and Chief Operating Officer, and Philippe Adam, Chief Financial Officer. Our press release recording our first quarter results was published earlier this morning. It can be found on our website at makegoodfood.ca, and on SEDAR. Please be aware that we'll 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. Let me remind you that all figures expressed on today's call are in CAD, unless otherwise stated. Turning to slide three, which outlines our key financial highlights for the first quarter.
Our exceptional results this quarter demonstrate the crystallization of strong secular trends, accelerating the adoption of online meal solutions and grocery shopping, as well as Goodfood'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 Goodfood 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 Goodfood penetration from coast to coast and across demographics. Our year-over-year growth in revenue outpaced our growth in subscribers by a factor of two 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 CAD 91.4 million, a 62% year-over-year increase.
Second, 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 Courier initiative, an increased density, improved packaging unit costs, and automation investments contributed to the gross margin increase. Third, we are pleased to report a third 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 CAD 1.4 million for the quarter or a margin of 1.5%, representing an improvement of eight 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 four 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 Goodfood 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 basket, as evidenced by the revenue growth being nearly double the subscriber growth this quarter. Our trailing 12 months revenue have now surpassed the CAD 300 million milestone, ending at CAD 321 million. Moreover, our gross profit growth came in 2.5x Higher than our subscriber growth, demonstrating our ability to continuously execute strongly on operational initiatives, providing better profitability. Second, this 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 of Goodfood WOW, our unlimited same-day delivery service in the greater Montreal area. Our members are absolutely loving our same-day delivery, 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 counts nearly 550 products, up 37% quarter-over-quarter. We are well on our way to reaching the 4,000 SKU 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.
Third, 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 vans 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, a grocery industry-leading level in Canada. Fourth, 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 half million Goodfood branded grocery products to our customers, 13x more than the same period last year, and 65% more than in Q4 of fiscal 2020. 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 CAD 100, highlighting the success of our investments to date with considerably more room to grow. 94% of our revenues have come from loyal subscribers who have ordered three or more times, further establishing that our strategic flywheel has robust momentum and strong unit economics. 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 CAD 800 million 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 five, which provides details on subscribers and revenues. The acceleration of online grocery and meal solutions adoption, combined with Goodfood increase in product offering and customer loyalty, have allowed us to achieve record results this quarter. Subscriber grew 33% year-over-year to surpass the 300,000 milestone, Revenue showed significantly higher year-over-year growth of 62% to hit the record level of CAD 91.4 million, up CAD 35.1 million 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 three orders or more, a trend that was mostly sustained this quarter and that is highlighting our subscriber-based loyalty, the stickiness of our customers, and our decreasing churn rate. Please now turn to slide six, which looks at our profitability levels. Our gross profit increased to CAD 29.6 million, a record, for a margin of 32.2%, an increase of 3.5 percentage points year-over-year.
The increase in gross margin resulted mainly from lower credits and incentives as a percentage of revenues due to an efficient marketing strategy and record low level of quality issues, also to improved 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 variable cost structure of Good Courier and by a higher density among the delivery shelves. Benefits from investments in automation have also driven operational efficiencies that enhance our cost structure. This was partially offset by CAD 0.9 million of COVID-19 related costs, such as personal protection equipment and agency premiums for additional production employees. We're also pleased to report another quarter of a positive adjusted EBITDA at CAD 1.4 million, or a margin of 1.5%.
This strong performance resulted primarily from higher revenues and gross profit, the efficiency of our marketing strategy, as well as operating leverage as SG&A expenses as a percentage of revenues continue to decrease year-over-year, despite significant investment in our people with several key additions in multiple departments. We will continue to invest in technology and hiring key personnel over the coming quarters as we look to further develop a technological and data-driven edge in our business model. Our net loss this quarter decreased by 48% to CAD 2.7 million, or CAD 0.04 per share. Turning to slide seven for cash flow and capital expenditures. We generated cash flow from operating activities of CAD 2.1 million for the first quarter 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 CAD 2.9 million, 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-19 pandemic, we are still confident we'll be able to complete our investments and achieve our plan with minimal delays. For fiscal 2021, we now plan on investing at least CAD 30 million in capital expenditures to build out our flagship facility in Toronto, implement the infrastructure for same-day delivery across the country, and further increase our automation and technology. We ended the quarter in a solid financial position with cash and cash equivalents of CAD 104 million.
We have great flexibility to grow from current levels, withstand headwinds, and execute on our strategy. Finally, we'd like to turn to slide eight to provide some color on our outlook. E-commerce grocery and meal solution shopping were already two of the fastest-growing industries in the world before the current pandemic hit nearly 10 months ago. Since March of 2020, this strong growth has significantly accelerated, and we have seen a bigger movement to grocery shopping completed online. We have seen this shift be sustained over 10 months now and 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 delivery-to-home fulfillment model have supported 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 or restaurants has shifted and will continue to shift online. The trends we began to see in March and April this year have now crystallized over time as evident by the strong demand seen in the past two quarters. Investing in our strategy to build the number one direct-to-consumer grocery technology company continues to be our main priority.
With Goodfood's 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 this cemented year-over-year shift. We are thrilled that this strategy has had the intended effects of enhancing our 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 one of Canada's largest industries. We are making great progress each quarter in building the economic moat around the business that will give Goodfood an incredibly valuable long-term competitive advantage. This concludes our financial highlights for the first quarter and our prepared remarks for today. We'll now be pleased to answer any questions you may have. Thank you.
Certainly. At this time, if you'd like to ask a question, please press star one. Again, we ask that you please limit yourself to one question and one follow-up question to allow everyone an opportunity. Martin Landry with Stifel, your line is open.
Hi, good morning, everyone, and congratulations on your good results.
Thank you, Martin.
My first question is on your same-day delivery portion 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 these services, the same-day delivery service in the GTA.
Hey, Martin. It's Neil. Thanks for the question. In terms of left, we have the one facility up and running, it's a matter of just getting the SKUs in the facility. That's been ramping up well, and then making clients aware that the service is available. We're starting to market in Q2 and Q3 for same day, and we'll continue to build awareness in that market. In the next quarters and years. In terms of what's left, there's not a tremendous amount of work left other than transferring SKUs and making people aware that it's available.
Is the service available on a pilot mode before an official launch right now?
Are you speaking of GTA specifically or?
Yes.
Right now it's not available, same-day service, but it will be available in the coming months.
Okay.
We'll definitely do a progressive rollover as 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. 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 kind of 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. That's progressing well. 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. The NPS scores are really exciting to see on WOW in Montreal. The basket sizes are similar to our weekly subscription, but the order frequency is higher. Just overall, the qualitative feedback from our members is it's a magic moment for them, right.
When they've been used to receiving their deliveries in five days after placing the order of the cutoff, it's just a magic moment to receive it on a same-day basis. We were gathering all of this information, making sure that we were happy with the gross margins as well. That's all coming together really nicely. We'll be ready to scale up progressively, as Neil mentioned, in the GTA and launch our same-day delivery service there.
Perfect. Thank you very much.
Luke Hannan 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 % of revenues. I believe in the press release you call out an efficient marketing strategy and low level of quality issues. 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.
Yeah. Thanks very much for the question. On the marketing side, we've been successful in both marketing our ready-to-cook offering efficiently across Canada. That entails some brand new creatives and market positioning around ensuring the customer is aware of Goodfood and understands that Goodfood is what we're calling eating evolved, right. It's the most interesting, newest way in which customers can do their grocery shopping, meal planning for the week in just a matter of minutes, conveniently receive the products at home. 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 Goodfood is proposing to them. I would say it's partly the efficiency of our 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 on those metrics. We still think that we have room to grow, but we're including that in our marketing efficiency. 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. Our intent is to continue growing that selection, rolling out progressively our same-day delivery service across the country.
We expect that that should continue to enable us to generate superior returns on our marketing spend.
Understood. Neil, I wanted to go back to something you said. I think you had mentioned that marketing spend for Goodfood WOW in 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 is that marketing spend as a whole for Q1, I think, was a controlled decrease. 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?
Yeah, Jonathan, do you want to take that one too?
Yeah, I'm happy to take it. 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. For example, our holiday dinners, we had some turkey dinner, kind of a really nice turkey dinner for six people with all of the sides, the trimming, the turkey. Our holiday meals did really well, I would say, in the last couple weeks of December, but still a seasonally slower period for us. As we look to the remaining months in our fiscal year, January and February are typically months where we continue to see strong uptake in our service and market to customers.
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.
Just to add to that, Luke, it decreased as a percentage of sales, not necessarily in CAD. Also, to your credit and incentive question, just to add to that as well, 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. There are almost no stock-out and the high efficiency of our shipping and logistics.
Got it. Great. Last one from me, and then I'll pass the line. Just on the incremental COVID-19 costs that you guys called out, almost CAD 1 million. I guess a clarification, is that all in the cost of sales line, or is it most of that in cost of sales and then some of that in SG&A?
It's mostly in cost of sales. Yeah, 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 zero.
Okay, great. Thank you very much.
Luke, just on that, this is the cost that we are accounting in our COGS, but this doesn't include all the time that the management spent on it and all the time that is indirect. Definitely conservative representation of the investment that Goodfood is making.
Michael Glen 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 2020. Can you just clarify exactly what you were referring to there?
Yeah, good morning. I was referring to our private label grocery SKUs. Excluding our ready-to-cook meals and our other meal solutions, we delivered almost a half a million individual grocery, Goodfood-branded grocery items. The intent was to give a little bit of a sense of traction on the number of units that we're currently delivering just on the private label grocery side. We're quite impressed with the traction. We're happy with the uptake rates and increased penetration of grocery products within our base. There continues to be huge room to grow, both in terms of uptake rate and launching additional grocery SKUs as well. We'll give you some periodic updates in terms of traction on that front.
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 Goodfood in any given week, but also continued growth in basket size. 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 adding SKUs. It's hard to distinguish between the two, but what we do know is more established online grocery companies will typically have a basket size of around CAD 120, so we're still pretty far from that. The average shopper in a brick-and-mortar retail store is visiting a grocery store about two and a half times per week.
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. Just to come into the meal kit market. Your primary competitor in the market has been out 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.
Yeah, we're seeing the entire market, both in terms of meal kits and meal solutions and groceries growing nicely across Canada. I think, depending on the sources of data that you look at, I'm not sure what sources of data they're looking at. 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. We think long term, we're in a really good position to have more of a one-stop shop. 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 any specific meal kit competitor.
I think if you also look at the website visits, we had about 1.6 million website visits in December, which is the largest amount of website visits of any meal kit business in Canada, and compare very favorably to website visits of, I think we're above Instacart as well. 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.
Frederic Tremblay with Desjardins Capital Markets, your line is open.
Good morning, congrats on the continued strong performance.
Thanks.
Yeah. First question is on your comment on 94% of revenue coming from subscribers with three or more orders. I was wondering if that's consistent across the cohorts, meaning, those that joined during COVID and those that were here before COVID? If you can maybe comment on order frequencies, for those two cohorts?
Thanks, Fred. I mean, what we've seen in 2020 is that an increase of the loyalty of our customers. The [TVP], I think we're showing a number of like 91% of our customer with two orders or more in 2019. 2020, that number jumped to 94% for three orders or more, which is a significant jump. I mean, COVID-19 impacted our fiscal 2020, but the[ TVP] acceleration was done much before COVID-19 hit. What we're seeing broadly is just an acceleration of the loyalty of our customers and a reduction of our churn. People are staying longer with us and are ordering more frequently with bigger basket sizes. Overall, maybe the unit economics was a bit accelerated by COVID-19, but acceleration was done way before.
Thank you. Maybe a question on cost inflation. Are you seeing any meaningful inflation for ingredients or order cost? What sort of initiatives could you take to offset that?
Yeah. Hey, Frederic. Thanks for the question. I think we had similar questions about that in past quarters, the answer remains kind of consistent. Like we're seeing the same inflation on the food side that all the grocers are seeing and customers are seeing. We're able to mitigate part of that by intelligent menu design or working with different suppliers. Always face that same headwind. Then on the labor side, as Phil mentioned, there's about CAD 1 million of cost this quarter, mostly related to PP&E, what you don't see in that COVID-19 related cost is the additional wages or the unemployment rate coming down in the warehouse labor market, making it more challenging to find people. It's not stuff that we haven't faced in the past.
We added about 2,000 employees over the last 12 months. We're still able to bring high-quality talent on board. I would say, similar to all the grocers and Amazon and other companies in the e-commerce space, we see those two as headwinds, but 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? Secondly, I think the general view in the grocery space is that any potential spikes won't be as big as what was experienced in the spring. Is that your expectation as well, as we go into the current lockdowns?
Yeah. Good morning, and thanks very much for the question. I would say the biggest difference with this lockdown versus the last one, certainly in Montreal, is the addition of a curfew between 8:00 P.M. and 5:00 A.M. Our main concern there was ensuring that our night shift employees, so we do operate our fulfillment centers 24 hours a day. The main concern was for the night shift employees to be able to get to work safely and attend their shifts. If you recall, back in the spring, we did have high levels of absenteeism during the lockdown on our shifts because employees were scared to leave their homes and come to work.
We proactively did a lot of work this time around to make sure that communication to our employees was 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 shifts. This has been in place only since Saturday, 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, of management time and dealing with this lockdown and the curfew, but we are able to focus more on our operations this time around. 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 plexiglass and that kind of protective equipment.
This time around, there's certainly a lot of the groundwork that was already set up and in place, which is really helpful. 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. We're happy with all of the economics that we're seeing right now.
Okay. Thank you for that.
George Doumet with Scotiabank, your line is open.
Yeah. Morning, guys? Congratulations on a strong quarter. Maybe I'm going to ask this question in a different way. Can you talk a little bit about how the first half of the quarter evolved versus the second half of the quarter when obviously there was 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?
Yeah, happy to do so. Thank you, and good morning. I would say the start of the quarter, 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. Certainly competitors were marketing as usual again in September. In October and November, I would say we had a very, or particularly in November, we had a great Black Friday season and promotion, which led to, I would say, a good part of the customer adds for the quarter happened in the back half of Q1. I think that's pretty much the commentary that I can add.
I would say we were marketing 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. That's partly what led to the increase in basket sizes in November.
Okay.
Yeah, I would add to that, George, that the extension of our product offering throughout the quarter made a difference in the second half and definitely impact our basket size and order rate.
Okay, thanks for that. 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 like you're maybe underrepresented today, or is it going to be just the same categories but more products?
I would say one of the most underrepresented categories right now is on the standalone fruit and vegetable side. We focused certainly the first 500 SKUs on items that are high margin and with extended shelf lives. We do have the capabilities internally to deal with fresh and perishable products because of our experience in the base meal kit business. We'll be launching, let's say, a small or restricted or curated assortment of fruits and vegetables in the coming quarters. The intent is, the fresh part of our business is really one of the most important differentiators. When customers are thinking about doing their online grocery shopping for the very first time, there's three components that are really interesting.
They think about, of course, 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. We think we have a real opportunity to differentiate from the personal shopper model, like a NoodleEat or an Instacart, walking into a grocery store and shopping through a grocery basket, because we're able to manage our supply chain in a more vertically integrated way than they are. We expect that we will be able to offer better quality, better pricing, and really differentiate on the fresh side. That's coming in calendar 2021.
Okay. Thanks for the color. Just let me, one last one, if I may. Obviously, your business model has benefited quite a bit from the negative working capital with the meal kits. As we ramp up those SKUs and as we invest in the GTA, just to what extent do you think our free cash flow conversion 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, if you look at our Q1 and even our Q4, we've opened new facilities, we've launched hundreds of SKUs, and we're able to mitigate the inventory impact. As John was mentioning, we're seen expert at dealing with perishable products and high inventory turnover. Definitely, it's a challenge to continue to excel and maintain a low inventory turnover. As we invest in our technology and as we get more efficient, operationally speaking, we are able to manage tighter inventory. We saw a very small impact in Q1 and no impact in Q4 at all, like I said, despite the new facility openings.
Okay.
If you look at our Q1, our cash flow generation was above CAD 2 million in terms of cash flow from ops, we were able to do three years in a row of free cash flow. We hope to continue to do so. Sorry, John, you were going to say something on yield?
Yeah. No, sorry, George. I was just going to add that the large grocers are also negative working capital as models, so it's not like a business model that's going into a different type of working capital structure. We anticipate benefiting from it on both sides of the business.
Okay, thanks.
Okay, our final question is a follow-up from Martin Landry with Stifel, y our line is open.
Yeah, thank you for taking my question. Try to see how new customer accounts 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. Yeah, definitely, we saw some great things in the couple last quarters. Our customers evolved in many ways, and we're happy to report that we had as many customers in their 20s and as in their 60s now. We're seeing, the early adopters were young professionals, but it was like five years ago. Now we have older customers that are ordering frequently with large basket size, and we love to see that. I think with the current pandemic, we even have customers that are in their 86, 87, 88 years old. Finding people are seeing our business model as a way to keep their family safe and receive their food at their door without going to brick and mortar stores. Definitely a benefit of our business model, and we're happy to see our customers evolving in that sense as well.
Okay. Are you seeing more customers coming in from Quebec versus Western Canada? I'm just trying to get a sense of where your new customers are coming from.
I would say it continues to be representative of the population across the country. We are trying to balance demand within our fulfillment center network. 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. Certainly, the GTA has been a huge growth area for us over the past 12 months. We were always more penetrated in Quebec, given that it was our first market and our head office was based in Quebec. 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, Martin.
There are no further questions at this time. I would now like to turn it back over to Jonathan Ferrari 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 Goodfood call. We thank you for your participation, y ou may now disconnect.