Thank you for standing by. Welcome to the Goodfood third quarter 2020 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 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 difficulties hearing the conference, please press star followed by zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded today, July 8th, 2020, at 8:00 A.M. Eastern Daylight Time.
Furthermore, I would like to remind you that today's presentation may contain forward-looking statements about Goodfood's current and future plans, expectations and intentions, results, level of activity, performance, goals or achievements, or other future events or developments. As such, please take a moment to read the disclaimer on forward-looking statements on slide two of the presentation. I would 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. Results for the third quarter of fiscal 2020 ended on May 31, 2020. I'm pleased to be joined on the call today by Neil Cuggy, Goodfood's President and Chief Operating Officer, and by Philippe Adam, Chief Financial Officer. Our press release reporting third quarter results was published earlier this morning. It can also be found on our website at makegoodfood.ca and on SEDAR. Please be aware that we will refer to certain metrics and non-IFRS measures. Where possible, these measures are identified and reconciled to the most comparable IFRS measures in our MD&A. Finally, let me remind you that all figures expressed on today's call are in Canadian dollars unless otherwise stated. Now turning to slide three. It outlines our key financial highlights for the third quarter. Our exceptional quarterly results validate Goodfood's long-term business strategy and leading position in the e-commerce, grocery, and meal solutions market.
The month of March, April, and May have seen the online grocery market take off, and its penetration among Canadian households accelerate significantly with years of forecasted growth turning into months. During this quarter, we experienced tremendous growth, but also significant business and human challenges. While this made Q3 among the most difficult quarters in our history, it was also the most rewarding for us. In addition to managing their personal and family considerations, our employees worked tremendously hard to keep up with the essential needs of Canadians coast to coast while implementing enhanced safety protocols to keep our workforce and customers safe. To all our Goodfood employees, I want to say thank you. Our third quarter results significantly surpassed our growth and profitability expectations.
For the first time in our history, we are pleased to report net income and positive EBITDA, in addition to record levels on other key metrics. There are a few items I'd like to highlight on this slide. First, our growth in revenue outpaced our growth in subscribers and GMS as our strategy to expand our product offering and provide a larger share of our customers' grocery basket, combined with the pandemic's impact, translated into larger basket sizes and more frequent orders. We were able to achieve these levels of revenue using less incentives as we curbed delivery days and matched our marketing spend to our supply chain capabilities. Second, gross merchandise sales for the quarter were just shy of CAD 100 million, which is a significant milestone for us. This increase was primarily driven by the growth in our active subscriber base, higher order rates, and basket sizes.
The contribution of the latter two factors is another clear indication of the success of our strategy to fulfill an even larger part of our subscribers' meal planning needs with a growing number of exclusive private label grocery products and delicious meal solutions. We are very pleased to report our first net income and positive EBITDA in Goodfood's history. This reflects not only growth in revenue, but also a clear demonstration of operating leverage driven by higher order rates. Our financial performance this quarter has been exceptional, driven by the accelerated penetration of online grocery shopping. I will now turn to slide four to present a few highlights. We delivered record financial results by responding to Canadians' strong and sustained demand as they embraced online grocery shopping in a way that marks a pivotal and permanent shift in consumer shopping habits.
Our run rate GMS now stands at CAD 418 million, approaching the half billion mark ahead of schedule. From an operational perspective, we continue to expand our footprint and roll out key initiatives. First, we have taken major steps to reinforce our presence in the Greater Toronto Area. At the end of April, we announced the launch of our first fulfillment center in the GTA with a 42,000 sq ft facility. This new facility helped grow capacity quickly and allowed us to get closer to our customers in Canada's largest market. Our first deliveries were completed at the end of May, and the operations are gradually ramping up as planned. At the end of May, we also announced a second fulfillment center in the GTA, which was planned earlier this year and will be financed with part of the proceeds raised in the convertible debenture issued in late February.
This new flagship 200,000 square foot purpose-built facility will be state-of-the-art and is intended to support Goodfood's next phase of growth, as it will be highly automated to fulfill online grocery products more efficiently. This facility is currently under construction and should be operational by demand in Western Canada, further accentuated by COVID-19. During this quarter, we also completed the construction of our prepared meals commissary at our Montreal facility and ramped up our last-mile delivery initiative, Goodcourier, which delivered almost a third of our members' orders this quarter. Taking control of the last mile delivery in certain high-density areas has helped our members' overall experience. We continue to execute on our strategy to grow our product selection in order to provide Goodfood with the ability to fulfill an even larger part of its subscriber meal planning needs.
On the private label side, we now have 300 exclusive private label grocery products, doubling the offering in the last three months. During this quarter, we have observed significant traction for our private label products, with sales nearly quadrupling quarter-over-quarter. Moving on to slide five, we want to share some details on the impact of COVID-19 on our business. The past few months have represented a pivotal point in time for Goodfood, as the pandemic ignited the growth of online grocery shopping in Canada. COVID-19 has proven to be a significant catalyst as the adoption rate of online grocery has effectively outpaced growth projections of several years in a matter of months, as Canadians fully embraced a new way of shopping that we believe will continue to grow in popularity in the coming years.
Consequently, we observed increased demand for all of our products and private label grocery items in particular. Furthermore, the order frequency from existing clients increased, and the average basket size was also higher as customers further adopted our grocery and ready-to-eat products. The crisis also created operational challenges and additional costs that impacted our gross margin. On the labor front, we needed to bring a significant number of new employees on board during the quarter and established an Essential Canadian Pay Program, leading to temporarily higher labor direct and indirect costs. In addition, supplemental pressure on the supply chain, which drove increases in food costs and enhanced hygiene procedures, personal protective equipment, and social distancing measures, negatively impacted our gross margin.
These additional costs were offset in part by our decision to match our marketing spend to our supply chain capabilities, as well as amortizing our fixed costs over a larger revenue base. I'd like to end by saying that I am extremely proud of our team for stepping up our role as a Canadian corporate citizen. Among other things, we launched a fundraising campaign to support the Breakfast Club of Canada's COVID-19 Emergency Fund, and we also provided weekly meals to teams working at the CHUM Hospital's first-line patient call center and volunteers at the on-site daycare center. Giving back is a core part of our business, and it has never been more pressing to support Canadians across the country who are facing unprecedented challenges.
In summary, our customers are embracing Goodfood as an alternative to traditional supermarkets throughout our growing selection of exclusive private label grocery products and delicious meal solutions. COVID-19 has accelerated the timeline of our business plan and provides us with a unique opportunity to grow and reinforce our position as a Canadian leader in online grocery and meal solutions. Our team is excited by the strong tailwinds behind us, which we expect will drive us to new heights throughout much of the decade. Our operations have come through the first stress test of the pandemic, and we are currently focused on preparing our operations and supply chain to be ready for a second wave of COVID-19 in the event that it were to occur in the fall and/or winter months. On that note, I will now turn the call over to Philippe to go over our financial performance.
Thank you, Jonathan. Good morning, everyone. Slide six provides details on subscribers and revenue. Interestingly, our third quarter is usually the start of a slower period impacted by spring breaks in March across Canada and by the start of the nicer weather in May. However, the acceleration of online grocery adoption changed these seasonality trends as demand naturally grew for our products. At the end of the third quarter, Goodfood subscriber base reached 272,000, with the addition of 26,000 net new active subscribers during the quarter. Revenue has also grown to a record CAD 86 million. It was primarily driven by higher order rates and basket sizes from our current subscribers. The continued expansion of the company's product offering and decrease in incentives and credits as a % of revenue also contributed to the increase in quarterly revenue.
This exponential growth, combined with our solid execution, allowed us to reach just shy of the CAD 250 million mark in LTM revenue. Turning to slide seven. Gross merchandise sales also increased significantly to CAD 99.8 million, up 63% year-over-year. The solid growth momentum of the third quarter allowed us to surpass the CAD 400 million mark in gross merchandise sales run rate for the first time. After only five years in business, we believe this is quite an achievement as it demonstrates not only our ability to execute, but also a fast and reliable adoption rate. It is important to highlight that revenues grew more than GMS as we achieved a level of credits and incentives of 13% of gross merchandise sales, well below the 20% average for fiscal 2019.
Despite the surge in demand for our products, we're able to keep a tight control on quality issues and the credits given accordingly as keeping our high quality standards for our members was a priority. Incentives usually given to new customers were reduced as part of our plan to limit marketing spend to match supply chain capabilities. Please now turn to slide eight, which compares our gross profit and adjusted gross profit. Our gross profit increased to CAD 24.9 million, a record, or a margin of 28.8%, an increase of 0.5% in packaging and shipping due to operational efficiencies, increased density among delivery zones, and purchasing power with key suppliers. This was offset by higher costs incurred for additional production employees and temporary wage increases, higher food costs, and other related costs such as personal protection equipment directly related to COVID-19.
Our adjusted gross profit reached CAD 38.1 million, or a margin of 38.2%, down 3.4 percentage points year-over-year, due primarily to pressure on food and labor costs resulting from the COVID-19 pandemic. A significant part of these costs is deemed non-recurring. The next slide shows our net income and adjusted EBITDA. We are extremely proud to report our first quarterly positive adjusted EBITDA in our short history at CAD 6 million, or a margin of 6.9%. Note that adjusted EBITDA is also at near breakeven for the first nine months of the fiscal year. Percentage of revenues decreased, offset by additional expenses resulting from the launch of new product offerings, as well as the additional costs incurred due to COVID-19. Similarly, we reported our first net income.
It reached CAD 2.8 million or CAD 0.05 per share, compared to a net loss of CAD 3.6 million or negative CAD 0.06 per share for the same period last year. The first quarter of profitability is strengthening our business model and strategy as we continue to develop and launch new online grocery and meal solution products on a weekly basis. Turning to slide 10 for cash flow and capital expenditures. In the third quarter, we provided record cash flow from operating activities of CAD 8.6 million, primarily due to a positive net income and a favorable variance in non-cash operating working capital as a result of our balance sheet structure. The capital expenditures of CAD 1.9 million were mainly related to the build-out of the Vancouver fulfillment facility, the construction of the in-house ready-to-eat area at our Montreal facility, and the continued investment in automation equipment.
Overall, we've generated over CAD 6 million of free cash flow net of capital expenditure this quarter. For the first nine months of this fiscal year, we invested CAD 5.8 million in capital expenditures. We still expect to spend around CAD 10 million in capital expenditures in fiscal 2020. The investments in the build-out of the new flagship fulfillment center in the GTA will only start in fiscal 2021. We ended the quarter in a very strong financial position with cash equivalents, and restricted cash of CAD 80.5 million. We thus have ample flexibility to grow from current levels and withstand exchange habits across consumer markets. We've seen a sustained shift to grocery shopping completed online. We expect this shift to accelerate over the coming years as consumers realize how easy and affordable it is to receive grocery items purchased online, delivered directly at home.
With that said, some financial consequences of the pandemic will most likely reverse over time. We've incurred roughly CAD 2.4 million of pandemic-related expenses that are non-recurring and are already reduced, like the Essential Canadian Pay Program, which we recently discontinued. The COVID-19 related costs consist of CAD 2 million in production labor costs, as well as CAD 0.4 million in other production costs and SG&A expenses. For instance, personal protection equipment and sanitizer and additional health and safety measures. The pandemic has brought about business challenges and opportunities, and evaluating the full range of medium and long-term consequences today is very difficult. What we know is the acceleration of online. We also anticipate that a large portion of food consumption done at restaurants and other hospitality businesses has and may very well continue to shift to e-commerce home meal solutions.
With our developed footprint of purpose-built fulfillment centers, best-in-class last-mile logistics, and well-established brand, Goodfood is in an ideal position to capitalize on these industry shifts. Before we conclude, I'd like to make a few comments on our next quarter. As a reminder, our fourth quarter is typically slow given vacation time and nicer weather, which changes and influences the behavior of our members and of potential customers. As such, the fourth quarter is characterized by lower order rates, lower marketing expenses, and fewer new active subscriber additions.
Margin are also affected by higher packaging costs due to warmer weather. The current COVID-19 pandemic has accelerated penetration of online grocery and home meal solutions, but may not significantly change the seasonal dynamics affecting our next quarter. It is difficult to predict exactly how consumer will behave, we'll monitor the situation closely and will be ready to adjust our operations accordingly. This concludes our financial highlights for the third quarter and our prepared remarks for today. We'll now be pleased to answer any questions you may have. Thank you.
Thank you. As a reminder, financial analysts may press star one on your telephone to ask a question. To withdraw your question, please press the pound or hash key. As a courtesy to others, we do ask that each participant limit themselves to one question, and if necessary, one follow-up. Your first question this morning comes from Martin Landry from Stifel. Please go ahead.
Hi, good morning. Congratulations on the solid results. I understand that you don't have full visibility on your Q4, but I was wondering if you can share a bit of color. You've seen a higher basket size and higher order rates due to the COVID crisis. I'm wondering how these metrics have evolved post-quarter end.
Morning, Martin. We're about a month into Q4 right now. In terms of order COVID, we have seen them come down a little bit since the peak of the crisis and the peak of the lockdown. As Phil mentioned, part of our thinking there is there's an impact from loosening of some of the social distancing guidelines that are in place. I think there's also an effect from our typical Q4 seasonality pattern, although less exacerbated perhaps than in the past. We know that during the summer months, people tend to find ways to leave their homes, even during these periods where road trips or staycations can still be an option.
As we look longer term into the, let's say, the next coming years, we can see definitely that the industry as a whole can be bolstered by this shift that's really accelerating in terms of the dollars moving from offline grocery stores and restaurants into the online world. We think that will continue to show improvement in those metrics. The last thing I would say is, I'd just like to remind everyone in this situation that our business strategy pre-COVID was also built around increasing order rates and average order values through growing our selection, whether it's our meal solutions or our private label grocery products to fulfill a larger part of our customers' basket. Some of that was accelerated during this crisis, but long term, that was always our strategy and intent, and we're happy to see that that's been accelerated and well on track.
Okay, thank you. Maybe just a follow-up. There's a lot of discussion on online grocery in your press release, and I was wondering if you could share some of the attachment rates you're seeing for grocery items into your meal kit boxes currently, and what would be your near term and long term goals for attachment rates?
Today we're seeing more than 25% of orders are containing a non-ready-to-cook item. I think there will be a couple of different inflection points for that part of the business. Right now we're in a stage where with 300 SKUs on the website, those SKUs are primarily add-ons to the order. The main driving force continues to be the attraction of our ready-to-cook meals. We're able to see add-ons, which is positive for average order value as well as overall gross margin.
As we hit different milestones in growing the selection on the website, so going from 300 to 1,000 to 2,000 plus SKUs, we believe there's going to be a point where we'll continue to lead with our ready-to-cook meals and our differentiated meal solutions that are high margin products, but we'll become more of a destination for other items outside of only the ready-to-cook products, which we believe will be positive for all of the economics across the board.
Okay, that's helpful. Thank you so much.
Your next question comes from Ryan Lamey from National Bank Financial. Please go ahead.
Hey, guys. Thanks for taking my questions and congrats on the great quarter. I just want to touch on the lower SG&A rates. Can you just break it down more specifically, which kind of buckets you benefited from in this quarter, and then how sticky do you think those are going forward, notwithstanding seasonality?
Hi, Ryan. It's Philippe. I think in the past, we said that our SG&A bucket was split between mostly marketing expenses and wages and salaries, and that wages and salaries represented 35%-45% of that bucket in the past. In this quarter, we've definitely continued to build out our teams. As John mentioned, we're ramping up our grocery offerings. We're building up that team very much, opening new facilities across the country. You can imagine that we've invested as well in wages and salaries. That's wages and salaries is at the higher part of that range for the SG&A bucket. Like we mentioned on our call, the goal of this quarter was to limit our marketing spend to match our supply chain capabilities to alleviate pressure on operations.
Definitely, we saw a big operating leverage there, and we benefit from being able to amortize our fixed costs over a larger revenue base.
Okay, thank you. In terms of the new website, is that fully launched? I see it in my account, or is it just rolled out partially to some members? Have you noticed any benefits? It's definitely set up a lot better than the prior website.
I'm glad you noticed it, Ryan. We've been working on that behind the scenes. We have been working on a new user experience for a few reasons. I think it was primarily the thinking behind it was to make it easier to discover some of our new products and to make selection process faster and more seamless. We're rolling out that new selection page user experience in a phased way across the country in order to continue gathering feedback from customers and continuously improve on the experience. There's about 70% of our member base today that has access to that new selection page and user experience. Our hope was that it would help continue to drive an increase in average order value and order rates, which is coming true. The other exciting part of this user experience is that we're able to offer more flexibility to our customers.
Our customers can choose from different recipes, from different ready-to-cook plans, for example, which was a big pain point, as well as select as many servings of an individual recipe as they'd like. It's exciting for flexibility. It's a real differentiator in the market in terms of experience. Over the next few months, we'll have rolled it out to 100% of Goodfood members.
Okay, thanks for that.
Thank you, and congrats on a great quarter. Just wondering on private label grocery, with it being so successful currently, do you plan on accelerating the pace at which you will introduce additional SKUs in that category? Maybe if you could take us through some of the timeline of going from 300 to several thousand SKUs.
Hi, Eric. Neil here. Thanks for the question and thanks for the comments on the quarter. We definitely have a pretty aggressive ramp plan already drawn up on paper. During the first couple of weeks of COVID-19, we decided to focus on the current operations and make sure supply chain can keep up with the demand that we saw coming in well above the CAD 420 million run rate that we announced. We have a good team in place here that's been built out over this quarter and past quarter that's ready to scale pretty aggressively. You should see an increasing frequency of new products on the new part of the webpage that Ryan was just referring to, and also around the country, because we tend to focus the launches on certain regions at the beginning and then scale across the country.
We don't think it's a rush to get to any specific number of SKUs, but want to control the scaling to make sure the experience is very, very good.
Perfect. Maybe as a follow-up to that, there was a mention of Goodcourier in the comments. Especially with online grocery, I am wondering what your internal plans are in terms of potentially eventually offering same or next day delivery. Maybe if you could comment on your intentions for that.
Yeah, for sure. We're really excited about what we've been able to do with Goodcourier so far. As we've said in the past many times on these calls and in other investor forums, density is extremely important for the last mile delivery game. Because of our density from our marketing strategy and high customer retention in those markets, we've been able to significantly reduce the cost and increase the experience with Goodcourier.
In the coming months, you can imagine an Uber Eats type experience through Goodfood platform in terms of user experience. We think the current timeline definitely from order to receiving is very, very good for clients that have a very predictable schedule. But those who travel a little more often have different schedules that are much less predictable could benefit quite a bit from some sort of same-day, next-day delivery service. We're not going to commit to any timeframe officially on the call, but it's something that we're working on and we should have some news in the coming quarters.
Great. That's very helpful. Thank you.
Your next question comes from Luke Hannan from Canaccord Genuity. Please go ahead.
Yeah, thanks, and good morning, guys. I'd like to echo the comments on what was obviously a very strong quarter. The first question I have, I guess, is on that lower marketing spend. I know you briefly touched on what the trends are in Q4 to date. I'm just curious to know if the marketing spend is, I guess, at similar levels as to where it would've been in Q3 so far.
As to match our marketing spend to our operational and supply chain capabilities. We have definitely stabilized the operation since Q3 and are in a good stable situation from a demand and a supply perspective. The other thing I would mention is Q4 is always a typically seasonally light period for marketing spend and for customer acquisition. We're trying to continue to find ways to balance the short term and the long term to ensure that we're making the right decisions for our competitive position in the coming years. Understanding that we believe that our addressable market has shifted from a CAD 10 billion market in Canada to a CAD 23 billion market by 2023. During this journey, we'll be making the right decisions for shareholders in order to maximize that long-term value while balancing shorter-term profitability.
Understood. My second question is on your two newest fulfillment centers in Vancouver and Toronto. I'm just curious, are these sort of operating at scale right now or is there still some time before both of these are fully ramped up?
Definitely the Vancouver facility or BC facility, we had it in our strategic plan many months in advance and had time to properly plan and ramp up. That was something that is on target with our ramp plan and is definitely not operating at capacity because we built a facility larger than what we needed to accommodate the growth that John was just mentioning. Definitely on track and is taking almost all of the volume that it can across the network right now. We're ramping up still and should be fully fulfilling all of the capacity it can in a couple of months. The GTA, the smaller facility that we announced kind of during the COVID height of the lockdown, is taking additional capacity that was coming from our Montreal facility.
We're really excited about being closer to clients, enabling some of those shorter timeframes of deliveries in the future as well, and is ramping up very nicely from the time that we thought we should act on the facility or decided that it made sense to our first delivery was about seven weeks, and now we've been really scaling that up. It's been really positive to have that in the network. You can anticipate more volume going through there, but definitely not at capacity either.
Okay, great. Appreciate the color.
As a reminder, it's star one on your touch-tone phone in order to ask a question. Your next question comes from Michael Glen from Raymond James. Please go ahead.
Hey, good morning. Just on the competitive situation in Canada right now with the big uptick that we're seeing in the online grocery world, you're obviously benefiting from that, capturing your fair share or more than your fair share. Are you seeing an uptick in the competitive situation as people try to jump in and grab some market share here as well?
We are in a market that is experiencing such significant increases in growth and penetration. I think it's to be expected in the coming years that I would say from a current perspective in the market today, we continue to see more of a supply side challenge than a demand side challenge. There's more demand out there for grocery delivery and food delivery
There is a supply of businesses that are able to fulfill that demand. I think on a differentiated strategy that we'll be able to carve out a unique piece of the market. Our unique differentiator includes our technology and fulfillment capabilities that we've invested in in the past few years, which will get us, as Neil mentioned, to same day and next day deliveries in a ultra cost competitive fashion, as well as our merchandising strategy. That's Pokét Basket with private label, really a complete selection of private label grocery products to fill out the rest of the grocery basket, which again, is under Goodfood's brand in order to be differentiated, to reduce the complexity of selection, and to carve out larger margins than what a typical retailer might make in selling grocery items.
We would look at this competitive environment as continuing to be quite favorable for us in growing the overall market. We're quite pleased with the progress that we're making on executing on that strategy.
Okay. Last quarter, you alluded to the meal kit business being, EBITDA positive. I'm assuming that that's the case this quarter as well. Are you able to indicate whether the private label offering was EBITDA positive in the period?
Hi, Michael. Yeah, definitely meal kit is EBITDA positive this quarter, obviously. On the private label in the meal solution business, we're starting to see some profitability sign, but we're not completely there yet. Definitely the growth that we've been seeing in Q3 is helping with operating leverage, ramping up the margin, establishing stronger relationship with our suppliers and getting better pricing for what we buy. This is all beneficial to our business and profitability is coming, but overall, it's still the meal kit business that is increasing the profitability on a consolidated level. Yeah, in terms of the split, like last quarter, we said 90% of our revenues was coming from the meal kit. It's still the case, even though directionally is still the case, and even though we saw a big increase in our private label sales.
Okay. Thanks for taking the questions.
Our next question comes from Jenny Wang from Eight Capital. Please go ahead.
Thank you. Good morning. Congrats on the quarter, guys. A lot of questions were asked, just one question on the subscriber, adding new subscribers. At the onset of the pandemic, when you were kind of holding back on adding new subscribers, are you kind of back to normal now in terms of being able to absorb new additions?
Yeah, the operations have definitely stabilized across the country. As we mentioned, we're still seeing some cost challenges. We had the Canada Emergency Wage Subsidy, that is ending officially in July, early July for all associates across the country. Supply chain, price of protein, as you guys have seen, probably from shopping yourselves or in the news or other coverage, is still quite high. We still have definitely some gross margin pressure, but we're able to absorb more volume now that the operations are stabilized and we have the additional facilities that can ramp as well.
Got it. Thanks. Maybe just one more on maybe on the cost side. Are you seeing any pressure on food costs or anything that's kind of putting pressure on gross margins? What's the dynamic in terms of on the cost side of things? Thanks.
Yeah, definitely. I think things have stabilized, as I said. We're not running around to find ingredients, and bring on new suppliers every day, like kind of at the top of the crisis. We're able to have a little more strategic discussions and better negotiations, and our contractual pricing is back in line. Definitely still pressure on food cost, mostly coming from protein, especially as it starts to warm up in Canada. There's usually a pretty big drop in produce prices in the summer months. Definitely some price on the protein side. On the labor side as well, at least through the month of June, having higher expenses due to the Canada Emergency Wage Subsidy. The Canada Day causes a little pressure on the gross margin side. Overall that's what we're seeing.
Some of it offset by some of the Goodcourier gains that we've had and other logistics gains that we've had. Definitely the seasonal packaging pressure that we always have is there as well. That's the current situation for gross margin.
Got it. Thank you.
This concludes the Q&A portion of our call. I will now turn the call back to our speakers for concluding remarks.
Thanks very much, everybody, for joining us on the call today. We look forward to speaking with you next quarter.
Ladies and gentlemen, this does conclude today's conference call. Thank you once more for participating. You may now disconnect.