Investor Day 2019

Feb 20, 2019

Slides

Ladies and gentlemen, greetings and welcome to the Good Food Market Investor Presentation. At this time, all participants are in a listen only mode. If you have not already done so, please close all other programs on your computer. You may submit a question via the web at any time by using the ask a question feature located on the left side of your window. If anyone should require operator technical assistance during the program, please push star 0 on your telephone keypad. It is now my pleasure to introduce your host, Glenn Axelrod. Thank you. You may begin. Thanks, Adam, and thank you everybody for joining our webcast today with Good Food Market. The purpose of today's presentation is to introduce the company and to give you a better understanding of the business to a PowerPoint for you in discussion with management. The discussion will be led by Co Founder and CEO, Jonathan Ferriari, who is also joined by company's CFO, Philip Adam. We're going to break the Q and A at the end of the formal presentation. And when we do break, we encourage Q and A to take place. A couple of quick reminders, this is a teaching call and geared towards helping investors better understand the business. Any specific high level detailed quarterly type questions should be emailed to me, and I'll forward them to management for direct feedback. We're going to like to keep this call at a high level for folks to better understand the business in general. And also as the company has refinancing pending questions not covered by the file perspective will have to be deferred to a later date. It doesn't be an issue, but just an FYI. Finally, just to remind us, we are only taking questions via the web portal. If you're listening via the telephone, please access the web link sent earlier to ask a question. Just to remind you that you're going to be advancing the slides on your own today using the arrow keys on the top right hand corner of the presentation. You can also extend the PowerPoint using the expansion feature in the top right of the PowerPoint. If these arrow keys should disappear, simply hover your mouse on the top right position in PowerPoint of your screen and don't reappear. If for whatever reason your audio is having an issue, a dial in phone number is provided. Remember, you can submit a question that you'd like management to address using the question text box within the Webinar portal at any time. I'll ask the question on the air for everyone to hear and management will get an answer. I'm not going to reference any names, so simply read the questions out. If I can't get to your question online, I'll come back to you via email. If there's some reason you're experiencing any issues, hope you start, please remember you can email me at glenn@gritt poliara.com. I will be happy to assist. I'm not going to read the forward looking statements, but I simply say that they apply in reference to the page 2 of this PowerPoint. With that said, once again, thank you for joining us. Remember, it's fairly informal, and we do encourage Q and A to help you better understand the business. And now I'll turn the call over to Jonathan to start his part of the discussion and presentation. Thank you very much, Glenn. To those Jonathan Ferrari here, I'm the co founder and CEO of Food. I'll invite you to turn to page 3 of the presentation to see a little bit more about my background. So I'm the cofounder of Good Food. I started the business a couple of 5 years ago now. We, I would say, I am a 100 dollar winner ready. I was recognized as one of Canada's top 40, under 40 Canadian business leaders in 2017. And I was also recognized as one of the 1st and youngest entrepreneur of the year in 2018. Phil, I'll let you introduce yourself. Hi. I'm Philippe Cydam. I'm CFO. I joined the company a year ago. I'm in charge of finance, treasury, accounting, and strategy. Before joining the food, I worked in private equity and live in banking at National Bank, and before that, we started next year of employment in CAGRE. Moving over to Page 4 for a few of the key investment highlights. The food is the number one home meal solution brand in Canada. What does that mean? We have an online website, maker2. Ca, where we provide meal solutions for our members on a subscription basis. So our members sign up for a weekly delivery, and we will deliver ready to cook meals anywhere across Canada on that weekly subscription basis. We have 126,000 active subscribers. Those are households across Canada that subscribe to our weekly delivery, and that represents approximately 1% of the Canadian population. So the key investment thesis behind Good Food is the grocery industry in Canada is about $130,000,000,000 and there are some pretty significant changes that are happening in the grocery business and across the entire retail industry and retail sectors. So there's a significant amount of dollars we are shifting from offline stores into online destinations where consumers can purchase products and services to use to purchase offline. So today, good food has captured $168,000,000 in annualized revenues from new solutions that consumers used to buy offline and that are now buying online. And that gives us the leading position in our industry across Canada. We still really have approximately 40% of the Canadian market. We started the business primarily in Eastern Canada. We were servicing Ontario, Quebec and the Maritime provinces for the first few years of operations. And approximately a year ago, we launched our Western Canadian operations out of a center in Calgary, which we'll talk to you a little bit more about later on in this call. So that's the ability to service Canadians coast to coast. Throughout that rapid growth, we've been averaging approximately 20% month over month growth since 2016. We've been able to achieve a positive EBITDA in our earlier, more mature market, And we've also been cash from operations positive for 3 quarters in a row. So we've been able to follow-up and we'll talk to you a little bit more about our strategy, but follow-up strategy of very rapid growth while being approximately from a capital cost perspective. And the last point on this page that's important to note is the management team, including myself, founders and some other I think part of the management team own more than 30% of the shares in the company. So we really have a dedicated OI team that's working for the ECD success and continue to strengthen the business. Phil, I'll let you move on to the slide. Yeah. Complete overview, page 5. As John said, we started in Montreal, but sales is supported there. We have over 1500 employees across Canada between Montreal and Calgary facility and 136,000 active subscribers as of November 2 yet, which was due on the Q1. We now have the largest infrastructure in Canada for a new chip company with 200,000 square feet, 155,000 square feet in Montreal, distributing the extension of 72,000 square feet that we announced in the fall, which will be completed next summer and an additional 50,000 croresies in the same salary, where I listed on the TSX. And since June 2020, we paid 35,000,000 of capital, and that's excluding the current budget deal financing that should close this Friday for $25,000,000 So in total, dollars 60,000,000 of capital paid to date. Moving on to Slide 6, business model. So there were some good food. We received many clients that take order a meal prep on our website. We receive a payment, let's say, on a Wednesday, once you receive a buzz on the next Sunday. And then we place the orders with our suppliers. We have direct with more than 40 farms. We deal with distributor as well, mostly in Canada and some in South America and the US. And then the box gets delivered to the clients, let's say, on Sundays, but we only pay our supplier on 45 days, the ranges between 10 and 90 days and the other important capital structure, which would give us, I mean, growth I mean, true to quarter growth. Like John said, the last few quarters, we were cash positive even though capital provisions were positive and the Orchid was negative. So that's kind of negative working capital structure that Costco or Amazon as well. So it's really helpful to finance the growth. We also have the best in time inventory. So when we order what we need, so we know exactly what's what's our, what the customer is gonna order, and that creates minimal food waste close to the 1% mark, which compares very heavily to the grocers who have close to 20% of waste. Alright. That's the 3rd business model. I'll let John continue with slide 8. So on page 8, there's a little bit more detail about the facilities that we sold. So this is about approximately 200,000 square feet of purchased build manufacturing and fulfillment centers across the country. This leads us to have the largest direct to consumer perishable goods supply chain in Canada. So with this capacity in Montreal and Calgary, we figure we have approximately $500,000,000 of total revenue capacity across the country, split approximately $400,000,000 in Eastern Canada through the Montreal facility, approximately $100,000,000 in Calgary for the Western Canadian facility. On page 9, you go through a little bit more detail in terms of how we think about what business we're in and the total addressable market that we're going after. So understanding from the slide the tour on slide 8, this national direct to consumer perishable food supply chain allows us to deliver ready to cook dinners, which is currently the vast majority of our business. And it's that the first bar on the left hand side of Page 9. That being said, through the same infrastructure, we're able to solve other mail solutions for other dayparts as well as meal solutions that required some levels of engagement, for example, through our prepared meal segment. So if you think about the need that we're solving from a consumer perspective, every day, 3 times a day, every single consumer is asking themselves, what am I going to have for breakfast? What am I going to have for lunch? What am I going to have for dinner? And we are uniquely positioned to be able to answer that question for our consumer with meal solutions for each part of the day for breakfast, lunch, and dinner as well as meal solutions that require different levels of engagement. So I prepared meal, for example, that would be ready to heat and serve on busier days of the week, whereas on other days of the week when the consumer would like to engage in a quick cook at home from scratch ready to eat dinner, we would be able to address that need in a way that's mixed and matched in the same good piece of the free. So we figured that throughout these different segments, we have approximately $9,000,000,000 in the addressable market. And that's a pretty small segment of the $130,000,000,000 overall grocery industry in Canada. And we intend to build leadership position with the potential to be critical delivered directly to the consumer. On Page 11, there's a little bit more detail about some of our indirect competitors. So of course, our indirect competitors would be major grocery stores where a consumer would have previously purchased ingredients to make their meals. From a direct competitor perspective, we look at website traffic data as a proxy of the competitive landscape for market position. And as you can see within the chart on Page 11, you've been able to lead the market in Canada from taking this republic in 2017. In terms of what size it is, so the momentum is great. If I continue on Slide 13, the gradual growth last quarter was a record quarter with net new add of 37,000 new vendors. So as of the end of the quarter, we had 100 and 25,000 members across Canada. And really what's great with our business is the loyal customer base seed growing, meaning if you stay with good food for several months, it becomes embedded into your lifestyle and you, instead of ordering about 3 months, you keep ordering almost every week and you end up ordering 4 or $5,000 a year with us. And the loyal customer base are secure, and they're seeing good in our vendor base, and we are ordering more. And that's why, depending on the seasonality, we see higher customer growth than higher revenue growth than customer growth because the loyalty is growing and it's these guys who are increasing the average annual revenue per member. Moving on to Page 14, revenue growth. Last quarter, we with our last 12 months, dollars 6,200,000,000 mark in terms of gross merchandise sales. Like John mentioned, our gross mission wise sales fundraise and at $168,000,000 as of last November. And we are one of the factors going to continue under GSA in terms of revenue growth. We're the fastest for a couple of quarters. Now we're on the on the nettations, but still what they 5 growth, the average quarter over quarter growth of 29%. Then one of the main drivers are, like, our model, recurring subscriber base, the loyal customers, as you mentioned, and also that what John mentioned, the introduction and an uptrend of new product offerings, the launch of Western Canada contributing to the growth as well. So, Indonesian, of all of us just mentioned, we give Doctor. Mendez Mariento to continue. Moving on to page 15, on the left side of the slide, the ABOR margin. So last quarter, our gross margin was at 37.7 percent, So, I mean, we've seen 7 percentage points in the last 12 months. And we're able to achieve actually economies of scale. The more we grow, the more we can the bigger the terms are of our suppliers and in terms of strategy of packaging, in terms of shipping and getting better terms because we're prepared also because of the tendency, haven't yet with the resurgence in scope. And we use carriers to deliver our box. So carriers was delivering 1 box at a condo power in Toronto a year ago and now it's delivering 20 boxes. The price is not the same, so that's good leverage on the margin as well as the information you've seen information for a while now, several quarters, and we see the results from our margin for the past 12 months is the biggest driver for the improvement. On the right hand side, you have our cash position at 25,000,000 dollars and that was in Q1, so before the BAW deal that we've announced and that we closed this Friday. And the cash flow come up, like John mentioned, we had cash flow come up positive for the last few quarters. That total approximately $5,000,000 of cash flow from most patients generated. Moving on to Slide 16, that's the food growth side wheel. I think we've alluded to this already, but our strategy is really to grow subscriber base and for revenues. So that's number 1 for us. And then then that gives us an increased entity in economies of scale. So that's translated to a lower cost structure. You also invest in automation and that gives us, like I just mentioned, growth margin expansion. And instead of marketing the savings and the profits, we reinvest them into value provision to members. So for instance, we're bigger. We have economies that scale on food. So when we're buying a 1,000 lemon, now we're buying coffee, 10,000 lemons. We're not paying the same price, but we reinvest the savings into the value proposition to probably give more food to the customer, better quality in terms of protein. So we're really trying to improve the value proposition and therefore translate into growth subscriber, more bigger order value, higher order rate and more recent for us. For us, our strategy is usually to invest in profit in order to grow the business and the customer base. Moving on to Slide 17, that's our the left hand side of the slide is our core driven plus structure. So gross margin was up 38% last quarter. That's been there. There was a drag coming from the same standard operation because it's a new operation. We already started it in a year last year and new product drag as well to, let's say the margin that is more limited is 40%. And we aim to have an adjusted gross margin of 45% and we're going to get scale and we'll be able to achieve the 45% through additional investment information. Right now, our processes are about 60% estimated and we aim to be at 75%. And if you add the economies of scale, we think the 45% gross margin is something that's realistic and then even before tax. After for marketing expenses represents approximately 40%. We're going to continue to invest in marketing, so the dollar investment will continue to go up, but as a percentage of sales, should go down. Therefore, they are aiming at an EBITDA margin of 16% when we're going to do FQL. Moving on to Slide 18, that's our automation investment track record. So when we moved into a new Eastern Canada facility in Montreal in September 2017, we started to invest in automation quite significantly. And in terms of labor costs, we're able to reduce them by 40% since September 2017. And with additional investment in automation, we are aiming to reduce labor costs by another 30%. Therefore, this will be translating to gross margin points and implied we are aiming to grow the 4 year to a 25% gross margin. Guillaume, I'll let you continue on the investment highlights. Yes. Thank you, Phil. So on Page 9, changes included here before we turn to the Q and A session. Through the $25,000,000 equity cost deal that we'll be closing on Friday, We'll be preparing to use that capital to bring Good Food to its next phase of growth. So we will be investing in our breakfast submissions that are healthy, tasty and ready in less than a minute. We will be scaling our prepared meals with the increasing penetration of the across Canada, in Eastern and Western Canada to continue to grow. We will be investing in automation to cross our production facility, which will improve labor efficiencies and improve our gross margin. And as we continue to grow our market position, we will be delaying short term profitability in order to maximize longer term shareholder value. And so building the scale, building our market position in order to gain those cost efficiencies on the delivery side to be able to build a really sustainable moat around this business into the future. But then we're happy to take questions from the running session. Perfect. Thanks, Jonathan. And we've got a bunch of questions in the queue. You may have touched on some of these points, but I'll ask the question anyway, so maybe you could expand on the points. What are the reasons for limiting current operations to Canada? And do you have any plans to expand into the U. S. Market? The Canadian market and U. S. Market are quite distinct from a food supply chain logistics perspective and there's a lot of cross border issues to be able to deliver either from the U. S. To Canada or from Canada to the U. S. To be present outside of Canada would require facilities and a supply chain outside of Canada. Our focus to date has been on building our market position and building the density within the Canadian landscape. And given that we're at approximately $170,000,000 of annualized sales in a market which we expect to grow just in Canada to $9,000,000,000 The investments that we're committed today are focused on the Canadian market. Okay. Super. Thank you. What is the average price paid by consumer? And does the consumer pick all the food items? We have a number of different plans. If you think of our the way that we've augmented our client days, we have 3 age groups that we've created product offerings for. The first group would be the 25 to 35 year old young professionals. And primarily, what they're presenting is our easy cut plan, where all of the ingredients are pre cut and some of the cooking are pre cut and so you can get there on the table in approximately 15 minutes. That price point will $12 per person per meal. Our next pay group is our family segment. The mills are from our family plan that are specifically tailored designed for kids and parents alike. The price point for our family plan is approximately $8.75 per adult portion. So depending on the age of the kids, adult portion could contribute approximately to $8.75 per adult portion. And then as we move into kind of our anti nester age categories, we have primarily our classic plan that's targeted towards empty nesters. So chocolate plants are recipes that you cook entirely from scratch, and millions are not precooked or precooked. And those meals start at approximately $10 or $11 per serving, and we've focused those around trying to create a really different culinary experience with some unique flavors and unique ingredients that you might want to talk about including in your weeknight question. Okay. Super. Thank you. Can you comment on the company's, I guess, strategy related to food allergies and how you deal with that for organic offerings and free range animals? So from a allergy perspective, all of our meals are prepared because of the infertility, So we can't guarantee any severe allergy that an allergen would not have come into contact with any specific meal or any specific ingredient. However, we do label in the client section of our website which meals contain which allergen, we'll be able to let our customers know which which meals contain nuts or dairy or steroid or any of the other common allergens. And depending on the severity of their allergy, we do have some clients that will order the nail and leave out the allergen. But of course, we can confirm that that is completely untouched. The second section was around So from a we do have some ingredients that we source organically for free range, but we don't currently have an entirely organic or free range plan or box today, something that we can develop in the future, but we've been focusing on trying to target the, what we consider to be the largest piece in the market first. And then over time, we'll be developing options for organic diet, having some higher end free range meats, for example, as well, focusing on some other dietary plants such as diabetes focused nutrition, for example, on halal or kosher techniques. So these are things that we would see being able to address further down the road. Okay. Super. Thank you. How do you see the acquisition of Chefs' Rights by HelloFresh creating a larger competitor in the Canadian market? And do you expect a more competitive environment in the future as a result? Overall, what we've seen is 2 things. So following the acquisition of Chef's Place by HelloFresh, we Good Food continues to be the number one best selling omnicholocation brands in Canada. And so HelloFresh and Chef Blaze are being maintained as separate brands. And so while in total, this will grow HelloFresh's historically based in Canada, it could remain the number one best selling brand, which we think is important from a consumer perspective and also important from a network effect because a lot of our spin offs come from referrals from friends and family members that are encouraging people to try their food service. And the second point I would say is, generally speaking, we've seen consolidation within the industry as something that we've expected and something that we think is positive for the industry. So if you compare the Canadian market to the U. S. Market, there are many, many brands in the U. S. That are going after the same customer. I believe that the latest number is 150 different home meal solution spend in the U. S, whereas in Canada, the top 2 companies own approximately 80% of the market in Canada. So we feel that this consolidation is actually positive for the players in the Canadian market and lead to better customer acquisition costs and unit economics than you might see in an industry like the U. S. Market. Can you comment on what is the lead time for an order? In other words, put it at 10 am on a Wednesday. When can you get it? So there's approximately, depending when you order, there's a 3 to 5 day lead time when the order is placed and when a customer receives the order. That's something that it might seem long for the first time a customer places their order. But we remember that this is a subscription weekly delivery. So whatever that timing of the first delivery might take a little bit long, the subsequent deliveries will be arriving at a better new player, which is kind of in the product lifecycle because the meals that we deliver on average have approximately a 7 day shelf life. So you'll get a week's worth of meals and they'll be good in your fridge for approximately 7 days. And by the time you're coming to the end of your meals, you're receiving your food delivery. And so we focus on not so much trying to reduce the lead time between an order and delivery, but focus on keeping that lead time intact right now because it enables us to be much more cost effective from a delivery perspective and from a food purchasing perspective. And it makes sense for the customer once they get onto our cycle. Thank you. Do you believe your meal kits will ever be available to be bought in grocery stores? We've seen some a few players in the space get into brick and mortar retail. So in Canada, Miss Fresh was acquired by Metro a few years ago, and so they've been selling Miss Fresh meal kits in metro stores. And in the U. S, Albertsons purchased Playdive, which was the number 3 meal kit in the U. S. At the time, and they introduced items into their stores. And Home Chef was acquired by Kroger last year, I believe, and they've also been introducing a Hundge Fest branded milk chip, which is growing in the U. S. So it's something that we're seeing internationally becoming a little bit more popular. There are some unique challenges that come with brick and mortar retail. So it becomes more difficult to manage inventory, manage waste and also ensure that the quality of the product and the shelf life of the product is a magic consumer expectation. And the second challenge is making room at the margin for this to become an attractive product for a retailer. So we're following other companies and other markets closely. And perhaps when we feel confident that those two challenges can be addressed, it's something that we might see in the future. Okay. Super. Thank you. Can you talk about, and I'm not sure if you can or if you need this public, but what is your average number of consecutive weeks per subscription? And what is your average subscription cost either on a monthly or yearly basis? These aren't numbers that disclosed publicly. So was there any comment that you want to give on public disclosure? Yeah. I mean, when we all disclose these numbers, but in terms of the average revenue per subscriber, if you take if you go for a run rate of €168,000,000 divided by our subscriber number, you got approximately $14.50, dollars 1400 per customer per year. So that gives you a good outlook and that's including the guys who are staying with us only a week or 2, also including the guys who are ordering 60 2 weeks in a row and spending 5, 6, 7, even $10,000 left. Okay. Super. Thank you. What's the advantage of having almost double these new reps at the auction versus your direct competitors? As we started expanding across Canada, we realized that there are many different ways in which taste preferences change across the country. And so having more recipe systems enables us to better tailor menus to different parts of Canada. And I would say that translates into better order rates and higher order values when we're able to have and use that are tailored to the taste references of consumers across Canada. And the second point I would add is we've been focusing on building out our rest of the offering based on the 2 verticals that I mentioned earlier. So the case preferences that I just talked about, but also different levels of engagement. And so we have, for example, the Easy Prep Plan, which was launched last year and allows us to address the needs of consumers that do want to cook at home, don't want to spend less time doing so. And another example that I'll give you is in January of 2019, which is a month ago, we launched our team 15 plan, which is a plan that is lean, clean and ready in 15 minutes. And so it's potentially a low carb offering of higher serving of protein and vegetables. And this came out of the request from our member base to have more diet or fitness oriented offerings in our meals. So we think we're putting more choice on our menu and more variety of plans and recipes can help us tailor our meal to different Canadian customers that eat differently and then engage with their food in different ways. Okay. Thank you. What is your lowest price meal chip cost right now, and can you see it going lower? And can you also comment on your highest price point meal as you see going higher? So I would say the answer is yes to going higher and lower. So our lowest price meals is about $8.75 per meal, and our highest type meal currently would be our artisan collection of premium recipes. So our artisan recipes are recipes that will be market priced for premium short cuts of meat and seafood that won't fit within the best one of any of our other meals. So we've had artisan meals that will have a whole quarter house shake and that could be priced at $30 or $40 per person. And then kind of on the lower end, as I mentioned, we have our $8.75 is the lowest cost for our family client adult portion. And I would say as we build density across the country and as we tier our product to different types of consumers, we would see ways in which we can provide more convenience. And for example, organic that might be pushing our average price point up. And you can also see ways in which you can simplify recipes in order to hit lower price points with a lower food cost, for example, to go a little bit down market as well. Thank you. Our next question is, how you define a loyal customer? So I would say a loyal customer for us will probably be defined in terms of their tenure with the food. So most of the churn or cancellations will happen earlier on in the life cycle of the customer. So if you think about consumer experience within the 1st few weeks of trying to get food subscription, you'll get a good chance of whether an optimal meal is tailored to your lifestyle, your dietary preferences, the way that you want to eat. And if within those 1st few weeks, it is a good fit for your lifestyle, We usually see that the retention really stabilizes after that. And if it's not fitting within your lifestyle, for example, it's not the right price point or you don't have a lifestyle that is consistent enough from 1 week to the next to be able to receive a weekly delivery, you might cancel and churn out. So I would say within, call it, 6 months of the life cycle of the client, the customer does remain beyond that, will be at least at that point. Perfect. Thank you. Do you and this may go into your disclosure issue, but have you ever disclosed the percentage of revenues, the number of revenues that come from loyal customers historically? We have not disclosed that. So that's a figure we're the home made publicly traded company in our state in Canada. And so we follow those numbers quite internally, but we don't disclose numbers of, let's say, customized revision costs or a specific question on value costs because we believe that our competitors would benefit from having that competitive question. And we don't have competitive intelligence on our competitors. Okay, perfect. And this might be the same type of answer, but I'll ask it because 4 or 5 different people asked it in different ways. Can you comment of the 126,000 subscribers, what sort of the average churn rate? How do you think about turnover of subscribers on a regular basis? So what we can share is the economics of the business generally have exhibited positive trends over the past few months. So partly, perhaps due to some of the consolidation that we talked about in the space in Canada, We've seen positive impact on the customer acquisition product and lifetime value and retention numbers. And the other thing that I think is important to comment on is, I believe we are the only company in our space globally that has demonstrated the ability to generate positive kind of flow from operation. And of course, while growing at the peak that was on that, we're the only company in our state home that has demonstrated multiple quarters of the WPROMICAT from allogeneic acid. And an important part of the reason why we were able to not burn significant amounts of cash while applying at this pace is because of the solid nature of our unit economics, the positive retention numbers and customer acquisition numbers and lifetime value numbers are really important to be able to generate that solid financial base. Okay. Super. Thank you. And you may have commented on this, but as this is more of a topical idea for a strategic perspective on how do you control churn? 1 of your major competitors have struggled on the public market, mainly due to the problem of steady churn limiting their ability to long term profit growth. So maybe just some high level overview on that. Sure. From our perspective, the most important way to limit churn are two things. So if we try and make sure that we're acquiring the right customers, we're constantly optimizing the way in which we target our customers through the various marketing channels that we use in order to use the data and the intelligence that we've had over the past 5 years to continue to refine the ways in which we go after those customers. That's the first part. The second part is, it's tremendously important to deliver a customer experience that really wows our customer and a customer experience that's way beyond what they were expecting. So we're really proud through the silo deal that David was talking about in our investor presentation. We're really proud that we've been able to use the scale that we built at the time and we have some scale now that we intend to develop significantly more scale in the future. And so we've been able to use that scale in order to reinvest in the product experience and every week delivers more value to a member that we were delivering the week before or the month before or the year before. So customers notice that and we're able to retain them by showing them that we'll continue to continue to experience and that we're reinvesting into value of the product. And we make sure that we're making those same investments in improving our technology, improving the ways in which we develop new recipes to better tailor the product to the needs of our consumers. But when you combine all of that together, can you also layer on we like to say that we have a team of 1500 entrepreneurs. And so it's not just myself that's leading an entrepreneur here, but we have 1500 people who are entrepreneurs and who are thinking about customer internally, who are thinking about ways to deliver more value, pet cost, improve the experience. And when you have so many people that are dedicated to that, it really makes a big difference in the customer experience. That's how we've been able to retain more customers over time than some of our international competitors. Okay. Thank you. How are the delivery logistics managed? Are they internal or outsource? And do you disclose your shipping costs for you? We don't own any trucks, and our delivery drivers are employed by 3rd party delivery carriers. It could be big national carriers like ETS, synthetics, smaller couriers in cancer areas of major urban centers in Canada. And in terms of delivery cost, I think there's 2 pieces of guidance that we can give on that. So the first one is we do we've mentioned publicly the ranking of our cost bracket. So within our gross margin, food cost is our largest cost, then labor, then delivery cost, our 3rd largest cost in our gross margin, and then packaging cost for the box and all the packaging that's included in the delivery. So the delivery cost is the largest cost. And the other piece of guidance that we can give is we're able to benefit from the cost savings that are generated from the density in our delivery without having to necessarily own the trucks or over deploy the delivery prices themselves. And so we're still able to try and generate routes that are more and more dense. And as we did mention during the presentation, if we talk about having 1 delivery on the same street, having 4 deliveries or 5 deliveries on the same street, the delivery cost that we can see on those more dense areas completely go below $5 per delivery. And if I can add to that, I mean, definitely, our shipping costs have been trending down with the high density of the scale. And for our current logistics structure, we are now able to deliver to 95% of the Canadian competition. Okay. Thank you, Paul. Just a reminder to everybody, I tried to get to everybody's question. Some questions were asked, answered at other times. Other questions that couldn't get to because of the prospectus and financing issue. If the Q3 question wasn't answered, just email me and I'll try to get it done. I've got 6 questions remaining for you guys in the queue. The next question is, can you just talk about the key areas of automation? Sure, absolutely. So we have 2 major areas of automation that we're investing in right now. The first one is in the portioning of ingredients. So within our warehouses, we receive both amounts of ingredients, for example, 12 ounce of vinegar or 10 ounce of variety. And so we're investing in machines that can, for example, a bottling line that can torsion bottle, capsule bottles, chemical bottles. So, so, portioning is one major part of our automation investment. And the second type of partnership investment is around storing and recreating, so moving things around within our warehouses. And so we have approximately 30% of our labor spend moving things around within a warehouse. And so we have some current projects right now in tech automation. Okay. Thank you. And sort of a related question, with the pending close of the financing, what are your priorities for this new plan going forward? EBITDA automation, new fulfillment center, extension plans? And would investors see any impact to margins in either calendar 2019 or 2020 with the automation impact? Yes. I'll answer that question. So in terms of the current financing, I mean, said that $10,000,000 will go towards automation and capacity expansion. We don't provide just the discount, but it needs to be a big portion of the $20,000,000 that will still continue will be towards these 2 projects. And another $5,000,000 will go towards New Meal Solution extending the total cost in the fall. In addition to that, we also have bank financing, dollars 12,500,000 bank financing composed of $10,000,000 term loan and $2,500,000 revolver. And out of that $12,500,000 as of November 2 years with $10,000,000 on drawn and that $10,000,000 was going to use for Montreal extension but also information also expenditures. So if you combine the bank's financing and the new liquidity financing that will come into our way, we'll continue to invest significantly in automation assessment through facilities. And in terms of margin impact, I mean, it's one of our main focus to increase the margin through automation. So in terms of timing, we don't provide any guidance, but the margin should increase to refine as the investment automation will decline. Great. Thank you. Can you speak at all to the gross margin profile of your different segments? Example, Easy Cup versus Family Plan. And do you expect the profile to differ in the meals you plan to launch, I. E. Breakfast? Yes. We're not providing that level of detail. Okay. Super. I've got 2 questions. I'm going to combine them into 1, Jonathan, and then I'm going to ask you to give some closing remarks. So TeleFresh and Blue Apron have significantly larger customer bases, but still further serves to achieve profitability. How does this food structure differ from peers? And under the current model, what number of subscribers do you believe you need to reach in order to reach profitability? And sort of, I guess, in a nutshell, what the question is asking is sort of your competitive advantage versus your competitors. Sure. So we are this is able to be profitable from 1 quarter to the next without achieving a larger subscriber number. The profitability for discrete is not about a certain number of subscribers, but rather it's about how quickly we want to be growing the business. And the reason why I feel that is because the negative EBITDA is generated by the investments that we're making in our people, in technology, in marketing, in product development to grow the business. And if we were to back up on those, we would be able to generate shorter term profitability. And we disclosed publicly that in our more mature markets, our very 30 business have already achieved EBITDA profitability that we're using to reinvest in some of the growth opportunities that we mentioned. So our strategy is really the way in which we believe we've combined longer term shareholder value by delaying that profitability and taking advantage of the window of opportunities that we have in front of us to build our market and grow a very good business quickly. And then that will hold them out around the business in terms of having the tentative deliveries across the country and having much more scale on food and packaging and that's in the automation that will allow us to be by far, the lowest cost producer in our space in Canada and hopefully globally. So that's the way that we think about our strategy and what differentiates us from some of the other companies that you mentioned. I think the we've always been the type of company that has been very lean. So we try to move quickly, but one of our core values in the business is doing more with less. And so our we've created a drastically different cost structure. We disclosed that more than half of our SG and A is marketing, growth marketing investments that we're investing to acquire new subscribers. And so what that means is our actual G and A is very tight, and we're able to run the business on a lean cost structure. So I think overall, being more capital efficient and having great competitive dynamics in the industry. And that has helped us to grow the business without burning significant amounts of cash. Okay, perfect. I have no more questions in the queue. If you want any closing remarks, and then we'll end the call. Absolutely. Well, thank you very much, everyone, for joining in. We are really excited about the future of the home meal physician business in Canada. We're very proud of what our team has accomplished in the 1st 5 years of compute life, but the opportunity in front of us has probably never been larger. It is $9,000,000,000 of online home mail solutions to go in debt, and we feel like we're uniquely positioned to capture a significant piece of that market. We have a solid balance sheet following the capital raise that we're closing on Friday to be able to invest in the automation and the future solutions that we've been talking about today. And so over the next few years, we believe that we have a limited right future for the business. And please follow-up with plan or with Fideast if you have any other further questions that you'd like to dig into. We're always happy to chat with interested parties about the good food story. Thank you very much and thank you, Glenn, and to the team for organizing the session today. Perfect. Thanks, gentlemen. Thanks, Philippe, and thanks to our investors. This concludes our call.