Goodfood Market and Beyond

Guys from Goodfood (TSX:FOOD) are getting creative.
They issued C$12.65 million in new debentures with a 12.5% interest rate, C$10 million of which were purchased by Investissement Québec, aka my taxes.
Debentures have a C$0.75 conversion rate (share dilution) and an interest that converts into shares (more share dilution) at a market price plus 50% premium in the first 2 years.
In my humble opinion, it looks like La Belle Province is propping up this unprofitable business by giving them $10m and charging “nothing” for 2 years.
This extra $10m will buy FOOD some more time, but 12.5% interest is crazy expensive.

At the same time, Goodfood is promising positive Adjusted EBIDTA very soon and is giving away big discounts to attract new clients:

“goodfood301” anyone? Source: CEO.CA/FOOD

Even one of the analysts was surprised:

Martin Landry
Okay. And I was wondering if you could touch on the promotional environment right now. I’ve received a voucher on the mail with a rebate of all the way up to $200, which — from Goodfood, which I thought was pretty high. Can you talk a little bit about the promotional environment right now, how it is? And how is your customer acquisition strategy going?

– Source Goodfood Market Corp. Q1 2023 Earnings Call Transcript

FOOD burned another C$8 million in the last quarter, resulting in a C$20.4 million shareholder deficit:

Surprisingly, despite the previous quarter’s record-breaking Gross Margin, Adjusted EBITDA Margin was lower than in Q4 2022:

This happened because of “suddenly” increased SG&A, which, at least partially, can be explained by increased quarter-over-quarter incentives: from 9% to 12% of net sales.
So, bigger promotions with fewer customers and lower revenue…
I guess if you adjust it well enough, your EBIDTA will become positive. 🙂

3 comments on “Goodfood Market and Beyond”

  1. Goodfood‘s CEO and COO only bought C$200k of debentures each, while John Khabbaz bought C$2m.
    John Khabbaz (through Phoenician Capital LLC) is the biggest shareholder of FOOD at the moment, holding 9,768,400 shares.
    I think the problem (for John) is that he bought these shares somewhere at the end of 2021 or beginning of 2022 and paid in the range of C$3-C$5/share.
    So he is probably throwing good money after bad in attempt to fix a poor investment decision. 

  2. Goodfood Announces Management Team Change.
    My speculative take is FOOD management is fighting a lot at the moment and Jonathan Roiter was either forced to leave or left by himself, because Founders and CFO had too many disagreements.
    It’s a common dynamic in struggling companies, I’ve experienced it myself in the past. 😀
    CFO couldn’t survive even 2 years: Jonathan Roiter was appointed Chief Financial Officer, effective June 7, 2021.
    Did Goodfood Founders ask him to be more creative with financial statements? Positive Adjusted EBIDTA at any cost?

    Compare it to the previous CFO, Philippe Adam, who left on April 2, 2021 and it was announced in January 2021:

    Mr. Adam’s resignation will be effective April 2, 2021 as he works with the Goodfood management team to ensure a smooth and seamless transition.

    Source : Goodfood Announces the Upcoming Departure of its Chief Financial Officer.
    There is definitely no smooth transition with Jonathan Roiter.
    They did it so fast, that Goodfood website is still showing Jonathan Roiter as CFO:

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