General Assembly Holdings Limited Reports Third Quarter 2021 Financial Results

135,048 frozen pizza (units) sold from July to September 2021

173% quarterly revenue increase to a record high of C$1,291,960

Production facility in Vaughan opened to support increased demand

TORONTO–(BUSINESS WIRE)–General Assembly Holdings Limited (the “Company” or “GA Pizza”) (TSXV: GA), an innovative, premium consumer packaged goods (“CPG”) brand dedicated to making delicious pizzas available to everyone, everywhere, is pleased to report their financial results for the three and nine months ended September 30, 2021. Unless otherwise specified, all figures are in Canadian dollars.

“General Assembly’s transitional third quarter was a success,” said Ali Khan Lalani, Founder and Chief Executive Officer of GA Pizza. “We moved production into our new master facility and activated its first line at the tail end of the quarter. Until that move, we produced frozen units in our restaurant on Adelaide Street West in Toronto, ​​and we sold every unit we had the capacity to sell, while maintaining a responsible baseline of inventory. We closed our restaurant to diners throughout the entire quarter — first to handle the increased demand for frozen units, and then, once we moved to our new production facility, to complete a significant renovation of our flagship space. In the fourth quarter, we expect to accelerate our retail business by partnering with leading distributor UNFI Canada and expanding our pilot program with Fortinos. Our new production facility will enable us to produce up to 100,000 units per month. And with the re-opening of our restaurant in December—with a fresh dining and retail experience — we expect to be firing on all cylinders in Q1 2022 as we’ll see all revenue channels producing for the first time since April 2020.”

Third Quarter 2021 Financial Highlights

• For the quarter, overall revenue increased 173% to $1,291,960 in Q3 2021, compared to $472,726 in Q3 2020.
• For the nine months ended September 30, 2021, frozen pizza revenue increased 1,887% compared to $159,071 for the same period in 2020, a result of the Company shipping 361,489 frozen pizzas in the first nine months of 2021, compared to 15,242 for the same period in 2020.
• Quarter-to-quarter revenues increased by $18,090 or 1% to $1,291,960 in Q3 2021, compared to $1,273,870 in Q2 2021. The increase in revenue reflects the Q3 2021 contribution from off-premise restaurant revenues, which was offset by the slight reduction in frozen pizza units shipped during the Company’s transition to its new production facility in Vaughan, Ontario (the “Marycroft Facility”) in Q3 2021 (see “Frozen pizza units sold” below).
• Frozen pizza units sold decreased 6% to 135,048 in Q3 2021, compared to 143,790 units sold in Q2 2021, as the Company shut down pizza production at its restaurant location and moved production to the Marycroft Facility in September.
• Frozen pizza revenues, which is comprised of revenues generated by the wholesale and DTC channels, decreased by $93,009 or 8% in Q3 2021, compared to $1,234,589 of frozen pizza revenues in Q2 2021. This is due to a reduction in frozen pizza units shipped during the months of July and August.
• Impact of restaurant closure: The decline in frozen pizza revenues was offset by an increase in restaurant revenue due to the reopening of the restaurant’s take-out and delivery services in late Q3 2021. The Company is reopening its restaurant for dining on December 1, 2021.
• Gross profit⁽¹⁾, which the Company defines as revenue minus procurement costs, was $443,129 (34% of revenues) in Q3 2021 compared to $555,440 (44% of revenues) in Q2 2021. Gross profit represents the Company’s cost to procure and manufacture the Company’s frozen pizzas as well as the gross profit from the restaurant operations.
• Fulfillment costs decreased by 9% in Q3 2021 to $499,778 compared to Q2 2021.
• General and administrative expenses increased by $300,003 in Q3 2021 compared to Q2 2021, and increased by $2,122,349 compared to the same quarter in 2020, because of an increase in headcount and associated wages and benefits, an increase in office and occupancy expenses, and an increase in costs related to moving production to the Marycroft Facility, as well as legal, accounting, tax, and other professional fees related to the Company’s go-public activities.
• Adjusted EBITDA⁽¹⁾ was a loss of $2,376,809 in Q3 2021 compared to an Adjusted EBITDA loss of $2,250,096 in Q2 2021 and Adjusted EBITDA of $31,304 in Q3 2020.
  • The Adjusted EBITDA loss in Q3 2021 compared to the same quarter in 2020 is a result of the increase in fulfillment costs, sales and marketing costs, and general and administrative operating expenses, which have increased significantly over the past twelve months as the Company added new headcount and infrastructure to support the growing demand for frozen pizzas.
• Cash on hand: On September 30, 2021, the Company had cash on hand of $2,297,355, compared to $6,293,740 as of June 30, 2021, and $878,505 as of December 31, 2020.

Financial and Operational Metrics

		Three months ended						Nine months ended
		Sept. 30, 2021		June 30, 2021		Sept. 30, 2020		Sept. 30, 2021		Sept. 30, 2020
Revenue by channel
Direct to Consumer (“DTC”)		$ 827,956		$ 980,755		$ —		$ 2,443,330		$ —
Wholesale		313,624		253,834		107,303		718,052		159,071
Restaurant and other		150,380		39,281		365,423		476,787		1,225,569
Total revenue		$ 1,291,960		$ 1,273,870		$ 472,726		$ 3,638,169		$ 1,384,640
Procurement expense		848,831		718,430		213,513		2,083,893		680,977
Gross Profit		$ 443,129		$ 555,440		$ 259,213		$ 1,554,276		$ 703,663
Gross Profit %		34%		44%		55%		43%		51%
Fulfillment expense		499,778		546,852		98,460		1,374,579		197,625
General and administrative expense		2,285,739		1,985,736		163,390		5,414,597		533,514
Sales and marketing expense		475,524		571,912		53,336		1,545,415		119,055
Operating loss		(2,817,912)		(2,549,060)		(55,973)		(6,780,315)		(146,531)
Net income (loss)		$ (4,410,159)		$ 532,214		$ (103,162)		$ (9,368,157)		$ (287,163)
Adjusted EBITDA		(2,376,809)		(2,250,096)		31,304		(5,908,196)		102,044
Production volume shipped by channel (units)
Direct to Consumer (“DTC”)		93,155		111,466		—		268,583		—
Wholesale		41,893		32,324		10,244		92,906		15,242
Total		135,048		143,790		10,244		361,489		15,242
Frozen pizza revenue		$ 1,141,580		$ 1,234,589		$ 107,303		$ 3,161,382		$ 159,071

(1) See “Non-GAAP Measures” below and in our Management’s Discussion and Analysis for the three months and nine months ended September 30, 2021 and 2020 (which is available under our SEDAR profile at www.sedar.com) for further details concerning Gross Profit, Gross Profit % and Adjusted EBITDA including definitions and reconciliations to the relevant reported IFRS measures.

Corporate and Operational Highlights and Corporate Developments in Q3 2021 and Subsequent to the End of Q3 2021

• Retail sales: GA Pizza units were distributed to more than 100 retailers in Q3 2021, including a milestone pilot program with Fortinos Supermarket, a grocery chain owned by Loblaw Companies Ltd.
  • Growth in the retail channel was further accelerated by a new sales partnership with national CPG food broker Propel Natural Foods, which was announced in August.
  • Late in Q3 2021, GA Pizza filed documents to list with UNFI Canada, the Canadian subsidiary of the largest publicly traded grocery distributor in North America.
• Direct-to-consumer sales: The Company expanded its direct-to-consumer markets outside of the Greater Toronto Area, deepening business in Prince Edward County, Muskoka, Ottawa, Kingston and the Windsor corridor.
  • The Company launched a new direct-to-consumer website with new branding, offering new purchase options to consumers.
• Manufacturing: The Company opened the Marycroft Facility, a 42,060 square foot master production facility in Vaughan, Ontario, on September 9, 2021. In its first weeks of operation, the facility’s first line (Line One) had output of more than 4,000 units per day; monthly output of 150,000 pizzas is expected by the end of Q1 2022.
  • The facility was certified by Toronto Public Health, as well as by the Canadian Food Inspection Agency, which enables the Company to sell throughout Canada.
  • By the end of Q3 2021, the facility was operating between two shifts, five days a week.
• Scaling Consumer Packaged Goods: The Company continues to put a greater focus on the CPG business within General Assembly, with the intent of scaling up CPG sales to drive further increases in frozen pizza units sold.
• Leadership: The Company strengthened its leadership ranks with the appointments of:
  • Hormis Tharakan as Chief Operating Officer. Mr. Tharakan brings more than 16 years of leading sustainable growth at innovative food production brands, with acumen in negotiations, strategic sourcing, purchasing, manufacturing, frozen food, and inventory management.
  • Karen Zuccala to the Company’s Board of Directors. Ms. Zuccala is an experienced executive in the retail and consumer packaged goods space with a wide knowledge of brand strategy. She has also been appointed as Chair of the Nominating and Corporate Governance Committee.
• Media: The Company continued to receive top-tier press coverage, with prominent editorial placements in Forbes and LCBO’s Food & Drink Magazine.
• Base shelf prospectus filing: On November 3, 2021, the Company filed and obtained a receipt for a preliminary short form base shelf prospectus (the “Preliminary Base Shelf Prospectus”) with the securities commissions in each of the provinces of Canada other than the province of Québec in respect of an aggregate offering amount of up to $50,000,000. The Company has filed the Preliminary Base Shelf Prospectus to maintain financial flexibility as it continues to scale its business in retail and DTC sales channels, supported by a new master production facility. The Preliminary Base Shelf Prospectus is available under the Company’s SEDAR profile at www.sedar.com, and is subject to review and approval by the Ontario Securities Commission.
• Debt financing: On November 5, 2021 (the “Loan Date”), the Company entered into loan arrangements with certain third-party lenders whereby such lenders advanced to the Company an aggregate of $2,000,000 (the “Loans”). Details regarding the Loans are set forth in the press release issued by the Company on the Loan Date. The Loans remain subject to review and acceptance by the TSX Venture Exchange.

Non-GAAP Measures

The items listed below represent the consolidated income and expense amounts that are required to reconcile net loss for the year as defined under IFRS to the non-IFRS measure of adjusted EBITDA for the year.

		Three months ended						Nine months ended
		Sept. 30, 2021		June 30, 2021		Sept. 30, 2020		Sept. 30, 2021		Sept. 30, 2020
Net income (loss) as reported		$ (4,410,159)		$ 532,214		$ (103,162)		$ (9,368,157)		$ (287,163)
Adjustments:
Stock-based compensation		239,402		191,521		—		476,350		—
Depreciation		201,701		107,443		87,277		395,769		248,575
Finance expense		69,004		33,619		92,575		130,578		232,855
Remeasurement of derivative warrant liability		1,519,894		(3,118,558)		—		2,450,250		—
Other expense (income)		3,349		3,665		(45,386)		7,014		(92,223)
Adjusted EBITDA		$ (2,376,809)		$ (2,250,096)		$ 31,304		$ (5,908,196)		$ 102,044

The Company measures the success of the Company’s strategies and performance based on adjusted EBITDA, which is outlined and reconciled with net income (loss). The Company defines adjusted EBITDA as net income (loss) from operations before: (a) depreciation of property and equipment and amortization of intangible assets; (b) share-based payments; (c) finance income and costs; (d) gain or loss from the remeasurement of derivative warrant liabilities; (e) depreciation of right-to-use-assets; and (h) employee severance expenses. Management uses adjusted EBITDA as a measure of the Company’s operating performance because it provides information related to the Company’s ability to generate operating cash flows for working capital requirements, capital expenditures, and potential acquisitions. The Company also believes that analysts and investors use adjusted EBITDA as a supplemental measure to evaluate the overall operating performance of companies in its industry.

The non-IFRS financial measure is used in addition to and in conjunction with results presented in the Company’s consolidated financial statements prepared in accordance with IFRS and should not be relied upon to the exclusion of IFRS financial measures. Management strongly encourages investors to review the Company’s consolidated financial statements in their entirety and to not rely on any single financial measure. Because non-IFRS financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-IFRS financial measures having the same or similar names. In addition, the Company expects to continue to incur expenses similar to the non-IFRS adjustments described above, and exclusion of these items from the Company’s non-IFRS measures should not be construed as an inference that these costs are unusual, infrequent, or non-recurring.

The company’s profile is available on SEDAR (www.sedar.com) for complete copies of the Company’s unaudited condensed consolidated interim financial statements and management’s discussion and analysis (MD&A) for the three and nine months ended September 30, 2021.

About GA Pizza

GA Pizza began its life as a fast-casual pizza restaurant in the heart of Toronto. Four years later, we also offer a freezer-to-table consumer packaged goods line and a revolutionary direct-to-consumer eCommerce experience—not to mention a pizza box with more than one pizza in it. Our ambition? Make delicious pizzas available to everyone, everywhere. We’re always working to take pizza to new heights—from showing the world that better pizza is possible, to finding new spaces and places to deliver unrivaled pizza experiences. Find us in your freezer or visit gapizza.com for more information.

Visit invest.gapizza.com or gapizza.com for more information.

Cautionary Notice

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward-Looking Information

This press release contains statements which constitute “forward-looking information” or “forward-looking statements” (together “forward-looking information”) within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs, and current expectations of the Company with respect to future business activities and operating performance. Forward-looking information is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” or similar expressions and includes information regarding anticipated increases to the Company’s production capacity at the master facility and the Company’s growth strategy.

Investors are cautioned that forward-looking information is not based on historical facts but instead reflect the Company’s management’s expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although the Company believes that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance, or achievements of the combined company. Among key factors and risks that could cause actual results to differ materially from those projected in the forward-looking information may include, without limitation, the following: there being no market for the securities of the Company; the Company’s limited operating history; global economic risk; COVID-19’s impact on the Company; the general economic environment; cybersecurity risks; financial projections may prove materially inaccurate or incorrect; the Company may experience difficulties to forecast sales; general competition in the industry from other companies; management of growth-related risks; reliance on management; risks relating to insurance; changes in food and supply costs could adversely affect profitability and ultimately our results of operations; our business could be adversely affected by increased labour costs or difficulties in finding suitable employees; changes in customer tastes and preferences, spending patterns and demographic trends could cause sales to decline; changes in nutrition and food regulation; failure to establish our master production facility; failure to expand production capacity; disruption at our facilities; government regulation of the food industry creating risks and challenges; risk associated with food safety and consumer health; changes in internet and social media search algorithms; risks associated with leasing commercial and retail space; third party reliance for shipping and payment processing; environmental laws; we may not persuade customers of the benefits of paying our prices for higher-quality food; our marketing and advertising strategies may not be successful, which could adversely impact our business; requirements for further financing; the Company may prioritize customer growth and engagement and the customer experience over short-term financial results. This forward-looking information may be affected by risks and uncertainties in the business of the Company and market conditions.

Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated, or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.

Contacts

Media
Tat Read, Communications Director, GA Pizza

[email protected]

Investor Relations
Glen Akselrod, Bristol Capital

[email protected]

Ali Khan Lalani, Chief Executive Officer & Founder

(416) 583-5571