Earnings release
Page 1
DAVIDsTEA Delivers Strong Start to Fiscal 2025 with Higher Margins and Profitability Gains in Q1 ➢ Q1 sales reached $13.5 million, representing a 0.6% increase year-over-year ➢ Gross profit margin rose to 51.1%, up from 43.3% in Q1 2024 ➢ Net loss significantly reduced to $0.2 million compared to $2.6 million in Q1 2024 ➢ Adjusted EBITDA turned positive at $1.6 million versus negative $0.8 million in Q1 2024 ➢ Cash position strengthened to $10.4 million, up from $8.8 million in Q1 2024 MONTREAL, June 17, 2025 - DAVIDsTEA Inc. (TSX-Venture: DTEA) (“DAVIDsTEA” or the “Company”), a leading North American tea merchant, today announced its financial results for the quarter ended May 3, 2025. “Our first -quarter performance demonstrates consistent execution of our omni -channel growth strategy and significant operational progress. Retail store sales rose 11.5% year-over-year, including 2.8% comparable store sales growth, while gross profit margin exceeded 51% of sales. With adjusted EBITDA reaching $1.6 million, these are meaningful steps forward in our turnaround journey ,” said Sarah Segal, Chief Executive Officer and Chief Brand Officer, DAVIDsTEA. “As we enter the summer season, we are preparing to launch new retail locations this fall —an important milestone in our broader growth strategy. These openings are designed to strengthen revenue performance and support our goal of achieving a compound annua l growth rate of more than 10% over the next three years. We also expect positive momentum across our e -commerce and wholesale channels. At the core of our strategy is a commitment to sustainable, long -term growth, through optimizing our retail footprint, elevating the brand experience at every touchpoint, and deepening customer engagement,” stated Ms. Segal. “We began fiscal 2025 on a strong note, delivering incremental sales growth, improved gross margins, tighter expense control, and a significantly reduced net loss in the first quarter. While we anticipate some seasonal softness in the second and third quarters, our leaner cost structure, adequate liquidity, and diversified channel mix positions us to achieve our objective of full-year profitability. We remain focused on disciplined execution and long-term value creation for shareholders. Revenues are up, gross profit is up, and costs are down — a direct result of laser- focused execution of our business plan,” said Frank Zitella, President, Chief Financial and Operating Officer, DAVIDsTEA. “Our focus has been on delivering a value proposition that resonates with consumers supported by a memorable experience, both in person and online in order to generate sales as we deal with macro-economic headwinds,” Mr. Zitella added. Operating Results for the First Quarter of Fiscal 2025 Three Months Ended May 3, 2025 compared to Three Months Ended May 4, 2024 Sales. Sales for the first quarter of fiscal 2025 increased by $0.1 million to $13.5 million, or 0.6%, compared to the prior year quarter. Sales in Canada, which accounted for 86.1% of total revenue, decreased by $0.1 million, or 0.8%, compared to the prior year quarter. U.S. sales of $1.9 million increased by $0.2 million or 10.1% compared to the prior year quarter. Brick-and-mortar sales of $5.0 million increased by $0.5 million or 11.5% from $4.5 million in the prior year quarter. Brick-and-mortar sales represented 37.3% of sales compared to 33.7% of sales in the prior year quarter. Online sales of $6.4 million decreased by $0.3 million or 4.8% from $6.7 million in the prior year quarter. Online sales represented
Page 2
2 47.5% of sales compared to 50.2% of sales in the prior year quarter. Sales from our wholesale channel of $2.1 million decreased by $0.1 million or 5.3% from $2.2 million in the prior year quarter. Wholesale sales represented 15.2% of sales compared to 16.1% of sales in the prior year quarter. Gross profit. Gross profit increased by 18.6% to $6.9 million from the prior year quarter due to an increase in product margins, and a decrease in unitized freight, shipping and fulfillment costs. Gross profit as a percentage of sales increased to 51.1% for the quarter compared to 43.3% in the prior year quarter. Selling, general and administration expenses . Selling, general and administrative expenses (“SG&A”) were $6.9 million for the quarter, representing a decrease of $1.5 million, or 17.9%, compared to the same quarter in the prior year. The most significant driver of this decrease was a $1.1 million redu ction in ongoing IT -related expenses, resulting from the successful conversion of the Company’s full technology stack to a lower-cost operating system. This strategic transition has materially and permanently reduced our operating cost base, providing sustainable efficiency gains going forward. Additionally, the prior year quarter included $0.6 million in professional fees related to financing activities and $0.5 million in impairment charges on property and equipment and intangible assets. These items did not recur in the current quarter, further contributing to the year-over-year reduction in SG&A. These savings were partially offset by an increase in marketing expenses of $0.4 million and employee separation costs of $0.3 million. As a percentage of sales, SG&A expenses declined to 51.3% in the current quarter from 62.9% in the prior year quarter, reflecting improved cost efficiency and operating leverage. EBITDA, Adjusted EBITDA and Adjusted EBITDA (after rent equivalent expense)1. EBITDA was $1.1 million in the quarter compared to negative $2.0 million in the prior year quarter. Adjusted EBITDA was $1.6 million compared to negative $0.8 million for the same period in the prior year. Adjusted EBITDA (after rent equivalent expense) was $0.4 million in the quarter compared to negative $1.6 million in the prior year quarter. The increases quarter over quarter reflect the impact of an increase in Gross profit and a decrease in ongoing SG&A expenses. Net loss and Adjusted net income (loss). Net loss was negative $0.2 million in the quarter compared to a net loss of $2.6 million in the prior year quarter. Adjusted net income was $0.2 million in the first quarter compared to adjusted net loss of $1.6 million in the prior year quarter. Fully diluted net loss per share and Adjusted fully -diluted net income (loss) per share. Fully diluted net loss per common share amounted to $0.01 in the quarter compared to a fully diluted net loss per common share of $0.10 in the prior year quarter. Adjusted fully diluted net income per common share1, which is Adjusted net income on a fully diluted weighted average shares outstanding basis, was $0.01 compared to an Adjusted fully diluted net loss of $0.06 in the prior year quarter. Liquidity and Capital Resources As at May 3, 2025, the Company had $10.4 million of cash held by major Canadian financial institutions. Working capital was $12.7 million as at May 3, 2025 compared to $12.8 million as at February 1, 2025. The decrease in working capital is substantially explained by a decrease in cash and prepaid expenses and deposits. These are substantially offset by an increase in inventories and a decrease in trade and other payables. 1 Please refer to “Use of Non-IFRS Financial Measures” in this press release.
Page 3
3 Our primary source of liquidity is cash on hand and cashflow generated from operations. Our working capital requirements are driven by the purchase of inventory, payment of payroll, ongoing technology expenditures and other operating costs. Our working capital requirements fluctuate during the year, rising in the second and third fiscal quarters as we take title to increasing quantities of inventory in anticipation of our peak selling season in the fourth fiscal quarter. Capital expenditures amounted to $34 in the first quarter of fiscal 2025 (May 4, 2024 - $461). As at May 3, 2025, the Company had financial commitments in connection with the purchase of goods and services that are enforceable and legally binding on the Company, amounting to $9.5 million, net of $1.2 million of advances (fiscal 2024 - $7.4 million, net of $0.5 million of advances) which are expected to be discharged within twelve months. Commitments include variable payments required under certain IT service contacts which are based on sales with minimum committed amounts extending to fiscal 2027 totaling $0.4 million. Condensed Consolidated Financial Data (Canadian dollars, in thousands, except per share information) ________________ 1 Please refer to “Use of Non-IFRS Financial Measures” in this press release. Sales $ 13,518 $ 13,435 Cost of sales 6,615 7,615 Gross profit 6,903 5,820 Selling, general and administration 6,932 8,447 Results from operating activities (29) (2,627) Finance costs 217 146 Finance income (80) (124) Net loss $ (166) $ (2,649) Sales - by country Canada $ 11,639 $ 11,729 USA 1,879 1,706 Sales - by channel Online 6,419 6,740 Retail 5,047 4,528 Wholesale $ 2,052 $ 2,167 Comparable store sales growth 2.8% 7.7% Comparable retail sales per square foot $ 306 $ 298 EBITDA (1) 1,138 (1,980) Adjusted EBITDA (1) 1,576 (820) Adjusted EBITDA (after rent equivalent 353 (1,588) Adjusted net income (loss) (1) 196 (1,577) Adjusted fully diluted income (loss) per $ 0.01 $ (0.06) Gross profit as a percentage of sales 51.1% 43.3% SG&A expenses as a percentage of sales 51.3% 62.9% For the three-months ended May 3, May 4, 2025 2024
Page 4
4 Use of Non-IFRS Financial Measures This press release includes “non-IFRS financial measures” defined as including: 1) EBITDA, Adjusted EBITDA and Adjusted EBITDA (after rent equivalent expense) , 2) Adjusted net income (loss), and 3 ) Adjusted fully diluted income (loss) per common share. These non-IFRS financial measures are not defined by or in accordance with IFRS and may differ from similar measures reported by other companies. DAVIDsTEA believes that these non -IFRS financial measures provide knowledgeable investors with useful information with respect to historical operations. These non -IFRS financial measures are presented as supplemental performance measures because the Company believes they facilitate a comparative assessment of its operating performance relative to its performance based on IFRS results, while isolating the effects of some items that vary from period-to-period but not in substitution to IFRS financial measures. Please refer to the non-IFRS financial measures section in the Company’s Management Discussion and Analysis for a reconciliation to IFRS financial measures. Note This release should be read in conjunction with the Company’s Management Discussion and Analysis, which is filed with Canadian securities regulatory authorities on SEDAR+ at www.sedarplus.ca and will also be available in the Investor Relations section of the Company’s website at www.davidstea.com. Caution Regarding Forward-Looking Statements This press release includes statements that express our opinions, expectations, beliefs, plans or assumptions regarding future events or future results and there are, or may be deemed to be, “forward -looking statements” within the meaning of applicable Canadian securities law. These forward-looking statements can generally be identified by the use of forward -looking terminology, including the terms “believes”, “expects”, “may”, “will”, “should”, “approximately”, “intends”, “plans”, “estimates” or “anticipates” or, in each case, their negatives or other variations or comparable terminology. These forward -looking statements include all matters that are not historical facts and Cash flows used in operating activities $ (4,575) $ (2,587) Cash flows used in financing activities (1,176) (780) Cash used in investing activities (34) (461) Decrease in cash during the period (5,785) (3,828) Cash, end of period $ 10,402 $ 8,772 Free cash flow $ (4,609) $ (3,048) Inventory turnover 0.27 0.25 CAPEX $ 34 $ 461 Number of stores 20 18 As at Cash $ 10,402 $ 16,187 Accounts and other receivables 2,237 1,775 Inventories 12,989 12,736 Prepaid expenses and deposits 1,965 1,468 Trade and other payables $ 7,527 $ 11,814 May 3, February 1, 2025 2025 For the three-months ended May 3, May 4, 2025 2024
Page 5
5 include statements regarding our intentions, beliefs or current expectations concerning, among other things, our plan to return to profitability , future sales through our retail, e-commerce and wholesale channels, and our results of operations, financial condition, liquidity and prospects. While DAVIDsTEA believes its opinions and expectations are based on reasonable assumptions, such forward - looking statements are inherently subject to risks, uncertainties and assumptions about us, including the risk factors discussed in Management Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended February 1, 2025, filed with the Autorité des marchés financiers on May 28, 2025 , which could materially affect the Company’s business, financial condition or future results. Conference Call Information A conference call to discuss first quarter financial results for fiscal 2025 is scheduled for June 17, 2025, at 8:30 am Eastern Time. The conference call will be webcast and may be accessed via the Investor Relations section of the Company’s website at ir.davidstea.com. An online archive of the webcast will be available within two hours of the conclusion of the call and will remain available for one year. About DAVIDsTEA DAVIDsTEA offers a specialty branded selection of high-quality proprietary loose-leaf teas, pre-packaged teas, tea sachets, tea-related accessories and gifts through its e-commerce platform at www.davidstea.com and the Amazon Marketplace, its wholesale customers which include over 4,000 grocery stores and pharmacies, over 1,500 convenience stores in Canada and over 900 grocery stores in the United States, as well as 20 company-owned stores across Canada. It off ers primarily proprietary tea blends that are exclusive to the Company, as well as traditional single-origin teas and herbs. The team’s passion for and knowledge of tea permeates the Company’s culture and is rooted in an excitement to explore the taste, health and lifestyle elements of tea. With a focus on innovative flavours, wellness-driven ingredients and organic tea, the Company launches seasonally driven “collections” with a mission of making tea fun and accessible to all. The Company is headquartered in Montréal, Canada. Contact information MBC Capital Markets Advisors Pierre Boucher 514-731-0000 DAVIDsTEA Investor Relations investors@davidstea.com