Mr. Bill Besenhofer reports

THE FRESH FACTORY REPORTS Q2 2023 RESULTS WITH TOTAL BILLED REVENUE OF $5.9M

The Fresh Factory B.C. Ltd. has released its financial results for the second quarter ending June 30, 2023 (Q2 2023).

All figures in this news release are in United States dollars unless otherwise stated.

Bill Besenhofer, chief executive officer and co-founder of The Fresh Factory, commented: "Reflecting on the progress we've made over the past few quarters, I'm pleased to announce that our billed revenue for the first half of the year has reached $11.3-million, showing year-over-year growth of 30 per cent. We continue to expand the top-line of the business with new customers (four in Q2 2023) and organic growth, especially with our co-pack customers. With a focus on operational efficiencies and strategic financial management, we continued to make the necessary improvements that have helped drive better bottom-line results. As we look to the back half of 2023, we expect to execute a similar playbook, and drive both top-line and bottom-line results towards strategic targets. Looking ahead to 2024, we are excited to continue as a leader in the fresh, clean-label food and beverage industry in the United States."

Financial highlights -- H1 2023 versus H1 2022:

• Billed revenue of $11.3-million ($15.2-million (Canadian)) in H1 2023 versus $8.7-million ($11.7-million (Canadian)) for H1 2022, an increase of 30 per cent, was mainly driven by the addition of new customers and increased sales through existing customers.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of negative $600,000 (negative $800,000 (Canadian)) in H1 2023, was favourable $200,000 ($300,000 (Canadian)) versus H1 2022.

Financial and operational highlights -- Q2 2023 versus Q2 2022:

• Total billed revenue of $5.9-million ($8-million (Canadian)) in Q2 2023 versus $4.9-million ($6.6-million (Canadian)) for Q2 2022, mainly driven by new customers added in late 2022 and incremental growth of existing business.
• Adjusted EBITDA of negative $100,000 (negative $100,000 (Canadian)) in Q2 2023 versus negative $400,000 (negative $500,000 (Canadian)) in Q2 2022.
• Adjusted gross margins of $1.7-million ($2.3-million (Canadian)) in Q2 2023 versus $1.4-million ($1.9-million (Canadian)) in Q2 2022.
• As of June 26, 2023, the company purchased 167,000 of the eligible 546,436 common shares at a cost of $100,000 ($100,000 (Canadian)), representing a weighted average price of 53 cents (72 Canadian cents) per share under its June, 2022, normal course issuer bid (2022 NCIB).
• On Aug. 2, 2023, the company renewed its normal course issuer bid (2023 NCIB). Under the 2023 NCIB, the company may purchase up to 5 per cent of the issued common shares, resulting in a maximum limit of 540,169 shares.

Strategic areas of focus

The Fresh Factory is building a platform to serve emerging food and beverage brands in the fresh-food sector with an emphasis on better for you brands. The company has established four key areas of focus on which it will report on a quarterly basis moving forward:

• Execution: Focus on safety, high-quality operations and strong margins:
  • Adjusted gross margins, on a percentage basis, increased by 2.9 per cent from 26.6 per cent in Q1 2023 to 29.5 per cent in Q2 2023, mainly driven by increased sales, operational efficiencies and a March, 2023, price increase.
  • Operating profit, on a percentage basis, increased by 7 per cent from 9.6 per cent in Q1 2023 to 16.6 per cent in Q2 2023, driven by gross margin improvement and spend management.
  • The company successfully completed its annual safe quality foods (SQF) audit at its bars production facility.
  • The company successfully completed its annual GFCO-gluten-free audit, SQF.
• Growth: Invest in and grow with the right brands across diversified channels:
  • Total revenue in Q2 2023 continues to remain broadly diversified across direct-to-consumer, quick-service restaurants, retail customers and food-service customers.
  • The company expanded capacity at its bars production facility with minimal capital spend to satisfy increased demand.
  • The company produced 5.4 million total units in H1 2023, a 24-per-cent increase from H1 2022.
  • The company on-boarded four new customers, expanding its portfolio of produced products.
• Sustainability: Become a market leader in sustainability:
  • The company continues to use solar-farm energy to help offset its electrical usage.
  • The company continues to compost 100 per cent of its food waste and donate 100 per cent of produce extras.
  • The company installed a FOG mitigation system, enabling collection and recycling of oils used in production, which materially improves the quality of waste water expelled from the facility.

This earnings news release should be read in conjunction with the company's interim financial statements for the second quarter ending June 30, 2023, and the related management's discussion and analysis (MD&A), both of which will be available to download on The Fresh Factory's profile on SEDAR+.

For conversion purposes, this release used 74 cents as the conversion rate from Canadian to United States dollars.

About The Fresh Factory B.C. Ltd.

The Fresh Factory is a vertically integrated company focused on accelerating the growth of the fresh, clean-label, plant-based food and beverage brands of tomorrow. The Fresh Factory owns or partners with emerging brands in the plant-based space to develop, manufacture and sell products made from fresh produce and recognizable ingredients. It operates from its centrally located manufacturing facility near Chicago, serving customers across the United States. As a public benefits corporation, The Fresh Factory is ESG-focused (environmental, social, governance), driven to make a lighter, greener impact on the environment and a stronger, positive impact on local communities and the food system as a whole.

We seek Safe Harbor.