Mr. Peter Ruis reports

INDIGO REPORTS FY23 FULL-YEAR RESULTS AND PROVIDES UPDATE ON RANSOMWARE ATTACK

Indigo Books & Music Inc. has released its financial results for the 52-week period ended April 1, 2023, compared with the 52-week period ended April 2, 2022.

On Feb. 8, 2023, the company was the victim of a ransomware attack, resulting in internal operational disruptions and service disruptions to both sales channels. This had a material impact on sales and profitability in the fourth quarter and fiscal year, as further discussed herein. The company's e-commerce platforms were temporarily shut down, with the full website being restored after four weeks. The retail network was unable to process electronic payments for approximately three days and experienced other operational limitations that impacted the company's ability to fulfil demand.

Revenue for the year totalled $1,058-million, compared with $1,062-million in the prior year, a decrease of $4.6-million or 0.4 per cent. Prior year revenue was inclusive of a one-time payment of $17.0-million, resulting from the renegotiation of the company's partnership with one of its cafe vendors. Merchandise sales, the total of retail and on-line sales and excluding other revenues, grew $4.6-million or 0.5 per cent to $1,015-million, compared with $1,010-million in the prior year.

Merchandise sales growth was achieved despite the ransomware attack, which compounded the headwinds of an already challenging macroeconomic environment. Customers' desire to shop in-store fuelled a rebounding retail channel, which in the company's second quarter drove sales above prepandemic levels and in the third quarter delivered a record-breaking Boxing week. Strong retail performance resulted in a shift in the sales channel mix, which coupled with the ransomware attack led to a year-over-year decline in on-line sales performance. However, the company's e-commerce platforms sustained year-to-date sales growth of 71 per cent, through January, compared with prepandemic fiscal 2020, demonstrating their importance as a lever of expansion and investment for the company. The general merchandise business increased 5.8 per cent in the current year, with double-digit growth in the paper, baby and wellness product categories. The print business declined by 3.7 per cent, negatively impacted by system limitations from the ransomware attack which adversely affected the company's ability to replenish its inventory levels.

Commenting on results, chief executive officer Peter Ruis said: "This has been a turbulent year for Indigo, as the progress gained from our postpandemic re-emergence was negatively impacted by adverse macroeconomic factors. These headwinds were furthered by the ransomware attack in our fourth quarter. I am incredibly thankful for our incredible teams, who have been working tirelessly to bring operations back to normal. Through all of this, Indigo customers continued to show their loyalty to our brand, and we are proud to have achieved merchandise sales growth. We are looking forward to injecting momentum back into the business in fiscal 2024 with the exciting launch of a new digital platform in the late summer and our new flagship store at the Well, Toronto, in September."

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the year was a loss of $20.5-million, compared with earnings of $32.5-million in the prior year. The ransomware attack caused an interruption to the company's sales operations, the ultimate financial impact of which cannot be reasonably estimated at this time, however, the impact was material to fiscal 2023 sales, adjusted EBITDA and net loss position. Adjusted EBITDA was further impacted by the macroeconomic environment which drove increased cost of inventories and an incremental $5.5-million of international freight, amongst other inflationary pressures. The company was challenged by higher shrink levels, which is consistent with industry trends, and incurred additional costs associated with the modernization of its e-commerce platforms.

Indigo maintains cyber insurance coverage and is in the process of working with its insurer to make claims under the policy. While the business interruption losses cannot be reasonably estimated at this time, the company incurred $5.2-million of expenses as of April 1, 2023, which impacted the net loss position. Net loss for the year totalled $49.6-million ($1.78 net loss per basic common share) compared with net earnings of $3.3-million (12 cents net earnings per basic common share) in the prior year.

Fourth quarter results were heavily impacted by the ransomware attack, driving a decrease in revenue of $26.5-million to $194.2-million for the quarter ended April 1, 2023, compared with revenue of $220.7-million in the prior year. This also accounted for the majority of the $19.1-million change in net loss position, which was a loss of $42.5-million compared with a loss of $23.4-million in the same period last year.

Indigo is also pleased to announce the appointment of Donald Lewtas, Joel Silver and Markus Dohle to its board of directors, with Mr. Lewtas and Mr. Silver joining the audit committee and Mr. Lewtas chairing the committee.

On June 27, 2023, the company received a binding commitment with respect to a revolving line of credit facility with a related party, Trilogy Retail Holdings Inc., as lender. The credit facility is for an aggregate principal amount of up to $45.0-million and, with the consent of Trilogy, the amount may be increased by up to $10.0-million. The credit facility will be used to finance the seasonal working capital and operational needs of the company, will be issued on reasonable commercial terms, and will not be convertible, directly or indirectly, into equity or voting securities. The credit facility will be subject to the terms and conditions of the credit agreement anticipated to be entered into between the company and Trilogy on or before July 31, 2023.

Analyst/investor call

Indigo will host a conference call for analysts and investors to review these results at 10 a.m. Eastern Time, tomorrow, June 28, 2023.

To join the conference call without operator assistance, you may register and enter your phone number on-line to receive an instant automated callback.

The call can also be accessed through an operator by dialling 416-764-8659 from within the Toronto area, or 1-888-664-6392 outside of Toronto. The eight-digit participant code is 73083952.

A playback of the call will also be available by telephone until 11:59 p.m. ET on July 5, 2023. The call playback can be accessed after 12 p.m. ET on June 28, 2023, by dialling 416-764-8677 from within the Toronto area, or 1-888-390-0541 outside of Toronto. The six-digit replay passcode number is 083952 followed by the pound key. The conference call transcript will be archived in the investor relations section of the Indigo website.

About Indigo Books & Music Inc.

Indigo is a publicly traded Canadian company listed on the Toronto Stock Exchange (IDG). Indigo is Canada's leading book and lifestyle retailer, offering a curated assortment of books, gifts, home, wellness, fashion, paper, baby and kids products, that support customers by simplifying their journey to Living with Intention. Indigo believes in real books, in living life fully and generously, in being kind to each other and that stories -- big and little -- connect people.

We seek Safe Harbor.