Ms. Heather Reisman reports

INDIGO REPORTS FY24 THIRD QUARTER RESULTS

Indigo Books & Music Inc. has released financial results for the 13-week period ended Dec. 30, 2023, compared with the 13-week period ended Dec. 31, 2022.

The company recognized total revenue of $370.6-million in the quarter, compared with revenue of $422.7-million in the same period last year. Disruptions throughout 2023, including the ransomware attack and the premature launch of a new digital platform, negatively impacted the company's ability to serve its customers. This was most significantly felt in the on-line channel, which disproportionally underperformed compared with the retail network. Prevailing economic headwinds also impacted consumer spending patterns as customers continued to show price sensitivity, noted by lower full-priced sell-through.

The company recognized decreased revenue in both its general merchandise and print product lines. General merchandise suffered from a less successful product assortment, missing certain key top-selling holiday products. On the book side of the business, top-selling releases of the quarter were not as strong as last year, leading to lower sales in this category.

Commenting on the results, chief executive officer Heather Reisman said: "These results are disappointing and in no way reflect the opportunity we have with our customers. We are deeply and effectively engaged in a turnaround. I feel confident that with the current focus, we will fully reclaim our position as the booklovers' happy place, both in-store and on-line."

Adjusted earnings before interest, taxes, depreciation and amortization for the quarter were $22.3-million, compared with $40.8-million in the prior year. The aforementioned impacts of the current macroeconomic environment led to an increased penetration of promotions and discounts. The company deeply discounted product, a decision made to fully clear unproductive inventory, which it does not intend to carry forward as part of its assortment.

During the quarter, the company undertook several steps aimed at improving customer engagement and the overall economics of the business, including enriching book assortment, simplifying and improving lifestyle assortment, and streamlining the organization and head office work force. Improving customer engagement and profitability is the full focus for the company.

Driven by the sales and margin declines, as well as significant restructuring costs, net income for the quarter totalled $10.0-million (36-cent net income per basic common share) compared with net income of $34.3-million ($1.23 net income per basic common share) in the prior year.

Subsequent to quarter-end, the company amended and extended its revolving credit facility with Trilogy Retail Holdings Inc. as lender. The material terms of the amendment are limited to: (i) an increased principal credit amount to up to $70.0-million and, with the consent of TRHI, this amount may be increased by up to an additional $10.0-million; (ii) an extended maturity date to Dec. 31, 2024; and (iii) a revised interest rate to the Royal Bank of Canada prime rate from time to time in effect plus 2.5 per cent. The amended credit facility, the effectiveness of which is subject to certain customary conditions precedent which are expected to be satisfied in the coming days, will be used for continuing working capital needs and general corporate purposes of the company, and for non-recurring restructuring costs and capital expenditures agreed between the company and TRHI from time to time. It was issued on reasonable commercial terms, and is not convertible, directly or indirectly, into equity or voting securities.

Analyst/investor call

Indigo Books will host a conference call for analysts and investors to review these results at 9 a.m. Eastern Time tomorrow, Feb. 9, 2024.

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

The call will also be available 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 15865756.

A playback of the call will also be available by telephone until 11:59 p.m. ET on Feb. 16, 2024. The call playback will be available after 12 p.m. ET on Feb. 9, 2024, 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 865756 followed by the number sign. The conference call transcript will be archived in the investor relations section of the Indigo Books website.

About Indigo Books & Music Inc.

Indigo Books is a publicly traded Canadian company listed on the Toronto Stock Exchange. Indigo Booms is Canada's leading book and lifestyle retailer, offering a curated assortment of books, gifts, and home, wellness, fashion, paper, baby and kids products that supports customers by simplifying their journey to living with intention. The company operates retail stores in all 10 provinces and one territory in Canada, and also has retail operations in the United States through a wholly owned subsidiary, operating one retail store in Short Hills, N.J. Retail operations are integrated with the company's digital channels, including the Indigo Books website and the mobile applications, which are extensions of the physical stores and offer customers an expanded assortment of book titles, along with a meaningfully curated assortment of general merchandise. Indigo Books believes in real books, in living life fully and generously, and in being kind to each other, and that stories -- big and little -- connect people.

The company supports a separate registered charity, called the Indigo Love of Reading Foundation, which is committed to addressing educational inequality and, more specifically, the literacy crisis in Canada. The foundation provides resources including new books and learning materials, training, and year-round curation support to help ensure teachers, education staff, school administrators and other key stakeholders have the tools they need to promote literacy in their communities. With the support of the company, its customers, employees and suppliers, the foundation has committed over $35.0-million to more than one million students across Canada since 2004.

We seek Safe Harbor.