DAVIDsTEA Inc.

Thank you. Good afternoon, everyone.

With me on the call is Joel Silver, President and Chief Executive Officer. Before we get started, I would like to remind you of the company’s Safe Harbor language which I'm sure you are all familiar with.

This presentation includes forward-looking statements about our expectations for the performance of our business in the coming quarter and year. Each forward-looking statement contained in this presentation is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements.

Additional information regarding these factors appear under the heading Risk Factors in our 10-Q, that will be filed with the SEC subsequent to this call and will be available at www.sec.gov and on our website. The forward-looking statements in this discussion speak only as of today's date and we undertake no obligation to update or revise any of these statements.

If any non-IFRS financial measure is used in this call, a presentation of the most directly comparable IFRS financial measure to this non-IFRS financial measure will be provided as a supplement financial information in our press release. In the interest of time and given that we are hosting our annual general meeting later this week, we will not be holding a Q&A session at the end of this call.

We will connect with analysts and investors with questions on an individual basis. Now, I'd like to turn the call over to Joel Silver, President and Chief Executive Officer of DAVIDs TEA.

Thank you, Howard. Good afternoon everyone, and thank you for joining us today.

First, before I address the Q1 results, I'd like to thank those shareholders who’ve voted in advance of our annual general meeting, which will be held this Thursday, 9:30 AM in Downtown Montreal at the Queen Elizabeth Hotel. For those shareholders that have not yet voted, we encourage you to do so before the cut off at 5 PM Eastern Time.

For information on how to vote, please visit the Investor Relations page on our website. Every vote counts, no matter how many shares you have and we want all of your voices to be heard.

While we acknowledge our shareholders who have voted to date, it should also be mentioned that a proxy contest of this nature is distracting and can be harmful to a brand and the performance of the business. As we have said from the outset, we believe this could have been avoided and tried repeatedly to put together a compromised slate, but our attempts were rejected.

For our shareholders, customers, and everyone at DAVIDs TEA, thank you for supporting us through this. We are pleased that it will be coming to an end as of this week.

With that, I will turn to the results for the quarter and the progress we're making against our strategic plan. In the first quarter of 2018, we continued to focus on addressing challenges in the business and continuing to deliver an exceptional tea experience for our customers, both in our stores across North America and online.

We remain committed to improving the performance of our Canadian and US network of stores, leveraging our store brand, and charting the best path forward for all of DAVIDs TEA stakeholders. For those of you who have been following our communications over the past two months, you'll have heard me speak on four key pillars that anchor our vision for the future.

I want to take this opportunity to walk you through them and explain how they will help drive improved performance. First, we are investing in e-commerce, which is a core part of our growth plan, and we'll complement the work we're doing in stores to enhance the customer experience.

Second, we're refocusing on merchandising and marketing by leveraging customer insights to build our product assortment and drive new business. And third, we're taking full advantage of the strong DAVIDs TEA brand by identifying opportunities to drive sales through new wholesale channels and eventually into international markets.

And last and perhaps most importantly, we are continuing to build the sustainably profitable store network by focusing on improving productivity of our existing stores, specifically expanding the DAVIDs TEA 2.0 store renovation concept and closing underperforming stores. Howard will speak to our Q1 numbers in greater detail shortly, but to summarize comparable sales declined 7% relative to the first quarter 2017.

This overall decline in sales can be attributed in part to an average -- to a decrease in mall traffic and stores and certain stores located in sub optimal locations, the latter of which we are actively working to correct with select store closures and renegotiation of subpar lease agreements. The performance can also be attributed to legacy purchasing and merchandising decisions that are actively -- that the team now is actively working to correct.

Our overall performance in the first quarter of 2018 is clearly not where it needs to be. There is work to be done.

As the management team, we have been investing our time and energy in executing our plans to turnaround the company. With that being said, I’m encouraged by the progress we're making.

We saw positive momentum in the first quarter of 2018. Here's what we saw in Q1 that supports this.

E-commerce sales continued to perform well into the first quarter delivering double-digit growth compared to the first quarter of 2017. We launched the new DAVIDs TEA online platform in April and we are continuing to introduce new features and functions that will improve the user experience on all devices.

As we've previously noted, we have also developed a solid platform to begin selling DAVIDs TEA products on Amazon, we expect will be in place in fall 2018. We have also added to our team of digital and e-commerce marketing professionals and continue to work for additional staff to help drive this growth.

They are focused on ensuring our online customer experience is best-in-class and on introducing digital and social media marketing initiatives that will deliver results and drive traffic to our website and into our stores. While we are focusing on improving sales and profitability at our bricks and mortar stores, as a 21st Century retailer, we also recognize growth will be driven by e-commerce sales.

With the investments we have made in this area, we believe we are now in a solid position to support our ambitious e-commerce goals over the next several years. In Q1 2018, we saw a relative improvement of sales in our US stores.

We've seen improvement at numerous stores, which includes both locations that previously co-located with Teavana as well as those that were not. We now have 50 stores in the US and we intend to take a very conservative go-slow approach to expanding that footprint, focused on ensuring our existing stores are optimized and profitable.

In addition, we are continuing to see strong sales improvements in our new DAVIDs TEA 2.0 stores. The emphasis of the new DAVIDs TEA store format is improving our service model and in-store customer experience, and it seems to be resonating well with customers.

The signature tea wall remains, but customers can now self shop and buy prepackaged teas thereby accelerating the service levels. This new store format will become the blueprint of all our future store renovation programs.

We expect to introduce five DAVIDs TEA 2.0 stores before holiday season. We believe the addition of more 2.0 stores will help drive improvements in same-store sales as renovated stores come back online.

Lastly, we remain in a solid financial position with a cash balance of almost – of 53.9 million at the end of the first quarter. As we look forward to the second quarter, we expect some of the challenges we're facing to persist, but there is change on the horizon.

We now have a strong leadership team in place. We're focused on the execution of our plan, and we expect to see notable improvements in the third and fourth quarters as our plan, most notably, improved product offering and merchandising gains full traction as we go into the holiday.

I'll now turn the call over to Howard for a more detailed review of our first quarter financial results.

Thank you, Joel. I'll begin my remarks with a review of our fiscal 2018 first quarter results.

As a reminder, the dollar amounts referred to when reviewing our results are in Canadian dollars. Sales decreased by 6% to 45.8 million in the first quarter of 2018 from 48.7 million from the same quarter in 2017.

We ended the quarter with a total of 240 stores, an increase of 8 net new stores versus 232 stores at the end of Q1 2017. First quarter comparable sales decreased by 7% as we continued to face challenges with the decrease in mall traffic and with our accessory and kit product assortment.

This is compared to an 8.1 comp decrease in Q4 last year. Gross profit decreased 6.2% to 22.7 million from 24.2 million in the first quarter of 2017.

Gross profit, as a percentage of sales was stable at 49.6 year-over-year. The product margin increased over last year driven by less promotional activity and a shift in product mix.

This was offset by de-leveraging of fixed costs associated with the negative comparable sales. Adjusted SG&A in the first quarter decreased to 25.1 million from 25.6 million in Q1 2017, which includes the impact of significant legislative minimum wage increases.

As a percentage of sales, adjusted SG&A increased to 54.8% from 52.6% last year to the de-leveraging of fixed costs due to the negative comparable sales. Adjusted results from operating activities for Q1 2018 were recorded as a loss of 2.4 million relative to a loss of 1.4 million in the first quarter of 2017.

In Q1 2018, the company reported an adjusted net loss of 1.7 million or $0.07 per fully diluted share. This is compared to a net loss of 1.1 million or $0.04 per fully diluted shares a year ago.

Adjusted EBITDA was negative 4 -- 0.4 million [ph] in the first quarter compared to positive adjusted EBITDA of 1.5 million in Q1 2017. At the end of the first quarter, our ending inventory was 25.8 million as compared to 28.6 million at the end of Q1 2017.

On a per store basis, inventory decreased by 13% due to the planned seasonal clearance, which occurred mainly in Q2 2017 and Q3 2017 and a more focused buying enabled us to return to a more normal level of inventories including carryover. In terms of liquidity, we ended the first quarter with 53.9 million in cash.

We are continuing to prudently manage our cash position and balance sheet. With that, I'll turn the call back over to Joel for some final remarks.

Thank you, Howard. We are moving forward with a strong management team and a clear go-forward plan focused on our store network, reinvestments in merchandising and marketing, advancing e-commerce, and expanding distribution channels.

We are focused on improving the business and maximizing the potential of the DAVIDs TEA. On behalf of management, I would like to thank our shareholders for your patience and for all of our employees for their great work and dedication.

As I mentioned a few minutes ago, we took -- we have work to do to get this business back on track, but I’m confident we will get there. I expect DAVIDs TEA will end 2018 in a very different position than it began it.

Thank you for joining this afternoon. For those who are attending the annual general meeting, I look forward to seeing you on Thursday.

Thanks again for your support.