DAVIDsTEA Inc.

Thank you, operator. Good morning, everyone.

Despite tough economic conditions reducing sales 6.1% year-over-year, to $13.4 million in the first quarter of 2024, we are committed to turning our business around based on a number of inflection points. First of all, brick-and-mortar sales delivered mid-single-digit growth for a second consecutive quarter in Q1 2024.

In-store sales were up 6.2% and 6.3% in the first quarter of 2024 and fourth quarter of 2023 respectively on a year-over-year basis. Our specialty teas and brand equity resonate strongly with consumers in-store as shoppers want a sensory experience smelling and sampling our teas to help discover and buy.

Therefore, we are reiterating our focus towards an in-store growth strategy with the goal of doubling our store footprint in the next three years. We have secured lease agreements for this fall related to the opening of two new stores in the Montreal area, one downtown and the other in Mount Royal that will raise our store count to 20 across Canada.

Second, we have expanded from a regional to national strategy to address the U.S. wholesale market.

If you recall, we initiated our wholesale expansion into the Northeast U.S. in the second half of 2023 with the release of four flavors of premium tea sachets at Stop & Shop supermarket stores and Roche Bros.

supermarkets. We have since extended our reach across the U.S.

on the strength of new partnerships with supermarket chains and distributors. One such signed up distributor KeHE ranked among the largest pure play wholesale food distributors in North America.

It has access to more than 31,000 [stores] (ph) including natural food stores, independent grocery stores and chains, e-commerce retailers and other specialty products retailers. Given a massive U.S.

wholesale market combined with increasing our key assortments at 4,000 plus locations in Canada, we expect this channel to grow in 2024. A third inflection point revolves around the recent launch of our cold brew sparkling iced tea collection for the ready-to-drink market in North America.

The inaugural launch of our ready-to-drink collection features sparkling versions of best-seller Organic Cream of Earl Grey, energizing Organic Queen of Tarts and caffeine-free Magic Potion. These bring a unique product offering to market with the cans being infused directly with our DAVIDsTEA blend, that have a long product following.

By making our premium teas available in a convenient format like a can, we are significantly expanding our addressable market by tapping into the multibillion dollar RTD sector. As a result, we believe that strategic initiatives will fuel both online and in-store sales.

In summary, DAVIDsTEA is still facing a number of headwinds including challenging economic conditions reducing overall demand, changing consumer behavior online, a short-term liquidity issue that Frank Zitella, President, Chief Financial and Operating Officer of DAVIDsTEA will address in his prepared comments. For my part, I firmly believe the growth drivers that I’ve outlined earlier should bolster revenue growth and gradually lean to profitability.

I will now turn the webcast over to Frank.

Thank you, Sarah, and good morning, everyone. Before reviewing our first quarter results, I’d like to address our liquidity position.

At quarter-end, DAVIDsTEA had cash in the amount of $8.8 million and working capital of $28.7 million. During our previous quarterly webcast, we outlined negotiations with a commercial lender to provide up to $12 million in the form of a revolving line of credit.

At this point, we have terminated negotiations with the commercial lender without reaching an agreement. As a result, we will pursue cost reduction and working capital strategy more aggressively while not compromising on growth opportunities related to upcoming quarters.

Turning to our financial results, consolidated sales decreased 6.1% to $13.4 million in the first quarter of 2024 as unfavorable economic conditions negatively affected online and wholesale revenue, while brick-and-mortar sales grew mid-single-digits on higher average ticket value. In Canada which represented 80% of total revenues, sales were down $0.5 million year-over-year while U.S.

sales declined by $0.4 million. Online sales dropped by $0.9 million in Q1 2024 or 11.7% year-over-year, as we continue to observe a leveling out of pandemic-driven online sales in addition to lower average ticket value.

Online sales represented 50% of total revenues in the first quarter of 2024 compared to 53% in the same period last year. Wholesale channel sales decreased 9.7% to $2.2 million in the first quarter of 2024 representing 16% of total revenue.

For their part, brick-and-mortar sales increased 6.2% to $4.5 million in Q1, 2024 accounting for one-third of total revenue. As Sarah mentioned, we’ve reported mid-single-digit growth for brick-and-mortar sales for two consecutive quarters.

Despite a lower revenue level year-over-year gross profit as a percentage of sales improved 300 basis points to 43.3% in the first quarter due to lower freight, shipping and fulfillment cost per unit. Sales, general and administrative expenses increased by 7.6% to $8.4 million compared to the prior year quarter.

Included in SG&A this quarter was $0.6 million of professional fees in connection with the revolving line of credit. As a percentage of sales, SG&A expenses rose to 62.9% in the first quarter of 2024 from 54.9% in the first quarter of 2023 due to a deleveraging of fixed cost against the lower sales level.

Now turning to the bottom line, net loss amounted to $2.6 million in the first quarter of 2024 compared to a loss of $2 million in the first quarter of 2023. Adjusted EBITDA for the first quarter was negative $0.8 million compared to negative $0.9 million for the same period in 2023.

To wrap up, we have several growth initiatives on the horizon, but in the short-term we need to implement tight cost control measures and efficiently manage our working capital to support a path towards profitable growth. This concludes the review of our first quarter results.

We encourage investors wishing to obtain additional color about DAVIDsTEA to contact Investor Relations who will coordinate access to management. Thank you for joining us today.