Thank you, and good afternoon, everyone. Welcome to Pizza Pizza Royalty Corp's earnings call for the first quarter ended 03/31/2025. Joining me on the call today is Pizza Pizza Limited chief executive officer, Paul Goddard. Just a quick note, our discussion today will contain forward looking statements that may involve risks relating to future events. Actual events may differ materially from the projections discussed today. All forward looking statements should be considered in conjunction with the cautionary language in our earnings press release, and the risk factors included in our annual information form. Please refer to our earnings press release and the MD and A in the Investor Relations section of our website for a reconciliation and other disclosures related to non IFRS measures mentioned on this call. As a reminder, analysts are welcome to ask questions after the prepared remarks. Portfolio managers, media and shareholders can contact us after this call. With that, I'd like to turn the call over to Paul Goddard to provide a business update.

Thanks very much, Christine. Afternoon, everyone, and thank you for joining us on today's call.

To discuss our Q1 twenty twenty five results. Are happy to report a solid start to 2025, with positive sales growth at both Pizza Pizza and Pizza seventy three. For the quarter, our brands reported a combined same store sales growth of 1.2% with Pizza Pizza Restaurants reporting a 0.6% growth and Pizza seventy three restaurants reporting growth of 4.3%. I should mention also this was lapping a positive Q1 same store sales growth of 1.7% for 2024. So we are positive on top of positive for this first quarter. And we're pleased to see that we've regained some positive momentum recently. As we discussed on our last call, our plans for 2025 see us continuing to leverage our brand assets and strengths as we implement new promotions backed by our core product propositions and ongoing menu innovation. Too many restaurants and tech platform through all of this, it's approved customer experience. Now let's get into the details of our performance this quarter. As I said, we kicked off the year with positive same store sales, which is great. And at both brands, growth this quarter was driven by increases in both guest traffic and the average customer check. Customer traffic growth was driven by thoughtful calendar initiatives and new product launches, and we're happy to see growth in our organic delivery channel, which helped increase the average check.

As we've mentioned in the past, the QSR foodservice category is highly competitive and we do see a heightened level of discounting continuing in the quarter. We continue to strive to find the right balance between offering competitive offers and discounts while also protecting the profitability of our restaurant owner operators. Following the success of the extra extra large pizza, the XXL at Pizza seventy three, introduced the massive 18 inches pizza to Pizza Pizza customers as well. The unique benefit of operating two unique but similar brands in Canada and that's something that allows us to test and learn at one banner before launching at the other, which we've really, really, I think, gotten better and better at as well. At Pizza Pizza, the XXL was an immediate hit with customers, growing our pizza category overall and providing Canadians with a completely unique value option on our menu. At $20 with three toppings, this big pizza can feed a family for an unbeatable price. Beyond our strong always on value propositions, our convenience, innovative marketing programs and partnerships continue to be on display this quarter, driving visibility and incremental sales. So I wanted to quickly highlight a few points about leveraging our brand strength and innovation as seen this quarter.

Our brands like to be at the forefront of current trending topics. While many brands added proudly Canadian badges on their ads, we took it a step further with the timely and actionable reverse tariff promotion providing Canadians with memorable advertising and true financial savings in the form of a 25% discount. Close collaboration with our agency partners and our in house creative team allowed us to launch the program in time for the Four Nations Hockey Final, Our breakthrough and funny ads ran in the lead up throughout the game and in the four weeks following. Dominating the Proudly Canadian conversation while driving up sales via the tactical 25% off reverse tariff offer. As well, the TAG actually Canadian something you might have seen while watching one of our many sponsored professional sports teams this quarter. Beyond our score a slice, and Score a Pie promotions at our partner arenas across the country, this quarter we leveraged our NHL team sponsorships and our longstanding Coca Cola supplier relationship to create our custom hockey boxes. These boxes provided hockey fans a unique hockey tabletop game complete with hockey net with their pizza eating experience. We had regional versions for our Montreal Canadians, Winnipeg Jets, and Toronto Maple Leaf fans as well as generic boxes for all other provinces.

And coincidentally, obviously, three of those teams actually our three sponsored teams have made it to the playoffs. And, are still in it, obviously, the Jets, the Oilers, and, and the Leafs. So pretty exciting times. Maybe the hockey box is good luck. Now Pizza seventy three, leverage our relationship with the Edmonton Oilers, we introduced the Skinner Dinner, a product endorsement with the Oilers goalie Stuart Skinner. This offer has done well and was very timely as the adult Oilers battled on and round through the playoffs here. While we are always innovating on our messages, I would also be remiss if I didn't speak to our product innovations this quarter. At Pizza Pizza, we introduced a unique product in the QSR space for Canada, the loaded Tater Tots. This program was led with our ownable and craveable Creamy Garlic Tots in the forefront. This offer was a great addition to orders and helped lift organic sales during the promotion window. And meanwhile, at Pizza seventy three, we introduced new signature wraps including crispy chicken and donair to highlight our menu variety and drive lunch and snacking occasions. Following the successful launch of cheese stuffed crust pizzas, Pizza Pizza, also introduced a program at Pizza seventy three this quarter.

Again, you know, proving it in one brand and then take it to the other if it works. The new stuffed crust option was an immediate hit with our customers, nearly doubling our sales expectation and providing us an instant net new revenue stream. As we look ahead to the second half of twenty twenty five, we know that there is significant competition for consumer spending. Especially with the impact tariffs will have on our customers' wallets. But the overall strengths of our foundation remain the same. Our brand strength and resident marketing messages the continually enhanced menu, relentless innovations across all aspects of our business, and unrivaled quality and convenience for our customers. So together, these pillars have been a winning formula for us in the past and we feel will continue to drive our future growth and success as well. Before I turn the call over to Christine, I just wanted to briefly discuss our restaurant network growth. We remain focused on growing our business across Canada, and we are by any measure, the leading homegrown national QSR pizza brand. During the quarter, we opened two traditional and two nontraditional Pizza Pizza locations, Meanwhile, at Pizza seventy three, we opened one traditional location.

And we closed four nontraditional Pizza Pizza sites and one traditional Pizza Pizza which, actually converted to a Pizza seventy three site. So we continue to see opportunities across Canada, And I would also mention, in Ontario, where we have the highest concentration of restaurants at Ophterol, that's where we're originally from, and continue to see growth opportunities there in select places. And in fact, the two traditional restaurant openings this quarter were both in Ontario. As we head into the second half of twenty twenty five, expect to see restaurant network expansion of roughly 2% to 3% traditional restaurant growth. And I've also mentioned aside from the network growth side, just on the tech side, we're also continuing to invest heavily in our technology platform. With increased restaurant order automation and streamlining visual order tracking for customers, which we already have, but we're looking to enhance that. On our app and web and getting much more conversion now with what you see on third party platforms. Well as features like SMS broadcast messaging, order reminders, particularly for app users and our Club eleven eleven loyalty members. So our ongoing investments here on the tech side help drive customer engagement and loyalty along with increased order frequency.

And just to close off, I'd just say we are pleased to see the improvement in sales and especially traffic growth. We always want volume. We always want transactions. So I think that's most pleasing of all. But we do know that the economic landscape is challenged and customers much more deliberate in managing their overall spend. Our job, of course, is to ensure that our customers see us offering the best food at the best price. And I think we're really well known for that. So we will continue to lean into our value offerings but supported by product innovations, and tech innovations and also marketing activations. And we will be wherever our customers are we'll be available to them whenever and however they wanna order from us. Finally, I'd just like to close by thanking our team corporate employees and operators alike for all they do day in and day out for our customers. Our communities, and for each other. Especially in this difficult economic environment with a lot of uncertainty. And potentially worsening climate, a recessionary climate that could be ahead of us even more than it is now. So I think we have to be prepared for that.

But feel great about our team. We've got a very unique special team culture from coast to coast. And the level of passion and commitment ambition is second to none. So I feel very confident they'll continue to be a leader in the market, continually innovating, refreshing, and reinventing ourselves. So thank you for listening, and I'll now ask Christine to provide a brief financial update.

Thanks, Paul. As a reminder, Pete's Pizza Royalty Corp is a top line royalty corp that earns a monthly royalty through a license agreement with Pizza Pizza Limited. In exchange for the use of the Pizza Pizza and Pizza seventy three trademarks in its restaurant operations. Pizza Pizza pays the partnership a monthly royalty calculated as a percentage of royalty pool sales. Growth in the corp is derived from increasing same store sales, of the restaurants in the Royalty Pool and by adding new restaurants to the pool. On January 1 of each year, royalty pool is adjusted by adding new restaurants opened in the previous year less any restaurants that have permanently closed. And in return, Pizza Pizza's ownership increases. As announced earlier this year, on 01/01/2025, the Royalty Pool increased by 20 net new restaurants. This is the result of adding 45 new locations less the 25 that permanently closed. So for fiscal twenty twenty five, there will be 794 restaurants in the Royalty Pool. Comprised of 694 100 pizza 73. So with that information, let's briefly cover the financial results for the quarter. As Paul mentioned, same store sales, a key driver of yield growth for shareholders, increased 1.2% for the quarter. 0.6% for the quarter, and 73 restaurants increased 4.6%.

Both brands saw an increase in traffic as well as average check.

The combination of new restaurants added to the Royalty Pool on January 1 and the same store sales growth resulted in an increase in royalty pool system sales and the corresponding royalty income. Royalty pool system sales for the quarter increased 1.6% to $151,300,000 from $148,900,000 in the same quarter last year. By brand, sales from the six ninety four Pizza restaurants, increased 1.2% a hundred and 29,800,000.0, and sales from the hundred Pizza 73 restaurants increased 4.3 percent 21,500,000.0 in the quarter. The partnership's royalty income earned as a percentage of royalty pool sales increased 1.9% to $9,700,000 in the quarter. Beyond royalty income, the partnership also earns interest income on cash and short term investments. And for the quarter, the partnership earned $68,000 Turning to the partnership expenses. Administrative expenses, including listing costs, as well as director, legal, and auditor fees, totaled $152,000 for the quarter compared to $126,000 in the prior year. The increase reflects higher legal expenses and higher director fees, which were associated with one additional director joining the board as part of its succession plan. In addition to administrative expense, the partnership is making interest only payments on its $47,000,000 credit facility. Interest paid in the quarter was 317,000.

Dollars For the quarter, the interest rate was locked through April of twenty twenty five, using the swap agreement that fixed the interest at a core rate of 1.81 plus the credit spread. For a combined interest rate of 2.685. In March 2025, the company renewed the credit facility for a three year term with maturity now set for April 2028. The balance of the facility remained unchanged However, the credit spread table increased slightly with the lowest tier increasing from 0.875% to 1%. Additionally, in April 2025, the company entered into forward interest rate swaps. The new three year interest rate swaps commenced when the existing swaps expired in April of twenty twenty five.

And the new locked in rate is 2.51% which is an increase from the maturing swap that were 1.81%. So now after the partnership has received its royalty, interest income, paid its administrative and interest expense, the resulting net cash is available for distribution to its two partners based on their ownership. After the 2025 vend in, and the prior year's true up, Pizza Pizza Limited's ownership increased to 26.2%. Pizza Pizza Royalty Corp shares in the remaining 73.8% of the partnership's distributions. It then pays taxes on its share of the partnership earnings, and any residual cash is available for dividends to company shareholders. Turning to dividends. The company declared shareholder dividends of $5,700,000 in the current quarter or $0.02 $3.02 $5 per share was consistent with the prior year comparative quarter.

As a reminder, system sales for the quarter ended '31 have generally been the softest, and historically, this quarter results in a payout ratio over 100%. The payout ratio for Q1 twenty twenty five was 117% and resulted in the company's working capital reserve decreasing by 900,000 and we ended the quarter with 5,200,000.0 available. The $5,200,000 working capital reserve is available to stabilize dividends and fund other expenditures in the event of short to medium term variability. Our system sales. And royalty income. The company historically targets a payout ratio at or near 100% on an annualized basis. That concludes the financial overview. I'll now turn the call back to the operator to poll for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Will hear a prompt that Anne has been raised. Should you wish to decline the polling process, please press star followed by the 2. If you are using a speakerphone, please lift the handset before pressing any case. First question comes from a direct Lessard with TD Cowen. Please go ahead.

Yes. Good morning. Good morning. Long day. Good afternoon, everyone. How are doing? Very well, Derek. Paul, the the the custom hockey box doesn't look like it brought any luck to the hab, so I'm gonna gonna ding on that one. Every everyone but the haves.

Yeah. Exactly. Alright. Maybe next year.

Maybe next get by. Yeah. Maybe next year. Yeah. You guys are are are clearly working extremely hard I think probably over time, like everyone else, just given given the environment, So maybe you're not as surprised by the swing to positive same store sales as everyone else might be. But I was just wondering if you can maybe talk to how you guys think about maybe the sustainability of the traffic and check? Yeah. It's a good question, Derek. I mean, I think sort of of all, the macro environment is concerning. Think that would be pretty clear to everyone, anyone. Out there. So, you know, who knows what it's gonna look like the rest of this the general economic climate. That's probably the biggest factor. But I do think even toward the end of last year, although results were you know, stellar last year, I we could really feel that what we're starting to do really around q four even was really starting to to work. And a lot of that was really just a lot of the novel marketing items, sort of the new innovations. Be it the hockey box or the XXL, you know, the wraps, things like that out west.

The tots. And so a lot of it, I think, was the the new product intros, and I think the tone that we took as well with the the tariff ads and things really got a real sort of cultural buzz, I think, aside from specific promos. Sort of a specific promo product intro piece. That the overall brand arching message under the everyone deserves pizza sort of theme I think, just resonated. You know? And I think we did also see with that increase in delivery that I said in my comment, you know, the average check is up on that. And so that helps pull us up as well. And that's those are not heavily, or sorry, not easily won battles. In the organic delivery side, it is tough. I mean, we've generally in the recent years, see more growth in pickup, and we still do see good growth in pickup. It's been harder to grow that organic delivery channel. And others in the market have also had this tough trouble. It's just a reality of the market and, you know, growing third party platforms and things. But I think we're pretty happy with how people have really taken advantage of that.

Things like our, you know, a special code, for instance, let's say, it's the lease or in the Habs market. There'll be a Habs delivery or a lease Dell code on game days, for instance, that says on delivery charge. And so things like that really do nudge people towards our own organic apps or web and drive organic delivery. So that helps boost check. You know, which is nice. But the traffic side, I think, it's just really been compelling compelling specials more than anything and just the overarching marketing messages really resonating.

For that color. Congratulations. Yeah. It's it's it really shot shone through in that same store sales number. [indiscernible] you know, Pizza Step 73 was particularly strong. And it's and I and I know you you talked about the signature wraps and the stuffed crust Is it do you think that was the, you know, I guess, was that the biggest driver that that new innovation, was that the biggest driver of that outperformance there?

I think so. I mean, Christine might have more thoughts, but I think the reverse tariff, the XXL did very well there. Stuffed crust did very well there. That's why we extended it. So I mean the Skinner dinner was also a factor, but not maybe as significant as some others, but it still was definitely relevant. Then with Oilers making the playoffs and continuing, and that's helping as well. So I think it was good to see that, you know, on and the organic delivery was up as well. As a percent of sales, like I said, similar to Pizza Pizza. So that those are probably the biggest factors.

Oh, and to add on it, Derek, I think you might remember a 73 used to be thought of as, you know, like, you get two pizzas for a certain price. But with us introducing a lot of single pizza offerings, we've been able to attract another level of customers as well. So the Skinner dinner is a single pizza offering at a $19 price point. The double XL, pizza, again, at a sub $20 price point. So those have really helped us as we continue to lean into value at that brand too.

Okay. That's helpful. And then you know, maybe just just hitting along the same theme on the sort of that consumer backdrop. Have you have you noticed any changes, I guess, in the consumer behavior from last quarter? Has deteriorated? I know it's tough to just get a beat on sort of that given the economic challenges, but wondering if you've seen any change in that behavior.

Overall, I mean, we've seen we've been happy that our traffic gone up at both brands along with Check. But I haven't sensed anything dramatically deteriorating. I'm I'm honestly more guess, concerned about the rest of this year based on the geopolitical situation of things. So I wouldn't say anything too dramatic. I just think our messages have been resonating more We do see a lot of competitor discounting. That we think is not sustainable for some. But overall, I think you know, we feel like it's it's working overall. And I mean, people are still, in some cases, in some demographics, not ordering as many add ons, dips, drinks, sides, and like I mentioned on our last call. But then on the other hand, we are you know, we're getting good success with our creamy garlic. We've been really trying create that And it really has turned into almost like a cult phenomena, the creamy garlic sauce itself. Right? I mean, our social media right now, I think there's kind of an influencer doing an ad with this massive creamy garlic sauce as he's eating pizza on a leash jersey. Unfortunately, not a half jersey. For you, but, you know, stuff like that.

Yeah. Something that really helps. So I think creamy garlic and creamy garlic tots, for instance, that helps kind of thread through different product, products because we are famous for that. And in some cases, that's an order winner, the fact that the people love our creamy garlic sauce, even if they're indifferent about well, you know, these chicken wings are comparable to another leading chain, let's say, their mind are pizzas similar to another leading chain? Well, only we have the creamy garlic. So we are successful with that, and we are always trying to work with partners like Coke, for instance, who, you know, help with our hockey box to promote more drinks, more beverages as well. So I think it's been a bit patchy, I would say. In some cases, we've had a little more success recently, hence our results. But overall, I still think the consumer climate is very challenged. And my sense is it's probably worsening.

Right. Okay. And I guess you know, the what I did notice is that you're expectations, and this is on network expansion, so your expectations for I think, the 3% network expansion is still in place. Have you given the environment, I guess, what's the level of franchise interest that you have currently?

I think our pipeline has been pretty solid overall. I mean, we and as I mentioned, had some success even in Ontario which is fairly mature for us. But we do see parts of Ontario, for instance, that have been good. And also, recently, Newfoundland, places like that, which went off to a great start. And and there, we have had an places like Quebec. It has a little bit more been a little more challenging as we move eastward. To Quebec City where we I think we are still looking to fill in a couple stores, looking for the franchisee even though we have the store built. So that's that shows a bit of headwind there. But we're pretty confident that's going to get resolved very quickly. But so that's a little bit weaker there. But we do have, for instance, in British Columbia where we're still quite new, and still climb climb climbing up the growth curve there. We've got some franchisees there that are actually asking for another restaurant. And we're saying, no. No. Hang on. It's a little early for that. But even though they're actually still in a real growth mode to grow their sales up, some of them are very enthusiastic to get another store.

So I I we've always been pretty happy with our franchisees the franchisee pipeline in recent years, it it still looks good. I think I'm going mention on our call last month, we also won the Elite Franchise Award out of the a hundred franchises in Canada, leading franchises, and we're picked number one. And that type of thing helps our franchise sales team when we can say, look, an independent group from Europe came and rated us the number one franchise. So all those factors. And just, you know, obviously, kind of success begets success. So never take it for granted. There's always a few disgruntled franchisees out there. But I think overall, the mood is good. And then when they're in a better mood, they also talk to their friends, family members, etcetera. And that's part of our organic franchise sales, you know, new prospect network. Are those people. And if they're happy ambassadors, then tend to have a pretty good pipeline.

Absolutely. So then maybe along the same lines, Mexico, We've noticed that you started to report the royalties It's small from but from the Yes, small. Yeah.

Just thought we would. And obviously, it's still early days in Mexico. We really like our partner down there. It has gone slower than expected, for sure. I mean, we've had cases where leases take many months where I think we could do it much quicker in Canada. And you think, well, why? But there's some benefits because labor is so cheap there. Construction costs are cheaper. But you know, there it just you can't control the flow of things down there. It's just not as quick. But our our partners there are looking to, I think, back of the envelope, get probably five or six more this year. We've got our four performing well there. That exists right now in Guadalajara. [indiscernible] quite confident we'll be getting five or six more, and hopefully, to 10 by the end of the year. They've already got sites and leases that I think pretty close on most of them. So we're excited that it'll be faster this year. But it's still quite early.

Okay. That's for me. Congrats Congratulations on the quarter, and good luck.

Thanks a lot, Derek. Thanks for your great questions, as always. Appreciate it.

There are no further questions. Please continue.

Thank you, everyone, for joining us on the call this afternoon. If you have any further questions, you can reach us after the call. Our information is on the earnings release. You, and you may disconnect your lines now.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.