PIZZA PIZZA ROYALTY CORP. ANNOUNCES FOURTH QUARTER 2025 RESULTS
PIZZA PIZZA ROYALTY CORP. ANNOUNCES FOURTH QUARTER 2025 RESULTS |
| [25-March-2026] |
TORONTO, March 25, 2026 /CNW/ - Pizza Pizza Royalty Corp. (the "Company") (TSX: PZA), which indirectly owns the Pizza Pizza and Pizza 73 Rights and Marks, released financial results today for the three months ("Quarter") and twelve months ("Year") ended December, 31, 2025. Fourth Quarter highlights:
Year to Date highlights:
"While we delivered positive sales in a very tough environment, it is clear that momentum has softened as customers become more deliberate in how they spend. That said, we will leverage our strong everyday value leadership position, backed by ongoing enhancements to our menu, restaurants and digital customer experience to continue to grow successfully," said Paul Goddard, President and CEO of Pizza Pizza Limited. SALES Royalty Pool System Sales for the Year increased 2.4% to $635.5 million from $620.6 million in the same Year last year. By brand, sales from the 694 Pizza Pizza restaurants in the Royalty Pool increased 2.4% to $547.6 million for the Year compared to $534.8 million in the same Year last year. Sales from the 100 Pizza 73 restaurants increased 2.5% to $87.9 million for the Year compared to $85.8 million in 2024. For the Quarter and Period, the increase in Royalty Pool System Sales is driven by the same store sales and new restaurants added to the Royalty Pool on January 1, 2025. Additionally, while the number of restaurants in the Pizza 73 Royalty Pool remains less than 2019 when there were 104 restaurants, the negative impact on Royalty Pool System Sales due to prior year restaurant closures has been mitigated by the Make-Whole Carryover Amount. See "Same Store Sales Growth". The Pizza Pizza and Pizza 73 restaurants are subject to seasonal variations in their business. System Sales for the quarter ended March 31 have generally been the lowest. System Sales for the quarter ended December 31 have generally been the highest relative to other quarters. SAME STORE SALES GROWTH ("SSSG")
SSSG is driven by the change in the customer check and customer traffic, both of which are affected by changes in pricing and sales mix. During the Quarter, at both brands, restaurant traffic decreased due to the current economic situation and its impact on consumer discretionary spending, as well as heightened competition for those consumer spending dollars. The average customer check increased, as the brands saw an increase in higher ticket delivery orders. For the Year, both brands saw a slight increase in orders and average customer check. MONTHLY DIVIDENDS AND WORKING CAPITAL RESERVE The Company's policy is to distribute all available cash in order to maximize returns to shareholders over time, after allowing for reasonable reserves. Despite seasonal variations inherent to the restaurant industry, the Company's policy is to make equal dividend payments to shareholders on a monthly basis in order to smooth out income to shareholders. After the reduction in the monthly dividend in April 2020, and the eight subsequent increases, including the most recent increase in November 2023, any further change will be implemented with a view to maintaining the continuity of consistent monthly distributions. It is expected that future dividends will continue to be funded entirely by cash flow from operations and the cash reserve. The Company's working capital reserve is $3.7 million at December 31, 2025, which is a decrease of $2.4 million in the Year (omitting fiscal 2024's debt reclassification). System sales for the quarter ended March 31 have generally been the softest and historically results in a payout ratio over 100%. The reserve is available to stabilize dividends and fund other expenditures in the event of short-to-medium-term variability in System Sales and, thus, the Company's royalty income. The Company has historically targeted a payout ratio at or near 100% on an annualized basis. EARNINGS PER SHARE ("EPS") As compared to basic EPS, the Company considers adjusted EPS(5) to be a more meaningful indicator of the Company's operating performance and, therefore, presents fully diluted, adjusted EPS. The adjusted EPS for the Quarter was also flat at $0.245 when compared to the same period of 2024, and decreased 0.2% to $0.951 for the Year. RESTAURANT DEVELOPMENT As previously announced, the number of restaurants in the Company's Royalty Pool increased by 20 net locations to 794 on the January 1, 2025 Adjustment Date, and consists of 694 Pizza Pizza restaurants and 100 Pizza 73 restaurants. The number of restaurants in the Royalty Pool remained unchanged through 2025. During the Quarter, Pizza Pizza Limited ("PPL") opened three traditional and three non-traditional Pizza Pizza restaurants. Additionally, at the Pizza 73 brand, PPL opened one traditional restaurants and closed three traditional restaurants. During the Year, PPL opened 12 traditional and 20 non-traditional Pizza Pizza restaurants, and closed three traditional and 11 non-traditional Pizza Pizza restaurants. PPL also opened five traditional Pizza 73 restaurants, and closed five Pizza 73 traditional restaurants. Four of the five traditional Pizza 73 closures, had their delivery territory fully assigned to their neighbouring restaurant, to minimize the impact on sales. PPL management expects to grow its traditional restaurant network by 2% to 3% and continue its renovation program through 2026. Readers should note that the number of restaurants added to the Royalty Pool each year may differ from the number of restaurant openings and closings reported by PPL on an annual basis as the years for which they are reported differ slightly. CREDIT FACILITY The credit facility includes affirmative and negative covenants customary for agreements of this nature, and as at June 30, 2025 all covenants have been met. The Partnership is required to maintain a funded debt-to-EBITDA ratio not to exceed 2.5:1.0 on a four quarter rolling average and an interest coverage ratio of minimum 3:1. The debt-to-EBITDA ratio for the last four-quarter rolling average is 1.18:1 and the interest coverage ratio is 26.04:1. The Partnership is presently making interest-only payments on the non-revolving credit facility. As the debt-to-EBITDA level changes, the credit spread will change as follows.
SELECTED FINANCIAL HIGHLIGHTS The following tables set out selected financial information and other data of the Company and should be read in conjunction with the December 31, 2025 audited consolidated financial statements of the Company ("Financial Statements"). Readers should note that the 2025 results are not directly comparable to the 2024 results due to there being 794 restaurants in the 2025 Royalty Pool compared to 774 restaurants in the 2024 Royalty Pool.
A copy of the Company's interim consolidated financial statements and related Management's Discussion and Analysis ("MD&A") will be available at www.sedarplus.ca and www.pizzapizza.ca after the market closes on March 25, 2026. As previously announced, the Company will host a conference call to discuss the results. The details of the conference call are as follows:
A recording of the call will also be available on the Company's website at www.pizzapizza.ca. FORWARD-LOOKING STATEMENTS Certain statements in this report, including information regarding the Company's dividend policy, its ability to meet covenants and other financial obligations, and their ability to achieve their business objectives, constitute "forward-looking" statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this report, such statements include such words as "may", "will", "expect", "believe", "plan", and other similar terminology in conjunction with a discussion of future events or operating or financial performance. These statements reflect management's current expectations regarding future events and operating and financial performance and speak only as of the date of this MD&A. The Company does not assume any obligation to update any such forward looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. These forward-looking statements involve a number of risks and uncertainties. The following are some factors that could cause actual results to differ materially from those expressed in or underlying such forward-looking statements: changes in national and local business and economic conditions, impacts of legislation and governmental regulation, accounting policies and practices, competition, changes in demographic trends and changing consumer preferences, and the results of operations and financial condition of PPL. The foregoing list of factors is not exhaustive and should be read in conjunction with the other information included in the foregoing MD&A, the PPL financial statements for the period ended December 28, 2025 and the related MD&A and the Company's Annual Information Form. Exhibit One: Reconciliation of Non-IFRS Measures The Company's earnings, as presented under IFRS includes non-cash items, such as deferred tax, that do not affect the Company's business operations or its ability to pay dividends to shareholders. The Company believes its earnings are not the only, or most meaningful, measurement of the Company's ability to pay dividends or measure the rate at which the Company is paying out its earnings. Therefore, the Company reports the following non-IFRS measures:
The Company believes that the above noted measures provide investors with more meaningful information regarding the amount of cash that the Company has generated to pay dividends, and, together with Interest Paid on Borrowings and SSSG, help illustrate the Company's operating performance and highlight trends in the Company's business. These measures are also frequently used by analysts, investors, and other interested parties in the evaluation of issuers in the Company's sector, particularly those with a royalty-based model. The adjustments to net earnings as recorded under IFRS relate to non-cash items included in earnings and cash payments accounted for on the statement of financial position. Investors are cautioned, however, that this should not be construed as an alternative to net earnings as a measure of profitability. The method of calculating the Company's NI 52-112 non-IFRS financial measures: Adjusted earnings available for distribution to the Company and Pizza Pizza Limited, Adjusted earnings from operations, Adjusted earnings available for shareholder dividends, Adjusted EPS, Payout Ratio, Working Capital and SSSG for the purposes of this MD&A may differ from that used by other issuers and, accordingly, these measures may not be comparable to similar measures used by other issuers. The table below reconciles the following to "Earnings for the period before income taxes" which is the most directly comparable measure calculated in accordance with IFRS:
The Basic EPS and the Adjusted EPS calculations are based on fully diluted weighted average shares, and both include PPL's Class B and Class D Exchangeable Shares since they are exchangeable into and economically equivalent to the Shares. See "Adjusted EPS". Adjusted EPS is calculated by dividing Adjusted earnings from operations, as explained above, by the fully diluted weighted average shares. Adjusted EPS for the Quarter was flat at $0.245 when compared to the same period of 2024, and decreased 0.2% to $0.951 for the Year.
Payout Ratio is a non-IFRS financial measure that does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. The Company presents the Payout Ratio to illustrate the earnings being returned to shareholders. The Company's Payout Ratio is calculated by dividing the dividends declared to shareholders by the adjusted earnings from operations, after paying the distribution on Class B and Class D Exchangeable Shares, in that same period.
Working Capital is defined as total current assets less total current liabilities. The Company views working capital as a measure for assessing overall liquidity and its ability to stabilize dividends and fund unusual expenditures in the event of short- to medium-term variability in Royalty Pool System Sales. In 2024, the borrowings of $47.0 million were reclassified to current liabilities as the facility was scheduled to come due in April 2025. On March 20, 2025, the Company renewed its facility for a three-year term and maturity is now April 2028. Excluding the impact of the borrowings in 2024, the working capital reserve would have been $6.1 million as at December 31, 2024. The use of the working capital during the Period relates to the payout ratio of 110%.
SSSG is a key indicator used by the Company to measure performance against internal targets and prior period results. SSSG is commonly used by financial analysts and investors to compare PPL to other QSR brands. SSSG is defined as the change in period gross sales of Pizza Pizza and Pizza 73 restaurants as compared to sales in the previous comparative period, where the restaurant has been open at least 13 months. Additionally, for a Pizza 73 restaurant whose restaurant territory was adjusted due to an additional restaurant, the sales used to derive the Step-Out Payment may be added to sales to arrive at SSSG (as defined in footnote 2 on page 3). It is a key performance indicator for the Company as this measure excludes sales fluctuations due to store closings, permanent relocations and chain expansion. The following table calculates SSSG by reconciling Royalty Pool System Sales, based on calendar periods, to PPL's 13-week sales reporting period used in calculating same store sales.
SOURCE Pizza Pizza Royalty Corp. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Company Codes: Toronto:PZA | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
