MTY Food Group Inc.

Good morning and welcome to MTY Fleet Group 2025 fourth quarter and year-end results earnings conference call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided for you at the time for questions. If anyone has any difficulty hearing the conference, you may press star zero for operator assistance at any time. Listeners are reminded that portions of today's discussion contain forward-looking statements that reflect current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in forward-looking statements. For more information on MQI, food groups, risks, and uncertainties related to these forward-looking statements, Please refer to the company's annual information form dated February 19, 2026, which is posted on CEDAR+. The company's press release, MD&A, and financial statements were issued earlier this morning and are available on its website and on CEDAR+. All figures presented on today's call are in Canadian dollars, unless otherwise stated. This morning's call is being recorded on Thursday, February 19, 2026, at 8.30 a.m. Eastern Time. I would now like to turn the call over to Mr. Eric Le Cibri, Chief Executive Officer of MDY Food Group. Please go ahead, sir.

Thank you, and good morning, everyone. This morning, we released our 2025 Q4 and fiscal year end results, which you can find posted on our website. While micro conditions remain challenging throughout 2025, Q4 showed continued strengthening in many of our core metrics. We are encouraged by the acceleration in positive net unit growth, deepening of our development pipeline, robust free cash flow generation, and lower leverage, which grants us greater financial flexibility. After many years of strategic focus, NT-wide store network is now in its healthiest position in over a decade. Building off last quarter's positive momentum, Q4 experienced a net addition of 19 locations, which pushed us into positive territory on an annual basis for the first time since 2013. This has been achieved through a combination of strengthening of our partnerships with existing franchisees, selectively investing where we see the strongest returns, and developing more tools to energize and monitor our business. Excluding normal seasonal weakness expected in Q1, we believe that we're in good position for this positive momentum to continue into 2026. Turning to same-store sales growth, the macroeconomic backdrop remained challenging as consumers and business owners faced a variety of shocks throughout 2025. In Q4, our same-store sales declined by 1.7% overall, with Canada flat and the U.S. down 2.8%. Results were generally similar by restaurant type within each region. To counteract these pressures, NTUI must continue investing for the long-term in both the guest and the franchisee experience. Our priorities remain enhancing consumer engagement and decision-making through data science, fueling our omnichannel experience, which has significant white space in Canada, and reinforcing all our brands through continuous improvements and innovation. Moving to profitability this quarter, franchise operations segment profit reported a 53% improvement in Q4, which was primarily due to a gift card breakage income, which Rene will address in a moment. Net of this impact, franchise operations in Canada remained flat while the U.S. had a decline, which aligns with their corresponding same-store sales results that I mentioned earlier. During 2025, our free cash flows per share net of lease payments reached $5.68. The last two years have been the two best in our history, showcasing the resilience of our model and cash flow profile across business cycles. As such, we also raised our quarterly dividend by 12% last month to 37 cents per share. Before I pass the line to Rene, I would like to comment on the strategic review that was recently initiated by the Board of Directors. We cannot provide a specific timeline or assurance that any transaction will result. I can confirm that the process is ongoing and active. For the purpose of today's call, I cannot comment on the process, but I can assure you that we will provide an update or make announcements as appropriate or as required by law. In parallel, MPOI continues to be run as business as usual, with the same discipline and long-term focus that's defined the company since our founding. With that, I'll turn it over to Renee to discuss the financials. Renee?

Thank you, Eric, and good morning, everyone. Normalized adjusted dividend came in at $87.7 million for the fourth quarter, up 48% year-over-year compared to the same period last year. This increase was primarily due to a one-time $29.5 million increase in gift card breakage income related to unredeemed gift card balances related to an acquisition we made several years ago. At the time, we took a conservative approach to the unused portion of the gift cards for that brand pending the accumulation of sufficient reliable redemption data. Based on the clear pattern that can be derived from this additional decade of usage data, we are catching up on the estimates of the portion of the gift cards that will not be redeemed. Moving forward, we expect the usage to remain consistent. As mentioned by Eric, this gift card breakage fee also positively impacted our franchise operations segment profits and normalized adjusted EBITDA. Net of this impact, franchise operations segment profits in Canada were flat while the U.S. decreased by 12%. Canada franchising revenues saw an increase of 1% due to higher recurring revenue streams from the increase in system sales generated by this segment, while the U.S. was impacted by a decrease to recurring revenue streams as a result of lower system sales. On the expense side, franchise operating costs in Canada were in line with the same period last year, while the U.S. and international were up $2.5 million. The increase were primarily due to higher wages as a result of normal inflation, as well as IT licensing costs and expenses related to our gift card program. We continue to add higher quality new stores and capture efficiencies from our ongoing initiatives, We expect franchisee EBITDA growth to outpace things for sales growth. Segment profit and normalized adjusted EBITDA for the corporate store segment came in at $7.9 million, up 23% or $1.5 million from last year. Margins improved to 7% compared to 5% in the same period last year. We remain confident in our ability to drive improvements in corporate store over time, which should result in margins moving towards the high single digits. Food processing distribution in retail segment delivered revenue growth of 27%, driven by a shift in our retail model from a licensing agreement to vendor on record for some of our products. Our profit margins remain stable between the two periods at 11%. We believe meaningful opportunities exist within the retail channel for top line and margin expansion as we continue to build scale and strengthen our presence in underpenetrated markets. We reported 32.1 million in net income attributable to owners, or $1.40 per diluted share, an increase of more than 87 million from the prior period. The improvement was primarily due to a one-time impairment loss recorded last year in relation to Papa Murphy's, as well as the gift card breakage recorded this year. As Eric mentioned earlier, our asset-like and well-diversified business model continues to generate strong free cash flows. This performance provides us with significant optionality to reduce debt, invest for the future, and return capital to shareholders. In the fourth quarter, cash flow from operations were $46.2 million compared to $43.7 million in the same period last year. Free cash flow net of lease repayments was $37.6 million, up 38% compared to $27.4 million in the same period last year. We ended the quarter with net debt of approximately $580 million. Considering our strong free cash flow generating ability, our debt to EBITDA of approximately two times is at a level that gives us the opportunity to take advantage of the options we possess to deliver enhanced shareholder value. And with that, I'd like to thank you for your time and turn it back to Eric for closing remarks.