Pizza Pizza Royalty Corp.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Pizza Pizza Royalty Corps earnings call for the first quarter of 2022. During the presentation, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star then the number one on your telephone keypad. As a reminder, this conference call is being recorded on Wednesday, May 11, 2022. I would now like to turn the conference call over to Mr. Alexander Swatton, Director of Finance, please go ahead.

Thank you. Good afternoon, everyone, and welcome to Pizza Pizza Royalty Corps' earnings call for the first quarter ended March 31, 2022. Joining me on the call today are Pizza Pizza Limited's Chief Executive Officer, Paul Goddard, and Chief Financial Officer, Christine DaSilva. 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 MV&A in the investor relations section of our website for a reconciliation and other disclosures related to our non-IFRS financial measures mentioned on this call. As a reminder, Analysts are welcome to ask questions after the prepared remarks, and portfolio managers and media can contact us after the call. Before turning the call over to Paul for the business update, I wanted to spend a few moments reviewing the structure of the corp for our new investors. Pizza Pizza Royalty Corp indirectly owns the Pizza Pizza and Pizza 73 brands and trademarks through its subsidiary, Pizza Pizza Royalty Limited Partnership. This partnership has two partners. Pizza Pizza Royalty Corp, the public company, which owns 76.5%, and the other partner, Pizza Pizza Limited, the private operating company, which owns the remaining 23.5%. The Royalty Corp is a top-line restaurant royalty corp that earns a monthly royalty through a lease agreement with Pizza Pizza Limited. In exchange for the use of the Pizza Pizza and Pizza's 73 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 the same store sales at the restaurant in the royalty pool and by adding new restaurants to the pool each year. The royalty pool is adjusted at the beginning of each year by adding new restaurants open in the previous year, less any restaurants that have been permanently closed. For the fiscal year 2022, The royalty pool was adjusted on January 1, 2022, to include 624 Pizza Pizza restaurants and 103 Pizza 73 restaurants. With that review, I'll turn the call over to Paul Goddard to provide a business update.

Thanks, Alex, and welcome everyone to Pizza Pizza's first quarter investor conference call. Today, I will discuss our first quarter results, and then Christine, our CFO, will summarize our key financial highlights before the Q&A at the end. Today we are pleased to present the financial results of the Realty Corp for the first quarter which ended March 31st, 2022. Results for the first quarter were driven by strong same-store sales. Pizza Pizza reported same-store sales growth of 16.0% and Pizza 73 reported 2.1% growth for a combined 13.6% same-store sales growth. The positive results for the quarter were due to the increase in guest traffic from the easing of government restrictions and an increase in the average check. As a result, our board was pleased to announce an 8.3% increase in the shareholder dividend effective February 2022. Turning to our quarterly results, we didn't expect that after nearly two years since the start of the pandemic, we would once again see government restrictions return in January and February due to the Omicron surge, of course, but that's exactly what happened, as you know. However, the good news was that as those restrictions lifted, we experienced an increase in sales from walk-in traffic and saw the reopening of key non-traditional stores, especially sports venues. And in addition to increased sales to our already strong pickup and delivery business, growth across all channels was well supported by menu innovation, strong promotional campaigns, and operational excellence. Now, with almost all restrictions removed and the return of warmer weather as we enter the second quarter, we are optimistic that this momentum will continue as almost all government restrictions have been removed and customers are feeling more comfortable visiting our restaurants. You're still waiting for some non-traditional locations to reopen, such as some university and college locations that are waiting until September, and for a more robust return to office in our urban markets. But at the same time, we know that the pandemic has affected consumer behavior and the importance of digital sales channels, including delivery, has grown. So we will continue to support ongoing enhancements to our digital assets and to our digital marketing capabilities, and we'll continue to focus on our core competitive advantages of convenience, innovation, high-quality menu offerings, and restaurant network expansion. Speaking to our operations during the first quarter, the first quarter is always an exciting one for us in spite of the government restrictions we saw this year, as I said, in Jan and Feb. It's always the beginning of a new year with new food innovation, new marketing campaigns, and a lot of excitement at our key non-traditional locations where the NHL and NBA teams make their playoff runs. Pizza Pizza and Pizza 73 are the official pizza sponsors for almost all the Canadian NHL teams and for Canada's only NBA team. While fans enjoy watching their teams, especially when they make it into the playoffs, they can also enjoy a hot and fresh slice from our many concession locations in the arenas or can order our game day specials to enjoy while watching from the comfort of their own homes. Additionally, as I mentioned on our last call, we reintroduced our score slice promotion and during Raptors games and new in 2021 Maple Leafs games as well, fans were directed to a massive QR code. Some of you may have seen it if you've been to some of the games in Toronto. shown on the Central Arena scoreboard, which loaded a free slice coupon into their digital wallet to use with their Pizza Pizza app. In addition to being a fun digital giveaway for existing customers, this was also a phenomenal program to drive app downloads for fans that didn't already have our app and introduce them to our array of fast, convenient, organic ordering platforms. Seeing the success of this activation, we've also now rolled it out for the Toronto Football Club, TFC, home games at BMO Field in Toronto, and are excited to see how fans is similarly engaged with the activation this season. Turning to our marketing and food innovations, pizza and wings have gone hand-in-hand at Pizza Pizza for decades, and we've established a lead position on our quality wings, which are raised without antibiotics and fried to crispy perfection. So, early in the quarter, we built on the success of our chicken sandwich launch and our overall chicken category with the introduction of three new wing sauces, Hot Honey, National Hot, and Mango Inferno. These new sauces capitalized on the hot wings trend we were seeing, and were launched in time for all of those Super Bowl orders. A Dave and Wing sales are at their very highest. And just in time for New Year's resolutions at Pizza 73, we started the year off with a New Year New Crust campaign, where we introduced customers to our Keto Crust pizzas that were well-received at Pizza Pizza back in 2021. Pizza Pizza has always been at the forefront of alternative crusts, and we took the opportunity to expand that category at the Pizza 73 brand as well. We're excited to be able to provide an offering that is relevant to consumers at that unique time of year as well, where Google search trends show a spike in interest in keto diets, not surprisingly. Continuously refreshing the pizza category with new crusts, recipes, and toppings brings new life to our pizza menu. Early in 2022, we introduced two new gourmet pizzas, the Chicken Shawarma and Halifax-style Doner Pizzas. Both of these pizza flavor profiles are emerging trends, and the Doner Pizza has been on the menu in Halifax for several years and is very popular with customers. So constant innovation and focus on our core helps us stay top of mind and the first choice for pizza eaters. Sharing key moments with customers from Valentine's Day to Friday night game nights at home all translate into winning moments for us. In the latter part of the quarter, we once again partnered with the number one card game in the world, Uno by Mattel, to offer our customers the ultimate pizza and game night experience, another opportunity to share moments with our customers. At both Pizza Pizza and Pizza 73, our marketing strategies are structured to support restaurant profitability while also increasing customer orders and order frequency. Whether you prefer to phone 967-1111, tap your Pizza Pizza app, or simply walk into your local neighborhood Pizza Pizza. And all our campaigns are supported by our in-house marketing team to be designed and creative and deploy it on an array of assets from radio, flyer, billboards, and on our multiple social media digital channels. So, on the sales side, we are very pleased with our momentum. On the more sobering side of things, though, and consistent with our comments on the last earnings call, we do continue to face significant inflationary cost increases across our supply chain and in labor markets. Our goal is to take modest selective price increases across our menu to offset often double-digit input cost increases we've seen, but do it in a balanced approach, a balanced way, so as not to adversely impact overall customer traffic. We know our customers are looking for value as well as quality, so we ought to find that proper balance of perceived value for money. And it's a fine line to walk. It's certainly an art. And we need to keep those customers happy and revisiting and continuing to see the value and the quality that we always promise. But we've also got a simple chance to do that while we drive profitability and sales growth for our unit operators, our own operators, and our private operating company, Pizza Pizza Limited, as well. So I just want everyone to be aware of that. But I do want to emphasize, though, that the realty corp investors are, of course, insulated from that operational risk since our key drivers are for the realty core investors are really the top line revenues and in turn the same store sales growth and that restaurant network growth. So turning to network growth, during the quarter PPL opened two traditional and five non-traditional pizza restaurants and four traditional pizza restaurants were closed. The new restaurants were opened outside of our core markets as we continue to expand our footprint across Canada. This quarter we opened in Portage La Prairie, Manitoba and Moncton, New Brunswick. Our non-traditional location development plan continues to be well executed with three of the five openings in high volume service stations where we offer delivery as well. Pizza Pizza Limited Management expects to accelerate its restaurant network expansion to 5% traditional restaurant growth and continue its renovation program throughout 2022 and beyond. To date, we are proud to say that 80% of our restaurants feature our hot and fresh new look. As the warmer weather returns and walk-in sales increase, customers will experience the new look and style at Pizza Pizza locations across the country. We remain focused on growing our business across Canada, and it's safe to say we are known and respected as a major homegrown national brand and the leading pizza chain in the country. The past two years have taught us a lot about ourselves, our business, and our customers, and we couldn't have emerged through the worst of this pandemic without the tireless dedication and resilience of our restaurant owner-operators and our passionate employees as well. So a quick shout-out and big thank you to all of them, and of course to all of our loyal customers of both brands as well. We know trends continuously change, but our diverse high-quality menu network penetration, digital assets, and strong customer service reputation have all helped us stay strong during these uncertain times and have been a real constant. Our restaurant network growth continues to be strong, and as we continue to scale effectively, we've only become stronger. So we look forward to the rest of the year, the return to full operations, and the sales that will come with it. Thanks for listening, and I'll now hand it over to Christine, our CFO, for a brief financial update.