Pizza Pizza Royalty Corp.

Ladies and gentlemen, thank you for standing by and welcome to the Pizza Pizza Royalty Corps earnings call for the third quarter of 2023. During this presentation, all participants will be in listen-only mode. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. As a reminder, this conference is being recorded on Tuesday, November 7th of 2023. I will now turn the call over to Christine De Silva, CFO. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to Pizza Pizza Royalty Corps' earnings call for the third quarter, ended September 30th, 2023. Joining me on the call today is Pizza Pizza Limited's 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&A in the investor relations section of our website for our reconciliation and other disclosures related to non-IFRS financial 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 the call. I would now like to turn the call over to Paul to provide a business update.

Thank you, Christine, and welcome, everyone, to Pizza Pizza's third quarter investor conference call. Today, I will discuss our third quarter results, and then Christine will summarize our key financial highlights before the Q&A at the end. We are very excited to announce our 10th consecutive quarter of positive sales with 7.0% same-store sales growth. During the quarter, the Pizza Pizza brand reported a 6.4% increase in same-store sales, and the Pizza 73 brand reported an 11.3% increase. Growth at both brands was driven by increases in both guest traffic and the average customer check. This consistency in performance has enabled our board to announce another increase to our monthly dividend, a 3.3% increase, resulting in an annualized rate of $0.93 a share. So getting into the details of the quarter, our positive momentum has continued in the third quarter and was driven by two key factors, growth in our walk-in and pick-up, are non-traditional sales and special events channels. And our marketing initiatives continue to show superb momentum. Our non-traditional sales typically account for 10% of total sales, and it has been really refreshing to see all of these special events and non-traditional locations welcome more hungry customers this year. We have many high-profile sponsorships and marketing activations through which we sell our delicious product. At our traditional locations, our customers continue to recognize our strong value proposition and convenience as well as our innovation and high quality menu offerings, all supported by our top of mind brand visibility and our ongoing restaurant network expansion. And as mentioned on our last call, our areas of focus for marketing continue to be building the brand, innovating our menu, and driving organic sales for our franchisees across Canada. And on the brand front, we continue to build on the successful Everyone Deserves Pizza campaign platform, identifying opportunities to advocate for our customers and bring pizza, and Pizza Pizza specifically, into fun and relevant social and cultural conversations. For example, this summer, unlike some companies who hopped on the popular shrinkflation bandwagon, in other words, shrinking the size or volume of their products but still selling it for the same price, Pizza Pizza announced its Growflation campaign to combat shrinkflation by giving out a medium pizza instead of a small pizza for the same small price. This campaign continues to highlight our promotional, and value offerings that speak to the pressures Canadians feel related to rising interest rates and price inflation. Food innovation also continues to be a key asset in driving brand visibility and incremental sales for us. In August, we were the first national QSR to introduce Strombolis to Canadians, essentially a rolled pizza dough filled with popular toppings, cheese, and sauce, as Stromboli is a great handheld snacking option and fills a gap in our pizza menu. The launch far exceeded our initial estimates, and this category has continued with solid performance since the initial marketing campaign. And good margin, by the way, for our operators on that product as well, so it's a real win-win. And meanwhile, at Pizza 73, we focused on food innovation there as well this quarter and shoring up opportunity day parts, specifically lunch and late night. Through new snackable menu items, such as our signature curly fries poutine, and a variety of new chicken fries, snack boxes, and a new under $10 menu, we have seen significant growth in both these day parts as well as our walk-in business. And the food innovation isn't just for our traditional restaurants. We continue to see the Pizza Pizza brand come alive in communities across Canada via our best-in-class sponsorship activities and special events programs. In addition to record sales of critical events like the C&E, and the Calgary Stampede. Just as an example, our team innovated our product offering at the CNA this year, at the exhibition, as we introduced deep-fried pizza. This innovation drove national media attention and helped nearly double our sales at the event versus previous years. So it really worked, and we got a lot of attention there and a lot of fun with that one, and it really translated into real results. So while brand-building campaigns and food innovations continue to find success driving visibility, relevance, and sales, We continue to invest in critical infrastructure to ensure we are successfully pushing orders through our websites, apps, and call center. In Q3, we introduced customer push notifications for Pizza 73 and a new in-app messaging platform for Pizza Pizza. And we invested incremental resources to further optimize and drive our online awareness and social media presence as well. So behind the scenes, there's a lot of IT investment, reinvestment, as I think long-time investors will know that we are very... focus on continuing those investments. And they really do, I think, put us in a position separate from most competitors in the space as a result. And finally, we expanded our virtual chicken-chicken restaurant concept to Pizza 73 this quarter. Previously, it was just at Pizza Pizza. And that is already contributing significantly to our third-party sales channel growth for that platform. So that's great to see. Turning to restaurant network growth, we continue to have a large pipeline of franchise leads that are eager to join the team. And we also have many of our current franchisees looking to further invest in their business and help drive our expansion too. We ended the third quarter with a total of 763 locations, of which 661 were Pizza Pizzas and 102 were Pizza 73. During the quarter, we opened seven traditional and six non-traditional Pizza Pizza restaurants. Meanwhile, four non-traditional Pizza Pizza restaurants were closed. And at the Pizza 73 brand, we opened one new traditional and one non-traditional restaurant. Our restaurant openings continue our national expansion plan as we open in British Columbia, Ontario, and Quebec. And COVID-related delays associated with construction, permits, and supply chain issues are slowly reducing and we'd say returning to normal overall. While we continue our expansion plans, we also continue with our renovation programs. Over 85% of our traditional Pizza Pizza stores now have our new look, and approximately 25% of the Pizza 73 traditional stores have been renovated this year. And those ones are actually very quick, given they have a smaller store footprint lobby area as well, so they're quicker and cheaper to do, so we expect to move a little faster even with those rentals, which is great. And our restaurants feature our hot and fresh new look and or a refresh on the interior and exterior, and significant upgrades continue to be made in regards to restaurant equipment, such as new and more efficient ovens, digital menu boards, and in-store technology. And beyond Canada, we continue working with our Mexican partners on the next set of restaurant openings. We are happy with the progress of the first three stores and what they're achieving down there and are excited about the long-term potential of this high-growth, high-pizza-consuming market. But we are going to be careful and purposeful in how and where we expand our new footprint there. And we do expect to see several more locations open there during 2024. As I close my comments, we are now in our busiest quarter and aren't going to stop pushing hard and leading with innovation, marketing initiatives, digital investments, and delivering high quality, great tasting food to our customers. And we look forward to closing off this year the way we started it, strong. And lastly, the key to our strong performance is our strong team. So I want to give a big thank you to all of our restaurant owner operators and our corporate team who are working hard together to continue building on our brand success by taking great care of our customers each and every day. Thank you for listening, and I'll now ask Christine to provide a brief financial update.