Pizza Pizza Royalty Corp.

Thank you for standing by. And welcome to the Pizza Pizza Royalties Corp. earnings call for the fourth quarter of 2023. During the presentation, all participants will be in a lesson-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 Wednesday, March 6, 2024. I will now turn the call over to Ms. Christine De Silva, CFO. Thank you. Please go ahead.

Good afternoon, everyone, and welcome to Pizza Pizza Royalty Corp's earnings call for the fourth quarter ended December 31st, 2023. Joining me on the call today is Pizza Pizza Limited's Chief Executive Officer, Paul Gard. 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 projections discussed. 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 the earnings press release and the MDNA in the investor relations section of our website for reconciliation and other disclosures related to the non-IFRS financial measures mentioned today. 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 will now turn the call over to Paul Goddard to provide a business update.

Thank you, Christine, and welcome everyone to Pizza Pizza's fourth quarter investor conference call. Today, I will discuss our fourth quarter initiatives and results, and we'll share a brief outlook of what's ahead in 2024. Christine will then summarize our key financial highlights before the Q&A at the end. I am proud to say that 2023 was an exceptional year for our brands as we achieved 8.2% same-store sales growth and strengthened our presence across Canada by opening 45 restaurants. Because of the achievements in sales and network growth, the total royalty pool system sales were at a record high, crossing the $600 million threshold, and enabled our board to declare three dividend increases in 2023. And in the fourth quarter, we reported a combined 4% same-store sales growth, as Pizza Pizza restaurants reported 3.5% growth and Pizza 73 restaurants reported 7.3% growth. So growth at both brands was driven by increases in both guest traffic and the average customer chat. Getting into the details of the quarter, our positive momentum continued in the fourth quarter and was driven by several key factors. The strength and resiliency of our brands, supported by our marketing initiatives, our product innovation and diverse menu, our focus on customer experience, and growth in walk-in and pickup, non-traditional and special channels, as well as on third-party platforms. In terms of strength of the brand, Pizza Pizza's innovative marketing activities and partnerships continue to be recognized as industry best in class and are well-received by Canadians, driving strong top-of-mind visibility and engagement scores throughout the year. And this quarter was no different. The fourth quarter contains two of the busiest days for our restaurants, Halloween and New Year's Eve. And as we have done over the past 55 years, we help celebrate and own key moments and occasions for our loyal customers. And on that note, this Halloween past, we had some fun actually with it. We capitalized on our creamy garlic dipping sauce fandom. We really have a real sort of cult following for our creamy garlic sauce in particular. And we actually had our marketing team, they created a creamy garlic dip costume, which we then leveraged to successfully get broad attention on social media channels. to really highlight the creamy garlic sauce in conjunction with our usual strong Halloween occasion popularity, which worked really nicely. So that was a lot of fun. And that was, you know, a really fruitful brand-building initiative as an example of how we continually succeed at keeping our brands top of mind with customers in this competitive QSR landscape. And another way to keep our brands top of mind is through our many high-profile sponsorships and marketing activations through which we sell our delicious products. We are always looking for new and exciting opportunities with our partners, And during the quarter, we have two more exciting samples of this. It would be number one, through our Pizza Pizza sponsorship with the Toronto Maple Leafs, we are now the official helmet sponsor, and our Pizza Pizza logo can be clearly seen on the players' helmets for all home games. This provides literally millions of impressions to customers all across Canada every time they see a Leaf player in action or in a still photo. Number two, continuing on the hockey theme, through our Pizza 73 sponsorships with the Edmonton Oilers and Calgary Flames, we rolled out our Score a Pie promotion. And this promotion has been a massive success at our Pizza Pizza partner locations in the East. It builds brand awareness in a fun, compelling way and helps drive organic transactions as it requires customers to download our app when they see a big QR code in the stadium arena. So we're really excited to launch it at Q4 at Pizza 73 and get all those Alberta hockey fans excited as well. It's a great way to get new customers on board, new data acquisition and app downloads. So it's a real win-win-win. And also it keeps fans very excited as well in venues, which the team's like. In terms of food innovation, it also appears to be a key asset driving brand visibility and incremental sales. So aside from brand strength, the second cornerstone of our success in 2023 and always is our innovation. Innovation is not just about launching new products. It's being innovative about how you promote them and create buzz about those products or innovating the ways customers interact with you. And as we've seen, innovation can also take the form of reimagining existing products or even our packaging to make them more desirable. Earlier in the year, we added to our poutine category of Pizza Pizza and took those successes and rolled out poutine to the Pizza 73 brand as well, where we saw immediate success. We also introduced more snacking options for our customers through our Stromboli offerings, which nicely filled out our pizza menu, and at Pizza 73, created a new opportunity in the lunch day part. We didn't stop innovating in the fourth quarter. We continued to accelerate our product development with the launch of stuffed crust pizzas. This launch showed our ongoing food innovation success while also offering a check-building opportunity. And we're confident that no other large pizza QSR offers so many exciting types of crust, by the way, ranging from keto, cauliflower, gluten-free, gourmet thin, deep pan, and now stuffed crust, in addition to our regular crust pizza, which is delicious, of course. At Pizza 73, seeing the successes in the lunch and snack day part of Q3, the brand continued to develop their offerings with snack-sized panzerottis to complement the other items in the under $10 menu. We have seen significant growth in both these day parts as well as in our walk-in business. And while brand building campaigns and food innovations continue to find success driving visibility, relevance, and sales, we continue to invest in critical technology infrastructure to ensure we're successfully pushing orders for our websites, apps, and call center. During the year, we launched the new Pizza73 website and app and further enhanced our suite of digital ordering to allow for customer push notifications for PISA 73, and new in-app messaging as well. And all these things help piece by piece to just make our applications and our web more sticky. And we continue our investments in data analytics and technology to enhance our customer understanding and, in turn, our business results. Finally, turning to our continuous focus on customer experience, the QSR environment is competitive. Customers have a lot of choices out there in the marketplace. So we have to ensure that we are not just offering customers a buzz-worthy product or value offering, but rather an exceptional experience. And to achieve this, we've launched our A-level operations initiative that is focused on the overall customer experience and in-store restaurant operations. And this is really a never-ending continuous improvement initiative to always aim higher and strive for even stronger experiences for our customers that each and every order visit to our stores. So the overall strength of our foundation, brand strength, marketing messages, enhanced menu, innovations in technology, and continuous improvement in operations will continue to be our growth Key to our growth as we grow forward. Turning to restaurant network growth, we continue to have a large pipeline of franchisee 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. So we always love seeing that. We ended the third quarter with a total of 774 locations, of which 672 were Pizza Pizzas and 102 were Pizza 73. The fourth quarter was also highlighted with 12 new store openings, seven traditional and five non-traditional pizza restaurants, and one non-traditional pizza restaurant was closed. Over the year, our restaurant openings continued our national expansion as we opened in British Columbia, Ontario, Atlantic Canada, and Quebec. Construction times, permitting, and supply chain seem to now be working at a more normal pace, which is excellent to see as well. Beyond Canada, we continue working with our Mexican partners on the next set of restaurant openings as well. We are happy with the progress of the first stores and the level they're achieving and are excited about the long-term potential of this high-consuming, high-pizza-consuming market. But we're certainly going to be judicious and purposeful in how and where we expand our new footprint there. So stay tuned there, and we'll have more store openings this year. Now on to Outlook and some closing remarks. As we look to 2024, we feel we're well-positioned to continue driving our business executing on our plans of innovation, marketing initiatives, digital investments, and delivering high-quality, great value, and delicious hot and fresh food to our customers. Lastly, thank you to our team members and restaurant owner-operators for your commitment and dedication to our customers and our brands, and for being key members in our success. Thank you for listening, and I'll now ask Christine to provide a brief financial update.